COOP Mr Cooper Group Inc

• Reported net income of $204 million including other mark-to-market of $68 million, equivalent to ROCE of 18.1% and operating ROTCE of 15.3%
• Book value per share and tangible book value per share increased to $71.24 and $68.67
• Servicing portfolio grew 37% y/y to $1,206 billion
• Repurchased 0.3 million shares of common stock for $24 million. Board of directors approved additional $200 million for stock repurchase, bringing total authorization to approximately $270 million
• Announced acquisition of Flagstar’s mortgage operations, including MSRs and subservicing contracts totaling approximately $356 billion in unpaid principal balance (UPB), for $1.4 billion in cash

Mr. Cooper Group Inc. (NASDAQ: COOP) (the “Company”), reported second quarter income before income tax expense of $277 million and net income of $204 million. Excluding other mark-to-market and other adjustments, the Company reported pretax operating income of $219 million. Adjustments included other mark-to-market net of hedges of $68 million and other items shown below in the reconciliation of GAAP and non-GAAP results.

The acquisition of Flagstar’s mortgage operations consists of acquiring MSRs, advances, subservicing contracts, and a third-party origination platform. This purchase will be funded through available cash and drawdowns of existing MSR lines. Upon closing, Mr. Cooper expects to welcome 1.3 million customers and add approximately $356 billion in UPB. The transaction is expected to close in the fourth quarter of 2024, subject to customary closing conditions.

Chairman and CEO Jay Bray commented, “We have the operational capacity to onboard Flagstar’s customers with a smooth and positive experience, which will be our top priority. We also look forward to welcoming Flagstar team members to the Mr. Cooper family. We have long respected Flagstar as a mortgage servicer, and we feel very closely aligned with their cultural values.”

Servicing

The Servicing segment provides a best-in-class home loan experience for our 5.3 million customers while simultaneously strengthening asset performance for investors. In the first quarter, Servicing recorded pretax income of $354 million, including other mark-to-market of $68 million. The servicing portfolio ended the quarter at $1,206 billion. Servicing generated pretax operating income, excluding other mark-to-market, of $288 million. At quarter end, the carrying value of the MSR was $10,352 million equivalent to 153 bps of MSR UPB.

 

Quarter Ended

($ in millions)

 

Q2'24

 

Q1'24

 

$

 

BPS

 

$

 

BPS

Operational revenue

$

604

 

 

 

20.7

 

 

$

577

 

 

 

21.6

 

Amortization, net of accretion

 

(217

)

 

 

(7.4

)

 

 

(170

)

 

 

(6.4

)

Mark-to-market

 

69

 

 

 

2.3

 

 

 

43

 

 

 

1.6

 

Total revenues

 

456

 

 

 

15.5

 

 

 

450

 

 

 

16.8

 

Total expenses

 

(171

)

 

 

(5.9

)

 

 

(185

)

 

 

(6.9

)

Total other income, net

 

69

 

 

 

2.4

 

 

 

48

 

 

 

1.8

 

Income before taxes

 

354

 

 

 

12.1

 

 

 

313

 

 

 

11.7

 

Other mark-to-market

 

(68

)

 

 

(2.4

)

 

 

(42

)

 

 

(1.6

)

Accounting items

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Intangible amortization

 

2

 

 

 

0.1

 

 

 

2

 

 

 

0.1

 

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

$

288

 

 

 

9.8

 

 

$

273

 

 

 

10.2

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Q2'24

 

Q1'24

MSRs UPB ($B)

$

676

 

 

$

631

 

Subservicing and Other UPB ($B)

 

530

 

 

 

505

 

Ending UPB ($B)

$

1,206

 

 

$

1,136

 

Average UPB ($B)

$

1,171

 

 

$

1,068

 

60+ day delinquency rate at period end

 

1.4

%

 

 

1.6

%

Annualized CPR

 

5.6

%

 

 

4.7

%

Modifications and workouts

 

22,645

 

 

 

24,460

 

Originations

The Originations segment creates 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 $38 million.

The Company funded 15,080 loans in the second quarter, totaling approximately $3.8 billion UPB, which was comprised of $1.7 billion in direct-to-consumer and $2.1 billion in correspondent. Funded volume increased 32% quarter-over-quarter, while pull through adjusted volume increased 48% quarter-over-quarter to $4.5 billion.

 

Quarter Ended

($ in millions)

 

Q2'24

 

Q1'24

Income before taxes

$

38

 

$

32

Accounting items

 

—

 

 

—

Pretax operating income excluding accounting items and other

$

38

 

$

32

 

Quarter Ended

($ in millions)

 

Q2'24

 

Q1'24

Total pull through adjusted volume

$

4,473

 

 

$

3,013

 

Funded volume

$

3,794

 

 

$

2,878

 

Refinance recapture percentage

 

73

%

 

 

70

%

Recapture percentage

 

22

%

 

 

24

%

Purchase volume as a percentage of funded volume

 

62

%

 

 

55

%

Conference Call Webcast and Investor Presentation

The Company will host a conference call on July 25, 2024 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, 2024

 

Three Months Ended March 31, 2024

Revenues:

 

 

 

Service related, net

$

485

 

 

$

478

 

Net gain on mortgage loans held for sale

 

98

 

 

 

86

 

Total revenues

 

583

 

 

 

564

 

Total expenses:

 

300

 

 

 

317

 

Other (expense) income, net:

 

 

 

Interest income

 

189

 

 

 

158

 

Interest expense

 

(187

)

 

 

(170

)

Other expense, net

 

(8

)

 

 

(3

)

Total other expense, net

 

(6

)

 

 

(15

)

Income before income tax expense

 

277

 

 

 

232

 

Income tax expense

 

73

 

 

 

51

 

Net income

$

204

 

 

$

181

 

 

 

 

 

Earnings per share:

 

 

 

Basic

$

3.16

 

 

$

2.80

 

Diluted

$

3.10

 

 

$

2.73

 

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

 

 

 

Basic

 

64.6

 

 

 

64.6

 

Diluted

 

65.8

 

 

 

66.3

 

MR. COOPER GROUP INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(millions of dollars)

 

 

 

 

 

June 30, 2024

 

March 31, 2024

Assets

 

 

 

Cash and cash equivalents

$

642

 

$

578

Restricted cash

 

162

 

 

157

Mortgage servicing rights at fair value

 

10,352

 

 

9,796

Advances and other receivables, net

 

934

 

 

914

Mortgage loans held for sale at fair value

 

1,539

 

 

1,070

Property and equipment, net

 

57

 

 

55

Deferred tax assets, net

 

351

 

 

426

Other assets

 

1,746

 

 

1,779

Total assets

$

15,783

 

$

14,775

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

Unsecured senior notes, net

$

4,141

 

$

4,137

Advance, warehouse and MSR facilities, net

 

4,925

 

 

4,087

Payables and other liabilities

 

1,684

 

 

1,691

MSR related liabilities - nonrecourse at fair value

 

439

 

 

455

Total liabilities

 

11,189

 

 

10,370

Total stockholders' equity

 

4,594

 

 

4,405

Total liabilities and stockholders' equity

$

15,783

 

$

14,775

UNAUDITED SEGMENT STATEMENT OF

OPERATIONS & EARNINGS RECONCILIATION

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

 

 

Three Months Ended June 30, 2024

 

Servicing

 

Originations

 

Corporate/ Other

 

Consolidated

 

 

 

 

 

 

 

 

Service related, net

$

446

 

 

$

19

 

 

$

20

 

 

$

485

 

Net gain on mortgage loans held for sale

 

10

 

 

 

88

 

 

 

—

 

 

 

98

 

Total revenues

 

456

 

 

 

107

 

 

 

20

 

 

 

583

 

Total expenses

 

171

 

 

 

69

 

 

 

60

 

 

 

300

 

Other income (expense), net:

 

 

 

 

 

 

 

Interest income

 

174

 

 

 

15

 

 

 

—

 

 

 

189

 

Interest expense

 

(105

)

 

 

(15

)

 

 

(67

)

 

 

(187

)

Other expense, net

 

—

 

 

 

—

 

 

 

(8

)

 

 

(8

)

Total other income (expense), net

 

69

 

 

 

—

 

 

 

(75

)

 

 

(6

)

Pretax income (loss)

$

354

 

 

$

38

 

 

$

(115

)

 

$

277

 

Income tax expense

 

 

 

 

 

 

 

73

 

Net income

 

 

 

 

 

 

$

204

 

Earnings per share

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

$

3.16

 

Diluted

 

 

 

 

 

 

$

3.10

 

 

 

 

 

 

 

 

 

Non-GAAP Reconciliation:

 

 

 

 

 

 

 

Pretax income (loss)

$

354

 

 

$

38

 

 

$

(115

)

 

$

277

 

Other mark-to-market

 

(68

)

 

 

—

 

 

 

—

 

 

 

(68

)

Accounting items / other

 

—

 

 

 

—

 

 

 

8

 

 

 

8

 

Intangible amortization

 

2

 

 

 

—

 

 

 

—

 

 

 

2

 

Pretax operating income (loss)

$

288

 

 

$

38

 

 

$

(107

)

 

$

219

 

Income tax expense(1)

 

 

 

 

 

 

 

(53

)

Operating income

 

 

 

 

 

 

$

166

 

Operating ROTCE(2)

 

 

 

 

 

 

 

15.3

%

Average tangible book value (TBV)(3)

 

 

 

 

 

 

$

4,333

 

 

(1) Assumes tax-rate of 24.2%.

(2) Computed by dividing annualized earnings by average TBV. (3) Average of beginning TBV of $4,238 and ending TBV of $4,428.

UNAUDITED SEGMENT STATEMENT OF

OPERATIONS & EARNINGS RECONCILIATION

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

 

 

Three Months Ended March 31, 2024

 

Servicing

 

Originations

 

Corporate/ Other

 

Consolidated

 

 

 

 

 

 

 

 

Service related, net

$

440

 

 

$

16

 

 

$

22

 

 

$

478

 

Net gain on mortgage loans held for sale

 

10

 

 

 

76

 

 

 

—

 

 

 

86

 

Total revenues

 

450

 

 

 

92

 

 

 

22

 

 

 

564

 

Total expenses

 

185

 

 

 

62

 

 

 

70

 

 

 

317

 

Other income (expense), net:

 

 

 

 

 

 

 

Interest income

 

146

 

 

 

12

 

 

 

—

 

 

 

158

 

Interest expense

 

(98

)

 

 

(10

)

 

 

(62

)

 

 

(170

)

Other expense, net

 

—

 

 

 

—

 

 

 

(3

)

 

 

(3

)

Total other income (expense), net

 

48

 

 

 

2

 

 

 

(65

)

 

 

(15

)

Pretax income (loss)

$

313

 

 

$

32

 

 

$

(113

)

 

$

232

 

Income tax expense

 

 

 

 

 

 

 

51

 

Net income

 

 

 

 

 

 

$

181

 

Earnings per share

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

$

2.80

 

Diluted

 

 

 

 

 

 

$

2.73

 

 

 

 

 

 

 

 

 

Non-GAAP Reconciliation:

 

 

 

 

 

 

 

Pretax income (loss)

$

313

 

 

$

32

 

 

$

(113

)

 

$

232

 

Other mark-to-market

 

(42

)

 

 

—

 

 

 

—

 

 

 

(42

)

Accounting items / other

 

—

 

 

 

—

 

 

 

7

 

 

 

7

 

Intangible amortization

 

2

 

 

 

—

 

 

 

—

 

 

 

2

 

Pretax operating income (loss)

$

273

 

 

$

32

 

 

$

(106

)

 

$

199

 

Income tax expense

 

 

 

 

 

 

 

(48

)

Operating income(1)

 

 

 

 

 

 

$

151

 

Operating ROTCE(2)

 

 

 

 

 

 

 

14.5

%

Average tangible book value (TBV)(3)

 

 

 

 

 

 

$

4,176

 

  (1) Assumes tax-rate of 24.2%. (2) Computed by dividing annualized earnings by average TBV. (3) Average of beginning TBV of $4,113 and ending TBV of $4,238.

Non-GAAP Reconciliation:

Quarter Ended

($ in millions except value per share data)

Q2'24

 

Q1'24

Stockholders' equity (BV)

$

4,594

 

 

$

4,405

 

Goodwill

 

(141

)

 

 

(141

)

Intangible assets

 

(25

)

 

 

(26

)

Tangible book value (TBV)

$

4,428

 

 

$

4,238

 

Ending shares of common stock outstanding (in millions)

 

64.5

 

 

 

64.7

 

 

 

 

 

BV/share

$

71.24

 

 

$

68.06

 

TBV/share

$

68.67

 

 

$

65.48

 

 

 

 

 

Net income

$

204

 

 

$

181

 

ROCE(1)

 

18.1

%

 

 

16.7

%

 

 

 

 

Beginning stockholders’ equity

$

4,405

 

 

$

4,282

 

Ending stockholders’ equity

$

4,594

 

 

$

4,405

 

Average stockholders’ equity (BV)

$

4,500

 

 

$

4,344

 

 

(1) Return on Common Equity (ROCE) is computed by dividing annualized earnings by average BV.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240725237654/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