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Mr. Cooper Delivers $1.4 billion GAAP Net Income and 17% Servicing Portfolio Growth for Full-year 2021

  • Reported fourth quarter net income of $155 million and $2.01 per diluted share, equivalent to ROCE of 19%
  • Book value per share increased to $45.64 and tangible book value per share increased to $43.82
  • Servicing UPB grew to $710 billion, up 6% quarter-over-quarter and 17% year-over-year
  • Repurchased 1.3 million common shares in the fourth quarter for $56 million at an average price of $41.22
  • Board authorized additional $200 million stock repurchase in the fourth quarter, bringing total authorization to $252 million

Mr. Cooper Group Inc. (NASDAQ: COOP) (the “Company”), which principally operates under the Mr. Cooper® and Xome® brands, reported a fourth quarter net income of $155 million or $2.01 per diluted share. The Company reported pretax income of $231 million and pretax operating income of $156 million, which excluded mark-to-market and other items. The mark-to-market adjustment was $46 million in the quarter and other items included $34 million gain from the sale of Xome Field Services, $3 million in charges related to severance and $2 million of intangible amortization.

Chairman and CEO Jay Bray commented, “Solid results in the fourth quarter closed out a fantastic year for Mr. Cooper, where we delivered very strong returns and portfolio growth. We enter 2022 with an extremely talented and dedicated team and a balanced business model that positions us to benefit from higher interest rates.”

Chris Marshall, Vice Chairman, President, and CFO added, “The fourth quarter capped a year of terrific improvement in the balance sheet, with record levels of capital and liquidity, exceptional growth in tangible book value per share, and significant advancements in many of our technology initiatives. Our team is perfectly positioned to capitalize on the strong momentum we have across our business.”

Servicing

The Servicing segment is focused on providing a best-in-class home loan experience for our 3.6 million customers while simultaneously strengthening asset performance for investors. In the fourth quarter, Servicing recorded pretax income of $87 million, including other mark-to-market of $46 million. The forward servicing portfolio ended the quarter at $710 billion in UPB. Servicing generated pretax operating income, excluding other mark-to-market, of $41 million. At quarter end, the carrying value of the MSR was $4,223 million equivalent to 124 bps of MSR UPB

 

Quarter Ended

($ in millions)

Q3'21

 

Q4'21

 

$

 

BPS

 

$

 

BPS

Operational revenue

$

402

 

 

24.6

 

 

$

390

 

 

22.9

 

Amortization, net of accretion

 

(202

)

 

(12.4

)

 

 

(186

)

 

(10.9

)

Mark-to-market

 

151

 

 

9.3

 

 

 

45

 

 

2.6

 

Total revenues

 

351

 

 

21.5

 

 

 

249

 

 

14.6

 

Total expenses

 

(128

)

 

(7.8

)

 

 

(143

)

 

(8.4

)

Total other expenses, net

 

(26

)

 

(1.6

)

 

 

(19

)

 

(1.1

)

Income before taxes

 

197

 

 

12.1

 

 

 

87

 

 

5.1

 

Other mark-to-market

 

(153

)

 

(9.4

)

 

 

(46

)

 

(2.7

)

Accounting items

 

 

 

 

 

 

 

 

 

Pretax operating income excluding other mark-to-market and accounting items

$

44

 

 

2.7

 

 

$

41

 

 

2.4

 

 

Quarter Ended

 

Q3'21

 

Q4'21

Ending UPB ($B)

$

668

 

 

$

710

 

Average UPB ($B)

$

653

 

 

$

682

 

60+ day delinquency rate at period end

 

4.0

%

 

 

3.1

%

Annualized CPR

 

24.6

%

 

 

21.2

%

Modifications and workouts

 

28,581

 

 

 

39,554

 

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 $181 million and pretax operating income of $182 million.

The Company funded 65,971 loans in the fourth quarter, totaling approximately $17.2 billion UPB, which was comprised of $9.0 billion in direct-to-consumer and $8.2 billion in correspondent. Funded volume decreased 14% quarter-over-quarter, while pull through adjusted volume decreased 27% quarter-over-quarter to $14.7 billion.

 

Quarter Ended

($ in millions)

Q3'21

 

Q4'21

Income before taxes

$

271

 

$

181

Accounting items / other

 

2

 

 

1

Pretax operating income excluding accounting items and other

$

273

 

$

182

 

Quarter Ended

($ in millions)

Q3'21

 

Q4'21

Total pull through adjusted volume

$

20,073

 

 

$

14,736

 

Funded volume

$

19,938

 

 

$

17,165

 

Refinance recapture percentage

 

40

%

 

 

43

%

Recapture percentage

 

30

%

 

 

32

%

Purchase volume as a percentage of funded volume

 

31

%

 

 

30

%

Conference Call Webcast and Investor Presentation

The Company will host a conference call on February 11, 2022 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 7271516 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 Ended

September 30, 2021

 

Three Months Ended

December 31, 2021

Revenues:

 

 

 

Service related, net

$

288

 

 

$

207

 

Net gain on mortgage loans held for sale

 

572

 

 

 

418

 

Total revenues

 

860

 

 

 

625

 

Total expenses:

 

402

 

 

 

381

 

Other income (expense), net:

 

 

 

Interest income

 

66

 

 

 

68

 

Interest expense

 

(118

)

 

 

(115

)

Other income, net

 

8

 

 

 

34

 

Total other expense, net

 

(44

)

 

 

(13

)

Income before income tax expense

 

414

 

 

 

231

 

Income tax expense

 

104

 

 

 

61

 

Net income from continuing operations

 

310

 

 

 

170

 

Net loss from discontinued operations

 

(11

)

 

 

(15

)

Net income

 

299

 

 

 

155

 

Net income attributable to non-controlling interest

 

 

 

 

 

Net income attributable to Mr. Cooper Group

 

299

 

 

 

155

 

Undistributed earnings attributable to participating stockholders

 

1

 

 

 

 

Premium on retirement of preferred stock

 

28

 

 

 

 

Net income attributable to common stockholders

$

270

 

 

$

155

 

 

 

 

 

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

 

 

 

Basic

$

3.56

 

 

$

2.28

 

Diluted

$

3.42

 

 

$

2.20

 

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

 

 

 

Basic

$

(0.14

)

 

$

(0.20

)

Diluted

$

(0.13

)

 

$

(0.19

)

Earnings per common share attributable to Mr. Cooper:

 

 

 

Basic

$

3.42

 

 

$

2.08

 

Diluted

$

3.29

 

 

$

2.01

 

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

 

 

 

Basic

 

78.9

 

 

 

74.6

 

Diluted

 

82.1

 

 

 

77.4

 

 

MR. COOPER GROUP INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(millions of dollars)

 

 

September 30, 2021

 

December 31, 2021

Assets

 

 

 

Cash and cash equivalents

$

731

 

$

895

Restricted cash

 

118

 

 

146

Mortgage servicing rights at fair value

 

3,666

 

 

4,223

Advances and other receivables, net

 

909

 

 

1,228

Mortgage loans held for sale at fair value

 

7,939

 

 

4,381

Property and equipment, net

 

103

 

 

98

Deferred tax assets, net

 

1,011

 

 

991

Other assets

 

3,462

 

 

2,242

Assets of discontinued operations

 

3,722

 

 

Total assets

$

21,661

 

$

14,204

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

Unsecured senior notes, net

$

2,076

 

$

2,670

Advance and warehouse facilities, net

 

8,206

 

 

4,997

Payables and other liabilities

 

3,537

 

 

2,392

MSR related liabilities - nonrecourse at fair value

 

842

 

 

778

Liabilities of discontinued operations

 

3,740

 

 

Total liabilities

 

18,401

 

 

10,837

Total stockholders' equity

 

3,260

 

 

3,367

Total liabilities and stockholders' equity

$

21,661

 

$

14,204

 

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

 

 

 

 

 

 

 

(64

)

Operating income(1)

 

 

 

 

 

 

$

199

 

ROTCE(2)

 

 

 

 

 

 

 

25.2

%

Average tangible book value (TBV)(3)

 

 

 

 

 

 

$

3,165 

 

 

(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.

 

UNAUDITED SEGMENT STATEMENT OF

OPERATIONS & EARNINGS RECONCILIATION

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

 

 

Three Months Ended December 31, 2021

 

Servicing

 

Originations

 

Corporate/

Other

 

Consolidated

 

 

 

 

 

 

 

 

Service related, net

$

147

 

 

$

44

 

 

$

16

 

 

$

207

 

Net gain on mortgage loans held for sale

 

102

 

 

 

316

 

 

 

 

 

 

418

 

Total revenues

 

249

 

 

 

360

 

 

 

16

 

 

 

625

 

Total expenses

 

143

 

 

 

187

 

 

 

51

 

 

 

381

 

Other (expense) income, net:

 

 

 

 

 

 

 

Interest income

 

42

 

 

 

26

 

 

 

 

 

 

68

 

Interest expense

 

(61

)

 

 

(18

)

 

 

(36

)

 

 

(115

)

Other income, net

 

 

 

 

 

 

 

34

 

 

 

34

 

Total other (expense) income, net

 

(19

)

 

 

8

 

 

 

(2

)

 

 

(13

)

Pretax income (loss)

$

87

 

 

$

181

 

 

$

(37

)

 

$

231

 

Income tax expense

 

 

 

 

 

 

 

61

 

Net income from continuing operations

 

 

 

 

 

 

 

170

 

Net loss from discontinued operations

 

 

 

 

 

 

 

(15

)

Net income

 

 

 

 

 

 

 

155

 

Net income attributable to noncontrolling interests

 

 

 

 

 

 

 

 

Net income attributable to common stockholders of Mr. Cooper Group

 

 

 

 

 

 

 

155

 

Undistributed earnings attributable to participating stockholders

 

 

 

 

 

 

 

 

Net income attributable to common stockholders

 

 

 

 

 

 

$

155

 

Net income per share

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

$

2.08

 

Diluted

 

 

 

 

 

 

$

2.01

 

 

 

 

 

 

 

 

 

Non-GAAP Reconciliation:

 

 

 

 

 

 

 

Pretax income (loss)

$

87

 

 

$

181

 

 

$

(37

)

 

$

231

 

Other mark-to-market

 

(46

)

 

 

 

 

 

 

 

 

(46

)

Accounting items / other

 

 

 

 

1

 

 

 

(32

)

 

 

(31

)

Intangible amortization

 

 

 

 

 

 

 

2

 

 

 

2

 

Pretax operating income (loss)

$

41

 

 

$

182

 

 

$

(67

)

 

$

156

 

Income tax expense(1)

 

 

 

 

 

 

 

(38

)

Operating income

 

 

 

 

 

 

$

118

 

ROTCE(2)

 

 

 

 

 

 

 

14.9

%

Average tangible book value (TBV)(3)

 

 

 

 

 

 

$

3,178

 

(1)

Assumes tax-rate of 24.2%.

(2)

Computed by dividing annualized earnings by average TBV.

(3)

Average of beginning TBV of $3,122 and ending TBV of $3,233.

 

UNAUDITED SEGMENT STATEMENT OF

OPERATIONS & EARNINGS RECONCILIATION

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

 

 

Year Ended December 31, 2021

 

Servicing

 

Originations

 

Corporate/

Other

 

Consolidated

 

 

 

 

 

 

 

 

Service related, net

$

705

 

 

$

176

 

 

$

186

 

 

$

1,067

 

Net gain on mortgage loans held for sale

 

568

 

 

 

1,683

 

 

 

 

 

 

2,251

 

Total revenues

 

1,273

 

 

 

1,859

 

 

 

186

 

 

 

3,318

 

Total expenses

 

502

 

 

 

852

 

 

 

308

 

 

 

1,662

 

Other (expense) income, net:

 

 

 

 

 

 

 

Interest income

 

129

 

 

 

102

 

 

 

 

 

 

231

 

Interest expense

 

(262

)

 

 

(88

)

 

 

(128

)

 

 

(478

)

Other income, net

 

 

 

 

 

 

 

528

 

 

 

528

 

Total other (expense) income, net

 

(133

)

 

 

14

 

 

 

400

 

 

 

281

 

Pretax income

$

638

 

 

$

1,021

 

 

$

278

 

 

$

1,937

 

Income tax expense

 

 

 

 

 

 

 

471

 

Net income from continuing operations

 

 

 

 

 

 

 

1,466

 

Net loss from discontinued operations

 

 

 

 

 

 

 

(12

)

Net income

 

 

 

 

 

 

 

1,454

 

Net income attributable to noncontrolling interests

 

 

 

 

 

 

 

 

Net income attributable to common stockholders of Mr. Cooper Group

 

 

 

 

 

 

 

1,454

 

Undistributed earnings attributable to participating stockholders

 

 

 

 

 

 

 

8

 

Premium on retirement of preferred stock

 

 

 

 

 

 

 

28

 

Net income attributable to common stockholders

 

 

 

 

 

 

$

1,418

 

Net income per share

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

$

17.24

 

Diluted

 

 

 

 

 

 

$

16.53

 

 

 

 

 

 

 

 

 

Non-GAAP Reconciliation:

 

 

 

 

 

 

 

Pretax income

$

638

 

 

$

1,021

 

 

$

278

 

 

$

1,937

 

Other mark-to-market

 

(437

)

 

 

 

 

 

 

 

 

(437

)

Accounting items / other

 

1

 

 

 

9

 

 

 

(516

)

 

 

(506

)

Intangible amortization

 

 

 

 

 

 

 

12

 

 

 

12

 

Pretax operating income (loss)

$

202

 

 

$

1,030

 

 

$

(226

)

 

$

1,006

 

Income tax expense(1)

 

 

 

 

 

 

 

(243

)

Operating income

 

 

 

 

 

 

$

763

 

ROTCE(2)

 

 

 

 

 

 

 

25.7

%

Average tangible book value (TBV)(3)

 

 

 

 

 

 

$

2,970

 

(1)

Assumes tax-rate of 24.2%.

(2)

Computed by dividing annualized earnings by average TBV.

(3)

Average of quarterly TBV averages of $2,555 for 1Q’21, $2,983 for 2Q’21, $3,165 for 3Q’21, and $3,178 for 4Q’21.

Non-GAAP Reconciliation:

Quarter Ended

($ in millions except value per share data)

Q3'21

 

Q4'21

Stockholders' equity (BV)

$

3,260

 

 

$

3,367

 

Goodwill

 

(120

)

 

 

(120

)

Intangible assets

 

(18

)

 

 

(14

)

Tangible book value (TBV)

$

3,122

 

 

$

3,233

 

Ending shares of common stock outstanding (in millions)

 

75.1

 

 

 

73.8

 

 

 

 

 

BV/share

$

43.40

 

 

$

45.64

 

TBV/share

$

41.56

 

 

$

43.82

 

 

 

 

 

Net income

$

299

 

 

$

155

 

ROCE(1)

 

36.2

%

 

 

18.7

%

 

 

 

 

Beginning stockholders’ equity

$

3,350

 

 

$

3,260

 

Ending stockholders’ equity

$

3,260

 

 

$

3,367

 

Average stockholders’ equity (BV)

$

3,305

 

 

$

3,314

 

(1)

Computed by dividing annualized earnings by average BV.

 

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