Ladder Capital(LADR) - 2025 Q2 - Quarterly Results

Executive Summary & Q2 2025 Highlights Overview of Ladder Capital Corp's Q2 2025 financial performance and strategic achievements Q2 2025 Financial Performance Ladder Capital Corp reported GAAP income before taxes of $20.8 million and diluted EPS of $0.14 for Q2 2025, with distributable earnings reaching $30.9 million and distributable EPS at $0.23 Q2 2025 Financial Performance Summary | Metric | Q2 2025 (Millions) | Q1 2025 (Millions) | Change (QoQ) | Change (%) | | :---------------------- | :----------------- | :----------------- | :----------- | :--------- | | GAAP Income Before Taxes| $20.8 | $10.7 | $10.1 | 94.4% | | Diluted EPS | $0.14 | $0.09 | $0.05 | 55.6% | | Distributable Earnings | $30.9 | $25.5 | $5.4 | 21.2% | | Distributable EPS | $0.23 | $0.20 | $0.03 | 15.0% | CEO Commentary & Strategic Achievements The CEO highlighted the achievement of investment grade status and the completion of an inaugural unsecured bond offering, positioning Ladder as the only investment grade mortgage REIT, strengthening its foundation, reducing capital costs, and enabling new investment opportunities - Achieved investment grade status and completed an inaugural unsecured bond offering in the investment grade market[2] - Positioned as the only investment grade mortgage REIT, anchored by a diversified, highly liquid, senior secured asset base and a predominantly unsecured capital structure[2] - Reduced cost of capital, enabling deployment into new investment opportunities, expansion of investor base, and delivery of attractive, risk-adjusted returns[2] Company Overview This section provides an overview of Ladder Capital's business, investment strategy, and corporate governance About Ladder Capital Ladder Capital is a publicly listed, investment grade-rated commercial real estate finance company with a diversified, nationwide platform, focusing on tailored capital solutions to the middle market to preserve shareholder capital and generate attractive, risk-adjusted returns - Ladder is a publicly listed, investment grade-rated commercial real estate finance company with a diversified, nationwide platform[5] - Delivers tailored capital solutions across the commercial real estate landscape, with a focus on the middle market[5] - Investment objective is to preserve and protect shareholder capital while generating attractive, risk-adjusted returns[5] Business Model and Investment Strategy Since its founding in 2008, Ladder has deployed over $48 billion of capital, primarily originating fixed and floating rate first mortgage loans collateralized by commercial property types, and also owns net leased real estate and invests in investment grade securities - Deployed more than $48 billion of capital across the real estate capital stack since 2008[6] - Primary business is originating fixed and floating rate first mortgage loans collateralized by all major commercial property types[6] - Owns and operates predominantly net leased, income-producing real estate and invests in investment grade securities secured by first mortgage loans on commercial real estate[6] Corporate Governance and Capital Structure Ladder is internally managed by a seasoned team with over 11% insider ownership, ensuring strong alignment with stakeholders, and maintains a conservative capital structure with investment grade credit ratings of Baa3 from Moody's and BBB- from Fitch, both with stable outlooks - Internally managed by a seasoned management team with over 11% insider ownership, ensuring strong alignment with stakeholders[7] - Maintains a conservative and durable capital structure, reflected in investment grade credit ratings of Baa3 from Moody's Ratings and BBB- from Fitch Ratings, both with stable outlooks[7] Corporate Information This section outlines important disclaimers regarding forward-looking statements and details for investor relations Forward-Looking Statements This section provides a disclaimer that certain statements are forward-looking, based on management's current expectations, and involve risks and uncertainties, with actual results potentially differing materially and the company disclaiming any obligation to update these statements - Statements are based on management's current opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or results[9] - Forward-looking statements are predictions, not historical fact, and involve certain risks and uncertainties; actual results could differ materially[9] - Ladder expressly disclaims any obligation or undertaking to release any updates or revisions to any forward-looking statements[9] Investor Relations & Conference Call Details for investor contact and the Q2 2025 earnings conference call are provided, including dial-in information, webcast link, and replay access - Investor Contact: - Phone: (917) 369-3207 - Email: investor.relations@laddercapital.com[10] - Q2 2025 Earnings Conference Call: - Date: Thursday, July 24, 2025 - Time: 10:00 a.m. Eastern Time - Domestic Dial-in: (877) 407-4018 - International Dial-in: (201) 689-8471 - Webcast: ir.laddercapital.com/event - Audio replay available until August 7, 2025[4] Consolidated Financial Statements This section presents Ladder Capital's consolidated balance sheets and statements of income for the specified periods Consolidated Balance Sheets The consolidated balance sheets show a decrease in total assets and liabilities from December 31, 2024, to June 30, 2025, with cash and cash equivalents significantly decreasing while securities held increased substantially Consolidated Balance Sheets Summary | Item | June 30, 2025 ($ Thousands) | December 31, 2024 ($ Thousands) | Change ($ Thousands) | Change (%) | | :------------------------------------------ | :-------------------------- | :------------------------------ | :------------------- | :--------- | | Assets | | | | | | Cash and cash equivalents | 134,939 | 1,323,481 | (1,188,542) | -89.8% | | Securities | 1,966,471 | 1,080,839 | 885,632 | 81.9% | | Total assets | 4,457,474 | 4,845,073 | (387,599) | -8.0% | | Liabilities | | | | | | Debt obligations, net | 2,783,166 | 3,135,617 | (352,451) | -11.2% | | Total liabilities | 2,957,404 | 3,312,134 | (354,730) | -10.7% | | Equity | | | | | | Total shareholders' equity | 1,502,616 | 1,535,030 | (32,414) | -2.1% | | Total liabilities and equity | 4,457,474 | 4,845,073 | (387,599) | -8.0% | Consolidated Statements of Income For the three months ended June 30, 2025, Ladder Capital reported a significant increase in income before taxes and net income attributable to Class A common shareholders compared to the previous quarter, driven by higher net interest income, real estate operating income, and increased net results from mortgage loan receivables held for sale, alongside a decrease in total costs and expenses Consolidated Statements of Income Summary | Item | Three Months Ended June 30, 2025 ($ Thousands) | Three Months Ended March 31, 2025 ($ Thousands) | Change ($ Thousands) | Change (%) | | :-------------------------------------------------- | :--------------------------------------------- | :---------------------------------------------- | :------------------- | :--------- | | Net interest income | 21,530 | 20,329 | 1,201 | 5.9% | | Real estate operating income | 25,775 | 21,773 | 4,002 | 18.4% | | Net result from mortgage loan receivables held for sale | 4,914 | 162 | 4,752 | 2933.3% | | Total other income (loss) | 34,731 | 30,874 | 3,857 | 12.5% | | Total costs and expenses | 35,481 | 40,567 | (5,086) | -12.5% | | Income (loss) before taxes | 20,822 | 10,717 | 10,105 | 94.3% | | Net income (loss) attributable to Class A common shareholders | 17,328 | 11,775 | 5,553 | 47.2% | | Diluted EPS | 0.14 | 0.09 | 0.05 | 55.6% | | Dividends per share of Class A common stock | 0.23 | 0.23 | 0 | 0.0% | Non-GAAP Financial Measures This section defines and reconciles non-GAAP financial measures, including distributable earnings and EPS, and outlines their limitations Definition and Purpose Ladder Capital utilizes non-GAAP financial measures such as distributable earnings, distributable EPS, and after-tax distributable ROAE to supplement GAAP measures, aiming to provide a more relevant and consistent comparison of operating performance and dividend-paying ability by excluding certain non-cash expenses, unrealized results, and timing differences - Distributable earnings, distributable EPS, and after-tax distributable ROAE are non-GAAP financial measures used as supplemental measures of operating performance[16] - These measures assist investors in comparing operating performance and dividend-paying ability by excluding non-cash expenses, unrealized results, and timing differences[16] - Management uses these metrics to evaluate earnings, and the board of directors considers distributable earnings in determining quarterly dividends[16] Adjustments to GAAP Measures Distributable earnings are derived from GAAP income before taxes by applying several adjustments that primarily address non-cash items, unrealized gains/losses, and timing differences related to real estate depreciation, derivative transactions, loan sales, securities valuation, and loan loss provisions Real Estate Depreciation, Amortization, and Sale Adjustments This section details adjustments made for real estate depreciation, amortization, and gains/losses on sales to derive distributable earnings - Excludes the Company's share of real estate depreciation and amortization from distributable earnings[18] - Adjusts GAAP gains and losses on sales of real estate to eliminate the portion derived from previously recognized depreciation and amortization[18] Derivative Results and Loan Sale Activity This section outlines adjustments for derivative activity and economic gains or losses from inter-segment conduit loan sales - Excludes GAAP results from derivative activity until the associated mortgage loan or security is sold or paid off, or the hedge position is closed, to adjust for timing differences[19] - Includes adjustments for economic gains or losses related to the sale of inter-segment conduit loans when risk has substantially transferred, excluding subsequent GAAP amortization of related premium/discount[20] Unrealized Gains/Losses on Securities This section describes adjustments for unrealized gains and losses on securities, including realized gains/losses and non-recoverable impairments - Excludes the impact of unrealized gains and losses associated with securities recorded at fair value from distributable earnings[21] - Includes realized gains and losses in connection with any disposition of securities[21] - Declines in fair value deemed non-recoverable impairments for GAAP are included in distributable earnings in the period such determination is made[21] Provision for Loan Losses and Real Estate Impairment This section details adjustments for unrealized and realized provisions for loan losses and real estate impairment - Includes adjustments for unrealized provision for loan losses and real estate impairment[22] - Recognizes realized losses on loans and real estate in distributable earnings when the asset is sold or deemed non-recoverable[22] Reconciliation of Non-GAAP Measures The reconciliation table details the adjustments made to GAAP income before taxes to arrive at distributable earnings and distributable EPS for the three months ended June 30, 2025, and March 31, 2025, with key adjustments including real estate depreciation, derivative results, and non-cash stock-based compensation Reconciliation of Distributable Earnings and EPS | Item | Three Months Ended June 30, 2025 ($ Thousands) | Three Months Ended March 31, 2025 ($ Thousands) | Change ($ Thousands) | Change (%) | | :---------------------------------------------------------------- | :--------------------------------------------- | :---------------------------------------------- | :------------------- | :--------- | | Income (loss) before taxes | 20,822 | 10,717 | 10,105 | 94.3% | | Our share of real estate depreciation, amortization and real estate sale adjustments | 7,755 | 4,503 | 3,252 | 72.2% | | Adjustments for derivative results and loan sale activity | (724) | (435) | (289) | 66.4% | | Non-cash stock-based compensation | 2,996 | 11,215 | (8,219) | -73.3% | | Distributable earnings | 30,925 | 25,452 | 5,473 | 21.5% | | Estimated corporate tax (expense) benefit | (1,990) | (206) | (1,784) | 866.0% | | After-tax distributable earnings | 28,935 | 25,246 | 3,689 | 14.6% | | Weighted average diluted shares outstanding | 126,204 | 126,280 | (76) | -0.1% | | Distributable EPS | 0.23 | 0.20 | 0.03 | 15.0% | After-Tax Distributable Return on Average Equity (ROAE) The after-tax distributable ROAE for the three months ended June 30, 2025, was 7.7%, an increase from 6.6% in the prior quarter, reflecting improved after-tax distributable earnings After-Tax Distributable ROAE Calculation | Item | Three Months Ended June 30, 2025 | Three Months Ended March 31, 2025 | Change (Percentage Points) | | :---------------------------- | :------------------------------- | :-------------------------------- | :------------------------- | | After-tax distributable earnings | $28,935 | $25,246 | $3,689 | | Average shareholders' equity | $1,509,642 | $1,525,849 | ($16,207) | | After-tax distributable ROAE | 7.7 % | 6.6 % | 1.1 pp | Limitations of Non-GAAP Measures The company highlights several limitations of its non-GAAP financial measures, including that they do not reflect certain cash charges, are not necessarily indicative of cash needs, rely on estimated tax rates that may differ from actual rates, and may not be comparable to measures used by other companies, thus they should not be considered substitutes for GAAP measures or cash flows from operations - Non-GAAP measures do not reflect the impact of certain cash charges not indicative of ongoing operations and are not necessarily indicative of cash needed to fund cash needs[25][28] - Based on a non-GAAP estimate of the effective tax rate, which may differ materially from the actual tax rate[28] - Other companies in the industry may calculate non-GAAP financial measures differently, limiting their usefulness as comparative measures[28] - Should not be considered in isolation or as a substitute for net income (loss) attributable to shareholders, earnings per share, book value per share, or as an alternative to cash flows from operations[25] - Distributable earnings should not be considered equivalent to REIT taxable income for determining minimum dividend distribution requirements[26]