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New Residential Announces Second Quarter 2013 Results

If the Company had fully invested the $112 million of average uninvested cash it held during the quarter at a 15% return, GAAP Income and core earnings would each have been $0.02 higher on a diluted per share basis. The Company had approximately $60 million of cash available to invest, after commitments, as of August 5, 2013.

For a reconciliation of GAAP Income to core earnings, please refer to the table following the presentation of GAAP results.

Highlights for the quarter ended June 30, 2013:

  • Spin-Off of New Residential –New Residential became an independent publicly traded company following its spin-off from Newcastle on May 15, 2013.
  • Excess MSR Value Appreciation – Mark-to-market gains on Excess MSRs of $59 million; weighted average discount rate of the portfolio declined from 18% to 12.5%.
  • Consumer Loan Outperformance – Estimated unleveraged lifetime returns of 14%, versus initial target of 12%; charge-off rate and prepayment rate outperforming expectations. Expect leveraged lifetime returns in the mid to high 20% range.
  • Investment Highlights – Invested $180 million, including $40 million in Excess MSRs on a $23 billion portfolio of Agency pools and $140 million in non-Agency RMBS with a face amount of $180 million.
  • Dividend – Declared a quarterly common dividend of $0.07 per common share, or $18 million, based on the Company’s earnings for the period following the spin-off through June 30, 2013.
  • Book Value – Book value increased from $3.03 per common share as of March 31, 2013 (based on the number of common shares outstanding immediately following the spin-off) to $4.92 per common share as of June 30, 2013.

Highlights subsequent to June 30, 2013:

  • Excess MSR Closings – Settled Excess MSRs on loans with an unpaid principal balance of $82 billion, in connection with the previously announced Bank of America transaction, for $139 million; expect remainder of investment to close by September 2013.
  • Sales & Financings – Generated $25 million by levering non-Agency RMBS with a one-year repurchase agreement not subject to margin calls and generated $3 million from the paydown of non-Agency RMBS at par following the collapse of the related securitizations.

New Residential Chief Executive Officer Kenneth Riis commented, "We are very excited about the spin-off of New Residential. Our investments continue to outperform our initial expectations, and we continue to pursue a robust pipeline of investments to bolster our future growth. Although the dividend for the second quarter reflected only forty-five days of stand-alone operations, future dividends will reflect earnings for a full quarter.”

 

New Residential Investment Corp.

Unaudited Consolidated Statements of Income

(dollars in thousands, except share data)

 
Three Months Ended

June 30,

Six Months Ended

June 30,

2013   2012 2013 2012
 
Interest income $ 22,999 $ 4,479 $ 39,190 $ 6,516
Interest expense 2,651 - 3,550 -
Net Interest Income 20,348 4,479 35,640 6,516
 
Impairment
Other-than-temporary impairment ("OTTI")

on securities

3,756 - 3,756 -
Net interest income after impairment 16,592 4,479 31,884 6,516
 
Other Income
Change in fair value of investments in excess mortgage

servicing rights

41,833 3,523 43,691 4,739
Change in fair value of investments in excess mortgage

servicing rights, equity method investees

20,127 - 21,096 -
Earnings from investments in consumer loans, equity

method investees

36,164 - 36,164 -
Gain on settlement of securities 58 - 58 -
98,182 3,523 101,009 4,739
 
Operating Expenses
General and administrative expenses 602 1,266 3,321 1,677
Management fee allocated by Newcastle 1,809 262 4,134 416
Management fee to affiliate 2,263 - 2,263 -
Incentive compensation to affiliate 878 - 878 -
5,552 1,528 10,596 2,093
 
Net Income $ 109,222 $ 6,474 $ 122,297 $ 9,162
 
Income Per Share of Common Stock
Basic $ 0.43 $ 0.03 $ 0.48 $ 0.04
Diluted $ 0.43 $ 0.03 $ 0.48 $ 0.04
 
Weighted Average Number of Shares of Common

Stock Outstanding

Basic 253,025,645 253,025,645 253,025,645 253,025,645
Diluted 256,659,488 253,025,645 254,852,605 253,025,645
 
Dividends Declared per Share of Common Stock $ 0.07 $ - $ 0.07 $ -
 
       

New Residential Investment Corp.

Consolidated Balance Sheets

(dollars in thousands)

 
June 30, 2013

(Unaudited)

 

December 31, 2012

Assets
Real estate securities, available-for-sale $ 1,759,239 $ 289,756
Investments in excess mortgage servicing rights, at fair value 271,420 245,036
Investments in excess mortgage servicing rights, equity method

investees, at fair value

183,153 -
Investments in consumer loans, equity method investees 280,816 -
Residential mortgage loans, held-for-investment 33,636 -
Cash and cash equivalents 209,699 -
Other assets   4,479   84
$ 2,742,442 $ 534,876
 
Liabilities and Equity
 
Liabilities
Repurchase agreements $ 1,474,338 $ 150,922
Due to affiliate 3,631 5,136
Dividends payable 17,712 -
Accrued expenses and other liabilities   1,036   462
  1,496,717   156,520
 
Commitments and contingencies
 
Stockholders' Equity
Common Stock, $0.01 par value, 2,000,000,000 shares authorized,

253,025,645 issued and outstanding at June 30, 2013

2,530 -
Additional paid-in capital 1,157,042 362,830
Retained earnings 66,939 -
Accumulated other comprehensive income   19,214   15,526
  1,245,725   378,356
$ 2,742,442 $ 534,876
 
           

New Residential Investment Corp.

Reconciliation of Core Earnings

(dollars in thousands)

 
Three Months Ended

June 30, 2013

Three Months Ended

June 30,

Six Months Ended

June 30,

April 1 - May 15 May 16 - June 30 2013 2012 2013 2012
 
Income available for common shareholders $ 24,572 $ 84,650 $ 109,222 $ 6,474 $ 122,297 $ 9,162
Impairment 3,756 - 3,756 - 3,756 -
Other Income (20,298 ) (77,884 ) (98,182 ) (3,523 ) (101,009 ) (4,739 )
Core earnings of equity method investees
Excess mortgage servicing rights 1,716 1,147 2,863 - 5,409 -
Consumer loans   9,986     9,807     19,793     -     19,793     -  
Core Earnings $ 19,732   $ 17,720   $ 37,452   $ 2,951   $ 50,246   $ 4,423  
 

Core Earnings

Set forth above is a reconciliation of core earnings to income available for common stockholders, which is the most directly comparable GAAP financial measure. Core earnings is used by management to gauge the Company’s current performance without taking into account gains and losses, which are subject to significant variability and are only a potential indicator of future economic performance, although they do represent a part of the Company’s recurring operations. Core earnings also adjusts earnings from the Company’s investment in consumer loans to a level yield basis, which is the basis on which management assesses the performance of this investment.

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