Rithm Capital (RITM)2025-05-02 10:49Financial Performance - The book value per common share decreased to $12.39 as of March 31, 2025, from $12.56 as of December 31, 2024, primarily due to a net income of $36.5 million and a dividend of $132.5 million for the three months ended March 31, 2025 [397]. - For the three months ended March 31, 2025, net income attributable to common stockholders was $36.5 million, a decrease of $226.7 million or approximately 86% compared to the prior quarter [509]. - Servicing revenue, net decreased by $1.1 billion to $28.9 million, primarily due to a $1.1 billion decrease in the fair value of the MSRs portfolio [512]. - Asset management revenues for the three months ended March 31, 2025, were $87.7 million, primarily driven by management fees and incentive income [499]. - Asset management revenues decreased by $171.2 million in Q1 2025 compared to the prior quarter, primarily due to the timing of incentive income crystallizations [524]. Economic Environment - The U.S. economy contracted by an annualized 0.3% in the first quarter of 2025, influenced by a surge in imports ahead of tariff impositions [399]. - The unemployment rate increased slightly to 4.2% in March 2025 from 4.1% in December 2024, with average payroll growth at 152,000 jobs per month in Q1 2025 [402]. - The nominal 10-year Treasury yield fell to 4.23% at the end of March 2025 from 4.58% in December 2024, reflecting lower real yields from Treasury Inflation Protected Securities (TIPS) [401]. - The 12-month increase in the overall Consumer Price Index (CPI) was 2.4% in March 2025, down from 2.9% in December 2024, signaling progress towards lower inflation [400]. - The overall economic outlook is uncertain due to changes in policies related to global trade, despite signs of labor market stability [399]. Company Operations - Rithm Capital's investment strategy includes exploring acquisitions and dispositions of assets, financing transactions, and other value-creating opportunities [395]. - The company operates through segments including Origination and Servicing, Investment Portfolio, Residential Transitional Lending, and Asset Management [407]. - The company has several wholly-owned subsidiaries providing various services in the mortgage and real estate sectors, enhancing its operational capabilities [440]. - The company has a multi-channel residential lending platform, providing a competitive advantage in originating both purchase and refinance loans across different market conditions [410]. Mortgage and Servicing Portfolio - As of March 31, 2025, Newrez serviced over 3.7 million customers with an aggregated unpaid principal balance (UPB) of approximately $786.6 billion, compared to $778.4 billion as of December 31, 2024 [410]. - The total servicing portfolio reached $844.9 billion UPB as of March 31, 2025, an increase of $1.0 billion from December 31, 2024 [412]. - The performing loan servicing division serviced $516.8 billion UPB of loans, while the special servicing division serviced $269.7 billion UPB of loans as of March 31, 2025 [412]. - The total UPB of MSRs and MSR financing receivables as of March 31, 2025, is $591.1 billion, with a carrying value of $10.1 billion [430]. - The delinquency rate for GSE loans is 0.3%, while the non-agency loans have a delinquency rate of 2.3% [432]. Financing and Liquidity - As of March 31, 2025, Rithm Capital had approximately $1.3 billion of available liquidity at NRM and Newrez, with $0.8 billion in excess of new regulatory liquidity requirements [541]. - Total outstanding debt obligations amounted to $32.5 billion as of March 31, 2025, including secured financing agreements and unsecured notes [545]. - Rithm Capital has margin exposure on $16.8 billion of secured financing agreements, which could significantly impact liquidity if collateral values decline [546]. - The total borrowing capacity under secured financing arrangements was $25.5 billion, with $11.6 billion of available financing [557]. - The company expects its cash on hand, cash flow from operations, and ability to refinance secured financing agreements to meet liquidity needs for the next 12 months [559]. Dividends and Shareholder Returns - Preferred dividends declared for the quarter ended March 31, 2025, were $27.3 million [567]. - Common dividends declared for the three months ended March 31, 2025, were $132.5 million [571]. Loan Origination and Performance - The origination business funded $11.8 billion in mortgages for the three months ended March 31, 2025, down from $17.3 billion in the prior quarter [418]. - Funded loan origination volume for Q1 2025 was $11.8 billion, down from $17.3 billion in the prior quarter, with refinance volume at 27.0%, down from 28.9% [519]. - Gain on originated residential mortgage loans as a percentage of pull through adjusted lock volume increased to 1.23% in Q1 2025, compared to 1.14% in the prior quarter [519]. - Refinance originations comprised 27.0% of funded loans for the three months ended March 31, 2025, down from 28.9% in the prior quarter due to lower refinance activity as interest rates remained elevated [417].