- Reported total net income of $113 million including other
mark-to-market of $122 million, equivalent to ROCE of 11.1%
- Book value per share increased to $58.18 and Tangible book
value per share increased to $56.35
- Servicing UPB grew to $854 billion, up 28% y/y
- Repurchased 1.1 million common shares for $50 million
Mr. Cooper Group Inc. (NASDAQ: COOP) (the “Company”), which
principally operates under the Mr. Cooper® and Xome® brands,
reported a third quarter net income of $113 million or $1.55 per
diluted share. Net income included other mark-to-market of $122
million, which excludes fair value of excess spread accretion of $2
million. Excluding other mark-to-market and other items, the
Company reported pretax operating income of $56 million. Other
items included $18 million loss associated with equity investments,
$5 million loss in lease breakage and other charges, and $2 million
loss in intangible amortization.
Chairman and CEO Jay Bray commented, “Thanks to our balanced
business model, we produced another solid quarter with rising
earnings and cash flow, and strong growth in book value per share.
We finished the quarter with extremely robust capital and
liquidity, which will support continued prudent growth in our
platform and customer base.”
Chris Marshall, Vice Chairman and President added, “The
highlight of the quarter was the strong ramp in servicing earnings,
which reflects not only the benefit of higher interest rates, but
our industry-leading technology, scale, and process discipline. We
grew the servicing portfolio with new and existing clients who
appreciate our scalable and compliant platform and our demonstrated
loss mitigation capabilities.”
Servicing
The Servicing segment is focused on providing a best-in-class
home loan experience for our 4.1 million customers while
simultaneously strengthening asset performance for investors. In
the third quarter, Servicing recorded pretax income of $203
million, including other mark-to-market of $122 million. The
servicing portfolio ended the quarter at $854 billion in UPB.
Servicing generated pretax operating income, excluding other
mark-to-market, of $81 million. At quarter end, the carrying value
of the MSR was $6,408 million equivalent to 162 bps of MSR UPB.
Quarter Ended
($ in millions)
Q2'22
Q3'22
$
BPS
$
BPS
Operational revenue
$
394
19.8
$
377
18.3
Amortization, net of accretion
(199
)
(10.0
)
(169
)
(8.2
)
Mark-to-market
200
10.1
124
6.0
Total revenues
395
19.9
332
16.1
Total expenses
(143
)
(7.2
)
(147
)
(7.1
)
Total other expenses, net
(26
)
(1.3
)
18
0.9
Income before taxes
226
11.4
203
9.9
Other mark-to-market
(196
)
(9.9
)
(122
)
(5.9
)
Accounting items
—
—
—
—
Pretax operating income excluding other
mark-to-market and accounting items
$
30
1.5
$
81
4.0
Quarter Ended
Q2'22
Q3'22
MSR UPB($B)
$
398
$
396
Subservicing and Other UPB ($B)
406
458
Ending UPB ($B)
$
804
$
854
Average UPB ($B)
$
796
$
823
60+ day delinquency rate at period end
2.7
%
2.5
%
Annualized CPR
11.0
%
8.3
%
Modifications and workouts
25,721
16,505
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 and
pretax operating income of $45 million.
The Company funded 21,487 loans in the third quarter, totaling
approximately $5.7 billion UPB, which was comprised of $3.6 billion
in direct-to-consumer and $2.1 billion in correspondent. Funded
volume decreased 26% quarter-over-quarter, while pull through
adjusted volume decreased 19% quarter-over-quarter to $5.3
billion.
Quarter Ended
($ in millions)
Q2'22
Q3'22
Income before taxes
$
61
$
45
Accounting items / other
2
—
Pretax operating income excluding
accounting items and other
$
63
$
45
Quarter Ended
($ in millions)
Q2'22
Q3'22
Total pull through adjusted volume
$
6,485
$
5,276
Funded volume
$
7,767
$
5,741
Refinance recapture percentage
60
%
80
%
Recapture percentage
29
%
28
%
Purchase volume as a percentage of funded
volume
37
%
42
%
Conference Call Webcast and Investor
Presentation
The Company will host a conference call on October 26, 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,
change in equity method investments, fair value change in equity
investments 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. 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 June 30,
2022
Three Months Ended September 30,
2022
Revenues:
Service related, net
$
460
$
395
Net gain on mortgage loans held for
sale
139
115
Total revenues
599
510
Total expenses:
328
316
Other income (expense), net:
Interest income
50
83
Interest expense
(111
)
(104
)
Other income (expense), net
(5
)
(20
)
Total other income (expense), net
(66
)
(41
)
Income before income tax expense
205
153
Income tax expense
54
40
Net income
151
113
Net income attributable to non-controlling
interest
—
—
Net income attributable to common
stockholders
$
151
$
113
Earnings per common share attributable to
Mr. Cooper:
Basic
$
2.08
$
1.59
Diluted
$
2.03
$
1.55
Weighted average shares of common stock
outstanding (in millions):
Basic
72.7
71.2
Diluted
74.3
72.9
MR. COOPER GROUP INC. AND
SUBSIDIARIES
UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS
(millions of dollars)
June 30, 2022
September 30, 2022
Assets
Cash and cash equivalents
$
514
$
530
Restricted cash
115
148
Mortgage servicing rights at fair
value
6,151
6,408
Advances and other receivables, net
892
831
Mortgage loans held for sale at fair
value
2,072
1,581
Property and equipment, net
72
69
Deferred tax assets, net
750
711
Other assets
2,329
2,537
Total assets
$
12,895
$
12,815
Liabilities and
Stockholders' Equity
Unsecured senior notes, net
$
2,672
$
2,673
Advance and warehouse facilities, net
3,407
3,070
Payables and other liabilities
2,223
2,428
MSR related liabilities - nonrecourse at
fair value
556
539
Total liabilities
8,858
8,710
Total stockholders' equity
4,037
4,105
Total liabilities and stockholders'
equity
$
12,895
$
12,815
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 income, net
—
—
(5
)
(5
)
Total other (expense) income, net
(26
)
5
(45
)
(66
)
Pretax income
$
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
(4
)
Operating income(1)
$
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.
UNAUDITED SEGMENT STATEMENT
OF
OPERATIONS & EARNINGS
RECONCILIATION
(millions of dollars, except for
earnings per share data)
Three Months Ended September 30,
2022
Servicing
Originations
Corporate/ Other
Consolidated
Service related, net
$
353
$
20
$
22
$
395
Net gain on mortgage loans held for
sale
(21
)
136
—
115
Total revenues
332
156
22
510
Total expenses
147
112
57
316
Other (expense) income, net:
Interest income
71
12
—
83
Interest expense
(53
)
(11
)
(40
)
(104
)
Other expense, net
—
—
(20
)
(20
)
Total other (expense) income, net
18
1
(60
)
(41
)
Pretax income (loss)
$
203
$
45
$
(95
)
$
153
Income tax expense
40
Net income
113
Net income attributable to noncontrolling
interests
—
Net income attributable to common
stockholders
$
113
Net income per share
Basic
$
1.59
Diluted
$
1.55
Non-GAAP Reconciliation:
Pretax income (loss)
$
203
$
45
$
(95
)
$
153
Other mark-to-market
(122
)
—
—
(122
)
Accounting items / other
—
—
23
23
Intangible amortization
—
—
2
2
Pretax operating income (loss)
$
81
$
45
$
(70
)
$
56
Income tax expense(1)
(14
)
Operating income
$
42
ROTCE(2)
4.3
%
Average tangible book value (TBV)(3)
$
3,941
(1)
Assumes tax-rate of 24.2%.
(2)
Computed by dividing annualized earnings
by average TBV.
(3)
Average of beginning TBV of $3,906 and
ending TBV of $3,976.
Non-GAAP Reconciliation:
Quarter Ended
($ in millions except value per share
data)
Q2'22
Q3'22
Stockholders' equity (BV)
$
4,037
$
4,105
Goodwill
(120
)
(120
)
Intangible assets
(11
)
(9
)
Tangible book value (TBV)
$
3,906
$
3,976
Ending shares of common stock outstanding
(in millions)
71.7
70.6
BV/share
$
56.34
$
58.18
TBV/share
$
54.51
$
56.35
Net income
$
151
$
113
ROCE(1)
15.1
%
11.1
%
Beginning stockholders’ equity
$
3,977
$
4,037
Ending stockholders’ equity
$
4,037
$
4,105
Average stockholders’ equity (BV)
$
4,007
$
4,071
(1)
Return on Common Equity (ROCE) is computed
by dividing annualized earnings by average BV.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221026005298/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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