- Generated record Originations pretax income of $118 million on
record funded volume of $10 billion
- Grew servicing portfolio to $644 billion, up 2%
quarter-over-quarter
- Xome reported pretax income of $7 million and pretax operating
income of $10 million, due to significant progress in integrating
Assurant Mortgage Solutions (AMS)
- Reported pretax loss of $(117) million or EPS of $(0.96) per
share driven by $(231) million mark-to-market and pretax operating
income of $118 million
- Completed integration of Pacific Union and Seterus
Mr. Cooper Group Inc. (NASDAQ: COOP) (the "Company"), which
principally operates under the Mr. Cooper® and Xome® brands,
reported a second quarter net loss of $(87) million, $(0.96) per
diluted share, driven predominately by a net fair value
mark-to-market on the MSR portfolio of $(231) million. Excluding
the mark-to-market and other items, the Company reported pretax
operating income of $118 million. Items excluded from operating
income were $(231) million in mark-to-market, net of the add back
of $26 million in fair value amortization that is included in the
mark-to-market, $17 million in merger related costs, and $13
million in intangible amortization.
Chairman and CEO Jay Bray commented, “The Originations segment
made a major contribution this quarter, posting record pretax
profits of $118 million on record funding of $10 billion. This
strong performance is the result of several years of operational
focus and technology investments, as well as the Pacific Union
acquisition. The Originations segment now acts as a much stronger
macro hedge for our servicing operation, and we believe it will
play a major role in helping us achieve our profitability and
shareholder return targets.”
Chris Marshall, vice chairman and CFO added, “In addition to
strong Originations results, Xome produced a significant increase
in profits, reflecting the successful migration of the Assurant
back-office, strong refinance-driven results in Title & Close,
and third-party client wins in the Auction Exchange. We believe
Xome has the potential to contribute significantly to the Company’s
returns over time.”
Servicing
The Servicing segment is focused on providing a best-in-class
home loan experience for our 3.8 million customers while
simultaneously strengthening asset performance for investors. In
the second quarter, Servicing recorded pretax loss of $(135)
million primarily driven by a net fair value mark-to-market on the
MSR portfolio of $(231) million. During the quarter the total
servicing portfolio grew 2% quarter-over-quarter to $644 billion
UPB. Servicing earned pretax operating income excluding the
mark-to-market of $96 million, equivalent to a servicing margin of
6.0 bps. At quarter end, the carrying value of the MSR was $3.5
billion, equivalent to 111 bps of MSR UPB, and the original cost
basis was 85 bps.
Quarter Ended
($ in millions)
Q1'19
Q2'19
$
BPS
$
BPS
Operational revenue
$
324
22.5
$
314
19.6
Amortization, net of accretion
(23
)
(1.6
)
(56
)
(3.5
)
Mark-to-market
(293
)
(20.3
)
(231
)
(14.4
)
Total revenues
8
0.6
27
1.7
Expenses
(195
)
(13.6
)
(189
)
(11.8
)
Total other income (expenses), net
1
0.1
27
1.7
Loss before taxes
(186
)
(12.9
)
(135
)
(8.4
)
Mark-to-market
293
20.3
231
14.4
Accounting items
(9
)
(0.6
)
—
—
Pretax operating income excluding
mark-to-market and accounting items
$
98
6.8
$
96
6.0
Quarter Ended
Q1'19
Q2'19
Ending UPB ($B)
$
632
$
644
Average UPB ($B)
$
576
$
639
60+ day delinquency rate
2.4
%
2.3
%
Annualized CPR
8.2
%
13.0
%
Modifications and workouts
9,590
12,108
Originations
The Originations segment focuses on creating servicing assets at
attractive margins through existing customer relationships,
correspondent, and wholesale originations. Originations earned
record pretax income of $118 million, up from $45 million in the
prior quarter.
Mr. Cooper funded 42,933 loans in the second quarter, totaling
approximately $10.0 billion UPB comprised of $3.5 billion in
direct-to-consumer, $5.8 billion in correspondent, and $0.7 billion
in wholesale. Funded volume increased 76% quarter-over-quarter.
Quarter Ended
($ in millions)
Q1'19
Q2'19
Income before taxes
$
45
$
118
Quarter Ended
($ in millions)
Q1'19
Q2'19
Total pull through adjusted volume
$
5,960
$
11,197
Funded volume
$
5,716
$
9,996
Refinance recapture percentage
52
%
44
%
Recapture percentage
28
%
23
%
Purchase volume as a percentage of funded
volume
52
%
53
%
Xome
Xome provides real estate solutions including property
disposition, asset management, title, close, valuation, and field
services for Mr. Cooper and third-party clients. The Xome segment
recorded pretax income of $7 million, or pretax operating income
excluding intangible amortization of $10 million in the second
quarter.
Quarter Ended
($ in millions)
Q1'19
Q2'19
Income before taxes
$
8
$
7
Accounting items
(11
)
—
Intangible amortization
3
3
Pretax operating income excluding
intangible amortization and accounting items
$
—
$
10
Quarter Ended
Q1'19
Q2'19
Exchange property listings sold
2,421
2,645
Average exchange property listings
6,275
6,693
Services orders completed
379,585
417,510
Percentage of revenue earned from
third-party customers
53
%
53
%
Conference Call Webcast and Investor
Presentation
The Company will host a conference call on August 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 3194207 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 approximately two hours after the conclusion of
the conference call by dialing 855-859-2056, or 404-537-3406
internationally. Please use the passcode 3194207 to access the
replay. The replay will be accessible through August 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 company and
servicing segment eliminates the effects of mark-to-markets 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, 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, including statements
regarding Originations' role in achieving profitability and
shareholder return targets and Xome's significant contributions to
returns. 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 reports
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 Ended March 31,
2019
Three Months Ended June 30,
2019
Revenues:
Service related, net
$
377
$
368
Mark-to-market
(293
)
(231
)
Net gain on mortgage loans held for
sale
166
262
Total revenues
250
399
Total expenses
443
492
Other income (expense):
Interest income
134
162
Interest expense
(189
)
(187
)
Other income (expenses)
15
1
Total other income (expenses), net
(40
)
(24
)
Income before income tax benefit
(233
)
(117
)
Income tax benefit
(47
)
(29
)
Net loss
(186
)
(88
)
Net loss attributable to non-controlling
interest
—
(1
)
Net loss attributable to Mr. Cooper
Group
$
(186
)
$
(87
)
Loss per share attributable to common
stockholders:
Basic
$
(2.05
)
$
(0.96
)
Diluted
$
(2.05
)
$
(0.96
)
Weighted average shares of common stock
outstanding (in thousands):
Basic
90,828
91,054
Diluted
90,828
91,054
MR. COOPER GROUP INC. AND
SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE
SHEETS
(millions of dollars)
March 31, 2019
June 30, 2019
Assets
Cash and cash equivalents
$
181
$
245
Restricted cash
339
304
Mortgage servicing rights
3,488
3,511
Advances and other receivables, net
1,147
1,000
Reverse mortgage interests, net
7,489
7,110
Mortgage loans held for sale at fair
value
2,170
3,422
Mortgage loans held for investment at fair
value
118
114
Property and equipment, net
112
115
Deferred tax asset
1,024
1,055
Other assets
1,578
1,529
Total assets
$
17,646
$
18,405
Liabilities and
Stockholders' Equity
Unsecured senior notes, net
$
2,461
$
2,462
Advance facilities, net
578
567
Warehouse facilities, net
3,050
4,045
Payables and accrued liabilities
1,975
2,116
MSR related liabilities - nonrecourse at
fair value
1,343
1,472
Mortgage servicing liabilities
90
80
Other nonrecourse debt, net
6,388
5,985
Total liabilities
15,885
16,727
Total stockholders' equity
1,761
1,678
Total liabilities and stockholders'
equity
$
17,646
$
18,405
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
Corporate and Other
Elimination/
Reclassification⁽¹⁾
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 (loss) income
$
(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⁽²⁾
(25
)
—
—
—
—
(25
)
Pretax operating income (loss)
$
73
$
45
$
—
$
(70
)
$
—
$
48
Income tax expense
(12
)
Operating income
$
36
ROTCE
8.7
%
⁽¹⁾ For Servicing segment results
purposes, all revenue is attributable to servicing the portfolio.
Therefore, $35 of net gain on mortgage loans is moved to service
related, net for the three months ended March 31, 2019. For
consolidated results purposes, these amounts were reclassed to net
gain on mortgage loans held for sale.
⁽²⁾ 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 June 30,
2019
Servicing
Originations
Xome
Corporate and Other
Elimination/
Reclassification⁽¹⁾
Consolidated
Service related, net
$
27
$
20
$
108
$
—
$
(18
)
$
137
Net gain on mortgage loans held for
sale
—
244
—
—
18
262
Total revenues
27
264
108
—
—
399
Total expenses
189
145
101
57
—
492
Other income (expense):
Interest income
136
23
—
3
—
162
Interest expense
(109
)
(25
)
—
(53
)
—
(187
)
Other expense
—
1
—
—
—
1
Total other income (expense)
27
(1
)
—
(50
)
—
(24
)
Pretax (loss) income
$
(135
)
$
118
$
7
$
(107
)
$
—
$
(117
)
Income tax benefit
(29
)
Net loss
$
(88
)
Net loss attributable to noncontrolling
interests
(1
)
Net loss attributable to common
stockholders of Mr. Cooper Group
$
(87
)
Loss per share
Basic
$
(0.96
)
Diluted
$
(0.96
)
Non-GAAP Reconciliation:
Pretax income (loss)
$
(135
)
$
118
$
7
$
(107
)
$
—
$
(117
)
Mark-to-market
231
—
—
—
—
231
Merger related costs
—
—
—
17
—
17
Intangible amortization
—
—
3
10
—
13
Pretax income (loss), net of notable
items
$
96
$
118
$
10
$
(80
)
$
—
$
144
Fair value amortization⁽²⁾
(26
)
—
—
—
—
(26
)
Pretax operating income (loss)
$
70
$
118
$
10
$
(80
)
$
—
$
118
Income tax expense
(29
)
Operating income
$
89
ROTCE
23.8
%
⁽¹⁾ For Servicing segment results
purposes, all revenue is attributable to servicing the portfolio.
Therefore, $18 of net gain on mortgage loans is moved to service
related, net for the three months ended June 30, 2019. For
consolidated results purposes, these amounts were reclassed to net
gain on mortgage loans held for sale.
⁽²⁾ 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/20190801005317/en/
Investor Contact: Kenneth Posner, SVP Strategic Planning and
Investor Relations (469) 426-3633 Shareholders@mrcooper.com
Media Contact: Christen Reyenga, VP Corporate Communications
MediaRelations@mrcooper.com
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