UWM (US:UWMC)2024-11-07 20:15Loan Origination and Production - For the three months ended September 30, 2024, the company originated $39.5 billion in loans, an increase of $9.8 billion, or 32.9%, from $29.7 billion during the same period in 2023[90]. - For the nine months ended September 30, 2024, the company originated $100.8 billion in loans, an increase of $16.9 billion, or 20.1%, from $83.9 billion during the same period in 2023[91]. - Total loan origination volume for Q3 2024 reached $39,509,521,000, up 32.9% from $29,721,633,000 in Q3 2023[103]. - 91% of the loans originated in the three months ended September 30, 2024, were sold to Fannie Mae or Freddie Mac, or transferred to Ginnie Mae pools in the secondary market[84]. - Loan production income for Q3 2024 was $465,548,000, a 61.1% increase from $288,930,000 in Q3 2023[100]. Financial Performance - The company reported net income of $31.9 million for the three months ended September 30, 2024, a decrease of $269.0 million compared to $301.0 million for the same period in 2023[90]. - For the nine months ended September 30, 2024, net income was $288.8 million, a decrease of $102.4 million compared to $391.2 million for the same period in 2023[91]. - Adjusted EBITDA for the three months ended September 30, 2024, was $107.2 million, compared to $112.1 million for the same period in 2023[90]. - Adjusted EBITDA for the nine months ended September 30, 2024, was $341.8 million, down from $378.7 million for the same period in 2023[91]. - Net income for Q3 2024 was $31,945,000, a significant decrease from $300,993,000 in Q3 2023[98]. Expenses and Costs - The company’s operating expenses include salaries, commissions, direct loan production costs, and general administrative expenses, among others[89]. - Total expenses for Q3 2024 were $494,145,000, an increase from $375,389,000 in Q3 2023[98]. - Other costs for Q3 2024 increased to $328.0 million, an increase of $80.0 million or 32.3% compared to $248.0 million in Q3 2023[118]. - Loan servicing income for Q3 2024 was $134.8 million, a decrease of $65.7 million or 32.8% compared to $200.4 million in Q3 2023[106]. - Total interest expense for Q3 2024 was $141.1 million, an increase from $93.7 million in Q3 2023[113]. Mortgage Servicing Rights (MSRs) - The company retained the majority of the mortgage servicing rights (MSRs) associated with its production but intends to opportunistically sell MSRs depending on market conditions[84]. - Capitalization of mortgage servicing rights (MSRs) for Q3 2024 was $761,928,000, a 19.6% increase from $637,280,000 in Q3 2023[100]. - The weighted average servicing fee increased to 0.3150% as of September 30, 2024, compared to 0.3014% as of September 30, 2023[105]. - The company has entered into early funding programs with Fannie Mae and Freddie Mac, with $105 million outstanding under the Early Funding program as of September 30, 2024[140]. - UWM entered into a Loan and Security Agreement with Citibank, providing up to $1.5 billion of uncommitted borrowing capacity for mortgage servicing rights[150]. Cash Flow and Liquidity - Net cash used in operating activities was $5.7 billion for the nine months ended September 30, 2024, a significant decrease from $494.5 million in the same period of 2023[156]. - Net cash provided by investing activities increased to $2.6 billion for the nine months ended September 30, 2024, up from $1.7 billion in 2023[157]. - Net cash provided by financing activities was $3.3 billion for the nine months ended September 30, 2024, compared to cash used of $2.1 billion in 2023[158]. - The company expects its cash on hand and liquidity sources to be sufficient to maintain operations and fund loan originations for the next twelve months[131]. - As of September 30, 2024, total advanced against warehouse facilities was approximately $6.5 billion, with significant amounts in various master repurchase agreements[138]. Market and Risk Factors - The company is subject to credit risk, with repurchase and indemnification obligations for breaches under loan sale agreements, despite selling loans into the secondary market without recourse[178]. - The company utilizes forward agency or Ginnie Mae To Be Announced (TBA) securities as its primary hedge instrument to manage interest rate risk[175]. - The fair value of mortgage servicing rights (MSRs) is primarily driven by interest rates, with expected prepayments decreasing in rising interest rate environments[174]. - The company assesses market risk based on changes in interest rates using a sensitivity analysis, which measures potential impacts on fair values[176]. - The company has established relationships with a variety of well-established counterparties to mitigate financing risks associated with its borrowing agreements[181].