Q2 2026 Ready Capital Corp Earnings Call

August 7, 2026

Operator: Greetings, and welcome to the Ready Capital Corporation Q2 2026 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Andrew Ahlborn, Chief Financial Officer. Thank you. You may begin.

Speaker #1: Greetings, and welcome to the Ready Capital Corporation second quarter 2026 earnings call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation.

Speaker #1: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Speaker #1: I would now like to turn the call over to your host, Andrew Ahlborn, Chief Financial Officer. Thank you. You may begin.

Speaker #2: 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.

Andrew Ahlborn: Thank you, operator. 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 more detailed discussion of the risks that could impact our future operating results and financial condition. During the call, we will discuss our non-GAAP 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 GAAP.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: During the call, we will discuss our non-get 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 GAAP.

Andrew Ahlborn: During the call, we will discuss our non-GAAP 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 GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available in our Q2 2026 earnings release and our supplemental information, which can be found in the investors section of the Ready Capital website. I will now turn it over to Chief Executive Officer, Tom Capasse.

Speaker #2: A reconciliation of these measures to the most directly comparable GAAP measure is available in our second quarter 2026 earnings release and our supplemental information, which can be found in the investor section of the Ready Capital website.

Andrew Ahlborn: A reconciliation of these measures to the most directly comparable GAAP measure is available in our Q2 2026 earnings release and our supplemental information, which can be found in the investors section of the Ready Capital website. I will now turn it over to Chief Executive Officer, Tom Capasse.

Speaker #2: I will now turn it over to Chief Executive Officer Tom Capasse.

Speaker #3: Thank you, Andrew. Good morning, everyone, and thank you for joining today's call. The second quarter of 2026 demonstrates meaningful progress in our balance sheet repositioning strategy.

Thomas Capasse: Thank you, Andrew. Good morning, everyone, and thank you for joining today's call. The Q2 2026 demonstrates meaningful progress in our balance sheet repositioning strategy. At this juncture, we do not anticipate further large portfolio sales as our completed sales were successful in both raising liquidity and repositioning legacy assets. We have also completed several important financings and believe that multiple initiatives are coming together to meet our corporate obligations as we build towards sustainable profitability. We've been organizing our work this year around four priorities. First, strengthening liquidity to generate free cash flow in excess of our 2026 debt maturities. Second, resolving non- and sub-performing CRE assets to eliminate earnings drag. Third, transitioning to a lower-cost business model by divesting non-core business lines and integrating our CRE lending with our external manager Waterfall. Fourth, focusing on growth in our small business SBA 7 lending.

Tom Capasse: Thank you, Andrew. Good morning, everyone, and thank you for joining today's call. The Q2 2026 demonstrates meaningful progress in our balance sheet repositioning strategy. At this juncture, we do not anticipate further large portfolio sales as our completed sales were successful in both raising liquidity and repositioning legacy assets. We have also completed several important financings and believe that multiple initiatives are coming together to meet our corporate obligations as we build towards sustainable profitability. We've been organizing our work this year around four priorities. First, strengthening liquidity to generate free cash flow in excess of our 2026 debt maturities. Second, resolving non- and sub-performing CRE assets to eliminate earnings drag. Third, transitioning to a lower-cost business model by divesting non-core business lines and integrating our CRE lending with our external manager Waterfall. Fourth, focusing on growth in our small business SBA 7 lending.

Speaker #3: At this juncture, we do not anticipate further large portfolio sales as our completed sales were successful in both raising liquidity and repositioning legacy assets.

Speaker #3: We have also completed several important financings and believe that multiple initiatives are coming together to meet our corporate obligations as we build toward sustainable profitability.

Speaker #3: We've ve been organizing our work this year around four priorities. First, strengthening liquidity to generate free cash flow and excess of our 2026 debt maturities.

Speaker #3: Second, resolving non- and sub-performing CRE assets to eliminate earnings drag. Third, transitioning to a lower-cost business model by divesting non-core business lines and integrating our CRE lending with our external manager waterfall.

Speaker #3: And fourth, focusing on growth in our small business SBA 7A lending. On liquidity, we are nearing completion of the initiatives we started at the end of 2025.

Thomas Capasse: On liquidity, we are nearing completion of the initiatives we started at the end of 2025. Since our Q1 earnings, we have completed the following actions. First, the sale of our $167 million construction portfolio, generating $64 million of net liquidity and removing $172 million of future funding obligations. Second, the securitization of $158 million of unguaranteed SBA 7 loans at a 92% advance priced at SOFR plus 240 basis points. The transaction generated $25 million of net liquidity and $500 million of additional funding capacity for 7 production. Third, the disposition of $445 million of CRE assets for net liquidity of $85 million. Fourth, the successful refinance of the Portland Ritz asset into a C-PACE loan.

Tom Capasse: On liquidity, we are nearing completion of the initiatives we started at the end of 2025. Since our Q1 earnings, we have completed the following actions. First, the sale of our $167 million construction portfolio, generating $64 million of net liquidity and removing $172 million of future funding obligations. Second, the securitization of $158 million of unguaranteed SBA 7 loans at a 92% advance priced at SOFR plus 240 basis points. The transaction generated $25 million of net liquidity and $500 million of additional funding capacity for 7 production. Third, the disposition of $445 million of CRE assets for net liquidity of $85 million. Fourth, the successful refinance of the Portland Ritz asset into a C-PACE loan.

Speaker #3: Since our first quarter earnings, we have completed the following actions: first, the sale of our 167 million construction portfolio generating 64 million of net liquidity and removing 172 million of future funding obligations.

Speaker #3: Second, the securitization of 158 million of unguaranteed SBA 7A loans at a 92% advance priced at SOFR plus 240 basis points. The transaction generated 25 million of net liquidity and 500 million of additional funding capacity for 7A production.

Speaker #3: Third, the disposition of 445 million of CRE assets for net liquidity of 85 million and fourth, the successful refinance of the Portland Ritz asset into a CPACE loan.

Speaker #3: These items, together with prior loan sales and portfolio runoff, have generated approximately 1.9 billion of cash, which has been used to pay down 1.7 billion of asset level and corporate debt.

Thomas Capasse: These items, together with prior loan sales and portfolio runoff, have generated approximately $1.9 billion of cash that has been used to pay down $1.7 billion of asset level and corporate debt. We now have achieved approximately 81% of our target liquidity objective. Three initiatives to complete the final leg of our liquidity plan are underway. Optimizing the financing of approximately $950 million of CRE loans, the sale or financing of our $118 million joint venture position, and the H2 anticipated runoff of approximately $900 million of CRE loans. Additionally, we continue to evaluate the potential refinance of a portion of the October maturity, which will help to further accelerate earnings recovery as we move into 2027. On the CRE portfolio, following this quarter's actions, the legacy loan book stands at approximately $2.7 billion across 172 positions with an additional $218 million of CMBS exposure.

Tom Capasse: These items, together with prior loan sales and portfolio runoff, have generated approximately $1.9 billion of cash that has been used to pay down $1.7 billion of asset level and corporate debt. We now have achieved approximately 81% of our target liquidity objective. Three initiatives to complete the final leg of our liquidity plan are underway. Optimizing the financing of approximately $950 million of CRE loans, the sale or financing of our $118 million joint venture position, and the H2 anticipated runoff of approximately $900 million of CRE loans. Additionally, we continue to evaluate the potential refinance of a portion of the October maturity, which will help to further accelerate earnings recovery as we move into 2027. On the CRE portfolio, following this quarter's actions, the legacy loan book stands at approximately $2.7 billion across 172 positions with an additional $218 million of CMBS exposure.

Speaker #3: We now have achieved approximately 81% of our target liquidity objective. Three initiatives to complete the final leg of our liquidity plan are underway. Optimizing the financing of approximately 950 million of CRE loans, the sale or financing of our 118 million joint venture position, and the second half participated runoff of approximately 900 million of CRE loans.

Speaker #3: Additionally, we continue to evaluate the potential refinance of a portion of the October maturity, which will help to further accelerate earnings recovery as we move into 2027.

Speaker #3: On the CRE portfolio, following this quarter's actions, the legacy loan book stands at approximately $2.7 billion, across 172 positions, with an additional $218 million of CMBS exposure.

Speaker #3: 37% of roughly $1 billion of the loan book comprises sub- and non-performing assets, whose current status produces a greater net present value through active asset management on our balance sheet versus sales in the secondary market.

Thomas Capasse: 37% or roughly $1 billion of the loan book comprises sub and non-performing assets whose current status produces a greater net present value through active asset management on our balance sheet versus sales in the secondary market. We continuously monitor assets to determine the best path forward maximizing value which may include sales. The sub and non-performing loans have an average duration of 11 months, average market to market LTVs of 82% and are marked at 85%. The current equity held in sub and non-performing loans is $436 million. In our performing loan book totaling $572 million in equity, leverage yields equal 10.1%. As of quarter end, we had $588 million of REO across 24 properties. The Ritz property remains our largest REO asset, representing 66% of total REO and approximately 22% of quarter end stockholders' equity. We believe our stabilization strategy is working.

Tom Capasse: 37% or roughly $1 billion of the loan book comprises sub and non-performing assets whose current status produces a greater net present value through active asset management on our balance sheet versus sales in the secondary market. We continuously monitor assets to determine the best path forward maximizing value which may include sales. The sub and non-performing loans have an average duration of 11 months, average market to market LTVs of 82% and are marked at 85%. The current equity held in sub and non-performing loans is $436 million. In our performing loan book totaling $572 million in equity, leverage yields equal 10.1%. As of quarter end, we had $588 million of REO across 24 properties. The Ritz property remains our largest REO asset, representing 66% of total REO and approximately 22% of quarter end stockholders' equity. We believe our stabilization strategy is working.

Speaker #3: We continuously monitor assets to determine the best path forward, maximizing value, which may include sales. The sub and non-performing loans have an average duration of 11 months, average mark-to-market LTVs of 82%, and are marked at 85%.

Speaker #3: The current equity held in sub and non-performing loans is 436 million. In our performing loan book, totaling 572 million in equity, leverage yields equal 10.1%.

Speaker #3: As of quarter end, we had 588 million of REO across 24 properties. The risk property remains our largest REO asset, representing 66% of total REO and approximately 22% of quarter end stockholders' equity.

Speaker #3: We believe our stabilization strategy is working. We now have sold 50 condominium units and have three under contract, bringing the sell-out to 40% of the total.

Thomas Capasse: We now sold 50 condominium units and have three under contract, bringing the sellout to 40% of the total. Sales progress remains consistent with our phase strategy of building momentum toward a full sellout. On the hotel, we continue to realize linear improvement in operating performance. Hotel NOI was $1 million in the quarter. Trailing 12-month occupancy rose 10% to 52%. ADR decreased 4% to $468, and room RevPAR increased 20% to $244 compared to the same period last year. As we move forward, we will determine the optimal path forward for the property, whether that's continued stabilization or monetization. The current earnings drag across our non- and sub-performing in REO was $0.29 per share in the quarter. In our SBA 7 platform, capital constraints at the start of the quarter resulted in Q2 origination volume of $82 million, which is well below production capacity.

Tom Capasse: We now sold 50 condominium units and have three under contract, bringing the sellout to 40% of the total. Sales progress remains consistent with our phase strategy of building momentum toward a full sellout. On the hotel, we continue to realize linear improvement in operating performance. Hotel NOI was $1 million in the quarter. Trailing 12-month occupancy rose 10% to 52%. ADR decreased 4% to $468, and room RevPAR increased 20% to $244 compared to the same period last year. As we move forward, we will determine the optimal path forward for the property, whether that's continued stabilization or monetization. The current earnings drag across our non- and sub-performing in REO was $0.29 per share in the quarter. In our SBA 7 platform, capital constraints at the start of the quarter resulted in Q2 origination volume of $82 million, which is well below production capacity.

Speaker #3: Sales progress remains consistent with our phase strategy of building momentum toward a full sell-out. On the hotel, we continue to realize linear improvement in operating performance.

Speaker #3: Hotel NOI was 1 million in the quarter. Trailing 12-month occupancy rose 10% to 52%. ADR decreased 4% to 468 dollars. And room rev par increased 20% to 244 dollars compared to the same period last year.

Speaker #3: As we move forward, we will determine the optimal path forward for the property, whether that's continued stabilization or monetization. The current earnings drag across our non- and sub-performing and REO was $0.29 per share in the quarter.

Speaker #3: In our SBA 7(a) platform, capital constraints at the start limited origination volume to $82 million, which is well below production capacity. We've addressed those constraints with the completion of our SBA 7(a) securitization in June, which we believe will provide capital for approximately $500 million of incremental go-forward volume. We intend to accelerate our capital levels through more frequent SBA 7(a) ABS offerings.

Thomas Capasse: We've addressed those constraints with the completion of our SBA 7 securitization in June, which we believe will provide capital for approximately $500 million of incremental go-forward volume. We intend to accelerate our capital level through more frequent SBA 7 ABS offerings. Since completing the securitization, we have originated $43 million of 7 loans. We have a current money up pipeline of $78 million. We expect steady growth towards our annual target of $1.5 billion of originations. Turning to expenses, we are executing a targeted cost optimization program to align our cost structure with our go-forward business model. This includes targeted organizational efficiency initiatives, divestiture of non-core businesses and assets, and deeper integration of our CRE lending platform with Waterfall. We expect these initiatives will materially lower our OpEx ratio and improve operating leverage.

Tom Capasse: We've addressed those constraints with the completion of our SBA 7 securitization in June, which we believe will provide capital for approximately $500 million of incremental go-forward volume. We intend to accelerate our capital level through more frequent SBA 7 ABS offerings. Since completing the securitization, we have originated $43 million of 7 loans. We have a current money up pipeline of $78 million. We expect steady growth towards our annual target of $1.5 billion of originations. Turning to expenses, we are executing a targeted cost optimization program to align our cost structure with our go-forward business model. This includes targeted organizational efficiency initiatives, divestiture of non-core businesses and assets, and deeper integration of our CRE lending platform with Waterfall. We expect these initiatives will materially lower our OpEx ratio and improve operating leverage.

Speaker #3: Since completing the securitization, we have originated $43 million of 7A loans and have a current money-up pipeline of $78 million. We expect steady growth toward our annual target of $1.5 billion of originations.

Speaker #3: Turning to expenses, we are executing a targeted cost optimization program to align our cost structure with our go-forward business model. This includes targeted organizational efficiency initiatives, divestiture of non-core businesses and assets, and deeper integration of our CRE lending platform with Waterfall.

Speaker #3: We expect these initiatives will materially lower our operating expense ratio and improve operating leverage. In summary, we remain equally focused on the completion of our liquidity plan and the action items needed to return the business to profitability.

Thomas Capasse: In summary, we remain equally focused on the completion of our liquidity plan and the action items needed to return the business to profitability. We still have steps to complete in order to meet our 2026 corporate obligations, concurrent actions to accelerate resolutions, reduce operating costs, and increase capital deployment into new investments that focus on our SBA 7(a) and CRE platforms position the company for improvement as we move forward. With that said, I'll now turn it over to Andrew for a detailed review of the quarterly results.

Tom Capasse: In summary, we remain equally focused on the completion of our liquidity plan and the action items needed to return the business to profitability. We still have steps to complete in order to meet our 2026 corporate obligations, concurrent actions to accelerate resolutions, reduce operating costs, and increase capital deployment into new investments that focus on our SBA 7(a) and CRE platforms position the company for improvement as we move forward. With that said, I'll now turn it over to Andrew for a detailed review of the quarterly results.

Speaker #3: While we still have steps to complete in order to meet our 2026 corporate obligations, concurrent actions to accelerate resolutions, reduce operating costs, and increase capital deployment into new investments that focus on our SBA 7A and CRE platforms position the company for improvement as we move forward.

Speaker #3: With that said, I'll now turn it over to Andrew for a detailed review of the quarterly results.

Speaker #2: Thanks, Tom. Second quarter earnings and balance sheet reflect a continuation of the repositioning plan Tom described, and importantly, a deceleration in the pressures that have weighed on our results.

Andrew Ahlborn: Thanks, Tom. Second quarter earnings and balance sheet reflect a continuation of the repositioning plan Tom described, and importantly, a deceleration in the pressures that have weighed on our results. For the quarter, we reported a GAAP loss from continuing operations of $0.63 per common share, an improvement from the $1.25 loss in the first quarter. Distributable earnings were a loss of $0.47 per common share and a loss of $0.24 per common share, excluding realized losses on asset sales, compared to losses of $1.33, respectively, in the prior quarters. At quarter end, book value per share was $6.83 versus $7.43 at 31 March. A decline of 8.1%, which is a substantial deceleration from the 15.5% and 14.5% per share declines in the two prior quarters and reflects the wind down of the loan sale program.

Speaker #2: For the quarter, we reported a GAAP loss from continuing operations of $0.63 per common share, an improvement from the $1.25 loss in the first quarter.

Speaker #2: Distributor earnings were a loss of $0.47 per common share and a loss of $0.24 per common share, excluding realized losses on asset sales.

Speaker #2: Compared to losses of $1.33 respectively in the prior quarters. At quarter end, book value per share was $6.83 versus $7.43 at March 31st. A decline of 8.1%, which is a substantial deceleration from the 15.5% and 14.5% per share declines in the two prior quarters and reflects the wind-down of the loan sale program.

Speaker #2: The change was primarily due to approximately $0.23 per share of realized losses on asset sales, approximately $0.12 per share of net loan loss provisioning and valuation allowances, and the balance from the operating loss in the quarter.

Andrew Ahlborn: The change was primarily due to approximately $0.23 per share of realized losses on asset sales, approximately $0.12 per share of net loan loss provisioning and valuation allowances, and the balance from the operating loss in the quarter. The net loss from normal operations was impacted by the following revenue and expense items. On the revenue side, reoccurring revenue was $15.3 million compared to $16.2 million in the prior quarter. The change was driven by an $8.7 million improvement in the net interest loss, offset by a $2 million reduction in gain on sale revenue and a $7.5 million reduction in other reoccurring revenue. The improvement in the net interest loss was due to a $445 million reduction in secured borrowings and continued corporate debt paydown, more than offsetting $4.3 million in lower interest income, which settled at $77.4 million as the CRE portfolio continued to contract.

Speaker #2: The net loss from normal operations was impacted by the following revenue and expense items. On the revenue side, reoccurring revenue was 15.3 million compared to 16.2 million in the prior quarter.

Speaker #2: The change was driven by a 8.7 million improvement in the net interest loss offset by $2 million reduction in gain on sale revenue and a 7.5 million reduction in other reoccurring revenue.

Speaker #2: The improvement in the net interest loss was due to a 445 million reduction in secured borrowings and continued corporate debt paydown. More than offsetting 4.3 million in lower interest income which shuttled at 77.4 million as the CRE portfolio continued to contract.

Speaker #2: We expect net interest income to continue improving as not accrual loans and REO are resolved. Asset level and corporate debt are reduced. And capital is recycled into current market yield.

Andrew Ahlborn: We expect net interest income to continue improving as non-accrual loans and REO are resolved, asset level and corporate debt are reduced, and capital is recycled into current market yields. On the expense side, operating expenses improved to $48.7 million from $67.7 million. This was primarily due to normalization of servicing expenses to $3.4 million from $15.4 million, which previously included $6.7 million of non-reoccurring servicer advance reimbursements tied to the Q1 CLO collapses. Additionally, the net loss on the risk position improved $1.2 million in the quarter. Other items included in earnings improved $80.2 million quarter-over-quarter to a loss of $68.3 million. The improvement was primarily due to lower realized losses, which equaled $27.9 million, and lower loan loss reserves and evaluation allowances, which equaled $20.1 million. Regarding liquidity and capitalization, we ended the quarter with $124.1 million of unrestricted cash.

Speaker #2: On the expense side, operating expenses improved to $48.7 million from $67.7 million. This was primarily due to the normalization of servicing expenses to $3.4 million from $15.4 million.

Speaker #2: Which previously included 6.7 million of non-reoccurring servicer advance reimbursements tied to the first quarter CLO collapses. Additionally, the net loss on the risk position improved 1.2 million in the quarter.

Speaker #2: Other items included in earnings improved $80.2 million quarter over quarter, to a loss of $68.3 million. The improvement was primarily due to lower realized losses, which equaled $27.9 million, and lower loan loss reserves and evaluation allowances, which equaled $20.1 million.

Speaker #2: Regarding liquidity and capitalization, we ended the quarter with 124.1 million of unrestricted cash, total assets declined to 6.26 billion from 6.31 billion on March 31st.

Andrew Ahlborn: Total assets declined to $6.26 billion from $6.31 billion on 31 March. Total leverage was three times, trending towards our two and a half times target. We held $690 million of unencumbered assets at quarter end. With that, we will open the line for questions.

Speaker #2: Total leverage was three times trending towards our 2.5 times target. And we held 690 million of unencumbered assets at quarter end. With that, we will open the line for questions.

Speaker #1: Thank you. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

Operator: Thank you. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment please while we pull for questions. Our first question comes from the line of Crispin Love with Piper Sandler. Please proceed with your question.

Speaker #1: You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Speaker #1: One moment, please, while we pull for questions. Our first question comes from the line of Crispin Love with Piper Sandler. Please proceed with your question.

Speaker #3: Thank you, good morning, everyone. First, on meeting the fourth quarter debt maturities, can you share just what else needs to be done to be able to do that?

Crispin Love: Thank you. Good morning, everyone. First, on meeting the Q4 debt maturities, can you share just what else needs to be done to be able to do that? Is it driven by continued sales of loans? Just how close are you to accomplishing that? What are you targeting for the remainder of 2026 as it relates for CRE and REO dispositions and runoff?

Speaker #3: Is it driven by continued sales of loans? And then, just how close are you to accomplishing that? And then, what are you targeting for the remainder of 2026 as it relates to CRE and ROE dispositions and runoff?

Speaker #4: Yeah, just to contextualize that, Crispin, we embarked on a liquidity plan in the fourth quarter. And then, through organic liquidity, which is portfolio runoff supplemented by loan sales, we raised almost $2 billion, which was used to pay down $1.7 billion of unsecured and corporate debt and secured debt.

Thomas Capasse: Yeah, just to contextualize that, Crispin, we embarked on a liquidity plan in Q4. Through organic liquidity, which is portfolio runoff supplemented by loan sales, we raised almost $2 billion, which was used to pay down $1.7 billion of secure, unsecured and corporate debt and secured debt. As of today, we are in what I'd characterize as the eighth inning, the only major difference here is that we are no longer budgeting loan sales at this stage. Maybe opportunistically at the loan level here and there as part of an asset management strategy.

Tom Capasse: Yeah, just to contextualize that, Crispin, we embarked on a liquidity plan in Q4. Through organic liquidity, which is portfolio runoff supplemented by loan sales, we raised almost $2 billion, which was used to pay down $1.7 billion of secure, unsecured and corporate debt and secured debt. As of today, we are in what I'd characterize as the eighth inning, the only major difference here is that we are no longer budgeting loan sales at this stage. Maybe opportunistically at the loan level here and there as part of an asset management strategy.

Speaker #4: So as of today, we're in the I characterize as the eighth inning. And the only major difference here is that we are no longer budgeting loan sales.

Speaker #4: At this stage, maybe opportunistically at the loan level here and there as part of an asset management strategy. But the balance of what we're looking at is the optimization of financing on a $950 million of performing and non-performing loans.

Thomas Capasse: The balance of what we're looking at is the optimization of financing on $950 million of performing and non-performing loans, runoff on $900 million, and a potential sale or financing on a $118 million joint venture position. There's a few other incremental liquidity initiatives, but we're confident that those three key drivers, absent any loan sales, which are not currently budgeted, will generate liquidity in excess of the 2026 remaining maturities.

Tom Capasse: The balance of what we're looking at is the optimization of financing on $950 million of performing and non-performing loans, runoff on $900 million, and a potential sale or financing on a $118 million joint venture position. There's a few other incremental liquidity initiatives, but we're confident that those three key drivers, absent any loan sales, which are not currently budgeted, will generate liquidity in excess of the 2026 remaining maturities.

Speaker #4: And runoff on 900 and potential sale or financing on a $118 million joint venture position. There's a few other incremental liquidity initiatives, but we're confident that those three key drivers absent in the loan sales, which are not currently budgeted, will generate liquidity in excess of the 2026 remaining maturities.

Speaker #3: Okay, that's helpful. And then just on the Portland mixed-use property, Tom, I believe you discussed potential monetization for that property. Is that beyond the risk—kind of hotel and residences?

Crispin Love: Okay. That's helpful. Just on The Ritz-Carlton, Portland mixed-use property, Tom, I believe you discussed potential monetization for that property. Is that beyond the Ritz-Carlton, kind of hotel and residences? Can you just discuss the process there and when you might decide if that's the right path for the property, and what are what you need to look at to see if that's the right path?

Speaker #3: And then can you discuss the process there and when you might decide if that's the right path for the property, and what kind of things you need to look at to see if that's the right path?

Speaker #4: Yeah, I'll give a high level and I'll have Dom, our chief credit officer, comment. But as you may recall, the there's three components to that mixed-use project.

Thomas Capasse: Yeah. I'll give a high level, and I'll have Dom, our Chief Credit Officer, comment. As you may recall, there's three components to that mixed-use project. One is obviously the core is The Ritz-Carlton, Portland, which continues to meet its stabilization target as measured by RevPAR, occupancy, et cetera. One of the big decisions we made there, which has been very successful, is working with Marriott to reduce the ADR to increase occupancy. That strategy, that is about 50% of the value, and that continues to continues on a trajectory. The second component, which is about 40%, is the condos. And we've embarked with Christie's International Real Estate on a four-phase project going back to earlier late last year.

Tom Capasse: Yeah. I'll give a high level, and I'll have Dom, our Chief Credit Officer, comment. As you may recall, there's three components to that mixed-use project. One is obviously the core is The Ritz-Carlton, Portland, which continues to meet its stabilization target as measured by RevPAR, occupancy, et cetera. One of the big decisions we made there, which has been very successful, is working with Marriott to reduce the ADR to increase occupancy. That strategy, that is about 50% of the value, and that continues to continues on a trajectory. The second component, which is about 40%, is the condos. And we've embarked with Christie's International Real Estate on a four-phase project going back to earlier late last year.

Speaker #4: One is the obviously the core is the Ritz-Carlton Hotel, which continues to meet its stabilization target as measured by RevPAR occupancy, etc., and one of the big decisions we made there, which has been very successful, is working with Marriott to reduce the ADR to increase occupancy.

Speaker #4: So that strategy, that is about 50% of the value and that continues to continues on a trajectory. The second component, which is about 40%, is the condos and we've embarked with Christie's on a four-phase project going back to earlier late last year.

Speaker #4: We're in phase two now, and we're on target in terms of both pricing and number. Actually, we're ahead of schedule on the number of units sold. With those under contract plus what we've sold, we're at about 40% at this stage.

Thomas Capasse: We're in phase II now, we're on target in terms of both pricing and number. Actually, ahead of schedule on number of units sold. With those under contract plus what we've sold, we're at about 40% at this stage. Finally, there's the office, which is about, I think, 26% occupied, which we're continuing to look at. We're getting some tenant traffic there, but that's only 10%. All of that together, we have a very aggressive plan for which is on or ahead of target. That will lead, to answer your question, that will lead to a decision to monetize it at some point in the coming quarters.

Tom Capasse: We're in phase II now, we're on target in terms of both pricing and number. Actually, ahead of schedule on number of units sold. With those under contract plus what we've sold, we're at about 40% at this stage. Finally, there's the office, which is about, I think, 26% occupied, which we're continuing to look at. We're getting some tenant traffic there, but that's only 10%. All of that together, we have a very aggressive plan for which is on or ahead of target. That will lead, to answer your question, that will lead to a decision to monetize it at some point in the coming quarters.

Speaker #4: And finally, there's the office, which is about, I think, 26% occupied, which we're continuing to look at we're getting some tenant traffic there, but that's only 10%.

Speaker #4: So all of that together is we have a very aggressive plan for which is on or ahead of target. And so that will lead to answer your question, that will lead to a decision to monetize it at some point in the next the coming quarters.

Speaker #3: Great. Thank you. I appreciate you taking my questions.

Crispin Love: Great. Thank you. I appreciate you taking my question.

Speaker #1: Thank you. Once again, if you'd like to join the question queue, please press star 1 on your telephone keypad. Our next question comes from the line of Jade Rahmani with KBW.

Operator: Thank you. Once again, if you'd like to join the question queue, please press star one on your telephone keypad. Our next question comes from the line of Jade Rahmani with KBW. Please proceed with your question.

Speaker #1: Please proceed with your.

Speaker #3: Thank you very much. Can you say more about the $118 million joint venture investment? What is that exactly?

Thomas Capasse: Thank you.

Thomas Capasse: Thank you very much. Can you say more about the USD 118 million joint venture investment? What is that exactly?

Jade Rahmani: Thank you very much. Can you say more about the USD 118 million joint venture investment? What is that exactly?

Speaker #4: Yeah, Jade, that was a that was historically ReadyCap had purchased equity interests in CRE equity from the external manager who had a strategy around accessing those investments at a very cheap levels in the context of the fair value options on CMBS deals.

Thomas Capasse: Yeah, Jade, that was a, that was historically, ReadyCap had purchased equity interests in CRE equity from the external manager who had a strategy around accessing those investments at very cheap levels in the context of the fair value options on CMBS deals. That was in turn converted into a fund was raised around that strategy and ReadyCap converted its interest in those CRE equity investments into an investment in the fund. It is essentially an LP interest in a waterfall-managed CRE fund, which is currently unencumbered.

Tom Capasse: Yeah, Jade, that was a, that was historically, ReadyCap had purchased equity interests in CRE equity from the external manager who had a strategy around accessing those investments at very cheap levels in the context of the fair value options on CMBS deals. That was in turn converted into a fund was raised around that strategy and ReadyCap converted its interest in those CRE equity investments into an investment in the fund. It is essentially an LP interest in a waterfall-managed CRE fund, which is currently unencumbered.

Speaker #4: So that was in turn converted into a fund was raised around that strategy and ReadyCap converted its interests in those CRE equity investments into an investment in the fund.

Speaker #4: So, it's essentially an LP interest in a waterfall-managed CRE fund, which is currently unencumbered.

Speaker #3: Okay, but I assume that the underlying investments have leverage on them. Or did they not?

Jade Rahmani: Okay. I assume that the underlying investments have leverage on them or do they not?

Thomas Capasse: They're Yes, they're just traditional CRE equity investments. There is about 30 line items in the portfolio.

Tom Capasse: They're Yes, they're just traditional CRE equity investments. There is about 30 line items in the portfolio.

Speaker #4: Yeah, they're just traditional CRE equity investments. There's about 30 line items in the portfolio.

Speaker #3: So, this investment can be leveraged?

Jade Rahmani: This can be leveraged, this investment?

Speaker #4: Yes, it's a straight-up LP interest in a fund that's in its harvest period. So it's very short duration. And so there's, as you probably know, there's a whole growth area in the banking industry and non-banks with these fund finance fund financing on LP interests as well as a secondary market for sale.

Thomas Capasse: Yes. It's a straight up LP interest in a fund that's in its harvest period. It's very short duration. There's, as you probably know, there's a whole growth area in the banking industry and non-banks with these fund finance fund, you know, fund financing, at, on LP interest as well as a secondary market for sale. That's what we've been evaluating in the context of this being a good asset that's unlevered.

Tom Capasse: Yes. It's a straight up LP interest in a fund that's in its harvest period. It's very short duration. There's, as you probably know, there's a whole growth area in the banking industry and non-banks with these fund finance fund, you know, fund financing, at, on LP interest as well as a secondary market for sale. That's what we've been evaluating in the context of this being a good asset that's unlevered.

Speaker #4: So that's what we've been evaluating in the context of this being a good asset that's unlevered.

Speaker #3: And the $2.7 billion CRE loan book, how much leverage both secured and unsecured is currently on that portfolio?

Jade Rahmani: The $2.7 billion CRE loan book, how much leverage, both secured and unsecured, is currently on that portfolio?

Speaker #4: Andrew, you want to comment?

Thomas Capasse: Andy, you wanna comment?

Tom Capasse: Andy, you wanna comment?

Speaker #3: Yeah. So, on the asset-level side, to the extent not securitized, average advance rates there are in the low 60s. So the majority of that book is leveraged, with the exception of the unencumbered portfolio, which on the loan side is roughly $300 million or so.

Andrew Ahlborn: On the asset level side, to the extent not securitized, average advance rates there are in the low 60s. The majority of that book is levered with the exception of the unencumbered portfolio, which, you know, on the loan side is roughly $300 million or so. On the securitized side, it is really, given all the CLOs have been collapsed, it is really limited to our legacy fixed-rate product, as well as some of the small balance commercial loans we bought

Speaker #3: And then, on the securitized side, it's really, given all the CLOs have been collapsed, it's really limited to our legacy fixed-rate product, as well as some of the small-balance commercial loans we bought.

Speaker #3: At the start of the company, so typically the warehouse leverage advance rates are in the low 60s. But in aggregate, that doesn't include the corporate leverage.

Andrew Ahlborn: At the start of the company. Typically, the warehouse leverage advance rates are in the low 60s.

Jade Rahmani: In aggregate, that does not include the corporate leverage. The 60s advance rate goes up, including the corporate leverage. What is the total leverage that you would associate?

Speaker #3: So, the 60s advance rate goes up, including the corporate leverage. So, what's the total leverage that you would associate with the $2.7 billion portfolio?

Thomas Capasse: Our-

Tom Capasse: Our-

Jade Rahmani: with this $2.7 billion portfolio?

Speaker #2: Yeah, so on the corporate leverage on the secured side, the majority of that secured debt is sort of equity pledges of entities throughout the structure.

Thomas Capasse: Yeah. On the corporate leverage on the secured side, the majority of that secured debt is sort of equity pledges of entities throughout the structure. The majority or a good portion of that debt equity is in CRE assets. That's really how it's done. It's not a direct pledge of that CRE collateral.

Tom Capasse: Yeah. On the corporate leverage on the secured side, the majority of that secured debt is sort of equity pledges of entities throughout the structure. The majority or a good portion of that debt equity is in CRE assets. That's really how it's done. It's not a direct pledge of that CRE collateral.

Speaker #2: The majority or a good portion of that equity is in CRE assets. So that's really how it's done. It's not a direct pledge of that CRE collateral.

Speaker #3: So I mean, just from my vantage point as an outsider, looking at this, it seems challenging to raise $450 million of equity capital in order to pay off the upcoming maturities.

Jade Rahmani: Just from my vantage point as an outsider looking at this, it seems challenging to raise $450 million of equity capital in order to pay off the upcoming maturities. I'm surprised to hear that the loan asset sale program, that you're not going to be doing that. I would've thought you would continue to do that as the way to make sure you meet these maturities.

Speaker #3: So I'm surprised to hear that the loan asset sale program has been that you're not going to be doing that. I would have thought it would continue to do that as the way to make sure you meet these maturities.

Speaker #4: You know, Jade, I think the and totally understand the comment, but what we constantly evaluate is the discount for sale and secondary market versus on-balance sheet strategies.

Thomas Capasse: Jade, totally understand the comment, what we constantly evaluate is the discount for sale in the secondary market versus on-balance-sheet strategies. We're talking about, obviously, a smaller number of line items now. The billion-dollar non-performing portfolio, for example, is down to 44 assets. It's very finite, away from loan sales, we have very strong financing counterparties. There's a lot of liquidity available for these assets. What we've done is we've focused on optimization of the existing remaining legacy book as an alternative to loan sales, that is generating that plus cash on hand and the other liquidity initiatives that we've talked about, or the runoff on the portfolio. Those three items will have enough cash to pay off the debt with a comfortable margin.

Tom Capasse: Jade, totally understand the comment, what we constantly evaluate is the discount for sale in the secondary market versus on-balance-sheet strategies. We're talking about, obviously, a smaller number of line items now. The billion-dollar non-performing portfolio, for example, is down to 44 assets. It's very finite, away from loan sales, we have very strong financing counterparties. There's a lot of liquidity available for these assets. What we've done is we've focused on optimization of the existing remaining legacy book as an alternative to loan sales, that is generating that plus cash on hand and the other liquidity initiatives that we've talked about, or the runoff on the portfolio. Those three items will have enough cash to pay off the debt with a comfortable margin.

Speaker #4: And we're talking about obviously a smaller number of line items now. The billion-dollar non-performing portfolio, for example, is down to 44 assets. So it's very finite.

Speaker #4: And so we have very strong away from loan sales, we have very strong financing counterparties. There's a lot of liquidity available for these assets.

Speaker #4: So, what we've done is we've focused on optimization of the existing remaining legacy book as an alternative to loan sales. That is generating, along with cash on hand and the other liquidity initiatives that we've talked about, or the runoff on the portfolio.

Speaker #4: Those three items will have enough cash to pay off the debt with a comfortable margin.

Speaker #3: Okay. And so, post all of this, do you think the company can get back to profitability based on its existing capital base—whatever that will look like after all of these remaining actions are effectuated?

Jade Rahmani: Okay. Post all of this, do you think the company can get back to profitability based on its existing capital base, whatever that will look like after all of these remaining actions are effectuated?

Speaker #4: Yes. And it's a very straightforward answer. And as you know, the in one shade of gray or another, many in the sector are undertaking this exercise.

Thomas Capasse: Yes, it's a very straightforward answer. As you know, in one shade of gray or another, many in the sector are undertaking this exercise. With respect to Ready, the first is the recycling of the legacy book, which is $2.7 billion. We've changed the characterization of the portfolio, performing, non-performing, to enable analysts and investors to track the success there. I do point out that the duration of that book, the $1 billion of non-performing, is only 11 months. It's a very quick runoff, and it's 44 assets. The other component of the legacy book, obviously, is the 24 REO units, of which the Ritz is the largest. Those have very defined, relatively short duration runoff too.

Tom Capasse: Yes, it's a very straightforward answer. As you know, in one shade of gray or another, many in the sector are undertaking this exercise. With respect to Ready, the first is the recycling of the legacy book, which is $2.7 billion. We've changed the characterization of the portfolio, performing, non-performing, to enable analysts and investors to track the success there. I do point out that the duration of that book, the $1 billion of non-performing, is only 11 months. It's a very quick runoff, and it's 44 assets. The other component of the legacy book, obviously, is the 24 REO units, of which the Ritz is the largest. Those have very defined, relatively short duration runoff too.

Speaker #4: But with respect to Ready, it's the first is the recycling of the legacy book, which is $2.7 billion. And we've changed the characterization of the portfolio performing non-performing to enable analysts and investors to track the success there.

Speaker #4: But I do point out that the duration of that book is—the billion dollars of non-performing—is only 11 months. So it's a very quick runoff.

Speaker #4: And it's 44 assets. The other component of the legacy book, obviously, is the 24 REO units, of which the rich is the largest. And those have very defined relatively short duration runoff too.

Speaker #4: So the big part, the first leg of the stool on the reboot of the earnings is the runoff of the legacy book, which we're highly confident that it is these short duration and will be realized.

Thomas Capasse: The first leg of the stool on the reboot of the earnings is the runoff of the legacy book, which we're highly confident that it's short duration and will be realized. We're also looking at joint ventures and other ideas, quasi-securitizations to accelerate that effort. The second thing is obviously now that we've fixed the liquidity and warehouse line structure in our SBA business, that is obviously highly profitable, that'll be the ramp in originations there will be the second leg of the stool. Finally, OpEx. We expect through 3 approaches. One is just a natural reduction in staffing and vendors associated with the portfolio runoff. Two, the second thing being divestiture of ancillary businesses, all of which are in flight. The third is integration with the external managers' CRE lending businesses to source investments.

Tom Capasse: The first leg of the stool on the reboot of the earnings is the runoff of the legacy book, which we're highly confident that it's short duration and will be realized. We're also looking at joint ventures and other ideas, quasi-securitizations to accelerate that effort. The second thing is obviously now that we've fixed the liquidity and warehouse line structure in our SBA business, that is obviously highly profitable, that'll be the ramp in originations there will be the second leg of the stool. Finally, OpEx. We expect through 3 approaches. One is just a natural reduction in staffing and vendors associated with the portfolio runoff. Two, the second thing being divestiture of ancillary businesses, all of which are in flight. The third is integration with the external managers' CRE lending businesses to source investments.

Speaker #4: And we're also looking at joint ventures and other ideas quasi-securitizations to accelerate that effort. The second thing is obviously the now that we've fixed the liquidity and warehouse line structure and our SBA business, that is obviously highly profitable.

Speaker #4: And that'll be the ramp, and originations there will be the second leg of the stool. And finally, opex. We expect, through three approaches, one is just a natural reduction in staffing and vendors associated with the portfolio runoff.

Speaker #4: Two, the second thing being divestiture of ancillary businesses, all of which are in flight. And the third is integration with the external managers CRE lending businesses to source investments.

Speaker #4: Those three things will result in a targeted $25 to $35% reduction in opex. So those are the three legs of the stool, the runoff of the legacy book, focus on the and doubling down on the SBA business and the opex right sizing in that context, which will enable us to return to profitability.

Thomas Capasse: Those 3 things will result in a targeted 25% to 35% reduction in OpEx. Those are the 3 legs of the stool, the runoff of the legacy book, focus and doubling down on the SBA business, and the OpEx rightsizing in that context, which will enable us to return to profitability.

Tom Capasse: Those 3 things will result in a targeted 25% to 35% reduction in OpEx. Those are the 3 legs of the stool, the runoff of the legacy book, focus and doubling down on the SBA business, and the OpEx rightsizing in that context, which will enable us to return to profitability.

Speaker #3: Okay. Thank you for taking the questions.

Jade Rahmani: Okay. Thank you for taking the questions.

Speaker #1: Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Capassi for any final comments.

Operator: Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Capasse for any final comments.

Operator: Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Capasse for any final comments.

Speaker #4: We appreciate everybody's time today. We look forward to next quarter in terms of final updates on our repositioning plan. Thank you, everybody. Have a good day.

Thomas Capasse: We appreciate everybody's time today and look forward to next quarter in terms of final updates on our repositioning plan. Thank you, everybody. Have a good day.

Tom Capasse: We appreciate everybody's time today and look forward to next quarter in terms of final updates on our repositioning plan. Thank you, everybody. Have a good day.

Operator: Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

Q2 2026 Ready Capital Corp Earnings Call

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