Attached files
| file | filename |
|---|---|
| 8-K/A - 8-K/A - STONEGATE MORTGAGE CORP | d685827d8ka.htm |
| EX-23.1 - EX-23.1 - STONEGATE MORTGAGE CORP | d685827dex231.htm |
| EX-99.1 - EX-99.1 - STONEGATE MORTGAGE CORP | d685827dex991.htm |
| EX-99.2 - EX-99.2 - STONEGATE MORTGAGE CORP | d685827dex992.htm |
EXHIBIT 99.3
STONEGATE MORTGAGE CORPORATION
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
On December 19, 2013, Stonegate Mortgage Corporation (“Stonegate”) completed the previously announced purchase of Crossline Capital, Inc. (“Crossline”), a California-based mortgage lender that originates and services consumer direct mortgages. Information relating to Stonegate’s purchase of Crossline was previously included in Stonegate’s Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on November 19, 2013. The completion of Stonegate’s purchase of Crossline was previously reported in Stonegate’s Current Report on Form 8-K filed with the SEC on December 24, 2013.
The unaudited pro forma combined balance sheet combines the consolidated balance sheet of Stonegate as of September 30, 2013 and balance sheet of Crossline as of September 30, 2013 and is presented as if the purchase had occurred on September 30, 2013. The unaudited pro forma combined statement of operations for the nine months ended September 30, 2013 combines the consolidated results of operations of Stonegate for the nine months ended September 30, 2013 and the results of operations of Crossline for the nine months ended September 30, 2013 and is presented as if the purchase had occurred on December 1, 2013. The unaudited pro forma combined statement of operations for the year ended December 31, 2012 combines the consolidated results of operations of Stonegate for the year ended December 31, 2012 and the results of operations of Crossline for the year ended December 31, 2012 and is presented as if the purchase had occurred on December 1, 2012.
The historical consolidated financial information of Stonegate and the historical consolidated financial information of Crossline have been adjusted in the unaudited pro forma combined balance sheet and statements of operations to give effect to pro forma events that are (1) directly attributable to the purchase, (2) factually supportable and (3) expected to have a continuing impact on the combined results. The unaudited pro forma combined balance sheet and statements of operations should be read in conjunction with the accompanying notes thereto. In addition, the unaudited pro forma combined balance sheet and statements of operations was based on and should be read in conjunction with the:
| • | Historical audited financial statements of Stonegate for the year ended December 31, 2012 and the related notes that are included in its final prospectus dated October 9, 2013; |
| • | Historical unaudited consolidated financial statements of Stonegate for the nine months ended September 30, 2013 and 2012 and the related notes that are included in its Quarterly Report on Form 10-Q; |
| • | Historical audited financial statements of Crossline for the year ended December 31, 2012 and the related notes that are included as Exhibit 99.1; and |
| • | Historical unaudited financial statements of Crossline for the nine months ended September 30, 2013 and 2012 that are included as Exhibit 99.2. |
The unaudited pro forma combined balance sheet and statements of operations are provided for informational purposes only and are not necessarily, and should not be assumed to be, an indication of the results that would have been achieved had the purchase of Crossline by Stonegate been completed as of the dates indicated. In addition, the unaudited pro forma combined statements of operations do not purport to project the future operating results of the combined companies nor do they expect realization of any cost savings associated with the purchase of Crossline by Stonegate.
STONEGATE MORTGAGE CORPORATION
UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2013
(In thousands)
| Stonegate Historical |
Crossline Historical |
Pro Forma Adjustments |
Stonegate Pro Forma Combined |
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| Assets |
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| Cash and cash equivalents |
$ | 24,564 | $ | 9,080 | $ | (14,891 | ) 1 | $ | 18,753 | |||||||
| Restricted cash |
20,132 | 230 | — | 20,362 | ||||||||||||
| Mortgage loans held for sale, at fair value |
518,858 | 15,393 | — | 534,251 | ||||||||||||
| Servicing advances |
1,952 | — | — | 1,952 | ||||||||||||
| Derivative assets |
17,071 | 390 | — | 17,461 | ||||||||||||
| Mortgage servicing rights, at fair value |
132,907 | 294 | — | 133,201 | ||||||||||||
| Property and equipment, net |
7,859 | 98 | — | 7,957 | ||||||||||||
| Goodwill |
— | — | 4,874 | 2 | 4,874 | |||||||||||
| Other intangible assets, net |
3,320 | — | 2,204 | 3 | 5,524 | |||||||||||
| Investment in closely held entity, at cost |
740 | — | — | 740 | ||||||||||||
| Loans eligible for repurchase from GNMA |
13,909 | — | — | 13,909 | ||||||||||||
| Other assets |
7,617 | 626 | — | 8,243 | ||||||||||||
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| Total assets |
$ | 748,929 | $ | 26,111 | $ | (7,813 | ) | $ | 767,227 | |||||||
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| Liabilities and stockholders’ equity |
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| Liabilities |
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| Secured borrowings |
$ | 272,610 | $ | — | $ | — | $ | 272,610 | ||||||||
| Warehouse lines of credit |
194,709 | 15,307 | — | 210,016 | ||||||||||||
| Operating lines of credit |
4,684 | — | — | 4,684 | ||||||||||||
| Accounts payable and accrued expenses |
22,772 | 437 | 500 | 4 | 23,709 | |||||||||||
| Derivative liabilities |
23,825 | 178 | — | 24,003 | ||||||||||||
| Reserve for mortgage repurchases and indemnifications |
3,202 | — | — | 3,202 | ||||||||||||
| Due to related parties |
309 | — | — | 309 | ||||||||||||
| Contingent earn-out liabilities |
2,103 | — | 1,706 | 5 | 3,809 | |||||||||||
| Liability for loans eligible for repurchase from GNMA |
13,909 | — | — | 13,909 | ||||||||||||
| Income taxes payable |
— | 170 | — | 170 | ||||||||||||
| Deferred income tax liabilities, net |
26,868 | — | — | 26,868 | ||||||||||||
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| Total liabilities |
564,991 | 16,092 | 2,206 | 583,289 | ||||||||||||
| Stockholders’ equity |
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| Common stock |
176 | 25 | (25 | ) 6 | 176 | |||||||||||
| Treasury stock |
(1,707 | ) | — | — | (1,707 | ) | ||||||||||
| Additional paid-in capital |
144,127 | — | — | 144,127 | ||||||||||||
| Retained earnings |
41,342 | 9,994 | (9,994 | ) 6 | 41,342 | |||||||||||
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| Total stockholders’ equity |
183,938 | 10,019 | (10,019 | ) | 183,938 | |||||||||||
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| Total liabilities and stockholders’ equity |
$ | 748,929 | $ | 26,111 | $ | (7,813 | ) | $ | 767,227 | |||||||
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Pro Forma Adjustments
The unaudited pro forma combined consolidated balance sheet as of September 30, 2013 gives effect to the purchase of Crossline by Stonegate as if it had occurred on September 30, 2013. The pro forma adjustments to the Stonegate unaudited pro forma combined consolidated balance sheet are based on the following adjustments to the historical balance sheets of Stonegate and Crossline:
| 1. | To remove the $8,891 of cash consideration used by Stonegate to purchase Crossline and to remove the $6,000 cash dividend paid to Crossline’s seller by Crossline immediately prior to the purchase of Crossline by Stonegate. |
| 2. | To add $4,874 of preliminary goodwill resulting from the excess of the total purchase consideration transferred by Stonegate over the net assets of Crossline acquired. |
| 3. | To add $2,204 of fair value of identified intangible assets (which consist of a trade name, non-compete agreement and state licenses) acquired from Crossline by Stonegate based on their December 19, 2013 fair value. |
| 4. | To add the $500 contractual holdback liability pursuant to Article 2.5 of the associated Stock Purchase Agreement. |
| 5. | To add $1,706 of fair value of the contingent consideration arrangements based on their December 19, 2013 fair value, pursuant to Article 2.6 of the associated Stock Purchase Agreement. |
| 6. | To remove the $9,994 of historical stockholders’ equity of Crossline. |
STONEGATE MORTGAGE CORPORATION
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013
(In thousands, except share and per share amounts)
| Stonegate Historical |
Crossline Historical |
Pro Forma Adjustments |
Stonegate Pro Forma Combined |
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| Revenues |
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| Gain on mortgage loans held for sale |
$ | 63,791 | $ | 13,405 | $ | — | $ | 77,196 | ||||||||
| Changes in mortgage servicing rights valuation |
11,649 | — | — | 11,649 | ||||||||||||
| Loan origination and other loan fees |
15,638 | — | — | 15,638 | ||||||||||||
| Loan servicing fees |
14,324 | — | — | 14,324 | ||||||||||||
| Interest income |
11,106 | 304 | (140 | ) 1 | 11,270 | |||||||||||
| Other revenue |
— | (80 | ) | — | (80 | ) | ||||||||||
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| Total revenues |
116,508 | 13,629 | (140 | ) | 129,997 | |||||||||||
| Expenses |
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| Salaries, commissions and benefits |
48,604 | 6,382 | — | 54,986 | ||||||||||||
| General and administrative expense |
15,026 | 1,385 | — | 16,411 | ||||||||||||
| Interest expense |
10,972 | 941 | — | 11,913 | ||||||||||||
| Occupancy, equipment and communications |
6,103 | 234 | — | 6,337 | ||||||||||||
| Provision for mortgage repurchases and indemnifications |
1,379 | — | — | 1,379 | ||||||||||||
| Depreciation and amortization expense |
1,379 | 18 | 418 | 2 | 1,815 | |||||||||||
| Loss on disposal of property and equipment |
25 | — | — | 25 | ||||||||||||
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| Total expenses |
83,488 | 8,960 | 418 | 92,866 | ||||||||||||
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| Income before income taxes |
33,020 | 4,669 | (558 | ) | 37,131 | |||||||||||
| Income tax expense |
12,487 | 69 | 1,485 | 3 | 14,041 | |||||||||||
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| Net income |
20,533 | 4,600 | (2,043 | ) | 23,090 | |||||||||||
| Less: preferred stock dividends |
(27 | ) | — | — | (27 | ) | ||||||||||
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| Net income attributable to common shareholders |
$ | 20,506 | $ | 4,600 | $ | (2,043 | ) | $ | 23,063 | |||||||
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| Weighted average basic shares outstanding |
10,386 | 10,386 | ||||||||||||||
| Weighted average diluted shares outstanding |
14,466 | 14,466 | ||||||||||||||
| Basic earnings per share |
$ | 1.97 | $ | 2.22 | ||||||||||||
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| Diluted earnings per share |
$ | 1.42 | $ | 1.59 | ||||||||||||
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Pro Forma Adjustments
The unaudited pro forma combined consolidated statement of operations for the nine months ended September 30, 2013 gives effect to the purchase of Crossline by Stonegate as if it had occurred on January 1, 2013. The pro forma adjustments to the Stonegate unaudited pro forma combined statement of operations are based on the following adjustments to the statements of operations of Stonegate and Crossline:
| 1. | To remove nine months of interest income, or $140, earned on (i) the $8,891 of cash consideration paid by Stonegate to Crossline and (ii) the $6,000 cash dividend paid to Crossline’s seller by Crossline immediate prior to the purchase of Crossline by Stonegate. |
| 2. | To record nine months of amortization of acquired intangible assets, or $418, reflecting amortization expense that would have been recognized if the acquired intangible assets had been recorded on January 1, 2013 at their December 19, 2013 fair value. |
| 3. | To record the tax impacts of the pro-forma adjustments and adjust the combined consolidated pro forma tax expense to reflect the change in Crossline from an S Corporation to a C Corporation under the Internal Revenue Code. |
STONEGATE MORTGAGE CORPORATION
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2012
(In thousands, except share and per share amounts)
| Stonegate Historical |
Crossline Historical |
Pro Forma Adjustments |
Stonegate Pro Forma Combined |
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| Revenues |
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| Gain on mortgage loans held for sale |
$ | 73,337 | $ | 16,279 | $ | — | $ | 89,616 | ||||||||
| Changes in mortgage servicing rights valuation |
— | — | — | — | ||||||||||||
| Loan origination and other loan fees |
9,871 | — | — | 9,871 | ||||||||||||
| Loan servicing fees |
5,908 | — | — | 5,908 | ||||||||||||
| Interest income |
5,257 | 1,117 | (187 | ) 1 | 6,187 | |||||||||||
| Other revenue |
1,172 | 38 | — | 1,210 | ||||||||||||
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| Total revenues |
95,545 | 17,434 | (187 | ) | 112,792 | |||||||||||
| Expenses |
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| Salaries, commissions and benefits |
32,737 | 5,695 | — | 38,432 | ||||||||||||
| General and administrative expense |
7,706 | 2,243 | — | 9,949 | ||||||||||||
| Interest expense |
6,239 | 1,631 | — | 7,870 | ||||||||||||
| Occupancy, equipment and communications |
2,999 | 180 | — | 3,179 | ||||||||||||
| Impairment of mortgage servicing rights |
11,698 | — | — | 11,698 | ||||||||||||
| Amortization of mortgage servicing rights |
3,679 | — | — | 3,679 | ||||||||||||
| Provision for mortgage repurchases and indemnifications |
1,917 | — | — | 1,917 | ||||||||||||
| Depreciation and amortization expense |
750 | 4 | 661 | 2 | 1,415 | |||||||||||
| Loss on disposal of property and equipment |
11 | — | — | 11 | ||||||||||||
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| Total expenses |
67,736 | 9,753 | 661 | 78,150 | ||||||||||||
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| Income before income taxes |
27,809 | 7,681 | (848 | ) | 34,642 | |||||||||||
| Income tax expense |
10,724 | 120 | 2,518 | 3 | 13,362 | |||||||||||
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| Net income |
17,085 | 7,561 | (3,366 | ) | 21,280 | |||||||||||
| Less: preferred stock dividends |
(119 | ) | — | — | (119 | ) | ||||||||||
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| Net income attributable to common shareholders |
$ | 16,966 | $ | 7,561 | $ | (3,366 | ) | $ | 21,161 | |||||||
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| Weighted average basic shares outstanding |
3,193 | 3,193 | ||||||||||||||
| Weighted average diluted shares outstanding |
7,517 | 7,517 | ||||||||||||||
| Basic earnings per share |
$ | 5.31 | $ | 6.63 | ||||||||||||
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| Diluted earnings per share |
$ | 2.26 | $ | 2.82 | ||||||||||||
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Pro Forma Adjustments
The unaudited pro forma combined consolidated statement of operations for the year ended December 31, 2012 gives effect to the purchase of Crossline by Stonegate as if it had occurred on January 1, 2012. The pro forma adjustments to the Stonegate unaudited pro forma combined statement of operations are based on the following adjustments to the statements of operations of Stonegate and Crossline:
| 1. | To remove one year of interest income, or $187, earned on (i) the $8,891 of cash consideration paid by Stonegate to Crossline and (ii) the $6,000 cash dividend paid to Crossline’s seller by Crossline immediate prior to the purchase of Crossline by Stonegate. |
| 2. | To record one year of amortization of acquired intangible assets, or $661, reflecting amortization expense that would have been recognized if the acquired intangible assets had been recorded on January 1, 2012 at their December 19, 2013 fair value. |
| 3. | To record the tax impacts of the pro-forma adjustments and adjust the combined consolidated pro forma tax expense to reflect the change in Crossline from an S Corporation to a C Corporation under the Internal Revenue Code. |