LADR

• Overall Financial Performance

  • Ladder reported strong Q2 2026 results, with $30.8 million in distributable earnings, or 24 cents per share, and a conservative adjusted leverage ratio of 2.3x.
  • Book value per share as of Q2 end was $13.44, net of a $0.37 per share CECL reserve, and the stock trades at a meaningful discount to this book value.
  • The firm has an investment-grade rated balance sheet, $1.1 billion in robust liquidity, and 73% of total assets are unencumbered, supporting funding flexibility.
  • S&P revised Ladder's outlook to positive, the second positive rating action from S&P in 2026, bringing the firm one step closer to a full investment-grade rating that would align S&P with Moody's and Fitch.

• Strategic Priorities & Core Levers

  • Management identified three core levers to close the stock discount to book value: 1) rotating capital into higher yielding loans to build earnings power; 2) generating consistent gains from the firm's multi-cylinder strategy across securities, real estate and conduit loans; 3) opportunistic share repurchases at below book value to grow book value per share.
  • 85% of the loan portfolio is newly originated at conservative loan-to-values on a reset basis, with no legacy book carried at peak cycle values. Net interest margin has trended higher year over year as the firm rotates out of lower-yielding securities and legacy loans into new higher-yielding loans.
  • New loans are predominantly floating rate, while liabilities are largely fixed rate, so further interest rate increases will directly benefit earnings. Rotating from 5% yielding securities to 7%+ yielding floating rate mortgages adds ~200 basis points of incremental income.
  • The firm will prioritize expanding its equity investor base in H2 2026, targeting investors in lower-yielding investment grade property REITs, regional banks and T-bills, as Ladder is the only investment-grade commercial mortgage REIT in the U.S. Management and the board are the largest shareholder group, aligning incentives with outside investors.

• Operational Updates

  • Year-to-date 2026 originations total $1.2 billion in new loans. Q2 2026 saw over $800 million in total new investments, including a $268 million acquisition loan for a Class A Midtown Manhattan office/retail building plus a $10 million equity co-investment.
  • Entering Q3 2026, there is ~$500 million in active loan pipeline under application and closing. Overall market transaction volume has picked up, expanding the firm's opportunity set, with a primary focus on middle-market income-producing multifamily and industrial collateral.
  • In Q2 2026, the firm repurchased $8 million (800,000 shares) of common stock at a weighted average price of $10.03 per share, a 25% discount to book value. Year-to-date repurchases total $21 million (2.1 million shares), with $92 million remaining available under the repurchase program.
  • All five of the firm's largest legacy office exposures first highlighted in 2022 are on track to return full capital to the firm, with four already fully resolved and the fifth expected to close by year-end. This outperformance relative to peers has resulted in lower charge-offs and a stable book value.

• Net loan portfolio growth is expected to increase each quarter for the remainder of 2026, as loan payoffs are projected to stay light through year-end. The firm targets originating $400-$500 million in new loans per quarter going forward.
  • The share of balance sheet assets held in loans is expected to continue climbing from the current 50%, while the share of the securities portfolio is expected to contract further. It is possible the securities portfolio could decline to ~$1 billion by the end of 2026, depending on origination activity.
  • The firm expects to issue new unsecured corporate debt within the next six months to refinance 4.25% bonds maturing in early 2027, when an attractive issuance window opens.
  • Net interest income from the loan portfolio is expected to continue rising gradually, and distributable earnings are projected to grow from the combination of loan rotation, real estate income and occasional monetization gains across the multi-cylinder business.
  • A 25 basis point Fed rate increase would add 2 cents per share to quarterly distributable earnings, as fixed-rate liabilities insulate the firm from higher funding costs while floating-rate loan income increases.
  • Management's long-term target is 26-27 cents in distributable EPS, consistent with a high single-digit to low double-digit return on equity, achievable as loan rotation and gains accumulate.

1. Loans: As of Q2 2026, the loan portfolio grew 75% over the trailing 12 months, and now accounts for approximately 50% of total company assets. In Q2 2026, the firm originated over $550 million in new loans at a weighted average yield of 7.2%. 85% of the entire current loan portfolio was originated in the past two years.
2. Securities: The securities portfolio totaled $1.9 billion as of Q2 end, representing 33% of total company assets. 99% of the portfolio is investment grade, 96% is AAA rated, with a weighted average yield of 5.19% and a weighted average duration of approximately three years. $925 million (50%) of the portfolio is unencumbered. Net sales of securities in Q2 generated $1.8 million in gains.
3. Real Estate: The $1 billion real estate portfolio generated $18 million in net operating income in Q2 2026. The portfolio includes 149 net lease properties, primarily with investment grade credit tenants and an average remaining lease term of 6.2 years. The firm realized a $1.7 million gain to distributable earnings from a joint venture equity distribution in Q2.
4. Conduit: The conduit business generated $600,000 in gains in Q2 2026. Total gains across all three business cylinders (securities, real estate, conduit) were approximately $4.1 million for the quarter.

• Office sector recovery is highly geographically concentrated, with meaningful recovery only seen in New York and San Francisco, and ongoing weakness in Chicago, Los Angeles, and Washington D.C. The firm only pursues select office opportunities with reset pricing and strong leasing momentum, avoiding broad sector exposure.
  • Multifamily rent growth remains muted, with ongoing supply headwinds in overbuilt Sunbelt markets, and rising property taxes and other expenses pressuring net operating income for lower-tier properties. The firm mitigates this by focusing on newer properties with strong sponsor equity and low leverage.
  • Conduit/CMBS origination volume remains low, with most available loans being cash-out refinances rather than acquisition loans, which management views as a cautionary indicator. The firm is moving slowly and being highly selective for conduit originations.
  • Higher interest rates have reduced overall borrower appetite, slowing market transaction volume after an initial push to close loans before further rate increases. The firm has responded by stiffening pricing and credit standards for new originations.
  • One non-accrual office loan ($13.4 million carrying value) was added in Q2, and the firm foreclosed on an $8 million Birmingham, Alabama office loan, which will require stabilization before sale. There is no guarantee that all remaining legacy office positions will close as expected by year-end.

Q: How does the firm select which securities to sell when rotating capital into new loans, and do longer-duration securities get prioritized? / A: Selection prioritizes securities that are close to paying off, with low loan-to-value and long holding periods, since they generate cash quickly to fund new originations. If market pricing is attractive, the firm will also sell appreciated positions to realize gains. All securities sold in the recent rotation were floating-rate AAA, and the firm only tapped the most liquid assets first to generate 24-hour cash for closings, with no need to sell larger positions to date. The $1.8 million in Q2 gains came from selling these positions at a roughly half-point premium.

Q: Given 85% of the current loan portfolio was originated in 2025-2026, how does this vintage concentration change back-half 2026 deployment plans? / A: Paydowns have slowed dramatically now that most legacy loans have matured and been redeployed, not for credit reasons. The firm will continue to originate its target $400-$500 million per quarter, funding new originations via either the undrawn corporate revolver or further sales of unencumbered AAA securities. 900 million of unencumbered AAA securities are available for 24-hour cash conversion, so there is plenty of capacity to continue growing the loan share of the balance sheet over time.

Q: Could the securities portfolio decline to ~$1 billion by end of 2026, and what is the outlook for the conduit business? / A: A decline to ~$1 billion by year-end is very possible, depending on the pace of loan origination; the firm views short-dated AAA securities similarly to cash, so there is no minimum target for how much it needs to hold permanently. For conduit origination, volume has only just started picking up after a multi-year downturn, and there are very few eligible high-quality assets, with most originations being cash-out refinances rather than acquisition loans. Management is moving slowly, being very selective, and notes recent rate increases over 4.5% on the 10-year Treasury will likely further slow CMBS pipeline activity.

Q: How will net interest income from the growing loan portfolio inflect higher after being flat for three quarters? / A: Net interest income will continue to rise gradually, not dramatically, because originations are lumpy depending on closing timing and deal spreads, which currently range from 275-350 basis points. The baseline projection is ~$400-$500 million in originations per quarter at an average ~300 basis point spread. While the loan book drives gradual NII growth, overall distributable earnings will also get ongoing contributions from real estate net operating income and accumulated monetization gains across the multi-cylinder strategy, which mean full-year results are more meaningful than quarter-over-quarter comparisons.