Ladder Capital(LADR) - 2024 Q3 - Quarterly Results

Executive Summary / Q3 2024 Highlights Q3 2024 Financial Performance Ladder Capital Corp reported solid operating results for Q3 2024, with GAAP income before taxes of $28.5 million and diluted EPS of $0.22. Distributable earnings reached $37.7 million, translating to $0.30 of distributable EPS | Metric | Q3 2024 (Millions) | | :-------------------------- | :----------------- | | GAAP Income Before Taxes | $28.5 | | Diluted EPS | $0.22 | | Distributable Earnings | $37.7 | | Distributable EPS | $0.30 | CEO Commentary & Strategic Outlook CEO Brian Harris highlighted solid earnings and returns, noting stabilizing real estate markets and significant liquidity following a $500 million unsecured corporate bond offering. The company is actively pursuing new origination opportunities, signaling a return to an 'offense' strategy - Real estate markets are continuing to stabilize[1] - Ladder has significant liquidity after closing a $500 million unsecured corporate bond offering[1] - The company is actively pursuing new origination opportunities and is 'excited to return to offense'[1] Company Overview Business Description and Investment Strategy Ladder Capital Corp is an internally-managed commercial real estate investment trust (REIT) with $5.4 billion in assets as of September 30, 2024. Its primary objective is to preserve shareholder capital while generating attractive risk-adjusted returns through originating and investing in a diverse portfolio of senior secured commercial real estate and related assets - Ladder Capital Corp is an internally-managed commercial real estate investment trust (REIT)[4] | Metric | Value (as of Sep 30, 2024) | | :--------------- | :------------------------- | | Total Assets | $5.4 billion | - Investment activities include originating senior first mortgage fixed and floating rate loans, owning and operating commercial real estate (including net leased properties), and investing in investment grade securities secured by first mortgage loans[4] Financial Statements Consolidated Balance Sheets As of September 30, 2024, Ladder Capital's total assets decreased slightly to $5.38 billion from $5.51 billion at year-end 2023. Cash and cash equivalents significantly increased, while mortgage loan receivables held for investment decreased. Total liabilities and shareholders' equity remained relatively stable Consolidated Balance Sheet Highlights (Dollars in Thousands) | Metric | Sep 30, 2024 | Dec 31, 2023 | | :------------------------------------------ | :----------- | :----------- | | Total Assets | $5,379,139 | $5,512,677 | | Cash and cash equivalents | $1,607,204 | $1,015,678 | | Mortgage loan receivables held for investment, net | $2,039,545 | $3,155,089 | | Securities | $852,783 | $485,533 | | Debt obligations, net | $3,585,332 | $3,783,946 | | Total shareholders' equity | $1,532,619 | $1,533,148 | - Cash and cash equivalents increased by approximately $591.5 million from December 31, 2023, to September 30, 2024[9] - Mortgage loan receivables held for investment, net, decreased by approximately $1.12 billion over the same period[9] Consolidated Statements of Operations For the three months ended September 30, 2024, net interest income increased to $38.4 million from $34.3 million in the prior quarter. However, income before taxes and net income attributable to Class A common shareholders saw a decline compared to the previous quarter, resulting in diluted EPS of $0.22, down from $0.26 Consolidated Statements of Operations Highlights (Dollars in Thousands) | Metric | Q3 2024 | Q2 2024 |\n| :------------------------------------------ | :----------- | :----------- | | Net interest income | $38,416 | $34,317 | | Income (loss) before taxes | $28,463 | $31,036 | | Net income (loss) attributable to Class A common shareholders | $27,913 | $32,349 | | Diluted EPS | $0.22 | $0.26 | | Dividends per share of Class A common stock | $0.23 | $0.23 | - Net interest income increased by $4.1 million quarter-over-quarter[12] - Income before taxes decreased by $2.57 million from Q2 2024 to Q3 2024[12] Non-GAAP Financial Measures Definition and Calculation of Distributable Earnings Ladder Capital utilizes distributable earnings, distributable EPS, and after-tax distributable ROAE as supplemental non-GAAP measures to assess operating performance and dividend capacity. These metrics adjust GAAP income by excluding non-cash expenses, unrealized results, and timing differences related to securitization gains and asset/derivative value changes, providing a more consistent basis for comparison - Distributable earnings, distributable EPS, and after-tax distributable ROAE are used as supplemental measures to compare operating performance and dividend-paying ability[14] - Key adjustments to GAAP income include excluding real estate depreciation/amortization, derivative gains/losses (until realized), unrealized gains/losses on fair value securities, unrealized/realized provision for loan losses, non-cash stock-based compensation, and certain non-recurring items[15][16][17][18][19] - Distributable earnings prior to charge-offs of allowance for credit losses is an additional metric considered for dividend declarations[14] Reconciliation of GAAP to Distributable Earnings The reconciliation from GAAP income before taxes to distributable earnings shows various adjustments, including a significant charge-off of allowance for credit losses in Q3 2024. This resulted in distributable earnings of $37.7 million and distributable EPS of $0.30 for the quarter, a decrease from Q2 2024 Reconciliation of GAAP Income to Distributable Earnings (Thousands, except per share data) | Metric | Q3 2024 | Q2 2024 | | :------------------------------------------ | :----------- | :----------- | | Income (loss) before taxes | $28,463 | $31,036 | | Our share of real estate depreciation, amortization and gain adjustments | $7,514 | $(1,398) | | Adjustment for impairment | $3,063 | $5,055 | | Non-cash stock-based compensation | $3,177 | $3,117 | | Distributable earnings prior to charge-off of allowance for credit losses | $42,691 | $40,398 | | Charge-off of allowance for credit losses | $(5,023) | — | | Distributable earnings | $37,668 | $40,398 | | After-tax distributable earnings | $37,528 | $39,091 | | Distributable EPS | $0.30 | $0.31 | - A charge-off of allowance for credit losses of $5.023 million was recorded in Q3 2024, impacting distributable earnings[20][25] - Distributable EPS decreased from $0.31 in Q2 2024 to $0.30 in Q3 2024[20] After-Tax Distributable Return on Average Equity (ROAE) The after-tax distributable ROAE for the three months ended September 30, 2024, was 9.8%, a slight decrease from 10.2% in the prior quarter After-Tax Distributable ROAE | Metric | Q3 2024 (Thousands) | Q2 2024 (Thousands) | | :------------------------------- | :------ | :------ | | After-tax distributable earnings | $37,528 | $39,091 | | Average shareholders' equity | 1,531,345 | 1,527,643 | | After-tax distributable ROAE | 9.8 % | 10.2 % | Limitations of Non-GAAP Measures The company explicitly states that its non-GAAP financial measures, such as distributable earnings and EPS, have limitations. They do not reflect certain cash charges, are based on estimated tax rates, and may not be comparable to measures used by other companies. These non-GAAP metrics should not be considered in isolation or as substitutes for GAAP measures or cash flows from operations - Non-GAAP measures do not reflect certain cash charges and are not necessarily indicative of cash needed to fund operations[27] - Distributable EPS and ROAE are based on a non-GAAP estimate of the effective tax rate, which may differ materially from the actual tax rate[27] - Non-GAAP financial measures should not be considered in isolation or as a substitute for GAAP measures (net income, EPS, book value, or cash flows from operations)[28] Additional Information Supplemental Information & Conference Call Ladder Capital issued a supplemental presentation detailing its Q3 2024 results, available on its investor relations website. A conference call was scheduled for October 24, 2024, to discuss these results, with an audio replay available until November 7, 2024 - A supplemental presentation for Q3 2024 operating results is available at http://ir.laddercapital.com[2](index=2&type=chunk) - A conference call was held on Thursday, October 24, 2024, at 10:00 a.m. Eastern Time to discuss Q3 2024 results, with an audio replay available until November 7, 2024[3] Forward-Looking Statements The release contains forward-looking statements based on management's current expectations, which are predictions and not historical facts. These statements involve risks and uncertainties, and actual results could differ materially from those anticipated. The company disclaims any obligation to update these statements - Statements in the release may constitute 'forward-looking' statements, which are predictions, not historical fact, and involve risks and uncertainties[6] - Actual results, levels of activity, performance, achievements, and events could differ materially from those stated or implied by forward-looking statements[6] - Ladder expressly disclaims any obligation to release updates or revisions to any forward-looking statements[7] Investor Contact Contact information for Ladder Capital Corp Investor Relations is provided for inquiries - Investor Relations can be reached at (917) 369-3207 or investor.relations@laddercapital.com[8]