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RC

Ready Capital Corp (RC)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 results: GAAP loss per common share from continuing operations of $(0.31); distributable loss per common share of $(0.14); distributable loss before realized losses of $(0.10) .
  • Management executed a $494M bulk sale of legacy multifamily bridge loans (net proceeds $85M) and completed sale of the residential mortgage banking segment to drive liquidity and reposition toward core multifamily bridge originations .
  • Book value per share was $10.44; 8.5M shares repurchased at $4.41 average, adding ~$0.31 to BVPS; total leverage 3.5x; recourse leverage 1.5x .
  • Outlook: re-enter CRE originations in Q3, ramp SBA/USDA volumes (USDA $300M annual target), and stabilize the Portland mixed-use asset; dividend expected to be maintained at $0.125 pending earnings recovery .

What Went Well and What Went Wrong

  • What Went Well

    • “First bulk sale” of $494M legacy bridge loans eliminated 2021 vintage syndicated loans; management cites immediate EPS uplift (+$0.05/quarter) from removing negative carry and +$0.02/quarter from reinvestment over 3–4 months .
    • Warehouse capacity expanded: two SBA lines (+$75M) approved; $100M USDA facility closed with a second $100M expected in Q3, enabling USDA ramp to $300M annual target .
    • Shareholder capital actions: 8.5M shares repurchased at $4.41 average, adding ~$0.31 to BVPS; book value per share $10.44 .

  • What Went Wrong

    • Portland mixed-use asset carried a quarterly negative drag of ~$$5.3M (≈$0.03/share); ownership via deed-in-lieu (July 21) increases near-term costs pending stabilization (hotel RevPAR $192; office 23% leased; retail 100% occupied) .
    • Higher valuation allowance ($39.7M) tied to pricing adjustments on the bulk sale; combined provision and valuation allowance increased ~$48.4M in Q2 .
    • SBA originations slowed (capital constraints pending SBA warehouse approvals), reducing gain-on-sale contribution; small-business originations were $216M vs prior quarters .

Financial Results

Metric ($USD Millions unless noted)Q2 2024Q1 2025Q2 2025
Interest income$234.119 $154.967 $152.735
Interest expense$(183.167) $(140.466) $(135.837)
Net interest income before (prov./recov.)$50.952 $14.501 $16.898
(Provision)/Recovery of loan losses$18.871 $109.568 $(8.640)
Net interest income after (prov./recov.)$69.823 $124.069 $8.258
Total non-interest income (expense)$(82.393) $25.736 $(26.671)
Income tax benefit$48.579 $5.207 $39.939
Net income (loss) from continuing ops$(31.427) $82.410 $(48.751)
EPS from continuing ops – diluted ($)$(0.21) $0.46 $(0.31)

Consensus vs Actual (S&P Global):

MetricQ2 2025 EstimateQ2 2025 Actual
Primary EPS Consensus Mean$0.10*$(0.14)*
Revenue Consensus Mean$169.3M*$(12.0)M*
Primary EPS – # of Estimates5*—
Revenue – # of Estimates3*—

Values retrieved from S&P Global.*

Segment results (Q2 2025):

Segment ($USD Millions)Interest incomeInterest expenseNet interest after provisionTotal non-interest income (loss)Total non-interest expenseIncome (loss) before taxes
LMM Commercial Real Estate$122.268 $(116.088) $1.034 $(36.557) $(27.521) $(63.044)
Small Business Lending$30.467 $(19.749) $7.224 $24.126 $(27.723) $3.627
Corporate-Other———$(14.240) $(15.033) $(29.273)
Consolidated$152.735 $(135.837) $8.258 $(26.671) $(70.277) $(88.690)

Key KPIs:

KPIQ2 2024Q1 2025Q2 2025
Total loan originations$473.7M $466.1M $532.1M
SBA 7(a) originations—$343.0M $216.1M
USDA originations—$3.0M $41.9M sold at ~9.7% premium
Book value per share$12.97 $10.61 $10.44
Shares repurchased (quarter)—3.4M @ $5.02 avg 8.5M @ $4.41 avg
Core portfolio 60+ day delinquency2.0% 4.1% 4.6%
Non-core portfolio 60+ day delinquency23.9% 62.7% 67.6%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per common shareNear-term (Q3 2025)Maintain $0.125 until earnings profile warrants increase Maintain $0.125; board to evaluate as earnings bridge materializes Maintained
CRE originations strategyH2 2025Execute defensive repositioning; ramp new production as liquidity improves Re-enter origination market in Q3 with high-quality multifamily bridge; target retained yields ~13–15% (SOFR+275–300bp lend; AAA CLO <150bp) Raised/lined to start in Q3
Non-core liquidation2025–2026Reduce non-core; targets laid out in Q1 supplement 78% of Q2 targets met; bulk sale executed; combined non-core+REO down ~25% YTD; continue minimizing financial drag Accelerated execution
SBA 7(a) volumesH2 2025Below $1.5B annual near-term; warehouse approvals pending Return to >$325M/quarter; volumes to ramp as warehouse approvals and securitization/freeing capacity progress Raised
USDA volumes2025Platform ramp; sizing to come $300M annual target with $100M facility closed and second $100M anticipated Raised
Portland mixed-use asset2025–2026Expect sequential exits upon stabilization; significant negative carry Ownership taken; stabilize hotel/resi/office; expect ongoing ~$5.3M quarterly drag near-term; reduce via leasing/sales Operational plan clarified

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Core vs non-core portfolio bifurcationBifurcation and heavy reserving to ring-fence problem loans; plan to liquidate non-core over 7–10 quarters Bulk sale completed; non-core+REO down ~25% YTD; minimize financial drag Improving execution
Portland mixed-use stabilizationMoved to nonaccrual; carry expense ~$0.05/share; plan to take title & sequential exits Title obtained; hotel RevPAR $192; office 23% leased; retail 100%; quarterly drag $$5.3M ($0.03/share) Stabilization underway, drag persists
SBA program/warehouse capacityExpect moderation, below $1.5B; pending SBA warehouses; gain-on-sale ~10% Two SBA lines approved (+$75M); ramp expected back half; >$325M/quarter target in time Capacity improving
USDA build-outMadison One acquired; ramp to come $100M facility closed; $100M expected; $300M annual target Scaling up
CLO liability managementPlan to collapse/reissue, improve advance rates, generate liquidity Collapsed two securitizations; $71M liquidity; improved financing costs Balance-sheet progress
Dividend policyCut to $0.125 to align with cash earnings, expected growth later Maintain $0.125 pending earnings recovery; Board monitoring Stable near-term

Management Commentary

  • “As we begin to emerge from this CRE cycle, several items were completed since the first quarter which we believe will restore us to profitability.” – Thomas Capasse, CEO .
  • “Selling $494 million of legacy multifamily bridge assets… is strategically significant, eliminating 100% of the 2021 vintage syndicated loans… immediate increase of $0.05 per share per quarter… and longer term, an additional $0.02 per share per quarter from reinvestment.” – Thomas Capasse .
  • “Distributable earnings were a loss of $0.14 per common share and $0.10 per common share excluding realized losses on asset sales.” – Andrew Ahlborn, CFO .
  • “We completed the sale of our residential mortgage banking business, GMFS… the transaction resulted in a cumulative loss and disposition of $3 million.” – Andrew Ahlborn .

Q&A Highlights

  • Earnings Bridge: CFO detailed a path from normalized loss of ~$0.04/share to positive via removal of negative carry (+$0.05), reinvestment (+$0.02), SBA/USDA ramp (+$0.02–$0.05), partly offset by higher refinancing costs (–$0.03 to –$0.05) .
  • Portland Carry and CapEx: Quarterly drag ~$$5.3M; efforts to lower financing cost; TI estimates $150–$200/sf for office (≈70k sf to lease) with “good news” investment; stabilization expected to reduce drag .
  • Bulk Sale Pricing/Proceeds: Price ~77% of UPB; net proceeds ~$85M after warehouse/CLO payoffs; removal of sponsor concentrations (GVA, Tides) .
  • Dividend Debate: Investors questioned suspending dividend; management expects to maintain $0.125 as earnings bridge materializes; Board monitoring .

Estimates Context

  • EPS vs Consensus: Q2 2025 EPS (distributable) $(0.14) vs consensus $0.10 – MISS; 5 estimates [Primary EPS Consensus Mean: 0.10*, actual: –0.14*; Primary EPS – # of Estimates: 5*].
  • Revenue vs Consensus: Q2 2025 revenue $(12.0)M vs consensus $169.3M – MISS; 3 estimates [Revenue Consensus Mean: $169.3M*, actual: –$12.016M*; Revenue – # of Estimates: 3*].
    Values retrieved from S&P Global.*

Where estimates may adjust:

  • Lower SBA volumes and higher valuation allowance should prompt downward revisions to near-term revenue/earnings; bulk sale’s removal of negative carry and reinvestment could improve H2 trajectory .

Key Takeaways for Investors

  • Near-term EPS drag driven by Portland, valuation allowance on bulk sale, and constrained SBA volumes; removal of negative carry (+$0.05/qtr) and reinvestment (+$0.02/qtr) provide visible H2 uplift .
  • Liquidity actions (CLO collapses $71M, $50M senior secured draw, share repurchases) and expanded SBA/USDA capacity de-risk balance sheet and enable originations ramp .
  • Dividend likely maintained at $0.125 pending earnings recovery; Board evaluating as SBA/USDA and core CRE ramp materialize .
  • Credit migration in core is manageable (60+ days 4.6%); non-core remains elevated (67.6%), but liquidation pace accelerating post bulk sale .
  • Portland stabilization is key swing factor; any acceleration in condo sales/office leasing reduces drag and could be a catalyst .
  • Stock repurchases added ~$0.31 to BVPS; sustained buybacks at discounts to BV could support BV accretion .
  • Watch for Q3 updates on USDA second facility, SBA third warehouse approval, CLO reissuance; these are catalysts for estimate revisions and sentiment .

Notes and Data Sources

  • Q2 2025 press release and exhibits, including financial statements and segment data: .
  • Q2 2025 earnings call (prepared remarks and Q&A): .
  • Prior quarters context (Q1 2025 press release, 8-K and call): . Q4 2024 8-K and call: .
  • S&P Global estimates (Primary EPS, Revenue, counts): Values retrieved from S&P Global.*