Mr. Cooper Group Reports First Quarter 2024 Results

Rhea-AI Summary

Mr. Cooper Group Inc. (NASDAQ: COOP) reported first quarter 2024 results with net income of $181 million, ROCE of 16.7%, and operating ROTCE of 14.5%. The company saw growth in book value per share, servicing portfolio, and repurchased shares. The Servicing segment recorded pretax income of $313 million, while the Originations segment earned $32 million. The company remains optimistic about its momentum, technology investments, and growth opportunities.

Positive

• Reported net income of $181 million with ROCE of 16.7% and operating ROTCE of 14.5%
• Book value per share and tangible book value per share increased to $68.06 and $65.48
• Servicing portfolio grew 33% y/y to $1,136 billion
• Repurchased 0.5 million shares of common stock for $39 million
• Issued $1 billion senior notes maturing 2032 with a coupon of 7.125%
• Servicing segment recorded pretax income of $313 million
• Originations segment earned pretax income of $32 million
• Funded volume increased 8% quarter-over-quarter to $2.9 billion UPB
• Company remains optimistic about strategic technology investments and growth opportunities

Negative

• None.

Insights

Financial Analyst

The release presents Mr. Cooper Group's first-quarter financial results for 2024, which show a robust net income of $181 million and significant growth in their servicing portfolio by 33% year-over-year, reaching $1,136 billion. The rise in tangible book value per share to $65.48 and the repurchase of 0.5 million shares signal confidence in the company's financial health and a shareholder-friendly capital allocation policy. The issuance of senior notes also indicates an active management of the company's capital structure, potentially aiming to optimize its financing costs and invest in growth opportunities. Investors should note the substantial mark-to-market adjustments, as these non-cash accounting entries can create volatility in reported earnings without necessarily reflecting changes in cash flows or the company's operational efficiency.

Mortgage Industry Analyst

The robust performance of Mr. Cooper Group's Servicing segment, with a pretax income of $313 million, is indicative of a strong position within the mortgage servicing market. The increase in the servicing portfolio to $1,136 billion is remarkable and underscores the company's growing influence in this sector. A 1.6% 60+ day delinquency rate is indicative of a healthy mortgage portfolio. Additionally, with the annualized constant prepayment rate (CPR) at 4.7%, investors can gauge the rate at which the underlying loans are expected to be paid off, which can impact the value of servicing rights and the overall profitability of this segment. The successful recapture rate of 70% in refinancing further reflects the company's ability to retain customers amidst competitive market conditions.

Debt Markets Analyst

The issuance of $1 billion in senior notes with a coupon of 7.125%, maturing in 2032, is a strategic move. Given the interest rate environment as of early 2024, it appears the company is locking in long-term financing at a fixed rate, which could be beneficial if rates were to rise further. However, investors should consider the implications of such a debt level on the company's balance sheet and how it may affect future financial flexibility. The senior notes offering, by extending the company's debt maturity profile and diversifying its funding sources, could be seen as a proactive step in capital management, provided the proceeds are deployed effectively for accretive opportunities.

• Reported net income of $181 million including other mark-to-market of $42 million, equivalent to ROCE of 16.7% and operating ROTCE of 14.5%
• Book value per share and tangible book value per share increased to $68.06 and $65.48
• Servicing portfolio grew 33% y/y to $1,136 billion
• Repurchased 0.5 million shares of common stock for $39 million
• Issued $1 billion senior notes maturing 2032 with coupon of 7.125%

DALLAS--(BUSINESS WIRE)-- Mr. Cooper Group Inc. (NASDAQ: COOP) (the “Company”), reported first quarter income before income tax expense of $232 and net income of $181 million. Excluding other mark-to-market and other adjustments, the Company reported pretax operating income of $199 million. Adjustments included other mark-to-market net of hedges of $42 million and other items shown below in the reconciliation of GAAP and non-GAAP results.

Chairman and CEO Jay Bray commented, “The company has started the year with excellent momentum, including return on tangible common equity rising to 14.5%. Thanks to our strategic emphasis on technology, including years of investment in AI and the cloud, Mr. Cooper is well positioned to provide our customers with world-class service, operate as a trusted counterparty for our industry stakeholders, and grow and sustain investor returns.”

Mike Weinbach, President added, “This environment is playing to the strengths of our balanced business model, as we are enjoying strong momentum with subservicing clients and seeing attractive opportunities to acquire MSRs, while our originations team has been very nimble in helping customers save money and access the equity they’ve built up in their homes.”

Servicing

The Servicing segment provides a best-in-class home loan experience for our 5.1 million customers while simultaneously strengthening asset performance for investors. In the first quarter, Servicing recorded pretax income of $313 million, including other mark-to-market of $42 million. The servicing portfolio ended the quarter at $1,136 billion. Servicing generated pretax operating income, excluding other mark-to-market, of $273 million. At quarter end, the carrying value of the MSR was $9,796 million equivalent to 155 bps of MSR UPB.

	Quarter Ended
($ in millions)	Q1'24								Q4'23
	$				BPS				$				BPS
Operational revenue	$	577				21.6			$	507				21.1
Amortization, net of accretion		(170	)			(6.4	)			(151	)			(6.3	)
Mark-to-market		43				1.6				(40	)			(1.7	)
Total revenues		450				16.8				316				13.1
Total expenses		(185	)			(6.9	)			(180	)			(7.4	)
Total other income, net		48				1.8				48				1.9
Income before taxes		313				11.7				184				7.6
Other mark-to-market		(42	)			(1.6	)			41				1.7
Accounting items		—				—				2				0.1
Intangible amortization		2				0.1				2				0.1
Pretax operating income excluding other mark-to-market and accounting items	$	273				10.2			$	229				9.5
	Quarter Ended
	Q1'24								Q4'23
MSRs UPB ($B)	$	631							$	588
Subservicing and Other UPB ($B)		505								404
Ending UPB ($B)	$	1,136							$	992
Average UPB ($B)	$	1,068							$	963
60+ day delinquency rate at period end		1.6					%			1.9					%
Annualized CPR		4.7					%			4.0					%
Modifications and workouts		24,460								16,953

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 $32 million.

The Company funded 11,599 loans in the first quarter, totaling approximately $2.9 billion UPB, which was comprised of $1.4 billion in direct-to-consumer and $1.5 billion in correspondent. Funded volume increased 8% quarter-over-quarter, while pull through adjusted volume increased 16% quarter-over-quarter to $3.0 billion.

	Quarter Ended
($ in millions)	Q1'24				Q4'23
Income before taxes	$	32			$	9
Accounting items		—				1
Pretax operating income excluding accounting items and other	$	32			$	10

	Quarter Ended
($ in millions)	Q1'24				Q4'23
Total pull through adjusted volume	$	3,013			$	2,592
Funded volume	$	2,878			$	2,661
Refinance recapture percentage		70	%			76	%
Recapture percentage		24	%			22	%
Purchase volume as a percentage of funded volume		55	%			59	%

Conference Call Webcast and Investor Presentation

The Company will host a conference call on April 24, 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 March 31, 2024				Three Months Ended December 31, 2023
Revenues:
Service related, net	$	478			$	345
Net gain on mortgage loans held for sale		86				59
Total revenues		564				404
Total expenses:		317				332
Other (expense) income, net:
Interest income		158				159
Interest expense		(170	)			(159	)
Other (expense) income, net		(3	)			(3	)
Total other (expense) income, net		(15	)			(3	)
Income before income tax expense		232				69
Income tax expense		51				23
Net income	$	181			$	46
Earnings per share:
Basic	$	2.80			$	0.71
Diluted	$	2.73			$	0.69
Weighted average shares of common stock outstanding (in millions):
Basic		64.6				65.1
Diluted		66.3				66.7

MR. COOPER GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(millions of dollars)
	Unaudited
	March 31, 2024			December 31, 2023
Assets
Cash and cash equivalents	$	578		$	571
Restricted cash		157			169
Mortgage servicing rights at fair value		9,796			9,090
Advances and other receivables, net		914			996
Mortgage loans held for sale at fair value		1,070			927
Property and equipment, net		55			53
Deferred tax assets, net		426			472
Other assets		1,779			1,918
Total assets	$	14,775		$	14,196
Liabilities and Stockholders' Equity
Unsecured senior notes, net	$	4,137		$	3,151
Advance, warehouse and MSR facilities, net		4,087			4,302
Payables and other liabilities		1,691			1,995
MSR related liabilities - nonrecourse at fair value		455			466
Total liabilities		10,370			9,914
Total stockholders' equity		4,405			4,282
Total liabilities and stockholders' equity	$	14,775		$	14,196

UNAUDITED SEGMENT STATEMENT OF
OPERATIONS & EARNINGS RECONCILIATION
(millions of dollars, except for earnings per share data)
	Three Months Ended March 31, 2024
	Servicing				Originations				Corporate/ Other				Consolidated
Service related, net	$	440			$	16			$	22			$	478
Net gain on mortgage loans held for sale		10				76				—				86
Total revenues		450				92				22				564
Total expenses		185				62				70				317
Other income (expense), net:
Interest income		146				12				—				158
Interest expense		(98	)			(10	)			(62	)			(170	)
Other expense, net		—				—				(3	)			(3	)
Total other income (expense), net		48				2				(65	)			(15	)
Pretax income (loss)	$	313			$	32			$	(113	)		$	232
Income tax expense														51
Net income													$	181
Earnings per share
Basic													$	2.80
Diluted													$	2.73
Non-GAAP Reconciliation:
Pretax income (loss)	$	313			$	32			$	(113	)		$	232
Other mark-to-market		(42	)			—				—				(42	)
Accounting items / other		—				—				7				7
Intangible amortization		2				—				—				2
Pretax operating income (loss)	$	273			$	32			$	(106	)		$	199
Income tax expense(1)														(48	)
Operating income													$	151
Operating ROTCE(2)														14.5	%
Average tangible book value (TBV)(3)													$	4,176

(1)		Assumes tax-rate of 24.2%.
(2)		Computed by dividing annualized earnings by average TBV.
(3)		Average of beginning TBV of $4,113 and ending TBV of $4,238.

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 expense, 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														(37	)
Operating income(1)													$	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.

Non-GAAP Reconciliation:	Quarter Ended
($ in millions except value per share data)	Q1'24				Q4'23
Stockholders' equity (BV)	$	4,405			$	4,282
Goodwill		(141	)			(141	)
Intangible assets		(26	)			(28	)
Tangible book value (TBV)	$	4,238			$	4,113
Ending shares of common stock outstanding (in millions)		64.7				64.6
BV/share	$	68.06			$	66.29
TBV/share	$	65.48			$	63.67
Net income	$	181			$	46
ROCE(1)		16.7	%			4.3	%
Beginning stockholders’ equity	$	4,282			$	4,304
Ending stockholders’ equity	$	4,405			$	4,282
Average stockholders’ equity (BV)	$	4,344			$	4,293

(1)

Return on Common Equity (ROCE) is computed by dividing annualized earnings by average BV.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240424284765/en/

Investor Contact:

Kenneth Posner, SVP Strategic Planning and Investor Relations

(469) 426-3633

Shareholders@mrcooper.com

Media Contact:

Christen Reyenga, VP Corporate Communications

MediaRelations@mrcooper.com

Source: Mr. Cooper Group Inc.

FAQ

What was Mr. Cooper Group's net income for the first quarter of 2024?

Mr. Cooper Group reported a net income of $181 million for the first quarter of 2024.

What is the ticker symbol for Mr. Cooper Group?

The ticker symbol for Mr. Cooper Group is COOP.

How much did Mr. Cooper Group increase its book value per share to in the first quarter of 2024?

Mr. Cooper Group increased its book value per share to $68.06 in the first quarter of 2024.

What was the percentage increase in the servicing portfolio for Mr. Cooper Group year-over-year?

The servicing portfolio for Mr. Cooper Group grew by 33% year-over-year to $1,136 billion.

How many shares of common stock did Mr. Cooper Group repurchase in the first quarter of 2024?

Mr. Cooper Group repurchased 0.5 million shares of common stock in the first quarter of 2024.

What type of notes did Mr. Cooper Group issue maturing in 2032 and with what coupon rate?

Mr. Cooper Group issued $1 billion senior notes maturing in 2032 with a coupon rate of 7.125%.