Guild Mortgage, a California-based lender, reported an increase in profits for the third quarter of 2023 despite the obstacles of elevated mortgage rates and a tight housing inventory.
The company, which operates a distributed retail model and focuses on purchase loans, attributed its success to a strategic push for market share, accomplished through targeted acquisitions and the recruitment of top-performing loan originators amid a general downturn in mortgage demand.
For the third quarter, Guild announced a net income of $54.2 million, a significant 47% leap from the previous quarter’s $36.9 million, with an adjusted net income that soared to $29 million from $9 million year-on-year.
“We have remained consistent with our strategy of growing market share in the retail purchase mortgage market, while retaining the servicing of those loans. This focus not only allows us to see more reliable income, it enables us to build an ongoing asset, where we believe we have the opportunity to realize repeat transactions over time," Guild CEO Terry Schmidt said.
The company’s in-house loan originations slightly dipped to $4.3 billion from $4.5 billion the previous quarter. However, the gain-on-sale margins improved, with a notable 22% increase.
In the third quarter, Guild saw net revenue of $257.3 million compared to $236.8 million in the prior quarter. And it's year-to-date net income has been $54 million, compared to $343.6 million in the prior year.
Amber Kramer, Guild’s chief financial officer, noted during an earnings call that adjustments in valuation models for interest rate lock commitments and held-for-sale mortgage loans triggered a $17.4 million rise in loan sales gains.
Despite broader industry trends, Guild reported that 94% of its closed production volume was from purchase loans, surpassing the MBA's industry average of 82%.
The company’s origination business turned around from a net loss to a $7.2 million net income in the third quarter, although the servicing business saw a slight decrease in net income. Guild’s servicing portfolio grew modestly, with a fair value adjustment contributing to a $22.1 million gain.
Guild has been proactive in its growth approach, anticipating continued pressures on loan originations and a trend toward consolidation in the market.
"Through a combination of selective acquisitions and organic recruiting, we have continued to invest in our people and our platform to both drive market share in the near term, and to be positioned to accelerate growth when this cycle turns," Schmidt said.
In the third quarter, Guild broadened its Midwestern presence by acquiring First Centennial Mortgage and continued its 2023 expansion strategy by integrating Cherry Creek Mortgage and Legacy Mortgage, alongside expanding its branches in California.
