UWM Holdings Corporation Announces First Quarter 2021 Results

$860 Million in 1Q21 Net Income;
$49.1 Billion in 1Q21 Loan Volume

PONTIAC, Mich.–(BUSINESS WIRE)–$UWMC #earnings—UWM Holdings Corporation (NYSE: UWMC), the publicly traded indirect parent of United Wholesale Mortgage (“UWM”), the #1 wholesale mortgage lender in America, today announced the results for the first quarter ended March 31, 2021. UWMC reported 1Q21 net income of $860 million, a 42x increase over 1Q20 net income of $20.3 million. Additionally, the Board of Directors of UWMC declared a quarterly dividend of $0.10 per share on the outstanding shares of Class A Common Stock. The dividend is payable on July 6, 2021 to stockholders of record at the close of business on June 10, 2021. The Board of Directors also authorized a share repurchase program of up to $300 million over the next 24 months, beginning on May 11, 2021.

Mat Ishbia, Chairman and CEO of UWMC said: “The first quarter of 2021 was not only the best first quarter in our 35-year history, it also marked our first quarter as a public company and solidified our foundation for growth. We believe we now have the capital, liquidity, technology, campus and staffing necessary to further scale our business and grow to become the largest mortgage originator in the country. We welcome the shift to more of a purchase market and the pressure on margins as we believe our business model is built to outperform competitors under those conditions. Moving forward, our priorities remain the same: our people, the industry-leading service we offer to our brokers, and creating long-term value for our shareholders.”

First Quarter 2021 Financial Highlights

Originations of $49.1 billion in loan volume, a 16% increase from the 1Q20 $42.4 billion loan volume

Total gain margin of 219 bps in 1Q21 compared to 95 bps in 1Q20

First quarter net income of $860.0 million, as compared to $20.3 million for 1Q20

Increased total equity to $2.78 billion at March 31, 2021 as compared to $681.5 million at March 31, 2020

Unpaid principal balance of mortgage servicing rights increased to $221.0 billion in 1Q21 from $85.6 billion in 1Q20

Production and Income Statement Highlights (dollars in thousands)

 

 

Q1 2021

 

Q4 2020

 

Q1 2020

Closed loan volume(1)

 

$

49,094,240

 

 

$

54,678,923

 

 

$

42,441,727

 

Total gain margin(1)(2)

 

2.19

%

 

3.05

%

 

0.95

%

Net income

 

$

860,005

 

 

$

1,371,791

 

 

$

20,349

 

Adjusted net income(3)

 

$

665,318

 

 

$

1,046,303

 

 

$

15,510

 

 

(1)

Key operational metric – see discussion below.

 

(2)

Represents total loan production income divided by total production.

 

(3)

Non-GAAP metric – see discussion below.

Balance Sheet Highlights as of Period-end (dollars in thousands)

 

 

Q1 2021

 

Q4 2020

 

Q1 2020

Cash and cash equivalents

 

$

1,592,663

 

 

$

1,223,837

 

 

$

56,207

 

Mortgage loans at fair value

 

5,503,271

 

 

7,916,515

 

 

5,572,903

 

Mortgage servicing rights (fair value at Q1 2021; amortized cost in Q4 2020 and Q1 2020)(1)

 

2,300,434

 

 

1,756,864

 

 

721,202

 

Total assets

 

10,372,626

 

 

11,493,476

 

 

7,641,791

 

Non-funding debt (2)

 

1,270,167

 

 

1,159,283

 

 

500,278

 

Total equity

 

2,778,036

 

 

2,374,280

 

 

681,495

 

Non-funding debt to equity (2)

 

0.46

 

 

0.49

 

 

0.73

 

 
(1)

The Company elected the fair value method of accounting for mortgage servicing rights effective January 1, 2021.

 
(2)

Non-GAAP metric – please see discussion below.

Mortgage Servicing Rights (dollars in thousands)

 

 

Q1 2021

 

Q4 2020

 

Q1 2020

Unpaid principal balance

 

$

220,978,670

 

 

$

188,268,883

 

 

$

85,645,355

 

Weighted average interest rate

 

3.00

%

 

3.13

%

 

3.79

%

Weighted average age (months)

 

7

 

 

6

 

 

6

 

Operational and Community Highlights

We maintained an average application to clear to close time (“Days to Close”) of approximately 17 days in 1Q21 as compared to 18 days in 4Q20, while management estimates that the first quarter industry average remains in line with previous performance, which was 52 days for the fourth quarter 2020

Our 1.54% 60+ days delinquency and our 1.44% forbearance rates, as of March 31, 2021, are significantly better than the industry averages of 4.3% and 4.8%, highlighting our strong credit quality

Hired industry veteran Desmond P. Smith, previously an executive for Fannie Mae, to be the company’s first Chief Growth Officer

Our team members completed 457,052 training hours in 1Q21 and UWM was ranked #1 on Training magazine’s Training Top 100 Award winners list

We continued to support our community by purchasing food from locally owned restaurants and having the food delivered to homeless shelters, serving nearly 10,000 meals to those in need

Technology Update

Continued investment into machine learning and Robotic Process Automation (RPA) to further advance our operational excellence while driving down costs

Continued to invest in our technology platform and on-site teams resulting in additional operational efficiencies focused on reducing costs, reducing closing times, and increasing loan processing speed

Our continued investments in the cloud, as well as technologies that increase Underwriting efficiency, such as Automated Document Recognition and Optical Character Recognition, have strengthened our technology advantage while driving greater efficiency, and reducing both fixed and variable costs

Product and Investor Mix – Unpaid Principal Balance as of Period-end (dollars in thousands)

Purchase:

 

Q1 2021

 

Q4 2020

 

Q1 2020

Conventional

 

$

10,310,924

 

 

$

10,638,926

 

 

$

8,076,736

 

Jumbo

 

13,264

 

 

661

 

 

521,255

 

Government

 

1,893,354

 

 

1,457,197

 

 

3,927,328

 

Total Purchase

 

$

12,217,542

 

 

$

12,096,784

 

 

$

12,525,319

 

 

 

 

 

 

 

 

Refinance:

 

Q1 2021

 

Q4 2020

 

Q1 2020

Conventional

 

$

33,623,348

 

 

$

37,647,428

 

 

$

22,191,960

 

Jumbo

 

5,446

 

 

—

 

 

765,097

 

Government

 

3,247,904

 

 

4,934,711

 

 

6,959,351

 

Total Refinance

 

$

36,876,698

 

 

$

42,582,139

 

 

$

29,916,408

 

Total Originations

 

$

49,094,240

 

 

$

54,678,923

 

 

$

42,441,727

 

Chairman and CEO of UWMC, Mat Ishbia, added: “While others in our industry guide towards lower volumes in 2Q21, UWMC is quite the opposite. Because of our purchase focus and our broker network, we expect to do more business in 2Q21 than 1Q21 and believe that we will be one of the only mortgage companies in America that grows in a rising rate environment.”

Share Repurchase Program

The Board of Directors has authorized a share repurchase program of up to $300 million in aggregate value of the Company’s Class A common stock effective May 11, 2021. The share repurchase program authorizes the Company to repurchase shares of the Company’s Class A common stock from time to time, in the open market or through privately negotiated transactions, at management’s discretion based on market and business conditions, applicable legal requirements and other factors. Shares purchased will be retired. The new plan will expire on May 11, 2023 unless otherwise modified or terminated by the Company’s Board of Directors at any time in the Company’s sole discretion.

Second Quarter 2021 Outlook

We anticipate second quarter production to be in the $51-$55 billion range, with expected gain margin between 75 and 110 bps.

Earnings Conference Call Details

As previously announced, UWMC will hold a conference call for financial analysts and investors on Tuesday, May 11 at 10 AM ET to review the results and answer questions. Interested parties may register for a toll-free dial-in number by visiting:



Conference ID 8291654

Conference Call Name: UWM Holdings Corporation 1Q 2021 Earnings Call

Please dial in at least 15 minutes in advance to ensure a timely connection to the call. Audio webcast, taped replay and transcript will be available on the UWMC investor relations website at https://investors.uwm.com/.

Key Operational Metrics

“Closed loan volume” and “Total gain margin” are key operational metrics that UWMC management uses to evaluate the performance of the business. “Closed loan volume” is the aggregate principal of the residential mortgage loans originated by UWMC during a period. “Total gain margin” represents total loan production income divided by total production.

Non-GAAP Metrics

UWMC’s net income for periods prior to the first quarter of 2021 does not reflect an income tax provision, since UWM (UWMC’s accounting predecessor) is a pass-through entity not subject to federal and most state income taxes. For periods commencing with the first quarter of 2021, UWMC’s net income does not reflect the income tax provision that would otherwise be reflected if 100% of the economic interest in UWM was owned by UWMC. Therefore, for comparison purposes, UWMC provides “Adjusted net income”, which is our pre-tax income adjusted for a 23.78% estimated effective tax rate. “Adjusted net income” is a Non-GAAP Metric.

In addition, we disclose “Non-funding debt” and the “Non-funding debt to equity ratio” as a Non-GAAP metric. We define “Non-funding debt” as UWMC’s total of operating lines of credit, senior notes, equipment note payable, and finance leases as reported on our balance sheet, and the “Non-funding debt to equity ratio” as Non-funding debt divided by UWMC’s total equity.

Management believes that these Non-GAAP metrics provide useful information to investors. These measures are not financial measures calculated in accordance with GAAP and should not be considered as a substitute for any other operating performance measure calculated in accordance with GAAP, and may not be comparable to a similarly titled measure reported by other companies.

The following table presents these non-GAAP financial measures along with their most directly comparable financial measure calculated in accordance with GAAP (dollars in thousands):

Adjusted net income

 

Q1 2021

 

Q4 2020

 

Q1 2020

Earnings before income taxes

 

$

872,891

 

 

 

$

1,372,741

 

 

 

$

20,349

 

 

Impact of estimated effective tax rate of 23.78%

 

(207,573

)

 

 

(326,438

)

 

 

(4,839

)

 

Adjusted net income

 

$

665,318

 

 

 

$

1,046,303

 

 

 

$

15,510

 

 

 

 

 

 

 

 

 

Non-funding debt and non-funding debt to equity

 

Q1 2021

 

Q4 2020

 

Q1 2020

Senior notes

 

$

789,870

 

 

 

$

789,323

 

 

 

$

—

 

 

Operating lines of credit

 

400,000

 

 

 

320,300

 

 

 

471,721

 

 

Equipment note payable

 

25,424

 

 

 

26,528

 

 

 

28,557

 

 

Finance lease liability

 

54,873

 

 

 

23,132

 

 

 

—

 

 

Total non-funding debt

 

$

1,270,167

 

 

 

$

1,159,283

 

 

 

$

500,278

 

 

Total equity

 

$

2,778,036

 

 

 

$

2,374,280

 

 

 

$

681,495

 

 

Non-funding debt to equity

 

0.46

 

 

 

0.49

 

 

 

0.73

 

 

Forward Looking Statements

This press release and our earnings call include forward-looking statements. These forward-looking statements are generally identified by the use of words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” and similar words indicating that these reflect our views with respect to future events. Forward-looking statements in this press release include statements regarding: (1) our foundation and strategies for growth and the drivers of that growth; (2) our ability to scale operations and increase market share with current resources; (3) our performance in shifting market conditions and the comparison of such performance against our competitors; (4) growth of the wholesale channel; (5) our investments in technology and the impact to our operations; (6) our Jumbo and Government loans production and purchase levels; and (7) our anticipated ranges for production volume and margin in the second quarter of 2021. These statements are based on management’s current expectations, but are subject to risks and uncertainties, many of which are outside of our control, and could cause future events or results materially differ from those stated or implied in the forward-looking statements, including (i) UWM’s dependence on macroeconomic and U.S. residential real estate market conditions, including changes in U.S. monetary policies that affect interest rates; (ii) UWM’s reliance on its warehouse facilities and the risk of a decrease in the value of the collateral underlying certain of its facilities causing an unanticipated margin call; (iii) UWM’s ability to sell loans in the secondary market; (iv) UWM’s dependence on the government sponsored entities such as Fannie Mae and Freddie Mac; (v) changes in the GSEs’, FHA, USDA and VA guidelines or GSE and Ginnie Mae guarantees; (vi) UWM’s dependence on Independent Mortgage Advisors to originate mortgage loans; (vii) the risk that an increase in the value of the MBS UWM sells in forward markets to hedge its pipeline may result in an unanticipated margin call; (viii) UWM’s inability to continue to grow, or to effectively manage the growth of, its loan origination volume; (ix) UWM’s ability to continue to attract and retain its Independent Mortgage Advisor relationships; (x) UWM’s ability to implement technological innovation; (xi) UWM’s ability to continue to comply with the complex state and federal laws regulations or practices applicable to mortgage loan origination and servicing in general; and (xii) other risks and uncertainties indicated from time to time in our filings with the Securities and Exchange Commission including those under “Risk Factors” therein. With respect to expectations regarding the share repurchase program, the amount and timing of share repurchases will depend upon, among other things, market conditions, share price, liquidity targets, regulatory requirements. We wish to caution readers that certain important factors may have affected and could in the future affect our results and could cause actual results for subsequent periods to differ materially from those expressed in any forward-looking statement made by or on behalf of us. We undertake no obligation to update forward-looking statements to reflect events or circumstances after the date hereof

About UWM Holdings Corporation and United Wholesale Mortgage

Headquartered in Pontiac, Michigan, UWM Holdings Corporation is the publicly traded indirect parent of United Wholesale Mortgage (“UWM”). UWM is the #1 wholesale lender in the nation six years in a row, providing state-of-the-art technology and unrivaled client service. UWM underwrites and provides closing documentation for residential mortgage loans originated by independent mortgage brokers, correspondents, small banks and local credit unions. UWM focuses on providing highly efficient, accurate and expeditious lending support. UWM’s exceptional teamwork and focus on technology result in the delivery of innovative mortgage solutions that drive the company’s ongoing growth in market share and its leadership position as the foremost advocate for independent mortgage brokers. For more information, visit www.uwm.com.

 

UWM HOLDINGS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except shares and per share amounts)

 

 

March 31,2021

 

December 31,2020

Assets

(Unaudited)

 

 

Cash and cash equivalents

$

1,592,663

 

 

$

1,223,837

 

Mortgage loans at fair value

5,503,271

 

 

7,916,515

 

Derivative assets

113,168

 

 

61,072

 

Accounts receivable, net

549,381

 

 

253,600

 

Mortgage servicing rights

2,300,434

 

 

1,756,864

 

Premises and equipment, net

111,964

 

 

107,572

 

Operating lease right-of-use asset, net

(includes $87,440 and $92,571 with related parties)

87,896

 

 

93,098

 

Finance lease right-of-use asset

(includes $29,192 and $0 with related parties)

54,456

 

 

22,929

 

Other assets

59,393

 

 

57,989

 

Total assets

$

10,372,626

 

 

$

11,493,476

 

Liabilities and Equity

 

 

 

Warehouse lines of credit

$

4,823,740

 

 

$

6,941,397

 

Accounts payable and accrued expenses

1,185,499

 

 

847,745

 

Accrued dividends payable

160,517

 

 

—

 

Derivative liabilities

55,479

 

 

66,237

 

Equipment note payable

25,424

 

 

26,528

 

Operating lines of credit

400,000

 

 

320,300

 

Senior notes

789,870

 

 

789,323

 

Operating lease liability

(includes $98,733 and $104,006 with related parties)

99,188

 

 

104,534

 

Finance lease liability

(includes $29,241 and $0 with related parties)

54,873

 

 

23,132

 

Total liabilities

7,594,590

 

 

9,119,196

 

Equity:

 

 

 

Preferred stock, $0.0001 par value – 100,000,000 shares authorized, none issued and outstanding as of March 31, 2021

—

 

 

—

 

Class A common stock, $0.0001 par value – 4,000,000,000 shares authorized, 103,104,205 shares issued and outstanding as of March 31, 2021

10

 

 

—

 

Class B common stock, $0.0001 par value – 1,700,000,000 shares authorized, none issued and outstanding as of March 31, 2021

—

 

 

—

 

Class C common stock, $0.0001 par value – 1,700,000,000 shares authorized, none issued and outstanding as of March 31, 2021

—

 

 

—

 

Class D common stock, $0.0001 par value – 1,700,000,000 shares authorized, 1,502,069,787 shares issued and outstanding as of March 31, 2021

150

 

 

—

 

Additional paid-in capital

—

 

 

24,839

 

Retained earnings

113,078

 

 

2,349,441

 

Non-controlling interest

2,664,798

 

 

—

 

Total equity

2,778,036

 

 

2,374,280

 

Total liabilities and equity

$

10,372,626

 

 

$

11,493,476

 

 

UWM HOLDINGS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except shares and per share amounts)

(Unaudited)

 

 

For the three months ended

 

March 31,2021

 

December 31,2020

 

March 31,2020

Revenue

 

 

 

 

 

Loan production income

$

1,074,665

 

 

 

$

1,667,252

 

 

$

404,214

 

 

Loan servicing income

123,789

 

 

 

105,648

 

 

50,097

 

 

Change in fair value of mortgage servicing rights

(59,259

)

 

 

—

 

 

—

 

 

Gain (loss) on sale of mortgage servicing rights

4,763

 

 

 

3,538

 

 

(50,222

)

 

Interest income

45,912

 

 

 

41,852

 

 

51,367

 

 

Total revenue, net

1,189,870

 

 

 

1,818,290

 

 

455,456

 

 

Expenses

 

 

 

 

 

Salaries, commissions and benefits

213,061

 

 

 

89,437

 

 

121,784

 

 

Direct loan production costs

13,162

 

 

 

14,595

 

 

12,554

 

 

Marketing, travel, and entertainment

10,495

 

 

 

6,452

 

 

7,434

 

 

Depreciation and amortization

7,289

 

 

 

8,749

 

 

2,645

 

 

Servicing costs

20,508

 

 

 

29,549

 

 

13,322

 

 

Amortization, impairment and pay-offs of mortgage servicing rights

—

 

 

 

215,390

 

 

218,754

 

 

General and administrative

16,778

 

 

 

28,024

 

 

15,576

 

 

Interest expense

52,990

 

 

 

53,353

 

 

43,038

 

 

Other (income)/expense

(17,304

)