Rithm Capital Corp. · NYSE:RITM
Rithm Capital — New Residential Investment — Q2 2018 Earnings Presentation
37 slides from Rithm Capital's earnings presentation, Jul 16, 2018
Slide 1: New Residential Investment Corp. Quarterly Supplement Second Quarter 2018
New Residential Investment Corp. Quarterly Supplement Second Quarter 2018
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 Overview
New Residential Overview * New Residential (NYSE: NRZ) is a publicly traded mortgage real estate investment trust (“REIT”) with a $6.2 billion market capitalization (1) What Makes NRZ a Different Kind of Mortgage REIT? (2) 2Q 2018 WELL POSITIONED FOR RISING MANAGE A DIVERSIFIED $520Bn ~$140Bn PORTFO
Slide 4: Financial Performance
Financial Performance Second Quarter 2018: GAAP Net Income of $175 million, or $0.51 per diluted share Core Earnings of $198 million, or $0.58 per diluted share (1) Second quarter dividend of $0.50 per common share 2Q’18 1Q’18 ($mm) ($ / diluted share) (2) ($mm) ($ / diluted share) (2) GAAP
Slide 5: New Residential Portfolio Overview – 2Q18
New Residential Portfolio Overview – 2Q18 * We believe our portfolio is well positioned for various interest rate environments In particular, MSRs, one of the few fixed income assets that should increase in value in a rising rate environment, make up more than 50% of NRZ’s net investment Net Inv
Slide 6: New Residential 101
New Residential 101 * NRZ is a leading capital provider to the U.S. mortgage industry Our objective is to drive strong and sustainable risk-adjusted returns primarily through investments in three main portfolios: 1 Mortgage Servicing Rights & Advances 2 Non-Agency Securities & Associated Call R
Slide 7: Consistent Growth & Robust Performance Since Inception
Consistent Growth & Robust Performance Since Inception * NRZ has a strong track record of executing on its core investment strategies while making attractive opportunistic investments Delivered Consistent Growth NRZ Book Value Per Share (1) $16.80 $15.26 +10% $13.00 +17% YoY Since 2017 YE $12.13 $11
Slide 8: Shellpoint Partners (“Shellpoint”)
Shellpoint Partners (“Shellpoint”) * In July 2018, NRZ closed the previously announced acquisition of Shellpoint Shellpoint is an integrated mortgage origination and servicing company with industry leading 3rd party servicing capabilities, a mortgage origination platform that can help improve reca
Slide 9: Interest Rate Market Expectations
Interest Rate Market Expectations * “We’re gradually moving up rates and we think that is the policy that will help us get inflation to 2% sustainably.” - Statement made by Fed Chairman Jerome Powell on July 18, 2018 Forward LIBOR Curve Possibility of Four or More Hikes in 2018 & 2019 3.1 6% 3,000 S
Slide 10: What Do Higher Rates Mean for New Residential?
What Do Higher Rates Mean for New Residential?*(1) Management’s View: Portfolio Is Well Positioned for Rising Interest Rates Estimated Impact to NRZ Negative Neutral Positive One of the few fixed income assets that should increase in value as interest rates rise Mortgages underlying the MSRs are
Slide 11: NRZ Portfolio Update
New RESIDENTIAL INvesTMENT Corp.
Slide 12: New Residential - 2Q 2018 & Subsequent Highlights
New Residential - 2Q 2018 & Subsequent Highlights* Acquired ~$20 billion UPB of MSRs for ~$245 million from five different counterparties during the second quarter of 2018 MSRs Acquired ~$1 billion of flow MSRs during the quarter; expect an increase in flow MSR purchases in the coming quarters (
Slide 13: MSRs – Portfolio Overview
MSRs – Portfolio Overview * NRZ’s MSR portfolio totals $520 billion UPB (1) NRZ continues to selectively purchase MSR portfolios at compelling returns – notable MSR purchases include: ~$20Bn UPB MSRs from five counterparties (Settled in 2Q18) $110Bn UPB MSR purchase from Ocwen (Settled & await
Slide 14: MSRs – Robust MSR Financing Activity in 2018
MSRs – Robust MSR Financing Activity in 2018 *(1) To further enhance liquidity, NRZ completed over $2.1 billion in MSR financings in 2018 year-to-date 2018 year-to-date, NRZ has issued four fixed rate MSR term notes, totaling $2.1 billion, at a weighted average cost of funds of ~4.1% New Residen
Slide 15: Non-Agency Securities & Call Rights – Call Rights Opportunity
Non-Agency Securities & Call Rights – Call Rights Opportunity* NRZ has access to ~$140 billion of mortgage collateral, representing ~30% of the Non-Agency market (1)(2) Continue to Grow Continue to Scale Access to ~$140Bn Robust Execution Bond Portfolio Loan & REO of Loans (1) Around Call Strategy P
Slide 16: Non-Agency Securities & Call Rights – Portfolio Overview
Non-Agency Securities & Call Rights – Portfolio Overview In 2Q18, NRZ called 32 Non-Agency RMBS deals with an aggregate UPB of ~$1.1 billion (1) In 2Q18, NRZ continued to execute its deal collapse strategy by executing clean-up calls on 32 seasoned, Non-Agency RMBS deals with an aggregate UPB of a
Slide 17: Non-Agency Securities & Call Rights – Bond Portfolio Overview
Non-Agency Securities & Call Rights – Bond Portfolio Overview * $1.6 billion in net equity as of 2Q18, up from $1.4 billion from the prior year During the quarter, NRZ purchased $696 million face value of Non-Agency securities at an average price of 78% (1) Over 93% of the Non-Agency bond portfo
Slide 18: Servicer Advances - Portfolio Overview
Servicer Advances - Portfolio Overview * NRZ’s Servicer Advance portfolio totals $3.8 billion (1) Outstanding advance balance of $3.8 billion is funded with $3.4 billion of debt; 88% LTV and a 3.3% interest rate (1) During the quarter, NRZ continued to focus on improving funding and lowering adv
Slide 19: Consumer Loans – Prosper Investment Overview
Consumer Loans – Prosper Investment Overview * To date, NRZ, as part of a 4-member Consortium, has acquired approximately $2.91 billion of unsecured consumer loans from Prosper Marketplace (“Prosper”) Targeting 15% to 20% levered yield for the life of the investment (1) Initial investment has
Slide 20: Consumer Loans – SpringCastle Investment Overview
Consumer Loans – SpringCastle Investment Overview Through a combination of distributions and refinancing proceeds, NRZ generated a LTD IRR of 87% and received a LTD profit of $567 million NRZ’s Investment Interest Portfolio Overview NRZ’s NRZ’s NRZ Current Total Avg. LTD Ownership Equity Distributio
Slide 21: Residential Loans – Loan Portfolio Overview
Residential Loans – Loan Portfolio Overview* Portfolio Overview NRZ’s residential loan portfolio consists of $3.1 billion UPB, which represents $621 million of equity Portfolio Breakdown: Seasoned Performing - $304 million of equity invested, target strong levered returns through various fun
Slide 22: Aim to Maintain Strong Track Record & Performance
Aim to Maintain Strong Track Record & Performance* Expect to continue executing on key strategic initiatives with the goal of generating attractive returns for shareholders WELL POSITIONED FOR RISING RATES (1) NRZ – Selected Key Milestones 2015 MSRs are one of the few fixed income assets that Apr’15
Slide 23: Appendices
Appendices 1) Financial Statements 2) GAAP Reconciliation & Endnotes
Slide 24: 1) Financial Statements
1) Financial Statements kes New RESIDENTIAL SN Sy INVESTMENT Corp. WY
Slide 25: Condensed Consolidated Balance Sheets
Condensed Consolidated Balance Sheets As of 6/30/18 As of 3/31/18 ($000s, except per share data) (Unaudited) (Unaudited) ASSETS Investments in: Excess mortgage servicing rights, at fair value $ 495,299 $ 515,676 Excess mortgage servicing rights, equity method investees, at fair value 159,034 164,886
Slide 26: Condensed Consolidated Income Statements
Condensed Consolidated Income Statements 3 Months Ended 3 Months Ended June 30, 2018 March 31, 2018 ($ 000s) (Unaudited) (Unaudited) Interest Income $ 403,805 $ 383,573 Interest Expense 133,916 124,387 Net Interest Income 269,889 259,186 Impairment 12,631 6,670 Other-than-temporary impairment (OTTI)
Slide 27: 2) GAAP Reconciliation & Endnotes
2) GAAP Reconciliation & Endnotes
Slide 28: 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) 2Q 2018 1Q 2018 Reconciliation of Core Earnings Net income
Slide 29: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Core Earnings We have four 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 and (iv) our
Slide 30: Endnotes to Slides 2 & 5
Endnotes to Slides 2 & 5 Endnotes to Slide 2: 1) As of July 25, 2018. 2) Based on management’s current views and estimates. See “Disclaimers” at the beginning of this Presentation for more information on forward-looking statements. 3) MSR UPB as of June 30, 2018. $520 billion UPB of MSRs. 4) Call ri
Slide 31: Endnotes to Slide 4
Endnotes to Slide 4 1) Net Investment & Targeted Lifetime Net Yield as of 12/31/2017 MSRs (Excess & Full): Excess MSRs - Net Investment of $877 million includes (A) $706 million investment in 12/31/17 Legacy NRZ Excess MSRs, (B) $639 million net investment in HLSS Excess MSRs acquired on 4/6/2015, a
Slide 32: Endnotes to Slide 4 (Cont’d)
Endnotes to Slide 4 (Cont’d) 2) Net Investment & Targeted Lifetime Net Yield as of 3/31/2018 MSRs (Excess & Full): Excess MSRs - Net Investment of $489 million includes (A) $679 million investment in 3/31/18 Legacy NRZ Excess MSRs, and (B) $8 million of restricted cash and other assets, net of debt
Slide 33: Endnotes to Slide 4 (Cont’d)
Endnotes to Slide 4 (Cont’d) 3) Net Investment & Targeted Lifetime Net Yield as of 6/30/2018 MSRs (Excess & Full): Excess MSRs - Net Investment of $463 million includes (A) $652 million investment in 6/30/18 Legacy NRZ Excess MSRs, and (B) $10 million of restricted cash and other assets, net of debt
Slide 34: Endnotes to Slides 6, 7, 9, 11 & 12
Endnotes to Slides 6, 7, 9, 11 & 12 Endnotes to Slide 6: 1) Book value per share for 2013, 2014, 2015, 2016 and 2017 are as of year-end. Book value per share for “Today” is as of June 30, 2018. 2) Market cap for 2013, 2014, 2015, 2016 and 2017 are as of year-end. Market cap for “Today” is as of July
Slide 35: Endnotes to Slides 13 & 14
Endnotes to Slides 13 & 14 Endnotes to Slide 13: 1) Based on management’s current views and estimates. See “Disclaimers” at the beginning of this Presentation for more information on forward-looking statements. 2) As of June 30, 2018. Endnotes to Slide 14: 1) Our call rights may be materially lower
Slide 36: Endnotes to Slides 15, 17, 18 & 21
Endnotes to Slides 15, 17, 18 & 21 Endnotes to Slide 15: 1) As of June 30, 2018. 2) Securitizations include other collateral that NRZ purchased from dealers. 3) Based on management’s current views and estimates. See “Disclaimers” at the beginning of this Presentation for more information on forward-
Slide 37: Abbreviations
Abbreviations Abbreviations: This Presentation may include abbreviations, which have the following meanings: Age (mths) or Loan Age (mths) – Weighted average number of months loans are outstanding WA – Weighted Average BPO – Broker’s Price Opinion WAC – Weighted Average Coupon BV – Book Va
New Residential Investment — Q2 2018 Earnings Presentation on 6ix