• 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.

 

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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