Ready Capital Corporation · NYSE:RC
Ready Capital — Investor Presentation (June 2022)
43 slides from Ready Capital's investor presentation, June 2022
Slide 1: Investor Presentation June 2022
INVESTOR PRESENTATION June 2022
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: Differentiated Mortgage REIT
Differentiated Mortgage REIT Largest non-bank lender to both investors in and owners of small balance commercial (“SBC”) properties with current capitalization of approximately $2.0 billion1,2 All-weather investment strategy as a direct lender and acquiror of bulk portfolios, including distressed $9
Slide 4: Diversified Investment Strategy
Diversified Investment Strategy Capital allocated opportunistically to highest ROE Operating Company across economic cycle SBC LENDING AND RESIDENTIAL SMALL BUSINESS LENDING ACQUISITIONS MORTGAGE BANKING Products: Investor SBC lending across 9 Owner occupied SBC lending Residential mortgage loan pro
Slide 5: Complementary Platforms
Complementary Platforms INVESTED EQUITY ALLOCATION TTM CORE EARNINGS CONTRIBUTION 5% 7% 5%1% 16% 15% 5% 9% 14% 32% 54% 1% 30% 6% Acquisitions Fixed rate Acquisitions Fixed rate Bridge Freddie Mac 1 Bridge Freddie Mac1 Construction Small Business Lending Construction Small Business Lending Residentia
Slide 6: Company History and Evolution
Company History and Evolution 2011 October 2019 ▪ Ready Capital, then Sutherland Asset Management was founded ▪ Acquired Knight Capital, a technology-driven platform that provides working capital to small and medium businesses across the U.S., for $27.8mm July 2014 June 2020 ▪ Acquired SBA ownership
Slide 7: SBC Lending & Acquisitions
a ~ READY CAPITAL. @ @ ® o ° @ ® e e @ e @ eo e ® e ® e ® e SBC Lending & Acquisitions _ _--* e e e e e e e e a e ee @ e @ ° e @
Slide 8: SBC Market
SBC Market SBC loans are 1st liens on either investor or owner occupied commercial real estate assets Typically, property appraised values of <$10M and <50,000 square feet TOTAL SMALL-CAP COMMERICAL MARKET VALUE SMALL-BALANCE LOAN ORIGINATION TREND SUB $5 Million 8
Slide 9: SBC Lending & Acquisition Overview
SBC Lending & Acquisition Overview All-weather origination platform with ability to allocate capital to the best opportunities across 9 products spanning heavy transitional to stabilized 1 of 12 Freddie Mac Small Balance Loan lenders; ranked #5 based on 2021 volume Over $14.5 billion in originations
Slide 10: Platform Growth
Platform Growth 42.1% 10-year CAGR Current 1.0% SBC market share with 1.5% 3-year target HISTORICAL GROWTH1 $5,272 $5,000 $4,000 $3,000 $2,849 $2,000 $1,738 $1,537 $1,188 $1,142 $1,000 $862 $868 $863 $588 $372 $140 $208 $197 $98 $5 $0 Pre-2016(2) 2016 2017 2018 2019 2020 2021 2022 YTD(3) Acquisition
Slide 11: SBC Product Offerings
SBC Product Offerings READY CAPITAL. GROUND-UP HEAVY TRANSITIONAL PRODUCT CONSTRUCTION BRIDGE BRIDGE-TO-PERM LIGHT TRANSITIONAL STABILIZING STABILIZED BRIDGE-TO- AGENCY STRUCTURED FIXED RATE CMBSDIRECT CORRESPONDENT AGENCY FREDDIE MAC SBL AFFORDABLE HOUSING Construction Vacant Renovation Final Lease
Slide 12: Transitional Case Study
Transitional Case Study LOAN AMOUNT: $29,850,000 PRICING BASIS: Variable RATE: SOFR + 360bps FEES: 175bps LIEN: 1st ORIGINATION DATE: March 2022 TERM (MONTHS): 36 (+2yr Extension) AMORTIZATION (MONTHS): 360 LOAN-TO-VALUE: 75% Name: The Vicinity PERSONAL GUARANTEE: No RETAINED YIELD: 12.21% Location:
Slide 13: Fixed Rate Case Study
Fixed Rate Case Study LOAN AMOUNT: $10,850,000 PRICING BASIS: Fixed RATE: 4.40% TYPE: 10-Yr Balloon LIEN: 1st ORIGINATION DATE: December 2021 TERM (MONTHS): 120 AMORTIZATION (MONTHS): 360 LOAN-TO-VALUE: 68% Name: Kona Ice PERSONAL GUARANTEE: No RETAINED YIELD: 13.5% Location: Florence, KY 41042 Loan
Slide 14: Freddie Mac SBL Case Study
Freddie Mac SBL Case Study LOAN AMOUNT: $3,760,000 PRICING BASIS: Fixed RATE: 3.26% TYPE: 5-Yr Hybrid LIEN: 1st ORIGINATION DATE: December 2021 TERM (MONTHS): 240 AMORTIZATION (MONTHS): 360 LOAN-TO-VALUE: 50% Name: Paloma PERSONAL GUARANTEE: No GROSS FEES: 1.25% Location: Venice, CA 90291 Loan Purpo
Slide 15: SBC Lending and Acquisitions
SBC Lending and Acquisitions LOAN 60+ DAYS UPB BOOK VALUE WA LTV WA COUPON FIXED/FLOAT(1) COUNT PAST DUE 2,510 $8.77B $8.69B 64.7% 4.5% 20.7 / 79.3% 2.4% ACQUISITIONS 1,652 $798M $787M 37.2% 5.6% 49.0 / 51.0% 3.3% FIXED RATE 323 $1.29B $1.29B 60.3% 4.9% 1.8 / 98.2% 1.9% BRIDGE 517 $6.29B $6.22B 69.4
Slide 16: Small Business Lending
"READY CAPITAL. Small Business Lending
Slide 17: Small Business Lending Overview
Small Business Lending Overview A leading provider of capital to small businesses through 7(a) loans, USDA loans and unsecured small business loans 1 of 14 non-bank Small Business Administration 7(a) license holders; acquired from CIT in 2014 #2 non-bank 7(a) lender and #8 overall lender1 Fully inte
Slide 18: Small Business Market – 7(a)
Small Business Market – 7(a) • The SBA (1953) is an independent federal agency • The SBA’s lead program is the 7(a) which that guarantees loans to small businesses guarantees 75% of eligible loans up to $5M @ Prime + 275bps maximum rate • Eligible participants are banks except for 14 non- bank licen
Slide 19: SBA 7(a) Economics
SBA 7(a) Economics ASSUMPTIONS YEAR 1 GROSS RETURN ONGOING GROSS RETURN Gain on Sale Income on Loan Amount: $1,000,000 Revenue: $90,000 Retained Loan: $15,000 Guaranteed Income on Debt Cost on Balance: $750,000 Retained Loan: $15,000 Retained Loan: ($5,775) Unguaranteed Debt Cost on Balance: $250,00
Slide 20: Platform Growth
Platform Growth 81.9% CAGR Current 1.4% non-bank market share with 2.0% 3-year target or ~$600 million in volume Approximately $5.0 billion of PPP loans originated ORIGINATIONS1 600 $480.8 500 400 300 $216.3 $216.6 $213.0 200 $175.1 $129.8 100 $45.4 $11.6 0 2015 2016 2017 2018 2019 2020 2021 2022 YT
Slide 21: SBA 7(a) Case Study
SBA 7(a) Case Study LOAN AMOUNT: $3,350,000 PRICING BASIS: Variable RATE: Prime + 125 bps GUARANTEE: 75% SALE PREMIUM: 12% SECURITIZATION ADVANCE RATE: 84% SERVICING STRIP: 1% DEBT COST: 3.45% LIEN: 1st Name: Creative JDEA, Inc. ORIGINATION DATE: February 2022 Location: Los Angeles, CA 90020 TERM (M
Slide 22: Small Business Lending
Small Business Lending 60+ DAYS LOAN COUNT UPB BOOK VALUE WA LTV WA COUPON FIXED/FLOAT PAST DUE 2,078 $649M $614M 88.6% 5.6% 0.3 / 99.7% 1.3% GEOGRAPHY PROPERTY TYPE 21% 39% 15% 11% 14% Lodging Retail Doctors Eating Place Other 22
Slide 23: Residential Mortgage Banking
Residential Mortgage Banking
Slide 24: Residential Mortgage Banking Overview
Residential Mortgage Banking Overview GMFS, founded in 1999, has a leading Southeast market share and acquired via the ZFC merger in 2016 Licensed in 18 states, approved FNMA and FHLMC seller-servicer, GNMA issuer, HUD / FHA / USDA originator and VA lender GMFS provides a wide range of residential m
Slide 25: Production Metrics
Production Metrics PURCHASE VOLUME HAS ACCOUNTED FOR ~60% OF HISTORICAL PRODUCTION (IN MILLIONS) $4,500 $2,435 $2,110 $3,000 $728 $463 $775 $2,095 $1,500 $636 $398 $1,812 $1,460 $1,508 $1,380 $1,439 $1,189 $364 $664 $0 2015 2016 2017 2018 2019 2020 2021 2022 YTD(1) Purchase Refi DIVERSIFIED PRODUCTI
Slide 26: Servicing Asset
Servicing Asset HISTORICAL RETENTION RATES EXCEEDING 30% 5.00% $11,357 $10,996 $10,000 4.1% 4.1% 3.9% 3.8% 3.9% 3.7% 4.00% $9,529 3.4% 3.3% $8,000 $8,165 $7,467 3.00% $6,000 $6,558 $5,483 2.00% $4,000 $4,175 1.00% $2,000 $0 0.00% 2015 2016 2017 2018 2019 2020 2021 2022 UPB WAC 26
Slide 27: Financial Overview & Performance
Financial Overview & Performance
Slide 28: First Quarter 2022 Results
First Quarter 2022 Results ▪ Net income of $64.3 million1, or $0.70 per common share Earnings / Dividends ▪ Distributable earnings of $48.9 million1, or $0.52 per common share ▪ Declared dividend of $0.42 per common share ▪ Return on Equity2 of 18.0% Returns ▪ Distributable Return on Equity3 of 13.6
Slide 29: First Quarter 2022 Results (continued)
First Quarter 2022 Results (continued) ▪ Total liquidity of $326 million1 including cash, anticipated warehouse advances, Current Liquidity principal and interest receivable from servicers, and anticipated proceeds from available-for-sale assets ▪ Closed a $1.1 billion commercial mortgage collateral
Slide 30: Return on Equity
Return on Equity (2) (2) GAAP ROE Distributable ROE Distributable Levered Equity Segment Levered Q1'22 Q4'21 Q1'22 Q4'21 Yield (1) (1) Allocation Yield SBC Lending and Acquisitions 12.8 % 12.8 % 89.7 % 20.4 % 18.0 % 14.4 % 16.7 % Small Business Lending 43.3 % 43.3 % 5.4 % (3) Residential Mortgage Ba
Slide 31: Debt – Leverage
Debt – Leverage (2) Leverage Debt Balance Ratio $587 0.3x • Recourse leverage ratio of 1.6x PPPLF • Total leverage of 4.6x • Full market to market liabilities and credit mark to market liabilities represent 19% and Securitized Debt $4,001 2.1x 12% of total debt Obligations Recourse Leverage by Repor
Slide 32: Revenue Trends
Revenue Trends Diverse & re-occurring revenue from stabilized net interest and servicing revenue with alpha from gain on sale operations 140,000 120,000 Current WA Servicing Fee: 28bps 100,000 80,000 60,000 Current WAC: 4.6% 40,000 20,000 - Q118 Q218 Q318 Q418 Q119 Q219 Q319 Q419 Q120 Q220 Q320 Q420
Slide 33: Current Liquidity
Current Liquidity 1, 2 Cash & Cash Equivalents Approved Warehouse Estimated Proceeds Total Available Advances and Anticipated on AFS Liquidity Proceeds from Securitization and Mosaic Liquidation 1. As of June 3, 2022 2. in millions 33
Slide 34: Historical Performance
Historical Performance 2Q 2021 3Q 2021 4Q 2021 1Q 2022 2Q 2021 3Q 2021 4Q 2021 1Q 2022 Dividends per Net Income2: $30.9 $46.5 $53.6 $64.3 Share: $0.42 $0.42 $0.42 $0.42 Dividend Yield Distributable on Market Earnings2: $41.4 $49.4 $52.5 $48.9 Price1: 10.59% 11.64% 10.75% 11.16% Distributable Earning
Slide 35: Loan Portfolio – Risk Rating
Loan Portfolio – Risk Rating RISK RATING DISTRIBUTION CRITERIA 100% 92% 88% 80% BUCKET 1: Very Low Risk of Loss: New origination or current with strong 60% credit metrics (LTV/DSCR/DY). No expected losses. 40% 20% BUCKET 2: 3% 6% 2% 4% 3% 2% Low Risk of Loss: Current with maturity > 6 months. Lower
Slide 36: Waterfall Asset Management
"READY CAPITAL. Waterfall Asset Management
Slide 37: Waterfall – A Successful & Proven Asset Manager
Waterfall – A Successful & Proven Asset Manager Waterfall consists of a dedicated team of 71 investment professionals who have extensive experience in small balance commercial (SBC) distressed asset acquisition, loan origination, asset management and capital markets. KEY MANAGEMENT Thomas Capasse Ja
Slide 38: Additional Financial Information
APPENDIX Additional Financial Information
Slide 39: Balance Sheet by Quarter
READY CAPITAL. Balance Sheet by Quarter Cash and cash equivalents S 308428 $ 200723 $ 209769 $ 229,531 $ 211,369 Restricted cash 62,961 587,118 52,692 51,569 56,963 Loans, net 1,611,826 2,222,284 2,384,497 2,915,446 4,062,335 Loans, held for sale, at fair value 473,078 470,184 549,917 852,935 523,21
Slide 40: Statement of Income by Quarter
Statement of Income by Quarter (In thousands, except share data) Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Interest income $ 73,371 $ 103,047 $ 105,136 $ 121,942 $ 124,405 Interest expense (50,761) (55,415) (50,136) (57,249) (61,017) Net interest income before provision for loan losses $ 22,610 $ 47,6
Slide 41: Distributable Earnings Reconciliation by Quarter
Distributable Earnings Reconciliation by Quarter (In thousands, except share data) Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Net Income $ 28,947 $ 30,904 $ 46,535 $ 53,588 $ 64,263 Reconciling items: Unrealized gain on mortgage servicing rights $ (15,356) $ 4,699 $ (147) $ (6,119) $ (32,599) Impact of
Slide 42: Experienced Management Team
Experienced Management Team Name & position Background Thomas Capasse Chairman of the Board, CEO ▪ Manager and Co-Founder of Waterfall Asset Management Principal Ready Capital Corporation ▪ 35+ years of structured credit experience globally Waterfall Asset Management ▪ Co-founded Merrill Lynch’s ABS
Slide 43: Ready Capital (NYSE: RC)
READY RC LISTED NYSE EES CAPITAL.