UWM Reports 72% Profit Margin, Misses Analyst Estimates

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With reported quarterly profit of $ 860 million on $ 1.19 billion in revenue for the first part of 2021, United Wholesale Mortgage Corp. will buy back shares and issue a dividend to investors.

The Pontiac-based wholesale mortgage lender reported its results Monday afternoon, its first full quarter as a public company since closing a reverse merger in late January and debuting on the public markets (NYSE: UWMC).

The reported profits represent a profit margin of just over 72%. For the same quarter of last year, the company reported net profit of $ 20 million.

Despite those numbers, UWM has consistently missed analysts ‘earnings projections, missing $ 80 million, and analysts’ estimates of 33 cents in earnings per share of 14 cents, according to the financial news outlet. Seeking Alpha.

The quarter turned out to be the best in the company’s 35-year history, said Mat Ishbia, President and CEO of UWM, who noted that the continued momentum of rising interest rates leading consumers to move away from refinancing in favor of home purchase mortgages will work in society’s favor.

“We believe that we now have the capital, liquidity, technology, campus and staff to further develop our business and become the largest mortgage originator in the country,” Ishbia said in a press release. “We welcome the transition to a larger buying market and the pressure on margins, as we believe our business model is designed to outperform our competitors under these conditions. Going forward, our priorities remain the same: our people, the cutting-edge service we provide to our brokers and creating long-term value for our shareholders. “

Along with its earnings, UWMC’s board of directors declared a quarterly dividend of 10 cents for holders of Class A common shares of the company. The dividend will be paid on July 6 for those who held shares in the company before the close of business on June 10, according to the earnings report.

In addition, the company’s board of directors also authorized a share buyback program of up to $ 300 million over the next 24 months, starting May 11.

2020 was a banner year for the mortgage industry, as lower interest rates fueled a refinancing boom and the pandemic, which keeps people at home, led to growing demand for purchases. of houses.

But since the end of the year, mortgage rates have risen by about half a percent, according to a report by the Mortgage Bankers Association trade group.

The hike has reduced UWM’s loan production figures, according to the company’s latest earnings report.

For the first quarter, UWM reported closed loan volume of nearly $ 49.1 billion, up from $ 54.6 billion at the end of 2020, but up from $ 42.4 billion in the first quarter of 2020.

The company’s total profit margin, or loan production income divided by total production, stood at 219 basis points for the first quarter of this year, up from 300 basis points at the end of 2020, but up significantly from less than 100 basis points in the 2020 game.

According to its earnings report, around 75% of UWM’s total mortgage production volume in the last quarter came from refinancing.

For the second quarter of this year, UWM said it expects mortgage production to be between $ 51 billion and $ 55 billion, with an expected profit margin of between 75 and 110 basis points.

The company’s stock had a negative impact on earnings, trading more than 2% after hours after closing at $ 6.72.

The stock is down almost half from its closing price of $ 11.35 on the first day of trading on January 22.

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