UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||
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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).
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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 |
Preferred Stock, 6.25% Series C Cumulative Convertible, par value $0.0001 per share | RC PRC | New York Stock Exchange |
7.00% Convertible Senior Notes due 2023 | RCA | New York Stock Exchange |
6.20% Senior Notes due 2026 5.75% Senior Notes due 2026 | RCB RCC | New York Stock Exchange New York Stock Exchange |
Item 2.02. | Results of Operations and Financial Condition |
On May 6, 2021, Ready Capital Corporation (the “Company”) issued an earnings release announcing the financial results for the quarter ended March 31, 2021. A copy of the earnings release is attached as Exhibit 99.1 hereto and incorporated herein by reference.
On May 6, 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 |
Exhibit No. |
| Description |
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99.1 |
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99.2 | Supplemental Financial Information for the quarter ended March 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 |
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| By: | /s/ Andrew Ahlborn |
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| Name: Andrew Ahlborn |
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| Title: Chief Financial Officer |
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Date: May 6, 2021
Exhibit 99.1
READY CAPITAL CORPORATION ANNOUNCES FIRST QUARTER 2021 RESULTS
New York, New York, May 6, 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 March 31, 2021. Ready Capital reported U.S. GAAP Net income for the three months ended March 31, 2021, of $28.9 million, or $0.49 per share of common stock, and Distributable Earnings (a non-GAAP financial measure) of $24.7 million, or $0.41 per share of common stock.
First Quarter Results:
● | U.S. GAAP Net income of $28.9 million, or $0.49 per diluted share of common stock |
● | Distributable Earnings of $24.7 million, or $0.41 per diluted share of common stock |
● | Adjusted net book value of $14.89 per share of common stock as of March 31, 2021 |
● | Current liquidity of $424 million including cash, approved but undrawn financing and principal and interest collections receivable from servicers |
● | Originated a record of $823.2 million of small-to-medium balance commercial loans |
● | Originated $1.2 billion of residential mortgage loans |
● | Originated $50.2 million of loans guaranteed by the U.S. Small Business Administration (the “SBA”) under its Section 7(a) loan program |
● | Originated over 36,000 loans under the Paycheck Protection Program totaling $1.3 billion; earned $73.3 million in net fees, with $67.8 million to be recognized in future periods as of March 31, 2021 |
● | Closed $338 million merger with Anworth Mortgage Asset Corporation |
● | Declared and paid dividend of $0.40 per share in cash |
“We are off to an active start to 2021. Our first quarter performance is attributable to our diversified model which provides both stable net interest income from our loan and servicing assets and alpha from our government sponsored gain on sale businesses. Our efforts to increase scale and improve our capitalization have positioned us well to create additional value for shareholders,” commented Thomas Capasse, Ready Capital’s Chairman and Chief Executive Officer. “We are proud of our efforts to aid small businesses through the Paycheck Protection Program which we will continue to parlay into expansion of our core SBA 7(a) lending program.”
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:
| Three Months Ended March 31, | |
(in thousands) | 2021 | |
Net Income | $ | 28,947 |
Reconciling items: | | |
Unrealized (gain) loss on mortgage servicing rights | | (15,356) |
Impact of ASU 2016-13 on accrual loans | | (29) |
Merger transaction costs and other non-recurring expenses | | 7,263 |
Total reconciling items | $ | (8,122) |
Income tax adjustments | | 3,883 |
Distributable earnings | $ | 24,708 |
Less: Distributable earnings attributable to non-controlling interests | | 563 |
Less: Income attributable to participating shares | | 657 |
Distributable earnings attributable to common stockholders | $ | 23,488 |
Distributable Earnings per common share - basic and diluted | $ | 0.41 |
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, May 7, 2021 at 8:30 am ET to provide a general business update and discuss the financial results for the quarter ended March 31, 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: 1-877-407-0792
International: 1-201-689-8263
Conference Call Playback:
Domestic: 1-844-512-2921
International: 1-412-317-6671
Replay Pin #: 13719237
The playback can be accessed through May 21, 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 CONSOLIDATED BALANCE SHEETS
(In Thousands) |
| March 31, 2021 |
| December 31, 2020 | ||
Assets | | | | | | |
Cash and cash equivalents | | $ | 308,428 | | $ | 138,975 |
Restricted cash | |
| 62,961 | |
| 47,697 |
Loans, net (including $13,618 and $13,795 held at fair value) | |
| 1,611,826 | |
| 1,550,624 |
Loans, held for sale, at fair value | |
| 473,078 | |
| 340,288 |
Paycheck Protection Program loans (including $38,388 and $74,931 held at fair value) | |
| 1,292,808 | |
| 74,931 |
Mortgage backed securities, at fair value | |
| 682,948 | |
| 88,011 |
Loans eligible for repurchase from Ginnie Mae | | | 221,464 | | | 250,132 |
Investment in unconsolidated joint ventures | | | 75,048 | | | 79,509 |
Purchased future receivables, net | | | 13,240 | | | 17,308 |
Derivative instruments | |
| 12,529 | |
| 16,363 |
Servicing rights (including $98,542 and $76,840 held at fair value) | |
| 138,941 | |
| 114,663 |
Real estate, held for sale | | | 73,454 | | | 45,348 |
Other assets | |
| 151,503 | |
| 89,503 |
Assets of consolidated VIEs | | | 2,898,727 | | | 2,518,743 |
Total Assets | | $ | 8,016,955 | | $ | 5,372,095 |
Liabilities | | | | | | |
Secured borrowings | |
| 2,064,785 | |
| 1,294,243 |
Paycheck Protection Program Liquidity Facility (PPPLF) borrowings | |
| 1,132,536 | |
| 76,276 |
Securitized debt obligations of consolidated VIEs, net | |
| 2,211,923 | |
| 1,905,749 |
Convertible notes, net | | | 112,405 | | | 112,129 |
Senior secured notes, net | |
| 179,744 | |
| 179,659 |
Corporate debt, net | | | 333,317 | | | 150,989 |
Guaranteed loan financing | |
| 386,036 | |
| 401,705 |
Liabilities for loans eligible for repurchase from Ginnie Mae | | | 221,464 | | | 250,132 |
Derivative instruments | |
| 4,403 | |
| 11,604 |
Dividends payable | |
| 9,631 | |
| 19,746 |
Accounts payable and other accrued liabilities | |
| 162,465 | |
| 135,655 |
Total Liabilities | | $ | 6,818,709 | | $ | 4,537,887 |
Preferred stock Series C, liquidation preference $25.00 per share | | | 19,494 | | | — |
Stockholders’ Equity | | | | | | |
Preferred stock Series B and D, liquidation preference $25.00 per share | | | 98,241 | | | — |
Common stock, $0.0001 par value, 500,000,000 shares authorized, 71,221,699 and 54,368,999 shares issued and outstanding, respectively | |
| 7 | |
| 5 |
Additional paid-in capital | |
| 1,088,512 | |
| 849,541 |
Retained earnings (deficit) | | | (20,027) | | | (24,203) |
Accumulated other comprehensive loss | |
| (7,042) | |
| (9,947) |
Total Ready Capital Corporation equity | |
| 1,159,691 | |
| 815,396 |
Non-controlling interests | |
| 19,061 | |
| 18,812 |
Total Stockholders’ Equity | | $ | 1,178,752 | | $ | 834,208 |
Total Liabilities, Redeemable Preferred Stock, and Stockholders’ Equity | | $ | 8,016,955 | | $ | 5,372,095 |
READY CAPITAL CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
| | Three Months Ended March 31, | ||||
(In Thousands, except share data) |
| 2021 |
| 2020 | ||
Interest income | | $ | 73,371 | | $ | 69,551 |
Interest expense | |
| (50,761) | |
| (46,930) |
Net interest income before provision for loan losses | | $ | 22,610 | | $ | 22,621 |
Recovery of (provision for) loan losses | |
| 8 | |
| (39,804) |
Net interest income after (provision for) recovery of loan losses | | $ | 22,618 | | $ | (17,183) |
Non-interest income | | | | | | |
Residential mortgage banking activities | | | 41,409 | | | 36,669 |
Net realized gain on financial instruments and real estate owned | | | 8,846 | | | 7,172 |
Net unrealized gain (loss) on financial instruments | | | 20,996 | | | (33,434) |
Servicing income, net of amortization and impairment of $1,942 and $1,725 | |
| 15,635 | |
| 8,097 |
Income on purchased future receivables, net of allowance for doubtful accounts of $995 and $6,917 | | | 2,317 | | | 3,483 |
Income (loss) on unconsolidated joint ventures | | | (809) | | | (3,537) |
Other income | |
| 571 | |
| 4,073 |
Total non-interest income | | $ | 88,965 | | $ | 22,523 |
Non-interest expense | | | | | | |
Employee compensation and benefits | |
| (22,777) | |
| (18,936) |
Allocated employee compensation and benefits from related party | |
| (2,123) | |
| (1,250) |
Variable expenses on residential mortgage banking activities | |
| (15,485) | |
| (20,129) |
Professional fees | |
| (2,982) | |
| (2,556) |
Management fees – related party | |
| (2,693) | |
| (2,561) |
Loan servicing expense | |
| (6,104) | |
| (5,570) |
Merger related expenses | | | (6,307) | | | (47) |
Other operating expenses | |
| (15,484) | |
| (13,744) |
Total non-interest expense | | $ | (73,955) | | $ | (64,793) |
Income (loss) before provision for income taxes | | $ | 37,628 | | $ | (59,453) |
Income tax (provision) benefit | |
| (8,681) | | | 7,937 |
Net income (loss) | | $ | 28,947 | | $ | (51,516) |
Less: Dividends on preferred stock | | | 281 | | | — |
Less: Net income (loss) attributable to non-controlling interest | |
| 659 | | | (1,064) |
Net income (loss) attributable to Ready Capital Corporation | | $ | 28,007 | | $ | (50,452) |
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Earnings (loss) per common share - basic | | $ | 0.49 | | $ | (0.98) |
Earnings (loss) per common share - diluted | | $ | 0.49 | | $ | (0.98) |
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Weighted-average shares outstanding | |
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Basic | | | 56,817,632 | | | 51,984,040 |
Diluted | | | 56,843,448 | | | 51,990,013 |
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Dividends declared per share of common stock | | $ | 0.40 | | $ | 0.40 |
READY CAPITAL CORPORATION
UNAUDITED SEGMENT REPORTING
fOR THE three months ENDED March 31, 2021
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| SBA Originations, |
| Residential |
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| | Loan | | SBC | | Acquisitions, | | Mortgage | | Corporate- | | |
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(In Thousands) | | Acquisitions | | Originations | | and Servicing | | Banking | | Other | | Consolidated |
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Interest income | | $ | 14,534 | | $ | 39,693 | | $ | 15,432 | | $ | 2,044 | | $ | 1,668 | | $ | 73,371 | |
Interest expense | | | (11,971) | | | (24,998) | | | (9,207) | | | (2,328) | | | (2,257) | | | (50,761) | |
Net interest income before provision for loan losses | | $ | 2,563 | | $ | 14,695 | | $ | 6,225 | | $ | (284) | | $ | (589) | | $ | 22,610 | |
Recovery of (provision for) loan losses | |
| 1,262 | | | (1,609) | | | 355 | | | — | | | — | |
| 8 | |
Net interest income after (provision for) recovery of loan losses | | $ | 3,825 | | $ | 13,086 | | $ | 6,580 | | $ | (284) | | $ | (589) | | $ | 22,618 | |
Non-interest income | | | | | | | | | | | | | | | | | | | |
Residential mortgage banking activities | | $ | — | | $ | — | | $ | — | | $ | 41,409 | | $ | — | | $ | 41,409 | |
Net realized gain (loss) on financial instruments and real estate owned | | | (1,493) | | | 5,565 | | | 4,900 | | | — | | | (126) | | | 8,846 | |
Net unrealized gain (loss) on financial instruments | | | 897 | | | 3,033 | | | 514 | | | 15,355 | | | 1,197 | | | 20,996 | |
Other income | | | 1,183 | | | 1,288 | | | (1,960) | | | 15 | | | 45 | | | 571 | |
Servicing income | | | 21 | | | 726 | | | 7,782 | | | 7,106 | | | — | | | 15,635 | |
Income on purchased future receivables, net of allowance for doubtful accounts | | | 2,317 | | | — | | | — | | | — | | | — | | | 2,317 | |
Income (loss) on unconsolidated joint ventures | | | (809) | | | — | | | — | | | — | | | — | | | (809) | |
Total non-interest income | | $ | 2,116 | | $ | 10,612 | | $ | 11,236 | | $ | 63,885 | | $ | 1,116 | | $ | 88,965 | |
Non-interest expense | | | | | | | | | | | | | | | | | | | |
Employee compensation and benefits | |
| (1,485) | | | (2,252) | | | (4,561) | | | (13,588) | | | (891) | |
| (22,777) | |
Allocated employee compensation and benefits from related party | |
| (212) | | | — | | | — | | | — | | | (1,911) | |
| (2,123) | |
Variable expenses on residential mortgage banking activities | | | — | | | — | | | — | | | (15,485) | | | — | | | (15,485) | |
Professional fees | |
| (786) | | | (323) | | | (380) | | | (251) | | | (1,242) | |
| (2,982) | |
Management fees – related party | |
| — | | | — | | | — | | | — | | | (2,693) | |
| (2,693) | |
Loan servicing expense | |
| (1,751) | | | (2,052) | | | 102 | | | (2,364) | | | (39) | |
| (6,104) | |
Merger related expenses | | | — | | | — | | | — | | | — | | | (6,307) | | | (6,307) | |
Other operating expenses | |
| (2,364) | | | (3,916) | | | (6,285) | | | (2,204) | | | (715) | |
| (15,484) | |
Total non-interest expense | | $ | (6,598) | | $ | (8,543) | | $ | (11,124) | | $ | (33,892) | | $ | (13,798) | | $ | (73,955) | |
Income (loss) before provision for income taxes | | $ | (657) | | $ | 15,155 | | $ | 6,692 | | $ | 29,709 | | $ | (13,271) | | $ | 37,628 | |
Total assets | | $ | 1,121,590 | | $ | 3,128,924 | | $ | 1,983,098 | | $ | 672,255 | | $ | 1,111,088 | | $ | 8,016,955 | |
Exhibit 99.2
Supplemental Financial Data First Quarter 2021 |
DISCLAIMER 2 This presentation 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; Ready Capital Corporation (the "Company") cangiveno 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 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 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. This presentation includes certain non-GAAP financial measures, including Distributable earnings. These non-GAAP financial measures should be considered only as supplemental to, and not as superior to, financial measures in accordance with GAAP. Please refer to Appendix A for the most recent GAAP information. This presentation also contains market statistics and industry data which are subject to uncertainty and are not necessarily reflective of market conditions. These have been derived from third party sources and have not been independently verified by the Company or its affiliates. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. All data is as of March 31, 2021 unless otherwise noted. |
FIRST QUARTER 2021 RESULTS 3 .. Net income of $28.9 million(1), or $0.49 per common share .. Distributable earnings of $24.7 million(1), or $0.41 per common share .. Declared dividend of $0.40 per common share EARNINGS / DIVIDENDS .. Return on Equity(2) of 12.8% .. Distributable Return on Equity(3) of 10.9% .. Dividend Yield(4) of 11.9% RETURNS .. CRE originations and acquisitions of $823.2 million .. SBA loan originations of $50.2 million .. Residential mortgage loan originations of $1.2 billion LOAN ORIGINATIONS(5) / ACQUISITIONS .. Adjusted net book value(6) of $14.89 per common share .. Recourse leverage ratio of 2.3x consisting of 1.3x of warehouse credit facilities and borrowings under repurchase agreements, 0.5x of corporate debt and 0.5x of agency secured borrowings BALANCE SHEET 1) Before dividends on preferred securities and inclusive of non-controlling interest 2) Return on Equity is an annualized percentage equal to quarterly net income over the average monthly total stockholders’ equity for the period 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 “Distributable Earnings Reconciliation” slide for a reconciliation of GAAP Net Income to Distributable Earnings 4) Q1 Dividend yield for the period based on the 03/31/2021 closing share price of $13.42 5) Represents fully committed amounts 6) Excludes the equity component of our 2017 convertible note issuance |
FIRST QUARTER 2021 RESULTS (CONTINUED) 4 .. Total liquidity of $424 million including cash, approved but undrawn financing and principal and interest collections receivable from servicers CURRENT LIQUIDITY .. Closed a $768 million CRE CLO pricing AAA bonds at +100 .. Closed a $113 million non-mark-to-market warehouse facility to facilitate loan acquisitions .. Closed a $201 million 5 ¾ baby bond to retire existing $50 million 6 ½ baby bonds CAPITAL MARKETS .. Originated over 36,000 loans totaling $1.3 billion through March 31st .. Earned $73.3 million of net fees with $67.8 million deferred and to be recognized in future periods PAYCHECK PROTECTION PROGRAM –R OUND 2 .. Closed ANH merger adding $338 million of total equity .. Liquidated $1.8 billion of the agency RMBS portfolio to date, generating over $200 million of capital to be reinvested in core strategies ANH TRANSACTION |
RETURN ON EQUITY 5 1) Levered yield includes interest income, accretion of discount, MSR creation, income from unconsolidated joint ventures, realized gains (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 annualized basis. 2) GAAP ROE is based on GAAP Net Income, while Distributable ROE is based on Distributable Earnings, which adjusts GAAP Net Income for certain items detailed on the “Distributable Earnings Reconciliation” slide. 3) ROE based on net income before tax of the Residential Mortgage Banking business line divided by the business line’s average monthly equity. |
SBC INVESTMENT BY PRODUCT TYPE(1) 6 1) Origination volumes are based on fully committed amounts $45.5 $20.8 $82.9 $65.0 $50.2 $60.7 $17.0 $6.0 $149.4 $157.9 $105.6 $132.1 $164.4 $259.6 $16.9 $243.2 $652.8 $51.5 $15.8 $140.2 $- $50 $100 $150 $200 $250 $300 $350 $400 $450 $500 $550 $600 $650 $700 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Investment (UPB in $) SBA Conventional Freddie Mac Transitional Acquired |
SBC ORIGINATIONS -S EGMENT SNAPSHOT 7 1) $ in millions, as of quarter end. 2) Represents fixed rate loans that have been securitized. 3) Represents fully committed amounts. 4) Calculated on unpaid principal balance 5) Includes interest income, accretion of discount, and servicing income net of interest expense and amortization of deferred financing costs. 6) Includes realized and unrealized gains (losses) on loans held for sale and MSR creation. • Freddie Mac loan originations of $164.4 million driven by continued low rates averaging 3.5% • Current money up pipeline of $182.5 million, including $67.0 million funded in April • CRE originations of $658.8(3) million closed in the quarter • Current money up pipeline of $239.4 million, including $134.8 million funded in April 10.5% 12.8% 11.5% 12.0% 11.2% 2.0% 3.9% 2.5% 2.5% 2.9% 0.0% 5.0% 10.0% 15.0% 20.0% Q1 '20 Q2 '20 Q3 '20 Q4 '20 Q1'21 Gross Levered Yield (ex. Gains) Gains on Loans, held for sale GROSS LEVERED YIELD CURRENT QUARTER HIGHLIGHTS (5) (6) |
SBA ORIGINATIONS, ACQUISITIONS, & SERVICING -S EGMENT SNAPSHOT 8 1) $ in millions, as of quarter end. 2) Calculated on unpaid principal balance and excludes assets offset by guaranteed loan financing liabilities 3) Includes interest income, accretion of discount, and servicing income net of interest expense and amortization of deferred financing costs. 4) Includes realized and unrealized gains (losses) on loans held for sale and MSR creation. • SBA 7(a) loans originations of $50.2 million • Current money up pipeline of $235.5 million, including $40.8 million funded in April • SBA net sales premiums peaking at 15% and averaging 13%, net 25.1% 26.9% 21.4% 28.4% 37.0% 18.6% 12.8% 37.6% 34.6% 50.4% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% Q1 '20 Q2 '20 Q3 '20 Q4 '20 Q1'21 Gross Levered Yield (ex. Gains) Gains on Loans, held for sale CURRENT QUARTER HIGHLIGHTS GROSS LEVERED YIELD (3) (4) |
LOAN ACQUISITIONS -S EGMENT SNAPSHOT 9 1) Excludes joint venture investments. 2) $ in millions, as of quarter end. 3) Represents fixed rate loans that have been securitized. 4) Calculated on unpaid principal balance 5) Includes interest income, accretion of discount, and servicing income net of interest expense and amortization of deferred financing costs. 6) Includes realized and unrealized gains (losses) on loans held for sale and MSR creation. • Current acquisition pipeline in excess of $500 million • Future liquidation of ANH non-agency MBS and residential loans to be managed in coordination with investment pipeline 7.3% 13.6% 10.3% 10.4% 8.8% 0.0% 1.0% 3.4% 5.2% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% Q1 '20 Q2 '20 Q3 '20 Q4 '20 Q1'21 Income on joint venture investments and Gains on loans, held for sale Gross Levered Yield (ex. Income on joint venture investments and Gains on loans, held for sale) (5) CURRENT QUARTER HIGHLIGHTS GROSS LEVERED YIELD (6) |
RESIDENTIAL MORTGAGE BANKING –S EGMENT SNAPSHOT 10 1) $ in millions. Represents activity during the quarter. • Elevated originations of $1.2 billion • Recapture rates of 37% • Average margin of 198 bps for the quarter, leveling off at 152 bps at quarter end $8.3 $8.7 $9.1 $9.5 $9.9 $7.5 $8.0 $8.5 $9.0 $9.5 $10.0 MSR PORTFOLIO (UPB IN $ BILLIONS) CURRENT QUARTER HIGHLIGHTS |
DIVERSIFIED, COMPLEMENTARY, AND SCALABLE PLATFORMS (1) Assets include loans, MBS, servicing assets, JV investments, real estate owned, and purchased future receivables. (2) Based on QTD Distributable Earnings. Distributable earnings includes interest income, accretion of discount, MSR creation, income from unconsolidated joint ventures, realized gains (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 annualized basis. (3) 11 PORTFOLIO BREAKDOWN(1) REVENUE BREAKDOWN(2) Acquisitions 30% SBC Originations - Fixed rate 19% SBC Originations - Bridge 31% SBC Originations - Freddie Mac 2% SBA Originations, Acquisitions, & Servicing 11% Residential Mortgage Banking 7% Acquisitions, $6,043 SBC Originations - Fixed rate, $2,803 SBC Originations - Bridge, $14,218 SBC Originations - Freddie Mac, $5,915 SBA Originations, Acquisitions, & Servicing, $6,210 Residential Mortgage Banking, $10,764 $- $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 |
LOAN PORTFOLIO COMPOSITION AS OF MARCH 31, 2021(1)(2) Geographic Location Lien Position (1) As a percent of unpaid principal balance (2) Excludes loans held-for-sale, at fair value (3) Collateral Type SBA Collateral Type 12 California 19% Texas 14% Florida 8% New York 11% Georgia 6% Other 42% First Mortgage 99.3% Subordinated Mortgage 0.7% Multi-family 31% Retail 16% SBA 14% Office 13% Mixed Use 12% Other 14% Lodging 19% Offices of Physicians 13% Child Day Care Services 8% Eating Places 6% Gasoline Service Stations 4% Other 50% |
13 CURRENT EXPECTED CREDIT LOSSES |
LOAN PORTFOLIO –R ISK RATINGS AS OF MARCH 31, 2021(1)(2)(3) CREDIT QUALITY INDICATORS (1) Commercial real estate portfolio only (2) As a percent of unpaid principal balance (3) Excludes loans held-for-sale, at fair value 14 Bucket 1 35% Bucket 2 47% Bucket 3 7% Bucket 4 6% Bucket 5 5% CRITERIA • Bucket 1 – Very Low Risk of Loss: New origination or current with strong credit metrics (LTV/DSCR/DY). No expected losses. • Bucket 2 – Low Risk of Loss: Current with maturity > 6 months. Lower credit metrics with possibility of inclusion on CREFC watchlist. No expected losses. • Bucket 3 – Medium Risk of Loss: Current with near term maturities or in forbearance. Loss unlikely with no specific reserves booked. • Bucket 4 – Higher Risk: Loan delinquent or in maturity default. Potential issues with sponsor or business plans. Minimal losses possible and adequately reserved in current period. • Bucket 5 – Highest risk: Loan in default or special servicing. Specific losses identified and adequately reserved for in current period. |
CAPITAL STRUCTURE ► Current cash and available liquidity of $424 million ► Closed $201 million in Baby Bonds in Q1 with 5-year maturity and 5 ¾ coupon ► Redeemed existing $50 million 6 ½ Baby Bonds ► Closed $768 million CRE CLO with AAA bonds pricing at +100 15 Total Debt + Equity LIQUIDITY UPDATE HISTORICAL CAPITAL STRUCTURE Total Debt + Equity ($M) Funding Mix $4,608 $4,648 $4,502 $4,553 $7,213 |
FINANCING AND LEVERAGE 16 2.8x 2.1x 2.0x 2.2x 2.3x 4.9x 4.7x 4.5x 4.5x 5.1x - 1.0 2.0 3.0 4.0 5.0 6.0 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Historical Leverage Recourse Total HISTORICAL LEVERAGE |
CREDIT AND REPURCHASE FACILITIES 17 1) Commitment size is €200.0 million and has been converted for purposes of this disclosure. |
FINANCIAL SNAPSHOT ($ in thousands, except per share data) 18 (5) Excludes the equity component of our 2017 convertible note issuance 1) Average carrying value includes average quarterly carrying value of loan and servicing asset balances 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 for sale and servicing income net of interest expense and amortization of deferred financing costs on an annualized basis. 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 interest expense and deferred financing amortization for the quarter ended 3/31/2021 on an annualized basis. 4) Excludes loans, held for sale, at fair value 5) Excludes the equity component of our 2017 convertible note issuance. |
APPENDIX 19 |
BALANCE SHEET BY QUARTER 20 |
STATEMENT OF INCOME BY QUARTER 21 (1) Certain balances have been reclassified to match current period presentation |
DISTRIBUTABLE EARNINGS RECONCILIATION BY QUARTER 22 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. We calculate Distributable earnings as GAAP net income (loss) excluding the following: i) any unrealized gains or losses on certain MBS ii) any realized gains or losses on sales of certain MBS iii) any unrealized gains or losses on Residential MSRs iv) any unrealized gains or losses resulting from a change in CECL impairment reserves on accrual loans v) one-time non-recurring gains or losses, such as gains or losses on discontinued operations, bargain purchase gains, or merger related expenses 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. |
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