The following discussion and analysis provides information that management
believes is relevant to an assessment and understanding of our consolidated
results of operations and financial condition. You should read this discussion
and analysis in conjunction with the unaudited condensed consolidated financial
statements and notes thereto included elsewhere in this Quarterly Report on Form
10-Q, as well as SoFi Technologies' audited consolidated financial statements
and notes thereto included in the final prospectus and definitive proxy
statement, dated May 7, 2021 (the "Proxy Statement/Prospectus") and filed with
the SEC. Certain amounts may not foot due to rounding. Certain information in
this discussion and analysis or set forth elsewhere in this Quarterly Report on
Form 10-Q contains forward-looking statements that involve numerous risks and
uncertainties, including, but not limited to, those described under the sections
entitled "Cautionary Note Regarding Forward-Looking Statements" and Item II,
Part 1A. "Risk Factors" included in this Quarterly Report on Form 10-Q. We
assume no obligation to update any of these forward-looking statements. Actual
results may differ materially from those contained in any forward-looking
statements.
Social Finance, Inc. ("Social Finance") entered into a merger agreement (the
"Agreement") with Social Capital Hedosophia Holdings Corp. V ("SCH") on January
7, 2021. The transactions contemplated by the terms of the Agreement were
completed on May 28, 2021 (the "Closing"), in conjunction with which SCH changed
its name to SoFi Technologies, Inc. (hereafter referred to, collectively with
its subsidiaries, as "SoFi", the "Company", "we", "us" or "our", unless the
context otherwise requires). The transactions contemplated in the Agreement are
collectively referred to as the "Business Combination".
Business Overview
We are a member-centric, one-stop shop for digital financial services that
allows members to borrow, save, spend, invest and protect their money. Our
mission is to help our members achieve financial independence in order to
realize their ambitions. To us, financial independence does not mean being
wealthy, but rather represents the ability of our members to have the financial
means to achieve their personal objectives at each stage of life, such as owning
a home, having a family, or having a career of their choice - more simply
stated, to have enough money to do what they want. We were founded in 2011 and
have developed a suite of financial products that offers the speed, selection,
content, and convenience that only an integrated digital platform can provide.
In order for us to achieve our mission, we have to help people get their money
right, which means providing them with the ability to borrow better, save
better, spend better, invest better and protect better. Everything we do today
is geared toward helping our members "Get Your Money Right" and we strive to
innovate and build ways for our members to achieve this goal.
Our three reportable segments and their respective products as of June 30, 2021
were as follows:
                Lending                                   Financial Services                               Technology Platform
•        Student Loans(1)                      •           SoFi Money                          •              Technology Platform Services
•        Personal Loans                        •           SoFi Invest(2)                                     (Galileo)
•        Home Loans                            •           SoFi Relay
                                               •           SoFi Credit Card
                                               •           SoFi At Work
                                               •           SoFi Protect
                                               •           Lantern Credit
                                               •           Equity capital markets and
                                                           advisory services


__________________
(1)Composed of in school loans and student loan refinancing.
(2)Our SoFi Invest service is composed of three products: active investing
accounts, robo-advisory accounts and digital assets accounts.
We refer to our customers as "members". We define a member as someone who has a
lending relationship with us through origination or servicing, opened a
financial services account, linked an external account to our platform, or
signed up for our credit score monitoring service. Once someone becomes a
member, they are always considered a member unless they violate our terms of
service, given that our members have continuous access to our certified
financial planners ("CFPs"), our career advice services, our member events, our
content, educational material, news, tools and calculators at no cost to the
member. Additionally, our mobile app and website have a member home feed that is
personalized and delivers content to a member about what they must do that day
in their financial life, what they should consider doing that day in their
financial life, and what they can do that day in their financial life. Since our
inception through June 30, 2021, we have served approximately 2.6 million
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members who have used approximately 3.7 million products on the SoFi platform.
We believe we are in the early stages of the digital transformation of financial
services and, as a result, have a substantial opportunity to continue to grow
our member base and increase the number of products that our members use on the
SoFi platform.

                    [[Image Removed: sofi-20210630_g1.jpg]]
We offer our members a suite of financial products and services, enabling them
to borrow, save, spend, invest and protect within one integrated platform. Our
aim is to create a best-in-class, integrated financial services platform that
will generate a virtuous cycle whereby positive member experiences will lead to
more products adopted per member and enhanced profitability for each additional
product by lowering overall member acquisition costs and increasing the lifetime
value of our members. We refer to this virtuous cycle as our "Financial Services
Productivity Loop".
We believe that developing a relationship with our members and gaining their
trust is central to our success as a financial services platform. Moreover, we
believe that some of the current frictions faced by other financial institutions
are caused by a disjointed and non-seamless product experience, a lack of
digital acquisition, subpar mobile web products instead of digital native apps
and incomplete product offerings to meet a customer's holistic financial needs.
Through our mobile technology and continuous effort to improve our financial
services products, we are seeking to build a financial services platform that
members can access for all of their financial services needs.
We believe we are in the early stages of realizing the benefits of the Financial
Services Productivity Loop, as increasing numbers of our members are using
multiple products on our platform.
In addition to benefiting our members, our products and capabilities are also
designed to appeal to enterprises, such as financial services institutions that
subscribe to our enterprise services through SoFi At Work, and other enterprises
that leverage our capabilities to assist with equity capital markets and
advisory services. These enterprises become interconnected with the SoFi
platform when using it for these services. While these enterprises are not
considered members, they are important contributors to the growth of the SoFi
platform, and, in some cases, also have their own constituents who might benefit
from our products in the future. Further, our wholly-owned subsidiary, Galileo,
had approximately 79 million total accounts on its platform (excluding SoFi
accounts) as of June 30, 2021. Galileo started contributing new accounts to the
SoFi ecosystem during the second quarter of 2020.
While we primarily operate in the United States, in 2020, we expanded into Hong
Kong with our acquisition of 8 Limited, an investment business. Additionally,
with the acquisition of Galileo in May 2020, we gained clients in Mexico.
National Bank Charter.  A key element of our long-term strategy is to secure a
national bank charter, which we believe can enhance our overall profitability.
While we currently rely on third-party bank holding companies to provide banking
services to our members, securing a national bank charter would, among other
things, allow us to provide members and prospective members broader and more
competitive options across their financial services needs, including deposit
accounts, and lower our cost to fund loans (by utilizing our SoFi Money members'
deposits to fund our loans), which would enable us to offer lower interest rates
on loans to members as well as offer higher interest rates on SoFi Money
accounts, all while continuing not to charge non-interest based fees.
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In October 2020, we received preliminary, conditional approval from the Office
of the Comptroller of the Currency (the "OCC") for our application for a
national bank charter. Final OCC approval is subject to a number of preopening
requirements. In March 2021, we entered into an agreement to acquire Golden
Pacific Bancorp, Inc., a bank holding company ("Golden Pacific"), and its
wholly-owned subsidiary, Golden Pacific Bank, National Association, a national
bank ("Golden Pacific Bank"), for a total cash purchase price of $22.3 million.
The acquisition is subject to regulatory approval, including approval from the
OCC of a revised business plan for the acquiree national bank, and approval from
the Federal Reserve to become a bank holding company and for a change of
control, and other customary closing conditions. In March 2021, we also
submitted an application to the Federal Reserve to become a bank holding
company. The application review process is ongoing.
In order to be compliant with all applicable regulations, to operate to the
satisfaction of the banking regulators, and to successfully execute our business
plan for the bank, SoFi has been building out the required infrastructure to run
the bank and to operate as a bank holding company. This effort spans our people
and organization, technology, marketing/product management, risk management,
compliance, and control functions. We have invested and expect to continue to
invest substantial time, money and human resources towards bank readiness, and
towards the regulatory approval process. During the three and six months ended
June 30, 2021, we incurred direct costs associated with securing a national bank
charter of $3.7 million and $9.2 million, respectively, which consisted
primarily of professional fees and compensation and benefits costs. While
largely dependent on the timing of the regulatory approvals, we estimate that we
could incur additional costs of approximately $5 million to $10 million through
the remainder of the regulatory approval process.
IPO Investment Center.  Through our FINRA-registered broker-dealer subsidiary,
SoFi Securities LLC ("SoFi Securities"), we are licensed to underwrite
securities offerings. In March 2021, we launched an IPO investment center that
allows members with a SoFi active Invest account to invest in initial public
offerings before they trade on an exchange. During the three and six months
ended June 30, 2021, we recognized underwriting fee revenue of $1.8 million
within noninterest income - other in the Unaudited Condensed Consolidated
Statements of Operations and Comprehensive Income (Loss) associated with our IPO
Investment Center underwriting activities. We aim to continue to generate
revenues in future periods for our IPO investment center activities in the form
of underwriting fees.
Our Reportable Segments
We conduct our business through three reportable segments: Lending, Financial
Services and Technology Platform. Below is a discussion of our segments and
their corresponding products.
Lending Segment
Through our Lending segment, we offer student loans, personal loans, home loans
and related services.
Student Loans. We primarily operate in the student loan refinance space, with a
focus on super-prime graduate school loans. In 2019, we expanded into
"in-school" lending, which allows members to borrow funds while they attend
school. We offer flexible loan sizes and repayment options, as well as
competitive rates, on our student loan refinancing and in-school loan products.
Personal Loans. We primarily originate personal loans for debt consolidation
purposes and home improvement projects. We offer fixed and variable rate loans
with no origination fees and flexible repayment terms, such as unemployment
protection. There are other personal loan purposes or channels that we have not
aggressively pursued, which we believe could represent opportunities for us in
the future.
Home Loans. We have historically offered agency and non-agency loans for members
purchasing a home or refinancing an existing mortgage. For our home loan
products, we offer competitive rates, flexible down-payment options for as
little as 5% and educational tools and calculators.
A key element of our underwriting process is the ability to facilitate
risk-based interest rates that are appropriate for each loan. Using SoFi's
proprietary risk models, we project quarterly loan performance, including
expected losses and prepayments. The outcome of this process helps us determine
a more data-driven, risk-adjusted interest rate that we can offer our members.
SoFi has built a comprehensive underwriting process across each lending product
that is focused on willingness to pay (measured by credit attributes), ability
to pay (measured through income verification), and capacity to pay (measured by
debt service in relation to other loans). Our student loan and personal loan
underwriting models consider credit reports, industry credit and bankruptcy
prediction models, custom credit assessment models, and debt capacity analysis,
as indicated by borrower free cash flow (defined as borrower monthly net income
less revolving and installment payments less housing payments). Our minimum FICO
requirements are 650 for student loan refinancing, 650 for in-school loans
(primary or co-signer) and 680 for personal loans. We decreased our in-school
loan minimum FICO requirement in conjunction with our launch of a revised
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underwriting strategy, which utilizes an advanced risk model that focuses on
borrowers' ability to pay and provides refined risk separation. Home loans
originated by SoFi that are agency conforming loans are subject to credit, debt
service, and collateral eligibility established by Fannie Mae. Existing members
generally experience a higher approval rate than new members, subject to the
existing member being in good standing on their existing products. Home loans
originated by SoFi that are non-agency loans are subject to our credit criteria,
including a minimum tri-bureau credit score, established credit history
requirements, income verification, as well as maximum qualified mortgage limits
on debt-to-income service and caps on loan-to-value based on an accredited
appraisal. We also leverage our data to provide existing members a streamlined
application process through automation.
Our lending business is primarily a gain-on-sale model, whereby we originate
loans and recognize a gain from these loans when we sell them into either our
whole loan or securitization channels. We sell our whole loans primarily to
large financial institutions, such as bank holding companies, typically at a
premium to par, and in excess of our costs to originate the loans. Our loan
premiums fluctuate from time to time based on benchmark rates and credit
spreads, and we are not guaranteed a gain on all or any of our loan sales. When
securitizing loans, we first isolate the underlying loans in a trust and then
sell the beneficial interests in the trust to a bankruptcy-remote entity. In
securitization transactions that do not qualify for sale accounting, the related
assets remain on our balance sheet and cash proceeds received are reported as
liabilities, with related interest expense recognized over the life of the
related borrowing. In securitization transactions that qualify for sale
accounting, we typically have insignificant continuing involvement as an
investor. In the case of both whole loan sales and securitizations, we also
typically continue to retain servicing rights following transfer. We, therefore,
view servicing as an integral component of the Lending segment.
Prior to selling our loans, we hold them on our balance sheet at fair value and
rely upon warehouse financing arrangements. Net interest income, which we define
as the difference between the earned interest income and interest expense to
finance loans, is a key component of the profitability of our Lending segment.
With the exception of certain of our home loans, we retain servicing rights to
our originated loans, and believe our servicing function is an important asset
because of the connection to the member it affords us throughout the life of the
loan. We directly service all of the personal loans that we originate. We act as
master servicer for, and rely on sub-servicers to directly service, all of our
student loans and Federal National Mortgage Association ("FNMA") conforming home
loans. We believe this ongoing relationship with our members enhances the
effectiveness of our Financial Services Productivity Loop by increasing member
touchpoints and driving increases in the number of products per member.
Furthermore, our platform supports the full transaction lifecycle, including
credit application, underwriting, approval, funding and servicing. Through data
derived at loan origination and throughout the servicing process, SoFi has
life-of-loan performance data on each loan in its ecosystem, which provides a
meaningful data asset.
Financial Services Segment
Our Financial Services segment consists of cash management, investment and other
financial services activities.
SoFi Money
Through SoFi Money, a digital, mobile cash management experience for our
members, we invest in member acquisition and marketing activities to attract new
members, including by offering rewards to incentivize prospective members to
house their cash management activities on the SoFi platform.
We generate interest income from deposits sitting in our various member banks,
which is reduced by the interest fees paid to members. We also earn payment
network fees on member expenditures via SoFi-branded debit cards issued by one
of our member bank holding companies (each a "Member Bank"). Payment network
fees are reduced by direct fees payable to card associations and the Member
Bank.
The Bancorp Bank ("Bancorp") is the issuer of all SoFi Money debit cards and
sponsors access to debit networks for payment transactions, funding transactions
and associated settlement of funds under a sponsorship agreement with SoFi
Securities. Additionally, Bancorp provides sponsorship and support for ACH,
check, and wire transactions along with associated funds settlement. The SoFi
Money product also utilizes a sweep administrator, UMB Bank, National
Association ("UMB"), to sweep funds to and from the SoFi Money program banks, as
necessary, under a program broker agreement between SoFi Securities and UMB and
program account and program bank agreements with a variety of sweep program
banks. The SoFi Securities agreement with Bancorp provides for receipt by
Bancorp of program revenue and transaction fees, and is subject to a minimum
monthly card activity fee. The agreement with Bancorp is terminable by SoFi
Securities with 120 days prior notice. The program broker agreement between SoFi
Securities and UMB provides for one-year terms that automatically renew and is
terminable by either party with at least 90 days' written notice prior to the
end of the current term. The program
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account agreements and program bank agreements between SoFi Securities, UMB and
the sweep banks provide for the rate of interest payable on the balances in a
member's SoFi Money account and include certain maximum transfer requirements on
transfers. These arrangements are generally terminable upon termination of SoFi
Securities' sweep arrangement with UMB.
SoFi Invest
We also provide introductory brokerage services to our members, and have
invested significantly in creating SoFi Invest, a streamlined mobile investing
experience through which we offer multiple ways to invest and give members
access to active investing, robo-advisory and digital assets services. While we
do not charge trading fees, other than for digital assets trading, our platform
benefits from increasing assets under management as we generate interest income
on cash balances that we hold, and we also earn brokerage revenue through share
lending and pay for order flow arrangements. We also believe there are
opportunities to generate incremental future revenue through margin lending and
options. Through our acquisition of 8 Limited in 2020, we expanded SoFi Invest
into the Hong Kong market. With respect to our digital assets trading
activities, which we initiated in 2019, we do not hold or store members' digital
assets, but instead rely on a third party custodian, and we hold an immaterial
amount of digital assets in order to facilitate paying new member bonuses when
members initiate their first digital assets trade. We do this for member
convenience to facilitate a seamless payment of digital assets.
Furthermore, our innovative "stock bits" feature allows members to purchase
fractional shares in various companies. Through our "stock bits" offering,
members with SoFi Invest active brokerage accounts may buy or sell fractional
shares in a variety of equity securities. Members can place orders in dollars or
shares. During the course of a trading day, all member orders are consolidated
into a single order for each equity security, which may be a sell or buy order.
These fractional orders are rounded up to the next whole share and executed as a
market order prior to market close on a standard trading day. Following market
close, we allocate the trades to each individual member. We maintain a stock
inventory for each issuer for whose securities we provide fractional trading in
order to facilitate "stock bits" trades.
Other
In August 2020, we began offering the SoFi Credit Card, which we expanded to a
broader market in the fourth quarter of 2020. Additionally, we developed SoFi
Relay within the SoFi mobile application, a personal finance management product
which allows members to track all of their financial accounts in one place and
utilize credit score monitoring services. Further, we leverage our technology
and information infrastructure to offer services to other enterprises, such as
loan referrals and SoFi At Work, which is a platform we offer to enterprises
that are looking for a seamless way to provide financial benefits to their
employees, such as student loan payments made on their employees' behalf, for
which we earn a fee. We have also developed a financial services marketplace
platform branded as Lantern Credit to help applicants that do not qualify for
SoFi products find alternative products, as well as providing a product
comparison experience. Finally, commencing in the second quarter of 2021, we
started earning revenues for equity capital markets and advisory services.
We earn revenues in connection with our Financial Services segment through
various partnerships and our SoFi Money and SoFi Invest products in the
following ways:
•Referral fees: Through strategic partnerships, we earn a specified referral fee
in connection with referral activity we facilitate through our platform, which
is not directly tied to a particular Financial Services product. The referral
fee is paid to us by third-party partners that offer services to end users who
do not use one of our product offerings, but who were referred to the partners
through our platform. As such, the third-party enterprise partners are our
customers in these referral arrangements.
•Payment network fees: We earn payment network fees, which primarily constitute
interchange fees from our SoFi Money and SoFi Credit Card products, which are
reduced by fees payable to card associations and the issuing bank holding
company. These fees are remitted by merchants and are calculated by multiplying
a set fee percentage (as stipulated by the debit card payment network) by the
transaction volume processed through such network. We arrange for performance by
a card association and the bank issuer to enable certain aspects of the SoFi
branded transaction card process. We enter into contracts with both parties that
establish the shared economics of SoFi branded transaction cards.
•Enterprise service fees: These fees are earned in connection with services we
provide to enterprise partners, such as when we facilitate transactions for the
benefit of their employees, such as 529 plan contributions or student loan
payments through our At Work product, which represents our single performance
obligation in the arrangements. Commencing in the second quarter of 2021,
enterprise services also included fees for providing advisory services to an
enterprise partner to facilitate reaching a quorum on their shareholder vote,
which represented our single performance obligation in the arrangement. Our fee
was a success-based fee for achieving contractually-specified targets, which
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represented variable consideration at contract inception. However, as advisory
fees were billed to, and collected directly from, our partner only once our
performance obligation was satisfied, the variable consideration within the
reporting period was not constrained. Our revenue was reported on a gross basis,
as we acted in the capacity of a principal, demonstrated the requisite control
over the service, and were primarily responsible for fulfilling the performance
obligation to our enterprise partner. These fees are discussed herein as a
component of equity capital markets and advisory services.
•Brokerage fees: We earn brokerage fees from our share lending and pay for order
flow arrangements related to our SoFi Invest product (for which Apex Clearing
Holdings, LLC, or "Apex", serves as principal), exchange conversion services and
digital assets activity. In our share lending arrangements and pay for order
flow arrangements with Apex, we do not oversee the execution of the transactions
by our members, but benefit through a negotiated multi-year revenue sharing
arrangement, since our members' brokerage activity drives the share lending and
pay for order flow volume. Apex connects with market makers (order flow) and
institutions (share lending) to facilitate the service and is responsible for
execution. Apex carries inventory risk with the share lending program and
ultimately is responsible for successful order routing to market makers that
trigger the pay for order flow revenue. Apex sets the gross price and negotiates
with market makers and institutions as part of our order flow and share lending
arrangements. We have no discretion or visibility into this pricing and,
instead, negotiate a net fee for our order flow and share lending arrangements,
which is settled with Apex rather than with market makers or other institutions.
In our digital assets arrangements, our fee is calculated as a negotiated
percentage of the transaction volume. In our exchange conversion arrangements,
we earn fees for exchanging one currency for another. Historically, these fees
have not been a significant portion of our total net revenue. Our arrangements
with Apex are governed by an agreement which contains certain minimum monthly
requirements and which is terminable by either party upon notice. Although we no
longer have an equity method investment in Apex as of the balance sheet date,
Apex continues to provide the services under this agreement.
•Underwriting Fees: Commencing in the second quarter of 2021, we earned
underwriting fees related to our membership in underwriting syndicates for
initial public offerings. The underwriting of securities is the only performance
obligation in our underwriting agreements, and we recognize underwriting fees on
the trade date. Moreover, we are a principal in our underwriting agreements,
because we demonstrate the requisite control over the satisfaction of the
performance obligation through the assumption of underwriter liability for our
designated share allotment. As such, we recognize underwriting fee revenue on a
gross basis.
•Net interest income: Our SoFi Invest and SoFi Money products also generate net
interest income based on the cash balances held in these accounts. Historically,
this income has not been a significant portion of our total net revenue.
Technology Platform Segment
Our Technology Platform segment consists of Galileo, and historically included
our minority ownership of Apex, a technology-enabled provider of investment
custody and clearing brokerage services, in which we invested in December 2018.
During January 2021, the seller of the Apex interest exercised its call rights
on our Apex investment. Therefore, we did not recognize any Apex equity method
investment income during the three and six months ended June 30, 2021, nor will
we have such equity method investment income in future periods. Additionally, we
measured the carrying value of the Apex equity method investment as of December
31, 2020 equal to the call payment that we received in January 2021. Although
following the exercise of the seller's call rights we no longer have an equity
method investment in Apex or recognize equity method investment income, Apex
continues to provide investment custody and clearing services for SoFi Invest,
including for our brokerage activities, under a multi-year revenue sharing
arrangement.
In May 2020, we acquired Galileo, a provider of technology platform services to
financial and non-financial institutions. Through Galileo, we provide services
through a suite of program, event and authorization application programming
interfaces for financial and non-financial institutions. Additionally, Galileo
provides vertical integration benefits with SoFi Money. In addition to growth in
its U.S. client base, Galileo is increasingly focused on international
opportunities, including in Latin America and Asia.
We earn revenue on Galileo's platform in the following two ways:
•Technology Platform Fees: The platform fees we earn are based on access to the
platform and are specific to the type of transaction. For example, we offer
"event pricing", which includes a specific charge for an account setup, an
active account on file, use of Program, Event and Authorization Application
Programming Interfaces ("APIs"), card activation, authorizations and processing,
and card loads. In addition, we offer "partner pricing", which is the back-end
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support we provide to Galileo's clients, such as live agent customer service,
chargeback and fraud analysis and credit bureau reporting, all within one
integrated solution for our clients.
•Program Management Fees: Also referred to as "card program fees", these
transaction fees are generated from the creation and management of card programs
issued by banks and requested by enterprise partners. In these arrangements,
Galileo performs card management services and the revenue stems from the payment
network and card program fees generated by the card program. This revenue is
reduced by association and bank issuer costs, and a revenue share passed along
to the enterprise partner that markets the card program. We categorize this
class of revenue as payment network fees.
Galileo typically enters into multi-year service contracts with its clients. The
contracts provide for a variety of integrated platform services, which vary by
client and are generally either non-cancellable or cancellable with a
substantive payment. Pricing structures under these contracts are typically
volume-based, or a combination of activity- and volume-based, and payment terms
are predominantly monthly in arrears. Most of Galileo's contracts contain
minimum monthly payments with agreed upon monthly service levels and may contain
penalties if service levels are not met.
COVID-19 Pandemic
Although the long-term effects of the novel coronavirus ("COVID-19") pandemic
globally and in the United States remain unknown, we are seeing signs of
recovery from the impacts of the pandemic due to the increased availability of
vaccinations and evolving government stimulus programs, particularly in the
United States, including businesses and schools reopening, improved employment
metrics, and increased consumer spending and confidence levels. However, we
continue to monitor developments related to the pandemic, particularly the
spread of additional strains of the COVID virus and potential related impacts.
Through our business continuity program, which was expanded in response to the
COVID-19 pandemic, we continue to monitor the recommendations and protocols
published by the U.S. Centers for Disease Control and Prevention ("CDC") and the
World Health Organization, as well as state and local governments, and to
communicate with employees on a regular basis to provide updated information and
corporate policies. As the guidance issued by governments and regulators
continues to evolve, we likewise continue to assess the impacts on us and to
adjust our business operations, policies and procedures as needed to best
accommodate our ecosystem of members and prospective members, Member Banks and
employees. See "- Key Factors Affecting Operating Results - Industry Trends and
General Economic Conditions" for discussion of the impact to our business of
measures taken in response to the economic and financial effects of the COVID-19
pandemic.
Since the onset of the COVID-19 pandemic, we have continued to adapt our
response and strategies to navigate uncertain economic, workplace and market
conditions. We have taken a number of measures to proactively support our
members, applicants for new loans, employees and investors.
Members:  We have and will continue to approach hardship programs from a
member-first perspective. In addition to our Unemployment Protection Plan, which
remains available to all eligible members, we launched comprehensive forbearance
programs that provided meaningful Federal Emergency Management Agency disaster
hardship relief. Starting in March 2020, we made available a web-enabled
self-service forbearance request process to enable members who faced
unemployment, reduction in income or general economic uncertainty to defer their
loan payment for an initial period with options to extend. For student loans and
personal loans, when a forbearance request was accepted, interest on the loan
continued to accrue and is amortized over the remaining life of the loan, and
the maturity date of the loan is extended for the length of the deferment. Home
loans are subject to FNMA servicing guidelines, which provide certain options to
the borrower. In accordance with these guidelines, after the forbearance period
has ended, members are required to repay the amount that was suspended, but are
not required to repay the amount all at once, though they have that option.
Other potential options we offer allow members to repay all delinquent amounts
gradually over a period of time in addition to their regular monthly payments,
move the deferred amount to the end of the loan term, or set up a loan
modification, if they are eligible. In all instances, interest continues to
accrue during the forbearance period. In response to the hardship brought on by
the COVID-19 pandemic, we also deferred certain collection recovery activities,
while taking every opportunity to work with our members to find a path to
repayment. We discontinued enrollment in our COVID-19 forbearance programs,
which were designed to be temporary in nature, for personal loans and student
loans on March 31, 2021 and April 30, 2021, respectively. Although enrollment in
COVID-19 forbearance programs for home loans remains open, new requests remain
low and are primarily related to extensions of existing forbearance. Subject to
eligibility, members may participate in other customary hardship programs.
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As of June 30, 2021, the loans in active short-term hardship relief or payment
deferral due to the COVID-19 pandemic included 95 student loans with an
aggregate balance of $6.0 million and 84 home loans with an aggregate balance of
$22.9 million. There were no personal loans in this category due to the COVID-19
pandemic.
Applicants: In response to deteriorating economic conditions and market
uncertainty amid the COVID-19 pandemic, in 2020 we proactively executed our
recession readiness credit risk strategies. This included introducing elevated
credit eligibility requirements for personal loans, thorough validation of
income and income continuity, and limiting loan amounts. We expected
originations incorporating credit risk strategy changes, when stressed using
external loss forecasting models with stressed econometric scenarios, to perform
similarly to previous vintages. Our student loan refinance business is
substantially composed of applicants refinancing federal loans and/or existing
private student loans. We developed objective content and calculators to educate
applicants about the Federal relief available to them through the CARES Act and
subsequent extensions, which enabled them to maximize their savings. Throughout
the first half of 2021, we adapted our elevated credit eligibility requirements
for personal loans through phases of reopening following our metric-driven,
return-to-normalcy action plan.
Employees: In order to safeguard the health and safety of our team members and
their families, we virtualized our entire organization beginning in March 2020,
enabling all of our team members to work virtually. We have taken a proactive
approach to enable ongoing communication and engagement. In February 2021, we
announced that our employees may work with their managers to determine the best
place for them to work from, including continuing to work virtually.
Additionally, based on feedback we received from an employee engagement survey,
we initiated a pilot reopening of our U.S. offices in July 2021 on a voluntary
basis. In the Fall of 2021, we expect to commence a staggered
Return-To-Workplace program, followed by a full reopening of all United States
SoFi office locations. We will continue to align our protocols with evolving
CDC, state and local guidelines to continue to safeguard the health and safety
of our team members and their families.
Investors: Durability of, and confidence in, the performance of our originated
asset classes has never been more important. Despite uncertain market and
economic conditions, our serviced assets continue to perform at historic low
delinquency and loss metrics, even when adjusted for forbearance. The majority
of our members have validated their income resiliency and have returned to
making full or partial payments on their loan or have paid in full. We have
identified members who have sustained hardships and we have worked
constructively with the investor community to establish expanded loss mitigation
tools to maximize recovery while providing empathy for distressed members. Our
team has worked to provide greater transparency to our investor community
through access to our Capital Markets and Risk Management team and by providing
internal and external analytical and stress testing forecasts, which provide a
range of economic scenarios that could manifest in performance of their owned
assets. Investors continue to not only have demand for our assets, but have
grown their demand for our assets in light of their demonstrated performance.
Delinquencies: Members enrolled in forbearance or hardship relief programs do
not appear in delinquency metrics and are not subject to collection activity.
Despite this, during any re-enrollment, we work with members to determine when a
short-term hardship becomes long-term, which requires differing solutions to
ensure a member has the best chance for repayment success. At the onset of the
COVID-19 pandemic, we provided online self-service opportunities to members to
request initial relief and subsequently extend that short-term forbearance
relief as needed (subject to approval). COVID-19 hardship relief was available
to members who were current or delinquent at the time of request, although the
majority of student loan and personal loan initial enrollments were members who
were "current" at the time of enrollment. The vast majority of members that
entered COVID-19 hardship programs have exited such programs.
Liquidity: We took action to prepare for potential liquidity needs resulting
from the COVID-19 pandemic by securing additional committed warehouse capacity
in May 2020. We were able to manage these needs along with other liquidity needs
of our business by relying on our strong liquidity position going into the
crisis, having a deep and diversified portfolio of warehouse lenders, being
proactive and forward-looking as it related to anticipated liquidity risks and
needs, and managing decisions conservatively with regard to loan origination
growth and loan sales.
We remain committed to serving our members, applicants and investors, while
caring for the safety of our employees and their families. See Part II, Item 1A
"Risk Factors - COVID-19 Pandemic Risks" for additional discussion of the risks
and uncertainties associated with the repercussions of the COVID-19 pandemic.
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Executive Overview
The following tables display key financial measures for our three reportable
segments and our consolidated company that are used, along with our key business
metrics, by management to evaluate our business, measure our performance,
identify trends and make strategic decisions. Contribution profit (loss) is the
primary measure of segment-level profit and loss reviewed by management and is
defined as total net revenue for each reportable segment less expenses directly
attributable to the corresponding reportable segment and, in the case of our
Lending segment, less fair value adjustments attributable to assumption changes
associated with our servicing rights and residual interests classified as debt.
See "- Results of Operations", "- Summary Results by Segment" and "- Non-GAAP
Financial Measures" herein for discussion and analysis of these key financial
measures.
                                                           Three Months Ended June 30,                 Six Months Ended June 30,
($ in thousands)                                             2021                  2020                 2021                  2020
Lending
Total interest income                                  $       83,035          $  83,985          $      164,582          $ 177,162
Total interest expense                                        (26,213)           (39,650)                (55,983)           (87,166)
Total noninterest income                                      109,469             51,549                 205,669             79,766
Total net revenue                                             166,291             95,884                 314,268            169,762
Adjusted net revenue(1)(2)                                    172,232            117,182                 340,269            198,937
Contribution profit(1)                                         89,188             49,419                 176,874             53,514
Financial Services(1)
Total interest income                                             893                316                   1,433              2,053
Total interest expense                                           (351)              (233)                   (662)            (1,755)
Total noninterest income                                       16,497              2,345                  22,731              4,284
Total net revenue                                              17,039              2,428                  23,502              4,582

Contribution loss                                             (24,745)           (30,893)                (60,264)           (57,876)
Technology Platform(1)(3)
Total interest expense                                            (32)               (18)                    (68)               (18)
Total noninterest income                                       45,329             19,037                  91,430             20,034
Total net revenue                                              45,297             19,019                  91,362             20,016
Contribution profit                                            13,013             12,100                  28,698             13,097
Other(4)
Total interest income                                             180              1,764                     621              4,132
Total interest expense                                         (1,500)            (3,417)                 (6,631)            (4,512)
Total noninterest income (loss)                                 3,967               (726)                  4,136               (726)
Total net revenue (loss)                                        2,647             (2,379)                 (1,874)            (1,106)
Consolidated
Total interest income                                  $       84,108          $  86,065          $      166,636          $ 183,347
Total interest expense                                        (28,096)           (43,318)                (63,344)           (93,451)
Total noninterest income                                      175,262             72,205                 323,966            103,358
Total net revenue                                             231,274            114,952                 427,258            193,254
Adjusted net revenue(1)(2)                                    237,215            136,250                 453,259            222,429
Net income (loss)                                            (165,314)             7,808                (342,878)           (98,559)
Adjusted EBITDA(2)                                             11,240            (23,750)                 15,372            (89,902)


___________________
(1)Adjusted net revenue within our Lending segment is used by management to
evaluate our Lending segment and our consolidated results. For our Lending
segment, total net revenue is adjusted to exclude the fair value changes in
servicing rights and residual interests classified as debt due to valuation
inputs and assumption changes (including conditional prepayment and default and
discount rates). We use this adjusted measure in our determination of
contribution profit (loss) in the Lending segment, as well as to evaluate our
consolidated results, as it removes non-cash charges that are not realized
during the period and, therefore, do not impact the cash available to fund our
operations, and our overall liquidity position. For our Financial Services and
Technology Platform segments, there are no adjustments from total net revenue to
arrive at the consolidated adjusted net revenue shown in this table.
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(2)Adjusted net revenue and adjusted EBITDA are non-GAAP financial measures. For
information regarding our uses and definitions of these measures and for
reconciliations to the most directly comparable U.S. Generally Accepted
Accounting Principles ("GAAP") measures, see "- Non-GAAP Financial Measures".
(3)There was no interest income recorded within our Technology Platform segment
for any of the periods presented.
(4)"Other" includes total net revenue associated with corporate functions and
non-recurring gains from non-securitization investment activities that are not
directly related to a reportable segment. For further discussion, see Note 16 to
the Notes to Unaudited Condensed Consolidated Financial Statements.
Key Recent Developments
We continue to execute on our growth and other strategic initiatives and in
recent years, we have celebrated launches across our product suite and strategic
partnerships, establishing ourselves as a platform that enables individuals to
borrow, save, spend, invest, and protect their assets. Some of our key recent
achievements are discussed below.
Acquisitions
In January 2021, Social Finance entered into the Agreement by and among SoFi,
SCH, and Plutus Merger Sub Inc. The transactions contemplated by the terms of
the Agreement were completed on May 28, 2021, upon which SoFi survived the
merger and became a wholly owned subsidiary of SCH, which concurrently changed
its name to "SoFi Technologies, Inc." Shares of SoFi Technologies' common stock
and SoFi Technologies' warrants began trading on The Nasdaq Global Select Market
("Nasdaq") under the symbols "SOFI" and "SOFIW", respectively, on June 1, 2021,
in lieu of the ordinary shares, warrants and units of SCH. See Note 2 to the
Notes to Unaudited Condensed Consolidated Financial Statements for additional
information on the transaction.
In March 2021, we entered into an agreement to acquire Golden Pacific Bancorp,
Inc., a bank holding company, and its wholly-owned subsidiary, Golden Pacific
Bank, National Association, a national bank, for a total cash purchase price of
$22.3 million. The acquisition is subject to regulatory approval, including
approval from the OCC of a revised business plan for Golden Pacific Bank, and
approval from the Federal Reserve to become a bank holding company and for a
change of control, and other customary closing conditions, which we anticipate
can be completed by the end of 2021. In March 2021, we submitted an application
to the Federal Reserve to become a bank holding company. The application review
process is ongoing.
In May 2020, we completed our acquisition of Galileo for a purchase price of
$1.2 billion. Galileo provides technology platform services to financial and
non-financial institutions. Our acquisition of Galileo represented a material
addition to our Technology Platform segment, but was not a significant
acquisition under Regulation S-X, Rule 3-05, Financial Statements of Businesses
Acquired or to be Acquired.
In April 2020, we acquired 8 Limited, a Hong Kong based investment business, for
a purchase price of $16.1 million. Our acquisition of 8 Limited marked our first
expansion outside the United States and enables our non-U.S. members to
experience many of the product features we have developed in the United States
for SoFi Invest, including zero commission non-digital assets trading.
Product Development and Partnerships
In May 2021, we launched a feature in our SoFi Money product that enables
members to receive their qualifying direct deposit paychecks (or other eligible
direct deposits) up to two days earlier than their regularly scheduled payday,
providing them quicker access to money they have already earned.
Through our FINRA-registered broker-dealer subsidiary, SoFi Securities, we are
licensed to underwrite securities offerings. In March 2021, we launched an IPO
investment center that allows members with a SoFi active Invest account to
invest in initial public offerings before they trade on an exchange. Beginning
in the second quarter of 2021, we began earning revenues from our underwriting
services. See "-Business Overview" for additional information.
In 2020, we celebrated the official opening of SoFi Stadium and the
establishment of a 20-year partnership with LA Stadium and Entertainment
District at Hollywood Park in Inglewood, California, a multi-purpose sports and
entertainment district that serves as the stadium for the National Football
League teams the Los Angeles Chargers and Los Angeles Rams. SoFi's 20-year
partnership with the LA Stadium and Entertainment District at Hollywood Park,
across the naming rights and sponsorship agreements, collectively requires SoFi
to pay sponsorship fees quarterly in each contract year beginning in 2020 and
ending in 2040 for an aggregate total of $625.0 million, which includes
operating lease obligations, finance lease obligations and sponsorship and
advertising opportunities at the stadium complex. See Note 14 to the Notes to
Unaudited Condensed Consolidated Financial Statements for discussion of an
associated contingent matter.
In the second half of 2020, we launched our SoFi Credit Card, which carries no
annual membership fee and provides up to two percent unlimited cash back when
the cash back rewards are applied to a SoFi Money or SoFi Invest account, or are
used to
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pay down SoFi student loans or personal loans, as well as a one-percent
annual percentage rate reduction after 12 consecutive on-time credit card
payments, with the reduced rate sustained with continued on-time payments.
Non-GAAP Financial Measures
Our management and board of directors use adjusted net revenue and adjusted
EBITDA, which are non-GAAP financial measures, to evaluate our operating
performance, formulate business plans, help better assess our overall liquidity
position, and make strategic decisions, including those relating to operating
expenses and the allocation of internal resources. Accordingly, we believe that
adjusted net revenue and adjusted EBITDA provide useful information to investors
and others in understanding and evaluating our operating results in the same
manner as our management and board of directors.
Adjusted Net Revenue
Adjusted net revenue is defined as total net revenue, adjusted to exclude the
fair value changes in servicing rights and residual interests classified as debt
due to valuation inputs and assumptions changes, which relate only to our
Lending segment. We adjust total net revenue to exclude the fair value changes
in servicing rights and residual interests classified as debt due to valuation
inputs and assumptions changes, as they are non-cash charges that are not
realized during the period, and therefore positive or negative changes do not
impact the cash available to fund our operations. This measure helps provide our
management with an understanding of the net revenue available to finance our
operations and helps management better decide on the proper expenses to
authorize for each of our operating segments, to ultimately help achieve target
contribution profit margins. Therefore, the measure of adjusted net revenue
serves as both the starting point for how we think about the liquidity generated
from our operations and also the starting point for our annual financial
planning, the latter of which focuses on the cash we expect to generate from our
operating segments to help fund the current year's strategic objectives.
Adjusted net revenue has limitations as an analytical tool and should not be
considered in isolation from, or as a substitute for, the analysis of other GAAP
financial measures, such as total net revenue. The primary limitation of
adjusted net revenue is its lack of comparability to other companies that do not
utilize this measure or that use a similar measure that is defined in a
different manner. We reconcile adjusted net revenue to total net revenue, the
most directly comparable GAAP measure, as presented for the periods indicated
below:

                                                         Three Months Ended June 30,                 Six Months Ended June 30,
($ in thousands)                                           2021                  2020                 2021                  2020
Total net revenue                                    $      231,274

$ 114,952 $ 427,258 $ 193,254 Servicing rights - change in valuation inputs or assumptions(1)

                                               224             18,720                  12,333             11,661
Residual interests classified as debt - change
in valuation inputs or assumptions(2)                         5,717              2,578                  13,668             17,514
Adjusted net revenue                                 $      237,215          $ 136,250          $      453,259          $ 222,429


___________________
(1)Reflects changes in fair value inputs and assumptions on servicing rights,
including conditional prepayment and default rates and discount rates. These
assumptions are highly sensitive to market interest rate changes and are not
indicative of our performance or results of operations. Moreover, these non-cash
charges are unrealized during the period and, therefore, have no impact on our
cash flows from operations. As such, these positive and negative changes are
adjusted out of total net revenue to provide management and financial users with
better visibility into the net revenue available to finance our operations and
our overall performance.
(2)Reflects changes in fair value inputs and assumptions on residual interests
classified as debt, including conditional prepayment and default rates and
discount rates. When third parties finance our consolidated securitization
Variable Interest Entities ("VIEs") by purchasing residual interests, we receive
proceeds at the time of the closing of the securitization and, thereafter, pass
along contractual cash flows to the residual interest owner. These residual debt
obligations are measured at fair value on a recurring basis, but they have no
impact on our initial financing proceeds, our future obligations to the residual
interest owner (because future residual interest claims are limited to
contractual securitization collateral cash flows), or the general operations of
our business. As such, these positive and negative non-cash changes in fair
value attributable to assumption changes are adjusted out of total net revenue
to provide management and financial users with better visibility into the net
revenue available to finance our operations.

                                                                                         Quarter Ended
                                                 June 30,          March 31,           December 31,           September 30,           June 30,
($ in thousands)                                   2021               2021                 2020                   2020                  2020
Total net revenue                              $ 231,274          $ 195,984

$ 171,491 $ 200,787 $ 114,952 Servicing rights - change in valuation inputs or assumptions(1)

                             224             12,109                  1,127                   4,671             18,720
Residual interests classified as debt -
change in valuation inputs or
assumptions(2)                                     5,717              7,951                  9,401                  11,301              2,578
Adjusted net revenue                           $ 237,215          $ 216,044          $     182,019          $      216,759          $ 136,250


___________________

(1)See footnote (1) to the table above.


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(2)See footnote (2) to the table above.
The reconciling items to determine our non-GAAP measure of adjusted net revenue
are applicable only to the Lending segment. The table below presents adjusted
net revenue for the Lending segment for the periods indicated:
                                                         Three Months Ended June 30,                 Six Months Ended June 30,
($ in thousands)                                           2021                  2020                 2021                  2020
Total net revenue - Lending                          $      166,291

$ 95,884 $ 314,268 $ 169,762 Servicing rights - change in valuation inputs or assumptions(1)

                                               224             18,720                  12,333             11,661
Residual interests classified as debt - change
in valuation inputs or assumptions(2)                         5,717              2,578                  13,668             17,514
Adjusted net revenue - Lending                       $      172,232

$ 117,182 $ 340,269 $ 198,937

___________________


(1)See footnote (1) to the table above.
(2)See footnote (2) to the table above.
Adjusted EBITDA
Adjusted EBITDA is defined as net income (loss), adjusted to exclude:
(i) corporate borrowing-based interest expense (our adjusted EBITDA measure is
not adjusted for warehouse or securitization-based interest expense, nor deposit
interest expense and finance lease liability interest expense, as discussed
further below), (ii) income taxes, (iii) depreciation and amortization,
(iv) stock-based expense (inclusive of equity-based payments to non-employees),
(v) impairment expense (inclusive of goodwill impairment and of property,
equipment and software abandonments), (vi) transaction-related expenses,
(vii) warrant fair value adjustments, and (viii) fair value changes in servicing
rights and residual interests classified as debt due to valuation assumptions.
We believe adjusted EBITDA provides a useful measure for period-over-period
comparisons of our business, as it removes the effect of certain non-cash items
and certain charges that are not indicative of our core operating performance or
results of operations. It is also a measure that management relies upon to
evaluate cash flows generated from operations, and therefore the extent of
additional capital, if any, required to invest in strategic initiatives.
Adjusted EBITDA has limitations as an analytical tool and should not be
considered in isolation from, or as a substitute for, the analysis of other GAAP
financial measures, such as net income (loss). Some of the limitations of
adjusted EBITDA include that it does not reflect the impact of working capital
requirements or capital expenditures and it is not a universally consistent
calculation among companies in our industry, which limits its usefulness as a
comparative measure.
We reconcile adjusted EBITDA to net income (loss), the most directly comparable
GAAP measure, for the periods indicated below:
                                                              Three Months Ended June 30,                    Six Months Ended June 30,
($ in thousands)                                                2021                  2020                    2021                    2020
Net income (loss)                                        $      (165,314)         $   7,808          $     (342,878)              $ (98,559)
Non-GAAP adjustments:
Interest expense - corporate borrowings(1)                         1,378              3,415                   6,386                   4,503
Income tax expense(2)                                                (78)           (99,768)                  1,021                 (99,711)
Depreciation and amortization(3)                                  24,989             14,955                  50,966                  19,670
Stock-based expense                                               52,154             24,453                  89,608                  44,138

Transaction-related expense(4)                                    21,181              4,950                  23,359                   8,864
Fair value changes in warrant liabilities(5)                      70,989               (861)                160,909                   2,018
Servicing rights - change in valuation inputs or
assumptions(6)                                                       224             18,720                  12,333                  11,661
Residual interests classified as debt - change in
valuation inputs or assumptions(7)                                 5,717              2,578                  13,668                  17,514
Total adjustments                                                176,554            (31,558)                358,250                   8,657
Adjusted EBITDA                                          $        11,240          $ (23,750)         $       15,372               $ (89,902)


___________________
(1)Our adjusted EBITDA measure adjusts for corporate borrowing-based interest
expense, which includes interest on our revolving credit facility and the seller
note issued in connection with our acquisition of Galileo (for periods prior to
the quarter ended June 30, 2021) and other financings assumed in the
acquisition, as these expenses are a function of our capital structure. Our
adjusted EBITDA measure does not adjust for interest expense on warehouse
facilities and securitization debt, which are recorded within interest expense -
securitizations and warehouses in the accompanying Unaudited Condensed
Consolidated Statements of Operations and Comprehensive Income (Loss), as these
interest expenses are direct operating expenses driven by loan origination and
sales activity. Additionally, our adjusted EBITDA measure does not adjust for
interest expense on SoFi Money deposits or interest expense on our finance lease
liability in connection with SoFi Stadium, which are recorded within interest
expense - other, as these interest expenses are
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direct operating expenses driven by SoFi Money deposits and finance leases,
respectively. As compared to the three and six months ended June 30, 2020,
during the three and six months ended June 30, 2021, we had a higher average
balance on our revolving credit facility as a result of the Galileo acquisition,
as well as interest expense related to the Galileo seller note issued in May
2020, which we repaid in February 2021.
(2)The significant change in our income tax position for the 2021 periods
relative to 2020 was primarily due to a partial release of our valuation
allowance in the second quarter of 2020 in connection with deferred tax
liabilities resulting from intangible assets acquired from Galileo in May 2020.
See Note 12 to the Notes to Unaudited Condensed Consolidated Financial
Statements for additional information.
(3)Depreciation and amortization expense for the three and six months ended June
30, 2021 increased compared to the same periods in 2020 primarily due to:
(i) amortization expense on intangible assets acquired during the second quarter
of 2020 from Galileo and 8 Limited, (ii) amortization of purchased and
internally-developed software, and (iii) depreciation related to SoFi Stadium
related fixed assets.
(4)During the three months ended June 30, 2021, transaction-related expenses
included the special payment to the Series 1 preferred stockholders in
conjunction with the Business Combination. Transaction-related expenses for the
six months ended June 30, 2021 also included financial advisory and professional
services costs associated with our pending purchase of Golden Pacific Bancorp,
Inc. During the three and six months ended June 30, 2020, transaction-related
expenses included certain costs, such as financial advisory and professional
services costs, associated with our acquisitions of Galileo and 8 Limited.
(5)In 2019, Social Finance issued Series H warrants in connection with certain
redeemable preferred stock issuances, which were accounted for as liabilities
and measured at fair value on a recurring basis. In conjunction with the Closing
of the Business Combination, we measured the final fair value of the Series H
warrants and subsequently reclassified them into permanent equity. Therefore, we
will not measure the Series H warrants at fair value on an ongoing basis,
subsequent to May 28, 2021. In addition, in conjunction with the Business
Combination, SoFi Technologies assumed certain common stock warrants ("SoFi
Technologies warrants") that are accounted for as liabilities and measured at
fair value on a recurring basis, subsequent to the Business Combination. Our
adjusted EBITDA measure excludes the non-cash fair value changes in the Series H
warrants and the SoFi Technologies warrants during the periods wherein each
class of warrants was measured at fair value through earnings. The increases for
the three and six months ended June 30, 2021 compared to the same periods in
2020 were primarily attributable to a significant increase in our assumed Series
H redeemable preferred stock share price for the Series H warrants, as well as
the assumption of the SoFi Technologies warrants in the second quarter of 2021.
The fair value of the SoFi Technologies warrants is based on the closing price
of ticker SOFIW and, therefore, fluctuates based on market activity. See Note 7
and Note 9 to the Notes to Unaudited Condensed Consolidated Financial Statements
for additional information on these classes of warrants.
(6)Reflects changes in fair value inputs and assumptions, including market
servicing costs, conditional prepayment and default rates and discount rates.
This non-cash change is unrealized during the period and, therefore, has no
impact on our cash flows from operations. As such, these positive and negative
changes in fair value attributable to assumption changes are adjusted out of net
loss to provide management and financial users with better visibility into the
earnings available to finance our operations.
(7)Reflects changes in fair value inputs and assumptions, including conditional
prepayment and default rates and discount rates. When third parties finance our
consolidated VIEs through purchasing residual interests, we receive proceeds at
the time of the securitization close and, thereafter, pass along contractual
cash flows to the residual interest owner. These obligations are measured at
fair value on a recurring basis, which has no impact on our initial financing
proceeds, our future obligations to the residual interest owner (because future
residual interest claims are limited to contractual securitization collateral
cash flows), or the general operations of our business. As such, these positive
and negative non-cash changes in fair value attributable to assumption changes
are adjusted out of net loss to provide management and financial users with
better visibility into the earnings available to finance our operations.
                                                                                              Quarter Ended
                                                     June 30,            March 31,           December 31,           September 30,           June 30,
($ in thousands)                                       2021                2021                  2020                   2020                  2020
Net income (loss)                                  $ (165,314)         $ 

(177,564) $ (82,616) $ (42,878) $ 7,808 Non-GAAP adjustments: Interest expense - corporate borrowings

                 1,378               5,008                 19,125                   4,346              3,415
Income tax expense (benefit)                              (78)              1,099                 (4,949)                    192            (99,768)
Depreciation and amortization                          24,989              25,977                 25,486                  24,676             14,955
Stock-based expense                                    52,154              37,454                 30,089                  26,551             24,453

Transaction-related expenses                           21,181               2,178                      -                     297              4,950
Fair value changes in warrant liabilities              70,989              89,920                 14,154                   4,353               (861)
Servicing rights - change in valuation
inputs or assumptions                                     224              12,109                  1,127                   4,671             18,720
Residual interests classified as debt -
change in valuation inputs or assumptions               5,717               7,951                  9,401                  11,301              2,578
Total adjustments                                     176,554             181,696                 94,433                  76,387            (31,558)
Adjusted EBITDA                                    $   11,240          $    4,132          $      11,817          $       33,509          $ (23,750)



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Key Business Metrics
The table below presents the key business metrics that management uses to
evaluate our business, measure our performance, identify trends and make
strategic decisions.
                                                                   2021 vs 2020
                        June 30, 2021         June 30, 2020          % Change
Members                 2,560,492             1,204,475                   113  %
Total Products          3,667,121             1,645,044                   123  %
Lending
Total Products            981,440               861,970                    14  %
Financial Services
Total Products          2,685,681               783,074                   243  %
Technology Platform
Total Accounts         78,902,156            35,988,090                   119  %


See "- Summary Results by Segment" for additional metrics we review at the
segment level.
Members
We refer to our customers as "members", as defined in "- Business Overview". We
view members as an indication not only of the size and a measurement of growth
of our business, but also as a measure of the significant value of the data we
have collected over time. The data we collect from our members helps us to,
among other things: (i) assess loan life performance data on each loan in our
ecosystem, which can inform risk-based interest rates that we can offer our
members, (ii) understand our members' spending behavior to identify and suggest
other products we offer that may align with the members' financial needs; and
(iii) enhance our opportunities to sell additional products to our members, as
our members represent a vital source of marketing opportunities. When we provide
additional products to members, it helps improve our unit economics per member,
as we save on marketing costs we would otherwise incur to attract new members.
It also increases the lifetime value of an individual member. This in turn
enhances our Financial Services Productivity Loop. Member growth is generally an
indicator of future revenue, but is not directly correlated with revenues, since
not all members who sign up for one of our products fully utilize or continue to
use our products, and not all of our products (such as our complementary
product, SoFi Relay) provide direct sources of revenue.
Total Products
Total products refers to the aggregate number of lending and financial services
products that our members have selected on our platform since our inception
through the reporting date, whether or not the members are still registered for
such products. In our Lending segment, total products refers to the number of
home loans, personal loans and student loans that have been originated through
our platform through the reporting date, whether or not such loans have been
paid off. If a member has multiple loan products of the same loan product type,
such as two personal loans, that is counted as a single product. However, if a
member has multiple loan products across loan product types, such as one
personal loan and one home loan, that is counted as two products. In our
Financial Services segment, total products refers to the number of SoFi Money
accounts, SoFi Invest accounts, SoFi Credit Card accounts (including accounts
with a zero dollar balance at the reporting date), SoFi At Work accounts and
SoFi Relay accounts (with either credit score monitoring enabled or external
linked accounts) that have been opened through our platform through the
reporting date. Our SoFi Invest service is composed of three products: active
investing accounts, robo-advisory accounts and digital asset accounts. Our
members can select any one or combination of the three types of SoFi Invest
products. If a member has multiple SoFi Invest products of the same account
type, such as two active investing accounts, that is counted as a single
product. However, if a member has multiple SoFi Invest products across account
types, such as one active investing account and one robo-advisory account, those
separate account types are considered separate products. Total products is a
primary indicator of the size and reach of our Lending and Financial Services
segments. Management relies on total products metrics to understand the
effectiveness of our member acquisition efforts and to gauge the propensity for
members to use more than one product. As of June 30, 2021, we had 3,667,121
total products.
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                    [[Image Removed: sofi-20210630_g2.jpg]]
Total lending products were composed of the following as of the dates indicated:
Lending Products              June 30, 2021        June 30, 2020        Variance        % Change
Home loans                      18,102               10,511              7,591              72  %
Personal loans                 544,068              474,581             69,487              15  %
Student loans                  419,270              376,878             42,392              11  %
Total lending products         981,440              861,970            119,470              14  %


Total financial services products were composed of the following as of the dates
indicated:
Financial Services Products                      June 30, 2021              June 30, 2020                Variance                 % Change
Money                                               954,519                    220,201                    734,318                        333  %
Invest                                            1,038,570                    328,837                    709,733                        216  %
Credit Card                                          42,744                          -                     42,744                           n/m
Relay                                               626,195                    227,201                    398,994                        176  %
At Work                                              23,653                      6,835                     16,818                        246  %
Total financial services products                 2,685,681                    783,074                  1,902,607                        243  %


Technology Platform Total Accounts
In our Technology Platform segment, total accounts refers to the number of open
accounts at Galileo as of the reporting date, excluding SoFi accounts. We
exclude SoFi accounts because revenue generated by Galileo from the SoFi
relationship is eliminated in consolidation. No information is reported prior to
our acquisition of Galileo on May 14, 2020. Total accounts is a primary
indicator of the accounts dependent upon Galileo's technology platform to use
virtual card products, virtual wallets, make peer-to-peer and bank-to-bank
transfers, receive early paychecks, separate savings from spending balances,
make debit transactions and rely upon real-time authorizations, all of which
result in technology platform fees for the Technology Platform segment.
Key Factors Affecting Operating Results
Our future operating results and cash flows are dependent upon a number of
opportunities, challenges and other factors, including our loan origination
volume, financial services products and member activity on our platform, growth
in Galileo accounts, competition and industry trends, general economic
conditions and whether or not we are able to secure a national bank charter.
Origination Volume
Our Lending segment is our largest segment, comprising 72% and 83% of our total
net revenue during the three months ended June 30, 2021 and 2020, respectively,
and 74% and 88% during the six months ended June 30, 2021 and 2020,
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respectively. We are dependent upon the addition of new members and new activity
from existing members within our Lending segment to generate origination volume,
which we believe is a contributor to Lending segment net revenue. We believe we
have a high-quality loan portfolio, as indicated by our weighted average
origination FICO score of 763 during the six months ended June 30, 2021. See "-
Industry Trends and General Economic Conditions" for the impact of specific
economic factors, including the COVID-19 pandemic, on origination volume.
Member Growth and Activity
We have invested heavily in our platform and are dependent on continued member
growth, as well as our ability to generate additional revenues from our existing
members using additional products and services. Member growth and activity is
critical to our ability to increase our scale and earn a return on our
technology and product investments. Growth in members and member activity will
depend heavily on our ability to continue to offer attractive products and
services at sustainable costs and our continued member acquisition and marketing
efforts.
Product Growth
Our aim is to develop and offer a best-in-class integrated financial services
platform with products that meet the broad objectives of our members and the
lifecycle of their financial needs. We have invested, and continue to invest,
heavily in the development, improvement and marketing of our suite of lending
and financial services products and are dependent on continued growth in the
number of products selected by our members, as well as our ability to build
trust and reliability between our members and our platform to reinforce the
effects of the Financial Services Productivity Loop. In order to deliver on our
strategy, we aim to foster positive member experiences designed to lead to more
products per member, leading to enhanced profitability for each additional
product by lowering overall member acquisition costs.
Galileo Account Growth
During 2020, we acquired Galileo, which primarily provides technology platform
services to financial and non-financial institutions, to enable us to diversify
our business from a primarily consumer-based business to also serve enterprises
that rely upon Galileo's integrated platform as a service to serve their
clients. We are dependent on growth in the number of accounts at Galileo, which
is an indication of the amount of users that are dependent upon the technology
platform for a variety of products and services, including virtual card
products, virtual wallets, peer-to-peer and bank-to-bank transfers, early
paychecks and relying on real-time authorizations, all of which generate
revenues for Galileo.
Competition
We face competition from several financial services institutions given our
status as a diversified financial services provider. In each of our reportable
segments, we may compete with more established financial institutions, some of
which have more financial resources than we do. We compete at multiple levels,
including competition among other personal loan, student loan, credit card and
residential mortgage lenders, competition for deposits in our SoFi Money product
from traditional banks and other non-bank lenders, competition for investment
accounts in our SoFi Invest product from other brokerage firms, including those
based on online or mobile platforms, competition for subscribers to our
financial services content, and competition with other technology platforms for
the enterprise services we provide. Some of our competitors may at times seek to
increase their market share by undercutting pricing terms prevalent in that
market, which could adversely affect our market share for any of our products
and services or require us to incur higher member acquisition costs.
Furthermore, our competitors could offer relatively attractive benefits to our
current members, which could limit members using more than one product.
Industry Trends and General Economic Conditions
Our results of operations have historically been relatively resilient to
economic downturns but in the future may be impacted by the relative strength of
the overall economy and its effect on unemployment, asset markets and consumer
spending. As general economic conditions improve or deteriorate, the amount of
consumer disposable income tends to fluctuate, which in turn impacts consumer
spending levels and the willingness of consumers to take out loans to finance
purchases or invest in financial assets. Specific economic factors, such as
interest rate levels, changes in monetary and related policies, unemployment
rates, market volatility and consumer confidence also influence consumer
spending, saving, investing and borrowing patterns. Increased focus by
policymakers and the new presidential administration on outstanding student
loans has led to discussions of potential legislative and regulatory actions,
among other possible steps, to reduce outstanding balances of loans, or cancel
loans at a significant scale, including the potential forgiveness of federal
student debt. Such actions resulting in forgiveness or cancellation at a
meaningful scale would likely have an adverse impact on our results of
operations and overall business.
Additionally, our business has been, and may continue to be, impacted by some of
the national measures taken to counteract the economic impact of the COVID-19
pandemic. For example, the CARES Act and subsequent extensions of
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certain hardship provisions led to decreased demand for our student loan
refinancing products prior to emerging signs of economic recovery from the
pandemic. The Federal Reserve's actions to reduce interest rates to near-zero
benchmark levels have led to increased demand for home loan refinancing and we
believe have increased the attractiveness of our SoFi Invest product, as members
look for alternative ways to earn higher returns on their cash. Conversely,
these lower benchmark rates have reduced deposit interest rates we can offer on
our SoFi Money product, which we believe has adversely impacted demand for the
product. The impacts of the COVID-19 pandemic on our products and measures we
have taken to help our Company and our members navigate the uncertain economic
environment caused by the COVID-19 pandemic are discussed further throughout
this "Management's Discussion and Analysis of Financial Condition and Results of
Operations".
National Bank Charter
A key element of our long-term strategy is to secure a national bank charter. In
March 2021, we entered into an Agreement and Plan of Merger to acquire Golden
Pacific, a registered bank holding company, and its wholly owned subsidiary
Golden Pacific Bank, a national banking association. See "Business Overview -
National Bank Charter". If we are successful in securing a national bank charter
through the proposed acquisition, we expect to incur additional costs in our
operation of the bank primarily associated with headcount, technology
infrastructure, governance, compliance and risk management, marketing, and other
general and administrative expenses.
The key expected financial benefits to us of obtaining a national bank charter
include: (i) lowering our cost to fund loans, as we can utilize SoFi Money
deposits to fund loans, which have a lower borrowing cost of funds than our
current financing model, (ii) holding loans on our balance sheet for longer
periods, thereby enabling us to earn interest on these loans for a longer period
and increasing our net interest income margin, and (iii) supporting origination
volume growth by providing an alternative financing option, while also
maintaining our warehouse capacity. There can be no guarantee that we will be
able to secure a national bank charter, either through the proposed acquisition
or through the formation of a de novo national bank or, if we do, that we will
realize the anticipated benefits. See Part II, Item 1A "Risk Factors".
Key Components of Results of Operations
Interest Income
Interest income is predominantly driven by loan origination volume, prevailing
interest rates that we receive on the loans we make and the amount of time we
hold loans on our balance sheet. Securitizations interest income is driven by
our securitization-related investments in bonds and residual interest positions,
which are required under securitization risk retention rules. See Note 1 to the
Notes to Unaudited Condensed Consolidated Financial Statements for additional
information on our securitization-related investments. Moreover, we earn other
interest income on excess corporate cash balances and SoFi Money member
balances. Related party interest income was derived from notes extended to Apex
and one of our stockholders, and was not core to our operations. We received
full repayment of all related party notes as of the balance sheet date.
Interest Expense
Interest expense primarily includes interest we incur under our warehouse
facilities, inclusive of the amortization of debt issuance costs, and under our
securitization debt, inclusive of debt issuance costs and discounts. We incur
securitization-related interest expense when securitization transfers do not
qualify as true sales pursuant to ASC 810, Consolidation. Securitization-related
interest expense fluctuates depending on the level of our securitization
activity, market rates and whether and how much such activity results in true
sale treatment. We also incur interest expense related to our revolving credit
facility and on the seller note issued in connection with our acquisition of
Galileo in May 2020, which was fully repaid in February 2021, as well as on the
other financings assumed in the acquisition. For our residual interests
classified as debt, we recognize interest expense over the expected life using
the effective yield method, which represents a portion of the overall fair value
change in the residual interests classified as debt. On a quarterly basis, we
reevaluate the cash flow estimates to determine if a change to the accretable
yield is required on a prospective basis, which is a reclassification between
two income statement line items, and therefore has no net impact on net income
(loss). We also pay interest income to our members who have SoFi Money account
balances, which is interest expense to us. Interest expense is dependent on
market interest rates, such as LIBOR, interest rate spreads versus benchmark
rates, the amount of warehouse capacity we can access, warehouse advance rates
and the amount of loans we ultimately pledge to our warehouse facilities.
Finally, we incur interest on our finance lease liabilities associated with SoFi
Stadium, which relate to certain physical signage within the stadium. Our
interest expense has historically fluctuated due to changes in the interest rate
environment and we expect it will continue to fluctuate in future periods.
Noninterest Income
Noninterest income primarily consists of: (i) fair value changes in loans while
we hold them on our balance sheet; (ii) gains on sales of loans transferred into
the securitization or whole loan sale channels; (iii) the income we receive from
our loan
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servicing activities; (iv) fair value changes related to our securitization
activities; and (v) revenue recognized pursuant to ASC 606, Revenue from
Contracts with Customers, which primarily relates to our Technology Platform
fees.
When we originate a loan, we generally expect that we will sell the loan for
more than its par value, which will result in positive loan origination and
sales results. Moreover, loan origination and sales also includes recognized
servicing assets at the time of a loan sale. The subsequent measurement of our
servicing assets at fair value impacts noninterest income - servicing in our
accompanying Unaudited Condensed Consolidated Statements of Operations and
Comprehensive Income (Loss). When we sell a loan into a securitization trust
that qualifies for true sale accounting, the gain or loss on sale is recorded
within noninterest income - loan origination and sales. Noninterest income -
securitizations is impacted by fair value changes in securitization loan
collateral, which is impacted by the change in fair value of the loan collateral
from the previous period end, residual interests classified as debt and our
securitization investments associated with our continuing interest in the
securitization subsequent to the sale. Our revenue recognized in accordance with
ASC 606 is attributable to our Financial Services and Technology Platform
segments and has grown due to our acquisition of Galileo during 2020, primarily
in the form of Technology Platform fees, as well as growth generated in our
Financial Services segment.
Noninterest Expense
Noninterest expense primarily relates to the following categories of expenses:
(i) technology and product development, (ii) sales and marketing, (iii) cost of
operations, and (iv) general and administrative. Certain costs are included
within each of these line items, such as compensation and benefits-related
expense (inclusive of stock-based compensation expense), professional services,
depreciation and amortization and occupancy and travel-related costs. We
allocate certain costs to each of these four categories based on
department-level headcounts. We generally expect the expenses within each such
category to increase in absolute dollars as our business continues to grow.
Noninterest expense also includes the fair value changes in warrant liabilities,
as well as the provision for credit losses, which relates primarily to our
credit card product within the Financial Services segment.
Directly Attributable Expenses
As presented within "-Summary Results by Segment", in our determination of the
contribution profit (loss) for our Lending, Financial Services and Technology
Platform segments, we allocate certain expenses that are directly attributable
to the corresponding segment. Directly attributable expenses primarily include
compensation and benefits and sales and marketing, and vary based on the amount
of activity within each segment. Directly attributable expenses also include
loan origination and servicing expenses, professional services, occupancy and
travel, tools and subscriptions, bank service charge expenses and other general
and administrative expenses. Expenses are attributed to the reportable segments
using either direct costs of the segment or labor costs that can be attributed
based upon the allocation of employee time for individual products.
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Results of Operations
The following table sets forth condensed consolidated statements of income data
for the periods indicated:
                                                Three Months Ended June 30,            2021 vs 2020                Six Months Ended June 30,               2021 vs 2020
($ in thousands)                                  2021                  2020             % Change                   2021                    2020             % Change
Interest income
Loans                                      $         79,678          $ 77,485                   3  %       $      156,899               $ 163,601                  (4) %
Securitizations                                       3,794             6,500                 (42) %                8,261                  13,561                 (39) %
Related party notes                                       -               879                (100) %                  211                   1,931                 (89) %
Other                                                   636             1,201                 (47) %                1,265                   4,254                 (70) %
Total interest income                                84,108            86,065                  (2) %              166,636                 183,347                  (9) %
Interest expense
Securitizations and warehouses                       26,250            39,678                 (34) %               56,058                  87,201                 (36) %
Corporate borrowings                                  1,378             3,416                 (60) %                6,386                   4,504                  42  %
Other                                                   468               224                 109  %                  900                   1,746                 (48) %
Total interest expense                               28,096            43,318                 (35) %               63,344                  93,451                 (32) %
Net interest income                                  56,012            42,747                  31  %              103,292                  89,896                  15  %
Noninterest income
Loan origination and sales                          109,719            62,958                  74  %              220,064                 167,213                  32  %
Securitizations                                         (26)            7,350                (100) %               (2,062)                (75,754)                (97) %
Servicing                                              (224)          (18,720)                (99) %              (12,333)                (11,661)                  6  %
Technology Platform fees                             44,950            16,202                 177  %               90,609                  16,202                 459  %
Other                                                20,843             4,415                 372  %               27,688                   7,358                 276  %
Total noninterest income                            175,262            72,205                 143  %              323,966                 103,358                 213  %
Total net revenue                                   231,274           114,952                 101  %              427,258                 193,254                 121  %
Noninterest expense
Technology and product development                   69,389            47,833                  45  %              135,337                  88,004                  54  %
Sales and marketing                                  94,951            64,267                  48  %              182,185                 126,937                  44  %
Cost of operations                                   60,624            41,408                  46  %              118,194                  74,065                  60  %
General and administrative                          171,216            53,404                 221  %              332,913                 102,518                 225  %
Provision for credit losses                             486                 -                    n/m                  486                       -                    n/m
Total noninterest expense                           396,666           206,912                  92  %              769,115                 391,524                  96  %
Loss before income taxes                           (165,392)          (91,960)                 80  %             (341,857)               (198,270)                 72  %
Income tax (expense) benefit                             78            99,768                (100) %               (1,021)                 99,711                (101) %
Net income (loss)                          $       (165,314)         $  7,808                    n/m       $     (342,878)              $ (98,559)                248  %
Other comprehensive income (loss)
Foreign currency translation
adjustments, net                           $           (266)         $    (36)                639  %       $         (346)              $     (43)                705  %
Total other comprehensive loss                         (266)              (36)                639  %                 (346)                    (43)                705  %
Comprehensive income (loss)                $       (165,580)         $  7,772                    n/m       $     (343,224)              $ (98,602)                248  %


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Interest Income
The following table presents the components of our total interest income for the
periods indicated:
                                           Three Months Ended June 30,            2021 vs 2020             Six Months Ended June 30,              2021 vs 2020
($ in thousands)                             2021                 2020              % Change                2021                  2020              % Change
Loans                                  $       79,678          $ 77,485                    3  %       $      156,899          $ 163,601                   (4) %
Securitizations                                 3,794             6,500                  (42) %                8,261             13,561                  (39) %
Related party notes                                 -               879                 (100) %                  211              1,931                  (89) %
Other                                             636             1,201                  (47) %                1,265              4,254                  (70) %
Total interest income                  $       84,108          $ 86,065                   (2) %       $      166,636          $ 183,347                   (9) %


Total interest income decreased by $2.0 million, or 2%, for the three months
ended June 30, 2021 compared to the three months ended June 30, 2020, and
decreased by $16.7 million, or 9%, for the six months ended June 30, 2021
compared to the six months ended June 30, 2020 due to the following:
Three Months - Loans.  Loans interest income increased by $2.2 million, or 3%,
for the three months ended June 30, 2021 compared to 2020 primarily driven by an
increase in non-securitization personal loan and student loan interest income of
$23.6 million, which was primarily a function of an increase in aggregate
average balances of $1.5 billion (76%). These increases were offset by a decline
of $22.1 million in interest income from consolidated personal loan and student
loan securitizations, which were impacted by a $1.2 billion (52%) decline in
aggregate average balances attributable to payment activity and the
deconsolidation of a VIE in July 2020. The remaining increase was primarily
attributable to credit card loans, which launched in the third quarter of 2020,
and home loans.
Six Months - Loans.  Loans interest income decreased by $6.7 million, or 4%, for
the six months ended June 30, 2021 compared to 2020 primarily driven by a
decline of $51.4 million in interest income from consolidated personal loan and
student loan securitizations, which were impacted by a $1.3 billion (51%)
decline in average balances attributable to payment activity and the
deconsolidation of two securitizations in March 2020 and one in July 2020. This
decrease was offset by increases in non-securitization personal loan and student
loan interest income of $32.8 million and $11.0 million, respectively, which
were primarily a function of increases in average balances for personal loans
and student loans of $0.6 billion (98%) and $0.7 billion (56%), respectively.
The remaining variance was primarily attributable to increases in interest
income on credit card loans, which launched in the third quarter of 2020, and
home loans.
Three Months - Securitizations.  Securitizations interest income decreased by
$2.7 million, or 42%, for the three months ended June 30, 2021 compared to 2020,
which was attributable to decreases in residual investment interest income of
$1.1 million and asset-backed bonds of $1.2 million related to decreases in
average securitization investment balances period over period, and a decrease in
securitization float interest income of $0.4 million related to decreases in
average securitization loan balances and a decline in interest rates period over
period.
Six Months - Securitizations.  Securitizations interest income decreased by $5.3
million, or 39%, for the six months ended June 30, 2021 compared to 2020, which
was attributable to decreases in residual investment interest income of
$1.9 million and asset-backed bonds of $2.0 million related to decreases in
average securitization investment balances period over period, and a decrease in
securitization float interest income of $1.4 million related to decreases in
average securitization loan balances and a decline in interest rates period over
period.
Three Months - Related Party Notes. Related party notes interest income
decreased by $0.9 million, or 100%, for the three months ended June 30, 2021
compared to 2020 due to a decrease in interest income on a stockholder loan,
which was fully settled in the fourth quarter of 2020, and a decrease in
interest income related to our loans to Apex, which were fully settled in
February 2021. See Note 13 to the Notes to Unaudited Condensed Consolidated
Financial Statements for additional information on our related party notes.
Six Months - Related Party Notes. Related party notes interest income decreased
by $1.7 million, or 89%, for the six months ended June 30, 2021 compared to 2020
due to a decrease in interest income on a stockholder loan and a decrease in
interest income related to our loans to Apex.
Three Months - Other.  Other interest income decreased by $0.6 million, or 47%,
for the three months ended June 30, 2021 compared to 2020 primarily due to
interest rate decreases period over period and a decrease in our average cash
balances. The interest rate decreases impacted the interest income we earned on
both our bank balances and Member Bank deposits; however, increases in Member
Bank deposits period over period partially offset the interest rate impact.
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Six Months - Other.  Other interest income decreased by $3.0 million, or 70%,
for the six months ended June 30, 2021 compared to 2020 primarily due to
interest rate decreases period over period and a decrease in our average cash
balances. The interest rate decreases impacted the interest income we earned on
both our bank balances and Member Bank deposits.
Interest Expense
The following table presents the components of our total interest expense for
the periods indicated:
                                                     Three Months Ended June 30,            2021 vs 2020            Six Months Ended June 30,             2021 vs 2020
($ in thousands)                                       2021                 2020              % Change                2021                2020              % Change
Securitizations and warehouses                   $       26,250          $ 39,678                  (34) %       $      56,058          $ 87,201                  (36) %
Corporate borrowings                                      1,378             3,416                  (60) %               6,386             4,504                   42  %
Other                                                       468               224                  109  %                 900             1,746                  (48) %
Total interest expense                           $       28,096          $ 43,318                  (35) %       $      63,344          $ 93,451

(32) %




Total interest expense decreased by $15.2 million, or 35%, for the three months
ended June 30, 2021 compared to the three months ended June 30, 2020, and
decreased by $30.1 million, or 32%, for the six months ended June 30, 2021
compared to the six months ended June 30, 2020, due to the following:
Securitizations and Warehouses.  The following tables present the components of
securitizations and warehouses interest expense and other pertinent information.
                                           Three Months Ended June 30,            2021 vs 2020            Six Months Ended June 30,             2021 vs 2020
($ in thousands)                             2021                 2020              % Change                2021                2020              % Change
Securitization debt interest
expense                                $        9,414          $ 17,772                  (47) %       $      20,362          $ 39,083                  (48) %
Warehouse debt interest expense                 9,370            13,489                  (31) %              19,901            27,603                  (28) %
Residual interests classified as
debt interest expense                           2,146             3,437                  (38) %               4,345             7,283                  (40) %
Debt issuance cost interest
expense(1)                                      5,320             4,980                    7  %              11,450            13,232                  (13) %
Securitizations and warehouses
interest expense                       $       26,250          $ 39,678                  (34) %       $      56,058          $ 87,201                  (36) %


___________________
(1)Debt issuance cost interest expense excludes the acceleration of debt
issuance costs of $2,632 and $3,587 during the three and six months ended June
30, 2020, respectively, associated with the deconsolidation of VIEs, which is
reported within noninterest income - securitizations in the Unaudited Condensed
Consolidated Statements of Operations and Comprehensive Income (Loss).

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