Shares in Guild Holdings gain 10 percent as investors recognize $23.9 million net loss for the quarter was driven by a $70 million writedown in the fair value of Guild’s mortgage servicing rights portfolio.
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Shares in Guild Mortgage’s publicly traded parent company posted double-digit gains Thursday after the company reported first quarter mortgage originations were up 35 percent from a year ago, to $5.2 billion.
San Diego-based Guild Holdings Company posted a $23.9 million net loss for the quarter, but investors understood that the loss was driven by a $69.9 million writedown in the fair value of Guild’s mortgage servicing rights.
But investors liked the company’s year-over-year growth and higher profit margins, with gain-on-sale margins climbing to 376 basis points, up 59 basis points from Q4 and 12 basis points from a year ago.
Shares in Guild Holdings, which in the last 12 months have traded for as little as $11.21 and as much as $18.25, were up 10 percent Thursday after closing at $12.50 before Wednesday’s earnings announcement.
Guild is a bigger company than it was a year ago, sponsoring 2,728 mortgage loan originators working out of 708 branch locations, according to records maintained by the Nationwide Mortgage Licensing System and Registry (NMLS).
The lender’s growth has been fueled in part by deals like last year’s acquisition of Academy Mortgage Corp. — and First Centennial Mortgage, Cherry Creek Mortgage and Legacy Mortgage in 2023 — but also through organic recruiting efforts.
“These results showcase the benefits of our strategy to invest through market downturns, and we continue to grow at a faster rate than the broader industry,” CEO Terry Schmidt said on the company’s earnings call. “Our year-over-year growth in originations reflects not only the Academy acquisition we made in the first quarter of last year, but also the organic recruiting efforts we’ve completed throughout the past year.”
Guild executives said 88 percent of the $5.2 billion in mortgages originated by the company in the first three months of the year were purchase mortgages, compared to 71 percent for the industry as a whole.
David Neylan
“We have added scale … by successfully retaining loan officers who join via acquisitions, while also welcoming additional new loan officers through organic recruiting at a time when top producers are making a flight to quality,” Chief Operating Officer David Neylan said. “Second, our experience playbook and expertise with onboarding resulted in quickly achieving operational leverage as we grow. This can be attributed to discipline integration efforts from our seasoned teams across the country.”
Guild’s mortgage servicing rights portfolio grew to $94 billion during the quarter, up $1 billion from the end of 2024 and nearly $8 billion from a year ago. The company kept the mortgage servicing rights (MSRs) for 60 percent of the loans it originated and sold to investors.
While fluctuations in MSR valuations can be an accounting headache, the loan servicing busines helped Guild “recapture” 31 percent of borrowers who sought to refinance during the quarter, and 26 percent of those who took out purchase loans.
“The loss in this year’s first quarter was primarily due to the downward valuation adjustment of MSRs of $70 million due to the period in interest rate declines,” Chief Financial Officer Desiree Kramer said. “Our servicing portfolio continues to be a valuable source for ongoing cash flow, future opportunities for loan recapture, and it reinforces our customer for life strategy.”
Guild’s $23.9 million loss for the quarter was a big swing from the previous quarter, when the lender posted a $97.7 million profit thanks to an $84.3 million lift from a positive MSR valuation adjustment.
MSR valuations fluctuate with mortgage rates, as a company’s loan servicing portfolio is worth less when mortgage rates decline because borrowers are more likely to refinance and end up with another servicer.
At $198.5 million, net revenue for the quarter was down 47 percent from Q4 and 14 percent from a year ago. But net revenue from Guild’s originations business was up 38 percent from a year ago, to $190.6 million.
“We have built a model designed to perform in every market cycle, and we have successfully navigated multiple cycles throughout our history,” Schmidt said. “Our consistent productivity improvements showcase the strength and deep experience as we continue to thrive, even as the broader market is experiencing prolonged volatility. We do not expect the current conditions to change in the short term, but we are all well positioned for success, even in today’s uncertain landscape.”
Asked whether Guild is on the hunt for acquisitions, Schmidt said “we’re always talking to a lot of suitors.”
The company is selective, “So it’s a long process. Sometimes we’re talking to people for six months, sometimes it’s two years.”
So far this year, organic growth has been stronger than M&A, but “we’re constantly doing both and our brand is extremely strong. There’s still a lot across the country that we can conquer and so we’re going to continue to work on growing the share.”
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