STONEGATE MORTGAGE CORPORATION REPORTS FOURTH QUARTER AND ANNUAL 2016 FINANCIAL RESULTS‌‌ Indianapolis, Ind. - March 9, 2017 - Stonegate Mortgage Corporation (NYSE: SGM) ("Stonegate Mortgage" or the "Company"), a leading, non-bank mortgage company focused on originating, financing and servicing U.S. residential mortgage loans, today reported financial results and operating performance for the quarter and year ended December 31, 2016. These results are based on continuing operations, unless otherwise noted, as the retail restructuring announced last year resulted in, and is presented as, discontinued operations.

Revenues increased 18% to $78.2 million in the fourth quarter of 2016 from $66.3 million in the third quarter of 2016, and increased 67% from $46.8 million in the fourth quarter of 2015. The increase in revenues quarter over quarter was predominantly the result of favorable changes in the fair value of our MSRs, partially offset by decreases in gains on mortgage loans held for sale. Full year 2016 revenues decreased 4% to $176.0 million from $182.7 million in 2015. The decrease in revenues year over year was predominantly the result of decreases in gains on mortgage loans held for sale, loan servicing fees, interest and other income and loan origination and other loan fees, partially offset by a lower negative change in the fair value of our MSRs and a decline in loan payoffs and principal amortization of MSRs.

Total expenses during the fourth quarter of 2016 were $40.8 million, down $9.6 million, or 19%, compared to the third quarter of 2016 and down $3.3 million, or 8%, compared to the fourth quarter of 2015. Full year 2016 expenses decreased 12% to

$179.2 million from $204.5 million in 2015. Total expenses have decreased due to lower salaries, commissions and benefits primarily as a result of decreased commission and incentive compensation expense related to the decline in origination volume, as well as a decline in interest expense primarily due to lower volume of mortgage loans originated and funded. This was partially offset by higher depreciation and amortization expenses primarily due to increased property and equipment and software expenditures during 2015 related to major additions to our information technology systems for regulatory compliance, accounting, and operations.

Net income from continuing operations, net of tax for the fourth quarter of 2016 was $36.0 million, or $1.39 per diluted share, compared to net income of $15.6 million, or $0.60 per diluted share, in the third quarter of 2016 and net income of $1.1 million, or $0.04 per diluted share, in the fourth quarter of 2015. Net loss for the full year 2016 was $3.1 million, or $0.12 per diluted share, compared to net loss of $16.2 million, or $0.63 per diluted share, for the full year 2015.

Adjusted net income from continuing operations1 was $1.6 million, or $0.06 per diluted share, for the fourth quarter of 2016, after excluding pre-tax non-cash mortgage servicing rights valuation adjustments of $36.1 million and adding certain other pre- tax non-cash expense items and other non-routine expenses. Adjusted net income from continuing operations was $11.0 million, or $0.42 per diluted share, for the third quarter of 2016 and $1.2 million, or $0.05 per diluted share, for the fourth quarter 2015. Full year 2016 adjusted net income from continuing operations was $10.6 million, or $0.41 per diluted share.

Full year 2015 adjusted net income was $10.7 million, or $0.42 per diluted share. Refer to table below for a reconciliation of adjusted net income and adjusted diluted earnings per share to the most directly comparable measures calculated in accordance with GAAP.

1 Adjusted net income from continuing operations and adjusted diluted earnings per share from continuing operations are considered non- GAAP financial measures. These non-GAAP financial measures are performance measures and are presented to provide additional information about our core operations. See table below for a discussion of the use of these non-GAAP measures and a reconciliation of each of these non-GAAP measures to the most comparable measure prepared in accordance with GAAP.

As of December 31, 2016, the Company had cash and cash equivalents of $26.3 million.

Segment Highlights

  • Originations segment

    • Pre-tax income of $5.0 million for the fourth quarter 2016 as compared to $17.7 million for the third quarter 2016

    • Total originations of $2.46 billion during the fourth quarter 2016 as compared to $2.62 billion during the third quarter 2016

  • Servicing segment

    • Pre-tax income of $36.1 million for the fourth quarter 2016 as compared to $3.6 million for the third quarter 2016

    • Adjusted pre-tax income of $40 thousand compared to a $1.3 million loss in the third quarter 2016

    • Total expenses during the fourth quarter 2016 decreased 9% from the third quarter 2016

    • End of quarter servicing UPB of $16.29 billion with a weighted average coupon of 3.72%

  • Financing segment (NattyMac)

    • Pre-tax income of $872 thousand for the fourth quarter 2016 as compared to $983 thousand for the third quarter 2016

    • Funding fee income of $479 thousand for the fourth quarter 2016, a decrease of 2% from the third quarter 2016

    • Total expenses during the fourth quarter 2016 increased 7% from the third quarter 2016

Recent Developments

On January 26, 2017, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Home Point Financial Corporation, a New Jersey Corporation ("Home Point Financial") and Longhorn Merger Sub, Inc. an Ohio corporation and wholly owned subsidiary of Home Point Financial ("Merger Sub"), pursuant to which, Merger Sub will merge with and into the Company, with the Company as the surviving entity (the "Merger"). Under the terms of the Merger Agreement, our stockholders will receive $8.00 per share, which represents a per share premium of approximately 61 percent over our 90-day volume weighted average price on January 26, 2017 and 34 percent over our closing price per share on January 26, 2017.

About Stonegate Mortgage Corporation

Founded in 2005, Stonegate Mortgage Corporation (NYSE: SGM) is a leading, publicly-traded, 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.

Key Operating Statistics

(Unaudited)

Three Months Ended Years Ended December 31,

(In millions)

December 31, 2016

September 30, 2016

December 31, 2015

2016

2015

Origination volume by channel:

Retail

$ 322.2

$ 364.2

$ 292.9

$ 1,189.1

$ 1,533.3

Wholesale

559.8

596.8

545.9

2,146.4

$ 2,550.6

Correspondent

1,574.8

1,660.3

1,433.2

6,027.5

7,154.2

Total origination volume

$ 2,456.8

$ 2,621.4

$ 2,272.0

$ 9,363.0

$ 11,238.1

Average origination volume per business day $ 40.3 $ 41.0 $ 37.2 $ 37.3 $ 45.0

Mortgage loan locks volume:

Mortgage loans locked

$ 2,140.9

$ 3,625.0

$ 2,690.2

$ 12,112.3

$ 15,245.9

Average mortgage loans locked per business day

$ 35.1

$ 56.6

$ 44.1

$ 48.3

$ 61.0

As of

December 31, 2016

September 30, 2016

December 31, 2015

Servicing portfolio $ 16,286.8 $ 14,416.9 $ 17,520.7

Consolidated Statements of Operations‌

(Unaudited)

Three Months Ended Years Ended December 31,

December

September

December

(In thousands, except per share data)

31, 2016 30, 2016 31, 2015 2016 2015

Revenues

Gains on mortgage loans held for sale, net

$ 25,552

$ 41,239

$ 22,724

$ 118,226

$ 141,819

Changes in mortgage servicing rights valuation

36,063

4,918

4,130

(12,666)

(30,395)

Payoffs and principal amortization of mortgage servicing rights

(8,259)

(8,592)

(7,226)

(34,247)

(41,529)

Loan origination and other loan fees

5,485

6,013

5,425

21,433

23,956

Loan servicing fees

11,891

11,184

13,771

50,233

54,772

Interest and other income

7,480

11,515

7,993

32,980

34,117

Total revenues

78,212

66,277

46,817

175,959

182,740

Expenses

Salaries, commissions and benefits

22,781

25,880

22,473

95,438

116,341

General and administrative expense

4,798

11,576

7,351

29,854

32,260

Interest expense

6,702

6,488

7,705

27,263

31,063

Occupancy, equipment and communication

3,963

4,230

4,430

16,491

16,870

Depreciation and amortization expense

2,596

2,247

2,202

10,114

7,980

Total expenses

40,840

50,421

44,161

179,160

204,514

Income (loss) from continuing operations before income tax expense (benefit)

37,372

15,856

2,656

(3,201)

(21,774)

Income tax expense (benefit)

1,353

282

1,603

(119)

(5,533)

Income (loss) from continuing operations, net of tax

36,019

15,574

1,053

(3,082)

(16,241)

(Loss) income from discontinued operations, net of tax

-

-

(534)

-

(6,029)

Net income (loss) attributable to common stockholders $ 36,019 $ 15,574 $ 519 $ (3,082)$ (22,270)

Earnings (loss) per share

Basic from continuing operations

$ 1.39 $

0.60 $

0.04

$ (0.12) $

(0.63)

Diluted from continuing operations

$ 1.39 $

0.60 $

0.04

$ (0.12) $

(0.63)

Stonegate Mortgage Corporation published this content on 09 March 2017 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 15 March 2017 12:15:13 UTC.

Original documenthttps://www.stonegatemtg.com/downloads/2016 Q4 - ER-FINAL 3.8.17 6pm.pdf

Public permalinkhttp://www.publicnow.com/view/94D08B4860551AC1B1F2A82F673B12FB6D8C3667