Ready Capital Q2 Earnings Call Highlights

Ready Capital narrowed its quarterly loss, reporting a GAAP loss of $0.63 per share versus $1.25 in the first quarter, while book value per share fell 8.1% to $6.83. The company has completed about 81% of its liquidity plan through asset sales, loan securitization and debt repayment, with remaining efforts focused on financing $950 million of CRE loans, monetizing a $118 million joint venture stake and collecting expected loan runoff. Management is targeting a return to profitability by resolving legacy CRE assets, expanding SBA 7(a) originations toward a $1.5 billion annual goal and cutting operating expenses by 25% to 35%.

Ready Capital said its second-quarter results reflected continued progress in a balance sheet repositioning plan, including portfolio sales, debt paydowns and new financing initiatives, as the company works to meet remaining 2026 debt maturities and return to sustainable profitability. Chief Executive Officer Thomas Capasse said the company does not expect to pursue additional large portfolio sales after completed transactions raised liquidity and repositioned legacy assets. Instead, Ready Capital plans to rely on financing optimization, loan runoff and a potential transaction involving a joint venture investment to complete its liquidity plan.

Chief Financial Officer Andrew Ahlborn said Ready Capital reported a GAAP loss from continuing operations of $0.63 per common share in the second quarter, improving from a $1.25 loss in the first quarter. Distributable earnings were a loss of $0.47 per share, or a loss of $0.24 per share excluding realized losses on asset sales. Book value per share declined 8.1% sequentially to $6.83 at June 30 from $7.43 at March 31. Ahlborn said the decline was slower than the 15.5% and 14.5% per-share declines reported in the prior two quarters, respectively, and reflected the winding down of the loan-sale program. The book value change included approximately $0.23 per share in realized losses on asset sales and approximately $0.12 per share in net loan-loss provisions and valuation allowances, with the remainder attributable to the quarter's operating loss.

Recurring revenue totaled $15.3 million, compared with $16.2 million in the prior quarter. The company cited an $8.7 million improvement in net interest loss, partly offset by a $2 million decline in gain-on-sale revenue and a $7.5 million reduction in other recurring revenue. Interest income declined $4.3 million to $77.4 million as the commercial real estate portfolio contracted. Operating expenses fell to $48.7 million from $67.7 million in the first quarter. The decline primarily reflected servicing expenses normalizing to $3.4 million from $15.4 million, after the prior quarter included nonrecurring servicer-advance reimbursements associated with CLO collapses.

Capasse said the company has achieved about 81% of its liquidity target. Since the first-quarter call, Ready Capital completed a sale of a $167 million construction portfolio, producing $64 million of net liquidity and removing $172 million in future funding obligations. The company also securitized $158 million of unguaranteed SBA 7(a) loans at a 92% advance rate and pricing of SOFR plus 240 basis points. The transaction generated $25 million of net liquidity and provided $500 million of additional funding capacity for SBA 7(a) production, according to management. Ready Capital disposed of $445 million of CRE asset...