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8-K - FORM 8-K - New Residential Investment Corp.d816450d8k.htm

Exhibit 99.1

SELECTED FINANCIAL INFORMATION

The financial statements of New Residential Investment Corp. (the “Company”) for the periods ended on and prior to September 30, 2014 that have been previously filed by the Company are presented without giving effect to the reverse stock split approved by the Company’s board of directors on August 6, 2014 and by the Company’s stockholders on October 15, 2014. As a result of the reverse stock split, the Company is presenting selected financial data for the Company, which reflects the effect of the 1-for-2 reverse common stock split, for (i) the three and six months ended June 30, 2014 and 2013, (ii) the three months ended March 31, 2014 and 2013, (iii) the years ended December 31, 2013 and 2012 and (iv) the period from December 8, 2011 (commencement of operations) through December 31, 2011.

The selected financial information should be read in conjunction with the Company’s consolidated financial statements and the notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q for these periods.

 

     (in thousands, except per share data)  
     Year Ended December 31,         
Statement of Income Data    2013     2012      December 8
through
December 31,

2011
 

Interest income

   $ 87,567      $ 33,759       $ 1,260   

Interest expense

     15,024        704         —     

Net interest income

     72,543        33,055         1,260   

Impairment

     5,454        —           —     
  

 

 

   

 

 

    

 

 

 

Net interest income after impairment

     67,089        33,055         1,260   

Other income

     241,008        17,423         367   

Operating expenses

     42,474        9,231         913   
  

 

 

   

 

 

    

 

 

 

Income (Loss) before income taxes

     265,623        41,247         714   

Income tax expense

     —          —           —     
  

 

 

   

 

 

    

 

 

 

Net income (loss)

   $ 265,623      $ 41,247       $ 714   
  

 

 

   

 

 

    

 

 

 

Noncontrolling interests in income of consolidated subsidiaries

   $ (326   $ —         $ —     
  

 

 

   

 

 

    

 

 

 

Net Income (Loss) Attributable to Common Stockholders

   $ 265,949      $ 41,247       $ 714   
  

 

 

   

 

 

    

 

 

 

Net income per share of common stock, basic

   $ 2.10      $ 0.33       $ 0.01   
  

 

 

   

 

 

    

 

 

 

Net income per share of common stock, diluted

   $ 2.07      $ 0.33       $ 0.01   
  

 

 

   

 

 

    

 

 

 

Weighted average number of shares of common stock outstanding, basic

     126,539,024        126,512,823         126,512,823   
  

 

 

   

 

 

    

 

 

 

Weighted average number of shares of common stock outstanding, diluted

     128,684,128        126,512,823         126,512,823   
  

 

 

   

 

 

    

 

 

 

Dividends declared per share of common stock

   $ 0.990      $ —         $ —     
  

 

 

   

 

 

    

 

 

 


     (in thousands, except per share data)  
     Three months ended
March 31,
     Three months ended June 30,      Six months ended June 30,  
Statement of Income Data    2014      2013      2014      2013      2014      2013  

Interest income

   $ 71,490       $ 16,191       $ 92,656       $ 22,999       $ 161,146       $ 39,190   

Interest expense

     38,997         899         36,512         2,651         75,509         3,550   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net interest income

     32,493         15,292         56,144         20,348         88,637         35,640   

Impairment

     492         —           908         3,756         1,400         3,756   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net interest income after impairment

     32,001         15,292         55,236         16,592         87,237         31,884   

Other income

     35,050         2,827         177,889         98,182         212,939         101,009   

Operating expenses

     9,899         5,044         29,522         5,552         39,421         10,596   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income (Loss) before income taxes

     57,152         13,075         203,603         109,222         260,755         122,297   

Income tax expense

     287         —           21,395         —           21,682         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income (loss)

   $ 56,865       $ 13,075       $ 182,208       $ 109,222       $ 239,073       $ 122,297   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Noncontrolling interests in income of consolidated subsidiaries

   $ 8,093       $ —         $ 58,705       $ —         $ 66,798       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net Income (Loss) Attributable to Common Stockholders

   $ 48,772       $ 13,075       $ 123,503       $ 109,222       $ 172,275       $ 122,297   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income per share of common stock, basic

   $ 0.39       $ 0.10       $ 0.91       $ 0.86       $ 1.31       $ 0.97   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income per share of common stock, diluted

   $ 0.38       $ 0.10       $ 0.88       $ 0.85       $ 1.28       $ 0.96   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average number of shares of common stock outstanding, basic

     126,604,510         126,512,823         136,465,454         126,512,823         131,562,222         126,512,823   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average number of shares of common stock outstanding, diluted

     129,919,967         126,512,823         139,668,128         128,329,744         131,790,790         127,426,303   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Dividends declared per share of common stock

   $ 0.350       $ —         $ 0.500       $ 0.140       $ 0.850       $ 0.140   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 


     (in thousands, except per share data)  
     December 31,  
Balance Sheet Data    2013      2012      2011  

Investments in:

        

Excess mortgage servicing rights, at fair value

   $ 324,151       $ 245,036       $ 43,971   

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

     352,766         —           —     

Servicer advances

     2,665,551         —           —     

Real estate securities, available-for-sale

     1,973,189         289,756         —     

Residential mortgage loans, held-for-investment

     33,539         —           —     

Consumer loans, equity method investees

     215,062         —           —     

Cash and cash equivalents

     271,994         —           —     

Total assets

     5,958,658         534,876         43,971   

Total debt

     4,109,329         150,922         —     

Total liabilities

     4,445,583         156,520         4,163   

Total New Residential stockholders’ equity

     1,265,850         378,356         39,808   

Noncontrolling interests in equity of consolidated subsidiaries

     247,225         —           —     

Total equity

     1,513,075         378,356         39,808   

Supplemental Balance Sheet Data

        

Common shares outstanding

     126,598,987         

Book value per share of common stock

   $ 10.00         

Other Data

        

Core earnings (A)

   $ 129,997       $ 37,454       $ 1,132   

 

(A) We have four primary variables that impact our operating performance: (i) the current yield earned on our investments, (ii) the interest expense incurred on the debt used to finance our investments, (iii) our operating expenses and (iv) our realized and unrealized gains or losses, including any impairment, on our investments. “Core earnings” is a non-GAAP measure of our operating performance excluding the fourth variable above and adjusting the earnings from the consumer loan investment to a level yield basis. It is used by management to gauge our current performance without taking into account: (i) realized and unrealized gains and losses, which although they represent a part of our recurring operations, are subject to significant variability and are only a potential indicator of future economic performance; (ii) incentive compensation paid to an affiliate (our “Manager”) of Fortress Investment Group LLC; and (iii) non-capitalized deal inception costs.

While incentive compensation paid to our Manager may be a material operating expense, we exclude it from core earnings because (i) from time to time, a component of the computation of this expense will relate to items (such as gains or losses) that are excluded from core earnings, and (ii) it is impractical to determine the portion of the expense related to core earnings and non-core earnings, and the type of earnings (loss) that created an excess


(deficit) above or below, as applicable, the incentive compensation threshold. To illustrate why it is impractical to determine the portion of incentive compensation expense that should be allocated to core earnings, we note that, as an example, in a given period, we may have core earnings in excess of the incentive compensation threshold but incur losses (which are excluded from core earnings) that reduce total earnings below the incentive compensation threshold. In such case, we would either need to (a) allocate zero incentive compensation expense to core earnings, even though core earnings exceeded the incentive compensation threshold, or (b) assign a “pro forma” amount of incentive compensation expense to core earnings, even though no incentive compensation was actually incurred. We believe that neither of these allocation methodologies achieves a logical result. Accordingly, the exclusion of incentive compensation facilitates comparability between periods and avoids the distortion to our non-GAAP operating measure that would result from the inclusion of incentive compensation that relates to non-core earnings. With regard to non-capitalized deal inception costs, management does not view these costs as part of our core operations. Non-capitalized deal inception costs are generally legal and valuation service costs, as well as other professional service fees, incurred when we acquire certain investments. These costs are recorded as general and administrative expenses in our statements of income.

In the third quarter of 2013, we changed our definition of “core earnings” to exclude incentive compensation paid to our Manager and non-capitalized deal inception costs. The calculation of “core earnings” has been retroactively adjusted for all periods presented. Management believes that the adjustments to compute “core earnings” specified above allow investors and analysts to readily identify the operating performance of the assets that form the core of our activity, assist in comparing the core operating results between periods, and enable investors to evaluate our current performance using the same measure that management uses to operate the business.

Core earnings does not represent cash generated from operating activities in accordance with GAAP and therefore should not be considered an alternative to net income as an indicator of our operating performance or as an alternative to cash flow as a measure of our liquidity and is not necessarily indicative of cash available to fund cash needs. For a further description of the difference between cash flow provided by operations and net income, see “Management’s Discussion and Analysis of Financial Consolidation and Results of Operations—Liquidity and Capital Resources” in our Annual Report on Form 10-K filed on March 28, 2014. Our calculation of core earnings may be different from the calculation used by other companies and, therefore, comparability may be limited. Set forth below is a reconciliation of core earnings to the most directly comparable GAAP financial measure (dollars in thousands):

 

     (in thousands, except per share data)  
     Year Ended December 31,        
     2013     2012     December 8
through
December 31,
2011
 

Net income (loss) attributable to common stockholders

   $ 265,949      $ 41,247      $ 714   

Impairment

     5,454        —          —     

Other Income

     (241,008     (9,023     (367

Incentive compensation to affiliate

     16,847        —          —     

Non-capitalized deal inception costs

     5,698        5,230        785   

Core earnings of equity method investees:

      

Excess mortgage servicing rights

     23,361        —          —     

Consumer loans

     53,696        —          —     
  

 

 

   

 

 

   

 

 

 

Core Earnings

   $ 129,997      $ 37,454      $ 1,132