ladies and gentlemen welcome and in today's video I want to show off sofi's 10K and a lot of the slides that I think are most important whenever you're looking at the numbers that weren't available in their original presentation okay so if you guys don't know what the 10K is this is their business like their annual report for their business that they end up putting out that is extremely long and in this case it's 253 pages of nothing but business insights okay now I've went through a lot of this information and pulled out my favorite parts and then in this video I want to show a presentation of some of the slides that I think are most important for us to go through so just to save you a little bit of time on uh you know having to do that yourself all right so this is the presentation sorry about myh sick Voice or whatever but we'll just get through it all right first up it's sofi's debt breakdown okay so whenever looking at sofi's debt you have convertible notes they're revolving credit facilities and then well what we used to have was preferred shares now the preferred Shares are in Gray and you can see that we've gotten rid of the preferred shares and have increased our total amount of convertible debt some of this is actually for 2026 and then a other part is for 2029 however whenever you look at the difference uh which is between these two quarters whenever we really made some major changes from Q4 to q1 of 2024 the overall percentage that we pay on the convertible notes just went up slightly but the amount we paid on preferred shares has gone down from 12. 5% to zero because we took away all those preferred shares now the revolving credit facilities are a variable rate loan and so whenever interest ratees started to go down we started paying less to those large banks that are offering us that credit and so that rate has slowly been going down so what does that translate to for sofi's business their business debt expenses this is the total amount that they pay on a quarterly basis okay out to these businesses now the percentages are annualized but the actual rate that we're paying is quarterly which is now at 10 million a quarter previously before in 202 uh3 this was at 20 million a quarter and now it's looking like next quarter if we see any sort of rate cut or anything along these lines that we will actually fall beneath that $10 million Mark all right so getting very exciting for uh 2025 now this slide is the risk weighted assets for Sofi now what's interesting about risk weighted assets is that it also depends on the type of assets that you're bringing on so if you're signing up a bunch of Home Loans those aren't actually a onetoone number because they risk on home loans are much lower than personal loans so personal loans are counted as one to one and I think Home Loans are about 0. 5 or 0.
25 I forget the exact statistic but uh you know depending on the different type of loan there is a risk way asset which is very important for Sofi underneath that we have the 10. 5% risk-based capital uh minimum okay so whenever people talk about Capital ratios and these sort of things Sofi cannot fall behind or fall below 10 and a half% and really they can't fall behind 12 and a half% before a red flags start going off but 10% is a changing number so over the couple years between q1 of 2022 and Q4 of 24 that number has essentially tripled even though the 10. 5% has uh you know stayed the same the actual number has changed so for the total risk-based Capital amount that Sofi has you can see that this is where they're sitting at about $ 4.
5 billion or roughly about 6. 17% of their total risk rated assets okay this is their safety buffer think about it that way and so whenever we keep this High into the 16 percentages that's very good once we start falling below into the 14 percentages yes we'll be making more money because we're holding more loans on the balance sheet that are making great rates but also it could be a little bit more dangerous if things were to turn poor okay so this is a little bit more conservative holding it at higher rates we want to keep around that 16% okay now getting a little bit more lending specific let's take a look originations now this wasn't actually a new slide from the 10K but it's going to be needed going into all the information that we just got uh personal loans make up for the large large majority of what we're signing on to whenever it comes to lending originations however you can also see how big of a step that uh you know student loans and Home Loans have taken they've all three of them have taken large increases quarter over quarter okay or especially year over-ear that being said let's take an even closer look at each individual segment so looking at sofi's personal loans going all the way back from the first quarter that we've ever looked at them to now we are judging it based on a couple different things origination volume interest income recognized which is loans that are held on our balance sheet that are actually making us money based on their interest then in the top line here you have average interest rate earned and then in the bottom line here you have actual default rate in the gray here and you can actually see it's done a slight drop off quarter over quarter now down to a new low in in quite a long time to 3. 37% but is that an accurate number let's go ahead and see this next slide so this is actually what breaks out our actual default rate versus our default rate that is adjusted and what is it adjusted by Sofi selling off like late stage delinquent loans okay so 90 plus day delinquent loans which never are expected to come back we write off 90 plus per of those loans instead of Sofi letting those run off or trying to do their own version of collections they are actually selling large amounts of those loans last quarter I think it was 90 million and this is essentially changing the default rate because we're getting rid of the lowest rung of the loans now the problem is is just how conservative we have to be because the 90 million that they said they sold we don't know exactly how much that they would have actually received in collections now Sofi has said that they've made about double what they would have expected if they were to have done it on their own at low double digits so people are assuming somewhere around 20% I am not factoring in the fact that they are making about 20% back on the loss of that $90 million of poorly performing loans so 5.
42 is a little high but also to assume that we got 3. 37 is also just a little low because it doesn't factor in you know a large part of the the loans that we actually didn't hit on okay so it' be somewhere in the middle here but it's a good way to sort of break that out ever since they started selling uh late stage delinquent loans for the last four quarters essentially student loans okay so the average interest rate earned on student loans went at 5. 73% default stayed extremely low at 5 or sorry 0.
59% and then the origination volumes skyrocketed in the most recent quarter we haven't seen a high quarter like this since Q4 of 2021 and also the amount of interest income recognized was also a brand new high for the company so student loans are hitting it off personal loans are hitting it off home loans are a little different we don't actually really see any sort of default rate because we don't have enough loans on the platform we almost sell them off immediately okay so originations are skyrocketing for uh Home Loans it's not the highest we've ever seen it however we are doing more of the loan now than what we were doing previously which was a lot through referral okay so now we're actually making a lot more money through the loans that we're selling even though they're much less and the average uh interest rate that we're earning here is much much higher than what we were earning previously as well roughly around 1 to 2% now being able to capture roughly 8% is just insane this is the total amount of interest income earned whenever you look across sofi's entire lending platform it continues to hit new uh all-time highs and that's very exciting for Sofi just continues to build up the base and as long as defaults aren't skyrocketing that this is a great add to the business just knowing that they'll continue to make more money over time as they have more lending customers now one of the best statistics in the entire quarter one that we really haven't seen in quite a long time is the net spread starting to climb up again and unlike this little dip or or acceleration in Q3 of 2023 this one I actually think is sticky so what we see here is that the average cost of funding is starting to fall but the average coupon rate is not falling okay so what this actually allows us us to do is the spread between what we're receiving on our loans and what we're paying out to fund those loans are we're seeing sort of a different spread so here in Q3 of 2022 was by far the best time okay the amount that we were paying for deposits or or cost of funding in general was super low but the average coupon rate was very high you know respectively so as we continue to climb higher but but cost of funding also went higher the the net spread actually lowered to a bottom of Q 4 of 2023 and now this is starting to climb back up and actually seeing quite the tick up uh in the most recent quarter here as well now total loan sales there's not much I have to say here it kind of speaks for itself we are so back baby so this is personal loan percentages of loan sales which is now at 15% of the total amount of uh loans that are on sofi's balance sheet are being sold within the quarter it's not quite the 50 60% we probably will never never see that again this was back out of necessity whenever they had no Bank Charter okay then q1 we originally got the bank Charter and then you really started to see as raising interest rates and a certain amount of need to grow the balance sheet we just saw a complete disaster here . 1% on you know personal loan sales this is nothing but now getting back to 15% you can see that the market really wants the loans that Sofi has to offer selling $3 billion in loans total total loan sales okay but uh absolutely amazing now this is my sort of non-gaap metric this is something that I like to add this is factoring in all defaults all the cost of fundings into sofi's loans and taking away the idea that they're ever going to sell loans okay just assuming how much would we make on these loans based on how they're how the loans are doing and how much that they would be receiving inclusive of all their additional costs the higher this number goes also means that they can ask for a better cost whenever they do sell the loans so this might not be the number that Sofi actually receives but it could be the asking price to say hey our loans are actually doing great versus their defaults or versus their uh cost of funding and that these might be loans that people would want to have on their balance sheet so this just hit a brand new high in company history since it's been a public business and so we just continue to uh do very well got a little spotty around Q4 2023 it didn't look too good that those those were hard times but you know 2024 was very good and 2025 is seeming even more ripe for for this to grow even further and then another area where we saw massive amounts of information uh that we didn't receive in the regular press release was credit cards okay let's take a look so credit cards by FICO score breaking down each and every line item what we can see is that they have loans ranging from 800 plus credit scores all the way down to you know below 640 now the highest yellow one that is here that's just dominating every other line is actually below 640 it's a very scary number and in q1 of 2024 I was very scared this seemed to be something that just kept growing out of its you know out of the way and and a scary line that you don't necessarily want because that's how you're going to see big losses but instead is actually started to decrease quarter after quarter after quarter and the other and potentially the fastest line to be growing in this area is actually the 800 plus and so I didn't actually bring out the numbers because it' be very hard to read if you were to bring out every single number here but essentially all of the upperbound 700 plus FICO scored numbers are going up and all of the ones below that are the ones that are going down okay so the gray here is the 640 to 6 60 the orange here is 660 to 679 all of the ones that are essentially low FICO are going down everything else is going up so a very good quarter for for credit cards so far based on FICO scores now credit cards in terms of how what is the total amount of credit card loans and the total default rate Sofi another slam dunk dropped that by nearly 200 basis points okay crazy so now we're down to 10. 4% still very high comparatively to their competitors but way way better than 16.
