Indianapolis-based Stonegate Mortgage Corp. (NYSE: SGM) is reporting a first quarter net loss of $11.1 million, compared to a loss of $7.9 million during the same period the previous year. Chief Executive Officer Jim Cutillo says the company is committed to reinvesting in its origination and financing businesses.

May 6, 2015

News Release

Indianapolis, Ind. — Stonegate Mortgage Corporation (“Stonegate Mortgage” or the “Company”) (NYSE:SGM), a specialty finance company focused on providing yield opportunities in the residential mortgage market, today reported results for the quarter ended March 31, 2015. The Company operates as an intermediary between residential mortgage borrowers and the ultimate investors of mortgages through originating, financing, and servicing U.S. residential mortgages.

Jim Cutillo, Chief Executive Officer of Stonegate Mortgage commented, “I am pleased with the way our integrated business model performed in the first quarter. The low rate environment resulted in increased servicing payoffs and reduced MSR valuations. However, the strong origination and financing results show that our integrated business model is capable of performing well over any interest rate cycle. We remain committed to freeing up capital from the servicing segment to reinvest in our origination and financing businesses, which provide better leverage and return potential. The strength of our balance sheet continues to put us in a strong position to take advantage of changing market dynamics.”

Mortgage loan origination volume increased 17% to $2.84 billion during the first quarter of 2015 from $2.42 billion in the first quarter of 2014, and decreased 16% from $3.37 billion in originations in the fourth quarter of 2014. Lock volume was up 41% to $4.88 billion during the first quarter of 2015 from $3.46 billion in the first quarter 2014, and grew 22% from lock volume of $4.01 billion in the fourth quarter of 2014.

The Company's servicing portfolio, as measured by unpaid principal balance (“UPB”), was $17.0 billion at March 31, 2015, an increase of 20% over the March 31, 2014 UPB of $14.1 billion, and down 7% from the December 31, 2014 UPB of $18.3 billion.

Mortgage loan funded volume through the Company's warehouse lines of credit provided to its correspondent customers in the Company's Financing segment increased 517% to $638.1 million in the first quarter of 2015 from $103.4 million in the first quarter of 2014, and increased 35% from $472.4 million in the fourth quarter of 2014.

Revenues increased 16% to $44.3 million in the first quarter of 2015 from $38.3 million in the first quarter of 2014, and were up 67% from $26.5 million in the fourth quarter of 2014. The increase over prior year was primarily due to increases in gains on mortgage loans held for sale, net, loan servicing fees, interest and other income, loan origination fees and gain on sale of mortgage servicing rights, substantially offset by a decrease in the fair value of our MSRs and increased loan payoffs and principal amortization of our MSRs.

Net loss for the first quarter 2015 was $11.1 million, or $0.43 per diluted share, compared to net loss of $7.9 million, or $0.31 per diluted share in the first quarter of 2014, and $21.4 million, or $0.83 per diluted share in the fourth quarter of 2014.

Recent Developments

April 2015 Key Operating Highlights

Total origination volume was $1,099.8 million during the month of April 2015, up 16% compared with average origination volume of $946.0 million per month during the first quarter of 2015.

Average mortgage loans locked per business day in April 2015 decreased 11% to $71.0 million, compared with average locks per business day of $80.0 million during the first quarter of 2015.

Retail locks per day decreased 6% in April 2015 to $18.7 million to represent 26% of total lock volume, compared to 25% of total lock volume during the first quarter of 2015.

On April 30, 2015, the Company completed a sale of MSRs with an underlying UPB of nearly $2.0 billion in GNMA loans to an unrelated third party. The Company will perform temporary sub-servicing activities with respect to the underlying loans through the established transfer date, targeted for the third quarter of 2015, for a fee, during which time the Company would also be entitled to certain other ancillary income amounts.

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.

Source: Stonegate Mortgage Corp.

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