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RC

Ready Capital Corp (RC)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 was dominated by portfolio repositioning and loss recognition: GAAP EPS from continuing ops was -$0.13, while distributable EPS was -$0.94, driven by $189.0M realized losses on asset sales offset by a $178.2M valuation allowance reversal and $24.5M bargain purchase gain .
  • The company accelerated balance sheet actions: sold $665M UPB of loans (net proceeds $85M) and a second sale of 196 small balance loans ($93M UPB, $97M price, netting $24M), lifting levered yields to 11% and increasing core 60+ delinquency to 5.9% as seasoning and modifications progressed .
  • Small Business Lending was a relative bright spot: SBA 7(a) originations $175M and USDA $67M; $75M warehouse facility approval and two planned securitizations expand 2026 capacity; SBL generated ~$11M net income and 280 bps ROE contribution before realized losses .
  • Management flagged a more conservative posture and will evaluate the dividend level in December amid $650M 2026 maturities; liquidity includes $830M unencumbered assets and ~$$150M cash, with $425M expected net liquidity from maturities/resolutions, though deleveraging may pressure book value, a key catalyst for stock reaction around the dividend decision and refi path .

What Went Well and What Went Wrong

What Went Well

  • Executed decisive asset sales to improve portfolio yield and reduce drag: $665M UPB sale netted $85M (~$0.02 EPS in Q3; ~$0.05 EPS pro forma per quarter), plus sale of 196 loans ($93M UPB) at $97M, netting $24M; levered yields increased 10 bps to 11% .
  • SBL platform resilience and capacity expansion: SBA 7(a) originations $175M and USDA $67M; approval of $75M warehouse and planned securitizations position volumes for growth in 2026; SBL contributed ~$11M net income and added ~280 bps ROE before realized losses .
  • Portland asset operational progress: Ritz hotel RevPAR rose Q/Q to $240 with ADR $504 and occupancy 48%; the mixed-use position is nearing operational break-even with ~$1.3M net operating loss and ~$3.7M interest carry; new property manager executing stabilization plan and revised condo pricing to accelerate sales .
    • “Our primary focus continues to be restoring financial health…we believe we are on the path to balance sheet stability and profitability.” — CEO Thomas Capasse .

What Went Wrong

  • Earnings under pressure from loss recognition and lower NII: distributable EPS -$0.94 with $189.0M realized losses on asset sales; net interest income fell to $10.5M on a $1.4B CRE portfolio reduction and negative credit migration .
  • Credit migration increased: core 60+ delinquency rose to 5.9%; $40M of new core net delinquencies and $131M migrated to 60+, partially offset by $91M resolutions (mod/liquidation) .
  • Ongoing Portland drag and non-core headwinds: non-core portfolio liquidation produced an $8M drag (~$0.05/share) in the quarter; Portland mixed-use asset continued to incur NOL and carry costs despite improving hotel metrics .
    • Analyst concerns around dividend sustainability amid maturities and buybacks prompted management to reiterate a rank-order liquidity approach and December dividend evaluation .

Financial Results

Core Income Statement Drivers (quarterly)

MetricQ1 2025Q2 2025Q3 2025
Interest Income ($USD ‘000)$154,967 $152,735 $137,491
Net Interest Income before Provision ($USD ‘000)$14,501 $16,898 $10,520
Provision for Loan Losses ($USD ‘000)$109,568 recovery $(8,640) $(37,977)
Net Interest Income after Provision ($USD ‘000)$124,069 $8,258 $(27,457)
Total Non-Interest Income ($USD ‘000)$25,736 $(26,671) $74,914
Loss from Continuing Ops before Tax ($USD ‘000)$77,203 $(88,690) $(26,882)
Income Tax Benefit ($USD ‘000)$5,207 $39,939 $9,935
Net Income (Loss) from Continuing Ops ($USD ‘000)$82,410 $(48,751) $(16,947)

EPS and Book Value

MetricQ1 2025Q2 2025Q3 2025
GAAP EPS – Continuing Ops (Basic)$0.47 $(0.31) $(0.13)
Distributable EPS (Basic & Diluted)$(0.09) $(0.14) $(0.94)
Distributable EPS Before Realized Losses$0.00 $(0.10) $(0.04)
Book Value per Share ($)$10.61 $10.44 $10.28

Segment Breakdown (current vs prior quarter)

Segment MetricQ2 2025Q3 2025
LMM CRE Interest Income ($USD ‘000)$122,268 $105,856
SBL Interest Income ($USD ‘000)$30,467 $31,635
Net Interest after Provision – LMM CRE ($USD ‘000)$1,034 $(31,680)
Net Interest after Provision – SBL ($USD ‘000)$7,224 $4,223
Non-Interest Income – LMM CRE ($USD ‘000)$(36,557) $17,028
Non-Interest Income – SBL ($USD ‘000)$24,126 $32,564
Pre-Tax Income (Consolidated) ($USD ‘000)$(88,690) $(26,882)

Margins/Yields

Portfolio Yield MetricQ1 2025Q2 2025Q3 2025
Core Portfolio Levered Yield (%)11.1% 10.9% 11.0%
Core Interest Yield (%)8.4% 8.1% 8.1%
Core Cash Yield (%)6.7% 6.1% 5.8%

KPIs and Balance Sheet Indicators

KPIQ1 2025Q2 2025Q3 2025
Core 60+ Day Delinquency (%)4.1% 4.6% 5.9%
Unencumbered Assets ($USD ‘000)~$1,000,000 just under $1,000,000 $830,000
Unrestricted Cash ($USD ‘000)>$200,000 >$150,000 ~$150,000
REO Carrying Value ($USD ‘000)$199,910 $199,790 $632,985
Share Repurchases8.5M shares @ $4.41 2.5M shares @ $4.17
Dividend per Common ($)$0.125 $0.125 $0.125 (declared, paid 10/31/25)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend PolicyQ4 2025 decisionMaintain current level until earnings support increase Evaluate current level in December; adopt conservative posture amid 2026 maturities Under review; potential reduction
2026 Debt Maturities ($650M)2026Refinance with mix of secured/unsecured; confident access Use $830M unencumbered assets, ~$150M cash, ~$425M net liquidity from maturities/resolutions, plus asset sales and new issuance; deleveraging may pressure BV More detailed, conservative plan
SBL Capacity/Capital2026Pending SBA warehouse approvals; ramp back half of 2H25 $75M warehouse approved; two securitizations planned, opening significant 2026 capacity Raised capacity visibility
Portland Mixed-Use AssetOngoingNegative carry ~$$5.3M/Q; stabilize then exit components sequentially Hotel ADR $504, RevPAR $240; occupancy 48%; NOL ~$1.3M and interest carry ~$3.7M; targeting exit post-stabilization Operational metrics improved; exit reiterated
BuybacksOngoing8.5M shares repurchased @ $4.41 in Q2 2.5M shares repurchased @ $4.17 in Q3 Slower pace

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1, Q2)Current Period (Q3 2025)Trend
Balance sheet repositioning & CRE loan salesQ1: plan to liquidate non-core; Q2: sold $494M UPB; collapsed CLOs $665M UPB sale (net $85M) plus 196-loan sale ($93M UPB; $97M price), levered yield to 11% Accelerating dispositions, yield rehab
Small Business Lending volumes & fundingQ1: capacity 1.5–2.0B, moderation expected ; Q2: volumes constrained by SBA lines SBA 7(a) $175M, USDA $67M; $75M warehouse approved; planned securitizations Capacity building; path to re-acceleration
Dividend policyQ2: maintain current until earnings improve Evaluate in December; conservative posture Risk rising; decision catalyst
2026 maturities/refi planQ1/Q2: $650M ladder; confident access