- Quarterly net income of $198 million,
$2.01 per diluted share and adjusted EPS of $0.36
- Adjusted servicing profitability of $58
million, 5.0 basis points (bps), increased 49% compared to the
third quarter
- Boarded $161 billion of servicing
assets in 2016, ending UPB increased 19% year-over-year
- Over $144 billion of servicing assets
expected to board during 2017
- Originations quarterly GAAP net income
of $31 million and adjusted pretax income of $43 million
Nationstar Mortgage Holdings Inc. (NYSE: NSM) today announced
that it generated fourth quarter GAAP net income attributable to
Nationstar of $198 million, or $2.01 per diluted share driven
principally by strong operating results, a favorable mark-to-market
("MTM") adjustment, and decreased amortization of the servicing
portfolio. On an adjusted basis, the Company reported earnings for
the fourth quarter of $35 million, or $0.36 per share, driven
principally by sequential improvement in servicing profitability
and strong originations earnings.
"Nationstar had an incredible year of success in 2016,” said Jay
Bray, Chairman and Chief Executive Officer. “We increased servicing
profitability bps over 87% while ending the year with a record 2.9
million customers. Originations also had a banner year posting
record earnings and funding more than $20 billion in loans. At
Xome®, we continued to invest in new technologies and grow
third-party business,” Bray added. “We enter 2017 with solid
momentum and the opportunity to welcome almost 1 million new
customers to our servicing platform as we continue on our journey
to reinvent the mortgage experience for the customer and enhance
our leadership role in residential servicing.”
Fourth Quarter and Full Year Business Highlights
Servicing Segment
The Servicing segment achieved $348 million GAAP pretax income
or $58 million adjusted pretax income (5.0 bps) during the fourth
quarter. Adjusted pretax income improved by 49% over the prior
quarter due to lower amortization, improvement in portfolio
performance, and lower corporate overhead. We also continued to
implement technology and process initiatives to drive overall
servicing profitability higher. For the full year, the Servicing
segment earned GAAP pretax income of $13 million, adjusted pretax
income of $229 million or 5.6 bps which represents an 87% basis
point improvement over 2015.
Quarter Ended Year
Ended ($ in millions)
Q3'16 Q4'16
2015 2016 $ BPS $ BPS $
BPS $ BPS Operational $ 310 31.8 $ 317
27.3 $ 1,314 33.3 $ 1,278 31.5 Amortization
(92 ) (9.4 ) (79 ) (6.8 ) (320 ) (8.1 ) (314 ) (7.7 )
Mark-to-market (8 ) (0.8 ) 290 25.0 (112 ) (2.9 )
(211 ) (5.2 ) Total revenues 210 21.6 528 45.5 882 22.4 753 18.6
Expenses (154 ) (15.8 ) (156 ) (13.4 ) (788 ) (19.9 ) (645 ) (15.9
) Total other income (expenses), net (25 ) (2.6 ) (24 ) (2.1 ) (110
) (2.8 ) (95 ) (2.3 ) Income (loss) before taxes (GAAP) 31 3.2 348
30.0 (16 ) (0.4 ) 13 0.3 Mark-to-market 8 0.8 (290 ) (25.0 ) 112
2.9 211 5.2 Non-recurring — — — — 20
0.5 — 4 0.1 Adjusted pretax income $ 39
4.0 $ 58 5.0 $ 117 3.0 $
229 5.6 Adjusted pretax income margin 19 % 11
% 13 % 30 %
Throughout the year we boarded $161 billion of loans, including
$95 billion of subserviced loans, which are expected to generate
significantly higher returns on equity due to the limited capital
deployed. In addition, our new subservicing partners provide an
additional source of future MSRs to replenish and grow our
portfolio.
Quarter Ended Year
Ended Q3'16 Q4'16 2015
2016 Ending UPB ($B) $ 453 $ 473 $ 398 $ 473
Average UPB ($B) $ 390 $ 464 $ 396 $ 406 60+ day delinquency rate 5
% 5 % 7 % 5 % Annualized CPR 18 % 18 % 16 % 17 % Annualized CPR,
net of recapture 15 % 15 % 13 % 14 % Modifications and workouts
13,506 14,530 64,992 58,034
The Company enters 2017 with strong tailwinds for the servicing
segment that should continue to drive increased servicing
profitability and cash flow. First, prepayments are trending lower,
lengthening the duration and increasing the value of the servicing
portfolio. Annualized CPR was 14% in January 2017 compared to an
average of 18% for the fourth quarter of 2016. Second, Nationstar's
continued ability to keep homeowners in their homes along with an
improving economy enhances portfolio performance and drives down
costs to service loans increasing overall profitability and cash
flows. Third, the Company expects to board $144 billion UPB
throughout 2017 with limited use of capital. This includes the
recently announced subservicing agreement with New Residential
where Nationstar will subservice approximately $111 billion UPB
that New Residential has agreed to purchase, including $97 billion
UPB of seasoned Agency MSRs from CitiMortgage, Inc. Based upon
current boarding expectations we believe servicing profitability
should approximate 5.0 bps or higher over the full year 2017.
Originations Segment
The Originations segment achieved $31 million GAAP pretax income
or $43 million adjusted pretax income in the fourth quarter.
Adjusted pretax income declined compared to the prior quarter, due
to the increase in mortgage rates during the quarter and
seasonality. For the full year, the Originations segment earned
$209 million GAAP pretax income or $223 million adjusted pretax
income, and increased customer recapture to 29%.
Quarter Ended Year
Ended ($ in millions)
Q3'16 Q4'16
2015 2016 Adjusted Pretax Income:
Income before taxes (GAAP) $ 83 $ 31 $ 206 $ 209
Non-recurring 2 12 4 14
Adjusted pretax income $ 85 $ 43 $ 210
$ 223 Adjusted pretax income margin 38 % 27 %
32 % 30 %
The integrated originations platform continues to replenish the
MSR portfolio at attractive rates of returns by providing customers
with an extended array of mortgage options. To build increased
awareness of our core brand and to drive customer retention,
management decided to retire the Greenlight trademark as of
year-end. This retirement accounts for the non-recurring charges in
the fourth quarter.
Quarter Ended Year
Ended ($ in millions)
Q3'16 Q4'16
2015 2016 Total pull through adjusted volume $
5,881 $ 4,870 $ 18,405 $ 20,470 Funded volume $ 5,533
$ 5,338 $ 17,971 $ 20,316 Recapture percentage 27 % 28 % 27 % 29 %
Purchase volume as a percentage of funded volume 24 % 19 % 26 % 24
%
Key initiatives for the Originations segment in 2017 include
increasing customer recapture across the entire servicing
portfolio, expanding our government lending and streamlined
offerings, and further reducing operating expenses.
Xome Segment
Xome delivered $16 million GAAP pretax income, or $18 million
adjusted pretax income in the fourth quarter. Earnings were down
sequentially due to a 9% reduction in property listing sales
attributable partially to seasonality as well as a reduction in
available inventory. Third-party revenues for the quarter, which
primarily consist of leading financial institutions, were 44% of
total revenues, as Xome continues to focus on diversifying its
revenue streams and client base. For the full year, Xome earned $69
million GAAP pretax income or $77 million adjusted pretax income,
while growing title operations, launching new SaaS initiatives and
expanding third-party revenues.
Quarter Ended Year
Ended ($ in millions)
Q3'16 Q4'16
2015 2016 Adjusted Pretax Income:
Income before taxes (GAAP) $ 20 $ 16 $ 79 $ 69 Non-recurring
— 2 — 8 Adjusted pretax
income $ 20 $ 18 $ 79 $ 77
Adjusted pretax income margin 19 % 19 % 18 % 18 %
In the fourth quarter of 2016, Xome entered into a referral
contract that combines Xome’s real estate brokerage, marketing,
technology and transactional expertise with a leading “sale by
owner” platform. Through this new program, homeowners who wish to
sell their homes themselves will benefit from having access to
Xome’s auction platform, real estate agent panel and additional
transaction-related services while helping to market and amplify
property listings for owners on the site.
Quarter Ended Year
Ended Q3'16 Q4'16 2015
2016 Property listings sold 4,061 3,687 20,640
17,319 REO listings at period end 5,284 4,669 8,426 4,669
Xome services completed orders 146,257 139,691 657,129 594,623
Percentage of revenue earned from third-party customers 44 % 44 %
33 % 40 %
Key strategies for 2017 include improved profitability of core
service offerings, expanding our SaaS and other technology
offerings organically and through partnering with third parties to
create innovative service offerings to customers as well as
continued investment in new products and technologies that we
believe will drive third-party revenues.
Capital & Liquidity
The Company maintained a robust capital position with regulatory
ratios well above regulatory standards. The Company is authorized
to repurchase up to $100 million of common stock pursuant to the
previously-announced stock repurchase program. Unless Nationstar
amends the share repurchase program or repurchases the full $100
million amount by an earlier date, the share repurchase program
will continue through December 2017. In addition, strong cash flow
generation has enabled the Company to repurchase $11 million of
unsecured senior notes in the fourth quarter, for a total of $40
million for the full year 2016.
Conference Call Webcast and Investor
Presentation
The Company will host a conference call on February 22, 2017 at
9:00 A.M. Eastern Time. The conference call may be accessed by
dialing 855-874-2685, or 720-634-2923 internationally, five minutes
prior to the scheduled start of the call. Please use the
participant passcode 70143118 to access the conference call.
A simultaneous audio webcast of the conference call will be
available on the Shareholder Relations section of
http://www.mynationstar.com. Please click on the February 22, 2017
Conference Call link to access the call. A replay will also be
available approximately two hours after the conclusion of the
conference call by dialing 855-859-2056, or 404-537-3406
internationally. Please use the passcode 70143118 to access the
replay. The replay will be accessible through March 8, 2017.
Non-GAAP Financial
Measures
The Company utilizes non-GAAP (or “adjusted”) financial measures
as the measures provide additional information to assist investors
in understanding and assessing the Company’s and our business
segments’ ongoing performance and financial results, as well as
assessing our prospects for future performance. The adjusted
financial measures facilitate a meaningful analysis and allow more
accurate comparisons of our ongoing business operations because
they exclude items that may not be indicative of or are unrelated
to the Company’s and our business segments’ core operating
performance, and are better measures for assessing trends in our
underlying businesses. These adjustments are consistent with how
management views our businesses. Management uses these non-GAAP
financial measures in making financial, operational and planning
decisions and evaluating the Company’s and our business segment’s
ongoing performance. Adjusted earnings (loss) eliminates the
effects of mark-to-market adjustments which primarily reflects
unrealized gains or losses based on the changes in fair value
measurements of MSRs and their related financing liabilities for
which a fair value accounting election was made. These adjustments,
which can be highly volatile and material due to changes in credit
markets, are not necessarily reflective of the gains and losses
that will ultimately be realized by the Company. Adjusted earnings
(loss) also eliminates, as applicable, restructuring costs,
rebranding and integration costs, gains (losses) on sales of fixed
assets, certain legal settlement costs that are not considered
normal operational matters, and other adjustments based on the
facts and circumstances that would provide investors a supplemental
means for evaluating the Company’s core operating performance.
Forward Looking
Statements
Any statements in this release that are not historical or
current facts are forward looking statements. These forward looking
statements include, but are not limited to, statements regarding
our Servicing segment's profitability, cash flow, pipeline and key
initiatives in 2017 for Originations and Xome. Forward looking
statements involve known and unknown risks, uncertainties and other
factors that may cause our actual results, performance, or
achievements to be materially different from any future results,
performance or achievements expressed or implied by the forward
looking statements. Certain of these risks and uncertainties are
described in the "Business" and "Risk Factors" sections of our most
recent annual report and other required documents as filed with the
SEC which are available at the SEC’s website at http://www.sec.gov.
Nationstar undertakes no obligation to publicly update or revise
any forward looking statement or any other financial information
contained herein, and the statements made in this press release are
current as of the date of this release only.
Financial Tables
NATIONSTAR MORTGAGE HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars and shares in millions, except
per share data)
Quarter Ended September 30, 2016 December 31, 2016
Revenues: Service related, excluding MTM $ 313 $ 326
Total MTM (8 ) 290 Net gain on mortgage loans held for sale 237
173 Total revenues 542 789
Total expenses 407 412
Other income (expense):
Interest income 103 112 Interest expense (165 ) (172 ) Other
expense (2 ) — Total other expense, net (64 ) (60 ) Income
before income tax expense 71 317 Income tax expense 29 119
Net income 42 198 Less: net loss attributable to
noncontrolling interests (3 ) —
Net income attributable
to Nationstar $ 45 $ 198 Earnings
per share attributable to common stockholders: Basic $ 0.46
$ 2.02 Diluted $ 0.46 $ 2.01 Weighted
average shares of common stock outstanding (in millions) Basic 97
98 Diluted 98 99
NATIONSTAR MORTGAGE HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(dollars in millions)
September 30, 2016 December 31, 2016
Assets
Cash and cash equivalents $ 695 $ 489 Restricted cash 336 388
Mortgage servicing rights 2,732 3,166 Advances and other
receivables, net 1,824 1,749 Reverse mortgage interests, net 7,334
11,033 Mortgage loans held for sale at fair value 1,839 1,788
Mortgage loans held for investment, net 156 151 Property and
equipment, net 149 136 Derivative financial instruments at fair
value 127 133 Other assets 654 560 Total assets $ 15,846
$ 19,593
Liabilities and
stockholders' equity
Unsecured senior notes, net $ 2,000 $ 1,990 Advance facilities, net
1,188 1,096 Warehouse facilities, net 2,610 2,421 Payables and
accrued liabilities 1,164 1,470 MSR related liabilities -
nonrecourse at fair value 1,079 1,241 Mortgage servicing
liabilities 11 48 Derivative financial instruments at fair value 14
13 Other nonrecourse debt, net 6,298 9,631 Total liabilities
14,364 17,910 Total stockholders' equity 1,482 1,683 Total
liabilities and stockholders' equity $ 15,846 $ 19,593
UNAUDITED SEGMENT STATEMENT OF OPERATIONS
& EARNINGS RECONCILIATION
(dollars in millions, except per share
data)
Quarter ended September 30, 2016
Corporate Servicing Originations Xome and Other Elim.
Consolidated
REVENUES: Service related, net $ 210 $
14 $ 107 $ — $ (26 ) $ 305
Net gain on mortgage loans held for
sale
— 211 — — 26 237
Total
revenues 210 225 107 — — 542
Total expenses (154 ) (142 ) (87 ) (24 ) (407 ) Other
income (expense): Interest income 82 17 — 4 — 103 Interest expense
(107 ) (16 ) — (42 ) — (165 ) Other — (1 ) — (1 ) —
(2 ) Total other income (expense) (25 ) — —
(39 ) (64 )
Pretax income (loss) $ 31
$ 83 $ 20 $
(63 ) $ — 71
Income tax expense (29 ) Noncontrolling interest 3 Net
income attributable to Nationstar $ 45 Earnings per share -
diluted and basic $ 0.46
Adjusted Earnings:
Pretax income (loss) $ 31 $ 83 $ 20 $ (63 ) $ — $ 71 MTM 8 —
— — — 8 Non-recurring — 2 — — —
2 Adjusted pretax income (loss) $ 39 $ 85 $ 20
$ (63 ) $ — 81 Income tax expense (30 ) Adjusted
earnings $ 51 Adjusted EPS $ 0.52
UNAUDITED SEGMENT STATEMENT OF OPERATIONS & EARNINGS
RECONCILIATION
(dollars in millions, except per share
data)
Quarter ended December 31, 2016
Corporate Servicing Originations Xome and Other Elim.
Consolidated
REVENUES: Service related, net $ 528 $
15 $ 97 $ 1 $ (25 ) $ 616 Net gain on mortgage loans held for sale
— 148 — — 25 173
Total
revenues 528 163 $ 97 1
—
789
Total expenses (156 ) (133 ) (81 ) (42 )
—
(412 ) Other income (expense): Interest income 93 15
—
4
—
112 Interest expense (117 ) (14 ) — (41 ) — (172 )
Total other income (expense) (24 ) 1
—
(37 )
—
(60 )
Pretax income (loss) $ 348
$ 31 $ 16 $
(78 ) $ —
317 Income tax expense
(119 ) Noncontrolling interest — Net income attributable to
Nationstar $ 198 Earnings per share Basic $ 2.02
Diluted $ 2.01
Adjusted Earnings: Pretax
income (loss) $ 348 $ 31 $ 16 $ (78 ) $ — $ 317 MTM (290 ) — —
— — (290 ) Non-recurring expenses — 12 2 15
— 29 Adjusted pretax income $ 58 $ 43
$ 18 $ (63 ) $ — 56 Income tax expense (21 )
Adjusted earnings $ 35 Adjusted EPS $ 0.36
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Nationstar Mortgage Holdings Inc.Robert Stiles, 972-316-5383
Nationstar Mortgage Holdings (NYSE:NSM)
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