Mr. cooper group reports third quarter 2019 financial results
Dallas--(business wire)--mr. cooper group inc. (nasdaq: coop) (the "company"), which principally operates under the mr. cooper® and xome® brands, reported a third quarter net income of $83 million or $0.90 per diluted share, partially offset by a net fair value mark-to-market on the msr portfolio of $(83) million. excluding the mark-to-market and other items, the company reported pretax operating income of $171 million. items excluded from pretax operating income was $(83) million in mark-to-market, net of the add back of $32 million in fair value amortization included in the full mark-to-market, $4 million gain from remeasuring contingent consideration associated with the ams acquisition, $5 million in charges related to corporate actions, and $12 million of intangible amortization. chairman and ceo jay bray commented, “the originations segment produced another quarter of record fundings, with strong margins, demonstrating our capability to scale up in response to refinance market conditions. at the same time, we were very pleased with continued strong performance in the servicing segment and delighted to receive the great place to work certification.” chris marshall, vice chairman and cfo added, “net income, operating profits, and cash flow were all very strong in the quarter, allowing us to move forward with our deleveraging plan and begin retiring some of our senior notes. deleveraging will strengthen the balance sheet, improve profitability, and afford us greater financial flexibility.” servicing the servicing segment is focused on providing a best-in-class home loan experience for our 3.8 million customers while simultaneously strengthening asset performance for investors. in the third quarter, servicing recorded pretax income of $9 million offset by a net fair value mark-to-market on the msr portfolio of $(83) million. during the quarter the total servicing portfolio remained stable, ending the quarter at $641 billion upb. servicing earned pretax operating income excluding the full mark of $92 million, equivalent to a servicing margin of 5.8 bps. at quarter end, the carrying value of the msr was $3,346 million, equivalent to 109 bps of msr upb, and the original cost basis was 86 bps. quarter ended ($ in millions) q2'19 q3'19 $ bps $ bps operational revenue $ 314 19.6 $ 319 20.0 amortization, net of accretion (56 ) (3.5 ) (73 ) (4.6 ) mark-to-market (231 ) (14.4 ) (83 ) (5.2 ) total revenues 27 1.7 163 10.2 expenses (189 ) (11.8 ) (171 ) (10.7 ) total other income (expenses), net 27 1.7 17 1.1 (loss) income before taxes (135 ) (8.4 ) 9 0.6 mark-to-market 231 14.4 83 5.2 pretax operating income excluding mark-to-market $ 96 6.0 $ 92 5.8 quarter ended q2'19 q3'19 ending upb ($b) $ 644 $ 641 average upb ($b) $ 639 $ 637 60+ day delinquency rate 2.3 % 2.2 % annualized cpr 13.0 % 17.5 % modifications and workouts 12,108 8,792 originations the originations segment focuses on creating servicing assets at attractive margins through existing customer relationships, correspondent, and wholesale originations. originations earned record pretax income of $178 million, up from $118 million in the prior quarter. mr. cooper funded 48,904 loans in the third quarter, totaling approximately $12 billion upb comprised of $4.9 billion in direct-to-consumer, $6.4 billion in correspondent, and $0.6 billion in wholesale. funded volume increased 19% quarter-over-quarter. quarter ended ($ in millions) q2'19 q3'19 income before taxes $ 118 $ 178 quarter ended ($ in millions) q2'19 q3'19 total pull through adjusted volume $ 11,197 $ 12,699 funded volume $ 9,996 $ 11,911 refinance recapture percentage 44 % 38 % recapture percentage 23 % 25 % purchase volume as a percentage of funded volume 53 % 39 % 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 $14 million, or pretax operating income of $13 million in the third quarter, which excluded accounting items related to remeasuring the contingent consideration associated with the ams acquisition and intangible amortization. quarter ended ($ in millions) q2'19 q3'19 income before taxes $ 7 $ 14 accounting items — (4 ) intangible amortization 3 3 pretax operating income excluding accounting items and intangible amortization $ 10 $ 13 quarter ended q2'19 q3'19 exchange property listings sold 2,645 2,453 average exchange property listings 6,693 6,688 services orders completed 417,510 429,128 percentage of revenue earned from third-party customers 53 % 53 % conference call webcast and investor presentation the company will host a conference call on october 31, 2019 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 9583900 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 9583900 to access the replay. the replay will be accessible through november 14, 2019 at 11:00 a.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, including statements regarding the results of deleveraging. 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 consolidated statements of operations (millions of dollars, except for earnings per share data) three months ended june 30, 2019 three months ended september 30, 2019 revenues: service related, net – excluding mark-to-market $ 368 $ 341 mark-to-market (231 ) (83 ) net gain on mortgage loans held for sale 262 360 total revenues 399 618 total expenses 492 478 other income (expense): interest income 162 163 interest expense (187 ) (196 ) other income (expenses) 1 — total other income (expenses), net (24 ) (33 ) (loss) income before income tax (benefit) expense (117 ) 107 income tax (benefit) expense (29 ) 24 net (loss) income (88 ) 83 net loss attributable to non-controlling interest (1 ) (1 ) net (loss) income attributable to mr. cooper group (87 ) 84 undistributed earnings attributable to participating stockholders — 1 net (loss) income attributable to mr. cooper group $ (87 ) $ 83 (loss) income per share attributable to common stockholders: basic $ (0.96 ) $ 0.91 diluted $ (0.96 ) $ 0.90 weighted average shares of common stock outstanding (in thousands): basic 91,054 91,080 diluted 91,054 92,036 mr. cooper group inc. and subsidiaries unaudited consolidated balance sheets (millions of dollars) june 30, 2019 september 30, 2019 assets cash and cash equivalents $ 245 $ 371 restricted cash 304 271 mortgage servicing rights 3,511 3,346 advances and other receivables, net 1,000 967 reverse mortgage interests, net 7,110 6,662 mortgage loans held for sale at fair value 3,422 4,267 mortgage loans held for investment at fair value 114 — property and equipment, net 115 113 deferred tax asset 1,055 1,032 other assets 1,529 1,449 total assets $ 18,405 $ 18,478 liabilities and stockholders' equity unsecured senior notes, net $ 2,462 $ 2,464 advance facilities, net 567 513 warehouse facilities, net 4,045 4,802 payables and accrued liabilities 2,116 2,002 msr related liabilities - nonrecourse at fair value 1,472 1,328 mortgage servicing liabilities 80 69 other nonrecourse debt, net 5,985 5,533 total liabilities 16,727 16,711 total stockholders' equity 1,678 1,767 total liabilities and stockholders' equity $ 18,405 $ 18,478 unaudited segment statement of operations & earnings reconciliation (millions of dollars, except for earnings per share data) three months ended for june 30, 2019 servicing originations xome corporate and other elimination/reclassification⁽¹⁾ consolidated service related, net $ 27 $ 20 $ 108 $ — $ (18 ) $ 137 net gain on mortgage loans held for sale — 244 — — 18 262 total revenues 27 264 108 — — 399 total expenses 189 145 101 57 — 492 other income (expense): interest income 136 23 — 3 — 162 interest expense (109 ) (25 ) — (53 ) — (187 ) other expense — 1 — — — 1 total other income (expense) 27 (1 ) — (50 ) — (24 ) pretax (loss) income $ (135 ) $ 118 $ 7 $ (107 ) $ — $ (117 ) income tax benefit (29 ) net loss $ (88 ) net loss attributable to noncontrolling interests (1 ) net loss attributable to common stockholders of mr. cooper group $ (87 ) loss per share basic $ (0.96 ) diluted $ (0.96 ) non-gaap reconciliation: pretax income (loss) $ (135 ) $ 118 $ 7 $ (107 ) $ — $ (117 ) mark-to-market 231 — — — — 231 merger related costs — — — 17 — 17 intangible amortization — — 3 10 — 13 pretax income (loss), net of notable items $ 96 $ 118 $ 10 $ (80 ) $ — $ 144 fair value amortization⁽²⁾ (26 ) — — — — (26 ) pretax operating income (loss) $ 70 $ 118 $ 10 $ (80 ) $ — $ 118 income tax expense (29 ) operating income $ 89 rotce 23.8 % ⁽¹⁾ for servicing segment results purposes, all revenue is attributable to servicing the portfolio. therefore, $18 of net gain on mortgage loans is moved to service related, net for the three months ended june 30, 2019. for consolidated results purposes, these amounts were reclassed to net gain on mortgage loans held for sale. ⁽²⁾ 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 for september 30, 2019 servicing originations xome corporate and other elimination/reclassification⁽¹⁾ consolidated service related, net $ 163 $ 22 $ 112 $ — $ (39 ) $ 258 net gain on mortgage loans held for sale — 312 — 11 37 360 total revenues 163 334 112 11 (2 ) 618 total expenses 171 155 101 53 (2 ) 478 other income (expense): interest income 137 24 — 2 — 163 interest expense (120 ) (24 ) — (52 ) — (196 ) other expense — (1 ) 3 (2 ) — — total other income (expense) 17 (1 ) 3 (52 ) — (33 ) pretax income (loss) $ 9 $ 178 $ 14 $ (94 ) $ — $ 107 income tax expense 24 net income $ 83 net loss attributable to noncontrolling interests (1 ) net income attributable to common stockholders of mr. cooper group $ 84 undistributed earnings attributable to participating stockholders 1 net income attributable to mr. cooper group $ 83 income per share basic $ 0.91 diluted $ 0.90 non-gaap reconciliation: pretax income (loss) $ 9 $ 178 $ 14 $ (94 ) $ — $ 107 mark-to-market 83 — — — — 83 accounting items / other — — (4 ) 5 — 1 intangible amortization — — 3 9 — 12 pretax income (loss), net of notable items $ 92 $ 178 $ 13 $ (80 ) $ — $ 203 fair value amortization⁽²⁾ (32 ) — — — — (32 ) pretax operating income (loss) $ 60 $ 178 $ 13 $ (80 ) $ — $ 171 income tax expense (41 ) operating income $ 130 rotce 34.5 % ⁽¹⁾ for servicing segment results purposes, all revenue is attributable to servicing the portfolio. therefore, $37 of net gain on mortgage loans is moved to service related, net for the three months ended september 30, 2019. for consolidated results purposes, these amounts were reclassed to net gain on mortgage loans held for sale. ⁽²⁾ amount represents additional amortization required under the fair value amortization method over the cost amortization method.
