Ready Capital Corporation · NYSE:RC
Ready Capital — Sutherland Asset Management — Q1 2018 Earnings Presentation
22 slides from Ready Capital's earnings presentation, May 8, 2018
Slide 1: Supplemental Financial Data First Quarter 2018
Supplemental Financial Data First Quarter 2018
Slide 2: 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 safe harbor
Slide 3: First Quarter 2018 Highlights
Net income of $18.5 million(1), or $0.56 per common share Core earnings of $15.5 million(1), or $0.47 per common share Declared dividend of $0.37 per share Q1 Return on Equity(2) of 13.1% Q1 Core Return on Equity(3) of 11.0% Q1 Dividend Yield(4) of 9.8% SBC loan originations of $
Slide 4: Segment returns on equity and yield
GAAP ROE (2) Core ROE (2) Core Levered Levered Equity Q4'17(4) Q4'17(4) Q1'18 Q1'18 Segment Yield (1) Allocation Yi eld (1) Loan Acquisitions SBC Originations SBA Originations, Acquisitions, & Servicing 56.1 % 20.1 % 56.1 % 20.1 % 13.9 % 40.6 % 30.4 % 30.4 % 26.0 % (3) 32.4 % 18.2 % 19.5 % Residenti
Slide 5: SBC Origination Volume by Product Type
120 100 $87.2 80 $75.4 60 40 20 0 Q1'17 Q2'17 SBA Q3'17 Freddie Mac Q4'17 Q1'18 Conventional Transitional Fully committed ($ in millions) (1) (1) Origination volumes are based on fully committed amounts4 Highlights • Total SBC loan originations of $211.6 million for the quarter • SBA loan originatio
Slide 6: Loan acquisitions and originations
► Acquired $142.2 million of SBC loans, comprised of primarily performing loans. ► Funded $250.5 million(1) of SBC and SBA loan originations. HELD FOR SALE TOTAL HELD FOR INVESTMENT SBC TRANSITIONAL SBA(7) SBA(7) FREDDIE MAC + 285 (2) $ in millions (4) (5) (6) Gross yield equals contractual interest
Slide 7: SBC Originations: Current Quarter Highlights
CURRENT QUARTER HIGHLIGHTS GROSS LEVERED YIELD ► Originations of $211.6 million(1), 60% of loans held-for-investment are floating rate 22.5% 20.5% 18.5% 16.5% 14.5% 12.5% 10.5% 8.5% 6.5% 4.5% 2.5% ► Gains on sales of Freddie Mac loans of $2.1 million (2) ► Origination pipeline of $477.9 million ► $2
Slide 8: SBA Originations: Current Quarter Highlights
CURRENT QUARTER HIGHLIGHTS GROSS LEVERED YIELD 32.5% ► $33.6 million of SBA secondary market loans sales, with an average sale premium of 11.6% 27.5% ► Originations of $48.3 million(1) 22.5% 17.5% ► Origination pipeline in excess of $120 million SBA loans(2) and an acquisition pipeline of $16.0 mill
Slide 9: SBC Acquisitions: Current Quarter Highlights
CURRENT QUARTER HIGHLIGHTS GROSS LEVERED YIELD 65.0% ► At this stage of the credit cycle, ample inventory opportunistic performing SBC loans of 55.0% 45.0% ► Acquired $142.2 million of SBC loans 35.0% 25.0% ► Acquisition pipeline of $259.6 million SBC loans (4) 15.0% 5.0% Q1 '17 Q2 '17 Q3 '17 Q4 '17
Slide 10: Residential Mortgage Banking: Current Quarter Highlights
CURRENT QUARTER HIGHLIGHTS MSR SERVICING PORTFOLIO (UPB IN $BILLIONS) $7.0 $6.8 $6.6 $6.4 $6.2 $6.0 $5.8 $5.6 $5.4 $5.2 ► MSR portfolio of approximately $6.8 billion in UPB, up 4% compared to Q4 ► Fair market value of $81.6 million, up 13% compared to Q4 ► Originations of $438.9 million(2), down 4%
Slide 11: Securitizations
Los s (1) Represents remaining collateral in the securitization10 Recent transactions: ► In March, priced a $165.0 million securitization of fixed-rate SBC loans, at 6 basis points tighter than AAA-rated large balance CMBS. ► $148.5 million of bonds issued, collateralized by $165.0 million of origin
Slide 12: Fixed vs Floating Portfolio and Interest Rate Sensitivity
► 54% of our held-for-investment loan portfolio is floating rate ► 67% of our fixed rate loan portfolio is match funded ► a 100 basis point increase in LIBOR would increase annual pre-tax net interest income by approximately $0.07 per share(3) Annu al Net Interest Inco me Per Share (Pre-tax) $0.08 $
Slide 13: Loan Portfolio Composition as of March 31, 2018
Other, 0.7% Subordinated Mortgage, 1.9% California, 13.8% Texas, 11.9% Florida, 11.6% New York, Other, 49.8% First Mortgage, 97.4% Georgia, 6.0% 6.9% Physicians Offices, 16.2% Other, 15.0% Industrial, 7.9% Day Care Services, 11.7% Lodging, 10.7% SBA, 23.1% Other, 48.9% Office, 14.9% Multi-Family, 21
Slide 14: Funding Mix
Total Debt + Equity and an additional $50 million in April 2018: $154.9 $165.0 Funding Mix ► Since going public in Q4 2016, we continue to optimize our capital structure: Issued $295 million in non-recourse debt through 3/31/18 -Convertible notes: 6 year notes, 7.0% coupon, $115 million -Senior se
Slide 15: Financing and Leverage
HISTORICAL LEVERAGE 3.5 3 2.5 2 1.5 1 0.5 0 2.9x 2.7x 2.4x 2.0x 1.9x 1.7x 1.6x 1.6x 1.2x 1.1x Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 RecourseTotal 14 3/31/2018 Total de bt-to-e quity ratio (in millions) Secured borrowings (warehous e credit facilities and borrowings under repo trans actions ) $ 657
Slide 16: Borrowings under credit facilities and repurchase agreements
Facility S ize (1) Available Capacity (1) Bank Maturity Rate Description (1) $ in millions15 Borrowings unde r cre dit facilitie s JPMorgan June '18 3M L + 3.25 to 3.50% $ 250 $ 179 Borrowings are used to finance SBC and SBA loan acquisitions, and SBA loan originations. Keybank Feb '19 1M L + 1.75%
Slide 17: Q1 2018 Earnings Data and Metrics
AVG. DEBT BALANCE LEVERED YIELD GROSS YIELD(2) DEBT COST(3) INVESTMENT TYPE CARRYING VALUE(1) unrealized gains (losses) on loans held for sale and servicing income net of interest expense and amortization of deferred fi nancing costs on an annualized basis. (3) Sutherland finances the assets include
Slide 18: Appendix
APPENDIX SUTHERLAND Asset Management
Slide 19: Per Share Financial Performance
Q1’18 earnings per share up $0.18, or 47%, compared to the previous quarter Adjusted net book value of $16.88 per common share as of March 31, 2018 17 $0.60 $0.50 $0.40 $0.30 $0.20 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Earnings Core earnings Dividends declared $0.56 $0.47 (1) $0.38 $0.38 $0.37
Slide 20: Balance Sheet
Cash and cash equivalent s $ 40,000 $ 63,931 $ 70,590 $ 63,425 $ 86,773 Short -t erm invest ment s 239,856 — 99,994 — — Loans, held for sale, at fair value 152,231 206,706 200,318 216,022 160,999 Loans eligible for repurchase from Ginnie Mae 117,229 105,244 101,408 95,158 81,484 Derivat ive inst rum
Slide 21: Income Statement
8 Int erest expense (16,441) (17,230) (19,908) (21,067) (22,666) P rovision for loan losses (1,232) (159) (466) (506) (167) Non -i n te re s t i n com e Ot her income 839 1,588 1,853 3,130 1,334 Servicing income, net of amort izat ion and impairment 4,442 5,631 6,134 6,787 6,410 Non -i n te re s t e
Slide 22: Core Earnings Reconciliation
(In Th ou s ands ) Q 1 2017 Q 2 2017 Q 3 2017 Q 4 2017 Q 1 2018 Re con cilin g ite m s : Unrealized (gain) loss on mort gage servicing right s 1,120 1,671 1,728 47 (4,155) Rest rict ed st ock unit grant t o independent direct ors 290 — — — — C ore e arn i n gs be fore i n com e taxe s $ 11,082 $ 11,
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