Stonegate Mortgage Profit Drops

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Indianapolis-based Stonegate Mortgage Corp. (NYSE: SGM) is reporting third quarter net income of $1.7 million, compared to $9.5 million during the same period a year earlier. The company says the results reflect a recently-completed initial public offering, the acquisition of Crossline Capital and the planned acquisition of a Texas-based lender's wholesale channel. November 14, 2013

News Release

INDIANAPOLIS, Ind. - Stonegate Mortgage Corporation ("Stonegate Mortgage" or the "Company") (NYSE:SGM), a leading, non-bank mortgage company focused on originating, financing and servicing U.S. residential mortgage loans, today reported results for the quarter ended September 30, 2013.

"Our third quarter results reflect solid business execution during a period of rising interest rates and underscore the strength of our differentiated, vertically integrated and scalable mortgage banking platform," said Jim Cutillo, Chief Executive Officer of Stonegate Mortgage. "Our three lines of business--mortgage originations, mortgage servicing and mortgage financing--complement each other and create a natural hedge against interest rate volatility and business cyclicality, an important factor in our performance. Having completed our IPO, we continue to execute our growth strategy as evidenced by our recently announced acquisitions which will accelerate our geographic expansion, add talented senior executives and enhance our ability to serve a broader range of mortgage brokers and regional banks. We are confident in our ability to integrate these businesses, which will help fuel our growth and create near and long-term shareholder value for our investors."

Net income for the third quarter was $1.7 million, or $0.10 per diluted share, compared to $9.1 million, or $0.63 per diluted share, in the second quarter of 2013 and $9.5 million, or $1.00 per diluted share in the third quarter of 2012.

Adjusted net income was $6.1 million, or $0.35 per diluted share, for the third quarter 2013, after adjusting for non-cash valuation adjustments, certain other non-cash expense items and ramp-up and other non-routine expenses. Adjusted net income was $8.4 million, or $0.58 per diluted share, for the second quarter of 2013 and $7.0 million, or $0.74 per diluted share, for the third quarter 2012. Refer to page 8 for a reconciliation to the most directly comparable measure calculated in accordance with GAAP.

Revenues decreased 27% to $32.3 million in the third quarter of 2013 from $44.3 million in the second quarter of 2013 and were up 3% from $31.4 million in the third quarter of 2012.

Adjusted revenues decreased 4% to $37.8 million in the third quarter of 2013 from $39.5 million in the second quarter of 2013 and were up 50% from $25.2 million in the third quarter of 2012. Refer to page 7 for a reconciliation to the most directly comparable measure calculated in accordance with GAAP.

Mortgage loan origination volume increased 12%, to $2.3 billion during the third quarter of 2013 from $2.1 billion in originations in the second quarter of 2013 and grew 123% from origination volume of $1.1 billion in the third quarter of 2012.

The Company's servicing portfolio, as measured by unpaid principal balance (“UPB”), ended the third quarter 2013 at $9.7 billion, an increase of 28% from second quarter 2013 ending UPB of $7.6 billion, and up 229% over the third quarter 2012 ending UPB of $2.9 billion.

Recent Developments - Acquisition of Crossline Capital; Continues Execution of Retail Channel Expansion and Growth Strategy

On November 13, 2013, Stonegate Mortgage entered into a definitive agreement to acquire Crossline. The acquisition of Crossline will help expand the Company’s retail channel and accelerate its geographic expansion, which is consistent with the Company’s acquisition and growth strategy. Crossline will be operated as a wholly-owned subsidiary of Stonegate Mortgage.

Crossline is licensed to originate mortgages in 20 states including Arizona, California, Colorado, Connecticut, Florida, Georgia, Idaho, Maryland, Massachusetts, New Hampshire, New Mexico, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, Texas, Utah, Virginia and Washington, and is an approved Fannie Mae Seller Servicer. In addition, it operates two national mortgage origination call centers in Lake Forest, CA and Scottsdale, AZ and also operates retail mortgage origination branches in seven other locations in Southern California. Crossline originated $572 million in mortgage loans during the year ended December 31, 2012 and $374 million in mortgage loans during the nine months ended September 30, 2013.

Conference Call and Webcast

The Company will host a conference call today, November 14, 2013, at 8:30 a.m. EST in which management will discuss the third quarter earnings results.

To access the call please dial (877) 303-5863 from the United States, or (678) 304-6908 from outside the U.S. The conference call I.D. number is 90506738. Participants should dial in 5 to 10 minutes before the scheduled time and must be on a touch-tone telephone to ask questions.

A replay of the call can be accessed through November 21, 2013 by dialing (800) 585-8367 from the U.S., or (404) 537-3406 from outside the U.S. The conference call I.D. number is 90506738.

This call will also be available as a live webcast which can be accessed at Stonegate Mortgage's Investor Relations Website at http://investors.stonegatemtg.com.

About Stonegate Mortgage Corporation

Founded in 2005, Stonegate Mortgage Corporation (NYSE: SGM) is a leading, non-bank, integrated mortgage company that originates, finances and services agency and non-agency residential mortgages through its network of retail offices and approved third party originators. Stonegate Mortgage also provides financing through its fully integrated warehouse lending platform, NattyMac. Stonegate Mortgage’s operational excellence, financial strength, dedication to customer service and commitment to technology have positioned the firm as a leading provider in the emerging housing finance market.

For more information on Stonegate Mortgage Corp