Guild’s profits fall as total originations plummet in the second quarter

Guild Holdings (GHLD) reported lower quarterly gains due to lower volume and lower gain on-sale margins. This is a decrease of 92.7% year-over-year compared to the $123 Million recorded in the second-quarter of 2020. The income for the most recent period was lower than the profits of $160.6 million in the first three months 2021. Earnings per share equaled $0.15, or $0.87 on an adjusted basis, compared to the previous quarter’s EPS of $2.67, or $1.77, adjusted.The company posted net revenue of $294.1 million, down 32.4% from $435.1 million in the second quarter last year, and $526.2 million last quarter.The subdued numbers came even as purchase originations remained robust, with applications for purchase loans up 12% quarter-over-quarter. However, the increase in purchases was offset by a decrease in refinances volumes, which led to a 12% drop in overall applications. The gain on sale was 457 basis points in the first quarter. CEO Mary Ann McGarry stated that margins have been reducing due to rising competitive pressures. This dynamic resulted in lower gain-on sale margins in the second quarter. According to forecasts by the Mortgage Bankers Association, the industry trends that contributed to the quarter’s margin declines will not reverse in the second half of the year. Guild had already taken into account the slimmer margins due to a second-half slowdown. However, they still predicted that annual earnings would remain consistent with long-term historical averages. This was despite having incorporated the lower net income from Guild’s originations section to $78.8million for the quarter. This is down from $254.6 million one-year ago and $160.1million in the first quarter. The company funded loans totaling $8.2 billion during the period. Guild’s servicing arm suffered a net loss in the quarter of $48.9million, primarily due to valuation adjustments for mortgage-servicing rights. The second quarter of last year saw a net loss in the amount of $68.6 millions. However, the servicing segment had earned net income of $67.1million in the first quarter. After the earnings were announced, investors appeared unperturbed. The unpaid balance of Guild’s loans was up by 24% compared to one year ago, rising to $65.7 billion. The stock of Guild Holdings opened at $15.65 on Thursday morning, up from $15.60 the previous day. This was a significant increase from the closing price of $15.60 the previous day. Guild started the third quarter with a local presence, in 11 new states, and added approximately 250 loan officers. McGarry said that the company did not have immediate plans to expand, but she didn’t rule out the possibility. McGarry stated that she likes to be in communities where we can capture a large market share. “So we want the top five. If we aren’t in the top 5, and there’s a good culture fit — organic or acquisition — then we’ll take the chance to look at it.”