Ready Capital Corporation · NYSE:RC
Ready Capital — Investor Presentation (May 2020)
34 slides from Ready Capital's investor presentation, May 2020
Slide 1: Investor Presentation May 2020
INVESTOR PRESENTATION May 2020
Slide 2: Disclaimer
DISCLAIMER These materials and any presentation of which they form a part are neither an offer to sell, nor a solicitation of an offer to purchase, an interest in Ready Capital Corporation (“Ready Capital,” “RC,” or the “Company”). Neither the Company nor any of its representatives or affiliates mak
Slide 3: Company Overview
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Slide 4: Who Is Ready Capital?
WHO IS READY CAPITAL? • Only nationwide specialty finance company focused on the SBC market • Compelling risk-adjusted returns due to fragmentation in the SBC market • Dual strategy of acquisitions and originations with extensive track record • Cost-effective financing through securitization and ban
Slide 5: SBC Market Opportunities
SBC MARKET OPPORTUNITIES ► SBC Loans ► SBC Originations • First lien on commercial real estate • Investor • Owner-occupied • Appraised value generally $5M or less • 50,000 square ft or less • Highly fragmented origination market ► SBC Market Size ► SBA Originations 30 Small Balance 15% 25 20 Billion
Slide 6: Pursuing SBC Opportunities
PURSUING SBC OPPORTUNITIES Investor owned Investor multi- retail strip mall family Tempe, AZ Kenedy, TX Core loan Freddie Mac originated by loan originated RCC by RCC Type Loan Amount Rate Term LTV Type Loan Amount Rate Term LTV Retail $5,587,500 5.38% 10 years 75% Multifamily $5,135,000 5.28% 10 ye
Slide 7: A Multidimensional Platform to Drive Growth
A MULTIDIMENSIONAL PLATFORM TO DRIVE GROWTH SBA ORIGINATION, RESIDENTIAL LOAN SBC ORIGINATIONS ACQUISITIONS, AND MORTGAGE ACQUISITIONS SERVICING BANKING Products SBC Investor Property SBC Owner-Occupied; Acquisitions of non- Residential mortgage originator; stabilized 1 of 14 SBA non-bank and-re-per
Slide 8: Financial Overview
“=” READY CAPITAL. FINANCIAL OVERVIEW
Slide 9: Company Update
COMPANY UPDATE(1) Government sponsored lending segments remain active with SBA, Mortgage Banking and Freddie Mac Multifamily originations operating at full capacity BUSINESS ACTIVITIES CRE lending activities reduced due to uncertainty in the capital markets and a preference for retaining liquidi
Slide 10: 2019 Highlights
2019 HIGHLIGHTS Net income of $75.1 million(1), or $1.72 per common share EARNINGS / Core earnings of $67.3 million(1), or $1.54 per common share DIVIDENDS Declared dividend of $1.60 per share Return on Equity(2) of 10.5% RETURNS Core Return on Equity(3) of 9.4% Dividend Yield(4) of 10.9
Slide 11: Return on Equity – FY 2019
RETURN ON EQUITY – FY 2019 (2) (2) GAAP ROE Core ROE Core Levered Equity Segment Levered Q4'19 Q3'19 FY 2019 Q4'19 Q3'19 FY 2019 Yield (1) Allocation Yield (1) Loan Acquisitions 12.6 % 12.6 % 26.3 % SBC Originations 12.0 % 12.0 % 58.8 % 16.1 % 13.8 % 13.7 % 15.1 % 17.0 % 15.8 % SBA Originations, Acq
Slide 12: First Quarter 2020 Results
FIRST QUARTER 2020 RESULTS Net loss of $51.5 million(1), or $(0.98) per common share EARNINGS / Core earnings of $1.2 million(1), or $0.01 per common share DIVIDENDS Declared dividend of $0.40 per share Return on Equity(2) of (24.9)% RETURNS Core Return on Equity(3) of 0.6% Dividend Yiel
Slide 13: Return on Equity - Q1'20
RETURN ON EQUITY- Q1’20 GAAP ROE (2) Core ROE (2) Core Levered Equity Segment (1) Levered Q1'20 Q4'19 Q1'20 Q4'19 Yield (1) Allocation Yield Loan Acquisitions 7.3 % 7.9 % 23.9 % SBC Originations 12.5 % 12.5 % 63.1 % 10.5 % 16.1 % 17.1 % 15.1 % SBA Originations, Acquisitions, 43.7 % 43.7 % 6.7 % & Se
Slide 14: Capital Structure
CAPITAL STRUCTURE Total HISTORICAL CAPITAL STRUCTURE LIQUIDITY UPDATE Total Debt Debt + + Equity $3,088 $3,642 $3,915 $4,290 $4,608 ► Approximate liquidity of $100 million Equity consisting of cash on hand and available ($M) borrowing capacity on committed warehouse lines 37% 37% 37% 43% 42% ► Since
Slide 15: Loan Portfolio Composition as of March 31, 2020
LOAN PORTFOLIO COMPOSITION AS OF MARCH 31, 2020(1)(2) Geographic Location Lien Position California Subordinated Other 18% Mortgage 0.3% 0.8% Texas 15% Other 45% First Mortgage 98.9% Illinois New York Florida 5% 9% 8% Collateral Type SBA Collateral Type Other SBA Physicians Child Day Care 16% 16% Off
Slide 16: Financing and Leverage
FINANCING AND LEVERAGE 3/31/2020 Total Debt-to-Equity Ratio (in millions) Secured borrowings (warehouse credit facilities and borrowings under repo transactions) $ 1,699 Securitized debt obligations 1,692 Senior secured notes and corporate bonds 329 Convertible notes 111 Total Debt $ 3,831 Total Sto
Slide 17: Appendix 1: Additional Financial Information
APPENDIX 1 ADDITIONAL FINANCIAL INFORMATION 17
Slide 18: Diversified, Complementary, and Scalable Platforms
DIVERSIFIED, COMPLEMENTARY, AND SCALABLE PLATFORMS PORTFOLIO BREAKDOWN(1) EARNINGS BREAKDOWN(2) $12,000 SBC Originations Residential - Bridge, $10,511 Mortgage Banking $10,000 6% Residential SBA Mortgage Originations, $8,000 Acquisitions Banking, $7,048 Acquisitions, & 25% Servicing 14% $6,000 SBC O
Slide 19: Ready Capital Snapshot
READY CAPITAL SNAPSHOT ($ amounts in thousands, except per share data) Gross Average Debt Investment Type Average Carrying (2) (3) (1) Yield Balance Debt Cost Levered Yield Value Loan Acquisitions $ 1,101,490 4.5% $ 861,219 3.7% 7.3% SBC Originations $ 2,594,876 6.2% $ 1,960,563 4.2% 12.5% SBA Origi
Slide 20: Credit and Repurchase Facilities
CREDIT AND REPURCHASE FACILITIES Facility Carrying Available Lender Asset Class Maturity Pricing Size (1) Value(1) Capacity (1) Borrowings under credit facilities JPMorgan Acquired loans, SBA loans Aug-2020 1M L + 2.00 to 2.50% $ 250,000 $ 82,204 $ 167,796 Keybank Freddie Mac loans Feb-2021 1M L + 1
Slide 21: Balance Sheet by Quarter
BALANCE SHEET BY QUARTER (In Thousands) 3/31/2019 6/30/2019 9/30/2019 12/31/2019 3/31/2020 Assets Cash and cash equivalents $ 47,597 $ 41,925 $ 52,727 $ 67,928 $ 122,265 Restricted cash 29,979 38,019 45,303 51,728 93,164 Loans, net 1,057,023 1,002,676 1,380,359 1,727,984 1,969,052 Loans, held for sa
Slide 22: Statement of Income by Quarter
STATEMENT OF INCOME BY QUARTER (In thousands, except share data) Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Interest income $ 48,753 $ 57,034 $ 59,723 $ 64,406 $ 69,551 Interest expense (35,775) (35,753) (39,390) (40,962) (46,930) Net interest income before provision for loan losses $ 12,978 $ 21,281 $
Slide 23: Core Earnings Reconciliation by Quarter
CORE EARNINGS RECONCILIATION BY QUARTER (In Thousands) Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Net Income $ 30,450 $ 11,245 $ 12,427 $ 20,936 $ (51,516) Reconciling items: Unrealized (gain) loss on mortgage servicing rights $ 7,128 $ 6,339 $ 7,582 $ (2,482) $ 16,437 Adoption of ASU 2016-3 — — — — 35
Slide 24: Appendix 2: Business Segment Information
APPENDIX 2 BUSINESS SEGMENT INFORMATION 24
Slide 25: SBC Originations - Segment Snapshot
SBC ORIGINATIONS - SEGMENT SNAPSHOT Portfolio Metrics (Balance Sheet) Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Number of loans 429 485 501 537 593 Unpaid Principal Balance (3) $ 1,582 $ 1,829 $ 2,064 $ 2,298 $ 2,581 Carrying Value (3) $ 1,589 $ 1,835 $ 2,070 $ 2,300 $ 2,580 Weighted Average LTV 63% 6
Slide 26: SBA Originations, Acquisitions, & Servicing - Segment Snapshot
SBA ORIGINATIONS, ACQUISITIONS, & SERVICING - SEGMENT SNAPSHOT Portfolio Metrics (Balance Sheet) Q1 2019 Q2 2019 Q3 2019 Q4 2019(5) Q1 2020(5) Number of loans 1,876 1,902 1,875 1,880 1,813 (2) Unpaid Principal Balance $ 262 $ 270 $ 278 $ 804 $ 701 (2) Carrying Value $ 221 $ 230 $ 240 $ 770 $ 664 Wei
Slide 27: Loan Acquisitions - Segment Snapshot
LOAN ACQUISITIONS - SEGMENT SNAPSHOT (1) Portfolio Metrics (Balance Sheet) Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Number of loans 1,018 2,385 2,363 2,231 2,212 (2) Unpaid Principal Balance $ 798 $ 1,075 $ 1,068 $ 1,048 $ 1,073 (2) Carrying Value $ 770 $ 1,055 $ 1,056 $ 1,039 $ 1,066 Weighted Averag
Slide 28: Supported by Diversity in Asset Types
SUPPORTED BY DIVERSITY IN ASSET TYPES Loan Origination Business Acquisition Conventional Transitional Freddie Mac Business SBA 7(a) Residential Loans Loans SBL Program First mortgages on owner- occupied Multifamily Acquisition of First mortgages on investor-owned commercial Residential Principal Bus
Slide 29: Robust SBC Origination Platform
ROBUST SBC ORIGINATION PLATFORM Nationwide Presence Origination Volumes $2,500 $2,000 $1,500 $1,000 $500 States with Funded Loans Sales Offices $0 Headquarters Actively Recruiting 2014 2015 2016 2017 2018 2019 Core Freddie Transitional SBA The ReadyCap origination platform is In mid-2014, ReadyCap a
Slide 30: Freddie Mac Offers Compelling Risk-Adjusted Returns
FREDDIE MAC OFFERS COMPELLING RISK-ADJUSTED RETURNS ► In 2014, Freddie Mac launched its Small Balance Loan (SBL) program for approved SBL Sellers/Servicers to originate and sell loans on smaller rental properties (under 50 units) ► Ready Capital is one of 11 approved Seller/Servicers under the progr
Slide 31: Meaningful Competitive Advantage in SBA 7(a) Loans
MEANINGFUL COMPETITIVE ADVANTAGE IN SBA 7(A) LOANS • The SBA (1953) is an independent federal agency which provides • The SBA Section 7(a) Program is the SBA’s primary program secured financing to small businesses • The SBA typically guarantees 75% of qualified loans up to $5M • Eligible participant
Slide 32: Enhanced Residential Mortgage Origination Platform
ENHANCED RESIDENTIAL MORTGAGE ORIGINATION PLATFORM BUSINESS DESCRIPTION ORIGINATION VOLUME BY PURPOSE ($MM) • GMFS, founded in 1999, has a leading Southeast $2,500 market share and acquired via the ZFC merger in 2016 $2,000 $728 $775 $463 $636 $398 • GMFS provides a wide range of residential $1,500
Slide 33: Waterfall – A Successful & Proven Asset Manager
WATERFALL – A SUCCESSFUL & PROVEN ASSET MANAGER ► Waterfall consists of a dedicated team of 73 investment professionals who have extensive experience in small balance commercial (SBC) distressed asset acquisition, loan origination, asset management and capital markets. Key Loan Management 24% Perman
Slide 34: Ready Capital
. CAPITAL. RC LISTED NYSE