• Reported total net income of $658 million including MSR mark of $552 million, equivalent to ROCE of 71.7%
  • Book value per share increased to $53.81 and Tangible book value per share increased to $52.01
  • Servicing UPB grew to $796 billion, up 27% y/y
  • Repurchased 0.7 million common shares for $35 million
  • Closed Sagent transaction resulting in pretax gain of $223 million

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 $658 million or $8.59 per diluted share. Net income included other mark-to-market of $552 million, which excludes fair value of excess spread accretion of $1 million. Excluding other mark-to-market and other items, the Company reported pretax operating income of $96 million. Other items included $223 million gain from the Sagent transaction, $3 million in charges related to severance, and $2 million of intangible amortization.

Chairman and CEO Jay Bray commented, “During the quarter we were able to react quickly and take advantage of attractively priced acquisition opportunities, and we were awarded sizeable subservicing mandates, which together produced spectacular growth in our servicing portfolio, which reached $796 billion. We now have 3.9 million customers, and nothing is more important to us than delighting every single customer with a personalized, friction-free experience that helps them achieve their goals.”

Chris Marshall, Vice Chairman and President added, “While the sharp rise in interest rates will place pressure on the originations industry, we are in a much better position than most, as we stand to benefit from significant improvements in servicing profitability during 2022.”

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 first quarter, Servicing recorded pretax income of $558 million, including other mark-to-market of $552 million. The forward servicing portfolio ended the quarter at $796 billion in UPB. Servicing generated pretax operating income, excluding other mark-to-market, of $7 million. At quarter end, the carrying value of the MSR was $6,006 million equivalent to 146 bps of MSR UPB.

 

Quarter Ended

($ in millions)

Q4'21

 

Q1'22

 

$

 

BPS

 

$

 

BPS

Operational revenue

$

390

 

 

22.9

 

 

$

365

 

 

19.5

 

Amortization, net of accretion

 

(186

)

 

(10.9

)

 

 

(202

)

 

(10.8

)

Mark-to-market

 

45

 

 

2.6

 

 

 

553

 

 

29.5

 

Total revenues

 

249

 

 

14.6

 

 

 

716

 

 

38.2

 

Total expenses

 

(143

)

 

(8.4

)

 

 

(123

)

 

(6.5

)

Total other expenses, net

 

(19

)

 

(1.1

)

 

 

(35

)

 

(1.9

)

Income before taxes

 

87

 

 

5.1

 

 

 

558

 

 

29.8

 

Other mark-to-market

 

(46

)

 

(2.7

)

 

 

(552

)

 

(29.5

)

Accounting items

 

 

 

 

 

 

1

 

 

0.1

 

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

$

41

 

 

2.4

 

 

$

7

 

 

0.4

 

 

Quarter Ended

 

Q4'21

 

Q1'22

Ending UPB ($B)

$

710

 

 

$

796

 

Average UPB ($B)

$

682

 

 

$

749

 

60+ day delinquency rate at period end

 

3.1

%

 

 

2.5

%

Annualized CPR

 

21.2

%

 

 

14.8

%

Modifications and workouts

 

39,554

 

 

 

32,498

 

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 $155 million and pretax operating income of $157 million, which excluded $2 million in charges related to severance.

The Company funded 46,933 loans in the first quarter, totaling approximately $11.6 billion UPB, which was comprised of $7.8 billion in direct-to-consumer and $3.8 billion in correspondent. Funded volume decreased 33% quarter-over-quarter, while pull through adjusted volume decreased 30% quarter-over-quarter to $10.3 billion.

 

Quarter Ended

($ in millions)

 

Q4'21

 

Q1'22

Income before taxes

$

181

 

$

155

Accounting items / other

 

1

 

 

2

Pretax operating income excluding accounting items and other

$

182

 

$

157

 

Quarter Ended

($ in millions) 

Q4'21

 

Q1'22

Total pull through adjusted volume

$

14,736

 

 

$

10,332

 

Funded volume

$

17,165

 

 

$

11,573

 

Refinance recapture percentage

 

43

%

 

 

50

%

Recapture percentage

 

32

%

 

 

37

%

Purchase volume as a percentage of funded volume

 

30

%

 

 

23

%

Conference Call Webcast and Investor Presentation

The Company will host a conference call on April 28, 2022 at 4:30 P.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 1470118 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 December 31, 2021

 

Three Months Ended March 31, 2022

Revenues:

 

 

 

Service related, net

$

207

 

 

$

755

 

Net gain on mortgage loans held for sale

 

418

 

 

 

297

 

Total revenues

 

625

 

 

 

1,052

 

Total expenses:

 

381

 

 

 

338

 

Other income (expense), net:

 

 

 

Interest income

 

68

 

 

 

36

 

Interest expense

 

(115

)

 

 

(106

)

Other income, net

 

34

 

 

 

222

 

Total other (expense) income, net

 

(13

)

 

 

152

 

Income before income tax expense

 

231

 

 

 

866

 

Income tax expense

 

61

 

 

 

208

 

Net income from continuing operations

 

170

 

 

 

658

 

Net loss from discontinued operations

 

(15

)

 

 

 

Net income

 

155

 

 

 

658

 

Net income attributable to non-controlling interest

 

 

 

 

 

Net income attributable to Mr. Cooper Group

 

155

 

 

 

658

 

Undistributed earnings attributable to participating stockholders

 

 

 

 

 

Net income attributable to common stockholders

$

155

 

 

$

658

 

 

 

 

 

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

 

 

 

Basic

$

2.28

 

 

$

8.91

 

Diluted

$

2.20

 

 

$

8.59

 

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

 

 

 

Basic

$

(0.20

)

 

$

 

Diluted

$

(0.19

)

 

$

 

Earnings per common share attributable to Mr. Cooper:

 

 

 

Basic

$

2.08

 

 

$

8.91

 

Diluted

$

2.01

 

 

$

8.59

 

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

 

 

 

Basic

 

74.6

 

 

 

73.9

 

Diluted

 

77.4

 

 

 

76.6

 

     

MR. COOPER GROUP INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(millions of dollars)

     

 

December 31, 2021

 

March 31, 2022

Assets

 

 

 

 

 

Cash and cash equivalents

$

895

 

 

$

579

 

Restricted cash

 

146

 

 

 

130

 

Mortgage servicing rights at fair value

 

4,223

 

 

 

6,006

 

Advances and other receivables, net

 

1,228

 

 

 

1,044

 

Mortgage loans held for sale at fair value

 

4,381

 

 

 

3,593

 

Property and equipment, net

 

98

 

 

 

75

 

Deferred tax assets, net

 

991

 

 

 

794

 

Other assets

 

2,242

 

 

 

2,269

 

Total assets

$

14,204

 

 

$

14,490

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

Unsecured senior notes, net

$

2,670

 

 

$

2,670

 

Advance and warehouse facilities, net

 

4,997

 

 

 

4,795

 

Payables and other liabilities

 

2,392

 

 

 

2,203

 

MSR related liabilities - nonrecourse at fair value

 

778

 

 

 

845

 

Total liabilities

 

10,837

 

 

 

10,513

 

Total stockholders' equity

 

3,367

 

 

 

3,977

 

Total liabilities and stockholders' equity

$

14,204

 

 

$

14,490

   

UNAUDITED SEGMENT STATEMENT OF

OPERATIONS & EARNINGS RECONCILIATION

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

 

 

Three Months Ended December 31, 2021

 

Servicing

 

Originations

 

Corporate/ Other

 

Consolidated

 

 

 

 

 

 

 

 

Service related, net

$

147

 

 

$

44

 

 

$

16

 

 

$

207

 

Net gain on mortgage loans held for sale

 

102

 

 

 

316

 

 

 

 

 

 

418

 

Total revenues

 

249

 

 

 

360

 

 

 

16

 

 

 

625

 

Total expenses

 

143

 

 

 

187

 

 

 

51

 

 

 

381

 

Other (expense) income, net:

 

 

 

 

 

 

 

Interest income

 

42

 

 

 

26

 

 

 

 

 

 

68

 

Interest expense

 

(61

)

 

 

(18

)

 

 

(36

)

 

 

(115

)

Other income, net

 

 

 

 

 

 

 

34

 

 

 

34

 

Total other (expense) income, net

 

(19

)

 

 

8

 

 

 

(2

)

 

 

(13

)

Pretax income (loss)

$

87

 

 

$

181

 

 

$

(37

)

 

$

231

 

Income tax expense

 

 

 

 

 

 

 

61

 

Net income from continuing operations

 

 

 

 

 

 

 

170

 

Net loss from discontinued operations

 

 

 

 

 

 

 

(15

)

Net income

 

 

 

 

 

 

 

155

 

Net income attributable to noncontrolling interests

 

 

 

 

 

 

 

 

Net income attributable to common stockholders of Mr. Cooper Group

 

 

 

 

 

 

 

155

 

Undistributed earnings attributable to participating stockholders

 

 

 

 

 

 

 

 

Net income attributable to common stockholders

 

 

 

 

 

 

$

155

 

Net income per share

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

$

2.08

 

Diluted

 

 

 

 

 

 

$

2.01

 

 

 

 

 

 

 

 

 

Non-GAAP Reconciliation:

 

 

 

 

 

 

 

Pretax income (loss)

$

87

 

 

$

181

 

 

$

(37

)

 

$

231

 

Other mark-to-market

 

(46

)

 

 

 

 

 

 

 

 

(46

)

Accounting items / other

 

 

 

 

1

 

 

 

(32

)

 

 

(31

)

Intangible amortization

 

 

 

 

 

 

 

2

 

 

 

2

 

Pretax operating income (loss)

$

41

 

 

$

182

 

 

$

(67

)

 

$

156

 

Income tax expense

 

 

 

 

 

 

 

(38

)

Operating income(1)

 

 

 

 

 

 

$

118

 

ROTCE(2)

 

 

 

 

 

 

 

14.9

%

Average tangible book value (TBV)(3)

 

 

 

 

 

 

$

3,178

 

(1)

Assumes tax-rate of 24.2%.

(2)

Computed by dividing annualized earnings by average TBV.

(3)

Average of beginning TBV of $3,122 and ending TBV of $3,233.

 

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 from continuing operations

 

 

 

 

 

 

 

658

 

Net loss from discontinued operations

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

658

 

Net income attributable to noncontrolling interests

 

 

 

 

 

 

 

 

Net income attributable to common stockholders of Mr. Cooper Group

 

 

 

 

 

 

 

658

 

Undistributed earnings attributable to participating stockholders

 

 

 

 

 

 

 

 

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(1)

 

 

 

 

 

 

 

(23

)

Operating income

 

 

 

 

 

 

$

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.

Non-GAAP Reconciliation:

Quarter Ended

($ in millions except value per share data) 

Q4'21

 

Q1'22

Stockholders' equity (BV)

$

3,367

 

 

$

3,977

 

Goodwill

 

(120

)

 

 

(120

)

Intangible assets

 

(14

)

 

 

(13

)

Tangible book value (TBV)

$

3,233

 

 

$

3,844

 

Ending shares of common stock outstanding (in millions)

 

73.8

 

 

 

73.9

 

 

 

 

 

BV/share

$

45.64

 

 

$

53.81

 

TBV/share

$

43.82

 

 

$

52.01

 

 

 

 

 

Net income

$

155

 

 

$

658

 

ROCE(1)

 

18.7

%

 

 

71.7

%

 

 

 

 

Beginning stockholders’ equity

$

3,260

 

 

$

3,367

 

Ending stockholders’ equity

$

3,367

 

 

$

3,977

 

Average stockholders’ equity (BV)

$

3,314

 

 

$

3,672

 

(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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