Stonegate Mortgage Posts Loss

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Indianapolis-based Stonegate Mortgage Corp. (NYSE: SGM) is reporting a first quarter net loss of nearly $8 million, compared to a profit of $9.7 million during the same period the previous year. The company says the results are due in part to the acquisition of Nationstar in Texas.

May 15, 2014

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 March 31, 2014.

"Despite contracting industry volumes in the first quarter, we were pleased with our continued growth in originations and lock volumes," said Jim Cutillo, Chief Executive Officer of Stonegate Mortgage. "It is increasingly evident that our strategic focus on retail and small to mid-sized originators is resulting in higher gain on sale margins and greater wallet share. Retail and wholesale continue to make up a larger percentage of our overall business, and we will continue to focus on integrating the previous acquisitions as well as looking for additional growth opportunities in these channels.”

The Company's servicing portfolio, as measured by unpaid principal balance ("UPB"), ended the first quarter 2014 at $14.1 billion, an increase of 18% from fourth quarter 2013 ending UPB of $11.9 billion, and up 144% over the first quarter 2013 ending UPB of $5.8 billion.

Mortgage loan origination volume grew modestly to $2.42 billion during the first quarter of 2014 compared to $2.38 billion in originations in the fourth quarter of 2013 and grew 27% from origination volume of $1.90 billion in the first quarter of 2013.

Revenues decreased 13% to $38.3 million in the first quarter of 2014 from $43.8 million in the fourth quarter of 2013 and were down 1% from $38.9 million in the first quarter of 2013, primarily due to a negative $7.9 million non-cash fair market value adjustment on the mortgage servicing rights due to changes in inputs and assumptions.

Net loss for the first quarter 2014 was $7.9 million, or $0.31 per diluted share, compared to net income of $2.1 million, or $0.08 per diluted share, in the fourth quarter of 2013 and $9.7 million, or $0.86 per diluted share in the first quarter of 2013. The decrease in net income during the first quarter of 2014 was driven primarily by a negative fair market value adjustment in the mortgage servicing rights valuation resulting in lower revenues and increased expenses associated with the ramp-up of our recently acquired retail and wholesale assets from Nationstar. The decrease in diluted earnings per share during the first quarter of 2014 was driven primarily by the decrease in net income and the dilution associated with higher weighted average shares outstanding during the first quarter of 2014 as a result of our equity offerings during the second and fourth quarters of 2013.

Adjusted net income1 was $3.4 million, or $0.13 per diluted share1, for the first quarter 2014, after excluding pre-tax non-cash mortgage servicing rights valuation adjustments of $7.9 million and adding certain other pre-tax non-cash expense items, ramp-up and other non-routine expenses totaling $10.5 million. Adjusted net income was $2.7 million, or $0.11 per diluted share, for the fourth quarter of 2013 and $6.1 million, or $0.54 per diluted share, for the first quarter 2013. Refer to page 7 for a reconciliation to the most directly comparable measures calculated in accordance with GAAP.

Recent Developments

April 2014 Key Operating Highlights

Average mortgage loans locked per business day increased 25% to $68.9 million during the month of April 2014, compared with average locks per business day of $55.0 million during the first quarter of 2014.

Retail and wholesale locks represented 13% and 21%, respectively, of total lock volume during April 2014, compared with retail and wholesale locks of 12% and 20%, respectively, of total lock volume during the first quarter of 2014.

Conference Call and Webcast

The Company will host a conference call today, May 15, 2014, at 11:00 a.m. EDT in which management will discuss the first 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 30435070. 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 June 15, 2014 by dialing (855) 859-2056 from the U.S., or (404) 537-3406 from outside the U.S. The conference call I.D. number is 30435070.

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, publicly traded, non-bank 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 Corporation, please visit www.stonegatemtg.com.

Source: Stonegate Mortgage Corp.