UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____to _____

Commission File Number: 001-40003

loanDepot, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware			85-3948939
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
26642 Towne Centre Drive,	Foothill Ranch,	California	92610
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (888) 337-6888

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Class A Common Stock, $0.001 per value per share	LDI	The New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐  No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 7, 2021, 6,643,187 shares of the registrant’s Class A common stock, par value $0.001 per share, were outstanding. No shares of registrant’s Class B common stock were outstanding, 181,515,475 shares of registrant’s Class C common stock were outstanding and 119,694,200 shares of registrant’s Class D common stock were outstanding.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, technology developments, financing and investment plans, dividend policy, competitive position, industry and regulatory environment, potential growth opportunities and the effects of competition. Forward-looking statements include statements that are not historical facts and can be identified by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “will,” “would” or similar expressions and the negatives of those terms.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Given these uncertainties, you should not place undue reliance on forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this report. You should read this report with the understanding that our actual future results may be materially different from what we expect.

Important factors that could cause actual results to differ materially from our expectations are included in Part I, Item 2 “Management's Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 1A "Risk Factors" in this report as well as Part I, Item 1A “Risk Factors” and Part II, Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission (“SEC”) on March 16, 2021.

Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

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loanDepot, Inc.

Table of Contents

PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020	1
Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020	2
Consolidated Statements of Equity for the three months ended March 31, 2021 and 2020	3
Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020	4
Notes to Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3. Quantitative and Qualitative Disclosures About Market Risk	56
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	58
Item 1A. Risk Factors	58
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 6. Exhibits	59
Signatures

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

loanDepot, Inc.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

	March 31, 2021		December 31, 2020
ASSETS	(Unaudited)
Cash and cash equivalents	$	630,457	$	284,224
Restricted cash	121,389		204,465
Accounts receivable, net	84,047		138,122
Loans held for sale, at fair value (includes $2,213,801 and $1,595,442 pledged to creditors in securitization trusts at March 31, 2021 and December 31, 2020, respectively)	8,787,756		6,955,424
Derivative assets, at fair value	760,519		647,939
Servicing rights, at fair value (includes $355,565 and $300,465 pledged to creditors in securitization trusts at March 31, 2021 and December 31, 2020, respectively)	1,772,099		1,127,866
Property and equipment, net	91,007		85,002
Operating lease right-of-use assets	63,207		66,433
Prepaid expenses and other assets	84,804		77,241
Loans eligible for repurchase	842,970		1,246,158
Investments in joint ventures	17,332		17,528
Goodwill and intangible assets, net	42,698		42,826
Total assets	$	13,298,285	$	10,893,228
LIABILITIES AND EQUITY
Liabilities:
Warehouse and other lines of credit	$	8,309,450	$	6,577,429
Accounts payable, accrued expenses and other liabilities	890,826		446,370
Derivative liabilities, at fair value	95,188		168,169
Liability for loans eligible for repurchase	842,970		1,246,158
Operating lease liability	80,804		86,023
Debt obligations, net	1,305,089		712,466
Total liabilities	11,524,327		9,236,615
Commitments and contingencies (Note 16)
Equity:
Class A common stock, $0.001 par value, 2,500,000,000 authorized, 6,643,187 issued and outstanding as of March 31, 2021	$	7	$	—
Class B common stock, $0.001 par value, 2,500,000,000 authorized, none issued and outstanding as of March 31, 2021	—		—
Class C common stock, $0.001 par value, 2,500,000,000 authorized, 179,746,190 issued and outstanding as of March 31, 2021	180		—
Class D common stock, $0.001 par value, 2,500,000,000 authorized, 119,694,200 issued and outstanding as of March 31, 2021	119		—
Preferred stock, $0.001 par value, 50,000,000 authorized, none issued and outstanding as of March 31, 2021	—		—
Additional paid-in capital	561,494		—
Retained earnings	42,412		—
Noncontrolling interest	1,169,746		1,656,613
Total equity	1,773,958		1,656,613
Total liabilities and equity	$	13,298,285	$	10,893,228

See accompanying notes to the unaudited consolidated financial statements.

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loanDepot, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands)
(Unaudited)

	Three Months Ended March 31,
	2021		2020
REVENUES:
Interest income	$	54,730	$	35,165
Interest expense	(53,497)		(32,805)
Net interest income	1,233		2,360
Gain on origination and sale of loans, net	1,020,646		492,485
Origination income, net	101,599		38,613
Servicing fee income	82,568		36,563
Change in fair value of servicing rights, net	69,294		(100,287)
Other income	40,668		16,387
Total net revenues	1,316,008		486,121
EXPENSES:
Personnel expense	603,735		240,199
Marketing and advertising expense	109,626		57,312
Direct origination expense	46,976		26,503
General and administrative expense	51,317		29,630
Occupancy expense	9,988		9,892
Depreciation and amortization	8,454		9,372
Subservicing expense	26,611		13,247
Other interest expense	13,171		10,970
Total expenses	869,878		397,125
Income before income taxes	446,130		88,996
Income taxes	18,277		—
Net income	427,853		88,996
Net income attributable to noncontrolling interests	382,978		88,996
Net income attributable to loanDepot, Inc.	$	44,875	$	—
Earnings per share:
Basic	$	0.36	N/A
Diluted	$	0.36	N/A
Weighted average shares outstanding:
Basic	125,772,797		N/A
Diluted	125,772,797		N/A

See accompanying notes to the unaudited consolidated financial statements.

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loanDepot, Inc.

CONSOLIDATED STATEMENTS OF EQUITY

(Dollars in thousands)

(Unaudited)

	Common shares issued			Common shares $						Additional paid-in capital		Retained Earnings		Noncontrolling Interests		Total Equity
	Class A	Class C	Class D	Class A		Class C		Class D
Balance at December 31, 2019	—	—	—	$	—	$	—	$	—	$	—	$	—	$	375,885	$	375,885
Repurchase	—	—	—	—		—		—		—		—		(220)		(220)
Equity-based compensation	—	—	—	—		—		—		—		—		(65)		(65)
Dividends	—	—	—	—		—		—		—		—		(1,914)		(1,914)
Net income	—	—	—	—		—		—		—				88,996		88,996
Balance at March 31, 2020	—	—	—	$	—	$	—	$	—	$	—	$	—	$	462,682	$	462,682
Balance at December 31, 2020	—	—	—	$	—	$	—	$	—	$	—	$	—	$	1,656,613	$	1,656,613
Distributions prior to the reorganization transaction	—	—	—	—		—		—		—		—		(160,617)		(160,617)
Equity compensation prior to the reorganization transaction	—	—	—	—		—		—		—		—		338		338
Net income prior to the reorganization transaction	—	—	—	—		—		—		—		—		294,598		294,598
Deferred taxes and other tax adjustments associated with the Reorganization and IPO	—	—	—	—		—		—		(203,741)		—		—		(203,741)
Effect of the reorganization transaction	2,215,687	181,789,329	121,368,600	2		182		121		740,629		—		(740,934)		—
Effect of the IPO	3,850,000	(2,394,000)	(1,456,000)	4		(2)		(2)		—		—		—		—
Effect of the Greenshoe	577,500	(359,100)	(218,400)	1		(1)		—		—		—		—		—
Vested Class C shares	—	709,961	—	—		1		—		(1)						—
Net income subsequent to the reorganization and IPO	—	—	—	—		—		—		—		44,875		88,380		133,255
Stock based compensation subsequent to the reorganization transaction	—	—	—	—		—		—		24,607		—		34,872		59,479
Distributions for state taxes on behalf of shareholders, net	—	—	—	—		—		—		—		(2,463)		(3,504)		(5,967)
Balance at March 31, 2021	6,643,187	179,746,190	119,694,200	$	7	$	180	$	119	$	561,494	$	42,412	$	1,169,746	$	1,773,958

See accompanying notes to the unaudited consolidated financial statements.

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loanDepot, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

	Three Months Ended March 31,
	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	427,853	$	88,996
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization expense	8,454		9,372
Amortization of operating lease right-of-use asset	5,895		6,174
Amortization of debt issuance costs	2,685		1,498
Gain on origination and sale of loans	(990,904)		(417,716)
Loss on sale of servicing rights	39		63
Provision for loss obligation on sold loans and servicing rights	857		6,494
(Increase) decrease in net deferred tax liabilities	203,892		—
Fair value change in derivative assets	(92,879)		(199,327)
Fair value change in derivative liabilities	(72,980)		150,175
Premium (paid) received on derivatives	(19,700)		12,919
Fair value change in loans held for sale	178,844		(54,519)
Fair value change in servicing rights	(112,917)		119,355
Equity compensation	59,817		(65)
Change in fair value of contingent consideration	—		2,508
Originations of loans	(41,401,575)		(15,106,459)
Proceeds from sales of loans	40,380,774		15,611,107
Proceeds from principal payments	23,300		3,000
Payments to investors for loan repurchases	(556,870)		(8,692)
Disbursements from joint ventures	819		1,493
Changes in operating assets and liabilities:
Other changes in operating assets and liabilities	76,795		(60,178)
Net cash (used in) provided by operating activities	(1,877,801)		166,198
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment	(14,163)		(4,997)
Proceeds from sale of servicing rights	635		6,808
Return of capital from joint ventures	189		150
Net cash flows (used in) provided by investing activities	(13,339)		1,961

See accompanying notes to the unaudited consolidated financial statements.

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loanDepot, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

(Dollars in thousands)

(Unaudited)

	Three Months Ended March 31,
	2021		2020
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings on warehouse lines of credit	$	45,606,028	$	15,542,362
Repayment of borrowings on warehouse lines of credit	(43,874,006)		(15,237,251)
Proceeds from debt obligations	776,743		64,450
Payments on debt obligations	(175,935)		—
Payments of debt issuance costs	(11,260)		(767)
Payments on capital lease obligation	(689)		(6,119)
Payments on repurchase of units	—		(220)
Dividend distributions	(166,584)		(1,914)
Net cash provided by financing activities	2,154,297		360,541
Net change in cash and cash equivalents and restricted cash	263,157		528,700
Cash and cash equivalents and restricted cash at beginning of the period	488,689		117,496
Cash and cash equivalents and restricted cash at end of the period	$	751,846	$	646,196
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid (received) during the period for:
Interest	$	49,901	$	47,585
Income taxes	3		(3)
Supplemental disclosure of noncash investing and financing activities
Operating leases right-of-use assets obtained in exchange for lease liabilities	$	2,669	$	2,247
Purchase of equipment under capital leases	168		202

See accompanying notes to the unaudited consolidated financial statements.

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loanDepot, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands, unless otherwise indicated)

(Unaudited)

NOTE 1 – DESCRIPTION OF BUSINESS, PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited consolidated financial statements were prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation were included. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. For further information, refer to the consolidated financial statements and footnotes thereto included in the Annual Report of loanDepot, Inc. on Form 10-K for the year ended December 31, 2020 (“2020 Form 10-K”).

Nature of Operations

loanDepot, Inc. was incorporated in Delaware on November 6, 2020 to facilitate the initial public offering (“IPO”) of its Class A common stock and related transactions in order to carry on the business of LD Holdings Group LLC (“LD Holdings”) and its consolidated subsidiaries loanDepot.com, LLC (“LDLLC”), Artemis Management, LLC (“ART”), LD Settlement Services, LLC (“LDSS”), and mello Holdings, LLC (“Mello”). Unless otherwise noted or indicated by the context, the term the “Company” refers (1) prior to the consummation of the IPO and Reorganization described below, to LD Holdings and its consolidated subsidiaries, and (2) after the IPO and reorganization described below, to loanDepot, Inc. and its consolidated subsidiaries, including LD Holdings.

The Company engages in the originating, financing, selling, and servicing of residential mortgage loans, and engages in title, escrow, and settlement services for mortgage loan transactions. The Company derives income primarily from gains on the origination and sale of loans to investors, income from loan servicing, and fees charged for settlement services related to the origination and sale of loans.

Initial Public Offering

The Company's common stock began trading on The New York Stock Exchange on February 11, 2021 under the ticker symbol “LDI.” The IPO consisted of 3,850,000 shares of Class A common stock, $0.001 par value per share, at an offering price of $14.00 per share, pursuant to a Registration Statement on Form S-1.

Prior to the IPO, the Company completed a reorganization by which it changed its equity structure to create a single class of LLC units in LD Holdings. Prior to that transaction, the capital structure consisted of different classes of membership interests held by certain members of LD Holdings (“Continuing LLC Members”). The LLC units were then exchanged on a one-for-one basis for Holdco Units and Class C common stock. The Continuing LLC Members have the right to exchange one Holdco Unit and one share of Class B common stock or Class C common stock, as applicable, together for cash or one share of Class A common stock at the Company’s election, subject to customary conversion rate adjustments for stock splits, stock dividends, and reclassifications.

The reorganization is considered a transaction between entities under common control, therefore, the financial statements for the periods prior to the IPO and reorganization have been adjusted to combine the previously separate entities for presentation. Prior to the reorganization and IPO, the Company had not engaged in any business or other activities, except in connection with its formation.

As a result of the IPO and reorganization:

•loanDepot, Inc. is a holding company and its sole material asset is an equity interest in LD Holdings. LD Holdings continues to be a holding company and has no material assets other than its equity interests in its direct subsidiaries consisting of a 99.99% ownership in LDLLC (the majority asset of the group), and 100% equity ownership in ART, LDSS, and Mello. loanDepot, Inc. is the sole managing member of LD Holdings, and indirectly

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operates and controls all of LD Holdings’ business and affairs and consolidates the financial results of LD Holdings and its subsidiaries. The financial results of LD Holdings and its subsidiaries are consolidated with loanDepot, Inc., and the consolidated net earnings or loss are allocated to the noncontrolling interest to reflect the entitlement of the Continuing LLC Members.

•The Company has entered into a tax receivable agreement (“TRA”) with certain funds managed by Parthenon Capital Partners, (the “Parthenon Stockholders”), Parthenon affiliates owning Holdco Units, and certain Continuing LLC Members, whereby loanDepot, Inc. will be obligated to pay such parties or their permitted assignees, 85% of the amount of cash tax savings, if any, in U.S. federal, state, and local taxes that loanDepot, Inc. realizes, or is deemed to realize as a result of future tax benefits from increases in tax basis. The TRA liability is accounted for as a contingent liability with amounts accrued when deemed probable and estimable.

Summary of Significant Accounting Policies

Our accounting policies are described below and in Note 1- Description of Business, Presentation and Summary of Significant Accounting Policies, of our audited consolidated financial statements included in our 2020 Form 10-K.

Consolidation and Basis of Presentation

The Company's consolidated financial statements are prepared in accordance with GAAP as codified in the Financial Accounting Standards Board's (“FASB”) Accounting Standards Codification (“ASC” or the “Codification”).

ASC 250 requires that a change in the reporting entity or the consummation of a transaction accounted for in a manner similar to a pooling of interests, i.e., a reorganization of entities under common control, be retrospectively applied to the financial statements of all prior periods when the financial statements are issued for a period that includes the date the change in reporting entity or the transaction occurred. The IPO and reorganization were considered transactions between entities under common control, therefore, the financial statements for the periods prior to the IPO and reorganization have been adjusted to combine the previously separate entities for presentation. The financial results of LD Holdings and its subsidiaries were therefore combined with loanDepot, Inc., and the consolidated net earnings or loss has been allocated to the noncontrolling interest to reflect the entitlement of the Continuing LLC Members.

The accompanying consolidated financial statements include all of the assets, liabilities, and results of operations of the Company and consolidated variable interest entities (“VIEs”) in which the Company is the primary beneficiary. VIEs are entities that have a total equity investment at risk that is insufficient to permit the entity to finance its activities without additional subordinated financial support, whose equity investors at risk lack the ability to control the entity's activities, or is structured with non-substantive voting rights. The Company evaluates its associations with VIEs, both at inception and when there is a change in circumstance that requires reconsideration, to determine if the Company is the primary beneficiary and consolidation is required. A primary beneficiary is defined as a variable interest holder that has a controlling financial interest. A controlling financial interest requires both: (a) the power to direct the activities that most significantly impact the VIEs’ economic performance, and (b) the obligation to absorb losses or receive benefits of a VIE that could potentially be significant to the VIE. The Company has not provided financial or other support during the periods presented to any VIE that it was not previously contractually required to provide. Other entities that the Company does not consolidate, but for which it has significant influence over operating and financial policies, are accounted for using the equity method. All intercompany accounts and transactions have been eliminated in consolidation.

Certain items in prior periods were reclassified to conform to the current presentation. As of March 31, 2021, financing lease obligations are now included as part of accounts payable, accrued expenses and other liabilities.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Management has

7

made significant estimates in certain areas, including determining the fair value of loans held for sale, servicing rights, derivative assets and derivative liabilities, awards granted under the incentive equity plan, assets acquired and liabilities assumed in business combinations, and determining the loan loss obligation on sold loans. Actual results could differ from those estimates.

Non-controlling interests

loanDepot, Inc. is a holding company and its sole material asset is an equity interest in LD Holdings. LD Holdings continues to be a holding company and has no material assets other than its equity interests in its direct subsidiaries consisting of a 99.99% ownership in LDLLC (the majority asset of the group), and 100% equity ownership in ART, LDSS, and Mello. loanDepot, Inc. is the sole managing member of LD Holdings, and indirectly operates and controls all of LD Holdings’ business and affairs and consolidates the financial results of LD Holdings and its subsidiaries. The financial results of LD Holdings and its subsidiaries are consolidated with loanDepot, Inc., and the consolidated net earnings or loss will be allocated to the noncontrolling interest to reflect the entitlement of the Continuing LLC Members.

Income Taxes

The Company’s provision for income taxes is made for current and deferred income tax on pretax net income adjusted for permanent and temporary differences based on enacted tax laws and applicable statutory tax rates. The Company accounts for interest and penalties associated with income tax obligations as a component of income tax expense.

Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates for the periods in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the change. Deferred tax assets are recorded in prepaid expenses and other assets on the consolidated balance sheets. Deferred tax liabilities are recorded in accounts payable, accrued expenses and other liabilities on the consolidated balance sheets.

Following the IPO and Reorganization, the Company’s purchase of Holdco Units and any future exchanges of Holdco Units for cash or Class A Common Stock are expected to result in increases to the Company’s allocable tax basis in its assets. These increases in tax basis are expected to increase (for tax purposes) depreciation and amortization deductions allocable to the Company, and therefore reduce the amount of tax that the Company would otherwise be required to pay in the future. As a result, the Company has entered into a TRA with Parthenon Stockholders and certain Continuing LLC Members, whereby loanDepot, Inc. will be obligated to pay such parties or their permitted assignees, 85% of the amount of cash tax savings, if any, in U.S. federal, state, and local taxes that loanDepot, Inc. realizes, or is deemed to realize as a result of future tax benefits from increases in tax basis. The TRA liability is accounted for as a contingent liability within accounts payable, accrued expenses and other liabilities on the consolidated balance sheets with amounts accrued when deemed probable and estimable.

The Company evaluates tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions deemed to meet the more-likely than-not threshold of being sustained would be recorded as a tax benefit in the current period.

Stock-Based Compensation

Effective upon the completion of the IPO, the Company adopted the loanDepot, Inc. 2021 Omnibus Incentive Plan (the “2021 Plan”). The 2021 Plan allows for the grant of stock options, restricted stock, restricted stock units (“RSUs”), and stock appreciation rights. There are currently only RSUs granted under the 2021 Plan. The Company uses the grant-date fair value of equity awards to determine the compensation cost associated with each award. Compensation cost for service-based equity awards is recognized on a straight-line basis over the requisite service period, which is generally the vesting period. Compensation cost for awards with only service conditions that have graded vesting schedules is recognized on a straight-line basis over the requisite service period for the entire award such that compensation cost recognized at any date is at least equal to the portion of the grant-date value of the award that is vested at that date. Expense is reduced for actual forfeitures as they occur. The cost of stock-based compensation is recorded to personnel expense.

8

Earnings per share

Basic net income per common share is calculated using the two-class method. The two-class method is an earnings allocation formula that determines earnings per share for each share of common stock and participating security according to dividends declared (distributed earnings) and participation rights in undistributed earnings. Distributed and undistributed earnings are allocated between common and participating security shareholders based on their respective rights to receive dividends. According to the Company’s certificate of incorporation, the holders of Class A common stock and Class D common stock are entitled to share equally, on a per share basis, in dividends and other distributions of cash, property or shares of stock of the Company as may be declared by the board of directors.

Diluted net income per common share is calculated using the more dilutive of either the treasury stock method or the two-class method. The dilutive calculation considers common stock issuable under the assumed conversion of Class C common stock to Class A common stock as well as restricted stock units granted under the Corporation’s stock plans using the treasury stock method, if dilutive.

Concentration of Risk

The Company has concentrated its credit risk for cash by maintaining deposits in several financial institutions, which may at times exceed amounts covered by insurance provided by the Federal Deposit Insurance Corporation (“FDIC”). The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk related to cash.

Due to the nature of the mortgage lending industry, changes in interest rates may significantly impact revenue from originating mortgages and subsequent sales of loans to investors, which are the primary source of income for the Company. The Company originates mortgage loans on property located throughout the United States, with loans originated for property located in California totaling approximately 36% of total loan originations for the three months ended March 31, 2021.

The Company sells mortgage loans to various third-party investors. Three investors accounted for 47%, 33%, and 13% of the Company’s loan sales for the three months ended March 31, 2021. No other investors accounted for more than 5% of the loan sales for the three months ended March 31, 2021.

The Company funds loans through warehouse lines of credit. As of March 31, 2021, 23% and 9% of the Company's warehouse lines were payable to two separate lenders.

NOTE 2 – RECENT ACCOUNTING PRONOUNCEMENTS

    In September 2018, the FASB issued ASU 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” ASU 2018-15 was issued to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The ASU was effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The adoption of this guidance on January 1, 2020 did not have a significant effect on the Company’s consolidated financial statements given that (1) the changes under the ASU generally align with our existing accounting treatment of implementation costs incurred in a hosting arrangement that is a service contract and (2) the Company has not incurred a material amount of implementation costs in a hosting arrangement.

In December 2019, FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” The amendments in ASU 2019-12 simplify the accounting for income taxes by removing certain exceptions to the general principles in ASC Topic 740, Income Taxes related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies

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the accounting for transactions that result in a step-up in the tax basis of goodwill. The guidance clarifies that single-member limited liability companies and similar disregarded entities that are not subject to income tax are not required to recognize an allocation of consolidated income tax expense in their separate financial statements, but they could elect to do so. This ASU was effective for public business entities for fiscal years and interim periods beginning after December 15, 2020. The adoption of this guidance on January 1, 2021 did not have a significant effect on the Company’s consolidated financial statements.

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,” which provided optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the benefits of) reference rate reform on financial reporting. The amendments in ASU 2020-04 are elective and apply to all entities, subject to meeting certain criteria, that have contract, hedging relationships, and other transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU 2021-01 to clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. This guidance is effective upon issuance and allows application to contract changes as early as January 1, 2020. The Company is in the process of reviewing its warehouse and other lines of credit and debt obligations that use LIBOR as the reference rate and is currently evaluating the potential impact that the adoption of this ASU will have on the consolidated financial statements.

NOTE 3 – FAIR VALUE

The Company's consolidated financial statements include assets and liabilities that are measured based on their estimated fair values. Refer to Note 1 - Description of Business, Presentation and Summary of Significant Accounting Policies in the 2020 Form 10-K for information on the fair value hierarchy, valuation methodologies, and key inputs used to measure financial assets and liabilities recorded at fair value, as well as methods and assumptions used to estimate fair value disclosures for financial instruments not recorded at fair value in their entirety on a recurring basis.

The following tables present the carrying amount and estimated fair value of financial instruments included in the consolidated financial statements.

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	March 31, 2021
	Carrying Amount		Estimated Fair Value
			Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	630,457	$	630,457	$	—	$	—
Restricted cash	121,389		121,389		—		—
Loans held for sale, at fair value	8,787,756		—		8,787,756		—
Derivative assets, at fair value	760,519		—		448,722		311,797
Servicing rights, at fair value	1,772,099		—		—		1,772,099
Loans eligible for repurchase	842,970		—		842,970		—
Liabilities
Warehouse and other lines of credit	$	8,309,450	$	—	$	8,309,450	$	—
Derivative liabilities, at fair value	95,188		30,167		2		65,019
Servicing rights, at fair value(1)	6,011		—		—		6,011
Debt obligations:
2020-VF1 Notes	8,720		—		9,401		—
GMSR VFN	15,000		—		15,000		—
Term notes	198,791		—		200,000		—
Senior notes	1,082,578		—		1,134,340		—
Liability for loans eligible for repurchase	842,970		—		842,970		—

(1)Included in accounts payable and accrued expenses on the consolidated balance sheet.

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	December 31, 2020
	Carrying Amount		Estimated Fair Value
			Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	284,224	$	284,224	$	—	$	—
Restricted cash	204,465		204,465		—		—
Loans held for sale, at fair value	6,955,424		—		6,955,424		—
Derivative assets, at fair value	647,939		483		107		647,349
Servicing rights, at fair value	1,127,866		—		—		1,127,866
Loans eligible for repurchase	1,246,158		—		1,246,158		—
Liabilities
Warehouse and other lines of credit	$	6,577,429	$	—	$	6,577,429	$	—
Derivative liabilities, at fair value	168,169		4,299		163,566		304
Servicing rights, at fair value (1)	3,564		—		—		3,564
Debt obligations:
2020-VF1 Notes	7,571		—		8,593
GMSR VFN	15,000		—		15,000		—
Term notes	198,640		—		200,000		—
Senior notes	491,255				518,245
Liability for loans eligible for repurchase	1,246,158		—		1,246,158		—

(1)Included in accounts payable and accrued expenses on the consolidated balance sheet.

Financial Statement Items Measured at Fair Value on a Recurring Basis

The following tables presents the Company’s assets and liabilities that are measured at fair value on a recurring basis by fair value hierarchy as of the dates indicated.

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	March 31, 2021
	Recurring Fair Value Measurements of Assets (Liabilities) Using:
	Quoted Market Prices in Active Markets for Identical Assets  (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value Measurements
Fair value through net income:
Assets:
Loans held for sale	$	—	$	8,787,756	$	—	$	8,787,756
Derivative assets:
Interest rate lock commitments	—		—		311,797		311,797
Forward sales contracts	—		442,317		—		442,317
MBS put options	—		6,405		—		6,405
Servicing rights	—		—		1,772,099		1,772,099
Total assets at fair value	$	—	$	9,236,478	$	2,083,896	$	11,320,374
Liabilities:
Derivative liabilities:
Interest rate lock commitments	$	—	$	—	$	65,019	$	65,019
Interest rate swap futures	10,833		—		—		10,833
Forward sales contracts	—		2		—		2
Put options on treasuries	19,334		—		—		19,334
Servicing rights(1)	—		—		6,011		6,011
Total liabilities at fair value	$	30,167	$	2	$	71,030	$	101,199

(1)Included in accounts payable and accrued expenses on the consolidated balance sheet.

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	December 31, 2020
	Recurring Fair Value Measurements of Assets (Liabilities) Using:
	Quoted Market Prices in Active Markets for Identical Assets  (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value Measurements
Fair value through net income:
Assets:
Loans held for sale	$	—	$	6,955,424	$	—	$	6,955,424
Derivative assets:
Interest rate lock commitments	—		—		647,349		647,349
Forward sales contracts	—		107		—		107
Interest rate swap futures	483		—		—		483
Servicing rights	—		—		1,127,866		1,127,866
Total assets at fair value	$	483	$	6,955,531	$	1,775,215	$	8,731,229
Liabilities:
Derivative liabilities:
Interest rate lock commitments	$	—	$	—	$	304	$	304
Put options on treasuries	4,299		—		—		4,299
Forward sales contracts	—		163,566		—		163,566
Servicing rights (1)	—		—		3,564		3,564
Total liabilities at fair value	$	4,299	$	163,566	$	3,868	$	171,733

(1)Included in accounts payable and accrued expenses on the consolidated balance sheet.

The following presents the changes in the Company’s assets and liabilities that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

	Three Months Ended March 31, 2021
	Interest Rate Lock Commitments(1)		Servicing Rights, net(2)
Balance at beginning of period	$	647,045	$	1,124,302
Total net gains or losses included in
earnings (realized and unrealized)	388,548		642,421
Sales and settlements
Purchases	—		—
Sales	—		(635)
Settlements	(593,703)		—
Transfers of IRLCs to closed loans	(195,112)		—
Balance at end of period	$	246,778	$	1,766,088

(1) Interest rate lock commitments include both assets and liabilities and are shown net.

(2) Balance is net of $6.0 million servicing liability at March 31, 2021.

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	Three Months Ended March 31, 2020
	Interest Rate Lock Commitments(1)		Servicing Rights, net(2)		Contingent Consideration
Balance at beginning of period	$	128,208	$	444,443	$	(