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EQUITY AND EARNINGS PER SHARE
 9 Months Ended
Sep. 30, 2023
Earnings Per Share [Abstract]  
EQUITY AND EARNINGS PER SHARE EQUITY AND EARNINGS PER SHARE
 
Equity and Dividends

Rithm Capital’s certificate of incorporation authorizes 2.0 billion shares of common stock, par value $0.01 per share, and 100.0 million shares of preferred stock, par value $0.01 per share.

On August 5, 2022, Rithm Capital entered into a Distribution Agreement to sell shares of its common stock, par value $0.01 per share (the “ATM Shares”), having an aggregate offering price of up to $500.0 million, from time to time, through an “at-the-market” equity offering program (the “ATM Program”). No share issuances were made during the nine months ended September 30, 2023 under the ATM Program.

On December 15, 2022, Rithm Capital’s board of directors approved the Stock Repurchase Program authorizing the repurchase of up to $200.0 million of its common stock and $100.0 million of its preferred stock through December 31, 2023. The objective of the Stock Repurchase Program is to seek flexibility to return capital when deemed accretive to shareholders. Repurchases may be made from time to time through open market purchases or privately negotiated transactions, pursuant to one or more plans established pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934 or by means of one or more tender offers, in each case, as permitted by securities laws and other legal requirements. During the nine months ended September 30, 2023, the Company did not repurchase any shares of its common stock or preferred stock.

Purchases and sales of Rithm Capital’s securities by the Company’s officers and directors are subject to the Rithm Capital Corp. Insider Trading Compliance Policy. Further, as of September 30, 2023, the Company has not established a trading plan pursuant to Rule 10b5-1 under the Exchange Act.
The table below summarizes preferred shares:
Dividends Declared per Share
Number of SharesThree Months Ended
September 30,		Nine Months Ended
September 30,
SeriesSeptember 30, 2023December 31, 2022
Liquidation Preference(A)
Issuance Discount
Carrying Value(B)
2023202220232022
Series A, 7.50% issued July 2019(C)
6,200 6,200 $155,002 3.15 %$149,822 $0.47 $0.47 $1.41 $1.41 
Series B, 7.125% issued August 2019(C)
11,261 11,261 281,518 3.15 %272,654 0.45 0.45 1.34 1.34 
Series C, 6.375% issued February 2020(C)
15,903 15,903 397,584 3.15 %385,289 0.40 0.40 1.20 1.20 
Series D, 7.00% issued September 2021(D)
18,600 18,600 465,000 3.15 %449,489 0.44 0.44 1.31 1.31 
Total51,964 51,964 $1,299,104 $1,257,254 $1.76 $1.76 $5.26 $5.26 
(A)Each series has a liquidation preference or par value of $25.00 per share.
(B)Carrying value reflects par value less discount and issuance costs.
(C)Fixed-to-floating rate cumulative redeemable preferred.
(D)Fixed-rate reset cumulative redeemable preferred.

On September 14, 2023, Rithm Capital’s board of directors declared third quarter 2023 preferred dividends of $0.47 per share of the Series A, $0.45 per share of the Series B, $0.40 per share of the Series C and $0.44 per share of the 7.00% Fixed-Rate Reset Series D Cumulative Redeemable Preferred Stock (the “Series D”), or $2.9 million, $5.0 million, $6.3 million and $8.1 million, respectively.

Common dividends have been declared as follows:
Declaration DatePayment DatePer ShareTotal Amounts Distributed (millions)
Quarterly Dividend
June 17, 2022July 20220.25 116.7 
September 22, 2022October 20220.25 118.4 
December 15, 2022January 20230.25 118.6 
March 17, 2023April 20230.25 120.8 
June 23, 2023July 20230.25 120.8 
September 14, 2023October 20230.25 120.8 

Common Stock Purchase Warrants

During the second quarter of 2020, the Company issued warrants (the “2020 Warrants”) in conjunction with the issuance of a term loan, which was fully repaid in the third quarter of 2020, that provided the holders the right to acquire, subject to anti-dilution adjustments, up to 43.4 million shares of the Company’s common stock in the aggregate. The 2020 Warrants were exercisable in cash or on a cashless basis and were set to expire on May 19, 2023 and were exercisable, in whole or in part, at any time or from time to time after September 19, 2020 at the following prices (subject to certain anti-dilution adjustments): approximately 24.6 million shares of common stock at $6.11 per share and approximately 18.9 million shares of common stock at $7.94 per share.

On February 21, 2023, warrant holders exercised all remaining and outstanding warrants to purchase up to approximately 25.6 million shares of the Company’s common stock. The warrants were exercised on a cashless basis, using the market price of the Company’s common stock on February 17, 2023, which was the last trading day preceding the date of exercise of the warrants, resulting in the issuance of approximately 9.3 million shares of the Company’s common stock on February 23, 2023.
The table below summarizes the 2020 Warrants at September 30, 2023:
Number of Warrants (in millions)Adjusted Weighted Average Exercise Price
(per share)
Initial
Adjusted(A)
December 31, 2022
22.4 25.6 $6.1 
Granted— — — 
Exercised(22.4)(25.6)6.1 
Expired— — — 
September 30, 2023
— — 
(A)Reflects the incremental number of additional common stock issuable upon exercise of warrants in accordance with the warrant agreement.

Option Plan

As of September 30, 2023, outstanding options were as follows:
Held by Former Manager21,471,990
Issued to the independent directors2,000
Total21,473,990 

The following table summarizes outstanding options as of September 30, 2023. The last sales price on the New York Stock Exchange for Rithm Capital’s common stock in the quarter ended September 30, 2023 was $9.29 per share.
Recipient
Date of
Grant/
Exercise(A)
Number of Unexercised
Options
Options
Exercisable
as of
September 30, 2023
Weighted
Average
Exercise
Price(B)
Intrinsic Value of Exercisable Options as of
September 30, 2023
(millions)
DirectorsVarious2,000 2,000 $10.70 $— 
Former Manager20171,130,916 1,130,916 12.84 — 
Former Manager20185,320,000 5,320,000 15.57 — 
Former Manager20196,351,000 6,351,000 14.95 — 
Former Manager20201,619,739 1,619,739 16.30 — 
Former Manager20217,050,335 6,501,162 9.35 —
Outstanding21,473,990 20,924,817 
(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.
 
The following table summarizes activity in outstanding options:
Number of OptionsWeighted Average Exercise Price
December 31, 2022
21,476,990 $— 
Granted— — 
Exercised— — 
Expired(3,000)14.24 
September 30, 2023
21,473,990 See table above
Stock-Based Compensation

On May 25, 2023, Rithm Capital’s stockholders adopted the Rithm Capital Corp. 2023 Omnibus Incentive Plan (the “2023 Plan”), which became effective as of May 25, 2023. The 2023 Plan replaced Rithm Capital’s Nonqualified Stock Option and Incentive Award Plan which became effective on May 15, 2013, and was amended and restated as of November 4, 2014 and as of February 16, 2023, which expired by its terms on April 29, 2023 (the “2013 Plan”). Any stock-based awards issued under the 2013 Plan will continue to be subject to the terms and provisions of the 2013 Plan applicable to such awards. The Company may grant stock-based compensation to its officers and other employees and non-employee directors for the purpose of providing incentives and rewards for service or performance. Stock-based awards issued under the Plan include time-based and performance-based restricted stock unit awards (“RSU” and “PSU” awards, respectively), and restricted stock awards (“RSA”), and may include other forms of equity-based compensation. RSU and PSU awards are an agreement to issue an equivalent number of shares of the Company’s common stock, plus any equivalent shares for dividends declared on the Company’s common stock, at the time the award vests. RSAs and RSU awards vest over a specified service period. PSU awards vest over a specified service period subject to achieving long-term performance criteria.

Shares underlying RSU and PSU awards are issued when the awards vest. Statutory tax withholding obligations may be covered via (i) election of a cash payment, (ii) net settlement of the applicable shares of stock underlying the RSUs or PSUs, (iii) a broker assisted sale process or (iv) any such other method approved by Rithm Capital. If applicable, the fair value of shares withheld for tax withholdings is recorded as a reduction to additional paid-in capital.

During the nine months ended September 30, 2023, the Company granted RSU awards to employees with a grant date fair value of $12.5 million, inclusive of dividend equivalents, which vest ratably over a three-year period. The Company also granted PSU awards to employees which vest at the end of a three-year period provided that specified performance criteria are met. The fair value of the PSU awards granted during the nine months ended September 30, 2023 as of the grant date was $23.1 million, assuming the maximum levels of performance are achieved.

The table below summarizes the Company’s awards granted, forfeited or vested under the 2013 Plan and the 2023 Plan during the nine months ended September 30, 2023:
Number of SharesGrant Date Price
RSAsRSUsPSUsTotalRSAsRSUsPSUs
Unvested Shares at December 31, 2022
578,034 — — 578,034 $8.65 $— $— 
Granted— 1,215,329 2,430,658 3,645,987 — 9.52 9.52 
Accrued RSU and PSU dividend equivalents(A)
— 98,384 196,768 295,152 — 9.52 9.52 
Vested(192,678)— — (192,678)8.65 — — 
Forfeited— (23,003)(46,006)(69,009)— 9.52 9.52 
Unvested Shares at September 30, 2023(A)
385,356 1,290,710 2,581,420 4,257,486 
(A)Number of PSUs assumes maximum levels of performance are achieved for outstanding unvested PSU awards.

The Company measures and recognizes compensation expense for all stock-based payment awards made to employees and non-employee directors based on their fair value. The fair value of granted awards is determined based on the closing price of the Company’s common stock on the date of grant of the awards. Stock-based compensation is recorded within Compensation and benefits in the Consolidated Statements of Operations and corresponding recording within Additional paid-in-capital in the Consolidated Balance Sheets and Consolidated Statements of Changes in Stockholders’ Equity. For RSUs, compensation expense is recognized using the accelerated attribution model. For PSU awards, the Company estimates the probability that the performance criteria will be achieved and recognizes compensation expense only for those awards expected to vest using the accelerated attribution model. The Company reevaluates its estimate each reporting period and recognizes a cumulative effect adjustment to expense if estimates change from the prior period. For RSAs, compensation expense is recognized using the accelerated attribution model. The Company does not estimate forfeiture rates but rather adjusts for forfeitures in the periods in
which they occur. For RSUs and PSUs, the Company provides dividend equivalents for any dividends that are paid out during the period in between grant date and the date the shares are delivered upon vesting.

For the nine months ended September 30, 2023, total stock-based compensation expenses recorded was $8.9 million. For the nine months ended September 30, 2023 for the RSU and PSU awards, there were no performance adjustments for actual performance achieved relative to the maximum and no vested shares. The fair value of the RSU and PSU awards forfeited during the nine months ended September 30, 2023 was $0.6 million. For the nine months ended September 30, 2023 for the RSAs, the fair value of vested shares after consideration of net settlement of the vested shares for tax withholding purposes was $0.7 million, and there were no forfeited shares.

At September 30, 2023, aggregate unrecognized compensation cost for all unvested equity awards was $31.1 million (assuming maximum levels of performance are achieved), which is expected to be recognized over a weighted-average period of 1.2 years.

Earnings Per Share

Rithm Capital 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.

The following table summarizes the basic and diluted earnings per share calculations:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Net income$221,191 $154,190 $697,825 $877,452 
Noncontrolling interests in income of consolidated subsidiaries
4,848 7,307 10,437 27,098 
Dividends on preferred stock22,394 22,427 67,184 67,315 
Net income attributable to common stockholders$193,949 $124,456 $620,204 $783,039 
Basic weighted average shares of common stock outstanding483,214,061 467,974,962 481,503,762 467,192,721 
Dilutive effect of stock options, restricted stock, common stock purchase warrants, RSUs and PSUs(A)(B)
1,136,227 8,821,795 2,026,465 14,707,408 
Diluted weighted average shares of common stock outstanding484,350,288 476,796,757 483,530,227 481,900,129 
Basic earnings per share attributable to common stockholders$0.40 $0.27 $1.29 $1.68 
Diluted earnings per share attributable to common stockholders$0.40 $0.26 $1.28 $1.62 
(A)Stock options and common stock purchase warrants that could potentially dilute basic earnings per share in the future were not included in the computation of diluted earnings per share for the periods where they were out-of-the-money or a loss has been recorded because they would have been anti-dilutive for the period presented. There were no anti-dilutive common stock purchase warrants for all periods presented.
(B)RSU and PSU awards were included to the extent dilutive and issuable under the relevant performance measures.