EQUITY AND EARNINGS PER SHARE

Equity and Dividends

In January 2018, New Residential issued 28.8 million shares of its common stock in a public offering at a price to the public of $17.10 per share for net proceeds of approximately $482.3 million. 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 2.9 million shares of New Residential’s common stock at the public offering price, which had a fair value of approximately $3.8 million as of the grant date. The assumptions used in valuing the options were: a 2.58% risk-free rate, a 9.86% dividend yield, 23.16% volatility and a 10-year term.

On March 22, 2018, New Residential’s board of directors declared a first quarter 2018 dividend of $0.50 per common share or $168.1 million, which was paid on April 27, 2018 to stockholders of record as of April 2, 2018.

Approximately 0.5 million shares of New Residential’s common stock were held by Fortress, through its affiliates, at March 31, 2018.

Option Plan

As of March 31, 2018, New Residential’s outstanding options were summarized as follows:



Held by the Manager	18,131,564
Issued to the Manager and subsequently transferred to certain of the Manager’s employees	3,239,624
Issued to the independent directors	6,000
Total	21,377,188

The following table summarizes New Residential’s outstanding options as of March 31, 2018. The last sales price on the New York Stock Exchange for New Residential’s common stock in the quarter ended March 31, 2018 was $16.45 per share.



Recipient	Date of Grant/ Exercise^(A)	Number of Unexercised Options	Options Exercisable as of March 31, 2018	Weighted Average Exercise Price^(B)		Intrinsic Value of Exercisable Options as of March 31, 2018 (millions)
Directors	Various	6,000	6,000	$	13.49	$	—
Manager^(C)	2012	25,000	25,000	6.70		0.2
Manager^(C)	2013	835,571	835,571	10.98		4.6
Manager^(C)	2014	1,437,500	1,437,500	11.70		6.8
Manager^(C)	2015	8,543,539	8,543,539	14.96		12.7
Manager^(C)	2016	2,000,000	1,266,667	13.70		3.5
Manager^(C)	2017	5,654,578	2,450,317	14.50		4.8
Manager^(C)	2018	2,875,000	191,667	17.10		—
Outstanding		21,377,188	14,756,261


(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. A portion of New Residential’s 2017 dividends was deemed to be a return of capital and the exercise prices were adjusted accordingly.


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



Date of Grant to Manager	Range of Exercise Prices	Total Unexercised Inception to Date
2015	$14.75 to $15.38	1,708,708
2016	$13.70	400,000
2017	$14.50	1,130,916
Total		3,239,624

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



	Amount	Weighted Average Exercise Price
December 31, 2017 outstanding options	18,502,188
Options granted	2,875,000	$	17.10
Options exercised	—	$	—
Options expired unexercised	—
March 31, 2018 outstanding options	21,377,188	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 months ended March 31, 2018, based on the treasury stock method, New Residential had 2,995,580 dilutive common stock equivalents outstanding. During the three months ended March 31, 2017, based on the treasury stock method, New Residential had 1,640,864 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 Servicer Advance Investments (Note 6) and Consumer Loans (Note 9).