• Reported net income of $561 and $5.92 per diluted share, including other mark-to-market of $373 million⁽¹⁾, equivalent to a ROCE of 83%
  • Generated record pretax operating income of $363 million, equivalent to a ROTCE of 43.1%
  • Book value per share increased to $33.71 and Tangible book value per share increased to $31.97
  • Originations generated pretax income of $362 million on record funded volume of $25.1 billion
  • Servicing portfolio grew 3% quarter-over-quarter to $646 billion
  • Announced sale of Title365 for $500 million
  • Repurchased 4.5 million shares of common stock for $148 million in the quarter
  • Quarter-end unrestricted cash was $674 million

⁽¹⁾ Other mark-to-market does not include fair value amortization

Mr. Cooper Group Inc. (NASDAQ: COOP) (the “Company”), which principally operates under the Mr. Cooper® and Xome® brands, reported a first quarter net income of $561 million or $5.92 per diluted share. Net income included $373 million in other mark-to-market, which excludes fair value amortization of $19 million. Excluding mark-to-market and other items, the Company reported pretax operating income of $363 million. Other items were $1 million in severance charges related to corporate actions, $3 million in transaction costs related to Title365 sale, and $4 million of intangible amortization.

Chairman and CEO Jay Bray commented, “This quarter was a clear demonstration of how innovative technology, world-class operational discipline, and a culture of team members working together for customers can produce exceptional results, including record operating performance, record origination fundings, and strong growth in our servicing portfolio.”

Chris Marshall, Vice Chairman and CFO added, “Even after investing in MSRs and repurchasing shares, we ended the quarter with a very robust cash position and strengthened capital ratios. The company’s balance sheet and liquidity have never been stronger.”

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 first quarter, Servicing recorded pretax income of $413 million, reflecting a total mark-to-market of $354 million, which included $373 million in other mark-to-market offset by $19 million in fair value amortization. The total servicing portfolio ended the quarter at $646 billion UPB. Servicing generated pretax operating income, excluding the full mark-to-market, of $59 million. At quarter end, the carrying value of the MSR was $3,359 million, of which $3,354 million was at fair value equivalent to 122 bps of MSR UPB and original cost basis of 86 bps.

 

Quarter Ended

($ in millions)

Q4'20

 

Q1'21

 

$

 

BPS

 

$

 

BPS

Operational revenue

$

326

 

 

21.4

 

 

$

375

 

 

23.6

 

Amortization, net of accretion

 

(130

)

 

(8.5

)

 

 

(153

)

 

(9.6

)

Mark-to-market

 

(6

)

 

(0.4

)

 

 

354

 

 

22.3

 

Total revenues

 

190

 

 

12.5

 

 

 

576

 

 

36.3

 

Total expenses

 

(169

)

 

(11.1

)

 

 

(125

)

 

(7.9

)

Total other expenses, net

 

(50

)

 

(3.3

)

 

 

(38

)

 

(2.4

)

(Loss) income before taxes

 

(29

)

 

(1.9

)

 

 

413

 

 

26.0

 

Mark-to-market

 

6

 

 

0.4

 

 

 

(354

)

 

(22.3

)

Accounting items

 

2

 

 

0.1

 

 

 

 

 

 

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

$

(21

)

 

(1.4

)

 

$

59

 

 

3.7

 

 

Quarter Ended

 

Q4'20

Q1'21

Ending UPB ($B)

$

626

 

$

646

 

Average UPB ($B)

$

608

 

$

634

 

60+ day delinquency rate at period end

 

5.8

%

 

5.3

%

Annualized CPR

 

33.1

%

 

30.8

%

Modifications and workouts

 

26,406

 

 

33,976

 

 

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 $362 million.

Mr. Cooper funded 92,463 loans in the first quarter, totaling approximately $25.1 billion UPB, which was comprised of $11.4 billion in direct-to-consumer and $13.7 billion in correspondent. Funded volume increased 2% quarter-over-quarter.

 

Quarter Ended

 

($ in millions)

 

Q4'20

 

 

Q1'21

 

Income before taxes

$

435

 

 

$

362

       

 

Quarter Ended

($ in millions)

Q4'20

 

Q1'21

Total pull through adjusted volume

$

23,706

 

 

$

23,267

 

Funded volume

$

24,526

 

 

$

25,133

 

Refinance recapture percentage

35

%

 

37

%

Recapture percentage

29

%

 

31

%

Purchase volume as a percentage of funded volume

18

%

 

12

%

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 $9 million and pretax operating income of $13 million in the first quarter, which excluded intangible amortization and accounting items related to transaction costs related to Title365 sale.

 

Quarter Ended

($ in millions)

Q4'20

 

Q1'21

Income before taxes

$

10

 

 

$

9

 

Accounting items / other

 

6

 

 

 

3

 

Intangible amortization

 

2

 

 

 

1

 

Pretax operating income excluding accounting items and intangible amortization

$

18

 

 

$

13

 

 

Quarter Ended

 

Q4'20

 

Q1'21

Exchange properties sold

863

 

 

710

 

Average Exchange properties under management

15,132

 

 

14,210

 

Title completed orders

205,718

 

 

188,356

 

Solution completed orders

709,121

 

 

546,552

 

Percentage of revenue earned from third-party customers

47

%

 

48

%

Conference Call Webcast and Investor Presentation

The Company will host a conference call on April 29, 2021 at 10:00 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 5199996 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 5199996 to access the replay. The replay will be accessible through May 14, 2021 at 1:00 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. Return on tangible common equity (ROTCE) is computed by dividing annualized earnings 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 a non-GAAP financial measure that is defined as stockholders’ equity less goodwill and intangible assets. Tangible book value per share is calculated by dividing tangible book value by the number of common shares outstanding. Management believes tangible book value and tangible book value per share are useful metrics to investors because they provide a more accurate measure of the realizable value of stockholder 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 December 31, 2020

 

Three Months Ended March 31, 2021

Revenues:

 

 

 

Service related, net, excluding mark-to-market

$

243

 

 

$

234

 

Mark-to-market

 

(6

)

 

 

354

 

Net gain on mortgage loans held for sale

 

716

 

 

 

679

 

Total revenues

 

953

 

 

 

1,267

 

Total expenses:

 

537

 

 

 

469

 

Other expense, net:

 

 

 

Interest income

 

84

 

 

 

89

 

Interest expense

 

(168

)

 

 

(159

)

Other expense, net

 

(85

)

 

 

 

Total other expense, net

 

(169

)

 

 

(70

)

Income before income tax expense

 

247

 

 

 

728

 

Income tax expense

 

56

 

 

 

167

 

Net income

 

191

 

 

 

561

 

Net income attributable to non-controlling interest

 

 

 

 

 

Net income attributable to Mr. Cooper Group

 

191

 

 

 

561

 

Undistributed earnings attributable to participating stockholders

 

2

 

 

 

5

 

Net income attributable to common stockholders

$

189

 

 

$

556

 

 

 

 

 

 

 

 

 

Net income per share attributable to common stockholders:

 

 

 

Basic

$

2.10

 

 

$

6.22

 

Diluted

$

2.00

 

 

$

5.92

 

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

 

 

 

Basic

 

90.2

 

 

 

89.5

 

Diluted

 

94.7

 

 

 

93.9

 

 

MR. COOPER GROUP INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(millions of dollars)

 

 

December 31, 2020

 

March 31, 2021

Assets

 

 

 

Cash and cash equivalents

$

695

 

 

$

674

 

Restricted cash

218

 

 

261

 

Mortgage servicing rights

2,708

 

 

3,359

 

Advances and other receivables, net

940

 

 

838

 

Reverse mortgage interests, net

5,253

 

 

5,091

 

Mortgage loans held for sale at fair value

5,720

 

 

6,351

 

Property and equipment, net

116

 

 

118

 

Deferred tax assets, net

1,340

 

 

1,228

 

Other assets

7,175

 

 

6,793

 

Total assets

$

24,165

 

 

$

24,713

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

Unsecured senior notes, net

$

2,074

 

 

$

2,074

 

Advance and warehouse facilities, net

6,763

 

 

7,379

 

Payables and other liabilities

7,392

 

 

7,140

 

MSR related liabilities - nonrecourse at fair value

967

 

 

957

 

Mortgage servicing liabilities

41

 

 

38

 

Other nonrecourse debt, net

4,424

 

 

4,221

 

Total liabilities

21,661

 

 

21,809

 

Total stockholders' equity

2,504

 

 

2,904

 

Total liabilities and stockholders' equity

$

24,165

 

 

$

24,713

 

 

UNAUDITED SEGMENT STATEMENT OF

OPERATIONS & EARNINGS RECONCILIATION

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

 

 

Three Months Ended December 31, 2020

 

Servicing

 

Originations

 

Xome

 

Corporate/ Other

 

Consolidated

 

 

 

 

 

 

 

 

 

 

Service related, net

$

87

 

 

$

37

 

 

$

113

 

 

$

 

 

$

237

 

Net gain on mortgage loans held for sale

 

103

 

 

 

613

 

 

 

 

 

 

 

 

 

716

 

Total revenues

 

190

 

 

 

650

 

 

 

113

 

 

 

 

 

 

953

 

Total expenses

 

169

 

 

 

218

 

 

 

104

 

 

 

46

 

 

 

537

 

Other (expense) income, net:

 

 

 

 

 

 

 

 

 

Interest income

 

57

 

 

 

26

 

 

 

 

 

 

1

 

 

 

84

 

Interest expense

 

(107

)

 

 

(23

)

 

 

 

 

 

(38

)

 

 

(168

)

Other income (expense), net

 

 

 

 

 

 

 

1

 

 

 

(86

)

 

 

(85

)

Total other (expense) income, net

 

(50

)

 

 

3

 

 

 

1

 

 

 

(123

)

 

 

(169

)

Pretax (loss) income

$

(29

)

 

$

435

 

 

$

10

 

 

$

(169

)

 

$

247

 

Income tax expense

 

 

 

 

 

 

 

 

 

56

 

Net income

 

 

 

 

 

 

 

 

 

191

 

Net income attributable to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

Net income attributable to common stockholders of Mr. Cooper Group

 

 

 

 

 

 

 

 

 

191

 

Undistributed earnings attributable to participating stockholders

 

 

 

 

 

 

 

 

 

2

 

Net income attributable to common stockholders

 

 

 

 

 

 

 

 

$

189

 

Net income per share

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

$

2.10

 

Diluted

 

 

 

 

 

 

 

 

$

2.00

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Reconciliation:

 

 

 

 

 

 

 

 

 

Pretax (loss) income

$

(29

)

 

$

435

 

 

$

10

 

 

$

(169

)

 

$

247

 

Mark-to-market

 

6

 

 

 

 

 

 

 

 

 

 

 

 

6

 

Accounting items / other

 

2

 

 

 

 

 

 

6

 

 

 

87

 

 

 

95

 

Intangible amortization

 

 

 

 

 

 

 

2

 

 

 

5

 

 

 

7

 

Pretax income (loss), net of notable items

 

(21

)

 

 

435

 

 

 

18

 

 

 

(77

)

 

 

355

 

Fair value amortization (1)

 

(26

)

 

 

 

 

 

 

 

 

 

 

 

(26

)

Pretax operating (loss) income

$

(47

)

 

$

435

 

 

$

18

 

 

$

(77

)

 

$

329

 

Income tax expense(2)

 

 

 

 

 

 

 

 

 

(80

)

Operating income

 

 

 

 

 

 

 

 

$

249

 

ROTCE(3)

 

 

 

 

 

 

 

 

 

44.1

%

Average tangible book value (TBV)(4)

 

 

 

 

 

 

 

 

$

2,263

 

 

(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 $2,176 and ending TBV of $2,350.

 

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

$

449

 

 

$

43

 

 

$

96

 

$

 

 

$

588

 

Net gain on mortgage loans held for sale

 

127

 

 

 

552

 

 

 

 

 

 

 

 

679

 

Total revenues

 

576

 

 

 

595

 

 

 

96

 

 

 

 

 

1,267

 

Total expenses

 

125

 

 

 

231

 

 

 

87

 

 

26

 

 

 

469

 

Other (expense) income, net:

 

 

 

 

 

 

 

 

 

Interest income

 

66

 

 

 

23

 

 

 

 

 

 

 

 

89

 

Interest expense

 

(104

)

 

 

(25

)

 

 

 

 

(30

)

 

 

(159

)

Other income (expense), net

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other (expense) income, net

 

(38

)

 

 

(2

)

 

 

 

 

(30

)

 

 

(70

)

Pretax income (loss)

$

413

 

 

$

362

 

 

$

9

 

$

(56

)

 

$

728

 

Income tax expense

 

 

 

 

 

 

 

 

 

167

 

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)

$

413

 

 

$

362

 

 

$

9

 

$

(56

)

 

$

728

 

Mark-to-market

 

(354

)

 

 

 

 

 

 

 

 

 

 

(354

)

Accounting items / other

 

 

 

 

 

 

 

3

 

 

1

 

 

 

4

 

Intangible amortization

 

 

 

 

 

 

 

1

 

 

3

 

 

 

4

 

Pretax income (loss), net of notable items

 

59

 

 

 

362

 

 

 

13

 

 

(52

)

 

 

382

 

Fair value amortization (1)

 

(19

)

 

 

 

 

 

 

 

 

 

 

(19

)

Pretax operating income (loss)

$

40

 

 

$

362

 

 

$

13

 

$

(52

)

 

$

363

 

Income tax expense

 

 

 

 

 

 

 

 

 

(88

)

Operating income(2)

 

 

 

 

 

 

 

 

$

275

 

ROTCE(3)

 

 

 

 

 

 

 

 

43.1

%

Average tangible book value (TBV)(4)

 

 

 

 

 

 

 

 

$

2,552

 

(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 $2,350 and ending TBV of $2,754.

Non-GAAP Reconciliation:

Quarter Ended

($ in millions except value per share data)

 

Q4'20

 

Q1'21

Stockholders' equity (BV)

$

2,504

 

 

$

2,904

 

Goodwill

 

(120

)

 

 

(120

)

Intangible assets

 

(34

)

 

 

(30

)

Tangible book value (TBV)

$

2,350

 

 

$

2,754

 

Ending shares of common stock outstanding (in millions)

 

89.5

 

 

 

86.1

 

 

 

 

 

BV/share

$

27.99

 

 

$

33.71

 

TBV/share

$

26.27

 

 

$

31.97

 

 

 

 

 

Net income

$

191

 

 

$

561

 

ROCE(1)

 

31.5

%

 

 

83.0

%

 

 

 

 

Beginning stockholders’ equity

$

2,341

 

 

$

2,504

 

Ending stockholders’ equity

$

2,504

 

 

$

2,904

 

Average stockholders’ equity (BV)

$

2,423

 

 

$

2,704

 

(1)

Computed by dividing annualized earnings by average BV.

 

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