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 .