- Reported total net income of $275 million, equivalent to ROCE
of 26.2%
- Book value per share and tangible book value per share
increased to $65.38 and $62.78
- Servicing UPB grew 10% y/y to $937 billion, establishing Mr.
Cooper as the nation’s largest servicer
- Repurchased 1.0 million shares of common stock for $58
million
- Closed acquisitions of Home Point Capital and Roosevelt
Management Company
Mr. Cooper Group Inc. (NASDAQ: COOP) (the “Company”) reported
third quarter net income of $275 million. Excluding other
mark-to-market and certain other items, pretax operating income was
$249 million, which benefitted from a $67 million gain from the
collapse of a securitization trust. Excluding that gain, operating
return on equity was 13.8% in the quarter. Other mark to market
adjustment was $61 million, and other items included a $96 million
preliminary bargain purchase gain related to the Home Point Capital
Acquisition, a $39 million loss associated with equity investments
primarily related to the sale of our Title business in 2021, and
other items as is reconciled below.
Chairman and CEO Jay Bray commented, “Our impressive
performance, highlighted by rising return on equity, strong book
value per share growth, robust capital, and record liquidity,
reflects the strength of our balanced business model. With our
servicing portfolio now at $937 billion, Mr. Cooper’s consistent
track record of growth has propelled us to the nation’s leading
servicer, one step closer to achieving our $1 trillion target.”
Chris Marshall, Vice Chairman and President added, “I am very
pleased with the outstanding performance of our operations, led by
record servicing results and solid earnings in originations despite
headwinds from rising rates. This drove our operating returns back
into our 12-20% target range, distinguishing us from our
competitors. Our focus on operational excellence and strategic
initiatives positions us to continue to drive higher returns and
sustained growth into the future.”
Additionally, the Company disclosed that Mr. Marshall has
informed it of his plans to retire by the end of 2024. The Company
has initiated a search process to identify his successor.
Servicing
The Servicing segment is focused on providing a best-in-class
home loan experience for our 4.3 million customers while
simultaneously strengthening asset performance for investors. In
the third quarter, Servicing recorded pretax income of $361
million, including other mark-to-market of $61 million. The
servicing portfolio ended the quarter at $937 billion in UPB.
Servicing generated pretax operating income, excluding other
mark-to-market, of $301 million. At quarter end, the carrying value
of the MSR was $8,504 million equivalent to 161 bps of MSR UPB.
Quarter Ended
($ in millions)
Q3'23
Q2'23
$
BPS
$
BPS
Operational revenue
$
561
25.0
$
442
20.9
Amortization, net of accretion
(160
)
(7.1
)
(137
)
(6.5
)
Mark-to-market
63
2.8
63
3.0
Total revenues
464
20.7
368
17.4
Total expenses
(172
)
(7.6
)
(159
)
(7.5
)
Total other expenses, net
69
3.0
34
1.6
Income before taxes
361
16.1
243
11.5
Other mark-to-market
(61
)
(2.7
)
(61
)
(2.9
)
Accounting items
1
—
—
—
Pretax operating income excluding other
mark-to-market and accounting items
$
301
13.4
$
182
8.6
Quarter Ended
Q3'23
Q2'23
MSRs UPB ($B)
$
528
$
459
Subservicing and Other UPB ($B)
409
423
Ending UPB ($B)
$
937
$
882
Average UPB ($B)
$
897
$
848
60+ day delinquency rate at period end
1.9
%
2.0
%
Annualized CPR
5.3
%
5.5
%
Modifications and workouts
21,459
16,851
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 $29 million.
The Company funded 12,468 loans in the third quarter, totaling
approximately $3.4 billion UPB, which was comprised of $1.7 billion
in direct-to-consumer and $1.7 billion in correspondent. Funded
volume decreased 11% quarter-over-quarter, while pull through
adjusted volume decreased 13% quarter-over-quarter to $3.3
billion.
Quarter Ended
($ in millions)
Q3'23
Q2'23
Income before taxes
$
29
$
38
Accounting items
—
—
Pretax operating income excluding
accounting items and other
$
29
$
38
Quarter Ended
($ in millions)
Q3'23
Q2'23
Total pull through adjusted volume
$
3,308
$
3,819
Funded volume
$
3,412
$
3,822
Refinance recapture percentage
83
%
80
%
Recapture percentage
24
%
24
%
Purchase volume as a percentage of funded
volume
54
%
63
%
Conference Call Webcast and Investor
Presentation
The Company will host a conference call on October 25, 2023 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 September 30,
2023
Three Months Ended June 30,
2023
Revenues:
Service related, net
$
432
$
402
Net gain on mortgage loans held for
sale
142
84
Total revenues
574
486
Total expenses:
301
278
Other income (expense), net:
Interest income
167
117
Interest expense
(146
)
(122
)
Other income (expense), net
58
(5
)
Total other income (expense), net
79
(10
)
Income before income tax expense
352
198
Income tax expense
77
56
Net income
$
275
$
142
Earnings per share:
Basic
$
4.14
$
2.10
Diluted
$
4.06
$
2.07
Weighted average shares of common stock
outstanding (in millions):
Basic
66.4
67.6
Diluted
67.7
68.6
MR. COOPER GROUP INC. AND
SUBSIDIARIES
UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS
(millions of dollars)
September 30, 2023
June 30, 2023
Assets
Cash and cash equivalents
$
553
$
517
Restricted cash
151
170
Mortgage servicing rights at fair
value
8,504
7,149
Advances and other receivables, net
758
802
Mortgage loans held for sale at fair
value
893
1,187
Property and equipment, net
59
61
Deferred tax assets, net
499
657
Other assets
2,010
2,601
Total assets
$
13,427
$
13,144
Liabilities and
Stockholders' Equity
Unsecured senior notes, net
$
3,147
$
2,676
Advance and warehouse facilities, net
3,545
3,512
Payables and other liabilities
1,964
2,395
MSR related liabilities - nonrecourse at
fair value
467
482
Total liabilities
9,123
9,065
Total stockholders' equity
4,304
4,079
Total liabilities and stockholders'
equity
$
13,427
$
13,144
UNAUDITED SEGMENT STATEMENT
OF
OPERATIONS & EARNINGS
RECONCILIATION
(millions of dollars, except for
earnings per share data)
Three Months Ended September 30,
2023
Servicing
Originations
Corporate/ Other
Consolidated
Service related, net
$
392
$
18
$
22
$
432
Net gain on mortgage loans held for
sale
72
70
—
142
Total revenues
464
88
22
574
Total expenses
172
58
71
301
Other income (expense), net:
Interest income
157
10
—
167
Interest expense
(88
)
(11
)
(47
)
(146
)
Other income, net
—
—
58
58
Total other income (expense), net
69
(1
)
11
79
Pretax income (loss)
$
361
$
29
$
(38
)
$
352
Income tax expense
77
Net income
$
275
Earnings per share
Basic
$
4.14
Diluted
$
4.06
Non-GAAP Reconciliation:
Pretax income (loss)
$
361
$
29
$
(38
)
$
352
Other mark-to-market
(61
)
—
—
(61
)
Accounting items / other
—
—
(44
)
(44
)
Intangible amortization
1
—
1
2
Pretax operating income (loss)
$
301
$
29
$
(81
)
$
249
Income tax expense(1)
(60
)
Operating income
$
189
Operating ROTCE(2)
18.7
%
Average tangible book value (TBV)(3)
$
4,032
(1)
Assumes tax-rate of 24.2%.
(2)
Computed by dividing annualized earnings
by average TBV.
(3)
Average of beginning TBV of $3,931 and
ending TBV of $4,133.
UNAUDITED SEGMENT STATEMENT
OF
OPERATIONS & EARNINGS
RECONCILIATION
(millions of dollars, except for
earnings per share data)
Three Months Ended June 30,
2023
Servicing
Originations
Corporate/ Other
Consolidated
Service related, net
$
365
$
16
$
21
$
402
Net gain on mortgage loans held for
sale
3
81
—
84
Total revenues
368
97
21
486
Total expenses
159
59
60
278
Other income (expense), net:
Interest income
107
10
—
117
Interest expense
(73
)
(10
)
(39
)
(122
)
Other expense, net
—
—
(5
)
(5
)
Total other income (expense), net
34
—
(44
)
(10
)
Pretax income (loss)
$
243
$
38
$
(83
)
$
198
Income tax expense
56
Net income
$
142
Earnings per share
Basic
$
2.10
Diluted
$
2.07
Non-GAAP Reconciliation:
Pretax income (loss)
$
243
$
38
$
(83
)
$
198
Other mark-to-market
(61
)
—
—
(61
)
Accounting items / other
—
—
11
11
Intangible amortization
—
—
2
2
Pretax operating income (loss)
$
182
$
38
$
(70
)
$
150
Income tax expense
(36
)
Operating income(1)
$
114
ROTCE(2)
11.7
%
Average tangible book value (TBV)(3)
$
3,896
(1)
Assumes tax-rate of 24.2%.
(2)
Computed by dividing annualized earnings
by average TBV.
(3)
Average of beginning TBV of $3,860 and
ending TBV of $3,931.
Non-GAAP Reconciliation:
Quarter Ended
($ in millions except value per share
data)
Q3'23
Q2'23
Stockholders' equity (BV)
$
4,304
$
4,079
Goodwill
(141
)
(120
)
Intangible assets
(30
)
(28
)
Tangible book value (TBV)
$
4,133
$
3,931
Ending shares of common stock outstanding
(in millions)
65.8
66.8
BV/share
$
65.38
$
61.02
TBV/share
$
62.78
$
58.81
Net income
$
275
$
142
ROCE(1)
26.2
%
14.1
%
Beginning stockholders’ equity
$
4,079
$
3,986
Ending stockholders’ equity
$
4,304
$
4,079
Average stockholders’ equity (BV)
$
4,192
$
4,033
(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/20231025230426/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
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