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What changed in Ready Capital Corp's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Ready Capital Corp's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+445 added−479 removedSource: 10-K (2026-03-02) vs 10-K (2025-03-03)

Top changes in Ready Capital Corp's 2025 10-K

445 paragraphs added · 479 removed · 332 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

57 edited+9 added−26 removed62 unchanged
Biggest changeDecember 31, 2024 (in millions) Asset Class Issuance Bonds Issued Weighted Average Debt Cost Outstanding Balance RCMT 2014-1 LMM Originated conventional September 2014 $ 181.7 3.2 % $ — RCMT 2015-2 LMM Originated conventional November 2015 218.8 4.0 % — FRESB 2016-SB11 Originated agency multi-family January 2016 110.0 2.8 % 13.7 FRESB 2016-SB18 Originated agency multi-family July 2016 118.0 2.2 % 12.7 RCMT 2016-3 LMM Originated conventional November 2016 162.1 3.4 % 25.9 FRESB 2017-SB33 Originated agency multi-family June 2017 197.9 2.6 % 41.3 RCMF 2017-FL1 LMM Originated bridge August 2017 198.8 L + 139 bps — FRESB 2018-SB45 Originated agency multi-family January 2018 362.0 2.8 % 103.9 RCMT 2018-4 LMM Originated conventional March 2018 165.0 3.8 % 60.5 RCMF 2018-FL2 LMM Originated bridge June 2018 217.1 L + 121 bps — FRESB 2018-SB52 Originated agency multi-family September 2018 505.0 2.9 % 223.5 FRESB 2018-SB56 Originated agency multi-family December 2018 507.3 3.6 % 259.6 RCMT 2019-5 LMM Originated conventional January 2019 355.8 4.1 % 103.6 RCMF 2019-FL3 LMM Originated bridge April 2019 320.2 L + 133 bps — RCMT 2019-6 LMM Originated conventional November 2019 430.7 3.2 % 218.5 RCMF 2020-FL4 LMM Originated bridge June 2020 405.3 L + 290 bps — KCMT 2020-S3 LMM Originated conventional September 2020 263.2 5.3 % 238.0 RCMF 2021-FL5 LMM Originated bridge March 2021 628.9 SOFR + 140 bps 193.9 RCMF 2021-FL6 LMM Originated bridge August 2021 652.5 SOFR + 120 bps 315.7 RCMF 2021-FL7 LMM Originated bridge November 2021 927.2 SOFR + 150 bps 597.4 RCMF 2022-FL8 LMM Originated bridge March 2022 1,135.0 SOFR + 250 bps 809.0 RCMT 2022-7 LMM Originated conventional April 2022 276.8 4.1 % 262.7 RCMF 2022-FL9 LMM Originated bridge June 2022 754.2 SOFR + 341 bps 469.9 RCMF 2022-FL10 LMM Originated bridge October 2022 860.1 SOFR + 326 bps 718.6 RCMF 2023-FL11 LMM Originated bridge February 2023 586.0 SOFR + 277 bps 425.2 RCMF 2023-FL12 LMM Originated bridge June 2023 648.6 SOFR + 314 bps 421.7 Total $ 11,188.2 6.1 % $ 5,515.3 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.
Biggest changeDecember 31, 2025 (in millions) Asset Class Issuance Bonds Issued Weighted Average Debt Cost Outstanding Balance FRESB 2016-SB11 Originated agency multi-family January 2016 110.0 2.8 % 3.6 FRESB 2016-SB18 Originated agency multi-family July 2016 118.0 2.2 % 7.8 RCMT 2016-3 LMM Originated conventional November 2016 162.1 3.4 % 9.7 FRESB 2017-SB33 Originated agency multi-family June 2017 197.9 2.6 % 31.1 FRESB 2018-SB45 Originated agency multi-family January 2018 362.0 2.8 % 86.2 RCMT 2018-4 LMM Originated conventional March 2018 165.0 3.8 % 56.4 FRESB 2018-SB52 Originated agency multi-family September 2018 505.0 2.9 % 186.9 FRESB 2018-SB56 Originated agency multi-family December 2018 507.3 3.6 % 217.4 RCMT 2019-5 LMM Originated conventional January 2019 355.8 4.1 % 77.7 RCMT 2019-6 LMM Originated conventional November 2019 430.7 3.2 % 182.0 KCMT 2020-S3 LMM Originated conventional September 2020 263.2 5.3 % 225.0 RCMF 2021-FL7 LMM Originated bridge November 2021 927.2 SOFR + 150 bps 444.1 RCMT 2022-7 LMM Originated conventional April 2022 276.8 4.1 % 237.5 RCMF 2023-FL11 LMM Originated bridge February 2023 586.0 SOFR + 277 bps 239.3 RCMF 2023-FL12 LMM Originated bridge June 2023 648.6 SOFR + 314 bps 298.0 Total $ 5,615.6 4.8 % $ 2,302.7 We believe large banks are not focused on the LMM market and many smaller banks are focused on lending in specific geographies.
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.
Our originations focus 10 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.
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 13 Companies originating loans under the SBA 504 program, GSEs, and state economic development authorities.
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.
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.
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 18 Ethics, free of charge, to stockholders who request such documents.
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.
Due to the special servicing expertise needed to effectively manage these assets, the small average 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 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. 8 Our Manager We are externally managed and advised by Waterfall, an SEC registered investment adviser.
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.
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.
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. 15 Our financing agreements require us to maintain a debt-to-equity leverage ratio at certain levels.
Hedges are periodically re-balanced to match expected duration of the securitization and are closed at securitization issuance with the resulting gain or loss 17 allocated to the retained basis in the securitization with the objective of protecting the yield for the aforementioned changes in securitization liabilities.
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.
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.
Formed in 2005, Waterfall specializes in acquiring, managing, servicing and financing LMM and residential mortgage loans, as well as asset backed 8 securities (“ABS”) and MBS. Waterfall has extensive experience in performing and non-performing loan acquisition, resolution and financing strategies.
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.
In accordance with NYSE’s independence standards, a majority of the directors serving on our 16 Board are independent. The Audit, Nominating and Corporate Governance and Compensation Committees of our Board are composed exclusively of independent directors.
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.
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 16 non-bank Small Business Lending Companies (“SBLCs”) and have been granted preferred lender status by the SBA.
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.
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, 68 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.
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.
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, 42 is our Chief Financial Officer. Mr.
We or Waterfall may in 18 the future hire additional personnel that may be dedicated to our business.
We or Waterfall may in the future hire additional personnel that may be dedicated to our business.
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 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 Busines s Lending (“SBL”) .
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.
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, 2025 , the Company had 442 full-time employees, excluding employees related to our discontinued operations.
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.
These originated loans are either held-for-investment, placed into securitization structures, or sold. In addition, we originate and service USDA loans through our subsidiary, ReadyCap Commercial, as well as originate and service small business loans through our subsidiary iBusiness Funding LLC.
In addition, we acquire, originate and service USDA loans through our subsidiary, Madison One, as well as originate and service small business loans through 14 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.
In addition, we originate and service USDA loans through our subsidiary, ReadyCap Commercial, 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.
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.
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, finance, legal and informational technology professionals who are also dedicated primarily to us.
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.
ReadyCap Commercial has been approved by Freddie Mac as one of 10 originators and servicers for multifamily loan products under the Freddie Mac SBL program . We also offer construction and permanent financing for the preservation and construction of affordable housing, primarily utilizing tax-exempt bonds through Ready Capital Affordable.
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.
Capasse began his career as 17 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, 68 is our President and a member of our Board. He is a Manager and co-founder of Waterfall.
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”) .
This is reflected in the growth of our balance sheet; our book value grew from $536 million as of December 31, 2017 to approximately $1.6 billion as of December 31, 2025 , a 15% compound annual growth rate (“CAGR”) .
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.
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.
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.
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.
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.
As of December 31, 2025 , we had a total leverage ratio of 3.5x and recourse leverage ratio of 1.6x . 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 0.5x and 0.2x , respectively.
When sold at par, service fee will be in excess of 1.0% and all of the fee is retained. 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.
When sold at par, service fee will be in excess of 1.0% and all of the fee is retained. We have originated approximately $4.7 billion in SBL loans since our program’s inception in mid-2015. 14 The table below presents our SBL loan portfolio by delinquency status.
Mr. Taylor received a Bachelor of Science degree, with Honors, in Business from Florida A&M University. 19 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.
Mr. Taylor received a Bachelor of Science degree, with Honors, in Business from Florida A&M University. Adam Zausmer, 48 wa s our Chief Credit Officer until February 2026 . Prior to joining Waterfall in 2013, Mr, Zausmer was a Senior Underwriter with JPMorgan Chase’s Commercial Term Lending business.
December 31, 2024 (in millions) Asset Class Issuance Bonds Issued Weighted Average Debt Cost Outstanding Balance RCLT 2015-1 SBA 7(a) Loans June 2015 $ 189.5 Lesser of L + 125 bps or Prime - 150 bps $ — RCLT 2019-2 SBA 7(a) Loans December 2019 131.0 SOFR + 250 bps 18.2 RCLT 2023-3 SBA 7(a) Loans July 2023 132.0 Lesser of 30 day Avg SOFR or Prime + 0.07% 101.0 16 In addition, we actively participated in the Paycheck Protection Program (the “PPP”) through the Treasury and SBA prior to its termination in May 2021.
December 31, 2025 (in millions) Asset Class Issuance Bonds Issued Weighted Average Debt Cost Outstanding Balance RCLT 2019-2 SBA 7(a) Loans December 2019 131.0 SOFR + 250 bps 6.4 RCLT 2023-3 SBA 7(a) Loans July 2023 132.0 Lesser of 30 day Avg SOFR or Prime + 0.07% 63.5 In addition, we actively participated in the Paycheck Protection Program (the “PPP”) through the Treasury and SBA prior to its termination in May 2021.
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.
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.
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 . 12 We finance our LMM loans primarily through term-match securitizations. The table below summarizes our originated LMM loan securitization activities.
As of December 31, 2025 , the loans we originated had a 15.6% CAGR since inception in 2013 based on origination volume. 11 The chart below summarizes our annual LMM loan originations since 2023 . We finance our LMM loans primarily through term-match securitizations. The table below summarizes our originated LMM loan securitization activities.
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.
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.
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 provide construction and permanent financing for the preservation and construction of affordable housing, primarily utilizing tax- exempt bonds through Ready Capital Affordable, a business line that is supported by our subsidiary Red Stone and its affiliates (“Ready Capital Affordable”). In addition, we acquire LMM loans as part of our business strategy.
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.
As part of this segment, we originate and service multi- family loan products under the Freddie Mac Small Balance Loan (“Freddie Mac SBL ”) program. These originated loans are held for sale, and subsequently sold to Freddie Mac.
Lenders can require personal guarantees of owners with less than 20% ownership. 15 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 balanc e . 75% Guaranteed Guaranteed portion sold at premium.
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 balanc e . 75% Guaranteed Guaranteed portion sold at premium.
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.
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.
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.
For loans with a maturity that exceeds 12 months, the upfront fees are: i) For loans of $150,000 or less: 2.00% of the guaranteed portion of the loan ii) For loans of $150,001 to $700,000: 3.00% of the guaranteed portion of the loan iii) For loans of $700,001 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 over $1,000,000; • The adjusted FY 2026 Lender's Annual Service Fee will be 0.55% of the outstanding balance of the guaranteed portion of each loan.
(in thousands) Proceeds Received for Sale of Guaranteed Portion of Loans UPB Sold Net Proceeds Weighted Average Sales Premium (1) Q1 2022 $ 67,257 $ 60,323 $ 6,934 11.5 % Q2 2022 109,287 99,827 9,460 9.5 Q3 2022 105,351 97,025 8,326 8.6 Q4 2022 109,874 101,956 7,918 7.8 Q1 2023 81,315 74,252 7,063 9.5 Q2 2023 106,825 97,879 8,946 9.1 Q3 2023 98,868 90,965 7,903 8.7 Q4 2023 107,273 98,525 8,748 8.9 Q1 2024 149,303 135,392 13,911 10.3 Q2 2024 189,471 170,663 18,808 11.0 Q3 2024 280,341 254,285 26,056 10.2 Q4 2024 232,678 210,718 21,960 10.4 Total $ 1,637,843 $ 1,491,810 $ 146,033 9.8 % (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 thousands) Proceeds Received for Sale of Guaranteed Portion of Loans UPB Sold Net Proceeds Weighted Average Sales Premium (1) Q1 2023 $ 81,315 $ 74,252 $ 7,063 9.5 % Q2 2023 106,825 97,879 8,946 9.1 Q3 2023 98,868 90,965 7,903 8.7 Q4 2023 107,273 98,525 8,748 8.9 Q1 2024 149,303 135,392 13,911 10.3 Q2 2024 189,471 170,663 18,808 11.0 Q3 2024 280,341 254,285 26,056 10.2 Q4 2024 232,678 210,718 21,960 10.4 Q1 2025 279,816 254,035 25,781 10.1 Q2 2025 133,186 121,230 11,956 9.9 Q3 2025 141,649 129,659 11,990 9.2 Q4 2025 133,218 121,363 11,855 9.8 Total $ 1,933,943 $ 1,758,966 $ 174,977 9.9 % (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.
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.
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.
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.
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.
We sell qualifying loans to Freddie Mac, which, in turn, sells such loans to securitization structures. 11 The following table summarizes the loan features by product types. As of December 31, 2024 , we have originated approximately $19.1 billion in LMM loans since Ready Capital’s inception.
The following table summarizes the loan features by product types. As of December 31, 2025 , we have originated approximately $19.7 billion in LMM loans since Ready Capital’s inception.
LMM 9 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 typically include those loans with original principal amounts of between $500,000 and $40 million and are primarily financed by community and regional banks, specialty finance companies and loans guaranteed under the SBA loan programs. 9 LMM loans are used by small businesses to purchase real estate used in their operations or by investors seeking to acquire small multifamily, office, retail, mixed use or warehouse properties.
HISTORICAL PRE-TAX INCOME (LOSS) ($ millions) NET INCOME (LOSS) TO ASSETS (%) DISTRIBUTABLE EARNINGS ($ millions) RETURN ON EQUITY (%) 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. 10 The table below presents a summary of our loan assets.
Our Loan Portfolio As of December 31, 2025 , our loan portfolio was $5.9 billion (excluding PPP loans) and was comprised of 8,931 loans diversified across 50 states and Europe, 96% of which were secured by senior liens and the remaining 4% of which were secured by subordinated liens. The table below presents a summary of our loan assets.
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.
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. 12 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.
S BA 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.
Other S BA Section 7(a) Program key features include: • 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.
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, 66 wa s our Chief Operating Officer until February 2026 . 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.
December 31, 2024 (in thousands, except personnel) LMM Commercial Real Estate Small Business Lending Coordinating Affiliate/ Manager Waterfall, ReadyCap Commercial and Red Stone ReadyCap Lending, Madison One and iBusiness Strategy LMM loan originations and acquisitions SBA and USDA loan originations, acquisitions and servicing Gross Assets $8,058,707 $1,427,281 Loan Portfolio Allocation 84.7% 15.3% Equity Allocation 88.9% 9.7% Distributable Earnings $29,779 $57,066 Distributable Earnings Allocation 29.8% 57.1% Personnel 118 357 The commercial mortgage market is largely bifurcated by loan size between “large balance” loans and LMM loans.
December 31, 2025 (in thousands, except personnel) LMM Commercial Real Estate Small Business Lending Coordinating Affiliate/ Manager Waterfall, ReadyCap Commercial and Ready Capital Affordable ReadyCap Lending, Madison One and iBusiness Strategy LMM loan originations and acquisitions SBA and USDA loan originations, acquisitions and servicing Gross Assets $5,937,031 $1,280,903 Loan Portfolio Allocation 81.4% 18.6% Equity Allocation 82.4% 17.2% Distributable Earnings $(193,407) $4,924 Distributable Earnings Allocation 95.9% 2.4% Personnel 108 334 The commercial mortgage market is largely bifurcated by loan size between “large balance” loans and LMM loans.
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 intend to use leverage for the prim ary purpose of financing our portfolio and not for the purpose of speculating on changes in interest rates.
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.
FINANCING STRATEGY We finance the loans we originate through securitizations and 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.
December 31, 2024 (in thousands) Segment UPB % of Total Carrying Value % of Total Bridge LMM Commercial Real Estate $ 5,413,832 60.0 % $ 5,160,410 60.4 % Fixed rate LMM Commercial Real Estate 891,675 9.9 885,417 10.4 Construction LMM Commercial Real Estate 952,045 10.5 787,668 9.2 Freddie Mac LMM Commercial Real Estate 35,931 0.4 36,248 0.4 Other LMM Commercial Real Estate and Small Business Lending 390,992 4.3 370,650 4.3 SBA - 7(a) Small Business Lending 1,347,106 14.9 1,309,443 15.3 Total $ 9,031,581 100.0 % $ 8,549,836 100.0 % In the table above, • 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.
December 31, 2025 (in thousands) Segment UPB % of Total Carrying Value % of Total Bridge LMM Commercial Real Estate $ 3,592,010 57.3 % $ 3,440,902 58.3 % Fixed rate LMM Commercial Real Estate 712,058 11.4 706,511 12.0 Construction LMM Commercial Real Estate 509,085 8.1 388,042 6.6 Freddie Mac LMM Commercial Real Estate 20,181 0.3 20,500 0.3 Other LMM Commercial Real Estate and Small Business Lending 283,007 4.5 253,276 4.3 SBA - 7(a) Small Business Lending 1,153,143 18.4 1,096,073 18.5 Total $ 6,269,484 100.0 % $ 5,905,304 100.0 % In the table above, • 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.
“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”).
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.
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.
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.
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.
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 We completed the sale of 27 loans totaling $597.3 million across 2 transactions for expected net proceeds of $130.7 million after financing payments.
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 believe this fragmented market, combined with the portfolio expertise required to manage these loans, provides attractive origination and acquisition opportunities. We expect to continue to source LMM loan originations through the following loan origination channels: • Direct and indirect lending relationships .
December 31, 2024 (in thousands) UPB % of Total Carrying Value (1) % of Total Current $ 1,277,013 93.5 % $ 1,249,454 95.2 % 30 - 59 days past due 28,156 2.1 27,214 2.1 60+ days past due 60,894 4.5 36,312 2.8 Total $ 1,366,063 100.0 % $ 1,312,980 100 % (1) Includes loan assets of consolidated VIEs and is net of allowance.
December 31, 2025 (in thousands) UPB % of Total Carrying Value (1) % of Total Current $ 1,082,717 90.2 % $ 1,052,253 93.5 % 30 - 59 days past due 21,722 1.8 20,673 1.8 60+ days past due 88,617 7.4 46,951 4.2 Bankruptcy/ Foreclosure 7,461 0.6 5,494 0.5 Total $ 1,200,517 100.0 % $ 1,125,371 100.0 % (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.
December 31, 2025 (in millions) Asset Class Issuance Bonds Issued Weighted Average Debt Cost Outstanding Balance SCMT 2019-SBC8 LMM Acquired Loans June 2019 306.5 2.9 % 100.1 SCMT 2021-SBC10 LMM Acquired Loans May 2021 232.6 1.6 % 61.8 Total $ 539.1 2.4 % $ 161.9 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 16 licensed non-bank SBLCs.
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.
The lender initially pays the guaranty fee and has the option to pass the expense on to the borrower at closing.
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.
Eligibility depends on industry-specific standards—typically under 500 employees or less than $7.5 million in annual revenue, verified using the SBA Size Standards Tool. The SBA supports small businesses by administering several programs that provide loan guarantees against default on qualified loans made to eligible small businesses.
Removed
Item 1. Business 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.
Added
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.
Removed
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 loans and, to a lesser extent, MBS collateralized primarily by LMM loans, or other real estate-related investments.
Added
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.
Removed
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.
Added
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. The SBA qualifies small businesses based on specific size standards, generally defining them as for-profit, independently owned/operated, U.S.-based and owned by a US c itize n or legal permanent resident.
Removed
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.
Added
SBA Section 7(a) Program loans can be used for: • Providing financing for start-up businesses; • Acquiring, refinancing, or improving real estate and buildings; • Short- and long-term working capital; • Refinancing current business debt; • Purchasing and installation of machinery and equipment, including AI-related expenses; • Purchasing furniture, fixtures, and supplies; 13 • Changes of ownership (complete or partial); and • Multiple purpose loans, including any of the above.
Removed
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.
Added
The maximum loan amount for an SBA Section 7(a) Program loan is $5 million. Key eligibility factors are based on what the business does to receive its income, its credit history, and where the business operates. The SBA typically guarantees 75% of qualified loans over $150,000 and 85% of qualified loans under $150,000.
Removed
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.
Added
This includes 7(a) Working Capital Pilot (WCP) loans. Lenders may not pass the Lender's Annual Service Fee on to the Borrower; and • A personal guarantee is required from all owners holding 20% or more of the equity of the business. Lenders can require personal guarantees of owners with less than 20% ownership.
Removed
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.
Added
He is a licensed Certified Public Accountant in New York. Dominick Scali, 45 has been our Chief Credit Officer since February 2026. Mr. Scali has been a Managing Director and Co-Head of Bridge Lending with the Company since 2015.
Removed
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.
Added
Prior to that, he was head of credit and underwriting for Doral Bank’s national bridge lending platform and held positions in credit and originations at Anglo Irish bank. He began his career at Citigroup working within Citibank’s affordable housing department. Mr. Scali holds a B.A. from Columbia University. Gary T.
Removed
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.
Added
In February of 2026, we repaid in full our 5.75% Senior Notes due 2026 upon the maturity of such notes.
Removed
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.
Removed
December 31, 2024 (in millions) Asset Class Issuance Bonds Issued Weighted Average Debt Cost Outstanding Balance WVMT 2011-SBC1 LMM Acquired Loans - NPL February 2011 $ 40.5 7.0 % $ — WVMT 2011-SBC2 LMM Acquired Loans March 2011 97.6 5.1 % — WVMT 2011-SBC3 LMM Acquired Loans - NPL October 2011 143.4 6.4 % — SCML 2015-SBC4 LMM Acquired Loans - NPL August 2015 125.4 4.0 % — SCMT 2017-SBC6 LMM Acquired Loans August 2017 154.9 3.5 % 10.2 SCMT 2018-SBC7 LMM Acquired Loans November 2018 217.0 4.7 % — SCMT 2019-SBC8 LMM Acquired Loans June 2019 306.5 2.9 % 116.4 SCMT 2020-SBC9 LMM Acquired Loans June 2020 203.6 3.7 % — SCMT 2021-SBC10 LMM Acquired Loans May 2021 232.6 1.6 % 76.8 Total $ 1,521.5 3.8 % $ 203.4 LMM Asset Management Strategy.
Removed
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.
Removed
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 the carrying value of our total loan portfolio.
Removed
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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

145 edited+23 added−107 removed589 unchanged
Biggest changeThe inability to consummate securitizations of our portfolio to finance our LMM loan and ABS assets on a long-term basis could require us to seek other forms of potentially less attractive financing or to liquidate assets at an inopportune time or price, which could have a material and adverse effect on our business, financial condition and results of operations. 54 The transition away from the London interbank offered rate (“LIBOR”) to alternative reference rates may adversely impact our borrowings and assets.
Biggest changeWe are also subject to the risk that we will not be able to obtain short-term financing arrangements or will not be able to renew any short-term financing arrangements after they expire should we find it necessary to extend such short-term financing arrangements to allow more time to obtain the necessary eligible assets for a long-term financing. 46 The inability to consummate securitizations of our portfolio to finance our LMM loan and ABS assets on a long-term basis could require us to seek other forms of potentially less attractive financing or to liquidate assets at an inopportune time or price, which could have a material and adverse effect on our business, financial condition and results of operations.
We have engaged in certain securitization transactions that are treated as taxable mortgage pools for U.S. federal income tax purposes.
We have engaged in certain securitization transactions that are treated as taxable mortgage pools for U.S. federal income tax purposes.
Although we believe that such transactions are structured in a manner so that they should not cause any portion of the distributions in our shares to be treated as excess inclusion income, no assurance can be provided that the IRS would not assert a contrary position.
Although we believe that such transactions are structured in a manner so that they should not cause any portion of the distributions in our shares to be treated as excess inclusion income, no assurance can be provided that the IRS would not assert a contrary position.
Such outbreaks and the actual and potential restrictions intended to prevent and mitigate such outbreaks could impact our business in the following ways: • to the extent the value of commercial real estate declines, which would also likely negatively impact the value of the loans we own, we could become subject to additional margin calls under our repurchase agreements; • our ability to continue to satisfy any additional margin calls from our lenders and to the extent we are unable to satisfy any such margin calls, any acceleration of our indebtedness, increase in the interest rate on advanced funds, termination of our ability to borrow funds from them, or foreclosure by our lenders on our assets; • difficulty accessing debt and equity capital on attractive terms, or at all; • a severe disruption and instability in the financial markets or deteriorations in credit and financing conditions may jeopardize the solvency and financial wherewithal of counterparties with whom we do business, including our borrowers and could affect our or our counterparties’ ability to make regular payments of principal and interest and our ability to recover the full value of our loan, thus reducing our earnings and liquidity; • unavailability of information, resulting in restricted access to key inputs used to derive estimates and assumptions made in connection with evaluating our loans for impairments and establishing allowances for loan losses; • our ability to remain in compliance with the financial covenants under our borrowings, including in the event of impairments in the value of the loans we own; • disruptions to the efficient function of our operations because of, among other factors, any inability to access short-term or long-term financing for the loans we make; • to the extent we elect or are forced to reduce our loan origination activities; and • effects of legal and regulatory responses to concerns about such outbreaks, which could result in additional regulation or restrictions affecting the conduct of our business.
Such outbreaks and the actual and potential restrictions intended to prevent and mitigate such outbreaks could impact our business in the following ways: • to the extent the value of commercial real estate declines, which would also likely negatively impact the value of the loans we own, we could become subject to additional margin calls under our repurchase agreements; • our ability to continue to satisfy any additional margin calls from our lenders and to the extent we are unable to satisfy any such margin calls, any acceleration of our indebtedness, increase in the interest rate on advanced funds, termination of our ability to borrow funds from them, or foreclosure by our lenders on our assets; • difficulty accessing debt and equity capital on attractive terms, or at all; • a severe disruption and instability in the financial markets or deteriorations in credit and financing conditions may jeopardize the solvency and financial wherewithal of counterparties with whom we do business, including our borrowers and could affect our or our counterparties’ ability to make regular payments of principal and interest and our ability to recover the full value of our loan, thus reducing our earnings and liquidity; • unavailability of information, resulting in restricted access to key inputs used to derive estimates and assumptions made in connection with evaluating our loans for impairments and establishing allowances for loan losses; 25 • our ability to remain in compliance with the financial covenants under our borrowings, including in the event of impairments in the value of the loans we own; • disruptions to the efficient function of our operations because of, among other factors, any inability to access short-term or long-term financing for the loans we make; • to the extent we elect or are forced to reduce our loan origination activities; and • effects of legal and regulatory responses to concerns about such outbreaks, which could result in additional regulation or restrictions affecting the conduct of our business.
We have acquired real estate properties through foreclosure, which exposes us to additional risks, including, but not limited to, the following: • facing difficulties in integrating these properties with our existing business operations; • incurring costs to carry, and in some cases make repairs or improvements, which results in additional expenses and requires additional liquidity that could exceed our original estimates and impact our operating results; • being unable to realize sufficient amounts from sales of the properties to avoid losses; 23 • being unable to sell properties, which are not liquid assets, in a timely manner, or at all, when we need to increase liquidity; • properties being acquired with one or more co-owners (called tenants-in-common) where development or sale requires written agreement or consent by all; without timely agreement or consent, we could suffer a loss from being unable to develop or sell the property; • maintaining occupancy of the properties; • controlling operating expenses; • coping with general and local market conditions; • complying with changes in laws and regulations pertaining to taxes, use, zoning and environmental protection; • possible liability for injury to persons and property; • possible uninsured losses related to environmental events such as earthquakes, floods or mudslides; and • possible liability for environmental remediation.
We have acquired real estate properties through foreclosure, which exposes us to additional risks, including, but not limited to, the following: • facing difficulties in integrating these properties with our existing business operations; • incurring costs to carry, and in some cases make repairs or improvements, which results in additional expenses and requires additional liquidity that could exceed our original estimates and impact our operating results; • being unable to realize sufficient amounts from sales of the properties to avoid losses; • being unable to sell properties, which are not liquid assets, in a timely manner, or at all, when we need to increase liquidity; • properties being acquired with one or more co-owners (called tenants-in-common) where development or sale requires written agreement or consent by all; without timely agreement or consent, we could suffer a loss from being unable to develop or sell the property; • maintaining occupancy of the properties; • controlling operating expenses; • coping with general and local market conditions; • complying with changes in laws and regulations pertaining to taxes, use, zoning and environmental protection; • possible liability for injury to persons and property; • possible uninsured losses related to environmental events such as earthquakes, floods or mudslides; and • possible liability for environmental remediation.
Net operating income of an income-producing property can be adversely affected by, but not limited to, the following: • tenant mix; • success of tenant businesses; • property management decisions; • property location, condition and design; • competition from comparable types of properties; • changes in national, regional or local economic conditions and/or specific industry segments; • declines in regional or local real estate values; • declines in regional or local rental or occupancy rates; • increases in interest rates, real estate tax rates and other operating expenses; • costs of remediation and liabilities associated with environmental conditions; • the potential for uninsured or underinsured property losses; • changes in governmental laws and regulations, including fiscal policies, zoning ordinances and environmental legislation and the related costs of compliance; and • acts of God, terrorism, pandemics and other health crises and natural disasters, social unrest and civil disturbances.
Net operating income of an income-producing property can be adversely affected by, but not limited to, the following: • tenant mix; • success of tenant businesses; • property management decisions; • property location, condition and design; • competition from comparable types of properties; • changes in national, regional or local economic conditions and/or specific industry segments; • declines in regional or local real estate values; • declines in regional or local rental or occupancy rates; • increases in interest rates, real estate tax rates and other operating expenses; • costs of remediation and liabilities associated with environmental conditions; • the potential for uninsured or underinsured property losses; 24 • changes in governmental laws and regulations, including fiscal policies, zoning ordinances and environmental legislation and the related costs of compliance; and • acts of God, terrorism, pandemics and other health crises and natural disasters, social unrest and civil disturbances.
We may make investments through joint ventures and such joint venture investments may involve risks not otherwise present when we make investments without partners, including the following: • we may not have exclusive control over the investment or the joint venture, which may prevent us from taking actions that are in our best interest and could create the potential risk of creating impasses on decisions, such as with respect to acquisitions or dispositions; • joint venture agreements often restrict the transfer of a partner’s interest or may otherwise restrict our ability to sell the interest when we desire and/or on advantageous terms; • joint venture agreements may contain buy-sell provisions pursuant to which one partner may initiate procedures requiring the other partner to choose between buying the other partner’s interest or selling its interest to that partner; 32 • a partner may, at any time, have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals; • a partner may be in a position to take action contrary to our instructions, requests, policies or objectives, including our policy with respect to maintaining our qualification as a REIT and our exemption from registration under the 1940 Act; • a partner may fail to fund its share of required capital contributions or may become bankrupt, which may mean that we and any other remaining partners generally would remain liable for the joint venture’s liabilities; • our relationships with our partners are contractual in nature and may be terminated or dissolved under the terms of the applicable joint venture agreements and, in such event, we may not continue to own or operate the interests or investments underlying such relationship or may need to purchase such interests or investments at a premium to the market price to continue ownership; • disputes between us and a partner may result in litigation or arbitration that could increase our expenses and prevent Waterfall and our officers and directors from focusing their time and efforts on our business and could result in subjecting the investments owned by the joint venture to additional risk; or • we may, in certain circumstances, be liable for the actions of a partner, and the activities of a partner could adversely affect our ability to qualify as a REIT or maintain our exclusion from registration under the 1940 Act, even though we do not control the joint venture.
We may make investments through joint ventures and such joint venture investments may involve risks not otherwise present when we make investments without partners, including the following: • we may not have exclusive control over the investment or the joint venture, which may prevent us from taking actions that are in our best interest and could create the potential risk of creating impasses on decisions, such as with respect to acquisitions or dispositions; • joint venture agreements often restrict the transfer of a partner’s interest or may otherwise restrict our ability to sell the interest when we desire and/or on advantageous terms; • joint venture agreements may contain buy-sell provisions pursuant to which one partner may initiate procedures requiring the other partner to choose between buying the other partner’s interest or selling its interest to that partner; • a partner may, at any time, have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals; • a partner may be in a position to take action contrary to our instructions, requests, policies or objectives, including our policy with respect to maintaining our qualification as a REIT and our exemption from registration under the 1940 Act; • a partner may fail to fund its share of required capital contributions or may become bankrupt, which may mean that we and any other remaining partners generally would remain liable for the joint venture’s liabilities; • our relationships with our partners are contractual in nature and may be terminated or dissolved under the terms of the applicable joint venture agreements and, in such event, we may not continue to own or operate the 31 interests or investments underlying such relationship or may need to purchase such interests or investments at a premium to the market price to continue ownership; • disputes between us and a partner may result in litigation or arbitration that could increase our expenses and prevent Waterfall and our officers and directors from focusing their time and efforts on our business and could result in subjecting the investments owned by the joint venture to additional risk; or • we may, in certain circumstances, be liable for the actions of a partner, and the activities of a partner could adversely affect our ability to qualify as a REIT or maintain our exclusion from registration under the 1940 Act, even though we do not control the joint venture.
However, if in the future we do not meet the conditions set forth in the No-Action Letter or the relief provided by the No-Action Letter becomes unavailable for any other reason and we are unable to obtain another exemption from registration, we may be required to reduce or eliminate our use of interest rate swaps or vary the manner in which we deploy interest rate swaps in our business and we or our directors may be required to register with the CFTC as CPOs and Waterfall may be required to register as a “commodity trading advisor” with the CFTC, which will require compliance with CFTC rules and subject us, our Board and Waterfall to regulation by the CFTC.
However, if in the future we do not meet the conditions set forth in the No-Action Letter or the relief provided by the No-Action Letter becomes unavailable for any other reason and we are unable to obtain another exemption from registration, we may be required to reduce or eliminate our use of interest rate swaps or vary the manner in which we deploy interest rate swaps in our business and we or our directors 51 may be required to register with the CFTC as CPOs and Waterfall may be required to register as a “commodity trading advisor” with the CFTC, which will require compliance with CFTC rules and subject us, our Board and Waterfall to regulation by the CFTC.
Unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland, or, if that court does not have jurisdiction, the United States District Court for the District of Maryland, Baltimore Division is the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of our Company, (ii) any action asserting a claim of breach of any duty owed by any director or officer or other employee of our Company to our Company or to our stockholders, (iii) any action asserting a claim against our Company or any director or officer or other employee of our Company arising pursuant to any provision of the MGCL or our charter or bylaws, or (iv) any action asserting a claim against our Company or any director or officer or other employee of our Company that is governed by the internal affairs doctrine.
Unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland, or, if that court does not have jurisdiction, the United States District Court for the District of Maryland, Baltimore Division is the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of our Company, (ii) any action asserting a claim of breach of any duty owed by any director or officer or other employee of our Company to our 63 Company or to our stockholders, (iii) any action asserting a claim against our Company or any director or officer or other employee of our Company arising pursuant to any provision of the MGCL or our charter or bylaws, or (iv) any action asserting a claim against our Company or any director or officer or other employee of our Company that is governed by the internal affairs doctrine.
Our Board may, in its sole discretion, subject to such conditions as it may determine and the receipt of certain representations and undertakings, prospectively or retroactively, waive the ownership limits or establish a different limit 65 on ownership, or excepted holder limit, for a particular stockholder if the stockholder’s ownership in excess of the ownership limits would not result in us being “closely held” under Section 856(h) of the Code or otherwise failing to qualify as a REIT.
Our Board may, in its sole discretion, subject to such conditions as it may determine and the receipt of certain representations and undertakings, prospectively or retroactively, waive the ownership limits or establish a different limit on ownership, or excepted holder limit, for a particular stockholder if the stockholder’s ownership in excess of the ownership limits would not result in us being “closely held” under Section 856(h) of the Code or otherwise failing to qualify as a REIT.
When purchasing securities, we may rely on opinions or advice of counsel for the issuer of such securities, or statements made in related offering documents, for purposes of determining whether such securities represent debt or equity securities for U.S. federal income tax purposes, and also to what extent those securities constitute REIT real estate assets for purposes of the REIT asset tests and produce income which qualifies under the 75% gross income test.
When purchasing securities, we may rely on opinions or advice of counsel for the issuer of such securities, or statements made in related offering documents, for purposes of determining whether such securities represent debt or equity 60 securities for U.S. federal income tax purposes, and also to what extent those securities constitute REIT real estate assets for purposes of the REIT asset tests and produce income which qualifies under the 75% gross income test.
These loan modifications may impact our liquidity and make us more reliant upon financing strategies to meet potential cash requirements. For a detailed discussion of our loan modifications, see “Notes to Consolidated Financial Statements, Note 26 6 – Loans and Allowance for Credit Losses” included in Item 8, “Financial Statements and Supplementary Data,” in this Form 10-K.
These loan modifications may impact our liquidity and make us more reliant upon financing strategies to meet potential cash requirements. For a detailed discussion of our loan modifications, see “Notes to Consolidated Financial Statements, Note 6 – Loans and Allowance for Credit Losses” included in Item 8, “Financial Statements and Supplementary Data,” in this Form 10-K.
If we internalize our management functions or if Waterfall is internalized by another sponsored program, we may be unable to obtain key personnel, and the consideration we pay for any such internalization could exceed the amount of 44 any termination fee, either of which could have a material and adverse effect on our business, financial condition and results of operations.
If we internalize our management functions or if Waterfall is internalized by another sponsored program, we may be unable to obtain key personnel, and the consideration we pay for any such internalization could exceed the amount of any termination fee, either of which could have a material and adverse effect on our business, financial condition and results of operations.
We may invest in LMM loans, LMM ABS and other real estate-related investments. Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political 35 considerations, and other factors beyond our control. Rising interest rates generally reduce the demand for mortgage loans due to the higher cost of borrowing.
We may invest in LMM loans, LMM ABS and other real estate-related investments. Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, and other factors beyond our control. Rising interest rates generally reduce the demand for mortgage loans due to the higher cost of borrowing.
If we cannot acquire, make or sell government-guaranteed loans, we may generate less interest income, fewer origination fees, and our ability to generate gains on sale of loans may decrease. 53 From time-to-time, the government agencies that guarantee these loans reach their internally budgeted limits and cease to guarantee loans for a stated time period.
If we cannot acquire, make or sell government-guaranteed loans, we may generate less interest income, fewer origination fees, and our ability to generate gains on sale of loans may decrease. From time-to-time, the government agencies that guarantee these loans reach their internally budgeted limits and cease to guarantee loans for a stated time period.
Our portfolio of assets may at times be concentrated in certain property types or secured by properties concentrated in a limited number of geographic areas, which increases our exposure to economic downturn with respect to those property types or geographic locations. 27 While we seek to diversify our portfolio of assets, we are not required to observe specific diversification criteria.
Our portfolio of assets may at times be concentrated in certain property types or secured by properties concentrated in a limited number of geographic areas, which increases our exposure to economic downturn with respect to those property types or geographic locations. While we seek to diversify our portfolio of assets, we are not required to observe specific diversification criteria.
Additionally, due to the size and nature of our Company, we rely on third-party service providers for many aspects of our business. Notwithstanding our efforts to oversee and mitigate risks associated with our use of third-party service 40 providers, we can provide no assurance that the networks and systems that our third-party vendors have established or use will be effective.
Additionally, due to the size and nature of our Company, we rely on third-party service providers for many aspects of our business. Notwithstanding our efforts to oversee and mitigate risks associated with our use of third-party service providers, we can provide no assurance that the networks and systems that our third-party vendors have established or use will be effective.
The amount due would be equal to the unrealized loss of 57 the open swap positions with the respective counterparty and could also include other fees and charges, and these economic losses will be reflected in our results of operations. We may also be required to provide margin to our counterparties to collateralize our obligations under hedging agreements.
The amount due would be equal to the unrealized loss of the open swap positions with the respective counterparty and could also include other fees and charges, and these economic losses will be reflected in our results of operations. We may also be required to provide margin to our counterparties to collateralize our obligations under hedging agreements.
Our estimates and judgments are based on a number of factors, including (1) whether cash from operations is sufficient to cover the debt service requirements currently and into the future, (2) the ability of the borrower to refinance the loan and (3) the property’s liquidation value, all of which remain uncertain and are subjective.
Our estimates and judgments 40 are based on a number of factors, including (1) whether cash from operations is sufficient to cover the debt service requirements currently and into the future, (2) the ability of the borrower to refinance the loan and (3) the property’s liquidation value, all of which remain uncertain and are subjective.
Our estimates and judgments may not be correct and, therefore, our results of operations and financial condition could be severely impacted. 41 Under the CECL model, we are required to present certain financial assets carried at amortized cost, such as loans held for investment, at the net amount expected to be collected.
Our estimates and judgments may not be correct and, therefore, our results of operations and financial condition could be severely impacted. Under the CECL model, we are required to present certain financial assets carried at amortized cost, such as loans held for investment, at the net amount expected to be collected.
We are exposed to fluctuations in foreign currency exchange rates, particularly with respect to the Euro and the Pound Sterling (“GBP”). Any significant change in the value of the currencies of the countries in which we do business could have a material adverse effect on our business, financial condition and results of operations.
We are exposed to fluctuations in foreign currency exchange rates, particularly with respect to the Euro (“EUR”) and the Pound Sterling (“GBP”). Any significant change in the value of the currencies of the countries in which we do business could have a material adverse effect on our business, financial condition and results of operations.
Cybersecurity risk and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of the security, confidentiality, or integrity of our Company, employee, customer, or third- party confidential information and/or damage to our reputation or business relationships, any of which could negatively impact our financial results.
Cybersecurity risk and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of the security, confidentiality, availability, or integrity of our Company, employee, customer, or third-party confidential information and/or damage to our reputation or business relationships, any of which could negatively impact our financial results.
The 1940 Act further defines voting securities as any security presently 37 entitling the owner or holder thereof to vote for the election of directors of a company. We will treat companies in which we own at least a majority of the outstanding voting securities as majority-owned subsidiaries for purposes of the 40% test.
The 1940 Act further defines voting securities as any security presently entitling the owner or holder thereof to vote for the election of directors of a company. We will treat companies in which we own at least a majority of the outstanding voting securities as majority-owned subsidiaries for purposes of the 40% test.
Additionally, the current support provided by the Treasury to Freddie Mac, and any additional support it may provide in the future, could have the effect of lowering the interest rates we expect to receive from such assets, thereby tightening 52 the spread between the interest we earn on these assets and the cost of financing these assets.
Additionally, the current support provided by the Treasury to Freddie Mac, and any additional support it may provide in the future, could have the effect of lowering the interest rates we expect to receive from such assets, thereby tightening the spread between the interest we earn on these assets and the cost of financing these assets.
We intend to conduct our operations so that any asset that we or a subsidiary REIT owns that could be treated as held for sale to customers in the 66 ordinary course of our business qualifies for certain safe harbor provisions that prevent the application of this prohibited transaction tax.
We intend to conduct our operations so that any asset that we or a subsidiary REIT owns that could be treated as held for sale to customers in the ordinary course of our business qualifies for certain safe harbor provisions that prevent the application of this prohibited transaction tax.
Any shortfall resulting from the bankruptcy of one or more of our tenants could adversely affect our cash flow and results of operations. 24 Any mezzanine loan assets we may purchase or originate may involve greater risks of loss than senior loans secured by income-producing properties.
Any shortfall resulting from the bankruptcy of one or more of our tenants could adversely affect our cash flow and results of operations. Any mezzanine loan assets we may purchase or originate may involve greater risks of loss than senior loans secured by income-producing properties.
Aggregate characteristics taken into consideration include type of collateral, index, margin, periodic cap, lifetime cap, underwriting standards, age and delinquency experience. However, the fair value reflects estimates and may not be indicative of the amounts we would receive in a 36 current market exchange.
Aggregate characteristics taken into consideration include type of collateral, index, margin, periodic cap, lifetime cap, underwriting standards, age and delinquency experience. However, the fair value reflects estimates and may not be indicative of the amounts we would receive in a current market exchange.
Our ability to fund these obligations will depend on the liquidity of our assets and access to capital at the time. The need to fund these obligations could adversely impact our financial condition. Hedging against interest rate exposure may adversely affect our earnings, which could reduce our cash available for distribution to our stockholders.
Our ability to fund these obligations will depend on the liquidity of our assets and access to capital at the time. The need to fund these obligations could adversely impact our financial condition. 49 Hedging against interest rate exposure may adversely affect our earnings, which could reduce our cash available for distribution to our stockholders.
As a result, our ability to vary our portfolio in response to changes in economic and other conditions may be relatively limited, which may cause us to incur losses. Our non-U.S. assets may subject us to the uncertainty of foreign laws and markets and currency rate exposure.
As a result, our ability to vary our portfolio in response to changes in economic and other conditions may be relatively limited, which may cause us to incur losses. 35 Our non-U.S. assets may subject us to the uncertainty of foreign laws and markets and currency rate exposure.
To qualify as a REIT, we must distribute to our stockholders each calendar year dividends equal to at least 90% of our REIT taxable income (including certain items of non-cash income), determined without regard to the deduction for dividends paid and excluding net capital gain.
To qualify as a REIT, we must distribute to our stockholders each calendar year dividends equal to at least 90% of our REIT taxable income (including certain items of non-cash income), determined without regard to the deduction for 54 dividends paid and excluding net capital gain.
In addition, these investments subject us to risks of multiple and conflicting tax laws and regulations, other laws and regulations that may make foreclosure and the exercise of other remedies in the case of default more difficult or costly compared to U.S. assets, and political and economic instability abroad.
In addition, these investments subject us to risks of multiple 23 and conflicting tax laws and regulations, other laws and regulations that may make foreclosure and the exercise of other remedies in the case of default more difficult or costly compared to U.S. assets, and political and economic instability abroad.
If we are unable to post the additional collateral, we 33 would have to sell the assets at a time when we might not otherwise choose to do so. A reduction in credit available may reduce our earnings and, in turn, cash available for distribution to stockholders.
If we are unable to post the additional collateral, we would have to sell the assets at a time when we might not otherwise choose to do so. A reduction in credit available may reduce our earnings and, in turn, cash available for distribution to stockholders.
In some states, foreclosure actions can sometimes take several years or more to litigate. At any time prior to or during the foreclosure proceedings, the borrower may file for bankruptcy, which would have the effect of staying the foreclosure actions and further delaying the foreclosure process.
In some states, foreclosure actions can sometimes take several years or more to litigate. At any time prior to or during the foreclosure proceedings, the borrower may file for bankruptcy, which would have the effect of staying the foreclosure actions and further 21 delaying the foreclosure process.
Additionally, to the extent cash flows from LMM loans and ABS assets that return scheduled and unscheduled principal are reinvested, the spread between the yields on the new LMM loans and ABS assets and available borrowing rates may decline, which would likely decrease our net income.
Additionally, to the extent cash flows from LMM loans and 34 ABS assets that return scheduled and unscheduled principal are reinvested, the spread between the yields on the new LMM loans and ABS assets and available borrowing rates may decline, which would likely decrease our net income.
In addition, we expect that our Chief Executive Officer and Chief Investment Officer, President, portfolio managers and any other appropriate personnel of Waterfall will devote such portion of their time to our affairs as is necessary to enable us to effectively operate our business.
In addition, we expect that our Chief Executive Officer and Chief Investment Officer, President, portfolio managers and any other appropriate personnel of Waterfall will devote such portion of their time to our affairs as is necessary to enable us to effectively 42 operate our business.
Certain provisions of the Maryland General Corporation Law (“MGCL”) may have the effect of deterring a third party from making a proposal to acquire us or of impeding a change in control under circumstances that otherwise could provide the holders of shares of our common stock with the opportunity to realize a premium over the then-prevailing market price of our common stock, including: • “business combination" provisions of the MGCL that, subject to limitations, prohibit certain business combinations between us and an "interested stockholder" (defined generally as any person who beneficially owns 10% or more of our then outstanding voting stock or an affiliate or associate of ours who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of our then outstanding voting stock) or an affiliate thereof for five years after the most recent date on which the stockholder becomes an interested stockholder and, thereafter, impose fair price and/or supermajority stockholder voting requirements on these combinations; • "control share" provisions of the MGCL that provide that a holder of "control shares" of a Maryland corporation (defined as shares which, when aggregated with all other shares controlled by the stockholder (except solely by virtue of a revocable proxy), entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a "control share acquisition" (defined as the direct or indirect acquisition of ownership or control of issued and outstanding "control shares") has no voting rights with respect to such shares except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding votes entitled to be cast by the acquirer of control shares, our officers and personnel who are also directors; and 70 • "unsolicited takeover" provisions of the MGCL that permit our Board, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to implement takeover defenses, some of which (for example, a classified board) we do not yet have.
Certain provisions of the Maryland General Corporation Law (“MGCL”) may have the effect of deterring a third party from making a proposal to acquire us or of impeding a change in control under circumstances that otherwise could provide the holders of shares of our common stock with the opportunity to realize a premium over the then-prevailing market price of our common stock, including: • “business combination ” provisions of the MGCL that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder ” (defined generally as any person who beneficially owns 10% or more of our then outstanding voting stock or an affiliate or associate of ours who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of our then outstanding voting stock) or an affiliate thereof for five years after the most recent date on which the stockholder becomes an interested stockholder and, thereafter, impose fair price and/or supermajority stockholder voting requirements on these combinations; • “ control share ” provisions of the MGCL that provide that a holder of “control shares ” of a Maryland corporation (defined as shares which, when aggregated with all other shares controlled by the stockholder (except solely by virtue of a revocable proxy), entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition ” (defined as the direct or indirect 62 acquisition of ownership or control of issued and outstanding “control shares ” ) has no voting rights with respect to such shares except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding votes entitled to be cast by the acquirer of control shares, our officers and personnel who are also directors; and • “ unsolicited takeover ” provisions of the MGCL that permit our Board, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to implement takeover defenses, some of which (for example, a classified board) we do not yet have.
Both default frequency and default severity of loans may depend upon the quality of the servicer. If a servicer is not vigilant in encouraging the borrowers to make their monthly payments, the borrowers may be far less likely to make these payments, which could result in a higher frequency of default.
Both default frequency and default severity of loans may depend upon the quality of the servicer. If 29 a servicer is not vigilant in encouraging the borrowers to make their monthly payments, the borrowers may be far less likely to make these payments, which could result in a higher frequency of default.
Additionally, origination of LMM loans by our competitors may increase the availability of LMM loans which may result in a reduction of interest rates on LMM loans. Some competitors may have a lower cost of funds and access to funding sources that may not be available to us.
Additionally, origination of LMM loans by our competitors 30 may increase the availability of LMM loans which may result in a reduction of interest rates on LMM loans. Some competitors may have a lower cost of funds and access to funding sources that may not be available to us.
Our charter also provides that, unless exempted by our Board, no person may own more than 9.8% in value or in number, whichever is more restrictive, of the outstanding shares of our common stock, or 9.8% in value or in number, whichever is more restrictive, of the outstanding shares of all classes and series of our capital stock.
Our charter also provides that, unless exempted by our Board, no person may own more 57 than 9.8% in value or in number, whichever is more restrictive, of the outstanding shares of our common stock, or 9.8% in value or in number, whichever is more restrictive, of the outstanding shares of all classes and series of our capital stock.
In addition, when purchasing the equity tranche of a securitization, we may rely on opinions or advice of counsel regarding the 68 qualification of the securitization for exemption from U.S. corporate income tax and the qualification of interests in such securitization as debt for U.S. federal income tax purposes.
In addition, when purchasing the equity tranche of a securitization, we may rely on opinions or advice of counsel regarding the qualification of the securitization for exemption from U.S. corporate income tax and the qualification of interests in such securitization as debt for U.S. federal income tax purposes.
It is possible that the integration process related to acquisitions could result in the disruption of our ongoing 29 businesses or inconsistencies in standards, controls, procedures and policies that could adversely affect our ability to maintain relationships with clients, customers, and employees.
It is possible that the integration process related to acquisitions could result in the disruption of our ongoing businesses or inconsistencies in standards, controls, procedures and policies that could adversely affect our ability to maintain relationships with clients, customers, and employees.
Additionally, the operation of the acquired businesses may adversely affect our existing profitability, and we may not be able to achieve results in the future similar to those achieved by our existing business or manage growth resulting from the acquisition effectively.
Additionally, the operation of the acquired businesses may adversely affect our existing 28 profitability, and we may not be able to achieve results in the future similar to those achieved by our existing business or manage growth resulting from the acquisition effectively.
The receivables underlying the ABS we may acquire are subject to credit risks, liquidity risks, interest rate risks, market risks, operations risks, structural risks and legal risks, which could result in losses to us. We may acquire ABS securities, where the underlying pool of assets consists primarily of LMM loans.
The receivables underlying the ABS we may acquire are subject to credit risks, liquidity risks, interest rate risks, market risks, operations risks, structural risks and legal risks, which could result in losses to us. We may acquire ABS where the underlying pool of assets consists primarily of LMM loans.
When we sell loans, we are required to make customary representations and warranties about such loans to the loan purchaser. Our mortgage loan sale agreements may require us to repurchase or 55 substitute loans in the event we breach a representation or warranty given to the loan purchaser.
When we sell loans, we are required to make customary representations and warranties about such loans to the loan purchaser. Our mortgage loan sale agreements may require us to repurchase or substitute loans in the event we breach a representation or warranty given to the loan purchaser.
Non- performing LMM loans may require a substantial amount of workout negotiations and/or restructuring, which may divert our attention from other activities and entail, among other things, a substantial reduction in the interest rate or capitalization of past due interest.
Non- 19 performing LMM loans may require a substantial amount of workout negotiations and/or restructuring, which may divert our attention from other activities and entail, among other things, a substantial reduction in the interest rate or capitalization of past due interest.
A government shutdown occurred in October 2013 and December 2018, which affected the ability of entities to originate SBA and USDA loans because Congress failed to approve a budget which in turn eliminated the availability of funds for these programs.
A government shutdown occurred in October 2013, December 2018 and October 2025, which affected the ability of entities to originate SBA and USDA loans because Congress failed to approve a budget which in turn eliminated the availability of funds for these programs.
Difficult market conditions, as well as inflation, 20 energy costs, geopolitical issues, health epidemics and outbreaks of contagious diseases, unemployment and the availability and cost of credit, can contribute to increased volatility and diminished expectations for the economy and markets.
Difficult market conditions, as well as inflation, energy costs, geopolitical issues, health epidemics and outbreaks of contagious diseases, unemployment and the availability and cost of credit, can contribute to increased volatility and diminished expectations for the economy and markets.
In addition, certain ABS (particularly subordinated ABS) provide that the non-payment of interest thereon in cash will not constitute an event of default in certain circumstances, and the holders of such ABS will not have available to 34 them any associated default remedies.
In addition, certain ABS (particularly subordinated ABS) provide that the non-payment of interest thereon in cash will not constitute an event of default in certain circumstances, and the holders of such ABS will not have available to them any associated default remedies.
The remedies available to a purchaser of mortgage loans are generally broader than those available to us against the originating broker or correspondent. Further, if a purchaser enforces its remedies against us, we may not be able to enforce the remedies we have against the sellers.
The remedies available to a purchaser of mortgage loans are generally broader than those available to us against the originating broker or correspondent. Further, if a purchaser enforces its remedies against us, we may not be able to 47 enforce the remedies we have against the sellers.
Disruptions and uncertainty in 21 the financial and banking sectors, including due to regional bank failures or decreased consumer confidence in the banking system, may hinder our ability to access capital on reasonable terms or at all.
Disruptions and uncertainty in the financial and banking sectors, including due to regional bank failures or decreased consumer confidence in the banking system, may hinder our ability to access capital on reasonable terms or at all.
If we are unable to collect the full amount of the working capital advance receivable we acquire through the advance, we may be required to expend monies in connection with remedial actions, 39 which expenditures could be material.
If we are unable to collect the full amount of the working capital advance receivable we acquire through the advance, we may be required to expend monies in connection with remedial actions, which expenditures could be material.
In such a case, we might need to borrow money or sell assets in 60 order to pay our taxes. Our payment of income tax would decrease the amount of our income available for distribution to our stockholders.
In such a case, we might need to borrow money or sell assets in order to pay our taxes. Our payment of income tax would decrease the amount of our income available for distribution to our stockholders.
The appraiser may 22 feel pressure from the broker or lender to provide an appraisal in the amount necessary to enable the originator to make the loan, whether or not the value of the property justifies such an appraised value.
The appraiser may feel pressure from the broker or lender to provide an appraisal in the amount necessary to enable the originator to make the loan, whether or not the value of the property justifies such an appraised value.
In addition, unless we were eligible for certain statutory relief provisions, we could not re-elect to qualify as a REIT until the fifth calendar year following the year in which we failed to qualify.
In addition, unless we were eligible for certain 52 statutory relief provisions, we could not re-elect to qualify as a REIT until the fifth calendar year following the year in which we failed to qualify.
To the extent that we satisfy the 90% distribution requirement, but distribute less than 100% of our taxable income, we will be subject to U.S. federal corporate income tax on our 62 undistributed income.
To the extent that we satisfy the 90% distribution requirement, but distribute less than 100% of our taxable income, we will be subject to U.S. federal corporate income tax on our undistributed income.
Performing LMM loans (either loans purchased with historical activity, i.e., not originated, purchased 30 in the secondary market or ReadyCap Commercial originations) will be securitized with us retaining the subordinate tranches.
Performing LMM loans (either loans purchased with historical activity, i.e., not originated, purchased in the secondary market or ReadyCap Commercial originations) will be securitized with us retaining the subordinate tranches.
Although there are other measures we can take in such circumstances in order to remain in compliance, there can be no assurance that we will be able to comply with both of these tests in all market conditions. 61 Complying with REIT requirements may force us to liquidate or forego otherwise attractive investments, which could reduce returns on our assets and adversely affect returns to our stockholders.
Although there are other measures we can take in such circumstances in order to remain in compliance, there can be no assurance that we will be able to comply with both of these tests in all market conditions. 53 Complying with REIT requirements may force us to liquidate or forego otherwise attractive investments, which could reduce returns on our assets and adversely affect returns to our stockholders.
We believe we will meet the conditions set forth in the No-Action Letter and we have filed our claim with the 59 CFTC to perfect the use of the no-action relief from registration.
We believe we will meet the conditions set forth in the No-Action Letter and we have filed our claim with the CFTC to perfect the use of the no-action relief from registration.
Any person or entity purchasing or otherwise acquiring any interest in shares of 71 our capital stock shall be deemed to have notice of and to have consented to the provisions described above.
Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions described above.
We might also be subject to this tax if we were to sell assets in connection with a disposition of certain segments of our business or in connection with a liquidation of us.
We might also be subject to this tax if we were to sell assets 58 in connection with a disposition of certain segments of our business or in connection with a liquidation of us.
If, however, less than 95% of the assets of a REMIC in which we hold an interest consists of real estate assets (determined as if we held such assets), we will be treated as holding our proportionate share of the assets of the REMIC for the purpose of the asset tests and receiving directly our proportionate share of the income of the REMIC for the 64 purpose of determining the amount of income from the REMIC that is treated as interest on an obligation secured by a mortgage on real property.
If, however, less than 95% of the assets of a REMIC in which we hold an interest consists of real estate assets 56 (determined as if we held such assets), we will be treated as holding our proportionate share of the assets of the REMIC for the purpose of the asset tests and receiving directly our proportionate share of the income of the REMIC for the purpose of determining the amount of income from the REMIC that is treated as interest on an obligation secured by a mortgage on real property.
In addition, we offer no assurance that Waterfall will remain our manager or that we will continue to have access to Waterfall’s principals and professionals. The current term of our management agreement runs through October 31, 2025 and, unless terminated in accordance with its terms, our management agreement will automatically renew for a successive one-year term on each anniversary thereafter.
In addition, we offer no assurance that Waterfall will remain our manager or that we will continue to have access to Waterfall’s principals and professionals. The current term of our management agreement runs through October 31, 2026 and, unless terminated in accordance with its terms, our management agreement will automatically renew for a successive one-year term on each anniversary thereafter.
These provisions may increase the cost to our Company of terminating the management agreement and adversely affect our ability to terminate Waterfall without cause.
These provisions may increase the cost to our 43 Company of terminating the management agreement and adversely affect our ability to terminate Waterfall without cause.
For example, these restrictions will limit the ability of our subsidiaries to invest directly in MBS that represent less than the entire ownership in a pool of mortgage loans, debt and equity tranches of securitizations and MBS, and real estate companies or in assets not related to real estate.
For example, these restrictions can limit the ability of our subsidiaries to invest directly in MBS that represent less than the entire ownership in a pool of mortgage loans, debt and equity tranches of securitizations and MBS, and real estate companies or in assets not related to real estate.
Interest rate fluctuations present a variety of risks, including the risk of a narrowing of the difference between asset yields and borrowing rates, 72 flattening or inversion of the yield curve and fluctuating prepayment rates, and may adversely affect our income and the value of our assets and common stock.
Interest rate fluctuations present a variety of risks, including the risk of a narrowing of the difference between asset yields and borrowing rates, 64 flattening or inversion of the yield curve and fluctuating prepayment rates, and may adversely affect our income and the value of our assets and common stock.
Further, if many of our potential lenders are unwilling or unable to provide us with financing, we could be forced to sell our assets at an 73 inopportune time when prices are depressed.
Further, if many of our potential lenders are unwilling or unable to provide us with financing, we could be forced to sell our assets at an 65 inopportune time when prices are depressed.
Current or future outbreaks of highly infectious diseases could materially and adversely impact the value of our assets, our business, financial condition and results of operations and cash flows, and both our and Waterfall’s ability to operate successfully.
Future outbreaks of highly infectious diseases could materially and adversely impact the value of our assets, our business, financial condition and results of operations and cash flows, and both our and Waterfall’s ability to operate successfully.
We will treat as qualifying assets for this purpose LMM loans and other mortgages, in each case meeting certain other qualifications based upon SEC staff no-action letters.
We will 36 treat as qualifying assets for this purpose LMM loans and other mortgages, in each case meeting certain other qualifications based upon SEC staff guidance and no -action letters.
The result of these incidents may include disrupted operations, misstated or unreliable financial data, disrupted market price of our common stock, misappropriation of assets, liability for stolen assets or information, increased cybersecurity protection and insurance cost, regulatory enforcement, litigation and damage to our relationships.
The result of these incidents may include disrupted operations, misstated or unreliable financial data, lost profit, increased expenses, disrupted market price of our common stock, misappropriation of assets, liability for stolen assets or information, increased cybersecurity protection and insurance cost, regulatory enforcement, litigation and damage to our relationships.
Current or future pandemics and epidemics may adversely affect our borrowers, the real estate industry and global markets, and our business and operations, financial condition, results of operations, liquidity and capital resources.
Future pandemics and epidemics may adversely affect our borrowers, the real estate industry and global markets, and our business and operations, financial condition, results of operations, liquidity and capital resources.
We cannot predict the unintended consequences and market distortions that may stem from far-ranging interventions in the financial system and oversight of financial markets. U.S.
We cannot predict the unintended consequences and market distortions that may stem from far-ranging interventions in the financial system and oversight of financial markets.
To the extent that the SEC, or its staff, publishes new or different guidance with respect to these matters, we may be required to adjust our strategy accordingly. Although we intend to monitor our portfolio periodically and prior to each investment acquisition, there can be no assurance that we will be able to maintain an exclusion for these subsidiaries.
To the extent that the SEC, or its staff, takes new or different positions with respect to these matters, we may be required to adjust our strategy accordingly. Although we intend to monitor our portfolio periodically and prior to each investment acquisition, there can be no assurance that we will be able to maintain an exclusion for these subsidiaries.
In addition, we originate and service USDA guaranteed loan products through our subsidiary, Madison One. These originated loans are either held-for-investment, placed into securitization structures, or sold. The origination and servicing of these loans are subject to similar risks associated with the origination and servicing of SBA loans as described above.
In addition, we originate and service USDA guaranteed loan products through our subsidiary, ReadyCap Commercial. These originated loans are either held-for-investment, placed into securitization structures, or sold. The origination and servicing of these loans are subject to similar risks associated with the origination and servicing of SBA loans as described above.
None of these other funds or separate accounts focus on LMM loans as their primary business strategy. 43 To address certain potential conflicts arising from our relationship with Waterfall or its affiliates, Waterfall has agreed in a side letter agreement with us that, for so long as the management agreement is in effect, neither it nor any of its affiliates will (i) sponsor or manage any additional investment vehicle where we do not participate as an investor whose primary investment strategy will involve LMM mortgage loans, unless Waterfall obtains the prior approval of a majority of our Board (including a majority of our independent directors), or (ii) acquire a portfolio of assets, a majority of which (by value or UPB) are LMM mortgage loans on behalf of another investment vehicle (other than acquisitions of LMM ABS), unless we are first offered the investment opportunity and a majority of our Board (including a majority of our independent directors) decide not to acquire such assets.
To address certain potential conflicts arising from our relationship with Waterfall or its affiliates, Waterfall has agreed in a side letter agreement with us that, for so long as the management agreement is in effect, neither it nor any of its affiliates will (i) sponsor or manage any additional investment vehicle where we do not participate as an investor whose primary investment strategy will involve LMM mortgage loans, unless Waterfall obtains the prior approval of a majority of our Board (including a majority of our independent directors), or (ii) acquire a portfolio of assets, a majority of which (by value or UPB) are LMM mortgage loans on behalf of another investment vehicle (other than acquisitions of LMM ABS), unless we are first offered the investment opportunity and a majority of our Board (including a majority of our independent directors) decide not to acquire such assets.
We are highly dependent on information systems and communication systems; systems failures and other operational disruptions could significantly affect our business, which may, in turn, negatively affect our operating results and our ability to pay dividends to our stockholders.
W e are highly dependent on information systems and communication systems; systems failures and other operational disruptions could significantly affect our business, which may, in turn, negatively affect our operating results and our ability to pay dividends to our stockholders.
We may seek to sell one of our business segments in an effort to maximize shareholder value, which may adversely affect our Company, our reputation, our results of operations and financial position or our stock price.
We may seek to sell one of our business segments in an effort to maximize shareholder value, which may adversely af fect our Company, our reputation, our results of operations and financial position or our stock price.
A continuation or increase in the volatility and deterioration in the LMM and LMM ABS markets as well as the broader financial markets may adversely affect the performance and fair market values of our LMM loan and LMM ABS assets and may adversely affect our results of operations and credit availability, which may reduce earnings and, in turn, cash available for distribution to our stockholders.
Volatility and deterioration in the LMM and LMM ABS markets as well as the broader financial markets may adversely affect the performance and fair market values of our LMM loan and LMM ABS assets and may adversely affect our results of operations and credit availability, which may reduce earnings and, in turn, cash available for distribution to our stockholders.
Furthermore, we will monitor the value of our investments in our TRSs to ensure compliance with the rule that no more than 20% of the value of our assets may consist of TRS stock and securities (which is applied at the end of each calendar quarter).
Furthermore, we will monitor the value of our investments in our TRSs to ensure compliance with the rule that no more than 20% or 25%, as appropriate, of the value of our assets may consist of TRS stock and securities (which is applied at the end of each calendar quarter).
Federal government agencies, including the Federal Reserve, the Treasury Department and the SEC, as well as other governmental and regulatory bodies, have taken, are taking or may in the future take, various actions to address financial crises or other areas of national regulatory concern.
U.S. f ederal government agencies, including the Federal Reserve, the Treasury Department and the SEC, as well as other governmental and regulatory bodies, have taken, are taking or may in the future take, various actions to address financial crises or other areas of national regulatory concern.
These risks require continuous and likely increasing attention and other resources from us to, among other actions, identify and quantify these risks, upgrade and expand our technological capabilities, systems and processes to adequately address them and provide periodic training for our employees to assist them in detecting phishing, malware and other schemes.
These risks require continuous attention and resources from us to, among other actions, identify and quantify these risks, enhance and expand our technological capabilities, systems and processes to adequately address them and provide periodic training for our employees to assist them in detecting phishing, malware and other schemes.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeIn the event of an Incident, the IRT is authorized to take the appropriate steps deemed necessary to identify, assess, contain, mitigate, and resolve the Incident including by (a) maintaining (i) the Company’s Incident Response Plan in the event of an Incident, (ii) the Company’s Written Information Security Policy which governs information technology security policies, and (iii) the Company’s Business Continuity Plan designed to keep all major business systems in operation in the event of an Incident or other disaster (b) regularly monitoring all Company systems and user accounts for any suspected Incidents (c) performing quarterly audits on all Company systems and user accounts (d) and general cybersecurity awareness and data protection training for our employees.
Biggest changeIn order to identify, prevent, detect, and mitigate cybersecurity incidents , the IRT is authorized to (a) take the appropriate steps deemed necessary to identify, assess, contain, mitigate, and resolve a cybersecurity incident including; (b) maintain (i) the Company’s Incident Response Plan in the event of an i ncident , (ii) the Company’s Written Information Security Policy which governs information technology security policies, and (iii) the Company’s Business Continuity Plan designed to keep all major business systems in operation in the event of an i ncident or other disaster; (c) regularly monitor all Company systems and user accounts for any suspected i ncidents (d) perform quarterly assessments on all Company systems and user accounts; and (e) conduct general cybersecurity awareness and data protection training for our employees.
The Board reviews IRT reports, practices relating to information technology, information security, cybersecurity, disaster recovery, business continuity, data privacy and data governance; and the Board monitors compliance with regulatory requirements and industry standards.
The Board reviews IRT reports and practices relating to information technology, information security, cybersecurity, disaster recovery, business continuity, data privacy and data governance; and the Board monitors compliance with regulatory requirements and industry standards.
Certain members of the IRT report to our Board on a quarterly basis regarding the external threat environment, steps taken by us to address and mitigate cybersecurity risks as well as updates on our readiness to prevent, detect, respond and recover from a potential cybersecurity incident (“Incident”).
Certain members of the IRT report to our Board on a quarterly basis regarding the external threat environment, steps taken by us to address and mitigate cybersecurity risks as well as updates on our readiness to prevent, detect, respond and recover from a potential cybersecurity incident .
Item 1C. Cybersecurity We recognize the importance of implementing and maintaining robust cybersecurity measures designed to safeguard the confidentiality, integrity and availability of our data and systems. We seek to prevent or reduce risks by providing a prompt, effective, and skillful response to cybersecurity threats.
Item 1C. Cybersecurity We recognize the importance of implementing and maintaining robust cybersecurity measures designed to safeguard the confidentiality, security, integrity and availability of our data and systems. We seek to prevent or reduce risks by providing a prompt, effective, and skillful response to cybersecurity threats.
As of the date of 74 this Form 10-K, we are not aware of any risks from cybersecurity threats that have materially affected or are reasonably likely to materially affect us, including our financial position, results of operations and/or business strategy .
As of the date of 66 this Form 10-K, we are not aware of any risks from cybersecurity threats that have materially affected or are reasonably likely to materially affect us, including our financial position, results of operations and/or business strategy .
While we have not, as of the date of this Form 10-K, experienced a cybersecurity threat or Incident that resulted in a material adverse impact to our business or operations, there can be no guarantee that we will not experience such an Incident in the future where we may be unable to implement effective preventative measures in a timely manner.
While we have not, as of the date of this Form 10-K, experienced a cybersecurity threat or i ncident that resulted in a material adverse impact to our business or operations, there can be no guarantee that we will not experience such an i ncident in the future where we may be unable to implement effective preventative measures in a timely manner.
In addition, depending on the circumstances of an Incident, we may engage third parties such as insurance carriers, outside legal counsel, forensic investigators, crisis communications or public relations firms, investor relations firms and response vendors and we may coordinate with regulators or law enforcement.
In addition, we may engage third parties such as insurance carriers, outside legal counsel, forensic investigators, crisis communications or public relations firms, investor relations firms and response vendors and we may coordinate with regulators or law enforcement. We also assess third party risks when determining the selection and oversight of applicable third-party service providers.
Removed
We also assess third party risks when determining the selection and oversight of applicable third-party service providers.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe use our principal executive offices and the three offices of Red Stone located at 666 Old Country Road, Suite 603, Garden City, New York, 11530, 350 Fifth Avenue, Suite 4830, New York, New York, 10118 and 750 Main Street, Suite 202, Mendota Heights, Minnesota, 55118 for our LMM Commercial Real Estate segment.
Biggest changeWe use our principal executive offices and the two offices of Ready Capital Affordable located at 666 Old Country Road, Suite 603, Garden City, New York, 11530 and 350 Fifth Avenue, Suite 4830, New York, New York, 10118 for our LMM Commercial Real Estate segment.
For our Small Business Lending segment, w e use the office of ReadyCap Lending located at 200 Connell Drive, Suite 4000, Berkeley Heights, New Jersey, 07922, the office of Madison One located at 9375 East Shea Boulevard, Suite 100, Scottsdale, Arizona, 85260, the office of Funding Circle located at 85 2nd Street, San Francisco, California, 94105, and the office of iBusiness Funding LLC, located at 110 Southeast 6th Street, Suite 700, Fort Lauderdale, Florida, 33301 .
For our Small Business Lending segment, w e use the office of ReadyCap Lending located at 200 Connell Drive, Suite 4000, Berkeley Heights, New Jersey, 07922, the office of Madison One located at 9375 East Shea Boulevard, Suite 100, Scottsdale, Arizona, 85260, and the office of iBusiness Funding LLC, located at 110 Southeast 6th Street, Suite 700, Fort Lauderdale, Florida, 33301 .

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings From time to time, the Company may be involved in various claims and legal actions in the ordinary course of business. On June 6, 2024, a purported former stockholder of Broadmark filed a class action lawsuit, captioned Eibling v. Pyatt, et al., Case No. C-24-CV-24-000818, in the Circuit Court for Baltimore City, Maryland (the “Action”).
Biggest changeItem 3. Legal Proceedings From time to time, the Company may be involved in various claims and legal actions in the ordinary course of business. Merger litigation On June 6, 2024, a purported former stockholder of Broadmark filed a class action lawsuit in the Circuit Court for Baltimore City, Maryland, captioned Eibling v. Pyatt, et al., No. C-24-CV-24-000818 (Md. Cir.
The Action names as defendants Broadmark’s former board of directors and alleges they breached their fiduciary duties in connection with the Broadmark Merger by failing to properly consider acquisition proposals that were purportedly superior to the Broadmark Merger, by relying on purportedly false and misleading valuation analyses, and by authorizing the issuance of a purportedly false and misleading proxy statement.
The Broadmark Merger Action names as defendants Broadmark’s former board of directors and alleges they breached their fiduciary duties in connection with the Broadmark Merger by failing to properly consider acquisition proposals that were purportedly superior to the Broadmark Merger, by relying on purportedly false and misleading valuation analyses, and by authorizing the issuance of a purportedly false and misleading proxy statement.
The Action also asserts claims against Broadmark’s financial advisor for aiding and abetting these alleged breaches of fiduciary duty. The Action seeks damages in the form of compensatory damages, quasi-appraisal damages, rescissory damages, and disgorgement of any merger-related benefits. The Action also seeks reimbursement for litigation expenses and attorneys’ and experts’ fees.
The Broadmark Merger Action also asserts claims against Broadmark’s financial advisor for aiding and abetting these alleged breaches of fiduciary duty. The Broadmark Merger Action seeks damages in the form of compensatory damages, quasi-appraisal damages, rescissory damages, and disgorgement of any merger-related benefits. The Broadmark Merger Action also seeks reimbursement for litigation expenses and attorneys’ and experts’ fees.
On September 13, 2024, the Action was assigned to the Business and Technology Case Management Program of the Circuit Court for Baltimore City, Maryland. Thereafter, on December 10, 2024, the defendants moved to dismiss the operative complaint.
On September 13, 2024, the Broadmark Merger Action was assigned to the Business and Technology Case Management Program of the Circuit Court for Baltimore City, Maryland. Thereafter, on December 10, 2024, the defendants moved to dismiss the initial complaint.
Although the Company is not a defendant in the Action, it is subject to contractual indemnification obligations (conditioned on the satisfaction of various contractual requirements) in connection therewith, including with respect to the defendants’ service as Broadmark directors and provision of services to Broadmark, as applicable. The defendants intend to vigorously defend against the Action. Item 4.
Although the Company is not a defendant in the Broadmark Merger Action, it is subject to contractual indemnification obligations (conditioned on the satisfaction of various contractual requirements) in connection therewith, including with respect to the defendants’ service as Broadmark directors and the provision of services to Broadmark, as applicable.
Added
In response, the plaintiff filed an amended complaint on February 10, 2025, which the defendants subsequently moved to dismiss on April 14, 2025. Briefing on the defendants’ motions to dismiss the amended complaint was completed on July 22, 2025.
Added
The defendants and the Company intend to vigorously defend against the Broadmark Merger Action. On March 18, 2025, a purported former stockholder of UDF IV filed a class action lawsuit in the Circuit Court for Baltimore City, Maryland, captioned The Lawrence C. Headley Living Trust v. Jones, et al., No. C-24-CV-25-002222 (Md. Cir. Ct. Balt.
Added
The UDF IV Merger Action names as defendants UDF IV’s former board of trustees and alleges they breached their fiduciary duties in connection with the UDF IV Merger by failing to properly consider an acquisition proposal that was purportedly superior to the UDF IV Merger, by relying on purportedly false and misleading valuation analyses, by authorizing the issuance of a purportedly false and misleading proxy statement, and by obtaining improper personal benefits that were not shared with all UDF IV stockholders.
Added
The complaint also asserts claims against UDF IV’s former advisor, UMTH General Services, L.P., for aiding and abetting 67 these alleged breaches of fiduciary duty. The complaint seeks compensatory damages, rescissory damages, and unwinding of the UDF IV Merger, as well as attorneys’ fees and costs.
Added
On April 11, 2025, the UDF IV Merger Action was assigned to the Business and Technology Case Management Program of the Circuit Court for Baltimore City, Maryland. Thereafter, on May 16, 2025, the defendants moved to dismiss the initial complaint.
Added
In response, the plaintiff filed an amended complaint on July 11, 2025, which the defendants subsequently moved to dismiss on September 9, 2025. Briefing on the defendants’ motion to dismiss the amended complaint was completed on December 18, 2025.
Added
Although the Company is not a defendant in the UDF IV Merger Action, it is subject to contractual indemnification obligations (conditioned on the satisfaction of various contractual requirements) in connection therewith, including with respect to the defendants’ service as UDF IV trustees and the provision of services to UDF IV, as applicable.
Added
The defendants and the Company intend to vigorously defend against the UDF IV Merger Action.
Added
Securities and derivative litigation On March 6, 2025 and April 23, 2025, the Company and certain of its executive officers were named as defendants in two separate but largely identical putative stockholder class action lawsuits filed in the United States District Court for the Southern District of New York (the “Exchange Act Class Actions”).
Added
The Exchange Act Class Actions were filed under the captions Quinn v. Ready Capital Corp., et al., No. 1:25-cv-01883 (S.D.N.Y.) and Goebel v. Ready Capital Corp., et al., No. 1:25-cv-3373 (S.D.N.Y.).
Added
The Exchange Act Class Actions allege that the defendants violated Section 10(b) of the Exchange Act and SEC Rule 10b-5 promulgated thereunder by making false and misleading statements and omissions regarding the performance of the Company’s loan portfolio and related matters, and that the executive officers named as defendants violated Section 20(a) of the Exchange Act as control persons of the Company.
Added
The Exchange Act Class Actions seek compensatory damages, costs, and expenses on behalf of the purported classes. On July 8, 2025, the court entered an order consolidating the Exchange Act Class Actions under the caption In re Ready Capital Securities Litigation, No. 1:25-cv-01883 (S.D.N.Y.) (the “Exchange Act Litigation”) and appointing lead plaintiff and lead counsel.
Added
Lead plaintiff filed an amended complaint on September 8, 2025, which the defendants moved to dismiss on November 10, 2025. Briefing on the defendants’ motion to dismiss was completed on February 9, 2026.
Added
Between March and July 2025, the Company was named as a nominal defendant and certain of its executive officers and directors were named as defendants in parallel derivative lawsuits captioned Pittrof v. Capasse, et al., No. 1:25-cv-02274 (S.D.N.Y.) and Vancampenhout v.
Added
Capasse, et al., No. 1:25-cv-02930 (S.D.N.Y.) respectively, filed in the United States District Court for the Southern District of New York (collectively, the “New York Derivative Actions”), and Poon v. Ready Capital Corp., et al., No. 1:25-cv-01827 (D. Md.) and Cote v. Ready Capital Corp., et al., No. 1:25-cv-02429-JRR (D.
Added
Md.) filed in the United States District Court for the District of Maryland (the “Maryland Derivative Actions” and, together with the New York Derivative Actions, the “Ready Capital Derivative Actions”).
Added
The Ready Capital Derivative Actions assert claims for violations of Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5, contribution under Sections 10(b) and 21D of the Exchange Act, breach of fiduciary duties, aiding and abetting breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets for participating and/or failing to prevent the securities law violations alleged in the Exchange Act Litigation and for purportedly causing the Company to overpay for certain stock repurchases.
Added
The Ready Capital Derivative Actions seek compensatory damages, disgorgement of compensation and profits, imposition of a constructive trust, revisions to the Company’s corporate governance and internal procedures, and attorneys’ fees and costs.
Added
On July 8, 2025, the United States District Court for the Southern District of New York consolidated the New York Derivative Actions under the caption In re Ready Capital Corp. Stockholder Derivative Litigation, No. 1:25-cv-02274 (S.D.N.Y.).
Added
The Ready Capital Derivative Actions are currently stayed, pending: (1) dismissal of the Exchange Act Litigation with prejudice, and the exhaustion of all appeals thereto; or (2) denial, in full or in part, of the defendants’ motion to dismiss the Exchange Act Litigation. The defendants intend to vigorously defend against the Exchange Act Litigation and the Ready Capital Derivative Actions.
Added
In early August 2025, the Board received a demand letter from a purported Ready Capital stockholder (the “Derivative Demand Letter”). The Derivative Demand Letter closely mirrors the allegations of the Exchange Act Litigation and Ready Capital Derivative Actions and demands that the Board investigate the facts alleged in these actions.
Added
The Derivative Demand Letter requests that the directors investigate any purported wrongdoing that occurred between August 2, 2024, and August 1, 2025, and commence legal proceedings against the Ready Capital executive officers and directors named in the Exchange Act Litigation and Ready Capital Derivative Actions.
Added
The Company and the demanding stockholder have agreed to hold the Derivative Demand Letter in abeyance until: (i) the defendants’ motion to dismiss in 68 the Exchange Act Litigation is denied in whole or in part; or (ii) the demanding stockholder or the Company give written notice that they no longer consent to the voluntary abeyance of the Derivative Demand Letter.
Added
On May 8 and May 14, 2025, the Company and certain of its executive officers and directors were named as defendants in two separate but largely identical putative class action lawsuits filed by purported former Broadmark stockholders in the Superior Court for King County, Washington (the “Broadmark State Court Actions”).
Added
Certain former directors and officers of Broadmark and certain affiliates of the Company and its directors, including Waterfall, were also named as defendants. The Broadmark State Court Actions were filed under the captions van Wyk et al. v. Ready Capital Corp., et al., No. 25-2-14038-5 SEA (Wash. Super. Ct. King Cnty.) and Whittlesey v.
Added
Ready Capital Corp., et al., No. 25-2-14567-1 SEA (Wash. Super Ct. King Cnty.).
Added
The Broadmark State Court Actions allege that the defendants violated Sections 11, 12(a)(2), and 15 of the Securities Act by issuing false and misleading statements and omissions in connection with the Broadmark Merger regarding the performance of the Company’s loan portfolio and related matters and seek disgorgement, compensatory damages, and the costs and expenses of litigation.
Added
On June 20, 2025, the court consolidated the Broadmark State Court Actions under the caption In re Ready Capital Corporation Securities Litigation, No. 25-2-14038-5 SEA (Wash. Super. Ct. King Cnty.) (the “Broadmark State Court Litigation”). On August 19, 2025, the plaintiffs filed a consolidated complaint, which the defendants subsequently moved to dismiss on October 20, 2025.
Added
On February 2, 2026, the defendants moved to stay the Broadmark State Court Litigation pending resolution of the Broadmark Federal Court Litigation. On February 19, 2026, the motions to dismiss and stay were denied.
Added
On May 28, 2025, the Company and certain of its executive officers and directors were named as defendants in a putative class action filed by a purported former Broadmark stockholder in the United States District Court for the Western District of Washington (the “Broadmark Federal Court Litigation”).
Added
Broadmark and certain of its former directors and officers were also named as defendants. The Broadmark Federal Court Litigation is captioned Grant v. Ready Capital Corp., et al., No. 2:25-cv-1013 (W.D. Wash.). On October 15, 2025, the court entered an order appointing lead plaintiff and lead counsel.
Added
On November 25, 2025, the lead plaintiff filed an amended complaint asserting that the defendants violated Sections 14(a) and 20(a) of the Exchange Act and Section 11, 12(a)(2), and 15 of the Securities Act by issuing false and misleading statements and omissions in connection with the Broadmark Merger regarding the performance of the Company’s loan portfolio and related matters.
Added
The amended complaint seeks compensatory and rescissory damages, as well as attorneys’ fees and litigation expenses. On January 12, 2026, the defendants moved to dismiss the amended complaint. Briefing on the defendants' motion to dismiss is expected to be completed by March 2026. On January 8, 2026, the defendants moved to transfer the Broadmark Federal Court Litigation to the U.S.
Added
District Court for the Southern District of New York, where the Exchange Act Litigation is pending. Briefing on the defendants’ motion to transfer was completed on February 5, 2026.
Added
On July 18, 2025, the Company and Broadmark were named as nominal defendants, and certain of the Company’s and Broadmark’s current and former executive officers and directors and Waterfall were named as defendants in a double derivative action filed by a purported former stockholder of Broadmark in the United States District Court for the District of Maryland (the “Broadmark Derivative Litigation”).
Added
The Broadmark Derivative Litigation is captioned Murguia v. Broadmark Realty Capital Inc., et al., No. 1:25-cv-02350-JRR (D. Md.).
Added
The Broadmark Derivative Litigation asserts claims for violations of Sections 10(b), 20(a), and 14(a) of the Exchange Act, SEC Rule 10b-5, breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets, and contribution pursuant to Section 10(b) and 21D of the Exchange Act for participating in and/or failing to prevent the securities law violations alleged in the Broadmark Exchange Act Litigation and for purportedly causing the Company to overpay for certain stock repurchases.
Added
The Broadmark Derivative Litigation seeks revisions to the Company’s corporate governance and internal procedures, disgorgement, compensatory damages, and attorney’s fees and costs of litigation.
Added
The Broadmark Derivative Litigation is currently stayed, pending: (1) dismissal of the Broadmark Exchange Act Litigation with prejudice, and the exhaustion of all appeals thereto; or (2) denial, in full or in part, of the defendants’ motion to dismiss the Broadmark Exchange Act Litigation.
Added
The defendants intend to vigorously defend against the Broadmark State Court Litigation, the Broadmark Federal Court Litigation, and the Broadmark Derivative Litigation.
Added
Legacy UDF IV litigation As a result of the UDF IV Merger, the Company assumed certain outstanding litigation against UDF IV and affiliated parties. 69 On March 20, 2020, Megatel Homes, LLC and certain of its affiliates filed a lawsuit against Mehrdad Moayedi, United Development Funding, L.P., United Development Funding II, L.P., United Development Funding III, L.P., UDF IV, United Development Funding V, and various other affiliates (collectively the “UDF Defendants”) in the United States District Court for the Northern District of Texas, captioned Megatel Homes LLC, et al. v.
Added
Moayedi, et al., No. 3:20- cv-00688-L-BT (N.D. Tex.) (the “Megatel Action”).
Added
The Megatel Action alleges that the UDF Defendants knowingly participated in a scheme to “prop” up Moayedi’s companies, and thereby defraud the plaintiffs, by lending funds to Moayedi’s companies, which Moayedi’s companies then used to repay older loans they had received from the UDF Defendants, rather than using such funds to “advance” real estate projects with the plaintiffs.
Added
The plaintiffs assert claims under the Racketeer Influenced and Corrupt Organizations Act (“RICO”) and for common law fraud, statutory fraud, and fraudulent inducement. The plaintiffs seek compensatory damages, treble damages, exemplary damages, and attorneys’ fees.
Added
On May 18, 2020, the defendants moved to dismiss the plaintiffs’ complaint, which the court granted in part and denied in part on November 16, 2021. The plaintiffs filed an amended complaint on November 29, 2021, which the defendants again moved to dismiss. The court denied the motions to dismiss on June 27, 2022.
Added
Discovery in the Megatel Action is complete and summary judgment motions are due to be filed by March 11, 2026. The UDF Defendants will be filing a motion for summary judgment in an attempt to dispose of the litigation against them. The court will issue a forthcoming order setting a trial date, likely after the summary judgment motions are decided.
Added
The UDF Defendants and the Company intend to vigorously defend against the Megatel Action.
Added
On August 17, 2022, certain former officers, trustees, and advisors of UDF IV were named as defendants in a lawsuit filed by former UDF IV stockholder NexPoint Diversified Real Estate Trust and an affiliated entity in the District Court of Dallas County, Texas, captioned NexPoint Diversified Real Estate Trust, et al. v. UMTH General Services, L.P., et al., No.
Added
DC-22-09833 (Tex. Dist. Ct. Dallas Cnty.) (the “UDF Advisor Action”). The UDF Advisor Action alleges that the defendants caused UDF IV to improperly indemnify, advance litigation expenses, and fund settlement amounts in connection with an SEC civil enforcement action and the subsequent criminal prosecution of UDF IV’s former officers and trustees.
Added
The UDF Advisor Action also alleges that the defendants caused UDF IV to pay improper fees to UDF IV’s advisor.
Added
The UDF Advisor Action asserts claims against the defendants for breaches of fiduciary duty, aiding and abetting, breaches of the advisory agreement between UDF IV and its advisors, and civil conspiracy and seeks compensatory damages, punitive damages, costs and fees, as well as specific performance of certain contractual obligations.
Added
On October 12, 2022, the defendants moved to dismiss the lawsuit, which the trial court denied on November 30, 2022. On March 17, 2023, the plaintiffs filed an amended petition adding certain former UDF IV board members (the “Trustee Defendants”) to the lawsuit.
Added
On May 4, 2023, the Trustee Defendants moved to dismiss the claims asserted against them and the Trustee Defendants were subsequently dismissed from the lawsuit.
Added
On January 9, 2024, the remaining defendants filed a writ of mandamus with the Texas Supreme Court, arguing that the plaintiffs’ claims were derivative (rather than direct) and that the plaintiffs lacked standing to assert their claims because they failed to make a pre-suit demand on UDF IV’s board of trustees.
Added
On January 30, 2024, the Texas Supreme Court stayed the trial court proceedings pending resolution of the writ. Briefing on the merits of the appeal was completed on February 6, 2025, and the Texas Supreme Court held oral argument on September 9, 2025.
Added
On November 14, 2025, the Texas Supreme Court granted the writ and directed the trial court to dismiss the UDF Advisor Action with prejudice.
Added
Although UDF IV and the Company are not defendants in the UDF Advisor Action, the Company is subject to contractual indemnification obligations (conditioned on the satisfaction of various contractual requirements) in connection therewith, including with respect to the defendants’ service as UDF IV officers and trustees and the provision of services to UDF IV, as applicable. Item 4.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+2 added−1 removed12 unchanged
Biggest changeThe following graph is a comparison of the cumulative total stockholder return on our shares of common stock, the Standard & Poor’s 500 Index (the “S&P 500 Index”) and a Competitor Composite Average, a peer group index from October 31, 2016 to December 31, 2024 . 76 As of the period ended As of December 31, Index October 31, 2016 2016 2017 2018 2019 2020 2021 2022 2023 2024 RC 100.0 100.4 124.9 125.8 155.3 147.0 206.5 165.3 173.0 130.5 S&P 500 100.0 105.3 125.7 117.9 152.0 176.7 224.2 180.6 224.3 279.5 Competitor Composite Average 100.0 100.6 115.0 125.3 169.9 160.7 203.5 165.4 204.0 194.8 In the table above: • Total return performance presents our common stock during the two months ended December 31, 2016 and each of the fiscal years ended December 31, 2017 through 2024 , reflecting the post-merger prices of our common stock. • Details shall not be deemed, under the Securities Act or the Exchange Act, to be (i) “soliciting material” or “filed” or (ii) incorporated by reference by any general statement into any filing made by the Company with the SEC, except to the extent that the Company specifically incorporates such stock performance graph and table by reference. • It is assumed that $100 was invested on October 31, 2016 in shares of common stock of Ready Capital Corporation (previously Sutherland Asset Management Corporation), the S&P 500 Index, and each of the companies’ shares of common stock included in the Competitor Composite Average and that all dividends were reinvested without the payment of any commissions.
Biggest changeAs of the period ended As of December 31, Index October 31, 2016 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 RC 100.0 100.4 124.9 125.8 155.3 147.0 206.5 165.3 173.0 130.5 47.2 S&P 500 100.0 105.3 125.7 117.9 152.0 176.7 224.2 180.6 224.3 279.5 322.0 Competitor Composite Average 100.0 100.6 115.0 125.3 169.9 160.7 203.5 165.4 204.0 194.8 182.5 71 In the table above: • Total return performance presents our common stock during the two months ended December 31, 2016 and each of the fiscal years ended December 31, 2017 through 2025 , reflecting the post-merger prices of our common stock. • Details shall not be deemed, under the Securities Act or the Exchange Act, to be (i) “soliciting material” or “filed” or (ii) incorporated by reference by any general statement into any filing made by the Company with the SEC, except to the extent that the Company specifically incorporates such stock performance graph and table by reference. • It is assumed that $100 was invested on October 31, 2016 in shares of common stock of Ready Capital Corporation (previously Sutherland Asset Management Corporation), the S&P 500 Index, and each of the companies’ shares of common stock included in the Competitor Composite Average and that all dividends were reinvested without the payment of any commissions.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed for trading on the NYSE under the symbol “RC”. 75 Holders As of February 28, 2025 , we ha d 806 re gistered holders of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed for trading on the NYSE under the symbol “RC”. 70 Holders As of February 27, 2026 , we ha d 2,018 re gistered holders of our common stock.
On January 16, 2025, our Board approved a new share repurchase program, replacing the previous program, authorizing, but not obligating the repurchase of up to $150.0 million of our common stock.
Purchases of Equity Securities By the Issuer and Affiliated Purchasers Share Repurchase Program On January 16, 2025, our Board approved a new share repurchase program, replacing the previous program, authorizing, but not obligating the repurchase of up to $150.0 million of our common stock.
Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Programs Maximum Shares (or Approximate Dollar Value) That May Yet Be Purchased Under the Program October — $ — — $ 42,802,320 November — — — 42,802,320 December 5,843,463 7.35 5,821,219 — Total 5,843,463 (1) $ 7.35 (2) 5,821,219 $ — (1) Total shares purchased includes shares of common stock owned by certain of our employees which have been surrendered by them to satisfy their tax and other compensation related withholdings associated with the vesting of restricted stock units and other equity awards. 77 (2) The price paid per share is based on the price of our common stock as of the date of the withholding.
Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Programs Maximum Shares (or Approximate Dollar Value) That May Yet Be Purchased Under the Program October 3,721 $ 3.38 — $ 84,712,998 November 751,087 2.59 750,000 82,770,332 December 56,808 2.23 — 82,770,332 Total 811,616 (1) $ 2.57 (2) 750,000 $ 82,770,332 (1) Total shares purchased includes shares of common stock owned by certain of our employees which have been surrendered by them to satisfy their tax and other compensation related withholdings associated with the vesting of restricted stock units and other equity awards.
Our current policy is to pay distributions, which will allow us to satisfy the requirements to qualify as a REIT and generally not be subject to U.S. federal income tax on our undistributed income. Although we may borrow funds to make distributions, cash for such distributions is expected to be largely generated from our consolidated statements of income.
We currently intend to pay sufficient distributions to stockholders, which will allow us to satisfy the requirements to qualify as a REIT and generally not be subject to U.S. federal income tax on our undistributed income.
Removed
Purchases of Equity Securities By the Issuer and Affiliated Purchasers Share Repurchase Program O n June 1, 2023, our Board approved a new share repurchase program, replacing the previous program, authorizing, but not obligating, the repurchase of up to $100.0 million of our common stock.
Added
The following graph is a comparison of the cumulative total stockholder return on our shares of common stock, the Standard & Poor’s 500 Index (the “S&P 500 Index”) and a Competitor Composite Average, a peer group index from October 31, 2016 to December 31, 2025 .
Added
(2) The price paid per share is based on the price of our common stock as of the date of the withholding. Item 6. [Reserved]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

106 edited+22 added−12 removed83 unchanged
Biggest change(in thousands) Current Pipeline Loan originations: LMM loans $ 728,005 SBL loans 1,784,167 Total loan investment pipeline (1) $ 2,512,172 (1) Includes 2025 fundings Balance Sheet Analysis and Metrics (in thousands) December 31, 2024 December 31, 2023 $ Change % Change Assets Cash and cash equivalents $ 143,803 $ 138,532 $ 5,271 3.8 % Restricted cash 30,560 30,063 497 1.7 Loans, net (including $3,533 and $9,348 held at fair value) 3,378,149 4,020,160 (642,011) (16.0) Loans, held for sale (including $128,531 and $81,599 held at fair value and net of valuation allowance of $97,620 and $0) 241,626 81,599 160,027 196.1 Mortgage-backed securities 31,006 27,436 3,570 13.0 Investment in unconsolidated joint ventures (including $6,577 and $7,360 held at fair value) 161,561 133,321 28,240 21.2 Derivative instruments 7,963 2,404 5,559 231.2 Servicing rights 128,440 102,837 25,603 24.9 Real estate owned, held for sale 193,437 252,949 (59,512) (23.5) Other assets 362,486 300,175 62,311 20.8 Assets of consolidated VIEs 5,175,295 6,897,145 (1,721,850) (25.0) Assets held for sale 287,595 454,596 (167,001) (36.7) Total Assets $ 10,141,921 $ 12,441,217 $ (2,299,296) (18.5) % Liabilities Secured borrowings 2,035,176 2,102,075 (66,899) (3.2) Securitized debt obligations of consolidated VIEs, net 3,580,513 5,068,453 (1,487,940) (29.4) Senior secured notes, net 437,847 345,127 92,720 26.9 Corporate debt, net 895,265 764,908 130,357 17.0 Guaranteed loan financing 691,118 844,540 (153,422) (18.2) Contingent consideration 573 7,628 (7,055) (92.5) Derivative instruments 352 212 140 66.0 Dividends payable 43,168 54,289 (11,121) (20.5) Loan participations sold 95,578 62,944 32,634 51.8 Due to third parties 1,442 3,641 (2,199) (60.4) Accounts payable and other accrued liabilities 188,051 207,481 (19,430) (9.4) Liabilities held for sale 228,735 333,157 (104,422) (31.3) Total Liabilities $ 8,197,818 $ 9,794,455 $ (1,596,637) (16.3) % Preferred stock Series C, liquidation preference $25.00 per share 8,361 8,361 — — Commitments & contingencies Stockholders’ Equity Preferred stock Series E, liquidation preference $25.00 per share 111,378 111,378 — — Common stock, $0.0001 par value, 500,000,000 shares authorized, 162,792,372 and 172,276,105 shares issued and outstanding, respectively 17 17 — — Additional paid-in capital 2,250,291 2,321,989 (71,698) (3.1) Retained earnings (deficit) (505,089) 124,413 (629,502) (506.0) Accumulated other comprehensive loss (18,552) (17,860) (692) (3.9) Total Ready Capital Corporation equity 1,838,045 2,539,937 (701,892) (27.6) Non-controlling interests 97,697 98,464 (767) (0.8) Total Stockholders’ Equity $ 1,935,742 $ 2,638,401 $ (702,659) (26.6) % Total Liabilities, Redeemable Preferred Stock, and Stockholders’ Equity $ 10,141,921 $ 12,441,217 $ (2,299,296) (18.5) % 82 As of December 31, 2024 , total assets in our consolidated balance sheet were $10.1 billion , a decrease of $2.3 billion from December 31, 2023 , primarily reflecting a decrease in Assets of consolidated VIEs and Loans, net.
Biggest change(in thousands) Current Pipeline Loan originations: LMM loans $ 335,291 SBL loans 1,220,271 Total loan investment pipeline (1) $ 1,555,562 (1) Includes 2026 fundings 76 Balance Sheet Analysis and Metrics (in thousands) December 31, 2025 December 31, 2024 $ Change % Change Assets Cash and cash equivalents $ 207,841 $ 143,803 $ 64,038 44.5 % Restricted cash 39,746 30,560 9,186 30.1 Loans, net (including $737 and $3,533 held at fair value) 3,500,298 3,378,149 122,149 3.6 Loans, held for sale (including $73,094 and $128,531 held at fair value and net of valuation allowance of $67,612 and $97,620) 585,820 241,626 344,194 142.4 Mortgage-backed securities 34,501 31,006 3,495 11.3 Investment in unconsolidated joint ventures (including $5,737 and $6,577 held at fair value) 161,424 161,561 (137) (0.1) Derivative instruments 6,740 7,963 (1,223) (15.4) Servicing rights 126,279 128,440 (2,161) (1.7) Real estate owned 620,225 193,437 426,788 220.6 Other assets 508,238 362,486 145,752 40.2 Assets of consolidated VIEs 1,978,684 5,175,295 (3,196,611) (61.8) Assets held for sale — 287,595 (287,595) (100.0) Total Assets $ 7,769,796 $ 10,141,921 $ (2,372,125) (23.4) % Liabilities Secured borrowings 2,788,926 2,035,176 753,750 37.0 Securitized debt obligations of consolidated VIEs, net 1,174,785 3,580,513 (2,405,728) (67.2) Senior secured notes, net 722,729 437,847 284,882 65.1 Corporate debt, net 652,487 895,265 (242,778) (27.1) Guaranteed loan financing 524,091 691,118 (167,027) (24.2) Contingent consideration 18,698 573 18,125 3,163.2 Derivative instruments 1,432 352 1,080 306.8 Dividends payable 3,633 43,168 (39,535) (91.6) Loan participations sold 56,616 95,578 (38,962) (40.8) Due to third parties 3,135 1,442 1,693 117.4 Accounts payable and other accrued liabilities 171,636 188,051 (16,415) (8.7) Liabilities held for sale — 228,735 (228,735) (100.0) Total Liabilities $ 6,118,168 $ 8,197,818 $ (2,079,650) (25.4) % Preferred stock Series C, liquidation preference $25.00 per share 8,361 8,361 — — Commitments & contingencies Stockholders’ Equity Preferred stock Series E, liquidation preference $25.00 per share 111,378 111,378 — — Common stock, $0.0001 par value, 500,000,000 shares authorized, 163,010,012 and 162,792,372 shares issued and outstanding, respectively 17 17 — — Additional paid-in capital 2,264,355 2,250,291 14,064 0.6 Retained deficit (807,522) (505,089) (302,433) 59.9 Accumulated other comprehensive loss (24,196) (18,552) (5,644) 30.4 Total Ready Capital Corporation equity 1,544,032 1,838,045 (294,013) (16.0) Non-controlling interests 99,235 97,697 1,538 1.6 Total Stockholders’ Equity $ 1,643,267 $ 1,935,742 $ (292,475) (15.1) % Total Liabilities, Redeemable Preferred Stock, and Stockholders’ Equity $ 7,769,796 $ 10,141,921 $ (2,372,125) (23.4) % As of December 31, 2025 , total assets in our consolidated balance sheet were $7.8 billion , a decrease of $2.4 billion from December 31, 2024 , primarily reflecting a decrease in Assets of consolidated VIEs, partially offset by an increase in Real estate owned and Loans, held for sale.
(in millions) Collateral Asset Class Issuance Active / Collapsed Bonds Issued Trusts (Firm sponsored) Waterfall Victoria Mortgage Trust 2011-1 (SBC1) LMM Acquired loans February 2011 Collapsed $ 40.5 Waterfall Victoria Mortgage Trust 2011-3 (SBC3) LMM Acquired loans October 2011 Collapsed 143.4 Sutherland Commercial Mortgage Trust 2015-4 (SBC4) LMM Acquired loans August 2015 Collapsed 125.4 Sutherland Commercial Mortgage Trust 2018 (SBC7) LMM Acquired loans November 2018 Collapsed 217.0 ReadyCap Lending Small Business Trust 2015-1 (RCLT 2015-1) Acquired SBA 7(a) loans June 2015 Collapsed 189.5 ReadyCap Lending Small Business Loan Trust 2019-2 (RCLT 2019-2) Originated SBA 7(a) loans, Acquired SBA 7(a) loans December 2019 Active 131.0 ReadyCap Lending Small Business Loan Trust 2023-3 (RCLT 2023-3) Originated SBA 7(a) loans, Acquired SBA 7(a) loans July 2023 Active 132.0 Real Estate Mortgage Investment Conduits (REMICs) ReadyCap Commercial Mortgage Trust 2014-1 (RCMT 2014-1) LMM Originated conventional September 2014 Collapsed 181.7 ReadyCap Commercial Mortgage Trust 2015-2 (RCMT 2015-2) LMM Originated conventional November 2015 Collapsed 218.8 ReadyCap Commercial Mortgage Trust 2016-3 (RCMT 2016-3) LMM Originated conventional November 2016 Active 162.1 ReadyCap Commercial Mortgage Trust 2018-4 (RCMT 2018-4) LMM Originated conventional March 2018 Active 165.0 Ready Capital Mortgage Trust 2019-5 (RCMT 2019-5) LMM Originated conventional January 2019 Active 355.8 Ready Capital Mortgage Trust 2019-6 (RCMT 2019-6) LMM Originated conventional November 2019 Active 430.7 Ready Capital Mortgage Trust 2022-7 (RCMT 2022-7) LMM Originated conventional April 2022 Active 276.8 Waterfall Victoria Mortgage Trust 2011-2 (SBC2) LMM Acquired loans March 2011 Collapsed 97.6 Sutherland Commercial Mortgage Trust 2018 (SBC6) LMM Acquired loans August 2017 Active 154.9 Sutherland Commercial Mortgage Trust 2019 (SBC8) LMM Acquired loans June 2019 Active 306.5 Sutherland Commercial Mortgage Trust 2020 (SBC9) LMM Acquired loans June 2020 Collapsed 203.6 Sutherland Commercial Mortgage Trust 2021 (SBC10) LMM Acquired loans May 2021 Active 232.6 Collateralized Loan Obligations (CLOs) Ready Capital Mortgage Financing 2017– FL1 LMM Originated bridge August 2017 Collapsed 198.8 Ready Capital Mortgage Financing 2018 – FL2 LMM Originated bridge June 2018 Collapsed 217.1 Ready Capital Mortgage Financing 2019 – FL3 LMM Originated bridge April 2019 Collapsed 320.2 Ready Capital Mortgage Financing 2020 – FL4 LMM Originated bridge June 2020 Collapsed 405.3 Ready Capital Mortgage Financing 2021 – FL5 LMM Originated bridge March 2021 Active 628.9 Ready Capital Mortgage Financing 2021 – FL6 LMM Originated bridge August 2021 Active 652.5 Ready Capital Mortgage Financing 2021 – FL7 LMM Originated bridge November 2021 Active 927.2 Ready Capital Mortgage Financing 2022 – FL8 LMM Originated bridge March 2022 Active 1,135.0 Ready Capital Mortgage Financing 2022 – FL9 LMM Originated bridge June 2022 Active 754.2 Ready Capital Mortgage Financing 2022 – FL10 LMM Originated bridge October 2022 Active 860.1 Ready Capital Mortgage Financing 2023 – FL11 LMM Originated bridge February 2023 Active 586.0 Ready Capital Mortgage Financing 2023 – FL12 LMM Originated bridge June 2023 Active 648.6 Trusts (Non-firm sponsored) Freddie Mac Small Balance Mortgage Trust 2016-SB11 Originated agency multi-family January 2016 Active 110.0 Freddie Mac Small Balance Mortgage Trust 2016-SB18 Originated agency multi-family July 2016 Active 118.0 Freddie Mac Small Balance Mortgage Trust 2017-SB33 Originated agency multi-family June 2017 Active 197.9 Freddie Mac Small Balance Mortgage Trust 2018-SB45 Originated agency multi-family January 2018 Active 362.0 Freddie Mac Small Balance Mortgage Trust 2018-SB52 Originated agency multi-family September 2018 Active 505.0 Freddie Mac Small Balance Mortgage Trust 2018-SB56 Originated agency multi-family December 2018 Active 507.3 Key Commercial Mortgage Trust 2020-S3 (1) LMM Originated conventional September 2020 Active 263.2 (1) Contributed portion of assets into trust 94 We used the proceeds from the sale of the tranches issued to purchase and originate LMM and SBL loans .
(in millions) Collateral Asset Class Issuance Active / Collapsed Bonds Issued Trusts (Firm sponsored) Waterfall Victoria Mortgage Trust 2011-1 (SBC1) LMM Acquired loans February 2011 Collapsed $ 40.5 Waterfall Victoria Mortgage Trust 2011-3 (SBC3) LMM Acquired loans October 2011 Collapsed 143.4 Sutherland Commercial Mortgage Trust 2015-4 (SBC4) LMM Acquired loans August 2015 Collapsed 125.4 Sutherland Commercial Mortgage Trust 2018 (SBC7) LMM Acquired loans November 2018 Collapsed 217.0 ReadyCap Lending Small Business Trust 2015-1 (RCLT 2015-1) Acquired SBA 7(a) loans June 2015 Collapsed 189.5 ReadyCap Lending Small Business Loan Trust 2019-2 (RCLT 2019-2) Originated SBA 7(a) loans, Acquired SBA 7(a) loans December 2019 Active 131.0 ReadyCap Lending Small Business Loan Trust 2023-3 (RCLT 2023-3) Originated SBA 7(a) loans, Acquired SBA 7(a) loans July 2023 Active 132.0 Real Estate Mortgage Investment Conduits (REMICs) ReadyCap Commercial Mortgage Trust 2014-1 (RCMT 2014-1) LMM Originated conventional September 2014 Collapsed 181.7 ReadyCap Commercial Mortgage Trust 2015-2 (RCMT 2015-2) LMM Originated conventional November 2015 Collapsed 218.8 ReadyCap Commercial Mortgage Trust 2016-3 (RCMT 2016-3) LMM Originated conventional November 2016 Active 162.1 ReadyCap Commercial Mortgage Trust 2018-4 (RCMT 2018-4) LMM Originated conventional March 2018 Active 165.0 Ready Capital Mortgage Trust 2019-5 (RCMT 2019-5) LMM Originated conventional January 2019 Active 355.8 Ready Capital Mortgage Trust 2019-6 (RCMT 2019-6) LMM Originated conventional November 2019 Active 430.7 Ready Capital Mortgage Trust 2022-7 (RCMT 2022-7) LMM Originated conventional April 2022 Active 276.8 Waterfall Victoria Mortgage Trust 2011-2 (SBC2) LMM Acquired loans March 2011 Collapsed 97.6 Sutherland Commercial Mortgage Trust 2018 (SBC6) LMM Acquired loans August 2017 Collapsed 154.9 Sutherland Commercial Mortgage Trust 2019 (SBC8) LMM Acquired loans June 2019 Active 306.5 Sutherland Commercial Mortgage Trust 2020 (SBC9) LMM Acquired loans June 2020 Collapsed 203.6 Sutherland Commercial Mortgage Trust 2021 (SBC10) LMM Acquired loans May 2021 Active 232.6 Collateralized Loan Obligations (CLOs) Ready Capital Mortgage Financing 2017– FL1 LMM Originated bridge August 2017 Collapsed 198.8 Ready Capital Mortgage Financing 2018 – FL2 LMM Originated bridge June 2018 Collapsed 217.1 Ready Capital Mortgage Financing 2019 – FL3 LMM Originated bridge April 2019 Collapsed 320.2 Ready Capital Mortgage Financing 2020 – FL4 LMM Originated bridge June 2020 Collapsed 405.3 Ready Capital Mortgage Financing 2021 – FL5 LMM Originated bridge March 2021 Collapsed 628.9 Ready Capital Mortgage Financing 2021 – FL6 LMM Originated bridge August 2021 Collapsed 652.5 Ready Capital Mortgage Financing 2021 – FL7 LMM Originated bridge November 2021 Active 927.2 Ready Capital Mortgage Financing 2022 – FL8 LMM Originated bridge March 2022 Collapsed 1,135.0 Ready Capital Mortgage Financing 2022 – FL9 LMM Originated bridge June 2022 Collapsed 754.2 Ready Capital Mortgage Financing 2022 – FL10 LMM Originated bridge October 2022 Collapsed 860.1 Ready Capital Mortgage Financing 2023 – FL11 LMM Originated bridge February 2023 Active 586.0 Ready Capital Mortgage Financing 2023 – FL12 LMM Originated bridge June 2023 Active 648.6 Trusts (Non-firm sponsored) Freddie Mac Small Balance Mortgage Trust 2016-SB11 Originated agency multi-family January 2016 Active 110.0 Freddie Mac Small Balance Mortgage Trust 2016-SB18 Originated agency multi-family July 2016 Active 118.0 Freddie Mac Small Balance Mortgage Trust 2017-SB33 Originated agency multi-family June 2017 Active 197.9 Freddie Mac Small Balance Mortgage Trust 2018-SB45 Originated agency multi-family January 2018 Active 362.0 Freddie Mac Small Balance Mortgage Trust 2018-SB52 Originated agency multi-family September 2018 Active 505.0 Freddie Mac Small Balance Mortgage Trust 2018-SB56 Originated agency multi-family December 2018 Active 507.3 Key Commercial Mortgage Trust 2020-S3 (1) LMM Originated conventional September 2020 Active 263.2 (1) Contributed portion of assets into trust We used the proceeds from the sale of the tranches issued to purchase and originate LMM and SBL loans .
We refer to assets as being part of our acquisition or origination pipeline if (i) an asset or portfolio opportunity has been presented to us and we have determined, after a preliminary analysis, that the assets fit within our investment strategy and exhibit the appropriate risk/reward characteristics (ii) in the case of acquired loans, we have executed a non-disclosure agreement (“NDA”) or an exclusivity agreement and commenced the due diligence process or we have executed more definitive documentation, such as a letter of intent (“LOI”); and (iii) in the case of originated loans, we have issued an LOI, and the borrower has paid a deposit.
We refer to assets as being part of our acquisition or origination pipeline if (i) an asset or portfolio opportunity has been presented to us and we have determined, after a preliminary analysis, that the assets fit within our investment strategy and exhibit the appropriate risk/reward characteristics (ii) in the case of acquired loans, we have executed a non-disclosure agreement or an exclusivity agreement and commenced the due diligence process or we have executed more definitive documentation, such as a letter of intent (“LOI”); and (iii) in the case of originated loans, we have issued an LOI, and the borrower has paid a deposit.
We typically acquire non-performing loans at a discount to their unpaid principal balance 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.
We typically acquire non-performing loans at a discount to their unpaid principal balance 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 .
These agreements often contain customary negative covenants and financial covenants, including maintenance of minimum liquidity, minimum tangible net worth, maximum debt to net worth ratio and current ratio and limitations on capital expenditures, indebtedness, distributions, transactions with affiliates and maintenance of positive net income. The table below presents certain characteristics of our credit facilities and other financing arrangements.
These agreements often contain customary negative covenants and financial covenants, including maintenance of minimum liquidity, minimum tangible net worth, 85 maximum debt to net worth ratio and current ratio and limitations on capital expenditures, indebtedness, distributions, transactions with affiliates and maintenance of positive net income. The table below presents certain characteristics of our credit facilities and other financing arrangements.
The Term Loan was issued pursuant to a credit agreement, which contains certain customary representations and warranties and affirmative and negative covenants and requirements relating to the collateral and our Company, Ready Term Holdings, and the Term Loan Guarantors, including maintenance of a minimum asset coverage ratio. Corporate debt. We issue senior unsecured notes in public and private transactions.
The Term Loan was issued pursuant to a credit agreement, which contains certain customary representations and warranties and affirmative and negative covenants and requirements relating to the collateral and the Company, Ready Term Holdings, and the Term Loan Guarantors, including maintenance of a minimum asset coverage ratio. Corporate debt We issue senior unsecured notes in public and private transactions.
These differences may result in certain items that are recognized in the current period’s calculation of distributable earnings not being included in taxable income, and thus not subject to the REIT dividend distribution requirement, until future years. The table below presents a reconciliation of net income to distributable earnings before realized losses and distributable earnings.
These differences may result in certain items that are recognized in the current period’s calculation of distributable earnings not being included in taxable income, and thus not subject to the REIT dividend distribution requirement, until future years. 82 The table below presents a reconciliation of net income to distributable earnings before realized losses and distributable earnings.
For collateral-dependent loans that we determine foreclosure is not probable, we apply a practical expedient to estimate expected losses using the difference between the collateral’s fair value (less costs to sell the asset if repayment is expected through the sale of the collateral) and the amortized cost basis of the loan.
For collateral-dependent loans that we determine foreclosure is not probable, we apply a practical expedient to estimate 92 expected losses using the difference between the collateral’s fair value (less costs to sell the asset if repayment is expected through the sale of the collateral) and the amortized cost basis of the loan.
For such loans that we determine that foreclosure of the collateral is probable, we measure the 95 expected losses based on the difference between the fair value of the collateral (less costs to sell the asset if repayment is expected through the sale of the collateral) and the amortized cost basis of the loan as of the measurement date.
For such loans that we determine that foreclosure of the collateral is probable, we measure the expected losses based on the difference between the fair value of the collateral (less costs to sell the asset if repayment is expected through the sale of the collateral) and the amortized cost basis of the loan as of the measurement date.
Refer to Notes 1 and 5, included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Form 10-K, for more information about the Madison One Acquisition and the assets acquired and liabilities assumed as a result of the Madison One Acquisition. Broadmark.
Refer to Notes 1 and 5, included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Form 10-K, for more information about the Madison One Acquisition and the assets acquired and liabilities assumed as a result of the Madison One Acquisition.
Management’s Discussion and Analysis of Financial Condition and Results of Operations Introduction Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our consolidated financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results.
Management’s Discussion and Analysis of Financial Condition and Results of Operations 72 Introduction Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our consolidated financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results.
In connection with the entry into the credit agreement, the Company also agreed to pay certain upfront fees on the initial borrowing date. The Company will also pay, with respect to any unused portion of the Term Loan, a commitment fee of 1.00% per annum.
In connection with the entry into the credit agreement, the Company also agreed to pay certain upfront fees on the 89 initial borrowing date. The Company will also pay, with respect to any unused portion of the Term Loan, a commitment fee of 1.00% per annum.
Results of Operations 80 Key Financial Measures and Indicators As a real estate finance company, we believe the key financial measures and indicators for our business are earnings per share, dividends declared per share, distributable earnings, return on equity, and net book value per share.
Results of Operations Key Financial Measures and Indicators As a real estate finance company, we believe the key financial measures and indicators for our business are earnings per share, dividends declared per share, distributable earnings, return on equity, and net book value per share.
Additional purchase price payments, including cash payments and the issuance of shares of common stock of the Company, may be made over the four years following the acquisition date contingent upon the 79 Madison One business achieving certain performance metrics.
Additional purchase price payments, including cash payments and the issuance of shares of common stock of the Company, may be made over the four years following the acquisition date contingent upon the Madison One business achieving certain performance metrics.
We own and expect to acquire or originate fixed rate mortgages and floating rate mortgages with maturities ranging from two to 30 years. Our loans typically have amortization periods of 15 to 30 years or balloon payments due in two to 10 years.
We own and expect to acquire or originate fixed rate and floating rate loans with maturities ranging from two to 30 years. Our loans typically have amortization periods of 15 to 30 years or balloon payments due in two to 10 years.
The Senior Secured Notes are redeemable by ReadyCap Holdings’ following a non-call period, through the payment of the outstanding principal balance of the Senior Secured Notes plus a “make-whole” or other premium that decreases the closer the Senior Secured Notes are to maturity.
The 2026 Senior Secured Notes are redeemable by ReadyCap Holdings’ following a non-call period, through the payment of the outstanding principal balance of the 2026 Senior Secured Notes plus a “make-whole” or other premium that decreases the closer the 2026 Senior Secured Notes are to maturity.
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.
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 73 strategies.
We are the primary beneficiary of all firm sponsored securitizations; therefore they are consolidated in our financial statements. Contractual Obligations and Off-Balance Sheet Arrangements The table below provides a summary of our contractual obligations.
We are the primary beneficiary of all firm sponsored securitizations; therefore they are consolidated in our financial statements. 91 Contractual Obligations and Off-Balance Sheet Arrangements The table below provides a summary of our contractual obligations.
Refer to “—Non- GAAP Financial Measures” below for a reconciliation of net income to distributable earnings. The table below sets forth certain information on our operating results.
Refer to “—Non- GAAP Financial Measures” below for a reconciliation of net income to distributable earnings. 75 The table below sets forth certain information on our operating results.
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. These originated loans are generally held-for-investment or placed into 78 securitization structures.
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 . These originated loans are generally held-for-investment or placed into securitization structures.
No such sales through the Debt ATM Program were made during the years ended December 31, 2024 or December 31, 2023 , respectively. Securitization transactions Our Manager’s extensive experience in loan acquisition, origination, servicing and securitization strategies has enabled us to complete several securitizations of LMM and SBA loan assets since January 2011.
No such sales through the Debt ATM Program were made during the years ended December 31, 2025 or December 31, 2024 , respectively. Securitization transactions Our Manager’s extensive experience in loan acquisition, origination, servicing and securitization strategies has enabled us to complete several securitizations of LMM and SBA loan assets since January 2011.
The Senior Secured Notes were issued pursuant to a note purchase agreement, which contains certain customary negative covenants and requirements relating to the collateral and our company, ReadyCap Holdings, and the SSN Guarantors, including maintenance of minimum liquidity, minimum tangible net worth, maximum debt to net worth ratio and limitations on transactions with affiliates.
The 2026 Senior Secured Notes were issued pursuant to a note purchase agreement, which contains certain customary negative covenants and requirements relating to the collateral and the Company, ReadyCap Holdings, and the 2026 SSN Guarantors, including maintenance of minimum liquidity, minimum tangible net worth, maximum debt to net worth ratio and limitations on transactions with affiliates.
(4) Interest on the corporate debt is payable quarterly on January 30, April 30, July 30, and October 30 of each year. (5) Interest on the corporate debt is payable semiannually on April 30 and October 30 of each year. (6) Interest on the corporate debt is payable semiannually on January 31 and July 31 of each year.
(5) Interest on the corporate debt is payable quarterly on January 30, April 30, July 30, and October 30 of each year. (6) Interest on the corporate debt is payable semiannually on January 31 and July 31 of each year.
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 in our asset classes and segments with the most attractive risk-adjusted returns.
In order to achieve this objective, we intend 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 in our asset classes and segments with the most attractive risk-adjusted returns.
We hold an SBA license as one of only 20 non-bank Small Business Lending Companies and have been granted preferred lender status by the SBA. These originated loans are either held-for-investment, placed into securitization structures, or sold .
We hold an SBA license as one of only 16 non-bank Small Business Lending Companies and have been granted preferred lender status by the SBA. These originated loans are either held-for-investment, placed into securitization structures, or sold .
T he net cash used for financing activities primarily reflected repayments of securitized debt obligations of consolidated VIEs, dividend payments and repayments of secured borrowings. The net cash provided by investing activities primarily reflected proceeds from disposition and principal payments of loans, partially offset by net cash used for loan originations.
The net cash used for financing activities primarily reflected repayments of securitized debt obligations of consolidated VIEs, dividend payments and repayments of secured borrowings. The net cash provided by investing activities primarily reflected proceeds from disposition and principal payments of loans, partially offset by net cash used for loan originations.
We calculate distributable earnings as GAAP net income (loss) excluding the following: i) any unrealized gains or losses on certain MBS not retained by us as part of our loan origination businesses ii) any realized gains or losses on sales of certain MBS iii) any unrealized gains or losses on Residential MSRs from discontinued operations iv) any unrealized change in current expected credit loss reserve and valuation allowances v) any unrealized gains or losses on de-designated cash flow hedges vi) any unrealized gains or losses on foreign exchange hedges vii) any unrealized gains or losses on certain unconsolidated joint ventures viii) any non-cash compensation expense related to stock-based incentive plan ix) any unrealized gains or losses on preferred equity , at fair value x) one-time non-recurring gains or losses, such as gains or losses on discontinued operations, bargain purchase gains, or merger related expenses In calculating distributable earnings, net income (in accordance with GAAP) is adjusted to exclude unrealized gains and losses on MBS acquired by us in the secondary market but is not adjusted to exclude unrealized gains and losses on MBS retained by us as part of our loan origination businesses, where we transfer originated loans into an MBS securitization and retain an interest in the securitization.
We calculate distributable earnings as GAAP net income (loss) excluding the following: i) any unrealized gains or losses on certain MBS not retained by us as part of our loan origination businesses ii) any realized gains or losses on sales of certain MBS iii) any unrealized gains or losses on Residential MSRs from discontinued operations iv) any unrealized change in current expected credit loss reserve and valuation allowances v) any unrealized gains or losses on de-designated cash flow hedges vi) any unrealized gains or losses on foreign exchange hedges vii) any unrealized gains or losses on certain unconsolidated joint ventures viii) any non-cash compensation expense related to stock-based incentive plan ix) any unrealized gains or losses on preferred equity , at fair value x) any unrealized gain or losses or other non-cash items related to real estate owned xi) one-time non-recurring gains or losses, such as gains or losses on discontinued operations, bargain purchase gains, or merger related expenses In calculating distributable earnings, net income (in accordance with GAAP) is adjusted to exclude unrealized gains and losses on MBS acquired by us in the secondary market but is not adjusted to exclude unrealized gains and losses on MBS retained by us as part of our loan origination businesses, where we transfer originated loans into an MBS securitization and retain an interest in the securitization.
Because the severity, magnitude and duration of these economic events remain uncertain, rapidly changing and difficult to predict, the impact on our operations and liquidity also remains uncertain and difficult to predict . Cash flow Year Ended December 31, 2024 .
Because the severity, magnitude and duration of these economic events remain uncertain, rapidly changing and difficult to predict, the impact on our operations and liquidity also remains uncertain and difficult to predict . Cash flow Year Ended December 31, 2025 .
Cash and cash equivalents as of December 31, 2024 , decreased by $79.7 million to $182.8 million from December 31, 2023 , primarily due to net cash used for financing activities, partially offset by net cash provided by investing and operating activities.
C ash and cash equivalents as of December 31, 2024 , decreased by $79.7 million to $182.8 million from December 31, 2023 , primarily due to net cash used for financing activities, partially offset by net cash provided by investing and operating activities.
On October 20, 2021, ReadyCap Holdings, an indirect subsidiary of the Company, completed the offer and sale of $350.0 million of its 4.50% Senior Secured Notes due 2026 (the “Senior Secured Notes”).
On October 20, 2021, ReadyCap Holdings, an indirect subsidiary of the Company, completed the offer and sale of $350.0 million of its 4.50% Senior Secured Notes due 2026 (the “2026 Senior Secured Notes”).
(7) Interest on the corporate debt is payable semiannually on May 15 and November 15 of each year; assumed as part of the Broadmark Merger. (8) Interest on the corporate debt is payable quarterly on March 15, June 15, September 15, and December 15 of each year.
(7) Interest on the corporate debt is payable semiannually on May 15 and November 15 of each year; assumed as part of the Broadmark Merger (as defined below). (8) Interest on the corporate debt is payable quarterly on March 15, June 15, September 15, and December 15 of each year.
ReadyCap Holdings is required to offer to repurchase the Senior Secured Notes at 101% of the principal balance of the Senior Secured Notes in the event of a change in control and a 92 downgrade of the rating on the Senior Secured Notes in connection therewith, as set forth more fully in the note purchase agreement.
ReadyCap Holdings is required to offer to repurchase the 2028 Senior Secured Notes at 101% of the principal balance of the 2028 Senior Secured Notes in the event of a change in control and a downgrade of the rating on the 2028 Senior Secured Notes in connection therewith, as set forth more fully in the note purchase agreement governing the 2028 Senior Secured Notes.
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 Red Stone, a subsidiary.
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 Ready Capital Affordable, a subsidiary.
ReadyCap Holdings’ and the SSN Guarantors’ respective obligations under the Senior Secured Notes are secured by a perfected first-priority lien on certain capital stock and assets (collectively, the “SSN Collateral”) owned by certain subsidiaries of the Company.
ReadyCap Holdings’ and the 2026 SSN Guarantors’ respective obligations under the 2026 Senior Secured Notes are secured by a perfected first-priority lien on certain capital stock and assets (collectively, the “2026 SSN Collateral”) owned by certain subsidiaries of the Company.
The discussion and analysis of our financial condition and results of operations is for the year ended December 31, 2024 compared with the year ended December 31, 2023 .
The discussion and analysis of our financial condition and results of operations is for the year ended December 31, 2025 compared with the year ended December 31, 2024 .
The Senior Secured Notes are fully and unconditionally guaranteed by the Company, each direct parent entity of ReadyCap Holdings, and other direct or indirect subsidiaries of the Company from time to time that is a direct parent entity of Sutherland Asset III, LLC or otherwise pledges collateral to secure the Senior Secured Notes (collectively, the “SSN Guarantors”).
The 2026 Senior Secured Notes are fully and unconditionally guaranteed by the Company, each direct parent entity of ReadyCap Holdings, and other direct or indirect subsidiaries of the Company from time to time that is a direct parent entity of Sutherland Asset III, LLC or otherwise pledges collateral to secure the 2026 Senior Secured Notes (collectively, the “2026 SSN Guarantors”).
Fixed rate mortgage loans bear interest that is fixed for the term of the loan and we typically utilize derivative financial and hedging instruments in an effort to hedge the interest rate risk associated with such fixed rate mortgages. As of December 31, 2024 , all fixed rate loans are match funded in securitization.
Fixed rate loans bear interest that is fixed for the term of the loan and we typically utilize derivative financial and hedging instruments in an effort to hedge the interest rate risk associated with such fixed rate loans. As of December 31, 2025 , all fixed rate loans are match funded in securitization.
The table below presents certain selected balance sheet data by business segments, with the remaining amounts reflected in Corporate –Other .
The table below presents certain selected balance sheet data by business segments, with the remaining amounts reflected in Unallocated –Corporate .
These factors may increase our reliance on our primary sources of liquidity, including our existing cash balances, borrowings, including securitizations, re-securitizations, repurchase agreements, warehouse facilities, bank credit facilities and other financing agreements (including term loans and revolving facilities), the net proceeds of offerings of equity and debt securities, including our senior secured notes, corporate debt, and net cash provided by operating activities.
These factors may increase our reliance on our primary sources of liquidity, including our existing cash balances, borrowings, including securitizations, re-securitizations, repurchase agreements, warehouse facilities, bank credit facilities and other financing agreements (including term loans and revolving facilities), the net proceeds of offerings of equity and secured and unsecured debt securities , and net cash provided by operating and investing activities.
(the “Agent”), pursuant to which it may offer and sell, from time to time, up to $100.0 million of the 6.20% 2026 Notes and the 5.75% 2026 Notes.
(the “Agent”), pursuant to which it may offer and sell, from time to time, up to $ 100.0 million of the Company’s 6.20% Senior Notes due 2026 and 5.75% Senior Notes due 2026.
Ready Term Holdings, LLC (“Ready Term Holdings”) term loan due 2029. On April 12, 2024, Ready Term Holdings, an indirect subsidiary of the Company, entered into a credit agreement which provides for a delayed draw term loan to the Company in an aggregate principal amount not to exceed $115.25 million (the “Term Loan”).
On April 12, 2024, Ready Term Holdings, an indirect subsidiary of the Company, entered into a credit agreement which provides for a delayed draw term loan to the Company in an aggregate principal amount not to exceed $115.25 million (the “Term Loan”).
Discussions of our financial condition and results of operations for the year ended December 31, 2023 compared with the year ended December 31, 2022 that have been omitted under this item can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the Securities and Exchange Commission on February 28, 2024 .
Discussions of our financial condition and results of operations for the year ended December 31, 2024 compared with the year ended December 31, 2023 that have been omitted under this item can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K/A for the year ended December 31, 2024, which was filed with the Securities and Exchange Commission on September 30, 2025 .
Our loans generally range in original principal amounts 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, as well as through capital appreciation.
Our loans generally range in original principal amounts 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.
The net cash provided by operating activities reflected sales on loans, held for sale and an increase in the provision for loan losses, partially offset by an increase in operating assets and net loss from continuing operations. Year Ended December 31, 2023 .
The net cash provided by operating activities reflected sales on loans, held for sale and an increase in the provision for loan losses, partially offset by an increase in operating assets and net loss from continuing operations.
Factors Impacting Operating Results We expect that our results of operations will be affected by a number of factors and will primarily depend on the level of interest income from our assets, the market and fair value of our assets and the supply of, and demand for, LMM loans, SBA loans, USDA loans, construction loans, MBS and other assets we may acquire in the future, demand for housing, population trends, construction costs, the availability of alternative real estate financing from other lenders, changes in credit spreads, and the financing and other costs associated with our business.
For additional information on our business, refer to Part I, Item 1, “Business” in this Form 10-K. 74 Factors Impacting Operating Results We expect that our results of operations will be affected by a number of factors and will primarily depend on the level of interest income from our assets, the market and fair value of our assets and the supply of, and demand for, LMM loans, SBA loans, USDA loans, construction loans, MBS and other assets we may acquire in the future, demand for housing, population trends, construction costs, the availability of alternative real estate financing from other lenders, changes in credit spreads, and the financing and other costs associated with our business.
Refer to “Notes to Consolidated Financial Statements, Note 8 – Servicing Rights” included in Item 8, “Financial Statements and Supplementary Data,” in this Form 10-K for a more complete discussion of our critical accounting estimates as they pertain to servicing rights impairment. 96 Refer to “Notes to Consolidated Financial Statements, Note 4– Recent Accounting Pronouncements” included in Item 8, “Financial Statements and Supplementary Data,” in this Form 10-K for a discussion of recent accounting developments and the expected impact to the Company.
Refer to “Notes to Consolidated Financial Statements, Note 8 – Servicing Rights” included in Item 8, “Financial Statements and Supplementary Data,” in this Form 10-K for a more complete discussion of our critical accounting estimates as they pertain to servicing rights impairment.
As of December 31, 2024 , we had approximately $20.9 million outstanding under this credit facility. 91 Senior Secured Notes and Corporate Debt, Net The table below presents information about senior secured notes and corporate debt issued through public and private transactions .
As of December 31, 2025 , we had approximately $8.6 million outstanding under this credit facility. 87 Senior Secured Notes and Corporate Debt, Net The table below presents information about senior secured notes and corporate debt issued through public and private transactions .
Sales of the 6.20% 2026 Notes and the 5.75% 2026 Notes pursuant to 93 the Sales Agreement, if any, may be made in transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act (the “Debt ATM Program”).
Sales of such notes pursuant to the Sales Agreement, if any, may be made in transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act (the “Debt ATM Program”).
These securitizations allow us to match fund the LMM and SBA loans on a long-term, non-recourse basis. The assets pledged as collateral for these securitizations were contributed from our portfolio of assets. By contributing these LMM and SBA assets to the various securitizations, these transactions created capacity for us to fund other investments.
These securitizations allow us to match fund the LMM and SBA loans on a long-term, non-recourse basis. The assets pledged as collateral for these securitizations were contributed from our portfolio of assets.
The increase in the distributable earnings reconciling items is primarily due to an increase in provision for loan losses and realized losses on sale of investments , partially offset by a decrease to the valuation allowance.
The decrease in the distributable earnings reconciling items is primarily due to a decrease in the provision for loan losses and unrealized losses on discontinued operations, partially offset by an increase in the valuation allowance.
(2) Interest on the term loan is payable quarterly on January 12, April 12, July 12 and October 12 of each year. (3) Interest on the corporate debt is payable semiannually on June 30 and December 30 of each year.
(2) Interest on the senior secured notes is payable semiannually on March 1 and September 1 of each year. (3) Interest on the term loan is payable quarterly on January 12, April 12, July 12 and October 12 of each year. (4) Interest on the corporate debt is payable semiannually on June 30 and December 30 of each year.
Incentive distribution payable to our Manager Under the partnership agreement of our operating partnership, our Manager, the holder of the Class A special unit in our operating partnership, is entitled to receive an incentive distribution, distributed quarterly in arrears in an amount, not less than zero, equal to the difference between (i) the product of (A) 15% and (B) the difference between (x) IFCE (as described below) of our operating partnership, on a rolling four-quarter basis and before the incentive distribution for the current quarter, and (y) the product of (1) the weighted average of the issue price per share of common stock or operating partnership unit (“OP unit”) (without double counting) in all of our offerings multiplied by the weighted average number of shares of common stock outstanding (including any restricted shares of common stock and any other shares of common stock underlying awards granted under our 2013 Equity Incentive Plan, our 2023 Equity Incentive Plan and the Broadmark Equity Plan) and OP units (without double counting) in such quarter and (2) 8%, and (ii) the sum of any incentive distribution paid to our Manager with respect to the first three quarters of such previous four quarters; provided, however, that no incentive distribution is payable with respect to any calendar quarter unless cumulative IFCE is greater than zero for the most recently completed 12 calendar quarters.
Consolidated distributable loss of $246.0 million for the year ended December 31, 2025 represented an increase of $274.4 million from the year ended December 31, 2024 due to certain charge-offs and losses realized on sales of real estate owned assets and LMM loans. 83 Incentive distribution payable to our Manager Under the partnership agreement of our operating partnership, our Manager, the holder of the Class A special unit in our operating partnership, is entitled to receive an incentive distribution, distributed quarterly in arrears in an amount, not less than zero, equal to the difference between (i) the product of (A) 15% and (B) the difference between (x) IFCE (as described below) of our operating partnership, on a rolling four-quarter basis and before the incentive distribution for the current quarter, and (y) the product of (1) the weighted average of the issue price per share of common stock or operating partnership unit (“OP unit”) (without double counting) in all of our offerings multiplied by the weighted average number of shares of common stock outstanding (including any restricted shares of common stock and any other shares of common stock underlying awards granted under our 2013 Equity Incentive Plan, our 2023 Equity Incentive Plan and Broadmark's 2019 Stock Incentive Plan (the “Broadmark Equity Plan”), and OP units (without double counting) in such quarter and (2) 8%, and (ii) the sum of any incentive distribution paid to our Manager with respect to the first three quarters of such previous four quarters; provided, however, that no incentive distribution is payable with respect to any calendar quarter unless cumulative IFCE is greater than zero for the most recently completed 12 calendar quarters.
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. We are organized and conduct our operations to qualify as a REIT under the Code.
In addition, we originate and service USDA loans through our subsidiary, ReadyCap Commercial, as well as originate and service small business loans through our subsidiary iBusiness Funding LLC. We are organized and conduct our operations to qualify as a REIT under the Internal Revenue Code of 1986, as amended .
The supplemental indentures governing the notes often contain customary negative covenants and financial covenants relating to maintenance of minimum liquidity, minimum tangible net worth, maximum debt to net worth ratio and limitations on transactions with affiliates.
The supplemental indentures governing the notes often contain customary negative covenants and financial covenants relating to maintenance of minimum liquidity, minimum tangible net worth, maximum debt to net worth ratio and limitations on transactions with affiliates. In addition, in connection with the merger among the Company, Broadmark Realty Capital Inc.
Floating rate mortgage loans generally have an adjustable interest rate equal to the sum of a fixed spread plus an index rate, such as the SOFR , which typically resets monthly. As of December 31, 2024 , approximate ly 84% of the loans in our portfolio were floating rate mortgages, and 16% wer e fixed rate mortgages, based on UPB.
Floating rate loans generally have an adjustable interest rate equal to the sum of a fixed spread plus an index rate, such as SOFR , which typically resets monthly. As of December 31, 2025 , approximat e ly 81% of the loans in our portfolio were floating rate loans, and 19% wer e fixed rate loans, based on carrying value.
Consolidated distributable losses of $0.3 million for the fourth quarter of 2024 represented a decrease of $48.3 million from the fourth quarter of 2023 due to certain charge-offs and losses realized on sales of real estate owned assets and LMM loans. YTD 2024 versus YTD 2023 .
Consolidated distributable loss of $65.3 million for the fourth quarter of 2025 represented an increase of $65.5 million from the fourth quarter of 2024 due to certain charge-offs and losses realized on sales of real estate owned assets and LMM loans. YTD 2025 versus YTD 2024 .
We are continuing to monitor the impact of shifts in interest rates, credit spreads and inflation on the Company, the borrowers underlying our real estate-related assets, the tenants in the properties we own, our financing sources, and the economy as a whole.
We expect to utilize these resources, together with our access to the capital markets, to meet our liquidity needs . 84 We are continuing to monitor the impact of shifts in interest rates, credit spreads and inflation on the Company, the borrowers underlying our real estate-related assets, the tenants in the properties we own, our financing sources, and the economy as a whole.
In calculating 86 distributable earnings, we do not exclude realized gains or losses on commercial MSRs, as servicing income is a fundamental part of our business and an indicator of the ongoing performance.
Servicing rights relating to our small business commercial business are accounted for under ASC 860, Transfer and Servicing. In calculating distributable earnings, we do not exclude realized gains or losses on commercial MSRs, as servicing income is a fundamental part of our business and an indicator of the ongoing performance.
In calculating distributable earnings, net income (in accordance with GAAP) is adjusted to exclude realized gains and losses on certain MBS securities due to a variety of reasons which may include collateral type, duration, and size.
In calculating distributable earnings, net income (in accordance with GAAP) is adjusted to exclude realized gains and losses on certain MBS securities due to a variety of reasons which may include collateral type, duration, and size. 81 In addition, in calculating distributable earnings, net income (in accordance with GAAP) is adjusted to exclude unrealized gains or losses on residential MSRs, held at fair value from discontinued operations.
Our ability to meet future margin calls will be impacted by the Cushion, which varies based on the fair value of our investments, our cash position and margin requirements. Our cash position fluctuates based on the timing of our operating, investing and financing activities and is managed based on our anticipated cash needs.
Our ability to meet future margin calls will be impacted by the Cushion, which varies based on the fair value of our investments, our cash position and margin requirements.
The amount will be adjusted to exclude one-time events pursuant to changes in GAAP and certain other non- cash charges after discussions between our Manager and our independent directors and after approval by a majority of the independent directors. 88 Liquidity and Capital Resources Liquidity is a measure of our ability to turn non-cash assets into cash and to meet potential cash requirements.
The amount will be adjusted to exclude one-time events pursuant to changes in GAAP and certain other non- cash charges after discussions between our Manager and our independent directors and after approval by a majority of the independent directors.
(in thousands) Coupon Rate Maturity Date December 31, 2024 Senior secured notes principal amount (1) 4.50 % 10/20/2026 $ 350,000 Term loan principal amount (2) SOFR + 5.50% 4/12/2029 95,000 Unamortized discount - Senior secured notes (2,456) Unamortized deferred financing costs - Term loan (4,697) Total senior secured notes, net $ 437,847 Corporate debt principal amount (3) 5.50 % 12/30/2028 110,000 Corporate debt principal amount (4) 6.20 % 7/30/2026 104,614 Corporate debt principal amount (4) 5.75 % 2/15/2026 206,270 Corporate debt principal amount (5) 6.125 % 4/30/2025 120,000 Corporate debt principal amount (6) 7.375 % 7/31/2027 100,000 Corporate debt principal amount (7) 5.00 % 11/15/2026 100,000 Corporate debt principal amount (8) 9.00 % 12/15/2029 130,000 Unamortized discount - corporate debt (8,318) Unamortized deferred financing costs - corporate debt (3,551) Junior subordinated notes principal amount (9) SOFR + 3.10% 3/30/2035 15,000 Junior subordinated notes principal amount (10) SOFR + 3.10% 4/30/2035 21,250 Total corporate debt, net $ 895,265 Total carrying amount of debt $ 1,333,112 (1) Interest on the senior secured notes is payable semiannually on April 20 and October 20 of each year.
(in thousands) Coupon Rate Maturity Date December 31, 2025 Senior secured notes principal amount (1) 4.50 % 10/20/2026 $ 350,000 Senior secured notes principal amount (2) 9.375 % 3/1/2028 270,000 Term loan principal amount (3) SOFR + 5.50% 4/12/2029 115,250 Unamortized discount (1,890) Unamortized deferred financing costs (10,631) Total senior secured notes, net $ 722,729 Corporate debt principal amount (4) 5.50 % 12/30/2028 110,000 Corporate debt principal amount (5) 6.20 % 7/30/2026 67,437 Corporate debt principal amount (5) 5.75 % 2/15/2026 116,557 Corporate debt principal amount (6) 7.375 % 7/31/2027 100,000 Corporate debt principal amount (7) 5.00 % 11/15/2026 100,000 Corporate debt principal amount (8) 9.00 % 12/15/2029 129,371 Unamortized discount - corporate debt (5,190) Unamortized deferred financing costs - corporate debt (1,938) Junior subordinated notes principal amount (9) SOFR + 3.10% 3/30/2035 15,000 Junior subordinated notes principal amount (10) SOFR + 3.10% 4/30/2035 21,250 Total corporate debt, net $ 652,487 Total carrying amount of debt $ 1,375,216 (1) Interest on the senior secured notes is payable semiannually on April 20 and October 20 of each year.
Interest rates and prepayment speeds vary according to the type of investment, conditions in the financial markets, competition and other factors, none of which can be predicted with any certainty.
Interest rates and prepayment speeds vary according to the type of investment, conditions in the financial markets, competition and other factors, none of which can be predicted with any certainty. Our operating results may also be impacted by changes in our provision for loan losses.
We use significant cash to purchase LMM loans and other target assets, originate new LMM loans, pay dividends, repay principal and interest on our borrowings, fund our operations and meet other general business needs.
Liquidity and Capital Resources Liquidity is a measure of our ability to turn non-cash assets into cash and to meet potential cash requirements. We use significant cash to purchase LMM loans and other target assets, originate new LMM loans, pay dividends, repay principal and interest on our borrowings, fund our operations and meet other general business needs.
The Broadmark Merger further diversified our business by expanding on our residential and commercial construction lending platforms. Refer to Notes 1 and 5, included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Form 10-K , for more information about the Broadmark Merger and the assets acquired and liabilities assumed as a result of the Broadmark Merger.
Refer to Notes 1 and 5, included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Form 10-K, for more information about the UDF IV Merger and the assets acquired and liabilities assumed as a result of the UDF IV Merger. Funding Circle.
Funding Circle is an online lending platform that originates and services small business loans. The Funding Circle Acquisition integrates Funding Circle’s loan origination servicing platform with the Company’s Lending as a Service ("LaaS") and LenderAI product offerings.
The Funding Circle Acquisition integrates Funding Circle’s loan origination servicing platform with the Company’s Lending as a Service and LenderAI product offerings.
As of December 31, 2024 , total stockholders’ equity was $1.9 billion , a decrease of $702.7 million from December 31, 2023 , primarily due to net losses, dividends paid and common stock repurchased through the Company’s share repurchase program. Selected Balance Sheet Information by Business Segment.
As of December 31, 2025 , total stockholders’ equity was $1.6 billion , a decrease of $0.3 billion from December 31, 2024 , primarily due to net losses, common stock repurchased through the Company’s share repurchase program and dividends paid, partially offset by shares issued in connection with the acquisition of UDF IV. Selected Balance Sheet Information by Business Segment.
The net decrease in the outstanding balances during 2023 was primarily due to the closings of RCMF 2023-FL11 and RCMF 2023-FL12, partially offset by the collapse of RCMF 2019-FL3 and RCMF 2020-FL4. Paycheck Protection Program Liquidity Facility borrowings. The Company uses the PPPLF from the Federal Reserve to finance PPP loans. The program charges an interest rate of 0.35%.
The net decrease in the outstanding balances during 2024 was primarily due to the sale of warehouse loans, partially offset by increased borrowings to fund origination volumes and the collapse of RCMT 2015-2. Paycheck Protection Program Liquidity Facility borrowings. The Company uses the PPPLF from the Federal Reserve to finance PPP loans. The program charges an interest rate of 0.35%.
Typical supplemental terms and conditions, which differ by lender, may include changes to the margin maintenance requirements, required haircuts and purchase price maintenance requirements, requirements that all controversies related to the repurchase agreement be litigated in a particular jurisdiction, and cross default and setoff provisions. 90 We maintain certain assets, which, from time to time, may include cash, unpledged LMM loans, LMM ABS and short- term investments (which may be subject to various haircuts if pledged as collateral to meet margin requirements) and collateral in excess of margin requirements held by our counterparties, or collectively, the “Cushion”, to meet routine margin calls and protect against unforeseen reductions in our borrowing capabilities.
We maintain certain assets, which, from time to time, may include cash, unpledged LMM loans, LMM ABS and short- term investments (which may be subject to various haircuts if pledged as collateral to meet margin requirements) and collateral in excess of margin requirements held by our counterparties, or collectively, the “Cushion”, to meet routine margin calls and protect against unforeseen reductions in our borrowing capabilities.
(2) Current maturity does not reflect extension options available beyond original commitment terms. (3) Asset class pricing is determined using an index rate plus a weighted average spread. (4) Non-USD denominated repurchase agreements have been converted into USD for purposes of this disclosure.
(2) Current maturity does not reflect extension options available beyond original commitment terms. (3) Asset class pricing is determined using an index rate plus a weighted average spread.
Our Residential Mortgage Banking segment meets the criteria to be classified as held for sale and presented as a discontinued operation. For all periods presented, the operating results for these operations have been removed from continuing operations. The MD&A has been adjusted to exclude discontinued operations unless otherwise noted.
We completed the disposition of our Residential Mortgage Banking segment effective on June 30, 2025. In connection with this sale, we classified our Residential Mortgage Banking segment as a discontinued operation. For all periods presented, the operating results for these operations have been removed from continuing operations. Our MD&A has been adjusted to exclude discontinued operations unless otherwise noted.
(in thousands) December 31, 2024 2025 $ 120,000 2026 760,884 2027 100,000 2028 110,000 2029 225,000 Thereafter 36,250 Total contractual amounts $ 1,352,134 Unamortized deferred financing costs, discounts, and premiums, net (19,022) Total carrying amount of debt $ 1,333,112 ReadyCap Holdings 4.50% senior secured notes due 2026.
(in thousands) December 31, 2025 2026 $ 633,994 2027 100,000 2028 380,000 2029 244,621 2030 — Thereafter 36,250 Total contractual amounts $ 1,394,865 Unamortized deferred financing costs, discounts, and premiums, net (19,649) Total carrying amount of debt $ 1,375,216 ReadyCap Holdings 4.50% senior secured notes due 2026.
Three Months Ended December 31, Year Ended December 31, ($ in thousands, except share data) 2024 2024 2023 Net Income (loss) from continuing operations $ (297,517) $ (411,999) $ 351,245 Earnings per common share from continuing operations - basic $ (1.80) $ (2.52) $ 2.27 Earnings per common share from continuing operations - diluted $ (1.80) $ (2.52) $ 2.24 Distributable earnings before realized losses $ 44,513 $ 181,931 $ 190,120 Distributable earnings before realized losses per common share - basic $ 0.23 $ 0.97 $ 1.18 Distributable earnings before realized losses per common share - diluted $ 0.23 $ 0.97 $ 1.17 Distributable earnings $ 267 $ 28,360 $ 190,120 Distributable earnings per common share - basic $ (0.03) $ 0.07 $ 1.18 Distributable earnings per common share - diluted $ (0.03) $ 0.07 $ 1.17 Dividends declared per common share $ 0.25 $ 1.10 $ 1.46 Dividend yield (1) 14.7 % 14.7 % 13.5 % Return on equity from continuing operations (60.3) % (19.6) % 17.2 % Distributable return on equity before realized losses 7.1 % 7.5 % 8.6 % Distributable return on equity (0.3) % 0.9 % 8.6 % Book value per common share $ 10.61 $ 10.61 $ 14.10 (1) Dividend yield is based on the respective period end closing share price.
Three Months Ended December 31, Year Ended December 31, ($ in thousands, except share data) 2025 2025 2024 Net Income (loss) from continuing operations $ (232,565) $ (215,853) $ (411,999) Earnings per common share from continuing operations - basic $ (1.46) $ (1.41) $ (2.52) Earnings per common share from continuing operations - diluted $ (1.46) $ (1.41) $ (2.52) Distributable earnings before realized losses $ (10,070) $ (20,804) $ 181,931 Distributable earnings before realized losses per common share - basic $ (0.09) $ (0.23) $ 0.97 Distributable earnings before realized losses per common share - diluted $ (0.09) $ (0.23) $ 0.97 Distributable earnings $ (65,279) $ (246,047) $ 28,360 Distributable earnings per common share - basic $ (0.43) $ (1.59) $ 0.07 Distributable earnings per common share - diluted $ (0.43) $ (1.59) $ 0.07 Dividends declared per common share $ 0.01 $ 0.385 $ 1.10 Dividend yield (1) 1.8 % 1.8 % 14.7 % Return on equity from continuing operations (58.8) % (13.2) % (19.6) % Distributable return on equity before realized losses (3.1) % (1.8) % 7.5 % Distributable return on equity (16.8) % (15.0) % 0.9 % Book value per common share $ 8.79 $ 8.79 $ 10.61 (1) Dividend yield is based on the respective period end closing share price.
C ash and cash equivalents as of December 31, 2023 , decreased by $11.1 million to $262.5 million from December 31, 2022 , primarily due to net cash used for financing activities , partially offset by net cash provided by investing and operating activities.
Cash and cash equivalents as of December 31, 2025 , increased by $66.8 million to $249.5 million from December 31, 2024 , primarily due to net cash provided by investing and operating activities, partially offset by net cash used for financing activities.
Our LMM 89 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. Secured Borrowings Credit Facilities and Other Financing Agreements. We utilize credit facilities and other financing arrangements to finance our business.
The remaining recourse leverage ratio is from our corporate debt offerings. Secured Borrowings Credit Facilities and Other Financing Agreements. We utilize credit facilities and other financing arrangements to finance our business.
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.
As of December 31, 2025 , we had a total leverage ratio of 3.5x and recourse leverage ratio of 1.6x . 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 0.5x and 0.2x , respectively.
In addition, in connection with the Broadmark Merger, RCC Merger Sub, a wholly owned subsidiary of the operating partnership, assumed Broadmark’s obligations on certain senior unsecured notes.
(“Broadmark”), and RCC Merger Sub, LLC, a wholly owned subsidiary of the operating partnership (“RCC Merger Sub”), in which Broadmark merged with and into RCC Merger Sub, with RCC Merger Sub remaining as a wholly owned subsidiary of the operating partnership (the “Broadmark Merger”), RCC Merger Sub assumed Broadmark’s obligations on certain senior unsecured notes.
Consolidated net loss of $314.8 million for the fourth quarter of 2024 represented a decrease of $325.6 million from the fourth quarter of 2023 , primarily due to an increase in provision for loan losses and n et 87 realized losses on financial instruments and real estate owned , and a decrease to other income, partially offset by a decrease to the valuation allowance.
Consolidated net loss of $232.6 million for the fourth quarter of 2025 represented a decrease of $82.1 million from the fourth quarter of 2024 , primarily due to a decrease in provision for loan losses, partially offset by an increase in the valuation allowance and a decrease in net interest income.
Three Months Ended December 31, Year Ended December 31, (in thousands) 2024 2024 2023 Loan originations: LMM loans $ 435,848 $ 1,198,090 $ 1,683,363 SBL loans 348,471 1,202,592 493,949 Total loan investment activity $ 784,319 $ 2,400,682 $ 2,177,312 81 The table below presents information on our origination pipeline opportunities (based on fully committed amounts).
Three Months Ended December 31, Year Ended December 31, (in thousands) 2025 2025 2024 Loan originations: LMM loans $ 234,872 $ 626,085 $ 1,198,090 SBL loans 139,698 1,168,444 1,202,592 Total loan investment activity $ 374,570 $ 1,794,529 $ 2,400,682 The table below presents information on our origination pipeline opportunities (based on fully committed amounts).
Consolidated distributable earnings before realized losses of $44.5 million for the fourth quarter of 2024 represented a decrease of $4.0 million from the fourth quarter of 2023 .
Consolidated distributable loss before realized losses of $10.1 million for the fourth quarter of 2025 represented a decrease of $54.6 million from the fourth quarter of 2024 .

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+0 added−0 removed43 unchanged
Biggest changeBecause non-performing LMM loans are short-term assets, the discount rates used for valuation are based on short-term market interest rates, which may not move in tandem with long-term market interest rates. 97 The table below projects the impact on our interest income and expense for the twelve-month period following December 31, 2024 , assuming an immediate increase or decrease of 25, 50, 75, and 100 basis points in interest rates. 12-month pretax net interest income sensitivity profiles Instantaneous change in rates (in thousands) 25 basis point increase 50 basis point increase 75 basis point increase 100 basis point increase 25 basis point decrease 50 basis point decrease 75 basis point decrease 100 basis point decrease Assets: Loans $ 15,516 $ 31,118 $ 46,739 $ 62,374 $ (15,421) $ (29,447) $ (42,640) $ (55,666) Interest rate swap hedges 1,058 2,116 3,174 4,232 (1,058) (2,116) (3,174) (4,232) Total $ 16,574 $ 33,234 $ 49,913 $ 66,606 $ (16,479) $ (31,563) $ (45,814) $ (59,898) Liabilities: Secured borrowings (4,408) (8,816) (13,224) (17,632) 4,408 8,816 13,224 17,632 Securitized debt obligations (7,431) (14,862) (22,293) (29,724) 7,431 14,862 22,293 29,724 Senior secured notes and corporate debt (328) (656) (984) (1,313) 328 656 984 1,313 Total $ (12,167) $ (24,334) $ (36,501) $ (48,669) $ 12,167 $ 24,334 $ 36,501 $ 48,669 Total Net Impact to Net Interest Income (Expense) $ 4,407 $ 8,900 $ 13,412 $ 17,937 $ (4,312) $ (7,229) $ (9,313) $ (11,229) Such hypothetical impact of interest rates on our variable rate debt does not consider the effect of any change in overall economic activity that could occur in a rising interest rate environment.
Biggest changeBecause non-performing LMM loans are short-term assets, the discount rates used for valuation are based on short-term market interest rates, which may not move in tandem with long-term market interest rates. 94 The table below projects the impact on our interest income and expense for the twelve-month period following December 31, 2025 , assuming an immediate increase or decrease of 25, 50, 75, and 100 basis points in interest rates. 12-month pretax net interest income sensitivity profiles Instantaneous change in rates (in thousands) 25 basis point increase 50 basis point increase 75 basis point increase 100 basis point increase 25 basis point decrease 50 basis point decrease 75 basis point decrease 100 basis point decrease Assets: Loans $ 7,018 $ 14,489 $ 22,100 $ 29,744 $ (6,827) $ (13,488) $ (20,024) $ (26,496) Interest rate swap hedges 1,045 2,090 3,135 4,180 (1,045) (2,090) (3,135) (4,180) Total $ 8,063 $ 16,579 $ 25,235 $ 33,924 $ (7,872) $ (15,578) $ (23,159) $ (30,676) Liabilities: Secured borrowings (6,614) (13,229) (19,843) (26,457) 6,614 13,229 19,843 26,457 Securitized debt obligations (379) (758) (1,136) (1,515) 379 758 1,136 1,515 Senior secured notes and corporate debt (1,554) (3,107) (4,661) (6,214) 1,554 3,107 4,661 6,214 Total $ (8,547) $ (17,094) $ (25,640) $ (34,186) $ 8,547 $ 17,094 $ 25,640 $ 34,186 Total Net Impact to Net Interest Income (Expense) $ (484) $ (515) $ (405) $ (262) $ 675 $ 1,516 $ 2,481 $ 3,510 Such hypothetical impact of interest rates on our variable rate debt does not consider the effect of any change in overall economic activity that could occur in a rising interest rate environment.
This could have a negative impact on our results of operations. In some situations, we may be forced to sell assets to maintain adequate liquidity, which could cause us to incur losses. 98 Real estate risk.
This could have a negative impact on our results of operations. In some situations, we may be forced to sell assets to maintain adequate liquidity, which could cause us to incur losses. 95 Real estate risk.
Refer to “Quantitative and Qualitative Disclosures About Market Risk – Interest Rate Risk” in this Form 10-K for a discussion on interest rate sensitivity. 100
Refer to “Quantitative and Qualitative Disclosures About Market Risk – Interest Rate Risk” in this Form 10-K for a discussion on interest rate sensitivity. 97
A+/Aa3 $ 125,979 5 6.5 % In the table above, 99 • The counterparty ratings presented are the long-term issuer credit rating as rated by S&P and Moody’s, respectively. • The amount at risk reflects the difference between the amount loaned through repurchase agreements, including interest payable, and the cash and fair value of the assets pledged as collateral, including accrued interest receivable.
BBB+/A3 $ 89,281 3.9 5.4 % In the table above, 96 • The counterparty ratings presented are the long-term issuer credit rating as rated by S&P and Moody’s, respectively. • The amount at risk reflects the difference between the amount loaned through repurchase agreements, including interest payable, and the cash and fair value of the assets pledged as collateral, including accrued interest receivable.
December 31, 2024 (in thousands) Counterparty Rating Amount of Risk Weighted Average Months to Maturity for Agreement Percentage of Stockholders’ Equity JPMorgan Chase Bank, N.A. AA-/Aa2 $ 526,490 19 27.2 % Morgan Stanley Bank, N.A.
December 31, 2025 (in thousands) Counterparty Rating Amount of Risk Weighted Average Months to Maturity for Agreement Percentage of Stockholders’ Equity JPMorgan Chase Bank, N.A. AA-/Aa2 $ 785,221 6.9 47.8 % Churchill MRA Funding I LLC Not rated $ 141,906 2.2 8.6 % Atlas Warehouse Lending Company, L.P.

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