Correspondence 0001818874-24-000223 from SoFi Technologies, Inc. (SOFI) (CIK 0001818874) (SOFI)
SoFi Technologies, Inc. (SOFI) (CIK 0001818874)
Date: Oct. 3, 2024 · CIK: 0001818874 · Accession: 0001818874-24-000223
AI Filing Summary & Sentiment
File numbers found in text: 001-39606
Referenced dates: September 19, 2024
Letter
United States Securities and Exchange Commission Division of Corporation Finance Office of Finance Attention: Marc Thomas and Cara Lubit Form 10-K for the Fiscal Year Ended December 31, 2023 Form 10-Q for the Quarterly Period Ended June 30, 2024 Form 8-K Filed July 30, 2024 File No. 001-39606
Dear Mr. Thomas and Ms. Lubit:
On behalf of SoFi Technologies, Inc. (the “Company”), this letter respectfully responds to the comment letter dated September 19, 2024, setting forth the comments of the staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission relating to the Company’s above-referenced Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “2023 Form 10-K”), Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024 (the “Form 10-Q”) and the Current Report on Form 8-K filed July 30, 2024 (the “Form 8-K”). For your convenience, we have reproduced the Staff’s comment in italics below, followed by the Company’s response.
Form 10-K for the Fiscal Period Ending December 31, 2023
Consolidated Results of Operations, page 98
1.Please revise future filings to enhance your quantitative and qualitative description of material changes from period to period, including where such changes within a line item offset one another. Refer to Item 303 of Regulation S-K. Examples of enhancements may include:
•narrative discussing changes over all periods presented. We note, for example, that narrative disclosures at the top of page 103 and bottom of 108 appear to only include discussion of changes from 2021 to 2022.
•quantification of the key factors impacting period over period changes, so that readers have context as to how much of the change is attributable to different factors discussed and the extent of offsetting amounts.
•additional granularity, where applicable, to understand any differences among material drivers or trends that apply to specific loan types. One example might be enhanced discussion by loan type for the components that aggregate into “loan origination, sales, and securitizations” within noninterest income.
•when discussing multiple key drivers (e.g., for noninterest income, noninterest expense, etc.), clear identification of the component line items to which different drivers relate.
•enhanced explanation tying trends to underlying causes. As one example only, disclosures on pages 102 and 109 note utilization and expansion of lead generation channels but do not provide context as to type or nature of the channels that have grown or been added.
RESPONSE: The Company respectfully acknowledges the Staff’s comment and advises the Staff that it will revise its future filings in response to the Staff’s comment to enhance the quantitative and qualitative description of material changes from period to period.
October 3, 2024
Page 2
Provision for Credit Losses
Analysis of Charge-offs, page 103
2.We note your tabular disclosure on page 103 providing the net charge-offs and ratio of net charge-offs to average loans by loan product for each period presented. Please revise your disclosures, in future filings, to provide a discussion of the factors that drove material changes in these numbers, or the related components, during all periods presented. Refer to Item 1405(b) of Regulation S-K. Ensure your revised disclosure includes, and quantifies where appropriate, consideration of the following:
•Clarification of what types of charge-offs are non-credit-related and the differences, if any, between factors impacting credit and non-credit related charge-off trends.
•Discussion of factors driving the changes in charge-off rates (e.g., delinquency rate trends, recovery amounts, etc.), by loan product.
RESPONSE: The Company respectfully acknowledges the Staff’s comment and advises the Staff that it will revise its future filings in response to the Staff’s comment.
Financial Services Segment, page 112
3.We note your tabular disclosure on page 93 regarding Financial Services products. Please revise future filings, here or elsewhere as appropriate, to more fulsomely explain whether and how changes in these numbers relate to or impact revenue and expense trends discussed within your Summary Results segment disclosures.
RESPONSE: The Company respectfully acknowledges the Staff’s comment and advises the Staff that it will revise its future filings in response to the Staff’s comment to explain whether and how changes in its Financial Services products numbers relate to or impact revenue and expense trends.
4.We note your disclosure, such as on page 87, that your Financial Services Segment primarily earns revenue from net interest income, referral fees, interchange fees, and brokerage fees. The last three of these appear to be aggregated into noninterest income in the table on page 112. In future filings, please include some quantitative measure(s) to indicate the proportion of noninterest income attributable to these different revenue streams.
RESPONSE: The Company respectfully acknowledges the Staff’s comment, and directs the Staff to Note 3 to the Company’s Consolidated Financial Statements in which, on page 155 of the 2023 Form 10-K, under the heading Disaggregated Revenue, the Company discloses noninterest income attributable to Financial Services on a disaggregated basis, including referral fees, interchange fees, and brokerage fees.
In response to the Staff’s comment, the Company respectfully advises the Staff that, in future filings, it intends to revise the disclosures as set forth on page 1 of Exhibit A to this letter for additional clarity.
5.Exhibit 99.1 of your 8-K dated July 30, 2024 discloses that assets under management have grown over 50% year-over-year. In future filings, including 10-Q and 10-K filings, please quantify assets under management for each period presented, and discuss any material changes in levels or composition.
RESPONSE: The Company respectfully acknowledges the Staff’s comment, and advises the Staff that assets under management (“AUM”) and related revenue that the Company earned were not significant to results for either of the three or six month periods ended June 30, 2024 (accounted for approximately 1% of total net revenue in either period) and therefore were not included. Further, the Company respectfully advises the Staff that it will revise its future filings in response to the Staff’s comment to no longer discuss AUM related metrics until the related revenue becomes material to the Company’s financial results, at which point it will quantify AUM.
October 3, 2024
Page 3
Critical Accounting Policies and Estimates
Goodwill, page 123
6.For any reporting units that have recognized a goodwill impairment charge or are deemed to be at risk of an impairment charge, please revise your disclosures in future filings to quantify the amount of goodwill allocated to the reporting unit.
RESPONSE: The Company respectfully acknowledges the Staff’s comment and advises the Staff that it will revise its future filings in response to the Staff’s comment to quantify the amount of goodwill allocated to a reporting unit for any reporting units that have recognized a goodwill impairment charge or are deemed to be at risk of an impairment charge.
Interest Rate Risk, page 124
7.We note your discussion of sensitivity analysis regarding interest rate changes, including disclosure of certain assumptions incorporated into your analysis (e.g., market expectations of interest rates, contractual cash flows, etc.). In future filings, please address the items below.
•Enhance your disclosures to discuss how any assumptions have changed from period to period, including changes to data sources used or material changes in judgements and determinations made by management as your modeling evolves.
•To the extent that management reviews sensitivity analyses for additional hypothetical changes in interest rates (e.g., 50 or 200 basis point changes in market interest rates, etc.), consider adding these other points to your tabular disclosure.
•To the extent that your ALCO or senior management receives information about and uses other metrics, such as economic value of equity (“EVE”), for purposes of managing or monitoring interest rate risk, consider expanding your disclosure to include discussion of those other metrics and how management uses them.
RESPONSE: The Company respectfully acknowledges the Staff’s comment and advises the Staff that it will revise its future filings in response to the Staff’s comment.
Consolidated Statements of Operations and Comprehensive Loss, page 132
8.We note that you present Provision for credit loss within noninterest expenses on the Consolidated Statements of Operations. We also note your disclosure on page 122 that the Company became a bank holding company during 2022. Please tell us how you considered presentation of your consolidated financial statements in accordance with Article 9 of Regulation S-X.
RESPONSE: The Company respectfully acknowledges the Staff’s comment and advises the Staff that since becoming a Bank Holding Company in 2022, it has been subject to Rule 9 of Regulation S-X, including specifically Rule 9-04 Statements of comprehensive income which indicates that various captions, if applicable, should appear on the face of the statement of comprehensive income or notes thereto. The Company also acknowledges that Rule 9-04 depicts an “ordering” of these captions which relates provision for credit losses to net interest income. The Company agrees that the provision for credit losses is an important caption and the Company reports it as a separate line item on the Consolidated Statements of Operations and Comprehensive Income (Loss). The Company also discloses provision for credit losses within its Allowance for Credit Losses footnote.
The Company acknowledges its presentation of provision for credit losses, as a discrete line item within noninterest expense, differs from the depiction within Rule 9-04. However, the Company believes its presentation is acceptable for the following reasons.
•While provision for credit losses is an important line item to the Company and for readers of its financial statements, it is not material to net interest income nor total net revenue (4.4% and 2.3% of net interest income, and 2.6% and 1.5% of total net revenue, for the year ended December 31, 2023 and six months ended June 30, 2024, respectively).
◦While the Company’s lending-activities subject itself to credit risk, the vast majority of its loans (96% and 91% as of December 31, 2023 and June 30, 2024,
October 3, 2024
Page 4
respectively) are reported at fair value on the balance sheet under the fair value option and therefore, with respect to those loans, the provision for credit losses under ASC 326, Financial Instruments — Credit Losses (“CECL”) is not applicable. These loans (Personal Loans, Student Loans and Home Loans) are recorded on the balance sheet at fair value with changes in fair value, including those related to credit, recorded outside of the provision for credit losses. The provision for credit losses primarily relates to credit card loans measured at amortized cost, which only made up 1.2% and 1.1% of total loans as of December 31, 2023 and June 30, 2024, respectively.
◦Refer to the tables below for additional detail on the composition of the Company’s loans, related provision for credit losses, and provision for credit losses as it relates to net interest income and total net revenue.
•The Company believes a presentation of the components of its net interest income and noninterest revenue – and their summation (total net revenue), without the impact of provision for credit losses, provides readers of its financial statements with transparency and an understanding of its underlying business performance, and allows for comparability amongst other financial services companies.
◦SoFi is a highly diverse financial services company, which offers a diverse suite of products and services, including those which could be considered “traditional banking activities”, as well as products and capabilities designed for enterprises, and technology products and solutions. As a result of this diversity, a significant portion of the Company’s total net revenue is related to noninterest income, given that customer relationships generate revenues from both “interest income” and “noninterest income” (e.g., referral, interchange, brokerage, technology services, loan originations, sales, and securitizations, and servicing income).
◦An important focus of the Company and its investors is revenue growth and that revenue growth would be distorted by netting the provision for credit losses from total net revenue because the provision for credit losses does not relate to the majority of the Company’s revenue generating activities.
◦The Company has noted that many of its diversified bank holding company peers, who also have significant noninterest income, present the provision for credit losses outside of revenue.
Considering these factors, the Company believes presenting the provision for credit losses as a discrete line item within other noninterest expenses on the income statement provides the most meaningful information to its investors and an acceptable alternative to presenting within revenue.
The Company will continue to monitor and assess the materiality, both qualitatively and quantitatively, of its provision for credit losses to reaffirm its current view on its presentation on the income statement. If the Company determines in the future that the provision for credit losses is material, it will update its presentation by presenting the provision for credit losses below total net revenue and above noninterest expense.
The tables below present information on the Company’s loan portfolio, provision for credit losses on loans held at amortized cost, net interest income and total net revenue.
Consolidated Balance Sheets Metrics
($ in thousands)
December 31, 2023 June 30, 2024
Total loans $ 22,958,414 $ 25,260,855
Loans held at fair value 22,122,255 23,088,327
Loans held at fair value as percentage of total loans
96.4 % 91.4 %
Loans held at amortized cost 836,159 2,172,528
Loans held at amortized cost as percentage of total loans
3.6 % 8.6 %
Credit card loans 272,628 274,233
Credit card loans as a percentage of total loans 1.2 % 1.1 %
October 3, 2024
Page 5
Consolidated Statements of Operations and Comprehensive Income (Loss) Metrics
($ in thousands)
Year Ended
December 31, 2023
Six Months Ended
June 30, 2024
Net interest income $ 1,261,740 $ 815,302
Total net revenue 2,122,789 1,243,613
Provision for credit losses on loans held at amortized cost 54,945 18,822
Provision for credit losses on loans held at amortized cost as a percentage of total net revenue
2.6 % 1.5 %
Provision for credit losses on loans held at amortized cost as a percentage of net interest income
4.4 % 2.3 %
Notes to Consolidated Financial Statements
Note 1. Organization, Summary of Significant accounting Policies
Financial Guarantees, page 140
9.We note your disclosure, here and on page 171, that you entered into a credit default swap related to your student loans that meets the definition of a financial guarantee and is excluded from derivative accounting treatment. Please provide us with your accounting analysis supporting your accounting for this credit default swap. The response should include, but not be limited to, analysis addressing how this met the definition of a financial guarantee, why it is
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CORRESP 1 filename1.htm Document Goodwin Procter LLP The New York Times Building 620 Eighth Avenue New York, New York 10018 goodwinlaw.com +1 212 813 8800 October 3, 2024 United States Securities and Exchange Commission Division of Corporation Finance Office of Finance 100 F. Street, N.E. Washington, D.C. 20549 Attention: Marc Thomas and Cara Lubit Re: SoFi Technologies, Inc. Form 10-K for the Fiscal Year Ended December 31, 2023 Form 10-Q for the Quarterly Period Ended June 30, 2024 Form 8-K Filed July 30, 2024 File No. 001-39606 Dear Mr. Thomas and Ms. Lubit: On behalf of SoFi Technologies, Inc. (the “Company”), this letter respectfully responds to the comment letter dated September 19, 2024, setting forth the comments of the staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission relating to the Company’s above-referenced Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “2023 Form 10-K”), Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024 (the “Form 10-Q”) and the Current Report on Form 8-K filed July 30, 2024 (the “Form 8-K”). For your convenience, we have reproduced the Staff’s comment in italics below, followed by the Company’s response. Form 10-K for the Fiscal Period Ending December 31, 2023 Consolidated Results of Operations, page 98 1.Please revise future filings to enhance your quantitative and qualitative description of material changes from period to period, including where such changes within a line item offset one another. Refer to Item 303 of Regulation S-K. Examples of enhancements may include: •narrative discussing changes over all periods presented. We note, for example, that narrative disclosures at the top of page 103 and bottom of 108 appear to only include discussion of changes from 2021 to 2022. •quantification of the key factors impacting period over period changes, so that readers have context as to how much of the change is attributable to different factors discussed and the extent of offsetting amounts. •additional granularity, where applicable, to understand any differences among material drivers or trends that apply to specific loan types. One example might be enhanced discussion by loan type for the components that aggregate into “loan origination, sales, and securitizations” within noninterest income. •when discussing multiple key drivers (e.g., for noninterest income, noninterest expense, etc.), clear identification of the component line items to which different drivers relate. •enhanced explanation tying trends to underlying causes. As one example only, disclosures on pages 102 and 109 note utilization and expansion of lead generation channels but do not provide context as to type or nature of the channels that have grown or been added. RESPONSE: The Company respectfully acknowledges the Staff’s comment and advises the Staff that it will revise its future filings in response to the Staff’s comment to enhance the quantitative and qualitative description of material changes from period to period. October 3, 2024 Page 2 Provision for Credit Losses Analysis of Charge-offs, page 103 2.We note your tabular disclosure on page 103 providing the net charge-offs and ratio of net charge-offs to average loans by loan product for each period presented. Please revise your disclosures, in future filings, to provide a discussion of the factors that drove material changes in these numbers, or the related components, during all periods presented. Refer to Item 1405(b) of Regulation S-K. Ensure your revised disclosure includes, and quantifies where appropriate, consideration of the following: •Clarification of what types of charge-offs are non-credit-related and the differences, if any, between factors impacting credit and non-credit related charge-off trends. •Discussion of factors driving the changes in charge-off rates (e.g., delinquency rate trends, recovery amounts, etc.), by loan product. RESPONSE: The Company respectfully acknowledges the Staff’s comment and advises the Staff that it will revise its future filings in response to the Staff’s comment. Financial Services Segment, page 112 3.We note your tabular disclosure on page 93 regarding Financial Services products. Please revise future filings, here or elsewhere as appropriate, to more fulsomely explain whether and how changes in these numbers relate to or impact revenue and expense trends discussed within your Summary Results segment disclosures. RESPONSE: The Company respectfully acknowledges the Staff’s comment and advises the Staff that it will revise its future filings in response to the Staff’s comment to explain whether and how changes in its Financial Services products numbers relate to or impact revenue and expense trends. 4.We note your disclosure, such as on page 87, that your Financial Services Segment primarily earns revenue from net interest income, referral fees, interchange fees, and brokerage fees. The last three of these appear to be aggregated into noninterest income in the table on page 112. In future filings, please include some quantitative measure(s) to indicate the proportion of noninterest income attributable to these different revenue streams. RESPONSE: The Company respectfully acknowledges the Staff’s comment, and directs the Staff to Note 3 to the Company’s Consolidated Financial Statements in which, on page 155 of the 2023 Form 10-K, under the heading Disaggregated Revenue, the Company discloses noninterest income attributable to Financial Services on a disaggregated basis, including referral fees, interchange fees, and brokerage fees. In response to the Staff’s comment, the Company respectfully advises the Staff that, in future filings, it intends to revise the disclosures as set forth on page 1 of Exhibit A to this letter for additional clarity. 5.Exhibit 99.1 of your 8-K dated July 30, 2024 discloses that assets under management have grown over 50% year-over-year. In future filings, including 10-Q and 10-K filings, please quantify assets under management for each period presented, and discuss any material changes in levels or composition. RESPONSE: The Company respectfully acknowledges the Staff’s comment, and advises the Staff that assets under management (“AUM”) and related revenue that the Company earned were not significant to results for either of the three or six month periods ended June 30, 2024 (accounted for approximately 1% of total net revenue in either period) and therefore were not included. Further, the Company respectfully advises the Staff that it will revise its future filings in response to the Staff’s comment to no longer discuss AUM related metrics until the related revenue becomes material to the Company’s financial results, at which point it will quantify AUM. October 3, 2024 Page 3 Critical Accounting Policies and Estimates Goodwill, page 123 6.For any reporting units that have recognized a goodwill impairment charge or are deemed to be at risk of an impairment charge, please revise your disclosures in future filings to quantify the amount of goodwill allocated to the reporting unit. RESPONSE: The Company respectfully acknowledges the Staff’s comment and advises the Staff that it will revise its future filings in response to the Staff’s comment to quantify the amount of goodwill allocated to a reporting unit for any reporting units that have recognized a goodwill impairment charge or are deemed to be at risk of an impairment charge. Interest Rate Risk, page 124 7.We note your discussion of sensitivity analysis regarding interest rate changes, including disclosure of certain assumptions incorporated into your analysis (e.g., market expectations of interest rates, contractual cash flows, etc.). In future filings, please address the items below. •Enhance your disclosures to discuss how any assumptions have changed from period to period, including changes to data sources used or material changes in judgements and determinations made by management as your modeling evolves. •To the extent that management reviews sensitivity analyses for additional hypothetical changes in interest rates (e.g., 50 or 200 basis point changes in market interest rates, etc.), consider adding these other points to your tabular disclosure. •To the extent that your ALCO or senior management receives information about and uses other metrics, such as economic value of equity (“EVE”), for purposes of managing or monitoring interest rate risk, consider expanding your disclosure to include discussion of those other metrics and how management uses them. RESPONSE: The Company respectfully acknowledges the Staff’s comment and advises the Staff that it will revise its future filings in response to the Staff’s comment. Consolidated Statements of Operations and Comprehensive Loss, page 132 8.We note that you present Provision for credit loss within noninterest expenses on the Consolidated Statements of Operations. We also note your disclosure on page 122 that the Company became a bank holding company during 2022. Please tell us how you considered presentation of your consolidated financial statements in accordance with Article 9 of Regulation S-X. RESPONSE: The Company respectfully acknowledges the Staff’s comment and advises the Staff that since becoming a Bank Holding Company in 2022, it has been subject to Rule 9 of Regulation S-X, including specifically Rule 9-04 Statements of comprehensive income which indicates that various captions, if applicable, should appear on the face of the statement of comprehensive income or notes thereto. The Company also acknowledges that Rule 9-04 depicts an “ordering” of these captions which relates provision for credit losses to net interest income. The Company agrees that the provision for credit losses is an important caption and the Company reports it as a separate line item on the Consolidated Statements of Operations and Comprehensive Income (Loss). The Company also discloses provision for credit losses within its Allowance for Credit Losses footnote. The Company acknowledges its presentation of provision for credit losses, as a discrete line item within noninterest expense, differs from the depiction within Rule 9-04. However, the Company believes its presentation is acceptable for the following reasons. •While provision for credit losses is an important line item to the Company and for readers of its financial statements, it is not material to net interest income nor total net revenue (4.4% and 2.3% of net interest income, and 2.6% and 1.5% of total net revenue, for the year ended December 31, 2023 and six months ended June 30, 2024, respectively). ◦While the Company’s lending-activities subject itself to credit risk, the vast majority of its loans (96% and 91% as of December 31, 2023 and June 30, 2024, October 3, 2024 Page 4 respectively) are reported at fair value on the balance sheet under the fair value option and therefore, with respect to those loans, the provision for credit losses under ASC 326, Financial Instruments — Credit Losses (“CECL”) is not applicable. These loans (Personal Loans, Student Loans and Home Loans) are recorded on the balance sheet at fair value with changes in fair value, including those related to credit, recorded outside of the provision for credit losses. The provision for credit losses primarily relates to credit card loans measured at amortized cost, which only made up 1.2% and 1.1% of total loans as of December 31, 2023 and June 30, 2024, respectively. ◦Refer to the tables below for additional detail on the composition of the Company’s loans, related provision for credit losses, and provision for credit losses as it relates to net interest income and total net revenue. •The Company believes a presentation of the components of its net interest income and noninterest revenue – and their summation (total net revenue), without the impact of provision for credit losses, provides readers of its financial statements with transparency and an understanding of its underlying business performance, and allows for comparability amongst other financial services companies. ◦SoFi is a highly diverse financial services company, which offers a diverse suite of products and services, including those which could be considered “traditional banking activities”, as well as products and capabilities designed for enterprises, and technology products and solutions. As a result of this diversity, a significant portion of the Company’s total net revenue is related to noninterest income, given that customer relationships generate revenues from both “interest income” and “noninterest income” (e.g., referral, interchange, brokerage, technology services, loan originations, sales, and securitizations, and servicing income). ◦An important focus of the Company and its investors is revenue growth and that revenue growth would be distorted by netting the provision for credit losses from total net revenue because the provision for credit losses does not relate to the majority of the Company’s revenue generating activities. ◦The Company has noted that many of its diversified bank holding company peers, who also have significant noninterest income, present the provision for credit losses outside of revenue. Considering these factors, the Company believes presenting the provision for credit losses as a discrete line item within other noninterest expenses on the income statement provides the most meaningful information to its investors and an acceptable alternative to presenting within revenue. The Company will continue to monitor and assess the materiality, both qualitatively and quantitatively, of its provision for credit losses to reaffirm its current view on its presentation on the income statement. If the Company determines in the future that the provision for credit losses is material, it will update its presentation by presenting the provision for credit losses below total net revenue and above noninterest expense. The tables below present information on the Company’s loan portfolio, provision for credit losses on loans held at amortized cost, net interest income and total net revenue. Consolidated Balance Sheets Metrics ($ in thousands) December 31, 2023 June 30, 2024 Total loans $ 22,958,414 $ 25,260,855 Loans held at fair value 22,122,255 23,088,327 Loans held at fair value as percentage of total loans 96.4 % 91.4 % Loans held at amortized cost 836,159 2,172,528 Loans held at amortized cost as percentage of total loans 3.6 % 8.6 % Credit card loans 272,628 274,233 Credit card loans as a percentage of total loans 1.2 % 1.1 % October 3, 2024 Page 5 Consolidated Statements of Operations and Comprehensive Income (Loss) Metrics ($ in thousands) Year Ended December 31, 2023 Six Months Ended June 30, 2024 Net interest income $ 1,261,740 $ 815,302 Total net revenue 2,122,789 1,243,613 Provision for credit losses on loans held at amortized cost 54,945 18,822 Provision for credit losses on loans held at amortized cost as a percentage of total net revenue 2.6 % 1.5 % Provision for credit losses on loans held at amortized cost as a percentage of net interest income 4.4 % 2.3 % Notes to Consolidated Financial Statements Note 1. Organization, Summary of Significant accounting Policies Financial Guarantees, page 140 9.We note your disclosure, here and on page 171, that you entered into a credit default swap related to your student loans that meets the definition of a financial guarantee and is excluded from derivative accounting treatment. Please provide us with your accounting analysis supporting your accounting for this credit default swap. The response should include, but not be limited to, analysis addressing how this met the definition of a financial guarantee, why it is