- Reported full-year combined net income
of $1,038 million and fourth quarter GAAP net loss of $(136)
million or $(1.50) per share
- Grew servicing portfolio to $548
billion, up 7% quarter-over-quarter and 8% year-over-year
- Reported servicing margin of (7.6)
basis points (bps) including mark-to-market or servicing margin of
6.7 bps excluding mark-to-market
- Grew origination fundings 5%
quarter-over-quarter to $5.4 billion
- Grew Xome third-party revenue to 57%
from 49% in third quarter
- On February 1, 2019, closed acquisition
of Pacific Union Financial
- On February 28, 2019, closed
acquisition of Seterus mortgage servicing platform
Mr. Cooper Group Inc. (NASDAQ:COOP) (the "Company"), which
principally operates under the Mr. Cooper® and Xome® brands,
reported a fourth quarter net loss of $(136) million, or $(1.50)
per diluted share driven principally by a net fair value
mark-to-market on the MSR portfolio of $(188) million.
"The Company is coming off a period of strong growth and a very
high level of activity in 2018, including the WMIH merger, the name
change to Mr. Cooper Group, and three acquisitions. Now it’s time
for us to integrate these transactions and focus on profitability,"
said Jay Bray, Chairman and Chief Executive Officer of Mr. Cooper
Group Inc.
"Fourth quarter results showcased the growth and margins of the
company’s market-leading servicing platform, and by executing on
our servicing transformation initiative, project Titan, we intend
to drive further efficiencies and improve the servicing experience
for team members and customers,” said Chris Marshall, Vice Chairman
of Mr. Cooper Group Inc.
Servicing
The Servicing segment is focused on providing a best-in-class
home loan experience for our 3.3 million customers while also
strengthening asset performance for investors. In the fourth
quarter, Servicing recorded pretax loss of $(100) million
principally driven by a net fair value mark-to-market on the MSR
portfolio of $(188) 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 year end, the carrying
value of the MSR was approximately $3.7 billion, equivalent to 124
bps of MSR UPB. Excluding the mark-to-market, Servicing earned $88
million in pretax income during the quarter, equivalent to a
servicing margin of 6.7 bps. Pretax income excluding mark-to-market
and merger related costs improved 17% quarter-over-quarter driven
by lower amortization, net of accretion due to a lower CPR, higher
servicing fees driven by a larger portfolio, and by strong
performance in the reverse portfolio. The strong performance in the
reverse portfolio was driven by operational execution that led to
favorable assignment volume, resulting in $15 million benefit to
pretax income. For the full year, Servicing achieved $273 million
combined pretax income or $300 million pretax income excluding
mark-to-market and merger related costs.
Mr. Cooper ended the year with a servicing portfolio of $548
billion UPB, achieving 7% growth quarter-over-quarter and 8% growth
year-over-year.
Quarter Ended ($ in millions)
Q3'18
Combined Q4'18 $ BPS $ BPS
Operational revenue $ 272 21.8 $ 280 21.3 Amortization, net of
accretion (41 ) (3.3 ) (39 ) (3.0 ) Mark-to-market 49
3.9 (188 ) (14.3 ) Total revenues 280 22.4 53 4.0
Expenses (230 ) (18.4 ) (199 ) (15.1 ) Total other income
(expenses), net 15 1.2 46 3.5
Income (loss) before taxes 65 5.2 (100 ) (7.6 )
Mark-to-market (49 ) (3.9 ) 188 14.3 Merger related costs 59
4.7 — — Pretax income excluding
mark-to-market and merger related costs $ 75 6.0 $ 88
6.7
Quarter Ended
Q3'18 Combined Q4'18 Ending UPB ($B) $ 514 $ 548
Average UPB ($B) $ 500 $ 526 60+ day delinquency rate
2.5
%
2.2
%
Annualized CPR
11.1
%
9.1
%
Annualized CPR, net of recapture
9.6
%
7.7
%
Modifications and workouts 14,448 10,645
Originations
The Originations segment focuses on creating servicing assets at
attractive margins through existing customer relationships and
correspondent originations. Excluding $5 million in business
shutdown costs, Originations earned pretax income of $16 million in
the fourth quarter. For the full year, Originations earned $94
million combined pretax income, or $99 million excluding business
shutdown costs.
Funded loans totaled approximately $5.4 billion UPB, up 5%
quarter-over-quarter, with $2.3 billion from the consumer direct
channel and $3.2 billion from the correspondent channel.
Quarter Ended ($ in millions)
Q3'18
Combined Q4'18 Income before taxes $ 32 $ 11
Business shutdown costs — 5 Pretax income excluding
business shutdown costs $ 32 $ 16
Quarter
Ended ($ in millions)
Q3'18 Combined Q4'18
Total pull through adjusted volume $ 5,027 $ 4,874 Funded volume $
5,147 $ 5,425 Refinance recapture percentage 57 % 55 % Recapture
percentage 22 % 26 % Purchase volume as a percentage of funded
volume 53 % 58 %
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 loss of $(2) million during the fourth quarter, or
$1 million net of adjustments. The decline in pretax income
quarter-over-quarter was driven by the integration of Assurant
Mortgage Solutions (AMS) and lower exchange property listings sold.
The AMS impact in the fourth quarter was $7 million, up from $5
million in the prior quarter due to Xome incurring a full quarter
of AMS results. For the full year, Xome earned $34 million combined
pretax income or $29 million pretax income, net of adjustments.
Quarter Ended ($ in millions)
Q3'18
Combined Q4'18 Income (loss) before taxes $ 4 $
(2 ) Business shutdown costs 1 1 Asset sales — (1 ) Intangible
amortization — 3 Pretax income, net of
adjustments $ 5 $ 1
Quarter
Ended Q3'18 Combined Q4'18 Exchange
property listings sold 2,658 2,222 Exchange property listings at
period end 6,917 6,177 Services orders completed 312,536 531,566
Percentage of revenue earned from third-party customers 49 % 57 %
Conference Call Webcast and Investor
Presentation
The Company will host a conference call on March 7, 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 9057278 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 9057278 to access the
replay. The replay will be accessible through March 21, 2019, at
1:00 P.M. Eastern Time. Additionally, the Company may use its
website at www.mrcoopergroup.com as a distribution channel of
material Company information.
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 non-GAAP 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 items adjusted
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. We adjust pretax income
(loss) in the servicing segment to eliminate 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. The pretax income in each
segment also may eliminate, 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
This presentation contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
All statements other than statements of historical or current fact
included in this presentation that address activities, events,
conditions or developments that we expect, believe or anticipate
will or may occur in the future are forward-looking statements.
Forward-looking statements give our current expectations and
projections relating to our financial condition, results of
operations, plans, objectives, future performance and business and
these statements are not guarantees of future performance.
Forward-looking statements may include the words “anticipate,”
“estimate,” “expect,” “project,” “intend,” “plan,” “believe,”
“strategy,” “future,” “opportunity,” “may,” “should,” “will,”
“would,” “will be,” “will continue,” “will likely result,” and
similar expressions. Such forward-looking statements involve risks
and uncertainties that may cause actual events, results or
performance to differ materially from those indicated by such
statements. Certain of these risks are identified and discussed in
documents Mr. Cooper has filed or will file from time to time with
the SEC. These risk factors will be important to consider in
determining future results and should be reviewed in their
entirety. These forward-looking statements are expressed in good
faith, and Mr. Cooper believes there is a reasonable basis for
them. However, the events, results or trends identified in these
forward-looking statements may not occur or be achieved.
Forward-looking statements speak only as of the date they are made,
and Mr. Cooper is not under any obligation, and expressly disclaims
any obligation, to update, alter or otherwise revise any
forward-looking statement, except as required by law. Readers
should carefully review the statements set forth in the reports
that Mr. Cooper has filed or will file from time to time with the
SEC.
Basis of Presentation
For purpose of Mr. Cooper's financial statement presentation,
Mr. Cooper Group Inc. was determined to be the accounting acquirer
in the WMIH Corp. merger. “Predecessor” financial information
relates to Nationstar and “Successor” financial information relates
to Mr. Cooper. The financial results for the three months ended
December 31, 2018, reflect the results of the Successor. With
respect to the three months ended September 30, 2018, the Company
has presented the results on a “combined” basis by combining the
financial results of the Predecessor for the period from July 1,
2018, through July 31, 2018, and the financial results of the
Successor for the period from August 1, 2018, through September 30,
2018. Although the separate financial results of the Predecessor
for the period from July 1, 2018, through July 31, 2018, and the
Successor for the period from August 1, 2018, through September 30,
2018, are each separately presented under generally accepted
accounting principles (“GAAP”) in the United States, the combined
results reported reflect non-GAAP financial measures, because a
different basis of accounting was used with respect to the
financial results for the Predecessor as compared to the financial
results of the Successor. The financial results for the period
January 1, 2018, through July 31, 2018, reflect the results of the
Predecessor.
Financial Tables
MR. COOPER GROUP INC. AND
SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF
OPERATIONS
(millions of dollars, except for earnings
per share data)
Predecessor Successor Combined Successor For the Period July
1-July 31, 2018 For the Period August 1-September 30, 2018 Three
Months Ended September 30, 2018 Three Months Ended December 31,
2018
Revenues: Service related, net $ 95 $ 235 $ 330 $ 347
Mark-to-market 25 24 49 (188 ) Net gain on mortgage loans held for
sale 44 83 127 93
Total revenues 164 342
506 252
Total expenses 242 275
517 432
Other income (expense): Interest income 48 90
138 166 Interest expense (53 ) (122 ) (175 ) (171 ) Other income
(expenses) — 6 6 7
Total other income (expenses), net (5 ) (26 )
(31 ) 2 Income before income tax expense
(benefit) (83 ) 41 (42 ) (178 ) Income tax expense (benefit)
(19 ) (979 ) (998 ) (42 ) Net income (loss)
attributable to Successor/Predecessor (64 ) 1,020
956 (136 ) Undistributed earnings
attributable to participating stockholders — 9
9 —
Net income (loss)
attributable to Mr. Cooper Group $ (64 ) $ 1,011 $ 947
$ (136 ) Earnings (loss) per share
attributable to common stockholders: Basic $ (0.65 ) $ 11.13 $
(1.50 ) Diluted $ (0.65 ) $ 10.99 $ (1.50 ) Weighted average shares
of common stock outstanding (in thousands): Basic 98,164 90,808
90,816 Diluted 98,164 91,992 90,816
MR.
COOPER GROUP INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED
BALANCE SHEETS
(millions of dollars)
Successor Successor September 30, 2018 December 31, 2018
Assets Cash and cash equivalents $ 198 $ 242
Restricted cash 332 319 Mortgage servicing rights 3,500 3,676
Advances and other receivables, net 1,174 1,194 Reverse mortgage
interests, net 8,886 7,934 Mortgage loans held for sale at fair
value 1,681 1,631 Mortgage loans held for investment 122 119
Property and equipment, net 102 96 Deferred tax asset 934 967 Other
assets 799 795 Total assets $ 17,728 $ 16,973
Liabilities and Stockholders' Equity Unsecured
senior notes, net $ 2,457 $ 2,459 Advance facilities, net 596 595
Warehouse facilities, net 2,888 2,349 Payables and accrued
liabilities 1,342 1,543 MSR related liabilities - nonrecourse at
fair value 1,123 1,216 Mortgage servicing liabilities 79 71 Other
nonrecourse debt, net 7,165 6,795 Total liabilities
15,650 15,028 Total stockholders' equity 2,078 1,945
Total liabilities and stockholders' equity $ 17,728 $ 16,973
UNAUDITED SEGMENT
STATEMENT OF OPERATIONS & EARNINGS RECONCILIATION
(millions of dollars, except for earnings
per share data)
Combined Three Months Ended for September 30, 2018 Servicing
Originations Xome Corporate and Other Elim. Consolidated
Service related, net $ 280 $ 14 $ 95 $ — $ (10 ) $ 379 Net gain on
mortgage loans held for sale — 117
— — 10 127
Total revenues 280 131 95
—
— 506
Total expenses 230 100 90 97
— 517 Other income
(expense): Interest income 119 16
— 3
— 138 Interest
expense (109 ) (16 ) (1 ) (49 ) — (175 ) Other expense 5
1 — — —
6 Total other income (expense) 15
1 (1 ) (46 )
—
(31 )
Pretax income (loss) $ 65
$ 32 $ 4 $
(143 ) $
— $ (42 )
Non-GAAP Reconciliation: Pretax income (loss)
$ 65 $ 32 $ 4 $ (143 ) $ — $ (42 ) Mark-to-market (49 ) — — — — —
(49 ) Business shutdown costs — — 1 — — 1 Merger related costs 59 —
— 64 — 123 Intangible amortization — —
— 9 — 9
Pretax income (loss), net of adjustments $ 75 $ 32 $
5 $ (70 ) $ — $ 42
UNAUDITED SEGMENT STATEMENT OF
OPERATIONS & EARNINGS RECONCILIATION
(millions of dollars, except for earnings
per share data)
Predecessor For the Period July 1-July 31, 2018 Servicing
Originations Xome Corporate and Other Elim. Consolidated
Service related, net $ 97 $ 4 $ 22 $ — $ (3 ) $ 120 Net gain on
mortgage loans held for sale — 41
— — 3 44
Total
revenues 97 45 22 —
— 164
Total
expenses 126 34 19 63
— 242 Other income (expense):
Interest income 41 6
— 1
— 48 Interest expense (35 )
(6 ) — (12 ) — (53 ) Other expense — —
— — — — Total
other income (expense) 6 — —
(11 )
— (5 )
Pretax income
(loss) $ (23 ) $ 11
$ 3 $ (74 ) $ —
$ (83 ) Income tax benefit
19 Net loss (64 ) Undistributed earnings attributable
to participating stockholders — Net loss attributable
to common stockholders of Mr. Cooper Group $ (64 ) Loss per share
Basic $ (0.65 ) Diluted $ (0.65 )
UNAUDITED SEGMENT STATEMENT OF
OPERATIONS & EARNINGS RECONCILIATION
(millions of dollars, except for earnings
per share data)
Successor For the Period August 1 - September 30, 2018
Servicing Originations Xome Corporate and Other Elim. Consolidated
Service related, net $ 183 $ 10 $ 73 $ — $ (7 ) $ 259 Net
gain on mortgage loans held for sale — 76
— — 7 83
Total revenues 183 86
73 —
— 342
Total expenses 104 66 71 34
— 275 Other income
(expense): Interest income 78 10
— 2
— 90 Interest
expense (74 ) (10 ) (1 ) (37 ) — (122 ) Other expense 5
1 — — —
6 Total other income (expense) 9
1 (1 ) (35 )
—
(26 )
Pretax income (loss) $ 88
$ 21 $ 1 $
(69 ) $ —
$ 41 Income tax
benefit 979 Net income 1,020 Undistributed earnings
attributable to participating stockholders 9 Net
income attributable to common stockholders of Mr. Cooper Group $
1,011 Earnings per share Basic $ 11.13 Diluted $
10.99
UNAUDITED SEGMENT STATEMENT OF OPERATIONS & EARNINGS
RECONCILIATION
(millions of dollars, except for earnings
per share data)
Successor Three Months Ended for December 31, 2018 Servicing
Originations Xome Corporate and 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 income (loss) $ (100
) $ 11 $ (2 )
$ (87 ) $ — $
(178 ) Income tax benefit 42 Net
loss (136 ) Undistributed earnings attributable to participating
stockholders
— 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 adjustments $ 88 $ 16 $ 1
$ (72 ) $ — $ 33
UNAUDITED SEGMENT STATEMENT OF
OPERATIONS & EARNINGS RECONCILIATION
(millions of dollars, except for earnings
per share data)
Combined Year Ended for December 31, 2018 Servicing
Originations Xome Corporate and Other Elim. Consolidated
Service related, net $ 976 $ 60 $ 326 $ 1 $ (44 ) $ 1,319 Net gain
on mortgage loans held for sale — 427
— — 44 471
Total revenues 976 487
326 1
— 1,790
Total expenses 777 400 301 174
— 1,652 Other
income (expense): Interest income 510 65
— 14
— 589
Interest expense (441 ) (63 ) (1 ) (176 ) — (681 ) Other expense
5 5 10 (1 )
— 19 Total other income (expense) 74
7 9 (163 )
— (73 )
Pretax income (loss) $
273 $ 94 $ 34
$ (336 ) $ —
$ 65 Non-GAAP Reconciliation:
Pretax income (loss) $ 273 $ 94 $ 34 $ (336 ) $ — $ 65
Mark-to-market (32 ) — — — — (32 ) Business shutdown costs — 5 2 —
— 7 Merger related costs 59 — — 73 — 132 Asset sales — — (10 ) — —
(10 ) Intangible amortization — —
3 20 — 23
Pretax income (loss), net of adjustments $ 300 $ 99 $
29 $ (243 ) $ — $ 185
UNAUDITED SEGMENT STATEMENT OF
OPERATIONS & EARNINGS RECONCILIATION
(millions of dollars, except for earnings
per share data)
Successor For the Period August 1-December 31, 2018
Servicing Originations Xome Corporate and Other Elim. Consolidated
Service related, net $ 236 $ 24 $ 177 $ — $ (19 ) $ 418 Net
gain on mortgage loans held for sale — 157
— — 19 176
Total revenues 236 181
177 —
— 594
Total expenses 303 155 178 71
— 707 Other
income (expense): Interest income 222 27
— 7
— 256
Interest expense (173 ) (26 ) (1 ) (93 ) — (293 ) Other expense
6 5 1 1
— 13 Total other income (expense)
55 6 — (85 )
— (24 )
Pretax income (loss)
$ (12 ) $ 32 $
(1 ) $ (156 ) $ —
$ (137 ) Income tax benefit
1,021 Net income 884
Undistributed earnings attributable to
participating stockholders(1)
8 Net income attributable to common stockholders of
Mr. Cooper Group $ 876 Earnings per share Basic $ 9.65
Diluted $ 9.54
(1) Due to the loss during the fourth quarter of 2018, the
Company did not allocate the losses to participating stockholders,
therefore the combined year to date undistributed earnings
attributable to participating stockholders may not equal the sum of
the periods.
UNAUDITED SEGMENT
STATEMENT OF OPERATIONS & EARNINGS RECONCILIATION
(millions of dollars, except for earnings
per share data)
Predecessor For the Period January 1 - July 31, 2018
Servicing Originations Xome Corporate and Other Elim. Consolidated
REVENUES: Service related, net $ 740 $ 36 $ 149 $ 1 $
(25 ) $ 901 Net gain on mortgage loans held for sale —
270 — — 25
295
Total revenues 740
306 149 1
—
1,196
Total expenses 474 245 123 103
— 945
Other income (expense): Interest income 288 38
— 7
—
333 Interest expense (268 ) (37 ) — (83 ) — (388 ) Other expense
(1 ) — 9 (2 ) —
6 Total other income (expense) 19
1 9 (78 )
—
(49 )
Pretax income (loss) $ 285
$ 62 $ 35 $ (180
) $ —
$ 202 Income tax expense
48 Net income 154 Undistributed earnings attributable
to participating stockholders — Net income
attributable to common stockholders of Mr. Cooper Group $ 154
Earnings per share Basic $ 1.57 Diluted $ 1.55
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190307005265/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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