Ready Capital Corporation · NYSE:RC
Ready Capital — Investor Presentation (November 2021)
43 slides from Ready Capital's investor presentation, November 2021
Slide 1: Investor Presentation November 2021
INVESTOR PRESENTATION November 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 $1.1 billion1 All-weather investment strategy as a direct lender and acquiror of bulk portfolios, including distressed $1.2 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 4% 1% 9% 6% 35% 19% 21% 68% 24% 13% 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 ] ® o ° @ ® e e @ e @ eo e ® e e e ® e SBC Lending & Acquisitions _ —-,* 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 $9.8 billion in originations
Slide 9: Platform Growth
Platform Growth 36.7% 10-year CAGR Current 1.2% SBC market share with 1.5% 3-year target HISTORICAL GROWTH1 $3,500 $3,436 $3,000 $2,500 $2,000 $1,738 $1,500 $1,188 $1,142 $1,000 $868 $863 $588 $439 $500 $356 $348 $313 $372 $158 $204 $222 $140 $208 $168 $110 $209 $98 $22 $19 $0 2008 2009 2010 2011 20
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+ 2,661 $5.48B $5.43B 60.8% 4.9% 32.1 / 67.9% 2.3% GEOGRAPHY PROPERTY TYPE 16% 48% 10% 11% 15% Multi-family Retail Office Mixed-use Other Investments 1. 63.8% 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 #2 non-bank 7(a) lender and #6 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 83.7% CAGR Current 1.04% non-bank market share with 2.0% 3-year target or ~$500 million in volume Approximately $5.0 billion of PPP loans originated ORIGINATIONS1 450 400 $382.4 350 300 250 $213.8 $216.0 $214.2 200 150 $129.8 100 $45.4 50 $11.6 0 2015 2016 2017 2018 2019 2020 2021 YT
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+ 1,853 $650M $617M 83% 5.5% 0.6 / 99.4% 1.2% GEOGRAPHY PROPERTY TYPE 19% 57% 12% 7% 5% 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 $1,708 $728 $463 $775 $1,500 $636 $398 $1,812 $1,460 $1,508 $1,439 $1,624 $1,189 $1,380 $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% $10,726 4.1% 4.00% 3.9% 3.9% $9,529 $8,000 3.8% $8,165 3.80% $7,467 $6,000 $6,558 3.7% 3.60% $5,483 $4,000 $4,175 3.4% 3.40% $2,000 3.20% $0 3.00% 2015 2016 2017 2018 2019 2020 2021 UPB WAC 25
Slide 26: Financial Overview & Performance
Financial Overview & Performance
Slide 27: Third Quarter 2021 Results
Third Quarter 2021 Results ▪ Net income of $46.5 million1, or $0.61 per common share Earnings / Dividends ▪ Distributable earnings of $49.4 million1, or $0.64 per common share ▪ Declared dividend of $0.42 per common share ▪ Return on Equity2 of 16.3% Returns ▪ Distributable Return on Equity3 of 17.3
Slide 28: Third Quarter 2021 Results (continued)
Third Quarter 2021 Results (continued) ▪ Total liquidity of $341 million(1) including cash, anticipated warehouse advances, Current Liquidity principal and interest receivable from servicers, and anticipated proceeds from available-for-sale assets ▪ Closed $652.5 million commercial mortgage collater
Slide 29: Return on Equity
Return on Equity (2) (2) GAAP ROE Distributable ROE Distributable Levered Equity Segment Levered Q3'21 Q2'21 Q3'21 Q2'21 Yield (1) (1) Allocation Yield Loan Acquisitions 10.2 % 10.2 % 26.3 % SBC Originations 13.2 % 13.2 % 63.0 % 17.8 % 18.4 % 17.8 % 19.6 % Small Business Lending 76.1 % 76.1 % 6.3 %
Slide 30: Financing and Leverage
Financing and Leverage $ in millions Total debt-to-equity ratio September 2021 Secured borrowings (warehouse credit facilities and borrowings under repo transactions) $ 1,950 Secured borrowings (ANH warehouse credit facilities and borrowings under repo transactions) 94 Paycheck Protection Program Li
Slide 31: Capital Structure / Funding Mix
Capital Structure HISTORICAL CAPITAL STRUCTURE LIQUIDITY UPDATE Total Debt & Eqty ($M) $4,502 $4,553 $7,233 $8,222 $8,531 • Closed $652.5 million commercial mortgage collateralized loan obligation with the limited right to acquire all or part of $87.8 million in future funding with an advance rate o
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 August 2022 1M L + 2.5% to 2.875% $ 200,000 $ 46,307 $ 153,693 Keybank Freddie Mac loans February
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: 29bps 60,000 Current WAC: 40,000 4.9% 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 Advance and on AFS Liquidity Anticipated Proceeds from Securitization Settlement 1. As of November 10. 2021 2. in Millions 34
Slide 35: Historical Performance
Historical Performance 4Q 2020 1Q 2021 2Q 2021 3Q 2021 4Q 2020 1Q 2021 2Q 2021 3Q 2021 Dividends per Net Income2: $27.6 $28.9 $30.9 $46.5 Share: $0.35 $0.40 $0.42 $0.42 Dividend Yield Distributable on Market Earnings2: $28.8 $24.7 $41.4 $49.4 Price1: 10.93% 11.92% 10.59% 11.64% Distributable Earning
Slide 36: Risk Ratings
Risk Ratings RISK RATING DISTRIBUTION AVERAGE RISK RATING 100% 87% 2.50 82% 2.08 2.10 2.07 1.982.02 80% 2.00 1.83 1.83 1.77 1.821.88 1.72 1.69 1.621.71 60% 1.50 40% 1.00 20% 0.50 6% 10% 4% 5% 3% 3% 0% - 1&2 3 4 5 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 Q3'21 SBC SBA SBC SBA CECL TRENDS CECL DISTRIBUTION
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 70 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 39: Additional Financial Information
APPENDIX Additional Financial Information
Slide 40: Balance Sheet by Quarter
Balance Sheet by Quarter (In Thousands) 9/30/2020 12/31/2020 3/31/2021 6/30/2021 9/30/2021 Assets Cash and cash equivalents $ 149,847 $ 138,975 $ 308,428 $ 200,723 $ 209,769 Restricted cash 46,204 47,697 62,961 57,118 52,692 Loans, net 1,286,935 1,550,624 1,611,826 2,222,284 2,384,497 Loans, held fo
Slide 41: Statement of Income by Quarter
Statement of Income by Quarter (In thousands, except share data) Q3 2020 Q4 2020 Q1 2020 Q2 2021 Q3 2021 Interest income $ 61,074 $ 64,810 $ 73,371 $ 103,047 $ 105,136 Interest expense (43,823) (41,319) (50,761) (55,415) (50,136) Net interest income before provision for loan losses $ 17,251 $ 23,491
Slide 42: Distributable Earnings Reconciliation by Quarter
Distributable Earnings Reconciliation by Quarter (In thousands, except share data) Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Net Income $ 35,363 $ 27,559 $ 28,947 $ 30,904 $ 46,535 Reconciling items: Unrealized gain on mortgage servicing rights $ 4,688 $ 4,087 $ (15,356) $ 4,699 $ (147) Impact of ASU
Slide 43: READY
READY RC LISTED NYSE EES CAPITAL.
Ready Capital — Investor Presentation (November 2021) on 6ix