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Lending

Stonegate Mortgage misses expectations but retail originations nearly double in Q1

Retail originations increased from $131.9 million to $260.9 million

money roll

Stonegate Mortgage Corporation (SGM) posted a loss of $7.9 million in the first quarter and missed revenue expectations by $7.3 million. The company posting a loss may have been expected given the market’s weakness in the early part of the year, but the loss didn’t come from the company’s mortgage origination arm.

In fact, the company’s retail mortgage originations increased by nearly 100% from the fourth quarter of 2013. The company’s retail originations increased from $131.9 million in the fourth quarter to $260.9 million in 2014’s first quarter. Stonegate’s first quarter originations were also up over $110 million from the same time period last year.

The company’s wholesale originations were up from $416.5 million to $422.2 million, while the company’s correspondent originations were down from $1.83 billion to $1.74 billion. On the whole, the company’s total origination volume increased from $2.38 billion in the fourth quarter to $2.42 billion in the first quarter.

The company’s average origination volume per business day in the first quarter was $39.7 million, up from $38.4 million in the 2013’s fourth quarter and up from $30.2 million per day in the first quarter of 2013.

"Despite contracting industry volumes in the first quarter, we were pleased with our continued growth in originations and lock volumes," said Jim Cutillo, Stonegate’s chief executive officer. "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."

On the servicing side, the company's servicing portfolio, as measured by unpaid principal balance, ended the first quarter of 2014 at $14.1 billion, an increase of 18% from 2013’s fourth quarter when the unpaid principal balance was $11.9 billion. That’s also up 144% over the 2013’s first quarter unpaid principal balance was $5.8 billion.

The company’s 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. Industry expectations projected Stonegate's earnings at $45.6 million for the first quarter. 

Stonegate posted a net loss for the first quarter 2014 of $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 company said the income loss 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.”

Stonegate acquired Nationstar’s wholesale lending channel in December and added more than 200 employees to its payroll. According to the company’s earnings statement, its payroll increased from $23.87 million in the fourth quarter to $33.42 million in the first quarter. The company’s payroll was $14.49 million in the first quarter of 2013.

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