New Residential Investment Corp. Announces Fourth Quarter and Full Year 2020 Results

Rhea-AI Summary

New Residential Investment Corp. (NYSE:NRZ) reported Q4 2020 GAAP net income of $68.6 million ($0.16/share) and core earnings of $137.0 million ($0.32/share). Despite a full-year GAAP net loss of $(1,464.7) million, the company showed resilience with $295.7 million in pre-tax income from origination and servicing in Q4. The common dividend for Q4 was $82.9 million ($0.20/share). As of December 31, 2020, cash reserves stood at $944.9 million. The outlook remains positive, projecting increased earnings from rising interest rates and improved servicing portfolio performance.

Positive

• Q4 GAAP net income of $68.6 million, up from the previous quarter.
• Core earnings of $137.0 million in Q4, reflecting strong operational performance.
• Record origination funded production of $23.9 billion in Q4, a 32% QoQ increase.
• Servicing portfolio increased to $297.8 billion in UPB, a 36% YoY growth.
• Dividends increased in three consecutive quarters after initial reduction in March 2020.

Negative

• Full-year 2020 GAAP net loss of $(1,464.7) million, a significant decline from profitability in 2019.
• Q4 total gain on sale margin decreased to 1.57% from 2.04% in Q3 2020.
• Overall leverage increased to 3.6x, compared to 2.8x in the previous quarter.

New Residential Investment Corp. (NYSE:NRZ; “New Residential” or the “Company”) today reported the following information for the fourth quarter and full year ended December 31, 2020:

FOURTH QUARTER 2020 FINANCIAL HIGHLIGHTS:

• GAAP Net Income of $68.6 million, or $0.16 per diluted common share⁽¹⁾
  • $295.7 million pre-tax income from Origination and Servicing⁽²⁾
• Core Earnings of $137.0 million, or $0.32 per diluted common share⁽¹⁾⁽³⁾
• Common Dividend of $82.9 million, or $0.20 per common share⁽¹⁾
• Book Value per common share of $10.87⁽¹⁾
• $944.9 million of cash as of December 31, 2020

FULL YEAR 2020 FINANCIAL HIGHLIGHTS:

• GAAP Net Loss of $(1,464.7) million, or $(3.52) per diluted common share⁽¹⁾
  • $934.4 million pre-tax income from Origination and Servicing⁽²⁾
• Core Earnings of $607.2 million, or $1.46 per diluted common share⁽¹⁾⁽³⁾
• Common Dividends of $207.7 million, or $0.50 per common share⁽¹⁾

		Q4 2020		Q3 2020		Year Ended December 31, 2020		Year Ended December 31, 2019
Summary Operating Results:
GAAP Net Income (Loss) per Diluted Common Share(1)		$0.16		$0.19		$(3.52)		$1.34
GAAP Net Income (Loss)		$68.6 million		$77.9 million		$(1,464.7) million		$550.0 million
Non-GAAP Results:
Core Earnings per Diluted Common Share(1)		$0.32		$0.31		$1.46		$2.17
Core Earnings(3)		$137.0 million		$131.6 million		$607.2 million		$886.8 million
NRZ Common Dividend:
Common Dividend per Share(1)		$0.20		$0.15		$0.50		$2.00
Common Dividend		$82.9 million		$62.4 million		$207.7 million		$831.0 million

“In the aftermath of the challenging market conditions caused by the COVID-19 pandemic, I am happy to report that our Company ended 2020 in a very strong position,” said Michael Nierenberg, Chairman, Chief Executive Officer and President of New Residential. “The early days of the pandemic created market volatility causing us to react quickly as the financing markets for all products, including government guaranteed securities, froze. Asset prices plummeted and assets financed in the repurchase markets needed to be funded with additional capital. We moved quickly to de-lever our portfolios, reduce risk, lock down financing, create liquidity and get the Company back to a position of strength. While 2020 saw historically low rates, NewRez produced record earnings. After reducing our common stock dividend in March 2020, we raised our common stock dividend in the following three consecutive quarters.”

“Looking forward, we believe that our portfolio of MSRs will benefit from rising interest rates, resulting in more cash flows and higher earnings. We also believe that our mortgage company is poised to capture additional market share and increase borrower retention. Against this backdrop, we look forward to executing on our strategy and delivering on our objectives for shareholders,” added Mr. Nierenberg.

FOURTH QUARTER 2020 COMPANY HIGHLIGHTS:

• Origination
  • Segment pre-tax net income of $247.9 million (-21% QoQ and +187% YoY)⁽²⁾
  • Record quarterly origination funded production of $23.9 billion in unpaid principal balance (“UPB”) (+32% QoQ and +125% YoY)
    • Record quarterly Direct to Consumer funded production of $4.3 billion UPB (+25% QoQ and +169% YoY)
  • Record quarterly origination pull through adjusted lock volume of $25.8 billion (+18% QoQ and +119% YoY)
  • Total gain on sale margin of 1.57% for the fourth quarter 2020 compared to 2.04% for the third quarter 2020

• Servicing
  • Record quarterly segment pre-tax net income of $47.8 million (+58% QoQ and +75% YoY)⁽²⁾
  • Servicing portfolio grew to $297.8 billion in UPB (+4% QoQ and +36% YoY)

• Mortgage Servicing Rights (“MSRs”) and Servicer Advances
  • MSR portfolio totaled approximately $537 billion UPB as of December 31, 2020 compared to $571 billion UPB as of September 30, 2020⁽⁴⁾
  • Issued two MSR debt securitizations for $1.0 billion
  • Issued two servicer advance securitizations for $0.8 billion
  • Servicer advance balances of $3.6 billion as of December 31, 2020 from $3.4 billion as of September 30, 2020 due to the seasonal nature of property tax and insurance disbursements

• Residential Securities and Call Rights
  • Purchased $3.9 billion (net face value) of Agency securities
  • Sold $160 million (face value) of non-Agency securities
  • Called non-Agency collateral of $155 million UPB⁽⁵⁾

• Residential Loans
  • Sold $195 million (face value) of residential loans
  • Purchased $321 million of early buyout (“EBO”) loans

• Financing and Leverage
  • Overall leverage of 3.6x compared to 2.8x as of September 30, 2020⁽⁶⁾
    • Leverage excluding Agency securities of 1.2x at December 31, 2020 compared to 1.0x as of September 30, 2020

• First Quarter 2021 Commentary⁽⁷⁾
  • Estimated Q1’21 Funded Origination Volume of approximately $23 billion to $25 billion UPB
  • Estimated Q1’21 Servicing Portfolio UPB of approximately $300 billion UPB
  • Through January 2021, called 13 deals with collateral of $387 million UPB⁽⁵⁾⁽⁸⁾
  • Forbearances on Full NRZ MSR portfolio declined to 5.3% as of January 22, 2021 compared to 6.8% as of September 30, 2020

(1)		Per common share calculations for both GAAP Net Income (Loss) and Core Earnings are based on 425,127,967 weighted average diluted shares during the quarter ended December 31, 2020; 420,968,626 weighted average diluted shares during the quarter ended September 30, 2020; 415,513,187 weighted average diluted shares during the year ended December 31, 2020; and 408,990,107 weighted average diluted shares during the year ended December 31, 2019. Per share calculations of Common Dividend are based on 414,744,518 basic shares outstanding as of December 31, 2020; 415,744,518 basic shares outstanding as of September 30, 2020; 415,744,518 basic shares outstanding as of June 30, 2020; 415,649,214 basic shares outstanding as of March 31, 2020; 415,520,780 basic shares outstanding as of December 31, 2019; 415,520,780 basic shares outstanding as of September 30, 2019; 415,520,780 basic shares outstanding as of June 30, 2019; and 415,429,677 basic shares outstanding as of March 31, 2019. Per common share calculations for Book Value are based on 414,744,518 basic common shares outstanding as of December 31, 2020.
(2)		Includes non-controlling interests.
(3)		Core Earnings is a non-GAAP financial measure. For a reconciliation of 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.
(4)		Includes excess and full MSRs.
(5)		Call rights UPB estimated as of December 31, 2020. The UPB of the loans relating to our call rights may be materially lower than the estimates in this Presentation, 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 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.
(6)		Represents recourse leverage. Excludes non-recourse leverage, including outstanding consumer debt, servicer advance debt, $37.4 million of full MSR debt for September 30, 2020, SAFT 2013-1 and MDST Trusts mortgage backed securities issued, and Shellpoint non-agency RMBS.
(7)		Based on management’s current views and estimates, and actual results may vary materially.
(8)		Represents activity from January 1, 2021 through February 1, 2021.

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, February 9, 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 1-866-777-2509 (from within the U.S.) or 1-412-317-5413 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference “New Residential Fourth Quarter and Full Year 2020 Earnings Call.” In addition, participants are encouraged to pre-register for the conference call at https://dpregister.com/sreg/10151608/e12056e4c8.

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, February 23, 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 “10151608.”

Consolidated Statements of Income
($ in thousands, except share and per share data)

		Three Months Ended								Twelve Months Ended December 31,
		December 31, 2020				September 30, 2020				2020				2019
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
Revenues
Interest income		$	234,118			$	233,848			$	1,102,537			$	1,766,130
Servicing revenue, net of change in fair value of $(404,269), $(395,064), $(1,889,741), and $(712,950), respectively

FAQ

What were New Residential's Q4 2020 earnings results for NRZ?

In Q4 2020, New Residential reported a GAAP net income of $68.6 million and core earnings of $137.0 million.

What was the common dividend declared by New Residential for Q4 2020?

New Residential declared a common dividend of $82.9 million, or $0.20 per common share for Q4 2020.

How did New Residential perform financially in 2020 compared to 2019?

New Residential had a full-year GAAP net loss of $(1,464.7) million in 2020 compared to a net income of $550 million in 2019.

What is the outlook for New Residential following the Q4 results?

New Residential expects to benefit from rising interest rates and aims to increase market share and borrower retention.

What was the origination production of New Residential in Q4 2020?

New Residential achieved a record origination funded production of $23.9 billion in Q4 2020.