Guild pany(GHLD) - 2025 Q2 - Quarterly Report

Cautionary Statement Regarding Forward-Looking Statements This section advises that the report contains forward-looking statements subject to inherent uncertainties and risks, including those related to market conditions, regulatory changes, and the pending merger - The report contains forward-looking statements based on current views, estimates, and projections, which are subject to inherent uncertainties and risks[6] - Key risk factors include disruptions in the secondary home loan market, macroeconomic and real estate market conditions, dependence on government-sponsored entities, changes in interest rates and monetary policies, servicing rights termination, reliance on warehouse lines of credit, indebtedness, technology infrastructure, acquisitions, competition, referral relationships, servicing advances, fair value measurement inaccuracies, adaptation to technological changes, adverse client events, geographic concentration, cybersecurity breaches, capital availability, operational risks, loan repurchases, seasonality, brand reputation, real estate investment risks, personnel attraction/retention, risk management effectiveness, complex legal/regulatory framework, fair lending compliance, state licenses, GSE/FHA/VA/USDA/Ginnie Mae guideline changes, reverse mortgage program changes, data privacy/security, litigation, control by MCMI, 'controlled company' status, director/executive officer control, holding company dependence, potential stock sales, capital stock issuance, dividend uncertainty, anti-takeover provisions, dual class structure, fluctuating operating results, and internal control failures[7][8] - Additional risks are associated with the pending Merger, including uncertainties impacting business, financial results, cash flows, or stock price, potential failure to complete the Merger, litigation challenging the Merger, business uncertainties and contractual restrictions during the Merger's pendency, and potential delays or conditions imposed by regulatory approvals[11] Part I—Financial Information This part presents the unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements of Guild Holdings Company, including balance sheets, statements of operations, changes in stockholders' equity, and cash flows, along with detailed notes explaining business operations, accounting policies, fair value measurements, and specific financial line items Condensed Consolidated Balance Sheets This section provides a snapshot of the Company's financial position, detailing assets, liabilities, and stockholders' equity at specific reporting dates | (in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Assets | | | | Cash and cash equivalents | $107,364 | $118,203 | | Restricted cash | 7,066 | 6,853 | | Mortgage loans held for sale, at fair value | 1,821,187 | 1,523,447 | | Reverse mortgage loans held for investment, at fair value | 516,899 | 451,704 | | Ginnie Mae loans subject to repurchase right | 753,707 | 807,283 | | Mortgage servicing rights, at fair value | 1,303,599 | 1,343,829 | | Advances, net | 61,001 | 85,523 | | Property and equipment, net | 21,533 | 19,032 | | Right-of-use assets | 59,987 | 67,139 | | Goodwill and intangible assets, net | 221,535 | 225,994 | | Other assets | 159,677 | 119,296 | | Total assets | $5,033,555 | $4,768,303 | | Liabilities | | | | Warehouse lines of credit, net | $1,670,303 | $1,414,563 | | HMBS related borrowings | 494,156 | 425,979 | | Ginnie Mae loans subject to repurchase right | 763,922 | 817,271 | | Notes payable, net | 318,489 | 300,000 | | Accounts payable and accrued expenses | 103,863 | 92,401 | | Operating lease liabilities | 69,415 | 76,980 | | Deferred tax liabilities | 241,491 | 251,440 | | Other liabilities | 153,818 | 135,659 | | Total liabilities | 3,815,457 | 3,514,293 | | Stockholders' equity | | | | Total stockholders' equity | 1,218,098 | 1,254,010 | | Total liabilities and stockholders' equity | $5,033,555 | $4,768,303 | - Total assets increased by $265.25 million (5.56%) from December 31, 2024, to June 30, 2025, primarily driven by increases in mortgage loans held for sale and reverse mortgage loans held for investment[13] - Total liabilities increased by $301.16 million (8.57%) over the same period, mainly due to higher warehouse lines of credit and HMBS-related borrowings[13] - Total stockholders' equity decreased by $35.91 million (2.86%) from December 31, 2024, to June 30, 2025[13] Condensed Consolidated Statements of Operations This section presents the Company's financial performance over specific periods, detailing revenues, expenses, and net income or loss | (in thousands, except per share amounts) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | | | | | | Loan origination fees and gain on sale of loans, net | $236,001 | $205,848 | $421,214 | $339,908 | | Gain on reverse mortgage loans held for investment and HMBS-related borrowings, net | 2,591 | 2,134 | 5,506 | 5,364 | | Loan servicing and other fees | 72,745 | 67,709 | 145,496 | 133,497 | | Valuation adjustment of mortgage servicing rights | (41,313) | 2,134 | (111,249) | 22,912 | | Interest income | 38,714 | 36,219 | 67,808 | 60,947 | | Interest expense | (28,963) | (28,647) | (51,042) | (45,188) | | Other (expense) income, net | (330) | 288 | 198 | 27 | | Net revenue | 279,445 | 285,685 | 477,931 | 517,467 | | Expenses | | | | | | Salaries, incentive compensation and benefits | 202,838 | 188,938 | 376,050 | 329,005 | | General and administrative | 31,426 | 28,398 | 60,579 | 57,609 | | Occupancy, equipment and communication | 19,913 | 20,348 | 41,633 | 40,163 | | Depreciation and amortization | 3,611 | 3,970 | 7,258 | 7,724 | | Provision for (reversal of) foreclosure losses | 1,115 | (496) | 3,493 | (104) | | Total expenses | 258,903 | 241,158 | 489,013 | 434,397 | | Income (loss) before income taxes | 20,542 | 44,527 | (11,082) | 83,070 | | Income tax expense (benefit) | 1,879 | 6,936 | (5,786) | 17,079 | | Net income (loss) | 18,663 | 37,591 | (5,296) | 65,991 | | Net income (loss) attributable to Guild | $18,661 | $37,583 | $(5,236) | $66,081 | | Earnings (loss) per share attributable to Class A and Class B common stock: | | | | | | Basic | $0.30 | $0.61 | $(0.08) | $1.08 | | Diluted | $0.30 | $0.60 | $(0.08) | $1.06 | - Net revenue for the three months ended June 30, 2025, decreased by $6.24 million (2.18%) compared to the same period in 2024, primarily due to a significant negative valuation adjustment of mortgage servicing rights[14] - Net revenue for the six months ended June 30, 2025, decreased by $39.54 million (7.64%) compared to the same period in 2024, also driven by the negative MSR valuation adjustment[14] - Net income attributable to Guild for the three months ended June 30, 2025, was $18.66 million, a decrease of $18.92 million (50.34%) from $37.58 million in the prior year period[14] - Net loss attributable to Guild for the six months ended June 30, 2025, was $5.24 million, a significant decline from net income of $66.08 million in the prior year period[14] - Diluted EPS for the three months ended June 30, 2025, was $0.30, down from $0.60 in the prior year period. For the six months, diluted EPS was $(0.08) compared to $1.06 in the prior year[14] Condensed Consolidated Statements of Changes in Stockholders' Equity This section outlines the changes in the Company's equity accounts over time, reflecting net income, dividends, and stock transactions | (in thousands, except share and per share amounts) | Balance at December 31, 2024 | Net loss | Cash dividends declared ($0.50 per share) | Repurchase and retirement of Class A common stock | Stock-based compensation | Dividend equivalents on unvested restricted stock units issued | Dividend equivalents on unvested restricted stock units forfeited | Vesting of restricted stock units | Shares of Class A common stock withheld related to net share settlement | Balance at June 30, 2025 | | :------------------------------------------------- | :--------------------------- | :------- | :------------------------------------------ | :------------------------------------------------ | :----------------------- | :----------------------------------------------------------- | :---------------------------------------------------- | :------------------------- | :------------------------------------------------------------------- | :----------------------- | | Class A Shares | 21,592,992 | — | — | (96,437) | — | — | — | 543,620 | (136,792) | 21,903,383 | | Class A Amount | $216 | — | — | (1) | — | — | — | 5 | (1) | $219 | | Class B Shares | 40,333,019 | — | — | — | — | — | — | — | — | 40,333,019 | | Class B Amount | $403 | — | — | — | — | — | — | — | — | $403 | | Additional Paid-In Capital | $51,996 | — | — | (1,267) | 3,432 | 556 | (9) | (5) | (1,827) | $52,876 | | Retained Earnings | $1,200,908 | (5,236) | (30,952) | — | — | (556) | 9 | — | — | $1,164,173 | | Non-controlling Interests | $487 | (60) | — | — | — | — | — | — | — | $427 | | Total | $1,254,010 | $(5,296) | $(30,952) | $(1,268) | $3,432 | $(556) | $9 | — | $(1,828) | $1,218,098 | - Total stockholders' equity decreased by $35.91 million from $1.25 billion at December 31, 2024, to $1.22 billion at June 30, 2025[16] - The decrease was primarily driven by a net loss of $5.30 million and cash dividends declared of $30.95 million during the six months ended June 30, 2025[16] - The Company repurchased and retired 96,437 shares of Class A common stock for $1.27 million during the six months ended June 30, 2025[16] Condensed Consolidated Statements of Cash Flows This section details the Company's cash inflows and outflows from operating, investing, and financing activities over specific periods | (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(247,040) | $(850,942) | | Net cash used in investing activities | (56,607) | (85,086) | | Net cash provided by financing activities | 293,021 | 916,452 | | Decrease in cash, cash equivalents and restricted cash | $(10,626) | $(19,576) | | Cash, cash equivalents and restricted cash, beginning of period | 125,056 | 127,381 | | Cash, cash equivalents and restricted cash, end of period | $114,430 | $107,805 | - Net cash used in operating activities significantly decreased from $(850.94) million in H1 2024 to $(247.04) million in H1 2025, primarily due to changes in mortgage loans held for sale[17] - Net cash used in investing activities decreased from $(85.09) million in H1 2024 to $(56.61) million in H1 2025, mainly due to lower acquisition spending[17] - Net cash provided by financing activities decreased from $916.45 million in H1 2024 to $293.02 million in H1 2025, driven by lower net borrowings on warehouse lines of credit and notes payable[17] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the condensed consolidated financial statements, covering accounting policies and specific line items NOTE 1—Business, Basis of Presentation, and Significant Accounting Policies This note describes Guild's mortgage origination and servicing business, its regulatory certifications, the pending merger with Gulf MSR HoldCo, LLC, and the accounting standards applied - Guild operates in two reportable segments: origination and servicing of residential mortgage loans, with approximately 430 branches licensed in 49 states and D.C[20] - The Company is certified with HUD, VA, Ginnie Mae, Fannie Mae, Freddie Mac, and USDA[21] - A merger agreement was entered into on June 17, 2025, with Gulf MSR HoldCo, LLC, and Gulf MSR Merger Sub Corporation, with the Company surviving as a wholly owned subsidiary of the Parent. The merger is expected to close in Q4 2025[22] - Expenses related to the pending Merger were approximately $4.4 million for the six months ended June 30, 2025[22] - The Company is evaluating the impact of new accounting standards: ASU 2025-03 (Business Combinations), ASU 2024-03 (Expense Disaggregation Disclosures), and ASU 2023-09 (Income Tax Disclosures)[27][28][29] NOTE 2—Fair Value Measurements This note defines fair value, outlines the three-level hierarchy, and details valuation methodologies and unobservable inputs for various financial instruments - Fair value measurements are categorized into a three-level hierarchy: Level One (quoted prices in active markets for identical assets), Level Two (observable inputs other than Level One quoted prices), and Level Three (unobservable inputs reflecting management's assumptions)[30][33] Assets and Liabilities Measured at Fair Value (June 30, 2025) | (in thousands) | Level 1 | Level 2 | Level 3 | Total | | :------------------------------------------------- | :------ | :-------- | :-------- | :-------- | | Assets: | | | | | | Mortgage loans held for sale | $— | $1,821,187 | $— | $1,821,187 | | Reverse mortgage loans held for investment | — | — | 516,899 | 516,899 | | Mortgage servicing rights | — | — | 1,303,599 | 1,303,599 | | Derivative assets (IRLCs) | — | — | 29,099 | 29,099 | | Derivative assets (Forward delivery commitments) | — | 70 | — | 70 | | Notes receivable | — | — | 12,514 | 12,514 | | Total assets at fair value | $— | $1,821,257 | $1,862,111 | $3,683,368 | | Liabilities: | | | | | | HMBS-related borrowings | $— | $— | $494,156 | $494,156 | | Derivative liabilities (Forward delivery commitments and best efforts sales commitments) | — | 12,721 | — | 12,721 | | Contingent liabilities due to acquisitions | — | — | 30,840 | 30,840 | | Total liabilities at fair value | $— | $12,721 | $524,996 | $537,717 | Assets and Liabilities Measured at Fair Value (December 31, 2024) | (in thousands) | Level 1 | Level 2 | Level 3 | Total | | :------------------------------------------------- | :------ | :-------- | :-------- | :-------- | | Assets: | | | | | | Mortgage loans held for sale | $— | $1,523,447 | $— | $1,523,447 | | Reverse mortgage loans held for investment | — | — | 451,704 | 451,704 | | Mortgage servicing rights | — | — | 1,343,829 | 1,343,829 | | Derivative assets (IRLCs) | — | — | 7,964 | 7,964 | | Derivative assets (Forward delivery commitments) | — | 9,074 | — | 9,074 | | Notes receivable | — | — | 11,894 | 11,894 | | Total assets at fair value | $— | $1,532,521 | $1,815,391 | $3,347,912 | | Liabilities: | | | | | | HMBS-related borrowings | $— | $— | $425,979 | $425,979 | | Derivative liabilities (Forward delivery commitments and best efforts sales commitments) | — | 2,487 | — | 2,487 | | Contingent liabilities due to acquisitions | — | — | 27,983 | 27,983 | | Total liabilities at fair value | $— | $2,487 | $453,962 | $456,449 | - For Level Three measurements, key unobservable inputs include conditional prepayment rates and discount rates for reverse mortgage loans and HMBS-related borrowings, prepayment speeds and discount rates for MSRs, pull-through rates for IRLCs, and future earn-out payments and risk-adjusted discount rates for contingent liabilities[35][36][37][42][44] NOTE 3—Advances, Net This note details the Company's trust and foreclosure advances, net of a foreclosure loss reserve. The reserve activity reflects provisions for losses and realized losses Advances, Net | (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :---------------- | | Trust advances | $39,709 | $65,048 | | Foreclosure advances | 28,565 | 25,761 | | Foreclosure loss reserve | (7,273) | (5,286) | | Total advances, net | $61,001 | $85,523 | Foreclosure Loss Reserve Activity | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Balance — beginning of period | $6,931 | $5,826 | $5,286 | $5,694 | | Provision for (reversal of) foreclosure losses | 1,115 | (496) | 3,493 | (104) | | Realized losses, net | (773) | (523) | (1,506) | (783) | | Balance — end of period | $7,273 | $4,807 | $7,273 | $4,807 | - Total advances, net, decreased by $24.52 million (28.67%) from December 31, 2024, to June 30, 2025[53] - The provision for foreclosure losses for the six months ended June 30, 2025, was $3.49 million, compared to a reversal of $0.10 million in the prior year period[53] NOTE 4—Derivative Financial Instruments This note explains the Company's use of derivative instruments like IRLCs and Forward Delivery Commitments to hedge interest rate risk, detailing their fair values and hedging gains/losses - Derivative instruments are used to hedge interest rate risk on fixed and adjustable rate commitments, with changes in fair value recognized in current period earnings[54] Unrealized Hedging Gains (Losses) | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Unrealized hedging gains (losses) | $591 | $(7,566) | $(5,381) | $17,506 | Notional and Fair Value of Derivative Financial Instruments (June 30, 2025) | (in thousands) | Notional Value | Derivative Asset | Derivative Liability | | :------------------------------------------------- | :------------- | :--------------- | :------------------- | | IRLCs | $1,976,020 | $29,099 | $— | | Forward delivery commitments and best efforts sales commitments | $2,692,341 | $70 | $12,721 | Notional and Fair Value of Derivative Financial Instruments (December 31, 2024) | (in thousands) | Notional Value | Derivative Asset | Derivative Liability | | :------------------------------------------------- | :------------- | :--------------- | :------------------- | | IRLCs | $1,072,217 | $7,964 | $— | | Forward delivery commitments and best efforts sales commitments | $2,092,660 | $9,074 | $2,487 | - The weighted average loan funding probability ('pull-through') for IRLCs was 90.2% at June 30, 2025, up from 88.7% at December 31, 2024[57] NOTE 5—Mortgage Servicing Rights This note details the activity and fair value measurement of Mortgage Servicing Rights (MSRs), including valuation model assumptions and sensitivity analysis to market changes Mortgage Servicing Rights Activity | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Balance — beginning of period | $1,312,377 | $1,216,483 | $1,343,829 | $1,161,357 | | MSRs originated | 50,687 | 55,397 | 89,171 | 89,631 | | MSRs purchased | — | 18,648 | — | 18,762 | | Sale of subserviced portfolio | (18,152) | — | (18,152) | — | | Changes in fair value: | | | | | | Due to collection/realization of cash flows | (21,857) | (18,511) | (36,773) | (30,630) | | Due to changes in valuation model inputs or assumptions | (19,456) | 20,645 | (74,476) | 53,542 | | Balance — end of period | $1,303,599 | $1,292,662 | $1,303,599 | $1,292,662 | Unobservable Input Assumptions for MSRs | Unobservable Input | June 30, 2025 Range (Weighted Average) | December 31, 2024 Range (Weighted Average) | | :----------------- | :------------------------------------- | :----------------------------------------- | | Discount rate | 9.6% - 15.5% (10.6%) | 9.6% - 15.5% (10.8%) | | Prepayment rate | 5.5% - 28.2% (8.8%) | 5.5% - 43.9% (8.2%) | | Cost to service (per loan) | $72 - $826 ($95) | $72 - $827 ($98) | - The fair value of MSRs decreased by $41.31 million for the three months ended June 30, 2025, and by $111.25 million for the six months ended June 30, 2025, primarily due to changes in valuation model inputs/assumptions[59] - The weighted average life of MSRs was approximately 7.8 years at June 30, 2025, down from 8.2 years at December 31, 2024[59] Impact of Adverse Changes on MSRs (June 30, 2025) | (in thousands) | 10% Adverse Change | 20% Adverse Change | | :--------------- | :----------------- | :----------------- | | Prepayment Speeds | $(43,940) | $(85,430) | | Discount Rate | $(53,337) | $(103,260) | | Cost to Service (per loan) | $(12,874) | $(25,956) | NOTE 6—Mortgage Loans Held for Sale This note reconciles the changes in Mortgage Loans Held for Sale (MLHS), which are primarily sold into the secondary market. The reconciliation includes originations, sales proceeds, and fair value adjustments Mortgage Loans Held for Sale Activity | (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------- | :----------------------------- | :----------------------------- | | Balance — beginning of period | $1,523,447 | $901,227 | | Origination and purchase of mortgage loans held for sale | 11,563,727 | 9,650,745 | | Proceeds on sale of and payments from mortgage loans held for sale | (11,617,957) | (9,057,786) | | Gain on sale of mortgage loans excluding fair value of other financial instruments, net | 327,307 | 235,539 | | Valuation adjustment of mortgage loans held for sale | 24,663 | (718) | | Balance — end of period | $1,821,187 | $1,729,007 | - The balance of MLHS increased by $297.74 million (19.54%) from December 31, 2024, to June 30, 2025[13][64] - Origination and purchase of MLHS increased by $1.91 billion (19.82%) for the six months ended June 30, 2025, compared to the same period in 2024[64] NOTE 7—Reverse Mortgage Loans Held for Investment and HMBS-related Borrowings This note provides a reconciliation of changes in reverse mortgage loans held for investment and related HMBS-related borrowings, which are accounted for as secured borrowings. It also details the gains on these loans and the unobservable input assumptions used for fair value determination Changes in Reverse Mortgage Loans Held for Investment and HMBS-Related Borrowings (Six Months Ended June 30, 2025) | (in thousands) | Reverse Mortgage Loans Held for Investment | HMBS-Related Borrowings | | :--------------- | :--------------------------------------- | :---------------------- | | Balance — beginning of period | $451,704 | $(425,979) | | Originations and purchases | 65,520 | — | | Securitization of HECM loans and tails | — | (73,935) | | Repayments (principal payments received) | (18,829) | 18,756 | | Change in fair value recognized in earnings | 18,504 | (12,998) | | Balance — end of period | $516,899 | $(494,156) | Gains on Reverse Mortgage Loans Held for Investment and HMBS-Related Borrowings | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Gain on new originations | $1,575 | $1,882 | $3,382 | $3,166 | | Gain on tail securitizations | 478 | 435 | 979 | 757 | | Net interest income | 32 | 25 | 56 | 48 | | Change in fair value | 506 | (208) | 1,089 | 1,393 | | Fair value gain recognized in earnings | $2,591 | $2,134 | $5,506 | $5,364 | | Loan fees and other | 1,140 | 963 | 2,159 | 1,749 | | Total | $3,731 | $3,097 | $7,665 | $7,113 | Unobservable Input Assumptions for Reverse Mortgage Loans and HMBS-Related Borrowings | Unobservable Input | June 30, 2025 Range (Weighted Average) | December 31, 2024 Range (Weighted Average) | | :----------------- | :------------------------------------- | :----------------------------------------- | | Life in years | 0.1 - 9.1 (6.5) | 0.1 - 9.2 (6.8) | | Discount rate | 12.0% - 12.0% (12.0%) | 12.0% - 12.0% (12.0%) | | Conditional prepayment rate | 6.2% - 10.5% (7.9%) | 6.5% - 10.9% (7.9%) | NOTE 8—Goodwill and Intangible Assets, Net This note presents the carrying amounts of goodwill and intangible assets, net, and details the changes in goodwill allocated to the origination reporting unit. It also provides the amortization expense for intangible assets Goodwill and Intangible Assets, Net | (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :---------------- | | Goodwill | $198,724 | $198,724 | | Intangible assets, net | 22,811 | 27,270 | | Goodwill and intangible assets, net | $221,535 | $225,994 | - Goodwill remained constant at $198.72 million from December 31, 2024, to June 30, 2025[70] - Intangible assets, net, decreased by $4.46 million (16.35%) from $27.27 million at December 31, 2024, to $22.81 million at June 30, 2025[69] - Amortization expense for intangible assets was $2.2 million for Q2 2025 and $4.5 million for H1 2025[71] NOTE 9—Warehouse Lines of Credit, Net This note provides details on the Company's warehouse lines of credit, which are used to fund mortgage loan originations. It lists the facility sizes, outstanding balances, maturity dates, and weighted average interest rates, and confirms compliance with all debt covenants Warehouse Lines of Credit, Net | Facility Size | Maturity Date | Outstanding Balance as of June 30, 2025 | Outstanding Balance as of December 31, 2024 | | :------------ | :------------ | :-------------------------------------- | :------------------------------------------ | | $250 million | 1/14/2026 | $179,835 | $84,257 | | $250 million | 8/26/2025 | 172,816 | 164,382 | | $400 million | 8/11/2025 | 297,153 | 287,631 | | $60 million | 8/31/2025 | 28,732 | 99,084 | | $140 million | 8/31/2025 | 74,041 | — | | $200 million | 9/2/2025 | 109,934 | 89,597 | | $350 million | 9/11/2025 | 239,836 | 245,821 | | $300 million | N/A | 178,807 | 201,778 | | $200 million | 10/1/2025 | 152,833 | 83,410 | | $75 million | N/A | 12,475 | 22,216 | | $350 million | 11/19/2025 | 216,339 | 138,201 | | $200 million | 11/22/2025 | 7,889 | 1,076 | | Total outstanding balance | | $1,670,690 | $1,417,453 | | Debt issuance costs | | (387) | (2,890) | | Warehouse lines of credit, net | | $1,670,303 | $1,414,563 | - The total outstanding balance on warehouse lines of credit increased by $253.24 million (17.87%) from December 31, 2024, to June 30, 2025[73] - The weighted average interest rate for warehouse lines of credit decreased from 6.7% at December 31, 2024, to 5.9% at June 30, 2025[73] - The Company was in compliance with all debt covenants at June 30, 2025, and December 31, 2024[74] NOTE 10—Notes Payable, Net This note describes the Company's revolving notes payable, which are collateralized by MSRs. It outlines the committed amounts, outstanding borrowings, and interest rate terms for each facility - The Company has three revolving notes payable, collateralized by GNMA, FHLMC, and FNMA MSRs, with aggregate committed amounts totaling $850.0 million[77][78][79] - Outstanding borrowings on these notes payable totaled $320.0 million at June 30, 2025, compared to $300.0 million at December 31, 2024[13][77][78][79] - The weighted average interest rate for notes payable was 7.5% at June 30, 2025, down from 8.3% at December 31, 2024[237] NOTE 11—Stockholders' Equity This note details common stock dividends declared and the Company's share repurchase program. It specifies the amounts of dividends paid, dividend equivalent units issued, and Class A common stock repurchased, noting the termination of the repurchase program due to the pending merger - The Company declared and paid $31.0 million in dividends during the six months ended June 30, 2025[81] - The share repurchase program, which authorized up to $20.0 million of Class A common stock repurchases, was extended to May 5, 2026, but terminated on June 18, 2025, in connection with the Merger Agreement[83] - During the six months ended June 30, 2025, the Company repurchased and retired 96,437 shares of Class A common stock for $1.3 million at an average price of $13.13 per share[83] NOTE 12—Earnings (Loss) Per Share This note presents the calculation of basic and diluted earnings (loss) per share for Class A and Class B common stock, including the weighted average shares outstanding and the dilutive effects of unvested restricted stock Earnings (Loss) Per Share | (in thousands, except per share amounts) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) attributable to Guild | $18,661 | $37,583 | $(5,236) | $66,081 | | Weighted average shares outstanding—Basic | 62,168 | 61,337 | 62,039 | 61,223 | | Weighted average shares outstanding—Diluted | 62,622 | 62,393 | 62,039 | 62,275 | | Basic EPS | $0.30 | $0.61 | $(0.08) | $1.08 | | Diluted EPS | $0.30 | $0.60 | $(0.08) | $1.06 | - Diluted EPS decreased from $0.60 in Q2 2024 to $0.30 in Q2 2025. For the six months, it changed from $1.06 earnings in H1 2024 to $(0.08) loss in H1 2025[86] - Approximately 0.5 million potential shares were excluded from diluted loss per share calculation for the six months ended June 30, 2025, due to being anti-dilutive[86] NOTE 13—Stock-Based Compensation This note outlines the Company's stock-based compensation arrangements, including RSUs and PSUs under the 2020 Omnibus Incentive Plan. It details the compensation costs recognized and the treatment of these awards upon the effectiveness of the pending merger - Stock-based compensation costs were $1.8 million for Q2 2025 and $3.4 million for H1 2025[87] - As of June 30, 2025, there was $12.3 million of unrecognized compensation costs related to unvested grants, expected to be recognized over a weighted average period of 2.0 years[87] - Upon merger effectiveness, outstanding RSUs will be converted into cash equal to the number of shares multiplied by $20.00. PSUs will be converted into cash based on target achievement for incomplete periods and certified achievement for completed periods, multiplied by $20.00[88] NOTE 14—Commitments and Contingencies This note addresses the Company's reserves for loan repurchases from investors, various commitments including interest rate lock commitments (IRLCs) and reverse mortgage borrowing capacity, and ongoing legal proceedings Investor Reserves Activity | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Balance — beginning of period | $21,949 | $18,278 | $23,362 | $19,973 | | Provision for investor reserves | 10,872 | 4,036 | 15,967 | 4,556 | | Realized losses, net | (7,365) | (2,003) | (13,873) | (4,218) | | Balance — end of period | $25,456 | $20,311 | $25,456 | $20,311 | - Total commitments to originate forward mortgage loans were approximately $2.0 billion at June 30, 2025, up from $1.1 billion at December 31, 2024[90] - Total commitments related to derivative instruments (forward loan sales, mandatory delivery, options, futures) were approximately $2.7 billion at June 30, 2025, compared to $2.1 billion at December 31, 2024[91] - Borrowers of reverse mortgage loans had additional borrowing capacity of $150.9 million at June 30, 2025, an increase from $131.4 million at December 31, 2024[92] - The Company is involved in various lawsuits in the ordinary course of business but does not expect them to have a material adverse effect on its financial position or results of operations[93] NOTE 15—Regulatory Capital and Liquidity Requirements This note outlines the minimum net worth and capital requirements imposed by secondary market investors and state regulators, including FHFA, Fannie Mae, Freddie Mac, and Ginnie Mae. It confirms the Company's compliance with these requirements - The Company is subject to minimum net worth, capital ratio, and liquidity requirements from secondary market investors and state regulators[94][95] - The most restrictive minimum adjusted net worth requirement was $281.6 million at June 30, 2025, and $277.0 million at December 31, 2024[96] - The Company was in compliance with all regulatory capital and liquidity requirements at June 30, 2025, and December 31, 2024[96] NOTE 16—Segments This note defines Guild's Origination and Servicing segments, detailing their operations and how the Chief Operating Decision Maker assesses their performance using net income - Guild operates in two reportable segments: Origination (loan origination, acquisition, and sale) and Servicing (collection, remittance, impound accounts, loss mitigation, foreclosure)[98][99] - The Servicing segment provides a steady cash flow and builds client relationships to drive repeat business back to the Origination segment[99] - The CODM (executive management team) uses net income as the primary measure for assessing segment performance and allocating resources; assets are managed on a consolidated basis and not allocated to segments[100] Segment Net Income (Loss) (Three Months Ended June 30, 2025) | (in thousands) | Origination | Servicing | All Other | Total | | :--------------- | :---------- | :-------- | :-------- | :------ | | Net income (loss) | $23,390 | $27,345 | $(32,072) | $18,663 | Segment Net Income (Loss) (Six Months Ended June 30, 2025) | (in thousands) | Origination | Servicing | All Other | Total | | :--------------- | :---------- | :-------- | :-------- | :------ | | Net income (loss) | $20,534 | $22,780 | $(48,610) | $(5,296) | NOTE 17—Subsequent Events This note discloses two significant events occurring after the reporting period: the signing of the One Big Beautiful Bill Act (OBBBA) and the declaration of a special cash dividend - On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA), a comprehensive legislative package extending Tax Cuts and Jobs Act provisions and introducing additional tax relief. The Company is assessing its financial impact[105] - On August 6, 2025, the Board of Directors declared a special cash dividend of $0.25 per share on Class A and Class B common stock, payable September 2, 2025, to stockholders of record on August 18, 2025[106] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition and results of operations, highlighting key performance indicators, market trends, recent developments, and a detailed analysis of revenue, expenses, segment performance, liquidity, capital resources, and cash flows for the periods presented Executive Summary The executive summary highlights Guild's financial performance for Q2 2025 and H1 2025, noting increased loan originations, growth in the servicing portfolio, and a shift from net income to net loss for the six-month period. It also presents adjusted financial metrics and key operational indicators like recapture rates Selected Financial and Operational Highlights | Metric | Q2 2025 | Q1 2025 | H1 2025 | H1 2024 | | :----------------------------------- | :------ | :------ | :------ | :------ | | Mortgage loans originated (billions) | $7.5 | $5.2 | $12.7 | $10.4 | | Purchase originations % | 88.6% | 87.6% | 88.2% | 91.8% | | Servicing portfolio UPB (billions) | $96.3 | $94.0 | $96.3 | $89.1 | | Net income (loss) (millions) | $18.7 | $(23.9) | $(5.2) | $66.1 | | Diluted EPS | $0.30 | $(0.39) | $(0.08) | $1.06 | | Adjusted net income (millions) | $41.4 | $21.6 | $63.1 | $38.8 | | Adjusted diluted EPS | $0.66 | $0.35 | $1.01 | $0.62 | | Adjusted EBITDA (millions) | $58.0 | $36.4 | $94.4 | $57.5 | | Return on average equity | 6.2% | (7.8)% | (0.8)% | 11.0% | | Adjusted return on average equity | 13.7% | 7.0% | 10.2% | 6.4% | | Book value per share | $19.57 | N/A | $19.57 | N/A | | Tangible net book value per share | $16.01 | N/A | $16.01 | N/A | | Overall recapture rate | 31.8% | 28.7% | 31.2% | 26.6% | - Total originations increased by 43.6% QoQ and 22.2% YoY for the three and six months ended June 30, 2025, respectively[110] - The servicing portfolio UPB grew by 2.4% QoQ and 8.1% YoY, reaching $96.3 billion as of June 30, 2025[110] - The Company reported a net income of $18.7 million in Q2 2025, recovering from a net loss of $23.9 million in Q1 2025, but a net loss of $5.2 million for H1 2025 compared to a net income of $66.1 million in H1 2024[110] Market and Economic Overview This section discusses the FOMC's rate cuts, elevated Treasury yields, market volatility, and the MBA's forecast for increased industry origination volume in 2025, noting MSR portfolio sensitivity and competitive pressures - The FOMC initiated multiple rate cuts starting September 2024, bringing the target range to 4.25% to 4.5%, but 10-year Treasury yields remain elevated due to inflation concerns and market uncertainty[113] - The MBA's July 2025 forecast anticipates the average 30-year mortgage interest rate to be near 7.0% in 2025, declining modestly to 6.7% by year-end, with the 10-year Treasury yield close to 4.5%[113] - The industry's total origination volume is projected to increase by 13.6% in 2025 to $2.0 trillion, with purchase originations up 5.4% and refinance originations up 35.2%. Guild's originations increased by 22.2% in H1 2025, outpacing the market forecast[114] - The Company recorded MSR valuation losses of $41.3 million in Q2 2025 and $111.2 million in H1 2025, reflecting the inverse relationship between interest rates and MSR values[113] Recent Developments Guild Holdings Company announced a merger agreement on June 18, 2025, with Gulf MSR HoldCo, LLC, a fund managed by Bayview Asset Management, LLC. Under the agreement, Class A and Class B common stock shareholders (excluding Bayview) will receive $20.00 per share in cash. The merger is expected to close in Q4 2025, is not subject to financing conditions, and has already received stockholder approval from McCarthy Capital Mortgage Investors, LLC - On June 18, 2025, Guild Holdings Company entered into a Merger Agreement with Gulf MSR HoldCo, LLC (Parent) and Gulf MSR Merger Sub Corporation[116] - Each share of Class A and Class B common stock (excluding Bayview's holdings) will be converted into the right to receive $20.00 in cash, without interest[117] - The Merger Agreement allows for special cash dividends of up to $0.25 per share in 2025, and quarterly dividends of up to $0.25 per share if the merger extends beyond 2025, without adjusting the merger consideration[117] - The merger is expected to close in Q4 2025, is not subject to financing conditions, and has received the required stockholder approval from McCarthy Capital Mortgage Investors, LLC[117][118][119] Key Performance Indicators This section presents key performance indicators for the origination and servicing segments, enabling monitoring of business results, trend identification, and performance evaluation against strategic goals - Origination metrics monitor revenue generation, market share, and recapture rates (purchase, refinance, overall) to retain customers[122] - Servicing metrics track customer base size, MSR characteristics and value, delinquency rates, and net additions to the portfolio as a leading indicator of servicing income growth[122] Origination Data (Three Months Ended) | ($ and units in thousands) | June 30, 2025 | March 31, 2025 | Change ($/units) | % Change | | :------------------------- | :------------ | :------------- | :--------------- | :------- | | Total originations | $7,474,794 | $5,204,565 | $2,270,229 | 43.6% | | Total originations (units) | 21.4 | 15.3 | 6.1 | 39.9% | | Total loans sold | $6,813,533 | $5,191,405 | $1,622,128 | 31.2% | | Service retained % | 61.0% | 60.2% | 0.8% | 1.3% | | Gain on sale margin (bps) | 329 | 376 | (47) | (12.5)% | | Purchase origination % | 88.6% | 87.6% | 1.0% | 1.1% | | Refinance origination % | 11.4% | 12.4% | (1.0)% | (8.1)% | | Overall recapture rate | 31.8% | 28.7% | 3.1% | 10.8% | Servicing Data (Three Months Ended) | ($ and units in thousands) | June 30, 2025 | March 31, 2025 | Change ($/units) | % Change | | :------------------------- | :------------ | :------------- | :--------------- | :------- | | UPB of servicing portfolio (period end) | $96,275,766 | $94,005,693 | $2,270,073 | 2.4% | | Loans serviced (period end) | 381 | 373 | 8 | 2.1% | | Weighted average prepayment speed | 8.8% | 8.6% | 0.2% | 2.3% | | MSR multiple (period end) | 4.5 | 4.6 | (0.1) | (2.2)% | | Loan delinquency rate 60-plus days (period end) | 1.8% | 1.8% | 0.0% | —% | Non-GAAP Financial Measures This section defines and reconciles several non-GAAP financial measures, including adjusted net income, adjusted earnings per share, adjusted EBITDA, adjusted return on average equity, and tangible net book value per share. These metrics are used by management to evaluate operating performance and capital position, excluding non-cash or non-core operational items like MSR fair value adjustments and merger-related expenses - Non-GAAP measures are used to evaluate operating performance, establish budgets, and develop operational goals, excluding fair value and other adjustments not indicative of core operations[134][135] - Adjusted net income excludes MSR fair value changes, contingent liabilities/notes receivable fair value changes, amortization of acquired intangibles, stock-based compensation, and merger-related expenses, adjusted for tax impact[136] Reconciliation of Net Income (Loss) to Adjusted Net Income and EPS | (in thousands, except per share amounts) | Q2 2025 | Q1 2025 | H1 2025 | H1 2024 | | :--------------------------------------- | :------ | :------ | :------ | :------ | | Net income (loss) attributable to Guild | $18,661 | $(23,897) | $(5,236) | $66,081 | | Add adjustments: | | | | | | Change in fair value of MSRs due to model inputs and assumptions | 19,456 | 55,020 | 74,476 | (53,542) | | Change in fair value of contingent liabilities and notes receivable due to acquisitions, net | 2,062 | 2,001 | 4,063 | 7,397 | | Amortization of acquired intangible assets | 2,230 | 2,229 | 4,459 | 4,597 | | Stock-based compensation | 1,830 | 1,602 | 3,432 | 4,824 | | Merger-related expenses | 4,386 | — | 4,386 | — | | Tax impact of adjustments | (7,187) | (15,335) | (22,522) | 9,401 | | Adjusted net income | $41,438 | $21,620 | $63,058 | $38,758 | | Adjusted earnings per share—Diluted | $0.66 | $0.35 | $1.01 | $0.62 | Reconciliation of Net Income (Loss) to Adjusted EBITDA | ($ in thousands) | Q2 2025 | Q1 2025 | H1 2025 | H1 2024 | | :--------------- | :------ | :------ | :------ | :------ | | Net income (loss) | $18,663 | $(23,959) | $(5,296) | $65,991 | | Add adjustments: | | | | | | Interest expense on non-funding debt | 6,148 | 5,749 | 11,897 | 8,030 | | Income tax expense (benefit) | 1,879 | (7,665) | (5,786) | 17,079 | | Depreciation and amortization | 3,611 | 3,647 | 7,258 | 7,724 | | Change in fair value of MSRs due to model inputs and assumptions | 19,456 | 55,020 | 74,476 | (53,542) | | Change in fair value of contingent liabilities and notes receivable due to acquisitions, net | 2,062 | 2,001 | 4,063 | 7,397 | | Stock-based compensation | 1,830 | 1,602 | 3,432 | 4,824 | | Merger-related expenses | 4,386 | — | 4,386 | — | | Adjusted EBITDA | $58,035 | $36,395 | $94,430 | $57,503 | Reconciliation of Book Value Per Share to Tangible Net Book Value Per Share | (in thousands, except per share amounts) | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Total stockholders' equity attributable to Guild | $1,217,671 | $1,253,523 | | Less: Goodwill | (198,724) | (198,724) | | Less: Intangible assets, net | (22,811) | (27,270) | | Tangible common equity | $996,136 | $1,027,529 | | Ending shares of Class A and Class B common stock outstanding | 62,236 | 61,926 | | Book value per share | $19.57 | $20.24 | | Tangible net book value per share | $16.01 | $16.59 | Results of Operations This section provides a detailed comparative analysis of the Company's consolidated statements of operations, breaking down revenue and expense components for the three and six months ended June 30, 2025, against prior periods. It explains the drivers behind changes in loan origination fees, MSR valuation adjustments, interest income/expense, and various operating expenses Revenue This section analyzes revenue components, including loan origination fees, MSR valuation adjustments, interest income, and interest expense, driven by loan volume, MSR value, and funding changes Loan Origination Fees and Gain on Sale of Loans, Net (QoQ) | ($ in thousands) | Q2 2025 | Q1 2025 | $ Change | % Change | | :------------------------------------------------- | :------ | :------ | :------- | :------- | | Gain on sale of loans | $152,463 | $122,914 | $29,549 | 24.0% | | Loan origination fees | 29,201 | 23,215 | 5,986 | 25.8% | | Fair value of originated MSRs | 50,687 | 38,484 | 12,203 | 31.7% | | Changes in fair value of MLHS and IRLCs | 19,938 | 26,795 | (6,857) | (25.6)% | | Changes in fair value of forward commitments | (5,416) | (21,100) | 15,684 | 74.3% | | Provision for investor reserves | (10,872) | (5,095) | (5,777) | (113.4)% | | Total loan origination fees and gain on sale of loans, net | $236,001 | $185,213 | $50,788 | 27.4% | - Loan origination fees and gain on sale, net, increased by 27.4% QoQ and 23.9% YoY, driven by higher loan sales and origination volume[155][160] - MSR valuation adjustment resulted in a loss of $41.3 million in Q2 2025 and $111.2 million in H1 2025, primarily due to increased prepayment speeds and decreased escrow earnings rates[170] Interest Income (QoQ) | ($ in thousands) | Q2 2025 | Q1 2025 | $ Change | % Change | | :----------------------- | :------ | :------ | :------- | :------- | | Interest income, funding | $24,332 | $17,786 | $6,546 | 36.8% | | Interest income earnings credit | 12,561 | 9,967 | 2,594 | 26.0% | | Other | 1,821 | 1,341 | 480 | 35.8% | | Total interest income | $38,714 | $29,094 | $9,620 | 33.1% | Interest Expense (QoQ) | ($ in thousands) | Q2 2025 | Q1 2025 | $ Change | % Change | | :------------------------- | :------ | :------ | :------- | :------- | | Interest expense, funding facilities | $19,922 | $13,619 | $6,303 | 46.3% | | Interest expense, other financing | 6,400 | 6,028 | 372 | 6.2% | | Bank servicing charges | 1,798 | 1,855 | (57) | (3.1)% | | Payoff interest expense | 843 | 577 | 266 | 46.1% | | Total interest expense | $28,963 | $22,079 | $6,884 | 31.2% | Expenses This section analyzes expenses, including compensation, general and administrative, occupancy, depreciation, and foreclosure losses, attributing changes to origination volume, acquisitions, merger costs, and regulatory shifts Salaries, Incentive Compensation and Benefits (QoQ) | ($ in thousands) | Q2 2025 | Q1 2025 | $ Change | % Change | | :------------------------------------------ | :------ | :------ | :------- | :------- | | Salaries | $87,254 | $86,217 | $1,037 | 1.2% | | Incentive compensation | 86,698 | 58,744 | 27,954 | 47.6% | | Benefits | 28,886 | 28,251 | 635 | 2.2% | | Total salaries, incentive compensation and benefits expense | $202,838 | $173,212 | $29,626 | 17.1% | - Incentive compensation increased by 47.6% QoQ and 26.6% YoY, primarily due to increased origination volume[183][185] General and Administrative Expense (QoQ) | ($ in thousands) | Q2 2025 | Q1 2025 | $ Change | % Change | | :------------------------------------------------- | :------ | :------ | :------- | :------- | | Professional fees | $17,919 | $12,499 | $5,420 | 43.4% | | Advertising and promotions | 5,486 | 8,500 | (3,014) | (35.5)% | | Office supplies, travel and entertainment | 3,932 | 3,786 | 146 | 3.9% | | Contingent liability and notes receivable fair value adjustment, net | 2,062 | 2,001 | 61 | 3.0% | | Other | 2,027 | 2,367 | (340) | (14.4)% | | Total general and administrative expense | $31,426 | $29,153 | $2,273 | 7.8% | - Professional fees increased by $5.42 million QoQ and $3.29 million YoY, including $4.4 million in merger-related expenses in Q2 2025[187][189] - Provision for foreclosure losses increased from a reversal of $0.1 million in H1 2024 to a provision of $3.5 million in H1 2025, due to the expiration of the VA foreclosure moratorium[198] - Income tax expense shifted from a benefit of $7.7 million in Q1 2025 to a provision of $1.9 million in Q2 2025. The effective tax rate for H1 2025 was 52.2%, impacted by a $4.4 million benefit from California SB-132[200] Segment Results This section analyzes the financial performance of Guild's two interdependent segments: Origination and Servicing. It details the net income, revenue, and expense trends for each segment, highlighting the impact of origination volume, MSR valuation, and operational efficiencies Origination The Origination segment's net income significantly improved in Q2 2025 and H1 2025, driven by increased loan originations and net revenue, despite a decrease in gain on sale margins. Purchase volume remained dominant, and service retained originations saw a slight increase QoQ Origination Segment Results (QoQ) | ($ and units in thousands) | June 30, 2025 | March 31, 2025 | Change ($/units) | % Change | | :------------------------- | :------------ | :------------- | :--------------- | :------- | | Total originations | $7,474,794 | $5,204,565 | $2,270,229 | 43.6% | | Net revenue | $242,544 | $190,601 | $51,943 | 27.3% | | Total expenses | $219,154 | $193,457 | $25,697 | 13.3% | | Net income (loss) allocated to origination | $23,390 | $(2,856) | $26,246 | 919.0% | | Gain on sale margins (bps) | 329 | 376 | (47) | (12.5)% | | Purchase volume percentage | 88.6% | 87.6% | 1.0% | 1.1% | | Service retained originations % | 61.0% | 60.2% | 0.8% | 1.3% | - Net income for the origination segment increased by $26.2 million (919.0%) QoQ and $47.8 million (175.3%) YoY, driven by increased net revenue and origination volume[206][213] - Total originations increased by 43.6% QoQ and 22.2% YoY, influenced by seasonality, interest rate volatility, and expansion from acquisitions and organic recruiting[207][214] - Gain on sale margins decreased QoQ to 329 bps but increased YoY to 349 bps, reflecting market volatility and investor reserves[209][215] Servicing The Servicing segment's net income saw a significant increase QoQ but a substantial decrease YoY, primarily due to the valuation adjustment of MSRs. Total revenue increased YoY, aligning with the growth in the servicing portfolio's UPB and number of loans serviced, while foreclosure losses increased due to the expiration of the VA foreclosure moratorium Servicing Segment Results (QoQ) | ($ and units in thousands) | June 30, 2025 | March 31, 2025 | Change ($/units) | % Change | | :------------------------- | :------------ | :------------- | :--------------- | :------- | | Average UPB of servicing portfolio | $95,140,730 | $93,502,278 | $1,638,452 | 1.8% | | Net revenue | $43,332 | $12,980 | $30,352 | 233.8% | | Total expenses | $15,987 | $17,545 | $(1,558) | (8.9)% | | Net income (loss) allocated to servicing | $27,345 | $(4,565) | $31,910 | 699.0% | | Valuation adjustment of MSRs | $(41,313) | $(69,936) | $28,623 | 40.9% | | Provision for foreclosure losses | $1,115 | $2,378 | $(1,263) | (53.1)% | - Net income for the servicing segment increased by $31.9 million (699.0%) QoQ, primarily due to a $28.6 million increase in the MSR valuation adjustment[219] - Net income for the servicing segment decreased by $130.7 million (85.2%) YoY, mainly due to a $134.2 million decrease in the MSR valuation adjustment[223] - The average UPB of the servicing portfolio increased by 1.8% QoQ and 8.7% YoY[219][222] - Provision for foreclosure losses decreased QoQ but increased YoY due to the expiration of the VA foreclosure moratorium[220][224] Liquidity, Capital Resources and Cash Flows This section discusses the Company's liquidity management, including primary sources and uses of funds, debt obligations (warehouse lines of credit and notes payable), and compliance with financial covenants. It also analyzes cash flow activities from operations, investing, and financing, and provides an update on the share repurchase program and interest rate lock commitments Debt Obligations The Company relies on warehouse lines of credit and notes payable, collateralized by MSRs, to fund loan originations and operations. It maintains multiple facilities with varying maturities and interest rates, and consistently complies with all associated financial covenants - The Company uses warehouse lines of credit (primarily master repurchase agreements) to fund mortgage loan originations, typically financing 97% to 98% of the principal balance[228][229] - As of June 30, 2025, total facility size for warehouse lines was approximately $2.8 billion with $1.7 billion outstanding, and for notes payable was $850.0 million with $320.0 million outstanding[231][232] - The weighted average interest rate for warehouse lines of credit was 5.9% at June 30, 2025 (down from 6.7% at Dec 31, 2024), and for notes payable was 7.5% (down from 8.3% at Dec 31, 2024)[237] - The Company was in compliance with all debt covenants, including maximum adjusted leverage ratio, minimum net worth, minimum liquidity, and adjusted pre-tax net income requirements, as of June 30, 2025, and December 31, 2024[74][236] Secondary Market Investors Secondary market investors impose specific operating and financial covenants on the Company, including minimum net worth, liquidity, and total liquid assets. Compliance with these covenants is critical to avoid default and maintain the ability to sell mortgage loans - Secondary market investors require compliance with covenants such as minimum net worth, minimum liquidity, minimum total liquid assets, and a maximum ratio of adjusted net worth to total assets[239][240] - Breach of these covenants could lead to default, sanctions, or termination of selling/servicing agreements, significantly impacting liquidity and operations[240] - The Company was in compliance with all secondary market investor covenants as of June 30, 2025, and December 31, 2024[240] Cash Flows The Company's cash flows are summarized across operating, investing, and financing activities. Operating cash flow improved significantly due to changes in loans held for sale. Investing cash flow decreased due to lower acquisition spending, while financing cash flow decreased due to reduced net borrowings on warehouse lines and notes payable Summary of Cash Flows (Six Months Ended June 30) | ($ in thousands) | 2025 | 2024 | | :--------------------------------------- | :----- | :----- | | Net cash used in operating activities | $(247,040) | $(850,942) | | Net cash used in investing activities | (56,607) | (85,086) | | Net cash provided by financing activities | 293,021 | 916,452 | | Decrease in cash, cash equivalents and restricted cash | $(10,626) | $(19,576) | - Net cash used in operating activities decreased by $603.90 million in H1 2025 compared to H1 2024, primarily because loan originations exceeded sales, increasing loans held for sale[242] - Net cash used in investing activities decreased by $28.48 million in H1 2025, mainly due to $17.7 million used for acquisitions in H1 2024 not recurring[243] - Net cash provided by financing activities decreased by $623.43 million in H1 2025, driven by lower net borrowings on warehouse lines of credit and notes payable[245][246] Share Repurchase Program The Company's share repurchase program, initially authorized for $20.0 million, was extended multiple times but terminated on June 18, 2025, due to the pending Merger Agreement. During H1 2025, the Company repurchased 96,437 shares of Class A common stock - The share repurchase program, authorizing up to $20.0 million of Class A common stock, was extended to May 5, 2026, but terminated on June 18, 2025, in connection with the Merger Agreement[247] - During the six months ended June 30, 2025, the Company repurchased and retired 96,437 shares of Class A common stock at an average price of $13.13 per share[247] Interest Rate Lock Commitments Interest Rate Lock Commitments (IRLCs) expose the Company to market risk from interest rate changes and credit loss if loans are not sold or customers default. Total commitments, adjusted for pull-through, increased significantly from December 31, 2024, to June 30, 2025 - IRLCs expose the Company to market risk from interest rate changes and credit loss if loans are not econom