Ready Capital Corporation · NYSE:RC
Ready Capital — Investor Presentation (March 2022)
41 slides from Ready Capital's investor presentation, March 2022
Slide 1: Investor Presentation March 2022
INVESTOR PRESENTATION March 2022
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 just under $1.3 billion1,2 All-weather investment strategy as a direct lender and acquiror of bulk portfolios, including distressed $
Slide 4: Diversified Investment Strategy
Diversified Investment Strategy Capital allocated opportunistically to highest ROE OpCo across economic cycle SBC LENDING & RESIDENTIAL SMALL BUSINESS LENDING ACQUISITIONS MORTGAGE BANKING Products: Investor SBC lending across 7 Owner occupied SBC lending Residential mortgage loan products (bridge t
Slide 5: Complementary Platforms
Complementary Platforms INVESTED EQUITY ALLOCATION TTM CORE EARNINGS CONTRIBUTION 3% 6% 8% 11% 19% 40% 72% 31% 10% 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 Oth
Slide 6: SBC Lending & Acquisitions
a ~ READY CAPITAL. @ @ ® o ° @ ® e e @ e @ eo e ® e ® e ® e SBC Lending & Acquisitions _ _--* e 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 $4.0T 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 2021 volume Over $11.7 billion in originations
Slide 9: Platform Growth
Platform Growth 38.9% 10-year CAGR Current 1.5% SBC market share with 1.5% 3-year target HISTORICAL GROWTH1 $5,272 $5,000 $4,000 $3,000 $2,000 $1,738 $1,188 $1,142 $1,158 $1,000 $868 $863 $588 $439 $356 $348 $313 $372 $158 $204 $222 $209 $140 $208 $197 $22 $19 $110 $98 $5 $0 2008 2009 2010 2011 2012
Slide 10: SBC Product Offerings
READY CAPITAL. SBC Product Offerings HEAVY TRANSITIONAL |GHT TRANSITIONAL STABILIZING STABILIZED propuct BRIDGE BRIDGE-TO.PERM BRIDGE-TO-AGENCY STRUCTURED FIXEDRATE —CMBSDIRECT CORRESPONDENT AGENCY FREDDIE MAC SBL Vacant Renovation Final Lease Up ‘Cash Out Rehabiltation Lease Up ‘Seasoning Term Refi
Slide 11: Transitional Case Study
Transitional Case Study LOAN AMOUNT: $29,850,000 PRICING BASIS: Variable RATE: SOFR + 360bps FEES: 175bps LIEN: 1st ORIGINATION DATE: March 2022 TERM (MONTHS): 36 (+2yr Extension) AMORTIZATION (MONTHS): 360 LOAN-TO-VALUE: 75% Name: The Vicinity PERSONAL GUARANTEE: No RETAINED YIELD: 12.21% Location:
Slide 12: Fixed Rate Case Study
Fixed Rate Case Study LOAN AMOUNT: $10,850,000 PRICING BASIS: Fixed RATE: 4.40% TYPE: 10-Yr Balloon LIEN: 1st ORIGINATION DATE: December 2021 TERM (MONTHS): 120 AMORTIZATION (MONTHS): 360 LOAN-TO-VALUE: 68% Name: Kona Ice PERSONAL GUARANTEE: No RETAINED YIELD: 13.5% Location: Florence, KY 41042 Loan
Slide 13: Freddie Mac SBL Case Study
Freddie Mac SBL Case Study LOAN AMOUNT: $3,760,000 PRICING BASIS: Fixed RATE: 3.26% TYPE: 5-Yr Hybrid LIEN: 1st ORIGINATION DATE: December 2021 TERM (MONTHS): 240 AMORTIZATION (MONTHS): 360 LOAN-TO-VALUE: 50% Name: Paloma PERSONAL GUARANTEE: No GROSS FEES: 1.25% Location: Venice, CA 90291 Loan Purpo
Slide 14: SBC Lending and Acquisitions
SBC Lending and Acquisitions 60+ DAYS LOAN COUNT UPB BOOK VALUE WA LTV WA COUPON FIXED/FLOAT(1) PAST DUE 2,608 $6.76B $6.71B 65.5% 4.6% 26.4 / 73.6% 1.8% ACQUIRED 1,868 $1.20B $1.19B 44.4% 5.1% 52.1 / 47.9% 3.0% TRANSITIONAL 433 $4.43B $4.39B 72.0% 4.2% 0.5 / 99.5% 1.0% FIXED/CMBS 291 $1.09B $1.09B
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 #16 overall lender1 Fully int
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 86.0% CAGR Current 1.92% non-bank market share with 2.0% 3-year target or ~$500 million in volume Approximately $5.0 billion of PPP loans originated ORIGINATIONS1 600 $480.8 500 400 300 $216.3 $216.6 $213.0 200 $129.8 100 $45.4 $57.9 $11.6 0 2015 2016 2017 2018 2019 2020 2021 2022 YT
Slide 20: SBA 7(a) Case Study
SBA 7(a) Case Study LOAN AMOUNT: $3,350,000 PRICING BASIS: Variable RATE: Prime + 125 bps GUARANTEE: 75% LIEN: 1st ORIGINATION DATE: February 2022 TERM (MONTHS): 300 AMORTIZATION (MONTHS): 300 LOAN-TO-VALUE: 84% Name: Creative JDEA, Inc. PERSONAL GUARANTEE: Yes RETAINED YIELD: 16.37% Location: Los A
Slide 21: Small Business Lending
Small Business Lending 60+ DAYS LOAN COUNT UPB BOOK VALUE WA LTV WA COUPON FIXED/FLOAT PAST DUE 1,886 $657M $623M 88.4% 5.5% 0.6 / 99.4% 1.2% GEOGRAPHY PROPERTY TYPE 21% 41% 15% 10% 13% Lodging Doctors Retail 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 PRODUCTION (IN MILLIONS) $4,500 $2,435 $2,110 $3,000 $728 $463 $775 $2,095 $1,500 $636 $398 $1,812 $1,460 $1,508 $1,380 $1,439 $1,189 $0 2015 2016 2017 2018 2019 2020 2021 Purchase Refi DIVERSIFIED PRODUCTION CHANNELS WITH FOCUS
Slide 25: Servicing Asset
Servicing Asset HISTORICAL RETENTION RATES EXCEEDING 35% 5.00% $10,996 $10,000 4.1% 4.1% 3.9% 3.8% 3.9% $9,529 4.00% 3.7% $8,000 3.4% $8,165 $7,467 3.00% $6,000 $6,558 $5,483 2.00% $4,000 $4,175 $2,000 1.00% $0 0.00% 2015 2016 2017 2018 2019 2020 2021 UPB WAC 25
Slide 26: Financial Overview & Performance
Financial Overview & Performance
Slide 27: Fourth Quarter 2021 Results
Fourth Quarter 2021 Results ▪ Net income of $53.6 million1, or $0.69 per common share Earnings / Dividends ▪ Distributable earnings of $52.5 million1, or $0.67 per common share ▪ Declared dividend of $0.42 per common share ▪ Return on Equity2 of 18.1% Returns ▪ Distributable Return on Equity3 of 17.
Slide 28: Fourth Quarter 2021 Results (continued)
Fourth Quarter 2021 Results (continued) ▪ Total liquidity of $246 million1 including cash, anticipated warehouse advances, Current Liquidity principal and interest receivable from servicers, and anticipated proceeds from available-for-sale assets ▪ Closed $927.2 million commercial mortgage collatera
Slide 29: Return on Equity
Return on Equity 1. Levered yield includes interest income, accretion of discount, MSR creation, income 2. GAAP ROE is based on GAAP Net Income, while Distributable ROE is based on from unconsolidated joint ventures, realized gains (losses) on loans held for sale, Distributable Earnings, which adjus
Slide 30: Capital Structure and Funding Mix
Capital Structure HISTORICAL CAPITAL STRUCTURE HISTORICAL LEVERAGE Total Debt & Eqty ($M) $4,553 $7,233 $8,222 $8,531 $8,859 6.0 5.9x 5.9x 5.0 5.4x 5.1x 30% 28% 31% 36% 4.0 4.5x 42% 3.0 2.0 2.7x 2.2x 2.3x 2.2x Funding Mix 1.8x 44% 49% 1.0 47% 39% 30% 0.0 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 7% 7%
Slide 31: 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 Current WA Servicing Fee: 80,000 28bps 60,000 Current WAC: 40,000 4.8% 20,000 - Q118 Q218 Q318 Q418 Q119 Q219 Q319 Q419 Q120 Q220 Q320 Q420 Q121 Q2
Slide 32: 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 March 1, 2022 2. in Millions 32
Slide 33: Historical Performance
Historical Performance 1Q 2021 2Q 2021 3Q 2021 4Q 2021 1Q 2021 2Q 2021 3Q 2021 4Q 2021 Dividends per Net Income2: $28.9 $30.9 $46.5 $53.6 Share: $0.40 $0.42 $0.42 $0.42 Dividend Yield Distributable on Market Earnings2: $24.7 $41.4 $49.4 $52.5 Price1: 11.92% 10.59% 11.64% 10.75% Distributable Earning
Slide 34: Loan Portfolio – Risk Rating
Loan Portfolio – Risk Rating RISK RATING DISTRIBUTION CRITERIA 100% 90% 85% 80% BUCKET 1: Very Low Risk of Loss: New origination or current with strong 60% credit metrics (LTV/DSCR/DY). No expected losses. 40% 20% BUCKET 2: 5% 8% 3% 5% 2% 2% Low Risk of Loss: Current with maturity > 6 months. Lower
Slide 35: Waterfall Asset Management
"READY CAPITAL. Waterfall Asset Management
Slide 36: Waterfall – A Successful & Proven Asset Manager
Waterfall – A Successful & Proven Asset Manager Waterfall consists of a dedicated team of 75 investment professionals who have extensive experience in small balance commercial (SBC) distressed asset acquisition, loan origination, asset management and capital markets. KEY MANAGEMENT Thomas Capasse Ja
Slide 37: Additional Financial Information
APPENDIX Additional Financial Information
Slide 38: Balance Sheet by Quarter
READY CAPITAL. Balance Sheet by Quarter Cash and cash equivalents S$ 138975 $ 308428 $ 200,723 $ 209,769 $ 229,531 Restricted cash 47,697 62,961 57,118 52,692 51,569 Loans, net 1,550,624 1,611,826 2,222,284 2,384,497 2,915,446 Loans, held for sale, at fair value 340,268 473,078 470,184 549,917 552,9
Slide 39: Statement of Income by Quarter
Statement of Income by Quarter (In thousands, except share data) Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Interest income $ 64,810 $ 73,371 $ 103,047 $ 105,136 $ 121,942 Interest expense (41,319) (50,761) (55,415) (50,136) (57,249) Net interest incom e before provision for loan losses $ 23,491 $ 22,6
Slide 40: Distributable Earnings Reconciliation by Quarter
Distributable Earnings Reconciliation by Quarter The Company believes that this non-U.S. GAAP financial information, in addition to the related U.S. GAAP measures, provides investors greater transparency into the information used by management in its financial and operational decision-making, includ
Slide 41: READY
READY RC LISTED NYSE EES CAPITAL.