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Section 1: 8-K (NATIONSTAR MORTGAGE HOLDINGS INC. 8-K)


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: July 17, 2018



Nationstar Mortgage Holdings Inc.
(Exact Name of Registrant as Specified in Charter)


Delaware

001-35449

45-2156869

(State or Other Jurisdiction

of Incorporation)

(Commission File Number)

(I.R.S. Employer

Identification Number)

8950 Cypress Waters Boulevard
Coppell, Texas 75019
(Address of Principal Executive Offices)

(469) 549-2000
(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 communications 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 communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

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

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 17, 2018, Nationstar Mortgage Holdings Inc. (the “Company”) issued a press release announcing its financial results for the second quarter ended June 30, 2018. A copy of the press release is attached as Exhibit 99.1 and will be published in the Investor Information section on the Company’s website at www.nationstarholdings.com. In connection with the release and the related conference call, the Company posted a presentation relating to its second quarter ended June 30, 2018 financial results in the Investor Information 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 16, 2018, the Company's wholly-owned subsidiaries, Nationstar Mortgage LLC and Nationstar Capital Corporation, provided notice of their election to redeem all the currently outstanding 9.625% senior notes due 2019 (the "2019 Notes") and all the currently outstanding 7.875% senior notes due 2020 (the "2020 Notes" and, together with the 2019 Notes, the "Existing Notes"). The Existing Notes will be redeemed on August 15, 2018 (the "Redemption Date") at a redemption price of (x) in the case of the 2019 Notes, 100% of the principal amount of the 2019 Notes and (y) in the case of the 2020 Notes, 101.969% of the principal amount of the 2020 Notes, in each case, plus accrued and unpaid interest on the Existing Notes to the Redemption Date.

Item 9.01 Financial Statements and Exhibits.
 

(d) Exhibits

 
 
Exhibit
Number
Exhibit
 

99.1

Press release of Nationstar Mortgage Holdings Inc., dated July 17, 2018


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.


Nationstar Mortgage Holdings Inc.

 

 
Date:

July 17, 2018

By:

/s/ Amar Patel

Amar Patel

Chief Financial Officer

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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit 99.1

Nationstar Reports Second Quarter 2018 Financial Results

DALLAS--(BUSINESS WIRE)--July 17, 2018--Nationstar Mortgage Holdings Inc. (NYSE:NSM), which principally operates under the Mr. Cooper® and Xome® brands, reported second quarter GAAP net income of $58 million, or $0.59 per diluted share. On an adjusted basis, the Company reported earnings for the second quarter of $52 million, or $0.53 per diluted share.

"Nationstar continues to deliver solid operating results with all segments experiencing growth. Servicing profitability is improving ahead of expectations, and significant opportunities exist for further growth. Originations grew in profitability and volume, and it is focused on providing solutions for our 3.2 million customers. Xome sales and order volumes increased with the continued addition of new third-party clients," said Jay Bray, Chairman and Chief Executive Officer. "We have received all required approvals for our merger transaction with WMIH and we expect to close the merger on July 31. We appreciate the support of our shareholders, the WMIH shareholders and our partners who have provided these approvals. We look forward to growing our differentiated platform and building value for our shareholders and customers."

Servicing

Servicing supports home ownership for our 3.2 million customers and earns recurring revenues from mortgage servicing rights and subservicing. The Servicing segment earned $88 million GAAP pretax income or $72 million adjusted pretax income (5.8 basis points). Adjusted pretax profitability improved 5% from the prior quarter primarily due to lower expenses. Expenses improved by $16 million or 9% quarter-over-quarter as a result of improved efficiencies in the segment.


Nationstar boarded $20 billion UPB, ending the second quarter at $498 billion. An estimated $65 billion UPB, consisting of both mortgage servicing rights and subservicing, is scheduled to board in the second half of the year. Nationstar continues to evaluate significant servicing growth opportunities and expects to end the year with over $530 billion.

Nationstar is targeting adjusted servicing profitability in excess of 6.0 basis points on average for the full year 2018 which will be propelled by lower prepayment environment, portfolio additions, and continued cost savings initiatives.

                           
Quarter Ended
($ in millions) Q1'18   Q2'18
$   BPS $   BPS
Operational revenue $ 291 23.0 $ 277 22.3
Amortization (48 ) (3.8 ) (48 ) (3.9 )
Mark-to-market   152   12.1     19   1.5  
Total revenues 395 31.3 248 20.0
Expenses (182 ) (14.4 ) (166 ) (13.4 )
Total other income (expenses), net   7   0.6     6   0.5  
Income before taxes (GAAP) 220 17.6 88 7.1
Mark-to-market (152 ) (12.1 ) (19 ) (1.5 )
Adjustments         3   0.2  
Adjusted pretax income $ 69   5.5   $ 72   5.8  
 
               
Quarter Ended
Q1'18   Q2'18
Ending UPB ($B) $ 500 $ 498
Average UPB ($B) $ 504 $ 497
60+ day delinquency rate 3.2 % 2.8 %
Annualized CPR 10.7 % 12.1 %
Annualized CPR, net of recapture 8.9 % 10.5 %
Modifications and workouts 19,950 14,715
 

Originations

Originations creates servicing assets at attractive margins through recapture of existing customers, new customer acquisitions, and correspondent originations. The Originations segment earned $32 million GAAP pretax income or $33 million adjusted pretax income, an increase of 32% from the prior quarter primarily attributable to higher volume and reduced expenses.

Nationstar funded over 25,000 loans totaling approximately $5.5 billion which was composed of $2.6 billion from the consumer direct channel and $2.9 billion from the correspondent channel. The consumer direct channel is primarily focused on improving cash flow and consolidating debt for nearly 750,000 customers identified from the servicing portfolio. A new mobile app called Home Intelligence is expected to be available to Nationstar's 3.2 million customers later in third quarter to help them optimize their personal balance sheets and further add volume for the channel.


Nationstar is targeting Originations adjusted pretax income of $120 million for the full year 2018.

           
Quarter Ended
($ in millions) Q1'18   Q2'18
Income before taxes (GAAP) $ 19 $ 32
Adjustments   5   1
Adjusted pretax income $ 25 $ 33
 
   
Quarter Ended
($ in millions) Q1'18   Q2'18
Total pull through adjusted volume $ 4,862 $ 5,440
Funded volume $ 5,087 $ 5,542
Recapture percentage 27 % 22 %
Purchase volume as a percentage of funded volume 40 % 51 %
 

Xome

Xome provides real estate solutions including property disposition, asset management, title, close, valuation, and field services to Nationstar and third parties. The Xome segment earned $10 million GAAP pretax income or $13 million adjusted pretax income.

Both the Exchange and Services segments experienced sequential growth as property sales and completed order volumes increased. The Exchange business sold over 3,700 properties in the quarter, a 16% increase from prior quarter. Third-party listings accounted for over 45% of total property sales as the segment continues to attract third-party business and referral listings. During the quarter, the Exchange business added six new institutional clients. The Services business completed over 117,000 orders in the quarter, a 5% increase from prior quarter. The field services business continues to capture property inspection and preservation orders and is expected to be fully ramped by the end of the year.

Nationstar is targeting Xome adjusted pretax income of $60 million for the full year 2018.


   
Quarter Ended
($ in millions) Q1'18   Q2'18
Income before taxes (GAAP) $ 22 $ 10
Adjustments   (8 )   3
Adjusted pretax income $ 14   $ 13
 
   
Quarter Ended
Q1'18     Q2'18  
Exchange property listings sold 3,202   3,720
Exchange property listings at period end 7,594 7,417
Services orders completed 111,339 117,093
Percentage of revenue earned from third-party customers 27 % 28 %
 

Conference Call Webcast and Investor Presentation

The Company will host a conference call on July 17, 2018, 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 7668739 to access the conference call. A simultaneous audio webcast of the conference call will be available in the Investor Information section of www.nationstarholdings.com. A replay will also be available by dialing 855-859-2056, or 404-537-3406 internationally. Please use the passcode 7668739 to access the replay. The replay will be accessible through July 31, 2018.

Non-GAAP Financial Measures

The Company utilizes non-GAAP (or “adjusted”) 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 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 adjustments 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. Adjusted pre-tax 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. Adjusted pre-tax income (loss) also eliminates in each segment, as applicable, transition and integration costs, gains (losses) on sales of fixed assets, certain settlement costs that are not considered normal operational matters, 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. These forward looking statements include, but are not limited to, statements regarding estimates of Servicing's profitability, growth and Originations and Xome adjusted pre-tax income. 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 "Business" and "Risk Factors" sections of our most recent annual report and other required documents as filed with the SEC which are available at the SEC’s website at http://www.sec.gov. Nationstar 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

   
NATIONSTAR MORTGAGE HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(millions of dollars, except for earnings per share data)

 
             
Quarter Ended
March 31, 2018 June 30, 2018
Revenues:
Service related, net $ 312 $ 298
Mark-to-market 152 19
Net gain on mortgage loans held for sale   124     127  
Total revenues   588     444  
 
Total expenses 364 339
 
Other income (expense):
Interest income 145 140
Interest expense (171 ) (164 )
Other income (expenses)   8     (2 )
Total other income (expenses), net   (18 )   (26 )
Income before income tax expense 206 79
Income tax expense   46     21  
Net income attributable to Nationstar $ 160   $ 58  
 
Earnings per share attributable to common stockholders:
Basic $ 1.63   $ 0.59  
Diluted $ 1.61   $ 0.59  
Weighted average shares of common stock outstanding (in thousands):
Basic   97,873     98,203  
Diluted   99,111     99,130  
 

   
NATIONSTAR MORTGAGE HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS

(millions of dollars)

 
         
Quarter Ended
March 31, 2018 June 30, 2018
Assets
Cash and cash equivalents $ 187 $ 185
Restricted cash 365 310
Mortgage servicing rights 3,194 3,356
Advances and other receivables, net 1,424 1,317
Reverse mortgage interests, net 10,225 9,477
Mortgage loans held for sale at fair value 1,589 1,635
Mortgage loans held for investment, net 136 132
Property and equipment, net 123 123
Derivative financial instruments at fair value 65 62
Other assets   556   593
Total assets $ 17,864 $ 17,190
 
Liabilities and Stockholders' Equity
Unsecured senior notes, net $ 1,859 $ 1,815
Advance facilities, net 562 516
Warehouse facilities, net 3,161 3,086
Payables and accrued liabilities 1,235 1,288
MSR related liabilities - nonrecourse at fair value 1,035 1,063
Mortgage servicing liabilities 30 27
Derivative financial instruments at fair value 9 9
Other nonrecourse debt, net   8,091   7,445
Total liabilities 15,982 15,249
Total stockholders' equity   1,882   1,941
Total liabilities and stockholders' equity $ 17,864 $ 17,190
 

           
UNAUDITED SEGMENT STATEMENT OF
OPERATIONS & EARNINGS RECONCILIATION

(millions of dollars, except for earnings per share data)

 
                                             
Quarter ended March 31, 2018
Servicing Originations Xome Corporate and Other Elim. Consolidated
 
REVENUES:
Service related, net $ 395 $ 15 $ 65 $ $ (11 ) $ 464
Net gain on mortgage loans held for sale       113             11     124  
Total revenues   395     128     65             588  
Total expenses 182 109 52 21 364
Other income (expense):
Interest income 126 15 4 145
Interest expense (118 ) (15 ) (38 ) (171 )
Other expense   (1 )       9             8  
Total other income (expense)   7         9     (34 )       (18 )
Pretax income (loss) $ 220   $ 19   $ 22   $ (55 ) $   $ 206
 
Income tax expense (46 )
Net income attributable to Nationstar $ 160  
Earnings per share
Basic $ 1.63  
Diluted $ 1.61  
 
Adjusted Earnings:
Pretax income (loss) $ 220 $ 19 $ 22 $ (55 ) $ $ 206
MTM (152 ) (152 )
Adjustments       5     (8 )   6         3  
Adjusted pretax income (loss) $ 69   $ 25   $ 14   $ (49 ) $   $ 58
Income tax expense   (14 )
Adjusted earnings $ 44  
Adjusted diluted EPS $ 0.44  
 

Notes: Items may not sum due to rounding

 

           
UNAUDITED SEGMENT STATEMENT OF
OPERATIONS & EARNINGS RECONCILIATION

(millions of dollars, except for earnings per share data)

 
                                           
Quarter ended June 30, 2018
Servicing Originations Xome Corporate and Other Elim. Consolidated
 
REVENUES:
Service related, net $ 248 $ 17 $ 62 $ 1 $ (11 ) $ 317
Net gain on mortgage loans held for sale       116           11     127  
Total revenues   248     133   $ 62   1         444  
Total expenses 166 102 52 19 339
Other income (expense):
Interest income 121 17 2 140
Interest expense (115 ) (16 ) (33 ) (164 )
Other expense             (2 )       (2 )
Total other income (expense)   6     1       (33 )       (26 )
Pretax income (loss) $ 88   $ 32   $ 10 $ (51 ) $   $ 79
 
Income tax expense (21 )
Net income attributable to Nationstar $ 58  
Earnings per share
Basic $ 0.59  
Diluted $ 0.59  
 
Adjusted Earnings:
Pretax income (loss) $ 88 $ 32 $ 10 $ (51 ) $ $ 79
MTM (19 ) (19 )
Adjustments   3     1     3   2         9  
Adjusted pretax income (loss) $ 72   $ 33   $ 13 $ (49 ) $   $ 69
Income tax expense   (17 )
Adjusted earnings $ 52  
Adjusted diluted EPS $ 0.53  
 

Notes: Items may not sum due to rounding

CONTACT:
Nationstar Mortgage Holdings Inc.
Rich Delgado, 214-687-4844

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