Core Insights - Ready Capital Corporation (NYSE:RC) is currently viewed as a promising penny stock, but recent price target reductions by UBS and Keefe Bruyette indicate caution among analysts [1][2]. Financial Performance - Ready Capital reported a decline in core interest income for Q3 2025, with net interest income falling to $10.5 million due to a reduction in the loan portfolio and negative credit migration [2]. - The total loan portfolio's delinquency rate reached 5.9%, highlighting potential credit risks [2]. Strategic Focus - The company's future strategy discussions emphasize managing debt and addressing limited long-run earnings visibility, which is linked to market access and leverage [3]. Company Overview - Ready Capital operates as a real estate finance company in the US, functioning through two segments: LMM Commercial Real Estate and Small Business Lending [3].

We came close a few times, but ultimately, we never gave Ready Capital Corporation ( RC ) a single buy rating. In investing, it is always better to be lucky than to be good, and we were fortunate toTrapping Value is a team of analysts with over 40 years of combined experience generating options income while also focusing on capital preservation. They run the investing group Conservative Income Portfolio in partnership with Preferred Stock Trader. The investing group features two income-generating portfolios ...

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Acquisitions and Divestitures - The company completed the divestiture of its Residential Mortgage Banking segment effective June 30, 2025, classifying it as a discontinued operation [398]. - The company acquired United Development Funding IV on March 13, 2025, with each outstanding common share converting into 0.416 shares of company common stock and contingent value rights [400]. - The company acquired Funding Circle for approximately $41.2 million in cash on July 1, 2024, integrating its loan origination servicing platform with the company's offerings [401]. - The company acquired Madison One for an initial purchase price of approximately $32.9 million on June 5, 2024, with additional payments based on performance metrics [402]. Financial Performance - Net income from continuing operations for the three months ended September 30, 2025, was $(16,947) thousand, compared to $(7,473) thousand for the same period in 2024 [410]. - Distributable earnings for the nine months ended September 30, 2025, were $(180,768) thousand, a significant decline from $28,093 thousand in 2024 [410]. - Total loan investment activity for the three months ended September 30, 2025, was $421,807 thousand, down from $685,879 thousand in 2024 [414]. - Consolidated net loss for Q3 2025 was $16.7 million, an increase of $9.5 million from Q3 2024, driven by net realized losses on financial instruments and real estate [443]. - Consolidated net income for the nine months ended September 30, 2025, was $11.6 million, an increase of $127.2 million from the same period in 2024, primarily due to a gain on bargain purchase from the UDF IV Merger and a decrease in valuation allowance [444]. Liquidity and Capital Resources - The company emphasizes the importance of liquidity and capital resources to fund ongoing obligations and address upcoming debt maturities [389]. - As of September 30, 2025, the company had approximately $150.0 million in unrestricted cash and $830.0 million in unencumbered assets [451]. - The company expects approximately $425.0 million in net liquidity from portfolio maturities and pending asset resolutions over the next 12 months [451]. - The company anticipates utilizing resources and access to capital markets to meet liquidity needs, including potential adjustments to the dividend rate [452]. Interest Income and Expense - Total interest income decreased by $89,046 thousand to $137,491 thousand in Q3 2025 compared to Q3 2024, primarily due to lower loan balances and interest rates [423]. - Interest expense decreased by $48,601 thousand to $126,971 thousand in Q3 2025 compared to Q3 2024, driven by decreased loan balances and interest rates [423]. - Year-to-date interest income for 2025 was $353,097 thousand, down $243,000 thousand from 2024, mainly due to increased non-accrual loans and decreased loan balances [430]. - Year-to-date interest expense for 2025 was $342,998 thousand, a decrease of $124,720 thousand from 2024, driven by lower loan balances and interest rates [430]. Loan Portfolio and Credit Quality - As of September 30, 2025, approximately 81% of the loans in the portfolio were floating rate loans, while 19% were fixed rate loans [406]. - The allowance for credit losses is reviewed quarterly, considering credit quality indicators such as LTV ratio and economic conditions [502]. - The company utilizes loan loss forecasting models to estimate expected lifetime credit losses at the individual loan level [503]. - Provision for loan losses was $31,000 thousand in Q3 2025, a decrease of $18,260 thousand from Q3 2024, primarily due to loan sales [427]. Debt and Financing - The total carrying amount of debt is $1,387,775,000, with senior secured notes totaling $721,151,000 and corporate debt totaling $666,624,000 [480]. - The Company issued $350 million of 4.50% Senior Secured Notes due 2026, with interest payable semiannually [480]. - The Company completed the sale of $220 million of 9.375% Senior Secured Notes due 2028, with net proceeds of $216.7 million before expenses [484]. - The total leverage ratio as of September 30, 2025, was 3.1x, with a recourse leverage ratio of 1.4x [458]. - The company maintains a diversified debt structure with varying maturity dates and interest rates, enhancing financial flexibility [476]. Dividends and Stockholder Equity - The company declared dividends of $0.125 per common share for the three months ended September 30, 2025, down from $0.25 in 2024 [410]. - Total stockholders' equity was $1.9 billion, a decrease of $60.5 million from December 31, 2024, mainly due to dividends paid and common stock repurchased [419]. - The company must distribute at least 90% of its REIT taxable income to qualify as a REIT, which may differ from distributable earnings due to certain non-cash items [440]. Market and Economic Conditions - The company reported that the U.S. Federal Reserve delivered its first interest rate cut since November 2024, impacting the economic outlook [407]. - The company is monitoring the impact of shifts in interest rates, credit spreads, and inflation on its operations and liquidity [453].

Financial Data and Key Metrics Changes - The company reported a GAAP loss from continuing operations of $0.13 per common share and distributable earnings were a loss of $0.94 per common share, with $0.04 per common share excluding realized losses on asset sales [13] - Net interest income declined to $10.5 million due to a $1.4 billion reduction in the CRE portfolio and $40 million of negative credit migration [13] - Book value per share was $10.28 at quarter end, down $0.16 from June 30, primarily due to the dividend covered shortfall [17] Business Line Data and Key Metrics Changes - The core portfolio totaled 1,120 loans with an unpaid principal balance of $5.4 billion, with delinquencies increasing to 5.9% of the total [5] - The small business lending platform originated $175 million of SBA 7(a) loans, 50% below the quarterly target, generating $11 million in net income [10] - The non-core portfolio had an $8 million drag on earnings, with $503 million liquidated in the quarter [7] Market Data and Key Metrics Changes - The Portland mixed-use asset represented 14% of quarter-end equity, with a net operating loss of $330,000 and occupancy of 48% [8] - The office and retail space in the Portland asset is currently 28% leased and has hit break-even [8] Company Strategy and Development Direction - The company is focused on returning to financial health and profitability through portfolio yield rehabilitation, growth in small business lending, and management of 2026 debt maturities [4] - The strategy includes reducing CRE loan exposure and accelerating sales of non-performing loans and REO positions [11] - The company plans to evaluate the dividend in December based on progress in the business plan and liquidity levels [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in refinancing pending debt maturities and emphasized a conservative approach to new investments and dividend policy [11][50] - The company expects to utilize unencumbered assets and additional senior and unsecured issuance to address liquidity needs [30] Other Important Information - The company completed two portfolio sales, netting $85 million and $24 million from the sales of loans [4][5] - The combined provision for loan loss and valuation allowance decreased by $140.2 million, with a net increase in provision for loan losses of $38 million [15][16] Q&A Session Summary Question: What is the right level of leverage for the company going forward? - Management indicated that the current gross leverage is around $3.5 million, with a target of less than that on a pro forma basis [19] Question: What is the target mix of secured versus unsecured debt? - The expectation is that the majority of debt will be secured for the immediate future, with potential access to unsecured markets as they open [20][21] Question: Can you explain the rationale behind continuing to pay dividends while reducing leverage? - The company is adopting an aggressive approach to repositioning the balance sheet and will evaluate the dividend in December based on liquidity and business progress [30] Question: Will the other assets category be evaluated at year-end as part of the audit? - Management confirmed that deferred tax assets will be reevaluated at year-end, with expectations of profitability growth as origination volume increases [34] Question: Is the Portland property being carried at fair value or at cost? - The property is carried at fair value for the condos held for sale, while the other components are held at cost [36][40] Question: How does the recent sale of a large office building in Portland affect property valuations? - Management clarified that the Portland asset is a luxury hospitality asset, which is not directly comparable to older office properties experiencing valuation declines [45]

Financial Data and Key Metrics Changes - The company reported a GAAP loss from continuing operations of $0.13 per common share and distributable earnings were a loss of $0.94 per common share, with $0.04 per common share excluding realized losses on asset sales [13] - Net interest income declined to $10.5 million due to a $1.4 billion reduction in the CRE portfolio and $40 million of negative credit migration [13] - Book value per share was $10.28 at quarter end, down $0.16 from June 30, primarily due to the dividend covered shortfall [17] Business Line Data and Key Metrics Changes - The core portfolio totaled 1,120 loans with an unpaid principal balance of $5.4 billion, with delinquencies increasing to 5.9% of the total [5] - In the small business lending operations, $175 million of SBA 7(a) loans were originated, which was 50% below the quarterly target [9] - The small business lending platform generated $11 million in net income, adding 280 basis points return on equity before realized losses [10] Market Data and Key Metrics Changes - The Portland mixed-use asset represented 14% of quarter-end equity, with a net operating loss of $330,000 and occupancy of 48% [8] - The office and retail space in the Portland asset is currently 28% leased and has hit break-even [8] Company Strategy and Development Direction - The company is focused on returning to financial health and profitability through rehabilitation of the portfolio yield, growth of small business lending operations, and management of 2026 debt maturities [4] - The strategy includes reducing CRE loan exposure and accelerating sales of non-performing loans and REO positions [11] - The company plans to evaluate the dividend in December based on progress in the business plan and liquidity levels [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in refinancing pending debt maturities and emphasized a conservative posture regarding new investments and dividend policy [11][50] - The company expects to utilize unencumbered assets and additional senior and unsecured issuance to address liquidity needs [30] Other Important Information - The company liquidated $503 million in the non-core portfolio during the quarter, which had an $8 million drag on earnings [7] - The company has $830 million of unencumbered assets, including $150 million of unrestricted cash [17] Q&A Session Summary Question: What is the right level of leverage for the company going forward? - Management indicated that the current gross leverage is around $3.5 million and they are looking for a pro forma basis of less than that [19] Question: What is the target mix of secured versus unsecured debt? - The expectation is that the majority of debt will be secured for the immediate future, with potential access to unsecured markets as they open [20][21] Question: Can you explain the rationale behind continuing to pay dividends while reducing leverage? - Management stated that they are adopting an aggressive approach to reposition the balance sheet and will evaluate the dividend in December based on liquidity and business progress [30] Question: Will the other assets category be evaluated at year-end as part of the audit? - Management confirmed that deferred tax assets are reevaluated regularly, including at year-end audits, and they expect profitability to grow as origination volume increases [34] Question: Is the Portland property being carried at fair value or at cost? - The property is carried at fair value with the current appraised value of $425 million, with condos held for sale at fair value and other components held at cost [36][40]

Financial Data and Key Metrics Changes - The company reported a GAAP loss from continuing operations of $0.13 per common share and distributable earnings were a loss of $0.94 per common share, with $0.04 per common share excluding realized losses on asset sales [13][16] - Net interest income declined to $10.5 million due to a $1.4 billion reduction in the CRE portfolio and $40 million of negative credit migration [13][14] - Book value per share was $10.28 at quarter end, down $0.16 from June 30, primarily due to the dividend covered shortfall [17] Business Line Data and Key Metrics Changes - The core portfolio totaled 1,120 loans with an unpaid principal balance of $5.4 billion, with delinquencies increasing to 5.9% of the total [5][6] - In small business lending operations, $175 million of SBA 7(a) loans were originated, which is 50% below the quarterly target [9][10] - The small business lending platform generated $11 million in net income, adding 280 basis points return on equity before realized losses [10] Market Data and Key Metrics Changes - The Portland mixed-use asset represented 14% of quarter-end equity, with a net operating loss of $330,000 for the hotel and occupancy at 48% [7][8] - The office and retail space in the Portland asset is currently 28% leased and has reached break-even [8] Company Strategy and Development Direction - The company is focused on returning to financial health and profitability through portfolio yield rehabilitation, growth in small business lending, and management of 2026 debt maturities [4] - The strategy includes reducing CRE loan exposure and liquidating non-core assets to improve liquidity [4][11] - The company plans to evaluate the dividend in December based on progress in the business plan and liquidity levels [12][28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in refinancing pending debt maturities and emphasized a conservative approach to new investments and dividend policy [11][40] - The company expects to leverage unencumbered assets and additional debt issuance to address maturing obligations [11][28] Other Important Information - The company completed two portfolio sales, netting $85 million from the sale of 21 loans and $24 million from the sale of 196 small balance loans [4][5] - The net increase in provision for loan losses was $38 million, with a decrease in the valuation allowance of $178 million [15][16] Q&A Session Summary Question: What is the right level of leverage for the company going forward? - Management indicated that current gross leverage is around $3.5 million, with a target of less than that on a pro forma basis [19][20] Question: What is the current covenant on the unencumbered asset ratio? - The company confirmed that the unencumbered asset test is well covered within the 1.2 range, with no requirement to be at 1.25 [23][25] Question: What is the rationale for continuing to pay dividends while managing debt maturities? - Management stated that they are adopting an aggressive approach to reposition the balance sheet and will evaluate the dividend in December based on liquidity and business progress [27][28] Question: How is the Portland property being carried on the balance sheet? - The property is carried at fair value for the condos and at cost for the other components [33][34] Question: How does the company view the current market valuations for properties? - Management noted that the Portland asset is unique and not directly comparable to other properties, emphasizing positive trends in hospitality and RevPAR [36][37]

Financial Performance - Net loss from continuing operations was $(0.13) per common share[5] - Distributable losses were $(0.94) per common share[5] - Distributable losses before realized losses were $(0.04) per common share[5] - A dividend of $0.125 per common share was declared[5] Loan Portfolio - Total loan portfolio amounted to $6.5 billion[5] - Total loan originations reached $421.8 million[5] - Loan repayments and sales totaled $1.3 billion[5] - New 60+ day core delinquencies were $39.9 million, with a 60+ day core delinquency rate of 5.9% at quarter end[5] - The company completed a first portfolio sale of commercial real estate loans worth $665 million, generating net proceeds of $85 million[5] - A second portfolio sale of commercial real estate loans worth $93 million generated net proceeds of $24 million[5] Capitalization - The company repurchased 2.5 million shares at an average price of $4.17, resulting in a book value per share (BVPS) impact of $0.09[5]

Core Insights - Ready Capital reported a quarterly loss of $0.94 per share, significantly missing the Zacks Consensus Estimate of $0.02, and compared to earnings of $0.25 per share a year ago, indicating a substantial decline in performance [1] - The company posted revenues of $10.52 million for the quarter ended September 2025, missing the Zacks Consensus Estimate by 76.13%, and down from $50.97 million year-over-year [2] - Ready Capital shares have decreased by approximately 55.4% year-to-date, contrasting with the S&P 500's gain of 15.6% [3] Earnings Outlook - The earnings outlook for Ready Capital is uncertain, with current consensus EPS estimates at $0.05 for the upcoming quarter and -$0.26 for the current fiscal year, with revenues expected to be $45.7 million and $121.18 million respectively [7] - The estimate revisions trend for Ready Capital was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold), suggesting the stock is expected to perform in line with the market in the near future [6] Industry Context - The REIT and Equity Trust industry, to which Ready Capital belongs, is currently ranked in the top 37% of over 250 Zacks industries, indicating a favorable position compared to the bottom 50% [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Ready Capital's stock performance [5]

Core Insights - Ready Capital Corporation reported a GAAP loss per common share from continuing operations of $(0.13) and a distributable loss per common share of $(0.94) for the quarter ended September 30, 2025 [1][22] - The company is focused on restoring financial health through decisive exit strategies for underperforming loans and risk management of upcoming debt maturities, aiming for balance sheet stability and profitability [2] Financial Performance - The company reported LMM commercial real estate originations of $139 million and Small Business Lending loan originations of $283 million, which included $173 million of Small Business Administration 7(a) loans [6] - The book value of common stock was $10.28 per share as of September 30, 2025 [6] - The company completed two portfolio sales consisting of 217 loans with an unpaid principal balance of $758 million for net proceeds of $109 million [6] Non-GAAP Financial Information - Distributable earnings, a non-GAAP measure, is defined as net income adjusted for various unrealized gains and losses, providing greater transparency into financial performance [3][4] - The calculation of distributable earnings excludes unrealized gains and losses on mortgage-backed securities retained as part of the loan origination business, as these are considered fundamental to ongoing performance [5] Income Statement Highlights - For the three months ended September 30, 2025, the company reported net interest income before provision for loan losses of $10,520 thousand, with a net loss from continuing operations of $(16,947) thousand [22][23] - Total non-interest income was $74,914 thousand, while total non-interest expense was $74,339 thousand, resulting in a loss from continuing operations before income taxes of $(26,882) thousand [22][23] Balance Sheet Overview - As of September 30, 2025, total assets were $8,332,101 thousand, with total liabilities of $6,448,542 thousand, resulting in stockholders' equity of $1,875,198 thousand [20][21] - The company had cash and cash equivalents of $147,505 thousand and loans net of $4,360,501 thousand [20]