OppFi Inc

Note 1. Organization and Nature of Operations

OppFi Inc. (“OppFi”), formerly FG New America Acquisition Corp. (“FGNA”), collectively with its subsidiaries (“Company”), is a tech-enabled, mission-driven specialty finance platform that broadens the reach of community banks to extend credit access to everyday Americans. OppFi’s primary products are offered by its OppLoans platform. OppFi’s products also previously included its payroll deduction secured installment loan product, SalaryTap, and credit card product, OppFi Card.

On July 20, 2021 (“Closing Date”), the Company completed a business combination pursuant to the Business Combination Agreement (“Business Combination Agreement”), dated as of February 9, 2021, by and among Opportunity Financial, LLC (“OppFi-LLC”), a Delaware limited liability company, OppFi Shares, LLC (“OFS”), a Delaware limited liability company, and Todd Schwartz (“Members’ Representative”), in his capacity as the representative of the members of OppFi-LLC (“Members”) immediately prior to the closing (“Closing”). The transactions contemplated by the Business Combination Agreement are referred to herein as the “Business Combination.” At the Closing, FGNA changed its name to “OppFi Inc.” OppFi’s Class A common stock, par value $0.0001 per share (“Class A Common Stock”), and redeemable warrants exercisable for Class A Common Stock (“Public Warrants”) are listed on the New York Stock Exchange (“NYSE”) under the symbols “OPFI” and “OPFI WS,” respectively.

Following the Closing, the Company is organized in an “Up-C” structure in which substantially all of the assets and the business of the Company are held by OppFi-LLC and its subsidiaries, and OppFi’s only direct assets consist of Class A common units of OppFi-LLC (“OppFi Units”). As of September 30, 2024 and December 31, 2023, OppFi owned approximately 23.9% and 17.0% of the OppFi Units, respectively, and controls OppFi-LLC as the sole manager of OppFi-LLC in accordance with the terms of the Third Amended and Restated Limited Liability Company Agreement of OppFi-LLC (“OppFi A&R LLCA”). All remaining OppFi Units (“Retained OppFi Units”) are beneficially owned by the Members. OFS holds a controlling voting interest in OppFi through its ownership of shares of Class V common stock, par value $0.0001 per share, of OppFi (“Class V Voting Stock”) in an amount equal to the number of Retained OppFi Units and therefore has the ability to control OppFi-LLC.

Note 2. Significant Accounting Policies

Basis of presentation and consolidation: The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been omitted if they substantially duplicate the disclosures contained in the Company’s annual audited consolidated financial statements pursuant to such rules and regulations.

These unaudited consolidated financial statements and related notes should be read in conjunction with the Company’s audited consolidated financial statements and the related notes as of and for the year ended December 31, 2023 included in the 2023 Annual Report. In the opinion of the Company’s management, these unaudited consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for the fair statement of the results and financial position for the periods presented. The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results of operations that may be expected for the full year ending December 31, 2024.

The accompanying unaudited consolidated financial statements include the accounts of OppFi and OppFi-LLC with its wholly-owned subsidiaries and variable interest entities (“VIEs”) in which the Company is the primary beneficiary. As the primary beneficiary of the VIEs, the Company has consolidated the financial statements of the VIEs. All intercompany transactions and balances have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements include the accounts of Opportunity Financial SMB, LLC (“OppFi-SMB”), a wholly-owned indirect subsidiary of OppFi-LLC.

Segments: Segments are defined as components of an enterprise for which discrete financial information is available and evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. OppFi’s Chief Executive Officer is considered to be the CODM. The CODM reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. The Company’s operations constitute a single reportable segment.

Use of estimates: The preparation of the unaudited consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

The judgements, assumptions, and estimates used by management are based on historical experience, management’s experience and qualitative factors. The areas subject to significant estimation techniques are the determination of fair value of installment finance receivables and warrants, valuation allowance of deferred tax assets, stock-based compensation expense, income tax provision and equity method investment. For the aforementioned estimates, it is reasonably possible the recorded amounts or related disclosures could significantly change in the near future as new information is available.

Accounting policies: There have been no changes to the Company's significant accounting policies from those described in Part II, Item 8 - Financial Statements and Supplementary Data in the 2023 Annual Report.

Participation rights purchase obligations: OppFi-LLC has entered into bank partnership arrangements with certain banks insured by the FDIC. As part of these bank partnership arrangements, the banks have the ability to retain a percentage of the finance receivables they have originated, and OppFi-LLC’s participation rights are reduced by the percentage of the finance receivables retained by the banks. For the nine months ended September 30, 2024 and 2023, finance receivables originated through the bank partnership arrangements totaled 100% and 96%, respectively. As of September 30, 2024 and December 31, 2023, the unpaid principal balance of finance receivables outstanding for purchase was $16.7 million and $14.5 million, respectively.

Equity method investment: The Company accounts for its equity method investments in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 323, Investments - Equity Method and Joint Ventures, for equity investment in a company over which the Company has significant influence but does not own a controlling financial interest. Under the equity method of accounting, the initial investment, including transaction costs, is recorded at cost and the investment is subsequently adjusted for its proportionate share of the investee’s earnings or losses and amortization of basis differences. Basis differences represent differences between the cost of the investment and the underlying equity in net assets of the investment and are amortized into losses from equity method investments over the useful lives of the underlying assets that gave rise to them. Equity method goodwill is not amortized or tested for impairment; instead the equity method investment is tested for impairment.

On July 31, 2024 (the “Acquisition Date”), OppFi-SMB acquired a 35% equity interest in Bitty Holdings, LLC (“Bitty”) for (i) a cash payment of $15.2 million and (ii)734,851 OppFi Units, valued at approximately $2.8 million as of the Acquisition Date. The Company also incurred transaction costs of approximately $0.7 million. OppFi-SMB also holds call options issued by Bitty, which entitle OppFi-SMB to purchase additional equity interests of 30% and 35% of Bitty within a specific time period from the date that isthree andsix years from the Acquisition Date, respectively, atsix times the trailing twelve months post-tax earnings of Bitty as of June 30, 2027 and June 30, 2030, respectively. The Company determined that it does not have a controlling financial interest in Bitty but does exercise significant influence and therefore, the investment is accounted for under the equity method. For the three months ended September 30, 2024, the Company’s proportionate share of Bitty’s earnings, net of tax, was $0.6 million and is included in income from equity method investment on the consolidated statements of operations. The basis difference between the Company’s carrying value and proportionate share of Bitty’s book value is primarily related to consideration paid in excess of the Company’s proportionate share of Bitty’s book value on the Acquisition Date.

Capitalized technology: The Company capitalized software costs associated with application development totaling $3.4 million and $2.2 million for the three months ended September 30, 2024 and 2023, respectively, and $7.8 million and $6.7 million for the nine months ended September 30, 2024 and 2023, respectively. Amortization expense, which is included in depreciation and amortization on the consolidated statements of operations, totaled $2.1 million and $2.9 million for the three months ended September 30, 2024 and 2023, respectively, and $7.0 million and $9.2 million for the nine months ended September 30, 2024 and 2023, respectively.

Noncontrolling interests: Noncontrolling interests are held by the Members, who retained 76.1% and 83.0% of the economic ownership percentage of OppFi-LLC as of September 30, 2024 and December 31, 2023, respectively. In accordance with the provisions of FASBASC 810, Consolidation, the Company classifies the noncontrolling interests as a component of stockholders’ equity in the consolidated balance sheets. Additionally, the Company has presented the net income attributable to the Company and the noncontrolling ownership interests separately in the consolidated statements of operations.

Costs associated with exit activities: Costs associated with exit activities include contract termination costs and other costs associated with exit activities. In January 2024, the Company completed the previously disclosed wind down and exited its OppFi Card product. In accordance with the provisions of FASB ASC 420, Exit or Disposal Cost Obligations, the Company recognized a liability for $2.9 million for costs related to contracts associated with its OppFi Card product that will continue to be incurred under these contracts for their remaining term without economic benefit to the Company. The Company recorded these costs in exit costs on the consolidated statements of operations. As of September 30, 2024, the Company’s remaining liability totaled $2.2 million, which is included in accrued expenses on the consolidated balance sheets.

Emerging growth company: The Company is an emerging growth company as defined under the Jumpstart Our Business Startups Act of 2012 (“Jobs Act”). The Company is permitted to delay the adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements apply to private companies. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Recently adopted accounting pronouncements: None.

Accounting pronouncements issued and not yet adopted: In March 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The purpose of ASU 2020-04 is to provide optional guidance for a period of time related to accounting for reference rate reform on financial reporting. It is intended to reduce the potential burden of reviewing contract modifications related to discontinued rates. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope. The purpose of ASU 2021-01 is to expand guidance on contract modifications and hedge accounting. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. The purpose of ASU 2022-06 is to defer the effective date of the provisions of ASU 2020-04 from December 31, 2022 to December 31, 2024. The Company did not utilize the optional expedients and exceptions provided by ASU 2020-04 during the quarter ended September 30, 2024. This guidance is not expected to have a material impact on the Company’s consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The purpose of ASU 2023-07 is to provide guidance on new segment disclosures, including significant segment expenses. The guidance is effective for annual reporting periods beginning after December 15, 2023 and interim periods within the annual reporting period beginning after December 15, 2024. Early adoption is permitted. This guidance is not expected to have a material impact on the Company’s consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The purpose of ASU 2023-09 is to provide guidance on the enhanced income tax disclosure requirements. The guidance requires an entity to disclose specific categories in the effective tax rate reconciliation as well as provide additional information for reconciling items that meet a quantitative threshold. Further, the ASU requires certain disclosures of state versus federal income tax expense and taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. The guidance is effective for annual reporting periods beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact on the Company’s consolidated financial statements.

Note 3. Finance Receivables

Finance receivables at fair value: The components of installment finance receivables at fair value as of September 30, 2024 and December 31, 2023 were as follows (in thousands):

The Company’s policy is to discontinue and reverse the accrual of interest income on installment finance receivables at the earlier of 60 days past due on a recency basis or 90 days past due on a contractual basis. As of September 30, 2024 and December 31, 2023, the aggregate unpaid principal balance of installment finance receivables 90 days or more past due on a contractual basis was $13.4 million and $15.2 million, respectively. As of September 30, 2024 and December 31, 2023, the fair value of installment finance receivables 90 days or more past due on a contractual basis was $0.5 million and $0.5 million, respectively.

Changes in the fair value of installment finance receivables at fair value for the three and nine months ended September 30, 2024 and 2023 were as follows (in thousands):

The estimated amount of losses included in earnings attributable to changes in instrument-specific credit risk was $2.9 million and $5.9 million for the three months ended September 30, 2024 and 2023, respectively, and was $11.3 million and $24.7 million for the nine months ended September 30, 2024 and 2023, respectively. The credit risk component was driven by the credit loss assumption applied in the discounted cash flow model, particularly the default rate. This assumption was primarily developed based on historical data of the installment loan portfolio.

Finance receivables at amortized cost, net: The components of finance receivables at amortized cost as of September 30, 2024 and December 31, 2023 were as follows (in thousands):

In January 2024, the Company completed the wind down and exited its OppFi Card revolving charge account product; as a result, the Company charged-off its remaining OppFi Card finance receivables. As of September 30, 2024, the Company’s finance receivables measured at amortized cost were comprised solely of the SalaryTap finance receivables.

Changes in the allowance for credit losses on finance receivables at amortized cost for the three and nine months ended September 30, 2024 and 2023 were as follows (in thousands):

The following is an assessment of the credit quality of finance receivables measured at amortized cost and presents the recency and contractual delinquency by year of origination as of September 30, 2024 and December 31, 2023 (in thousands):

In accordance with the Company’s income recognition policy, finance receivables at amortized cost in non-accrual status as of September 30, 2024 and December 31, 2023 were $8 thousand and $30 thousand, respectively.

Note 4. Property, Equipment and Software, Net

Property, equipment and software consisted of the following (in thousands):

Depreciation and amortization expense was $2.3 million and $3.1 million for the three months ended September 30, 2024 and 2023, respectively, and was $7.5 million and $9.8 million for the nine months ended September 30, 2024 and 2023, respectively.

Note 5. Accrued Expenses

Accrued expenses consisted of the following (in thousands):

Note 6. Leases

The components of total lease cost for three and nine months ended September 30, 2024 and 2023 were as follows (in thousands):

Supplemental cash flow information related to the leases for the three and nine months ended September 30, 2024 and 2023 was as follows (in thousands):

The weighted average remaining lease term and discount rate as of September 30, 2024 and December 31, 2023 were as follows:

Future minimum lease payments as of September 30, 2024 were as follows (in thousands):

Note 7. Borrowing

The following is a summary of the Company’s outstanding borrowings as of September 30, 2024 and December 31, 2023, including borrowing capacity as of September 30, 2024 (in thousands):

Senior debt, net:

Revolving line of credit - Opportunity Funding SPE IX, LLC

On March 19, 2024, the Company entered into an amendment (the “First Amendment”) to its revolving credit agreement with UMB Bank, N.A. The First Amendment, among other things, removed a collateral performance trigger that the Company had previously been out of compliance with.

Revolving line of credit - Gray Rock SPV LLC

On April 12, 2024, Gray Rock SPV LLC entered into an amendment (the “Fourth Amendment”) to its revolving line of credit agreement. The Fourth Amendment, among other things, extended the maturity date from April 15, 2025 to October 16, 2026 and increased the applicable margin rate from 7.25% to 7.45%.

Term loan, net

On May 30, 2024, the Company entered into an amendment (the “Eleventh Amendment”) to its senior secured multi-draw term loan agreement (the “Loan Agreement”). The Eleventh Amendment, among other things, replaced the use of the synthetic LIBOR rates with Term Secured Overnight Financing Rate as the benchmark interest rate and amended the optional prepayments provision to allow the Company to voluntarily prepay in part, in minimum amounts of $10.0 million and increments of $10.0 million thereof.

On September 13, 2024, the Company entered into an amendment (the “Twelfth Amendment”) to the Loan Agreement. The Twelfth Amendment, among other things, extended the maturity date from March 30, 2025 to September 30, 2025 and amended the repayment provision to require OppFi-LLC to repay outstanding principal in installment amounts of $20.0 million on the last day of the fiscal quarter ending on March 31, 2025 and $10.0 million on the last day of each subsequent fiscal quarter.

Certain of the Company’s foregoing credit facilities that consist of term loan and revolving loan facilities are subject to provisions that provide for a cross-default in the event certain covenants under the relevant agreements are breached.

Total interest expense related to the Company’s senior debt, which is included in interest expense and amortized debt issuance costs in the consolidated statements of operations, was $10.7 million and $11.4 million for the three months ended September 30, 2024 and 2023, respectively, and was $31.9 million and $32.7 million for the nine months ended September 30, 2024 and 2023, respectively. Additionally, the Company has capitalized $14.8 million in debt issuance costs in connection with the Company’s senior debt as of September 30, 2024. Amortized debt issuance costs associated with the Company’s senior debt, which is included in interest expense and amortized debt issuance costs in the consolidated statements of operations, were $0.6 million and $0.6 million for the three months ended September 30, 2024 and 2023, respectively, and were $1.8 million and $1.9 million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024 and December 31, 2023, unamortized debt issuance costs associated with the Company’s senior debt totaled $3.4 million and $4.3 million, respectively, of which $3.2 million and $3.8 million related to the revolving lines of credit, respectively, and $0.2 million and $0.5 million related to the term loan, respectively.

Note payable: As of September 30, 2024, the borrowing under this note payable was paid in full. Total interest expense related to notes payable, which is included in interest expense and amortized debt issuance costs in the consolidated statements of operations, was $13 thousand and $26 thousand for the three months ended September 30, 2024 and 2023, respectively, and was $65 thousand and $77 thousand for the nine months ended September 30, 2024 and 2023, respectively.

Secured borrowing payable: On February 16, 2023, the borrowings under the Company’s previous secured borrowing payable, with Opportunity Funding SPE II, LLC as borrower, were paid in full, of which borrowings totaling $0.1 million were forgiven. Subsequent to repayment, OppFi-LLC terminated the preferred return agreement. No interest expense was recognized related to secured borrowings for the three and nine months ended September 30, 2024. No interest expense was recognized related to secured borrowings for the three months ended September 30, 2023. Interest expense related to this facility was $10 thousand for the nine months ended September 30, 2023. For the three and nine months ended September 30, 2024 and 2023, there wereno amortized debt issuance costs related to the secured borrowing payable.

As of September 30, 2024, required payments for all borrowings, excluding revolving lines of credit, for each of the next five years were as follows (in thousands):

Note 8. Warrant Liabilities

As of September 30, 2024 and December 31, 2023, there were 11,887,500 Public Warrants and 3,451,937 Private Placement Warrants outstanding. As of September 30, 2024 and December 31, 2023, the Company recorded warrant liabilities of $4.1 million and $6.9 million, respectively, in the consolidated balance sheets. The change in fair value of the Public Warrants and Private Placement Warrants was increased by $0.9 million and $0.5 million, respectively, for the three months ended September 30, 2024 and was decreased by $2.2 million and $0.6 million, respectively, for nine months ended September 30, 2024. The change in fair value of the Public Warrants and Private Placement Warrants was decreased by $0.2 million and $0.1 million, respectively, for the three months ended September 30, 2023 and was decreased by $0.6 million and $0.2 million, respectively, for nine months ended September 30, 2023.

Note 9. Stockholders’ Equity

Share repurchase: On April 9, 2024, the Company announced that its Board of Directors (the “Board”) had authorized a program to repurchase (the “Repurchase Program”) up to $20.0 million in the aggregate of shares of the Company’s Class A Common Stock. Repurchases under the Repurchase Program may be made from time to time, on the open market, in privately negotiated transactions, or by other methods, at the discretion of the management of the Company and in accordance with the limitations set forth in Rule 10b-18 promulgated under the Exchange Act and other applicable legal requirements, including restrictions in the Company’s existing credit facilities. Repurchases may be made pursuant to any trading plan that may be adopted in accordance with SEC Rule 10b5-1, which would permit Class A Common Stock to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. The timing and amount of the repurchases will depend on market conditions and other requirements. The Repurchase Program does not obligate the Company to repurchase any dollar amount or number of shares and the Repurchase Program may be extended, modified, suspended, or discontinued at any time. For each share of Class A Common Stock that the Company repurchases under the Repurchase Program, OppFi-LLC, the Company’s direct subsidiary, will redeemone Class A common unit of OppFi-LLC held by the Company, decreasing the percentage ownership of OppFi-LLC by the Company and relatively increasing the ownership by the other members. The Repurchase Program will expire in April 2027.

During the three months ended September 30, 2024, OppFi repurchased 264,995 shares of Class A Common Stock, which were held as treasury stock as of September 30, 2024, for an aggregate purchase price of $1.0 million at an average purchase price per share of $3.82. During the nine months ended September 30, 2024, the Company repurchased 1,034,710 shares of Class A Common Stock, which were held as treasury stock as of September 30, 2024, for an aggregate purchase price of $3.6 million at an average purchase price per share of $3.41. As of September 30, 2024, $16.4 million of the repurchase authorization under the Repurchase Program remained available.

Dividend paid: On May 1, 2024, the Company paid a dividend of $0.12 per share ($2.4 million in the aggregate) to stockholders of record of the Company’s Class A Common Stock as of the close of business on April 19, 2024.

Member Distributions: On May 1, 2024, OppFi-LLC paid a special distribution of $0.12 per share ($10.3 million in the aggregate), which is included in member distributions in the consolidated statements of stockholders’ equity, to holders of record of OppFi Units as of the close of business on April 19, 2024.

Earnout Units: On July 21, 2024, the Company determined that the 25,500,000 earnout Class A common units (the “Earnout Units”) of OppFi-LLC issued pursuant to the Business Combination Agreement, were not earned pursuant to the earnout provisions of the Business Combination Agreement on or prior to the three (3) year anniversary of the closing date of the Business Combination. Accordingly, on such date the Earnout Units were forfeited, for no consideration, by the holders thereof to OppFi-LLC and the 25,500,000 shares of Class V Voting Stock associated with the Earnout Units were forfeited, for no consideration, by OFS to the Company.

Class V Voting Stock: In connection with the acquisition of the equity interest in Bitty, the Company also issued 734,851 shares of Class V Voting Stock to OFS, which number of shares of Class V Voting Stock was equal to the number of OppFi Units issued to Blaze Capital Funding 5, LLC, a Wyoming limited liability company, as the seller of the Bitty equity interests.

Note 10. Stock-Based Compensation

On July 20, 2021, the Company established the OppFi Inc. 2021 Equity Incentive Plan (“Plan”), which provides for the grant of awards in the form of options, stock appreciation rights, restricted stock awards, restricted stock units, performance shares, performance units, cash-based awards, and other stock-based awards to employees, non-employee directors, officers, and consultants. As of September 30, 2024, the maximum aggregate number of shares of Class A Common Stock that may be issued under the Plan (including from outstanding awards) was 22,794,973 shares. As of September 30, 2024, the Company had only granted awards in the form of options, restricted stock units, and performance stock units.

Stock options: A summary of the Company’s stock option activity for the nine months ended September 30, 2024 is as follows:

The Company recognized stock-based compensation expense related to stock options of $0.1 million and $0.2 million for the three months ended September 30, 2024 and 2023, respectively, and $0.4 million and $0.5 million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024 the Company had unrecognized stock-based compensation of $0.5 million related to unvested stock options that is expected to be recognized over an estimated weighted-average period of approximately 1.0 years.

Restricted stock units: A summary of the Company’s restricted stock units (“RSUs”) activity for the nine months ended September 30, 2024 is as follows:

The Company recognized stock-based compensation related to RSUs of $0.9 million and $0.9 million for the three months ended September 30, 2024 and 2023, respectively, and $3.6 million and $2.5 million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, total unrecognized compensation expense related to RSUs was $5.8 million, which will be recognized over a weighted-average vesting period of approximately 2.7 years.

Performance stock units: A summary of the Company’s performance stock units (“PSUs”) activity for the nine months ended September 30, 2024 is as follows:

The Company recognized stock-based compensation related to PSUs of $26 thousand and $0.1 million for the three months ended September 30, 2024 and 2023, respectively, and $93 thousand and $0.1 million for the nine months ended September 30,

2024 and 2023, respectively. As of September 30, 2024, total unrecognized compensation expense related to PSUs was $0.1 million, which will be recognized over a weighted-average vesting period of approximately 1.5 years.

Employee Stock Purchase Plan: On July 20, 2021, the Company established the OppFi Inc. 2021 Employee Stock Purchase Plan (“ESPP”). As of September 30, 2024, the maximum aggregate number of shares of Class A Common Stock that may be issued under the ESPP was 1,672,427 and may consist of authorized but unissued or reacquired shares of Class A Common Stock.

As of September 30, 2024 and December 31, 2023, there were 361,292 and 234,249 shares of the Company’s Class A Common Stock purchased under the ESPP, respectively. As of September 30, 2024 and December 31, 2023, ESPP employee payroll contributions of $0.1 million and $0.1 million, respectively, are included within accrued expenses on the consolidated balance sheets. Payroll contributions accrued as of September 30, 2024 will be used to purchase shares at the end of the ESPP offering period ending on December 31, 2024. Payroll contributions ultimately used to purchase shares are reclassified to stockholders’ equity on the purchase date. The Company recognized ESPP compensation expense of $18 thousand and $23 thousand for the three months ended September 30, 2024 and 2023, respectively, and $64 thousand and $68 thousand for the nine months ended September 30, 2024 and 2023, respectively.

Note 11. Income Taxes

For the three months ended September 30, 2024, OppFi recorded an income tax expense of $2.3 million and reported consolidated income before income taxes of $34.4 million, resulting in a 6.7% effective income tax rate. For the three months ended September 30, 2023, OppFi recorded an income tax expense of $0.5 million and reported consolidated income before income taxes of $16.0 million, resulting in a 2.8% effective income tax rate. For the nine months ended September 30, 2024, OppFi recorded an income tax expense of $3.6 million and reported consolidated income before income taxes of$73.5 million, resulting in a 4.9% effective tax rate. For the nine months ended September 30, 2023, OppFi recorded an income tax expense of $1.3 million and reported consolidated income before income taxes of $38.8 million, resulting in a 3.3% effective income tax rate.

OppFi’s effective income tax rates for the three and nine months ended September 30, 2024 and 2023, differ from the federal statutory income tax rate of 21% primarily due to the noncontrolling interest in the Up-C partnership structure, nondeductible expenses, state income taxes, warrant liability, and discrete tax items. The warrant liability is recorded by OppFi and is a fair market value adjustment of the warrant liability and is a permanent difference between GAAP and taxable income, which impacts OppFi’s effective income tax rate. For the three months ended September 30, 2024, one discrete item was recorded of $0.1 million related to stock compensation, which in total decreased the effective tax rate by 0.3%. Excluding the aforementioned discrete item, the effective tax rate for the three months ended September 30, 2024 would have been 7.0%. For the three months ended September 30, 2023, one discrete item was recorded consisting of a $45 thousand benefit related to stock compensation, which in total decreased the effective tax rate by 0.3%. Excluding the aforementioned discrete item, the effective tax rate for the three months ended September 30, 2023 would have been 3.1%. For the nine months ended September 30, 2024, two discrete items were recorded consisting of $17 thousand expense related to a prior period adjustment based on FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” and $0.3 million benefit related to stock compensation, which in total decreased the effective tax rate by 0.4%. Excluding the aforementioned discrete items, the effective tax rate for the nine months ended September 30, 2024, would have been 5.3%. For the nine months ended September 30, 2023, two discrete items were recorded consisting of a $7 thousand expense related to a prior period state tax adjustment during the three months ended March 31, 2023, and a $48 thousand benefit related to stock compensation, which in total decreased the effective tax rate by 0.1%. Excluding the aforementioned discrete items, the effective tax rate for the nine months ended September 30, 2023, would have been 3.4%.

OppFi is subject to a 21% federal income tax rate on its activities and its distributive share of income from OppFi-LLC, as well as various state and local income taxes. As of September 30, 2024 and 2023, OppFi owned 23.9% and 15.7%, respectively, of the outstanding units of OppFi-LLC and considers appropriate tax accounting only on this portion of OppFi-LLC’s activity. Additionally, OppFi’s income tax rate varies from the 21% statutory federal income tax rate primarily due to a permanent difference related to the adjustment of the warrant liabilities recorded by OppFi. This fair value adjustment of the warrant liabilities represents a large portion of OppFi’s pre-tax book income or loss and is a permanent difference between GAAP and taxable income, which impacts OppFi’s effective income tax rate.

As of September 30, 2024 and December 31, 2023, OppFi recorded an unrecognized tax benefit of $55 thousand and $38 thousand, respectively, related to research and development credits allocated from OppFi-LLC. ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There wereno amounts accrued for the payment of interest and penalties as of September 30, 2024 and December 31, 2023. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviations from its position. The Company is subject to income tax examinations by major taxing authorities since inception.

Note 12. Fair Value Measurements

Fair value on a nonrecurring basis: The Company has no assets or liabilities measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances.

Fair value measurement on a recurring basis: The Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023 were as follows (in thousands):

(1) The Company primarily estimates the fair value of its installment finance receivables portfolio using discounted cash flow models that have been internally developed. The models use inputs that are unobservable but reflect the Company’s best estimates of the assumptions a market participant would use to calculate fair value.

(2) The fair value measurement for the Public Warrants is categorized as Level 1 due to the use of an observable market quote in an active market under the ticker OPFI WS.

(3) The fair value of the Private Placement Warrants is measured using a Black-Scholes option-pricing model; accordingly, the fair value measurement for the Private Placement Warrants is categorized as Level 3.

During the three and nine months ended September 30, 2024 and 2023, there were no transfers of assets or liabilities in or out of Level 3 fair value measurements.

The following table presents quantitative information about the significant unobservable inputs used for the Company’s installment finance receivables fair value measurements as of September 30, 2024 and December 31, 2023:

The following table presents the significant assumptions used for the Company’s Private Placement Warrants as of September 30, 2024 and December 31, 2023:

Financial assets and liabilities not measured at fair value: The following table presents the carrying value and estimated fair values of financial assets and liabilities disclosed but not carried at fair value and the level within the fair value hierarchy as of September 30, 2024 and December 31, 2023 (in thousands):

Note 13. Commitments, Contingencies and Related Party Transactions

Legal contingencies: Due to the nature of its business activities, the Company is subject to extensive regulations and legal actions and is currently involved in certain legal proceedings, including class action allegations, and regulatory matters, which arise in the normal course of business. In accordance with applicable accounting guidance, the Company establishes an accrued liability for legal proceedings and regulatory matters when those matters present loss contingencies that are both probable and reasonably estimable.

The Company has received inquiries from certain agencies and states on its lending compliance, the validity of the bank partnership model, and its ability to facilitate the servicing of bank originated loans. Management is confident that its lending practices and the bank partnership structure, in addition to the Company’s technologies, services, and overall relationship with its bank partners, complies with state and federal laws. However, the inquiries are still in process and the outcome is unknown at this time.

The Company is vigorously defending all legal proceedings and regulatory matters. Except as described below, management does not believe that the resolution of any currently pending legal proceedings and regulatory matters will have a material adverse effect on the Company’s financial condition, results of operations, or cash flows.

On March 7, 2022, the Company filed a complaint for declaratory and injunctive relief (“Complaint”) against the Commissioner (in her official capacity) of the Department of Financial Protection and Innovation of the State of California (“Defendant”) in the Superior Court of the State of California, County of Los Angeles, Central Division (“Court”). The Complaint seeks a declaration that the interest rate caps set forth in the California Financing Law, as amended by the Fair Access to Credit Act, a/k/a AB 539 (“CFL”), do not apply to loans that are originated by the Company’s federally-insured state-chartered bank partners and serviced through the Company’s technology and service platform pursuant to a contractual arrangement with each such bank (“Program”). The Complaint further seeks injunctive relief against the Defendant, preventing the Defendant from enforcing interest rate caps under the CFL against the Company based on activities related to the Program. On April 8, 2022, the Defendant filed a cross-complaint against the Company attempting to enforce the CFL against the Company and, among other things, void loans that are originated by the Company’s federally-insured state-chartered bank partners through the Program in California and seek financial penalties against the Company. On October 17, 2022, the Company filed a cross-complaint against the Defendant seeking declaratory relief for issuing an underground regulation to determine the “true lender” under the CFL without complying with California’s Administrative Procedures Act. On January 30, 2023, the Defendant filed a motion for a preliminary injunction seeking to enjoin the Company from providing services to FinWise in connection with loans made to California consumers to the extent that such loans are in excess of California’s interest rate caps. On September 26, 2023, the Court sustained the Defendant’s demurrer to the Company’s cross-complaint with leave to amend. On October 26, 2023, the Company filed its amended cross-complaint. On October 30, 2023, the Defendant’s motion for preliminary injunction was denied. On November 27, 2023, the Defendant filed her answer to the Company’s cross-complaint. The Company intends to continue to aggressively prosecute the claims set forth in the Complaint and vigorously defend itself and its position as the matter proceeds through the court process. The Company believes that the Defendant’s position is without merit as explained in the Complaint.

On July 20, 2023, a stockholder filed a putative class action complaint in the Court of Chancery of the State of Delaware (Case No. 2023-0737) on behalf of a purported class of Company stockholders naming certain of FGNA’s former directors and officers and its controlling stockholder, FG New America Investors, LLC (the “Sponsor”), as defendants. The lawsuit alleges that the defendants breached their fiduciary duties to the stockholders of FGNA stemming from FGNA’s merger with OppFi-LLC and that the defendants were unjustly enriched. The lawsuit seeks, among other relief, unspecified damages, redemption rights, and attorneys’ fees. Neither the Company nor any of the Company’s current officers or directors are parties to the lawsuit. The Company is obligated to indemnify certain of the defendants in the action. The Company has tendered defense of this action under its directors’ and officers' insurance policy. Due to the early stage of this case, neither the likelihood that a loss, if any, will be realized, nor an estimate of the possible loss or range of loss, if any, can be determined.

Related party transactions: In connection with the Business Combination, OppFi entered into the Tax Receivable Agreement with the Members and the Members’ Representative (the “Tax Receivable Agreement”). The Tax Receivable Agreement provides for payment to the Members of 90% of the U.S. federal, state and local income tax savings realized by the Company as a result of the increases in tax basis and certain other tax benefits related to the transactions contemplated under the Business Combination Agreement and the exchange of Retained OppFi Units for Class A Common Stock or cash.

Note 14. Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of finance receivables. As of September 30, 2024, consumers living primarily in Texas, Florida and Virginia made up approximately 14%,12% and 11%, respectively, of the Company’s portfolio of finance receivables. As of September 30, 2024, there were no other states that made up more than 10% or more of the Company’s portfolio of finance receivables. As of

December 31, 2023, consumers living primarily in Texas, Florida and Virginia made up approximately 16%,12%, and 11%, respectively, of the Company’s portfolio of finance receivables. Furthermore, such consumers’ ability to honor their installment contracts may be affected by economic conditions in these areas. The Company is also exposed to a concentration of credit risk inherent in providing alternate financing programs to borrowers who cannot obtain traditional bank financing.

Note 15. Retirement Plan

The Company sponsors a 401(k) retirement plan (“401(k) Plan”) for its employees. Full time employees (except certain non-resident aliens) and others, as defined in the plan document, who are age 21 and older are eligible to participate in the 401(k) Plan. The 401(k) Plan participants may elect to contribute a portion of their eligible compensation to the 401(k) Plan. The Company has elected amatching contribution up to 4% on eligible employee compensation. The Company’s contribution, which is included in salaries and employee benefits in the consolidated statements of operations, totaled $0.4 million and $0.4 million for the three months ended September 30, 2024 and 2023, respectively, and $1.1 million and $1.2 million for the nine months ended September 30, 2024 and 2023, respectively.

Note 16. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2024 and 2023 (in thousands, except share and per share data):

The following table presents securities that have been excluded from the calculation of diluted earnings per share as their effect would have been anti-dilutive for the three and nine months ended September 30, 2024 and 2023:

Note 17. Subsequent Events

The Company has evaluated the impact of events that have occurred through the date these financial statements were issued and has not identified any subsequent events that required disclosure.