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Stonegate posts $57.6 million in revenue in 2Q2014

Growing origination volume, MSRs beat industry trend

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Stonegate Mortgage Corporation (SGM) posted strong revenues in the second quarter of 2014, up 50% to $57.6 million in the second quarter of 2014 from $38.3 million in the first quarter of 2014.

The powerful showing was primarily due to increases in gains on mortgage loans held for sale, interest income, loan servicing fees, and loan origination and other loan fees, partially offset by a decrease in the fair value of mortgage servicing rights.

Net income for the second quarter 2014 was $0.3 million, or $0.01 per diluted share, compared to net loss of $7.9 million, or $0.31 per diluted share, in the first quarter of 2014 and net income of $9.1 million, or $0.63 per diluted share in the second quarter of 2013.

Net loss for the six months ended 2014 was $7.6 million, or $0.30 per diluted share, compared to net income of $18.9 million, or $1.46 per diluted share for the six months ended 2013.

“We are very pleased with the operational and financial results produced by Stonegate during the second quarter,” said Jim Cutillo, CEO of Stonegate Mortgage. “Our commitment to growing our retail and wholesale channels has started to flow through the income statement as gain on sale margins continued to improve during the quarter while primary-secondary spreads in the market remained stable. Our other strategic focuses of growing NattyMac and non-agency also continue to provide improving results.”

The company's servicing portfolio, as measured by unpaid principal balance, ended the second quarter 2014 at $16.7 billion, an increase of 40% from the ending fourth quarter 2013 UPB of $11.9 billion, and up 121% over the ending second quarter 2013 UPB of $7.6 billion.

Mortgage loan origination volume grew 37% to $3.3 billion during the second quarter of 2014 compared to $2.4 billion in originations in the first quarter of 2014 and grew 59% from origination volume of $2.1 billion in the second quarter of 2013. Six months ended 2014 mortgage loan origination volume grew 44% to $5.7 billion compared to $4.0 billion in originations for the six months ended 2013.

"The strong origination volume growth and 23 basis point improvement in gain on sale margins resulted in strong top line growth" said Rob Eastep, CFO of Stonegate Mortgage. "The fee income generated from our growing servicing portfolio and NattyMac are also providing a stable source of revenue. Just as important to our revenue growth was our improvement in non-interest expenses in basis points of origination volume as more revenue is flowing through to the bottom line."

Revenues increased 50% to $57.6 million in the second quarter of 2014 from $38.3 million in the first quarter of 2014 and were up 33% from $43.4 million in the second quarter of 2013, primarily due to increases in gains on mortgage loans held for sale, interest income, loan servicing fees, and loan origination and other loan fees, partially offset by a decrease in the fair value of MSRs.

Revenues increased 17% to $95.9 million for the six months ended 2014 from $82.2 for the six months ended 2013.

Average mortgage loans locked per business day decreased 14% to $62.8 million during the month of July 2014, compared with average locks per business day of $72.8 million during the second quarter of 2014.

Retail locks per day grew 18% in July to $11.4 million to represent 18% of total lock volume, compared to 13% of total lock volume during the second quarter of 2014.

Wholesale locks per day declined 7% in July to $16.0 million to represent 26% of total lock volume, compared to 24% of total lock volume during the second quarter of 2014.

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