Q2 2019 Earnings Conference Call

August 08 2019 | 8:30 AM ET
 View details

Press Release

Ready Capital Corporation Announces Second Quarter 2019 Results

-- Net Income of $0.25 per share of common stock in the second quarter --

-- Core Earnings of $0.37 per share of common stock in the second quarter --

-- Originated and acquired over $835 million of Small Balance Commercial (SBC) loans in Q2 2019 --

Company Release - 8/7/2019 4:15 PM ET

NEW YORK, Aug. 7, 2019 /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-sized balance commercial loans, today reported financial results for the quarter ended June 30, 2019. A summary of Ready Capital's operating results for the quarter ended June 30, 2019 is presented below. Ready Capital reported U.S. GAAP Net Income for the three months ended June 30, 2019 of $11.2 million, or $0.25 per share of common stock, and Core Earnings (a non-GAAP financial measure) of $16.8 million, or $0.37 per share of common stock.

  Second Quarter Highlights:

  • U.S. GAAP Net Income of $11.2 million, or $0.25 per diluted share of common stock
  • Core Earnings of $16.8 million, or $0.37 per diluted share of common stock
  • Adjusted net book value of $16.35 per share of common stock as of June 30, 2019
  • Originated $419.6 million and acquired $362.2 million of small balance commercial ("SBC") loans
  • Originated $53.7 million of loans guaranteed by the U.S. Small Business Administration (the "SBA") under its Section 7(a) loan program
  • Originated $518.2 million of residential mortgage loans
  • Declared and paid dividend of $0.40 per share
  • Subsequent to quarter end, completed the issuance of $57.5 million in aggregate principal of 6.20% Senior Notes due 2026

Use of Non-GAAP Financial Information

In addition to the results presented in accordance with U.S. GAAP, this press release includes Core Earnings which is a non-U.S. GAAP financial measure. The Company defines Core Earnings as net income adjusted for unrealized gains and losses related to certain mortgage backed securities, realized gains and losses on sales of certain MBS, unrealized gains and losses related to residential mortgage servicing rights, and one-time non-recurring gains or losses, such as gains or losses on discontinued operations, bargain purchase gains or merger related expenses.

The Company believes that providing investors with this non-U.S. GAAP financial information, in addition to the related U.S. GAAP measures, gives investors greater transparency into the information used by management in its financial and operational decision-making. However, because Core 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 Core Earnings may not be comparable to other similarly-titled measures of other companies.

In calculating Core Earnings, Net Income (in accordance with 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 Core Earnings, the Company does not adjust Net Income (in accordance with 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 Core Earnings, Net Income (in accordance with GAAP) is adjusted to exclude realized gains and losses on certain MBS securities considered to be non-core.  Certain MBS positions are considered to be non-core due to a variety of reasons which may include collateral type, duration, and size.

In addition, in calculating Core Earnings, Net Income (in accordance with 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 Core 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 as an indicator of the ongoing performance.

The following table reconciles net income computed in accordance with U.S. GAAP to Core Earnings for the three months ended June 30, 2019:






Three Months Ended

(In Thousands)


June 30, 2019

Net Income

$

11,245

Reconciling items:



Unrealized loss on mortgage-backed securities


106

Unrealized loss on mortgage servicing rights


6,339

Merger transaction costs


603

Non-recurring expenses


67

Total reconciling items

$

7,115

Core earnings before income taxes

$

18,360

      Income tax adjustments


(1,585)

Core earnings

$

16,775

U.S. GAAP Return on Equity is based on U.S. GAAP Net Income, while Core Return on Equity is based on Core Earnings, which adjusts GAAP Net Income for the items in the Core reconciliation above.

Webcast and Earnings Conference Call

Management will host a webcast and conference call on Thursday, August 8, 2019 at 8:30 am ET to provide a general business update and discuss the financial results for the quarter ended June 30, 2019. A 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.

To Participate in the Telephone Conference Call:

Dial in at least five minutes prior to start time.

Domestic: 1-855-327-6838
International: 1-604-638-5340
Conference ID #: 13689763

Conference Call Playback:

Domestic: 1-844-512-2921
International: 1-412-317-6671
Replay Pin #: 10007329

The playback can be accessed through August 22, 2019.

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. Ready Capital specializes in loans backed by commercial real estate, including agency multifamily, investor and bridge as well as SBA 7(a) business loans. Headquartered in New York, New York, Ready Capital employs over 400 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)


June 30, 2019


December 31, 2018

Assets







Cash and cash equivalents


$

41,925


$

54,406

Restricted cash



38,019



28,921

Loans, net (including $20,409 and $22,664 held at fair value)



1,002,676



1,193,392

Loans, held for sale, at fair value



177,507



115,258

Mortgage backed securities, at fair value



99,407



91,937

Loans eligible for repurchase from Ginnie Mae



69,101



74,180

Investment in unconsolidated joint ventures



47,551



33,438

Derivative instruments



3,670



2,070

Servicing rights (including $85,658 and $93,065 held at fair value)



114,761



120,062

Receivable from third parties



2,763



8,888

Real estate acquired in settlement of loans, held for sale



65,834



7,787

Other assets



68,399



55,447

Assets of consolidated VIEs



2,108,710



1,251,057

Total Assets


$

3,840,323


$

3,036,843

Liabilities







Secured borrowings



988,868



834,547

Securitized debt obligations of consolidated VIEs, net



1,567,113



905,367

Convertible notes, net



110,506



109,979

Senior secured notes, net



179,086



178,870

Corporate debt, net



48,795



48,457

Guaranteed loan financing



28,445



229,678

Liabilities for loans eligible for repurchase from Ginnie Mae



69,101



74,180

Derivative instruments



9,032



3,625

Dividends payable



18,292



13,346

Accounts payable and other accrued liabilities



73,679



74,719

Total Liabilities


$

3,092,917


$

2,472,768

Stockholders' Equity







Common stock, $0.0001 par value, 500,000,000 shares authorized, 44,415,479 and 32,105,112
shares issued and outstanding, respectively



4



3

Additional paid-in capital



720,812



540,478

Retained earnings



14,914



5,272

Accumulated other comprehensive loss



(7,703)



(922)

Total Ready Capital Corporation equity



728,027



544,831

Non-controlling interests



19,379



19,244

Total Stockholders' Equity


$

747,406


$

564,075

Total Liabilities and Stockholders' Equity


$

3,840,323


$

3,036,843

 

READY CAPITAL CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME


















Three Months Ended June 30, 


Six Months Ended June 30, 


(In Thousands, except share data)


2019


2018


2019


2018


Interest income


$

57,034


$

41,858


$

105,787


$

79,007


Interest expense



(35,753)



(26,407)



(71,529)



(49,071)


Net interest income before provision for loan losses


$

21,281


$

15,451


$

34,258


$

29,936


Provision for loan losses



(1,348)



397



(1,866)



229


Net interest income after provision for loan losses


$

19,933


$

15,848


$

32,392


$

30,165


Non-interest income














Residential mortgage banking activities



21,021



17,255



35,608



31,279


Net realized gain on financial instruments and real estate owned



6,255



8,620



13,537



20,851


Net unrealized gain (loss) on financial instruments



(7,006)



4,457



(13,918)



7,464


Servicing income, net of amortization and impairment of $853 and $2,616 for
the three and six months ended June 30, 2019, and $1,229 and $2,580 for the
three and six months ended June 30, 2018, respectively



7,811



6,627



14,563



13,037


Other income



2,792



1,826



3,692



3,160


Income on unconsolidated joint ventures



2,083



1,503



5,012



7,243


Gain on bargain purchase







30,728




Total non-interest income


$

32,956


$

40,288



89,222



83,034


Non-interest expense














Employee compensation and benefits



(12,509)



(14,272)



(23,957)



(29,592)


Allocated employee compensation and benefits from related party



(1,250)



(1,200)



(2,103)



(2,400)


Variable expenses on residential mortgage banking activities



(13,501)



(7,493)



(22,677)



(9,783)


Professional fees



(1,586)



(2,401)



(3,415)



(5,049)


Management fees – related party



(2,495)



(2,036)



(4,492)



(4,049)


Incentive fees – related party





(269)





(676)


Loan servicing expense



(4,571)



(3,000)



(8,219)



(7,093)


Merger related expenses



(603)





(6,070)




Other operating expenses



(8,085)



(8,916)



(14,947)



(16,927)


Total non-interest expense


$

(44,600)


$

(39,587)


$

(85,880)


$

(75,569)


Income before provision for income taxes


$

8,289


$

16,549


$

35,734


$

37,630


Provision for income (taxes) benefit



2,956



(665)



5,959



(3,228)


Net income


$

11,245


$

15,884


$

41,693


$

34,402


Less: Net income attributable to non-controlling interest



276



588



1,257



1,252


Net income attributable to Ready Capital Corporation


$

10,969


$

15,296


$

40,436


$

33,150
















Earnings per common share - basic


$

0.25


$

0.48


$

1.05


$

1.03


Earnings per common share - diluted


$

0.25


$

0.48


$

1.05


$

1.03
















Weighted-average shares outstanding














Basic



44,425,598



32,073,717



38,524,023



32,055,110


Diluted



44,431,263



32,092,750



38,527,317



32,069,499
















Dividends declared per share of common stock


$

0.40


$

0.40


$

0.80


$

0.77


 

READY CAPITAL CORPORATION

 UNAUDITED SEGMENT REPORTING

FOR THE THREE MONTHS ENDED JUNE 30, 2019



























SBA Originations,


Residential







Loan


SBC


Acquisitions,


Mortgage


Corporate-



(In Thousands)


Acquisitions


Originations


and Servicing


Banking


Other


Consolidated

Interest income


$

18,208


$

30,639


$

7,124


$

1,063


$


$

57,034

Interest expense



(10,602)



(21,401)



(2,300)



(1,450)





(35,753)

Net interest income before provision for loan losses


$

7,606


$

9,238


$

4,824


$

(387)


$


$

21,281

Provision for loan losses



(544)



(350)



(454)







(1,348)

Net interest income after provision for loan losses


$

7,062


$

8,888


$

4,370


$

(387)


$


$

19,933

Non-interest income



















Residential mortgage banking activities


$


$


$


$

21,021


$


$

21,021

Net realized gain on financial instruments



453



1,627



4,175







6,255

Net unrealized gain on financial instruments



(661)



(76)



71



(6,340)





(7,006)

Other income



957



1,661



39



85



50



2,792

Servicing income





461



1,818



5,532





7,811

Income from unconsolidated joint ventures



2,083











2,083

Gain on bargain purchase













Total non-interest income


$

2,832


$

3,673


$

6,103


$

20,298


$

50


$

32,956

Non-interest expense



















Employee compensation and benefits



(26)



(1,774)



(4,424)



(5,445)



(840)



(12,509)

Allocated employee compensation and benefits from
related party



(125)









(1,125)



(1,250)

Variable expenses on residential mortgage banking
activities









(13,501)





(13,501)

Professional fees



(47)



(313)



(169)



(229)



(828)



(1,586)

Management fees – related party











(2,495)



(2,495)

Loan servicing expense



(1,117)



(1,475)



(260)



(1,677)



(42)



(4,571)

Merger related expenses











(603)



(603)

Other operating expenses



(882)



(2,712)



(2,076)



(2,054)



(361)



(8,085)

Total non-interest expense


$

(2,197)


$

(6,274)


$

(6,929)


$

(22,906)


$

(6,294)


$

(44,600)

Net income (loss) before provision for income taxes


$

7,697


$

6,287


$

3,544


$

(2,995)


$

(6,244)


$

8,289

Total assets


$

1,158,351


$

2,055,751


$

261,326


$

303,465


$

61,430


$

3,840,323

 

READY CAPITAL CORPORATION

 UNAUDITED SEGMENT REPORTING

FOR THE SIX MONTHS ENDED JUNE 30, 2019



























SBA Originations,


Residential







Loan


SBC


Acquisitions,


Mortgage


Corporate-



(In Thousands)


Acquisitions


Originations


and Servicing


Banking


Other


Consolidated

Interest income


$

28,881


$

58,828


$

16,233


$

1,845


$


$

105,787

Interest expense



(18,307)



(42,068)



(8,790)



(2,364)





(71,529)

Net interest income before provision for loan losses


$

10,574


$

16,760


$

7,443


$

(519)


$


$

34,258

Provision for loan losses



(677)



(309)



(880)







(1,866)

Net interest income after provision for loan losses


$

9,897


$

16,451


$

6,563


$

(519)


$


$

32,392

Non-interest income



















Residential mortgage banking activities


$


$


$


$

35,608


$


$

35,608

Net realized gain on financial instruments



404



5,167



7,966







13,537

Net unrealized gain on financial instruments



(680)



734



(504)



(13,468)





(13,918)

Other income



1,025



2,447



53



102



65



3,692

Servicing income



1



897



2,833



10,832





14,563

Income from unconsolidated joint ventures



5,012











5,012

Gain on bargain purchase











30,728



30,728

Total non-interest income


$

5,762


$

9,245


$

10,348


$

33,074


$

30,793


$

89,222

Non-interest expense



















Employee compensation and benefits



(27)



(4,034)



(8,192)



(10,040)



(1,664)



(23,957)

Allocated employee compensation and benefits from
related party



(210)









(1,893)



(2,103)

Variable expenses on residential mortgage banking
activities









(22,677)





(22,677)

Professional fees



(217)



(614)



(356)



(465)



(1,763)



(3,415)

Management fees – related party











(4,492)



(4,492)

Incentive fees – related party













Loan servicing expense



(1,918)



(2,690)



(117)



(3,417)



(77)



(8,219)

Merger related expenses











(6,070)



(6,070)

Other operating expenses



(1,304)



(4,829)



(3,126)



(4,127)



(1,561)



(14,947)

Total non-interest expense


$

(3,676)


$

(12,167)


$

(11,791)


$

(40,726)


$

(17,520)


$

(85,880)

Net income (loss) before provision for income taxes


$

11,983


$

13,529


$

5,120


$

(8,171)


$

13,273


$

35,734

Total assets


$

1,158,351


$

2,055,751


$

261,326


$

303,465


$

61,430


$

3,840,323

 

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SOURCE Ready Capital Corporation