Greetings, and welcome to the Ready Capital Third Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Andrew Ahlborn, Chief Financial Officer. Thank you. You may begin.

Thank you, operator, and good morning to those of you on the call. Some of our comments today will be forward-looking statements within the meaning of the federal securities laws. Such statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Therefore, you should exercise caution in interpreting and relying on them. We refer you to our SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. During the call, we will discuss our non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available in our third quarter 2025 earnings release and our supplemental information, which can be found in the Investors section of the Ready Capital website. In addition to Tom and myself on today's call, we are also joined by Adam Zausmer, Ready Capital's Chief Credit Officer. I will now turn it over to Chief Executive Officer, Tom Capasse.

Thanks, Andrew. Good morning, everyone, and thank you for joining the call today. Our focus remains on returning the company to financial health and profitability via rehabilitation of the portfolio yield, growth of our Small Business Lending operations, and management of our 2026 debt maturities. To begin, we continue to make progress in our balance sheet repositioning via reductions in our CRE loan exposure using sales of low-yielding assets in conjunction with our traditional asset management strategies. To that end, we completed 2 portfolio sales. The first discussed in the second quarter call was the sale of 21 loans with an unpaid principal balance of $665 million at a price of [ $78 ]. The transaction netted $85 million and provided incremental earnings of $0.02 per share in the quarter with $0.05 per share expected for the pro forma full quarter. The second, the sale of 196 small balance loans with high servicing costs with an unpaid principal balance of $93 million at a price of [ $97 ] netting $24 million. At quarter end, post completion of the sales, along with normal principal paydowns of $410 million, the portfolio totaled 1,120 loans with an unpaid principal balance of $5.4 billion and carrying value of $5.2 billion, split 94% in the core portfolio and 6% noncore portfolio. In the core portfolio, in the absence of adding new loans, we anticipate that the denominator effect will prevail as payoffs accelerate with portfolio seasoning and some loans migrate to delinquency, net of modifications. In the quarter, there were $40 million of new core net delinquencies, $131 million of core migrated to 60-day-plus, of which $91 million were resolved via modification or liquidation. As a result, delinquencies increased to 5.9% of the total. Levered yields in the portfolio increased 10 basis points to…

Thanks, Tom. For the third quarter, we reported a GAAP loss from continuing operations of $0.13 per common share. Distributable earnings were a loss of $0.94 per common share and $0.04 per common share, excluding realized losses on asset sales. Several key factors impacted our quarterly results. First, net interest income declined to $10.5 million in the quarter. The movement was due to a $1.4 billion reduction in the CRE portfolio and $40 million of negative credit migration. In the core portfolio, the interest yield was 8.1% and the cash yield was 5.8%. The interest yield in the noncore portfolio was 3.1%. Second, gain-on-sale income, net of variable costs, decreased $2.6 million to $20 million. The change was the result of lower USDA and SBA 7(a) volume. The income was driven by the sale of $130 million of guaranteed SBA 7(a) loans at average premiums of 9.3% and the sale of $57 million of USDA production at premiums averaging 10.6%. Realized gains from normal operations were offset by $189 million of realized losses from the sale of assets. These losses were offset by the release of $178 million of valuation allowances. Third, operating costs from normal operations were $52.5 million, representing an 8% improvement from the previous quarter. The change was the result of a $4.1 million reduction in compensation expense, servicing expense, and other fixed operating costs, along with an increased tax benefit of $5.6 million. These positive movements were partially offset by the inclusion of the Portland mixed-use asset's net operating loss and carry costs, which totaled $5 million. Further, the combined provision for loan loss and valuation allowance [ decreased ] to $140.2 million. The net increase in provision for loan losses of $38 million was due to a net increase of $43.2 million of specific reserves,…

[Operator Instructions] The first question is from Doug Harter from UBS.

You talked about having a more conservative posture for the company going forward. Can you talk about where you think the right level of leverage to run the business, and so in thinking about how much debt do you need to refinance versus pay down?

Yes. Doug, right now, our current gross leverage is around 3.5x. I think we're looking at a turn less than that on a pro forma basis.

And then I guess, how do you think about what is the target mix of secured versus unsecured?

Andrew, do you want to comment on the target mix?

Yes. I expect, at least on the corporate side, the majority of our debt to be secured, at least for the immediate future. With that being said, we've accessed the unsecured markets via the baby bond market over the years quite frequently. So to the extent that market is open, I think we will tap that. But I expect more secured issuance, at least at this point.

The next question is from Jade Rahmani from KBW.

Can you tell me what the current covenant is on the unencumbered asset ratio? I'm not sure if it's 1.25x or 1.2x, and the slide deck shows 1.2x as the current ratio.

So the unencumbered asset test, we are well covered within that 1.2x range. So the covenant is well in excess of that.

The covenant -- is the covenant minimum 1.2x.

No, no, 1.2x is our current coverage of that. The only debt we have that has that ratio is $350 million, and that's at a 1:1, so we're well covered.

So there's no requirement to be at 1.25.

No, it's just the $350 at 1:1.

The comment about the restoration of financial health is well taken. The dividend cost, as you know, around, I think, $80 million a year, seems unjustifiable to continue paying it, and also spending money to buy back stock in the face of these corporate maturities and the company's plans to reduce leverage. So it just doesn't seem justifiable to continue to pay dividend and to also buy back stock. Can you please explain the rationale and what the plan is going forward?

Yes. So, Jade, the company is adopting a very aggressive approach to repositioning the balance sheet. And in the context of your question, we think about it in terms of the rank order of liquidity. We currently have $150 million of cash, $150 million of warehouse lines, and organic projected maturities of about $425 million, $450 million. We're going to supplement that with -- we have $800 million of unencumbered assets. That will be supplemented by additional senior and unsecured issuance as well as asset sales to plug the gap. In that context, we're going to evaluate, obviously, the dividend in December to determine the appropriate policy in that context. But the rank order of liquidity will be to: a, reduce leverage; b, exit low-yielding assets and regenerating the resulting liquidity with a prioritization on the debt; and then subsequently, the potential for asset repurchases; and then reinvestment of ultimate free cash flow into new loans to rehabilitate the net interest margin.

Just one more, which would be on the other assets category, which continues to increase to now 5.7% of assets and 25% of equity. I guess that, I assume, will be evaluated at year-end as part of the audit. It includes significant deferred tax assets. And the duration of being able to absorb such assets seems quite long given current profitability and allocation of G&A to the SBA business. So do you think that, that category of assets will be evaluated at year-end as part of the audit process?

Jade, we certainly reevaluate the deferred tax assets on an ongoing basis, including at the year-end audit. What I would say is our expectation is that profitability in those businesses grow as origination volume grows to our target levels. And then the second thing I would add is, to the extent we monetize those businesses at some point inside the TRS, that tax benefit can be used in that way as well. So there's no limitations on the time period in which they can be used. And we think the pro forma profitability of those businesses, as well as the fair value of those businesses in excess of their current book value, provides a window to utilize those over time.

[Operator Instructions] The next question is from Christopher Nolan from Ladenburg Thalmann.

On the Portland property, is that being carried at fair value or at cost?

Fair value-- the current fair value of $425 million.

Okay. And then -- yes, please go ahead.

Chris, just one thing. The property is actually broken out into 2 components. So the condos are being held for sale and they're at fair value. And then the other 2 components are held for use, so they're being carried at cost. But both were put on the balance sheet at the time of taking the property REO at fair value.

And would the Portland property be categorized as one of the unencumbered assets that Tom alluded to earlier?

No, there's currently leverage on that asset.

And I guess the final question is, I saw somewhere where there's a large office building in Portland, the Big Pink, I think it's called, I think it was the U.S. Bancorp headquarters. And they recently sold for $45 million. It was originally -- prior value was $373 million, like 5 or 10 years ago. And given that, and apparently it's a marquee property in Portland, doesn't that for -- as nice as this property seems, doesn't it seem like the valuations on these things is really going to take a dive? Just like your comments.

Yes. No, appreciate it, Chris. It really is an apples and oranges comparison. And as you're probably well aware, the office sector, especially for -- I think the Big Pink was an [ 80s-ish ] property, maybe a B, B minus, and it had very large tenant concentrations, and there was an outflow from the poor-quality, the B/C space, into newer space. Actually, we're benefiting from that with the small amount of office we have in the Ritz. But the Ritz is really a hospitality asset, a luxury hospitality asset. And it's the only -- in the Portland market, it's the only luxury-branded hotel. And most of what you have in Portland on the luxury end is more on the boutique side. So this is a one-of-a-kind property. So I think the economic forces that are driving the loss of tenancy in the Big Pink are actually benefiting a brand-new Class A office like the small amount we have. And then the hospitality is completely different. It's really not affected by the office trend. And as we noted, RevPAR has increased sequentially. And with the new Lincoln Property, they're best-in-class and they've had a lot of experience, not only just in the Portland market, but globally in these hospitality properties. And so we're 2 years into the stabilization, and we continue to see positive trends in the hospitality -- in the RevPAR at the hotel, which ultimately will drive condo sales, where we've hired a national firm that has experience with Ritz Residences to drive a different pricing policy there to get some momentum on the heels of the stabilization of hotels. So anyways, duly noted on the Big Pink. But it is really an apples and oranges comparison.

There are no further questions at this time. I would like to turn the floor back over to Mr. Capasse for closing comments.

We appreciate everybody's time today. And again, I wanted to underscore the commitment of the management team to continue to drive the repositioning of the company. We're very confident of our ability to refinance our pending debt maturities, and we look to the fourth quarter call pending. Thanks for your time.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.