Stonegate Profit Rises

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Indianapolis-based Stonegate Mortgage Corp. (NYSE: SGM) is reporting 2013 net income of $22.6 million, up from $17.1 million the previous year. Chief Executive Officer Jim Cutillo says multiple acquisitions last year position the company to be a "significant player" in the emerging mortgage market.

February 25, 2014

News Release

Indianapolis, Ind. -- Stonegate Mortgage Corporation ("Stonegate Mortgage" or the "Company") (NYSE: SGM), a leading, non-bank integrated mortgage company focused on originating, financing and servicing U.S. residential mortgage loans, today reported results for the fourth quarter and full year ended December 31, 2013.

"Despite challenging market conditions during the second half of the year, we are pleased with the financial and operational successes we achieved in 2013," said Jim Cutillo, Chief Executive Officer of Stonegate Mortgage. "We made a number of investments that will position us to be a significant player in the emerging mortgage market, including our Crossline Capital and Nationstar acquisitions, our investments in the NattyMac financing platform and our growing non-agency program. Our Company began 2013 with $55 million of net assets, completed two significant capital raises, and still returned approximately 20% on our capital to investors, representing a significant financial and operational accomplishment. Going forward, we continue to see compelling opportunities to invest capital into attractive assets as well as realize gains on investments made to date."

The Company's servicing portfolio, as measured by unpaid principal balance ("UPB"), ended the fourth quarter 2013 at $11.9 billion, an increase of 23% from third quarter 2013 ending UPB of $9.7 billion, and up 188% over the fourth quarter 2012 ending UPB of $4.1 billion.

Mortgage loan origination volume increased 2% to $2.4 billion during the fourth quarter of 2013 from $2.3 billion in originations in the third quarter of 2013 and grew 70% from origination volume of $1.4 billion in the fourth quarter of 2012. Full year 2013 mortgage loan origination volume increased 152%, to $8.7 billion from $3.4 billion in 2012.

Revenues increased 38% to $43.8 million in the fourth quarter of 2013 from $31.9 million in the third quarter of 2013 and were up 35% from $32.4 million in the fourth quarter of 2012. Full year 2013 revenue increased 69% to $157.9 million from $93.6 million in 2012.

Net income for the fourth quarter 2013 was $2.1 million, or $0.08 per diluted share, compared to $1.7 million, or $0.10 per diluted share, in the third quarter of 2013 and $3.7 million, or $0.38 per diluted share in the fourth quarter of 2012. Net income for the full year 2013 was $22.6 million, or $1.32 per diluted share, compared to $17.1 million or $2.26 per diluted share for the full year 2012. The decrease in diluted EPS during the fourth quarter and full year 2013 was driven primarily by the dilution associated with higher weighted average shares outstanding as a result of our equity offerings during 2013.

Adjusted net income1 was $2.7 million, or $0.11 per diluted share1, for the fourth quarter 2013, after excluding pre-tax non-cash mortgage servicing rights valuation adjustments of $5.2 million and adding certain other pre-tax non-cash expense items, ramp-up and other non-routine expenses totaling $6.2 million. Adjusted net income was $0.1 million, or $0.00 per diluted share, for the third quarter of 2013 and $7.5 million, or $0.77 per diluted share, for the fourth quarter 2012. Full year 2013 adjusted net income was $15.6 million, or $0.91 per diluted share, compared to $23.8 million, or $3.16 per diluted share in 2012. Full year 2013 adjusted net income excludes the effects of pre-tax non-cash mortgage servicing rights valuation adjustments of $23.0 million and adds certain other pre-tax non-cash expense items, ramp-up and other non-routine expenses totaling $11.7 million. Refer to page 8 for a reconciliation to the most directly comparable measure calculated in accordance with GAAP.

Recent Developments

Acquisition of Crossline Capital, Inc.

On December 19, 2013, Stonegate Mortgage completed its acquisition of Crossline Capital, Inc. ("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 is 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 contributed approximately $21 million in mortgage loan originations during the fourth quarter of 2013 (during the period between the December 19, 2013 acquisition date and December 31, 2013).

Acquisition of Medallion Mortgage Company

On February 5, 2014, Crossline (a wholly-owned subsidiary of Stonegate Mortgage) completed its acquisition of Medallion Mortgage Company ("Medallion"), a Southern-California based residential mortgage originator. Medallion originated more than $400 million in mortgage loans during the year ended December 31, 2013 through its California and Utah locations, serving customers with an extensive portfolio of residential real estate loan programs. The acquisition of Medallion includes 10 offices along the southern and central coast of California, Utah and a new operations center in Ventura, California. These offices will employ more than 30 loan officers. Mack McConkey, Medallion's Executive Vice President, joined Crossline in a senior role to manage portions of its southern and central California mortgage retail production. In the acquisition of Medallion, Crossline agreed to purchase certain assets, assume certain liabilities and offer employment to certain employees.

Acquisition of Wholesale Channel and Retail Assets from Nationstar Mortgage Holdings, Inc.

On November 29, 2013, Stonegate Mortgage completed its acquisition of the wholesale lending channel and certain distributed retail assets of Nationstar Mortgage Holdings Inc. ("Nationstar"). The acquisition of Nationstar’s wholesale lending channel and retail assets complement our existing wholesale and retail channels and accelerates our geographic retail channel expansion. In this acquisition, the Company agreed to purchase certain assets and offer employment to certain employees.

January 2014 Key Operating Highlights

• Average mortgage loans locked per business day during the month of January 2014 of $52.8 million, compared with average locks per business day of $49.8 million during the fourth quarter of 2013.

• Retail and wholesale locks represented 9% and 19%, respectively, of total lock volume during January 2014, compared with retail and wholesale locks of 6% and 17%, respectively, of total lock volume during the fourth quarter of 2013.

Conference Call and Webcast

The Company will host a conference call today, February 24, 2014, at 4:15 p.m. EST in which management will discuss the fourth quarter and full year ended December 31, 2013 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 68319384. 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 March 3, 2014 by dialing (855) 859-2056 from the U.S., or (404) 537-3406 from