Form 8-K - Current report

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): July 25, 2024

 

Mr. Cooper Group Inc.

(Exact Name of Registrant as Specified in Charter) 

 

 

Delaware		001-14667		91-1653725
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)

8950 Cypress Waters Blvd.

Coppell, TX 75019

(Address of Principal Executive Offices, and Zip Code)

 

[phone]

Registrant’s Telephone Number, Including Area Code

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨	Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	COOP	The Nasdaq Stock Market

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

Item 2.02

Results of Operations and Financial Condition.

 

On July 25, 2024, Mr. Cooper Group Inc. (the “Company”) issued a press release announcing its financial results for the second quarter ended June 30, 2024. A copy of the press release is attached as Exhibit 99.1 and will be published in the Investors section on the Company’s website at www.mrcoopergroup.com. In connection with the release and the related conference call, the Company posted a presentation relating to its second quarter ended June 30, 2024 financial results in the Investors section on the Company’s website.

 

The press release and presentation include certain non-generally accepted accounting principles financial measures. Reconciliations to the most directly comparable generally accepted accounting principles financial measures are included in the press release and the presentation.

 

The information furnished pursuant to this Item 2.02 shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

Item 8.01

Other Events.

 

On July 24, 2024, (1) Nationstar Mortgage LLC, a Delaware limited liability company and the Company’s operating subsidiary (“Nationstar”), entered into an Agreement for the Bulk Purchase and Sale of Mortgage Servicing Rights with Flagstar Bank, N.A., a national banking association and a wholly owned subsidiary of New York Community Bank (“Flagstar”), pursuant to which, and upon the terms and subject to the conditions therein, Flagstar has agreed to sell, and Nationstar has agreed to purchase, certain mortgage servicing rights held by Flagstar and (2) Nationstar and Flagstar entered into an Asset Purchase Agreement, pursuant to which, and upon the terms and subject to the conditions therein, Flagstar has agreed to sell, and Nationstar has agreed to purchase, certain other assets of Flagstar, including its mortgage servicing and subservicing assets and contracts.

 

Item 9.01

Financial Statements and Exhibits.

 

(d) Exhibits

 

Exhibit Number		Exhibit
99.1		Press release of Mr. Cooper Group Inc., dated July 25, 2024
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. 

 

				Mr. Cooper Group Inc.
Date:  July 25, 2024				By:	/s/ Kurt Johnson
					Kurt Johnson Executive Vice President & Chief Financial Officer

 

 

 

Exhibit 99.1

 

 

FOR IMMEDIATE RELEASE

 

MR. COOPER GROUP REPORTS SECOND QUARTER 2024 RESULTS AND ANNOUNCES ACQUISITION OF MORTGAGE OPERATIONS FROM FLAGSTAR

 

•

Reported net income of $204 million including other mark-to-market of $68 million, equivalent to ROCE of 18.1% and operating ROTCE of 15.3%

•

Book value per share and tangible book value per share increased to $71.24 and $68.67

•

Servicing portfolio grew 37% y/y to $1,206 billion

•

Repurchased 0.3 million shares of common stock for $24 million. Board of directors approved additional $200 million for stock repurchase, bringing total authorization to approximately $270 million

•

Announced acquisition of Flagstar’s mortgage operations, including MSRs and subservicing contracts totaling approximately $356 billion in unpaid principal balance (UPB), for $1.4 billion in cash

 

Dallas, TX (July 25, 2024) - Mr. Cooper Group Inc. (NASDAQ: COOP) (the “Company”), reported second quarter income before income tax expense of $277 million and net income of $204 million. Excluding other mark-to-market and other adjustments, the Company reported pretax operating income of $219 million. Adjustments included other mark-to-market net of hedges of $68 million and other items shown below in the reconciliation of GAAP and non-GAAP results.

 

The acquisition of Flagstar’s mortgage operations consists of acquiring MSRs, advances, subservicing contracts, and a third-party origination platform. This purchase will be funded through available cash and drawdowns of existing MSR lines. Upon closing, Mr. Cooper expects to welcome 1.3 million customers and add approximately $356 billion in UPB. The transaction is expected to close in the fourth quarter of 2024, subject to customary closing conditions.

 

Chairman and CEO Jay Bray commented, “We have the operational capacity to onboard Flagstar’s customers with a smooth and positive experience, which will be our top priority. We also look forward to welcoming Flagstar team members to the Mr. Cooper family. We have long respected Flagstar as a mortgage servicer, and we feel very closely aligned with their cultural values.”

 

1

 

Servicing

The Servicing segment provides a best-in-class home loan experience for our 5.3 million customers while simultaneously strengthening asset performance for investors. In the first quarter, Servicing recorded pretax income of $354 million, including other mark-to-market of $68 million. The servicing portfolio ended the quarter at $1,206 billion. Servicing generated pretax operating income, excluding other mark-to-market, of $288 million. At quarter end, the carrying value of the MSR was $10,352 million equivalent to 153 bps of MSR UPB.

 

		Quarter Ended
($ in millions)		Q2'24								Q1'24
		$				BPS				$				BPS
Operational revenue		$	604				20.7			$	577				21.6
Amortization, net of accretion			(217	)			(7.4	)			(170	)			(6.4	)
Mark-to-market			69				2.3				43				1.6
Total revenues			456				15.5				450				16.8
Total expenses			(171	)			(5.9	)			(185	)			(6.9	)
Total other income, net			69				2.4				48				1.8
Income before taxes			354				12.1				313				11.7
Other mark-to-market			(68	)			(2.4	)			(42	)			(1.6	)
Accounting items			—				—				—				—
Intangible amortization			2				0.1				2				0.1
Pretax operating income excluding other mark-to-market and accounting items		$	288				9.8			$	273				10.2

		Quarter Ended
			Q2'24				Q1'24
MSRs UPB ($B)		$	676			$	631
Subservicing and Other UPB ($B)			530				505
Ending UPB ($B)		$	1,206			$	1,136
Average UPB ($B)		$	1,171			$	1,068
60+ day delinquency rate at period end			1.4	%			1.6	%
Annualized CPR			5.6	%			4.7	%
Modifications and workouts			22,645				24,460

 

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 $38 million.

 

The Company funded 15,080 loans in the second quarter, totaling approximately $3.8 billion UPB, which was comprised of $1.7 billion in direct-to-consumer and $2.1 billion in correspondent. Funded volume increased 32% quarter-over-quarter, while pull through adjusted volume increased 48% quarter-over-quarter to $4.5 billion.

 

2

 

		Quarter Ended
($ in millions)		Q2'24				Q1'24
Income before taxes		$	38			$	32
Accounting items			—				—
Pretax operating income excluding accounting items and other		$	38			$	32

 

		Quarter Ended
($ in millions)		Q2'24				Q1'24
Total pull through adjusted volume		$	4,473			$	3,013
Funded volume		$	3,794			$	2,878
Refinance recapture percentage			73	%			70	%
Recapture percentage			22	%			24	%
Purchase volume as a percentage of funded volume			62	%			55	%

 

Conference Call Webcast and Investor Presentation

The Company will host a conference call on July 25, 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.

 

3

 

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.

 

Investor Contact:

Kenneth Posner, SVP Strategic Planning and Investor Relations

[phone]

[e-mail]

 

Media Contact:

Christen Reyenga, VP Corporate Communications

[e-mail]

 

 

 

 

 

 

4

 

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 June 30, 2024				Three Months Ended March 31, 2024
Revenues:
Service related, net		$	485			$	478
Net gain on mortgage loans held for sale			98				86
Total revenues			583				564
Total expenses:			300				317
Other (expense) income, net:
Interest income			189				158
Interest expense			(187	)			(170	)
Other expense, net			(8	)			(3	)
Total other expense, net			(6	)			(15	)
Income before income tax expense			277				232
Income tax expense			73				51
Net income		$	204			$	181
Earnings per share:
Basic		$	3.16			$	2.80
Diluted		$	3.10			$	2.73
Weighted average shares of common stock outstanding (in millions):
Basic			64.6				64.6
Diluted			65.8				66.3

 

 

5

 

MR. COOPER GROUP INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(millions of dollars)

		June 30, 2024				March 31, 2024
Assets
Cash and cash equivalents		$	642			$	578
Restricted cash			162				157
Mortgage servicing rights at fair value			10,352				9,796
Advances and other receivables, net			934				914
Mortgage loans held for sale at fair value			1,539				1,070
Property and equipment, net			57				55
Deferred tax assets, net			351				426
Other assets			1,746				1,779
Total assets		$	15,783			$	14,775
Liabilities and Stockholders' Equity
Unsecured senior notes, net		$	4,141			$	4,137
Advance, warehouse and MSR facilities, net			4,925				4,087
Payables and other liabilities			1,684				1,691
MSR related liabilities - nonrecourse at fair value			439				455
Total liabilities			11,189				10,370
Total stockholders' equity			4,594				4,405
Total liabilities and stockholders' equity		$	15,783			$	14,775

 

 

 

6

 

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(1)															(53	)
Operating income														$	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.

 

 

 

7

 

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															(48	)
Operating income(1)														$	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.

 

8

 

 

Non-GAAP Reconciliation:		Quarter Ended
($ in millions except value per share data)		Q2'24				Q1'24
Stockholders' equity (BV)		$	4,594			$	4,405
Goodwill			(141	)			(141	)
Intangible assets			(25	)			(26	)
Tangible book value (TBV)		$	4,428			$	4,238
Ending shares of common stock outstanding (in millions)			64.5				64.7
BV/share		$	71.24			$	68.06
TBV/share		$	68.67			$	65.48
Net income		$	204			$	181
ROCE(1)			18.1	%			16.7	%
Beginning stockholders’ equity		$	4,405			$	4,282
Ending stockholders’ equity		$	4,594			$	4,405
Average stockholders’ equity (BV)		$	4,500			$	4,344

 

(1)

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

 

 

 

 

9

 

Cover	Jul. 25, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Jul. 25, 2024
Entity File Number	001-14667
Entity Registrant Name	Mr. Cooper Group Inc.
Entity Central Index Key	0000933136
Entity Tax Identification Number	91-1653725
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	8950 Cypress Waters Blvd.
Entity Address, City or Town	Coppell
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	75019
City Area Code	(469)
Local Phone Number	549-2000
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, $0.01 par value per share
Trading Symbol	COOP
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false

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