Loandepot saw losses grow in the first quarter, as expenses from a January data breach hindered their push toward profitability.

Despite making inroads on reducing expenses, the national lender and servicer posted a net loss of $71.5 million in the first quarter, worsening 19.6% from $59.8 million three months earlier. First-quarter numbers, though, narrowed 22% from the $91,721 loss of a year ago, as the company continued ongoing cost-cutting efforts.

But the early-year cyber hack slowed some of the momentum Loandepot was making toward achieving goals spelled out in previously published Vision 2025 plan to cut costs and turn itself into a more efficient operation. 

“As we’ve previously reported, we were able to restore operations relatively quickly,” said CEO Frank Martell in the company’s earnings call, in reference to the data breach. “Our lost revenue and additional expenses impacted our first-quarter financial results.”

Company officials stressed that the cyber event was not expected to impact results for the rest of the year, but the Foothill Ranch, California-based company faces multiple class action lawsuits related to the data breach resulting from the attack. The company had previously forecasted it saw profitability in sight as early as this spring. 

“Part of the cyber related costs incurred during the quarter were to support our loan officers by compensating them for lost commission,” said Chief Financial Officer David Hayes.

Quarterly expenses added up to $307,950, up 1.8% from $302,571 three months earlier. But the latest total finished 2.1% lower from the first quarter of 2023, despite the financial toll of the January incident. 

“This reduction came despite incurring an additional $15 million in cyber related costs,” Hayes said. 

The lender also said it took another $1.1 million hit in legal expenses unassociated with the cyber attack, but instead, tied to the anticipated settlement of other outstanding litigation during the quarter. 

Overall, Loandepot managed to cut expenses during the quarter primarily thanks to lower salaries and marketing costs, it said. Headcount was reduced by approximately 600 full-time employees. 

Accrued revenue amounted to $222.9 million, near the mark of $228.6 million at the end of the previous quarter. Revenues rose 7.2% from the year-over-year mark of $207.9 million, mostly due to higher servicing revenue and gain-on-sale margins.

“This figure includes the negative impact of the cyber incident,” Hayes said, estimating revenue was adversely impacted by close to $22 million when Loandepot’s systems were inaccessible and unable to take customer locks. 

Funded originations in the first quarter finished at approximately $4.6 billion, in line with prior guidance, but down 15.1% and 7.8%  on a quarterly and annual basis from $5.4 billion and $4.9 billion, respectively. Gain-on-sale margins equaled 284 basis points, up from 243 in both the most recent and year-ago quarters.

The latest results come as mortgage lenders continue to deal with the effects of the most unprofitable period in recent history, with the Mortgage Bankers Association reporting rising losses per loan at the end of last year.  

Servicing units at many lenders have provided an antidote in light of challenges in originations and high costs. Loandepot’s servicing fee income was $124.1 million in the first quarter. The total decreased from $132.5 one quarter prior, but climbed higher from $119.9 million a year earlier. 

Unpaid principal balance within its servicing portfolio slid down to $142.3 billion from $145.1 billion in the fourth quarter but inched up from $141.7 billion 12 months prior.   

Company officials said reduced spending cuts were on the way, as they aimed for their goal of reaching annualized earnings improvements of close to $120 million. 

“These reductions have been significant. They’re specifically identified and relate to third-party vendor spend, process and organizational efficiencies and facilities-related expenses,” Martell said.