Guild Holdings Company (NYSE:GHLD) Q2 2022 Earnings Conference Call August 4, 2022 6:00 PM ET Company Participants Michael Kim - Investor Relations Mary Ann McGarry - Chief Executive Officer Terry Schmidt - President Amber Kramer - Chief Financial Officer Conference Call Participants Don Fandetti - Wells Fargo Rick Shane - JPMorgan Trevor Cranston - JMP Securities Operator Good afternoon, ladies and gentlemen, and welcome to the Guild Holdings Company Second Quarter 2022 Earnings Conference Call. At this ti ...

Table of Contents1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _____________ Commission File Number: 001-39645 GUILD HOLDINGS COMPANY (Exact Name of Registrant as Specified in its Charter) _______________ ...

Guild Holdings Company (NYSE:GHLD) Q1 2022 Earnings Conference Call May 6, 2022 8:30 AM ET Company Participants Michael Kim - IR Mary Ann McGarry - CEO Terry Schmidt - President Amber Kramer - CFO Conference Call Participants Rick Shane - JP Morgan Paul Fandetti - Wells Fargo Securities Trevor Cranston - JMP Securities Operator Good morning, ladies and gentlemen, and welcome to the Guild Holdings Company First Quarter 2022 Earnings Conference Call. [Operator Instructions] As a reminder, this call will be re ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 OR ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _____________ Commission File Number: 001-39645 GUILD HOLDINGS COMPANY (Exact Name of Registrant as Specified in its Charter) _______________ ...

Guild mortgage Fourth Quarter and Full Year2021 Investor Presentation MARCH 2022 Disclaimer 2 Forward-Looking Statements This presentation contains forward-looking statements. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as "may," "should," "could," "predict," "potential," "believe," "will likely result," "expect," "continue ...

Financial Data and Key Metrics Changes - In Q4 2021, the company originated nearly $9 billion in mortgage loans, bringing the full year total to approximately $37 billion, which is a 5% increase compared to 2020 [4] - Adjusted net income for Q4 2021 was $22 million, while the full year adjusted net income was $259 million [4][5] - Adjusted earnings per share were $0.37 for Q4 and $4.27 for the full year, with an adjusted return on equity ratio of 31% for 2021 [5] - Total loan originations for 2021 were $36.9 billion, up 5% year-over-year, with net revenue totaling $1.6 billion [14] Business Line Data and Key Metrics Changes - The servicing business saw an 18% growth in unpaid principal balance in 2021, reaching $71 billion, which contributed to a 22% increase in total servicing fees for the year [10] - Purchase loans accounted for 62% of mortgage volumes in Q4 2021, up from 44% in Q4 2020, while industry-wide purchase loans accounted for an estimated 47% [7] - The gain on sale margin for Q4 2021 was 347 basis points on $8.8 billion of total funded origination, down from 436 basis points in the prior year [15] Market Data and Key Metrics Changes - The company is experiencing macro headwinds due to rising interest rates, which are expected to impact origination volumes and gain on sale margins [7] - The Mortgage Bankers Association forecasts steady growth in purchase volumes through 2023, which aligns with the company's focus on purchase loans [7] Company Strategy and Development Direction - The company emphasizes a purchase-focused mortgage provider strategy, leveraging its scale, relationships, and expertise built over 60 years [6] - The company aims to enhance client retention and recapture rates through its servicing platform, which has shown improved efficacy [11] - The company is focused on capitalizing on demographic trends, particularly among millennials transitioning from renting to owning [9] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges posed by rising interest rates and inventory limitations but remains confident in the company's ability to capture market share during such periods [7] - The company plans to continue leveraging synergies between its originations and servicing businesses to enhance growth and mitigate revenue volatility [11] Other Important Information - The company reported a favorable change in the fair value of MSR due to higher interest rates, amounting to $16.8 million in Q4 2021 [13] - The company identified certain internal control deficiencies that represented a material weakness but stated there was no impact on financial statements [18] Q&A Session Summary Question: Update on first quarter gain and pull-through adjusted basis - Management noted competitive pressures on margins and the expectation of continued pressure due to market volatility [22] Question: Impact of changing contingent consideration on goodwill - Management confirmed no change to goodwill based on their analysis and stated that the liability was specific to volume and gain on sale [24] Question: Market share and addressable market estimates - Management indicated that seasonality and inventory constraints are affecting market share and origination mix [28] Question: Material weaknesses within the accounting framework - Management clarified that there was no impact on financial statements and the weaknesses were primarily related to documentation [32] Question: M&A activity and market environment - Management observed increased M&A activity and expressed interest in retail businesses with strong market share [39] Question: Cash and liquidity related to warehouse lines - Management confirmed approximately $45 million was used to buy down warehouse lines, consistent with previous quarters [37] Question: Gain on sale breakdown - Management stated that about 70% of the total gain on sale is received in cash, with the remainder being capitalized [44]

Guild Holdings Company (NYSE:GHLD) Q3 2021 Results Conference Call November 10, 2021 5:00 PM ET Company Participants Michael Kim - IR Mary Ann McGarry - CEO Terry Schmidt - President Amber Kramer - CFO Conference Call Participants Trevor Cranston - JMP Securities Rick Shane - JP Morgan Don Fandetti - Wells Fargo Operator Good afternoon, ladies and gentlemen, and welcome to the Guild Holdings Company Third Quarter 2021 Earnings Conference Call. [Operator Instructions] As a reminder, this call will be recorde ...

Financial Data and Key Metrics Changes - For Q2 2021, total loan originations were $8.2 billion, down from $8.8 billion in the same quarter last year [20] - Net revenue totaled $294 million compared to $435 million in Q2 2020, while net income was $9 million or $0.15 per diluted share [20] - Adjusted net income for Q2 was $52 million or $0.87 per share, reflecting a year-over-year decline primarily due to lower origination fees and gain on sale [20][21] - Year-to-date loan originations reached $17.9 billion, up 23% year-over-year, with net revenue increasing 36% to $820 million [21] Business Line Data and Key Metrics Changes - The servicing segment reported an unpaid principal balance growth of 24% year-over-year to $66 billion, with servicing fees increasing by 26% to $48 million in Q2 [23] - The gain on sale margins for originations were 405 basis points for the quarter, with a margin of 415 basis points on pull-through adjusted locked volume [22] Market Data and Key Metrics Changes - The company noted that margins have compressed due to rising competitive pressures, which are expected to continue through the year [8] - The MBA forecast indicates a 21% decline in overall volume for Q3, while purchase applications were up 12% quarter-over-quarter [26] Company Strategy and Development Direction - The company focuses on the retail channel, which accounted for 97% of total originations in Q2 [13] - The acquisition of Residential Mortgage Services (RMS) is expected to enhance local presence and add approximately 250 loan officers [14] - The company aims to expand its footprint both organically and through acquisitions, maintaining a focus on the purchase market [17][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering sustainable and profitable growth despite market dynamics [9] - The company anticipates further margin compression in the latter half of the year, with gain on sale margins expected to align with long-term averages of approximately 380 basis points [27] - Management highlighted the importance of adapting to market changes and maintaining strong client relationships [10][12] Other Important Information - The company maintains a strong balance sheet with $322 million in cash and cash equivalents, and $3.1 billion in warehouse lines of credit [24] - The company paid a $1 per share dividend during Q2 and closed the RMS acquisition on July 1 [24] Q&A Session Summary Question: What is the current mix between cash gain and capitalization of the MSR? - The mix is approximately 85 to 90 basis points for cash gain, with the remainder being capitalized MSR [29] Question: How did GSE changes impact capital markets execution? - The company was able to pivot quickly to fill the void left by GSE changes, and it did not materially affect overall gain on sale numbers [30][31] Question: Will the RMS acquisition be accretive in Q3? - The acquisition is expected to be accretive, with RMS being historically profitable and similar in operations to the company [36][38] Question: What caused the slight drop in refi recapture rate? - The drop is attributed to quarter-to-quarter fluctuations, with pressure in the refi market affecting gain on sale compression [42][43] Question: What is the outlook for gain on sale guidance in the back half of the year? - The guidance indicates a significant decline in gain on sale margins, expected to drop below the historical average of 380 basis points [47] Question: What are the company's future acquisition strategies? - The company is focused on growth through both organic and inorganic means, seeking partners that align with its purchase-focused model [49][50]

[Cautionary Statement Regarding Forward-Looking Statements](index=3&type=section&id=CAUTIONARY%20STATEMENT%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This statement cautions that forward-looking statements are inherently uncertain, and actual results may differ materially [Forward-Looking Statements Overview](index=3&type=section&id=Forward-Looking%20Statements%20Overview) This overview clarifies that forward-looking statements are based on uncertain expectations, and actual results may differ materially - Forward-looking statements are based on current expectations, estimates, and projections about the industry, management's beliefs, and certain assumptions, many of which are inherently uncertain and beyond control[10](index=10&type=chunk) - Actual results may prove to be **materially different** from the results expressed or implied by the forward-looking statements[10](index=10&type=chunk) [Important Factors Affecting Future Results](index=3&type=section&id=Important%20Factors%20Affecting%20Future%20Results) This section identifies key factors, including macroeconomic conditions and market disruptions, that could materially affect future results - Key risk factors include changes in macro-economic conditions, U.S. residential real estate market conditions (including interest rates and COVID-19 effects), and disruptions in the secondary home loan market[11](index=11&type=chunk) - Risks also stem from changes in government-sponsored entities (FNMA, FHLMC, GNMA, FHA, USDA, VA), failure to maintain technological infrastructure, and inability to attract and retain qualified personnel[11](index=11&type=chunk) - Other significant factors include inaccuracies in fair value estimates (e.g., MSRs), costs of potential litigation, cybersecurity breaches, and non-compliance with complex industry laws and regulations[11](index=11&type=chunk)[15](index=15&type=chunk) [PART I - FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This part presents the unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements and detailed notes on accounting policies and financial instruments [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The Condensed Consolidated Balance Sheets show the company's financial position as of March 31, 2021, compared to December 31, 2020, indicating an increase in total assets and stockholders' equity, while total liabilities decreased Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2021 | December 31, 2020 | Change | % Change | | :-------------------------------- | :------------- | :---------------- | :----- | :------- | | Total assets | $4,877,917 | $4,818,087 | $59,830 | 1.2% | | Total liabilities | $3,979,689 | $4,082,095 | $(102,406)| (2.5%) | | Total stockholders' equity | $898,228 | $735,992 | $162,236 | 22.0% | | Mortgage servicing rights, net | $586,717 | $446,998 | $139,719 | 31.3% | | Warehouse lines of credit | $2,071,333 | $2,143,443 | $(72,110)| (3.4%) | [Condensed Consolidated Statements of Income (Loss)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20(Loss)) The Condensed Consolidated Statements of Income (Loss) show a significant turnaround from a net loss in Q1 2020 to a substantial net income in Q1 2021, driven by increased net revenue and improved valuation of mortgage servicing rights Condensed Consolidated Statements of Income (Loss) Highlights (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change | % Change | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :----- | :------- | | Net revenue | $526,187 | $170,200 | $355,987 | 209.2% | | Total expenses | $312,578 | $187,367 | $125,211 | 66.8% | | Income (loss) before income tax | $213,609 | $(17,167) | $230,776 | NM | | Net income (loss) | $160,604 | $(12,986) | $173,590 | NM | | Basic EPS | $2.68 | N/A | N/A | N/A | - Loan origination fees and gain on sale of loans, net, increased significantly from **$239,861 thousand** in Q1 2020 to **$446,589 thousand** in Q1 2021[21](index=21&type=chunk) - Valuation adjustment of mortgage servicing rights swung from a loss of **$(108,649) thousand** in Q1 2020 to a gain of **$35,743 thousand** in Q1 2021[21](index=21&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) The Condensed Consolidated Statements of Changes in Stockholders' Equity show an increase in total stockholders' equity from $735,992 thousand at December 31, 2020, to $898,228 thousand at March 31, 2021, primarily due to net income and stock-based compensation Changes in Stockholders' Equity (in thousands) | Metric | Balance at Dec 31, 2020 | Stock-based compensation | Net income | Balance at Mar 31, 2021 | | :----------------------- | :---------------------- | :----------------------- | :--------- | :---------------------- | | Additional Paid-In Capital | $18,035 | $1,632 | — | $19,667 | | Retained Earnings | $717,357 | — | $160,604 | $877,961 | | Total Stockholders' Equity | $735,992 | $1,632 | $160,604 | $898,228 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The Condensed Consolidated Statements of Cash Flows indicate a shift from net cash used in operating activities in Q1 2020 to net cash provided in Q1 2021, while financing activities shifted from providing to using cash, resulting in an overall decrease in cash, cash equivalents, and restricted cash Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net cash provided by (used in) operating activities | $34,349 | $(231,206) | | Net cash used in investing activities | $(667) | $(14,393) | | Net cash (used in) provided by financing activities | $(53,354) | $262,712 | | (Decrease) increase in cash, cash equivalents and restricted cash | $(19,672) | $17,113 | | Cash, cash equivalents and restricted cash, end of period | $319,961 | $123,848 | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes detail accounting policies, fair value measurements, financial instruments, commitments, contingencies, and segment reporting [NOTE 1 - Business, Basis of Presentation, and Accounting Policies](index=11&type=section&id=NOTE%201%20-%20BUSINESS,%20BASIS%20OF%20PRESENTATION,%20AND%20ACCOUNTING%20POLICIES) This note outlines the company's mortgage business, basis of financial statement presentation, accounting policies, and COVID-19 impact monitoring - Guild Holdings Company's core business involves originating, selling, and servicing residential mortgage loans within the United States[29](index=29&type=chunk) - The company adopted ASU 2018-15 on January 1, 2021, for cloud computing arrangements, which did not materially impact financial statements[37](index=37&type=chunk) - Escrow and fiduciary funds, totaling **$1.7 billion** at March 31, 2021, are maintained in segregated bank accounts and excluded from the balance sheets[36](index=36&type=chunk) [NOTE 2 - Fair Value Measurements](index=12&type=section&id=NOTE%202%20-%20FAIR%20VALUE%20MEASUREMENTS) This note details fair value measurements, categorizing assets and liabilities into a three-level hierarchy based on input observability - Fair value measurements are categorized into Level One (quoted prices in active markets), Level Two (observable inputs other than quoted prices), and Level Three (unobservable inputs reflecting management's assumptions)[38](index=38&type=chunk)[41](index=41&type=chunk) - Interest Rate Lock Commitments (IRLCs) and Mortgage Servicing Rights (MSRs) are classified as Level Three due to significant unobservable inputs, such as pull-through rates for IRLCs and prepayment estimates/discount rates for MSRs[43](index=43&type=chunk)[47](index=47&type=chunk) Assets and Liabilities Measured at Fair Value (March 31, 2021, in thousands) | Description | Level 1 | Level 2 | Level 3 | Total | | :-------------------------------- | :------ | :------ | :------ | :------ | | **Assets:** | | | | | | Trading securities | $91 | — | — | $91 | | Derivative (Forward delivery commitments) | — | $97,060 | — | $97,060 | | Derivative (Interest rate lock commitments) | — | — | $38,009 | $38,009 | | Mortgage loans held for sale | — | $2,345,927 | — | $2,345,927 | | Mortgage servicing rights | — | — | $586,717 | $586,717 | | **Total assets at fair value** | **$91** | **$2,442,987** | **$624,726** | **$3,067,804** | | **Liabilities:** | | | | | | Contingent liabilities due to acquisitions | — | — | $16,568 | $16,568 | | **Total liabilities at fair value** | **—** | **—** | **$16,568** | **$16,568** | [NOTE 3 - Accounts and Interest Receivable](index=16&type=section&id=NOTE%203%20-%20ACCOUNTS%20AND%20INTEREST%20RECEIVABLE) Accounts and interest receivable decreased from $43,390 thousand at December 31, 2020, to $38,227 thousand at March 31, 2021. The company maintains a foreclosure loss reserve, which increased to $13,350 thousand at March 31, 2021 Accounts and Interest Receivable (in thousands) | Category | March 31, 2021 | December 31, 2020 | | :-------------------------- | :------------- | :---------------- | | Trust advances | $34,268 | $36,241 | | Foreclosure advances, net | $3,379 | $2,894 | | Receivables related to loan sales | $1,620 | $2,707 | | Other | $(1,040) | $1,548 | | **Total accounts and interest receivable** | **$38,227** | **$43,390** | Foreclosure Loss Reserve Activity (in thousands) | Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Balance — beginning of period | $12,402 | $7,869 | | Utilization of foreclosure reserve | $(1,514) | $(800) | | Provision charged to operations | $2,462 | $1,924 | | Balance — end of period | $13,350 | $8,993 | [NOTE 4 - Other Assets](index=17&type=section&id=NOTE%204%20-%20OTHER%20ASSETS) Other assets slightly decreased from $150,275 thousand at December 31, 2020, to $148,300 thousand at March 31, 2021. Property and equipment, net, also saw a decrease, with depreciation and amortization expense of $1.7 million for Q1 2021 Other Assets (in thousands) | Category | March 31, 2021 | December 31, 2020 | | :-------------------------- | :------------- | :---------------- | | Prepaid expenses | $15,831 | $16,652 | | Company owned life insurance | $34,174 | $29,910 | | Property and equipment, net | $13,786 | $14,773 | | Right-of-use assets | $83,222 | $87,508 | | Real estate owned | $1,196 | $1,354 | | Trading securities | $91 | $78 | | **Total other assets** | **$148,300** | **$150,275** | - Depreciation and amortization expense for property and equipment was **$1.7 million** for the three months ended March 31, 2021, down from $1.9 million in the prior year period[58](index=58&type=chunk) [NOTE 5 - Derivative Financial Instruments](index=17&type=section&id=NOTE%205%20-%20DERIVATIVE%20FINANCIAL%20INSTRUMENTS) This note explains the company's use of derivative instruments to hedge interest rate risk, showing increased hedging gains and shifts in fair values - Net unrealized hedging gains increased by **41.9%** to **$43,001 thousand** for the three months ended March 31, 2021, compared to $30,290 thousand in the prior year[60](index=60&type=chunk) Notional and Fair Value of Derivative Financial Instruments (in thousands) | Instrument | Notional Value (Mar 31, 2021) | Derivative Asset (Mar 31, 2021) | Derivative Liability (Dec 31, 2020) | | :------------------ | :---------------------------- | :------------------------------ | :------------------------------ | | IRLCs | $4,021,335 | $38,009 | — | | Forward commitments | $4,396,480 | $97,060 | $38,270 | - The weighted average loan funding probability ('pull-through') for IRLCs increased from **87.8%** at December 31, 2020, to **92.2%** at March 31, 2021[63](index=63&type=chunk) [NOTE 6 - Mortgage Servicing Rights](index=19&type=section&id=NOTE%206%20-%20MORTGAGE%20SERVICING%20RIGHTS) MSRs significantly increased due to originations and positive valuation adjustments from model input changes, including a decreased prepayment rate Mortgage Servicing Rights Activity (in thousands) | Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Balance — beginning of period | $446,998 | $418,402 | | MSRs originated | $103,976 | $42,461 | | Changes in fair value: Due to collection/realization of cash flows | $(44,862) | $(22,510) | | Changes in fair value: Due to changes in valuation model inputs or assumptions | $80,605 | $(86,139) | | Balance — end of period | $586,717 | $352,214 | MSR Valuation Assumptions | Unobservable Input | March 31, 2021 (Weighted Average) | December 31, 2020 (Weighted Average) | | :------------------ | :-------------------------------- | :----------------------------------- | | Discount rate | 10.0% | 10.0% | | Prepayment rate | 13.1% | 18.2% | | Cost to service (per loan) | $91.6 | $92.5 | - The unpaid principal balance of mortgage loans serviced increased by **25.5%** to **$63.6 billion** at March 31, 2021, from $50.1 billion at March 31, 2020[67](index=67&type=chunk) [NOTE 7 - Mortgage Loans Held for Sale](index=20&type=section&id=NOTE%207%20-%20MORTGAGE%20LOANS%20HELD%20FOR%20SALE) Mortgage Loans Held for Sale (MLHS) slightly decreased to $2,345,927 thousand at March 31, 2021, from $2,368,777 thousand at the beginning of the period. Originations significantly increased, but were largely offset by proceeds from sales Mortgage Loans Held for Sale Activity (in thousands) | Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :---------------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Balance at the beginning of period | $2,368,777 | $1,504,842 | | Origination of mortgage loans held for sale | $9,815,270 | $5,620,167 | | Proceeds on sale of payments from mortgage loans held for sale | $(10,131,643) | $(5,561,492) | | Gain on sale of mortgage loans excluding fair value of other financial instruments, net | $355,157 | $170,948 | | Valuation adjustment of mortgage loans held for sale | $(61,634) | $31,025 | | Balance at the end of period | $2,345,927 | $1,765,490 | [NOTE 8 - Investor Reserves](index=20&type=section&id=NOTE%208%20-%20INVESTOR%20RESERVES) Investor reserves increased slightly to $14,877 thousand at March 31, 2021, from $14,535 thousand at the beginning of the period, reflecting provisions for potential losses from loan repurchases and indemnifications Investor Reserves Activity (in thousands) | Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Balance — beginning of period | $14,535 | $16,521 | | Benefit from investor reserves | $(2,006) | $(768) | | Provision for investor reserves charged to operations | $2,348 | $2,151 | | Balance — end of period | $14,877 | $17,904 | [NOTE 9 - Warehouse Lines of Credit](index=21&type=section&id=NOTE%209%20-%20WAREHOUSE%20LINES%20OF%20CREDIT) Warehouse lines of credit decreased, with the company maintaining multiple collateralized facilities and remaining in compliance with all debt covenants Warehouse Lines of Credit (in thousands) | Facility Description | Maturity (Mar 31, 2021) | March 31, 2021 | December 31, 2020 | | :------------------------------------------ | :---------------------- | :------------- | :---------------- | | $800 million master repurchase facility | January 2022 | $353,809 | $442,593 | | $250 million master repurchase facility | September 2021 | $169,473 | $148,011 | | $500 million master repurchase facility | February 2022 | $424,687 | $541,074 | | $200 million master repurchase facility | May 2021 | $171,491 | $187,214 | | $300 million master repurchase facility | September 2021 | $223,600 | $232,272 | | $500 million master repurchase facility | July 2021 | $417,250 | $464,355 | | $200 million master repurchase facility | April 2021 | $136,116 | $104,880 | | $250 million master repurchase facility | N/A | $154,616 | — | | $75 million master repurchase facility | March 2024 | $22,439 | $25,185 | | **Net warehouse lines of credit** | | **$2,071,333** | **$2,143,443** | - The weighted average interest rate for warehouse lines of credit decreased from **2.52%** at December 31, 2020, to **2.44%** at March 31, 2021[75](index=75&type=chunk) - The company had cash balances of **$131.1 million** in warehouse buy down accounts at March 31, 2021, up from $15.6 million at December 31, 2020[75](index=75&type=chunk) [NOTE 10 - Notes Payable](index=23&type=section&id=NOTE%2010%20-%20NOTES%20PAYABLE) Notes payable, primarily revolving and term notes collateralized by MSRs, increased to $165,000 thousand at March 31, 2021, from $145,750 thousand at December 31, 2020. The company amended a term note in March 2021, increasing its commitment - The company has a **$135.0 million** revolving note (expandable to $200.0 million) collateralized by GNMA MSRs, with **$45.0 million** outstanding at March 31, 2021[79](index=79&type=chunk) - Another revolving note of up to **$65.0 million**, collateralized by FHLMC MSRs, had **$20.0 million** outstanding at March 31, 2021[80](index=80&type=chunk) - A term note, collateralized by FNMA MSRs, was amended in March 2021 to a **$125.0 million** commitment (expandable to $175.0 million), with **$100.0 million** outstanding at March 31, 2021[81](index=81&type=chunk) [NOTE 11 - Earnings Per Share](index=23&type=section&id=NOTE%2011%20-%20EARNINGS%20PER%20SHARE) Basic and diluted earnings per share for Class A and Class B Common Stock were $2.68 and $2.67, respectively, for the three months ended March 31, 2021. EPS information is not presented for periods prior to the IPO in October 2020 Earnings Per Share (Three Months Ended March 31, 2021) | Metric | Amount | | :------------------------------------------ | :------- | | Net income available for Class A and Class B Common Stock | $160,604 | | Weighted-average shares outstanding - basic | 60,000 | | Weighted-average shares outstanding - diluted | 60,211 | | Basic earnings per share | $2.68 | | Diluted earnings per share | $2.67 | - The company has two classes of common stock, Class A (traded on NYSE: GHLD) and Class B, with identical preferences except for voting rights (Class A: one vote/share, Class B: ten votes/share)[87](index=87&type=chunk)[89](index=89&type=chunk) [NOTE 12 - Stock-Based Compensation](index=24&type=section&id=NOTE%2012%20-%20STOCK-BASED%20COMPENSATION) Stock-based compensation expense recognized for the three months ended March 31, 2021, was $1.6 million, with approximately $18.9 million of unrecognized compensation costs remaining - Stock-based compensation expense was **$1.6 million** for the three months ended March 31, 2021[91](index=91&type=chunk) - Unrecognized compensation costs related to non-vested restricted stock units totaled approximately **$18.9 million** as of March 31, 2021, expected to be recognized over the next 3.4 years[92](index=92&type=chunk) [NOTE 13 - Commitments and Contingencies](index=25&type=section&id=NOTE%2013%20-%20COMMITMENTS%20AND%20CONTINGENCIES) The company holds significant credit and derivative commitments and faces routine lawsuits, but expects no material adverse effects - Total commitments to originate loans were approximately **$4.0 billion** at March 31, 2021, a decrease from $5.2 billion at December 31, 2020[93](index=93&type=chunk) - Total commitments related to derivative instruments (forward loan sales, mandatory delivery, options, futures contracts) were approximately **$4.4 billion** at March 31, 2021, down from $5.5 billion at December 31, 2020[94](index=94&type=chunk) - The company is involved in various lawsuits but does not expect them to have a **material adverse effect** on its financial position or results of operations[95](index=95&type=chunk) [NOTE 14 - Minimum Net Worth Requirements](index=25&type=section&id=NOTE%2014%20-%20MINIMUM%20NET%20WORTH%20REQUIREMENTS) The company adheres to minimum net worth, capital, and liquidity requirements from regulators and investors, and was in compliance as of December 31, 2020 - Minimum net worth for Fannie Mae and Freddie Mac is **$2,500** plus **25 basis points** of outstanding UPB for total loans serviced[98](index=98&type=chunk) - Minimum net worth for Ginnie Mae is **$2,500** plus **35 basis points** of the issuer's total single-family effective outstanding obligations[99](index=99&type=chunk) - The company must maintain a ratio of Adjusted/Tangible Net Worth to Total Assets greater than **6%** for Fannie Mae, Freddie Mac, and Ginnie Mae[98](index=98&type=chunk) - As of December 31, 2020, the company was in compliance with the most restrictive minimum adjusted net worth requirement of **$78,064 thousand**[101](index=101&type=chunk) [NOTE 15 - Segments](index=26&type=section&id=NOTE%2015%20-%20SEGMENTS) The company operates in two interdependent segments, Origination and Servicing, with servicing supporting origination through client relationships - The company has two reportable segments: Origination and Servicing[102](index=102&type=chunk) - The Origination segment is responsible for loan origination, acquisition, and sale activities, employing a relationship-based sourcing strategy[103](index=103&type=chunk) - The Servicing segment provides a steady cash flow and builds client relationships, driving repeat business back to the origination segment[104](index=104&type=chunk) Net Income (Loss) by Segment (in thousands) | Segment | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :---------- | :-------------------------------- | :-------------------------------- | | Origination | $160,124 | $68,833 | | Servicing | $67,066 | $(79,345) | | All Other | $(66,586) | $(2,474) | | **Total** | **$160,604** | **$(12,986)** | [NOTE 16 - Subsequent Events](index=28&type=section&id=NOTE%2016%20-%20SUBSEQUENT%20EVENTS) Subsequent events include an agreement to acquire Residential Mortgage Services, Inc. for $196.7 million and a declared special cash dividend of $1.00 per share - On May 10, 2021, the company agreed to acquire Residential Mortgage Services, Inc. for approximately **$196.7 million**, to be financed with cash and Class A common shares[108](index=108&type=chunk) - The acquisition is expected to close in the **third quarter of 2021**[108](index=108&type=chunk) - On May 6, 2021, a special cash dividend of **$1.00 per share** on Class A and Class B common stock was declared, payable on May 28, 2021[109](index=109&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of financial condition and results, covering growth, COVID-19 impact, KPIs, non-GAAP measures, and liquidity [Business and Executive Overview](index=29&type=section&id=Business%20and%20Executive%20Overview) This overview describes Guild Holdings Company as a growth-oriented mortgage company focused on a relationship-based loan sourcing strategy and personalized borrower experience - The company is a growth-oriented mortgage company with a relationship-based loan sourcing strategy, aiming to deliver home ownership across the U.S[113](index=113&type=chunk) - Its business model emphasizes a personalized mortgage-borrowing experience supported by knowledgeable loan officers and diverse product offerings[113](index=113&type=chunk) [Executive Summary of Results of Operations for Periods Presented](index=29&type=section&id=Executive%20Summary%20of%20Results%20of%20Operations%20for%20Periods%20Presented) The company achieved significant revenue and net income growth in Q1 2021, driven by increased origination volume and higher profit margins on loan sales - Net income for Q1 2021 was **$160.6 million**, a significant improvement from a $13.0 million loss in Q1 2020[116](index=116&type=chunk) - Adjusted Net Income increased to **$106.4 million** in Q1 2021 from $57.9 million in Q1 2020[116](index=116&type=chunk) - Adjusted EBITDA grew to **$144.3 million** in Q1 2021 from $82.0 million in Q1 2020[116](index=116&type=chunk) - Loan origination volume increased by **70%** to **$9.8 billion** in Q1 2021 from $5.8 billion in Q1 2020, driven by decreased interest rates[116](index=116&type=chunk) - The servicing portfolio's UPB grew by **25.5%** to **$62.9 billion** as of March 31, 2021, from $50.1 billion as of March 31, 2020[116](index=116&type=chunk) - Gain on sale margins increased by **39 basis points (9.3%)** in Q1 2021 compared to Q1 2020[117](index=117&type=chunk) - The company's overall recapture rate for Q1 2021 was **65%**, up from 58% in Q1 2020, indicating success in retaining existing borrowers[121](index=121&type=chunk) [Recent Developments](index=31&type=section&id=Recent%20Developments) Recent developments include the ongoing COVID-19 impact on servicing, leading to increased delinquencies, and enhanced liquidity through a new loan funding facility [COVID-19 Pandemic](index=31&type=section&id=COVID-19%20Pandemic) The COVID-19 pandemic negatively impacted servicing with increased delinquencies and forbearance, though the company's rate remains below industry average - The 60-plus day delinquency rate on the servicing portfolio was **3.1%** as of March 31, 2021, compared to 3.5% as of December 31, 2020, and below the U.S. mortgage market average of 5.0%[123](index=123&type=chunk) - Approximately **2.7%** of loans in the servicing portfolio had elected forbearance as of April 30, 2021, lower than the industry average of 4.5%[124](index=124&type=chunk) - Increased delinquency rates and forbearance programs are expected to reduce servicing income and increase servicing expenses, requiring the company to finance substantial advances[123](index=123&type=chunk) [Increased Liquidity](index=32&type=section&id=Increased%20Liquidity) To support increased loan origination volume, the company added a new $250.0 million loan funding facility in Q1 2021, bringing the aggregate available amount under its loan facilities to approximately $3.1 billion - One additional loan funding facility with a total size of **$250.0 million** was added in Q1 2021[128](index=128&type=chunk) - As of March 31, 2021, the aggregate available amount under loan facilities was approximately **$3.1 billion**[128](index=128&type=chunk) [Description of Certain Components of Financial Data](index=32&type=section&id=Description%20of%20Certain%20Components%20of%20Financial%20Data) This section outlines the primary components of the company's revenue, including loan origination and servicing fees, and expenses such as salaries and administrative costs [Our Components of Revenue](index=32&type=section&id=Our%20Components%20of%20Revenue) Revenue primarily stems from loan origination fees, gain on sale of loans, servicing fees, MSR valuation adjustments, and net interest income - Loan origination fees and gain on sale of loans, net, include net proceeds from loan sales, client fees, fair value of MSRs at sale, changes in fair value of IRLCs and MLHS, and changes in fair value of forward commitments[132](index=132&type=chunk) - Loan servicing and other fees consist of contractual servicing fees, other ancillary fees (e.g., late fees), and impound interest[134](index=134&type=chunk) - Valuation adjustment of mortgage servicing rights reflects periodic reevaluation of MSR fair value due to changes in model inputs or assumptions and cash flow collections[134](index=134&type=chunk) [Our Components of Expenses](index=33&type=section&id=Our%20Components%20of%20Expenses) Expenses include salaries, incentive compensation, general and administrative costs, occupancy, depreciation, and provision for foreclosure losses - Salaries, incentive compensation and benefits include payroll, incentive compensation (variable based on origination volume), and employee benefits[138](index=138&type=chunk) - General and administrative expenses cover professional services, office expenses, liability insurance, and adjustments to the fair value of contingent liabilities due to acquisitions ('earn-out payments')[139](index=139&type=chunk) - Provision for foreclosure losses is incurred on government loans for unreimbursed interest and foreclosure costs, reserved based on historical loss experience and loan-specific issues[142](index=142&type=chunk) [Key Performance Indicators](index=34&type=section&id=Key%20Performance%20Indicators) Management reviews key performance indicators such as origination volume, gain on sale margins, servicing portfolio UPB, MSR multiple, and delinquency rates Key Performance Indicators (in thousands, except percentages) | Indicator | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change | % Change | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :----- | :------- | | Total in-house origination ($) | $9,768,037 | $5,744,246 | $4,023,791 | 70.0% | | Total originations ($) | $9,781,352 | $5,771,306 | $4,010,046 | 69.5% | | Gain on sale margin (bps) | 457 | 418 | 39 | 9.3% | | UPB (period end) ($) | $62,891,262 | $50,117,988 | $12,773,274 | 25.5% | | MSR multiple (period end) | 3.2 | 2.1 | 1.1 | 52.4% | | Loan delinquency rate 60-plus days (period end) | 3.1% | 1.4% | 1.7% | 121.4% | - The 30-year conventional conforming par rate decreased from **3.5%** in Q1 2020 to **2.9%** in Q1 2021[146](index=146&type=chunk) [Non-GAAP Financial Measures](index=35&type=section&id=Non-GAAP%20Financial%20Measures) The company uses non-GAAP measures like Adjusted Net Income and Adjusted EBITDA to supplement GAAP results, excluding non-cash fair value adjustments - Adjusted Net Income excludes changes in fair value measurements related to MSRs, contingent liabilities due to acquisitions, and stock-based compensation, with an implied tax effect[150](index=150&type=chunk) - Adjusted EBITDA excludes interest (excluding net warehouse interest and payoff interest), taxes, depreciation, amortization, and the same fair value adjustments and stock-based compensation as Adjusted Net Income[151](index=151&type=chunk) Reconciliation of Net Income (Loss) to Adjusted Net Income (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net income (loss) | $160,604 | $(12,986) | | Change in fair value of MSRs due to model inputs and assumptions | $(80,605) | $86,139 | | Change in fair value of contingent liabilities due to acquisitions | $6,620 | $9,007 | | Stock-based compensation | $1,632 | — | | Tax impact of adjustments | $18,161 | $(24,262) | | **Adjusted Net Income** | **$106,412** | **$57,898** | Reconciliation of Net Income (Loss) to Adjusted EBITDA (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net income (loss) | $160,604 | $(12,986) | | Interest expense on non-funding debt | $1,397 | $2,162 | | Income tax expense (benefit) | $53,005 | $(4,181) | | Depreciation and amortization | $1,654 | $1,887 | | Change in fair value of MSRs due to model inputs and assumptions | $(80,605) | $86,139 | | Change in fair value of contingent liabilities due to acquisitions | $6,620 | $9,007 | | Stock-based compensation | $1,632 | — | | **Adjusted EBITDA** | **$144,307** | **$82,028** | [Results of Operations for the Three Months Ended March 31, 2021 and 2020](index=37&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20March%2031,%202021%20and%202020) The company saw significant net revenue growth and a swing from net loss to net income in Q1 2021, driven by increased loan origination and MSR valuation Consolidated Statement of Operations Highlights (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | $ Change | % Change | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :------- | :------- | | Net revenue | $526,187 | $170,200 | $355,987 | 209.2% | | Total expenses | $312,578 | $187,367 | $125,211 | 66.8% | | Income before income tax expense (benefit) | $213,609 | $(17,167) | $230,776 | NM | | Net income (loss) | $160,604 | $(12,986) | $173,590 | NM | [Revenue](index=37&type=section&id=Revenue) Revenue substantially increased, driven by loan origination fees, gain on sale of loans, and a positive MSR valuation adjustment Revenue Components (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | $ Change | % Change | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :------- | :------- | | Loan origination fees and gain on sale of loans, net | $446,589 | $239,861 | $206,728 | 86.2% | | Loan servicing and other fees | $45,199 | $38,532 | $6,667 | 17.3% | | Valuation adjustment of mortgage servicing rights | $35,743 | $(108,649) | $144,392 | 132.9% | | Interest income | $15,098 | $13,001 | $2,097 | 16.1% | | Interest expense | $(16,511) | $(12,934) | $(3,577) | 27.7% | [Loan Origination Fees and Gain on Sale of Loans, Net](index=37&type=section&id=Loan%20Origination%20Fees%20and%20Gain%20on%20Sale%20of%20Loans,%20Net) Loan origination fees and gain on sale of loans, net, increased by 86.2% due to higher origination volume and improved gain on sale margins Loan Origination Fees and Gain on Sale of Loans, Net (in thousands) | Component | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | $ Change | % Change | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :------- | :------- | | Gain on sale of loans | $324,375 | $159,222 | $165,153 | 103.7% | | Loan origination fees | $26,828 | $15,599 | $11,229 | 72.0% | | Fair value of originated MSRs | $99,464 | $38,623 | $60,841 | 157.5% | | Fair value adjustment to MLHS and IRLCs | $(137,060) | $79,611 | $(216,671)| NM | | Changes in fair value of forward commitments | $135,330 | $(51,043) | $186,373 | NM | | Provision for investor reserves | $(2,348) | $(2,151) | $(197) | 9.2% | Loan Origination Volume by Type (in thousands) | Loan Type | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change | % Change | | :-------------------------- | :-------------------------------- | :-------------------------------- | :----- | :------- | | Conventional conforming | $6,689,951 | $3,519,178 | $3,170,773 | 90.1% | | Government | $2,542,427 | $1,695,002 | $847,425 | 50.0% | | State housing | $315,946 | $350,612 | $(34,666)| (9.9%) | | Non-agency | $219,713 | $179,454 | $40,259 | 22.4% | | **Total in-house originations** | **$9,768,037** | **$5,744,246** | **$4,023,791** | **70.0%** | - The percentage of service retained loans increased to **94.2%** in Q1 2021 from 72.4% in Q1 2020, contributing to the increase in fair value of originated MSRs[163](index=163&type=chunk)[164](index=164&type=chunk) [Loan Servicing and Other Fees](index=40&type=section&id=Loan%20Servicing%20and%20Other%20Fees) Loan servicing and other fees increased by 17.3% due to a larger servicing portfolio UPB, despite some dampening from forbearance clients Loan Servicing and Other Fees (in thousands) | Component | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | $ Change | % Change | | :-------------------------- | :-------------------------------- | :-------------------------------- | :------- | :------- | | Servicing fee income | $43,856 | $37,076 | $6,780 | 18.3% | | Other ancillary fees | $1,271 | $1,653 | $(382) | (23.1%) | | Loan modification fees | $435 | $199 | $236 | 118.6% | | Interest on impound accounts | $(363) | $(396) | $33 | (8.3%) | | **Total servicing fees** | **$45,199** | **$38,532** | **$6,667** | **17.3%** | - The average UPB of the servicing portfolio increased by **23.5%** to **$61,430,458 thousand** in Q1 2021[168](index=168&type=chunk) - Weighted average prepayment speed decreased from **23.8%** in Q1 2020 to **13.7%** in Q1 2021[168](index=168&type=chunk) [Valuation Adjustment of Mortgage Servicing Rights](index=41&type=section&id=Valuation%20Adjustment%20of%20Mortgage%20Servicing%20Rights) MSR valuation adjustment swung from a loss to a gain, driven by increased average 30-year mortgage rates and decreased prepayment speed MSR Valuation Adjustment (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | $ Change | % Change | | :-------------------------- | :-------------------------------- | :-------------------------------- | :------- | :------- | | MSR valuation adjustment | $35,743 | $(108,649) | $144,392 | 132.9% | - Average 30-year mortgage rates increased by **10 basis points** in Q1 2021, while they decreased by 20 basis points in Q1 2020[172](index=172&type=chunk) - The weighted average prepayment speed decreased from **23.8%** in Q1 2020 to **13.7%** in Q1 2021[172](index=172&type=chunk) [Interest Income](index=41&type=section&id=Interest%20Income) Interest income increased by 16.1% to $15,098 thousand, mainly driven by higher interest income from funding, despite a decrease in the weighted average note rate of originated loans Interest Income (in thousands) | Component | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | $ Change | % Change | | :-------------------------- | :-------------------------------- | :-------------------------------- | :------- | :------- | | Interest income, funding | $12,690 | $9,919 | $2,771 | 27.9% | | Interest income earnings credit | $713 | $2,076 | $(1,363) | (65.7%) | | Wire transfer fees | $1,695 | $1,006 | $689 | 68.5% | | **Total interest income** | **$15,098** | **$13,001** | **$2,097** | **16.1%** | - The weighted average note rate of originated loans decreased from **3.7%** in Q1 2020 to **2.8%** in Q1 2021[173](index=173&type=chunk) [Interest Expense](index=41&type=section&id=Interest%20Expense) Interest expense increased by 27.7% due to higher payoff interest expense from increased loan payoff volume and bank servicing charges Interest Expense (in thousands) | Component | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | $ Change | % Change | | :-------------------------- | :-------------------------------- | :-------------------------------- | :------- | :------- | | Interest expense, funding facilities | $(8,392) | $(6,998) | $(1,394) | 19.9% | | Interest expense, other financing | $(1,598) | $(2,352) | $754 | (32.1%) | | Bank servicing charges | $(3,117) | $(1,664) | $(1,453) | 87.3% | | Payoff interest expense | $(3,374) | $(1,877) | $(1,497) | 79.8% | | Miscellaneous interest expense | $(30) | $(43) | $13 | (30.2%) | | **Total interest expense** | **$(16,511)** | **$(12,934)** | **$(3,577)** | **27.7%** | - Payoff interest expense increased due to an **88.1%** increase in loan payoff volume[174](index=174&type=chunk) - Warehouse lines of credit costs decreased due to a **0.9%** decrease in LIBOR rates[175](index=175&type=chunk) [Summary of Expenses](index=43&type=section&id=Summary%20of%20Expenses) Total expenses increased by 66.8%, primarily due to higher salaries, incentive compensation, and benefits driven by increased origination volume Summary of Expenses (in thousands) | Expense Category | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | $ Change | % Change | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :------- | :------- | | Salaries, incentive compensation and benefits | $266,724 | $148,013 | $118,711 | 80.2% | | General and administrative | $26,906 | $22,225 | $4,681 | 21.1% | | Occupancy, equipment and communication | $14,832 | $13,318 | $1,514 | 11.4% | | Depreciation and amortization | $1,654 | $1,887 | $(233) | (12.3%) | | Provision for foreclosure losses | $2,462 | $1,924 | $538 | 28.0% | | **Total expenses** | **$312,578** | **$187,367** | **$125,211** | **66.8%** | [Salaries, Incentive Compensation and Benefits](index=43&type=section&id=Salaries,%20Incentive%20Compensation%20and%20Benefits) Salaries, incentive compensation, and benefits increased by 80.2%, driven by higher incentive compensation from increased origination volume and additional hires Salaries, Incentive Compensation and Benefits (in thousands) | Component | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | $ Change | % Change | | :-------------------------- | :-------------------------------- | :-------------------------------- | :------- | :------- | | Incentive compensation | $150,968 | $78,458 | $72,510 | 92.4% | | Salaries | $83,710 | $53,111 | $30,599 | 57.6% | | Benefits | $32,046 | $16,444 | $15,602 | 94.9% | | **Total salaries, incentive compensation and benefits expense** | **$266,724** | **$148,013** | **$118,711** | **80.2%** | - Benefits expense increased by **$6.1 million** due to higher employment taxes and a **$3.5 million** increase in the fair value of the deferred compensation plan[180](index=180&type=chunk) [General and Administrative](index=43&type=section&id=General%20and%20Administrative) General and administrative expenses increased by 21.1%, mainly due to higher professional fees supporting origination growth and public company costs General and Administrative (in thousands) | Component | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | $ Change | % Change | | :-------------------------- | :-------------------------------- | :-------------------------------- | :------- | :------- | | Contingent liability fair value adjustment | $6,620 | $9,007 | $(2,387) | (26.5%) | | Professional fees | $12,762 | $5,377 | $7,385 | 137.3% | | Advertising and promotions | $4,092 | $4,217 | $(125) | (3.0%) | | Office supplies, travel and entertainment | $2,459 | $2,507 | $(48) | (1.9%) | | Miscellaneous | $973 | $1,117 | $(144) | (12.9%) | | **Total general and administrative expense** | **$26,906** | **$22,225** | **$4,681** | **21.1%** | - Professional fees increased by **$4.7 million** due to third-party fees, business taxes, and costs related to becoming a public company[182](index=182&type=chunk) [Occupancy, Equipment and Communication](index=44&type=section&id=Occupancy,%20Equipment%20and%20Communication) Occupancy, equipment, and communication expenses increased by 11.4% to $14,832 thousand, driven by higher equipment and communication costs to support a remote working environment due to COVID-19 Occupancy, Equipment and Communication (in thousands) | Component | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | $ Change | % Change | | :-------------------------- | :-------------------------------- | :-------------------------------- | :------- | :------- | | Occupancy | $8,349 | $8,185 | $164 | 2.0% | | Equipment | $2,215 | $1,632 | $583 | 35.7% | | Communication | $4,268 | $3,501 | $767 | 21.9% | | **Total occupancy, equipment and communication expense** | **$14,832** | **$13,318** | **$1,514** | **11.4%** | - Equipment and communication expenses increased due to the needs of a remote working environment caused by COVID-19[183](index=183&type=chunk) [Provision for Foreclosure Losses](index=44&type=section&id=Provision%20for%20Foreclosure%20Losses) Provision for foreclosure losses increased by 28.0% due to higher significant delinquencies and anticipated longer foreclosure times, despite fewer foreclosure starts - Provision for foreclosure losses increased to **$2,462 thousand** in Q1 2021 from $1,924 thousand in Q1 2020[177](index=177&type=chunk) - The increase is due to higher significant delinquencies and expected delays/backlogs in the foreclosure process, leading to increased estimated per-loan losses[184](index=184&type=chunk) [Summary Results by Segment for the Three Months Ended March 31, 2021 and 2020](index=44&type=section&id=Summary%20Results%20by%20Segment%20for%20the%20Three%20Months%20Ended%20March%2031,%202021%20and%202020) The company's interdependent Origination and Servicing segments showed increased net income, with Servicing swinging to profit due to MSR valuation changes - Management views the origination and servicing segments as intricately related and interdependent, with servicing supporting origination through client relationships[185](index=185&type=chunk) [Origination](index=45&type=section&id=Origination) The Origination segment's net income significantly increased, driven by an 86.3% rise in loan origination fees and gain on sale, net, and higher loan sales volume Origination Segment Performance (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Total in-house originations | $9,768,037 | $5,744,246 | | Loan origination fees and gain on sale, net | $444,797 | $238,802 | | Net revenue | $447,643 | $241,027 | | Salaries, incentive compensation and benefits | $250,815 | $140,006 | | **Net income allocated to origination** | **$160,124** | **$68,833** | - Loan origination fees and gain on sale, net, increased by **$205.6 million (86.3%)** in Q1 2021[188](index=188&type=chunk) - Gain on sale margins increased by **39 basis points (9.3%)** and on pull-through adjusted locked volume by **180 basis points (60.4%)**[188](index=188&type=chunk) [Servicing](index=45&type=section&id=Servicing) The Servicing segment swung to a net income of $67,066 thousand, primarily due to a $35.7 million MSR fair value gain, despite higher interest expense Servicing Segment Performance (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | UPB of servicing portfolio (period end) | $62,891,262 | $50,117,988 | | Loan servicing and other fees | $45,199 | $38,532 | | Valuation adjustment of MSRs | $35,743 | $(108,649) | | Net revenue | $79,895 | $(69,020) | | Salaries, incentive compensation and benefits | $7,213 | $5,686 | | **Net income (loss) allocated to servicing** | **$67,066** | **$(79,345)** | - The increase in MSR fair value was driven by a **10 basis point increase** in average 30-year mortgage rates and a decrease in prepayment speeds[190](index=190&type=chunk) - Salaries, incentive compensation, and benefits increased due to hiring additional employees to support increased servicing volume and clients in forbearance[192](index=192&type=chunk) [Liquidity, Capital Resources and Cash Flows](index=47&type=section&id=Liquidity,%20Capital%20Resources%20and%20Cash%20Flows) The company's liquidity, sourced from operations and various credit facilities, is deemed sufficient for the next 12 months, with all debt covenants in compliance - Primary liquidity sources include cash flows from operations (loan sales, origination fees, servicing income, interest income), borrowings on warehouse lines of credit, and MSR notes payable[194](index=194&type=chunk) - As of March 31, 2021, the aggregate available amount under loan funding facilities was approximately **$3.1 billion**, with combined outstanding balances of $2.1 billion[198](index=198&type=chunk) - As of March 31, 2021, the aggregate available amount under MSR notes payable was **$440.0 million**, with combined outstanding balances of $165.0 million[199](index=199&type=chunk) - The company believes it was in compliance with all debt covenants as of March 31, 2021, and December 31, 2020[203](index=203&type=chunk)[205](index=205&type=chunk) [Cash Flows](index=50&type=section&id=Cash%20Flows) Operating cash flows turned positive in Q1 2021, investing activities used less cash, and financing activities shifted to a net cash outflow Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net cash provided by (used in) operating activities | $34,349 | $(231,206) | | Net cash used in investing activities | $(667) | $(14,393) | | Net cash (used in) provided by financing activities | $(53,354) | $262,712 | [Operating activities](index=50&type=section&id=Operating%20activities) Net cash from operating activities turned positive in Q1 2021, driven by increased proceeds from loan sales relative to originations Cash Flows from Operating Activities (in thousands) | Component | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Loans held for sale | $22,850 | $(260,648) | | Other operating sources | $11,499 | $29,442 | | **Net cash provided by (used in) operating activities** | **$34,349** | **$(231,206)** | - Cash provided by loans held for sale increased due to higher proceeds on sale and payments from mortgage loans held for sale relative to originations[210](index=210&type=chunk) [Investing activities](index=50&type=section&id=Investing%20activities) Net cash used in investing activities decreased due to fewer property and equipment purchases and the absence of a prior-year affiliate payment - Cash used in investing activities decreased primarily due to less cash used for purchases of property and equipment[211](index=211&type=chunk) - The prior year period included a **$12.0 million** payment made on behalf of an affiliate[211](index=211&type=chunk) [Financing activities](index=50&type=section&id=Financing%20activities) Net cash used in financing activities shifted to an outflow, driven by higher net repayments on warehouse lines of credit Cash Flows from Financing Activities (in thousands) | Component | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Warehouse lines of credit | $(72,103) | $304,815 | | Other financing sources | $18,749 | $(42,103) | | **Net cash (used in) provided by financing activities** | **$(53,354)** | **$262,712** | - The decrease in cash from warehouse lines of credit was due to higher net repayments[214](index=214&type=chunk) - Cash from other financing sources increased due to net borrowings of **$19.3 million** on MSR notes payable in Q1 2021, compared to net repayments of $30.0 million in Q1 2020[214](index=214&type=chunk) [Contractual Obligations](index=51&type=section&id=Contractual%20Obligations) There have been no significant changes to the company's contractual obligations and commitments since its 2020 Annual Report on Form 10-K, as disclosed in Note 13 - No significant changes to contractual obligations and commitments since the 2020 Annual Report on Form 10-K[216](index=216&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=51&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Guild Holdings Company is not required to provide quantitative and qualitative disclosures about market risk in this report - The company is not required to provide quantitative and qualitative disclosures about market risk as it is a smaller reporting company[217](index=217&type=chunk) [Item 4. Controls and Procedures](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of March 31, 2021, with internal control over financial reporting to be evaluated post-2021 Annual Report - Disclosure controls and procedures were evaluated and deemed **effective** as of March 31, 2021[218](index=218&type=chunk) - Evaluation of internal control over financial reporting is not required until after the filing of the 2021 Annual Report on Form 10-K[220](index=220&type=chunk) [PART II - OTHER INFORMATION](index=52&type=section&id=PART%20II%20OTHER%20INFORMATION) This part contains other information not included in the financial statements, such as legal proceedings, risk factors, and exhibits [Item 1. Legal Proceedings](index=52&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal and regulatory proceedings in the ordinary course of business but does not anticipate any material adverse effect on its business, results of operations, or financial condition - The company is routinely subject to various examinations and legal/regulatory proceedings[223](index=223&type=chunk) - Management does not expect current legal or regulatory proceedings to have a **material adverse effect** on the company's business, results of operations, or financial condition[223](index=223&type=chunk) [Item 1A. Risk Factors](index=52&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's 2020 Annual Report on Form 10-K - No **material changes** to the risk factors disclosed in the 2020 Annual Report on Form 10-K[224](index=224&type=chunk) [Item 6. Exhibits](index=53&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report, including the Amended and Restated Certificate of Incorporation and Bylaws, CEO and CFO certifications, and Inline XBRL documents - Exhibits include the Amended and Restated Certificate of Incorporation and Bylaws, CEO and CFO certifications (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act), and Inline XBRL documents[227](index=227&type=chunk) [Signatures](index=54&type=section&id=Signatures) The Quarterly Report is signed on behalf of Guild Holdings Company by its Chief Executive Officer, Mary Ann McGarry, and Chief Financial Officer, Desiree A. Elwell, on May 11, 2021 - The Quarterly Report was signed by Mary Ann McGarry, Chief Executive Officer, and Desiree A. Elwell, Chief Financial Officer, on **May 11, 2021**[233](index=233&type=chunk)

Guild Holdings Company (NYSE:GHLD) Q1 2021 Earnings Conference Call May 11, 2021 8:00 AM ET Company Participants Michael Kim - IR Mary Ann McGarry - CEO Terry Schmidt - President Conference Call Participants Don Fandetti - Wells Fargo Rick Shane - JP Morgan Trevor Cranston - JMP Securities Giuliano Bologna - Compass Point Operator Good morning ladies and gentlemen, and welcome to the Guild Holdings Company First Quarter 2021 Earnings Conference Call. At this time all participants are in a listen-only mode. ...