Ready Capital Corporation · NYSE:RC
Ready Capital — Investor Presentation (September 2021)
43 slides from Ready Capital's investor presentation, September 2021
Slide 1: Investor Presentation September 2021
INVESTOR PRESENTATION September 2021
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 market capitalization over $1.0 billion1 All-weather investment strategy as a direct lender and acquiror of bulk portfolios, including distressed $1.3 bill
Slide 4: Diversified Investment Strategy
Diversified Investment Strategy Capital allocated opportunistically to highest ROE OpCo across economic cycle SBC LOAN ORIGINATIONS & RESIDENTIAL SMALL BUSINESS LENDING ACQUISITIONS MORTGAGE BANKING Products: Investor SBC lending across 7 Owner occupied SBC lending Residential mortgage loan products
Slide 5: Complementary Platforms
Complementary Platforms INVESTED EQUITY ALLOCATION TTM CORE EARNINGS CONTRIBUTION 6% 2% 5% 6% 33% 36% 21% 62% 11% 18% SBC Loan Originations SBC Loan Acquisitions SBC Loan Originations SBC Loan Acquisitions SBA 7(a) Residential Mortgage Banking SBA 7(a) Residential Mortgage Banking Other Investments
Slide 6: SBC Lending & Acquisitions
a ~ READY CAPITAL. e Yd] ad o ° @ ® e e @ e @ eo e ® e ® e © e SBC Lending & Acquisitions _ —-,* e ) e e e e e e a e ee @ e @ ° e @
Slide 7: 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 $4.9T OF COMMERCIAL MORTGAGE DEBT OUTSTANDING SMALL-BALANCE LOAN ORIGINATION TREND SUB $5 Million Small Balance 15% Large Balanc
Slide 8: SBC Lending & Acquisition Overview
SBC Lending & Acquisition Overview All-weather origination platform with ability to allocate capital to the best opportunities across 7 products spanning heavy transitional to stabilized 1 of 12 Freddie Mac Small Balance Loan lenders; ranked #5 based on 2020 volume Over $8.6 billion in originations
Slide 9: Platform Growth
Platform Growth 32.3% 10-year CAGR Current 0.60% SBC market share with 1.5% 3-year target HISTORICAL GROWTH1 $2,500 $2,241 $2,000 $1,738 $1,500 $1,188 $1,142 $1,000 $868 $863 $588 $500 $439 $356 $348 $313 $372 $204 $222 $208 $158 $209 $140 $110 $98 $22 $19 $0 2008 2009 2010 2011 2012 2013 2014 2015
Slide 10: SBC Product Offerings
READY CAPITAL. SBC Product Offerings HEAVY TRANSITIONAL LIGHT TRANSITIONAL STABILIZING STABILIZED PRODUCT BRIDGE BRIDGE-TO-PERM BRIDGE-TO-AGENCY © STRUCTURED FIXEDRATE | CMBSDIRECT CORRESPONDENT AGENCY* FREDDIE MAC SBL Renovation Final Lease Up Cash Out Rehabilitation Lease Up ‘Seasoning Term Refina
Slide 11: Transitional Case Study
Transitional Case Study LOAN AMOUNT: $18,910,000 PRICING BASIS: Variable RATE: Libor + 425bps FEES: 200bps LIEN: 1st ORIGINATION DATE: Jan 2021 TERM (MONTHS): 48 (+1yr Extension) AMORTIZATION (MONTHS): 300 LOAN-TO-VALUE: 67% Name: Technicolor Memphis PERSONAL GUARANTEE: No RETAINED YIELD: 11.20% Loc
Slide 12: Fixed Rate Case Study
Fixed Rate Case Study LOAN AMOUNT: $2,760,000 PRICING BASIS: Fixed RATE: 4.30% FEES: 10-Yr Balloon LIEN: 1st ORIGINATION DATE: April 2021 TERM (MONTHS): 120 AMORTIZATION (MONTHS): 360 LOAN-TO-VALUE: 66% Name: Harbor View Apartments PERSONAL GUARANTEE: No RETAINED YIELD: 15.5% Location: Jacksonville,
Slide 13: Freddie Mac SBL Case Study
Freddie Mac SBL Case Study LOAN AMOUNT: $3,025,000 PRICING BASIS: Fixed RATE: 3.08% FEES: 10-Yr Fixed LIEN: 1st ORIGINATION DATE: February 2021 TERM (MONTHS): 120 AMORTIZATION (MONTHS): 360 LOAN-TO-VALUE: 55% Name: North Walcott PERSONAL GUARANTEE: No GROSS FEES: 1.63% Location: Chicago, IL 60640 Lo
Slide 14: SBC Portfolio
SBC Portfolio LOAN COUNT UPB BOOK VALUE WA LTV WA COUPON FIXED/FLOAT(1) %60+ 2,696 $4.78B $4.73B 63.7% 5.1% 34.3 / 65.7% 3.3% GEOGRAPHY PROPERTY TYPE 16% 45% 12% 12% 15% Multi-family Retail Office Mixed-use Other Investments 1. 75.0% of fixed rate loans match funded 14
Slide 15: Small Business Lending
"READY CAPITAL. Small Business Lending
Slide 16: 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 #1 non-bank 7(a) lender and #7 overall lender1 Fully inte
Slide 17: 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 18: 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: $112,500 Retained Loan: $14,375 Guaranteed Income on Debt Cost on Balance: $750,000 Retained Loan: $14,375 Retained Loan: ($5,688) Unguaranteed Debt Cost on Balance: $250,0
Slide 19: Platform Growth
Platform Growth 79.4% CAGR Current 0.91% non-bank market share with 2.0% 3-year target or ~$500 million in volume Approximately $5.0 billion of PPP loans originated ORIGINATIONS1 300 $266.7 250 $213.8 $216.0 $214.2 200 $129.8 150 100 $45.4 50 $11.6 0 2015 2016 2017 2018 2019 2020 2021 YTD(2) 1. In m
Slide 20: SBA 7(a) Case Study
SBA 7(a) Case Study LOAN AMOUNT: $3,250,000 PRICING BASIS: Variable RATE: Prime + 175bps GUARANTEE: 90% LIEN: 1st ORIGINATION DATE: May 2021 TERM (MONTHS): 300 AMORTIZATION (MONTHS): 300 LOAN-TO-VALUE: 73% Name: The Cottages of Artesia PERSONAL GUARANTEE: Yes RETAINED YIELD: 39.1% Location: Buena Pa
Slide 21: SBA 7(a) Portfolio
SBA 7(a) Portfolio LOAN COUNT UPB BOOK VALUE WA LTV WA COUPON FIXED/FLOAT %60+ 1,808 $648M $613M 81% 5.5% 0.6 / 99.4% 1.4% GEOGRAPHY PROPERTY TYPE 19% 55% 12% 8% 6% Lodging Doctors Child Care Eating Place Other 21
Slide 22: Residential Mortgage Banking
Residential Mortgage Banking
Slide 23: 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 24: Production Metrics
Production Metrics PURCHASE VOLUME HAS ACCOUNTED FOR ~60% OF HISTORICAL PRODUCTION1 $4,500 $2,435 $3,000 $728 $463 $775 $1,245 $1,500 $636 $398 $1,812 $1,460 $1,508 $1,380 $1,439 $1,189 $1,067 $0 2015 2016 2017 2018 2019 2020 2021 1. In millions Purchase Refi DIVERSIFIED PRODUCTION CHANNELS WITH FOC
Slide 25: Servicing Asset
Servicing Asset HISTORICAL RETENTION RATES EXCEEDING 35% 4.20% $10,000 4.1% $10,374 4.10% 4.1% $9,529 4.00% 3.9% 3.9% $8,000 3.8% 3.90% $8,165 $7,467 3.80% $6,000 $6,558 3.7% 3.70% $5,483 3.60% $4,000 3.50% $4,175 3.5% 3.40% $2,000 3.30% 3.20% $0 3.10% 2015 2016 2017 2018 2019 2020 2021 UPB WAC 25
Slide 26: Financial Overview & Performance
Financial Overview & Performance
Slide 27: Second Quarter 2021 Results
Second Quarter 2021 Results ▪ Net income of $30.9 million1, or $0.38 per common share Earnings / Dividends ▪ Distributable earnings of $41.4 million1, or $0.52 per common share ▪ Declared dividend of $0.42 per common share ▪ Return on Equity2 of 10.0% Returns ▪ Distributable Return on Equity3 of 13.
Slide 28: Second Quarter 2021 Results (continued)
Second Quarter 2021 Results (continued) ▪ Total liquidity of $428(1) million including cash, anticipated warehouse advances, Current Liquidity principal and interest receivable from servicers and anticipated proceeds from available-for-sale assets. ▪ Closed $232 million acquired SBC loan securitizat
Slide 29: Return on Equity
Return on Equity (2) (2) GAAP ROE Distributable ROE Distributable Levered Equity Segment (1) Levered Q2'21 Q1'21 Q2'21 Q1'21 Yield (1) Allocation Yield Loan Acquisitions 11.9 % 11.9 % 29.3 % SBC Originations 14.0 % 14.0 % 60.0 % 18.4 % 24.3 % 19.6 % 19.1 % Small Business Lending 99.2 % 99.2 % 5.6 %
Slide 30: Financing and Leverage
Financing and Leverage $ in millions Total debt-to-equity ratio June 2021 Secured borrowings (warehouse credit facilities and borrowings under repo transactions) $ 1,568 Secured borrowings (ANH warehouse credit facilities and borrowings under repo transactions) 135 Paycheck Protection Program Liquid
Slide 31: Capital Structure
Capital Structure HISTORICAL CAPITAL STRUCTURE LIQUIDITY UPDATE Total Debt & Eqty ($M) $4,648 $4,502 $4,553 $7,312 $8,213 • Current cash and available liquidity of $428 million • Closed $232 million acquired SBC loan securitization at a 79.8% advance rate and a weighted average cost of 1.6% 30% 28%
Slide 32: Credit and Repurchase Facilities
Credit and Repurchase Facilities $ in thousands Facility Available Carrying Value Lender Asset Class Maturity Pricing Size Capacity Borrowings under credit facilities JPMorgan Acquired loans, SBA loans July 2021 (2) 1M L + 2.5% to 2.875% $ 200,000 $ 42,488 $ 157,512 Keybank Freddie Mac loans Februar
Slide 33: Revenue Trends
Revenue Trends Diverse & re-occurring revenue from stabilized net interest and servicing revenue with alpha from gain on sale operations 120,000 100,000 80,000 Current WA Servicing Fee: 27bps 60,000 Current WAC: 40,000 5.0% 20,000 - Q118 Q218 Q318 Q418 Q119 Q219 Q319 Q419 Q120 Q220 Q320 Q420 Q121 Q2
Slide 34: Current Liquidity
Current Liquidity 1, 2 Cash & Cash Approved Warehouse P&I Collections Estimated Proceeds Total Available Equivalents Advances on AFS Liquidity 1. As of August 13. 2021 2. in Millions 34
Slide 35: Historical Performance
Historical Performance 3Q 2020 4Q 2020 1Q 2021 2Q 2021 3Q 2020 4Q 2020 1Q 2021 2Q 2021 Dividends per Net Income2: $35.4 $27.6 $28.9 $30.9 Share: $0.30 $0.35 $0.40 $0.42 Dividend Yield Distributable on Market Earnings2: $32.1 $28.8 $24.7 $41.4 Price1: 10.82% 10.93% 11.92% 10.59% Distributable Earning
Slide 36: Risk Ratings
Risk Ratings RISK RATING DISTRIBUTION AVERAGE RISK RATING 100% 2.50 86% 82% 2.08 2.10 2.07 1.98 2.02 80% 2.00 1.83 1.83 1.77 1.82 1.88 1.72 1.69 60% 1.50 40% 1.00 20% 7% 9% 0.50 3% 6% 4% 3% 0% - 1&2 3 4 5 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 SBC SBA SBC SBA CECL TRENDS CECL DISTRIBUTION $65,000 $57,9
Slide 37: Waterfall Asset Management
"READY CAPITAL. Waterfall Asset Management
Slide 38: Waterfall – A Successful & Proven Asset Manager
Waterfall – A Successful & Proven Asset Manager Waterfall consists of a dedicated team of 65 investment professionals who have extensive experience in small balance commercial (SBC) distressed asset acquisition, loan origination, asset management and capital markets. TOTAL AUM $9.4B KEY MANAGEMENT L
Slide 39: Additional Financial Information
APPENDIX Additional Financial Information
Slide 40: Balance Sheet by Quarter
Balance Sheet by Quarter (In Thousands) 6/30/2020 9/30/2020 12/31/2020 3/31/2021 6/30/2021 Assets Cash and cash equivalents $ 257,017 $ 149,847 $ 138,975 $ 308,428 $ 200,723 Restricted cash 91,539 46,204 47,697 62,961 57,118 Loans, net 1,432,807 1,286,935 1,550,624 1,611,826 2,222,284 Loans, held fo
Slide 41: Statement of Income by Quarter
Statement of Income by Quarter (In thousands, except share data) Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Interest income $ 63,211 $ 61,074 $ 64,810 $ 73,371 $ 103,047 Interest expense (43,408) (43,823) (41,319) (50,761) (55,415) Net interest income before provision for loan losses $ 19,803 $ 17,251
Slide 42: Distributable Earnings Reconciliation by Quarter
Distributable Earnings Reconciliation by Quarter (In thousands, except share data) Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Net Income $ 34,663 $ 35,363 $ 27,559 $ 28,947 $ 30,904 Reconciling items: Unrealized (gain) loss on mortgage servicing rights $ 12,044 $ 4,688 $ 4,087 $ (15,356) $ 4,699 Change
Slide 43: READY
READY RC LISTED NYSE EES CAPITAL.
Ready Capital — Investor Presentation (September 2021) on 6ix