Ladder Capital Corp

Previous wording

Our businesses, including balance sheet lending, conduit lending, securities investments, and real estate investments, provide for a stable base of net interest and rental income. We have originated $29.8 billion of commercial real estate loans from our inception in October 2008 through June 30, 2024. During this timeframe, we also acquired $13.3 billion of predominantly investment grade-rated securities secured by first mortgage loans on commercial real estate and $2.1 billion of selected net leased and other real estate assets.

Current wording

Our businesses, including balance sheet lending, conduit lending, securities investments, and real estate investments, provide for a stable base of net interest and rental income. We have originated $29.8 billion of commercial real estate loans from our inception in October 2008 through September 30, 2024. During this timeframe, we also acquired $13.8 billion of predominantly investment grade-rated securities secured by first mortgage loans on commercial real estate and $2.1 billion of selected net leased and other real estate assets.

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 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.

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 September 30, 2024, we originated $16.9 billion of conduit loans, of which $16.9 billion were sold into 74 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

Ladder was founded in October 2008 and we completed our IPO in February 2014. We are led by a disciplined and highly aligned management team. As of June 30, 2024, our management team and directors held interests in our Company comprising over 11% of our total equity. On average, our management team members have 28 years of experience in the industry. Our management team includes Brian Harris, Chief Executive Officer; Pamela McCormack, President; Paul J. Miceli, Chief Financial Officer; Robert Perelman, Head of Asset Management; and Kelly Porcella, Chief Administrative Officer & General Counsel. Anthony V. Esposito, Chief Accounting Officer, is an additional officer of Ladder.

Current wording

Ladder was founded in October 2008 and we completed our IPO in February 2014. We are led by a disciplined and highly aligned management team. As of September 30, 2024, our management team and directors held interests in our Company comprising over 11% of our total equity. On average, our management team members have 28 years of experience in the industry. Our management team includes Brian Harris, Chief Executive Officer; Pamela McCormack, President; Paul J. Miceli, Chief Financial Officer; Robert Perelman, Head of Asset Management; and Kelly Porcella, Chief Administrative Officer & General Counsel. Anthony V. Esposito, Chief Accounting Officer, and Stephanie Lin, Assistant Secretary, are additional officers of Ladder.

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 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.

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 September 30, 2024, we held a portfolio of 57 balance sheet first mortgage loans with an aggregate book value of $2.0 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 66.4% at September 30, 2024.

Previous 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.

Current 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 September 30, 2024, we held a portfolio of 5 mezzanine loans with an aggregate book value of $13.8 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 73.6% at September 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 $26.4 million at June 30, 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 $27.5 million at September 30, 2024.

Previous 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.

Current wording

Net Leased Commercial Real Estate Properties. As of September 30, 2024, we owned 155 single tenant net leased properties with an undepreciated book value of $637.3 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 September 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 7.9 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 September 30, 2024, we collected 100% of rent on these properties.

Previous 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.

Current wording

Diversified Commercial Real Estate Properties. As of September 30, 2024, we owned 54 diversified commercial real estate properties throughout the U.S with an undepreciated book value of $308.3 million. During the three months ended September 30, 2024, we collected 99% of rent on these properties.

Previous wording

The Company invests in primarily AAA-rated real estate securities, typically front pay securities, with relatively short duration and significant subordination. We invest primarily in CMBS, including CLOs, secured by first mortgage loans on commercial real estate. These investments provide a stable and attractive base of net interest income and help us manage our liquidity and hyper-amortization features included in many of these securities positions help mitigate potential credit losses in the event of adverse market conditions. We have significant in-house expertise in the evaluation and trading of these securities, due in part to our experience in originating and underwriting mortgage loans that comprise assets within CMBS trusts, as well as our experience in structuring CMBS transactions.

Current wording

We invest in primarily AAA-rated real estate securities, typically front pay securities, with relatively short duration and significant subordination. We invest primarily in CMBS, including CLOs, secured by first mortgage loans on commercial real estate. These investments provide a stable and attractive base of net interest income and help us manage our liquidity and hyper-amortization features included in many of these securities positions help mitigate potential credit losses in the event of adverse market conditions. We have significant in-house expertise in the evaluation and trading of these securities, due in part to our experience in originating and underwriting mortgage loans that comprise assets within CMBS trusts, as well as our experience in structuring CMBS transactions.

Previous 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:

Current wording

As of September 30, 2024, the estimated fair value of our portfolio of CMBS investments totaled $843.4 million in 95 CUSIPs ($8.9 million average investment per CUSIP). Included in the $843.4 million of CMBS securities are $9.1 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% of which were rated investment grade by Standard & Poor’s Ratings Group, Moody’s Investors Service, Inc. or Fitch Ratings Inc. as of September 30, 2024:

Previous 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.

Current wording

In the future, we may invest in CMBS securities or other securities that are unrated. As of September 30, 2024, our CMBS investments had a weighted average duration of 2.4 years. The commercial real estate collateral underlying our CMBS investment portfolio is located throughout the United States. As of September 30, 2024, by property count and market value, respectively, 59.9% and 65.5% of the collateral underlying our CMBS investment portfolio was distributed throughout the top 25 metropolitan statistical areas (“MSAs”) in the United States, with 4.8% and 11.9%, 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 0.2% to 5.8% by property count and 0.1% to 8.2% by market value.

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 June 30, 2024, we held $1.2 billion of U.S. Treasury securities classified as cash and cash equivalents 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 September 30, 2024, we held $1.3 billion of U.S. Treasury securities classified as cash and cash equivalents on our consolidated balance sheet.

Previous wording

As of June 30, 2024, we had $1.6 billion of unsecured corporate bonds outstanding. These unsecured financings were comprised of $327.8 million in aggregate principal amount of 5.25% senior notes due 2025 (the “2025 Notes”), $611.9 million in aggregate principal amount of 4.25% senior notes due 2027 (the “2027 Notes”) and $633.9 million in aggregate principal amount of 4.75% senior notes due 2029 (the “2029 Notes,” and collectively with the 2025 Notes and the 2027 Notes, the “Notes”).

Current wording

As of September 30, 2024, we had $2.1 billion of unsecured corporate bonds outstanding. These unsecured financings were comprised of $322.0 million in aggregate principal amount of 5.25% senior notes due 2025 (the “2025 Notes”), $611.9 million in aggregate principal amount of 4.25% senior notes due 2027 (the “2027 Notes”), $633.9 million in aggregate principal amount of 4.75% senior notes due 2029 (the “2029 Notes”) and $500.0 million in aggregate principal amount of 7.00% senior notes due 2031 (the “2031 Notes,” and collectively with the 2025 Notes, the 2027 Notes and the 2029 Notes, the “Notes”). The 2031 Notes were issued during the three months ended September 30, 2024 with an aggregate principal balance of $500.0 million.

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 $3.1 billion pool of unencumbered assets, comprised primarily of first mortgage loans and unrestricted cash as of June 30, 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 $3.6 billion pool of unencumbered assets, comprised primarily of first mortgage loans and unrestricted cash as of September 30, 2024.

Previous 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.

Current wording

We are parties to multiple committed loan repurchase agreement facilities, totaling $1.2 billion of credit capacity. As of September 30, 2024, the Company had $244.5 million of borrowings outstanding, with an additional $911.5 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

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.

Current wording

We generally finance our real estate using long-term non-recourse mortgage financing. During the nine months ended September 30, 2024, the Company executed 16 new term debt agreements to finance properties in its real estate portfolio with a carrying amount of $81.9 million. Our mortgage loan financings have primarily fixed rates ranging from 4.39% to 8.78%, mature between 2024 and 2034 and total $513.8 million as of September 30, 2024. These long-term non-recourse mortgages include net unamortized premiums of $3.9 million at September 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 $0.6 million of premium amortization, which decreased interest expense, for the nine months ended September 30, 2024. The loans are collateralized by real estate and related lease intangibles, net, of $530.2 million as of September 30, 2024.

Previous wording

Activity for the three months ended June 30, 2024 included fundings of $20.9 million and paydowns of $255.2 million contributing to a $258.6 million decrease of commercial mortgage loans. Activity for the three months ended June 30, 2024 included securities purchases of $81.7 million, sales of $5.8 million and $60.0 million of amortization and paydowns, which contributed to a net increase in our securities portfolio of $14.3 million. We acquired $27.2 million in real estate via foreclosure. In addition, we purchased $1.8 billion of short-term U.S. Treasury securities and received $1.8 billion from redemptions of short-term U.S. Treasury securities during the three months ended June 30, 2024.

Current wording

Activity for the three months ended June 30, 2024 included fundings of $20.9 million and paydowns of $255.2 million, contributing to a $258.6 million decrease of commercial mortgage loans. Activity for the three months ended June 30, 2024 included securities purchases of $81.7 million, sales of $5.8 million and $60.0 million of amortization and paydowns, which contributed to a net increase in our securities portfolio of $14.3 million. We acquired $27.2 million in real estate via foreclosure. In addition, we purchased $1.8 billion of short-term U.S. Treasury securities during the three months ended June 30, 2024, of which $1.8 billion matured during the three months ended June 30, 2024.

Previous 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.

Current wording

The $3.5 million increase in interest expense was primarily attributable to the issuance of our 2031 Notes, partially offset by a reduction in our loan repurchase facilities utilization and repurchases of our 2025 Notes.

Previous 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.

Current wording

The increase in net interest income before provision for loan losses of $4.1 million as explained above.

Previous 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.

Current wording

As of September 30, 2024 and June 30, 2024, the weighted average yield on our mortgage loan receivables was 9.2% and 9.4%, respectively. As of September 30, 2024 and June 30, 2024, the weighted average interest rate on borrowings against our mortgage loan receivables was 7.0% and 7.2%, respectively. The decrease in the rate on borrowings against our mortgage loan receivables from September 30, 2024 to June 30, 2024 was primarily due to decreases in prevailing interest rates. As of September 30, 2024, we had outstanding borrowings secured by our mortgage loan receivables equal to 50.7% of the carrying value of our mortgage loan receivables, compared to 51.9% as of June 30, 2024.

Previous 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.

Current wording

As of September 30, 2024 and June 30, 2024, the weighted average yield on our securities was 6.8% and 6.9%, respectively. As of September 30, 2024, we did not have any borrowings against our securities. As June 30, 2024, the weighted average interest rate on borrowings against our securities was 6.7%. As of June 30, 2024, we had outstanding borrowings secured by our securities equal to 0.3% of the carrying value of our securities.

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 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.

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 September 30, 2024 and June 30, 2024, the weighted average interest rate on mortgage borrowings against our real estate was 6.0%, respectively. As of September 30, 2024, we had outstanding borrowings secured by our real estate equal to 72.4% of the carrying value of our real estate, compared to 70.9% as of June 30, 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. For additional information, refer to Note 3, Mortgage Loan Receivables, in the consolidated financial statements.

Current wording

The provision for the three months ended September 30, 2024 of $3.1 million was primarily due to continued uncertainty in macroeconomic market 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. During the three months ended September 30, 2024, we charged-off $5.0 million of an existing allowance related to an office property in Oakland, California. For additional information, refer to Note 3, Mortgage Loan Receivables, in the consolidated financial statements.

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 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.

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 September 30, 2024, we recorded $1.1 million of unrealized gains on loans related to lower of cost or market adjustments on our conduit loans. During the three months ended June 30, 2024, recorded a lower of cost or market adjustment of $(0.5) 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

The increase of $12.5 million of gain on real estate, net during the three months ended June 30, 2024 compared to the three months ended March 31, 2024 was primarily the result of sales of two multifamily portfolios, one retail portfolio and one office property during the the three months ended June 30, 2024 compared to no sales during the three months ended March 31, 2024.

Current wording

The decrease of $12.2 million of gain on real estate, net during the three months ended September 30, 2024 compared to the three months ended June 30, 2024 was primarily the result of the sale of one multifamily property during the three months ended September 30, 2024 compared to sales of two multifamily portfolios, one retail portfolio and one office property during the three months ended June 30, 2024.

Previous 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.

Current wording

We generate fee income on the loans we originate and in which we invest, and dividend income on our FHLB stock. The $3.0 million increase in fee and other income was primarily due to the timing of loan payoffs and late fees received for the three months ended September 30, 2024 as compared to the three months ended June 30, 2024.

Previous 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.

Current wording

Net result from derivative transactions of $0.8 million was comprised of a realized gain of $0.1 million and an unrealized loss of $0.9 million for the three months ended September 30, 2024. 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. 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 September 30, 2024 was primarily related to movement in interest rates during the three months ended September 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

During the three months ended March 31, 2024, there was $0.2 million of gain on extinguishment of debt as the Company retired $2.0 million of principal of the 2029 Notes for a repurchase price of $1.8 million, recognizing a $0.2 million net gain on extinguishment of debt after recognizing $21 thousand of unamortized debt issuance costs associated with the retired debt.

Current wording

During the three months ended September 30, 2024, there was $20 thousand of gain on extinguishment of debt as the Company retired: $5.8 million of principal of the 2025 Notes for a repurchase price of $5.8 million, recognizing a $20 thousand net gain on extinguishment of debt after recognizing $11 thousand of unamortized debt issuance costs associated with the retired debt.

Previous 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.

Current wording

Compensation and employee benefits are comprised primarily of salaries, bonuses, stock-based compensation and other employee benefits. The increase of $0.7 million in compensation expense was primarily attributable to an increase in bonus accrual for the three months ended September 30, 2024 as compared to the three months ended June 30, 2024.

Previous 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.

Current wording

Operating expenses are primarily composed of professional fees, lease expense and technology expenses. The decrease of $0.7 million during the three months ended September 30, 2024 compared to the three months ended June 30, 2024 was primarily related to a decrease in professional fees and franchise taxes, partially offset by an increase in occupancy costs.

Previous 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.

Current wording

The decrease of $0.3 million in real estate operating expenses during the three months ended September 30, 2024 compared to the three months ended June 30, 2024 was primarily attributable to the sale of two multifamily portfolios, one office property and one retail property during the three months ended June 30, 2024, for which there was no operating expense during the three months ended September 30, 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 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.

Current 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 $0.7 million during the three months ended September 30, 2024 compared to the three months ended June 30, 2024 was primarily attributable to a decrease in deal related expenses.

Previous 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.

Current 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 September 30, 2024 compared to the three months ended June 30, 2024 is primarily a result of changes in our income in our TRSs.

Previous 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.

Current wording

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

Previous 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.

Current wording

The $26.2 million decrease in interest income was primarily attributable net payoffs within our loan portfolio, partially offset by an increase in income from collection of deferred interest from the resolution of a previously modified loan, and an increase in interest on short-term U.S. Treasury securities due to purchases. There was a $1.0 billion decrease in average loan investments from $3.7 billion for the nine months ended September 30, 2023 to $2.7 billion for the nine months ended September 30, 2024. There was a $29.9 million increase in average securities investments from $502.0 million for the nine months ended September 30, 2023 to $531.9 million for the nine months ended September 30, 2024.

Previous 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.

Current wording

The $13.7 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, partially offset by the issuance of our 2031 Notes.

Previous 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.

Current wording

As of September 30, 2024, the weighted average yield on our mortgage loan receivables was 9.2%, compared to 9.7% as of September 30, 2023. As of September 30, 2024, the weighted average interest rate on borrowings against our mortgage loan receivables was 7.0%, compared to 7.2% as of September 30, 2023. The decrease in the rate on borrowings against our mortgage loan receivables from September 30, 2023 to September 30, 2024 was primarily due to decreases in prevailing interest rates. As of September 30, 2024, we had outstanding borrowings secured by our mortgage loan receivables equal to 50.7% of the carrying value of our mortgage loan receivables, compared to 49.9% as of September 30, 2023.

Previous 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.

Current wording

As of September 30, 2024 and September 30, 2023, the weighted average yield on our securities was 6.8%. As of September 30, 2024, we did not have any borrowings against our securities. As of September 30, 2023, the weighted average interest rate on borrowings against our securities was 5.8%. As of September 30, 2023, we had outstanding borrowings secured by our securities equal to 24.5% of the carrying value of our real estate securities.

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 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.

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 September 30, 2024, the weighted average interest rate on mortgage borrowings against our real estate assets was 6.0%, compared to 5.9% as of September 30, 2023. As of September 30, 2024, we had outstanding borrowings secured by our real estate equal to 72.4% of the carrying value of our real estate, compared to 64.8% as of September 30, 2023.

Previous wording

The provision for the six months ended June 30, 2024 of $10.8 million represents an increase in the general reserve of loans held for investment. The increase in the provision associated with the general reserve during the six months ended June 30, 2024 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 loans as a result of repayments.

Current wording

The provision for the nine months ended September 30, 2023 was $19.1 million. The increase in provision associated with the general reserve during the nine months ended September 30, 2023 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.