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Ready Capital Corporation Reports Fourth Quarter 2023 Results

–   GAAP EARNINGS PER COMMON SHARE FROM CONTINUING OPERATIONS OF $0.12  

–   DISTRIBUTABLE EARNINGS PER COMMON SHARE OF $0.26  

–   DISTRIBUTABLE RETURN ON AVERAGE STOCKHOLDERS’ EQUITY OF 7.5%  

NEW YORK, Feb. 27, 2024 (GLOBE NEWSWIRE) — Ready Capital Corporation (“Ready Capital” or the “Company”) (NYSE: RC), a multi-strategy real estate finance company that originates, acquires, finances, and services lower-to-middle-market (“LMM”) investor and owner occupied commercial real estate loans, today reported financial results for the quarter ended December 31, 2023.

“We continue to make progress on our business strategy of repositioning the capital acquired in our merger with Broadmark Realty Capital into our core lending strategies despite current challenges in the commercial real estate sector,” said Thomas Capasse, Ready Capital’s Chairman and Chief Executive Officer. “We believe our portfolio is well positioned to withstand market headwinds as a result of our avoidance of office collateral, its granularity with over 5,000 positions and its concentration in strong markets.”

Fourth Quarter Highlights

Full Year Highlights

Use of Non-GAAP Financial Information

In addition to the results presented in accordance with U.S. GAAP, this press release includes distributable earnings, formerly referred to as core earnings, which is a non-U.S. GAAP financial measure. The Company defines distributable earnings as net income adjusted for unrealized gains and losses related to certain mortgage backed securities (“MBS”) not retained by us as part of our loan origination business, realized gains and losses on sales of certain MBS, unrealized gains and losses related to residential mortgage servicing rights (“MSR”) from discontinued operations, unrealized changes in our current expected credit loss reserve, unrealized gains or losses on de-designated cash flow hedges, unrealized gains or losses on foreign exchange hedges, unrealized gains or losses on certain unconsolidated joint ventures, non-cash compensation expense related to our stock-based incentive plan, and one-time non-recurring gains or losses, such as gains or losses on discontinued operations, bargain purchase gains, or merger related expenses.

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, including the determination of dividends. However, because distributable earnings is an incomplete measure of the Company’s financial performance and involves differences from net income computed in accordance with U.S. GAAP, it should be considered along with, but not as an alternative to, the Company’s net income computed in accordance with U.S. GAAP as a measure of the Company’s financial performance. In addition, because not all companies use identical calculations, the Company’s presentation of distributable earnings may not be comparable to other similarly-titled measures of other companies.

In calculating distributable earnings, Net Income (in accordance with U.S. GAAP) is adjusted to exclude unrealized gains and losses on MBS acquired by the Company in the secondary market but is not adjusted to exclude unrealized gains and losses on MBS retained by Ready Capital as part of its loan origination businesses, where the Company transfers originated loans into an MBS securitization and the Company retains an interest in the securitization. In calculating distributable earnings, the Company does not adjust Net Income (in accordance with U.S. GAAP) to take into account unrealized gains and losses on MBS retained by us as part of the loan origination businesses because the unrealized gains and losses that are generated in the loan origination and securitization process are considered to be a fundamental part of this business and an indicator of the ongoing performance and credit quality of the Company’s historical loan originations. In calculating distributable earnings, Net Income (in accordance with U.S. GAAP) is adjusted to exclude realized gains and losses on certain MBS securities considered to be non-distributable. Certain MBS positions are considered to be non-distributable due to a variety of reasons which may include collateral type, duration, and size.

In addition, in calculating distributable earnings, Net Income (in accordance with U.S. GAAP) is adjusted to exclude unrealized gains or losses on residential MSRs, held at fair value from discontinued operations. Servicing rights relating to the Company’s small business commercial business are accounted for under ASC 860, Transfer and Servicing. In calculating distributable earnings, the Company does not exclude realized gains or losses on commercial MSRs, as servicing income is a fundamental part of Ready Capital’s business and is an indicator of the ongoing performance.

To qualify as a REIT, the Company must distribute to its stockholders each calendar year at least 90% of its REIT taxable income (including certain items of non-cash income), determined without regard to the deduction for dividends paid and excluding net capital gain. There are certain items, including net income generated from the creation of MSRs, that are included in distributable earnings but are not included in the calculation of the current year’s taxable income. These differences may result in certain items that are recognized in the current period’s calculation of distributable earnings not being included in taxable income, and thus not subject to the REIT dividend distribution requirement until future years.

The table below reconciles Net Income computed in accordance with U.S. GAAP to Distributable Earnings.

     
(in thousands) Three Months Ended December 31, 2023
Net Income $ 10,881  
Reconciling items:    
Unrealized loss on MSR – discontinued operations   20,715  
Unrealized loss on joint ventures   2,124  
Unrealized loss on foreign exchange hedges   1,582  
Increase in CECL reserve   3,195  
Non-cash compensation   1,360  
Merger transaction costs and other non-recurring expenses   7,361  
Loss on bargain purchase   7,060  
Total reconciling items $ 43,397  
Income tax adjustments   (5,754 )
Distributable earnings $ 48,524  
Less: Distributable earnings attributable to non-controlling interests   1,358  
Less: Income attributable to participating shares   2,206  
Distributable earnings attributable to common stockholders $ 44,960  
Distributable earnings per common share – basic $ 0.26  
Distributable earnings per common share – diluted $ 0.26  

U.S. GAAP return on equity is based on U.S. GAAP net income, while distributable return on equity is based on distributable earnings, which adjusts U.S. GAAP net income for the items in the distributable earnings reconciliation above.

Webcast and Earnings Conference Call

Management will host a webcast and conference call on Wednesday, February 28, 2024 at 8:30am ET to provide a general business update and discuss the financial results for the quarter ended December 31, 2023.

The Company encourages use of the webcast due to potential extended wait times to access the conference call via dial-in. The webcast of the conference call will be available in the Investor Relations section of the Company’s website at www.readycapital.com. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time in order to register, download and install any necessary audio software.

To Participate in the Telephone Conference Call:

Dial in at least five minutes prior to start time.

Domestic: 1-877-407-0792
International: 1-201-689-8263

Conference Call Playback:

Domestic: 1-844-512-2921
International: 1-412-317-6671
Replay Pin #: 13743091

The playback can be accessed through March 13, 2024.        

Safe Harbor Statement

This press release 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 provided by the same. These statements are based on management’s current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements; the Company can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from the Company’s expectations include, but are not limited to, applicable regulatory changes; general volatility of the capital markets; changes in the Company’s investment objectives and business strategy; the availability of financing on acceptable terms or at all; the availability, terms and deployment of capital; the availability of suitable investment opportunities; changes in the interest rates or the general economy; increased rates of default and/or decreased recovery rates on investments; changes in interest rates, interest rate spreads, the yield curve or prepayment rates; changes in prepayments of Company’s assets; the degree and nature of competition, including competition for the Company’s target assets; and other factors, including those set forth in the Risk Factors section of the Company’s most recent Annual Report on Form 10-K filed with the SEC, and other reports filed by the Company with the SEC, copies of which are available on the SEC’s website, www.sec.gov. The Company undertakes no obligation to update these statements for revisions or changes after the date of this release, except as required by law.

About Ready Capital Corporation

Ready Capital Corporation (NYSE: RC) is a multi-strategy real estate finance company that originates, acquires, finances and services lower-to-middle-market investor and owner occupied commercial real estate loans. The Company specializes in loans backed by commercial real estate, including agency multifamily, investor, construction, and bridge as well as U.S. Small Business Administration loans under its Section 7(a) program. Headquartered in New York, New York, the Company employs approximately 350 professionals nationwide.

Contact
Investor Relations
Ready Capital Corporation
212-257-4666
InvestorRelations@readycapital.com

Additional information can be found on the Company’s website at www.readycapital.com

READY CAPITAL CORPORATION
UNAUDITED CONSOLIDATED BALANCE SHEETS
             
(in thousands)   December 31, 2023   December 31, 2022
Assets            
Cash and cash equivalents   $ 138,532     $ 147,399  
Restricted cash     30,063       48,146  
Loans, net (including $9,348 and $9,786 held at fair value)     4,020,160       3,571,799  
Loans, held for sale, at fair value     81,599       123,735  
Paycheck Protection Program loans (including $165 and $576 held at fair value)     34,597       186,985  
Mortgage-backed securities     27,436       32,041  
Investment in unconsolidated joint ventures (including $7,360 and $8,094 held at fair value)     133,321       118,641  
Derivative instruments     2,404       12,532  
Servicing rights     102,837       87,117  
Real estate owned, held for sale     252,949       117,098  
Other assets     265,578       183,533  
Assets of consolidated VIEs     6,897,145       6,552,760  
Assets held for sale     454,596       439,191  
Total Assets   $ 12,441,217     $ 11,620,977  
Liabilities            
Secured borrowings     2,102,075       2,663,735  
Paycheck Protection Program Liquidity Facility (PPPLF) borrowings     36,036       201,011  
Securitized debt obligations of consolidated VIEs, net     5,068,453       4,903,350  
Convertible notes, net           114,397  
Senior secured notes, net     345,127       343,355  
Corporate debt, net     764,908       662,665  
Guaranteed loan financing     844,540       264,889  
Contingent consideration     7,628       28,500  
Derivative instruments     212       1,319  
Dividends payable     54,289       47,177  
Loan participations sold     62,944       54,641  
Due to third parties     3,641       11,805  
Accounts payable and other accrued liabilities     171,445       153,614  
Liabilities held for sale     333,157       271,924  
Total Liabilities   $ 9,794,455     $ 9,722,382  
Preferred stock Series C, liquidation preference $25.00 per share     8,361       8,361  
             
Commitments & contingencies            
             
Stockholders’ Equity            
Preferred stock Series E, liquidation preference $25.00 per share     111,378       111,378  
Common stock, $0.0001 par value, 500,000,000 shares authorized, 172,276,105 and 110,523,641 shares issued and outstanding, respectively     17       11  
Additional paid-in capital     2,321,989       1,684,074  
Retained earnings     124,413       4,994  
Accumulated other comprehensive loss     (17,860 )     (9,369 )
Total Ready Capital Corporation equity     2,539,937       1,791,088  
Non-controlling interests     98,464       99,146  
Total Stockholders’ Equity   $ 2,638,401     $ 1,890,234  
Total Liabilities, Redeemable Preferred Stock, and Stockholders’ Equity   $ 12,441,217     $ 11,620,977  
READY CAPITAL CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
             
(in thousands, except share data)      Three Months Ended
December 31, 2023
     For the Year Ended
December 31, 2023
Interest income   $ 250,130     $ 945,814  
Interest expense     (197,591 )     (716,468 )
Net interest income before provision for loan losses   $ 52,539     $ 229,346  
Provision for loan losses     (6,688 )     (7,230 )
Net interest income after provision for loan losses   $ 45,851     $ 222,116  
Non-interest income            
Net realized gain (loss) on financial instruments and real estate owned     15,153       65,008  
Net unrealized gain (loss) on financial instruments     1,643       9,718  
Servicing income, net of amortization and impairment of $3,416 and $7,911     4,613       21,161  
Income on purchased future receivables, net of allowance for credit losses of $2,099 and $8,989     857       2,387  
Gain (loss) on bargain purchase     (7,060 )     207,972  
Loss on unconsolidated joint ventures     (1,650 )     (905 )
Other income     46,458       103,127  
Total non-interest income   $ 60,014     $ 408,468  
Non-interest expense            
Employee compensation and benefits     (19,410 )     (81,530 )
Allocated employee compensation and benefits from related party     (3,010 )     (10,837 )
Professional fees     (15,997 )     (34,738 )
Management fees – related party     (7,035 )     (25,103 )
Incentive fees – related party           (1,791 )
Loan servicing expense     (9,221 )     (40,811 )
Transaction related expenses     (576 )     (17,764 )
Other operating expenses     (24,806 )     (59,591 )
Total non-interest expense   $ (80,055 )   $ (272,165 )
Income from continuing operations before provision for income taxes     25,810       358,419  
Income tax provision     (1,236 )     (7,174 )
Net income from continuing operations   $ 24,574     $ 351,245  
Discontinued operations            
Loss from discontinued operations before provision for income taxes     (18,258 )     (3,779 )
Income tax benefit     4,565       945  
Net loss from discontinued operations     (13,693 )     (2,834 )
Net income     10,881       348,411  
Less: Dividends on preferred stock     1,999       7,997  
Less: Net income attributable to non-controlling interest     1,118       8,960  
Net income attributable to Ready Capital Corporation   $ 7,764     $ 331,454  
             
Earnings per common share from continuing operations – basic   $ 0.12     $ 2.27  
Earnings per common share from discontinued operations – basic   $ (0.08 )   $ (0.02 )
Total earnings per common share – basic   $ 0.04     $ 2.25  
             
Earnings per common share from continuing operations – diluted   $ 0.12     $ 2.24  
Earnings per common share from discontinued operations – diluted   $ (0.08 )   $ (0.02 )
Total earnings per common share – diluted   $ 0.04     $ 2.22  
             
Weighted-average shares outstanding            
Basic     172,116,989       146,841,594  
Diluted     173,957,731       148,567,026  
             
Dividends declared per share of common stock   $ 0.30     $ 1.46  
READY CAPITAL CORPORATION
UNAUDITED SEGMENT REPORTING
FOR THE THREE MONTHS ENDED DECEMBER 31, 2023
               
(in thousands)   LMM Commercial
Real Estate
  Small
Business
Lending
Corporate-
Other
  Consolidated
Interest income   $ 217,566     $ 32,564   $     $ 250,130  
Interest expense     (171,629 )     (25,983 )   21       (197,591 )
Net interest income before provision for loan losses   $ 45,937     $ 6,581   $ 21     $ 52,539  
Provision for loan losses     (6,592 )     (96 )         (6,688 )
Net interest income after provision for loan losses   $ 39,345     $ 6,485   $ 21     $ 45,851  
Non-interest income                      
Net realized gain (loss) on financial instruments and real estate owned     6,838       8,315           15,153  
Net unrealized gain (loss) on financial instruments     700       943           1,643  
Servicing income, net     1,638       2,975           4,613  
Income on purchased future receivables, net           857           857  
Loss on bargain purchase               (7,060 )     (7,060 )
Loss on unconsolidated joint ventures     (1,650 )               (1,650 )
Other income     12,723       32,722     1,013       46,458  
Total non-interest income (loss)   $ 20,249     $ 45,812   $ (6,047 )   $ 60,014  
Non-interest expense                      
Employee compensation and benefits     (7,859 )     (8,893 )   (2,658 )     (19,410 )
Allocated employee compensation and benefits from related party     (301 )         (2,709 )     (3,010 )
Professional fees     (1,989 )     (11,672 )   (2,336 )     (15,997 )
Management fees – related party               (7,035 )     (7,035 )
Incentive fees – related party                      
Loan servicing expense     (9,062 )     (159 )         (9,221 )
Transaction related expenses               (576 )     (576 )
Other operating expenses     (8,367 )     (13,760 )   (2,679 )     (24,806 )
Total non-interest expense   $ (27,578 )   $ (34,484 ) $ (17,993 )   $ (80,055 )
Income (loss) before provision for income taxes   $ 32,016     $ 17,813   $ (24,019 )   $ 25,810  
Total assets   $ 10,282,531     $ 1,395,687   $ 308,403     $ 11,986,621  
READY CAPITAL CORPORATION
UNAUDITED SEGMENT REPORTING
FOR THE YEAR ENDED DECEMBER 31, 2023
               
(in thousands)   LMM Commercial
Real Estate
  Small
Business
Lending
Corporate-
Other
  Consolidated
Interest income   $ 847,253     $ 98,561   $     $ 945,814  
Interest expense     (650,624 )     (65,844 )         (716,468 )
Net interest income before provision for loan losses   $ 196,629     $ 32,717   $     $ 229,346  
Provision for loan losses     (1,413 )     (5,817 )         (7,230 )
Net interest income after provision for loan losses   $ 195,216     $ 26,900   $     $ 222,116  
Non-interest income                      
Net realized gain (loss) on financial instruments and real estate owned     34,072       30,936           65,008  
Net unrealized gain (loss) on financial instruments     8,427       1,291           9,718  
Servicing income, net     5,819       15,342           21,161  
Income on purchased future receivables, net           2,387           2,387  
Gain on bargain purchase               207,972       207,972  
Loss on unconsolidated joint ventures     (905 )               (905 )
Other income     38,552       62,112     2,463       103,127  
Total non-interest income   $ 85,965     $ 112,068   $ 210,435     $ 408,468  
Non-interest expense                      
Employee compensation and benefits     (33,012 )     (40,289 )   (8,229 )     (81,530 )
Allocated employee compensation and benefits from related party     (882 )         (9,955 )     (10,837 )
Professional fees     (5,369 )     (19,535 )   (9,834 )     (34,738 )
Management fees – related party               (25,103 )     (25,103 )
Incentive fees – related party               (1,791 )     (1,791 )
Loan servicing expense     (40,070 )     (741 )         (40,811 )
Transaction related expenses               (17,764 )     (17,764 )
Other operating expenses     (24,443 )     (27,763 )   (7,385 )     (59,591 )
Total non-interest expense   $ (103,776 )   $ (88,328 ) $ (80,061 )   $ (272,165 )
Income before provision for income taxes   $ 177,405     $ 50,640   $ 130,374     $ 358,419  
Total assets   $ 10,282,531     $ 1,395,687   $ 308,403     $ 11,986,621  


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