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Filed Pursuant to fule 424(B)(5)
Registration No. 333-232952
The information in this preliminary prospectus supplement is not complete and may be changed. A registration statement relating to these securities has become effective under the Securities Act of 1933. This preliminary prospectus supplement and the accompanying prospectus are not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.
Subject to Completion, dated April 14, 2021
Preliminary Prospectus Supplement
(To Prospectus dated August 1, 2019)
45,000,000 Shares

New Residential Investment Corp.
Common Stock
We are offering 45,000,000 shares of our common stock, $0.01 par value per share by this prospectus supplement and the accompanying prospectus.
This offering is intended to be part of our financing for the proposed acquisition of Caliber Home Loans Inc. (“Caliber”) and will be consummated prior to the closing of the Caliber Acquisition (as defined below). This offering of common stock is not contingent on the consummation of the Caliber Acquisition, and the closing of the Caliber Acquisition is not contingent on the consummation of this offering, and, as a result, it is possible that this offering occurs and the Caliber Acquisition does not occur and vice versa. We cannot assure you that the Caliber Acquisition will be consummated on the terms described herein or the time frame contemplated herein, if at all.
Our common stock is listed on the New York Stock Exchange (the “NYSE”) under the symbol “NRZ.” On April 13, 2021, the last reported sale price of our common stock was $10.93 per share.
Investing in our common stock involves a high degree of risk. Before making a decision to invest in our common stock, you should read the discussion of material risks of investing in our common stock in “Risk Factors” beginning on page S-13 of this prospectus supplement and in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2020, which has been filed with the Securities and Exchange Commission (the “SEC”) and is incorporated by reference in this prospectus supplement and the accompanying prospectus.
Neither the SEC nor any state or other securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus supplement or the accompanying prospectus. Any representation to the contrary is a criminal offense.
 
Per
Share
Total
Public offering price
$   
$   
Underwriting discount
$   
$   
Proceeds, before expenses, to us
$   
$   
We have granted the underwriters an option to purchase up to an additional 6,750,000 shares of our common stock at the public offering price, less the underwriting discount, within 30 days after the date of this prospectus supplement.
Delivery of the shares of our common stock will be made on or about    , 2021.
Book-Running Manager
Citigroup
The date of this prospectus supplement is    , 2021.

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You should rely only on the information contained in this prospectus supplement and the accompanying prospectus, including the documents incorporated herein and therein by reference. We have not, and the underwriters have not, authorized anyone to provide you with additional or different information. We are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where the offers and sales are permitted. The information contained or incorporated by reference in this prospectus supplement or the accompanying prospectus is accurate only as of the date of this prospectus supplement or the accompanying prospectus or the date of the document incorporated by reference, as the case may be, regardless of the time of delivery of this prospectus supplement or of any sale of shares of our common stock.
All references to “we,” “our,” “us,” “the Company” and “New Residential” in this prospectus supplement and the accompanying prospectus mean New Residential Investment Corp. and its consolidated subsidiaries, except where it is made clear that the term means only the parent company.
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Prospectus Supplement
Prospectus
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INCORPORATION BY REFERENCE
The SEC allows us to “incorporate by reference” into this prospectus supplement and the accompanying prospectus, information that we file with the SEC prior to the completion of this offering. This permits us to disclose important information to you by referring to these filed documents. Any information referenced in this way is considered to be a part of this prospectus supplement and the accompanying prospectus and any such information filed by us with the SEC subsequent to the date of this prospectus supplement (but prior to the completion of this offering) will automatically be deemed to update and supersede this information. We incorporate by reference the following documents which we have already filed with the SEC, except that any information which is furnished under Item 2.02 or Item 7.01 of any Current Report on Form 8-K (including financial statements or exhibits relating thereto furnished pursuant to Item 9.01) and not filed shall not be deemed incorporated by reference herein:
Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 16, 2021;
Current Report on Form 8-K, filed with the SEC on April 14, 2021;
The portions of our Definitive Proxy Statement on Schedule 14A for our 2021 Annual Meeting of Stockholders, filed on April 9, 2021, which are incorporated by reference in our Annual Report on Form 10-K for the year ended December 31, 2020.
The description of our Common Stock set forth in our Registration Statement on Form 10, as amended, filed on April 29, 2013, including any amendment or report filed for the purpose of updating such description (including the “Description of Securities Registered under Section 12 of the Exchange Act” included as Exhibit 4.24 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed on February 16, 2021).
Whenever after the date of this prospectus supplement (but prior to the completion of this offering) we file reports or documents under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, those reports and documents will be deemed to be a part of this prospectus supplement and the accompanying prospectus from the time they are filed (other than documents or information deemed to have been furnished and not filed in accordance with SEC rules). Any statement made in this prospectus supplement or the accompanying prospectus or in a document incorporated or deemed to be incorporated by reference in this prospectus supplement and the accompanying prospectus will be deemed to be modified or superseded for purposes of this prospectus supplement and the accompanying prospectus to the extent that a statement contained in this prospectus supplement or in any other subsequently filed document that is also incorporated or deemed to be incorporated by reference in this prospectus supplement and the accompanying prospectus modifies or supersedes that statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this prospectus supplement or the accompanying prospectus.
We will provide without charge, upon written or oral request, a copy of any or all of the documents which are incorporated by reference into this prospectus supplement and the accompanying prospectus, excluding any exhibits to those documents unless the exhibit is specifically incorporated by reference as an exhibit to the registration statement of which this prospectus supplement and the accompanying prospectus form a part. Requests should be directed to New Residential Investment Corp., 1345 Avenue of the Americas, 45th Floor, New York, New York 10105, Attention: Investor Relations (telephone number (212) 479-3150 and email address ir@newresi.com). Our SEC filings are also available free of charge at our website (www.newresi.com). The information on or accessible through our website is not incorporated by reference into this prospectus supplement or the accompanying prospectus.
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CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement, the accompanying prospectus and the documents incorporated herein and therein by reference contain certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. Such forward-looking statements relate to, among other things, the operating performance of our investments, the stability of our earnings, our financing needs and the size and attractiveness of market opportunities. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “endeavor,” “seek,” “anticipate” “estimate,” “overestimate,” “underestimate,” “believe,” “could,” “project,” “predict,” “continue” or other similar words or expressions. Forward-looking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain projections of results of operations, cash flows or financial condition or state other forward-looking information. Our ability to predict results or the actual outcome of future plans or strategies is inherently limited. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. These forward-looking statements involve risks, uncertainties and other factors that may cause our actual results in future periods to differ materially from forecasted results. As set forth more fully under the heading “Risk Factors” contained in Part I, Item IA in our Annual Report on Form 10-K for the year ended December 31, 2020, in this prospectus supplement and in any of our subsequent reports filed with the SEC and incorporated by reference herein, factors that could have a material adverse effect on our operations and future prospects include, but are not limited to:
the uncertainty and economic impact of the ongoing coronavirus (“COVID-19”) pandemic and of responsive measures implemented by various governmental authorities, businesses and other third parties, as well as the ultimate impact on us, our operations and personnel;
our ability to successfully execute our business and investment strategy;
our ability to deploy capital accretively and the timing of such deployment;
reductions in the value of, cash flows received from, or liquidity surrounding, our investments, which are based on various assumptions that could differ materially from actual results;
our reliance on, and counterparty concentration and default risks in, the servicers and subservicers we engage (“Servicing Partners”) and other third parties;
the impact of current or future legal proceedings and regulatory investigations and inquiries involving us, our Servicing Partners or other business partners;
the risks related to our origination and servicing operations, including, but not limited to, compliance with applicable laws, regulations and other requirements, significant increases in delinquencies for the loans, compliance with the terms of related servicing agreements, financing related servicer advances and the origination business, expenses related to servicing high risk loans, unrecovered or delayed recovery of servicing advances, foreclosure rates, servicer ratings, and termination of government mortgage refinancing programs;
our ability to obtain and maintain financing arrangements on terms favorable to us or at all, particularly in light of the current disruption in the financial markets;
changes in general economic conditions, in our industry and in the commercial finance and real estate markets, including the impact on the value of our assets or the performance of our investments;
the relative spreads between the yield on the assets in which we invest and the cost of financing;
impairments in the value of the collateral underlying our investments and the relation of any such impairments to the value of our securities or loans;
risks associated with our indebtedness, including our senior unsecured notes, and related restrictive covenants and non-recourse long-term financing structures;
adverse changes in the financing markets we access affecting our ability to finance our investments on attractive terms, or at all;
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changing risk assessments by lenders that potentially lead to increased margin calls, not extending our secured financing agreements or other financings in accordance with their current terms or not entering into new financings with us;
changes in interest rates and/or credit spreads, as well as the success of any hedging strategy we may undertake in relation to such changes;
the impact that risks associated with subprime mortgage loans and consumer loans, as well as deficiencies in servicing and foreclosure practices, may have on the value of our mortgage servicing rights (“MSRs”), excess mortgage servicing rights (“Excess MSRs”), servicer advance investments, residential mortgage-backed securities (“residential MBS” or “RMBS”), residential mortgage loans and consumer loan portfolios;
the risks that default and recovery rates on our MSRs, Excess MSRs, servicer advance investments servicer advance receivables, RMBS, residential mortgage loans and consumer loans deteriorate compared to our underwriting estimates;
changes in prepayment rates on the loans underlying certain of our assets, including, but not limited to, our MSRs or Excess MSRs;
the risk that projected recapture rates on the loan pools underlying our MSRs or Excess MSRs are not achieved;
servicer advances may not be recoverable or may take longer to recover than we expect, which could cause us to fail to achieve our targeted return on our Servicer Advance Investments or MSRs;
cybersecurity incidents and technology disruptions or failures;
our dependence on counterparties and vendors to provide certain services, which subjects us to various risks;
our ability to maintain our exclusion from registration under the Investment Company Act of 1940 (the “1940 Act”), and limits on our operations from maintaining such exclusion;
our ability to maintain our qualification as a real estate investment trust (“REIT”) for U.S. federal income tax purposes, and limits on our operations from maintaining REIT status;
competition within the finance and real estate industries;
our ability to attract and retain highly skilled personnel;
impact from our past and future acquisitions, and our ability to successfully integrate the acquired assets and assumed liabilities;
the impact of any material transactions or relationships with FIG LLC (the “Manager”) or one of its affiliates, including the impact of any actual, potential or perceived conflicts of interest;
the legislative/regulatory environment, including, but not limited to, the impact of the Dodd-Frank Act, regulation of corporate governance and public disclosure, changes in accounting rules, U.S. government programs intended to grow the economy, future changes to tax laws, the federal conservatorship of the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) and legislation that permits modification of the terms of residential mortgage loans;
the risk that actions by Fannie Mae or Freddie Mac or other regulatory initiatives or actions may adversely affect returns from investments in MSRs and Excess MSRs;
adverse market, regulatory or interest rate environments or our issuance of debt or equity, any of which may negatively affect the market price of our common stock;
our ability to pay distributions on our common stock.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. The factors noted above could cause our actual results to differ significantly from those contained in any forward-looking statement.
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We encourage you to read this prospectus supplement and the accompanying prospectus, as well as the information that is incorporated by reference in this prospectus supplement and the accompanying prospectus, in their entireties. In evaluating forward-looking statements, you should consider the discussion regarding risks and uncertainties under “Risk Factors” in this prospectus supplement and in our reports filed with the SEC. We caution that you should not place undue reliance on any of our forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us. Except as required by law, we are under no obligation (and expressly disclaim any obligation) to update or alter any forward-looking statement, whether written or oral, that we may make from time to time, whether as a result of new information, future events or otherwise.
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PROSPECTUS SUPPLEMENT SUMMARY
This summary highlights information contained elsewhere in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference. This summary does not contain all of the information you should consider before making a decision to invest in our common stock. You should read this entire prospectus supplement and the accompanying prospectus, including the documents incorporated by reference herein and therein, carefully before making an investment decision, especially the risks of investing in our common stock discussed under “Risk Factors” herein and therein and our consolidated financial statements and notes to those consolidated financial statements incorporated by reference herein and therein.
NEW RESIDENTIAL INVESTMENT CORP.
General
New Residential Investment Corp. (“New Residential”, “we”, “us” or “our”) is an investment manager with a vertically integrated mortgage platform. We are structured as a real estate investment trust (“REIT”) for U.S. federal income tax purposes.
We seek to generate long-term value for our investors by using our investment expertise to identify, manage and invest in mortgage related assets, including operating companies, that offer attractive risk-adjusted returns. Our investment strategy also involves opportunistically pursuing acquisitions and seeking to establish strategic partnerships that we believe enable us to maximize the value of the mortgage loans we originate and/or service by offering products and services to customers, servicers, and other parties through the lifecycle of transactions that affect each mortgage loan and underlying residential property.
We are externally managed and advised by our Manager, an affiliate of Fortress Investment Group LLC (“Fortress”) pursuant to a management agreement (the “Management Agreement”). We are able to draw upon the long-standing expertise and resources of Fortress, a global investment management firm. Pursuant to the terms of our Management Agreement with our Manager, our Manager provides a management team and other professionals who are responsible for implementing our business strategy, subject to supervision by our board of directors. For its services, our Manager is entitled to management fees, incentive fees and reimbursement for certain expenses, as defined in, and in accordance with the terms of the Management Agreement, and is eligible to receive incentive compensation, depending upon our performance. An affiliate of our Manager will also receive options in connection with this offering.
Acquisition of Caliber
Description of Acquisition
On April 14, 2021, we entered into a stock purchase agreement (the “Purchase Agreement”) with LSF Pickens Holdings, LLC (the “Seller”) and Caliber Home Loans, Inc. (“Caliber”). The Purchase Agreement provides that, upon the terms and subject to the conditions set forth therein, we or one of our subsidiaries will purchase all of the issued and outstanding equity interests of Caliber (the “Caliber Acquisition”) from LSF for a purchase price of $1.675 billion, subject to certain downward adjustments (including certain cash dividends and other payments out of Caliber and its subsidiaries since December 31, 2020).
The Purchase Agreement contains certain customary representations and warranties made by each party, which are qualified by matters included in Caliber’s confidential disclosures provided to us in connection with the Purchase Agreement. We, the Seller and Caliber have agreed to various customary covenants, including, among others, covenants regarding the conduct of Caliber’s business prior to the closing of the Caliber Acquisition and covenants requiring us, the Seller and Caliber to use commercially reasonable best efforts to obtain certain governmental consents, approvals or other authorizations required in connection with the Caliber Acquisition, subject to certain limitations. Subject to certain limited exceptions the representations and warranties and covenants made by each party do not survive the closing of the Caliber Acquisition.
Each party’s obligation to consummate the Caliber Acquisition is subject to certain closing conditions, including, among others, (i) the accuracy of the other party’s representations and warranties (subject to certain qualifications); (ii) the other party’s compliance with its covenants contained in the Purchase Agreement (subject to certain qualifications); (iii) the applicable waiting periods under the HSR Act (the “HSR Act Clearance”) shall have expired or been terminated; (iv) no judgment, decree or judicial order shall have been adopted, promulgated or entered into
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which prohibits the performance or consummation of the Caliber Acquisition and (v) the receipt of certain governmental entity, government-sponsored entity and third party approvals. In addition, our obligations to consummate the Caliber Acquisition are subject to the absence of any Material Adverse Effect (as defined in the Purchase Agreement).
The Purchase Agreement may be terminated by us or the Seller under certain circumstances, including, among others: (i) if the closing of the Caliber Acquisition has not occurred on or before December 31, 2021 (unless extended at our option for two additional thirty (30) day periods if certain closing conditions other than those relating to obtaining certain consents, approvals or other authorizations required in connection with the Caliber Acquisition have otherwise been satisfied); (ii) if a court or other governmental entity has issued a final and non-appealable order prohibiting the closing of the Caliber Acquisition; (iii) upon an uncured breach by the other party that would result in a failure of the conditions to the closing of the Caliber Acquisition to be satisfied; or (iv) certain circumstances relating to regulatory matters. In the event that the Purchase Agreement is terminated in certain circumstances and certain scheduled approvals from governmental entities and government-sponsored entities have not been obtained, we are obligated to pay the Seller a $25 million termination fee.
Description of Caliber
Caliber is a leader in the U.S. mortgage market with a diversified, customer-centric, purchase-focused platform. Caliber deliberately focuses on the purchase market and since 2016, is the second largest independent mortgage originator based on purchase volume according to Inside Mortgage Finance (“IMF”). Caliber has leveraged this platform to build scale across its various channels. As a result, for the year ended December 31, 2020, Caliber has maintained a top 20 market position across all three channels tracked by IMF – retail, wholesale, and correspondent.
Caliber was formed in 2013 when Lone Star Fund V (U.S.), L.P., Lone Star Fund VI (U.S.), L.P., and certain of their affiliates (“Lone Star”) combined separate origination and servicing investments to create a full-service mortgage platform, with an emphasis on the purchase market. Caliber’s high-touch Local Strategy (as defined below) has always been central to its business backed by its high-tech proprietary systems that help it efficiently meet the needs of its constituents. Caliber believes this approach has earned it a reputation with realtors and brokers nationwide as a trusted partner that executes complex transactions and delivers greater certainty of closing quickly and reliably.
Leveraging its established Local Strategy and strength in the purchase market, Caliber embarked on a journey four years ago to build out its Direct Strategy (as defined below). Caliber’s Direct Strategy sits at the intersection of its position in purchase and its ongoing servicing relationships, driving new customer acquisitions and refinance opportunities. Caliber chooses to retain servicing on the vast majority of the mortgages it originates in order to meet the ongoing housing needs of its customers.
Caliber’s track-record of success in originating and servicing mortgages is supported by robust capabilities, spanning operations, technology, analytics, capital markets and risk management. These capabilities have enabled Caliber to drive growth and attractive financial results. Caliber’s origination volume has increased at a 30% compound annual growth rate, or CAGR, since 2013 to $80.1 billion for the year ended December 31, 2020, versus an 11% CAGR of the overall mortgage market. Caliber’s steady growth and market leadership has led to net income of $665 million and a return on equity of 53% for the year ended December 31, 2020.
Caliber’s Local Strategy includes its retail and wholesale channels. Caliber’s Direct Strategy includes its direct-to-consumer (“DTC”) and correspondent channels as well as its servicing platform.
Caliber is treated as a taxable corporation for U.S. federal income tax purposes. Following the Caliber Acquisition, it is expected that Caliber will be, or that we will hold Caliber through, a taxable REIT subsidiary. Accordingly, Caliber’s operations will generally continue to be subject to U.S. federal (and applicable state and local) income tax at regular corporate rates. Because we are purchasing the stock of Caliber rather than its assets, Caliber’s tax basis in those assets will remain the same and not reflect a depreciable tax basis “step-up” based on our purchase price that would offset Caliber’s future taxable income and gains and increase its after-tax earnings.
Local Strategy
Caliber’s retail channel employs loan consultants across 46 states and 378 retail locations, including satellite offices. These loan consultants spend their time in their local communities at the point of sale, building and deepening relationships with realtors, home builders and other referral sources. These referral relationships are integral to
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Caliber’s success in the purchase mortgage market, as two-thirds of buyers typically rely on referrals when choosing a mortgage lender, according to a study conducted by STRATMOR Group in 2020. In addition, 92% of buyers aged 22 to 39 purchase a home through a real estate agent or broker, according to the 2020 NAR Home Buyer and Generational Trends survey.
Caliber loan consultants utilize Caliber’s state-of-the-art platform with integrated technologies from loan origination through fulfillment to focus on driving loans to close. Loan consultants have dedicated local operational resources. In many cases, a loan consultant and processor sit next to each other, facilitating quick communications and a brisk operational tempo. This allows Caliber to effectively solve complex purchase transactions.
Caliber drives further scale through its local network by partnering with wholesale brokers. Caliber has built a highly profitable and scaled wholesale platform, making it one of the four largest wholesale originators for the year ended December 31, 2020, according to IMF. Local loan brokers are able to leverage the full strength of Caliber’s platform and reputation to offer their customers the Caliber home purchase experience. Caliber has also built a rapidly growing direct-to-broker (“DTB”) centralized platform to expand its wholesale channel in markets where it does not currently have a local presence. Caliber believes that its DTB platform is highly scalable and efficient, leveraging the same centralized technology infrastructure (its proprietary web-based, workflow-oriented solution) and data and analytics framework developed for its DTC channel.
Direct Strategy
Caliber’s Direct Strategy sits at the intersection of Caliber’s position in purchase and its ongoing servicing relationships with customers. Caliber built its highly efficient and scalable DTC channel, and invested in predictive machine-learning based analytics, in order to optimize its customer lifetime value by providing customers with various financing options across their different life stages. Caliber’s DTC channel provides it with a cost-efficient method to refinance its existing customers. Caliber also utilizes its DTC platform to attract new customer acquisitions through advanced marketing techniques. Additionally, Caliber opportunistically acquires high-quality customers via its correspondent channel, which it considers a valuable resource for generating future originations. Approximately 47% of its DTC volume was sourced from its correspondent channel for the year ended December 31, 2020.
Caliber retains customer relationships through ongoing servicing. By retaining mortgage servicing rights, Caliber accumulates information about the future financing needs of its more than half a million servicing customers. This allows Caliber to maintain ongoing relationships with its customers, which positions it to serve their future home financing needs. Caliber’s ability to keep customers under the Caliber roof and notify its loan consultants of potential customer purchase and refinancing opportunities allows them to maintain and enhance their previously established relationships. Generally, the longer a loan consultant stays with Caliber, the larger their referral business grows, serving as an effective loan consultant retention tool. In addition to these benefits, Caliber’s servicing portfolio is designed to generate attractive and predictable cash flows and enhance the value of its origination business. Caliber operates an efficient servicing platform. Caliber has taken a disciplined approach to managing its servicing portfolio through careful monitoring of relative size compared to its origination volume, which Caliber believes has allowed it to efficiently grow its platform while minimizing risk through utilizing a deliberate mortgage servicing rights hedging strategy.
By providing its customers’ next purchase or refinance transaction, Caliber generates attractive incremental cash margins, while extending the life of its servicing cash flows. The roll-out of Caliber’s Direct Strategy has raised Caliber’s customer refinancing retention rates to industry-leading levels. Refinancing retention rates for Caliber’s retail and DTC operations have increased from 51% for the year ended December 31, 2018 to 69% for the year ended December 31, 2020 compared to the industry average of 18% for the year ended December 31, 2020. In addition to Caliber’s strength in refinancing retention, Caliber is also an industry leader in repeat purchase transactions and its local retail operations have consistently generated quarterly repeat purchases between 50% and 65% for the periods ended December 31, 2019, and December 31, 2020. Retail repeat purchases were 57% for the year ended December 31, 2020.
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Recent Developments
Preliminary Unaudited Financial Results for the First Quarter Ended March 31, 2021
 
Three Months Ended
March 31, 2021
Estimated Preliminary Financial Results
 
GAAP Net Income Per Diluted Share(1)
$0.64 to $0.70
Core Earnings Per Diluted Share(1)*
$0.31 to $0.37
Book Value Per Share(2)
$11.32 to $11.42
*
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” below.
(1)
Per common share calculations of GAAP net income and core earnings are based on 429,491,379 weighted average diluted common shares during the quarter ended March 31, 2021.
(2)
Book value per share based on 414,795,505 basic shares outstanding as of March 31, 2021.
Our preliminary financial results may change as a result of the completion of our closing procedures for the quarter ended March 31, 2021 and, as a result, our final results upon completion of the closing procedures may vary from the preliminary estimates. These preliminary results, which are the responsibility of our management, were prepared by our management in connection with the preparation of our financial statements and are based upon a number of assumptions. Additional items that may require adjustments to the preliminary operating results may be identified and could result in material changes to our estimated preliminary operating results. The preliminary operating results are inherently uncertain and we undertake no obligation to update this information. Ernst & Young LLP, the Company’s independent registered public accounting firm, has not audited, reviewed or performed any procedures with respect to this preliminary financial information. Accordingly, Ernst & Young LLP does not express an opinion or provide any form of assurance with respect thereto. See “Risk Factors—Risks Related to Our Business—Our preliminary financial results for the first quarter ended March 31, 2021 are prepared by our management. Our auditors have not audited, reviewed, compiled or performed any procedures with respect to this preliminary financial information. Our financial results upon completion of the closing procedures may vary from the preliminary estimates.”
Non-GAAP Measures and Reconciliation to GAAP Net Income
 
Three Months Ended
March 31, 2021
Estimated Preliminary Financial Results (dollars in thousands, except per share data)
Low
High
Net (loss) income attributable to common stockholders
$275,178
$300,948
Adjustments for Non-Core Earnings:
 
 
Unrealized and realized (gain) loss, net
(310,542)
(310,542)
Preferred stock management fee to affiliate
3,048
3,048
Deferred taxes
109,952
109,952
Other
54,427
54,427
Core Earnings
$132,063
$157,832
Net Income Per Diluted Share
$0.64
$0.70
Core Earnings Per Diluted Share
$0.31
$0.37
Weighted Average Number of Shares of Common Stock Outstanding, Diluted
429,491,379
429,491,379
The reconciliation of estimated preliminary net income to core earnings results was calculated across the low and high net income ranges based on our preliminary estimates of the expected base case differences between net income and core earnings. Similar to the estimated preliminary operating results noted above, our final reconciliation upon completion of our closing procedures may vary from the preliminary estimates. See footnote (A) under “Summary Historical and Unaudited Pro Forma Financial Information—New Residential Investment Corp. and Subsidiaries Consolidated Statements of Income” for a description of how we calculate core earnings
Our Corporate Information
Our principal executive offices are located at 1345 Avenue of the Americas, 45th Floor, New York, New York 10105. Our telephone number is 212-479-3150. Our web address is www.newresi.com. The information on or otherwise accessible through our web site does not constitute a part of this prospectus supplement or the accompanying prospectus and is not incorporated by reference into this prospectus supplement, the accompanying prospectus or any other report or document we file with or furnish to the Securities and Exchange Commission (the “SEC”).
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THE OFFERING
Common stock offered
45,000,000 shares (or 51,750,000 shares if the underwriters exercise their option to purchase additional shares of our common stock in full)
Common stock to be outstanding after the offering
459,797,263 shares (or 466,547,263 shares if the underwriters exercise their option to purchase additional shares of our common stock in full)
New York Stock Exchange (the “NYSE”) symbol
“NRZ”
Risk factors
Investing in our common stock involves certain risks, which are described under “Risk Factors” beginning on page S-13 of this prospectus supplement and in our reports filed with the SEC.
Use of proceeds
We estimate that the net proceeds from our sale of common stock in this offering will be approximately $   (or $   if the underwriters exercise their option to purchase additional shares of our common stock in full) after deducting the expenses of this offering and the underwriting discount. We intend to use the net proceeds from our sale of common stock in this offering to finance the Caliber Acquisition and to pay related fees and expenses, and the remainder (if any) for investments and general corporate purposes.
This offering of common stock is not contingent on the closing of the Caliber Acquisition, and the closing of the Caliber Acquisition is not contingent on the consummation of this offering, and, as a result, it is possible that this offering occurs and the Caliber Acquisition does not occur and vice versa. We cannot assure you that the Caliber Acquisition will be consummated on the terms described herein or the time frame contemplated herein, if at all. In the event the Caliber Acquisition is not consummated, we intend to use the net proceeds from the offering for general corporate purposes.
The number of shares of our common stock that will be outstanding after this offering is based on 414,797,263 shares of our common stock outstanding as of April 13, 2021 and excludes:
(i)
options relating to an aggregate of 11,667,675 shares of our common stock held by our Manager;
(ii)
options relating to an aggregate of 6,000 shares of our common stock held by our directors; and
(iii)
options relating to 4,500,000 shares of our common stock (or 5,175,000 shares if the underwriters exercise their option to purchase additional shares of our common stock in full) at an exercise price per share equal to the public offering price, representing 10% of the number of shares being offered by us hereby, that have been approved by the compensation committee of our board of directors to be granted pursuant to and in accordance with the terms of our Nonqualified Stock Option and Incentive Award Plan, as amended (the “Plan”), to an affiliate of our Manager in connection with this offering, and subject to adjustment if the underwriters exercise their option to purchase additional shares of our common stock. The options are fully vested as of the date of grant, become exercisable as to 1/30 of the shares to which it is subject on the first day of each of the 30 calendar months following the first month after the date of the grant and expire on the tenth anniversary of the date of grant.
These options will be settled in an amount of cash equal to the excess of the fair market value of a share of our common stock on the date of exercise over the exercise price, unless advance approval is made to settle the option in shares.
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SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL INFORMATION
Summary Historical and Other Data of NRZ
The following table presents our summary historical financial information for the years ended December 31, 2020, 2019 and 2018 and as of the years ended December 31, 2020 and 2019.
The summary historical consolidated statements of income for the years ended December 31, 2020, 2019 and 2018 and the summary historical consolidated balance sheets as of December 31, 2020 and 2019 have been derived from our audited financial statements incorporated by reference into this prospectus supplement.
The summary unaudited pro forma condensed combined balance sheet presented below has been prepared by us and gives effect to the pro forma adjustments described in “Unaudited Pro Forma Condensed Combined Financial Information” as if they had occurred on December 31, 2020. The summary unaudited pro forma condensed combined statement of income presented below has been prepared by us and gives effect to the pro forma adjustments described in “Unaudited Pro Forma Condensed Combined Financial Information” as if they had occurred on January 1, 2020.
The summary unaudited pro forma condensed combined financial information should be read in conjunction with the notes to the unaudited pro forma condensed combined financial statements. See “Unaudited Pro Forma Condensed Combined Financial Information.” In addition, the summary unaudited pro forma condensed combined financial information was based on, and should be read in conjunction with our and Caliber's audited consolidated financial statements for the year ended December 31, 2020, each incorporated by reference in this prospectus supplement.
The summary unaudited pro forma condensed combined financial information has been presented for informational purposes only. The pro forma information is not necessarily indicative of what the combined company’s financial position or results of operations actually would have been had the Caliber Acquisition been completed as of the date indicated. In addition, the summary unaudited pro forma condensed combined financial information does not purport to project the future financial position or operating results of the combined company. There were no material transactions between us and Caliber during the period presented in the unaudited pro forma condensed combined financial statements that would need to be eliminated.
The unaudited pro forma condensed combined financial statements have been prepared using the acquisition method of accounting under U.S. GAAP. The accounting for the Caliber Acquisition is dependent upon certain estimates that are subject to change. Accordingly, the pro forma adjustments are preliminary and have been made solely for the purpose of providing the unaudited pro forma condensed combined financial statements. Differences between these preliminary estimates and the final acquisition accounting may occur and these differences could be material. The differences could have a material impact on the summary unaudited pro forma condensed combined financial information presented below and our future results of operations and financial position.
In addition, except as otherwise noted, the summary unaudited pro forma condensed combined financial information presented below does not reflect any cost savings, operating synergies or revenue enhancements that the combined company may achieve as a result of the Caliber Acquisition, the costs to integrate Caliber’s operations with ours or the costs necessary to achieve these cost savings, operating synergies and revenue enhancements.
The summary historical financial information below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and New Residential’s audited consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended December 31, 2020, which is incorporated by reference into this prospectus supplement and the accompanying prospectus.
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NEW RESIDENTIAL INVESTMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except share and per share data)
 
Pro Forma
for the year
ended
December 31,
2020
Year Ended December 31,
 
2020
2019
2018
Revenues
 
 
 
 
Interest income
$1,177,345
$1,102,537
$1,766,130
$1,664,223
Fee income
229,739
Servicing revenue, net
(631,247)
(555,041)
385,159
528,595
Gain on sale of originated mortgage loans, held-for-sale, net
3,932,204
1,399,092
460,107
86,065
 
4,708,041
1,946,588
2,611,396
2,278,883
Expenses
 
 
 
 
Interest expense
743,337
584,469
933,751
606,433
General and administrative expenses
2,932,341
1,120,087
781,971
441,886
Management fee to affiliate
96,634
89,134
79,472
62,594
Incentive compensation to affiliate
91,892
94,900
 
3,772,312
1,793,690
1,887,086
1,205,813
Other income (loss)
 
 
 
 
Change in fair value of investments
(410,843)
(437,126)
(307,396)
(136,212)
Gain (loss) on settlement of investments, net
(930,205)
(930,131)
227,981
96,064
Earnings from investments in consumer loans, equity method investees
(1,438)
10,803
Other income (loss), net
(2,797)
(2,797)
39,819
(21,984)
 
(1,343,845)
(1,370,054)
(41,034)
(51,329)
Impairment
 
 
 
 
Provision (reversal) for credit losses on securities
13,404
13,404
25,174
30,017
Valuation and credit loss provision (reversal) on loans and real estate owned
110,208
110,208
10,403
60,624
 
123,612
123,612
35,577
90,641
Income (Loss) Before Income Taxes
(531,728)
(1,340,768)
647,699
931,100
Income tax expense (benefit)
242,579
16,916
41,766
(73,431)
Net Income (Loss)
$(774,307)
$(1,357,684)
$605,933
$1,004,531
Noncontrolling interests in income of consolidated subsidiaries
52,674
52,674
42,637
40,564
Dividends on preferred stock
54,295
54,295
13,281
Net Income (Loss) Attributable to Common Stockholders
$(881,276)
$(1,464,653)
$550,015
$963,967
Net Income (Loss) Per Share of Common Stock
 
 
 
 
Basic
$(1.91)
$(3.52)
$1.35
$2.82
Diluted
$(1.91)
$(3.52)
$1.34
$2.81
Weighted Average Number of Shares of Common Stock Outstanding
 
 
 
 
Basic
461,258,841
415,513,187
408,789,642
341,268,923
Diluted
461,258,841
415,513,187
408,990,107
343,137,361
Dividends Declared Per Share of Common Stock
 
$0.50
$2.00
$2.00
 
 
 
 
 
Other Data
 
 
 
 
Core Earnings(A)
 
$607,174
$886,794
$815,158
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NEW RESIDENTIAL INVESTMENT CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)
 
Pro Forma
as of
December 31,
2020
December 31,
 
2020
2019
Assets
 
 
 
Excess mortgage servicing rights, at fair value
$410,855
$410,855
$505,343
Mortgage servicing rights, at fair value
4,944,251
3,489,675
3,967,960
Mortgage servicing rights financing receivables, at fair value
1,096,166
1,096,166
1,718,273
Servicer advance investments, at fair value
538,056
538,056
581,777
Real estate and other securities
9,244,558
14,244,558
19,477,728
Residential loans and variable interest entity consumer loans held-for-investment, at fair value
1,359,754
1,359,754
1,753,251
Residential mortgage loans, held-for-sale (includes $4,705,816 and $4,613,612 at fair value at December 31, 2020 and 2019, respectively)
11,952,142
5,215,703
6,042,664
Residential mortgage loans subject to repurchase
3,874,509
1,452,005
172,336
Cash and cash equivalents
723,751
944,854
528,737
Restricted cash
188,696
135,619
162,197
Servicer advances receivable
3,133,390
3,002,267
3,301,374
Trades receivable
4,180
4,180
5,256,014
Other assets
2,364,560
1,358,422
1,395,800
 
$39,834,868
$33,252,114
$44,863,454
Liabilities and Equity
 
 
 
Liabilities
 
 
 
Secured financing agreements
$19,176,986
$17,547,680
$27,916,225
Secured notes and bonds payable (includes $1,662,852 and $659,738 at fair value at December 31, 2020 and 2019, respectively)
8,462,981
7,644,195
7,720,148
Residential mortgage loan repurchase liability
3,874,509
1,452,005
172,336
Unsecured senior notes, net of issuance costs
541,516
541,516
Trades payable
154
154
902,081
Due to affiliates
9,450
9,450
103,882
Dividends payable
90,128
90,128
211,732
Accrued expenses and other liabilities
1,749,460
537,302
600,790
 
33,905,184
27,822,430
37,627,194
Commitments and Contingencies
 
 
 
Equity
 
 
 
Preferred stock, $0.01 per value, 39,100,000 shares authorized, 33,610,000 and 17,510,000 issued and outstanding at December 31, 2020 and 2019, respectively ($840,250 and $437,750 aggregate liquidation preference, respectively)
812,992
812,992
423,444
Common stock, $0.01 par value, 2,000,000,000 shares authorized, 414,744,518 and 415,520,780 issued and outstanding at December 31, 2020 and 2019, respectively
4,605
4,148
4,156
Additional paid-in capital
6,046,651
5,547,108
5,498,226
Retained earnings (accumulated deficit)
(1,108,929)
(1,108,929)
549,733
Accumulated other comprehensive income
65,697
65,697
682,151
Total New Residential stockholders' equity
5,821,016
5,321,016
7,157,710
Noncontrolling interests in equity of consolidated subsidiaries
108,668
108,668
78,550
Total Equity
5,929,684
5,429,684
7,236,260
 
$39,834,868
$33,252,114
$44,863,454
(A)
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 realized and unrealized gains or losses on our investments, including any impairment or reserve for expected credit losses and (v) income from our origination and servicing businesses. “Core earnings” is a non-GAAP measure of our operating performance, excluding the fourth variable above and
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adjusts the earnings from the consumer loan investment to a level yield basis. Core earnings is used by management to evaluate our performance without taking into account: (i) realized and unrealized gains and losses, which although they represent a part of our recurring operations, are subject to significant variability and are generally limited to a potential indicator of future economic performance; (ii) incentive compensation paid to our Manager; (iii) non-capitalized transaction-related expenses; and (iv) deferred taxes, which are not representative of current operations.
Our definition of core earnings includes accretion on held-for-sale loans as if they continued to be held-for-investment. Although we intend 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, we continue to receive cash flows from such loans and believe that it is appropriate to record a yield thereon. In addition, our definition of core earnings excludes all deferred taxes, rather than just deferred taxes related to unrealized gains or losses, because we believe deferred taxes are not representative of current operations. Our definition of core earnings also limits accreted interest income on RMBS where we receive par upon the exercise of associated call rights based on the estimated value of the underlying collateral, net of related costs including advances. We 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. We believe this amount represents the amount of accretion we would have expected to earn on such bonds had the call rights not been exercised.
Beginning January 1, 2020, our 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 our 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 our investments in consumer loans, and the consolidation of entities that own our investments in consumer loans, respectively, we continue to record a level yield on those assets based on their original purchase price.
While incentive compensation paid to our Manager may be a material operating expense, we exclude 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, we note that, as an example, in a given period, we 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, we 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. We believe 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 our 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 our 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 we acquire certain investments, as well as costs associated with the acquisition and integration of acquired businesses.
Since the third quarter of 2018, as a result of the Shellpoint Partners LLC (“Shellpoint”) acquisition, we, through our wholly owned subsidiary, NewRez, originate conventional, government-insured and nonconforming residential mortgage loans for sale and securitization. In connection with the transfer of loans to the Government-sponsored enterprises (“GSEs”) or mortgage investors, we report realized gains or losses on the sale of originated residential mortgage loans and retention of mortgage servicing rights, which we believe is an indicator of performance for our servicing and origination 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.
Beginning with the third quarter of 2019, as a result of the continued evaluation of how Shellpoint operates its business and its impact on our operating performance, core earnings includes Shellpoint’s GAAP net income with the exception of the unrealized gains or losses due to changes in valuation inputs and assumptions on MSRs owned by NewRez, and non-capitalized transaction-related expenses. This change was not material to core earnings for the quarter ended September 30, 2019.
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 our activity, assist in comparing the core operating results between periods, and enable investors to evaluate our 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 our 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 our core operations for the reasons described herein. As such, core earnings is not intended to reflect all of our activity and should be considered as only one of the factors used by management in assessing our performance, along with GAAP net income which is inclusive of all of our activities.
The primary differences between core earnings and the measure we use 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 our incentive compensation measure (either immediately or through amortization). In addition, our 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, our incentive compensation measure is intended to reflect all realized results of operations.
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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 our calculation of this measure may not be comparable to similarly entitled measures reported by other companies. For a further description of the difference between cash flows provided by operations and net income, see “Management’s Discussion and Analysis of Financial Consolidation and Results of Operations—Liquidity and Capital Resources” in our Annual Report on Form 10-K for the year ended December 31, 2020, which is incorporated by reference in this prospectus supplement and the accompanying prospectus. 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)
Year Ended December 31,
 
2020
2019
2018
Net (loss) income attributable to common stockholders
$(1,464,653)
$550,015
$963,967
Adjustments for Non-Core Earnings:
 
 
 
Impairment
123,612
35,344
90,641
Change in fair value of investments
743,239
254,335
(115,896)
(Gain) loss on settlement of investments, net
947,316
(188,381)
(96,319)
Other (income) loss
132,741
1,756
11,425
Other income and impairment attributable to non-controlling interests
(5,585)
(13,548)
(22,247)
Non-capitalized transaction-related expenses
56,522
56,289
21,946
Incentive compensation to affiliate
91,892
94,900
Preferred stock management fee to affiliate
11,439
2,642
Deferred taxes
15,029
38,207
(80,054)
Interest income on residential mortgage loans, held-for-sale
37,246
60,689
13,374
Limit on RMBS discount accretion related to called deals
(19,590)
(58,581)
Adjust consumer loans to level yield
(1,147)
5,239
(21,181)
Core Earnings of equity method investees:
 
 
 
Excess mortgage servicing rights
11,415
11,905
13,183
Core Earnings
$607,174
$886,794
$815,158
 
 
 
 
Net (Loss) Income Per Diluted Share
$(3.52)
$1.34
$2.81
Core Earnings Per Diluted Share
$1.46
$2.17
$2.38
 
 
 
 
Weighted Average Number of Shares of Common Stock Outstanding, Diluted
415,513,187
408,990,107
343,137,361
Summary Historical Financial and Other Data of Caliber
The following tables present a summary of historical consolidated financial data for Caliber and Caliber’s subsidiaries for the years ended December 31, 2020, 2019 and 2018 and as of the years ended December 31, 2020 and 2019. The statement of operations data for each of the three years ended December 31, 2020, 2019 and 2018, and balance sheet data as of December 31, 2020 and 2019 have been obtained from Caliber’s audited consolidated financial statements contained in Exhibit 99.2 of our Current Report on Form 8-K filed on April 14, 2021, which is incorporated by reference into this prospectus supplement and the accompanying prospectus.
CALIBER HOME LOANS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except share and per share data)
 
Year Ended December 31,
 
2020
2019
2018
Revenues:
 
 
 
Gain on sale, net
$2,533,112
$1,093,233
$725,802
Fee income
229,739
164,734
133,583
Servicing fees, net
501,950
490,073
485,514
Change in fair value of mortgage servicing rights
(596,954)
(565,640)
(110,086)
Other income
18,798
12,377
4,266
Total revenues
2,686,645
1,194,777
1,239,079
 
 
 
 
Operating expenses:
 
 
 
Compensation and benefits
1,360,367
836,688
729,937
Occupancy and equipment
48,162
46,894
57,585
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Year Ended December 31,
 
2020
2019
2018
General and administrative
371,079
258,031
211,916
Depreciation and amortization
32,646
31,921
29,763
Total operating expenses
1,812,254
1,173,534
1,029,201
 
 
 
 
Income from operations
874,391
21,243
209,878
 
 
 
 
Other income (expense):
 
 
 
Interest income
187,091
207,452
148,772
Interest expense
(170,546)
(199,944)
(173,949)
Loss on extinguishment of debt
(74)
(519)
(8,454)
Other income (expense), net
16,471
6,989
(33,631)
Net income before taxes
890,862
28,232
176,247
Income tax expense
(225,663)
(6,605)
(47,208)
Net income
$665,199
$21,627
$129,039
 
 
 
 
Earnings per share
 
 
 
Basic
$5.58
$0.18
$1.08
CALIBER HOME LOANS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share amounts)
 
December 31,
 
2020
2019
Assets
 
 
Cash and cash equivalents
$504,378
$90,739
Restricted cash
29,293
49,200
Servicing advances, net
160,606
119,630
Mortgage loans held for sale, at fair value
8,007,730
6,639,122
Mortgage servicing rights, at fair value
1,156,831
1,743,570
Property and equipment, net
77,055
67,352
Loans eligible for repurchase from GNMA
2,273,601
194,554
Derivative assets
315,488
100,504
Prepaid expenses and other assets
430,257
274,443
Total assets
$12,955,239
$9,279,114
 
 
 
Liabilities and stockholder’s equity
 
 
Accounts payable and accrued expenses
$417,148
$234,038
Servicer advance facilities, net
109,965
46,060
Warehouse credit facilities, net
7,369,193
6,316,133
MSR financing facilities, net
899,898
1,071,224
Liability for loans eligible for repurchase from GNMA
2,273,601
194,554
Derivative liabilities
95,285
22,607
Other liabilities
386,371
309,222
Total liabilities
11,551,461
8,193,838
 
 
 
Stockholder’s equity
 
 
Preferred stock – 15,000,000 shares authorized, no shares issued and outstanding, $0.0001 par value
Common stock – 485,000,000 shares authorized, 119,172,000 shares issued and outstanding, $0.0001 par value
12
12
Additional paid-in capital
659,644
656,341
Retained earnings
744,122
428,923
Total stockholder’s equity
1,403,778
1,085,276
Total liabilities and stockholder’s equity
$12,955,239
$9,279,114
The following tables present a summary of the key operating metrics for Caliber for the years ended December 31, 2020 and 2019.
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Year Ended December 31,
 
2020
2019
Servicing
 
 
Servicing Portfolio (Unpaid Principal Balance (“UPB”), dollars in billions)
 
 
Owned or Parent Owned Performing MSR
$134.5
$140.6
Third Party / Special / Whole Loans
$14.0
$12.1
Total UPB
$148.5
$152.7
 
 
 
Origination
 
 
Funded Volume by Channel (UPB, dollars in billions)
 
 
Direct to Consumer
$3.3
$9.0
Distributed Retail
$21.4
$39.0
Joint Venture
Wholesale
$16.3
$22.5
Correspondent
$20.4
$9.8
Total Funded Volume
$61.3
$80.3
 
 
 
Funded Volume by Product (UPB, dollars in billions)
 
 
Agency
$29.5
$54.6
Government
$28.9
$24.2
Non-Agency
$1.4
$0.3
Non-QM
$1.6
$1.2
 
 
 
Purchase Refinance Funded Volume (UPB, dollars in billions)
 
 
Purchase
$33.5
$35.7
Refinance
$27.8
$44.6
 
 
 
Pull-Through Adjusted Lock Volume (UPB, dollars in billions)
 
 
Direct to Consumer
$4.1
$10.5
Total Pull-Through Adjusted Lock Volume
$64.5
$84.6
 
 
 
GOS Revenue Margin
 
 
Direct to Consumers
4.23%
4.64%
Distributed Retail
3.69%
4.31%
Joint Venture
Wholesale
1.14%
2.48%
Correspondent
0.46%
0.41%
Total
1.97%
3.41%
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RISK FACTORS
Investing in our common stock involves risks. Please see the risk factors set forth below as well as those risks described in our most recent Annual Report on Form 10-K for the year ended December 31, 2020, which is incorporated by reference in this prospectus supplement and the accompanying prospectus. Before making an investment decision, you should carefully consider these risks as well as other information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus. Any of these risks, as well as other risks and uncertainties, could materially harm our business, financial condition, results of operations and liquidity and our ability to make distributions to our shareholders. In that case, the value or trading price of our common stock could decline, and you could lose part or all of your investment.
Risks Related to the Caliber Acquisition
The Caliber Acquisition is subject to conditions, some or all of which may not be satisfied, or completed on a timely basis, if at all. Failure to complete the Caliber Acquisition could have material adverse effects on us.
On April 14, 2021, we signed the Purchase Agreement to acquire Caliber. The closing of this offering is not conditioned on, and is expected to be consummated before, the closing of the Caliber Acquisition, and the closing of the Caliber Acquisition is not conditioned on the consummation of this offering. As a result, it is possible that this offering occurs and the Caliber Acquisition does not occur and vice versa. We cannot assure you that the Caliber Acquisition will be consummated on the terms described herein or the timeframe contemplated herein, if at all. In addition, we may not be able to obtain financing on favorable terms, or at all, or we may be unable to use the financing that we obtain in connection with the Caliber Acquisition. In the event the Caliber Acquisition is not consummated, we may be unable to find attractive uses for the proceeds from this offering.
The completion of the Caliber Acquisition is subject to a number of conditions, including (i) the accuracy of the other party’s representations and warranties (subject to certain qualifications); (ii) the other party’s compliance with its covenants contained in the Purchase Agreement (subject to certain qualifications); (iii) the expiration or termination of the HSR Act Clearance, (iv) the absence of any judgment, decree or judicial order adopted, promulgated or entered into which prohibits the performance or consummation of the Caliber Acquisition, (v) the receipt of certain governmental entity, government-sponsored entity and third party approval and (vi) the absence of any Material Adverse Effect (as defined in the Purchase Agreement), which make the completion of the Caliber Acquisition and timing thereof uncertain. There can be no assurance that the conditions to closing of the Caliber Acquisition will be satisfied or waived or that other events will not intervene to delay or result in the failure to close the Caliber Acquisition. Under the terms of the Purchase Agreement, the Caliber Acquisition is required to close no later than December 31, 2021 (unless extended at our option for two additional thirty (30) day periods if certain closing conditions other than those relating to obtaining certain consents, approvals or other authorizations required in connection with the Caliber Acquisition have otherwise been satisfied), subject to the satisfaction or waiver of certain closing conditions. Any delay in closing or a failure to close could have a negative impact on our business and the trading price of our common stock.
In addition, regulators, such as governmental entities and GSEs, may impose conditions, terms, obligations or restrictions in connection with their approval of or consent to the Caliber Acquisition, and such conditions, terms, obligations or restrictions may delay completion of the Caliber Acquisition, require us to take actions that materially alter our existing business or the proposed combined business, including divestitures or similar transactions, or impose additional material costs on or materially limit the revenues of the combined company following the completion of the Caliber Acquisition. Regulators may impose such conditions, terms, obligations or restrictions, and, if imposed, such conditions, terms, obligations or restrictions may delay or lead to the abandonment of the Caliber Acquisition.
If the Caliber Acquisition is not completed, our ongoing business may be materially adversely affected and, without realizing any of the benefits of having completed the Caliber Acquisition, we will be subject to a number of risks, including the following:
the market price of our common stock could decline;
we could owe a substantial termination fee to the other party under certain circumstances;
time and resources committed by our management to matters relating to the Caliber Acquisition could otherwise have been devoted to pursuing other beneficial opportunities for our Company;
we may experience negative reactions from the financial markets or from our customers, employees, suppliers and regulators; and
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we will be required to pay the costs relating to the Caliber Acquisition, such as legal, accounting and financial advisory fees, whether or not the Caliber Acquisition is completed.
The materialization of any of these risks could adversely impact our ongoing business.
Similarly, delays in the completion of the Caliber Acquisition could, among other things, result in additional transaction costs, loss of revenue or other negative effects associated with uncertainty about completion of the Caliber Acquisition.
We and Caliber are each subject to business uncertainties and contractual restrictions while the Caliber Acquisition is pending, which could adversely affect the business and operations of the combined Company.
In connection with the pendency of the Caliber Acquisition, it is possible that some customers, suppliers and other persons with whom we or Caliber have a business relationship may delay or defer certain business decisions or might decide to seek to terminate, change or renegotiate their relationships with us or Caliber, as the case may be, as a result of the Caliber Acquisition, which could negatively affect our current or the combined Company’s future revenues, earnings and cash flows, regardless of whether the Caliber Acquisition is completed.
Under the terms of the Purchase Agreement, Caliber is subject to certain restrictions on the conduct of its business prior to completing the Caliber Acquisition, which may adversely affect its ability to execute certain of its business strategies, including the ability in certain cases to enter into or amend contracts, acquire or dispose of assets, incur indebtedness or fund capital expenditures. Such limitations could adversely affect Caliber’s business and operations prior to the completion of the Caliber Acquisition.
Each of the risks described above may be exacerbated by delays or other adverse developments with respect to the completion of the Caliber Acquisition.
Uncertainties associated with the Caliber Acquisition may cause a loss of management personnel and other key employees, and we may have difficulty attracting and motivating management personnel and other key employees, which could adversely affect our future business and operations.
We are dependent on the experience and industry knowledge of our management personnel and other key employees to execute our business plans. Our success after the completion of the Caliber Acquisition will depend in part upon our ability to attract, motivate and retain key management personnel and other key employees. Prior to completion of the Caliber Acquisition, current and prospective employees may experience uncertainty about their roles within our Company following the completion of the Caliber Acquisition, which may have an adverse effect on our ability to attract, motivate or retain management personnel and other key employees. In addition, no assurance can be given that we will be able to attract, motivate or retain management personnel and other key employees to the same extent after the completion of the Caliber Acquisition.
The unaudited pro forma condensed combined financial information in this prospectus supplement is presented for illustrative purposes only and may not be reflective of the operating results and financial condition of the combined Company following completion of the Caliber Acquisition.
The unaudited pro forma condensed combined financial information in this prospectus supplement is presented for illustrative purposes only and is not necessarily indicative of what the combined Company’s actual financial position or results of operations would have been had the Caliber Acquisition been completed on the date indicated. Further, the combined Company’s actual results and financial position after the Caliber Acquisition may differ materially and adversely from the unaudited pro forma condensed combined financial data that is included in this prospectus supplement. These estimates may be revised as additional information becomes available and as additional analyses are performed. The unaudited pro forma condensed combined financial information reflects adjustments based upon preliminary estimates of the fair value of assets to be acquired and liabilities to be assumed. The final acquisition accounting will be based upon the actual acquisition consideration and the fair value of the assets and liabilities of the Company under GAAP as of the date of the completion of the Caliber Acquisition. In addition, subsequent to the closing date, there will be further refinements of the acquisition accounting as additional information becomes available. Accordingly, the final acquisition accounting may differ materially from the pro forma condensed combined financial information reflected in this prospectus supplement. See “Unaudited Pro Forma Condensed Combined Financial Information” for more information.
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After the Caliber Acquisition, we may be unable to successfully integrate the businesses and realize the anticipated benefits of the Caliber Acquisition.
The success of the Caliber Acquisition will depend, in part, on our ability to successfully combine Caliber, which currently operates as an independent company, with our business and realize the anticipated benefits, including synergies, cost savings, innovation and operational efficiencies, from the combination. If we are unable to achieve these objectives within the anticipated time frame, or at all, the anticipated benefits may not be realized fully, or at all, or may take longer to realize than expected and the value of our common stock may be harmed. Additionally, as a result of the Caliber Acquisition, rating agencies may take negative actions with respect to our credit ratings, which may increase our financing costs, including in connection with the financing of the Caliber Acquisition. Caliber's business is subject to many of the same risks of our businesses relating to mortgage origination, loan servicing and other areas as described in our most recent Annual Report in Form 10-K for the year ended December 31, 2020, which is incorporated by reference in this prospectus supplement and the accompanying prospectus. In reviewing and considering those risks, investors should be mindful that our exposure to the risks involved in those businesses will be increased due to the substantial increase of our operations in those areas resulting from the Caliber Acquisition.
The Caliber Acquisition involves the integration of Caliber with our existing business, which is a complex, costly and time-consuming process. The integration of Caliber into our business may result in material challenges, including, without limitation:
the diversion of management’s attention from ongoing business concerns and performance shortfalls as a result of the devotion of management’s attention to the Caliber Acquisition;
managing a larger Company;
maintaining employee morale and attracting and motivating and retaining management personnel and other key employees;
the possibility of faulty assumptions underlying expectations regarding the integration process;
retaining existing business and operational relationships and attracting new business and operational relationships;
consolidating corporate and administrative infrastructures and eliminating duplicative operations;
coordinating geographically separate organizations;
unanticipated issues in integrating information technology, communications and other systems;
unanticipated changes in federal or state laws or regulations; and
unforeseen expenses or delays associated with the Caliber Acquisition.
Many of these factors will be outside of our control and any one of them could result in delays, increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy, which could materially affect our financial position, results of operations and cash flows.
We may not have discovered undisclosed liabilities of Caliber during our due diligence process.
In the course of the due diligence review of Caliber that we conducted prior to the execution of the Purchase Agreement, we may not have discovered, or may have been unable to quantify, undisclosed liabilities of Caliber and its subsidiaries and we do not have rights of indemnification against the seller for any such liabilities. Examples of such undisclosed liabilities may include, but are not limited to, unpaid taxes or pending or threatened litigation or regulatory matters. Any such undisclosed liabilities could have an adverse effect on our business, results of operations, financial condition and cash flows following the completion of the Caliber Acquisition.
Stockholder or other litigation could result in the payment of damages and/or may materially and adversely affect our business, financial condition results of operations and liquidity.
Transactions such as the Caliber Acquisition often give rise to lawsuits by stockholders or other third parties. Stockholders may pursue litigation relating to the Caliber Acquisition. The defense or settlement of any lawsuit or claim regarding the Caliber Acquisition may materially and adversely affect our business, financial condition, results of operations and liquidity. Further, such litigation could be costly and could divert our time and attention from the operation of the business.
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Additional Risks Related to the Caliber Business to Which We Would Be Subject Following the Caliber Acquisition
Caliber’s business is highly dependent on Ginnie Mae, Fannie Mae and Freddie Mac and certain federal and state government agencies, and any changes in these entities or their current roles could materially and adversely affect our business, liquidity, financial position and/or results of operations.
Caliber originates loans eligible for securitization or sale to Fannie Mae and Freddie Mac, government insured or guaranteed loans such as Federal Housing Administration (“FHA”) or Veterans Affairs Loans (“VA Loans”), and other loans eligible for Government National Mortgage Association (“Ginnie Mae”) securities issuance. Caliber also services loans on behalf of Fannie Mae and Freddie Mac, including loans Caliber sells to them, as well as loans that have been delivered into securitization programs sponsored by Fannie Mae, Freddie Mac or Ginnie Mae in connection with the issuance of Agency-guaranteed mortgage backed securities (“MBS”). These entities establish the base servicing fee to compensate Caliber for servicing loans as well as the assessment of fines and penalties that may be imposed upon Caliber for failing to meet servicing standards.
In 2008, the Federal Housing Finance Agency (“FHFA”) placed Fannie Mae and Freddie Mac into conservatorship and, as their conservator, FHFA controls and directs their operations. There is significant uncertainty regarding the future of the GSEs, including with respect to how long they will continue to be in existence, the extent of their roles in the market and what forms they will have, and whether they will be government agencies, government-sponsored agencies or private for-profit entities. Since they have been placed into conservatorship, many legislative and administrative plans for GSE reform have been put forth, but all have been met with resistance from various constituencies.
The Trump administration made reforming Fannie Mae and Freddie Mac, including their relationship with the federal government, a priority. In September 2019, the U.S. Department of the Treasury released a proposal for reform, and, in October 2019, FHFA released a strategic plan regarding the conservatorships, which included a scorecard under which preparing for exiting conservatorship is a key objective. Among other things, the Treasury recommendations include recapitalizing the GSEs, increasing private-sector competition with the GSEs, replacing GSE statutory affordable housing goals, changing mortgage underwriting requirements for GSE guarantees, revising the Consumer Financial Protection Bureau’s (“CFPB”), qualified mortgage regulations, and continuing to support the market for 30-year fixed-rate mortgages. Some of Treasury’s recommendations would require administrative action whereas others would require legislative action. It is uncertain whether these recommendations will be enacted. If these recommendations are enacted, the future roles of Fannie Mae and Freddie Mac could be reduced (perhaps significantly) and the nature of their guarantee obligations could be considerably limited relative to historical measurements.
More recently, on December 17, 2020, FHFA published a final rule establishing a new regulatory capital framework. On July 14, 2020, the Financial Stability Oversight Council (“FSOC”) announced that it was initiating an activities-based review of the secondary market, including the GSEs. Section 111 of the Dodd-Frank Act established the Council in order to identify risks to U.S. financial stability that could arise from the material financial distress or failure, or ongoing activities, of large, interconnected bank holding companies or nonbank financial companies; promote market discipline; and respond to emerging threats to the stability of the U.S. financial system. The Dodd-Frank Act designed the FSOC to facilitate a holistic, integrated approach among various federal agencies to manage the potential material risk of nonbank financial companies. In this regard, the voting members of the Council are the Secretary of the Treasury, who serves as Chairperson of the Council; the Chairman of the Board of Governors of the Federal Reserve System; the Comptroller of the Currency; the Director of the CFPB; the Chairman of the SEC; the Chairperson of the Federal Deposit Insurance Corporation; the Chairman of the Commodity Futures Trading Commission; the Director of the Federal Housing Finance Agency; the Chairman of the National Credit Union Board; and an independent member appointed by the President, with the advice and consent of the Senate, having insurance expertise. Following the FSOC disclosure, the Director of the FHFA, who also is a voting member of FSOC, applauded the activities-based review, noting that Fannie Mae and Freddie Mac must be well capitalized in order to support the mortgage market during a stressed environment.
In addition, various other proposals to generally reform the U.S. housing finance market have been offered by members of the U.S. Congress, and certain of these proposals seek to significantly reduce or eliminate over time the role of the GSEs in purchasing and guaranteeing mortgage loans. Any such proposals, if enacted, may have broad adverse implications for the MBS market and our business. It is possible that the adoption of any such proposals might lead to higher fees being charged by the GSEs or lower prices on sales of mortgage loans to them.
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The extent and timing of any regulatory reform regarding the GSEs and the U.S. housing finance market, as well as any effect on our business operations and financial results, are uncertain. It is not yet possible to determine whether such proposals will be enacted and, if so, when, what form any final legislation or policies might take or how proposals, legislation or policies may impact the MBS market and our business, operations and financial condition. Our inability to make the necessary changes to respond to these changing market conditions or loss of Caliber’s approved seller/servicer status with the Agencies would have a material adverse effect on our mortgage lending operations and our financial condition, results of operations and cash flows. If those Agencies cease to exist, wind down, or otherwise significantly change their business operations or if Caliber lost approvals with those Agencies or Caliber’s relationships with those Agencies are otherwise adversely affected, Caliber’s ability to profitably sell loans it originates and services would be affected and our profitability, business, financial condition and results of operations would be adversely affected.
Changes in applicable investor or insurer guidelines or Agency guarantees could adversely affect our business, financial condition and results of operations.
Caliber is required to follow specific guidelines of purchasers of its loans, such as Fannie Mae, Freddie Mac and private investors, as well as the guidelines of private mortgage insurers, FHA, VA and the United States Department of Agriculture (“USDA”), which in each case impacts the way Caliber originates and services loans, including guidelines with respect to:
credit standards for mortgage loans;
minimum financial requirements relating to its net worth, capital ratio and liquidity;
its servicing practices;
the servicing and incentive fees that may be charged;
modification standards and procedures; and
the amount of reimbursable advances.
For example, the FHFA has directed Fannie Mae and Freddie Mac to align their guidelines for servicing delinquent mortgages that they own or that back securities which they guarantee, which can result in monetary incentives for servicers that perform well and penalties for those that do not. In addition, the FHFA has directed Fannie Mae and Freddie Mac to assess compensatory penalties against servicers in connection with the failure to meet specified timelines relating to delinquent loans and foreclosure proceedings, and other breaches of servicing obligations. Similarly, the FHA requires servicers to curtail or reduce the amount of interest they seek from mortgage insurance proceeds if they fail to meet specified timelines. A significant change in these guidelines could impair the volume of Caliber’s loan production, require us to expend additional resources in providing mortgage services and increase our costs, which would adversely affect our business, financial condition and results of operations.
The GSEs recently issued guidance providing that borrowers in, or recently out of, forbearance will be eligible to refinance their existing loan or purchase a new home. To be eligible, a borrower either must have reinstated their forborne loan or resolved a delinquency on that loan through a loss mitigation solution. If the borrower resolved any missed payments due to forbearance through a reinstatement, the borrower will be eligible for a refinancing, as long as proceeds from the refinancing are not used to reinstate the loan. If outstanding payments have been or will be resolved through loss mitigation, the borrower is eligible for a refinancing if the borrower, as of the new note date, has made at least three timely regularly scheduled payments based on the applicable loss mitigation option. FHA subsequently announced substantially similar guidance, but with differing time periods for the number of timely regularly scheduled timely payments that must be made under the applicable loss mitigation option and depending on the loan type. For example, the borrower must complete three consecutive monthly payments post-forbearance for purchase-money loans and no cash-out refinances and twelve consecutive post-forbearance payments for cash-out refinances.
Both the U.S. Department of Housing and Urban Development (“HUD”) and the GSEs have issued guidance on the conditions under which they will insure or purchase loans going into forbearance pursuant to the CARES Act shortly after the loan is originated, but before the loan is insured by FHA or purchased by the GSEs. FHA announced that it would temporarily endorse mortgages with active forbearance plans submitted for FHA insurance through March 31, 2021 (unless extended), excluding refinancings of non FHA-to-FHA cash-out refinances. A condition to obtaining FHA insurance endorsement for such loans is the execution by the lender of a two-year “partial
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indemnification agreement” in connection with each of these loans providing for the indemnification of twenty percent of the initial loan amount. The mortgagee will responsible for paying this amount of losses incurred by HUD if the borrower fails to make two or more payments when due under the terms of the FHA-insured mortgage at any point within two years from the date of endorsement and the borrower remains in default until the filing of an FHA insurance claim. If the borrower enters into forbearance and subsequently brings the loan current, either pursuant to the terms of the mortgage or a permanent loss mitigation option, through the date that is two years from the date of endorsement of the mortgage, the indemnification agreement will terminate.
In addition, changes in the nature or extent of the guarantees provided by Fannie Mae and Freddie Mac or the insurance provided by the FHA could also have broad adverse market implications. The fees that we are required to pay to the Agencies for these guarantees have increased significantly over time. Any future increases in guarantee fees or changes to their structure or increases in the premiums we are required to pay the FHA for insurance would adversely affect our business, financial condition and results of operations.
Some of the loans Caliber services are higher risk loans, which are more expensive to service than conventional mortgage loans and may lead to liquidity challenges.
Some of the mortgage loans Caliber services are higher risk loans based on the underwriting criteria under which they were originated. This may mean that the loans are made to less credit worthy borrowers, are originated with a high loan to value ratio, or are secured by properties with declining values. These loans may have a higher risk of delinquency and as a result are more expensive to service because they require more frequent interaction with customers and greater monitoring and oversight. Additionally, in connection with the ongoing mortgage market reform and regulatory developments, servicers of higher risk loans are subject to increased scrutiny by state and federal regulators and will experience higher compliance and regulatory costs, which could result in a further increase in servicing costs. We may not be able to pass along to our servicing customers any of the additional expenses Caliber incurs in servicing higher risk loans. The greater cost of servicing higher risk loans—which may be further increased through regulatory reform, consent decrees or enforcement—could adversely affect our business, financial condition and results of operations.
Certain of Caliber’s material vendors have operations in India that could be adversely affected by changes in political or economic stability or by government policies.
Certain of Caliber’s material vendors currently have operations located in India, which is subject to relatively higher political and social instability than the United States and may lack the infrastructure to withstand political unrest, natural disasters or global pandemics. The political or regulatory climate in the United States, or elsewhere, also could change so that it would not be lawful or practical for us to use vendors with international operations in the manner in which we currently use them. If Caliber could no longer utilize vendors operating in India or if those vendors were required to transfer some or all of their operations to another geographic area, we would incur significant transition costs as well as higher future overhead costs that could materially and adversely affect our results of operations.
Risks Related to our Business
Our preliminary financial results for the first quarter ended March 31, 2021 are prepared by our management. Our auditors have not audited, reviewed, compiled or performed any procedures with respect to this preliminary financial information. Our financial results upon completion of the closing procedures may vary from the preliminary estimates.
The preliminary financial results included under “Prospectus Supplement Summary—Recent Developments” were prepared by our management in connection with the preparation of our financial statements and are based upon a number of assumptions. We are still in the process of preparing our full financial statements for the first quarter ended March 31, 2021. Additional items that may require adjustments to the preliminary operating results may be identified and could result in material changes to our estimated preliminary operating results. Ernst & Young LLP has not audited, reviewed or performed any procedures with respect to this preliminary financial information. As a result, our final results upon completion of the closing procedures may vary from the preliminary estimates.
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Risks Related to our Common Stock
The Caliber Acquisition may not occur, and if it does, it may not be accretive and may cause dilution to our earnings per share, which may negatively affect the market price of our common stock.
Although we currently anticipate that the Caliber Acquisition will occur and will be accretive to earnings per share (on an as adjusted earnings basis that is not pursuant to GAAP) from and after the Caliber Acquisition, this expectation is based on assumptions about our and Caliber’s business and preliminary estimates, which may change materially. As a result, should the Caliber Acquisition occur, certain other amounts to be paid in connection with the Caliber Acquisition may cause dilution to our earnings per share or decrease or delay the expected accretive effect of the Caliber Acquisition and cause a decrease in the market price of our common stock. See “—Risks Related to the Caliber Acquisition.” In addition, we could also encounter additional transaction-related costs or other factors such as the failure to realize all of the benefits anticipated in the Caliber Acquisition, including cost and revenue synergies. Any of these factors could cause dilution to our earnings per share or decrease or delay the expected accretive effect of the Caliber Acquisition and cause a decrease in the market price of our common stock.
There can be no assurance that the market for our stock will provide you with adequate liquidity.
Our common stock began trading on the NYSE in May 2013. There can be no assurance that an active trading market for our common stock will be sustained in the future, and the market price of our common stock may fluctuate widely, depending upon many factors, some of which may be beyond our control. These factors include, without limitation:
a shift in our investor base;
our quarterly or annual earnings and cash flows, or those of other comparable companies;
actual or anticipated fluctuations in our operating results;
changes in accounting standards, policies, guidance, interpretations or principles;
announcements by us or our competitors of significant investments, acquisitions, dispositions or other transactions;
the failure of securities analysts to cover our common stock;
changes in earnings estimates by securities analysts or our ability to meet those estimates;
market performance of affiliates and other counterparties with whom we conduct business;
the operating and stock price performance of other comparable companies;
our failure to qualify as a REIT, maintain our exemption under the Investment Company Act of 1940 or satisfy the NYSE listing requirements;
negative public perception of us, our competitors or industry;
overall market fluctuations; and
general economic conditions.
Stock markets in general have experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations may adversely affect the market price of our common.
Furthermore, the market price of our common stock may fluctuate significantly following consummation of the Caliber Acquisition if, among other things, the combined company is unable to achieve the expected growth in earnings, or if the operational cost savings estimates in connection with the integration of our and Caliber’s businesses are not realized, or if the transaction costs relating to the Caliber Acquisition are greater than expected, or if the financing relating to the transaction is on unfavorable terms. The market price also may decline if the combined company does not achieve the perceived benefits of the Caliber Acquisition as rapidly or to the extent anticipated by financial or industry analysts or if the effect of the Caliber Acquisition on the combined company’s financial position, results of operations or cash flows is not consistent with the expectations of financial or industry analysts. In addition, the results of operations of the combined company and the market price of our common stock after the completion of the Caliber Acquisition may be affected by factors different from those currently affecting the independent results of operations of each of our and Caliber’s business.
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Sales or issuances of shares of our common stock could adversely affect the market price of our common stock.
Sales or issuances of substantial amounts of shares of our common stock, or the perception that such sales or issuances might occur, could adversely affect the market price of our common stock. The issuance of our common stock in connection with property, portfolio or business acquisitions or the exercise of outstanding options or otherwise could also have an adverse effect on the market price of our common stock. We have an effective registration statement on file to sell common stock or convertible securities in public offerings.
Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could have a material adverse effect on our business and stock price.
As a public company, we are required to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. Internal control over financial reporting is complex and may be revised over time to adapt to changes in our business, or changes in applicable accounting rules. We have made investments through joint ventures, such as our investment in consumer loans, and accounting for such investments can increase the complexity of maintaining effective internal control over financial reporting. We cannot assure you that our internal control over financial reporting will be effective in the future or that a material weakness will not be discovered with respect to a prior period for which we had previously believed that our internal control over financial reporting was effective. If we are not able to maintain or document effective internal control over financial reporting, our independent registered public accounting firm will not be able to certify as to the effectiveness of our internal control over financial reporting. Matters impacting our internal control over financial reporting may cause us to be unable to report our financial information on a timely basis, or may cause us to restate previously issued financial information, and thereby subject us to adverse regulatory consequences, including sanctions or investigations by the SEC, or violations of applicable stock exchange listing rules. There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements. Confidence in the reliability of our financial statements is also likely to suffer if we or our independent registered public accounting firm reports a material weakness in the effectiveness of our internal control over financial reporting. This could materially adversely affect us by, for example, leading to a decline in our stock price and impairing our ability to raise capital.
Your percentage ownership in us may be diluted in the future.
Your percentage ownership in us may be diluted in the future because of equity awards that we expect will be granted to our Manager, to the directors, officers and employees of our Manager who perform services for us, and to our directors, officers and employees, as well as other equity instruments such as debt and equity financing. We have adopted the Plan, which provides for the grant of equity-based awards, including restricted stock, options, stock appreciation rights, performance awards, tandem awards and other equity-based and non-equity based awards, in each case to our Manager, to the directors, officers, employees, service providers, consultants and advisor of our Manager who perform services for us, and to our directors, officers, employees, service providers, consultants and advisors. We reserved 15 million shares of our common stock for issuance under the Plan. The term of the Plan expires in 2023. On the first day of each fiscal year beginning during the term of the Plan, that number will be increased by a number of shares of our common stock equal to 10% of the number of shares of our common stock newly issued by us during the immediately preceding fiscal year. In connection with any offering of our common or preferred stock, we will issue to our Manager options relating to shares of our common stock, representing 10% of the number of shares being offered. Our board of directors may also determine to issue options to our Manager that are not subject to the Plan, provided that the number of shares relating to any options granted to our Manager in connection with an offering of our common stock would not exceed 10% of the shares sold in such offering and would be subject to NYSE rules.
We may incur or issue debt or issue equity, which may negatively affect the market price of our common stock.
We may in the future incur or issue debt or issue equity or equity-related securities. In the event of our liquidation, lenders and holders of our debt and holders of our preferred stock (if any) would receive a distribution of our available assets before common stockholders. Any future incurrence or issuance of debt would increase our interest cost and could adversely affect our results of operations and cash flows. We are not required to offer any additional equity securities to existing common stockholders on a preemptive basis. Therefore, additional issuances of common stock, directly or through convertible or exchangeable securities, warrants or options, will dilute the holdings of our existing common stockholders and such issuances, or the perception of such issuances, may reduce
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the market price of our common stock. Our preferred stock has, and any additional preferred stock issued by us would likely have, a preference on distribution payments, periodically or upon liquidation, which could eliminate or otherwise limit our ability to make distributions to common stockholders. Because our decision to incur or issue debt or issue equity or equity-related securities in the future will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, nature or success of our future capital raising efforts. Thus, common stockholders bear the risk that our future incurrence or issuance of debt or issuance of equity or equity-related securities will adversely affect the market price of our common stock.
We have not established a minimum distribution payment level for our common stock, and we cannot assure you of our ability to pay distributions in the future.
We intend to make quarterly distributions of our REIT taxable income to holders of our common stock out of assets legally available therefor. We have not established a minimum distribution payment level and our ability to pay distributions may be adversely affected by a number of factors, including the risk factors included or incorporated by reference herein. Any distributions will be authorized by our board of directors and declared by us based upon a number of factors, including our actual and anticipated results of operations, liquidity and financial condition, restrictions under Delaware law or applicable financing covenants, our REIT taxable income, the annual distribution requirements under the REIT provisions of the Internal Revenue Code of 1986 (the “Code”), our operating expenses and other factors our directors deem relevant.
Our board of directors approved two increases in our quarterly dividends during 2017, which has resulted in reduced cash flows and we will begin making distributions on our preferred stock issued in July 2019, beginning in November 2019, which will further reduce our cash flows. Although we have other sources of liquidity, such as sales of and repayments from our investments, potential debt financing sources and the issuance of equity securities, there can be no assurance that we will generate sufficient cash or achieve investment results that will allow us to make a specified level of cash distributions or year-to-year increases in cash distributions in the future.
Furthermore, while we are required to make distributions in order to maintain our REIT status, we may elect not to maintain our REIT status, in which case we would no longer be required to make such distributions. Moreover, even if we do elect to maintain our REIT status, we may elect to comply with the applicable requirements by, after completing various procedural steps, distributing, under certain circumstances, a portion of the required amount in the form of shares of our common stock in lieu of cash. If we elect not to maintain our REIT status or to satisfy any required distributions in shares of common stock in lieu of cash, such action could negatively and materially affect our business, results of operations, liquidity and financial condition as well as the market price of our common stock. No assurance can be given that we will make any distributions on shares of our common stock in the future.
We may in the future choose to make distributions in our own stock, in which case you could be required to pay income taxes in excess of any cash distributions you receive.
We may in the future make taxable distributions that are payable in cash and shares of our common stock at the election of each stockholder. Taxable stockholders receiving such distributions will be required to include the full amount of the distribution as ordinary income to the extent of our current and accumulated earnings and profits for federal income tax purposes. As a result, stockholders may be required to pay income taxes with respect to such distributions in excess of the cash distributions received. If a U.S. stockholder sells the stock that it receives as a distribution in order to pay this tax, the sale proceeds may be less than the amount included in income with respect to the distribution, depending on the market price of our stock at the time of the sale. Furthermore, with respect to certain non-U.S. stockholders, we may be required to withhold U.S. tax with respect to such distributions, including in respect of all or a portion of such distribution that is payable in stock. In addition, if a significant number of our stockholders determine to sell shares of our common stock in order to pay taxes owed on distributions, it may put downward pressure on the market price of our common stock.
The Internal Revenue Service (“IRS”) has issued guidance authorizing elective cash/stock dividends to be made by public REITs where a cap of at least 20% is placed on the amount of cash that may be paid as part of the dividend, provided that certain requirements are met. It is unclear whether and to what extent we would be able to or choose to pay taxable distributions in cash and stock. In addition, no assurance can be given that the IRS will not impose additional requirements in the future with respect to taxable cash/stock distributions, including on a retroactive basis, or assert that the requirements for such taxable cash/stock distributions have not been met.
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Changes to U.S. federal income tax laws could materially and adversely affect us and our stockholders.
U.S. federal income tax laws may be modified, possibly with retroactive effect, by legislative, judicial or administrative action at any time, which could affect the U.S. federal income tax treatment of an investment in our shares. The U.S. federal income tax rules, including those dealing with REITs, are constantly under review by persons involved in the legislative process, the IRS and the U.S. Treasury Department, which results in statutory changes as well as frequent revisions to regulations and interpretations.
For example, the Biden administration has indicated that it intends to modify key aspects of the tax code, including by increasing corporate and individual tax rates. A significant portion of our assets are currently held through (and following the Caliber Acquisition, it is expected that Caliber will be, or that we will hold Caliber through) a taxable REIT subsidiary. Accordingly, any changes to corporate income tax rates could significantly increase the amount of corporate income taxes that we or our subsidiaries are required to pay.
An increase in market interest rates may have an adverse effect on the market price of our common stock.
One of the factors that investors may consider in deciding whether to buy or sell shares of our common stock is our distribution rate as a percentage of our stock price relative to market interest rates. If the market price of our common stock is based primarily on the earnings and return that we derive from our investments and income with respect to our investments and our related distributions to stockholders, and not from the market value of the investments themselves, then interest rate fluctuations and capital market conditions will likely affect the market price of our common stock. For instance, if market interest rates rise without an increase in our distribution rate, the market price of our common stock could decrease, as potential investors may require a higher distribution yield on our common stock or seek other securities paying higher distributions or interest. In addition, rising interest rates would result in increased interest expense on our outstanding and future (variable and fixed) rate debt, thereby adversely affecting cash flow and our ability to service our indebtedness and pay distributions.
Provisions in our certificate of incorporation and bylaws and of Delaware law may prevent or delay an acquisition of our company, which could decrease the market price of our common stock.
Our certificate of incorporation, bylaws and Delaware law contain provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the raider and to encourage prospective acquirers to negotiate with our board of directors rather than to attempt a hostile takeover. These provisions include, among others:
a classified board of directors with staggered three-year terms;
provisions regarding the election of directors, classes of directors, the term of office of directors, the filling of director vacancies and the resignation and removal of directors for cause only upon the affirmative vote of at least 80% of the then issued and outstanding shares of our capital stock entitled to vote thereon;
provisions regarding corporate opportunity only upon the affirmative vote of at least 80% of the then issued and outstanding shares of our capital stock entitled to vote thereon;
removal of directors only for cause and only with the affirmative vote of at least 80% of the then issued and outstanding shares of our capital stock entitled to vote in the election of directors;
our board of directors to determine the powers, preferences and rights of our preferred stock and to issue such preferred stock without stockholder approval;
advance notice requirements applicable to stockholders for director nominations and actions to be taken at annual meetings;
a prohibition, in our certificate of incorporation, stating that no holder of shares of our common stock will have cumulative voting rights in the election of directors, which means that the holders of a majority of the issued and outstanding shares of common stock can elect all the directors standing for election; and
a requirement in our bylaws specifically denying the ability of our stockholders to consent in writing to take any action in lieu of taking such action at a duly called annual or special meeting of our stockholders.
Public stockholders who might desire to participate in these types of transactions may not have an opportunity to do so, even if the transaction is considered favorable to stockholders. These anti-takeover provisions could
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substantially impede the ability of public stockholders to benefit from a change in control or a change in our management and board of directors and, as a result, may adversely affect the market price of our common stock and your ability to realize any potential change of control premium.
ERISA may restrict investments by plans in our common stock.
A plan fiduciary considering an investment in our common stock should consider, among other things, whether such an investment is consistent with the fiduciary obligations under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), including whether such investment might constitute or give rise to a prohibited transaction under ERISA, the Code or any substantially similar federal, state or local law and, if so, whether an exemption from such prohibited transaction rules is available.
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USE OF PROCEEDS
We estimate that the net proceeds from our sale of common stock in this offering will be approximately $   (or $   if the underwriters exercise their option to purchase additional shares of our common stock in full), after deducting the expenses of this offering. We intend to use the net proceeds from our sale of common stock in this offering to finance the Caliber Acquisition and to pay related fees and expenses, and the remainder (if any) for investments and general corporate purposes.
This offering of common stock is not contingent on the closing of the Caliber Acquisition, and the closing of the Caliber Acquisition is not contingent on the consummation of this offering, and, as a result, it is possible that this offering occurs and the Caliber Acquisition does not occur and vice versa. We cannot assure you that the Caliber Acquisition will be consummated on the terms described herein or the time frame contemplated herein, if at all. In the event the Caliber Acquisition is not consummated, we intend to use the net proceeds for the offering for general corporate purposes.
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CAPITALIZATION
The following table sets forth our consolidated capitalization (1) as of December 31, 2020, (2) on an as adjusted basis as of December 31, 2020, after giving effect to this offering, but not the application of the proceeds thereof as described under “Use of proceeds” and (3) on a pro forma basis giving effect to the pro forma adjustments described in “Unaudited Pro Forma Condensed Combined Financial Information.” The “As Adjusted” column of the table assumes that the proceeds of this offering are held in cash and cash equivalents.
You should read the data set forth in the table below in conjunction with “Summary Historical and Unaudited Pro Forma Financial Information” and “Unaudited Pro Forma Condensed Combined Financial Information” included in this offering memorandum, and our consolidated financial statements and related notes, which were included in our Annual Report on Form 10-K for the year ended December 31, 2020, and the financial statements and related notes of Caliber, which were included as Exhibit 99.2 to the Current Report on Form 8-K filed on April 14, 2021, each of which is incorporated by reference into this prospectus supplement and the accompanying prospectus.
 
As of December 31, 2020
 
Historical
As Adjusted
Pro Forma
 
(Dollars in thousands, unaudited)
Cash and cash equivalents
$944,854
$1,494,854
$723,751
Restricted cash
135,619
135,619
188,696
Mortgage servicing rights, at fair value
3,489,675
3,489,675
4,944,251
Real estate and other securities
14,244,558
14,244,558
9,244,558
Residential mortgage loans, held-for-sale
5,215,703
5,215,703
11,952,142
Residential mortgage loans subject to repurchase
1,452,005
1,452,005
3,874,509
Servicer advances receivable
3,002,267
3,002,267
3,133,390
Other assets
1,358,422
1,358,422
2,364,560
Secured financing agreements
17,547,680
17,547,680
19,176,986
Secured notes and bonds payable
7,644,195
7,644,195
8,462,981
Unsecured senior notes, net of issuance costs
541,516
541,516
541,516
Residential mortgage loan repurchase liability
1,452,005
1,452,005
3,874,509
Accrued expenses and other liabilities
537,302
537,302
1,749,460
Total debt
25,733,391
25,733,391
28,181,483
Stockholders’ equity:
 
 
 
Preferred stock, $0.01 per value, 100,000,000 shares authorized, 33,610,000 issued and outstanding at December 31, 2020 ($840,250 aggregate liquidation preference, respectively)
812,992
812,992
812,992
Common stock, par value $0.01 per share, 2,000,000,000 shares authorized; 414,744,518 shares issued and outstanding, historical and 460,490,172 shares issued and outstanding, as adjusted
4,148
4,648
4,605
Additional paid-in capital
5,547,108
6,096,608
6,046,651
Retained earnings (accumulated deficit)
(1,108,929)
(1,108,929)
(1,108,929)
Accumulated other comprehensive income (loss)
65,697
65,697
65,697
Total stockholders’ equity
5,321,016
5,871,016
5,821,016
Noncontrolling interests in equity of consolidated subsidiaries
108,668
108,668
108,668
Total equity
5,429,684
5,979,684
5,929,684
Total capitalization
$31,163,075
$31,713,075
$34,111,167
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On April 14, 2021, we entered into the Purchase Agreement with the Seller and Caliber. The Purchase Agreement provides that, upon the terms and subject to the conditions set forth therein, we or one of our subsidiaries will purchase all of the issued and outstanding equity interests of Caliber from LSF for a purchase price of $1.675 billion, subject to certain downward adjustments (including certain cash dividends and other payments out of Caliber and its subsidiaries since December 31, 2020).
As described in more detail herein, we intend to finance the purchase price with $925.0 million of existing cash on hand and available liquidity (of both us and Caliber), $500.0 million from the issuance of common shares offered hereby, and $250.0 million from the sale of certain investment securities.
The following unaudited pro forma condensed combined balance sheet shows the financial condition after giving effect to the probable acquisition of Caliber by us. The unaudited pro forma condensed combined balance sheet assumes that the Caliber Acquisition is accounted for under the acquisition method of accounting in accordance with Regulation S-X Article 11, as amended by the SEC Final Rule Release No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and that the assets and liabilities of Caliber will be recorded by us at their respective estimated fair values based on information currently available. The unaudited pro forma condensed combined balance sheet gives effect to the probable Caliber Acquisition as if the transaction had occurred on December 31, 2020.
The following unaudited pro forma condensed combined statement of income shows the results of operations, including per share data, after giving effect to the probable Caliber Acquisition. The unaudited pro forma condensed combined statement of income assumes that the Caliber Acquisition is accounted for under the acquisition method of accounting and that the assets and liabilities of Caliber will be recorded by us at their respective estimated fair values based on information currently available. The unaudited pro forma condensed combined statement of income for the year ended December 31, 2020 gives effect to the probable Caliber Acquisition as if the transaction had occurred on January 1, 2020.
The accompanying unaudited pro forma condensed combined financial statements are provided for illustrative purposes only and do not purport to represent what the actual financial position and results of operations of the Company would have been had the Caliber Acquisition occurred on the dates assumed, nor are they necessarily indicative of what the financial position or results of operations would be for any future periods. The unaudited pro forma condensed combined balance sheet includes pro forma purchase price allocations based upon preliminary estimates of the fair value of the assets acquired and liabilities assumed in connection with the probable Caliber Acquisition. These allocations may be adjusted in the future upon completion of the acquisition. In addition, the unaudited pro forma condensed combined statement of income does not include the impact of any revenue, cost or other operating synergies that may result from the probable Caliber Acquisition or any related restructuring costs.
The unaudited selected pro forma condensed combined financial information has been derived from and should be read in conjunction with our consolidated financial statements and related notes, which were included in our Annual Report on Form 10-K for the year ended December 31, 2020, and the financial statements and related notes of Caliber, which were included as Exhibit 99.2 to the Current Report on Form 8-K filed on April 14, 2021, which is incorporated by reference into this prospectus supplement and the accompanying prospectus. Certain reclassifications have been made to the historical presentation of Caliber to conform to our presentation and to the presentation of the pro forma financial statements contained herein.
The unaudited pro forma condensed combined financial statements reflect the following anticipated transactions and adjustments:
The probable Caliber Acquisition included in the unaudited pro forma condensed combined balance sheet as if it occurred on December 31, 2020 and the unaudited pro forma combined statement of income as if it occurred on January 1, 2020. The adjustments related to the Caliber Acquisition are shown in a separate column as “Transaction Accounting Adjustments —Acquisition Adjustments.”
The assumed issuance by us of an aggregate of 45.75 million common shares hereby at a purchase price of $10.93 per share in exchange for gross proceeds of approximately $500.0 million. The adjustments related to the issuance of common stock are shown in a separate column as “Transaction Accounting Adjustments — Financing Adjustments.”
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The assumed sale by us of approximately $5.0 billion face value of Agency residential mortgage-backed securities for net cash proceeds of $250.0 million after repayment of $4.75 billion debt financing. The adjustments related to the sale of securities are shown in a separate column as “Transaction Accounting Adjustments — Financing Adjustments.”
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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 2020
(Dollars in thousands)
 
Historical
Transaction Accounting Adjustments
Pro Forma
 
New
Residential
Caliber
Acquisition
Adjustments
Note 2
Reference
Financing
Adjustments
Note 2
Reference
Combined
Assets
 
 
 
 
 
 
 
Excess mortgage servicing rights, at fair value
$410,855
$
$
 
$
 
$410,855
Mortgage servicing rights, at fair value
3,489,675
1,156,831
297,745
G
 
4,944,251
Mortgage servicing rights financing receivables, at fair value
1,096,166
 
 
1,096,166
Servicer advance investments, at fair value
538,056
 
 
538,056
Real estate and other securities
14,244,558
 
(5,000,000)
B
9,244,558
Residential loans and variable interest entity consumer loans held-for-investment, at fair value
1,359,754
 
 
1,359,754
Residential mortgage loans, held-for-sale
5,215,703
8,007,730
(1,271,291)
G
 
11,952,142
Residential mortgage loans subject to repurchase
1,452,005
2,273,601
148,903
G
 
3,874,509
Cash and cash equivalents
944,854
504,378
(1,475,481)
C
750,000
A,B
723,751
Restricted cash
135,619
29,293
23,784
 
 
188,696
Servicer advances receivable
3,002,267
160,606
(29,483)
G
 
3,133,390
Trades receivable
4,180
 
 
4,180
Other assets
1,358,422
822,800
183,338
D,E,G
 
2,364,560
 
$33,252,114
$12,955,239
$(2,122,485)
 
$(4,250,000)
 
$39,834,868
 
 
 
 
 
 
 
 
Liabilities and Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Secured financing agreements
$17,547,680
$7,369,193
$(989,887)
G
$(4,750,000)
B
$19,176,986
Secured notes and bonds payable
7,644,195
1,009,863
(191,077)
G
 
8,462,981
Residential mortgage loan repurchase liability
1,452,005
2,273,601
148,903
G
 
3,874,509
Unsecured senior notes, net of issuance costs
541,516
 
 
541,516
Trades payable
154
 
 
154
Due to affiliates
9,450
 
 
9,450
Dividends payable
90,128
 
 
90,128
Accrued expenses and other liabilities(A)
537,302
898,804
313,354
G
 
1,749,460
 
27,822,430
11,551,461
(718,707)
 
(4,750,000)
 
33,905,184
 
 
 
 
 
 
 
 
Equity
 
 
 
 
 
 
 
Preferred stock, par value $0.01 per share
812,992
 
 
812,992
Common stock, par value $0.01 per share
4,148
12
(12)
F
457
A
4,605
Additional paid-in capital
5,547,108
659,644
(659,644)
F
499,543
A
6,046,651
Retained earnings (accumulated deficit)
(1,108,929)
744,122
(744,122)
F
 
(1,108,929)
Accumulated other comprehensive income (loss)
65,697
 
 
65,697
Total New Residential stockholders’ equity
5,321,016
1,403,778
(1,403,778)
 
500,000
 
5,821,016
Noncontrolling interests in equity of consolidated subsidiaries
108,668
 
 
108,668
Total Equity
5,429,684
1,403,778
(1,403,778)
 
500,000
 
5,929,684
 
$33,252,114
$12,955,239
$(2,122,485)
 
$(4,250,000)
 
$39,834,868
See notes to unaudited pro forma condensed combined financial statements.
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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2020
(Dollars in thousands, except share and per share data)
 
Historical
Transaction Accounting Adjustments
Pro Forma
 
New
Residential
Caliber
Acquisition
Adjustments
Note 2
Reference
Financing
Adjustments
Note 2
Reference
Combined
Revenues
 
 
 
 
 
 
 
Interest income
$1,102,537
$187,091
$
 
$(112,283)
2
$1,177,345
Fee income
229,739
 
 
229,739
Servicing revenue, net of change in fair value
(555,041)
(76,206)
 
 
(631,247)
Gain on originated mortgage loans, held-for-sale, net
1,399,092
2,533,112
 
 
3,932,204
 
1,946,588
2,873,736
 
(112,283)
 
4,708,041
Expenses