8-K
Ready Capital Corp (RC)
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 4, 2021
READY CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
| | | |
|---|---|---|
| Maryland | 001-35808 | 90-0729143 |
| (State or other jurisdiction | (Commission File Number) | (IRS Employer |
| of incorporation) | | Identification No.) |
1251 Avenue of the Americas, 50^th^ Floor New York , NY **** 10020
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: ( 212 ) 257-4600
n/a (Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
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|---|---|---|
| | ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| | | |
| | ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| | | |
| | ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| | | |
| | ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))<br><br> |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Securities registered pursuant to Section 12(b) of the Exchange Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $0.0001 par value per share | RC | New York Stock Exchange |
| Preferred Stock, 6.25% Series C Cumulative Convertible, par value $0.0001 per share | RC PRC | New York Stock Exchange |
| Preferred Stock, 6.50% Series E Cumulative Redeemable, par value $0.0001 per share | RC PRD | New York Stock Exchange |
| 7.00% Convertible Senior Notes due 2023 | RCA | New York Stock Exchange |
| 6.20% Senior Notes due 2026<br><br>5.75% Senior Notes due 2026 | RCB<br><br>RCC | New York Stock Exchange<br><br>New York Stock Exchange |
| Item 2.02. | Results of Operations and Financial Condition |
|---|
On November 4, 2021, Ready Capital Corporation (the “Company”) issued an earnings release announcing the financial results for the quarter ended September 30, 2021. A copy of the earnings release is attached as Exhibit 99.1 hereto and incorporated herein by reference.
On November 4, 2021, the Company posted supplemental financial information on the Investor Relations section of its website (www.readycapital.com). A copy of the supplemental financial information is furnished as Exhibit 99.2 hereto and incorporated herein by reference.
The information in Item 2.02 of this Current Report, including Exhibits 99.1 and 99.2, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, unless it is specifically incorporated by reference therein.
Item 9.01 Financial Statements and Exhibits
| | | |
|---|---|---|
| | (d) | Exhibits |
| 1, | | |
| --- | --- | --- |
| Exhibit No. | Description | |
| 99.1 | Earnings Release, dated November 4, 2021 | |
| | | |
| 99.2 | | Supplemental Financial Information for the quarter ended September 30, 2021 |
| | | |
| 104 | | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| | | | |
|---|---|---|---|
| READY CAPITAL CORPORATION | |||
| By: | /s/ Andrew Ahlborn | ||
| Name: Andrew Ahlborn | |||
| Title: Chief Financial Officer |
Date: November 4, 2021
Exhibit 99.1
READY CAPITAL CORPORATION REPORTS THIRD QUARTER 2021 RESULTS
| - | GAAP EARNINGS PER COMMON SHARE OF $0.61 - |
|---|---|
| - | DISTRIBUTABLE EARNINGS PER COMMON SHARE OF $0.64 - |
| --- | --- |
| - | DISTRIBUTABLE RETURN ON AVERAGE STOCKHOLDERS’ EQUITY OF 17.3% - |
| --- | --- |
New York, New York, November 4, 2021 / PRNewswire / – Ready Capital Corporation (“Ready Capital” or the “Company”) (NYSE: RC), a multi-strategy real estate finance company that originates, acquires, finances, and services small-to-medium balance commercial loans, today reported financial results for the quarter ended September 30, 2021.
“The strength of originations and earnings from the first half of the year continued to accelerate through the third quarter. The quarter over quarter growth in Distributable Earnings reflects the evolution of our business, driven by increased scale, expanded capabilities and an attractive economic climate,” commented Thomas Capasse, Ready Capital’s Chairman and Chief Executive Officer. “Our focus on providing life-cycle financing to small balance commercial properties continues to differentiate Ready Capital from the peer group and our diverse platform continues to produce attractive returns for our shareholders.”
Third Quarter Highlights
| ● | Declared and paid dividend of $0.42 per share in cash with Distributable Earnings coverage of the dividend at 1.5x |
|---|---|
| ● | Total investments of $2.3 billion, including $1.2 billion in SBC originations and acquisitions, $1.0 billion of residential mortgage loans, and $138.3 million of U.S. Small Business Administration 7(a) loans |
| --- | --- |
| ● | Total year-to-date investment activity of $6.8 billion, 67% year-over-year growth |
| --- | --- |
| ● | Adjusted net book value of $15.06 per share of common stock as of September 30, 2021, 1.5% year-over-year growth |
| --- | --- |
| ● | Completed the Company’s sixth CRE CLO with $652.5 million of transitional loans securitized at an 83% advance rate and weighted average cost of 1.3% |
| --- | --- |
Subsequent Events
| ● | Issued $350 million of 4.5% Senior Secured Notes to retire $180 million of 7.5% Senior Secured Notes due February 2022 and for reinvestment into the Company’s investment pipeline |
|---|
Use of Non-GAAP Financial Information
In addition to the results presented in accordance with U.S. GAAP, this press release includes distributable earnings, formerly referred to as core earnings, which is a non-U.S. GAAP financial measure. The Company defines Distributable Earnings as net income adjusted for unrealized gains and losses related to certain mortgage backed securities (“MBS”), realized gains and losses on sales of certain MBS, unrealized gains and losses related to residential mortgage servicing rights, unrealized current non-cash provision for credit losses on accrual loans and one-time non-recurring gains or losses, such as gains or losses on discontinued operations, bargain purchase gains, merger related expenses, or other one-time items.
The Company believes that this non-U.S. GAAP financial information, in addition to the related U.S. GAAP measures, provides investors greater transparency into the information used by management in its financial and operational decision-making, including the determination of dividends. However, because Distributable Earnings is an incomplete measure of the Company's financial performance and involves differences from net income computed in accordance with U.S. GAAP, it should be considered along with, but not as an alternative to, the Company's net income computed in accordance with U.S. GAAP as a measure of the Company's financial performance. In addition, because not all companies use identical calculations, the Company's presentation of Distributable Earnings may not be comparable to other similarly-titled measures of other companies.
In calculating Distributable Earnings, Net Income (in accordance with U.S. GAAP) is adjusted to exclude unrealized gains and losses on MBS acquired by the Company in the secondary market but is not adjusted to exclude unrealized gains and losses on MBS retained by Ready Capital as part of its loan origination businesses, where the Company transfers originated loans into an MBS securitization and the Company retains an interest in the securitization. In calculating Distributable Earnings, the Company does not adjust Net Income (in accordance with U.S. GAAP) to take into account unrealized gains and losses on MBS retained by us as part of the loan origination businesses because the unrealized gains and losses that are generated in the loan origination and securitization process are considered to be a fundamental part of this business and an indicator of the ongoing performance and credit quality of the Company’s historical loan originations. In calculating Distributable Earnings, Net Income (in accordance with U.S. GAAP) is adjusted to exclude realized gains and losses on certain MBS securities considered to be non-distributable. Certain MBS positions are considered to be non-distributable due to a variety of reasons which may include collateral type, duration, and size.
In addition, in calculating Distributable Earnings, Net Income (in accordance with U.S. GAAP) is adjusted to exclude unrealized gains or losses on residential MSRs, held at fair value. The Company treats its commercial MSRs and residential MSRs as two separate classes based on the nature of the underlying mortgages and the treatment of these assets as two separate pools for risk management purposes. Servicing rights relating to the Company’s small business commercial business are accounted for under ASC 860, Transfer and Servicing, while the Company’s residential MSRs are accounted for under the fair value option under ASC 825, Financial Instruments. In calculating Distributable Earnings, the Company does not exclude realized gains or losses on either commercial MSRs or residential MSRs, held at fair value, as servicing income is a fundamental part of Ready Capital’s business and is an indicator of the ongoing performance.
To qualify as a REIT, the Company must distribute to its stockholders each calendar year at least 90% of its REIT taxable income (including certain items of non-cash income), determined without regard to the deduction for dividends paid and excluding net capital gain. There are certain items, including net income generated from the creation of MSRs, that are included in distributable earnings but are not included in the calculation of the current year’s taxable income. These differences may result in certain items that are recognized in the current period’s calculation of distributable earnings not being included in taxable income, and thus not subject to the REIT dividend distribution requirement until future years.
The table below reconciles Net Income computed in accordance with U.S. GAAP to Distributable Earnings.
| | | |
|---|---|---|
| | | |
| (in thousands) | Three Months Ended September 30, 2021 | |
| Net Income | $ | 46,535 |
| Reconciling items: | | |
| Unrealized gain on mortgage servicing rights | | (147) |
| Impact of ASU 2016-13 on accrual loans | | (1,329) |
| Non-recurring REO impairment | | (10) |
| Merger transaction costs and other non-recurring expenses | | 5,485 |
| Total reconciling items | $ | 3,999 |
| **** Income tax adjustments | | (1,169) |
| Distributable earnings | $ | 49,365 |
| Less: Distributable earnings attributable to non-controlling interests | | 802 |
| Less: Income attributable to participating shares | | 2,444 |
| Distributable earnings attributable to common stockholders | $ | 46,119 |
| Distributable Earnings per common share - basic and diluted | $ | 0.64 |
U.S. GAAP Return on Equity is based on U.S. GAAP Net Income, while Distributable Return on Equity is based on Distributable Earnings, which adjusts U.S. GAAP Net Income for the items in the Distributable Earnings reconciliation above.
Webcast and Earnings Conference Call
Management will host a webcast and conference call on Friday, November 5, 2021 at 8:30 am ET to provide a general business update and discuss the financial results for the quarter ended September 30, 2021.
The Company encourages use of the webcast due to potential extended wait times to access the conference call via dial-in. The webcast of the conference call will be available in the Investor Relations section of the Company’s website at www.readycapital.com. To listen to a live broadcast, access the site at least 15 minutes prior to the scheduled start time in order to register and download and install any necessary audio software.
To Participate in the Telephone Conference Call:
Dial in at least five minutes prior to start time.
Domestic: 1-877-407-0792
International: 1-201-689-8263
Conference Call Playback:
Domestic: 1-844-512-2921
International: 1-412-317-6671
Replay Pin #: 13724143
The playback can be accessed through November 19, 2021.
Safe Harbor Statement
This press release contains statements that constitute "forward-looking statements," as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are intended to be covered by the safe harbor provided by the same. These statements are based on management's current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements; the Company can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from the Company's expectations include, but are not limited to, applicable regulatory changes; general volatility of the capital markets; changes in the Company’s investment objectives and business strategy; the availability of financing on acceptable terms or at all; the availability, terms and deployment of capital; the availability of suitable investment opportunities; changes in the interest rates or the general economy; increased rates of default and/or decreased recovery rates on investments; changes in interest rates, interest rate spreads, the yield curve or prepayment rates; changes in prepayments of Company’s assets; the degree and nature of competition, including competition for the Company's target assets; and other factors, including those set forth in the Risk Factors section of the Company's most recent Annual Report on Form 10-K filed with the SEC, and other reports filed by the Company with the SEC, copies of which are available on the SEC's website, www.sec.gov. The Company undertakes no obligation to update these statements for revisions or changes after the date of this release, except as required by law.
About Ready Capital Corporation
Ready Capital Corporation (NYSE: RC) is a multi-strategy real estate finance company that originates, acquires, finances and services small-to-medium balance commercial loans. Ready Capital specializes in loans backed by commercial real estate, including agency multi-family, investor and bridge as well as SBA 7(a) business loans. Headquartered in New York, New York, Ready Capital employs over 500 lending professionals nationwide. The company is externally managed and advised by Waterfall Asset Management, LLC.
Contact
Investor Relations Ready Capital Corporation 212-257-4666 InvestorRelations@readycapital.com
Additional information can be found on the Company’s website at www.readycapital.com
READY CAPITAL CORPORATION
UNAUDITED CONS OLIDATED BALANCE SHEETS
| | | | | | | |
|---|---|---|---|---|---|---|
| (In Thousands) | September 30, 2021 | December 31, 2020 | ||||
| Assets | | | | | | |
| Cash and cash equivalents | | $ | 209,769 | | $ | 138,975 |
| Restricted cash | | 52,692 | | 47,697 | ||
| Loans, net (including $12,162 and $13,795 held at fair value) | | 2,384,497 | | 1,550,624 | ||
| Loans, held for sale, at fair value | | 549,917 | | 340,288 | ||
| Paycheck Protection Program loans (including $9,873 and $74,931 held at fair value) | | 1,784,826 | | 74,931 | ||
| Mortgage backed securities, at fair value | | 117,681 | | 88,011 | ||
| Loans eligible for repurchase from Ginnie Mae | | | 149,723 | | | 250,132 |
| Investment in unconsolidated joint ventures | | | 125,547 | | | 79,509 |
| Purchased future receivables, net | | | 6,567 | | | 17,308 |
| Derivative instruments | | 6,180 | | 16,363 | ||
| Servicing rights (including $107,589 and $76,840 held at fair value) | | 171,106 | | 114,663 | ||
| Real estate owned, held for sale | | | 70,643 | | | 45,348 |
| Other assets | | 196,827 | | 89,503 | ||
| Assets of consolidated VIEs | | | 3,438,423 | | | 2,518,743 |
| Total Assets | | $ | 9,264,398 | | $ | 5,372,095 |
| Liabilities | | | | | | |
| Secured borrowings | | 2,044,069 | | 1,294,243 | ||
| Paycheck Protection Program Liquidity Facility (PPPLF) borrowings | | 1,945,883 | | 76,276 | ||
| Securitized debt obligations of consolidated VIEs, net | | 2,676,265 | | 1,905,749 | ||
| Convertible notes, net | | | 112,966 | | | 112,129 |
| Senior secured notes, net | | 179,914 | | 179,659 | ||
| Corporate debt, net | | | 333,975 | | | 150,989 |
| Guaranteed loan financing | | 348,774 | | 401,705 | ||
| Contingent consideration | | | 12,400 | | | — |
| Liabilities for loans eligible for repurchase from Ginnie Mae | | | 149,723 | | | 250,132 |
| Derivative instruments | | — | | 11,604 | ||
| Dividends payable | | 33,564 | | 19,746 | ||
| Accounts payable and other accrued liabilities | | 189,194 | | 135,655 | ||
| Total Liabilities | | $ | 8,026,727 | | $ | 4,537,887 |
| Preferred stock Series C, liquidation preference $25.00 per share | | | 8,361 | | | — |
| | | | | | | |
| Commitments & contingencies | | | | | | |
| | | | | | | |
| Stockholders’ Equity | | | | | | |
| Preferred stock Series E, liquidation preference $25.00 per share | | | 111,378 | | | — |
| Common stock, $0.0001 par value, 500,000,000 shares authorized, 72,919,824 and 54,368,999 shares issued and outstanding, respectively | | 7 | | 5 | ||
| Additional paid-in capital | | 1,115,471 | | 849,541 | ||
| Retained earnings (deficit) | | | (10,395) | | | (24,203) |
| Accumulated other comprehensive income (loss) | | (6,276) | | (9,947) | ||
| Total Ready Capital Corporation equity | | 1,210,185 | | 815,396 | ||
| Non-controlling interests | | 19,125 | | 18,812 | ||
| Total Stockholders’ Equity | | $ | 1,229,310 | | $ | 834,208 |
| Total Liabilities, Redeemable Preferred Stock, and Stockholders’ Equity | | $ | 9,264,398 | | $ | 5,372,095 |
READY CAPITAL CORPORATION
UNAUDITED CONSO LIDATED STATEMENTS OF INCOME
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
| (In Thousands, except share data) | **** | 2021 | **** | 2020 | **** | 2021 | **** | 2020 | ||||
| Interest income | | $ | 105,136 | | $ | 61,074 | | $ | 281,554 | | $ | 193,826 |
| Interest expense | | (50,136) | | (43,823) | | (156,312) | | (134,162) | ||||
| Net interest income before provision for loan losses | | $ | 55,000 | | $ | 17,251 | | $ | 125,242 | | $ | 59,664 |
| Recovery of (provision for) loan losses | | (1,579) | | 4,231 | | (7,088) | | | (34,984) | |||
| Net interest income after recovery of (provision for) loan losses | | $ | 53,421 | | $ | 21,482 | | $ | 118,154 | | $ | 24,680 |
| Non-interest income | | | | | | | | | | | | |
| Residential mortgage banking activities | | | 37,270 | | | 75,524 | | | 115,369 | | | 192,757 |
| Net realized gain on financial instruments and real estate owned | | | 23,210 | | | 7,507 | | | 49,239 | | | 22,118 |
| Net unrealized gain (loss) on financial instruments | | | 5,688 | | | 3,420 | | | 31,296 | | | (43,762) |
| Servicing income, net of amortization and impairment of $2,798 and $7,344 for the three and nine months ended September 30, 2021, and $1,555 and $4,556 for three and nine months ended September 30, 2020, respectively | | 10,243 | | 10,115 | | 37,806 | | | 27,193 | |||
| Income on purchased future receivables, net of allowance for (recovery of) doubtful accounts of ($279) and $1,260 for the three and nine months ended September 30, 2021, and $2,888 and $9,805 for three and nine months ended September 30, 2020, respectively | | | 2,838 | | | 4,848 | | | 7,934 | | | 13,917 |
| Income (loss) on unconsolidated joint ventures | | | 3,548 | | | 1,996 | | | 6,100 | | | (1,035) |
| Other income | | 5,674 | | 4,496 | | 5,557 | | | 40,163 | |||
| Total non-interest income | | $ | 88,471 | | $ | 107,906 | | $ | 253,301 | | $ | 251,351 |
| Non-interest expense | | | | | | | | | | | | |
| Employee compensation and benefits | | (24,537) | | (27,612) | | (71,584) | | | (73,836) | |||
| Allocated employee compensation and benefits from related party | | (3,804) | | (2,250) | | (9,226) | | | (4,750) | |||
| Variable expenses on residential mortgage banking activities | | (24,380) | | (30,918) | | (61,286) | | | (87,494) | |||
| Professional fees | | (6,900) | | (4,158) | | (12,754) | | | (8,632) | |||
| Management fees – related party | | (2,742) | | (2,714) | | (8,061) | | | (7,941) | |||
| Incentive fees – related party | | (2,775) | | (1,134) | | (3,061) | | | (4,640) | |||
| Loan servicing expense | | (8,124) | | (8,231) | | (21,079) | | | (24,122) | |||
| Transaction related expenses | | | (2,629) | | | (6) | | | (10,202) | | | (63) |
| Other operating expenses | | (12,926) | | (10,448) | | (45,600) | | | (41,927) | |||
| Total non-interest expense | | $ | (88,817) | | $ | (87,471) | | $ | (242,853) | | $ | (253,405) |
| Income before provision for income taxes | | | 53,075 | | | 41,917 | | | 128,602 | | | 22,626 |
| Income tax provision | | (6,540) | | | (6,554) | | (22,216) | | | (4,116) | ||
| Net income | | $ | 46,535 | | $ | 35,363 | | $ | 106,386 | | $ | 18,510 |
| Less: Dividends on preferred stock | | | 1,999 | | | — | | | 5,504 | | | — |
| Less: Net income attributable to non-controlling interest | | 756 | | | 805 | | 1,859 | | | 551 | ||
| Net income attributable to Ready Capital Corporation | | $ | 43,780 | | $ | 34,558 | | $ | 99,023 | | $ | 17,959 |
| | | | | | | | | | | | | |
| Earnings per common share - basic | | $ | 0.61 | | $ | 0.63 | | $ | 1.47 | | $ | 0.32 |
| Earnings per common share - diluted | | $ | 0.60 | | $ | 0.63 | | $ | 1.46 | | $ | 0.31 |
| | | | | | | | | | | | | |
| Weighted-average shares outstanding | | | | | | | | | ||||
| Basic | | | 71,618,168 | | | 54,626,995 | | | 66,606,749 | | | 53,534,497 |
| Diluted | | | 71,787,228 | | | 54,704,611 | | | 66,768,918 | | | 53,612,113 |
| | | | | | | | | | | | | |
| Dividends declared per share of common stock | | $ | 0.42 | | $ | 0.30 | | $ | 1.24 | | $ | 0.95 |
READY CAPITAL CORPORATION
UNAUDITED SEGMENT REPORTING
| | | | | | | | | | | | | | | | | | | | | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Three Months Ended September 30, 2021 | **** | |||||||||||||||||||||||||||||
| | | | | | | | | Small | | Residential | | | | | | | | ||||||||||||||
| | | | | SBC | | Business | | Mortgage | | Corporate- | | | **** | ||||||||||||||||||
| (In Thousands) | | Acquisitions | | Originations | | Lending | | Banking | | Other | | Consolidated | **** | ||||||||||||||||||
| Interest income | | 18,954 | | 55,230 | | 28,739 | | 2,213 | | — | | 105,136 | | ||||||||||||||||||
| Interest expense | | | (11,951) | | | (29,300) | | | (6,511) | | | (2,374) | | | — | | | (50,136) | | ||||||||||||
| Net interest income before provision for loan losses | | 7,003 | | 25,930 | | 22,228 | | (161) | | — | | 55,000 | | ||||||||||||||||||
| Recovery of (provision for) loan losses | | 1,217 | | | (2,774) | | | (22) | | | — | | | — | | (1,579) | | ||||||||||||||
| Net interest income after recovery of (provision for) loan losses | | 8,220 | | 23,156 | | 22,206 | | (161) | | — | | 53,421 | | ||||||||||||||||||
| Non-interest income | | | | | | | | | | | | | | | | | | | | ||||||||||||
| Residential mortgage banking activities | | — | | — | | — | | 37,270 | | — | | 37,270 | | ||||||||||||||||||
| Net realized gain on financial instruments and real estate owned | | | 4,699 | | | 4,192 | | | 14,319 | | | — | | | — | | | 23,210 | | ||||||||||||
| Net unrealized gain on financial instruments | | | 1,211 | | | 4,256 | | | 74 | | | 147 | | | — | | | 5,688 | | ||||||||||||
| Servicing income, net | | | — | | | 998 | | | 1,497 | | | 7,748 | | | — | | | 10,243 | | ||||||||||||
| Income on purchased future receivables, net | | | — | | | — | | | 2,838 | | | — | | | — | | | 2,838 | | ||||||||||||
| Income on unconsolidated joint ventures | | | 2,506 | | | 1,042 | | | — | | | — | | | — | | | 3,548 | | ||||||||||||
| Other income | | | 1,167 | | | 2,778 | | | 1,696 | | | 31 | | | 2 | | | 5,674 | | ||||||||||||
| Total non-interest income | | 9,583 | | 13,266 | | 20,424 | | 45,196 | | 2 | | 88,471 | | ||||||||||||||||||
| Non-interest expense | | | | | | | | | | | | | | | | | | | | ||||||||||||
| Employee compensation and benefits | | — | | | (7,034) | | | (10,716) | | | (5,399) | | | (1,388) | | (24,537) | | ||||||||||||||
| Allocated employee compensation and benefits from related party | | (383) | | | — | | | — | | | — | | | (3,421) | | (3,804) | | ||||||||||||||
| Variable expenses on residential mortgage banking activities | | | — | | | — | | | — | | | (24,380) | | | — | | | (24,380) | | ||||||||||||
| Professional fees | | (411) | | | (782) | | | (582) | | | (1,534) | | | (3,591) | | (6,900) | | ||||||||||||||
| Management fees – related party | | — | | | — | | | — | | | — | | | (2,742) | | (2,742) | | ||||||||||||||
| Incentive fees – related party | | — | | | — | | | — | | | — | | | (2,775) | | (2,775) | | ||||||||||||||
| Loan servicing expense | | (1,694) | | | (2,640) | | | (426) | | | (3,364) | | | — | | (8,124) | | ||||||||||||||
| Transaction related expenses | | | — | | | — | | | — | | | — | | | (2,629) | | | (2,629) | | ||||||||||||
| Other operating expenses | | (1,108) | | | (3,969) | | | (4,139) | | | (1,908) | | | (1,802) | | (12,926) | | ||||||||||||||
| Total non-interest expense | | (3,596) | | (14,425) | | (15,863) | | (36,585) | | (18,348) | | (88,817) | | ||||||||||||||||||
| Income (loss) before provision for income taxes | | 14,207 | | 21,997 | | 26,767 | | 8,450 | | (18,346) | | 53,075 | | ||||||||||||||||||
| Total assets | | 1,249,569 | | 4,546,757 | | 2,462,862 | | 570,236 | | 434,974 | | 9,264,398 | | ||||||||||||||||||
| | | | | | | | | | | | | |
All values are in US Dollars.
READY CAPITAL CORPORATION
UNAUDITED SEGMENT REPORTING
| | Nine Months Ended September 30, 2021 | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | Small | | Residential | | | | | | | ||
| | | | | SBC | | Business | | Mortgage | | Corporate- | | | ||||||
| (In Thousands) | | Acquisitions | | Originations | | Lending | | Banking | | Other | | Consolidated | ||||||
| Interest income | | $ | 53,919 | | $ | 141,040 | | $ | 80,304 | | $ | 6,291 | | $ | — | | $ | 281,554 |
| Interest expense | | | (36,206) | | | (81,402) | | | (29,698) | | | (6,997) | | | (2,009) | | | (156,312) |
| Net interest income before provision for loan losses | | $ | 17,713 | | $ | 59,638 | | $ | 50,606 | | $ | (706) | | $ | (2,009) | | $ | 125,242 |
| Recovery of (provision for) loan losses | | 2,405 | | | (9,032) | | | (461) | | | — | | | — | | (7,088) | ||
| Net interest income after recovery of (provision for) loan losses | | $ | 20,118 | | $ | 50,606 | | $ | 50,145 | | $ | (706) | | $ | (2,009) | | $ | 118,154 |
| Non-interest income | | | | | | | | | | | | | | | | | | |
| Residential mortgage banking activities | | $ | — | | $ | — | | $ | — | | $ | 115,369 | | $ | — | | $ | 115,369 |
| Net realized gain on financial instruments and real estate owned | | | 465 | | | 14,992 | | | 33,782 | | | — | | | — | | | 49,239 |
| Net unrealized gain on financial instruments | | | 8,240 | | | 9,197 | | | 3,055 | | | 10,804 | | | — | | | 31,296 |
| Servicing income, net | | | — | | | 2,520 | | | 12,966 | | | 22,320 | | | — | | | 37,806 |
| Income on purchased future receivables, net | | — | | | — | | | 7,934 | | | — | | | — | | 7,934 | ||
| Income on unconsolidated joint ventures | | | 5,058 | | | 1,042 | | | — | | | — | | | — | | | 6,100 |
| Other income (loss) | | | 3,240 | | | 5,602 | | | (3,454) | | | 84 | | | 85 | | | 5,557 |
| Total non-interest income | | $ | 17,003 | | $ | 33,353 | | $ | 54,283 | | $ | 148,577 | | $ | 85 | | $ | 253,301 |
| Non-interest expense | | | | | | | | | | | | | | | | | | |
| Employee compensation and benefits | | $ | — | | $ | (13,580) | | $ | (26,097) | | $ | (29,114) | | $ | (2,793) | | $ | (71,584) |
| Allocated employee compensation and benefits from related party | | (926) | | | — | | | — | | | — | | | (8,300) | | (9,226) | ||
| Variable expenses on residential mortgage banking activities | | — | | | — | | | — | | | (61,286) | | | — | | (61,286) | ||
| Professional fees | | (1,306) | | | (1,725) | | | (1,930) | | | (1,929) | | | (5,864) | | (12,754) | ||
| Management fees – related party | | — | | | — | | | — | | | — | | | (8,061) | | (8,061) | ||
| Incentive fees – related party | | — | | | — | | | — | | | — | | | (3,061) | | (3,061) | ||
| Loan servicing expense | | (4,829) | | | (7,968) | | | (468) | | | (7,814) | | | — | | (21,079) | ||
| Transaction related expenses | | | — | | | — | | | — | | | — | | | (10,202) | | | (10,202) |
| Other operating expenses | | (4,958) | | | (11,718) | | | (19,209) | | | (6,325) | | | (3,390) | | (45,600) | ||
| Total non-interest expense | | $ | (12,019) | | $ | (34,991) | | $ | (47,704) | | $ | (106,468) | | $ | (41,671) | | $ | (242,853) |
| Income (loss) before provision for income taxes | | $ | 25,102 | | $ | 48,968 | | $ | 56,724 | | $ | 41,403 | | $ | (43,595) | | $ | 128,602 |
| Total assets | | $ | 1,249,569 | | $ | 4,546,757 | | $ | 2,462,862 | | $ | 570,236 | | $ | 434,974 | | $ | 9,264,398 |
Exhibit 99.2
| SUPPLEMENTAL FINANCIAL DATA<br>Q3 2021 | |||
|---|---|---|---|
| 2<br>Disclaimer<br>This presentation contains statements that constitute “forward-looking statements,” as such term is defined in Section 27A of the Securities Act of 1933, as<br>amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are intended to be covered by the safe harbor provided by<br>the same. These statements are based on management’s current expectations and beliefs and are subject to a number of trends and uncertainties that could<br>cause actual results to differ materially from those described in the forward-looking statements; Ready Capital Corporation (the “Company”) can give no<br>assurance that its expectations will be attained. Factors that could cause actual results to differ materially from the Company’s expectations include those set forth<br>in the Risk Factors section of the most recent Annual Report on Form 10-K filed with the SEC and other reports filed by the Company with the SEC, copies of<br>which are available on the SEC’s website, www.sec.gov. The Company undertakes no obligation to update these statements for revisions or changes after the<br>date of this release, except as required by law.<br>This presentation includes certain non-GAAP financial measures, including Distributable earnings. These non-GAAP financial measures should be considered<br>only as supplemental to, and not as superior to, financial measures in accordance with GAAP. Please refer to the Appendix for the most recent GAAP information.<br>This presentation also contains market statistics and industry data which are subject to uncertainty and are not necessarily reflective of market conditions. These<br>have been derived from third party sources and have not been independently verified by the Company or its affiliates.<br>All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. All data is as of September 30, 2021,<br>unless otherwise noted. | |||
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| 3<br>Third Quarter 2021 Results<br>.. Net income of $46.5 million1, or $0.61 per common share<br>.. Distributable earnings of $49.4 million1, or $0.64 per common share<br>.. Declared dividend of $0.42 per common share<br>Earnings / Dividends<br>.. Return on Equity2 of 16.3%<br>.. Distributable Return on Equity3 of 17.3%<br>.. Dividend Yield4 of 11.6%<br>Returns<br>.. CRE originations and acquisitions of $1.2 billion<br>.. SBA loan originations of $138.3 million<br>.. Residential mortgage loan originations of $1.0 billion<br>Loan Originations5 /<br>Acquisitions<br>.. Adjusted net book value6 of $15.06 per common share<br>.. Recourse leverage ratio of 2.2x consisting of 1.5x of warehouse credit facilities<br>and borrowings under repurchase agreements, 0.5x of corporate debt and 0.2x of<br>agency secured borrowings<br>Balance Sheet<br>1. Before dividends on preferred securities and inclusive of non-controlling interest<br>2. Return on Equity is an annualized percentage equal to quarterly net income over the average monthly total stockholders’ equity for the period<br>3. Distributable Return on Equity is an annualized percentage equal to Distributable earnings over the average monthly total stockholders’ equity for the period. Refer to the<br>“Distributable Earnings Reconciliation” slide for a reconciliation of GAAP Net Income to Distributable Earnings<br>4. Q3 Dividend yield for the period based on the 09/30/2021 closing share price of $14.43<br>5. Represents fully committed amounts<br>6. Excludes the equity component of our 2017 convertible note issuance | |||
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| 4<br>Third Quarter 2021 Results (continued)<br>.. Total liquidity of $341 million(1) including cash, anticipated warehouse advances,<br>principal and interest receivable from servicers, and anticipated proceeds from<br>available-for-sale assets<br>Current Liquidity<br>.. Closed $652.5 million commercial mortgage collateralized loan obligation with the<br>limited right to acquire all or part of $87.8 million in future funding<br>.. Closed a private placement of $350.0 million in aggregate principal amount of<br>4.5% Senior Secured Notes due 2026. The Company used a portion of the net<br>proceeds to redeem all the outstanding 7.5% Senior Secured Notes due 2022.<br>Capital Markets<br>.. Surpassed $1 billion in SBA 7(a) loans and has grown to become the second<br>largest non-bank SBA lender in the US SBA 7(a)<br>.. Acquired Red Stone, a privately owned real estate finance and investment<br>company that provides innovative financial products and services to the<br>multifamily affordable housing industry.<br>Red Stone<br>Acquisition<br>1. Liquidity balance as of October 25, 2021 | |||
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| 5<br>Return on Equity<br>1. Levered yield includes interest income, accretion of discount, MSR creation, income<br>from unconsolidated joint ventures, realized gains (losses) on loans held for sale,<br>unrealized gains (losses) on loans held for sale and servicing income net of interest<br>expense and amortization of deferred financing costs on an annualized basis.<br>2. GAAP ROE is based on GAAP Net Income, while Distributable ROE is based on<br>Distributable Earnings, which adjusts GAAP Net Income for certain items detailed on<br>the “Distributable Earnings Reconciliation” slide.<br>3. ROE based on net income before tax of the Residential Mortgage Banking business<br>line divided by the business line’s average monthly equity.<br>Segment<br>Loan Acquisitions 10.2 % 10.2 % 26.3 %<br>SBC Originations 13.2 % 13.2 % 63.0 %<br>Small Business Lending 76.1 % 76.1 % 6.3 %<br>Residential Mortgage Banking (3) 46.7 % 45.9 % 4.4 %<br>5.1 2.6 5.1 3.1<br>22.9 % 21.0 % 22.9 % 22.7 %<br>6.6 2.4 6.6 2.4<br>(0.6) (2.0) (1.1) (0.5)<br>6.5 4.8 6.5 4.8<br>(1.0) (0.9) - -<br>(13.0) (10.6) (12.1) (10.3)<br>(2.0) (1.0) (2.0) (1.0)<br>(2.4) (2.5) (2.8) (3.1)<br>Dividends on preferred stock (0.7) (1.2) (0.7) (1.2)<br>16.3 % 10.0 % 17.3 % 13.8 %<br>GAAP ROE (2) Distributable ROE (2)<br>Levered<br>Yield (1)<br>Distributable<br>Levered<br>Yield (1)<br>Equity<br>Allocation Q3'21 Q2'21 Q3'21 Q2'21<br>Corporate leverage, net of non-earning assets<br>19.6 18.4 % 17.8 %<br>Return on equity<br>Gross return on equity<br>Realized & unrealized gains, net<br>Non-recurring gains, losses and expenses<br>Investment advisory fees<br>Provision for income taxes<br>Loan loss provision<br>PPP revenue, net of direct expenses<br>Operating expenses<br>17.8 % % | |||
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| 6<br>SBC Investment by Product Type<br>$82.9<br>$65.0 $50.2<br>$145.7 $138.3<br>$17.0 $6.0<br>$53.6<br>$104.9<br>$105.6<br>$132.1<br>$164.4<br>$240.5<br>$135.5<br>$16.9<br>$243.2<br>$652.8<br>$807.2<br>$730.4<br>$15.8<br>$140.2<br>$168.0<br>$31.5<br>$0<br>$100<br>$200<br>$300<br>$400<br>$500<br>$600<br>$700<br>$800<br>Q3'20 Q4'20 Q1'21 Q2'21 Q3'21<br>SBA Fixed Rate Freddie Mac Transitional Acquired Lot Loans<br>1. Origination volumes are based on fully committed amounts<br>2. Originations include $31.5M of Lot Loans<br>HISTORICAL GROWTH1<br>2 | |||
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| 7<br>SBC Originations<br>• Freddie Mac loan originations of $135.5 million driven by<br>continued low rates averaging 3.7%<br>o Current money up pipeline of $116.6 million,<br>including $16.2 million funded in October<br>• CRE originations of $1.0 billion3 closed in the quarter<br>o Current money up pipeline of $729.5 million,<br>including $250.4 million funded in October<br>1. $ in millions, as of quarter end.<br>2. Represents fixed rate loans that have been securitized.<br>3. Represents fully committed amounts.<br>4. Calculated on unpaid principal balance<br>5. Includes interest income, accretion of discount, and servicing income net of interest<br>expense and amortization of deferred financing costs.<br>6. Includes realized and unrealized gains (losses) on loans held for sale and MSR creation.<br>CURRENT QUARTER HIGHLIGHTS GROSS LEVERED YIELD<br>11.5% 12.0% 11.2% 11.1% 10.7%<br>2.5% 2.5% 2.9% 2.9% 2.5%<br>0%<br>5%<br>10%<br>15%<br>20%<br>Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021<br>Gross Levered Yield (ex. Gains) Gains on Loans, held for sale<br>SEGMENT SNAPSHOT<br>5 6 | |||
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| 8<br>Small Business Lending<br>• SBA 7(a) loans originations of $138.3 million<br>o Current money up pipeline of $212.4 million,<br>including $30.4 million funded in October<br>• SBA net sales premiums peaking at 15.9% and averaging<br>12.1%, net<br>o 6.9% of SBA sales sold below market<br>• After-tax PPP income was $13.3 million<br>1. $ in millions, as of quarter end.<br>2. Calculated on unpaid principal balance and excludes assets offset by guaranteed loan<br>financing liabilities<br>3. Includes interest income, accretion of discount, and servicing income net of interest<br>expense and amortization of deferred financing costs.<br>4. Includes realized and unrealized gains (losses) on loans held for sale and MSR creation.<br>CURRENT QUARTER HIGHLIGHTS GROSS LEVERED YIELD<br>21.4% 28.4% 37.0%<br>18.6% 20.7%<br>37.6%<br>34.6%<br>50.4% 80.6%<br>55.4%<br>0%<br>20%<br>40%<br>60%<br>80%<br>100%<br>Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021<br>Gross Levered Yield (ex. Gains) Gains on Loans, held for sale<br>SEGMENT SNAPSHOT<br>3 4 | |||
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| 9<br>Loan Acquisitions<br>• Current acquisition pipeline of $347 million<br>• Loan acquisitions of $168.0 million comprised of 49 loans<br>with an advance rate of 63%, expected levered yield of<br>15.3%, and weighted average LTV of 58%.<br>1. Excludes joint venture investments.<br>2. $ in millions, as of quarter end.<br>3. Represents fixed rate loans that have been securitized.<br>4. Calculated on unpaid principal balance<br>5. Includes interest income, accretion of discount, and servicing income net of interest<br>expense and amortization of deferred financing costs.<br>6. Includes realized and unrealized gains (losses) on loans held for sale and MSR creation.<br>CURRENT QUARTER HIGHLIGHTS GROSS LEVERED YIELD<br>10.3% 10.4% 8.8% 9.2% 8.5%<br>3.4% 5.2%<br>-1.2%<br>2.7% 1.7%<br>-5%<br>0%<br>5%<br>10%<br>15%<br>20%<br>Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021<br>Income on joint venture investments and Gains on loans, held for sale<br>Gross Levered Yield (ex. Income on joint venture investments and Gains<br>on loans, held for sale) 5<br>6<br>SEGMENT SNAPSHOT | |||
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| 10<br>• Originations of $1.0 billion<br>• Recapture rates of 32%<br>• Average margin of 92 bps for the quarter, leveling off at<br>84 bps at quarter end<br>1. $ in millions. Represents activity during the quarter.<br>CURRENT QUARTER HIGHLIGHTS MSR PORTFOLIO (UPB IN $ BILLIONS)<br>$9.1<br>$9.5<br>$9.9<br>$10.4<br>$10.7<br>$8.0<br>$8.5<br>$9.0<br>$9.5<br>$10.0<br>$10.5<br>$11.0<br>Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021<br>SEGMENT SNAPSHOT<br>Residential Mortgage Banking<br>Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021<br>Fair<br>Value<br>($mm) $74.4 $76.8 $98.5 $100.8 $107.6 | |||
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| 11<br>Diversified, Complementary, & Scalable Platforms<br>14%<br>13%<br>37%<br>2%<br>28%<br>6%<br>Acquisitions<br>SBC Originations - Fixed rate<br>SBC Originations - Bridge<br>SBC Originations - Freddie Mac<br>Small Business Lending<br>Residential Mortgage Banking<br>PORTFOLIO BREAKDOWN1 REVENUE BREAKDOWN2<br>$11,054<br>$3,924<br>$22,157<br>$8,104<br>$37,703<br>$20,733<br>$0<br>$5,000<br>$10,000<br>$15,000<br>$20,000<br>$25,000<br>$30,000<br>$35,000<br>$40,000<br>Acquisitions SBC<br>Originations<br>- Fixed rate<br>SBC<br>Originations<br>- Bridge<br>SBC<br>Originations<br>- Freddie<br>Mac<br>Small<br>Business<br>Lending<br>Residential<br>Mortgage<br>Banking<br>1. Assets include loans, MBS, servicing assets, JV investments, real estate owned, and purchased future receivables.<br>2. Based on QTD Distributable Earnings. Distributable earnings includes interest income, accretion of discount, MSR creation, income from unconsolidated joint ventures, realized gains<br>(losses) on loans held for sale, unrealized gains (losses) on loans held for sale and servicing income net of interest expense and amortization of deferred financing costs on an<br>annualized basis. | |||
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| 12<br>Loan Portfolio Composition<br>12<br>1. As a percent of unpaid principal balance<br>2. Excludes loans held-for-sale, at fair value<br>COLLATERAL TYPE SBA COLLATERAL TYPE<br>LIEN POSITION<br>19%<br>12%<br>7%<br>5%<br>4%<br>53%<br>Lodging Offices of Physicians<br>Child Day Care Services Eating Places<br>Gasoline Service Stations Other<br>44%<br>13% 10%<br>10%<br>9%<br>14%<br>Multi-family Retail SBA Office Mixed Use Other<br>GEOGRAPHIC LOCATION<br>16%<br>16%<br>8%<br>8% 8%<br>44%<br>California Texas Florida<br>New York Georgia Other<br>99.1%<br>0.9%<br>First Mortgage Subordinated Mortgage<br>As of September 30, 20211, 2 | |||
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| 13<br>Current Expected Credit Losses<br>• Total ending Q2 2021 allowance reserves of $50.0 million representing 1.0% of loan balances<br>• Total ending Q3 2021 allowance reserves of $49.5 million representing 0.9% of loan balances<br>• Net recovery of $0.5 million across our loan portfolios during the quarter:<br>• Originated Fixed Rate loans: Reduction in pooled reserves due to stabilizing assumptions, and a lower weighted<br>average maturity of portfolio.<br>• Originated Transitional loans: Incremental pooled reserves attributable to new loan originations in Q3 and<br>increase in certain specific reserves, offset by stabilizing assumptions.<br>• Acquired loans: Reduction in reserves attributable to liquidations and stabilizing assumptions.<br>• Small Business loans (7(a)): Reduction in reserves attributable to liquidations and stabilizing assumptions.<br>(In Thousands)<br>Originated<br>SBC loans<br>Originated<br>Transitional<br>loans<br>Acquired<br>loans<br>Acquired<br>SBA 7(a) loans<br>Originated<br>SBA 7(a) loans<br>Originated<br>Residential<br>Agency loans<br>Total held-for-<br>investment<br>loans<br>Beginning balance 7,980 21,201 7,098 3,975 9,375 — 49,629<br>Provision for loan losses (1,029) 3,944 (1,217) (210) 232 — 1,720<br>Charge-offs — — (26) (464) (938) — (1,428)<br>Recoveries — — (703) 29 — — (674)<br>Ending balance 6,951 25,145 5,152 3,330 8,669 — 49,247<br>Allowance on unfunded<br>commitments — 86 — — 133 — 219<br>Ending balance 6,951 25,231 5,152 3,330 8,802 — 49,466<br>Loan balance 1,056,936 3,191,008 977,943 197,097 391,200 3,173 5,817,357<br>% of Loan balance 0.7% 0.8% 0.5% 1.7% 2.3% 0.0% 0.9% | |||
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| 14<br>Loan Portfolio – Risk Rating<br>BUCKET 1:<br>Very Low Risk of Loss: New origination or current with strong<br>credit metrics (LTV/DSCR/DY). No expected losses.<br>BUCKET 2:<br>Low Risk of Loss: Current with maturity > 6 months. Lower credit<br>metrics with possibility of inclusion on CREFC watchlist. No<br>expected losses.<br>BUCKET 3:<br>Medium Risk of Loss: Current with near term maturities or in<br>forbearance. Loss unlikely with no specific reserves booked.<br>BUCKET 4:<br>Higher Risk: Loan delinquent or in maturity default. Potential<br>issues with sponsor or business plans. Minimal losses possible<br>and adequately reserved in current period.<br>BUCKET 5:<br>Highest risk: Loan in default or special servicing. Specific losses<br>identified and adequately reserved for in current period.<br>56%<br>28%<br>7%<br>5%<br>4%<br>CREDIT QUALITY INDICATORS<br>1. Commercial real estate portfolio only<br>2. As a percent of unpaid principal balance<br>3. Excludes loans held-for-sale, at fair value<br>CRITERIA<br>As of September 30, 20211, 2, 3 | |||
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| 18% 18% 15% 13% 13%<br>2%<br>3% 2%<br>3% 3% 2% 1% 1%<br>7% 7% 7% 6% 6%<br>26% 30%<br>44% 49% 47%<br>46% 42%<br>30% 28% 31%<br>Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021<br>Funding Mix<br>Securitized debt oblications<br>Credit faciities and repurchase agreements<br>Senior secured notes and Corporate debt<br>Convertible senior notes<br>Preferred Equity<br>Common Stockholders Equity<br>15<br>Capital Structure<br>• Current cash and available liquidity of $341 million<br>• Closed $652.5 million commercial mortgage collateralized<br>loan obligation with the limited right to acquire all or part of<br>$87.8 million in future funding with an advance rate of 83%<br>and a weighted average cost of 1.3%<br>• Closed a private placement of $350.0 million in aggregate<br>principal amount of 4.5% Senior Secured Notes due 2026.<br>The Company used the net proceeds to redeem all the<br>outstanding 7.5% Senior Secured Notes due 2022.<br>HISTORICAL CAPITAL STRUCTURE LIQUIDITY UPDATE<br>Total Debt &<br>Eqty ($M) $4,502 $4,553 $7,233 $8,222 $8,531 | |||
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| 16<br>Financing and Leverage<br>2.0x 2.2x 2.3x 1.8x 2.2x<br>4.5x 4.5x 5.1x 5.4x 5.9x<br>0.0<br>1.0<br>2.0<br>3.0<br>4.0<br>5.0<br>6.0<br>7.0<br>Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021<br>Recourse Total<br>HISTORICAL LEVERAGE<br>$ in millions<br>Total debt-to-equity ratio<br> Secured borrowings (warehouse credit facilities and borrowings under repo transactions) $ 1,950<br> Secured borrowings (ANH warehouse credit facilities and borrowings under repo transactions) 94<br> Paycheck Protection Program Liquidity Facility 1,946<br> Securitized debt obligations 2,676<br> Senior secured notes and corporate bonds 514<br> Convertible notes 113<br>Total debt $ 7,293<br>Total stockholders' equity $ 1,229<br>Total debt-to-equity ratio 5.9<br>Total recourse debt-to-equity ratio<br>Total debt $ 7,293<br> Less: Securitized debt obligations (2,676)<br> Less: Paycheck Protection Program Liquidity Facility (1,946)<br>Total recourse debt $ 2,671<br>Total stockholders' equity $ 1,229<br>Total recourse debt-to-equity ratio 2.2<br>September 2021 | |||
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| 17<br>Credit and Repurchase Facilities<br>1. Commitment size is €200.0 million and has been converted for purposes of this disclosure..<br>$ in thousands<br>Lender Asset Class Maturity Pricing<br> JPMorgan Acquired loans, SBA loans August 2022 1M L + 2.5% to 2.875% $ 200,000 $ 46,307 $ 153,693<br> Keybank Freddie Mac loans February 2022 SOFR + 1.41% 100,000 13,268 86,732<br> East West Bank SBA loans October 2022 Prime - 0.821% to + 0.00% 75,000 50,201 24,799<br> Credit Suisse(1) Acquired loans (non USD) December 2021 Euribor + 2.50% to 3.00% 231,600 40,250 191,350<br> GMFS facilities Residential loans Oct-2021 - Sept-2022 Various 370,000 268,892 101,108<br> GMFS - MSR Residential MSRs September 2023 1M L + 2.50% 50,000 49,400 600<br> Other - various Various Oct-2023 - Aug-2050 Various 122,770 23,616 99,154<br>$ 1,149,370 $ 491,934 $ 657,436<br> Citibank<br>Fixed rate, Transitional,<br>Acquired loans October 2021 1M L + 2.00% to 3.00% $ 500,000 $ 110,773 $ 389,227<br> Deutsche Bank<br>Fixed rate, Transitional<br>loans November 2021 3M L + 2.00% to 2.40% 350,000 225,974 124,026<br> Credit Suisse<br>Fixed rate, Transitional,<br>Acquired loans May 2022 1M L + 2.00% to 2.35% 500,000 184,892 315,108<br> Credit Suisse Residential loans December 2021 L + 3.00% 100,000 60,390 39,610<br> JPMorgan Transitional loans November 2022 1M L + 2.00% to 2.75% 700,000 636,171 63,829<br> Performance Trust Acquired loans March 2024 1M T + 2.00% 174,000 84,419 89,581<br> Various MBS Oct-2021 Various 249,516 249,516 -<br>$ 2,573,516 $ 1,552,135 $ 1,021,381<br>Total Secured Borrowings $ 3,722,886 $ 2,044,069 $ 1,678,817<br>Available<br>Capacity<br>Facility<br>Size<br>Borrowings under repurchase agreements<br>Total borrowings under repurchase agreements<br>Total borrowings under credit facilities<br>Borrowings under credit facilities<br>Carrying Value | |||
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| 18<br>Financial Snapshot<br>1. Average carrying value includes average quarterly carrying value of loan and servicing asset balances<br>2. Gross yields include interest income, accretion of discount, MSR creation, income from our unconsolidated joint venture, realized gains (losses) on loans held for sale, unrealized gains (losses) on loans held<br>for sale and servicing income net of interest expense and amortization of deferred financing costs on an annualized basis.<br>3. The Company finances the assets included in the Investment Type through securitizations, repurchase agreements, warehouse facilities and bank credit facilities. Interest expense is calculated based on<br>interest expense and deferred financing amortization for the quarter ended 9/30/2021 on an annualized basis.<br>4. Excludes loans, held for sale, at fair value<br>5. Excludes the equity component of our 2017 convertible note issuance.<br>6. Q3 Dividend yield for the period based on the 09/30/2021 closing share price of $14.43<br>($ in thousands, except per share data)<br>% Fixed vs Floating Rate 32% / 68%<br>% Originated vs Acquired 79% / 21%<br>Weighted Average LTV - SBC originations 66%<br>Weighted Average LTV - SBA 83%<br>Weighted Average LTV - Acquired 41%<br>Loan Portfolio Metrics (4)<br>SBA servicing rights - UPB $ 813,089<br>SBA servicing rights- carrying value $ 21,205<br>Freddie Mac servicing rights - UPB $ 4,043,989<br>Freddie Mac servicing rights - carrying value $ 42,312<br>Residential servicing rights - UPB $ 10,726,160<br>Residential servicing rights - carrying value $ 107,589<br>Servicing Portfolio Metrics<br>Common Stockholders' equity $ 1,098,807<br>Common Stockholders' equity (adjusted)(5) $ 1,098,059<br>Total Common Shares outstanding 72,919,824<br>Net Book Value per Common Share $ 15.07<br>Adjusted Net Book Value per Common Share $ 15.06<br>Book Equity Value Metrics<br>Net income | Distributable earnings $46,535 | $49,365<br>Earnings per share - Basic and diluted $0.61 | $0.60<br>Distributable Earnings per share - Basic and diluted $0.64<br>Return on Equity per Common Share 16.3%<br>Distributable Return on Equity per Common Share 17.3%<br>Dividend Yield (6) 11.6%<br>Q3 2021 Earnings Data Metrics |
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| APPENDIX<br>Additional Financial<br>Information | |||
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| 20<br>Balance Sheet by Quarter<br>(In Thousands)<br>Assets<br>Cash and cash equivalents $ 149,847 $ 138,975 $ 308,428 $ 200,723 $ 209,769<br>Restricted cash 46,204 47,697 62,961 57,118 52,692<br>Loans, net 1,286,935 1,550,624 1,611,826 2,222,284 2,384,497<br>Loans, held for sale, at fair value 348,719 340,288 473,078 470,184 549,917<br>Payment protection program loans, net 106,204 74,931 1,292,808 2,178,586 1,784,826<br>Mortgage backed securities, at fair value 90,427 88,011 682,948 260,110 117,681<br>Loans eligible for repurchase from Ginnie Mae 237,542 250,132 221,464 173,437 149,723<br>Investment in unconsolidated joint ventures 69,204 79,509 75,048 86,994 125,547<br>Purchased future receivables, net 16,659 17,308 13,240 7,213 6,567<br>Derivative instruments 20,849 16,363 12,529 6,600 6,180<br>Servicing rights 110,045 114,663 138,941 145,265 171,106<br>Real estate owned, held for sale 45,063 45,348 73,454 71,267 70,643<br>Other assets 98,614 89,503 151,503 120,214 196,827<br>Assets of consolidated VIEs 2,691,198 2,518,743 2,898,727 2,976,897 3,438,423<br>Total Assets $ 5,317,510 $ 5,372,095 $ 8,016,955 $ 8,976,892 $ 9,264,398<br>Liabilities<br>Secured borrowings 1,071,616 1,294,243 2,064,785 1,703,034 2,044,069<br>Paycheck Protection Program Liquidity Facility (PPPLF) borrowings 105,005 76,276 1,132,536 2,286,624 1,945,883<br>Securitized debt obligations of consolidated VIEs, net 2,059,114 1,905,749 2,211,923 2,309,217 2,676,265<br>Convertible notes, net 111,855 112,129 112,405 112,684 112,966<br>Senior secured notes and Corporate debt, net 330,230 330,648 513,061 513,494 513,889<br>Guaranteed loan financing 421,183 401,705 386,036 363,955 348,774<br>Contingent consideration — — — — 12,400<br>Liabilities for loans eligible for repurchase from Ginnie Mae 237,542 250,132 221,464 173,437 149,723<br>Derivative instruments 7,774 11,604 4,403 3,717 —<br>Dividends payable 16,934 19,746 9,631 33,968 33,564<br>Accounts payable and other accrued liabilities 132,087 135,655 162,465 180,018 189,194<br>Total Liabilities $ 4,493,340 $ 4,537,887 $ 6,818,709 $ 7,680,148 $ 8,026,727<br>Preferred stock Series C — — 19,494 8,361 8,361<br>Stockholders’ Equity<br>Preferred stock — — 98,241 209,619 111,378<br>Common stock 5 5 7 7 7<br>Additional paid-in capital 846,960 849,541 1,088,512 1,090,162 1,115,471<br>Retained earnings (31,779) (24,203) (20,027) (23,105) (10,395)<br>Accumulated other comprehensive income (loss) (9,916) (9,947) (7,042) (7,157) (6,276)<br>Total Ready Capital Corporation equity 805,270 815,396 1,159,691 1,269,526 1,210,185<br>Non-controlling interests 18,900 18,812 19,061 18,857 19,125<br>Total Stockholders’ Equity $ 824,170 $ 834,208 $ 1,178,752 $ 1,288,383 $ 1,229,310<br>Total Liabilities and Stockholders’ Equity $ 5,317,510 $ 5,372,095 $ 8,016,955 $ 8,976,892 $ 9,264,398<br>Adjusted Book Value per Share $ 14.84 $ 14.98 $ 14.89 $ 14.87 $ 15.06<br>9/30/2021 9/30/2020 12/31/2020 3/31/2021 6/30/2021 | |||
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| 21<br>Statement of Income by Quarter<br>(In thousands, except share data)<br>Interest income $ 61,074 $ 64,810 $ 73,371 $ 103,047 $ 105,136<br>Interest expense (43,823) (41,319) (50,761) (55,415) (50,136)<br>Net interest income before provision for loan losses $ 17,251 $ 23,491 $ 22,610 $ 47,632 $ 55,000<br>Recovery of (provision for) loan losses 4,231 258 8 (5,517) (1,579)<br>Net interest income after recovery of (provision for) loan losses $ 21,482 $ 23,749 $ 22,618 $ 42,115 $ 53,421<br>Non-interest income<br>Residential mortgage banking activities $ 75,524 $ 59,963 $ 41,409 $ 36,690 $ 37,270<br>Net realized gain on financial instruments and real estate owned 7,507 9,795 8,846 17,183 23,210<br>Net unrealized gain (loss) on financial instruments 3,420 (4,339) 20,996 4,612 5,688<br>Servicing income, net of amortization and impairment 10,115 11,401 15,635 11,928 10,243<br>Income on purchased future receivables, net 4,848 1,794 2,317 2,779 2,838<br>Income (loss) on unconsolidated joint ventures 1,996 3,439 (809) 3,361 3,548<br>Other income (loss) 4,496 1,353 571 (688) 5,674<br>Total non-interest income $ 107,906 $ 83,406 $ 88,965 $ 75,865 $ 88,471<br>Non-interest expense<br>Employee compensation and benefits $ (27,612) $ (18,084) $ (22,777) $ (24,270) $ (24,537)<br>Allocated employee compensation and benefits from related party (2,250) (2,250) (2,123) (3,299) (3,804)<br>Variable expenses on residential mortgage banking activities (30,918) (27,016) (15,485) (21,421) (24,380)<br>Professional fees (4,158) (4,728) (2,982) (2,872) (6,900)<br>Management fees – related party (2,714) (2,741) (2,693) (2,626) (2,742)<br>Incentive fees – related party (1,134) (1,333) — (286) (2,775)<br>Loan servicing expense (8,231) (6,734) (6,104) (6,851) (8,124)<br>Transaction related expenses (6) — (6,307) (1,266) (2,629)<br>Other operating expenses (10,448) (12,442) (15,484) (17,190) (12,926)<br>Total non-interest expense $ (87,471) $ (75,328) $ (73,955) $ (80,081) $ (88,817)<br>Income before provision for income taxes $ 41,917 $ 31,827 $ 37,628 $ 37,899 $ 53,075<br>Income tax provision (6,554) (4,268) (8,681) (6,995) (6,540)<br>Net income $ 35,363 $ 27,559 $ 28,947 $ 30,904 $ 46,535<br>Less: Dividends on preferred stock — — 281 3,224 1,999<br>Less: Net income attributable to non-controlling interest 805 648 659 444 756<br>Net income attributable to Ready Capital Corporation $ 34,558 $ 26,911 $ 28,007 $ 27,236 $ 43,780<br>Earnings per common share - basic $ 0.63 $ 0.49 $ 0.49 $ 0.38 $ 0.61<br>Earnings per common share - diluted $ 0.63 $ 0.49 $ 0.49 $ 0.38 $ 0.60<br>Weighted-average shares outstanding - Basic 54,626,995 54,338,209 56,817,632 71,221,806 71,618,168<br>Weighted-average shares outstanding - Diluted 54,704,611 54,420,064 56,843,448 71,385,603 71,787,228<br>Dividends declared per share of common stock $ 0.30 $ 0.35 $ 0.40 $ 0.42 $ 0.42<br>Q3 2020 Q4 2020 Q1 2020 Q2 2021 Q3 2021 | |||
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| 22<br>Distributable Earnings Reconciliation by Quarter<br>The Company believes that this non-U.S. GAAP financial information, in addition to the related U.S. GAAP measures, provides investors greater transparency into the information used by management in its financial and operational decision-making,<br>including the determination of dividends. However, because Distributable Earnings is an incomplete measure of the Company's financial performance and involves differences from net income computed in accordance with U.S. GAAP, it should be<br>considered along with, but not as an alternative to, the Company's net income computed in accordance with U.S. GAAP as a measure of the Company's financial performance. In addition, because not all companies use identical calculations, the<br>Company's presentation of Distributable Earnings may not be comparable to other similarly-titled measures of other companies.<br>We calculate Distributable earnings as GAAP net income (loss) excluding the following:<br>i) any unrealized gains or losses on certain MBS<br>ii) any realized gains or losses on sales of certain MBS<br>iii) any unrealized gains or losses on Residential MSRs<br>iv) any unrealized gains or losses resulting from a change in CECL impairment reserves on accrual loans<br>v) one-time non-recurring gains or losses, such as gains or losses on discontinued operations, bargain purchase gains, or merger related expenses<br>In calculating Distributable Earnings, Net Income (in accordance with U.S. GAAP) is adjusted to exclude unrealized gains and losses on MBS acquired by the Company in the secondary market but is not adjusted to exclude unrealized gains and losses<br>on MBS retained by Ready Capital as part of its loan origination businesses, where the Company transfers originated loans into an MBS securitization and the Company retains an interest in the securitization. In calculating Distributable Earnings, the<br>Company does not adjust Net Income (in accordance with U.S. GAAP) to take into account unrealized gains and losses on MBS retained by us as part of the loan origination businesses because the unrealized gains and losses that are generated in the<br>loan origination and securitization process are considered to be a fundamental part of this business and an indicator of the ongoing performance and credit quality of the Company’s historical loan originations. In calculating Distributable Earnings, Net<br>Income (in accordance with U.S. GAAP) is adjusted to exclude realized gains and losses on certain MBS securities considered to be non-distributable. Certain MBS positions are considered to be non-distributable due to a variety of reasons which may<br>include collateral type, duration, and size. In 2016, the Company liquidated the majority of its MBS portfolio from distributable earnings to fund recurring operating segments.<br>In addition, in calculating Distributable Earnings, Net Income (in accordance with U.S. GAAP) is adjusted to exclude unrealized gains or losses on residential MSRs, held at fair value. The Company treats its commercial MSRs and residential MSRs as<br>two separate classes based on the nature of the underlying mortgages and the treatment of these assets as two separate pools for risk management purposes. Servicing rights relating to the Company’s small business commercial business are<br>accounted for under ASC 860, Transfer and Servicing, while the Company’s residential MSRs are accounted for under the fair value option under ASC 825, Financial Instruments. In calculating Distributable Earnings, the Company does not exclude<br>realized gains or losses on either commercial MSRs or residential MSRs, held at fair value, as servicing income is a fundamental part of Ready Capital’s business and is an indicator of the ongoing performance.<br>To qualify as a REIT, the Company must distribute to its stockholders each calendar year at least 90% of its REIT taxable income (including certain items of non-cash income), determined without regard to the deduction for dividends paid and excluding<br>net capital gain. There are certain items, including net income generated from the creation of MSRs, that are included in distributable earnings but are not included in the calculation of the current year’s taxable income. These differences may result in<br>certain items that are recognized in the current period’s calculation of distributable earnings not being included in taxable income, and thus not subject to the REIT dividend distribution requirement until future years.<br>(In thousands, except share data)<br>Net Income $ 35,363 $ 27,559 $ 28,947 $ 30,904 $ 46,535<br>Reconciling items:<br>Unrealized gain on mortgage servicing rights $ 4,688 $ 4,087 $ (15,356) $ 4,699 $ (147)<br>Impact of ASU 2016-13 on accrual loans (7,248) (3,587) (29) 4,035 (1,329)<br>Non-recurring REO impairment (114) 445 — 510 (10)<br>Merger transaction costs and other non-recurring expenses 998 1,323 7,263 2,971 5,485<br>Total reconciling items $ (1,676) $ 2,268 $ (8,122) $ 12,215 $ 3,999<br>Distributable earnings before income taxes $ 33,687 $ 29,827 $ 20,825 $ 43,119 $ 50,534<br>Income tax adjustments (1,561) (1,023) 3,883 (1,691) (1,169)<br>Distributable earnings $ 32,126 $ 28,804 $ 24,708 $ 41,428 $ 49,365<br>Less: Distributable earnings attributable to non-controlling interests $ 731 $ 677 $ 563 $ 595 $ 802<br>Less: Income attributable to participating shares 339 305 376 392 445<br>Less: Dividends on preferred stock — — 281 3,224 1,999<br>Distributable earnings attributable to Common Stockholders $ 31,056 $ 27,822 $ 23,488 $ 37,217 $ 46,119<br>DIstributable earnings per share $ 0.57 $ 0.51 $ 0.41 $ 0.52 $ 0.64<br>Weighted average common shares outstanding 54,626,995 54,338,209 56,817,632 71,221,806 71,618,168<br>Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 | |||
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