Stonegate Mortgage results tumble in first quarter

Despite bucking an industry downturn in mortgage loan originations during the first quarter, Stonegate Mortgage Corp. on Thursday reported a net loss of $7.9 million, or 31 cents a share.

That contrasts with a profit of $9.7 million, or 86 cents a share, during the same quarter last year. Revenue for Indianapolis-based Stonegate—which originates, finances and services U.S. home mortgage loans—fell 1 percent to $38.3 million from the first quarter a year ago.

Stonegate's first-quarter results were hurt on the loan servicing side of the business that often has helped stabilize results during slowdowns in new mortgage originations.

Stonegate made a negative market value adjustment on mortgage servicing rights. It resulted in lower revenues and increased expenses related to recently acquired assets from mortgage company Nationstar. Sterne Agee analyst Henry Coffey, Jr. cited lower than expected gain on sale revenue and loan fees.

Excluding the pre-tax adjustment, Stonegate had adjusted net income of $3.4 million, or 13 cents a share. That was below Coffey’s estimate of 15 cents and the consensus estimate of 16 cents.

The company's servicing portfolio, as measured by unpaid principal balance, ended the first quarter at $14.1 billion, an increase of 144 percent over $5.8 billion in the first quarter of 2013. 

Mortgage loan origination volume in the first quarter actually grew 27 percent, to $2.42 billion, over the same quarter last year, and rose 1.6 percent from the fourth quarter.

Nationally, mortgage loan originations have been falling. January, for example, marked the lowest origination volume since 2008, according to Jacksonville, Fla.-based Black Knight Financial Services

In March, Stonegate said it planned to double its local work force by adding up to 400 jobs by 2017. It currently has about 400 employees in the metro area and about 1,100 nationwide.

Stonegate went public last October, reaching an IPO high of nearly $18.50 a share.

In late-morning trading Thursday, Stongegate shares had lost about 2.5 percent to just below $12 a share, amid a broader market downturn.

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