DALLAS--(BUSINESS WIRE)--Mr. Cooper Group Inc. (NASDAQ: COOP) (the “Company”), reported fourth quarter income before income tax expense of $69 and net income of $46 million. Excluding other mark-to-market and other adjustments, the Company reported pretax operating income of $151 million. Adjustments included other mark-to-market net of hedges of $41 million, $27 million related to the previously disclosed cyber event, and other items shown below in the reconciliation of GAAP and non-GAAP results.
Chairman and CEO Jay Bray commented, “The fourth quarter closed out an exceptionally productive year for Mr. Cooper, with steadily rising return on equity throughout the year and very substantial growth which puts us on the cusp of achieving our $1 trillion portfolio strategic target. We enter 2024 with robust capital and liquidity, an extremely talented and dedicated team, and enormous energy to serve customers, clients and all our other stakeholders.”
Chris Marshall, Vice Chairman added, “Operational performance this year has benefited from strong focus and vigorous execution. Accomplishments include record servicing profits and very agile performance by our originations unit despite headwinds from rising interest rates. Over the last fifteen years, we have grown in a steady, consistent, and prudent fashion, to the point that today we have earned the title of market leader. I believe we are in strong shape to excel in 2024 and beyond.”
Servicing
The Servicing segment provides a best-in-class home loan experience for our 4.6 million customers while simultaneously strengthening asset performance for investors. In the fourth quarter, Servicing recorded pretax income of $184 million, including other mark-to-market of $41 million. The servicing portfolio ended the quarter at $992 billion. Servicing generated pretax operating income, excluding other mark-to-market, of $229 million. At quarter end, the carrying value of the MSR was $9,090 million equivalent to 155 bps of MSR UPB.
|
Quarter Ended |
||||||||||||||
($ in millions) |
Q4'23 |
|
Q3'23 |
||||||||||||
|
$ |
|
BPS |
|
$ |
|
BPS |
||||||||
Operational revenue |
$ |
507 |
|
|
|
21.1 |
|
|
$ |
561 |
|
|
|
25.0 |
|
Amortization, net of accretion |
|
(151 |
) |
|
|
(6.3 |
) |
|
|
(160 |
) |
|
|
(7.1 |
) |
Mark-to-market |
|
(40 |
) |
|
|
(1.7 |
) |
|
|
63 |
|
|
|
2.8 |
|
Total revenues |
|
316 |
|
|
|
13.1 |
|
|
|
464 |
|
|
|
20.7 |
|
Total expenses |
|
(180 |
) |
|
|
(7.4 |
) |
|
|
(172 |
) |
|
|
(7.6 |
) |
Total other expenses, net |
|
48 |
|
|
|
1.9 |
|
|
|
69 |
|
|
|
3.0 |
|
Income before taxes |
|
184 |
|
|
|
7.6 |
|
|
|
361 |
|
|
|
16.1 |
|
Other mark-to-market |
|
41 |
|
|
|
1.7 |
|
|
|
(61 |
) |
|
|
(2.7 |
) |
Accounting items |
|
2 |
|
|
|
0.1 |
|
|
|
— |
|
|
|
— |
|
Intangible amortization |
|
2 |
|
|
|
0.1 |
|
|
|
1 |
|
|
|
— |
|
Pretax operating income excluding other mark-to-market and accounting items |
$ |
229 |
|
|
|
9.5 |
|
|
$ |
301 |
|
|
|
13.4 |
|
|
|
|
|
|
|
|
|
||||||||
|
Quarter Ended |
||||||||||||||
|
Q4'23 |
|
Q3'23 |
||||||||||||
MSRs UPB ($B) |
$ |
588 |
|
|
$ |
528 |
|
||||||||
Subservicing and Other UPB ($B) |
|
404 |
|
|
|
409 |
|
||||||||
Ending UPB ($B) |
$ |
992 |
|
|
$ |
937 |
|
||||||||
Average UPB ($B) |
$ |
963 |
|
|
$ |
897 |
|
||||||||
60+ day delinquency rate at period end |
|
1.9 |
% |
|
|
1.9 |
% |
||||||||
Annualized CPR |
|
4.0 |
% |
|
|
5.3 |
% |
||||||||
Modifications and workouts |
|
16,953 |
|
|
|
21,459 |
|
||||||||
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 of $9 million and pretax operating income of $10 million.
The Company funded 10,699 loans in the fourth quarter, totaling approximately $2.7 billion UPB, which was comprised of $1.2 billion in direct-to-consumer and $1.5 billion in correspondent. Funded volume decreased 22% quarter-over-quarter, while pull through adjusted volume decreased 22% quarter-over-quarter to $2.6 billion.
|
Quarter Ended |
||||
($ in millions) |
Q4'23 |
|
Q3'23 |
||
Income before taxes |
$ |
9 |
|
$ |
29 |
Accounting items |
|
1 |
|
|
— |
Pretax operating income excluding accounting items and other |
$ |
10 |
|
$ |
29 |
|
Quarter Ended |
||||||
($ in millions) |
Q4'23 |
|
Q3'23 |
||||
Total pull through adjusted volume |
$ |
2,592 |
|
|
$ |
3,308 |
|
Funded volume |
$ |
2,661 |
|
|
$ |
3,412 |
|
Refinance recapture percentage |
|
76 |
% |
|
|
83 |
% |
Recapture percentage |
|
22 |
% |
|
|
24 |
% |
Purchase volume as a percentage of funded volume |
|
59 |
% |
|
|
54 |
% |
Conference Call Webcast and Investor Presentation
The Company will host a conference call on February 9, 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 December 31, 2023 |
|
Three Months Ended September 30, 2023 |
||||
Revenues: |
|
|
|
||||
Service related, net |
$ |
345 |
|
|
$ |
432 |
|
Net gain on mortgage loans held for sale |
|
59 |
|
|
|
142 |
|
Total revenues |
|
404 |
|
|
|
574 |
|
Total expenses: |
|
332 |
|
|
|
301 |
|
Other (expense) income, net: |
|
|
|
||||
Interest income |
|
159 |
|
|
|
167 |
|
Interest expense |
|
(159 |
) |
|
|
(146 |
) |
Other (expense) income, net |
|
(3 |
) |
|
|
58 |
|
Total other (expense) income, net |
|
(3 |
) |
|
|
79 |
|
Income before income tax expense |
|
69 |
|
|
|
352 |
|
Income tax expense |
|
23 |
|
|
|
77 |
|
Net income |
$ |
46 |
|
|
$ |
275 |
|
|
|
|
|
||||
Earnings per share: |
|
|
|
||||
Basic |
$ |
0.71 |
|
|
$ |
4.14 |
|
Diluted |
$ |
0.69 |
|
|
$ |
4.06 |
|
Weighted average shares of common stock outstanding (in millions): |
|
|
|
||||
Basic |
|
65.1 |
|
|
|
66.4 |
|
Diluted |
|
66.7 |
|
|
|
67.7 |
|
MR. COOPER GROUP INC. AND SUBSIDIARIES |
|||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
|||||
(millions of dollars) |
|||||
|
|
|
Unaudited |
||
|
December 31, 2023 |
|
September 30, 2023 |
||
Assets |
|
|
|
||
Cash and cash equivalents |
$ |
571 |
|
$ |
553 |
Restricted cash |
|
169 |
|
|
151 |
Mortgage servicing rights at fair value |
|
9,090 |
|
|
8,504 |
Advances and other receivables, net |
|
996 |
|
|
758 |
Mortgage loans held for sale at fair value |
|
927 |
|
|
893 |
Property and equipment, net |
|
53 |
|
|
59 |
Deferred tax assets, net |
|
472 |
|
|
499 |
Other assets |
|
1,918 |
|
|
2,010 |
Total assets |
$ |
14,196 |
|
$ |
13,427 |
|
|
|
|
||
Liabilities and Stockholders' Equity |
|
|
|
||
Unsecured senior notes, net |
$ |
3,151 |
|
$ |
3,147 |
Advance and warehouse facilities, net |
|
4,302 |
|
|
3,545 |
Payables and other liabilities |
|
1,995 |
|
|
1,964 |
MSR related liabilities - nonrecourse at fair value |
|
466 |
|
|
467 |
Total liabilities |
|
9,914 |
|
|
9,123 |
Total stockholders' equity |
|
4,282 |
|
|
4,304 |
Total liabilities and stockholders' equity |
$ |
14,196 |
|
$ |
13,427 |
UNAUDITED SEGMENT STATEMENT OF |
|||||||||||||||
OPERATIONS & EARNINGS RECONCILIATION |
|||||||||||||||
(millions of dollars, except for earnings per share data) |
|||||||||||||||
|
Three Months Ended December 31, 2023 |
||||||||||||||
|
Servicing |
|
Originations |
|
Corporate/ Other |
|
Consolidated |
||||||||
|
|
|
|
|
|
|
|
||||||||
Service related, net |
$ |
307 |
|
|
$ |
16 |
|
|
$ |
22 |
|
|
$ |
345 |
|
Net gain on mortgage loans held for sale |
|
9 |
|
|
|
51 |
|
|
|
(1 |
) |
|
|
59 |
|
Total revenues |
|
316 |
|
|
|
67 |
|
|
|
21 |
|
|
|
404 |
|
Total expenses |
|
180 |
|
|
|
59 |
|
|
|
93 |
|
|
|
332 |
|
Other income (expense), net: |
|
|
|
|
|
|
|
||||||||
Interest income |
|
148 |
|
|
|
10 |
|
|
|
1 |
|
|
|
159 |
|
Interest expense |
|
(100 |
) |
|
|
(9 |
) |
|
|
(50 |
) |
|
|
(159 |
) |
Other income, net |
|
— |
|
|
|
— |
|
|
|
(3 |
) |
|
|
(3 |
) |
Total other income (expense), net |
|
48 |
|
|
|
1 |
|
|
|
(52 |
) |
|
|
(3 |
) |
Pretax income (loss) |
$ |
184 |
|
|
$ |
9 |
|
|
$ |
(124 |
) |
|
$ |
69 |
|
Income tax expense |
|
|
|
|
|
|
|
23 |
|
||||||
Net income |
|
|
|
|
|
|
$ |
46 |
|
||||||
Earnings per share |
|
|
|
|
|
|
|
||||||||
Basic |
|
|
|
|
|
|
$ |
0.71 |
|
||||||
Diluted |
|
|
|
|
|
|
$ |
0.69 |
|
||||||
|
|
|
|
|
|
|
|
||||||||
Non-GAAP Reconciliation: |
|
|
|
|
|
|
|
||||||||
Pretax income (loss) |
$ |
184 |
|
|
$ |
9 |
|
|
$ |
(124 |
) |
|
$ |
69 |
|
Other mark-to-market |
|
41 |
|
|
|
— |
|
|
|
— |
|
|
|
41 |
|
Accounting items / other |
|
2 |
|
|
|
1 |
|
|
|
36 |
|
|
|
39 |
|
Intangible amortization |
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
Pretax operating income (loss) |
$ |
229 |
|
|
$ |
10 |
|
|
$ |
(88 |
) |
|
$ |
151 |
|
Income tax expense(1) |
|
|
|
|
|
|
|
(37 |
) |
||||||
Operating income |
|
|
|
|
|
|
$ |
114 |
|
||||||
Operating ROTCE(2) |
|
|
|
|
|
|
|
11.1 |
% |
||||||
Average tangible book value (TBV)(3) |
|
|
|
|
|
|
$ |
4,123 |
|
||||||
| (1) | Assumes tax-rate of 24.2%. |
|
| (2) | Computed by dividing annualized earnings by average TBV. |
|
| (3) | Average of beginning TBV of $4,133 and ending TBV of $4,113. |
UNAUDITED SEGMENT STATEMENT OF |
|||||||||||||||
OPERATIONS & EARNINGS RECONCILIATION |
|||||||||||||||
(millions of dollars, except for earnings per share data) |
|||||||||||||||
|
Three Months Ended September 30, 2023 |
||||||||||||||
|
Servicing |
|
Originations |
|
Corporate/ Other |
|
Consolidated |
||||||||
|
|
|
|
|
|
|
|
||||||||
Service related, net |
$ |
392 |
|
|
$ |
18 |
|
|
$ |
22 |
|
|
$ |
432 |
|
Net gain on mortgage loans held for sale |
|
72 |
|
|
|
70 |
|
|
|
— |
|
|
|
142 |
|
Total revenues |
|
464 |
|
|
|
88 |
|
|
|
22 |
|
|
|
574 |
|
Total expenses |
|
172 |
|
|
|
58 |
|
|
|
71 |
|
|
|
301 |
|
Other income (expense), net: |
|
|
|
|
|
|
|
||||||||
Interest income |
|
157 |
|
|
|
10 |
|
|
|
— |
|
|
|
167 |
|
Interest expense |
|
(88 |
) |
|
|
(11 |
) |
|
|
(47 |
) |
|
|
(146 |
) |
Other expense, net |
|
— |
|
|
|
— |
|
|
|
58 |
|
|
|
58 |
|
Total other income (expense), net |
|
69 |
|
|
|
(1 |
) |
|
|
11 |
|
|
|
79 |
|
Pretax income (loss) |
$ |
361 |
|
|
$ |
29 |
|
|
$ |
(38 |
) |
|
$ |
352 |
|
Income tax expense |
|
|
|
|
|
|
|
77 |
|
||||||
Net income |
|
|
|
|
|
|
$ |
275 |
|
||||||
Earnings per share |
|
|
|
|
|
|
|
||||||||
Basic |
|
|
|
|
|
|
$ |
4.14 |
|
||||||
Diluted |
|
|
|
|
|
|
$ |
4.06 |
|
||||||
|
|
|
|
|
|
|
|
||||||||
Non-GAAP Reconciliation: |
|
|
|
|
|
|
|
||||||||
Pretax income (loss) |
$ |
361 |
|
|
$ |
29 |
|
|
$ |
(38 |
) |
|
$ |
352 |
|
Other mark-to-market |
|
(61 |
) |
|
|
— |
|
|
|
— |
|
|
|
(61 |
) |
Accounting items / other |
|
— |
|
|
|
— |
|
|
|
(44 |
) |
|
|
(44 |
) |
Intangible amortization |
|
1 |
|
|
|
— |
|
|
|
1 |
|
|
|
2 |
|
Pretax operating income (loss) |
$ |
301 |
|
|
$ |
29 |
|
|
$ |
(81 |
) |
|
$ |
249 |
|
Income tax expense |
|
|
|
|
|
|
|
(60 |
) |
||||||
Operating income(1) |
|
|
|
|
|
|
$ |
189 |
|
||||||
Operating ROTCE(2) |
|
|
|
|
|
|
|
18.7 |
% |
||||||
Average tangible book value (TBV)(3) |
|
|
|
|
|
|
$ |
4,032 |
|
||||||
| (1) | Assumes tax-rate of 24.2%. |
|
| (2) | Computed by dividing annualized earnings by average TBV. |
|
| (3) | Average of beginning TBV of $3,931 and ending TBV of $4,133. |
UNAUDITED SEGMENT STATEMENT OF |
|||||||||||||||
OPERATIONS & EARNINGS RECONCILIATION |
|||||||||||||||
(millions of dollars, except for earnings per share data) |
|||||||||||||||
|
Year Ended December 31, 2023 |
||||||||||||||
|
Servicing |
|
Originations |
|
Corporate/ Other |
|
Consolidated |
||||||||
|
|
|
|
|
|
|
|
||||||||
Service related, net |
$ |
1,295 |
|
|
$ |
61 |
|
|
$ |
84 |
|
|
$ |
1,440 |
|
Net gain on mortgage loans held for sale |
|
84 |
|
|
|
271 |
|
|
|
(1 |
) |
|
|
354 |
|
Total revenues |
|
1,379 |
|
|
|
332 |
|
|
|
83 |
|
|
|
1,794 |
|
Total expenses |
|
664 |
|
|
|
232 |
|
|
|
276 |
|
|
|
1172 |
|
Other income (expense), net: |
|
|
|
|
|
|
|
||||||||
Interest income |
|
491 |
|
|
|
36 |
|
|
|
1 |
|
|
|
528 |
|
Interest expense |
|
(324 |
) |
|
|
(37 |
) |
|
|
(176 |
) |
|
|
(537 |
) |
Other expense, net |
|
— |
|
|
|
— |
|
|
|
41 |
|
|
|
41 |
|
Total other income (expense), net |
|
167 |
|
|
|
(1 |
) |
|
|
(134 |
) |
|
|
32 |
|
Pretax income (loss) |
$ |
882 |
|
|
$ |
99 |
|
|
$ |
(327 |
) |
|
$ |
654 |
|
Income tax expense |
|
|
|
|
|
|
|
154 |
|
||||||
Net income |
|
|
|
|
|
|
$ |
500 |
|
||||||
Earnings per share |
|
|
|
|
|
|
|
||||||||
Basic |
|
|
|
|
|
|
$ |
7.46 |
|
||||||
Diluted |
|
|
|
|
|
|
$ |
7.30 |
|
||||||
|
|
|
|
|
|
|
|
||||||||
Non-GAAP Reconciliation: |
|
|
|
|
|
|
|
||||||||
Pretax income (loss) |
$ |
882 |
|
|
$ |
99 |
|
|
$ |
(327 |
) |
|
$ |
654 |
|
Other mark-to-market |
|
(18 |
) |
|
|
— |
|
|
|
— |
|
|
|
(18 |
) |
Accounting items / other |
|
2 |
|
|
|
1 |
|
|
|
14 |
|
|
|
17 |
|
Intangible amortization |
|
3 |
|
|
|
— |
|
|
|
4 |
|
|
|
7 |
|
Pretax operating income (loss) |
$ |
869 |
|
|
$ |
100 |
|
|
$ |
(309 |
) |
|
$ |
660 |
|
Income tax expense |
|
|
|
|
|
|
|
(160 |
) |
||||||
Operating income(1) |
|
|
|
|
|
|
$ |
500 |
|
||||||
Operating ROTCE(2) |
|
|
|
|
|
|
|
12.5 |
% |
||||||
Average tangible book value (TBV)(3) |
|
|
|
|
|
|
$ |
3,987 |
|
||||||
| (1) | Assumes tax-rate of 24.2%. |
|
| (2) | Computed by dividing annualized earnings by average TBV. |
|
| (3) | Average of quarterly TBV averages of $3,895 for 1Q’23, $3,896 for 2Q’23, $4,032 for 3Q’23, and $4,123 for 4Q’23. |
Non-GAAP Reconciliation: |
Quarter Ended |
||||||
($ in millions except value per share data) |
Q4'23 |
|
Q3'23 |
||||
Stockholders' equity (BV) |
$ |
4,282 |
|
|
$ |
4,304 |
|
Goodwill |
|
(141 |
) |
|
|
(141 |
) |
Intangible assets |
|
(28 |
) |
|
|
(30 |
) |
Tangible book value (TBV) |
$ |
4,113 |
|
|
$ |
4,133 |
|
Ending shares of common stock outstanding (in millions) |
|
64.6 |
|
|
|
65.8 |
|
|
|
|
|
||||
BV/share |
$ |
66.29 |
|
|
$ |
65.38 |
|
TBV/share |
$ |
63.67 |
|
|
$ |
62.78 |
|
|
|
|
|
||||
Net income |
$ |
46 |
|
|
$ |
275 |
|
ROCE(1) |
|
4.3 |
% |
|
|
26.2 |
% |
|
|
|
|
||||
Beginning stockholders’ equity |
$ |
4,304 |
|
|
$ |
4,079 |
|
Ending stockholders’ equity |
$ |
4,282 |
|
|
$ |
4,304 |
|
Average stockholders’ equity (BV) |
$ |
4,293 |
|
|
$ |
4,192 |
|
| (1) | Return on Common Equity (ROCE) is computed by dividing annualized earnings by average BV. |
