Rithm Capital Corp. · NYSE:RITM
Rithm Capital — Q3 2023 Earnings Presentation
40 slides from Rithm Capital's earnings presentation, Oct 26, 2023
Slide 1: Quarterly Supplement Q3 2023
Rithm Capital Quarterly Supplement Q3 2023 Q3 2023 Quarterly Supplement
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: Rithm: A Decade of Performance
Rithm Core business remains in focus as we transition into a leading global asset manager A Decade of Broad Powered by Performance Expertise Partnership $35B • • Specialty Finance Secured Lending Deploying Assets opportunistic capital • Structured and $4.9B Alternative Credit Positioning with (1) •
Slide 4: Q3'23 Financial Highlights
Q3’23 Financial Highlights GAAP Net Income: $193.9 Million / $0.40 per Diluted Share(1) Book Value: $12.32 per Common Share(6) Earnings Available for Distribution: as of September 30, 2023 $280.8 Million / $0.58 per Diluted Share(1)(2) Includes a realized gain of $0.15 related to the sale of excess
Slide 5: The Evolution of Rithm
The Evolution of Rithm Over the last decade, Rithm has created significant shareholder value through opportunistic investments in financial services-related assets and operating companies SPRINGCASTLE MSRs Europe 2013 2015 2017 2018 2019 2021 2022 2023 • Becomes • Grows • Acquires • Acquires • Enhan
Slide 6: Rithm's Private Capital Business Drives Platform Growth
Rithm’s Private Capital Business Drives Platform Growth Rithm is focused on expanding partnerships while maintaining strong performance across our existing investment portfolio Rithm actively manages operating companies and a portfolio of yield-oriented Driving continued growth through assets totali
Slide 7: Sculptor Q3'23 Transaction Update
Sculptor Q3’23 Transaction Update(1) The acquisition of Sculptor accelerates Rithm’s growth as an alternative asset manager(2) Significant Expansion into Asset Strong Alignment of Interests and Management Value-Additive for Rithm Shareholders • ~$34bn of AUM diversified across the • Potential to cre
Slide 8: Q3'23 Transaction Update: Computershare Mortgage Services Inc.
Q3’23 Transaction Update: Computershare Mortgage Services Inc. Transaction materially accretive to Newrez by adding MSRs, expanding third party subservicing and providing added operating leverage through additional scale(1) Transaction Summary Rithm Servicing Portfolio ($bn UPB) ~$840 • On October 2
Slide 9: Commercial Real Estate
Commercial Real Estate Rithm continues to utilize its extensive network and experience investing in complex and distressed real estate opportunities(1) ✓ 25+ person team of dedicated employees focused on opportunities in the commercial real estate sector ✓ Experience with structured debt, acquisitio
Slide 10: Residential Whole Loans
Residential Whole Loans Residential whole loans are currently an attractive sector with strong fundamentals that produce high quality, high yielding assets Market Conditions & Rithm Strategic Advantage(1) • Current macroeconomic volatility and growing liquidity needs in the market provide increased
Slide 11: Time to Deploy Opportunistic Capital
Time to Deploy Opportunistic Capital Rithm 2.0 positioned to opportunistically deploy capital leveraging deep expertise in specialty finance, structured and alternative credit, consumer lending and real estate(1) • Q3’23 was witness to financial conditions tightening along with bank tightening of cr
Slide 12: Increased Investment Opportunities in Current Environment
Increased Investment Opportunities in Current Environment Rithm views macroeconomic uncertainty and market volatility as producing increased investment opportunities across the financial services and real estate landscape(1) Increased liquidity needs for homebuilders paired with rising funding costs
Slide 13: Attractive Current Asset Yields
Attractive Current Asset Yields As benchmarks and spreads have faced significant volatility over the last few months, Rithm continues to focus on assets with downside protection and consistent cashflows 12/31/2021 12/31/2022 10/25/2023 Benchmark(1) 2Y Treasury Yield 0.73% 4.43% 5.22% 10Y Treasury Yi
Slide 14: Rithm's Strategic Advantage
Rithm’s Strategic Advantage(1) Strategy Connectivity Rithm is well positioned to take Rithm’s operating companies advantage of current market benefit from connectivity across dislocations, providing compelling platforms and collaborate on investment opportunities in light of strategy, execution, mar
Slide 15: Q3'23 Segment Performance
Q3’23 Segment Performance Q3 2023 Quarterly Supplement
Slide 16: Rithm MSR Portfolio Summary
Rithm MSR Portfolio Summary Rithm has significant investments in MSRs with beneficial earnings power in an elevated interest rate environment MSR Portfolio Activity & Outlook Rithm Strategic Advantage • MSR portfolio totaled ~$595 billion UPB as of September 30, 2023(1) Attractive Return ✓ Source of
Slide 17: Rithm MSR Values
Rithm MSR Values 99% of our Full MSR portfolio is out of the money to refinance with a portfolio WAC of ~3.8%, significantly below current new production(1) Full MSR Price & Multiples Full MSR Portfolio Speeds & Amortization During Q3’23, average portfolio speeds picked up modestly 220 6.0x from mul
Slide 18: Newrez Overview
Newrez Overview Our industry leading mortgage platform generated a 19% pre-tax ROE on $4.5bn of equity excluding MSR mark to market in Q3’23(1) • Our balanced business model continues to perform in all market cycles • Consolidation of Rithm third-party subservicers supports servicing growth strategy
Slide 19: Newrez Servicing Business Highlights
Newrez Servicing Business Highlights Newrez continues to execute on our core strategy of growing our servicing platform • Improving pre-tax income excluding MTM benefitting from market conditions, portfolio growth and operating efficiency • Newrez servicing portfolio increased by $56bn UPB QoQ prima
Slide 20: Newrez Origination Business Highlights
Newrez Origination Business Highlights Continued profitability despite a challenging environment • Originations segment remained profitable in Q3’23, however we expect market conditions to remain challenging through 2024(1) • Increased origination volumes while maintaining margin discipline • Contin
Slide 21: Residential Transitional Lending
Residential Transitional Lending Genesis is focused on originating high-quality loans to strong sponsors and maintaining robust credit standards Business Highlights Credit Overview • $1,530mm YTD 2023 origination volume, with new • Floating-rate nature of Genesis products protects asset-level return
Slide 22: Consumer Loans
Consumer Loans Rithm continues to opportunistically invest in consumer loan portfolios, as the strategy provides differentiated and attractive returns Marcus Prosper SpringCastle • In June 2023, Rithm invested $145 • In February 2017, Rithm became part • In April 2013, Rithm invested $241 million to
Slide 23: Single-Family Rental
Single-Family Rental Adoor is well positioned to benefit from the current market environment, acquiring SFR properties at elevated cap rates through its acquisition channels and maintaining active property management(1) Significant Opportunity to Scale in SFR • With housing supply strained and affor
Slide 24: Appendix
Appendix Q3 2023 Quarterly Supplement
Slide 25: Condensed Consolidated Balance Sheets
Condensed Consolidated Balance Sheets (dollars in thousands, except per share data) As of 9/30/23 As of 6/30/23 (Unaudited) (Unaudited) ASSETS Mortgage servicing rights and mortgage servicing rights financing receivables, at fair value $ 8,694,868 $ 8,688,556 Real estate and other securities ($9,201
Slide 26: Book Value per Share Summary
Book Value per Share Summary Per Share Ending Q2’23 Book Value Per Share $12.16 Net Income (Loss) (Net of Tax and Change in Fair Value) 0.36 MSR Realization of Cash Flows (0.29) Change in Valuation Inputs and Assumptions 0.33 GAAP Net Income 0.40 Other Comprehensive Income (0.00) Stock Based Compens
Slide 27: Consolidated Statements of Operations
Consolidated Statements of Operations Three Months Ended September 30, June 30, Unaudited (dollars in thousands) 2023 2023 Revenues Servicing fee revenue, net and interest income from MSRs and MSR financing receivables $ 442,644 $ 465,562 Change in fair value of MSRs and MSR financing receivables (i
Slide 28: Segment Information (Q3'23)
Segment Information (Q3’23) Residential Securities, Origination and Servicing Properties and Loans (dollars in thousands) Properties & Residential Mortgage MSR Related Real Estate Mortgage Consumer Loans Quarter Ended September 30, 2023 Origination Servicing Investments Securities Loans Loans Receiv
Slide 29: Segment Information (Q2'23)
Segment Information (Q2’23) Residential Securities, Origination and Servicing Properties and Loans (dollars in thousands) Properties & Residential Mortgage MSR Related Real Estate Mortgage Consumer Loans Quarter Ended June 30, 2023 Origination Servicing Investments Securities Loans Loans Receivable
Slide 30: Mortgage Servicing Rights
Mortgage Servicing Rights (dollars in thousands) MSRs Balance as of June 30, 2023 $ 8,688,556 Purchases, net - Originations 266,644 Proceeds from sales (281,266) Change in fair value due to: Realization of cash flows (138,993) Change in valuation inputs and assumptions 159,927 Balance as of Septembe
Slide 31: Servicing and Origination
Servicing and Origination Q3’22 Q4’22 Q1’23 Q2’23 Q3’23 Servicing Servicing Portfolio (UPB $bn) In-House Servicing $402.5 $401.9 $401.4 $401.6 $455.2 On Behalf of Third-Parties $91.5 $93.0 $94.1 $95.6 $99.4 Whole Loan & Other $9.6 $8.6 $8.6 $8.8 $8.5 Total UPB $503.6 $503.6 $504.0 $506.0 $563.1 Orig
Slide 32: Unaudited GAAP Reconciliation of Earnings Available for Distribution
Unaudited GAAP Reconciliation of Earnings Available for Distribution Management uses Earnings Available for Distribution, which is a Non-GAAP measure, as one measure of operating performance. Please see next slide for the definition of Earnings Available for Distribution. ($000s, except per share da
Slide 33: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures • The Company 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 operati
Slide 34: Endnotes
Endnotes Q3 2023 Quarterly Supplement
Slide 35: Endnotes
Endnotes Endnotes to Slide 3: 1) Total Dividends includes the common dividend for the third quarter, which is payable on October 27, 2023. 2) Total Equity: Origination: Net Investment of $282 million includes $1,930 million of total assets, net of debt and other liabilities of $1,639 million and non
Slide 36: Endnotes (Cont.)
Endnotes (Cont.) Endnotes to Slide 6 1) Based on 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. 2) On October 2, 2023, Rithm announced entry into a definitive
Slide 37: Endnotes (Cont.)
Endnotes (Cont.) Endnotes to Slide 13: 1) Source: Bloomberg. 2) Source: Bloomberg and market observations based upon current originations. Represents current unlevered yields on certain asset classes net of any associated servicing, property management or origination fees. These yields are subject t
Slide 38: Endnotes (Cont.)
Endnotes (Cont.) . Endnotes to Slide 22: 1) Based on 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. Endnotes to Slide 23: Source: Company filings and data. F
Slide 39: Abbreviations
Abbreviations Abbreviations: This Presentation may include abbreviations, which have the • REO – Real Estate Owned following meanings: • ROE – Return on Equity • 60+ DQ – Percentage of loans that are delinquent by 60 days or more • RPL – Reperforming Loan • BTR – Build to Rent • SFR – Single Family
Slide 40: Privileged & Confidential
Privileged & Confidential Q3 2023 Quarterly Supplement