Ready Capital (US:RC)2025-05-09 20:49PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents Ready Capital Corporation's unaudited consolidated financial statements for Q1 2025, detailing financial position, performance, and cash flows, alongside notes on significant events like the UDF IV acquisition and segment divestiture Consolidated Balance Sheets Total assets slightly decreased to $10.0 billion by March 31, 2025, while total liabilities decreased to $7.9 billion, and stockholders' equity increased to $2.04 billion Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $9,976,451 | $10,141,921 | | Loans, net | $4,354,017 | $3,378,149 | | Assets of consolidated VIEs | $3,723,738 | $5,175,295 | | Total Liabilities | $7,926,899 | $8,197,818 | | Secured borrowings | $2,713,415 | $2,035,176 | | Securitized debt obligations of consolidated VIEs, net | $2,574,139 | $3,580,513 | | Total Stockholders' Equity | $2,041,191 | $1,935,742 | Consolidated Statements of Operations Net income for Q1 2025 was $82.0 million, a significant improvement from a $74.2 million loss in Q1 2024, driven by a bargain purchase gain and loan loss recovery, resulting in $0.47 basic EPS Statement of Operations Highlights (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Interest Income | $14,501 | $48,549 | | Recovery of loan losses | $109,568 | $26,544 | | Gain on bargain purchase | $102,471 | $— | | Net Income (Loss) | $81,965 | ($74,167) | | Net Income (Loss) Attributable to Ready Capital | $77,506 | ($76,283) | | Total earnings per common share - basic | $0.47 | ($0.44) | | Dividends declared per share of common stock | $0.125 | $0.30 | Consolidated Statements of Cash Flows Q1 2025 saw $108.5 million net cash from operations and $307.3 million from investing activities, offset by $355.0 million used in financing, leading to a $60.7 million net cash increase Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2025 | | :--- | :--- | | Net cash provided by operating activities | $108,469 | | Net cash provided by investing activities | $307,268 | | Net cash used for financing activities | ($354,990) | | Net increase in cash and cash equivalents | $60,747 | Notes to the Consolidated Financial Statements These notes detail accounting policies and financial activities, highlighting the $102.5 million UDF IV bargain purchase gain, increased non-accrual loans to $848.4 million, Residential Mortgage Banking segment divestiture, and new senior secured note issuance - On March 13, 2025, the Company acquired United Development Funding IV (UDF IV), resulting in a preliminary bargain purchase gain of $102.5 million24132 - The company is divesting its Residential Mortgage Banking segment, which is now classified as discontinued operations. In Q1 2025, it sold $4.2 billion of residential mortgage servicing rights for net proceeds of $9.8 million216 - Non-accrual loans increased to $848.4 million as of March 31, 2025, up from $526.8 million at the end of 2024154169 - In February 2025, the company issued $220.0 million of 9.375% Senior Secured Notes due 2028. An additional $50.0 million was issued subsequent to the quarter end in April 2025232375 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the strategic shift to LMM commercial real estate and small business lending, the impact of the UDF IV merger, and a Q1 2025 distributable loss of $11.4 million ($(0.09) per share), with a total leverage ratio of 3.5x - The company's core focus is on LMM commercial real estate and small business lending, with the Residential Mortgage Banking segment being divested and reported as a discontinued operation381385 Key Financial Indicators Q1 2025 vs Q1 2024 | Indicator | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Distributable earnings per common share - diluted | $(0.09) | $0.29 | | Dividends declared per common share | $0.125 | $0.30 | | Return on equity from continuing operations | 18.4% | (13.3)% | | Book value per common share | $10.61 | $13.44 | - Total loan originations were $466.0 million in Q1 2025, a slight increase from $456.8 million in Q1 2024, with a significant increase in Small Business Lending (SBL) loans404 - As of March 31, 2025, the company had a total leverage ratio of 3.5x and a recourse leverage ratio of 1.3x441 - Consolidated distributable losses were $11.4 million for Q1 2025, a decrease of $65.4 million from Q1 2024, primarily due to charge-offs and realized losses on sales of real estate owned assets and LMM loans428430 Quantitative and Qualitative Disclosures About Market Risk The company details exposure to market, credit, interest rate, liquidity, and counterparty risks, with a 100 bps rate increase positively impacting net interest income by $8.4 million, and JPMorgan Chase Bank, N.A. being the largest counterparty risk at 29.8% of equity - The company is exposed to market, credit, interest rate, liquidity, prepayment, real estate, fair value, and counterparty risks491500501503504505 Net Interest Income Sensitivity to Interest Rate Changes | Change in Rates (Basis Points) | 12-Month Impact on Net Interest Income (in thousands) | | :--- | :--- | | +100 bps | $8,413 | | +50 bps | $4,044 | | -50 bps | ($2,973) | | -100 bps | ($4,319) | - The company's largest counterparty risk exposure for repurchase agreements is with JPMorgan Chase Bank, N.A., amounting to $608.3 million, or 29.8% of stockholders' equity509510 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during Q1 2025 - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of March 31, 2025514 - No material changes were identified in the Company's internal control over financial reporting during the quarter ended March 31, 2025515 PART II. OTHER INFORMATION Legal Proceedings The company faces multiple legal challenges, including class action lawsuits from Broadmark and UDF IV mergers, and securities and derivative lawsuits alleging false statements regarding its commercial real estate loan portfolio - The company is a defendant in two separate putative stockholder class action lawsuits (Quinn Action and Goebel Action) filed in March and April 2025, alleging violations of the Exchange Act related to statements about its commercial real estate loan portfolio522 - Two derivative lawsuits have been filed against certain officers and directors, asserting claims related to the allegations in the securities class actions523 - The company is subject to indemnification obligations for lawsuits related to the Broadmark and UDF IV mergers, which allege breaches of fiduciary duty by the former boards of those companies518520521 Risk Factors No material changes were reported from the risk factors previously disclosed in the Company's Annual Report on Form 10-K - No material changes from the risk factors previously disclosed in the Company's Form 10-K were reported529 Unregistered Sales of Equity Securities and Use of Proceeds The Board approved a $150.0 million share repurchase program in January 2025, with 3,734,044 shares repurchased in Q1 at an average price of $5.14, leaving $132.7 million available - A new share repurchase program for up to $150.0 million of common stock was approved by the Board on January 16, 2025530 Share Repurchases in Q1 2025 | Period | Total Shares Purchased | Average Price Paid per Share | Maximum Value Remaining Under Program | | :--- | :--- | :--- | :--- | | Q1 2025 Total | 3,734,044 | $5.14 | $132,698,476 | Default Upon Senior Securities The company reported no defaults upon senior securities - The company reported no defaults upon senior securities533 Other Information No officers or directors entered into, modified, or terminated any Rule 10b5-1 trading arrangements during the quarter ended March 31, 2025 - No officers or directors entered into, modified, or terminated any Rule 10b5-1 trading arrangements during the quarter535 Signatures The report was signed and authorized on May 9, 2025, by Thomas E. Capasse (Chairman, CEO, CIO) and Andrew Ahlborn (CFO) - The report was signed on May 9, 2025, by Thomas E. Capasse (Principal Executive Officer) and Andrew Ahlborn (Principal Accounting and Financial Officer)543545