Rithm Capital Corp. · NYSE:RITM
Rithm Capital — Q3 2022 Earnings Presentation
33 slides from Rithm Capital's earnings presentation, Nov 2, 2022
Slide 1: Quarterly Supplement Q3 2022
Rithm Capital Quarterly Supplement Q3 2022 Q3 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 Highlights
Rithm Capital Highlights We have positioned our Company to succeed in the current environment, exemplified by our ability to maintain book value this quarter while generating value for our shareholders(1)(2) 1 Durable Business Model with Differentiated Strategy ✓ Generating steady earnings and consi
Slide 4: Q3'22 Financial Highlights
Q3’22 Financial Highlights GAAP Net Income: $124.5 Million / $0.26 per Diluted Share(1) Book Value: $12.10 per Common Share(6) as of September 30, 2022 Earnings Available for Distribution: $153.0 Million / $0.32 per Diluted Share(1)(2) Reflects ($0.17) impact from warrant dilution(7) Third Quarter 2
Slide 5: Rithm's Evolution to Date
Rithm’s Evolution to Date Our company has evolved from solely a holder of mortgage servicing rights to a true 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 Rebran
Slide 6: Rithm 2.0
Rithm 2.0 Expanding Rithm’s business model to manage third-party capital will contribute stable and recurring fee income for our shareholders(1) Today, Rithm actively manages operating companies and a portfolio of yield- Driving growth through third party oriented assets totaling ~$7bn of equity cap
Slide 7: The State of the Housing Market
The State of the Housing Market While affordability has declined given higher rates and increasing home prices, supply continues to be constrained(1) Home Prices(2) Housing Affordability(3) 3.0 225 Median vs. Qualifying 200 MoM Change, % 2.0 175 1.0 Income 150 0.0 125 104.4 Aug ‘22 -1.0 100 (0.9) Au
Slide 8: Rithm's Positioning in the Current Environment
Rithm’s Positioning in the Current Environment Rithm is well positioned to deliver strong performance despite volatile market conditions(1) Driver Themes Advantage • Persistent inflation driving Fed’s rate policy • Continued uncertainty in economic outlook driving ✓ Defensive posture with $1.8bn in
Slide 9: Q3'22 Performance
Q3’22 Performance Q3 2022 Quarterly Supplement
Slide 10: Summary of Business Segments
Summary of Business Segments Rithm owns leading origination and servicing platforms and a portfolio of real estate-related assets and securities Business Segments Total Assets ($bn) Strategy Description • Top mortgage servicer (performing and special $41.6 Servicing servicing). Includes $402bn of in
Slide 11: Mortgage Company Overview
Mortgage Company Overview Our balanced mortgage platform generated another profitable quarter in a challenging market environment Business Overview Key Q3’22 Metrics • $209.8mm of pre-tax income, including Full MSR mark to market gain of $131.2mm $209.8mm $402bn $13.8bn – Includes ~$16mm of severanc
Slide 12: Mortgage Company Activity & Business Highlights
Mortgage Company Activity & Business Highlights Our servicing portfolio remains strong and acts as a hedge to declining origination volumes Servicing: Mortgage Company Portfolio Servicing: $615bn Total Rithm Portfolio(1) ($bn UPB) ($bn UPB) $476 $483 $497 $498 $504 Third-Party Agency MSRs $75 $78 $8
Slide 13: MSR Portfolio Summary
MSR Portfolio Summary Rithm has significant investments in MSRs with beneficial earnings power in a rising rate environment MSR Portfolio Activity & Outlook(1) • MSR portfolio totaled $615 billion UPB as of September 30, 2022(1) – 88% Full MSRs / 12% Excess MSRs • Newrez / SMS / Caliber servicing re
Slide 14: MSR Values
MSR Values MSRs are a premium asset in today’s market, and our MSR values are protected given the portfolio characteristics Full MSR Price & Multiples Full MSR Portfolio Speeds & Amortization 200 6.0x During Q3’22, average portfolio speeds slowed for the seventh consecutive quarter to multi-year low
Slide 15: Servicer Advances
Servicer Advances Rithm maintains significant excess servicer advance capacity Advance Balances • Servicer advance balances as of September 30, 2022 were approximately $2.9 billion, down ~3% from June 30, 2022 • Outstanding advance balances are financed with(1): – $2.4 billion of debt ($1.7 billion
Slide 16: Genesis Capital Overview
Genesis Capital Overview Genesis is prudently growing its loan portfolio while increasing financing capabilities and maintaining robust credit standards Business Highlights Financing and Credit Overview • $622mm Q3’22 origination volume • Stable credit facilities with additional growth potential: •
Slide 17: Single-Family Rental (SFR)
Single-Family Rental (SFR) Rithm is cautiously managing its SFR portfolio and focused on strengthening operating and occupancy metrics(1) Rithm’s SFR Portfolio Q3’22 Activity • Maintained elevated cap rates, leading to lower purchase activity Portfolio – Raised cap rate floors across all markets thr
Slide 18: Appendix
Appendix Q3 2022 Quarterly Supplement
Slide 19: Condensed Consolidated Balance Sheets
Condensed Consolidated Balance Sheets (dollars in thousands, except per share data) As of 9/30/22 As of 6/30/22 (Unaudited) (Unaudited) ASSETS Excess mortgage servicing rights, at fair value $ 322,168 $ 337,050 Mortgage servicing rights and mortgage servicing rights financing receivables, at fair va
Slide 20: Book Value per Share Summary
Book Value per Share Summary Per Share Ending Q2'22 Book Value Per Share 12.28 Impact of Cashless Warrant Exercise (0.17) Illustrative Ending Q2’22 Book Value Per Share 12.11 Net Income (Loss) (Net of Tax and Change in Fair Value) 0.26 MSR Realization of Cash Flows (0.30) Change in Valuation Inputs
Slide 21: Condensed Consolidated Income Statements
Condensed Consolidated Income Statements Three Months Ended September 30, June 30, Unaudited (dollars in thousands) 2022 2022 Revenues Servicing fee revenue, net and interest income from MSRs and MSR financing receivables $ 453,163 $ 469,478 Change in fair value of MSRs and MSR financing receivables
Slide 22: Segment Information (Q3'22)
Segment Information (Q3’22) Residential Securities, ($ in thousands) Origination and Servicing Properties and Loans MSRs & Residential Properties & Mortgage Servicer Securities & Residential Loans Corporate & Quarter Ended September 30, 2022 Origination Servicing Advances Call Rights Loans Receivabl
Slide 23: Segment Information (Q2'22)
Segment Information (Q2’22) Residential Securities, ($ in thousands) 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 Oth
Slide 24: Mortgage Servicing Rights
Mortgage Servicing Rights (in thousands) MSRs Balance as of June 30, 2022 $ 8,626,409 Purchases, net 363 Originations 268,613 Proceeds from sales (3,865) Change in fair value due to: Realization of cash flows (141,616) Change in valuation inputs and assumptions 143,175 (Gain)/loss realized 1,995 Bal
Slide 25: Servicing and Origination
Servicing and Origination Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Servicing Servicing Portfolio (UPB $bn) In-House Servicing $385.2 $390.0 $398.8 $400.5 $402.5 On Behalf of Third-Parties $74.8 $78.3 $85.4 $86.7 $91.5 Whole Loan & Other $15.9 $14.5 $12.7 $10.8 $9.6 Total UPB $475.8 $482.8 $496.9 $498.0 $503.6
Slide 26: 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 27: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures • The Company 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 operati
Slide 28: Endnotes
Endnotes Q3 2022 Quarterly Supplement
Slide 29: 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 September 30, 2022 unless otherwise noted. 1) Based on management’s current views and estimates, and actual results may vary materially. See “Disclaimers” at the beginning of
Slide 30: Endnotes to Slide 6 through 13
Endnotes to Slide 6 through 13 Endnotes to Slide 6: 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 7: Source: RDQ Economics. 1)
Slide 31: Endnotes to Slide 14 through 17
Endnotes to Slide 14 through 17 Endnotes to Slide 14: Source: Company filings and data as of September 30, 2022 unless otherwise noted. 1) Representative of MSR change in valuation inputs and assumptions. Please see Mortgage Servicing Rights table in Appendix for details. Endnotes to Slide 15: Sourc
Slide 32: 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
Slide 33: Q3 2022 Quarterly Supplement
Q3 2022 Quarterly Supplement