UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2016
 
or
 
¨  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ________________to________________
 
Commission File Number: 001-35777
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)
 
(Former name, former address and former fiscal year, if changed since last report) 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x    No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x    No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x  Accelerated filer ¨ Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨    No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the last practicable date.
Common stock, $0.01 par value per share: 250,773,117 shares outstanding as of October 28, 2016.




CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
 
This report contains 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 uncertain. 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. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to:
 
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, Ocwen, OneMain, Ditech 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 MSRs, Excess MSRs, servicer advances, RMBS and loan portfolios;
the risks that default and recovery rates on our MSRs, 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 MSRs or Excess MSRs;
the risk that projected recapture rates on the loan pools underlying our MSRs or 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 in which we invest 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 residential mortgage 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 Investment Company Act of 1940 (the “1940 Act”) and the fact that maintaining such exclusion imposes limits on our operations;
the risks related to HLSS liabilities that we have assumed;
the impact of current or future legal proceedings and regulatory investigations and inquiries;
the impact of any material transactions with FIG LLC (the “Manager”) or one of its affiliates, including the impact of any actual, potential or perceived conflicts of interest; and
events, conditions or actions that might occur at Ocwen.

We also direct readers to other risks and uncertainties referenced in this report, including those set forth under “Risk Factors.” 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.
 




SPECIAL NOTE REGARDING EXHIBITS
 
In reviewing the agreements included as exhibits to this Quarterly Report on Form 10-Q, please remember they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about New Residential Investment Corp. (the “Company,” “New Residential” or “we,” “our” and “us”) or the other parties to the agreements. The agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:
 
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 proved 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.

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this Quarterly Report on Form 10-Q and the Company’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.
 
The Company acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this report not misleading.
 




NEW RESIDENTIAL INVESTMENT CORP.
FORM 10-Q
 
INDEX
 
PAGE
Part I. Financial Information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    General
 
 
 
 
 
 
 
 
 
 




 
 
 
 
 
 
 
 
 
 
    Inflation
 
 
 
 
 
 
 
 
Part II. Other Information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




PART I. FINANCIAL INFORMATION
 
ITEM 1. FINANCIAL STATEMENTS
 
NEW RESIDENTIAL INVESTMENT CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)
 
September 30, 2016
 
December 31, 2015
 
(Unaudited)
 
Assets
 
 
 
Investments in:
 
 
 
Excess mortgage servicing rights, at fair value
$
1,404,052

 
$
1,581,517

Excess mortgage servicing rights, equity method investees, at fair value
195,904

 
217,221

Servicer advances, at fair value(A)
6,043,369

 
7,426,794

Real estate securities, available-for-sale
4,991,242

 
2,501,881

Residential mortgage loans, held-for-investment

 
330,178

Residential mortgage loans, held-for-sale
705,481

 
776,681

Real estate owned
60,459

 
50,574

Consumer loans, held-for-investment(A)
1,821,979

 

Cash and cash equivalents(A)
388,674

 
249,936

Restricted cash
153,127

 
94,702

Trades receivable
1,530,726

 
1,538,481

Deferred tax asset, net
172,510

 
185,311

Other assets
236,859

 
239,446

 
$
17,704,382

 
$
15,192,722

 
 
 
 
Liabilities and Equity
 
 
 
 
 
 
 
Liabilities
 
 
 
Repurchase agreements
$
4,929,944

 
$
4,043,054

Notes and bonds payable(A)
7,833,209

 
7,249,568

Trades payable
1,296,296

 
725,672

Due to affiliates
18,610

 
23,785

Dividends payable
115,356

 
106,017

Accrued expenses and other liabilities
93,456

 
58,046

 
14,286,871

 
12,206,142

 
 
 
 
Commitments and Contingencies


 


 
 
 
 
Equity
 
 
 
Common Stock, $0.01 par value, 2,000,000,000 shares authorized, 250,773,117 and 230,471,202 issued and outstanding at September 30, 2016 and December 31, 2015, respectively
2,507

 
2,304

Additional paid-in capital
2,919,765

 
2,640,893

Retained earnings
100,697

 
148,800

Accumulated other comprehensive income (loss)
105,381

 
3,936

Total New Residential stockholders’ equity
3,128,350

 
2,795,933

Noncontrolling interests in equity of consolidated subsidiaries
289,161

 
190,647

Total Equity
3,417,511

 
2,986,580

 
$
17,704,382

 
$
15,192,722


(A)
New Residential’s Condensed Consolidated Balance Sheets include the assets and liabilities of certain consolidated VIEs, the Buyer (Note 6) and the Consumer Loan SPVs (Note 9), which primarily hold investments in servicer advances and consumer loans, respectively, financed with notes and bonds payable. The Buyer’s balance sheet is included in Note 6 and the Consumer Loan SPVs’ balance sheet is included in Note 9. The creditors of the Buyer and the Consumer Loan SPVs do not have recourse to the general credit of New Residential and the assets of the Buyer and the Consumer Loan SPVs are not directly available to satisfy New Residential’s obligations.

See notes to condensed consolidated financial statements.

1



NEW RESIDENTIAL INVESTMENT CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands, except share data)
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2016
 
2015
 
2016
 
2015
Interest income
$
282,388

 
$
182,341

 
$
749,901

 
$
444,891

Interest expense
96,488

 
77,558

 
278,401

 
193,408

Net Interest Income
185,900

 
104,783

 
471,500

 
251,483

 
 
 
 
 
 
 
 
Impairment
 
 
 
 
 
 
 
Other-than-temporary impairment (OTTI) on securities
1,765

 
1,574

 
7,838

 
3,294

Valuation and loss provision on loans and real estate owned
18,275

 
(3,341
)
 
41,845

 
2,408

 
20,040

 
(1,767
)
 
49,683

 
5,702

 
 
 
 
 
 
 
 
Net interest income after impairment
165,860

 
106,550

 
421,817

 
245,781

 
 
 
 
 
 
 
 
Other Income
 
 
 
 
 
 
 
Change in fair value of investments in excess mortgage servicing rights
(17,060
)
 
1,131

 
(24,397
)
 
(274
)
Change in fair value of investments in excess mortgage servicing rights, equity method investees
6,261

 
8,427

 
8,608

 
16,443

Change in fair value of investments in servicer advances
21,606

 
(18,738
)
 
4,328

 
(1,845
)
Gain on consumer loans investment

 
14,385

 
9,943

 
33,342

Gain on remeasurement of consumer loans investment

 

 
71,250

 

Gain (loss) on settlement of investments, net
(17,079
)
 
(21,482
)
 
(44,290
)
 
(5,514
)
Other income (loss), net
32,973

 
(1,548
)
 
13,458

 
(10,032
)
 
26,701

 
(17,825
)
 
38,900

 
32,120

 
 
 
 
 
 
 
 
Operating Expenses
 
 
 
 
 
 
 
General and administrative expenses
8,777

 
19,563

 
28,082

 
49,362

Management fee to affiliate
10,536

 
9,860

 
30,552

 
23,357

Incentive compensation to affiliate
7,075

 
1,811

 
13,200

 
7,895

Loan servicing expense
14,187

 
1,668

 
30,037

 
9,510

 
40,575

 
32,902

 
101,871

 
90,124

 
 
 
 
 
 
 
 
Income Before Income Taxes
151,986

 
55,823

 
358,846

 
187,777

Income tax expense (benefit)
20,900

 
(5,932
)
 
18,195

 
4,947

Net Income
$
131,086

 
$
61,755

 
$
340,651

 
$
182,830

Noncontrolling Interests in Income of Consolidated Subsidiaries
$
32,178

 
$
7,193

 
$
61,355

 
$
17,174

Net Income Attributable to Common Stockholders
$
98,908

 
$
54,562

 
$
279,296

 
$
165,656

 
 
 
 
 
 
 
 
Net Income Per Share of Common Stock
 
 
 
 
 
 
 
Basic
$
0.41

 
$
0.24

 
$
1.19

 
$
0.87

Diluted
$
0.41

 
$
0.24

 
$
1.19

 
$
0.85

 
 
 
 
 
 
 
 
Weighted Average Number of Shares of Common Stock Outstanding
 
 
 
 
 
 
 
Basic
240,601,691

 
230,455,568

 
233,875,067

 
191,259,587

Diluted
241,099,381

 
231,215,235

 
234,184,611

 
194,081,345

 
 
 
 
 
 
 
 
Dividends Declared per Share of Common Stock
$
0.46

 
$
0.46

 
$
1.38

 
$
1.29

 
See notes to condensed consolidated financial statements.


2



NEW RESIDENTIAL INVESTMENT CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(dollars in thousands)
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2016
 
2015
 
2016
 
2015
Comprehensive income (loss), net of tax
 
 
 
 
 
 
 
Net income
$
131,086

 
$
61,755

 
$
340,651

 
$
182,830

Other comprehensive income (loss)
 
 
 
 
 
 
 
Net unrealized gain (loss) on securities
52,138

 
17,360

 
108,679

 
11,328

Reclassification of net realized (gain) loss on securities into earnings
2,444

 
(22,880
)
 
(7,234
)
 
(27,936
)
 
54,582

 
(5,520
)
 
101,445

 
(16,608
)
Total comprehensive income
$
185,668

 
$
56,235

 
$
442,096

 
$
166,222

Comprehensive income attributable to noncontrolling interests
$
32,178

 
$
7,193

 
$
61,355

 
$
17,174

Comprehensive income attributable to common stockholders
$
153,490

 
$
49,042

 
$
380,741

 
$
149,048

 
See notes to condensed consolidated financial statements.


3



NEW RESIDENTIAL INVESTMENT CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED) 
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016
(dollars in thousands, except share data)
 
 
Common Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares
 
Amount
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Total New Residential Stockholders’ Equity
 
Noncontrolling
Interests in Equity of Consolidated Subsidiaries
 
Total Equity
Equity - December 31, 2015
230,471,202

 
$
2,304

 
$
2,640,893

 
$
148,800

 
$
3,936

 
$
2,795,933

 
$
190,647

 
$
2,986,580

Dividends declared

 

 

 
(327,399
)
 

 
(327,399
)
 

 
(327,399
)
SpringCastle Transaction (Note 1)

 

 

 

 

 

 
110,438

 
110,438

Capital contributions

 

 

 

 

 

 

 

Capital distributions

 

 

 

 

 

 
(73,279
)
 
(73,279
)
Issuance of common stock
20,000,000

 
200

 
278,575

 

 

 
278,775

 

 
278,775

Option exercise
280,111

 
3

 
(3
)
 

 

 

 

 

Director share grant
21,804

 

 
300

 

 

 
300

 

 
300

Comprehensive income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income

 

 

 
279,296

 

 
279,296

 
61,355

 
340,651

Net unrealized gain (loss) on securities

 

 

 

 
108,679

 
108,679

 

 
108,679

Reclassification of net realized (gain) loss on securities into earnings

 

 

 

 
(7,234
)
 
(7,234
)
 

 
(7,234
)
Total comprehensive income
 
 
 
 
 
 
 
 
 
 
380,741

 
61,355

 
442,096

Equity - September 30, 2016
250,773,117

 
$
2,507

 
$
2,919,765

 
$
100,697

 
$
105,381

 
$
3,128,350

 
$
289,161


$
3,417,511

 
See notes to condensed consolidated financial statements.


4


NEW RESIDENTIAL INVESTMENT CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(dollars in thousands)
 
Nine Months Ended  
 September 30,
 
2016
 
2015
Cash Flows From Operating Activities
 
 
 
Net income
$
340,651

 
$
182,830

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
24,397

 
274

Change in fair value of investments in excess mortgage servicing rights, equity method investees
(8,608
)
 
(16,443
)
Change in fair value of investments in servicer advances
(4,328
)
 
1,845

(Gain) / loss on remeasurement of consumer loans investment
(71,250
)
 

(Gain) / loss on settlement of investments (net)
44,290

 
5,514

Unrealized (gain) / loss on derivative instruments
8,504

 
17,425

Unrealized (gain) / loss on other ABS
226

 
1,073

(Gain) / loss on transfer of loans to REO
(14,660
)
 
(1,075
)
(Gain) / loss on transfer of loans to other assets
(3,021
)
 
(143
)
(Gain) / loss on Excess MSR recapture agreements
(2,188
)
 
(2,247
)
Accretion and other amortization
(514,522
)
 
(360,467
)
Other-than-temporary impairment
7,838

 
3,294

Valuation and loss provision on loans and real estate owned
41,845

 
2,408

Non-cash directors’ compensation
300

 
300

Deferred tax provision
12,998

 
5,885

 
 
 
 
Changes in:
 
 
 
Restricted cash
16,179

 
(63,041
)
Other assets
191,939

 
177,737

Due to affiliates
(5,175
)
 
(45,026
)
Accrued expenses and other liabilities
12,136

 
19,055

Other operating cash flows:
 
 
 
Interest received from excess mortgage servicing rights
119,386

 
84,518

Interest received from servicer advance investments
132,758

 
124,934

Interest received from Non-Agency RMBS
73,108

 
31,715

Interest payments from residential mortgage loans, held-for-investment
2,815

 

Interest payments from PCD consumer loans, held-for-investment
34,265

 

Distributions of earnings from excess mortgage servicing rights, equity method investees
18,025

 
31,876

Purchases of residential mortgage loans, held-for-sale
(788,824
)
 
(611,160
)
Proceeds from sales of purchased residential mortgage loans, held-for-sale
802,110

 
722,961

Principal repayments from purchased residential mortgage loans, held-for-sale
52,805

 
48,069

Net cash provided by (used in) operating activities
523,999

 
362,111


Continued on next page.

5


NEW RESIDENTIAL INVESTMENT CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED), CONTINUED
(dollars in thousands)
 
Nine Months Ended  
 September 30,
 
2016
 
2015
Cash Flows From Investing Activities
 
 
 
Acquisition of investments in excess mortgage servicing rights
(2,022
)
 
(131,488
)
Acquisition of HLSS, net of cash acquired

 
(959,616
)
SpringCastle Transaction (Note 1), net of cash acquired
(49,943
)
 

Purchase of servicer advance investments
(11,588,537
)
 
(10,647,912
)
Purchase of Agency RMBS
(4,763,374
)
 
(3,040,422
)
Purchase of Non-Agency RMBS
(2,154,890
)
 
(763,095
)
Purchase of residential mortgage loans
(319
)
 
(664
)
Purchase of derivatives
(4,457
)
 
(4,370
)
Purchase of real estate owned and other assets
(10,936
)
 
(2,784
)
Purchase of consumer loans
(92,069
)
 

Draws on revolving consumer loans
(33,137
)
 

Payments for settlement of derivatives
(73,570
)
 
(61,212
)
Return of investments in excess mortgage servicing rights
142,718

 
112,648

Return of investments in excess mortgage servicing rights, equity method investees
11,900

 
3,867

Principal repayments from servicer advance investments
13,101,409

 
11,646,489

Principal repayments from Agency RMBS
67,738

 
110,863

Principal repayments from Non-Agency RMBS
364,310

 
54,979

Principal repayments from residential mortgage loans
31,092

 
15,944

Proceeds from sale of residential mortgage loans

 
649,712

Principal repayments from consumer loans
199,022

 

Proceeds from sale of Agency RMBS
4,774,116

 
2,435,168

Proceeds from sale of Non-Agency RMBS
95,683

 
389,719

Proceeds from settlement of derivatives
9,642

 
22,841

Proceeds from sale of real estate owned
51,941

 
52,139

Net cash provided by (used in) investing activities
76,317

 
(117,194
)

Continued on next page.

6


NEW RESIDENTIAL INVESTMENT CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED), CONTINUED
(dollars in thousands)
 
 
Nine Months Ended  
 September 30,
 
2016
 
2015
Cash Flows From Financing Activities
 
 
 
Repayments of repurchase agreements
(21,179,260
)
 
(5,644,864
)
Margin deposits under repurchase agreements and derivatives
(274,645
)
 
(441,696
)
Repayments of notes and bonds payable
(6,786,408
)
 
(5,445,381
)
Payment of deferred financing fees
(19,922
)
 
(38,486
)
Common stock dividends paid
(318,060
)
 
(197,011
)
Borrowings under repurchase agreements
22,065,713

 
6,184,472

Return of margin deposits under repurchase agreements and derivatives
276,634

 
439,875

Borrowings under notes and bonds payable
5,568,875

 
4,211,548

Issuance of common stock
279,600

 
882,166

Costs related to issuance of common stock
(825
)
 
(3,580
)
Noncontrolling interest in equity of consolidated subsidiaries - contributions

 

Noncontrolling interest in equity of consolidated subsidiaries - distributions
(73,279
)
 
(56,633
)
Net cash provided by (used in) financing activities
(461,577
)
 
(109,590
)
 
 
 
 
Net Increase (Decrease) in Cash and Cash Equivalents
138,738

 
135,327

 
 
 
 
Cash and Cash Equivalents, Beginning of Period
249,936

 
212,985

 
 
 
 
Cash and Cash Equivalents, End of Period
$
388,674

 
$
348,312

 
 
 
 
Supplemental Disclosure of Cash Flow Information
 
 
 
Cash paid during the period for interest
$
265,114

 
$
175,615

Cash paid during the period for income taxes
943

 
535

 
 
 
 
Supplemental Schedule of Non-Cash Investing and Financing Activities
 
 
 
Dividends declared but not paid
$
115,356

 
$
106,011

Reclassification resulting from the application of ASU No. 2014-11

 
85,955

Purchase of Agency and Non-Agency RMBS, settled after quarter end
1,296,296

 
1,059,232

Sale of investments, primarily Agency RMBS, settled after quarter end
1,530,726

 
2,031,425

Transfer from residential mortgage loans to real estate owned and other assets
218,467

 
28,836

Non-cash distributions from Consumer Loan Companies
25

 
585

Portion of HLSS Acquisition paid in common stock

 
434,092

Non-cash contingent consideration

 
50,000

Real estate securities retained from loan securitizations
122,585

 
14,990

Remeasurement of Consumer Loan Companies noncontrolling interest
110,438

 

Transfer of loans from held-for-investment to held-for sale
316,199

 

 
See notes to condensed consolidated financial statements.

7



NEW RESIDENTIAL INVESTMENT CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2016
(dollars in tables in thousands, except share data) 
 

1. ORGANIZATION AND BASIS OF PRESENTATION
 
New Residential Investment Corp. (together with its subsidiaries, “New Residential”) is a Delaware corporation that was formed as a limited liability company in September 2011 for the purpose of making real estate related investments and commenced operations on December 8, 2011. On December 20, 2012, New Residential was converted to a corporation. Newcastle Investment Corp. (“Newcastle”) was the sole stockholder of New Residential until the spin-off (Note 13), which was completed on May 15, 2013. Following the spin-off, New Residential is an independent publicly traded real estate investment trust (“REIT”) primarily focused on investing in residential mortgage related assets. New Residential is listed on the New York Stock Exchange (“NYSE”) under the symbol “NRZ.”
 
New Residential has elected and intends to qualify to be taxed as a REIT for U.S. federal income tax purposes. As such, New Residential will generally not be subject to U.S. federal corporate income tax on that portion of its net income that is distributed to stockholders if it distributes at least 90% of its REIT taxable income to its stockholders by prescribed dates and complies with various other requirements. See Note 17 regarding New Residential’s taxable REIT subsidiaries.
 
New Residential has entered into a management agreement (the “Management Agreement”) with FIG LLC (the “Manager”), an affiliate of Fortress Investment Group LLC (“Fortress”), pursuant to which the Manager provides a management team and other professionals who are responsible for implementing New Residential’s business strategy, subject to the supervision of New Residential’s Board of Directors. For its services, the Manager is entitled to management fees and incentive compensation, both defined in, and in accordance with the terms of, the Management Agreement. The Manager also manages Newcastle, investment funds that indirectly own a majority of the outstanding interests in Nationstar Mortgage LLC (“Nationstar”), a leading residential mortgage servicer, and investment funds that own a majority of the outstanding common stock of OneMain Holdings, Inc. (formerly known as Springleaf Holdings, Inc.) (together with its subsidiaries, “OneMain”), former managing member of the Consumer Loan Companies (Note 9).
 
As of September 30, 2016, New Residential conducted its business through the following segments: (i) investments in excess mortgage servicing rights (“Excess MSRs”), (ii) investments in servicer advances (including the basic fee component of the related mortgage servicing rights (“MSRs”)), (iii) investments in real estate securities, (iv) investments in real estate loans, (v) investments in consumer loans and (vi) corporate.
 
Approximately 2.4 million shares of New Residential’s common stock were held by Fortress, through its affiliates, and its principals as of September 30, 2016. In addition, Fortress, through its affiliates, held options relating to approximately 11.2 million shares of New Residential’s common stock as of September 30, 2016.
 
Interim Financial Statements

The accompanying condensed consolidated financial statements and related notes of New Residential have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and note disclosures normally included in financial statements prepared under U.S. generally accepted accounting principles have been condensed or omitted. In the opinion of management, all adjustments considered necessary for a fair presentation of New Residential’s financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These condensed consolidated financial statements should be read in conjunction with New Residential’s consolidated financial statements for the year ended December 31, 2015 and notes thereto included in New Residential’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”). Capitalized terms used herein, and not otherwise defined, are defined in New Residential’s consolidated financial statements for the year ended December 31, 2015.
 
Certain prior period amounts have been reclassified to conform to the current period’s presentation.


8

NEW RESIDENTIAL INVESTMENT CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2016
(dollars in tables in thousands, except share data) 
 

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenues from Contracts with Customers (Topic 606). The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In effect, companies will be required to exercise further judgment and make more estimates prospectively. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU No. 2014-09 is effective for New Residential in the first quarter of 2018. Early adoption is only permitted after December 31, 2016. Entities have the option of using either a full retrospective or a modified approach to adopt the guidance in ASU No. 2014-09. New Residential is currently evaluating the new guidance to determine the impact it may have on its condensed consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The standard provides guidance on management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern by requiring management to assess an entity’s ability to continue as a going concern by incorporating and expanding on certain principles that are currently in U.S. auditing standards. ASU No. 2014-15 is effective for New Residential for the annual period ending on December 31, 2016. Early adoption was permitted. New Residential is currently evaluating the new guidance to determine the impact that it may have on its condensed consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities. The standard: (i) requires that certain equity investments be measured at fair value, and modifies the assessment of impairment for certain other equity investments, (ii) changes certain disclosure requirements related to the fair value of financial instruments measured at amortized cost, (iii) changes certain disclosure requirements related to liabilities measured at fair value, (iv) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset, and (v) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. ASU No. 2016-01 is effective for New Residential in the first quarter of 2018. Early adoption is generally not permitted. An entity should apply ASU No. 2016-01 by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. New Residential is currently evaluating the new guidance to determine the impact it may have on its condensed consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments. The standard requires that a financial asset measured at amortized cost basis be presented at the net amount expected to be collected, net of an allowance for all expected (rather than incurred) credit losses. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. The standard also changes the accounting for purchased credit deteriorated (“PCD”) assets and available-for-sale securities to align with this treatment. ASU No. 2016-13 is effective for New Residential in the first quarter of 2020. Early adoption is permitted beginning in 2019. An entity should apply ASU No. 2016-13 by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. New Residential is currently evaluating the new guidance to determine the impact it may have on its condensed consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments. The standard provides guidance on the treatment of certain transactions within the statement of cash flows. ASU No. 2016-15 is effective for New Residential in the first quarter of 2018. Early adoption is permitted. New Residential adopted ASU No. 2016-15 in the third quarter of 2016 and it did not have an impact on its consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740) - Intra-Entity Transfers of Assets Other Than Inventory. The standard requires recognition of the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. ASU No. 2016-16 is effective for New Residential in the first quarter of 2018. Early adoption is permitted as of the beginning of an annual reporting period for which financial statements have not been issued. New Residential does not expect the adoption of ASU No. 2016-16 to have a material impact on its consolidated financial statements.


9

NEW RESIDENTIAL INVESTMENT CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2016
(dollars in tables in thousands, except share data) 
 

The FASB has recently issued or discussed a number of proposed standards on such topics as financial statement presentation, financial instruments, restricted cash and hedging. Some of the proposed changes are significant and could have a material impact on New Residential’s reporting. New Residential has not yet fully evaluated the potential impact of these proposals, but will make such an evaluation as the standards are finalized. 

SpringCastle Transaction

On March 31, 2016, certain of New Residential’s indirect wholly owned subsidiaries (collectively, the “NRZ SpringCastle Buyers”) entered into a Purchase Agreement (the “SpringCastle Purchase Agreement”) primarily with (i) certain direct or indirect wholly owned subsidiaries of OneMain (the “SpringCastle Sellers”), (ii) BTO Willow Holdings II, L.P. and Blackstone Family Tactical Opportunities Investment Partnership - NQ - ESC L.P. (together, the “Blackstone SpringCastle Buyers,” and the Blackstone SpringCastle Buyers together with the NRZ SpringCastle Buyers, collectively, the “SpringCastle Buyers”). Pursuant to the SpringCastle Purchase Agreement, the SpringCastle Sellers sold their collective 47% limited liability company interests in the Consumer Loan Companies (Note 9) to the SpringCastle Buyers for an aggregate purchase price of $111.6 million (the “SpringCastle Transaction”).

Pursuant to the SpringCastle Purchase Agreement, the NRZ SpringCastle Buyers collectively acquired an additional 23.5% limited liability company interest in the Consumer Loan Companies (representing 50% of the limited liability company interests being sold by the SpringCastle Sellers in the SpringCastle Transaction) and the Blackstone SpringCastle Buyers acquired the other 50% of the limited liability company interests being sold in the SpringCastle Transaction. The SpringCastle Buyers collectively paid $100.5 million of the aggregate purchase price to the SpringCastle Sellers on March 31, 2016, with the remaining $11.2 million paid into an escrow account within 120 days following March 31, 2016. The NRZ SpringCastle Buyers’ obligation with respect to purchase price was 50% of the total paid by the SpringCastle Buyers. The escrowed funds are expected to be held in escrow for a period of up to five years following March 31, 2016 and, subject to the terms of the SpringCastle Purchase Agreement and depending on the achievement of certain portfolio performance requirements, paid (in whole or in part) to the SpringCastle Sellers at the end of such five year period. Any portion of the escrowed funds that the SpringCastle Sellers are not entitled to receive at the end of such five year period, based on the failure to achieve certain portfolio performance requirements, will be returned to the SpringCastle Buyers. The SpringCastle Buyers are also entitled (but not required) to use the escrowed funds as a source of recovery for any indemnification payments to which they become entitled pursuant to the SpringCastle Purchase Agreement. The SpringCastle Purchase Agreement includes customary representations, warranties, covenants and indemnities.

The SpringCastle Transaction was unanimously approved by a special committee composed entirely of independent directors to which New Residential’s board of directors had delegated full authority to consider, negotiate and determine whether to engage in the SpringCastle Transaction.

Following the SpringCastle Transaction, New Residential, through the NRZ SpringCastle Buyers, owns 53.5% of the limited liability company interests in the Consumer Loan Companies and the Blackstone SpringCastle Buyers, collectively with their affiliates, own the remaining 46.5% interests in the Consumer Loan Companies. OneMain will remain as servicer of the loans held by the Consumer Loan Companies and their subsidiaries immediately following the SpringCastle Transaction.

In connection with the closing of the SpringCastle Transaction, each NRZ SpringCastle Buyer entered into a Second Amended & Restated Limited Liability Company Agreement (each, a “Second A&R LLC Agreement”) for each of the Consumer Loan Companies in which it acquired limited liability company interests. All of the Second A&R LLC Agreements contain substantially identical terms and conditions and designate the respective NRZ SpringCastle Buyer that is a party thereto as managing member of the applicable Consumer Loan Company. Pursuant to each Second A&R LLC Agreement, the managing member has the exclusive power and authority to manage the business and affairs of the applicable Consumer Loan Company, subject to the rights of the members to approve specified significant actions outside of the ordinary course of business and certain affiliate transactions, and subject to the other terms, conditions and limitations set forth in the Second A&R LLC Agreements. Each Second A&R LLC Agreement contains certain customary restrictions on the members’ ability to transfer their interests in the applicable Consumer Loan Companies.

As a result of the SpringCastle Transaction, New Residential obtained a controlling financial interest in the Consumer Loan Companies, which triggered the application of the acquisition model in ASC No. 805, including the fair value recognition of all net assets over which control has been obtained and the remeasurement of any previously held noncontrolling interest. Based on the guidance in ASC No. 805, New Residential has consolidated all of the assets and the related liabilities of the Consumer Loan Companies assuming a gross purchase price of $237.5 million. This gross purchase price is representative of the fair value, measured

10

NEW RESIDENTIAL INVESTMENT CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2016
(dollars in tables in thousands, except share data) 
 

in accordance with ASC No. 820, of 100% of the net assets of the Consumer Loan Companies, which was used to derive the $111.6 million purchase price for an aggregate 47.0% of the equity ownership acquired by the SpringCastle Buyers. New Residential previously held a 30% equity method investment in the Consumer Loan Companies, which had a basis of zero, and a fair value of $71.3 million based on 30% of the gross purchase price of $237.5 million, immediately prior to the SpringCastle Transaction. Therefore, the remeasurement of New Residential’s previously held equity method investment resulted in a gain of $71.3 million, which was recorded to Gain on Remeasurement of Consumer Loans Investment.

New Residential has performed a preliminary allocation of the purchase price to the Consumer Loans Companies’ assets and liabilities, as set forth below. The final allocation of purchase price may differ from the amounts included herein. The preliminary allocation of the total consideration, following reclassifications to conform to New Residential’s presentation, is as follows:
Total Consideration ($ in millions)
$
237.5

Assets
 
Consumer loans, held-for-investment
$
1,934.7

Cash and cash equivalents
0.3

Restricted cash
74.6

Other assets
35.9

Total Assets Acquired
2,045.5

 
 
Liabilities
 
Notes and bonds payable
$
1,803.2

Accrued expenses and other liabilities
4.8

Total Liabilities Assumed
1,808.0

 
 
Net Assets
$
237.5


The acquisition of the Consumer Loans Companies resulted in no goodwill because the total consideration transferred was equal to the fair value of the net assets acquired.

Unaudited Supplemental Pro Forma Financial Information - The following table presents New Residential’s unaudited pro forma combined Interest Income and Income Before Income Taxes for the three and nine months ended September 30, 2016 and 2015 prepared as if the SpringCastle Transaction had been consummated on January 1, 2015.
 
Three Months Ended September 30,
 
Nine Months Ended  
 September 30,
 
2016
 
2015
 
2016
 
2015
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(unaudited)
Pro Forma
 
 
 
 
 
 
 
Interest Income
$
282,388

 
$
276,720

 
$
836,814

 
$
739,490

Income Before Income Taxes
151,986

 
85,158

 
319,144

 
388,041

Noncontrolling Interests in Income of Consolidated Subsidiaries
32,178

 
27,523

 
79,944

 
77,870


The 2016 unaudited supplemental pro forma financial information has been adjusted to exclude, and the 2015 unaudited supplemental pro forma financial information has been adjusted to include, (i) the gain on remeasurement of New Residential’s Consumer Loans investment of $71.3 million and (ii) approximately $1.5 million of acquisition related costs incurred by New Residential in 2016. The unaudited supplemental pro forma financial information does not include any other anticipated benefits of the SpringCastle Transaction and, accordingly, the unaudited supplemental pro forma financial information is not necessarily indicative of either future results of operations or results that might have been achieved had the SpringCastle Transaction occurred on January 1, 2015.


11

NEW RESIDENTIAL INVESTMENT CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2016
(dollars in tables in thousands, except share data) 
 

New Residential’s Condensed Consolidated Statements of Income include Interest income and Income Before Income Taxes of the Consumer Loan Companies (Note 9) since the March 31, 2016 acquisition of $154.3 million and $60.1 million, respectively.

See Note 9 for further information on the Consumer Loan Companies and Note 11 for further information on related financing.

2. OTHER INCOME, ASSETS AND LIABILITIES
 
Other income (loss), net, is comprised of the following:
 
Three Months Ended September 30,
 
Nine Months Ended  
 September 30,
 
2016
 
2015
 
2016
 
2015
Unrealized gain (loss) on derivative instruments
$
26,962

 
$
(9,166
)
 
$
(8,504
)
 
$
(17,425
)
Unrealized gain (loss) on other ABS
724

 
(706
)
 
(226
)
 
(1,073
)
Gain (loss) on transfer of loans to REO
4,373

 
1,272

 
14,660

 
1,075

Gain (loss) on transfer of loans to other assets
2,743

 
314

 
3,021

 
143

Gain on Excess MSR recapture agreements
768

 
669

 
2,188

 
2,247

Other income (loss)
(2,597
)
 
6,069

 
2,319

 
5,001

 
$
32,973

 
$
(1,548
)
 
$
13,458

 
$
(10,032
)
 
Gain (loss) on settlement of investments, net is comprised of the following:
 
Three Months Ended September 30,
 
Nine Months Ended  
 September 30,
 
2016
 
2015
 
2016
 
2015
Gain (loss) on sale of real estate securities, net
$
(679
)
 
$
24,454

 
$
15,072

 
$
31,230

Gain (loss) on sale of residential mortgage loans, net
8,537

 
226

 
9,142

 
31,808

Gain (loss) on settlement of derivatives
(24,839
)
 
(44,479
)
 
(70,307
)
 
(53,300
)
Gain (loss) on liquidated residential mortgage loans
(1,331
)
 
246

 
(1,603
)
 
492

Gain (loss) on sale of REO
2,207

 
(1,914
)
 
5,193

 
(9,751
)
Other gains (losses)
(974
)
 
(15
)
 
(1,787
)
 
(5,993
)
 
$
(17,079
)
 
$
(21,482
)
 
$
(44,290
)
 
$
(5,514
)


12

NEW RESIDENTIAL INVESTMENT CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2016
(dollars in tables in thousands, except share data) 
 

Other assets and liabilities are comprised of the following:
 
Other Assets
 
 
 
Accrued Expenses
and Other Liabilities
 
September 30, 2016
 
December 31, 2015
 
 
 
September 30, 2016
 
December 31, 2015
Margin receivable, net
$
52,471

 
$
54,459

 
Interest payable
 
$
17,965

 
$
18,268

Other receivables
6,984

 
5,829

 
Accounts payable
 
33,727

 
18,650

Principal paydown receivable
1,834

 
795

 
Derivative liabilities (Note 10)
 
24,085

 
13,443

Receivable from government agency
63,204

 
68,833

 
Current taxes payable
 
3,678

 
1,573

Call rights
414

 
414

 
Due to servicers
 
8,975

 

Derivative assets (Note 10)
2,088

 
2,689

 
Other liabilities
 
5,026

 
6,112

Interest receivable
53,964

 
36,963

 
 
 
$
93,456

 
$
58,046

Ginnie Mae EBO servicer advance receivable, net
17,924

 
49,725

 
 
 
 
 
 
Due from servicers
17,788

 
5,064

 
 
 
 
 
 
Other assets
20,188

 
14,675

 
 
 
 
 
 
 
$
236,859

 
$
239,446

 
 
 
 
 
 

As reflected on the Condensed Consolidated Statements of Cash Flows, accretion and other amortization is comprised of the following:
 
 
Nine Months Ended  
 September 30,
 
 
2016
 
2015
Accretion of servicer advance interest income
 
$
257,877

 
$
256,045

Accretion of excess mortgage servicing rights income
 
106,848

 
87,874

Accretion of net discount on securities and loans(A)
 
164,806

 
35,239

Amortization of deferred financing costs
 
(13,889
)
 
(18,691
)
Amortization of discount on notes and bonds payable
 
(1,120
)
 

 
 
$
514,522

 
$
360,467


(A)
Includes accretion of the accretable yield on PCD loans.

3. SEGMENT REPORTING
 
New Residential conducts its business through the following segments: (i) investments in Excess MSRs, (ii) investments in Servicer Advances, (iii) investments in real estate securities, (iv) investments in real estate loans, (v) investments in consumer loans, and (vi) corporate. The corporate segment consists primarily of (i) general and administrative expenses, (ii) the management fees and incentive compensation related to the Management Agreement and (iii) corporate cash and related interest income. Securities owned by New Residential (Note 7) that are collateralized by servicer advances are included in the Servicer Advances segment. Secured corporate loans effectively collateralized by Excess MSRs are included in the Excess MSRs segment.
 
Summary financial data on New Residential’s segments is given below, together with a reconciliation to the same data for New Residential as a whole:
 
Servicing Related Assets
 
Residential Securities and Loans
 
 
 
 
 
 
 
Excess MSRs
 
Servicer Advances
 
Real Estate Securities
 
Real Estate Loans
 
Consumer Loans
 
Corporate
 
Total
Three Months Ended September 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
$
30,617

 
$
101,359

 
$
58,855

 
$
13,947

 
$
77,231

 
$
379

 
$
282,388

Interest expense
4,002

 
54,802

 
13,008

 
6,153

 
18,523

 

 
96,488

Net interest income (expense)
26,615

 
46,557

 
45,847

 
7,794

 
58,708

 
379

 
185,900

Impairment

 

 
1,765

 
(291
)
 
18,566

 

 
20,040

Other income (loss)
(10,052
)
 
21,430

 
1,392

 
13,931

 

 

 
26,701

Operating expenses
536

 
1,029

 
369

 
4,251

 
11,976

 
22,414

 
40,575

Income (Loss) Before Income Taxes
16,027

 
66,958

 
45,105

 
17,765

 
28,166

 
(22,035
)
 
151,986

Income tax expense (benefit)

 
16,348

 

 
4,556

 

 
(4
)
 
20,900

Net Income (Loss)
$
16,027

 
$
50,610

 
$
45,105

 
$
13,209

 
$
28,166

 
$
(22,031
)
 
$
131,086

Noncontrolling interests in income (loss) of consolidated subsidiaries
$

 
$
18,853

 
$

 
$

 
$
13,325

 
$

 
$
32,178

Net income (loss) attributable to common stockholders
$
16,027

 
$
31,757

 
$
45,105

 
$
13,209

 
$
14,841

 
$
(22,031
)
 
$
98,908



13

NEW RESIDENTIAL INVESTMENT CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2016
(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
Nine Months Ended September 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
$
106,848

 
$
265,119

 
$
172,982

 
$
47,712

 
$
155,541

 
$
1,699

 
$
749,901

Interest expense
12,117

 
176,672

 
31,425

 
20,447

 
37,740

 

 
278,401

Net interest income (expense)
94,731

 
88,447

 
141,557

 
27,265

 
117,801

 
1,699

 
471,500

Impairment

 

 
7,838

 
7,309

 
34,536

 

 
49,683

Other income (loss)
(14,234
)
 
9,103

 
(59,472
)
 
22,295

 
81,193

 
15

 
38,900

Operating expenses
1,066

 
3,076

 
1,307

 
11,194

 
26,194

 
59,034

 
101,871

Income (Loss) Before Income Taxes
79,431

 
94,474

 
72,940

 
31,057

 
138,264

 
(57,320
)
 
358,846

Income tax expense (benefit)

 
13,743

 

 
4,377

 
75

 

 
18,195

Net Income (Loss)
$
79,431

 
$
80,731

 
$
72,940

 
$
26,680

 
$
138,189

 
$
(57,320
)
 
$
340,651

Noncontrolling interests in income (loss) of consolidated subsidiaries
$

 
$
33,400

 
$

 
$

 
$
27,955

 
$

 
$
61,355

Net income (loss) attributable to common stockholders
$
79,431

 
$
47,331

 
$
72,940

 
$
26,680

 
$
110,234

 
$
(57,320
)
 
$
279,296


 
Servicing Related Assets
 
Residential Securities and Loans
 
 
 
 
 
 
 
Excess MSRs
 
Servicer Advances
 
Real Estate Securities
 
Real Estate Loans
 
Consumer Loans
 
Corporate
 
Total
September 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
Investments
$
1,599,956

 
$
6,294,697

 
$
4,739,914

 
$
765,940

 
$
1,821,979

 
$

 
$
15,222,486

Cash and cash equivalents
5,377

 
134,000

 
1,305

 
3,736

 
15,022

 
229,234

 
388,674

Restricted cash
2,406

 
90,899

 

 

 
59,822

 

 
153,127

Other assets
2,557

 
181,521

 
1,578,722

 
108,359

 
48,533

 
20,403

 
1,940,095

Total assets
$
1,610,296

 
$
6,701,117

 
$
6,319,941

 
$
878,035

 
$
1,945,356

 
$
249,637

 
$
17,704,382

Debt
$
268,290

 
$
6,210,358

 
$
3,924,111

 
$
653,197

 
$
1,707,197

 
$

 
$
12,763,153

Other liabilities
1,962

 
28,616

 
1,326,013

 
20,608

 
5,519

 
141,000

 
1,523,718

Total liabilities
270,252

 
6,238,974

 
5,250,124

 
673,805

 
1,712,716

 
141,000

 
14,286,871

Total equity
1,340,044

 
462,143

 
1,069,817

 
204,230

 
232,640

 
108,637

 
3,417,511

Noncontrolling interests in equity of consolidated subsidiaries

 
182,094

 

 

 
107,067

 

 
289,161

Total New Residential stockholders’ equity
$
1,340,044

 
$
280,049

 
$
1,069,817

 
$
204,230

 
$
125,573

 
$
108,637

 
$
3,128,350

Investments in equity method investees
$
195,904

 
$

 
$

 
$

 
$

 
$

 
$
195,904

 

14

NEW RESIDENTIAL INVESTMENT CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2016
(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 September 30, 2015













Interest income
$
38,477


$
105,135


$
28,984


$
8,888


$


$
857


$
182,341

Interest expense
2,936


64,291


5,150


4,651


530




77,558

Net interest income (expense)
35,541


40,844


23,834


4,237


(530
)

857


104,783

Impairment




1,574


(3,341
)





(1,767
)
Other income (loss)
10,227


(12,554
)

(28,354
)

(1,530
)

14,386




(17,825
)
Operating expenses
168


10,341


766


2,845


66


18,716


32,902

Income (Loss) Before Income Taxes
45,600

 
17,949

 
(6,860
)
 
3,203

 
13,790

 
(17,859
)

55,823

Income tax expense (benefit)

 
(4,852
)
 

 
(1,405
)
 
325

 


(5,932
)
Net Income (Loss)
$
45,600

 
$
22,801

 
$
(6,860
)
 
$
4,608

 
$
13,465

 
$
(17,859
)

$
61,755

Noncontrolling interests in income (loss) of consolidated subsidiaries
$

 
$
7,193

 
$

 
$

 
$

 
$


$
7,193

Net income (loss) attributable to common stockholders
$
45,600

 
$
15,608

 
$
(6,860
)
 
$
4,608

 
$
13,465

 
$
(17,859
)

$
54,562


 
Servicing Related Assets
 
Residential Securities and Loans
 
 
 
 
 
 
 
Excess MSRs
 
Servicer Advances
 
Real Estate Securities
 
Real Estate Loans
 
Consumer Loans
 
Corporate
 
Total
Nine Months Ended September 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
$
87,874

 
$
256,087

 
$
66,699

 
$
32,408

 
$
1

 
$
1,822

 
$
444,891

Interest expense
8,681

 
151,377

 
12,171

 
15,929

 
1,054

 
4,196

 
193,408

Net interest income (expense)
79,193

 
104,710

 
54,528

 
16,479

 
(1,053
)
 
(2,374
)
 
251,483

Impairment

 

 
3,294

 
2,408

 

 

 
5,702

Other income (loss)
18,415

 
835

 
(37,655
)
 
20,063

 
33,342

 
(2,880
)
 
32,120

Operating expenses
517

 
12,604

 
769

 
14,557

 
177

 
61,500

 
90,124

Income (Loss) Before Income Taxes
97,091

 
92,941

 
12,810

 
19,577

 
32,112

 
(66,754
)
 
187,777

Income tax expense (benefit)

 
7,565

 

 
(2,942
)
 
324

 

 
4,947

Net Income (Loss)
$
97,091