8-K
Ready Capital Corp (RC)
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): August 5, 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 August 5, 2021, Ready Capital Corporation (the “Company”) issued an earnings release announcing the financial results for the quarter ended June 30, 2021. A copy of the earnings release is attached as Exhibit 99.1 hereto and incorporated herein by reference.
On August 5, 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 August 5, 2021 | |
| | | |
| 99.2 | | Supplemental Financial Information for the quarter ended June 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: August 5, 2021
Exhibit 99.1
READY CAPITAL CORPORATION ANNOUNCES SECOND QUARTER 2021 RESULTS
New York, New York, August 5, 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 June 30, 2021. Ready Capital reported U.S. GAAP Net income for the three months ended June 30, 2021, of $30.9 million, or $0.38 per share of common stock, and Distributable Earnings (a non-GAAP financial measure) of $41.4 million, or $0.52 per share of common stock.
Second Quarter Results:
| ● | U.S. GAAP Net income of $30.9 million, or $0.38 per diluted share of common stock |
|---|---|
| ● | Distributable Earnings of $41.4 million, or $0.52 per diluted share of common stock |
| --- | --- |
| ● | Adjusted net book value of $14.87 per share of common stock as of June 30, 2021 |
| --- | --- |
| ● | Current liquidity of $428 million including cash, anticipated warehouse advances, principal and interest receivable from servicers and anticipated proceeds from available-for-sale assets |
| --- | --- |
| ● | Originated a record $1.1 billion of small-to-medium balance commercial loans |
| --- | --- |
| ● | Originated a record $145.7 million of loans guaranteed by the U.S. Small Business Administration (the “SBA”) under its Section 7(a) loan program |
| --- | --- |
| ● | Originated $1.1 billion of residential mortgage loans |
| --- | --- |
| ● | Declared and paid dividend of $0.42 per share in cash |
| --- | --- |
“Our second quarter performance is attributable to our continued effort to be the leading non-bank lender to both investors in and owner occupants of small balance commercial real estate properties. The record production in both our small balance commercial and SBA 7(a) loan programs is a result of the dedication of our employees and the recognition of Ready Capital’s brand in the market,” commented Thomas Capasse, Ready Capital’s Chairman and Chief Executive Officer. “We believe our business is positioned for growth and that our diversified model will continue to provide stable earnings for our shareholders.”
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 2016, the Company liquidated the majority of its MBS portfolio from distributable earnings to fund recurring operating segments.
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 following table reconciles Net Income computed in accordance with U.S. GAAP to Distributable Earnings:
| | | | | | | | | | | | | | | | | | | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | Three Months Ended June 30, 2021 | ||||||||||||||||||
| Net Income | $ | 30,904 | |||||||||||||||||
| Reconciling items: | | | |||||||||||||||||
| Unrealized (gain) loss on mortgage servicing rights | | 4,699 | |||||||||||||||||
| Impact of ASU 2016-13 on accrual loans | | 4,035 | |||||||||||||||||
| Non-recurring REO impairment | | 510 | |||||||||||||||||
| Merger transaction costs and other non-recurring expenses | | 2,971 | |||||||||||||||||
| Total reconciling items | $ | 12,215 | |||||||||||||||||
| **** Income tax adjustments | | (1,691) | |||||||||||||||||
| Distributable earnings | $ | 41,428 | |||||||||||||||||
| Less: Distributable earnings attributable to non-controlling interests | | 595 | |||||||||||||||||
| Less: Income attributable to participating shares | | 3,616 | |||||||||||||||||
| Distributable earnings attributable to common stockholders | $ | 37,217 | |||||||||||||||||
| Distributable Earnings per common share - basic and diluted | $ | 0.52 |
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 Thursday, August 5, 2021 at 8:30 am ET to provide a general business update and discuss the financial results for the quarter ended June 30, 2021. The webcast will be available on 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.
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: 1-800-920-3371
International: 1-303-223-0120
Conference Call Playback:
Domestic: 1-844-512-2921
International: 1-412-317-6671
Replay Pin #: 21996422
The playback can be accessed through August 20, 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) | June 30, 2021 | December 31, 2020 | ||||
| Assets | | | | | | |
| Cash and cash equivalents | | $ | 200,723 | | $ | 138,975 |
| Restricted cash | | 57,118 | | 47,697 | ||
| Loans, net (including $13,681 and $13,795 held at fair value) | | 2,222,284 | | 1,550,624 | ||
| Loans, held for sale, at fair value | | 470,184 | | 340,288 | ||
| Paycheck Protection Program loans (including $16,431 and $74,931 held at fair value) | | 2,178,586 | | 74,931 | ||
| Mortgage backed securities, at fair value | | 260,110 | | 88,011 | ||
| Loans eligible for repurchase from Ginnie Mae | | | 173,437 | | | 250,132 |
| Investment in unconsolidated joint ventures | | | 86,994 | | | 79,509 |
| Purchased future receivables, net | | | 7,213 | | | 17,308 |
| Derivative instruments | | 6,600 | | 16,363 | ||
| Servicing rights (including $100,820 and $76,840 held at fair value) | | 145,265 | | 114,663 | ||
| Real estate, held for sale | | | 71,267 | | | 45,348 |
| Other assets | | 120,214 | | 89,503 | ||
| Assets of consolidated VIEs | | | 2,976,897 | | | 2,518,743 |
| Total Assets | | $ | 8,976,892 | | $ | 5,372,095 |
| Liabilities | | | | | | |
| Secured borrowings | | 1,703,034 | | 1,294,243 | ||
| Paycheck Protection Program Liquidity Facility (PPPLF) borrowings | | 2,286,624 | | 76,276 | ||
| Securitized debt obligations of consolidated VIEs, net | | 2,309,217 | | 1,905,749 | ||
| Convertible notes, net | | | 112,684 | | | 112,129 |
| Senior secured notes, net | | 179,825 | | 179,659 | ||
| Corporate debt, net | | | 333,669 | | | 150,989 |
| Guaranteed loan financing | | 363,955 | | 401,705 | ||
| Liabilities for loans eligible for repurchase from Ginnie Mae | | | 173,437 | | | 250,132 |
| Derivative instruments | | 3,717 | | 11,604 | ||
| Dividends payable | | 33,968 | | 19,746 | ||
| Accounts payable and other accrued liabilities | | 180,018 | | 135,655 | ||
| Total Liabilities | | $ | 7,680,148 | | $ | 4,537,887 |
| Preferred stock Series C, liquidation preference $25.00 per share (refer to Note 21) | | | 8,361 | | | — |
| Stockholders’ Equity | | | | | | |
| Preferred stock Series B, D, and E, liquidation preference $25.00 per share (refer to Note 21) | | | 209,619 | | | — |
| Common stock, $0.0001 par value, 500,000,000 shares authorized, 71,231,422 and 54,368,999 shares issued and outstanding, respectively | | 7 | | 5 | ||
| Additional paid-in capital | | 1,090,162 | | 849,541 | ||
| Retained earnings (deficit) | | | (23,105) | | | (24,203) |
| Accumulated other comprehensive loss | | (7,157) | | (9,947) | ||
| Total Ready Capital Corporation equity | | 1,269,526 | | 815,396 | ||
| Non-controlling interests | | 18,857 | | 18,812 | ||
| Total Stockholders’ Equity | | $ | 1,288,383 | | $ | 834,208 |
| Total Liabilities, Redeemable Preferred Stock, and Stockholders’ Equity | | $ | 8,976,892 | | $ | 5,372,095 |
READY CAPITAL CORPORATION
UNAUDITED CONSO LIDATED STATEMENTS OF INCOME
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Three Months Ended June 30, | | Six Months Ended June 30, | ||||||||
| (In Thousands, except share data) | **** | 2021 | **** | 2020 | **** | 2021 | **** | 2020 | ||||
| Interest income | | $ | 103,047 | | $ | 63,211 | | $ | 176,418 | | $ | 132,762 |
| Interest expense | | (55,415) | | (43,408) | | (106,176) | | (90,338) | ||||
| Net interest income before provision for loan losses | | $ | 47,632 | | $ | 19,803 | | $ | 70,242 | | $ | 42,424 |
| Recovery of (provision for) loan losses | | (5,517) | | 591 | | (5,509) | | | (39,214) | |||
| Net interest income after recovery of (provision for) loan losses | | $ | 42,115 | | $ | 20,394 | | $ | 64,733 | | $ | 3,210 |
| Non-interest income | | | | | | | | | | | | |
| Residential mortgage banking activities | | | 36,690 | | | 80,564 | | | 78,099 | | | 117,233 |
| Net realized gain on financial instruments and real estate owned | | | 17,183 | | | 7,438 | | | 26,029 | | | 14,610 |
| Net unrealized gain (loss) on financial instruments | | | 4,612 | | | (13,744) | | | 25,608 | | | (47,178) |
| Servicing income, net of amortization and impairment of $2,604 and $4,546 for the three and six months ended June 30, 2021, and $1,277 and $3,001 for three and six months ended June 30, 2020, respectively | | 11,928 | | 8,982 | | 27,563 | | | 17,079 | |||
| Income on purchased future receivables, net of allowance for doubtful accounts of $587 and $1,540 for the three and six months ended June 30, 2021, and $1,771 and $8,688 for three and six months ended June 30, 2020, respectively | | | 2,779 | | | 5,586 | | | 5,096 | | | 9,069 |
| Income (loss) on unconsolidated joint ventures | | | 3,361 | | | 507 | | | 2,552 | | | (3,030) |
| Other income (loss) | | (688) | | 31,594 | | (117) | | | 35,667 | |||
| Total non-interest income | | $ | 75,865 | | $ | 120,927 | | $ | 164,830 | | $ | 143,450 |
| Non-interest expense | | | | | | | | | | | | |
| Employee compensation and benefits | | (24,270) | | (27,288) | | (47,047) | | | (46,224) | |||
| Allocated employee compensation and benefits from related party | | (3,299) | | (1,250) | | (5,422) | | | (2,500) | |||
| Variable expenses on residential mortgage banking activities | | (21,421) | | (36,446) | | (36,906) | | | (56,575) | |||
| Professional fees | | (2,872) | | (1,919) | | (5,854) | | | (4,475) | |||
| Management fees – related party | | (2,626) | | (2,666) | | (5,319) | | | (5,227) | |||
| Incentive fees – related party | | (286) | | (3,506) | | (286) | | | (3,506) | |||
| Loan servicing expense | | (6,851) | | (10,327) | | (12,955) | | | (15,898) | |||
| Merger related expenses | | | (1,266) | | | (11) | | | (7,573) | | | (58) |
| Other operating expenses | | (17,190) | | (17,745) | | (32,674) | | | (31,487) | |||
| Total non-interest expense | | $ | (80,081) | | $ | (101,158) | | $ | (154,036) | | $ | (165,950) |
| Income (loss) before provision for income taxes | | $ | 37,899 | | $ | 40,163 | | $ | 75,527 | | $ | (19,290) |
| Income tax (provision) benefit | | (6,995) | | | (5,500) | | (15,676) | | | 2,437 | ||
| Net income (loss) | | $ | 30,904 | | $ | 34,663 | | $ | 59,851 | | $ | (16,853) |
| Less: Dividends on preferred stock | | | 3,224 | | | — | | | 3,505 | | | — |
| Less: Net income (loss) attributable to non-controlling interest | | 444 | | | 810 | | 1,103 | | | (254) | ||
| Net income (loss) attributable to Ready Capital Corporation | | $ | 27,236 | | $ | 33,853 | | $ | 55,243 | | $ | (16,599) |
| | | | | | | | | | | | | |
| Earnings (loss) per common share - basic | | $ | 0.38 | | $ | 0.62 | | $ | 0.85 | | $ | (0.33) |
| Earnings (loss) per common share - diluted | | $ | 0.38 | | $ | 0.62 | | $ | 0.85 | | $ | (0.33) |
| | | | | | | | | | | | | |
| Weighted-average shares outstanding | | | | | | | | | ||||
| Basic | | | 71,221,806 | | | 53,980,451 | | | 64,059,509 | | | 52,982,246 |
| Diluted | | | 71,385,603 | | | 54,013,958 | | | 64,209,934 | | | 53,015,753 |
| | | | | | | | | | | | | |
| Dividends declared per share of common stock | | $ | 0.42 | | $ | 0.25 | | $ | 0.82 | | $ | 0.65 |
READY CAPITAL CORPORATION
UNAUDITED SEGMENT REPORTING
fOR THE three months ENDED JUNE 30, 2021
| | | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | **** | | **** | Small | **** | Residential | **** | | **** | | **** | |||||||
| | | Loan | | SBC | | Business | | Mortgage | | Corporate- | | | **** | ||||||
| (In Thousands) | | Acquisitions | | Originations | | Lending | | Banking | | Other | | Consolidated | **** | ||||||
| Interest income | | $ | 18,763 | | $ | 46,117 | | $ | 36,133 | | $ | 2,034 | | $ | — | | $ | 103,047 | |
| Interest expense | | | (12,036) | | | (27,104) | | | (13,980) | | | (2,295) | | | — | | | (55,415) | |
| Net interest income before provision for loan losses | | $ | 6,727 | | $ | 19,013 | | $ | 22,153 | | $ | (261) | | $ | — | | $ | 47,632 | |
| Recovery of (provision for) loan losses | | (74) | | | (4,649) | | | (794) | | | — | | | — | | (5,517) | | ||
| Net interest income after recovery of (provision for) loan losses | | $ | 6,653 | | $ | 14,364 | | $ | 21,359 | | $ | (261) | | $ | — | | $ | 42,115 | |
| Non-interest income | | | | | | | | | | | | | | | | | | | |
| Residential mortgage banking activities | | | — | | | — | | | — | | | 36,690 | | | — | | | 36,690 | |
| Net realized gain (loss) on financial instruments and real estate owned | | | (2,615) | | | 5,235 | | | 14,563 | | | — | | | — | | | 17,183 | |
| Net unrealized gain (loss) on financial instruments | | | 4,936 | | | 1,908 | | | 2,467 | | | (4,699) | | | — | | | 4,612 | |
| Other income (loss) | | | 1,217 | | | 1,536 | | | (3,550) | | | 38 | | | 71 | | | (688) | |
| Servicing income | | | — | | | 796 | | | 3,666 | | | 7,466 | | | — | | | 11,928 | |
| Income on purchased future receivables, net of allowance for doubtful accounts | | | — | | | — | | | 2,779 | | | — | | | — | | | 2,779 | |
| Income (loss) on unconsolidated joint ventures | | | 3,361 | | | — | | | — | | | — | | | — | | | 3,361 | |
| Total non-interest income | | $ | 6,899 | | $ | 9,475 | | $ | 19,925 | | $ | 39,495 | | $ | 71 | | $ | 75,865 | |
| Non-interest expense | | | | | | | | | | | | | | | | | | | |
| Employee compensation and benefits | | — | | | (4,294) | | | (9,335) | | | (10,127) | | | (514) | | (24,270) | | ||
| Allocated employee compensation and benefits from related party | | (331) | | | — | | | — | | | — | | | (2,968) | | (3,299) | | ||
| Variable expenses on residential mortgage banking activities | | | — | | | — | | | — | | | (21,421) | | | — | | | (21,421) | |
| Professional fees | | (373) | | | (620) | | | (704) | | | (144) | | | (1,031) | | (2,872) | | ||
| Management fees – related party | | — | | | — | | | — | | | — | | | (2,626) | | (2,626) | | ||
| Incentive fees – related party | | — | | | — | | | — | | | — | | | (286) | | (286) | | ||
| Loan servicing expense | | (1,345) | | | (3,276) | | | (144) | | | (2,086) | | | — | | (6,851) | | ||
| Merger related expenses | | | — | | | — | | | — | | | — | | | (1,266) | | | (1,266) | |
| Other operating expenses | | (2,809) | | | (3,833) | | | (7,405) | | | (2,213) | | | (930) | | (17,190) | | ||
| Total non-interest expense | | $ | (4,858) | | $ | (12,023) | | $ | (17,588) | | $ | (35,991) | | $ | (9,621) | | $ | (80,081) | |
| Income (loss) before provision for income taxes | | $ | 8,694 | | $ | 11,816 | | $ | 23,696 | | $ | 3,243 | | $ | (9,550) | | $ | 37,899 | |
| Total assets | | $ | 1,106,199 | | $ | 3,861,289 | | $ | 2,860,365 | | $ | 588,435 | | $ | 560,604 | | $ | 8,976,892 | |
READY CAPITAL CORPORATION
UNAUDITED SEGMENT REPORTING
fOR THE SIX months ENDED JUNE 30, 2021
| | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | **** | | **** | Small | **** | Residential | **** | | **** | | |||||||
| | | Loan | | SBC | | Business | | Mortgage | | Corporate- | | | ||||||
| (In Thousands) | | Acquisitions | | Originations | | Lending | | Banking | | Other | | Consolidated | ||||||
| Interest income | | $ | 33,297 | | $ | 85,810 | | $ | 51,565 | | $ | 4,078 | | $ | 1,668 | | $ | 176,418 |
| Interest expense | | | (24,007) | | | (52,102) | | | (23,187) | | | (4,623) | | | (2,257) | | | (106,176) |
| Net interest income before provision for loan losses | | $ | 9,290 | | $ | 33,708 | | $ | 28,378 | | $ | (545) | | $ | (589) | | $ | 70,242 |
| Recovery of (provision for) loan losses | | 1,188 | | | (6,258) | | | (439) | | | — | | | — | | (5,509) | ||
| Net interest income after recovery of (provision for) loan losses | | $ | 10,478 | | $ | 27,450 | | $ | 27,939 | | $ | (545) | | $ | (589) | | $ | 64,733 |
| Non-interest income | | | | | | | | | | | | | | | | | | |
| Residential mortgage banking activities | | | — | | | — | | | — | | | 78,099 | | | — | | | 78,099 |
| Net realized gain (loss) on financial instruments and real estate owned | | | (4,108) | | | 10,800 | | | 19,463 | | | — | | | (126) | | | 26,029 |
| Net unrealized gain (loss) on financial instruments | | | 5,832 | | | 4,941 | | | 2,981 | | | 10,657 | | | 1,197 | | | 25,608 |
| Other income (loss) | | | 2,040 | | | 2,824 | | | (5,150) | | | 53 | | | 116 | | | (117) |
| Servicing income | | — | | | 1,522 | | | 11,469 | | | 14,572 | | | — | | 27,563 | ||
| Income on purchased future receivables, net of allowance for doubtful accounts | | | — | | | — | | | 5,096 | | | — | | | — | | | 5,096 |
| Income (loss) on unconsolidated joint ventures | | | 2,552 | | | — | | | — | | | — | | | — | | | 2,552 |
| Total non-interest income | | $ | 6,316 | | $ | 20,087 | | $ | 33,859 | | $ | 103,381 | | $ | 1,187 | | $ | 164,830 |
| Non-interest expense | | | | | | | | | | | | | | | | | | |
| Employee compensation and benefits | | | — | | | (6,546) | | | (15,381) | | | (23,715) | | | (1,405) | | | (47,047) |
| Allocated employee compensation and benefits from related party | | (543) | | | — | | | — | | | — | | | (4,879) | | (5,422) | ||
| Variable expenses on residential mortgage banking activities | | — | | | — | | | — | | | (36,906) | | | — | | (36,906) | ||
| Professional fees | | (895) | | | (943) | | | (1,348) | | | (395) | | | (2,273) | | (5,854) | ||
| Management fees – related party | | — | | | — | | | — | | | — | | | (5,319) | | (5,319) | ||
| Incentive fees – related party | | — | | | — | | | — | | | — | | | (286) | | (286) | ||
| Loan servicing expense | | (3,096) | | | (5,328) | | | (42) | | | (4,450) | | | (39) | | (12,955) | ||
| Merger related expenses | | | — | | | — | | | — | | | — | | | (7,573) | | | (7,573) |
| Other operating expenses | | (3,793) | | | (7,749) | | | (15,070) | | | (4,417) | | | (1,645) | | (32,674) | ||
| Total non-interest expense | | $ | (8,327) | | $ | (20,566) | | $ | (31,841) | | $ | (69,883) | | $ | (23,419) | | $ | (154,036) |
| Income (loss) before provision for income taxes | | $ | 8,467 | | $ | 26,971 | | $ | 29,957 | | $ | 32,953 | | $ | (22,821) | | $ | 75,527 |
| Total assets | | $ | 1,106,199 | | $ | 3,861,289 | | $ | 2,860,365 | | $ | 588,435 | | $ | 560,604 | | $ | 8,976,892 |
Exhibit 99.2
| SUPPLEMENTAL FINANCIAL DATA<br>Q2 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 June 30, 2021, unless<br>otherwise noted. | ||
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| 3<br>Second Quarter 2021 Results<br>.. Net income of $30.9 million1, or $0.38 per common share<br>.. Distributable earnings of $41.4 million1, or $0.52 per common share<br>.. Declared dividend of $0.42 per common share<br>Earnings / Dividends<br>.. Return on Equity2 of 10.0%<br>.. Distributable Return on Equity3 of 13.8%<br>.. Dividend Yield4 of 10.6%<br>Returns<br>.. CRE originations and acquisitions of $1.1 billion<br>.. SBA loan originations of $145.7 million<br>.. Residential mortgage loan originations of $1.1 billion<br>Loan Originations5 /<br>Acquisitions<br>.. Adjusted net book value6 of $14.87 per common share<br>.. Recourse leverage ratio of 1.8x consisting of 1.1x 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. Q2 Dividend yield for the period based on the 06/30/2021 closing share price of $15.87<br>5. Represents fully committed amounts<br>6. Excludes the equity component of our 2017 convertible note issuance | ||
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| 4<br>Second Quarter 2021 Results (continued)<br>.. Total liquidity of $428(1) million 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 $232 million acquired SBC loan securitization at a 79.8% advance rate<br>and a weighted average cost of 1.6%<br>.. Closed a $500 million warehouse facility for SBC loans at 1mL plus spread by<br>product (2%-2.35%)<br>.. Issued new Series E Cumulative Redeemable 6.50% Preferred Stock securities to<br>redeem Series B 8.625% and Series D 7.625% Cumulative Preferred Stock<br>Capital Markets<br>.. Originated over 70,000 loans in round 2 totaling $2.2 billion through June 30th Paycheck Protection<br>Program – Round 2<br>.. Liquidated $1.8 billion of the agency RMBS portfolio to date, generating over $200<br>million of capital for reinvestment to core strategies ANH Transaction<br>1. Liquidity balance as of August 2, 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 11.9 % 11.9 % 29.3 %<br>SBC Originations 14.0 % 14.0 % 60.0 %<br>Small Business Lending 99.2 % 99.2 % 5.6 %<br>Residential Mortgage Banking (3) 17.1 % 41.9 % 5.0 %<br>2.6 1.9 3.1 0.3<br>21.0 % 26.2 % 22.7 % 19.4 %<br>2.4 2.7 2.4 2.7<br>(2.0) - (0.5) -<br>4.8 1.6 4.8 1.6<br>(0.9) (2.7) - -<br>(10.6) (9.8) (10.3) (9.4)<br>(1.0) (1.2) (1.0) (1.2)<br>(2.5) (3.9) (3.1) (2.1)<br>Dividends on preferred stock (1.2) (0.1) (1.2) (0.1)<br>10.0 % 12.8 % 13.8 % 10.9 %<br>GAAP ROE (2) Distributable ROE (2)<br>Levered<br>Yield (1)<br>Distributable<br>Levered<br>Yield (1)<br>Equity<br>Allocation Q2'21 Q1'21 Q2'21 Q1'21<br>Corporate leverage, net of non-earning assets<br>19.1 24.3 % 19.6 %<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>Benefit (Provision) for income taxes<br>Loan loss recovery (provision)<br>PPP revenue, net of direct expenses<br>Operating expenses<br>18.4 % % | ||
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| 6<br>SBC Investment by Product Type<br>$20.8<br>$82.9 $65.0 $50.2<br>$145.7<br>$17.0 $6.0<br>$53.6<br>$157.9<br>$105.6<br>$132.1<br>$164.4<br>$240.5<br>$16.9<br>$243.2<br>$652.8<br>$807.2<br>$15.8<br>$140.2<br>$0<br>$100<br>$200<br>$300<br>$400<br>$500<br>$600<br>$700<br>$800<br>Q2'20 Q3'20 Q4'20 Q1'21 Q2'21<br>SBA Fixed Rate Freddie Mac Transitional Acquired<br>1. Origination volumes are based on fully committed amounts<br>HISTORICAL GROWTH1 | ||
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| 7<br>SBC Originations<br>• Freddie Mac loan originations of $240.5 million driven by<br>continued low rates averaging 3.6%<br>o Current money up pipeline of $109.9 million,<br>including $56.3 million funded in July<br>• CRE originations of $860.83 million closed in the quarter<br>o Current money up pipeline of $524.5 million,<br>including $111.2 million funded in July<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>12.8% 11.5% 12.0% 11.2% 11.1%<br>3.9%<br>2.5% 2.5% 2.9% 2.9%<br>0%<br>5%<br>10%<br>15%<br>20%<br>Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021<br>Gross Levered Yield (ex. Gains) Gains on Loans, held for sale<br>SEGMENT SNAPSHOT<br>5 6<br>Portfolio Metrics (Balance Sheet)<br>Number of loans 568 552 561 564 617<br>Unpaid Principal Balance (1) $ 2,479 $ 2,338 $ 2,463 $ 2,968 $ 3,744<br>Carrying Value (1) $ 2,478 $ 2,308 $ 2,460 $ 2,975 $ 3,702<br>Weighted Average LTV 64% 62% 64% 66% 70%<br>Weighted Average Coupon 5.5% 5.6% 5.4% 5.3% 5.0%<br>Weighted Average Maturity 4 years 4 years 4 years 4 years 3 years<br>Weighted Average Principal Balance (1) $ 4.4 $ 4.2 $ 4.4 $ 5.3 $ 6.1<br>Percentage of loans fixed / floating 48% / 52% 48% / 52% 45% / 55% 36% / 64% 31% / 69%<br>Percentage of fixed, match funded (2) 80.9% 83.0% 81.2% 79.7% 76.7%<br>Percentage of loans 60+ days delinquent (4) 2.9% 3.4% 3.0% 3.0% 2.8%<br>Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 | ||
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| 8<br>Small Business Lending<br>• SBA 7(a) loans originations of $145.7 million<br>o Current money up pipeline of $223.8 million,<br>including $28.7 million funded in July<br>• SBA net sales premiums peaking at 16.3% and averaging<br>13.2%, net<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>26.9% 21.4% 28.4% 37.0%<br>18.6%<br>12.8%<br>37.6%<br>34.6%<br>50.4% 80.6%<br>0%<br>20%<br>40%<br>60%<br>80%<br>100%<br>Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021<br>Gross Levered Yield (ex. Gains) Gains on Loans, held for sale<br>SEGMENT SNAPSHOT<br>3 4<br>Portfolio Metrics (Balance Sheet)<br>Number of loans 1,804 1,836 1,771 1,760 1,808<br>Unpaid Principal Balance (1) $ 678 $ 701 $ 659 $ 645 $ 648<br>Carrying Value (1) $ 641 $ 668 $ 624 $ 612 $ 613<br>Weighted Average LTV 83% 85% 82% 84% 81%<br>Weighted Average Coupon 5.2% 5.5% 5.5% 5.5% 5.5%<br>Weighted Average Maturity 17 years 16 years 16 years 16 years 17 years<br>Weighted Average Principal Balance (1) $ 0.4 $ 0.4 $ 0.4 $ 0.4 $ 0.4<br>Percentage of loans fixed / floating 0.3% / 99.7% 0.7% / 99.3% 0.7% / 99.3% 0.7% / 99.3% 0.6% / 99.4%<br>Percentage of loans 60+ days delinquent (2) 5.4% 4.2% 2.7% 1.2% 1.4%<br>Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 | ||
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| 9<br>Loan Acquisitions<br>• Current acquisition pipeline of $1.3 billion with $193<br>million in closing<br>• Future liquidation of ANH non-agency MBS and<br>residential loans to be managed in coordination with<br>investment pipeline<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>13.6%<br>10.3% 10.4% 8.8% 9.2%<br>1.0%<br>3.4% 5.2%<br>-1.2%<br>2.7%<br>-5%<br>0%<br>5%<br>10%<br>15%<br>20%<br>Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 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<br>Portfolio Metrics(1) (Balance Sheet)<br>Number of loans 2,126 2,065 2,082 2,181 2,079<br>Unpaid Principal Balance (2) $ 1,010 $ 1,003 $ 1,054 $ 1,093 $ 1,038<br>Carrying Value (2) $ 1,002 $ 985 $ 1,047 $ 1,090 $ 1,031<br>Weighted Average LTV 38% 37% 37% 38% 41%<br>Weighted Average Coupon 6.0% 6.0% 5.9% 5.7% 5.7%<br>Weighted Average Maturity 9 years 8 years 8 years 10 years 9 years<br>Weighted Average Principal Balance (2) $ 0.5 $ 0.5 $ 0.5 $ 0.5 $ 0.5<br>Percentage of loans fixed / floating 49% / 51% 51% / 49% 50% / 50% 47% / 53% 48% / 52%<br>Percentage of fixed, match funded (3) 74.5% 74.7% 55.2% 49.4% 71.0%<br>Percentage of loans 60+ days delinquent (4) 6.6% 6.1% 6.3% 4.5% 5.1%<br>Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 | ||
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| 10<br>• Originations of $1.1 billion<br>• Recapture rates of 28%<br>• Average margin of 107 bps for the quarter, leveling off at<br>93 bps at quarter end<br>1. $ in millions. Represents activity during the quarter.<br>CURRENT QUARTER HIGHLIGHTS MSR PORTFOLIO (UPB IN $ BILLIONS)<br>$8.7<br>$9.1<br>$9.5<br>$9.9<br>$10.4<br>$7.5<br>$8.0<br>$8.5<br>$9.0<br>$9.5<br>$10.0<br>$10.5<br>Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021<br>SEGMENT SNAPSHOT<br>Residential Mortgage Banking<br>Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021<br>Fair<br>Value<br>($mm) $73.6 $74.4 $76.8 $98.5 $100.8<br>Portfolio Metrics (quarterly activity)<br>Unpaid principal balance (1) $ 1,192.9 $ 1,184.9 $ 1,179.4 $ 1,240.1 $ 1,071.6<br> % of Originations - Purchased 37.4% 44.3% 41.3% 37.9% 55.7%<br> % of Originations - Refinanced 62.6% 55.7% 58.7% 62.1% 44.3%<br>Channel - % Correspondent 32.6% 38.0% 37.0% 37.3% 37.1%<br>Channel - % Retail 49.9% 45.9% 45.3% 47.7% 48.1%<br>Channel - % Wholesale 17.5% 16.1% 17.7% 15.0% 14.8%<br>Unpaid principal balance (1) $ 1,150.6 $ 1,172.9 $ 1,203.1 $ 1,193.2 $ 1,101.8<br> % of UPB - Fannie/ Freddie securitizations 78.8% 77.8% 79.4% 80.2% 79.0%<br> % of UPB - Ginnie Mae securitizations 20.2% 22.2% 20.3% 18.7% 19.5%<br> % of UPB - Other investors 1.0% 0.0% 0.3% 1.1% 1.5%<br>Q1 2021 Q2 2021<br>Originations<br>Sales<br>Q2 2020 Q3 2020 Q4 2020 | ||
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| 11<br>Diversified, Complementary, & Scalable Platforms<br>13%<br>14%<br>31% 1%<br>34%<br>7%<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>$13,191<br>$4,376<br>$18,670<br>$8,672<br>$41,676<br>$14,254<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>$45,000<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>13%<br>8%<br>6% 4%<br>50%<br>Lodging Offices of Physicians<br>Child Day Care Services Eating Places<br>Gasoline Service Stations Other<br>31%<br>16%<br>14%<br>13%<br>12%<br>14%<br>Multi-family Retail SBA Office Mixed Use Other<br>GEOGRAPHIC LOCATION<br>19%<br>14%<br>7%<br>11% 6%<br>43%<br>California Texas Florida<br>New York Georgia Other<br>99.3%<br>0.7%<br>First Mortgage Subordinated Mortgage<br>As of June 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 the total loan balance<br>• Incremental reserves of $4.0 million across our loan portfolios during the quarter:<br>• Acquired loans: Net reserves remained consistent quarter-over-quarter.<br>• Small Business loans (7(a)): Net reserves remained consistent quarter-over-quarter.<br>• Originated Fixed Rate loans: Net reserves remained consistent quarter-over-quarter.<br>• Originated Transitional loans: Increase in pooled reserves attributable to new loan originations in Q2. | ||
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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>47%<br>35%<br>8%<br>5%<br>5%<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 June 30, 20211, 2, 3 | ||
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| 17% 18% 18% 16% 13%<br>2% 3%<br>2% 3% 3% 1% 1%<br>7% 7% 7% 7% 6%<br>27% 26% 30%<br>44% 49%<br>46% 46% 42%<br>30% 28%<br>Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 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 $428 million<br>• Closed $232 million acquired SBC loan securitization at a<br>79.8% advance rate and a weighted average cost of 1.6%<br>• Issued new Series E Cumulative Redeemable 6.50%<br>Preferred Stock securities to redeem Series B 8.625% and<br>Series D 7.625% Cumulative Preferred Stock<br>HISTORICAL CAPITAL STRUCTURE LIQUIDITY UPDATE<br>Total Debt &<br>Eqty ($M) $4,648 $4,502 $4,553 $7,312 $8,213<br>Convertible Notes $ 115.0 7.0% 7.0%<br>Senior Secured Notes $ 180.0 7.5% 7.0%<br>Baby Bonds $ 305.5 5.9% 5.9%<br>Junior Subordinated Notes $ 36.3 3.3% 3.3%<br>Series B Preferred Stock $ 48.0 8.6% 8.6%<br>Series C Convertible Prefer $ 8.4 6.3% 6.3%<br>Series D Preferred Stock $ 50.3 7.6% 7.6%<br>Series E Preferred Stock $ 115.0 6.5% 6.5%<br>Total $ 858.4 6.6% 6.5%<br>As of June 30, 2021<br>Principal<br>Balance Coupon YTM<br>Corporate Financing<br>($ in millions) | ||
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| 16<br>Financing and Leverage<br>2.1x 2.0x 2.2x 2.3x 1.8x<br>4.7x 4.5x 4.5x 5.1x 5.4x<br>0.0<br>1.0<br>2.0<br>3.0<br>4.0<br>5.0<br>6.0<br>Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 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) $ 1,568<br> Secured borrowings (ANH warehouse credit facilities and borrowings under repo transactions) 135<br> Paycheck Protection Program Liquidity Fund 2,287<br> Securitized debt obligations 2,309<br> Senior secured notes and corporate bonds 513<br> Convertible notes 113<br>Total debt $ 6,925<br>Total stockholders' equity $ 1,280<br>Total debt-to-equity ratio 5.4<br>Total recourse debt-to-equity ratio<br>Total debt $ 6,925<br> Less: Securitized debt obligations (2,309)<br> Less: Paycheck Protection Program Liquidity Fund (2,287)<br>Total recourse debt $ 2,329<br>Total stockholders' equity $ 1,280<br>Total recourse debt-to-equity ratio 1.8<br>June 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>2. The Company subsequently extended the agreement pursuant to an amendment with an updated maturity of August 2021<br>3. The Company subsequently extended the agreement pursuant to an amendment with an updated maturity of September 2021<br>$ in thousands<br>Lender Asset Class Maturity Pricing<br> JPMorgan Acquired loans, SBA loans July 2021 1M L + 2.5% to 2.875% $ 200,000 $ 42,488 $ 157,512<br> Keybank Freddie Mac loans February 2022 SOFR + 1.41% 100,000 36,533 63,467<br> East West Bank SBA loans October 2022 Prime - 0.821% to + 0.00% 50,000 41,581 8,419<br> Credit Suisse(1) Acquired loans (non USD) December 2021 Euribor + 2.50% to 3.00% 237,160 43,554 193,606<br> GMFS facilities Residential loans Aug-2021 - Nov-2021 Various 395,000 270,560 124,440<br> GMFS - MSR Residential MSRs September 2023 1M L + 2.50% 50,000 21,400 28,600<br> Other - various Various Oct-2023 - Aug-2050 Various 172,770 23,391 149,379<br>$ 1,204,930 $ 479,507 $ 725,423<br> Citibank<br>Fixed rate, Transitional,<br>Acquired loans October 2021 1M L + 2.50% to 3.25% $ 500,000 $ 66,184 $ 433,816<br> Deutsche Bank<br>Fixed rate, Transitional<br>loans November 2021 3M L + 2.00% to 2.40% 350,000 187,050 162,950<br> Credit Suisse<br>Fixed rate, Transitional,<br>Acquired loans May 2022 1M L + 2.00% to 2.35% 500,000 7,607 492,393<br> Credit Suisse Residential loans July 2021 L + 3.00% 100,000 70,570 29,430<br> JPMorgan Transitional loans November 2022 1M L + 2.00% to 2.75% 600,000 571,516 28,484<br> Performance Trust Acquired loans March 2024 1M T + 2.00% 123,000 35,625 87,375<br> Various MBS July-2021 - Oct-2021 Various 284,975 284,975 -<br>$ 2,457,975 $ 1,223,527 $ 1,234,448<br>Total Secured Borrowings $ 3,662,905 $ 1,703,034 $ 1,959,871<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<br>(2)<br>(3)<br>(2) | ||
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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 6/30/2021 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. Q2 Dividend yield for the period based on the 06/30/2021 closing share price of $15.87<br>($ in thousands, except per share data)<br>Average<br>Carrying Value(1) Debt Cost (3) Levered Yield<br>Loan Acquisitions 1,438,039 $ 5.8% 996,188 $ 3.0% 11.9%<br>SBC Originations 3,387,614 $ 6.2% 2,484,025 $ 3.4% 14.0%<br>Small Business Lending 255,381 $ 35.4% 170,860 $ 3.8% 99.2%<br> Total 5,081,034 $ 7.6% 3,651,073 $ 3.3% 18.4%<br>Investment Type Gross Yield(2) Average Debt<br>Balance<br>% Fixed vs Floating Rate 34% / 66%<br>% Originated vs Acquired 78% / 22%<br>Weighted Average LTV - SBC originations 70%<br>Weighted Average LTV - SBA 81%<br>Weighted Average LTV - Acquired 41%<br>Loan Portfolio Metrics (4)<br>Net income (loss) | Distributable earnings $30,904 | $41,428<br>Earnings per share - Basic and diluted $ 0.38<br>Distributable Earnings per Common Share $ 0.52<br>Return on Equity per Common Share 10.0%<br>Distributable Return on Equity per Common Share 13.8%<br>Dividend Yield (6) 10.6%<br>Q2 2021 Earnings Data Metrics<br>SBA servicing rights - UPB $ 729,071<br>SBA servicing rights- carrying value $ 19,721<br>Freddie Mac servicing rights - UPB $ 1,802,187<br>Freddie Mac servicing rights - carrying value $ 24,724<br>Residential servicing rights - UPB $ 10,373,511<br>Residential servicing rights - carrying value $ 100,820<br>Servicing Portfolio Metrics<br>Common Stockholders' equity $ 1,059,907<br>Common Stockholders' equity (adjusted)(5) $ 1,059,053<br>Total Common Shares outstanding 71,231,422<br>Net Book Value per Common Share $ 14.88<br>Adjusted Net Book Value per Common Share $ 14.87<br>Book Equity Value 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 $ 257,017 $ 149,847 $ 138,975 $ 308,428 $ 200,723<br>Restricted cash 91,539 46,204 47,697 62,961 57,118<br>Loans, net 1,432,807 1,286,935 1,550,624 1,611,826 2,222,284<br>Loans, held for sale, at fair value 297,669 348,719 340,288 473,078 470,184<br>Payment protection program loans, net 105,248 106,204 74,931 1,292,808 2,178,586<br>Mortgage backed securities, at fair value 75,411 90,427 88,011 682,948 260,110<br>Loans eligible for repurchase from Ginnie Mae 186,197 237,542 250,132 221,464 173,437<br>Investment in unconsolidated joint ventures 53,939 69,204 79,509 75,048 86,994<br>Purchased future receivables, net 27,190 16,659 17,308 13,240 7,213<br>Derivative instruments 19,037 20,849 16,363 12,529 6,600<br>Servicing rights 107,761 110,045 114,663 138,941 145,265<br>Real estate, held for sale 47,009 45,063 45,348 73,454 71,267<br>Other assets 103,701 98,614 89,503 151,503 120,214<br>Assets of consolidated VIEs 2,761,655 2,691,198 2,518,743 2,898,727 2,976,897<br>Total Assets $ 5,460,932 $ 5,317,510 $ 5,372,095 $ 8,016,955 $ 8,976,892<br>Liabilities<br>Secured borrowings 1,253,895 1,071,616 1,294,243 2,064,785 1,703,034<br>Paycheck Protection Program Liquidity Facility (PPPLF) borrowings — 105,005 76,276 1,132,536 2,286,624<br>Securitized debt obligations of consolidated VIEs, net 2,140,009 2,059,114 1,905,749 2,211,923 2,309,217<br>Convertible notes, net 111,581 111,855 112,129 112,405 112,684<br>Senior secured notes and Corporate debt, net 329,868 330,230 330,648 513,061 513,494<br>Guaranteed loan financing 436,532 421,183 401,705 386,036 363,955<br>Liabilities for loans eligible for repurchase from Ginnie Mae 186,197 237,542 250,132 221,464 173,437<br>Derivative instruments 9,106 7,774 11,604 4,403 3,717<br>Dividends payable 14,524 16,934 19,746 9,631 33,968<br>Accounts payable and other accrued liabilities 166,174 132,087 135,655 162,465 180,018<br>Total Liabilities $ 4,647,886 $ 4,493,340 $ 4,537,887 $ 6,818,709 $ 7,680,148<br>Preferred stock Series C — — — 19,494 8,361<br>Stockholders’ Equity<br>Preferred stock Series B and D — — — 98,241 209,619<br>Common stock 5 5 5 7 7<br>Additional paid-in capital 854,222 846,960 849,541 1,088,512 1,090,162<br>Retained earnings (49,755) (31,779) (24,203) (20,027) (23,105)<br>Accumulated other comprehensive loss (9,876) (9,916) (9,947) (7,042) (7,157)<br>Total Ready Capital Corporation equity 794,596 805,270 815,396 1,159,691 1,269,526<br>Non-controlling interests 18,450 18,900 18,812 19,061 18,857<br>Total Stockholders’ Equity $ 813,046 $ 824,170 $ 834,208 $ 1,276,993 $ 1,288,383<br>Total Liabilities and Stockholders’ Equity $ 5,460,932 $ 5,317,510 $ 5,372,095 $ 8,016,955 $ 8,976,892<br>Adjusted Book Value per Share $ 14.46 $ 14.84 $ 14.98 $ 14.89 $ 14.87<br>6/30/2021 6/30/2020 9/30/2020 12/31/2020 3/31/2021 | ||
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| 21<br>Statement of Income by Quarter<br>(1) Certain balances have been reclassified to match current period presentation<br>(In thousands, except share data)<br>Interest income $ 63,211 $ 61,074 $ 64,810 $ 73,371 $ 103,047<br>Interest expense (43,408) (43,823) (41,319) (50,761) (55,415)<br>Net interest income before provision for loan losses $ 19,803 $ 17,251 $ 23,491 $ 22,610 $ 47,632<br>Recovery of (provision for) loan losses 591 4,231 258 8 (5,517)<br>Net interest income after (provision for) recovery of loan losses $ 20,394 $ 21,482 $ 23,749 $ 22,618 $ 42,115<br>Non-interest income<br>Residential mortgage banking activities $ 80,564 $ 75,524 $ 59,963 $ 41,409 $ 36,690<br>Net realized gain on financial instruments and real estate owned 7,438 7,507 9,795 8,846 17,183<br>Net unrealized gain (loss) on financial instruments (13,744) 3,420 (4,339) 20,996 4,612<br>Servicing income, net of amortization and impairment 8,982 10,115 11,401 15,635 11,928<br>Income on purchased future receivables, net 5,586 4,848 1,794 2,317 2,779<br>Income (loss) on unconsolidated joint ventures 507 1,996 3,439 (809) 3,361<br>Other income 31,594 4,496 1,353 571 (688)<br>Total non-interest income $ 120,927 $ 107,906 $ 83,406 $ 88,965 $ 75,865<br>Non-interest expense<br>Employee compensation and benefits $ (27,288) $ (27,612) $ (18,084) $ (22,777) $ (24,270)<br>Allocated employee compensation and benefits from related party (1,250) (2,250) (2,250) (2,123) (3,299)<br>Variable expenses on residential mortgage banking activities (36,446) (30,918) (27,016) (15,485) (21,421)<br>Professional fees (1,919) (4,158) (4,728) (2,982) (2,872)<br>Management fees – related party (2,666) (2,714) (2,741) (2,693) (2,626)<br>Incentive fees – related party (3,506) (1,134) (1,333) — (286)<br>Loan servicing expense (10,327) (8,231) (6,734) (6,104) (6,851)<br>Merger related expenses (11) (6) — (6,307) (1,266)<br>Other operating expenses (17,745) (10,448) (12,442) (15,484) (17,190)<br>Total non-interest expense $ (101,158) $ (87,471) $ (75,328) $ (73,955) $ (80,081)<br>Income (loss) before provision for income taxes $ 40,163 $ 41,917 $ 31,827 $ 37,628 $ 37,899<br>Income tax (provision) benefit (5,500) (6,554) (4,268) (8,681) (6,995)<br>Net income (loss) $ 34,663 $ 35,363 $ 27,559 $ 28,947 $ 30,904<br>Less: Dividends on preferred stock — — — 281 3,224<br>Less: Net income (loss) attributable to non-controlling interest 810 805 648 659 444<br>Net income (loss) attributable to Ready Capital Corporation $ 33,853 $ 34,558 $ 26,911 $ 28,007 $ 27,236<br>Earnings (loss) per common share - basic $ 0.62 $ 0.63 $ 0.49 $ 0.49 $ 0.38<br>Earnings (loss) per common share - diluted $ 0.62 $ 0.63 $ 0.49 $ 0.49 $ 0.38<br>Weighted-average shares outstanding - Basic 53,980,451 54,626,995 54,338,209 56,817,632 71,221,806<br>Weighted-average shares outstanding - Diluted 54,013,958 54,704,611 54,420,064 56,843,448 71,385,603<br>Dividends declared per share of common stock $ 0.25 $ 0.30 $ 0.35 $ 0.40 $ 0.42<br>Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 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 $ 34,663 $ 35,363 $ 27,559 $ 28,947 $ 30,904<br>Reconciling items:<br>Unrealized (gain) loss on mortgage servicing rights $ 12,044 $ 4,688 $ 4,087 $ (15,356) $ 4,699<br>Change in CECL reserve on accrual loans (5,076) (7,248) (3,587) (29) 4,035<br>Non-recurring REO impairment 106 (114) 445 — 510<br>Merger transaction costs and other non-recurring expenses 967 998 1,323 7,263 2,971<br>Unrealized loss on mortgage-backed securities (45) — — — —<br>Unrealized loss on de-designated cash flow hedges — — — — —<br> Total reconciling items $ 7,996 $ (1,676) $ 2,268 $ (8,122) $ 12,215<br>Distributable earnings before income taxes $ 42,659 $ 33,687 $ 29,827 $ 20,825 $ 43,119<br>Income tax adjustments (3,436) (1,561) (1,023) 3,883 (1,691)<br>Distributable earnings $ 39,223 $ 32,126 $ 28,804 $ 24,708 $ 41,428<br>Less: Distributable earnings attributable to non-controlling interests $ 917 $ 731 $ 677 $ 563 $ 595<br>Less: Income attributable to participating shares 285 339 305 376 392<br>Less: Dividends on preferred stock — — — 281 3,224<br>Distributable earnings attributable to Common Stockholders $ 38,021 $ 31,056 $ 27,822 $ 23,488 $ 37,217<br>DIstributable earnings per share $ 0.70 $ 0.57 $ 0.51 $ 0.41 $ 0.52<br>Weighted average common shares outstanding 53,980,451 54,626,995 54,338,209 56,817,632 71,221,806<br>Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 | ||
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