- 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210729005326/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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