Banks and Stock Market and Banking & Finance and Mortgage Lenders and Investing and Mortgages

Fast-growing Stonegate Mortgage files for public offering

July 2, 2013

Stonegate Mortgage Corp., an Indianapolis-based residential lender that’s growing at a torrid pace, revealed Tuesday that it has filed with regulators for an initial public offering.

The company, which like many mortgage companies is benefitting from the recovery of  U.S. housing markets, didn’t say how much it intends to raise or on which exchange its shares would trade.

IPO filings with the Securities and Exchange Commission normally open a company’s books to immediate investor scrutiny. But Stonegate filed under a provision of the 2012 Our Business Startups Act that allows firms to keep financials confidential until 21 days before they launch a road show to promote the stock.

The provision spares companies from having to make profits, losses and other information public if they opt not to move forward with the IPO. It also shortens from months to weeks the period during which competitors and others can pick apart a company’s operations—scrutiny that sometimes negatively affects a company when it pulls the trigger on its offering.

The IPO would be the first involving an Indianapolis-area company since ExactTarget Inc. went public in March 2012.

Stonegate ranked No. 1 on IBJ’s June list of fastest-growing Indianapolis-area private companies. The eight-year-old company saw revenue rocket from $15.5 million in 2010 to $95.5 million in 2012.

Stonegate does business in more than 30 states, up from 20 at the end of 2011.

Helping fuel the expansion was a $30 million infusion of capital from New York-based private investment firm Long Ridge Equity Partners in early 2012.

“That growth capital is what’s really allowed us to ramp this up and continue our growth curve,” CEO Jim Cutillo told IBJ this spring.

Another key transaction was the September purchase of warehouse lender NattyMac, which enabled Stonegate to offer more products and services to its commercial customers. The result is that independent mortgage bankers dealing with Stonegate now have access to warehouse financing and liquidity for their agency loans.

“The more we have to offer our customers, the more of their business we get,” Cutillo said.

In May, Stonegate raised $115 million by selling shares in a private offering. Cutillo said at the time that his company would use the funds to fuel originations of so-called jumbo loans that are not intended for government-backed programs, as well as to build its portfolio of servicing contracts

About 65 percent of Stonegate’s business comes from buying loans from banks, other mortgage companies and mortgage brokers, as well as financial institutions that originate loans. The remaining 35 percent comes from loans made to consumers.

The U.S. mortgage market in 2012 amounted to more than $1.5 trillion in loans. Cutillo said Stonegate still has plenty of opportunity to grow. He estimates his company is yet to tap 46 percent of the market because it’s not yet in California, New York and a dozen other states.

“But we will be by the end of the year,” he said.


 

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