Rithm Capital Corp. (RITM) FY 2023 MD&A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis of financial condition and results of operations should be read in conjunction with the Consolidated Financial Statements and notes thereto, and with Part I, Item 1A. “Risk Factors.”

Management’s discussion and analysis of financial condition and results of operations is intended to allow readers to view our business from management’s perspective by (i) providing material information relevant to an assessment of our financial condition and results of operations, including an evaluation of the amount and certainty of cash flows from operations and from outside sources, (ii) focusing the discussion on material events and uncertainties known to management that are reasonably likely to cause reported financial information not to be indicative of future operating results or future financial condition, including descriptions and amounts of matters that are reasonably likely, based on management’s assessment, to have a material impact on future operations and (iii) discussing the financial statements and other statistical data management believes will enhance the reader’s understanding of our financial condition, changes in financial condition, cash flows and results of operations.

This section generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussions of 2022 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7. of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

COMPANY OVERVIEW

Rithm Capital is a global asset manager focused on real estate, credit and financial services. We are structured as an internally managed REIT for U.S. federal income tax purposes. Rithm Capital became a publicly-traded entity on May 15, 2013.

We seek to generate long-term value for our investors by using our investment expertise to identify, manage and invest in real estate related and other financial assets and more recently offer broader asset management capabilities, in each case, that provides investors with attractive risk-adjusted returns. Our investments in real estate related assets include our equity interest in operating companies, and our strategy also involves opportunistically pursuing acquisitions and seeking to establish strategic partnerships that we believe enable us to maximize the value of our investments by offering products and services related to the lifecycle of transactions that affect each mortgage loan and underlying residential property or collateral.

We conduct our business through the following segments: Origination and Servicing, Investment Portfolio, Mortgage Loans Receivable, Asset Management and Corporate.

Within our portfolio, we target complementary assets that generate stable long-term cash flows and employ conservative capital structures in an effort to generate returns across different interest rate environments. Our investment approach and capital allocation decisions combine a focus on asset selection, relative value, risk management, taking into consideration available financing and other relevant macroeconomic factors. In our efforts to identify and invest in target assets, we compete with banks, other REITs, non-bank mortgage lenders and servicers, private equity firms, alternative asset managers, hedge funds and other large financial services companies. In the face of this competition, the experience of members of our management team and dedicated investment professionals provide us with a competitive advantage when pursuing attractive investment opportunities.

Our residential mortgage origination business, operated through Newrez, sources and originates loans through four distinct channels: Direct to Consumer, Retail, Wholesale and Correspondent. Additionally, our servicing business compliments our origination business and offers our subsidiaries and third-party clients performing and special servicing capabilities. We also operate additional real estate related businesses, including Avenue 365, our title company, and eStreet, our appraisal company. Our real estate businesses also include Adoor LLC (“Adoor”), a wholly-owned subsidiary, which is focused on the acquisition and management of SFR properties and Genesis, a lender for experienced developers and investors of residential real estate, which also supports our Adoor Business. We also have investments in Guardian, a national provider of field services and property management services. We operate our asset management business primarily through our wholly-owned subsidiary, Sculptor. Sculptor is a leading global alternative asset manager and provides asset management services and investment products across credit, real estate and multi-strategy platforms through commingled funds, separate accounts and other alternative investment vehicles.

On November 17, 2023, we completed the Sculptor Acquisition, which accelerated our growth in our asset management business, and we intend to continue to diversify into a global asset manager. However, our legacy business lines are expected to

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remain important to the future of the Company. We believe we are well positioned to opportunistically deploy capital by leveraging our deep expertise in specialty finance, structured and alternative credit, consumer lending and real estate. In executing our strategy, from time to time, we explore and will continue to explore various opportunities for acquisitions and dispositions of assets and financing transactions, which may include equity or debt offerings by us or one or more of our subsidiaries, business combinations, spin-off transactions or other similar transactions. In 2023, the subsidiary that owns our mortgage origination and servicing platform business and related real estate assets confidentially submitted with the SEC a draft Registration Statement on Form S-1 relating to a proposed initial public offering of its equity securities. Any initial public offering is subject to market and other conditions and there can be no assurances as to the timing of the completion of an offering or that an offering will be completed at all, and the Company may determine to explore or execute (or to not explore or execute) other alternatives with respect to this or other business lines. Moreover, we may determine to change our strategy, including to pursue, modify or abandon any such potential transactions at any time, and, in any event, there can be no assurance we will be successful in executing on our strategy.

We seek to protect book value and the value of our assets by actively managing and hedging our portfolio. Diversification of our overall portfolio, including our portfolio assets and operating entities, and a variety of hedging strategies help contribute to book value stability. Both our portfolio composition (inclusive of long and short duration instruments and various operating businesses) and specific hedging instruments (including Agency mortgage-backed securities (“MBS”) TBAs, interest rate swaps and others) are employed to mitigate book value volatility. We believe that the actions we have taken over the past number of years to diversify and grow our portfolio have allowed us to operate efficiently and perform dynamically across economic conditions. See Part I, Item 1A “Risk Factors—Risks Related to Our Business—Any hedging transactions that we enter into may limit our gains or result in losses.”

As of December 31, 2023, we had $35.3 billion in total assets, approximately $32.8 billion in AUM and 6,570 employees, including those individuals employed by our operating entities.

BOOK VALUE PER COMMON SHARE

The following table summarizes the calculation of book value per common share:

Refer to Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” for interest rate risk and its impact on fair value.

MARKET CONSIDERATIONS

Summary

U.S. economic data and indicators gained strength as 2023 progressed. Real gross domestic product (“GDP”) was reported at 3.3% for the year, highlighted by a notably strong reading of 4.9% in the third quarter while slowing through the fourth quarter.

U.S. and global economic growth continues to be threatened by the ongoing war and tensions in the Middle East, in addition to trade disruptions due to the war in Ukraine, and still elevated inflation rates. The Federal Reserve continued to increase rates in the first half of 2023, to combat high inflation rates.

The Federal Reserve has paused on rate hikes since July 2023 and is projecting rate cuts in 2024. The labor market showed signs of strength with unexpected increases in job openings in September 2023 and December 2023. The unemployment rate has fluctuated between 3.5% and 3.8% throughout the year, remaining near 50-year historical lows.

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With respect to the mortgage and housing markets, the inventory of existing homes for sale remained low while mortgage rates briefly hit two decade highs at just below 8% in November. Despite significant changes in rates through 2023, the 10-year U.S. Treasury rate remained unchanged, and the 30-year fixed mortgage rate was 20bps higher compared to year end 2022. Further, mortgage rates are expected to fall slightly in 2024 while home prices are expected to continue to rise in 2024.

Banking Institutions

The U.S. markets experienced significant instability in the banking sector during the first and second quarters of 2023. In March 2023, each of Silicon Valley Bank and Signature Bank were taken over by the Federal Deposit Insurance Corporation (“FDIC”). This caused uncertainty for businesses that used these banks and resulted in significant general market disruption. Further, it raised concerns about the overall stability of the banking system in the United States, particularly relating to the stability of regional banks. As a result of these circumstances, the Federal Reserve created the Bank Term Funding Program in March 2023, under which eligible institutions could receive additional funding via loans, to help stabilize the banking sector and avoid a broader destabilization in the financial system and potentially a recession. In May 2023, First Republic Bank was closed by the California Department of Financial Protection and Innovation and sold by the FDIC to JPMorgan Chase, leading to additional uncertainty in the banking sector and increased market disruption.

Since the banking sector instability seen during the first half of 2023, results in the second half of the year showed signs of recovery, with deposit outflows stabilizing, strong capital and liquidity, generally strong bank profits and the overall banking system remaining strong and resilient.

Inflation

Inflation has moderated over the last year, declining substantially from its peak in 2022. While the Federal Reserve announced various rate increases during the beginning of the year, they have been on pause on rate hikes since July 2023 while projecting rate cuts in 2024, as inflation has steadily cooled. The Consumer Price Index increased 0.3% in December 2023 and 3.4% on an annual basis. A slight increase in inflation was seen from November 2023 to December 2023 following two months of decreases. The inflation rate increase appears to have subsided largely due to the easing of supply chain pressures that surged during the COVID-19 pandemic. The economy continues to grow at a pace that is faster than estimates, with annualized growth for GDP at 3.3% as of December 31, 2023. Long-term interest rates have fallen, and the stock market has risen sharply, easing overall financial conditions.

To the extent interest rates begin to rise again, we could experience increased interest expense on our outstanding variable rate debt and future variable and fixed-rate debt, thereby adversely affecting cash flow and our ability to service our indebtedness and pay distributions.

Labor Markets

Signs of a strong U.S. labor market emerged as the end of the year approached, with the unemployment rate remaining relatively unchanged near 50-year lows, ranging from 3.5% to 3.8% through 2023. The unemployment rate ended the year at 3.7%, up only 20 bps from December 2022. During 2023, there was an increase in jobs added in the U.S., in particular during each of September 2023 and December 2023, when the reported employment gains exceeded forecasts by adding 336,600 jobs and 216,000 jobs, respectively. Further, wage growth remained strong, with average hourly earnings up 4.1% year over year.

Housing Market

Elevated mortgage rates, high home prices and low home inventory drove housing market conditions. The inventory of existing homes for sale remained low throughout the year primarily due to the reluctance of homeowners to change residence and lose the low interest rates locked-in when they purchased or refinanced their mortgages at sub-3% mortgage rates in 2021. Further, while mortgage rates remained high overall, they began to ease during the fourth quarter of 2023 following increases since the first quarter of 2023.

The market conditions discussed above influence our investment strategy and results, many of which have been impacted by continued high inflation and mortgage rates, an increase in GDP growth rate, as well as the other global events such as the ongoing war and tensions in the Middle East, among other factors. See Part I, Item 1A. “Risk Factors—Risks Related to Our Business—Unfavorable global economic and political conditions could adversely affect our business, financial condition or results of operations” and “—Market conditions could negatively impact our business, results of operations, cash flows and financial condition.”

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The following table summarizes the change in U.S. GDP estimates annualized rate according to the U.S. Bureau of Economic Analysis:

(A)Annualized rate based on the advance estimate.

The following table summarizes the U.S. unemployment rate according to the U.S. Department of Labor:

The following table summarizes the 10-year Treasury rate and the 30-year fixed mortgage rates:

We believe the estimates and assumptions underlying our consolidated financial statements are reasonable and supportable based on the information available as of December 31, 2023; however, uncertainty related to market volatility and inflationary pressures driving the federal funds rate to increase makes any estimates and assumptions as of December 31, 2023 inherently less certain than they would be absent the current economic environment. Actual results may materially differ from those estimates. Market volatility and inflationary pressures and the ongoing war and tensions in the Middle East and their impact on the current financial, economic and capital markets environment, and future developments in these and other areas present uncertainty and risk with respect to our financial condition, results of operations, liquidity and ability to pay distributions.

CHANGES TO LIBOR

On March 5, 2021, Intercontinental Exchange Inc. (“ICE”) announced that ICE Benchmark Administration Limited, the administrator of LIBOR, intended to stop publication of the majority of USD-LIBOR tenors (overnight, 1-, 3-, 6- and 12-month) on June 30, 2023. On January 1, 2022, ICE discontinued the publication of the 1-week and 2-month tenors of USD-LIBOR. In the U.S., the ARRC identified the SOFR as its preferred alternative rate for U.S. dollar-based LIBOR. SOFR is a measure of the cost of borrowing cash overnight, collateralized by U.S. Treasury securities and is based on directly observable U.S. Treasury-backed repurchase transactions.

Rithm Capital completed its transition from LIBOR to an alternative benchmark, mainly SOFR, in June 2023. We do not currently intend to amend our Series A, Series B or Series C to change the existing USD-LIBOR cessation fallback language.

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OUR PORTFOLIO

Our portfolio, as of December 31, 2023, is composed of origination and servicing, our investment portfolio, mortgage loans receivable, and asset management, as described in more detail below (dollars in thousands).

Origination and Servicing

Our origination and servicing business operates within our Mortgage Company. We have a multi-channel lending platform, offering purchase and refinance loan products. We originate loans through our Retail channel, provide refinance opportunities to eligible existing servicing customers through our Direct to Consumer channel, and purchase originated loans through our Wholesale and Correspondent channels. We originate or purchase residential mortgage loans conforming to the underwriting standards of the GSEs and Ginnie Mae, government-insured residential mortgage loans which are insured by the FHA, VA and USDA, and Non-Agency and non-QM loans through our SMART Loan Series. Our non-QM loan products provide a variety of options for highly qualified borrowers who fall outside the specific requirements of Agency residential mortgage loans.

Our servicing business operates through our performing and special servicing divisions. The performing loan servicing division services performing Agency and government-insured loans. SMS, our special servicing division, services delinquent government-insured, Agency and Non-Agency loans on behalf of the owners of the underlying mortgage loans. We are highly experienced in loan servicing, including loan modifications, and seek to help borrowers avoid foreclosure. As of December 31, 2023, the performing loan servicing division serviced $445.8 billion UPB of loans and SMS serviced $122.2 billion UPB of loans, for a total servicing portfolio of $568.0 billion UPB, representing a 12.8% increase from December 31, 2022. The increase was primarily attributable to servicing transfer from third-party subservicers and loan production, partially offset by scheduled and voluntary prepayment loan activity.

We generate revenue through sales of residential mortgage loans, including, but not limited to, gain on residential loans originated and sold and the value of MSRs retained on transfer of the loans. Profit margins per loan vary by channel, with Correspondent typically being the lowest and Direct to Consumer being the highest. We sell conforming loans to the GSEs and Ginnie Mae and securitize Non-QM residential loans. We utilize warehouse financing to fund loans at origination through the sale date.

Included in our Origination segment are the financial results of two of our services businesses, eStreet and Avenue 365. eStreet offers appraisal valuation services, and Avenue 365 provides title insurance and settlement services to our Mortgage Company.

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The tables below provide selected operating statistics for our Origination and Servicing segment:

(A)Includes realized gains on loan sales and related new MSR capitalization, changes in repurchase reserves, changes in fair value of interest rate lock commitments, changes in fair value of loans held-for-sale and economic hedging gains and losses.

(B)Includes loan origination fees of $0.4 billion and $0.6 billion for the years ended December 31, 2023 and 2022, respectively.

(C)Represents Gain on originated residential mortgage loans, held-for-sale, net of the Origination segment (See Note 4 and Note 9 to our Consolidated Financial Statements).

(D)Excludes MSR revenue on recaptured loan volume delivered back to NRM.

Total Gain on originated residential mortgage loans, held-for-sale, net decreased $556.4 million to $483.5 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. During 2023, gain on sale margin continued to revert to historical levels largely driven by weakening demand for loans amid excess industry capacity due to an escalating interest rate environment weighing on the residential real estate market.

Gain on sale margin for the year ended December 31, 2023 was 1.31%, 39 bps lower than 1.70% for the prior year. The lower gain on sale margin for 2023 was driven by channel mix—funded loan production in our lower margin Correspondent channel outpaced production in higher margin channels. For the year ended December 31, 2023, loan origination volume was

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$36.9 billion, down from $67.6 billion in the prior year. During 2023, 13% of all funded origination volume was refinance, down from 30% in 2022. Similar trends were noted industry-wide; as of December 2023, the MBA estimated total U.S. origination volume for 2023 was $1.6 trillion, down 25% from an estimated $2.2 trillion in 2022. Furthermore, the MBA estimated that 19% of 2023 activity was related to refinance volume, a decline from 30% in 2022.

The table below provides the mix of our serviced assets portfolio between subserviced performing servicing (labeled as “Performing Servicing”) and subserviced non-performing, or special servicing (labeled as “Special Servicing”). The Mortgage Company subservices on behalf of Rithm Capital or its subsidiaries and for third parties for the periods presented.

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The table below summarizes base servicing fees and other fees for the periods presented:

(A)Includes other fees earned from third parties of $47.3 million and $39.5 million for the years ended December 31, 2023 and 2022, respectively.

MSRs and MSR Financing Receivables

Our servicing segment includes owned MSRs serviced by our Mortgage Company. As of December 31, 2023, 86.5% of the underlying UPB of the related mortgages is serviced by our Mortgage Company.

An MSR provides a mortgage servicer with the right to service a pool of residential mortgage loans in exchange for a portion of the interest payments made on the underlying residential mortgage loans, plus ancillary income and custodial interest. An MSR is made up of two components: a basic fee and an Excess MSR. The basic fee is the amount of compensation for the performance of servicing duties (including advance obligations), and the Excess MSR is the amount that exceeds the basic fee.

See Note 6 to our Consolidated Financial Statements for additional information including a summary of activity related to MSRs and MSR financing receivables from December 31, 2022 to December 31, 2023.

We finance our investments in MSRs and MSR financing receivables with short- and medium-term bank and public capital markets notes. These borrowings are primarily recourse debt and bear either fixed or variable interest rates, which are offered by the counterparty for the term of the notes for a specified margin over SOFR. The capital markets notes are typically issued with a collateral coverage percentage, which is a quotient expressed as a percentage equal to the aggregate note amount divided by the market value of the underlying collateral. The market value of the underlying collateral is generally updated on a quarterly basis, and if the collateral coverage percentage becomes greater than or equal to a collateral trigger, generally 90%, we may be required to add funds, pay down principal on the notes or add additional collateral to bring the collateral coverage percentage below 90%. The difference between the collateral coverage percentage and the collateral trigger is referred to as a “margin holiday.”

See Note 19 to our Consolidated Financial Statements for further information regarding financing of our MSRs and MSR financing receivables, including a summary of activity related to financing from December 31, 2022 to December 31, 2023.

We are generally obligated to fund all future servicer advances related to the underlying pools of residential mortgage loans on our MSRs and MSR financing receivables. Generally, we will advance funds when the borrower fails to meet, including during forbearance periods, contractual payments (e.g., principal, interest, property taxes and insurance). We will also advance funds to maintain and to report to regulators foreclosed real estate properties on behalf of investors. Advances are recovered through claims to the related investor. Pursuant to our servicing agreements, we are obligated to make certain advances on residential mortgage loans to be in compliance with applicable requirements. In certain instances, the subservicer is required to reimburse us for any advances that were deemed non-recoverable or advances that were not made in accordance with the related servicing contract.

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We finance our servicer advances with short- and medium-term collateralized borrowings. These borrowings are non-recourse committed facilities that are not subject to margin calls and bear either fixed or variable interest rates offered by the counterparty for the term of the notes, generally less than one year, of a specified margin over SOFR. See Note 19 to our Consolidated Financial Statements for further information regarding financing of our servicer advances.

The table below summarizes our MSRs and MSR financing receivables as of December 31, 2023.

(A)Includes GSE and Non-Agency MSRs of $25.9 billion and $45.5 billion underlying UPB, respectively, serviced by third-party subservicers discussed further in Investment Portfolio section below.

The following tables summarizes the collateral characteristics of the residential mortgage loans underlying our MSRs and MSR financing receivables as of December 31, 2023 (dollars in thousands):

(A)Includes GSE and Non-Agency MSRs of $25.9 billion and $45.5 billion underlying UPB, respectively, serviced by third-party subservicers discussed further in Investment Portfolio section below.

(A)Based on the weighted average of information provided by the loan servicer on a monthly basis. The loan servicer generally updates the FICO score when loans are refinanced or become delinquent.

(B)Represents the percentage of the total principal balance of the pool that corresponds to adjustable rate mortgages.

(C)Represents the annualized rate of the prepayments during the quarter as a percentage of the total principal balance of the pool.

(D)Represents the annualized rate of the voluntary prepayments during the quarter as a percentage of the total principal balance of the pool.

(E)Represents the annualized rate of the involuntary prepayments (defaults) during the quarter as a percentage of the total principal balance of the pool.

(F)Represents the percentage of the total principal balance of the pool that corresponds to loans that are delinquent by 90 or more days.

(G)Includes GSE and Non-Agency MSRs of $25.9 billion and $45.5 billion underlying UPB, respectively, serviced by third-party subservicers discussed further in Investment Portfolio section below.

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Investment Portfolio

MSRs and MSR Financing Receivables (Externally Serviced)

In addition to MSRs serviced by our Mortgage Company discussed in the previous section, we contract with certain subservicers to perform the related servicing duties on the residential mortgage loans underlying our MSRs and MSR financing receivables. Historically, we have contracted with Mr. Cooper, LoanCare, LLC (“LoanCare”), Flagstar Bank (“Flagstar”), PHH and Valon as subservicers. In 2023, we opted not to renew our subservicing agreements with Mr. Cooper, LoanCare and Flagstar and transferred servicing performed by Mr. Cooper, LoanCare and Flagstar to the Mortgage Company. As of December 31, 2023, no loans related to MSRs were subserviced by Mr. Cooper, LoanCare and Flagstar. As of December 31, 2023, third-party subservicers include PHH and Valon which subservice 8.6% and 4.9%, or $45.5 billion and $25.9 billion, of the underlying UPB of the related mortgages, respectively.

See Note 6 to our Consolidated Financial Statements for additional information including a summary of activity related to MSRs and MSR financing receivables from December 31, 2022 to December 31, 2023.

See Note 19 to our Consolidated Financial Statements for further information regarding financing of our MSRs and MSR financing receivables, including a summary of activity related to financing from December 31, 2022 to December 31, 2023.

Excess MSRs

The following tables summarize the terms of our Excess MSRs:

(A)The MSR is a weighted average as of December 31, 2023, and the Excess MSR represents the difference between the weighted average MSR and the basic fee (which fee remains constant).

(A)The MSR is a weighted average as of December 31, 2023, and the Excess MSR represents the difference between the weighted average MSR and the basic fee (which fee remains constant).

The following tables summarize the collateral characteristics of the loans underlying our direct Excess MSRs as of December 31, 2023 (dollars in thousands):

(A)Based on the weighted average of information provided by the loan servicer on a monthly basis. The loan servicer generally updates the FICO score when loans are refinanced or become delinquent.

(B)constant prepayment rate represents the annualized rate of the prepayments during the quarter as a percentage of the total principal balance of the pool.

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(C)Represents the annualized rate of the voluntary prepayments during the quarter as a percentage of the total principal balance of the pool.

(D)Represents the annualized rate of the involuntary prepayments (defaults) during the quarter as a percentage of the total principal balance of the pool.

(E)Represents the percentage of the total principal balance of the pool that corresponds to loans that are delinquent by 90 or more days.

(F)Weighted averages exclude collateral information for which collateral data was not available as of the report date.

The following table summarizes the collateral characteristics as of December 31, 2023 of the loans underlying Excess MSRs made through joint ventures accounted for as equity method investees (dollars in thousands). For each of these pools, we own a 50% interest in an entity that invested in a 66.7% interest in the Excess MSRs.

(A)Based on the weighted average of information provided by the loan servicer on a monthly basis. The loan servicer generally updates the FICO score when loans are refinanced or become delinquent.

(B)Constant prepayment rate represents the annualized rate of the prepayments during the quarter as a percentage of the total principal balance of the pool.

(C)Represents the annualized rate of the voluntary prepayments during the quarter as a percentage of the total principal balance of the pool.

(D)Represents the annualized rate of the involuntary prepayments (defaults) during the quarter as a percentage of the total principal balance of the pool.

(E)Represents the percentage of the total principal balance of the pool that corresponds to loans that are delinquent by 90 or more days.

(F)Weighted averages exclude collateral information for which collateral data was not available as of the report date.

Servicer Advance Investments

Servicer advances are a customary feature of residential mortgage securitization transactions and represent one of the duties for which a servicer is compensated. Servicer advances are generally reimbursable payments made by a servicer (i) when the borrower fails to make scheduled payments due on a residential mortgage loan, including during forbearance periods, or (ii) to support the value of the collateral property. Servicer advance investments are associated with specified pools of residential mortgage loans in which we have contractually assumed the servicing advance obligation and include the related outstanding servicer advances, the requirement to purchase future servicer advances and the rights to the basic fee component of the related MSR.

The following is a summary of our servicer advance investments, including the right to the basic fee component of the related MSRs (dollars in thousands):

(A)Represents the fair value of the servicer advance investments, including the basic fee component of the related MSRs.

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The following summarizes additional information regarding our servicer advance investments and related financing, as of and for the year ended, December 31, 2023 (dollars in thousands):

(A)Based on outstanding servicer advances, excluding purchased but unsettled servicer advances.

(B)Annualized measure of the cost associated with borrowings. Gross cost of funds primarily includes interest expense and facility fees. Net cost of funds excludes facility fees.

(C)Represents the weighted average expected timing of the receipt of expected net cash flows for this investment.

(D)Ratio of face amount of borrowings to par amount of servicer advance collateral, net of any general reserve.

(E)The following table summarizes the types of advances included in servicer advance investments (dollars in thousands):

Real Estate Securities

Agency RMBS and U.S. Treasury Bills

The following table summarizes our Agency RMBS and U.S. Treasury Bill portfolio as of December 31, 2023 (dollars in thousands):

(A)Carrying value equals fair value for Agency RMBS. U.S. Treasury Bills are held-to-maturity at amortized cost basis.

(B)Represents the annualized rate of the prepayments during the quarter as a percentage of the total amortized cost basis.

The following table summarizes the net interest spread of our Agency RMBS portfolio for the year ended December 31, 2023:

(A)The Agency RMBS portfolio consists of 100.0% fixed-rate securities (based on amortized cost basis).

We largely employ our Agency RMBS and Treasury positions, or government-backed securities, as a hedge to our MSR portfolio and for REIT status. Our government-backed securities portfolio was $8.6 billion as of December 31, 2023. We finance the investments with short-term borrowings under master uncommitted repurchase agreements. These borrowings generally bear interest rates offered by the counterparty for the term of the proposed repurchase transaction (e.g., 30 days, 60 days, etc.) of a specified margin over SOFR. At December 31, 2023 and 2022, the Company pledged Agency RMBS with a carrying value of approximately $8.5 billion and $7.1 billion, respectively, as collateral for borrowings under repurchase agreements. We expect to continue to finance our acquisitions of Agency RMBS with repurchase agreement financing. See Note 19 to our Consolidated Financial Statements for further information regarding financing of our Agency RMBS and U.S. Treasury Bills positions, including a summary of activity related to financing from December 31, 2022 to December 31, 2023.

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Non-Agency RMBS

Within our Non-Agency RMBS portfolio, we retain and own risk retention bonds from our securitizations in accordance with risk retention regulations under the Dodd-Frank Act. As of December 31, 2023, 53.9% of our Non-Agency RMBS portfolio was related to bonds retained pursuant to required risk retention regulations.

The following table summarizes our Non-Agency RMBS portfolio as of December 31, 2023 (dollars in thousands):

(A)Fair value, which is equal to carrying value for all securities.

The following tables summarize the characteristics of our Non-Agency RMBS portfolio and of the collateral underlying our Non-Agency RMBS as of December 31, 2023 (dollars in thousands):

(A)Excludes other asset-backed securities including bonds backed by consumer loans.

(B)The current amount of interest received on the underlying loans in excess of the interest paid on the securities, as a percentage of the outstanding collateral balance for the quarter ended December 31, 2023.

(C)Excludes residual bonds and certain other Non-Agency bonds, with a carrying value of $17.5 million and $1.0 million, respectively, for which no coupon payment is expected.

(D)The ratio of original UPB of loans still outstanding.

(E)Three-month average constant prepayment rate and default rates.

(F)The percentage of underlying loans that are 90+ days delinquent, or in foreclosure or considered REO.

The following table summarizes the net interest spread of our Non-Agency RMBS portfolio for the year ended December 31, 2023:

(A)The Non-Agency RMBS portfolio consists of 35.6% floating rate securities and 64.4% fixed-rate securities (based on amortized cost basis).

We finance our investments in Non-Agency RMBS with short-term borrowings under master uncommitted repurchase agreements. These borrowings generally bear interest rates offered by the counterparty for the term of the proposed repurchase transaction (e.g., 30 days, 60 days, etc.) of a specified margin over SOFR. At December 31, 2023 and 2022, the Company pledged Non-Agency RMBS with a carrying value of approximately $958.3 million and $946.2 million, respectively, as collateral for borrowings under repurchase agreements. A portion of collateral for borrowings under repurchase agreements is subject to daily mark-to-market fluctuations and margin calls. The remaining collateral is not subject to daily margin calls unless the collateral coverage percentage, a quotient expressed as a percentage equal to the current carrying value of outstanding debt divided by the market value of the underlying collateral, becomes greater than or equal to a collateral trigger. The difference between the collateral coverage percentage and the collateral trigger is referred to as a “margin holiday.” See Note 19 to our Consolidated Financial Statements for further information regarding financing of our Non-Agency RMBS, including a summary of activity related to financing from December 31, 2022 to December 31, 2023.

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See Note 8 to our Consolidated Financial Statements for additional information including a summary of activity related to real estate and other securities from December 31, 2022 to December 31, 2023.

Call Rights

We hold a limited right to cleanup call options with respect to certain securitization trusts (including securitizations we have issued) whereby, when the UPB of the underlying residential mortgage loans falls below a pre-determined threshold, we can generally purchase the underlying residential mortgage loans at par, plus unreimbursed servicer advances, resulting in the repayment of all of the outstanding securitization financing at par, in exchange for a fee of 0.75% of UPB paid to servicer (if applicable) at the time of exercise. The aggregate UPB of the underlying residential mortgage loans within these various securitization trusts is approximately $76.0 billion. For the year ended December 31, 2023, Rithm Capital executed no calls.

We continue to evaluate the call rights we acquired from each of our servicers, and our ability to exercise such rights and realize the benefits therefrom are subject to a number of risks. See “Risk Factors—Risks Related to Our Business—Our ability to exercise our cleanup call rights may be limited or delayed if a third party contests our ability to exercise our cleanup call rights, if the related securitization trustee refuses to permit the exercise of such rights, or if a related party is subject to bankruptcy proceedings.” The actual UPB of the residential mortgage loans on which we can successfully exercise call rights and realize the benefits therefrom may differ materially from our initial assumptions.

Residential Mortgage Loans

We have accumulated our residential mortgage loan portfolio through various bulk acquisitions and the execution of call rights. Additionally, through our Mortgage Company, we originate residential mortgage loans for sale and securitization to third parties.

Loans are accounted for based on our strategy for the loan and on whether the loan was performing or non-performing at the date of acquisition. Acquired performing loans means that, at the time of acquisition, it is likely the borrower will continue making payments in accordance with contractual terms. Purchased non-performing loans means that at the time of acquisition, the borrower will not likely make payments in accordance with contractual terms (i.e., credit-impaired). We account for loans based on the following categories:

•Loans held-for-investment, at fair value

•Loans held-for-sale, at lower of cost or fair value

•Loans held-for-sale, at fair value

As of December 31, 2023, we had approximately $3.0 billion outstanding face amount of residential mortgage loans (see below). These investments were financed with secured financing agreements with an aggregate face amount of approximately $1.9 billion and secured notes and bonds payable with an aggregate face amount of approximately $0.7 billion. We acquired these loans through open market purchases, loan origination through our Mortgage Company and the exercise of call rights and acquisitions.

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The following table presents the total residential mortgage loans outstanding by loan type at December 31, 2023 (dollars in thousands).

(A)For loans classified as Level 3 in the fair value hierarchy, the weighted average life is based on the expected timing of the receipt of cash flows. For Level 2 loans, the weighted average life is based on the contractual term of the loan.

(B)Performing loans are generally placed on non-accrual status when principal or interest is 90 days or more past due.

(C)As of December 31, 2023, we have placed all Non-Performing Loans, held-for-sale on non-accrual status, except as described in (D) below.

(D)Includes $224.5 million and $198.2 million UPB of Ginnie Mae EBO performing and non-performing loans, respectively, on accrual status as contractual cash flows are guaranteed by the FHA.

We consider the delinquency status, LTV ratios and geographic area of residential mortgage loans as our credit quality indicators.

We finance a significant portion of our investments in residential mortgage loans with borrowings under repurchase agreements. These recourse borrowings generally bear variable interest rates offered by the counterparty for the term of the proposed repurchase transaction, generally less than one year, of a specified margin over SOFR. At December 31, 2023 and 2022, the Company pledged residential mortgage loans with a carrying value of approximately $2.2 billion and $3.0 billion, respectively, as collateral for borrowings under repurchase agreements. A portion of collateral for borrowings under repurchase agreements is subject to daily mark-to-market fluctuations and margin calls. A portion of collateral for borrowings under repurchase agreements is not subject to daily margin calls unless the collateral coverage percentage, a quotient expressed as a percentage equal to the current carrying value of outstanding debt divided by the market value of the underlying collateral, becomes greater than or equal to a collateral trigger. The difference between the collateral coverage percentage and the collateral trigger is referred to as a “margin holiday.” See Note 19 to our Consolidated Financial Statements for further information regarding financing of our residential mortgage loans, including a summary of activity related to financing from December 31, 2022 to December 31, 2023.

See Note 9 to our Consolidated Financial Statements for additional information including a summary of activity related to residential mortgage loans from December 31, 2022 to December 31, 2023.

Consumer Loans

The table below summarizes the collateral characteristics of the consumer loans, including the portfolio of consumer loans purchased from Goldman Sachs in June 2023 (the “Marcus loans” or “Marcus”) and those held by Rithm Capital, through

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certain limited liability companies (together, the “Consumer Loan Companies”), as of December 31, 2023 (dollars in thousands):

(A)     Represents the percentage of the total principal balance of the pool that corresponds to loans that are delinquent by 90 or more days.

(B)    Represents the annualized rate of the voluntary prepayments during the three months as a percentage of the total principal balance of the pool.

(C)     Represents the annualized rate of the involuntary prepayments (defaults) during the three months as a percentage of the total principal balance of the pool.

We have financed our investments in the SpringCastle loans with securitized non-recourse long-term notes with a stated maturity date of May 2036. The Marcus loans were financed with long-term notes with a stated maturity date of June 2028. See Note 19 to our Consolidated Financial Statements for further information regarding financing of our consumer loans, including a summary of activity related to financing from December 31, 2022 to December 31, 2023.

See Note 10 to our Consolidated Financial Statements for additional information including a summary of activity related to consumer loans from December 31, 2022 to December 31, 2023.

Single-Family Rental (SFR) Portfolio

We continue to invest in our SFR portfolio and strive to become a leader in the SFR sector by acquiring and maintaining a geographically diversified portfolio of high-quality single-family homes and leasing them to high quality residents. As of December 31, 2023, our SFR portfolio consists of 3,888 properties with an aggregate carrying value of $1.0 billion, up from 3,731 units with an aggregate carrying value of $971.3 million as of December 31, 2022. During the years ended December 31, 2023 and 2022, we acquired 182 and 1,196 SFR units, respectively.

Our ability to identify and acquire properties that meet our investment criteria is impacted by property prices in our target markets, the inventory of properties available, competition for our target assets and our available capital. Properties added to our portfolio through traditional acquisition channels require expenditures in addition to payment of the purchase price, including property inspections, closing costs, liens, title insurance, transfer taxes, recording fees, broker commissions, property taxes and HOA fees, when applicable. In addition, we typically incur costs to renovate a property acquired through traditional acquisition channels to prepare it for rental. Renovation work varies, but may include paint, flooring, cabinetry, appliances, plumbing, hardware and other items required to prepare the property for rental. The time and cost involved to prepare our properties for rental can impact our financial performance and varies among properties based on several factors, including the source of acquisition channel and age and condition of the property. Additionally, we have acquired and are continuing to acquire additional homes through the purchase of communities and portions of communities built for renting from regional and national home builders. Our operating results are also impacted by the amount of time it takes to market and lease a property, which can vary greatly among properties, and is impacted by local demand, our marketing techniques and the size of our available inventory.

Our revenues are derived primarily from rents collected from tenants for our SFR properties under lease agreements which typically have a term of one to two years. Our rental rates and occupancy levels are affected by macroeconomic factors and local and property-level factors, including market conditions, seasonality and tenant defaults, and the amount of time it takes to turn properties when tenants vacate.

Once a property is available for its initial lease, we incur ongoing property-related expenses, which consist primarily of property taxes, insurance, HOA fees (when applicable), utility expenses, repairs and maintenance, leasing costs, marketing expenses and property administration. Prior to a property being rentable, certain of these expenses are capitalized as building and improvements. Once a property is rentable, expenditures for ordinary repairs and maintenance thereafter are expensed as incurred, and we capitalize expenditures that improve or extend the life of a property.

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The following table summarizes certain key SFR property metrics as of December 31, 2023 (dollars in thousands):

We primarily rely on the use of credit facilities, term loans and securitizations to finance purchases of SFR properties. See Note 19 to our Consolidated Financial Statements for further information regarding financing of our SFR properties.

Investment Portfolio Businesses

Our investment portfolio segment also includes the activity from several wholly-owned subsidiaries or minority investments in companies that perform various services in the mortgage and real estate sectors. This includes our subsidiary Guardian, which is a national provider of field services and property management services, and Adoor, which is focused on the acquisition and management of our SFR properties.

Additionally, in the fourth quarter of 2023, we entered into a strategic partnership with Darwin to establish a new property management platform, APM. Our SFR properties are managed through an external property manager and APM.

Mortgage Loans Receivable

Through our wholly-owned subsidiary Genesis, we specialize in originating and managing a portfolio of primarily short-term business purpose mortgage loans to fund single-family and multi-family real estate developers with construction, renovation and bridge loans.

Construction — Loans provided for ground-up construction, including mid-construction refinancing of ground-up construction and the acquisition of such properties.

Renovation — Acquisition or refinance loans for properties requiring renovation, excluding ground-up construction.

Bridge — Loans for initial purchase, refinance of completed projects or rental properties.

We currently finance construction, renovation and bridge loans using a warehouse credit facility and revolving securitization structures.

Properties securing our loans are typically secured by a mortgage or a first deed of trust lien on real estate. Depending on loan type, the size of each loan committed is based on a maximum loan value in accordance with our lending policy. For construction and renovation loans, we generally use loan-to-cost (“LTC”) or loan-to-after-repair-value (“LTARV”) ratio. For bridge loans, we use an LTV ratio. LTC and LTARV are measured by the total commitment amount of the loan at origination

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divided by the total estimated cost of a project or value of a property after renovations and improvements to a property. LTV is measured by the total commitment amount of the loan at origination divided by the “as-complete” appraisal.

At the time of origination, the difference between the initial outstanding principal and the total commitment is the amount held back for future release subject to property inspections, progress reports and other conditions in accordance with the loan documents. Loan ratios described above do not reflect interim activity such as construction draws or interest payments capitalized to loans, or partial repayments of the loan.

Each loan is typically backed by a corporate or personal guarantee to provide further credit support for the loan. The guarantee may be collaterally secured by a pledge of the guarantor’s interest in the borrower or other real estate or assets owned by the guarantor.

Loan commitments at origination are typically interest only and bear a variable interest rate tied to the SOFR plus a spread ranging from 4.0% to 12.0% and have initial terms typically ranging from 6 to 120 months in duration based on the size of the project and expected timeline for completion of construction, which we often elect to extend for several months based on our evaluation of the project. As of December 31, 2023, the average commitment size of our loans was $2.5 million, and the weighted average remaining term to contractual maturity of our loans was 12.4 months.

We receive loan origination fees, or “points” at an average of 1.0% of the total commitment at origination. These origination fees factor in the term of the loan, the quality of the borrower and the underlying collateral. In addition, we charge fees on past due receivables and receive reimbursements from borrowers for costs associated with services provided by us, such as closing costs, collection costs on defaulted loans and inspection fees. In addition to origination fees, we earn loan extension fees when maturing loans are renewed or extended and amendment fees when loan terms are modified, such as increases in interest reserves and construction holdbacks in line with our underwriting criteria or upon modification of a loan. Loans are generally only renewed or extended if the loan is not in default and satisfies our underwriting criteria, including our maximum LTV ratios of the appraised value as determined at the time of loan origination or based on an updated appraisal, if required. Loan origination and renewal fees are deferred and recognized in income over the contractual maturity of the underlying loan.

Typical borrowers include real estate investors and developers. Loan proceeds are used to fund the construction, development, investment, land acquisition and refinancing of residential properties and to a lesser extent mixed-use properties. We also make loans to fund the renovation and rehabilitation of residential properties. Our loans are generally structured with partial funding at closing and additional loan installments disbursed to the borrower upon satisfactory completion of previously agreed stages of construction.

A principal source of new loans has been repeat business from our customers and their referral of new business. Our retention originations typically have lower customer acquisition costs than originations to new customers, positively impacting our profit margins.

The following table summarizes certain information related to our mortgage loans receivable activity as of and for the year ended December 31, 2023 (dollars in thousands):

(A)Based on commitment.

(B)Excludes loan fees and based on commitment at funding.

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The following table summarizes our total mortgage loans receivable portfolio by loan purpose as of December 31, 2023 (dollars in thousands):

(A)Weighted by commitment LTV for bridge loans and LTC or LTARV for construction and renovation loans.

The following table summarizes our total mortgage loans receivable portfolio by geographic location as of December 31, 2023 (dollars in thousands):

See Note 12 to our Consolidated Financial Statements for additional information, including a summary of activity related to mortgage loans receivable from December 31, 2022 to December 31, 2023.

Asset Management

Our asset management business primarily operates through our wholly-owned subsidiary, Sculptor. Sculptor is a leading global alternative asset manager and a specialist in opportunistic investing. Sculptor provides asset management services and investment products across credit, real estate and multi-strategy platforms with approximately $32.8 billion in AUM as of December 31, 2023. Sculptor serves its global client base through our commingled funds, separate accounts and other alternative investment vehicles. We acquired Sculptor on November 17, 2023.

AUM refers to the assets for which we provide investment management, advisory or certain other investment-related services. This is generally equal to the sum of (i) net asset value of the funds, (ii) uncalled capital commitments, (iii) total capital commitments for certain real estate funds and (iv) par value of CLOs.

AUM includes amounts that are not subject to management fees, incentive income or other amounts earned on AUM. Our calculation of AUM may differ from the calculations of other asset managers, and as a result, may not be comparable to similar measures presented by other asset managers. Our calculations of AUM are not based on any definition set forth in the governing documents of the investment funds and are not calculated pursuant to any regulatory definitions.

Growth in fee paying AUM in Sculptor’s funds and positive investment performance of Sculptor’s funds drive growth in our asset management fees and earnings. Conversely, poor investment performance slows our growth by decreasing our AUM and increasing the potential for redemptions from our funds, which would have a negative effect on our revenues and earnings.

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Management fees are generally calculated based on the AUM we manage. Management fees are generally calculated and paid to Sculptor on a quarterly basis in advance, based on the amount of AUM at the beginning of the quarter. Management fees are prorated for capital inflows and redemptions during the quarter. Certain of Sculptor’s management fees are paid on a quarterly basis in arrears.

Incentive income is generally based on the investment performance of funds. Incentive income is generally equal to 20% of the profits, net of management fees, attributable to each fund investor. Incentive income may be subject to hurdle rates, where Sculptor is not entitled to incentive income until the investment performance exceed an agreed upon benchmark with a preferential “catch-up” allocation once the rate has been exceeded, or a perpetual “high-water mark”, where any losses generated in a fund must be recouped before taking incentive income.

The asset management business generates its revenues primarily through management fees and incentive income, each as described above.

For the quarter ended December 31, 2023, since the Sculptor Acquisition, our asset management revenues were $82.7 million, driven primarily by management and incentive income. Our asset management expenses were $63.9 million in the fourth quarter of 2023, since the Sculptor Acquisition, driven primarily by amortization of intangibles related to the acquisition, compensation and benefits expense, and office and professional expenses.

Our asset management business retains and owns investments in the CLOs we manage in accordance with EU and UK risk retention regulations. As of December 31, 2023, substantially all of our CLO portfolio was related to bonds retained pursuant to these regulations. Through CLOs, we invest in performing credit including leveraged loans, high-yield bonds, private credit/bespoke financings, and investment grade credit.

The following table summarizes our CLO portfolio as of December 31, 2023 (dollars in thousands):

(A)Fair value, which is equal to carrying value for all securities.

The following tables summarize the characteristics of our CLO portfolio as of December 31, 2023 (dollars in thousands):

The following table summarizes the net interest spread of our CLO portfolio for the year ended December 31, 2023:

(A)The CLO portfolio consists of 94.2% floating rate securities and 5.8% fixed-rate securities (based on amortized cost basis).

TAXES

We have elected to be treated as a REIT for U.S. federal income tax purposes. As a REIT, we generally pay no federal, state or local income tax on income that is currently distributed to our stockholders if we distribute at least 90% of our taxable income each year.

We hold certain assets, including servicer advance investments and MSRs, in TRSs that are subject to federal, state and local income tax because these assets either do not qualify under the REIT requirements or the status of these assets is uncertain. We also operate our securitization program and our servicing, origination, services and asset management businesses through TRSs.

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As part of the Sculptor Acquisition, Rithm Capital acquired a net deferred tax asset of $305.0 million, primarily composed of net operating losses and tax deductible goodwill. As of December 31, 2023, Sculptor recorded a net deferred tax asset of $279.0 million, which is reported within other assets in the Consolidated Balance Sheets. As of December 31, 2023, Rithm Capital recorded a net deferred tax liability of $801.9 million, primarily composed of deferred tax liabilities generated through the deferral of gains from residential mortgage loans sold by the origination business and changes in fair value of MSRs, loans and swaps held within taxable entities, which is reported within accrued expenses and other liabilities in the Consolidated Balance Sheets.

For the year ended December 31, 2023, we recognized deferred tax expense (benefit) of $116.3 million primarily reflecting deferred tax expense generated from changes in the fair value of MSRs, loans, and swaps held within taxable entities, as well as income in our servicing and origination and asset management segments.

CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

The Company’s accounting policies are more fully described in Note 2 to the Consolidated Financial Statements. As disclosed in Note 2 to the Consolidated Financial Statements, the preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ significantly from those estimates. The Company believes that the following discussion addresses the Company’s most critical accounting policies, which are those that are most important to the portrayal of the Company’s financial condition and results of operations and require management’s most difficult, subjective and complex judgments.

The mortgage and financial sectors operate in a challenging and uncertain economic environment. Financial and real estate companies continue to be affected by, among other things, market volatility, heightened interest rates and inflationary pressures. We believe the estimates and assumptions underlying our Consolidated Financial Statements are reasonable and supportable based on the information available as of December 31, 2023; however, uncertainty over the current macroeconomic conditions makes any estimates and assumptions as of December 31, 2023 inherently less certain than they would be absent the current economic environment. Actual results may materially differ from those estimates. Market volatility and inflationary pressures and their impact on the current financial, economic and capital markets environment, and future developments in these and other areas present uncertainty and risk with respect to our financial condition, results of operations, liquidity and ability to pay distributions.

MSRs and MSR Financing Receivables

Classification and valuation — An MSR can be created or acquired through a variety of means, including explicitly through a contract or implicitly through the origination and sale of a loan with servicing retained. As an approved owner of MSRs, we account for our MSRs as servicing assets or servicing liabilities, as we have undertaken an obligation to service financial assets. We measure our MSRs at fair value at acquisition and elect to subsequently measure at fair value at each reporting date using the fair value measurement method. Our MSRs are categorized as Level 3 under the GAAP fair value hierarchy, as described in Note 20 to our Consolidated Financial Statements. The inputs used in the valuation of MSRs include prepayment rate, delinquency rate, mortgage servicing amount, discount rate, and estimated market level future costs to service. These inputs are primarily based on current market data obtained from servicers and other third parties, which may be adjusted based on our expectations for the future, and requires significant judgement. The determination of estimated cash flows used in pricing models is inherently subjective and imprecise. The methods used to estimate fair value may not result in an amount that is indicative of net realizable value or reflective of future fair values. Changes in market conditions, as well as changes in the assumptions or methodology used to determine fair value, could result in a significant increase or decrease in fair value.

In order to evaluate the reasonableness of our fair value determinations, we engage an independent valuation firm to separately measure the fair value of our MSRs. The independent valuation firm determines an estimated fair value range based on its own models. We compare the range provided by the independent valuation firm to the values generated by our internal models. To date, we have not made any significant valuation adjustments as a result of the values provided by the third-party valuation adjustments.

In certain cases, we have legally purchased MSRs or the right to the economic interest in MSRs; however, we determined that the respective purchase agreement would not be treated as a sale under GAAP. Therefore, rather than recording an investment in MSRs, we have recorded an investment in MSR financing receivables. Income from this investment (net of subservicing fees) is recorded as interest income and is grouped and presented as part of Servicing Revenue, Net in the Consolidated Statements of Operations. Additionally, we elected to measure MSR Financing Receivables at fair value, with changes in fair value flowing through Servicing Revenue, Net in the Consolidated Statements of Operations. In order to evaluate the

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reasonableness of our fair value determinations, similar to MSRs, we engage an independent valuation firm to separately measure the fair value of our MSR Financing Receivables.

Revenue and interest income recognition — We recognize income from investment in MSRs and MSR Financing Receivables as Servicing Revenue, Net which comprises (i) income from the MSRs, plus or minus (ii) the mark-to-market on the MSRs including change in fair value due to realization of cash flows.

Real Estate and Other Securities

Classification and valuation — Our securities portfolio primarily consists of Agency RMBS and Non-Agency residential and other securities. Agency RMBS are securities issued or guaranteed as to principal and/or interest by a federally chartered corporation, such as the GSEs, or an agency of the U.S. Government, such as Ginnie Mae. Non-Agency securities are not issued or guaranteed by the GSEs or Ginnie Mae and are therefore subject to credit risk. Securities investments are classified as either available-for-sale or accounted for under the fair value option. We determine the appropriate classification of our securities at the time they are acquired and evaluate the appropriateness of such classifications at each balance sheet date. If classified as available-for-sale, investments are carried at fair value, with net unrealized gains or losses reported as a component of accumulated other comprehensive income and are evaluated for allowance for credit loss in other income in the Consolidated Statements of Operations. If classified under the fair value option, changes in fair value are recorded as a component of realized and unrealized gains (losses), net in the Consolidated Statements of Operations.

We generally categorize Agency RMBS under Level 2 and Non-Agency residential and other securities as Level 3 of the GAAP hierarchy. We estimate the fair value of the majority of our securities based upon broker quotations, counterparty quotations or pricing service quotations. Pricing services generally develop their pricing based on transaction prices of recent trades for similar financial instruments, when available. When recent trades for similar financial instruments are not available, cash flow models or other pricing models are used. The significant inputs used in the valuation of our securities include the discount rate, prepayment rates, default rates and loss severities, as well as other variables.

The determination of estimated cash flows used in pricing models is inherently subjective and imprecise. The methods used to estimate fair value may not be indicative of net realizable value or reflective of future fair values. Changes in market conditions, as well as changes in the assumptions or methodology used to determine fair value, could result in a significant increase or decrease in fair value.

Residential Mortgage Loans

Classification and valuation — Loans are classified as (i) held-for-investment at fair value, (ii) held-for-sale at fair value or (iii) held-for-sale at lower of cost or fair value. Loans are also eligible to be accounted for under the fair value option which are recorded on the Consolidated Balance Sheets at fair value and the periodic changes in fair value is recorded as a component of realized and unrealized gains (losses), net in the Consolidated Statements of Operations. When we have the intent and ability to hold loans for the foreseeable future or to maturity/payoff, such loans are classified as held-for-investment. When we have the intent to sell loans, such loans are classified as held-for-sale.

Our loans are generally categorized as Level 2 or 3 under the GAAP fair value hierarchy, as described in Note 20 to our Consolidated Financial Statements. The fair value of loans is affected by, among other things, changes in interest rates, credit performance, prepayments, and market liquidity. To the extent interest rates change or market liquidity and or credit conditions materially change, the value of these loans could decline, which could have a material effect on reported earnings.

For originated residential mortgage loans measured at fair value, the fair value is generally determined using a market approach by utilizing either (i) the fair value of securities backed by similar residential mortgage loans, adjusted for certain factors to approximate the fair value of a whole residential mortgage loan, (ii) current commitments to purchase loans or (iii) recent observable market trades for similar loans, adjusted for credit risk and other individual loan characteristics.

For acquired residential mortgage loans measured at fair value, the fair value is generally determined by discounting the expected future cash flows using inputs such as default rates, prepayment speeds and discount rates.

For loans measured at the lower of cost or fair value, we account for any excess of cost over fair value as a valuation allowance and include changes in the valuation allowance in the period in which the change occurs. Purchase price discounts or premiums are deferred in a contra loan account until the related loan is sold. The deferred discounts or premiums are an adjustment to the basis of the loan and are included in the quarterly determination of the lower of cost or fair value adjustments and/or the gain or loss recognized at the time of sale.

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A loan is determined to be past due when a monthly payment is due and unpaid for 30 days or more. Loans, other than purchase credit deteriorated loans, are placed on non-accrual status and considered non-performing when full payment of principal and interest is in doubt, which generally occurs when principal or interest is 90 days or more past due unless the loan is both well secured and in the process of collection. Loans held-for-sale are subject to the non-accrual policy. A loan may be returned to accrual status when repayment is reasonably assured and there has been demonstrated performance under the terms of the loan or, if applicable, the terms of the restructured loan. Our ability to recognize interest income on non-accrual loans as cash interest payments are received rather than as a reduction of the carrying value of the loans is based on the recorded loan balance being deemed fully collectible.

Business Combinations and Asset Acquisitions

When the assets acquired and liabilities assumed constitute a business, then the acquisition is a business combination. If substantially all of the fair value of the gross asset acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the asset is not considered a business. Business combinations are accounted for under the acquisition method. On acquisition, the identifiable assets, liabilities and contingent liabilities are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognized as goodwill. In instances where the cost of acquisition is lower than the fair values of the identifiable net assets acquired (i.e., bargain purchase), the difference is recognized in earnings in the period of acquisition. The consideration transferred for an acquisition is measured at fair value of the consideration given. Acquisition related costs are expensed as incurred. The results of operations of acquired businesses are included from the date of acquisition.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, we will recognize a measurement-period adjustment during the period in which we determine the amount of the adjustment, including the effect on earnings of any amounts we would have recorded in previous periods if the accounting had been completed at the acquisition date.

Investment Consolidation

Variable interest entities (“VIEs”) are defined as entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. A VIE is required to be consolidated by its primary beneficiary, and only by its primary beneficiary, which is defined as the party who has the power to direct the activities of a VIE that most significantly impact its economic performance and who has the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. The analysis as to whether to consolidate an entity is subject to a significant amount of judgment. Some of the criteria considered are the determination as to the degree of control over an entity by its various equity holders, the design of the entity, how closely related the entity is to each of its equity holders, the relation of the equity holders to each other and a determination of the primary beneficiary in entities in which we have a variable interest. These analyses involve estimates, based on our assumptions, as well as judgments regarding significance and the design of entities.

For additional information on VIEs, see “Item 8. Consolidated Financial Statements—Note 21. Variable Interest Entities.”

Income Taxes

We intend to operate in a manner that allows us to qualify for taxation as a REIT. As a result of our expected REIT qualification, we do not generally expect to pay U.S. federal or state and local corporate level taxes on income earned outside of our TRSs. Many of the REIT requirements, however, are highly technical and complex. If we were to fail to meet the REIT requirements, we would be subject to U.S. federal, state and local income and franchise taxes, and we would face a variety of adverse consequences. See “Risk Factors—Risks Related to Our Taxation as a REIT.” Rithm Capital operates various business segments, including servicing, origination, asset management and portions of our investment portfolio, through TRSs that are subject to regular corporate income taxes.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 2 to our Consolidated Financial Statements.

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Accounting Impact of Valuation Changes

Rithm Capital’s assets fall into three general categories as disclosed in the table below. These categories are:

Marked to Market Assets (“MTM Assets”) — Assets that are marked to market through the Consolidated Statements of Operations. Changes in the value of these assets (i) are recorded in the Consolidated Statement of Operations, as unrealized gains or losses that impact net income, and (ii) impact our Total Rithm Capital Stockholders’ Equity (net book value).

Other Comprehensive Income Assets (“OCI Assets”) — Assets that are marked to market through the Consolidated Statements of Comprehensive Income. Changes in the value of these assets (i) are recorded in the Consolidated Statements of Comprehensive Income as unrealized gains or losses, and therefore do not impact net income on the Consolidated Statement of Operations, and (ii) impact our Total Rithm Capital Stockholders’ Equity (net book value).

Cost Assets — Assets that are not marked to market. Changes in value of these assets do not impact net income in the Consolidated Statement of Operations nor do they impact our Total Rithm Capital Stockholders’ Equity (net book value).

An exception to these descriptions results from changes in value that represent impairment. Any such change (i) is recorded in the Consolidated Statements of Operations, as impairment that impacts net income, and (ii) impacts our Total Rithm Capital Stockholders’ Equity (net book value). In the case of residential mortgage loans, held-for-sale, at lower of cost or fair value, any reductions in value are considered impairment. Impairment on loans and REO, as well as securities, is subject to reversal if values subsequently increase.

All of Rithm Capital’s liabilities, with the exception of derivatives, residential mortgage loan repurchase liability and certain debt accounted for under the fair value option, are recorded at their amortized cost basis.

The table below summarizes Rithm Capital’s assets by category as of December 31, 2023:

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RESULTS OF OPERATIONS

Factors Impacting Comparability of Our Results of Operations

Our net income is primarily generated from net interest income, servicing fee revenue less cost and gain on sale of loans less cost to originate. Changes in various factors such as market interest rates, prepayment speeds, estimated future cash flows, servicing costs and credit quality could affect the amount of basis premium to be amortized or discount to be accreted into interest income for a given period. Prepayment speeds vary according to the type of investment, conditions in the financial markets, competition and other factors, none of which can be predicted with any certainty. Our operating results may also be affected by credit losses in excess of initial estimates or unanticipated credit events experienced by borrowers whose mortgage loans underlie the MSRs, mortgage loans receivable, or the non-Agency RMBS held in our investment portfolio.

During the year ended December 31, 2023, interest rates remained elevated. Higher interest rates can decrease a borrower’s ability or willingness to enter into mortgage transactions, including residential, business purpose and commercial loans. Higher interest rates also increase our financing costs.

In the fourth quarter of 2023, we acquired Sculptor. As a result of this acquisition, our revenues, specifically asset management revenues, and expenses include Sculptor from the date of acquisition, as well as include acquisition- and integration-related costs.

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Summary of Results of Operations

The following table summarizes the changes in our results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022 (dollars in thousands). Our results of operations are not necessarily indicative of our future performance.

Percentage changes in the table above deemed “n/m” are not meaningful.

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Servicing Revenue, Net

Servicing revenue, net consists of the following:

Percentage changes in the table above deemed “n/m” are not meaningful.

(A)The following table summarizes the components of servicing revenue, net related to changes in valuation inputs and assumptions:

The table below summarizes loan UPB by Servicing Portfolio of our Mortgage Company and third-party serviced MSRs and MSR financing receivables:

Servicing revenue, net decreased $1.3 billion, primarily driven by a $1.5 billion net change from increase in the fair value of our MSR portfolio to decrease in fair value during the year ended December 31, 2023. While interest rates were volatile throughout 2023, the forward interest curve at the beginning and end of year remained relatively unchanged, resulting in a $46.7 million, or approximately 0.5%, negative mark on our over $8.4 billion MSR value. The decrease was offset by (i) a $112.1 million decrease in realization of cash flows as a result of slower prepayments and (ii) a $90.4 million change in MSR hedge activity.

As of December 31, 2023, the performing loan servicing division serviced $445.8 billion UPB of loans and the special servicing division serviced $122.2 billion UPB of loans, including $102.5 billion UPB of third-party servicing, for a total servicing portfolio of $568.0 billion UPB, representing a 12.8% increase from December 31, 2022, contributing to the increase in

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servicing fee revenue. This increase was partially offset by sales of a portion of our MSRs “excess servicing strip” on agency loans with a total UPB of approximately $91.4 billion during the second and third quarters of 2023.

Interest Income

Interest income for the year ended December 31, 2023 increased $600.3 million, primarily driven by higher interest rates during 2023, including higher float income earned on custodial accounts associated with our MSRs and mortgage loans receivable, the addition of the Marcus loans and higher coupon Agency RMBS and residential mortgage loan portfolios.

Gain on Originated Residential Mortgage Loans, Held-for-Sale, Net

The following table provides information regarding gain on originated residential mortgage loans, held-for-sale, net as a percentage of pull through adjusted lock volume, by channel:

The following table summarizes funded loan production by channel:

Gain on originated residential mortgage loans, held-for-sale, net decreased $0.6 billion year over year, primarily driven by a reduction in the pull through adjusted lock volume attributable to an increase in interest rates during the year. For the year ended December 31, 2023, loan origination volume was $36.9 billion, down from $67.6 billion in the prior year. 13% of all funded origination volume during 2023 was refinance, down from 30% in 2022. Similar trends were noted industry-wide; as of December 2023, the MBA estimated total U.S. origination volume for 2023 was $1.6 trillion, down 25% from an estimated $2.2 trillion in 2022. Furthermore, 19% of 2023 activity was related to refinance volume, a decline from 30% in 2022.

During 2023, gain on sale margin continued to revert to historical levels largely driven by weakening demand for loans amid excess industry capacity due to a higher rate environment. Gain on sale margin for the year ended December 31, 2023 was 1.31%, 39 bps lower than 1.70% for the prior year. The lower gain on sale margin for 2023 was driven by channel mix—funded loan production in our lower margin Correspondent channel outpaced production in higher margin channels.

Other Revenues

Other revenues increased $5.3 million year over year, primarily attributable to increased rental revenues on our growing SFR business.

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Asset Management Revenues

Asset management revenues of $82.7 million were attributable to the Sculptor Acquisition during the fourth quarter of 2023.

Interest Expense and Warehouse Line Fees

Interest expense increased $0.6 billion year over year, primarily attributable to the higher average interest rates in 2023, the acquisition of the Marcus loans during second quarter of 2023 and Agency RMBS purchases.

General and Administrative

General and administrative expenses consists of the following:

General and administrative expenses decreased $144.7 million year over year, primarily attributable to (i) a decrease in loan origination and occupancy expense due to right-sizing of operations in view of lower loan production volume throughout the second half of 2022 and 2023 commensurate with the higher rate environment and (ii) a decrease in subservicing fees due to MSR servicing transfers from third-party subservicers to the Mortgage Company. As of December 31, 2023, 86.5% of the owned MSRs are serviced by the Mortgage Company, compared to 74.5% in the prior year. The decrease was partially offset by an increase in legal and professional fees primarily due to deal activity in 2023 related to the Sculptor Acquisition.

Compensation and Benefits

Compensation and benefits decreased $444.4 million year over year, primarily due to a lower overall average headcount of approximately 6,166 during the year ended December 31, 2023, compared to approximately 9,030 during the year ended December 31, 2022. The decrease was driven by right-sizing operations in view of lower loan production volume throughout the second half of 2022 and 2023 commensurate with the higher rate environment. This was partially offset by an increase in compensation expense associated with the Sculptor Acquisition.

Management Fee to Affiliate

Management fee to affiliate of $46.2 million in the prior year was attributable to the Internalization effective June 17, 2022. See Note 1 to our Consolidated Financial Statements for further information regarding the management fee to affiliate.

Termination Fee to Affiliate

The termination fee to affiliate of $400.0 million in the prior year was attributable to the Internalization effective June 17, 2022. See Note 1 to our Consolidated Financial Statements for further information regarding the management fee to affiliate.

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Other Income (Loss)

The following table summarizes the components of other income (loss):

Percentage changes in the table above deemed “n/m” are not meaningful.

(A)Includes excess MSRs, servicer advance investments, consumer loans and other.

Total other income (loss) was $106.2 million loss in 2023 compared to $345.6 million loss in the prior year. The decrease in loss year over year was primarily due to (i) a $1.7 billion increase in realized and unrealized gain on residential loans and real estate securities and (ii) a $63.3 million loss recognized during 2022, reflecting the write-off of our remaining interest in Covius Holdings Inc., partially offset by a $1.5 billion increase in loss on the associated economic hedges driven by moderating interest rates in 2023.

Income Tax Expense (Benefit)

Income tax expense decreased $157.4 million, of which $2.5 million and $154.9 million relate to current and deferred tax expense, respectively. The decrease in deferred tax expense was primarily driven by changes in the fair value of MSRs, loans and swaps held within taxable entities, offset by income generated by the origination and servicing and asset management business segments. Current tax expense is driven primarily by return to provision adjustments related to the Company’s 2022 tax filings.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is a measurement of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain investments and other general business needs. Additionally, to maintain our status as a REIT under the Internal Revenue Code, we must distribute annually at least 90% of our REIT taxable income. We note that a portion of this requirement may be able to be met in future years through stock dividends, rather than cash, subject to limitations based on the value of our stock.

Our primary sources of funds are cash provided by operating activities (primarily income from loan originations and servicing), sales of and repayments from our investments, potential debt financing sources, including securitizations, and the issuance of equity securities, when feasible and appropriate.

Our primary uses of funds are the payment of interest, servicing and subservicing expenses, outstanding commitments (including margins and loan originations), other operating expenses, repayment of borrowings and hedge obligations, dividends and funding of future servicer advances. Our total cash and cash equivalents at December 31, 2023 was $1.3 billion.

The Company intends to use a mix of existing cash and available liquidity on the balance sheet, as well as additional MSR and servicer advance financing to finance the Computershare Acquisition in the amount of $720 million, which management expects to close in the first quarter of 2024. See Note 1 to our Consolidated Financial Statements for further information regarding the Computershare Acquisition. In addition, at any given time, we may be evaluating or pursuing opportunities for acquisitions and dispositions of assets, financing transactions or other transactions to enhance our liquidity position. There can be no assurance if or when any such transactions will be completed, or the terms hereof.

Our ability to utilize funds generated by the MSRs held in our servicer subsidiaries, NRM and the Mortgage Company are subject to and limited by certain regulatory requirements, including maintaining liquidity, tangible net worth and ratio of capital

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to assets. Moreover, our ability to access and utilize cash generated from our regulated entities is an important part of our dividend paying ability. As of December 31, 2023, approximately $1.2 billion of available liquidity was held at NRM and the Mortgage Company, of which $0.7 billion were in excess of the new regulatory liquidity requirements made effective during 2023. NRM and the Mortgage Company are expected to maintain compliance with applicable liquidity and net worth requirements.

On August 17, 2022, the FHFA and Ginnie Mae released updated capital and liquidity standards for loan sellers and servicers. In regard to capital requirements, the updated standards require all loan sellers and servicers to maintain a minimum tangible net worth of $2.5 million plus 25 bps for Fannie Mae, Freddie Mac and private label servicing UPB plus 35 bps for Ginnie Mae servicing. This change aligns the existing Ginnie Mae capital requirement with the FHFA’s. In addition, the definition of tangible net worth has been changed to remove deferred tax assets, though the tangible net worth to tangible asset ratio remained unchanged at 6% or greater. In regard to liquidity requirements, the updated standards require all non-depositories to maintain base liquidity of 3.5 bps of Fannie Mae, Freddie Mac and private label servicing UPB plus 10 bps for Ginnie Mae servicing. This change is an increase in required liquidity for the Ginnie Mae balances and aligns with the FHFA’s. Furthermore, specific to FHFA, all non-banks will have to hold additional origination liquidity of 50 bps times loans held-for-sale plus pipeline loans. Large non-banks with greater than $50 billion UPB in servicing will have to hold an additional liquidity buffer of 2 bps on Fannie Mae and Freddie Mac servicing balances and 5 bps on Ginnie Mae servicing. Notwithstanding Ginnie Mae’s risk-based capital requirement, the updated standards became effective on September 30, 2023. As of December 31, 2023, Rithm Capital maintained compliance with the required capital and liquidity standards. Noncompliance with the capital and liquidity requirements can result in the FHFA and Ginnie Mae taking various remedial actions up to and including removing our ability to sell loans to and service loans on behalf of the FHFA and Ginnie Mae. Currently, Ginnie Mae’s risk-based capital requirement is expected to go into effect on December 31, 2024. The FHFA’s revised requirements are expected to increase our capital and liquidity requirement and lower our return on capital.

Currently, our primary sources of financing are secured financing agreements and secured notes and bonds payable, although we have in the past and may in the future also pursue one or more other sources of financing such as securitizations and other secured and unsecured forms of borrowing. As of December 31, 2023, we had outstanding secured financing agreements with an aggregate face amount of approximately $12.6 billion to finance our investments. The financing of our entire RMBS portfolio, which generally has 30- to 90-day terms, is subject to margin calls. Under secured financing agreements, we sell a security to a counterparty and concurrently agree to repurchase the same security at a later date for a higher specified price. The sale price represents financing proceeds and the difference between the sale and repurchase prices represents interest on the financing. The price at which the security is sold generally represents the market value of the security less a discount or “haircut,” which can range broadly. During the term of the secured financing agreement, the counterparty holds the security as collateral. If the agreement is subject to margin calls, the counterparty monitors and calculates what it estimates to be the value of the collateral during the term of the agreement. If this value declines by more than a de minimis threshold, the counterparty could require us to post additional collateral, or margin, in order to maintain the initial haircut on the collateral. This margin is typically required to be posted in the form of cash and cash equivalents. Furthermore, we may, from time to time, be a party to derivative agreements or financing arrangements that may be subject to margin calls based on the value of such instruments. In addition, $5.0 billion face amount of our MSR and Excess MSR financing is subject to mandatory monthly repayment to the extent that the outstanding balance exceeds the market value (as defined in the related agreement) of the financed asset multiplied by the contractual maximum LTV ratio. We seek to maintain adequate cash reserves and other sources of available liquidity to meet any margin calls or related requirements resulting from decreases in value related to a reasonably possible (in our opinion) change in interest rates.

Our ability to obtain borrowings and to raise future equity capital is dependent on our ability to access borrowings and the capital markets on attractive terms. We continually monitor market conditions for financing opportunities and at any given time may be entering or pursuing one or more of the transactions described above. Our senior management team has extensive long-term relationships with investment banks, brokerage firms and commercial banks, which we believe enhance our ability to source and finance asset acquisitions on attractive terms and access borrowings and the capital markets at attractive levels.

Our ability to fund our operations, meet financial obligations and finance acquisitions may be impacted by our ability to secure and maintain our secured financing agreements, credit facilities and other financing arrangements. Because secured financing agreements and credit facilities are short-term commitments of capital, lender responses to market conditions may make it more difficult for us to renew or replace, on a continuous basis, our maturing short-term borrowings and have imposed, and may continue to impose, more onerous conditions when rolling such financings. If we are not able to renew our existing facilities or arrange for new financing on terms acceptable to us, or if we default on our covenants or are otherwise unable to access funds under our financing facilities or if we are required to post more collateral or face larger haircuts, we may have to curtail our asset acquisition activities and/or dispose of assets.

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The use of TBA dollar roll transactions generally increases our funding diversification, expands our available pool of assets and increases our overall liquidity position, as TBA contracts typically have lower implied haircuts relative to Agency RMBS pools funded with repurchase financing. TBA dollar roll transactions may also have a lower implied cost of funds than comparable repurchase funded transactions offering incremental return potential. However, if it were to become uneconomical to roll our TBA contracts into future months it may be necessary to take physical delivery of the underlying securities and fund those assets with cash or other financing sources, which could reduce our liquidity position.

If the regulatory capital requirements imposed on our lenders change, they may be required to significantly increase the cost of the financing that they provide to us. Our lenders also have revised and may continue to revise their eligibility requirements for the types of assets they are willing to finance or the terms of such financings, including haircuts and requiring additional collateral in the form of cash, based on, among other factors, the regulatory environment and their management of actual and perceived risk. Moreover, the amount of financing we receive under our secured financing agreements will be directly related to our lenders’ valuation of our assets that cover the outstanding borrowings.

With respect to the next 12 months, we expect that our cash on hand, combined with our cash flow provided by operations and our ability to roll our secured financing agreements and servicer advance financings will be sufficient to satisfy our anticipated liquidity needs with respect to our current investment portfolio, including related financings, potential margin calls, loan origination and operating expenses. Our ability to roll over short-term borrowings is critical to our liquidity outlook. We have a significant amount of near-term maturities, which we expect to be able to refinance. If we cannot repay or refinance our debt on favorable terms, we will need to seek out other sources of liquidity. While it is inherently more difficult to forecast beyond the next 12 months, we currently expect to meet our long-term liquidity requirements through our cash on hand and, if needed, additional borrowings, proceeds received from secured financing agreements and other financings, proceeds from equity offerings and the liquidation or refinancing of our assets.

These short-term and long-term expectations are forward-looking and subject to a number of uncertainties and assumptions, including those described under “—Market Considerations” as well as Part I, Item 1A. “Risk Factors.” If our assumptions about our liquidity prove to be incorrect, we could be subject to a shortfall in liquidity in the future, and such a shortfall may occur rapidly and with little or no notice, which could limit our ability to address the shortfall on a timely basis and could have a material adverse effect on our business.

Our cash flow provided by operations differs from our net income due to these primary factors: (i) the difference between (a) accretion and amortization and unrealized gains and losses recorded with respect to our investments and (b) cash received therefrom, (ii) unrealized gains and losses on our derivatives, and recorded impairments, if any, (iii) deferred taxes and (iv) principal cash flows related to held-for-sale loans, which are characterized as operating cash flows under GAAP.

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Debt Obligations

The following table summarizes Secured Financing Agreements, Secured Notes and Bonds Payable and debt obligations related to consolidated funds:

(A)Net of deferred financing costs.

(B)All debt obligations with a stated maturity through the date of issuance were refinanced, extended or repaid.

(C)Includes approximately $142.3 million of associated accrued interest payable as of December 31, 2023.

(D)Includes $233.9 million which bear interest at an average fixed rate of 5.0% with the remaining having SOFR-based floating interest rates.

(E)All SOFR-based floating interest rates.

(F)All repurchase agreements have a fixed rate. Collateral carrying value includes margin deposits.

(G)All SOFR or EURIBOR-based floating interest rate.

(H)Includes $3.8 billion of MSR notes which bear interest equal to the sum of (i) a floating rate index equal to SOFR and (ii) a margin ranging from 2.5% to 3.7%; and $1.0 billion of MSR notes with fixed interest rates ranging 3.0% to 5.4%. The outstanding face amount of the collateral represents the UPB of the residential mortgage loans underlying the MSRs and MSR financing receivables securing these notes.

(I)Includes debt bearing interest equal to the sum of (i) a floating rate index equal to SOFR and (ii) a margin ranging from 1.5% to 3.7%. Collateral includes servicer advance investments, as well as servicer advances receivable related to the MSRs and MSR financing receivables owned by NRM and the Mortgage Company.

(J)Represents $650.0 million securitization backed by a revolving warehouse facility to finance newly originated first-lien, fixed- and adjustable-rate residential mortgage loans which bears interest equal to SOFR plus 1.2%. Collateral carrying value includes cash held in the securitization trust required to meet collateral requirements.

(K)Includes (i) SpringCastle debt, which is primarily composed of the following classes of asset-backed notes held by third parties: $205.2 million UPB of Class A notes with a coupon of 2.0% and $53.0 million of Class B notes with a coupon of 2.7% and (ii) $871.2 million of debt collateralized by the Marcus loans bearing interest at the sum of SOFR plus a margin of 3.0%.

(L)Includes $833.4 million of fixed rate notes which bear interest ranging from 3.5% to 7.1%.

(M)Includes $238.1 million which bear interest at an average fixed rate of 4.6% with the remaining having SOFR-based floating interest rates.

(N)Included within accrued expenses and other liabilities in the Consolidated Balance Sheets (Note 14).

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(O)Includes $120.0 million UPB of Class A notes with a fixed coupon of 4.3%, $70.0 million UPB of Class B notes with a fixed coupon of 5.3%, $15.0 million UPB of Class C notes with a fixed coupon of 6.3% and $17.3 million UPB of Subordinated notes, held within consolidated funds (Note 21). Weighted average life is based off expected maturity.

Certain of the debt obligations included above are obligations of our consolidated subsidiaries, for which own the related collateral. In some cases, such collateral is not available to other creditors of ours.

We have margin exposure on $12.6 billion of secured financing agreements. To the extent that the value of the collateral underlying these secured financing agreements declines, we may be required to post margin, which could significantly impact our liquidity.

The following tables provide additional information regarding our short-term borrowings (dollars in thousands):

(A)Represents the average for the period the debt was outstanding.

(A)Represents the average for the period the debt was outstanding.

Corporate Debt

On September 16, 2020, we, as issuer, completed a private offering of $550.0 million aggregate principal amount of our 2025 Senior Notes. Interest on the 2025 Senior Notes accrue at the rate of 6.250% per annum with interest payable semi-annually in arrears on each April 15 and October 15, commencing on April 15, 2021. Net proceeds from the offering were approximately $544.5 million, after deducting the initial purchasers’ discounts and commissions and estimated offering expenses payable by us.

The 2025 Senior Notes mature on October 15, 2025. The notes became redeemable at any time and from time to time, on or after October 15, 2022. The Company may redeem the notes in 2024 or thereafter at a fixed redemption price of 100%.

For additional information on our debt activities, see Note 19 to our Consolidated Financial Statements.

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Maturities

Our debt obligations as of December 31, 2023, as summarized in Note 19 to our Consolidated Financial Statements, had contractual maturities as follows (in thousands):

(A)Includes secured financing agreements, secured notes and bonds payable, and unsecured notes net of issuance costs of $0.9 billion, $5.2 billion, and $0.2 billion, respectively.

(B)Includes secured financing agreements, secured notes and bonds payable, and unsecured notes net of issuance costs of $11.7 billion, $5.6 billion, and $0.5 billion, respectively.

The weighted average differences between the fair value of the assets and the face amount of available financing for the Agency RMBS repurchase agreements (including amounts related to trades receivables and treasury securities) and Non-Agency RMBS repurchase agreements were 4.8% and 36.3%, respectively, and for residential mortgage loans was 13.2% during the year ended December 31, 2023.

Borrowing Capacity

The following table summarizes our borrowing capacity as of December 31, 2023 (in thousands):