Ready Capital Corporation · NYSE:RC
Ready Capital — Investor Presentation (August 2020)
33 slides from Ready Capital's investor presentation, August 2020
Slide 1: Investor Presentation August 2020
INVESTOR PRESENTATION August 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 Government sponsored lending segments remain active with SBA, Residential Mortgage Banking and Freddie Mac Multifamily originations fully operational BUSINESS ACTIVITIES Core CRE lending activities to resume in Q3 after Q2 pause due to uncertain capital markets and stressed underw
Slide 10: Second Quarter 2020 Results
SECOND QUARTER 2020 RESULTS Net income of $34.7 million(1), or $0.62 per common share EARNINGS / Core earnings of $39.2 million(1), or $0.70 per common share DIVIDENDS Declared dividend of $0.25 per share Return on Equity(2) of 17.4% RETURNS Core Return on Equity(3) of 19.7% Dividend Yie
Slide 11: Return on Equity
RETURN ON EQUITY GAAP ROE (2) Core ROE (2) Core Levered Equity Segment Levered Q2'20 Q1'20 Q2'20 Q1'20 Yield (1) (1) Allocation Yield Loan Acquisitions 14.6 % 14.6 % 22.9 % SBC Originations 16.7 % 16.7 % 65.4 % 20.7 % 10.5 % 26.0 % 17.1 % SBA Originations, Acquisitions, 39.7 % 39.7 % 5.6 % & Servici
Slide 12: Capital Structure
CAPITAL STRUCTURE Total HISTORICAL CAPITAL STRUCTURE LIQUIDITY UPDATE Total Debt Debt + + Equity $3,642 $3,915 $4,290 $4,608 $4,648 ► Approximate unencumbered cash of over Equity $250 million ($M) ► Completed $405 million securitization of originated transitional loans in June 2020, with senior bond
Slide 13: Loan Portfolio Composition as of June 30, 2020
LOAN PORTFOLIO COMPOSITION AS OF JUNE 30, 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 Lodging 15% 16% Multi-family 26% Offices o
Slide 14: Financing and Leverage
FINANCING AND LEVERAGE 6/30/2020 Total Debt-to-Equity Ratio (in millions) Secured borrowings (warehouse credit facilities and borrowings under repo transactions) $ 1,254 Securitized debt obligations 2,140 Senior secured notes and corporate bonds 330 Convertible notes 112 Total Debt $ 3,836 Total Sto
Slide 15: Appendix 1: Additional Financial Information
APPENDIX 1 ADDITIONAL FINANCIAL INFORMATION 15
Slide 16: Diversified, Complementary, and Scalable Platforms
DIVERSIFIED, COMPLEMENTARY, AND SCALABLE PLATFORMS PORTFOLIO BREAKDOWN(1) REVENUE BREAKDOWN(2) $30,000 SBA Originations, Residential Acquisitions, & Mortgage Servicing, Banking $25,000 $24,459 7% Residential SBA Acquisitions Mortgage Originations, 24% Banking, $20,000 Acquisitions, & SBC Origination
Slide 17: Ready Capital Snapshot
READY CAPITAL SNAPSHOT ($ 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 $ 1,043,171 5.8% $ 834,287 3.6% 14.6% SBC Originations $ 2,624,099 6.6% $ 2,028,672 3.7% 16.7% SBA Orig
Slide 18: 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 Jun-2021 1M L + 2.00 to 2.75% $ 250,000 $ 34,525 $ 215,475 Keybank Freddie Mac loans Feb-2021 1M L + 1
Slide 19: Balance Sheet by Quarter
BALANCE SHEET BY QUARTER (In Thousands) 6/30/2019 9/30/2019 12/31/2019 3/31/2020 6/30/2020 Assets Cash and cash equivalents $ 41,925 $ 52,727 $ 67,928 $ 122,265 $ 257,017 Restricted cash 38,019 45,303 51,728 93,164 91,539 Loans, net 1,002,676 1,380,359 1,727,984 1,969,052 1,432,807 Loans, held for s
Slide 20: Statement of Income by Quarter
STATEMENT OF INCOME BY QUARTER (In thousands, except share data) Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Interest income $ 57,034 $ 59,723 $ 64,406 $ 69,551 $ 63,211 Interest expense (35,753) (39,390) (40,962) (46,930) (43,408) Net interest income before provision for loan losses $ 21,281 $ 20,333 $
Slide 21: Core Earnings Reconciliation by Quarter
CORE EARNINGS RECONCILIATION BY QUARTER (In Thousands) Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Net Income $ 11,245 $ 12,427 $ 20,936 $ (51,516) $ 34,663 Reconciling items: Unrealized (gain) loss on mortgage servicing rights $ 6,339 $ 7,582 $ (2,482) $ 16,437 $ 12,044 Change in CECL reserve on accrua
Slide 22: Appendix 2: Business Segment Information
APPENDIX 2 BUSINESS SEGMENT INFORMATION 22
Slide 23: SBC Originations - Segment Snapshot
SBC ORIGINATIONS - SEGMENT SNAPSHOT Portfolio Metrics (Balance Sheet) Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Number of loans 485 501 537 593 568 Unpaid Principal Balance (3) $ 1,829 $ 2,064 $ 2,298 $ 2,581 $ 2,479 Carrying Value (3) $ 1,835 $ 2,070 $ 2,300 $ 2,580 $ 2,478 Weighted Average LTV 63% 6
Slide 24: SBA Originations, Acquisitions, & Servicing - Segment Snapshot
SBA ORIGINATIONS, ACQUISITIONS, & SERVICING - SEGMENT SNAPSHOT Portfolio Metrics (Balance Sheet) Q2 2019 Q3 2019 Q4 2019(5) Q1 2020(5) Q2 2020(5) Number of loans 1,902 1,875 1,880 1,813 1,804 (2) Unpaid Principal Balance $ 270 $ 278 $ 804 $ 701 $ 678 (2) Carrying Value $ 230 $ 240 $ 770 $ 664 $ 641
Slide 25: Loan Acquisitions - Segment Snapshot
LOAN ACQUISITIONS - SEGMENT SNAPSHOT (1) Portfolio Metrics (Balance Sheet) Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Number of loans 2,385 2,363 2,231 2,212 2,126 (2) Unpaid Principal Balance $ 1,075 $ 1,068 $ 1,048 $ 1,073 $ 1,010 (2) Carrying Value $ 1,055 $ 1,056 $ 1,039 $ 1,066 $ 1,002 Weighted Av
Slide 26: Residential Mortgage Banking - Segment Snapshot
RESIDENTIAL MORTGAGE BANKING – SEGMENT SNAPSHOT Portfolio Metrics (quarterly activity) Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 (1) Unpaid principal balance $ 518.2 $ 656.8 $ 586.3 $ 691.3 $ 1,192.9 Originations % of Originations - Purchased 74.0% 60.5% 54.7% 51.2% 37.4% % of Originations - Refinance
Slide 27: 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 28: 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 29: 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 30: 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 $5M • Eligible participant
Slide 31: Enhanced Residential Mortgage Origination Platform
ENHANCED RESIDENTIAL MORTGAGE ORIGINATION PLATFORM BUSINESS DESCRIPTION ORIGINATION VOLUME BY PURPOSE ($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 $1,083 $636 $398 • GMFS provides a wide range of residential
Slide 32: Waterfall – A Successful & Proven Asset Manager
WATERFALL – A SUCCESSFUL & PROVEN ASSET MANAGER ► Waterfall consists of a dedicated team of 64 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 33: . CAPITAL.
. CAPITAL. RC LISTED NYSE