Rithm Capital Corp. · NYSE:RITM
Rithm Capital — New Residential Investment — Q3 2019 Earnings Presentation
38 slides from Rithm Capital's earnings presentation, Oct 25, 2019
Slide 1: Quarterly Supplement Third Quarter 2019
New Residential Investment Corp. Quarterly Supplement Third Quarter 2019
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: NRZ Overview
NRZ Overview @ New RESIDENTIAL wy Sore, /eSTMENT CORP.
Slide 4: New Residential Investment Corp. – Differentiated Strategy
New Residential Investment Corp. – Differentiated Strategy Our mission is to identify and invest in assets that offer attractive risk-adjusted returns while protecting our existing portfolio and generating long-term value for our investors ~$6.5 Billion $41.3 Billion ~12.8% Market Cap Total Assets(1
Slide 5: Q3 2019 Company and Financial Highlights
Q3 2019 Company and Financial Highlights Company and Financial Highlights GAAP Net Income of $225 Million, or $0.54 Per Diluted Share(1) Core Earnings of $207 Million, or $0.50 Per Diluted Share(1)(2) Third Quarter Common Stock Dividend of $0.50 Per Common Share 12.8% dividend yield as of Se
Slide 6: Investment Portfolio
Investment Portfolio New Residential has built a differentiated, hard-to-replicate portfolio with diversified and value-creating investment strategies Investment Portfolio Overview(1) Investment Portfolio Composition Over Time Net Equity $3,070 million $8.0 MSRs & % of Portfolio 42% $7.2 Servicer $7
Slide 7: Active Portfolio Management and Hedging
Active Portfolio Management and Hedging New Residential emphasizes dynamic asset allocation, hedging and portfolio diversification to protect our book value New Residential Portfolio Hedging and Positioning(1) We actively manage and hedge our portfolio to help protect book value The balanced and
Slide 8: Markets Have Changed…and So Have We
Markets Have Changed…and So Have We Over time, New Residential has built a diversified investment portfolio including complementary operating businesses providing differentiated revenue streams 2013 Today P Excess MSRs Fully Integrated P Excess MSRs (from inception) Mortgage Investment Platform Inve
Slide 9: Recent Market Drivers and Impacts
Recent Market Drivers and Impacts Trends in the broader market have contributed to New Residential’s performance LIBOR has been declining… …helping New Residential achieve lower funding costs(1) 2.60 LIBOR declined 3.90% 3.58% Weighted Average 3.53% Cost of Funds (%) 38bps in Q3’19 3.46% 1 Month LIB
Slide 10: Ditech Acquisition – Summary
Ditech Acquisition – Summary Subsequent to Q3’19, New Residential completed the acquisition of select assets from Ditech What did New Residential Acquire from Ditech? 1 Asset Portfolio(1) 2 Operating Platform (Sites & Employees) 3 Purchase Price Other Financial Mortgage Mortgage ~$62bn UPB MSRs Empl
Slide 11: Q3 2019 Highlights
Q3 2019 Highlights New Residential made progress on a number of key initiatives in Q3’19 During Q3’19 we… Grew our origination and servicing businesses by 200% and 100% P Contributed additional earnings through YoY, respectively operating businesses Acquired field services provider Guardian Asset Ma
Slide 12: NRZ Operating Businesses
NRZ Operating Businesses @ New RESIDENTIAL ww Inv 1 Core.
Slide 13: Operating Businesses – Capturing the Whole Mortgage Pie
Operating Businesses – Capturing the Whole Mortgage Pie(1) New Residential’s operating business investments create growth opportunities throughout the mortgage loan life cycle Phases in Mortgage Loan Life Cycle Origination Performing Loan Servicing Special Servicing (60 days+ delinquent loans) Ancil
Slide 14: Origination – Q3'19 Performance
Origination – Q3’19 Performance Origination activity across all origination channels picked up in Q3’19 Q3’19 Origination Activity Product Mix(3) Increased loan origination during the quarter across all channels; total origination volume of $5.7 billion, +49% QoQ and +200% YoY 47% 47% 46% 42% 43%
Slide 15: Servicing – Q3'19 Performance
Servicing – Q3’19 Performance New Residential’s servicing portfolio continued to grow, driven by origination volume and additional transfers Q3’19 Servicing Activity UPB by Investor Servicing portfolio continues to grow Private Other GNMA Total UPB of $184 billion (+16% QoQ and +100% 18% 16% YoY
Slide 16: Q3'19 Portfolio Summary
Q3’19 Portfolio Summary @ New RESIDENTIAL Sy vesimtnr Cone
Slide 17: NRZ Investment Portfolio – Q3'19 Highlights & Subsequent Events
NRZ Investment Portfolio – Q3’19 Highlights & Subsequent Events Settled on ~$45 billion UPB of MSRs (that were agreed to in Q2’19) for ~$542 million from 10 different counterparties MSRs & MSR portfolio totaled $593 billion UPB as of September 30, 2019, compared to $576 billion as of June 30, 20
Slide 18: MSRs – Q3'19 Performance
MSRs – Q3'19 Performance New Residential’s MSR portfolio grew $17 billion UPB QoQ Q3’19 MSR Portfolio Activity MSR portfolio totaled $593 billion UPB as of September 30, 2019, compared to $576 billion as of June 30, 2019(1) (+3% QoQ) New Residential settled on ~$45 billion UPB of MSRs for ~$542
Slide 19: MSRs – Differentiation of NRZ's MSRs
MSRs – Differentiation of NRZ’s MSRs New Residential’s MSR portfolio benefits from differentiated characteristics as well as a platform of operating businesses and ancillary services NRZ’s Differentiated MSR Strategy(1) Our MSR portfolio composition is differentiated from others, given the greater
Slide 20: Call Rights – Q3'19 Performance
Call Rights – Q3'19 Performance Given lower rates in 2019, call volume has increased and we anticipate continued elevated volumes if rates remain low(1) Q3’19 Call Rights Portfolio Activity Successfully executed on our call rights strategy during Q3'19, calling 38 deals with collateral of ~$1.3 bi
Slide 21: Non-Agency Bond Portfolio – Q3'19 Performance
Non-Agency Bond Portfolio – Q3'19 Performance New Residential was active in delevering our bond portfolio as we capitalized on lower interest rates while our portfolio’s collateral performance also continued to improve Q3'19 Non-Agency Bond Portfolio Activity During the quarter, Non-Agency bond pr
Slide 22: Residential Loans – Q3'19 Performance
Residential Loans – Q3'19 Performance New Residential has been successful in improving the pay performance of its RPLs through special servicing Recent Residential Loan Portfolio Activity NRZ continues to provide multiple loss mitigation options to Improvement in Pay History for Sample RPL Pool bo
Slide 23: Securitization – Diversified and Robust Platform
Securitization – Diversified and Robust Platform Q3’19 was the most active quarter ever for New Residential’s securitization platform as we continued to focus on lowering cost of funds on outstanding debt ‘19 YTD Securitization Activity Completed seven securitizations during Q3’19 for a total of N
Slide 24: Our Focus
Our Focus(1) Our mission is to identify and invest in assets that offer attractive risk- Creating Value for Shareholders adjusted returns while also protecting our existing portfolio and generating long-term value for our investors We will continue to be opportunistic and disciplined where it aligns
Slide 25: Appendix
Appendix @ New RESIDENTIAL Ww Investment Core.
Slide 26: 1) Financial Statements
1) Financial Statements @ New RESIDENTIAL ww Inv 1 Core.
Slide 27: Condensed Consolidated Balance Sheets
Condensed Consolidated Balance Sheets As of 9/30/19 As of 6/30/19 ($000s, except per common share data) (Unaudited) (Unaudited) ASSETS Investments in: Excess mortgage servicing rights, at fair value $ 398,064 $ 411,537 Excess mortgage servicing rights, equity method investees, at fair value 132,259
Slide 28: Condensed Consolidated Income Statements
Condensed Consolidated Income Statements 3 Months Ended 3 Months Ended September 30, 2019 June 30, 2019 ($ 000s) (Unaudited) (Unaudited) Interest Income $ 448,127 $ 416,047 Interest Expense 245,902 228,004 Net Interest Income 202,225 188,043 Impairment 5,567 8,859 Other-than-temporary impairment (OT
Slide 29: 2) GAAP Reconciliation & Endnotes
2) GAAP Reconciliation & Endnotes
Slide 30: 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 common share data) 3Q 2019 2Q 2019 Reconciliation of Core Earnings Net
Slide 31: 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 32: Endnotes to Slides 3 and 4
Endnotes to Slides 3 and 4 Endnotes to Slide 3: Source: Company filings and data, and Bloomberg. Financial data as of September 30, 2019 unless otherwise noted. Market data as of September 30, 2019. (1) Refer to the condensed consolidated balance sheets on slide 26 of this presentation for additiona
Slide 33: Endnotes to Slide 5
Endnotes to Slide 5 Endnotes to Slide 5: Source: Company filings and data. Data as of September 30, 2019. (1) MSRs and Servicer Advances: Excess MSRs - Net Investment of $276 million includes (A) $530 million investment in 9/30/19 Legacy NRZ Excess MSRs, and (B) $17 million of restricted cash and ot
Slide 34: Endnotes to Slides 6 through 9
Endnotes to Slides 6 through 9 Endnotes to Slide 6: Source: Company filings and data, and Bloomberg. Financial and market data as of September 30, 2019 unless otherwise noted. (1) Based on management’s current views and estimates and actual results may vary materially. See “Disclaimers” at the begin
Slide 35: Endnotes to Slides 10 through 14
Endnotes to Slides 10 through 14 Endnotes to Slide 10: Source: Company filings and data as of September 30, 2019. (1) Includes $155 million of New Residential’s 7.50% Series A Cumulative Redeemable Preferred Stock and $283 million of New Residential’s 7.125% Series B Cumulative Redeemable Preferred
Slide 36: Endnotes to Slides 16 through 19
Endnotes to Slides 16 through 19 Endnotes to Slide 16: Source: Company filings and data. Financial data as of September 30, 2019 unless otherwise noted. (1) Includes Excess MSRs and Full MSRs. (2) Call rights UPB estimated as of September 30, 2019. The UPB of the loans relating to our call rights ma
Slide 37: Endnotes to Slides 20 through 23
Endnotes to Slides 20 through 23 Endnotes to Slide 20: Source: Company filings and data. Financial data as of September 30, 2019 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 38: Abbreviations
Abbreviations Abbreviations: This Presentation may include abbreviations, which have the following meanings: SI – Short Interest 60+ DQ – Percentage of loans that are delinquent by 60 days or more TSO – Total Shares Outstanding Age (mths) or Loan Age (mths) – Weighted average number of month
New Residential Investment — Q3 2019 Earnings Presentation on 6ix