Executive Summary

Q4 2024 printed a GAAP loss of $(1.90) per share (continuing ops $(1.80)) as RC took aggressive credit actions; distributable EPS was $(0.03), but distributable EPS before realized losses was $0.23 (7.1% ROE), reflecting underlying earnings capacity before asset sale losses .
Book value per share fell to $10.61 (from $12.59 in Q3) as management fully reserved 100% of non‑performing CRE loans (CECL + valuation actions), “setting the bottom” and positioning for NIM recovery; buybacks added +$0.18 to BVPS in Q4 .
Dividend reset to $0.125 per share for Q1 2025 to align with cash earnings and capital preservation; management expects ~1.5x dividend coverage over 2025 as non‑core liquidation, CLO reissues, SBA/USDA growth, and UDF IV accretion ramp .
Catalyst focus: decisive balance-sheet reset (reserves), dividend cut, non‑core liquidation plan (including Portland mixed‑use), liability management (collapsing/reissuing CLOs), and announced UDF IV acquisition with expected EPS/ROE accretion .

What Went Well and What Went Wrong

What Went Well
- Small Business Lending (SBL) remained a bright spot: Q4 SBL originations were $348M including $315M of SBA 7(a), with gain-on-sale premiums supporting revenue; management highlighted SBL as an outsized ROE contributor relative to capital used .
- Liquidity and capital actions: issued $130M 9.00% senior notes due 2029 in Dec (RCD) and closed $220M TRS 9.375% notes in Feb 2025; announced new $150M buyback authorization; buybacks of 5.8M shares at $7.35 in Q4 added $0.18 to BVPS .
- Transparent portfolio bifurcation and resolution roadmap: core vs non‑core split, serial disposition plan for Portland (Ritz-Carlton) asset, and targeted 2025-26 CRE origination ramp to restore NIM and ROE .
- Quotes: “We have taken decisive actions to stabilize and better position our balance sheet… fully reserving for all of our non‑performing loans in our CRE portfolio” . “These actions will establish the bottom for both book value per share and the dividend” .
What Went Wrong
- Credit costs/NPLs drove the quarter: $285.0M provision for loan losses (combined CECL and valuation allowances up $277.3M), leading to net loss from continuing ops of $(297.5)M and GAAP EPS (cont. ops) of $(1.80) .
- Book value compression: BVPS fell to $10.61 (from $12.59), reflecting reserve build and realized/unrealized losses despite buyback support .
- Dividend cut: common dividend reduced to $0.125 for Q1 2025 from $0.25 in Q4, underscoring near‑term cash-earnings pressure during non‑core liquidation; Portland mixed‑use asset reduces quarterly run‑rate by ~$0.11 per share near term until stabilization/disposition .

Financial Results

Metric	Q4 2023	Q3 2024	Q4 2024
Interest income ($USD Millions)	$250.130	$226.537	$203.965
Net interest income before (provision) ($USD Millions)	$52.539	$50.965	$50.054
Recovery/(Provision) for loan losses ($USD Millions)	$(6.688)	$(53.166)	$(285.008)
Net income (loss) from continuing ops ($USD Millions)	$24.574	$(7.473)	$(297.517)
GAAP EPS – Continuing ops ($)	$0.12	$(0.07)	$(1.80)
Distributable EPS ($)	$0.26	$(0.28)	$(0.03)
Distributable EPS before realized losses ($)	$0.26	$0.25	$0.23
Book value per share ($)	$14.10	$12.59	$10.61

Segment results (Q4 2024):

Metric ($USD Millions)	LMM CRE	Small Business Lending	Corporate-Other	Consolidated
Interest income	170.292	33.673	—	203.965
Provision for loan losses	(279.483)	(5.525)	—	(285.008)
Total non-interest income (loss)	(11.501)	36.382	2.123	27.004
Total non-interest expense	(52.440)	(31.146)	(23.299)	(106.885)
Income (loss) before taxes	(304.260)	10.601	(21.176)	(314.835)
Total assets (period-end)	8,058.707	1,427.281	368.338	9,854.326

Key KPIs and trajectory:

KPI	Q2 2024	Q3 2024	Q4 2024
LMM CRE originations ($USD Millions)	$257	$246	$436
SBA 7(a) originations ($USD Millions)	$217	$355	$315
LMM CRE 60+ days past due (%)	6.3% (Q2)	7.2% (Q3)	5.9% (Q4)
Book value per share ($)	$12.97	$12.59	$10.61
Common dividend declared ($/sh)	$0.30	$0.25	$0.25
Share repurchases	2.3M @ $8.61	—	5.8M @ $7.35
Leverage (Total / Recourse)	—	3.3x / 1.0x	3.8x / 1.3x

Notes: Distributable EPS figures exclude or include realized losses as specified; management emphasizes distributable earnings as a key dividend input .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Common dividend ($/sh)	Q1 2025	$0.25 (Q4’24 actual)	$0.125 declared	Lowered
Dividend coverage	FY 2025	—	~1.5x expected coverage over 2025	New
LMM CRE originations	FY 2025	—	$1.0–$1.5B expected, ramping through year	New
SBA 7(a) originations	FY 2025	—	~$1.5B expected; +$0.05 EPS contribution	New
USDA (Madison One)	FY 2025	—	~$300M expected; +$0.05 EPS contribution	New
Non‑core liquidation	7–10 quarters	—	+$0.18 EPS/yr ROE +165 bps when complete (full benefit in 2026)	New
Portland (Ritz‑Carlton) serial disposition	~10 quarters	—	+$0.31 EPS/yr ROE +275 bps upon stabilization/dispositions	New
CLO liability mgmt (call/reissue)	2025	—	First $1.3B tranche reissue adds ~$0.05 EPS/yr ROE +45 bps	New
UDF IV merger accretion	Post-close (H1’25 target)	—	~17% per share accretion or +150 bps ROE annualized	New
Share repurchase authorization	As authorized	—	$150M buyback authorized (Jan 16, 2025)	New

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 2024)	Previous Mentions (Q3 2024)	Current Period (Q4 2024)	Trend
Credit cycle and reserves	Began selling underperforming loans; valuation allowances increased; GAAP loss $(0.21) EPS; BVPS $12.97	Provision swung negative; valuation allowance release and realized losses; BVPS $12.59	Aggressive CECL/valuation actions ($277M CECL) fully reserving NPLs; BVPS $10.61; “sets the bottom”	Near‑term pain, foundation for recovery
Portfolio segmentation	—	Discussed RC‑originated vs M&A risk and migration	Bifurcated into core (hold) vs non‑core (liquidate); roadmap for resolution	Improved transparency
Portland mixed‑use (Ritz-Carlton)	—	Mosaic acquired asset; construction complete; shifting strategy	Ownership/stabilization then serial exits; −$0.11/sh near‑term run‑rate; $130M reserve	Drag now, accretive later
SBA/SBL growth	Record $217M SBA 7(a) in Q2	Record $355M SBA 7(a) in Q3	$315M SBA 7(a) in Q4; 2025 target $1.5B; credit stable (SBL 60+ DQ ~2.8%)	Structural growth driver
Liability management	—	Highlighted unencumbered pool/leverage	Plan to collapse/reissue CLOs; first $1.3B tranche in March; AAA spreads improved	Tailwind to NIM
Capital actions	Share repurchases in Q2 (2.3M)	BVPS stabilized vs Q2; dividend $0.25	Dividend reset to $0.125; new $150M buyback; $220M secured notes	Preserving/optimizing capital

Management Commentary

Strategy reset: “Entering 2025, we have taken decisive actions… fully reserving for all of our non‑performing loans… We believe these actions will enable the Company to resume growth in both book value per share and the dividend as we move forward.” — CEO Thomas Capasse .
Portfolio bifurcation and NIM path: “This bifurcation… aggressive liquidation of the 3.1% cash yield non‑core book and reinvestment… into 15%+ ROE core loans, providing a path to recovery in NIM.” — CEO .
Dividend policy: “Reduction of the dividend to $0.125… to better align… with projected cash earnings… and to preserve book value… It will be our expectation to grow the dividend from this new level with improved earnings.” — CEO .
Outlook components: Non‑core liquidation (+$0.18/sh), Portland serial disposition (+$0.31/sh), CLO reissues (+$0.05/sh), SBA ($1.5B; +$0.05/sh), USDA (+$0.05/sh), UDF IV (+17%/sh) .

Q&A Highlights

Dividend coverage and earnings cadence: Q1’25 likely the trough as non‑core moves to cash basis; expect ~1.5x coverage of the $0.125 dividend over 2025 with OpEx savings, SBA/USDA ramp, UDF IV accretion .
UDF IV rationale: Accretive basis, seasoned DFW land-lending assets; fully performing with maturities through 2028; management cites strong underwriting history and project familiarity .
Reserves and risk: Reserves ring‑fence known problem assets; core portfolio exhibits stronger metrics (DY ~9.7% vs ~8–9% refi threshold), supporting take‑out prospects .
SBA credit: SBL 60+ delinquency ~2.8%, stable; largest exposures in smaller‑market limited service lodging with resilient performance .
Debt maturities: Plan to address 2026 maturities via market access and cash flows; recent TRS secured notes refinance near‑term 2025/26 maturities .
Buybacks: Will be active but paced by liquidity from CLO calls and non‑core sales; maintaining higher cash levels given environment .

Estimates Context

Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue was not retrievable at the time of this analysis due to an S&P Global daily request limit; therefore, explicit “vs. estimates” comparisons are not shown here. We attempted to pull “Primary EPS Consensus Mean” and “Revenue Consensus Mean” for Q4 2024 but could not obtain values due to rate limits.
Implications for models: Consider lowering near‑term GAAP/DE on (i) NPLs on cash accounting, (ii) Portland run‑rate drag, and (iii) timing of non‑core liquidations; raise out‑quarters for CLO cost reductions, SBA/USDA growth, and UDF IV accretion per management’s quantified bridges .

Key Takeaways for Investors

The quarter was a deliberate “reset”: significant reserve build and dividend cut should compress near‑term earnings but improve visibility and speed of balance‑sheet repair and NIM recovery .
Core vs non‑core lens matters: core book (83% of CRE) shows stronger metrics and is the engine for ROE normalization; non‑core liquidation is the key bridge to 2026 .
Multiple self‑help levers are in motion: non‑core liquidations, Portland serial exits, CLO calls/re‑issues, SBA/USDA scaling, and UDF IV accretion are each quantified and time‑phased .
Capital discipline remains central: dividend reset, opportunistic buybacks ($150M authorization), and term financing activity support BVPS and liquidity through the cycle .
Watchlist items: pace and pricing of non‑core sales; stabilization milestones for Portland; CLO reissue economics; SBA premium trends and warehouse capacity approvals; UDF IV close and accretion timing .
Setup into 2025/26: Near‑term earnings trough likely in Q1’25 with a path to higher coverage later in 2025; full benefits from non‑core/Portland resolution targeted into 2026 .

Additional Q4/Q3/Q2 items and disclosures:

Q4 headline figures include: GAAP net loss $(314.8)M; interest income $203.97M; provision $(285.01)M; total non‑interest income $27.00M; non‑interest expense $(106.89)M .
Q3 snapshot for trend: GAAP EPS $(0.07); DE $(0.28); DE before realized losses $0.25; BVPS $12.59; record SBL originations $440M (SBA 7(a) $355M) .
Q2 snapshot for trend: GAAP EPS $(0.21); DE $0.07; DE before realized losses $0.19; BVPS $12.97; SBA 7(a) originations $217M .

Sources: Company 8‑K/press release and supplemental for Q4 2024 and prior quarters, and Q4 2024 earnings call transcript .

Ready Capital Corp (RC)·Q4 2024 Earnings Summary