Ladder Capital Corp (LADR)·Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 delivered diluted EPS of $0.25 and distributable EPS of $0.27; GAAP income before taxes was $33.0M as the business shifted from defense to offense amid heavy loan payoffs and rising securities income .
• Liquidity and balance sheet strength were the quarter’s anchors: $2.2B total liquidity, $1.3B cash (27% of assets), adjusted leverage 1.4x, and 77% of assets unencumbered, positioning Ladder to reaccelerate originations in 2025 .
• The company upsized and extended its unsecured revolver to $850M (accordion to $1.25B) at SOFR+170 bps with a stepdown to +125 bps upon two IG ratings, a key catalyst to lower funding costs and support deployment .
• Credit metrics remained controlled: CECL reserve held at $52M; nonaccruals were $77M including a $16M loan added in Q4; management expects reserve releases over time if macro conditions stabilize .
• No formal quantitative guidance; management signaled a strong 2025 as originations ramp (pipeline >$250M) and capital migrates from T‑bills/securities to higher‑yielding loans; quarterly dividend maintained at $0.23 .

What Went Well and What Went Wrong

What Went Well

• Robust liquidity and funding flexibility: $2.2B liquidity, $1.3B cash (27% of assets), and upsized $850M revolver at tighter spreads; “enable us to focus on new investment opportunities as 2025 begins,” per CEO Brian Harris .
• Record payoffs and securities deployment: $575M Q4 payoffs ($1.7B FY) supported $295M Q4 purchases of AAA securities at 6.2% unlevered yields; securities portfolio reached $1.1B (91% AAA) providing carry and optionality .
• Strategic credit and ratings momentum: 65% unsecured debt, new $500M unsecured due 2031, and positive ratings actions; management: “one notch below investment grade… goal of becoming an investment-grade credit” .

Selected quotes:

• “In the fourth quarter, Ladder generated strong earnings and dividend coverage… low leverage and robust liquidity position… enable us to focus on new investment opportunities as 2025 begins.” — CEO Brian Harris .
• “Adjusted leverage remained modest at 1.4x, with 77% of our asset base unencumbered…” — Pamela McCormack .
• “We believe… position us well for achieving our long‑held strategic goal of becoming an investment‑grade credit.” — CFO Paul Miceli .

What Went Wrong

• Net interest income pressure QoQ as loans paid off faster than originations: NII declined to $27.2M from $38.4M in Q3; distributable EPS dipped to $0.27 from $0.30 .
• Loan book contracted: Loans receivable fell to $1.59B at 12/31 from $2.04B at 9/30 as $575M Q4 payoffs outpaced $129M originations; management expects rebuild, but timing lag is 60–90 days from application .
• Incremental credit watch items: nonaccruals at $77M with a $16M addition in Q4; CECL reserve held at $52M as a conservative buffer while the denominator (loan book) shrank .

Financial Results

Core P&L and Per-Share Metrics (Quarterly)

Notes: Q4 GAAP income before taxes was $33.0M; net income attributable to Class A shareholders was $31.4M .

Full-Year Summary

Balance Sheet Mix (Quarter End)

Segment / KPI Snapshot (Q4 2024)

Guidance Changes

Management reiterated intent to deploy capital into higher‑yielding loans in 2025 as markets thaw, but did not provide numeric revenue/EPS guidance .

Earnings Call Themes & Trends

Management Commentary

• Strategic positioning: “We’re prepared to capitalize on opportunities in a recovering market while maintaining our disciplined approach to risk and growth.” — Pamela McCormack .
• Capital structure: “65% of our debt was comprised of unsecured corporate bonds… WAM 3.7 years… attractive 5.2% coupon” — CFO Paul Miceli .
• Deployment plan: “We plan to migrate our capital into higher concentrations of balance sheet loans and out of short‑term T‑bills and securities… while maintaining low leverage with high amounts of liquidity” — CEO Brian Harris .

Q&A Highlights

• Conduit outlook: Ladder won’t push hard near‑term; awaits a steeper curve to enhance conduit economics; will increase exposure as the curve steepens .
• CECL trajectory: Reserve percentage rose as the loan book shrank; management is “well covered” and sees higher probability of eventual releases rather than increases absent adverse macro surprises .
• Origination yields and mix: Credit spreads tightening, but all‑in coupons near ~7% require discipline; multifamily tightest; willing to lend across types where assets are recalibrated; cautious on select large‑city offices .
• Borrower behavior: Some gravitating to transitional/floating; Ladder also offering 1–2 year fully prepayable fixed‑rate loans to meet flexibility needs .

Estimates Context

• Wall Street consensus (S&P Global Capital IQ) for EPS and revenue was unavailable due to a request‑limit error at retrieval time. We cannot provide versus‑consensus comparisons for Q4 2024 in this report; we will update when S&P Global data access is restored.

Key Takeaways for Investors

• Balance sheet optionality is the near‑term driver: $2.2B liquidity, $850M revolver, and low leverage position Ladder to accelerate originations as markets thaw—potentially lifting NII and distributable EPS as cash/securities rotate into loans .
• Near‑term earnings cadence may be choppy until originations consistently outpace payoffs; Q4 NII decline underscores the timing lag from applications to closings (60–90 days) .
• Credit remains manageable: CECL stable at $52M and nonaccruals concentrated ($77M); management expects reserve releases over time if the macro backdrop improves .
• Securities provide carry and flexibility: $1.1B portfolio (91% AAA) at ~6% unlevered yields can be financed or sold to fund loan growth, cushioning earnings during the ramp .
• Ratings momentum is a medium‑term catalyst: progress toward investment grade could reduce funding costs (revolver stepdown) and broaden the investor base .
• Dividend remains supported by distributable earnings and protected by conservative leverage; $0.23 per share maintained for Q4 .