Slide 1: Business Update Third Quarter 2024
Business Update Third Quarter 2024 November 5, 2024 © 2024 Onity Group Inc. All rights reserved.
Slide 2: Disclaimer
Disclaimer FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements within the and other financial and other requirements of regulators, the Federal draws on existing loans in our reverse mortgage portfolio; our servicer meaning of Section 27A of the Securities Act of 1933, a
Slide 3: Third Quarter Highlights
Third Quarter Highlights Adjusted Pre-Tax GAAP Net Adjusted Continued strong performance with highest adjusted Income(a) Income ROE(b) pre-tax income and return on equity in the last 3 years $35M $21M 31% Total Servicing Origination Recapture Strong double-digit originations volume growth and Additi
Slide 4: Our strategy and financial objectives are sound and our ability to deliver is strong
Our strategy and financial objectives are sound and our ability to deliver is strong FY 2022 LTM Q3 2024 Our Strategy ($M) 92 Adjusted pre-tax 1. Balance and diversification income(c) (70) 2. Prudent capital-light growth Adjusted return FY 2022 LTM Q2'24 (17%) 19% on equity(d) 3. Industry-leading co
Slide 5: Balanced and diversified business performing through the interest rate cycle
Balanced and diversified business performing through the interest rate cycle Total business delivering improved performance Adjusted Pre-tax Income(a) 202 Q4 est. Servicing driving adjusted PTI and 145 generating cash flows above model 21 expectations 96 141 Originations Servicing Originations PTI i
Slide 6: Growing through capital-light subservicing and disciplined MSR management
Growing through capital-light subservicing and disciplined MSR management Growing total servicing portfolio Driving capital-light organic growth Servicing Avg UPB $38B Year-to-date 3rd party subservicing additions 304 80% Subservicing growth from Q4’20 to Q3’24 172 179 Disciplined and dynamic MSR ma
Slide 7: Well positioned for lower interest rates
Well positioned for lower interest rates Our portfolio exposure to refinancing Broad origination capability and high generally aligned with industry(a) hedge coverage % by Mortgage Interest Rate 1.9x Industry average recapture rate(b) As reported by ICE Mortgage Monitor LTM Q2’24 16% 10% with upside
Slide 8: Investing to drive recapture performance
Investing to drive recapture performance Improving capability Strong Q3 performance with ~100 bps Investing for best-practice Refinance Recapture Rate(a) mortgage rate drop in ~80 days(b) performance 50% vs Q2 ✓ Strengthened team by adding talent 40% with deep industry experience ✓ Lock Volume +76%
Slide 9: MSR hedge minimizing income volatility and protecting book value
MSR hedge minimizing income volatility and protecting book value MSR hedge performing well Expect to maintain MSR hedge coverage of 90–110% 75 ($12M) +$10M 50 ✓ Stabilizes earnings and protects book value from MSR FV changes 25 ($M) 0 ✓ Offsets impact of margin calls on MSR (25) Total MSR FV borrowi
Slide 10: We believe our share price has substantial upside
We believe our share price has substantial upside 1.3x of ONIT book value Share Price Against Key Metrics(a) Onity share price trades at substantial discount to a variety of metrics: $59 • Book value per share (BVPS) $50 • Sell-side research price targets $40 $40 • Premium to book value like some pe
Slide 11: Financial Performance
Financial Performance © 2024 Onity Group Inc. All rights reserved. 11
Slide 12: Delivered highest adjusted pre-tax income in last 12 quarters
Delivered highest adjusted pre-tax income in last 12 quarters and increased book value per share Profitability Continues Upward Momentum Robust Profitability Increase Year to Date Q3’24 Highlights Trend vs Q3’23 2024 YTD Highlights Trend vs Full-Year 2023 GAAP Net GAAP GAAP Net GAAP $21M Income 19%
Slide 13: Eighth consecutive quarter of positive and growing adjusted pre-tax income
Eighth consecutive quarter of positive and growing adjusted pre-tax income(a) 35 $35M Updating our Adjusted ROE guidance(b) 35% 32 20%+ for FY’24 and 15%+ for FY’25 - 31% $30M 30% $25M 25% 23 Adjusted ROE Adjusted PTI $20M 20% $15M 14 15% 11 10 $10M 10% 6 $5M 4 5% $0M 0% Q4'22 Q1'23 Q2'23 Q3'23 Q4'2
Slide 14: Servicing fueling profitability with strong contributions from Forward and Reverse
Servicing fueling profitability with strong contributions from Forward and Reverse Adjusted Pre-tax Income(a) +$20M YoY Comprehensive Servicing Capabilities Q3’24 Highlights 53 50 3 14 +$10M Reverse Servicing Adj PTI QoQ 33 +$14M Forward Servicing Adj PTI YoY 7 46 39 +$9B Subservicing Avg UPB YoY 25
Slide 15: Originations profitability rises due to Consumer Direct and MSR replenishment
Originations profitability rises due to Consumer Direct and MSR replenishment Adjusted Pre-tax Income(a) +$9M YoY Consumer Direct generates strong quarter & B2B replenishes MSR portfolio after sales 9.7 10.2 Q3’24 Highlights 5.8 +$6M Consumer Direct Adj PTI YoY 9.5 1.5 45% Opex-to-Revenue(b) Ratio v
Slide 16: Successfully restructured corporate debt: deleverages, grows future EPS and extends debt tenor
© 2 0 2 4 Successfully restructured corporate debt: deleverages, grows future EPS and O n i extends debt tenor t y G Q3 Routine Transactions Reverse Asset Acquisition MAV Sale $500M High Yield Issuance r o u p • Issued Reverse assets • Acquired ~$55M reverse • Monetizes Onity’s 15% • Redeems(b) PMC
Slide 17: Lower interest expense will accelerate EPS growth going forward
We expect lower interest expense will accelerate EPS growth going forward(a) Effective rate reduced from 13.2% to 10.3% (b) $14M lower interest expense going forward(b) including preferred dividends • ($41M) estimated impact of refinancing transactions 71 to Q4’24 net income including ($37M) due to
Slide 18: Financial results demonstrate an unwavering focus on our financial objectives
Financial results demonstrate an unwavering focus on our financial objectives Our Financial Objectives Operational Targets ❖ Sustain Adjusted PTI(a) ➢ Continue strong Adjusted PTI performance ROE, building on 2024 performance ❖ Reduce earnings volatility ➢ Target owned MSR hedge ❖ Improve ROE and ca
Slide 19: Positioned to deliver strong results in 2024 and beyond
Positioned to deliver strong results in 2024 and beyond SUSTAINED OPERATIONAL PROFITABILITY EXCELLENCE Robust Increase Leading Cost Structure and YTD 2024 Strong Operating Leverage PRUDENT CAPITAL- DELEVERAGING THE LIGHT GROWTH BALANCE SHEET Organic Growth That Reducing Debt While Emphasizes Subserv
Slide 20: Appendix | Operations
Appendix | Operations © 2024 Onity Group Inc. All rights reserved. 20
Slide 21: Onity is a leading mortgage originator and servicer
© 2 0 2 4 Onity is a leading mortgage originator and servicer O n i t y G Key Strengths r Scaled originator with #6 correspondent lender(a) o u differentiated sourcing 1.9x industry recapture(b) ✓ Balanced business built to deliver results p across multiple economic cycles I n c . A ✓ Multi-Channel
Slide 22: Delivered highest adjusted pre-tax income in last 12 quarters
Delivered highest adjusted pre-tax income in last 12 quarters and increased book value per share (Dollars in millions, except per share metrics) Q3’23 Q2’24 Q3’24 GAAP net income 8 11 21 Diluted EPS $1.05 $1.33 $2.65 Basic EPS $1.10 $1.34 $2.72 ROE(a) 8% 10% 19% Book value per share $58 $57 $59 MSR
Slide 23: Diversified servicing portfolio mitigates risk
Diversified servicing portfolio mitigates risk MSR to be hedged % of Servicing UPB GAAP MSR Fair Value end of Q3’24 end of period GSE MSR ~29% 2,224 Subservicing Fannie Owned MSR(a) ~57% ~43% 578 243 Other Freddie Subservicing 1,403 PLS MSR ($M) ~4% Q3'24 MAV Reverse Rithm, MAV and other pledged MSR
Slide 24: MSR Valuation
MSR(a) Valuation as of 9/30/2023 as of 6/30/2024 as of 9/30/2024 (Dollars in millions) Total Total Total GSE Gov’t(b) Non-Agency GSE Gov’t(b) Non-Agency GSE Gov’t(b) Non-Agency Retained Retained Retained UPB 88,738 16,829 13,832 119,398 91,501 17,416 13,038 121,955 87,587 18,673 12,684 118,944 Loan
Slide 25: Originations volume and gain on sale increase driven by Consumer Direct recapture and MSR replenishment
Originations volume and gain on sale increase driven by Consumer Direct recapture and MSR replenishment Funded Volume & Revenue Margin(a) by Channel revenue margin (bps) Fwd CL + Co-Issue Consumer Direct Reverse 241M 8.1B 197M 7.2B 181M 184M 6.6B 158M 32 466 106M 313 309 314 423 22 21 368 Q3'23 Q2'2
Slide 26: Managing owned MSRs to a targeted investment range of $115-135B
Managing owned MSRs to a targeted investment range of $115-135B incl. ESS (Dollars in billions) Q2’23 Q3’23 Q4’23 Q1’24 Q2’24 Q3’24 Forward Owned 127 121 122 124 124 123 Reverse Owned 8 8 8 8 8 9 Selling our stake in MAV Total Owned MSR did not alter our owned Servicing(a) Avg UPB 135 129 130 132 13
Slide 27: Scale and diligent cost management improving operating efficiency
Scale and diligent cost management improving operating efficiency Operating efficiency significantly improved since cost management actions in 2H’22 Originations Servicing 50 94% 250 40 200 71% 49% 66% 68% 30 150 52% 52% 20 100 31% 30% 28% 29% 26% 10 50 0 0 ($M) Q2'22 Q3'23 Q4'23 Q1'24 Q2'24 Q3'24 (
Slide 28: Value proposition for integrated Reverse originator, servicer and subservicer platform
Value proposition for integrated Reverse originator, servicer and subservicer platform Strong contributor to profitability Adjusted Pre-Tax Income(a) ✓ Delivers robust and consistent profitability ($M) FY’22 FY’23 Q3’24 YTD ✓ Creates upside potential on originations market if rates decline Servicing
Slide 29: Appendix | Balance Sheet
Appendix | Balance Sheet © 2024 Onity Group Inc. All rights reserved. 29
Slide 30: Condensed Consolidated Balance Sheets (GAAP)
Condensed Consolidated Balance Sheets (GAAP) Assets September 30, June 30, September 30, (Dollars in millions) 2023 2024 2024 Cash and cash equivalents 194 203 202 Restricted cash 72 46 78 Mortgage servicing rights (MSRs), at fair value 2,860 2,328 2,224 Advances, net 565 551 523 Loans held for sale
Slide 31: Condensed Balance Sheet Breakdown
Condensed Balance Sheet Breakdown Balance Sheet Breakdown Rithm, MAV & Assets GAAP other pledged Reverse GNMA All (Dollars in millions) September 30, 2024 Mortgages EBO others MSR Cash and cash equivalents 202 202 Restricted cash 78 78 Mortgage servicing rights (MSRs), at fair value 2,224 578 1,646
Slide 32: Recent transactions will have a material, positive impact on the business
Recent transactions will have a material, positive impact on the business • MAM assets acquired to strengthen the Company’s position in reverse servicing, provide incremental asset management opportuni ties and improve corporate and MSR debt / total equity from 3.9x to 2.8x Pro Forma for the announc
Slide 33: Ongoing deleveraging effort positioned us for a cost-effective debt refinance
Ongoing deleveraging effort positioned us for a cost-effective debt refinance Leverage ratio(a) reduced 24% since year-end 2023 due to recent actions debt / equity ✓ Repurchased $71M in corporate debt and at period end reduced MSR financing by >$100M YTD ✓ Executed deliberate actions to accelerate 3
Slide 34: Debt-to-Equity Ratio Calculation
Debt-to-Equity Ratio Calculation end of period (Dollars in millions) Q4’23 Q1’24 Q2’24 Q3’24 PMC Senior Secured Notes Outstanding 360 313 313 289 Balance Onity Senior Secured Notes Outstanding 285 285 285 285 Balance MSR Financing Facilities, net 916 964 928 805 I Corporate & MSR Debt 1,561 1,562 1,
Slide 35: Dilution controlled by Onity due to updated agreements
Dilution controlled by Onity due to updated agreements As of 9/30/24(a) Oaktree Warrant Settlement Method at Onity’s discretion ONIT Share Price $31.94 Gross Shares Settlement Net Settlement in Shares Net Settlement in Cash Book Value in $M Book Value Share Count Book Value Share Count Book Value Sh
Slide 36: Appendix | Income Statement
Appendix | Income Statement © 2024 Onity Group Inc. All rights reserved. 36
Slide 37: Condensed Consolidated Statement of Operations (GAAP Income Statement)
Condensed Consolidated Statement of Operations (GAAP Income Statement) 3 Months Ended 3 Months Ended 3 Months Ended (Dollars in millions) September 30, 2023 June 30, 2024 September 30, 2024 Revenue Servicing and subservicing fees 238 211 211 Gain on reverse loans held for investment and HMBS-related
Slide 38: Note Regarding Non-GAAP Financial Measures
Note Regarding Non-GAAP Financial Measures In the following slides, we present supplemental information (including reconciliations) relating to certain illustrative adjustments to GAAP pre-tax income (loss). We believe this non-GAAP financial measure provides a useful supplement to discussions and a
Slide 39: Notables and Adjusted Pre-tax Income (Loss) Calculation
Notables and Adjusted Pre-tax Income (Loss) Calculation (Dollars in millions) Q4’22 Q1’23 Q2’23 Q3’23 Q4’23 Q1’24 Q2’24 Q3’24 I Reported Net Income (Loss) (80) (40) 15 8 (47) 30 11 21 A Income Tax Benefit (Expense) (1) (2) (1) (1) (2) (2) (3) (6) II Reported Pre-Tax Income (Loss) [ I – A ] (79) (38)
Slide 40: Notables and Adjusted Pre-tax Income (Loss) Calculation
Notables and Adjusted Pre-tax Income (Loss) Calculation Q3’24 Q3’24 (Dollars in millions) FY’21 FY’22 FY’23 YTD LTM I Reported Net Income (Loss) 18 26 (64) 62 15 A Income Tax Benefit (Expense) 22 1 (6) (11) (13) II Reported Pre-Tax Income (Loss) [ I – A ] (4) 25 (58) 73 27 Forward MSR Valuation Adju
Slide 41: Adjusted Pre-tax Income (Loss) and Weighted Average Shares Outstanding
Adjusted Pre-tax Income (Loss) and Weighted Average Shares Outstanding (Dollars in millions) Q3’23 Q2’24 Q3’24 I Reported Net Income (Loss) 8 11 21 II Notable Items (0) (18) (8) III Income Tax Benefit (Expense) (1) (3) (6) Adjusted Pre-tax Income (Loss) [ I – II – III ] 9.6 31.7 35.3 Weighted Averag
Slide 42: GAAP ROE Calculation
GAAP ROE Calculation (Dollars in millions) Q4’22 Q1’23 Q2’23 Q3’23 Q4’23 Q1’24 Q2’24 Q3’24 I Reported Net Income (Loss) (80) (40) 15 8 (47) 30 11 21 II Annualized Net Income (Loss) (319) (161) 62 34 (190) 120 42 86 [I*4] A Beginning Period Equity 546 457 416 434 445 402 432 446 B Ending Period Equit
Slide 43: GAAP ROE Calculation
GAAP ROE Calculation Q3’24 Q3’24 (Dollars in millions) FY’21 FY’22 FY’23 YTD LTM I Reported Net Income (Loss) 18 26 (64) 62 15 II Annualized Net Income (Loss) 18 26 (64) 83 15 [ I * ( 4 / 3 ) ] for Q3’24 YTD A Beginning Period Equity 415 477 457 402 445 B Ending Period Equity 477 457 402 468 468 III
Slide 44: Adjusted Pre-Tax Income ROE Calculation
Adjusted Pre-Tax Income ROE Calculation (Dollars in millions) Q4’22 Q1’23 Q2’23 Q3’23 Q4’23 Q1’24 Q2’24 Q3’24 I Reported Net Income (Loss) (80) (40) 15 8 (47) 30 11 21 II Notable Items (83) (44) (6) (0) (56) 18 (18) (8) III Income Tax Expense (1) (2) (1) (1) (2) (2) (3) (6) IV Adjusted Pre-tax Incom
Slide 45: Adjusted Pre-Tax Income (Loss) ROE Calculation
Adjusted Pre-Tax Income (Loss) ROE Calculation Q3’24 Q3’24 (Dollars in millions) FY’21 FY’22 FY’23 YTD LTM I Reported Net Income (Loss) 18 26 (64) 62 15 II Notable Items (64) 94 (107) (8) (64) III Income Tax Benefit (Expense) 22 1 (6) (11) (13) IV Adjusted Pre-tax Income (Loss) [ I – II – III ] 59 (
Slide 46: Q3'24 P&L GAAP to Adjusted Bridge
Q3’24 P&L GAAP to Adjusted Bridge Rithm, MAV & Consolidated GAAP Other Pledged Reverse MSR FV Adj Other Inter-Segment Adjusted (Dollars in millions) Reclass Notables Notables Reclass MSR Reclass Revenue 266 (30) 4 (1) 1 - 240 MSR Valuation Adjustments, net (32) (0) (4) (4) - - (40) Operating Expense
Slide 47: Q3'24 P&L GAAP to Adjusted Bridge
Q3’24 P&L GAAP to Adjusted Bridge Rithm, MAV & Servicing Segment GAAP Other Pledged Reverse MSR FV Adj Other Inter-Segment Adjusted (Dollars in millions) Reclass Notables Notables Reclass MSR Reclass Revenue 236 (30) 4 (6) 1 - 205 MSR Valuation Adjustments, net (36) (0) (4) 1 - - (39) Operating Expe
Slide 48: End Notes
End Notes © 2024 Onity Group Inc. All rights reserved. 48
Slide 49: End Notes
End Notes SLIDE 3 SLIDE 7 cont. SLIDE 13 a) See slides 38-47 for discussion of non-GAAP measures including c) Source: Inside Mortgage Finance Top Correspondent Platforms a) Adj PTI has been positive for eight straight quarters and has improved notable items 6M2024 nine straight quarters after adjust
Slide 50: End Notes
End Notes SLIDE 18 SLIDE 24 cont. SLIDE 35 a) See slides 38-47 for discussion of non-GAAP measures including e) Annual $ per loan; ancillary incl. REO fee income on Non-Agency a) Where applicable, data is end of period; share and equity data after notable items MSRs dilution assumes exercise of all
Slide 51: End Notes
End Notes SLIDES 39 & 40 cont. f) Long-term incentive program (LTIP) compensation expense changes attributable to stock price changes during the period g) Includes costs associated with but not limited to rebranding, MAV upsize, and other strategic initiatives and transactions; FY’21 includes costs
Slide 52: Abbreviations
Abbreviations • Adj: Adjusted (equal to GAAP, net of notables) • #H: Half of the fiscal year • PF: Pro Forma • Agency: FHLMC, FNMA, and/or GNMA • HECM: Home Equity Conversion Mortgage • PLS: Private Label Securities • B: Billion • HELOAN: Home Equity Loan • PHH: PHH Mortgage Corporation, a wholly-ow
Slide 53: Customer first. Better together. We say. We do.
Customer first. Better together. We say. We do.