READY CAPITAL CORPORATION REPORTS SECOND QUARTER 2022 RESULT...| MENAFN.COM

Saturday, 20 August 2022 05:48 GMT

READY CAPITAL CORPORATION REPORTS SECOND QUARTER 2022 RESULTS'


(MENAFN- PR Newswire)

- GAAP EARNINGS PER COMMON SHARE OF $0.47 -- DISTRIBUTABLE EARNINGS PER COMMON SHARE OF $0.48 -- DISTRIBUTABLE RETURN ON AVERAGE STOCKHOLDERS' EQUITY OF 13.1% -

NEW YORK, Aug. 4, 2022 /PRNewswire/ -- Ready Capital Corporation ('Ready Capital' or the 'Company') (NYSE: RC ), a multi-strategy real estate finance company that originates, acquires, finances, and services small-to-medium balance commercial loans, today reported financial results for the quarter ended June 30, 2022.

'Despite market volatility, Ready Capital's results are reflective of our ability to deploy capital across economic cycles,' commented Thomas Capasse, Ready Capital's Chairman and Chief Executive Officer. 'The quarterly growth in our loan portfolio, our continued access to the capital markets and the credit strength of our assets positions us well for the future.'

Second Quarter Highlights

  • Total investments of $2.1 billion, including $1.2 billion of SBC originations and acquisitions, $746.4 million of residential mortgage loans, and $128.8 million of U.S. Small Business Administration 7(a) loans
  • Total year-to-date investment activity of $5.2 billion, 17% year-over-year growth
  • Closed a $754.2 million commercial mortgage CLO, consisting of 25 first-lien floating rate loans
  • Closed a $276.8 million fixed rate securitization with a 4.8% weighted average cost of debt
  • Closed a $120.0 million offering of 6.125% Senior Unsecured Notes due 2025
  • Declared and paid dividend of $0.42 per share in cash with distributable earnings coverage of the common dividend at 1.4x
  • Net book value of $15.28 per share of common stock as of June 30, 2022

Subsequent Events

  • Entered into a joint venture with pan-European commercial real estate lending platform Starz Real Estate, with the goal of originating approximately €300 million in senior commercial real estate loans between €10 million and €40 million in size throughout Europe over the next two years
  • Closed an $80.0 million placement of 7.375% Senior Unsecured Notes due 2027

Use of Non-GAAP Financial Information

In addition to the results presented in accordance with U.S. GAAP, this press release includes distributable earnings, formerly referred to as core earnings, which is a non-U.S. GAAP financial measure. The Company defines distributable earnings as net income adjusted for unrealized gains and losses related to certain mortgage backed securities ('MBS') not retained by us as part of our loan origination business, realized gains and losses on sales of certain MBS, unrealized gains and losses related to residential mortgage servicing rights ('MSR'), unrealized current non-cash provision for credit losses on accrual loans and one-time non-recurring gains or losses, such as gains or losses on discontinued operations, bargain purchase gains, merger related expenses, or other one-time items.

The Company believes that this non-U.S. GAAP financial information, in addition to the related U.S. GAAP measures, provides investors greater transparency into the information used by management in its financial and operational decision-making, including the determination of dividends. However, because Distributable Earnings is an incomplete measure of the Company's financial performance and involves differences from net income computed in accordance with U.S. GAAP, it should be considered along with, but not as an alternative to, the Company's net income computed in accordance with U.S. GAAP as a measure of the Company's financial performance. In addition, because not all companies use identical calculations, the Company's presentation of Distributable Earnings may not be comparable to other similarly-titled measures of other companies.

In calculating Distributable Earnings, Net Income (in accordance with U.S. GAAP) is adjusted to exclude unrealized gains and losses on MBS acquired by the Company in the secondary market but is not adjusted to exclude unrealized gains and losses on MBS retained by Ready Capital as part of its loan origination businesses, where the Company transfers originated loans into an MBS securitization and the Company retains an interest in the securitization. In calculating Distributable Earnings, the Company does not adjust Net Income (in accordance with U.S. GAAP) to take into account unrealized gains and losses on MBS retained by us as part of the loan origination businesses because the unrealized gains and losses that are generated in the loan origination and securitization process are considered to be a fundamental part of this business and an indicator of the ongoing performance and credit quality of the Company's historical loan originations. In calculating Distributable Earnings, Net Income (in accordance with U.S. GAAP) is adjusted to exclude realized gains and losses on certain MBS securities considered to be non-distributable. Certain MBS positions are considered to be non-distributable due to a variety of reasons which may include collateral type, duration, and size.

In addition, in calculating Distributable Earnings, Net Income (in accordance with U.S. GAAP) is adjusted to exclude unrealized gains or losses on residential MSRs, held at fair value. The Company treats its commercial MSRs and residential MSRs as two separate classes based on the nature of the underlying mortgages and the treatment of these assets as two separate pools for risk management purposes. Servicing rights relating to the Company's small business commercial business are accounted for under ASC 860, Transfer and Servicing, while the Company's residential MSRs are accounted for under the fair value option under ASC 825, Financial Instruments. In calculating Distributable Earnings, the Company does not exclude realized gains or losses on either commercial MSRs or residential MSRs, held at fair value, as servicing income is a fundamental part of Ready Capital's business and is an indicator of the ongoing performance.

To qualify as a REIT, the Company must distribute to its stockholders each calendar year at least 90% of its REIT taxable income (including certain items of non-cash income), determined without regard to the deduction for dividends paid and excluding net capital gain. There are certain items, including net income generated from the creation of MSRs, that are included in distributable earnings but are not included in the calculation of the current year's taxable income. These differences may result in certain items that are recognized in the current period's calculation of distributable earnings not being included in taxable income, and thus not subject to the REIT dividend distribution requirement until future years.

The table below reconciles Net Income computed in accordance with U.S. GAAP to Distributable Earnings.

(in thousands)

Three Months Ended June 30, 2022

Net Income

$

58,965

Reconciling items:

Unrealized loss on mortgage servicing rights

16

Impact of ASU 2016-13 on accrual loans

(2,110)

Non-recurring REO impairment

700

Merger transaction costs and other non-recurring expenses

3,248

Total reconciling items

$

1,854

Income tax adjustments

(717)

Distributable earnings

$

60,102

Less: Distributable earnings attributable to non-controlling interests

2,929

Less: Income attributable to participating shares

2,412

Distributable earnings attributable to common stockholders

$

54,761

Distributable earnings per common share - basic

$

0.48

Distributable earnings per common share - diluted

$

0.46

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, August 5, 2022 at 8:30 am ET to provide a general business update and discuss the financial results for the quarter ended June 30, 2022.

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 . 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: 1-877-407-0792International: 1-201-689-8263

Conference Call Playback:

Domestic: 1-844-512-2921International: 1-412-317-6671Replay Pin #: 13730375

The playback can be accessed through August 19, 2022.

Safe Harbor Statement

This press release contains statements that constitute 'forward-looking statements,' as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are intended to be covered by the safe harbor provided by the same. These statements are based on management's current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements; the Company can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from the Company's expectations include, but are not limited to, applicable regulatory changes; general volatility of the capital markets; changes in the Company's investment objectives and business strategy; the availability of financing on acceptable terms or at all; the availability, terms and deployment of capital; the availability of suitable investment opportunities; changes in the interest rates or the general economy; increased rates of default and/or decreased recovery rates on investments; changes in interest rates, interest rate spreads, the yield curve or prepayment rates; changes in prepayments of Company's assets; the degree and nature of competition, including competition for the Company's target assets; and other factors, including those set forth in the Risk Factors section of the Company's most recent Annual Report on Form 10-K filed with the SEC, and other reports filed by the Company with the SEC, copies of which are available on the SEC's website, . The Company undertakes no obligation to update these statements for revisions or changes after the date of this release, except as required by law.

About Ready Capital Corporation

Ready Capital Corporation (NYSE: RC ) is a multi-strategy real estate finance company that originates, acquires, finances and services small- to medium-sized balance commercial loans. The Company specializes in loans backed by commercial real estate, including agency multifamily, investor and bridge as well as U.S. Small Business Administration loans under its Section 7(a) program. Headquartered in New York, New York, the Company employs over 600 professionals nationwide.

Contact Investor Relations Ready Capital Corporation212-257-4666 [email protected]

Additional information can be found on the Company's website at

READY CAPITAL CORPORATION UNAUDITED CONS OLIDATED BALANCE SHEETS

(in thousands)

June 30, 2022

December 31, 2021

Assets

Cash and cash equivalents

$

127,939

$

229,531

Restricted cash

64,746

51,569

Loans, net (including $9,956 and $10,766 held at fair value)

3,907,321

2,915,446

Loans, held for sale, at fair value

469,442

552,935

Paycheck Protection Program loans (including $763 and $3,243 held at fair value)

389,189

870,352

Mortgage-backed securities, at fair value

40,648

99,496

Loans eligible for repurchase from Ginnie Mae

54,784

94,111

Investment in unconsolidated joint ventures (including $8,430 and $8,894 held at fair value)

224,220

141,148

Investments held to maturity (including $9,601 held at fair value)

50,618

Purchased future receivables, net

8,704

7,872

Derivative instruments

46,530

7,022

Servicing rights (including $168,653 and $120,142 held at fair value)

253,511

204,599

Real estate owned, held for sale

119,557

42,288

Other assets

183,887

172,098

Assets of consolidated VIEs

5,996,219

4,145,564

Total Assets

$

11,937,315

$

9,534,031

Liabilities

Secured borrowings

3,212,383

2,517,600

Paycheck Protection Program Liquidity Facility (PPPLF) borrowings

427,759

941,505

Securitized debt obligations of consolidated VIEs, net

4,533,789

3,214,303

Convertible notes, net

113,818

113,247

Senior secured notes, net

342,469

342,035

Corporate debt, net

565,230

441,817

Guaranteed loan financing

304,158

345,217

Contingent consideration

92,548

16,400

Liabilities for loans eligible for repurchase from Ginnie Mae

54,784

94,111

Derivative instruments

1,303

410

Dividends payable

51,185

34,348

Loan participations sold

53,544

Due to third parties

24,737

668

Accounts payable and other accrued liabilities

189,182

183,411

Total Liabilities

$

9,966,889

$

8,245,072

Preferred stock Series C, liquidation preference $25.00 per share

8,361

8,361

Commitments & contingencies

Stockholders' Equity

Preferred stock Series E, liquidation preference $25.00 per share

111,378

111,378

Common stock, $0.0001 par value, 500,000,000 shares authorized, 114,375,070 and 75,838,050 shares issued and outstanding, respectively

11

8

Additional paid-in capital

1,723,580

1,161,853

Retained earnings

27,298

8,598

Accumulated other comprehensive loss

(2,815)

(5,733)

Total Ready Capital Corporation equity

1,859,452

1,276,104

Non-controlling interests

102,613

4,494

Total Stockholders' Equity

$

1,962,065

$

1,280,598

Total Liabilities, Redeemable Preferred Stock, and Stockholders' Equity

$

11,937,315

$

9,534,031

READY CAPITAL CORPORATION UNAUDITED CONSO LIDATED STATEMENTS OF INCOME

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands, except share data)

2022

2021

2022

2021

Interest income

$

153,671

$

103,047

$

278,076

$

176,418

Interest expense

(80,827)

(55,415)

(141,844)

(106,176)

Net interest income before recovery of (provision for) loan losses

$

72,844

$

47,632

$

136,232

$

70,242

Recovery of (provision for) loan losses

4,390

(5,517)

2,848

(5,509)

Net interest income after recovery of (provision for) loan losses

$

77,234

$

42,115

$

139,080

$

64,733

Non-interest income

Residential mortgage banking activities

2,947

36,690

11,371

78,099

Net realized gain on financial instruments and real estate owned

21,114

17,183

29,121

26,029

Net unrealized gain (loss) on financial instruments

(3,253)

4,612

42,062

25,608

Servicing income, net of amortization and impairment of $5,660 and $9,005 for the three and six months ended June 30, 2022, and $2,604 and $4,546 for three and six months ended June 30, 2021, respectively

14,565

11,928

25,093

27,563

Income on purchased future receivables, net of allowance for (recovery of) doubtful accounts of ($565) and ($440) for the three and six months ended June 30, 2022, and $587 and $1,540 for three and six months ended June 30, 2021, respectively

1,859

2,779

4,328

5,096

Income on unconsolidated joint ventures

5,200

3,361

11,763

2,552

Other income (loss)

8,334

(688)

14,835

(117)

Total non-interest income

$

50,766

$

75,865

$

138,573

$

164,830

Non-interest expense

Employee compensation and benefits

(26,089)

(24,270)

(54,057)

(47,047)

Allocated employee compensation and benefits from related party

(1,804)

(3,299)

(4,804)

(5,422)

Variable income (expenses) on residential mortgage banking activities

4,532

(21,421)

3,553

(36,906)

Professional fees

(3,851)

(2,872)

(8,977)

(5,854)

Management fees – related party

(5,465)

(2,626)

(8,661)

(5,319)

Incentive fees – related party

(286)

(286)

Loan servicing expense

(10,296)

(6,851)

(19,216)

(12,955)

Transaction related expenses

(1,372)

(1,266)

(7,071)

(7,573)

Other operating expenses

(14,372)

(17,190)

(27,025)

(32,674)

Total non-interest expense

$

(58,717)

$

(80,081)

$

(126,258)

$

(154,036)

Income before provision for income taxes

69,283

37,899

151,395

75,527

Income tax provision

(10,318)

(6,995)

(28,167)

(15,676)

Net income

$

58,965

$

30,904

$

123,228

$

59,851

Less: Dividends on preferred stock

1,999

3,224

3,998

3,505

Less: Net income attributable to non-controlling interest

2,874

444

3,649

1,103

Net income attributable to Ready Capital Corporation

$

54,092

$

27,236

$

115,581

$

55,243

Earnings per common share - basic

$

0.47

$

0.38

$

1.13

$

0.85

Earnings per common share - diluted

$

0.45

$

0.38

$

1.07

$

0.85

Weighted-average shares outstanding

Basic

114,359,026

71,221,806

101,106,777

64,059,509

Diluted

125,065,492

71,385,603

111,803,431

64,209,934

Dividends declared per share of common stock

$

0.42

$

0.42

$

0.84

$

0.82

READY CAPITAL CORPORATION UNAUDITED SEGMENT REPORTING FOR THE THREE MONTHS ENDED June 30, 2022

Small

Residential

SBC Lending

Business

Mortgage

Corporate-

(in thousands)

and Acquisitions

Lending

Banking

Other

Consolidated

Interest income

$

122,427

$

29,024

$

2,220

$

$

153,671

Interest expense

(72,685)

(5,916)

(2,226)

(80,827)

Net interest income before recovery of (provision for) loan losses

$

49,742

$

23,108

$

(6)

$

$

72,844

Recovery of (provision for) loan losses

4,609

(219)

4,390

Net interest income after recovery of (provision for) loan losses

$

54,351

$

22,889

$

(6)

$

$

77,234

Non-interest income

Residential mortgage banking activities

$

$

$

2,947

$

$

2,947

Net realized gain on financial instruments and real estate owned

12,034

9,080

21,114

Net unrealized gain (loss) on financial instruments

(2,517)

(721)

(15)

(3,253)

Servicing income, net

1,431

4,558

8,576

14,565

Income on purchased future receivables, net

1,859

1,859

Income on unconsolidated joint ventures

5,200

5,200

Other income

6,338

1,950

21

25

8,334

Total non-interest income

$

22,486

$

16,726

$

11,529

$

25

$

50,766

Non-interest expense

Employee compensation and benefits

$

(7,903)

$

(10,217)

$

(6,906)

$

(1,063)

$

(26,089)

Allocated employee compensation and benefits from related party

(180)

(1,624)

(1,804)

Variable income (expenses) on residential mortgage banking activities

4,532

4,532

Professional fees

(1,097)

(1,619)

(217)

(918)

(3,851)

Management fees – related party

(5,465)

(5,465)

Loan servicing expense

(7,912)

74

(2,458)

(10,296)

Transaction related expenses

(1,372)

(1,372)

Other operating expenses

(6,457)

(4,314)

(2,175)

(1,426)

(14,372)

Total non-interest expense

$

(23,549)

$

(16,076)

$

(7,224)

$

(11,868)

$

(58,717)

Income (loss) before provision for income taxes

$

53,288

$

23,539

$

4,299

$

(11,843)

$

69,283

Total assets

$

10,296,900

$

1,049,763

$

454,556

$

136,096

$

11,937,315

READY CAPITAL CORPORATION UNAUDITED SEGMENT REPORTING FOR THE SIX MONTHS ENDED June 30, 2022

Small

Residential

SBC Lending

Business

Mortgage

Corporate-

(in thousands)

and Acquisitions

Lending

Banking

Other

Consolidated

Interest income

$

218,770

$

55,261

$

4,045

$

$

278,076

Interest expense

(125,778)

(11,606)

(4,184)

(276)

(141,844)

Net interest income before recovery of (provision for) loan losses

$

92,992

$

43,655

$

(139)

$

(276)

$

136,232

Recovery of (provision for) loan losses

4,339

(1,491)

2,848

Net interest income after recovery of (provision for) loan losses

$

97,331

$

42,164

$

(139)

$

(276)

$

139,080

Non-interest income

Residential mortgage banking activities

$

$

$

11,371

$

$

11,371

Net realized gain on financial instruments and real estate owned

12,916

16,205

29,121

Net unrealized gain (loss) on financial instruments

9,912

(433)

32,583

42,062

Servicing income, net

2,351

6,051

16,691

25,093

Income on purchased future receivables, net

4,328

4,328

Income on unconsolidated joint ventures

11,763

11,763

Other income

9,352

4,821

45

617

14,835

Total non-interest income

$

46,294

$

30,972

$

60,690

$

617

$

138,573

Non-interest expense

Employee compensation and benefits

$

(18,063)

$

(19,735)

$

(14,440)

$

(1,819)

$

(54,057)

Allocated employee compensation and benefits from related party

(480)

(4,324)

(4,804)

Variable (income) expenses on residential mortgage banking activities

3,553

3,553

Professional fees

(3,498)

(3,087)

(481)

(1,911)

(8,977)

Management fees – related party

(8,661)

(8,661)

Loan servicing expense

(13,787)

(428)

(5,001)

(19,216)

Transaction related expenses

(7,071)

(7,071)

Other operating expenses

(11,833)

(8,101)

(4,199)

(2,892)

(27,025)

Total non-interest expense

$

(47,661)

$

(31,351)

$

(20,568)

$

(26,678)

$

(126,258)

Income (loss) before provision for income taxes

$

95,964

$

41,785

$

39,983

$

(26,337)

$

151,395

Total assets

$

10,296,900

$

1,049,763

$

454,556

$

136,096

$

11,937,315

SOURCE Ready Capital Corporation

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