Rithm Capital Corp. · NYSE:RITM
Rithm Capital — Q2 2022 Earnings Presentation
36 slides from Rithm Capital's earnings presentation, Aug 2, 2022
Slide 1: Quarterly Supplement Q2 2022
Rithm Capital Quarterly Supplement Q2 2022 Q2 2022 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 Capital
Rithm Capital Rithm is focused on generating attractive returns through investments in operating companies and assets across the financial services and real estate sectors Diverse Portfolio of Operating Companies & Assets • Our various operating companies enable us to organically manufacture assets
Slide 4: Business Overview
Business Overview Rithm has grown from ~$1.2 billion of net equity since inception to ~$7.0 billion today Company Highlights Rithm Family of Companies $4.1 Billion in Dividends Paid Since Inception(1)(2) 10.7% Dividend Yield(3) (NYSE: RITM) $7.0 Billion Net Equity(4) ~$35 Billion of Assets N
Slide 5: Q2'22 Financial Highlights
Q2’22 Financial Highlights GAAP Net Income (Loss): ($3.3 Million) / ($0.01) per Diluted Share(1) - Reflects Termination Fee to Former External Manager, net of tax, Book Value: of ~$325 Million or ($0.70) per Diluted Share(1) $12.28 per Common Share as of June 30, 2022 Earnings Available for Distribu
Slide 6: Q2'22 Business Highlights
Q2’22 Business Highlights The second quarter marked a period of transformation for our Company as we internalized management, rebranded to Rithm Capital, and completed the integration of our mortgage companies 1 Internalization(1) 4 Completed Integration of Mortgage Companies • On June 17, 2022, Rit
Slide 7: Strategic Evolution
Strategic Evolution We have evolved from solely a holder of mortgage servicing rights to a true owner and active manager of assets and investments 2013 2013 - 2017 2018 2019 2021 2022 Investment Grow and Entry into Grow and Expand Internalization Portfolio Scale Complementary Scale Operating and Reb
Slide 8: Rithm Organically Manufactures Assets
Rithm Organically Manufactures Assets Our ability to organically generate assets helps drive our earnings and book value growth(1) Sector Agency Origination Non-Agency Business Purpose Single Family Rental Origination Lending Entity Newrez/Caliber Newrez/Caliber Genesis Capital Adoor Rithm Capital A
Slide 9: The Current Macro Environment
The Current Macro Environment Rithm is well positioned to continue driving strong returns despite volatile market conditions(1) Driver Themes Positioning • Inflation is at multi-year highs • Market uncertainty around inflation peaking Mortgage company benefits from higher payments Inflation • Fed’
Slide 10: Second Half 2022 Preview
Second Half 2022 Preview(1) We believe there will be attractive opportunities to deploy capital in the second half of the year Patient Approach to • Wider credit spreads coupled with higher benchmarks are driving asset yields higher Investment Strategy • Higher financing costs and increased volatili
Slide 11: Q2'22 Performance
Q2’22 Performance Q2 2022 Quarterly Supplement
Slide 12: Summary of Business Segments
Summary of Business Segments Rithm’s business includes leading origination and servicing platforms and an investment portfolio composed of real estate-related assets and securities Business Segments Total Assets ($bn) Strategy Description • Top 5 non-bank mortgage originator with multi- $41.6 Origin
Slide 13: MSR Portfolio Summary
MSR Portfolio Summary Rithm owns a large portfolio of MSRs that benefits from a rising rate environment MSR Portfolio Activity(1) • MSR portfolio totaled $623 billion UPB as of June 30, 2022(1) – 88% Full MSRs / 12% Excess MSRs • Newrez / SMS / Caliber servicing represents 73% of Rithm Full MSR Port
Slide 14: MSR Values
MSR Values Slowing prepayments amid the rising rate environment have increased the value of our MSRs Full MSR Price & Multiples Full MSR Portfolio Speeds & Amortization 200 6.0x During Q2’22, average portfolio speeds slowed for the sixth consecutive quarter to multi-year lows 180 4.8x 5.0x 4.5x 30%
Slide 15: Single Family Rental (SFR)
Single Family Rental (SFR) Rithm continues to prudently grow its SFR portfolio through various sourcing channels and high-quality property management(1) Rithm’s SFR Portfolio Q2’22 Activity & Outlook Portfolio • Acquired ~300 properties, increasing our portfolio ~10% QoQ • ~3,750 units (+10% Includi
Slide 16: Genesis Capital Overview
Genesis Capital Overview Genesis continues to see strong demand for its business purpose loan products, originating a record ~$1.3bn in the first half of 2022 Business Highlights Innovative Debt Solutions Across Products • $617mm Q2’22 origination volume (YTD originations of $1.3bn) • Commercial loa
Slide 17: Servicer Advances
Servicer Advances We continue to have significant excess servicer advance capacity Advance Balances • Servicer advance balances as of June 30, 2022 were approximately $3.0 billion, down ~3% from March 31, 2022 • Outstanding advance balances are financed with(1): – $2.5 billion of debt ($1.7 billion
Slide 18: Mortgage Company Overview
Mortgage Company Overview Our balanced origination and servicing platforms generated a profitable quarter, alongside significant actions to align our business to the current rate environment Key Q2’22 Metrics G&A Expenses – Annualized by Quarter ($bn) $552.1mm $498bn $19.1bn Pre-Tax Income Servicing
Slide 19: Origination: Q2'22 Activity and Business Highlights
Origination: Q2’22 Activity and Business Highlights We are focused on profitability and are aligning our origination segment to the current market ($26.4) million $11 - $15 billion $19.1 billion $15.5 billion 75% Origination Q3’22E Funded Volume PT Adj. Lock Volume Purchase Mix Pre-Tax Income (Loss)
Slide 20: Servicing: Q2'22 Activity and Business Highlights
Servicing: Q2’22 Activity and Business Highlights We continue to benefit from higher interest rates and lower amortization $578.5 million $623 billion UPB ~3.2 million Largest $401 billion UPB Total Loan Count Servicing Total Rithm Servicing Non-Bank Owned In-House Servicing (incl. ~2.3 million at P
Slide 21: Appendix
Appendix Q2 2022 Quarterly Supplement
Slide 22: Condensed Consolidated Balance Sheets
Condensed Consolidated Balance Sheets (dollars in thousands, except per share data) As of 6/30/22 As of 3/31/22 (Unaudited) (Unaudited) ASSETS Excess mortgage servicing rights, at fair value $ 337,050 $ 341,187 Mortgage servicing rights and mortgage servicing rights financing receivables, at fair va
Slide 23: Book Value per Share Summary
Book Value per Share Summary Per Share Ending Q1'22 Book Value Per Share 12.56 Net Income (Loss) (excluding termination fee to affiliate, net of tax and change in fair value) (0.02) Termination fee to affiliate, net of tax (0.70) MSR realization of cash flows (0.39) Change in valuation inputs and as
Slide 24: Condensed Consolidated Income Statements
Condensed Consolidated Income Statements Three Months Ended June 30, March 31, Unaudited (dollars in thousands) 2022 2022 Revenues Servicing fee revenue, net and interest income from MSRs and MSR financing receivables $ 469,478 $ 456,400 Change in fair value of MSRs and MSR financing receivables (in
Slide 25: Segment Information (Q2'22)
Segment Information (Q2’22) Residential Securities, Origination and Servicing Properties and Loans MSRs & Residential Properties & Mortgage Servicer Securities & Residential Loans Corporate & Quarter Ended June 30, 2022 Origination Servicing Advances Call Rights Loans Receivable Other Total Servicin
Slide 26: Segment Information (Q1'22)
Segment Information (Q1’22) Residential Securities, Origination and Servicing Properties and Loans MSRs & Residential Properties & Mortgage Servicer Securities & Residential Loans Corporate & Quarter Ended March 31, 2022 Origination Servicing Advances Call Rights Loans Receivable Other Total Servici
Slide 27: Mortgage Servicing Rights
Mortgage Servicing Rights (in thousands) MSRs Balance as of March 31, 2022 $ 7,964,465 Purchases, net (565) Originations 329,470 Proceeds from sales (3,524) Change in fair value due to: Realization of cash flows (180,265) Change in valuation inputs and assumptions 514,955 (Gain) loss realized 1,873
Slide 28: Servicing and Origination
Servicing and Origination Newrez Caliber Combined Q3’21 Q3’21 Q1'21 Q2'21 Reported Reported Q3'21 Q4'21 Q1'22 Q2'22 Servicing Servicing Portfolio (UPB $bn) In-House Servicing $222.2 $221.7 $229.2 $156.0 $385.2 $390.0 $398.8 $400.5 On Behalf of Third-Parties $74.6 $76.4 $74.8 $0.0 $74.8 $78.3 $85.4 $
Slide 29: 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 30: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Earnings Available for Distribution (formerly Core Earnings) Starting the quarter ended June 30, 2022, the Company changed the title of its non-GAAP measure of core earnings (and by calculation, core earnings per diluted share) to earnings available fo
Slide 31: Endnotes
Endnotes Q2 2022 Quarterly Supplement
Slide 32: Endnotes to Slide 3 & 4
Endnotes to Slide 3 & 4 Endnotes to Slide 3: Source: Company filings and data, and Bloomberg. Financial and market data as of June 30, 2022 unless otherwise noted. 1) “Inception” date refers to May 2, 2013. 2) Total economic return represents Rithm book value per share appreciation from June 30, 201
Slide 33: Endnotes to Slide 5 & 6
Endnotes to Slide 5 & 6 Endnotes to Slide 5: Source: Company filings and data, and Bloomberg. Financial and market data as of June 30, 2022 unless otherwise noted. 1) Per common share calculations for both GAAP Net Income and Earnings Available for Distribution are based on 466,804,548 weighted aver
Slide 34: Endnotes to Slide 8 through 15
Endnotes to Slide 8 through 15 Endnotes to Slide 8: 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 9: 1) Based on management’s
Slide 35: Endnotes to Slide 16 through 20
Endnotes to Slide 16 through 20 Endnotes to Slide 16: 1) As of June 30, 2022. Endnotes to Slide 17: Source: Company filings and data. Financial data as of June 30, 2022 unless otherwise noted. 1) Represents par value of advances and related debt obligations inclusive of a non-controlling interest ow
Slide 36: Abbreviations
Abbreviations Abbreviations: This Presentation may include abbreviations, which have the • Original UPB – UPB at Time of Securitization following meanings: • PLS – Private Label Securities • 60+ DQ – Percentage of loans that are delinquent by 60 days or more • PT Adj. Lock Volume – Pull Through Adju