Rithm Capital Corp. · NYSE:RITM
Rithm Capital — New Residential Investment — Q4 2019 Earnings Presentation
38 slides from Rithm Capital's earnings presentation, Feb 6, 2020
Slide 1: New Residential Investment Corp. Quarterly Supplement
New Residential Investment Corp. Quarterly Supplement Fourth Quarter and Full Year 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: New Residential Overview
New Residential Overview @ New RESIDENTIAL ww Inv 1 Core.
Slide 4: New Residential Investment Corp.
New Residential Investment Corp. New Residential is a leading provider of capital and services to the mortgage and financial services industries with a proven track record of returns and performance Who We Are P Diversified and Balanced Portfolio P Robust Mortgage Platform P Proven Track Record of P
Slide 5: Q4 2019 Company and Financial Highlights
Q4 2019 Company and Financial Highlights Company and Financial Highlights ▪ GAAP Net Income of $211.8 Million, or $0.51 per Diluted Share(1) ▪ Core Earnings of $255.4 Million, or $0.61 per Diluted Share(1)(2) ▪ Fourth Quarter Common Stock Dividend of $0.50 per Common Share ▪ 12.4% dividend yield as
Slide 6: 2019 Corporate Highlights
2019 Corporate Highlights New Residential made progress on a number of key initiatives in 2019, strengthening our overall positioning for our shareholders Acquisitions and Investments Securitization Platform 2019 FY Performance +27.4% Total Shareholder Return(1) Acquisition of Strategic Strategic As
Slide 7: New Residential Portfolio Summary
New Residential Portfolio Summary New Residential Portfolio Overview(1) New Residential Portfolio Composition Over Time(2) $8.0 Net Equity $328 million $7.2 Origination % of Portfolio 5% $7.0 $6.1 $6.0 Net Equity $181 million Servicing % of Portfolio 3% $4.9 $5.0 Net Equity ($ billion) Net Equity $3
Slide 8: Integrated Mortgage Platform
Integrated Mortgage Platform(1) New Residential’s portfolio strategically combines investment management with supporting origination and servicing Investment Management ▪ MSR Related Investments ▪ Call Rights ▪ Residential Mortgage Loans ▪ Consumer Loans ▪ Residential Securities ▪ Other Opportunisti
Slide 9: Book Value – Illustrative Sum of the Parts
Book Value – Illustrative Sum of the Parts(1) The opportunistic investments of our operating companies are expected to lead to a higher potential implied book value(1) 12/31/20E 12/31/19A Illustrative Potential Book Value $16.21 Implied Book Value $18.90 $19.68 $20.46 $21.24 Per Share Per Share (3)
Slide 10: NRZ’s Focus on Driving Shareholder Value Since Inception
NRZ’s Focus on Driving Shareholder Value Since Inception New Residential has been successful throughout its history in driving shareholder value in a variety of ways ▪ Dividends – NRZ has delivered $0.50 12.4% ~$3.3 bn impressive dividends to shareholders Quarterly common Dividend Dividends declared
Slide 11: Book Value & Economic Return Performance Over Time
Book Value & Economic Return Performance Over Time New Residential has successfully grown and protected book value, while delivering strong economic return over time Since inception, New Residential has been focused on protecting the value of its assets NRZ Economic Return Relative to Peers Over Tim
Slide 12: Portfolio Performance
Portfolio Performance @ New RESIDENTIAL ww Inv 1 Core.
Slide 13: NRZ Portfolio – Q4’19 Highlights & Subsequent Events
NRZ Portfolio – Q4’19 Highlights & Subsequent Events Origination ▪ Total origination volume of $10.6 billion UPB (+85% QoQ and +412% YoY) and Servicing ▪ Total servicing UPB of $219.4 billion (+19% QoQ and +101% YoY) ▪ Settled on $73 billion UPB of MSRs for $668 million of equity from nine counterpa
Slide 14: Originations
Originations Originations activity across all channels increased in Q4’19; growth drivers included market share expansion and acquisition of Ditech origination platform Originations Activity 2020 Focus & Outlook(3) ▪ Total Q4’19 origination volume of $10.6bn UPB (up +85% ▪ Estimated FY’20 originatio
Slide 15: Servicing
Servicing Servicing activity through NewRez and Shellpoint Mortgage Servicing (“SMS”) continued to grow while cost to service declined Servicing Activity 2020 Focus & Outlook(2) ▪ Total servicing UPB of $219.4bn (+19% QoQ and +101% ▪ Estimated FY’20 servicing UPB of ~$350bn YoY) ▪ Focus for servicin
Slide 16: MSRs
MSRs New Residential’s QoQ MSR portfolio growth was driven by the addition of MSRs from Ditech, originated loans from NewRez and other purchases MSR Portfolio Activity 2020 Focus & Outlook(2) ▪ Q4’19 Activity - MSR portfolio totaled $630bn UPB as of ▪ Continue to see value in MSRs with unlevered yie
Slide 17: 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 Building Blocks of NRZ’s NRZ MSR Population Compared to Industry Differentiated MSR Portfolio & Strategy(1) ✓ Robust
Slide 18: Call Rights
Call Rights New Residential called 140 deals with an aggregate collateral balance of $4.5 billion UPB during 2019 Call Rights Portfolio Activity 2020 Focus and Outlook(2) ▪ Q4’19 Activity ▪ Large callable population ▪ Successfully executed on our call rights strategy, calling ▪ New Residential contr
Slide 19: Non-Agency Bonds
Non-Agency Bonds We actively manage our bond portfolio to ensure alignment with NRZ’s overall strategy, adding bonds during the quarter that were accretive to that strategy Non-Agency Bond Portfolio Activity 2020 Focus & Outlook(3) ▪ Q4’19 Activity ▪ We expect spreads will continue to tighten in 202
Slide 20: Residential Loans
Residential Loans New Residential successfully executed on its residential loan portfolio strategy, particularly as it related to reperforming collateral, non-QM loans and securitization activity Residential Loan Portfolio Activity 2020 Focus & Outlook(1) ▪ Q4’19 Activity ▪ Build on strategy of acqu
Slide 21: Residential Loans – Strategy Overview
Residential Loans – Strategy Overview New Residential’s residential loan strategy benefits from investment management, capital markets and special servicing expertise 1 Improvement in Pay History for Sample Purchase Re- ▪ New Residential buys re-performing loans (loans with RPL Pool Since Acquisitio
Slide 22: Securitization – Diversified and Robust Platform
Securitization – Diversified and Robust Platform New Residential was a prolific issuer during 2019, completing 21 securitizations with collateral of $11.1 billion UPB Securitization Activity 2020 Focus(3) ▪ Q4’19 Activity - Completed six securitizations with collateral of ▪ We anticipate robust secu
Slide 23: Our Focus
Our Focus(1) Our mission is to generate attractive risk-adjusted returns across Creating Value for Shareholders all interest rate environments through our portfolio of investments and operating businesses We will continue to be opportunistic and disciplined and execute Opportunistic Investing transa
Slide 24: 1) Financial Statements
1) Financial Statements @ New RESIDENTIAL ww Inv 1 Core.
Slide 25: Condensed Consolidated Balance Sheets
Condensed Consolidated Balance Sheets As of 12/31/19 As of 9/30/19 ($000s, except per share data) (Unaudited) (Unaudited) ASSETS Investments in: Excess mortgage servicing rights, at fair value $ 379,747 $ 398,064 Excess mortgage servicing rights, equity method investees, at fair value 125,596 132,25
Slide 26: Condensed Consolidated Income Statements
Condensed Consolidated Income Statements 3 Months Ended 3 Months Ended 12 Months Ended 12 Months Ended December 31, 2019 September 30, 2019 December 31, 2019 December 31, 2018 ($ 000s) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Interest Income $ 463,089 $ 448,127 $ 1,766,130 $ 1,664,223 Interes
Slide 27: Net Income by Segment (Q3’19 and Q4’19)
Net Income by Segment (Q3’19 and Q4’19) Servicing and Originations Residential Securities and Loans MSRs & Residential Servicer Securities & Residential Corporate Originations Servicing Advances Call Rights Loans & Other Total Quarter Ended December 31, 2019 Interest income $ 17,321 $ 8,665 $ 151,75
Slide 28: 2) GAAP Reconciliation & Endnotes
2) GAAP Reconciliation & Endnotes
Slide 29: 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) Q4 2019 Q3 2019 FY 2019 FY 2018 Reconciliation of Core Ear
Slide 30: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Core Earnings ▪ We have five 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, (iv) our re
Slide 31: Endnotes to Slides
Endnotes to Slides 3 Endnotes to Slide 3: Source: Company filings and data, and Bloomberg. Financial and market data as of December 31, 2019 unless otherwise noted. (1) Refer to the condensed consolidated balance sheets on slide 24 of this presentation for additional information. (2) Dividend yield
Slide 32: Endnotes to Slide 4
Endnotes to Slide 4 Endnotes to Slide 4: Source: Company filings and data, and Bloomberg. Financial and market data as of December 31, 2019 unless otherwise noted. (1) Per common share calculations of GAAP Net Income and Core Earnings are based on 415,673,185 weighted average diluted common shares d
Slide 33: Endnotes to Slide 5
Endnotes to Slide 5 Endnotes to Slide 5: Source: Company filings and data, and Bloomberg. Financial and market data as of December 31, 2019 unless otherwise noted. (1) FY’19 Total Shareholder Return represents NRZ share price appreciation from December 31, 2018 through December 31, 2019 plus common
Slide 34: Endnotes to Slide 6
Endnotes to Slide 6 Endnotes to Slide 6: (1) Percentages are based on $7.2 billion portfolio which includes corporate net equity of ($227) million. Origination: Net Investment of $328 million includes $1,761 million of total assets, net of debt and other liabilities of $1,422 million and non-control
Slide 35: Endnotes to Slides 7 through 10
Endnotes to Slides 7 through 10 Endnotes to Slide 7 (1) Estimates and analysis on this slide are 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. Endno
Slide 36: Endnotes to Slides 12 through 16
Endnotes to Slides 12 through 16 Endnotes to Slide 12 Source: Company filings and data as of December 31, 2019 unless otherwise noted. (1) Includes Excess MSRs and Full MSRs. (2) Call rights UPB estimated as of December 31, 2019. The UPB of the loans relating to our call rights may be materially low
Slide 37: Endnotes to Slides 17 through 22
Endnotes to Slides 17 through 22 Endnotes to Slide 17 Source: Company filings and data. Financial data as of December 31, 2019 unless otherwise noted. (1) Call rights UPB estimated as of December 31, 2019. The UPB of the loans relating to our call rights may be materially lower than the estimates in
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 — Q4 2019 Earnings Presentation on 6ix