Ready Capital (RC) Q3 2024 earnings summary

Executive summary

• Reported a GAAP net loss of $7.3 million for Q3 2024, 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 per share were $(0.28), but before realized losses, distributable earnings per share were $0.25 (8.4% ROE).

• Record Small Business Lending originations of $440 million, including $355 million in SBA 7(a) loans; now the #1 non-bank and #4 overall SBA lender in the U.S.

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

• Strategic initiatives to reposition non-performing loans are 72% complete, with significant loan and REO sales reducing negative carry.

Financial highlights

• Net interest income before loan loss provision was $51.0 million for Q3 2024; total revenue from net interest, servicing, gain-on-sale, and origination income rose 22% quarter over quarter to $104 million.

• Book value per share was $12.59 at quarter-end, down from $14.42 a year earlier, mainly due to CECL and realized losses, partially offset by a $32.2 million bargain purchase gain.

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

• 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 and a decrease in loans, net.

• Provision for loan losses increased to $53.2 million in Q3 2024, driven by higher asset-specific reserves.

Outlook and guidance

• CRE market stabilization and improving fundamentals are expected to benefit results over coming quarters, with management noting ongoing macroeconomic uncertainty, inflationary pressures, and elevated interest rates.

• Monetization of remaining non-performing loans and REO assets is expected to extend into the first half of 2025.

• Small business lending segment is expected to provide a sustainable and growing earnings contribution, supporting a longer-term ROE premium.

• Exit from residential mortgage banking is progressing, with $40 million in MSR sales expected to settle by early 2025.

• Management highlights exposure to market and credit risks, with risk factors detailed in SEC filings.