Q1 2020 Earnings Conference Call

May 11 2020 | 8:30 AM ET
 View details

Press Release

Ready Capital Corporation Announces Fourth Quarter 2019 Results

- Net Income of $0.43 per share of common stock in the fourth quarter -

- Core Earnings of $0.43 per share of common stock in the fourth quarter -

- Originated and acquired approximately $750 million of Small Balance Commercial (SBC) loans in Q4 2019 -

- Declared First Quarter 2020 Dividend of $0.40 Per Share -

Company Release - 3/11/2020 4:39 PM ET

NEW YORK, March 11, 2020 /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 December 31, 2019. A summary of Ready Capital's operating results for the quarter ended December 31, 2019 is presented below. Ready Capital reported U.S. GAAP Net Income for the three months ended December 31, 2019 of $20.9 million, or $0.43 per share of common stock, and Core Earnings (a non-GAAP financial measure) of $21.0 million, or $0.43 per share of common stock.

Fourth Quarter Highlights:

  • U.S. GAAP Net Income of $20.9 million, or $0.43 per diluted share of common stock
  • Core Earnings of $21.0 million, or $0.43 per diluted share of common stock
  • Adjusted net book value of $16.12 per share of common stock as of December 31, 2019
  • Originated $525.7 million and acquired $153.7 million of small balance commercial ("SBC") loans
  • Originated $70.2 million of loans guaranteed by the U.S. Small Business Administration (the "SBA") under its Section 7(a) loan program
  • Originated $586.3 million of residential mortgage loans
  • Declared and paid dividend of $0.40 per share

Thomas Capasse, Chairman and Chief Executive Officer said, "We closed out a very positive 2019 continuing to sequentially grow our net interest income while starting to benefit from the operating leverage afforded through increased scale.  Volumes remain robust across most business lines led by record origination levels in both our small balance commercial and residential operating businesses as we continue to take advantage of our platform diversity."  

Dividends

For the first quarter 2020 the Company declared a dividend of $0.40 per share of common stock and operating partnership unit. This dividend is payable on April 30, 2020 to shareholders of record as of the close of business on March 31, 2020.

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 ("MBS"), 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 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. 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 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 Core 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 Core 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-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 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 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 is 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 December 31, 2019:






Three Months Ended

(In Thousands)


December 31, 

Net Income

$

20,936

Reconciling items:



Unrealized loss on mortgage servicing rights


(2,482)

Merger transaction costs


1,938

Unrealized loss on mortgage-backed securities


29

Total reconciling items

$

(515)

Core earnings before income taxes

$

20,421

      Income tax adjustments


544

Core earnings

$

20,965

Core earnings per share

$

0.43

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, March 12, 2020 at 8:30 am ET to provide a general business update and discuss the financial results for the quarter ended December 31, 2019. 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.

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 ID #: 13699720

Conference Call Playback:

Domestic: 1-844-512-2921
International: 1-412-317-6671
Replay Pin #: 13699720

The playback can be accessed through March 26, 2020.

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 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)


December 31, 2019


December 31, 2018

Assets







Cash and cash equivalents


$

67,928


$

54,406

Restricted cash



51,728



28,921

Loans, net (including $20,212 and $22,664 held at fair value)



1,727,984



1,193,392

Loans, held for sale, at fair value



188,077



115,258

Mortgage backed securities, at fair value



92,466



91,937

Loans eligible for repurchase from Ginnie Mae



77,953



74,180

Investment in unconsolidated joint ventures



58,850



33,438

Purchased future receivables, net



43,265



Derivative instruments



2,814



2,070

Servicing rights (including $91,174 and $93,065 held at fair value)



121,969



120,062

Real estate, held for sale



58,573



7,787

Other assets



106,925



64,335

Assets of consolidated VIEs



2,378,486



1,251,057

Total Assets


$

4,977,018


$

3,036,843

Liabilities







Secured borrowings



1,189,392



834,547

Securitized debt obligations of consolidated VIEs, net



1,815,154



905,367

Convertible notes, net



111,040



109,979

Senior secured notes, net



179,289



178,870

Corporate debt, net



149,986



48,457

Guaranteed loan financing



485,461



229,678

Liabilities for loans eligible for repurchase from Ginnie Mae



77,953



74,180

Derivative instruments



5,250



3,625

Dividends payable



21,302



13,346

Accounts payable and other accrued liabilities



97,407



74,719

Total Liabilities


$

4,132,234


$

2,472,768

Stockholders' Equity







Common stock, $0.0001 par value, 500,000,000 shares authorized, 51,127,326 and 32,105,112
shares issued and outstanding, respectively



5



3

Additional paid-in capital



822,837



540,478

Retained earnings



8,746



5,272

Accumulated other comprehensive loss



(6,176)



(922)

Total Ready Capital Corporation equity



825,412



544,831

Non-controlling interests



19,372



19,244

Total Stockholders' Equity


$

844,784


$

564,075

Total Liabilities and Stockholders' Equity


$

4,977,018


$

3,036,843

 

READY CAPITAL CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME




Three Months Ended
December 31, 


Year Ended
December 31, 

(In Thousands, except share data)


2019


2019

Interest income


$

64,406


$

229,916

Interest expense



(40,962)



(151,880)

Net interest income before provision for loan losses


$

23,444


$

78,036

Provision for loan losses



(1,125)



(3,684)

Net interest income after provision for loan losses


$

22,319


$

74,352

Non-interest income







Residential mortgage banking activities


$

18,918


$

83,539

Net realized gain on financial instruments and real estate owned



8,044



28,958

Net unrealized gain (loss) on financial instruments



3,009



(18,790)

Servicing income, net



8,653



30,665

Income on purchased future receivables, net of allowance for doubtful accounts of $5,082



2,362



2,362

Income on unconsolidated joint ventures



29



6,088

Other income



4,407



11,078

Gain on bargain purchase





30,728

Total non-interest income


$

45,422


$

174,628

Non-interest expense







Employee compensation and benefits



(13,842)



(51,237)

Allocated employee compensation and benefits from related party



(1,870)



(5,473)

Variable expenses on residential mortgage banking activities



(11,765)



(51,760)

Professional fees



(1,989)



(7,434)

Management fees – related party



(2,591)



(9,578)

Incentive fees – related party



(106)



(106)

Loan servicing expense



(4,891)



(17,976)

Merger related expenses



(1,629)



(7,750)

Other operating expenses



(10,070)



(33,162)

Total non-interest expense


$

(48,753)


$

(184,476)

Income before provision for income taxes


$

18,988


$

64,504

Income tax benefit (provision)



1,948



10,552

Net income


$

20,936


$

75,056

Less: Net income attributable to non-controlling interest



508



2,088

Net income attributable to Ready Capital Corporation


$

20,428


$

72,968








Earnings per common share - basic


$

0.43


$

1.72

Earnings per common share - diluted


$

0.43


$

1.72








Weighted-average shares outstanding







Basic



46,446,573



42,011,750

Diluted



46,482,470



42,047,648








Dividends declared per share of common stock


$

0.40


$

1.60















 

READY CAPITAL CORPORATION

UNAUDITED SEGMENT REPORTING

FOR THE THREE MONTHS ENDED DECEMBER 31, 2019








SBA Originations,


Residential







Loan


SBC


Acquisitions,


Mortgage


Corporate-



(In Thousands)


Acquisitions


Originations


and Servicing


Banking


Other


Consolidated

Interest income


$

18,161


$

36,313


$

8,628


$

1,304


$


$

64,406

Interest expense



(11,120)



(24,774)



(3,335)



(1,733)





(40,962)

Net interest income before provision for loan losses


$

7,041


$

11,539


$

5,293


$

(429)


$


$

23,444

Provision for loan losses



(37)



23



(1,111)







(1,125)

Net interest income after provision for loan losses


$

7,004


$

11,562


$

4,182


$

(429)


$


$

22,319

Non-interest income



















Residential mortgage banking activities


$


$


$


$

18,918


$


$

18,918

Net realized gain on financial instruments



51



3,518



4,475







8,044

Net unrealized gain (loss) on financial instruments



632



24



125



2,481



(253)



3,009

Other income



2,260



1,342



683



67



55



4,407

Income on purchased future receivables, net



2,362











2,362

Servicing income



797



513



1,317



6,026





8,653

Income from unconsolidated joint ventures



29











29

Gain on bargain purchase













Total non-interest income


$

6,131


$

5,397


$

6,600


$

27,492


$

(198)


$

45,422

Non-interest expense



















Employee compensation and benefits



(1,802)



(1,451)



(3,993)



(5,751)



(845)



(13,842)

Allocated employee compensation and benefits from related party



(187)









(1,683)



(1,870)

Variable expenses on residential mortgage banking activities









(11,765)





(11,765)

Professional fees



(311)



(467)



(376)



(292)



(543)



(1,989)

Management fees – related party











(2,591)



(2,591)

Incentive fees – related party











(106)



(106)

Loan servicing expense



(1,283)



(1,510)



61



(2,136)



(23)



(4,891)

Merger related expenses











(1,629)



(1,629)

Other operating expenses



(2,498)



(3,001)



(1,957)



(1,899)



(715)



(10,070)

Total non-interest expense


$

(6,081)


$

(6,429)


$

(6,265)


$

(21,843)


$

(8,135)


$

(48,753)

Net income (loss) before provision for income taxes


$

7,054


$

10,530


$

4,517


$

5,220


$

(8,333)


$

18,988

Total assets


$

1,264,226


$

2,492,156


$

760,031


$

330,363


$

130,242


$

4,977,018




















 

READY CAPITAL CORPORATION

UNAUDITED SEGMENT REPORTING

FOR THE YEAR ENDED DECEMBER 31, 2019








SBA Originations,


Residential









SBC


Acquisitions,


Mortgage


Corporate-



(In Thousands)


Acquisitions


Originations


and Servicing


Banking


Other


Consolidated

Interest income


$

65,922


$

127,495


$

32,096


$

4,403


$


$

229,916

Interest expense



(40,502)



(90,677)



(14,864)



(5,837)





(151,880)

Net interest income before provision for loan losses


$

25,420


$

36,818


$

17,232


$

(1,434)


$


$

78,036

Provision for loan losses



(808)



(319)



(2,557)







(3,684)

Net interest income after provision for loan losses


$

24,612


$

36,499


$

14,675


$

(1,434)


$


$

74,352

Non-interest income



















Residential mortgage banking activities


$


$


$


$

83,539


$


$

83,539

Net realized gain on financial instruments



18



13,750



15,190







28,958

Net unrealized gain (loss) on financial instruments



(254)



(107)



393



(18,569)



(253)



(18,790)

Servicing income



798



1,898



5,330



22,639





30,665

Income on purchased future receivables, net of allowance for doubtful accounts



2,362











2,362

Income from unconsolidated joint ventures



6,088











6,088

Other income



4,210



4,907



1,548



249



164



11,078

Gain on bargain purchase











30,728



30,728

Total non-interest income


$

13,222


$

20,448


$

22,461


$

87,858


$

30,639


$

174,628

Non-interest expense



















Employee compensation and benefits



(1,855)



(6,905)



(16,255)



(22,882)



(3,340)



(51,237)

Allocated employee compensation and benefits from related party



(547)









(4,926)



(5,473)

Variable expenses on residential mortgage banking activities









(51,760)





(51,760)

Professional fees



(723)



(1,652)



(1,011)



(1,101)



(2,947)



(7,434)

Management fees – related party











(9,578)



(9,578)

Incentive fees – related party











(106)



(106)

Loan servicing expense



(4,662)



(5,695)



(261)



(7,225)



(133)



(17,976)

Merger related expenses











(7,750)



(7,750)

Other operating expenses



(4,573)



(11,199)



(6,591)



(7,717)



(3,082)



(33,162)

Total non-interest expense


$

(12,360)


$

(25,451)


$

(24,118)


$

(90,685)


$

(31,862)


$

(184,476)

Net income (loss) before provision for income taxes


$

25,474


$

31,496


$

13,018


$

(4,261)


$

(1,223)


$

64,504

Total assets


$

1,264,226


$

2,492,156


$

760,031


$

330,363


$

130,242


$

4,977,018

 

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SOURCE Ready Capital Corporation