Ready Capital (US:RC)2025-11-07 21:44Acquisitions 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].