Business Wire | Oct 28, 2021 07:02AM EDT

Mr. Cooper Group Reports Third Quarter 2021 Results

Oct. 28, 2021

DALLAS--(BUSINESS WIRE)--Oct. 28, 2021--Mr. Cooper Group Inc. (NASDAQ: COOP) (the "Company"), which principally operates under the Mr. Cooper(r) and Xome(r) brands, reported a third quarter net income of $299 million or $3.29 per diluted share. The Company reported pretax operating income of $263 million, which excluded mark-to-market and other items. The mark-to-market adjustment was $153 million in the quarter and other items included $7 million gain from the sale of Xome valuations, $4 million in transaction-related costs associated with the Title365 sale, $2 million in charges related to corporate actions, $3 million of intangible amortization, and $15 million pretax loss from discontinued operations.

Chairman and CEO Jay Bray commented, "We took several steps this quarter to rationalize and simplify the business model, allowing us to make progress towards our strategic goals, at the same time that we delivered strong operating results, took care of our customers, and grew our portfolio."

Chris Marshall, Vice Chairman, President, and CFO added, "In addition to generating excellent operating performance, we increased our liquidity and our capital ratios, which positions us for additional growth."

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 third quarter, Servicing recorded pretax income of $197 million, including other mark-to-market of $153 million. The forward servicing portfolio ended the quarter at $668 billion in UPB. Servicing generated pretax operating income, excluding other mark-to-market, of $44 million. At quarter end, the carrying value of the MSR was $3,666 million equivalent to 121 bps of MSR UPB.

Quarter Ended

($ in millions) Q2'21 Q3'21

$ BPS $ BPS

Operational revenue $ 443 27.4 $ 402 24.6

Amortization, net of accretion (198 ) (12.2 ) (202 ) (12.4 )

Mark-to-market (140 ) (8.7 ) 151 9.3

Total revenues 105 6.5 351 21.5

Total expenses (121 ) (7.5 ) (128 ) (7.8 )

Total other expenses, net (40 ) (2.5 ) (26 ) (1.6 )

(Loss) income before taxes (56 ) (3.5 ) 197 12.1

Other mark-to-market 135 8.3 (153 ) (9.4 )

Accounting items 1 0.1 - -

Pretax operating income excluding other $ 80 4.9 $ 44 2.7 mark-to-market and accounting items



Quarter Ended

Q2'21 Q3'21

Ending UPB ($B) $ 654 $ 668

Average UPB ($B) $ 647 $ 653

60+ day delinquency rate at period end 4.5 % 4.0 %

Annualized CPR 26.0 % 24.6 %

Modifications and workouts 35,581 28,581

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 of $271 million and pretax operating income of $273 million, which excluded $2 million in charges related to corporate actions.

The Company funded 74,753 loans in the third quarter, totaling approximately $19.9 billion UPB, which was comprised of $9.8 billion in direct-to-consumer and $10.1 billion in correspondent. Funded volume decreased 10% quarter-over-quarter, while pull through adjusted volume increased 9% quarter-over-quarter to $20.1 billion.

Quarter Ended

($ in millions) Q2'21 Q3'21

Income before taxes $ 207 $ 271

Accounting items / other 6 2

Pretax operating income excluding accounting items and other $ 213 $ 273

Quarter Ended

($ in millions)

Q2'21

Q3'21

Total pull through adjusted volume

$

18,358

$

20,073

Funded volume

$

22,227

$

19,938

Refinance recapture percentage

42

%

40

%

Recapture percentage

32

%

30

%

Purchase volume as a percentage of funded volume

24

%

31

%

Conference Call Webcast and Investor Presentation

The Company will host a conference call on October 28, 2021 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. A telephonic replay will also be available approximately two hours after the conclusion of the conference call by dialing 855-859-2056 (toll-free), or 404-537-3406 (international). Please use the passcode 3974467 to access the replay.

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 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, 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

($ in millions) Q2'21 Q3'21

Total pull through adjusted volume $ 18,358 $ 20,073

Funded volume $ 22,227 $ 19,938

Refinance recapture percentage 42 % 40 %

Recapture percentage 32 % 30 %

Purchase volume as a percentage of funded volume 24 % 31 %

Conference Call Webcast and Investor Presentation

The Company will host a conference call on October 28, 2021 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. A telephonic replay will also be available approximately two hours after the conclusion of the conference call by dialing 855-859-2056 (toll-free), or 404-537-3406 (international). Please use the passcode 3974467 to access the replay.

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 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, 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 Ended Months June 30, Ended 2021 September 30, 2021

Revenues:

Service related, net $ (8 ) $ 288

Net gain on mortgage loans held for sale 582 572

Total revenues 574 860

Total expenses: 425 402

Other income (expense), net:

Interest income 51 66

Interest expense (119 ) (118 )

Other income, net 486 8

Total other income (expense), net 418 (44 )

Income before income tax expense 567 414

Income tax expense 140 104

Net income from continuing operations 427 310

Net income (loss) from discontinued operations 12 (11 )

Net income 439 299

Net income attributable to non-controlling interest - -

Net income attributable to Mr. Cooper Group 439 299

Undistributed earnings attributable to 4 1 participating stockholders

Premium on retirement of preferred stock - 28

Net income attributable to common stockholders $ 435 $ 270



Earnings from continuing operations per common share attributable to Mr. Cooper:

Basic $ 4.91 $ 3.56

Diluted $ 4.72 $ 3.42

Earnings from discontinued operations per common share attributable to Mr. Cooper:

Basic $ 0.14 $ (0.14 )

Diluted $ 0.13 $ (0.13 )

Earnings per common share attributable to Mr. Cooper:

Basic $ 5.05 $ 3.42

Diluted $ 4.85 $ 3.29

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

Basic 86.1 78.9

Diluted 89.6 82.1

MR. COOPER GROUP INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(millions of dollars)

June 30, 2021

September 30, 2021

Assets

Cash and cash equivalents

$

716

$

731

Restricted cash

113

118

Mortgage servicing rights at fair value

3,307

3,666

Advances and other receivables, net

837

909

Mortgage loans held for sale at fair value

6,961

7,939

Property and equipment, net

110

103

Deferred tax assets, net

1,118

1,011

Other assets

5,211

3,462

Assets of discontinued operations

4,935

3,722

Total assets

$

23,308

$

21,661

Liabilities and Stockholders' Equity

Unsecured senior notes, net

$

2,075

$

2,076

Advance and warehouse facilities, net

7,310

8,206

Payables and other liabilities

4,895

3,537

MSR related liabilities - nonrecourse at fair value

888

842

Liabilities of discontinued operations

4,790

3,740

Total liabilities

19,958

18,401

Total stockholders' equity

3,350

3,260

Total liabilities and stockholders' equity

$

23,308

$

21,661

MR. COOPER GROUP INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(millions of dollars)

June 30, September 30, 2021 2021

Assets

Cash and cash equivalents $ 716 $ 731

Restricted cash 113 118

Mortgage servicing rights at fair value 3,307 3,666

Advances and other receivables, net 837 909

Mortgage loans held for sale at fair value 6,961 7,939

Property and equipment, net 110 103

Deferred tax assets, net 1,118 1,011

Other assets 5,211 3,462

Assets of discontinued operations 4,935 3,722

Total assets $ 23,308 $ 21,661



Liabilities and Stockholders' Equity

Unsecured senior notes, net $ 2,075 $ 2,076

Advance and warehouse facilities, net 7,310 8,206

Payables and other liabilities 4,895 3,537

MSR related liabilities - nonrecourse at fair 888 842 value

Liabilities of discontinued operations 4,790 3,740

Total liabilities 19,958 18,401

Total stockholders' equity 3,350 3,260

Total liabilities and stockholders' equity $ 23,308 $ 21,661

UNAUDITED SEGMENT STATEMENT OF

OPERATIONS & EARNINGS RECONCILIATION

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

Three Months Ended June 30, 2021

Servicing

Originations

Corporate/ Other

Consolidated

Service related, net

$

(92

)

$

45

$

39

$

(8

)

Net gain on mortgage loans held for sale

197

385

-

582

Total revenues

105

430

39

574

Total expenses

121

226

78

425

Other (expense) income, net:

Interest income

25

26

-

51

Interest expense

(65

)

(23

)

(31

)

(119

)

Other income, net

-

-

486

486

Total other (expense) income, net

(40

)

3

455

418

Pretax (loss) income

$

(56

)

$

207

$

416

$

567

Income tax expense

140

Net income from continuing operations

427

Net income from discontinued operations

12

Net income

439

Net income attributable to noncontrolling interests

-

Net income attributable to common stockholders of Mr. Cooper Group

439

Undistributed earnings attributable to participating stockholders

4

Net income attributable to common stockholders

$

435

Net income per share

Basic

$

5.05

Diluted

$

4.85

Non-GAAP Reconciliation:

Pretax (loss) income

$

(56

)

$

207

$

416

$

567

Other mark-to-market

135

-

-

135

Accounting items / other

1

6

(485

)

(478

)

Intangible amortization

-

-

3

3

Pretax operating income (loss)

$

80

$

213

$

(66

)

$

227

Income tax expense(1)

(55

)

Operating income

$

172

ROTCE(2)

23.1

%

Average tangible book value (TBV)(3)

$

2,983

UNAUDITED SEGMENT STATEMENT OF

OPERATIONS & EARNINGS RECONCILIATION

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

Three Months Ended June 30, 2021

Servicing Originations Corporate Consolidated / Other



Service related, net $ (92 ) $ 45 $ 39 $ (8 )

Net gain on mortgage loans 197 385 - 582 held for sale

Total revenues 105 430 39 574

Total expenses 121 226 78 425

Other (expense) income, net:

Interest income 25 26 - 51

Interest expense (65 ) (23 ) (31 ) (119 )

Other income, net - - 486 486

Total other (expense) income, (40 ) 3 455 418 net

Pretax (loss) income $ (56 ) $ 207 $ 416 $ 567

Income tax expense 140

Net income from continuing 427 operations

Net income from discontinued 12 operations

Net income 439

Net income attributable to - noncontrolling interests

Net income attributable tocommon stockholders of Mr. 439 Cooper Group

Undistributed earningsattributable to participating 4 stockholders

Net income attributable to $ 435 common stockholders

Net income per share

Basic $ 5.05

Diluted $ 4.85



Non-GAAP Reconciliation:

Pretax (loss) income $ (56 ) $ 207 $ 416 $ 567

Other mark-to-market 135 - - 135

Accounting items / other 1 6 (485 ) (478 )

Intangible amortization - - 3 3

Pretax operating income $ 80 $ 213 $ (66 ) $ 227 (loss)

Income tax expense^(1) (55 )

Operating income $ 172

ROTCE^(2) 23.1 %

Average tangible book value $ 2,983 (TBV)^(3)

(1)Assumes tax-rate of 24.2%.

(2)Computed by dividing annualized earnings by average TBV.

(3)Average of beginning TBV of $2,757 and ending TBV of $3,208.

(1) Assumes tax-rate of 24.2%.

(2) Computed by dividing annualized earnings by average TBV.

(3) Average of beginning TBV of $2,757 and ending TBV of $3,208.

UNAUDITED SEGMENT STATEMENT OF

OPERATIONS & EARNINGS RECONCILIATION

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

Three Months Ended September 30, 2021

Servicing

Originations

Corporate/ Other

Consolidated

Service related, net

$

209

$

44

$

35

$

288

Net gain on mortgage loans held for sale

142

430

-

572

Total revenues

351

474

35

860

Total expenses

128

208

66

402

Other (expense) income, net:

Interest income

39

27

-

66

Interest expense

(65

)

(22

)

(31

)

(118

)

Other income, net

-

-

8

8

Total other (expense) income, net

(26

)

5

(23

)

(44

)

Pretax income (loss)

$

197

$

271

$

(54

)

$

414

Income tax expense

104

Net income from continuing operations

310

Net loss from discontinued operations

(11

)

Net income

299

Net income attributable to noncontrolling interests

-

Net income attributable to common stockholders of Mr. Cooper Group

299

Undistributed earnings attributable to participating stockholders

1

Premium on retirement of preferred stock

28

Net income attributable to common stockholders

$

270

Net income per share

Basic

$

3.42

Diluted

$

3.29

Non-GAAP Reconciliation:

Pretax income (loss)

$

197

$

271

$

(54

)

$

414

Other mark-to-market

(153

)

-

-

(153

)

Accounting items / other

-

2

(3

)

(1

)

Intangible amortization

-

-

3

3

Pretax operating income (loss)

$

44

$

273

$

(54

)

$

263

Income tax expense(1)

(64

)

Operating income

$

199

ROTCE(2)

25.2

%

Average tangible book value (TBV)(3)

$

3,165

UNAUDITED SEGMENT STATEMENT OF

OPERATIONS & EARNINGS RECONCILIATION

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

Three Months Ended September 30, 2021

Servicing Originations Corporate Consolidated / Other



Service related, net $ 209 $ 44 $ 35 $ 288

Net gain on mortgage loans 142 430 - 572 held for sale

Total revenues 351 474 35 860

Total expenses 128 208 66 402

Other (expense) income, net:

Interest income 39 27 - 66

Interest expense (65 ) (22 ) (31 ) (118 )

Other income, net - - 8 8

Total other (expense) (26 ) 5 (23 ) (44 )income, net

Pretax income (loss) $ 197 $ 271 $ (54 ) $ 414

Income tax expense 104

Net income from continuing 310 operations

Net loss from discontinued (11 )operations

Net income 299

Net income attributable to - noncontrolling interests

Net income attributable tocommon stockholders of Mr. 299 Cooper Group

Undistributed earningsattributable to 1 participating stockholders

Premium on retirement of 28 preferred stock

Net income attributable to $ 270 common stockholders

Net income per share

Basic $ 3.42

Diluted $ 3.29



Non-GAAP Reconciliation:

Pretax income (loss) $ 197 $ 271 $ (54 ) $ 414

Other mark-to-market (153 ) - - (153 )

Accounting items / other - 2 (3 ) (1 )

Intangible amortization - - 3 3

Pretax operating income $ 44 $ 273 $ (54 ) $ 263 (loss)

Income tax expense^(1) (64 )

Operating income $ 199

ROTCE^(2) 25.2 %

Average tangible book value $ 3,165 (TBV)^(3)

(1)Assumes tax-rate of 24.2%.

(2)Computed by dividing annualized earnings by average TBV.

(3)Average of beginning TBV of $3,208 and ending TBV of $3,122.

(1) Assumes tax-rate of 24.2%.

(2) Computed by dividing annualized earnings by average TBV.

(3) Average of beginning TBV of $3,208 and ending TBV of $3,122.

Non-GAAP Reconciliation:

Quarter Ended

($ in millions except value per share data)

Q2'21

.

Q3'21

Stockholders' equity (BV)

$

3,350

$

3,260

Goodwill

(120

)

(120

)

Intangible assets

(22

)

(18

)

Tangible book value (TBV)

$

3,208

$

3,122

Ending shares of common stock outstanding (in millions)

86.1

75.1

BV/share

$

38.89

$

43.40

TBV/share

$

37.24

$

41.56

Net income

$

439

$

299

ROCE(1)

56.2

%

36.2

%

Beginning stockholders' equity

$

2,904

$

3,350

Ending stockholders' equity

$

3,350

$

3,260

Average stockholders' equity (BV)

$

3,127

$

3,305

(1) Computed by dividing annualized earnings by average BV. View source version on businesswire.com: https://www.businesswire.com/news/home/20211028005420/en/

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