Rithm Capital Corp. · NYSE:RITM
Rithm Capital — Q1 2022 Earnings Presentation
41 slides from Rithm Capital's earnings presentation, May 3, 2022
Slide 1: New Residential Investment Corp. Quarterly Supplement
New Residential Investment Corp. Quarterly Supplement F I R ST Q UA R T E R 2 0 2 2
Slide 2: Disclaimers
Disclaimers IN GENERAL. This disclaimer applies to this document and the verbal or written comments of any person presenting it. This document, taken together with any such verbal or written comments, is referred to herein as the “Presentation.” FORWARD-LOOKING STATEMENTS. Certain statements regardi
Slide 3: New Residential Investment Corp. Overview
New Residential Investment Corp. Overview Our diversified investment management company leverages a unique portfolio of investments and operating businesses to generate attractive risk-adjusted returns $4.0 Billion in Dividends Paid Since Inception(1)(2) 9.1% Dividend Yield $7.1 Billion Net Eq
Slide 4: Q1'22 Financial Highlights
Q1’22 Financial Highlights GAAP Net Income: $661.9 Million / $1.37 per Diluted Share(1) Includes $690.3mm of total change in fair value of investments and realized gains/losses Core Earnings: $177.4 Million / $0.37 per Diluted Share(1)(2) Book Value: $12.56 per Common Share as of March 31, 2022 (+9.
Slide 5: Q1'22 Business Highlights
Q1’22 Business Highlights 1 Positioned to Perform Across Rate 4 Best-in-Class Capital Markets and Environments(1) Financing Capabilities(1) – MSRs are one of the few fixed income assets that – Non-daily mark to market financing on ~99% of the increase in value as rates rise NRZ portfolio(3) – Origin
Slide 6: Strategic Evolution
Strategic Evolution We have built a strategy over time that combines our investment management expertise and complementary operating companies to generate assets for our portfolio Investment Grow and Scale Entry into Grow and Scale Expand Goals for 2022 Portfolio Investment Complementary Operating O
Slide 7: The Current Macro Environment
The Current Macro Environment While the world has changed dramatically in the last few months, NRZ is well-positioned to drive returns Rising Inflation Increased Volatility Evolving Housing Market – Inflation has risen to multi-year highs – 2yr and 10yr treasury yields have risen – Housing inventory
Slide 8: NRZ Performs Across Rate Environments
NRZ Performs Across Rate Environments The rising rate environment drove higher earnings from our servicing portfolio while impacting mortgage origination, leading to significant book value growth and stable core earnings 1 2 3 4 5 Mortgage rates and driving higher MSR and lower earnings NRZ generate
Slide 9: NRZ Organically Manufactures Assets
NRZ Organically Manufactures Assets Our ability to organically generate assets helps drive our earnings and book value growth(1) Product Agency Origination Non-Agency Origination Business Purpose Lending (Conventional and FHA MSRs) (MSRs, Loans, Bonds and Call Rights) (Loans) 2022E Industry Total Ad
Slide 10: New Residential's 2022 Playbook
New Residential’s 2022 Playbook NRZ continues to originate and source high quality assets that deliver attractive risk- adjusted returns(1) Largest Portfolio of MSRs Among Non-Banks(2) Industry-Leading Origination Franchise $626bn UPB portfolio of MSRs positions us to increase Scalable originati
Slide 11: Q1'22 Performance
Q1’22 Performance NEW RESIDENTIAL Q1 2022 11
Slide 12: Business and Investment Summary
Business and Investment Summary Total Assets ($bn) Strategy Description $50 Top 5 non-bank mortgage originator with multi- Origination channel lending abilities(1) $41.6 Leading non-bank mortgage servicer (performing $39.7 $40 $37.9 and special servicing). Includes MSRs serviced in $37.3 Servici
Slide 13: MSR Portfolio Summary
MSR Portfolio Summary NRZ owns a large portfolio of MSRs with significant earnings power that benefits from a rising rate environment Q1’22 MSR Portfolio Activity and Outlook(1) ◆ MSR portfolio totaled $626 billion UPB as of March 31, 2022(1) – 88% Full MSRs / 12% Excess MSRs ◆ Newrez / SMS / Calibe
Slide 14: MSR Values
MSR Values Slowing prepayments amidst the rising rate environment have increased the value of our MSRs and driven higher earnings Full MSR Price & Multiples Full MSR Portfolio Speeds & Amortization During Q1’22, average portfolio speeds slowed for the fifth 160 5.0x consecutive quarter to multi-year
Slide 15: Single Family Rental (SFR)
Single Family Rental (SFR) NRZ continues to prudently grow its SFR portfolio through various sourcing channels and high-quality property management(1) NRZ’s SFR Portfolio Q1’22 Activity and Outlook Portfolio Including ◆ Acquired ~734 properties, increasing our portfolio ~27% QoQ ◆ ~3,400 units (+27%
Slide 16: Call Rights
Call Rights Call volumes in Q1’22 were down as a result of market volatility Q1’22 Call Rights Portfolio Activity and Outlook(1) ◆ Call rights are an important part of NRZ’s investment strategy, acting as an organic pipeline to the whole loan balance sheet and the servicing business – NRZ controls c
Slide 17: Servicer Advances
Servicer Advances Balances remain low and we continue to have significant excess servicer advance capacity Advance Balances as of March 31, 2022 ◆ Servicer advance balances as of March 31, 2022 were $3.1 billion, down ~7% from December 31, 2021 ◆ Outstanding advance balances are financed with(2): –
Slide 18: Mortgage Company Overview
Mortgage Company Overview Our balanced origination and servicing platforms continue to drive results Business Highlights Mortgage Company Pre-Tax Income(2) ($mm) ◆ Reporting pre-tax income of $787mm including MSR mark to market of $631mm $787 ◆ $26.9bn in funded origination volumes with margins of 1
Slide 19: Origination: Q1'22 Activity and Business Highlights
Origination: Q1’22 Activity and Business Highlights We continue to focus on profitability, purchase volume and recapture $25.9 million $26.7 billion $17 - $22 billion $26.9 billion 54% Origination PT Adj. Lock Q2’22E Funded Volume Purchase Mix Pre-Tax Income(1) Volume Funded Volume(2) Origination by
Slide 20: Origination: Leading Purchase Franchise Supported by Broad Product Set and Partnerships
Origination: Leading Purchase Franchise Supported by Broad Product Set and Partnerships We have grown purchase volumes across the combined Newrez and Caliber platforms for four consecutive years(1) Highlights Newrez & Caliber Purchase Volume(1) $77 ◆ Ability to continue growing purchase $80 5.0% vol
Slide 21: Servicing: Q1'22 Activity and Business Highlights
Servicing: Q1’22 Activity and Business Highlights We are positioned to benefit from higher interest rates and lower amortization $761.5 million $626 billion UPB ~3.2 million Largest $399 billion UPB Total Loan Count Servicing Total NRZ Servicing Non-Bank Owned In-House Servicing (incl. ~2.3 million
Slide 22: Servicing: Recapture
Servicing: Recapture Overall recapture performance remained strong in Q1’22 Recapture Highlights Overall Refinance Recapture Performance(1) ◆ Our search engine and content marketing strategies continue to keep us connected to our customer needs 48% 50% 50% 49% ◆ Our cash-out refinance transactions h
Slide 23: Complementary Operating Companies
Complementary Operating Companies In addition to the mortgage company, NRZ boasts a portfolio of multiple wholly-owned businesses that provide a boost to our earnings profile SUBSERVICING Subservicing on Provider of National title Manages network Nationwide behalf of third- business purpose insuranc
Slide 24: New Residential – How We Set Ourselves Apart
New Residential – How We Set Ourselves Apart(1) Leading Investment Asset Manufacturer with Manager with Ability to Organically Complementary Create New Quality Operating Businesses Investments MSR Portfolio Diversified Portfolio of with Significant Income Generating Upside Opportunity in Rising Rate
Slide 25: Appendix
Appendix NEW RESIDENTIAL Q1 2022 25
Slide 26: Condensed Consolidated Balance Sheets
Condensed Consolidated Balance Sheets As of 3/31/22 As of 12/31/21 (dollars in thousands, except per share data) (Unaudited) ASSETS Excess mortgage servicing rights, at fair value $ 341,187 $ 344,947 Mortgage servicing rights and mortgage servicing rights financing receivables, at fair value 7,964,4
Slide 27: Book Value per Share Summary
Book Value per Share Summary (1) QoQ% Per Share Change Ending Q4'21 BV 11.44 Net Income (Excluding change in fair value) 0.02 MSR Realization of Cash Flows (0.43) Change in valuation inputs and assumptions 1.81 Change in fair value of investments 0.02 GAAP Net Income 1.42 Other Comprehensive Income
Slide 28: Condensed Consolidated Income Statements
Condensed Consolidated Income Statements Three Months Ended March 31, December 31, Unaudited (dollars in thousands) 2022 2021 Revenues Servicing fee revenue, net and interest income from MSRs and MSR financing receivables $ 456,400 $ 464,200 Change in fair value of MSRs and MSR financing receivables
Slide 29: Segment Information (Q1'22)
Segment Information (Q1’22) Residential Securities, Properties and Origination and Servicing Loans Properties & (1) MSR Related Real Estate Residential Mortgage Loans Corporate & Quarter Ended March 31, 2022 Origination Servicing Investments Securities Mortgage Loans Receivable Other Total Servicing
Slide 30: Segment Information (Q4'21)
Segment Information (Q4’21) Residential Securities, Properties and Origination and Servicing Loans Properties & MSR Related Real Estate Residential Mortgage Loans Corporate & Quarter Ended December 31, 2021 Origination Servicing Investments Securities Mortgage Loans Receivable(1) Other Total Servici
Slide 31: Mortgage Servicing Rights
Mortgage Servicing Rights (in thousands) MSRs Balance as of December 31, 2021 $ 6,858,803 Purchases, net (48) Originations 461,452 Proceeds from sales (760) Change in fair value due to: Realization of cash flows (200,325) Change in valuation inputs and assumptions 845,037 (Gain)/loss realized 306 Ba
Slide 32: Servicing and Origination
Servicing and Origination Newrez Caliber Combined Q3'21 Q3'21 Q3'21 Q3'21 Q1'21 Q2'21 Q3'21 Reported Full Quarter Reported Full Quarter Q4'21 Q1'22 Servicing Servicing Portfolio (UPB $bn) In-House Servicing $222.2 $221.7 $229.2 $156.0 $156.0 $385.2 $385.2 $390.0 $398.8 On Behalf of Third-Parties $74
Slide 33: Unaudited GAAP Reconciliation of Core Earnings
Unaudited GAAP Reconciliation of Core Earnings Management uses Core Earnings, which is a Non-GAAP measure, as one measure of operating performance. Please see next slide for the definition of Core Earnings. ($000s, except per share data) Q1 2022 Q4 2021 Reconciliation of core earnings Net income att
Slide 34: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Core Earnings New Residential has five primary variables that impact its operating performance: (i) the current yield earned on the Company’s investments, (ii) the interest expense under the debt incurred to finance the Company’s investments, (iii) the Company’s
Slide 35: Endnotes
Endnotes NEW RESIDENTIAL Q1 2022 35
Slide 36: Endnotes to Slide 3
Endnotes to Slide 3 Endnotes to Slide 3: Source: Company filings and data, and Bloomberg. Financial and market data as of March 31, 2022 unless otherwise noted. (1) “Inception” date refers to May 2, 2013. (2) “Dividends Paid” represents both common and preferred dividends. Inclusive of common and pr
Slide 37: Endnotes to Slide 4 through 6
Endnotes to Slide 4 through 6 Endnotes to Slide 4: Source: Company filings and data, and Bloomberg. Financial and market data as of March 31, 2022 unless otherwise noted. (1) Per common share calculations for both GAAP Net Income and Core Earnings are based on 484,425,066 weighted average diluted co
Slide 38: Endnotes to Slides 7 through 14
Endnotes to Slides 7 through 14 Endnotes to Slide 7: Source: Company filings and data, and Bloomberg. Financial and market data as of March 31, 2022 unless otherwise noted. (1) Represents total change in yields from December 31, 2022 to May 2, 2022. (2) Total liquidity includes cash and available un
Slide 39: Endnotes to Slides 15 through 17
Endnotes to Slides 15 through 17 Endnotes to Slide 15: Source: Company filings and data. Financial data as of March 31, 2022 unless otherwise noted. (1) Based on management’s current views and estimates, and actual results may vary materially. See “Disclaimers” at the beginning of this Presentation
Slide 40: Endnotes to Slides 18 through 24
Endnotes to Slides 18 through 24 Endnotes to Slide 18: Source: Company filings and data. Financial data as of March 31, 2022 unless otherwise noted. (1) Based on management’s current views and estimates, and actual results may vary materially. See “Disclaimers” at the beginning of this Presentation
Slide 41: Abbreviations
Abbreviations Abbreviations: This Presentation may include abbreviations, which have the following Original UPB – UPB at Time of Securitization meanings: PLS – Private Label Securities 60+ DQ – Percentage of loans that are delinquent by 60 days or more PT Adj. Lock Volume – Pull Through Adju