UWM (US:UWMC)2021-03-21 16:00Part I Business UWM is a leading wholesale mortgage lender, leveraging technology and Independent Mortgage Advisors for loan origination 2020 Performance Highlights | Metric | Value | Source Chunk(s) | | :--- | :--- | :--- | | Total Loan Origination Volume | $182.5 billion | 30 | | Year-over-Year Volume Growth | 69% | 30 | | Net Income | $3.38 billion | 30 | | Year-over-Year Net Income Growth | 715% | 30 | | Wholesale Channel Market Share | ~34% | 30 | | Total Residential Market Share | 4.5% | 30 | - The company's core strategy is its exclusive focus on the wholesale mortgage channel, partnering with Independent Mortgage Advisors and avoiding direct competition for borrowers, which it believes fosters greater client loyalty and market share growth3337 Loan Production by Type (in thousands) | Loan Type | 2020 | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | :--- | | Conventional Conforming | $153,525,586 | $76,207,713 | $33,062,045 | $23,873,972 | | FHA/VA/USDA | $27,541,347 | $25,563,260 | $7,683,734 | $4,574,176 | | Non-Agency | $1,480,708 | $5,996,199 | $814,367 | $1,078,169 | | Total Loan Production | $182,547,641 | $107,767,172 | $41,560,146 | $29,526,317 | - UWM emphasizes originating high-quality loans, with borrowers having an average FICO score of 758 for the year ended December 31, 2020455068 - 98% of loans originated in 2020 were sold to Fannie Mae, Freddie Mac, or transferred to Ginnie Mae pools455068 - As of December 31, 2020, the company's mortgage servicing portfolio consisted of 606,688 loans with an aggregate unpaid principal balance (UPB) of approximately $188.3 billion102103 - The company utilizes two third-party sub-servicers for these loans102103 Risk Factors The company faces substantial risks from macroeconomic conditions, interest rates, funding, regulations, and corporate structure - The business is highly dependent on macroeconomic conditions, the U.S. residential real estate market, and changes in interest rates, which affect loan demand, origination volume, and the value of Mortgage Servicing Rights (MSRs)135140 - UWM relies heavily on short-term warehouse facilities and repurchase agreements to fund mortgage loans216222 - A disruption in funding, inability to renew facilities, or a margin call could curtail loan origination activities216222 - The business is highly dependent on its ability to sell loans to Fannie Mae, Freddie Mac (GSEs), and Ginnie Mae145149 - Any changes to these entities, their guidelines, or their roles in the mortgage market could be detrimental145149 - The COVID-19 pandemic poses risks including increased mortgage delinquencies, higher servicing advance requirements due to forbearance, and potential disruptions to operations and liquidity162164185 - The company is subject to extensive and complex federal and state regulations245250258 - Noncompliance could result in fines, loss of licenses, and reputational damage, with the Consumer Financial Protection Bureau (CFPB) having significant oversight authority245250258 - A Tax Receivable Agreement requires the company to pay SFS Corp. 85% of cash savings realized from certain tax benefits, which could be substantial and negatively impact liquidity206209 Properties The company's headquarters and primary operations are located in three leased buildings in Pontiac, Michigan - The company's headquarters are housed in three separately leased buildings on one campus in Pontiac, Michigan, where substantially all operations are based305 Legal Proceedings The company is routinely involved in legal and regulatory matters, not expecting a material adverse financial impact - The company is subject to routine consumer complaints, regulatory actions, and legal proceedings in the ordinary course of business, but does not expect these to have a material adverse effect on its financial position or cash flows306 Mine Safety Disclosures This section is not applicable to the company's operations - None Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Details on the company's NYSE-listed Class A common stock, Warrants, and adopted quarterly dividend policy - The company's Class A common stock and Warrants trade on the NYSE under the symbols "UWMC" and "UWMCWS," respectively310 - On February 4, 2021, the Board declared a regular quarterly dividend of $0.10 per share on Class A Common Stock313 - The Board has adopted a policy of paying a regular dividend of $0.40 per share annually, declared quarterly, subject to Board discretion313 Reserved This section is reserved and contains no information Management's Discussion and Analysis of Financial Condition and Results of Operations This MD&A covers Gores Holdings IV, Inc.'s pre-merger financial condition, reporting a $5.8 million net loss in 2020 - The financial information presented in this section is for Gores Holdings IV, Inc., the legal acquirer (a blank check company), prior to the business combination with UWM on January 21, 2021317318 Gores Holdings IV, Inc. - Results of Operations | Period | Net Loss Attributable to Common Shares | | :--- | :--- | | Year ended Dec 31, 2020 | ($5,807,306) | | Inception (Jun 12, 2019) to Dec 31, 2019 | ($39,002) | - As of December 31, 2020, the Company had negative working capital of ($4.96 million), largely due to accrued expenses related to the pending business combination326 - The Company had no off-balance sheet arrangements as of December 31, 2020327330 - Its primary contractual obligation was a deferred underwriting commission of $14.875 million, payable upon completion of the business combination327330 Quantitative and Qualitative Disclosures About Market Risk Prior to the merger, market risk was minimal, primarily interest rate exposure on its $425.3 million trust account - As of December 31, 2020, the company's market risk was limited to potential economic loss from adverse changes in the fair value of its investments held in the Trust Account332 - The Trust Account held $425,331,306 in U.S. Treasury Bills, with an effective annualized interest rate of approximately 0.02% at year-end 2020332 Financial Statements and Supplementary Data Presents audited financial statements for Gores Holdings IV, Inc. (pre-merger SPAC) for 2020 and 2019 Gores Holdings IV, Inc. Balance Sheet Summary (as of Dec 31, 2020) | Account | Amount | | :--- | :--- | | Total Assets | $425,565,768 | | Investments held in Trust Account | $425,331,306 | | Total Liabilities | $20,072,819 | | Deferred underwriting compensation | $14,875,000 | | Class A common stock subject to redemption | $400,492,940 | | Total Stockholders' Equity | $5,000,009 | Gores Holdings IV, Inc. Statement of Operations Summary (Year ended Dec 31, 2020) | Account | Amount | | :--- | :--- | | Loss from operations | ($6,827,438) | | Other income - interest income | $1,101,134 | | Net loss attributable to common shares | ($5,807,306) | - The notes to the financial statements detail the organization's history as a SPAC, the public offering, related party transactions with the Sponsor, and the subsequent business combination with UWM which closed on January 21, 2021360391395415 Changes in and Disagreements With Accountants on Accounting and Financial Disclosures Information on changes in and disagreements with accountants is incorporated by reference from a Form 8-K filing - Information regarding changes in and disagreements with accountants is incorporated by reference from the Form 8-K filed with the SEC on January 22, 2021420 Controls and Procedures Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2020 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2020422 - Management assessed the company's internal control over financial reporting and concluded that it was effective as of December 31, 2020424 Other Information This section contains no additional information to report - None Part III Management Identifies directors and executive officers, details 'controlled company' status, and outlines board governance and risk oversight - The company's leadership includes Mat Ishbia as President, CEO, and Chairman, and Tim Forrester as EVP and CFO429441 - The company is a "controlled company" under NYSE rules because SFS Corp. holds a majority of the voting power443 - This allows for exemptions from requirements like having a majority of independent directors or a fully independent compensation committee443 - The Audit Committee is composed of three independent directors: Kelly Czubak, Isiah Thomas, and Robert Verdun445 - Robert Verdun qualifies as an "audit committee financial expert"445 - The Board administers risk oversight directly and through its audit committee, which is responsible for monitoring major financial risk exposures456 Executive Compensation Outlines the 2020 executive compensation program, including base salary, incentives, and 2021 non-employee director compensation - The 2020 executive compensation program consisted of base salary, the Captains Annual Bonus Plan, a Long-Term Incentive Plan (LTIP), and other benefits465 2020 NEO Base Salaries | Name | 2020 Base Salary | | :--- | :--- | | Mat Ishbia | $600,000 | | Tim Forrester | $260,000 | | Melinda Wilner | $337,000 | | Alex Elezaj | $321,000 | | Laura Lawson | $255,000 | - The Captains Annual Bonus Plan is an annual cash bonus available to all 'Captains' (including NEOs, excluding the CEO) based on achieving company-wide financial and operational goals469 - The Long-Term Incentive Plan (LTIP) for top executives is a cash plan funded by a pool equal to 3% of annual net profit, paid in four equal annual installments to promote long-term decision making and retention471 - For 2021, non-employee directors will receive an annual cash retainer of $120,000, a $3,000 per-meeting fee, and an annual equity award of 1,000 shares of Class A common stock477 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Details beneficial ownership of common stock as of March 15, 2021, highlighting SFS Corp.'s majority control - As of March 15, 2021, SFS Corp. is the principal beneficial owner, holding 1,502,069,787 shares, representing 93.6% of the stock and 79.0% of the total voting power480 - Mat Ishbia and Jeffrey A. Ishbia may be deemed to beneficially own the securities held by SFS Corp482 - Justin Ishbia holds a pecuniary non-voting interest in SFS Corp. through trusts482 - Other significant shareholders include Gores Sponsor IV, LLC (13.3%), Blackrock Inc. (11.2%), and Brandeerian, Ltd. (7.3%) of Class A Stock480 Certain Relationships and Related Transactions, and Director Independence Discloses related party transactions, including leases with Ishbia family entities, and identifies independent directors - UWM leases its corporate campus from entities controlled by Jeffrey A. Ishbia and Mat Ishbia, incurring $8.2 million in lease expenses in 2020 and $3.7 million for an additional space493494 - The company leases an aircraft from an entity controlled by Mat Ishbia for executive travel, incurring $1.5 million in related expenses in 2020496 - UWM paid $0.6 million in 2020 for legal services to a law firm where founder Jeffrey A. Ishbia is a partner495 - The Board has determined that Kelly Czubak, Isiah Thomas, and Robert Verdun are independent directors under NYSE and SEC rules492 Principal Accounting Fees and Services Details fees paid to independent accounting firms for 2019-2020 and the Audit Committee's pre-approval policy Fees Paid to KPMG LLP (Previous Auditor) | Fee Type | 2020 | 2019 | | :--- | :--- | :--- | | Audit Fees | $159,500 | $91,500 | | All Other Fees | $1,329,866 | $0 | | Total | $1,489,366 | $91,500 | Fees Paid to Deloitte & Touche LLP (Current Auditor) | Fee Type | 2020 | | :--- | :--- | | Audit Fees | $91,000 | | Total | $91,000 | - The Audit Committee is responsible for appointing, compensating, and overseeing the independent registered public accounting firm and has a policy to pre-approve all audit and permissible non-audit services505 Part IV Exhibits, and Financial Statement Schedules Lists all financial statements and exhibits filed with the Form 10-K, including key agreements and plans - This section lists all documents filed as part of the Form 10-K, including financial statements and exhibits507 - Key exhibits filed include the Business Combination Agreement, Amended and Restated Registration Rights Agreement, Tax Receivable Agreement, and the 2020 Omnibus Incentive Plan508