Slide 1: New Residential Investment Corp. Quarterly Supplement Third Quarter 2020
New Residential Investment Corp. Quarterly Supplement Third 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. Overview
New Residential Investment Corp. Overview Our vertically integrated investment management and mortgage platform generates attractive and sustainable risk-adjusted returns ✓ Over $3.4 Billion in Dividends Paid Since Inception(2)(3) ✓ $5.3 Billion Net Equity(4) ✓ 40% Total Shareholder Return Since Inc
Slide 4: Q3'20 Company and Financial Highlights
Q3’20 Company and Financial Highlights ▪ GAAP Net Income of $77.9 Million, or $0.19 per Diluted Share(1) ▪ Core Earnings of $131.6 Million, or $0.31 per Diluted Share(1)(2) ▪ $342.6 Million Pre-Tax Income (“PTI”) from Origination and Servicing (+67% QoQ) ▪ Third Quarter Common Stock Dividend of $0.1
Slide 5: Book Value Per Share Summary
Book Value Per Share Summary Q3’20 book value per share was $11.01 before one-time term loan discount write-off; $10.86 inclusive of the write-off ✓ Refinancing of 11.00% senior secured term loan into 6.25% senior unsecured notes resulted in a one-time write- off discount of ($0.15) per share to boo
Slide 6: Sum of the Parts: Greater than the Whole
Sum of the Parts: Greater than the Whole(1) Current stock market valuation significantly understates the value of New Residential(1) $20.00 Illustrative Operating Company Valuation(4)(5) ~$16 - $19 $18.00 Low High $16.00 Operating Co Off Balance FY’20 PTI Estimate ($mm) $850 $900 $14.00 Sheet Value
Slide 7: High Levels of Liquidity in an Uncertain World
High Levels of Liquidity in an Uncertain World Significant dry powder to deploy opportunistically Cash on Balance Sheet ($mm) Potential Earnings from Deployment(3) $1,200 $1,013 Cash on Balance Sheet $841mm $1,000 $841 $800 $738* Dry Powder (Base Case)(2) $400mm ($mm) $600 Historical Average Cash $5
Slide 8: Low Leverage
Low Leverage We strengthened our balance sheet, lowered our cost of funds and reduced our mark to market exposure* Q4’19 vs. Q3’20 Financing and Leverage Metrics Q3’20 Financing Summary ▪ Annualized savings of approximately $50 2.7% million from Q3’20 refinancing activity(3) Weighted Average 1.8% ▪
Slide 9: Delivering Results
Delivering Results Q3’20 Accomplishments Maintained elevated levels of cash 1 Navigate from a position and unencumbered assets; $1.9 billion of of financial strength unencumbered assets of which $841 million is cash 2 Grow origination Increased funded origination volume 118% platform, scale and prof
Slide 10: Investment Portfolio
Investment Portfolio Increase in asset base quarter over quarter was driven primarily by purchases of Agency securities Q3’20 Activity Additional Opportunities(2) ✓ Added ~$5.1bn of Agency securities to hedge MSR ✓ Expect call activity to pick-up in Q4’20 – we intend to portfolio call over $400mm UP
Slide 11: MSR Valuation Upside as Multiples Increase
MSR Valuation Upside as Multiples Increase NRZ is positioned to benefit as MSR multiples* increase(1) MSR Values Poised for Recovery(1) MSR Multiples Over Time(2) ✓ MSR valuations are currently at historical lows 5.00x ✓ As interest rates rise, MSRs increase in value which offsets declines in origin
Slide 12: Investment Portfolio
Investment Portfolio @ New RESIDENTIAL wy /eSTMENT CORP.
Slide 13: MSRs
MSRs MSRs are one of the few fixed income assets that increase in value when interest rates rise Q3’20 MSR Portfolio Activity MSR Strategy and Outlook(2) ▪ MSR portfolio totaled $571bn UPB as of September 30, 2020(1) ▪ MSR values are near multi-year lows with significant upside opportunity ▪ NRZ pur
Slide 14: Residential Loans & Non-Agency Residential Securities
Residential Loans & Non-Agency Residential Securities Strategically retained residential loans and non-agency securities that fit within our long-term strategy Residential Loans Non-Agency Residential Securities Other RPL NPL 10% 34% 31% Risk Other NRZ Retention Portfolio Retained Bonds Composition
Slide 15: Servicer Advances
Servicer Advances Advance balances declined slightly in Q3’20 Advance Balances as of September 30, 2020 ▪ Servicer advance balances as of September 30, 2020 declined to $3.4bn from $3.5bn relative to June 30, 2020 ▪ Closed a $500 million GNMA advance and MSR facility(1) ▪ Due to refinancings, reduce
Slide 16: Improvement in Servicer Advances Outlook
Improvement in Servicer Advances Outlook The outlook for servicer advances has continued to improve through Q3’20 P Delinquencies through P Positive outlook driven by P limited new forbearance Recovered $141mm of advance September 2020 came in 8% requests and higher than equity during Q3’20 ($138mm
Slide 17: COVID-19 Related Forbearances Have Continued to Decline
COVID-19 Related Forbearances Have Continued to Decline Within NRZ’s full MSR portfolio, COVID-19 forbearances continue to decline, and increasing numbers of borrowers’ forbearances are ending(1) COVID-19 Loans in Forbearance from March 25, 2020 through October 16, 2020(2) 9.00% 8.00% 7.00% 6.00% 5.
Slide 18: Operating Business
Operating Business @ New RESIDENTIAL wy /eSTMENT CORP.
Slide 19: Leading Origination and Servicing Platform
Leading Origination and Servicing Platform Our mortgage platform provides a differentiated strategy among industry participants Differentiated Platform ✓ Multi-channel originator that performs across multiple interest rate environments ✓ Ability to service performing loans and delinquent loans with
Slide 20: NewRez has Grown Significantly
NewRez has Grown Significantly Key performance metrics demonstrate growth and profitability Pre-Tax Income Servicing Portfolio $1,000 $350 $310 $850-$900 Pre-Tax Income ($mm) 22x-24x $300 6x Servicing UPB ($bn) $750 Increase(1) $250 Increase(1) $219 $500 $200 $150 $109 $225 $250 $100 $38 $58 $52 $50
Slide 21: Path to Market Share Gains Across Origination Channels
Path to Market Share Gains Across Origination Channels Multi-channel platform poised for further market share expansion(1) ✓ Large owned MSR client base is a competitive Origination by Channel Consumer advantage Direct to ✓ Significant opportunity to grow lead acquisition $30.0 $28.4 business as we
Slide 22: Origination: Q3'20 Activity and Business Highlights
Origination: Q3’20 Activity and Business Highlights Continued strength in loan origination and profitability PRecord profitability; P P P 291% $21.8bn Estimate FY’20 Q3’20 Origination PTI Q3’20 Pull-Through Q3’20 Annualized Production of of $312.3 million Adjusted Lock Volume (up 72% QoQ) ROE(1) (up
Slide 23: Direct to Consumer Origination
Direct to Consumer Origination Significant increase in lock volume demonstrates progress on DTC initiatives Q3’20 NewRez DTC Origination Overview Ongoing NewRez DTC Priorities ▪ Growth in funded and pull through adjusted (PT Adj.) ▪ Growing customer lead acquisition strategy lock volumes combined wi
Slide 24: Servicing: Q3'20 Activity and Business Highlights
Servicing: Q3’20 Activity and Business Highlights Industry-leading servicer with financial and operational strength P P P P Q3’20 Servicing PTI of Servicing Portfolio has Estimate FY’20 54% $30.3 million Q3’20 Annualized increased 56% Servicing Portfolio of (up 24% QoQ) ROE(1) YoY $310 Billion UPB(2
Slide 25: Servicing: Helping Homeowners During COVID-19
Servicing: Helping Homeowners During COVID-19(1) Committed to helping homeowners and clients navigate COVID-19 landscape ▪ Our servicing team at NewRez and SMS Migration of COVID-19 Impacted Homeowners has supported homeowners and provided solutions throughout COVID-19 200,000 ▪ ~18,000 new forbeara
Slide 26: New Residential – Our Value Proposition
New Residential – Our Value Proposition(1) ABILITY TO DRIVE ATTRACTIVE RISK ADJUSTED RETURNS PORTFOLIO OF MSRs AT HISTORICALLY UNDERVALUED HIGH- LOW VALUATIONS PERFORMING OPERATING COMPANIES EXPERIENCED STRONG BALANCE MANAGEMENT SHEET WITH AMPLE TEAM & BROAD CASH NETWORK OF PARTNERS 25
Slide 27: Financial Statements and Appendix
Financial Statements and Appendix
Slide 28: Condensed Consolidated Balance Sheets
Condensed Consolidated Balance Sheets As of 9/30/2020 As of 6/30/2020 (dollars in thousands, except per share data) (Unaudited) (Unaudited) ASSETS Investments in: Excess mortgage servicing rights assets, at fair value $ 435,982 $ 458,923 Mortgage servicing rights, at fair value 3,651,805 3,551,159 M
Slide 29: Condensed Consolidated Income Statements
Condensed Consolidated Income Statements Three Months Ended September 30, 2020 June 30, 2020 (dollars in thousands) (Unaudited) (Unaudited) Revenues Interest income $ 233,848 $ 232,198 Servicing revenue, net of change in fair value of $(395,064) and $(441,033), respectively (43,929) (90,459) Gain on
Slide 30: Net Income by Segment (Q3'20 and Q2'20)
Net Income by Segment (Q3’20 and Q2’20) Servicing and Origination Residential Securities and Loans MSRs & Residential Servicer Securities & Call Residential Corporate & Quarter Ended September 30, 2020 Origination Servicing Advances Rights Loans Other Total Interest income $ 17,407 $ 373 $ 91,576 $
Slide 31: Servicing and Origination Appendix
Servicing and Origination Appendix Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Servicing Servicing Portfolio (UPB $bn) NewRez / NRZ $123.3 $138.7 $180.6 $175.6 $188.2 Third Party / SMS $61.0 $80.7 $95.2 $102.0 $99.0 Total UPB ($bn) $184.3 $219.4 $275.8 $277.6 $287.2 Cost Per Loan to Service Current $73.63 $69.61
Slide 32: 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 2020 Q2 2020 Reconciliation of Core Earnings Net income
Slide 33: 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 34: Endnotes
Endnotes @ New RESIDENTIAL Ww Investment Core.
Slide 35: Endnotes to Slide 2
Endnotes to Slide 2 Endnotes to Slide 2: Source: Company filings and data, and Bloomberg. Financial and market data as of September 30, 2020 unless otherwise noted. (1) “Investment portfolio” assets refers to total assets less cash, restricted cash, other assets, trades receivable, goodwill and mort
Slide 36: Endnotes to Slides 3 and 4
Endnotes to Slides 3 and 4 Endnotes to Slide 3: Source: Company filings and data. Financial data as of September 30, 2020 unless otherwise noted. (1) Per common share calculations of GAAP Net Income and Core Earnings are based on 420,968,626 weighted average diluted common shares during the quarter
Slide 37: Endnotes to Slides 5 to 7
Endnotes to Slides 5 to 7 Endnotes to Slide 5: (1) Note: All per share values on this slide are based on 415,744,518 basic common shares outstanding as of September 30, 2020. References to Operating Company for the purposes of calculating “Off Balance Sheet Value” include Origination Segment and Ser
Slide 38: Endnotes to Slides 8 to 12
Endnotes to Slides 8 to 12 Endnotes to Slide 8: Source: Company filings and data. Financial data as of September 30, 2020 unless otherwise noted. (1) Reflects borrowers with respect to which New Residential owns the full MSR. (2) Based on management’s current views and estimates, and actual results
Slide 39: Endnotes to Slides 13 to 15
Endnotes to Slides 13 to 15 Endnotes to Slide 13: Source: Company filings and data. Financial data as of September 30, 2020 unless otherwise noted. (1) Residential Loans: Net Investment of $798 million includes (A) $784 million net investment in Residential Loans & REO, with $3,071 million of total
Slide 40: Endnotes to Slides 16 to 22
Endnotes to Slides 16 to 22 Endnotes to Slide 16: Source: Portfolio data through October 16, 2020. (1) There can be no assurances that these trends continue in the future. Based on management’s current views and estimates, and actual results may vary materially. See “Disclaimers” at the beginning of
Slide 41: Endnotes to Slides 23 to 25
Endnotes to Slides 23 to 25 Endnotes to Slide 23: Source: Company filings and data. Financial data as of September 30, 2020 unless otherwise noted. (1) Annualized ROE calculated as Q3’20 annualized servicing PTI divided by quarter over quarter average equity and includes impact from ancillary servic
Slide 42: Abbreviations
Abbreviations Abbreviations: This Presentation may include abbreviations, which have the following meanings: ▪ Original UPB – UPB at Time of Securitization ▪ 60+ DQ – Percentage of loans that are delinquent by 60 days or more ▪ Proj. Future Cash Flows – Future cash flow projected with the Company’s