Ready Capital (US:RC)2025-08-08 13:30Financial Data and Key Metrics Changes - The company reported a GAAP loss from continuing operations of $0.31 per common share and distributable earnings loss of $0.14 per common share, with a loss of $0.10 per share excluding realized losses on asset sales [17][20] - Net interest income increased to $17 million in the quarter, attributed to a full quarter of interest income from the UDF transaction and lower interest expense [17][18] - The book value per share was $10.44 at quarter end, down $0.17 from March 31, primarily due to the dividend and coverage shortfall [21] Business Line Data and Key Metrics Changes - In the core portfolio, the interest yield was 8.1% and cash yield was 6.1%, while the interest yield in the non-core portfolio was 2.4% [18] - The CRE loan portfolio totaled $6.1 billion, segmented into a $5.4 billion core portfolio and a $695 million non-core portfolio [9][10] - The non-core portfolio was reduced by 52% to $333 million carrying value, with a quarterly yield of negative 10.7% [12] Market Data and Key Metrics Changes - The company experienced a decrease in SBA origination volume to $216 million due to capital constraints while awaiting approval for increased warehouse capacity [13] - The company anticipates a return of SBA seven lending volumes to over $325 million per quarter and entry into the USDA market at scale [15] Company Strategy and Development Direction - The company is focusing on repositioning its balance sheet by evaluating loans for potential asset sales to improve net interest margin [4] - The strategy includes stabilizing the Portland mixed-use asset and enhancing liquidity to support loan origination [8][15] - The company plans to reenter the origination market in the third quarter, focusing on high-quality multifamily bridge loans [11] Management's Comments on Operating Environment and Future Outlook - Management expects modest earnings growth in 2025 from increased originations, stabilization of the Portland asset, and a return to SBA lending volumes [15] - The company aims to maintain its current dividend level until its earnings profile warrants an increase [16] Other Important Information - The company completed the sale of $494 million of legacy multifamily bridge assets, generating net proceeds of $85 million [4][5] - The company took ownership of a mixed-use asset in Portland, Oregon, with a net cash outlay of $10 million [6] Q&A Session Summary Question: Will the company still expect distributable earnings losses in the near term? - Management indicated that the origination team is gearing up for new vintage multifamily bridge loans, which may take about 120 days to ramp up [26] Question: Can you describe the type of buyer for the bulk sale of legacy bridge loans? - The buyer is a multifamily operator with significant assets under management, and the sale price was around 77% of the unpaid principal balance [33][34] Question: What will be the driver for the expected increase in SBA volumes? - The company anticipates a ramp in demand for small business loans, particularly in M&A, and is awaiting approval for increased warehouse lines [40][41] Question: Why not eliminate the dividend and reallocate that capital toward debt repayment? - Management stated that the dividend is part of their repositioning strategy, and they are evaluating the performance of the core portfolio in relation to the dividend [63][65] Question: How much capital will need to be put in across the three categories for the Portland asset? - The company is currently assessing the budget for tenant improvements and marketing, with costs expected to be around $150 to $200 per square foot for office tenants [59][60]