Ready Capital Corp: Form 10-Q for the period ended Jun 30, 2026

Forward-Looking Statements

Except where the context suggests otherwise, the terms “Company,” “we,” “us” and “our” refer to Ready Capital

Corporation and its subsidiaries. We make forward-looking statements in this Quarterly Report on Form 10-Q (the

“Form 10-Q”) within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 27A of the

Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as

amended (the “Exchange Act”). We intend such statements to be covered by the safe harbor provisions for forward-

looking statements contained therein. Forward-looking statements contained in this Form 10-Q reflect our current views

about future events and are inherently subject to substantial risks and uncertainties, many of which are difficult to predict

and beyond our control, that may cause our actual results to materially differ. These forward-looking statements include

information about possible or assumed future results of our operations, financial condition, liquidity, plans and

objectives. When we use the words “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,”

“could,” “would,” “may,” “potential” or other comparable terminology, we intend to identify forward-looking

statements, although not all forward-looking statements may contain such words. Statements regarding the following

subjects, among others, may be forward-looking, and the occurrence of events impacting these subjects, or otherwise

impacting our business, may cause our financial condition, liquidity and consolidated results of operations to vary

materially from those expressed in, or implied by, any such forward-looking statements:

• our investment objectives and business strategy;
• our expected leverage;
• our expected investments;
• estimates or statements relating to, and our ability to make, future distributions;
• projected capital and operating expenditures;
• our ability to use our liquidity and capital resources, including cash on hand, anticipated net payments from the

loan portfolio, debt financings and proceeds from the potential disposition of assets, to provide liquidity to fund

ongoing obligations and address upcoming debt maturities;

• our ability to utilize liquidity and capital resources, together with our access to the capital markets and

potentially other balance-sheet actions, such as adjustments to our dividend rate, to meet our liquidity needs;

• availability of qualified personnel;
• prepayment rates;
• projected default rates;
• increased rates of default and/or decreased recovery rates on our investments;
• changes in interest rates, interest rate spreads, the yield curve or prepayment rates;
• our entry into certain hedging arrangements related to the delivery of shares of common stock upon vesting of

certain performance-based equity awards and restricted stock awards and the risk that such arrangements may

not have the desired impact and may expose us to additional risks, including the failure of the counterparty to

perform under the contracts;

• the impact of inflation on our business;
• tariffs imposed or threatened to be imposed by the current presidential administration;

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• changes in prepayments or acceleration of the disposition of our assets;
• risks associated with achieving expected synergies, cost savings and other benefits from recent acquisitions,

including the acquisition of United Development Funding IV (“UDF IV”);

• risks associated with the completed divestiture of our Residential Mortgage Banking segment;
• market, industry and economic trends;
• our ability to compete in the marketplace;
• the availability of attractive risk-adjusted investment opportunities in lower-to-middle-market commercial real

estate loans (“LMM”), loans guaranteed by the U.S. Small Business Administration (the “SBA”) under its

Section 7(a) loan program (the “SBA Section 7(a) Program”), mortgage backed securities (“MBS”), residential

mortgage loans and other real estate-related investments that satisfy our investment objectives and strategies;

• general volatility of the capital markets;
• changes in our investment objectives and business strategy;
• the availability, terms and deployment of capital;
• the availability of suitable investment opportunities;
• market developments and actions recently taken and which may be taken by the U.S. Government, including

pursuant to policies of the U.S. administration, the U.S. Department of the Treasury (“Treasury”) and the Board

of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Federal National

Mortgage Association (“Fannie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”), the

Government National Mortgage Association (“Ginnie Mae”), Federal Housing Administration (“FHA”)

Mortgagee, USDA, U.S. Department of Veterans Affairs (“VA”) and the U.S. Securities and Exchange

Commission (“SEC”);

• our ability to obtain a license for the Freddie Mac Conventional Small program, which is replacing the Freddie

Mac Small Balance Loan program that expired on April 30, 2026;

• applicable regulatory changes;
• changes in our assets, interest rates or the general economy;
• mortgage loan modification programs and future legislative actions;
• our ability to maintain our qualification as a real estate investment trust (“REIT”) and limitations on our

business as a result of our qualifications as a REIT;

• our ability to maintain our exemption from qualification under the Investment Company Act of 1940, as

amended (the “1940 Act”);

• factors described in our Annual Report on Form 10-K, including those set forth under the captions “Risk

Factors” and “Business”;

• our dependence on our external advisor, Waterfall Asset Management, LLC (“Waterfall” or the “Manager”),

and our ability to find a suitable replacement if we or Waterfall were to terminate the management agreement

we have entered into with Waterfall (the “management agreement”);

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• the degree and nature of our competition, including competition for LMM loans, MBS, residential mortgage

loans, construction loans and other real estate-related investments that satisfy our investment objectives and

strategies;

• geopolitical events such as acts of terrorism, war or other military conflict, and the related impact on

macroeconomic conditions; and

• the impact of future pandemics and epidemics on our borrowers, the real estate industry and global markets, and

on our business and operations, financial condition, results of operations, liquidity and capital resources.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot

guarantee future results, levels of activity, performance or achievements, and we caution readers not to place undue

reliance on any forward-looking statements. These forward-looking statements apply only as of the date of this Form 10-

Q. We are not obligated, and do not intend, to update or revise any forward-looking statements, whether as a result of

new information, future events or otherwise, except to the extent required by law. Refer to Item 1A. “Risk Factors” and

In the normal course of business, we enter into transactions in various financial instruments that expose us to various

types of risk, both on and off-balance sheet, which are associated with such financial instruments and markets for which

we invest. These financial instruments expose us to varying degrees of market risk, credit risk, interest rate risk, liquidity

risk, off-balance sheet risk and prepayment risk. Many of these risks have been augmented due to the continuing

economic disruptions caused by inflationary pressures, rising energy costs, heightened geopolitical tensions, and the

impact of pandemics and epidemics which remain uncertain and difficult to predict. We continue to monitor the impact

and effect of these risks in our operations.

Market risk. Market risk is the potential adverse changes in the values of the financial instrument due to unfavorable

changes in the level or volatility of interest rates, foreign currency exchange rates, or market values of the underlying

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financial instruments. We attempt to mitigate our exposure to market risk by entering into offsetting transactions, which

may include purchase or sale of interest-bearing securities and equity securities.

Credit risk. We are subject to credit risk in connection with our investments in LMM loans and LMM ABS and other

target assets we may acquire in the future. The credit risk related to these investments pertains to the ability and

willingness of the borrowers to pay, which is assessed before credit is granted or renewed and periodically reviewed

throughout the loan or security term. We believe that loan credit quality is primarily determined by the borrowers’ credit

profiles and loan characteristics. We seek to mitigate this risk by seeking to acquire assets at appropriate prices given

anticipated and unanticipated losses and by deploying a value-driven approach to underwriting and diligence, consistent

with our historical investment strategy, with a focus on projected cash flows and potential risks to cash flow. We further

mitigate our risk of potential losses while managing and servicing our loans by performing various workout and loss

mitigation strategies with delinquent borrowers. Nevertheless, unanticipated credit losses could occur which could

adversely impact operating results.

Interest rate risk. 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.

Our operating results will depend, in part, on differences between the income from our investments and our financing

costs. Our debt financing is based on a floating rate of interest calculated on a fixed spread over the relevant index,

subject to a floor, as determined by the particular financing arrangement. The general impact of changing interest rates is

discussed above under “— Factors Impacting Operating Results — Changes in Market Interest Rates.” In the event of a

significant rising interest rate environment and/or economic downturn, defaults could increase and result in credit losses

to us, which could materially and adversely affect our business, financial condition, liquidity, results of operations and

prospects. Furthermore, such defaults could have an adverse effect on the spread between our interest-earning assets and

interest-bearing liabilities.

Additionally, non-performing LMM loans are not as interest rate sensitive as performing loans, as earnings on non-

performing loans are often generated from restructuring the assets through loss mitigation strategies and

opportunistically disposing of them. Because 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.

The table below projects the impact on our interest income and expense for the twelve-month period following June 30,

2026, assuming an immediate increase or decrease of 25, 50, 75, and 100 basis points in interest rates.

(in thousands)

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. Further, in the event of such a change in interest

rates, we may take actions to further mitigate our exposure to such a change. However, due to the uncertainty of the

specific actions that would be taken and their possible effects, this analysis assumes no changes in our financial

structure.

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Liquidity risk. Liquidity risk arises in our investments and the general financing of our investing activities. It includes

the risk of not being able to fund acquisition and origination activities at settlement dates and/or liquidate positions in a

timely manner at a reasonable price, in addition to potential increases in collateral requirements during times of

heightened market volatility. It also includes risk stemming from PIK interest loans and loan modifications we may grant

to borrowers which are intended to minimize our economic loss and to avoid foreclosure or repossession of collateral.

Such modifications may include interest rate reductions, principal forgiveness, term extensions, and other-than-

insignificant payment delay, which may impact our ability to meet potential cash requirements and make us more reliant

on financing strategies. Additionally, if we were forced to dispose of an illiquid investment at an inopportune time, we

might be forced to do so at a substantial discount to the market value, resulting in a realized loss. We attempt to mitigate

our liquidity risk by regularly monitoring the liquidity of our investments in LMM loans, ABS and other financial

instruments. Factors such as our expected exit strategy for, the bid to offer spread of, and the number of broker dealers

making an active market in a particular strategy and the availability of long-term funding, are considered in analyzing

liquidity risk. To reduce any perceived disparity between the liquidity and the terms of the debt instruments in which we

invest, we attempt to minimize our reliance on short-term financing arrangements. While we may finance certain

investments in security positions using traditional margin arrangements and reverse repurchase agreements, other

financial instruments such as collateralized debt obligations, and other longer-term financing vehicles may be utilized to

provide us with sources of long-term financing.

Prepayment risk. Prepayment risk is the risk that principal will be repaid at a different rate than anticipated, causing the

return on certain investments to be less than expected. As we receive prepayments of principal on our assets, any

premiums paid on such assets are amortized against interest income. In general, an increase in prepayment rates

accelerates the amortization of purchase premiums, thereby reducing the interest income earned on the assets.

Conversely, discounts on such assets are accreted into interest income. In general, an increase in prepayment rates

accelerates the accretion of purchase discounts, thereby increasing the interest income earned on the assets.

LMM loan and ABS extension risk. Our Manager computes the projected weighted-average life of our assets based on

assumptions regarding the rate at which the borrowers will prepay the mortgages or extend. If prepayment rates decrease

in a rising interest rate environment or extension options are exercised, the life of the fixed-rate assets could extend

beyond the term of the secured debt agreements. 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.

Real estate risk. The market values of commercial assets are subject to volatility and may be affected adversely by a

number of factors, including, but not limited to, national, regional and local economic conditions (which may be

adversely affected by industry slowdowns and other factors); local real estate conditions (such as an oversupply of

housing, retail, industrial, office or other commercial space); changes or continued weakness in specific industry

segments; construction quality, construction cost, age and design; demographic factors; and retroactive changes to

building or similar codes. In addition, decreases in property values reduce the value of the collateral and the potential

proceeds available to a borrower to repay the underlying loans, which could also cause us to suffer losses.

Fair value risk. The estimated fair value of our investments fluctuates primarily due to changes in interest rates.

Generally, in a rising interest rate environment, the estimated fair value of the fixed-rate investments would be expected

to decrease; conversely, in a decreasing interest rate environment, the estimated fair value of the fixed-rate investments

would be expected to increase. As market volatility increases or liquidity decreases, the fair value of our assets recorded

and/or disclosed may be adversely impacted. Our economic exposure is generally limited to our net investment position

as we seek to fund fixed rate investments with fixed rate financing or variable rate financing hedged with interest rate

swaps.

Counterparty risk. We finance the acquisition of a significant portion of our commercial mortgage loans, MBS and other

assets with our repurchase agreements, credit facilities, and other financing agreements. In connection with these

financing arrangements, we pledge our mortgage loans and securities as collateral to secure the borrowings. The amount

of collateral pledged will typically exceed the amount of the borrowings (i.e. the haircut) such that the borrowings will

be over-collateralized. As a result, we are exposed to the counterparty if, during the term of the financing, a lender

should default on its obligation and we are not able to recover our pledged assets. The amount of this exposure is the

difference between the amount loaned to us plus interest due to the counterparty and the fair value of the collateral

pledged by us to the lender including accrued interest receivable on such collateral.

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We are exposed to changing interest rates and market conditions, which affects cash flows associated with borrowings.

We enter into derivative instruments, such as interest rate swaps, to mitigate these risks. Interest rate swaps are used to

mitigate the exposure to changes in interest rates and involve the receipt of variable-rate interest amounts from a

counterparty in exchange for us making payments based on a fixed interest rate over the life of the swap contract.

Certain of our subsidiaries have entered into over-the-counter (“OTC”) interest rate swap agreements to hedge risks

associated with movements in interest rates. Because certain interest rate swaps were not cleared through a central

counterparty, we remain exposed to the counterparty's ability to perform its obligations under each such swap and cannot

look to the creditworthiness of a central counterparty for performance. As a result, if an OTC swap counterparty cannot

perform under the terms of an interest rate swap, our subsidiary would not receive payments due under that agreement,

we may lose any unrealized gain associated with the interest rate swap and the hedged liability would cease to be hedged

by the interest rate swap. While we would seek to terminate the relevant OTC swap transaction and may have a claim

against the defaulting counterparty for any losses, including unrealized gains, there is no assurance that we would be able

to recover such amounts or to replace the relevant swap on economically viable terms or at all. In such case, we could be

forced to cover our unhedged liabilities at the then current market price. We may also be at risk for any collateral we

have pledged to secure our obligations under the OTC interest rate swap if the counterparty becomes insolvent or files

for bankruptcy. Therefore, upon a default by an interest rate swap agreement counterparty, the interest rate swap would

no longer mitigate the impact of changes in interest rates as intended.

The table below presents information with respect to any counterparty for repurchase agreements for which our

Company had greater than 5% of stockholders’ equity at risk in the aggregate.

(in thousands)

In the table above,

• 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.

Capital market risk. We are exposed to risks related to the equity capital markets, and our related ability to raise capital

through the issuance of our common stock or other equity instruments. We are also exposed to risks related to the debt

capital markets, and our related ability to finance our business through borrowings under repurchase obligations or other

financing arrangements. As a REIT, we are required to distribute a significant portion of our taxable income annually,

which constrains our ability to accumulate operating cash flow and therefore requires us to utilize debt or equity capital

to finance our business. We seek to mitigate these risks by monitoring the debt and equity capital markets to inform our

decisions on the amount, timing, and terms of capital we raise.

Off-balance sheet risk. Off-balance sheet risk refers to situations where the maximum potential loss resulting from

changes in the level or volatility of interest rates, foreign currency exchange rates or market values of the underlying

financial instruments may result in changes in the value of a particular financial instrument in excess of the reported

amounts of such assets and liabilities currently reflected in the accompanying consolidated balance sheets.

Inflation risk. Most of our assets and liabilities are interest rate sensitive in nature. As a result, interest rates and other

factors influence our performance significantly more than inflation does. Changes in interest rates may, but do not

necessarily, correlate with inflation rates and/or changes in inflation rates. Refer to “Quantitative and Qualitative

Disclosures About Market Risk – Interest Rate Risk” in this Form 10-Q for a discussion on interest rate sensitivity.

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The Company maintains disclosure controls and procedures that are designed to ensure that information required to be

disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified

in the SEC's rules and forms, and that such information is accumulated and communicated to its management, including

its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required

disclosure based on the definition of “disclosure controls and procedures” as promulgated under the Exchange Act and

the rules and regulations thereunder. In designing and evaluating the disclosure controls and procedures, management

recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable

assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in

evaluating the cost-benefit relationship of possible controls and procedures. The Company, including its Chief Executive

Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of its disclosure controls and

procedures as of June 30, 2026. Based on the foregoing, the Company's Chief Executive Officer and Chief Financial

Officer concluded that the Company's disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There have been no changes to the Company’s internal control over financial reporting as defined in Exchange Act Rule

13a-15(f) during the quarter ended June 30, 2026, that have materially affected, or are reasonably likely to materially

affect, the Company’s internal control over financial reporting.

Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may

materially adversely affect our business, financial condition and/or operating results.