Rithm Capital (RITM) - 2024 Q1 - Quarterly Report

FORM 10-Q Filing Information Filing Details 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] - The registrant is a large accelerated filer and has filed all required reports and interactive data files[4][5] 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 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][10] - 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][9] Special Note Regarding Exhibits Exhibits Disclosure 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] - 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] - The Company is responsible for additional disclosures to ensure statements in the report are not misleading, despite cautionary statements[14] Rithm Capital Corp. Form 10-Q Index Report Structure 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] - 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] - 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] Part I. Financial Information Item 1. Financial Statements (Unaudited) This section presents Rithm Capital Corp.'s unaudited consolidated financial statements and detailed notes Consolidated Balance Sheets 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] - Total liabilities of consolidated VIEs were $2.1 billion for both periods[19] Consolidated Statements of Operations 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] - Asset management revenues, which were zero in Q1 2023, contributed $75.9 million in Q1 2024 following the Sculptor acquisition[22] Consolidated Statements of Comprehensive Income 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] Consolidated Statements of Changes in Stockholders' Equity 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] - Common stock outstanding increased by 251,474 shares during Q1 2024 due to director share grants and employee non-cash stock-based compensation[26] Consolidated Statements of Cash Flows 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] - 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] - 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] Notes to Consolidated Financial Statements These notes provide detailed disclosures and explanations for the consolidated financial statements 1. Business and Organization 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][32][33] - The company's business segments include Origination and Servicing (Newrez, NRM, Caliber), Investment Portfolio, Mortgage Loans Receivable (Genesis), Asset Management (Sculptor), and Corporate[34][35] - Rithm Capital completed the acquisition of Sculptor Capital Management, Inc. on November 17, 2023, expanding its asset management capabilities[33] - The Computershare Mortgage Services Inc. acquisition, including SLS, was completed on May 1, 2024, for approximately $720 million[38] 2. Basis of Presentation 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] - 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] - 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] - Adoption of ASU 2022-03 (Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions) had no material effect[49] - ASU 2023-07 (Segment Reporting) and ASU 2024-01 (Compensation-Stock Compensation) are not expected to have a material effect[50][51] 3. Segment Reporting 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] - The Asset Management segment was identified in 2023 to reflect Sculptor's operations, and the Investment Portfolio now aggregates several previously separate segments[53] 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) 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][68] 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] - A weighted average discount rate of 8.8% was used to value Excess MSRs as of March 31, 2024[67] 5. Mortgage Servicing Rights (MSRs) and MSR Financing Receivables 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][75] - 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] - Servicer advances receivable decreased to $2.59 billion at March 31, 2024, from $2.76 billion at December 31, 2023[19][82] - The provision for expected non-recovery of advances was $93.2 million (3.5%) at March 31, 2024[83] 6. Servicer Advance Investments 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] 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] 7. Real Estate and Other Securities 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] - 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][107] - 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] 8. Residential Mortgage Loans 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] 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] 9. Consumer Loans 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] 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] - As of March 31, 2024, 6.1% of the total consumer loan UPB was 90+ days past due[123][124] 10. Single-Family Rental (SFR) Properties 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] - Depreciation expense for Q1 2024 was $7.7 million, up from $6.9 million in Q1 2023[129] - Future minimum rental revenues under existing leases total $45.7 million, with $36.5 million expected in the remainder of 2024[132] 11. Mortgage Loans Receivable 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] 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] - California accounts for 49.9% of the total loan commitment for mortgage loans receivable[136] 12. Cash, Cash Equivalents and Restricted Cash 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] 13. Other Assets and Accrued Expenses and Other Liabilities 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] 14. Expenses, Realized and Unrealized Gains (Losses), Net and Other 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 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][157] - Expected future amortization expense for acquired intangible assets is $57.3 million for the remainder of 2024 and $44.2 million for 2025[159] 16. Leases 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][161] 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] 17. Derivatives and Hedging 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] 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 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] - Rithm Capital repurchased $275 million of its 2025 Senior Notes for $282.4 million, leaving $275 million outstanding[208] - 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] - The company was in compliance with all debt covenants as of March 31, 2024[195][200][206] 19. Fair Value Measurements 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][217][218] 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] - The fair value of REO assets is estimated using a broker's price opinion discounted by 10%-25% (weighted average 20%)[274] 20. Variable Interest Entities (VIEs) 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][278] - 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][281][284][286][288][290] 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] 21. Equity and Earnings Per Share 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] 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 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] - 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][327][328][334] - 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] 23. Related Party Transactions 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] - 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] - The company earns substantially all management fees and incentive income from Sculptor-managed funds, which are considered related parties[336] - 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] 24. Income Taxes 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] - Certain business segments (origination, servicing, asset management, and parts of the investment portfolio) operate through TRSs and are subject to corporate income taxes[341] 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] 25. Asset Management Revenues 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] 26. Subsequent Events 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] - 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] - The company is currently evaluating the purchase price allocation for the Computershare Acquisition[346] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Rithm Capital's financial condition, operations, and cash flows, highlighting its global asset manager strategy Company Overview 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][351] - 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] 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 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] Market Considerations 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][359] - 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] - The US labor market added 303,000 jobs in March 2024, and the unemployment rate remained at 3.8%[356][360] - 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][361] Changes to LIBOR 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] - The company does not intend to amend the USD-LIBOR cessation fallback language for its Series A, B, or C preferred stock[363] Our Portfolio 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] Operating Investments 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][375] - The total servicing portfolio grew by $9.5 billion to $577.5 billion UPB as of March 31, 2024[369][377] 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] Investment Portfolio 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] 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][132] 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 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][444][445] 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] - California represents 49.9% of the total commitment for mortgage loans receivable[456] Asset Management 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] - Asset management revenues for Q1 2024 were $75.9 million, primarily from management fees[463] 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] 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] - Origination, servicing, asset management, and parts of the investment portfolio operate through TRSs and are subject to corporate income taxes[468] - 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] - A net deferred tax asset of $284.9 million was related to Sculptor[470] - 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] Critical Accounting Policies and Use of Estimates 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] - Critical estimates include fair value measurements of assets and liabilities, goodwill, intangible assets, and contingent assets and liabilities[472][473] - Uncertainty from market volatility, high interest rates, and inflation makes current estimates less certain, potentially causing actual results to differ materially[474] Results of Operations 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] 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 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] - The UPB of MSRs and MSR financing receivables decreased slightly by $1.8 billion QoQ to $526.7 billion[481] Interest Income 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][482] - The decrease was mainly driven by lower outstanding balances on Marcus loans and repayments of agency securities[482] Gain on Originated Residential Mortgage Loans, HFS, Net 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][484] - Pull-through adjusted lock volume increased to $11.7 billion in Q1 2024 from $8.8 billion in Q4 2023[484] - 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][485] - 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] Other Revenues 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][486] - Minimal fluctuations were observed in the single-family rental portfolio[486] Asset Management Revenues 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][487] - The decrease was primarily due to lower incentive income, offset by a full quarter of management fees in 2024[487] Interest Expense and Warehouse Line Fees 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][488] - The increase was primarily driven by higher borrowings for treasury and agency purchases[488] General and Administrative 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] Compensation and Benefits 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][491] - The increase was primarily driven by a full