Ready Capital Corporation

Greetings and welcome to the Ready Capital third quarter 2025 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Should anyone require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Andrew Alborn, Chief Financial Officer. Thank you. You may begin.

Thank you, operator, and good morning to those of you on the call. Some of our comments today will be forward-looking statements within the meaning of the federal securities laws. Such statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Therefore, you should exercise caution in interpreting and relying on them. We refer you to our SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. During the call, we will discuss our non-GATT measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GATT. A reconciliation of these measures to the most directly comparable GATT measure is available in our third quarter 2025 earnings release and our supplemental information, which can be found in the investors section of the Ready Capital website. In addition to Tom and myself on today's call, we are also joined by Adam Zasmer, Ready Capital's Chief Credit Officer. I will now turn it over to Chief Executive Officer Tom Capaci.

Thanks, Andrew. Good morning, everyone, and thank you for joining the call today. Our focus remains on returning the company to financial health and profitability via rehabilitation of the portfolio yield, growth of our small business lending operations, and management of our 2026 debt maturities. To begin, we continue to make progress in our balance sheet repositioning via reductions in our CRE loan exposure using sales of low-yielding assets in conjunction with our traditional asset management strategies. To that end, we completed two portfolio sales. The first, discussed in the second quarter call, was the sale of 21 loans with an unpaid principal balance of $665 million at a price of $78 million. The transaction netted $85 million and provided incremental earnings of $0.02 per share in the quarter, with $0.05 per share expected for the pro forma full quarter. The second, the sale of 196 small balance loans with high servicing costs, with an unpaid principal balance of $93 million at a price of $97, netting $24 million. At quarter-end post-completion of the sales, along with normal principal paydowns of $410 million, the portfolio totaled 1,120 loans with an unpaid principal balance of $5.4 billion and carrying value of $5.2 billion, split 94% in the core portfolio and 6% non-core portfolio. In the core portfolio, in the absence of adding new loans, we anticipate that the denominator effect will prevail as payoffs accelerate with portfolio seasoning, and some loans migrate to delinquency net of modifications. In the quarter, there were 40 billion of new core net delinquencies. 131 million of core migrated to 60-day plus, of which 91 million were resolved via modification or liquidation. As a result, delinquencies increased to 5.9% of the total. Leverage yields in the portfolio increased 10 basis points to 11%. For core loans experiencing negative migration, our go-forward asset management strategy will favor liquidations. In the non-core portfolio, we liquidated $503 million in the quarter, leaving 31 loans marked to 79% of UPV. In the quarter, the non-core portfolio had an $8 million drag on earnings for $0.05 per share. We also have 648 million of REO across 28 positions, including the Portland mixed-use asset comprising 66% of the total. The remaining REO book of 218 million comprises 27 assets with a 3.7 million average value, creating greater liquidity on exit. In the quarter, we sold five properties valued at 50 million and added four REO, totaling 54 million via foreclosure. Of note, collapsing the majority of our CRE CLOs has provided more flexible asset management, particularly quicker execution of foreclosure deed and lieu transactions to sell liquid multifamily properties. The Portland mixed-use asset represents 14% of quarter-end equity and is segmented into three components. The Ritz-branded hotel with 251 rooms, 169,000 square feet of office and retail space, and 132 Ritz residences. In the quarter, net operating loss on the hotel was $330,000 with occupancy of 48%, ADR $504, and rev par of $240, both up sequentially quarter over quarter. After 24 months of operation, the hotel continues to near stabilization. The office and retail are currently 28% leased and hit break-even. As discussed last quarter, our new property manager, Lincoln Property, a global platform with expertise in hospitality, is executing our business plan. We have had six prospective office tenants tour the space and taking the keys and expect to make significant progress in lease-up over the next few quarters. Lastly, we have sold a total of 11 Ritz residences. We've engaged a top global firm in luxury condo sales and are launching a revised pricing strategy to improve future sales velocity. The net loss on the residences was $900,000. In total, the position is nearing break-even on operations, with a net operating loss of $1.3 million with an additional $3.7 million in interest carried. As previously stated, we will look to exit the position on the heels of ongoing stabilization, lease-up, and sales. In our small business lending operations, despite pressure from the government shutdown, we continue to see growth opportunities. In the quarter, we originated $175 million of small business administration 7A loans, 50% below our quarterly target. As discussed on prior calls, the primary hurdle to reaching target volumes has been access to the capital markets, which has been slow given SBA turnover, staff turnover earlier in the year. With that being said, the approval of our $75 million warehouse facility and two planned securitizations will open significant capacity for achieving volume growth in 2026. USDA production was $67 million in the quarter. Combined, the small business lending platform generated $11 million in net income, adding 280 basis points return on equity before realized losses to the company's total. This platform continues to be a strong counterbalance to our C or E business with nearly 400 million invested and represents significant tangible equity value. Turning to our balance sheet, in 2026, we have 650 million of debt maturing, which is our top priority. We have multiple pathways to address these obligations. First, we have 830 million of unencumbered assets, including 150 million of unrestricted cash. Second, we expect $425 million in net liquidity from portfolio maturities and pending asset resolutions over the next 12 months. Third, we intend to further accelerate sales as we move out of non-performing loan and REO positions. We expect a combination of these items to de-lever the balance sheet, which may pressure book value depending on the size, timing, and pricing of such actions. And last, we've demonstrated our ability to access the capital markets, including our successful debt issuance earlier this year, and expect new debt issuance to replace a part of the maturing debt. We expect a more conservative posturing of the company regarding new investments and dividend policy as we work through our maturities. Regarding the dividend, we will evaluate the current level in December and determine at that time the most appropriate level in the context of progress in the business plan, liquidity levels for managing the 2026 maturities, and competing sources of liquidity. With that, I'll turn it over to Andrew to go through the quarterly results.