How SoFi's Bank Charter Could Pay Off for Long-Term Investors

SoFi Technologies' (NASDAQ: SOFI) operations were launched more than a decade ago. Back then, the company's sole activity was providing alumni-funded loans to recent grads.

Fast-forward to today, and SoFi has become a full-fledged digital financial services entity. Growth has been exceptional, as the business expanded its product and service offering. This helped to rapidly bring on new members.

In 2022, SoFi obtained a national bank charter that reshaped the company. Here's how this move could pay off for long-term investors.

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Taking deposits provides an advantage

Before SoFi got a bank charter, its operations were funded by a mix of securitized debt, warehouse facilities, and convertible notes. These sources of capital had obviously helped the business reach that point.

The issue, though, is that this kind of funding can be expensive. And it's dependent on robust capital market conditions. This sets the bar higher. When originating loans, SoFi must aim to achieve a better return than what it pays on its funding capital to generate net interest income. This put it at a huge disadvantage relative to banking peers.

The company announced in January 2022 that it had received approval from the Office of the Comptroller of the Currency and the Federal Reserve to acquire Golden Pacific Bancorp, a community bank that was based in Sacramento, California. This deal, giving SoFi a national bank charter, was then closed in February of that year.

Since that seminal moment, SoFi has been completely transformed. It immediately started offering checking and savings accounts to customers. As of March 31, 2022, the business had $1.2 billion in total deposits. Exactly four years later, that figure had ballooned to $40.2 billion.

Of SoFi's $42.9 billion in total liabilities, 94% are represented by these deposits (up from 17% four years before). This supported SoFi's Q1 2026 net interest margin of 5.94%. Net interest income also jumped 781% from $252 million in 2021 to over $2.2 billion in 2025.

Deposits are considered extremely sticky, as they establish a bank's direct relationship with where customers park their money. SoFi's savings account pays a standard annual percentage yield of 3.1%, well above the national average, which also attracts capital.

The fact that SoFi's deposit base is expanding so quickly is a sign of heightened demand from individuals for a tech-enabled platform with a superior user experience. This bodes well for the company's long-term success. Management expects adjusted earnings per share to increase at a compound annual rate of 40% (at the midpoint) over the next three years.

Without a national bank charter that drastically lowered its funding costs and opened up the capital floodgates, these profit gains would not be possible. An expanding earnings stream is just what this fintech stock's investors want to see.

Neil Patel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.