Ready Capital Corporation

Greetings and welcome to Ready Capital Corporation third quarter 2021 earnings conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during a conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Andrew Alborn, Chief Financial Officer. Thank you. You may begin.

Thank you, Operator, and good morning, and thanks to those of you on the call for joining us this morning. Some of our comments today will be forward-looking statements within the meaning of the federal securities laws. Such statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Therefore, you should exercise caution in interpreting and relying on them. We refer you to our SEC filings for a more detailed discussion on the risks that could impact our future operating results and financial condition. During the call, we will discuss our non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available in our third quarter 2021 earnings release and our supplemental information, which can be found in the investor relations section of the Ready Capital website. In addition to Tom and myself, we are also joined by Adam Zausma, our Chief Credit Officer, and David Cohen, Co-President of Bridge Lending, on today's call. I will now turn it over to Chief Executive Officer, Tom Capaciti.

Good morning and welcome to those of you on the call today. In keeping with our practice of having members of the executive team join Andrew and me on calls to display the depth of our team, I'd like to welcome David Cohen to today's call. David, a key leader in our organization, is co-founder of Ready Capital's bridge lending business, which has grown to be one of the premier sources of capital for owners of lower middle market properties in transition. Providing loans on transitional, value-add, and event-driven commercial loans and multifamily real estate, David Lee's core lending strategy, which accounts for nearly one half of our capital allocation. Turning to results, we reported distributable earnings per share of 64 cents, 23% growth from the prior quarter. This marks the sixth consecutive quarter where both return on equity and dividend coverage are in excess of our 10% and 105% targets. Both metrics are among the highest in our peer group, reflecting continued contributions across our multiple diverse business lines. At a high level, results continue to reflect post-COVID recovery in net interest margin in our core small-balance commercial or SBC lending business with stable contribution from our government-sponsored gain-on-sale segments. The post-COVID recovery in the SBC property market is lagging the large-balanced commercial real estate market reflected in 36% and 11% year-over-year increases in SBC property sales to over $150 billion and prices through July. This trend is driving loan demand across our diverse product offerings. We originated $1 billion of SBC loans in the quarter, holding consistent with record originations in the prior quarter. The volume was dispersed across our range of products which target all stages of an SBC property's life cycle, from heavy transitional to stabilize agency loans. In our Freddie Mac small balance loan program, we originated 136 million and expect annual volume to exceed 700 million in Freddie Mac and bridge to Freddie volume by year end. Despite quarterly volume declines due to changes in Freddie's affordability criteria and rate increases in the third quarter, demand for multifamily housing remains elevated. Freddie's recent rate reduction to as low as 2.6% in top markets is expected to drive increased volume through the end of the year. In the quarter, activity in our conventional fixed-rate segments picked up for the first time since the start of the pandemic. These products target stabilized or stabilizing properties with our fixed-rate product, providing flexibility in term, repayment options, and property types. Originations in the quarter for the segment exceeded $105 million. Fixed rate originations of $71 million had an average rate of 4.1% and are expected to generate a low teen leverage yield over their nine-year duration. CMBS originations of $34 million will be contributed to the company's first standalone CMBS offering and will generate gain-on-sale revenue. Our bridge lending business, which targets both heavy transitional to light transitional projects, was the star performer, with over $730 million originated in the third quarter. I'm going to turn it over to David to provide additional insight. Thanks, Tom.