Mr. Cooper Group Reports Third Quarter 2024 Results

DALLAS--(BUSINESS WIRE)--Mr. Cooper Group Inc. (NASDAQ: COOP) (the "Company"), reported third quarter income before income tax expense of $112 million and net income of $80 million. Excluding other mark-to-market and other adjustments, the Company reported pretax operating income of $246 million. Adjustments included other mark-to-market net of hedges of $126 million and other items shown below in the reconciliation of GAAP and non-GAAP results.

Chairman and CEO Jay Bray commented, "We delivered an exceptional quarter, marked by an operating ROTCE of 16.8%, and record liquidity. We are excited to welcome our new team members, with the acquisition of Flagstar's mortgage operations on target to close, as announced, in the fourth quarter."

Mike Weinbach, President added, "I'm extremely pleased with our strong performance in servicing and exceptional execution in originations, where volumes increased 80% quarter-over-quarter, as our direct-to-consumer channel helped customers take advantage of the rally in mortgage rates during September, while our correspondent channel implemented a number of new initiatives which were well-received by clients."

Servicing

The Servicing segment provides a best-in-class home loan experience for our 5.4 million customers while simultaneously strengthening asset performance for investors. In the third quarter, Servicing recorded pre-tax income of $177 million inclusive of other mark-to-market loss of $126 million and pretax operating income of $305 million. The servicing portfolio ended the quarter at $1,239 billion. At quarter end, the carrying value of the MSR was $10,035 million equivalent to 148 bps of MSR UPB.

	Quarter Ended
($ in millions)	Q3'24								Q2'24
	$				BPS				$				BPS
Operational revenue	$	616				20.1			$	604				20.7
Amortization, net of accretion		(235	)			(7.6	)			(217	)			(7.4	)
Mark-to-market		(125	)			(4.1	)			69				2.3
Total revenues		256				8.4				456				15.6
Total expenses		(180	)			(5.9	)			(171	)			(5.9	)
Total other income, net		101				3.3				69				2.4
Income before taxes		177				5.8				354				12.1
Other mark-to-market		126				4.1				(68	)			(2.4	)
Accounting items		-				-				-				-
Intangible amortization		2				0.1				2				0.1
Pretax operating income excluding other mark-to-market and accounting items	$	305				10.0			$	288				9.8
	Quarter Ended
	Q3'24								Q2'24
MSRs UPB ($B)	$					678			$					676
Subservicing and Other UPB ($B)						561								530
Ending UPB ($B)	$					1,239			$					1,206
Average UPB ($B)	$					1,225			$					1,171
60+ day delinquency rate at period end						1.5	%							1.4	%
Annualized CPR						7.1	%							5.6	%
Modifications and workouts						21,817								22,645

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 and pretax operating income of $69 million.

The Company funded 25,582 loans in the third quarter, totaling approximately $6.8 billion UPB, which was comprised of $2.3 billion in direct-to-consumer and $4.5 billion in correspondent. Funded volume increased 80% quarter-over-quarter, while pull through adjusted volume increased 67% quarter-over-quarter to $7.5 billion.

	Quarter Ended
($ in millions)	Q3'24			Q2'24
Income before taxes	$	69		$	38
Accounting items		-			-
Pretax operating income excluding accounting items and other	$	69		$	38

	Quarter Ended
($ in millions)	Q3'24				Q2'24
Total pull through adjusted volume	$	7,491			$	4,473
Funded volume	$	6,825			$	3,794
Refinance recapture percentage		69	%			73	%
Recapture percentage		22	%			22	%
Purchase volume as a percentage of funded volume		69	%			62	%

Conference Call Webcast and Investor Presentation

The Company will host a conference call on October 23, 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 September 30, 2024				Three Months Ended June 30, 2024
Revenues:
Service related, net	$	288			$	485
Net gain on mortgage loans held for sale		136				98
Total revenues		424				583
Total expenses:		335				300
Other (expense) income, net:
Interest income		227				189
Interest expense		(199	)			(187	)
Other expense, net		(5	)			(8	)
Total other expense, net		23				(6	)
Income before income tax expense		112				277
Income tax expense		32				73
Net income	$	80			$	204
Earnings per share:
Basic	$	1.24			$	3.16
Diluted	$	1.22			$	3.10
Weighted average shares of common stock outstanding (in millions):
Basic		64.3				64.6
Diluted		65.5				65.8

MR. COOPER GROUP INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (millions of dollars)
	September 30, 2024			June 30, 2024
Assets
Cash and cash equivalents	$	733		$	642
Restricted cash		186			162
Mortgage servicing rights at fair value		10,035			10,352
Advances and other receivables, net		940			934
Mortgage loans held for sale at fair value		1,962			1,539
Property and equipment, net		58			57
Deferred tax assets, net		315			351
Other assets		1,957			1,746
Total assets	$	16,186		$	15,783
Liabilities and Stockholders' Equity
Unsecured senior notes, net	$	4,885		$	4,141
Advance, warehouse and MSR facilities, net		4,379			4,925
Payables and other liabilities		1,841			1,684
MSR related liabilities - nonrecourse at fair value		443			439
Total liabilities		11,548			11,189
Total stockholders' equity		4,638			4,594
Total liabilities and stockholders' equity	$	16,186		$	15,783

UNAUDITED SEGMENT STATEMENT OF OPERATIONS & EARNINGS RECONCILIATION (millions of dollars, except for earnings per share data)
	Three Months Ended September 30, 2024
	Servicing				Originations				Corporate/ Other				Consolidated
Service related, net	$	246			$	24			$	18			$	288
Net gain on mortgage loans held for sale		10				126				-				136
Total revenues		256				150				18				424
Total expenses		180				83				72				335
Other income (expense), net:
Interest income		201				25				1				227
Interest expense		(100	)			(23	)			(76	)			(199	)
Other expense, net		-				-				(5	)			(5	)
Total other income (expense), net		101				2				(80	)			23
Pretax income (loss)	$	177			$	69			$	(134	)		$	112
Income tax expense														32
Net income													$	80
Earnings per share
Basic													$	1.24
Diluted													$	1.22
Non-GAAP Reconciliation:
Pretax income (loss)	$	177			$	69			$	(134	)		$	112
Other mark-to-market		126				-				-				126
Accounting items / other		-				-				6				6
Intangible amortization		2				-				-				2
Pretax operating income (loss)	$	305			$	69			$	(128	)		$	246
Income tax expense(1)														(60	)
Operating income													$	186
Operating ROTCE(2)														16.8	%
Average tangible book value (TBV)(3)													$	4,451

(1)	Assumes tax-rate of 24.2%.
(2)	Computed by dividing annualized earnings by average TBV.
(3)	Average of beginning TBV of $4,428 and ending TBV of $4,474.

UNAUDITED SEGMENT STATEMENT OF OPERATIONS & EARNINGS RECONCILIATION (millions of dollars, except for earnings per share data)
	Three Months Ended June 30, 2024
	Servicing				Originations				Corporate/ Other				Consolidated
Service related, net	$	446			$	19			$	20			$	485
Net gain on mortgage loans held for sale		10				88				-				98
Total revenues		456				107				20				583
Total expenses		171				69				60				300
Other income (expense), net:
Interest income		174				15				-				189
Interest expense		(105	)			(15	)			(67	)			(187	)
Other expense, net		-				-				(8	)			(8	)
Total other income (expense), net		69				-				(75	)			(6	)
Pretax income (loss)	$	354			$	38			$	(115	)		$	277
Income tax expense														73
Net income													$	204
Earnings per share
Basic													$	3.16
Diluted													$	3.10
Non-GAAP Reconciliation:
Pretax income (loss)	$	354			$	38			$	(115	)		$	277
Other mark-to-market		(68	)			-				-				(68	)
Accounting items / other		-				-				8				8
Intangible amortization		2				-				-				2
Pretax operating income (loss)	$	288			$	38			$	(107	)		$	219
Income tax expense														(53	)
Operating income(1)													$	166
Operating ROTCE(2)														15.3	%
Average tangible book value (TBV)(3)													$	4,333

(1)	Assumes tax-rate of 24.2%.
(2)	Computed by dividing annualized earnings by average TBV.
(3)	Average of beginning TBV of $4,238 and ending TBV of $4,428.

Non-GAAP Reconciliation:	Quarter Ended
($ in millions except value per share data)	Q3'24				Q2'24
Stockholders' equity (BV)	$	4,638			$	4,594
Goodwill		(141	)			(141	)
Intangible assets		(23	)			(25	)
Tangible book value (TBV)	$	4,474			$	4,428
Ending shares of common stock outstanding (in millions)		64.0				64.5
BV/share	$	72.49			$	71.24
TBV/share	$	69.93			$	68.67
Net income	$	80			$	204
ROCE(1)		6.9	%			18.1	%
Beginning stockholders' equity	$	4,594			$	4,405
Ending stockholders' equity	$	4,638			$	4,594
Average stockholders' equity (BV)	$	4,616			$	4,500

(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
[phone]
[e-mail]

Media Contact:
Christen Reyenga, VP Corporate Communications
[e-mail]