READY CAPITAL CORPORATION REPORTS FIRST QUARTER 2022 RESULTS

Rhea-AI Summary

Ready Capital Corporation (NYSE: RC) reported its first-quarter financial results for 2022, highlighting GAAP earnings of $0.70 per share and distributable earnings of $0.52 per share, with a distributable return on average stockholders' equity of 13.6%. The company successfully completed a $542 million merger with Mosaic Real Estate Credit, enhancing its commercial lending capabilities. Total investments reached $3.1 billion, including significant SBC originations. The company raised $107.1 million through a public offering and declared a cash dividend of $0.42 per share, with coverage at 1.3x.

Positive

• Completed a $542 million merger with Mosaic Real Estate Credit, expanding lending capabilities.
• Total investments of $3.1 billion, including $2.2 billion in SBC originations.
• Raised $107.1 million in gross proceeds in a public offering.
• Declared a cash dividend of $0.42 per share, with 1.3x coverage.

Negative

• None

- GAAP EARNINGS PER COMMON SHARE OF $0.70 -
- DISTRIBUTABLE EARNINGS PER COMMON SHARE OF $0.52 -
- DISTRIBUTABLE RETURN ON AVERAGE STOCKHOLDERS' EQUITY OF 13.6% -

NEW YORK, May 5, 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 March 31, 2022.

"Ready Capital's first quarter results are reflective of our sustained expansion of our core lending channels, the addition of complimentary lending products and the ongoing growth of our business," commented Thomas Capasse, Ready Capital's Chairman and Chief Executive Officer. "The quarter was highlighted by record SBC originations in addition to the closing of the merger with Mosaic Real Estate Credit. Both mark significant milestones in achieving the scale necessary to deliver consistent solutions to our customers."

First Quarter Highlights

• Completed a $542 million merger with Mosaic Real Estate Credit to expand the Company's ability to provide full life-cycle lending to small balance commercial ("SBC") properties
• Total investments of $3.1 billion, including $2.2 billion of SBC originations and acquisitions, $769.1 million of residential mortgage loans, and $101.0 million of U.S. Small Business Administration 7(a) loans
• Closed a $1.1 billion commercial mortgage collateralized loan obligation, the Company's largest CRE CLO to date
• Raised $107.1 million in gross proceeds in an underwritten public offering of 7,000,000 shares of common stock
• Declared and paid dividend of $0.42 per share in cash with distributable earnings coverage of the common dividend at 1.3x
• Net book value of $15.22 per share of common stock as of March 31, 2022

Subsequent Events

• Closed an underwritten public offering of $120.0 million in aggregate principal amount of 6.125% senior unsecured notes due 2025
• Completed the securitization of $276.8 million of fixed-rate SBC loans and issued $204.5 million of senior bonds at a weighted average pass-through rate of 4.2%

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 March 31, 2022
Net Income	$	64,263
Reconciling items:
Unrealized gain on mortgage servicing rights		(32,599)
Impact of ASU 2016-13 on accrual loans		1,968
Non-recurring REO impairment		1,567
Merger transaction costs and other non-recurring expenses		6,655
Total reconciling items	$	(22,409)
Income tax adjustments		7,009
Distributable earnings	$	48,863
Less: Distributable earnings attributable to non-controlling interests		589
Less: Income attributable to participating shares		2,412
Distributable earnings attributable to common stockholders	$	45,862
Distributable earnings per common share - basic	$	0.52
Distributable earnings per common share - diluted	$	0.48

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 6, 2022 at 8:30 am ET to provide a general business update and discuss the financial results for the quarter ended March 31, 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 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: 1-844-825-9789
International: 1-412-317-5180

Conference Call Playback:

Domestic: 1-844-512-2921
International: 1-412-317-6671
Replay Pin #: 10166523

The playback can be accessed through May 20, 2022.

Safe Harbor Statement

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

About Ready Capital Corporation

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

Contact

Investor Relations
Ready Capital Corporation
212-257-4666
InvestorRelations@readycapital.com

Additional information can be found on the Company's website at www.readycapital.com

READY CAPITAL CORPORATION UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands)		March 31, 2022			December 31, 2021
Assets
Cash and cash equivalents		$	211,369		$	229,531
Restricted cash			56,963			51,569
Loans, net (including $10,722 and $10,766 held at fair value)			4,062,335			2,915,446
Loans, held for sale, at fair value			523,214			552,935
Paycheck Protection Program loans (including $1,843 and $3,243 held at fair value)			554,656			870,352
Mortgage-backed securities, at fair value			93,259			99,496
Loans eligible for repurchase from Ginnie Mae			82,975			94,111
Investment in unconsolidated joint ventures (including $8,610 and $8,894 held at fair value)			149,475			141,148
Investments held to maturity (including $17,053 held at fair value)			57,285			—
Purchased future receivables, net			8,753			7,872
Derivative instruments			36,852			7,022
Servicing rights (including $159,834 and $120,142 held at fair value)			244,143			204,599
Real estate owned, held for sale			119,207			42,288
Other assets			186,089			172,098
Assets of consolidated VIEs			5,089,669			4,145,564
Total Assets		$	11,476,244		$	9,534,031
Liabilities
Secured borrowings			3,274,324			2,517,600
Paycheck Protection Program Liquidity Facility (PPPLF) borrowings			627,445			941,505
Securitized debt obligations of consolidated VIEs, net			3,864,150			3,214,303
Convertible notes, net			113,531			113,247
Senior secured notes, net			342,454			342,035
Corporate debt, net			446,118			441,817
Guaranteed loan financing			332,398			345,217
Contingent consideration			92,148			16,400
Liabilities for loans eligible for repurchase from Ginnie Mae			82,975			94,111
Derivative instruments			2,620			410
Dividends payable			51,161			34,348
Loan participations sold			56,386			—
Due to third parties			38,846			668
Accounts payable and other accrued liabilities			184,592			183,411
Total Liabilities		$	9,509,148		$	8,245,072
Preferred stock Series C, liquidation preference $25.00 per share (refer to Note 21)			8,361			8,361
Commitments & contingencies (refer to Note 25)
Stockholders' Equity
Preferred stock Series E, liquidation preference $25.00 per share (refer to Note 21)			111,378			111,378
Common stock, $0.0001 par value, 500,000,000 shares authorized, 114,335,948 and 75,838,050 shares issued and outstanding, respectively			11			8
Additional paid-in capital			1,723,099			1,161,853
Retained earnings			21,661			8,598
Accumulated other comprehensive income (loss)			(4,704)			(5,733)
Total Ready Capital Corporation equity			1,851,445			1,276,104
Non-controlling interests			107,290			4,494
Total Stockholders' Equity		$	1,958,735		$	1,280,598
Total Liabilities, Redeemable Preferred Stock, and Stockholders' Equity		$	11,476,244		$	9,534,031

 

READY CAPITAL CORPORATION UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
		Three Months Ended March 31,
(in thousands, except share data)		2022			2021
Interest income		$	124,405		$	73,371
Interest expense			(61,017)			(50,761)
Net interest income before provision for loan losses		$	63,388		$	22,610
Recovery of (provision for loan losses)			(1,542)			8
Net interest income after (provision for) recovery of loan losses		$	61,846		$	22,618
Non-interest income
Residential mortgage banking activities			8,424			41,409
Net realized gain on financial instruments and real estate owned			8,007			8,846
Net unrealized gain on financial instruments			45,315			20,996
Servicing income, net of amortization and impairment of $3,345 and $1,942			10,528			15,635
Income on purchased future receivables, net of allowance for doubtful accounts of ($125) and $995			2,469			2,317
Income (loss) on unconsolidated joint ventures			6,563			(809)
Other income			6,501			571
Total non-interest income		$	87,807		$	88,965
Non-interest expense
Employee compensation and benefits			(27,968)			(22,777)
Allocated employee compensation and benefits from related party			(3,000)			(2,123)
Variable expenses on residential mortgage banking activities			(979)			(15,485)
Professional fees			(5,126)			(2,982)
Management fees – related party			(3,196)			(2,693)
Loan servicing expense			(8,920)			(6,104)
Transaction related expenses			(5,699)			(6,307)
Other operating expenses			(12,653)			(15,484)
Total non-interest expense		$	(67,541)		$	(73,955)
Income before provision for income taxes			82,112			37,628
Income tax provision			(17,849)			(8,681)
Net income		$	64,263		$	28,947
Less: Dividends on preferred stock			1,999			281
Less: Net income attributable to non-controlling interest			775			659
Net income attributable to Ready Capital Corporation		$	61,489		$	28,007
Earnings per common share - basic		$	0.70		$	0.49
Earnings per common share - diluted		$	0.66		$	0.49
Weighted-average shares outstanding
Basic			87,707,281			56,817,632
Diluted			95,402,494			56,843,448
Dividends declared per share of common stock		$	0.42		$	0.40

 

READY CAPITAL CORPORATION UNAUDITED SEGMENT REPORTING FOR THE THREE MONTHS ENDED MARCH 31, 2022
					Small			Residential
		SBC Lending			Business			Mortgage			Corporate-
(in thousands)		and Acquisitions			Lending			Banking			Other			Consolidated
Interest income		$	96,343		$	26,237		$	1,825		$	—		$	124,405
Interest expense			(53,093)			(5,690)			(1,958)			(276)			(61,017)
Net interest income before provision for loan losses		$	43,250		$	20,547		$	(133)		$	(276)		$	63,388
Provision for loan losses			(270)			(1,272)			—			—			(1,542)
Net interest income after provision for loan losses		$	42,980		$	19,275		$	(133)		$	(276)		$	61,846
Non-interest income
Residential mortgage banking activities		$	—		$	—		$	8,424		$	—		$	8,424
Net realized gain on financial instruments and real estate owned			882			7,125			—			—			8,007
Net unrealized gain on financial instruments			12,429			288			32,598			—			45,315
Servicing income, net			920			1,493			8,115			—			10,528
Income on purchased future receivables, net			—			2,469			—			—			2,469
Income on unconsolidated joint ventures			6,563			—			—			—			6,563
Other income			3,014			2,871			24			592			6,501
Total non-interest income		$	23,808		$	14,246		$	49,161		$	592		$	87,807
Non-interest expense
Employee compensation and benefits			(10,160)			(9,518)			(7,534)			(756)			(27,968)
Allocated employee compensation and benefits from related party			(300)			—			—			(2,700)			(3,000)
Variable expenses on residential mortgage banking activities			—			—			(979)			—			(979)
Professional fees			(2,401)			(1,468)			(264)			(993)			(5,126)
Management fees – related party			—			—			—			(3,196)			(3,196)
Loan servicing expense			(5,875)			(502)			(2,543)			—			(8,920)
Transaction related expenses			—			—			—			(5,699)			(5,699)
Other operating expenses			(5,376)			(3,787)			(2,024)			(1,466)			(12,653)
Total non-interest expense		$	(24,112)		$	(15,275)		$	(13,344)		$	(14,810)		$	(67,541)
Income (loss) before provision for income taxes		$	42,676		$	18,246		$	35,684		$	(14,494)		$	82,112
Total assets		$	9,520,677		$	1,217,726		$	493,671		$	244,170		$	11,476,244

 

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SOURCE Ready Capital Corporation

FAQ

What were Ready Capital's earnings per share for Q1 2022?

Ready Capital reported GAAP earnings of $0.70 per share and distributable earnings of $0.52 per share for Q1 2022.

How much did Ready Capital invest in the first quarter of 2022?

Ready Capital's total investments reached $3.1 billion in the first quarter of 2022.

What significant merger did Ready Capital complete recently?

Ready Capital completed a $542 million merger with Mosaic Real Estate Credit to enhance its lending capabilities.

What is the dividend declared by Ready Capital for Q1 2022?

Ready Capital declared a cash dividend of $0.42 per share in Q1 2022.

What was the distributable return on equity for Ready Capital?

The distributable return on average stockholders' equity for Ready Capital was 13.6%.