Q1 2020 Earnings Conference Call

May 11 2020 | 8:30 AM ET
 View details

Press Release

Ready Capital Corporation Announces First Quarter 2020 Results

Company Release - 5/11/2020 6:00 AM ET

NEW YORK, May 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 March 31, 2020. A summary of Ready Capital's operating results for the quarter ended March 31, 2020 is presented below. Ready Capital reported a U.S. GAAP Net loss for the three months ended March 31, 2020 of $51.5 million, or $0.98 per share of common stock, and Core Earnings (a non-GAAP financial measure) of $1.2 million, or $0.01 per share of common stock.

First Quarter Results:

  • U.S. GAAP Net loss of $51.5 million, or $0.98 per diluted share of common stock
  • Core Earnings of $1.2 million, or $0.01 per diluted share of common stock
  • Adjusted net book value of $14.52 per share of common stock as of March 31, 2020
  • Unrestricted cash position of $122.3 million as of March 31, 2020
  • The net book value per share impact of the adoption of the new CECL accounting standard and the non-cash change in reserves on performing loans was $0.79 per share and includes the COVID-19 related adverse economic scenario forecasting
  • Originated $469.7 million and acquired $51.5 million of small balance commercial ("SBC") loans
  • Originated $45.5 million of loans guaranteed by the U.S. Small Business Administration (the "SBA") under its Section 7(a) loan program
  • Originated a record $691.3 million of residential mortgage loans
  • Declared and paid dividend of $0.40 per share in a combination of cash and common shares

Thomas Capasse, Chairman and Chief Executive Officer said, "In light of the increased volatility and market instability caused by COVID-19 pandemic, the Company shifted focus to increasing liquidity, managing mark-to-market liabilities, and preserving book value through pre-emptive asset management. We are and we will continue leveraging our various lending segments to help support the challenges our economy faces and continue to care for our colleagues, partners and stakeholders affected by this public health issue. Our thoughts remain with the individuals and communities affected across the world as the public health response to COVID-19 continues."

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, merger related expenses, or other one-time items, such as the impact of the adoption of ASU 2016-3, which replaces the incurred loss methodology with an expected loss model known as the Current Expected Credit Loss ("CECL") model.

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 March 31, 2020:






Three Months Ended

(In Thousands)


March 31, 

Net Income

$

(51,516)

Reconciling items:



Unrealized (gain) loss on mortgage servicing rights


16,437

Impact of the adoption of ASU 2016-13 on accrual loans


35,438

Non-recurring REO impairment


2,969

Merger transaction costs and other non-recurring expenses


1,255

Unrealized loss on mortgage-backed securities


230

Unrealized loss on de-designated cash flow hedges


2,118

Total reconciling items

$

58,447

Core earnings before income taxes

$

6,931

      Income tax adjustments


(5,706)

Core earnings

$

1,225

  Less: Core earnings attributable to non-controlling interests


(25)

  Less: Income attributable to participating shares


(463)

Core earnings attributable to Common Stockholders

$

736

Core earnings per share

$

0.01

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 Monday, May 11, 2020 at 8:30 am ET to provide a general business update and discuss the financial results for the quarter ended March 31, 2020. 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: 1-855-327-6837
International: 1-631-891-4304
Conference ID #: 10009537

Conference Call Playback:

Domestic: 1-844-512-2921
International: 1-412-317-6671
Replay Pin #: 10009537

The playback can be accessed through May 25, 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)


March 31, 2020


December 31, 2019

Assets







Cash and cash equivalents


$

122,265


$

67,928

Restricted cash



93,164



51,728

Loans, net (including $19,813 and $20,212 held at fair value)



1,969,052



1,727,984

Loans, held for sale, at fair value



306,328



188,077

Mortgage backed securities, at fair value



78,540



92,466

Loans eligible for repurchase from Ginnie Mae



77,605



77,953

Investment in unconsolidated joint ventures



53,379



58,850

Purchased future receivables, net



49,150



43,265

Derivative instruments



17,756



2,814

Servicing rights (including $78,631 and $91,174 held at fair value)



110,111



121,969

Real estate, held for sale



48,292



58,573

Other assets



114,891



106,925

Assets of consolidated VIEs



2,229,517



2,378,486

Total Assets


$

5,270,050


$

4,977,018

Liabilities







Secured borrowings



1,698,937



1,189,392

Securitized debt obligations of consolidated VIEs, net



1,692,074



1,815,154

Convertible notes, net



111,310



111,040

Senior secured notes, net



179,387



179,289

Corporate debt, net



150,074



149,986

Guaranteed loan financing



457,032



485,461

Liabilities for loans eligible for repurchase from Ginnie Mae



77,605



77,953

Derivative instruments



16,585



5,250

Dividends payable



21,747



21,302

Accounts payable and other accrued liabilities



89,740



97,407

Total Liabilities


$

4,494,491


$

4,132,234

Stockholders' Equity







Common stock, $0.0001 par value, 500,000,000 shares authorized, 52,091,850 and 51,127,326 shares issued and outstanding, respectively



5



5

Additional paid-in capital



837,064



822,837

Retained earnings



(69,605)



8,746

Accumulated other comprehensive loss



(9,536)



(6,176)

Total Ready Capital Corporation equity



757,928



825,412

Non-controlling interests



17,631



19,372

Total Stockholders' Equity


$

775,559


$

844,784

Total Liabilities and Stockholders' Equity


$

5,270,050


$

4,977,018

 

 

READY CAPITAL CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME










Three Months Ended March 31, 

(In Thousands, except share data)


2020


2019

Interest income


$

69,551


$

48,753

Interest expense



(46,930)



(35,775)

Net interest income before provision for loan losses


$

22,621


$

12,978

Provision for loan losses



(39,804)



(518)

Net interest income after provision for loan losses


$

(17,183)


$

12,460

Non-interest income







Residential mortgage banking activities



36,669



14,587

Net realized gain on financial instruments and real estate owned



7,172



7,282

Net unrealized gain (loss) on financial instruments



(33,434)



(6,912)

Servicing income, net of amortization and impairment of $1,725 and $1,763



8,097



6,752

Income on purchased future receivables, net of allowance for doubtful accounts of $6,917



3,483



Income (loss) on unconsolidated joint ventures



(3,537)



2,929

Other income



4,073



900

Gain on bargain purchase





30,728

Total non-interest income


$

22,523


$

56,266

Non-interest expense







Employee compensation and benefits



(18,936)



(11,448)

Allocated employee compensation and benefits from related party



(1,250)



(853)

Variable expenses on residential mortgage banking activities



(20,129)



(9,176)

Professional fees



(2,556)



(1,829)

Management fees – related party



(2,561)



(1,997)

Loan servicing expense



(5,570)



(3,648)

Merger related expenses



(47)



(5,467)

Other operating expenses



(13,744)



(6,861)

Total non-interest expense


$

(64,793)


$

(41,279)

Income (loss) before provision for income taxes


$

(59,453)


$

27,447

Income tax benefit



7,937



3,003

Net income (loss)


$

(51,516)


$

30,450

Less: Net income (loss) attributable to non-controlling interest



(1,064)



983

Net income (loss) attributable to Ready Capital Corporation


$

(50,452)


$

29,467








Earnings (loss) per common share - basic


$

(0.98)


$

0.90

Earnings (loss) per common share - diluted


$

(0.98)


$

0.90








Weighted-average shares outstanding







Basic



51,984,040



32,556,875

Diluted



51,990,013



32,563,644








Dividends declared per share of common stock


$

0.40


$

0.40

 

 

READY CAPITAL CORPORATION

UNAUDITED SEGMENT REPORTING

FOR THE THREE MONTHS ENDED MARCH 31, 2020


























SBA Originations,


Residential









SBC


Acquisitions,


Mortgage


Corporate-



(In Thousands)


Acquisitions


Originations


and Servicing


Banking


Other


Consolidated

Interest income


$

16,494


$

39,269


$

12,471


$

1,317


$


$

69,551

Interest expense



(11,205)



(25,627)



(8,513)



(1,585)





(46,930)

Net interest income before provision for loan losses


$

5,289


$

13,642


$

3,958


$

(268)


$


$

22,621

Provision for loan losses



(5,722)



(29,828)



(4,254)







(39,804)

Net interest income after provision for loan losses


$

(433)


$

(16,186)


$

(296)


$

(268)


$


$

(17,183)

Non-interest income



















Residential mortgage banking activities


$


$


$


$

36,669


$


$

36,669

Net realized gain (loss) on financial instruments



(739)



3,649



4,262







7,172

Net unrealized gain (loss) on financial instruments



(9,423)



(6,491)



(1,082)



(16,438)





(33,434)

Servicing income



355



532



1,074



6,136





8,097

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



3,483











3,483

Loss from unconsolidated joint ventures



(3,537)











(3,537)

Other income



2,336



1,283



295



60



99



4,073

Total non-interest income (loss)


$

(7,525)


$

(1,027)


$

4,549


$

26,427


$

99


$

22,523

Non-interest expense



















Employee compensation and benefits


$

(2,833)


$

(2,710)


$

(3,910)


$

(8,741)


$

(742)


$

(18,936)

Allocated employee compensation and benefits from related party



(125)









(1,125)



(1,250)

Variable expenses on residential mortgage banking activities









(20,129)





(20,129)

Professional fees



(235)



(338)



(289)



(287)



(1,407)



(2,556)

Management fees – related party











(2,561)



(2,561)

Loan servicing expense



(1,365)



(1,580)



(335)



(2,258)



(32)



(5,570)

Merger related expenses











(47)



(47)

Other operating expenses



(6,245)



(3,457)



(1,559)



(1,785)



(698)



(13,744)

Total non-interest expense


$

(10,803)


$

(8,085)


$

(6,093)


$

(33,200)


$

(6,612)


$

(64,793)

Net loss before provision for income taxes


$

(18,761)


$

(25,298)


$

(1,840)


$

(7,041)


$

(6,513)


$

(59,453)

Total assets


$

1,209,617


$

2,704,301


$

703,331


$

418,421


$

234,380


$

5,270,050

 

 

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SOURCE Ready Capital Corporation