Executive Summary

GAAP EPS was $0.47, driven by a $102.5M bargain purchase gain from the UDF IV acquisition, while distributable EPS was a loss of $(0.09); book value per share held flat at $10.61 .
Management reiterated a defensive, late‑cycle posture: accelerated liquidation of non‑core CRE assets, collapse of static CLOs to raise liquidity, and reinvestment into core multifamily to rebuild net interest margin; dividend expected to remain at $0.125 until earnings improve .
SBL originations were $387M (including $343M SBA 7(a)), with gain‑on‑sale premiums around 10%; core CRE levered yield of ~10% and cash yield ~6.7% underpin expected NIM recovery post reinvestment .
Street consensus (SPGI) for Q1 2025 “Primary EPS” was +$0.12*, while “actual” was −$0.09*; “Revenue” estimate $207.4M* vs “actual” $42.0M*—a significant miss on these SPGI-defined metrics. Note: GAAP EPS of $0.47 was not the Street “Primary EPS” basis here* [Values retrieved from S&P Global].

What Went Well and What Went Wrong

What Went Well

Book value per share stabilized QoQ at $10.61; accretion from share repurchases (+$0.11) and UDF IV merger (+$0.14) offset dividend shortfall: “book value per share quarter‑over‑quarter was flat at $10.61 per share” .
Non‑core bridge loan liquidation exceeded targets (2x): $51M liquidated at 102% of mark, generating $28M liquidity; plan to reduce non‑core portfolio to ~$270M in Q2 and ~$210M by YE 2025 .
Closed $220M senior secured notes (9.375% due 2028) and subsequently upsized by $50M, extending maturities and enhancing liquidity; collapsed three CRE CLOs generating $78M liquidity .

Management quotes:

“Despite this challenging macroeconomic environment, the Company continues to take decisive actions to reset the balance sheet and restore profitability.”
“We believe the plan will be executed in 2025 with accretion in 2026.”

What Went Wrong

Distributable EPS loss of $(0.09) as net interest income fell to $14.6M; movement of non‑core assets to non‑accrual produced cash yield of 1.3% and realized losses of $20.1M on asset sales (reserved previously) .
Core portfolio delinquency increased: 60+ day DQ rose to 4.1% (from 2.0% in Q4’24); non‑accrual ticked up to 3.7% in core .
Continued pressure in static CLOs: three deals currently failing interest coverage tests; leverage shifted slightly from non‑recourse to recourse as warehouse advance rates replaced lower CLO advance rates .

Financial Results

Income Statement Snapshot and EPS

Metric ($USD Millions unless noted)	Q1 2024	Q4 2024	Q1 2025
Interest Income	$232.4	$204.0	$155.0
Interest Expense	$(183.8)	$(153.9)	$(140.5)
Net Interest Income (pre recovery/provision)	$48.5	$50.1	$14.5
Recovery/(Provision) of Loan Losses	$26.5	$(285.0)	$109.6
Net Interest Income (post recovery/provision)	$75.1	$(235.0)	$124.1
Total Non‑Interest Income/(Expense)	$(102.6)	$27.0	$25.7
Total Non‑Interest Expense	$(78.3)	$(106.9)	$(72.6)
Income (Loss) Before Taxes	$(105.8)	$(314.8)	$77.2
Net Income (Loss)	$(74.2)	$(314.8)	$82.0
GAAP EPS – Basic	$(0.44)	$(1.80)	$0.47
GAAP EPS – Diluted	$(0.44)	$(1.80)	$0.46
Distributable EPS – Basic/Diluted	$0.29	$(0.03)	$(0.09)

Notes: Bargain purchase gain of $102.5M recognized in Q1 2025 (UDF IV) . Dividend declared $0.125 in Q1 .

Segment Breakdown (Q1 2025)

Segment ($USD Thousands)	Interest Income	Interest Expense	Net Interest Income pre Recovery/Provision	Recovery/(Provision)	Net Interest Income post Recovery/Provision	Non‑Interest Income/(Loss)	Non‑Interest Expense	Income Before Taxes	Total Assets
LMM Commercial Real Estate	$124,973	$(120,354)	$4,619	$117,941	$122,560	$(114,475)	$(27,763)	$(19,678)	$7,897,270
Small Business Lending	$29,994	$(20,112)	$9,882	$(8,373)	$1,509	$36,449	$(30,060)	$7,898	$1,510,635
Corporate‑Other	—	—	—	—	—	$103,762	$(14,779)	$88,983	$382,764
Consolidated	$154,967	$(140,466)	$14,501	$109,568	$124,069	$25,736	$(72,602)	$77,203	$9,790,669

KPIs and Portfolio Metrics

KPI	Q1 2024	Q4 2024	Q1 2025
LMM CRE Originations ($M)	$98.1	$217.3	$79.0
SBL Originations ($M)	$200.4	$343.3	$387.0 (incl. $343M SBA 7(a))
Core CRE 60+ DQ (%)	2.0%	2.0%	4.1%
Book Value per Share ($)	$13.44	$10.61	$10.61
Shares Repurchased (M)	—	5.8 at $7.35 (Q4 commentary)	3.4 at $5.02
Senior Secured Notes Issued ($M)	—	$220 (Dec/Mar)	$220; +$50 subsequent
CLOs Collapsed (Liquidity)	—	Plan initiated	Three collapsed; $78M liquidity
Core CRE Levered Yield / Cash Yield	—	10.8% / —	~10.2% / ~6.7%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Dividend per common share	Near term (2025)	Cut to $0.125 in Q4’24; intent to grow over time	Expected to remain at current $0.125 until earnings warrant an increase	Maintained
Non‑Core CRE Portfolio	Q2 2025; YE 2025	Liquidation plan underway (Q4)	Reduce to ~$270M in Q2; ~$210M by YE 2025	Accelerated execution
CLO Liability Mgmt	Q2/Q3 2025	Collapse callable static CLOs; reissue	Expect to collapse two additional deals by late Q2/early Q3	Maintained/Executing
SBA Volume	FY 2025	Platform capacity $1.5B–$2.0B	Expect below $1.5B; near‑term $1.0–$1.2B; premiums ~10%	Lower near term volumes; premiums maintained
Freddie Mac SBL Pipeline	Q2 2025	Muted in Q1 due to market process tightening	~$40–$45M pipeline in Q2	Improved
Corporate Debt Maturities	Through 2026	$650M total; plan to refinance/extend	Continued focus on extending maturities; markets receptive; secured options if needed	Maintained

Earnings Call Themes & Trends

Topic	Q3 2024 (Prior‑2)	Q4 2024 (Prior‑1)	Q1 2025 (Current)	Trend
Macro/Tariffs/Recession	Stabilization in CRE; tailwinds from rate cuts	Late‑cycle pressures; aggressive reserving	“Tariff implementations, declining consumer confidence and increased recession expectations provide headwinds”	Macro headwinds, sector bifurcation
Multifamily Fundamentals	Stabilizing rents/values; delinquencies plateau	Core metrics supportive of NIM recovery	Multifamily relatively resilient; rents up ~1% QoQ; core DQ 60+ at 4.1%	Stabilizing assets, higher DQs
Non‑Core Liquidation	72% of repositioning complete; ongoing sales	Aggressive liquidation planned	Exceeded Q1 targets; 2x plan; roadmap to ~$270M Q2, ~$210M YE	Accelerating execution
Portland Mixed‑Use (Ritz)	Completed construction; strategy pivot to ownership and serial exit	Marked down; earnings drag noted	Levered; stabilize hotel/office first; condos 2–3 year sell‑out	Sequential stabilization, long tail
SBA Policy/Volumes	Record growth; dual‑channel strategy	Continued growth; FY25 $1.5B target	Near‑term moderation; $1.0–$1.2B; premiums ~10%	Near‑term dip, structurally constructive
CLO/Capital Markets	Plan to call/reissue; reduce costs	Collapse callable static CLOs	Collapsed three deals; more in Q2/Q3; warehouse shift improves yield	Progressing
Share Repurchases & Liquidity	Consider buybacks; strong cash	$150M program; 5.8M shares bought in Q4	3.4M shares in Q1; ongoing evaluation	Ongoing
Dividend	Covered ex‑losses; outlook to cover ~1.5x	Cut to $0.125; intent to grow	Expected to remain at $0.125 near term	Maintained near term

Management Commentary

“Book value per share quarter‑over‑quarter was flat at $10.61 per share… we benefited this quarter from an $0.11 per share increase from repurchase of 3.4 million shares and $0.14 per share from closing of the UDF merger.”
“We surpassed first quarter liquidation targets by close to 2x… liquidated $51 million at a 102% premium to our mark, generating $28 million of liquidity.”
“Absent further material deterioration… we expect our dividend to remain at its current level until the earnings profile warrants an increase.”
“Net interest income declined to $14.6 million… movement of non‑core assets to nonaccrual generated a cash yield of 1.3%… Realized losses… $20.1 million, all adequately reserved previously.”

Q&A Highlights

Non‑core exits on track despite April volatility; multiple PSAs in progress; pricing/timeline intact .
Near‑term earnings to resemble Q1; improvement to begin after reinvestment of equity from liquidations; OpEx right‑sizing a lever; debt refi costs a headwind .
CLO collapses increase advance rates and liquidity; slight leverage uptick; NOI pressures and portfolio modifications drove interest coverage test failures .
Portland asset to remain levered; sequential exit plan: hotel/office first, condos over 2–3 years; basis supports recoveries .
SBA volumes expected $1.0–$1.2B near term; gain‑on‑sale premiums around ~10%; policy changes constructive; warehouse approvals pending .
Debt markets receptive; balanced unsecured/secured refi strategy; ample unencumbered collateral .

Estimates Context

Metric	Q4 2024 Estimate*	Q4 2024 Actual*	Q1 2025 Estimate*	Q1 2025 Actual*
Primary EPS Consensus Mean*	$0.2102*	$(0.03)*	$0.1221*	$(0.09)*
Revenue Consensus Mean* ($USD)	$228.64M*	$(201.16)M*	$207.43M*	$42.03M*

Additional context:

Target Price Consensus Mean*: $3.69 (FY 2024/2025) with 4 estimates [GetEstimates].
FY 2025 EPS Normalized Consensus Mean*: −$0.96; FY 2025 Revenue Consensus Mean*: $513.5M [GetEstimates].

Values retrieved from S&P Global.

Implication: RC significantly missed SPGI’s “Primary EPS” and “Revenue” consensus in Q1 2025 on this definition, while GAAP EPS benefited from one‑time bargain purchase gains .

Key Takeaways for Investors

Near‑term earnings likely remain subdued until equity from non‑core liquidations is redeployed into high‑yield core CRE; watch Q2 liquidation progress and reinvestment cadence as the primary NIM catalyst .
Dividend at $0.125 appears supported near term; management intends to hold at this level until earnings improve—monitor asset sale execution and SBA volumes for inflection .
Liquidity actions (CLO collapses, secured notes) are de‑risking the liability stack; next CLO collapses (late Q2/early Q3) and corporate refi timeline are key events .
Core multifamily fundamentals are stabilizing, but core 60+ DQ increased to 4.1%; credit migration and modification efficacy will influence future NIM recovery .
SBL remains a structural earnings lever with ~10% premiums; near‑term volume moderation likely, but platform capacity and policy tailwinds support medium‑term growth .
UDF IV integration boosted equity and GAAP EPS via bargain purchase; ongoing liquidity generation and credit performance from the portfolio will determine sustained contribution .
Trading setup: execution on asset sales, CLO/liability milestones, and SBA volume updates are near‑term catalysts; tone remains constructive but execution‑dependent amid macro volatility .

Appendix: Additional Balance Sheet and ROE

Metric	Q4 2024	Q1 2025
Total Assets ($USD M)	$10,141.9	$9,976.5
Total Liabilities ($USD M)	$8,197.8	$7,926.9
Total Equity ($USD M)	$1,935.7	$2,041.2
GAAP ROE (%)	−62.4%	18.2%
Distributable ROE (%)	−0.3%	−3.1%

Citations:

Ready Capital Corp (RC)·Q1 2025 Earnings Summary