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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 September 30, 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 shareLDIThe 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 November 8, 2021, 20,019,448 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, 174,093,440 shares of registrant’s Class C common stock were outstanding and 114,978,644 shares of registrant’s Class D common stock were outstanding.
 



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.


loanDepot, Inc.

Table of Contents

PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020
Consolidated Statements of Operations for the three and nine months September 30, 2021 and 2020
Consolidated Statements of Equity for the three and nine months ended September 30, 2021 and 2020
Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020
Notes to Consolidated Financial Statements
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
Signatures




PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
loanDepot, Inc.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
September 30,
2021		December 31,
2020
ASSETS(Unaudited)
Cash and cash equivalents$506,608 $284,224 
Restricted cash97,805 204,465 
Accounts receivable, net68,050 138,122 
Loans held for sale, at fair value (includes $2,462,653 and $1,595,442 pledged to creditors in securitization trusts at September 30, 2021 and December 31, 2020, respectively)
8,873,736 6,955,424 
Derivative assets, at fair value341,359 647,939 
Servicing rights, at fair value (includes $379,850 and $300,465 pledged to creditors in securitization trusts at September 30, 2021 and December 31, 2020, respectively)
1,841,512 1,127,866 
Trading securities, at fair value56,412 — 
Property and equipment, net103,556 85,002 
Operating lease right-of-use assets58,002 66,433 
Prepaid expenses and other assets108,720 77,241 
Loans eligible for repurchase632,722 1,246,158 
Investments in joint ventures18,353 17,528 
Goodwill and intangible assets, net42,443 42,826 
        Total assets$12,749,278 $10,893,228 
LIABILITIES AND EQUITY
Warehouse and other lines of credit$8,212,142 $6,577,429 
Accounts payable, accrued expenses and other liabilities715,615 446,370 
Derivative liabilities, at fair value48,899 168,169 
Liability for loans eligible for repurchase632,722 1,246,158 
Operating lease liability72,985 86,023 
Debt obligations, net1,408,751 712,466 
        Total liabilities11,091,114 9,236,615 
Commitments and contingencies (Note 16)
Class A common stock, $0.001 par value, 2,500,000,000 authorized, 19,575,763 issued as of September 30, 2021
$20 $— 
Class B common stock, $0.001 par value, 2,500,000,000 authorized, none issued as of September 30, 2021
— — 
Class C common stock, $0.001 par value, 2,500,000,000 authorized, 175,668,642 issued as of September 30, 2021
176 — 
Class D common stock, $0.001 par value, 2,500,000,000 authorized, 114,978,644 issued as of September 30, 2021
115 — 
Preferred stock, $0.001 par value, 50,000,000 authorized, none issued as of September 30, 2021
— — 
Treasury stock at cost, 1,591,549 shares as of September 30, 2021
(12,844)— 
Additional paid-in capital565,475 — 
Retained deficit(17,819)— 
Noncontrolling interest1,123,041 1,656,613 
Total equity1,658,164 1,656,613 
Total liabilities and equity$12,749,278 $10,893,228 
See accompanying notes to the unaudited consolidated financial statements.

1

loanDepot, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
(Unaudited)


Three Months Ended
September 30,		Nine Months Ended
September 30,
2021202020212020
REVENUES:
Interest income$71,020 $31,453 $187,625 $98,149 
Interest expense(56,785)(29,553)(165,130)(88,881)
Net interest income14,235 1,900 22,495 9,268 
Gain on origination and sale of loans, net821,275 1,251,141 2,647,328 2,767,140 
Origination income, net86,601 71,740 280,824 167,554 
Servicing fee income102,429 48,406 279,738 121,520 
Change in fair value of servicing rights, net(138,462)(29,313)(327,194)(109,817)
Other income37,678 25,056 116,487 58,115 
Total net revenues923,756 1,368,930 3,019,678 3,013,780 
EXPENSES:
Personnel expense449,152 441,818 1,523,012 1,022,734 
Marketing and advertising expense131,971 60,435 355,730 173,628 
Direct origination expense49,559 33,465 146,553 88,627 
General and administrative expense50,013 52,372 149,984 120,565 
Occupancy expense9,686 9,997 28,956 29,437 
Depreciation and amortization8,688 8,585 25,827 27,122 
Subservicing expense22,879 22,820 76,731 52,154 
Other interest expense22,823 10,522 57,261 32,117 
Total expenses744,771 640,014 2,364,054 1,546,384 
Income before income taxes178,985 728,916 655,624 1,467,396 
Income taxes24,708 567 47,210 1,457 
Net income154,277 728,349 608,414 1,465,939 
Net income attributable to noncontrolling interests102,802 728,349 503,503 1,465,939 
Net income attributable to loanDepot, Inc. $51,475 $— $104,911 $— 
Earnings per share:
Basic$0.40 N/A$0.82 N/A
Diluted$0.40 N/A$0.82 N/A
Weighted average shares outstanding:
Basic130,297,565 N/A127,941,331 N/A
Diluted130,297,565 N/A127,941,331 N/A

See accompanying notes to the unaudited consolidated financial statements.

2

loanDepot, Inc.
CONSOLIDATED STATEMENTS OF EQUITY
(Dollars in thousands)
(Unaudited)


Common stock issuedCommon stock $Treasury SharesAdditional paid-in capitalRetained Earnings (Deficit)Non-controlling InterestsTotal Equity
Class AClass CClass DClass AClass CClass D
Balance at June 30, 2020— — — $— $— $— $— $— $— $1,051,224 $1,051,224 
Redemptions— — — — — — — — — — — 
Stock-based compensation— — — — — — — — — 945 945 
Dividends— — — — — — — — — (146,997)(146,997)
Net income— — — — — — — — — 728,349 728,349 
Balance at September 30, 2020— — — $— $— $— $— $— $— $1,633,521 $1,633,521 
Balance at June 30, 202112,541,086 181,268,155 114,978,644 $13 $181 $115 $— $562,658 $(44,821)$1,050,688 $1,568,834 
Deferred taxes and other tax adjustments associated with the reorganization and IPO— — — — — — — 1,717 — — 1,717 
Net issuance of common stock under stock-based compensation plans5,443,128 (5,599,513)— 7 (5)— (12,844)(2)— — (12,844)
Dividends to Class A and Class D shareholders ($0.08 per share)
— — — — — — — — (4,668)(6,095)(10,763)
Dividends to Class C shareholders ($0.08 per share)
— (6,526)(8,517)(15,043)
Stock-based compensation— — — — — — — 1,102 — 1,495 2,597 
Distributions for taxes on behalf of shareholders, net— — — — — — — — (13,279)(17,332)(30,611)
Net income — — — — — — — — 51,475 102,802 154,277 
Balance at September 30, 202117,984,214 175,668,642 114,978,644 $20 $176 $115 $(12,844)$565,475 $(17,819)$1,123,041 $1,658,164 
See accompanying notes to the unaudited consolidated financial statements.

3

loanDepot, Inc.
CONSOLIDATED STATEMENTS OF EQUITY
(Dollars in thousands)
(Unaudited)


Common stock issuedCommon stock $Treasury StockAdditional paid-in capitalRetained Earnings (Deficit)Non-controlling InterestsTotal Equity
Class AClass CClass DClass AClass CClass D
Balance at December 31, 2019— — — $— $— $— $— $— $— $375,885 $375,885 
Redemptions— — — — — — — — — (65,308)(65,308)
Repurchase— — — — — — — — — (220)(220)
Stock-based compensation— — — — — — — — — 7,643 7,643 
Dividends— — — — — — — — — (150,418)(150,418)
Net income— — — — — — — — 1,465,939 1,465,939 
Balance at September 30, 2020— — — $— $— $— $— $— $— $1,633,521 $1,633,521 
Balance at December 31, 2020— — — $— $— $— $— $— $— $1,656,613 $1,656,613 
Distributions prior to the reorganization— — — — — — — — — (160,617)(160,617)
Stock-based compensation prior to the reorganization— — — — — — — — — 338 338 
Net income prior to the reorganization— — — — — — — — — 294,598 294,598 
Deferred taxes and other tax adjustments associated with the reorganization and IPO— — — — — — — (201,653)— — (201,653)
Effect of the reorganization2,215,687 181,789,329 121,368,600 2 182 121 — 740,629 — (740,934)— 
Effect of the IPO3,850,000 (2,394,000)(1,456,000)4 (2)(2)— — — — — 
Effect of the Greenshoe577,500 (359,100)(218,400)1 (1)— — — — — — 
Net issuance of common stock under stock-based compensation plans11,341,027 (3,367,587)(4,715,556)13 (3)(4)(12,844)(6)— (12,844)
Dividends to Class A and Class D shareholders ($0.77 per share)
— — — — — — — — (40,730)(58,033)(98,763)
Dividends to Class C shareholders ($0.78 per share)
— — — — — — — — (63,023)(89,885)(152,908)
Stock-based compensation subsequent to the reorganization— — — — — — 26,505 — 37,506 64,011 
Distributions for taxes on behalf of shareholders, net— — — — — — — (18,977)(25,450)(44,427)
Net income subsequent to the reorganization and IPO— — — — — — — 104,911 208,905 313,816 
Balance at September 30, 202117,984,214 175,668,642 114,978,644 $20 $176 $115 $(12,844)$565,475 $(17,819)$1,123,041 $1,658,164 
See accompanying notes to the unaudited consolidated financial statements.

4

loanDepot, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)



Nine Months Ended
September 30,
20212020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income$608,414 $1,465,939 
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization expense25,827 27,122 
Amortization of operating lease right-of-use asset16,932 19,215 
Amortization of debt issuance costs9,382 4,765 
Gain on origination and sale of loans(2,856,544)(2,256,438)
(Gain) loss on sale of servicing rights(1,453)3,074 
Fair value change in trading securities— — 
Provision for loss obligation on sold loans and servicing rights12,400 10,446 
Increase in provision for deferred income taxes37,269 — 
Fair value change in derivative assets312,586 (587,935)
Fair value change in derivative liabilities(119,270)49,455 
Premium received (paid) on derivatives4,376 (2,986)
Purchase of options contracts(10,383)— 
Fair value change in loans held for sale67,010 (114,173)
Fair value change in servicing rights224,812 232,598 
Stock-based compensation expense64,349 7,643 
Change in fair value of contingent consideration(77)32,650 
Originations of loans(107,717,154)(63,183,309)
Proceeds from sales of loans107,911,005 63,874,371 
Proceeds from principal payments119,822 43,307 
Payments to investors for loan repurchases(818,011)(150,274)
Disbursements from joint ventures8,765 6,633 
Changes in operating assets and liabilities:
Other changes in operating assets and liabilities41,105 99,754 
Net cash used in operating activities(2,058,838)(418,143)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment(43,830)(19,625)
Proceeds from sale of servicing rights332,931 6,023 
Cash flows received on trading securities617 — 
Investments in joint ventures(1,115)— 
Return of capital from joint ventures189 300 
Net cash flows provided by (used in) investing activities288,792 (13,302)

See accompanying notes to the unaudited consolidated financial statements.

5

loanDepot, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(Dollars in thousands)
(Unaudited)

Nine Months Ended
September 30,
20212020
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings on warehouse lines of credit$121,009,551 $63,014,591 
Repayment of borrowings on warehouse lines of credit(119,374,838)(61,880,096)
Proceeds from debt obligations1,179,037 169,100 
Payments on debt obligations(477,541)(55,000)
Payments of debt issuance costs(15,839)(4,503)
Payments for contingent consideration(113)(13,268)
Payments on financing lease obligation(1,911)(18,025)
Redemption of Class I Common Units— (38,400)
Payments on repurchase of units— (220)
Treasury stock purchased to net settle and withhold taxes on vested shares(12,844)— 
Dividends and shareholder distributions(419,732)(152,332)
Net cash provided by financing activities1,885,770 1,021,847 
Net change in cash and cash equivalents and restricted cash115,724 590,402 
Cash and cash equivalents and restricted cash at beginning of the period488,689 117,496 
Cash and cash equivalents and restricted cash at end of the period$604,413 $707,898 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid (received) during the period for:
Interest$180,143 $128,091 
Income taxes1,923 196 
Supplemental disclosure of noncash investing and financing activities
Operating leases right-of-use assets obtained in exchange for lease liabilities$8,501 $13,971 
Trading securities retained in securitizations57,031 — 
Purchase of equipment under financing leases168 2,468 


See accompanying notes to the unaudited consolidated financial statements.

6

loanDepot, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ are 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 and nine months ended September 30, 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”), mello Holdings, LLC (“Mello”), and mello Credit Strategies LLC (“MCS”). 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, securitizing, 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, Mello, and MCS. loanDepot, Inc. is the sole managing member of LD Holdings, and


7


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 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.

Financing lease obligations are included as part of accounts payable, accrued expenses and other liabilities on the consolidated balance sheets.
Gain on the origination and sale of loans, net was adjusted to exclude the change in fair value of forward sale contracts, including pair offs hedging MSRs, which are now included in the change in fair value of servicing rights, net on the consolidated statements of operations. The Company determined that this change would more appropriately reflect the hedged


8


item and better align with industry practice. Gain on origination and sale of loans, net and change in fair value of servicing rights, net, in the current and prior periods along with the related financial statement disclosures were adjusted to reflect this reclassification in reports beginning after the first quarter of 2021.

The Company has evaluated subsequent events for recognition or disclosure through the date of this report and has not identified any recordable or disclosable events that were not already reported in these consolidated financial statements or notes thereto.

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 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, Mello, and MCS. 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


9


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.

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 29% and 33% of total loan originations for the three and nine months ended September 30, 2021, respectively.

The Company sells mortgage loans to various third-party investors. Three investors accounted for 41%, 33%, and 14% of the Company’s loan sales for the nine months ended September 30, 2021. No other investors accounted for more than 5% of the loan sales for the three and nine months ended September 30, 2021.

The Company funds loans through warehouse lines of credit. As of September 30, 2021, 19% and 16% of the Company's warehouse lines were payable to two separate lenders.


NOTE 2 –