Rithm Capital Corp. · NYSE:RITM

Rithm Capital — New Residential Investment — Q1 2014 Earnings Presentation

22 slides from Rithm Capital's earnings presentation, May 2014

  1. Slide 1: New Residential Quarterly Supplement First Quarter 2014

    New Residential Quarterly Supplement First Quarter 2014

  2. Slide 2: Disclaimers

    Disclaimers FORWARD-LOOKING STATEMENTS. Certain statements in this presentation may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation references to potential or targeted/expected future cash flows, such as t

  3. Slide 3: Company Overview

    Company Overview New Residential is a publicly traded mortgage REIT (NYSE:NRZ) with a market capitalization of $1.8 billion(1)  NRZ primarily invests across the vast $20 trillion U.S. housing market  Performance has been strong  Generated Core Earnings of $0.16 per share in Q1 2014, versus $0.14

  4. Slide 4: Evolution of New Residential

    Evolution of New Residential  From Day 1, NRZ’s primary investment strategy was to invest in Excess MSRs  Over time, NRZ has complemented the core Excess MSR strategy with other market-driven opportunities  NRZ has also made one-off acquisitions where we believe we can generate out-sized returns(

  5. Slide 5: New Residential Today

    New Residential Today*  NRZ’s portfolio consists of ~$1.5 billion of net investments with an average lifetime targeted yield of 20%*  1) Servicing Related Assets, 2) Residential Securities & Loans and 3) Other Investments (i.e. Consumer Loans)  Portfolio is poised to increase in value in a rising

  6. Slide 6: Robust Investment Pipeline

    Robust Investment Pipeline (1)  Today, the potential areas for investment remain robust  U.S. residential market is in an unprecedented state of flux  Role of largest housing body, the GSEs, likely to evolve – potentially create interesting investment opportunities  Excess MSRs - $250 to $300 bi

  7. Slide 7: Investment Highlights – Q1 2014 & Subsequent to Q1 2014

    Investment Highlights – Q1 2014 & Subsequent to Q1 2014 1  Invested $19 million to acquire a 33% interest related to $8 billion of UPB Excess MSRs  Subsequent to quarter, invested $34 million to acquire 33% interest related to $13 billion of UPB  Returns have outperformed expectations(1) 2  NRZ

  8. Slide 8: Excess MSRs – Q1 2014 Overview & Performance

    1 Excess MSRs – Q1 2014 Overview & Performance  As of Q1 2014, NRZ has invested $701 million across 14 loan pools with $307 billion initial UPB  WAC of 4.8%, LTV of 88%, 30+ DQ of 25%; FICO of 669; WALA of 7.0 years  CPR slowed to 14%, versus 16% in Q4 2013 and outperformed NRZ’s Q1 2014 underwri

  9. Slide 9: Servicer Advances – Performance to Date

    2 Servicer Advances – Performance to Date  NRZ & co-investors (“Buyer”) acquired or agreed to acquire $6.3 billion (1) of advances from Nationstar  Transaction is being completed in stages  To date, NRZ has committed $284 million to the Buyer (including working capital) – equal to a 42% ownership

  10. Slide 10: Servicer Advances – Sensitivities

    2 Servicer Advances – Sensitivities  Transaction is structured to provide downside protection to the Buyer’s initial targeted 15% IRR  As a result of new recovery initiatives at Nationstar and improved financing terms, Buyer now targets ~20% IRR*  Buyer closed on 2 financing facilities totaling $

  11. Slide 11: Non-Performing Loans – Q1 2014 Overview & Performance

    3 Non-Performing Loans – Q1 2014 Overview & Performance  In Q1 2014, NRZ acquired $72 million UPB of non-performing loans – total portfolio is $229 million UPB  At the end of Q1 2014, actual results on NRZ’s existing portfolio continues to outperform  Portfolio had 50 liquidations in Q1 2014, whi

  12. Slide 12: Non-Agency RMBS – Q1 2014 Overview & Performance

    4 Non-Agency RMBS – Q1 2014 Overview & Performance  $1.6 billion face amount of Non-Agency RMBS – carrying value of $1.2 billion  In Q1 2014 NRZ:  Recognized $4 million of gains – sold $338 million of face for $247 million (average price of 73% of par)(1)  Purchased $626 million of face for appr

  13. Slide 13: Financial Highlights – Q1 2014

    Financial Highlights – Q1 2014  For the first quarter:  GAAP Income of $49 million, or $0.19 per diluted share  Core Earnings of $42 million, or $0.16 per diluted share (1)  Paid $44 million of common dividends, or $0.175 per share Q1 2014 Q4 2013 ($/ diluted ($/ diluted ($mm) ($mm) share)(2) sh

  14. Slide 14: Illustrative Book Value Analysis

    Illustrative Book Value Analysis*  NRZ believes that market dynamics could positively impact its portfolio and drive its book value Illustrative Targeted GAAP Book Value GAAP ASSETS Assets Book Value Low High Excess MSRs $680 $680 $749 $851 Driven by Excess MSRs Assuming slower CPR, higher recaptur

  15. Slide 15: 1) Financial Statements

    1) Financial Statements Gy New RESIDENTIAL wr INVESTMENT Corp. 4

  16. Slide 16: Unaudited Consolidated Balance Sheet

    Unaudited Consolidated Balance Sheet ($000, except where otherwise noted) As of 3/31/14 ASSETS Investments in: Excess mortgage servicing rights, at fair value $ 341,704 Excess mortgage servicing rights, equity method investees, at fair value 338,307 Servicer advances, at fair value 3,457,385 Real es

  17. Slide 17: Unaudited Consolidated Income Statement

    Unaudited Consolidated Income Statement Ending March 31, 2014 ($ 000s) 3 months Interest Income 71,490 Interest Expense 38,997 Net Interest Income 32,493 Impairment 492 Net Interest Income after impairment $ 32,001 Other Income Change in fair value of investments in excess MSRs 6,602 Change in fair

  18. Slide 18: 3) GAAP Reconciliation & Endnotes

    3) GAAP Reconciliation & Endnotes 17

  19. Slide 19: GAAP Reconciliation of Core Earnings

    GAAP Reconciliation of Core Earnings  Management uses core earnings, which is a Non-GAAP measure, as one measure of operating performance.  Please see the next page for the definition of Core Earnings. ($000, except per share data) Q1 2014 Q4 2013 Reconciliation of Core Earnings Net income (loss)

  20. Slide 20: Reconciliation of Non-GAAP Measures

    Reconciliation of Non-GAAP Measures  New Residential has four primary variables that impact its operating performance: (i) the current yield earned on its investm ents, (ii) the interest expense incurred on the debt used to finance its investments, (iii) its operating expenses and (iv) its realized

  21. Slide 21: Endnotes

    Endnotes to Slide 4 1)Servicing Related Assets include: 1) Excess MSRs - Asset and Net Investments represent carrying value of the investments. Targeted Yield is expected IRR for pools that have settled. 2) Servicer Advances - Asset represents carrying value of the servicer advances, including cash

  22. Slide 22: Abbreviations

    Abbreviations Abbreviations: This Presentation may include abbreviations, which have the following meanings: •30+ DQ – Percentage of loans that are delinquent by 30 days or more •Age (mths) or Loan Age (mths) – Weighted average number of months loans are outstanding •Cash Basis – Initial investment

New Residential Investment — Q1 2014 Earnings Presentation on 6ix