The bank charter also allows them to get creative with Galileo and offer services other providers simply cannot


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I am patiently waiting for 3/1/22 when SOFI reports. I have added to my position, I have sold puts and been assigned shares, and I continue to sell puts and am happy to be assigned more shares of SOFI. I think SOFI is going to exceed expectations and deliver a slate of catalysts for 2022 and beyond. SOFI is one of my highest conviction stocks for capital appreciation. I have a long-term time horizon on this investment, and I am not concerned with the share price in the short term. Investors always look back and regret missed opportunities, and I think SOFI is going to become a missed opportunity for many investors. Banking is a critical aspect of society, and SOFI is the future of personal finance. Every time Liz Young is on CNBC, SOFI gains more credibility, and the banking charter just added a level of legitimacy that is invaluable. I am excited for 2022 to play out, and SOFI shareholders are going to have a lot to be thankful for come Thanksgiving.

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Prior to receiving the bank charter, SOFI’s path to funding loans was originally funded by a warehouse lines of credit and then sold to third-party investors via securitizations

Deposit funding is generally the cheapest cost of funding available to financial institutions. In 3Q21, the average interest rate SOFI paid on its warehouse and securitization facilities was 1.4% and 4.0%. We are in the midst of a rising rate environment, and the Fed is expected to raise rates at least 3 times in 2022. The bank charter came at the right time because as interest rates increase, the cost of funds will likely increase, making the bank charter more important. In this interview, Mr. Noto breaks down the implications for having the ability to fund lending through SOFI’s deposits. When SOFI borrows money from traditional banks to utilize throughout its loans, they are paying between 2 – 2 ?%, and those banks are paying roughly 0.15% on their deposits creating a large margin. Mr. Noto is a man of his word, and SOFI announced that they will offer interest rates of 1% on its checking and savings accounts if the client is making direct deposit. SOFI is lowering their cost considerably and giving their members a portion of the spread back through a 1% interest rate.

2022 has significant catalysts that the shorts should be concerned with. SOFI has their bank charter so we know their cost of capital to fund loans is going to decrease and significantly improve their margins. The third catalyst is their revenue stream from student loan refinancing being turned back on and possibly only losing 4 months of this revenue in 2022. SOFI has been able to increase guidance without it which correlates to strong growth across its other products. It’s going to be interesting to see what SOFI’s revenue and EBITDA will look like when the federal student loan moratorium is lifted. There is also the potential for SOFI to become acquired. The last thing I want is for a large financial institution to acquire SOFI, but it’s a possibility. I don’t see the short play or being bearish on SOFI, especially at these levels, and the combination of SOFI’s current progress and future catalysts are enough to make me extremely bullish on its future.