Mr. Cooper Group Reports Fourth Quarter 2023 Results

  • Reported net income of $46 million including other mark-to-market loss of $41 million, equivalent to ROCE of 4.3% and operating ROTCE of 11.1%
  • Book value per share and tangible book value per share increased to $66.29 and $63.67
  • Servicing portfolio grew 14% y/y to $992 billion
  • Repurchased 1.3 million shares of common stock for $72 million
  • Subsequent to quarter end, issued $1 billion senior notes maturing 2032 with coupon of 7.125%

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.

 

Contacts

Investor Contact:

Kenneth Posner, SVP Strategic Planning and Investor Relations

(469) 426-3633

[email protected]

Media Contact:

Christen Reyenga, VP Corporate Communications

[email protected]