COOP Mr Cooper Group Inc

• Reported net income of $80 million including other mark-to-market of ($126) million, equivalent to ROCE of 6.9% and operating ROTCE of 16.8%
• Book value per share and tangible book value per share increased to $72.49 and $69.93
• Servicing portfolio grew 32% y/y to $1,239 billion
• Repurchased 0.5 million shares of common stock for $46 million
• Issued $750 million senior notes priced at 6.5%
• Certified as Great Place to Work for the 6th year in a row

Mr. Cooper Group Inc. (NASDAQ: COOP) (the “Company”), reported third quarter income before income tax expense of $112 million and net income of $80 million. Excluding other mark-to-market and other adjustments, the Company reported pretax operating income of $246 million. Adjustments included other mark-to-market net of hedges of $126 million and other items shown below in the reconciliation of GAAP and non-GAAP results.

Chairman and CEO Jay Bray commented, “We delivered an exceptional quarter, marked by an operating ROTCE of 16.8%, and record liquidity. We are excited to welcome our new team members, with the acquisition of Flagstar’s mortgage operations on target to close, as announced, in the fourth quarter.”

Mike Weinbach, President added, “I’m extremely pleased with our strong performance in servicing and exceptional execution in originations, where volumes increased 80% quarter-over-quarter, as our direct-to-consumer channel helped customers take advantage of the rally in mortgage rates during September, while our correspondent channel implemented a number of new initiatives which were well-received by clients.”

Servicing

The Servicing segment provides a best-in-class home loan experience for our 5.4 million customers while simultaneously strengthening asset performance for investors. In the third quarter, Servicing recorded pre-tax income of $177 million inclusive of other mark-to-market loss of $126 million and pretax operating income of $305 million. The servicing portfolio ended the quarter at $1,239 billion. At quarter end, the carrying value of the MSR was $10,035 million equivalent to 148 bps of MSR UPB.

 

Quarter Ended

($ in millions)

Q3'24

 

Q2'24

 

$

 

BPS

 

$

 

BPS

Operational revenue

$

616

 

 

 

20.1

 

 

$

604

 

 

 

20.7

 

Amortization, net of accretion

 

(235

)

 

 

(7.6

)

 

 

(217

)

 

 

(7.4

)

Mark-to-market

 

(125

)

 

 

(4.1

)

 

 

69

 

 

 

2.3

 

Total revenues

 

256

 

 

 

8.4

 

 

 

456

 

 

 

15.6

 

Total expenses

 

(180

)

 

 

(5.9

)

 

 

(171

)

 

 

(5.9

)

Total other income, net

 

101

 

 

 

3.3

 

 

 

69

 

 

 

2.4

 

Income before taxes

 

177

 

 

 

5.8

 

 

 

354

 

 

 

12.1

 

Other mark-to-market

 

126

 

 

 

4.1

 

 

 

(68

)

 

 

(2.4

)

Accounting items

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Intangible amortization

 

2

 

 

 

0.1

 

 

 

2

 

 

 

0.1

 

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

$

305

 

 

 

10.0

 

 

$

288

 

 

9.8

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Q3'24

 

Q2'24

MSRs UPB ($B)

$

678

 

 

$

676

 

Subservicing and Other UPB ($B)

 

561

 

 

 

530

 

Ending UPB ($B)

$

1,239

 

 

$

1,206

 

Average UPB ($B)

$

1,225

 

 

$

1,171

 

60+ day delinquency rate at period end

 

1.5

%

 

 

1.4

%

Annualized CPR

 

7.1

%

 

 

5.6

%

Modifications and workouts

 

21,817

 

 

 

22,645

 

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 $69 million.

The Company funded 25,582 loans in the third quarter, totaling approximately $6.8 billion UPB, which was comprised of $2.3 billion in direct-to-consumer and $4.5 billion in correspondent. Funded volume increased 80% quarter-over-quarter, while pull through adjusted volume increased 67% quarter-over-quarter to $7.5 billion.

 

Quarter Ended

($ in millions)

Q3'24

 

Q2'24

Income before taxes

$

69

 

$

38

Accounting items

 

—

 

 

—

Pretax operating income excluding accounting items and other

$

69

 

$

38

 

Quarter Ended

($ in millions)

Q3'24

 

Q2'24

Total pull through adjusted volume

$

7,491

 

 

$

4,473

 

Funded volume

$

6,825

 

 

$

3,794

 

Refinance recapture percentage

 

69

%

 

 

73

%

Recapture percentage

 

22

%

 

 

22

%

Purchase volume as a percentage of funded volume

 

69

%

 

 

62

%

Conference Call Webcast and Investor Presentation

The Company will host a conference call on October 23, 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 September 30, 2024

 

Three Months Ended June 30, 2024

Revenues:

 

 

 

Service related, net

$

288

 

 

$

485

 

Net gain on mortgage loans held for sale

 

136

 

 

 

98

 

Total revenues

 

424

 

 

 

583

 

Total expenses:

 

335

 

 

 

300

 

Other (expense) income, net:

 

 

 

Interest income

 

227

 

 

 

189

 

Interest expense

 

(199

)

 

 

(187

)

Other expense, net

 

(5

)

 

 

(8

)

Total other expense, net

 

23

 

 

 

(6

)

Income before income tax expense

 

112

 

 

 

277

 

Income tax expense

 

32

 

 

 

73

 

Net income

$

80

 

 

$

204

 

 

 

 

 

Earnings per share:

 

 

 

Basic

$

1.24

 

 

$

3.16

 

Diluted

$

1.22

 

 

$

3.10

 

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

 

 

 

Basic

 

64.3

 

 

 

64.6

 

Diluted

 

65.5

 

 

 

65.8

 

 

MR. COOPER GROUP INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(millions of dollars)

 

 

 

 

 

 

September 30, 2024

 

June 30, 2024

Assets

 

 

 

Cash and cash equivalents

$

733

 

$

642

Restricted cash

 

186

 

 

162

Mortgage servicing rights at fair value

 

10,035

 

 

10,352

Advances and other receivables, net

 

940

 

 

934

Mortgage loans held for sale at fair value

 

1,962

 

 

1,539

Property and equipment, net

 

58

 

 

57

Deferred tax assets, net

 

315

 

 

351

Other assets

 

1,957

 

 

1,746

Total assets

$

16,186

 

$

15,783

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

Unsecured senior notes, net

$

4,885

 

$

4,141

Advance, warehouse and MSR facilities, net

 

4,379

 

 

4,925

Payables and other liabilities

 

1,841

 

 

1,684

MSR related liabilities - nonrecourse at fair value

 

443

 

 

439

Total liabilities

 

11,548

 

 

11,189

Total stockholders' equity

 

4,638

 

 

4,594

Total liabilities and stockholders' equity

$

16,186

 

$

15,783

 

UNAUDITED SEGMENT STATEMENT OF

OPERATIONS & EARNINGS RECONCILIATION

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

 

 

 

Three Months Ended September 30, 2024

 

Servicing

 

Originations

 

Corporate/ Other

 

Consolidated

 

 

 

 

 

 

 

 

Service related, net

$

246

 

 

$

24

 

 

$

18

 

 

$

288

 

Net gain on mortgage loans held for sale

 

10

 

 

 

126

 

 

 

—

 

 

 

136

 

Total revenues

 

256

 

 

 

150

 

 

 

18

 

 

 

424

 

Total expenses

 

180

 

 

 

83

 

 

 

72

 

 

 

335

 

Other income (expense), net:

 

 

 

 

 

 

 

Interest income

 

201

 

 

 

25

 

 

 

1

 

 

 

227

 

Interest expense

 

(100

)

 

 

(23

)

 

 

(76

)

 

 

(199

)

Other expense, net

 

—

 

 

 

—

 

 

 

(5

)

 

 

(5

)

Total other income (expense), net

 

101

 

 

 

2

 

 

 

(80

)

 

 

23

 

Pretax income (loss)

$

177

 

 

$

69

 

 

$

(134

)

 

$

112

 

Income tax expense

 

 

 

 

 

 

32

 

Net income

 

 

 

 

$

80

 

Earnings per share

 

 

 

 

 

Basic

 

 

 

 

$

1.24

 

Diluted

 

 

 

 

 

$

1.22

 

 

 

 

 

 

 

 

Non-GAAP Reconciliation:

 

 

 

 

 

Pretax income (loss)

$

177

 

 

$

69

 

 

$

(134

)

 

$

112

 

Other mark-to-market

 

126

 

 

 

—

 

 

 

—

 

 

 

126

 

Accounting items / other

 

—

 

 

 

—

 

 

 

6

 

 

 

6

 

Intangible amortization

 

2

 

 

 

—

 

 

 

—

 

 

 

2

 

Pretax operating income (loss)

$

305

 

 

$

69

 

 

$

(128

)

 

$

246

 

Income tax expense(1)

 

 

 

 

 

 

(60

)

Operating income

 

 

 

 

 

 

$

186

 

Operating ROTCE(2)

 

 

 

 

16.8

%

Average tangible book value (TBV)(3)

 

 

 

 

$

4,451

 

(1)

Assumes tax-rate of 24.2%.

(2)

Computed by dividing annualized earnings by average TBV.

(3)

Average of beginning TBV of $4,428 and ending TBV of $4,474.

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

 

 

 

 

 

 

 

(53

)

Operating income(1)

 

 

 

 

 

 

$

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.

Non-GAAP Reconciliation:

Quarter Ended

($ in millions except value per share data)

Q3'24

 

Q2'24

Stockholders' equity (BV)

$

4,638

 

 

$

4,594

 

Goodwill

 

(141

)

 

 

(141

)

Intangible assets

 

(23

)

 

 

(25

)

Tangible book value (TBV)

$

4,474

 

 

$

4,428

 

Ending shares of common stock outstanding (in millions)

 

64.0

 

 

 

64.5

 

 

 

 

 

BV/share

$

72.49

 

 

$

71.24

 

TBV/share

$

69.93

 

 

$

68.67

 

 

 

 

 

Net income

$

80

 

 

$

204

 

ROCE(1)

 

6.9

%

 

 

18.1

%

 

 

 

 

Beginning stockholders’ equity

$

4,594

 

 

$

4,405

 

Ending stockholders’ equity

$

4,638

 

 

$

4,594

 

Average stockholders’ equity (BV)

$

4,616

 

 

$

4,500

(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/20241023604090/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