Ready Capital (US:RC)2023-05-09 20:21Financial Performance - Net income for Q1 2023 was $36,978,000, a decrease of 42.5% compared to $64,263,000 in Q1 2022[321]. - Basic earnings per share (EPS) decreased to $0.30 in Q1 2023 from $0.70 in Q1 2022, representing a decline of 57.1%[321]. - Diluted EPS also fell to $0.29 in Q1 2023 from $0.66 in Q1 2022, a decrease of 56.1%[321]. - Distributable earnings for Q1 2023 were $38,149,000, a decline of 21.9% compared to $48,863,000 in Q1 2022[400]. - The return on equity for Q1 2023 was 8.2%, down from 18.0% in Q1 2022[400]. - Consolidated net income for Q1 2023 was $37.0 million, a decrease of $27.3 million (42.4%) from $64.3 million in Q1 2022[423]. Assets and Liabilities - Total assets as of March 31, 2023, were $11,537,463,000, compared to $11,476,244,000 as of March 31, 2022, reflecting a growth of 0.5%[358]. - The company reported total liabilities of $2,657,222,000 as of March 31, 2023, with secured borrowings accounting for $2,484,902,000[328]. - Total liabilities were $9.6 billion, a decrease of $74 million (0.8%) from December 31, 2022, mainly due to reductions in secured borrowings and accounts payable[407]. - The total carrying amount of debt was $1,122,110,000, which includes senior secured notes, convertible notes, and corporate debt[454]. - The investment in unconsolidated joint ventures was $114.2 million, reflecting a slight decrease of $4.5 million (3.8%)[406]. Income and Expenses - Interest income for the three months ended March 31, 2023, was $217,573,000, a significant increase from $124,405,000 in the same period of 2022, representing a growth of 74.9%[358]. - Total non-interest income for Q1 2023 was $44,098,000, up from $87,807,000 in Q1 2022, indicating a decrease of 49.8%[358]. - Total non-interest expense for Q1 2023 was $70,642,000, compared to $67,541,000 in Q1 2022, showing an increase of 3.1%[358]. - Total other operating expenses rose to $14,318 thousand in Q1 2023, up from $12,653 thousand in Q1 2022, indicating an increase of about 13%[299]. Loan Activity - Total loan originations in Q1 2023 amounted to $828,794,000, down 72.9% from $3,064,974,000 in Q1 2022[405]. - The Company originated $109.5 million of PPP loans and recognized fees totaling $5.2 million in the period of origination[294]. - Total PPP related assets decreased from $190,509 thousand as of December 31, 2022, to $148,904 thousand as of March 31, 2023, representing a decline of approximately 22%[296]. - Loans, net decreased by $448 million (12.5%) to $3.1 billion, primarily due to the closing of RCMF 2023-FL11[406]. - Loans, net in the SBC Lending segment amounted to $9.4 billion, while small business lending and residential mortgage banking contributed $540 million and $5.1 million, respectively[409]. Equity and Dividends - The Company declared dividends of $0.1 million and $1.9 million for its Series C and Series E Preferred Stock, respectively, during the three months ended March 31, 2023[319]. - The dividend yield increased to 15.7% in Q1 2023 from 11.2% in Q1 2022[400]. - Total stockholders' equity was $1.9 billion, a decrease of $10 million from December 31, 2022, primarily due to declared dividends of $45 million, partially offset by net income of $37 million[408]. Risk Management - The company is exposed to various risks including market risk, credit risk, and liquidity risk associated with its financial instruments[329][330]. - The company manages counterparty credit risk through diversification and monitoring the creditworthiness of counterparties[333]. - The Company is exposed to liquidity risk, which includes the risk of not being able to fund acquisition and origination activities at settlement dates[338]. - The company is subject to credit risk, with potential increases in defaults adversely impacting operating results[396]. Strategic Initiatives - The company is focused on expanding its construction lending capabilities through the acquisition of the Mosaic Funds, which is expected to enhance its operational scale and synergies[363]. - The company expects the Broadmark Merger to close in the second quarter of 2023, which will increase the number of directors on the Board from nine to twelve[380][379]. - The company has a large and active pipeline of potential acquisition and origination opportunities, although competition may limit the ability to capitalize on these[403]. Financial Instruments and Hedging - The company utilizes interest rate swaps to mitigate risks associated with changing interest rates, which involves receiving variable-rate interest amounts in exchange for fixed-rate payments[336]. - The company utilizes derivative financial and hedging instruments to manage interest rate risk associated with fixed-rate mortgages[388]. - The total gross fair value of derivative contracts as of March 31, 2023, was $47,877,000, with $34,104,000 offset in the consolidated balance sheets[328]. Compliance and Accounting - The company must distribute at least 90% of its net taxable income to maintain its REIT status, with compliance confirmed as of March 31, 2023[350]. - The company’s financial statements are prepared in accordance with GAAP, requiring the use of estimates and assumptions[469]. - The implementation of the Current Expected Credit Loss (CECL) model began on January 1, 2020, replacing the previous incurred loss methodology[471].