Rithm Capital Corp. · NYSE:RITM
Rithm Capital — Q3 2021 Earnings Presentation
41 slides from Rithm Capital's earnings presentation, Nov 2, 2021
Slide 1: New Residential Investment Corp. Quarterly Supplement
New Residential Investment Corp. Quarterly Supplement T H I R D Q UA R T E R 2 0 2 1
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: Strategic Evolution
Strategic Evolution We have built a comprehensive strategy over time that combines our investment management expertise and complementary operating companies to create assets for our portfolio Grow and Scale Entry into Grow and Scale Expand Investment Portfolio Investment Complementary Operating Oper
Slide 4: Q3'21 Company and Financial Highlights
Q3’21 Company and Financial Highlights GAAP Net Income: Book Value: $146.1 Million / $0.30 per Diluted Share(1) $11.35 per Common Share as of September 30, 2021 ▪ +0.7% Book Value per Common Share from June 30, 2021 Core Earnings: 2.9% Total Economic Return $209.9 Million / $0.44 per Diluted Share(1
Slide 5: Delivering Results: Q3'21 and Beyond Highlights
Delivering Results: Q3’21 and Beyond Highlights 1 Closed acquisition of Caliber 4 Improved recapture rates to help drive returns Successfully closed the acquisition of Caliber in August 2021 and commenced integration and Newrez and Caliber Refinance Recapture(3) both strategic efforts between Newrez
Slide 6: NRZ Business and Investment Summary
NRZ Business and Investment Summary Total Assets ($bn) Strategy Description $50 ▪ Leading non-bank mortgage originator with multi- $41.6 Origination channel lending abilities $40 ▪ Leading non-bank mortgage servicer (performing $37.3 and special servicing) includes MSRs serviced in $35.2 Servicing h
Slide 7: Acquisition of Genesis Capital LLC
Acquisition of Genesis Capital LLC(1) The acquisition of Genesis is expected to add a new complementary business to our strategy and advance our ability to create and retain additional high coupon, low- duration REIT assets for our balance sheet Genesis Overview Key Metrics ~12,000 Cumulative Loans
Slide 8: Overview of Business Purpose Lending
Overview of Business Purpose Lending With the acquisition of Genesis, we expect to capture considerable market share in the fragmented residential business purpose lending industry(1) Favorable Near and Long-Term Secular Trends Driving Increased Large and Growing Total Addressable Market Investment
Slide 9: NRZ's Ability to Organically Manufacture Assets
NRZ’s Ability to Organically Manufacture Assets Our ability to organically create assets helps drive our earnings and book value growth Agency Origination Non-Agency Origination Business Purpose Lending Product (Conventional and FHA MSRs) (MSRs, Loans, Bonds and Call Rights) (Loans) 2022E Originatio
Slide 10: Supporting Market Tailwinds
Supporting Market Tailwinds Looking ahead, trends in the broader market are supportive of New Residential’s overall strategy(1) There is significant Continued trends of Purchase originations The mortgage market Rates are forecasted pent-up demand for borrower strength are expected to is large but re
Slide 11: Q3'21 Performance
Q3’21 Performance NEW RESIDENTIAL Q3 2021 11
Slide 12: NRZ MSR Portfolio Summary
NRZ MSR Portfolio Summary NRZ owns a hard to replicate portfolio of MSRs with significant earnings power that benefits from rising rates Q3’21 MSR Portfolio Activity and Outlook ◆ MSR portfolio totaled $635 billion UPB as of September 30, 2021 (1) ◆ 87% Full MSRs / 13% Excess MSRs ◆ $156 billion UPB
Slide 13: MSR Speeds Continue to Slow
MSR Speeds Continue to Slow Slowing amortization and growing origination have supported our MSR portfolio ◆ The gap between MSR run-off and origination is poised to turn positive and continue to trend higher ◆ During Q3’21, average portfolio speeds slowed for the third consecutive quarter but remain
Slide 14: Call Rights: Activity Remains Robust
Call Rights: Activity Remains Robust Call volumes in Q3’21 remained elevated, driven by positive fundamentals Q3’21 Call Rights Portfolio Activity and Outlook ◆ Call activity remained elevated in Q3’21 as advance balances declined and delinquencies improved and we expect these trends to continue(1)
Slide 15: SFR: Further Expansion into Single Family Rental
SFR: Further Expansion into Single Family Rental NRZ intends to grow its SFR exposure to $5bn of homes through various sourcing channels and best in class property management(1) NRZ’s SFR Portfolio NRZ SFR Competitive Advantage Portfolio Including ◆ Lower cost of financing ◆ ~2,200 units (56% QoQ in
Slide 16: Loans: Bullish on Investment Opportunities
Loans: Bullish on Investment Opportunities Organic access to steady pipeline of income generating assets within our loan portfolio Targeted NRZ Portfolio Lifetime Net Market Trends NRZ Advantage(2) Size ($bn) Yield(1)(2) Performing & 15-20% $1.5bn ◆ High demand due to ◆ NRZ owns call rights that con
Slide 17: Servicer Advances: Balances Remain Low
Servicer Advances: Balances Remain Low Advance balances remain low and we continue to have significant excess servicer advance capacity(1) Advance Balances as of September 30, 2021 ◆ Servicer advance balances as of September 30, 2021 were $3.2 billion, unchanged relative to June 30, 2021 ◆ Outstandi
Slide 18: Progress on Mortgage Company Integration and Synergies
Progress on Mortgage Company Integration and Synergies We expect to achieve significant synergies through our integration of Newrez and Caliber(1) Integration Update Integration Synergies(1) ◆ Single Executive Team: Created single leadership team from executives across Newrez and Caliber ($mm) ◆ Ori
Slide 19: Origination: Q3'21 Activity and Business Highlights
Origination: Q3’21 Activity and Business Highlights The acquisition of Caliber has added incremental origination production and diversification capabilities Funded PT Adj. Lock The acquisition of Caliber closed in August 2021. Volume Volume As a result, only a stub period of Caliber’s Q3’21 $177.5 m
Slide 20: Origination: Market Leading Recapture Rates
Origination: Market Leading Recapture Rates Continued strength in recapture will drive additional earnings power (1) We intend to leverage Caliber’s predictive models and Refinance Recapture Performance recapture ability to improve overall recapture rates Refinance Recapture(2) Newrez and Caliber Ne
Slide 21: Origination: Leading Purchase Focused Franchise
Origination: Leading Purchase Focused Franchise Supported by Extensive Local Footprint We believe our extensive local presence will drive our purchase performance(1) Footprint and Differentiators Growing Purchase Origination and Market Share ◆ Highly Scalable Platform and Distributed $30.0 6.0% Purc
Slide 22: Origination: Path to Higher Market Share
Origination: Path to Higher Market Share(1) Each part of our origination strategy is positioned to grow and contribute to higher market share Drivers Market Share Target ◆ Continued growth in recapture and expansion of Direct to customer base through retained servicing Consumer ◆ Growth of new custo
Slide 23: Servicing: Q3'21 Activity and Business Highlights
Servicing: Q3’21 Activity and Business Highlights Industry leading servicer with financial and operational strength $385 billion UPB $75 billion UPB $16 billion UPB ~2.3 million 4th Largest Q3’21 In-House Q3’21 Servicing on Q3’21 Whole Loan & Loan Count Non-Bank Servicer(1) Servicing Behalf of Third
Slide 24: New Residential – How We Set Ourselves Apart
New Residential – How We Set Ourselves Apart(1) Leading Investment Asset Manufacturer with Manager with Ability to Organically Complementary Create New Quality Operating Businesses Investments MSR Portfolio Diversified Portfolio of with Significant Income Generating Upside Opportunity in Rising Rate
Slide 25: Appendix
Appendix NEW RESIDENTIAL Q3 2021 25
Slide 26: Condensed Consolidated Balance Sheets
Condensed Consolidated Balance Sheets (dollars in thousands, except per share data) As of 9/30/21 As of 6/30/21 (Unaudited) (Unaudited) ASSETS Excess mortgage servicing rights assets, at fair value $ 359,288 $ 378,488 Mortgage servicing rights and mortgage servicing rights financing receivables, at
Slide 27: Book Value per Share Summary
Book Value per Share Summary Per Share (1) QoQ% Change Ending Q2'21 BVPS $11.27 Net Income (Excluding change in fair value) $0.71 MSR Realization of Cash Flows ($0.62) Change in valuation inputs and assumptions $0.20 Change in fair value of investments $0.02 GAAP Net Income $0.31 Other Comprehensive
Slide 28: Condensed Consolidated Income Statements
Condensed Consolidated Income Statements Three Months Ended September 30, June 30, Unaudited (dollars in thousands) 2021 2021 Revenues Servicing fee revenue, net and interest income from MSR financing receivables $ 398,645 $ 388,858 Change in fair value of MSRs and MSR financing receivables (includi
Slide 29: Net Income by Segment (Q3'21 and Q2'21)
Net Income by Segment (Q3’21 and Q2’21) Residential Securities, Properties and Origination and Servicing Loans Residential MSRs & Servicer Securities & Call Properties & Corporate & Quarter Ended September 30, 2021 Origination Servicing Advances Rights Residential Loans Other Total Servicing fee rev
Slide 30: Servicing Segment Realignment
Servicing Segment Realignment During the quarter ended September 30, 2021, due to the Caliber acquisition, New Residential reevaluated the composition of its reportable segments based on the significance of certain business activities to its operations and performance evaluation, which drive resourc
Slide 31: Mortgage Servicing Rights
Mortgage Servicing Rights (in thousands) MSRs Balance as of June 30, 2021 $ 4,790,429 Purchases, net 787 Transfers 1,507,524 Originations 415,054 Proceeds from sales (5,180) Change in fair value due to: Realization of cash flows (288,577) Change in valuation inputs and assumptions 145,969 (Gain)/los
Slide 32: Servicing and Origination
Servicing and Origination Newrez Caliber Combined Q3'21 Q3'21 Q3'21 Q3'21 Q1'21 Q2'21 Q3'21 Reported Full Quarter Reported Full Quarter Servicing Servicing Portfolio (UPB $bn) In-House Servicing $222.2 $221.7 $229.2 $156.0 $156.0 $385.2 $385.2 On Behalf of Third-Parties $74.6 $76.4 $74.8 $0.0 $0.0 $
Slide 33: 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) Q3 2021 Q2 2021 Reconciliation of core earnings Net income att
Slide 34: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Core Earnings ▪ New Residential 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
Slide 35: Endnotes
Endnotes NEW RESIDENTIAL Q3 2021 35
Slide 36: Endnotes to Slide 3 and 4
Endnotes to Slide 3 and 4 Endnotes to Slide 3: Source: Company filings and data. (1) The acquisition of Genesis Capital LLC has not yet closed and is expected to close during Q4’21, subject to certain approvals and customary closing conditions. Statements made about Genesis are based on management’s
Slide 37: Endnotes to Slides 5 and 6
Endnotes to Slides 5 and 6 Endnotes to Slide 5: Source: Company filings and data, and Bloomberg. Financial and market data as of September 30, 2021 unless otherwise noted. (1) Q3’21 Total Economic Return represents NRZ book value change from June 30, 2021 through September 30, 2021, plus common divi
Slide 38: Endnotes to Slides 7 through 13
Endnotes to Slides 7 through 13 Endnotes to Slide 7: (1) The acquisition of Genesis Capital LLC has not yet closed and is expected to close during Q4’21, subject to certain approvals and customary closing conditions. Statements made about Genesis are based on management’s current views and estimates
Slide 39: Endnotes to Slides 14 through 18
Endnotes to Slides 14 through 18 Endnotes to Slide 14: Source: Company filings and data. Financial data as of September 30, 2021 unless otherwise noted. (1) Based on management’s current views and estimates, and actual results may vary materially. See “Disclaimers” at the beginning of this Presentat
Slide 40: Endnotes to Slides 19 through 24
Endnotes to Slides 19 through 24 Endnotes to Slide 19: Source: Company filings and data. Financial data as of September 30, 2021 unless otherwise noted. (1) Source: Inside Mortgage Finance data as of October 28, 2021. (2) Source: MBA data as of October 17, 2021. (3) Based on management’s current vie
Slide 41: Abbreviations
Abbreviations Abbreviations: This Presentation may include abbreviations, which have the following ▪ Original UPB – UPB at Time of Securitization 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