Ready Capital Corp

In this Form 10-K, we refer to Ready Capital Corporation and its subsidiaries as “we,” “us,” “our,” or “our Company”

unless we specifically state otherwise or the context indicates otherwise.

General

We are a multi-strategy real estate finance company that originates, acquires, finances, and services LMM loans, SBA

loans, residential mortgage loans, construction loans, USDA loansand, to a lesser extent, MBS collateralized primarily

by LMM loans, or other real estate-related investments. Our loans range in original principal amounts generally up to

$40 million and are used by businesses to purchase real estate used in their operations or by investors seeking to acquire

multi-family, office, retail, mixed use or warehouse properties. Our objective is to provide attractive risk-adjusted returns

to our stockholders primarily through dividends. In order to achieve this objective, we continue to grow our investment

portfolio and believe that the breadth of our full-service real estate finance platform will allow us to adapt to market

conditions and deploy capital to asset classes and segments with the most attractive risk-adjusted returns.

In the fourth quarter of 2023, the Board approved a plan to strategically shift our Company’s core focus to LMM

commercial real estate lending and government backed small business loans, which contemplates the disposition of

assets and liabilities of our residential mortgage banking activities. Accordingly, as of both December 31, 2024 and

December 31, 2023, our Residential Mortgage Banking segment met the criteria to be classified as held for sale on the

consolidated balance sheets, presented as discontinued operations on the consolidated statements of income, and

excluded from continuing operations for all periods presented in this Form 10-K. Item 1. “Business” in this Form 10-K

has been adjusted to exclude discontinued operations unless otherwise noted. We report our activities in the following

two operating segments:

•LMM Commercial Real Estate. We originate LMM loans across the full life-cycle of an LMM property

including construction, bridge, stabilized and agency loan origination channels through our subsidiary,

ReadyCap Commercial, LLC (“ReadyCap Commercial”). These originated loans are generally held-for-

investment or placed into securitization structures. As part of this segment, we originate and service multi-

family loan products under the Freddie Mac SBL program. These originated loans are held for sale, and

subsequently sold to Freddie Mac. We provide construction and permanent financing for the preservation

and construction of affordable housing, primarily utilizing tax-exempt bonds through our subsidiary Red

Stone and its affiliates (“Red Stone”). In addition, we acquire LMM loans as part of our business strategy.

We hold performing LMM loans to term and seek to maximize the value of the non-performing LMM loans

acquired by us through borrower-based resolution strategies. We typically acquire non-performing loans at a

discount to their unpaid principal balance (“UPB”) when we believe that resolution of the loans will provide

attractive risk-adjusted returns.

•Small Business Lending. We acquire, originate and service owner-occupied loans guaranteed by the SBA

under the SBA Section 7(a) Program through our subsidiary, ReadyCap Lending, LLC (“ReadyCap

Lending”). We hold an SBA license as one of only 20 non-bank Small Business Lending Companies

(“SBLCs”) and have been granted preferred lender status by the SBA. These originated loans are either

held-for-investment, placed into securitization structures, or sold. In addition, we acquire, originate and

service USDA loans through our subsidiary, Madison One, as well as originate and service small business

loans through our subsidiary iBusiness Funding LLC.

To qualify as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”) we are required to annually

distribute dividends equal to at least 90% of our net taxable income, excluding capital gain, to stockholders. To the

extent that we do not distribute all of our net capital gain, or distribute at least 90%, but less than 100%, of our “REIT

taxable income,” as adjusted, we will be required to pay regular U.S. federal corporate income tax on the undistributed

amount. We are organized in a traditional umbrella partnership REIT (“UpREIT”) format pursuant to which we serve as

the general partner of, and conduct substantially all of our business through, Sutherland Partners, LP (our “operating

partnership”). We also intend to operate our business in a manner that will permit us to be excluded from registration as

an investment company under the 1940 Act.

Our Manager

We are externally managed and advised by Waterfall, an SEC registered investment adviser. Formed in 2005, Waterfall

specializes in acquiring, managing, servicing and financing LMM and residential mortgage loans, as well as asset backed

securities (“ABS”) and MBS. Waterfall has extensive experience in performing and non-performing loan acquisition,

resolution and financing strategies. Waterfall’s investment committee is chaired by Thomas Capasse, who serves as our

Chief Executive Officer and Chief Investment Officer, and Jack Ross, who serves as our President. Messrs. Capasse and

Ross, who are co-founders of Waterfall, each have over 30 years of experience in managing and financing a range of

financial assets, including having executed the first public commercial real estate asset-backed securitization for

performing loans and liquidating trusts for non-performing loans purchased from the Resolution Trust Corporation in

1993, through a variety of credit and interest rate environments. Messrs. Capasse and Ross have worked together in the

same organization for more than 30 years. They are supported by a team of approximately 160 investment and other

professionals with extensive experience in commercial mortgage credit underwriting, distressed asset acquisition and

financing, LMM loan originations, commercial property valuation, capital deployment, financing strategies and legal and

financial matters impacting our business.

We rely on Waterfall’s expertise to establish investment strategies and in identifying loan acquisitions and origination

opportunities. Waterfall uses the data and analytics developed through its experience as an owner of LMM loans and in

implementing loss mitigation actions to support our origination activities and to develop our loan underwriting standards.

Waterfall makes decisions based on a variety of factors, including expected risk-adjusted returns, credit fundamentals,

liquidity, availability of financing, borrowing costs and macroeconomic conditions, as well as maintaining our REIT

qualification and our exclusion from registration as an investment company under the 1940 Act.

Our Investment Strategy and Market Opportunities Across Our Operating Segments

Our investment strategy is to opportunistically expand our market presence and to further grow our LMM securitization

capabilities which serve as a source of attractively priced, match-term financing. Capitalizing on our experience in

underwriting and managing commercial real estate loans, we have grown our LMM and SBL origination and acquisition

capabilities. This is reflected in the growth of our balance sheet; our book value grew from $536 million as of December

31, 2017 to approximately$1.9 billion as of December 31, 2024, a 22% compound annual growth rate (“CAGR”). As

such, we have become a full-service real estate finance platform and we believe that the breadth of our business allows

us to adapt to market conditions and deploy capital in our asset classes with the most attractive risk-adjusted returns.

Our acquisition strategy complements our origination strategy by increasing our market intelligence in potential

origination geographies, providing additional data to support our underwriting criteria and offering securitization market

insight for various product offerings. The proprietary database on the causes of borrower default, loss severity, and

market information that we developed from our LMM loan acquisition experience has served as the basis for the

development of our LMM and SBL loan origination programs. Additionally, our origination strategy complements our

acquisition strategy by providing additional captive refinancing options for our borrowers and further data to support our

investment analysis while increasing our market presence with potential sellers of LMM assets.

The table below presents information with respect to our two business segments.

The commercial mortgage market is largely bifurcated by loan size between “large balance” loans and LMM loans.

Large balance commercial loans typically include those loans with original principal balances of at least $40 million and

are primarily financed by insurance companies and commercial mortgage backed securities (“CMBS”) conduits. LMM

loans typically include those loans with original principal amounts of between $500,000 and $40 million and are

primarily financed by community and regional banks, specialty finance companies and loans guaranteed under the SBA

loan programs.

LMM loans are used by small businesses to purchase real estate used in their operations or by investors seeking to

acquire small multifamily, office, retail, mixed use or warehouse properties. LMM loans represent a special category of

commercial mortgage loans, sharing both commercial and residential mortgage loan characteristics. LMM loans are

typically secured by first mortgages on commercial properties or other business assets, but because LMM loans are often

correlated to local housing markets and economic environments, aspects of residential mortgage credit analysis are

utilized in the underwriting process. Most LMM loans are amortizing on a schedule of up to 30 years.

Our investment decisions with respect to allocation of capital are dependent on prevailing market conditions and may

change over time in response to opportunities available in different economic and capital market environments. As a

result, we cannot predict the percentage of our equity that will be invested in any particular asset or strategy at any given

time.

The table below presents our historical pre-tax income(loss), net income(loss) to assets, distributable earnings and return

on equity for each of the years ended December 31,2022,2023 and 2024. See “Management’s Discussion and Analysis

of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a reconciliation of net income

to distributable earnings.

Our Loan Portfolio

As of December 31, 2024, our loan portfolio was$8.5 billion (excluding PPP loans) and was comprised of 8,422 loans

diversified across 50 states and Europe,97% of which were secured by senior liens and the remaining 3% of which were

secured by subordinated liens.

The table below presents a summary of our loan assets.

•The loan carrying value includes loan assets of consolidated variable interest entities (“VIEs”) and is net of

allowance.

•Loans with the “Other” classification are generally LMM acquired loans that have nonconforming

characteristics for the Fixed rate, Bridge, Construction, or Freddie Mac classifications due to loan size, rate

type, collateral or borrower criteria.

•Real estate, held for sale loans and mortgage servicing rights (“MSR”) are excluded.

Loan origination leads come directly through our relationships with commercial real estate brokers, bank loan officers

and mortgage brokers who refer leads to our loan officers. To a lesser extent, we also source loan leads through

commercial real estate realtors, trusted advisors such as financial planners, lawyers, and certified public accountants and

through direct-to-the-borrower transactions.

LMM Commercial Real Estate

As noted above, our LMM Commercial Real Estate segment consists of our LMM loan originations and acquisitions.

LMM Originations. We operate our LMM loan originations through ReadyCap Commercial. ReadyCap Commercial is

a specialty-finance nationwide originator focused on originating commercial real estate mortgage loans through its

agency multifamily and bridge loan programs. ReadyCap Commercial has been approved by Freddie Mac as one of 12

originators and servicers for multifamily loan products under the Freddie Mac program. We also offer construction and

permanent financing for the preservation and construction of affordable housing, primarily utilizing tax-exempt bonds

through Red Stone. Our conservative approach to credit has resulted in less than 5 basis points of losses incurred on new

originations since our inception.

We originate LMM commercial loans generally ranging in initial principal amount of between $500,000 and $40

million, and typically with an average duration of approximately two to six years at origination. Our originations focus

on first mortgage loans which provide conventional LMM mortgage financing for the full life-cycle of LMM properties

nationwide through the following programs and allocate capital across four products:

•Construction. Origination of loans and ownership of construction and pre-construction development loans

that typically have a short-term maturity profile.

•Bridge. Loans for the acquisition of properties requiring more substantial expenditures for stabilization,

secured by multifamily, office, retail, mixed use or warehouse properties. The loans are generally interest-

only and have a typical initial maturity profile of two to four years.

•Fixed rate. Loans for the acquisition or refinancing of stabilized properties secured by multifamily, office,

retail, mixed use or warehouse properties. The loans are typically amortizing and have maturities of five to

20 years.

•Freddie Mac. Origination of loans in initial principal amounts ranging from $1 million to $7.5 million

secured by multifamily properties under the Freddie Mac SBL program and loans for developers/owners of

multi-family affordable rental housing utilizing streamlined tax-exempt and taxable financing solutions.

We sell qualifying loans to Freddie Mac, which, in turn, sells such loans to securitization structures.

The following table summarizes the loan features byproduct types.

As of December 31, 2024, we have originated approximately$19.1 billion in LMM loans since Ready Capital’s

inception. As of December 31, 2024, the loans we originated had a 24.2% CAGR since inception in 2013 based on

origination volume.

The chart below summarizes our annual LMM loan originations since 2022.

We finance our LMM loans primarily through term-match securitizations.

The table below summarizes our originated LMM loan securitization activities.

We believe that we have significant opportunity to originate LMM loans at attractive risk-adjusted returns compared to

many banks that have restrictive credit guidelines for target assets. In addition, large banks are not focused on the LMM

market and smaller banks only lend in specific geographies. We believe this fragmented market, combined with the

portfolio expertise required to manage these loans, provides attractive origination and acquisition opportunities and

limits competition. We believe that increased demand, coupled with the fragmentation of the LMM lending market,

provides us with opportunities to originate loans to borrowers with strong credit profiles and real estate collateral that

supports ultimate repayment of the loans.

We expect to continue to source LMM loan originations through the following loan origination channels:

•Direct and indirect lending relationships. We generate loan origination leads directly through our relationships

with commercial real estate brokers, bank loan officers and mortgage brokers that refer leads to our loan

officers. To a lesser extent, we also source loan leads through commercial real estate realtors, trusted advisors

such as financial planners, lawyers, and certified public accountants and through direct-to-the-borrower

•Other direct origination sources. From time to time, we may enter into strategic alliances and other referral

programs with servicers, sub-servicers, strategic partners and vendors targeted at the refinancing of LMM loans.

LMM Acquisitions. Our LMM Commercial Real Estate segment also includes our acquired loans generally acquired

through mergers and acquisitions as well as non-performing LMM loans acquired by us through proprietary loan

reperformance programs.

Waterfall specializes in acquiring LMM loans that are sold by banks, including as part of bank recapitalizations or

mergers, and from other financial institutions such as thrifts and non-bank lenders. Other sources of LMM loans include

special servicers of large balance LMM ABS and CMBS trusts, the Federal Deposit Insurance Corporation (“FDIC”), as

receiver for failed banks, servicers of non-performing SBA Section 7(a) Program loans, and Community Development

Companies originating loans under the SBA 504 program, GSEs, and state economic development authorities. Over the

last several years, our Manager has developed relationships with many of these entities, primarily banks and their

advisors. In many cases, we are able to acquire LMM loans through negotiated transactions, at times partnering with

acquiring banks or private equity firms in bank acquisitions and recapitalizations. We believe that Waterfall’s

experience, reputation and ability to underwrite LMM loans make it an attractive buyer for this asset class, and that its

network of relationships will continue to produce opportunities for it to acquire LMM loans on attractive terms.

Competition for LMM loan asset acquisitions has been limited due to the special servicing expertise required to manage

LMM loan assets due to the small size of each loan, the uniqueness of the real properties that collateralize the loans,

licensing requirements, the high volume of loans needed to build portfolios, and the need to utilize residential mortgage

credit analysis in the underwriting process. These factors have limited institutional investor participation in LMM loan

acquisitions, which has allowed us to acquire LMM loans with attractive risk-adjusted return profiles.

The table below presents our acquired loan securitization activities.

LMM Asset Management Strategy. Originated LMM loans held in our portfolio had a UPB of$6.8 billion and carrying

value of$6.7 billion as of December 31, 2024. Such loans represented approximately 76% of the UPB and 78% of the

carrying value of our total loan portfolio. Acquired LMM loans held in our portfolio had a UPB of$0.8 billion and

carrying value of$0.7 billion as of December 31, 2024. Such loans represented approximately 9% of the UPB and 9% of

thecarrying value of our total loan portfolio.

When monitoring and assessing the credit quality of our loan portfolio, we bifurcate the loan portfolio into two

categories (i) Core and(ii) Non-Core. The Core portfolio generally consists of loans which we expect to hold to maturity

and generate a competitive return. The Non-Core portfolio generally consists of loans where the primary focus is near-

term liquidation and reinvestment of the equity into core assets. Core LMM loans held in our portfolio had a UPB of

$6.1 billion and a carrying value of$6.0 billion as of December 31, 2024. Such loans represented approximately 67% of

the UPB and 70% of the carrying value of our total loan portfolio. Non-Core LMM loans held in our portfolio had a

UPB of$1.6 billion and a carrying value of$1.3 billion as of December 31, 2024. Such loans represented approximately

18% of the UPB and 15% of the carrying value of our total loan portfolio. We seek to maximize the value of Non-Core

non-performing LMM loans through through the use of property sales, note sales or foreclosure sales.

The table below presents information on our LMM loan portfolio by delinquency status.

(1) Includes loan assets of consolidated VIEs and is net of allowance.

Small Business Lending

We acquire, originate, and service owner-occupied loans guaranteed by the SBA under the SBA Section 7(a) Program

through ReadyCap Lending’s license, one of only 20 licensed non-bank SBLCs. In addition, we acquire, originate and

service USDA loans through our subsidiary, Madison One, as well as originate and service small business loans through

our subsidiary iBusiness Funding LLC. Only banks and approved non-bank lenders are eligible to originate loans in the

SBA Section 7(a) Program, resulting in a highly fragmented market. We believe investor demand for pass-through

securities backed by the guaranteed portions of SBA Section 7(a) Program loans has been strong because the principal

and interest payments are guaranteed by the full faith and credit of the U.S. Government. For this reason, we believe that

SBA participating lenders that have sold the guaranteed portions of SBA Section 7(a) Program loans in recent years have

been able to recognize attractive gains.

The SBA was created out of the Small Business Act in 1953. The SBA’s function is to protect the interests of small

businesses. The SBA classifies a small business as a business that is organized for profit and is independently owned and

operating primarily within the United States with less than $15 million in tangible net worth and not more than $5

million in average after-tax net income. The SBA supports small businesses by administering several programs that

provide loan guarantees against default on qualified loans made to eligible small businesses.

The SBA Section 7(a) Program is the SBA’s primary program for providing financing for start-up and existing small

businesses. The SBA typically guarantees 75% of qualified loans over $150,000 and 85% of qualified loans under

$150,000. While the eligibility requirements of the SBA Section 7(a) Program vary depending on the industry of the

borrower and other factors, the general eligibility requirements include the following: (i) gross sales of the borrower

cannot exceed size standards set by the SBA (e.g., $40.0 million for limited service hospitality properties) or,

alternatively, average net income cannot exceed $5.0 million for the most recent two fiscal years and tangible net worth

of the borrower must be less than $15.0 million, (ii) desired credit is not available for non-federal, non-state, or non-local

government sources without SBA assistance, (iii) the borrower must be a U.S. citizen or legal permanent resident and

(iv) the maximum aggregate SBA loan guarantees to a borrower and its affiliates cannot exceed $3.75 million.

SBA Section 7(a) Program key features include:

•The use of proceeds on fixed assets, working capital, real estate, business start-up costs, purchase an existing

business or refinancing business debt.

•Maximum loan amount of $5 million;

•Real estate loans have a 25 year maturity while all other loan purposes have a ten year maturity;

•Interest rates are negotiated between applicant and lender and are subject to maximums. The current maximums

are i) For loans of $50,000 or less: Prime Rate plus 6.50% ii) For loans of $50,001 to $250,000: Prime Rate plus

6.00% iii) For loans of $250,001 to $350,000: Prime Rate plus 4.50% iv) For loans of $350,001 and greater:

Prime Rate plus 3.00%;

•The guaranty fee is based on the loan’s maturity and dollar amount guaranteed. The lender initially pays the

guaranty fee and has the option to pass the expense on to the borrower at closing. For loans with a maturity of

12 months or less, the upfront guaranty fees are: i) For loans of $1,000,000 or less: 0.00% ii) For loans greater

than $1,000,000: 0.25% of the guaranteed portion. For loans with a maturity that exceeds 12 months, the

upfront guaranty fees are: i) For loans of $1,000,000 or less: 0.00% ii) For loans of $1,000,001 to $5,000,000:

3.50% of the guaranteed portion of the loan up to and including $1,000,000 plus 3.75% of the guaranteed

portion of the loan over $1,000,000;

•The annual service fee will be i) For loans of $500,000 and less: 0.00% ii) For loans of $500,001 to $1,000,000:

0.17% of the guaranteed portion of the outstanding balance of the loan iii) For loans of $1,000,001 up to and

including $5,000,000: 0.55% of the guaranteed portion of the outstanding balance of the loan; and

•A personal guarantee is required from all owners of 20% or more of the equity of the business. Lenders can

require personal guarantees of owners with less than 20% ownership.

The illustration below presents our return on equity related to the SBA Section 7(a) Program generated through the

retained yield on the unguaranteed principal balance and sale premium and retained servicing on the guaranteed principal

balance.

We have originated approximately$3.5 billion in Small Business Lending (“SBL”) loans since our program’s inception

in mid-2015.

The table below presents our SBL loan portfolio by delinquency status.

(1) Includes loan assets of consolidated VIEs and is net of allowance.

The table below presents information on our sales of originated SBA Section 7(a) Program loans.

(1)Weighted average sales premiums are net after sharing any premiums above 10% with the SBA

The table below presents our securitization activities on the unguaranteed retained portion of our SBA Section 7(a)

Program loans.

In addition, we actively participated in the Paycheck Protection Program (the “PPP”) through the Treasury and SBA

prior to its termination in May 2021. PPP loans have: (a) an interest rate of 1.0%, (b) a five-year loan term to maturity

for loans made on or after June 5, 2020 (loans made prior to June 5, 2020 have a two-year term, however, borrowers and

lenders may mutually agree to extend the maturity for such loans to five years); and (c) principal and interest payments

deferred for six months from the date of disbursement. The SBA guaranteed 100% of the PPP loans made to eligible

borrowers. The entire principal amount of the borrower’s PPP loan, including any accrued interest, was eligible to be

reduced by the loan forgiveness amount under the PPP. These loans also earned an origination fee of 1% to 5%,

depending on the loan size.

FINANCING STRATEGY

We use prudent leverage to increase potential returns to our stockholders. We finance the loans we originate primarily

through securitization transactions, as well through other borrowings.

LMM securitization structures are non-recourse and typically provide debt equal to 50% to 90% of the cost basis of the

assets. Non-performing LMM ABS involve liquidating trusts with liquidation proceeds used to repay senior debt.

Performing LMM ABS involve longer-duration trusts with principal and interest collections allocated to senior debt and

losses on liquidated loans to equity and subordinate tranches. Our strategy includes continuing to finance our assets

through the securitization market, which will allow us to match fund the LMM loans pledged as collateral in an effort to

secure these securitizations on a long-term non-recourse basis.

We anticipate using other borrowings as part of our financing strategy, including re-securitizations, repurchase

agreements, warehouse facilities, bank credit facilities (including term loans and revolving facilities), and equity and

debt issuances.

Our financing agreements require us to maintain a debt-to-equity leverage ratio at certain levels. The amount of leverage

we may employ for particular assets will depend upon the availability of particular types of financing and Waterfall's

assessment of the credit, liquidity, price volatility and other risks of those assets and financing counterparties. We

currently target a total debt-to-equity leverage ratio between 4:1 to 4.5:1 and a recourse debt-to-equity leverage ratio

between 1.5:1 to 2:1. We believe that these target leverage ratios are conservative for these asset classes and exemplify

the conservative levels of borrowings we intend to use over time. We intend to use leverage for the primary purpose of

financing our portfolio and not for the purpose of speculating on changes in interest rates. We may, however, be limited

or restricted in the amount of leverage we may employ by the terms and provisions of any financing or other agreements

that we may enter into in the future, and we may be subject to margin calls as a result of its financing activity.

As of December 31, 2024, we had a total leverage ratio of 3.8 x and recourse leverage ratio of 1.3 x. Our operating

segments have different levels of recourse debt according to the differentiated nature of each segment. Our LMM

Commercial Real Estate and Small Business Lending segments have recourse leverage ratios of 0.4x and 0.1x,

respectively. The remaining recourse leverage ratio is from our corporate debt offerings.

HEDGING STRATEGY

Subject to maintaining our qualification as a REIT, we may use derivative financial instruments (or hedging

instruments), including interest rate swap agreements, interest rate cap agreements, options on interest rate swaps, or

swaptions, financial futures, structured credit indices, and options in an effort to hedge the interest rate and credit spread

risk associated with the financing of our portfolio. Specifically, we attempt to hedge our exposure to potential interest

rate mismatches between the interest we earn on our assets and our borrowing costs caused by fluctuations in short-term

interest rates, and we intend to hedge our LMM loan originations from the date the interest rate is locked until the loan is

included in a securitization. We also use derivative instruments to limit our exposure to changes in currency rates in

respect of certain investments denominated in foreign currencies.

In utilizing leverage and interest rate hedges, our objectives include, where desirable, locking in, on a long-term basis, a

spread between the yield on our assets and the cost of our financing in an effort to improve returns to our stockholders.

We aim to hedge our originated loan inventory pending securitization with respect to changes in securitization liability

cost resulting from both changes in benchmark treasuries and credit spreads. Hedges are periodically re-balanced to

match expected duration of the securitization and are closed at securitization issuance with the resulting gain or loss

allocated to the retained basis in the securitization with the objective of protecting the yield for the aforementioned

changes in securitization liabilities.

COMPETITION

We compete with numerous regional and community banks, specialty-finance companies, savings and loan associations

and other entities, and we expect that others may be organized in the future. Additional REITs and other institutions may

increase competition for the available supply of LMM and SBL assets suitable for purchase, which may cause the price

for such assets to rise. Additionally, greater originations and supply of LMM and SBL loans by our competitors may

result in a reduction of interest rates on these loans. In the face of this competition, we expect Waterfall’s professionals

and their industry expertise to provide us a competitive advantage in sourcing transactions and help us assess acquisition

and origination risks and determine appropriate pricing for potential assets. Additionally, we believe that we are

currently one of only a handful of active market participants in the secondary LMM loan market. Due to the special

servicing expertise needed to effectively manage these assets, the small size of each loan, the uniqueness of the real

properties that collateralize the loans and the need to bring residential mortgage credit analysis into the underwriting

process, we expect a restrained competitive demand for these assets. We seek to manage credit risk through our loan-

level pre-origination or pre-acquisition due diligence and underwriting processes, which aims to mitigate the amount of

potential realized losses. However, we may not be able to achieve our business goals or expectations due to competitive

risks. For additional information concerning these competitive risks, see “Item 1A - Risk Factors – Risks Related to Our

Business – New entrants in the market” for risks related to LMM loans that could adversely impact our ability to acquire

loans at attractive prices and originate LMM loans at attractive risk-adjusted returns.

CORPORATE GOVERNANCE

Our Board has adopted guidelines which addresses processes and procedures used to manage company affairs and

includes the structure and balance of power between management and the Board. These Corporate Governance

Guidelines include the composition of our Board, its functions and responsibilities, its standing committees, director

qualification standards, access to management and independent advisors, director compensation, management

succession, director orientation and continuing education and the annual performance evaluation and review of our

Board and committees. In accordance with NYSE’s independence standards, a majority of the directors serving on our

Board are independent. The Audit, Nominating and Corporate Governance and Compensation Committees of our Board

are composed exclusively of independent directors.

We strive to maintain a workplace with the highest ethical standards of professional conduct in all business relationships

which include:

•Adopting a Code of Ethics, which covers a wide range of business practices and procedures, that applies to our

officers, directors, employees, if any, and independent contractors, to Waterfall and Waterfall’s officers and

employees, and to any of our affiliates or affiliates of Waterfall, and such affiliates’ officers and employees,

who provide services to us or Waterfall with respect to our Company. Covered personsmay raise, on a

confidential basis, potential violations of the Code of Ethics with the Chief Compliance Officer (as defined in

the Code of Ethics).

•Implementing a whistleblowing policy for accounting and auditing matters that sets forth procedures by which

any covered persons may raise, on a confidential basis, concerns regarding, among other things, any

questionable or unethical accounting, internal accounting controls or auditing matters with our Audit

Committee.

•Adopting an Insider Trading Policy for Trading in the Securities of our Company (the “Insider Trading

Policy”), that governs the purchase or sale of our securities by any of our directors, officers, and associates (as

defined in the Insider Trading Policy), if any, and independent contractors, as well as officers and employees of

Waterfall and our officers, employees and affiliates, and that prohibits any such persons from buying or selling

our securities on the basis of material non-public information.

HUMAN CAPITAL MANAGEMENT

We are managed by Waterfall pursuant to the management agreement. Our Chief Financial Officer, Chief Operating

Officer and Chief Credit Officer are dedicated exclusively to us, along with several of Waterfall’s accounting

professionals and an information technology professional who are also dedicated primarily to us. We or Waterfall may in

the future hire additional personnel that may be dedicated to our business. Waterfall is not obligated under the

management agreement to dedicate any of its personnel exclusively to our business, other than our Chief Financial

Officer and an accounting professional, nor is it or its personnel obligated to dedicate any specific portion of its or their

time to our business. Accordingly, with the exception of our Chief Financial Officer, Chief Operating Officer and Chief

Credit Officer, our executive officers are not required to devote any specific amount of time to our business. We are

responsible for the costs of our own employees. In our recruitment efforts, we strive to have a diverse group of

candidates to consider for roles and aim to both attract and retain exceptionally skilled employees though a culture

designed to foster and encourage performance, integrity, and inclusion. Waterfall and our Company invest heavily in

developing and supporting our employees throughout their careers and are committed to ensuring that they are engaged

both professionally and socially as we believe our people are the foundation of our success. We encourage the

professional development of our employees through regular in-person trainings and online learning resources and strive

to maintain a work environment that fosters professionalism, high standards of business ethics, teamwork and

cooperation. As of December 31, 2024, the Company had 475 full-time employees, excluding employees related to our

discontinued operations. The majority of our Company’s employees are employed by our Company’s subsidiaries. We

do not have, or expect to have, our own employees, as our management team is designated by Waterfall. Our corporate

headquarters are located at 1251 Avenue of the Americas, 50 th Floor, New York, NY 10020, and our telephone number

is (212) 257-4600.

INFORMATION ABOUT OUR EXECUTIVE OFFICERS

Set forth below are the name, age, positions with our Company and Waterfall and certain biographical information for

our executive officers and other key personnel.

Thomas E. Capasse,67 is our Chairman of the Board, Chief Executive Officer and Chief Investment Officer. He is a

Manager and co-founder of Waterfall. Prior to founding Waterfall, Mr. Capasse managed the principal finance groups at

Greenwich Capital from 1995 until 1997, Nomura Securities from 1997 until 2001, and Macquarie Securities from 2001

until 2004. Mr. Capasse has significant and long-standing experience in the securitization market as a founding member

of Merrill Lynch’s ABS Group (1983 – 1994) with a focus on MBS transactions (including the initial Subprime

Mortgage and Manufactured Housing ABS) and experience in many other ABS sectors. Mr. Capasse began his career as

a fixed income analyst at Dean Witter and Bank of Boston. Mr. Capasse received a Bachelor of Arts degree in

Economics from Bowdoin College in 1979.

Jack J. Ross,67 is our President and a member of our Board. He is a Manager and co-founder of Waterfall. Prior to

founding Waterfall in January 2005, Mr. Ross was the founder of Licent Capital, a specialty broker/dealer for intellectual

property securitization. From 1987 until 1999, Mr. Ross was employed by Merrill Lynch where he managed the real

estate finance and ABS groups. Mr. Ross began his career at Drexel Burnham Lambert where he worked on several of

the early ABS transactions and at Laventhol & Horwath where he served as a senior auditor. Mr. Ross received a Master

of Business Administration degree in Finance with distinction from the University of Pennsylvania’s Wharton School of

Business in 1984 and a Bachelor of Science degree in Accounting, cum laude, from the State University of New York at

Buffalo in 1978.

Andrew Ahlborn,41 is our Chief Financial Officer. Mr. Ahlborn joined Waterfall in 2010 and was previously our

Controller. Prior to joining Waterfall, he worked in Ernst & Young, LLP's Financial Services Office. Mr. Ahlborn

received a Bachelor of Science degree in Accounting from Fordham University's Gabelli School of Business and a

Master of Business Administration through Columbia Business School. He is a licensed Certified Public Accountant in

New York.

Gary T. Taylor,65 is our Chief Operating Officer. Prior to joining our Company, Mr. Taylor served as President and

Chief Operating Officer of Newtek Business Credit from May 2015 to March 2019. From 2013 to 2015, Mr. Taylor was

Managing Director at Brevet Capital Management, and before that he was Chief Operating Officer of CIT Small

Business Lending from 2007 to 2013. Earlier in his career, Mr. Taylor held numerous roles within the financial services

industry including Lehman Brothers, Moody's Investors Service, AT&T Capital Corporation, Resolution Trust

Corporation, First Chicago Bank & Trust, and Chase Manhattan Bank. Mr. Taylor received a Bachelor of Science

degree, with Honors, in Business from Florida A&M University.

Adam Zausmer,47 is our Chief Credit Officer. Prior to joining Waterfall in 2013, Mr, Zausmer was a Senior

Underwriter with JPMorgan Chase’s Commercial Term Lending business. Prior to JPMorgan Chase, he was a Vice

President on the Credit Risk Management team at Credit Suisse. Mr. Zausmer began his career as a Management

Associate within Citigroup’s Global Shared Services division and transitioned to the Residential Real Estate business as

a Senior Credit Risk Analyst. Mr. Zausmer received a Bachelor of Science degree in Business Administration from the

University of Buffalo in 1999 and a Master of Science degree in Real Estate from New York University in 2007.

RECENT DEVELOPMENTS

On November 29, 2024, the Company entered into a definitive merger agreement with UDF IV, a real estate investment

trust providing capital solutions to residential real estate developers and regional homebuilders. Upon completion of the

merger, the Company is expected to have a pro forma equity capital base in excess of $2.2 billion. Under the terms of the

merger agreement, UDF IV will be permitted to distribute $75 million of cash on its pre-closing balance sheet to its

shareholders prior to the transaction closing (the “Pre-Closing Distribution”), representing value distributed by UDF IV

to its shareholders of up to $2.44 per share. Following such distribution, as part of the merger consideration, each

common share of beneficial interest of UDF IV (a "UDF IV share") will then be converted into 0.416 shares(the

“Exchange Ratio”) of Ready Capital common stock, with UDF IV shareholders receiving a total of approximately 12.8

million shares of Ready Capital common stock. The Exchange Ratio was negotiated to reflect an adjustment for the

expected Pre-Closing Distribution, as well as other valuation adjustments. Based on Ready Capital’s closing share price

on November 29, 2024, the implied value of the Ready Capital shares expected to be issued in connection with this

closing is approximately $94 million or $3.07 per UDF IV share. At closing, UDF IV shareholders are expected to own

approximately 7% of Ready Capital’s outstanding shares. In addition, as part of the merger consideration, UDF IV

shareholders will be entitled to receive 0.416 contingent value rights per UDF IV share, representing the potential right

to receive additional stock consideration after closing. The transaction is expected to close in the first half of 2025,

subject to the approval of UDF IV shareholders and other customary closing conditions.

AVAILABLE INFORMATION

We maintain a website at www.readycapital.com and will make available, free of charge, on our website (a) our annual

report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K (including any amendments

thereto), proxy statements and other information (collectively, “Company Documents”) filed with, or furnished to, the

SEC, as soon as reasonably practicable after such documents are so filed or furnished, (b) our Corporate Governance

Guidelines, (c) our Director Independence Standards, (d) our Code of Conduct and Ethics and (e) written charters of the

Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee of our Board.

Company Documents filed with, or furnished to, the SEC are also available for review and copying by the public at the

SEC’s website at www.sec.gov. We provide copies of our Corporate Governance Guidelines and Code of Conduct and

Ethics, free of charge, to stockholders who request such documents. Requests should be directed to Jacques Cornet, ICR,

Inc., at 685 Third Avenue, 2 nd Floor, New York, NY 10017.

Item 1A. Risk Factors