New Residential Investment Corp. |
(Exact name of registrant as specified in its charter) |
Delaware | 45-3449660 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
1345 Avenue of the Americas, New York, NY | 10105 | |
(Address of principal executive offices) | (Zip Code) |
(212) 798-3150 |
(Registrant’s telephone number, including area code) |
• | reductions in cash flows received from our investments; |
• | the quality and size of the investment pipeline and our ability to take advantage of investment opportunities at attractive risk-adjusted prices; |
• | 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 investment in servicer advances; |
• | our ability to deploy capital accretively and the timing of such deployment; |
• | our counterparty concentration and default risks in Nationstar, Springleaf and other third parties; |
• | a lack of liquidity surrounding our investments, which could impede our ability to vary our portfolio in an appropriate manner; |
• | 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 Excess MSRs, servicer advances, RMBS and consumer loan portfolios; |
• | the risks that default and recovery rates on our Excess MSRs, servicer advances, real estate securities, 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 Excess MSRs; |
• | the risk that projected recapture rates on the portfolios underlying our Excess MSRs are not achieved; |
• | the relationship between yields on assets which are paid off and yields on assets in which such monies can be reinvested; |
• | the relative spreads between the yield on the assets we invest in and the cost of financing; |
• | changes in economic conditions generally and the real estate and bond markets specifically; |
• | adverse changes in the financing markets we access affecting our ability to finance our investments on attractive terms, or at all; |
• | changing risk assessments by lenders that potentially lead to increased margin calls, not extending our repurchase 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; |
• | impairments in the value of the collateral underlying our investments and the relation of any such impairments to our judgments as to whether changes in the market value of our securities or loans are temporary or not and whether circumstances bearing on the value of such assets warrant changes in carrying values; |
• | the availability and terms of capital for future investments; |
• | competition within the finance and real estate industries; |
• | the legislative/regulatory environment, including, but not limited to, the impact of the Dodd-Frank Act, U.S. government programs intended to stabilize the economy, the federal conservatorship of Fannie Mae and Freddie Mac and legislation that permits modification of the terms of loans; |
• | our ability to maintain our qualification as a real estate investment trust (“REIT”) for U.S. federal income tax purposes and the potentially onerous consequences that any failure to maintain such qualification would have on our business; |
• | our ability to maintain our exclusion from registration under the 1940 Act and the fact that maintaining such exclusion imposes limits on our operations; and |
• | the risks related to the Acquisition (as defined herein). |
• | should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements provide to be inaccurate; |
• | have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; |
• | may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and |
• | were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. |
PAGE | |
CONDENSED CONSOLIDATED BALANCE SHEETS |
(dollars in thousands, except share data) |
March 31, 2015 | December 31, 2014 | ||||||
(Unaudited) | |||||||
Assets | |||||||
Investments in: | |||||||
Excess mortgage servicing rights, at fair value | $ | 526,662 | $ | 417,733 | |||
Excess mortgage servicing rights, equity method investees, at fair value | 225,111 | 330,876 | |||||
Servicer advances, at fair value | 3,245,457 | 3,270,839 | |||||
Real estate securities, available-for-sale | 2,324,915 | 2,463,163 | |||||
Residential mortgage loans, held-for-investment | 44,967 | 47,838 | |||||
Residential mortgage loans, held-for-sale | 500,174 | 1,126,439 | |||||
Real estate owned | 35,905 | 61,933 | |||||
Consumer loans, equity method investees | — | — | |||||
Cash and cash equivalents | 459,334 | 212,985 | |||||
Restricted cash | 28,325 | 29,418 | |||||
Derivative assets | 71 | 32,597 | |||||
Other assets | 76,701 | 99,869 | |||||
$ | 7,467,622 | $ | 8,093,690 | ||||
Liabilities and Equity | |||||||
Liabilities | |||||||
Repurchase agreements | $ | 2,339,389 | $ | 3,149,090 | |||
Notes payable | 2,999,418 | 2,913,209 | |||||
Trades payable | 196,000 | 2,678 | |||||
Due to affiliates | 6,465 | 57,424 | |||||
Dividends payable | 53,745 | 53,745 | |||||
Deferred tax liability | 13,414 | 15,114 | |||||
Accrued expenses and other liabilities | 44,777 | 52,505 | |||||
5,653,208 | 6,243,765 | ||||||
Commitments and Contingencies | |||||||
Equity | |||||||
Common Stock, $0.01 par value, 2,000,000,000 shares authorized, 141,434,905 and 141,434,905 issued and outstanding at March 31, 2015 and December 31, 2014, respectively | 1,414 | 1,414 | |||||
Additional paid-in capital | 1,328,587 | 1,328,587 | |||||
Retained earnings | 217,689 | 237,769 | |||||
Accumulated other comprehensive income, net of tax | 19,825 | 28,319 | |||||
Total New Residential stockholders’ equity | 1,567,515 | 1,596,089 | |||||
Noncontrolling interests in equity of consolidated subsidiaries | 246,899 | 253,836 | |||||
Total Equity | 1,814,414 | 1,849,925 | |||||
$ | 7,467,622 | $ | 8,093,690 |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) |
(dollars in thousands, except share data) |
Three Months Ended March 31, | |||||||
2015 | 2014 | ||||||
Interest income | $ | 84,373 | $ | 71,490 | |||
Interest expense | 33,979 | 38,997 | |||||
Net Interest Income | 50,394 | 32,493 | |||||
Impairment | |||||||
Other-than-temporary impairment (“OTTI”) on securities | 1,071 | 328 | |||||
Valuation provision on loans and real estate owned | 977 | 164 | |||||
2,048 | 492 | ||||||
Net interest income after impairment | 48,346 | 32,001 | |||||
Other Income | |||||||
Change in fair value of investments in excess mortgage servicing rights | (1,761 | ) | 6,602 | ||||
Change in fair value of investments in excess mortgage servicing rights, equity method investees | 4,921 | 6,374 | |||||
Change in fair value of investments in servicer advances | (7,669 | ) | — | ||||
Earnings from investments in consumer loans, equity method investees | — | 16,360 | |||||
Gain on settlement of investments, net | 14,767 | 4,357 | |||||
Other income (loss), net | 2,037 | 1,357 | |||||
12,295 | 35,050 | ||||||
Operating Expenses | |||||||
General and administrative expenses | 8,560 | 1,985 | |||||
Management fee to affiliate | 5,126 | 4,486 | |||||
Incentive compensation to affiliate | 3,693 | 3,338 | |||||
Loan servicing expense | 4,891 | 90 | |||||
22,270 | 9,899 | ||||||
Income Before Income Taxes | 38,371 | 57,152 | |||||
Income tax expense (benefit) | (3,427 | ) | 287 | ||||
Net Income | $ | 41,798 | $ | 56,865 | |||
Noncontrolling Interests in Income of Consolidated Subsidiaries | $ | 5,823 | $ | 8,093 | |||
Net Income Attributable to Common Stockholders | $ | 35,975 | $ | 48,772 | |||
Net Income Per Share of Common Stock | |||||||
Basic | $ | 0.25 | $ | 0.39 | |||
Diluted | $ | 0.25 | $ | 0.38 | |||
Weighted Average Number of Shares of Common Stock Outstanding | |||||||
Basic | 141,434,905 | 126,604,510 | |||||
Diluted | 144,911,309 | 129,919,967 | |||||
Dividends Declared per Share of Common Stock | $ | 0.38 | $ | 0.35 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) |
(dollars in thousands) |
Three Months Ended March 31, | |||||||
2015 | 2014 | ||||||
Comprehensive income (loss), net of tax | |||||||
Net income | $ | 41,798 | $ | 56,865 | |||
Other comprehensive income (loss) | |||||||
Net unrealized gain on securities | 15,132 | 10,878 | |||||
Reclassification of net realized (gain) on securities into earnings | (23,626 | ) | (4,164 | ) | |||
(8,494 | ) | 6,714 | |||||
Total comprehensive income | $ | 33,304 | $ | 63,579 | |||
Comprehensive income attributable to noncontrolling interests | $ | 5,823 | $ | 8,093 | |||
Comprehensive income attributable to common stockholders | $ | 27,481 | $ | 55,486 |
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED) FOR THE THREE MONTHS ENDED March 31, 2015 |
(dollars in thousands, except share data) |
Common Stock | ||||||||||||||||||||||||||||||
Shares | Amount | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income | Total New Residential Stockholders’ Equity | Noncontrolling Interests in Equity of Consolidated Subsidiaries | Total Equity | |||||||||||||||||||||||
Equity - December 31, 2014 | 141,434,905 | $ | 1,414 | $ | 1,328,587 | $ | 237,769 | $ | 28,319 | $ | 1,596,089 | $ | 253,836 | $ | 1,849,925 | |||||||||||||||
Dividends declared | — | — | — | (53,745 | ) | — | (53,745 | ) | — | (53,745 | ) | |||||||||||||||||||
Capital contributions | — | — | — | — | — | — | — | — | ||||||||||||||||||||||
Capital distributions | — | — | — | — | — | — | (12,760 | ) | (12,760 | ) | ||||||||||||||||||||
Modified retrospective adjustment for the adoption of ASU No. 2014-11 | — | — | — | (2,310 | ) | — | (2,310 | ) | — | (2,310 | ) | |||||||||||||||||||
Comprehensive income (loss) (net of tax) | ||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | 35,975 | — | 35,975 | 5,823 | 41,798 | ||||||||||||||||||||||
Net unrealized gain (loss) on securities | — | — | — | — | 15,132 | 15,132 | — | 15,132 | ||||||||||||||||||||||
Reclassification of net realized (gain) loss on securities into earnings | — | — | — | — | (23,626 | ) | (23,626 | ) | — | (23,626 | ) | |||||||||||||||||||
Total comprehensive income (loss) | 27,481 | 5,823 | 33,304 | |||||||||||||||||||||||||||
Equity - March 31, 2015 | 141,434,905 | $ | 1,414 | $ | 1,328,587 | $ | 217,689 | $ | 19,825 | $ | 1,567,515 | $ | 246,899 | $ | 1,814,414 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) |
(dollars in thousands) |
Three Months Ended March 31, | |||||||
2015 | 2014 | ||||||
Cash Flows From Operating Activities | |||||||
Net income | $ | 41,798 | $ | 56,865 | |||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||
Change in fair value of investments in excess mortgage servicing rights | 1,761 | (6,602 | ) | ||||
Change in fair value of investments in excess mortgage servicer rights, equity method investees | (4,921 | ) | (6,374 | ) | |||
Change in fair value of investments in servicer advances | 7,669 | — | |||||
Earnings from consumer loan equity method investees | — | (16,360 | ) | ||||
Change in fair value of investments in derivative assets | 7,030 | (1,357 | ) | ||||
Accretion and other amortization | (61,345 | ) | (56,650 | ) | |||
(Gain) / loss on settlement of investments (net) | (17,701 | ) | (4,357 | ) | |||
(Gain) / loss on transfer of loans to REO | 544 | — | |||||
Loss on extinguishment of debt | 2,934 | — | |||||
(Gain) / loss on mortgage servicing rights recapture agreement | (730 | ) | — | ||||
Other-than-temporary impairment (“OTTI”) | 1,071 | 328 | |||||
Valuation provision on loans and real estate owned | 977 | 164 | |||||
Unrealized loss on other ABS | 290 | — | |||||
Non-cash directors’ compensation | — | 78 | |||||
Deferred income tax expense | (3,007 | ) | — | ||||
Changes in: | |||||||
Restricted cash | 1,093 | (1,269 | ) | ||||
Other assets | (1,849 | ) | 5,531 | ||||
Due to affiliates | (50,959 | ) | (11,172 | ) | |||
Accrued expenses and other liabilities | 618 | 1,179 | |||||
Other operating cash flows: | |||||||
Interest received from excess mortgage servicing rights | 12,692 | 13,816 | |||||
Interest received from servicer advance investments | 23,168 | 16,304 | |||||
Interest received from Non-Agency RMBS | 8,050 | — | |||||
Distributions of earnings from excess mortgage servicing rights, equity method investees | 12,226 | 11,940 | |||||
Net cash provided by (used in) operating activities | (18,591 | ) | 2,064 | ||||
Cash Flows From Investing Activities | |||||||
Acquisition of investments in excess mortgage servicing rights | (23,831 | ) | (19,132 | ) | |||
Purchase of servicer advance investments | (1,765,294 | ) | (2,205,070 | ) | |||
Purchase of Agency RMBS | (1,026,525 | ) | (37,922 | ) | |||
Purchase of Non-Agency RMBS | (26,649 | ) | (1,038,721 | ) | |||
Purchase of residential mortgage loans | (19,032 | ) | — | ||||
Purchase of derivative assets | — | (71,923 | ) | ||||
Payments for settlement of derivatives | (25,007 | ) | — | ||||
Return of investments in excess mortgage servicing rights | 17,122 | 8,121 | |||||
Return of investments in excess mortgage servicing rights, equity method investees | 202 | 8,893 | |||||
Principal repayments from servicer advance investments | 1,802,188 | 1,442,648 | |||||
Principal repayments from Agency RMBS | 46,967 | 75,470 | |||||
Principal repayments from Non-Agency RMBS | 14,952 | 13,890 | |||||
Principal repayments from non-performing loans | — | 1,900 | |||||
Principal repayments from residential mortgage loans, held-for-investment | 9,022 | — | |||||
Proceeds from sale of residential mortgage loans | 627,719 | — | |||||
Proceeds from sale of Agency RMBS | 1,060,569 | 162,897 | |||||
Proceeds from sale of Non-Agency RMBS | 389,719 | 258,449 | |||||
Proceeds from settlement of derivatives | 2,417 | — | |||||
Proceeds from sale of real estate owned | 34,930 | — | |||||
Net cash provided by (used in) investing activities | 1,119,469 | (1,400,500 | ) |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) |
(dollars in thousands) |
Three Months Ended March 31, | |||||||
2015 | 2014 | ||||||
Cash Flows From Financing Activities | |||||||
Repayments of repurchase agreements | (2,016,777 | ) | (1,080,197 | ) | |||
Margin deposits under repurchase agreements and derivatives | (123,289 | ) | (43,270 | ) | |||
Repayments of notes payable | (396,125 | ) | (3,117,213 | ) | |||
Payment of deferred financing fees | (666 | ) | (5,660 | ) | |||
Common stock dividends paid | (53,745 | ) | (63,297 | ) | |||
Borrowings under repurchase agreements | 1,121,121 | 1,618,664 | |||||
Return of margin deposits under repurchase agreements and derivatives | 145,378 | 66,899 | |||||
Borrowings under notes payable | 482,334 | 3,862,782 | |||||
Noncontrolling interest in equity of consolidated subsidiaries - contributions | — | 142,024 | |||||
Noncontrolling interest in equity of consolidated subsidiaries - distributions | (12,760 | ) | (113,795 | ) | |||
Net cash provided by (used in) financing activities | (854,529 | ) | 1,266,937 | ||||
Net Increase (Decrease) in Cash and Cash Equivalents | 246,349 | (131,499 | ) | ||||
Cash and Cash Equivalents, Beginning of Period | 212,985 | 271,994 | |||||
Cash and Cash Equivalents, End of Period | $ | 459,334 | $ | 140,495 | |||
Supplemental Disclosure of Cash Flow Information | |||||||
Cash paid during the period for interest | $ | 32,880 | $ | 35,194 | |||
Cash paid during the period for income taxes | 305 | — | |||||
Supplemental Schedule of Non-Cash Investing and Financing Activities | |||||||
Dividends declared but not paid | $ | 53,745 | $ | 44,312 | |||
Application of ASU No. 2014-11 non-cash activity from investing to financing | 85,955 | — | |||||
Purchase of Non-Agency RMBS settled after quarter end | 196,000 | — |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
March 31, 2015 |
(dollars in tables in thousands, except share data) |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
March 31, 2015 |
(dollars in tables in thousands, except share data) |
Three Months Ended March 31, | |||||||
2015 | 2014 | ||||||
Unrealized gain (loss) on derivative instruments | $ | (7,030 | ) | $ | 1,357 | ||
Gain (loss) on transfer of loans to REO | (544 | ) | — | ||||
Gain on consumer loans investment | 10,447 | — | |||||
Other income (loss) | (836 | ) | — | ||||
$ | 2,037 | $ | 1,357 |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
March 31, 2015 |
(dollars in tables in thousands, except share data) |
Three Months Ended March 31, | |||||||
2015 | 2014 | ||||||
Gain on sale of real estate securities, net | $ | 24,697 | $ | 4,492 | |||
Gain (loss) on sale of residential mortgage loans, net | 20,830 | — | |||||
Gain (loss) on settlement of derivatives | (22,590 | ) | (135 | ) | |||
Gain (loss) on liquidated residential mortgage loans, held-for-investment | 400 | — | |||||
Gain (loss) on sale of REO(A) | (5,636 | ) | — | ||||
Other gains (losses) | (2,934 | ) | — | ||||
$ | 14,767 | $ | 4,357 |
(A) | Includes approximately $3.2 million loss on REO sold as a part of the residential mortgage loan sales described in Note 8. |
Other Assets | Accrued Expenses and Other Liabilities | ||||||||||||||||
March 31, 2015 | December 31, 2014 | March 31, 2015 | December 31, 2014 | ||||||||||||||
Margin receivable, net | $ | 36,934 | $ | 59,021 | Interest payable | $ | 7,516 | $ | 7,857 | ||||||||
Interest and other receivables | 11,320 | 10,455 | Accounts payable | 16,068 | 28,059 | ||||||||||||
Deferred financing costs, net(A) | 2,817 | 4,446 | Derivative liabilities | 21,127 | 14,220 | ||||||||||||
Principal paydown receivable | 3,761 | 3,595 | Current taxes payable | 47 | 2,349 | ||||||||||||
Receivable from government agency | 9,380 | 9,108 | Other liabilities | 19 | 20 | ||||||||||||
Call rights | 3,828 | 3,728 | $ | 44,777 | $ | 52,505 | |||||||||||
Other assets | 8,661 | 9,516 | |||||||||||||||
$ | 76,701 | $ | 99,869 |
(A) | Deferred financing costs are net of accumulated amortization of $5.4 million and $8.8 million as of March 31, 2015 and December 31, 2014, respectively. |
Three Months Ended March 31, | ||||||||
2015 | 2014 | |||||||
Accretion of servicer advance interest income | $ | 42,349 | $ | 45,716 | ||||
Accretion of excess mortgage servicing rights income | 15,037 | 13,816 | ||||||
Accretion of net discount on securities and loans | 5,399 | 356 | ||||||
Amortization of deferred financing costs | (1,440 | ) | (3,238 | ) | ||||
$ | 61,345 | $ | 56,650 |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
March 31, 2015 |
(dollars in tables in thousands, except share data) |
Servicing Related Assets | Residential Securities and Loans | ||||||||||||||||||||||||||
Excess MSRs | Servicer Advances | Real Estate Securities | Real Estate Loans | Consumer Loans | Corporate | Total | |||||||||||||||||||||
Three Months Ended March 31, 2015 | |||||||||||||||||||||||||||
Interest income | $ | 15,037 | $ | 42,349 | $ | 14,263 | $ | 12,724 | $ | — | $ | — | $ | 84,373 | |||||||||||||
Interest expense | — | 23,637 | 3,480 | 6,093 | — | 769 | 33,979 | ||||||||||||||||||||
Net interest income (expense) | 15,037 | 18,712 | 10,783 | 6,631 | — | (769 | ) | 50,394 | |||||||||||||||||||
Impairment | — | — | 1,071 | 977 | — | — | 2,048 | ||||||||||||||||||||
Other income | 3,890 | (10,727 | ) | (5,090 | ) | 13,775 | 10,447 | — | 12,295 | ||||||||||||||||||
Operating expenses | 88 | 575 | (102 | ) | 6,104 | 57 | 15,548 | 22,270 | |||||||||||||||||||
Income (Loss) Before Income Taxes | 18,839 | 7,410 | 4,724 | 13,325 | 10,390 | (16,317 | ) | 38,371 | |||||||||||||||||||
Income tax expense (benefit) | — | (3,240 | ) | — | (187 | ) | — | — | (3,427 | ) | |||||||||||||||||
Net Income (Loss) | $ | 18,839 | $ | 10,650 | $ | 4,724 | $ | 13,512 | $ | 10,390 | $ | (16,317 | ) | $ | 41,798 | ||||||||||||
Noncontrolling interests in income (loss) of consolidated subsidiaries | $ | — | $ | 5,823 | $ | — | $ | — | $ | — | $ | — | $ | 5,823 | |||||||||||||
Net income (loss) attributable to common stockholders | $ | 18,839 | $ | 4,827 | $ | 4,724 | $ | 13,512 | $ | 10,390 | $ | (16,317 | ) | $ | 35,975 |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
March 31, 2015 |
(dollars in tables in thousands, except share data) |
Servicing Related Assets | Residential Securities and Loans | ||||||||||||||||||||||||||
Excess MSRs | Servicer Advances | Real Estate Securities | Real Estate Loans | Consumer Loans | Corporate | Total | |||||||||||||||||||||
March 31, 2015 | |||||||||||||||||||||||||||
Investments | $ | 751,773 | $ | 3,245,457 | $ | 2,324,915 | $ | 581,046 | $ | — | $ | — | $ | 6,903,191 | |||||||||||||
Cash and cash equivalents | 267 | 69,180 | 5,288 | 5,895 | — | 378,704 | 459,334 | ||||||||||||||||||||
Restricted cash | 37 | 28,288 | — | — | — | — | 28,325 | ||||||||||||||||||||
Derivative assets | — | 71 | — | — | — | — | 71 | ||||||||||||||||||||
Other assets | 34 | 6,622 | 51,610 | 15,925 | 543 | 1,967 | 76,701 | ||||||||||||||||||||
Total assets | $ | 752,111 | $ | 3,349,618 | $ | 2,381,813 | $ | 602,866 | $ | 543 | $ | 380,671 | $ | 7,467,622 | |||||||||||||
Debt | $ | — | $ | 2,875,412 | $ | 1,928,891 | $ | 434,504 | $ | — | $ | 100,000 | $ | 5,338,807 | |||||||||||||
Other liabilities | 2,921 | 19,642 | 219,603 | 5,680 | 58 | 66,497 | 314,401 | ||||||||||||||||||||
Total liabilities | 2,921 | 2,895,054 | 2,148,494 | 440,184 | 58 | 166,497 | 5,653,208 | ||||||||||||||||||||
Total equity | 749,190 | 454,564 | 233,319 | 162,682 | 485 | 214,174 | 1,814,414 | ||||||||||||||||||||
Noncontrolling interests in equity of consolidated subsidiaries | — | 246,899 | — | — | — | — | 246,899 | ||||||||||||||||||||
Total New Residential stockholders’ equity | $ | 749,190 | $ | 207,665 | $ | 233,319 | $ | 162,682 | $ | 485 | $ | 214,174 | $ | 1,567,515 | |||||||||||||
Investments in equity method investees | $ | 225,111 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 225,111 |
Servicing Related Assets | Residential Securities and Loans | ||||||||||||||||||||||||||
Excess MSRs | Servicer Advances | Real Estate Securities | Real Estate Loans | Consumer Loans | Corporate | Total | |||||||||||||||||||||
Three Months Ended March 31, 2014 | |||||||||||||||||||||||||||
Interest income | $ | 13,816 | $ | 45,716 | $ | 11,238 | $ | 720 | $ | — | $ | — | $ | 71,490 | |||||||||||||
Interest expense | 1,291 | 31,956 | 4,069 | 198 | 1,483 | — | 38,997 | ||||||||||||||||||||
Net interest income (expense) | 12,525 | 13,760 | 7,169 | 522 | (1,483 | ) | — | 32,493 | |||||||||||||||||||
Impairment | — | — | 328 | 164 | — | — | 492 | ||||||||||||||||||||
Other income | 12,976 | — | 5,042 | 671 | 16,360 | 1 | 35,050 | ||||||||||||||||||||
Operating expenses | 65 | 250 | 60 | 90 | 23 | 9,411 | 9,899 | ||||||||||||||||||||
Income (Loss) Before Income Taxes | 25,436 | 13,510 | 11,823 | 939 | 14,854 | (9,410 | ) | 57,152 | |||||||||||||||||||
Income tax expense (benefit) | — | 287 | — | — | — | — | 287 | ||||||||||||||||||||
Net Income (Loss) | $ | 25,436 | $ | 13,223 | $ | 11,823 | $ | 939 | $ | 14,854 | $ | (9,410 | ) | $ | 56,865 | ||||||||||||
Noncontrolling interests in income (loss) of consolidated subsidiaries | $ | — | $ | 8,093 | $ | — | $ | — | $ | — | $ | — | $ | 8,093 | |||||||||||||
Net income (loss) attributable to common stockholders | $ | 25,436 | $ | 5,130 | $ | 11,823 | $ | 939 | $ | 14,854 | $ | (9,410 | ) | $ | 48,772 |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
March 31, 2015 |
(dollars in tables in thousands, except share data) |
Servicer | ||||||||||||
Nationstar | SLS(A) | Total | ||||||||||
Balance as of December 31, 2014 | $ | 409,076 | $ | 8,657 | $ | 417,733 | ||||||
Transfers from indirect ownership | 98,258 | — | 98,258 | |||||||||
Purchases | 26,479 | — | 26,479 | |||||||||
Interest income | 14,856 | 181 | 15,037 | |||||||||
Other income | 730 | — | 730 | |||||||||
Proceeds from repayments | (29,544 | ) | (270 | ) | (29,814 | ) | ||||||
Change in fair value | (1,472 | ) | (289 | ) | (1,761 | ) | ||||||
Balance as of March 31, 2015 | $ | 518,383 | $ | 8,279 | $ | 526,662 |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
March 31, 2015 |
(dollars in tables in thousands, except share data) |
March 31, 2015 | December 31, 2014 | ||||||||||||||||||||||
Unpaid Principal Balance (“UPB”) of Underlying Mortgages | Interest in Excess MSR | Weighted Average Life Years(A) | Amortized Cost Basis(B) | Carrying Value(C) | Carrying Value(C) | ||||||||||||||||||
New Residential | Fortress-managed funds | Nationstar | |||||||||||||||||||||
Agency | |||||||||||||||||||||||
Original and Recaptured Pools | $ | 54,829,877 | 32.5%-66.7% | 0.0%-33.3% | 33.3%-35% | 5.9 | $ | 161,109 | $ | 209,114 | $ | 188,733 | |||||||||||
Recapture Agreements | — | 32.5%-66.7% | 0.0%-33.3% | 33.3%-35% | 12.9 | 9,927 | 29,865 | 28,786 | |||||||||||||||
54,829,877 | 6.3 | 171,036 | 238,979 | 217,519 | |||||||||||||||||||
Non-Agency(D) | |||||||||||||||||||||||
Original and Recaptured Pools | $ | 108,742,559 | 33.3%-80.0% | 0.0%-50.0% | 0.0%-33.3% | 4.9 | $ | 231,228 | $ | 270,365 | $ | 189,812 | |||||||||||
Recapture Agreements | — | 33.3%-80.0% | 0.0%-50.0% | 0.0%-33.3% | 11.8 | 16,638 | 17,318 | 10,402 | |||||||||||||||
108,742,559 | 5.4 | 247,866 | 287,683 | 200,214 | |||||||||||||||||||
Total | $ | 163,572,436 | 5.8 | $ | 418,902 | $ | 526,662 | $ | 417,733 |
(A) | Weighted Average Life represents the weighted average expected timing of the receipt of expected cash flows for this investment. |
(B) | The amortized cost basis of the Recapture Agreements is determined based on the relative fair values of the Recapture Agreements and related Excess MSRs at the time they were acquired. |
(C) | Carrying Value represents the fair value of the pools or Recapture Agreements, as applicable. |
(D) | Excess MSR investments in which New Residential also invested in related servicer advances, including the basic fee component of the related MSR as of March 31, 2015 (Note 6). |
Three Months Ended March 31, | ||||||||
2015 | 2014 | |||||||
Original and Recaptured Pools | $ | (1,976 | ) | $ | 7,088 | |||
Recapture Agreements | 215 | (486 | ) | |||||
$ | (1,761 | ) | $ | 6,602 |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
March 31, 2015 |
(dollars in tables in thousands, except share data) |
Percentage of Total Outstanding Unpaid Principal Amount as of | ||||||
State Concentration | March 31, 2015 | December 31, 2014 | ||||
California | 33.0 | % | 31.5 | % | ||
Florida | 9.3 | % | 7.7 | % | ||
New York | 4.9 | % | 4.3 | % | ||
Maryland | 3.8 | % | 4.0 | % | ||
Texas | 3.6 | % | 4.2 | % | ||
New Jersey | 3.5 | % | 3.2 | % | ||
Virginia | 3.2 | % | 3.3 | % | ||
Illinois | 3.2 | % | 3.2 | % | ||
Washington | 3.2 | % | 3.6 | % | ||
Arizona | 2.7 | % | 3.2 | % | ||
Other U.S. | 29.6 | % | 31.8 | % | ||
100.0 | % | 100.0 | % |
March 31, 2015 | December 31, 2014 | |||||||
Excess MSR assets | $ | 440,714 | $ | 653,293 | ||||
Other assets | 9,508 | 8,472 | ||||||
Other liabilities | — | (13 | ) | |||||
Equity | $ | 450,222 | $ | 661,752 | ||||
New Residential’s investment | $ | 225,111 | $ | 330,876 | ||||
New Residential’s ownership | 50.0 | % | 50.0 | % |
Three Months Ended March 31, | ||||||||
2015 | 2014 | |||||||
Interest income | $ | 11,701 | $ | 18,493 | ||||
Other income (loss) | (1,835 | ) | (5,705 | ) | ||||
Expenses | (25 | ) | (40 | ) | ||||
Net income | $ | 9,841 | $ | 12,748 |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
March 31, 2015 |
(dollars in tables in thousands, except share data) |
Balance at December 31, 2014 | $ | 330,876 | |
Contributions to equity method investees | — | ||
Transfers to direct ownership | (98,258 | ) | |
Distributions of earnings from equity method investees | (12,226 | ) | |
Distributions of capital from equity method investees | (202 | ) | |
Change in fair value of investments in equity method investees | 4,921 | ||
Balance at March 31, 2015 | $ | 225,111 |
March 31, 2015 | |||||||||||||||||||
Unpaid Principal Balance | Investee Interest in Excess MSR(A) | New Residential Interest in Investees | Amortized Cost Basis(B) | Carrying Value(C) | Weighted Average Life (Years)(D) | ||||||||||||||
Agency | |||||||||||||||||||
Original and Recaptured Pools | $ | 84,000,746 | 66.7 | % | 50.0 | % | $ | 289,745 | $ | 358,909 | 5.5 | ||||||||
Recapture Agreements | — | 66.7 | % | 50.0 | % | 62,190 | 81,805 | 11.7 | |||||||||||
Total | $ | 84,000,746 | $ | 351,935 | $ | 440,714 | 6.6 |
(A) | The remaining interests are held by Nationstar. |
(B) | Represents the amortized cost basis of the equity method investees in which New Residential holds a 50% interest. The amortized cost basis of the Recapture Agreements is determined based on the relative fair values of the Recapture Agreements and related Excess MSRs at the time they were acquired. |
(C) | Represents the carrying value of the Excess MSRs held in equity method investees, in which New Residential holds a 50% interest. Carrying value represents the fair value of the pools or Recapture Agreements, as applicable. |
(D) | The weighted average life represents the weighted average expected timing of the receipt of cash flows of each investment. |
Percentage of Total Outstanding Unpaid Principal Amount as of | ||||||
State Concentration | March 31, 2015 | December 31, 2014 | ||||
California | 13.1 | % | 23.5 | % | ||
Florida | 7.4 | % | 8.9 | % | ||
Texas | 6.1 | % | 4.8 | % | ||
Georgia | 5.6 | % | 4.1 | % | ||
New York | 5.5 | % | 5.6 | % | ||
New Jersey | 4.1 | % | 3.9 | % | ||
Illinois | 4.0 | % | 3.5 | % | ||
Virginia | 3.2 | % | 3.2 | % | ||
Maryland | 3.2 | % | 3.3 | % | ||
Pennsylvania | 3.0 | % | 2.3 | % | ||
Other U.S. | 44.8 | % | 36.9 | % | ||
100.0 | % | 100.0 | % |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
March 31, 2015 |
(dollars in tables in thousands, except share data) |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
March 31, 2015 |
(dollars in tables in thousands, except share data) |
Amortized Cost Basis | Carrying Value(A) | Weighted Average Discount Rate | Weighted Average Life (Years)(B) | |||||||||
March 31, 2015 | ||||||||||||
Servicer advances | $ | 3,168,909 | $ | 3,245,457 | 5.4 | % | 3.9 | |||||
As of December 31, 2014 | ||||||||||||
Servicer advances | $ | 3,186,622 | $ | 3,270,839 | 5.4 | % | 4.0 |
(A) | Carrying value represents the fair value of the investments in servicer advances, including the basic fee component of the related MSRs. |
(B) | Weighted Average Life represents the weighted average expected timing of the receipt of expected net cash flows for this investment. |
Three Months Ended March 31, | ||||||||
2015 | 2014 | |||||||
Changes in Fair Value Recorded in Other Income | $ | (7,669 | ) | $ | — |
Loan-to-Value | Cost of Funds(B) | ||||||||||||||||||||||||||
UPB of Underlying Residential Mortgage Loans | Outstanding Servicer Advances | Servicer Advances to UPB of Underlying Residential Mortgage Loans | Carrying Value of Notes Payable | Gross | Net(A) | Gross | Net | ||||||||||||||||||||
March 31, 2015 | |||||||||||||||||||||||||||
Servicer advances(C) | $ | 92,159,246 | $ | 3,068,306 | 3.3 | % | $ | 2,875,412 | 91.5 | % | 90.6 | % | 2.6 | % | 2.2 | % | |||||||||||
December 31, 2014 | |||||||||||||||||||||||||||
Servicer advances(C) | $ | 96,547,773 | $ | 3,102,492 | 3.2 | % | $ | 2,890,230 | 91.4 | % | 90.4 | % | 3.0 | % | 2.3 | % |
(A) | Ratio of face amount of borrowings to par amount of servicer advance collateral, net of an interest reserve maintained by the Buyer. |
(B) | Annualized measure of the cost associated with borrowings. Gross Cost of Funds primarily includes interest expense and facility fees. Net Cost of Funds excludes facility fees. |
(C) | The following types of advances comprise the investments in servicer advances: |
March 31, 2015 | December 31, 2014 | |||||||
Principal and interest advances | $ | 737,845 | $ | 729,713 | ||||
Escrow advances (taxes and insurance advances) | 1,514,848 | 1,600,713 | ||||||
Foreclosure advances | 815,613 | 772,066 | ||||||
Total | $ | 3,068,306 | $ | 3,102,492 |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
March 31, 2015 |
(dollars in tables in thousands, except share data) |
Three Months Ended March 31, | ||||||||
2015 | 2014 | |||||||
Interest income, gross of amounts attributable to servicer compensation | $ | 63,357 | $ | 67,138 | ||||
Amounts attributable to base servicer compensation | (6,601 | ) | (6,280 | ) | ||||
Amounts attributable to incentive servicer compensation | (14,407 | ) | (15,142 | ) | ||||
Interest income from investments in servicer advances | $ | 42,349 | $ | 45,716 |
March 31, 2015 | December 31, 2014 | |||||||
Total Advance Purchaser LLC equity | $ | 445,041 | $ | 457,545 | ||||
Others’ ownership interest | 55.5 | % | 55.5 | % | ||||
Others’ interest in equity of consolidated subsidiary | $ | 246,899 | $ | 253,836 |
Three Months Ended March 31, | ||||||||
2015 | 2014 | |||||||
Net Advance Purchaser LLC income | $ | 10,496 | $ | 13,511 | ||||
Others’ ownership interest as a percent of total(A) | 55.5 | % | 59.9 | % | ||||
Others’ interest in net income (loss) of consolidated subsidiaries | $ | 5,823 | $ | 8,093 |
(A) | As a result, New Residential owned 44.5% and 40.1% of the Buyer, on average during the three months ended March 31, 2015 and 2014, respectively. |
Gross Unrealized | Weighted Average | December 31, 2014 | ||||||||||||||||||||||||||||||||||||||
Asset Type | Outstanding Face Amount | Amortized Cost Basis |