Ready Capital (US:RC)2025-11-07 14:32Financial 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]