Attached files
| file | filename |
|---|---|
| EX-99.2 - EX-99.2 - Guild Holdings Co | ghld-20210701xex992xfsjune.htm |
| EX-99.1 - EX-99.1 - Guild Holdings Co | ghld-20210701xex991xfs.htm |
| EX-23.1 - EX-23.1 - Guild Holdings Co | ghld-20210701xex231xrsmcon.htm |
| 8-K/A - 8-K/A - Guild Holdings Co | ghld-20210701.htm |
Exhibit 99.3
PRO FORMA FINANCIAL INFORMATION
On July 1, 2021, Guild Holdings Company, a Delaware corporation (the “Company”, “Guild”) and Guild Mortgage Company LLC, a wholly-owned subsidiary of the Company, consummated the previously announced business combination pursuant to a definitive merger agreement (the “merger agreement”), dated May 10, 2021, by and among the Company, Guild Mortgage Company LLC, Project Regal Merger Sub, Inc., a Delaware corporation, Residential Mortgage Services Holdings, Inc., a Delaware corporation (“Holdings” or “RMS”), and RMS Shareholder Representative, LLC, a Delaware limited liability company (the “acquisition”).
As a result of the acquisition, Project Regal Merger Sub Inc. merged with and into Holdings in accordance with the terms of the merger agreement and the Delaware General Corporation Law. Accordingly, upon consummation of the acquisition, Project Regal Merger Sub, Inc. ceased to exist and Holdings became a wholly-owned subsidiary of Guild Mortgage Company LLC.
The unaudited pro forma combined balance sheet gives effect to the acquisition as if it had been completed on June 30, 2021 and was prepared using the unaudited consolidated balance sheet of Guild and RMS as of June 30, 2021.
The unaudited pro forma combined statements of income for the year ended December 31, 2020 and the six months ended June 30, 2021 give effect to the acquisition as if it had been consummated on January 1, 2020. The unaudited pro forma combined statements of income include adjustments that give effect to events that are directly attributable to the acquisition, that are expected to have a continuing impact, and that are factually supportable. The notes to the unaudited pro forma combined financial information describe the pro forma amounts and adjustments. In addition, the unaudited pro forma combined financial information does not reflect any cost savings or integration costs.
The unaudited pro forma combined financial statements are being presented for illustrative purposes only and, therefore, are not necessarily indicative of the operating results that might have been achieved had the transaction occurred as of an earlier date, nor are they necessarily indicative of the operating results that may be achieved in the future.
The unaudited pro forma combined financial statements, including the notes thereto, should be read in conjunction with Guild’s audited historical consolidated financial statements for the year ended December 31, 2020 included in its Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 24, 2021, Guild's unaudited condensed consolidated financial statements for the six months ended June 30, 2021 included in its Form 10-Q filed with the SEC on August 13, 2021, as well as RMS's audited financial statements for the years ended December 31, 2020 and 2019 included in Exhibit 99.1 to this Current Report on Form 8-K/A and RMS’s unaudited condensed financial statements for the six months ended June 30, 2021 and 2020 included in Exhibit 99.2 to this Current Report on Form 8-K/A.
GUILD HOLDINGS COMPANY
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
JUNE 30, 2021
(In thousands)
| Guild Historical | RMS Historical | Reclassification Adjustments (Note 3) | Pro Forma Adjustments (Note 4) | Pro Forma Combined | |||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 322,005 | $ | 84,746 | $ | (496) | 3(a)(c) | $ | (185,786) | Note 2 | $ | 220,469 | |||||||||||||||||
| Restricted cash | 4,511 | 2,021 | (712) | 3(c) | — | 5,820 | |||||||||||||||||||||||
| Mortgage loans held for sale | 2,153,990 | 464,254 | 766 | 3(b) | — | 2,619,010 | |||||||||||||||||||||||
| Ginnie Mae loans subject to repurchase right | 1,037,266 | — | — | — | 1,037,266 | ||||||||||||||||||||||||
| Accounts and interest receivable | 41,256 | 1,110 | — | — | 42,366 | ||||||||||||||||||||||||
| Derivative asset | 47,893 | 17,059 | — | — | 64,952 | ||||||||||||||||||||||||
| Mortgage servicing rights, net | 578,690 | 4,815 | — | — | 583,505 | ||||||||||||||||||||||||
| Goodwill | 62,834 | — | — | 102,111 | Note 2 | 164,945 | |||||||||||||||||||||||
| Intangible assets | — | — | — | 44,600 | 4(a) | 44,600 | |||||||||||||||||||||||
| Other assets | 144,931 | 10,012 | — | 13,484 | 4(b)(h) | 168,427 | |||||||||||||||||||||||
| Total assets | $ | 4,393,376 | $ | 584,017 | $ | (442) | $ | (25,591) | $ | 4,951,360 | |||||||||||||||||||
| Liabilities and stockholders’ equity | |||||||||||||||||||||||||||||
| Warehouse lines of credit | $ | 1,883,665 | 431,181 | — | $ | — | $ | 2,314,846 | |||||||||||||||||||||
| Notes payable | 165,000 | 510 | — | — | 165,510 | ||||||||||||||||||||||||
| Ginnie Mae loans subject to repurchase right | 1,037,640 | — | — | — | 1,037,640 | ||||||||||||||||||||||||
| Accounts payable and accrued expenses | 45,329 | 27,139 | — | (11,263) | 4(i) | 61,205 | |||||||||||||||||||||||
| Accrued compensation and benefits | 68,691 | 13,129 | (1,508) | 3(d) | — | 80,312 | |||||||||||||||||||||||
| Investor reserves | 16,827 | — | 1,508 | 3(d) | — | 18,335 | |||||||||||||||||||||||
| Income taxes payable | 8,717 | — | — | — | 8,717 | ||||||||||||||||||||||||
| Contingent liabilities due to acquisitions | 20,416 | — | — | 63,956 | Note 2 | 84,372 | |||||||||||||||||||||||
| Derivative liability | 4,430 | 1,019 | (442) | 3(a)(b) | — | 5,007 | |||||||||||||||||||||||
| Operating lease liabilities | 88,816 | — | — | 12,364 | 4(b) | 101,180 | |||||||||||||||||||||||
| Note due to related party | 3,634 | 8 | — | — | 3,642 | ||||||||||||||||||||||||
| Deferred compensation plan | 98,528 | — | — | — | 98,528 | ||||||||||||||||||||||||
| Deferred tax liability | 103,060 | 4,596 | — | — | 107,656 | ||||||||||||||||||||||||
| Total liabilities | 3,544,753 | 477,582 | (442) | 65,057 | 4,086,950 | ||||||||||||||||||||||||
| Commitments and contingencies | |||||||||||||||||||||||||||||
| Stockholders’ equity | |||||||||||||||||||||||||||||
| Common stock | 600 | — | — | 10 | 4(c) | 610 | |||||||||||||||||||||||
| Preferred stock | 30,000 | — | (30,000) | 4(e) | — | ||||||||||||||||||||||||
| Additional paid-in capital | 22,571 | 1,429 | — | 14,348 | 4(c)(e) | 38,348 | |||||||||||||||||||||||
| Retained earnings | 825,452 | 75,006 | — | (75,006) | 4(e) | 825,452 | |||||||||||||||||||||||
| Total stockholders’ equity | 848,623 | 106,435 | — | (90,648) | 864,410 | ||||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 4,393,376 | $ | 584,017 | $ | (442) | $ | (25,591) | $ | 4,951,360 | |||||||||||||||||||
See accompanying notes to Unaudited Pro Forma Combined Financial Statements
2
GUILD HOLDINGS COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2021
(In thousands, except per share amounts)
| Guild Historical | RMS Historical | Reclassification Adjustments (Note 3) | Pro Forma Adjustments | Pro Forma Combined | |||||||||||||||||||||||||
| Revenue | |||||||||||||||||||||||||||||
| Loan origination fees and gain on sale of loans, net | $ | 777,347 | $ | 157,235 | $ | 1,349 | 3(e) (f)(g) | $ | — | $ | 935,931 | ||||||||||||||||||
| Loan servicing and other fees | 92,851 | 635 | — | — | 93,486 | ||||||||||||||||||||||||
| Valuation adjustment of mortgage servicing rights | (49,046) | — | (534) | 3(e) | — | (49,580) | |||||||||||||||||||||||
| Interest income | 29,734 | 5,510 | — | — | 35,244 | ||||||||||||||||||||||||
| Interest expense | (30,720) | (4,785) | — | (35,505) | |||||||||||||||||||||||||
| Other income (expense), net | 130 | (13,935) | (188) | 3(e)(f)(i) | — | (13,993) | |||||||||||||||||||||||
| Net revenue | 820,296 | 144,660 | 627 | — | 965,583 | ||||||||||||||||||||||||
| Expenses | |||||||||||||||||||||||||||||
| Salaries, incentive compensation and benefits | 499,287 | 92,068 | 273 | 3(k) | — | 591,628 | |||||||||||||||||||||||
| General and administrative | 58,701 | 3,371 | 1,216 | 3(g)(l) | (250) | 4(f) | 63,038 | ||||||||||||||||||||||
| Occupancy, equipment and communication | 29,494 | 9,431 | (868) | 3(k)(l) | — | 38,057 | |||||||||||||||||||||||
| Depreciation and amortization | 3,262 | 1,076 | — | 3,942 | 4(a) | 8,280 | |||||||||||||||||||||||
| Provision for foreclosure losses | 2,019 | — | 6 | 3(i) | — | 2,025 | |||||||||||||||||||||||
| Total expenses | 592,763 | 105,946 | 627 | 3,692 | 703,028 | ||||||||||||||||||||||||
| Income before income tax expense (benefit) | 227,533 | 38,714 | — | (3,692) | 262,555 | ||||||||||||||||||||||||
| Income tax expense (benefit) | 57,991 | 11,926 | — | (986) | 4(g) | 68,931 | |||||||||||||||||||||||
| Net income | $ | 169,542 | $ | 26,788 | — | $ | (2,707) | $ | 193,624 | ||||||||||||||||||||
| Net income per share attributable to Class A and Class B Common Stock: | |||||||||||||||||||||||||||||
| Basic | $ | 2.83 | $ | 3.17 | |||||||||||||||||||||||||
| Diluted | $ | 2.81 | $ | 3.16 | |||||||||||||||||||||||||
| Weighted average shares outstanding of Class A and Class B Common Stock: | |||||||||||||||||||||||||||||
| Basic | 60,000 | 997 | 4(d) | 60,997 | |||||||||||||||||||||||||
| Diluted | 60,234 | 997 | 4(d) | 61,231 | |||||||||||||||||||||||||
See accompanying notes to Unaudited Pro Forma Combined Financial Statements
3
GUILD HOLDINGS COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2020
(In thousands, except per share amounts)
| Guild Historical | RMS Historical | Reclassification Adjustments (Note 3) | Pro Forma Adjustments (Note 4) | Pro Forma Combined | |||||||||||||||||||||||||
| Revenue | |||||||||||||||||||||||||||||
| Loan origination fees and gain on sale of loans, net | $ | 1,759,871 | $ | 340,086 | $ | 1,861 | 3(e)(f)(g) | $ | (2,100) | 4(h) | $ | 2,099,718 | |||||||||||||||||
| Loan servicing and other fees | 160,237 | 1,041 | — | — | 161,278 | ||||||||||||||||||||||||
| Valuation adjustment of mortgage servicing rights | (296,307) | — | (2,444) | 3(e) | — | (298,751) | |||||||||||||||||||||||
| Interest income | 57,649 | 11,899 | — | 69,548 | |||||||||||||||||||||||||
| Interest expense | (60,168) | (9,499) | 120 | 3(h) | — | (69,547) | |||||||||||||||||||||||
| Other income (expense), net | 765 | (3,160) | 1,437 | 3(e)(f)(i) | — | (958) | |||||||||||||||||||||||
| Net revenue | 1,622,047 | 340,367 | 974 | (2,100) | 1,961,288 | ||||||||||||||||||||||||
| Expenses | |||||||||||||||||||||||||||||
| Salaries, incentive compensation and benefits | 953,758 | 172,794 | 487 | 3(j)(k) | — | 1,127,039 | |||||||||||||||||||||||
| General and administrative | 101,948 | 6,687 | 2,007 | 3(g)(j)(l)(m) | (500) | 4(f) | 110,142 | ||||||||||||||||||||||
| Occupancy, equipment and communication | 57,070 | 18,166 | (1,531) | 3(h) (k)(l) (m) | — | 73,705 | |||||||||||||||||||||||
| Depreciation and amortization | 7,501 | 2,295 | — | 7,883 | 4(a) | 17,679 | |||||||||||||||||||||||
| Provision for foreclosure losses | 7,700 | — | 11 | 3(i) | — | 7,711 | |||||||||||||||||||||||
| Total expenses | 1,127,977 | 199,942 | 974 | 7,383 | 1,336,276 | ||||||||||||||||||||||||
| Income before income tax expense (benefit) | 494,070 | 140,425 | — | (9,483) | 625,012 | ||||||||||||||||||||||||
| Income tax expense (benefit) | 123,493 | 36,369 | — | (1,971) | 4(g) | 157,891 | |||||||||||||||||||||||
| Net income | 370,577 | 104,056 | — | $ | (7,512) | 467,121 | |||||||||||||||||||||||
| Net income per share attributable to Class A and Class B Common Stock: | |||||||||||||||||||||||||||||
| Basic | $ | 6.18 | $ | 7.66 | |||||||||||||||||||||||||
| Diluted | $ | 6.17 | $ | 7.65 | |||||||||||||||||||||||||
| Weighted average shares outstanding of Class A and Class B Common Stock: | |||||||||||||||||||||||||||||
| Basic | 60,000 | 997 | 4(d) | 60,997 | |||||||||||||||||||||||||
| Diluted | 60,056 | 997 | 4(d) | 61,053 | |||||||||||||||||||||||||
See accompanying notes to Unaudited Pro Forma Combined Financial Statements
4
GUILD HOLDINGS COMPANY
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
The unaudited pro forma combined balance sheet as of June 30, 2021, and the unaudited pro forma combined statements of income for the year ended December 31, 2020 and six months ended June 30, 2021, presented herein were prepared in accordance with Article 11 of Regulation S-X. The unaudited pro forma combined balance sheet gives effect to the acquisition as if it had been completed on June 30, 2021 and combines the unaudited consolidated balance sheet of Guild and the assets acquired and liabilities assumed from RMS. The unaudited pro forma combined statements of income for the year ended December 31, 2020 and six months ended June 30, 2021 give effect to the acquisition as if it had occurred on January 1, 2020.
Certain financial information of RMS, as presented in its historical consolidated financial statements, has been reclassified to conform to the historical presentation in Guild’s consolidated financial statements for the purpose of preparing the pro forma financial information. Refer to Note 3 for explanations of these reclassifications.
The unaudited pro forma combined financial information should be read in conjunction with the accompanying notes to the unaudited combined financial statements and is not necessarily indicative of the combined financial condition ore results of operations had the acquisition been completed as of the dates indicated. In addition, the unaudited pro forma combined financial information does not reflect any cost savings or integration costs. The unaudited pro forma combined financial information does not purport to project the future financial position or results of operations of the combined company. The pro forma adjustments are based on preliminary estimates of the fair values of assets acquired and liabilities assumed and information available as of the date of this Current Report on Form 8-K/A. Certain valuations are currently in process. Actual results may differ from the amounts reflected in the unaudited pro forma combined financial statements and the differences may be material.
Accounting Policies
The unaudited pro forma combined financial information has been compiled in a manner consistent with the accounting policies of Guild, including to align with the Company’s policy of accounting for leases under ASC 842 as well as certain reclassifications (see Note 3). Following the acquisition, the combined company will conduct a review of accounting policies of RMS in an effort to determine if differences in accounting policies require further reclassification of assets or liabilities or reclassification of results of operations to conform to Guild’s accounting policies and classifications. As a result of that review, the combined company may identify differences in the accounting policies of the companies that, when conformed, could have a material impact on the unaudited pro forma combined financial information.
Note 2 - Transaction and Purchase Price Consideration
On July 1, 2021, Guild acquired all of the outstanding shares of capital stock of RMS pursuant to the merger agreement.
The acquisition date fair value of the consideration transferred totaled $265.5 million. The following table summarizes the estimated fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date. These estimates of fair value of identifiable assets acquired and liabilities assumed are preliminary, pending completion of a valuation, and thus are subject to revisions that may result in adjustment to the values presented below:
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| Amount | ||||||||
| Cash paid at acquisition close on July 1, 2021 | $ | 185,786 | ||||||
| Fair value of Guild’s Class A common stock issued | 15,787 | |||||||
| Estimated fair value of earn-out | 63,956 | |||||||
| Total allocable purchase price | $ | 265,529 | ||||||
| Fair value of assets acquired | ||||||||
| Cash, cash equivalents, restricted cash | $ | 84,746 | ||||||
| Mortgage loans held for sale | 464,254 | |||||||
| Acquired intangible assets | 44,600 | |||||||
| Right of use assets | 11,384 | |||||||
| Other | 37,117 | |||||||
| Total assets acquired | $ | 642,101 | ||||||
| Fair value of liabilities assumed | ||||||||
| Warehouse lines of credit | $ | 431,181 | ||||||
| Accounts payable and accrued expenses | 29,004 | |||||||
| Lease liabilities | 12,364 | |||||||
| Deferred taxes | 4,596 | |||||||
| Other | 1,538 | |||||||
| Total liabilities assumed | $ | 478,683 | ||||||
| Fair value of net assets acquired | 163,418 | |||||||
| Goodwill | 102,111 | |||||||
| Total preliminary purchase price allocation | $ | 265,529 | ||||||
Goodwill represents the excess of the purchase price over the fair values of the underlying tangible and intangible assets acquired and liabilities assumed. In accordance with ASC Topic 350, Intangibles – Goodwill and Other, goodwill will not be amortized, but instead will be tested for impairment at least annually and whenever an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. In the event management determines that the value of goodwill is impaired, the combined company will record an expense in earnings for the amount of the impairment during the period in which the determination is made. Goodwill recorded in the acquisition will not be deductible for tax purposes.
Note 3 - Reclassification Adjustments
Certain reclassification adjustments have been made to RMS’s historical financial statements presented within the pro forma financial information to align with Guild’s historical balances.
The following reclassification adjustments were made to the unaudited pro forma combined balance sheet as of June 30, 2021:
(a) Reclassification of accounts for margin calls out of cash and cash equivalents to derivative liability to conform with Guild’s financial statement line item presentation.
(b) Reclassification of pair offs from mortgage loans held for sale to to derivative liability to conform with Guild’s financial statement line item presentation
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(c ) Reclassification of collateral, escrow and T&I accounts from restricted cash to cash and cash equivalents to conform with Guild’s financial statement line item presentation.
(d) Reclassification of investor reserves out of accrued compensation and benefits to investor reserves to conform with Guild’s financial statement line item presentation.
The following reclassification adjustments were made to the unaudited pro forma combined statements of income:
(e) Reclassification of valuation adjustments of mortgage servicing rights from Loan origination fees and gain on sale of loans, net to Valuation adjustment of mortgage servicing rights and from Other income (expense), net to Valuation adjustment of mortgage servicing rights to conform with Guild’s financial statement line item presentation.
(f) Reclassification of provision for investor losses from Other income (expense), net to Loan origination fees and gain on sale of loans, net to conform with Guild’s financial statement line item presentation.
(g) Reclassification of post-closing and quality control expenses to General and administrative from Loan origination fees and gain on sale of loans, net to conform with Guild’s financial statement line item presentation.
(h) Reclassification of 3rd party payroll service provider fees from Interest expense to Occupancy, equipment and communication to conform with Guild’s financial statement line item presentation.
(i) Reclassification of foreclosure losses from Other income (expense), net to Provision for foreclosure losses to conform with Guild’s financial statement line item presentation.
(j) Reclassification of sponsorships and charitable contributions from Salaries, incentive compensation and benefits to General and administrative to conform with Guild’s financial statement line item presentation.
(k) Reclassification of training and education, relocation expenses and recruiting expenses from Occupancy, equipment and communication to Salaries, incentive compensation and benefits to conform with Guild’s financial statement line item presentation.
(l) Reclassification of office supplies, postage, subscriptions and other miscellaneous expenses from Occupancy, equipment and communication to General and administration to conform with Guild’s financial statement line item presentation.
(m) Reclassification of real estate and personal property tax from General and administration to Occupancy, equipment and communication to conform with Guild’s financial statement line item presentation.
Note 4 - Pro Forma Adjustments
(a) Adjustment to reflect the preliminary allocation of the purchase price to identifiable intangible assets and goodwill acquired in the transaction. The following table sets forth the finite-lived intangible amortization adjustment for the year ended December 31, 2020 and the six months ended June 30, 2021:
| Acquired intangible assets | Estimated Fair Value | Estimated Useful Life (years) | Annual 2020 Amortization Expense | Six Months Ended June 30, 2021 Amortization Expense | ||||||||||||||||||||||
| Referral network | $ | 41,900 | 6 | $ | 6,983 | $ | 3,492 | |||||||||||||||||||
| Non-compete agreements | 2,700 | 3 | 900 | 450 | ||||||||||||||||||||||
| Total pro forma adjustment (increase to amortization) | $ | 7,883 | $ | 3,942 | ||||||||||||||||||||||
(b) To record leases upon acquisition, including right-of-use assets of $11.4 million and $12.4 million in operating lease liabilities related to the present value of remaining lease payments. The right-of-use assets was offset by a $1.0 million unfavorable lease liability due to the current rent amount being higher than current market rates.
(c) To record the issuance of 996,644 shares of the Guild’s Class A common stock issued as consideration.
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(d) Represents the increase in the weighted average shares resulting from the issuance of shares of Guild’s Class A common stock in connection with the acquisition.
| Six Months Ended June 30, 2021 | Year Ended December 31, 2020 | ||||||||||
| Guild historical weighted-average number of shares outstanding, basic | 60,000 | 60,000 | |||||||||
| Total common shares issued by Guild | 997 | 997 | |||||||||
| Pro forma weighted-average common shares outstanding, basic | 60,997 | 60,997 | |||||||||
| Pro forma weighted-average common shares outstanding, basic | 60,997 | 60,997 | |||||||||
| Guild historical weighted-average number of dilutive shares | 234 | 56 | |||||||||
| Pro forma weighted-average common shares outstanding, diluted | 61,231 | 61,053 | |||||||||
(e) Elimination of RMS’ historical equity accounts not assumed in the acquisition.
(f) Represents a management fee that RMS paid to the previous owners which would not be recurring under Guild’s ownership structure.
(g) For purposes of these unaudited pro forma combined financial statements, an estimated income tax rate of approximately 25.0% has been used to calculate the income tax expense (benefit) related to the unaudited pro forma adjustments.
(h) Represents $2.1 million of unlocked pipeline recognized in other assets and the amortization of the unlocked pipeline within loan origination fees and gain on sale of loans, net as those loans move from unlocked to locked status.
(i) Transaction costs paid in connection with the closing of the transaction.
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