Rithm Capital Corp. · NYSE:RITM
Rithm Capital — New Residential Investment — Q3 2018 Earnings Presentation
36 slides from Rithm Capital's earnings presentation, Oct 15, 2018
Slide 1: New Residential Investment Corp. Quarterly Supplement Third Quarter 2018
New Residential Investment Corp. Quarterly Supplement Third Quarter 2018
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 Overview
New Residential Overview * New Residential (NYSE: NRZ) is a publicly traded mortgage real estate investment trust (REIT) with a diversified portfolio, a strong track record of performance What Makes NRZ a Different Kind of Mortgage REIT? (1) 3Q 2018 A DIVERSIFIED PORTFOLIO WELL POSITIONED FOR RISING
Slide 4: Financial Performance
Financial Performance Third Quarter 2018: GAAP Net Income of $185 million, or $0.54 per diluted share Core Earnings of $215 million, or $0.63 per diluted share (1) Third quarter dividend of $0.50 per common share 3Q’18 2Q’18 ($mm) ($ / diluted share) (2) ($mm) ($ / diluted share) (2) GAAP Ne
Slide 5: New Residential 101
New Residential 101 * NRZ is a leading capital provider to the U.S. mortgage industry NRZ has a portfolio of investments that would be difficult to replicate Our objective is to drive strong and sustainable risk-adjusted returns primarily through investments in: 1 Mortgage Servicing Rights 2 N
Slide 6: New Residential Portfolio – 3Q18
New Residential Portfolio – 3Q18* We believe our portfolio is well positioned for various interest rate environments In particular, MSRs, one of the few fixed income assets that should increase in value in a rising rate environment, make up approximately 50% of NRZ’s net investment Net Investmen
Slide 7: Consistent Growth & Robust Performance Since Inception
Consistent Growth & Robust Performance Since Inception* Strong track record of executing on core investment strategies, making attractive opportunistic investments and delivering consistent growth NRZ Book Value Per Share (1) $16.87 $15.26 +11% $13.00 +17% YoY Since 2017 YE $12.13 $11.28 $10.00 +7%
Slide 8: Interest Rate Market Expectations
Interest Rate Market Expectations* “We believe the market is underestimating the potential for rate increases in 2018 and 2019 with the economy at or beyond full employment, inflation at or above target, and a massive tax cut fueling demand growth in the economy.”- John Ryding, Chief Economist at RD
Slide 9: Interest Rates – Impact on MSRs
Interest Rates – Impact on MSRs At Current Mortgage Rates, only 5% of the Mortgage Universe is Refinanceable(1) During October 2018 the average 30 year mortgage rate increased to 4.9%, the highest level since 2011(2) NRZ’s prepayment speeds have dropped from a peak of 15% CPR in December 2016 to
Slide 10: What Does it all mean for New Residential?
What Does it all mean for New Residential?*(1) Economy Remains Strong GDP, unemployment, job growth and consumer confidence Rates are expected to rise; housing projected to remain stable into 2020 Increased market volatility continued opportunities for investment Asset Class Impact given curre
Slide 11: NRZ Portfolio Update
New RESIDENTIAL INvesTMENT Corp.
Slide 12: MSRs
MSRs* NRZ’s MSR portfolio totals $541 billion UPB (1) NRZ continues to selectively purchase MSR portfolios at compelling returns Year to date purchases of $95Bn UPB from 10 different counterparties, including $43Bn UPB in Q3 2018. $20Bn from Shellpoint(2) $75Bn from Other counterparties MSR
Slide 13: MSR Financing
MSR Financing* Robust MSR financing Activity in 2018(1) NRZ issued four fixed rate MSR Notes Increased Liquidity & Stable Financing $2.1 billion issued Weighted average cost of funds of ~4.1% New Residential has an additional $377 million in undrawn capacity(2) Proven Access to Capital Markets
Slide 14: Non-Agency Securities & Call Rights
Non-Agency Securities & Call Rights Call Rights Opportunity* NRZ has access to ~$130 billion of mortgage collateral, representing ~35% of the Non-Agency market (1)(2) ~$46 billion, or ~36%, of our call right population is currently callable(1) Continue to Grow Continue to Scale Access to ~$130Bn Rob
Slide 15: Non-Agency Securities & Call Rights: Call Rights Overview
Non-Agency Securities & Call Rights Call Rights Overview In 3Q18, NRZ called 10 Non-Agency RMBS deals with an aggregate UPB of ~$253 million (1) In August 2018, NRZ completed a $658 million Non-Agency loan securitization (2) Callability timelines are expected to shorten as delinquencies decline
Slide 16: Non-Agency Securities & Call Rights: Bond Portfolio Overview
Non-Agency Securities & Call Rights Bond Portfolio Overview * $1.7 billion in net equity as of 3Q18, up from $1.4 billion from the prior year During the quarter, NRZ purchased $2.4 billion face value of Non-Agency securities at an average price of 94% Over 96% of the Legacy Non-Agency bond portf
Slide 17: Servicer Advances
Servicer Advances* NRZ’s Servicer Advance balance Decreasing(1) Outstanding advance balance of $3.7 billion is financed with $3.2 billion of debt; 87% LTV and a 3.2% interest rate (1) During the quarter, NRZ continued to focus on improving financing and lowering advances Continue to work with
Slide 18: Residential Loans
Residential Loans Loan Portfolio* NRZ’s residential loan portfolio consists of $2.8 billion UPB, which represents $500 million of equity Portfolio Breakdown: Seasoned Performing - $264 million of equity invested, target strong levered returns through various funding options (1) Non-Performing
Slide 19: Consumer Loans
Consumer Loans SpringCastle Investment - • LTD IRR of 87% (combination of distributions and refinancing proceeds) • LTD profit of $571 million NRZ’s Investment Interest Portfolio Overview NRZ’s NRZ’s NRZ Current Total Avg. LTD Ownership Equity Distribution Asset Portfolio Charge-Off 30+ DQ IRR % Con
Slide 20: Consumer Loans: Prosper Investment
Consumer Loans Prosper Investment * • NRZ is part of a 4-member Consortium that has acquired approximately $3.25 billion of unsecured consumer loans from Prosper Marketplace (“Prosper”) • Achieved LTD IRR greater than 20% in line with underwriting expectations Targeting 15% to 20% levered yield fo
Slide 21: Wrap Up - Maintaining Strong Track Record & Performance
Wrap Up - Maintaining Strong Track Record & Performance* Expect to continue executing on key strategic initiatives with the goal of generating attractive returns for shareholders(1) WELL POSITIONED FOR RISING RATES (1) NRZ – Selected Key Milestones 2015 MSRs are one of the few fixed income assets th
Slide 22: Appendices
Appendices 1) Financial Statements 2) Performance & Shareholder Analyses 3) GAAP Reconciliation, REIT Test & Endnotes
Slide 23: 1) Financial Statements
1) Financial Statements kes New RESIDENTIAL SN Sy INVESTMENT Corp. WY
Slide 24: Condensed Consolidated Balance Sheets
Condensed Consolidated Balance Sheets As of 9/30/18 As of 6/30/18 ($000s, except per share data) (Unaudited) (Unaudited) ASSETS Investments in: Excess mortgage servicing rights, at fair value $ 467,061 $ 495,299 Excess mortgage servicing rights, equity method investees, at fair value 154,939 159,034
Slide 25: Condensed Consolidated Income Statements
Condensed Consolidated Income Statements 3 Months Ended 3 Months Ended September 30, 2018 June 30, 2018 ($ 000s) (Unaudited) (Unaudited) Interest Income $ 425,524 $ 403,805 Interest Expense 162,806 133,916 Net Interest Income 262,718 269,889 Impairment 3,889 12,631 Other-than-temporary impairment (O
Slide 26: 2) GAAP Reconciliation & Endnotes
2) GAAP Reconciliation & Endnotes
Slide 27: 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) 3Q 2018 2Q 2018 Reconciliation of Core Earnings Net income
Slide 28: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Core Earnings We have four primary variables that impact our operating performance: (i) the current yield earned on our investments, (ii) the interest expense under the debt incurred to finance our investments, (iii) our operating expenses and taxes and (iv) our
Slide 29: Endnotes to Slides 2 & 4
Endnotes to Slides 2 & 4 Endnotes to Slide 2: 1) Based upon management's current views and estimates. See “Disclaimers” at the beginning of this Presentation for more information on forward-looking statements. 2) MSRs UPB as of September 30, 2018. 3) Call rights UPB as of September 30, 2018. Our cal
Slide 30: Endnotes to Slide 5
Endnotes to Slide 5 1) Net Investment & Targeted Lifetime Net Yield as of 3/31/2018 MSRs: Excess MSRs - Net Investment of $489 million includes (A) $679 million investment in 3/31/18 Legacy NRZ Excess MSRs, and (B) $8 million of restricted cash and other assets, net of debt and other liabilities of
Slide 31: Endnotes to Slide 5 (Cont’d)
Endnotes to Slide 5 (Cont’d) 2) Net Investment & Targeted Lifetime Net Yield as of 6/30/2018 MSRs: Excess MSRs - Net Investment of $463 million includes (A) $652 million investment in 6/30/18 Legacy NRZ Excess MSRs, and (B) $10 million of restricted cash and other assets, net of debt and other liabi
Slide 32: Endnotes to Slide 5 (Cont’d)
Endnotes to Slide 5 (Cont’d) 3) Net Investment & Targeted Lifetime Net Yield as of 9/30/2018 MSRs: Excess MSRs - Net Investment of $343 million includes (A) $622 million investment in 9/30/18 Legacy NRZ Excess MSRs, and (B) $20 million of restricted cash and other assets, net of debt and other liabi
Slide 33: Endnotes to Slides 6, 9, 11 & 12
Endnotes to Slides 6, 9, 11 & 12 Endnotes to Slide 6: 1) Book value per share for 2013, 2014, 2015, 2016 and 2017 are as of year-end. Book value per share for “Today” is as of September 30, 2018. 2) Market cap for 2013, 2014, 2015, 2016 and 2017 are as of year-end. Market cap for “Today” is as of Oc
Slide 34: Endnotes to Slides 13 & 14
Endnotes to Slides 13 & 14 Endnotes to Slide 13: 1) Our call rights may be materially lower than the estimates in this Presentation and there can be no assurance that we will execute on this pipeline of callable deals in the near term, or at all, or that callable deals will be economically favorable
Slide 35: Endnotes to Slides 16, 19 & 20
Endnotes to Slides 16, 19 & 20 Endnotes to Slide 16: 1) Represents par value of advances and related debt obligations inclusive of a non-controlling interest ownership of ~27% in the Advance Purchaser portfolio. 2) Based on management’s current views and estimates, and actual results may vary materi
Slide 36: Abbreviations
Abbreviations Abbreviations: This Presentation may include abbreviations, which have the following meanings: 60+ DQ – Percentage of loans that are delinquent by 60 days or more WA – Weighted Average Age (mths) or Loan Age (mths) – Weighted average number of months loans are outstanding WAC –
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