COOP Mr Cooper Group Inc

• Reported net income of $181 million including other mark-to-market of $42 million, equivalent to ROCE of 16.7% and operating ROTCE of 14.5%
• Book value per share and tangible book value per share increased to $68.06 and $65.48
• Servicing portfolio grew 33% y/y to $1,136 billion
• Repurchased 0.5 million shares of common stock for $39 million
• Issued $1 billion senior notes maturing 2032 with coupon of 7.125%

Mr. Cooper Group Inc. (NASDAQ: COOP) (the “Company”), reported first quarter income before income tax expense of $232 and net income of $181 million. Excluding other mark-to-market and other adjustments, the Company reported pretax operating income of $199 million. Adjustments included other mark-to-market net of hedges of $42 million and other items shown below in the reconciliation of GAAP and non-GAAP results.

Chairman and CEO Jay Bray commented, “The company has started the year with excellent momentum, including return on tangible common equity rising to 14.5%. Thanks to our strategic emphasis on technology, including years of investment in AI and the cloud, Mr. Cooper is well positioned to provide our customers with world-class service, operate as a trusted counterparty for our industry stakeholders, and grow and sustain investor returns.”

Mike Weinbach, President added, “This environment is playing to the strengths of our balanced business model, as we are enjoying strong momentum with subservicing clients and seeing attractive opportunities to acquire MSRs, while our originations team has been very nimble in helping customers save money and access the equity they’ve built up in their homes.”

Servicing

The Servicing segment provides a best-in-class home loan experience for our 5.1 million customers while simultaneously strengthening asset performance for investors. In the first quarter, Servicing recorded pretax income of $313 million, including other mark-to-market of $42 million. The servicing portfolio ended the quarter at $1,136 billion. Servicing generated pretax operating income, excluding other mark-to-market, of $273 million. At quarter end, the carrying value of the MSR was $9,796 million equivalent to 155 bps of MSR UPB.

 

Quarter Ended

($ in millions)

 

Q1'24

 

Q4'23

 

$

 

BPS

 

$

 

BPS

Operational revenue

$

577

 

 

 

21.6

 

 

$

507

 

 

 

21.1

 

Amortization, net of accretion

 

(170

)

 

 

(6.4

)

 

 

(151

)

 

 

(6.3

)

Mark-to-market

 

43

 

 

 

1.6

 

 

 

(40

)

 

 

(1.7

)

Total revenues

 

450

 

 

 

16.8

 

 

 

316

 

 

 

13.1

 

Total expenses

 

(185

)

 

 

(6.9

)

 

 

(180

)

 

 

(7.4

)

Total other income, net

 

48

 

 

 

1.8

 

 

 

48

 

 

 

1.9

 

Income before taxes

 

313

 

 

 

11.7

 

 

 

184

 

 

 

7.6

 

Other mark-to-market

 

(42

)

 

 

(1.6

)

 

 

41

 

 

 

1.7

 

Accounting items

 

—

 

 

 

—

 

 

 

2

 

 

 

0.1

 

Intangible amortization

 

2

 

 

 

0.1

 

 

 

2

 

 

 

0.1

 

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

$

273

 

 

 

10.2

 

 

$

229

 

 

 

9.5

 

 

Quarter Ended

Q1'24

Q4'23

MSRs UPB ($B)

$

631

$

588

Subservicing and Other UPB ($B)

505

404

Ending UPB ($B)

$

1,136

$

992

Average UPB ($B)

$

1,068

$

963

60+ day delinquency rate at period end

1.6

%

1.9

%

Annualized CPR

4.7

%

4.0

%

Modifications and workouts

24,460

16,953

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 $32 million.

The Company funded 11,599 loans in the first quarter, totaling approximately $2.9 billion UPB, which was comprised of $1.4 billion in direct-to-consumer and $1.5 billion in correspondent. Funded volume increased 8% quarter-over-quarter, while pull through adjusted volume increased 16% quarter-over-quarter to $3.0 billion.

 

Quarter Ended

($ in millions)

 

Q1'24

 

Q4'23

Income before taxes

$

32

 

$

9

Accounting items

 

—

 

 

1

Pretax operating income excluding accounting items and other

$

32

 

$

10

 

Quarter Ended

($ in millions)

 

Q1'24

 

Q4'23

Total pull through adjusted volume

$

3,013

 

 

$

2,592

 

Funded volume

$

2,878

 

 

$

2,661

 

Refinance recapture percentage

 

70

%

 

 

76

%

Recapture percentage

 

24

%

 

 

22

%

Purchase volume as a percentage of funded volume

 

55

%

 

 

59

%

Conference Call Webcast and Investor Presentation

The Company will host a conference call on April 24, 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 March 31, 2024

 

Three Months Ended December 31, 2023

Revenues:

 

 

 

Service related, net

$

478

 

 

$

345

 

Net gain on mortgage loans held for sale

 

86

 

 

 

59

 

Total revenues

 

564

 

 

 

404

 

Total expenses:

 

317

 

 

 

332

 

Other (expense) income, net:

 

 

 

Interest income

 

158

 

 

 

159

 

Interest expense

 

(170

)

 

 

(159

)

Other (expense) income, net

 

(3

)

 

 

(3

)

Total other (expense) income, net

 

(15

)

 

 

(3

)

Income before income tax expense

 

232

 

 

 

69

 

Income tax expense

 

51

 

 

 

23

 

Net income

$

181

 

 

$

46

 

 

 

 

 

Earnings per share:

 

 

 

Basic

$

2.80

 

 

$

0.71

 

Diluted

$

2.73

 

 

$

0.69

 

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

 

 

 

Basic

 

64.6

 

 

 

65.1

 

Diluted

 

66.3

 

 

 

66.7

 

MR. COOPER GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(millions of dollars)

 

 

 

 

 

Unaudited

 

 

 

March 31, 2024

 

December 31, 2023

Assets

 

 

 

Cash and cash equivalents

$

578

 

$

571

Restricted cash

 

157

 

 

169

Mortgage servicing rights at fair value

 

9,796

 

 

9,090

Advances and other receivables, net

 

914

 

 

996

Mortgage loans held for sale at fair value

 

1,070

 

 

927

Property and equipment, net

 

55

 

 

53

Deferred tax assets, net

 

426

 

 

472

Other assets

 

1,779

 

 

1,918

Total assets

$

14,775

 

$

14,196

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

Unsecured senior notes, net

$

4,137

 

$

3,151

Advance, warehouse and MSR facilities, net

 

4,087

 

 

4,302

Payables and other liabilities

 

1,691

 

 

1,995

MSR related liabilities - nonrecourse at fair value

 

455

 

 

466

Total liabilities

 

10,370

 

 

9,914

Total stockholders' equity

 

4,405

 

 

4,282

Total liabilities and stockholders' equity

$

14,775

 

$

14,196

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(1)

 

 

 

 

 

 

 

(48

)

Operating income

 

 

 

 

 

 

$

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.

UNAUDITED SEGMENT STATEMENT OF

OPERATIONS & EARNINGS RECONCILIATION

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

 

 

 

Three Months Ended December 31, 2023

 

Servicing

 

Originations

 

Corporate/ Other

 

Consolidated

 

 

 

 

 

 

 

 

Service related, net

$

307

 

 

$

16

 

 

$

22

 

 

$

345

 

Net gain on mortgage loans held for sale

 

9

 

 

 

51

 

 

 

(1

)

 

 

59

 

Total revenues

 

316

 

 

 

67

 

 

 

21

 

 

 

404

 

Total expenses

 

180

 

 

 

59

 

 

 

93

 

 

 

332

 

Other income (expense), net:

 

 

 

 

 

 

 

Interest income

 

148

 

 

 

10

 

 

 

1

 

 

 

159

 

Interest expense

 

(100

)

 

 

(9

)

 

 

(50

)

 

 

(159

)

Other expense, net

 

—

 

 

 

—

 

 

 

(3

)

 

 

(3

)

Total other income (expense), net

 

48

 

 

 

1

 

 

 

(52

)

 

 

(3

)

Pretax income (loss)

$

184

 

 

$

9

 

 

$

(124

)

 

$

69

 

Income tax expense

 

 

 

 

 

 

 

23

 

Net income

 

 

 

 

 

 

$

46

 

Earnings per share

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

$

0.71

 

Diluted

 

 

 

 

 

 

$

0.69

 

 

 

 

 

 

 

 

 

Non-GAAP Reconciliation:

 

 

 

 

 

 

 

Pretax income (loss)

$

184

 

 

$

9

 

 

$

(124

)

 

$

69

 

Other mark-to-market

 

41

 

 

 

—

 

 

 

—

 

 

 

41

 

Accounting items / other

 

2

 

 

 

1

 

 

 

36

 

 

 

39

 

Intangible amortization

 

2

 

 

 

—

 

 

 

—

 

 

 

2

 

Pretax operating income (loss)

$

229

 

 

$

10

 

 

$

(88

)

 

$

151

 

Income tax expense

 

 

 

 

 

 

 

(37

)

Operating income(1)

 

 

 

 

 

 

$

114

 

Operating ROTCE(2)

 

 

 

 

 

 

 

11.1

%

Average tangible book value (TBV)(3)

 

 

 

 

 

 

$

4,123

 

(1)

 

Assumes tax-rate of 24.2%.

(2)

 

Computed by dividing annualized earnings by average TBV.

(3)

 

Average of beginning TBV of $4,133 and ending TBV of $4,113.

Non-GAAP Reconciliation:

Quarter Ended

($ in millions except value per share data)

Q1'24

 

Q4'23

Stockholders' equity (BV)

$

4,405

 

 

$

4,282

 

Goodwill

 

(141

)

 

 

(141

)

Intangible assets

 

(26

)

 

 

(28

)

Tangible book value (TBV)

$

4,238

 

 

$

4,113

 

Ending shares of common stock outstanding (in millions)

 

64.7

 

 

 

64.6

 

 

 

 

 

BV/share

$

68.06

 

 

$

66.29

 

TBV/share

$

65.48

 

 

$

63.67

 

 

 

 

 

Net income

$

181

 

 

$

46

 

ROCE(1)

 

16.7

%

 

 

4.3

%

 

 

 

 

Beginning stockholders’ equity

$

4,282

 

 

$

4,304

 

Ending stockholders’ equity

$

4,405

 

 

$

4,282

 

Average stockholders’ equity (BV)

$

4,344

 

 

$

4,293

 

(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/20240424284765/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