Rithm Capital Corp. · NYSE:RITM
Rithm Capital — New Residential Investment — Q4 2018 Earnings Presentation
35 slides from Rithm Capital's earnings presentation, Feb 12, 2019
Slide 1: Quarterly Supplement Fourth Quarter & Full Year 2018
New Residential Investment Corp. Quarterly Supplement Fourth Quarter & Full Year 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 and a strong track record of performance What Makes NRZ a Different Kind of Mortgage REIT? (1) FY 2018 A DIVERSIFIED PORTFOLIO WELL POSITIONED FOR CHA
Slide 4: Financial Performance
Financial Performance Full Year 2018: Fourth Quarter 2018: GAAP Net Income of $964 million, or $2.81 per diluted share GAAP Net Income of $0.3 million, or $0.00 per diluted share Core Earnings of $815 million, or $2.38 per diluted share (1) Core Earnings of $208 million, or $0.58 per diluted
Slide 5: New Residential 101
New Residential 101 * NRZ is a leading capital provider and facilitates home ownership through its mortgage origination subsidiary, NewRez NRZ has a diversified portfolio of investments that would be difficult to replicate Our objective continues to drive strong and sustainable risk-adjusted r
Slide 6: 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) $15.26 $16.25 +6% YoY $13.00 +17% YoY $12.13 $11.28 $10.00 +7% YoY +8% YoY
Slide 7: MSRs
MSRs* Mortgage Interest Rates Rose 56 basis points during 2018:(1) • MSR Multiples** increased by 1.1x from 3.0x to 4.1x • The share of the mortgage universe eligible for refinancing dropped from 29% to 9%(2) Mortgage rates were 3.99% as of December 31, 2017 and 4.55% as of December 31, 2018(1)
Slide 8: MSRs: Overview and Pipeline
MSRs: Overview and Pipeline* NRZ’s MSR portfolio totals $539 billion UPB (1) Acquisitions – $600bn UPB of MSRs were sold in 2018.(2) • NRZ purchased approximately 20% ($114bn) in 2018, and expects mid-teen levered returns(3) • Acquired $114bn UPB from 15 different counterparties; $19bn UPB acqui
Slide 9: MSR Financing
MSR Financing* NRZ issued $2.1Bn of Fixed Rate MSR Term Notes in 2018 Fixed rate term financing reduced NRZ’s cost of financing and extended maturities Expect to issue additional term notes in 2019 which will lengthen our maturities for ~90% of our portfolio(1) New Residential has an additiona
Slide 10: Maximizing Value of the Mortgage Asset
Maximizing Value of the Mortgage Asset* NRZ is pursuing strategic partnerships and investments to maximize value of our servicing portfolio NRZ owns $539bn UPB of MSRs which equates to approximately 3 million mortgage customers(1) We have strong purchasing power and unique partnership opportunit
Slide 11: Call Rights
Call Rights* NRZ controls call rights to ~$126 billion of mortgage collateral, representing ~37% of the Non-Agency market (1)(2) ~$47 billion, or ~37%, of our call right population is currently callable(1) Control Call Rights for ~$126Bn Robust Execution of Call Increasing Callable of Loans (1) Stra
Slide 12: Call Rights (cont'd)
Call Rights (cont’d)(1)* Expecting a robust pipeline of callable deals and issuances in 2019(2) Call Deals Executed by NRZ to Date (UPB) $4.7 Bn $2.7 Bn $1.4 Bn $1.2 Bn $1.2 Bn 2014 2015 2016 2017 2018 # of Deals 60 53 50 176 88 NRZ Callable Population Delinquencies on NRZ Owned Calls vs Aggregate *
Slide 13: Non-Agency Bond Portfolio
Non-Agency Bond Portfolio* As of year end 2018, NRZ’s Non-Agency bond portfolio totaled ~$10bn in face value with an average price of 80% NRZ Portfolio Composition(1) By Vintage (Book Value in millions) With ~20 points of discount in NRZ’s bond portfolio, ($ in mm) Total ≤ 2004 $467 NRZ’s Non-Agen
Slide 14: Residential Loans – 2018 Review
Residential Loans – 2018 Review* • Whole loan portfolio returns continued to be robust with 20% ROE for 2018 • NRZ’s residential loan portfolio consists of ~$4.2 billion UPB, which represents $763 million of equity The portfolio continues to migrate towards cash flowing loans $2bn of low LTV rep
Slide 15: New Residential – Loan Securitization Platform
New Residential – Loan Securitization Platform NRZ Continues to be a strong issuer in the market NRZ issued $3.8bn in mortgage securitizations in 2018 Strength in the NRMLT shelf supports NRZ’s call rights strategy and non-QM origination as well as opportunistic whole loan acquisitions(1) Called
Slide 16: Servicer Advances
Servicer Advances* NRZ’s Servicer Advance balance Decreasing(1) 87% financed with fixed rate debt Outstanding advance balance of $3.6 billion is financed with $3.2 billion of debt, 88% LTV and a 3.3% interest rate (1) During 4Q 2018, NRZ continued to focus on improving financing and lowering adv
Slide 17: Consumer Loans
Consumer Loans SpringCastle Investment - • Life-to-date IRR of 86% (combination of distributions and refinancing proceeds) • Life-to-date profit of $576 million • + $691M of Distributions Received + $218M of Asset Value(2) - $333M of Equity Investment = $576M Life-to-date NRZ Profit NRZ’s Investment
Slide 18: Consumer Loans: Prosper Investment
Consumer Loans* Prosper Investment • NRZ is part of a 4-member Consortium that has acquired approximately $3.33 billion of unsecured consumer loans from Prosper Marketplace (“Prosper”) • Life to date IRR greater than 20% - in line with underwriting expectations of 15% to 20%(1) Locked in fixed rat
Slide 19: Shellpoint
Shellpoint Shellpoint adds servicing, mortgage origination, recapture and ancillary revenue capabilities (formerly known as NewPenn Financial) Significantly increased recapture capabilities in 2018 SMS provides third party servicing to 30 third 130 professionals now dedicated to recapture part
Slide 20: What Does it all Mean for New Residential?
What Does it all Mean for New Residential?*(1) Economy Remains Strong U.S. GDP, job growth and consumer confidence all remain healthy Rates are still expected to rise moderately in 2019; housing market projected to remain stable into 2020 Increased market volatility = continued opportunities f
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) 2019 Outlook & Beyond(1) NRZ – Selected Key Milestones 2015 • Housing Market $27 Trillion(4) Apr’15 $1.4Bn Acquisiti
Slide 22: Appendices
Appendices 1) Financial Statements 2) GAAP Reconciliation & 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 12/31/18 As of 9/30/18 ($000s, except per share data) (Unaudited) (Unaudited) ASSETS Investments in: Excess mortgage servicing rights, at fair value $ 447,860 $ 467,061 Excess mortgage servicing rights, equity method investees, at fair value 147,964 154,93
Slide 25: Condensed Consolidated Income Statements
Condensed Consolidated Income Statements 3 Months Ended 3 Months Ended 12 Months Ended 12 Months Ended December 31, 2018 September 30, 2018 December 31, 2018 December 31, 2017 ($ 000s) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Interest Income $ 451,321 $ 425,524 $ 1,664,223 $ 1,519,679 Interes
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) 4Q 2018 3Q 2018 FY 2018 FY 2017 Reconciliation of Core Ear
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 Slide 2
Endnotes to Slide 2 1) Based upon management's current views and estimates, and actual results may vary materially. See “Disclaimers” at the beginning of this Presentation for more information on forward-looking statements. All data as of December 31, 2018 unless otherwise indicated. 2) MSRs UPB as
Slide 30: Endnotes to Slide 4
Endnotes to Slide 4 1) Net Investment & Targeted Lifetime Net Yield as of 12/31/2018. MSRs: Excess MSRs - Net Investment of $307 million includes (A) $595 million investment in 12/31/18 Legacy NRZ Excess MSRs, and (B) $10 million of restricted cash and other assets, net of debt and other liabilities
Slide 31: Endnotes to Slides 5, 6, 7 & 8
Endnotes to Slides 5, 6, 7 & 8 Endnotes to Slide 5: 1) Book value per share for 2013, 2014, 2015, 2016, 2017 and 2018 are as of year-end. 2) Market cap for 2013, 2014, 2015, 2016, 2017 and 2018 are as of year-end. 3) In January 2018, NRZ purchased from Ocwen $110 billion UPB of economic rights to MS
Slide 32: Endnotes to Slides 9, 10 & 11
Endnotes to Slides 9, 10 & 11 Endnotes to Slide 9: (1) Source: Inside Mortgage Finance. “Top 50 Mortgage Servicing Participants: 4Q18” published February 1, 2019 (2) Based on management’s current views and estimates. See “Disclaimers” at the beginning of this Presentation for more information on for
Slide 33: Endnotes to Slides 12, 13 & 15
Endnotes to Slides 12, 13 & 15 Endnotes to Slide 12: 1)Represents principal and interest-paying securities, excludes bonds backed by consumer loans and new issue securities. 2)“WAC” represents weighted average coupon of underlying loans in the deal and “WALA” represents weighted average loan age. 3)
Slide 34: Endnotes to Slides 17, 19 & 20
Endnotes to Slides 17, 19 & 20 Endnotes to Slide 17: 1) Based on management’s current estimates and expectations regarding targeted warehouse and securitization execution, and actual results may vary materially. See “Disclaimers” at the beginning of this Presentation for more information on forward-
Slide 35: 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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