UWM (US:UWMC)2021-11-08 16:00Financial Performance - The company generated $329.9 million of net income during the three months ended September 30, 2021, a decrease of $1.12 billion, or 77%, compared to net income of $1.45 billion for the same period in 2020[136]. - The company generated $1.33 billion of net income during the nine months ended September 30, 2021, a decrease of $682.1 million, or 34%, compared to net income of $2.01 billion for the same period in 2020[137]. - Net income for Q3 2021 was $329.9 million, a decrease of $1.12 billion compared to $1.45 billion in Q3 2020, primarily due to a decrease in total revenues[168]. - Net income for the nine months ended September 30, 2021, was $1.33 billion, a decrease of $682.1 million compared to $2.01 billion for the same period in 2020[169]. Loan Origination - For the three months ended September 30, 2021, the company originated $63.0 billion in residential mortgage loans, an increase of $8.7 billion, or 16%, from the same period in 2020[136]. - For the nine months ended September 30, 2021, the company originated $171.3 billion in residential mortgage loans, an increase of $43.4 billion, or 34%, from the same period in 2020[137]. - Total loan origination volume for Q3 2021 was $63.0 billion, an increase of $8.71 billion, or 16%, from $54.3 billion in Q3 2020[149]. - Total loan origination volume for the nine months ended September 30, 2021, was $171.3 billion, an increase of $43.4 billion, or 34%, from $127.9 billion in the same period in 2020[151]. Adjusted EBITDA - Adjusted EBITDA for the three months ended September 30, 2021 was $290.4 million, down from $1.39 billion for the same period in 2020[136]. - Adjusted EBITDA for the nine months ended September 30, 2021 was $1.21 billion, compared to $2.10 billion for the same period in 2020[137]. Loan Production and Servicing Income - Loan production income for Q3 2021 was $589.5 million, a decrease of $1.13 billion, or 66%, compared to $1.72 billion in Q3 2020[149]. - Loan production income for the nine months ended September 30, 2021, was $2.14 billion, a decrease of $740.8 million, or 26%, compared to $2.88 billion for the same period in 2020[150]. - Loan servicing income for Q3 2021 was $174.7 million, an increase of $104.2 million, or 148%, compared to $70.5 million in Q3 2020[152]. - Loan servicing income for the nine months ended September 30, 2021, was $443.8 million, an increase of $261.1 million, or 143%, compared to $182.7 million for the same period in 2020[153]. Expenses - Total expenses for Q3 2021 were $357.0 million, a decrease of $25.6 million, or 7%, compared to $382.6 million in Q3 2020[162]. - Total expenses for the nine months ended September 30, 2021, were $1.02 billion, a decrease of $89.7 million, or 8%, compared to $1.11 billion for the same period in 2020[165]. - Excluding the $68.9 million of amortization, impairment, and pay-offs of MSRs in 2020, total expenses increased by $43.3 million in Q3 2021, primarily due to a $49.6 million increase in interest expense[164]. - Interest expense increased by $102.2 million for the nine months ended September 30, 2021, due to higher borrowings from Senior Notes issued in 2020 and 2021[166]. Market Share and Position - The company has a 34% market share of the wholesale mortgage lending channel as of December 31, 2020, maintaining its position as the largest wholesale mortgage lender in the U.S.[125]. Mortgage Servicing Rights (MSRs) - The company retains mortgage servicing rights (MSRs) for a period depending on business and liquidity considerations, selling them in the bulk MSR secondary market when appropriate[126]. - The fair value of mortgage servicing rights (MSRs) declined by approximately $155.6 million in Q3 2021, primarily due to realization of cash flows and decay[155]. - The company recorded a loss on the sale of MSRs of $5.4 million in Q3 2021, compared to a loss of $0.3 million in Q3 2020[156]. - The fair value of mortgage servicing rights (MSRs) generally increases in rising interest rate environments, leading to expected increases in cash flows[206]. Interest Rates and Risk Management - The company employs a hedge strategy to mitigate interest rate volatility, primarily using forward agency or Ginnie Mae To Be Announced (TBA) securities[207]. - The company assesses market risk based on changes in interest rates using sensitivity analysis, which indicates potential impacts on fair values[209]. - As of September 30, 2021, a hypothetical 25 basis point increase in interest rates would result in a total change in assets of $(261,823) thousand, while a decrease would increase assets by $222,490 thousand[210]. Headcount and Business Growth - The headcount increased by approximately 1,700 team members from September 30, 2020, to September 30, 2021, to support business growth[164]. Cash Flow and Financing Activities - Net cash used in operating activities for the nine months ended September 30, 2021, was $(3.8) billion, a decrease from $1.4 billion provided in the same period in 2020, primarily due to lower net income and increased loan production[196]. - Net cash provided by financing activities was $3.3 billion for the nine months ended September 30, 2021, compared to $(981.8) million in the same period in 2020, driven by increased net borrowings under warehouse lines of credit[198]. Compliance and Financial Covenants - The company was in compliance with all financial covenants under its warehouse facilities as of September 30, 2021[185].