SoFi Technologies, Inc. 10-K

Item 8. Financial Statements and Supplementary Data SOFI TECHNOLOGIES, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Consolidated Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34 ) 121 Consolidated Balance Sheets 124 Consolidated Statements of Operations and Comprehensive Loss 126 Consolidated Statements of Changes in Temporary Equity and Permanent Equity (Deficit) 127 Consolidated Statements of Cash Flows 128 Notes to Consolidated Financial Statements 131 Note 1. Organization, Summary of Significant Accounting Policies and New Accounting Standards 131 Note 2. Business Combinations 146 Note 3. Revenue 150 Note 4. Loans 152 Note 5. Allowance for Credit Losses 159 Note 6. Investment Securities 161 Note 7. Securitization and Variable Interest Entities 163 Note 8. Goodwill and Intangible Assets 164 Note 9. Property, Equipment, Software and Leases 165 Note 10. Other Assets and Other Liabilities 168 Note 11. Deposits 169 Note 12. Debt 170 Note 13. Equity 172 Note 14. Derivative Financial Instruments 178 Note 15. Fair Value Measurements 180 Note 16. Share-Based Compensation 188 Note 17. Income Taxes 191 Note 18. Commitments, Guarantees, Concentrations and Contingencies 195 Note 19. Loss Per Share 197 Note 20. Business Segment and Geographic Information 198 Note 21. Regulatory Capital 204 Note 22. Parent Company Condensed Financial Information 205 Note 23. Subsequent Events 209 120 SoFi Technologies, Inc. TABLE OF CONTENTS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of SoFi Technologies, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of SoFi Technologies, Inc. and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, changes in temporary equity and permanent equity (deficit), and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 1, 2023, expressed an unqualified opinion on the Company’s internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Loans Held for Sale, at fair value— Refer to Notes 1, 4, and 15 to the financial statements Critical Audit Matter Description The Company has elected the fair value option to measure loans held for sale which are classified as Level 3 instruments because the valuations utilize significant unobservable inputs. As of December 31, 2022, loans held for sale, at fair value, were $13.6 billion. The Company determines the fair value of loans held for sale using a discounted cash flow calculation, which is a form of the income approach, while also considering market data as it becomes available. Management estimates the future cash flows of each loan portfolio using key loan metrics and significant unobservable inputs. The significant assumptions used in the valuation model include conditional prepayment rate, annual default rate and discount rate. We identified loans held for sale, at fair value, as a critical audit matter because of the unobservable inputs management uses to estimate fair value. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists. 121 SoFi Technologies, Inc. TABLE OF CONTENTS How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the fair value measurement of loans held for sale included the following, among others: • We tested the effectiveness of internal controls over the fair value of loans held for sale, including management’s controls over the evaluation of the reasonableness of unobservable inputs used in the valuation. • We evaluated the valuation models and the related assumptions, including significant unobservable inputs, and underlying loan data used by management and their third-party valuation expert. • We tested the completeness and accuracy of the source information derived from the Company’s loan data, which is used in the valuation model. • With the assistance of our fair value specialists, we developed independent fair value estimates and compared our estimates to the Company’s estimates. Acquisition of Technisys S.A. – Fair Value of Developed Technology and Customer-related Intangible Assets — Refer to Notes 1, 2 and 8 to the financial statements Critical Audit Matter Description The Company completed the acquisition of Technisys S.A. (“Technisys”) on March 3, 2022. The acquisition was accounted for as a business combination. The Company accounts for acquisitions of entities or asset groups that qualify as businesses using the acquisition method of accounting. Accordingly, the purchase consideration was allocated to the tangible and intangible assets acquired and liabilities assumed based on the estimated fair values as of the acquisition date, which are measured in accordance with fair value measurement principles. The allocation of the total purchase consideration to the estimated fair values of the developed technology and customer-related intangible assets acquired was $187 million and $42 million, respectively. Management used the Multi-Period Excess Earnings Method, a form of the income approach, to estimate the fair value of the developed technology. The significant assumptions include: (i) the estimated annual net cash flows, which are a function of expected earnings attributable to the asset (and include an assumed technology migration curve), and (ii) an assumed discount rate, which reflects the risk of the asset relative to the overall risk of Technisys. Management used the With and Without Method, a form of the income approach, to value the customer-related intangible assets. The significant assumptions include: (i) the estimated net cash flows both with the existing customer base and without the existing customer base, which include assumptions regarding revenue ramp-up periods and retention rates, and (ii) an assumed discount rate, which reflects the risk of the asset relative to the overall risk of Technisys. We identified the developed technology and customer-related intangible assets for Technisys as a critical audit matter because of the significant estimates and assumptions management made to determine the fair value of these assets. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the developed technology and customer-related intangible assets assumed for the Technisys acquisition included the following, among others: • We assessed the reasonableness of management’s estimated net cash flows by inquiring of management regarding its processes for developing projected financial information and comparing the projections to historical results achieved by Technisys, historical results of the Company and other acquisitions completed in recent years, and comparable peer companies. • We assessed the reasonableness of management’s assumption of the revenue ramp-up periods by evaluating Technisys’ historical growth trends, and testing the source information, including the number of existing customers through inspection of customer contracts. • We assessed the reasonableness of management’s assumption of the retention rates by evaluating Technisys’ historical retention rate, including testing of the source information, and comparing the retention rate to historical results achieved by comparable peer companies. 122 SoFi Technologies, Inc. TABLE OF CONTENTS • With the assistance of our fair value specialists, we evaluated: ◦ the reasonableness of the income approach valuation methodologies by assessing management’s application of the Multi-Period Excess Earnings Method and the With and Without Method, ◦ the reasonableness of the technology migration curve and discount rates used in the valuation by developing a range of independent estimates and comparing those to the assumptions selected by management, and ◦ the mathematical accuracy of the valuation analysis. Goodwill — Galileo Reporting Unit - Refer to Notes 1 and 8 to the financial statements Critical Audit Matter Description The Company tests goodwill for impairment at the reporting unit level annually or whenever indicators of impairment exist. The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying amount. The Company performed a quantitative goodwill impairment assessment on the Galileo reporting unit using a combination of a discounted cash flow (“DCF”) calculation, which is a form of the income approach, and a market multiples calculation, which is a form of the market approach. As of December 31, 2022, the Company had a goodwill balance of $1.62 billion, of which $1.59 billion was attributable to the Technology Platform reportable segment, which includes the Galileo reporting unit. The fair value of the Galileo reporting unit exceeded its carrying value as of the measurement date and, therefore, no impairment was recognized. We identified goodwill for the Galileo reporting unit as a critical audit matter because of the significant estimates and assumptions made by management to estimate the fair value of Galileo used in the quantitative impairment assessment. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s significant estimates and assumptions. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the significant estimates and assumptions made by management to estimate the fair value of Galileo used in the quantitative impairment assessment included the following, among others: • We tested the effectiveness of internal controls over the Company’s evaluation of goodwill for impairment. • With the assistance of our fair value specialists, we evaluated the appropriateness of the methodology and reasonableness of the significant estimates and assumptions. /s/ Deloitte & Touche LLP San Francisco, California March 1, 2023 We have served as the Company’s auditor since 2017. 123 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Consolidated Balance Sheets (In Thousands, Except for Share Data) December 31, 2022 2021 Assets Cash and cash equivalents $ 1,421,907 $ 494,711 Restricted cash and restricted cash equivalents 424,395 273,726 Investment securities (includes available-for-sale securities of $ 195,438 and $ 194,907 at fair value with associated amortized cost of $ 203,418 and $ 195,796 as of December 31, 2022 and 2021, respectively) 396,769 569,595 Loans held for sale, at fair value 13,557,074 5,952,972 Loans held for investment (less allowance for credit losses on loans at amortized cost of $ 40,788 and $ 7,037 as of December 31, 2022 and 2021, respectively) 307,957 115,912 Servicing rights 149,854 168,259 Equity method investments — 19,739 Property, equipment and software 170,104 111,873 Goodwill 1,622,991 898,527 Intangible assets 442,155 284,579 Operating lease right-of-use assets 97,135 115,191 Other assets (less allowance for credit losses of $ 2,785 and $ 2,292 as of December 31, 2022 and 2021, respectively) 417,334 171,242 Total assets $ 19,007,675 $ 9,176,326 Liabilities, temporary equity and permanent equity Liabilities: Deposits: Noninterest-bearing deposits $ 76,504 $ — Interest-bearing deposits 7,265,792 — Total deposits 7,342,296 — Accounts payable, accruals and other liabilities 516,215 298,164 Operating lease liabilities 117,758 138,794 Debt 5,485,882 3,947,983 Residual interests classified as debt 17,048 93,682 Total liabilities 13,479,199 4,478,623 Commitments, guarantees, concentrations and contingencies (Note 18) Temporary equity (1) : Redeemable preferred stock, $ 0.00 par value: 100,000,000 and 100,000,000 shares authorized; 3,234,000 and 3,234,000 shares issued and outstanding as of December 31, 2022 and 2021, respectively 320,374 320,374 Permanent equity: Common stock, $ 0.00 par value: 3,100,000,000 and 3,100,000,000 shares authorized; 933,896,120 and 828,154,462 shares issued and outstanding as of December 31, 2022 and 2021, respectively (2) 93 83 Additional paid-in capital 6,719,826 5,561,831 Accumulated other comprehensive loss ( 8,296 ) ( 1,471 ) Accumulated deficit ( 1,503,521 ) ( 1,183,114 ) Total permanent equity 5,208,102 4,377,329 Total liabilities, temporary equity and permanent equity $ 19,007,675 $ 9,176,326 __________________ (1) Redemption amount is $ 323,400 as of December 31, 2022 and 2021. (2) Includes 100,000,000 non-voting common shares authorized and no non-voting common shares issued and outstanding as of December 31, 2022 and 2021. See Note 13 for additional information. The accompanying notes are an integral part of these consolidated financial statements. 124 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Consolidated Balance Sheets (Continued) (In Thousands, Except for Share Data) The following table presents the assets and liabilities of consolidated variable interest entities (“VIEs”) which are included in our consolidated balance sheets. The assets in the below table may only be used to settle obligations of consolidated VIEs and are in excess of those obligations as of the dates presented. Additionally, the assets and liabilities in the table below exclude intercompany balances, which eliminate upon consolidation. December 31, 2022 2021 Assets: Restricted cash and restricted cash equivalents $ 68,151 $ 53,161 Loans held for sale, at fair value 931,701 808,904 Total assets $ 999,852 $ 862,065 Liabilities: Accounts payable, accruals and other liabilities $ 3,053 $ 388 Debt 771,454 660,419 Residual interests classified as debt 17,048 93,682 Total liabilities $ 791,555 $ 754,489 The accompanying notes are an integral part of these consolidated financial statements. 125 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Consolidated Statements of Operations and Comprehensive Loss (In Thousands, Except for Share and Per Share Data) Year Ended December 31, 2022 2021 2020 Interest income Loans $ 749,071 $ 337,862 $ 330,353 Securitizations 10,433 14,109 24,031 Other 13,867 3,049 9,153 Total interest income 773,371 355,020 363,537 Interest expense Securitizations and warehouses 110,127 90,485 155,150 Deposits 59,793 — — Corporate borrowings 18,438 10,345 27,974 Other 917 1,946 2,482 Total interest expense 189,275 102,776 185,606 Net interest income 584,096 252,244 177,931 Noninterest income Loan origination and sales 605,403 497,626 371,323 Securitizations ( 40,031 ) ( 14,862 ) ( 70,251 ) Servicing 43,547 ( 2,281 ) ( 19,426 ) Technology products and solutions 304,901 191,847 90,128 Other 75,619 60,298 15,827 Total noninterest income 989,439 732,628 387,601 Total net revenue 1,573,535 984,872 565,532 Noninterest expense Technology and product development 405,257 276,087 201,199 Sales and marketing 617,823 426,875 276,577 Cost of operations 313,226 256,980 178,896 General and administrative 501,618 498,534 237,381 Provision for credit losses 54,332 7,573 — Total noninterest expense 1,892,256 1,466,049 894,053 Loss before income taxes ( 318,721 ) ( 481,177 ) ( 328,521 ) Income tax (expense) benefit ( 1,686 ) ( 2,760 ) 104,468 Net loss $ ( 320,407 ) $ ( 483,937 ) $ ( 224,053 ) Other comprehensive loss Unrealized losses on available-for-sale securities, net ( 7,260 ) ( 1,351 ) — Foreign currency translation adjustments, net 435 46 ( 145 ) Total other comprehensive loss ( 6,825 ) ( 1,305 ) ( 145 ) Comprehensive loss $ ( 327,232 ) $ ( 485,242 ) $ ( 224,198 ) Loss per share (Note 19) Loss per share – basic $ ( 0.40 ) $ ( 1.00 ) $ ( 4.30 ) Loss per share – diluted $ ( 0.40 ) $ ( 1.00 ) $ ( 4.30 ) Weighted average common stock outstanding – basic 900,886,113 526,730,261 73,851,108 Weighted average common stock outstanding – diluted 900,886,113 526,730,261 73,851,108 The accompanying notes are an integral part of these consolidated financial statements. 126 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Consolidated Statements of Changes in Temporary Equity and Permanent Equity (Deficit)  (In Thousands, Except for Share Data) Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Permanent Equity (Deficit) Temporary Equity Shares Amount Shares Amount Balance at January 1, 2020 69,040,750 $ — $ 135,517 $ ( 21 ) $ ( 474,558 ) $ ( 339,062 ) 404,170,765 $ 2,439,731 Share-based compensation expense — — 99,870 — — 99,870 — — Equity-based payments to non-employees 130,710 — 908 — — 908 — — Vesting of RSUs 11,528,031 — — — — — — — Stock withheld related to taxes on vested RSUs ( 4,431,964 ) — ( 31,259 ) — — ( 31,259 ) — — Exercise of common stock options 2,039,000 — 3,781 — — 3,781 — — Vested stock options assumed in acquisition — — 32,197 — — 32,197 — — Common stock purchases ( 114,819 ) — — — ( 566 ) ( 566 ) — — Redeemable preferred stock dividends — — ( 40,536 ) — — ( 40,536 ) — — Note receivable issuance to stockholder, inclusive of interest — — ( 1,764 ) — — ( 1,764 ) — — Note receivable payments from stockholder, inclusive of interest — — 47,823 — — 47,823 — — Issuance of redeemable preferred stock — — — — — — 91,921,020 814,156 Preferred stock redemption — — ( 52,658 ) — — ( 52,658 ) ( 26,941,263 ) ( 80,201 ) Issuance of common stock in acquisition 1,919,356 — 15,565 — — 15,565 — — Issuance of common stock 34,973,294 — 369,840 — — 369,840 — — Common stock issuance costs — — ( 56 ) — — ( 56 ) — — Net loss — — — — ( 224,053 ) ( 224,053 ) — — Other comprehensive loss, net of taxes — — — ( 145 ) — ( 145 ) — — Balance at December 31, 2020 115,084,358 $ — $ 579,228 $ ( 166 ) $ ( 699,177 ) $ ( 120,115 ) 469,150,522 $ 3,173,686 Share-based compensation expense — — 246,787 — — 246,787 — — Equity-based payments to non-employees 18,058 — 360 — — 360 — — Vesting of RSUs 16,427,162 2 ( 2 ) — — — — — Stock withheld related to taxes on vested RSUs ( 2,405,588 ) — ( 42,644 ) — — ( 42,644 ) — — Exercise of common stock options 8,523,468 — 25,154 — — 25,154 — — Redeemable preferred stock dividends — — ( 40,426 ) — — ( 40,426 ) — — Issuance of contingently issuable stock 1,601,781 — — — — — — — Conversion of common stock warrants issued in connection with Business Combination and PIPE Investment into permanent equity — — 185,762 — — 185,762 — — Issuance of common stock related to exercise of warrants 15,193,668 2 95,045 — — 95,047 — — Cancellation of redeemable preferred stock related to a business combination — — — — — — ( 83,856 ) ( 743 ) Conversion of redeemable preferred stock warrants into permanent equity — — 161,775 — — 161,775 — — Conversion of redeemable preferred stock to common stock 450,832,666 45 2,702,524 — — 2,702,569 ( 450,832,666 ) ( 2,702,569 ) Issuance of common stock in connection with Business Combination and PIPE Investment 222,878,889 22 1,789,579 — — 1,789,601 — — Costs directly attributable to the issuance of common stock in connection with Business Combination and PIPE Investment — — ( 27,539 ) — — ( 27,539 ) — — Repurchase of redeemable common stock — — — — — — ( 15,000,000 ) ( 150,000 ) Change in par for historical SoFi common stock — 12 ( 12 ) — — — — — Purchase of capped calls — — ( 113,760 ) — — ( 113,760 ) — — Net loss — — — — ( 483,937 ) ( 483,937 ) — — Other comprehensive loss, net of taxes — — — ( 1,305 ) — ( 1,305 ) — — Balance at December 31, 2021 828,154,462 $ 83 $ 5,561,831 $ ( 1,471 ) $ ( 1,183,114 ) $ 4,377,329 3,234,000 $ 320,374 Share-based compensation expense — — 328,571 — — 328,571 — — Equity-based payments to non-employees 100,000 — — — — — — — Vesting of RSUs 23,183,000 2 ( 2 ) — — — — — Stock withheld related to taxes on vested RSUs ( 1,196,691 ) — ( 8,983 ) — — ( 8,983 ) — — Exercise of common stock options 1,955,031 — 2,610 — — 2,610 — — Issuance of common stock in acquisition 81,700,318 8 873,369 — — 873,377 — — Vested awards assumed in acquisition — — 2,855 — — 2,855 — — Redeemable preferred stock dividends — — ( 40,425 ) — — ( 40,425 ) — — Net loss — — — — ( 320,407 ) ( 320,407 ) — — Other comprehensive loss, net of taxes — — — ( 6,825 ) — ( 6,825 ) — — Balance at December 31, 2022 933,896,120 $ 93 $ 6,719,826 $ ( 8,296 ) $ ( 1,503,521 ) $ 5,208,102 3,234,000 $ 320,374 The accompanying notes are an integral part of these consolidated financial statements. 127 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Consolidated Statements of Cash Flows  (In Thousands) Year Ended December 31, 2022 2021 2020 Operating activities Net loss $ ( 320,407 ) $ ( 483,937 ) $ ( 224,053 ) Adjustments to reconcile net loss to net cash used in operating activities: Share-based compensation expense 305,994 239,011 99,870 Depreciation and amortization 151,360 101,568 69,832 Deferred debt issuance and discount expense 18,292 18,292 28,310 Provision for credit losses 54,332 7,573 — Deferred income taxes ( 3,498 ) 1,204 ( 104,504 ) Fair value changes in residual interests classified as debt 6,608 22,802 38,216 Fair value changes in securitization investments 13,600 ( 6,538 ) ( 13,919 ) Fair value changes in warrant liabilities — 107,328 20,525 Equity method investment earnings — 261 ( 4,314 ) Accretion of seller note interest expense — — 6,002 Other 13,426 ( 12,467 ) 2,030 Changes in operating assets and liabilities: Changes in loans held for sale, net ( 7,463,474 ) ( 1,308,329 ) ( 515,751 ) Servicing assets 18,405 ( 18,662 ) 52,021 Related party notes receivable interest income — 1,399 1,121 Other assets ( 56,861 ) ( 10,700 ) ( 29,883 ) Accounts payable, accruals and other liabilities 6,365 ( 9,022 ) 95,161 Net cash used in operating activities $ ( 7,255,858 ) $ ( 1,350,217 ) $ ( 479,336 ) Investing activities Purchases of property, equipment, software and intangible assets $ ( 93,201 ) $ ( 52,261 ) $ ( 24,549 ) Capitalized software development costs ( 10,532 ) — — Purchases of available-for-sale investments ( 44,974 ) ( 246,372 ) — Proceeds from sales of available-for-sale investments 23,497 52,742 — Proceeds from maturities and paydowns of available-for-sale investments 15,240 4,799 — Changes in loans held for investment, net ( 173,728 ) — — Proceeds from securitization investments 118,825 247,058 322,704 Proceeds from non-securitization investments — 109,534 974 Purchases of non-securitization investments — ( 22,000 ) ( 145 ) Acquisition of businesses, net of cash acquired 58,540 — ( 32,392 ) Related party notes receivable issuances — — ( 7,643 ) Proceeds from repayment of related party notes receivable — 16,693 — Net cash (used in) provided by investing activities $ ( 106,333 ) $ 110,193 $ 258,949 The accompanying notes are an integral part of these consolidated financial statements. 128 SoFi Technologies, Inc. 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Consolidated Statements of Cash Flows (Continued) (In Thousands) Year Ended December 31, 2022 2021 2020 Financing activities Net change in debt facilities $ 1,418,456 $ ( 1,186,880 ) $ 1,088,857 Proceeds from other debt issuances 439,990 1,191,908 547,058 Repayment of other debt ( 516,363 ) ( 912,890 ) ( 1,110,528 ) Payment of debt issuance costs ( 8,287 ) ( 9,465 ) ( 16,443 ) Net change in deposits 7,152,975 — — Taxes paid related to net share settlement of share-based awards ( 8,983 ) ( 42,644 ) ( 31,259 ) Proceeds from stock option exercises 2,610 25,154 3,781 Payment of redeemable preferred stock dividends ( 40,425 ) ( 40,426 ) ( 40,536 ) Finance lease principal payments ( 488 ) ( 516 ) ( 489 ) Purchases of common stock — ( 526 ) ( 40 ) Redemptions of redeemable common and preferred stock — ( 282,859 ) — Proceeds from Business Combination and PIPE Investment — 1,989,851 — Payment of costs directly attributable to the issuance of common stock in connection with Business Combination and PIPE Investment — ( 26,951 ) — Proceeds from warrant exercises — 95,047 — Purchase of capped calls — ( 113,760 ) — Payment of deferred equity costs — ( 56 ) — Proceeds from common stock issuances — — 369,840 Note receivable principal repayments from stockholder — — 43,513 Net cash provided by financing activities $ 8,439,485 $ 684,987 $ 853,754 Effect of exchange rates on cash and cash equivalents 571 46 ( 145 ) Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents $ 1,077,865 $ ( 554,991 ) $ 633,222 Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period 768,437 1,323,428 690,206 Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period $ 1,846,302 $ 768,437 $ 1,323,428 Reconciliation to amounts on consolidated balance sheets (as of period end) Cash and cash equivalents $ 1,421,907 $ 494,711 $ 872,582 Restricted cash and restricted cash equivalents 424,395 273,726 450,846 Total cash, cash equivalents, restricted cash and restricted cash equivalents $ 1,846,302 $ 768,437 $ 1,323,428 The accompanying notes are an integral part of these consolidated financial statements. 129 SoFi Technologies, Inc. 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Consolidated Statements of Cash Flows (Continued) (In Thousands) Year Ended December 31, 2022 2021 2020 Supplemental cash flow information Interest paid $ 150,866 $ 94,795 $ 129,131 Income taxes paid, net 2,567 1,759 529 Supplemental non-cash investing and financing activities Loans held for investment received in acquisition $ 84,485 $ — $ — Deposits assumed in acquisition 158,016 — — Debt assumed in acquisition 2,000 — 5,832 Available-for-sale securities received in acquisition 10,014 — — Derecognition of securitization investments 40,933 — — Property, equipment and software acquired in acquisition 3,192 — 2,026 Non-cash loan reduction 1,798 — — Deferred debt issuance costs accrued but unpaid 413 925 1,600 Deconsolidation of securitization debt 99,695 — 770,918 Deconsolidation of residual interests classified as debt — — 101,718 Securitization investments acquired via loan transfers — 118,274 151,768 Costs directly attributable to the issuance of common stock paid in prior year — 588 — Seller note issued in acquisition — — 243,998 Redeemed but unpaid common stock — — 526 Redeemed but unpaid redeemable preferred stock — — 132,859 The accompanying notes are an integral part of these consolidated financial statements. 130 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Note 1. Organization, Summary of Significant Accounting Policies and New Accounting Standards Organization 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”. SoFi is a financial services platform that was founded in 2011 to offer an innovative approach to the private student loan market by providing student loan refinancing options. The Company conducts its business through three reportable segments: Lending, Technology Platform and Financial Services. Since its founding, SoFi has expanded its lending and financial services strategy to offer personal loans, home loans and credit cards. The Company also developed additional financial products, such as money management and investment product offerings, and has also leveraged its financial services platform to empower other businesses. The Company has continued to expand its product offerings through strategic acquisitions. During 2020, the Company expanded its investment product offerings into Hong Kong through the acquisition of 8 Limited, and also began to operate as a platform-as-a-service for a variety of financial service providers, providing the infrastructure to facilitate core client-facing and back-end capabilities, such as account setup, account funding, direct deposit, authorizations and processing, payments functionality and check account balance features through the acquisition of Galileo. During 2022, the Company became a bank holding company and began operating as SoFi Bank, National Association, through its acquisition of Golden Pacific Bancorp, Inc., and expanded its platform to include a cloud-native digital and core banking platform with customers in Latin America through its acquisition of Technisys S.A., allowing the Company to expand its technology platform services to a broader international market. For additional information on our recent business combinations, see Note 2. For additional information on our reportable segments, see Note 20. Summary of Significant Accounting Policies Basis of Presentation The consolidated financial statements include the accounts of the Company, its wholly-owned and majority-owned subsidiaries and certain consolidated VIEs. All intercompany accounts were eliminated in consolidation. The consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) and in accordance with the rules and regulations of the SEC. In our consolidated financial statements, we made the following presentation changes in 2022: • in our consolidated balance sheets, (i) combined the financial statement line items for investments in available-for-sale securities and securitization investments and presented within investment securities, and (ii) broke out the financial statement line item loans into loans held for sale and loans held for investment ; • in our consolidated statements of operations and comprehensive income (loss), (i) reclassified amounts within the financial statement line item interest income—related party notes to interest income—other , as the balances were immaterial for separate presentation, and (ii) renamed the financial statement line item for noninterest income—technology platform fees to noninterest income—technology products and solutions to accommodate noninterest income earned from Technisys. See Note 3 for our presentation of disaggregated revenue and Note 2 for our discussion of business combinations; and • in our consolidated statements of cash flows, (i) reclassified amounts related to the provision for credit losses to a separate financial statement line item from other within the adjustments to reconcile net loss to net cash used in operating activities , (ii) combined amounts in prior years separately disclosed under the captions equity-based payments to non-employees and fair value adjustment to related party notes receivable into other within the adjustments to reconcile net cash to net cash used in operating activities , as they were immaterial individually and in aggregate and did not recur, and (iii) netted the financial statement line items for originations and purchase of loans 131 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) with proceeds from sales and repayments of loans and presented within changes in loans held for sale, net within cash flows from operating activities, consistent with industry practice. In all instances, the respective prior period amounts were recast to conform to the current period presentation. Use of Judgments, Assumptions and Estimates The preparation of our consolidated financial statements and related disclosures in conformity with GAAP requires management to make assumptions and estimates that affect the reported amounts of assets, liabilities, revenue, expenses, and the disclosures of contingent assets and liabilities. These estimates and assumptions are inherently subjective in nature and, therefore, actual results may differ from our estimates and assumptions, and the differences could be material. Management bases its estimates on historical experience and on various other factors it believes to be reasonable under the circumstances. These assumptions and estimates include, but are not limited to, the following: (i) fair value measurements, (ii) business combinations, and (iii) goodwill. Business Combinations We account for acquisitions of entities or asset groups that qualify as businesses using the acquisition method of accounting. Purchase consideration is allocated to the tangible and intangible assets acquired and liabilities assumed based on the estimated fair values as of the acquisition date, which are measured in accordance with fair value measurement accounting principles. The determination of fair value requires management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature. The excess of the total purchase consideration over the fair value of the identified net assets acquired is recognized as goodwill. The results of the acquired businesses are included in our results of operations beginning from the date of acquisition. Acquisition-related costs are expensed as incurred. During the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the allocation of purchase consideration and to the fair values of assets acquired and liabilities assumed to the extent that additional information becomes available. After this period, any subsequent adjustments are recorded in the consolidated statements of operations and comprehensive income (loss). Variable Interest Entities We enter into arrangements in which we originate loans, establish a special purpose entity (“SPE”), and transfer loans to the SPE. We retain the servicing rights of those loans and hold additional interests in the SPE. We evaluate each such arrangement to determine whether we have a variable interest. If we determine that we have a variable interest in an SPE, we then determine whether the SPE is a VIE. If the SPE is a VIE, we assess whether we are the primary beneficiary of the VIE, such that we must consolidate the VIE on our consolidated balance sheets. To determine if we are the primary beneficiary, we identify the most significant activities and determine who has the power over those activities, and who absorbs the variability in the economics of the VIE. We periodically reassess our involvement with each VIE in which we have a variable interest. We monitor matters related to our ability to control economic performance, such as management of the SPE and its underlying loans, contractual changes in the services provided, the extent of our ownership, and the rights of third parties to terminate us as the VIE servicer. In addition, we monitor the financial performance of each VIE for indications that we may or may not have the right to absorb benefits or the obligation to absorb losses associated with variability in the financial performance of the VIE that could potentially be significant to that VIE, which we define as a variable interest of greater than 10 %. A significant change to the pertinent rights of us or other parties, or a significant change to the ranges of possible financial performance outcomes used in our assessment of the variability of cash flows due to us, could impact the determination of whether or not a VIE should be consolidated in future periods. VIE consolidation and deconsolidation may lead to increased volatility in our financial results and impact period-over-period comparability. Our maximum exposure to loss as a result of our involvement with consolidated VIEs is limited to our investment, which is eliminated in consolidation. There are no liquidity arrangements, guarantees or other commitments by third parties that may affect the fair value or risk of our variable interests in consolidated VIEs. Refer to Note 7 for more details regarding our consolidated VIEs. 132 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Fair Value Measurements Fair value is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We use a three-level fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis in periods subsequent to their initial measurement. The hierarchy requires us to use observable inputs when available and to minimize the use of unobservable inputs when determining fair value. The three levels are defined as follows: • Level 1 — Quoted prices in active markets for identical assets or liabilities, accessible by us at the measurement date. • Level 2 — Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or observable inputs other than quoted prices. • Level 3 — Unobservable inputs for assets or liabilities for which there is little or no market data, which requires us to develop our own assumptions. These unobservable assumptions reflect estimates of inputs that market participants would use in pricing the asset or liability. Valuation techniques include the use of option pricing models, discounted cash flow models, or similar techniques, which incorporate management’s own estimates of assumptions that market participants would use in pricing the asset or liability. A financial instrument’s categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Instruments are categorized in Level 3 of the fair value hierarchy based on the significance of unobservable factors in the overall fair value measurement. As a result, the related gains and losses for assets and liabilities within the Level 3 category presented in Note 15 may include changes in fair value that are attributable to both observable and unobservable inputs. Transfers of Financial Assets The transfer of an entire financial asset is accounted for as a sale if all of the following conditions are met: • the financial asset is isolated from the transferor and its consolidated affiliates as well as its creditors, even in bankruptcy or other receivership; • the transferee or beneficial interest holders have the right to pledge or exchange the transferred financial asset; and • the transferor, its consolidated affiliates and its agents do not maintain effective control over the transferred financial asset. Loan sales are aggregated in the financial statements due to the similarity of both the loans transferred and servicing arrangements. The portion of our income relating to ongoing servicing and the fair value of our servicing rights are dependent upon the performance of the sold loans. We measure the gain or loss on the sale of financial assets as the net assets received from the sale less the carrying amount of the loans sold. The net assets received from the sale represent the fair value of any assets obtained or liabilities incurred as part of the transaction, including but not limited to cash, servicing assets, retained securitization investments and recourse obligations. When securitizing loans, we employ a two-step transaction that includes the isolation of the underlying loans in a trust and the sale of beneficial interests in the trust to a bankruptcy-remote entity. Transfers of financial assets that do not qualify for sale accounting are reported as secured borrowings. Accordingly, the related assets remain on our consolidated balance sheets and continue to be reported and accounted for as if the transfer had not occurred. Cash proceeds received from these transfers are reported as liabilities, with related interest expense recognized over the life of the related secured borrowing. As a component of the loan sale agreements, we make certain representations to third parties that purchase our previously-held loans, some of which include Government-Sponsored Enterprises (“GSE”) repurchase requirements and all of which are standard in nature and do not constrain our ability to recognize a sale for accounting purposes. Any significant estimated post-sale obligations or contingent obligations to the purchaser of the loans arising from these representations are accrued if probable and estimable. We establish a loan repurchase liability, which is based on historical experience and any current developments which would make it probable that we would buy back loans previously sold to third parties at the historical sales price. The loan repurchase liability is presented within accounts payable, accruals and other liabilities in the 133 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) consolidated balance sheets, with the corresponding charges recorded within noninterest income—loan origination and sales in the consolidated statements of operations and comprehensive income (loss). Cash and Cash Equivalents Cash and cash equivalents primarily include unrestricted deposits with financial institutions in checking, money market and short-term certificate of deposit accounts and certain short-term commercial paper. We consider all highly liquid investments with original maturity dates of three months or less to be cash equivalents. Restricted Cash and Restricted Cash Equivalents Restricted cash and restricted cash equivalents primarily include cash deposits, certificate of deposit accounts held on reserve, money market funds held by consolidated VIEs and collection balances. These accounts are earmarked as restricted because the balances are either member balances held in our custody, cash segregated for regulatory purposes associated with brokerage activities, escrow requirements for certain debt facilities and derivative agreements, deposits required by various bank holding companies we partner with (“Member Banks”) that support one or more of our products, loan collection balances awaiting disbursement, consolidated VIE cash balances that we cannot use for general operating purposes, or other legally restricted balances. Loans Our loan portfolio primarily consists of: (i) personal loans, student loans and home loans, which are held for sale and measured at fair value, and (ii) credit cards, and commercial and consumer banking loans, which are held for investment and measured at amortized cost. The commercial and consumer banking portfolio is primarily inclusive of commercial real estate loans, commercial and industrial loans and residential real estate and other consumer loans. Loans Held for Sale Loans that we have the intent and ability to sell to third-party purchasers are classified as held for sale. We elected the fair value option to measure our personal loans, student loans and home loans, as we believe that fair value best reflects the expected economic performance of the loans, as well as our intentions given our primary gain-on-sale origination model. Therefore, these loans are carried at fair value on a recurring basis. Loans do not trade in an active market with readily observable prices. We determine the fair value of our loans using a discounted cash flow methodology, while also considering market data as it becomes available. Direct fees, which primarily relate to home loan originations, are recognized in earnings as earned and are recorded within noninterest income—loan origination and sales in the consolidated statements of operations and comprehensive income (loss). Direct loan origination costs are recognized in earnings as incurred and are recorded within noninterest expense—cost of operations in the consolidated statements of operations and comprehensive income (loss). We record the initial fair value measurement and subsequent measurement changes in fair value in the period in which the changes occur within noninterest income—loan origination and sales in the consolidated statements of operations and comprehensive income (loss). We record cash flows related to loans held for sale within cash flows from operating activities in the consolidated statements of cash flows. Securitized loans are assets held by consolidated SPEs as collateral for bonds issued, for which fair value changes are recorded within noninterest income—securitizations in the consolidated statements of operations and comprehensive income (loss). Gains or losses recognized upon deconsolidation of a VIE are also recorded within noninterest income—securitizations . We consider a loan to be delinquent when the borrower has not made the scheduled payment amount within one day after the scheduled payment date, provided the borrower is not in school or in deferment, forbearance or within an agreed-upon grace period. Loan deferment is a provision within student loan contracts that permits the borrower to defer payments while enrolled at least half time in school. During the deferment period, interest accrues on the loan balance and is capitalized to the loan when the loan enters repayment status, which begins when the student no longer qualifies for deferment. Forbearance applies to student loans, personal loans and home loans. A borrower in repayment may generally request forbearance for reasons including a FEMA-declared disaster, unemployment, economic hardship or general economic uncertainty. Forbearance typically cannot exceed a total of 12 months over the life of the loan. If forbearance is granted, interest continues to accrue during the forbearance period and is capitalized to the loan when the borrower resumes making payments. At the conclusion of a forbearance period, the contractual monthly payment is recalculated and is generally higher as a result. 134 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) For personal loans and student loans, delinquent loans are charged off after 120 days of delinquency or on the date of confirmed loss. For home loans, delinquent loans are charged off after 180 days of delinquency or on the date of confirmed loss. For all loans, we stop accruing interest and reverse all accrued but unpaid interest on the date of charge-off. Additional information about our loans held for sale is included in Note 4, Note 7 and Note 15. Loans Held for Investment For our commercial and consumer banking loans, direct loan origination costs are deferred and amortized using the effective interest method over the contractual term of the loans within interest income—loans in the consolidated statements of operations and comprehensive income (loss). As of December 31, 2022, the remaining balance of deferred costs was immaterial. We present accrued interest for loans held for investment within loans held for investment in the consolidated balance sheets. We record cash flows related to loans held for investment within cash flows from investing activities in the consolidated statements of cash flows. Credit card balances are reported as delinquent when they become 30 or more days past due. Credit card balances are charged off after 180 days of delinquency or on the date of the confirmed loss, at which time we stop accruing interest and fees and reverse all accrued but unpaid interest and fees through interest income as of such date. When a credit card balance is charged off, we record a reduction to the allowance and the credit card balance. When recovery payments are received against charged off credit card balances, we record a direct reduction to the provision for credit losses. Credit card receivables associated with alleged or potential fraudulent transactions are charged off through noninterest expense—general and administrative in the consolidated statements of operations and comprehensive income (loss). Commercial and consumer banking loans are reported as delinquent when they become 30 or more days past due. For all commercial and consumer banking loans, we stop accruing interest and reverse all accrued but unpaid interest after 90 days of delinquency. For consumer banking loans, delinquent loans are charged off after 120 days of delinquency or on the date of confirmed loss. For commercial loans, performance is monitored on an individual loan basis and delinquent loans are charged off when collectability of interest and principal on the loan is not reasonably assured. Allowance for Credit Losses We primarily evaluate expected credit losses under the current expected credit loss model for the following financial assets: (i) cash equivalents and restricted cash equivalents, (ii) accounts receivable from contracts with customers, inclusive of servicing related receivables, (iii) loans measured at amortized cost, and (iv) investments in available-for-sale (“AFS”) debt securities. Our approaches to measuring the allowance for credit losses on the applicable financial assets are as follows: Cash equivalents and restricted cash equivalents : Our cash equivalents and restricted cash equivalents are short-term in nature and of high credit quality; therefore, we determined that our exposure to credit losses over the life of these instruments was immaterial. Accounts receivable from contracts with customers : Accounts receivable from contracts with customers as of the balance sheet dates, all of which are short-term in nature, are recorded at their original invoice amounts reduced by any allowance for credit losses. We assess the risk of loss for each individual customer, even when the risk is remote. Certain of our historical accounts receivable balances did not have any write-offs. We use the aging method and historical loss rates as a basis for estimating the percentage of current and delinquent accounts receivable balances that will result in credit losses. We consider whether the conditions at the measurement date and reasonable and supportable forecasts about future conditions, such as customer creditworthiness, current economic conditions, customer location, expectations of near-term economic trends and changes in customer payment terms and collection trends, warrant an adjustment to our historical loss experience. Based on this analysis, we determined that our historical loss rates remained most indicative of our lifetime expected losses. We record the provision for credit losses on accounts receivable from contracts with customers within noninterest expense—general and administrative in the consolidated statements of operations and comprehensive income (loss). When we determine that a receivable is not collectible, we write off the uncollectible amount as a reduction to both the allowance and the gross asset balance. Recoveries are recorded when received and credited to the provision for credit losses. Any change in the assumptions used in analyzing a specific account receivable may result in an additional allowance for credit 135 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) losses being recognized in the period in which the change occurs. See Note 5 for a rollforward of the allowance for credit losses related to our accounts receivable. Credit cards : We segment pools of credit cards based on consumer credit score bands as measured using FICO scores, which are obtained at origination of the account and are refreshed monthly thereafter, and also by delinquency status, which may be adjusted using other risk-differentiating attributes to model charge-off probabilities and the average life over which expected credit losses may occur for the credit cards within each pool. The pools estimate the likelihood of borrowers with similar FICO scores to pay credit obligations based on aggregate credit performance data. When necessary, we apply separate credit loss assumptions to assets that have deteriorated in credit quality such that they no longer share similar risk characteristics with other assets in the same FICO score band. We either estimate the allowance for credit losses on such non-performing assets individually based on individual risk characteristics or as part of a distinct pool of assets that shares similar risk characteristics. We reassess our credit card pools periodically to confirm that all loans within each pool continue to share similar risk characteristics. We establish an allowance within each pool of credit cards utilizing the risk model described above, which may then be adjusted for current conditions and reasonable and supportable forecasts of future conditions, including economic conditions. We apply the probability-of-default and loss-given-default assumptions to the drawn balance of credit cards within each pool to estimate the lifetime expected credit losses within each pool, which are then aggregated to determine the allowance for credit losses. We do not measure credit losses on the undrawn credit exposure, as such undrawn credit exposure is unconditionally cancellable by us. Management further considers an evaluation of overall portfolio credit quality based on indicators such as changes in our credit decisioning process, underwriting and collection management policies; the effects of external factors, such as regulatory requirements; general economic conditions; and inherent uncertainties in applying the methodology. We record the provision for credit losses on credit cards within noninterest expense—provision for credit losses in the consolidated statements of operations and comprehensive income (loss). We elected to exclude interest on credit cards from the measurement of our allowance, as our policy allows for accrued interest to be reversed in a timely manner. Further, we elected the practical expedient to exclude the accrued interest component of our credit cards from the quantitative disclosures presented. See Note 5 for a rollforward of the allowance for credit losses related to our credit cards. Commercial and consumer banking loans : We evaluate the credit quality of our commercial and consumer banking loan portfolio based on regulatory risk ratings. Loans are categorized into risk ratings based on relevant information about the ability of borrowers to service their debt, such as current financial information, historical payment experience, collateral adequacy, credit documentation, and current economic trends, among other factors. The allowance for credit losses is determined at an individual loan level and estimated based on weighted average remaining maturity and annualized loss rate according to the loan’s regulatory loan type and risk rating classification. This analysis is performed on an ongoing basis as new information is obtained. See Note 5 for a rollforward of the allowance for credit losses related to our commercial and consumer banking loans. Investments in AFS debt securities : An allowance for credit losses on our investments in AFS debt securities is required for any portion of impaired securities that is attributable to credit-related factors. For certain securities that are guaranteed by the U.S. Treasury or government agencies, or sovereign entities of high credit quality, we concluded that there is no risk of credit-related impairment due to the nature of the counterparties and history of no credit losses. For other investments in AFS debt securities, factors considered in evaluating credit losses include: (i) adverse conditions related to the macroeconomic environment or the industry, geographic area or financial condition of the issuer, (ii) other credit indicators of the security, such as external credit ratings, and (iii) payment structure of the security. As of December 31, 2022, we concluded that the credit-related impairment was immaterial. Credit-related impairment, if applicable, is recognized as an allowance for credit losses in the consolidated balance sheets with a corresponding adjustment to noninterest expense—provision for credit losses in the consolidated statements of operations and comprehensive income (loss). Such credit losses are limited to the amount of the total impairment. We did not recognize an allowance for credit losses on impaired investments in AFS debt securities as of December 31, 2022. 136 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Servicing Rights Each time we enter into a servicing agreement, either in connection with transfers of our financial assets or in connection with a referral fulfillment arrangement in which we are a sub-servicer for financial assets that we do not legally own, we determine whether we should record a servicing asset or servicing liability. We elected the fair value option to measure our servicing rights subsequent to initial recognition. We measure the initial and subsequent fair value of our servicing rights using a discounted cash flow methodology, while also considering market data as it becomes available. The significant assumptions used in the valuation model include our contractual servicing fee, ancillary income, prepayment rate assumptions, default rate assumptions, a discount rate commensurate with the risk of the servicing asset or liability being valued, and an assumed market cost of servicing, which is based on active quotes from third-party servicers. For servicing rights retained in connection with loan transfers that do not meet the requirements for sale accounting treatment, there is no recognition of a servicing asset or liability. Servicing rights in connection with transfers of financial assets are initially measured at fair value and recognized as a component of the gain or loss from sales of loans and the initial capitalization is reported within noninterest income—loan origination and sales in the consolidated statements of operations and comprehensive income (loss). Servicing rights assumed from third parties for financial assets for which we are not the loan originator are initially measured at fair value and recognized within noninterest income—servicing in the consolidated statements of operations and comprehensive income (loss). Servicing rights are measured at fair value at each subsequent reporting date and changes in fair value are reported in earnings in the period in which they occur. Subsequent measurement changes for all servicing rights, including servicing fee payments and fair value changes, are included within noninterest income—servicing in the consolidated statements of operations and comprehensive income (loss). We elected the fair value option to measure our servicing rights to better align with the valuation of our transferred loans, which also tend to share a similar risk profile to the personal loan servicing we assume from third parties when we are not the loan originator. The loans are also impacted by similar factors, such as conditional prepayment rates and default rates. We consider the risk of the assets and the observability of inputs in determining the classes of servicing rights. We have three classes of servicing assets: personal loans, student loans and home loans. See Note 15 for the key inputs used in the fair value measurements of our classes of servicing rights. Investments in Debt Securities The accounting and measurement framework for our investments in debt securities is determined based on the security classification. We do not hold investments in debt securities for trading purposes, nor do we have investments in debt securities that we have the intent and ability to hold to maturity. Therefore, we classify our investments in debt securities as available-for-sale. During the first quarter of 2022, we acquired additional investments in AFS debt securities with the Bank Merger. We record investments in AFS debt securities at fair value in our consolidated balance sheets, with unrealized gains and losses recorded, net of tax, as a component of accumulated other comprehensive income (loss) (“AOCI”). See Note 15 for additional information on our fair value estimates for investments in AFS debt securities. The amortized cost basis of our investments in AFS debt securities reflects the security’s acquisition cost, adjusted for amortization of premium or accretion of discount, and collection of cash and charge-offs, as applicable. For purposes of determining gross realized gains and losses on AFS debt securities, the cost of securities sold is based on specific identification. We elected to present accrued interest for AFS debt securities within investment securities in the consolidated balance sheets. Purchase discounts, premiums, and other basis adjustments for investments in AFS debt securities are generally amortized into interest income over the contractual life of the security using the effective interest method. However, premiums on certain callable debt securities are amortized to the earliest call date. Amortization of premiums and discounts and other basis adjustments for investments in AFS debt securities, as well as interest income earned on the investments, are recognized within interest income—other , and realized gains and losses on investments in AFS debt securities are recognized within noninterest income—other in the consolidated statements of operations and comprehensive income (loss). An investment in AFS debt security is considered impaired if its fair value is less than its amortized cost. If we determine that we have the intent to sell the impaired investment in AFS debt security, or if it is more likely than not that we will be required to sell the impaired investment in AFS debt security before recovery of its amortized cost, we recognize the full impairment loss reflecting the difference between the amortized cost (net of any prior recognized allowance) and the fair value of the investment in AFS debt security within noninterest income—other in the consolidated statements of operations and comprehensive income (loss). If neither of the above conditions exists, we evaluate whether the impairment loss is attributable 137 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) to credit-related or non-credit-related factors. Any impairment that is not credit-related is recognized within other comprehensive income (loss) , net of taxes. See the section “Allowance for Credit Losses” in this Note 1 for the factors we consider in identifying credit-related impairment and the treatment of credit losses. See Note 6 for additional information on our investments in AFS debt securities. Securitization Investments In Company-sponsored securitization transactions that meet the applicable criteria to be accounted for as a sale, we retain certain residual interests and asset-backed bonds. We measure these investments at fair value on a recurring basis and report them within investment securities in the consolidated balance sheets. Gains and losses related to our securitization investments are reported within noninterest income—securitizations in the consolidated statements of operations and comprehensive income (loss). We determine the fair value of our securitization investments using a discounted cash flow methodology, while also considering market data as it becomes available. Our residual investments accrete interest income over the expected life using the effective yield method , which reflects a portion of the overall fair value adjustment recorded each period on our residual investments. On a quarterly basis, we reevaluate the cash flow estimates over the life of the residual investments to determine if a change to the accretable yield is required on a prospective basis. Additionally, we record interest income associated with asset-backed bonds over the term of the underlying bond using the effective interest method on unpaid bond amounts. Interest income on residual investments and asset-backed bonds is presented within interest income—securitizations in the consolidated statements of operations and comprehensive income (loss). See Note 15 for the key inputs used in the fair value measurements of our residual investments and asset-backed bonds. Investments in Equity Securities Our investments in equity securities consist of investments for which fair values are not readily determinable, which we elect to measure using the alternative method of accounting, under which they are measured at cost less any impairment and adjusted for changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuers. Our investments in equity securities are presented within other assets in the consolidated balance sheets. Adjustments to the carrying values of our investments in equity securities, such as impairments and unrealized gains, are recognized within noninterest income—other in the consolidated statements of operations and comprehensive income (loss). Property, Equipment and Software All property, equipment and software are initially recorded at cost, while repairs and maintenance costs are expensed as incurred. Computer hardware, furniture and fixtures, software, buildings and finance lease right-of-use (“ROU”) assets are depreciated or amortized on a straight-line basis over the estimated useful life of each class of depreciable or amortizable assets (ranging from one to 30 years). Leasehold improvements are amortized over the shorter of the respective lease term or the estimated lives of the leasehold improvements. Software includes both purchased and internally-developed software. Internally-developed software is capitalized when preliminary project efforts are successfully completed, and it is probable that both the project will be completed and the software will be used as intended. Capitalized costs consist of salaries and compensation costs (inclusive of share-based compensation) for employees, fees paid to third-party consultants who are directly involved in development efforts and costs incurred for upgrades and functionality enhancements, and are amortized over a useful life of 2.5 years. Other costs are expensed as incurred. See Note 9 for additional information on our property, equipment and software. Goodwill and Intangible Assets Goodwill represents the fair value of an acquired business in excess of the fair value of the identified net assets acquired. Goodwill is tested for impairment at the reporting unit level annually or whenever indicators of impairment exist. Impairment of goodwill is the condition that exists when the carrying amount of a reporting unit that includes goodwill exceeds 138 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) its fair value. We may assess goodwill for impairment initially using a qualitative approach, referred to as “step zero”, to determine whether conditions exist to indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If management concludes, based on its assessment of relevant events, facts and circumstances, that it is more likely than not that a reporting unit’s carrying value is greater than its fair value, then a quantitative analysis will be performed to determine if there is any impairment. We may alternatively elect to initially perform a quantitative assessment and bypass the qualitative assessment. A goodwill impairment loss is recognized for the amount that the carrying amount of a reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit. Therefore, if the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired. Our annual impairment testing date is October 1. Definite-lived intangible assets are amortized on a straight-line basis over their useful lives and reviewed for impairment annually and whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. Intangible assets include capitalized costs incurred in the development and enhancement of our software products to be sold, leased or marketed. These costs, consisting primarily of salaries and compensation costs (inclusive of share-based compensation) for employees, are expensed as incurred until technological feasibility has been established, after which the costs are capitalized until the product is available for general release to customers. See Note 2 and Note 8 for further discussion of goodwill and intangible assets, including those recognized in connection with recent business combinations. Leases We determine if an arrangement is or contains a lease at inception of the contract. A contract is or contains a lease if the contract conveys the right to control the use of identified property or equipment for a period of time in exchange for consideration. For our current office and non-office classes of operating leases, we elected the practical expedient to not separate non-lease components from lease components and to, instead, account for each separate lease component and the non-lease components associated with that lease component as a single lease component. For our current classes of finance leases, we did not elect to apply this practical expedient and, instead, separately identify and measure the non-lease components of the contracts. As an accounting policy election, we apply the short-term lease exemption practical expedient to any lease that, at the commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that we are reasonably certain to exercise. Operating leases are presented within operating lease right-of-use assets and operating lease liabilities in the consolidated balance sheets. Finance lease ROU assets are presented within property, equipment and software and finance lease liabilities are presented within accounts payable, accruals and other liabilities in the consolidated balance sheets. Operating and finance lease ROU assets represent our right to use an underlying asset for the lease term and operating and finance lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As our leases do not provide an implicit borrowing rate, we use our incremental borrowing rate based on the information available at commencement date or modification date, as appropriate, in determining the present value of lease payments. The operating lease ROU assets are increased by any prepaid lease payments and are reduced by any unamortized lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Base rent is typically subject to rent escalations on each annual anniversary from the lease commencement dates. Lease expense for lease payments, including any step rent provisions specified in the lease agreements, is recognized on a straight-line basis over the lease term and is allocated among the components of noninterest expense in the consolidated statements of operations and comprehensive income (loss). The finance lease ROU assets are depreciated on a straight-line basis over the estimated useful life of seven years . Interest expense on finance leases is recognized for the difference between the present value of the lease liabilities and the scheduled lease payments within interest expense—other in the consolidated statements of operations and comprehensive income (loss). When a lease agreement is modified, we determine if the modification grants us the right to use an additional asset that is not included in the original lease contract and if the lease payments increase commensurate with the standalone price for the additional ROU asset. If both conditions are met, we account for the agreement as two separate contracts: (i) the original, 139 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) unmodified contract and (ii) a separate contract for the additional ROU asset. If both conditions are not met, the modification is not evaluated as a separate contract. Instead, based on the nature of the modification, we: (i) reassess the lease classification on the modification date under the modified terms, and (ii) use the modified lease payments and discount rate to remeasure the lease liability and recognize any difference between the new lease liability and the old lease liability as an adjustment to the ROU asset. See Note 9 for additional information on our leases. Derivative Financial Instruments We enter into derivative contracts to manage future loan sale execution risk. We did not elect hedge accounting, as management’s hedging intentions are to economically hedge the risk of unfavorable changes in the fair values of our personal loans, student loans and home loans. Our derivative instruments used to manage future loan sale execution risk include interest rate swaps, interest rate caps and home loan pipeline hedges. We also have interest rate lock commitments (“IRLC”), interest rate swaps and interest rate caps that were not related to future loan sale execution risk. Changes in derivative instrument fair values are recognized in earnings as they occur. Depending on the measurement date position, derivative financial instruments are presented within other assets or accounts payable, accruals and other liabilities in the consolidated balance sheets. Our derivative instruments are reported within cash flows from operating activities in the consolidated statements of cash flows. Certain derivative instruments are subject to enforceable master netting arrangements. Accordingly, we present our net asset or liability position by counterparty in the consolidated balance sheets. Additionally, since our cash collateral balances do not approximate the fair value of the derivative position, we do not offset our right to reclaim cash collateral or obligation to return cash collateral against recognized derivative assets or liabilities. See Note 14 and Note 15 for additional information on our derivative assets and liabilities. Residual Interests Classified as Debt Within consolidated securitizations, the residual interests held by third parties are presented as residual interests classified as debt in the consolidated balance sheets. We measure residual interests classified as debt at fair value on a recurring basis. We record subsequent measurement changes in fair value in the period in which the change occurs within noninterest income—securitizations in the consolidated statements of operations and comprehensive income (loss). We determine the fair value of residual interests classified as debt using a discounted cash flow methodology, while also considering market data as it becomes available. We recognize interest expense related to residual interests classified as debt over the expected life using the effective yield method, which reflects a portion of the overall fair value adjustment recorded each period on our residual interests classified as debt. Interest expense related to residual interests classified as debt is presented within interest expense—securitizations and warehouses in the consolidated statements of operations and comprehensive income (loss). 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. See Note 15 for the key inputs used in the fair value measurements of residual interests classified as debt. Safeguarding Asset and Liability Through our SoFi Invest product (via our wholly-owned subsidiary, SoFi Digital Assets, LLC, a licensed money transmitter), our members can invest in digital assets. We engage third parties to provide custodial services for our digital assets offering, which includes holding the cryptographic key information and working to protect the digital assets from loss or theft. The third-party custodians hold digital assets as custodial assets in an account in SoFi’s name for the benefit of our members. We maintain the internal recordkeeping of our members’ digital assets, including the amount and type of digital assets owned by each of our members in the custodial accounts. We currently utilize two third-party custodians. Therefore, we have concentration risk in the event the custodians are not able to perform in accordance with our agreements. In accordance with Staff Accounting Bulletin No. 121 (“SAB 121”), which is further discussed under “ Recently Adopted Accounting Standards ” in this Note 1, we recognize a digital assets safeguarding liability within accounts payable, 140 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) accruals and other liabilities in the consolidated balance sheets reflecting our obligation to safeguard the digital assets held by third-party custodians for the benefit of our members. We also recognize a corresponding safeguarding asset within other assets in the consolidated balance sheets. The safeguarding liability and corresponding safeguarding asset are measured and recorded at the fair value of the digital assets held by the custodians at each reporting date. Subsequent changes to the fair value measure are reflected as equal and offsetting adjustments to the carrying values of the safeguarding liability and corresponding safeguarding asset. We evaluate any potential loss events, such as theft, loss or destruction of the cryptographic keys, that may affect the measurement of the safeguarding asset, which would be reflected in our results of operations in the period the loss occurs. Measurement changes do not impact the consolidated statements of operations and comprehensive income (loss) unless such a loss event is identified. As of December 31, 2022, we did not identify any loss events. See Note 15 for additional information on the fair value measurement of the safeguarding liability and corresponding safeguarding asset. Borrowings and Financing Costs We borrow from various financial institutions to finance our lending activities. Direct costs incurred in connection with financing, such as banker fees, origination fees and legal fees, are classified as deferred debt issuance costs. We capitalize these costs and report the amounts as a direct deduction from the carrying amount of the debt balance. Any difference between the stated principal amount of debt and the amount of cash proceeds received, net of debt issuance costs, is presented as a discount or premium. The capitalized debt issuance costs and the original issue discount/premium are amortized into interest expense over the expected life of the related financing agreements using the straight-line method for revolving facilities and the effective interest method for securitization debt and our senior convertible notes, as defined and further discussed below. Remaining unamortized fees are expensed immediately upon early extinguishment of the debt. In a debt modification for revolving debt, the initial issuance costs and any additional fees incurred as a result of the modification are deferred over the term of the new agreement, if the borrowing capacity of the revolving facility is increased. In the case that a modification results in a decrease in our borrowing capacity, any fees paid to the creditor and any third-party costs incurred are considered to be associated with the new arrangement and are, therefore, deferred and amortized over the term of the new arrangement. Unamortized deferred costs relating to the old arrangement at the time of the modification are expensed immediately in proportion to the decrease in borrowing capacity of the old arrangement. Any remaining unamortized deferred costs relating to the old arrangement are deferred and amortized over the term of the new arrangement. We elected the fair value option to measure certain securitization debt, with the intent to mitigate the accounting divergence between debt liabilities measured at historical cost and the corresponding loans securing these financings, which are risk-managed on a fair value basis. For securitization debt carried at fair value on a recurring basis, we record the initial fair value measurement and subsequent measurement changes in fair value in the period in which the changes occur within noninterest income—securitizations in the consolidated statements of operations and comprehensive income (loss). We determined the fair value of the applicable securitization debt using a discounted cash flow methodology, while also considering market data as it becomes available. The key inputs to the calculation include the underlying contractual coupons, terms, discount rate and expectations for defaults and prepayments. Convertible Senior Notes In October 2021, we issued $ 1.2 billion aggregate principal amount of convertible senior notes due 2026 (the “Convertible Notes”). The Convertible Notes will mature on October 15, 2026, unless earlier repurchased, redeemed or converted. We will settle conversions by paying or delivering, at our election, cash, shares of our common stock or a combination of cash and shares of our common stock, based on the applicable conversion rate(s). The Convertible Notes will also be redeemable, in whole or in part, at our option at any time, and from time to time, on or after October 15, 2024 through on or before the 30th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Convertible Notes to be redeemed, plus accrued interest, if any, thereon to, but excluding, the redemption date, but only if certain liquidity conditions described in the indenture are satisfied and certain conditions are met with respect to the last reported sale price per share of our common stock prior to conversion. See Note 12 for more detailed disclosure of the term and features of the Convertible Notes. We elected to evaluate each embedded feature of the arrangement individually. We concluded that each of the conversion rights, optional redemption rights, fundamental change make-whole provision and repurchase rights did not require bifurcation as derivative instruments, which we reevaluate each reporting period. The additional interest and special interest that accrue on the notes in the event of our failure to comply with certain registration or reporting requirements are required to be bifurcated from the host contract, as the reporting requirement triggering event is not clearly and closely related to the host 141 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) convertible debt contract, and therefore we measure the contingent interest feature at fair value each reporting period. The value was determined to be immaterial; therefore, we accounted for the Convertible Notes wholly as debt, which was recognized on the settlement date. Accordingly, we allocated all debt issuance costs to the debt instrument on the basis of materiality. In connection with the pricing of the Convertible Notes, we entered into privately negotiated capped call transactions with certain financial institutions, as defined and further discussed below. Redeemable Preferred Stock Series 1 Redeemable Preferred Stock (as defined in Note 13) is classified in temporary equity, as it is not fully controlled by SoFi. See Note 13 for additional information. Foreign Currency Translation Adjustments We revalue assets, liabilities, income and expense denominated in non-United States currencies into United States dollars using applicable exchange rates. For foreign subsidiaries in which the functional currency is the subsidiary’s local currency, gains and losses relating to foreign currency translation adjustments are included in accumulated other comprehensive income (loss) in our consolidated balance sheets. For foreign subsidiaries in which the functional currency is the United States Dollar, gains and losses relating to foreign currency transaction adjustments are included within earnings in the consolidated statements of operations and comprehensive income (loss). Due to the highly inflationary economic environment in Argentina, we use the United States Dollar as the functional currency of our Argentinian operations. Our activities in Argentina are related to our Technology Platform segment and commenced in the first quarter of 2022 with the Technisys Merger. Capped Call Transactions We entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain financial institutions (the “Capped Call Counterparties”). The Capped Call Transactions initially cover, subject to customary anti-dilution adjustments, the number of shares of our common stock that initially underlie the Convertible Notes. The Capped Call Transactions are net purchased call options on our own common stock. The Capped Call Transactions are separate transactions entered into by the Company with each of the Capped Call Counterparties, are not part of the terms of the Convertible Notes, and do not affect any holder’s rights under the Convertible Notes. Holders of the Convertible notes do not have any rights with respect to the Capped Call Transactions. As the Capped Call Transactions are legally detachable and separately exercisable from the Convertible Notes, they were evaluated as freestanding instruments. We concluded that the Capped Call Transactions meet the scope exceptions for derivative instruments, and as such, the Capped Call Transactions meet the criteria for classification in equity and are included as a reduction to additional paid-in capital . See Note 13 for additional information on the Capped Call Transactions. Interest Income We record interest income associated with loans measured at fair value over the term of the underlying loans using the effective interest method on unpaid loan principal amounts, which is presented within interest income—loans in the consolidated statements of operations and comprehensive income (loss). We also record accrued interest income associated with loans measured at amortized cost within interest income—loans. We stop accruing interest and reverse all accrued but unpaid interest at the time a loan charges off. Loans are returned to accrual status if the loans are brought to nondelinquent status or have performed in accordance with the contractual terms for a reasonable period of time and, in management’s judgment, will continue to make scheduled periodic principal and interest payments. Other interest income is primarily earned on our bank balances. Loan Origination and Sales Activities As part of our loan sale agreements, we may retain the rights to service sold loans. We calculate a gain or loss on the sale based on the sum of the proceeds from the sale and any servicing asset or liability recognized, less the carrying value of the loans sold. Our gain or loss calculation is also inclusive of repurchase liabilities recognized at the time of sale. 142 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Loan Commitments We offer a program whereby applicants can lock in an interest rate on an in-school loan to be funded at a later time. Applicants can exit the loan origination process up until the loan funding date. SoFi is obligated to fund the loan at the committed terms on the disbursement date if the borrower does not cancel prior to the loan funding date. The student loan commitments meet the scope exception for issuers of commitments to originate non-mortgage loans. As the writer of the commitments, we elected the fair value option to measure our unfunded student loan commitments to align with the measurement methodology of our originated student loans. As such, our student loan commitments are carried at fair value on a recurring basis. Depending on the measurement date position, student loan commitments are presented within other assets or accounts payable, accruals and other liabilities in the consolidated balance sheets. We record the initial fair value measurement and subsequent measurement changes in fair value in the period in which the changes occur within noninterest income—loan origination and sales in the consolidated statements of operations and comprehensive income (loss). Loan commitments also include IRLCs, whereby we commit to interest rate terms prior to completing the origination process for home loans. IRLCs are derivative instruments that are measured at fair value on a recurring basis. Changes in fair value are recognized within noninterest income—loan origination and sales in the consolidated statements of operations and comprehensive income (loss). See “Derivative Financial Instruments” in this Note 1 for additional information on our derivative instruments. See Note 15 for the key inputs used in the fair value measurements of our loan commitments. Revenue Recognition In each of our revenue arrangements, revenue is recognized when control of the promised goods or services is transferred to the customer in an amount that reflects our expected consideration in exchange for those goods or services. Our primary revenue streams for the periods presented include the following: • Technology Products and Solutions: We earn fees for providing an integrated platform as a service for financial and non-financial institutions. • Referrals: We earn specified referral fees in connection with referral activities we facilitate through our platform, such as referrals to third-party partners that offer services to end users who do not use one of our product offerings and referrals of pre-qualified borrowers to a third-party partner who separately contracts with a loan originator. • Interchange: We earn interchange fees from debit and credit cardholder transactions conducted through payment networks. • Brokerage : We earn fees in connection with facilitating investment-related transactions through our platform, such as brokerage transactions, share lending, digital assets transactions and exchange conversion. See Note 3 for additional information on our revenue recognition policy within each revenue stream. Advertising, Sales and Marketing Advertising production costs and advertising communication costs, as well as amounts paid to various affiliates to market our products, are included within noninterest expense—sales and marketing in the consolidated statements of operations and comprehensive income (loss). Advertising costs are expensed either as incurred or when the advertising takes place, depending on the nature of the advertising activity. For the years ended December 31, 2022, 2021 and 2020, advertising totaled $ 256,125 , $ 183,106 and $ 138,888 , respectively. Expenses incurred by us related to member acquisition, including brand development, business development and direct member marketing expenses, are also presented within noninterest expense—sales and marketing in the consolidated statements of operations and comprehensive income (loss). 143 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Technology and Product Development Expenses incurred by us related to technology, product design and implementation, which includes compensation and benefits, are classified as noninterest expense—technology and product development in the consolidated statements of operations and comprehensive income (loss). Occupancy Occupancy-related costs, which primarily relate to the operations of our leased office spaces, were $ 33,170 , $ 28,949 , and $ 25,946 for the years ended December 31, 2022, 2021 and 2020, respectively. Occupancy-related expenses are presented within each of the financial statement line items within noninterest expense in the consolidated statements of operations and comprehensive income (loss). Loss Contingencies Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded in accounts payable, accruals and other liabilities in the consolidated balance sheets. Such liabilities and associated expenses are recorded when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Such estimates are based on the best information available at the time. As additional information becomes available, we reassess the potential liability and record an estimate in the period in which the adjustment is probable and an amount or range can be reasonably estimated. Due to the inherent uncertainties of loss contingencies, estimates may be different from the actual outcomes. With respect to legal proceedings, we recognize legal fees as they are incurred within noninterest expense—general and administrative in the consolidated statements of operations and comprehensive income (loss). See Note 18 for discussion of contingent matters. Compensation and Benefits Total compensation and benefits, inclusive of share-based compensation expense, was $ 830,298 , $ 608,505 and $ 385,745 for the years ended December 31, 2022, 2021 and 2020, respectively. Compensation and benefits expenses are presented within each of the financial statement line items within noninterest expense in the consolidated statements of operations and comprehensive income (loss). Share-Based Compensation Share-based compensation made to employees and non-employees, including stock options, restricted stock units (“RSUs”) and performance stock units (“PSUs”), is measured based on the grant date fair value of the awards and is recognized as compensation expense typically on a straight-line basis over the period during which the share-based award holder is required to perform services in exchange for the award (the vesting period) for stock options and RSUs and on an accelerated attribution basis for each vesting tranche over the respective derived service period for PSUs. Share-based compensation expense is allocated among the components of noninterest expense in the consolidated statements of operations and comprehensive income (loss). We used the Black-Scholes Option Pricing Model (the “Black-Scholes Model”) to estimate the grant-date fair value of stock options. RSUs are measured based on the fair values of the underlying stock on the dates of grant. We use a Monte Carlo simulation model to estimate the grant-date fair value of PSUs. We recognize forfeitures as incurred and, therefore, reverse previously recognized share-based compensation expense at the time of forfeiture. See Note 16 for further discussion of share-based compensation. Income Taxes We recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. In assessing the realizability of deferred tax assets, management reviews all available positive and negative evidence. Valuation allowances are recorded to reduce deferred tax assets to the amount we believe is more likely than not to be realized. The tax effects from an uncertain tax position can be recognized in the financial statements only if the tax position would more likely than not be upheld on examination by the taxing authorities based on the merits of the tax position. 144 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Management is required to analyze all open tax years, as defined by the statute of limitations, for all jurisdictions. We accrue tax penalties and interest, if any, as incurred and recognize them within income tax (expense) benefit in the consolidated statements of operations and comprehensive income (loss). Related Parties We define related parties as members of our Board of Directors, entity affiliates, executive officers and principal owners of our outstanding stock and members of their immediate families. Related parties also include any other person or entity with significant influence over our management or operations. Recently Adopted Accounting Standards Safeguarding Assets and Liabilities In March 2022, the SEC released SAB 121, which provides interpretive guidance for an entity to consider when it has obligations to safeguard crypto-assets held for its platform users, whether directly or through an agent or another third party acting on its behalf. SAB 121 requires an entity to record a liability to reflect its obligation to safeguard the crypto-assets, as well as a corresponding safeguarding asset, both of which should be measured at the fair value of the crypto-assets being safeguarded for the entity’s users. Entities should evaluate any potential loss events, such as theft, loss or destruction of the cryptographic keys, that may affect the measurement of the asset. SAB 121 also requires financial statement disclosure, including the nature and amount of crypto-assets that the entity holds for its users, any vulnerabilities that may arise as a result of any concentration in crypto-assets, and information about who is responsible for the record-keeping of the crypto-assets, the holding of the cryptographic keys and safeguarding the crypto-assets, among other disclosure considerations. Disclosures must also be made in accordance with fair value measurements accounting guidance. SAB 121 was effective for us for the interim period ending June 30, 2022. We applied the guidance through retrospective application as of January 1, 2022, at which time the value of our members’ digital assets was $ 266,014 . As of June 30, 2022, the adoption date, the value of our members’ digital assets was $ 112,010 . At each reporting date subsequent to adoption, we determine the value of our members’ digital assets and remeasure our digital assets safeguarding liability and corresponding digital assets safeguarding asset. Our application of this guidance did not impact our results of operations. We also enhanced our disclosures around our digital assets arrangements and our role in safeguarding them. See this Note 1 and Note 15 for the applicable disclosures. Accounting for Contract Assets and Contract Liabilities from Contracts with Customers In October 2021, the FASB issued Accounting Standards Update (“ASU”) 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers . The ASU requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with accounting guidance for revenue from contracts with customers, rather than at fair value. The standard should be applied prospectively to business combinations occurring on or after the effective date of the amendments. We early adopted the standard effective January 1, 2022 and applied its provisions to our acquisitions in 2022. The adoption of this standard did not have a material impact on our consolidated financial statements. Facilitation of the Effects of Reference Rate Reform on Financial Reporting In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting . In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope , which clarifies the scope of Topic 848 for certain derivative instruments that use an interest rate for margining, discounting or contract price alignment. The new standard provides for optional expedients and other guidance regarding the accounting related to modifications of contracts, hedging relationships and other transactions affected by reference rate reform. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 , which extends the relief period for relevant contract modifications to December 31, 2024. We adopted the provisions of the standard in the fourth quarter of 2021 using the prospective method of adoption. We established a cross-functional project team to execute our company-wide transition away from USD LIBOR. In the fourth quarter of 2021, we began to use the Secured Overnight Financing Rate (“SOFR”) or an alternative reference rate on new variable-rate loan originations, and on new warehouse facility agreements and other financial instruments. We also transitioned some existing warehouse facility lines to SOFR and elected to apply the optional expedients when all such terms were related to the replacement of the reference rate. We are continuing to review existing variable-rate loans, borrowings, Series 1 redeemable 145 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) preferred stock dividends and derivative instruments that utilize USD LIBOR as the reference rate and expect to continue transitioning these instruments to SOFR or other representative alternative reference rates in accordance with the provisions of the standard. We do not expect there to be a material impact on our consolidated financial statements as a result of applying this standard. Recent Accounting Standards Issued, But Not Yet Adopted Troubled Debt Restructurings and Vintage Disclosures In March 2022, the FASB issued ASU 2022-02, Financial Instruments — Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures . The ASU addresses two topics: (i) troubled debt restructuring (“TDR”) by creditors, and (ii) vintage disclosures for gross write offs. Under the TDR provisions, the ASU eliminates the recognition and measurement guidance under Accounting Standards Codification (“ASC”) 310-40, Receivables—Troubled Debt Restructurings by Creditors , and instead requires that an entity evaluate whether the modification represents a new loan or a continuation of an existing loan, consistent with the accounting for other loan modifications. Additionally, the ASU enhances existing disclosure requirements around TDRs and introduces new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. Under the vintage disclosure provisions, the ASU requires the entity to disclose current period gross write offs by year of origination for financing receivables and net investments in leases within the scope of ASC 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost . The standard is effective for fiscal years and interim periods beginning after December 15, 2022. The standard should be applied prospectively; however, for the TDR provisions, an entity has the option to apply a modified retrospective transition method. We do not expect the provisions of this standard to have a material impact on our consolidated financial statements. Note 2. Business Combinations Merger with Social Capital Hedosophia Holdings Corp. V On January 7, 2021, Social Finance entered into an agreement by and among Social Finance, SCH, a Cayman Islands exempted company limited by shares, and Plutus Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of SCH (“Merger Sub”), pursuant to which Merger Sub merged with and into Social Finance. Upon the Closing on May 28, 2021, the separate corporate existence of Merger Sub ceased and Social Finance survived the merger and became a wholly-owned subsidiary of SCH. On May 28, 2021, SCH also filed a notice of deregistration with the Cayman Islands Registrar of Companies, together with the necessary accompanying documents, and filed a certificate of incorporation and a certificate of corporate domestication with the Secretary of State of the State of Delaware, under which SCH was domesticated as a Delaware corporation, changing its name from “Social Capital Hedosophia Holdings Corp. V” to “SoFi Technologies, Inc.” These transactions are collectively referred to as the “Business Combination”. The Business Combination was accounted for as a reverse recapitalization whereby SCH was determined to be the accounting acquiree and Social Finance to be the accounting acquirer. This accounting treatment was the equivalent of Social Finance issuing stock for the net assets of SCH, accompanied by a recapitalization whereby no goodwill or other intangible assets were recorded. Operations prior to the Business Combination are those of Social Finance. At the Closing, we received gross cash consideration of $ 764.8 million as a result of the reverse recapitalization, which was then reduced by: (i) a redemption of redeemable common stock (classified as temporary equity) of $ 150.0 million, (ii) a special payment made to our Series 1 preferred stockholders of $ 21.2 million (which was expensed as incurred), and (iii) our equity issuance costs of $ 27.5 million, consisting of advisory, legal, share registration and other professional fees, which were recorded within additional paid-in capital as a reduction of proceeds. In connection with the Business Combination, SCH entered into subscription agreements with certain investors (the “Third Party PIPE Investors”), whereby it issued 122,500,000 shares of common stock at $ 10.00 per share (“PIPE Shares”) for an aggregate purchase price of $ 1.225 billion (“PIPE Investment”), which closed simultaneously with the consummation of the Business Combination. Upon the Closing, the PIPE Shares were automatically converted into shares of SoFi Technologies common stock on a one -for-one basis. Upon the Closing, holders of Social Finance common stock received shares of SoFi Technologies common stock in an amount determined by application of the exchange ratio of 1.7428 (“Exchange Ratio”), which was based on Social Finance’s 146 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) implied price per share prior to the Business Combination. Additionally, holders of Social Finance preferred stock (with the exception of the Series 1 preferred stockholders) received shares of SoFi Technologies common stock in amounts determined by application of either the Exchange Ratio or a multiplier of the Exchange Ratio, as provided by the Agreement. Acquisition of Golden Pacific Bancorp, Inc. On February 2, 2022, we acquired Golden Pacific, pursuant to an Agreement and Plan of Merger dated as of March 8, 2021 by and among the Company, a wholly-owned subsidiary of the Company, and Golden Pacific. In the business combination, we acquired all of the outstanding equity interests in Golden Pacific for total cash purchase consideration of $ 22.3 million (the “Bank Merger”). After closing the Bank Merger, we became a bank holding company and Golden Pacific began operating as SoFi Bank. We are duly registered as a bank holding company with the Federal Reserve. SoFi Bank is a national banking association whose primary federal regulator is the OCC. Deposit accounts of SoFi Bank are insured by the Federal Deposit Insurance Corporation (the “FDIC”) through the Deposit Insurance Fund to the fullest extent permitted by law. The closing of the Bank Merger was subject to regulatory approval. On January 18, 2022, we received approval from the Federal Reserve of our application to become a bank holding company under the Bank Holding Company Act, and we received conditional approval from the OCC to close the Bank Merger. The OCC also approved our application to change the composition of Golden Pacific’s assets in connection with the Bank Merger. The OCC conditional approval imposed a number of conditions, including that SoFi Bank have initial paid-in capital of no less than $ 750 million and adhere to an operating agreement. Golden Pacific’s community bank business continues to operate as a division of SoFi Bank. A portion of the total cash purchase consideration ($ 0.6 million) was held back by the Company to satisfy any indemnification or certain other obligations (“Holdback Amount”), as certain legal proceedings with which Golden Pacific is involved as a plaintiff were not resolved at the time the Bank Merger closed. During 2022, we incurred costs associated with the litigation involving Golden Pacific as a plaintiff in excess of the Holdback Amount. Therefore, none of the Holdback Amount will be released to the Golden Pacific shareholders. Additionally, we held back a $ 3.3 million payable to a dissenting Golden Pacific shareholder pending resolution of the shareholder’s dissenter’s rights appraisal claim, which could possibly result in a lower or higher amount paid to the dissenting shareholder once a ruling is made regarding the appraisal claim. The Bank Merger was accounted for as a business combination. The preliminary purchase consideration was allocated to the tangible and intangible assets acquired and liabilities assumed based on the estimated fair values as of the acquisition date. The excess of the total purchase consideration over the fair value of the net assets acquired of $ 11.2 million was allocated to goodwill, none of which is expected to be deductible for tax purposes, and which is allocated to our Financial Services segment. Goodwill is primarily attributable to the expected benefits of operating a national bank. The results of operations of Golden Pacific subsequent to the date of acquisition are included in SoFi’s consolidated financial statements as of and for the year ended December 31, 2022. As the acquisition was not determined to be a significant acquisition, we do not disclose the pro forma impact of this acquisition to the results of operations in our interim and annual filings with the SEC. Identifiable intangible net assets at the date of acquisition included finite-lived intangible assets for core deposits with an aggregate fair value of $ 1.0 million. The intangible assets are being amortized over a period of 7.3 years based on the estimated economic life of the underlying assets. We incurred total acquisition-related costs related to the Bank Merger of $ 2.2 million, which were incurred during the year ended December 31, 2021, and are presented within noninterest expense—general and administrative in the consolidated statements of operations and comprehensive income (loss). Acquisition of Technisys S.A. On March 3, 2022, we acquired Technisys S.A., a Luxembourg société anonyme, (“Technisys”), pursuant to an Agreement and Plan of Merger dated as of February 19, 2022 and amended as of March 3, 2022, by and among the Company, Technisys, Atom New Delaware, Inc., a Delaware corporation and a wholly owned subsidiary of Atom, and Atom Merger Sub Corporation, a Delaware corporation and wholly owned subsidiary of SoFi Technologies (“Technisys Merger”). We acquired all of the outstanding equity interests in Technisys (the “Technisys Merger”). The Technisys Merger was accounted for as a business combination. Technisys is a cloud-native digital and core banking platform with an existing footprint of financial services customers in Latin America. With the acquisition of Technisys, we expanded our technology platform services to a broader international 147 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) market. The following table presents the components of the purchase consideration to acquire Technisys as of December 31, 2022: Fair value of common stock issued (1) $ 873,377 Amounts payable to settle vested employee performance awards (2) 37,297 Fair value of awards assumed (3) 2,855 Settlement of pre-combination transactions between acquirer and acquiree 235 Total purchase consideration $ 913,764 ___________________ (1) Reflects the shares of SoFi common stock issued in the acquisition of 81,700,318 , multiplied by the closing stock price of SoFi common stock on the closing date of the Technisys Merger. Additionally, these shares are inclusive of 6,305,595 shares that remain held in escrow. These escrow shares are expected to be released no later than 15 months after the close of the acquisition. (2) We made payments of $ 17,641 related to this component of purchase consideration during the year ended December 31, 2022. (3) We contemporaneously converted outstanding performance awards into RSUs to acquire common stock of SoFi (“Replacement Awards”). The fair value of awards assumed in the purchase consideration was based on the closing stock price of SoFi common stock on the closing date of the Technisys Merger. Refer to Note 16 for additional information on our RSUs, including the Replacement Awards. During the third quarter of 2022, we finalized the closing net working capital calculation specified in the merger agreement, which resulted in a reduction to the equity consideration of 155,794 shares, representing an adjustment to the total purchase consideration of $ 1,665 , and a corresponding reduction to the carrying value of recognized goodwill. The remaining 442,274 shares that were held in escrow associated with the working capital calculation were released to the former Technisys shareholders. The finalized closing net working capital calculation did not impact the estimated fair values of the assets acquired and liabilities assumed in conjunction with the transaction. The following table presents the allocation of the total purchase consideration to the estimated fair values of the identified assets acquired and liabilities assumed of Technisys as of the date of acquisition. The table reflects measurement period adjustments made during 2022, as well as an adjustment to the purchase consideration associated with the final working capital calculation, each of which also impacted the amount of recognized goodwill: Preliminary Purchase Price Allocation Measurement Period Adjustments (1) Updated Purchase Price Allocation Assets acquired Cash and cash equivalents $ 25,710 $ — $ 25,710 Accounts receivable (2) 15,354 ( 2,942 ) 12,412 Intangible assets (3) 239,000 — 239,000 Operating lease right-of-use (“ROU”) assets 587 — 587 Other assets 1,011 2,843 3,854 Total identifiable assets acquired 281,662 ( 99 ) 281,563 Liabilities assumed Accounts payable, accruals and other liabilities 16,462 6,624 23,086 Operating lease liabilities 587 — 587 Deferred income taxes (4) 55,104 2,239 57,343 Total liabilities assumed 72,153 8,863 81,016 Total identified net assets acquired 209,509 ( 8,962 ) 200,547 Goodwill (5) 705,920 7,297 713,217 Total consideration $ 915,429 $ ( 1,665 ) $ 913,764 _________________ (1) The measurement period adjustments did not have a significant impact on our results of operations. The adjustment to accounts payable, accruals and other liabilities included a tax payable adjustment of $ 6,484 . 148 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) (2) Included accounts receivable and unbilled revenue with a gross contractual amount of $ 14,768 . At the date of acquisition, the Company expected $ 2,356 to be uncollectible. (3) Intangible assets consist of finite-lived intangible assets, as follows: Gross carrying amount Weighted-average useful life (years) Developed technology (a) $ 187,000 8.8 Customer-related (b) 42,000 4.8 Trade names, trademarks and domain names (c) 10,000 8.8 __________________ (a) Valued using the Multi-Period Excess Earnings Method (“MPEEM”), which is a form of the income approach. The significant assumptions include: (i) the estimated annual net cash flows, which are a function of expected earnings attributable to the asset (and include an assumed technology migration curve), contributory asset charges and the applicable tax rate, and (ii) an assumed discount rate, which reflects the risk of the asset relative to the overall risk of Technisys. (b) Valued using the With and Without Method, which is a form of the income approach. The significant assumptions include: (i) the estimated annual revenues and net cash flows both with the existing customer base and without the existing customer base, which include assumptions regarding revenue ramp-up periods and attrition rates, and (ii) an assumed discount rate, consistent with (a) above. (c) Valued using the Relief from Royalty Method, which is a form of the income approach. The significant assumptions include: (i) the estimated annual net cash flows, which are a function of expected earnings attributable to the asset, the probability of use of the asset, the royalty rate and the applicable tax rate, and (ii) the discount rate, consistent with (a) above. (4) The deferred tax liabilities recognized in the acquisition were primarily related to the acquired intangible assets, in which the acquiree had a significantly lower tax basis compared to the fair value. (5) The excess of the total purchase consideration over the fair value of the identified net assets acquired was allocated to goodwill, no ne of which is expected to be deductible for tax purposes. Goodwill is primarily attributable to expected growth opportunities at Technisys, and secondarily attributable to the expected synergies from leveraging the Technisys technology to enhance and expand Galileo’s product offerings and operations, as well as expand its market reach. As such, all of the goodwill is allocated to the Technology Platform segment. The Company incurred total acquisition-related costs related to the Technisys Merger of $ 20.7 million, of which $ 17.4 million were incurred during the year ended December 31, 2022 and $ 3.3 million were incurred during the year ended December 31, 2021, which were presented within noninterest expense—general and administrative in the consolidated statements of operations and comprehensive income (loss). From the date of acquisition through December 31, 2022, the acquired results of operations for Technisys contributed total net revenue of $ 69.2 million and net loss of $ 24.7 million to the Company’s consolidated results, which was inclusive of amortization expense recognized on the acquired intangible assets. The following unaudited supplemental pro forma financial information presents the Company’s consolidated results of operations as if the business combination had occurred on January 1, 2020: Year Ended December 31, 2022 2021 2020 Total net revenue $ 1,584,439 $ 1,055,219 $ 624,983 Net loss ( 311,512 ) ( 512,785 ) ( 256,238 ) The unaudited supplemental pro forma financial information is presented for comparative purposes only and is not necessarily indicative of the actual results of operations that would have been achieved, nor is it indicative of future results of operations. The unaudited supplemental pro forma financial information reflects pro forma adjustments that give effect to applying the Company’s accounting policies and certain events the Company believes to be directly attributable to the acquisition. The pro forma adjustments primarily include: • incremental straight-line amortization expense associated with acquired intangible assets; • an adjustment to reflect post-combination share-based compensation expense associated with the Replacement Awards as if the conversion had occurred on January 1, 2020; • an adjustment to reflect acquisition-related costs for both parties as if they were incurred during the earliest period presented; and • the related income tax effects, at the statutory tax rate applicable for each period, of the pro forma adjustments noted above. 149 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) The unaudited supplemental pro forma financial information does not give effect to any anticipated cost savings, operating efficiencies or other synergies that may be associated with the acquisition, or any estimated costs that have been or will be incurred by the Company to integrate the assets and operations of Technisys. Note 3. Revenue In each of our revenue arrangements, revenue is recognized when control of the promised goods or services is transferred to the customer in an amount that reflects our expected consideration in exchange for those goods or services. Technology Products and Solutions We earn fees for providing an integrated platform as a service for financial and non-financial institutions. Within our technology products and solutions fee arrangements, certain contracts contain a provision for a fixed, upfront implementation fee related to setup activities, which represents an advance payment for future technology platform services provided over the contract term. These implementation fees are recognized ratably over the contract life. Commencing in March 2022 with the Technisys Merger, we earn subscription and service fees for providing software licenses and associated services, including implementation and maintenance. We charge a recurring subscription fee for the software license and related maintenance services. Other software-related services are billed on a periodic basis as the services are provided. Certain arrangements for software and related services contain a provision for a fixed upfront payment. We recognize revenue related to software licenses at a point in time upon delivery of the license and the close of the user-acceptance testing period. When implementation services are distinct, we recognize revenue over time during the implementation period. We recognize maintenance services ratably over the contractual maintenance term. If a fixed upfront payment provides a material right to the customer, we recognize revenue associated with the material right over the period of benefit associated with the right to subscribe or renew a subscription, which is typically the product life. We allocate fees charged for software and related services to our performance obligations on the basis of the relative standalone selling price. The standalone selling prices either represent the prices at which we separately sell each license or service or are estimated using available information, such as market conditions and internal pricing policies. The standalone selling price of the software license and maintenance are determined based on the complexity and size of the license. We had deferred revenue of $ 10,028 and $ 2,553 as of December 31, 2022 and 2021, respectively, which are presented within accounts payable, accruals and other liabilities in the consolidated balance sheets. During the years ended December 31, 2022 and 2021, we recognized revenue of $ 7,773 and $ 685 , respectively, associated with deferred revenue within noninterest income—technology products and solutions in the consolidated statements of operations and comprehensive income (loss). Payments to customers : We may provide incentives to our technology platform customers, which may be payable up front or applied to future or past technology products and solutions fees. Evaluating whether such incentives are payments to a customer requires judgment. When we determine that an incentive is consideration payable to a customer, the incentive is recorded as a reduction of revenue. Incentives that represent consideration payable to a customer may also contain variable consideration. Therefore, such incentives are constraints on the revenue expected to be realized. Upfront customer incentives are recorded as prepaid assets and presented within other assets in the consolidated balance sheets, and are applied against revenue in the period such incentives are earned by the customer. Any incentive in excess of cumulative revenue is expensed as a contract cost. Referrals We earn specified referral fees in connection with certain referral activities we facilitate through our platform. In one type of referral arrangement, we refer end users through our platform to third-party enterprise partners. The third-party enterprise partners are our customers, and our single performance obligation is to present referral leads. Our referral fee is calculated as either a fixed price per successful referral or a percentage of the transaction volume between the enterprise partners and referred consumers. Our performance is satisfied over time and is measured under the expected value method based on the quantity of successful referrals or the referred transaction volume. The value of our services transferred to our partners is represented by the referral fee rate agreed upon at contract inception. 150 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) In another type of referral arrangement, we earn referral fulfillment fees for providing pre-qualified borrower referrals to a third-party partner who separately contracts with a loan originator. Our referral fees are based on the referred loan amount, subject to a referral fulfillment fee penalty if a loan is determined to be ineligible and becomes a charged-off loan as defined in the contract. We satisfy our performance obligation to provide borrower referrals over time as our customer purchases the successfully originated loans from the loan originator. The referral fulfillment fee penalty represents variable consideration. We allocate the variable consideration to the distinct period in which the referral services are delivered. When pricing terms are not consistent throughout the entire term of the contract, we estimate variable consideration using the expected value method based on the estimated probability of ineligible loan charge-offs, which requires management judgment using our meaningful experience through our lending business. We recognize revenue for each originated loan, less the estimated referral fulfillment fee penalty. The estimated referral fulfillment fee penalty was immaterial as of December 31, 2022. Interchange We earn interchange fees from debit and credit cardholder transactions conducted through payment networks. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. Interchange is presented net of cardholder rewards associated with card transactions. Brokerage We earn fees in connection with facilitating investment-related transactions through our platform, including brokerage transactions, share lending, digital assets transactions and exchange conversions, for which we may act in the capacity of a principal or an agent depending on the nature of our control and involvement. In certain brokerage transactions, we act in the capacity of a principal and earn negotiated fees based on the number and type of transactions requested by our customers. In our share lending arrangements and pay for order flow arrangements, we do not oversee the execution of the transactions, and ultimately lack requisite control, but benefit through a negotiated revenue sharing arrangement. Therefore, we act in the capacity of an agent for share lending and recognize revenue net of fees paid to satisfy the performance obligation. In our digital assets arrangements, our fee is calculated as a negotiated percentage of the transaction volume. In these arrangements, we act in the capacity of a principal and recognize revenue gross of the fees we pay to obtain the digital assets for access by our members. Our brokerage performance obligation is completely satisfied upon completion of an investment-related transaction. We measure our progress toward complete satisfaction of our performance obligation using the output method, with investment transaction activity representing the measure that faithfully depicts the transfer of brokerage services. We incur costs for clearing and processing services that relate to satisfied performance obligations within our brokerage arrangements, which are expensed as incurred. Although certain of our commission costs qualify for capitalization, because their amortization period is less than one year, we expense these costs as incurred. Additionally, we expense as incurred any upfront account funding incentives paid to customers that are not tied to a contract period. Disaggregated Revenue The table below presents revenue from contracts with customers disaggregated by type of service, which best depicts how the revenue and cash flows are affected by economic factors, and by the reportable segment to which each revenue stream relates, as well as a reconciliation of total revenue from contracts with customers to total noninterest income . Revenue from contracts with customers is presented within noninterest income—technology products and solutions and noninterest income— 151 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) other in the consolidated statements of operations and comprehensive income (loss). There were no revenues from contracts with customers attributable to our Lending segment for any of the years presented. Year Ended December 31, 2022 2021 2020 Financial Services Referrals $ 36,052 $ 15,750 $ 5,889 Interchange 17,391 10,642 2,433 Brokerage 15,446 22,733 3,470 Other (1) 2,245 5,541 244 Total financial services $ 71,134 $ 54,666 $ 12,036 Technology Platform Technology services $ 299,379 $ 191,847 $ 90,128 Software licenses 5,522 — — Other (1) 1,061 1,205 1,167 Total technology platform $ 305,962 $ 193,052 $ 91,295 Total Revenue from Contracts with Customers Technology services $ 299,379 $ 191,847 $ 90,128 Referrals 36,052 15,750 5,889 Interchange 17,391 10,642 2,433 Brokerage 15,446 22,733 3,470 Software licenses 5,522 — — Other (1) 3,306 6,746 1,411 Total revenue from contracts with customers $ 377,096 $ 247,718 $ 103,331 Other Sources of Revenue Loan origination and sales $ 605,403 $ 497,626 $ 371,323 Securitizations ( 40,031 ) ( 14,862 ) ( 70,251 ) Servicing 43,547 ( 2,281 ) ( 19,426 ) Other 3,424 4,427 2,624 Total other sources of revenue $ 612,343 $ 484,910 $ 284,270 Total noninterest income $ 989,439 $ 732,628 $ 387,601 _____________________ (1) In Financial Services, includes revenues from equity capital markets services and enterprise services. In Technology Platform, includes payment network fees for serving as a transaction card program manager for enterprise customers that are the program marketers for separate card programs. Contract Balances As of December 31, 2022 and 2021, accounts receivable, net associated with revenue from contracts with customers was $ 61,226 and $ 33,748 , respectively, which were reported within other assets in the consolidated balance sheets. The increase in contract balances during the current period includes the effect of the Technisys Merger, which contributed $ 21,614 to the balance as of December 31, 2022. Note 4. Loans As of December 31, 2022, our loan portfolio consisted of loans held for sale, including personal loans, student loans and home loans, which are measured at fair value under the fair value option, and loans held for investment, including credit cards, and commercial and consumer banking loans, which are measured at amortized cost. Below is a disaggregated 152 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) presentation of our loans, inclusive of fair market value adjustments and accrued interest income and net of the allowance for credit losses, as applicable: December 31, 2022 2021 Loans held for sale Personal loans (1) $ 8,610,434 $ 2,289,426 Student loans (2) 4,877,177 3,450,837 Home loans 69,463 212,709 Total loans held for sale, at fair value 13,557,074 5,952,972 Loans held for investment (3) Credit card 209,164 115,912 Commercial and consumer banking: Commercial real estate 88,652 — Commercial and industrial 7,179 — Residential real estate and other consumer 2,962 — Total commercial and consumer banking 98,793 — Total loans held for investment, at amortized cost 307,957 115,912 Total loans $ 13,865,031 $ 6,068,884 _____________________ (1) Includes $ 663,004 and $ 234,576 of personal loans in consolidated VIEs as of December 31, 2022 and 2021, respectively. (2) Includes $ 268,697 and $ 574,328 of student loans in consolidated VIEs as of December 31, 2022 and 2021, respectively. (3) See Note 1 and Note 5 for additional information on our loans at amortized cost as it pertains to the allowance for credit losses. Loans Held for Sale The following table summarizes the aggregate fair value of our loans held for sale, for which we elected the fair value option and are, therefore, measured at fair value on a recurring basis: Personal Loans Student Loans Home Loans Total December 31, 2022 Unpaid principal (1) $ 8,283,400 $ 4,794,517 $ 77,705 $ 13,155,622 Accumulated interest 55,673 19,433 151 75,257 Cumulative fair value adjustments (1) 271,361 63,227 ( 8,393 ) 326,195 Total fair value of loans $ 8,610,434 $ 4,877,177 $ 69,463 $ 13,557,074 December 31, 2021 Unpaid principal (1) $ 2,188,773 $ 3,356,344 $ 210,111 $ 5,755,228 Accumulated interest 12,310 9,990 190 22,490 Cumulative fair value adjustments (1) 88,343 84,503 2,408 175,254 Total fair value of loans $ 2,289,426 $ 3,450,837 $ 212,709 $ 5,952,972 _____________________ (1) These items are impacted by charge-offs during the period. 153 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) The following table summarizes the aggregate fair value of loans 90 days or more delinquent. As delinquent personal loans and student loans are charged off after 120 days of delinquency, amounts presented below represent the fair value of loans that are 90 to 120 days delinquent. There were no home loans that were 90 days or more delinquent as of the dates presented. Personal Loans Student Loans Total December 31, 2022 Unpaid principal balance $ 27,989 $ 6,435 $ 34,424 Accumulated interest 1,207 304 1,511 Cumulative fair value adjustments ( 25,022 ) ( 3,332 ) ( 28,354 ) Fair value of loans 90 days or more delinquent $ 4,174 $ 3,407 $ 7,581 December 31, 2021 Unpaid principal balance $ 4,765 $ 1,589 $ 6,354 Accumulated interest 149 32 181 Cumulative fair value adjustments ( 4,189 ) ( 865 ) ( 5,054 ) Fair value of loans 90 days or more delinquent $ 725 $ 756 $ 1,481 Transfers of Financial Assets We regularly transfer financial assets and account for such transfers as either sales or secured borrowings depending on the facts and circumstances of the transfer. When a transfer of financial assets qualifies as a sale, in many instances we have continued involvement as the servicer of those financial assets. As we expect the benefits of servicing to be more than just adequate, we recognize a servicing asset. Further, in the case of securitization-related transfers that qualify as sales, we have additional continued involvement as an investor, albeit at insignificant levels relative to the expected gains and losses of the securitization. In instances where a transfer is accounted for as a secured borrowing, we perform servicing (but we do not recognize a servicing asset) and typically maintain a significant investment relative to the expected gains and losses of the securitization. In whole loan sales, we do not have a residual financial interest in the loans, nor do we have any other power over the loans that would constrain us from recognizing a sale. Additionally, we have no repurchase requirements related to transfers of personal loans, student loans and non-GSE home loans other than standard origination representations and warranties, for which we record a liability based on expected repurchase obligations. For GSE home loans, we have customary GSE repurchase requirements, which do not constrain sale treatment but result in a liability for the expected repurchase requirement. 154 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) The following table summarizes our personal loan and student loan securitization transfers qualifying for sale accounting treatment. There were no loan securitization transfers qualifying for sale accounting treatment during the year ended December 31, 2022. Year Ended December 31, 2021 2020 Personal loans Fair value of consideration received: Cash $ 1,050,062 $ 316,503 Securitization investments 55,491 20,961 Deconsolidation of debt (1) — 414,261 Servicing assets recognized 6,003 2,086 Total consideration 1,111,556 753,811 Aggregate unpaid principal balance and accrued interest of loans sold 1,054,171 708,346 Gain from loan sales (1) $ 57,385 $ 45,465 Student loans Fair value of consideration received: Cash $ 1,187,714 $ 2,015,357 Securitization investments 62,783 130,807 Deconsolidation of debt (1) — 458,375 Servicing assets recognized 36,948 19,903 Total consideration 1,287,445 2,624,442 Aggregate unpaid principal balance and accrued interest of loans sold 1,227,379 2,540,052 Gain from loan sales (1) $ 60,066 $ 84,390 _____________________ (1) For the year ended December 31, 2020, the gains from sales excluded losses from deconsolidations on personal loans and student loans of $ 6,098 and $ 8,601 , respectively. Deconsolidation of debt reflects the impacts of previously consolidated VIEs that became deconsolidated during the year because we no longer held a significant financial interest in the underlying securitization entity, which can fluctuate from period to period. Gains and losses on deconsolidations are presented within noninterest income—securitizations in the consolidated statements of operations and comprehensive income (loss). During the year ended December 31, 2022, we had deconsolidation of debt on personal loans of $ 70.6 million and on student loans of $ 126.0 million. The impact on earnings from these deconsolidations was immaterial. 155 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) The following table summarizes our whole loan sales: Year Ended December 31, 2022 2021 2020 Personal loans Fair value of consideration received: Cash $ 3,016,740 $ 3,373,655 $ 1,285,689 Servicing assets recognized 21,925 21,811 8,429 Repurchase liabilities recognized ( 7,351 ) ( 8,168 ) ( 3,535 ) Total consideration 3,031,314 3,387,298 1,290,583 Aggregate unpaid principal balance and accrued interest of loans sold 2,924,567 3,253,645 1,238,474 Gain from loan sales $ 106,747 $ 133,653 $ 52,109 Student loans Fair value of consideration received: Cash $ 883,859 $ 1,676,892 $ 2,596,719 Servicing assets recognized 9,275 15,526 25,734 Repurchase liabilities recognized ( 134 ) ( 300 ) ( 510 ) Total consideration 893,000 1,692,118 2,621,943 Aggregate unpaid principal balance and accrued interest of loans sold 881,922 1,635,280 2,503,821 Gain from loan sales $ 11,078 $ 56,838 $ 118,122 Home loans Fair value of consideration received: Cash $ 1,057,596 $ 2,989,813 $ 2,173,709 Servicing assets recognized 13,926 31,294 20,440 Repurchase liabilities recognized ( 1,158 ) ( 3,288 ) ( 3,034 ) Total consideration 1,070,364 3,017,819 2,191,115 Aggregate unpaid principal balance and accrued interest of loans sold 1,095,882 2,935,343 2,101,895 Gain (loss) from loan sales $ ( 25,518 ) $ 82,476 $ 89,220 The following table presents information about the unpaid principal balances of transferred loans that are not recorded in our consolidated balance sheets, but with which we have a continuing involvement through our servicing agreements: Personal Loans Student Loans Home Loans Total December 31, 2022 Loans in repayment $ 3,266,023 $ 7,421,552 $ 5,099,069 $ 15,786,644 Loans in-school/grace/deferment — 30,844 — 30,844 Loans in forbearance 593 17,817 18,727 37,137 Loans in delinquency 136,179 115,818 16,510 268,507 Total loans serviced $ 3,402,795 $ 7,586,031 $ 5,134,306 $ 16,123,132 December 31, 2021 Loans in repayment $ 5,138,299 $ 9,852,957 $ 4,575,001 $ 19,566,257 Loans in-school/grace/deferment — 37,949 — 37,949 Loans in forbearance 1,120 44,833 40,353 86,306 Loans in delinquency 75,275 112,885 7,465 195,625 Total loans serviced $ 5,214,694 $ 10,048,624 $ 4,622,819 $ 19,886,137 156 SoFi Technologies, Inc. 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Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) The following table presents additional information about the servicing cash flows received and net charge-offs related to transferred loans with which we have a continuing involvement: Year Ended December 31, 2022 2021 2020 Personal loans Servicing fees collected $ 35,580 $ 34,421 $ 45,574 Charge-offs, net of recoveries (1) 107,359 102,276 197,927 Student loans Servicing fees collected 35,203 46,657 50,794 Charge-offs, net of recoveries (1) 34,136 24,675 16,999 Home loans Servicing fees collected 12,893 8,749 4,499 Charge-offs, net of recoveries — — — Total Servicing fees collected $ 83,676 $ 89,827 $ 100,867 Charge-offs, net of recoveries (1) 141,495 126,951 214,926 _____________________ (1) Personal loan and student loan charge-offs, net of recoveries, are impacted by the timing of charge-off sales performed on behalf of the purchasers of our loans, which lower the net amount disclosed. Loans Held for Investment Loan Portfolio Composition and Aging The following table presents the amortized cost basis of our credit card and commercial and consumer banking portfolios (excluding accrued interest and before the allowance for credit losses) by either current status or delinquency status: Delinquent Loans Current 30–59 Days 60–89 Days ≥ 90 Days (1) Total Delinquent Loans Total Loans (2) December 31, 2022 Credit card $ 225,165 $ 4,670 $ 3,626 $ 10,498 $ 18,794 $ 243,959 Commercial and consumer banking: Commercial real estate 89,544 — — — — 89,544 Commercial and industrial 7,636 — 1 — 1 7,637 Residential real estate and other consumer (3) 2,966 — — — — 2,966 Total commercial and consumer banking 100,146 — 1 — 1 100,147 Total loans $ 325,311 $ 4,670 $ 3,627 $ 10,498 $ 18,795 $ 344,106 December 31, 2021 Credit card $ 115,356 $ 1,893 $ 1,683 $ 2,658 $ 6,234 $ 121,590 _____________________ (1) All of the credit cards ≥ 90 days past due continued to accrue interest. As of the dates indicated, there were no credit cards on nonaccrual status. As of December 31, 2022, commercial and consumer banking loans on nonaccrual status were immaterial, and there were no loans that were ≥ 90 days past due. (2) For credit card, the balance is presented before allowance for credit losses of $ 39,110 and $ 7,037 as of December 31, 2022 and 2021, respectively, and accrued interest of $ 4,315 and $ 1,359 , respectively. For commercial and consumer banking, the balance is presented before allowance for credit losses of $ 1,678 and accrued interest of $ 324 as of December 31, 2022. (3) Primarily includes residential real estate loans acquired in the Bank Merger, for which we did not elect the fair value option. 157 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Credit Quality Indicators Credit Card The following table presents the amortized cost basis of our credit card portfolio (excluding accrued interest and before the allowance for credit losses) based on FICO scores, which are obtained at origination of the account and are refreshed monthly thereafter. The pools estimate the likelihood of borrowers with similar FICO scores to pay credit obligations based on aggregate credit performance data. December 31, FICO 2022 2021 ≥ 800 $ 14,421 $ 10,016 780 – 799 11,327 8,624 760 – 779 12,179 9,976 740 – 759 14,501 13,581 720 – 739 19,343 18,358 700 – 719 26,239 22,579 680 – 699 31,543 21,736 660 – 679 31,958 14,044 640 – 659 25,959 1,969 620 – 639 15,566 707 600 – 619 8,968 — ≤ 599 31,955 — Total credit card $ 243,959 $ 121,590 Commercial and Consumer Banking We analyze loans in our commercial and consumer banking portfolio by classification based on their associated credit risk, and perform an analysis on an ongoing basis as new information is obtained. Risk rating classifications are further described below. Loans with a lower expectation of credit losses are classified as Pass, while loans with a higher expectation of credit losses are classified as Substandard. • Pass — Loans that management believes will fully repay in accordance with the contractual loan terms. • Watch  —  Loans that management believes will fully repay in accordance with the contractual loan terms, but for which certain credit attributes have changed from origination and warrant further monitoring. • Special mention — Loans with a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or our credit position at some future date. • Substandard  — Loans that are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the full repayment. They are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. 158 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) The following table presents the amortized cost basis of our commercial and consumer banking portfolio (excluding accrued interest and before the allowance for credit losses) by origination year and credit quality indicator: Term Loans by Origination Year December 31, 2022 2022 2021 2020 2019 2018 Prior Total Term Loans Revolving Loans Commercial real estate Pass $ 34,550 $ 5,756 $ 6,312 $ 10,244 $ 6,541 $ 13,515 $ 76,918 $ 199 Watch 4,653 1,684 — 226 1,507 1,399 9,469 — Special mention — — — 678 1,202 406 2,286 — Substandard — — — — — 672 672 — Total commercial real estate $ 39,203 $ 7,440 $ 6,312 $ 11,148 $ 9,250 $ 15,992 $ 89,345 $ 199 Commercial and industrial Pass $ — $ 3 $ 101 $ — $ 79 $ 5,258 $ 5,441 $ 220 Watch — — — 132 — 263 395 24 Substandard — — — 221 526 810 1,557 — Total commercial and industrial $ — $ 3 $ 101 $ 353 $ 605 $ 6,331 $ 7,393 $ 244 Residential real estate and other consumer Pass $ — $ — $ — $ — $ — $ 2,850 $ 2,850 $ 73 Watch — — — — — 41 41 2 Total residential real estate and other consumer $ — $ — $ — $ — $ — $ 2,891 $ 2,891 $ 75 Total commercial and consumer banking $ 39,203 $ 7,443 $ 6,413 $ 11,501 $ 9,855 $ 25,214 $ 99,629 $ 518 Note 5. Allowance for Credit Losses Our allowance for credit losses represents our current estimate of expected credit losses over the remaining contractual life of certain financial assets including loans measured at amortized cost, including credit cards as well as commercial and consumer banking loans acquired in the Bank Merger, which relate to our Financial Services segment, and accounts receivables primarily related to our Technology Platform segment. Given our methods of collecting funds on servicing receivables, our historical experience of infrequent write offs, and that we have not observed meaningful changes in our counterparties’ abilities to pay, we determined that the future exposure to credit losses on servicing related receivables was immaterial. In estimating expected credit losses for credit cards, we segment loans based on credit quality indicators and reassess our pools periodically to confirm that all loans within each pool continue to share similar risk characteristics. We establish an allowance within each pool utilizing a proprietary risk model that relies on assumptions such as average annual percentage rate, payment rate, utilization, delinquency status and default probability. The model may then be adjusted for current conditions and reasonable and supportable forecasts of future conditions, including economic conditions. We apply the aforementioned assumptions to the drawn balance of credit cards within each pool to estimate the lifetime expected credit losses within each pool, which are then aggregated to determine the allowance for credit losses. We further consider an evaluation of overall portfolio credit quality based on indicators such as changes in our credit decisioning process, underwriting and collection management policies; the effects of external factors, such as regulatory requirements; general economic conditions; and inherent uncertainties in applying the methodology. When a credit card balance is charged off, we record a reduction to the allowance and the credit card balance. 159 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) The following table presents changes in the Company’s allowance for credit losses: Credit Card (1) Commercial and Consumer Banking (1) Accounts Receivable (1) Balance at January 1, 2021 $ 219 $ — $ 562 Provision for credit losses (2) 7,573 — 3,043 Write-offs charged against the allowance (3) ( 755 ) — ( 1,313 ) Balance at December 31, 2021 $ 7,037 $ — $ 2,292 Provision for credit losses (2) 53,030 1,302 586 Allowance for PCD loans (4) — 382 — Write-offs charged against the allowance (3) ( 20,957 ) ( 6 ) ( 93 ) Balance at December 31, 2022 $ 39,110 $ 1,678 $ 2,785 _____________________ (1) Credit cards and commercial and consumer banking loans measured at amortized cost, net of allowance for credit losses, are presented within loans held for investment in the consolidated balance sheets. Accounts receivable balances, net of allowance for credit losses, are presented within other assets in the consolidated balance sheets. (2) The provision for credit losses on credit cards and commercial and consumer banking loans is presented within noninterest expense—provision for credit losses. There were immaterial recoveries of amounts previously reserved related to credit cards and commercial and consumer banking loans. The provision for credit losses on accounts receivable is presented within noninterest expense—general and administrative in the consolidated statements of operations and comprehensive income (loss). During the years ended December 31, 2022 and 2021, recoveries of amounts previously reserved related to accounts receivable were $ 2,912 and $ 776 , respectively. (3) The increase in credit card write-offs charged against the allowance during the year ended December 31, 2022 relative to 2021 was commensurate with our increased loan portfolio combined with elevated loss rates. (4) In connection with the Bank Merger, we obtained purchased credit deteriorated (“PCD”) loans, for which we measured an allowance, with a corresponding increase to the amortized cost basis as of the acquisition date. Therefore, recognition of the initial allowance for credit losses did not impact earnings. Credit card: Accrued interest receivables written off by reversing interest income during the year ended December 31, 2022 were $ 4,650 . Accrued interest receivables written off during the year ended December 31, 2021 were immaterial . 160 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Note 6. Investment Securities Investments in AFS Debt Securities The following table presents our investments in AFS debt securities: December 31, 2022 Amortized Cost Accrued Interest Gross Unrealized Gains Gross Unrealized Losses (1) Fair Value U.S. Treasury securities $ 121,282 $ 217 $ — $ ( 3,510 ) $ 117,989 Multinational securities (2) 19,658 109 — ( 724 ) 19,043 Corporate bonds 41,890 257 — ( 2,644 ) 39,503 Agency mortgage-backed securities 8,899 22 — ( 991 ) 7,930 Other asset-backed securities 9,556 5 — ( 514 ) 9,047 Other (3) 2,133 21 — ( 228 ) 1,926 Total investments in AFS debt securities $ 203,418 $ 631 $ — $ ( 8,611 ) $ 195,438 December 31, 2021 Amortized Cost Accrued Interest Gross Unrealized Gains Gross Unrealized Losses (1) Fair Value U.S. Treasury securities 103,014 73 — ( 584 ) 102,503 Multinational securities (2) 19,911 109 — ( 154 ) 19,866 Corporate bonds 39,894 235 — ( 480 ) 39,649 Agency TBA (4) 7,457 13 4 ( 8 ) 7,466 Agency mortgage-backed securities 4,153 14 — ( 31 ) 4,136 Other asset-backed securities 9,610 5 — ( 91 ) 9,524 Commercial paper 9,939 — — — 9,939 Other (3) 1,818 13 — ( 7 ) 1,824 Total investments in AFS debt securities $ 195,796 $ 462 $ 4 $ ( 1,355 ) $ 194,907 _____________________ (1) As of December 31, 2022 and 2021, we determined that our unrealized loss positions related to credit losses were immaterial. Additionally, we do not intend to sell the securities in loss positions nor is it more likely than not that we will be required to sell the securities prior to recovery of the amortized cost basis. (2) Includes sovereign foreign and supranational bonds. (3) Includes state and city municipal bond securities. (4) Represented to-be-announced (“TBA”) securities, which were securities that were delivered under the purchase contract at a later date when the underlying security was issued. The December 31, 2021 balance was paid in cash during 2022. 161 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) The following table presents information about our investments in AFS debt securities with gross unrealized losses and the length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2022. There were no securities in a gross unrealized loss position for 12 months or more as of December 31, 2021. December 31, 2022 Less than 12 Months 12 Months or Longer Total Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses U.S. Treasury securities $ 27,759 $ ( 1,171 ) $ 90,230 $ ( 2,339 ) $ 117,989 $ ( 3,510 ) Multinational securities — — 19,043 ( 724 ) 19,043 ( 724 ) Corporate bonds 4,480 ( 313 ) 35,023 ( 2,331 ) 39,503 ( 2,644 ) Agency mortgage-backed securities 6,448 ( 814 ) 1,482 ( 177 ) 7,930 ( 991 ) Other asset-backed securities — — 9,047 ( 514 ) 9,047 ( 514 ) Other 745 ( 200 ) 1,181 ( 28 ) 1,926 ( 228 ) Total investments in AFS debt securities $ 39,432 $ ( 2,498 ) $ 156,006 $ ( 6,113 ) $ 195,438 $ ( 8,611 ) The following table presents the amortized cost and fair value of our investments in AFS debt securities by contractual maturity: December 31, 2022 Due Within One Year Due After One Year Through Five Years Due After Five Years Through Ten Years Due After Ten Years Total Investments in AFS debt securities—Amortized cost: U.S. Treasury securities $ 81,705 $ 39,577 $ — $ — $ 121,282 Multinational securities 10,916 8,742 — — 19,658 Corporate bonds 2,763 35,787 3,340 — 41,890 Agency mortgage-backed securities — 195 842 7,862 8,899 Other asset-backed securities — 7,600 1,956 — 9,556 Other 1,197 — — 936 2,133 Total investments in AFS debt securities $ 96,581 $ 91,901 $ 6,138 $ 8,798 $ 203,418 Weighted average yield for investments in AFS debt securities (1) ( 1.63 ) % ( 4.72 ) % ( 4.59 ) % ( 12.85 ) % ( 3.60 ) % Investments in AFS debt securities—Fair value (2) : U.S. Treasury securities $ 79,989 $ 37,783 $ — $ — $ 117,772 Multinational securities 10,590 8,344 — — 18,934 Corporate bonds 2,687 33,486 3,073 — 39,246 Agency mortgage-backed securities — 182 767 6,959 7,908 Other asset-backed securities — 7,179 1,863 — 9,042 Other 1,168 — — 737 1,905 Total investments in AFS debt securities $ 94,434 $ 86,974 $ 5,703 $ 7,696 $ 194,807 _____________________ (1) The weighted average yield represents the effective yield for the investment securities and is computed based on the amortized cost of each security as of December 31, 2022. (2) Presentation of fair values of our investments in AFS debt securities by contractual maturity excludes total accrued interest of $ 631 and $ 462 as of December 31, 2022 and 2021, respectively. 162 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Gross realized gains and losses on our investments in AFS debt securities were immaterial during the years ended December 31, 2022 and 2021, and there were no transfers between classifications of our investments in AFS debt securities. See Note 13 for unrealized gains and losses on our investments in AFS debt securities and amounts reclassified out of AOCI. Securitization Investments The following table presents the aggregate outstanding value of asset-backed bonds and residual interests owned by the Company in nonconsolidated VIEs, which are presented within investment securities in the consolidated balance sheets: December 31, 2022 2021 Personal loans $ 20,172 $ 62,925 Student loans 181,159 311,763 Securitization investments $ 201,331 $ 374,688 Note 7. Securitization and Variable Interest Entities Consolidated VIEs We consolidate certain securitization trusts in which we have a variable interest and are deemed to be the primary beneficiary. Our consolidation policy is further discussed in Note 1. The VIEs are SPEs with portfolio loans securing debt obligations. The SPEs were created and designed to transfer credit and interest rate risk associated with consumer loans through the issuance of collateralized notes and trust certificates. We make standard representations and warranties to repurchase or replace qualified portfolio loans. Aside from these representations, the holders of the asset-backed debt obligations have no recourse to the Company if the cash flows from the underlying portfolio loans securing such debt obligations are not sufficient to pay all principal and interest on the asset-backed debt obligations. We hold a significant interest in these financing transactions through our ownership of a portion of the residual interest in certain VIEs. In addition, in some cases, we invest in the debt obligations issued by the VIE. Our investments in consolidated VIEs eliminate in consolidation. The residual interest is the first VIE interest to absorb losses should the loans securing the debt obligations not provide adequate cash flows to satisfy more senior claims and is the interest that we expect to absorb the expected gains and losses of the VIE. Our exposure to credit risk in sponsoring SPEs is limited to our investment in the VIE. VIE creditors have no recourse against our general credit. As of December 31, 2022 and 2021, we had 6 and 13 consolidated VIEs, respectively, on our consolidated balance sheets. During the year ended December 31, 2022, we exercised securitization clean up calls related to 9 consolidated VIEs, and established 2 consolidated VIEs. The assets of consolidated VIEs that were included in our consolidated balance sheets may only be used to settle obligations of consolidated VIEs and were in excess of those obligations as of December 31, 2022 and 2021. Intercompany balances are eliminated upon consolidation. Nonconsolidated VIEs We have created and designed personal loan and student loan trusts to transfer associated credit and interest rate risk associated with the loans through the issuance of collateralized notes and residual certificates. We have a variable interest in the nonconsolidated loan trusts, as we own collateralized notes and residual certificates in the loan trusts that absorb variability. We also have continuing, non-controlling involvement with the trusts as the servicer. As servicer, we have the power to perform the activities which most impact the economic performance of the VIE, but since we hold an insignificant financial interest in the trusts, we are not the primary beneficiary. This financial interest represents the equity ownership interest in the loan trusts, wherein there is an obligation to absorb losses and the right to receive benefits from residual certificate ownership. The maximum exposure to loss as a result of our involvement with the nonconsolidated VIEs is limited to our investment. We did not provide financial support to any nonconsolidated VIEs beyond our initial equity investment. There are no liquidity arrangements, guarantees or other commitments by third parties that may affect the fair value or risk of our variable interests in nonconsolidated VIEs. 163 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) As of December 31, 2022 and 2021, we had investments in 23 and 33 nonconsolidated VIEs, respectively. During the year ended December 31, 2022, we exercised securitization clean up calls on 9 nonconsolidated VIEs and collapsed the associated trusts, as well as consolidated 1 previously nonconsolidated VIE. Note 8. Goodwill and Intangible Assets Goodwill A rollforward of our goodwill balance is presented below: Year Ended December 31, 2022 2021 Beginning balance $ 898,527 $ 899,270 Less: accumulated impairment — — Beginning balance, net 898,527 899,270 Additional goodwill recognized (1) 724,464 — Other adjustments (2) — ( 743 ) Ending balance (3) $ 1,622,991 $ 898,527 _____________________ (1) For the year ended December 31, 2022, includes $ 713,217 related to the Technisys Merger (inclusive of measurement period adjustments and an adjustment related to the finalization of the closing net working capital calculation) and $ 11,247 related to the Bank Merger. (2) For the year ended December 31, 2021, includes an adjustment related to the finalization of the closing net working capital calculation in April 2021 for the acquisition of Galileo, which closed in 2020. (3) As of December 31, 2022 and 2021, we had goodwill attributable to the following reportable segments: $ 1,585,832 and $ 872,615 , respectively, to Technology Platform and $ 37,159 and $ 25,912 , respectively, to Financial Services. There were no goodwill impairment charges during the years ended December 31, 2022, 2021 and 2020. Intangible Assets The following is a summary of the carrying amount and estimated useful lives of our intangible assets by class: Weighted Average Useful Life (Years) Gross Balance Accumulated Amortization Net Book Value December 31, 2022 Developed technology (1) 8.7 $ 444,438 $ ( 97,202 ) $ 347,236 Customer-related (1) 3.9 167,350 ( 99,264 ) 68,086 Trade names, trademarks and domain names (1) 8.7 20,060 ( 4,028 ) 16,032 Core banking infrastructure (2) n/a 17,100 ( 17,100 ) — Capitalized software development costs (3) 4.0 10,532 ( 737 ) 9,795 Core deposits (1) 7.3 1,000 ( 126 ) 874 Broker-dealer license and trading rights 5.7 250 ( 118 ) 132 Total $ 660,730 $ ( 218,575 ) $ 442,155 December 31, 2021 Developed technology 8.5 $ 257,438 $ ( 49,401 ) $ 208,037 Customer-related 3.6 125,350 ( 57,083 ) 68,267 Core banking infrastructure n/a 17,100 ( 17,100 ) — Trade names, trademarks and domain names 8.6 10,000 ( 1,901 ) 8,099 Broker-dealer license and trading rights 5.7 250 ( 74 ) 176 Total $ 410,138 $ ( 125,559 ) $ 284,579 164 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) _____________________ (1) During the year ended December 31, 2022, the Company acquired $ 187,000 in developed technology, $ 42,000 in customer-related intangible assets and $ 10,000 in trade names, trademarks and domain names related to the acquisition of Technisys. Additionally, the Company acquired $ 1,000 of deposits related to the acquisition of Golden Pacific Bank. (2) Although the core banking infrastructure intangible asset was fully amortized as of December 31, 2022, it remains in use by the Company. (3) Includes capitalized costs related to software products to be sold, leased or marketed within our technology products and solutions arrangements. During the year ended December 31, 2022, total amortization expense related to capitalized software was $ 737 , and capitalized share-based compensation related to capitalized software development costs was immaterial. For the years ended December 31, 2022, 2021 and 2020, amortization expense associated with intangible assets was $ 93,016 , $ 70,507 and $ 49,735 , respectively. There were no abandonments or impairments during any of the years presented. Estimated future amortization expense associated with intangible assets as of December 31, 2022 is as follows: 2023 $ 98,566 2024 65,245 2025 65,245 2026 63,680 2027 53,107 Thereafter 96,312 Total $ 442,155 Note 9. Property, Equipment, Software and Leases Property, Equipment and Software The table below presents our major classes of depreciable and amortizable assets by function: Gross Balance Accumulated Depreciation/Amortization Carrying Value December 31, 2022 Software (1) $ 172,101 $ ( 54,516 ) $ 117,585 Leasehold improvements 40,257 ( 17,145 ) 23,112 Computer hardware 21,265 ( 13,736 ) 7,529 Furniture and fixtures 18,808 ( 10,122 ) 8,686 Finance lease ROU assets (2) 15,100 ( 5,033 ) 10,067 Building and land 3,192 ( 67 ) 3,125 Total $ 270,723 $ ( 100,619 ) $ 170,104 December 31, 2021 Software (1) $ 75,632 $ ( 22,996 ) $ 52,636 Leasehold improvements 39,726 ( 12,233 ) 27,493 Furniture and fixtures 18,326 ( 7,748 ) 10,578 Computer hardware 16,864 ( 8,583 ) 8,281 Finance lease ROU assets (2) 15,100 ( 2,876 ) 12,224 Construction in progress 661 — 661 Total $ 166,309 $ ( 54,436 ) $ 111,873 _____________________ (1) Software primarily includes internally-developed software related to significant developments and enhancements for our products. During the years ended December 31, 2022 and 2021, we capitalized $ 22,577 and $ 7,776 , respectively, of share-based compensation related to internally-developed software, and recognized associated amortization expense of $ 6,223 and $ 792 , respectively. (2) Finance lease ROU assets include our rights to certain physical signage within SoFi Stadium. See below for additional information on our leases. 165 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) For the years ended December 31, 2022, 2021 and 2020, total depreciation and amortization expense associated with property, equipment and software, inclusive of the amortization of capitalized share-based compensation, was $ 59,081 , $ 31,061 and $ 20,097 , respectively. For the years ended December 31, 2022, 2021 and 2020, we recognized no property, equipment and software abandonment and there were no impairments recognized. We had immaterial losses on disposals during the years ended December 31, 2022 and 2021. Leases We primarily lease our office premises under multi-year, non-cancelable operating leases. Our operating leases have terms expiring from 2023 to 2040, exclusive of renewal option periods. Our office leases contain renewal option periods ranging from one to ten years from the expiration dates. These options were not recognized as part of our ROU assets and operating lease liabilities, as we did not conclude at the commencement date of the leases that we were reasonably certain to exercise these options. However, in our normal course of business, we expect our office leases to be renewed, amended or replaced by other leases. Our finance leases expire in 2040. Our operating and finance leases include leases from our September 2019 agreements associated with being the named sponsor of the LA Stadium and Entertainment District at Hollywood Park in Inglewood, California (“SoFi Stadium”), which includes the stadium itself, a performance venue and a future shopping district. Operating leases that commenced in September 2020 included our rights to use two multi-purpose stadium suites, for which we elected the practical expedient to not bifurcate the lease component from the non-lease components, and our rights to certain event space within the stadium and performance venue on a rent-free basis, for which we applied the short-term lease exemption practical expedient. Finance leases that commenced in September 2020 included our rights to certain physical signage within the stadium. The agreement associated with the shopping district is currently expected to commence during 2023. We bifurcated lease components from non-lease components of certain of the arrangements, the latter of which represent sponsorship and advertising opportunities rather than the rights to physical assets that we control. We recognize the non-lease components within noninterest expense—sales and marketing in the consolidated statements of operations and comprehensive income (loss). The components of lease expense and supplemental cash flow and non-cash information related to our leases were as follows. Year Ended December 31, 2022 2021 2020 Operating lease cost $ 20,805 $ 20,188 $ 17,371 Finance lease cost – amortization of ROU assets 2,157 2,157 719 Finance lease cost – interest expense on lease liabilities 469 485 167 Short-term lease cost 2,031 1,335 463 Variable lease cost (1) 3,483 3,979 2,382 Sublease income (2) — ( 717 ) ( 820 ) Total lease cost $ 28,945 $ 27,427 $ 20,282 Cash paid for amounts included in the measurement of lease liabilities Operating cash outflows from operating leases $ 21,682 $ 19,811 $ 17,444 Operating cash outflows from finance leases 469 488 85 Financing cash outflows from finance leases 488 516 489 Supplemental non-cash information Non-cash operating lease ROU assets obtained in exchange for lease liabilities (3) $ ( 3,885 ) $ 12,734 $ 26,496 Non-cash finance lease ROU assets obtained in exchange for new finance lease liabilities — — 15,100 166 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) _____________________ (1) Variable lease cost includes non-lease components classified as lease costs, such as common area maintenance fees, property taxes and utilities, that vary in amount for reasons other than the passage of time. We elected the practical expedient to not bifurcate the lease component from the non-lease components. (2) We entered into a sublease arrangement through which we earned sublease income, which offset our lease cost related to the underlying premises. During the year ended December 31, 2020, we offered the sublessee a partial rent abatement as a result of the COVID-19 pandemic. The sublease arrangement terminated in August 2021. (3) For the years ended December 31, 2022 and 2020, includes $ 764 and $ 5,640 , respectively, of operating lease ROU assets obtained through acquisitions. Also includes impacts from lease modifications. Supplemental balance sheet information related to our leases was as follows: December 31, 2022 2021 Operating Leases ROU assets $ 97,135 $ 115,191 Operating lease liabilities $ 117,758 $ 138,794 Weighted average remaining lease term (in years) 7.5 8.6 Weighted average discount rate 5.2 % 4.5 % Finance Leases ROU assets (1) $ 10,067 $ 12,224 Finance lease liabilities (2) $ 13,683 $ 14,174 Weighted average remaining lease term (in years) 17.3 18.3 Weighted average discount rate 3.4 % 3.4 % _____________________ (1) Finance lease ROU assets are presented within property, equipment and software in the consolidated balance sheets. (2) Finance lease liabilities are presented within accounts payable, accruals and other liabilities in the consolidated balance sheets. As of December 31, 2022, future maturities of lease liabilities and a reconciliation of the total undiscounted cash flows to the lease liabilities in the consolidated balance sheets were as follows: Operating Leases Finance Leases 2023 $ 25,120 $ 964 2024 22,194 968 2025 20,705 1,038 2026 19,462 1,060 2027 14,921 1,061 Thereafter 44,918 12,992 Total 147,320 18,083 Less: imputed interest ( 29,562 ) ( 4,400 ) Lease liabilities $ 117,758 $ 13,683 167 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Note 10. Other Assets and Other Liabilities The following table presents the components of other assets : December 31, 2022 2021 Accounts receivable, net (1) $ 127,050 $ 85,523 Digital assets safeguarding asset (2) 106,826 — Prepaid expenses 73,429 57,903 Derivative financial instruments (3) 34,610 15,337 Restricted investments (4) 28,651 — Investments in equity securities (5) 22,825 6,054 Other 23,943 6,425 Other assets $ 417,334 $ 171,242 _____________________ (1) Includes accounts receivable, net of allowance for credit losses, associated with revenue from contracts with customers, deposit-related receivables and other receivables. See Note 5 for information on the allowance for credit losses on accounts receivable. (2) See Note 1 and Note 15 for additional information on the digital assets safeguarding asset. (3) See Note 14 for additional information on derivative financial instruments. (4) Subsequent to operating SoFi Bank, we have investments in Federal Reserve Bank (“FRB”) stock and Federal Home Loan Bank (“FHLB”) stock, which are restricted investment securities that are not marketable. These investments are carried at cost and assessed for impairment. (5) As of December 31, 2022, primarily included an investment that was entered into in 2021 and recorded as an equity method investment until January 2022 in conjunction with relinquishing our seat on the investee’s board of directors. Our equity method investment income for the year ended December 31, 2022 was immaterial and we did not receive any distributions. The following table presents the components of accounts payable, accruals and other liabilities : December 31, 2022 2021 Accrued expenses (1) $ 145,971 $ 94,199 Accounts payable 126,875 156,757 Digital assets safeguarding liability (2) 106,826 — Deferred tax liabilities, net (3) 56,482 1,787 Accrued interest 17,700 1,306 Finance lease liability (4) 13,683 14,174 Deferred revenue (5) 10,028 2,553 Derivative financial instruments (6) 9,251 864 Other 29,399 26,524 Accounts payable, accruals and other liabilities $ 516,215 $ 298,164 _____________________ (1) Includes accrued compensation and compensation-related expenses, accrued taxes and other accrued expenses. (2) See Note 1 and Note 15 for additional information on the digital assets safeguarding liability. (3) See Note 17 for additional information on income taxes. (4) See Note 9 for additional information on finance leases. (5) See Note 3 for additional information on deferred revenue. (6) See Note 14 for additional information on derivative financial instruments. 168 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Note 11. Deposits We commenced offering deposit accounts (referred to as “SoFi Checking and Savings” accounts) to our members through SoFi Bank in the first quarter of 2022. Our interest-bearing deposits primarily consist of demand deposits, savings deposits and, to a lesser extent, time deposits. We also have noninterest-bearing deposits associated with legacy Golden Pacific accounts. The following table presents a detail of interest-bearing deposits: December 31, 2022 Savings deposits $ 4,383,953 Demand deposits (1) 1,912,452 Time deposits (1)(2) 969,387 Total interest-bearing deposits $ 7,265,792 _____________________ (1) Includes brokered deposits of $ 1,026,400 , of which $ 940,000 are time deposits and $ 86,400 are demand deposits. (2) The amount of time deposits that exceeded the insured limit (referred to as “uninsured deposits”) totaled $ 20,842 . As of December 31, 2022, future maturities of our total time deposits were as follows: 2023 $ 966,556 2024 2,455 2025 88 2026 288 Total $ 969,387 169 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Note 12. Debt The following table summarizes the components of our debt: December 31, 2022 December 31, 2021 Borrowing Description Total Collateral (1) Stated Interest Rate (2) Weighted Average Effective Interest Rate (3) Termination/ Maturity (4) Total Capacity Total Outstanding (5) Total Outstanding Debt Facilities Student loan warehouse facilities $ 2,530,021 4.85 % – 6.40 % 5.70 % April 2023 – May 2025 $ 4,300,000 $ 1,504,926 $ 1,074,915 Personal loan warehouse facilities 1,679,414 4.60 % – 6.41 % 5.82 % January 2023 – January 2032 3,800,000 1,452,085 228,145 Credit card warehouse facility — 5.94 % — % December 2023 100,000 — 11,810 Risk retention warehouse facilities (6) 125,184 5.80 % – 6.77 % 6.55 % January 2024 – October 2027 200,000 101,964 325,648 Revolving credit facility (7) 5.39 % 5.47 % September 2023 560,000 486,000 486,000 Other Debt Convertible senior notes — % 0.42 % October 2026 1,200,000 1,200,000 Other financing (8) 22,899 22,157 — — Securitizations Personal loan securitizations 660,998 0.49 % – 6.21 % 5.80 % September 2030 – April 2031 529,132 163,370 Student loan securitizations 276,170 2.74 % – 8.82 % 7.09 % January 2039 – July 2040 246,856 503,470 Total, before unamortized debt issuance costs, premiums and discounts $ 5,520,963 $ 3,993,358 Less: unamortized debt issuance costs, premiums and discounts ( 35,081 ) ( 45,375 ) Total debt $ 5,485,882 $ 3,947,983 _____________________ (1) As of December 31, 2022, represents the total of the unpaid principal balances within each debt category, with the exception of the risk retention warehouse facilities, which include securitization-related investments carried at fair value. In addition, certain securitization interests that eliminate in consolidation are pledged to risk retention warehouse facilities. Collateral balances relative to debt balances may vary period to period due to the timing of the next scheduled payment to the warehouse facility. (2) For variable-rate debt, the ranges of stated interest rates are based on the interest rates in effect as of December 31, 2022. The interest on our variable-rate debt is typically designed as a reference rate plus a spread. Reference rates as of December 31, 2022 included one-month LIBOR, three-month LIBOR, overnight SOFR, one-month SOFR, three-month SOFR, prime rate and commercial paper rates determined by the facility lenders. As debt arrangements are renewed, the reference rate and/or spread are subject to change. Unused commitment fees ranging from 0 to 65 basis points (“bps”) on our various warehouse facilities are recognized within noninterest expense—general and administrative in our consolidated statements of operations and comprehensive income (loss). (3) Weighted average effective interest rates are calculated based on the interest rates in effect as of December 31, 2022 and include the amortization of debt issuance costs. (4) For securitization debt, the maturity of the notes issued by the various trusts occurs upon either the maturity of the loan collateral or full payment of the loan collateral held in the trusts. Our maturity date represents the legal maturity of the last class of maturing notes. Securitization debt matures as loan collateral payments are made. (5) There were no debt discounts or premiums issued during the year ended December 31, 2022. (6) For risk retention warehouse facilities, we only state capacity amounts for facilities wherein we can pledge additional asset-backed bonds and residual investments as of the balance sheet date. (7) As of December 31, 2022, $ 6.0 million of the revolving credit facility total capacity was not available for general borrowing purposes because it was utilized to secure a letter of credit. Refer to our letter of credit disclosures in Note 18 for more details. Additionally, the interest rate presented is the interest rate on standard withdrawals on our revolving credit facility, while same-day withdrawals incur interest based on prime rate. (8) Includes $ 22.9 million of loans pledged as collateral to secure $ 14.6 million of available borrowing capacity with the FHLB, of which $ 11.7 million was not available as it was utilized to secure letters of credit. Refer to our letter of credit disclosures in Note 18 for more details. Also includes unsecured available borrowing capacity of $ 7.6 million with correspondent banks. 170 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) The total accrued interest payable on borrowings of $ 13,538 and $ 1,158 as of December 31, 2022 and 2021, respectively, was presented within accounts payable, accruals and other liabilities in the consolidated balance sheets. Convertible Senior Notes In October 2021, we issued $ 1.2 billion aggregate principal amount of Convertible Notes due 2026, pursuant to an indenture, dated October 4, 2021, between the Company and U.S. Bank National Association, as trustee. The Convertible Notes are unsecured, unsubordinated obligations. The Convertible Notes do not bear regular interest. The Convertible Notes will mature on October 15, 2026, unless earlier repurchased, redeemed or converted. The net proceeds from the offering were $ 1.176 billion, after deducting the 2 % initial purchasers’ discount of $ 24 million, and before the cost of the Capped Call Transactions, as described below, and offering expenses payable by the Company. The debt issuance costs of $ 1.7 million included third-party legal and accounting fees. The original issue discount and debt issuance costs are amortized into interest expense—corporate borrowings in the consolidated statements of operations and comprehensive income (loss) using the effective interest method over the contractual term of the Convertible Notes. For the years ended December 31, 2022 and 2021, total interest expense on the Convertible Notes was $ 5.1 million and $ 1.2 million, respectively, related to amortization of debt discount and issuance costs. As of December 31, 2022 and 2021, unamortized debt discount and issuance costs were $ 19.4 million and $ 24.5 million, respectively. We used a portion of the net proceeds to fund the cost of entering into the Capped Call Transactions, as described in Note 13. The remainder of the net proceeds from the offering were used to pay related expenses and were allocated for general corporate purposes. Conversion The Convertible Notes are convertible by the noteholders prior to the close of business on the business day immediately preceding April 15, 2026 if certain conditions related to the Company’s share price are met, there are certain corporate events or distributions of the Company’s stock, or the Company calls the notes for redemption, each as set forth in the indenture. On and after April 15, 2026 until the close of business on the second scheduled trading day immediately preceding the maturity date, the Convertible Notes are freely convertible by the noteholders. The conversion rate is 44.6150 shares of our common stock per $1,000 principal amount of Convertible Notes, which represents an initial conversion price of approximately $ 22.41 per share of our common stock. As of December 31, 2022, the Convertible Notes are potentially convertible into 53,538,000 shares of common stock. Settlement We will settle conversions by paying or delivering, at our election, cash, shares of our common stock or a combination of cash and shares of our common stock, based on the applicable conversion rate(s). If we elect to deliver cash or a combination of cash and shares of our common stock, then the consideration due upon conversion will be determined over an observation period consisting of 30 “VWAP Trading Days” (as defined in the indenture). The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time. Redemption The Convertible Notes will also be redeemable, in whole or in part, at our option at any time, and from time to time, on or after October 15, 2024 through on or before the 30th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Convertible Notes to be redeemed, plus accrued interest, if any, thereon to, but excluding, the redemption date, but only if certain liquidity conditions described in the indenture are satisfied and certain conditions are met with respect to the last reported sale price per share of our common stock prior to conversion. In addition, calling any note for redemption will also constitute a Make-Whole Fundamental Change with respect to that note, in which case the conversion rate applicable to the conversion of that note will be increased in certain circumstances if it is converted after it is called for redemption. See Note 1 for our accounting policy as it relates to the Convertible Notes. 171 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Material Changes to Debt Arrangements During the year ended December 31, 2022, we opened four personal loan warehouse facilities with an aggregate maximum available capacity of $ 1.5 billion, closed our only home loan warehouse facility that had a maximum available capacity of $ 1.0 million, and closed one risk retention warehouse facility that had a maximum available capacity of $ 192.1 million. Our warehouse and securitization debt is secured by a continuing lien and security interest in the loans financed by the proceeds. Within each of our debt facilities, we must comply with certain operating and financial covenants. These financial covenants include, but are not limited to, maintaining: (i) a certain minimum tangible net worth, (ii) minimum cash and cash equivalents, and (iii) a maximum leverage ratio of total debt to tangible net worth. Our debt covenants can lead to restricted cash classifications in our consolidated balance sheets. Our subsidiaries are restricted in the amount that can be distributed to the parent company only to the extent that such distributions would cause the financial covenants to not be met. We were in compliance with all financial covenants. We act as a guarantor for our wholly-owned subsidiaries in several arrangements in the case of default. As of December 31, 2022, we have not identified any risks of nonpayment by our wholly-owned subsidiaries. Maturities of Borrowings Future maturities of our outstanding debt with scheduled payments, which included our revolving credit facility and Convertible Notes, were as follows: December 31, 2022 2023 $ 486,000 2024 — 2025 — 2026 1,200,000 2027 — Thereafter — Total $ 1,686,000 Note 13. Equity Temporary Equity Pursuant to SoFi Technologies’ Certificate of Incorporation dated May 28, 2021, the Company is authorized to issue 100,000,000 shares of preferred stock having a par value of $ 0.0001 per share (“SoFi Technologies Preferred Stock”) and 100,000,000 shares of redeemable preferred stock having a par value of $ 0.0000025 per share (“SoFi Technologies Redeemable Preferred Stock”). The Company’s Board of Directors has the authority to issue SoFi Technologies Preferred Stock and SoFi Technologies Redeemable Preferred Stock and to determine the rights, preferences, privileges and restrictions, including voting rights, of those shares. The authorized shares of SoFi Technologies Redeemable Preferred Stock is inclusive of 4,500,000 shares of Series 1 redeemable preferred stock (“Series 1 Redeemable Preferred Stock”), which reflect the conversion on a one -for-one basis of shares of Social Finance Series 1 preferred stock in conjunction with the Business Combination. Shares of SoFi Technologies Series 1 Redeemable Preferred Stock that are redeemed, purchased or otherwise acquired by the Company will be canceled and may not be reissued by the Company. The Series 1 Redeemable Preferred Stock remains classified as temporary equity because the Series 1 Redeemable Preferred Stock is not fully controlled by the issuer, SoFi Technologies. See “Series 1 Preference and Rights” for additional provisions of the SoFi Technologies Series 1 Redeemable Preferred Stock. As of December 31, 2022, there were 3,234,000 shares of SoFi Technologies Series 1 Redeemable Preferred Stock issued and outstanding, which had an original issuance price of $ 100.00 . 172 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Recent Issuances and Redemptions In conjunction with the Business Combination, we redeemed and canceled 15,000,000 shares of redeemable SoFi Technologies common stock for a purchase price of $ 150.0 million. Series 1 Preference and Rights On January 7, 2021, the Company and (i) entities affiliated with Silver Lake, which is affiliated with Michael Bingle, one of the directors of SoFi, (ii) entities affiliated with the Qatar Investment Authority (“QIA”), which is affiliated with Ahmed Al-Hammadi, one of the directors of SoFi, and (iii) Mr. Noto, the Chief Executive Officer and one of the directors of SoFi, entered into the Amended and Restated Series 1 Preferred Stock Investors’ Agreement (the “Amended Series 1 Agreement”), which amended the Series 1 Preferred Stock Investors’ Agreement dated May 29, 2019 (the “Original Series 1 Agreement”). In conjunction with the Business Combination, the Amended Series 1 Agreement amended the special payment provision under the original agreement to provide for a one-time special payment of $ 21.2 million to the holders of Series 1 Redeemable Preferred Stock, which was paid from the proceeds of the Business Combination and settled contemporaneously with the Business Combination. The special payment was recognized within noninterest expense—general and administrative in the consolidated statements of operations and comprehensive income (loss), as this feature was accounted for as an embedded derivative that was not clearly and closely related to the host contract, and did not have a subsequent impact on our consolidated financial results. The Series 1 Redeemable Preferred Stock has no stated maturity. In addition, in connection with the Business Combination, the Series 1 preferred stockholders entered into the Series 1 Registration Rights Agreement upon request by QIA, which provides Series 1 preferred stockholders with certain registration rights, provides for certain shelf registration filing obligations by SoFi and limits the future registration rights that SoFi may grant other parties. Dividends Prior to the Business Combination, no dividends were declared or paid subject to the preferred stock dividend provisions. Subsequent to the Business Combination, the dividend provisions were no longer in effect. Pursuant to the SoFi Technologies Certificate of Incorporation, the SoFi Technologies Series 1 preferred stock are entitled to receive cumulative cash dividends from and including the date of issuance of such shares at a fixed rate equal to $ 12.50 per annum per share, or 12.5 % per annum, of the SoFi Technologies Series 1 Redeemable Preferred Stock share price of $ 100.00 (“Series 1 Dividend Rate”). The Series 1 Dividend Rate resets to a new fixed rate on the fifth anniversary of May 29, 2019, the original Series 1 preferred stock issue date (“Series 1 Original Issue Date”) and on every subsequent one-year anniversary of the Series 1 Original Issue Date (“Dividend Reset Date”), equal to six-month LIBOR as in effect on the second London banking day prior to such Dividend Reset Date plus a spread of 9.94 % per annum. Series 1 preferred stockholders prior to the Business Combination who received shares of SoFi Technologies Series 1 Redeemable Preferred Stock at the effective time of the Merger remained entitled to receive dividends accrued but unpaid as of the date of the Agreement in respect of such shares of Series 1 Redeemable Preferred Stock. During the years ended December 31, 2022, 2021 and 2020, the Series 1 preferred stockholders were entitled to dividends of $ 40,425 , $ 40,426 and $ 40,536 , respectively. There were no dividends payable as of December 31, 2022 and 2021. Dividends are payable semiannually in arrears on the 30th day of June and 31st day of December of each year, when and as authorized by the Board of Directors . The Company may defer any scheduled dividend payment for up to three semiannual dividend periods, subject to such deferred dividend accumulating and compounding at the applicable Series 1 Dividend Rate. If the Company defers any single scheduled dividend payment on the Series 1 Redeemable Preferred Stock for four or more semiannual dividend periods, the Series 1 Dividend Rate applicable to: (i) the compounding following the date of such default on all then-deferred dividend payments (whether or not deferred for four or more semiannual dividend periods) is applied on a go-forward basis and not retroactively, and (ii) new dividends declared following the date of such default and the compounding on such dividends if such new dividends are deferred shall be equal to the otherwise applicable Series 1 Dividend Rate plus 400 basis points. This default-related increase shall continue to apply until the Company pays all deferred dividends and related compounding. Once the Company is current on all such dividends, it may again commence deferral of any pre-scheduled dividend payment for up to three semiannual dividend periods, following the same procedure as outlined in the foregoing. 173 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Conversion Subsequent to the Business Combination, the conversion provisions in respect of each series of preferred stock were no longer in effect, other than the Series 1 Redeemable Preferred Stock, which did not have any rights of conversion. Pursuant to the SoFi Technologies Certificate of Incorporation, the Series 1 Redeemable Preferred Stock continue not to have any rights to convert into shares of any other class or series of securities of the Company. Liquidation Subsequent to the Business Combination, the liquidation provisions in respect of every series of preferred stock, other than Series 1 Redeemable Preferred Stock, were no longer in effect. Pursuant to the SoFi Technologies Certificate of Incorporation, with respect to rights to the distribution of assets upon the Company’s liquidation, dissolution or winding up, the Series 1 Redeemable Preferred Stock is senior to all classes or series of common stock, non-voting common stock, SoFi Technologies Preferred Stock and any other class or series of capital stock of the Company now or hereafter authorized, issued or outstanding that, by its terms, does not expressly provide that it ranks senior to or pari passu with the Series 1 Redeemable Preferred Stock. Settlement Rights Pursuant to the SoFi Technologies Certificate of Incorporation, the Series 1 Redeemable Preferred Stock is redeemable at SoFi’s option in certain circumstances. SoFi may, at any time but no more than three times, at its option, settle the Series 1 Redeemable Preferred Stock, in whole or in part, but if in part, in an amount no less than: (i) one-third of the total amount of Series 1 Redeemable Preferred Stock outstanding as of May 28, 2021 or (ii) the remainder of Series 1 Redeemable Preferred Stock outstanding (the “Minimum Redemption Amount”). In addition, SoFi may, at its option, settle for cash the Series 1 Redeemable Preferred Stock in whole, but not in part, within 120 days of the occurrence of a Change of Control (as that term is defined in the SoFi Technologies Certificate of Incorporation), which would result in a payment of the initial purchase price of the Series 1 preferred stock of $ 323.4 million plus any unpaid dividends on such stock (whether deferred or otherwise) (the “Series 1 Redemption Price”). Such settlement is determined at the discretion of the Board of Directors . If any such optional redemption by the Company occurs either: (i) prior to the fifth anniversary of the Series 1 Original Issue Date or (ii) after the fifth anniversary of the Series 1 Original Issue Date and not on a Dividend Reset Date, the Series 1 Redeemable Preferred Stock is entitled to receive an amount in cash equal to any such dividends that would have otherwise been payable to the holder on its redeemed shares of Series 1 Redeemable Preferred Stock for all dividend periods following the applicable optional redemption date up to and including the Dividend Reset Date immediately following such optional redemption date. If the Series 1 Redeemable Preferred Stock is not earlier redeemed by the Company, each holder of Series 1 Redeemable Preferred Stock has the right to require SoFi to settle for cash some or all of their Series 1 Redeemable Preferred Stock, in each case at the Series 1 Redemption Price, in the following circumstances: (i) within 120 days of the occurrence of a Change of Control, or (ii) during the six-month period following (a) a default in payment of any dividend on the Series 1 Redeemable Preferred Stock, or (b) the cure period for any covenant default under the SoFi Technologies Certificate of Incorporation. The Series 1 preferred stock had similar redemption provisions under the Original Series 1 Agreement. Pursuant to the Amended Series 1 Agreement, in January 2021, the Series 1 preferred stockholders waived their rights in the event of a liquidation, including the right to immediately receive the Series 1 proceeds. Therefore, the Series 1 preferred stock redemption value remained at $ 323.4 million subsequent to the Business Combination. The Series 1 Redeemable Preferred Stock remains in temporary equity following the Business Combination because the Series 1 Redeemable Preferred Stock is not fully controlled by SoFi. Voting Rights Subsequent to the Business Combination, the liquidation provisions in respect of every series of preferred stock, other than Series 1 Redeemable Preferred Stock, were no longer in effect. Pursuant to the SoFi Technologies Certificate of Incorporation, the Series 1 preferred stockholders do not have explicit board of director rights. Warrants In connection with the Series 1 and Series H preferred stock issuances during the year ended December 31, 2019, we also issued 12,170,990 Series H warrants, which were initially accounted for as liabilities, and were included within accounts 174 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) payable, accruals and other liabilities in the consolidated balance sheets. The Series H preferred stock was converted into shares of SoFi Technologies common stock in conjunction with the Business Combination. Prior to the Business Combination, the Series H warrants were measured at fair value on a recurring basis and classified as Level 3 because of our reliance on unobservable assumptions, with fair value changes recognized within noninterest expense—general and administrative in the consolidated statements of operations and comprehensive income (loss). On May 28, 2021, in conjunction with the Closing of the Business Combination, we measured the final fair value of our Series H warrants. Subsequently, we reclassified the Series H warrant liability of $ 161,775 into permanent equity, as the terms of the Series H instrument no longer necessitated liability accounting. Therefore, we did not measure the warrants at fair value subsequent to May 28, 2021. The key inputs into our Black-Scholes Model valuation as of May 28, 2021, the final measurement date, were as follows: Input May 28, 2021 Risk-free interest rate 0.3 % Expected term (years) 2.9 Expected volatility 33.9 % Dividend yield — % Exercise price $ 8.86 Fair value of Series H preferred stock $ 21.89 The Company’s use of the Black-Scholes Model required the use of subjective assumptions: • Risk-free interest rate — Based on the five-year U.S. Treasury rate, which was commensurate with the expected term of the warrants. At inception, we assumed that the term would be five years, given by design the warrants were only expected to extend for greater than five years if the Company was still not publicly traded by that point in time. The expected term assumption used reflects the five-year term less time elapsed since initial measurement. An increase in the expected term, in isolation, would typically correlate to a higher risk-free interest rate and result in an increase in the fair value measurement of the warrant liabilities and vice versa. • Expected volatility — Reflected the expectation that the Series H warrants would convert into common stock upon consummation of the Business Combination, and the Series H preference would be of no further effect, in which case the Series H preference would not have a material impact on the stock volatility measure. As such, the expected volatility assumptions reflect our common stock volatilities as of May 28, 2021. An increase in the expected volatility, in isolation, would result in an increase in the fair value measurement of the warrant liabilities and vice versa. • Fair value of Series H preferred stock — Determined as of May 28, 2021, which was informed from a common stock transaction during December 2020 at a price of $ 10.57 per common share. We determined that this common stock transaction was a reasonable proxy for the valuation of the Series H preferred stock as of May 28, 2021 due to the proximity to an expected Business Combination; therefore, other than adjusting for the Series H exchange ratio, no further adjustments were made for the Series H concluded price per share. As of May 28, 2021, the fair value measurement of the Series H redeemable preferred stock was determined based on the observable closing price of SCH stock (ticker symbol “IPOE”) on the measurement date multiplied by the weighted average exchange ratio of the Series H preferred stock. • Dividend yield — We assumed no dividend yield because we have historically not paid out dividends to our preferred stockholders, other than to the Series 1 preferred stockholders, which is considered a special circumstance. 175 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) The following table presents the changes in the fair value of the Series H warrant liabilities during the year ended December 31, 2021, prior to the Closing of the Business Combination. Warrant Liabilities Fair value as of January 1, 2021 $ 39,959 Change in valuation inputs or other assumptions (1) 121,816 Reclassification to permanent equity in conjunction with the Business Combination (2) ( 161,775 ) Fair value as of December 31, 2021 $ — _____________________ (1) Changes in valuation inputs or other assumptions are recognized within noninterest expense—general and administrative in the consolidated statements of operations and comprehensive income (loss). (2) Upon the Closing of the Business Combination, Social Finance Series H warrants were converted into SoFi Technologies common stock warrants and reclassified to permanent equity, as the warrants no longer had features requiring liability based accounting and, therefore, represented a non-cash activity. Permanent Equity On June 1, 2021, the Company’s common stock began trading on the Nasdaq Global Select Market under the ticker symbol “SOFI”. Pursuant to SoFi Technologies’ Certificate of Incorporation, the Company is authorized to issue 3,000,000,000 shares of common stock, with a par value of $ 0.0001 per share, and 100,000,000 shares of non-voting common stock, with a par value of $ 0.0001 per share. As of December 31, 2022, the Company had 933,896,120 shares of common stock and no shares of non-voting common stock issued and outstanding. The Company reserved the following common stock for future issuance: December 31, 2022 2021 Outstanding stock options, RSUs and PSUs 107,851,565 92,829,067 Outstanding common stock warrants 12,170,990 12,170,990 Conversion of Convertible Notes (1) 53,538,000 53,538,000 Possible future issuance under stock plans 26,434,957 32,470,481 Total common stock reserved for future issuance 199,995,512 191,008,538 _____________________ (1) Represents the number of common stock issuable upon conversion of all Convertible Notes at the conversion rate in effect at the balance sheet date. Dividends Common stockholders and non-voting common stockholders are entitled to dividends when and if declared by the Board of Directors and subject to government regulation over banks and bank holding companies, as discussed further in Note 21. There were no dividends declared or paid to common stockholders during the years ended December 31, 2022, 2021 and 2020. Voting Rights Each holder of common stock has the right to one vote per share of common stock and is entitled to notice of any stockholder meeting. Non-voting common stock does not have any voting rights or other powers. Capped Call Transactions During 2021, we entered into privately negotiated Capped Call Transactions for a total cost of $ 113.8 million. The Capped Call Transactions initially cover, subject to customary anti-dilution adjustments, the number of shares of our common stock that initially underlie the Convertible Notes. The Capped Call Transactions are expected generally to reduce the potential dilutive effect on the common stock upon any conversion of Convertible Notes and/or offset any potential cash payments we are required to make in excess of the principal amount of converted Convertible Notes, as the case may be, with such reduction and/or offset subject to a cap, subject to certain adjustments under the terms of the Capped Call Transactions. The Capped Call Transactions allow the Company to purchase shares of our common stock at a strike price equal to the initial conversion price 176 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) of approximately $ 22.41 per share, and are subject to a cap of $ 32.02 per share, subject to certain adjustments under the terms of the Capped Call Transactions. Capped Call Transactions are subject to automatic exercise if they are in-the-money as of certain expiration dates during September and October 2026. Settlement is subject to acceleration pursuant to the occurrence of certain corporate events, as well as postponement no later than January 12, 2027. See Note 1 for our accounting policy as it relates to the Capped Call Transactions. Accumulated Other Comprehensive Income (Loss) AOCI primarily consists of accumulated net unrealized gains or losses associated with our investments in AFS debt securities and foreign currency translation adjustments. The following table presents the rollforward of AOCI, inclusive of the changes in the components of other comprehensive loss: AFS Debt Securities Foreign Currency Translation Adjustments Total Balance at January 1, 2020 $ — $ ( 21 ) $ ( 21 ) Other comprehensive loss before reclassifications (1) — ( 145 ) ( 145 ) Net current-period other comprehensive loss (2) — ( 145 ) ( 145 ) Balance at December 31, 2020 $ — $ ( 166 ) $ ( 166 ) Other comprehensive loss before reclassifications (1) ( 1,459 ) 46 ( 1,413 ) Amounts reclassified from AOCI into earnings 108 — 108 Net current-period other comprehensive loss (2) ( 1,351 ) 46 ( 1,305 ) Balance at December 31, 2021 $ ( 1,351 ) $ ( 120 ) $ ( 1,471 ) Other comprehensive income (loss) before reclassifications (1) ( 7,545 ) 435 ( 7,110 ) Amounts reclassified from AOCI into earnings 285 — 285 Net current-period other comprehensive income (loss) (2) ( 7,260 ) 435 ( 6,825 ) Balance at December 31, 2022 $ ( 8,611 ) $ 315 $ ( 8,296 ) _____________________ (1) Gross realized gains and losses from sales of our investments in AFS debt securities that were reclassified from AOCI to earnings are recorded within noninterest income—other in the consolidated statements of operations and comprehensive income (loss). There were no reclassifications related to foreign currency translation adjustments during the years ended December 31, 2022 and 2021. (2) There were no material tax impacts during any of the years presented due to reserves against deferred tax assets in jurisdictions where other comprehensive loss activity was generated. 177 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Note 14. Derivative Financial Instruments The following table presents the gains (losses) recognized on our derivative instruments: Year Ended December 31, 2022 2021 2020 Derivative contracts to manage future loan sale execution risk (1)(2) $ 354,834 $ 49,090 $ ( 54,829 ) Derivative contracts to manage securitization investment interest rate risk (3) 15,064 — — Purchase price earn-out (1)(4) 1,094 9,312 — IRLCs (1) ( 3,543 ) ( 11,861 ) 14,530 Interest rate caps (1) ( 8,583 ) ( 193 ) — Third party warrants (5) ( 21 ) 573 — Special payment (6) — ( 21,181 ) — Derivative contracts to manage market risk associated with non-securitization investments (7) — — 996 Total $ 358,845 $ 25,740 $ ( 39,303 ) _____________________ (1) Recorded within noninterest income—loan origination and sales in the consolidated statements of operations and comprehensive income (loss). (2) The loss recognized during the year ended December 31, 2020 was inclusive of a $ 22,269 gain on credit default swaps that were opened and settled during the year. (3) Recorded within noninterest income—securitizations in the consolidated statements of operations and comprehensive income (loss). (4) In conjunction with a loan sale agreement, we are entitled to receive payments from the buyer of the loans underlying the agreement if the internal rate of return (as defined in the loan sale agreement) on such loans exceeds a specified hurdle, subject to a dollar cap. (5) Includes amounts recorded within noninterest income—other, noninterest expense—cost of operations and noninterest expense—general and administrative in the consolidated statements of operations and comprehensive income (loss), the latter of which represents the amortization of a deferred liability recognized at the initial fair value of the third party warrants acquired, as we are also a customer of the third party. (6) In conjunction with the Business Combination, we made a one-time special payment to the holders of Series 1 Redeemable Preferred Stock, which was paid from the proceeds of the Business Combination and settled contemporaneously with the Business Combination. The special payment was recognized within noninterest expense—general and administrativ e in the consolidated statements of operations and comprehensive income (loss), as this feature was accounted for as an embedded derivative that was not clearly and closely related to the host contract, and will not have a subsequent impact on our consolidated financial results. The Series 1 Redeemable Preferred Stock has no stated maturity. (7) Recorded within noninterest income—other in the consolidated statements of operations and comprehensive income (loss). The following table presents information about derivative instruments subject to enforceable master netting arrangements: December 31, 2022 December 31, 2021 Gross Derivative Assets Gross Derivative Liabilities Gross Derivative Assets Gross Derivative Liabilities Interest rate swaps $ 23,128 $ — $ 5,444 $ — Interest rate caps — ( 9,251 ) — ( 668 ) Home loan pipeline hedges 1,484 ( 80 ) 117 ( 313 ) Total, gross $ 24,612 $ ( 9,331 ) $ 5,561 $ ( 981 ) Derivative netting ( 80 ) 80 ( 117 ) 117 Total, net (1) $ 24,532 $ ( 9,251 ) $ 5,444 $ ( 864 ) _____________________ (1) We did not have a cash collateral requirement related to these instruments as of December 31, 2022. As of December 31, 2021, we had an immaterial cash collateral requirement. 178 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) The following table presents the notional amount of derivative contracts outstanding: December 31, 2022 2021 Derivative contracts to manage future loan sale execution risk: Interest rate swaps $ 5,638,177 $ 4,210,000 Interest rate caps 405,000 405,000 Home loan pipeline hedges 126,000 421,000 Interest rate caps (1) 405,000 405,000 Interest rate swaps (2) 171,823 — IRLCs (3) 82,335 357,529 Total $ 6,828,335 $ 5,798,529 _____________________ (1) We sold an interest rate cap that was subject to master netting to offset an interest rate cap purchase made in conjunction with a contract to manage future loan sale execution risk. (2) Represents interest rate swaps utilized to manage interest rate risk associated with certain of our securitization investments. (3) Amounts correspond with home loan funding commitments subject to IRLC agreements. While the notional amounts of derivative instruments give an indication of the volume of our derivative activity, they do not necessarily represent amounts exchanged by parties and are not a direct measure of our financial exposure. See Note 1 and 15 for additional information on our derivative assets and liabilities. 179 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Note 15. Fair Value Measurements Recurring Fair Value Measurements The following table summarizes, by level within the fair value hierarchy, the estimated fair values of our assets and liabilities measured at fair value on a recurring basis in the consolidated balance sheets: December 31, 2022 December 31, 2021 Fair Value Fair Value Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets Investments in AFS debt securities (1)(2) $ 137,032 $ 58,406 $ — $ 195,438 $ 129,835 $ 65,072 $ — $ 194,907 Asset-backed bonds (2)(3) — 155,093 — 155,093 — 253,669 — 253,669 Residual investments (2)(3) — — 46,238 46,238 — — 121,019 121,019 Loans at fair value — — 13,557,074 13,557,074 — — 5,952,972 5,952,972 Servicing rights — — 149,854 149,854 — — 168,259 168,259 Non-securitization investments – ETFs (4) — — — — 1,486 — — 1,486 Third party warrants (4)(5) — — 630 630 — — 1,369 1,369 Derivative assets (4)(6)(7) — 24,612 — 24,612 — 5,444 — 5,444 Purchase price earn-out (4)(8) — — 54 54 — — 4,272 4,272 IRLCs (4)(9) — — 216 216 — — 3,759 3,759 Student loan commitments (4)(9) — — — — — — 2,220 2,220 Interest rate caps (4)(7) — 9,178 — 9,178 — 493 — 493 Digital assets safeguarding asset (4)(10) — 106,826 — 106,826 — — — — Total assets $ 137,032 $ 354,115 $ 13,754,066 $ 14,245,213 $ 131,321 $ 324,678 $ 6,253,870 $ 6,709,869 Liabilities Debt (11) $ — $ 89,142 $ — $ 89,142 $ — $ — $ — $ — Residual interests classified as debt — — 17,048 17,048 — — 93,682 93,682 Derivative liabilities (4)(6)(7) — 9,331 — 9,331 196 668 — 864 Student loan commitments (4)(9) — — 236 236 — — — — Digital assets safeguarding liability (4)(10) — 106,826 — 106,826 — — — — Total liabilities $ — $ 205,299 $ 17,284 $ 222,583 $ 196 $ 668 $ 93,682 $ 94,546 _____________________ (1) The investments in AFS debt securities that were classified as Level 2 rely upon observable inputs other than quoted prices, dealer quotes in markets that are not active and implied pricing derived from new issuances of similar securities. See Note 6 for additional information. (2) These assets are presented within investment securities in the consolidated balance sheets. (3) These assets represent the carrying value of our holdings in VIEs wherein we were not deemed the primary beneficiary. See Note 6 for additional information. We classify asset-backed bonds as Level 2 due to the use of quoted prices for similar assets in markets that are not active, as well as certain factors specific to us. The key inputs used to value the asset-backed bonds include the discount rate and conditional prepayment rate. The fair value of our asset-backed bonds was not materially impacted by default assumptions on the underlying securitization loans, as the subordinate residual interests are expected to absorb all estimated losses based on our default assumptions for the period. We classify the residual investments as Level 3 due to the reliance on significant unobservable valuation inputs. (4) These assets and liabilities are presented within other assets and accounts payable, accruals and other liabilities , respectively, in the consolidated balance sheets. (5) The key unobservable assumption used in the fair value measurement of the third party warrants was the price of the stock underlying the warrants. The fair value was measured as the difference between the stock price and the strike price of the warrants. As the strike price was insignificant, we concluded that the impact of time value on the fair value measure was immaterial. (6) For certain derivative instruments for which an enforceable master netting agreement exists, we elected to net derivative assets and derivative liabilities by counterparty. These instruments are presented on a gross basis herein. See Note 1 and Note 14 for additional information. (7) Home loan pipeline hedges represent TBAs used as economic hedges of loan fair values and are classified as Level 2, as we rely on quoted market prices from similar loan pools that transact in the marketplace. Interest rate swaps and interest rate caps are classified as Level 2, because these financial instruments do not trade in active markets with observable prices, but rely on observable inputs other than quoted prices. As of December 31, 2022, interest rate swaps and interest rate caps were valued using the overnight SOFR curve and the implied volatilities suggested by the SOFR rate curve. As of December 31, 2021, interest rate swaps were valued using the three-month LIBOR swap yield curve. These were determined to be observable inputs from active markets. 180 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) (8) The purchase price earn-out provision is classified as Level 3 because of our reliance on unobservable inputs related to the underlying loan portfolio performance, such as conditional prepayment rates, annual default rates and discount rates. (9) IRLCs and student loan commitments are classified as Level 3 because of our reliance on assumed loan funding probabilities. The assumed probabilities are based on our internal historical experience with home loans and student loans similar to those in the funding pipelines on the measurement date. (10) The digital assets safeguarding liability and corresponding safeguarding asset are classified as Level 2, because they do not trade in active markets, and are valued using quoted prices on an active exchange that has been identified as the principal market for the underlying digital assets that are being held by our third-party custodians for the benefit of our members. (11) The fair value of our securitization debt was classified as Level 2 and valued using a discounted cash flow model, with key inputs relating to the underlying contractual coupons, terms, discount rate and expectations for defaults and prepayments. As of December 31, 2022, the unpaid principal related to debt measured at fair value was $ 98,868 . For the year ended December 31, 2022, losses from changes in fair value were $ 586 . The estimated amounts of gains (losses) included in earnings attributable to changes in instrument-specific credit risk, which were derived principally from observable changes in credit spread as observed in the bond market, were immaterial. Level 3 Recurring Fair Value Rollforward The following tables present the changes in our assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3). We did not have any transfers into or out of Level 3 during the years presented. Fair Value at Fair Value at January 1, 2022 Impact on Earnings Purchases Sales Issuances Settlements December 31, 2022 Assets Personal loans $ 2,289,426 $ 103,746 $ 1,677,682 $ ( 2,911,491 ) $ 9,773,705 $ ( 2,322,634 ) $ 8,610,434 Student loans 3,450,837 ( 24,166 ) 817,864 ( 877,920 ) 2,245,499 ( 734,937 ) 4,877,177 Home loans 212,709 ( 10,840 ) 2,901 ( 1,094,981 ) 966,177 ( 6,503 ) 69,463 Loans at fair value (1) 5,952,972 68,740 2,498,447 ( 4,884,392 ) 12,985,381 ( 3,064,074 ) 13,557,074 Servicing rights 168,259 39,651 3,712 ( 22,020 ) 45,126 ( 84,874 ) 149,854 Residual investments (2) 121,019 2,240 — ( 36,732 ) — ( 40,289 ) 46,238 Purchase price earn out 4,272 1,094 — — — ( 5,312 ) 54 IRLCs (3) 3,759 ( 2,630 ) — — — ( 913 ) 216 Third party warrants 1,369 ( 739 ) — — — — 630 Total assets $ 6,251,650 $ 108,356 $ 2,502,159 $ ( 4,943,144 ) $ 13,030,507 $ ( 3,195,462 ) $ 13,754,066 Liabilities Residual interests classified as debt (2) $ ( 93,682 ) $ ( 6,608 ) $ — $ — $ — $ 83,242 $ ( 17,048 ) Student loan commitments (3) 2,220 ( 1,876 ) — — — ( 580 ) ( 236 ) Total liabilities $ ( 91,462 ) $ ( 8,484 ) $ — $ — $ — $ 82,662 $ ( 17,284 ) Net impact on earnings $ 99,872 181 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Fair Value at Fair Value at January 1, 2021 Impact on Earnings Purchases Sales Issuances Settlements December 31, 2021 Assets Personal loans $ 1,812,920 $ 29,022 $ 405,051 $ ( 4,290,424 ) $ 5,386,934 $ ( 1,054,077 ) $ 2,289,426 Student loans 2,866,459 ( 6,231 ) 44,850 ( 2,854,778 ) 4,293,526 ( 892,989 ) 3,450,837 Home loans 179,689 ( 5,124 ) 1,144 ( 2,935,038 ) 2,978,222 ( 6,184 ) 212,709 Loans at fair value (1) 4,859,068 17,667 451,045 ( 10,080,240 ) 12,658,682 ( 1,953,250 ) 5,952,972 Servicing rights 149,597 ( 2,651 ) 370 ( 1,052 ) 111,582 ( 89,587 ) 168,259 Residual investments (2) 139,524 10,603 — ( 4,291 ) 49,317 ( 74,134 ) 121,019 IRLCs (3) 15,620 23,211 — — — ( 35,072 ) 3,759 Purchase price earn out — 2,147 — — 7,165 ( 5,040 ) 4,272 Student loan commitments (3) — 6,410 — — — ( 4,190 ) 2,220 Third party warrants — 573 — — 796 — 1,369 Total assets $ 5,163,809 $ 57,960 $ 451,415 $ ( 10,085,583 ) $ 12,827,542 $ ( 2,161,273 ) $ 6,253,870 Liabilities Residual interests classified as debt (2) $ ( 118,298 ) $ ( 22,802 ) $ — $ — $ ( 2,170 ) $ 49,588 $ ( 93,682 ) Total liabilities $ ( 118,298 ) $ ( 22,802 ) $ — $ — $ ( 2,170 ) $ 49,588 $ ( 93,682 ) Net impact on earnings $ 35,158 _____________________ (1) For loans at fair value, issuances represent the principal balance of loans originated during the year. Purchases reflect unpaid principal balance and relate to previously transferred loans or additions of loans to consolidated securitizations. Purchase activity during the years ended December 31, 2022 and 2021 included securitization clean-up calls of $ 518,659 and $ 425,302 , respectively. Additionally, during the years ended December 31, 2022 and 2021, we elected to purchase $ 1,843,575 and $ 17,596 , respectively, of previously sold loans from certain investors. We were not required to buy back these loans. The remaining purchases during the years presented related to standard representations and warranties pursuant to our various loan sale agreements. Gains and losses recognized in earnings include changes in accumulated interest and fair value adjustments on loans originated during the year and on loans held at the balance sheet date, as well as loan charge-offs. Changes in fair value are impacted by valuation assumption changes, as well as sales price execution and amount of time the loans are held prior to sale. The estimated amount of gains (losses) included in earnings attributable to changes in instrument-specific credit risk were $( 49,453 ), $ 4,143 and $ 13,896 during the years ended December 31, 2022, 2021 and 2020, respectively. The gains (losses) attributable to instrument-specific credit risk were estimated by incorporating our current default and loss severity assumptions for the loans. These assumptions are based on historical performance, market trends and performance expectations over the term of the underlying instrument. (2) For residual investments, sales include the derecognition of investments associated with securitization clean up calls. The estimated amounts of gains and losses for residual investments included in earnings attributable to changes in instrument-specific credit risk were immaterial during the years presented. For residual investments and residual interests classified as debt, we record changes in fair value within noninterest income—securitizations in the consolidated statements of operations and comprehensive income (loss), a portion of which is subsequently reclassified to interest expense—securitizations and warehouses for residual interests classified as debt and to interest income—securitizations for residual investments, but does not impact the liability or asset balance, respectively. (3) For IRLCs and student loan commitments, settlements reflect funded and unfunded adjustments representing the unpaid principal balance of funded and unfunded loans during the quarter multiplied by the IRLC or student loan commitment price in effect at the beginning of the quarter. For the year-to-date periods, amounts represent the summation of the per-quarter effects. Changes in fair value are recorded within noninterest income—loan origination and sales in the consolidated statements of operations and comprehensive income (loss). 182 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Level 3 Significant Inputs Loans The following key unobservable assumptions were used in the fair value measurement of our loans: December 31, 2022 December 31, 2021 Range Weighted Average Range Weighted Average Personal loans Conditional prepayment rate 17.3 % – 25.5 % 19.1 % 18.4 % –  37.7 % 20.5 % Annual default rate 3.8 % – 37.7 % 4.4 % 4.2 % –  30.0 % 4.4 % Discount rate 5.4 % – 8.3 % 6.1 % 3.9 % –  7.0 % 4.0 % Student loans Conditional prepayment rate 16.3 % – 21.8 % 20.4 % 16.5 % –  26.3 % 19.2 % Annual default rate 0.2 % – 4.5 % 0.5 % 0.2 % –  4.2 % 0.4 % Discount rate 3.6 % – 8.7 % 4.0 % 1.9 % –  7.1 % 2.9 % Home loans Conditional prepayment rate 2.0 % – 10.2 % 7.0 % 4.8 % –  16.4 % 12.4 % Annual default rate 0.1 % – 1.3 % 0.1 % 0.1 % –  0.2 % 0.1 % Discount rate 5.7 % – 14.1 % 5.9 % 2.5 % –  13.0 % 2.6 % The key assumptions are defined as follows: • Conditional prepayment rate  — The monthly annualized proportion of the principal of a pool of loans that is assumed to be paid off prematurely in each period. An increase in the conditional prepayment rate, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. • Annual default rate  — The annualized rate of borrowers who do not make loan payments on time. An increase in the annual default rate, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. • Discount rate  — The weighted average rate at which the expected cash flows are discounted to arrive at the net present value of the loans. The discount rate is primarily determined based on the federal funds rate, our weighted average coupon rate and expected duration of the assets, the last of which is also impacted by expected prepayment rates. An increase in the discount rate, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. See Note 4 for additional loan fair value disclosures. Servicing Rights Servicing rights for personal loans and student loans do not trade in an active market with readily observable prices. Similarly, home loan servicing rights infrequently trade in an active market. At the time of the underlying loan sale or the assumption of servicing rights, the fair value of servicing rights is determined using a discounted cash flow methodology based on observable and unobservable inputs. Management classifies servicing rights as Level 3 due to the use of significant unobservable inputs in the fair value measurement. 183 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) The following key unobservable inputs were used in the fair value measurement of our classes of servicing rights: December 31, 2022 December 31, 2021 Range Weighted Average Range Weighted Average Personal loans Market servicing costs 0.2 % – 0.5 % 0.3 % 0.2 % –  1.1 % 0.2 % Conditional prepayment rate 17.9 % – 31.3 % 22.7 % 22.5 % –  41.4 % 26.0 % Annual default rate 3.4 % – 7.9 % 4.9 % 3.2 % –  7.0 % 4.4 % Discount rate 7.8 % –  7.8 % 7.8 % 7.3 % –  7.3 % 7.3 % Student loans Market servicing costs 0.1 % – 0.2 % 0.1 % 0.1 % –  0.2 % 0.1 % Conditional prepayment rate 15.4 % – 21.9 % 17.8 % 15.2 %  –  25.6 % 20.4 % Annual default rate 0.3 % – 4.3 % 0.4 % 0.2 % –  4.3 % 0.4 % Discount rate 7.8 % – 7.8 % 7.8 % 7.3 % –  7.3 % 7.3 % Home loans Market servicing costs 0.1 % –  0.1 % 0.1 % 0.1 % –  0.1 % 0.1 % Conditional prepayment rate 4.9 % – 11.0 % 5.2 % 10.0 % –  16.4 % 11.5 % Annual default rate 0.1 % – 0.1 % 0.1 % 0.1 % –  0.2 % 0.1 % Discount rate 9.0 % – 9.0 % 9.0 % 7.5 % –  7.5 % 7.5 % The key assumptions are defined as follows: • Market servicing costs  — The fee a willing market participant, which we validate through actual third-party bids for our servicing, would require for the servicing of personal loans, student loans and home loans with similar characteristics as those in our serviced portfolio. An increase in the market servicing cost, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. • Conditional prepayment rate  — The monthly annualized proportion of the principal of a pool of loans that is assumed to be paid off prematurely in each period. An increase in the conditional prepayment rate, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. • Annual default rate  — The annualized rate of default within the total serviced loan balance. An increase in the annual default rate, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. • Discount rate  — The weighted average rate at which the expected cash flows are discounted to arrive at the net present value of the servicing rights. An increase in the discount rate, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. 184 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) The following table presents the estimated decrease to the fair value of our servicing rights if the key assumptions had each of the below adverse changes: December 31, 2022 2021 Market servicing costs 2.5 basis points increase $ ( 10,395 ) $ ( 10,822 ) 5.0 basis points increase ( 20,807 ) ( 21,644 ) Conditional prepayment rate 10% increase $ ( 4,036 ) $ ( 6,260 ) 20% increase ( 7,833 ) ( 12,031 ) Annual default rate 10% increase $ ( 166 ) $ ( 205 ) 20% increase ( 331 ) ( 408 ) Discount rate 100 basis points increase $ ( 3,905 ) $ ( 3,782 ) 200 basis points increase ( 7,562 ) ( 7,349 ) The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. The effect on fair value of a variation in assumptions generally cannot be determined because the relationship of the change in assumptions to the fair value may not be linear. Additionally, the effect of an adverse variation in a particular assumption on the fair value of our servicing rights is calculated while holding the other assumptions constant. In reality, changes in one factor may lead to changes in other factors, which could impact the above hypothetical effects. Residual Investments and Residual Interests Classified as Debt Residual investments and residual interests classified as debt do not trade in active markets with readily observable prices, and there is limited observable market data for reference. The fair values of residual investments and residual interests classified as debt are determined using a discounted cash flow methodology. Management classifies residual investments and residual interests classified as debt as Level 3 due to the use of significant unobservable inputs in the fair value measurements. The following key unobservable inputs were used in the fair value measurements of our residual investments and residual interests classified as debt: December 31, 2022 December 31, 2021 Range Weighted Average Range Weighted Average Residual investments Conditional prepayment rate 17.9 % – 32.0 % 19.9 % 19.5 %  – 33.6 % 23.0 % Annual default rate 0.4 % – 5.4 % 1.1 % 0.3 % –  5.7 % 0.9 % Discount rate 4.8 % – 10.5 % 6.7 % 2.6 % –  10.5 % 4.4 % Residual interests classified as debt Conditional prepayment rate 17.2 % – 18.1 % 17.8 % 20.0 % –  41.8 % 31.5 % Annual default rate 0.6 % – 0.8 % 0.7 % 0.5 % –  5.6 % 3.2 % Discount rate 7.5 % – 7.5 % 7.5 % 5.0 % –  9.5 % 5.7 % The key assumptions are defined as follows: • Conditional prepayment rate  — The monthly annualized proportion of the principal of a pool of loans that is assumed to be paid off prematurely in each period for the pool of loans in the securitization. An increase in the conditional prepayment rate, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. 185 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) • Annual default rate  — The annualized rate of borrowers who fail to remain current on their loans for the pool of loans in the securitization. An increase in the annual default rate, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. • Discount rate  — The weighted average rate at which the expected cash flows are discounted to arrive at the net present value of the residual investments and residual interests classified as debt. An increase in the discount rate, in isolation, would result in a decrease in a fair value measurement. The weighted average assumption was weighted based on relative fair value. Loan Commitments We classify student loan commitments as Level 3 because the assets do not trade in an active market with readily observable prices and, as such, our valuations utilize significant unobservable inputs. Additionally, we classify IRLCs as Level 3, as our IRLCs are inherently uncertain and unobservable given that a home loan origination is contingent on a plethora of factors. The following key unobservable inputs were used in the fair value measurements of our IRLCs and student loan commitments: December 31, 2022 December 31, 2021 Range Weighted Average Range Weighted Average IRLCs Loan funding probability (1) 11.1 % – 58.6 % 46.3 % 75.0 % – 75.0 % 75.0 % Student loan commitments Loan funding probability (1) 95.0 % – 95.0 % 95.0 % 95.0 % - 95.0 % 95.0 % _____________________ (1) The aggregate amount of student loans we committed to fund was $ 69,712 as of December 31, 2022. See Note 14 for the aggregate notional amount associated with IRLCs. The key assumption is defined as follows: • Loan funding probability  — Our expectation of the percentage of IRLCs or student loan commitments which will become funded loans. A significant difference between the actual funded rate and the assumed funded rate at the measurement date could result in a significantly higher or lower fair value measurement of our IRLCs and student loan commitments. An increase in the loan funding probabilities, in isolation, would result in an increase in a fair value measurement. The weighted average assumptions were weighted based on relative fair values. Safeguarding Assets and Liabilities The following table presents the significant digital assets held by our third-party custodians on behalf of our members: December 31, 2022 Bitcoin (BTC) $ 44,346 Ethereum (ETH) 37,826 Cardano (ADA) 5,217 Dogecoin (DOGE) 4,784 Litecoin (LTC) 2,492 Ethereum Classic (ETC) 2,333 All other (1) 9,828 Digital assets safeguarding liability and corresponding safeguarding asset $ 106,826 ___________________ (1) Includes 24 digital assets, none of which were determined to be individually significant. 186 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Financial Instruments Not Measured at Fair Value The following table summarizes the carrying values and estimated fair values, by level within the fair value hierarchy, of our assets and liabilities that are not measured at fair value on a recurring basis in the consolidated balance sheets: Fair Value Carrying Value Level 1 Level 2 Level 3 Total December 31, 2022 Assets Cash and cash equivalents (1) $ 1,421,907 $ 1,421,907 $ — $ — $ 1,421,907 Restricted cash and restricted cash equivalents (1) 424,395 424,395 — — 424,395 Loans at amortized cost (2) 307,957 — — 328,775 328,775 Other investments (3) 28,651 — 28,651 — 28,651 Total assets $ 2,182,910 $ 1,846,302 $ 28,651 $ 328,775 $ 2,203,728 Liabilities Deposits (4) $ 7,342,296 $ — $ 7,340,160 $ — $ 7,340,160 Debt (5) 5,396,740 826,242 4,219,574 — 5,045,816 Total liabilities $ 12,739,036 $ 826,242 $ 11,559,734 $ — $ 12,385,976 December 31, 2021 Assets Cash and cash equivalents (1) $ 494,711 $ 494,711 $ — $ — $ 494,711 Restricted cash and restricted cash equivalents (1) 273,726 273,726 — — 273,726 Loans at amortized cost (2) 115,912 — — 118,412 118,412 Total assets $ 884,349 $ 768,437 $ — $ 118,412 $ 886,849 Liabilities Debt (5) $ 3,947,983 $ 1,240,560 $ 2,807,253 $ — $ 4,047,813 Total liabilities $ 3,947,983 $ 1,240,560 $ 2,807,253 $ — $ 4,047,813 _____________________ (1) The carrying amounts of our cash and cash equivalents and restricted cash and restricted cash equivalents approximate their fair values due to the short-term maturities and highly liquid nature of these accounts. (2) The fair value of our credit cards was determined using a discounted cash flow model with key inputs relating to weighted average lives, expected lifetime loss rates and discount rate. The fair value of our commercial and consumer banking loans was determined using a discounted cash flow model with key inputs relating to the underlying contractual coupons, terms, discount rate and expectations for defaults. (3) Other investments include FRB and FHLB stock, which are presented within other assets in the consolidated balance sheets. (4) The fair values of our deposits without contractually defined maturities (such as demand and savings deposits) and our noninterest-bearing deposits approximate the carrying values. The fair value of our time-based deposits was determined using a discounted cash flow model based on rates currently offered for deposits of similar remaining maturities. (5) The carrying value of our debt is net of unamortized discounts and debt issuance costs. The fair value of our Convertible Notes was classified as Level 1, as it was based on an observable market quote. The fair values of our warehouse facility debt and revolving credit facility debt were classified as Level 2 and based on market factors and credit factors specific to these financial instruments. The fair value of our securitization debt was classified as Level 2 and valued using a discounted cash flow model, with key inputs relating to the underlying contractual coupons, terms, discount rate and expectations for defaults and prepayments. Nonrecurring Fair Value Measurements Investments in equity securities of $ 22,825 and $ 6,054 as of December 31, 2022 and 2021, respectively, which are presented within other assets in the consolidated balance sheets, include investments for which fair values are not readily determinable, which we elect to measure using the measurement alternative method of accounting. The fair value measurements are classified within Level 3 of the fair value hierarchy due to the uses of unobservable inputs in the fair value measurements. As of December 31, 2022, the balance was primarily composed of a $ 19,739 investment valued under the measurement alternative method during 2022 that was a former equity method investment. 187 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Note 16. Share-Based Compensation 2011 Stock Option Plan Prior to the Business Combination, the Company’s Amended and Restated 2011 Stock Option Plan (the “2011 Plan”) allowed the Company to grant shares of common stock to employees, non-employee directors and non-employee third parties. As of December 31, 2022, outstanding awards to non-employee third parties under the 2011 Plan were not material. The Company also had shares authorized under a stock plan assumed in a 2020 business combination, which were assumed by the 2011 Plan. Upon the Closing, the remaining unallocated share reserve under the 2011 Plan was cancelled and no new awards may be granted under such plan. Awards outstanding under the 2011 Plan were assumed by SoFi Technologies upon the Closing and continue to be governed by the terms of the 2011 Plan. 2021 Stock Option and Incentive Plan In connection with the Closing of the Business Combination, the Company adopted the 2021 Stock Option and Incentive Plan (the “2021 Plan”), which authorized for issuance 63,575,425 shares of common stock in connection with the Business Combination. Under the 2021 Plan, effective January 1, 2022, our Board of Directors authorized the issuance of an additional 8,937,242 shares. In the third quarter of 2022, the Company’s stockholders approved the amendment and restatement of the 2021 Stock Option and Incentive Plan (the “Amended and Restated 2021 Plan”), including a modification to the evergreen provision and an increase in the number of shares of common stock available for issuance under the plan. As of December 31, 2022, the Amended and Restated 2021 Plan includes an aggregate of 104,983,148 shares of common stock authorized for issuance of awards. The Amended and Restated 2021 Plan allows for the number of authorized shares to increase on the first day of each fiscal year beginning on January 1, 2023 and ending on and including January 1, 2030 equal to the lesser of (a) five percent of the aggregate number of shares of common stock outstanding on the final day of the immediately preceding calendar year, and (b) such smaller number of shares of common stock as determined by the Board of Directors. The Amended and Restated 2021 Plan allows for the issuance of stock options, stock appreciation rights, restricted stock, restricted stock units (including performance stock units), dividend equivalents and other stock or cash based awards for issuance to its employees, non-employee directors and non-employee third parties. Shares associated with option exercises and RSU vesting are issued from the authorized pool. Share-based compensation expense related to stock options, RSUs and PSUs is presented within the following line items in the consolidated statements of operations and comprehensive income (loss): Year Ended December 31, 2022 2021 2020 Technology and product development $ 77,674 $ 61,431 $ 28,271 Sales and marketing 24,176 16,140 8,045 Cost of operations 17,837 11,743 6,067 General and administrative 186,307 149,697 57,487 Total $ 305,994 $ 239,011 $ 99,870 Common Stock Valuations Subsequent to the Business Combination, we determine the value of our common stock based on the observable daily closing price of SoFi’s stock (ticker symbol “SOFI”). Stock Options The terms of the stock option grants, including the exercise price per share and vesting periods, are determined by our Board of Directors . At the discretion and determination of our Board of Directors , the 2021 Amended and Restated Plan allows for stock options to be granted that may be exercised before the stock options have vested. The 2011 Plan, which continues to govern awards outstanding under that plan that were assumed by SoFi Technologies upon the Closing, had a similar provision. 188 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Stock options were typically granted at exercise prices equal to the fair value of our common stock at the date of grant. Our stock options typically vest at a rate of 25 % after one year from the vesting commencement date and then monthly over an additional three-year period. While the vesting schedule noted is typical, stock options have been issued under other vesting schedules. Our stock options typically expire ten years from the grant date or within 90 days of employee termination. The following is a summary of stock option activity: Number of Stock Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Outstanding as of January 1, 2022 21,171,147 $ 6.81 5.8 Granted — n/a n/a Exercised ( 1,955,031 ) 1.34 n/a Forfeited ( 1,126 ) 6.84 n/a Expired ( 465,311 ) 4.93 n/a Outstanding as of December 31, 2022 18,749,679 $ 7.43 4.7 Exercisable as of December 31, 2022 18,686,243 $ 7.43 4.6 The aggregate intrinsic value of stock options exercised during the years ended December 31, 2022, 2021 and 2020 was $ 15.0 million, $ 131.2 million and $ 13.6 million, respectively. As of December 31, 2022, the aggregate intrinsic value of stock options outstanding and stock options exercisable was $ 4.9 million and $ 4.9 million, respectively. Total compensation cost related to unvested stock options not yet recognized as of December 31, 2022 was $ 0.9 million, and will be recognized over a weighted average period of approximately 0.3 years. The Black-Scholes Model, which was used to value the stock options granted during the year ended December 31, 2020, required the use of subjective assumptions, including the risk-free interest rate, expected term, expected stock price volatility and dividend yield. The following table summarizes the inputs used for estimating the fair value of stock options granted during the year ended December 31, 2020. The inputs disclosed below exclude those associated with certain replacement options granted in connection with our acquisition of Galileo in 2020. The weighted average grant date fair value of stock options granted during the year ended December 31, 2020 was $ 2.44 . Year Ended December 31, 2020 Input Risk-free interest rate 0.3 % – 1.4 % Expected term (years) (1) 5.5 – 6.0 Expected volatility (2) 36.5 % – 42.5 % Fair value of common stock $ 6.43 – $ 6.95 Dividend yield — % _____________________ (1) The expected term represented the period of time the stock options were expected to be outstanding and was based on the simplified method. Under the simplified method, the expected term of a stock option was presumed to be the midpoint between the vesting date and the end of the contractual term. Management used the simplified method due to the lack of sufficient historical exercise data to provide a reasonable basis upon which to otherwise estimate the expected term of the stock options. (2) Expected volatility was based on historical volatility for publicly-traded stock of comparable companies over the estimated expected life of the stock options. In identifying comparable companies, we considered factors such as industry, stage of life cycle and size. During the year ended December 31, 2020, certain employees were given the option to exchange stock options for RSUs. There were 296 employees who participated in this offer. We concluded that the facts and circumstances aligned with a probable-to-probable modification (Type I) for the modified stock options, and did not recognize any incremental share-based compensation expense because the fair value of the replacement award was less than the fair value of the replaced award at the time of the modification. 189 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Restricted Stock Units RSUs are equity awards granted to employees that entitle the holder to shares of our common stock when the awards vest. For employees hired during 2022, new hire RSU grants typically vest 12.5 % on the first vesting date, which occurs approximately six months after the date of grant, and ratably each quarter of the ensuing 14 -quarter period. For employees hired before January 1, 2022, new hire RSU grants typically vest 25 % on the first vesting date, which occurs approximately one year after the date of grant, and ratably each quarter of the ensuing 12 -quarter period. RSUs have been issued under other vesting schedules, including grants to existing employees. RSUs are measured based on the fair value of our common stock on the date of grant. The following table summarizes RSU activity: Number of RSUs Weighted Average Grant Date Fair Value Outstanding as of January 1, 2022 48,687,524 $ 12.23 Granted 54,816,762 7.32 Replacement Awards (1) 630,654 10.69 Vested (2) ( 23,183,000 ) 10.78 Forfeited ( 11,413,801 ) 11.23 Outstanding as of December 31, 2022 (3) 69,538,139 $ 9.07 _____________________ (1) In connection with the Technisys Merger, we converted outstanding Technisys performance awards into RSUs to acquire common stock of SoFi, and for which $ 2,855 of the fair value was attributed to pre-combination services. See Note 2 for additional information. (2) The total fair value, based on grant date fair value, of RSUs that vested during the years ended December 31, 2022, 2021 and 2020 was $ 249.9 million, $ 139.6 million, and $ 76.3 million, respectively. (3) Includes 178,021 RSUs that were granted in 2020 and later modified in an improbable-to-probable modification (Type III), related to which $ 1,695 of share-based compensation expense was recorded during the year ended December 31, 2022. The awards were fully expensed through the second quarter of 2022. The weighted average grant date fair value of RSUs issued during the years ended December 31, 2021 and 2020 was $ 16.92 and $ 7.79 , respectively. As of December 31, 2022, there was $ 580.2 million of unrecognized compensation cost related to unvested RSUs, which will be recognized over a weighted average period of approximately 2.8 years. Performance Stock Units PSUs are equity awards granted to employees that, upon vesting, entitle the holder to shares of our common stock. During 2021, we granted PSUs that will vest, if at all, on a graded basis during the four-year period commencing on May 28, 2022, subject to the achievement of specified performance goals, such as the volume-weighted average closing price of our stock over a 90 -trading day period (“Target Hurdles”) and, now that we are a bank holding company, maintaining certain minimum standards applicable to bank holding companies. All PSUs are subject to continued employment on the date of vesting. In the event of a Sale Event (as defined in the 2021 Amended and Restated Plan), the awards may automatically vest subject to the satisfaction of the Target Hurdles by reference to the sale price, without regard to any other vesting conditions. The following table summarizes PSU activity: Number of PSUs Weighted Average Grant Date Fair Value Outstanding as of January 1, 2022 22,970,396 $ 9.52 Granted 122,190 3.71 Vested — n/a Forfeited ( 3,528,839 ) 7.53 Outstanding as of December 31, 2022 19,563,747 $ 9.84 190 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Compensation cost associated with PSUs is recognized using the accelerated attribution method for each of the three vesting tranches over the respective derived service period. We determined the grant-date fair value of PSUs utilizing a Monte Carlo simulation model. The following table summarizes the inputs used for estimating the fair value of PSUs granted: Input Year Ended December 31, 2022 Year Ended December 31, 2021 Risk-free interest rate 1.6 % 0.8 % – 0.8 % Expected volatility 37.7 % 34.9 % – 35.9 % Fair value of common stock $ 12.06 $ 16.99 – $ 23.21 Dividend yield — % — % Our use of a Monte Carlo simulation model requires the use of subjective assumptions: • Risk-free interest rate — Based on the U.S. Treasury rate at the time of grant commensurate with the remaining term of the PSUs. • Expected volatility — Based on the implied volatility of our common stock from a set of comparable publicly-traded companies. • Fair value of common stock — Based on the closing stock price on the date of grant. • Dividend yield — We assumed no dividend yield because we have historically not paid out dividends to common stockholders. The weighted average grant date fair value of PSUs issued during the year ended December 31, 2021 was $ 9.50 . As of December 31, 2022, there was $ 52.1 million of unrecognized compensation cost related to unvested PSUs, which will be recognized over a weighted average period of approximately 1.6 years. Note 17. Income Taxes Loss before income taxes consisted of the following: Year Ended December 31, 2022 2021 2020 Domestic $ ( 299,751 ) $ ( 461,023 ) $ ( 316,252 ) Foreign ( 18,970 ) ( 20,154 ) ( 12,269 ) Loss before income taxes $ ( 318,721 ) $ ( 481,177 ) $ ( 328,521 ) 191 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Income tax expense (benefit) consisted of the following: Year Ended December 31, 2022 2021 2020 Current tax expense: U.S. state and local $ 4,275 $ 1,481 $ 23 Foreign 909 75 13 Total current tax expense 5,184 1,556 36 Deferred tax expense (benefit): U.S. federal — — ( 70,692 ) U.S. state and local 543 1,222 ( 33,823 ) Foreign ( 4,041 ) ( 18 ) 11 Total deferred tax expense (benefit) ( 3,498 ) 1,204 ( 104,504 ) Income tax expense (benefit) $ 1,686 $ 2,760 $ ( 104,468 ) Our income tax expense position in 2022 was primarily attributable to tax expense at SoFi Lending Corp. and SoFi Bank due to profitability in state jurisdictions where separate filings are required and recognition of expense from Technisys in certain Latin American countries where separate returns are filed. The expense was partially offset by deferred tax benefits from the amortization of intangible assets acquired in the Technisys Merger. See Note 2 and Note 8 for additional information. The significant change in our income tax positions for the years ended December 31, 2022 and 2021 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. The table below presents a reconciliation of the expected income tax benefit at the statutory federal income tax rate to the income tax expense (benefit) at the effective income tax rate: Year Ended December 31, 2022 2021 2020 Expected income tax benefit at federal statutory rate $ ( 66,944 ) $ ( 101,047 ) $ ( 68,921 ) Valuation allowance for deferred tax assets 27,101 92,197 ( 9,445 ) Non-deductible compensation expense (1) 23,100 23,838 — Share-based compensation 19,811 ( 33,950 ) ( 939 ) State and local income taxes, net of federal benefit 4,591 2,096 ( 26,681 ) Research and development tax credits ( 12,496 ) ( 7,067 ) ( 6,883 ) Change in fair value of warrants — 22,539 4,310 Other 6,523 4,154 4,091 Income tax expense (benefit) $ 1,686 $ 2,760 $ ( 104,468 ) Effective tax rate ( 0.53 ) % ( 0.57 ) % 31.80 % _________________ (1) Reflects the impact of applying Section 162(m), which prohibits deduction of certain excess employee compensation to certain “covered employees”. 192 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) The table below presents a reconciliation of unrecognized tax benefits: Year Ended December 31, 2022 2021 2020 Unrecognized tax benefits at beginning of year $ 6,972 $ 5,117 $ 4,307 Gross increases – tax positions in prior period (1) 10,944 582 55 Gross decreases – tax positions in prior period ( 98 ) — ( 331 ) Gross increases – tax positions in current period 6,236 1,273 1,086 Lapse of statute of limitations ( 324 ) — — Unrecognized tax benefits at end of year $ 23,730 $ 6,972 $ 5,117 _________________ (1) Increases to our unrecognized tax benefits were primarily related to the recognition of historical tax reserves that existed at the time of the Technisys Merger and were primarily recorded through goodwill. See Note 2 for additional information. As of December 31, 2022, unrecognized tax benefits of $ 6,812 , if recognized, would affect our effective tax rate in a future period. As of December 31, 2021 and 2020, none of the unrecognized tax benefits, if recognized, would affect our effective tax rate in a future period, as the tax benefit would increase a deferred tax asset, which is offset with a full valuation allowance. We expect to continue to accrue unrecognized tax benefits for certain recurring tax positions; however, we do not expect any other significant increases or decreases to unrecognized tax benefits within the next twelve months. Interest and penalties recorded during the year ended December 31, 2022 were immaterial . No interest and penalties were recorded during the years ended December 31, 2021 and 2020. The table below presents the significant components of the Company’s net deferred tax liabilities: December 31, 2022 2021 Deferred tax assets: Net operating loss carryforwards $ 287,473 $ 336,444 Operating lease liabilities 24,009 29,206 Share-based compensation 27,571 19,473 Research and development credits 56,811 35,416 Accruals and other 32,130 18,610 Gross deferred tax assets 427,994 439,149 Valuation allowance ( 318,410 ) ( 266,448 ) Total deferred tax assets $ 109,584 $ 172,701 Deferred tax liabilities: Amortization $ ( 101,971 ) $ ( 86,081 ) Operating lease ROU assets ( 20,597 ) ( 25,546 ) Servicing rights ( 41,168 ) ( 47,585 ) Other ( 2,330 ) ( 15,276 ) Total deferred tax liabilities ( 166,066 ) ( 174,488 ) Deferred tax liabilities, net (1) $ ( 56,482 ) $ ( 1,787 ) _____________________ (1) Increases to net deferred tax liabilities as of December 31, 2022 primarily relate to the Technisys Merger. See Note 2 for additional information. 193 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) The table below details the activity of the deferred tax asset valuation allowance: Balance at Beginning of Period Additions Deductions Balance at End of Period Charged to Costs and Expenses Charged to Other Accounts Year Ended December 31, 2020 Deferred tax asset valuation allowance (1) $ 148,426 $ 87,552 $ 4,916 $ ( 99,793 ) $ 141,101 Year Ended December 31, 2021 Deferred tax asset valuation allowance 141,101 125,347 — — 266,448 Year Ended December 31, 2022 Deferred tax asset valuation allowance 266,448 37,536 14,426 — 318,410 _____________________ (1) Deductions for the year ended December 31, 2020 were related to the release of our valuation allowance in connection with deferred tax liabilities resulting from intangible assets acquired from Galileo in May 2020. Galileo deferred tax liabilities provided for additional sources of income to support the realization of pre-combination deferred tax assets. During the years ended December 31, 2022, 2021, and 2020, we maintained a full valuation allowance against our net deferred tax assets, in applicable jurisdictions, increasing our valuation allowance by $ 37,536 , $ 125,347 and $ 87,552 , respectively. In certain foreign and state jurisdictions where sufficient deferred tax liabilities exist, no valuation allowance is recognized. We will continue to recognize a full valuation allowance until there is sufficient positive evidence to support its release. The table below provides information about our net operating loss carryforwards by jurisdiction: December 31, 2022 Expiration U.S. federal (1) $ 35,389 2036 – 2037 909,347 Indefinite U.S. state (2) 920,011 2022 – 2042 176,023 Indefinite Foreign 27,157 2022 – 2042 76,637 Indefinite _____________________ (1) Federal net operating loss carryforwards generated in periods after December 31, 2017 are subject to an 80% limitation when used in future tax periods as a result of the Tax Cuts and Jobs Act (“TCJA”) passed in 2017. The CARES Act provided for the temporary elimination of the 80% limitation for any net operating loss utilization prior to January 1, 2021. (2) State conformity to either TCJA or the CARES Act, which was signed into law in March 2020, is established by each state’s local statutes and conformity to one act does not require conformity to both acts. Federal and state research and development tax credits of $ 69,606 as of December 31, 2022 will expire at various dates beginning in 2031, if not utilized,. The Company files a federal income tax return in the United States and also files in various state and foreign jurisdictions. The following are the major tax jurisdictions in which the Company operates and the earliest tax year subject to examination: Jurisdiction Tax year United States 2011 California 2012 New York State and City 2016 Argentina 2017 A portion of our foreign operations benefit from tax holidays in two jurisdictions. However, due to loss carryforwards, tax holidays do not result in cash tax benefits for any period presented. First, we qualify for a tax holiday in Argentina by 194 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) fulfilling certain requirements of the “Regime for the Promotion of the Knowledge Economy (Law 27,506)”. The regime is in effect from January 1, 2020, through December 31, 2029. An annual application process is required for approval and to continue to qualify for the holiday. The regime reduces the statutory federal income tax rate from 35% to 24%. Second, we are operating under a 100% tax holiday in Uruguay due to our software-related services. There is no current expiration date for this holiday. Note 18. Commitments, Guarantees, Concentrations and Contingencies Commitments In September 2019, we entered into a 20 -year partnership with LA Stadium and Entertainment District at Hollywood Park in Inglewood, California that granted us the exclusive naming rights to SoFi Stadium and official partnerships with the Los Angeles Chargers and Los Angeles Rams, as well as rights with the performance venue and surrounding entertainment district (“Naming and Sponsorship Agreement”). During the third quarter of 2022, the parties signed an amended agreement whereby a previous contingency was resolved, and additional contracted payments were added. Contractual payments under the amended Naming and Sponsorship Agreement total $ 616.5 million, which began in 2020 and end in 2040 and include operating lease obligations, finance lease obligations and sponsorship and advertising opportunities at the complex. In addition, we also entered into a three-year marketing arrangement during 2022, with a total commitment of $ 5.0 million expected to be incurred throughout the term. In October 2021, we entered into a four-year arrangement for cloud computing services with a total commitment of $ 80.0 million to be incurred through the term. During the years ended December 31, 2022 and 2021, we incurred costs associated with this arrangement of $ 20.5 million and $ 3.6 million, respectively, which are recorded within noninterest expense—technology and product development in the consolidated statements of operations and comprehensive income (loss). We made payments related to these commitments totaling $ 50,829 , $ 22,017 and $ 6,533 during the years ended December 31, 2022, 2021 and 2020, respectively. Amounts payable in future periods are as follows: December 31, 2022 2023 $ 48,523 2024 45,257 2025 45,831 2026 30,751 2027 30,875 Thereafter 420,835 Total $ 622,072 We also have commitments to fund home loans and student loans that are only cancellable at the option of the borrower. The commitments are measured at fair value on a recurring basis. See Note 15 for additional information. For information on our leases, see Note 9. Concentrations Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents, restricted cash and restricted cash equivalents, residual investments and loans. We hold cash and cash equivalents and restricted cash and restricted cash equivalents in accounts at regulated domestic financial institutions in amounts that may exceed FDIC insured amounts. We believe these institutions are of high credit quality. We are dependent on third-party funding sources to originate loans, as well as our deposit balances. Additionally, we sell loans to various third parties. We have historically sold loans to a limited pool of third-party buyers. No individual third-party buyer accounted for 10% or more of consolidated total net revenues for any of the years presented. 195 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Within our Technology Platform segment, we have a relatively smaller number of clients compared to our lending business. As such, the loss of one or a few of our top clients could be significant to that portion of our business. No individual client accounted for 10% or more of consolidated total net revenues for any of the years presented. The Company is exposed to default risk on borrower loans originated and financed by us. There is no single borrower or group of borrowers that comprise a significant concentration of the Company’s loan portfolio. Likewise, the Company is not overly concentrated within a group of channel partners or other customers, with the exception of our distribution of personal loan residual interests in our sponsored personal loan securitizations, which we market to third parties, and the aforementioned whole loan buyers. Given we have a limited number of prospective buyers for our personal loan securitization residual interests, this might result in us utilizing a significant amount of deposits or our own capital to fund future residual interests in personal loan securitizations, or impact the execution of future securitizations if we are limited in our own ability to invest in the residual interest portion of future securitizations, or find willing buyers for securitization residual interests. Contingencies Legal Proceedings In limited instances, the Company may be subject to a variety of claims and lawsuits in the ordinary course of business. Regardless of the final outcome, defending lawsuits, claims, government investigations, and proceedings in which we are involved is costly and can impose a significant burden on management and employees, and there can be no assurances that we will receive favorable final outcomes. Juarez et al v. SoFi Lending Corp. SoFi Lending Corp. and SoFi (collectively, the “SoFi Defendants”) are defendants in a putative class action, captioned as Juarez v. Social Finance, Inc. et al., Civil Action No. 4:20-cv-03386-HSG (N.D. Cal.), filed against them in the United States District Court for the Northern District of California in May 2020. Plaintiffs, who are conditional permanent residents or Deferred Access for Childhood Arrival (“DACA”) holders, allege that the SoFi Defendants engaged in unlawful lending discrimination in violation of 42 U.S.C. § 1981 and California Civil Code, § 51, et seq., through policies and practices by making such categories of applicants ineligible for loans or eligible only with a co-signer who is a United States citizen or lawful permanent resident. Plaintiffs further allege that the SoFi Defendants violated the Fair Credit Reporting Act, by accessing the credit reports of non-United States citizen loan applicants who hold green cards with a validity period of less than two years without a permissible purpose. As relief, Plaintiffs seek, on behalf of themselves and a purported class of similarly-situated non-United States citizen loan applicants, a declaratory judgment that the challenged policies and practices violate federal and state law, an injunction against future violations, actual and statutory damages, exemplary and punitive damages, and attorneys’ fees. The parties entered into a settlement agreement that was fully executed in April 2022 and the plaintiffs have now moved for and obtained preliminary approval of the settlement from the court. The class settlement, which contemplates an aggregate payment by SoFi of an immaterial amount, remains subject to final court review and approval, which we expect to occur in 2023. Guarantees We have three types of repurchase obligations that we account for as financial guarantees. First, we issue financial guarantees to GSEs on loans that we sell to GSEs, which manifest as repurchase requirements if it is later discovered that loans sold to a GSE do not meet their guidelines. We have a three-year repurchase obligation from the time of origination to buy back originated loans that do not meet GSE guidelines, and we are required to pay the full initial purchase price back to the GSE. We recognize a liability for the full amount of expected loan repurchases, which we estimate based on historical repurchase activity for similar types of loans and assess whether adjustments to our historical loss experience are required based on current conditions and forecasts of future conditions, as appropriate, as our exposure under the guarantee is typically short-term in nature. The liability we record is equal to what we expect to buy back and, therefore, approximates fair value. Second, we make standard representations and warranties related to other loan transfers, breaches of which would require us to repurchase the transferred loans. Finally, we have limited repurchase obligations for certain loan transfers associated with credit-related events, such as early prepayment or events of default within 90 days after origination. In the event of a repurchase, we are typically required to pay the purchase price of the loans transferred. As of December 31, 2022 and 2021, the Company accrued liabilities within accounts payable, accruals and other liabilities in the consolidated balance sheets of $ 1.4 million and $ 7.4 million, respectively, related to our estimated repurchase obligation, with the corresponding charges recorded within noninterest income—loan origination and sales in the consolidated 196 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) statements of operations and comprehensive income (loss). As of December 31, 2022 and 2021, the amounts associated with loans sold that were subject to the terms and conditions of our repurchase obligations totaled $ 5.1 billion and $ 6.5 billion, respectively. As of December 31, 2022 and 2021, we had a total of $ 9.1 million in letters of credit outstanding with financial institutions, which were issued for the purpose of securing certain of our operating lease obligations. A portion of the letters of credit was collateralized by $ 3.1 million of our cash as of December 31, 2022 and 2021, which is included within restricted cash and restricted cash equivalents in the consolidated balance sheets. As of December 31, 2022, we had a total of $ 11.7 million in letters of credit outstanding with the FHLB, which serve as collateral for public deposits and were collateralized by loans. Mortgage Banking Regulatory Mandates We are subject to certain state-imposed minimum net worth requirements for the states in which we are engaged in the business of a residential mortgage lender. Noncompliance with these requirements on an annual basis could result in potential fines or penalties imposed by the applicable state. Future events or changes in mandates may affect our ability to meet mortgage banking regulatory requirements. As of December 31, 2022 and 2021, we were in compliance with all minimum net worth requirements and, therefore, have no t accrued any liabilities related to fines or penalties. Retirement Plans We have a 401(k) plan that covers all employees meeting certain eligibility requirements. The 401(k) plan is designed to provide tax-deferred retirement benefits in accordance with the provisions of Section 401(k) of the Internal Revenue Code. Eligible employees may defer up to 100 % of eligible compensation up to the annual maximum as determined by the Internal Revenue Service. Our contributions to the plan are discretionary. We have not made any contributions to the plan to date. Note 19. Loss Per Share We compute loss per share attributable to common stock using the two-class method required for participating interests. Prior to the Business Combination, our participating interests included all series of our preferred stock. Series 1 Redeemable Preferred Stock has preferential cumulative dividend rights. For each period presented, we increased net loss by the contractual amount of dividends payable to holders of Series 1 Redeemable Preferred Stock. Subsequent to the Business Combination, we did not have any participating interests. Prior to the Business Combination, all other classes of preferred stock, except for Series C, had stated dividend rights, which had priority over undistributed earnings. The remaining losses were shared pro-rata among the preferred stock (with the exception of Series 1 preferred stock) and common stock outstanding during the measurement period, as if all of the losses for the period had been distributed. While our calculation of loss per share accounted for a loss allocation to all participating shares, we only presented loss per share below for our common stock. Basic loss per share of common stock was computed by dividing net loss, adjusted for the impact of Series 1 Redeemable Preferred Stock dividends, by the weighted average number of shares of common stock outstanding during the period. We excluded the effect of all potentially dilutive common stock elements from the denominator in the computation of diluted loss per share, as their inclusion would have been anti-dilutive. 197 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) The calculations of basic and diluted loss per share were as follows: Year Ended December 31, 2022 2021 2020 Numerator: Net loss $ ( 320,407 ) $ ( 483,937 ) $ ( 224,053 ) Less: Redeemable preferred stock dividends ( 40,425 ) ( 40,426 ) ( 40,536 ) Less: preferred stock redemptions, net (1) — — ( 52,658 ) Net loss attributable to common stockholders – basic and diluted $ ( 360,832 ) $ ( 524,363 ) $ ( 317,247 ) Denominator: Weighted average common stock outstanding – basic 900,886,113 526,730,261 73,851,108 Weighted average common stock outstanding – diluted 900,886,113 526,730,261 73,851,108 Loss per share – basic $ ( 0.40 ) $ ( 1.00 ) $ ( 4.30 ) Loss per share – diluted $ ( 0.40 ) $ ( 1.00 ) $ ( 4.30 ) ___________________ (1) In December 2020, we exercised a call and redeemed certain redeemable preferred stock. We considered the premium paid on redemption to be akin to a dividend to the redeemable preferred stockholder. As such, the premium, which represented the amount paid upon redemption over the carrying value of the preferred stock (such carrying value being reduced for preferred stock issuance costs), was deducted from net loss to determine the loss available to common stockholders. We excluded the effect of the below elements from our calculation of diluted loss per share, as their inclusion would have been anti-dilutive, as there were no earnings attributable to common stockholders. These amounts represent the number of instruments outstanding at the end of the year. Year Ended December 31, 2022 2021 2020 Common stock options 18,749,679 21,171,147 29,947,975 Common stock warrants 12,170,990 12,170,990 — Unvested RSUs 69,538,139 48,687,524 44,601,586 Unvested PSUs 19,563,747 22,970,396 — Convertible Notes (1) 53,538,000 53,538,000 — Contingent common stock (2) 6,305,595 — 320,649 Redeemable preferred stock exchangeable for common stock — — 465,916,522 Redeemable preferred stock warrants exchangeable for common stock — — 12,170,990 ____________________ (1) Represents the shares of common stock issuable upon conversion of all Convertible Notes at the conversion rate in effect at the date indicated. See Note 1 and Note 12 for additional information. (2) As of December 31, 2022, includes contingently returnable common stock in connection with the Technisys Merger, which consists of shares that may be used to satisfy certain indemnification claims, subject to certain limitations, and to cover any outstanding claims or indemnifications pursuant to the merger agreement. These escrow shares are expected to be released no later than 15 months after the close of the acquisition. See Note 2 for additional information. As of December 31, 2020, included contingently issuable common stock in connection with our acquisition of 8 Limited, which was subsequently issued in 2021. Note 20. Business Segment and Geographic Information Segment Organization and Reporting Framework We have three reportable segments: Lending, Technology Platform and Financial Services. Each of our reportable segments is a strategic business unit that serves specific needs of our members based on the products and services provided. The segments are based on the manner in which management views the financial performance of the business. The reportable segments also reflect our organizational structure. Each segment has a segment manager who reports directly to the Chief 198 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Operating Decision Maker (“CODM”). The CODM has ultimate authority and responsibility over resource allocation decisions and performance assessment. The operations of acquired businesses have been integrated into, or managed as part of, our existing reportable segments. Activities that are not part of a reportable segment, such as management of our corporate investment portfolio and asset/liability management by our centralized treasury function (as further discussed below), are included in the Corporate/Other non-reportable segment. Contribution profit (loss) is the primary measure of segment profit and loss reviewed by the CODM and is intended to measure the direct profitability of each segment in the manner in which management evaluates performance and makes decisions about funding our operations and allocating resources. Contribution profit (loss) is defined as total net revenue for each reportable segment less: • fair value changes in servicing rights and residual interests classified as debt that are attributable to assumption changes, which impact the contribution profit within the Lending segment. These fair value changes are non-cash in nature and are not realized in the period; therefore, they do not impact the amounts available to fund our operations; and • expenses directly attributable to the corresponding reportable 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, product fulfillment, lead generation and occupancy-related costs. 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. During the first quarter of 2022, we implemented a funds transfer pricing (“FTP”) framework to attribute net interest income to our business segments based on their usage and/or provision of funding. The primary objective of the FTP framework is to transfer interest rate risk from the business segments by providing matched duration of funding of assets and liabilities to allocate interest income and interest expense to each segment. Therefore, the financial impact, management and reporting of interest rate risk is centralized in Corporate/Other, where it is monitored and managed. Under the FTP framework, treasury provides a funds credit for sources of funds, such as deposits, and a funds charge for the use of funds, such as loan originations and credit card. The process for determining FTP credits and charges is based on a number of factors and assumptions, including prevailing market interest rates, the expected duration of interest-earning and interest-bearing assets and liabilities, contingent risks and behaviors, and our broader funding profile. As the durations of assets and liabilities are typically not perfectly matched, the residual impact of the FTP framework is reflected within Corporate/Other. We regularly assess the assumptions, methodologies and reporting classifications used for segment reporting, which may result in further refinements or changes to the framework in future periods. The application of the FTP framework impacts the measure of net interest income and, thereby, total net revenue and contribution profit (loss) for our Lending and Financial Services segments, as well as the total net revenue of Corporate/Other, but has no impact on our consolidated results of operations. Prior to implementing the FTP framework, the presentation of our Lending and Financial Services segments’ net interest income reflected the difference between interest income earned on our loans and the actual interest expense incurred on any loans that were financed. Under the FTP framework, such interest expense is incurred by treasury within Corporate/Other and replaced by an FTP charge. Application of our current FTP framework during the comparative years ended December 31, 2021 and 2020 would not have had a material impact on Lending or Financial Services segment net interest income. The accounting policies of our reportable segments are consistent with those described in Note 1, except for the application of the FTP framework and the allocations of consolidated income and consolidated expenses. Assets are not allocated to reportable segments, as our CODM does not evaluate reportable segments using discrete asset information. Segment Information Lending. The Lending segment includes our personal loan, student loan and home loan products and the related servicing activities. We originate loans primarily with the objective of either selling whole loans or securitizing a pool of originated loans for transfer to third-party purchasers. Revenues in the Lending segment are driven by changes in the fair value of our whole loans and securitization interests (inclusive of our economic hedging activities), gains or losses recognized on transfers that meet the true sale requirements, and our servicing-related activities, which mainly consist of servicing fees and the 199 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) changes in our servicing assets over time. In our Lending segment, we also earn the difference between interest income earned on our loans and interest expense as determined using the FTP framework for the majority of the year ended December 31, 2022, and from our warehouse financing for the years ended December 31, 2021 and 2020. We present interest income net of interest expense, as our CODM considers net interest income in evaluating the performance of our Lending segment. Technology Platform . The Technology Platform segment includes our technology products and solutions revenue, which was primarily related to our platform-as-a-service through Galileo, which provides the infrastructure to facilitate core client-facing and back-end capabilities, such as account setup, account funding, direct deposit, authorizations and processing, payments functionality and check account balance features. Beginning in March 2022, this segment also includes our revenue earned by Technisys, which expanded our segment to include a cloud-native digital and core banking platform offering and which results in the sale of software licenses and the provision of related technology solutions. See Note 2 for additional information on the Technisys Merger. Financial Services. The Financial Services segment primarily includes our SoFi Money product (inclusive of SoFi Checking and Savings, which commenced in the first quarter of 2022, and cash management accounts), SoFi Invest product, SoFi Credit Card product, SoFi Relay personal finance management product and other financial services, such as lead generation and content for other financial services institutions and our members. SoFi Checking and Savings provides members a digital banking experience that offers no account fees, 2-day early paycheck and a competitive annual percentage yield. SoFi Money cash management provides members a digital cash management experience. Effective June 5, 2022, our SoFi Money cash management accounts no longer earn interest, as we implemented our plan to build new features only for SoFi Checking and Savings and reduce support of our SoFi Money cash management accounts. SoFi Invest provides investment features and financial planning services that we offer to our members. Revenues in the Financial Services segment include interest income earned and interest expense incurred under the FTP framework, interchange fees on our member debit and credit transactions, digital assets transaction fees, and fees related to pay for order flow and share lending arrangements in SoFi Invest. We also earn referral fees in connection with referral activity we facilitate through our platform. Our CODM considers net interest income in addition to contribution profit (loss) in evaluating the performance of our Financial Services segment and making resource allocation decisions. Under the FTP framework, the Financial Services segment earns interest income that is reflective of an FTP credit for deposits provided to the overall business, as well as incurs interest expense that is reflective of an FTP charge related to the use of funding for SoFi Credit Card. Corporate/Other. Non-segment operations are classified as Corporate/Other, which includes net revenues associated with corporate functions that are not directly related to a reportable segment. Beginning in the first quarter of 2022, net interest income (expense) within Corporate/Other reflects the residual impact from FTP charges and FTP credits allocated to our reportable segments under our FTP framework. These non-segment net revenue (loss) also include interest income earned on corporate cash balances, nonrecurring income on certain investments from available cash on hand, such as our investments in AFS debt securities (which investments are not interconnected with our core business lines and, thereby, reportable segments), and interest expense on other corporate borrowings, such as our revolving credit facility and the amortization of debt issuance costs and original issue discount on our Convertible Notes. 200 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Segment Results The following tables present financial information, including the measure of contribution profit (loss), for each reportable segment: Year Ended December 31, 2022 Lending Technology Platform (1) Financial Services (1) Reportable Segments Total Corporate/Other (1) Total Net revenue Net interest income (loss) $ 531,480 $ — $ 92,574 $ 624,054 $ ( 39,958 ) $ 584,096 Noninterest income (expense) (2) 608,511 315,133 75,102 998,746 ( 9,307 ) 989,439 Total net revenue (loss) $ 1,139,991 $ 315,133 $ 167,676 $ 1,622,800 $ ( 49,265 ) $ 1,573,535 Servicing rights – change in valuation inputs or assumptions (3) ( 39,651 ) — — ( 39,651 ) Residual interests classified as debt – change in valuation inputs or assumptions (4) 6,608 — — 6,608 Directly attributable expenses ( 442,945 ) ( 238,620 ) ( 367,102 ) ( 1,048,667 ) Contribution profit (loss) $ 664,003 $ 76,513 $ ( 199,426 ) $ 541,090 Year Ended December 31, 2021 Lending Technology Platform (1) Financial Services (1) Reportable Segments Total Corporate/Other (1) Total Net revenue Net interest income (loss) $ 258,102 $ ( 29 ) $ 3,765 $ 261,838 $ ( 9,594 ) $ 252,244 Noninterest income (2) 480,221 194,915 54,313 729,449 3,179 732,628 Total net revenue (loss) $ 738,323 $ 194,886 $ 58,078 $ 991,287 $ ( 6,415 ) $ 984,872 Servicing rights – change in valuation inputs or assumptions (3) 2,651 — — 2,651 Residual interests classified as debt – change in valuation inputs or assumptions (4) 22,802 — — 22,802 Directly attributable expenses ( 364,169 ) ( 130,439 ) ( 192,996 ) ( 687,604 ) Contribution profit (loss) $ 399,607 $ 64,447 $ ( 134,918 ) $ 329,136 201 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Year Ended December 31, 2020 Lending Technology Platform (1) Financial Services (1) Reportable Segments Total Corporate/Other (1) Total Net revenue Net interest income (loss) $ 199,345 $ ( 107 ) $ 484 $ 199,722 $ ( 21,791 ) $ 177,931 Noninterest income (expense) (2) 281,521 96,423 11,386 389,330 ( 1,729 ) 387,601 Total net revenue (loss) $ 480,866 $ 96,316 $ 11,870 $ 589,052 $ ( 23,520 ) $ 565,532 Servicing rights – change in valuation inputs or assumptions (3) 17,459 — — 17,459 Residual interests classified as debt – change in valuation inputs or assumptions (4) 38,216 — — 38,216 Directly attributable expenses ( 294,812 ) ( 42,427 ) ( 143,966 ) ( 481,205 ) Contribution profit (loss) $ 241,729 $ 53,889 $ ( 132,096 ) $ 163,522 _____________________ (1) Within the Technology Platform segment, intercompany fees were $ 7,604 , $ 1,863 and $ 686 for the years ended December 31, 2022, 2021 and 2020, respectively. The equal and offsetting intercompany expenses are reflected within the Financial Services and Technology Platform segment directly attributable expenses. The intercompany revenues and expenses are eliminated in consolidation. The revenues are eliminated within Corporate/Other and the expenses are adjusted in our reconciliation of directly attributable expenses below. (2) Refer to Note 3 for a reconciliation of revenue from contracts with customers to total noninterest income (expense). (3) Reflects changes in fair value inputs and assumptions, including market servicing costs, conditional prepayment, default rates and discount rates. This non-cash change, which is recorded within noninterest income in the consolidated statements of operations and comprehensive income (loss) is unrealized during the period and, therefore, has no impact on our cash flows from operations. As such, the changes in fair value attributable to assumption changes are adjusted to provide management and financial users with better visibility into the cash flows available to finance our operations. (4) Reflects changes in fair value inputs and assumptions, including conditional prepayment, 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, with fair value changes recorded within noninterest income in the consolidated statements of operations and comprehensive income (loss). The fair value change attributable to assumption changes has no impact on our initial financing proceeds, our future obligations to the residual interest owner (because future residual interest claims are limited to securitization collateral cash flows), or the general operations of our business. As such, this non-cash change in fair value during the period is adjusted to provide management and financial users with better visibility into the cash flows available to finance our operations. 202 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) The following table reconciles reportable segments total contribution profit to loss before income taxes. Expenses not allocated to reportable segments represent items that are not considered by our CODM in evaluating segment performance or allocating resources. Year Ended December 31, 2022 2021 2020 Reportable segments total contribution profit $ 541,090 $ 329,136 $ 163,522 Corporate/Other total net loss ( 49,265 ) ( 6,415 ) ( 23,520 ) Intercompany expenses 7,604 1,863 686 Servicing rights – change in valuation inputs or assumptions 39,651 ( 2,651 ) ( 17,459 ) Residual interests classified as debt – change in valuation inputs or assumptions ( 6,608 ) ( 22,802 ) ( 38,216 ) Expenses not allocated to segments: Share-based compensation expense ( 305,994 ) ( 239,011 ) ( 99,870 ) Employee-related costs (1) ( 184,764 ) ( 143,847 ) ( 114,599 ) Depreciation and amortization expense ( 151,360 ) ( 101,568 ) ( 69,832 ) Fair value change of warrant liabilities — ( 107,328 ) ( 20,525 ) Special payment (2) — ( 21,181 ) — Other corporate and unallocated expenses (3) ( 209,075 ) ( 167,373 ) ( 108,708 ) Loss before income taxes $ ( 318,721 ) $ ( 481,177 ) $ ( 328,521 ) _____________________ (1) Includes compensation, benefits, recruiting, certain occupancy-related costs and various travel costs of executive management, certain technology groups and general and administrative functions that are not directly attributable to the reportable segments. (2) Represents a special payment to the Series 1 preferred stockholders in connection with the Business Combination. (3) Represents corporate overhead costs that are not allocated to reportable segments, which primarily includes corporate marketing and advertising costs, tools and subscription costs, professional services costs, corporate and FDIC insurance costs and transaction-related expenses. No single customer accounted for more than 10% of our consolidated revenues for any of the years presented. Geographic Information The following tables present total net revenue from external customers and total assets attributed to the United States and to all foreign countries in total in which we operate. We attribute total net revenue and total assets based on the country of domicile of the legal entity. No individual foreign country had material total net revenue during any of the years presented. Our long-lived assets as of the dates indicated were not considered by management to be significant relative to total assets. The majority of our long-lived assets were located in the United States as of the dates indicated. Year Ended December 31, 2022 2021 2020 United States $ 1,504,680 $ 981,705 $ 564,751 All foreign countries 68,855 3,167 781 Total net revenue $ 1,573,535 $ 984,872 $ 565,532 December 31, 2022 2021 United States $ 17,921,296 $ 9,027,519 All foreign countries 1,086,379 148,807 Total assets $ 19,007,675 $ 9,176,326 203 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Note 21. Regulatory Capital SoFi Technologies, a bank holding company, and SoFi Bank, a nationally chartered association, are required to comply with regulatory capital rules issued by the Federal Reserve and other U.S. banking regulators, including the OCC and FDIC. We are required to manage our capital position to maintain sufficient capital to satisfy these regulatory rules and support our business activities, including the requirement to maintain minimum regulatory capital ratios in accordance with the Basel Committee on Banking Supervision standardized approach for U.S. banking organizations (U.S. Basel III). If the Federal Reserve finds that we are not “well-capitalized” or “well-managed”, we would be required to take remedial action to comply with all applicable capital and management requirements, which may contain additional limitations or conditions relating to our activities. The Federal Reserve and the OCC have authority to prohibit bank holding companies and banks, respectively, from paying dividends if, in their opinion, the payment of dividends would constitute an unsafe or unsound practice. Under the National Bank Act, SoFi Bank generally may, without prior approval of the OCC, declare a dividend so long as the total amount of all dividends (common and preferred), including the proposed dividend, in the current year do not exceed net income for the current year to date plus retained net income for the prior two years. However, taking into account a wide range of factors, the OCC may object and therefore prevent SoFi Bank from paying dividends to the Company. As such, as of December 31, 2022, the Bank would not have any funds free of restrictions that are available for dividend payments. Restrictions on the ability of SoFi Bank to pay dividends to the parent company could also impact the Company’s ability to pay dividends to common stockholders. Additionally, under the Federal Reserve’s capital rules, our bank holding company’s ability to pay dividends is restricted if we do not maintain capital above the capital conservation buffer, as discussed below. Further, a policy statement of the Federal Reserve provides that, among other things, a bank holding company generally should not pay dividends on regulatory capital instruments if its net income for the past year is not sufficient to cover both the cash dividends and a rate of earnings retention that is consistent with the company’s capital needs, asset quality, and overall financial condition. Based on this Federal Reserve policy, as of December 31, 2022, the Company generally would not have any funds free of restrictions available for dividend payments on regulatory capital instruments. These requirements establish required minimum ratios for Common Equity Tier 1 (“CET1”) risk-based capital, Tier 1 risk-based capital, total risk-based capital and a Tier 1 leverage ratio; set risk-weighting for assets and certain other items for purposes of the risk-based capital ratios; and define what qualifies as capital for purposes of meeting the capital requirements. Additionally, regulatory capital rules include a capital conservation buffer of 2.5% that is added on top of each of the minimum risk-based capital ratios in order to avoid restrictions on capital distributions and discretionary bonuses. 204 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) The risk- and leverage-based capital ratios and amounts are presented below: December 31, 2022 Amount Ratio Required Minimum (1) Well-Capitalized Minimum (2) SoFi Bank CET1 risk-based capital $ 1,162,024 14.6 % 7.0 % 6.5 % Tier 1 risk-based capital 1,162,024 14.6 % 8.5 % 8.0 % Total risk-based capital 1,202,429 15.1 % 10.5 % 10.0 % Tier 1 leverage 1,162,024 15.3 % 4.0 % 5.0 % Risk-weighted assets 7,972,956 Quarterly adjusted average assets 7,615,481 SoFi Technologies CET1 risk-based capital $ 3,188,341 20.3 % 7.0 % n/a Tier 1 risk-based capital 3,188,341 20.3 % 8.5 % n/a Total risk-based capital 3,228,746 20.6 % 10.5 % n/a Tier 1 leverage 3,188,341 21.8 % 4.0 % n/a Risk-weighted assets 15,695,217 Quarterly adjusted average assets 14,592,551 ___________________ (1) Required minimums presented for risk-based capital ratios include the required capital conservation buffer. (2) The well-capitalized minimum measure is applicable at the bank level only. As of December 31, 2022, our regulatory capital ratios exceeded the thresholds required to be regarded as a well-capitalized institution, and meet all capital adequacy requirements to which we are subject. There have been no events or conditions since December 31, 2022 that management believes would change the categorization. Note 22. Parent Company Condensed Financial Information The following parent company condensed financial statements are prepared in accordance with Regulation S-X of the SEC, which require such disclosures when the restricted net assets of consolidated subsidiaries exceed 25% of consolidated net assets. The condensed balance sheets as of December 31, 2022 and 2021 reflect balances at SoFi Technologies, Inc. The condensed statement of operations and comprehensive loss and condensed statement of cash flow for the year ended December 31, 2021 reflect the activity of Social Finance, Inc. from January 1, 2021 through the close of the Business Combination and the activity of SoFi Technologies, Inc. from the close of the Business Combination through December 31, 2022. The condensed statement of operations and comprehensive loss and condensed statement of cash flow for the year ended December 31, 2020 reflect the activity of Social Finance, Inc. Refer to Note 2 for additional information on the Business Combination. 205 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) SoFi Technologies, Inc. Condensed Balance Sheets (Parent Company Only) ( In Thousands, Except for Share Data ) December 31, 2022 2021 Assets Cash and cash equivalents $ 201 $ — Investments in subsidiaries 5,802,861 5,873,354 Goodwill 713,217 — Intangible assets 213,328 — Other assets 471 — Total assets $ 6,730,078 $ 5,873,354 Liabilities, temporary equity and permanent equity Liabilities: Accounts payable, accruals and other liabilities $ 21,019 $ 143 Debt 1,180,583 1,175,508 Total liabilities 1,201,602 1,175,651 Temporary equity (1) : Redeemable preferred stock, $ 0.00 par value: 100,000,000 and 100,000,000 shares authorized; 3,234,000 and 3,234,000 shares issued and outstanding as of December 31, 2022 and 2021, respectively 320,374 320,374 Permanent equity: Common stock, $ 0.00 par value: 3,100,000,000 and 3,100,000,000 shares authorized; 933,896,120 and 828,154,462 shares issued and outstanding as of December 31, 2022 and 2021, respectively (2) 93 83 Additional paid-in capital 6,719,826 5,561,831 Accumulated other comprehensive loss ( 8,296 ) ( 1,471 ) Accumulated deficit ( 1,503,521 ) ( 1,183,114 ) Total permanent equity 5,208,102 4,377,329 Total liabilities, temporary equity and permanent equity $ 6,730,078 $ 5,873,354 _______________ (1) Redemption amount is $ 323,400 as of December 31, 2022 and 2021. (2) Includes 100,000,000 non-voting common shares authorized and no non-voting common shares issued and outstanding as of December 31, 2022 and 2021. 206 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) SoFi Technologies, Inc. Condensed Statements of Operations and Comprehensive Loss (Parent Company Only) ( In Thousands ) Year Ended December 31, 2022 2021 2020 Interest income — 6,279 30,230 Interest expense 5,075 14,926 40,046 Net interest expense ( 5,075 ) ( 8,647 ) ( 9,816 ) Noninterest income — 2,617 4,102 Total net revenue ( 5,075 ) ( 6,030 ) ( 5,714 ) Noninterest expense 42,114 278,697 317,398 Loss before income taxes ( 47,189 ) ( 284,727 ) ( 323,112 ) Income tax benefit — 5,294 113,548 Loss before equity in loss of subsidiaries ( 47,189 ) ( 279,433 ) ( 209,564 ) Equity in loss of subsidiaries ( 273,218 ) ( 204,504 ) ( 14,489 ) Net loss $ ( 320,407 ) $ ( 483,937 ) $ ( 224,053 ) Other comprehensive loss Unrealized losses on available-for-sale debt securities, net ( 7,260 ) ( 1,351 ) — Foreign currency translation adjustments, net 435 46 ( 145 ) Total other comprehensive loss ( 6,825 ) ( 1,305 ) ( 145 ) Comprehensive loss $ ( 327,232 ) $ ( 485,242 ) $ ( 224,198 ) 207 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) SoFi Technologies, Inc. Condensed Statements of Cash Flows (Parent Company Only) (In Thousands) Year Ended December 31, 2022 2021 2020 Operating activities Net cash provided by (used in) operating activities $ 290,298 $ ( 136,134 ) $ ( 226,217 ) Investing activities Changes in investments in subsidiaries $ ( 284,295 ) $ ( 3,231,314 ) $ — Issuances of notes to subsidiaries — ( 312 ) ( 1,387,801 ) Repayments of notes by subsidiaries — — 1,443,765 Proceeds from securitization investments — 106,994 322,704 Proceeds from non-securitization investments — 107,534 — Acquisition of business, net of cash acquired — — ( 76,194 ) Other investing activities — 13,122 ( 26,115 ) Net cash (used in) provided by investing activities $ ( 284,295 ) $ ( 3,003,976 ) $ 276,359 Financing activities Net change in debt facilities $ — $ 144,339 $ 144,636 Proceeds from other debt issuances — 1,010,728 — Repayment of other debt — ( 250,000 ) — Taxes paid related to net share settlement of share-based awards ( 8,983 ) ( 42,644 ) ( 31,259 ) Payment of redeemable preferred stock dividends — — ( 40,536 ) Redemptions of redeemable common and preferred stock — ( 282,859 ) — Proceeds from Business Combination and PIPE Investment — 1,989,851 — Proceeds from warrant exercises — 95,047 — Purchase of capped calls — ( 113,760 ) — Proceeds from common stock issuances — — 369,840 Note receivable principal repayments from stockholder — — 43,513 Other financing activities 2,610 ( 4,605 ) 2,324 Net cash (used in) provided by financing activities $ ( 6,373 ) $ 2,546,097 $ 488,518 Effect of exchange rates on cash and cash equivalents 571 46 ( 145 ) Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents $ 201 $ ( 593,967 ) $ 538,515 Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period — 593,967 55,452 Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period $ 201 $ — $ 593,967 Supplemental non-cash investing and financing activities Non-cash settlement of notes receivable via beneficial loan interest transfers $ — $ — $ 176,449 Seller note issued in acquisition — — 243,998 Notes to Parent Company Condensed Financial Information Note 1. Debt In October 2021, SoFi Technologies, Inc. issued $ 1.2 billion aggregate principal amount of Convertible Notes due 2026. See Note 12 for additional information on the Convertible Notes. Note 2. Temporary Equity See Note 13 for information on the redeemable preferred stock held at SoFi Technologies, Inc. 208 SoFi Technologies, Inc. TABLE OF CONTENTS SoFi Technologies, Inc. Notes to Consolidated Financial Statements  (continued) (In Thousands, Unless Otherwise Stated and Except for Share and Per Share Data) Note 23. Subsequent Events Management of the Company performed an evaluation of subsequent events that occurred after the balance sheet date through the date of this Annual Report on Form 10-K, and determined that there were no subsequent events to report. 209 SoFi Technologies, Inc. TABLE OF CONTENTS Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None.