Rithm Capital Corp. (RITM) shares have gained 15% in the past year. The stock has outperformed the industry's 10.4% increase. Based in New York, Rithm Capital is an asset manager specializing in the real estate and financial services sectors. It has a market cap of $5.2 billion. Its asset management business expansion and continuous acquisition of customer loans are aiding the company. Its diversified platform and focus on growing profitability of its Newrez business is buoying its performance. Muted prepay ...

100 gesrey Focus of Article: The focus of this two-part article is to provide a very detailed analysis comparing Rithm Capital Corp. (NYSE:RITM) to 19 other mortgage real estate investment trust (mREIT) peers I currently fully cover. I am writing this two-part article due to the continued requests that such an analysis be specifically performed on RITM and some of the company's mREIT peers at periodic intervals. For readers who just want the summarized conclusions/results, I would suggest to scroll down to ...

Shares of the real estate investment trust witnessed a loss of 3.81% over the previous month, trailing the performance of the Finance sector with its loss of 0.44% and the S&P 500's gain of 3.96%. Looking at the full year, the Zacks Consensus Estimates suggest analysts are expecting earnings of $1.76 per share and revenue of $4.82 billion. These totals would mark changes of -14.56% and +33.16%, respectively, from last year. Empirical research indicates that these revisions in estimates have a direct correla ...

Colonial HD E t H the state the first the first 4000 t The focus of PART 1 of this article is to analyze Rithm Capital Corp.'s (NYSE:RITM) recent results and compare several of the company's metrics to 19 mortgage real estate investment trust (mREIT) peers. This analysis will show past and current data with supporting documentation. Table 1a will compare RITM's investment composition, recent leverage, hedging coverage ratio, and change in investment portfolio size to the 19 mREIT peers. Table 1b will compar ...

Zephyr18 Rithm Capital (NYSE:RITM) is growing its business, seeing solid earnings available for distribution strength and supplying a well-supported dividend for investors. The company has evolved drastically in the last couple of years, broadening its investment scope and portfolio footprint, although Rithm Capital is still heavily focused on one of its original investment premises: mortgage servicing rights. I believe Rithm Capital is a truly outstanding income play with a 9% dividend yield and shares con ...

nicolamargaret Rithm Capital Company Web Site Rithm Capital (NYSE:RITM) is a residential mortgage REIT (mREIT), at least for tax purposes. But it is much more diversified than some other mREITs, many of which simply purchase mortgages. RITM, however, calls itself a global asset manager. Yes, it has investments in mortgages and real estate loans, but it also has a large investment in mortgage service rights (MSRs). Other real estate investments include single family homes, title insurance, appraisals and a m ...

Dragon Claws Rithm Capital Corp. (NYSE:RITM) is a well-managed mortgage real estate investment trust with strong distributable earnings results for the first quarter and a low dividend pay-out ratio. Furthermore, Rithm Capital has considerable investments in Mortgage Servicing Rights, whose values benefit from higher interest rates. With inflation seeing a bit of a resurgence in early 2024, I think the market is set to face a higher-for-longer interest rate environment, which would benefit Rithm Capital. Si ...

We Are This mREIT Investment Thesis Remains Robust, If Intermediate-Term Expectations Are Tempered RITM's Business Model Rithm 2.0 Lays the Foundation for Growth We are in the early stages of our transformation into a leading global asset manager 2013 - 2018 2019 - 2024 Future State ore Strategy Sculptor adoor ! undine Seeking Alpha Rithm Capital Corp. (NYSE:RITM) is a company that initially started as an owner of excess Mortgage Scriving Rights [MSR] and eventually evolved to an asset manager company focus ...

Core Viewpoint - Rithm Capital Corp. reported strong first-quarter 2024 results, driven by solid performance in its servicing portfolio and a recovery in gain on sale margins, although they have not yet reached last year's levels [1][4]. Financial Performance - Adjusted earnings for Q1 2024 were 48 cents per share, exceeding the Zacks Consensus Estimate of 41 cents, and reflecting a 37.1% year-over-year increase [5]. - Revenues reached nearly $1.3 billion, a 52.8% increase year-over-year, surpassing the consensus mark by 18.7% [5]. - Net servicing revenues amounted to $554.4 million, up 69.3% year-over-year, and exceeded the Zacks Consensus Estimate by 50.2% [6]. - Interest income increased by 29.3% year-over-year to $448.2 million, although it fell short of the consensus estimate by 2.4% [6]. - Gain on originated residential mortgage loans rose 36.9% year-over-year to $149.5 million, beating the consensus estimate by 41% [6]. - Total expenses were $845.3 million, a 27.1% increase year-over-year, primarily due to higher interest expenses and compensation costs [7]. Segment Performance - In the Origination and Servicing segment, net servicing revenues were $490.8 million, up from $311.9 million a year ago, with pre-tax income rising to $408.1 million from $164 million [8]. - The Investment Portfolio segment saw net servicing revenues increase to $63.5 million from $15.6 million year-over-year, with a pre-tax loss narrowing to $15.4 million from $64.7 million [9]. - Mortgage Loans Receivable revenues advanced to $73.7 million from $58.3 million, with pre-tax income increasing to $41.1 million from $8.3 million [10]. - Asset Management generated total revenues of $75.9 million, with a pre-tax loss of $29.7 million [11]. Strategic Initiatives - The company is considering spinning off its mortgage business or pursuing an initial public offering, believing the business is undervalued [3]. - Rithm Capital hedged most of its mortgage servicing rights risk during the quarter, which is expected to enhance stability amid market volatility [3]. Financial Position - As of March 31, 2024, Rithm Capital had cash and cash equivalents of $1.14 billion, down from $1.29 billion at the end of 2023 [12]. - Total assets increased to $42.12 billion from $35.31 billion at the end of 2023, while debt rose to approximately $29.5 billion from around $24 billion [12]. - Total equity increased to $7.2 billion from $7.1 billion at the end of 2023 [12]. Capital Deployment - The company did not repurchase any shares during the quarter but has a $200 million share repurchase program in place through December 31, 2024 [14]. - A quarterly common dividend of 25 cents per share was paid, totaling $120.9 million [14].

FORM 10-Q Filing Information [Filing Details](index=1&type=section&id=Filing%20Details) Rithm Capital Corp. filed its Q1 2024 Form 10-Q as a large accelerated filer, with 483.5 million common shares outstanding - Rithm Capital Corp. filed its **Quarterly Report on Form 10-Q for the period ended March 31, 2024**[2](index=2&type=chunk) - The registrant is a **large accelerated filer** and has filed all required reports and interactive data files[4](index=4&type=chunk)[5](index=5&type=chunk) Common Stock and Preferred Stock Outstanding | Metric | Value | | :----- | :---- | | Common Stock Outstanding (as of April 26, 2024) | 483,477,713 shares | | Preferred Stock Series A | RITM PR A | | Preferred Stock Series B | RITM PR B | | Preferred Stock Series C | RITM PR C | | Preferred Stock Series D | RITM PR D | Cautionary Statement Regarding Forward-Looking Statements [Forward-Looking Statements Disclosure](index=2&type=section&id=CAUTIONARY%20STATEMENT%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) The report contains forward-looking statements subject to substantial risks, advising against undue reliance on forecasts - The report contains **forward-looking statements** that involve substantial risks and uncertainties, and actual results may differ materially from expectations[7](index=7&type=chunk)[10](index=10&type=chunk) - Key risks include: - Ability to successfully operate business strategies and generate sufficient revenue - Reductions in the value, cash flows, or liquidity of investments - Changes in general economic conditions, including recessions and their impact on asset values - Reliance on and counterparty risks with Servicing Partners and other third parties - Risks related to origination and servicing operations, including compliance, loan delinquencies, and financing - Competition within the finance, real estate, and asset management industries - Interest rate fluctuations and shifts in the yield curve, and hedging strategy success - Risks associated with residential mortgage loans, consumer loans, and servicing practices affecting MSRs and related assets - Deterioration of default and recovery rates on MSRs, servicer advance investments, RMBS, and loans - Changes in prepayment rates on underlying assets, affecting MSRs and Excess MSRs - Cybersecurity incidents and technology disruptions - Dependence on counterparties and vendors for services - Regulatory risks from the Consumer Financial Protection Bureau and other authorities - Risks related to the Asset Management business, including Sculptor Capital Management, Inc., such as redemption, market, leverage, liquidity, and valuation risks - Ability to successfully integrate acquired businesses, like Sculptor - Risks associated with Genesis Capital LLC business, including borrower, short-term loan, and concentration risks - Risks associated with the single-family rental (SFR) business, including seasonal fluctuations, competition, and increasing fixed costs - Ability to maintain exclusion from Investment Company Act of 1940 and REIT qualification - Legislative/regulatory environment risks, including tax law changes and GSE actions - Risks associated with indebtedness, including senior unsecured notes and restrictive covenants - Ability to obtain and maintain favorable financing arrangements - Increased focus on environmental, social, and governance (ESG) issues - Impact from current or future acquisitions, such as Computershare Mortgage Services Inc. and SLS - Impact of current or future legal proceedings and regulatory investigations - Adverse market, regulatory, or interest rate environments affecting common stock price - Ability to consummate future acquisitions, dispositions, and financing transactions - Ability to pay distributions on common stock - Dilution experienced by existing stockholders from preferred stock conversion or equity award vesting[8](index=8&type=chunk)[9](index=9&type=chunk) Special Note Regarding Exhibits [Exhibits Disclosure](index=5&type=section&id=SPECIAL%20NOTE%20REGARDING%20EXHIBITS) Exhibits provide agreement terms, not factual disclosures, with representations qualified by disclosures and recent developments - Exhibits are provided to inform about **agreement terms**, not as factual disclosures about Rithm Capital Corp. or other parties[12](index=12&type=chunk) - Representations and warranties in exhibits: - Allocate risk if statements are inaccurate - Are qualified by disclosures not necessarily in the agreement - May use different materiality standards - Were made as of the agreement date and are subject to recent developments[15](index=15&type=chunk) - The Company is responsible for additional disclosures to ensure statements in the report are not misleading, despite cautionary statements[14](index=14&type=chunk) Rithm Capital Corp. Form 10-Q Index [Report Structure](index=6&type=section&id=RITHM%20CAPITAL%20CORP.%20FORM%2010-Q%20INDEX) This section outlines the Form 10-Q's table of contents, detailing Financial Information and Other Information parts - The report is structured into **Part I (Financial Information)** and **Part II (Other Information)**[16](index=16&type=chunk) - Part I includes: - Item 1. Financial Statements (Unaudited) - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Item 3. Quantitative and Qualitative Disclosures About Market Risk - Item 4. Controls and Procedures[17](index=17&type=chunk) - Part II includes: - Item 1. Legal Proceedings - Item 1A. Risk Factors - Item 2. Unregistered Sales of Equity Securities and Use of Proceeds - Item 3. Defaults Upon Senior Securities - Item 4. Mine Safety Disclosures - Item 5. Other Information - Item 6. Exhibits[17](index=17&type=chunk) Part I. Financial Information [Item 1. Financial Statements (Unaudited)](index=7&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents Rithm Capital Corp.'s unaudited consolidated financial statements and detailed notes [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to $42.1 billion, driven by real estate and secured financing, with liabilities and equity also rising Consolidated Balance Sheet Summary (dollars in thousands) | Metric | March 31, 2024 (Unaudited) | December 31, 2023 | | :------------------------------------------------- | :-------------------------- | :------------------ | | **Assets** | | | | Mortgage servicing rights and MSR financing receivables, at fair value | $8,706,723 | $8,405,938 | | Real estate and other securities | $15,314,199 | $9,782,217 | | Residential mortgage loans, held-for-sale | $3,766,115 | $2,540,742 | | Total Assets | $42,120,928 | $35,311,785 | | **Liabilities** | | | | Secured financing agreements | $18,271,046 | $12,561,283 | | Secured notes and bonds payable | $10,045,375 | $10,679,186 | | Total Liabilities | $34,877,556 | $28,210,747 | | **Equity** | | | | Total Rithm Capital stockholders' equity | $7,149,552 | $7,006,942 | | Total Equity | $7,243,372 | $7,101,038 | - Total assets of consolidated variable interest entities (VIEs) were **$2.6 billion** as of March 31, 2024, up from $2.5 billion as of December 31, 2023[19](index=19&type=chunk) - Total liabilities of consolidated VIEs were **$2.1 billion** for both periods[19](index=19&type=chunk) [Consolidated Statements of Operations](index=8&type=section&id=Consolidated%20Statements%20of%20Operations) Net income significantly increased to $287.5 million, driven by higher servicing revenue and mortgage loan gains Consolidated Statements of Operations Summary (dollars in thousands, except per share data) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------------------- | :-------------------------------- | :-------------------------------- | | **Revenues** | | | | Servicing revenue, net | $554,378 | $327,535 | | Interest income | $448,179 | $346,614 | | Gain on originated residential mortgage loans, held-for-sale, net | $149,545 | $109,268 | | Asset management revenues | $75,860 | $0 | | Total Revenues | $1,286,310 | $841,561 | | **Expenses** | | | | Interest expense and warehouse line fees | $414,365 | $309,068 | | General and administrative | $195,118 | $167,155 | | Compensation and benefits | $235,778 | $188,880 | | Total Expenses | $845,261 | $665,103 | | **Net Income (loss)** | $287,487 | $89,949 | | Net income (loss) attributable to common stockholders | $261,640 | $68,854 | | Basic EPS | $0.54 | $0.14 | | Diluted EPS | $0.54 | $0.14 | | Dividends declared per share of common stock | $0.25 | $0.25 | - Servicing revenue, net **increased by $226.8 million (69.2%) year-over-year**, primarily due to a positive change in fair value of MSRs and MSR financing receivables[22](index=22&type=chunk) - Asset management revenues, which were zero in Q1 2023, contributed **$75.9 million in Q1 2024** following the Sculptor acquisition[22](index=22&type=chunk) [Consolidated Statements of Comprehensive Income](index=9&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income rose substantially to $288.3 million, primarily due to higher net income Consolidated Statements of Comprehensive Income Summary (dollars in thousands) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net income (loss) | $287,487 | $89,949 | | Other comprehensive income (loss) | | | | Unrealized gain (loss) on available-for-sale securities, net | $1,603 | $2,980 | | Cumulative translation adjustment | $(870) | $0 | | Deferred taxes | $94 | $0 | | Comprehensive income (loss) | $288,314 | $92,929 | | Comprehensive income (loss) attributable to common stockholders | $262,467 | $71,834 | - Comprehensive income **increased by $195.4 million (210.3%) year-over-year**, largely mirroring the increase in net income[24](index=24&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=10&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Total equity increased to $7.2 billion in Q1 2024, driven by net income, partially offset by dividends Changes in Stockholders' Equity (dollars in thousands) | Metric | Balance at Dec 31, 2023 | Q1 2024 Activity | Balance at Mar 31, 2024 | | :-------------------------------- | :---------------------- | :----------------- | :---------------------- | | Total Rithm Capital stockholders' equity | $7,006,942 | $142,610 | $7,149,552 | | Dividends declared on common stock | | $(120,869) | | | Dividends declared on preferred stock | | $(22,395) | | | Net income (loss) | | $284,035 | | | Unrealized gain (loss) on AFS securities, net | | $1,603 | | | Cumulative translation adjustment | | $(870) | | | Deferred taxes | | $94 | | - Total Rithm Capital stockholders' equity **increased by $142.6 million** from December 31, 2023, to March 31, 2024[26](index=26&type=chunk) - Common stock outstanding **increased by 251,474 shares** during Q1 2024 due to director share grants and employee non-cash stock-based compensation[26](index=26&type=chunk) [Consolidated Statements of Cash Flows](index=12&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash, cash equivalents, and restricted cash decreased by $141.8 million, due to operating and investing outflows Consolidated Statements of Cash Flows Summary (dollars in thousands) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by (used in) operating activities | $(1,144,201) | $1,181,267 | | Net cash provided by (used in) investing activities | $(4,053,218) | $(590,573) | | Net cash provided by (used in) financing activities | $5,055,583 | $(407,982) | | Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | $(141,836) | $182,712 | | Cash, Cash Equivalents and Restricted Cash, End of Period | $1,530,983 | $1,800,346 | - Operating activities shifted from providing **$1.18 billion in cash in Q1 2023** to using **$1.14 billion in Q1 2024**[28](index=28&type=chunk) - Investing activities used significantly more cash in Q1 2024 (**$4.05 billion**) compared to Q1 2023 (**$0.59 billion**), largely due to purchases of US Treasuries and reverse repurchase agreements[28](index=28&type=chunk) - Financing activities provided **$5.06 billion in cash in Q1 2024**, a substantial increase from using $0.41 billion in Q1 2023, driven by higher borrowings under secured financing agreements and warehouse credit facilities[29](index=29&type=chunk) [Notes to Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures and explanations for the consolidated financial statements [1. Business and Organization](index=14&type=section&id=1.%20BUSINESS%20AND%20ORGANIZATION) Rithm Capital Corp. is a global asset manager and REIT, investing in real estate and financial assets across five segments - Rithm Capital Corp. is a **global asset manager** focused on real estate, credit, and financial services, operating as an internally managed REIT[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk) - The company's business segments include **Origination and Servicing (Newrez, NRM, Caliber), Investment Portfolio, Mortgage Loans Receivable (Genesis), Asset Management (Sculptor), and Corporate**[34](index=34&type=chunk)[35](index=35&type=chunk) - Rithm Capital completed the acquisition of **Sculptor Capital Management, Inc. on November 17, 2023**, expanding its asset management capabilities[33](index=33&type=chunk) - The Computershare Mortgage Services Inc. acquisition, including SLS, was completed on **May 1, 2024, for approximately $720 million**[38](index=38&type=chunk) [2. Basis of Presentation](index=15&type=section&id=2.%20BASIS%20OF%20PRESENTATION) Financial statements adhere to US GAAP, consolidating controlled entities and using key estimates for fair value and goodwill - Consolidated financial statements are prepared in accordance with **US GAAP**, including accounts of Rithm Capital and its consolidated subsidiaries, eliminating significant intercompany transactions[40](index=40&type=chunk) - Key economic risks include: - Credit risk: default on investments due to borrower/counterparty inability to pay - Market risk: changes in investment value due to prepayment rates, interest rates, spreads, or collateral values[43](index=43&type=chunk) - The company transitioned from LIBOR to an alternative benchmark (mainly SOFR) by **June 30, 2023**, and does not intend to amend preferred stock fallback language[48](index=48&type=chunk) - Adoption of ASU 2022-03 (Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions) had **no material effect**[49](index=49&type=chunk) - ASU 2023-07 (Segment Reporting) and ASU 2024-01 (Compensation-Stock Compensation) are **not expected to have a material effect**[50](index=50&type=chunk)[51](index=51&type=chunk) [3. Segment Reporting](index=17&type=section&id=3.%20SEGMENT%20REPORTING) Rithm Capital's five reportable segments reflect its strategic growth as an asset manager and consolidated operations - Rithm Capital's reportable segments are **Origination and Servicing, Investment Portfolio, Mortgage Loans Receivable, Asset Management, and Corporate**[52](index=52&type=chunk) - The Asset Management segment was identified in 2023 to reflect Sculptor's operations, and the Investment Portfolio now aggregates several previously separate segments[53](index=53&type=chunk) Segment Financial Information (Three Months Ended March 31, 2024, dollars in thousands) | Metric | Origination and Servicing | Investment Portfolio | Mortgage Loans Receivable | Asset Management | Corporate | Total | | :------------------------------------------------- | :------------------------ | :------------------- | :------------------------ | :--------------- | :-------- | :---------- | | Total revenues | $776,729 | $360,054 | $73,665 | $75,860 | $2 | $1,286,310 | | Total operating expenses | $368,544 | $297,737 | $53,010 | $102,668 | $23,302 | $845,261 | | Income (loss) before income taxes | $408,149 | $(15,395) | $41,089 | $(29,681) | $(23,263) | $380,899 | | Net income (loss) attributable to common stockholders | $311,893 | $(18,680) | $41,422 | $(27,337) | $(45,658) | $261,640 | Segment Assets and Liabilities (March 31, 2024, dollars in thousands) | Metric | Origination and Servicing | Investment Portfolio | Mortgage Loans Receivable | Asset Management | Corporate | Total | | :------------------------------------------------- | :------------------------ | :------------------- | :------------------------ | :--------------- | :-------- | :---------- | | Total assets | $15,001,011 | $22,857,895 | $2,689,844 | $1,528,831 | $43,347 | $42,120,928 | | Total liabilities | $10,916,193 | $19,864,487 | $2,001,633 | $879,580 | $1,215,663 | $34,877,556 | | Total Rithm Capital stockholders' equity | $4,076,767 | $2,949,982 | $688,211 | $606,908 | $(1,172,316) | $7,149,552 | [4. Excess Mortgage Servicing Rights (Excess MSRs)](index=19&type=section&id=4.%20EXCESS%20MORTGAGE%20SERVICING%20RIGHTS) Excess MSRs, including direct and joint venture investments, decreased to $255.1 million due to repayments and fair value changes - Excess MSRs include **direct investments and investments in joint ventures**, with fair value measured under the equity method for joint ventures[59](index=59&type=chunk)[68](index=68&type=chunk) Excess MSRs, at fair value (dollars in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :------------------------ | :------------- | :---------------- | | Direct investments in Excess MSRs | $199,363 | $208,385 | | Excess MSR joint ventures | $55,748 | $62,765 | | Total Excess MSRs, at fair value | $255,111 | $271,150 | - Changes in fair value of Excess MSR investments resulted in a **loss of $1.9 million** for the three months ended March 31, 2024, compared to a loss of $9.8 million in the prior year period[67](index=67&type=chunk) - A weighted average discount rate of **8.8%** was used to value Excess MSRs as of March 31, 2024[67](index=67&type=chunk) [5. Mortgage Servicing Rights (MSRs) and MSR Financing Receivables](index=21&type=section&id=5.%20MORTGAGE%20SERVICING%20RIGHTS%20AND%20MSR%20FINANCING%20RECEIVABLES) MSRs and MSR financing receivables increased to $8.7 billion, driving a significant rise in servicing revenue, net MSRs and MSR Financing Receivables Activity (dollars in thousands) | Metric | Amount | | :------------------------------------------------- | :------------- | | Balance as of December 31, 2023 | $8,405,938 | | Originations | $215,939 | | Realization of cash flows | $(116,839) | | Change in valuation inputs and assumptions | $201,014 | | Balance at March 31, 2024 | $8,706,723 | Servicing Revenue, Net Components (dollars in thousands) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Servicing fee revenue, net and interest income from MSRs and MSR financing receivables | $470,203 | $469,839 | | Change in fair value of MSRs and MSR financing receivables | $84,175 | $(142,304) | | Servicing revenue, net | $554,378 | $327,535 | - As of March 31, 2024, the total UPB of underlying mortgages for MSRs and MSR financing receivables was **$526.7 billion**, with a weighted average life of **7.5 years** and a weighted average discount rate of **8.5%**[74](index=74&type=chunk)[75](index=75&type=chunk) - Rithm Capital recognized approximately **$1.8 billion in residential mortgage loans** subject to repurchase and a corresponding liability as of March 31, 2024, due to Ginnie Mae delinquency criteria[76](index=76&type=chunk) - Servicer advances receivable decreased to **$2.59 billion** at March 31, 2024, from $2.76 billion at December 31, 2023[19](index=19&type=chunk)[82](index=82&type=chunk) - The provision for expected non-recovery of advances was **$93.2 million (3.5%)** at March 31, 2024[83](index=83&type=chunk) [6. Servicer Advance Investments](index=24&type=section&id=6.%20SERVICER%20ADVANCE%20INVESTMENTS) Servicer advance investments, recorded at fair value, totaled $374.5 million, slightly down from prior quarter - Servicer advance investments are recorded at **fair value** and include the right to the basic fee component of related MSRs[85](index=85&type=chunk) Servicer Advance Investments Summary (dollars in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :------------------------------------------------- | :------------- | :---------------- | | Carrying Value (Fair Value) | $374,511 | $376,881 | | Weighted Average Discount Rate | 6.2% | 6.2% | | Weighted Average Expected Life (Years) | 8.4 | 8.1 | | UPB of Underlying Residential Mortgage Loans | $14,871,701 | $15,499,559 | | Outstanding Servicer Advances | $313,271 | $320,630 | - The servicer advance investment related to SLS, with a fair value of **$9.7 million** at March 31, 2024, will be reclassified to a full MSR in Q2 2024 following the Computershare acquisition[87](index=87&type=chunk) [7. Real Estate and Other Securities](index=26&type=section&id=7.%20REAL%20ESTATE%20AND%20OTHER%20SECURITIES) Real estate and other securities significantly increased to $15.3 billion, primarily measured at fair value through net income Real Estate and Other Securities by Designation (March 31, 2024, dollars in thousands) | Asset Type | Carrying Value | | :------------------------------------------------- | :------------- | | Securities designated as available for sale (AFS): | | | Agency | $64,331 | | Non-Agency | $356,232 | | Securities measured at fair value through net income: | | | Agency | $9,501,879 | | US Treasury | $4,472,656 | | Non-Agency | $894,216 | | Total/Weighted Average (Fair Value) | $15,289,314 | | Treasury Bills Designated as Held to Maturity (HTM): | | | Treasury | $24,885 | - Total real estate and other securities **increased by $5.5 billion (56.6%)** from December 31, 2023, to March 31, 2024[19](index=19&type=chunk) - As of March 31, 2024, the company had **$296.7 million in RMBS designated as AFS** in an unrealized loss position, with $10.7 million attributed to credit impairment[102](index=102&type=chunk)[107](index=107&type=chunk) - Purchases of US Treasuries and Agency RMBS were significant in Q1 2024, with **$4.77 billion and $1.26 billion** in purchase price, respectively[99](index=99&type=chunk) [8. Residential Mortgage Loans](index=29&type=section&id=8.%20RESIDENTIAL%20MORTGAGE%20LOANS) Residential mortgage loans increased to $4.1 billion, driven by originations and purchases, with positive net interest income Residential Mortgage Loans Outstanding by Loan Type (March 31, 2024, dollars in thousands) | Loan Type | Carrying Value | | :------------------------------------------------- | :------------- | | Total residential mortgage loans, HFI, at fair value | $365,398 | | Total residential mortgage loans, HFS, at lower of cost or market | $74,415 | | Total residential mortgage loans, HFS, at fair value | $3,691,700 | | Total residential mortgage loans | $4,131,513 | - Originations of residential mortgage loans totaled **$10.87 billion** for the three months ended March 31, 2024[114](index=114&type=chunk) Net Interest Income for Residential Mortgage Loans (dollars in thousands) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Total interest income | $44,734 | $48,299 | | Total interest expense | $42,178 | $48,356 | | Net interest income | $2,556 | $(57) | - Gain on originated residential mortgage loans, HFS, net, increased to **$149.5 million in Q1 2024** from $109.3 million in Q1 2023, primarily driven by MSRs retained on transfer of residential mortgage loans[118](index=118&type=chunk) [9. Consumer Loans](index=32&type=section&id=9.%20CONSUMER%20LOANS) The consumer loan portfolio decreased to $1.1 billion due to repayments, with a weighted average coupon of 11.8% - The consumer loan portfolio consists of **Marcus loans** (unsecured fixed-rate closed-end installment loans) and **SpringCastle loans** (personal unsecured and homeowner loans)[121](index=121&type=chunk) Consumer Loan Portfolio Characteristics (dollars in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :------------------------------------------------- | :------------- | :---------------- | | Total consumer loans (Carrying Value) | $1,103,799 | $1,274,005 | | Total consumer loans (Unpaid Principal Balance) | $1,154,642 | $1,308,774 | | Weighted Average Coupon | 11.8% | 12.0% | | Weighted Average Expected Life (Years) | 1.6 | 1.7 | - Proceeds from repayments for consumer loans totaled **$154.4 million** for the three months ended March 31, 2024[125](index=125&type=chunk) - As of March 31, 2024, **6.1% of the total consumer loan UPB was 90+ days past due**[123](index=123&type=chunk)[124](index=124&type=chunk) [10. Single-Family Rental (SFR) Properties](index=33&type=section&id=10.%20SINGLE-FAMILY%20RENTAL%20PROPERTIES) The SFR portfolio increased to 3,928 properties with a net carrying value of $1.007 billion, acquiring 48 new units Net Carrying Value of SFR Properties (dollars in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :------------------------------------------------- | :------------- | :---------------- | | Total gross investment in SFR properties | $1,068,519 | $1,055,665 | | Accumulated depreciation | $(61,347) | $(53,737) | | Investment in SFR properties, net | $1,007,172 | $1,001,928 | - The SFR portfolio grew by **40 units**, from 3,888 to 3,928, during the three months ended March 31, 2024[132](index=132&type=chunk) - Depreciation expense for Q1 2024 was **$7.7 million**, up from $6.9 million in Q1 2023[129](index=129&type=chunk) - Future minimum rental revenues under existing leases total **$45.7 million**, with $36.5 million expected in the remainder of 2024[132](index=132&type=chunk) [11. Mortgage Loans Receivable](index=34&type=section&id=11.%20MORTGAGE%20LOANS%20RECEIVABLE) Mortgage loans receivable increased to $2.38 billion, diversified across construction, bridge, and renovation loans - Mortgage loans receivable are primarily **short-term business purpose loans** originated by Genesis for residential property construction, renovation, and bridge financing[133](index=133&type=chunk) Mortgage Loans Receivable by Loan Type (March 31, 2024, dollars in thousands) | Loan Type | Carrying Value | % of Portfolio | Weighted Average Yield | Weighted Average Original Life (Months) | | :------------------------------------------------- | :------------- | :------------- | :--------------------- | :-------------------------------------- | | Construction | $1,047,688 | 43.9% | 10.9% | 16.8 | | Bridge | $1,037,056 | 43.5% | 9.9% | 27.2 | | Renovation | $300,000 | 12.6% | 10.3% | 12.6 | | Total | $2,384,744 | 100.0% | 10.4% | 20.5 | - The balance of mortgage loans receivable **increased by $151.8 million** from December 31, 2023, to March 31, 2024, driven by initial loan advances and construction holdbacks[135](index=135&type=chunk) - California accounts for **49.9% of the total loan commitment** for mortgage loans receivable[136](index=136&type=chunk) [12. Cash, Cash Equivalents and Restricted Cash](index=36&type=section&id=12.%20CASH,%20CASH%20EQUIVALENTS%20AND%20RESTRICTED%20CASH) Total cash, cash equivalents, and restricted cash decreased to $1.53 billion, with restricted cash slightly increasing Cash, Cash Equivalents and Restricted Cash (dollars in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :------------------------------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $1,136,437 | $1,287,199 | | Restricted cash | $394,546 | $385,620 | | Total cash, cash equivalents and restricted cash | $1,530,983 | $1,672,819 | - Restricted cash **increased by $8.9 million**, with the largest portion held in the Origination and Servicing segment ($237.2 million)[139](index=139&type=chunk) [13. Other Assets and Accrued Expenses and Other Liabilities](index=37&type=section&id=13.%20OTHER%20ASSETS%20AND%20LIABILITIES) Other assets totaled $3.51 billion, while accrued expenses and other liabilities reached $2.10 billion Other Assets (March 31, 2024, dollars in thousands) | Asset Type | Amount | | :------------------------------------------------- | :------------- | | Assets of consolidated funds | $350,043 | | Deferred tax asset | $284,950 | | Derivative and hedging assets | $102,227 | | Equity investments | $201,624 | | Excess MSRs, at fair value | $255,111 | | Goodwill | $131,857 | | Intangible assets | $368,967 | | Notes receivable, at fair value | $364,977 | | Servicer advance investments, at fair value | $374,511 | | Total Other Assets | $3,509,497 | Accrued Expenses and Other Liabilities (March 31, 2024, dollars in thousands) | Liability Type | Amount | | :------------------------------------------------- | :------------- | | Accounts payable | $117,827 | | Accrued compensation and benefits | $112,002 | | Deferred tax liability | $898,040 | | Derivative liabilities | $33,586 | | Interest payable | $144,216 | | Liabilities of consolidated funds | $223,188 | | Total Accrued Expenses and Other Liabilities | $2,102,598 | - Real Estate Owned (REO) assets increased to **$29.4 million** at March 31, 2024, from $15.5 million at December 31, 2023[146](index=146&type=chunk) [14. Expenses, Realized and Unrealized Gains (Losses), Net and Other](index=39&type=section&id=14.%20EXPENSES,%20REALIZED%20AND%20UNREALIZED%20GAINS%20(LOSSES),%20NET%20AND%20OTHER) General and administrative expenses increased to $195.1 million, while other income (loss) improved to a $60.2 million loss Other Revenues (dollars in thousands) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Property and maintenance | $32,380 | $33,637 | | Rental | $18,949 | $18,123 | | Other | $7,019 | $6,384 | | Total other revenues | $58,348 | $58,144 | General and Administrative Expenses (dollars in thousands) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Legal and professional | $21,489 | $12,755 | | Information technology | $41,202 | $34,968 | | Total general and administrative expenses | $195,118 | $167,155 | Other Income (Loss) Components (dollars in thousands) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Realized and unrealized gains (losses), net | $(68,134) | $(78,149) | | Other income (loss), net | $7,984 | $(25,166) | | Total other income (loss) | $(60,150) | $(103,315) | [15. Goodwill and Intangible Assets](index=40&type=section&id=15.%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) Goodwill remained stable at $131.9 million, while net intangible assets decreased to $369.0 million due to amortization Goodwill by Reportable Segment (March 31, 2024, dollars in thousands) | Segment | Amount | | :------------------------ | :------------- | | Origination and Servicing | $24,376 | | Investment Portfolio | $5,092 | | Mortgage Loans Receivable | $55,731 | | Asset Management | $46,658 | | Total Goodwill | $131,857 | Acquired Identifiable Intangible Assets, Net (March 31, 2024, dollars in thousands) | Asset Type | Net Carrying Value | | :------------------------ | :----------------- | | Management contracts | $264,760 | | Customer relationships | $30,525 | | Purchased technology | $68,561 | | Trademarks / Trade names | $5,121 | | Total Intangible Assets, Net | $368,967 | - No impairment charges were recognized on goodwill or intangible assets for the three months ended March 31, 2024[155](index=155&type=chunk)[157](index=157&type=chunk) - Expected future amortization expense for acquired intangible assets is **$57.3 million** for the remainder of 2024 and **$44.2 million** for 2025[159](index=159&type=chunk) [16. Leases](index=41&type=section&id=16.%20LEASES) Rithm Capital holds operating and finance leases, with total remaining undiscounted lease payments of $180.4 million - Rithm Capital leases office space and computer hardware, with operating lease ROU assets and lease liabilities recorded on the balance sheet[160](index=160&type=chunk)[161](index=161&type=chunk) Future Minimum Rental Revenues Under Existing Leases (dollars in thousands) | Year Ending | Operating Leases | Finance Leases | Total | | :------------------------------------------------- | :--------------- | :------------- | :---------- | | Total remaining undiscounted lease payments | $179,731 | $684 | $180,415 | | Less: imputed interest | $28,834 | $88 | $28,922 | | Total remaining discounted lease payments | $150,897 | $596 | $151,493 | - Rent expense, net of sublease income, for the three months ended March 31, 2024, was **$11.9 million**[160](index=160&type=chunk) [17. Derivatives and Hedging](index=42&type=section&id=17.%20DERIVATIVES%20AND%20HEDGING) Rithm Capital uses economic hedges to manage interest rate risk, reporting an $87.3 million gain on derivatives in Q1 2024 - Rithm Capital uses **interest rate swaps, to-be-announced forward contract positions (TBAs), and treasury short sales** for economic hedging against interest rate risk[165](index=165&type=chunk) Derivatives and Hedging Assets and Liabilities (March 31, 2024, dollars in thousands) | Metric | Assets | Liabilities | | :------------------------------------------------- | :------------- | :------------ | | Interest rate swaps | $0 | $0 | | IRLCs | $32,063 | $835 | | TBAs | $7,492 | $15,654 | | Treasury short sales | $62,672 | $0 | | Other commitments | $0 | $17,097 | | Total | $102,227 | $33,586 | Gain (Loss) on Derivatives and Hedging (dollars in thousands) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Gain on originated residential mortgage loans, HFS, net (unrealized) | $45,395 | $(32,990) | | Realized and unrealized gains (losses), net | $41,932 | $(151,006) | | Total gain (loss) | $87,327 | $(183,996) | [18. Debt Obligations](index=45&type=section&id=18.%20DEBT%20OBLIGATIONS) Total debt obligations increased to $28.5 billion, driven by secured financing, with new notes issued and compliance maintained Debt Obligations Summary (dollars in thousands) | Metric | March 31, 2024 (Carrying Value) | December 31, 2023 (Carrying Value) | | :------------------------------------------------- | :------------------------------ | :------------------------------- | | Secured Financing Agreements | $18,271,046 | $12,561,283 | | Secured Notes and Bonds Payable | $10,045,375 | $10,679,186 | | Liabilities of Consolidated Funds | $218,123 | $218,157 | | Total Debt Obligations | $28,534,544 | $23,458,626 | - The company issued **$775 million aggregate principal amount of 8.000% senior unsecured notes due 2029** on March 19, 2024[196](index=196&type=chunk) - Rithm Capital repurchased **$275 million of its 2025 Senior Notes** for $282.4 million, leaving $275 million outstanding[208](index=208&type=chunk) - The estimated undiscounted future payment under the Tax Receivable Agreement (TRA) was **$267.9 million** as of March 31, 2024, with a carrying value of $174.8 million[211](index=211&type=chunk) - The company was in compliance with all debt covenants as of March 31, 2024[195](index=195&type=chunk)[200](index=200&type=chunk)[206](index=206&type=chunk) [19. Fair Value Measurements](index=50&type=section&id=19.%20FAIR%20VALUE%20MEASUREMENTS) Fair value measurements of financial instruments are categorized by input observability, with Level 3 relying on unobservable inputs - Fair value measurements are classified into **Level 1** (quoted prices in active markets), **Level 2** (observable market parameters), and **Level 3** (unobservable inputs)[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk) Fair Value of Assets and Liabilities (March 31, 2024, dollars in thousands) | Metric | Total Fair Value | Level 1 | Level 2 | Level 3 | | :------------------------------------------------- | :--------------- | :------ | :-------- | :-------- | | **Assets** | | | | | | MSRs and MSR financing receivables | $8,706,723 | $0 | $0 | $8,706,723 | | Real estate and other securities | $15,314,199 | $4,497,542 | $9,566,210 | $1,250,448 | | Residential mortgage loans, HFS, at fair value | $3,691,700 | $0 | $3,353,549 | $338,151 | | Consumer loans | $1,103,799 | $0 | $0 | $1,103,799 | | Mortgage loans receivable | $2,384,744 | $0 | $341,830 | $2,042,914 | | Total Assets at Fair Value | $36,543,820 | $6,091,197 | $15,114,970 | $14,999,317 | | **Liabilities** | | | | | | Secured financing agreements | $18,271,046 | $0 | $18,090,307 | $180,739 | | Secured notes and bonds payable | $10,045,375 | $0 | $324,062 | $10,052,833 | | Total Liabilities at Fair Value | $32,890,972 | $1,271,542 | $20,275,912 | $11,671,632 | - A hypothetical **10% increase in the discount rate for Agency MSRs** would decrease their fair value by 3.6%, while a 10% increase in prepayment rate would decrease fair value by 1.9%[235](index=235&type=chunk) - The fair value of REO assets is estimated using a broker's price opinion discounted by **10%-25% (weighted average 20%)**[274](index=274&type=chunk) [20. Variable Interest Entities (VIEs)](index=62&type=section&id=20.%20VARIABLE%20INTEREST%20ENTITIES) Rithm Capital consolidates VIEs where it is the primary beneficiary, with assets restricted and $809.9 million exposure to non-consolidated VIEs - Rithm Capital consolidates VIEs where it has control over significant operating, financing, and investing decisions or is the primary beneficiary[277](index=277&type=chunk)[278](index=278&type=chunk) - Consolidated VIEs include: - Advance Purchaser (89.3% interest) - Newrez Joint Ventures - Residential Mortgage Loan securitization vehicles - Consumer Loan Companies (53.5% interest) - Mortgage Loans Receivable securitization (2022-RTL1 Securitization) - Sculptor's structured alternative investment solution[280](index=280&type=chunk)[281](index=281&type=chunk)[284](index=284&type=chunk)[286](index=286&type=chunk)[288](index=288&type=chunk)[290](index=290&type=chunk) Carrying Value of Consolidated VIEs (March 31, 2024, dollars in thousands) | Metric | Total Assets | Total Liabilities | | :------------------------------------------------- | :----------- | :-------------- | | Advance Purchaser | $378,269 | $268,281 | | Newrez Joint Ventures | $18,631 | $2,366 | | Residential Mortgage Loans | $1,186,832 | $1,058,897 | | Consumer Loan Companies | $278,231 | $223,509 | | Mortgage Loans Receivable | $358,325 | $324,433 | | Consolidated Funds | $350,043 | $223,188 | | Total Consolidated VIEs | $2,570,331 | $2,100,674 | - Maximum exposure to loss from non-consolidated VIEs was **$809.9 million** at March 31, 2024, primarily from unearned income, receivables, investments, and unfunded commitments[300](index=300&type=chunk) [21. Equity and Earnings Per Share](index=68&type=section&id=21.%20EQUITY%20AND%20EARNINGS%20PER%20SHARE) Equity includes common and preferred stock, with Q1 2024 basic and diluted EPS at $0.54, up from $0.14 in Q1 2023 - Rithm Capital's board renewed a stock repurchase program for up to **$200 million of common stock** and **$100 million of preferred stock** for 2024[306](index=306&type=chunk) Preferred Shares Summary (March 31, 2024, dollars in thousands) | Series | Number of Shares | Liquidation Preference | Carrying Value | | :------------------------------------------------- | :--------------- | :--------------------- | :------------- | | Series A, 7.50% | 6,200 | $155,002 | $149,822 | | Series B, 7.125% | 11,261 | $281,518 | $272,654 | | Series C, 6.375% | 15,903 | $397,584 | $385,289 | | Series D, 7.00% | 18,600 | $465,000 | $449,489 | | Total | 51,964 | $1,299,104 | $1,257,254 | Basic and Diluted EPS Calculations (dollars in thousands, except per share data) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net income (loss) attributable to common stockholders | $261,640 | $68,854 | | Basic weighted average shares of common stock outstanding | 483,336,777 | 478,167,178 | | Diluted weighted average shares of common stock outstanding | 485,931,501 | 482,846,911 | | Basic earnings (loss) per share attributable to common stockholders | $0.54 | $0.14 | | Diluted earnings (loss) per share attributable to common stockholders | $0.54 | $0.14 | [22. Commitments and Contingencies](index=71&type=section&id=22.%20COMMITMENTS%20AND%20CONTINGENCIES) Rithm Capital faces litigation and has significant capital commitments, including $232.9 million to Sculptor-managed funds - An agreement in principle was reached to settle all claims in the Sculptor Stockholder Action for a total payment of **$6.5 million**[324](index=324&type=chunk) - Key capital commitments include: - Obligation to fund future servicer advances for MSRs and servicer advance investments - Mortgage Origination Reserves: Estimated liability of **$52.6 million** for representations and warranties and **$1.8 billion** for Ginnie Mae repurchases - Residential Mortgage Loans: Capital outlays for escrow, tax payments, maintenance, and disposition fees - Consumer Loans: **$168.4 million** of unfunded and available revolving credit privileges - SFR Properties: **$95.6 million** estimated aggregate purchase price for 371 SFR properties from Lennar, and **$49.0 million** for 171 SFR properties from BTR - Mortgage Loans Receivable: Commitments to fund up to **$827.0 million** (Genesis) and **$2.0 million** (Rithm Capital) of additional advances - Equity Investments: Pro rata share of future capital contributions in commercial real estate projects - Fund Commitments: **$232.9 million** to Sculptor-managed funds, with $94.8 million expected from employees/executive managing directors[326](index=326&type=chunk)[327](index=327&type=chunk)[328](index=328&type=chunk)[334](index=334&type=chunk) - Rithm Capital provided limited guarantees to a senior lender for two commercial real estate projects related to non-recourse carve-outs, completion, environmental, and carry costs[330](index=330&type=chunk) [23. Related Party Transactions](index=73&type=section&id=23.%20RELATED%20PARTY%20TRANSACTIONS) Rithm Capital engages in various related party transactions, including loan agreements and management fees from Sculptor-managed funds - Genesis entered into an **$86.4 million loan agreement** with a commercial real estate development project entity in which Rithm Capital has an equity interest[334](index=334&type=chunk) - Rithm Capital entered into a management agreement with Adoor Property Management LLC, an entity in which it has an ownership interest, to manage certain SFR properties[335](index=335&type=chunk) - The company earns substantially all management fees and incentive income from Sculptor-managed funds, which are considered related parties[336](index=336&type=chunk) - Approximately **53.7% of AUM** from Sculptor's current executive managing directors, employees, and other related parties are not charged management or incentive fees[337](index=337&type=chunk) [24. Income Taxes](index=74&type=section&id=24.%20INCOME%20TAXES) Rithm Capital aims for REIT status but incurs $93.4 million in Q1 2024 income tax expense through its TRSs - Rithm Capital intends to qualify as a REIT, generally not subject to US federal corporate income tax on distributed income (at least **90% of REIT taxable income**)[340](index=340&type=chunk) - Certain business segments (origination, servicing, asset management, and parts of the investment portfolio) operate through TRSs and are subject to corporate income taxes[341](index=341&type=chunk) Income Tax Expense (Benefit) (dollars in thousands) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Total current income tax expense (benefit) | $2,784 | $39 | | Total deferred income tax expense (benefit) | $90,628 | $(16,845) | | Total income tax expense (benefit) | $93,412 | $(16,806) | - As of March 31, 2024, Rithm Capital recorded a net deferred tax liability of **$898.0 million** and Sculptor recorded a net deferred tax asset of **$284.9 million**[342](index=342&type=chunk) [25. Asset Management Revenues](index=75&type=section&id=25.%20ASSET%20MANAGEMENT%20REVENUES) Asset management revenues, primarily from Sculptor, totaled $75.9 million, comprising management fees and incentive income Composition of Asset Management Revenues (dollars in thousands) | Metric | Three Months Ended March 31, 2024 | | :------------------------------------------------- | :-------------------------------- | | Management fees | $57,130 | | Incentive income | $13,821 | | Other asset management revenue | $4,909 | | Total asset management revenues | $75,860 | Composition of Income and Fees Receivable (dollars in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :------------------------------------------------- | :------------- | :---------------- | | Management fees receivable | $21,548 | $23,757 | | Incentive income receivable | $28,281 | $35,377 | | Total income and fees receivable | $49,829 | $59,134 | - Unearned incentive income was **$39.0 million** at March 31, 2024, recognized when distributions from funds have not yet met the revenue recognition threshold[344](index=344&type=chunk) [26. Subsequent Events](index=75&type=section&id=26.%20SUBSEQUENT%20EVENTS) The Computershare Acquisition was completed on May 1, 2024, for $720.0 million, including $45.0 billion UPB of MSRs - Rithm Capital completed the **Computershare Acquisition on May 1, 2024, for approximately $720.0 million**[346](index=346&type=chunk) - The acquisition included: - Approximately **$45.0 billion UPB of MSRs** - Approximately **$104.0 billion of third-party servicing UPB** - SLS's origination services business[346](index=346&type=chunk) - The company is currently evaluating the purchase price allocation for the Computershare Acquisition[346](index=346&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=77&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses Rithm Capital's financial condition, operations, and cash flows, highlighting its global asset manager strategy [Company Overview](index=77&type=section&id=COMPANY%20OVERVIEW) Rithm Capital is a global asset manager and REIT, with $42.1 billion in total assets and $32.3 billion in AUM - Rithm Capital is a **global asset manager** focused on real estate, credit, and financial services, structured as an internally managed REIT[350](index=350&type=chunk)[351](index=351&type=chunk) - The company's strategy involves identifying, managing, and investing in real estate-related and other financial assets, and broader asset management capabilities through Sculptor[351](index=351&type=chunk) Company Overview Metrics (as of March 31, 2024) | Metric | Amount | | :----- | :---------------------------- | | Total Assets | $42.1 billion | | Assets Under Management (AUM) | $32.3 billion | [Book Value Per Common Share](index=77&type=section&id=BOOK%20VALUE%20PER%20COMMON%20SHARE) Book value per common share increased to $12.19, reflecting growth in total equity attributable to common stock Book Value Per Common Share Calculation (dollars in thousands, except per share amounts) | Metric | March 31, 2024 | December 31, 2023 | | :------------------------------------------------- | :------------- | :---------------- | | Total equity | $7,243,372 | $7,101,038 | | Less: Preferred Stock Series A, B, C and D | $1,257,254 | $1,257,254 | | Less: Noncontrolling interests of consolidated subsidiaries | $93,820 | $94,096 | | Total equity attributable to common stock | $5,892,298 | $5,749,688 | | Common stock outstanding | 483,477,713 | 483,226,239 | | Book value per common share | $12.19 | $11.90 | - Book value per common share **increased by $0.29 (2.4%)** quarter-over-quarter[353](index=353&type=chunk) [Market Considerations](index=78&type=section&id=MARKET%20CONSIDERATIONS) Q1 2024 saw steady US economic data, elevated inflation, stable interest rates, and a challenging housing market - US real GDP growth **decreased to an annualized rate of 1.6% in Q1 2024** from 3.4% in Q4 2023[354](index=354&type=chunk)[359](index=359&type=chunk) - Inflation remained high, with the Consumer Price Index rising **3.5% annually as of March 2024**, while the Federal Reserve held interest rates steady at 5.25%-5.5%[355](index=355&type=chunk) - The US labor market added **303,000 jobs in March 2024**, and the unemployment rate remained at 3.8%[356](index=356&type=chunk)[360](index=360&type=chunk) - The housing market continued to face low affordability due to high home prices (**up 7.4% YoY**) and elevated 30-year fixed mortgage rates (**6.8% in Q1 2024**)[357](index=357&type=chunk)[361](index=361&type=chunk) [Changes to LIBOR](index=79&type=section&id=CHANGES%20TO%20LIBOR) Rithm Capital successfully transitioned from LIBOR to SOFR by June 2023, with no intent to amend preferred stock fallback language - Rithm Capital completed its transition from LIBOR to alternative benchmarks, mainly SOFR, by **June 2023**[363](index=363&type=chunk) - The company does not intend to amend the USD-LIBOR cessation fallback language for its Series A, B, or C preferred stock[363](index=363&type=chunk) [Our Portfolio](index=80&type=section&id=OUR%20PORTFOLIO) Rithm Capital's portfolio grew to $42.1 billion, comprising Origination, Servicing, Investment, Mortgage Loans, and Asset Management Portfolio Summary (March 31, 2024, dollars in thousands) | Segment | Investments | Total Assets | Debt | | :------------------------ | :------------ | :----------- | :----------- | | Origination and Servicing | $10,844,061 | $15,001,011 | $7,621,241 | | Investment Portfolio | $19,207,349 | $22,857,895 | $18,446,477 | | Mortgage Loans Receivable | $2,384,744 | $2,689,844 | $1,981,198 | | Asset Management | $211,996 | $1,528,831 | $442,350 | | Corporate | $0 | $43,347 | $1,030,566 | | Total | $32,648,150 | $42,120,928 | $29,521,832 | - Total investments increased significantly from **$25.6 billion at December 31, 2023, to $32.6 billion at March 31, 2024**[366](index=366&type=chunk) [Operating Investments](index=80&type=section&id=Operating%20Investments) Origination and Servicing saw funded loan volume rise to $10.8 billion, with the servicing portfolio reaching $577.5 billion UPB - Funded loan origination volume increased to **$10.82 billion in Q1 2024**, up from $8.91 billion in Q4 2023, with the Correspondent channel contributing 73% of production[372](index=372&type=chunk)[375](index=375&type=chunk) - The total servicing portfolio grew by **$9.5 billion to $577.5 billion UPB** as of March 31, 2024[369](index=369&type=chunk)[377](index=377&type=chunk) MSRs and MSR Financing Receivables (March 31, 2024, dollars in millions) | Type | Current UPB | Weighted Average MSR (bps) | Carrying Value | | :------------------------ | :---------- | :------------------------- | :------------- | | GSE | $348,953.1 | 27 | $5,477.5 | | Non-Agency | $47,806.3 | 46 | $667.0 | | Ginnie Mae | $129,914.4 | 44 | $2,562.2 | | Total/Weighted Average | $526,673.8 | 33 | $8,706.7 | - Servicer advance investments, including the right to the basic fee component of related MSRs, totaled **$374.5 million** as of March 31, 2024, with $14.9 billion UPB of underlying mortgage loans[406](index=406&type=chunk) [Investment Portfolio](index=84&type=section&id=Investment%20Portfolio) The Investment Portfolio includes MSRs, real estate securities, residential mortgage loans, consumer loans, and SFR properties - Third-party subservicers (PHH and Valon) serviced **8.5% and 4.8%** of the underlying UPB of MSRs, respectively, as of March 31, 2024[390](index=390&type=chunk) Real Estate Securities Portfolio (March 31, 2024, dollars in thousands) | Asset Type | Carrying Value | | :------------------------ | :------------- | | Agency RMBS | $9,566,210 | | Treasury Notes | $4,472,656 | | Treasury Bills | $24,885 | | Non-Agency RMBS | $1,038,452 | | Total Government-backed securities | $14,063,751 | | Total Non-Agency RMBS | $1,038,452 | - The SFR portfolio consisted of **3,928 properties** with an aggregate carrying value of **$1.0 billion** as of March 31, 2024, with 48 properties acquired during the quarter[436](index=436&type=chunk)[132](index=132&type=chunk) Consumer Loans Collateral Characteristics (March 31, 2024, dollars in thousands) | Loan Type | UPB | Number of Loans | Weighted Average Coupon | Expected Life (Months) | | :------------------------ | :---------- | :-------------- | :---------------------- | :--------------------- | | SpringCastle | $246,553 | 41,110 | 18.2% | 45.6 | | Marcus | $908,089 | 100,855 | 10.1% | 11.8 | | Total Consumer Loans | $1,154,642 | 141,965 | 11.8% | 19.0 | [Mortgage Loans Receivable](index=91&type=section&id=Mortgage%20Loans%20Receivable) Mortgage Loans Receivable, primarily Genesis, manages $3.2 billion in short-term business purpose loans, with 10.4% weighted average yield - Genesis originates and manages **short-term business purpose mortgage loans** for construction, renovation, and bridge financing[443](index=443&type=chunk)[444](index=444&type=chunk)[445](index=445&type=chunk) Mortgage Loans Receivable Activity (Three Months Ended March 31, 2024, dollars in thousands) | Metric | Amount | | :------------------------ | :------------- | | Loans originated | $835,766 | | Loans repaid | $505,091 | | Number of loans originated | 367 | | Unpaid principal balance | $2,370,769 | | Total commitment | $3,202,076 | | Weighted average contractual interest | 10.4% | - Construction loans account for **57.0% of the total commitment**, followed by bridge loans at 32.5%[455](index=455&type=chunk) - California represents **49.9% of the total commitment** for mortgage loans receivable[456](index=456&type=chunk) [Asset Management](index=93&type=section&id=Asset%20Management) Asset Management, through Sculptor, manages $32.3 billion in AUM, generating $75.9 million in Q1 2024 revenues - Sculptor, a wholly-owned subsidiary, is a leading global alternative asset manager with approximately **$32.3 billion in AUM** as of March 31, 2024[457](index=457&type=chunk) - Asset management revenues for Q1 2024 were **$75.9 million**, primarily from management fees[463](index=463&type=chunk) CLO Portfolio Summary (March 31, 2024, dollars in thousands) | Metric | Carrying Value | Weighted Average Life (Years) | Weighted Average Coupon | | :------------------------ | :------------- | :---------------------------- | :---------------------- | | CLOs | $211,996 | 8.6 | 5.5% | - The CLO portfolio had a net interest spread of **2.35%** for the three months ended March 31, 2024[466](index=466&type=chunk) [Taxes](index=94&type=section&id=TAXES) Rithm Capital maintains REIT status but incurs corporate income taxes through TRSs, reporting a net deferred tax liability - Rithm Capital intends to qualify as a REIT, distributing at least **90% of its REIT taxable income** to avoid federal corporate income tax[467](index=467&type=chunk) - Origination, servicing, asset management, and parts of the investment portfolio operate through TRSs and are subject to corporate income taxes[468](index=468&type=chunk) - As of March 31, 2024, a net deferred tax liability of **$898.0 million** was recorded, primarily from deferred gains and fair value changes in taxable entities[469](index=469&type=chunk) - A net deferred tax asset of **$284.9 million** was related to Sculptor[470](index=470&type=chunk) - Deferred tax expense of **$90.6 million** was recognized in Q1 2024, mainly due to fair value changes in MSRs, loans, and swaps within taxable entities and income from the origination and servicing segment[471](index=471&type=chunk) [Critical Accounting Policies and Use of Estimates](index=95&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20USE%20OF%20ESTIMATES) Financial statements rely on significant estimates for fair value and goodwill, with market volatility introducing uncertainty - Financial statements are prepared in accordance with GAAP, requiring estimates and assumptions for reported amounts of assets, liabilities, revenues, and expenses[472](index=472&type=chunk) - Critical estimates include **fair value measurements** of assets and liabilities, goodwill, intangible assets, and contingent assets and liabilities[472](index=472&type=chunk)[473](index=473&type=chunk) - Uncertainty from market volatility, high interest rates, and inflation makes current estimates less certain, potentially causing actual results to differ materially[474](index=474&type=chunk) [Results of Operations](index=95&type=section&id=RESULTS%20OF%20OPERATIONS) Net income reached $287.5 million in Q1 2024, a significant improvement driven by servicing revenue and mortgage loan gains - Net income for Q1 2024 was **$287.5 million**, a significant increase from a net loss of $67.2 million in Q4 2023[479](index=479&type=chunk) Summary of Results of Operations (dollars in thousands) | Metric | Three Months Ended March 31, 2024 | Three Months Ended December 31, 2023 | QoQ Change | | :------------------------------------------------- | :-------------------------------- | :----------------------------------- | :--------- | | Total Revenues | $1,286,310 | $706,940 | $579,370 | | Total Expenses | $845,261 | $814,545 | $30,716 | | Income (Loss) Before Income Taxes | $380,899 | $(37,301) | $426,278 | | Net Income (Loss) | $287,487 | $(67,151) | $354,638 | | Net Income (Loss) Attributable to Common Stockholders | $261,640 | $(87,526) | $349,166 | [Servicing Revenue, Net](index=97&type=section&id=Servicing%20Revenue,%20Net) Servicing revenue, net, significantly increased to $554.4 million, driven by positive fair value changes in the MSR portfolio Servicing Revenue, Net Components (dollars in thousands) | Metric | Three Months Ended March 31, 2024 | Three Months Ended December 31, 2023 | QoQ Change | | :------------------------------------------------- | :-------------------------------- | :----------------------------------- | :--------- | | Servicing fee revenue, net and interest income from MSRs and MSR financing receivables | $470,203 | $482,210 | $(12,007) | | Change in fair value of MSRs and MSR financing receivables | $84,175 | $(466,346) | $550,521 | | Servicing revenue, net | $554,378 | $15,864 | $538,514 | - The change in fair value of MSRs and MSR financing receivables shifted from a loss of **$466.3 million in Q4 2023** to a gain of **$84.2 million in Q1 2024**, contributing $550.5 million to the QoQ change[481](index=481&type=chunk) - The UPB of MSRs and MSR financing receivables decreased slightly by **$1.8 billion QoQ to $526.7 billion**[481](index=481&type=chunk) [Interest Income](index=97&type=section&id=Interest%20Income) Interest income decreased by $2.4 million due to lower Marcus loan balances and agency security repayments - Interest income **decreased by $2.4 million QoQ**, from $450.5 million in Q4 2023 to $448.2 million in Q1 2024[479](index=479&type=chunk)[482](index=482&type=chunk) - The decrease was mainly driven by lower outstanding balances on Marcus loans and repayments of agency securities[482](index=482&type=chunk) [Gain on Originated Residential Mortgage Loans, HFS, Net](index=98&type=section&id=Gain%20on%20Originated%20Residential%20Mortgage%20Loans,%20HFS,%20Net) Gain on originated residential mortgage loans, HFS, net, increased to $149.5 million, driven by higher lock volume - Gain on originated residential mortgage loans, HFS, net, **increased by $51.4 million QoQ**, from $98.1 million in Q4 2023 to $149.5 million in Q1 2024[479](index=479&type=chunk)[484](index=484&type=chunk) - Pull-through adjusted lock volume increased to **$11.7 billion in Q1 2024** from $8.8 billion in Q4 2023[484](index=484&type=chunk) - The overall gain on sale margin decreased slightly to **1.20% in Q1 2024** from 1.23% in Q4 2023, primarily due to channel mix[484](index=484&type=chunk)[485](index=485&type=chunk) - Funded loan origination volume was **$10.8 billion in Q1 2024**, up from $8.9 billion in Q4 2023, with purchase originations comprising 83% of funded loans[485](index=485&type=chunk) [Other Revenues](index=98&type=section&id=Other%20Revenues) Other revenues remained consistent at $58.3 million, with minimal fluctuations in the single-family rental portfolio - Other revenues were **$58.3 million in Q1 2024**, consistent with $58.5 million in Q4 2023[479](index=479&type=chunk)[486](index=486&type=chunk) - Minimal fluctuations were observed in the single-family rental portfolio[486](index=486&type=chunk) [Asset Management Revenues](index=98&type=section&id=Asset%20Management%20Revenues) Asset management revenues decreased to $75.9 million, primarily due to lower incentive income, offset by full quarter management fees - Asset management revenues **decreased by $8.1 million QoQ**, from $83.9 million in Q4 2023 to $75.9 million in Q1 2024[479](index=479&type=chunk)[487](index=487&type=chunk) - The decrease was primarily due to lower incentive income, offset by a full quarter of management fees in 2024[487](index=487&type=chunk) [Interest Expense and Warehouse Line Fees](index=98&type=section&id=Interest%20Expense%20and%20Warehouse%20Line%20Fees) Interest expense and warehouse line fees increased to $414.4 million, driven by higher borrowings for treasury and agency purchases - Interest expense and warehouse line fees **increased by $13.9 million QoQ**, from $400.5 million in Q4 2023 to $414.4 million in Q1 2024[479](index=479&type=chunk)[488](index=488&type=chunk) - The increase was primarily driven by higher borrowings for treasury and agency purchases[488](index=488&type=chunk) [General and Administrative](index=99&type=section&id=General%20and%20Administrative) General and administrative expenses increased to $195.1 million, primarily due to full quarter Asset Management operating expenses General and Administrative Expenses (dollars in thousands) | Metric | Three Months Ended March 31, 2024 | Three Months Ended December 31, 2023 | QoQ Change | | :------------------------------------------------- | :-------------------------------- | :----------------------------------- | :--------- | | Legal and professional | $21,489 | $38,348 | $(16,859) | | Information Technology | $41,202 | $34,044 | $7,158 | | Other | $43,355 | $35,828 | $7,527 | | Total | $195,118 | $191,614 | $3,504 | - The increase was primarily driven by a full quarter of Asset Management operating expenses in 2024[490](index=490&type=chunk) [Compensation and Benefits](index=99&type=section&id=Compensation%20and%20Benefits) Compensation and benefits expense increased to $235.8 million, driven by a full quarter of Asset Management compensation expense - Compensation and benefits expense **increased by $13.3 million QoQ**, from $222.5 million in Q4 2023 to $235.8 million in Q1 2024[479](index=479&type=chunk)[491](index=491&type=chunk) - The increase was primarily driven by a full