Ladder Capital(US:LADR)2023-02-13 11:08Debt and Financing - As of December 31, 2022, the company had $1.6 billion of unsecured corporate bonds outstanding, including $344.0 million in 5.25% senior notes due 2025, $650.8 million in 4.25% senior notes due 2027, and $649.0 million in 4.75% senior notes due 2029[69]. - The company maintains a $2.9 billion pool of unencumbered assets, primarily consisting of first mortgage loans and unrestricted cash as of December 31, 2022[70]. - The company executed a long-term debt agreement for real estate financing totaling $498.0 million, with fixed rates ranging from 4.25% to 8.03%, maturing between 2023 and 2031[80]. - As of December 31, 2022, the company had $1.1 billion of matched term, non-mark-to-market and non-recourse CLO debt included in its debt obligations[74]. - The company has $616.9 million of borrowings outstanding under committed loan repurchase agreement facilities, with an additional $0.7 billion of committed financing available as of December 31, 2022[75]. - The company's revolving credit facility has a maximum borrowing amount of $323.9 million, with no outstanding borrowings as of December 31, 2022[81]. - As of December 31, 2022, the company had $213.0 million of borrowings outstanding from the FHLB, with interest rates ranging from 2.74% to 4.70%[84]. - The company seeks to maintain a debt-to-equity ratio of approximately 3.0:1.0 or below, which may fluctuate during the fiscal year due to business operations[86]. - The company is in compliance with all covenants as of December 31, 2022[90]. Market and Competition - The commercial real estate finance markets are highly competitive, with the company facing competition from various institutional lenders and investors[91]. Employee Relations and Culture - The company employs 63 full-time employees as of December 31, 2022, with no union representation and a good employee relations environment[113]. - The company emphasizes a culture of diversity, equity, and inclusion, with two female co-founders and policies against discrimination[115]. - The company offers competitive compensation, including base salaries and stock awards, and promotes from within to develop talent[116]. - The company provides comprehensive healthcare benefits and supports employee wellness, including mental health services and work-life balance initiatives[119]. Financial Performance - Distributable earnings for the year ended December 31, 2022, were $148,399,000, a significant increase from $61,340,000 in 2021, representing a growth of 142.5%[472]. - The company's income before taxes for 2022 was $170,214,000, compared to $57,821,000 in 2021, indicating a year-over-year increase of 194.5%[472]. - The total GAAP depreciation and amortization for 2022 was $32,673,000, down from $37,801,000 in 2021, reflecting a decrease of 13.4%[473]. - The company's weighted-average loan-to-value ratio was 67.9% as of December 31, 2022, indicating a strong equity position[487]. - The company reported a GAAP realized gain on the sale of real estate of $115,998,000 for 2022, up from $55,766,000 in 2021, marking an increase of 107.5%[473]. - The company intends to maintain its REIT status by distributing at least 90% of its REIT taxable income to shareholders[474]. - The company has declared regular quarterly distributions to shareholders, aligning with its net taxable income[474]. - Net income for the year ended December 31, 2022, was $165,305,000, a significant increase from $56,893,000 in 2021 and a recovery from a loss of $9,458,000 in 2020[546]. - Cash provided by operating activities for 2022 was $106,710,000, compared to $79,739,000 in 2021 and $111,943,000 in 2020, indicating a strong operational performance[546]. - The company originated mortgage loan receivables held for investment totaling $1,234,765,000 in 2022, a decrease from $2,309,888,000 in 2021[546]. - The company reported a loss on the extinguishment of debt amounting to $685,000 in 2022, contrasting with a loss of $22,250,000 in 2020[546]. - The unrealized loss on derivative instruments was $645,000 in 2022, compared to a loss of $42,000 in 2021[546]. - The company declared dividends totaling $107,729,000, reflecting a commitment to returning value to shareholders[543]. Credit Losses and Impairments - The provision for loan losses for the year ended December 31, 2022, was $3.7 million, compared to a release of $8.7 million in 2021[457]. - The allowance for loan losses at December 31, 2022, was $21.5 million, down from $32.2 million at December 31, 2021[458]. - During 2022, there was a charge-off of reserve amounting to $14.4 million and a recovery of $3.1 million from a loan that was previously on non-accrual status[458]. - The Company evaluates each loan for impairment at least quarterly, with impairment occurring when it is probable that the Company will not collect all principal and interest due[452]. - A loan is designated as non-accrual when principal or interest payments are 90 days past due or if collection is doubtful[455]. - The Company uses a current expected credit loss model (CECL) for estimating loan loss provisions, which includes both portfolio-based and asset-specific components[451]. - The estimate of loan losses is sensitive to assumptions regarding future expected economic conditions[458]. - The Company engages a third-party service provider to support the calculation of CECL reserves, utilizing a forward-looking econometric model[451]. - The allowance for credit losses reflects the company's estimate of current expected credit losses on mortgage loan receivables over the life of the loans[507]. - The company uses a third-party probability of default and loss given default model to estimate expected losses, incorporating macroeconomic variables and collateral fair value[507]. - The critical audit matter involved the subjective nature of estimating the allowance for credit losses due to complex models and significant assumptions[505]. - The audit procedures included evaluating the methodology and significant assumptions used in estimating the allowance for credit losses[509]. Assets and Liabilities - Total assets increased to $5,951,173, up from $5,851,252 in 2021, representing a growth of 1.7%[527]. - Total liabilities increased to $4,417,612, compared to $4,337,633 in 2021, reflecting a rise of 1.8%[527]. - Cash and cash equivalents rose to $609,078, an increase of 10.9% from $548,744 in 2021[527]. - The total cash, cash equivalents, and restricted cash at the end of 2022 was $659.6 million, up from $621.5 million at the end of 2021, reflecting a 6.1% increase[549]. - The company reported a net increase in cash, cash equivalents, and restricted cash of $38.1 million in 2022, contrasting with a decrease of $(662.7) million in 2021[547]. Real Estate and Investments - The company’s investment activities include originating senior first mortgage loans and owning commercial real estate, focusing on senior secured assets[552]. - The Company classifies securities as available-for-sale or held-to-maturity, with changes in fair value recognized in earnings or other comprehensive income[570]. - Real estate assets are acquired through cash purchases or foreclosure, classified as held for use or held for sale based on the Company's strategic intent[580]. - Impairment assessments for properties held for use consider factors like low lease percentages and projected cash flow losses, with impairment recognized if future cash flows are less than carrying value[589]. - When assets are classified as held for sale, depreciation is discontinued, and impairment charges are recorded if estimated net sales price is less than net book value[590]. - The Company recognizes gains on sales of real estate in accordance with ASC 606-20 and ASC 610-20, with residential condominiums governed by ASC 606-20 and rental properties under ASC 610-20[592]. - Investments in unconsolidated ventures are recorded at cost and adjusted for equity in earnings and cash contributions, with the equity method discontinued when the investment is reduced to zero[593]. - The Company only recognizes its share of income from ventures to the extent it exceeds previously unrecognized losses[593].