Stonegate mortgage origination volume surges 51%

Misses analyst expectations

Stonegate Mortgage Corporation’s (SGM) mortgage loan origination volume slightly increased in the third quarter, growing 7% to $3.5 billion compared to $3.3 billion in originations in the second quarter of 2014.

This is a 51% rise from origination volume of $2.3 billion in the third quarter of 2013.

For the nine months ended 2014, mortgage loan origination volume grew 46% to $9.3 billion compared to $6.3 billion in originations for the nine months ended 2013.

"We continue to make progress on our strategic initiatives, in spite of the industry headwinds and interest rate volatility,” said Jim Cutillo, CEO of Stonegate Mortgage.

“More importantly we increased our liquidity through monetizing our investment in a portion of our mortgage servicing rights asset and reducing our net cost to originate through noticeably growing our retail and wholesale volumes in the third quarter. We continue to see opportunity to grow our market share and are positioned to take advantage of the emerging mortgage market with a strong balance sheet,” Cutillo added.

Stonegate’s servicing portfolio, as measured by unpaid principal balance, ended the third quarter 2014 at $17.7 billion, an increase of 48% from the ending fourth quarter 2013 UPB of $11.9 billion, and up 82% over the ending third quarter 2013 UPB of $9.7 billion.

Revenues increased 9% to $63.1 million in the third quarter of 2014 from $57.6 million in the second quarter of 2014 and were up 98% from $31.9 million in the third quarter of 2013. This is primarily due to increases in gains on mortgage loans held for sale, interest income, loan servicing fees, and loan origination and other loan fees. However, these increases were partially offset by a decrease in the fair value of mortgage servicing rights. 

This missed analyst expectations by $14.55 million.

Net loss for the third quarter 2014 was $1.7 million, or $0.07 per diluted share, compared to net income of $0.3 million, or $0.01 per diluted share, in the second quarter of 2014 and net income of $1.7 million, or $0.10 per diluted share in the third quarter of 2013.

Financial results were impacted by a $6.0 billion decrease in MSR valuations as well as an additional $2.5 million of non-cash tax expense primarily caused by a change in its blended state tax rates due to shifts in the geographic concentration of its origination business, and related effects on its deferred tax liabilities and other tax-related adjustments. 

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