Ready Capital Corporation Reports Third Quarter 2024 Results

– GAAP LOSS PER COMMON SHARE FROM CONTINUING OPERATIONS OF $(0.07) –
– DISTRIBUTABLE EARNINGS PER COMMON SHARE OF $(0.28) –
– DISTRIBUTABLE EARNINGS PER COMMON SHARE BEFORE REALIZED LOSSES OF $0.25 –
– DISTRIBUTABLE RETURN ON AVERAGE STOCKHOLDERS’ EQUITY BEFORE REALIZED LOSSES OF 8.4% –

NEW YORK, Nov. 07, 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 September 30, 2024.

“Our third quarter performance demonstrates our diligent efforts to reposition underperforming loans into market yielding investments,” said Thomas Capasse, Ready Capital’s Chairman and Chief Executive Officer. “With record growth in our Small Business Lending business and an improving economic environment, we continue to make significant progress toward our long-term targets that are marked by higher levels of sustained returns.”

Third Quarter Highlights

  • Lower-to-Middle Market originations of $246 million
  • Record Small Business Lending loan originations of $440 million, including $355 million of Small Business Administration 7(a) loans
  • Net book value of $12.59 per share of common stock as of September 30, 2024
  • Declared and paid dividend of $0.25 per share
  • Strengthened the Small Business Lending platform with the acquisition of Funding Circle USA, Inc.

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 September 30, 2024
Net Loss $         (7,279 )
Reconciling items:  
Unrealized loss on joint ventures           2,173  
Increase in CECL reserve   52,442  
Decrease in valuation allowance           (71,060 )
Non-recurring REO impairment   525  
Non-cash compensation   1,916  
Merger transaction costs and other non-recurring expenses   4,070  
Bargain purchase gain           (32,165 )
Realized losses on sale of investments   109,675  
Total reconciling items $ 67,576  
Income tax adjustments   (13,739 )
Distributable earnings before realized losses $ 46,558  
Realized losses on sale of investments, net of tax           (89,072 )
Distributable earnings $         (42,514 )
Less: Distributable earnings attributable to non-controlling interests   1,766  
Less: Income attributable to participating shares   2,241  
Distributable earnings attributable to common stockholders $         (46,521 )
Distributable earnings before realized losses on investments, net of tax per common share – basic and diluted $ 0.25  
Distributable earnings per common share – basic and diluted $         (0.28 )

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 Friday, November 8, 2024 at 8:30am ET to provide a general business update and discuss the financial results for the quarter ended September 30, 2024.

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 #: 13748606

The playback can be accessed through November 22, 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
[email protected]

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

READY CAPITAL CORPORATION
UNAUDITED CONSOLIDATED BALANCE SHEETS

(in thousands) September 30, 2024   December 31, 2023
Assets      
Cash and cash equivalents $         181,315     $ 138,532  
Restricted cash   31,331       30,063  
Loans, net (including $4,851 and $9,348 held at fair value)   3,555,928       4,020,160  
Loans, held for sale (including $101,364 and $81,599 held at fair value and net of valuation allowance of $156,107 and $0)   320,082       81,599  
Mortgage-backed securities   30,780       27,436  
Investment in unconsolidated joint ventures (including $6,777 and $7,360 held at fair value)   146,397       133,321  
Derivative instruments   11,032       2,404  
Servicing rights   127,989       102,837  
Real estate owned, held for sale   166,697       252,949  
Other assets   412,238       300,175  
Assets of consolidated VIEs   5,794,720       6,897,145  
Assets held for sale   474,535       454,596  
Total Assets $ 11,253,044     $ 12,441,217  
Liabilities      
Secured borrowings   2,184,280       2,102,075  
Securitized debt obligations of consolidated VIEs, net   3,960,185       5,068,453  
Senior secured notes, net   437,689       345,127  
Corporate debt, net   768,470       764,908  
Guaranteed loan financing   742,631       844,540  
Contingent consideration   2,007       7,628  
Derivative instruments   2,085               212  
Dividends payable   44,602       54,289  
Loan participations sold   99,737       62,944  
Due to third parties   1,239       3,641  
Accounts payable and other accrued liabilities   279,014       207,481  
Liabilities held for sale   392,697               333,157  
Total Liabilities $ 8,914,636     $ 9,794,455  
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, 168,530,704 and 172,276,105 shares issued and outstanding, respectively   17       17  
Additional paid-in capital   2,292,229       2,321,989  
Retained earnings (deficit)           (146,003 )     124,413  
Accumulated other comprehensive loss           (24,232 )     (17,860 )
Total Ready Capital Corporation equity   2,233,389       2,539,937  
Non-controlling interests   96,658       98,464  
Total Stockholders’ Equity $ 2,330,047     $ 2,638,401  
Total Liabilities, Redeemable Preferred Stock, and Stockholders’ Equity $ 11,253,044     $ 12,441,217  
READY CAPITAL CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

  Three Months Ended September 30,   Nine Months Ended September 30,
(in thousands, except share data)   2024       2023       2024       2023  
Interest income $   226,537     $ 248,711     $  693,010     $         695,683  
Interest expense           (175,572 )     (189,788 )             (542,544 )             (518,877 )
Net interest income before recovery of (provision for) loan losses $ 50,965     $ 58,923     $         150,466     $ 176,806  
Recovery of (provision for) loan losses           (53,166 )     12,151               (7,751 )             (542 )
Net interest income after recovery of (provision for) loan losses $         (2,201 )   $ 71,074     $ 142,715     $ 176,264  
Non-interest income              
Net realized gain (loss) on financial instruments and real estate owned           (69,184 )     14,402               (43,066 )     49,855  
Net unrealized gain (loss) on financial instruments           (1,241 )     15,121       2,034       8,075  
Valuation allowance, loans held for sale   71,060                     (156,107 )      
Servicing income, net of amortization and impairment of $5,841 and $14,216 for the three and nine months ended September 30, 2024, and $324 and $4,495 for the three and nine months ended September 30, 2023, respectively   5,415               6,867       12,444       16,548  
Gain (loss) on bargain purchase   32,165               (14,862 )     13,859       215,032  
Income on unconsolidated joint ventures   3,214       56       4,821       745  
Other income   14,823       19,176       37,246       58,200  
Total non-interest income (expense) $ 56,252     $ 40,760     $         (128,769 )   $ 348,455  
Non-interest expense              
Employee compensation and benefits           (22,989 )             (19,979 )             (59,202 )             (62,120 )
Allocated employee compensation and benefits from related party           (2,537 )             (3,001 )             (8,037 )             (7,827 )
Professional fees           (6,232 )             (7,666 )             (19,330 )             (18,742 )
Management fees – related party           (6,498 )             (7,229 )             (19,344 )             (18,070 )
Incentive fees – related party          —               —               (1,791 )
Loan servicing expense           (10,101 )             (12,541 )             (33,907 )             (31,590 )
Transaction related expenses           (2,998 )             (2,329 )             (5,240 )             (17,188 )
Other operating expenses           (18,573 )             (12,760 )             (70,562 )             (34,926 )
Total non-interest expense $         (69,928 )   $         (65,505 )   $         (215,622 )   $         (192,254 )
Income (loss) from continuing operations before benefit (provision) for income taxes           (15,877 )             46,329               (201,676 )     332,465  
Income tax benefit (provision)   8,404               (2,808 )             87,194               (5,903 )
Net income (loss) from continuing operations $         (7,473 )   $ 43,521     $         (114,482 )   $ 326,562  
Discontinued operations              
Income (loss) from discontinued operations before benefit (provision) for income taxes   258       4,877               (1,554 )     14,624  
Income tax benefit (provision)           (64 )             (1,219 )     389               (3,656 )
Net income (loss) from discontinued operations $ 194     $ 3,658     $         (1,165 )   $ 10,968  
Net income (loss) $         (7,279 )   $ 47,179     $         (115,647 )   $ 337,530  
Less: Dividends on preferred stock   1,999       1,999       5,997       5,998  
Less: Net income attributable to non-controlling interest   2,031       1,517       3,968       7,842  
Net income (loss) attributable to Ready Capital Corporation $         (11,309 )   $ 43,663     $         (125,612 )   $ 323,690  
               
Earnings per common share from continuing operations – basic $         (0.07 )   $ 0.23     $         (0.74 )   $ 2.25  
Earnings per common share from discontinued operations – basic $ 0.00     $ 0.02     $         (0.01 )   $ 0.08  
Total earnings per common share – basic $         (0.07 )   $ 0.25     $         (0.75 )   $ 2.33  
               
Earnings per common share from continuing operations – diluted $         (0.07 )   $ 0.23     $         (0.74 )   $ 2.22  
Earnings per common share from discontinued operations – diluted $ 0.00     $ 0.02     $ (0.01 )   $ 0.08  
Total earnings per common share – diluted $         (0.07 )   $ 0.25     $ (0.75 )   $ 2.30  
               
Weighted-average shares outstanding              
Basic   168,335,483       171,973,933       169,669,145       138,323,878  
Diluted   169,509,208       174,440,869       170,815,080       140,628,545  
               
Dividends declared per share of common stock $ 0.25     $ 0.36     $     0.85     $ 1.16  
READY CAPITAL CORPORATION
UNAUDITED SEGMENT REPORTING
  Three Months Ended September 30, 2024
(in thousands) LMM Commercial Real Estate   Small Business Lending   Corporate-Other   Consolidated
Interest income $ 193,252     $   33,285     $     $         226,537  
Interest expense           (150,489 )             (25,083 )                   (175,572 )
Net interest income before provision for loan losses $ 42,763     $ 8,202     $     $         50,965  
Provision for loan losses           (49,240 )             (3,926 )                   (53,166 )
Net interest income after provision for loan losses $ (6,477 )   $ 4,276     $     $         (2,201 )
Non-interest income              
Net realized gain (loss) on financial instruments and real estate owned   (95,206 )     26,022                     (69,184 )
Net unrealized gain (loss) on financial instruments   (2,447 )     1,206                     (1,241 )
Valuation allowance, loans held for sale   71,060                           71,060  
Servicing income, net   1,445       3,970             5,415  
Gain on bargain purchase               32,165       32,165  
Income on unconsolidated joint ventures   3,204       10             3,214  
Other income   2,803       10,792       1,228       14,823  
Total non-interest income (loss) $         (19,141 )   $ 42,000     $ 33,393     $ 56,252  
Non-interest expense              
Employee compensation and benefits           (6,462 )             (13,852 )             (2,675 )             (22,989 )
Allocated employee compensation and benefits from related party           (254 )                   (2,283 )             (2,537 )
Professional fees           (809 )     (3,326 )             (2,097 )             (6,232 )
Management fees – related party                       (6,498 )             (6,498 )
Loan servicing expense           (9,632 )     (469 )                   (10,101 )
Transaction related expenses                       (2,998 )             (2,998 )
Other operating expenses           (3,919 )             (12,697 )             (1,957 )             (18,573 )
Total non-interest expense $         (21,076 )   $         (30,344 )   $         (18,508 )   $         (69,928 )
Income (loss) before provision for income taxes $         (46,694 )   $ 15,932     $ 14,885     $         (15,877 )
Total assets $ 8,950,073     $ 1,486,085     $ 342,351     $         10,778,509  
READY CAPITAL CORPORATION
UNAUDITED SEGMENT REPORTING
  Nine Months Ended September 30, 2024
(in thousands) LMM Commercial Real Estate   Small Business Lending   Corporate-Other   Consolidated
Interest income $ 596,062     $ 96,948     $     $ 693,010  
Interest expense           (467,718 )             (74,826 )                   (542,544 )
Net interest income before provision for loan losses $ 128,344     $ 22,122     $     $ 150,466  
Provision for loan losses           (4,071 )     (3,680 )           (7,751 )
Net interest income after provision for loan losses $ 124,273     $ 18,442     $     $ 142,715  
Non-interest income              
Net realized gain (loss) on financial instruments and real estate owned           (99,540 )     56,474             (43,066 )
Net unrealized gain (loss) on financial instruments           (958 )     2,992             2,034  
Valuation allowance, loans held for sale           (156,107 )                 (156,107 )
Servicing income, net   3,998       8,446             12,444  
Gain on bargain purchase               13,859       13,859  
Income on unconsolidated joint ventures   4,811       10             4,821  
Other income   20,326       14,267       2,653       37,246  
Total non-interest income (loss) $         (227,470 )   $ 82,189     $ 16,512     $ (128,769 )
Non-interest expense              
Employee compensation and benefits           (21,080 )     (31,472 )             (6,650 )             (59,202 )
Allocated employee compensation and benefits from related party           (804 )                   (7,233 )             (8,037 )
Professional fees           (3,324 )     (9,471 )             (6,535 )             (19,330 )
Management fees – related party                       (19,344 )             (19,344 )
Loan servicing expense           (33,075 )     (832 )                   (33,907 )
Transaction related expenses                       (5,240 )             (5,240 )
Other operating expenses           (37,507 )             (23,968 )             (9,087 )             (70,562 )
Total non-interest expense $         (95,790 )   $         (65,743 )   $         (54,089 )   $         (215,622 )
Income (loss) before provision for income taxes $         (198,987 )   $         34,888     $         (37,577 )   $         (201,676 )
Total assets $ 8,950,073     $ 1,486,085     $ 342,351     $ 10,778,509  


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