Guild Mortgage returns to profit and eyes additional acquisitions

San Diego giant Guild Mortgage bounced back to profitability in the second quarter, thanks in part to a successful integration of numerous companies the lender acquired in the first quarter. The mortgage shop is laser focused on growing its market share, with company executives noting they are on the lookout for additional companies to buy in the near future.

Guild's net income was $36.9 million, up from a net loss of $37.2 million in the previous quarter. The lender's net revenue more than doubled, increasing to $236.8 million from the $103.9 million the lender reported in the first quarter of 2023.

Its gain on sale margin on originations in the second quarter of 2023 was 310 basis points. Guild's total in-house originations amounted to $4.5 billion, up from $2.7 billion in the first quarter.

Terry Schmidt, Guild Mortgage's new CEO, said the second quarter results are a reflection of the company's push to "further scale [its] platform." 

"We are achieving this to the successful execution of our organic and external growth strategy," she said during the company's earnings call. "Broader industry challenges persist due to higher interest rates, and limited home inventory, which is putting pressure on production volume and industry margin, however, the Guild brand within the mortgage industry is stronger than it's ever been."

Additionally, the lender's portfolio unpaid principal balance grew to $82 billion as of June 30, up 3% compared to $79.9 billion in the first quarter and an 8% increase from $75.9 billion last year.

"We retain mortgage servicing rights for 84% of the total loan sold in the second quarter of 2023. This provides both reliable fee income as well as continued interaction with our customers supporting our strong recapture rate," Shmidt said.

The company's CEO added that Guild's "strong balance sheet and liquidity position supports ongoing pursuits of additional growth opportunities."

"Guild has engaged in several opportunistic acquisitions in the recent years, which has grown our reputation as a valued business partner, and we believe the continued needed origination environment will create additional opportunities for us to add smaller businesses to Guild's platform," she said.

In recent months the lender has been on a buying spree, acquiring reverse mortgage lender Cherry Creek Mortgage, Legacy Mortgage and Inlanta Mortgage. It also brought on eight branches from Fairway Independent Mortgage in March, adding to its ballooning headcount of over 4,000 employees.

Regarding Cherry Creek, Scmidt noted that within 45 days of acquiring the company it became fully operational and the 500 employees onboarded are "almost going full speed," Schmidt said. 

"We've gotten better at integrating [new companies that we bring in], we're comfortable continuing to work towards adding more of these types of acquisitions."

Despite solid financial results for the second quarter, year-to-date the company reported a net loss of $0.3 million compared to a net income of $266.3 million in 2021. And to no one's surprise total in-house originations of $7.2 billion year-to-date were also significantly lower compared to the $11.8 billion reported in 2021.

Guild's second quarter results beat the expectations of some analysts. A report from Wedbush noted that Guild's "gain on sale and servicing revenues were higher than expected, driven by higher than expected volumes."

"The company sees additional opportunities to add smaller businesses to the Guild platform, giving muted origination activity, which should help to generate market share gains over time," the report added.