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): February 24, 2022
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) |
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| | ☐ | 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)) |
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| | ☐ | 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 PRE | 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 February 24, 2022, Ready Capital Corporation (the “Company”) issued an earnings release announcing the financial results for the quarter ended December 31, 2021. A copy of the earnings release is attached as Exhibit 99.1 hereto and incorporated herein by reference.
On February 24, 2022, 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 February 24, 2022 | |
| | | |
| 99.2 | | Supplemental Financial Information for the quarter ended December 31, 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: February 24, 2022
Exhibit 99.1
READY CAPITAL CORPORATION REPORTS FOURTH QUARTER 2021 RESULTS
| - | GAAP EARNINGS PER COMMON SHARE OF $0.69 - |
|---|---|
| - | DISTRIBUTABLE EARNINGS PER COMMON SHARE OF $0.67 - |
| --- | --- |
| - | DISTRIBUTABLE RETURN ON AVERAGE STOCKHOLDERS’ EQUITY OF 17.8% - |
| --- | --- |
New York, New York, February 24, 2022 / 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 December 31, 2021.
“Ready Capital’s record fourth quarter results concluded an exceptional year highlighted by record originations in our SBC and SBA 7(a) lending businesses, growth in our equity and debt capitalization and strong credit performance,” commented Thomas Capasse, Ready Capital’s Chairman and Chief Executive Officer. “Our unique business model, diversified revenue streams and increased scale position the Company well to continue to deliver results for our shareholders going forward.”
Fourth Quarter Highlights
| ● | Total investments of $3.3 billion, including $2.3 billion of SBC originations and acquisitions, $876.3 million of residential mortgage loans, and $135.7 million of U.S. Small Business Administration 7(a) loans |
|---|---|
| ● | Closed a $927.2 million commercial mortgage collateralized loan obligation with an 81% advance rate and a 153bps weighted average cost |
| --- | --- |
| ● | Issued $350.0 million of 4.50% Senior Secured Notes due 2026 and $110.0 million of 5.50% Senior Unsecured Notes due 2028 |
| --- | --- |
| ● | Declared and paid dividend of $0.42 per share in cash with distributable earnings coverage of the common dividend at 1.6x |
| --- | --- |
| ● | Adjusted net book value of $15.35 per share of common stock as of December 31, 2021, 2.5% year-over-year growth |
| --- | --- |
Full Year Highlights
| ● | GAAP earnings per common share of $2.17 and distributable earnings per common share of $2.29 |
|---|---|
| ● | Distributable return on average stockholders’ equity of 15.4% |
| --- | --- |
| ● | Total SBC originations and acquisitions of $5.5 billion, 298% year-over-year growth |
| --- | --- |
| ● | Total SBA 7(a) originations of $480.8 million, 122% year-over-year growth |
| --- | --- |
| ● | $3.4 billion in equity and debt capital raised to support investment pipeline |
| --- | --- |
Subsequent Events
| ● | In January 2022, completed a public offering of 7 million shares of common stock for total gross proceeds of $108.9 million |
|---|
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”) not retained by us as part of our loan origination business, realized gains and losses on sales of certain MBS, unrealized gains and losses related to residential mortgage servicing rights (“MSR”), 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 December 31, 2021 | |
| Net Income | $ | 53,588 |
| Reconciling items: | | |
| Unrealized gain on mortgage servicing rights | | (6,119) |
| Impact of ASU 2016-13 on accrual loans | | 845 |
| Non-recurring REO recovery | | (1,441) |
| Merger transaction costs and other non-recurring expenses | | 5,036 |
| Total reconciling items | $ | (1,679) |
| Income tax adjustments | | 626 |
| Distributable earnings | $ | 52,535 |
| Less: Distributable earnings attributable to non-controlling interests | | 364 |
| Less: Income attributable to participating shares | | 2,376 |
| Distributable earnings attributable to common stockholders | $ | 49,795 |
| Distributable earnings per common share - basic and diluted | $ | 0.67 |
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, February 25, 2021 at 8:30 am ET to provide a general business update and discuss the financial results for the quarter ended December 31, 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, go to the site at least 15 minutes prior to the scheduled start time in order to register, 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 #: 13726423
The playback can be accessed through March 11, 2022.
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-sized balance commercial loans. The Company specializes in loans backed by commercial real estate, including agency multifamily, investor and bridge as well as U.S. Small Business Administration loans under its Section 7(a) program. Headquartered in New York, New York, the Company employs over 600 professionals nationwide.
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) | December 31, 2021 | December 31, 2020 | ||||
| Assets | | | | | | |
| Cash and cash equivalents | | $ | 229,531 | | $ | 138,975 |
| Restricted cash | | 51,569 | | 47,697 | ||
| Loans, net (including $10,766 and $13,795 held at fair value) | | 2,915,446 | | 1,550,624 | ||
| Loans, held for sale, at fair value | | 552,935 | | 340,288 | ||
| Paycheck Protection Program loans (including $3,243 and $74,931 held at fair value) | | 870,352 | | 74,931 | ||
| Mortgage backed securities, at fair value | | 99,496 | | 88,011 | ||
| Loans eligible for repurchase from Ginnie Mae | | | 94,111 | | | 250,132 |
| Investment in unconsolidated joint ventures (including $8,894 held at fair value) | | | 141,148 | | | 79,509 |
| Purchased future receivables, net | | | 7,872 | | | 17,308 |
| Derivative instruments | | 7,022 | | 16,363 | ||
| Servicing rights (including $120,142 and $76,840 held at fair value) | | 204,599 | | 114,663 | ||
| Real estate owned, held for sale | | | 42,288 | | | 45,348 |
| Other assets | | 172,098 | | 89,503 | ||
| Assets of consolidated VIEs | | | 4,145,564 | | | 2,518,743 |
| Total Assets | | $ | 9,534,031 | | $ | 5,372,095 |
| Liabilities | | | | | | |
| Secured borrowings | | 2,517,600 | | 1,294,243 | ||
| Paycheck Protection Program Liquidity Facility (PPPLF) borrowings | | 941,505 | | 76,276 | ||
| Securitized debt obligations of consolidated VIEs, net | | 3,214,303 | | 1,905,749 | ||
| Convertible notes, net | | | 113,247 | | | 112,129 |
| Senior secured notes, net | | 342,035 | | 179,659 | ||
| Corporate debt, net | | | 441,817 | | | 150,989 |
| Guaranteed loan financing | | 345,217 | | 401,705 | ||
| Contingent consideration | | | 16,400 | | | — |
| Liabilities for loans eligible for repurchase from Ginnie Mae | | | 94,111 | | | 250,132 |
| Derivative instruments | | 410 | | 11,604 | ||
| Dividends payable | | 34,348 | | 19,746 | ||
| Accounts payable and other accrued liabilities | | 184,079 | | 135,655 | ||
| Total Liabilities | | $ | 8,245,072 | | $ | 4,537,887 |
| Preferred stock Series C, liquidation preference $25.00 per share (refer to Note 21) | | | 8,361 | | | — |
| | | | | | | |
| Commitments & contingencies (refer to Note 25) | | | | | | |
| | | | | | | |
| Stockholders’ Equity | | | | | | |
| Preferred stock Series E, liquidation preference $25.00 per share (refer to Note 21) | | | 111,378 | | | — |
| Common stock, $0.0001 par value, 500,000,000 shares authorized, 75,838,050 and 54,368,999 shares issued and outstanding, respectively | | 8 | | 5 | ||
| Additional paid-in capital | | 1,161,853 | | 849,541 | ||
| Retained earnings (deficit) | | | 8,598 | | | (24,203) |
| Accumulated other comprehensive loss | | (5,733) | | (9,947) | ||
| Total Ready Capital Corporation equity | | 1,276,104 | | 815,396 | ||
| Non-controlling interests | | 4,494 | | 18,812 | ||
| Total Stockholders’ Equity | | $ | 1,280,598 | | $ | 834,208 |
| Total Liabilities, Redeemable Preferred Stock, and Stockholders’ Equity | | $ | 9,534,031 | | $ | 5,372,095 |
READY CAPITAL CORPORATION
UNAUDITED CONSO LIDATED STATEMENTS OF INCOME
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Three Months Ended | For the Year Ended | |||
| (in thousands, except share data) | **** | December 31, 2021 | **** | December 31, 2021 | ||
| Interest income | | $ | 121,942 | | $ | 403,496 |
| Interest expense | | (57,249) | | (213,561) | ||
| Net interest income before provision for loan losses | | $ | 64,693 | | $ | 189,935 |
| Provision for loan losses | | (961) | | (8,049) | ||
| Net interest income after provision for loan losses | | $ | 63,732 | | $ | 181,886 |
| Non-interest income | | | | | | |
| Residential mortgage banking activities | | | 21,928 | | | 137,297 |
| Net realized gain on financial instruments and real estate owned | | | 19,642 | | | 68,881 |
| Net unrealized gain on financial instruments | | | 8,081 | | | 39,377 |
| Servicing income, net of amortization and impairment of $3,244 and $10,588 | | 10,209 | | 48,015 | ||
| Income on purchased future receivables, net of allowance for doubtful accounts of $36 and $1,296 | | | 2,323 | | | 10,257 |
| Income on unconsolidated joint ventures | | | 816 | | | 6,916 |
| Other income | | 3,452 | | | 9,009 | |
| Total non-interest income | | $ | 66,451 | | $ | 319,752 |
| Non-interest expense | | | | | | |
| Employee compensation and benefits | | (18,481) | | | (90,065) | |
| Allocated employee compensation and benefits from related party | | (2,805) | | (12,031) | ||
| Variable expenses on residential mortgage banking activities | | (13,847) | | (75,133) | ||
| Professional fees | | (3,585) | | (16,339) | ||
| Management fees – related party | | (2,867) | | (10,928) | ||
| Incentive fees – related party | | (2,358) | | (5,419) | ||
| Loan servicing expense | | (8,904) | | (29,983) | ||
| Transaction related expenses | | | (4,080) | | | (14,282) |
| Other operating expenses | | (12,801) | | (58,401) | ||
| Total non-interest expense | | $ | (69,728) | | $ | (312,581) |
| Income before provision for income taxes | | | 60,455 | | | 189,057 |
| Income tax provision | | (6,867) | | (29,083) | ||
| Net income | | $ | 53,588 | | $ | 159,974 |
| Less: Dividends on preferred stock | | | 1,999 | | | 7,503 |
| Less: Net income attributable to non-controlling interest | | 371 | | 2,230 | ||
| Net income attributable to Ready Capital Corporation | | $ | 51,218 | | $ | 150,241 |
| | | | | | | |
| Earnings per common share - basic | | $ | 0.69 | | $ | 2.17 |
| Earnings per common share - diluted | | $ | 0.68 | | $ | 2.17 |
| | | | | | | |
| Weighted-average shares outstanding | | | | | ||
| Basic | | | 74,163,951 | | | 68,511,578 |
| Diluted | | | 74,326,672 | | | 68,660,906 |
| | | | | | | |
| Dividends declared per share of common stock | | $ | 0.42 | | $ | 1.66 |
READY CAPITAL CORPORATION
UNAUDITED SEGMENT REPORTING
FOR THE THREE MONTHS ENDED DECEMBER 31, 2021
| | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | SBC | | Small | | Residential | | | | | | | | ||
| | | Lending and | | Business | | Mortgage | | Corporate- | | | **** | |||||
| (in thousands) | | Acquisitions | | Lending | | Banking | | Other | | Consolidated | **** | |||||
| Interest income | | $ | 83,496 | | $ | 36,437 | | $ | 2,009 | | $ | — | | $ | 121,942 | |
| Interest expense | | | (47,189) | | | (7,174) | | | (2,196) | | | (690) | | | (57,249) | |
| Net interest income before provision for loan losses | | $ | 36,307 | | $ | 29,263 | | $ | (187) | | $ | (690) | | $ | 64,693 | |
| Provision for loan losses | | | (760) | | | (201) | | | — | | | — | | (961) | | |
| Net interest income after provision for loan losses | | $ | 35,547 | | $ | 29,062 | | $ | (187) | | $ | (690) | | $ | 63,732 | |
| Non-interest income | | | | | | | | | | | | | | | | |
| Residential mortgage banking activities | | $ | — | | $ | — | | $ | 21,928 | | $ | — | | $ | 21,928 | |
| Net realized gain on financial instruments and real estate owned | | | 9,356 | | | 10,286 | | | — | | | — | | | 19,642 | |
| Net unrealized gain (loss) on financial instruments | | | 2,020 | | | (56) | | | 6,117 | | | — | | | 8,081 | |
| Servicing income, net | | | 593 | | | 1,544 | | | 8,072 | | | — | | | 10,209 | |
| Income on purchased future receivables, net | | | — | | | 2,323 | | | — | | | — | | | 2,323 | |
| Income on unconsolidated joint ventures | | | 816 | | | — | | | — | | | — | | | 816 | |
| Other income (loss) | | | 4,160 | | | (2,777) | | | 2,069 | | | — | | | 3,452 | |
| Total non-interest income | | $ | 16,945 | | $ | 11,320 | | $ | 38,186 | | $ | — | | $ | 66,451 | |
| Non-interest expense | | | | | | | | | | | | | | | | |
| Employee compensation and benefits | | | (3,002) | | | (10,660) | | | (3,859) | | | (960) | | (18,481) | | |
| Allocated employee compensation and benefits from related party | | | (277) | | | — | | | — | | | (2,528) | | (2,805) | | |
| Variable expenses on residential mortgage banking activities | | | — | | | — | | | (13,847) | | | — | | | (13,847) | |
| Professional fees | | | (1,033) | | | (1,104) | | | (1,022) | | | (426) | | (3,585) | | |
| Management fees – related party | | | — | | | — | | | — | | | (2,867) | | (2,867) | | |
| Incentive fees – related party | | | — | | | — | | | — | | | (2,358) | | (2,358) | | |
| Loan servicing expense | | | (6,883) | | | (418) | | | (1,603) | | | — | | (8,904) | | |
| Transaction related expenses | | | — | | | — | | | — | | | (4,080) | | | (4,080) | |
| Other operating expenses | | | (5,321) | | | (4,168) | | | (2,173) | | | (1,139) | | (12,801) | | |
| Total non-interest expense | | $ | (16,516) | | $ | (16,350) | | $ | (22,504) | | $ | (14,358) | | $ | (69,728) | |
| Income (loss) before provision for income taxes | | $ | 35,976 | | $ | 24,032 | | $ | 15,495 | | $ | (15,048) | | $ | 60,455 | |
| Total assets | | $ | 7,106,206 | | $ | 1,558,641 | | $ | 482,185 | | $ | 386,999 | | $ | 9,534,031 | |
READY CAPITAL CORPORATION
UNAUDITED SEGMENT REPORTING
For The YEAR ENDED December 31, 2021
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | SBC | | Small | | Residential | | | | | | | ||
| | | Lending and | | Business | | Mortgage | | Corporate- | | | |||||
| (in thousands) | | Acquisitions | | Lending | | Banking | | Other | | Consolidated | |||||
| Interest income | | $ | 278,455 | | $ | 116,741 | | $ | 8,300 | | $ | — | | $ | 403,496 |
| Interest expense | | | (164,797) | | | (36,872) | | | (9,193) | | | (2,699) | | | (213,561) |
| Net interest income before provision for loan losses | | $ | 113,658 | | $ | 79,869 | | $ | (893) | | $ | (2,699) | | $ | 189,935 |
| Provision for loan losses | | | (7,387) | | | (662) | | | — | | | — | | (8,049) | |
| Net interest income after provision for loan losses | | $ | 106,271 | | $ | 79,207 | | $ | (893) | | $ | (2,699) | | $ | 181,886 |
| Non-interest income | | | | | | | | | | | | | | | |
| Residential mortgage banking activities | | $ | — | | $ | — | | $ | 137,297 | | $ | — | | $ | 137,297 |
| Net realized gain on financial instruments and real estate owned | | | 24,813 | | | 44,068 | | | — | | | — | | | 68,881 |
| Net unrealized gain on financial instruments | | | 19,457 | | | 2,999 | | | 16,921 | | | — | | | 39,377 |
| Servicing income, net | | | 3,113 | | | 14,510 | | | 30,392 | | | — | | | 48,015 |
| Income on purchased future receivables, net | | | — | | | 10,257 | | | — | | | — | | 10,257 | |
| Income on unconsolidated joint ventures | | | 6,916 | | | — | | | — | | | — | | | 6,916 |
| Other income (loss) | | | 13,002 | | | (6,231) | | | 2,153 | | | 85 | | | 9,009 |
| Total non-interest income | | $ | 67,301 | | $ | 65,603 | | $ | 186,763 | | $ | 85 | | $ | 319,752 |
| Non-interest expense | | | | | | | | | | | | | | | |
| Employee compensation and benefits | | $ | (16,582) | | $ | (36,757) | | $ | (32,973) | | $ | (3,753) | | $ | (90,065) |
| Allocated employee compensation and benefits from related party | | | (1,203) | | | — | | | — | | | (10,828) | | (12,031) | |
| Variable expenses on residential mortgage banking activities | | | — | | | — | | | (75,133) | | | — | | (75,133) | |
| Professional fees | | | (4,064) | | | (3,034) | | | (2,951) | | | (6,290) | | (16,339) | |
| Management fees – related party | | | — | | | — | | | — | | | (10,928) | | (10,928) | |
| Incentive fees – related party | | | — | | | — | | | — | | | (5,419) | | (5,419) | |
| Loan servicing expense | | | (19,680) | | | (886) | | | (9,417) | | | — | | (29,983) | |
| Transaction related expenses | | | — | | | — | | | — | | | (14,282) | | | (14,282) |
| Other operating expenses | | | (21,997) | | | (23,377) | | | (8,498) | | | (4,529) | | (58,401) | |
| Total non-interest expense | | $ | (63,526) | | $ | (64,054) | | $ | (128,972) | | $ | (56,029) | | $ | (312,581) |
| Income (loss) before provision for income taxes | | $ | 110,046 | | $ | 80,756 | | $ | 56,898 | | $ | (58,643) | | $ | 189,057 |
| Total assets | | $ | 7,106,206 | | $ | 1,558,641 | | $ | 482,185 | | $ | 386,999 | | $ | 9,534,031 |
Exhibit 99.2
| SUPPLEMENTAL FINANCIAL DATAQ4 2021 | |||
|---|---|---|---|
| 2DisclaimerThispresentationcontainsstatementsthatconstitute“forward-lookingstatements,”assuchtermisdefinedinSection27AoftheSecuritiesActof1933,asamended,andSection21EoftheSecuritiesExchangeActof1934,asamended,andsuchstatementsareintendedtobecoveredbythesafeharborprovidedbythesame.Thesestatementsarebasedonmanagement’scurrentexpectationsandbeliefsandaresubjecttoanumberoftrendsanduncertaintiesthatcouldcauseactualresultstodiffermateriallyfromthosedescribedintheforward-lookingstatements;ReadyCapitalCorporation(the“Company”)cangivenoassurancethatitsexpectationswillbeattained.FactorsthatcouldcauseactualresultstodiffermateriallyfromtheCompany’sexpectationsincludethosesetforthintheRiskFactorssectionofthemostrecentAnnualReportonForm10-KfiledwiththeSECandotherreportsfiledbytheCompanywiththeSEC,copiesofwhichareavailableontheSEC’swebsite,www.sec.gov.TheCompanyundertakesnoobligationtoupdatethesestatementsforrevisionsorchangesafterthedateofthisrelease,exceptasrequiredbylaw.Thispresentationincludescertainnon-GAAPfinancialmeasures,includingDistributableearnings.Thesenon-GAAPfinancialmeasuresshouldbeconsideredonlyassupplementalto,andnotassuperiorto,financialmeasuresinaccordancewithGAAP.PleaserefertotheAppendixforthemostrecentGAAPinformation.Thispresentationalsocontainsmarketstatisticsandindustrydatawhicharesubjecttouncertaintyandarenotnecessarilyreflectiveofmarketconditions.ThesehavebeenderivedfromthirdpartysourcesandhavenotbeenindependentlyverifiedbytheCompanyoritsaffiliates.Allmaterialpresentediscompiledfromsourcesbelievedtobereliableandcurrent,butaccuracycannotbeguaranteed.AlldataisasofDecember31,2021,unlessotherwisenoted. | |||
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| 3Fourth Quarter 2021 Results<br>Net income of $53.6 million1, or $0.69 per common share Distributable earnings of $52.5 million1, or $0.67 per common shareDeclared dividend of $0.42 per common share<br>Earnings / Dividends<br>Return on Equity2of 18.1% Distributable Return on Equity3of 17.8%Dividend Yield4of 10.7%<br>Returns<br>CREoriginationsandacquisitionsof$2.3billionSBAloanoriginationsof$135.7millionResidentialmortgageloanoriginationsof$876.3millionClosedinexcessof$1.5billioninbridgefinancingduringthequarter,morethan$3.7billionfortheyearRedStonehasclosed$548millionoffinancingssincebeingacquired<br>Loan Originations5/ Acquisitions1.Before dividends on preferred securities and inclusive of non-controlling interest2.Return on equity is an annualized percentage equal to quarterly net income over the average monthly total stockholders’ equity for the period3.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 “Distributable Earnings Reconciliation by Quarter” slide for a reconciliation of GAAP Net Income to Distributable Earnings4.Q4 dividend yield for the period is based on the 12/31/2021 closing share price of $15.635.Represents fully committed amounts | |||
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| 4Fourth Quarter 2021 Results (continued)<br>Total liquidity of $246million1including cash, anticipated warehouse advances, principal and interest receivable from servicers, and anticipated proceeds from available-for-sale assets<br>Current Liquidity<br>Closed$927.2millioncommercialmortgagecollateralizedloanobligationwiththelimitedrighttoacquireallorpartof$135.2millioninfuturefundingClosedanunderwrittenpublicofferingof$110.0millioninaggregateprincipalamountof5.50%seniorunsecurednotesdue2028Closedaprivateplacementof$350.0millioninaggregateprincipalamountof4.50%SeniorSecuredNotesdue2026.TheCompanyusedaportionofthenetproceedstoredeemalloftheoutstanding7.50%SeniorSecuredNotesdue2022.<br>Capital Markets<br>Adjustednetbookvalue2of$15.35percommonshareRecourseleverageratioof2.7xconsistingof1.8xofwarehousecreditfacilitiesandborrowingsunderrepurchaseagreements,0.7xofcorporatedebtand0.2xofagencysecuredborrowings<br>Balance Sheet<br>Enteredintoadefinitivemergeragreementtoacquireaseriesofprivatelyheld,realestatestructuredfinanceopportunitiesfunds,withafocusonconstructionlending,managedbyMRECManagement,LLC.ThemergerisexpectedtocloseduringQ12022.<br>Mosaic Merger1.Liquidity balance as of February 24, 20222.Excludes the equity component of our 2017 convertible note issuance | |||
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| 52021 Highlights<br>EARNINGS ($ in millions)<br>RETURN ON EQUITY<br>INVESTMENT ACTIVITY ($ in millions)<br>BALANCE SHEET GROWTH ($ in millions)<br>$61.5$75.1$46.1$160.0$58.7$67.3$101.4$168.0$0$50$100$150$2002018201920202021<br>Net income<br>Distributable earnings<br>10.8%10.5%5.6%14.6%10.3%9.4%12.3%15.4%11.4%10.9%10.4%11.2%0%5%10%<br>15%2018201920202021<br>Return on equity<br>Distributable return on equity<br>Dividend Yield<br>$1,568.7$2,425.2$1,372.9$5,468.9$213.0$216.3$216.6$480.8$1,778.8$2,105.6$4,246.4$4,208.6$0$2,000$4,000$6,000<br>$8,000$10,0002018201920202021<br>SBC Lending & Acquisitions<br>Small Business Lending<br>Residential Mortgage Banking<br>$3,036.8$4,977.0$5,297.2$8,663.7$564.1$844.8$834.2$1,280.6$0$3,000$6,000$9,0002018201920202021<br>Assets<br>Equity1.Before dividends on preferred securities and inclusive of non-controlling interest2.Return on equity is an annualized percentage equal to quarterly net income over the average monthly total stockholders’ equity for the period3.Distributable return on equity is an annualized percentage equal to distributable earnings over the average monthly total stockholders’ equity for the period. Refer to the “Distributable Earnings Reconciliation” slide for a reconciliation of GAAP Net Income to Distributable Earnings4.Dividend yield is based on the respective year end closing share price5.Excludes the impact of Paycheck Protection Program loans112345 | |||
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| 6Return on Equity1.Leveredyieldincludesinterestincome,accretionofdiscount,MSRcreation,incomefromunconsolidatedjointventures,realizedgains(losses)onloansheldforsale,unrealizedgains(losses)onloansheldforsaleandservicingincomenetofinterestexpenseandamortizationofdeferredfinancingcostsonanannualizedbasis.2.GAAPROEisbasedonGAAPNetIncome,whileDistributableROEisbasedonDistributableEarnings,whichadjustsGAAPNetIncomeforcertainitemsdetailedonthe“DistributableEarningsReconciliation”slide.3.ROEbasedonnetincomebeforetaxoftheResidentialMortgageBankingbusinesslinedividedbythebusinessline’saveragemonthlyequity. | |||
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| 7Diversified, Complementary, & Scalable Platforms<br>13%13%50%2%17%5%<br>Acquisitions<br>SBC Originations - Fixed rate<br>SBC Originations - Bridge<br>SBC Originations - Freddie Mac<br>Small Business Lending<br>Residential Mortgage Banking<br>PORTFOLIO BREAKDOWN1<br>REVENUE BREAKDOWN2 ($ in thousands)<br>$5,752$4,519$29,481$11,032$40,763$26,673$0$5,000$10,000$15,000$20,000$25,000$30,000$35,000$40,000$45,000AcquisitionsSBCOriginations- Fixed rateSBCOriginations- BridgeSBCOriginations- FreddieMacSmallBusinessLendingResidentialMortgageBanking1.Assetsincludeloans,MBS,servicingassets,JVinvestments,realestateowned,andpurchasedfuturereceivables.2.BasedonQTDDistributableEarningsincludinginterestincome,accretionofdiscount,MSRcreation,incomefromunconsolidatedjointventures,realizedgains(losses)onloansheldforsale,unrealizedgains(losses)onloansheldforsaleandservicingincomenetofinterestexpenseandamortizationofdeferredfinancingcostsonanannualizedbasis. | |||
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| 8SBC and SBA Investment by Product Type<br>$65.6$52.0$148.7$144.3$135.7$34.8$6.0$53.6$104.9$98.2$132.1$164.4$240.5$135.5$169.3$243.2$652.8$807.2$730.4$1,529.2$140.2$168.0$29.0$136.2$443.8$0$400$800$1,200<br>$1,600<br>$2,000<br>$2,400Q4'20Q1'21Q2'21Q3'21Q4'21<br>SBA<br>Fixed Rate/CMBS<br>Freddie Mac<br>Transitional<br>Acquired<br>Other<br>$2,405.2<br>$1,419.3<br>$1,250.0<br>$875.21.Origination volumes are based on fully committed amounts in millions<br>QUARTERLY GROWTH1<br>$615.9 | |||
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| 9SBC Lending and Acquisitions1.Excludes joint venture investments2.56.9% of fixed rate loans match funded3. Calculated on unpaid principal balance4. Includes realized and unrealized gains (losses) on loans held for sale and MSR creation5. Includes interest income, accretion of discount, and servicing income net of interest expense and amortization of deferredfinancing costs6. Includes originated SBC floating rate loans that are included in our RCMT securitization and therefore, categorized as fixed/cmbs<br>GROSS LEVERED YIELD<br>LOAN COUNT(1)UPBBOOK VALUEWA LTVWA COUPONFIXED/FLOAT(2)60%+(3)2,608$6.76B$6.71B65.5%4.6%26.4 / 73.6%1.8%ACQUIRED1,868$1.20B$1.19B44.4%5.1%52.1 / 47.9%3.0%TRANSITIONAL433$4.43B$4.39B72.0%4.2%0.5 / 99.5%1.0%FIXED/CMBS(6)291$1.09B$1.09B62.7%5.0%99.1 / 0.9%3.6%AGENCY16$43M$44M69.7%3.4%78.7 / 21.3%0.0%<br>CURRENT QUARTER HIGHLIGHTS<br>11.5%10.4%10.4%10.1%10.3%3.3%1.7%3.0%2.2%2.0%0%5%10%<br>15%Q4 2020Q1 2021Q2 2021Q3 2021Q4 2021<br>Income on joint venture investments and gains on loans, held for sale<br>Gross levered yield (ex. gains)45•FreddieMaccontinuedlowratesaveraging3.4%withamoneyuppipelineof$121.7million,including$23.5millionfundedinJanuary•CREmoneyuppipelineof$1.1billion,including$356.1millionfundedinJanuary | |||
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| 10Small Business Lending<br>GROSS LEVERED YIELD<br>LOAN COUNTUPBBOOK VALUEWA LTVWA COUPONFIXED/FLOAT60%+(1)1,886$657M$623M88.4%5.5%0.6 / 99.4%1.2%<br>CURRENT QUARTER HIGHLIGHTS<br>28.4%37.0%18.6%20.7%16.5%34.6%50.4%80.6%55.4%33.2%0%20%40%60%80%100%Q4 2020Q1 2021Q2 2021Q3 2021Q4 2021<br>Gross levered yield (ex. gains)<br>Gains on loans, held for sale1. Includes interest income, accretion of discount, and servicing income net of interest expense and amortization of deferredfinancing costs2. Includes realized and unrealized gains (losses) on loans held for sale and MSR creation21•SBAnetsalespremiumspeakingat14.9%andaveraging11.5%net,with19.6%ofSBAsalessoldforahigherfutureIOstrip•Currentmoneyuppipelineof$169.0million,including$20.6millionfundedinJanuary•After-taxPPPincomewas$16.1million | |||
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| 11Loan Portfolio Composition<br>21%15%13%10%41%Small Business Lending<br>Lodging<br>Doctors<br>Retail<br>Eating Place<br>Other1. Calculated on unpaid principal balance and excludes assets offset by guaranteed loan financing liabilities<br>58%11%9%8%14%SBC Lendingand Acquisitions<br>Multi-family<br>Retail<br>Office<br>Mixed-use<br>Other Investments<br>PROPERTY TYPE<br>GEOGRAPHY<br>20%14%8%7%7%44%SBC Lendingand Acquisitions<br>Texas<br>California<br>Arizona<br>New York<br>Georgia<br>Other<br>17%12%8%5%5%53%Small Business Lending<br>California<br>Texas<br>Florida<br>Washington<br>Georgia<br>Other | |||
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| 12<br>QUARTERLY ORIGINATIONS UPB $875.8MSEGMENT SNAPSHOTResidential Mortgage Banking<br>54%46%Production by Purpose<br>Purchased<br>Refinanced<br>QUARTERLY SALES UPB $921.7M<br>76%21%<br>3%<br>Sales by Investor<br>Fannie/Freddie<br>Ginnie Mae<br>Other<br>MSR PORTFOLIO UPDATE ($ in billions)<br>45%37%18%Production by Platform<br>Retail<br>Correspondent<br>Wholesale<br>$9.5$9.9$10.4$10.7$11.03.7%3.6%3.5%3.4%3.4%2.0%2.5%<br>3.0%<br>3.5%<br>4.0%$0$2$4$6$8$10$12Q4'20Q1'21Q2'21Q3'21Q4'21<br>UPB<br>WAC | |||
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| 13Loan Portfolio –Risk Rating<br>BUCKET1:VeryLowRiskofLoss:Neworiginationorcurrentwithstrongcreditmetrics(LTV/DSCR/DY).Noexpectedlosses.BUCKET2:LowRiskofLoss:Currentwithmaturity>6months.LowercreditmetricswithpossibilityofinclusiononCREFCwatchlist.Noexpectedlosses.BUCKET3:MediumRiskofLoss:Currentwithneartermmaturitiesorinforbearance.Lossunlikelywithnospecificreservesbooked.BUCKET4:HigherRisk:Loandelinquentorinmaturitydefault.Potentialissueswithsponsororbusinessplans.Minimallossespossibleandadequatelyreservedincurrentperiod.BUCKET5:Highestrisk:Loanindefaultorspecialservicing.Specificlossesidentifiedandadequatelyreservedforincurrentperiod.<br>RISK RATING DISTRIBUTION<br>CRITERIA<br>90%5%3%2%85%8%5%2%0%20%40%60%<br>80%100%1 & 2345<br>SBC<br>SBA<br>1.98<br>1.82 1.72 1.62 1.51<br>2.02<br>1.88<br>1.69<br>1.71<br>1.68 - 0.50<br> 1.00 1.50 2.00<br> 2.50Q4'20Q1'21Q2'21Q3'21Q4'21<br>SBC<br>SBA<br>RISK RATING DISTRIBUTION | |||
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| 18%15%13%13%13%2%3%2%2%3%2%1%1%1%7%7%6%6%9%30%44%49%47%39%42%30%28%31%36%Q4 2020Q1 2021Q2 2021Q3 2021Q4 2021<br>Funding Mix<br>Securitized debt oblications<br>Credit faciities and repurchase agreements<br>Senior secured notes and Corporate debt<br>Convertible senior notes<br>Preferred Equity<br>Common Stockholders Equity<br>14Capital Structure<br>HISTORICAL CAPITAL STRUCTURE<br>HISTORICAL LEVERAGE<br>Total Debt &<br>Eqty ($M)<br>$4,553$7,233$8,222$8,531$8,859<br>4.5x5.1x5.4x5.9x5.9x2.2x2.3x1.8x2.2x2.7x0.01.0<br>2.0<br>3.04.05.0<br>6.0Q4 2020Q1 2021Q2 2021Q3 2021Q4 2021<br>Debt-to-equity ratio<br>Recourse debt-to-equity ratio<br>Corporate Financing<br>(in millions)<br>Principal Balance<br>Coupon<br>Convertible Notes<br>$115.0<br>7.0%<br>Senior Secured Notes<br>$350.0<br>4.5%<br>Baby Bonds<br>$415.5<br>5.8%<br>Junior Subordinated Notes<br>$36.3<br>3.3%<br>Series C Convertible Preferred Stock<br>$8.4<br>6.3%<br>Series E Preferred Stock<br>$115.0<br>6.5%<br>Total<br>$1,040.2<br>5.6% | |||
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| 15Financial Snapshot<br>Investment Type<br>Average Carrying Value<br>(1)<br>Gross Yield(2)<br>Average Debt Balance<br>Debt Cost<br>(3)<br>Levered Yield<br>SBC Lending and Acquisitions<br>$ 6,304,317<br>5.4%$ 4,694,787<br>3.0%<br>12.6%<br>Small Business Lending<br>$ 304,962<br>22.6%$ 181,848<br>4.2%<br>49.7%<br>Total<br>$ 6,609,279<br>6.2%<br>$ 4,876,635<br>3.0%<br>18.0%<br>Book Equity Value Metrics<br>Common Stockholders' equity<br>$ 1,164,726<br>Common Stockholders' equity (adjusted)<br>(5)<br>$ 1,164,084<br>Total Common Shares outstanding<br>75,838,050<br>Net Book Value per Common Share<br>$ 15.36<br>Adjusted Net Book Value per Common Share<br>$ 15.35<br>Loan Portfolio Metrics (4)% Fixed vs Floating Rate<br>26% / 74%<br>% Originated vs Acquired<br>84% / 16%<br>Weighted Average LTV -SBC<br>66%<br>Weighted Average LTV -SBA<br>88%<br>Q4 2021 Earnings Data Metrics<br>Net income | Distributable earnings<br>$53,588 | $52,535<br>Earnings per share<br>-Basic and diluted<br>$0.69 | $0.68<br>Distributable Earnings per share<br>-Basic and<br>diluted<br>$0.67<br>Return on Equity per Common Share<br>18.1%<br>Distributable Return on Equity per Common<br>Share<br>17.8%<br>Dividend Yield<br>(6)<br>10.7%<br>Servicing Portfolio MetricsSBA servicing rights -UPB<br>$<br>856,188<br>SBA servicing rights-carrying value<br>$<br>22,157<br>Freddie Mac servicing rights -UPB<br>$<br>4,232,969<br>Freddie Mac servicing rights -carrying value<br>$<br>62,300<br>Residential servicing rights -UPB<br>$<br>10,995,685<br>Residential servicing rights -carrying value<br>$<br>120,142<br>1.Averagecarryingvalueincludesaveragequarterlycarryingvalueofloanandservicingassetbalances2.Grossyieldsincludeinterestincome,accretionofdiscount,MSRcreation,incomefromourunconsolidatedjointventure,realizedgains(losses)onloansheldforsale,unrealizedgains(losses)onloansheldforsaleandservicingincomenetofinterestexpenseandamortizationofdeferredfinancingcostsonanannualizedbasis.3.TheCompanyfinancestheassetsincludedintheInvestmentTypethroughsecuritizations,repurchaseagreements,warehousefacilitiesandbankcreditfacilities.Interestexpenseiscalculatedbasedoninterestexpenseanddeferredfinancingamortizationforthequarterended12/31/2021onanannualizedbasis.4.Excludesloans,heldforsale,atfairvalue5.Excludestheequitycomponentofour2017convertiblenoteissuance.6.Q4Dividendyieldfortheperiodisbasedonthe12/31/2021closingsharepriceof$15.63 |
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| APPENDIXAdditional Financial Information | |||
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| 17Balance Sheet by Quarter | |||
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| 18Statement of Income by Quarter<br>(In thousands, except share data)<br>Interest income$64,810 $73,371 $103,047 $105,136 $121,942<br>Interest expense (41,319) (50,761) (55,415) (50,136) (57,249)<br>Net interest income before provision for loan losses$23,491 $22,610 $47,632 $55,000 $64,693<br>Recovery of (provision for) loan losses 258 8 (5,517) (1,579) (961)<br>Net interest income after provision for loan losses$23,749 $22,618 $42,115 $53,421 $63,732<br>Non-interest income<br>Residential mortgage banking activities$59,963 $41,409 $36,690 $37,270 $21,928<br>Net realied gain on financial instruments and real estate oned9,795 8,846 17,183 23,210 19,642<br>Net unrealied gain (loss) on financial instruments(4,339) 20,996 4,612 5,688 8,081<br>Servicing income, net of amortiation and impairment 11,401 15,635 11,928 10,243 10,209<br>Income on purchased future receivables, net1,794 2,317 2,779 2,838 2,323<br>Income (loss) on unconsolidated oint ventures3,439 (809) 3,361 3,548 816<br>ther income (loss) 1,353 571 (688) 5,674 3,452<br>Total non-interest income$83,406 $88,965 $75,865 $88,471 $66,451<br>Non-interest expense<br>Employee compensation and benefits$(18,084) $(22,777) $(24,270) $(24,537) $(18,481)<br>Allocated employee compensation and benefits from related party (2,250) (2,123) (3,299) (3,804) (2,805)<br>Variable expenses on residential mortgage banking activities(27,016) (15,485) (21,421) (24,380) (13,847)<br>Professional fees (4,728) (2,982) (2,872) (6,900) (3,585)<br>Management fees related party (2,741) (2,693) (2,626) (2,742) (2,867)<br>Incentive fees related party (1,333) (286) (2,775) (2,358)<br>Loan servicing expense (6,734) (6,104) (6,851) (8,124) (8,904)<br>Transaction related expenses (6,307) (1,266) (2,629) (4,080)<br>ther operating expenses (12,442) (15,484) (17,190) (12,926) (12,801)<br>Total non-interest expense$(75,328) $(73,955) $(80,081) $(88,817) $(69,728)<br>Income before provision for income taxes$31,827 $37,628 $37,899 $53,075 $60,455<br>Income tax (provision) benefit (4,268) (8,681) (6,995) (6,540) (6,867)<br>Net income$27,559 $28,947 $30,904 $46,535 $53,588<br>Less: Dividends on preferred stock 281 3,224 1,999 1,999<br>Less: Net income attributable to non-controlling interest 648 659 444 756 371<br>Net income attributable to Ready Capital Corporation$26,911 $28,007 $27,236 $43,780 $51,218<br>Earnings per common share - basic$0.49 $0.49 $0.38 $0.61 $0.69<br>Earnings per common share - diluted$0.49 $0.49 $0.38 $0.60 $0.68<br>eighted-average shares outstanding - Basic54,338,209 56,817,632 71,221,806 71,618,168 74,163,951<br>eighted-average shares outstanding - Diluted54,420,064 56,843,448 71,385,603 71,787,228 74,326,672<br>Dividends declared per share of common stock$0.35 $0.40 $0.42 $0.42 $0.42<br>Q4 2020<br>Q1 2021<br>Q2 2021<br>Q3 2021<br>Q4 2021 | |||
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| 19Distributable Earnings Reconciliation by QuarterTheCompanybelievesthatthisnon-U.S.GAAPfinancialinformation,inadditiontotherelatedU.S.GAAPmeasures,providesinvestorsgreatertransparencyintotheinformationusedbymanagementinitsfinancialandoperationaldecision-making,includingthedeterminationofdividends.However,becauseDistributableEarningsisanincompletemeasureoftheCompany'sfinancialperformanceandinvolvesdifferencesfromnetincomecomputedinaccordancewithU.S.GAAP,itshouldbeconsideredalongwith,butnotasanalternativeto,theCompany'snetincomecomputedinaccordancewithU.S.GAAPasameasureoftheCompany'sfinancialperformance.Inaddition,becausenotallcompaniesuseidenticalcalculations,theCompany'spresentationofDistributableEarningsmaynotbecomparabletoothersimilarly-titledmeasuresofothercompanies.WecalculateDistributableearningsasGAAPnetincome(loss)excludingthefollowing:i)anyunrealizedgainsorlossesoncertainMBSnotretainedbyusaspartofourloanoriginationbusinessesii)anyrealizedgainsorlossesonsalesofcertainMBSiii)anyunrealizedgainsorlossesonResidentialMSRsiv)anyunrealizedcurrentnon-cashprovisionforcreditlossesonaccrualloansv)anyunrealizedgainsorlossesonde-designatedcashflowhedgesvi)one-timenon-recurringgainsorlosses,suchasgainsorlossesondiscontinuedoperations,bargainpurchasegains,ormergerrelatedexpensesIncalculatingDistributableEarnings,NetIncome(inaccordancewithU.S.GAAP)isadjustedtoexcludeunrealizedgainsandlossesonMBSacquiredbytheCompanyinthesecondarymarketbutisnotadjustedtoexcludeunrealizedgainsandlossesonMBSretainedbyReadyCapitalaspartofitsloanoriginationbusinesses,wheretheCompanytransfersoriginatedloansintoanMBSsecuritizationandtheCompanyretainsaninterestinthesecuritization.IncalculatingDistributableEarnings,theCompanydoesnotadjustNetIncome(inaccordancewithU.S.GAAP)totakeintoaccountunrealizedgainsandlossesonMBSretainedbyusaspartoftheloanoriginationbusinessesbecausetheunrealizedgainsandlossesthataregeneratedintheloanoriginationandsecuritizationprocessareconsideredtobeafundamentalpartofthisbusinessandanindicatoroftheongoingperformanceandcreditqualityoftheCompany’shistoricalloanoriginations.IncalculatingDistributableEarnings,NetIncome(inaccordancewithU.S.GAAP)isadjustedtoexcluderealizedgainsandlossesoncertainMBSsecuritiesconsideredtobenon-distributable.CertainMBSpositionsareconsideredtobenon-distributableduetoavarietyofreasonswhichmayincludecollateraltype,duration,andsize.In2016,theCompanyliquidatedthemajorityofitsMBSportfoliofromdistributableearningstofundrecurringoperatingsegments.<br>Inaddition,incalculatingDistributableEarnings,NetIncome(inaccordancewithU.S.GAAP)isadjustedtoexcludeunrealizedgainsorlossesonresidentialMSRs,heldatfairvalue.TheCompanytreatsitscommercialMSRsandresidentialMSRsastwoseparateclassesbasedonthenatureoftheunderlyingmortgagesandthetreatmentoftheseassetsastwoseparatepoolsforriskmanagementpurposes.ServicingrightsrelatingtotheCompany’ssmallbusinesscommercialbusinessareaccountedforunderASC860,TransferandServicing,whiletheCompany’sresidentialMSRsareaccountedforunderthefairvalueoptionunderASC825,FinancialInstruments.IncalculatingDistributableEarnings,theCompanydoesnotexcluderealizedgainsorlossesoneithercommercialMSRsorresidentialMSRs,heldatfairvalue,asservicingincomeisafundamentalpartofReadyCapital’sbusinessandisanindicatoroftheongoingperformance.ToqualifyasaREIT,theCompanymustdistributetoitsstockholderseachcalendaryearatleast90%ofitsREITtaxableincome(includingcertainitemsofnon-cashincome),determinedwithoutregardtothedeductionfordividendspaidandexcludingnetcapitalgain.Therearecertainitems,includingnetincomegeneratedfromthecreationofMSRs,thatareincludedindistributableearningsbutarenotincludedinthecalculationofthecurrentyear’staxableincome.Thesedifferencesmayresultincertainitemsthatarerecognizedinthecurrentperiod’scalculationofdistributableearningsnotbeingincludedintaxableincome,andthusnotsubjecttotheREITdividenddistributionrequirementuntilfutureyears. | |||
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