Ready Capital (RC) Q3 2024 earnings summary

Executive summary

• Q3 2024 marked a stabilization in the commercial real estate (CRE) cycle, with improving rent growth and property prices, but reported a consolidated net loss of $7.3 million, or $(0.07) per share, mainly due to higher loan loss provisions and realized losses, partially offset by a $32.2 million gain from the Funding Circle acquisition.

• Distributable earnings before realized losses were $46.6 million, or $0.25 per share (8.4% ROE), but after realized losses, distributable earnings were negative $42.5 million, or $(0.28) per share.

• Record Small Business Lending originations of $440 million, including $355 million in SBA 7(a) loans, with the segment generating strong pre-tax income.

• Completed acquisitions of Funding Circle and Madison One, further diversifying the loan origination and servicing platform.

• Continued strategic shift with the sale of $4.7 billion in residential mortgage servicing rights and ongoing disposition of the residential mortgage banking segment.

Financial highlights

• Net book value per share was $12.59 at quarter end, down from $12.97 last quarter and $14.42 a year earlier.

• Net interest income before loan loss provision was $51.0 million for Q3 2024; interest income was $226.5 million, with net interest income after provision for loan losses at $(2.2) million.

• Total assets were $11.3 billion as of September 30, 2024, down 9.6% from December 31, 2023, primarily due to paydowns on securitized loans.

• Dividend of $0.25 per share declared and paid for Q3 2024, with a dividend yield of 13.1%.

• Total leverage ratio was 3.3x and recourse leverage ratio was 1.0x as of September 30, 2024.

Outlook and guidance

• Management expects continued macroeconomic uncertainty, including CRE sector concerns, inflationary pressures, and elevated interest rates, to impact results.

• The company remains focused on LMM commercial real estate and government-backed small business loans, with a large and active origination pipeline.

• Distributable earnings baseline of $0.25 per share is seen as sustainable, with growth expected as CRE returns normalize and small business lending expands.

• Full monetization of remaining non-performing assets anticipated by the first half of 2025.

• Forward-looking statements are subject to significant risks and uncertainties, including those detailed in SEC filings.