• Reported total net income of $299 million and $3.29 per diluted share, equivalent to ROCE of 36%
  • Generated pretax operating income of $263 million, equivalent to ROTCE of 25.2%
  • Book value per share increased to $43.40 and Tangible book value per share increased to $41.56
  • Originations generated GAAP pretax income of $271 million and pretax operating income of $273 million on funded volume of $19.9 billion
  • Recognized as a Great Place To Work for the third year in a row

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 $299 million or $3.29 per diluted share. The Company reported pretax operating income of $263 million, which excluded mark-to-market and other items. The mark-to-market adjustment was $153 million in the quarter and other items included $7 million gain from the sale of Xome valuations, $4 million in transaction-related costs associated with the Title365 sale, $2 million in charges related to corporate actions, $3 million of intangible amortization, and $15 million pretax loss from discontinued operations.

Chairman and CEO Jay Bray commented, “We took several steps this quarter to rationalize and simplify the business model, allowing us to make progress towards our strategic goals, at the same time that we delivered strong operating results, took care of our customers, and grew our portfolio.”

Chris Marshall, Vice Chairman, President, and CFO added, “In addition to generating excellent operating performance, we increased our liquidity and our capital ratios, which positions us for additional growth.”

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 third quarter, Servicing recorded pretax income of $197 million, including other mark-to-market of $153 million. The forward servicing portfolio ended the quarter at $668 billion in UPB. Servicing generated pretax operating income, excluding other mark-to-market, of $44 million. At quarter end, the carrying value of the MSR was $3,666 million equivalent to 121 bps of MSR UPB.

 

 

Quarter Ended

($ in millions)

 

Q2'21

 

Q3'21

 

$

 

BPS

 

$

 

BPS

Operational revenue

$

443

 

 

27.4

 

 

$

402

 

 

24.6

 

Amortization, net of accretion

(198

)

 

(12.2

)

 

(202

)

 

(12.4

)

Mark-to-market

(140

)

 

(8.7

)

 

151

 

 

9.3

 

Total revenues

105

 

 

6.5

 

 

351

 

 

21.5

 

Total expenses

(121

)

 

(7.5

)

 

(128

)

 

(7.8

)

Total other expenses, net

(40

)

 

(2.5

)

 

(26

)

 

(1.6

)

(Loss) income before taxes

(56

)

 

(3.5

)

 

197

 

 

12.1

 

Other mark-to-market

135

 

 

8.3

 

 

(153

)

 

(9.4

)

Accounting items

1

 

 

0.1

 

 

 

 

 

Pretax operating income excluding other mark-to-market and accounting items

$

80

 

 

4.9

 

 

$

44

 

 

2.7

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Q2'21

 

Q3'21

Ending UPB ($B)

$

654

 

 

$

668

 

Average UPB ($B)

$

647

 

 

$

653

 

60+ day delinquency rate at period end

4.5

%

 

4.0

%

Annualized CPR

26.0

%

 

24.6

%

Modifications and workouts

35,581

 

 

28,581

 

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 $271 million and pretax operating income of $273 million, which excluded $2 million in charges related to corporate actions.

The Company funded 74,753 loans in the third quarter, totaling approximately $19.9 billion UPB, which was comprised of $9.8 billion in direct-to-consumer and $10.1 billion in correspondent. Funded volume decreased 10% quarter-over-quarter, while pull through adjusted volume increased 9% quarter-over-quarter to $20.1 billion.

 

Quarter Ended

($ in millions)

 

Q2'21

 

Q3'21

Income before taxes

$

207

 

 

$

271

 

Accounting items / other

6

 

 

2

 

Pretax operating income excluding accounting items and other

$

213

 

 

$

273

 

 

Quarter Ended

($ in millions)

 

Q2'21

 

Q3'21

Total pull through adjusted volume

$

18,358

 

 

$

20,073

 

Funded volume

$

22,227

 

 

$

19,938

 

Refinance recapture percentage

42

%

 

40

%

Recapture percentage

32

%

 

30

%

Purchase volume as a percentage of funded volume

24

%

 

31

%

Conference Call Webcast and Investor Presentation

The Company will host a conference call on October 28, 2021 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. A telephonic replay will also be available approximately two hours after the conclusion of the conference call by dialing 855-859-2056 (toll-free), or 404-537-3406 (international). Please use the passcode 3974467 to access the replay.

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 June 30, 2021

 

Three Months Ended September 30, 2021

Revenues:

 

 

 

Service related, net

$

(8

)

 

$

288

 

Net gain on mortgage loans held for sale

582

 

 

572

 

Total revenues

574

 

 

860

 

Total expenses:

425

 

 

402

 

Other income (expense), net:

 

 

 

Interest income

51

 

 

66

 

Interest expense

(119

)

 

(118

)

Other income, net

486

 

 

8

 

Total other income (expense), net

418

 

 

(44

)

Income before income tax expense

567

 

 

414

 

Income tax expense

140

 

 

104

 

Net income from continuing operations

427

 

 

310

 

Net income (loss) from discontinued operations

12

 

 

(11

)

Net income

439

 

 

299

 

Net income attributable to non-controlling interest

 

 

 

Net income attributable to Mr. Cooper Group

439

 

 

299

 

Undistributed earnings attributable to participating stockholders

4

 

 

1

 

Premium on retirement of preferred stock

 

 

28

 

Net income attributable to common stockholders

$

435

 

 

$

270

 

 

 

 

 

Earnings from continuing operations per common share attributable to Mr. Cooper:

 

 

 

Basic

$

4.91

 

 

$

3.56

 

Diluted

$

4.72

 

 

$

3.42

 

Earnings from discontinued operations per common share attributable to Mr. Cooper:

 

 

 

Basic

$

0.14

 

 

$

(0.14

)

Diluted

$

0.13

 

 

$

(0.13

)

Earnings per common share attributable to Mr. Cooper:

 

 

 

Basic

$

5.05

 

 

$

3.42

 

Diluted

$

4.85

 

 

$

3.29

 

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

 

 

 

Basic

86.1

 

 

78.9

 

Diluted

89.6

 

 

82.1

 

 

MR. COOPER GROUP INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(millions of dollars)

 

June 30, 2021

 

September 30, 2021

Assets

 

 

 

Cash and cash equivalents

$

716

 

 

$

731

 

Restricted cash

113

 

 

118

 

Mortgage servicing rights at fair value

3,307

 

 

3,666

 

Advances and other receivables, net

837

 

 

909

 

Mortgage loans held for sale at fair value

6,961

 

 

7,939

 

Property and equipment, net

110

 

 

103

 

Deferred tax assets, net

1,118

 

 

1,011

 

Other assets

5,211

 

 

3,462

 

Assets of discontinued operations

4,935

 

 

3,722

 

Total assets

$

23,308

 

 

$

21,661

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

Unsecured senior notes, net

$

2,075

 

 

$

2,076

 

Advance and warehouse facilities, net

7,310

 

 

8,206

 

Payables and other liabilities

4,895

 

 

3,537

 

MSR related liabilities - nonrecourse at fair value

888

 

 

842

 

Liabilities of discontinued operations

4,790

 

 

3,740

 

Total liabilities

19,958

 

 

18,401

 

Total stockholders' equity

3,350

 

 

3,260

 

Total liabilities and stockholders' equity

$

23,308

 

 

$

21,661

 

 

UNAUDITED SEGMENT STATEMENT OF

OPERATIONS & EARNINGS RECONCILIATION

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

 

 

Three Months Ended June 30, 2021

 

Servicing

 

Originations

Corporate/ Other

Consolidated

 

 

 

 

 

 

Service related, net

$

(92

)

 

$

45

 

$

39

 

$

(8

)

Net gain on mortgage loans held for sale

 

197

 

 

385

 

 

582

 

Total revenues

 

105

 

 

430

 

39

 

574

 

Total expenses

 

121

 

 

226

 

78

 

425

 

Other (expense) income, net:

 

 

 

 

 

Interest income

25

 

 

26

 

 

51

 

Interest expense

(65

)

 

(23

)

(31

)

(119

)

Other income, net

 

 

 

486

 

486

 

Total other (expense) income, net

(40

)

 

3

 

455

 

418

 

Pretax (loss) income

$

(56

)

 

$

207

 

$

416

 

$

567

 

Income tax expense

 

 

 

 

140

 

Net income from continuing operations

 

 

 

 

427

 

Net income from discontinued operations

 

 

 

 

12

 

Net income

 

 

 

 

439

 

Net income attributable to noncontrolling interests

 

 

 

 

 

Net income attributable to common stockholders of Mr. Cooper Group

 

 

 

 

439

 

Undistributed earnings attributable to participating stockholders

 

 

 

 

4

 

Net income attributable to common stockholders

 

 

 

 

$

435

 

Net income per share

 

 

 

 

 

Basic

 

 

 

 

$

5.05

 

Diluted

 

 

 

 

$

4.85

 

 

 

 

 

 

 

Non-GAAP Reconciliation:

 

 

 

 

 

Pretax (loss) income

$

(56

)

 

$

207

 

$

416

 

$

567

 

Other mark-to-market

 

135

 

 

 

 

135

 

Accounting items / other

 

1

 

 

6

 

(485

)

(478

)

Intangible amortization

 

 

 

 

3

 

3

 

Pretax operating income (loss)

$

80

 

 

$

213

 

$

(66

)

$

227

 

Income tax expense(1)

 

 

 

 

(55

)

Operating income

 

 

 

 

$

172

 

ROTCE(2)

 

 

 

 

23.1

%

Average tangible book value (TBV)(3)

 

 

 

 

$

2,983

 

(1)

Assumes tax-rate of 24.2%.

(2)

Computed by dividing annualized earnings by average TBV.

(3)

Average of beginning TBV of $2,757 and ending TBV of $3,208.

 

UNAUDITED SEGMENT STATEMENT OF

OPERATIONS & EARNINGS RECONCILIATION

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

 

 

Three Months Ended September 30, 2021

 

Servicing

 

Originations

 

Corporate/ Other

 

Consolidated

 

 

 

 

 

 

 

 

Service related, net

$

209

 

 

$

44

 

 

$

35

 

 

$

288

 

Net gain on mortgage loans held for sale

142

 

 

430

 

 

 

 

572

 

Total revenues

351

 

 

474

 

 

35

 

 

860

 

Total expenses

128

 

 

208

 

 

66

 

 

402

 

Other (expense) income, net:

 

 

 

 

 

 

 

Interest income

39

 

 

27

 

 

 

 

66

 

Interest expense

(65

)

 

(22

)

 

(31

)

 

(118

)

Other income, net

 

 

 

 

8

 

 

8

 

Total other (expense) income, net

(26

)

 

5

 

 

(23

)

 

(44

)

Pretax income (loss)

$

197

 

 

$

271

 

 

$

(54

)

 

$

414

 

Income tax expense

 

 

 

 

 

 

104

 

Net income from continuing operations

 

 

 

 

 

 

310

 

Net loss from discontinued operations

 

 

 

 

 

 

(11

)

Net income

 

 

 

 

 

 

299

 

Net income attributable to noncontrolling interests

 

 

 

 

 

 

 

Net income attributable to common stockholders of Mr. Cooper Group

 

 

 

 

 

 

299

 

Undistributed earnings attributable to participating stockholders

 

 

 

 

 

 

1

 

Premium on retirement of preferred stock

 

 

 

 

 

 

28

 

Net income attributable to common stockholders

 

 

 

 

 

 

$

270

 

Net income per share

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

$

3.42

 

Diluted

 

 

 

 

 

 

$

3.29

 

 

 

 

 

 

 

 

 

Non-GAAP Reconciliation:

 

 

 

 

 

 

 

Pretax income (loss)

$

197

 

 

$

271

 

 

$

(54

)

 

$

414

 

Other mark-to-market

(153

)

 

 

 

 

 

(153

)

Accounting items / other

 

 

2

 

 

(3

)

 

(1

)

Intangible amortization

 

 

 

 

3

 

 

3

 

Pretax operating income (loss)

$

44

 

 

$

273

 

 

$

(54

)

 

$

263

 

Income tax expense(1)

 

 

 

 

 

 

(64

)

Operating income

 

 

 

 

 

 

$

199

 

ROTCE(2)

 

 

 

 

 

 

 

25.2

%

Average tangible book value (TBV)(3)

 

 

 

 

 

 

$

3,165

 

(1)

Assumes tax-rate of 24.2%.

(2)

Computed by dividing annualized earnings by average TBV.

(3)

Average of beginning TBV of $3,208 and ending TBV of $3,122.

 

Non-GAAP Reconciliation:

Quarter Ended

($ in millions except value per share data)

 

Q2'21

.

Q3'21

Stockholders' equity (BV)

$

3,350

 

 

$

3,260

 

Goodwill

(120

)

 

(120

)

Intangible assets

(22

)

 

(18

)

Tangible book value (TBV)

$

3,208

 

 

$

3,122

 

Ending shares of common stock outstanding (in millions)

 

86.1

 

 

75.1

 

 

 

 

 

BV/share

$

38.89

 

 

$

43.40

 

TBV/share

$

37.24

 

 

$

41.56

 

 

 

 

 

Net income

$

439

 

 

$

299

 

ROCE(1)

56.2

%

 

36.2

%

 

 

 

 

Beginning stockholders’ equity

$

2,904

 

 

$

3,350

 

Ending stockholders’ equity

$

3,350

 

 

$

3,260

 

Average stockholders’ equity (BV)

$

3,127

 

 

$

3,305

 

  (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

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