Ladder Capital Corp

Good morning and welcome to Ladder Capital Corp's earnings call for the third quarter of 2026. As a reminder, today's call is being recorded. This morning, Ladder released its financial results for the quarter ended September 30th, 2026. Before the call begins, I'd like to call your attention to the customary safe harbor 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 irrelevant 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 earnings supplement 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.

Good morning and thank you for joining us today. LADA had a strong third quarter. We generated distributable earnings of $44.7 million or 35 cents per share with modest adjusted leverage of 2.5 times. Results included a $31 million gain on the sale of our largest net lease asset and office campus in Jacksonville, Florida. The sale provides another clear example of unlocking value above our cost basis in the real estate portfolio. We are executing the plan we laid out at the start of the year, and the quarter reflects it. Three things stand out this quarter. Book value increased, our loan portfolio is predominantly new vintage with limited legacy loans, and we're well positioned for rising rates. Each one supports our earnings going forward. First, book value. Our undepreciated book value per share did not just hold steady this quarter, it went up, rising to $1,350 from $1,344, driven primarily by the gain on sale of the Jacksonville office campus. That increased builds on book value that has held firm since the end of 2022, reflecting the strong credit performance of our portfolio. The Jacksonville sale along with the full payoff of our largest legacy office loan in Miami during the second quarter is the latest proof. Second, our loan portfolio is new vintage. Approximately 90% of our loans have been originated since late 2024. They were underwritten in a higher rate environment at conservative loan to values on reset basis. We believe that positions the portfolio well for today's rates and gives us room to keep growing it. Third, we are well positioned for rising rates. Over 50% of our debt is fixed rate. So as our floating rate assets reset higher, our income rises while the cost of that debt stays the same. As the only investment grade rated commercial mortgage REIT with senior secured assets and modest leverage, Our model is cycle tested. LADA has been in business for 18 years, public for 13, and a bond issuer for 14. We are middle market by design. Our average loan size is about $30 million, and our average investment size is about $15 million. Backgroundularity and diversification limit our exposure to any single asset, sponsor, or market, and we believe it is one of the reasons our book value has remained stable, in addition to our clear alignment of interests with high insider ownership. Investment activity. During the third quarter, we stayed selective as rates rose. We made $703 million of new investments, including $481 million of predominantly AAA-rated securities at attractive yields and seven new balance sheet loans totaling $222 million. Net of payoff, sales, and amortization, our combined loan and securities portfolios grew by approximately $570 million. Year to date, we've originated $1.4 billion in new loans, already matching our 2025 volume, and our loan portfolio has grown over 50% in the trailing 12 months. Balance sheet loans now make up approximately half of our total assets. Our goal is to keep growing that share over time, but we will stay flexible. When higher rates flow lending activity, as they began to in September, we will put capital to work where we see the best risk-adjusted returns. Brian will talk more about that. That said, with ample liquidity and payoffs expected to remain light in coming quarters, we are well positioned to keep growing our loan portfolio without compromising on credit. Securities portfolio. During the third quarter, we acquired $481 million of primarily AAA-rated securities at attractive yields, and we continued buying into October. As of September 30th, our securities portfolio totaled $2.3 billion, representing 37% of total assets, with a weighted average yield of 5.5%. The portfolio is 99% investment grade and 97% AAA rated with a weighted average duration of approximately three years. Because of this short duration, liquid and largely floating rate, our securities portfolio earns attractive yields in today's market and gives us a ready source of capital to move into loans when they offer the best risk adjusted returns. Real estate portfolio. Ladder has consistently produced real estate and other gains on top of our carry income, and Brian will discuss that track record in more detail. As mentioned, this quarter, we completed the sale of our net lease office campus in Jacksonville, Florida. The sale contributed $31 million to distributable earnings and generated an 18% IRR over the life of the investment. We sold the property well above our carrying value, which highlights the value embedded in our real estate portfolio. Share repurchases. We believe our stock is undervalued. During the third quarter, we repurchased $8 million of stock at an average price of $9.38 per share, a 31% discount to our underappreciated book value of $13.50 per share. Repurchases at these levels are accretive to book value and alongside loan growth and real estate gains, they remain one of the ways we create value for shareholders. In closing, this course showed our plan at work, our loan and securities portfolios grew, We realized a meaningful gain in our real estate portfolio and our floating rate assets earned more while the cost of our fixed rate debt stayed the same. Our plan for the coming quarters is unchanged. Grow our loan portfolio, deploy capital where we see the best risk-adjusted returns, and realize gains across our businesses, all with the credit discipline that is always the fine ladder. We believe these levers will drive higher earnings, support our dividend, and create long-term value. Finally, as promised, we've begun taking our story directly to shareholders and we'll continue those conversations in the coming months. Our message is simple. Management and board own 13% of Ladder and are collectively our largest shareholder group. So we're focused on the same things you are, protecting principal, growing earnings, and building long-term value. With that, I'll turn the call over to Paul.

Thank you, Pamela. Good morning. During the third quarter, Latter generated distributable earnings of $44.7 million, or $0.35 per share. Excluding a realized loan loss previously reserved for, our third quarter earnings were $0.38 per share. Our balance sheet remains strong. We maintain modest leverage and a resilient investment-grade capital structure, with unsecured debt representing 69% of our total debt at an attractive cost of capital. As of quarter end, our adjusted leverage ratio was 2.5 times. and we maintained robust liquidity of $784 million, including same day capacity on our unsecured revolver. In addition, we held $1.2 billion of unencumbered, primarily AAA securities. Our $1.25 billion unsecured corporate revolver continues to be a valuable asset, allowing for funding flexibility with same day liquidity, driving our ability to execute our capital deployment strategy. Alongside of our revolver, our access to the investment-grade unsecured corporate bond market allows us to fund our growth with long-term fixed-rate unsecured debt. We have been monitoring the markets closely and expect the unsecured debt market to continue to be a meaningful source of capital for Ladder. As Pamela mentioned, rising rates this quarter highlighted the benefit of how we finance our balance sheet. As of September 30th, 57% of our debt was fixed-rate, primarily unsecured corporate bonds, with a weighted average coupon of 5.3%. This is complemented by 92% or 4.8 billion of our interest earning assets being floating rate. Based on our balance sheet as of quarter end, we estimate that each 25 basis point increase in SOFR adds approximately one penny per share per quarter to our distributable earnings. Our own encumbered asset pool represented 73% of total assets as of quarter end September 30th. 88% of this pool is comprised of first mortgage loans, investment-grade securities, and unrestricted cash. As of September 30th, Ladder's undepreciated book value per share was $13.50, which is net of $0.35 per share of Cecil Reserve established. In the third quarter, we repurchased $8.2 million of common stock, or 871,000 shares, at a weighted average share price of $9.38. Year to date in 2026, we've repurchased $29.6 million of common stock or 3 million shares at a weighted average price of $9.89 per share. As of September 30th, $83.8 million remains outstanding on Ladder's stock repurchase program. Overall, we continue to believe in our book value and we'll seek to continue to opportunistically utilize our buyback program while our stock is trading at a meaningful discount. In the third quarter, The latter declared a 23 cent per share dividend, which was paid on October 15th, 2026. Going forward, we believe our largely floating rate asset base, fixed rate debt, and continued loan growth will support a durable dividend. Turning to credit quality. As of September 30th, we had two loans on non-accrual with a combined carrying value of $61 million. The first with a carrying value of $51 million is collateralized by a hotel in Los Angeles, California. The second is collateralized by an office property in Minneapolis, Minnesota. We expect to take ownership of that property in the fourth quarter. In anticipation, we charge off $3.5 million of an existing CECL allowance associated with that loan, bringing our carrying value to $9.9 million or $67 per square foot. As of September 30th, our CECL reserve was $44 million or 35 cents per share, which represents 1.48% of our loan portfolio. and takes into consideration current market conditions, including the rise in interest rates, as well as the fact that 87% of our loan portfolio was originated since late 2024 at reset values. We continue to believe this reserve level is adequate. As of September 30th, our securities portfolio totaled $2.3 billion with a weighted average yield of 5.5%. Notably, 99% of the portfolio was investment grade, 97% was AAA rated with 96% being floating rate in a weighted average duration of approximately three years, underscoring its high credit quality and overall liquidity. During the quarter, we recognized a $4.5 million loss in distributable earnings on a legacy fixed rate CMBS with no impact of book value as the loss was previously recognized through our other comprehensive income. As previously stated, as of quarter end, over 50% or $1.2 billion of our securities portfolio remained unencumbered complementing our $784 million of same-day liquidity. We believe this combined broad access to liquidity reinforces the strength of our balance sheet and positions ladder well to continue to selectively originate and grow our loan portfolio to drive future earnings growth. Our $900 million real estate segment continued to generate stable net operating income during the quarter. The portfolio includes 148 net lease properties comprised primarily of investment grade credits committed to long-term leases with an average remaining lease term of 6.4 years. As noted, we sold our largest net lease property in the third quarter, the office campus in Jacksonville, Florida. The sale contributed a $31 million gain to distributable earnings and produced a gap gain of $66 million. The difference between the two reflects the recapture of depreciation and amortization previously recorded on the property and is why we measure our real estate and our book value at an unappreciated basis. For further details on our third quarter 2026 operating results, please refer to our earnings supplement presentation available on our website, as well as our quarterly report on Form 10Q, which we expect to file in the coming days. With that, I'll let Brian take it from here.