• Reported total net income of $439 million and $4.85 per diluted share, equivalent to a ROCE of 56%
  • Generated pretax operating income from continuing operations of $227 million, equivalent to ROTCE of 23.1%
  • Book value per share increased to $38.89 and Tangible book value per share increased to $37.24
  • Originations generated pretax income of $207 million on funded volume of $22.2 billion
  • Servicing portfolio grew 4% quarter-over-quarter to $654 billion
  • Completed sale of Title365 for $500 million
  • Unrestricted cash was $1.2 billion as of July 1st, 2021
  • Subsequent to quarter-end, announced $500 million stock repurchase authorization and agreement to sell Reverse servicing portfolio

Mr. Cooper Group Inc. (NASDAQ: COOP) (the “Company”), which principally operates under the Mr. Cooper® and Xome® brands, reported second quarter net income of $439 million or $4.85 per diluted share. Net income included a $135 million mark-to-market charge, which excludes fair value amortization of $45 million. Excluding mark-to-market and other items, the Company reported pretax operating income of $227 million. Other items were $7 million in severance charges related to corporate actions, $485 million in gain on the sale of Title365, net of transaction costs, $16 million in discontinued operations related to the reverse portfolio, and $3 million of intangible amortization.

Chairman and CEO Jay Bray commented, “Not only did we generate very solid operating returns this quarter, but also we took strategic actions, including the sale of Title365 and Reverse, which rationalize and simplify the business model, strengthen the balance sheet, and prepare us for faster growth.”

Chris Marshall, Vice Chairman, President, and CFO added, “The company’s balance sheet has never been stronger, with $1.2 billion in cash as of July 1, 2021 including the proceeds of the sale of Title365 and immediately accessible liquidity of $509 million. Additionally, pro forma for the sale of the Reverse portfolio, our capital ratio exceeded our previously disclosed target of 15%.”

Servicing

The Servicing segment is focused on providing a best-in-class home loan experience for our 3.5 million customers while simultaneously strengthening asset performance for investors. In the second quarter, Servicing recorded a pretax loss of $56 million, reflecting a total mark-to-market charge of $180 million, which included $135 million in other mark-to-market and $45 million in fair value amortization. The forward servicing portfolio ended the quarter at $654 billion UPB. Servicing generated pretax operating income, excluding the full mark-to-market and accounting items, of $125 million. At quarter end, the carrying value of the MSR was $3,307 million equivalent to 115 bps of MSR UPB and original cost basis of 86 bps.

 

Quarter Ended

($ in millions)

 

Q1'21

 

Q2'21

 

$

 

BPS

 

$

 

BPS

Operational revenue

$

370

 

 

24.0

 

$

443

 

 

27.4

Amortization, net of accretion

(156

)

 

(10.1)

 

(158

)

 

(9.8)

Mark-to-market

354

 

 

22.9

 

(180

)

 

(11.1)

Total revenues

568

 

 

36.8

 

105

 

 

6.5

Total expenses

(110

)

 

(7.1)

 

(121

)

 

(7.5)

Total other expenses, net

(48

)

 

(3.2)

 

(40

)

 

(2.5)

Income (loss) before taxes from continuing operations

410

 

 

26.5

 

(56

)

 

(3.5)

Mark-to-market

(354

)

 

(22.9)

 

180

 

 

11.1

Accounting items

 

 

 

1

 

 

0.1

Pretax operating income excluding mark-to-market and accounting items

$

56

 

 

3.6

 

$

125

 

 

7.7

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Q1'21

 

Q2'21

Ending UPB ($B)

$

629

 

 

$

654

 

Average UPB ($B)

$

617

 

 

$

647

 

60+ day delinquency rate at period end

5.3

%

 

4.5

%

Annualized CPR

30.8

%

 

26.0

%

Modifications and workouts

33,976

 

 

35,581

 

Originations

The Originations segment focuses on creating servicing assets at attractive margins by acquiring loans through the correspondent channel and refinancing existing loans in the direct-to-consumer channel. Originations earned pretax income of $207 million and pretax operating income of $213 million, which excluded $6 million in severance charges related to corporate actions.

The Company funded 83,871 loans in the second quarter, totaling approximately $22.2 billion UPB, which was comprised of $10.5 billion in direct-to-consumer and $11.7 billion in correspondent. Funded volume decreased 12% quarter-over-quarter.

 

Quarter Ended

($ in millions)

 

Q1'21

 

Q2'21

Income before taxes from continuing operations

$

362

 

 

$

207

 

Accounting items / other

 

 

6

 

Pretax operating income excluding accounting items

$

362

 

 

$

213

 

 

Quarter Ended

($ in millions)

 

Q1'21

 

Q2'21

Total pull through adjusted volume

$

23,267

 

 

$

18,358

 

Funded volume

$

25,133

 

 

$

22,227

 

Refinance recapture percentage

37

%

 

42

%

Recapture percentage

31

%

 

32

%

Purchase volume as a percentage of funded volume

12

%

 

24

%

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 $480 million and pretax operating loss of $4 million in the second quarter, which excluded intangible amortization and a $485 million gain, net of transactions costs, related to the sale of Title365.

 

Quarter Ended

($ in millions)

 

Q1'21

 

Q2'21

Income before taxes from continuing operations

$

9

 

 

$

480

 

Accounting items / other

3

 

 

(485

)

Intangible amortization

1

 

 

1

 

Pretax operating income (loss) excluding accounting items and intangible amortization

$

13

 

 

$

(4

)

 

Quarter Ended

 

Q1'21

 

Q2'21

Exchange properties sold

710

 

 

659

 

Average Exchange properties under management

14,210

 

 

14,196

 

Title Completed Orders

188,356

 

 

 

Solutions Completed Orders

546,552

 

 

475,507

 

Percentage of revenue earned from third-party customers

48

%

 

36

%

Conference Call Webcast and Investor Presentation

The Company will host a conference call on July 29, 2021 at 10:00 A.M. Eastern Time. Preregistration for the call is now available in the Investor section of www.mrcoopergroup.com. Participants will receive a toll-free dial-in number and a unique registrant ID to be used for immediate call access. A simultaneous audio webcast of the conference call will be available under the investors section on www.mrcoopergroup.com. A telephonic replay will also be available approximately two hours after the conclusion of the conference call by dialing 855-859-2056 (toll-free), or 404-537-3406 (international). Please use the passcode 6059502 to access the replay.

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. Return on tangible common equity (ROTCE) is computed by dividing net income by average tangible common equity (also known as tangible book value). Tangible common equity equals total stockholders’ equity less goodwill and intangible assets. Management believes that ROTCE is a useful financial measure because it measures the performance of a business consistently and enables investors and others to assess the Company’s use of equity. Tangible book value is defined as stockholders’ equity less goodwill and intangible assets. Our management believes tangible book value is useful to investors because it provides a more accurate measure of the realizable value of shareholder returns, excluding the impact of goodwill and intangible assets.

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, including the severity and duration of the COVID-19 pandemic; the pandemic’s impact on the U.S. and global economies; federal, state, and local governmental responses to the pandemic; borrower forbearance rates and availability of financing. 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 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(millions of dollars, except for earnings per share data)

 

 

Three Months Ended March 31, 2021

 

Three Months Ended June 30, 2021

Revenues:

 

 

 

Service related, net, excluding mark-to-market

$

226

 

 

$

172

 

Mark-to-market

354

 

 

(180

)

Net gain on mortgage loans held for sale

679

 

 

582

 

Total revenues

1,259

 

 

574

 

Total expenses:

454

 

 

425

 

Other expense, net:

 

 

 

Interest income

46

 

 

51

 

Interest expense

(126

)

 

(119

)

Other income, net

 

 

486

 

Total other (expense) income, net

(80

)

 

418

 

Income before income tax expense

725

 

 

567

 

Income tax expense

166

 

 

140

 

Net income from continuing operations

559

 

 

427

 

Net income from discontinued operations

2

 

 

12

 

Net income

561

 

 

439

 

Net income attributable to non-controlling interest

 

 

 

Net income attributable to Mr. Cooper Group

561

 

 

439

 

Undistributed earnings attributable to participating stockholders

5

 

 

4

 

Net income attributable to common stockholders

$

556

 

 

$

435

 

 

 

 

 

Earnings from continuing operations per common share attributable to Mr. Cooper:

 

 

 

Basic

$

6.20

 

 

4.91

 

Diluted

$

5.90

 

 

4.72

 

Earnings from discontinued operations per common share attributable to Mr. Cooper:

 

 

 

Basic

$

0.02

 

 

0.14

 

Diluted

$

0.02

 

 

0.13

 

Earnings per common share attributable to Mr. Cooper:

 

 

 

Basic

$

6.22

 

 

5.05

 

Diluted

$

5.92

 

 

4.85

 

Weighted average shares of common stock outstanding (in millions):

 

 

 

Basic

89.5

 

 

86.1

 

Diluted

93.9

 

 

89.6

 

MR. COOPER GROUP INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(millions of dollars)

 

 

March 31, 2021

 

June 30, 2021

Assets

 

 

 

Cash and cash equivalents

$

674

 

 

$

716

 

Restricted cash

176

 

 

113

 

Mortgage servicing rights at fair value

3,354

 

 

3,307

 

Advances and other receivables, net

838

 

 

837

 

Mortgage loans held for sale at fair value

6,351

 

 

6,961

 

Property and equipment, net

115

 

 

110

 

Deferred tax assets, net

1,228

 

 

1,118

 

Other assets

6,791

 

 

5,211

 

Assets of discontinued operations

5,186

 

 

4,935

 

Total assets

$

24,713

 

 

$

23,308

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

Unsecured senior notes, net

$

2,074

 

 

$

2,075

 

Advance and warehouse facilities, net

6,869

 

 

7,310

 

Payables and other liabilities

6,906

 

 

4,895

 

MSR related liabilities - nonrecourse at fair value

957

 

 

888

 

Liabilities of discontinued operations

5,003

 

 

4,790

 

Total liabilities

21,809

 

 

19,958

 

Total stockholders' equity

2,904

 

 

3,350

 

Total liabilities and stockholders' equity

$

24,713

 

 

$

23,308

 

UNAUDITED SEGMENT STATEMENT OF

OPERATIONS & EARNINGS RECONCILIATION

(millions of dollars, except for earnings per share data)

 

 

Three Months Ended March 31, 2021

 

Servicing

Originations

Xome

Corporate/ Other

Consolidated

 

 

 

 

 

 

Service related, net

$

441

 

$

43

 

$

96

$

 

$

580

 

Net gain on mortgage loans held for sale

 

127

 

 

552

 

 

 

 

 

679

 

Total revenues

 

568

 

 

595

 

 

96

 

 

 

1,259

 

Total expenses

 

110

 

 

231

 

 

87

 

26

 

 

454

 

Other (expense) income, net:

 

 

 

 

 

Interest income

 

23

 

 

23

 

 

 

 

 

46

 

Interest expense

 

(71

)

 

(25

)

 

 

(30

)

 

(126

)

Total other (expense) income, net

 

(48

)

 

(2

)

 

 

(30

)

 

(80

)

Pretax income (loss) from continuing operations

$

410

 

$

362

 

$

9

$

(56

)

$

725

 

Income tax expense

 

 

 

 

 

166

 

Net income from continuing operations

 

 

 

 

 

559

 

Net income from discontinued operations

 

 

 

 

 

2

 

Net income

 

 

 

 

 

561

 

Net income attributable to noncontrolling interests

 

 

 

 

 

 

Net income attributable to common stockholders of Mr. Cooper Group

 

 

 

 

 

561

 

Undistributed earnings attributable to participating stockholders

 

 

 

 

 

5

 

Net income attributable to common stockholders

 

 

 

 

$

556

 

Net income per share

 

 

 

 

 

Basic

 

 

 

 

$

6.22

 

Diluted

 

 

 

 

$

5.92

 

 

 

 

 

 

 

Non-GAAP Reconciliation:

 

 

 

 

 

Pretax income (loss) from continuing operations

$

410

 

$

362

 

$

9

$

(56

)

$

725

 

Mark-to-market

 

(354

)

 

 

 

 

 

 

(354

)

Accounting items / other

 

 

 

 

 

3

 

1

 

 

4

 

Intangible amortization

 

 

 

 

 

1

 

3

 

 

4

 

Pretax income (loss), net of notable items

 

56

 

 

362

 

 

13

 

(52

)

 

379

 

Fair value amortization (1)

 

(19

)

 

 

 

 

 

 

(19

)

Pretax operating income (loss) from continuing operations

$

37

 

$

362

 

$

13

$

(52

)

$

360

 

Income tax expense

 

 

 

 

 

(87

)

Operating income from continuing operations(2)

 

 

 

 

$

273

 

ROTCE(3)

 

 

 

 

 

42.7

%

Average tangible book value (TBV)(4)

 

 

 

 

$

2,555

 

 

(1)

Amount represents additional amortization required under the fair value amortization method over the cost amortization method.

(2)

Assumes tax-rate of 24.2%.

(3)

Computed by dividing annualized earnings by average TBV.

(4)

Average of beginning TBV of $2,353 and ending TBV of $2,757.

UNAUDITED SEGMENT STATEMENT OF

OPERATIONS & EARNINGS RECONCILIATION

(millions of dollars, except for earnings per share data)

 

 

Three Months Ended June 30, 2021

 

Servicing

 

Originations

 

Xome

 

Corporate/ Other

 

Consolidated

 

 

 

 

 

 

 

 

 

 

Service related, net

$

(92

)

 

$

45

 

 

$

39

 

 

$

 

 

$

(8

)

Net gain on mortgage loans held for sale

197

 

 

385

 

 

 

 

 

 

582

 

Total revenues

105

 

 

430

 

 

39

 

 

 

 

574

 

Total expenses

121

 

 

226

 

 

45

 

 

33

 

 

425

 

Other (expense) income, net:

 

 

 

 

 

 

 

 

 

Interest income

25

 

 

26

 

 

 

 

 

 

51

 

Interest expense

(65

)

 

(23

)

 

 

 

(31

)

 

(119

)

Other income, net

 

 

 

 

486

 

 

 

 

486

 

Total other (expense) income, net

(40

)

 

3

 

 

486

 

 

(31

)

 

418

 

Pretax (loss) income from continuing operations

$

(56

)

 

$

207

 

 

$

480

 

 

$

(64

)

 

$

567

 

Income tax expense

 

 

 

 

 

 

 

 

140

 

Net income from continuing operations

 

 

 

 

 

 

 

 

427

 

Net income from discontinued operations

 

 

 

 

 

 

 

 

12

 

Net income

 

 

 

 

 

 

 

 

439

 

Net income attributable to noncontrolling interests

 

 

 

 

 

 

 

 

 

Net income attributable to common stockholders of Mr. Cooper Group

 

 

 

 

 

 

 

 

439

 

Undistributed earnings attributable to participating stockholders

 

 

 

 

 

 

 

 

4

 

Net income attributable to common stockholders

 

 

 

 

 

 

 

 

$

435

 

Net income per share

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

$

5.05

 

Diluted

 

 

 

 

 

 

 

 

$

4.85

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Reconciliation:

 

 

 

 

 

 

 

 

 

Pretax (loss) income from continuing operations

$

(56

)

 

$

207

 

 

$

480

 

 

$

(64

)

 

$

567

 

Mark-to-market

180

 

 

 

 

 

 

 

 

180

 

Accounting items / other

1

 

 

6

 

 

(485

)

 

 

 

(478

)

Intangible amortization

 

 

 

 

1

 

 

2

 

 

3

 

Pretax income (loss), net of notable items

125

 

 

213

 

 

(4

)

 

(62

)

 

272

 

Fair value amortization (1)

(45

)

 

 

 

 

 

 

 

(45

)

Pretax operating (loss) income from continuing operations

$

80

 

 

$

213

 

 

$

(4

)

 

$

(62

)

 

$

227

 

Income tax expense(2)

 

 

 

 

 

 

 

 

(55

)

Operating income from continuing operations

 

 

 

 

 

 

 

 

$

172

 

ROTCE(3)

 

 

 

 

 

 

 

 

23.1

%

Average tangible book value (TBV)(4)

 

 

 

 

 

 

 

 

$

2,983

 

 

(1)

Amount represents additional amortization required under the fair value amortization method over the cost amortization method.

(2)

Assumes tax-rate of 24.2%.

(3)

Computed by dividing annualized earnings by average TBV.

(4)

Average of beginning TBV of $2,757 and ending TBV of $3,208.

Non-GAAP Reconciliation:

Quarter Ended

($ in millions except value per share data)

 

Q1'21

 

Q2'21

Stockholders' equity (BV)

$

2,904

 

 

$

3,350

 

Goodwill

(120

)

 

(120

)

Intangible assets

(27

)

 

(22

)

Tangible book value (TBV)

$

2,757

 

 

$

3,208

 

Ending shares of common stock outstanding (in millions)

86.1

 

 

86.1

 

 

 

 

 

BV/share

$

33.71

 

 

$

38.89

 

TBV/share

$

32.01

 

 

$

37.24

 

 

 

 

 

Net income

$

561

 

 

$

439

 

ROCE(1)

83.0

%

 

56.2

%

 

 

 

 

Beginning stockholders’ equity

$

2,504

 

 

$

2,904

 

Ending stockholders’ equity

$

2,904

 

 

$

3,350

 

Average stockholders’ equity (BV)

$

2,704

 

 

$

3,127

 

(1)

Computed by dividing annualized earnings by average BV.

 

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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