Ready Capital Corporation · NYSE:RC
Ready Capital — Q3 2018 Earnings Presentation
23 slides from Ready Capital's earnings presentation, Nov 7, 2018
Slide 1: Supplemental Financial Data Third Quarter 2018
Supplemental Financial Data Third Quarter 2018
Slide 2: Disclaimer
DISCLAIMER This presentation 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 s
Slide 3: Third Quarter 2018 Highlights
THIRD QUARTER 2018 HIGHLIGHTS (1) (2) (3) Inclusive of non-controlling interest Return on Equity is an annualized percentage equal to quarterly net income over the average monthly total stockholders’ equity for the period Core Return on Equity is an annualized percentage equal to core earnings over
Slide 4: Return on Equity and Levered Yield
RETURN EQUITY ON Levered Yield (1) Equity Allocation & Servicing 1) Levered yields include interest income, accretion of discount, MSR creation, income from our unconsolidated joint venture, realized gains (losses) on loans held for sale, unrealized gains (losses) on loans held for sale and servicin
Slide 5: SBC Origination Volume by Product Type
SBC ORIGINATION VOLUME PRODUCT TYPE BY $160.3 160 140 120 $105.2 100 80 60 40 20 0 Q3'17 Q4'17 SBA Q1'18 Freddie Mac Q2'18 Q3'18 Conventional Transitional Highlights • Total SBC and SBA loan originations of $342.3 million for the quarter • Conventional SBC loan originations up $56.0 million, or 80%
Slide 6: Q3 2018 Quarterly SBC Investment Allocation
Q3 2018 QUARTERLY SBC INVESTMENT ALLOCATION Total funded investments of $400.0 million added during the quarter. • • • Acquired $86.4 million of SBC loans Funded $313.6 million(1) of SBC and SBA loan originations. Debt Cost (6) # of Loans FX / ARM Prime + 29 Prime + 29 43 2.1 6.4% 5 years 96% / 4% 8
Slide 7: SBC Originations - Segment Snapshot
SBC ORIGINATIONS - SEGMENT SNAPSHOT 30.0% • Originations of $291.2 million(1), 55% of loans held-for-investment are floating rate Gains on sales of Freddie Mac loans of $1.7 million Origination pipeline of $387.3 million(2) 25.0% 20.0% • 15.0% 10.0% • • • • $154.9 million of transitional loans $122.
Slide 8: SBA Originations, Acquisitions, & Servicing - Segment Snapshot
SBA ORIGINATIONS, ACQUISITIONS, & SERVICING-SEGMENT SNAPSHOT 35.0% • $35.1 million of SBA secondary market loans sales, with an average sale premium of 9.8% Originations of $51.1 million(1) Origination pipeline of $147.2 million SBA loans(2) 30.0% 25.0% • • 20.0% 15.0% 10.0% 5.0% 0.0% Q3 '17 Q4 '17
Slide 9: Loan Acquisitions - Segment Snapshot
LOAN ACQUISITIONS-SEGMENT SNAPSHOT 60.0% • At this stage of the credit cycle, ample inventory of opportunistic performing SBC loans Acquired $86.4 million of SBC loans Acquisition pipeline of $216.5 million SBC loans(4) 50.0% 40.0% • • 30.0% 20.0% 10.0% 0.0% Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q3 '18 Income
Slide 10: Residential Mortgage Banking - Segment Snapshot
RESIDENTIAL MORTGAGE BANKING – SEGMENT SNAPSHOT $8.0 • MSR portfolio of approximately $7.3 billion in UPB, up 3% compared to Q2 • Fair market value of $91.7 million, up 7% compared to Q2 Originations of $472.1 million(2) Loan sales of $496.1 million, up 3% compared to Q2 Origination pipeline of $156
Slide 11: Active SBC and SBA Loan Securitization Performance
ACTIVE SBC SBA LOAN SECURITIZATION PERFORMANCE AND 11 1) Represents remaining collateral in the securitization Securitization Original Collateral Balance Pool - Factor(1) Issuance Date Delinquency 30+ Delinquency 60+ Delinquency 90+ Cumulative Loss Originated Fixed Rate $727,754 RCMT 2014-1 Septembe
Slide 12: Interest Rate Risk Sensitivity
INTEREST RATE RISK SENSITIVITY ► 45% of our fixed rate loan portfolio is match funded 1) 2) 3) As a percent of carrying value Excludes loans held-for-sale, at fair value Based on portfolio as of September 30, 2018 and assumes no future changes in the composition of the portfolio. 12 INTEREST RATE SE
Slide 13: Loan Portfolio Composition as of September 30, 2018
2018(1)(2) LOAN PORTFOLIO COMPOSITION SEPTEMBER 30, AS OF 11.1% Offices, 16.2% Services, Other, 51.3% 10.2% (1) As a percent of unpaid principal balance (2) Excludes loans held-for-sale, at fair value 13 SBA Collateral Type Physicians Child Day Care 10.1% Lodging, Veterinarians, Eating Places, 7.0%
Slide 14: Capital Structure - Reduction in Liquidity Risk
CAPITAL STRUCTURE – REDUCTION LIQUIDITY RISK IN Total Debt + Equity ($M) 14 Funding Mix Corporate Financing (in $M) Principal Balance Coupon YTM Convertible Notes $ 115 7.0% 7.0% Senior Secured Notes $ 180 7.5% 7.0% Retail Baby Bonds $ 50 6.5% 6.5% Total $ 345 7.2% 7.0% $2,012 $2,038 $2,193 $2,382 $
Slide 15: Financing and Leverage
FINANCING LEVERAGE AND 4 3.5 3 2.5 2 1.5 1 0.5 0 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 15 Recourse Total 3.4x 3.2x 2.9x 2.7x 2.4x 2.0x 1.8x 1.7x 1.6x 1.2x HISTORICAL LEVERAGE 9/30/2018 Total Debt-to-Equity Ratio (in millions) Secured borrowings (warehouse credit facilities and borrowings under rep
Slide 16: Loan Warehouse Facilities
LOAN WAREHOUSE FACILITIES Bank Maturity Rate Description and Uses of Funds ► In July 2018, entered into a new warehouse facility with East West Bank to provide financing of up to $50.0 million for new originations of SBA 7(a) loans. 16 (1) $ in millions FacilityAvailable Size (1)Capacity (1) Borrowi
Slide 17: Ready Capital Snapshot
READY CAPITAL SNAPSHOT ($ amounts in thousands, except per share data) Investment Type Average Carrying (2) (3) 1) Average carrying value includes average quarterly carrying value of loan and servicing asset balances 2) Gross yields include interest income, accretion of discount, MSR creation, incom
Slide 18: Appendix
READY CAPITAL. APPENDIX
Slide 19: Per Share Financial Performance
PER SHARE FINANCIAL PERFORMANCE ► Adjusted net book value of $17.08 per common share as of September 30, 2018 19 $0.60 $0.50 $0.40 $0.30 $0.20 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Earnings Core earnings Dividends declared $0.56 $0.53 $0.48 $0.48 $0.47 $0.47 $0.40 $0.40 $0.38 $0.38 $0.37 $0.37 $0.
Slide 20: Balance Sheet by Quarter
BALANCE SHEET QUARTER BY Cash and cash equivalents $ 70,590 $ 63,425 $ 86,773 $ 105,833 $ 47,845 Short-term investments 99,994 — — — — Loans, held f or sale, at f air value 200,318 216,022 160,999 188,752 124,988 Loans eligible f or repurchase f rom Ginnie Mae 101,408 95,158 81,484 79,623 79,600 Der
Slide 21: Statement of Income by Quarter
STATEMENT INCOME QUARTER OF BY Interest expense (19,908) (21,067) (22,666) (26,407) (28,925) Provision f or loan losses (466) (506) (167) 397 (800) Non-inte r e s t incom e Other income 1,853 3,130 1,334 1,826 1,204 Servicing income, net of amortization and impairment 6,134 6,787 6,410 6,627 6,922 N
Slide 22: Core Earnings Reconciliation
CORE EARNINGS RECONCILIATION Re conciling ite m s : Unrealized (gain) loss on mortgage servicing rights 1,728 47 (4,155) (253) (1,969) Cor e e ar nings be for e incom e taxe s $ 13,908 $ 12,801 $ 14,442 $ 15,717 $ 15,590 Cor e e ar nings $ 12,871 $ 12,442 $ 15,489 $ 15,781 $ 16,085 Cor e e ar nings
Slide 23: *° READY Beta,
*° READY 1 Beta, RC LISTED NYSE