Shares of Ready Capital Corp (RC) plummeted 6.21% in pre-market trading on Tuesday, with the sell-off likely driven by the company's Q4 2024 earnings release and efforts to address problem loans and reset its earnings trajectory.

For the fourth quarter, Ready Capital reported a GAAP loss of $1.90 per share and took aggressive actions to bolster its balance sheet and earnings outlook going forward. The company recorded $284 million in combined loan loss reserves and valuation allowances to mark 100% of its non-performing loans to current values, resulting in a 14% hit to book value per share.

To better align its dividend policy, Ready Capital cut its quarterly payout to $0.125 per share starting in Q1 2025. Management stated this reduction, along with plans to aggressively liquidate a $1.2 billion "non-core" portfolio over 7-10 quarters, will establish a bottom for the dividend and book value while providing resources to reinvest in higher-yielding core assets.

As part of its strategic reset, Ready Capital bifurcated its $7.2 billion commercial real estate loan portfolio into an 83% "core" segment with strong credit metrics to retain, and a 17% "non-core" bucket targeted for accelerated resolutions. The company also acquired the distressed UDF IV portfolio in a merger expected to close in March, which management believes will be immediately accretive to earnings given the attractive basis.

Other initiatives outlined to drive earnings recovery include collapsing and reissuing CLOs to generate liquidity and reduce liability costs, growing its profitable Small Business Lending segment, and undertaking liability management efforts on both securitized and corporate debt.