Ready Capital Corp
For the period ended Mar 31, 2025. Filed May 9, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 9, 2025
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-12.
0001628280-24-047137
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-09.
0001628280-25-024331
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 664 previous paragraphs and 669 current paragraphs.
443 unchanged; 128 reworded; 83 added; 78 removed; 15 previous and 15 current paragraphs rearranged.
Tables are not compared: 13 previous and 13 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (83)
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•tariffs imposed or threatened to be imposed by the current presidential administration;
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including the acquisitions of United Development Funding IV (“UDF IV”), Madison One Capital, M1 CUSO
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and our increased scale;
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United States Department of Agriculture (“USDA”), mortgage backed securities (“MBS”), residential mortgage
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pursuant to policies of the new U.S. administration, the U.S. Department of the Treasury (“Treasury”) and the
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Exchange Commission (“SEC”);
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Factors” and “Business”;
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macroeconomic conditions; and
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resources.
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returns.
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under the SBA Section 7(a) Program through our subsidiary, ReadyCap Lending, LLC. We hold an SBA
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structures, orsold. In addition, we acquire, originate and service USDA loans through our subsidiary,
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Madison One, as well as originate and service small business loans through our subsidiary iBusiness
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Funding LLC.
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United Development Funding IV. On March 13, 2025, pursuant to the terms of the Agreement and Plan of Merger,
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dated as of November 29, 2024, by and among the Company, UDF IV, and RC Merger Sub IV, LLC, a wholly owned
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subsidiary of the Company (“RC Merger Sub IV”), the Company acquired UDF IV, a real estate investment trust
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providing capital solutions to residential real estate developers and regional homebuilders, (the “UDF IV Merger”). At
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the effective time of the UDF IV Merger (the “Effective Time”), each outstanding common share of beneficial interest,
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par value $0.01 per share, of UDF IV (“UDF IV Common Shares”), excluding any UDF IV Common Shares held by
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UDF IV, the Company, RC Merger Sub IV or their subsidiaries, was automatically cancelled and retired and converted
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into the right to receive (i) 0.416 shares of Company common stock, (ii) 0.416 contingent value rights (“CVRs”)
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representing the potential right to receive additional shares of Company common stock after the end of each of (1) the
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period beginning on October 1, 2024, and ending on December 31, 2025 and (2) the three subsequent calendar years,
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based, in part, upon cash proceeds received by the Company and its subsidiaries in respect of a portfolio of five UDF IV
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loans and (iii) cash consideration in lieu of any fractional shares of Company common stock. Refer to Notes 1 and 5,
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included in Part I, Item 1, “Financial Statements,” of this Form 10-Q, for more information about the UDF IV Merger
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on UPB.
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Loans, net. Assets of consolidated VIEs decreased $1.5 billion, primarily due to thecollapseof RCMF 2021-FL5,
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RCMF 2021-FL6, and RCMF 2022-FL8, and paydowns on securitized loans. Loans, netincreased $975.9 million,
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primarily due to the collapse of RCMF 2021-FL5, RCMF 2021-FL6, and RCMF 2022-FL8.
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offset by an increase in Secured borrowings and Senior secured notes, net. Securitized debt obligations of consolidated
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RCMF 2021-FL6, and RCMF 2022-FL8. Secured borrowings increased$678.2 million due to the collapse of RCMF
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2021-FL5, RCMF 2021-FL6, and RCMF 2022-FL8.
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2024, primarily due to shares issued in connection with the acquisition of UDF IV, partially offset by dividends paid and
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Q1 2025 versus Q1 2024. Interest income of$125.0 million representeda decrease of$75.8 million, primarily due to
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of$38.5 million, driven by decreased loan balances and interest rates. Recovery of loan losses of$117.9 million
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interest loss of$114.5 million representeda decrease of$8.5 million, primarily due to a decrease in the valuation
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allowance related to loans sold, partially offset by net realized losses on financial instruments and real estate owned.
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Q1 2025 versus Q1 2024. Interest income of$30.0 million representeda decrease of$1.6 million, primarily due to
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Removed paragraphs (78)
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the acquisitions of Broadmark Realty Capital Inc. (“Broadmark”), Madison One Capital, M1 CUSO and
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increased scale;
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•risks related to integrating a construction lending platform into our existing operations and the origination and
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ownership of construction loans, which are subject to additional risks as compared to loans secured by existing
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structures or land, following the Broadmark Merger;
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Mae”), Federal Housing Administration (“FHA”) Mortgagee, United States Department of Agriculture
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(“SEC”);
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and “Business”;
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macroeconomic conditions;
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•the impact of pandemics and epidemics, such as the coronavirus (“COVID-19”) pandemic, on our business and
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partnership (“RCC Merger Sub”), completed a merger (such transaction, the “Broadmark Merger”) in which Broadmark
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partnership. As a result of the Broadmark Merger, the number of directors on the Company's board of directors (the
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“Board”) increased by three members, from nine to twelve, with the three additional directors each having served on the
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board of directors of Broadmark immediately prior to the effective time of the Broadmark Merger. The Broadmark
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Merger further diversified our business by expanding on our residential and commercial construction lending platforms.
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based on UPB.
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committed amounts).
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by an increase in Loans, held for sale. Assets of consolidated VIEs decreased $1.1 billion, due to paydowns on
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securitized loans. Loans, netdecreased $464.2 million, primarily due to loans transferred to Loans, held for sale. Loans,
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Q3 2024 versus Q3 2023. Interest income of$193.3 million representeda decrease of$26.2 million, primarily due to
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loan losses of$49.2 million representedan increase of$63.7 million, primarily due to an increase in asset specific
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reserves. Non-interest loss of$19.1 million representedan increase of$50.5 million, primarily due to net realized losses
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on financial instruments and real estate owned, partially offset by a decrease inthe valuation allowance related to the
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transfer of Loans, net to Loans, held for sale in the first half of 2024. Non-interest expense of$21.1 million representeda
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YTD 2024 versus YTD 2023. Interest income of$596.1 million representeda decrease of$33.6 million, primarily due to
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decreased loan balances, partially offset by increases in interest rates. Interest expense of$467.7 million representeda
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decrease of$11.3 million, driven by decreased debt balances, partially offset by increases in interest rates. Provision for
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loan losses of$4.1 million representedan increase of$9.3 million, primarily due to an increase in asset specific reserves,
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partially offset by loans transferred to Loans, held for sale in the first half of 2024. Non-interest loss of$227.5 million
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representedan increase of$293.2 million, primarily due to net realized losses on financial instruments and real estate
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owned and the valuation allowance related to the transfer of Loans, net to Loans, held for sale in the first half of 2024.
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compensation and benefits.
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Q3 2024 versus Q3 2023. Interest income of$33.3 million representedan increase of$4.0 million, primarily due to
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increases in interest rates and increased loan balances. Interest expense of$25.1 million representedan increase of$4.3
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million, driven by increases in interest rates. Provision for loan losses of$3.9 million representedan increase of$1.6
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million, due to increased loan originations. Non-interest income of$42.0 million representedan increase of$18.6
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benefits.
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YTD 2024 versus YTD 2023. Interest income of$96.9 million representedan increase of$31.0 million, primarily due to
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increases in interest rates and increased loan balances. Interest expense of$74.8 million representedan increase of$35.0
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million, driven by increases in interest rates and increased debt balances. Provision for loan losses of$3.7 million
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•risks associated with achieving expected synergies, cost savings and other benefits from acquisitions and our
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•risks associated with achieving expected synergies, cost savings and other benefits from recent acquisitions,
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Madison One Lender Services (together, “Madison One”), and Funding Circle USA, Inc ("Funding Circle");
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and Madison One Lender Services (together, “Madison One”), and Funding Circle USA, Inc “Funding Circle”),
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under the SBA Section 7(a) Program and government guaranteed loans focused on the USDA through our
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Section 7(a) loan program (the “SBA Section 7(a) Program”), government-guaranteed loans focused on the
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mortgage loans and other real estate-related investments that satisfy our investment objectives and strategies;
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loans and other real estate-related investments that satisfy our investment objectives and strategies;
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•market developments and actions recently taken and which may be taken by the U.S. Government, the U.S.
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•market developments and actions recently taken and which may be taken by the U.S. Government, including
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Department of the Treasury (“Treasury”) and the Board of Governors of the Federal Reserve System, the
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Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Federal
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Home Loan Mortgage Corporation (“Freddie Mac”), the Government National Mortgage Association (“Ginnie
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National Mortgage Association (“Fannie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie
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(“USDA”), U.S. Department of Veterans Affairs (“VA”) and the U.S. Securities and Exchange Commission
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(“FHA”) Mortgagee, USDA, U.S. Department of Veterans Affairs (“VA”) and the U.S. Securities and
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•factors described in our annual report on Form 10-K, including those set forth under the captions “Risk Factors”
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•factors described inour Annual Report on Form 10-K, including those set forth under the captions “Risk
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•the impact of pandemics or epidemics on our borrowers, the real estate industry and global markets.
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•the impact of current or future pandemics and epidemics on our borrowers, the real estate industry and global
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operations, financial condition, results of operations, liquidity and capital resources; and
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markets, and on our business and operations, financial condition, results of operations, liquidity and capital
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loans, construction loans and, to a lesser extent, MBS collateralized primarily by LMM loans, or other real estate-related
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loans, construction loans, USDA loansand, to a lesser extent, MBS collateralized primarily by LMM loans, or other real
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investments. Our loans generally range in original principal amounts up to $40 million and are used by businesses to
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estate-related investments. Our loans generally range in original principal amounts up to $40 million and are used by
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purchase real estate used in their operations or by investors seeking to acquire multi-family, office, retail, mixed use or
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businesses to purchase real estate used in their operations or by investors seeking to acquire multi-family, office, retail,
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warehouse properties. Our objective is to provide attractive risk-adjusted returns to our stockholders primarily through
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mixed use or warehouse properties. Our objective is to provide attractive risk-adjusted returns to our stockholders
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dividends, as well as through capital appreciation. In order to achieve this objective, we continue to grow our investment
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primarily through dividends, as well as through capital appreciation. In order to achieve this objective, we continue to
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portfolio and believe that the breadth of our full-service real estate finance platform will allow us to adapt to market
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grow our investment portfolio and believe that the breadth of our full-service real estate finance platform will allow us to
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conditions and deploy capital in our asset classes and segments with the most attractive risk-adjusted returns.
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adapt to market conditions and deploy capital in our asset classes and segments with the most attractive risk-adjusted
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continuing operations. The MD&A has been adjusted to exclude discontinued operations unless otherwise noted. We
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continuing operations. Our MD&A has been adjusted to exclude discontinued operations unless otherwise noted. We
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ReadyCap Commercial. These originated loans are generally held-for-investment or placed into
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ReadyCap Commercial, LLC. These originated loans are generally held-for-investment or placed into
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subsidiary, ReadyCap Lending. We hold an SBA license as one of only 17 non-bank Small Business
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license as one of only 20 non-bank Small Business Lending Companiesand have been granted preferred
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Lending Companiesand have been granted preferred lender status by the SBA. These originated loans are
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lender status by the SBA. These originated loans are either held-for-investment, placed into securitization
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We are organized and conduct our operations to qualify as a REIT under the Code. To qualify as a REIT, we are required
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We are organized and conduct our operations to qualify as a REIT under the Internal Revenue Code of 1986, as
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to annually distribute substantially all of our net taxable income, excluding capital gain, to stockholders. To the extent
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excluding capital gain, to stockholders. To the extent that we do not distribute all of our net capital gain, or distribute at
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income, as adjusted, we will be required to pay U.S. federal corporate income tax on the undistributed income. We are
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least 90%, but less than 100%, of our REIT taxable income, as adjusted, we will be required to pay U.S. federal
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organized in a traditional UpREIT format pursuant to which we serve as the general partner of, and conduct substantially
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(UpREIT) format pursuant to which we serve as the general partner of, and conduct substantially all of our business
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all of our business through, our operating partnership. We also intend to operate our business in a manner that will
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through, Sutherland Partners, LP (our “operating partnership”). We also intend to operate our business in a manner that
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permit us to be excluded from registration as an investment company under the 1940 Act.
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will permit us to be excluded from registration as an investment company under the 1940 Act.
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the Broadmark Merger and the assets acquired and liabilities assumed as a result of the Broadmark Merger.
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and the assets acquired and liabilities assumed as a result of the UDF IVMerger.
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Madison One. On June 5, 2024, the Company acquired Madison One Capital, M1 CUSO and Madison One Lender
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Madison One. On June 5, 2024, the Company acquired Madison One, a leading originator and servicer of USDA and
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an initial purchase price of approximately $32.9 million paid in cash (the “Madison One Acquisition”). Approximately
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SBA guaranteed loan products, for an initial purchase price of approximately $32.9 million paid in cash (the “Madison
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$3.6 million of the initial purchase price was paid as bonuses to certain key Madison One personnel in cash. Additional
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One Acquisition”). Approximately $3.6 million of the initial purchase price was paid as bonuses to certain key Madison
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purchase price payments, including cash payments and the issuance of shares of common stock of the Company, may be
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One personnel in cash. Additional purchase price payments, including cash payments and the issuance of shares of
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made over the four years following the acquisition date contingent upon the Madison One business achieving certain
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common stock of the Company, may be made over the four years following the acquisition date contingent upon the
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performance metrics. Part of the Company’s strategy in acquiring Madison One included the value of the anticipated
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Madison One business achieving certain performance metrics. Part of the Company’s strategy in acquiring Madison One
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synergies arising from the acquisition and the value of the acquired assembled workforce, neither of which qualify for
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included the value of the anticipated synergies arising from the acquisition and the value of the acquired assembled
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recognition as an intangible asset. Refer to Notes 1 and 5, included in Part I, Item 1, “Financial Statements,” of this Form
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workforce, neither of which qualify for recognition as an intangible asset. Refer to Notes 1 and 5, included in Part I, Item
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10-Q, for more information about the Madison One Acquisition and the assets acquired and liabilities assumed as a
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1, “Financial Statements,” of this Form 10-Q, for more information about the Madison One Acquisition and the assets
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could also impact our operating results. For additional information about certain risks we face, including market risk,
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For additional information about certain risks we face, including market risk, credit risk, interest rate risk, liquidity risk,
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credit risk, interest rate risk, liquidity risk, off-balance sheet risk and prepayment risk, refer to Note 23, included in Part
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off-balance sheet risk and prepayment risk, refer to Note 23, included in Part I, Item 1, “Financial Statements,” and Part
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Mac”), the Government National Mortgage Association (“Ginnie Mae”), Federal Housing Administration
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amended. To qualify as a REIT, we are required to annually distribute substantially all of our net taxable income,
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corporate income tax on the undistributed income. We are organized in a traditional umbrella partnership REIT
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acquired and liabilities assumed as a result of the Madison One Acquisition.
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could also impact our operating results.
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(2)Interest on the senior secured notes is payable semiannually on March 1 and September 1 of each year.
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(7)Interest on the corporate debt is payable semiannually on January 31 and July 31 of each year.
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(9)Interest on the corporate debt is payable quarterly on March 15, June 15, September 15, and December 15 of each year.
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Guarantors, including maintenance of minimum liquidity, minimum tangible net worth, maximum debt to net worth ratio
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expenses. The 2028 Senior Secured Notes are fully and unconditionally guaranteed by the Company and other direct or
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The 2028 Senior Secured Notes are redeemable by ReadyCap Holdings following a non-call period, through the
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that decreases the closer the 2028 Senior Secured Notes are to maturity. ReadyCap Holdings is required to offer to
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event of a change in control and a downgrade of the rating on the 2028 Senior Secured Notes in connection therewith, as
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The 2028 Senior Secured Notes were issued pursuant to a note purchase agreement, which contains certain customary
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Guarantors, including maintenance of minimum tangible net worth, maximum debt to net worth ratio and limitations on
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•our ability to achieve the expected synergies, cost savings and other benefits from recent acquisitions, including
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Section 7(a) loan program (the “SBA Section 7(a) Program”), mortgage backed securities (“MBS”), residential
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Federal Deposit Insurance Corporation, the Federal National Mortgage Association (“Fannie Mae”), the Federal
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either held-for-investment, placed into securitization structures, orsold.
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that we do not distribute all of our net capital gain, or distribute at least 90%, but less than 100%, of our REIT taxable
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Services (together, “Madison One”), a leading originator and servicer of USDA and SBA guaranteed loan products, for
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result of the Madison One Acquisition.
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Refer to Notes 1 and 5, included in Part I, Item 1, “Financial Statements,” of this Form 10-Q, for more information about
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decrease of$8.6 million, due to a decrease in employee compensation and benefits and loan servicing expenses.
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representedan increase of$15.9 million, primarily due to net realized gains on financial instruments. Non-interest
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representeda decrease of$113.5 million from thenine months ended September 30, 2023 due to certain charge-offs and
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losses realized on sales of real estate owned assets and LMM loans.
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(3)Interest on the corporate debt is payable semiannually on June 30 and December 30 of each year.
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including maintenance of minimum liquidity, minimum tangible net worth, maximum debt to net worth ratio and
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partnership, assumed Broadmark’s obligations on certain senior unsecured notes. The note purchase agreement