Ready Capital (NYSE:RC) said it substantially completed its balance sheet repositioning and liquidity plan in the third quarter of 2026, shifting its focus toward resolving legacy commercial real estate loans and rebuilding earnings.
The effort generated $2.3 billion of liquidity but reduced book value and contributed to a dividend cut. Chief Executive Officer Tom Capasse said the company’s near-term goal is to bring distributable earnings and operating cash flow closer to break-even through growth in its lending businesses, management of troubled real estate assets and lower expenses.
Ready Capital reported a third-quarter loss from continuing operations under generally accepted accounting principles of $0.40 per common share, compared with a loss of $0.63 in the second quarter. Its distributable loss widened to $0.53 per share from $0.47, but excluding realized losses, the distributable loss improved to $0.21 per share from $0.24.
Liquidity Plan Came at a Cost
Capasse said Ready Capital expects to have repaid $649 million of corporate debt after a final payment due at maturity in November. The company also reduced secured asset-level financing by $1.7 billion and resolved $2.7 billion of legacy commercial real estate loans through runoff or sales.
The liquidity plan reduced book value per share by $2.35 year to date, leaving it at $6.44 as of Sept. 30, Capasse said. The company also reduced its dividend to $0.01 per share to preserve liquidity.
Book value fell from $6.83 per share at the end of June. Chief Financial Officer Andrew Ahlborn said the quarter-over-quarter percentage decline was substantially smaller than in the preceding two quarters.
Ready Capital ended the third quarter with $157.1 million of unrestricted cash, up from $124.1 million at the end of June. Total leverage declined to 2.8 times from 3 times, approaching the company’s target of 2.5 times, Ahlborn said.
Lending Growth and Expense Cuts
Management identified the Small Business Administration 7(a) lending platform as a growth priority. Third-quarter originations rose 33% to $109 million, while gain-on-sale revenue from the business increased 56% to $6.1 million.
Capasse said a June securitization created funding capacity for $500 million of originations. Ready Capital is targeting an annual SBA 7(a) origination rate of $1 billion initially and $1.5 billion longer term. Ahlborn said the company expects to reach the $1 billion run rate sometime in early 2027.
The company also plans to expand unsecured working capital lending through its iBusiness Funding platform. Capasse said originations totaled $61 million in the third quarter, producing $3.2 million in gain-on-sale income and origination fees. Management believes it can roughly double production in the new year.
Ready Capital expects to reduce spending and staff to match its smaller balance sheet and plans to divest noncore businesses. Ahlborn said right-sizing measures are expected in the fourth quarter, with the full benefits appearing in earnings early in 2027. He said some divestitures could be completed in 2026 and others in 2027.
Quarterly operating expenses fell to $47.6 million from $55.5 million in the second quarter. Recurring revenue rose to $20.7 million from $15.3 million.
Longer Holds for Troubled Real Estate Assets
Ready Capital’s commercial real estate loan portfolio totaled $1.95 billion. Capasse said it included $1.1 billion of performing loans, $318 million of assets expected to be resolved by the end of 2027, and $515 million of nonperforming loans targeted for longer-term workouts.
The longer-term workout group comprises 28 assets and generated a quarterly earnings drag of $1.7 million. Five additional real estate-owned assets with approximately $67 million in carrying value could also benefit from longer holds, management said.
Chief Credit Officer Dominick Scali said the company plans to improve occupancy and manage expenses at troubled properties. He estimated that approximately $15 million of capital would be needed for the portfolio under discussion, while noting that detailed plans were still being developed.
Higher interest rates remain a risk to loan resolutions. Capasse said the rate increase had reduced transaction volume and probably contributed to a further 5% to 10% decline in multifamily property prices. Scali said elevated rates could delay refinancing or sales of assets.
At the Ritz-Carlton, Portland, hotel net operating income after replacement reserves improved to $1.6 million in the quarter, helped by higher occupancy. Ahlborn said the property’s net loss, including financing costs, improved to $4.2 million. Capasse said 52 condominium units, or 39% of the building, had been sold, with two more under contract.
About Ready Capital (NYSE:RC)
Ready Capital Corporation (NYSE: RC) is a real estate finance company that operates as a mortgage real estate investment trust. The company provides financing to owners, operators and developers of commercial real estate, with a focus on small- to mid-sized properties and borrowers that may not be served by traditional banks.
Ready Capital originates, acquires, finances and services a range of commercial real estate loans. Its offerings have included bridge loans, construction loans, loans secured by transitional properties, multifamily financing and small business administration (SBA) loans.
