Rithm Capital Corp. · NYSE:RITM
Rithm Capital — Q2 2021 Earnings Presentation
47 slides from Rithm Capital's earnings presentation, Jul 29, 2021
Slide 1: New Residential Investment Corp. Quarterly Supplement
New Residential Investment Corp. Quarterly Supplement S EC O N 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: 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 $3.7 Billion in Dividends Paid Since Inception(2)(3) ✓ $6.1 Billion Net Equity(4) ✓ 92% Total Shareholder Return Since Inc
Slide 4: New Residential – How We Set Ourselves Apart
New Residential – How We Set Ourselves Apart We believe the market continues to understate the full value of New Residential Leading Investment Ability to Manager with Organically Create New Complementary Quality Investments Operating Businesses MSR Portfolio Diversified Portfolio of with Significan
Slide 5: Q2'21 Company and Financial Highlights
Q2’21 Company and Financial Highlights GAAP Net Income: Book Value: $121.3 Million / $0.26 per Diluted Share(1) $11.27 per Common Share as of June 30, 2021 $107.7 Million Pre-Tax Income (“PTI”) from Origination and Servicing(2) • (0.7%) Book Value per Common Share from March 31, 2020 Core Earnings:
Slide 6: Book Value per Share Summary
Book Value per Share Summary Q2’21 book value per share was $11.43 before impact from common equity raise; $11.27 inclusive of the impact Per Share (1) QoQ% Change Ending Q1'21 BV $11.35 Origination & Servicing Segment Net Income(2) $0.23 Investment Portfolio and Corporate Segment Net Income (3) $0.
Slide 7: Delivering Results: Q2'21 and Beyond Highlights
Delivering Results: Q2’21 and Beyond Highlights 1 Further positioned NRZ to perform in 4 Improved recapture rates to help drive any rate environment returns Announced agreement to acquire Caliber, expected to Refinance recapture increased to 40.7% in Q2’21 increase asset generation ability and build
Slide 8: Acquisition of Caliber
Acquisition of Caliber(1) Detailed endnotes are included in the Appendix. NEW RESIDENTIAL Q2 2021 8
Slide 9: Financing of Caliber Acquisition
Financing of Caliber Acquisition(1) NRZ expects to have $1.1 billion of available cash & liquidity after funding the acquisition of Caliber ◆ NRZ is acquiring Caliber for an all-cash purchase price of $1.675 billion (2) ◆ NRZ intends to use the following to fund the acquisition of Caliber ◆ NRZ avai
Slide 10: Scaled and Growing Mortgage Platform
Scaled and Growing Mortgage Platform(1) Combined platform expected to have greater production diversification, scale and customer opportunity Leader in Mortgage Production Strengthens and Diversifies Origination Mix Origination Fundings ($bn) Origination Channel Mix $173 11% $91 26% 38% 62% $51 18%
Slide 11: Together, NRZ, Newrez and Caliber have… 3.2 million Customers
Combination Propels Us Forward(1) Combined platform will have multiple options to access customers Together, NRZ, Newrez and Caliber have… 700 Direct to 5,000+ Consumer Wholesale Broker Loan Officers Partners 3.2 million Distinct ~540+ 60+ Customers in Retail Branches Third-Party NRZ’s Full MSR Serv
Slide 12: Synergies from Combination
Synergies from Combination(1) We target achieving meaningful financial benefits from various synergies as a result of the acquisition of Caliber 1 2 3 4 Revenue Cost Capital Strategy Reduced Expanded Increased Improved fixed and variable product and volumes cost of funds costs ancillary offerings En
Slide 13: Market Share Opportunity
Market Share Opportunity(1) Combination of platforms is expected to have ample ability to capture further market share …and expectations are that volumes will remain The U.S. mortgage market is highly fragmented…(2) elevated(3) MBA Mortgage Finance Actuals & Estimates ($bn) $3,828 $4,000 $3,574 Top
Slide 14: Unmatched Franchise Ability and Value
Unmatched Franchise Ability and Value Multiple distribution channels, products and access to NRZ’s balance sheet Top 5 Non-Bank Mortgage Lenders(1) 1 2 3 4 5 (2) DTC (3) JV / Retail Wholesale Correspondent (4) (4) Non-QM Products Performing Servicing Special Servicing Ancillary Services REIT Balance
Slide 15: Future State Competitive Advantage: Our Winning Position
Future State Competitive Advantage: Our Winning Position Access to capital and scale matters End to End Mortgage Local and National Footprint Platform ✓ Broad footprint with purchase ✓ Involved throughout the driven abilities entire mortgage journey ✓ Distribution reaches our (including ancillary bu
Slide 16: Investment Portfolio
Investment Portfolio NEW RESIDENTIAL Q2 2021 16
Slide 17: NRZ's Investment Portfolio Drives Returns
NRZ’s Investment Portfolio Drives Returns NRZ’s access to assets differentiates us from the pack ✓ Organic ability to create assets with leading in-house mortgage originator Leading Mortgage ✓ Shrinking GSE footprint creates additional PLS opportunities Originator ✓ Ability to expand or contract MSR
Slide 18: Investment Activity
Investment Activity The opportunity set within NRZ’s investment portfolio continued to expand in Q2’21 and beyond Investment Portfolio(3) Q2’21 and Beyond Activity $34.3 ◆ Called non-Agency collateral of $666 million UPB, the highest quarterly call population since $29.2 Q4’19(1) $27.9 $26.4 ◆ Purch
Slide 19: MSRs
MSRs NRZ owns a hard-to-replicate portfolio of MSRs with significant earnings power Q2’21 MSR Portfolio Activity and Outlook ◆ MSR portfolio totaled $489 billion UPB as of June 30, 2021(1) (5% QoQ decline in MSR UPB) ◆ 100% of MSR financings are non-daily mark to market facilities* ◆ Newly originate
Slide 20: MSRs: Financing Summary
MSRs: Financing Summary Our MSR financing has strengthened from continued capital markets executions MSR Financing Summary Track Record of MSR Securitizations ◆ We continue to see improvement in the cost of MSR New Residential has executed multiple offerings across funding Freddie Mac, Fannie Mae an
Slide 21: Origination Platform Offsets MSR Run-Off
Origination Platform Offsets MSR Run-Off Growth in origination and recapture balances MSR amortization ◆ Our growing origination platform acts as a hedge for our MSR portfolio ◆ As Newrez’s origination ability has grown and recapture has also increased, the gap between MSR run-off and origination ha
Slide 22: Call Rights: Activity Remains Robust
Call Rights: Activity Remains Robust Call volumes in Q2’21 reached their highest level since Q4’19 Q2’21 Call Rights Portfolio Activity and Outlook ◆ Call activity continued to improve in Q2’21. We expect call activity to pick up as advance balances decline and delinquencies improve(1) ◆ Called 26 d
Slide 23: Loans: Bullish on Investment Opportunities
Loans: Bullish on Investment Opportunities Organic access to steady pipeline of income generating assets within our loan portfolio Targeted NRZ Portfolio Lifetime Net Market Trends NRZ Advantage(2) Size ($bn) Yield(1) Performing & 15-20% $1.0bn ◆ High demand due to ◆ NRZ owns call rights that contro
Slide 24: SFR: Further Expansion into Single Family Rental
SFR: Further Expansion into Single Family Rental NRZ intends to grow SFR exposure to $5bn of homes through new operating company(1) NRZ’s SFR Portfolio NRZ Thesis & Positioning ◆ Opportunity to address the growing supply-demand Portfolio Including Pipeline ◆ 1,400 units (75% QoQ increase) imbalance
Slide 25: Servicer Advances: Balances Remain Low
Servicer Advances: Balances Remain Low We continue to have significant excess servicer advance capacity(1) Advance Balances as of June 30, 2021 ◆ Servicer advance balances as of June 30, 2021 decreased to $3.2 billion from $3.4 billion as of March 31, 2021 ◆ Outstanding advance balances are financed
Slide 26: Newrez Q2'21 Performance
Newrez Q2’21 Performance NEW RESIDENTIAL Q2 2021 26
Slide 27: Newrez Origination: Q2'21 Activity and Business Highlights
Newrez Origination: Q2’21 Activity and Business Highlights While overall volumes were impacted by higher rates in Q2’21, DTC, JV and Wholesale channels continued to perform well $20.5 billion $40 to $45 billion(2) $75.4 million(1) $23.5 billion Q2’21 PT Adj. Lock Q3’21E Newrez and Q2’21 Origination
Slide 28: Newrez Recapture: Continued Improvement
Newrez Recapture: Continued Improvement During Q2’21 we continued to see strong improvement in recapture performance Higher Recapture Achieved by… Newrez Recapture Summary(1) P Strong pull-through rates 69.0% 63.3% 58.0% PFaster turn times 40.7% 44.4% 35.6% PSlowdown in prepayment speeds 32.0% 28.2%
Slide 29: Newrez Origination: Q2'21 Highlights by Channel
Newrez Origination: Q2’21 Highlights by Channel We continued to expand our channel capabilities during Q2’21 Direct to Consumer Joint Venture ◆ Return to normalization with purchase ◆ Record quarterly funding volume of $6.4 billion transactions representing approximately 78% of (+13% QoQ) channel vo
Slide 30: Newrez Servicing: Q2'21 Activity and Business Highlights
Newrez Servicing: Q2’21 Activity and Business Highlights Industry leading servicer with financial and operational strength $465 - $475 billion UPB(1) $32.3 million $305.9 billion UPB ~1.7 million Q3’21E Newrez & Caliber Q2’21 Servicing PTI Q2’21 Servicing Portfolio Customers Servicing Portfolio Serv
Slide 31: Leading Special Servicer Helps Create Positive Outcomes for Homeowners
Leading Special Servicer Helps Create Positive Outcomes for Homeowners Committed to helping homeowners and clients navigate COVID-19 landscape Migration of COVID-19 Impacted Homeowners ◆ Our servicing team at NewRez and SMS has supported homeowners and provided solutions throughout Cumulative and Ac
Slide 32: Appendix
Appendix NEW RESIDENTIAL Q2 2021 32
Slide 33: Condensed Consolidated Balance Sheets
Condensed Consolidated Balance Sheets (dollars in thousands, except per share data) As of 6/30/21 As of 3/31/21 (Unaudited) (Unaudited) ASSETS Excess mortgage servicing rights assets, at fair value $ 378,488 $ 402,454 Mortgage servicing rights, at fair value 3,800,593 4,023,559 Mortgage servicing ri
Slide 34: Condensed Consolidated Income Statements
Condensed Consolidated Income Statements Three Months Ended June 30, March 31, Unaudited (dollars in thousands) 2021 2021 Revenues Interest income $ 253,677 $ 253,735 Servicing revenue, net of change in fair value (86,511) 513,548 Gain on originated mortgage loans, held-for-sale, net 286,885 403,434
Slide 35: Net Income by Segment (Q2'21 and Q1'21)
Net Income by Segment (Q2’21 and Q1’21) Servicing and Origination Residential Securities and Loans Residential MSRs & Servicer Securities & Call Residential Corporate & Quarter Ended June 30, 2021 Origination Servicing Advances Rights Loans Other Total Interest income $ 31,262 $ 251 $ 65,980 $ 97,96
Slide 36: Servicing and Origination
Servicing and Origination Q2'20 Q3'20 Q4'20 FY'20 Q1'21 Q2'21 Servicing Servicing Portfolio (UPB $bn) NewRez / NRZ $174.8 $188.2 $204.4 $204.4 $211.8 $214.2 Third Party / SMS $102.8 $99.0 $93.3 $93.3 $92.8 $91.7 Total UPB ($bn) $277.6 $287.2 $297.8 $297.8 $304.6 $305.9 Annualized Direct Cost To Serv
Slide 37: Mortgage Servicing Rights
Mortgage Servicing Rights MSR Financing (in thousands) MSRs Receivables Total Balance as of March 31, 2021 $ 4,023,559 $ 1,021,780 $ 5,045,339 Purchases, net 3,134 - 3,134 Transfers - - - Originations 207,663 - 207,663 Proceeds from sales (32,675) (2,427) (35,102) Change in fair value due to: Realiz
Slide 38: 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) Q2 2021 Q1 2021 Reconciliation of core earnings Net income att
Slide 39: 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 40: Endnotes
Endnotes NEW RESIDENTIAL Q2 2021 40
Slide 41: Endnotes to Slide 3
Endnotes to Slide 3 Endnotes to Slide 3: Source: Company filings and data, and Bloomberg. Financial and market data as of June 30, 2021 unless otherwise noted. (1) “Investment portfolio” assets refers to total assets less cash, restricted cash, other assets, trades receivable, goodwill and mortgage
Slide 42: Endnotes to Slide 5
Endnotes to Slide 5 Endnotes to Slide 5: Source: Company filings and data. Financial data as of June 30, 2021 unless otherwise noted. (1) Per common share calculations of GAAP Net Income and Core Earnings are based on 472,729,245 weighted average diluted common shares during the quarter ended June 3
Slide 43: Endnotes to Slides 7 through 13
Endnotes to Slides 7 through 13 Endnotes to Slide 7: Source: Company filings and data, and Bloomberg. Financial and market data as of June 30, 2021 unless otherwise noted. (1) Based on management’s current views and estimates, and actual results may vary materially. See “Disclaimers” at the beginnin
Slide 44: Endnotes to Slides 14 through 21
Endnotes to Slides 14 through 21 Endnotes to Slide 14: (1) Represents Top 5 non-bank mortgage lenders based on Q1’21 funded volumes. Source: Inside Mortgage Finance. (2) Represents Newrez and Caliber combined platform based on anticipated closing of acquisition of Caliber in August 2021. Based on ma
Slide 45: Endnotes to Slides 22 through 27
Endnotes to Slides 22 through 27 Endnotes to Slide 22: Source: Company filings and data. Financial data as of June 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 Presentation f
Slide 46: Endnotes to Slides 28 through 31
Endnotes to Slides 28 through 31 Endnotes to Slide 28: Source: Company filings and data. Chart represents Q2’21 data through May 30, 2021. (1) “Refinance recapture” is defined as total unpaid principal balance, or UPB, of our customers that originate a mortgage with us divided by total UPB of custom
Slide 47: 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 ▪ Proj. Future Cash Flows – Future cash f