Ladder Capital Corp

Previous wording

As part of our commercial mortgage lending operations, we originate conduit loans, which are first mortgage loans on stabilized, income producing commercial real estate properties that we intend to make available for sale in commercial mortgage-backed securities (“CMBS”) securitizations. From our inception in October 2008 through March 31, 2024, we originated $16.9 billion of conduit loans, of which $16.8 billion were sold into 72 CMBS securitizations, making us, by volume, we have been one of the largest non-bank contributors of loans to CMBS securitizations in the United States in such period. Our sales of loans into securitizations are generally accounted for as true sales, not financings, and we generally retain no ongoing interest in loans which we securitize unless we are required to do so as issuer pursuant to the risk retention requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as amended, (the “Dodd-Frank Act”). The securitization of conduit loans enables us to reinvest our equity capital into new loan originations or allocate it to other investments.

Current wording

As part of our commercial mortgage lending operations, we originate conduit loans, which are first mortgage loans on stabilized, income producing commercial real estate properties that we intend to make available for sale in commercial mortgage-backed securities (“CMBS”) securitizations. From our inception in October 2008 through June 30, 2024, we originated $16.9 billion of conduit loans, of which $16.9 billion were sold into 73 CMBS securitizations, making us, by volume, we have been one of the largest non-bank contributors of loans to CMBS securitizations in the United States in such period. Our sales of loans into securitizations are generally accounted for as true sales, not financings, and we generally retain no ongoing interest in loans which we securitize unless we are required to do so as issuer pursuant to the risk retention requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as amended, (the “Dodd-Frank Act”). The securitization of conduit loans enables us to reinvest our equity capital into new loan originations or allocate it to other investments.

Previous wording

We generally seek to hold our balance sheet first mortgage loans for investment although we also maintain the flexibility to contribute such loans into a CLO or similar structure, sell participation interests or “b-notes” in our mortgage loans or sell such mortgage loans as whole loans. Our balance sheet first mortgage loans may be refinanced by us into a new conduit first mortgage loan upon property stabilization. As of March 31, 2024, we held a portfolio of 94 balance sheet first mortgage loans with an aggregate book value of $2.8 billion. Based on the loan balances and the “as-is” third-party Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”) appraised values at origination, the weighted average loan-to-value ratio of this portfolio was 65.7% at March 31, 2024.

Current wording

We generally seek to hold our balance sheet first mortgage loans for investment although we also maintain the flexibility to contribute such loans into a CLO or similar structure, sell participation interests or “b-notes” in our mortgage loans or sell such mortgage loans as whole loans. Our balance sheet first mortgage loans may be refinanced by us into a new conduit first mortgage loan upon property stabilization. As of June 30, 2024, we held a portfolio of 79 balance sheet first mortgage loans with an aggregate book value of $2.5 billion. Based on the loan balances and the “as-is” third-party Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”) appraised values at origination, the weighted average loan-to-value ratio of this portfolio was 64.4% at June 30, 2024.

Previous wording

Other Commercial Real Estate-Related Loans. We selectively invest in note purchase financings, subordinated debt, mezzanine debt and other structured finance products related to commercial real estate that are generally held for investment. As of March 31, 2024, we held a portfolio of 6 mezzanine loans with an aggregate book value of $16.3 million. Based on the loan balance and the “as-is” third-party FIRREA appraised values at origination, the weighted average loan-to-value ratio of the portfolio was 74.4% at March 31, 2024.

Current wording

June 30, 2024, we held a portfolio of 6 mezzanine loans with an aggregate book value of $16.3 million. Based on the loan balance and the “as-is” third-party FIRREA appraised values at origination, the weighted average loan-to-value ratio of the portfolio was 74.4% at June 30, 2024.

Previous wording

Conduit First Mortgage Loans. We also originate conduit loans, which are first mortgage loans that are secured by cash-flowing commercial real estate and are available for sale to securitizations. These first mortgage loans are typically structured with fixed interest rates and generally have five- to ten-year terms. Conduit first mortgage loans are originated, underwritten, approved and funded using the same comprehensive legal and underwriting approach, process and personnel used to originate our balance sheet first mortgage loans. Conduit first mortgage loans in excess of $50.0 million also require approval of our board of directors’ Risk and Underwriting Committee. We held one conduit loan with an aggregate carrying value of $27.0 million at March 31, 2024.

Current wording

Conduit First Mortgage Loans. We also originate conduit loans, which are first mortgage loans that are secured by cash-flowing commercial real estate and are available for sale to securitizations. These first mortgage loans are typically structured with fixed interest rates and generally have five- to ten-year terms. Conduit first mortgage loans are originated, underwritten, approved and funded using the same comprehensive legal and underwriting approach, process and personnel used to originate our balance sheet first mortgage loans. Conduit first mortgage loans in excess of $50.0 million also require approval of our board of directors’ Risk and Underwriting Committee. We held one conduit loan with an aggregate carrying value of $26.4 million at June 30, 2024.

Previous wording

Net Leased Commercial Real Estate Properties. As of March 31, 2024, we owned 156 single tenant net leased properties with an undepreciated book value of $654.6 million. These properties are fully leased on a net basis where the tenant is generally responsible for payment of real estate taxes, property, building and general liability insurance and property and building maintenance expenses. As of March 31, 2024, our net leased properties comprised a total of 3.8 million square feet, 100% leased with an average age since construction of 19.6 years and a weighted average remaining lease term of 8.5 years. Commercial real estate investments in excess of $20.0 million require the approval of our board of directors’ Risk and Underwriting Committee. The majority of the tenants in our net leased properties are necessity-based businesses. During the three months ended March 31, 2024, we collected 100% of rent on these properties.

Current wording

Net Leased Commercial Real Estate Properties. As of June 30, 2024, we owned 155 single tenant net leased properties with an undepreciated book value of $635.1 million. These properties are fully leased on a net basis where the tenant is generally responsible for payment of real estate taxes, property, building and general liability insurance and property and building maintenance expenses. As of June 30, 2024, our net leased properties comprised a total of 3.7 million square feet, 100% leased with an average age since construction of 19.5 years and a weighted average remaining lease term of 8.3 years. Commercial real estate investments in excess of $20.0 million require the approval of our board of directors’ Risk and Underwriting Committee. The majority of the tenants in our net leased properties are necessity-based businesses. During the three months ended June 30, 2024, we collected 100% of rent on these properties.

Previous wording

Diversified Commercial Real Estate Properties. As of March 31, 2024, we owned 55 diversified commercial real estate properties throughout the U.S with an undepreciated book value of $308.2 million. During the three months ended March 31, 2024, we collected 99% of rent on these properties.

Current wording

Diversified Commercial Real Estate Properties. As of June 30, 2024, we owned 56 diversified commercial real estate properties throughout the U.S with an undepreciated book value of $311.5 million. During the three months ended June 30, 2024, we collected 98% of rent on these properties.

Previous wording

As of March 31, 2024, the estimated fair value of our portfolio of CMBS investments totaled $465.4 million in 74 CUSIPs ($6.3 million average investment per CUSIP). Included in the $465.4 million of CMBS securities are $9.2 million of CMBS securities designated as risk retention securities under the Dodd-Frank Act, which are subject to transfer restrictions over the term of the securitization trust. The following chart summarizes our securities investments by market value, 98.8% of which were rated investment grade by Standard & Poor’s Ratings Group, Moody’s Investors Service, Inc. or Fitch Ratings Inc. as of March 31, 2024:

Current wording

As of June 30, 2024, the estimated fair value of our portfolio of CMBS investments totaled $480.8 million in 77 CUSIPs ($6.2 million average investment per CUSIP). Included in the $480.8 million of CMBS securities are $9.2 million of CMBS securities designated as risk retention securities under the Dodd-Frank Act, which are subject to transfer restrictions over the term of the securitization trust. The following chart summarizes our securities investments by market value, 99.5% of which were rated investment grade by Standard & Poor’s Ratings Group, Moody’s Investors Service, Inc. or Fitch Ratings Inc. as of June 30, 2024:

Previous wording

In the future, we may invest in CMBS securities or other securities that are unrated. As of March 31, 2024, our CMBS investments had a weighted average duration of 2.1 years. The commercial real estate collateral underlying our CMBS investment portfolio is located throughout the United States. As of March 31, 2024, by property count and market value, respectively, 64.7% and 63.1% of the collateral underlying our CMBS investment portfolio was distributed throughout the top 25 metropolitan statistical areas (“MSAs”) in the United States, with 7.4% and 18.6%, by property count and market value, respectively, of the collateral located in the New York-Newark-Jersey City MSA, and the concentrations in each of the remaining top 24 MSAs ranging from 0.1% to 7.8% by property count and 0.1% to 7.4% by market value.

Current wording

In the future, we may invest in CMBS securities or other securities that are unrated. As of June 30, 2024, our CMBS investments had a weighted average duration of 2.1 years. The commercial real estate collateral underlying our CMBS investment portfolio is located throughout the United States. As of June 30, 2024, by property count and market value, respectively, 62.2% and 59.7% of the collateral underlying our CMBS investment portfolio was distributed throughout the top 25 metropolitan statistical areas (“MSAs”) in the United States, with 4.6% and 17.9%, by property count and market value, respectively, of the collateral located in the New York-Newark-Jersey City MSA, and the concentrations in each of the remaining top 24 MSAs ranging from 0.1% to 7.0% by property count and 0.1% to 5.8% by market value.

Previous wording

Unconsolidated Venture. From time to time we invest in real estate related ventures. As of March 31, 2024, the carrying value of our unconsolidated ventures was $6.9 million.

Current wording

Unconsolidated Ventures. From time to time we invest in real estate related ventures. As of June 30, 2024, the carrying value of our unconsolidated ventures was $20.0 million.

Previous wording

United States Treasury Securities. We invest in short-term and long-term U.S. Treasury securities. Short-term U.S. Treasury securities are classified as cash and cash equivalents on our consolidated balance sheet. As of March 31, 2024, we held $1.1 billion of U.S. Treasury securities classified as cash and cash equivalents and held $1.1 million of U.S. Treasury securities classified as securities on our consolidated balance sheet.

Current wording

United States Treasury Securities. We invest in short-term and long-term U.S. Treasury securities. Short-term U.S. Treasury securities are classified as cash and cash equivalents on our consolidated balance sheet. As of June 30, 2024, we held $1.2 billion of U.S. Treasury securities classified as cash and cash equivalents on our consolidated balance sheet.

Previous wording

Due in large part to devoting such a large portion of the Company’s capital structure to equity and unsecured corporate bond debt, Ladder maintains a $3.0 billion pool of unencumbered assets, comprised primarily of first mortgage loans and unrestricted cash as of March 31, 2024.

Current wording

Due in large part to devoting such a large portion of the Company’s capital structure to equity and unsecured corporate bond debt, Ladder maintains a $3.1 billion pool of unencumbered assets, comprised primarily of first mortgage loans and unrestricted cash as of June 30, 2024.

Previous wording

We are parties to multiple committed loan repurchase agreement facilities, totaling $1.2 billion of credit capacity. As of March 31, 2024, the Company had $487.2 million of borrowings outstanding, with an additional $754.8 million of committed financing available. Assets pledged as collateral under these facilities are generally limited to first mortgage whole mortgage loans, mezzanine loans and certain interests in such first mortgage and mezzanine loans. Our repurchase facilities include covenants covering net worth requirements, minimum liquidity levels, and maximum debt/equity ratios.

Current wording

We are parties to multiple committed loan repurchase agreement facilities, totaling $1.2 billion of credit capacity. As of June 30, 2024, the Company had $351.9 million of borrowings outstanding, with an additional $804.1 million of committed financing available. Assets pledged as collateral under these facilities are generally limited to first mortgage whole mortgage loans, mezzanine loans and certain interests in such first mortgage and mezzanine loans. Our repurchase facilities include covenants covering net worth requirements, minimum liquidity levels, and maximum debt/equity ratios.

Previous wording

Additionally, we are a party to multiple uncommitted master repurchase agreements with several counterparties to finance our investments in CMBS and U.S. Agency securities. The securities that serve as collateral for these borrowings are typically AAA-rated CMBS with relatively short duration and significant subordination. The lenders have sole discretion to determine the market value of the collateral on a daily basis, and, if the estimated market value of the collateral declines, the lenders have the right to require additional cash collateral. If the estimated market value of the collateral subsequently increases, we have the right to call back excess cash collateral.

Current wording

We are a party to multiple uncommitted master repurchase agreements with several counterparties to finance our investments in CMBS and U.S. Agency securities. The securities that serve as collateral for these borrowings are typically AAA-rated CMBS with relatively short duration and significant subordination. The lenders have sole discretion to determine the market value of the collateral on a daily basis, and, if the estimated market value of the collateral declines, the lenders have the right to require additional cash collateral. If the estimated market value of the collateral subsequently increases, we have the right to call back excess cash collateral.

Previous wording

We generally finance our real estate using long-term non-recourse mortgage financing. During the three months ended March 31, 2024, the Company executed five new term debt agreements to finance properties in its real estate portfolio with an aggregate balance outstanding debt balance of $40.1 million. Our mortgage loan financings have primarily fixed rates ranging from 4.39% to 9.03%, mature between 2024 and 2034 and total $478.8 million as of March 31, 2024. These long-term non-recourse mortgages include net unamortized premiums of $2.5 million at March 31, 2024, representing proceeds received upon financing greater than the contractual amounts due under the agreements. The premiums are being amortized over the remaining life of the respective debt instruments using the effective interest method. We recorded $0.2 million of premium amortization, which decreased interest expense, for the three months ended March 31, 2024. The loans are collateralized by real estate and related lease intangibles, net, of $505.0 million as of March 31, 2024.

Current wording

We generally finance our real estate using long-term non-recourse mortgage financing. During the six months ended June 30, 2024, the Company executed ten new term debt agreements to finance properties in its real estate portfolio with an aggregate balance outstanding debt balance of $68.9 million. Our mortgage loan financings have primarily fixed rates ranging from 4.39% to 9.03%, mature between 2024 and 2034 and total $509.4 million as of June 30, 2024. These long-term non-recourse mortgages include net unamortized premiums of $4.1 million at June 30, 2024, representing proceeds received upon financing greater than the contractual amounts due under the agreements. The premiums are being amortized over the remaining life of the respective debt instruments using the effective interest method. We recorded $0.3 million of premium amortization, which decreased interest expense, for the six months ended June 30, 2024. The loans are collateralized by real estate and related lease intangibles, net, of $500.1 million as of June 30, 2024.

Previous wording

Activity for the three months ended March 31, 2024 included net paydowns of $357.1 million of commercial mortgage loans. Activity for the three months ended March 31, 2024 included securities purchases of $70.6 million, sales of $4.8 million and $88.4 million of amortization and paydowns, which contributed to a net decrease in our securities portfolio of $19.0 million. We acquired $14.1 million in real estate via foreclosure. In addition, we purchased $2.0 billion of short-term U.S. Treasury securities and received $1.9 billion from redemptions of short-term U.S. Treasury securities during the three months ended March 31, 2024.

Current wording

Activity for the three months ended March 31, 2024 included net paydowns $357.1 million of commercial mortgage loans. Activity for the three months ended March 31, 2024 included securities purchases of $70.6 million, sales of $4.8 million and $88.4 million of amortization and paydowns, which contributed to a net decrease in our securities portfolio of $19.0 million. We acquired $14.1 million in real estate via foreclosure. In addition, we purchased $2.0 billion of short-term U.S. Treasury securities and received $1.9 billion from redemptions of short-term U.S. Treasury securities during the three months ended March 31, 2024.

Previous wording

The $4.7 million decrease in interest income was primarily attributable to a reduction in our outstanding loan balances as a result of net paydowns. For the three months ended March 31, 2024, the amortized cost of loan investments averaged $3.0 billion and the amortized cost of securities investments averaged $458.7 million. For the three months ended December 31, 2023, the amortized cost of loan investments averaged $3.3 billion and the amortized cost of securities investments averaged $474.9 million. There was a $238.2 million decrease in average loan investments and a $16.2 million decrease in average securities investments.

Current wording

The $7.4 million decrease in interest income was primarily attributable to a reduction in our outstanding loan balances as a result of net paydowns. For the three months ended June 30, 2024, the amortized cost of loan investments averaged $2.6 billion and the amortized cost of securities investments averaged $452.3 million. For the three months ended March 31, 2024, the amortized cost of loan investments averaged $3.0 billion and the amortized cost of securities investments averaged $458.7 million. There was a $430.5 million decrease in average loan investments and a $6.4 million decrease in average securities investments.

Previous wording

The $2.0 million decrease in interest expense is primarily a result of a reduction in our security and loan repurchase facilities and repurchases of our Notes.

Current wording

The $4.6 million decrease in interest expense is primarily a result of a reduction in our loan repurchase facilities and repurchases of our Notes.

Previous wording

The decrease in net interest income before provision for loan losses of $2.7 million as explained above is primarily driven by a reduction in interest income as a result of net payoffs.

Current wording

The decrease in net interest income before provision for loan losses of $2.8 million as explained above is primarily driven by a reduction in interest income as a result of net payoffs.

Previous wording

As of March 31, 2024, the weighted average yield on our mortgage loan receivables was 9.4%, compared to 9.6% as of December 31, 2023. As of March 31, 2024 and December 31, 2023, the weighted average interest rate on borrowings against our mortgage loan receivables was 7.2% as compared to 7.5% as of December 31, 2023. As of March 31, 2024, we had outstanding borrowings secured by our mortgage loan receivables equal to 55.3% of the carrying value of our mortgage loan receivables, compared to 53.1% as of December 31, 2023.

Current wording

As of June 30, 2024 and March 31, 2024, the weighted average yield on our mortgage loan receivables was 9.4%. As of June 30, 2024 and March 31, 2024, the weighted average interest rate on borrowings against our mortgage loan receivables was 7.2%. As of June 30, 2024, we had outstanding borrowings secured by our mortgage loan receivables equal to 51.9% of the carrying value of our mortgage loan receivables, compared to 55.3% as of March 31, 2024.

Previous wording

As of March 31, 2024 and December 31, 2023, the weighted average yield on our securities was 6.8%. As of March 31, 2024 and December 31, 2023 the weighted average interest rate on borrowings against our securities was 5.8%. As of March 31, 2024, we had outstanding borrowings secured by our securities equal to 19.6% of the carrying value of our securities, compared to 24.0% as of December 31, 2023.

Current wording

As of June 30, 2024 and March 31, 2024, the weighted average yield on our securities was 6.9% and 6.8%, respectively. As of June 30, 2024 and March 31, 2024, the weighted average interest rate on borrowings against our securities was 6.7% and 5.75%, respectively. As of June 30, 2024, we had outstanding borrowings secured by our securities equal to 0.3% of the carrying value of our securities, compared to 19.6% as of March 31, 2024.

Previous wording

Our real estate is comprised of non-interest bearing assets; however, interest incurred on mortgage financing collateralized by such real estate is included in interest expense. As of March 31, 2024, and December 31, 2023, the weighted average interest rate on mortgage borrowings against our real estate was 6.0% and 5.9%, respectively. As of March 31, 2024, we had outstanding borrowings secured by our real estate equal to 65.3% of the carrying value of our real estate, compared to 60.3% as of December 31, 2023.

Current wording

Our real estate is comprised of non-interest bearing assets; however, interest incurred on mortgage financing collateralized by such real estate is included in interest expense. As of June 30, 2024 and March 31, 2024, the weighted average interest rate on mortgage borrowings against our real estate was 6.0%. As of June 30, 2024, we had outstanding borrowings secured by our real estate equal to 70.9% of the carrying value of our real estate, compared to 65.3% as of March 31, 2024.

Previous wording

The provision for the three months ended March 31, 2024 of $5.8 million was primarily due to adverse changes in macroeconomic conditions affecting commercial real estate, partially offset by a decrease in the size of our balance sheet first mortgage loan portfolio as a result of repayments.

Current wording

The provision for the three months ended June 30, 2024 of $5.1 million was primarily due to adverse changes in macroeconomic conditions affecting commercial real estate, partially offset by a decrease in the size of our balance sheet first mortgage loan portfolio as a result of repayments.

Previous wording

The provision for the three months ended December 31, 2023 of $6.0 million was primarily due to adverse changes in macroeconomic conditions affecting commercial real estate. For additional information, refer to Note 3, Mortgage Loan Receivables, in the consolidated financial statements.

Current wording

The provision for the three months ended March 31, 2024 of $5.8 million was primarily due to adverse changes in macroeconomic conditions affecting commercial real estate, partially offset by a decrease in the size of our balance sheet first mortgage loan portfolio as a result of repayments. For additional information, refer to Note 3, Mortgage Loan Receivables, in the consolidated financial statements.

Previous wording

The increase of $0.8 million in real estate operating income was primarily the result of increases in tenant related income and the timing of the acquisition of properties via foreclosure during the three months ended March 31, 2024 and December 31, 2023.

Current wording

The increase of $2.2 million in real estate operating income was primarily the result of increases in tenant related income and the timing of the acquisition of properties via foreclosure during the three months ended June 30, 2024 and March 31, 2024.

Previous wording

Net result from mortgage loan receivables held for sale, includes all loan sales, whether by securitization, whole loan sales or other means. Net result from mortgage loan receivables held for sale also includes unrealized losses on loans related to lower of cost or market adjustments. During the three months ended March 31, 2024, we did not transfer any balance sheet first mortgage or conduit loans and recorded a lower of cost or market adjustment reversal of $0.1 million. During the three months ended December 31, 2023, we did not transfer any balance sheet mortgage loans or conduit loans and recorded $0.6 million net in lower of cost or market adjustments. Income from sales of loans, net is subject to market conditions impacting timing, size and pricing and as such may vary significantly quarter to quarter.

Current wording

Net result from mortgage loan receivables held for sale, includes all loan sales, whether by securitization, whole loan sales or other means. Net result from mortgage loan receivables held for sale also includes unrealized losses on loans related to lower of cost or market adjustments. During the three months ended June 30, 2024, we recorded a lower of cost or market adjustment of $(0.5) million on our conduit loan. During the three months ended March 31, 2024, recorded a lower of cost or market adjustment reversal of $0.1 million. Income from sales of loans, net is subject to market conditions impacting timing, size and pricing and as such may vary significantly quarter to quarter.

Previous wording

We generate fee income on the loans we originate and in which we invest, and dividend income on our FHLB stock. The $1.5 million increase in fee and other income was primarily due to the timing of loan payoffs for the three months ended March 31, 2024 as compared to the three months ended December 31, 2023.

Current wording

We generate fee income on the loans we originate and in which we invest, and dividend income on our FHLB stock. The $0.1 million decrease in fee and other income was primarily due to the timing of loan payoffs for the three months ended June 30, 2024 as compared to the three months ended March 31, 2024.

Previous wording

Net result from derivative transactions of $4.0 million was comprised of a realized gain of $4.8 million and an unrealized loss of $0.8 million for the three months ended March 31, 2024. Net result from derivative transactions of $5.2 million was comprised of a realized loss of $5.0 million and an unrealized loss of $0.2 million for the three months ended December 31, 2023. The hedge positions primarily relate to fixed rate conduit loans and securities investments. The derivative positions that generated these results were a combination of five and ten year U.S. treasury rate futures that we employed in an effort to hedge the interest rate risk primarily on the financing of our fixed rate assets and the net interest income we earn against the impact of changes in interest rates. The gain in 2024 was primarily related to movement in interest rates during the three months ended March 31, 2024. The total net result from derivative transactions is comprised of hedging interest expense, realized gains/losses related to hedge terminations and unrealized gains/losses related to changes in the fair value of asset hedges.

Current wording

Net result from derivative transactions of $0.6 million was comprised of a realized gain of $0.5 million and an unrealized gain of $0.1 million for the three months ended June 30, 2024. Net result from derivative transactions of $4.0 million was comprised of a realized gain of $4.8 million and an unrealized loss of $0.8 million for the three months ended March 31, 2024. The hedge positions primarily relate to fixed rate conduit loans and securities investments. The derivative positions that generated these results were a combination of five and ten year U.S. treasury rate futures that we employed in an effort to hedge the interest rate risk primarily on the financing of our fixed rate assets and the net interest income we earn against the impact of changes in interest rates. The gain during three months ended June 30, 2024 was primarily related to movement in interest rates during the three months ended June 30, 2024. The total net result from derivative transactions is comprised of hedging interest expense, realized gains/losses related to hedge terminations and unrealized gains/losses related to changes in the fair value of asset hedges.

Previous wording

Compensation and employee benefits are comprised primarily of salaries, bonuses, stock-based compensation and other employee benefits. The increase of $7.8 million in compensation expense was primarily attributable to the granting of fully vested annual stock-based compensation during the three months ended March 31, 2024, whereas there was no equity based compensation granted during the three months ended December 31, 2023.

Current wording

Compensation and employee benefits are comprised primarily of salaries, bonuses, stock-based compensation and other employee benefits. The decrease of $7.1 million in compensation expense was primarily attributable to the granting of fully vested annual stock-based compensation during the three months ended March 31, 2024, whereas there was no equity based compensation granted during the three months ended June 30, 2024.

Previous wording

Operating expenses are primarily composed of professional fees, lease expense and technology expenses. The increase during the three months ended March 31, 2024 compared to the three months ended December 31, 2023 of $0.2 million was primarily related to an increase in professional fees.

Current wording

Operating expenses are primarily composed of professional fees, lease expense and technology expenses. The increase of $0.5 million during the three months ended June 30, 2024 compared to the three months ended March 31, 2024 was primarily related to an increase in professional fees.

Previous wording

The increase in real estate operating expenses during the three months ended March 31, 2024 compared to the three months ended December 31, 2023 of $0.6 million is primarily the result of the timing of the acquisition of properties via foreclosure during the three months ended March 31, 2024 and December 31, 2023.

Current wording

The increase of $1.9 million in real estate operating expenses during the three months ended June 30, 2024 compared to the three months ended March 31, 2024 was primarily the result of the timing of the acquisition of three properties via foreclosure during the three months ended June 30, 2024 and March 31, 2024.

Previous wording

Investment related expenses are comprised primarily of custodian fees, financing costs, servicing fees related to loans, and other deal related expenses. The decrease of $0.4 million during the three months ended March 31, 2024 compared to the three months ended December 31, 2023 was primarily attributable to a decrease in deal related expenses.

Current wording

Investment related expenses are comprised primarily of custodian fees, financing costs, servicing fees related to loans, and other deal related expenses. The increase of $0.3 million during the three months ended June 30, 2024 compared to the three months ended March 31, 2024 was primarily attributable to an increase in deal related expenses.

Previous wording

The $0.5 million increase during the three months ended March 31, 2024 compared to the three months ended December 31, 2023 in depreciation and amortization is primarily attributable to the timing of the acquisition of properties via foreclosure during the three months ended March 31, 2024 and December 31, 2023.

Current wording

The $0.1 million increase during the three months ended June 30, 2024 compared to the three months ended March 31, 2024 in depreciation and amortization is primarily attributable to the timing of the acquisition of properties via foreclosure during the three months ended June 30, 2024 and March 31, 2024.

Previous wording

Most of our consolidated income tax provision related to the business units held in our TRSs. The increase in expense during the three months ended March 31, 2024 compared to the three months ended December 31, 2023 is primarily a result of changes in our income in our TRSs.

Current wording

Most of our consolidated income tax provision related to the business units held in our TRSs. The decrease in expense during the three months ended June 30, 2024 compared to the three months ended March 31, 2024 is primarily a result of changes in our income in our TRSs.

Previous wording

A discussion regarding our results of operations for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 is presented below.

Current wording

A discussion regarding our results of operations for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 is presented below.

Previous wording

Activity for the three months ended December 31, 2023 included originating and funding $7.0 million in principal value of commercial mortgage loans, which was offset by $166.8 million of principal repayments. Activity for the three months ended December 31, 2023 included securities purchases of $67.4 million and $59.1 million of amortization and paydowns in the portfolio, which contributed to a net increase in our securities portfolio of $8.8 million. In addition, we purchased $1.7 billion of short-term U.S. Treasury securities during the three months ended December 31, 2023, of which $1.4 billion matured during the three months ended December 31, 2023.

Current wording

Activity for the six months ended June 30, 2023 included originating and funding $44.2 million in principal value of commercial mortgage loans, which was offset by $440.5 million of principal repayments. Activity for the six months ended June 30, 2023 included securities purchases of $17.9 million, sales of $14.2 million and $135.7 million of amortization and paydowns, which partially contributed to a net decrease in our securities portfolio of $129.3 million during the six months ended June 30, 2023. In addition, we purchased $2.1 billion of short-term U.S. Treasury securities during the six months ended June 30, 2023, of which $1.5 billion matured during the six months ended June 30, 2023.

Previous wording

The $7.9 million decrease in interest income was primarily attributable net payoffs within our loan portfolio partially offset by an increase in income from our cash and cash equivalent U.S. Treasuries. There was a $(0.9) billion decrease in average loan investments from $3.9 billion for the three months ended March 31, 2023 to $3.0 billion for the three months ended March 31, 2024. There was a $(90.3) million decrease in average securities investments from $549.0 million for the three months ended March 31, 2023 to $458.7 million for the three months ended March 31, 2024.

Current wording

The $21.2 million decrease in interest income was primarily attributable net payoffs within our loan portfolio partially offset by an increase in income from our cash and cash equivalent U.S. Treasuries. There was a $(0.9) billion decrease in average loan investments from $3.8 billion for the six months ended June 30, 2023 to $2.9 billion for the six months ended June 30, 2024. There was a $(62.4) million decrease in average securities investments from $518.2 million for the six months ended June 30, 2023 to $455.8 million for the six months ended June 30, 2024.

Previous wording

The $2.0 million decrease in interest expense is primarily related to lower outstanding balances on our securities and loan repurchase facilities and FHLB borrowings as well as a reduction in expense as a result of redemptions of our Notes.

Current wording

The $9.1 million decrease in interest expense is primarily related to lower outstanding balances on our securities and loan repurchase facilities and the payoff of our FHLB borrowings as well as a reduction in expense as a result of redemptions of our Notes.

Previous wording

As of March 31, 2024, the weighted average yield on our mortgage loan receivables was 9.4%, compared to 9.1% as of March 31, 2023. The weighted average yield increased as a result of increases in the prevailing interest rates. As of March 31, 2024, the weighted average interest rate on borrowings against our mortgage loan receivables was 7.2%, compared to 6.5% as of March 31, 2023. The increase in the rate on borrowings against our mortgage loan receivables from March 31, 2023 to March 31, 2024 was primarily due to the increase in prevailing interest rates. As of March 31, 2024, we had outstanding borrowings secured by our mortgage loan receivables equal to 55.3% of the carrying value of our mortgage loan receivables, compared to 45.1% as of March 31, 2023.

Current wording

As of June 30, 2024, the weighted average yield on our mortgage loan receivables was 9.4%, compared to 9.5% as of June 30, 2023. The weighted average yield increased as a result of securities purchase activity with higher rates. As of June 30, 2024, the weighted average interest rate on borrowings against our mortgage loan receivables was 7.2%, compared to 7.2% as of June 30, 2023. The decrease in the rate on borrowings against our mortgage loan receivables from June 30, 2023 to June 30, 2024 was primarily due to the increase in prevailing interest rates. As of June 30, 2024, we had outstanding borrowings secured by our mortgage loan receivables equal to 51.9% of the carrying value of our mortgage loan receivables, compared to 49.3% as of June 30, 2023.

Previous wording

As of March 31, 2024, the weighted average yield on our securities was 6.8%, compared to 5.6% as of March 31, 2023. The weighted average yield increased as a result of increases in the prevailing interest rates. As of March 31, 2024, the weighted average interest rate on borrowings against our securities was 5.8%, compared to 5.2% as of March 31, 2023. The increase in the rate on borrowings against our securities from March 31, 2023 to March 31, 2024 was primarily due to higher prevailing market borrowing rates as of March 31, 2024 compared to March 31, 2023. As of March 31, 2024, we had outstanding borrowings secured by our securities equal to 19.6% of the carrying value of our real estate securities, compared to 63.7% as of March 31, 2023.

Current wording

As of June 30, 2024, the weighted average yield on our securities was 6.9%, compared to 6.2% as of June 30, 2023. The weighted average yield increased as a result of increases in the prevailing interest rates. As of June 30, 2024, the weighted average interest rate on borrowings against our securities was 6.7%, compared to 5.4% as of June 30, 2023. The increase in the rate on borrowings against our securities from June 30, 2023 to June 30, 2024 was primarily due to higher prevailing market borrowing rates as of June 30, 2024 compared to June 30, 2023. As of June 30, 2024, we had outstanding borrowings secured by our securities equal to 0.3% of the carrying value of our real estate securities, compared to 39.5% as of June 30, 2023.

Previous wording

Our real estate is comprised of non-interest bearing assets; however, interest incurred on mortgage financing collateralized by such real estate is included in interest expense. As of March 31, 2024, the weighted average interest rate on mortgage borrowings against our real estate assets was 6.0%, compared to 5.7% as of March 31, 2023. As of March 31, 2024, we had outstanding borrowings secured by our real estate equal to 65.3% of the carrying value of our real estate, compared to 67.8% as of March 31, 2023.

Current wording

Our real estate is comprised of non-interest bearing assets; however, interest incurred on mortgage financing collateralized by such real estate is included in interest expense. As of June 30, 2024, the weighted average interest rate on mortgage borrowings against our real estate assets was 6.0%, compared to 5.7% as of June 30, 2023. As of June 30, 2024, we had outstanding borrowings secured by our real estate equal to 70.9% of the carrying value of our real estate, compared to 68.3% as of June 30, 2023.