EQUITY AND EARNINGS PER SHARE

Equity and Dividends

On January 26, 2017, New Residential’s board of directors declared a first quarter 2017 dividend of $0.48 per common share or $147.5 million, which was paid on April 28, 2017 to stockholders of record as of March 27, 2017.

On June 21, 2017, New Residential’s board of directors declared a second quarter 2017 dividend of $0.50 per common share or $153.7 million, which was paid on July 28, 2017 to stockholders of record as of July 3, 2017.

On September 22, 2017, New Residential’s board of directors declared a third quarter 2017 dividend of $0.50 per common share or $153.7 million, which was paid on October 27, 2017 to stockholders of record as of October 2, 2017.

In February 2017, New Residential issued 56.5 million shares of its common stock in a public offering at a price to the public of $15.00 per share for net proceeds of approximately $834.5 million. One of New Residential’s executive officers participated in this offering and purchased 18,600 shares at the public offering price. To compensate the Manager for its successful efforts in raising capital for New Residential, in connection with this offering, New Residential granted options to the Manager relating to 5.7 million shares of New Residential’s common stock at the public offering price, which had a fair value of approximately $8.1 million as of the grant date. The assumptions used in valuing the options were: a 2.38% risk-free rate, a 10.82% dividend yield, 28.64% volatility and a 10-year term.

Approximately 2.4 million shares of New Residential’s common stock were held by Fortress, through its affiliates, and its principals at September 30, 2017.

Option Plan

As of September 30, 2017, New Residential’s outstanding options were summarized as follows:



Held by the Manager	16,128,730
Issued to the Manager and subsequently transferred to certain of the Manager’s employees	2,367,458
Issued to the independent directors	6,000
Total	18,502,188

The following table summarizes New Residential’s outstanding options as of September 30, 2017. The last sales price on the New York Stock Exchange for New Residential’s common stock in the quarter ended September 30, 2017 was $16.73 per share.



Recipient	Date of Grant/ Exercise^(A)	Number of Unexercised Options	Options Exercisable as of September 30, 2017	Weighted Average Exercise Price^(B)		Intrinsic Value of Exercisable Options as of September 30, 2017 (millions)
Directors	Various	6,000	6,000	$	13.99	$	—
Manager^(C)	2012	25,000	25,000	7.19		0.2
Manager^(C)	2013	835,571	835,571	11.48		4.4
Manager^(C)	2014	1,437,500	1,437,500	12.20		6.5
Manager^(C)	2015	8,543,539	8,072,518	15.46		10.3
Manager^(C)	2016	2,000,000	866,667	14.20		2.2
Manager^(C)	2017	5,654,578	1,319,402	15.00		2.3
Outstanding		18,502,188	12,562,658


(A)	Options expire on the tenth anniversary from date of grant.


(B)	The exercise prices are subject to adjustment in connection with return of capital dividends.


(C)	The Manager assigned certain of its options to Fortress’s employees as follows:



Date of Grant	Range of Exercise Prices	Total Unexercised Inception to Date
2014	$12.20	258,750
2015	$15.25 to $15.88	1,708,708
2016	$14.20	400,000
Total		2,367,458

The following table summarizes activity in New Residential’s outstanding options:



	Amount		Weighted Average Exercise Price
December 31, 2016 outstanding options	13,196,610
Options granted	5,654,578		$	15.00
Options exercised	—		$	—
Options expired unexercised	(349,000	)
September 30, 2017 outstanding options	18,502,188		See table above

Income and Earnings Per Share

New Residential is required to present both basic and diluted earnings per share (“EPS”). Basic EPS is calculated by dividing net income by the weighted average number of shares of common stock outstanding. Diluted EPS is computed by dividing net income by the weighted average number of shares of common stock outstanding plus the additional dilutive effect, if any, of common stock equivalents during each period. New Residential’s common stock equivalents are its outstanding options. During the three and nine months ended September 30, 2017, based on the treasury stock method, New Residential had 1,846,036 and 1,845,597 dilutive common stock equivalents outstanding. During the three and nine months ended September 30, 2016, based on the treasury stock method, New Residential had 497,690 and 309,544 dilutive common stock equivalents outstanding.

Noncontrolling Interests

Noncontrolling interests is comprised of the interests held by third parties in consolidated entities that hold New Residential’s investments in Servicer Advances (Note 6) and Consumer Loans (Note 9).