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Operator
Good afternoon and welcome to Ladder Capital Corp's earnings call for the first quarter of 2023. As a reminder, today's call is being recorded. This afternoon, Ladder released its financial results for the quarter ended March 31st, 2023. Before the call begins, I'd like to call your attention to the customary safe harbour disclosure in our earnings release regarding forward-looking statements. Today's call may include forward-looking statements and projections and we refer you to our most recent Form 10-K for important factors that could cause actual results to differ materially from these statements and projections. We do not undertake any obligation to update our forward-looking statements or projections unless required by law. In addition, Ladder will discuss certain non-GAAP financial measures on this call, which management believes are relevant to assessing the company's financial performance. The company's presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. These measures are reconciled to GAAP figures in our supplemental presentation, which is available in the Investor Relations section of our website. We also refer you to our Form 10-K and Earnings Supplement presentation for definitions of certain metrics which we may cite on today's call. At this time, I'd like to turn the call over to Ladder's President, Pamela McCormack.
Ladder
Thank you, and good afternoon, everyone. We are pleased to report for the first quarter of 2023, Ladder generated distributable earnings of $47.2 million or 38 cents per share, reflecting an after tax return on equity of 12.3%. Our dividend remains well covered from net interest margin and net rental income. As of March 31st, Ladder had over $600 million or more than 10% of our assets in cash and cash equivalents. With $950 million of same day liquidity including our unsecured revolver. The latter remains modestly leveraged with an adjusted leverage ratio of 1.8 times and 1.1 times net of cash and securities at quarter end. Subsequent to quarter end, we furthered the leverage to the company by paying down loan and securities repo by $87 million, both bringing our adjusted leverage ratio down to 1.7 times and reducing our interest expense by approximately $1.2 million per quarter. In the first quarter, we originated a $15 million multifamily balance sheet loan and funded $19 million on existing commitments. In addition, we've continued to see liquidity for our existing loans. Repayments in the first quarter and through April totaled over $147 million with $72 million of repayments on office loans, including the full payoff of five office loans. As of March 31st, Ladder's balance sheet loan portfolio totaled $3.8 billion with a weighted average coupon of 8.72%. In addition to strong liquidity, we have modest future funding commitments of $290 million, and more than half of this commitment is contingent upon a creative good news leasing. We are well positioned to transact when activity resumes in the market. In the meantime, we've been keenly focused on asset management, and our significant insider ownership and latter helps ensure our full alignment with shareholders in proactively managing any potential risk on our balance sheet. We're currently seeing stable performance in our loan portfolio, including for our office loans, which currently comprise 24% of the portfolio. Notably, 76% of our office loans were originated post-COVID, and 56% are located in the Sun Belt. While we'll continue to monitor the pressures on real estate valuations, We did not have a need to take any specific impairments in the quarter. And as Paul will discuss, the increase in the general portion of our CECL reserve reflects our view of macro market conditions. Our focus on dollars per foot or basis lending in the middle market continues to allow us to both demonstrate a meaningful distinction between a default and a loss on a given loan, and further distinguish latter with sustained credit performance. Turning to our other business segments, Our real estate portfolio continues to contribute to distributable earnings by generating $13 million of net rental income in the quarter, and our securities portfolio ended the quarter with a balance of $520 million. In furtherance of our goal of becoming an investment-grade company, we have maintained a modest use of leverage coupled with a thoughtful composition of unsecured and non-recourse, non-mark-to-market debt, anchored by $1.6 billion of long-term unsecured bonds. Our nearest bond maturity is not until October of 2025. During the quarter, we repurchased $59 million of our outstanding bonds at a discount, resulting in a $9.2 million gain and highlighting the dynamic nature of our business model. In conclusion, we like our positioning. Our dividend is well covered from a primarily senior secured asset base that is demonstrating stable credit performance. and we delivered an ROE in excess of 12% with modest leverage and robust liquidity. With that, I'll turn the call over to Paul.
Ladder
Thank you, Pamela. In the first quarter, Ladder's diverse business model performed well, generating distributable earnings of $47.2 million or $0.38 per share. Our net interest margin continued to increase and benefited from rising rates and a liability structure of which approximately 50% is fixed rate. Our $3.8 billion balance sheet loan portfolio is primarily floating rate and diverse in terms of collateral and geography. The portfolio decreased 97 million in the first quarter due to 131 million of proceeds received from loan paydowns, offset by 34 million from the origination of one loan, and funding on existing commitments. In the first quarter, we increased our CECL reserve by 25% to 25.5 million, driven by the current market outlook. Overall, we continue to believe the credit of our loan portfolio benefits from granularity, with an average loan size of $25 million, and vintage, with over 84% of the portfolio originated post-COVID, with limited exposure to any single sponsor or market. Our $900 million real estate segment also continues to provide stable net operating income to our earnings. The portfolio includes 156 net lease properties with strong investment-grade tenants that have long-term leases, representing 73% of the segment. As of March 31st, The carrying value of our securities portfolio was $520 million and was comprised of 84% AAA rated securities and 99.5% investment grade rated securities. In the first quarter, we received $60 million of pay downs on these positions as their seniority and short dated maturity continues to demonstrate steady amortization. As of March 31st, we had $950 million of same day liquidity and our adjusted leverage ratio was 1.8 times. This liquidity represents cash and cash equivalents plus our undrawn corporate revolver capacity of $324 million with a maturity in 2027. Unsecured corporate bonds anchor our capital structure with $1.6 billion outstanding or 38% of our debt. The weighted average maturity of these unsecured bonds is 4.5 years and they maintain an attractive fixed rate cost of capital at 4.7% average coupon. As Pamela discussed in the first quarter, we repurchased $58.7 million in principle of unsecured bonds at 83.6% of par. The retirement of such debt at a discount generated $9.2 million of gains. As of March 31st, our unencumbered asset pool stood at $2.9 billion, or over 50% of our balance sheet. 74% of this unencumbered asset pool was comprised of first mortgage loans and cash and cash equivalents. We believe our liquidity position and large pool of high-quality unencumbered assets continues to provide ladder with strong financial flexibility and is reflected in our corporate credit rating that is one notch from investment grades in two of three rating agencies. During the first quarter, we repurchased $2.3 million of our common stock at a weighted average price of $9.14. Our share buyback program authorization of $50 million has $44 million of remaining capacity as of March 31st, 2023. Our underappreciated book value per share was $13.64 at quarter end based on 126.9 million shares outstanding as of March 31st. Finally, our dividend remains well covered. And in the first quarter, Ladder declared a 23 cent per share dividend, which was paid on April 17th, 2023. For more details on our first quarter operating results, please refer to our earnings supplement, which is available on our website, as well as our 10Q. With that, I will turn the call over to Brian.
Pamela
Thanks, Paul. We're particularly pleased with our strong performance in the first quarter, especially considering the stress in the banking system that we witnessed toward the end of the quarter. As a few bank failures roiled the financial markets in March, we took comfort in the strength of our balance sheets. When volatility in the corporate bond markets caused indiscriminate selling of bonds for sellers trying to raise liquidity, we stepped in and purchased about $59 million of our outstanding corporate bonds, generating a $9 million gain in the quarter while decreasing our overall leverage and interest costs. This action was open to us because we had over $1 billion of liquidity at the time. strong credit performance for our asset base, and very modest adjusted leverage of 1.8 times. Our strong balance sheet allowed us to take advantage of the market's dislocation in March, and we will continue to seize upon opportunities like this as the year unfolds. We expect that our careful attention to credit, liquidity, and leverage will continue to lead to strong performance at ladder. Because our earnings are positively correlated to increases in short-term interest rates, we again saw a meaningful increase in our net interest income that rose to $43 million in the first quarter versus $37.3 million in the fourth quarter and versus $9.2 million in the first quarter of 2022. We easily covered our quarterly cash dividend of 23 cents per share, with our 38 cents per share of distributable earnings per share. Our 12.3% ROAE also compares favorably to last quarter of 10.2% and versus 8.4% in the first quarter of 2022. We stand ready to lend on quality assets that carry modest leverage, but transaction activity has been somewhat slow. We are seeing loan requests and are not having any arguments over the level of interest rates that we charge, but there is still a sticking point in the size of the loan requested. Borrowers are consistently requesting higher loan amounts than we are comfortable making, regardless of the rates offered to us. We expect to see lower loan amounts to be acceptable as time goes by and a likely mild recession takes hold. With not much further to add in a quarter that speaks for itself, I'll leave you with two data points to consider when comparing our stock to other investments. The first is our dividend coverage of 165%, and the second is our modest adjusted leverage of just 1.7 times today. With unencumbered assets of $2.9 billion, including cash of $626 million at the end of the first quarter, we are very well positioned to take advantage of market dislocations or the return to more tranquil market conditions. As the regional and community banks contract a bit, now fully aware of how mobile their deposit base is, we expect demand for our type of mortgage lending program to increase in the years ahead. We're very well capitalized, and the competitive forces in the current market are rather muted. This should bode well for ladder going forward, and we're looking forward to meeting that demand with our lending capabilities. Let's now turn to Q&A.
Paul
Ladies and gentlemen, at this time, we'll begin the question and answer session. To join the question queue, you may press star and then one using a touch tone telephone. If you are using a speaker phone, we do ask that you kindly pick up the handset prior to pressing the numbers to ensure the best sound quality. To withdraw your questions, you may press star and two. Once again, that is star and then one to join the question queue.
spk08
We'll pause momentarily to assemble the roster.
Paul
And our first question today comes from Jade Romani from KBW. Please go ahead with your question.
spk06
Thank you very much. Not sure if the 10Q is filed. I didn't see it, so I apologize if it was. But any credit changes of notes, risk ratings, watch list, those types of things, any updates that we should be aware of?
Pamela
No, Jade, this is Brian. Paul, go ahead.
Ladder
You can answer it. Yeah, I was going to say no, no, no non-agreable loans, no specific impairments.
spk06
Okay. How would you say that the credit cycle is playing out versus your expectations? Clearly, there's a lot of headlines, but there are, you know, sizable increases in non-performance. We've seen earnings from the banks. They're taking up reserves quite meaningfully. Some of the mortgage REITs have booked either losses or meaningful uptick in reserve. A couple others have not. But just curious as to how the credit trends are faring versus your expectations for the market.
Pamela
Sure. I would say that obviously you move interest rates up at the pace that they've been moved up over the last year. And you're going to feel obviously a lot of dollars going into the lender column as opposed to the equity column. So there's a little bit of stress in the system for sure. I find though that there's a lot of equity and a lot of capital in the system also. And if sponsors are having trouble extending or refinancing, it does seem to me that if they have capital available, they're willing to protect the assets at this point. And when I say the assets, I'm really talking about multifamily and office here. The industrial sector, we're not seeing a lot of stress in that area at all. Retail is holding up very well also. And hotels, I don't think I've seen hotels doing much better than this in a long time. But everybody worries about the office side. I think the office side is a little overcooked on the media side where they're telling you the world is ending. I do think there are some big cities and there are some big loans where this is a bit more of a social story more than it is a real estate story at this point. You've got depleted amounts of the population returning to work in some of these cities, but I don't think it's necessarily a return to work problem necessarily. I think it has more to do with the specific cities. For instance, San Francisco I don't think could be doing worse. Whereas New York's doing okay, Miami's doing very well. So it all depends really on where you are and what the population trends are as far as their attitudes towards returning to work. But so far, at least as far as the performance in our portfolio specifically, we do see leases being signed. Anybody who tells you no one is signing leases is wrong. We are seeing it being slower in the office side in particular. However, oddly... the rental rates that are being charged by landlords are actually higher than we were anticipating in most cases. So it's a little bit of a mixed bag, certainly. But I would say that so far, at least at the portfolio of Ladder, if sponsors have capital, and most do, they are protecting. And so far, most of what I would call the damage is being incurred on the equity side of the equation as opposed to on the debt side.
spk06
Thank you very much for taking the questions. I'll get back in the queue.
Paul
And our next question comes from Sarah Barkham from BTIG. Please go ahead with your question.
Sarah Barkham
Hi, everyone. Thanks for taking the question. So you mentioned earlier in the script, you know, you have a little over 40 million of capacity on the stock repurchase authorization. That's something that you guys have been doing pretty consistently. I'm just curious how you're viewing the stock price now and if we could expect the pace of stock repurchases to ramp up in the near term and how you're thinking about that.
Pamela
We have usually plenty of room for that. The board of directors gives us a lot of leeway there. We look at the stock as another investment. And at various times, and depending on what our capital situation is around cash and what our expectations are for disbursements of investments, we become more or less aggressive in the area. Given the current pricing conditions where I see things at this point, at least over the last couple of weeks, I'd imagine we'd be back involved in the next quarter also. But I wouldn't try to indicate to you that an already undersized company is looking to get a whole lot smaller You did see us buy a sizable portion of our debt back. And at that time, the debt was yielding pretty close to what the equity was yielding. So we had a preference for the debt side.
Sarah Barkham
Okay. And just to kind of move over to the multifamily book. We've received some questions on, you know, some of the perhaps more aggressive Sunbelt multifamily lending that might have happened, you know, during the rapid rent growth and ultra-low interest rate period. Can you speak to any exposure that you might have to perhaps negative leverage deals that might have been done during that period and any risk there might be in the portfolio?
Pamela
Well, we did see a big run-up in prices and we saw a lot of loan requests for 80% leverage on a purchase price of a property that sold three years prior at half the price it was being sold at in 2021. We tended to avoid those transactions unless there was a reason that we could point to concrete-wise as to why we would expect the population of that area and the demand side of, uh, rental apartments and the income side that might be able to, uh, to, um, you know, absorb getting to those apartments at those rents. We didn't do a lot of that. Um, in fact, we pretty much toward the end of 21, I believe, uh, we noticed that spreads were widening in the CLO market. And I think a lot of, uh, Lenders interpreted that to mean it was just the end of the year, and that's what happens when LIBOR and SOFR get to the end of the year. We did not interpret it that way. And so we pretty much began bowing out of stabilized debt yields of six around that time. And we began using an eight on stabilized debt. debt yield on the exit. So we don't have a lot of it. We also introduced the program because caps were so expensive, where we were funding construction loan takeouts, where we were funding brand new apartment buildings with CFOs. And the only thing they had to do was lease them up. And we were writing two-year fixed rate loans. So a lot of our exposure is in that area. and they'll be coming due in 24 in all likelihood. And I've seen the business plans, they're doing fine. We've had a couple of management misses where you saw some delinquencies pop up inexplicably, but then they solved it the following month. There was a computer problem. So we don't have a lot of exposure that I'm worried about. If I told you, and I don't have a number for you here, but if I had a concern, it would be on the Class C garden style apartment in a high crime neighborhood from 2019. where 80% levered, 30,000 a unit going into the property because there's a belief that the crime problem is going to be solved and they're going to be able to charge higher rents. So I would look to the vintages of 2018 and 2019 that have not refinanced yet as potentially where trouble could be lurking. But as far as where we are, we're very attuned to the debt yield on the exits. and began addressing that in late 2021. So I don't really feel like we have a lot of exposure there.
Sarah Barkham
Great.
Paul
Thanks for that, Collette.
Pamela
Yep.
Paul
And our next question comes from Matthew Howlett from B Reilly. Please go ahead with your question.
Matthew Howlett
Thanks for taking my question. First, on repayments, I mean, there are 131 for the quarter. I mean, it's pretty steady. What's the outlook on the repayment rate? And Brian, how much are you willing to de-lever the company? I mean, you talked about the regeneration is going to come back. Would you look to buy securities? How low would you look to take leverage if these repayments keep coming out and the market for regeneration isn't back yet?
Pamela
I feel like we're as de-levered as we need to be at this point. You never like to say the word you feel overcapitalized because it could bite you in the butt one day. But to me, it feels like given the opportunity set that's out there, the return to borrowing at levels that we're comfortable with has been a little slow. I think it's inevitable that it's coming. So I want to hang on to a lot of dry powder at ladder and we're ready to make loans. But I do think that there is a bit of a plateau here. where buyers and sellers are not quite in sync, although the lenders are beginning to push the issue a little bit. So I think we'll start seeing a pickup in activity there. And interestingly enough, we actually did start seeing some loan quotes go out the door in the last month or so. And we were fine on rate. We were not getting to the proceeds requested. We did see other lenders getting to the loan proceeds that were requested, at least in the application phase. They haven't closed yet. And interestingly enough, several of the lenders that were getting those proceeds, I had never heard of. So there is also a group of investors, I think, that's getting into the business now, thinking it's a great time to make a loan. And I tend to agree with that. But it still requires caution. As far as leverage goes, I feel on an adjusted basis below 2.0 times. We have an unusually high amount of cash laying around right now. You don't need as much cash when you're not terribly leveraged. And, you know, when we saw the opportunity to repurchase some of our debt in prices in the low 80s, that seemed a little bit too attractive to avoid.
Matthew Howlett
You're buying that debt, you're buying that stock, but you've always been opportunistically. Would you look at buying securities, real estate? I mean, obviously, First Republic, there's talk of, you know, $100 billion coming out of them, CMBS. I mean, anything... opportunistic-wise that you could do with the excess capital?
Pamela
Yeah, I'd love to. And we're on the FDIC list for taking a look at some of the portfolios, especially here in New York out of the signature bank portfolio. We haven't seen anything, and $100 billion coming out of First Republic. I mean, obviously, we're not going to tangle with that. So we do think it's almost everything is opportunistic right now. There is no regular way lending going on at all. Nobody is borrowing 65% at SOFR plus 300 on an acquisition. It's very much a special situations market. And sometimes those special situations involve our own debt when the high yield market is selling off indiscriminately. And those prices have bounced back quite a bit here, although still quite attractive in my opinion. We are mortgage lenders at heart. We understand the securities business too. The securities business is attractive today. but it does require quite a bit of leverage, and I'm a little bit concerned about some of the attitudes towards leverage in some of the banks. It's not that they're not lending. They started charging a lot. You might have heard Pamela mention that we paid off a lot of our securities repo subsequent to the end of the quarter. The reason why is banks are charging 6.1% for financing AAA bonds that we're earning 7.3% on, and they have 85% subordination because they're CLOs from 2019. So we just think that rather than pay the 6.1%, we'll just pay that off and we'll collect the 7.3% unlevered. So they're very attractive. You can lever yourself into the 20s if you want. Obviously, that's a situation open to us. But to me, I'm a little bit concerned when I hear that First Republic might be selling $100 billion of loans and securities. That is not a constructive environment for us to be stepping in thinking that spreads can't widen because they certainly could.
Matthew Howlett
Makes sense. And the last question, a lot of your competitors talk about just only doing multifamily because you have the GSE takeout there. It sounds like you're open to everything. I mean, were you quoting hotels? You look at office. And then long-term, is there any major impact on your model if the banks end up with higher regulation or they curtail lending?
Pamela
Well, the regional banks are certainly going to wind up with curtailed lending and higher regulation. So I think in the initial phase of whatever they're going to go through, I don't believe they're going to stop lending. I mean, they're still banks. And I think that they have now notice that their deposit base can be pretty tricky. So I think they'll all be running, they'll be paying higher deposit rates to hang on to deposits. They'll also be lending more conservatively. That will cause maybe some difficulty in refinancing our loans, although frankly we haven't seen that yet. We might. There's also plenty of other lenders too, and there's tons of small banks that don't have any problems along the lines of what you read about in the newspapers. Long term, I think it's a positive for us because I think it's another example of regulation, leverage, and past mistakes forcing a lot of the mortgage lending apparatus in the United States outside of the banking system. And since we service that mid-market borrower base, I think it'll come right to us. And that's very helpful. So short term, not helpful on refis. Long term, extraordinarily helpful.
Matthew Howlett
Great. And then just on the quote, are you still lending to all sectors or is something that you won't do now?
Pamela
Yeah, well, we haven't made a loan other than multifamily in the last quarter. It's going to sound wacky. I like office. And I don't like office because I believe office is going to do fine and rents are not coming down and everyone's going back to work tomorrow. I just believe the story is a little overdone. And yet I've got to – portfolio of office loans that are doing okay. And we pick more office these days rather than supply and demand as opposed to we really look at where they're located. And I don't mean what corner, I mean what city. So I can't imagine making a loan in San Francisco. I might buy a building there. I think Ladder could do that because I don't think it's kind of a binary outcome. The good part about all the problems that are taking place in some of these larger cities that are having difficulty with office is the problems are quite fixable. And I think that they will ultimately get fixed over time. But Chicago just took a step backwards. So they won't be, you know, fixing their problems anytime too soon here. So I don't expect us to be a lender in Chicago, San Francisco, Portland, Seattle, Los Angeles, D.C., and parts of New York.
Matthew Howlett
makes a lot of sense. I really appreciate that.
Pamela
And the hotel sector, by the way, I'm sorry, I didn't get to that one. They're doing fine. But I do believe we're going to go into a mild recession here and rates are quite high. And I think the American consumer wants to get out and wants to go vacation. So I sort of like the, I've always, we've always favored the drive-to market and the resort market as opposed to the Inner city, you know, I saw a property change hands the other day, like 700 rooms in an inner city. That's difficult. And so those I think we would avoid. But we like the garden inns. We like the courtyards.
Matthew Howlett
The desk station. Yeah, those have held up very well. I really appreciate it. Sure.
Paul
And once again, if you would like to ask a question, please press star and then one. To withdraw your questions, you may press star and two. Our next question is a follow-up from Jade Romani from KBW. Please go ahead with your follow-up.
spk06
Sure. I wanted to ask just two strategic questions. One, do you see an opportunity to raise a fund, raise third-party capital, and maybe invest in office repositionings or some kind of contrarian or distressed-oriented fund? Since de novo pools of capital tend to do you know, pretty well at this point in the cycle.
Pamela
Yeah, certainly there's an opportunity to do that. I will tell you, we haven't been overly active in that area because it comes with systems and controls that, you know, we have had outside funds in the past before we went public. But we do think it's a good opportunity for that. But right now, we think given the asset base that we work off of, keep in mind, we work the lending operations in two big Swiss banks in the prior 15 years. And so we do see a lot of large loans and a lot of good opportunities. But I think we kind of work backwards, Jade. I think if we wanted to do a $400 million recap on an office property that we thought was really cheap, we would probably just buy it and then distribute it to some high net worth individuals or funds or insurance companies and syndicate it that way. as opposed to just raising money for a fund. Because in my experience anyway, to a startup, I mean, you take an organization that's a real asset manager, they raise money very quickly. And they have a whole system of people who go out and do it. We're a small operation with about 60 people, and we don't have all of the slides and all of the accounting systems that a lot of people that do investments institutionally like to see. But I do think we can do a lot of that right inside where we are right now. So I think we'll participate in it, and I think we'll do larger than bite-sized transactions, and we'll syndicate it after the fact as opposed to having the money in hand. It takes a long time to raise money that way, and oftentimes by the time – I mean, when we first opened Ladder in 2008, securities were so cheap. It was ridiculous. And we went about raising an outside fund. And ultimately, the funds we did raise were for rich people as opposed to institutions. The institutions all knew that we knew what we were doing, but we had to go through their advisor, and then we had to go through their due diligence periods. And by the time they got around to saying yes, the opportunity had passed. So these markets move pretty quickly. I think we specialize in things that move quickly. And You know, we have enough capital at this point to at least get started on things. If things look particularly attractive and we feel like we need more capital, I don't think we'll have any trouble getting that. But we're not anticipating a fund just yet.
spk06
Okay. And then on the M&A side, is merging with another company something that is interesting to you? Yeah. You know, there are plenty of mortgage rates trading at below your valuation and bigger seems to be better, although it could jeopardize the investment grade goal. But just wanted to get your thoughts on that.
Pamela
Yeah, I mean, there's a couple of names that I have written on the back of my hand that I think about once in a while. And it really isn't so much that I think I understand the company so well. It's just I understand the people who run the company pretty well. And some of them are pretty talented people. And I doubt that the problems they're seemingly having are nearly as bad as what the stock prices would indicate. So, you know, I think about it, it's certainly not outside of our wheelhouse. And, you know, I always thought by this point, the first thing we might look at would be a residential platform. But the residential platforms seem to have a lot of leverage in them. And you've seen us get away from that over the last few years. So unless something just walks through the door that looks pretty cheap, we're not going to do it as a capital raise where we buy a residential platform and just sell all their bonds and then use the cash for commercials. I do think we could run a very attractive residential platform, especially now with some of the changes taking place in residential lending. But it is a long-duration asset, and I think we've said before why we haven't been in that business, and here it is again. It's that long-duration asset. risk interest rate management is very difficult to do. And you see a couple of banks now in some trouble, and you see a couple of banks not in trouble that have huge losses that have not been realized yet. And so this is a good time to get into the residential space, though.
Paul
Thanks for taking the questions. Sure. Our next question comes from Chris Muller from JMP Securities. Please go ahead with your question.
Chris Muller
Thanks for taking the question. I just had a quick one on what would make you guys more comfortable on getting aggressive on the lending side? Last year, you guys were able to put out some pretty big origination volumes. So is it more the Fed pausing, or I guess what type of things would make you more comfortable stepping back on the gas there?
Pamela
Thanks. I think if we, you know, Pamela mentioned transaction volume has been muted. That sentence can represent a lot of things. There's a lot of people looking to refinance loans that, you know, the loans were written in a zero interest rate environment. And there's difficulty, you know, with unless they've executed perfectly and possibly even done better. It's very difficult for them to handle today's rates based on the size of the loan they want. I think where we get much more comfortable is seeing acquisitions of assets today with today's underwritings, with new equity going in. and a very sober loan request. So when Pamela mentioned the transaction volume has been muted, not only has the loan side been slow, but the acquisition side has been very slow too. And you even see it in the residential side. New mortgages are falling because rates have gone up. So it isn't that we're uncomfortable. We're very comfortable lending in this kind of a market and even going into a recession. I tend to believe it's hard to write a very bad loan in a market like this. because every assumption you use is probably a little bit worse than what will actually happen. But we're just not seeing a lot of properties change hands. So what we're primarily focused on right now is acquisitions, and there just aren't many of them.
Chris Muller
Got it. That's helpful. And then just quickly on the dividend, can you just remind me when you guys would address either a special dividend or a dividend increase? Is that an annual thing you look at, or is it quarterly? The board will look at that. Just seeing the pace of distributable earnings above that dividend, it looks like there could be something that needs to be done there. Thanks.
Pamela
We look at it quarterly, usually right before the dividend declaration date. So I'd imagine the first couple of weeks of June, we'll take a look at it again. Last year, we raised our dividend twice for a total of 15% versus where we started the year at. And so we're going to revisit it again in June here. We took a look at it in March, and earnings looked pretty good. And then I guess it was Silicon Valley Bank got in trouble around March 10th. I think all of the bonds and all of the stock we bought back took place after March 10th. So when we were figuring out our next dividend calculation, the market was a little bit up in the air. And so we wound up supplementing the earnings of this quarter greatly in the last two weeks, largely as a result of the turmoil in the banking sector. So I think we'll be revisiting it again in June, in the first two weeks of June.
Chris Muller
Thanks for taking the question, guys, and congrats on a nice quarter. Thank you.
Paul
And our next question comes from Derek Hewitt from Bank of America. Please go ahead with your question.
Derek Hewitt
Good afternoon, everyone. You had mentioned earlier bank behavior with securities repo tightening caused you to repay that source of funding on the securities book. But what about the bank behavior on the loan repo facilities? Are you seeing any changes in the bank's behavior in regards to maybe advance rates, maturity extensions, requiring higher spreads? in terms of their thoughts on the loan repo facilities?
Pamela
Sure. Pamela, I think you deal more with that than I do. I can answer it, but I think you'd do a better job with it. So I'm going to ask Pamela to catch it.
Ladder
Yeah, and Paul, feel free to jump in. But the short story is we're not really seeing – first of all, let's start here. We have very limited repo outstanding, and we haven't really – in the first quarter, I think Paul confirmed, we did not have any margin calls I think there is at least one lender who's looking at their multifamily exposure and looking at debt yield and may make some adjustments there across the industry, as we understand. But to date, we have not funded a margin call.
Pamela
Okay. Thank you. Yeah, I can answer a little more there. I think it would be hard to replicate the lending criteria that we've got right now in place on some of those. I think that they're tighter now in standard. The rates are higher. On the security side, the only thing that really happened was rate went up. The spread went up. They didn't pull back on the advance rate. So it's not a credit conversation. It's a liquidity conversation. And so as a result of that, we just pulled back.
Ladder
And to be clear, we also funded some additional repo. I think it was important for us to demonstrate the capabilities we have there and the capacity. So we funded some repo recently and have a ton of capacity there. And if anything, I think it's probably true for us and our peers. We're seeing people looking to open up new lines with us at this time. They're anxious to lend is the way I would describe it.
Derek Hewitt
Okay. Thank you. And then within the office portfolio, is there any way to kind of... kind of segment what the kind of the higher risk, like risk-rated four or five office loans are since the 10Q is not out yet?
Pamela
We don't use that kind of criteria. Paul, I think you have some information about how many of our loans were written after the pandemic. And if you hear my dog, I'm sorry, that's live calling. But, Paul, didn't we have like 76% of our loans were the office sector was written after March of 21? So, yeah, so we don't have them rated the way other people do. But last call, if you remember, we went through our five largest exposures. And, in fact, today, I think it was today or yesterday, I saw an article in the Wall Street Journal saying some of the Sunbelt office markets look like they're losing some of their momentum today. And the place where we have our most exposure was on the bottom of that chart in Miami, not losing its momentum. So we're not having a lot of trouble with office, despite what's in the news. And we're reviewing business plans. We're sending people out to see properties. There are leases being signed, even in New York City, even in mid-block buildings in the garment district. It is just not as bad as what's being portrayed in the press.
Derek Hewitt
Okay, thank you.
Paul
And ladies and gentlemen, with that, we'll end today's question and answer session. I'd like to hand the floor back over to Brian Harris for any closing comments.
Pamela
I'll just wish you all well and thank you for getting on the call and missing the Amazon action today. I know that they're releasing too, but thanks for hanging with us. And this is a good market for us. We don't mind rough weather. And as long as we keep our focus on credit quality and liquidity and leverage, we expect to be very, very profitable in the quarters ahead here. So thank you.
Paul
Ladies and gentlemen, with that, we'll conclude today's conference call. We do thank you for joining. You may now disconnect your lines.
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