- Reported EPS of $(2.05) per share
driven by $(293) million mark-to-market
- Grew servicing portfolio to $632
billion, up 15% quarter-over-quarter
- Boarded 444,000 new customers or 13% of
the servicing portfolio in 35 days
- Originations pretax income increased
quarter-over-quarter from $11 million to $45 million
- Pacific Union and Assurant Mortgage
Solutions (AMS) integrations on track
Mr. Cooper Group Inc. (NASDAQ: COOP) (the "Company"), which
principally operates under the Mr. Cooper® and Xome® brands,
reported a first quarter net loss of $(186) million, $(2.05) per
diluted share driven principally by a net fair value mark-to-market
on the MSR portfolio of $(293) million. Excluding the
mark-to-market and other items, the Company reported pretax
operating income of $48 million and after-tax operating income of
$36 million equivalent to an after-tax ROTCE of 8.7%. Items
excluded from operating income were $(293) million in
mark-to-market net of $25 million in fair value amortization that
is included in the full mark-to-market, $20 million in merger
related costs, $20 million in accounting items and $13 million in
intangible amortization.
Jay Bray, chairman and CEO, commented, “2019 is a year of
integration and investment for Mr. Cooper, designed to set the
stage for sustained growth and higher returns in the years to come.
Notable achievements in the quarter included boarding 440,000 new
servicing customers from our Pacific Union and Seterus acquisitions
and making important progress in the integration of Assurant
Mortgage Solutions into Xome.”
Vice chairman and CFO Chris Marshall added, “The first quarter
included a mark-to-market that was in line with our expectations,
while the underlying profitability of the servicing segment was
strong, and originations enjoyed a strong rebound in profitability
thanks to improved capital markets conditions and two months’
contribution from Pacific Union.”
Servicing
The Servicing segment is focused on providing a best-in-class
home loan experience for our 3.8 million customers while also
strengthening asset performance for investors. In the first
quarter, Servicing recorded a pretax loss of $(186) million
principally driven by a net fair value mark-to-market on the MSR
portfolio of $(293) million. The change in fair value
mark-to-market revenue compared to the prior period was primarily
due to a lower interest rate environment. At the end of the
quarter, the carrying value of the MSR was approximately $3.5
billion, equivalent to 115 bps of MSR UPB, and the original cost
basis was 83 bps. Servicing earned pretax operating income
excluding the full mark of $98 million, equivalent to a servicing
margin of 6.8 bps. Pretax operating income improved 11%
quarter-over-quarter driven by $20 million benefit from a collapse
of a securitization trust, lower amortization, net of accretion due
to a lower CPR, and lower income contribution from the reverse
portfolio in this quarter relative to the prior quarter.
Mr. Cooper ended the quarter with a servicing portfolio of $632
billion UPB, achieving 15% growth quarter-over-quarter. The growth
was primarily driven by the Pacific Union and Seterus
acquisitions.
Quarter Ended ($ in millions)
Q4'18
Q1'19 $ BPS $ BPS
Operational revenue $ 280 21.3 $ 324 22.5 Amortization, net of
accretion (39 ) (3.0 ) (23 ) (1.6 ) Mark-to-market (188 )
(14.3 ) (293 ) (20.3 ) Total revenues 53 4.0 8 0.6 Expenses
(199 ) (15.1 ) (195 ) (13.6 ) Total other income (expenses), net
46 3.5 1 0.1 Loss before
taxes (100 ) (7.6 ) (186 ) (12.9 ) Mark-to-market 188 14.3 293 20.3
Accounting item — — (9 ) (0.6 )
Pretax operating income excluding mark-to-market and accounting
items $ 88 6.7 $ 98 6.8
Quarter Ended Q4'18 Q1'19 Ending UPB
($B) $ 548 $ 632 Average UPB ($B) $ 526 $ 576 60+ day delinquency
rate
2.2
%
2.4
%
Annualized CPR
9.1
%
8.2
%
Modifications and workouts 10,645 9,590
Originations
The Originations segment focuses on creating servicing assets at
attractive margins through existing customer relationships and
correspondent originations. Originations earned pretax income of
$45 million in the first quarter, up from $11 million in the prior
quarter. The strong results were driven by the lower interest rate
environment, resulting in higher locked volumes and favorable
capital markets conditions which led to recovery in gain-on-sale
margins.
Mr. Cooper funded 27,294 loans in the first quarter, totaling
approximately $5.7 billion UPB with $2.2 billion from the
direct-to-consumer channel, $3.1 billion from the correspondent
channel, and $0.4 billion from the Wholesale channel. Funded volume
improved 5% quarter-over-quarter driven by two months of Pacific
Union funded volume.
Quarter Ended ($ in millions)
Q4'18
Q1'19 Income before taxes $ 11 $ 45 Business shutdown
costs 5 — Pretax operating income $ 16 $ 45
Quarter Ended ($ in millions)
Q4'18
Q1'19 Total pull through adjusted volume $ 4,874 $
5,960 Funded volume $ 5,425 $ 5,716 Refinance recapture percentage
55 % 52 % Recapture percentage 26 % 28 % Purchase volume as a
percentage of funded volume 58 % 52 %
Xome
Xome provides real estate solutions including property
disposition, asset management, title, close, valuation, and field
services to Mr. Cooper and third-party clients. The Xome segment
recorded pretax income of $8 million or $0 million after excluding
intangible amortization and an $11 million change in fair value of
the contingent consideration for the acquisition of AMS. Excluding
the contingent consideration, profitability reflected the impact of
the AMS acquisition, which is moving forward according to plan.
Quarter Ended ($ in millions)
Q4'18
Q1'19 (Loss) / Income before taxes $ (2 ) $ 8
Business shutdown costs 1 — Asset sales (1 ) — Accounting item —
(11 ) Intangible amortization 3 3
Pretax operating income excluding intangible amortization and
accounting item $ 1 $ —
Quarter Ended
Q4'18 Q1'19 Exchange property listings sold
2,222 2,421 Exchange property listings at period end 6,177
6,634 Services orders completed 531,566 379,585 Percentage of
revenue earned from third-party customers 57 % 53 %
Conference Call Webcast and Investor
Presentation
The Company will host a conference call on May 1, 2019 at 9:00
A.M. Eastern Time. The conference call may be accessed by dialing
855-874-2685, or 720-634-2923 internationally. Please use the
participant passcode 5458663 to access the conference call. A
simultaneous audio webcast of the conference call will be available
in the Investor section of www.mrcoopergroup.com. A replay will
also be available by dialing 855-859-2056, or 404-537-3406
internationally. Please use the passcode 5458663 to access the
replay. The replay will be accessible through May 15, 2019 at 12:00
P.M. Eastern Time.
Non-GAAP Financial
Measures
The Company utilizes non-GAAP 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 operating 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 notable items 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. Pretax operating income (loss) in the servicing
segment 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.
Pretax operating income (loss) in each segment also eliminates, as
applicable, transition and integration costs, gains (losses) on
sales of fixed assets, certain settlement costs that are not
considered normal operational matters, intangible amortization, 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. 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. Results for any specified quarter are not
necessarily indicative of the results that may be expected for the
full year or any future period. Certain of these risks and
uncertainties are described in the "Risk Factors" section of Mr.
Cooper Group's 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. Mr. Cooper 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
MR. COOPER GROUP INC. AND
SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF
OPERATIONS
(millions of dollars, except for earnings
per share data)
Three Months EndedDecember 31, 2018
Three Months EndedMarch 31, 2019
Revenues: Service related, net $ 347 $ 377
Mark-to-market (188 ) (293 ) Net gain on mortgage loans held for
sale 93 166 Total revenues
252 250
Total
expenses 432 443
Other income (expense): Interest
income 166 134 Interest expense (171 ) (189 ) Other income
(expenses) 7 15 Total other
income (expenses), net 2 (40 ) Income
before income tax benefit (178 ) (233 ) Income tax benefit
(42 ) (47 ) Net loss (136 ) (186
) Undistributed earnings attributable to participating stockholders
— —
Net loss attributable to
Mr. Cooper Group $ (136 ) $ (186 )
Loss per share attributable to common stockholders: Basic $ (1.50 )
$ (2.05 ) Diluted $ (1.50 ) $ (2.05 ) Weighted average shares of
common stock outstanding (in thousands): Basic 90,816
90,828 Diluted 90,816 90,828
MR. COOPER GROUP INC. AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(millions of dollars)
December 31, 2018 March 31, 2019
Assets
(unaudited) Cash and cash equivalents $242 $181 Restricted
cash 319 339 Mortgage servicing rights 3,676 3,488 Advances and
other receivables, net 1,194 1,147 Reverse mortgage interests, net
7,934 7,489 Mortgage loans held for sale at fair value 1,631 2,170
Mortgage loans held for investment 119 118 Property and equipment,
net 96 112 Deferred tax asset 967 1,024 Other assets 795 1,578
Total assets $16,973 $17,646
Liabilities and
Stockholders' Equity
Unsecured senior notes, net $2,459 $2,461 Advance facilities, net
595 578 Warehouse facilities, net 2,349 3,050 Payables and accrued
liabilities 1,543 1,975 MSR related liabilities - nonrecourse at
fair value 1,216 1,343 Mortgage servicing liabilities 71 90 Other
nonrecourse debt, net 6,795 6,388 Total liabilities 15,028 15,885
Total stockholders' equity 1,945 1,761 Total liabilities and
stockholders' equity $16,973 $17,646
UNAUDITED SEGMENT STATEMENT OF
OPERATIONS & EARNINGS
RECONCILIATION
(millions of dollars, except for earnings
per share data)
Three Months Ended for December 31, 2018 Servicing
Originations Xome
Corporateand Other
Elim. Consolidated Service related, net
$ 53 $ 14 $ 104 $ — $ (12 ) $ 159 Net gain on mortgage loans held
for sale — 81 — —
12 93
Total revenues
53 95 104 —
— 252
Total expenses 199
89 107 37
— 432 Other income (expense): Interest income 144
17
— 5
— 166 Interest expense (99 ) (16 ) — (56 ) —
(171 ) Other expense 1 4 1
1 — 7 Total other
income (expense) 46 5 1
(50 )
— 2
Pretax
(loss) income $ (100 ) $ 11
$ (2 ) $ (87 ) $ —
$ (178 ) Income tax benefit (42
) Net loss attributable to common stockholders of Mr. Cooper Group
$ (136 ) Loss per share Basic $ (1.50 ) Diluted $ (1.50 )
Non-GAAP
Reconciliation:
Pretax income (loss) $ (100 ) $ 11 $ (2 ) $ (87 ) $ — $ (178
) Mark-to-market 188 — — — — 188 Business shutdown costs — 5 1 — —
6 Merger related costs — — — 4 — 4 Asset sales — — (1 ) — — (1 )
Intangible amortization — —
3 11 —
14 Pretax income (loss), net of notable items
88 16 1
(72 ) — 33 Fair value
amortization⁽¹⁾ (35 ) — —
— —
(35 ) Pretax operating income (loss) $ 53 $ 16 $ 1
$ (72 ) $ — $ (2 ) Income tax expense —
Operating loss $ (2 ) ROTCE (0.3 )% ⁽¹⁾ Amount
represents additional amortization required under the fair value
amortization method over the cost amortization method
UNAUDITED SEGMENT STATEMENT OF
OPERATIONS & EARNINGS
RECONCILIATION
(millions of dollars, except for earnings
per share data)
Three Months Ended for March 31, 2019 Servicing
Originations Xome
Corporateand Other
Elim. Consolidated
Service related, net $ 8 $ 15 $ 96 $ — $ (35 ) $ 84 Net gain
on mortgage loans held for sale — 131
— — 35 166
Total revenues 8 146 96
—
— 250
Total expenses 195 104 99 45
— 443 Other income
(expense): Interest income 115 17
— 2
— 134 Interest
expense (114 ) (18 ) — (57 ) — (189 ) Other expense —
4 11 — —
15 Total other income (expense) 1
3 11 (55 )
—
(40 )
Pretax (loss) income $
(186 ) $ 45 $ 8
$ (100 ) $ —
$
(233 ) Income tax benefit (47 ) Net loss
attributable to common stockholders of Mr. Cooper Group $ (186 )
Loss per share Basic $ (2.05 ) Diluted $ (2.05 )
Non-GAAP
Reconciliation:
Pretax income (loss) $ (186 ) $ 45 $ 8 $ (100 ) $ — $ (233 )
Mark-to-market 293 — — — — 293 Accounting items (9 ) — (11 ) — —
(20 ) Merger related costs — — — 20 — 20 Intangible amortization
— — 3
10 — 13
Pretax income (loss), net of notable items $ 98 $ 45
$ — $ (70 ) $ — $ 73 Fair
value amortization⁽¹⁾ (25 ) —
— — —
(25 ) Pretax operating income (loss) $ 73 $ 45
$ — $ (70 ) $ — $ 48 Income tax expense
(12 ) Operating income $ 36 ROTCE 8.7 % ⁽¹⁾
Amount represents additional amortization required under the fair
value amortization method over the cost amortization method
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190430006347/en/
Investor Contact:Kenneth Posner, SVP Strategic Planning and
Investor Relations(469) 426-3633Shareholders@mrcooper.comMedia
Contact:Christen Reyenga, VP Corporate
CommunicationsMediaRelations@mrcooper.com
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