Business Wire | Apr 29, 2021 07:01AM EDT

Mr. Cooper Group Reports First Quarter 2021 Financial Results

Apr. 29, 2021

DALLAS--(BUSINESS WIRE)--Apr. 29, 2021--Mr. Cooper Group Inc. (NASDAQ: COOP) (the "Company"), which principally operates under the Mr. Cooper(r) and Xome(r) brands, reported a first quarter net income of $561 million or $5.92 per diluted share. Net income included $373 million in other mark-to-market, which excludes fair value amortization of $19 million. Excluding mark-to-market and other items, the Company reported pretax operating income of $363 million. Other items were $1 million in severance charges related to corporate actions, $3 million in transaction costs related to Title365 sale, and $4 million of intangible amortization.

Chairman and CEO Jay Bray commented, "This quarter was a clear demonstration of how innovative technology, world-class operational discipline, and a culture of team members working together for customers can produce exceptional results, including record operating performance, record origination fundings, and strong growth in our servicing portfolio."

Chris Marshall, Vice Chairman and CFO added, "Even after investing in MSRs and repurchasing shares, we ended the quarter with a very robust cash position and strengthened capital ratios. The company's balance sheet and liquidity have never been stronger."

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 first quarter, Servicing recorded pretax income of $413 million, reflecting a total mark-to-market of $354 million, which included $373 million in other mark-to-market offset by $19 million in fair value amortization. The total servicing portfolio ended the quarter at $646 billion UPB. Servicing generated pretax operating income, excluding the full mark-to-market, of $59 million. At quarter end, the carrying value of the MSR was $3,359 million, of which $3,354 million was at fair value equivalent to 122 bps of MSR UPB and original cost basis of 86 bps.

Quarter Ended

($ in millions) Q4'20 Q1'21

$ BPS $ BPS

Operational revenue $ 326 21.4 $ 375 23.6

Amortization, net of accretion (130 ) (8.5 ) (153 ) (9.6 )

Mark-to-market (6 ) (0.4 ) 354 22.3

Total revenues 190 12.5 576 36.3

Total expenses (169 ) (11.1 ) (125 ) (7.9 )

Total other expenses, net (50 ) (3.3 ) (38 ) (2.4 )

(Loss) income before taxes (29 ) (1.9 ) 413 26.0

Mark-to-market 6 0.4 (354 ) (22.3 )

Accounting items 2 0.1 - -

Pretax operating (loss) incomeexcluding mark-to-market and accounting $ (21 ) (1.4 ) $ 59 3.7 items

Quarter Ended

Q4'20

Q1'21

Ending UPB ($B)

$

626

$

646

Average UPB ($B)

$

608

$

634

60+ day delinquency rate at period end

5.8

%

5.3

%

Annualized CPR

33.1

%

30.8

%

Modifications and workouts

26,406

33,976

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 $362 million.

Mr. Cooper funded 92,463 loans in the first quarter, totaling approximately $25.1 billion UPB, which was comprised of $11.4 billion in direct-to-consumer and $13.7 billion in correspondent. Funded volume increased 2% quarter-over-quarter.

Quarter Ended

Q4'20 Q1'21

Ending UPB ($B) $ 626 $ 646

Average UPB ($B) $ 608 $ 634

60+ day delinquency rate at period end 5.8 % 5.3 %

Annualized CPR 33.1 % 30.8 %

Modifications and workouts 26,406 33,976

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 $362 million.

Mr. Cooper funded 92,463 loans in the first quarter, totaling approximately $25.1 billion UPB, which was comprised of $11.4 billion in direct-to-consumer and $13.7 billion in correspondent. Funded volume increased 2% quarter-over-quarter.

Quarter Ended

($ in millions) Q4'20 Q1'21

Income before taxes $ 435 $ 362

Quarter Ended

($ in millions)

Q4'20

Q1'21

Total pull through adjusted volume

$

23,706

$

23,267

Funded volume

$

24,526

$

25,133

Refinance recapture percentage

35

%

37

%

Recapture percentage

29

%

31

%

Purchase volume as a percentage of funded volume

18

%

12

%

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 $9 million and pretax operating income of $13 million in the first quarter, which excluded intangible amortization and accounting items related to transaction costs related to Title365 sale.

Quarter Ended

($ in millions) Q4'20 Q1'21

Total pull through adjusted volume $ 23,706 $ 23,267

Funded volume $ 24,526 $ 25,133

Refinance recapture percentage 35 % 37 %

Recapture percentage 29 % 31 %

Purchase volume as a percentage of funded volume 18 % 12 %

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 $9 million and pretax operating income of $13 million in the first quarter, which excluded intangible amortization and accounting items related to transaction costs related to Title365 sale.

Quarter Ended

($ in millions) Q4'20 Q1'21

Income before taxes $ 10 $ 9

Accounting items / other 6 3

Intangible amortization 2 1

Pretax operating income excluding accounting items and $ 18 $ 13intangible amortization

Quarter Ended

Q4'20

Q1'21

Exchange properties sold

863

710

Average Exchange properties under management

15,132

14,210

Title completed orders

205,718

188,356

Solution completed orders

709,121

546,552

Percentage of revenue earned from third-party customers

47

%

48

%

Conference Call Webcast and Investor Presentation

The Company will host a conference call on April 29, 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 5199996 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 5199996 to access the replay. The replay will be accessible through May 14, 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. Return on tangible common equity (ROTCE) is computed by dividing annualized earnings 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 a non-GAAP financial measure that is defined as stockholders' equity less goodwill and intangible assets. Tangible book value per share is calculated by dividing tangible book value by the number of common shares outstanding. Management believes tangible book value and tangible book value per share are useful metrics to investors because they provide a more accurate measure of the realizable value of stockholder 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, 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

Quarter Ended

Q4'20 Q1'21

Exchange properties sold 863 710

Average Exchange properties under management 15,132 14,210

Title completed orders 205,718 188,356

Solution completed orders 709,121 546,552

Percentage of revenue earned from third-party customers 47 % 48 %

Conference Call Webcast and Investor Presentation

The Company will host a conference call on April 29, 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 5199996 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 5199996 to access the replay. The replay will be accessible through May 14, 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. Return on tangible common equity (ROTCE) is computed by dividing annualized earnings 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 a non-GAAP financial measure that is defined as stockholders' equity less goodwill and intangible assets. Tangible book value per share is calculated by dividing tangible book value by the number of common shares outstanding. Management believes tangible book value and tangible book value per share are useful metrics to investors because they provide a more accurate measure of the realizable value of stockholder 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, 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 Ended Three Months Ended December 31, 2020 March 31, 2021

Revenues:

Service related, net, excluding $ 243 $ 234 mark-to-market

Mark-to-market (6 ) 354

Net gain on mortgage loans held for 716 679 sale

Total revenues 953 1,267

Total expenses: 537 469

Other expense, net:

Interest income 84 89

Interest expense (168 ) (159 )

Other expense, net (85 ) -

Total other expense, net (169 ) (70 )

Income before income tax expense 247 728

Income tax expense 56 167

Net income 191 561

Net income attributable to - - non-controlling interest

Net income attributable to Mr. 191 561 Cooper Group

Undistributed earnings attributable 2 5 to participating stockholders

Net income attributable to common $ 189 $ 556 stockholders





Net income per share attributable to common stockholders:

Basic $ 2.10 $ 6.22

Diluted $ 2.00 $ 5.92

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

Basic 90.2 89.5

Diluted 94.7 93.9

MR. COOPER GROUP INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(millions of dollars)

December 31, March 31, 2020 2021

Assets

Cash and cash equivalents $ 695 $ 674

Restricted cash 218 261

Mortgage servicing rights 2,708 3,359

Advances and other receivables, net 940 838

Reverse mortgage interests, net 5,253 5,091

Mortgage loans held for sale at fair value 5,720 6,351

Property and equipment, net 116 118

Deferred tax assets, net 1,340 1,228

Other assets 7,175 6,793

Total assets $ 24,165 $ 24,713



Liabilities and Stockholders' Equity

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

Advance and warehouse facilities, net 6,763 7,379

Payables and other liabilities 7,392 7,140

MSR related liabilities - nonrecourse at fair 967 957 value

Mortgage servicing liabilities 41 38

Other nonrecourse debt, net 4,424 4,221

Total liabilities 21,661 21,809

Total stockholders' equity 2,504 2,904

Total liabilities and stockholders' equity $ 24,165 $ 24,713

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 103 613 - - 716 held 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 56 expense

Net income 191

Net incomeattributable to - noncontrollinginterests

Net incomeattributable tocommon 191 stockholders ofMr. Cooper Group

Undistributedearningsattributable to 2 participatingstockholders

Net incomeattributable to $ 189 commonstockholders

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 income(loss), 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 (80 )expense^(2)

Operating income $ 249

ROTCE^(3) 44.1 %

Average tangiblebook value (TBV)^ $ 2,263 (4)

(1)

Amount represents additional amortization required under the fair value amortization method over the cost amortization method.

(2)

Assumes tax-rate of 24.2%.

(3)

Computed by dividing annualized earnings by average TBV.

(4)

Average of beginning TBV of $2,176 and ending TBV of $2,350.

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

^ Assumes tax-rate of 24.2%.(2)

^ Computed by dividing annualized earnings by average TBV.(3)

^ Average of beginning TBV of $2,176 and ending TBV of $2,350.(4)

UNAUDITED SEGMENT STATEMENT OF

OPERATIONS & EARNINGS RECONCILIATION

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

Three Months Ended March 31, 2021

Servicing Originations Xome Corporate Consolidated / Other



Service related, net $ 449 $ 43 $ 96 $ - $ 588

Net gain on mortgage 127 552 - - 679 loans held for sale

Total revenues 576 595 96 - 1,267

Total expenses 125 231 87 26 469

Other (expense) income, net:

Interest income 66 23 - - 89

Interest expense (104 ) (25 ) - (30 ) (159 )

Other income - - - - - (expense), net

Total other(expense) income, (38 ) (2 ) - (30 ) (70 )net

Pretax income (loss) $ 413 $ 362 $ 9 $ (56 ) $ 728

Income tax expense 167

Net income 561

Net incomeattributable to - noncontrollinginterests

Net incomeattributable to 561 common stockholdersof Mr. Cooper Group

Undistributedearningsattributable to 5 participatingstockholders

Net incomeattributable to $ 556 common stockholders

Net income per share

Basic $ 6.22

Diluted $ 5.92



Non-GAAP Reconciliation:

Pretax income (loss) $ 413 $ 362 $ 9 $ (56 ) $ 728

Mark-to-market (354 ) - - - (354 )

Accounting items / - - 3 1 4 other

Intangible - - 1 3 4 amortization

Pretax income(loss), net of 59 362 13 (52 ) 382 notable items

Fair value (19 ) - - - (19 )amortization ^(1)

Pretax operating $ 40 $ 362 $ 13 $ (52 ) $ 363 income (loss)

Income tax expense (88 )

Operating income^(2) $ 275

ROTCE^(3) 43.1 %

Average tangible $ 2,552 book value (TBV)^(4)

(1)

Amount represents additional amortization required under the fair value amortization method over the cost amortization method.

(2)

Assumes tax-rate of 24.2%.

(3)

Computed by dividing annualized earnings by average TBV.

(4)

Average of beginning TBV of $2,350 and ending TBV of $2,754.

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

^ Assumes tax-rate of 24.2%.(2)

^ Computed by dividing annualized earnings by average TBV.(3)

^ Average of beginning TBV of $2,350 and ending TBV of $2,754.(4)

Non-GAAP Reconciliation: Quarter Ended

($ in millions except value per share data) Q4'20 Q1'21

Stockholders' equity (BV) $ 2,504 $ 2,904

Goodwill (120 ) (120 )

Intangible assets (34 ) (30 )

Tangible book value (TBV) $ 2,350 $ 2,754

Ending shares of common stock outstanding (in millions) 89.5 86.1



BV/share $ 27.99 $ 33.71

TBV/share $ 26.27 $ 31.97



Net income $ 191 $ 561

ROCE^(1) 31.5 % 83.0 %



Beginning stockholders' equity $ 2,341 $ 2,504

Ending stockholders' equity $ 2,504 $ 2,904

Average stockholders' equity (BV) $ 2,423 $ 2,704

(1)

Computed by dividing annualized earnings by average BV.

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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