Name: Ladder Capital Corp Q2 2025 Earnings Call
Start: 2025-07-24T14:00:00.000Z

Executive Summary

Q2 2025 GAAP diluted EPS was $0.14 and distributable EPS was $0.23, with income before taxes of $20.8M and net income of $17.3M; Ladder achieved investment-grade status at both Fitch (BBB-) and Moody’s (Baa3) and priced a $500M 5.5% senior unsecured note, materially lowering its cost of funds .
Versus S&P Global consensus, EPS modestly beat while revenue modestly missed; management cited timing-related softness in loan originations during Q2 and stronger gains in other income components as key drivers (see Estimates Context) .
Balance sheet repositioning continued: securities reached ~$2.0B (44% of assets, 97% AAA; 81% unencumbered), loans totaled ~$1.6B (36% of assets, ~9% yield), and real estate NOI remained stable at $15.1M; liquidity stood at ~$1.0B and gross leverage at ~1.9x .
Catalysts: the new IG ratings and lower revolver spread (SOFR+125) expand unsecured funding flexibility; a building loan pipeline ($325M under application) with post-quarter originations ($188M) favors an acceleration into Q3/Q4; watch non-accruals ($162.3M) and credit normalization pace .

What Went Well and What Went Wrong

What Went Well

Achieved dual investment-grade ratings (Fitch BBB-, Moody’s Baa3), enabling a $500M 5.5% unsecured bond at a 167 bps spread; pro forma unsecured debt now ~74% of total with cost-of-funds tailwind (“most meaningful impact will be the long-standing improvement in our cost of funds”) .
Liquidity and balance sheet strength: ~$1.0B liquidity, undrawn $850M revolver cut to SOFR+125, 83% unencumbered assets; management emphasized moving funding mix further toward unsecured while keeping leverage in the 2–3x target range .
Securities and real estate performance: acquired >$600M AAA securities at ~6.1% yields; securities portfolio ~$2.0B (97% AAA) provides carry and optional liquidity; real estate NOI was $15.1M with long-dated net leases .
- Quote: “We are very pleased to achieve investment grade status… With this strong foundation and a reduced cost of capital, we are very well-positioned to deploy capital into new investment opportunities” — CEO Brian Harris .

What Went Wrong

Loan origination pace dipped in Q2 due to timing (payoffs $191M vs originations $173M), pushing closings into Q3; management flagged rent softness in pockets of multifamily and longer closing timelines .
Non-accrual loans rose to five positions totaling $162.3M (3.6% of assets); one $50M multifamily loan moved to non-accrual with foreclosure pursuit; CECL reserve remained $52M ($0.41/sh) .
Revenue miss vs consensus (see Estimates Context); composition leaned more on securities carry and real estate income while loan origination cadence lagged plan, constraining top-line vs Street .

Financial Results

Key P&L and EPS trends (oldest → newest):

Metric	Q2 2024	Q4 2024	Q1 2025	Q2 2025
Diluted EPS (GAAP) ($)	$0.26	$0.25	$0.09	$0.14
Distributable EPS ($)	$0.30	$0.27	$0.20	$0.23
Net Income Attributable to Class A ($MM)	$32.35	$31.38	$11.78	$17.33
Income Before Taxes ($MM)	$31.04	$33.04	$10.72	$20.82
Net Interest Income After Provision ($MM)	$29.26	$27.17	$20.41	$21.57
Total Other Income ($MM)	$42.41	$41.40	$30.87	$34.73
Net Income Margin %	45.14%*	45.77%*	23.08%*	30.78%*

Values retrieved from S&P Global*.

Consensus vs actual (Q2 2025):

Metric	Consensus	Actual	Result
Primary EPS ($)	0.222*	0.23*	Beat (small)
Revenue ($MM)	59.3*	56.30*	Miss (modest)

Values retrieved from S&P Global*.
Drivers of EPS beat and revenue miss: QoQ, other income improved ($34.73M vs $30.87M), derivative result rose ($1.53M vs $0.32M), and conduit loan sale contribution improved ($4.91M vs $0.16M), while compensation expense declined ($11.56M vs $18.76M); loan originations were timing-lagged, pushing some closings into Q3 .

Segment breakdown (Q2 2025):

Segment	Asset Base	Share of Assets	Yield / NOI	Key Notes
Loans	~$1.6B	36%	~9% yield	Payoffs $191M; originations $173M at ~+400 bps spread; non-accruals $162.3M (5 loans)
Securities	~$2.0B	44%	~5.9% yield	99% IG; 97% AAA; 81% unencumbered; >$600M acquired in Q2
Real Estate	~$0.936B	~21% (balance)	$15.1M NOI	149 net lease properties; WALT >7 yrs; Carmel office foreclosed at $112/sf, 82% occupied, >11% unlevered return

Key KPIs (Q2 2025):

KPI	Q2 2025
Liquidity	~$1.0B
Revolver	$850M undrawn; SOFR +125 bps after IG
Gross Leverage	~1.9x
Unencumbered Assets	~83% of total
Undepreciated BVPS	$13.68
CECL Reserve	$52M (~$0.41/sh)
Dividend	$0.23 declared for Q2, paid Jul 15

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Leverage Target	Ongoing	2–3x target (historical)	Maintain 2–3x; mix shifting to more unsecured	Maintained; mix evolving
Funding Mix	Ongoing	~65% unsecured (FY24)	~74% unsecured; aim potentially “entirely” unsecured over time	Raised/shifted toward unsecured
Revolver Spread	Ongoing	SOFR +170 bps (pre-IG)	SOFR +125 bps post dual IG	Lowered
Unsecured Bond Plans	H2 2025	N/A	Possible additional issuance before year-end; potentially >5 yr tenor	New commentary
Dividend	Q2 2025	$0.23 (Q1)	$0.23 declared (Q2)	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current Period (Q2 2025)	Trend
Investment-grade ratings	Aiming for IG; positive outlook; path through unsecured funding	Achieved Fitch BBB- & Moody’s Baa3; revolver spread cut	Upgraded/achieved
Cost of funds	Revolver upsized; SOFR+170 bps; plan to reduce with IG	$500M 5.5% bond at +167 bps; facility SOFR+125	Improving
Securities rotation	Bought $295M AAA in Q4 ; $521M in Q1	>$600M acquired; now selectively selling as spreads tighten	Active rotation; pivot to loans
Loan pipeline	Pipeline >$250M (Q4) ; $329M originations (Q1)	$173M originations; $188M post-QE; $325M under application	Accelerating into Q3
Leverage	~1.4x (Q4) ; ~1.83x (Q1)	~1.9x; target 2–3x maintained	Gradually rising
Credit/non-accruals	2 loans $77M (Q4)	4 loans $116M (Q1)	5 loans $162.3M (Q2)
Macro/tariffs	Volatility; tariffs re-emerging (Q1)	April tariff volatility widened spreads; opportunistic securities buys	Persistent
Conduit	Curve not steep enough (Q4)	High-ROE potential as curve steepens (Q1)	Sold $64M conduit loan; re-engaging where warranted

Management Commentary

“As the only investment grade mortgage REIT in the country… anchored by a diversified, highly liquid, senior secured asset base… we are very well-positioned to deploy capital into new investment opportunities” — CEO Brian Harris .
“Pro forma for the offering, 74% of Ladder’s debt consisted of unsecured corporate bonds… As of June 30th, Ladder had $1 billion in liquidity… revolver reduced to SOFR + 125 bps” — President Pamela McCormack .
“Just 12 months ago, we issued a $500M seven-year unsecured… at 7%… now… 5.5%… With fixed-income investors welcoming us into the investment-grade capital markets… we have established an optimized financial foundation” — CEO Brian Harris .
“We fully intend… leverage two to three times… the only thing changing… composition of leverage… now funding ourselves two thirds unsecured, one third secured” — President Pamela McCormack .

Q&A Highlights

Securities vs loans rotation: Management is selectively selling AAA positions as spreads tighten, redeploying into loans; securities portfolio designed as liquidity to support loan growth .
Pipeline convertibility: ~$325M under application; conversion expected but timing remains elongated vs pre-pandemic; noted multifamily pockets of rent softness and big-city hotel caution .
Net lease strategy: Focus on asset-level “$/ft” discipline and credit; add when funding costs vs cap rates are favorable; cap-rate/financing differential drives ROE; open to opportunistic adds as costs fall .
Leverage and funding composition: Maintain 2–3x leverage; mix shifting further to unsecured; potential to fund “almost entirely on unsecured” as spreads tighten .
Conduit participation: Conduit remains supply constrained; contributed/sold a $64M loan; expect more participation as curve steepens; high-ROE potential .

Estimates Context

Q2 2025 vs S&P Global consensus: EPS $0.23 vs $0.222 (beat); revenue $56.30M vs $59.3M (miss).*
EPS beat rationale: stronger other income (including conduit loan sale gains and derivative gains), lower compensation expense QoQ; revenue miss tied to timing lag in loan originations, with closings pushing into Q3 .
Revisions outlook: As loan originations accelerate (post-QE $188M; $325M under application) and cost of funds declines, Street may raise forward EPS while revenue trajectories should reflect mix (securities carry vs loan growth) .
Values retrieved from S&P Global*.

Key Takeaways for Investors

Investment-grade status is a structural positive: it’s already lowering funding costs (SOFR+125 revolver; 5.5% notes at +167 bps), broadening market access and likely lifting valuation comps over time .
Near-term earnings path: expect distributable EPS support from securities carry and decreasing interest expense; medium-term upside as loan originations ramp through Q3–Q4 .
Watch credit normalization: non-accruals rose to $162.3M; CECL reserve ($52M) appears adequate per management, but credit migration merits monitoring .
Capital deployment pivot: management intends to migrate from securities into balance sheet loans and selectively conduit; this should improve ROE as origination velocity increases .
Funding mix and leverage: targeting 2–3x leverage with higher unsecured share; additional unsecured issuance in H2 could further compress cost of capital and support asset growth .
Dividend stability: $0.23 maintained; coverage to improve as deployment accelerates and cost of funds declines .
Trading implications: multi-quarter narrative of IG-driven cost-of-capital advantage and a building pipeline is constructive; monitor spread moves and tariff/macro volatility for opportunistic entry points per management’s own approach .

Ladder Capital Corp (LADR)·Q2 2025 Earnings Summary