- Reported total net income of $151 million including MSR mark of
$196 million, equivalent to ROCE of 15.1%
- Book value per share increased to $56.34 and Tangible book
value per share increased to $54.51
- Servicing UPB grew to $804 billion, up 23% y/y
- Repurchased 2.3 million common shares for $100 million
Mr. Cooper Group Inc. (NASDAQ: COOP) (the “Company”), which
principally operates under the Mr. Cooper® and Xome® brands,
reported a second quarter net income of $151 million or $2.03 per
diluted share. Net income included an other mark-to-market of $196
million, which excludes fair value of excess spread accretion of $4
million. Excluding other mark-to-market and other items, the
Company reported pretax operating income of $17 million. Other
items included $3 million in severance charges, $3 million in
transaction costs related to the acquisition of our new default
servicing business, $1 million in facilities consolidation costs,
and $1 million in intangible amortization.
Chairman and CEO Jay Bray commented, “The company’s originations
and servicing teams continue to do a great job with execution. I
was extremely pleased to see us grow the servicing portfolio to
$804 billion, welcome the team from our new default servicing
platform, rebranded to Right Path Servicing, to our family, buy
back $100 million in stock, and end the quarter with exceptional
capital and liquidity.”
Chris Marshall, Vice Chairman and President added, “In addition
to generating portfolio growth, servicing enjoyed higher
profitability in the second quarter thanks to the rise in interest
rates, while Originations did a fantastic job with customer
retention, achieving and then exceeding our strategic recapture
target and helping borrowers achieve their financial goals with
cash-out refinancings.”
Servicing
The Servicing segment is focused on providing a best-in-class
home loan experience for our 3.9 million customers while
simultaneously strengthening asset performance for investors. In
the second quarter, Servicing recorded pretax income of $226
million, including other mark-to-market of $196 million. The
forward servicing portfolio ended the quarter at $804 billion in
UPB. Servicing generated pretax operating income, excluding other
mark-to-market, of $30 million. At quarter end, the carrying value
of the MSR was $6,151 million equivalent to 155 bps of MSR UPB.
Quarter Ended
($ in millions)
Q1'22
Q2'22
$
BPS
$
BPS
Operational revenue
$
365
19.5
$
394
19.8
Amortization, net of accretion
(202
)
(10.8
)
(199
)
(10.0
)
Mark-to-market
553
29.5
200
10.1
Total revenues
716
38.2
395
19.9
Total expenses
(123
)
(6.5
)
(143
)
(7.2
)
Total other expenses, net
(35
)
(1.9
)
(26
)
(1.3
)
Income before taxes
558
29.8
226
11.4
Other mark-to-market
(552
)
(29.5
)
(196
)
(9.9
)
Accounting items
1
0.1
—
—
Pretax operating income excluding other
mark-to-market and accounting items
$
7
0.4
$
30
1.5
Quarter Ended
Q1'22
Q2'22
Ending UPB ($B)
$
796
$
804
Average UPB ($B)
$
749
$
796
60+ day delinquency rate at period end
2.5
%
2.7
%
Annualized CPR
14.8
%
11.0
%
Modifications and workouts
32,498
25,721
Originations
The Originations segment focuses on creating servicing assets at
attractive margins by acquiring loans through the correspondent
channel and refinancing existing loans through the
direct-to-consumer channel. Originations earned pretax income of
$61 million and pretax operating income of $63 million, which
excluded $2 million in severance charges.
The Company funded 29,154 loans in the second quarter, totaling
approximately $7.8 billion UPB, which was comprised of $4.5 billion
in direct-to-consumer and $3.3 billion in correspondent. Funded
volume decreased 33% quarter-over-quarter, while pull through
adjusted volume decreased 37% quarter-over-quarter to $6.5
billion.
Quarter Ended
($ in millions)
Q1'22
Q2'22
Income before taxes
$
155
$
61
Accounting items / other
2
2
Pretax operating income excluding
accounting items and other
$
157
$
63
Quarter Ended
($ in millions)
Q1'22
Q2'22
Total pull through adjusted volume
$
10,332
$
6,485
Funded volume
$
11,573
$
7,767
Refinance recapture percentage
50
%
60
%
Recapture percentage
37
%
29
%
Purchase volume as a percentage of funded
volume
23
%
37
%
Conference Call Webcast and Investor
Presentation
The Company will host a conference call on July 27, 2022 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.
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,
2022
Three Months Ended June 30,
2022
Revenues:
Service related, net
$
755
$
460
Net gain on mortgage loans held for
sale
297
139
Total revenues
1,052
599
Total expenses:
338
328
Other income (expense), net:
Interest income
36
50
Interest expense
(106
)
(111
)
Other income (expense), net
222
(5
)
Total other income (expense), net
152
(66
)
Income before income tax expense
866
205
Income tax expense
208
54
Net income
658
151
Net income attributable to non-controlling
interest
—
—
Net income attributable to common
stockholders
$
658
$
151
Earnings per common share attributable to
Mr. Cooper:
Basic
$
8.91
$
2.08
Diluted
$
8.59
$
2.03
Weighted average shares of common stock
outstanding (in millions):
Basic
73.9
72.7
Diluted
76.6
74.3
MR. COOPER GROUP INC. AND
SUBSIDIARIES
UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS
(millions of dollars)
March 31, 2022
June 30, 2022
Assets
Cash and cash equivalents
$
579
$
514
Restricted cash
130
115
Mortgage servicing rights at fair
value
6,006
6,151
Advances and other receivables, net
1,044
892
Mortgage loans held for sale at fair
value
3,593
2,072
Property and equipment, net
75
72
Deferred tax assets, net
794
750
Other assets
2,269
2,329
Total assets
$
14,490
$
12,895
Liabilities and
Stockholders' Equity
Unsecured senior notes, net
$
2,670
$
2,672
Advance and warehouse facilities, net
4,795
3,407
Payables and other liabilities
2,203
2,223
MSR related liabilities - nonrecourse at
fair value
845
556
Total liabilities
10,513
8,858
Total stockholders' equity
3,977
4,037
Total liabilities and stockholders'
equity
$
14,490
$
12,895
UNAUDITED SEGMENT STATEMENT
OF
OPERATIONS & EARNINGS
RECONCILIATION
(millions of dollars, except for
earnings per share data)
Three Months Ended March 31,
2022
Servicing
Originations
Corporate/ Other
Consolidated
Service related, net
$
701
$
42
$
12
$
755
Net gain on mortgage loans held for
sale
15
282
—
297
Total revenues
716
324
12
1,052
Total expenses
123
174
41
338
Other (expense) income, net:
Interest income
19
17
—
36
Interest expense
(54
)
(12
)
(40
)
(106
)
Other income, net
—
—
222
222
Total other (expense) income, net
(35
)
5
182
152
Pretax income
$
558
$
155
$
153
$
866
Income tax expense
208
Net income
658
Net income attributable to noncontrolling
interests
—
Net income attributable to common
stockholders
$
658
Net income per share
Basic
$
8.91
Diluted
$
8.59
Non-GAAP Reconciliation:
Pretax income (loss)
$
558
$
155
$
153
$
866
Other mark-to-market
(552
)
—
—
(552
)
Accounting items / other
1
2
(223
)
(220
)
Intangible amortization
—
—
2
2
Pretax operating income (loss)
$
7
$
157
$
(68
)
$
96
Income tax expense
(23
)
Operating income(1)
$
73
ROTCE(2)
8.2
%
Average tangible book value (TBV)(3)
$
3,539
(1)
Assumes tax-rate of 24.2%.
(2)
Computed by dividing annualized earnings
by average TBV.
(3)
Average of beginning TBV of $3,233 and
ending TBV of $3,844.
UNAUDITED SEGMENT STATEMENT
OF
OPERATIONS & EARNINGS
RECONCILIATION
(millions of dollars, except for
earnings per share data)
Three Months Ended June 30,
2022
Servicing
Originations
Corporate/ Other
Consolidated
Service related, net
$
414
$
24
$
22
$
460
Net gain on mortgage loans held for
sale
(19
)
158
—
139
Total revenues
395
182
22
599
Total expenses
143
126
59
328
Other (expense) income, net:
Interest income
35
15
—
50
Interest expense
(61
)
(10
)
(40
)
(111
)
Other expense, net
—
—
(5
)
(5
)
Total other (expense) income, net
(26
)
5
(45
)
(66
)
Pretax income (loss)
$
226
$
61
$
(82
)
$
205
Income tax expense
54
Net income
151
Net income attributable to noncontrolling
interests
—
Net income attributable to common
stockholders
$
151
Net income per share
Basic
$
2.08
Diluted
$
2.03
Non-GAAP Reconciliation:
Pretax income (loss)
$
226
$
61
$
(82
)
$
205
Other mark-to-market
(196
)
—
—
(196
)
Accounting items / other
—
2
5
7
Intangible amortization
—
—
1
1
Pretax operating income (loss)
$
30
$
63
$
(76
)
$
17
Income tax expense(1)
(4
)
Operating income
$
13
ROTCE(2)
1.3
%
Average tangible book value (TBV)(3)
$
3,875
(1)
Assumes tax-rate of 24.2%.
(2)
Computed by dividing annualized earnings
by average TBV.
(3)
Average of beginning TBV of $3,844 and
ending TBV of $3,906.
Non-GAAP Reconciliation:
Quarter Ended
($ in millions except value per share
data)
Q1'22
Q2'22
Stockholders' equity (BV)
$
3,977
$
4,037
Goodwill
(120
)
(120
)
Intangible assets
(13
)
(11
)
Tangible book value (TBV)
$
3,844
$
3,906
Ending shares of common stock outstanding
(in millions)
73.9
71.7
BV/share
$
53.81
$
56.34
TBV/share
$
52.01
$
54.51
Net income
$
658
$
151
ROCE(1)
71.7
%
15.1
%
Beginning stockholders’ equity
$
3,367
$
3,977
Ending stockholders’ equity
$
3,977
$
4,037
Average stockholders’ equity (BV)
$
3,672
$
4,007
(1)
Computed by dividing annualized earnings
by average BV.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220727005294/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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