COOP Mr Cooper Group Inc

• Reported $214 million net income or $2.18 per diluted share
• Generated strong pretax operating income of $348 million, equivalent to a ROTCE of 50.9%, offset by a mark-to-market loss of $29 million
• Tangible book value per share increased to $23.95 from $21.42 in the prior quarter
• Originations segment generated record pretax income of $438 million on record funded volume of $15.6 billion
• Xome reported pretax income of $15 million and pretax operating income of $18 million
• As of October 25th, 2020, 6.1% of customers on forbearance, down from peak of 7.2%
• Repurchased 1.2 million shares of common stock for $23.3 million
• Redeemed $950 million of senior notes with $100 million in cash and issued new debt of $850 million at 5.5%
• Expanded total committed advance financing capacity to $2.0 billion, of which $1.5 billion was unused as of 3Q’20
• Quarter-end unrestricted cash of $946 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 $214 million or $2.18 per diluted share. Net income included $53 million in debt refinancing costs related to senior note refinanced in the quarter and a negative $29 million in mark-to-market. Excluding the mark-to-market and other items, the Company reported pretax operating income of $348 million. Items excluded from operating income were negative $29 million in mark-to-market, net of the add back of $25 million in fair value amortization that is included in the full mark-to-market, $53 million in debt breakage, $1 million in severance charges related to corporate actions, and $9 million of intangible amortization.

Chairman and CEO Jay Bray commented, “The strong earnings this quarter, including record origination fundings and a 51% operating ROTCE, are the result of our key strengths - great people, technology development as a core competency, and a business model that balances servicing and originations.”

Chris Marshall, Vice Chairman and CFO added, “We continued to strengthen the company’s balance sheet during the quarter, redeeming $100 million in senior notes, refinancing $850 million at a coupon of 5.5%, and extending our liquidity runway to almost 6 years. At the same time, we bolstered our advance funding capacity with a $900 million committed facility for Ginnie Mae MSRs and advances.”

Servicing

The Servicing segment is focused on providing a best-in-class home loan experience for our 3.4 million customers while simultaneously strengthening asset performance for investors. In the third quarter, Servicing recorded pretax loss of $32 million, reflecting a negative $29 million in mark-to-market. The total servicing portfolio ended the quarter at $588 billion UPB. Servicing earned pretax operating loss, excluding the full mark, of $2 million, equivalent to a servicing margin of negative 0.1 bps. At quarter end, the carrying value of the MSR was $2,669 million, of which $2,663 million was at fair value equivalent to 100 bps of MSR UPB and original cost basis of 86 bps.

 

 

Quarter Ended

($ in millions)

Q2'20

 

Q3'20

 

$

 

BPS

 

$

 

BPS

Operational revenue

$

294

 

19.2

 

 

$

273

 

18.5

 

Amortization, net of accretion

(102)

 

(6.6)

 

 

(112)

 

(7.6)

 

Mark-to-market

(261)

 

(17.1)

 

 

(29)

 

(2.0)

 

Total revenues

(69)

 

(4.5)

 

 

132

 

8.9

 

Total expenses

(122)

 

(8.0)

 

 

(99)

 

(6.7)

 

Total other expenses, net

(60)

 

(3.9)

 

 

(65)

 

(4.4)

 

Loss before taxes

(251)

 

(16.4)

 

 

(32)

 

(2.2)

 

Mark-to-market

261

 

17.1

 

 

29

 

2.0

 

Accounting items

—

 

—

 

 

1

 

0.1

 

Pretax operating income (loss) excluding mark-to-market and accounting items

$

10

 

0.7

 

 

$

(2)

 

(0.1)

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Q2'20

 

Q3'20

Ending UPB ($B)

$

596

 

 

$

588

 

Average UPB ($B)

$

612

 

 

$

591

 

60+ day delinquency rate at period end

4.7

%

 

5.9

%

Annualized CPR

26.0

%

 

30.1

%

Modifications and workouts

6,582

 

 

23,725

 

 

Originations

The Originations segment focuses on creating servicing assets at attractive margins by acquiring loans through the correspondent channel and principally refinancing existing loans in the direct-to-consumer channel. Originations earned pretax income of $438 million.

Mr. Cooper funded 58,140 loans in the third quarter, totaling approximately $15.6 billion UPB, which was comprised of $9.1 billion in direct-to-consumer and $6.5 billion in correspondent. Funded volume increased 45% quarter-over-quarter.

 

 

Quarter Ended

($ in millions)

Q2'20

 

Q3'20

 

 

 

 

Income before taxes

$

433

 

 

$

438

 

Accounting items

1

 

 

—

 

Pretax operating income excluding accounting items

$

434

 

 

$

438

 

 

Quarter Ended

($ in millions)

Q2'20

 

Q3'20

Total pull through adjusted volume

$

12,394

 

 

$

19,794

 

Funded volume

$

10,729

 

 

$

15,598

 

Refinance recapture percentage

31

%

 

31

%

Recapture percentage

26

%

 

25

%

Purchase volume as a percentage of funded volume

10

%

 

16

%

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 $15 million and pretax operating income of $18 million in the third quarter, which excluded intangible amortization.

 

 

Quarter Ended

($ in millions)

Q2'20

 

Q3'20

Income before taxes

$

12

 

 

$

15

 

Intangible amortization

1

 

 

3

 

Pretax operating income excluding intangible amortization

$

13

 

 

$

18

 

 

Quarter Ended

($ in millions)

Q2'20

 

Q3'20

Exchange property sold

1,191

 

 

860

 

Average Exchange property listings

17,438

 

 

15,067

 

Services orders completed

423,974

 

 

422,935

 

Percentage of revenue earned from third-party customers

53

%

 

50

%

 

Conference Call Webcast and Investor Presentation

The Company will host a conference call on October 29, 2020 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 1498733 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 approximately two hours after the conclusion of the conference call by dialing 855-859-2056, or 404-537-3406 internationally. Please use the passcode 1498733 to access the replay. The replay will be accessible through November 13, 2020 at 11:59 P.M. Eastern Time.

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.

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 June 30, 2020

 

Three Months Ended September 30, 2020

Revenues:

 

 

 

Service related, net, excluding mark-to-market

$

273

 

 

$

256

 

Mark-to-market

(261

)

 

(29

)

Net gain on mortgage loans held for sale

618

 

 

645

 

Total revenues

630

 

 

872

 

Total expenses:

419

 

 

431

 

Other expense, net:

 

 

 

Interest income

76

 

 

56

 

Interest expense

(177

)

 

(165

)

Other expense, net

—

 

 

(51

)

Total other expense, net

(101

)

 

(160

)

Income before income tax expense

110

 

 

281

 

Income tax expense

37

 

 

67

 

Net income

73

 

 

214

 

Net income attributable to non-controlling interest

—

 

 

5

 

Net income attributable to Mr. Cooper Group

73

 

 

209

 

Undistributed earnings attributable to participating stockholders

1

 

 

2

 

Net income attributable to common stockholders

$

72

 

 

$

207

 

 

 

 

 

 

 

 

 

Net income per share attributable to common stockholders:

 

 

 

Basic

$

0.78

 

 

$

2.26

 

Diluted

$

0.77

 

 

$

2.18

 

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

 

 

 

Basic

92.0

 

 

91.7

 

Diluted

93.0

 

 

95.1

 

 

MR. COOPER GROUP INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(millions of dollars)

 

June 30, 2020

 

September 30, 2020

Assets

 

 

 

Cash and cash equivalents

$

1,041

 

 

$

946

 

Restricted cash

260

 

 

229

 

Mortgage servicing rights

2,763

 

 

2,669

 

Advances and other receivables, net

668

 

 

745

 

Reverse mortgage interests, net

5,709

 

 

5,460

 

Mortgage loans held for sale at fair value

3,179

 

 

3,817

 

Property and equipment, net

115

 

 

114

 

Deferred tax assets, net

1,391

 

 

1,344

 

Other assets

2,174

 

 

6,431

 

Total assets

$

17,300

 

 

$

21,755

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

Unsecured senior notes, net

$

2,261

 

 

$

2,167

 

Advance and warehouse facilities, net

4,506

 

 

4,851

 

Payables and other liabilities

2,460

 

 

6,590

 

MSR related liabilities - nonrecourse at fair value

1,173

 

 

1,091

 

Mortgage servicing liabilities

48

 

 

44

 

Other nonrecourse debt, net

4,707

 

 

4,671

 

Total liabilities

15,155

 

 

19,414

 

Total stockholders' equity

2,145

 

 

2,341

 

Total liabilities and stockholders' equity

$

17,300

 

 

$

21,755

 

 

UNAUDITED SEGMENT STATEMENT OF

OPERATIONS & EARNINGS RECONCILIATION

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

 

Three Months Ended June 30, 2020

 

Servicing

 

Originations

 

Xome

 

Corporate/ Other

 

Consolidated

 

 

 

 

 

 

 

 

 

Service related, net

$

(114

)

 

$

21

 

 

$

106

 

$

(1

)

 

$

 

12

Net gain on mortgage loans held for sale

45

 

 

573

 

 

—

 

—

 

 

618

 

Total revenues

(69

)

 

594

 

 

106

 

(1

)

 

630

 

Total expenses

122

 

 

167

 

 

95

 

35

 

 

419

 

Other (expense) income, net:

 

 

 

 

 

 

 

 

 

Interest income

57

 

 

19

 

 

—

 

—

 

 

76

 

Interest expense

(117

)

 

(13

)

 

—

 

(47

)

 

(177

)

Other income (expense), net

—

 

 

—

 

 

1

 

(1

)

 

—

 

Total other (expense) income, net

(60

)

 

6

 

 

1

 

(48

)

 

(101

)

Pretax (loss) income

$

(251

)

 

$

433

 

 

$

12

 

$

(84

)

 

$

110

 

Income tax expense

 

 

 

 

 

 

 

 

37

 

Net income

 

 

 

 

 

 

 

 

73

 

Net income attributable to noncontrolling interests

 

 

 

 

 

 

 

 

—

 

Net income attributable to common stockholders of Mr. Cooper Group

 

 

 

 

 

 

 

 

73

 

Undistributed earnings attributable to participating stockholders

 

 

 

 

 

 

 

 

1

 

Net income attributable to common stockholders

 

 

 

 

 

 

 

 

$

72

 

Net income per share

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

$

0.78

 

Diluted

 

 

 

 

 

 

 

 

$

0.77

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Reconciliation:

 

 

 

 

 

 

 

 

 

Pretax (loss) income

$

(251

)

 

$

433

 

 

$

12

 

$

(84

)

 

$

110

 

Mark-to-market

261

 

 

—

 

 

—

 

—

 

 

261

 

Accounting items / other

—

 

 

1

 

 

—

 

—

 

 

1

 

Intangible amortization

—

 

 

—

 

 

1

 

6

 

 

7

 

Pretax income (loss), net of notable items

10

 

 

434

 

 

13

 

(78

)

 

379

 

Fair value amortization (1)

(29

)

 

—

 

 

—

 

—

 

 

(29

)

Pretax operating (loss) income

$

(19

)

 

$

434

 

 

$

13

 

$

(78

)

 

$

350

 

Income tax expense

 

 

 

 

 

 

 

 

(85

)

Operating income

 

 

 

 

 

 

 

 

$

265

 

ROTCE

 

 

 

 

 

 

 

 

 

 

55.0

%

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

 

UNAUDITED SEGMENT STATEMENT OF

OPERATIONS & EARNINGS RECONCILIATION

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

 

Three Months Ended September 30, 2020

 

Servicing

 

Originations

 

Xome

 

Corporate/ Other

 

Consolidated

 

 

 

 

 

 

 

 

 

 

Service related, net

$

92

 

 

$

27

 

 

$

108

 

$

—

 

 

$

227

 

Net gain on mortgage loans held for sale

40

 

 

605

 

 

—

 

—

 

 

645

 

Total revenues

132

 

 

632

 

 

108

 

—

 

 

872

 

Total expenses

99

 

 

195

 

 

94

 

43

 

 

 

431

Other (expense) income, net:

 

 

 

 

 

 

 

 

 

Interest income

40

 

 

16

 

 

—

 

—

 

 

56

 

Interest expense

(105

)

 

(15

)

 

—

 

(45

)

 

(165

)

Other income (expense), net

—

 

 

—

 

 

1

 

(52

)

 

(51

)

Total other (expense) income, net

(65

)

 

1

 

 

1

 

(97

)

 

(160

)

Pretax (loss) income

$

(32

)

 

$

438

 

 

$

15

 

$

(140

)

 

$

281

 

Income tax expense

 

 

 

 

 

 

 

 

67

 

Net income

 

 

 

 

 

 

 

 

214

 

Net income attributable to noncontrolling interests

 

 

 

 

 

 

 

 

5

 

Net income attributable to common stockholders of Mr. Cooper Group

 

 

 

 

 

 

 

 

209

 

Undistributed earnings attributable to participating stockholders

 

 

 

 

 

 

 

 

2

 

Net income attributable to common stockholders

 

 

 

 

 

 

 

 

$

207

 

Net income per share

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

$

2.26

 

Diluted

 

 

 

 

 

 

 

 

$

2.18

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Reconciliation:

 

 

 

 

 

 

 

 

 

Pretax (loss) income

$

(32

)

 

$

438

 

 

$

15

 

$

(140

)

 

$

281

 

Mark-to-market

29

 

 

—

 

 

—

 

—

 

 

29

 

Accounting items / other

1

 

 

—

 

 

—

 

53

 

 

54

 

Intangible amortization

—

 

 

—

 

 

3

 

6

 

 

9

 

Pretax (loss) income, net of notable items

(2

)

 

438

 

 

18

 

(81

)

 

373

 

Fair value amortization (1)

(25

)

 

—

 

 

—

 

—

 

 

(25

)

Pretax operating (loss) income

$

(27

)

 

$

438

 

 

$

18

 

$

(81

)

 

$

348

 

Income tax expense

 

 

 

 

 

 

 

 

(84

)

Operating income

 

 

 

 

 

 

 

 

$

264

 

ROTCE

 

 

 

 

 

 

 

 

 

50.9

%

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

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20201029005395/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