Operating in a sector that came under severe strain in the first quarter of this year, New Residential Investment (NRZ +0.31%) actually did relatively well.
The company, which is a mortgage real estate investment trust (mREIT), saw its net interest income decline by 14% over last year's first quarter to $185.5 million. Core earnings fell by 22% to just over $198 million (working out to $0.48 per share).
That profitability was much higher than expected by analysts; according to Zacks, the anticipation was for $0.24 per share.
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As the SARS-CoV-2 coronavirus began to spread around the world, the market collapsed for the non-agency mortgage-backed securities that New Residential specializes in ("non-agency" means they're not backed by government agencies like Fannie Mae or Freddie Mac). This is because the economic uncertainty caused by the pandemic has led to serious doubts as to whether many homeowners can continue to pay their mortgages.
New Residential reacted by selling off nearly $28 billion worth of assets. Other retrenchment measures include a deep cut to the company's quarterly dividend, which was reduced to $0.05 per share from the previous level of $0.50.
The mREIT didn't hesitate to mention that it has a backstop of over $517 million of cash on its books, and slightly more than $397 million in unencumbered financing.
"Looking ahead, our investment strategy will be to target assets that are term financed or low leverage," the company said in a statement. "Our primary focus will be on our operating business, which includes our mortgage origination, servicing and ancillary service business lines."
Investors apparently liked the sound of that; they bid New Residential's stock up by 7.6% on Tuesday, a rate that exceeded the gains of the broader stock market.
