INVESTOR RELATIONS

Financial Highlights

• Generated third quarter Core Earnings of $41.2 million
• Core EPS of $0.40 for the third quarter of 2015 (Diluted EPS on a GAAP basis of $0.06)
• Originated $836.1 million of commercial mortgage loans, including $649.1 million of mortgage loans held for sale and $187.0 million of mortgage loans held for investment, and made $26.5 million of net leased and other equity investments during the quarter
• Contributed $860.1 million of loans to 3 securitization transactions in the third quarter of 2015 (completed 7 securitizations thus far in 2015)
• Generated a 10.6% after-tax return on equity, declared a dividend of $0.275/share, and ended the quarter with a book value of $15.02/share

NEW YORK--(BUSINESS WIRE)-- Ladder Capital Corp (NYSE:LADR) (“we,” “Ladder,” or the “Company”) today announced operating results for the quarter ended September 30, 2015. Core Earnings, a non-GAAP financial measure, was $41.2 million for the third quarter of 2015, compared to $49.2 million earned in the third quarter of 2014. For the nine months ended September 30, 2015, Core Earnings were $141.3 million compared to $166.4 million for the comparable period in 2014. These results reflect lower profit margins on securitizations during the quarter partially offset by higher net interest and rental income. We believe Core Earnings, which adjusts GAAP income before taxes for certain non-cash expenses and unrecognized derivative results, is useful in evaluating our earnings from operations. Net income for the three and nine months ended September 30, 2015 was $2.8 million and $89.5 million, respectively, compared to $37.2 million and $85.8 million for the three and nine months ended September 30, 2014, respectively.

Core EPS, a non-GAAP measure, was $0.40 per share for the third quarter of 2015 and $1.40 per share for the nine months ended September 30, 2015, compared to $0.31 and $1.04 per share for the three and nine months ended September 30, 2014, respectively. Diluted EPS on a GAAP basis was $0.06 per share for the third quarter of 2015, compared to $0.28 per share for the quarter ended September 30, 2014.

Brian Harris, Ladder's Chief Executive Officer, said, “Our earnings this quarter reflect the high level of macro-market volatility experienced in the third quarter. China’s devaluation and other factors led to rapid credit spread widening which affected our conduit securitization business. Nevertheless, all three securitizations in the quarter were profitable, and we are pleased to report an annualized after-tax return on equity of 10.6% for the quarter. Our other business lines continued to produce substantial net interest margin and net rents. In short, we remain committed to our balanced and diversified investment approach, which is designed to produce strong ROE’s and preserve book value.”

As of September 30, 2015, we had total assets of $5.8 billion, including $2.1 billion of commercial real estate loans, $2.4 billion of commercial real estate-related securities, $840.6 million of real estate, $232.5 million of cash and $213.2 million of other assets. As of September 30, 2015, 77.0% of our total assets were comprised of senior secured assets, including first mortgage loans, commercial real estate-related securities secured by first mortgage loans, and cash. During the third quarter, senior secured assets comprised 96.5% of the total $1.1 billion investment activity.

During the quarter ended September 30, 2015, we originated $836.1 million of loans comprised of $649.1 million of commercial mortgage loans held for sale and $187.0 million of commercial mortgage loans held for investment. We participated in 3 securitization transactions during the third quarter of 2015 contributing a total of $860.1 million in face amount of commercial mortgage loans. The sale of loans into these 3 securitization transactions resulted in income from the sale of loans, net, of $15.2 million in the third quarter. After factoring in related hedging results and other related adjustments, the net economic benefit from securitization activity during the third quarter was $12.2 million. We also received $136.9 million in proceeds from the repayment of mortgage loans during the three months ended September 30, 2015.

Our portfolio of CMBS and U.S. Agency Securities increased by $116.0 million during the third quarter to $2.4 billion as we purchased $208.6 million and sold $62.0 million of securities during the quarter. We also received $27.8 million of proceeds from the repayment of securities.

During the third quarter of 2015, we purchased 11 single tenant net lease properties for a total investment of $26.5 million. We have financed these properties with internal non-recourse mortgage loan financing eligible for securitization. During the three months ended September 30, 2015, our mortgage loan financing increased by $26.7 million primarily due to the contribution of 16 loans secured by our real estate investments to securitizations. We also sold 39 condominium units for a total of $14.0 million during the third quarter, which generated income from the sale of real estate, net, of $5.0 million. Our total real estate portfolio as of September 30, 2015 was $840.6 million.

Net interest income for the third quarter of 2015 was $33.5 million, compared to $28.5 million for the comparable period in the prior year, primarily due to higher average loan receivable balances partially offset by higher interest expense as a result of higher outstanding financing obligations. Sale of loans, net decreased by $5.2 million and realized gain on securities decreased by $13.6 million in the third quarter of 2015 compared to the third quarter of 2014, as the widening of credit spreads during the quarter led to reduced profit margins. A net loss from derivative transactions of $42.2 million for the three months ended September 30, 2015 compared to net gain of $1.1 million in the same period in 2014 also contributed to lower total other income.

Portfolio Overview

The following table summarizes the book value of our investment portfolio as of the following dates:

We originate conduit first mortgage loans eligible for securitization that are secured by cash-flowing commercial real estate properties. These first mortgage loans are structured with fixed rates and five- to ten-year terms. As of September 30, 2015, we held 20 first mortgage loans that were substantially available for contribution into future securitizations with an aggregate book value of $333.5 million. Based on the outstanding loan principal balances at September 30, 2015 and the “as-is” third-party FIRREA appraised values at origination, the weighted average loan- to-value ratio of this portfolio was 63.0%.

We also originate balance sheet first mortgage loans secured by commercial real estate properties that are undergoing lease-up, sell-out, renovation, or repositioning. These mortgage loans are generally structured with floating rates and terms (including extension options) ranging from one to five years. As of September 30, 2015, we held a portfolio of 64 balance sheet first mortgage loans with an aggregate book value of $1.5 billion, 89.5% of which was floating-rate. Based on the outstanding loan principal balances at September 30, 2015 and the “as-is” third-party FIRREA appraised values at origination, the weighted average loan-to-value ratio of this portfolio was 66.6%.

We selectively invest in other commercial real estate loans in the form of note purchase financings, subordinated debt, mezzanine debt, and other structured finance products related to commercial real estate. We held $285.1 million of other commercial real estate-related loans as of September 30, 2015, 32.9% of which was floating-rate. Based on the outstanding loan principal balances through the mezzanine or subordinated debt level at September 30, 2015 and the “as-is” third-party FIRREA appraised values at origination, the weighted average loan-to-value ratio of this portfolio was 67.5%.

As of September 30, 2015, our portfolio of CMBS investments had an estimated fair value of $2.3 billion and was comprised of investments in 167 CUSIPs ($14.0 million average investment per CUSIP), with a weighted average duration of 3.4 years.

As of September 30, 2015, our portfolio of U.S. Agency Securities had an estimated fair value of $73.3 million and was comprised of investments in 35 CUSIPs ($2.1 million average investment per CUSIP), with a weighted average duration of 7.1 years.

As of September 30, 2015, we owned 6.9 million square feet of real estate, comprised of 81 single tenant net lease properties, 4 individual office buildings, 3 portfolios of office buildings, 1 warehouse, 148 condominium units at Veer Towers in Las Vegas, and 178 condominium units at Terrazas River Park Village in Miami. Our total real estate portfolio had an aggregate book value of $840.6 million. We typically originate internal non-recourse mortgage loan financing secured by an individual property or a group of properties in our real estate portfolio and subsequently seek to securitize these loans. Once the loans have been securitized, they are included on our balance sheet as mortgage loan financing. As of September 30, 2015, we had $555.8 million of such mortgage loan financing, secured by certain of our real estate properties.

Liquidity and Capital Resources

We held unrestricted cash and cash equivalents of $181.5 million at September 30, 2015. We had total debt outstanding of $4.2 billion as of September 30, 2015, and we had an additional $1.5 billion of committed financing available for additional investment through our FHLB membership, our revolving credit agreements, and our committed repurchase facilities. On August 14, 2015, we also executed an amendment of one of our credit facilities with a major banking institution, providing for, among other things, an increase in the maximum funding capacity to $600.0 million.

The following table summarizes our debt obligations as of the following dates:

To maintain our qualification as a REIT, we must distribute our accumulated earnings and profits and we must annually distribute at least 90% of our taxable income. We expect that a portion of our annual distribution, as well as a one- time earnings and profits distribution, as required by the REIT rules, would be payable primarily in stock, to provide for meaningful capital retention, and would be subject to a cash/stock election in accordance with the private letter ruling we have received from the IRS.

Selected Investment-Related Activity Subsequent to September 30, 2015

• Originated $392.1 million in principal balance of conduit loans in October 2015
• Originated $44.0 million in principal balance of balance sheet loans in October 2015

Conference Call and Webcast

We will host a conference call on Wednesday, November 4, 2015 at 5:00 p.m. EST to discuss third quarter 2015 results. The conference call can be accessed by dialing (877) 407-9039 domestic or (201) 689-8470 international. Individuals who dial in will be asked to identify themselves and their affiliations. For those unable to participate, an audio replay will be available from 8:00 p.m. EST on Wednesday, November 4, 2015 through midnight Wednesday, November 18, 2015. To access the replay, please call (877) 870-5176 domestic or (858) 384-5517 international, access code 13623204. The conference call will also be webcast though a link on Ladder Capital Corp’s Investor Relations website at ir.laddercapital.com. A web-based archive of the conference call will also be available at the above website.

Non-GAAP Financial Measures

We present Core Earnings, which is a non-GAAP measure, as a supplemental measure of our performance. We consider limited partners of Ladder Capital Finance Holdings LLLP other than Ladder Capital Corp ("Continuing LCFH Limited Partners") to have fundamentally equivalent interest in our pre-tax earnings. Accordingly, for purposes of computing Core Earnings we start with pre-tax earnings and adjust for other noncontrolling interest in consolidated joint ventures but we do not adjust for amounts attributable to noncontrolling interests held by Continuing LCFH Limited Partners.

We define Core Earnings as income before taxes adjusted to exclude (i) real estate depreciation and amortization, (ii) the impact of derivative gains and losses related to the hedging of assets on our balance sheet as of the end of the specified accounting period, (iii) unrealized gains/(losses) related to our investments in Agency interest-only securities, (iv) the premium (discount) on mortgage loan financing and the related amortization of premium (discount) on mortgage loan financing recorded during the period, (v) non-cash stock-based compensation and (vi) certain one-time items.

We do not designate derivatives as hedges to qualify for hedge accounting and therefore any net payments under, or fluctuations in the fair value of, our derivatives are recognized currently in our income statement. However, fluctuations in the fair value of the related assets are not included in our income statement. We consider the gain or loss on our hedging positions related to assets that we still own as of the reporting date to be “open hedging positions.” While recognized for GAAP purposes, we exclude the results on the hedges from Core Earnings until the related asset is sold and the hedge position is considered “closed”, whereupon they would then be included in Core Earnings in that period. These are reflected as “Adjustments for unrecognized derivative results” for purposes of computing Core Earnings for the period.

Our investments in Agency interest-only securities are recorded at fair value with changes in fair value recorded in current period earnings. We believe that excluding these specifically identified gains and losses associated with the open hedging positions adjusts for timing differences between when we recognize changes in the fair values of our assets and derivatives which we use to hedge asset values. Set forth below is an unaudited reconciliation of income before taxes to Core Earnings:

We present Core EPS, which is a non-GAAP measure, as a supplemental measure of our performance. Core EPS is defined as Core Earnings adjusted for taxes based on an estimate of our corporate tax rate assuming full deductibility of all expenses, divided by the weighted average diluted shares outstanding during the quarter, pro forma for the conversion of all Class B common shares outstanding into shares of Class A common stock as of January 1, 2014, as if the Company’s IPO had occurred on that date. The average diluted shares outstanding for Core EPS now includes the incremental shares of unvested Class A restricted stock to correspond to the GAAP calculation of diluted shares. This change has no impact on Core EPS figures reported in prior quarters.

Set forth below is an unaudited reconciliation of GAAP Diluted EPS to Core EPS:

Set forth below is an unaudited computation of Core EPS:

We present Core Earnings and Core EPS because we believe they assist investors in comparing our performance across reporting periods on a consistent basis by excluding non-cash expenses and unrecognized results from derivatives and Agency interest-only securities, which we believe makes comparisons across reporting periods more relevant by eliminating timing differences related to changes in the values of assets and derivatives. In addition, we use Core Earnings and Core EPS: (i) to evaluate our earnings from operations and (ii) because management believes that it may be a useful performance measure for us.

Core Earnings and Core EPS have limitations as analytical tools. Some of these limitations are:

• Core Earnings and Core EPS do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations and are not necessarily indicative of cash necessary to fund cash needs;
• Core EPS is based on a non-GAAP estimate of Ladder’s effective tax rate, including the impact of UBT and the impact of Ladder's election to be taxed as a REIT effective January 1, 2015, assuming the conversion of all shares of Class B common stock into shares of Class A common stock. Ladder’s actual tax rate may differ materially from this estimate; and
• other companies in our industry may calculate Core Earnings and Core EPS differently than we do, limiting its usefulness as a comparative measure.

Because of these limitations, Core Earnings and Core EPS should not be considered in isolation or as a substitute for net income or earnings per share as an alternative to cash flow as a measure of our liquidity or any other performance measures calculated in accordance with GAAP.

In the future we may incur gains and losses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Core Earnings and Core EPS should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

For additional information about our non-GAAP financial measures, please refer to our Quarterly Report on Form 10-Q.

About Ladder

Ladder is an internally-managed real estate investment trust that is a leader in commercial real estate finance. Ladder originates and invests in a diverse portfolio of commercial real estate and real estate-related assets, focusing on senior secured assets. Ladder’s investment activities include: (i) direct origination of commercial real estate first mortgage loans; (ii) investments in investment grade securities secured by first mortgage loans on commercial real estate; and (iii) investments in net leased and other commercial real estate. Founded in 2008, Ladder is run by a highly experienced management team with extensive expertise in all aspects of the commercial real estate industry, including origination, credit, underwriting, structuring, capital markets and asset management. Led by Brian Harris, the Company’s Chief Executive Officer, Ladder is headquartered in New York City and has branches in Boca Raton, Los Angeles and San Francisco.

Forward-Looking Statements

Certain statements in this release may constitute “forward-looking” statements. These statements are based on management’s current opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results. These forward-looking statements are only predictions, not historical fact, and involve certain risks and uncertainties, as well as assumptions. Actual results, levels of activity, performance, achievements and events could differ materially from those stated, anticipated or implied by such forward-looking statements. While Ladder believes that its assumptions are reasonable, it is very difficult to predict the impact of known factors, and, of course, it is impossible to anticipate all factors that could affect actual results. There are a number of risks and uncertainties that could cause actual results to differ materially from forward-looking statements made herein including, most prominently, the risks discussed under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, as well as its consolidated financial statements, related notes, and other financial information appearing therein, and its other filings with the U.S. Securities and Exchange Commission. Such forward- looking statements are made only as of the date of this release. Ladder expressly disclaims any obligation or undertaking to release any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or changes in events, conditions, or circumstances on which any such statement is based.

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Investors
Ladder Capital Corp Investor Relations
917-369-3207
investor.relations@laddercapital.com

Source: Ladder Capital Corp