Market Overview

New Residential Announces Third Quarter 2017 Results


New Residential Investment Corp. (NYSE:NRZ; "New Residential" or the
"Company") today reported the following information for the quarter
ended September 30, 2017:


  • GAAP Net Income of $226 million, or $0.73 per diluted share
  • Core Earnings of $199 million, or $0.64 per diluted share*
  • Common dividend of $154 million, or $0.50 per share


3Q 2017 2Q 2017
Summary Operating Results:
GAAP Net Income per Diluted Share** $0.73 $1.04
GAAP Net Income $226 million $322 million
Non-GAAP Results:
Core Earnings per Diluted Share** $0.64 $1.03
Core Earnings* $199 million $318 million
NRZ Common Dividend:
Common Dividend per Share** $0.50 $0.50
Common Dividend $154 million $154 million

* Core Earnings is a non-GAAP 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

** Per share calculations of GAAP Net Income and Core Earnings are
based on 309,207,345 weighted average diluted shares during the quarter
ended September 30, 2017, and 309,392,512 weighted average diluted
shares during the quarter ended June 30, 2017.

Third Quarter 2017 & Subsequent Highlights:

  • Mortgage Servicing Rights ("MSRs") -
    • In July 2017, New Residential continued to grow its full MSR
      portfolio by agreeing to pay approximately $400 million(1)
      in total restructuring fee payments for the transfer of $110
      billion in unpaid principal balance ("UPB") of Non-Agency MSRs(2)
      from Ocwen Financial Corporation (together with its subsidiaries,
      "Ocwen"). Concurrently with the MSR transfer agreement, New
      Residential Mortgage LLC, a wholly-owned subsidiary of NRZ,
      entered into a 5-year subservicing agreement with Ocwen, pursuant
      to which Ocwen will subservice the mortgage loans underlying the
      transferred MSRs.
  • Non-Agency Securities & Call Rights -
    • During the third quarter, New Residential continued to accelerate
      the execution around its deal collapse strategy by executing
      clean-up calls on 43 seasoned, Non-Agency RMBS deals with an
      aggregate UPB of $948 million. In addition, during and subsequent
      to the third quarter, New Residential completed two Non-Agency
      loan securitizations, totaling $1.1 billion.
    • In the third quarter, New Residential continued to strategically
      invest in Non-Agency securities that are expected to be accretive
      to the Company's call rights strategy. New Residential purchased
      $435 million face value of Non-Agency RMBS, bringing net equity to
      approximately $1.37 billion as of September 30, 2017.
  • Servicer Advances -
    • New Residential continued to focus on lowering advance balances
      during the quarter. Advances declined meaningfully to $4.3 billion
      in the third quarter, down approximately 10% quarter-over-quarter
      and down approximately 32% year-over-year.


Payment amount based on transfer of all loans on June 30, 2017.


New Residential already owns the fee economics and servicer
advances on the portfolio and pays Ocwen a monthly servicing fee
as a result of the HLSS transaction which closed in April 2015.
Stated UPB is as of June 30, 2017. UPB and total restructuring fee
payments will likely be lower at the time of settlement due to
amortization of the UPB of the MSR portfolio. Ocwen MSR transfer
remains subject to NRZ's satisfaction of certain contractual
requirements and certain customary closing conditions, including
but not limited to certain third party consents. There can be no
assurance of whether or when New Residential will be able to
complete the agreed upon MSR transfer. See "Cautionary Note
Regarding Forward-Looking Statements" at the end of this press
release for more information on forward-looking statements.



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,
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,


New Residential's management will host a conference call on Friday,
October 27, 2017 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,

All interested parties are welcome to participate on the live call. The
conference call may be accessed by dialing 1-866-393-1506 (from within
the U.S.) or 1-281-456-4044 (from outside of the U.S.) ten minutes prior
to the scheduled start of the call; please reference "New Residential
Third Quarter 2017 Earnings Call."

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

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
Friday, November 10, 2017 by dialing 1-855-859-2056 (from within the
U.S.) or 1-404-537-3406 (from outside of the U.S.); please reference
access code "5282459."


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


Three Months Ended September 30,

  Nine Months Ended September 30,
2017   2016 2017   2016
(unaudited) (unaudited) (unaudited) (unaudited)
Interest income $ 397,722 $ 282,388 $ 1,162,212 $ 749,901
Interest expense   125,278     96,488     338,664     278,401  
Net Interest Income   272,444     185,900     823,548     471,500  
Other-than-temporary impairment (OTTI) on securities 1,509 1,765 8,736 7,838
Valuation and loss provision on loans and real estate owned   26,700     18,275     65,381     41,845  
  28,209     20,040     74,117     49,683  
Net interest income after impairment 244,235 165,860 749,431 421,817
Servicing revenue, net 58,014 - 269,467 -
Other Income
Change in fair value of investments in excess mortgage servicing
(14,291 ) (17,060 ) (32,650 ) (24,397 )
Change in fair value of investments in excess mortgage servicing
rights, equity method investees
2,054 6,261 6,056 8,608
Change in fair value of investments in mortgage servicing rights
financing receivable
70,232 - 75,828 -
Change in fair value of servicer advance investments 10,941 21,606 70,469 4,328
Gain on consumer loans investment - - - 9,943
Gain on remeasurement of consumer loans investment - - - 71,250
Gain (loss) on settlement of investments, net 1,553 (11,165 ) 1,250 (37,682 )
Earnings from investments in consumer loans, equity method investees 6,769 - 12,649 -
Other income (loss), net   9,887     27,059     7,696     6,850  
  87,145     26,701     141,298     38,900  
Operating Expenses
General and administrative expenses 19,919 8,777 47,788 28,082
Management fee to affiliate 14,187 10,536 41,447 30,552
Incentive compensation to affiliate 19,491 7,075 72,123 13,200
Loan servicing expense 13,690 14,187 40,068 30,037
Subservicing expense   49,773     -     123,435     -  
  117,060     40,575     324,861     101,871  
Income Before Income Taxes 272,334 151,986 835,335 358,846
Income tax expense (benefit)   32,613     20,900     121,053     18,195  
Net Income $ 239,721   $ 131,086   $ 714,282   $ 340,651  
Noncontrolling Interests in Income of Consolidated Subsidiaries $ 13,600   $ 32,178   $ 45,051   $ 61,355  
Net Income Attributable to Common Stockholders $ 226,121   $ 98,908   $ 669,231   $ 279,296  
Net Income Per Share of Common Stock
Basic $ 0.74   $ 0.41   $ 2.23   $ 1.19  
Diluted $ 0.73   $ 0.41   $ 2.21   $ 1.19  
Weighted Average Number of Shares of Common Stock Outstanding
Basic   307,361,309     240,601,691     300,511,550     233,875,067  
Diluted   309,207,345     241,099,381     302,357,147     234,184,611  
Dividends Declared per Share of Common Stock $ 0.50   $ 0.46   $ 1.48   $ 1.38  

Condensed Consolidated Balance Sheets
($ in

    September 30, 2017   December 31, 2016
Assets (unaudited)
Investments in:
Excess mortgage servicing rights, at fair value $ 1,178,308 $ 1,399,455
Excess mortgage servicing rights, equity method investees, at fair
175,633 194,788
Mortgage servicing rights, at fair value 1,702,749 659,483
Mortgage servicing rights financing receivable, at fair value 607,396 -
Servicer advance investments, at fair value 4,044,802 5,706,593
Real estate securities, available-for-sale 6,714,846 5,073,858
Residential mortgage loans, held-for-investment 702,227 190,761
Residential mortgage loans, held-for-sale 1,426,751 696,665
Real estate owned 107,281 59,591
Consumer loans, held-for-investment 1,467,933 1,799,486
Consumer loans, equity method investees 46,322 -
Cash and cash equivalents 279,760 290,602
Restricted cash 152,047 163,095
Servicer advances receivable 657,255 81,582
Trades receivable 1,785,708 1,687,788
Deferred tax asset, net 32,440 151,284
Other assets   323,375   244,498
$ 21,404,833 $ 18,399,529
Liabilities and Equity
Repurchase agreements $ 7,848,028 $ 5,190,631
Notes and bonds payable 7,236,967 7,990,605
Trades payable 1,076,086 1,381,968
Due to affiliates 79,624 47,348
Dividends payable 153,681 115,356
Accrued expenses and other liabilities   331,243   205,444
  16,725,629   14,931,352
Commitments and Contingencies

Common Stock, $0.01 par value, 2,000,000,000 shares authorized,
307,361,309 and
250,773,117 issued and outstanding at
September 30, 2017 and December 31, 2016, respectively

3,074 2,507
Additional paid-in capital 3,760,372 2,920,730
Retained earnings 424,854 210,500
Accumulated other comprehensive income (loss)   383,312   126,363
Total New Residential stockholders' equity 4,571,612 3,260,100
Noncontrolling interests in equity of consolidated subsidiaries   107,592   208,077
Total Equity   4,679,204   3,468,177
$ 21,404,833 $ 18,399,529


New Residential has four 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
and (iv) the Company's realized and unrealized gains or losses,
including any impairment, on the Company's investments. "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.

The Company's investments in consumer loans are accounted for under ASC
No. 310-20 and ASC No. 310-30, including certain non-performing consumer
loans with revolving privileges that are explicitly excluded from being
accounted for under ASC No. 310-30. Under ASC No. 310-20, the
recognition of expected losses on these non-performing consumer loans is
delayed in comparison to the level yield methodology under ASC No.
310-30, which recognizes income based on an expected cash flow model
reflecting an investment's lifetime expected losses. The purpose of the
Core Earnings adjustment to adjust consumer loans to a level yield is to
present income recognition across the consumer loan portfolio in the
manner in which it is economically earned, 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 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

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.

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 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), (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. The Gain on Remeasurement of Consumer Loans
Investment was treated as an unrealized gain for the purposes of
calculating incentive compensation and was therefore excluded from such

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 (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2017   2016 2017   2016
Net income attributable to common stockholders $ 226,121 $ 98,908 $ 669,231 $ 279,296
Impairment 28,209 20,040 74,117 49,683
Other Income adjustments:
Other Income
Change in fair value of investments in excess mortgage servicing
14,291 17,060 32,650 24,397

Change in fair value of investments in excess mortgage servicing
rights, equity method investees

(2,054 ) (6,261 ) (6,056 ) (8,608 )
Change in fair value of investments in mortgage servicing rights
financing receivable
(89,115 ) - (95,838 ) -

Change in fair value of servicer advance investments

(10,941 ) (21,606 ) (70,469 ) (4,328 )
Gain on consumer loans investment - - - (9,943 )
Gain on remeasurement of consumer loans investment - - - (71,250 )
(Gain) loss on settlement of investments, net (1,553 ) 11,165 (1,250 ) 37,682
Unrealized (gain) loss on derivative instruments (3,560 ) (21,048 ) 124 15,112
Unrealized (gain) loss on other ABS (189 ) (724 ) (340 ) 226
(Gain) loss on transfer of loans to REO (5,179 ) (4,373 ) (16,791 ) (14,660 )
(Gain) loss on transfer of loans to other assets (66 ) (2,743 ) (359 ) (3,021 )
Gain on Excess MSR recapture agreements (606 ) (768 ) (1,948 ) (2,188 )
(Gain) loss on Ocwen common stock (6,987 ) - (6,987 ) -
Other (income) loss   6,700     2,597     18,605     8,054  
Total Other Income Adjustments   (99,259 )   (26,701 )   (148,659 )   (28,527 )
Other Income and Impairment attributable to non-controlling interests (6,329 ) (4,783 ) (24,430 ) (9,970 )
Change in fair value of investments in mortgage servicing rights 11,518 - (77,465 ) -
Non-capitalized transaction-related expenses 6,467 2,608 14,397 8,021
Incentive compensation to affiliate 19,491 7,075 72,123 13,200
Deferred taxes 28,410 17,132 114,016 12,998
Interest income on residential mortgage loans, held-for sale 4,603 6,177 12,069 12,650
Limit on RMBS discount accretion related to called deals (13,543 ) - (20,059 ) (6,243 )
Adjust consumer loans to level yield (9,874 ) (2,621 ) (23,460 ) 12,541
Core earnings of equity method investees:
Excess mortgage servicing rights   3,476     6,092     10,010     12,231  
Core Earnings $ 199,290   $ 123,927   $ 671,890   $ 355,880  


Certain information in this press release constitutes as
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, including, but not limited to
the completion of the Ocwen MSR transfer. 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 annual and quarterly reports filed with
the SEC, which are available on the Company's website (
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.


New Residential focuses on opportunistically investing in, and
actively managing, investments related to residential real estate. The
Company primarily targets investments in mortgage servicing related
assets and other related opportunistic investments. New Residential is
organized and conducts its operations to qualify as a real estate
investment trust ("REIT") for federal income tax purposes. The Company
is managed by an affiliate of Fortress Investment Group LLC (NYSE:FIG),
a global investment management firm.

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