Business Wire | Nov 2, 2021 06:30AM EDT

New Residential Investment Corp. Announces Third Quarter 2021 Results

Nov. 02, 2021

NEW YORK--(BUSINESS WIRE)--Nov. 02, 2021--New Residential Investment Corp. (NYSE: NRZ; "New Residential" or the "Company") today reported the following information for the third quarter ended September 30, 2021:

Third Quarter 2021 Financial Highlights

* GAAP net income of $146.1 million, or $0.30 per diluted common share(1) * Core earnings of $209.9 million, or $0.44 per diluted common share(1)(2) * Common dividend of $116.6 million, or $0.25 per common share(1) * Book value per common share of $11.35(1) * $1.4 billion of cash, for $1.9 billion of total liquidity(3)

Q3 2021 Q2 2021

Summary Operating Results:

GAAP Net Income per Diluted Common Share $ 0.30 $ 0.26 ^(1)

GAAP Net Income $ 146.1 million $ 121.3 million



Non-GAAP Results:

Core Earnings per Diluted Common Share^ $ 0.44 $ 0.31 (1)

Core Earnings^(2) $ 209.9 million $ 146.6 million



NRZ Common Dividend:

Common Dividend per Share^(1) $ 0.25 $ 0.20

Common Dividend $ 116.6 million $ 93.3 million

"Our performance in the third quarter demonstrated the strength of our overall platform across complementary strategies," said Michael Nierenberg, Chairman, Chief Executive Officer and President of New Residential. "Third quarter earnings were supported by the addition of the Caliber Home Loans, Inc. platform, strength in our investment portfolio, slowing MSR amortization and higher recapture. Over the last few years, we have evolved into a true asset creator, and, with the recently announced agreement to acquire Genesis Capital LLC, we plan to further our ability to create, retain and manage strong assets for our balance sheet. We believe our comprehensive strategy of combining investment management expertise with complementary operating companies will continue to drive earnings for our shareholders."

Nierenberg continued, "With the closing of the Caliber acquisition in August, the integration of the Caliber and Newrez mortgage platforms is well underway. We are thrilled to be working together as a united group to drive positive outcomes for borrowers and have already made significant progress in combining our teams, strategies and technologies to further position ourselves as a leader within the industry. We continue to believe that the combination of these two companies will allow our business to increase scale, efficiency, recapture, servicing and origination leadership."

Third Quarter 2021 Company Highlights:

* Corporate Highlights Closed acquisition of Caliber Home Loans, Inc. ("Caliber") New Residential completed its previously announced acquisition of Caliber, a leading mortgage originator and servicer. New Residential's results for the third quarter include the financial results of Caliber beginning on August 23, 2021 through September 30, 2021 Raised $465 million in gross proceeds in an 18.6 million share preferred stock offering

* Origination Segment pre-tax income of $177.5 million (up 136% QoQ and down 43% YoY)(4) Quarterly origination funded production of $34.5 billion in unpaid principal balance ("UPB") (up 47% QoQ and up 91% YoY) Reported quarterly funded production includes stub period of Q3'21 origination production from Caliber Total gain on sale margin of 1.61% for the third quarter of 2021 compared to 1.31% for the second quarter of 2021 Gain on sale margin increased with additional benefit from channel diversification and the combination of Caliber and Newrez LLC ("Newrez") platforms

* Servicing Servicing portfolio grew to $476 billion in UPB (up 56% QoQ and up 66% YoY) driven by the addition of mortgage servicing rights ("MSRs") from the Caliber acquisition during the quarter $156 billion UPB of Full MSRs were added from Caliber

* MSRs and Servicer Advances MSR portfolio totaled approximately $635 billion UPB as of September 30, 2021 compared to $489 billion UPB as of June 30, 2021(5) Servicer advance balances of $3.2 billion as of September 30, 2021, effectively unchanged from June 30, 2021

* Residential Securities and Call Rights Sold $4.5 billion (net face value) of Agency securities Called non-agency collateral of $636 million UPB(6)

* Residential Loans Sold $850 million (face value) of residential loans Priced two securitizations (one investor loan and one Non-QM) representing approximately $600 million UPB of collateral Acquired $91 million of early buyout ("EBO") loans Acquired $570 million of Non-QM and Investor Loans Grew single-family rental portfolio by approximately 725 units

* Financing and Leverage Overall leverage of 2.3x, down from 3.5x at June 30, 2021(7) Leverage excluding Agency securities of 1.0x, down from 1.1x at June 30, 2021

* Fourth Quarter 2021 Commentary(8) New Residential entered into a definitive agreement with affiliates of The Goldman Sachs Group, Inc. to acquire Genesis Capital LLC, a leading business purpose lender that provides innovative solutions to developers of new construction, fix and flip and rental hold projects, and acquire a related portfolio of loans Estimated Newrez and Caliber Q4'21 Funded Origination Volume of approximately $35 billion to $40 billion UPB(9) Estimated Newrez and Caliber Q4'21 Servicing Portfolio UPB of approximately $480 billion to $490 billion UPB(9)

Per common share calculations for both GAAP Net Income and Core Earnings are based on 482,282,695 and 472,729,245 weighted average diluted shares(1) for the quarter ended September 30, 2021 and June 30, 2021, respectively. Per share calculations of both Common Dividend and Book Value are based on 466,579,920 basic common shares outstanding at both September 30, 2021 and June 30, 2021.



Core Earnings is a non-GAAP financial measure. For a reconciliation of(2) Core Earnings to GAAP Net Income, as well as an explanation of this measure, please refer to Non-GAAP Measures and Reconciliation to GAAP Net Income below.



(3) Total liquidity includes cash and available undrawn financing.



(4) Includes non-controlling interests.



(5) Includes excess and full MSRs.



Call rights UPB estimated as of September 30, 2021. The UPB of the loans relating to our call rights may be materially lower than the estimates in this release, and there can be no assurance that we will be able to execute on this pipeline of callable deals in the near term, on the timeline presented above, or at all, or that callable deals will be economically favorable. The economic returns from this strategy could be adversely affected by a rise in interest rates and are contingent on the(6) level of delinquencies and outstanding advances in each transaction, fair market value of the related collateral and other economic factors and market conditions. We may become subject to claims and legal proceedings, including purported class-actions, in the ordinary course of our business, challenging our right to exercise these call rights and, as a result, we may not be able to exercise such rights on favorable terms or at all. Call rights are usually exercisable when current loan balances in a related portfolio are equal to, or lower than, 10% of their original balance.



Represents recourse leverage. Excludes non-recourse leverage, including(7) outstanding consumer debt, servicer advance debt, SAFT 2013-1 and MDST Trusts mortgage backed securities issued, and Shellpoint non-agency RMBS.



(8) Based on management's current views and estimates, and actual results may vary materially.



Q4'21 estimates for combined Newrez and Caliber origination activity based(9) upon estimated full quarter production volumes for the fourth quarter 2021. Q4'21 estimates for combined Newrez and Caliber servicing portfolio based on quarter-end (12/31/21) estimated portfolio size.

ADDITIONAL INFORMATION

For additional information that management believes to be useful for investors, please refer to the latest presentation posted on the Investor Relations section of the Company's website, www.newresi.com. For consolidated investment portfolio information, please refer to the Company's most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K, which are available on the Company's website, www.newresi.com.

EARNINGS CONFERENCE CALL

New Residential's management will host a conference call on Tuesday, November 2, 2021 at 8:00 A.M. Eastern Time. A copy of the earnings release will be posted to the Investor Relations section of New Residential's website, www.newresi.com.

All interested parties are welcome to participate on the live call. The conference call may be accessed by dialing 1-833-974-2382 (from within the U.S.) or 1-412-317-5787 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference "New Residential Third Quarter 2021 Earnings Call." In addition, participants are encouraged to pre-register for the conference call at https://dpregister.com/sreg/10160952/ee52599f38.

A simultaneous webcast of the conference call will be available to the public on a listen-only basis at www.newresi.com. Please allow extra time prior to the call to visit the website and download any necessary software required to listen to the internet broadcast.

A telephonic replay of the conference call will also be available two hours following the call's completion through 11:59 P.M. Eastern Time on Tuesday, November 9, 2021 by dialing 1-877-344-7529 (from within the U.S.) or 1-412-317-0088 (from outside of the U.S.); please reference access code "10160952."

Consolidated Statements of Income (Unaudited)

($ in thousands, except share and per share data)

Three Months Ended Nine Months Ended

September 30, September 30, September 30, June 30, 2021 QoQ Change YoY Change 2021 2021 2020

Revenues

Servicing feerevenue, netand interest $ 398,645 $ 388,858 $ 1,168,431 $ 1,390,042 $ 9,787 $ (221,611 )income fromMSR financingreceivables

Change in fairvalue of MSRsand MSRfinancingreceivables(including (195,623 ) (417,983 ) (421,332 ) (1,731,378 ) 222,360 1,310,046 amortizationof $(287,318),$(297,778), $(924,766) and$(1,135,515),respectively)

Servicing 203,022 (29,125 ) 747,099 (341,336 ) 232,147 1,088,435 revenue, net

Interest 190,633 201,762 593,342 622,224 (11,129 ) (28,882 )income

Gain onoriginatedmortgage 566,761 286,885 1,257,094 966,813 279,876 290,281 loans,held-for-sale,net

960,416 459,522 2,597,535 1,247,701 500,894 1,349,834

Expenses

Interest 129,928 106,539 355,372 463,786 23,389 (108,414 )expense

General andadministrative 245,071 205,668 647,244 546,939 39,403 100,305 expenses

Compensation 324,545 194,730 717,919 412,402 129,815 305,517 and benefits

Management fee 24,315 23,677 70,154 66,682 638 3,472 to affiliate

723,859 530,614 1,790,689 1,489,809 193,245 300,880

Other Income (Loss)

Change in fairvalue of 11,112 229,900 1,224 (123,314 ) (218,788 ) 124,538 investments

Gain (loss) onsettlement of (98,317 ) (78,611 ) (188,919 ) (968,995 ) (19,706 ) 780,076 investments,net

Other income 59,266 30,044 79,696 (39,766 ) 29,222 119,462 (loss), net

(27,939 ) 181,333 (107,999 ) (1,132,075 ) (209,272 ) 1,024,076

Impairment

Provision(reversal) for (2,370 ) (1,756 ) (5,020 ) 15,166 (614 ) (20,186 )credit losseson securities

Valuation andcredit lossprovision(reversal) on 8,748 (32,652 ) (42,617 ) 118,504 41,400 (161,121 )loans and realestate owned(REO)

6,378 (34,408 ) (47,637 ) 133,670 40,786 (181,307 )

Income (Loss)Before Income 202,240 144,649 746,484 (1,507,853 ) 57,591 2,254,337 Taxes

Income taxexpense 31,559 (1,077 ) 128,741 (48,647 ) 32,636 177,388 (benefit)

Net Income $ 170,681 $ 145,726 $ 617,743 $ (1,459,206 ) $ 24,955 $ 2,076,949 (Loss)

Noncontrollinginterests inincome (loss) 9,001 10,053 28,448 34,118 (1,052 ) (5,670 )ofconsolidatedsubsidiaries

Dividends onpreferred 15,533 14,358 44,249 39,938 1,175 4,311 stock

Net Income(Loss)Attributable $ 146,147 $ 121,315 $ 545,046 $ (1,533,262 ) $ 24,832 $ 2,078,308 to CommonStockholders



Net Income(Loss) Per Share ofCommon Stock

Basic $ 0.31 $ 0.27 $ 1.22 $ (3.69 )

Diluted $ 0.30 $ 0.26 $ 1.18 $ (3.69 )

WeightedAverage Numberof Shares of Common StockOutstanding

Basic 466,579,920 456,312,486 446,085,657 415,665,441

Diluted 482,282,695 472,729,245 461,694,481 415,665,441



DividendsDeclared per $ 0.25 $ 0.20 $ 0.65 $ 0.30 Share ofCommon Stock

Consolidated Balance Sheets

($ in thousands, except share data)

September 30,

2021

(Unaudited)

December 31,

2020

Assets

Excess mortgage servicing rights assets, at fair value

$

359,288

$

410,855

Mortgage servicing rights and mortgage servicing rights financing receivables, at fair value

6,565,267

4,585,841

Servicer advance investments, at fair value

472,004

538,056

Real estate and other securities

9,973,795

14,244,558

Residential loans and variable interest entity consumer loans held-for-investment, at fair value

1,142,807

1,359,754

Residential mortgage loans, held-for-sale ($13,972,557 and $4,705,816 at fair value, respectively)

14,117,300

5,215,703

Residential mortgage loans subject to repurchase

1,826,620

1,452,005

Cash and cash equivalents

1,366,678

944,854

Restricted cash

194,745

135,619

Servicer advances receivable

2,782,622

3,002,267

Receivable for investments sold

-

4,180

Other assets

2,802,989

1,358,422

$

41,604,115

$

33,252,114

Liabilities and Equity

Liabilities

Secured financing agreements

$

22,759,985

$

17,547,680

Secured notes and bonds payable ($798,198 and $1,662,852 at fair value, respectively)

8,248,092

7,644,195

Residential mortgage loan repurchase liability

1,826,620

1,452,005

Unsecured senior notes, net of issuance costs

542,849

541,516

Payable for investments purchased

-

154

Due to affiliates

8,895

9,450

Dividends payable

124,999

90,128

Accrued expenses and other liabilities

1,465,562

537,302

34,977,002

27,822,430

Commitments and Contingencies

Equity

Preferred stock, $0.01 par value, 100,000,000 shares authorized, 52,210,000 and 33,610,000 issued and outstanding, $1,305,250 and $840,250 aggregate liquidation preference, respectively

1,262,498

812,992

Common stock, $0.01 par value, 2,000,000,000 shares authorized, 466,579,920 and 414,744,518 issued and outstanding, respectively

4,667

4,148

Additional paid-in capital

6,057,739

5,547,108

Retained earnings (accumulated deficit)

(856,803

)

(1,108,929

)

Accumulated other comprehensive income

87,989

65,697

Total New Residential stockholders' equity

6,556,090

5,321,016

Noncontrolling interests in equity of consolidated subsidiaries

71,023

108,668

Total equity

6,627,113

5,429,684

$

41,604,115

$

33,252,114

NON-GAAP MEASURES AND RECONCILIATION TO GAAP NET INCOME

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 operating expenses and taxes, (iv) the Company's realized and unrealized gains or losses on investments, including any impairment or reserve for expected credit losses and (v) income from the Company's origination and servicing businesses. "Core earnings" is a non-GAAP measure of the Company's operating performance, excluding the fourth variable above and adjusts the earnings from the consumer loan investment to a level yield basis. Core earnings is used by management to evaluate the Company's performance without taking into account: (i) realized and unrealized gains and losses, which although they represent a part of the Company's recurring operations, are subject to significant variability and are generally limited to a potential indicator of future economic performance; (ii) incentive compensation paid to the Company's manager; (iii) non-capitalized transaction-related expenses; and (iv) deferred taxes, which are not representative of current operations.

The Company's definition of core earnings includes accretion on held-for-sale loans as if they continued to be held-for-investment. Although the Company intends to sell such loans, there is no guarantee that such loans will be sold or that they will be sold within any expected timeframe. During the period prior to sale, the Company continues to receive cash flows from such loans and believes that it is appropriate to record a yield thereon. In addition, the Company's definition of core earnings excludes all deferred taxes, rather than just deferred taxes related to unrealized gains or losses, because the Company believes deferred taxes are not representative of current operations. The Company's definition of core earnings also limits accreted interest income on RMBS where the Company receives par upon the exercise of associated call rights based on the estimated value of the underlying collateral, net of related costs including advances. The Company created this limit in order to be able to accrete to the lower of par or the net value of the underlying collateral, in instances where the net value of the underlying collateral is lower than par. The Company believes this amount represents the amount of accretion the Company would have expected to earn on such bonds had the call rights not been exercised.

Beginning January 1, 2020, the Company's investments in consumer loans are accounted for under the fair value option. Core earnings adjusts earnings on consumer loans to a level yield to present income recognition across the consumer loan portfolio in the manner in which it is economically earned, to avoid potential delays in loss recognition, and align it with the Company's overall portfolio of mortgage-related assets which generally record income on a level yield basis. With respect to consumer loans classified as held-for-sale, the level yield is computed through the expected sale date. With respect to the gains recorded under GAAP in 2014 and 2016 as a result of a refinancing of, and the consolidation of, the debt related to the Company's investments in consumer loans, and the consolidation of entities that own the Company's investments in consumer loans, respectively, the Company continues to record a level yield on those assets based on their original purchase price.

While incentive compensation paid to the Company's manager may be a material operating expense, the Company excludes it from core earnings because (i) from time to time, a component of the computation of this expense will relate to items (such as gains or losses) that are excluded from core earnings, and (ii) it is impractical to determine the portion of the expense related to core earnings and non-core earnings, and the type of earnings (loss) that created an excess (deficit) above or below, as applicable, the incentive compensation threshold. To illustrate why it is impractical to determine the portion of incentive compensation expense that should be allocated to core earnings, the Company notes that, as an example, in a given period, it may have core earnings in excess of the incentive compensation threshold but incur losses (which are excluded from core earnings) that reduce total earnings below the incentive compensation threshold. In such case, the Company would either need to (a) allocate zero incentive compensation expense to core earnings, even though core earnings exceeded the incentive compensation threshold, or (b) assign a "pro forma" amount of incentive compensation expense to core earnings, even though no incentive compensation was actually incurred. The Company believes that neither of these allocation methodologies achieves a logical result. Accordingly, the exclusion of incentive compensation facilitates comparability between periods and avoids the distortion to the Company's non-GAAP operating measure that would result from the inclusion of incentive compensation that relates to non-core earnings.

With regard to non-capitalized transaction-related expenses, management does not view these costs as part of the Company's core operations, as they are considered by management to be similar to realized losses incurred at acquisition. Non-capitalized transaction-related expenses are generally legal and valuation service costs, as well as other professional service fees, incurred when the Company acquires certain investments, as well as costs associated with the acquisition and integration of acquired businesses.

Through its wholly owned subsidiaries, the Company originates conventional, government-insured and nonconforming residential mortgage loans for sale and securitization. In connection with the transfer of loans to the GSEs or mortgage investors, the Company reports realized gains or losses on the sale of originated residential mortgage loans and retention of mortgage servicing rights, which the Company believes is an indicator of performance for the Origination and Servicing segments and therefore included in core earnings. Realized gains or losses on the sale of originated residential mortgage loans had no impact on core earnings in any prior period, but may impact core earnings in future periods.

Core earnings includes results from operating companies with the exception of the unrealized gains or losses due to changes in valuation inputs and assumptions on MSRs, net of unrealized gains and losses on hedged MSRs, and non-capitalized transaction-related expenses.

Management believes that the adjustments to compute "core earnings" specified above allow investors and analysts to readily identify and track the operating performance of the assets that form the core of the Company's activity, assist in comparing the core operating results between periods, and enable investors to evaluate the Company's current core performance using the same measure that management uses to operate the business. Management also utilizes core earnings as a measure in its decision-making process relating to improvements to the underlying fundamental operations of the Company's investments, as well as the allocation of resources between those investments, and management also relies on core earnings as an indicator of the results of such decisions. Core earnings excludes certain recurring items, such as gains and losses (including impairment and reserves as well as derivative activities) and non-capitalized transaction-related expenses, because they are not considered by management to be part of the Company's core operations for the reasons described herein. As such, core earnings is not intended to reflect all of the Company's activity and should be considered as only one of the factors used by management in assessing the Company's performance, along with GAAP net income which is inclusive of all of the Company's activities.

The primary differences between core earnings and the measure the Company uses to calculate incentive compensation relate to (i) realized gains and losses (including impairments and reserves for expected credit losses), (ii) non-capitalized transaction-related expenses and (iii) deferred taxes (other than those related to unrealized gains and losses). Each are excluded from core earnings and included in the Company's incentive compensation measure (either immediately or through amortization). In addition, the Company's incentive compensation measure does not include accretion on held-for-sale loans and the timing of recognition of income from consumer loans is different. Unlike core earnings, the Company's incentive compensation measure is intended to reflect all realized results of operations.

Core earnings does not represent and should not be considered as a substitute for, or superior to, net income or as a substitute for, or superior to, cash flows from operating activities, each as determined in accordance with U.S. GAAP, and the Company's calculation of this measure may not be comparable to similarly entitled measures reported by other companies. Set forth below is a reconciliation of core earnings to the most directly comparable GAAP financial measure (dollars in thousands, except share and per share data):

Consolidated Balance Sheets

($ in thousands, except share data)

September 30, December 31, 2021 2020 (Unaudited)

Assets

Excess mortgage servicing rights assets, at $ 359,288 $ 410,855 fair value

Mortgage servicing rights and mortgageservicing rights financing receivables, at fair 6,565,267 4,585,841 value

Servicer advance investments, at fair value 472,004 538,056

Real estate and other securities 9,973,795 14,244,558

Residential loans and variable interest entityconsumer loans held-for-investment, at fair 1,142,807 1,359,754 value

Residential mortgage loans, held-for-sale($13,972,557 and $4,705,816 at fair value, 14,117,300 5,215,703 respectively)

Residential mortgage loans subject to 1,826,620 1,452,005 repurchase

Cash and cash equivalents 1,366,678 944,854

Restricted cash 194,745 135,619

Servicer advances receivable 2,782,622 3,002,267

Receivable for investments sold - 4,180

Other assets 2,802,989 1,358,422

$ 41,604,115 $ 33,252,114

Liabilities and Equity

Liabilities

Secured financing agreements $ 22,759,985 $ 17,547,680

Secured notes and bonds payable ($798,198 and 8,248,092 7,644,195 $1,662,852 at fair value, respectively)

Residential mortgage loan repurchase liability 1,826,620 1,452,005

Unsecured senior notes, net of issuance costs 542,849 541,516

Payable for investments purchased - 154

Due to affiliates 8,895 9,450

Dividends payable 124,999 90,128

Accrued expenses and other liabilities 1,465,562 537,302

34,977,002 27,822,430

Commitments and Contingencies



Equity

Preferred stock, $0.01 par value, 100,000,000shares authorized, 52,210,000 and 33,610,000 1,262,498 812,992 issued and outstanding, $1,305,250 and $840,250aggregate liquidation preference, respectively

Common stock, $0.01 par value, 2,000,000,000shares authorized, 466,579,920 and 414,744,518 4,667 4,148 issued and outstanding, respectively

Additional paid-in capital 6,057,739 5,547,108

Retained earnings (accumulated deficit) (856,803 ) (1,108,929 )

Accumulated other comprehensive income 87,989 65,697

Total New Residential stockholders' equity 6,556,090 5,321,016

Noncontrolling interests in equity of 71,023 108,668 consolidated subsidiaries

Total equity 6,627,113 5,429,684

$ 41,604,115 $ 33,252,114

NON-GAAP MEASURES AND RECONCILIATION TO GAAP NET INCOME

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 operating expenses and taxes, (iv) the Company's realized and unrealized gains or losses on investments, including any impairment or reserve for expected credit losses and (v) income from the Company's origination and servicing businesses. "Core earnings" is a non-GAAP measure of the Company's operating performance, excluding the fourth variable above and adjusts the earnings from the consumer loan investment to a level yield basis. Core earnings is used by management to evaluate the Company's performance without taking into account: (i) realized and unrealized gains and losses, which although they represent a part of the Company's recurring operations, are subject to significant variability and are generally limited to a potential indicator of future economic performance; (ii) incentive compensation paid to the Company's manager; (iii) non-capitalized transaction-related expenses; and (iv) deferred taxes, which are not representative of current operations.

The Company's definition of core earnings includes accretion on held-for-sale loans as if they continued to be held-for-investment. Although the Company intends to sell such loans, there is no guarantee that such loans will be sold or that they will be sold within any expected timeframe. During the period prior to sale, the Company continues to receive cash flows from such loans and believes that it is appropriate to record a yield thereon. In addition, the Company's definition of core earnings excludes all deferred taxes, rather than just deferred taxes related to unrealized gains or losses, because the Company believes deferred taxes are not representative of current operations. The Company's definition of core earnings also limits accreted interest income on RMBS where the Company receives par upon the exercise of associated call rights based on the estimated value of the underlying collateral, net of related costs including advances. The Company created this limit in order to be able to accrete to the lower of par or the net value of the underlying collateral, in instances where the net value of the underlying collateral is lower than par. The Company believes this amount represents the amount of accretion the Company would have expected to earn on such bonds had the call rights not been exercised.

Beginning January 1, 2020, the Company's investments in consumer loans are accounted for under the fair value option. Core earnings adjusts earnings on consumer loans to a level yield to present income recognition across the consumer loan portfolio in the manner in which it is economically earned, to avoid potential delays in loss recognition, and align it with the Company's overall portfolio of mortgage-related assets which generally record income on a level yield basis. With respect to consumer loans classified as held-for-sale, the level yield is computed through the expected sale date. With respect to the gains recorded under GAAP in 2014 and 2016 as a result of a refinancing of, and the consolidation of, the debt related to the Company's investments in consumer loans, and the consolidation of entities that own the Company's investments in consumer loans, respectively, the Company continues to record a level yield on those assets based on their original purchase price.

While incentive compensation paid to the Company's manager may be a material operating expense, the Company excludes it from core earnings because (i) from time to time, a component of the computation of this expense will relate to items (such as gains or losses) that are excluded from core earnings, and (ii) it is impractical to determine the portion of the expense related to core earnings and non-core earnings, and the type of earnings (loss) that created an excess (deficit) above or below, as applicable, the incentive compensation threshold. To illustrate why it is impractical to determine the portion of incentive compensation expense that should be allocated to core earnings, the Company notes that, as an example, in a given period, it may have core earnings in excess of the incentive compensation threshold but incur losses (which are excluded from core earnings) that reduce total earnings below the incentive compensation threshold. In such case, the Company would either need to (a) allocate zero incentive compensation expense to core earnings, even though core earnings exceeded the incentive compensation threshold, or (b) assign a "pro forma" amount of incentive compensation expense to core earnings, even though no incentive compensation was actually incurred. The Company believes that neither of these allocation methodologies achieves a logical result. Accordingly, the exclusion of incentive compensation facilitates comparability between periods and avoids the distortion to the Company's non-GAAP operating measure that would result from the inclusion of incentive compensation that relates to non-core earnings.

With regard to non-capitalized transaction-related expenses, management does not view these costs as part of the Company's core operations, as they are considered by management to be similar to realized losses incurred at acquisition. Non-capitalized transaction-related expenses are generally legal and valuation service costs, as well as other professional service fees, incurred when the Company acquires certain investments, as well as costs associated with the acquisition and integration of acquired businesses.

Through its wholly owned subsidiaries, the Company originates conventional, government-insured and nonconforming residential mortgage loans for sale and securitization. In connection with the transfer of loans to the GSEs or mortgage investors, the Company reports realized gains or losses on the sale of originated residential mortgage loans and retention of mortgage servicing rights, which the Company believes is an indicator of performance for the Origination and Servicing segments and therefore included in core earnings. Realized gains or losses on the sale of originated residential mortgage loans had no impact on core earnings in any prior period, but may impact core earnings in future periods.

Core earnings includes results from operating companies with the exception of the unrealized gains or losses due to changes in valuation inputs and assumptions on MSRs, net of unrealized gains and losses on hedged MSRs, and non-capitalized transaction-related expenses.

Management believes that the adjustments to compute "core earnings" specified above allow investors and analysts to readily identify and track the operating performance of the assets that form the core of the Company's activity, assist in comparing the core operating results between periods, and enable investors to evaluate the Company's current core performance using the same measure that management uses to operate the business. Management also utilizes core earnings as a measure in its decision-making process relating to improvements to the underlying fundamental operations of the Company's investments, as well as the allocation of resources between those investments, and management also relies on core earnings as an indicator of the results of such decisions. Core earnings excludes certain recurring items, such as gains and losses (including impairment and reserves as well as derivative activities) and non-capitalized transaction-related expenses, because they are not considered by management to be part of the Company's core operations for the reasons described herein. As such, core earnings is not intended to reflect all of the Company's activity and should be considered as only one of the factors used by management in assessing the Company's performance, along with GAAP net income which is inclusive of all of the Company's activities.

The primary differences between core earnings and the measure the Company uses to calculate incentive compensation relate to (i) realized gains and losses (including impairments and reserves for expected credit losses), (ii) non-capitalized transaction-related expenses and (iii) deferred taxes (other than those related to unrealized gains and losses). Each are excluded from core earnings and included in the Company's incentive compensation measure (either immediately or through amortization). In addition, the Company's incentive compensation measure does not include accretion on held-for-sale loans and the timing of recognition of income from consumer loans is different. Unlike core earnings, the Company's incentive compensation measure is intended to reflect all realized results of operations.

Core earnings does not represent and should not be considered as a substitute for, or superior to, net income or as a substitute for, or superior to, cash flows from operating activities, each as determined in accordance with U.S. GAAP, and the Company's calculation of this measure may not be comparable to similarly entitled measures reported by other companies. Set forth below is a reconciliation of core earnings to the most directly comparable GAAP financial measure (dollars in thousands, except share and per share data):

Three Months Ended Nine Months Ended

September 30, September 30, September 30, June 30, 2021 2021 2021 2020

Net income (loss)attributable to $ 146,147 $ 121,315 $ 545,046 $ (1,533,262 )common stockholders

Adjustments for Non-Core Earnings:

Impairment 6,378 (34,408 ) (47,637 ) 133,670

Change in fairvalue of (116,241 ) (98,766 ) (490,426 ) 724,364 investments

(Gain) loss onsettlement of 144,690 120,212 296,237 986,921 investments, net

Other (income) (21,007 ) 14,226 17,558 111,596 loss, net

Other income andimpairmentattributable to (2,071 ) (1,473 ) (8,055 ) (7,307 )non-controllinginterests

Non-capitalizedtransaction-related 15,109 9,905 35,637 48,892 expenses

Preferred stockmanagement fee to 3,281 3,048 9,377 8,391 affiliate

Deferred taxes 27,331 6,965 119,526 (42,266 )

Interest income onresidential 6,153 7,073 20,796 30,146 mortgage loans,held-for-sale

Adjust consumerloans to level - - - (1,147 )yield

Core earnings ofequity method investees:

Excess mortgage 127 (1,463 ) 3,240 10,210 servicing rights

Core earnings $ 209,897 $ 146,634 $ 501,299 $ 470,208



Net income (loss) $ 0.30 $ 0.26 $ 1.18 $ (3.69 )per diluted share

Core earnings per $ 0.44 $ 0.31 $ 1.09 $ 1.13 diluted share



Weighted averagenumber of shares ofcommon stock 482,282,695 472,729,245 461,694,481 415,665,441 outstanding,diluted

NET INCOME BY SEGMENT

During the quarter ended September 30, 2021, due to the Caliber acquisition, New Residential reevaluated the composition of its reportable segments based on the significance of certain business activities to its operations and performance evaluation, which drive resource allocation. Based on this reevaluation, MSR assets serviced by Newrez (previously reflected within the MSR Related Segment) and Caliber, representing $385 billion UPB as of September 30, 2021, are reflected within Servicing. MSRs owned by third-parties but serviced by the Company's subsidiaries, representing $75 billion as of September 30, 2021, are also reflected within Servicing. MSR assets sub-serviced by third-parties (PHH Mortgage Corporation, LoanCare LLC, Flagstar Bank and Mr. Cooper), representing $164 billion UPB as of September 30, 2021, continue to be reflected as part of the MSR Related Investments. Segment information for prior periods have been restated to reflect this change.

Residential Securities, Origination and Servicing Properties and Loans

Residential Properties MSRs &Third Quarter Securities and Corporate &2021 Origination Servicing Servicer & Total Residential Other Advances Call Rights Loans

Servicing feerevenue, netand interest $ (6,451 ) $ 257,520 $ 147,576 $ - $ - $ - $ 398,645 income fromMSR financingreceivables

Change in fairvalue of MSRsand MSR - (118,941 ) (76,682 ) - - - (195,623 )financingreceivables

Servicing (6,451 ) 138,579 70,894 - - - 203,022 revenue, net

Interest 54,851 (2,729 ) 11,385 52,489 37,490 37,147 190,633 income

Gain onoriginatedmortgage 510,740 28,292 3,437 15,276 9,016 - 566,761 loans,held-for-sale,net

Total revenues 559,140 164,142 85,716 67,765 46,506 37,147 960,416

Interest 37,775 43,199 7,499 9,365 19,680 12,410 129,928 expense

G&A and other 344,198 102,602 87,927 1,753 23,901 33,550 593,931

Totaloperating 381,973 145,801 95,426 11,118 43,581 45,960 723,859 expenses

Change in fairvalue of - - (7,675 ) 50,927 (26,432 ) (5,708 ) 11,112 investments

Gain (loss) onsettlement of - (989 ) (1,295 ) (130,066 ) 34,033 - (98,317 )investments,net

Other income 368 (11 ) 41,848 - 17,641 (580 ) 59,266 (loss), net

Total other 368 (1,000 ) 32,878 (79,139 ) 25,242 (6,288 ) (27,939 )income (loss)

Impairment - - - (2,370 ) 8,748 - 6,378

Income (loss)before income 177,535 17,341 23,168 (20,122 ) 19,419 (15,101 ) 202,240 taxes

Income taxexpense 32,322 (3,125 ) (8,372 ) - 10,735 (1 ) 31,559 (benefit)

Net income 145,213 20,466 31,540 (20,122 ) 8,684 (15,100 ) 170,681 (loss)

Noncontrollinginterests inincome (loss) 3,032 - (280 ) - - 6,249 9,001 ofconsolidatedsubsidiaries

Dividends onpreferred - - - - - 15,533 15,533 stock

Net income(loss)attributable $ 142,181 $ 20,466 $ 31,820 $ (20,122 ) $ 8,684 $ (36,882 ) $ 146,147 to commonstockholders

Origination and Servicing

Residential Securities,

Properties and Loans

Second Quarter 2021

Origination

Servicing

MSRs &

Servicer

Advances

Residential

Securities &

Call Rights

Properties

and

Residential

Loans

Corporate &

Other

Total

Servicing fee revenue, net and interest income from MSR financing receivables

$

(5,077

)

$

219,070

$

174,865

$

-

$

-

$

-

$

388,858

Change in fair value of MSRs and MSR financing receivables

-

(216,376

)

(201,607

)

-

-

-

(417,983

)

Servicing revenue, net

(5,077

)

2,694

(26,742

)

-

-

-

(29,125

)

Interest income

31,262

11,316

3,000

97,960

33,294

24,930

201,762

Gain on originated mortgage loans, held-for-sale, net

268,539

12,794

(7,636

)

(3,638

)

16,826

-

286,885

Total revenues

294,724

26,804

(31,378

)

94,322

50,120

24,930

459,522

Interest expense

18,960

40,902

3,702

13,630

17,463

11,882

106,539

G&A and other

200,551

86,956

82,806

1,034

20,968

31,760

424,075

Total operating expenses

219,511

127,858

86,508

14,664

38,431

43,642

530,614

Change in fair value of investments

-

-

(9,281

)

119,565

121,242

(1,626

)

229,900

Gain (loss) on settlement of investments, net

-

(30,318

)

29,579

(76,270

)

(1,254

)

(348

)

(78,611

)

Other income (loss), net

138

-

7,660

-

18,206

4,040

30,044

Total other income (loss)

138

(30,318

)

27,958

43,295

138,194

2,066

181,333

Impairment

-

-

-

(1,756

)

(32,652

)

-

(34,408

)

Income (loss) before income taxes

75,351

(131,372

)

(89,928

)

124,709

182,535

(16,646

)

144,649

Income tax expense (benefit)

19,030

(15,447

)

(21,969

)

-

17,288

21

(1,077

)

Net income (loss)

56,321

(115,925

)

(67,959

)

124,709

165,247

(16,667

)

145,726

Noncontrolling interests in income (loss) of consolidated subsidiaries

3,225

-

(1,825

)

-

-

8,653

10,053

Dividends on preferred stock

-

-

-

-

-

14,358

14,358

Net income (loss) attributable to common stockholders

$

53,096

$

(115,925

)

$

(66,134

)

$

124,709

$

165,247

$

(39,678

)

$

121,315

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain information in this press release constitutes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, our ability to complete the acquisition of Genesis Capital LLC on a timely basis, or at all, ability to further our ability to create, retain and manage strong assets for our balance sheet, ability to increase scale, efficiency, recapture, servicing and origination leadership, ability to successfully integrate the businesses and realize the anticipated benefits of the Caliber acquisition, our estimated Newrez and Caliber fourth quarter 2021 Funded Origination Value and Servicing Portfolio UPB, and ability to generate and drive earnings for our shareholders. These statements are not historical facts. They represent management's current expectations regarding future events and are subject to a number of trends and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those described in the forward-looking statements. Accordingly, you should not place undue reliance on any forward-looking statements contained herein. For a discussion of some of the risks and important factors that could affect such forward-looking statements, see the sections entitled "Cautionary Statements Regarding Forward Looking Statements," "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's most recent annual and quarterly reports and other filings filed with the U.S. Securities and Exchange Commission, which are available on the Company's website (www.newresi.com). New risks and uncertainties emerge from time to time, and it is not possible for New Residential to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Forward-looking statements contained herein speak only as of the date of this press release, and New Residential expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in New Residential's expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

ABOUT NEW RESIDENTIAL

New Residential is a leading provider of capital and services to the mortgage and financial services industry. The Company's mission is to generate attractive risk-adjusted returns in all interest rate environments through a complementary portfolio of investments and operating businesses. Since inception in 2013, New Residential has delivered over $3.8 billion in dividends to shareholders. New Residential's investment portfolio is composed of mortgage servicing related assets (full and excess MSRs and servicer advances), residential securities (and associated called rights) and loans (including single family rental), and consumer loans. New Residential's investments in operating entities include leading origination and servicing platforms through wholly-owned subsidiaries, Newrez LLC and Caliber Home Loans, Inc., as well as investments in affiliated businesses that provide mortgage related services. New Residential is organized and conducts its operations to qualify as a real estate investment trust (REIT) for federal income tax purposes and is managed by an affiliate of Fortress Investment Group LLC, a global investment management firm, and headquartered in New York City.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211102005646/en/

CONTACT: Investor Relations Kaitlyn Mauritz Head of Investor Relations 212-479-3150 IR@NewResi.com