RC-E Ready Capital Corporation 65

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

 

FORM 8-K/A

 

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date Earliest Event reported): May 31, 2023

 

 

READY CAPITAL CORPORATION

(Exact name of registrant as specified in its charter)

 

 

Maryland		001-35808		90-0729143
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

1251 Avenue of the Americas, 50^th Floor

New York, NY 10020

(212) 257-4600

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e- 4(c))

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value	RC	New York Stock Exchange
6.25% Series C Cumulative Convertible Preferred Stock, $0.0001 par value per share	RC PRC	New York Stock Exchange
6.50% Series E Cumulative Redeemable Preferred Stock, $0.0001 par value per share	RC PRE	New York Stock Exchange
7.00% Convertible Senior Notes due 2023	RCA	New York Stock Exchange
6.20% Senior Notes due 2026	RCB	New York Stock Exchange
5.75% Senior Notes due 2026	RCC	New York Stock Exchange

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company               ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.                 ¨

 

 

EXPLANATORY NOTE

 

On May 31, 2023, Ready Capital Corporation (“Ready Capital”) filed a Current Report on Form 8-K with the U.S. Securities and Exchange Commission (the “SEC”) in connection with the consummation on May 31, 2023 (the “Closing Date”), of the transactions contemplated by that certain Agreement and Plan of Merger, dated as of February 26, 2023 (the “Merger Agreement”), by and among Ready Capital, RCC Merger Sub, LLC, a wholly owned subsidiary of Ready Capital (“Merger Sub”), and Broadmark Realty Capital Inc. (“Broadmark”). Pursuant to the Merger Agreement, on the Closing Date, Broadmark merged with and into Merger Sub, with Merger Sub continuing as the surviving company (the “Merger”). This Current Report on Form 8-K/A is being filed to amend the Form 8-K filed by Ready Capital with the SEC on May 31, 2023, to provide the financial statements and pro forma financial information described below, in accordance with the requirements of Item 9.01 of Form 8-K.

 

Item 9.01 Financial Statements and Exhibits.

 

(a) Financial Statements of Businesses Acquired.

 

The required audited consolidated financial statements of Broadmark as of December 31, 2022 and December 31, 2021 and for each of the years ended December 31, 2022, December 31, 2021 and December 31, 2020 and the required unaudited consolidated financial statements of Broadmark as of March 31, 2023 and for the three months then ended are filed as Exhibits 99.1 and 99.2, respectively, and are incorporated herein by reference.

 

(b) Pro Forma Financial Information.

 

The required unaudited pro forma condensed combined financial information with respect to the Merger is filed as Exhibit 99.3 and incorporated herein by reference.

 

(d) Exhibits.

 

Exhibit Number		Description
2.1		Agreement and Plan of Merger, dated as of February 26, 2023, by and among Ready Capital Corporation, RCC Merger Sub, LLC and Broadmark Realty Capital Inc. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC by Ready Capital Corporation on May 31, 2023)
23.1*		Consent of Moss Adams LLP, independent registered public accounting firm (in respect of Broadmark Realty Capital Inc.)
99.1		Audited consolidated financial statements of Broadmark Realty Capital Inc. as of December 31, 2022 and December 31, 2021 and for each of the years ended December 31, 2022, December 31, 2021 and December 31, 2020 (incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC by Broadmark Realty Capital Inc. on March 1, 2023)
99.2		Unaudited consolidated financial statements of Broadmark Realty Capital Inc. as of March 31, 2023, and for the three months then ended (incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 filed with the SEC by Broadmark Realty Capital Inc. on May 9, 2023)
99.3*		Unaudited pro forma condensed combined financial information of Ready Capital Corporation as of March 31, 2023, and for the year ended December 31, 2022, and the three months ended March 31, 2023
104.1		Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

* Filed herewith

 

 

Signatures

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed by the undersigned hereunto duly authorized.

 

				READY CAPITAL CORPORATION
Date: August 16, 2023				By:	/s/ Andrew Ahlborn
				Name:	Andrew Ahlborn
				Title:	Chief Financial Officer

 

 

Exhibit 23.1

 

Consent of Independent Registered Public Accounting Firm

 

We consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-263756, 333-262104, 333-234423, 333-217810 and 333-196296) and Form S-8 (Nos. 333-272310 and 333-216988) of Ready Capital Corporation, of our report dated March 1, 2023, relating to the consolidated financial statements of Broadmark Realty Capital Inc. (the “Company”) and the effectiveness of internal control over financial reporting of the Company appearing in the Annual Report on Form 10-K of the Company for the year ended December 31, 2022, filed with the Securities and Exchange Commission, and incorporated by reference in the Current Report on Form 8-K/A of Ready Capital Corporation.

 

/s/ Moss Adams LLP

 

Phoenix, Arizona

August 16, 2023

 

 

Exhibit 99.3

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

On May 31, 2023, Ready Capital Corporation, a Maryland corporation (the “Company” or “Ready Capital”), and RCC Merger Sub, LLC, a Delaware limited liability company and a wholly owned subsidiary of Ready Capital (“RCC Merger Sub”), consummated the transactions contemplated by the Agreement and Plan of Merger, dated as of February 26, 2023 (the “Merger Agreement”), with Broadmark Realty Capital Inc., a Maryland corporation (“Broadmark”), pursuant to which Broadmark merged with and into RCC Merger Sub, with RCC Merger Sub continuing as the surviving company and a subsidiary of the Company (the “Merger”).

 

Upon completion of the Merger (the “Effective Time”) and under the terms of the Merger Agreement, each outstanding share of common stock, par value $0.001 per share, of Broadmark (“Broadmark Common Stock”) (other than shares held by Ready Capital or RCC Merger Sub or by any wholly owned subsidiary of Ready Capital, RCC Merger Sub or Broadmark, which were automatically cancelled and retired and ceased to exist) was converted into the right to receive from Ready Capital 0.47233 (the “Exchange Ratio”) newly issued shares of common stock, par value $0.0001 per share, of Ready Capital (“Ready Capital Common Stock”). No fractional shares of Ready Capital Common Stock were issued in the Merger, and the value of any fractional interests to which a former holder of Broadmark Common Stock was otherwise entitled was paid in cash.

 

Additionally, at the Effective Time, each award of performance restricted stock units (each a “Broadmark Performance RSU Award”) granted by Broadmark under its 2019 Stock Incentive Plan (the “Broadmark Equity Plan”) was automatically cancelled in exchange for the right to receive a number of shares of Ready Capital Common Stock equal to the product of (i) the number of shares of Broadmark Common Stock subject to such Broadmark Performance RSU Award based on the achievement of the applicable performance metric measured as of immediately prior to the Effective Time and (ii) the Exchange Ratio.

 

Furthermore, as of the Effective Time, each award of restricted stock units that was not a Broadmark Performance RSU Award granted pursuant to the Broadmark Equity Plan (each a “Broadmark RSU Award”) was assumed by Ready Capital and converted into an award of restricted stock units with respect to a number of shares of Ready Capital Common Stock equal to the product of (i) the total number of shares of Broadmark Common Stock subject to such Broadmark RSU Award as of immediately prior to the Effective Time and (ii) the Exchange Ratio (rounded to the nearest whole share), on the same terms and conditions as were applicable to such Broadmark RSU Award as of immediately prior to the Effective Time.

 

Furthermore, prior to the Effective Time, each outstanding warrant (whether designated as a public warrant, private warrant or otherwise) which represented the right to purchase shares of Broadmark Common Stock (each a “Broadmark Warrant”) that was outstanding as of the Effective Time remained outstanding and entitled each holder thereof to receive, upon exercise of such Broadmark Warrant, a number of shares of Ready Capital Common Stock equal to the product of (i) the total number of shares of Broadmark Common Stock that such holder would have been entitled to receive had such holder exercised such Broadmark Warrant immediately prior to the Effective Time and (ii) the Exchange Ratio. The per share price under each Broadmark Warrant was adjusted by dividing the per share purchase price under such Broadmark Warrant as of immediately prior to the Effective Time by the Exchange Ratio and rounding down to the nearest cent.

 

The unaudited pro forma condensed combined balance sheet gives effect to the Merger based on the historical balance sheets of Ready Capital and Broadmark as of March 31, 2023. The Ready Capital and Broadmark balance sheet information was derived from their unaudited consolidated balance sheets at March 31, 2023, that were included in their Quarterly Reports on Form 10-Q for the quarter then ended, which were each filed with the SEC on May 9, 2023.

 

 

The unaudited pro forma condensed combined statements of income are presented for the twelve months ended December 31, 2022, and for the three months ended March 31, 2023. The historical results of Ready Capital were derived from its audited consolidated statement of income for the twelve months ended December 31, 2022, that was included in its Annual Report on Form 10-K for the year then ended, filed on February 28, 2023, and its unaudited consolidated statement of income for the three months ended March 31, 2023, that was included in its Quarterly Report on Form 10-Q for the quarter then ended, filed on May 9, 2023. The historical results of Broadmark were derived from its audited consolidated statement of income for the twelve months ended December 31, 2022 that was included in its Annual Report on Form 10-K for the year then ended, filed on March 1, 2023, and its unaudited consolidated statement of income for the three months ended March 31, 2023, that was included in its Quarterly Report on Form 10-Q for the quarter then ended, filed on May 9, 2023.

 

The adjustments for the unaudited pro forma condensed combined balance sheet as of March 31, 2023, assume the Merger was completed on that date. The adjustments for the unaudited pro forma condensed combined statements of income for the year ended December 31, 2022, and for the unaudited pro forma condensed combined statements of income for the three months ended March 31, 2023, were prepared assuming the Merger was completed on January 1, 2022. The unaudited pro forma financial statements may not be indicative of the results of operations that would have occurred if the events reflected therein had been in effect on the dates indicated or the results which may be obtained in the future. In preparing the unaudited pro forma financial statements, no adjustments have been made to reflect the potential operating synergies and administrative cost savings or the costs of integration activities that could result from the combination of Ready Capital and Broadmark.

 

The following unaudited pro forma condensed combined financial statements have been prepared for illustrative purposes only and has been adjusted to reflect certain reclassifications in order to conform to Ready Capital’s financial statement presentation. The unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting for business combinations pursuant to ASC 805, Business Combinations, with Ready Capital considered the acquirer for accounting purposes. The statements are not necessarily indicative of the consolidated financial position or results of operations in future periods or the results that actually would have been realized had Ready Capital and Broadmark been combined during the specified periods. The following unaudited pro forma condensed combined financial information, including the notes thereto, are qualified in their entirety by reference to, and should be read in conjunction with, the historical financial statements referred to above and other information relating to Ready Capital and Broadmark contained in their respective Annual Reports on Form 10-K for the year ended December 31, 2022, Quarterly Reports on Form 10-Q for the quarter ended March 31, 2023, and any subsequent filings.

 

The estimated fair values for the assets acquired and liabilities assumed are preliminary and are subject to change during the measurement period as additional information related to the inputs and assumptions used in determining the fair value of the assets and liabilities becomes available and may result in variances to the amounts presented in the unaudited pro forma condensed combined balance sheet and statements of income.

 

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 2023

 

(In Thousands)		Ready Capital (Accounting Acquirer)				Broadmark (Accounting Acquiree)				Broadmark Financial Statement Adjustments (B)								Transaction Accounting Adjustments								Pro Forma Combined
Assets
Cash and cash equivalents		$	111,192			$	39,323				-							$	(14,711	)			C1			$	135,804
Restricted cash			49,632				-				-																49,632
Loans, net			3,128,197				784,881				-								7,632				C2				3,920,710
Loans, held for sale, at fair value			236,578				-				-																236,578
Paycheck Protection Program loans			146,557				-				-																146,557
Mortgage backed securities, at fair value			32,607				-				-																32,607
Loans eligible for repurchase from Ginnie Mae			64,293				-				-																64,293
Investment in unconsolidated joint ventures			114,169				-				-																114,169
Investments held to maturity			3,306				-				-																3,306
Purchased future receivables, net			10,568				-				-																10,568
Derivative instruments			13,773				-				-																13,773
Servicing rights			278,936				-				-																278,936
Real estate owned, held for sale			90,104				36,096				155,207				c				(33,997	)			C3				247,410
Other assets			202,690				5,538				18,405				a,b				(6,049	)			C4, C5				220,584
Assets of consolidated VIEs			7,054,861				-				-																7,054,861
Interest and fees receivable, net			-				12,902				(12,902	)			a												-
Investment in real property held for use, net			-				155,207				(155,207	)			c												-
Right-of-use assets			-				5,503				(5,503	)			b												-
Total Assets		$	11,537,463			$	1,039,450				-							$	(47,125	)						$	12,529,788
Liabilities
Secured borrowings			2,484,902				-				-																2,484,902
Paycheck Protection Program Liquidity Facility (PPPLF) borrowings			169,596				-				-																169,596
Securitized debt obligations of consolidated VIEs, net			5,300,967				-				-																5,300,967
Convertible notes, net			114,689				-				-																114,689
Senior secured notes, net			343,798				-				-																343,798
Corporate debt, net			663,623				-				97,932				d												761,555
Guaranteed loan financing			238,948				-				-																238,948
Contingent consideration			16,636				-				-																16,636
Liabilities for loans eligible for repurchase from Ginnie Mae			64,293				-				-																64,293
Derivative instruments			2,639				-				-																2,639
Dividends payable			47,308				4,612				-																51,920
Loan participations sold			55,967				-				-																55,967
Due to third parties			12,881				-				-																12,881
Accounts payable and other accrued liabilities			132,523				9,988				7,394				e				6,075				C6, C7				155,980
Lease liabilities			-				7,394				(7,394	)			e												-
Senior unsecured notes, net			-				97,932				(97,932	)			d												-
Total Liabilities		$	9,648,770			$	119,926			$	-							$	6,075							$	9,774,771
Preferred stock Series C, liquidation preference $25.00 per share			8,361																								8,361
Commitments & Contingencies
Stockholders' Equity
Ready Capital Preferred Stock Series E, liquidation preference $25.00 per share			111,378				-				-																111,378
Ready Capital Common Stock			11				-				-								6				C15				17
Broadmark Common Stock			-				131				-								(131	)			C14				-
Ready Capital Additional paid-in capital			1,687,631				-				-								659,189				C15				2,346,820
Broadmark Additional paid-in capital			-				1,215,933				-								(1,215,933	)			C14				-
Ready Capital Retained earnings (deficit)			(6,532	)			-				-								204,190				C1, C11				197,658
Broadmark Retained earnings (deficit)			-				(296,540	)			-								296,540				C14				-
Ready Capital Accumulated other comprehensive income (loss)			(12,353	)			-				-								-								(12,353	)
Total Ready Capital Corporation equity			1,780,135				919,524				-								(56,139	)							2,643,520
Non-controlling interests			100,197				-				-								2,939				C1, C11				103,136
Total Stockholders' Equity		$	1,880,332			$	919,524				-							$	(53,200	)						$	2,746,656
Total Liabilities, Redeemable Preferred Stock, and Stockholders' Equity		$	11,537,463			$	1,039,450				-							$	(47,125	)						$	12,529,788
Common shares outstanding			110,745,658				131,750,308				-								62,229,429								172,975,087
Book value per common share			15.07				6.98				-								-								14.64

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2023

 

(In Thousands, except share data)		Ready Capital (Accounting Acquirer)				Broadmark (Accounting Acquiree)				Broadmark Financial Statement Adjustments (B)								Transaction Accounting Adjustments								Pro Forma Combined
Interest income		$	217,573			$	19,264				-								-							$	236,837
Interest expense			(160,394	)			(2,116	)			-								426				C9				(162,084	)
Net interest income before provision for loan losses		$	57,179			$	17,148				-							$	426							$	74,753
Recovery of (provision for) loan losses			6,734				(1,701	)			-								-								5,033
Net interest income after recovery of (provision for) loan losses		$	63,913			$	15,447				-							$	426							$	79,786
Non-interest income
Residential mortgage banking activities			9,169				-				-								-								9,169
Net realized gain on financial instruments and real estate owned			11,575				-				(30	)			k				(33,997	)			C3				(22,452	)
Net unrealized gain (loss) on financial instruments			(11,728	)			-				-								-								(11,728	)
Servicing income			14,003				-				-								-								14,003
Income on purchased future receivables, net			540				-				-								-								540
Income (loss) on unconsolidated joint ventures			656				-												-								656
Other income			19,883				-				5,437				f,g				-								25,320
Fee income			-				4,572				(4,572	)			f				-								-
Real property revenue from operations			-				865				(865	)			g				-								-
Bargain purchase gain			-				-				-								221,840				C11				221,840
Total non-interest income		$	44,098			$	5,437			$	(30	)						$	187,843							$	237,348
Non-interest expense
Employee compensation and benefits			(25,139	)			(4,322	)			-								(1,457	)			C12				(30,918	)
Allocated employee compensation and benefits from related party			(2,326	)			-				-								-								(2,326	)
Variable expenses on residential mortgage banking activities			(5,485	)			-				-								-								(5,485	)
Professional fees			(5,717	)			-				(1,231	)			i				-								(6,948	)
Management fees - related party			(5,081	)			-				-								(2,135	)			C8				(7,216	)
Incentive fees - related party			(1,720	)			-				-								-								(1,720	)
Loan servicing expense			(9,963	)			-				-								-								(9,963	)
Transaction related expenses			(893	)			(4,920	)			-								(20,786.08	)			C1,C6,C7				(26,599.08	)
Other operating expenses			(14,318	)			-				(5,825	)			h,i,j				513				C10				(19,630	)
General and administrative			-				(3,221	)			3,221				i				-								-
Real property operating expenses and depreciation			-				(2,831	)			2,831				h				-								-
Goodwill impairment			-				-				-								-								-
Change in fair value of warrant liabilities			-				-				-								-								-
Gain on sale of real property			-				(30	)			30				k				-								-
Impairment on real property			-				(1,004	)			1,004				j				-								-
Total non-interest expense		$	(70,642	)		$	(16,328	)		$	30							$	(23,865.08	)						$	(110,805.08	)
Income before provision for income taxes		$	37,369			$	4,556				-							$	164,403.92				C13			$	206,328.92
Income tax provision			(391	)			-				-								-								(391	)
Net income		$	36,978			$	4,556				-							$	164,403.92							$	205,937.92
Less: Dividends on preferred stock			1,999				-				-								-								1,999
Less: Net income attributable to non-controlling interest			1,835				-				-								2,822								4,657
Net income attributable to Ready Capital Corporation		$	33,144			$	4,556				-							$	161,581.92							$	199,281.92
Earnings per common share - basic		$	0.30			$	0.03				-								-							$	1.15
Earnings per common share - diluted		$	0.29			$	0.03				-								-							$	1.09
Weighted-average shares outstanding
Basic			110,672,939				131,727,381				-								62,229,429								172,902,368
Diluted			121,025,909				132,046,269				-								62,229,429								183,255,338

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2022

 

(In Thousands, except share data)		Ready Capital (Accounting Acquirer)				Broadmark (Accounting Acquiree)				Broadmark Financial Statement Adjustments (B)								Transaction Accounting Adjustments								Pro Forma Combined
Interest income		$	671,170				83,410				-								-							$	754,580
Interest expense			(400,774	)			(8,638	)			-								1,705				C9				(407,707	)
Net interest income before provision for loan losses		$	270,396			$	74,772				-							$	1,705							$	346,873
Recovery of (provision for) loan losses			(34,442	)			(38,266	)			-								-								(72,708	)
Net interest income after recovery of (provision for) loan losses		$	235,954			$	36,506				-							$	1,705							$	274,165
Non-interest income
Residential mortgage banking activities			23,973				-				-								-								23,973
Net realized gain on financial instruments and real estate owned			53,764				-				984				k				(33,997	)			C3				20,751
Net unrealized gain (loss) on financial instruments			67,952				-				1,813				l				-								69,765
Servicing income			45,925				-				-								-								45,925
Income on purchased future receivables, net			5,490				-				-								-								5,490
Income (loss) on unconsolidated joint ventures			11,661				-												-								11,661
Other income			50,756				-				25,467				f,g				-								76,223
Fee income			-				22,668				(22,668	)			f				-								-
Real property revenue from operations			-				2,799				(2,799	)			g				-								-
Bargain purchase gain			-				-				-								229,593				C12				229,593
Total non-interest income		$	259,521			$	25,467			$	2,797							$	195,596							$	483,381
Non-interest expense
Employee compensation and benefits			(99,226	)			(16,935	)			-								(1,168	)			C13				(117,329	)
Allocated employee compensation and benefits from related party			(9,549	)			-				-								-								(9,549	)
Variable expenses on residential mortgage banking activities			(4,340	)			-				-								-								(4,340	)
Professional fees			(18,093	)			-				(3,367	)			i				-								(21,460	)
Management fees - related party			(19,295	)			-				-								(8,617	)			C8				(27,912	)
Incentive fees - related party			(3,105	)			-				-								-								(3,105	)
Loan servicing expense			(40,036	)			-				-								-								(40,036	)
Transaction related expenses			(13,633	)			-				-								(20,786.08	)			C1,C6,C7				(34,419.08	)
Other operating expenses			(55,302	)			-				(23,894	)			h,i,j				678				C11				(78,518	)
General and administrative			-				(13,300	)			13,300				i				-								-
Real property operating expenses and depreciation			-				(6,365	)			6,365				h				-								-
Goodwill impairment			-				(136,965	)			-								136,965				C10				-
Change in fair value of warrant liabilities			-				1,813				(1,813	)			l				-								-
Gain on sale of real property			-				984				(984	)			k				-								-
Impairment on real property			-				(7,596	)			7,596				j				-								-
Total non-interest expense		$	(262,579	)		$	(178,364	)		$	(2,797	)						$	107,071.92							$	(336,668.08	)
Income before provision for income taxes		$	232,896			$	(116,391	)			-							$	304,372.92				C14			$	420,877.92
Income tax provision			(29,733	)			-				-								-								(29,733	)
Net income		$	203,163			$	(116,391	)			-							$	304,372.92							$	391,144.92
Less: Dividends on preferred stock			7,996				-				-								-								7,996
Less: Net income attributable to non-controlling interest			8,900				-				-								2,845								11,745
Net income attributable to Ready Capital Corporation		$	186,267			$	(116,391	)			-							$	301,527.92							$	371,403.92
Earnings per common share - basic		$	1.73			$	(0.88	)			-								-							$	2.20
Earnings per common share - diluted		$	1.66			$	(0.88	)			-								-							$	2.07
Weighted-average shares outstanding
Basic			106,878,139				132,841,196				-								62,229,429								169,107,568
Diluted			117,193,958				132,841,196				-								62,229,429								179,423,387

 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

(A) Basis of Presentation

 

Under the terms of the Merger Agreement, in connection with the Merger, each outstanding share of Broadmark Common Stock (other than shares held by Ready Capital or RCC Merger Sub or by any wholly owned subsidiary of Ready Capital, RCC Merger Sub or Broadmark, which were automatically cancelled and retired and ceased to exist) was converted into the right to receive from Ready Capital 0.47233 newly issued shares of Ready Capital Common Stock. No fractional shares of Ready Capital Common Stock were issued in the Merger, and the value of any fractional interests to which a former holder of Broadmark Common Stock was otherwise entitled was paid in cash.

 

On May 31, 2023, Ready Capital completed the Merger and issued 62.2 million shares of Ready Capital Common Stock to the former holders of Broadmark Common Stock. The total purchase price for the Merger of $637.2 million consisted of the Ready Capital Common Stock issued based on a share price of $10.24, or the opening price of a share of Ready Capital Common Stock on the acquisition date, and cash paid in lieu of fractional shares.

 

Upon the closing of the Merger and after giving effect to the issuance of shares of Ready Capital Common Stock as consideration in the Merger, Ready Capital’s historical stockholders owned approximately 64% of the outstanding Ready Capital Common Stock, while historical Broadmark stockholders owned approximately 36% of the outstanding Ready Capital Common Stock.

 

		Calculation of Bargain Purchase Gain (in thousands, except share and per share data)
Net asset value of Broadmark		$	919,524
Fair value adjustments(1)		$	(60,455	)
Fair value of net assets acquired		$	859,069
Shares of Ready Capital Common Stock issued			62,229,429
Fair value per share of Ready Capital Common Stock(2)		$	10.24
Total consideration transferred based on fair value of Ready Capital Common Stock to be issued		$	637,229
Bargain purchase gain		$	221,840

 

(1)

Relates to fair value adjustments to the assets and liabilities acquired, which are primarily comprised of a $34 million impairment to Real estate owned, held for sale and $28 million in transaction costs to be paid by Ready Capital and Broadmark.

 

(2)

The opening share price of Ready Capital Common Stock as of May 31, 2023.

 

 

(B) Accounting Presentation and Policies

 

Financial Statement Reclassifications

 

The unaudited pro forma condensed combined financial information has been compiled in a manner consistent with the accounting policies adopted by Ready Capital. Certain balances from the consolidated financial statements of Broadmark were reclassified to conform the presentation to that of Ready Capital.

 

The following Balance Sheet reclassifications have been made from Broadmark’s balance sheet information derived from its unaudited balance sheet at March 31, 2023, that was included in its Quarterly Report on Form 10-Q for the quarter then ended, which was filed with the Securities and Exchange Commission on May 9, 2023:

 

Assets:

 

a)

Reclassified Interest and fees receivable, net to Other assets

 

b)

Reclassified Right-of-use assets to Other assets

 

c)

Reclassified Investment in real property held for use, net to Real estate owned, held for sale

 

Liabilities:

 

d)

Reclassified Senior unsecured notes, net to Corporate debt, net

 

e)

Reclassified Lease liabilities to Accounts payable and other accrued liabilities

 

The following Statement of Income reclassifications have been made from Broadmark’s income statement information derived from its audited statement of income for the twelve months ended December 31, 2022 that was included in its Annual Report on Form 10-K for the year then ended, which was filed with the Securities and Exchange Commission on March 1, 2023, and its unaudited statement of income for the three months ended March 31, 2023, that was included in its Quarterly Report on Form 10-Q for the quarter then ended, which was filed with the Securities and Exchange Commission on May 9, 2023:

 

f)

Reclassified Fee income to Other income

 

g)

Reclassified Real property revenue from operations to Other income

 

h)

Reclassified Real property operating expenses and depreciation to Other operating expenses

 

i)

Reclassified General and administrative to Other operating expenses and professional fees

 

j)

Reclassified Impairment on real property to Other operating expenses

 

k)

Reclassified Gain on sale of real property to Net realized gain on financial instruments and real estate owned

 

l)

Reclassified Change in fair value of warrant liabilities to Net unrealized gain (loss) on financial instruments

 

 

(C) Transaction Accounting Adjustments

 

The unaudited pro forma financial statements as of March 31, 2023, and for the three months then ended reflect the following adjustments:

 

C1)

Adjustment relates to the recognition and payment of $14.7 million transaction costs related to the Merger paid by Ready Capital, the accounting acquirer, allocated, $14.5 million to common stockholders and $0.2 million to Non-controlling interests.

 

C2)

Adjustment relates to $7.6 million adjustments to loans, held for investment to measure the acquired assets at fair value.

 

C3)

Adjustment relates to $34.0 million impairments on real estate investments to measure the acquired assets at fair value.

 

C4)

Adjustment relates to elimination of $1.7 million deferred financing costs associated with the execution of a revolving credit facility and $2.6 million fixed assets such as leasehold improvements, computer and furniture because they would not benefit Ready Capital post the merger.

 

C5)

Adjustment relates to $1.8 million adjustments to right of use assets for Broadmark’s lease. Ready Capital does not plan to use Broadmark’s office space, but sublease the space. Therefore, $1.8 million was reduced based on projected recoverability of lease obligation.

 

C6)

Adjustment relates to $ 6.3 million accrual of the severance cost of Broadmark employees which will be paid subsequent to the Merger by Ready Capital.

 

C7)

Adjustment relates to $0.2 million adjustments to CECL reserve on unfunded portion of Broadmark loans.

 

C8)

Adjustment relates to the impact of the management fees under the management agreement (the “Management Agreement”) between Ready Capital and its external manager (the “Ready Capital Manager”). Pursuant to the terms of the Management Agreement, the Ready Capital Manager is paid a management fee calculated and payable quarterly in arrears equal to 1.5% per annum of Ready Capital’s stockholders’ equity (as defined in the Management Agreement) up to $500 million and 1.00% per annum of stockholders’ equity in excess of $500 million.

 

C9)

Adjustment relates to $426 thousand reversal of amortization of deferred financing costs associated the execution of a revolving credit facility and an at-the-market equity offering program for the three months ended March 31, 2023 as there were no credit facilities assumed by Ready Capital upon the Merger.

 

C10)

Adjustment relates to reversal of $0.5 million of depreciation expenses on real property held for use due to the accounting reclassification of Real property held for use, net to Real estate owned, held for sale.

 

C11)

Adjustment relates to bargain purchase gain from the Merger.

 

C12)

Adjustment relates to additional compensation expenses for Broadmark RSU Awards which were assumed by Ready Capital upon the Merger.

 

 

C13)

Transaction accounting adjustments are not expected to have any tax provision impact as all activities will occur under subsidiaries of the REIT.

 

C14)

Adjustment relates to the elimination of Broadmark’s capital balances, including Broadmark Common Stock, Additional paid-in capital and historical retained deficits.

 

C15)

Adjustment relates to the issuance of Ready Capital Common Stock and additional paid-in capital.

 

The unaudited pro forma condensed combined statement of income for the twelve months ended December 31, 2022, reflects the following adjustments:

 

C8)

Adjustment relates to the impact of the management fees under the Management Agreement. Pursuant to the terms of the Management Agreement, the Ready Capital Manager is paid a management fee calculated and payable quarterly in arrears equal to 1.5% per annum of Ready Capital’s stockholders’ equity (as defined in the Management Agreement) up to $500 million and 1.00% per annum of stockholders’ equity in excess of $500 million.

 

C9)

Adjustment relates to $1.7 million reversal of amortization of deferred financing costs associated the execution of a revolving credit facility and an at the market equity offering program for the period ended December 31, 2022 as there were no credit facilities assumed by Ready Capital upon the Merger.

 

C10)

Adjustment relates to reversal of $137.0 million of goodwill impairment relating to Broadmark lending business as the combined company would not have goodwill on its balance sheet as of January 1, 2023.

 

C11)

Adjustment relates to reversal of $0.7 million of depreciation expenses on real property held for use due to the accounting reclassification of Real property held for use, net to Real estate owned, held for sale.

 

C12)

Adjustment relates to bargain purchase gain from the Merger.

 

C13)

Adjustment relates to additional compensation expenses for Broadmark RSU Awards which were assumed by Ready Capital upon the Merger.

 

C14)

Transaction accounting adjustments are not expected to have any tax provision impact as all activities will occur under subsidiaries of the REIT.

 

 

Earnings Per Share

 

The unaudited pro forma adjustment to shares outstanding used in the calculation of basic and diluted earnings per share are based on the combined basic and diluted weighted average shares, after giving effect to the Exchange Ratio, as follows (in thousands, except share data):

 

		For the year ended December 31, 2022				For the quarter ended March 31, 2023
Numerator:
Net income attributable to common stockholders - Ready Capital		$	186,267			$	33,144
Net income (loss) attributable to common stockholders - Broadmark			(116,391	)			4,556
Pro Forma Merger Adjustments			301,527				161,581
Net income attributable to common stockholders - Combined Company		$	371,403			$	199,281
Denominator:
Ready Capital weighted average common shares outstanding - basic			106,878,139				110,672,939
Ready Capital Common Stock issued to Broadmark stockholders			62,229,429				62,229,429
Pro forma weighted average common shares outstanding – basic			169,107,568				172,902,368
Effect of dilutive shares			10,315,819				10,352,970
Pro forma weighted average common shares outstanding - diluted			179,423,387				183,255,338
Basic per common share data:
Net income per weighted average common share		$	2.20			$	1.15
Diluted per common share data:
Net income per weighted average common share		$	2.07			$	1.09

 

 

v3.23.2

Cover	May 31, 2023
Document Information [Line Items]
Document Type	8-K/A
Amendment Flag	false
Document Period End Date	May 31, 2023
Entity File Number	001-35808
Entity Registrant Name	READY CAPITAL CORPORATION
Entity Central Index Key	0001527590
Entity Tax Identification Number	90-0729143
Entity Incorporation, State or Country Code	MD
Entity Address, Address Line One	1251 Avenue of the Americas
Entity Address, Address Line Two	50th Floor
Entity Address, City or Town	New York
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	10020
City Area Code	212
Local Phone Number	257-4600
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
Common Stock, $0.0001 par value per share
Document Information [Line Items]
Title of 12(b) Security	Common Stock, $0.0001 par value
Trading Symbol	RC
Security Exchange Name	NYSE
Series C Preferred Stock [Member]
Document Information [Line Items]
Title of 12(b) Security	6.25% Series C Cumulative Convertible Preferred Stock, $0.0001 par value per share
Trading Symbol	RC PRC
Security Exchange Name	NYSE
Series E Preferred Stock [Member]
Document Information [Line Items]
Title of 12(b) Security	6.50% Series E Cumulative Redeemable Preferred Stock, $0.0001 par value per share
Trading Symbol	RC PRE
Security Exchange Name	NYSE
7.00% Convertible Senior Notes due 2023
Document Information [Line Items]
Title of 12(b) Security	7.00% Convertible Senior Notes due 2023
Trading Symbol	RCA
Security Exchange Name	NYSE
6.20% Senior Notes due 2026
Document Information [Line Items]
Title of 12(b) Security	6.20% Senior Notes due 2026
Trading Symbol	RCB
Security Exchange Name	NYSE
5.75% Senior Notes due 2026
Document Information [Line Items]
Title of 12(b) Security	5.75% Senior Notes due 2026
Trading Symbol	RCC
Security Exchange Name	NYSE

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