Business Wire | Feb 23, 2021 07:00AM EST

Mr. Cooper Group Reports Fourth Quarter 2020 Financial Results

Feb. 23, 2021

DALLAS--(BUSINESS WIRE)--Feb. 23, 2021--Mr. Cooper Group Inc. (NASDAQ: COOP) (the "Company"), which principally operates under the Mr. Cooper(r) and Xome(r) brands, reported a fourth quarter net income of $191 million or $2.00 per diluted share. Net income included a negative $6 million in mark-to-market, and $85 million expense on redemption of unsecured senior notes (debt breakage costs). Excluding the mark-to-market, fair value amortization of $26 million, debt breakage costs, and other items, the Company reported pretax operating income of $329 million. Other items were $5 million in severance charges related to corporate actions, $5 million in business shutdown costs, and $7 million of intangible amortization.

Chairman and CEO Jay Bray commented, "Strong results in the fourth quarter capped an outstanding year for Mr. Cooper. Despite all the challenges and uncertainties, we never wavered from our focus on the customer, whether it was helping people enter and exit forbearance or save money by refinancing. We enter 2021 with a strong operating and financial momentum, extremely talented and dedicated teammates, and unmatched technology and operational capacity."

Chris Marshall, Vice Chairman and CFO added, "Consistent cash flow allowed us to continue down the path of deleveraging and refinancing our senior notes, which has not only reduced our funding costs, but also leaves us in the position of having no maturities for six years. The company's balance sheet has never been in better shape."

Servicing

The Servicing segment is focused on providing a best-in-class home loan experience for our 3.5 million customers while simultaneously strengthening asset performance for investors. In the fourth quarter, Servicing recorded pretax loss of $29 million, reflecting $6 million in mark-to-market. The total servicing portfolio ended the quarter at $626 billion UPB. Servicing generated pretax operating loss, excluding the full mark and accounting items, of $21 million, equivalent to a servicing margin of negative 1.4 bps. At quarter end, the carrying value of the MSR was $2.7 billion, equivalent to 100 bps of MSR UPB and original cost basis of 86 bps.

Quarter Ended

($ in millions) Q3'20 Q4'20

$ BPS $ BPS

Operational revenue $ 273 18.5 $ 326 21.4

Amortization, net of accretion (112) (7.6) (130) (8.5)

Mark-to-market (29) (2.0) (6) (0.4)

Total revenues 132 8.9 190 12.5

Total expenses (99) (6.7) (169) (11.1)

Total other expenses, net (65) (4.4) (50) (3.3)

Loss before taxes (32) (2.2) (29) (1.9)

Mark-to-market 29 2.0 6 0.4

Accounting items 1 0.1 2 0.1

Pretax operating loss excluding $ (2) (0.1) $ (21) (1.4) mark-to-market and accounting items



Quarter Ended

Q3'20 Q4'20

Ending UPB ($B) $ 588 $ 626

Average UPB ($B) $ 591 $ 608

60+ day delinquency rate at period end 5.9 % 5.8 %

Annualized CPR 30.1 % 33.1 %

Modifications and workouts 23,725 25,525

Originations

The Originations segment focuses on creating servicing assets at attractive margins by acquiring loans through the correspondent channel and refinancing existing loans in the direct-to-consumer channel. Originations earned pretax income of $435 million.

Mr. Cooper funded 85,452 loans in the fourth quarter, totaling approximately $24.5 billion UPB, which was comprised of $10.9 billion in direct-to-consumer and $13.6 billion in correspondent. Funded volume increased 57% quarter-over-quarter.

Quarter Ended

($ in millions) Q3'20 Q4'20

Income before taxes $ 438 $ 435



Quarter Ended

($ in millions)

Q3'20

Q4'20

Total pull through adjusted volume

$

19,794

$

23,706

Funded volume

$

15,598

$

24,526

Refinance recapture percentage

31

%

35

%

Recapture percentage

25

%

29

%

Purchase volume as a percentage of funded volume

16

%

18

%

Xome

Xome provides real estate solutions including property disposition, asset management, title, close, valuation, and field services for Mr. Cooper and third-party clients. The Xome segment recorded pretax income of $10 million and pretax operating income of $18 million in the fourth quarter, which excluded intangible amortization and accounting items related to business shutdown costs and severance.

Quarter Ended

($ in millions) Q3'20 Q4'20

Total pull through adjusted volume $ 19,794 $ 23,706

Funded volume $ 15,598 $ 24,526

Refinance recapture percentage 31 % 35 %

Recapture percentage 25 % 29 %

Purchase volume as a percentage of funded volume 16 % 18 %

Xome

Xome provides real estate solutions including property disposition, asset management, title, close, valuation, and field services for Mr. Cooper and third-party clients. The Xome segment recorded pretax income of $10 million and pretax operating income of $18 million in the fourth quarter, which excluded intangible amortization and accounting items related to business shutdown costs and severance.

Quarter Ended

($ in millions) Q3'20 Q4'20

Income before taxes $ 15 $ 10

Accounting items / other - 6

Intangible amortization 3 2

Pretax operating income excluding accounting items and $ 18 $ 18 intangible amortization

Quarter Ended

Q3'20 Q4'20

Exchange property sold 860 777

Average Exchange property listings 15,067 15,132

Title Completed Orders 223,497 205,718

Solution Completed Orders 635,059 709,121

Percentage of revenue earned from third-party customers 50 % 47 %

Conference Call Webcast and Investor Presentation

The Company will host a conference call on February 23, 2021 at 10:00 A.M. Eastern Time. The conference call may be accessed by dialing 855-874-2685, or 720-634-2923 internationally. Please use the participant passcode 4794750 to access the conference call. A simultaneous audio webcast of the conference call will be available in the Investor section of www.mrcoopergroup.com. A replay will also be available approximately two hours after the conclusion of the conference call by dialing 855-859-2056, or 404-537-3406 internationally. Please use the passcode 4794750 to access the replay. The replay will be accessible through March 10, 2021 at 1:00 P.M. Eastern Time.

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, and other adjustments based on the facts and circumstances that would provide investors a supplemental means for evaluating the Company's core operating performance.

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, including the severity and duration of the COVID-19 pandemic; the pandemic's impact on the U.S. and global economies; federal, state, and local governmental responses to the pandemic; borrower forbearance rates and availability of financing. 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 Three Months Ended Ended September 30, December 31, 2020 2020

Revenues:

Service related, net, excluding mark-to-market $ 256 $ 243

Mark-to-market (29) (6)

Net gain on mortgage loans held for sale 645 716

Total revenues 872 953

Total expenses: 431 537

Other expense, net:

Interest income 56 84

Interest expense (165) (168)

Other expense, net (51) (85)

Total other expense, net (160) (169)

Income before income tax expense 281 247

Income tax expense 67 56

Net income 214 191

Net income attributable to non-controlling 5 - interest

Net income attributable to Mr. Cooper Group 209 191

Undistributed earnings attributable to 2 2 participating stockholders

Net income attributable to common stockholders $ 207 $ 189





Net income per share attributable to common stockholders:

Basic $ 2.26 $ 2.10

Diluted $ 2.18 $ 2.00

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

Basic 91.7 90.2

Diluted 95.1 94.7

MR. COOPER GROUP INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(millions of dollars)

September 30, December 31, 2020 2020

Assets

Cash and cash equivalents $ 946 $ 695

Restricted cash 229 218

Mortgage servicing rights 2,669 2,708

Advances and other receivables, net 745 940

Reverse mortgage interests, net 5,460 5,253

Mortgage loans held for sale at fair value 3,817 5,720

Property and equipment, net 114 116

Deferred tax assets, net 1,344 1,340

Other assets 6,431 7,175

Total assets $ 21,755 $ 24,165



Liabilities and Stockholders' Equity

Unsecured senior notes, net $ 2,167 $ 2,074

Advance and warehouse facilities, net 4,851 6,763

Payables and other liabilities 6,590 7,392

MSR related liabilities - nonrecourse at 1,091 967 fair value

Mortgage servicing liabilities 44 41

Other nonrecourse debt, net 4,671 4,424

Total liabilities 19,414 21,661

Total stockholders' equity 2,341 2,504

Total liabilities and stockholders' equity $ 21,755 $ 24,165

UNAUDITED SEGMENT STATEMENT OF

OPERATIONS & EARNINGS RECONCILIATION

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

Three Months Ended September 30, 2020

Servicing Originations Xome Corporate Consolidated / Other



Service related, $ 92 $ 27 $ 108 $ - $ 227 net

Net gain onmortgage loans held 40 605 - - 645 for sale

Total revenues 132 632 108 - 872

Total expenses 99 195 94 43 431

Other (expense) income, net:

Interest income 40 16 - - 56

Interest expense (105 ) (15 ) - (45 ) (165 )

Other income - - 1 (52 ) (51 )(expense), net

Total other(expense) income, (65 ) 1 1 (97 ) (160 )net

Pretax (loss) $ (32 ) $ 438 $ 15 $ (140 ) $ 281 income

Income tax expense 67

Net income 214

Net incomeattributable to 5 noncontrollinginterests

Net incomeattributable to 209 common stockholdersof Mr. Cooper Group

Undistributedearningsattributable to 2 participatingstockholders

Net incomeattributable to $ 207 common stockholders

Net income per share

Basic $ 2.26

Diluted $ 2.18



Non-GAAP Reconciliation:

Pretax (loss) $ (32 ) $ 438 $ 15 $ (140 ) $ 281 income

Mark-to-market 29 - - - 29

Accounting items / 1 - - 53 54 other

Intangible - - 3 6 9 amortization

Pretax income(loss), net of (2 ) 438 18 (81 ) 373 notable items

Fair value (25 ) - - - (25 )amortization ^(1)

Pretax operating $ (27 ) $ 438 $ 18 $ (81 ) $ 348 (loss) income

Income tax expense (84 )

Operating income $ 264

ROTCE 50.9 %

^(1) Amount represents additional amortization required under the fair valueamortization method over the cost amortization method.

UNAUDITED SEGMENT STATEMENT OF

OPERATIONS & EARNINGS RECONCILIATION

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

Three Months Ended December 31, 2020

Servicing Originations Xome Corporate Consolidated / Other



Service related, $ 87 $ 37 $ 113 $ - $ 237 net

Net gain onmortgage loans held 103 613 - - 716 for sale

Total revenues 190 650 113 - 953

Total expenses 169 218 104 46 537

Other (expense) income, net:

Interest income 57 26 - 1 84

Interest expense (107 ) (23 ) - (38 ) (168 )

Other income - - 1 (86 ) (85 )(expense), net

Total other(expense) income, (50 ) 3 1 (123 ) (169 )net

Pretax (loss) $ (29 ) $ 435 $ 10 $ (169 ) $ 247 income

Income tax expense 56

Net income 191

Net incomeattributable to - noncontrollinginterests

Net incomeattributable to 191 common stockholdersof Mr. Cooper Group

Undistributedearningsattributable to 2 participatingstockholders

Net incomeattributable to $ 189 common stockholders

Net income per share

Basic $ 2.10

Diluted $ 2.00



Non-GAAP Reconciliation:

Pretax (loss) $ (29 ) $ 435 $ 10 $ (169 ) $ 247 income

Mark-to-market 6 - - - 6

Accounting items / 2 - 6 87 95 other

Intangible - - 2 5 7 amortization

Pretax (loss)income, net of (21 ) 435 18 (77 ) 355 notable items

Fair value (26 ) - - - (26 )amortization ^(1)

Pretax operating $ (47 ) $ 435 $ 18 $ (77 ) $ 329 (loss) income

Income tax expense (80 )

Operating income $ 249

ROTCE 44.1 %

^(1) Amount represents additional amortization required under the fair valueamortization method over the cost amortization method.

UNAUDITED SEGMENT STATEMENT OF

OPERATIONS & EARNINGS RECONCILIATION

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

Year Ended December 31, 2020

Servicing Originations Xome Corporate Consolidated / Other



Service related, $ (115 ) $ 105 $ 433 $ - $ 423 net

Net gain onmortgage loans held 222 2,088 - - 2,310 for sale

Total revenues 107 2,193 433 - 2,733

Total expenses 539 746 389 157 1,831

Other (expense) income, net:

Interest income 237 95 - 2 334

Interest expense (442 ) (78 ) - (182 ) (702 )

Other income - - 4 (139 ) (135 )(expense), net

Total other(expense) income, (205 ) 17 4 (319 ) (503 )net

Pretax (loss) $ (637 ) $ 1,464 $ 48 $ (476 ) $ 399 income

Income tax expense 92

Net income 307

Net incomeattributable to 2 noncontrollinginterests

Net incomeattributable to 305 common stockholdersof Mr. Cooper Group

Undistributedearningsattributable to 3 participatingstockholders

Net incomeattributable to $ 302 common stockholders

Net income per share

Basic $ 3.31

Diluted $ 3.20



Non-GAAP Reconciliation:

Pretax (loss) $ (637 ) $ 1,464 $ 48 $ (476 ) $ 399 income

Mark-to-market 679 - - - 679

Accounting items / 7 1 6 140 154 other

Intangible - - 8 24 32 amortization

Pretax income(loss), net of 49 1,465 62 (312 ) 1,264 notable items

Fair value (110 ) - - - (110 )amortization ^(1)

Pretax operating $ (61 ) $ 1,465 $ 62 $ (312 ) $ 1,154 (loss) income

Income tax expense (279 )

Operating income $ 875

ROTCE 42.5 %

^(1) Amount represents additional amortization required under the fair valueamortization method over the cost amortization method.

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CONTACT: Investor Contact: Kenneth Posner, SVP Strategic Planning and Investor Relations (469) 426-3633 Shareholders@mrcooper.com

CONTACT: Media Contact: Christen Reyenga, VP Corporate Communications MediaRelations@mrcooper.com