Ready Capital Corp Q4 FY2024 earnings call

• Undertaken $284 million combined CECL and valuation allowances, reducing book value per share to $10.61, and reduced dividend to $0.125 per share. - Bifurcated CRE portfolio into core (hold to maturity) and non-core (aggressive liquidation). Core portfolio has strong credit metrics; non-core to be liquidated over 7-10 quarters. - Small business lending had record origination in 2024, expecting $1.5 billion SBA 7(a) lending in 2025. - UDF IV merger expected to close in March, providing annual incremental earnings. - Strong liquidity, $150 million share repurchase program planned.

The CRE loan portfolio totaled $7.2 billion at year-end, split 83% core and 17% non-core. The core $6 billion portfolio has strong credit metrics: 8% contractual yield, 93% pay rate, 2% 60+ day delinquencies, average risk rating 2.2. Non-core $1.2 billion portfolio has a cash yield of 3.1%, 36% 60+ day delinquencies. Small business lending had fourth quarter originations of $350 million, capping a record year of $1.2 billion, representing 8% of capital but contributing $0.08 per share or 290 basis points of ROE.

• Liquidation of non-core portfolio to benefit ROE by $0.18 per share. - Serial disposition of Ritz project components to benefit ROE by $0.31 per share. - Collapsing and reissuing CLOs to generate $60 million liquidity, increasing earnings $0.05 per share. - SBA lending expected to originate $1.5 billion, contributing $0.05 per share. - UDF IV merger to add $0.17 per share.

• Potential negative migration in core portfolio, non-core assets with high delinquencies. - Maturities of debt in 2025 and 2026, need to manage refinancing and liquidity. - Potential delinquency in small balance and micro loans in SBA lending, though current 60+ delinquencies are moderate.

Q: On dividend and core earnings, how does cash earnings cover dividend?

A: First quarter lowest, but over year expected to cover 1.5 times, with OpEx savings, Madison One contribution, SBA growth, UDF merger contributing.

Q: On acquiring UDF IV, why make sense?

A: Aggressive discounts, good knowledge base, historical performance of loans, basis secure even in downturn.

Q: On remaining assets and additional reserving?

A: Core portfolio risk rating 2, minimal future losses expected; non-core assets in expeditious liquidation.

Q: On SBA credit trends?

A: 60+ delinquencies moderate, small balance/micro loans have higher but expected, hospitality assets perform well.

Q: On share repurchases?

A: Pace dependent on liquidity events, active throughout year, but cash levels considered.