Press Release

Mr. Cooper Group Reports First Quarter 2020 Financial Results

Company Release - 4/30/2020 7:00 AM ET
  • Reported $171 million net loss or $1.84 per diluted share, reflecting a negative $383 million mark-to-market
  • Moved more than 95% of teammates to work-from-home status in 5 days
  • Increased unrestricted cash quarter-over-quarter from $329 million to $579 million
  • Generated strong pretax operating income of $127 million, equivalent to a 19.6% after-tax ROTCE
  • Originations segment generated pretax income of $158 million on funded volume of $12.4 billion
  • Servicing margin compressed to 3.9 bps
  • Xome reported pretax income of $11 million and pretax operating income of $13 million, with third-party revenue rising quarter-over-quarter from 51% to 55%

DALLAS--(BUSINESS WIRE)-- Mr. Cooper Group Inc. (NASDAQ: COOP) (the “Company”), which principally operates under the Mr. Cooper® and Xome® brands, reported a first quarter net loss of $171 million or $1.84 per diluted share. Net loss included a negative $383 million in mark-to-market. Excluding the mark-to-market and other items, the Company reported pretax operating income of $127 million. Items excluded from operating income were negative $383 million in mark-to-market, net of the add back of $30 million in fair value amortization that is included in the full mark-to-market, $4 million in severance charges related to corporate actions, and $9 million of intangible amortization.

Chairman and CEO Jay Bray commented, “I am very proud of how all our team members rose to the challenge, helping over 194,000 customers initiate pandemic forbearance plans, while at the same time generating very strong operating results for the company.”

Chris Marshall, vice chairman and CFO added, “2020 will be a much different year than the one we planned for, but we’ve executed our contingency plans and positioned our balance sheet and bank facilities appropriately; as a result we expect our business to continue to produce excellent results throughout the year.”

Servicing

The Servicing segment is focused on providing a best-in-class home loan experience for our 3.7 million customers while simultaneously strengthening asset performance for investors. In the first quarter, Servicing recorded pretax loss of $325 million, reflecting a negative $383 million in mark-to-market. The total servicing portfolio ended the quarter at $629 billion UPB. Servicing earned pretax operating income excluding the full mark and severance charges related to corporate actions of $62 million, equivalent to a servicing margin of 3.9 bps. At quarter end, the carrying value of the MSR was $3,115 million, of which $3,109 million was at fair value equivalent to 107 bps of MSR UPB and original cost basis of 86 bps.

 

Quarter Ended

($ in millions)

Q4'19

 

Q1'20

 

$

 

BPS

 

$

 

BPS

Operational revenue

$

316

 

 

20.1

 

 

$

313

 

 

19.7

 

Amortization, net of accretion

(84

)

 

(5.3

)

 

(76

)

 

(4.8

)

Mark-to-market

102

 

 

6.4

 

 

(383

)

 

(24.1

)

Total revenues

334

 

 

21.2

 

 

(146

)

 

(9.2

)

Total expenses

(135

)

 

(8.6

)

 

(149

)

 

(9.3

)

Total other income (expenses), net

(10

)

 

(0.6

)

 

(30

)

 

(1.9

)

Income before taxes

189

 

 

12.0

 

 

(325

)

 

(20.4

)

Mark-to-market

(102

)

 

(6.5

)

 

383

 

 

24.1

 

Accounting items

 

 

 

 

4

 

 

0.2

 

Pretax operating income excluding mark-to-market

$

87

 

 

5.5

 

 

$

62

 

 

3.9

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Q4'19

 

Q1'20

Ending UPB ($B)

$

643

 

 

$

629

 

Average UPB ($B)

$

630

 

 

$

636

 

60+ day delinquency rate at period end

2.0

%

 

1.9

%

Annualized CPR

19.1

%

 

19.2

%

Modifications and workouts

9,873

 

 

8,709

 

Originations

The Originations segment focuses on creating servicing assets at attractive margins through existing customer relationships, correspondent, and wholesale originations. Originations earned pretax income of $158 million.

Mr. Cooper funded 50,369loans in the first quarter, totaling approximately $12.4 billion UPB comprised of $6.4 billion in direct-to-consumer, $5.5 billion in correspondent, and $0.5 billion in wholesale. Funded volume decreased 2% quarter-over-quarter.

 

Quarter Ended

($ in millions)

Q4'19

 

Q1'20

 

 

 

 

Income before taxes

$

138

 

 

$

158

 

 

 

 

 

 

 

 

 

 

Quarter Ended

($ in millions)

Q4'19

 

Q1'20

Total pull through adjusted volume

$

12,537

 

 

$

12,677

 

Funded volume

$

12,559

 

 

$

12,359

 

Refinance recapture percentage

39

%

 

38

%

Recapture percentage

29

%

 

30

%

Purchase volume as a percentage of funded volume

32

%

 

26

%

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 $11 million and pretax operating income of $13 million in the first quarter, which excluded intangible amortization.

 

Quarter Ended

($ in millions)

Q4'19

 

Q1'20

Income before taxes

$

9

 

 

$

11

 

Accounting items / other

3

 

 

 

Intangible amortization

2

 

 

2

 

Pretax operating income excluding intangible amortization and accounting items

$

14

 

 

$

13

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Q4'19

 

Q1'20

Exchange properties sold

2,332

 

 

2,114

 

Average Exchange properties under management

11,917

 

 

17,777

 

Services completed orders

403,779

 

 

408,734

 

Percentage of revenue earned from third-party customers

51

%

 

55

%

 

Conference Call Webcast and Investor Presentation

The Company will host a conference call on April 30, 2020 at 9:00 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 3079677 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 3079677 to access the replay. The replay will be accessible through May 15, 2020 at 12:00 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.

 

MR. COOPER GROUP INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

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

  

 

 

Three Months Ended December 31, 2019

 

Three Months Ended March 31, 2020

Revenues:

 

 

 

 

Service related, net, excluding mark-to-market

 

$

328

 

 

$

330

 

Mark-to-market

 

102

 

 

(383

)

Net gain on mortgage loans held for sale

 

310

 

 

331

 

Total revenues

 

740

 

 

278

 

Total expenses

 

438

 

 

444

 

Other income (expense):

 

 

 

 

Interest income

 

146

 

 

118

 

Interest expense

 

(207

)

 

(192

)

Other expense, net

 

(1

)

 

1

 

Total other income (expenses), net

 

(62

)

 

(73

)

Income (loss) before income tax benefit

 

240

 

 

(239

)

Income tax benefit

 

(221

)

 

(68

)

Net income (loss)

 

461

 

 

(171

)

Net loss attributable to non-controlling interest

 

(2

)

 

(3

)

Net income (loss) attributable to Mr. Cooper Group

 

463

 

 

(168

)

Undistributed earnings attributable to participating stockholders

 

4

 

 

 

Net income (loss) attributable to common stockholders

 

$

459

 

 

$

(168

)

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share attributable to common stockholders:

 

 

 

 

Basic

 

$

5.03

 

 

$

(1.84

)

Diluted

 

$

4.95

 

 

$

(1.84

)

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

 

 

 

 

Basic

 

91,105

 

 

91,385

 

Diluted

 

92,599

 

 

91,385

 

 

MR. COOPER GROUP INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

(millions of dollars)

  

 

 

December 31, 2019

 

March 31, 2020

Assets

 

 

 

 

Cash and cash equivalents

 

$

329

 

 

$

579

 

Restricted cash

 

283

 

 

266

 

Mortgage servicing rights

 

3,502

 

 

3,115

 

Advances and other receivables, net

 

988

 

 

685

 

Reverse mortgage interests, net

 

6,279

 

 

5,955

 

Mortgage loans held for sale at fair value

 

4,077

 

 

3,922

 

Property and equipment, net

 

112

 

 

111

 

Deferred tax asset, net

 

1,345

 

 

1,411

 

Other assets

 

1,390

 

 

1,569

 

Total assets

 

$

18,305

 

 

$

17,613

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

Unsecured senior notes, net

 

$

2,366

 

 

$

2,259

 

Advance facilities, net

 

422

 

 

489

 

Warehouse facilities, net

 

4,575

 

 

4,551

 

Payables and other liabilities

 

2,016

 

 

1,965

 

MSR related liabilities - nonrecourse at fair value

 

1,348

 

 

1,285

 

Mortgage servicing liabilities

 

61

 

 

53

 

Other nonrecourse debt, net

 

5,286

 

 

4,945

 

Total liabilities

 

16,074

 

 

15,547

 

Total stockholders’ equity

 

2,231

 

 

2,066

 

Total liabilities and stockholders’ equity

 

$

18,305

 

 

$

17,613

 

 

UNAUDITED SEGMENT STATEMENT OF

OPERATIONS & EARNINGS RECONCILIATION

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

  

 

 

Three Months Ended December 31, 2019

 

 

Servicing

 

Originations

 

Xome

 

Corporate/ Other

 

Elimination

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Service related, net

 

$

300

 

 

$

23

 

 

$

106

 

 

$

2

 

 

$

(1

)

 

$

430

 

Net gain on mortgage loans held for sale

 

34

 

 

276

 

 

 

 

 

 

 

 

310

 

Total revenues

 

334

 

 

299

 

 

106

 

 

2

 

 

(1

)

 

740

 

Total expenses

 

135

 

 

164

 

 

97

 

 

43

 

 

(1

)

 

438

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

112

 

 

34

 

 

 

 

 

 

 

 

146

 

Interest expense

 

(126

)

 

(31

)

 

 

 

(50

)

 

 

 

(207

)

Other income (expense), net

 

4

 

 

 

 

 

 

(5

)

 

 

 

(1

)

Total other income (expense), net

 

(10

)

 

3

 

 

 

 

(55

)

 

 

 

(62

)

Pretax income (loss)

 

$

189

 

 

$

138

 

 

$

9

 

 

$

(96

)

 

$

 

 

$

240

 

Income tax benefit

 

 

 

 

 

 

 

 

 

 

 

(221

)

Net income

 

 

 

 

 

 

 

 

 

 

 

$

461

 

Net loss attributable to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

(2

)

Net income attributable to Mr. Cooper Group

 

 

 

 

 

 

 

 

 

 

 

$

463

 

Undistributed earnings attributable to participating stockholders

 

 

 

 

 

 

 

 

 

 

 

4

 

Net income attributable to common stockholders

 

 

 

 

 

 

 

 

 

 

 

$

459

 

Net income per share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

 

 

$

5.03

 

Diluted

 

 

 

 

 

 

 

 

 

 

 

$

4.95

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Reconciliation:

 

 

 

 

 

 

 

 

 

 

 

 

Pretax income (loss)

 

$

189

 

 

$

138

 

 

$

9

 

 

$

(96

)

 

$

 

 

$

240

 

Mark-to-market

 

(102

)

 

 

 

 

 

 

 

 

 

(102

)

Accounting items / other

 

 

 

 

 

3

 

 

3

 

 

 

 

6

 

Intangible amortization

 

 

 

 

 

2

 

 

10

 

 

 

 

12

 

Pretax income (loss), net of notable items

 

$

87

 

 

$

138

 

 

$

14

 

 

$

(83

)

 

$

 

 

$

156

 

Fair value amortization(1)

 

(31

)

 

 

 

 

 

 

 

 

 

(31

)

Pretax operating income (loss)

 

$

56

 

 

$

138

 

 

$

14

 

 

$

(83

)

 

$

 

 

$

125

 

Income tax expense

 

 

 

 

 

 

 

 

 

 

 

(30

)

Operating income

 

 

 

 

 

 

 

 

 

 

 

$

95

 

ROTCE

 

 

 

 

 

 

 

 

 

 

 

21.1

%

¹ Amount represents additional amortization required under the fair value amortization 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 March 31, 2020

 

 

Servicing

 

Originations

 

Xome

 

Corporate/ Other

 

Elimination

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Service related, net

 

$

(180

)

 

$

20

 

 

$

106

 

 

$

2

 

 

$

(1

)

 

$

(53

)

Net gain on mortgage loans held for sale

 

34

 

 

297

 

 

 

 

 

 

 

 

331

 

Total revenues

 

(146

)

 

317

 

 

106

 

 

2

 

 

(1

)

 

278

 

Total expenses

 

149

 

 

166

 

 

96

 

 

34

 

 

(1

)

 

444

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

83

 

 

34

 

 

 

 

1

 

 

 

 

118

 

Interest expense

 

(113

)

 

(27

)

 

 

 

(52

)

 

 

 

(192

)

Other income, net

 

 

 

 

 

1

 

 

 

 

 

 

1

 

Total other income (expense), net

 

(30

)

 

7

 

 

1

 

 

(51

)

 

 

 

(73

)

Pretax (loss) income

 

$

(325

)

 

$

158

 

 

$

11

 

 

$

(83

)

 

$

 

 

$

(239

)

Income tax benefit

 

 

 

 

 

 

 

 

 

 

 

(68

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

$

(171

)

Net loss attributable to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

(3

)

Net loss attributable to Mr. Cooper Group

 

 

 

 

 

 

 

 

 

 

 

$

(168

)

Undistributed earnings attributable to participating stockholders

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to common stockholders

 

 

 

 

 

 

 

 

 

 

 

$

(168

)

Net loss per share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

 

 

$

(1.84

)

Diluted

 

 

 

 

 

 

 

 

 

 

 

$

(1.84

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Reconciliation:

 

 

 

 

 

 

 

 

 

 

 

 

Pretax (loss) income

 

$

(325

)

 

$

158

 

 

$

11

 

 

$

(83

)

 

$

 

 

$

(239

)

Mark-to-market

 

383

 

 

 

 

 

 

 

 

 

 

383

 

Accounting items / other

 

4

 

 

 

 

 

 

 

 

 

 

4

 

Intangible amortization

 

 

 

 

 

2

 

 

7

 

 

 

 

9

 

Pretax income (loss), net of notable items

 

$

62

 

 

$

158

 

 

$

13

 

 

$

(76

)

 

$

 

 

$

157

 

Fair value amortization(1)

 

(30

)

 

 

 

 

 

 

 

 

 

(30

)

Pretax operating income (loss)

 

$

32

 

 

$

158

 

 

$

13

 

 

$

(76

)

 

$

 

 

$

127

 

Income tax expense

 

 

 

 

 

 

 

 

 

 

 

(31

)

Operating income

 

 

 

 

 

 

 

 

 

 

 

$

96

 

ROTCE

 

 

 

 

 

 

 

 

 

 

 

19.6

%

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

 

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

Source: Mr. Cooper Group Inc.

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