Market Overview

Mr. Cooper Group Reports Third Quarter 2019 Financial Results

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  • Reported $83 million net income or $0.90 per share, and pretax operating income of $171 million
  • Generated record Originations pretax income of $178 million on record funded volume of $11.9 billion
  • Servicing UPB remained stable, ending the quarter at $641 billion
  • Xome reported pretax income of $14 million and pretax operating income of $13 million, with Assurant Mortgage Solutions (AMS) contributing positive results
  • Announced retirement of $100 million of unsecured senior notes due 2021, which settled in October
  • Achieved Great Place to Work certification

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

%

 

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