Following its recent acquisitions of Caliber Home Loans and Genesis Capital, further deals are likely forthcoming at New Residential, executives said.

The company is applying the same strategy it did with its other purchases — finding opportunities to make the most amount of money for its shareholders, according to Michael Nierenberg, CEO and president of New Residential Investment Corp.

“We are looking at things quite frankly in the commercial space, which could be accretive,” Nierenberg said in the company’s third-quarter earnings call on Thursday. New Residential is not going out to acquire a whole business. “But there’s some things that we’re currently working on, that we’re excited about the prospect of potentially getting done, [with] not a lot of capital required,” he continued.

As for New Residential’s October purchase of Genesis Capital, the specialists in fix-and-flip, lending would likely provide between $2 billion and $2.5 billion annually of high-coupon, short-duration, good-read assets for its balance sheet, Nierenberg said.

The Genesis announcement and the closure of its merger with Caliber Home Loans were among the highlights of a profitable third quarter for the New York-based real estate investment trust, which posted GAAP net income of $146.1 million, a 20.5% increase over the second-quarter’s $121.3 million. The third-quarter profit was also 87.5% higher on a year-over-year basis, compared with $77.9 million from the same quarter in 2020. Total earnings per share amounted to $0.44, beating consensus estimates of $0.35.

“The ability to manufacture our own assets through our different operating business lines, thus creating earnings for our company, is a true differentiating factor for us,” Nierenberg said.

Its originations segment, part of its NewRez operating business, contributed $142.2 million to the total bottom line, a 168% gain from $53.1 in the previous quarter, but dropping 39.8% on an annual basis from $236.1 million in the third quarter last year. Gain-on-sale margin came out to 161 basis points, up from 131 bps in the second quarter, but down from 204 bps annually.

The company’s servicing segment posted net income of $20.5 million for the three months ending Sept. 30, compared with a $116 million loss the previous quarter. New Residential realigned and reevaluated the composition of its servicing division due to the Caliber acquisition during the quarter.

New Residential also recorded net income of $31.8 million in mortgage-servicing rights and servicing advances business line, improving from losses of $66.1 million in the second quarter and $187.6 million in the same 2020 period.

Among residential securities and call rights, the company reported a $20.1 million third-quarter loss, compared to income gain of $124.7 million in the previous quarter and $85.2 million a year ago. Its properties and residential-loans segment recorded $8.7 million in income, down from $165.2 million in the second quarter and $26.8 million a year ago.

Its corporate and other costs accounted for a net loss of $36.9 million, up slightly from 39.7 million the prior quarter and $106.9 million year over year.

Despite the likelihood of higher interest rates taking a bite out of originations in the coming months, Nierenberg expressed confidence that New Residential was well positioned to profit from them thanks to its servicing business.

“When you think about higher rates — the potential for mortgage-company earnings to decrease a little bit here — the MSR portfolios should kick in in a big way,” he said. “And as those go up in value, that’s only going to add to our book value as a company.”

NewRez serviced $476 billion in unpaid principal balance as of Sept.30. That included $156 billion in full mortgage servicing rights picked up from Caliber, In addition, New Residential’s MSRs and Servicer Advances segment had a $635 billion portfolio of both full and excess rights at the end of the third quarter, up from $489 billion on June 30.

Going forward, the company expects to generate about $35 billion to $40 billion in origination production in the fourth quarter. New Residential hopes to pare down expenses by 10-20% in the next year and up its technology capabilities as well, fully integrating Caliber’s digital tools into New Residential’s post merger by the end of 2022. Plans also include the hiring of a chief digital officer.

“We hope to get that done by year end, which then would launch what we’ll call a lab within the company that will focus on how we become, quite frankly, competitors to Rocket and everybody else that’s a real leading technology provider in the industry. So that’s kind of really where I think we’re headed,” Nierenberg said.

Investors greeted the earnings announcement by driving New Residential’s (NRZ) stock price to $11.67 at the opening bell immediately following the earnings call, before ending trading at $11.60. The stock closed Monday at $11.56.





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