Rithm Capital Corp. · NYSE:RITM
Rithm Capital — Q1 2020 Earnings Presentation
37 slides from Rithm Capital's earnings presentation, May 5, 2020
Slide 1: Quarterly Supplement First Quarter 2020
New Residential Investment Corp. Quarterly Supplement First Quarter 2020
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.
New Residential Investment Corp.
Slide 4: Who We Are
New Residential Investment Corp. New Residential is a leading provider of capital and services to the mortgage and financial services industries Who We Are Our mission is to generate attractive risk-adjusted returns across various interest rate environments through our portfolio of investments and o
Slide 5: Q1'20 Company and Financial Highlights
Q1’20 Company and Financial Highlights Q1’20 Company and Financial Highlights ▪ GAAP Net Loss of $1,602.3 Million, or $(3.86) per Diluted Share(1), includes MTM/Impairment of $(2.24) and realized losses of $(1.92) ▪ Core Earnings of $198.4 Million, or $0.48 per Diluted Share(1)(2) ▪ First Quarter Co
Slide 6: A Tale of Two Quarters
A Tale of Two Quarters Our estimates(1) for Q1’20 were significantly impacted by industry-wide volatility at the end of March Q1’20 Earnings Estimate Impact from COVID-19 Q1’20 Earnings Actual as of 03/13/20(1) Related Volatility Core Earnings Per Share $0.65 ($0.17) $0.48(2) Book Value Per Share $1
Slide 7: Book Value – Illustrative Sum of the Parts
Book Value – Illustrative Sum of the Parts(1) Operating Company growth is creating substantial off-balance sheet value within NRZ(1) $16.00 Illustrative Operating Company Valuation(1)(2) $6.1bn Off Low High $14.00 Balance Sheet Potential $5.6bn Implied FY20E Earnings ($mm) $300 $400 Operating $12.00
Slide 8: New Residential Positioned for Changes in Macro Environment
New Residential Positioned for Changes in Macro Environment Across our Company, we made a number of strategic adjustments to position for the future De-Risked Portfolio and Stabilized Book Value Strengthened Balance Sheet ✓ Sold approximately $27.9bn of assets as of April ✓ Executed on liquidity pla
Slide 9: Repositioning in Residential Securities and Loans
Repositioning in Residential Securities and Loans NRZ aggressively sold assets and increased liquidity Residential Securities and Loans Recent Activity(1) Financing and Investment Strategy(4) ▪ Significantly reduced our investments and related short ▪ By end of May 2020, we expect that greater than
Slide 10: Call Rights
Call Rights New Residential controls ~$80 billion UPB of call rights(1) Q1’20 Call Rights Portfolio Activity and Strategy ▪ New Residential controls call rights representing ~29% of the Non-Agency market(1)(2) ▪ Roughly $34.5bn UPB, or ~43%, of our call rights population is currently callable(1) ▪ I
Slide 11: Servicer Advances – New Residential Advance Experience
Servicer Advances – New Residential Advance Experience Unparalleled experience managing large portfolios of advance balances ▪ Advances are a top of the waterfall, high-quality asset ▪ Since 2015, we have recovered ~100% of the advances on our portfolio ▪ Following the acquisition of HLSS in 2015, N
Slide 12: Servicer Advances – Portfolio as of March 31, 2020
Servicer Advances – Portfolio as of March 31, 2020 Advance balances were relatively unchanged quarter over quarter Advance Balances as of March 31, 2020 ▪ Servicer advance balances decreased to $3.5bn as of March 31, 2020, relative to $3.8bn as of December 31, 2019 ▪ Outstanding advance balances are
Slide 13: Servicer Advances – Advance Financing Capacity
Servicer Advances – Advance Financing Capacity We believe we have plenty of capacity to deal with COVID-19 scenarios(1) ▪ Since March 31, 2020, we have increased our committed advance financing capacity by $1.8bn, to a total of $5.25bn(2) $5.25bn ▪ We are working with Ginnie Mae on advance financing
Slide 14: MSRs
MSRs MSRs are one of the few fixed income assets that increase in value when interest rates rise MSR Portfolio Activity MSR Strategy(2) ▪ MSR portfolio totaled $648bn UPB as of March 31, 2020, ▪ Improve recapture performance by working diligently compared to $630bn as of December 31, 2019(1) with ou
Slide 15: MSRs – Differentiation of New Residential's MSRs
MSRs – Differentiation of New Residential’s MSRs New Residential’s MSR portfolio benefits from differentiated characteristics, stable financing and a platform of operating businesses MSR Financing(1) NRZ’s Differentiated MSR Portfolio & Strategy(4) 50% of our MSR financing is in capital markets term
Slide 16: Mortgage Origination and Servicing
Mortgage Origination and Servicing Industry leading mortgage platform; key contributor to profitability(1) ✓ Origination business is well-capitalized and continues to take advantage of attractive origination environment Positioned origination for on-going ✓ Shifted to Fannie, Freddie and Ginnie elig
Slide 17: Origination
Origination Positive market backdrop for loan origination and recapture(1) P P P Gain on sale margins at recent Q1’20 Origination Pre-Tax Net Estimate FY’20 Production of wides Income of $60.2mm $45 Billion UPB(1) Origination by Channel Over Time Origination PTI Margin(2) $15.0 140 120 120 Originati
Slide 18: Direct to Consumer Originations
Direct to Consumer Originations Significant recapture opportunity in current rate environment(1) ▪ Expect volume to double from Q1’20 to Q3’20, supporting MSR portfolio retention(1) ▪ Increasing sales and operational capacity to handle growth ▪ New predictive marketing campaign engine rolled out in
Slide 19: Servicing
Servicing Industry leading servicing, financial and operating performance P P P Broad product spectrum and Q1’20 Servicing Pre-Tax Net Estimate FY’20 Servicing cost efficient servicing Income of $30.4mm Portfolio of $330 Billion UPB(1) platform Servicing Portfolio Over Time Annual Direct Cost To Ser
Slide 20: Servicing – Special Servicing Expertise
Servicing – Special Servicing Expertise A proven track record of helping borrowers preserve the dream of homeownership ▪ Servicing over 40 world class institutional clients, including GSEs, money center banks and whole loan investors ▪ As delinquencies rise, SMS is well-positioned due to its special
Slide 21: COVID-19 Forbearance Update
COVID-19 Forbearance Update Forbearance requests from borrowers in our MSR portfolio have declined since peaking in mid- April 2020(1) Forbearances Granted from March 25, 2020 through April 30, 2020(1)(2) 25,000 As of April 30, 2020, 20,000 ~215,000 borrowers have been granted forbearance(2) 15,000
Slide 22: Ancillary Services
Ancillary Services We believe that our ancillary services businesses could experience a significant increase in activity in today’s environment, and we continue to evaluate synergies with NewRez(1) Origination & Title & Field Servicing Solutions Appraisal Services Provider of Origination and Provide
Slide 23: Our Focus
Our Focus(1) Our mission is to generate attractive risk-adjusted returns across Creating Value for Shareholders our portfolio of investments and operating businesses Against the current market backdrop, we believe there is significant Growing Recapture, Origination opportunity for the growth of our
Slide 24: Appendix
Appendix @ New RESIDENTIAL Ww Investment Core.
Slide 25: 1) Financial Statements
1) Financial Statements @ New RESIDENTIAL ww Inv 1 Core.
Slide 26: Condensed Consolidated Balance Sheets
Condensed Consolidated Balance Sheets As of 3/31/20 As of 12/31/19 ($000s, except per share data) (Unaudited) (Unaudited) ASSETS Investments in: Excess mortgage servicing rights (“MSRs”), at fair value $ 363,932 $ 379,747 Excess mortgage servicing rights, equity method investees, at fair value 119,6
Slide 27: Condensed Consolidated Income Statements
Condensed Consolidated Income Statements 3 Months Ended 3 Months Ended March 31, 2020 December 31, 2019 ($ 000s) (Unaudited) (Unaudited) Interest Income $ 402,373 $ 463,089 Interest Expense 216,855 247,013 Net Interest Income 185,518 216,076 Impairment Provision (reversal) for credit losses on secur
Slide 28: Net Income by Segment (Q1'20 and Q4'19)
Net Income by Segment (Q1’20 and Q4’19) Servicing and Originations Residential Securities and Loans MSRs & Residential Servicer Securities & Residential Corporate Origination Servicing Advances Call Rights Loans & Other Total Quarter Ended March 31, 2020 Interest income $ 16,735 $ 7,487 $ 99,353 $ 1
Slide 29: 2) GAAP Reconciliation & Endnotes
2) GAAP Reconciliation & Endnotes
Slide 30: 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 2020 Q4 2019 Reconciliation of Core Earnings Net (loss)
Slide 31: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Core Earnings ▪ We have five 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, (iv) our re
Slide 32: Endnotes to Slide 4
Endnotes to Slide 4 Endnotes to Slide 4: Source: Company filings and data. Financial data as of March 31, 2020 unless otherwise noted. (1) Per common share calculations of GAAP Net Income (Loss) and Core Earnings are based on 415,589,155 weighted average diluted common shares during the quarter ende
Slide 33: Endnotes to Slides 5 to 8
Endnotes to Slides 5 to 8 Endnotes to Slide 5: Source: Company filings and data. Financial data as of March 31, 2020 unless otherwise noted. (1) Estimates reflect unaudited estimates as of March 13, 2020. (2) Core earnings is a non-GAAP measure. See Reconciliation pages in the Appendix for a reconci
Slide 34: Endnotes to Slides 9 to 13
Endnotes to Slides 9 to 13 Endnotes to Slide 9: Source: Company filings and data. Financial data as of March 31, 2020 unless otherwise noted. (1) Call rights UPB estimated as of March 31, 2020. The UPB of the loans relating to our call rights may be materially lower than the estimates in this Presen
Slide 35: Endnotes to Slides 14 to 19
Endnotes to Slides 14 to 19 Endnotes to Slide 14: Source: Company filings and data. Financial data as of March 31, 2020 unless otherwise noted. (1) Represents MSR Financing as of April 30, 2020. (2) FNMA/FHLMC/GNMA agency data via eMBS provider and PLS data via CoreLogic provider. (3) “Smaller Refin
Slide 36: Endnotes to Slides 20 to 22
Endnotes to Slides 20 to 22 Endnotes to Slide 20: Source: Company data as of April 30, 2020. (1) There can be no assurances that these trends continue in the future. (2) Reflects borrowers where New Residential owns the Full MSR. Endnotes to Slide 21: (1) Based on management’s current views and esti
Slide 37: Abbreviations
Abbreviations Abbreviations: This Presentation may include abbreviations, which have the following meanings: ▪ RPL – Reperforming Loan ▪ 60+ DQ – Percentage of loans that are delinquent by 60 days or more ▪ SI – Short Interest ▪ Age (mths) or Loan Age (mths) – Weighted average number of months loans