| Fair Value Measurements | Note 12. Fair Value Measurements Recurring Fair Value Measurements The following table summarizes, by level within the fair value hierarchy, the estimated fair values of our assets and liabilities measured at fair value on a recurring basis in the condensed consolidated balance sheets: March 31, 2024 December 31, 2023 Fair Value Fair Value Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets Investments in AFS debt securities (1)(2) $ 465,491 $ 373,015 $ — $ 838,506 $ 527,711 $ 67,476 $ — $ 595,187 Asset-backed bonds (2)(3) — 98,739 — 98,739 — 70,828 — 70,828 Residual investments (2)(3) — — 35,853 35,853 — — 35,920 35,920 Loans at fair value (4) — 59,477 21,891,166 21,950,643 — 66,198 22,056,057 22,122,255 Servicing rights — — 240,752 240,752 — — 180,469 180,469 Third party warrants (5)(6) — — 630 630 — — 630 630 Derivative assets (5)(7)(8) — 1,537 — 1,537 — 2,209 — 2,209 IRLCs (5)(9) — — 2,436 2,436 — — 2,155 2,155 Student loan commitments (5)(9) — — 314 314 — — 5,465 5,465 Interest rate caps (5)(8) — 986 — 986 — 3,269 — 3,269 Digital assets safeguarding asset (5)(10) — — — — — 9,292 — 9,292 Total assets $ 465,491 $ 533,754 $ 22,171,151 $ 23,170,396 $ 527,711 $ 219,272 $ 22,280,696 $ 23,027,679 Liabilities Debt (11) $ — $ 107,409 $ — $ 107,409 $ — $ 119,641 $ — $ 119,641 Residual interests classified as debt — — 4,129 4,129 — — 7,396 7,396 Derivative liabilities (5)(7)(8) — 5,943 — 5,943 — 5,951 — 5,951 Digital assets safeguarding liability (5)(10) — — — — — 9,292 — 9,292 Total liabilities $ — $ 113,352 $ 4,129 $ 117,481 $ — $ 134,884 $ 7,396 $ 142,280 _____________________ (1) The investments in AFS debt securities that were classified as Level 2 rely upon observable inputs other than quoted prices, dealer quotes in markets that are not active and implied pricing derived from new issuances of similar securities. See Note 6. Investment Securities for additional information. (2) These assets are presented within investment securities in the condensed consolidated balance sheets. (3) These assets represent the carrying value of our holdings in VIEs wherein we were not deemed the primary beneficiary. See Note 7. Securitization and Variable Interest Entities for additional information. We classify asset-backed bonds as Level 2 due to the use of quoted prices for similar assets in markets that are not active, as well as certain factors specific to us. The key inputs used to value the asset-backed bonds include the discount rate and conditional prepayment rate. The fair value of our asset-backed bonds was not materially impacted by default assumptions on the underlying securitization loans, as the subordinate residual interests are expected to absorb all estimated losses based on our default assumptions for the period. We classify the residual investments as Level 3 due to the reliance on significant unobservable valuation inputs. (4) Home loans are classified as Level 2 due to observable pricing sources utilized by management. Personal loans and student loans classified as Level 3 do not trade in an active market with readily observable prices. Personal loans and home loans are presented within loans held for sale, at fair value , and student loans are presented within loans held for investment, at fair value. (5) These assets and liabilities are presented within other assets and accounts payable, accruals and other liabilities , respectively, in the condensed consolidated balance sheets. (6) The key unobservable assumption used in the fair value measurement of the third party warrants was the price of the stock underlying the warrants. The fair value was measured as the difference between the stock price and the strike price of the warrants. As the strike price was insignificant, we concluded that the impact of time value on the fair value measure was immaterial. (7) For certain derivative instruments for which an enforceable master netting agreement exists, we elected to net derivative assets and derivative liabilities by counterparty. These instruments are presented on a gross basis herein. See Note 11. Derivative Financial Instruments for additional information. (8) Home loan pipeline hedges represent TBAs used as economic hedges of loan fair values and are classified as Level 2, as we rely on quoted market prices from similar loan pools that transact in the marketplace. Interest rate swaps and interest rate caps are classified as Level 2, because these financial instruments do not trade in active markets with observable prices, but rely on observable inputs other than quoted prices. As of March 31, 2024 and December 31, 2023, interest rate swaps and interest rate caps were valued using the overnight SOFR curve and the implied volatilities suggested by the SOFR rate curve. These were determined to be observable inputs from active markets. (9) IRLCs and student loan commitments are classified as Level 3 because of our reliance on assumed loan funding probabilities. The assumed probabilities are based on our internal historical experience with home loans and student loans similar to those in the funding pipelines on the measurement date. (10) The digital assets safeguarding liability and corresponding safeguarding asset are classified as Level 2, because they do not trade in active markets, and are valued using quoted prices on an active exchange that has been identified as the principal market for the underlying digital assets that were being held by our third-party custodians for the benefit of our members. In the fourth quarter of 2023, we transferred the crypto services provided by SoFi Digital Assets, LLC, and began closing existing digital assets accounts. This process was completed in the first quarter of 2024, subsequent to which we have no digital assets safeguarding liability and safeguarding asset. (11) The fair value of our securitization debt was classified as Level 2 and valued using a discounted cash flow model, with key inputs relating to the underlying contractual coupons, terms, discount rate and expectations for defaults and prepayments. As of March 31, 2024 and December 31, 2023, the unpaid principal related to debt measured at fair value was $114,960 and $128,619, respectively. For the three months ended March 31, 2024, losses from changes in fair value were $1,427. The estimated amounts of gains (losses) included in earnings attributable to changes in instrument-specific credit risk, which were derived principally from observable changes in credit spread as observed in the bond market and default assumptions, were immaterial for the three months ended March 31, 2024 and March 31, 2023. Level 3 Recurring Fair Value Rollforward The following tables present the changes in our assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3). We did not have any transfers into or out of Level 3 during the periods presented. Fair Value at Fair Value at January 1, Impact on Earnings Purchases Sales Issuances Settlements Other Changes March 31, Assets Personal loans $ 15,330,573 $ (269,426) $ 16,580 $ (1,262,854) $ 3,278,882 $ (2,035,697) $ (1,053) $ 15,057,005 Student loans 6,725,484 (17,117) — (294,187) 751,680 (335,937) 4,238 6,834,161 Loans at fair value (1) 22,056,057 (286,543) 16,580 (1,557,041) 4,030,562 (2,371,634) 3,185 21,891,166 Servicing rights (2) 180,469 5,226 980 (53) 75,554 (21,424) — 240,752 Residual investments (3) 35,920 732 2,553 — — (3,352) — 35,853 IRLCs (4) 2,155 2,436 — — — (2,155) — 2,436 Student loan commitments (4) 5,465 314 — — — (5,465) — 314 Third party warrants (5) 630 — — — — — — 630 Liabilities Residual interests classified as debt (3) (7,396) (73) — — — 3,340 — (4,129) Net impact on earnings $ (277,908) Fair Value at Fair Value at January 1, Impact on Earnings Purchases Sales Issuances Settlements Other Changes March 31, Assets Personal loans $ 8,610,434 $ 86,200 $ 40,039 $ — $ 2,951,358 $ (1,150,926) $ (106) $ 10,536,999 Student loans 4,877,177 64,699 — — 525,373 (229,681) 2,491 5,240,059 Home loans (6) 69,463 (494) 552 (77,880) 89,787 (381) — 81,047 Loans at fair value (1) 13,557,074 150,405 40,591 (77,880) 3,566,518 (1,380,988) 2,385 15,858,105 Servicing rights (2) 149,854 12,084 613 (135) 954 (16,856) — 146,514 Residual investments (3) 46,238 1,104 — (306) — (4,076) — 42,960 Purchase price earn out (7’) 54 9 — — — (63) — — IRLCs (4) 216 634 — — — (216) — 634 Student loan commitments (4) (236) 75 — — — 236 — 75 Third party warrants (5) 630 — — — — — — 630 Liabilities Residual interests classified as debt (3) (17,048) (89) — — — 1,572 — (15,565) Net impact on earnings $ 164,222 _____________________ (1) For loans at fair value, purchases reflect unpaid principal balance and relate to previously transferred loans. Purchase activity included elective repurchases of $16.6 million during the three months ended March 31, 2024, and securitization clean-up calls of $39.9 million during the three months ended March 31, 2023. The remaining purchases during the periods presented related to standard representations and warranties pursuant to our various loan sale agreements. Issuances represent the principal balance of loans originated during the period. Settlements represent principal payments made on loans during the period. Other changes represent fair value adjustments that impact the balance sheet primarily associated with whole loan strategic repurchases, clean up calls and consolidated securitizations. Impacts on earnings for loans at fair value are recorded within interest income—loans and securitizations , within noninterest income—loan origination, sales, and s ecuritizations , and within noninterest expense—general and administrative in the condensed consolidated statements of operations and comprehensive income (loss). (2) For servicing rights, impacts on earnings are recorded within noninterest income—servicing in the condensed consolidated statements of operations and comprehensive income (loss). (3) For residual investments, sales include the derecognition of investments associated with securitization clean up calls. The estimated amounts of gains and losses for residual investments included in earnings attributable to changes in instrument-specific credit risk were immaterial during the periods presented. For residual investments and residual interests classified as debt, impacts on earnings are recorded within noninterest income—loan origination, sales, and securitizations in the condensed consolidated statements of operations and comprehensive income (loss), a portion of which is subsequently reclassified to interest expense—securitizations and warehouses for residual interests classified as debt and to interest income—loans and securitizations for residual investments, but does not impact the liability or asset balance, respectively. (4) For IRLCs and student loan commitments, settlements reflect funded and unfunded adjustments representing the unpaid principal balance of funded and unfunded loans during the quarter multiplied by the IRLC or student loan commitment price in effect at the beginning of the quarter. Purchases of IRLCs during the three months ended March 31, 2024 were associated with our acquisition of Wyndham. For year-to-date periods, amounts represent the summation of the per-quarter effects. For IRLCs and student loan commitments, impacts on earnings are recorded within noninterest income—loan origination, sales, and securitizations in the condensed consolidated statements of operations and comprehensive income (loss). (5) For third party warrants, impacts on earnings are recorded within noninterest income—other in the condensed consolidated statements of operations and comprehensive income (loss). (6) During the fourth quarter of 2023, we transferred home loans out of Level 3 into Level 2 relating to an update to observable pricing sources utilized by management, as part of the integration of Wyndham. (7) For purchase price earn out, impacts on earnings are recorded within noninterest income—loan origination, sales, and securitizations in the condensed consolidated statements of operations and comprehensive income (loss). Loans at Fair Value Gains and losses recognized in earnings include changes in accumulated interest and fair value adjustments on loans originated during the period and on loans held at the balance sheet date, as well as loan charge-offs. Changes in fair value are primarily impacted by valuation assumption changes as well as sales price execution. The estimated amount of gains (losses) included in earnings attributable to changes in instrument-specific credit risk were $40,824 during the three months ended March 31, 2024, and $(50,529) during the three months ended March 31, 2023. The gains (losses) attributable to instrument-specific credit risk were estimated by incorporating our current default and loss severity assumptions for the loans. These assumptions are based on historical performance, market trends and performance expectations over the term of the underlying instrument. Level 3 Significant Inputs Fair value is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Level 3 fair value measurements include unobservable inputs for assets or liabilities for which there is little or no market data, which requires us to develop our own assumptions. These unobservable assumptions reflect estimates of inputs that market participants would use in pricing the asset or liability. Valuation techniques include the use of option pricing models, discounted cash flow models, or similar techniques, which incorporate management’s own estimates of assumptions that market participants would use in pricing the asset or liability. Loans The following key unobservable assumptions were used in the fair value measurement of our loans: March 31, 2024 December 31, 2023 Range Weighted Average Range Weighted Average Personal loans Conditional prepayment rate 18.4% – 29.5% 24.7% 17.5% – 29.5% 23.2% Annual default rate 4.7% – 48.7% 4.8% 4.5% – 50.4% 4.8% Discount rate 5.7% – 8.1% 5.8% 5.5% – 8.1% 5.5% Student loans Conditional prepayment rate 7.7% – 12.6% 10.5% 8.4% – 12.6% 10.5% Annual default rate 0.6% – 6.1% 0.6% 0.4% – 6.4% 0.6% Discount rate 4.3% – 8.8% 4.3% 4.1% – 8.1% 4.3% The key assumptions are defined as follows: • Conditional prepayment rate — The monthly annualized proportion of the principal of a pool of loans that is assumed to be paid off prematurely in each period. An increase in the conditional prepayment rate, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. • Annual default rate — The annualized rate of borrowers who do not make loan payments on time. An increase in the annual default rate, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. • Discount rate — The weighted average rate at which the expected cash flows are discounted to arrive at the net present value of the loans. The discount rate is primarily determined based on an underlying benchmark rate curve and spread(s), the latter of which is determined based on factors including, but not limited to, weighted average coupon rate, prepayment rate, default rate and resulting expected duration of the assets. An increase in the discount rate, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. See Note 4. Loans for additional loan fair value disclosures. Servicing Rights Servicing rights for personal loans and student loans do not trade in an active market with readily observable prices. Similarly, home loan servicing rights infrequently trade in an active market. At the time of the underlying loan sale or the assumption of servicing rights, the fair value of servicing rights is determined using a discounted cash flow methodology based on observable and unobservable inputs. Management classifies servicing rights as Level 3 due to the use of significant unobservable inputs in the fair value measurement. The following key unobservable inputs were used in the fair value measurement of our classes of servicing rights: March 31, 2024 December 31, 2023 Range Weighted Average Range Weighted Average Personal loans Market servicing costs 0.2% – 1.0% 0.2% 0.1% – 1.8% 0.2% Conditional prepayment rate 8.6% – 38.1% 22.5% 17.9% – 35.5% 22.4% Annual default rate 3.3% – 16.0% 4.0% 3.3% – 22.5% 4.7% Discount rate 8.8% – 20.0% 9.1% 8.8% – 8.8% 8.8% Student loans Market servicing costs 0.1% – 0.2% 0.1% 0.1% – 0.2% 0.1% Conditional prepayment rate 8.1% – 15.1% 12.1% 10.9% – 15.3% 12.2% Annual default rate 0.3% – 3.6% 0.7% 0.3% – 3.7% 0.6% Discount rate 8.8% – 8.8% 8.8% 8.8% – 8.8% 8.8% Home loans Market servicing costs 0.1% – 0.2% 0.2% 0.1% – 0.2% 0.2% Conditional prepayment rate 5.5% – 23.8% 8.6% 5.6% – 24.0% 8.1% Annual default rate 0.1% – 0.1% 0.1% 0.1% – 0.1% 0.1% Discount rate 9.2% – 10.0% 9.3% 9.2% – 10.0% 9.3% The key assumptions are defined as follows: • Market servicing costs — The fee a willing market participant, which we validate through actual third-party bids for our servicing, would require for the servicing of personal loans, student loans and home loans with similar characteristics as those in our serviced portfolio. An increase in the market servicing cost, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. • Conditional prepayment rate — The monthly annualized proportion of the principal of a pool of loans that is assumed to be paid off prematurely in each period. An increase in the conditional prepayment rate, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. • Annual default rate — The annualized rate of default within the total serviced loan balance. An increase in the annual default rate, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. • Discount rate — The weighted average rate at which the expected cash flows are discounted to arrive at the net present value of the servicing rights. An increase in the discount rate, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. The following table presents the estimated decrease to the fair value of our servicing rights if the key assumptions had each of the below adverse changes: March 31, 2024 December 31, 2023 Market servicing costs 2.5 basis points increase $ (6,466) $ (6,176) 5.0 basis points increase (12,931) (12,351) Conditional prepayment rate 10% increase $ (6,881) $ (5,189) 20% increase (13,400) (10,098) Annual default rate 10% increase $ (550) $ (480) 20% increase (1,094) (921) Discount rate 100 basis points increase $ (5,409) $ (4,674) 200 basis points increase (10,498) (9,054) The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. The effect on fair value of a variation in assumptions generally cannot be determined because the relationship of the change in assumptions to the fair value may not be linear. Additionally, the effect of an adverse variation in a particular assumption on the fair value of our servicing rights is calculated while holding the other assumptions constant. In reality, changes in one factor may lead to changes in other factors, which could impact the above hypothetical effects. Residual Investments and Residual Interests Classified as Debt Residual investments and residual interests classified as debt do not trade in active markets with readily observable prices, and there is limited observable market data for reference. The fair values of residual investments and residual interests classified as debt are determined using a discounted cash flow methodology. Management classifies residual investments and residual interests classified as debt as Level 3 due to the use of significant unobservable inputs in the fair value measurements. The following key unobservable inputs were used in the fair value measurements of our residual investments and residual interests classified as debt: March 31, 2024 December 31, 2023 Range Weighted Average Range Weighted Average Residual investments Conditional prepayment rate 12.4% – 29.9% 15.5% 12.2% – 28.3% 14.8% Annual default rate 0.5% – 6.9% 1.5% 0.5% – 6.9% 1.4% Discount rate 5.8% – 13.5% 8.8% 5.8% – 15.5% 8.7% Residual interests classified as debt Conditional prepayment rate 12.7% – 12.8% 12.8% 12.3% – 12.6% 12.4% Annual default rate 0.8% – 0.8% 0.8% 0.7% – 0.7% 0.7% Discount rate 10.0% – 10.3% 10.0% 10.0% – 10.3% 10.0% The key assumptions are defined as follows: • Conditional prepayment rate — The monthly annualized proportion of the principal of a pool of loans that is assumed to be paid off prematurely in each period for the pool of loans in the securitization. An increase in the conditional prepayment rate, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. • Annual default rate — The annualized rate of borrowers who fail to remain current on their loans for the pool of loans in the securitization. An increase in the annual default rate, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. • Discount rate — The weighted average rate at which the expected cash flows are discounted to arrive at the net present value of the residual investments and residual interests classified as debt. An increase in the discount rate, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. Loan Commitments We classify student loan commitments as Level 3 because the assets do not trade in an active market with readily observable prices and, as such, our valuations utilize significant unobservable inputs. Additionally, we classify IRLCs as Level 3, as our IRLCs are inherently uncertain and unobservable given that a home loan origination is contingent on a plethora of factors. The following key unobservable inputs were used in the fair value measurements of our IRLCs and student loan commitments: March 31, 2024 December 31, 2023 Range Weighted Average Range Weighted Average IRLCs Loan funding probability (1) 48.9% – 85.8% 79.2% 71.9% – 77.2% 76.3% Student loan commitments Loan funding probability (1) 95.0% – 95.0% 95.0% 95.0% – 95.0% 95.0% ___________________ (1) The aggregate amount of student loans we committed to fund was $6,459 as of March 31, 2024. See Note 11. Derivative Financial Instruments for the aggregate notional amount associated with IRLCs. The key assumption is defined as follows: • Loan funding probability — Our expectation of the percentage of IRLCs or student loan commitments which will become funded loans. A significant difference between the actual funded rate and the assumed funded rate at the measurement date could result in a significantly higher or lower fair value measurement of our IRLCs and student loan commitments. An increase in the loan funding probabilities, in isolation, would result in an increase in a fair value measurement. The weighted average assumptions were weighted based on relative fair values. Financial Instruments Not Measured at Fair Value The following table summarizes the carrying values and estimated fair values, by level within the fair value hierarchy, of our assets and liabilities that are not measured at fair value on a recurring basis in the condensed consolidated balance sheets: Fair Value Carrying Value Level 1 Level 2 Level 3 Total March 31, 2024 Assets Cash and cash equivalents (1) $ 3,693,390 $ 3,693,390 $ — $ — $ 3,693,390 Restricted cash and restricted cash equivalents (1) 454,518 454,518 — — 454,518 Loans at amortized cost (2) 1,250,231 — — 1,281,749 1,281,749 Other investments (3) 92,805 — 92,805 — 92,805 Total assets $ 5,490,944 $ 4,147,908 $ 92,805 $ 1,281,749 $ 5,522,462 Liabilities Deposits (4) $ 21,604,594 $ — $ 21,602,954 $ — $ 21,602,954 Debt (5) 2,783,908 1,311,986 1,445,303 — 2,757,289 Total liabilities $ 24,388,502 $ 1,311,986 $ 23,048,257 $ — $ 24,360,243 December 31, 2023 Assets Cash and cash equivalents (1) $ 3,085,020 $ 3,085,020 $ — $ — $ 3,085,020 Restricted cash and restricted cash equivalents (1) 530,558 530,558 — — 530,558 Loans at amortized cost (2) 836,159 — — 864,312 864,312 Other investments (3) 83,551 — 83,551 — 83,551 Total assets $ 4,535,288 $ 3,615,578 $ 83,551 $ 864,312 $ 4,563,441 Liabilities Deposits (4) $ 18,620,663 $ — $ 18,612,822 $ — $ 18,612,822 Debt (5) 5,113,775 955,306 4,024,516 — 4,979,822 Total liabilities $ 23,734,438 $ 955,306 $ 22,637,338 $ — $ 23,592,644 ___________________ (1) The carrying amounts of our cash and cash equivalents and restricted cash and restricted cash equivalents approximate their fair values due to the short-term maturities and highly liquid nature of these accounts. (2) The fair value of our credit cards was determined using a discounted cash flow model with key inputs relating to weighted average lives, expected lifetime loss rates and discount rate. The fair value of our commercial and consumer banking and senior secured loans was determined using a discounted cash flow model with key inputs relating to the underlying contractual coupons, terms, discount rate and expectations for defaults. (3) Other investments include FRB stock and FHLB stock, which are presented within other assets in the condensed consolidated balance sheets. (4) The fair values of our deposits without contractually defined maturities (such as demand and savings deposits) and our noninterest-bearing deposits approximate their carrying values. The fair value of our time-based deposits was determined using a discounted cash flow model based on rates currently offered for deposits of similar remaining maturities. (5) The carrying value of our debt is net of unamortized discounts and debt issuance costs. The fair value of our convertible notes was classified as Level 1, as it was based on an observable market quote. The fair values of our warehouse facility debt and revolving credit facility debt were classified as Level 2 based on market factors and credit factors specific to these financial instruments. The fair value of our securitization debt was classified as Level 2 and valued using a discounted cash flow model, with key inputs relating to the underlying contractual coupons, terms, discount rate and expectations for defaults and prepayments. Nonrecurring Fair Value Measurements Investments in equity securities of $23,085 and $22,920 as of March 31, 2024 and December 31, 2023, respectively, which are presented within other assets in the condensed consolidated balance sheets, include investments for which fair values are not readily determinable, which we elect to measure using the measurement alternative method of accounting. The fair value measurements are classified within Level 3 of the fair value hierarchy due to the use of unobservable inputs in the fair value measurements. The balances were primarily composed of a $19,739 investment valued under the measurement alternative method during 2022 that was a former equity method investment. |
