LADR 10-Q Quarterly Report March 31, 2017

LADDER CAPITAL CORP

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2017

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number:

001-36299

Ladder Capital Corp

(Exact name of registrant as specified in its charter)



Delaware (State or other jurisdiction of incorporation or organization)		80-0925494 (IRS Employer Identification No.)

345 Park Avenue, New York (Address of principal executive offices)		10154 (Zip Code)

(212) 715-3170

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:



Large accelerated filer o		Accelerated filer ý

Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o
		Emerging growth company ý

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes o No ý

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.



Class		Outstanding at May 8, 2017
Class A Common Stock, $0.001 par value		79,559,308
Class B Common Stock, $0.001 par value		31,162,013

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LADDER CAPITAL CORP

FORM 10-Q

March 31, 2017



Index			Page
PART I - FINANCIAL INFORMATION			5
Item 1.	Financial Statements (Unaudited)		5
		Consolidated Balance Sheets	6
		Consolidated Statements of Income	7
		Consolidated Statements of Comprehensive Income	9
		Consolidated Statements of Changes in Equity	10
		Consolidated Statements of Cash Flows	12
		Notes to Consolidated Financial Statements	15
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		73
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		103
Item 4.	Controls and Procedures		106
PART II - OTHER INFORMATION			106
Item 1.	Legal Proceedings		106
Item 1A.	Risk Factors		106
Item 2.	Unregistered Sales of Securities		106
Item 3.	Defaults Upon Senior Securities		106
Item 4.	Mine Safety Disclosures		107
Item 5.	Other Information		107
Item 6.	Exhibits and Financial Statement Schedules		108
SIGNATURES			109

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “ Quarterly Report”) includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact contained in this Quarterly Report, including statements regarding our future results of operations and financial position, strategy and plans, and our expectations for future operations, are forward-looking statements. The words “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “might,” “will,” “should,” “can have,” “likely,” “continue,” “design,” and other words and terms of similar expressions are intended to identify forward-looking statements.

We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, strategy, short-term and long-term business operations and objectives and financial needs. Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ from those expressed in our forward-looking statements. Our future financial position and results of operations, as well as any forward-looking statements are subject to change and inherent risks and uncertainties. You should consider our forward-looking statements in light of a number of factors that may cause actual results to vary from our forward-looking statements including, but not limited to:


•	risks discussed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016 (“Annual Report”), as well as our consolidated financial statements, related notes, and the other financial information appearing elsewhere in this Quarterly Report and our other filings with the United States Securities and Exchange Commission (“SEC”);


•	changes in general economic conditions, in our industry and in the commercial finance and the real estate markets;


•	changes to our business and investment strategy;


•	our ability to obtain and maintain financing arrangements;


•	the financing and advance rates for our assets;


•	our actual and expected leverage and liquidity;


•	the adequacy of collateral securing our loan portfolio and a decline in the fair value of our assets;


•	interest rate mismatches between our assets and our borrowings used to fund such investments;


•	changes in interest rates and the market value of our assets;


•	changes in prepayment rates on our mortgages and the loans underlying our mortgage-backed and other asset-backed securities;


•	the effects of hedging instruments and the degree to which our hedging strategies may or may not protect us from interest rate and credit risk volatility;


•	the increased rate of default or decreased recovery rates on our assets;


•	the adequacy of our policies, procedures and systems for managing risk effectively;


•	a potential downgrade in the credit ratings assigned to our investments;


•	our compliance with, and the impact of and changes in, governmental regulations, tax laws and rates, accounting guidance and similar matters;


•	our ability to maintain our qualification as a real estate investment trust (“REIT”) for U.S. federal income tax purposes and our ability and the ability of our subsidiaries to operate in compliance with REIT requirements;


•	our ability and the ability of our subsidiaries to maintain our and their exemptions from registration under the Investment Company Act of 1940, as amended (the “Investment Company Act”);


•	potential liability relating to environmental matters that impact the value of properties we may acquire or the properties underlying our investments;


•	the inability of insurance covering real estate underlying our loans and investments to cover all losses;


•	the availability of investment opportunities in mortgage-related and real estate-related instruments and other securities;


•	fraud by potential borrowers;


•	the availability of qualified personnel;


•	the degree and nature of our competition; and


•	the market trends in our industry, interest rates, real estate values, the debt securities markets or the general economy.

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You should not rely upon forward-looking statements as predictions of future events. In addition, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. The forward-looking statements contained in this Quarterly Report are made as of the date hereof, and the Company assumes no obligation to update or supplement any forward-looking statements.

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REFERENCES TO LADDER CAPITAL CORP

Ladder Capital Corp is a holding company, and its primary assets are a controlling equity interest in Ladder Capital Finance Holdings LLLP (“LCFH” or the “Operating Partnership”) and in each series thereof, directly or indirectly. Unless the context suggests otherwise, references in this report to “Ladder,” “Ladder Capital,” the “Company,” “we,” “us” and “our” refer (1) prior to the February 2014 initial public offering (“IPO”) of the Class A common stock of Ladder Capital Corp and related transactions, to LCFH (“Predecessor”) and its consolidated subsidiaries and (2) after our IPO and related transactions, to Ladder Capital Corp and its consolidated subsidiaries.

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Part I - Financial Information

Item 1. Financial Statements (Unaudited)

The consolidated financial statements of Ladder Capital Corp and the notes related to the foregoing consolidated financial statements are included in this Item 1.

Index to Consolidated Financial Statements (Unaudited)



Consolidated Balance Sheets		6
Consolidated Statements of Income		7
Consolidated Statements of Comprehensive Income		9
Consolidated Statements of Changes in Equity		10
Consolidated Statements of Cash Flows		12
Notes to Consolidated Financial Statements		15
	Note 1. Organization and Operations	15
	Note 2. Significant Accounting Policies	18
	Note 3. Mortgage Loan Receivables	24
	Note 4. Real Estate Securities	28
	Note 5. Real Estate and Related Lease Intangibles, Net	30
	Note 6. Investment in Unconsolidated Joint Ventures	33
	Note 7. Debt Obligations	35
	Note 8. Fair Value of Financial Instruments	42
	Note 9. Derivative Instruments	48
	Note 10. Offsetting Assets and Liabilities	50
	Note 11. Equity Structure and Accounts	51
	Note 12. Noncontrolling Interests	56
	Note 13. Earnings Per Share	57
	Note 14. Stock Based Compensation Plans	59
	Note 15. Income Taxes	66
	Note 16. Related Party Transactions	67
	Note 17. Commitments and Contingencies	69
	Note 18. Segment Reporting	70
	Note 19. Subsequent Events	72

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Ladder Capital Corp

Consolidated Balance Sheets

(Dollars in Thousands)



	March 31, 2017			December 31, 2016

Assets
Cash and cash equivalents	$	62,568		$	44,615
Restricted cash	54,440			44,813
Mortgage loan receivables held for investment, net, at amortized cost	2,300,093			1,996,095
Mortgage loan receivables held for sale	516,582			357,882
Real estate securities, available-for-sale	1,701,980			2,100,947
Real estate and related lease intangibles, net	814,353			822,338
Investments in unconsolidated joint ventures	34,185			34,025
FHLB stock	77,915			77,915
Derivative instruments	108			5,018
Due from brokers	22			10
Accrued interest receivable	27,264			24,439
Other assets	352,112			70,240
Total assets	$	5,941,622		$	5,578,337
Liabilities and Equity
Liabilities
Debt obligations, net	$	4,377,686		$	3,942,138
Due to brokers	2,561			394
Derivative instruments	4,207			3,446
Amount payable pursuant to tax receivable agreement	2,330			2,520
Dividends payable	1,017			24,682
Accrued expenses	43,496			66,597
Other liabilities	29,012			29,006
Total liabilities	4,460,309			4,068,783
Commitments and contingencies (Note 17)	—			—
Equity
Class A common stock, par value $0.001 per share, 600,000,000 shares authorized; 81,117,375 and 72,681,218 shares issued and 79,086,784 and 71,586,170 shares outstanding	80			72
Class B common stock, par value $0.001 per share, 100,000,000 shares authorized; 31,644,537 and 38,002,344 shares issued and outstanding	32			38
Additional paid-in capital	1,106,394			992,307
Treasury stock, 2,030,591 and 1,095,048 shares, at cost	( 24,501		)	( 11,244		)
Retained Earnings/(Dividends in Excess of Earnings)	( 39,697		)	( 11,148		)
Accumulated other comprehensive income (loss)	4,834			1,365
Total shareholders’ equity	1,047,142			971,390
Noncontrolling interest in operating partnership	428,931			533,246
Noncontrolling interest in consolidated joint ventures	5,240			4,918
Total equity	1,481,313			1,509,554

Total liabilities and equity	$	5,941,622		$	5,578,337

The accompanying notes are an integral part of these consolidated financial statements.

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Ladder Capital Corp

Consolidated Statements of Income

(Dollars in Thousands, Except Per Share and Dividend Data)



	Three Months Ended March 31,
	2017			2016

Net interest income
Interest income	$	57,512		$	59,601
Interest expense	31,415			29,536
Net interest income	26,097			30,065
Provision for loan losses	—			150
Net interest income after provision for loan losses	26,097			29,915

Other income
Operating lease income	19,630			19,294
Tenant recoveries	1,579			1,335
Sale of loans, net	( 999		)	7,830
Realized gain (loss) on securities	5,361			( 573		)
Unrealized gain (loss) on Agency interest-only securities	159			660
Realized gain on sale of real estate, net	2,331			6,095
Fee and other income	4,466			2,975
Net result from derivative transactions	( 1,981		)	( 50,862		)
Earnings (loss) from investment in unconsolidated joint ventures	( 74		)	794
Gain (loss) on extinguishment of debt	( 54		)	5,382
Total other income	30,418			( 7,070		)
Costs and expenses
Salaries and employee benefits	16,042			12,615
Operating expenses	5,479			6,295
Real estate operating expenses	7,473			5,719
Real estate acquisition costs	( 19		)	—
Fee expense	693			731
Depreciation and amortization	8,592			9,802
Total costs and expenses	38,260			35,162
Income (loss) before taxes	18,255			( 12,317		)
Income tax expense (benefit)	( 1,375		)	( 873		)
Net income (loss)	19,630			( 11,444		)
Net (income) loss attributable to noncontrolling interest in consolidated joint ventures	( 322		)	232
Net (income) loss attributable to noncontrolling interest in operating partnership	( 5,838		)	5,673
Net income (loss) attributable to Class A common shareholders	$	13,470		$	( 5,539	)

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	Three Months Ended March 31,
	2017		2016

Earnings per share:
Basic	$	0.18	$	( 0.09	)
Diluted	$	0.18	$	( 0.09	)

Weighted average shares outstanding:
Basic	72,871,990		59,596,889
Diluted	109,334,847		59,596,889

Dividends per share of Class A common stock (Note 11)	$	0.300	$	0.275

The accompanying notes are an integral part of these consolidated financial statements.

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Ladder Capital Corp

Consolidated Statements of Comprehensive Income

(Dollars in Thousands)



	Three Months Ended March 31,
	2017			2016

Net income (loss)	$	19,630		$	( 11,444	)

Other comprehensive income (loss)
Unrealized gain (loss) on securities, net of tax:
Unrealized gain (loss) on real estate securities, available for sale	10,485			34,394
Reclassification adjustment for (gains) included in net income	( 5,734		)	( 11		)

Total other comprehensive income (loss)	4,751			34,383

Comprehensive income	24,381			22,939
Comprehensive (income) loss attributable to noncontrolling interest in consolidated joint ventures	( 322		)	232
Comprehensive income of combined Class A common shareholders and Operating Partnership unitholders	$	24,059		$	23,171
Comprehensive (income) attributable to noncontrolling interest in operating partnership	( 7,472		)	( 9,243		)
Comprehensive income attributable to Class A common shareholders	$	16,587		$	13,928

The accompanying notes are an integral part of these consolidated financial statements.

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Ladder Capital Corp

Consolidated Statements of Changes in Equity

(Dollars and Shares in Thousands)



	Shareholders’ Equity
	_{Class A Common Stock}					_{Class B Common Stock}					_{Additional Paid-} _in-Capital			_{Treasury Stock}			_{Retained Earnings/(Dividends in Excess of Earnings)}			_Accumulated _Other _{Comprehensive} _{Income (Loss)}			_{Noncontrolling Interests}					_{Total Shareholders’} _{Equity/Partners} _Capital
	_Shares		_Par			_Shares		_Par			_{Additional Paid-} _in-Capital			_{Treasury Stock}			_{Retained Earnings/(Dividends in Excess of Earnings)}			_Accumulated _Other _{Comprehensive} _{Income (Loss)}			_Operating _Partnership			_Consolidated _{Joint Ventures}		_{Total Shareholders’} _{Equity/Partners} _Capital

Balance, December 31, 2016	71,586		$	72		38,003		$	38		$	992,307		$	( 11,244	)	$	( 11,148	)	$	1,365		$	533,246		$	4,918	$	1,509,554
Distributions	—		—			—		—			—			—			—			—			( 21,034		)	—		( 21,034		)
Equity based compensation	—		—			—		—			104			—			—			—			7,150			—		7,254
Grants of restricted stock	832		1			—		—			( 1		)	—			—			—			—			—		—
Shares acquired to satisfy minimum required federal and state tax withholding on vesting restricted stock and units	( 936	)	( 1		)	—		—			—			( 13,257		)	—			—			—			—		( 13,258		)
Dividends declared	—		—			—		—			—			—			( 24,700		)	—			—			—		( 24,700		)
Stock dividends	814		1			432		1			17,317			—			( 17,319		)	—			—			—		—
Exchange of noncontrolling interest for common stock	6,790		7			( 6,790	)	( 7		)	92,397			—			—			403			( 93,684		)	—		( 884		)
Net income (loss)	—		—			—		—			—			—			13,470			—			5,838			322		19,630
Other comprehensive income (loss)	—		—			—		—			—			—			—			3,117			1,634			—		4,751
Rebalancing of ownership percentage between Company and Operating Partnership	—		—			—		—			4,270			—			—			( 51		)	( 4,219		)	—		—
Balance, March 31, 2017	79,086		$	80		31,645		$	32		$	1,106,394		$	( 24,501	)	$	( 39,697	)	$	4,834		$	428,931		$	5,240	$	1,481,313

The accompanying notes are an integral part of these consolidated financial statements.

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Ladder Capital Corp

Consolidated Statements of Changes in Equity

(Dollars and Shares in Thousands)



	Shareholders’ Equity
	_{Class A Common Stock}				_{Class B Common Stock}					_{Additional Paid- in-Capital}			_{Treasury Stock}			_{Retained Earnings/(Dividends in Excess of Earnings)}			_{Accumulated Other Comprehensive Income (Loss)}			_{Noncontrolling Interests}						_{Total Shareholders’ Equity/Partners Capital}
	_Shares		_Par		_Shares		_Par			_{Additional Paid- in-Capital}			_{Treasury Stock}			_{Retained Earnings/(Dividends in Excess of Earnings)}			_{Accumulated Other Comprehensive Income (Loss)}			_{Operating Partnership}			_{Consolidated Joint Ventures}			_{Total Shareholders’ Equity/Partners Capital}

Balance, December 31, 2015	55,210		$	55	44,056		$	44		$	776,866		$	( 5,812	)	$	60,618		$	( 3,556	)	$	657,380		$	5,813		$	1,491,408
Contributions	—		—		—		—			—			—			—			—			250			—			250
Distributions	—		—		—		—			—			—			—			—			( 39,805		)	( 757		)	( 40,562		)
Equity based compensation	—		—		—		—			516			—			—			—			17,124			—			17,640
Grants of restricted stock	794		1		—		—			( 1		)	—			—			—			—			—			—
Purchase of treasury stock	( 424	)	—		—		—			—			( 4,652		)	—			—			—			—			( 4,652		)
Shares acquired to satisfy minimum required federal and state tax withholding on vesting restricted stock and units	( 73	)	—		( 1	)	—			—			( 780		)	—			—			( 6		)	—			( 786		)
Forfeitures	( 48	)	—		—		—			—			—			—			—			—			—			—
Dividends declared	—		—		—		—			—			—			( 74,393		)	—			—			—			( 74,393		)
Stock dividends	5,606		6		4,469		4			64,090			—			( 64,100		)	—			—			—			—
Exchange of noncontrolling interest for common stock	10,521		10		( 10,521	)	( 10		)	144,629			—			—			1,202			( 145,831		)	—			—
Adjustment for deferred taxes/tax receivable agreement as a result of the exchange of Class B shares	—		—		—		—			( 1,590		)	—			—			—			—			—			( 1,590		)
Net income (loss)	—		—		—		—			—			—			66,727			—			47,131			( 138		)	113,720
Other comprehensive income (loss)	—		—		—		—			—			—			—			3,420			5,099			—			8,519
Rebalancing of ownership percentage between Company and Operating Partnership	—		—		—		—			7,797			—			—			299			( 8,096		)	—			—
Balance, December 31, 2016	71,586		$	72	38,003		$	38		$	992,307		$	( 11,244	)	$	( 11,148	)	$	1,365		$	533,246		$	4,918		$	1,509,554

The accompanying notes are an integral part of these consolidated financial statements.

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Ladder Capital Corp

Consolidated Statements of Cash Flows

(Dollars in Thousands)



	Three Months Ended March 31,
	2017			2016

Cash flows from operating activities:
Net income (loss)	$	19,630		$	( 11,444	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
(Gain) loss on extinguishment of debt	54			( 5,382		)
Depreciation and amortization	8,592			9,802
Unrealized (gain) loss on derivative instruments	5,649			9,630
Unrealized (gain) loss on Agency interest-only securities	( 159		)	( 660		)
Unrealized (gain) loss on investment in mutual fund	( 40		)	—
Provision for loan losses	—			150
Amortization of equity based compensation	7,254			3,464
Amortization of deferred financing costs included in interest expense	2,436			2,688
Amortization of premium on mortgage loan financing	( 226		)	( 216		)
Amortization of above- and below-market lease intangibles	( 25		)	( 27		)
Amortization of premium/(accretion) of discount and other fees on loans	( 2,468		)	( 3,013		)
Amortization of premium/(accretion) of discount and other fees on securities	19,357			18,958
Realized (gain) loss on sale of mortgage loan receivables held for sale	999			( 7,830		)
Realized (gain) loss on real estate securities	( 5,361		)	573
Realized gain on sale of real estate, net	( 2,331		)	( 6,095		)
Origination of mortgage loan receivables held for sale	( 279,898		)	( 69,360		)
Purchases of mortgage loan receivables held for sale	—			( 21,667		)
Repayment of mortgage loan receivables held for sale	247			524
Proceeds from sales of mortgage loan receivables held for sale	—			316,766
(Income) loss from investments in unconsolidated joint ventures in excess of distributions received	74			( 794		)
Deferred tax asset	( 2,728		)	( 1,991		)
Changes in operating assets and liabilities:
Accrued interest receivable	( 2,826		)	637
Other assets	29,476			( 6,502		)
Amount payable pursuant to tax receivable agreement	( 230		)	—
Accrued expenses and other liabilities	( 22,781		)	( 46,056		)
Net cash provided by (used in) operating activities	( 225,305		)	182,155

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	Three Months Ended March 31,
	2017			2016

Cash flows from investing activities:
Purchase of derivative instruments	( 199		)	—
Purchases of real estate securities	( 43,572		)	( 218,837		)
Repayment of real estate securities	74,285			36,136
Proceeds from sales of real estate securities	361,323			15,477
Origination of mortgage loan receivables held for investment	( 249,829		)	( 49,735		)
Repayment of mortgage loan receivables held for investment	68,251			218,410
Capital contributions to investment in unconsolidated joint ventures	—			( 59		)
Capitalization of interest on investment in unconsolidated joint ventures	( 234		)	( 204		)
Purchases of real estate	( 3,892		)	—
Capital improvements of real estate	( 752		)	( 2,042		)
Proceeds from sale of real estate	6,325			23,515
Net cash provided by (used in) investing activities	211,706			22,661
Cash flows from financing activities:
Deferred financing costs paid	( 8,143		)	( 416		)
Proceeds from borrowings under debt obligations	2,666,161			3,235,468
Repayment of borrowings under debt obligations	( 2,231,899		)	( 3,414,355		)
Cash dividends paid to Class A common shareholders	( 48,367		)	( 33,020		)
(Increase) decrease in amount due from trustee included in other assets	( 302,281		)	—
Capital contributed by noncontrolling interests in operating partnership	—			250
Capital distributed to noncontrolling interests in operating partnership	( 21,034		)	( 12,937		)
Capital distributed to noncontrolling interests in consolidated joint ventures	—			( 104		)
Payment of liability assumed in exchange for shares for the minimum withholding taxes on vesting restricted stock	( 13,258		)	( 786		)
Purchase of treasury stock	—			( 4,652		)
Net cash provided by (used in) financing activities	41,179			( 230,552		)
Net increase (decrease) in cash, cash equivalents and restricted cash	27,580			( 25,736		)
Cash, cash equivalents and restricted cash at beginning of period	89,428			162,794
Cash, cash equivalents and restricted cash at end of period	$	117,008		$	137,058

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	Three Months Ended March 31,
	2017			2016

Supplemental information:
Cash paid for interest, net of amounts capitalized	$	26,773		$	37,683
Cash paid (received) for income taxes	( 1,147		)	9,807

Non-cash investing and financing activities:
Securities and derivatives purchased, not settled	( 2,167		)	( 8,922		)
Transfer from mortgage loans receivable held for sale to mortgage loans receivable held for investment, at amortized cost	119,952			—
Exchange of noncontrolling interest for common stock	93,691			28,328
Change in deferred tax asset related to exchanges of noncontrolling interest for common stock	845			( 772		)
Dividends declared, not paid	1,017			826
Stock dividends	17,319			64,100

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statement of cash flows ($ in thousands):


	March 31, 2017			March 31, 2016

Cash and cash equivalents	62,568			82,678
Restricted cash	54,440			54,380
Total cash, cash equivalents and restricted cash shown in the consolidated statement of cash flows	117,008			137,058

Restricted cash is comprised of accounts the Company maintains with brokers to facilitate financial derivative and repurchase agreement transactions in support of its loan and securities investments and risk management activities. Based on the value of the positions in these accounts and the associated margin requirements, the Company may be required to deposit additional cash into these broker accounts. The cash collateral held by broker is considered restricted cash. Restricted cash also includes tenant security deposits, deposits related to real estate sales and acquisitions and required escrow balances on credit facilities.

The accompanying notes are an integral part of these consolidated financial statements.

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Ladder Capital Corp

Notes to Consolidated Financial Statements

1. ORGANIZATION AND OPERATIONS

Ladder Capital Corp is an internally-managed real estate investment trust (“REIT”) that is a leader in commercial real estate finance. Ladder Capital Corp, as the general partner of Ladder Capital Finance Holdings LLLP (“LCFH,” “Predecessor” or the “Operating Partnership”), operates the Ladder Capital business through LCFH and its subsidiaries. As of March 31, 2017 , Ladder Capital Corp has a 71.4 % economic interest in LCFH and controls the management of LCFH as a result of its ability to appoint its board members. Accordingly, Ladder Capital Corp consolidates the financial results of LCFH and records noncontrolling interest for the economic interest in LCFH held by the Continuing LCFH Limited Partners (as defined below). In addition, Ladder Capital Corp, through certain subsidiaries which are treated as taxable REIT subsidiaries (each a “TRS”), is indirectly subject to U.S. federal, state and local income taxes. Other than the noncontrolling interest in the Operating Partnership and such indirect U.S. federal, state and local income taxes, there are no material differences between Ladder Capital Corp’s consolidated financial statements and LCFH’s consolidated financial statements.

The IPO Transactions

Ladder Capital Corp was formed as a Delaware corporation on May 21, 2013. The Company conducted an initial public offering (“IPO”) which closed on February 11, 2014. The Company used the net proceeds from the IPO to purchase newly issued limited partnership units (“LP Units”) from LCFH. In connection with the IPO, Ladder Capital Corp also became a holding corporation and the general partner of, and obtained a controlling interest in, LCFH. Ladder Capital Corp’s only business is to act as the general partner of LCFH, and, as such, Ladder Capital Corp indirectly operates and controls all of the business and affairs of LCFH and its subsidiaries through its ability to appoint the LCFH board. The proceeds received by LCFH in connection with the sale of the LP Units have been and will be used for loan origination and related real estate business lines and for general corporate purposes.

Ladder Capital Corp consolidates the financial results of LCFH and its subsidiaries. The ownership interest of certain existing owners of LCFH, who owned LP Units and an equivalent number of shares of Ladder Capital Corp Class B common stock as of the completion of the IPO (the “Continuing LCFH Limited Partners”) and continue to hold equivalent units in the Series of LCFH (as described below) and Ladder Capital Corp Class B common stock, is reflected as a noncontrolling interest in Ladder Capital Corp’s consolidated financial statements.

Immediately prior to the closing of the IPO on February 11, 2014, LCFH effectuated certain transactions intended to simplify its capital structure (the “Reorganization Transactions”). Prior to the Reorganization Transactions, LCFH’s capital structure consisted of three different classes of membership interests (Series A and Series B Participating Preferred Units and Class A Common Units), each of which had different capital accounts. The net effect of the Reorganization Transactions was to convert the multiple-class structure into LP Units, a single new class of units in LCFH, and an equal number of shares of Class B common stock of Ladder Capital Corp. The conversion of all of the different classes of LCFH occurred in accordance with conversion ratios for each class of outstanding units based upon the liquidation value of LCFH, as if it had been liquidated upon the IPO, with such value determined by the $ 17.00 price per share of Class A common stock sold in the IPO. The distribution of LP Units per class of outstanding units was determined pursuant to the distribution provisions set forth in LCFH’s amended and restated Limited Liability Limited Partnership Agreement (the “Amended and Restated LLLP Agreement”). In addition, in connection with the IPO, certain of LCFH’s existing investors (the “Exchanging Existing Owners”) received 33,672,192 shares of Ladder Capital Corp Class A common stock in lieu of any or all LP Units and shares of Ladder Capital Corp Class B common stock that would otherwise have been issued to such existing investors in the Reorganization Transactions, which resulted in Ladder Capital Corp, or a wholly-owned subsidiary of Ladder Capital Corp, owning one LP Unit for each share of Class A Common Stock so issued to the Exchanging Existing Owners.

The IPO resulted in the issuance by Ladder Capital Corp of 15,237,500 shares of Class A common stock to the public, including 1,987,500 shares of Class A common stock offered as a result of the exercise of the underwriters’ over-allotment option, and net proceeds to Ladder Capital Corp of $ 238.5 million (after deducting fees and expenses associated with the IPO). In addition, in connection with the IPO, the Company granted 1,687,513 shares of restricted Class A common stock to members of management, certain directors and certain employees. As a result, the equivalent number of LP Units were issued by LCFH to Ladder Capital Corp.

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Pursuant to the Amended and Restated LLLP Agreement, and subject to the applicable minimum retained ownership requirements and certain other restrictions, including notice requirements, from time to time, Continuing LCFH Limited Partners (or certain transferees thereof) had the right to exchange their LP Units for shares of Ladder Capital Corp’s Class A common stock on a one -for- one basis.

As a result of the Company’s acquisition of LP Units of LCFH and LCFH’s election under Section 754 of the Internal Revenue Code of 1986, as amended (the “Code”), the Company expects to benefit from depreciation and other tax deductions reflecting LCFH’s tax basis for its assets. Those deductions will be allocated to the Company and will be taken into account in reporting the Company’s taxable income.

As a result of the transactions described above, at the time of the IPO:


•	Ladder Capital Corp became the general partner of LCFH and, through LCFH and its subsidiaries, operates the Ladder Capital business. Accordingly, Ladder Capital Corp had a 51.0 % economic interest in LCFH (which has since increased), and Ladder Capital Corp has a majority voting interest and controls the management of LCFH;

•

50,597,205 shares of Ladder Capital Corp’s Class A common stock were outstanding (comprised of 15,237,500 shares issued to the investors in the IPO, 33,672,192 shares issued to the Exchanging Existing Owners and 1,687,513 shares issued to certain directors, officers, and employees in connection with the IPO), and 48,537,414 shares of Ladder Capital Corp’s Class B common stock were outstanding. Class B common stock has no economic interest but rather voting interest in the Company. At the time of the IPO, 99,134,619 LP Units of LCFH were outstanding, of which 50,597,205 LP Units were held by Ladder Capital Corp and its subsidiaries and 48,537,414 units were held by the Continuing LCFH Limited Partners; and

•

LP Units became exchangeable on a one -for- one basis for shares of Ladder Capital Corp Class A common stock. In connection with an exchange, a corresponding number of shares of Ladder Capital Corp Class B common stock were required to be provided and canceled. LP units and Ladder Capital Corp Class B common stock could not be legally separated. However, the exchange of LP Units for shares of Ladder Capital Corp Class A common stock would not affect the exchanging owners’ voting power since the votes represented by the canceled shares of Ladder Capital Corp Class B common stock would be replaced with the votes represented by the shares of Class A common stock for which such LP Units were exchanged.

The Company accounted for the Reorganization Transactions as an exchange between entities under common control and recorded the net assets and shareholders’ equity of the contributed entities at historical cost.

The Reorganization Transactions and the IPO are collectively referred to as the “IPO Transactions.”

The REIT Structuring Transactions

In anticipation of the Company’s election to be subject to tax as a REIT under the Internal Revenue Code of 1986 (the “Code”) beginning with its 2015 taxable year (the “REIT Election”), we effected an internal realignment as of December 31, 2014 that we believe permits us to operate as a REIT, subject to the risk factors described in the Annual Report (see “Risk Factors—Risks Related to Our Taxation as a REIT”). As part of this realignment, LCFH and certain of its wholly-owned subsidiaries were serialized in order to segregate our REIT-qualified assets and income from our non-REIT-qualified assets and income. Pursuant to such serialization, all assets and liabilities of LCFH and each such subsidiary were identified as TRS assets and liabilities (e.g., our conduit securitization and condominium sales businesses) and REIT assets and liabilities (e.g., balance sheet loans, real estate and most securities), and were allocated on our internal books and records into two pools within LCFH or such subsidiary, Series TRS and Series REIT (collectively, the “Series”), respectively.

In connection with this serialization, the Amended and Restated LLLP Agreement was amended and restated, effective as of December 5, 2014 and again as of December 31, 2014 (the “Third Amended and Restated LLLP Agreement”). Pursuant to the Third Amended and Restated LLLP Agreement, as of December 31, 2014:


•	all assets and liabilities of LCFH were allocated on LCFH’s internal books and records to either Series REIT or Series TRS of LCFH;


•	the Company serves as general partner of LCFH and of Series REIT of LCFH;

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•	LC TRS I LLC (“LC TRS I”), a Delaware limited liability company wholly-owned by Series REIT of LCFH, serves as the general partner of Series TRS of LCFH;

•

each outstanding LP Unit was exchanged for one Series REIT limited partnership unit (“Series REIT LP Unit”), which is entitled to receive profits and losses derived from REIT assets and liabilities, and one Series TRS limited partnership unit (“Series TRS LP Unit”), which is entitled to receive profits and losses derived from TRS assets and liabilities (Series REIT LP Units and Series TRS LP Units are collectively referred to as “Series Units”);


•	as a result, Ladder Capital Corp owned, directly and indirectly, an aggregate of 51.9 % of Series REIT of LCFH, and, through such ownership, the right to receive 51.9 % of the profits and distributions of Series TRS;


•	the limited partners of LCFH owned the remaining 48.1 % of each of Series REIT and Series TRS of LCFH;


•	Series REIT of LCFH, in turn, owns, directly or indirectly, 100 % of the REIT series of each of its serialized subsidiaries as well as certain wholly-owned REIT subsidiaries;


•	Series TRS of LCFH owns, directly or indirectly, 100 % of the TRS series of each of its serialized subsidiaries, as well as certain wholly-owned TRSs;


•	Series TRS LP Units are exchangeable for an equal number of shares (“TRS Shares”) of LC TRS I (a “TRS Exchange”);


•	in order to effect the exchange of Series Units for shares of Class A common stock of the Company on a one-for-one basis (the “Class A Exchange”), holders are required to surrender (i) one share of the Company’s Class B common stock, (ii) one Series REIT LP Unit, and (iii) either one Series TRS LP Unit or one TRS Share; and


•	Series REIT and Series TRS have separate boards, officers, books and records, bank accounts, and tax identification numbers.

Each Series of LCFH also signed a separate joinder agreement, agreeing, effective as of 11:59:59 pm on December 31, 2014 (the “Effective Time”), to assume and pay when due (i) any and all liabilities of LCFH incurred or accrued by LCFH as of the Effective Time and (ii) any and all obligations of LCFH arising under contracts, bonds, notes, guarantees, leases or other agreements to which LCFH was a party as of the Effective Time (collectively, the “Agreements”), regardless of whether such obligations arise under the applicable Agreement at, prior to, or after the Effective Time, in each case, with the same force and effect as if each Series had been a signatory to such Agreements on the date thereof.

Also in connection with the REIT Election, the Company’s certificate of incorporation was amended and restated, effective as of February 27, 2015, following approval by our shareholders (the “Charter Amendment”), to, among other things, impose ownership limitations and transfer restrictions to facilitate our compliance with the REIT requirements. To qualify as a REIT under the Code, our stock must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months or during a proportionate part of a shorter taxable year (other than the first year for which an election to be a REIT has been made). Also, not more than 50% of the value of the outstanding shares of our capital stock may be owned, directly or indirectly, by five or fewer “individuals” (as defined to include certain entities such as private foundations) during the last half of a taxable year (other than the first taxable year for which an election to be a REIT has been made). Finally, a person actually or constructively owning 10% or more of the vote or value of the outstanding shares of our capital stock could lead to a level of affiliation between the Company and one or more of its tenants that could disqualify our revenues from the affiliated tenants and possibly jeopardize or otherwise adversely impact our qualification as a REIT.

To facilitate satisfaction of these requirements for qualification as a REIT, the Charter Amendment contains provisions restricting the ownership and transfer of shares of all classes or series of our capital stock. Including ownership limitations in a REIT’s charter is the most effective mechanism to monitor compliance with the above-described provisions of the Code. The Charter Amendment provides that, subject to certain exceptions and the constructive ownership rules, no person may own, or be deemed to own by virtue of the attribution provisions of the Code, in excess of (i) 9.8 % in value of the outstanding shares of all classes or series of our capital stock or (ii) 9.8 % in value or number (whichever is more restrictive) of the outstanding shares of any class of our common stock.

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In addition, our Tax Receivable Agreement with the Continuing LCFH Limited Partners (the “TRA Members”) was amended and restated in connection with our REIT Election, effective as of December 31, 2014 (the “TRA Amendment”), in order to preserve a portion of the potential tax benefits currently existing under the Tax Receivable Agreement that would otherwise be reduced in connection with our REIT Election. The TRA Amendment provides that, in lieu of the existing tax benefit payments under the Tax Receivable Agreement for the 2015 taxable year and beyond, LC TRS I will pay to the TRA Members 85 % of the amount of the benefits, if any, that LC TRS I realizes or under certain circumstances (such as a change of control) is deemed to realize as a result of (i) the increases in tax basis resulting from the TRS Exchanges by the TRA Members, (ii) any incremental tax basis adjustments attributable to payments made pursuant to the TRA Amendment, and (iii) any deemed interest deductions arising from payments made by LC TRS I under the TRA Amendment. Under the TRA Amendment, LC TRS I may benefit from the remaining 15 % of cash savings in income tax that it realizes, which is in the same proportion realized by the Company under the existing Tax Receivable Agreement. The purpose of the TRA Amendment was to preserve the benefits of the Tax Receivable Agreement to the extent possible in a REIT, although, as a result, the amount of payments made to the TRA Members under the TRA Amendment is expected to be less than would be made under the prior Tax Receivable Agreement. The TRA Amendment continues to share such benefits in the same proportions and otherwise has substantially the same terms and provisions as the prior Tax Receivable Agreement. See Note 2 and Note 15 for further discussion of the Tax Receivable Agreement.

As of March 4, 2015, the Company made the necessary TRS and check-the-box elections and elected to be taxed as a REIT on its tax return for the year ended December 31, 2015, filed in September 2016.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting and Principles of Combination and Consolidation

The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). In the opinion of management, the unaudited financial information for the interim periods presented in this report reflects all normal and recurring adjustments necessary for a fair statement of results of operations, financial position and cash flows. The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2016, which are included in the Company’s Annual Report, as certain disclosures would substantially duplicate those contained in the audited consolidated financial statements have not been included in this interim report. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year. The interim consolidated financial statements have been prepared, without audit, and do not necessarily include all information and footnotes necessary for a fair statement of our consolidated financial position, results of operations and cash flows in accordance with GAAP.

The consolidated financial statements include the Company’s accounts and those of its subsidiaries which are majority-owned and/or controlled by the Company and variable interest entities for which the Company has determined itself to be the primary beneficiary, if any. All significant intercompany transactions and balances have been eliminated. The consolidated financial statements of the Company are comprised of the consolidation of LCFH and its wholly-owned and majority owned subsidiaries, prior to the IPO Transactions, and the consolidated financial statements of Ladder Capital Corp, subsequent to the IPO Transactions.

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810 — Consolidation (“ASC 810”), provides guidance on the identification of entities for which control is achieved through means other than voting rights (“variable interest entities” or “VIEs”) and the determination of which business enterprise, if any, should consolidate the VIEs. Generally, the consideration of whether an entity is a VIE applies when either: (1) the equity investors (if any) lack one or more of the essential characteristics of a controlling financial interest; (2) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support; or (3) the equity investors have voting rights that are not proportionate to their economic interests and the activities of the entity involve or are conducted on behalf of an investor with a disproportionately small voting interest. The Company consolidates VIEs in which it is considered to be the primary beneficiary. The primary beneficiary is the entity that has both of the following characteristics: (1) the power to direct the activities that, when taken together, most significantly impact the VIE’s performance; and (2) the obligation to absorb losses and right to receive the returns from the VIE that would be significant to the VIE.

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Noncontrolling interests in consolidated subsidiaries are defined as “the portion of the equity (net assets) in the subsidiaries not attributable, directly or indirectly, to a parent.” Noncontrolling interests are presented as a separate component of capital in the consolidated balance sheets. In addition, the presentation of net income attributes earnings to shareholders/unitholders (controlling interest) and noncontrolling interests.

Emerging Growth Company Status

The Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (“JOBS Act”), and is eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation in the Company’s periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, the Company chose to “opt out” of such extended transition period, and as a result, it will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that the Company’s decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

The Company could remain an “emerging growth company” for up to five years from the date of the IPO, or until the earliest of (i) the last day of the first fiscal year in which its annual gross revenues exceed $1.07 billion; (ii) the date that the Company becomes a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of its common stock that is held by nonaffiliates exceeds $700 million as of the last business day of its most recently completed second fiscal quarter; or (iii) the date on which the Company has issued more than $1 billion in nonconvertible debt during the preceding three-year period.

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the balance sheets and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates and assumptions are reviewed periodically, and the effects of resulting changes are reflected in the consolidated financial statements in the period the changes are deemed to be necessary. Significant estimates made in the accompanying consolidated financial statements include, but are not limited to the following:


•	valuation of real estate securities;


•	allocation of purchase price for acquired real estate;


•	impairment, and useful lives, of real estate;


•	useful lives of intangible assets;


•	valuation of derivative instruments;


•	valuation of deferred tax asset;


•	amounts payable pursuant to the Tax Receivable Agreement;


•	determination of effective yield for recognition of interest income;


•	adequacy of provision for loan losses;


•	determination of other than temporary impairment of real estate securities and investments in unconsolidated joint ventures;


•	certain estimates and assumptions used in the accrual of incentive compensation and calculation of the fair value of equity compensation issued to employees;


•	determination of the effective tax rate for income tax provision; and


•	certain estimates and assumptions used in the allocation of revenue and expenses for our segment reporting.

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Cash and Cash Equivalents

The Company considers all investments with original maturities of three months or less, at the time of acquisition, to be cash equivalents. The Company maintains cash accounts at several financial institutions, which are insured up to a maximum of $ 250,000 per account as of March 31, 2017 and December 31, 2016 . At March 31, 2017 and December 31, 2016 , and at various times during the years, the balances exceeded the insured limits.

Restricted Cash

Restricted cash is comprised of accounts the Company maintains with brokers to facilitate financial derivative and repurchase agreement transactions in support of its loan and securities investments and risk management activities. Based on the value of the positions in these accounts and the associated margin requirements, the Company may be required to deposit additional cash into these broker accounts. The cash collateral held by broker is considered restricted cash. Restricted cash also includes tenant security deposits, deposits related to real estate sales and acquisitions and required escrow balances on credit facilities. Prior to January 1, 2017, these amounts were previously recorded in other assets on the Company’s consolidated balance sheets. Prior period amounts have been reclassified to conform to current period presentation.

Investments in Unconsolidated Joint Ventures

The Company accounts for its investments in unconsolidated joint ventures under the equity method of accounting. The Company applies the equity method by initially recording these investments at cost, as investments in unconsolidated joint ventures, subsequently adjusted for equity in earnings and cash contributions and distributions. The outside basis portion of the Company’s joint ventures is amortized over the anticipated useful lives of the underlying ventures’ tangible and intangible assets acquired and liabilities assumed. Generally, the Company would discontinue applying the equity method when the investment (and any advances) is reduced to zero and would not provide for additional losses unless the Company has guaranteed obligations of the venture or is otherwise committed to providing further financial support for the investee. If the venture subsequently generates income, the Company only recognizes its share of such income to the extent it exceeds its share of previously unrecognized losses. The Company classifies distributions received from it investments in unconsolidated joint ventures using the nature of the distribution approach.

On a periodic basis, management assesses whether there are any indicators that the value of the Company’s investments in unconsolidated joint ventures may be impaired. An investment is impaired only if management’s estimate of the value of the investment is less than the carrying value of the investment, and such decline in value is deemed to be other than temporary. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the investment over the value of the investment. The Company’s estimates of value for each investment (particularly in commercial real estate joint ventures) are based on a number of assumptions that are subject to economic and market uncertainties including, among others, demand for space, competition for tenants, changes in market rental rates, and operating costs. As these factors are difficult to predict and are subject to future events that may alter management’s assumptions, the values estimated by management in its impairment analyses may not be realized, and actual losses or impairment may be realized in the future. See Note 6, Investment in Unconsolidated Joint Ventures .

Out-of-Period Adjustments

During the first quarter of 2017, the Company recorded an out-of-period adjustment to reduce depreciation expense of $ 0.8 million , related to prior periods. The Company has concluded that this adjustment is not material to the financial position or results of operations for the three months ended March 31, 2017, or any prior periods; accordingly, the Company recorded the related adjustment in the three month period ended March 31, 2017.

During the first quarter of 2016, the Company had recorded the following out-of-period adjustments to correct errors from prior periods: (i) additional deferred financing cost amortization of $ 0.5 million relating to 2015; (ii) additional taxes of $ 1.2 million representing additional state taxes relating to 2015 and (iii) additional return on equity of $ 0.9 million from the Company’s investment in an unconsolidated joint venture predominately relating to prior years. The Company has concluded that these adjustments were not material to the financial position or results of operations for the current period or any prior periods, accordingly, the Company recorded the related adjustments in the three month period ended March 31, 2016.

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Recently Adopted Accounting Pronouncements

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows to reduce diversity in practice with respect to (i) debt prepayment or debt extinguishment costs, (ii) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (iii) contingent consideration payments made after a business combination, (iv) proceeds from the settlement of insurance claims, (v) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, (vi) distributions received from equity method investees, (vii) beneficial interests in securitization transactions, and (viii) separately identifiable cash flows and application of the predominance principle. For a public company, ASU 2016-15 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted in any interim or annual period. The Company elected to early adopt ASU 2016-15 effective January 1, 2017. The adoption did not have a material effect on the Company’s consolidated financial statements.

In October 2016, the FASB issued ASU 2016-17, Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control (“ASU 2016-17”). ASU 2016-17 changes how a reporting entity that is a decision maker should consider indirect interests in a VIE held through an entity under common control. If a decision maker must evaluate whether it is the primary beneficiary of a VIE, it will only need to consider its proportionate indirect interest in the VIE held through a common control party. ASU 2016-17 amends ASU 2015-02, which the Company adopted on January 1, 2016, and which currently directs the decision maker to treat the common control party’s interest in the VIE as if the decision maker held the interest itself. ASU 2016-17 is effective for public business entities in fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, with early adoption permitted. The Company adopted this update in the quarter ended March 31, 2017. The adoption did not have a material effect on the Company’s consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”). ASU 2016-18 requires the inclusion of restricted cash with cash and cash equivalents when reconciling the beginning-of-the period and end-of-period total amounts shown on the statement of cash flows. For a public company, ASU 2016-18 is effective for annual reporting periods, beginning after December 15, 2017, including interim periods within that reporting period. The Company elected to early adopt ASU 2016-18 effective January 1, 2017 and the amendment was applied on a retrospective basis for all periods presented. As a result of the adoption, the Company no longer presents the change within restricted cash in the consolidated statements of cash flows.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In adopting ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach. Additionally, this guidance requires improved disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In August 2015, the FASB issued ASU 2015-14, Deferral of the Effective Date (“ASU 2015-14”), which amends ASU 2014-09. As a result, the effective date for the amendments contained in ASU 2014-09 will be the first quarter of fiscal year 2018, with early adoption permitted in the first quarter of fiscal year 2017. The FASB allows two adoption methods under ASU 2014-09. Under the full retrospective method, a company will apply the rules to contracts in all reporting periods presented, subject to certain allowable exceptions. Under the modified retrospective method, a company will apply the rules to all contracts existing as of January 1, 2018, recognizing in beginning retained earnings an adjustment for the cumulative effect of the change and providing additional disclosures comparing results to previous rules. The Company continues to evaluate the available adoption methods and has not yet selected which transition method it will apply. The Company believes the effects on its existing accounting policies will be associated with its non-leasing revenue components, specifically the amount, timing and presentation of tenant expense reimbursements revenue. The Company is also currently evaluating the impact to the amount and timing of historical real estate sales and associated gain recognition. The Company continues to evaluate other areas of the standard and is currently assessing the impact on its consolidated financial statements. The Company expects to adopt this update beginning January 1, 2018.

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In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (“ASU 2016-08”). This update provides clarifying guidance regarding the application of ASU 2014-09 when another party, along with the reporting entity, is involved in providing a good or a service to a customer. In these circumstances, an entity is required to determine whether the nature of its promise is to provide that good or service to the customer (that is, the entity is a principal) or to arrange for the good or service to be provided to the customer by the other party (that is, the entity is an agent). In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”), which clarifies the identification of performance obligations and the licensing implementation guidance. In May 2016, the FASB issued ASU 2016-11, Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 Emerging Issues Task Force (“EITF”) Meeting (SEC Update) (“ASU 2016-11”), which rescinds SEC paragraphs pursuant to SEC staff announcements. These rescissions include changes to topics pertaining to accounting for shipping and handling fees and costs and accounting for consideration given by a vendor to a customer. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”), which provides clarifying guidance in certain narrow areas and adds some practical expedients. The effective dates for these ASUs are the same as the effective date for ASU No. 2014-09, for annual and interim periods beginning after December 15, 2017. The Company is reviewing its policies and processes to ensure compliance with the requirements in these updates.

In December 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers (“ASU 2016-20”). The amendments in this ASU affect the guidance in ASU 2014-09, which is not yet effective. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements of Topic 606 (and any other Topic amended by Update 2014-09). ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date , defers the effective date of ASU 2014-09 by one year.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). The update provides guidance to improve certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The standard is effective for public companies for fiscal years beginning after December 15, 2017, and for interim periods within those fiscal years. Early adoption by public companies for fiscal year or interim period financial statements that have not yet been issued or, by all other entities, that have not yet been made available for issuance of this guidance, is permitted as of the beginning of the fiscal year of adoption, under certain restrictions. The Company is required to apply the guidance by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The guidance related to equity securities without readily determinable fair values should be applied prospectively to equity investments that exist at the date of adoption. The Company anticipates adopting this update in the quarter ending March 31, 2018 and is currently evaluating the impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) ("ASU 2016-02"), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sale-type leases, direct financing leases and operating leases. ASU 2016-02 supersedes the previous lease standard, Leases (Topic 840) . The standard is effective for the Company on January 1, 2019, with an early adoption permitted. The Company continues to evaluate the effect the adoption of ASU 2016-02 will have on the Company's financial position and/or results of operations. The Company currently believes that the adoption of ASU 2016-02 will not have a material impact for operating leases where it is a lessor and will continue to record revenues from rental properties for its operating leases on a straight-line basis. However, for leases where the Company is the lessee, primarily for the Company's corporate headquarters and regional offices, the Company will measure the present value of the future lease payments and recognize a right-of-use asset and corresponding lease liability on its balance sheet .

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In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The guidance changes the impairment model for most financial assets. The new model uses a forward-looking expected loss method, which will generally result in earlier recognition of allowances for losses. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019, and early adoption is permitted for annual and interim periods beginning after December 15, 2018. The Company must apply the amendments in this update through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company is currently assessing the impact of this standard on the consolidated financial statements. In general, the allowance for credit losses is expected to increase when changing from an incurred loss to expected loss methodology. The models and methodologies that are currently used in estimating the allowance for credit losses are being evaluated to identify the changes necessary to meet the requirements of the new standard.

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350) (“ASU 2017-04”). The ASU simplifies the accounting for goodwill impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance will be applied prospectively and is effective for annual or any interim goodwill impairment tests in years beginning after December 15, 2019 with early adoption permitted. The Company is currently assessing the impact that this guidance will have on its consolidated financial statements when adopted.

In February 2017, the FASB issued ASU 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20) (“ASU 2017-05”). Subtopic 610-20 was issued as part of the new revenue standard. It provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with non-customers. The new guidance defines “in substance nonfinancial assets,” unifies guidance related to partial sales of nonfinancial assets, eliminates rules specifically addressing sales of real estate, removes exceptions to the financial asset derecognition model, and clarifies the accounting for contributions of nonfinancial assets to joint ventures. The amendments are effective for annual periods beginning after December 15, 2017 with early adoption permitted. Transition can use either the full retrospective approach or the modified retrospective approach. The Company is currently assessing the impact that this guidance will have on its consolidated financial statements when adopted.

In March 2017, the FASB issued ASU 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20) (“ASU 2017-08”). The ASU shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date. Today, entities generally amortize the premium over the contractual life of the security. The new guidance does not change the accounting for purchased callable debt securities held at a discount; the discount continues to be amortized to maturity. ASU No. 2017-08 is effective for interim and annual reporting periods beginning after December 15, 2018; early adoption is permitted. The guidance calls for a modified retrospective transition approach under which a cumulative-effect adjustment will be made to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is currently assessing the impact that this guidance will have on its consolidated financial statements when adopted.

Any new accounting standards, not disclosed above, that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.

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3. MORTGAGE LOAN RECEIVABLES

March 31, 2017 ($ in thousands)



	Outstanding Face Amount		Carrying Value			Weighted Average Yield (1)		Remaining Maturity (years)

Mortgage loan receivables held for investment, at amortized cost	$	2,317,221	$	2,304,093		6.93	%	1.70
Provision for loan losses	N/A		( 4,000		)
Total mortgage loan receivables held for investment, at amortized cost	2,317,221		2,300,093
Mortgage loan receivables held for sale	520,679		516,582			5.06	%	7.71
Total	$	2,837,900	$	2,816,675		6.59	%	2.81

(1) March 31, 2017 London Interbank Offered Rate (“LIBOR”) rates are used to calculate weighted average yield for floating rate loans.

As of March 31, 2017 , $ 459.2 million , or 19.9 % , of the carrying value of our mortgage loan receivables held for investment, at amortized cost, were at fixed interest rates and $ 1.8 billion , or 80.1 % , of the carrying value of our mortgage loan receivables held for investment, at amortized cost, were at variable interest rates, linked to LIBOR, some of which include interest rate floors. As of March 31, 2017 , $ 516.6 million , or 100.0 % , of the carrying value of our mortgage loan receivables held for sale were at fixed interest rates.

December 31, 2016 ($ in thousands)



	Outstanding Face Amount		Carrying Value			Weighted Average Yield (1)		Remaining Maturity (years)

Mortgage loan receivables held for investment, at amortized cost	$	2,011,309	$	2,000,095		7.17	%	1.66
Provision for loan losses	N/A		( 4,000		)
Total mortgage loan receivables held for investment, at amortized cost	2,011,309		1,996,095
Mortgage loan receivables held for sale	360,518		357,882			4.20	%	4.55
Total	2,371,827		2,353,977			6.73	%	2.10

(1) December 31, 2016 LIBOR rates are used to calculate weighted average yield for floating rate loans.

As of December 31, 2016 , $ 205.4 million , or 10.3 % , of the carrying value of our mortgage loan receivables held for investment, at amortized cost, were at fixed interest rates and $ 1.8 billion , or 89.7 % , of the carrying value of our mortgage loan receivables held for investment, at amortized cost, were at variable interest rates, linked to LIBOR, some of which include interest rate floors. As of December 31, 2016 , $ 360.5 million , or 100 % , of the carrying value of our mortgage loan receivables held for sale were at fixed interest rates.

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The following table summarizes mortgage loan receivables by loan type ($ in thousands):



	March 31, 2017					December 31, 2016
	Outstanding Face Amount		Carrying Value			Outstanding Face Amount		Carrying Value

Mortgage loan receivables held for investment, at amortized cost
First mortgage loans	$	2,149,727	$	2,137,383		$	1,843,006	$	1,832,626
Mezzanine loans	167,494		166,710			168,303		167,469
Total mortgage loan receivables held for investment, at amortized cost	2,317,221		2,304,093			2,011,309		2,000,095
Mortgage loan receivables held for sale
First mortgage loans	520,679		516,582			360,518		357,882
Total mortgage loan receivables held for sale	520,679		516,582			360,518		357,882

Provision for loan losses	N/A		( 4,000		)	N/A		( 4,000		)
Total	$	2,837,900	$	2,816,675		$	2,371,827	$	2,353,977

For the three months ended March 31, 2017 and 2016 , the activity in our loan portfolio was as follows ($ in thousands):



	Mortgage loan receivables held for investment, at amortized cost (1)			Mortgage loan receivables held for sale

Balance, December 31, 2016	$	1,996,095		$	357,882
Origination of mortgage loan receivables	249,829			279,898
Repayment of mortgage loan receivables	( 68,251		)	( 247		)
Realized gain on sale of mortgage loan receivables(2)	—			( 999		)
Transfer between held for investment and held for sale(3)	119,952			( 119,952		)
Accretion/amortization of discount, premium and other fees	2,468			—
Balance, March 31, 2017	$	2,300,093		$	516,582



	Mortgage loan receivables held for investment, at amortized cost (1)			Mortgage loan receivables held for sale

Balance, December 31, 2015	$	1,738,645		$	571,764
Origination of mortgage loan receivables	49,735			91,027
Repayment of mortgage loan receivables	( 218,410		)	( 524		)
Proceeds from sales of mortgage loan receivables	—			( 316,766		)
Realized gain on sale of mortgage loan receivables	—			7,830
Accretion/amortization of discount, premium and other fees	3,013			—
Loan loss provision	( 150		)	—
Balance, March 31, 2016	$	1,572,833		$	353,331

(1) Includes provision for loan losses of $ 4.0 million and $ 3.9 million as of March 31, 2017 and 2016 , respectively.

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(2) Includes $ 1.0 million of realized losses on loans recorded as other than temporary impairments related to lower of cost or market adjustments for the three months ended March 31, 2017 .

(3)

During the three months ended March 31, 2017 , the Company reclassified from mortgage loan receivables held for sale to mortgage loan receivables held for investment, at amortized cost, a loan with an outstanding face amount of $ 120.0 million , a book value of $ 120.0 million (fair value at date of reclassification) and a remaining maturity of 3 years . The loan had been recorded at lower of cost or market prior to its reclassification. The discount to fair value is the result of an increase in market interest rates since the loan’s origination and not a deterioration in credit of the borrower or collateral coverage and the Company expects to collect all amounts due under the loan. The transfer has been reflected as a non-cash item on the consolidated statement of cash flows for the three months ended March 31, 2017 .

During the three months ended March 31, 2017 , the transfers of financial assets via sales of loans were treated as sales in accordance with ASC Topic 860 — Transfers and Servicing, with the exception of two assets with a combined book value of $ 56.1 million in which the Company retains effective control that would preclude sales accounting. The transfers are considered nonrecourse secured borrowings in which the assets remain on the Company’s consolidated balance sheets in mortgage loan receivables held for investment, net, at amortized cost and the sale proceeds of $ 56.1 million are recognized in debt obligations. During the three months ended March 31, 2016 , the transfers of financial assets via sales of loans were treated as sales under ASC Topic 860 — Transfers and Servicing.

At March 31, 2017 and December 31, 2016 , there was $ 0.5 million and $ 0.6 million , respectively, of unamortized discounts included in our mortgage loan receivables held for investment, at amortized cost, on our consolidated balance sheets.

The Company evaluates each of its loans for potential losses at least quarterly. Its loans are typically collateralized by real estate directly or indirectly. As a result, the Company regularly evaluates the extent and impact of any credit deterioration associated with the performance and/or value of the underlying collateral property, as well as the financial and operating capability of the borrower. Specifically, a property’s operating results and any cash reserves are analyzed and used to assess (i) whether cash flow from operations is sufficient to cover the debt service requirements currently and into the future, (ii) the ability of the borrower to refinance the loan at maturity, and/or (iii) the property’s liquidation value. The Company also evaluates the financial wherewithal of any loan guarantors as well as the borrower’s competency in managing and operating the properties. In addition, the Company considers the overall economic environment, real estate sector, and geographic sub-market in which the collateral property is located. Such impairment analyses are completed and reviewed by asset management personnel, who utilize various data sources, including (i) periodic financial data such as property occupancy, tenant profile, rental rates, operating expenses, the borrowers’ business plan, and capitalization and discount rates, (ii) site inspections, and (iii) current credit spreads and other market data. As a result of this analysis, the Company has concluded that none of its loans are individually impaired as of March 31, 2017 and December 31, 2016 .

However, based on the inherent risks shared among the loans as a group, it is probable that the loans had incurred an impairment due to common characteristics and inherent risks in the portfolio. Therefore, the Company has recorded a reserve, based on a targeted percentage level which it seeks to maintain over the life of the portfolio, as disclosed in the tables below. Historically, the Company has not incurred losses on any originated loans.

As of March 31, 2017 , two of the Company’s loans, which were originated simultaneously as part of a single transaction, and had a carrying value of $ 26.9 million , were in default. The borrower is currently in bankruptcy court; however, the Company determined that no impairment was necessary and continues to accrue interest on these loans because the loans’ collateral value was in excess of the outstanding balances and pursue its legal remedies. As of March 31, 2017 , accrued but unpaid interest totaled $ 1.9 million , which included $ 1.8 million of default interest. As of December 31, 2016 , the same two loans mentioned above were in default. As of December 31, 2016 , accrued but unpaid interest totaled $ 3.5 million , which included $ 2.2 million of default interest.

As of March 31, 2017 and December 31, 2016 there were no loans on non-accrual status.

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Provision for Loan Losses ($ in thousands)



	Three Months Ended March 31,
	2017		2016

Provision for loan losses at beginning of period	$	4,000	$	3,700
Provision for loan losses	—		150
Provision for loan losses at end of period	$	4,000	$	3,850

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4. REAL ESTATE SECURITIES

Commercial mortgage backed securities (“CMBS”), CMBS interest-only securities, Agency securities, Government National Mortgage Association (“GNMA”) construction securities and Government National Mortgage Association (“GNMA”) permanent securities are classified as available-for-sale and reported at fair value with changes in fair value recorded in the current period in other comprehensive income. GNMA and Federal Home Loan Mortgage Corp (“FHLMC”) securities (collectively, “Agency interest-only securities”) are recorded at fair value with changes in fair value recorded in current period earnings. The following is a summary of the Company’s securities at March 31, 2017 and December 31, 2016 ($ in thousands):

March 31, 2017



						Gross Unrealized								Weighted Average
Asset Type	Outstanding Face Amount			Amortized Cost Basis		Gains		Losses			Carrying Value		# of Securities	Rating (1)	Coupon %		Yield %		Remaining Duration (years)

CMBS(2)	$	1,306,653		$	1,323,369	$	7,909	$	( 6,028	)	$	1,325,250	128	AAA	3.18	%	2.72	%	3.38
CMBS interest-only(2)	7,801,370		(3)	316,486		4,749		( 370		)	320,865		59	AAA	1.01	%	3.58	%	3.04
GNMA interest-only(4)	457,597		(3)	17,640		196		( 2,211		)	15,625		17	AA+	0.72	%	4.47	%	4.37
Agency securities(2)	760			786		—		( 15		)	771		2	AA+	2.88	%	1.90	%	3.35
GNMA permanent securities(2)	38,029			38,836		879		( 246		)	39,469		9	AA+	4.08	%	3.69	%	5.81
Total	$	9,604,409		$	1,697,117	$	13,733	$	( 8,870	)	$	1,701,980	215		1.31	%	2.92	%	3.38

December 31, 2016



						Gross Unrealized								Weighted Average
Asset Type	Outstanding Face Amount			Amortized Cost Basis		Gains		Losses			Carrying Value		# of Securities	Rating (1)	Coupon %		Yield %		Remaining Duration (years)

CMBS(2)	$	1,676,680		$	1,698,616	$	10,880	$	( 8,101	)	$	1,701,395	131	AAA	3.26	%	2.81	%	3.55
CMBS interest-only(2)	8,160,458		(3)	343,438		1,273		( 2,540		)	342,171		60	AAA	0.87	%	3.45	%	2.99
GNMA interest-only(4)	478,577		(3)	18,994		159		( 2,332		)	16,821		17	AA+	0.73	%	4.19	%	4.44
Agency securities(2)	774			802		—		( 22		)	780		2	AA+	2.90	%	1.29	%	3.27
GNMA permanent securities(2)	38,327			39,144		882		( 246		)	39,780		9	AA+	4.09	%	3.80	%	10.30
Total	$	10,354,816		$	2,100,994	$	13,194	$	( 13,241	)	$	2,100,947	219		1.27	%	2.94	%	3.60

(1)

Represents the weighted average of the ratings of all securities in each asset type, expressed as an S&P equivalent rating. For each security rated by multiple rating agencies, the highest rating is used. Ratings provided were determined by third-party rating agencies as of a particular date, may not be current and are subject to change (including the assignment of a “negative outlook” or “credit watch”) at any time.


(2)	CMBS, CMBS interest-only securities, Agency securities, and GNMA permanent securities are classified as available-for-sale and reported at fair value with changes in fair value recorded in the current period in other comprehensive income.


(3)	The amounts presented represent the principal amount of the mortgage loans outstanding in the pool in which the interest-only securities participate.

(4)

Agency interest-only securities are recorded at fair value with changes in fair value recorded in current period earnings. The Company’s Agency interest-only securities are considered to be hybrid financial instruments that contain embedded derivatives. As a result, the Company accounts for them as hybrid instruments in their entirety at fair value with changes in fair value recognized in unrealized gain (loss) on Agency interest-only securities in the consolidated statements of income in accordance with ASC 815.

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The following is a breakdown of the carrying value of the Company’s securities by remaining maturity based upon expected cash flows at March 31, 2017 and 2016 ($ in thousands):

March 31, 2017



Asset Type	Within 1 year		1-5 years		5-10 years		After 10 years		Total

CMBS(1)	$	74,889	$	1,008,680	$	241,681	$	—	$	1,325,250
CMBS interest-only(1)	1,128		319,737		—		—		320,865
GNMA interest-only(2)	172		14,691		713		49		15,625
Agency securities(1)	—		771		—		—		771
GNMA permanent securities(1)	1,593		2,086		35,790		—		39,469
Total	$	77,782	$	1,345,965	$	278,184	$	49	$	1,701,980

December 31, 2016



Asset Type	Within 1 year		1-5 years		5-10 years		After 10 years		Total

CMBS(1)	$	132,730	$	1,156,026	$	412,639	$	—	$	1,701,395
CMBS interest-only(1)	11,188		330,983		—		—		342,171
GNMA interest-only(2)	—		15,914		724		183		16,821
Agency securities(1)	—		780		—		—		780
GNMA permanent securities(1)	—		4,488		27,675		7,617		39,780
Total	$	143,918	$	1,508,191	$	441,038	$	7,800	$	2,100,947


(1)	CMBS, CMBS interest-only securities, Agency securities, and GNMA permanent securities are classified as available-for-sale and reported at fair value with changes in fair value recorded in the current period in other comprehensive income.


(2)	Agency interest-only securities are recorded at fair value with changes in fair value recorded in current period earnings.

There were $ 0.4 million and $ 0.6 million realized losses on securities recorded as other than temporary impairments for the three months ended March 31, 2017 and 2016 , respectively. The determination of whether a security is other-than-temporarily impaired involves judgments and assumptions based on subjective and objective factors. Consideration is given to (i) the length of time and the extent to which the fair value has been less than amortized cost, (ii) the financial condition and near-term prospects of recovery in fair value of the security, and (iii) the Company’s intent to sell the security and whether it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. The Company has no intention to sell the securities before recovery of its amortized cost basis. For cash flow statement purposes, all receipts of interest from interest-only real estate securities are treated as part of cash flows from operations.

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5. REAL ESTATE AND RELATED LEASE INTANGIBLES, NET

The following tables present additional detail related to our real estate portfolio ($ in thousands):



	March 31, 2017			December 31, 2016

Land	$	144,085		$	143,286
Building	645,535			646,372
In-place leases and other intangibles	155,160			154,687
Less: Accumulated depreciation and amortization	( 130,427		)	( 122,007		)
Real estate and related lease intangibles, net	$	814,353		$	822,338

Below market lease intangibles, net (other liabilities)	$	( 16,428	)	$	( 16,506	)

The following table presents depreciation and amortization expense on real estate recorded by the Company ($ in thousands):



	Three Months Ended March 31,
	2017		2016

Depreciation expense (1)	$	5,720	$	6,104
Amortization expense	2,849		3,693
Total real estate depreciation and amortization expense	$	8,569	$	9,797


(1)	Depreciation expense on the consolidated statements of income also includes $ 23 thousand and $ 5 thousand of depreciation on corporate fixed assets for the three months ended March 31, 2017 and 2016 , respectively.

The Company’s intangible assets are comprised of in-place leases, favorable leases compared to market leases and other intangibles. At March 31, 2017 , gross intangible assets totaled $ 155.2 million with total accumulated amortization of $ 51.2 million , resulting in net intangible assets of $ 104.0 million , including $ 6.8 million of unamortized favorable lease intangibles which are included in real estate and related lease intangibles, net on the consolidated balance sheets. At December 31, 2016 , gross intangible assets totaled $ 154.7 million with total accumulated amortization of $ 48.1 million , resulting in net intangible assets of $ 106.6 million , including $ 7.0 million of unamortized favorable lease intangibles which are included in real estate and related lease intangibles, net on the consolidated balance sheets. For the three months ended March 31, 2017 and 2016 , the Company recorded a net increase (reduction) in operating lease income of $( 0.3 ) million and $ 0.4 million , respectively, for amortization of above market lease intangibles acquired. For the three months ended March 31, 2017 and 2016 , the Company recorded a net increase (reduction) in operating lease income of $ 0.3 million and $( 0.4 ) million , respectively, for amortization of below market lease intangibles acquired.

The following table presents expected amortization expense during the next five years and thereafter related to the acquired in-place lease intangibles for property owned as of March 31, 2017 ($ in thousands):



Period Ending December 31,	Amount

2017 (last 9 months)	$	8,964
2018	7,650
2019	7,650
2020	7,650
2021	6,824
Thereafter	65,270
Total	$	104,008

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There were $ 0.6 million and $ 0.7 million of unbilled rent receivables included in other assets on the consolidated balance sheets as of March 31, 2017 and December 31, 2016 , respectively.

There was unencumbered real estate of $ 63.1 million and $ 70.3 million as of March 31, 2017 and December 31, 2016 , respectively.

The following is a schedule of non-cancellable, contractual, future minimum rent under leases (excluding property operating expenses paid directly by tenant under net leases or rent escalations under other leases from tenants) at March 31, 2017 ($ in thousands):



Period Ending December 31,	Amount

2017 (last 9 months)	$	55,786
2018	70,931
2019	65,911
2020	62,574
2021	59,407
Thereafter	505,373
Total	$	819,982

Acquisitions

During the three months ended March 31, 2017 , the Company acquired the following properties ($ in thousands):



Acquisition Date	Type	Primary Location(s)	Purchase Price		Ownership Interest (1)

February 2017	Net Lease	Carmi, IL	$	1,411	100.0 %
February 2017	Net Lease	Peoria, IL	1,183		100.0 %
March 2017	Net Lease	Ridgedale, MO	1,298		100.0 %
Total			$	3,892

(1) Properties were consolidated as of acquisition date.

On October 1, 2016, the Company early adopted Accounting Standards Update (“ASU”) 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”). As a result of this adoption, acquisitions of real estate do not meet the revised definition of a business and are treated as asset acquisitions rather than business combinations. The measurement of assets and liabilities acquired will no longer be recorded at fair value and the Company will now allocate purchase consideration based on relative fair values. Real estate acquisition costs are no longer expensed as incurred and will now be capitalized as a component of the cost of the assets acquired.

The purchase prices were allocated to the net assets acquired, which also include asset acquisitions occurring on or after October 1, 2016, during the three months ended March 31, 2017 , as follows ($ in thousands):



	Purchase Price Allocation

Land	$	744
Building	2,777
Intangibles	559
Below Market Lease Intangibles	( 188		)
Total purchase price	$	3,892

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The weighted average amortization period for intangible assets acquired during the three months ended March 31, 2017 was 34.2 years. The Company recorded $ 35,946 in revenues and $ 35,946 in earnings (losses) from its 2017 acquisitions for the three months ended March 31, 2017 , which are included in our consolidated statements of income.

No properties were acquired during the three months ended March 31, 2016 .

Sales

The Company sold the following properties during the three months ended March 31, 2017 ($ in thousands):



Sales Date	Type	Primary Location(s)	Net Sales Proceeds		Net Book Value		Realized Gain/(Loss)		Properties	Units Sold	Units Remaining

Various	Condominium	Las Vegas, NV	$	4,200	$	2,320	$	1,880	—	12	47
Various	Condominium	Miami, FL	2,125		1,674		451		—	6	82
Totals			$	6,325	$	3,994	$	2,331

The Company sold the following properties during the three months ended March 31, 2016 ($ in thousands):



Sales Date	Type	Primary Location(s)	Net Sales Proceeds		Net Book Value		Realized Gain/(Loss)		Properties	Units Sold	Units Remaining

Mar 2016	Net Lease	Rockland, MA	$	7,922	$	7,211	$	711	1	—	—
Various	Condominium	Las Vegas, NV	8,404		4,417		3,987		—	17	115
Various	Condominium	Miami, FL	5,963		4,566		1,397		—	21	132
Totals			$	22,289	$	16,194	$	6,095

Real Estate Sold or Classified as Held for Sale

On January 1, 2014, the Company early adopted ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity , and as the properties sold or classified as real estate held for sale in the three months ended March 31, 2017 and 2016 did not represent a strategic shift (as the Company is not entirely exiting markets or property types), they have not been reflected as part of discontinued operations.

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6. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

As of March 31, 2017 , the Company had an aggregate investment of $34.2 million in its equity method joint ventures with unaffiliated third parties.

Included in the Company’s investments in unconsolidated joint ventures as of March 31, 2017 is one unconsolidated joint venture, which is a VIE for which the Company is not the primary beneficiary. This joint venture is primarily established to develop real estate property for long-term investment and was deemed to be a VIE primarily based on the fact there are disproportionate voting and economic rights within the joint venture. The Company determined that it was not the primary beneficiary of this VIE based on the fact that the Company has shared control of this entity along with the entity’s partner and therefore does not have controlling financial interests in this VIE. The Company’s aggregate investment in this VIE was $ 30.2 million . The Company’s maximum exposure to loss is limited to its investment in the VIE. The Company has not provided financial support to this VIE that it was not previously contractually required to provide. In general, future costs of development not financed through a third party will be funded with capital contributions from the Company and its outside partner in accordance with their respective ownership percentages.

The following is a summary of the Company’s investments in unconsolidated joint ventures, which we account for using the equity method, as of March 31, 2017 and December 31, 2016 ($ in thousands):



Entity	March 31, 2017		December 31, 2016

Ladder Capital Realty Income Partnership I LP	$	—	$	—
Grace Lake JV, LLC	3,958		3,719
24 Second Avenue Holdings LLC	30,227		30,306
Investment in unconsolidated joint ventures	$	34,185	$	34,025

The following is a summary of the Company’s allocated earnings (losses) based on its ownership interests from investment in unconsolidated joint ventures for the three months ended March 31, 2017 and 2016 ($ in thousands):



	Three Months Ended March 31,
Entity	2017			2016

Ladder Capital Realty Income Partnership I LP	$	—		$	892
Grace Lake JV, LLC	238			225
24 Second Avenue Holdings LLC	( 312		)	( 323		)
Earnings (loss) from investment in unconsolidated joint ventures	$	( 74	)	$	794

Ladder Capital Realty Income Partnership I LP

On April 15, 2011, the Company entered into a limited partnership agreement, becoming the general partner and acquiring a 10 % limited partnership interest in LCRIP I to invest in first mortgage loans held for investment and acted as general partner and manager to LCRIP I. The Company accounted for its interest in LCRIP I using the equity method of accounting, as it exerted significant influence but the unrelated limited partners had substantive participating rights, as well as kick-out rights. During the quarter ended June 30, 2015, the last loan held by LCRIP I was repaid. The term of the partnership expired on April 15, 2016. At that time, LCRIP I made distributions to the partners in the aggregate amounts determined by the general partner in accordance with the Limited Partnership Agreement. Simultaneously with the execution of the LCRIP I Partnership Agreement, the Company was engaged as the manager of LCRIP I and was entitled to a fee based upon the average net equity invested in LCRIP I, which was subject to a fee reduction in the event average net equity invested in LCRIP I exceeded $ 100.0 million . As discussed in “Out-of-Period Adjustments” in

Note 2. Significant Accounting Policies , during the first quarter of 2016, the Company recorded an additional return on equity of $ 0.9 million in this investment in unconsolidated joint venture predominately relating to prior years. During the three months ended March 31, 2017 , the Company recorded no management fees. During the three months ended March 31, 2016 , the Company recorded $ 6,905 in management fees, which is reflected in fee and other income in the consolidated statements of income.

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Grace Lake JV, LLC

In connection with the origination of a loan in April 2012, the Company received a 25 % equity kicker with the right to convert upon a capital event. On March 22, 2013, the loan was refinanced, and the Company converted its interest into a 25 % limited liability company membership interest in Grace Lake JV, LLC (“Grace Lake LLC”), which holds an investment in an office building complex. After taking into account the preferred return of 8.25 % and the return of all equity remaining in the property to the Company’s operating partner, the Company is entitled to 25 % of the distribution of all excess cash flows and all disposition proceeds upon any sale. The Company is not legally required to provide any future funding to Grace Lake JV. The Company accounts for its interest in Grace Lake JV using the equity method of accounting, as it has a 25 % investment, compared to the 75 % investment of its operating partner and does not control the entity.

24 Second Avenue Holdings LLC

On August 7, 2015 , the Company entered into a joint venture, 24 Second Avenue Holdings LLC (“24 Second Avenue”), with an operating partner to invest in a ground-up condominium construction and development project located at 24 Second Avenue, New York, NY. The Company accounts for its interest in 24 Second Avenue using the equity method of accounting as its joint venture partner is the managing member of 24 Second Avenue and has substantive participating rights. The Company contributed $ 31.1 million for a 73.8 % interest, with the operating partner holding the remaining 26.2 % interest. The Company is entitled to income allocations and distributions based upon its membership interest of 73.8 % until the Company achieves a 1.70 x profit multiple, after which, ultimately, income is allocated and distributed 50 % to the Company and 50 % to the operating partner. During the three months ended March 31, 2017 and 2016 , the Company recorded $ 0.3 million and $ 0.3 million , respectively, in expenses , which is recorded in earnings (loss) from investment in unconsolidated joint ventures in the consolidated statements of income. The Company capitalizes interest related to the cost of its investment, as 24 Second Avenue has activities in progress necessary to construct and ultimately sell condominium units. During the three months ended March 31, 2017 and 2016 , the Company capitalized $ 0.2 million and $ 0.2 million , respectively, of interest expense, using a weighted average interest rate, which is recorded in investment in unconsolidated joint ventures in the consolidated balance sheets. As of March 31, 2017 and December 31, 2016 , 24 Second Avenue had $ 24.7 million and $ 21.6 million , respectively, of loans payable. As of March 31, 2017 , the existing building has been demolished and we are anticipating completion in 2018. Our operating partner entered into a construction loan in the amount of $ 50.5 million to fund the project. As of March 31, 2017 , draws of $ 24.7 million have been taken against the construction loan. The Company has no remaining capital commitment to our operating partner.

Combined Summary Financial Information for Unconsolidated Joint Ventures

The following is a summary of the combined financial position of the unconsolidated joint ventures in which the Company had investment interests as of March 31, 2017 and December 31, 2016 ($ in thousands):



	March 31, 2017		December 31, 2016

Total assets	$	140,905	$	138,298
Total liabilities	97,068		94,964
Partners’/members’ capital	$	43,837	$	43,334

The following is a summary of the combined results from operations of the unconsolidated joint ventures for the period in which the Company had investment interests during the three months ended March 31, 2017 and 2016 ($ in thousands):



	Three Months Ended March 31,
	2017			2016

Total revenues	$	3,791		$	4,237
Total expenses	5,798			4,416
Net income (loss)	$	( 2,007	)	$	( 179	)

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7. DEBT OBLIGATIONS, NET

The details of the Company’s debt obligations at March 31, 2017 and December 31, 2016 are as follows ($ in thousands):

March 31, 2017



Debt Obligations	Committed Financing		Debt Obligations Outstanding			Committed but Unfunded		Interest Rate at March 31, 2017(1)	Current Term Maturity	Remaining Extension Options	Eligible Collateral	Carrying Amount of Collateral		Fair Value of Collateral

Committed Loan Repurchase Facility	$	600,000	$	311,312		$	288,688	2.66% - 3.41%	10/30/2018	(2)	(3)	$	453,843	$	461,210
Committed Loan Repurchase Facility	450,000		137,324			312,676		3.08% - 3.90%	5/24/2017	(4)	(3)	241,974		244,538
Committed Loan Repurchase Facility	300,000		151,257			148,743		3.08% - 4.16%	4/9/2018	(5)	(6)	299,156		306,986
Committed Loan Repurchase Facility	100,000		34,369			65,631		3.16% - 3.41%	6/28/2019	—	(3)	46,186		46,491
Committed Loan Repurchase Facility	200,000		50,732			149,268		3.13% - 3.88%	2/29/2020	(7)	(3)	69,422		75,291		(8)
Total Committed Loan Repurchase Facilities	1,650,000		684,994			965,006						1,110,581		1,134,516
Committed Securities Repurchase Facility	400,000		115,000			285,000		1.10% - 2.12%	7/1/2018	N/A	(9)	213,238		213,238
Uncommitted Securities Repurchase Facility	N/A (9)		239,361			N/A (10)		1.10% - 2.57%	4/2017 - 6/2017	N/A	(9)	279,764		279,764
Total Repurchase Facilities	2,050,000		1,039,355			1,250,006						1,603,583		1,627,518
Revolving Credit Facility	168,520		168,000			520		6.5%	2/11/2018	(11)	N/A (12)	N/A (12)		N/A (12)
Mortgage Loan Financing	589,217		589,217			—		4.25% - 6.75%	2018 - 2026	N/A	(13)	749,677		875,725		(14)
Mortgage Loan Receivable Financing	57,038		57,038			—		N/A	N/A	N/A	N/A	N/A		N/A
Borrowings from the FHLB	2,000,000		1,475,500			524,500		0.57% - 2.74%	2017 - 2024	N/A	(14)	1,921,263		1,930,137
Senior Unsecured Notes	1,057,732		1,048,576		(16)	—		5.250% - 7.375%	2017 - 2022	N/A	N/A (17)	N/A (17)		N/A (17)
Total Debt Obligations	$	5,922,507	$	4,377,686		$	1,775,026					$	4,274,523	$	4,433,380


(1)	March 31, 2017 LIBOR rates are used to calculate interest rates for floating rate debt.


(2)	Three additional 12 -month periods at Company’s option. No new advances are permitted after the initial maturity date, or if the lender consents, October 30, 2019, the initial extended maturity date.


(3)	First mortgage commercial real estate loans. It does not include the real estate collateralizing such loans.


(4)	Three additional 12 -month periods at Company’s option.


(5)	Two additional 364 -day periods at Company’s option and one additional 364 -day period with Bank’s consent.


(6)	First mortgage and mezzanine commercial real estate loans. It does not include the real estate collateralizing such loans.


(7)	One additional 12 -month extension period and two additional 6 -month extension periods at Company’s option.


(8)	Includes $ 5.1 million of loans made to consolidated subsidiaries.


(9)	Commercial real estate securities. It does not include the real estate collateralizing such securities.


(10)	Represents uncommitted securities repurchase facilities for which there is no committed amount subject to future advances.


(11)	Three additional 12 -month extension periods at Company’s option.


(12)	The obligations under the Revolving Credit Facility are guaranteed by the Company and certain of its subsidiaries and secured by equity pledges in certain Company subsidiaries.


(13)	Real estate.


(14)	Using undepreciated carrying value of commercial real estate to approximate fair value.


(15)	First mortgage commercial real estate loans and investment grade commercial real estate securities. It does not include the real estate collateralizing such loans and securities.

(16)

Presented net of unamortized debt issuance costs of $ 9.2 million at March 31, 2017 . Pursuant to their terms, the Company had called for prepayment of the 2017 Notes at par (plus any accrued and unpaid interest to the redemption date) with an outstanding principal balance of $ 291.5 million . The Company remitted the payment amount to the Trustee on March 31, 2017 and the 2017 Notes were repaid on April 3, 2017. The amount held by the Trustee was reflected in other assets on the Company’s consolidated balance sheets as of March 31, 2017 .

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(17)	The obligations under the senior unsecured notes are guaranteed by the Company and certain of its subsidiaries.

December 31, 2016



Debt Obligations	Committed Financing		Debt Obligations Outstanding			Committed but Unfunded		Interest Rate at December 31, 2016(1)	Current Term Maturity	Remaining Extension Options	Eligible Collateral	Carrying Amount of Collateral		Fair Value of Collateral

Committed Loan Repurchase Facility	$	600,000	$	183,604		$	416,396	2.45% - 3.27%	10/30/2018	(2)	(3)	$	292,628	$	293,618
Committed Loan Repurchase Facility	450,000		184,158			265,842		2.95% - 3.70%	5/24/2017	(4)	(3)	286,848		288,267
Committed Loan Repurchase Facility	400,000		100,979			299,021		2.95% - 3.99%	4/9/2017	(5)	(6)	235,878		236,696
Committed Loan Repurchase Facility	100,000		27,132			72,868		2.90% - 3.13%	6/28/2019	—	(3)	36,166		36,410
Committed Loan Repurchase Facility	100,000		71,290			28,710		2.93% - 3.68%	8/2/2019	(7)	(3)	110,271		110,897
Total Committed Loan Repurchase Facilities	1,650,000		567,163			1,082,837						961,791		965,888
Committed Securities Repurchase Facility	400,000		228,317			171,683		1.00% - 2.59%	7/1/2018	N/A	(8)	272,402		272,402
Uncommitted Securities Repurchase Facility	N/A (9)		311,705			N/A (9)		1.00% - 2.41%	1/2017 - 3/2017	N/A	(8)	368,638		368,638
Total Repurchase Facilities	2,050,000		1,107,185			1,254,520						1,602,831		1,606,928
Revolving Credit Facility	143,000		25,000			118,000		3.16%	2/11/2017	(10)	N/A (11)	N/A (11)		N/A (11)
Mortgage Loan Financing	590,106		590,106			—		4.25% - 6.75%	2018 - 2026	N/A	(12)	757,468		875,160		(13)
Borrowings from the FHLB	1,998,931		1,660,000			338,931		0.43% - 2.74%	2017 - 2024	N/A	(14)	2,162,779		2,167,017
Senior Unsecured Notes	563,872		559,847		(15)	—		5.875% - 7.375%	2017 - 2021	N/A	N/A (16)	N/A (16)		N/A (16)
Total Debt Obligations	$	5,345,909	$	3,942,138		$	1,711,451					$	4,523,078	$	4,649,105


(1)	December 31, 2016 LIBOR rates are used to calculate interest rates for floating rate debt.


(2)	Three additional 12 -month periods at Company’s option. No new advances are permitted after the initial maturity date, or if the lender consents, October 30, 2019, the initial extended maturity date.


(3)	First mortgage commercial real estate loans. It does not include the real estate collateralizing such loans.


(4)	Three additional 12 -month periods at Company’s option.


(5)	Two additional 364 -day periods at Company’s option.


(6)	First mortgage and mezzanine commercial real estate loans. It does not include the real estate collateralizing such loans.


(7)	One additional 12 -month extension period and two additional 6 -month extension periods at Company’s option.


(8)	Commercial real estate securities. It does not include the real estate collateralizing such securities.


(9)	Represents uncommitted securities repurchase facilities for which there is no committed amount subject to future advances.


(10)	Two additional 12 -month extension periods at Company’s option.


(11)	The obligations under the Revolving Credit Facility are guaranteed by the Company and certain of its subsidiaries and secured by equity pledges in certain Company subsidiaries.


(12)	Real estate.


(13)	Using undepreciated carrying value of commercial real estate to approximate fair value.


(14)	First mortgage commercial real estate loans and investment grade commercial real estate securities. It does not include the real estate collateralizing such loans and securities.


(15)	Presented net of unamortized debt issuance costs of $ 4.0 million at December 31, 2016 .


(16)	The obligations under the senior unsecured notes are guaranteed by the Company and certain of its subsidiaries.

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Committed Loan and Securities Repurchase Facilities

The Company has entered into multiple committed master repurchase agreements in order to finance its lending activities. The Company has entered into five committed master repurchase agreements, as outlined in the March 31, 2017 table above, totaling $1.7 billion of credit capacity. Assets pledged as collateral under these facilities are limited to whole mortgage loans or participation interests in mortgage loans collateralized by first liens on commercial properties and mezzanine debt. The Company also has a term master repurchase agreement with a major U.S. bank to finance CMBS totaling $ 400.0 million . The Company’s repurchase facilities include covenants covering net worth requirements, minimum liquidity levels, and maximum leverage ratios. The Company believes it was in compliance with all covenants as of March 31, 2017 and December 31, 2016 .

The Company has the option to extend some of the current facilities subject to a number of conditions, including satisfaction of certain notice requirements, no event of default exists, and no margin deficit exists, all as defined in the repurchase facility agreements. The lenders have sole discretion with respect to the inclusion of collateral in these facilities, to determine the market value of the collateral on a daily basis, to be exercised on a good faith basis, and have the right to require additional collateral, a full and/or partial repayment of the facilities (margin call), or a reduction in unused availability under the facilities, sufficient to rebalance the facilities if the estimated market value of the included collateral declines.

On April 19, 2016, the Company entered into an amendment to its committed loan repurchase facility with one of its multiple major banking institutions, adding two one -year extension options and extending the maximum term of such facility to May 24, 2020.

On May 26, 2016, the Company entered into an amendment to its committed repurchase facility with a major banking institution to memorialize the replacement of the servicer under such facility.

On June 27, 2016, the Company executed an amendment and extension of one of its credit facilities with a major banking institution, with an effective date of July 1, 2016, providing for, among other things, the extension of the maximum term of the facility to July 1, 2018 and increasing the maximum funding capacity to $ 400.0 million .

On June 28, 2016, the Company entered into a committed loan repurchase facility with a major banking institution with total capacity of $ 100.0 million and a final maturity date of June 28, 2019.

On August 3, 2016, the Company executed a committed loan repurchase facility with a major banking institution with total capacity of $ 100.0 million and an initial maturity date of August 2, 2019, with one twelve -month extension period, followed by two six -month extension periods. In connection with the execution of this new facility, the Company terminated its existing committed loan repurchase facility with total capacity of $ 35.0 million .

On November 9, 2016, the Company entered into an amendment to its committed repurchase facility with a major banking institution to, among other things, extend the initial term to October 30, 2018 and add three ( 3 ) additional one year extension options to the term thereof, provided that the Company will not be permitted to obtain advances under such facility after October 30, 2018, or if the lender thereunder consents, October 30, 2019.

On February 22, 2017, the Company exercised a one year extension option on one of its committed loan repurchase facilities. In connection with this extension, the Company elected to reduce the maximum capacity of the facility to $ 300.0 million . In addition, on March 21, 2017, the Company amended this committed loan repurchase facility to, among other things, add one additional 364 -day extension period at Company’s option and one additional 364 -day extension period permitted with lender’s consent.

On March 1, 2017, the Company executed an amendment and extension of one of its credit facilities with a major banking institution, providing for, among other things, the extension of the maximum term of the facility to February 28, 2022 and increasing the maximum funding capacity to $ 200.0 million .

As of March 31, 2017 , we had repurchase agreements with nine counterparties, with total debt obligations outstanding of $ 1.0 billion . As of March 31, 2017 , three counterparties, Deutsche Bank, J.P. Morgan and Wells Fargo , held collateral that exceeded the amounts borrowed under the related repurchase agreements by more than $ 74.1 million , or 5 % of our total equity. As of March 31, 2017 , the weighted average haircut, or the percent of collateral value in excess of the loan amount, under our repurchase agreements was 36.1 % . There have been no significant fluctuations in haircuts across asset classes on our repurchase facilities.

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Revolving Credit Facility

On February 11, 2014, the Company entered into a revolving credit facility (the “Revolving Credit Facility”), which was subsequently amended on February 26, 2016, March 1, 2017 and March 23, 2017, to add additional banks to our syndicate, add two additional one-year extension options and increase its maximum funding capacity. The Revolving Credit Facility provides for an aggregate maximum borrowing amount of $ 168.5 million , including a $ 25.0 million sublimit for the issuance of letters of credit. The Revolving Credit Facility is available on a revolving basis to finance the Company’s working capital needs and for general corporate purposes. The Revolving Credit Facility has a three -year maturity, which may be extended by four 12 -month periods subject to the satisfaction of customary conditions, including the absence of default. Interest on the Revolving Credit Facility is one-month LIBOR plus 3.50 % per annum payable monthly in arrears.

The obligations under the Revolving Credit Facility are guaranteed by the Company and certain of its subsidiaries. The Revolving Credit Facility is secured by a pledge of the shares of (or other ownership or equity interests in) certain subsidiaries to the extent the pledge is not restricted under existing regulations, law or contractual obligations.

LCFH is subject to customary affirmative covenants and negative covenants, including limitations on the incurrence of additional debt, liens, restricted payments, sales of assets and affiliate transactions. In addition, under the Revolving Credit Facility, LCFH is required to comply with financial covenants relating to minimum net worth, maximum leverage, minimum liquidity, and minimum fixed charge coverage, consistent with our other credit facilities. The Company’s ability to borrow under the Revolving Credit Facility is dependent on, among other things, LCFH’s compliance with the financial covenants. The Revolving Credit Facility contains customary events of default, including non-payment of principal or interest, fees or other amounts, failure to perform or observe covenants, cross-default to other indebtedness, the rendering of judgments against the Company or certain of our subsidiaries to pay certain amounts of money and certain events of bankruptcy or insolvency.

Debt Issuance Costs

As discussed in Note 2, Significant Accounting Policies in the Annual Report, the Company considers its committed loan master repurchase facilities and Revolving Credit Facility to be revolving debt arrangements. As such, the Company continues to defer and present costs associated with these facilities as an asset, subsequently amortizing those costs ratably over the term of each revolving debt arrangement. As of March 31, 2017 and December 31, 2016 , the amount of unamortized costs relating to such facilities are $ 5.5 million and $ 4.9 million , respectively, and are included in other assets in the consolidated balance sheets.

Uncommitted Securities Repurchase Facilities

The Company has also entered into multiple master repurchase agreements with several counterparties collateralized by real estate securities. The borrowings under these agreements have typical advance rates between 70 % and 95 % of the fair value of collateral.

Mortgage Loan Financing

During the three months ended March 31, 2017 , the Company did not execute any term debt agreements to finance properties in its real estate portfolio. During the three months ended March 31, 2016 , the Company executed 4 term debt agreements to finance properties in its real estate portfolio. These nonrecourse debt agreements provide for fixed rate financing at rates, ranging from 4.25 % to 6.75 % , maturing between 2018 - 2026 as of March 31, 2017 . These loans have carrying amounts of $ 589.2 million and $ 590.1 million , net of unamortized premiums of $ 5.3 million and $ 5.6 million at March 31, 2017 and December 31, 2016 , respectively, representing proceeds received upon financing greater than the contractual amounts due under these agreements. The premiums are being amortized over the remaining life of the respective debt instruments using the effective interest method. The Company recorded $ 0.2 million and $ 0.2 million of premium amortization, which decreased interest expense, for the three months ended March 31, 2017 and 2016 , respectively. The loans are collateralized by real estate and related lease intangibles, net, of $ 749.7 million and $ 757.5 million as of March 31, 2017 and December 31, 2016 , respectively.

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Mortgage Loan Receivable Financing (Nonrecourse)

During the three months ended March 31, 2017 , the transfers of financial assets via sales of loans were treated as sales in accordance with ASC Topic 860 — Transfers and Servicing, with the exception of two assets, with a combined book value of $ 56.1 million in which the Company retains effective control that would preclude sales accounting. The transfers are considered nonrecourse secured borrowings in which the assets remain on the Company’s consolidated balance sheets in mortgage loan receivables held for investment, net, at amortized cost and the sale proceeds of $ 56.1 million are recognized in debt obligations. During the three months ended March 31, 2016 , the transfers of financial assets via sales of loans were treated as sales under ASC Topic 860 — Transfers and Servicing.

Borrowings from the Federal Home Loan Bank (“FHLB”)

On July 11, 2012, Tuebor Captive Insurance Company LLC (“Tuebor”), a consolidated subsidiary of the Company, became a member of the FHLB and subsequently drew its first secured funding advances from the FHLB. On January 13, 2017, Tuebor’s advance limit was updated to the lowest of $ 2.0 billion , 40 % of Tuebor’s total assets or 150 % of the Company’s total equity.

As of March 31, 2017 , Tuebor had $ 1.5 billion of borrowings outstanding (with an additional $ 524.5 million of committed term financing available from the FHLB), with terms of overnight to seven years (with a weighted average of 2.6 years ), interest rates of 0.57 % to 2.74 % (with a weighted average of 1.24 % ), and advance rates of 57.8 % to 95.2 % of the collateral. As of March 31, 2017 , collateral for the borrowings was comprised of $ 1.2 billion of CMBS and U.S. Agency Securities and $ 761.0 million of first mortgage commercial real estate loans.

As of December 31, 2016 , Tuebor had $ 1.7 billion of borrowings outstanding (with an additional $ 338.9 million of committed term financing available from the FHLB), with terms of overnight to seven years (with a weighted average of 2.4 years ), interest rates of 0.43 % to 2.74 % (with a weighted average of 1.12 % ), and advance rates of 49.6 % to 95.2 % of the collateral. As of December 31, 2016 , collateral for the borrowings was comprised of $ 1.4 billion of CMBS and U.S. Agency Securities and $ 724.0 million of first mortgage commercial real estate loans.

Tuebor is subject to state regulations which require that dividends (including dividends to the Company as its parent) may only be made with regulatory approval. However, there can be no assurance that we would obtain such approval if sought. Largely as a result of this restriction, approximately $ 324.3 million of the member’s capital was restricted from transfer to Tuebor’s parent without prior approval of state insurance regulators at March 31, 2017 .

Effective February 19, 2016, the Federal Housing Finance Agency (the “FHFA’’), regulator of the FHLB, adopted a final rule amending its regulation regarding the eligibility of captive insurance companies for FHLB membership. According to the final rule, Ladder’s captive insurance company subsidiary, Tuebor may remain as a member of the FHLB through February 19, 2021 (the “Transition Period”). During the Transition Period, Tuebor is eligible to continue to draw new additional advances, extend the maturities of existing advances, and pay off outstanding advances on the same terms as non-captive insurance company FHLB members with the following two exceptions:


1.	New advances (including any existing advances that are extended during the Transition Period) will have maturity dates on or before February 19, 2021; and


2.	The FHLB will make new advances to Tuebor subject to a requirement that Tuebor’s total outstanding advances do not exceed 40 % of Tuebor’s total assets.

Tuebor has executed new advances since the effective date of the new rule in the ordinary course of business.

There is no assurance that the FHFA or the FHLB will not take actions that could adversely impact Tuebor’s membership in the FHLB and continuing access to new or existing advances prior to February 19, 2021.

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Senior Unsecured Notes

LCFH issued the 2022 Notes, the 2021 Notes and the 2017 Notes (each as defined below, and collectively, the “Notes”) with Ladder Capital Finance Corporation (“LCFC”), as co-issuers on a joint and several basis. LCFC is a 100 % owned finance subsidiary of Series TRS of LCFH with no assets, operations, revenues or cash flows other than those related to the issuance, administration and repayment of the Notes. The Company and certain subsidiaries of LCFH currently guarantee the obligations under the Notes and the indenture. The Company is the general partner of LCFH and, through LCFH and its subsidiaries, operates the Ladder Capital business. As of March 31, 2017 , the Company has a 71.4 % economic and voting interest in LCFH and controls the management of LCFH as a result of its ability to appoint board members. Accordingly, the Company consolidates the financial results of LCFH and records noncontrolling interest for the economic interest in LCFH held by the Continuing LCFH Limited Partners. In addition, the Company, through certain subsidiaries which are treated as TRSs, is indirectly subject to U.S. federal, state and local income taxes. Other than the noncontrolling interest in the Operating Partnership and federal, state and local income taxes, there are no material differences between the Company’s consolidated financial statements and LCFH’s consolidated financial statements.

Unamortized debt issuance costs of $ 9.2 million and $ 4.0 million are included in senior unsecured notes as of March 31, 2017 and December 31, 2016 , respectively, in accordance with GAAP.

2017 Notes

On September 19, 2012, LCFH issued $ 325.0 million in aggregate principal amount of 7.375 % senior notes due October 1, 2017 (the “2017 Notes”). The 2017 Notes required interest payments semi-annually in cash in arrears on April 1 and October 1 of each year, beginning on September 19, 2012. The 2017 Notes were unsecured and subject to incurrence-based covenants, including limitations on the incurrence of additional debt, restricted payments, liens, sales of assets, affiliate transactions and other covenants typical for financings of this type. At any time on or after April 1, 2017, the 2017 Notes were redeemable at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days’ notice, without penalty. On November 5, 2014, the board of directors authorized the Company to make up to $ 325.0 million in repurchases of the 2017 Notes from time to time without further approval.

On December 17, 2014, the Company retired $ 5.4 million of principal of the 2017 Notes for a repurchase price of $ 5.6 million recognizing a $ 0.2 million loss on extinguishment of debt. During the year ended December 31, 2016, the Company retired $ 21.9 million of principal of the 2017 Notes for a repurchase price of $ 21.4 million , recognizing a $ 0.3 million net gain on extinguishment of debt after recognizing $( 0.2 ) million of unamortized debt issuance costs associated with the retired debt. During the three months ended March 31, 2017, the Company retired $ 6.1 million of principal of the 2017 Notes for a repurchase price of $ 6.2 million , recognizing a $ 0.1 million net loss on extinguishment of debt after recognizing $ 22,847 of unamortized debt issuance costs associated with the retired debt. As of March 31, 2017 , the remaining $ 291.5 million in aggregate principal amount of the 2017 Notes was due October 2, 2017.

On March 1, 2017, the Company delivered a notice of conditional full redemption to holders of the 2017 Notes, pursuant to which the Company redeemed all outstanding 2017 Notes at 100 % of the principal amount thereof (plus any accrued and unpaid interest to the redemption date) as of April 1, 2017. The redemption was conditional on the completion by the Company of a senior notes offering with gross proceeds of not less than $ 500 million . The Company’s offering of the 2022 Notes, described below, satisfied this condition. On April 3, 2017 , the Company repaid the remaining $ 291.5 million in aggregate principal amount of the 2017 Notes (including accrued and unpaid interest as of that date).

2021 Notes

On August 1, 2014, LCFH issued $ 300.0 million in aggregate principal amount of 5.875 % senior notes due August 1, 2021 (the “2021 Notes”). The 2021 Notes require interest payments semi-annually in cash in arrears on February 1 and August 1 of each year, beginning on February 1, 2015. The 2021 Notes will mature on August 1, 2021. The 2021 Notes are unsecured and are subject to incurrence-based covenants, including limitations on the incurrence of additional debt, restricted payments, liens, sales of assets, affiliate transactions and other covenants typical for financings of this type. At any time on or after August 1, 2020, the 2021 Notes are redeemable at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days’ notice, without penalty. On February 24, 2016, the board of directors authorized the Company to make up to $ 100.0 million in repurchases of the 2021 Notes from time to time without further approval.

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During the year ended December 31, 2016, the Company retired $ 33.8 million of principal of the 2021 Notes for a repurchase price of $ 28.2 million , recognizing a $ 5.1 million net gain on extinguishment of debt after recognizing $( 0.4 ) million of unamortized debt issuance costs associated with the retired debt. As of March 31, 2017 , the remaining $ 266.2 million in aggregate principal amount of the 2021 Notes is due August 1, 2021.

2022 Notes

On March 16, 2017, LCFH issued $ 500.0 million in aggregate principal amount of 5.250 % senior notes due March 15, 2022 (the “2022 Notes”). The 2022 Notes require interest payments semi-annually in cash in arrears on March 15 and September 15 of each year, beginning on September 15, 2017. The 2022 Notes will mature on March 15, 2022. The 2022 Notes are unsecured and are subject to an unencumbered assets to unsecured debt covenant. At any time on or after September 15, 2021, the 2022 Notes are redeemable at the option of the Company, in whole or in part, upon not less than 15 nor more than 60 days’ notice, without penalty.

Combined Maturity of Debt Obligations

The following schedule reflects the Company’s contractual payments under all borrowings by maturity ($ in thousands):



Period ending December 31,	Borrowings by Maturity (1)

2017 (last 9 months)(2)	$	1,312,542
2018	806,468
2019	313,298
2020	113,801
2021	362,941
Thereafter	1,472,447
Subtotal	$	4,381,497
Debt issuance costs included in senior unsecured notes	( 9,156		)
Premiums included in mortgage loan financing	5,345
Total	4,377,686


(1)	Contractual payments under current maturities, some of which are subject to extensions. The maturities listed above for 2017 include $ 1.0 billion relating to debt obligations that are subject to existing Company controlled extension options for one or more additional one-year periods or could be refinanced by other existing facilities as of March 31, 2017 .


(2)	Amount includes $ 291.5 million of 2017 Notes. The Company had remitted the payment amount to the Trustee on March 31, 2017 and the 2017 Notes were repaid on April 3, 2017. The amount held by the Trustee was reflected in other assets on the Company’s consolidated balance sheets as of March 31, 2017 .

The Company’s debt facilities are subject to covenants which require the Company to maintain a minimum level of total equity. Largely as a result of this restriction, approximately $ 899.4 million of the total equity is restricted from payment as a dividend by the Company at March 31, 2017 .

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8. FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is based upon market quotations, broker quotations, counterparty quotations or pricing services quotations, which provide valuation estimates based upon reasonable market order indications and are subject to significant variability based on market conditions, such as interest rates, credit spreads and market liquidity. The fair value of the mortgage loan receivables held for sale is based upon a securitization model utilizing market data from recent securitization spreads and pricing.

Fair Value Summary Table

The carrying values and estimated fair values of the Company’s financial instruments, which are both reported at fair value on a recurring basis (as indicated) or amortized cost/par, at March 31, 2017 and December 31, 2016 are as follows ($ in thousands):

March 31, 2017



									Weighted Average
	Outstanding Face Amount			Amortized Cost Basis		Fair Value		Fair Value Method	Yield %		Remaining Maturity/Duration (years)
Assets:
CMBS(1)	$	1,306,653		$	1,323,369	$	1,325,250	Internal model, third-party inputs	2.72	%	3.38
CMBS interest-only(1)	7,801,370		(2)	316,486		320,865		Internal model, third-party inputs	3.58	%	3.04
GNMA interest-only(3)	457,597		(2)	17,640		15,625		Internal model, third-party inputs	4.47	%	4.37
Agency securities(1)	760			786		771		Internal model, third-party inputs	1.90	%	3.35
GNMA permanent securities(1)	38,029			38,836		39,469		Internal model, third-party inputs	3.69	%	5.81
Mortgage loan receivables held for investment, at amortized cost	2,317,221			2,300,093		2,321,245		Discounted Cash Flow(4)	6.93	%	1.70
Mortgage loan receivables held for sale	520,679			516,582		585,212		Internal model, third-party inputs(5)	5.06	%	7.71
FHLB stock(6)	77,915			77,915		77,915		(6)	4.25	%	N/A
Nonhedge derivatives(1)(7)	97,100			N/A		108		Counterparty quotations	N/A		0.44

Liabilities:
Repurchase agreements - short-term	549,892			549,892		549,892		Discounted Cash Flow(8)	2.28	%	0.12
Repurchase agreements - long-term	489,464			489,464		489,464		Discounted Cash Flow(9)	2.34	%	1.56
Revolving credit facility	168,000			168,000		168,000		Discounted Cash Flow(10)	6.50	%	1.87
Mortgage loan financing	589,152			589,217		594,012		Discounted Cash Flow(9)	4.85	%	6.90
Mortgage loan receivable financing	57,038			57,038		57,038		Sales Proceeds	N/A		N/A
Borrowings from the FHLB	1,475,500			1,475,500		1,476,686		Discounted Cash Flow	1.24	%	2.64
Senior unsecured notes	1,057,732			1,048,576		1,064,144		Broker quotations, pricing services	5.99	%	3.57
Nonhedge derivatives(1)(7)	1,001,200			N/A		4,207		Counterparty quotations	N/A		1.23


(1)	Measured at fair value on a recurring basis with the net unrealized gains or losses recorded as a component of other comprehensive income (loss) in equity.


(2)	Represents notional outstanding balance of underlying collateral.


(3)	Measured at fair value on a recurring basis with the net unrealized gains or losses recorded in current period earnings.

(4)

Fair value for floating rate mortgage loan receivables, held for investment is estimated to approximate the outstanding face amount given the short interest rate reset risk ( 30 days ) and no significant change in credit risk. Fair value for fixed rate mortgage loan receivables, held for investment is measured using a hypothetical securitization model utilizing market data from recent securitization spreads and pricing.


(5)	Fair value for mortgage loan receivables, held for sale is measured using a hypothetical securitization model utilizing market data from recent securitization spreads and pricing.


(6)	Fair value of the FHLB stock approximates outstanding face amount as the Company’s captive insurance subsidiary is restricted from trading the stock and can only put the stock back to the FHLB, at the FHLB’s discretion, at par.


(7)	The outstanding face amount of the nonhedge derivatives represents the notional amount of the underlying contracts.


(8)	Fair value for repurchase agreement liabilities is estimated to approximate carrying amount primarily due to the short interest rate reset risk (30 days) of the financings and the high credit quality of the assets collateralizing these positions. If the collateral is determined to be impaired, the related financing would be revalued accordingly. There are no impairments on any positions.


(9)	For repurchase agreements - long term and mortgage loan financing, the carrying value approximates the fair value discounting the expected cash flows at current market rates. If the collateral is determined to be impaired, the related financing would be revalued accordingly. There are no impairments on any positions.


(10)	Fair value for borrowings under the revolving credit facility is estimated to approximate carrying amount primarily due to the short interest rate reset risk ( 30 days ) of the financings and the high credit quality of the assets collateralizing these positions.

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December 31, 2016



									Weighted Average
	Outstanding Face Amount			Amortized Cost Basis		Fair Value		Fair Value Method	Yield %		Remaining Maturity/Duration (years)
Assets:
CMBS(1)	$	1,676,680		$	1,698,276	$	1,701,395	Internal model, third-party inputs	2.81	%	3.55
CMBS interest-only(1)	8,160,458		(2)	343,534		342,171		Internal model, third-party inputs	3.45	%	2.99
GNMA interest-only(3)	478,577		(2)	18,994		16,821		Internal model, third-party inputs	4.19	%	4.44
Agency securities(1)	774			802		780		Internal model, third-party inputs	1.29	%	3.27
GNMA permanent securities(1)	38,327			39,145		39,780		Internal model, third-party inputs	3.80	%	10.30
Mortgage loan receivables held for investment, at amortized cost	2,011,309			1,996,095		2,014,973		Discounted Cash Flow(4)	7.17	%	1.66
Mortgage loan receivables held for sale	360,518			357,882		359,897		Internal model, third-party inputs(5)	4.20	%	4.55
FHLB stock(6)	77,915			77,915		77,915		(6)	4.25	%	N/A
Nonhedge derivatives(1)(7)	847,000			N/A		5,018		Counterparty quotations	N/A		0.25

Liabilities:
Repurchase agreements - short-term	629,430			629,430		629,430		Discounted Cash Flow(8)	2.10	%	0.18
Repurchase agreements - long-term	477,756			477,756		477,756		Discounted Cash Flow(9)	2.00	%	1.70
Revolving credit facility	25,000			25,000		25,000		Discounted Cash Flow(10)	3.16	%	0.12
Mortgage loan financing	589,152			590,106		595,778		Discounted Cash Flow(9)	4.85	%	7.15
Borrowings from the FHLB	1,660,000			1,660,000		1,662,178		Discounted Cash Flow	1.12	%	2.42
Senior unsecured notes	563,872			559,847		550,562		Broker quotations, pricing services	6.67	%	2.81
Nonhedge derivatives(1)(7)	100,400			N/A		3,446		Counterparty quotations	N/A		3.21


(1)	Measured at fair value on a recurring basis with the net unrealized gains or losses recorded as a component of other comprehensive income (loss) in equity.


(2)	Represents notional outstanding balance of underlying collateral.


(3)	Measured at fair value on a recurring basis with the net unrealized gains or losses recorded in current period earnings.

(4)


(5)	Fair value for mortgage loan receivables, held for sale is measured using a hypothetical securitization model utilizing market data from recent securitization spreads and pricing.


(6)	Fair value of the FHLB stock approximates outstanding face amount as the Company’s captive insurance subsidiary is restricted from trading the stock and can only put the stock back to the FHLB, at the FHLB’s discretion, at par.


(7)	The outstanding face amount of the nonhedge derivatives represents the notional amount of the underlying contracts.


(8)	Fair value for repurchase agreement liabilities is estimated to approximate carrying amount primarily due to the short interest rate reset risk (30 days) of the financings and the high credit quality of the assets collateralizing these positions. If the collateral is determined to be impaired, the related financing would be revalued accordingly. There are no impairments on any positions.


(9)	For repurchase agreements - long term and mortgage loan financing, the carrying value approximates the fair value discounting the expected cash flows at current market rates. If the collateral is determined to be impaired, the related financing would be revalued accordingly. There are no impairments on any positions.


(10)	Fair value for borrowings under the revolving credit facility is estimated to approximate carrying amount primarily due to the short interest rate reset risk ( 30 days ) of the financings and the high credit quality of the assets collateralizing these positions.

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The following table summarizes the Company’s financial assets and liabilities, which are both reported at fair value on a recurring basis (as indicated) or amortized cost/par, at March 31, 2017 and 2016 ($ in thousands):

March 31, 2017



Financial Instruments Reported at Fair Value on Consolidated Statements of Financial Condition	Outstanding Face Amount			Fair Value
	Outstanding Face Amount			Level 1		Level 2		Level 3		Total

Assets:
CMBS(1)	$	1,306,653		$	—	$	—	$	1,325,250	$	1,325,250
CMBS interest-only(1)	7,801,370		(2)	—		—		320,865		320,865
GNMA interest-only(3)	457,597		(2)	—		—		15,625		15,625
Agency securities(1)	760			—		—		771		771
GNMA permanent securities(1)	38,029			—		—		39,469		39,469
Nonhedge derivatives(4)	97,100			—		108		—		108
				$	—	$	108	$	1,701,980	$	1,702,088
Liabilities:
Nonhedge derivatives(4)	1,001,200			$	—	$	4,207	$	—	$	4,207

Financial Instruments Not Reported at Fair Value on Consolidated Statements of Financial Condition	Outstanding Face Amount			Fair Value
	Outstanding Face Amount			Level 1		Level 2		Level 3		Total

Assets:
Mortgage loan receivable held for investment	$	2,317,221		$	—	$	—	$	2,321,245	$	2,321,245
Mortgage loan receivable held for sale	520,679			—		—		585,212		585,212
FHLB stock	77,915			—		—		77,915		77,915
				$	—	$	—	$	2,984,372	$	2,984,372
Liabilities:										0
Repurchase agreements - short-term	549,892			$	—	$	—	$	549,892	$	549,892
Repurchase agreements - long-term	489,464			—		—		489,464		489,464
Revolving credit facility	168,000			—		—		168,000		168,000
Mortgage loan financing	589,152			—		—		594,012		594,012
Mortgage loan receivable financing	57,038			—		—		57,038		57,038
Borrowings from the FHLB	1,475,500			—		—		1,476,686		1,476,686
Senior unsecured notes	1,057,732			—		—		1,064,144		1,064,144
				$	—	$	—	$	4,399,236	$	4,399,236


(1)	Measured at fair value on a recurring basis with the net unrealized gains or losses recorded as a component of other comprehensive income (loss) in equity.


(2)	Represents notional outstanding balance of underlying collateral.


(3)	Measured at fair value on a recurring basis with the net unrealized gains or losses recorded in current period earnings.


(4)	Measured at fair value on a recurring basis with the net unrealized gains or losses recorded in current period earnings. The outstanding face amount of the nonhedge derivatives represents the notional amount of the underlying contracts.

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December 31, 2016



Financial Instruments Reported at Fair Value on Consolidated Statements of Financial Condition	Outstanding Face Amount			Fair Value
	Outstanding Face Amount			Level 1		Level 2		Level 3		Total

Assets:
CMBS(1)	$	1,676,680		$	—	$	—	$	1,701,395	$	1,701,395
CMBS interest-only(1)	8,160,458		(2)	—		—		342,171		342,171
GNMA interest-only(3)	478,577		(2)	—		—		16,821		16,821
Agency securities(1)	774			—		—		780		780
GNMA permanent securities(1)	38,327			—		—		39,780		39,780
Nonhedge derivatives(4)	847,000			—		5,018		—		5,018
				$	—	$	5,018	$	2,100,947	$	2,105,965
Liabilities:
Nonhedge derivatives(4)	100,400			—		3,446		—		3,446


Financial Instruments Not Reported at Fair Value on Consolidated Statements of Financial Condition	Outstanding Face Amount			Fair Value
	Outstanding Face Amount			Level 1		Level 2		Level 3		Total

Assets:
Mortgage loan receivables held for investment, at amortized cost	2,011,309			—		—		2,014,973		2,014,973
Mortgage loan receivables held for sale	360,518			—		—		359,897		359,897
FHLB stock	77,915			—		—		77,915		77,915
				$	—	$	—	$	2,452,785	$	2,452,785
Liabilities:										0
Repurchase agreements - short-term	629,430			—				629,430		629,430
Repurchase agreements - long-term	477,756			—		—		477,756		477,756
Revolving credit facility	25,000			—		—		25,000		25,000
Mortgage loan financing	589,152			—		—		595,778		595,778
Mortgage loan receivable financing	—			—		—		—		—
Borrowings from the FHLB	1,660,000			—		—		1,662,178		1,662,178
Senior unsecured notes	563,872			—		—		550,562		550,562
				$	—	$	—	$	3,940,704	$	3,940,704


(1)	Measured at fair value on a recurring basis with the net unrealized gains or losses recorded as a component of other comprehensive income (loss) in equity.


(2)	Represents notional outstanding balance of underlying collateral.


(3)	Measured at fair value on a recurring basis with the net unrealized gains or losses recorded in current period earnings.


(4)	Measured at fair value on a recurring basis with the net unrealized gains or losses recorded in current period earnings. The outstanding face amount of the nonhedge derivatives represents the notional amount of the underlying contracts.

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The following table summarizes changes in Level 3 financial instruments reported at fair value on the consolidated statements of financial condition for the three months ended March 31, 2017 and 2016 ($ in thousands):



Level 3	2017			2016

Balance at January 1,	$	2,100,947		$	2,407,217
Transfer from level 2	—			—
Purchases	45,726			227,758
Sales	( 361,323		)	( 15,477		)
Paydowns/maturities	( 74,285		)	( 36,136		)
Amortization of premium/discount	( 19,357		)	( 18,958		)
Unrealized gain/(loss)	4,911			34,459
Realized gain/(loss) on sale	5,361			11
Balance at March 31,	$	1,701,980		$	2,598,874

The following is quantitative information about significant unobservable inputs in our Level 3 measurements for those assets and liabilities measured at fair value on a recurring basis ($ in thousands):

March 31, 2017



Financial Instrument	Carrying Value			Valuation Technique	Unobservable Input	Minimum		Weighted Average		Maximum

CMBS (1)	$	1,325,250		Discounted cash flow	Yield (4)	1.41	%	2.79	%	8.62	%
					Duration (years)(5)	0.10		3.65		7.99
CMBS interest-only (1)	320,865		(2)	Discounted cash flow	Yield (4)	2.62	%	3.52	%	4.24	%
					Duration (years)(5)	0.75		3.03		4.22
					Prepayment speed (CPY)(5)	100.00		100.00		100.00
GNMA interest-only (3)	15,625		(2)	Discounted cash flow	Yield (4)	3.84	%	8.28	%	50.65	%
					Duration (years)(5)	0.26		2.35		5.21
					Prepayment speed (CPJ)(5)	5.00		13.33		35.00
Agency securities (1)	771			Discounted cash flow	Yield (4)	1.4	%	2.06	%	2.43	%
					Duration (years)(5)	0.00		3.47		5.38
GNMA permanent securities (1)	39,469			Discounted cash flow	Yield (4)	2.73	%	3.63	%	6.37	%
					Duration (years)(5)	1.74		6.12		6.47
Total	$	1,701,980


(1)	CMBS, CMBS interest-only securities, Agency securities, GNMA construction securities, and GNMA permanent securities are classified as available-for-sale and reported at fair value with changes in fair value recorded in the current period in other comprehensive income.


(2)	Agency interest-only securities are recorded at fair value with changes in fair value recorded in current period earnings.


(3)	The amounts presented represent the principal amount of the mortgage loans outstanding in the pool in which the interest-only securities participate.

Sensitivity of the Fair Value to Changes in the Unobservable Inputs


(4)	Significant increase (decrease) in the unobservable input in isolation would result in significantly lower (higher) fair value measurement.


(5)	Significant increase (decrease) in the unobservable input in isolation would result in either a significantly lower or higher (lower or higher) fair value measurement depending on the structural features of the security in question.

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December 31, 2016



Financial Instrument	Carrying Value			Valuation Technique	Unobservable Input	Minimum		Weighted Average		Maximum

CMBS (1)	$	1,701,395		Discounted cash flow	Yield (3)	1.35	%	2.87	%	9.18	%
					Duration (years)(4)	0.04		3.55		9.01
CMBS interest-only (1)	342,171		(2)	Discounted cash flow	Yield (3)	2.84	%	4.04	%	4.8	%
					Duration (years)(4)	0.00		2.99		4.37
					Prepayment speed (CPY)(4)	100.00		100.00		100.00
GNMA interest-only (3)	16,821		(2)	Discounted cash flow	Yield (4)	0.87	%	7.22	%	48.64	%
					Duration (years)(5)	1.69		4.44		20.66
					Prepayment speed (CPJ)(5)	5.00		13.80		35.00
Agency securities (1)	780			Discounted cash flow	Yield (4)	1.4	%	2.17	%	2.63	%
					Duration (years)(5)	2.61		3.27		4.39
GNMA permanent securities (1)	39,780			Discounted cash flow	Yield (4)	2.63	%	3.65	%	6.92	%
					Duration (years)(5)	1.92		10.30		15.66
Total	$	2,100,947


(1)	CMBS, CMBS interest-only securities, GNMA construction securities, and GNMA permanent securities are classified as available-for-sale and reported at fair value with changes in fair value recorded in the current period in other comprehensive income.


(2)	Agency interest-only securities are recorded at fair value with changes in fair value recorded in current period earnings.

Sensitivity of the Fair Value to Changes in the Unobservable Inputs


(3)	Significant increase (decrease) in the unobservable input in isolation would result in significantly lower (higher) fair value measurement.


(4)	Significant increase (decrease) in the unobservable input in isolation would result in either a significantly lower or higher (lower or higher) fair value measurement depending on the structural features of the security in question.

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9. DERIVATIVE INSTRUMENTS

The Company uses derivative instruments primarily to economically manage the fair value variability of fixed rate assets caused by interest rate fluctuations and overall portfolio market risk. The following is a breakdown of the derivatives outstanding as of March 31, 2017 and December 31, 2016 ($ in thousands):

March 31, 2017



			Fair Value					Remaining Maturity (years)
Contract Type	Notional		Asset(1)		Liability(1)			Remaining Maturity (years)

Futures
5-year Swap	$	482,600	$	1	$	3,051		0.25
10-year Swap	419,500		15		3,106			0.25
5-year U.S. Treasury Note	21,500		—		34			0.25
10-year U.S. Treasury Note Ultra	3,200		—		25			0.25
Variation Margin	—		—		( 5,104		)
Total futures	926,800		16		1,112
Swaps
3 Month LIBOR(2)	50,000		—		2,618			3.47
Credit derivatives
CMBX	10,000		5		—			4.85
CDX	33,500		—		477			1.72
S&P 500 Put Options	78,000		87		—			0.21
Total credit derivatives	121,500		92		477
Total derivatives	$	1,098,300	$	108	$	4,207

(1) Shown as derivative instruments, at fair value, in the accompanying consolidated balance sheets.

(2) The Company is paying fixed interest rates on these swaps.

December 31, 2016



			Fair Value				Remaining Maturity (years)
Contract Type	Notional		Asset(1)		Liability(1)		Remaining Maturity (years)

Futures
5-year Swap	602,200		3,210		2		0.25
10-year Swap	226,700		1,674		266		0.25
5-year U.S. Treasury Note	21,800		93		—		0.25
10-year U.S. Treasury Note	3,200		38		—		0.25
Total futures	853,900		5,015		268
Swaps
3 Month LIBOR(2)	50,000		—		2,697		3.72
Credit Derivatives
CMBX	10,000		3		—		5.08
CDX	33,500		—		481		1.97
Total credit derivatives	43,500		3		481
Total derivatives	$	947,400	$	5,018	$	3,446

(1) Shown as derivative instruments, at fair value, in the accompanying consolidated balance sheets.

(2) The Company is paying fixed interest rates on these swaps.

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The following table indicates the net realized gains (losses) and unrealized appreciation (depreciation) on derivatives, by primary underlying risk exposure, as included in net result from derivatives transactions in the consolidated statements of operations for the three months ended March 31, 2017 and 2016 ($ in thousands):



	Three Months Ended March 31, 2017
	Unrealized Gain/(Loss)			Realized Gain/(Loss)			Net Result from Derivative Transactions

Contract Type
Futures	$	( 5,844	)	$	4,043		$	( 1,801	)
Swaps	301			( 279		)	22
Credit Derivatives	( 106		)	( 96		)	( 202		)
Total	$	( 5,649	)	$	3,668		$	( 1,981	)



	Three Months Ended March 31, 2016
	Unrealized Gain/(Loss)			Realized Gain/(Loss)			Net Result from Derivative Transactions

Contract Type
Futures	$	( 8,564	)	$	( 40,797	)	$	( 49,361	)
Swaps	( 1,078		)	( 338		)	( 1,416		)
Credit Derivatives	12			( 97		)	( 85		)
Total	$	( 9,630	)	$	( 41,232	)	$	( 50,862	)

The Company’s counterparties held $ 18.2 million and $ 11.3 million of cash margin as collateral for derivatives as of March 31, 2017 and December 31, 2016 , respectively, which is included in restricted cash in the consolidated balance sheets.

Futures

Collateral posted with our futures counterparties is segregated in the Company’s books and records. Interest rate futures are centrally cleared by the Chicago Mercantile Exchange (“CME”) through a Futures Commission Merchant. Interest rate futures that are governed by an ISDA agreement provide for bilateral collateral pledging based on the counterparties’ market value. The counterparties have the right to re-pledge the collateral posted, but have the obligation to return the pledged collateral, or substantially the same collateral, if agreed to by us, as the market value of the interest rate futures change.

The Company is required to post initial margin and daily variation margin for our interest rate futures that are centrally cleared by CME. CME determines the fair value of our centrally cleared futures, including daily variation margin. Effective January 3, 2017, CME amended their rulebooks to legally characterize daily variation margin payments for centrally cleared interest rate futures as settlement rather than collateral. As a result of this rule change, variation margin pledged on the Company’s centrally cleared interest rate futures is settled against the realized results of these futures.

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Credit Risk-Related Contingent Features

The Company has agreements with certain of its derivative counterparties that contain a provision whereby, if the Company defaults on certain of its indebtedness, the Company could also be declared in default on its derivatives, resulting in an acceleration of payment under the derivatives. As of March 31, 2017 and December 31, 2016 , the Company was in compliance with these requirements and not in default on its indebtedness. As of March 31, 2017 and December 31, 2016 , there was $ 4.2 million and $ 6.2 million of cash collateral held by the derivative counterparties for these derivatives, respectively, included in restricted cash in the consolidated statements of financial condition. No additional cash would be required to be posted if the acceleration of payment under the derivatives was triggered.

10. OFFSETTING ASSETS AND LIABILITIES

The following tables present both gross information and net information about derivatives and other instruments eligible for offset in the statement of financial position as of March 31, 2017 and December 31, 2016 . The Company’s accounting policy is to record derivative asset and liability positions on a gross basis, therefore, the following tables present the gross derivative asset and liability positions recorded on the balance sheets, while also disclosing the eligible amounts of financial instruments and cash collateral to the extent those amounts could offset the gross amount of derivative asset and liability positions. The actual amounts of collateral posted by or received from counterparties may be in excess than the amounts disclosed in the following tables as the following only disclose amounts eligible to be offset to the extent of the recorded gross derivative positions.

As of March 31, 2017

Offsetting of Financial Assets and Derivative Assets

($ in thousands)



Description	Gross amounts of recognized assets		Gross amounts offset in the balance sheet		Net amounts of assets presented in the balance sheet		Gross amounts not offset in the balance sheet				Net amount
Description	Gross amounts of recognized assets		Gross amounts offset in the balance sheet		Net amounts of assets presented in the balance sheet		Financial instruments		Cash collateral received/(posted)(1)		Net amount

Derivatives	$	108	$	—	$	108	$	—	$	—	$	108
Total	$	108	$	—	$	108	$	—	$	—	$	108

(1) Included in restricted cash on consolidated balance sheets.

As of March 31, 2017

Offsetting of Financial Liabilities and Derivative Liabilities

($ in thousands)



Description	Gross amounts of recognized liabilities		Gross amounts offset in the balance sheet		Net amounts of liabilities presented in the balance sheet		Gross amounts not offset in the balance sheet				Net amount
Description	Gross amounts of recognized liabilities		Gross amounts offset in the balance sheet				Financial instruments collateral		Cash collateral posted/(received)(1)		Net amount

Derivatives	$	4,207	$	—	$	4,207	$	—	$	4,207	$	—
Repurchase agreements	1,039,355		—		1,039,355		1,039,355		—		—
Total	$	1,043,562	$	—	$	1,043,562	$	1,039,355	$	4,207	$	—

(1) Included in restricted cash on consolidated balance sheets.

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As of December 31, 2016

Offsetting of Financial Assets and Derivative Assets

($ in thousands)



Description	Gross amounts of recognized assets		Gross amounts offset in the balance sheet		Net amounts of assets presented in the balance sheet		Gross amounts not offset in the balance sheet				Net amount
Description	Gross amounts of recognized assets		Gross amounts offset in the balance sheet		Net amounts of assets presented in the balance sheet		Financial instruments		Cash collateral received/(posted)(1)		Net amount

Derivatives	$	5,018	$	—	$	5,018	$	—	$	—	$	5,018
Total	$	5,018	$	—	$	5,018	$	—	$	—	$	5,018

(1) Included in restricted cash on consolidated balance sheets.

As of December 31, 2016

Offsetting of Financial Liabilities and Derivative Liabilities

($ in thousands)



Description	Gross amounts of recognized liabilities		Gross amounts offset in the balance sheet		Net amounts of liabilities presented in the balance sheet		Gross amounts not offset in the balance sheet				Net amount
Description	Gross amounts of recognized liabilities		Gross amounts offset in the balance sheet				Financial instruments collateral		Cash collateral posted/(received)(1)		Net amount

Derivatives	$	3,446	$	—	$	3,446	$	—	$	3,446	$	—
Repurchase agreements	1,107,185		—		1,107,185		1,107,185		—		—
Total	$	1,110,631	$	—	$	1,110,631	$	1,107,185	$	3,446	$	—

(1) Included in restricted cash on consolidated balance sheets.

Master netting agreements that the Company has entered into with its derivative and repurchase agreement counterparties allow for netting of the same transaction, in the same currency, on the same date. Assets, liabilities, and collateral subject to master netting agreements as of March 31, 2017 and December 31, 2016 are disclosed in the tables above. The Company does not present its derivative and repurchase agreements net on the consolidated financial statements as it has elected gross presentation.

11. EQUITY STRUCTURE AND ACCOUNTS

A description of the IPO Transactions is included in Note 1 . In addition, a description of the distribution policies of, and accounting for, the predecessor capital structure is included later in this Note.

Subsequent to the IPO Transactions, the Company has two classes of common stock, Class A and Class B, which are described as follows:

Class A Common Stock

Voting Rights

Holders of shares of Class A common stock are entitled to one vote per share on all matters to be voted upon by the shareholders. The holders of Class A common stock do not have cumulative voting rights in the election of directors.

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Dividend Rights

Subject to the rights of the holders of any preferred stock that may be outstanding and any contractual or statutory restrictions, holders of Class A common stock are entitled to receive equally and ratably, share for share, dividends as may be declared by the board of directors out of funds legally available to pay dividends. Dividends upon Class A common stock may be declared by the board of directors at any regular or special meeting and may be paid in cash, in property, or in shares of capital stock. Before payment of any dividend, there may be set aside out of any funds available for dividends, such sums as the board of directors deems proper as reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any of the Company’s property, or for any proper purpose, and the board of directors may modify or abolish any such reserve.

Liquidation Rights

Upon liquidation, dissolution, distribution of assets or other winding up, the holders of Class A common stock are entitled to receive ratably the assets available for distribution to the shareholders after payment of liabilities and the liquidation preference of any outstanding shares of preferred stock.

Other Matters

The shares of Class A common stock have no preemptive or conversion rights and are not subject to further calls or assessment by the Company. There are no redemption or sinking fund provisions applicable to the Class A common stock. All outstanding shares of Class A common stock are fully paid and non-assessable.

Allocation of Income and Loss

Income and losses are allocated among the shareholders based upon the number of shares outstanding.

Class B Common Stock

Voting Rights

Holders of shares of Class B common stock are entitled to one vote for each share held of record by such holder and all matters submitted to a vote of shareholders. Holders of shares of our Class A common stock and Class B common stock vote together as a single class on all matters presented to our shareholders for their vote or approval, except as otherwise required by applicable law.

No Dividend or Liquidation Rights

Holders of Class B common stock do not have any right to receive dividends or to receive a distribution upon a liquidation or winding up of Ladder Capital Corp.

Exchange for Class A Common Stock

As part of the REIT Structuring Transactions described in Note 1 , and pursuant to the Third Amended and Restated LLLP Agreement of LCFH, the Continuing LCFH Limited Partners may from time to time, subject to certain conditions, receive one share of the Company’s Class A common stock in exchange for (i) one share of the Company’s Class B common stock, (ii) one Series REIT LP Unit and (iii) either one Series TRS LP Unit or one TRS Share, subject to equitable adjustments for stock splits, stock dividends and reclassifications.

During the three months ended March 31, 2017 , 6,790,121 Series REIT LP Units and 6,790,121 Series TRS LP Units were collectively exchanged for 6,790,121 shares of Class A common stock and 6,790,121 shares of Class B common stock were canceled. We received no other consideration in connection with these exchanges.

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Stock Repurchases

On October 30, 2014, the board of directors authorized the Company to repurchase up to $ 50.0 million of the Company’s Class A common stock from time to time without further approval. Stock repurchases by the Company are generally made for cash in open market transactions at prevailing market prices but may also be made in privately negotiated transactions or otherwise. The timing and amount of purchases are determined based upon prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. During the three months ended March 31, 2017 , the Company repurchased no shares of Class A common stock. During the three months ended March 31, 2016 , the Company repurchased 424,317 shares of Class A common stock at an average of $ 10.96 per share for a total aggregate purchase price of $ 4.7 million . All repurchased shares are recorded in treasury stock at cost. As of March 31, 2017 , the Company has a remaining amount available for repurchase of $ 44.4 million , which represents 3.9 % in the aggregate of its outstanding Class A common stock, based on the closing price of $ 14.44 per share on such date.

The following table is a summary of the Company’s repurchase activity of its Class A common stock during the three months ended March 31, 2017 and 2016 ($ in thousands):



	Shares	Amount(1)

Authorizations remaining as of December 31, 2016		$	44,353
Additional authorizations		—
Repurchases paid	—	—
Repurchases unsettled		—
Authorizations remaining as of March 31, 2017		$	44,353

(1) Amount excludes commissions paid associated with share repurchases.



	Shares	Amount(1)

Authorizations remaining as of December 31, 2015		$	49,006
Additional authorizations		—
Repurchases paid	424,317	( 4,653		)
Repurchases unsettled		—
Authorizations remaining as of March 31, 2016		$	44,353

(1) Amount excludes commissions paid associated with share repurchases.

Dividends

In order for the Company to maintain its qualification as a REIT under the Code, it must annually distribute at least 90% of its taxable income. The Company has paid and in the future intends to declare regular quarterly distributions to its shareholders in an amount approximating the REIT’s net taxable income.

Consistent with the Company’s Private Letter Ruling, it may, subject to a cash/stock election by its shareholders, pay a portion of its dividends in stock, to provide for meaningful capital retention; however, the REIT distribution requirements limit its ability to retain earnings and thereby replenish or increase capital for operations. The timing and amount of future distributions is based on a number of factors, including, among other things, the Company’s future operations and earnings, capital requirements and surplus, general financial condition and contractual restrictions. All dividend declarations are subject to the approval of the Company’s board of directors. Generally, the Company expects its distributions to be taxable as ordinary dividends to its shareholders, whether paid in cash or a combination of cash and common stock, and not as a tax-free return of capital or a capital gain. The Company believes that its significant capital resources and access to financing will provide the financial flexibility at levels sufficient to meet current and anticipated capital requirements, including funding new investment opportunities, paying distributions to its shareholders and servicing our debt obligations.

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The following table presents dividends declared (on a per share basis) of Class A common stock for the three months ended March 31, 2017 and 2016 :



Declaration Date	Dividend per Share

March 1, 2017	$	0.300
Total	$	0.300

March 1, 2016	$	0.275
Total	$	0.275

Stock Dividend and Distribution of Accumulated Earnings and Profits

In order to qualify as a REIT the Company must annually distribute at least 90% of its taxable income. In addition, the Company was required to make a one-time distribution of its undistributed accumulated earnings and profits attributable to taxable periods ending prior to January 1, 2015 (the “E&P Distribution”). The E&P Distribution requirement was $ 48.3 million or $ 0.90 per share. Pursuant to the terms of an IRS private letter ruling (the “Private Letter Ruling”), the Company elected, subject to the cash/stock election by its shareholders described below, to pay its fourth quarter 2015 and 2016 dividends in a mix of cash and stock and have such dividends be treated as a taxable distribution to its shareholders for U.S. federal income tax purposes.

In order to comply with the Private Letter Ruling, shareholders had the option to elect to receive the fourth quarter 2015 and 2016 dividends in all cash (a “Cash Election”), or all shares of Ladder’s Class A common stock (a “Share Election”). Shareholders who did not return an election form, or who otherwise failed to properly complete an election form, were deemed to have made a Share Election. The total amount of cash paid to all shareholders was limited to a maximum of 20% of the total value of each of the fourth quarter 2015 and 2016 dividends (the “Cash Amount”). The aggregate amount of the dividends owed to shareholders who made Cash Elections exceeded the Cash Amount, and accordingly, the Cash Amount was prorated among such shareholders, with the remaining portion of the fourth quarter 2015 or 2016 dividend, as applicable, paid to such shareholders in shares of Ladder’s Class A common stock plus cash in lieu of any fractional shares. Shareholders making Stock Elections received the full amount of the dividend in shares of Ladder’s Class A common stock plus cash in lieu of any fractional shares. The Company believes that the total value of its 2015 dividends was sufficient to fully distribute its 2015 taxable income and its accumulated earnings and profits. The Company believes that the total value of its 2016 dividends was sufficient to fully distribute its 2016 taxable income.

On January 24, 2017 , the Company paid an aggregate of $ 20.8 million in cash to its Class A shareholders, accrued for dividends payable on unvested restricted stock and unvested options with dividend equivalent rights of $ 0.7 million and issued 815,819 shares of its Class A common stock, equivalent to $ 11.5 million , in connection with the fourth quarter 2016 dividend totaling $ 0.46 per share. The total number of shares of Class A common stock distributed pursuant to the fourth quarter 2016 dividend was determined based on shareholder elections and the volume weighted average price of $ 14.06 per share of Class A common stock on the New York Stock Exchange for the three trading days after January 12, 2017 , the date that election forms were due. The Company also issued 432,314 shares of its Class B common stock and each of Series REIT and Series TRS of LCFH issued 1,248,133 of their respective Series LP units corresponding to the aggregate number of Class A and Class B shares issued by the Company. The Company believes that the total value of its 2017 dividend was sufficient to fully distribute its 2017 taxable income.

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Changes in Accumulated Other Comprehensive Income

The following table presents changes in accumulated other comprehensive income related to the cumulative difference between the fair market value and the amortized cost basis of securities classified as available for sale for the three months ended March 31, 2017 and 2016 ($ in thousands):



	Accumulated Other Comprehensive Income (Loss)			Accumulated Other Comprehensive Income of Noncontrolling Interests			Total Accumulated Other Comprehensive Income

December 31, 2016	$	1,365		$	761		$	2,126
Other comprehensive income (loss)	3,117			1,634			4,751
Exchange of noncontrolling interest for common stock	403			( 403		)	—
Rebalancing of ownership percentage between Company and Operating Partnership	( 51		)	51			—
March 31, 2017	$	4,834		$	2,043		$	6,877



	Accumulated Other Comprehensive Income (Loss)			Accumulated Other Comprehensive Income of Noncontrolling Interests			Total Accumulated Other Comprehensive Income

December 31, 2015	$	( 3,556	)	$	( 2,839	)	$	( 6,395	)
Other comprehensive income (loss)	19,467			14,916			34,383
Exchange of noncontrolling interest for common stock	( 122		)	122			—
Rebalancing of ownership percentage between Company and Operating Partnership	350			( 350		)	—
March 31, 2016	$	16,139		$	11,849		$	27,988

Capitalized Offering Costs

As described in Note 1 , the Company completed an IPO of its Class A Common Stock on February 11, 2014. Costs directly attributable to the Company’s IPO of $ 20.5 million were capitalized and charged against the proceeds of the IPO once completed.

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12. NONCONTROLLING INTERESTS

Pursuant to ASC 810, Consolidation , on the accounting and reporting for noncontrolling interests and changes in ownership interests of a subsidiary, changes in a parent’s ownership interest (and transactions with noncontrolling interest unitholders in the subsidiary), while the parent retains its controlling interest in its subsidiary, should be accounted for as equity transactions. The carrying amount of the noncontrolling interest shall be adjusted to reflect the change in its ownership interest in the subsidiary, with the offset to equity attributable to the parent. Accordingly, as a result of reorganization transactions which caused changes in ownership percentages between the Company’s Class A shareholders and the noncontrolling interests in the Operating Partnership that occurred during the three months ended March 31, 2017 , the Company has decreased noncontrolling interests in the Operating Partnership and increased additional paid-in capital and accumulated other comprehensive income in the Company’s shareholders’ equity by $ 4.2 million as of March 31, 2017 . Upon the adoption of ASU 2015-02, which amended ASC 810, Consolidation, in the quarter ended March 31, 2016, the Operating Partnership is now determined to be a VIE, however, since the Company was previously consolidating the Operating Partnership, the adoption of ASU 2015-02 had no material impact on the Company’s consolidated financial statements.

There are two main types of noncontrolling interest reflected in the Company’s consolidated financial statements (i) noncontrolling interest in the operating partnership and (ii) noncontrolling interest in consolidated joint ventures.

Noncontrolling Interest in the Operating Partnership

As more fully described in Note 1 , certain of the predecessor equity owners continue to own interests in the operating partnership as modified by the IPO Transactions. These interests were subsequently further modified by the REIT Structuring Transactions (also described in Note 1 ). These interests, along with the Class B shares held by these investors, are exchangeable for Class A shares of the Company. The roll-forward of the Operating Partnership’s LP Units follow the Class B common stock of the Company as disclosed in the consolidated statements of changes in equity.

Distributions to Noncontrolling Interest in the Operating Partnership

Notwithstanding the foregoing, subject to any restrictions in applicable debt financing agreements and available liquidity as determined by the board of directors of each of Series REIT of LCFH and Series TRS of LCFH, each Series must use commercially reasonable efforts to make quarterly distributions to each of its partners (including the Company) at least equal to such partner’s “Quarterly Estimated Tax Amount,” which shall be computed (as more fully described in LCFH’s Third Amended and Restated LLLP Agreement) for each partner as the product of (x) the U.S. federal taxable income (or alternative minimum taxable income, if higher) allocated by such Series to such partner in respect of the Series REIT LP Units and Series TRS LP Units held by such partner and (y) the highest marginal blended U.S. federal, state and local income tax rate (or alternative minimum taxable rate, as applicable) applicable to an individual residing in New York, NY, taking into account, for U.S. federal income tax purposes, the deductibility of state and local taxes; provided that Series TRS of LCFH may take into account, in determining the amount of tax distributions to holders of Series TRS LP Units, the amount of any distributions each such holder received from Series REIT of LCFH in excess of tax distributions. In addition, to the extent the Company requires an additional distribution from the Series of LCFH in excess of its quarterly tax distribution in order to pay its quarterly cash dividend, the Series of LCFH will be required to make a corresponding distribution of cash to each of their partners (other than the Company) on a pro-rata basis.

Allocation of Income and Loss

Income and losses and comprehensive income are allocated among the partners in a manner to reflect as closely as possible the amount each partner would be distributed under the Third Amended and Restated LLLP Agreement upon liquidation of the Operating Partnership’s assets.

Noncontrolling Interest in Unconsolidated Joint Ventures

The Company consolidates seven ventures in which there are other noncontrolling investors, which own between 1.2 % - 22.5 % of such ventures. These ventures hold investments in eight office buildings, one warehouse, one shopping center and a condominium project. The Company makes distributions and allocates income from these ventures to the noncontrolling interests in accordance with the terms of the respective governing agreements.

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13. EARNINGS PER SHARE

The Company’s net income (loss) and weighted average shares outstanding for the three months ended March 31, 2017 and 2016 consist of the following:



($ in thousands except share amounts)	For the Three Months Ended March 31, 2017		For the Three Months Ended March 31, 2016

Basic Net income (loss) available for Class A common shareholders	$	13,470	$	( 5,539	)
Diluted Net income (loss) available for Class A common shareholders	$	19,280	$	( 5,539	)
Weighted average shares outstanding
Basic	72,871,990		59,596,889
Diluted	109,334,847		59,596,889

The calculation of basic and diluted net income (loss) per share amounts for the three months ended March 31, 2017 and 2016 are described and presented below.

Basic Net Income (Loss) per Share

Numerator: utilizes net income (loss) available for Class A common shareholders for the three months ended March 31, 2017 and 2016 , respectively.

Denominator: utilizes the weighted average shares of Class A common stock for the three months ended March 31, 2017 and 2016 , respectively.

Diluted Net Income (Loss) per Share

Numerator: utilizes net income (loss) available for Class A common shareholders for the three months ended March 31, 2017 and 2016 , respectively, for the basic net income (loss) per share calculation described above, adding net income (loss) amounts attributable to the noncontrolling interest in the Operating Partnership using the as-if converted method for the Class B common shareholders while adjusting for additional corporate income tax expense (benefit) for the described net income (loss) add-back.

Denominator: utilizes the weighted average number of shares of Class A common stock for the three months ended March 31, 2017 and 2016 , respectively, for the basic net income (loss) per share calculation described above adding the dilutive effect of shares issuable relating to Operating Partnership exchangeable interests and the incremental shares of unvested Class A restricted stock using the treasury method.

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(In thousands except share amounts)	For the Three Months Ended March 31, 2017			For the Three Months Ended March 31, 2016

Basic Net Income (Loss) Per Share of Class A Common Stock
Numerator:
Net income (loss) attributable to Class A common shareholders	$	13,470		$	( 5,539	)
Denominator:
Weighted average number of shares of Class A common stock outstanding	72,871,990			59,596,889
Basic net income (loss) per share of Class A common stock	$	0.18		$	( 0.09	)

Diluted Net Income (Loss) Per Share of Class A Common Stock
Numerator:
Net income (loss) attributable to Class A common shareholders	$	13,470		$	( 5,539	)
Add (deduct) - dilutive effect of:
Amounts attributable to operating partnership’s share of Ladder Capital Corp net income (loss)	5,838			—
Additional corporate tax (expense) benefit	( 28		)	—
Diluted net income (loss) attributable to Class A common shareholders	$	19,280		$	( 5,539	)
Denominator:
Basic weighted average number of shares of Class A common stock outstanding	72,871,990			59,596,889
Add - dilutive effect of:
Shares issuable relating to converted Class B common shareholders	36,340,717			—
Incremental shares of unvested Class A restricted stock	122,140			—
Diluted weighted average number of shares of Class A common stock outstanding	109,334,847			59,596,889
Diluted net income (loss) per share of Class A common stock	$	0.18		$	( 0.09	)

For the three months ended March 31, 2016 , shares issuable relating to converted Class B common shareholders and incremental shares of unvested Class A restricted stock are excluded from the calculation of diluted EPS as the inclusion of such potential common shares in the calculation would be anti-dilutive.

The shares of Class B common stock do not share in the earnings of Ladder Capital Corp and are, therefore, not participating securities. Accordingly, basic and diluted net income (loss) per share of Class B common stock has not been presented, although the assumed conversion of Class B common stock has been included in the presented diluted net income (loss) per share of Class A common stock.

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14. STOCK BASED COMPENSATION PLANS

2014 Omnibus Incentive Plan

In connection with the IPO Transactions, the 2014 Ladder Capital Corp Omnibus Incentive Equity Plan (the “2014 Omnibus Incentive Plan”) was adopted by the board of directors on February 11, 2014, and provides certain members of management, employees and directors of the Company or its affiliates with additional incentives including grants of stock options, stock appreciation rights, restricted stock, other stock-based awards and other cash-based awards.

2015 Annual Restricted Stock Awards and Annual Option Awards

Members of management are eligible to receive annual restricted stock awards (the “Annual Restricted Stock Awards”) and annual option awards (the “Annual Option Awards”) based on the performance of the Company. On February 18, 2015 , Annual Restricted Stock Awards were granted to our executive officers (each, a “Management Grantee”) with an aggregate value of $ 12.6 million which represents 688,400 shares of restricted Class A common stock in connection with 2014 compensation. Fifty percent of each restricted stock award granted is subject to time-based vesting criteria, and the remaining 50 % of each restricted stock award is subject to attainment of the Performance Target for the applicable years. The time-vesting restricted stock granted to the Management Grantees will generally vest in three installments on each of the first three anniversaries of the date of grant, subject to continued employment on the applicable vesting dates. The performance-vesting restricted stock will vest in three equal installments on December 31 of each of 2015, 2016 and 2017 if the Company achieves a return on equity, based on Core Earnings divided by the Company’s average book value of equity, equal to or greater than 8% for such year (the “Performance Target”) for those years. If the Company misses the Performance Target during either the first or second calendar year but meets the Performance Target for a subsequent year during the three -year performance period and the Company’s return on equity for such subsequent year and any years for which it missed its Performance Target equals or exceeds the compounded return on equity of 8 % , based on Core Earnings divided by the Company’s average book value of equity, the performance-vesting restricted stock which failed to vest because the Company previously missed its Performance Target will vest on the last day of such subsequent year (the “Catch-Up Provision”). If the term “Core Earnings” is no longer used in the Company’s SEC filings and approved by the compensation committee, then the Performance Target will be calculated using such other pre-tax performance measurement defined in the Company’s SEC filings, as determined by the compensation committee. The Company met the Performance Target for the years ended December 31, 2016 and 2015.

The Company has elected to recognize the compensation expense related to the time-based vesting portion of the Annual Restricted Stock Awards for the entire award on a straight-line basis over the requisite service period. As such, the compensation expense related to the February 18, 2015 Annual Restricted Stock Awards to Management Grantees shall be recognized as follows:


1.	Compensation expense for restricted stock subject to time-based vesting criteria granted to Brian Harris will be expensed 1/2 each year, for two years , on an annual basis in advance of the Harris Retirement Eligibility Date, as described below.


2.	Compensation expense for restricted stock subject to time-based vesting criteria granted to the Management Grantees other than Mr. Harris, will be expensed 1/3 each year, for three years on an annual basis following such grant.

Accruals of compensation cost for an award with a performance condition shall be based on the probable outcome of that performance condition. Therefore, compensation cost shall be accrued if it is probable that the performance condition will be achieved and shall not be accrued if it is not probable that the performance condition will be achieved.

On February 18, 2015, Annual Stock Option Awards were granted to Management Grantees with an aggregate grant date fair value of $ 1.4 million , which represents 670,256 shares of Class A common stock subject to the Annual Stock Option Awards. The stock option awards are subject to time-based vesting criteria only and vest in three equal installments on February 18 of each of 2016, 2017 and 2018, subject to continued employment until the applicable vesting date. Upon termination of a Management Grantee’s employment or service due to death, disability, termination by the Company without Cause or termination by the Management Grantee for Good Reason (each, as defined in the 2014 Omnibus Incentive Plan), the respective Management Grantee’s option awards will accelerate and vest in full. The actual grant date fair values of the Annual Option Awards granted to our Management Grantees were computed in accordance with FASB ASC Topic 718 using the Black Scholes model based on the following assumptions: (1) risk-free rate of 1.79 % ; (2) dividend yield of 5.3 % ; (3) expected life of six years; and (4) volatility of 24.0 % .

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On February 18, 2015 , members of the board of directors each received Annual Restricted Stock Awards with a grant date fair value of $ 0.1 million , representing 7,962 shares of restricted Class A common stock, which will vest in full on the first anniversary of the date of grant, subject to continued service on the board of directors. Compensation expense for restricted stock subject to time-based vesting criteria granted to directors will be expensed in full on an annual basis following such grant.

Upon a change in control (as defined in the respective award agreements), all restricted stock and option awards will become fully vested, if (1) the Management Grantee continues to be employed through the closing of the change in control or (2) after the signing of definitive documentation related to the change in control, but prior to its closing, the Management Grantee’s employment is terminated without Cause or due to death or disability or the Management Grantee resigns for Good Reason. The compensation committee retains the right, in its sole discretion, to provide for the accelerated vesting (in whole or in part) of the restricted stock and option awards granted.

On February 11, 2017 (the “Harris Retirement Eligibility Date”), all outstanding Annual Restricted Stock Awards, including the time-vesting portion and the performance-vesting portion, and all outstanding Annual Option Awards granted to Mr. Harris became fully vested, and any Annual Restricted Stock Awards and Annual Option Awards granted after the Harris Retirement Eligibility Date will be fully vested at grant. For other Management Grantees, upon the first date that is on or after February 11, 2019, where the sum of the individual’s age and the individual’s number of full, completed years of employment with us or our subsidiaries is equal to or greater than 60 (the “Executive Retirement Eligibility Date”). The Executive Retirement Eligibility Date for Pamela McCormack is December 8, 2019 (the “McCormack Retirement Eligibility Date”). For Management Grantees other than Harris and McCormack, the Executive Retirement Eligibility Date is February 11, 2019), the time-vesting portion of the Annual Restricted Stock Awards and the Annual Option Awards will become fully vested, and the time-vesting portion of any Annual Restricted Stock Awards and Annual Option Awards granted after the Executive Retirement Eligibility Date will be fully vested at grant. Upon the occurrence of the Executive Retirement Eligibility Date, the performance-vesting portion of such Management Grantee’s Annual Restricted Stock Awards will remain outstanding for the performance period and will vest to the extent we meet the Performance Target, including via the Catch-Up Provision described above, regardless of continued employment with us our subsidiaries following the Executive Retirement Eligibility Date.

On June 10, 2015 , a new member of the board of directors received an Annual Restricted Stock Award with a grant date fair value of $ 0.1 million , representing 4,223 shares of restricted Class A common stock, which will vest in three equal installments on each of the first three anniversaries of the date of grant, subject to continued service on the board of directors. Compensation expense for restricted stock subject to time-based vesting criteria granted to the director will be expensed 1/3 each year, for three years on an annual basis following such grant.

2016 Annual Restricted Stock Awards and Annual Option Awards

On February 18, 2016 , Annual Restricted Stock Awards were granted to Management Grantees with an aggregate value of $ 9.1 million which represents 793,598 shares of restricted Class A common stock in connection with 2015 compensation. These awards are subject to the same terms and conditions as the 2015 Annual Restricted Stock Awards, except that the relevant vesting periods begin in 2016, rather than in 2015. The Company met the Performance Target for the year ended December 31, 2016.

The Company has elected to recognize the compensation expense related to the time-based vesting of the Annual Restricted Stock Awards for the entire award on a straight-line basis over the requisite service period. As such, the compensation expense related to the February 18, 2016 Annual Restricted Stock Awards to Management Grantees shall be recognized as follows:


1.	Compensation expense for restricted stock subject to time-based vesting criteria granted to Brian Harris was expensed in full on February 11, 2017 , the Harris Retirement Eligibility Date.


2.	Compensation expense for restricted stock subject to time-based vesting criteria granted to the Management Grantees other than Mr. Harris, will be expensed 1/3 each year, for three years on an annual basis following such grant.

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On February 18, 2016 , Annual Stock Option Awards were granted to Management Grantees with an aggregate grant date fair value of $ 1.0 million , which represents 289,326 shares of Class A common stock subject to the Annual Stock Option Awards. The stock option awards are subject to the same terms and conditions as those granted in 2015 except that the vesting period commenced in 2016 and the 2016 stock option awards included dividend equivalent rights. The actual grant date fair values of the Annual Option Awards granted to our Management Grantees were computed in accordance with FASB ASC Topic 718 using the Black Scholes model based on the following assumptions: (1) risk-free rate of 1.5 % ; (2) dividend yield of 9.8 % ; (3) expected life of six years; and (4) volatility of 48.0 % .

On February 18, 2016 , certain members of the board of directors each received Annual Restricted Stock Awards with a grant date fair value of $ 0.1 million , representing 12,636 shares of restricted Class A common stock, which will vest in full on the first anniversary of the date of grant, subject to continued service on the board of directors. Compensation expense for restricted stock subject to time-based vesting criteria granted to directors will be expensed in full on an annual basis following such grant. These grants are subject to the same terms and conditions as those made in 2015 except that the vesting period commenced in 2016.

The 2016 awards are subject to the same change in control and retirement provisions that are described above.

2017 Annual Restricted Stock Awards

On February 18, 2017 , certain members of the board of directors each received Annual Restricted Stock Awards with a grant date fair value of $ 0.2 million , representing 16,245 shares of restricted Class A common stock, which will vest in full on the first anniversary of the date of grant, subject to continued service on the board of directors. Compensation expense related to the time-based vesting criteria of the award shall be recognized on a straight-line basis over the one-year vesting period.

For 2016 performance, management received solely stock-based incentive equity. On February 18, 2017 , Annual Restricted Stock Awards were granted to Management Grantees with an aggregate value of $ 10.2 million which represents 736,461 shares of restricted Class A common stock in connection with 2016 compensation. In accordance with the Harris Employment Agreement, Mr. Harris’ annual awards were fully vested at grant. For other Management Grantees, fifty percent of each restricted stock award granted is subject to time-based vesting criteria, and the remaining 50 % of each restricted stock award is subject to attainment of the Performance Target for the applicable years. The time-vesting restricted stock will vest in three installments on each of the first three anniversaries of the date of grant, subject to continued employment on the applicable vesting dates and subject to the applicable Retirement Eligibility Date. The performance-vesting restricted stock will vest in three equal installments upon the compensation committee’s confirmation that the Company achieves the Performance Target for the years ended December 31, 2017, 2018 and 2019, respectively. The Catch-Up Provision applies to the performance vesting portion of this award.

The Company has elected to recognize the compensation expense related to the time-based vesting of the Annual Restricted Stock Awards for the entire award on a straight-line basis over the requisite service period for the entire award. As such, the compensation expense related to the February 18, 2017 Annual Restricted Stock Awards to Management Grantees shall be recognized as follows:


1.	Compensation expense for stock granted to Brian Harris will be expensed immediately in accordance with the Harris Retirement Eligibility Date.


2.	Compensation expense for restricted stock subject to time-based vesting criteria granted to Pamela McCormack will be expensed 1/3 each year, for three years , on an annual basis in advance of the McCormack Retirement Eligibility Date.


3.	Compensation expense for restricted stock subject to time-based vesting criteria granted to the Management Grantees other than Mr. Harris and Ms. McCormack, will be expensed 1/3 each year, for three years , on an annual basis in advance of the Executive Retirement Eligibility Date.

Accruals of compensation cost for an award with a performance condition is accrued if it is probable that the performance condition will be achieved and shall not be accrued if it is not probable that the performance condition will be achieved.

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On February 18, 2017 , Restricted Stock Awards were granted to certain non-management employees (each, a “Non-Management Grantee”) with an aggregate value of $ 0.6 million which represents 40,000 shares of restricted Class A common stock in connection with 2016 compensation. Fifty percent of each Restricted Stock Award granted is subject to time-based vesting criteria, and the remaining 50% of each Restricted Stock Award is subject to attainment of the Performance Target for the applicable years. The time-vesting restricted stock granted to Non-Management Grantees will vest in three installments on each of the first three anniversaries of June 1, 2017, subject to continued employment on the applicable vesting dates. The performance-vesting restricted stock will vest in three equal installments on June 1 of each of 2018, 2019 and 2020 (subject to the performance target being achieved). The Catch-Up Provision applies to the performance vesting portion of this award. The Company has elected to recognize the compensation expense related to the time-based vesting criteria of these Restricted Stock Awards for the entire award on a straight-line basis over the requisite service period. As such, the compensation expense related to the February 18, 2017 Restricted Stock Awards to Non-Management Grantees shall be recognized 1/3 for the period February 18, 2017 through June 1, 2018, 1/3 for the period June 2, 2018 through June 1, 2019 and 1/3 for the period June 2, 2019 through June 1, 2020.

On March 3, 2017 , a new member of the board of directors received a Restricted Stock Award with a grant date fair value of $ 75,616 , representing 5,130 shares of restricted Class A common stock, which will vest in three equal installments on each of the first three anniversaries of the date of grant, subject to continued service on the board of directors. Compensation expense for restricted stock subject to time-based vesting criteria granted to the director will be expensed 1/3 each year, for three years on an annual basis following such grant.

Other 2017 Restricted Stock Awards

On January 24, 2017 , Management Grantees received a Restricted Stock Award with a grant date fair value of $ 30,455 , representing 2,191 shares of restricted Class A common stock. These shares represent stock dividends paid on the number of shares subject to the 2016 options (had such shares been outstanding) and vest with the time-vesting 2016 options they are associated with, subject to the Retirement Eligibility Date of the respective member of management. Compensation expense shall be recognized on a straight-line basis over the requisite service period.

On February 18, 2017, a new employee of the Company received a Restricted Stock Award with a grant date fair value of $ 0.4 million , representing 28,881 shares of restricted Class A common stock, which will vest in two equal installments on each of the first two anniversaries of the date of grant, subject to continued employment on the applicable vesting dates. Compensation expense shall be recognized on a straight-line basis over the requisite service period.

On February 18, 2017, Management Grantees received cash of $ 1.0 million and a Stock Award with a grant date fair value of $ 48,475 , representing 3,500 shares of Class A common stock, intended to represent dividends in type and amount that the 2015 stock option grant to management would have received had such options had dividend equivalent rights since grant. This grant also provides for future dividend equivalents that vest according to the vesting schedule of the 2015 stock option grant. Compensation expense shall be recognized on a straight-line basis over the requisite service period.

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Summary of Restricted Stock and Stock Option Expense and Shares/Options Nonvested/Outstanding

A summary of the grants is presented below ($ in thousands):



	Three Months Ended March 31,
	2017				2016
	Number of Shares/Options	Weighted Average Fair Value			Number of Shares	Weighted Average Fair Value

Grants - Class A Common Stock (restricted)	832,408	$	11,616		793,598	$	9,118
Grants - Class A Common Stock (restricted) dividends	15,560	216			166,934	1,908
Stock Options	—	—			380,949	1,356

Amortization to compensation expense
Ladder compensation expense		( 7,254		)		( 3,464		)
Total amortization to compensation expense		$	( 7,254	)		$	( 3,464	)

The table below presents the number of unvested shares and outstanding stock options at March 31, 2017 and changes during 2017 of the (i) Class A Common stock and Stock Options of Ladder Capital Corp granted under the 2014 Omnibus Incentive Plan



	Restricted Stock		Stock Options

Nonvested/Outstanding at December 31, 2016	1,475,865		982,135
Granted	847,968		—
Exercised			—
Vested	( 1,423,934	)
Forfeited	—		—
Expired			—
Nonvested/Outstanding at March 31, 2017	899,899		982,135

Exercisable at March 31, 2017			752,017

At March 31, 2017 there was $ 10.5 million of total unrecognized compensation cost related to certain share-based compensation awards that is expected to be recognized over a period of up to 39 months , with a weighted-average remaining vesting period of 25.3 months .

Phantom Equity Investment Plan

LCFH maintains a Phantom Equity Investment Plan, effective on June 30, 2011 (the “Phantom Equity Plan”) in which certain eligible employees of LCFH, LCF and their subsidiaries participate. On July 3, 2014, the Board of Directors froze the Phantom Equity Plan, as further described below. The Phantom Equity Plan is an annual deferred compensation plan pursuant to which participants could elect, or in some cases, non-management participants could be required, depending upon the participant’s specific level of compensation, to defer all or a portion of their annual cash performance-based bonuses as elective or mandatory contributions. Generally, if a participant’s total compensation was in excess of a certain threshold, a portion of such participant’s annual bonus, was required to be deferred into the Phantom Equity Plan. Otherwise, amounts could be deferred into the Phantom Equity Plan at the election of the participant, so long as such election was timely made in accordance with the terms and procedures of the Phantom Equity Plan.

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In the event that a participant elected to (or was required to) defer a portion of his or her compensation pursuant to the Phantom Equity Plan, such amount was not paid to the participant and was instead credited to such participant’s notional account under the Phantom Equity Plan. Prior to the closing of our IPO, such amounts were invested, on a phantom basis, in the Series B Participating Preferred Units issued by LCFH until such amounts were eventually paid to the participant pursuant to the Phantom Equity Plan. Following our IPO, as described below, such amounts were invested on a phantom basis in shares of the Company’s Class A common stock. Mandatory contributions are subject to one-third vesting over a three year period following the applicable Phantom Equity Plan year in which the related compensation was earned. Elective contributions were immediately vested upon contribution. Unvested amounts are generally forfeited upon the participant’s involuntary termination for cause, a voluntary termination for which the participant’s employer would have grounds to terminate the participant for cause or a voluntary termination within one year of which the participant obtains employment with a financial services organization.

The date that the amounts deferred into the Phantom Equity Plan are paid to a participant depends upon whether such deferral is a mandatory deferral or an elective deferral. Elective deferrals are paid upon the earliest to occur of (1) a change in control (as defined in the Phantom Equity Plan), (2) the end of the participant’s employment, or (3) December 31, 2017. The vested amounts of the mandatory contributions are paid upon the first to occur of (A) a change in control and (B) the first to occur of (x) December 31, 2017 or (y) the date of payment of the annual bonus payments following December 31 of the third calendar year following the applicable plan year to which the underlying deferred annual bonus relates. The Company could elect to make, and did make, payments pursuant to the Phantom Equity Plan in the form of cash in an amount equal to the then fair market value of such shares of the Company’s Class A common stock (or, prior to our IPO, the Series B Participating Preferred Units), and on May 14, 2014, the Compensation Committee made a global election to make all payments pursuant to the Phantom Equity Plan in the form of cash. Mandatory contributions that were paid at the time specified in clause 2(B) above were made in cash.

Upon the closing of our IPO, each participant in the Phantom Equity Plan had his or her notional interest in LCFH’s Series B Participating Preferred Units converted into a notional interest in the Company’s Class A common stock, which notional conversion was based on the issuance price of our Class A common stock at the time of the IPO. On July 3, 2014, the board of directors froze the Phantom Equity Plan, effective as of such date, so that there will neither be future participants in the Phantom Equity Plan nor additional amounts contributed to any accounts outstanding under the Phantom Equity Plan. Amounts previously outstanding under the Phantom Equity Plan will be paid in accordance with their original payment terms, including limiting payment to the dates and events specified above. In connection with freezing the Phantom Equity Plan, the board of directors also updated the definition of fair market value for purposes of measuring the value of its Class A Common Stock, to provide that, generally, such value would be the closing price of such stock on the principal national securities exchange on which it is then traded.

As of March 31, 2017 , there are 274,285 phantom units outstanding, all of which are vested, resulting in a liability of $ 4.4 million , which is included in accrued expenses on the consolidated balance sheets. As of December 31, 2016 , there are 373,871 phantom units outstanding, all of which are vested, resulting in a liability of $ 6.1 million , which is included in accrued expenses on the consolidated balance sheets.

Ladder Capital Corp Deferred Compensation Plan

On July 3, 2014, the Company adopted a new, nonqualified deferred compensation plan, which was amended and restated on March 17, 2015 (the “2014 Deferred Compensation Plan”), in which certain eligible employees participate. Pursuant to the 2014 Deferred Compensation Plan, participants may elect, or in some cases non-management participants may be required, to defer all or a portion of their annual cash performance-based bonuses into the 2014 Deferred Compensation Plan. Generally, if a participant’s total compensation is in excess of a certain threshold, a portion of a participant’s performance-based annual bonus is required to be deferred into the 2014 Deferred Compensation Plan. Otherwise, a portion of the participant’s annual bonus may be deferred into the 2014 Deferred Compensation Plan at the election of the participant, so long as such elections are timely made in accordance with the terms and procedures of the 2014 Deferred Compensation Plan.

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In the event that a participant elects to (or is required to) defer a portion of his or her compensation pursuant to the 2014 Deferred Compensation Plan, such amount is not paid to the participant and is instead credited to such participant’s notional account under the 2014 Deferred Compensation Plan. Such amounts are then invested on a phantom basis in Class A common stock of the Company, or the phantom units, and a participant’s account is credited with any dividends or other distributions received by holders of Class A common stock of the Company, which are subject to the same vesting and payment conditions as the applicable contributions. Elective contributions are immediately vested upon contribution. Mandatory contributions are subject to one-third vesting over a three -year period on a straight-line basis following the applicable year in which the related compensation was earned.

If a participant’s employment with the Company is terminated by the Company other than for cause and such termination is within six months following a change in control (each, as defined in the 2014 Deferred Compensation Plan), then the participant will fully vest in his or her unvested account balances. Furthermore, the unvested account balances will fully vest in the event of the participant’s death, disability, retirement (as defined in the 2014 Deferred Compensation Plan) or in the event of certain hostile takeovers of the board of directors of the Company. In the event that a participant’s employment is terminated by the Company other than for cause, the participant will vest in the portion of the participant’s account that would have vested had the participant remained employed through the end of the year in which such termination occurs, subject to, in such case or in the case of retirement, the participant’s timely execution of a general release of claims in favor of the Company. Unvested amounts are otherwise generally forfeited upon the participant’s resignation or termination of employment, and vested mandatory contributions are generally forfeited upon the participant’s termination for cause.

Amounts deferred into the 2014 Deferred Compensation Plan are paid upon the earliest to occur of (1) a change in control, (2) within sixty ( 60 ) days following the end of the participant’s employment with the Company, or (3) the date of payment of the annual bonus payments following December 31 of the third calendar year following the applicable year to which the underlying deferred annual compensation relates. Payment is made in cash equal to the fair market value of the number of phantom units credited to a participant’s account, provided that, if the participant’s termination was by the Company for cause or was a voluntary resignation other than on account of such participant’s retirement, the amount paid is based on the lowest fair market value of a share of Class A common stock during the forty-five day period following such termination of employment. The amount of the final cash payment may be more or less than the amount initially deferred into the 2014 Deferred Compensation Plan, depending upon the change in the value of the Class A common stock of the Company during such period.

As of March 31, 2017 , there are 354,638 phantom units outstanding, of which 226,465 are unvested, resulting in a liability of $ 3.8 million , which is included in accrued expenses on the consolidated balance sheets. As of December 31, 2016 , there are 273,709 phantom units outstanding, of which 134,281 are unvested, resulting in a liability of $ 3.6 million , which is included in accrued expenses on the consolidated balance sheets.

Bonus Payments

On February 8, 2017 , the board of directors of Ladder Capital Corp approved 2017 bonus payments to employees, including officers, totaling $ 39.5 million , which included $ 10.2 million of equity based compensation. The bonuses were accrued for as of December 31, 2017 and paid to employees in full on February 21, 2017 . On February 10, 2016 , the board of directors of Ladder Capital Corp approved 2016 bonus payments to employees, including officers, totaling $ 46.8 million , which included $ 10.3 million of equity based compensation. The bonuses were accrued for as of March 31, 2016 and paid to employees in full on February 17, 2016 . During the three months ended March 31, 2017 and 2016 , the Company recorded compensation expense of $ 3.1 million and $ 4.7 million , respectively, related to bonuses.

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15. INCOME TAXES

Prior to February 11, 2014, the Company had not been subject to U.S. federal income taxes as the predecessor entity was a Limited Liability Limited Partnership (“LLLP”), but had been subject to the New York City Unincorporated Business Tax (“NYC UBT”). As a result of the IPO, a portion of the Company’s income was subject to U.S. federal, state and local corporate income taxes and taxed at the prevailing corporate tax rates in addition to being subject to NYC UBT. Because the Company is operating as a REIT effective January 1, 2015, the Company’s income will generally no longer be subject to U.S. federal, state and local corporate income taxes other than as described below.

Certain of the Company’s subsidiaries have elected to be treated as TRSs. TRSs permit the Company to participate in certain activities from which REITs are generally precluded, as long as these activities meet specific criteria, are conducted within the parameters of certain limitations established by the Code, and are conducted in entities which elect to be treated as taxable subsidiaries under the Code. To the extent these criteria are met, the Company will continue to maintain its qualification as a REIT. The Company’s TRSs are not consolidated for U.S. federal income tax purposes, but are instead taxed as corporations. For financial reporting purposes, a provision for current and deferred taxes is established for the portion of earnings recognized by the Company with respect to its interest in TRSs. Current income tax expense (benefit) was $ 2.2 million and $ 1.1 million for the three months ended March 31, 2017 and March 31, 2016 , respectively.

As of March 31, 2017 and December 31, 2016 , the Company’s net deferred tax assets were $ 4.8 million and $ 2.1 million , respectively, and are included in other assets in the Company’s consolidated balance sheets. Deferred income tax expense (benefit) included within the provision for income taxes was $( 3.6 ) million and $( 2.0 ) million for the three months ended March 31, 2017 and March 31, 2016 , respectively. The Company believes it is more likely than not that the net deferred tax assets will be realized in the future. Realization of the net deferred tax assets is dependent upon our generation of sufficient taxable income in future years in appropriate tax jurisdictions to obtain benefit from the reversal of temporary differences. The amount of net deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income change.

As of March 31, 2017 , the Company has a deferred tax asset of $ 6.0 million relating to capital losses which it may only use to offset capital gains. These tax attributes will expire if unused in 2020. As the realization of these assets are not more likely than not before their expiration, the Company has provided a full valuation allowance against this deferred tax asset.

The Company’s tax returns are subject to audit by taxing authorities. Generally, as of March 31, 2017 , the tax years 2013, 2014, 2015 and 2016 remain open to examination by the major taxing jurisdictions in which the Company is subject to taxes. The Company acquired certain corporate entities in the IPO Reorganization Transactions. The related acquisition agreements provided an indemnification to the Company by the transferor of any amounts due for any potential tax liabilities owed by these entities for tax years prior to their acquisition. During the three months ended September 30, 2016, management proposed a settlement pertaining to a New York State tax audit for these corporate entities for the years 2010-2012 (which are now wholly owned). As a result of the settlement, management recorded income tax expense in the amount of $ 3.3 million and a corresponding payable to the State of New York. The settlement was finalized during the three months ended December 31, 2016. Pursuant to the indemnification, Management expected to recover such amounts and, accordingly, recorded fee and other income in the amount of $ 3.3 million as well as a corresponding receivable from the indemnity counterparties. As of March 31, 2017 , the Company had recovered all amounts owed by the indemnity counterparties related to the 2010-2012 audit. The IRS and New York State have recently begun routine audits of the Company’s U.S. federal and state income tax returns for tax year 2014 and 2013-2015 respectively. The Company does not expect the audit to result in any material changes to the Company’s financial position. The Company does not expect tax expense to have an impact on either short or long-term liquidity or capital needs.

Under U.S. GAAP, a tax benefit related to an income tax position may be recognized when it is more likely than not that the position will be sustained upon examination by the tax authorities based on the technical merits of the position. A position that meets this standard is measured at the largest amount of benefit that will more likely than not be realized upon settlement. As of March 31, 2017 and December 31, 2016 , the Company’s unrecognized tax benefit is a liability for $ 0.8 million and is included in the accrued expenses in the Company’s consolidated balance sheets. This unrecognized tax benefit, if recognized, would have a favorable impact on our effective income tax rate in future periods. As of March 31, 2017 , the Company has no t recognized any interest or penalties related to uncertain tax positions. In addition, the Company does not believe that it has any tax positions for which it is reasonably possible that it will be required to record a significant liability for unrecognized tax benefits within the next twelve months.

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Tax Receivable Agreement

Upon consummation of the IPO, the Company entered into a Tax Receivable Agreement with the Continuing LCFH Limited Partners. Under the Tax Receivable Agreement the Company generally is required to pay to those Continuing LCFH Limited Partners that exchange their interests in LCFH and Class B shares of the Company for Class A shares of the Company, 85 % of the applicable cash savings, if any, in U.S. federal, state and local income tax that the Company realizes (or is deemed to realize in certain circumstances) as a result of (i) the increase in tax basis in its proportionate share of LCFH’s assets that is attributable to the Company as a result of the exchanges and (ii) payments under the Tax Receivable Agreement, including any tax benefits related to imputed interest deemed to be paid by the Company as a result of such agreement. The Company may make future payments under the Tax Receivable Agreement if the tax benefits are realized. We would then benefit from the remaining 15 % of cash savings in income tax that we realize. For purposes of the Tax Receivable Agreement, cash savings in income tax will be computed by comparing our actual income tax liability to the amount of such taxes that we would have been required to pay had there been no increase to the tax basis of the assets of LCFH as a result of the exchanges and had we not entered into the Tax Receivable Agreement.

Payments to a Continuing LCFH Limited Partner under the Tax Receivable Agreement are triggered by each exchange and are payable annually commencing following the Company’s filing of its income tax return for the year of such exchange. The timing of the payments may be subject to certain contingencies, including the Company having sufficient taxable income to utilize all of the tax benefits defined in the Tax Receivable Agreement.

As of March 31, 2017 and December 31, 2016 , pursuant to the Tax Receivable Agreement, the Company recorded a liability of $ 2.3 million and $ 2.5 million , respectively, included in amount payable pursuant to tax receivable agreement in the consolidated balance sheets for Continuing LCFH Limited Partners. The amount and timing of any payments may vary based on a number of factors, including the absence of any material change in the relevant tax law, the Company continuing to earn sufficient taxable income to realize all tax benefits, and assuming no additional exchanges that are subject to the Tax Receivable Agreement. Depending upon the outcome of these factors, the Company may be obligated to make substantial payments pursuant to the Tax Receivable Agreement. The actual payment amounts may differ from these estimated amounts, as the liability will reflect changes in prevailing tax rates, the actual benefit the Company realizes on its annual income tax returns, and any additional exchanges.

To determine the current amount of the payments due, the Company estimates the amount of the Tax Receivable Agreement payments that will be made within twelve months of the balance sheet date. As described in Note 1 above, the Tax Receivable Agreement was amended and restated in connection with our REIT Election, effective as of December 31, 2014, in order to preserve a portion of the potential tax benefits currently existing under the Tax Receivable Agreement that would otherwise be reduced in connection with our REIT Election. The purpose of the TRA Amendment was to preserve the benefits of the Tax Receivable Agreement to the extent possible in a REIT, although, as a result, the amount of payments made to the TRA Members under the TRA Amendment is expected to be less than the amount that would have been paid under the original Tax Receivable Agreement. The TRA Amendment continues to share such benefits in the same proportions and otherwise has substantially the same terms and provisions as the prior Tax Receivable Agreement.

16. RELATED PARTY TRANSACTIONS

Ladder Select Bond Fund

On October 18, 2016, Ladder Capital Asset Management LLC (“LCAM”), a subsidiary of the Company and a registered investment adviser, launched the Ladder Select Bond Fund (the “Fund”), a mutual fund. In addition, on October 18, 2016, the Company made a $ 10.0 million investment in the Fund, which is included in other assets in the consolidated balance sheets. As of March 31, 2017 , members of senior management have also invested $ 1.6 million in aggregate in the Fund, since inception. LCAM earns a 0.75 % fee on assets under management, which may be reduced for expenses incurred in excess of the Fund’s expense cap of 0.95 % .

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Commercial Real Estate Loans

From time to time, the Company may provide commercial real estate loans to entities affiliated with certain of our directors, officers or large shareholders who are, as part of their ordinary course of business, commercial real estate investors. These loans are made in the ordinary course of the Company’s business on the same terms and conditions as would be offered to any other borrower of similar type and standing on a similar property.

On May 20, 2015, the Company provided a $ 25.0 million , 9.0 % fixed rate, approximately one year, interest-only mezzanine loan, to Halletts Investors LLC (“Borrower”), an entity affiliated with Douglas Durst, one of the Company’s directors and chairman of The Durst Organization. The loan, which was approved by the Audit Committee and Risk and Underwriting Committee in accordance with the Company’s policies regarding related party transactions, was secured by Borrower’s ownership interest in Durst Halletts Member LLC (“Guarantor”). Borrower and Guarantor indirectly own a controlling interest in the three entities that collectively own approximately 9.66 acres of undeveloped land located along the East River waterfront on Hallets Point Peninsula in Astoria Queens, New York. Douglas Durst and members of his family, including trusts for which Douglas Durst is a trustee, have a controlling interest in Borrower and Guarantor. The loan matured on and was repaid in full as of June 3, 2016. For the three months ended March 31, 2016 , the Company earned $ 0.6 million in interest income related to this loan.

On March 13, 2017, Related Reserve IV LLC, an affiliate of Related Fund Management LLC (the “B Participation Holder”), purchased a $ 4.0 million subordinate participation interest (the “B Participation Interest”) in the up to $ 136.5 million mortgage loan (the “Loan”) secured by the Conrad hotels and condominiums in Fort Lauderdale, Florida from a subsidiary of the Company. The B Participation Interest earns interest at an annual rate of 17 % , with the Company’s participation interest (the “A Participation Interest”) receiving the balance of all interest paid under the Loan. Upon an event of default under the Loan, all receipts will be applied to the payment of interest and principal on the Company’s share of the principal balance before the B Participation Holder receives any sums. The Company retains all control over the administration and servicing of the whole loan, except that upon the occurrence of certain Loan defaults and other events, the B Participation Holder will have the option to trigger a buy-sell option, whereupon the Company shall have the right to either repurchase the B Participation Interest at par or sell the A Participation Interest to the B Participation Holder at par plus exit fees that would have been payable upon a borrower repayment. Because the participation interest was not pari passu and effective control continued to reside with the retained portions of the loans the transfers of any portion of this loan asset is considered a nonrecourse secured borrowing in which the full loan asset remains on the Company’s consolidated balance sheets in mortgage loan receivables held for investment, net, at amortized cost and the sale proceeds are recognized as debt obligations. For the three months ended March 31, 2017 , the Company incurred $ 35,944 in interest expense related to this loan which is included in accrued expenses on the Company’s consolidated balance sheets.

Stockholders Agreement

On March 3, 2017, Ladder, Related and certain pre-IPO stockholders of Ladder, including affiliates of TowerBrook Capital Partners, L.P. and GI Partners L.P., closed a purchase by Related of $ 80.0 million of Ladder’s Class A common stock from the pre-IPO stockholders. As part of the closing of the transaction, Ladder and Related entered into a Stockholders Agreement, dated as of March 3, 2017, pursuant to which Jonathan Bilzin resigned from the Board, and all committees thereof, and Ladder appointed Richard O’Toole to replace Mr. Bilzin as a Class II Director on Ladder’s Board, each effective as of March 3, 2017. Pursuant to the Stockholders Agreement, Ladder granted to Related a right of first offer with respect to certain horizontal risk retention investments in which Ladder intends to retain an interest and Related agreed to certain standstill provisions.

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17. COMMITMENTS AND CONTINGENCIES

Leases

The Company entered into an operating lease for its previous primary office space, which commenced on January 5, 2009 and expired on May 30, 2015. Subsequent to entering into this leasing arrangement, the office space was subleased to a third party. Income received on the subleased office space was recorded in other income on the consolidated statements of income. In 2011, the Company entered into a lease for its primary office space, which commenced on October 1, 2011 and expires on January 31, 2022 with no extension option. In 2012, the Company entered into a lease for secondary office space. The lease commenced on May 15, 2012 and would have expired on May 14, 2015 with no extension option. This lease was amended, however, on October 2, 2014, extending the expiration date from May 14, 2015 to May 14, 2018. The Company recorded $ 0.3 million and $ 0.3 million , of rental expense for the three months ended March 31, 2017 and 2016 , respectively, which is included in operating expenses in the consolidated statements of income.

The following is a schedule of future minimum rental payments required under the above operating leases ($ in thousands):



Period Ending December 31,	Amount

2017 (last 9 months)	$	942
2018	1,206
2019	1,180
2020	1,180
2021	1,180
Thereafter	99
Total	$	5,787

Unfunded Loan Commitments

As of March 31, 2017 , the Company’s off-balance sheet arrangements consisted of $ 123.7 million of unfunded commitments on mortgage loan receivables held for investment to provide additional first mortgage loan financing, at rates to be determined at the time of funding, which consisted of $ 123.7 million to provide additional first mortgage loan financing. As of December 31, 2016 , the Company’s off-balance sheet arrangements consisted of $ 147.7 million of unfunded commitments of mortgage loan receivables held for investment, at rates to be determined at the time of funding, which was composed of $ 146.3 million to provide additional first mortgage loan financing and $ 1.4 million to provide additional mezzanine loan financing. Such commitments are subject to our loan borrowers’ satisfaction of certain financial and nonfinancial covenants and may or may not be funded depending on a variety of circumstances including timing, credit metric hurdles, and other nonfinancial events occurring. These commitments are not reflected on the consolidated balance sheets.

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18. SEGMENT REPORTING

The Company has determined that it has three reportable segments based on how the chief operating decision maker reviews and manages the business. These reportable segments include loans, securities, and real estate. The loans segment includes mortgage loan receivables held for investment (balance sheet loans) and mortgage loan receivables held for sale (conduit loans). The securities segment is composed of all of the Company’s activities related to commercial real estate securities, which include investments in CMBS and U.S. Agency Securities. The real estate segment includes net leased properties, office buildings, a warehouse and condominium units. Corporate/other includes the Company’s investments in joint ventures, other asset management activities and operating expenses.

The Company evaluates performance based on the following financial measures for each segment ($ in thousands):



	Loans			Securities			Real Estate(1)			Corporate/Other(2)			Company Total

Three months ended March 31, 2017
Interest income	$	44,297		$	13,208		$	3		$	4		$	57,512
Interest expense	( 6,253		)	( 1,853		)	( 6,550		)	( 16,759		)	( 31,415		)
Net interest income (expense)	38,044			11,355			( 6,547		)	( 16,755		)	26,097
Provision for loan losses	—			—			—			—			—
Net interest income (expense) after provision for loan losses	38,044			11,355			( 6,547		)	( 16,755		)	26,097

Operating lease income	—			—			19,630			—			19,630
Tenant recoveries	—			—			1,579			—			1,579
Sale of loans, net	( 999		)	—			—			—			( 999		)
Realized gain on securities	—			5,361			—			—			5,361
Unrealized gain (loss) on Agency interest-only securities	—			159			—			—			159
Realized gain (loss) on sale of real estate, net	—			—			2,331			—			2,331
Fee and other income	1,621			—			1,973			872			4,466
Net result from derivative transactions	( 1,681		)	( 300		)	—			—			( 1,981		)
Earnings (loss) from investment in unconsolidated joint ventures	—			—			( 74		)	—			( 74		)
Loss on extinguishment of debt	—			—			—			( 54		)	( 54		)
Total other income (expense)	( 1,059		)	5,220			25,439			818			30,418

Salaries and employee benefits	( 1,000		)	—			—			( 15,042		)	( 16,042		)
Operating expenses	43			—			—			( 5,522		)	( 5,479		)
Real estate operating expenses	—			—			( 7,473		)	—			( 7,473		)
Real estate acquisition costs	—			—			19			—			19
Fee expense	( 535		)	( 94		)	( 64		)	—			( 693		)
Depreciation and amortization	—			—			( 8,569		)	( 23		)	( 8,592		)
Total costs and expenses	( 1,492		)	( 94		)	( 16,087		)	( 20,587		)	( 38,260		)

Income tax (expense) benefit	—			—			—			1,375			1,375
Segment profit (loss)	$	35,493		$	16,481		$	2,805		$	( 35,149	)	$	19,630

Total assets as of March 31, 2017	$	2,816,675		$	1,701,980		$	848,538		$	574,429		$	5,941,622

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	Loans			Securities			Real Estate(1)			Corporate/Other(2)			Company Total

Three months ended March 31, 2016
Interest income	$	41,328		$	18,256		$	—		$	17		$	59,601
Interest expense	( 6,151		)	( 1,970		)	( 6,195		)	( 15,220		)	( 29,536		)
Net interest income (expense)	35,177			16,286			( 6,195		)	( 15,203		)	30,065
Provision for loan losses	( 150		)	—			—			—			( 150		)
Net interest income (expense) after provision for loan losses	35,027			16,286			( 6,195		)	( 15,203		)	29,915

Operating lease income	—			—			19,294			—			19,294
Tenant recoveries	—			—			1,335			—			1,335
Sale of loans, net	7,830			—			—			—			7,830
Realized gain on securities	—			( 573		)	—			—			( 573		)
Unrealized gain (loss) on Agency interest-only securities	—			660			—			—			660
Realized gain on sale of real estate, net	641			—			5,454			—			6,095
Fee and other income	1,805			—			342			828			2,975
Net result from derivative transactions	( 16,125		)	( 34,737		)	—			—			( 50,862		)
Earnings from investment in unconsolidated joint ventures	—			—			( 98		)	892			794
Gain (loss) on extinguishment of debt	—			—			—			5,382			5,382
Total other income	( 5,849		)	( 34,650		)	26,327			7,102			( 7,070		)

Salaries and employee benefits	( 1,500		)	—			—			( 11,115		)	( 12,615		)
Operating expenses	—			—			( 422		)	( 5,873		)	( 6,295		)
Real estate operating expenses	—			—			( 5,719		)	—			( 5,719		)
Fee expense	( 436		)	—			( 114		)	( 181		)	( 731		)
Depreciation and amortization	—			—			( 9,797		)	( 5		)	( 9,802		)
Total costs and expenses	( 1,936		)	—			( 16,052		)	( 17,174		)	( 35,162		)

Income tax expense	—			—			—			873			873
Segment profit (loss)	$	27,242		$	( 18,364	)	$	4,080		$	( 24,402	)	$	( 11,444	)

Total assets as of December 31, 2016	$	2,353,977		$	2,100,947		$	856,363		$	267,050		$	5,578,337


(1)	Includes the Company’s investment in unconsolidated joint ventures that held real estate of $ 34.2 million and $ 34.0 million as of March 31, 2017 and December 31, 2016 , respectively

(2)

Corporate/Other represents all corporate level and unallocated items including any intercompany eliminations necessary to reconcile to consolidated Company totals. This caption also includes the Company’s investment in unconsolidated joint ventures and strategic investments that are not related to the other reportable segments above, including the Company’s investment in FHLB stock of $ 77.9 million as of March 31, 2017 and December 31, 2016 , the Company’s deferred tax asset of $ 4.8 million and $ 2.1 million as of March 31, 2017 and December 31, 2016 , respectively and the Company’s senior unsecured notes of $ 1.0 billion and $ 559.8 million as of March 31, 2017 and December 31, 2016 , respectively.

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19. SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the issuance date of the financial statements and determined that the following disclosure is necessary:

Senior Unsecured Notes

2017 Notes

On March 1, 2017, the Company delivered a notice of conditional full redemption to holders of the 2017 Notes, pursuant to which the Company redeemed all outstanding 2017 Notes at 100 % of the principal amount thereof (plus any accrued and unpaid interest to the redemption date) on April 1, 2017. The redemption was conditional on the completion by the Company of a senior notes offering with gross proceeds of not less than $ 500 million . The Company’s offering of the 2022 Notes, described in Note 7, Debt Obligations, Net , satisfied this condition. On April 3, 2017 , the Company redeemed the remaining $ 291.5 million in aggregate principal amount of the 2017 Notes (including accrued and unpaid interest as of that date). The Company remitted the payment amount to the Trustee on March 31, 2017 and the 2017 Notes were repaid on April 3, 2017. The amount held by the Trustee was reflected in other assets on the Company’s consolidated balance sheets as of March 31, 2017 .

Committed Loan Repurchase Facility

On May 1, 2017 , the Company executed an amendment to one of its credit facilities with a major banking institution to, among other things, extend the maximum term an additional year to May 24, 2021 .

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations should be read in conjunction with the consolidated financial statements and the related notes of Ladder Capital Corp included within this Quarterly Report and the Annual Report. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. See “Cautionary Statement Regarding Forward-Looking Statements” within this Quarterly Report and “Risk Factors” within the Annual Report for a discussion of the uncertainties, risks and assumptions associated with these statements. Actual results may differ materially from those contained in any forward-looking statements as a result of various factors, including but not limited to, those in “Risk Factors” set forth within the Annual Report.

References to “Ladder,” the “Company,” and “we,” “our” and “us” refer to Ladder Capital Corp, a Delaware corporation incorporated in 2013, and its consolidated subsidiaries subsequent to the initial public offering (“IPO”) and related transactions described below.

Overview

We are a leading commercial real estate finance company structured as an internally-managed REIT. We conduct our business through three commercial real estate-related business lines: loans, securities, and real estate investments. We believe that our in-house origination platform, ability to flexibly allocate capital among complementary product lines, credit-centric underwriting approach, access to diversified financing sources, and experienced management team position us well to deliver attractive returns on equity to our shareholders through economic and credit cycles.

Our businesses, including conduit lending, balance sheet lending, securities investments, and real estate investments, provide for a stable base of net interest and rental income. We have originated $17.7 billion of commercial real estate loans from our inception through March 31, 2017 . During this timeframe, we also acquired $9.6 billion of investment grade-rated securities secured by first mortgage loans on commercial real estate and $1.3 billion of selected net leased and other real estate assets.

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, 2017 , we originated $13.0 billion of conduit loans, $12.6 billion of which were sold into 43 CMBS securitizations, making us, by volume, the second largest non-bank contributor of loans to CMBS securitizations in the United States in such period. Our sales of loans into securitizations are generally, historically accounted for as true sales, not financings, and we generally retain no ongoing interest in loans which we securitize. The securitization of conduit loans enables us to reinvest our equity capital into new loan originations or allocate it to other investments.

As of March 31, 2017 , we had $5.9 billion in total assets and $1.5 billion of total equity. As of that date, our assets included $2.8 billion of loans, $1.7 billion of securities, and $814.4 million of real estate.

We have a diversified and flexible financing strategy supporting our business operations, including significant committed term financing from leading financial institutions. As of March 31, 2017 , we had $4.4 billion of debt financing outstanding. This financing comprised $1.5 billion of financing from the Federal Home Loan Bank (the “FHLB”), $800.0 million committed secured term repurchase agreement financing, $239.4 million of other securities financing, $589.2 million of third-party, non-recourse mortgage debt, $291.5 million in aggregate principal amount of 7.375% senior notes due October 1, 2017 (the “2017 Notes”), $266.2 million in aggregate principal amount of 5.875% senior notes due 2021 (the “2021 Notes”) and $500.0 million in aggregate principal amount of 5.25% senior notes due 2022 (the “2022 Notes,” collectively with the 2017 Notes and the 2021 Notes, the “Notes”). There were $168.0 million of borrowings outstanding under our Revolving Credit Facility. In addition, as of March 31, 2017 , we had $1.8 billion of committed, undrawn funding capacity available, consisting of $0.5 million of availability under our $168.5 million Revolving Credit Facility, $524.5 million of undrawn committed FHLB financing and $1.3 billion of other undrawn committed financings. As of March 31, 2017 , our debt-to-equity ratio was 3.0 :1.0, as we employ leverage prudently to maximize financial flexibility.

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 March 31, 2017 , our management team and directors held interests in our Company comprising 11.8% 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; Michael Mazzei, President; Pamela McCormack, Chief Operating Officer; Marc Fox, Chief Financial Officer; Thomas Harney, Head of Merchant Banking & Capital Markets; and Robert Perelman, Head of Asset Management. Additional officers of Ladder include Kelly Porcella, General Counsel and Secretary, and Kevin Moclair, Chief Accounting Officer. We employ 67 full-time industry professionals.

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We are organized and conduct our operations to qualify as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”). As such, we will generally not be subject to U.S. federal income tax on that portion of our net income that is distributed to shareholders if we distribute at least 90% of our taxable income and comply with certain other requirements.

Recent Developments

Senior Unsecured Notes

2017 Notes

On March 1, 2017, the Company delivered a notice of conditional full redemption to holders of the 2017 Notes, pursuant to which the Company redeemed all outstanding 2017 Notes at 100% of the principal amount thereof (plus any accrued and unpaid interest to the redemption date) on April 1, 2017. The redemption was conditional on the completion by the Company of a senior notes offering with gross proceeds of not less than $500 million . The Company’s offering of the 2022 Notes, described in Note 7, Debt Obligations, Net , satisfied this condition. On April 3, 2017 , the Company repaid the remaining $291.5 million in aggregate principal amount of the 2017 Notes (including accrued and unpaid interest as of that date).

Committed Loan Repurchase Facility

Our Businesses

We invest primarily in loans, securities and other interests in U.S. commercial real estate, with a focus on senior secured assets. Our complementary business segments are designed to provide us with the flexibility to opportunistically allocate capital in order to generate attractive risk-adjusted returns under varying market conditions. The following table summarizes the value of our investment portfolio as reported in our consolidated financial statements as of the dates indicated below ($ in thousands):



	March 31, 2017				December 31, 2016
Loans
Conduit first mortgage loans	$	516,582	8.7	%	$	357,882	6.4	%
Balance sheet first mortgage loans	2,133,672		35.9	%	1,828,961		32.8	%
Other commercial real estate-related loans	166,421		2.8	%	167,134		3.0	%
Total loans	2,816,675		47.4	%	2,353,977		42.2	%
Securities
CMBS investments	1,646,115		27.7	%	2,043,566		36.6	%
U.S. Agency Securities investments	55,865		0.9	%	57,381		1.1	%
Total securities	1,701,980		28.6	%	2,100,947		37.7	%
Real Estate
Real estate and related lease intangibles, net	814,353		13.7	%	822,338		14.7	%
Total real estate	814,353		13.7	%	822,338		14.7	%
Other Investments
Investments in unconsolidated joint ventures	34,185		0.6	%	34,025		0.6	%
FHLB stock	77,915		1.3	%	77,915		1.4	%
Total other investments	112,100		1.9	%	111,940		2.0	%
Total investments	5,445,108		91.6	%	5,389,202		96.6	%
Cash, cash equivalents and restricted cash	117,008		2.0	%	64,017		1.1	%
Other assets	379,506		6.4	%	125,118		2.3	%
Total assets	$	5,941,622	100.0	%	$	5,578,337	100.0	%

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We invest in the following types of assets:

Loans

Conduit First Mortgage Loans. We 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. Our loans are directly originated by an internal team that has longstanding and strong relationships with borrowers and mortgage brokers throughout the United States. We follow a rigorous investment process, which begins with an initial due diligence review; continues through a comprehensive legal and underwriting process incorporating multiple internal and external checks and balances; and culminates in approval or disapproval of each prospective investment by our Investment Committee. Conduit first mortgage loans in excess of $50.0 million also require approval of our board of directors’ Risk and Underwriting Committee.

Although our primary intent is to sell our conduit first mortgage loans to CMBS trusts, we generally seek to maintain the flexibility to keep them on our balance sheet, sell participation interests or “b-notes” in our conduit first mortgage loans or sell conduit first mortgage loans as whole loans. From our inception in 2008 through March 31, 2017 , we have originated and funded $13.0 billion of conduit first mortgage loans and securitized $12.6 billion of such mortgage loans in 43 separate transactions, including two securitizations in 2010 , three securitizations in 2011 , six securitizations in 2012 , six securitizations in 2013 , 10 securitizations in 2014 , 10 securitizations in 2015 , six securitizations in 2016 and no securitizations in 2017 . We generally securitize our loans together with certain financial institutions, which to date have included affiliates of Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, UBS Securities LLC and Wells Fargo Securities, LLC, and we have also completed three single-asset securitizations and maintain the flexibility to complete a Ladder-only deal from our Ladder’s CMBS shelf. As of March 31, 2017 , we held 22 first mortgage loans that were substantially available for contribution into a securitization with an aggregate book value of $516.6 million . 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 53.7% at March 31, 2017 . The Company holds these conduit loans in its taxable REIT subsidiary (“TRS”).

Balance Sheet First Mortgage Loans. We also originate and invest in balance sheet first mortgage loans secured by commercial real estate properties that are undergoing transition, including lease-up, sell-out, and renovation or repositioning. These mortgage loans are structured to fit the needs and business plans of the property owners, and generally have LIBOR based floating rates and terms (including extension options) ranging from one to five years. Balance sheet first mortgage loans are originated, underwritten, approved and funded using the same comprehensive legal and underwriting approach, process and personnel used to originate our conduit first mortgage loans. Balance sheet first mortgage loans in excess of $20.0 million also require the approval of our board of directors’ Risk and Underwriting Committee.

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 collateralized loan obligation (“CLO”) or similar structure, sell participation interests or “b-notes” in our mortgage loans or sell such mortgage loans as whole loans. These investments have been typically repaid at or prior to maturity (including by being refinanced by us into a new conduit first mortgage loan upon property stabilization). As of March 31, 2017 , we held a portfolio of 97 balance sheet first mortgage loans with an aggregate book value of $2.1 billion . Based on the loan balances and the “as-is” third-party FIRREA appraised values at origination, the weighted average loan-to-value ratio of this portfolio was 64.6% at March 31, 2017 .

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, 2017 , we held a portfolio of 35 other commercial real estate-related loans with an aggregate book value of $166.4 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 70.6% at March 31, 2017 .

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The following charts set forth our total outstanding conduit first mortgage loans, balance sheet first mortgage loans and other commercial real estate-related loans as of March 31, 2017 and a breakdown of our loan portfolio by loan size and geographic location and asset type of the underlying real estate.

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Securities

CMBS Investments. We invest in CMBS secured by first mortgage loans on commercial real estate and own predominantly AAA-rated securities. These investments provide a stable and attractive base of net interest income and help us manage our liquidity. We have significant in-house expertise in the evaluation and trading of CMBS, 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. AAA-rated CMBS investments in excess of $50.0 million and all other investment grade securities positions in excess of $26.0 million require the approval of our board of directors’ Risk and Underwriting Committee. The Risk and Underwriting Committee also must approve the lesser of (x) $21,000,000 and (y) 10% of the total net asset value of the respective Ladder investment company for non-rated or sub-investment grade securities. As of March 31, 2017 , the estimated fair value of our portfolio of CMBS investments totaled $1.6 billion in 187 CUSIPs ( $8.8 million average investment per CUSIP). As of that date, 100% of our CMBS investments were rated investment grade by Standard & Poor’s Ratings Group, Moody’s Investors Service, Inc. or Fitch Ratings Inc., consisting of 83.6% AAA/Aaa-rated securities and 16.4% of other investment grade-rated securities, including 13.4% rated AA/Aa, 1.4% rated A/A and 1.6% rated BBB/Baa. In the future, we may invest in CMBS securities or other securities that are unrated. As of March 31, 2017 , our CMBS investments had a weighted average duration of 3.3 years. The commercial real estate collateral underlying our CMBS investment portfolio is located throughout the United States. As of March 31, 2017 , by property count and market value, respectively, 53.4% and 76.7% of the collateral underlying our CMBS investment portfolio was distributed throughout the top 25 metropolitan statistical areas (“MSAs”) in the United States, with 3.1% and 36.2% of the collateral located in the New York-Newark-Edison MSA, and the concentrations in each of the remaining top 24 MSAs ranging from 0.2% to 9.9% by property count and 0.1% to 13.8% by market value.

U.S. Agency Securities Investments. Our U.S. Agency Securities portfolio consists of securities for which the principal and interest payments are guaranteed by a U.S. government agency, such as the Government National Mortgage Association (“GNMA”), or by a government-sponsored enterprise (“GSE”), such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”). In addition, these securities are secured by first mortgage loans on commercial real estate. Investments in U.S. Agency Securities are subject to the same Risk and Underwriting Committee approval requirements as CMBS investments, as described above. As of March 31, 2017 , the estimated fair value of our portfolio of U.S. Agency Securities was $55.9 million in 28 CUSIPs ( $2.0 million average investment per CUSIP), with a weighted average duration of 5.4 years. The commercial real estate collateral underlying our U.S. Agency Securities portfolio is located throughout the United States. As of March 31, 2017 , by market value, 68.4% , 16.4% , and 3.3% of the collateral underlying our U.S. Agency Securities, excluding the collateral underlying our Agency interest-only securities, was located in New York , California , and Georgia , respectively, with no other state having a concentration greater than 10.0%. By property count, California represented 62.9% , Georgia represented 11.4% and New York represented 2.9% of such collateral. While the specific geographic concentration of our Agency interest-only securities portfolio as of March 31, 2017 is not obtainable, risk relating to any such possible concentration is mitigated by the interest payments of these securities being guaranteed by a U.S. government agency or a GSE.

Real Estate

Commercial Real Estate Properties. As of March 31, 2017 , we owned 118 single tenant net leased properties with an aggregate book value of $542.9 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, 2017 , our net leased properties comprised a total of 4.2 million square feet and had a 100% occupancy rate, an average age since construction of 8.4 years and a weighted average remaining lease term of 14.1 years.

In addition, as of March 31, 2017 , we owned 31 other properties with an aggregate book value of $236.4 million . Through separate joint ventures, we owned a portfolio of 13 office buildings in Richmond, VA with a book value of $92.1 million with an 89.9% occupancy rate, a portfolio of four office buildings in St. Paul, MN with a book value of $53.7 million and a 100.0% occupancy rate, an office building in Ewing, NJ with a book value of $30.4 million and a 100.0% occupancy rate, a portfolio of seven office buildings in Richmond, VA with a book value of $16.8 million and an 82.8% occupancy rate, a 13-story office building in Oakland County, MI with a book value of $10.0 million and a 73.2% occupancy rate, a two-story office building in Grand Rapids, MI with a book value of $9.0 million and a 100.0% occupancy rate, and a warehouse in Grand Rapids, MI with a book value of $5.7 million and a 100.0% occupancy rate. We also own a two-story office building in Wayne, NJ with a book value of $9.0 million with a 100.0% occupancy rate, a shopping center in Carmel, NY with a book value of $6.8 million and a 100.0% occupancy rate, and an office building in Peoria, IL with a book value of $2.8 million and a 100.0% occupancy rate.

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Residential Real Estate. We sold 12 condominium units at Veer Towers in Las Vegas, NV, during the three months ended March 31, 2017 , generating aggregate gains on sale of $1.9 million . As of March 31, 2017 , we owned 47 residential condominium units at Veer Towers in Las Vegas, NV with a book value of $14.4 million through a joint venture, and we intend to sell these remaining units over time. As of March 31, 2017 , 4 condominium units were under contract for sale with a book value of $0.8 million . As of March 31, 2017 , the remaining condominium units we hold were 31.3% rented and occupied. During the three months ended March 31, 2017 , the Company recorded $0.1 million of rental income from the condominium units.

We sold 6 condominium units at Terrazas River Park Village in Miami, FL, during the three months ended March 31, 2017 , generating aggregate gains on sale of $0.5 million . As of March 31, 2017 , we owned 82 residential condominium units at Terrazas River Park Village in Miami, FL with a book value of $20.7 million , and we intend to sell these remaining units over time. As of March 31, 2017 , 11 condominium units were under contract for sale with a book value of $2.6 million . As of March 31, 2017 , the remaining condominium units we hold were 84.1% rented and occupied. During the three months ended March 31, 2017 , the Company recorded $0.4 million of rental income from the condominium units.

The Company holds these residential condominium units in its TRS.

The following table, organized by tenant type and acquisition date, summarizes our owned properties as of March 31, 2017 ($ amounts in thousands):



Location	Acquisition date	Acquisition price/basis		Year built/reno.	Lease expiration (1)	Approx. square footage	Carrying value of asset		Mortgage loan outstanding (2)		Asset net of mortgage loan outstanding		Annual rental income (3)		Ownership Percentage (4)

Net Lease
Ridgedale, MO	03/09/17	$	1,298	2016	6/30/31	9,002	$	1,362	$	—	$	1,362	$	94	100.0	%
Peoria, IL	02/06/17	1,183		2016	8/31/31	7,489	1,269		—		1,269		86		100.0	%
Carmi, IL	02/03/17	1,411		2016	10/31/31	9,100	1,435		—		1,435		102		100.0	%
Springfield, IL	11/16/16	1,322		2016	6/30/31	9,026	1,395		—		1,395		96		100.0	%
Fayetteville, NC	11/15/16	6,971		2008	10/31/34	14,820	6,881		—		6,881		450		100.0	%
Dryden Township, MI	10/26/16	1,190		2016	8/31/31	9,100	1,266		—		1,266		87		100.0	%
Lamar, MO	07/22/16	1,176		2016	5/31/31	9,100	1,216		—		1,216		86		100.0	%
Union, MO	07/01/16	1,227		2016	5/31/31	9,100	1,315		—		1,315		90		100.0	%
Pawnee, IL	07/01/16	1,201		2016	5/31/31	9,002	1,207		—		1,207		88		100.0	%
Decatur, IL	06/30/16	1,365		2016	5/31/31	9,002	1,449		—		1,449		100		100.0	%
Cape Girardeau, MO	06/30/16	1,281		2016	5/31/31	9,100	1,351		1,016		335		94		100.0	%
Linn, MO	06/30/16	1,122		2016	5/31/31	9,002	1,167		—		1,167		82		100.0	%
Rantoul, IL	06/21/16	1,204		2016	4/30/31	9,100	1,275		—		1,275		88		100.0	%
Flora Vista, NM	06/06/16	1,305		2016	4/30/31	9,002	1,302		—		1,302		95		100.0	%
Champaign, IL	06/03/16	1,324		2016	4/30/31	9,002	1,404		—		1,404		97		100.0	%
Mountain Grove, MO	06/03/16	1,279		2016	4/30/31	10,566	1,370		—		1,370		93		100.0	%
Decatur, IL	06/03/16	1,181		2016	4/30/31	9,002	1,248		945		303		86		100.0	%
San Antonio, TX	05/06/16	1,096		2015	3/31/31	9,100	1,122		886		236		80		100.0	%
Borger, TX	05/06/16	978		2016	3/31/31	9,100	1,021		783		238		71		100.0	%
St.Charles, MN	04/26/16	1,198		2016	3/31/31	9,026	1,232		960		272		87		100.0	%
Philo, IL	04/26/16	1,156		2016	3/31/31	9,026	1,210		923		287		84		100.0	%
Dimmitt, TX	04/26/16	1,319		2016	3/31/31	10,566	1,359		1,046		313		96		100.0	%
Radford, VA	12/23/15	1,564		2015	9/30/30	8,360	1,511		1,139		372		104		100.0	%
Albion, PA	12/23/15	1,525		2015	9/30/30	8,184	1,447		1,136		311		101		100.0	%
Rural Retreat, VA	12/23/15	1,399		2015	9/30/30	8,305	1,353		1,048		305		93		100.0	%
Mount Vernon, AL	12/23/15	1,224		2015	6/30/30	8,323	1,192		953		239		84		100.0	%
Malone, NY	12/16/15	1,474		2015	6/30/30	8,320	1,422		1,089		333		99		100.0	%
Mercedes, TX	12/16/15	1,263		2015	11/30/30	9,100	1,226		839		387		86		100.0	%
Gordonville, MO	11/10/15	1,207		2015	9/30/30	9,026	1,167		775		392		80		100.0	%
Rice, MN	10/28/15	1,242		2015	9/30/30	9,002	1,183		821		362		85		100.0	%
Bixby, OK	10/27/15	12,151		2012	12/31/32	75,996	11,736		7,991		3,745		769		100.0	%
Farmington, IL	10/23/15	1,408		2015	8/31/30	9,100	1,354		900		454		93		100.0	%
Grove, OK	10/20/15	5,583		2012	8/31/32	31,500	5,336		3,642		1,694		364		100.0	%

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Location	Acquisition date	Acquisition price/basis	Year built/reno.	Lease expiration (1)	Approx. square footage	Carrying value of asset	Mortgage loan outstanding (2)	Asset net of mortgage loan outstanding	Annual rental income (3)	Ownership Percentage (4)

Jenks, OK	10/19/15	13,418	2009	9/24/33	80,932	12,921	8,842	4,079	912	100.0	%
Bloomington, IL	10/14/15	1,294	2015	8/31/30	9,026	1,246	821	425	85	100.0	%
Montrose, MN	10/14/15	1,193	2015	8/31/30	9,100	1,132	789	343	83	100.0	%
Lincoln County , MO	10/14/15	1,137	2015	8/31/30	9,002	1,094	742	352	76	100.0	%
Wilmington, IL	10/07/15	1,399	2015	8/31/30	9,002	1,345	906	439	93	100.0	%
Danville, IL	10/07/15	1,160	2015	8/31/30	9,100	1,120	742	378	76	100.0	%
Moultrie, GA	09/22/15	1,305	2014	6/30/29	8,225	1,238	934	304	85	100.0	%
Rose Hill, NC	09/22/15	1,420	2014	6/30/29	8,320	1,355	1,004	351	93	100.0	%
Rockingham, NC	09/22/15	1,158	2014	6/30/29	8,320	1,099	825	274	76	100.0	%
Biscoe, NC	09/22/15	1,216	2014	6/30/29	8,320	1,157	863	294	80	100.0	%
De Soto, IL	09/08/15	1,111	2015	7/31/30	9,100	1,063	707	356	76	100.0	%
Kerrville, TX	08/28/15	1,236	2015	7/31/30	9,100	1,175	769	406	84	100.0	%
Floresville, TX	08/28/15	1,312	2015	7/31/30	9,100	1,250	815	435	89	100.0	%
Minot, ND	08/19/15	6,946	2012	1/31/34	55,440	6,701	4,703	1,998	419	100.0	%
Lebanon, MI	08/14/15	1,261	2015	7/31/30	9,050	1,217	821	396	85	100.0	%
Effingham County, IL	08/10/15	1,252	2015	6/30/30	9,002	1,200	821	379	85	100.0	%
Ponce, PR	08/03/15	9,345	2012	8/31/37	15,660	8,966	6,527	2,439	560	100.0	%
Tremont, IL	06/25/15	1,192	2015	5/31/30	9,026	1,134	792	342	82	100.0	%
Pleasanton, TX	06/24/15	1,377	2015	5/31/30	9,026	1,310	869	441	93	100.0	%
Peoria, IL	06/24/15	1,293	2015	5/31/30	9,002	1,230	858	372	87	100.0	%
Bridgeport, IL	06/24/15	1,241	2015	5/31/30	9,100	1,183	825	358	84	100.0	%
Warren, MN	06/24/15	1,090	2015	4/30/30	9,100	1,023	697	326	75	100.0	%
Canyon Lake, TX	06/18/15	1,443	2015	3/31/30	9,100	1,373	911	462	98	100.0	%
Wheeler, TX	06/18/15	1,127	2015	3/31/30	9,002	1,061	719	342	76	100.0	%
Aurora, MN	06/18/15	993	2015	3/31/30	9,100	945	631	314	68	100.0	%
Red Oak, IA	05/07/15	1,208	2014	10/31/29	9,026	1,135	778	357	84	100.0	%
Zapata, TX	05/07/15	1,204	2015	3/31/30	9,100	1,114	746	368	82	100.0	%
St. Francis, MN	03/26/15	1,180	2014	1/31/30	9,002	1,088	732	356	79	100.0	%
Yorktown, TX	03/25/15	1,301	2015	2/28/30	10,566	1,201	784	417	86	100.0	%
Battle Lake, MN	03/25/15	1,168	2014	2/28/30	9,100	1,072	719	353	78	100.0	%
Paynesville, MN	03/05/15	1,254	2015	11/30/26	9,100	1,173	803	370	89	100.0	%
Wheaton, MO	03/05/15	970	2015	11/30/29	9,100	901	653	248	69	100.0	%
Rotterdam, NY	03/03/15	12,619	1996	8/31/32	115,660	11,300	8,893	2,407	940	100.0	%
Hilliard, OH	03/02/15	6,384	2007	8/31/32	14,820	6,007	4,590	1,417	399	100.0	%
Niles, OH	03/02/15	5,200	2007	11/30/32	14,820	4,886	3,729	1,157	325	100.0	%
Youngstown, OH	02/20/15	5,400	2005	9/30/30	14,820	5,054	3,843	1,211	336	100.0	%
Kings Mountain, NC	01/29/15	24,167	1995	9/30/30	467,781	26,770	18,717	8,053	1,504	100.0	%
Iberia, MO	01/23/15	1,328	2015	12/31/29	10,542	1,234	898	336	94	100.0	%
Pine Island, MN	01/23/15	1,142	2014	4/30/27	9,100	1,051	772	279	81	100.0	%
Isle, MN	01/23/15	1,077	2014	1/31/30	9,100	990	726	264	77	100.0	%
Jacksonville, NC	01/22/15	8,632	2014	12/31/29	55,000	8,132	5,701	2,431	517	100.0	%
Evansville, IN	11/26/14	9,000	2014	12/31/35	71,680	8,388	6,451	1,937	540	100.0	%
Woodland Park, CO	11/14/14	3,969	2014	8/31/29	22,141	3,640	2,808	832	258	100.0	%
Bellport, NY	11/13/14	18,100	2014	8/16/34	87,788	16,813	12,868	3,945	1,119	100.0	%
Ankeny, IA	11/04/14	16,510	2013	10/30/34	94,872	15,395	11,737	3,658	991	100.0	%
Springfield, MO	11/04/14	11,675	2011	10/30/34	88,793	11,078	8,386	2,692	701	100.0	%
Cedar Rapids, IA	11/04/14	11,000	2012	10/30/34	79,389	10,038	7,820	2,218	660	100.0	%
Fairfield, IA	11/04/14	10,695	2011	10/30/34	69,280	9,879	7,607	2,272	642	100.0	%
Owatonna, MN	11/04/14	9,970	2010	10/30/34	70,825	9,290	7,146	2,144	598	100.0	%
Muscatine, IA	11/04/14	7,150	2013	10/30/34	78,218	8,212	5,124	3,088	429	100.0	%
Sheldon, IA	11/04/14	4,300	2011	10/30/34	35,385	4,054	3,082	972	258	100.0	%
Memphis, TN	10/24/14	5,310	1962	12/31/29	68,761	4,902	3,928	974	358	100.0	%
Bennett, CO	10/02/14	3,522	2014	8/31/29	21,930	3,210	2,493	717	229	100.0	%
Conyers, GA	08/28/14	32,530	2014	4/30/29	499,668	29,935	22,845	7,090	1,937	100.0	%

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Location	Acquisition date	Acquisition price/basis		Year built/reno.	Lease expiration (1)	Approx. square footage	Carrying value of asset		Mortgage loan outstanding (2)		Asset net of mortgage loan outstanding			Annual rental income (3)		Ownership Percentage (4)

O'Fallon, IL	08/08/14	8,000		1984	1/31/28	141,436	7,594		5,688		1,906			460		100.0	%
El Centro, CA	08/08/14	4,277		2014	6/30/29	19,168	3,952		2,985		967			278		100.0	%
Durant, OK	01/28/13	4,991		2007	2/28/33	14,550	4,445		3,230		1,215			323		100.0	%
Gallatin, TN	12/28/12	5,062		2007	6/30/82	14,820	4,568		3,302		1,266			329		100.0	%
Mt. Airy, NC	12/27/12	4,492		2007	6/30/82	14,820	4,139		2,932		1,207			292		100.0	%
Aiken, SC	12/21/12	5,926		2008	2/28/83	14,550	5,324		3,861		1,463			384		100.0	%
Johnson City, TN	12/21/12	5,262		2007	9/30/82	14,550	4,656		3,432		1,224			341		100.0	%
Palmview, TX	12/19/12	6,820		2012	8/31/87	14,820	6,124		4,577		1,547			437		100.0	%
Ooltewah, TN	12/18/12	5,703		2008	1/31/83	14,550	5,053		3,833		1,220			365		100.0	%
Abingdon, VA	12/18/12	4,688		2006	6/30/81	15,371	4,462		3,078		1,384			300		100.0	%
Wichita, KS	12/14/12	7,200		2012	10/15/62	73,322	6,152		4,796		1,356			536		100.0	%
North Dartmouth, MA	09/21/12	29,965		1989	7/31/57	103,680	24,433		19,022		5,411			2,169		100.0	%
Vineland, NJ	09/21/12	22,507		2003	7/31/57	115,368	18,644		13,955		4,689			1,629		100.0	%
Saratoga Springs, NY	09/21/12	20,222		1994	7/31/57	116,620	16,590		12,539		4,051			1,464		100.0	%
Waldorf, MD	09/21/12	18,803		1999	7/31/57	115,660	16,404		11,659		4,745			1,361		100.0	%
Mooresville, NC	09/21/12	17,644		2000	7/31/57	108,528	14,396		10,940		3,456			1,277		100.0	%
Sennett, NY	09/21/12	7,476		1996	7/31/57	68,160	6,036		4,745		1,291			616		100.0	%
DeLeon Springs, FL	08/13/12	1,242		2011	1/31/27	9,100	1,014		820		194			98		100.0	%
Orange City, FL	05/23/12	1,317		2011	3/31/27	9,026	1,074		797		277			103		100.0	%
Satsuma, FL	04/19/12	1,092		2011	11/30/26	9,026	856		717		139			86		100.0	%
Greenwood, AR	04/12/12	5,147		2009	7/31/84	13,650	4,504		3,420		1,084			332		100.0	%
Snellville, GA	04/04/12	8,000		2011	4/30/32	67,375	6,699		5,320		1,379			596		100.0	%
Columbia, SC	04/04/12	7,800		2001	4/30/32	71,744	6,701		5,175		1,526			581		100.0	%
Millbrook, AL	03/28/12	6,941		2008	1/31/83	14,820	5,999		4,611		1,388			448		100.0	%
Pittsfield, MA	02/17/12	14,700		2011	10/31/61	85,188	12,460		11,129		1,331			1,118		100.0	%
Spartanburg, SC	01/14/11	3,870		2007	8/31/82	14,820	3,454		2,689		765			291		100.0	%
Tupelo, MS	08/13/10	5,128		2007	11/30/92	14,691	4,290		3,090		1,200			400		100.0	%
Lilburn, GA	08/12/10	5,791		2007	4/30/82	14,752	4,823		3,474		1,349			443		100.0	%
Douglasville, GA	08/12/10	5,409		2008	10/31/83	13,434	4,645		3,264		1,381			417		100.0	%
Elkton, MD	07/27/10	4,872		2008	9/30/82	13,706	4,062		2,928		1,134			380		100.0	%
Lexington, SC	06/28/10	4,732		2009	9/30/83	14,820	4,040		2,901		1,139			362		100.0	%
Total Net Lease		592,790				4,151,296	542,856		385,113		157,743			39,786
Other
Peoria, IL	10/21/16	2,760		1926	7/31/30	252,940	2,821		—		2,821			1,593		100.0	%
Ewing, NJ	08/04/16	30,640		2009	7/31/30	110,765	30,435		21,847		8,588			1,921		100.0	%
Carmel, NY	10/14/15	6,706		1985	1/31/39	50,121	6,762		—		6,762			458		100.0	%
Wayne, NJ	06/24/15	9,700		1980	7/31/27	56,387	8,957		6,667		2,290			1,128		100.0	%
Grand Rapids, MI	06/18/15	9,731		1963	6/30/24	97,167	9,049		7,236		1,813			841		97.0	%	(5)
Grand Rapids, MI	06/18/15	6,300		1992	6/30/24	160,000	5,702		4,925		777			549		97.0	%	(5)
St. Paul, MN	09/22/14	62,540		1900	10/1/21	760,318	53,733		48,235		5,498			3,135		97.0	%	(5)(6)
Richmond, VA	08/14/14	19,850		1986	4/30/21	195,881	16,801		15,801		1,000			696		77.5	%	(5)
Richmond, VA	06/07/13	118,405		1984	4/30/21	994,040	92,126		87,724		4,402			2,726		77.5	%	(5)
Oakland County, MI	02/01/13	18,000		1989	12/31/21	240,900	9,980		11,669		(1,689		)	871		90.0	%	(5)
Total Other		284,632				2,918,519	236,366		204,104		32,262			13,918
Condominium
Miami, FL	11/21/13	80,000		2010		94,517	20,727		—		20,727			429		100.0	%	(7)
Las Vegas, NV	12/20/12	119,000		2006		45,060	14,404		—		14,404			387		98.8	%	(5)(8)
Total Condominium		199,000				139,577	35,131		—		35,131			816
Total		$	1,076,422			7,209,392	$	814,353	$	589,217	$	225,136		$	54,520


(1)	Lease expirations reflect the earliest date the lease is cancellable without penalty, although actual terms may be longer.


(2)	Non-recourse.

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(3)	Annual rental income represents twelve months of contractual rental income, excluding concessions, due under leases outstanding for the year ended December 31, 2017 . Operating lease income on the consolidated statements of income represents rental income earned and recorded on a straight line basis over the term of the lease.


(4)	Properties were consolidated as of acquisition date.


(5)	See Note 12 for further information regarding noncontrolling interests.


(6)	Includes real estate acquired for parking purposes on April 21, 2016 with an acquisition price of $0.2 million and a carrying value of $0.4 million as of March 31, 2017 .


(7)	We own a portfolio of residential condominium units, some of which are subject to residential leases. We intend to sell these units. The residential leases are generally short term in nature and are not included in the table above given our intention to sell the units.


(8)	We own, through a majority-owned joint venture with an operating partner, a portfolio of residential condominium units, some of which are subject to residential leases. The joint venture intends to sell these units. The residential leases are generally short term in nature and are not included in the table above given the joint venture’s intention to sell the units.

Other Investments

Institutional Bridge Loan Partnership. In 2011, we established Ladder Capital Realty Income Partnership I LP (“LCRIP I”), an institutional partnership, with a Canadian sovereign pension fund to invest in first mortgage bridge loans that meet predefined criteria. Our partner owned 90% of the limited partnership interest, and we owned the remaining 10% on a pari passu basis and acted as general partner. We retained discretion over which loans to present to LCRIP I, and our partner retained the discretion to accept or reject individual loans. As the general partner, we engaged our advisory entity to manage the assets of LCRIP I and earned management fees and incentive fees from LCRIP I. In addition, we were entitled to retain origination fees of up to 1% on loans that we sold to LCRIP I and on a case-by-case basis as approved by our partner, retain certain exit fees. During the quarter ended June 30, 2015, the last loan held by LCRIP I was repaid. The term of the partnership expired on April 15, 2016. At that time, LCRIP I made distributions to the partners in the aggregate amounts determined by the general partner in accordance with the Limited Partnership Agreement.

Unconsolidated Joint Venture. In connection with the origination of a loan in April 2012, we received a 25% equity kicker with the right to convert upon a capital event. On March 22, 2013, we refinanced the loan, and we converted our equity kicker interest into a 25% limited liability company membership interest in Grace Lake JV, LLC (“Grace Lake LLC”). As of March 31, 2017 , Grace Lake LLC owned an office building campus with a carrying value of $63.7 million , which is net of accumulated depreciation of $19.8 million , that is financed by $70.9 million of long-term debt. Debt of Grace Lake LLC is nonrecourse to the limited liability company members, except for customary nonrecourse carve-outs for certain actions and environmental liability. As of March 31, 2017 , the book value of our investment in Grace Lake LLC was $4.0 million .

Unconsolidated Joint Venture. On August 7, 2015 , the Company entered into a joint venture, 24 Second Avenue Holdings LLC (“24 Second Avenue”), with an operating partner to invest in a ground-up condominium construction and development project located at 24 Second Avenue, New York, NY. The Company contributed $31.1 million for a 73.8% interest, with the operating partner holding the remaining 26.2% interest. The Company is entitled to income allocations and distributions based upon its membership interest of 73.8% until the Company achieves a 1.70x profit multiple, after which, ultimately, income is allocated and distributed 50% to the Company and 50% to the operating partner. As of March 31, 2017 , the existing building has been demolished, and we are anticipating completion in 2018. Our operating partner entered into a construction loan with Ladder in the amount of $50.5 million to fund the project. As of March 31, 2017 , draws of $24.7 million have been taken against the construction loan. The Company has no remaining capital commitment to our operating partner. As of March 31, 2017 , the book value of our investment in 24 Second Avenue was $30.2 million .

FHLB Stock. Tuebor Captive Insurance Company LLC (“Tuebor”) is a member of the FHLB. Each member of the FHLB must purchase and hold FHLB stock as a condition of initial and continuing membership, in proportion to their borrowings from the FHLB and levels of certain assets. Members may need to purchase additional stock to comply with these capital requirements from time to time. FHLB stock is redeemable by Tuebor upon five years’ prior written notice, subject to certain restrictions and limitations. Under certain conditions, the FHLB may also, at its sole discretion, repurchase FHLB stock from its members. As of March 31, 2017 , the book value of our investment in FHLB Stock was $77.9 million .

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Our Financing Strategies

Our financing strategies are critical to the success and growth of our business. We manage our financing to complement our asset composition and to diversify our exposure across multiple capital markets and counterparties.

We fund our investments in commercial real estate loans and securities through multiple sources, including the $611.6 million of gross cash proceeds we raised in our initial equity private placement beginning in October 2008, the $257.4 million of gross cash proceeds we raised in our follow-on equity private placement in the third quarter of 2011, proceeds from the issuance of $325.0 million of 2017 Notes in 2012, the $238.5 million of net proceeds from the issuance of Class A common stock in 2014, proceeds from the issuance of $300.0 million of 2021 Notes in 2014, proceeds from the issuance of $500.0 million of 2022 Notes in 2017, current and future earnings and cash flow from operations, existing debt facilities, and other borrowing programs in which we participate.

We finance our portfolio of commercial real estate loans using committed term facilities provided by multiple financial institutions, with total commitments of $1.7 billion at March 31, 2017 , a $168.5 million Revolving Credit Facility and through our FHLB membership. As of March 31, 2017 , there was $685.0 million outstanding under the committed term facilities. We finance our securities portfolio, including CMBS and U.S. Agency Securities, through our FHLB membership, a $400.0 million committed term master repurchase agreement from a leading domestic financial institution and uncommitted master repurchase agreements with numerous counterparties. As of March 31, 2017 , we had total outstanding balances of $354.4 million under all securities master repurchase agreements. We finance our real estate investments with nonrecourse first mortgage loans. As of March 31, 2017 , we had outstanding balances of $589.2 million on these nonrecourse mortgage loans.

In addition to the amounts outstanding on our other facilities, we had $1.5 billion of borrowings from the FHLB outstanding at March 31, 2017 . As of March 31, 2017 , we also had a $168.5 million Revolving Credit Facility, with $168.0 million borrowings outstanding, and $1.1 billion of Notes issued and outstanding. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” and Note 7, Debt Obligations, Net in our consolidated financial statements included elsewhere in this Quarterly Report for more information about our financing arrangements.

We enter into interest rate and credit spread derivative contracts to mitigate our exposure to changes in interest rates and credit spreads. We generally seek to hedge the interest rate risk on the financing of assets that have a duration longer than five years, including newly-originated conduit first mortgage loans, securities in our CMBS portfolio if long enough in duration, and most of our U.S. Agency Securities portfolio. We monitor our asset profile and our hedge positions to manage our interest rate and credit spread exposures, and we seek to match fund our assets according to the liquidity characteristics and expected holding periods of our assets.

We generally seek to maintain a debt-to-equity ratio of approximately 3.0:1.0 or below. We expect this ratio to fluctuate during the course of a fiscal year due to the normal course of business in our conduit lending operations, in which we generally securitize our inventory of conduit loans at intervals, and also because of changes in our asset mix, due in part to such securitizations. As of March 31, 2017 , our debt-to-equity ratio was 3.0 :1.0. We believe that our predominantly senior secured assets and our moderate leverage provide financial flexibility to be able to capitalize on attractive market opportunities as they arise.

From time to time, we may add financing counterparties that we believe will complement our business, although the agreements governing our indebtedness may limit our ability and the ability of our present and future subsidiaries to incur additional indebtedness. Our amended and restated charter and by-laws do not impose any threshold limits on our ability to use leverage.

Factors Impacting Operating Results

There are a number of factors that influence our operating results in a meaningful way. The most significant factors include: (1) our competition; (2) market and economic conditions; (3) loan origination volume; (4) profitability of securitizations; (5) avoidance of credit losses; (6) availability of debt and equity funding and the costs of that funding; (7) the net interest margin on our investments; (8) effectiveness of our hedging and other risk management practices; (8) real estate transaction volumes; (9) occupancy rates; and (10) expense management.

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Results of Operations

Three months ended March 31, 2017 compared to the three months ended March 31, 2016

Investment overview

Investment activity in the three months ended March 31, 2017 focused on loan originations and securities activity. We originated and funded $529.7 million in principal value of commercial mortgage loans in the three months ended March 31, 2017 . We acquired $45.7 million of new securities, which was offset by $361.3 million of sales and $74.3 million of amortization in the portfolio, which partially contributed to a net decrease in our securities portfolio of $399.0 million . We also invested $3.9 million in real estate.

Investment activity in the three months ended March 31, 2016 focused on loan originations and securities investments. We originated and funded $119.1 million in principal value of commercial mortgage loans in the three months ended March 31, 2016 . We acquired $227.8 million of new securities, which was offset by $15.5 million of sales and $36.1 million of amortization in the portfolio, which partially contributed to a net increase in our securities portfolio of $191.7 million.

Operating overview

Net income (loss) attributable to Class A common shareholders totaled $13.5 million for the three months ended March 31, 2017 , compared to $(5.5) million for the three months ended March 31, 2016 . The most significant drivers of the $19.0 million increase are as follows:


•	an increase in total other income of $37.5 million , primarily as a result of a $48.9 million increase in net results from derivative transactions and an increase of $6.0 million in gain (loss) on securities, partially offset by a decrease of $8.8 million in sale of loans, net and a $5.4 million decrease in gain (loss) on extinguishment of debt;


•	a decrease in net interest income of $4.0 million , primarily as a result of lower average securities balances and higher interest expense as a result of higher outstanding financing obligations as well as the decrease in the average yield on the securities portfolio year-over-year;


•	an increase in total costs and expenses of $3.1 million compared to the prior year, primarily as a result of increase of $3.4 million in salaries and employee benefits related to an increase in equity based compensation expense related to vesting during the three months ended March 31, 2017 and higher real estate operating expenses related to our expanded real estate portfolio; and


•	a decrease in income tax expense (benefit) of $0.5 million compared to the prior year, primarily as a result of decrease d income in our TRSs and certain other one-time adjustments.

Core Earnings, a non-GAAP financial measure, totaled $31.6 million for the three months ended March 31, 2017 , compared to $38.2 million for the three months ended March 31, 2016 . The significant components of the $6.6 million decrease in Core Earnings are a decrease in net interest income of $4.0 million and a decrease in profits on sales of loans, net of $9.0 million , partially offset by an increase in profits on gain (loss) on securities of $5.9 million and an increase in net results from derivative transactions of $7.6 million . See “—Reconciliation of Non-GAAP Financial Measures” for our definition of Core Earnings and a reconciliation to income (loss) before taxes.

Net interest income

Interest income totaled $57.5 million for the three months ended March 31, 2017 , compared to $59.6 million for the three months ended March 31, 2016 . For the three months ended March 31, 2017 , securities investments averaged $1.8 billion and loan investments averaged $2.5 billion . For the three months ended March 31, 2016 , securities investments averaged $2.5 billion and loan investments averaged $2.2 billion . Securities investments decreased by $0.6 billion partially offset by a $0.4 billion increase in loan investments, resulting in lower interest income.

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Interest expense totaled $31.4 million for the three months ended March 31, 2017 , compared to $29.5 million for the three months ended March 31, 2016 . The $1.9 million increase in interest expense was primarily attributable to the increase in LIBOR rates throughout 2016 and 2017. As of March 31, 2017 , we had $1.6 billion of floating rate debt, or 36.5% of our total debt obligations, compared to $1.5 billion of floating rate debt, or 35.5% of our total debt obligations as of March 31, 2016 . The increase of $145.3 million of floating rate debt was primarily due to a $42.3 million increase in FHLB floating rate debt and a $168.0 million increase in our revolving credit facility, partially offset by a decrease in amounts due pursuant to repurchase agreements. The increase in percentage of floating rate debt is due both to an increase in floating rate debt as discussed above, as well as a $448.0 million decrease in FHLB fixed rate debt, partially offset by an increase in mortgage loan financing.

Net interest income after provision for loan losses totaled $26.1 million for the three months ended March 31, 2017 , compared to $29.9 million for the three months ended March 31, 2016 . The $3.8 million decrease in net interest income after provision for loan losses was primarily attributable to the decrease in net interest income, increase in interest expense discussed above and increase in debt obligations.

Cost of funds, a non-GAAP financial measure, totaled $35.1 million for the three months ended March 31, 2017 , compared to $37.0 million for the three months ended March 31, 2016 . The $1.9 million decrease in cost of funds was primarily attributable to a rise in interest rates period over period, offset by a reduction of average debt outstanding of $283.2 million .

We present cost of funds, which is a non-GAAP financial measure, as a supplemental measure of the Company’s cost of debt financing. We define cost of funds as interest expense as reported on our consolidated statements of income adjusted to include the net interest expense component resulting from our hedging activities, which is currently included in net results from derivative transactions on our consolidated statements of income. See “—Reconciliation of Non-GAAP Financial Measures” for our definition of cost of funds and a reconciliation to interest expense.

Interest spreads

As of March 31, 2017 , the weighted average yield on our mortgage loan receivables was 6.6% , compared to 7.0% as of March 31, 2016 as the weighted average yield on new loans originated was lower than the weighted average yield on loans that were securitized or paid off. As of March 31, 2017 , the weighted average interest rate on borrowings against our mortgage loan receivables was 2.4% , compared to 2.3% as of March 31, 2016 . The increase in the rate on borrowings against our mortgage loan receivables from March 31, 2016 to March 31, 2017 was primarily due to higher prevailing market borrowing rates. As of March 31, 2017 , we had outstanding borrowings secured by our mortgage loan receivables equal to 41.7% of the carrying value of our mortgage loan receivables, compared to 44.6% as of March 31, 2016 .

As of March 31, 2017 , the weighted average yield on our real estate securities was 2.9% , compared to 3.0% as of March 31, 2016 as the weighted average yield on securities purchased was lower than the weighted average yield on securities that were sold or paid off. As of March 31, 2017 , the weighted average interest rate on borrowings against our real estate securities was 1.4% , compared to 1.1% as of March 31, 2016 . The increase in the rate on borrowings against our real estate securities from March 31, 2016 to March 31, 2017 was primarily due to higher prevailing market borrowing rates. As of March 31, 2017 , we had outstanding borrowings secured by our real estate securities equal to 78.8% of the carrying value of our real estate securities, compared to 81.8% as of March 31, 2016 .

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, 2017 and 2016 , the weighted average interest rate on mortgage borrowings against our real estate was 4.9% . As of March 31, 2017 , we had outstanding borrowings secured by our real estate equal to 72.4% of the carrying value of our real estate, compared to 67.7% as of March 31, 2016 .

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Provision for loan losses

We had no provision for loan loss expense for the three months ended March 31, 2017 compared to $0.2 million for the three months ended March 31, 2016 . We originate and invest primarily in loans with high credit quality, and we sell our conduit loans in the ordinary course of business. We estimate our loan loss provision based on our historical loss experience and our expectation of losses inherent in the investment portfolio but not yet realized. To ensure that the risk exposures are properly measured and the appropriate reserves are taken, the Company assesses a loan loss provision balance that will grow over time with its portfolio and the related risk as the assets approach maturity and ultimate refinancing where applicable. As a result, we determined that no provision expense for loan losses was required for the three months ended March 31, 2017 . As of March 31, 2017 , two of the Company’s loans, which were originated simultaneously as part of a single transaction, with a carrying value of $26.9 million were in default. The Company determined that no impairment was necessary due to the property’s liquidation value and continues to accrue interest on these loans.

Operating lease income and tenant recoveries

Operating lease income totaled $19.6 million for the three months ended March 31, 2017 , compared to $19.3 million for the three months ended March 31, 2016 . The increase of $0.3 million was attributable to acquisitions, which increased real estate to $814.4 million at March 31, 2017 versus $809.2 million at March 31, 2016 , as well as a full period of operations of properties acquired in 2016 .

Tenant recoveries totaled $1.6 million for the three months ended March 31, 2017 , compared to $1.3 million for the three months ended March 31, 2016 . The increase of $0.3 million reflects the acquisitions of office real estate in 2016 . It also reflects additional recoveries on properties acquired in 2017 and a full period of recoveries on properties acquired in 2016 .

Sales of loans, net

Income from sales of loans, net, which includes all loan sales, whether by securitization, whole loan sales or other means, totaled $(1.0) million for the three months ended March 31, 2017 , compared to $7.8 million for the three months ended March 31, 2016 , a decrease of $8.8 million . Income from sales of loans, net also includes unrealized losses on loans recorded as other than temporary impairments related to lower of cost or market adjustments. In the three months ended March 31, 2017 , we participated in no securitization transactions and recorded $1.0 million of unrealized losses on loans recorded as other than temporary impairments related to lower of cost or market adjustments. In the three months ended March 31, 2016 , we participated in two securitization transactions, selling 26 loans with an aggregate outstanding principal balance of $249.2 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. The decrease in income from sales of securitized loans, net of hedging was due to no securitization activity for the three months ended March 31, 2017 .

Income from sale of loans, net, represents gross proceeds received from the sale of loans, less the book value of those loans at the time they were sold, less any costs, such as legal and closing costs, associated with the sale. Income from sales of securitized loans, net, a non-GAAP financial measure, represents the portion of income from sales of loans, net related to the sale of loans into securitization trusts. See “—Reconciliation of Non-GAAP Financial Measures” for our definition of income from sale of securitized loans, net of hedging and a reconciliation to income from sale of loans, net.

Realized gain (loss) on securities

Realized gain (loss) on securities totaled $5.4 million for the three months ended March 31, 2017 , compared to $(0.6) million for the three months ended March 31, 2016 , an increase of $6.0 million . For the three months ended March 31, 2017 , we sold $361.3 million of CMBS securities. For the three months ended March 31, 2016 , we sold $15.5 million of securities, comprised of $15.0 million of CMBS and $0.5 million of U.S. Agency Securities. The increase reflects higher transaction volume in 2017 as compared to 2016 .

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Unrealized gain (loss) on Agency interest-only securities

Unrealized gain (loss) on Agency interest-only securities represented a gain of $0.2 million for the three months ended March 31, 2017 , compared to a gain of $0.7 million for the three months ended March 31, 2016 . The negative change of $0.5 million in unrealized gain (loss) on Agency interest-only securities was due to amortization of the portfolio.

Income from sales of real estate, net

For the three months ended March 31, 2017 , income from sales of real estate, net totaled $2.3 million compared to $6.1 million for the three months ended March 31, 2016 . The decrease of $3.8 million was a result of the commercial real estate and residential condominium sales discussed below.

During the three months ended March 31, 2017 , we sold no single-tenant net leased properties. During the three months ended March 31, 2016 , we sold one single-tenant retail property resulting in a net gain on sale of $0.7 million .

During the three months ended March 31, 2017 , income from sales of residential condominiums totaled $2.3 million . We sold 12 residential condominium units from Veer Towers in Las Vegas, NV, resulting in a net gain on sale of $1.9 million , and six residential condominium units from Terrazas River Park Village in Miami, FL, resulting in a net gain on sale of $0.4 million . During the three months ended March 31, 2016 , income from sales of residential condominiums totaled $5.4 million . We sold 17 residential condominium units from Veer Towers in Las Vegas, NV, resulting in a net gain on sale of $4.0 million , and 21 residential condominium units from Terrazas River Park Village in Miami, FL, resulting in a net gain on sale of $1.4 million .

Fee and other income

Fee and other income totaled $4.5 million for the three months ended March 31, 2017 , compared to $3.0 million for the three months ended March 31, 2016 . We generate fee and other income from origination fees, exit fees and other fees on the loans we originate and in which we invest, HOA fees, unrealized gains (losses) on our investment in mutual fund and dividend income on our investment in FHLB stock. The $1.5 million increase in fee and other income year-over-year was primarily due to an increase in exit fees, HOA fee income and dividend income on our investment in FHLB stock, partially offset by a decrease in management fees due to the termination of our institutional partnership and our managed account and lower origination fees due to lower origination volume in 2016.

Net result from derivative transactions

Net result from derivative transactions represented a loss of $2.0 million for the three months ended March 31, 2017 , which was comprised of an unrealized loss of $5.7 million and a realized gain of $3.7 million , compared to a loss of $50.9 million which was comprised of an unrealized loss of $9.6 million and a realized loss of $41.2 million , for the three months ended March 31, 2016 , a positive change of $48.9 million . The derivative positions that generated these results were a combination of interest rate swaps, caps, and futures that we employed in an effort to hedge the interest rate risk on the financing of our fixed rate assets and the net interest income we earn against the impact of changes in interest rates. The loss in 2017 was primarily related to the movement in interest rates during the three months ended March 31, 2017 . The total net result from derivative transactions is composed 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. The hedge positions were related to fixed rate conduit loans and securities investments.

Earnings (loss) from investment in unconsolidated joint ventures

Total earnings (loss) from investment in unconsolidated joint ventures totaled $(0.1) million for the three months ended March 31, 2017 , compared to $0.8 million for the three months ended March 31, 2016 . There were $0.9 million in earnings from our investment in LCRIP I for the three months ended March 31, 2016 , which reflects recognition of final incentive fee earned from our investment. The term of LCRIP I expired on April 15, 2016. At that time, LCRIP I made distributions to the partners in the aggregate amounts determined by the general partner in accordance with the Limited Partnership Agreement. Earnings from our investment in Grace Lake JV totaled $0.2 million for the three months ended March 31, 2017 and 2016 . Earnings (loss) from our investment in 24 Second Avenue totaled $(0.3) million for the three months ended March 31, 2017 and 2016 . The loss is due to a negative return related to upfront development costs on the investment.

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Gain (loss) on extinguishment of debt

Gain (loss) on extinguishment of debt totaled $0.1 million for the three months ended March 31, 2017 , compared to $5.4 million for the three months ended March 31, 2016 . During the three months ended March 31, 2017, the Company retired $6.1 million of principal of the 2017 Notes for a repurchase price of $6.2 million , recognizing a $0.1 million net loss on extinguishment of debt after recognizing $22,847 of unamortized debt issuance costs associated with the retired debt. During the three months ended March 31, 2016, the Company retired $21.9 million of principal of the 2017 Notes for a repurchase price of $21.4 million, recognizing a $0.3 million net gain on extinguishment of debt after recognizing $(0.2) million of unamortized debt issuance costs associated with the retired debt, and the Company retired $33.8 million of principal of the 2021 Notes for a repurchase price of $28.2 million, recognizing a $5.1 million net gain on extinguishment of debt after recognizing $(0.4) million of unamortized debt issuance costs associated with the retired debt.

Salaries and employee benefits

Salaries and employee benefits totaled $16.0 million for the three months ended March 31, 2017 , compared to $12.6 million for the three months ended March 31, 2016 . Salaries and employee benefits are comprised primarily of salaries, bonuses, originator bonuses related to loan profitability, equity based compensation and other employee benefits. The increase of $3.4 million in compensation expense was attributable to an increase in equity based compensation expense related to vesting during the three months ended March 31, 2017 .

Operating expenses

Operating expenses totaled $5.5 million for the three months ended March 31, 2017 , compared to $6.3 million for the three months ended March 31, 2016 . Operating expenses are primarily comprised of professional fees, lease expense, and technology expenses. The decrease of $0.8 million represents cost cutting initiatives in 2016 and 2017.

Real estate operating expenses

Real estate operating expenses totaled $7.5 million for the three months ended March 31, 2017 , compared to $5.7 million for the three months ended March 31, 2016 . The increase of $1.8 million in real estate operating expenses was in part due to the acquisitions of office real estate in 2016 , an increase in HOA fees on our portfolio of condominiums and an increase in real estate taxes.

Fee expense

Fee expense totaled $0.7 million for the three months ended March 31, 2017 and 2016 . Fee expense is comprised primarily of custodian fees, financing costs and servicing fees related to loans.

Depreciation and amortization

Depreciation and amortization totaled $8.6 million for the three months ended March 31, 2017 , compared to $9.8 million for the three months ended March 31, 2016 . The $1.2 million decrease in depreciation and amortization is primarily attributable to an out-of-period-adjustment recorded in the first quarter of 2017 reducing depreciation expense by $0.8 million, related to prior periods and certain intangible assets approaching the end of their useful lives in 2017 .

Income tax (benefit) expense

Most of our consolidated income tax provision related to the business units held in our TRSs. Income tax (benefit) expense totaled $(1.4) million for the three months ended March 31, 2017 , compared to $(0.9) million for the three months ended March 31, 2016 . The decrease of $0.5 million is primarily attributable to the decrease d income in our TRSs.

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Liquidity and Capital Resources

We require substantial amounts of capital to support our business. The management team, in consultation with our board of directors, establishes our overall liquidity and capital allocation strategies. A key objective of those strategies is to support the execution of our business strategy while maintaining sufficient ongoing liquidity throughout the business cycle to service our financial obligations as they become due. When making funding and capital allocation decisions, members of our senior management consider business performance; the availability of, and costs and benefits associated with, different funding sources; current and expected capital markets and general economic conditions; our balance sheet and capital structure; and our targeted liquidity profile and risks relating to our funding needs.

To ensure that Ladder Capital can effectively address the funding needs of the Company on a timely basis, we maintain a diverse array of liquidity sources including (1) cash and cash equivalents; (2) cash generated from operations; (3) borrowings under repurchase agreements; (4) principal repayments on investments including mortgage loans and securities; (5) borrowings under our credit agreement; (6) borrowings under our revolving credit facility; (7) proceeds from securitizations and sales of loans; (8) proceeds from the sale of securities; (9) proceeds from the sale of real estate; (10) proceeds from the issuance of the Notes; and (11) proceeds from the issuance of equity capital. We use these funding sources to meet our obligations on a timely basis.

Our primary uses of liquidity are for (1) the funding of loan and real estate-related investments; (2) the repayment of short-term and long-term borrowings and related interest; (3) the funding of our operating expenses; and (4) distributions to our equity investors to comply with the REIT distribution requirements and the terms of LCFH’s LLLP Agreement. We require short-term liquidity to fund loans that we originate and hold on our consolidated balance sheet pending sale, including through whole loan sale, participation, or securitization. We generally require longer-term funding to finance the loans and real estate-related investments that we hold for investment. We have historically used the aforementioned funding sources to meet the operating and investment needs as they have arisen and have been able to do so by applying a rigorous approach to long and short-term cash and debt forecasting.

In addition, as a REIT, we are also required to make sufficient dividend payments to our shareholders (and equivalent distributions to the Continuing LCFH Limited Partners) in amounts at least sufficient to maintain out REIT status. We have obtained the Private Letter Ruling, pursuant to which we may elect to pay a portion of our dividends in stock, subject to a cash/stock election by our shareholders, to optimize our level of capital retention. Accordingly, our cash requirement to pay dividends to maintain REIT status could be substantially reduced at the discretion of the board.

A summary of our financial obligations is provided below in our Contractual Obligations table. Except for the maturity of the 2017 Notes due October, 1, 2017, all our existing financial obligations, due within the following year, are either extendable for one or more additional years at our discretion or are incurred in the normal course of business (i.e., interest payments/loan funding obligations). On April 3, 2017 , the Company repaid the remaining $291.5 million in aggregate principal amount of the 2017 Notes (including accrued and unpaid interest as of that date).

We generally seek to maintain a debt-to-equity ratio of approximately 3.0:1.0 or below. This ratio typically fluctuates during the course of a fiscal year due to the normal course of business in our conduit lending operations, in which we generally securitize our inventory of loans at intervals, and also because of changes in our asset mix, due in part to such securitizations. We generally seek to match fund our assets according to their liquidity characteristics and expected hold period. We believe that the defensive positioning of our predominantly senior secured assets and our financing strategy has allowed us to maintain financial flexibility to capitalize on an attractive range of market opportunities as they have arisen.

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We and our subsidiaries may incur substantial additional debt in the future. However, we are subject to certain restrictions on our ability to incur additional debt in the indentures governing the Notes (the “Indentures”) and our other debt agreements. Under the Indentures, we may not incur certain types of indebtedness unless our consolidated debt to equity ratio (as defined in the Indentures) is less than or equal to 4.00 to 1.00 and our consolidated non-funding debt to equity ratio (as defined in the Indentures) is less than or equal to 1.75 to 1.00 or if the unencumbered assets of the Company and its subsidiaries is less than 120% of their unsecured indebtedness, although our subsidiaries are permitted to incur indebtedness where recourse is limited to the assets and/or the general credit of such subsidiary. Our borrowings under certain financing agreements and our committed loan facilities are subject to maximum consolidated leverage ratio limits (currently ranging from 3.50 to 1.00 to 4.00 to 1.00), including maximum consolidated leverage ratio limits weighted by asset composition that change based on our asset base at the time of determination, and, in the case of one provider, a minimum interest coverage ratio requirement of 1.50 to 1.00 if certain liquidity thresholds are not satisfied. These restrictions, which would permit us to incur substantial additional debt, are subject to significant qualifications and exceptions.

Our principal debt financing sources include: (1) committed secured funding provided by banks, (2) uncommitted secured funding sources, including asset repurchase agreements with a number of banks, (3) long term nonrecourse mortgage financing, (4) long term senior unsecured notes in the form of corporate bonds and (5) borrowings on both a short- and long-term committed basis, made by Tuebor from the FHLB.

As of March 31, 2017 , we had unrestricted cash and cash equivalents of $62.6 million , unencumbered loans of $897.2 million , unencumbered securities of $48.8 million , unencumbered real estate of $63.1 million and $491.6 million of other assets not secured by any portion of secured indebtedness.

To maintain our qualification as a REIT under the Code, we were required to distribute our accumulated earnings and profits attributable to taxable periods ending prior to January 1, 2015 and we must annually distribute at least 90% of our taxable income. Consistent with the terms of the Private Letter Ruling, we paid our fourth quarter 2016 and 2015 dividends in a combination of cash and stock and may pay future distributions in such a manner; however, the REIT distribution requirements limit our ability to retain earnings and thereby replenish or increase capital for operations. We believe that our significant capital resources and access to financing will provide us with financial flexibility at levels sufficient to meet current and anticipated capital requirements, including funding new investment opportunities, paying distributions to our shareholders and servicing our debt obligations.

Our captive insurance company subsidiary, Tuebor, is subject to state regulations which require that dividends may only be made with regulatory approval. Largely as a result of this restriction, $324.3 million of Tuebor’s member’s capital was restricted from transfer to Tuebor’s parent without prior approval of state insurance regulators at March 31, 2017 .

The Company established a broker-dealer subsidiary, LCS, which was initially licensed and capitalized to do business in July 2010. LCS is required to be compliant with FINRA and SEC regulations, which require that dividends may only be made with regulatory approval. Largely as a result of this restriction, $1.9 million of LCS’s member’s capital was restricted from transfer to LCS’s parent without prior approval of regulators at March 31, 2017 .

Cash, cash equivalents and restricted cash

We held unrestricted cash and cash equivalents of $62.6 million and $44.6 million at March 31, 2017 and December 31, 2016 , respectively. We held restricted cash of $54.4 million and $44.8 million at March 31, 2017 and December 31, 2016 , respectively. We elected to early adopt ASU 2016-18 effective January 1, 2017. ASU 2016-18 requires the inclusion of restricted cash with cash and cash equivalents when reconciling the beginning-of-the-period and end-of-period total amounts show on the statement of cash flows. We held cash, cash equivalents and restricted cash of $117.0 million and $89.4 million at March 31, 2017 and December 31, 2016 , respectively.

Cash generated from (used in) operations

Our operating activities were a net provider (user) of cash of $(225.3) million and $182.2 million during the three months ended March 31, 2017 and 2016 , respectively. Cash from operations includes the origination of loans held for sale, net of the proceeds from sale of loans and gains from sales of loans, which was the predominant driver of the $407.5 million decrease in cash generated from operations for the three months ended March 31, 2017 , compared to the three months ended March 31, 2016 .

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Borrowings under various financing arrangements

Our financing strategies are critical to the success and growth of our business. We manage our leverage policies to complement our asset composition and to diversify our exposure across multiple counterparties. Our borrowings under various financing arrangements as of March 31, 2017 and December 31, 2016 are set forth in the table below ($ in thousands):



	March 31, 2017			December 31, 2016

Committed loan repurchase facilities	$	684,994		$	567,163
Committed securities repurchase facility	115,000			228,317
Uncommitted securities repurchase facilities	239,361			311,705
Total repurchase facilities	1,039,355			1,107,185
Revolving credit facility	168,000			25,000
Mortgage loan financing	589,217			590,106
Mortgage loan receivable financing	57,038			—
Borrowings from the FHLB	1,475,500			1,660,000
Senior unsecured notes	1,048,576		(1)	559,847
Total debt obligations	$	4,377,686		$	3,942,138

(1)

Presented net of unamortized debt issuance costs of $9.2 million at March 31, 2017 . Pursuant to their terms, the Company had called for prepayment of the 2017 Notes at par (plus any accrued and unpaid interest to the redemption date) with an outstanding principal balance of $291.5 million . The Company remitted the payment amount to the Trustee on March 31, 2017 and the 2017 Notes were repaid on April 3, 2017. The amount held by the Trustee was reflected in other assets on the Company’s consolidated balance sheets as of March 31, 2017 .

The Company’s repurchase facilities include covenants covering minimum net worth requirements (ranging from $300.0 million to $899.4 million ), maximum reductions in net worth over stated time periods, minimum liquidity levels (typically $30.0 million of cash or a higher standard that often allows for the inclusion of different percentages of liquid securities in the determination of compliance with the requirement), maximum leverage ratios (calculated in various ways based on specified definitions of indebtedness and net worth) and a fixed charge coverage ratio of 1.25x, and, in the instance of one lender, an interest coverage ratio of 1.50x, in each case, if certain liquidity thresholds are not satisfied. We believe we were in compliance with all covenants as of March 31, 2017 and December 31, 2016 . Further, certain of our financing arrangements and loans on our real property are secured by the assets of the Company, including pledges of the equity of certain subsidiaries or the assets of certain subsidiaries. From time to time, certain of these financing arrangements and loans may prohibit certain of our subsidiaries from paying dividends to the Company, from making distributions on such subsidiary’s capital stock, from repaying to the Company any loans or advances to such subsidiary from the Company or from transferring any of such subsidiary’s property or other assets to the Company or other subsidiaries of the Company.

Committed loan facilities

We are parties to multiple committed loan repurchase agreement facilities, totaling $1.7 billion of credit capacity. As of March 31, 2017 , the Company had $685.0 million of borrowings outstanding, with an additional $1.0 billion of committed financing available. As of December 31, 2016 , the Company had $567.2 million of borrowings outstanding, with an additional $1.1 billion of committed financing available. Assets pledged as collateral under these facilities are generally limited to whole mortgage loans collateralized by first liens on commercial real estate. Our repurchase facilities include covenants covering net worth requirements, minimum liquidity levels, and maximum debt/equity ratios. We believe we were in compliance with all covenants as of March 31, 2017 and December 31, 2016 .

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We have the option to extend some of our existing facilities subject to a number of customary conditions. The lenders have sole discretion with respect to the inclusion of collateral in these facilities, to determine the market value of the collateral on a daily basis, and, if the estimated market value of the included collateral declines, the lenders have the right to require additional collateral or a full and/or partial repayment of the facilities (margin call), sufficient to rebalance the facilities. Typically, the facilities are established with stated guidelines regarding the maximum percentage of the collateral asset’s market value that can be borrowed. We often borrow at a lower percentage of the collateral asset’s value than the maximum leaving us with excess borrowing capacity that can be drawn upon at a later date and/or applied against future margin calls so that they can be satisfied on a cashless basis.

Committed securities facility

We are a party to a term master repurchase agreement with a major U.S. banking institution for CMBS, totaling $400.0 million of credit capacity. As we do in the case of borrowings under committed loan facilities, we often borrow at a lower percentage of the collateral asset’s value than the maximum leaving us with excess borrowing capacity that can be drawn upon a later date and/or applied against future margin calls so that they can be satisfied on a cashless basis. As of March 31, 2017 , the Company had $115.0 million of borrowings outstanding, with an additional $285.0 million of committed financing available. As of December 31, 2016 , the Company had $228.3 million of borrowings outstanding, with an additional $171.7 million of committed financing available.

Uncommitted securities facilities

We are party to multiple master repurchase agreements with several counterparties to finance our investments in CMBS and U.S. Agency Securities. The securities that served as collateral for these borrowings are highly liquid and marketable assets that are typically of relatively short duration. As we do in the case of other secured borrowings, we often borrow at a lower percentage of the collateral asset’s value than the maximum leaving us with excess borrowing capacity that can be drawn upon a later date and/or applied against future margin calls so that they can be satisfied on a cashless basis.

Collateralized borrowings under repurchase agreement

The following table presents the amount of collateralized borrowings outstanding as of the end of each quarter, the average amount of collateralized borrowings outstanding during the quarter and the monthly maximum amount of collateralized borrowings outstanding during the quarter ($ in thousands):



	Total						Collateralized Borrowings Under Repurchase Agreements (1)						Other Collateralized Borrowings (2)
Quarter Ended	Quarter-end balance		Average quarterly balance		Maximum balance of any month-end		Quarter-end balance		Average quarterly balance		Maximum balance of any month-end		Quarter-end balance		Average quarterly balance		Maximum balance of any month-end

March 31, 2014	$	370,970	$	549,085	$	782,147	$	370,970	$	549,085	$	782,147	$	—	$	—	$	—
June 30, 2014	685,693		1,056,118		1,258,258		685,693		1,056,118		1,258,258		—		—		—
September 30, 2014	761,627		836,330		895,904		761,627		831,330		880,904		—		5,000		15,000
December 31, 2014	1,489,416		1,394,674		1,603,206		1,431,666		1,340,924		1,545,456		57,750		53,750		57,750
March 31, 2015	1,456,163		1,481,913		1,506,723		1,409,413		1,427,496		1,447,973		46,750		54,417		58,750
June 30, 2015	1,178,130		1,308,066		1,492,066		1,056,380		1,216,316		1,370,316		121,750		91,750		121,750
September 30, 2015	1,241,326		1,420,356		1,653,179		1,191,326		1,347,523		1,556,429		50,000		72,833		96,750
December 31, 2015	1,260,755		1,296,608		1,344,330		1,260,755		1,283,008		1,323,930		—		13,600		20,400
March 31, 2016	1,104,339		1,162,008		1,240,778		1,104,339		1,162,008		1,240,778		—		—		—
June 30, 2016	1,139,615		1,108,263		1,139,615		1,139,615		1,108,263		1,139,615		—		—		—
September 30, 2016	1,458,327		1,393,122		1,468,013		1,458,327		1,393,122		1,468,013		—		—		—
December 31, 2016	1,107,185		1,397,061		1,555,941		1,107,185		1,397,061		1,555,941		—		—		—
March 31, 2017	1,039,356		1,073,893		1,119,863		1,039,356		1,073,893		1,119,863		—		—		—


(1)	Collateralized borrowings under repurchase agreements include all securities and loan financing under repurchase agreements.

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(2)	Other collateralized borrowings include borrowings under credit agreement and borrowings under credit and security agreement.

As of March 31, 2017 , we had repurchase agreements with nine counterparties, with total debt obligations outstanding of $1.0 billion . As of March 31, 2017 , three counterparties, Deutsche Bank, J.P. Morgan and Wells Fargo , held collateral that exceeded the amounts borrowed under the related repurchase agreements by more than $74.1 million , or 5% of our total equity. As of March 31, 2017 , the weighted average haircut, or the percent of collateral value in excess of the loan amount, under our repurchase agreements was 36.1% . There have been no significant fluctuations in haircuts across asset classes on our repurchase facilities.

Revolving Credit Facility

On February 11, 2014, we entered into a revolving credit facility (the “Revolving Credit Facility”), which was subsequently amended on February 26, 2016, March 1, 2017 and March 23, 2017, including to add additional banks to our syndicate, add two additional one-year extension options and increase its maximum funding capacity. The Revolving Credit Facility provides for an aggregate maximum borrowing amount of $168.5 million , including a $25.0 million sublimit for the issuance of letters of credit. As of March 31, 2017 , the Company had $168.0 million borrowings outstanding under this facility. As of December 31, 2016 , the Company had $25.0 million borrowings outstanding under this facility. The Revolving Credit Facility is available on a revolving basis to finance the Company’s working capital needs and for general corporate purposes. The Revolving Credit Facility has a three -year maturity, which may be extended by four 12 -month periods subject to the satisfaction of customary conditions, including the absence of default. Interest is incurred on the Revolving Credit Facility at a rate of one-month LIBOR plus 3.50% per annum payable monthly in arrears.

LCFH is subject to customary affirmative covenants and negative covenants, including limitations on the incurrence of additional debt, liens, restricted payments, sales of assets and affiliate transactions under the Revolving Credit Facility. In addition, under the Revolving Credit Facility, LCFH is required to comply with financial covenants relating to minimum net worth, maximum leverage, minimum liquidity, and minimum fixed charge coverage, consistent with our other credit facilities. Our ability to borrow under the Revolving Credit Facility will be dependent on, among other things, LCFH’s compliance with the financial covenants. The Revolving Credit Facility contains customary events of default, including non-payment of principal or interest, fees or other amounts, failure to perform or observe covenants, cross-default to other indebtedness, the rendering of judgments against the Company or certain of our subsidiaries to pay certain amounts of money and certain events of bankruptcy or insolvency.

Mortgage loan financing

We generally finance our real estate using long-term nonrecourse mortgage financing. During the three months ended March 31, 2017 , we executed no term debt agreements to finance real estate. These nonrecourse debt agreements are fixed rate financing at rates ranging from 4.25% to 6.75% , maturing between 2018 - 2026 and totaling $589.2 million at March 31, 2017 and $590.1 million at December 31, 2016 . These long-term nonrecourse mortgages include net unamortized premiums of $5.3 million and $5.6 million at March 31, 2017 and December 31, 2016 , respectively, 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 and $0.2 million of premium amortization, which decreased interest expense, for the three months ended March 31, 2017 and 2016 , respectively. The loans are collateralized by real estate and related lease intangibles, net, of $749.7 million and $757.5 million as of March 31, 2017 and December 31, 2016 , respectively.

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Mortgage Loan Receivable Financing (Nonrecourse)

During the three months ended March 31, 2017 , the transfers of financial assets via sales of loans were treated as sales in accordance with ASC Topic 860 — Transfers and Servicing, with the exception of two assets with a combined book value of $56.1 million in which the Company retains effective control that would preclude sales accounting. The transfers are considered nonrecourse secured borrowings in which the assets remain on the Company’s consolidated balance sheets in mortgage loan receivables held for investment, net, at amortized cost and the sale proceeds of $57.0 million are recognized in debt obligations. During the three months ended March 31, 2016 , the transfers of financial assets via sales of loans were treated as sales under ASC Topic 860 — Transfers and Servicing.

FHLB financing

On July 11, 2012, Tuebor became a member of the FHLB. As of March 31, 2017 , Tuebor had $1.5 billion of borrowings outstanding (with an additional $524.5 million of committed term financing available from the FHLB), with terms of overnight to 7 years , interest rates of 0.57% to 2.74% , and advance rates of 57.8% to 95.2% of the collateral. As of March 31, 2017 , collateral for the borrowings was comprised of $1.2 billion of CMBS and U.S. Agency Securities and $761.0 million of first mortgage commercial real estate loans. The weighted-average borrowings outstanding were $1.6 billion for the three months ended March 31, 2017 . On March 21, 2016, Tuebor’s advance limit was updated to the lowest of $2.0 billion , 40% of Tuebor’s total assets or 150% of Ladder Capital Corp’s total equity. As of December 31, 2016 , Tuebor had $1.7 billion of borrowings outstanding (with an additional $338.9 million of committed term financing available from the FHLB), with terms of overnight to 7 years , interest rates of 0.43% to 2.74% , and advance rates of 49.6% to 95.2% of the collateral. As of December 31, 2016 , collateral for the borrowings was comprised of $1.4 billion of CMBS and U.S. Agency Securities and $724.0 million of first mortgage commercial real estate loans. The weighted-average borrowings outstanding were $1.8 billion for the three months ended December 31, 2016 .

Effective February 19, 2016, the FHFA, regulator of the FHLB, adopted a final rule amending its regulation regarding the eligibility of captive insurance companies for FHLB membership.

Pursuant to the final rule, Tuebor may remain a member of the FHLB through February 19, 2021 (the “Transition Period”). During the Transition Period, Tuebor is eligible to continue to draw new additional advances, extend the maturities of existing advances, and pay off outstanding advances on the same terms as non-captive insurance company FHLB members with the following two exceptions:


1.	New advances (including any existing advances that are extended during the Transition Period) will have maturity dates on or before February 19, 2021; and


2.	The FHLB will make new advances to Tuebor subject to a requirement that Tuebor’s total outstanding advances do not exceed 40% of Tuebor’s total assets. As of March 31, 2017 , the Company is in compliance with this requirement.

Tuebor has executed new advances since the effective date of the new rule in the ordinary course of business.

FHLB advances amounted to 33.7% of the Company’s outstanding debt obligations as of March 31, 2017 . The Company does not anticipate that the FHFA’s final regulation will materially impact its operations as it will continue to access FHLB advances during the five-year Transition Period and it has multiple, diverse funding sources for financing its portfolio in the future. In the latter stages of the five-year Transition Period, the Company expects to adjust its financing activities by gradually making greater use of alternative sources of funding of types currently used by the Company including secured and unsecured borrowings from banks and other counterparties, the issuance of corporate bonds and equity, and the securitization or sale of assets. Future moves to alternative funding sources could result in higher or lower advance rates from secured funding sources but also the incurrence of higher funding and operating costs than would have been incurred had FHLB funding continued to be available. In addition, the Company may find it more difficult to obtain committed secured funding for multiple year terms as it has been able to obtain from the FHLB.

The Transition Period allows time for events to occur that may impact Tuebor’s long-term membership in the FHLB, including further regulatory changes, the enactment of legislation, or the filing of litigation challenging the validity of the final rule. During this period, a combination of these external events and/or Tuebor’s own actions could result in the emergence of feasible alternative approaches for it to retain its FHLB membership.

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Tuebor is subject to state regulations which require that dividends (including dividends to the Company as its parent) may only be made with regulatory approval. However, there can be no assurance that we would obtain such approval if sought. Largely as a result of this restriction, $324.3 million of the member’s capital was restricted from transfer to Tuebor’s parent without prior approval of state insurance regulators at March 31, 2017 .

Senior Unsecured Notes

LCFH issued the 2022 Notes, the 2021 Notes and the 2017 Notes (each as defined below, and collectively, the “Notes”) with Ladder Capital Finance Corporation (“LCFC”), as co-issuers on a joint and several basis. LCFC is a 100% owned finance subsidiary of Series TRS of LCFH with no assets, operations, revenues or cash flows other than those related to the issuance, administration and repayment of the Notes. The Company and certain subsidiaries of LCFH currently guarantee the obligations under the Notes and the indenture. The Company is the general partner of LCFH and, through LCFH and its subsidiaries, operates the Ladder Capital business. As of March 31, 2017 , the Company has a 71.4% economic and voting interest in LCFH and controls the management of LCFH as a result of its ability to appoint board members. Accordingly, the Company consolidates the financial results of LCFH and records noncontrolling interest for the economic interest in LCFH held by the Continuing LCFH Limited Partners. In addition, the Company, through certain subsidiaries which are treated as TRSs, is indirectly subject to U.S. federal, state and local income taxes. Other than the noncontrolling interest in the Operating Partnership and federal, state and local income taxes, there are no material differences between the Company’s consolidated financial statements and LCFH’s consolidated financial statements. Unamortized debt issuance costs of $9.2 million and $4.0 million are included in senior unsecured notes as of March 31, 2017 and December 31, 2016 , respectively, in accordance with GAAP.

2017 Notes

On September 19, 2012, LCFH issued $325.0 million in aggregate principal amount of 7.375% senior notes due October 1, 2017 (the “2017 Notes”). The 2017 Notes require interest payments semi-annually in cash in arrears on April 1 and October 1 of each year, beginning on September 19, 2012. The 2017 Notes were unsecured and subject to incurrence-based covenants, including limitations on the incurrence of additional debt, restricted payments, liens, sales of assets, affiliate transactions and other covenants typical for financings of this type. At any time on or after April 1, 2017, the 2017 Notes were redeemable at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days’ notice, without penalty. On November 5, 2014, the board of directors authorized the Company to make up to $325.0 million in repurchases of the 2017 Notes from time to time without further approval.

On December 17, 2014, the Company retired $5.4 million of principal of the 2017 Notes for a repurchase price of $5.6 million recognizing a $0.2 million loss on extinguishment of debt. During the year ended December 31, 2106, the Company retired $21.9 million of principal of the 2017 Notes for a repurchase price of $21.4 million , recognizing a $0.3 million net gain on extinguishment of debt after recognizing $(0.2) million of unamortized debt issuance costs associated with the retired debt. During the three months ended March 31, 2017, the Company retired $6.1 million of principal of the 2017 Notes for a repurchase price of $6.2 million , recognizing a $0.1 million net loss on extinguishment of debt after recognizing $22,847 of unamortized debt issuance costs associated with the retired debt. As of March 31, 2017 , the remaining $291.5 million in aggregate principal amount of the 2017 Notes was due October 2, 2017.

On March 1, 2017, the Company delivered a notice of conditional full redemption to holders of the 2017 Notes, pursuant to which the Company redeemed all outstanding 2017 Notes at 100% of the principal amount thereof (plus any accrued and unpaid interest to the redemption date) as of April 1, 2017. The redemption was conditioned on the completion by the Company of a senior notes offering with gross proceeds of not less than $500 million. The Company’s offering of the 2022 Notes, described below, satisfied this condition. On April 3, 2017 , the Company repaid the remaining $291.5 million in aggregate principal amount of the 2017 Notes (including accrued and unpaid interest as of that date).

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2021 Notes

On August 1, 2014, LCFH issued $300.0 million in aggregate principal amount of 5.875% senior notes due August 1, 2021 (the “2021 Notes”). The 2021 Notes require interest payments semi-annually in cash in arrears on February 1 and August 1 of each year, beginning on February 1, 2015. The 2021 Notes will mature on August 1, 2021. The 2021 Notes are unsecured and are subject to incurrence-based covenants, including limitations on the incurrence of additional debt, restricted payments, liens, sales of assets, affiliate transactions and other covenants typical for financings of this type. At any time on or after August 1, 2020, the 2021 Notes are redeemable at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days’ notice, without penalty. On February 24, 2016, the board of directors authorized the Company to make up to $100.0 million in repurchases of the 2021 Notes from time to time without further approval.

During the year ended December 31, 2016, the Company retired $33.8 million of principal of the 2021 Notes for a repurchase price of $28.2 million , recognizing a $5.1 million net gain on extinguishment of debt after recognizing $(0.4) million of unamortized debt issuance costs associated with the retired debt. As of March 31, 2017 , the remaining $266.2 million in aggregate principal amount of the 2021 Notes is due August 1, 2021.

2022 Notes

On March 16, 2017, LCFH issued $500.0 million in aggregate principal amount of 5.250% senior notes due March 15, 2022 (the “2022 Notes”). The 2022 Notes require interest payments semi-annually in cash in arrears on March 15 and September 15 of each year, beginning on September 15, 2017. The 2022 Notes will mature on March 15, 2022. The 2022 Notes are unsecured and are subject to an unencumbered assets to unsecured debt covenant. At any time on or after September 15, 2021, the 2022 Notes are redeemable at the option of the Company, in whole or in part, upon not less than 15 nor more than 60 days’ notice, without penalty.

Stock Repurchases

On October 30, 2014, the board of directors authorized the Company to make up to $50.0 million in repurchases of the Company’s Class A common stock from time to time without further approval. Stock repurchases by the Company are generally made for cash in open market transactions at prevailing market prices but may also be made in privately negotiated transactions or otherwise. The timing and amount of purchases are determined based upon prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. As of March 31, 2017 , the Company has a remaining amount available for repurchase of $44.4 million , which represents 3.9% in the aggregate of its outstanding Class A common stock, based on the closing price of $14.44 per share on such date.

The following table is a summary of the Company’s repurchase activity of its Class A common stock during the three months ended March 31, 2017 and 2016 ($ in thousands):



	Shares	Amount(1)

Authorizations remaining as of December 31, 2016		$	44,353
Additional authorizations		—
Repurchases paid	—	—
Repurchases unsettled		—
Authorizations remaining as of March 31, 2017		$	44,353

(1) Amount excludes commissions paid associated with share repurchases.

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	Shares	Amount(1)

Authorizations remaining as of December 31, 2015		$	49,006
Additional authorizations		—
Repurchases paid	424,317	(4,653		)
Repurchases unsettled		—
Authorizations remaining as of March 31, 2016		$	44,353

(1) Amount excludes commissions paid associated with share repurchases.

Dividends

To maintain our qualification as a REIT under the Code, we must annually distribute at least 90% of our taxable income and, for 2015, we had to distribute our undistributed accumulated earnings and profits attributable to taxable periods prior to January 1, 2015 (the “E&P Distribution”). The Company made the E&P Distribution on January 21, 2016 and has paid and in the future intend to declare regular quarterly distributions to our shareholders in an amount approximating our net taxable income.

Consistent with the Private Letter Ruling we may, subject to a cash/stock election by our shareholders, pay a portion of our dividends in stock, to provide for meaningful capital retention; however, the REIT distribution requirements limit our ability to retain earnings and thereby replenish or increase capital for operations. The timing and amount of future distributions is based on a number of factors, including, among other things, our future operations and earnings, capital requirements and surplus, general financial condition and contractual restrictions. All dividend declarations are subject to the approval of our board of directors. Generally, we expect the distributions to be taxable as ordinary dividends to our shareholders, whether paid in cash or a combination of cash and common stock, and not as a tax-free return of capital or a capital gain. We believe that our significant capital resources and access to financing will provide the financial flexibility at levels sufficient to meet current and anticipated capital requirements, including funding new investment opportunities, paying distributions to our shareholders and servicing our debt obligations.

The following table presents dividends declared (on a per share basis) of Class A common stock for the three months ended March 31, 2017 and 2016 :



Declaration Date	Dividend per Share

March 1, 2017	$	0.300
Total	$	0.300

March 1, 2016	$	0.275
Total	$	0.275

Principal repayments on investments

We receive principal amortization on our loans and securities as part of the normal course of our business. Repayment of mortgage loan receivables provided net cash of $68.5 million for the three months ended March 31, 2017 and $218.9 million for the three months ended March 31, 2016 . Repayment of real estate securities provided net cash of $74.3 million for the three months ended March 31, 2017 and $36.1 million for the three months ended March 31, 2016 .

Proceeds from securitizations and sales of loans

We sell our conduit mortgage loans to securitization trusts and to other third parties as part of our normal course of business. Proceeds from sales of mortgage loans provided no net cash for the three months ended March 31, 2017 and $316.8 million for the three months ended March 31, 2016 .

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Proceeds from the sale of securities

We invest in CMBS and U.S. Agency Securities. Proceeds from sales of securities provided net cash of $361.3 million for the three months ended March 31, 2017 and $15.5 million for the three months ended March 31, 2016 .

Proceeds from the sale of real estate

We own a portfolio of commercial real estate properties as well as residential condominium units. Proceeds from sales of real estate provided net cash of $6.3 million for the three months ended March 31, 2017 and $23.5 million for the three months ended March 31, 2016 .

Proceeds from the issuance of equity

For the three months ended March 31, 2017 and 2016 , there were no proceeds realized in connection with the issuance of equity. We may issue additional equity in the future.

Other potential sources of financing

In the future, we may also use other sources of financing to fund the acquisition of our assets, including credit facilities, warehouse facilities, repurchase facilities and other secured and unsecured forms of borrowing. These financings may be collateralized or non-collateralized, may involve one or more lenders and may accrue interest at either fixed or floating rates. We may also seek to raise further equity capital or issue debt securities in order to fund our future investments.

Contractual obligations

Contractual obligations as of March 31, 2017 were as follows ($ in thousands):



	Contractual Obligations
	Less than 1 Year			1-3 Years		3-5 Years		More than 5 Years		Total

Secured financings	$	890,894	(1)	$	1,082,667	$	221,620	$	960,585	$	3,155,766
Unsecured revolving credit facility	168,000		(1)	—		—		—		168,000
Senior unsecured notes	291,531		(2)	—		766,201				1,057,732
Interest payable(3)	92,983			140,511		129,776		58,143		421,413
Other funding obligations(4)	123,668			—		—		—		123,668
Payments pursuant to tax receivable agreement	155			311		311		1,553		2,330
Operating lease obligations	942			2,386		2,360		99		5,787
Total	$	1,568,173		$	1,225,875	$	1,120,268	$	1,020,380	$	4,934,696

(1) As more fully disclosed in

Note 7, Debt Obligations, Net , these obligations are subject to existing Company controlled extension options for one or more additional one-year periods or could be refinanced by other existing facilities.

(2)

Pursuant to their terms, the Company had called for prepayment of the 2017 Notes at par (plus any accrued and unpaid interest to the redemption date) with an outstanding principal balance of $291.5 million . The Company remitted the payment amount to the Trustee on March 31, 2017 and the 2017 Notes were repaid on April 3, 2017. The amount held by the Trustee was reflected in other assets on the Company’s consolidated balance sheets as of March 31, 2017 .

(3) Composed of interest on secured financings and on senior unsecured notes. For borrowings with variable interest rates, we used the rates in effect as of March 31, 2017 to determine the future interest payment obligations.

(4) Comprised of our off-balance sheet unfunded commitment to provide additional first mortgage loan financing as of March 31, 2017 .

The tables above do not include amounts due under our derivative agreements as those contracts do not have fixed and determinable payments. Our contractual obligations will be refinanced and/or repaid from earnings as well as amortization and sales of our liquid collateral.

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Off-Balance Sheet Arrangements

We have made investments in various unconsolidated joint ventures. See

Note 6, Investment in Unconsolidated Joint Ventures for further details of our unconsolidated investments. Our maximum exposure to loss from these investments is limited to the carrying value of our investments.

Unfunded Loan Commitments

We may be a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of our borrowers. As of March 31, 2017 , our off-balance sheet arrangements consisted of $123.7 million of unfunded commitments of mortgage loan receivables held for investment, which was composed of $123.7 million to provide additional first mortgage loan financing. As of December 31, 2016 , our off-balance sheet arrangements consisted of $147.7 million of unfunded commitments of mortgage loan receivables held for investment, which was comprised of $146.3 million to provide additional first mortgage loan financing and $1.4 million to provide additional mezzanine loan financing. Such commitments are subject to our borrowers’ satisfaction of certain financial and nonfinancial covenants and involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets and are not reflected on our consolidated balance sheets.

Critical Accounting Policies

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” within the Annual Report for a full discussion of our critical accounting policies. Other than disclosed in

Note 2, Significant Accounting Policies , our critical accounting policies have not materially changed since December 31, 2016 .

Reconciliation of Non-GAAP Financial Measures

Core Earnings

We present Core Earnings, which is a non-GAAP financial measure, as a supplemental measure of our performance. We believe Core Earnings assists investors in comparing our performance across reporting periods on a consistent basis by excluding non-cash expenses and unrecognized results from derivatives and Agency interest-only securities, which we believe makes comparisons across reporting periods more relevant by eliminating timing differences related to changes in the values of assets and derivatives. In addition, we use Core Earnings: (i) to evaluate our earnings from operations and (ii) because management believes that it may be a useful performance measure for us. Core Earnings is also used as a factor in determining the annual incentive compensation of our senior managers and other employees.

We consider the Class A common shareholders of the Company and Continuing LCFH Limited Partners to have fundamentally equivalent interests in our pre-tax earnings. Accordingly, for purposes of computing Core Earnings we start with pre-tax earnings and adjust for other noncontrolling interest in consolidated joint ventures but we do not adjust for amounts attributable to noncontrolling interest held by Continuing LCFH Limited Partners.

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

As discussed in Note 2 to the consolidated financial statements included elsewhere in this Quarterly Report, we do not designate derivatives as hedges to qualify for hedge accounting and therefore any net payments under, or fluctuations in the fair value of, our derivatives are recognized currently in our income statement. However, fluctuations in the fair value of the related assets are not included in our income statement. We consider the gain or loss on our hedging positions related to assets that we still own as of the reporting date to be “open hedging positions.” While recognized for GAAP purposes, we exclude the results on the hedges from Core Earnings until the related asset is sold and the hedge position is considered “closed,” whereupon they would then be included in Core Earnings in that period. These are reflected as “Adjustments for unrecognized derivative results” for purposes of computing Core Earnings for the period. We believe that excluding these specifically identified gains and losses associated with the open hedging positions adjusts for timing differences between when we recognize changes in the fair values of our assets and changes in the fair value of the derivatives used to hedge such assets.

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As more fully discussed in Note 2 to the consolidated financial statements included elsewhere in this Quarterly Report, our investments in Agency interest-only securities are recorded at fair value with changes in fair value recorded in current period earnings. We believe that excluding these specifically identified gains and losses associated with the Agency interest-only securities adjusts for timing differences between when we recognize changes in the fair values of our assets.

Set forth below is a reconciliation of income (loss) before taxes to Core Earnings ($ in thousands):



	Three Months Ended March 31,
	2017			2016

Income (loss) before taxes	$	18,255		$	(12,317	)
Net (income) loss attributable to noncontrolling interest in consolidated joint ventures and operating partnership (GAAP) (1)	(330		)	232
Our share of real estate depreciation, amortization and gain adjustments (2)	7,795			8,304
Adjustments for unrecognized derivative results (3)	(1,933		)	39,348
Unrealized (gain) loss on Agency IO securities	(159		)	(660		)
Premium (discount) on mortgage loan financing, net of amortization	(226		)	(35		)
Non-cash stock-based compensation	8,149			3,331
Core Earnings	$	31,551		$	38,203


(1)	Includes $8 thousand of net income attributable to noncontrolling interest in consolidated joint ventures which are included in net (income) loss attributable to noncontrolling interest in operating partnership on the consolidated statements of income for the three months ended March 31, 2017 .



(2)	The following is a reconciliation of GAAP depreciation and amortization to our share of real estate depreciation, amortization and gain adjustments presented in the computation of Core Earnings in the preceding table ($ in thousands):

		Three Months Ended March 31,
		2017			2016

	Total GAAP depreciation and amortization	$	8,592		$	9,802
	Less: Depreciation and amortization related to non-rental property fixed assets	(23		)	(5		)
	Less: Non-controlling interest in consolidated joint ventures’ share of accumulated depreciation and amortization	(375		)	(673		)
	Our share of real estate depreciation and amortization	8,194			9,124

	Realized gain from accumulated depreciation and amortization on real estate sold (see below)	(402		)	(824		)
	Less: Non-controlling interests in consolidated joint ventures’ share of accumulated depreciation and amortization on real estate sold	3			4
	Our share of accumulated depreciation and amortization on real estate sold	(399		)	(820		)

	Our share of real estate depreciation, amortization and gain adjustments	$	7,795		$	8,304

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	GAAP gains/losses on sales of real estate include the effects of previously recognized real estate depreciation and amortization. For purposes of Core Earnings, our share of real estate depreciation and amortization is eliminated and, accordingly, the resultant gain/losses also must be adjusted. Following is a reconciliation of the related consolidated GAAP amounts to the amounts reflected in Core Earnings:

		Three Months Ended March 31,
		2017			2016

	GAAP realized gain on sale of real estate, net	$	2,331		$	6,095
	Adjusted gain/loss on sale of real estate for purposes of Core Earnings	$	(1,932	)	$	(5,275	)
	Our share of accumulated depreciation and amortization on real estate sold	$	399		$	820

(3)	The following is a reconciliation of GAAP net results from derivative transactions to our unrecognized derivative result presented in the computation of Core Earnings in the preceding table ($ in thousands):

		Three Months Ended March 31,
		2017			2016

	Net results from derivative transactions	$	(1,981	)	$	(50,862	)
	Hedging interest expense	3,728			7,421
	Hedging realized result	186			4,093
	Adjustments for unrecognized derivative results	$	1,933		$	(39,348	)

Core Earnings has limitations as an analytical tool. Some of these limitations are:


•	Core Earnings does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations and is not necessarily indicative of cash necessary to fund cash needs; and


•	other companies in our industry may calculate Core Earnings differently than we do, limiting its usefulness as a comparative measure.

Because of these limitations, Core Earnings should not be considered in isolation or as a substitute for net income (loss) attributable to shareholders or any other performance measures calculated in accordance with GAAP, or as an alternative to cash flows from operations as a measure of our liquidity.

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

Income from sales of securitized loans, net of hedging

We present income from sales of securitized loans, net of hedging, a non-GAAP financial measure, as a supplemental measure of the performance of our loan securitization business. Income from sales of securitized loans, net is a key component of our results. Since our loans sold into securitizations to date are comprised of long-term fixed-rate loans, the result of hedging those exposures prior to securitization represents a substantial portion of our securitization profitability. Therefore, we view these two components of our profitability together when assessing the performance of this business activity and find it a meaningful measure of the Company’s performance as a whole. When evaluating the performance of our sale of loans into securitization business, we generally consider the income from sales of securitized loans, net, in conjunction with other income statement items that are directly related to such securitization transactions, including portions of the realized net result from derivative transactions that are specifically related to hedges on the securitized or sold loans, which we reflect as hedge gain/(loss) related to loans securitized, a non-GAAP financial measure, in the table below.

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Set forth below is an unaudited reconciliation of income from sale of securitized loans, net to income from sale of loans, net as reported in our consolidated financial statements included herein and an unaudited reconciliation of hedge gain/(loss) relating to loans securitized to net results from derivative transactions as reported in our consolidated financial statements included herein ($ in thousands except for number of loans and securitizations):



	Three Months Ended March 31,
	2017		2016

Number of loans	—		26
Face amount of loans sold into securitizations	$	—	$	249,156
Number of securitizations	—		2

Income from sales of securitized loans, net (1)	$	—	$	7,545
Hedge gain/(loss) related to loans securitized (2)	—		(3,808		)
Income from sales of securitized loans, net of hedging	$	—	$	3,737

(1) The following is a reconciliation of the non-GAAP financial measure of income from sales of securitized loans, net to income from sale of loans, net, which is the closest GAAP measure, as reported in our consolidated financial statements included herein ($ in thousands):



	Three Months Ended March 31,
	2017			2016

Income from sales of loans, net	$	(999	)	$	7,830
Unrealized losses on loans recorded as other than temporary impairments related to lower of cost or market adjustments	999			—
(Income) loss from sale of loans (non-securitized), net	—			(285		)
Income from sales of securitized loans, net	$	—		$	7,545

(2) The following is a reconciliation of the non-GAAP financial measure of hedge gain/(loss) related to loans securitized to net results from derivative transactions, which is the closest GAAP measure, as reported in our consolidated financial statements included herein ($ in thousands):



	Three Months Ended March 31,
	2017			2016

Net results from derivative transactions	$	(1,981	)	$	(50,862	)
Hedge gain/(loss) related to lending and securities positions	3,130			46,769
Hedge gain/(loss) related to loans (non-securitized)	(1,149		)	285
Hedge gain/(loss) related to loans securitized	$	—		$	(3,808	)

Cost of funds

We present cost of funds, which is a non-GAAP financial measure, as a supplemental measure of the Company’s cost of debt financing. We define cost of funds as interest expense as reported on our consolidated statements of income adjusted to include the net interest expense component resulting from our hedging activities, which is currently included in net results from derivative transactions on our consolidated statements of income. Interest income, net of cost of funds, which is a non-GAAP financial measure, is defined as interest income, less cost of funds.

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Set forth below is an unaudited reconciliation of interest expense to cost of funds ($ in thousands):



	Three Months Ended March 31,
	2017			2016

Interest expense	$	(31,415	)	$	(29,536	)
Net interest expense component of hedging activities (1)	(3,728		)	(7,421		)
Cost of funds	$	(35,143	)	$	(36,957	)

Interest income	$	57,512		$	59,601
Cost of funds	(35,143		)	(36,957		)
Interest income, net of cost of funds	$	22,369		$	22,644



		Three Months Ended March 31,
		2017			2016

(1)	Net result from derivative transactions	$	(1,981	)	$	(50,862	)
	Hedging realized result	186			4,093
	Hedging unrecognized result	(1,933		)	39,348
	Net interest expense component of hedging activities	$	(3,728	)	$	(7,421	)

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

The nature of the Company’s business exposes it to market risk arising from changes in interest rates. Changes, both increases and decreases, in the rates the Company is able to charge its borrowers, the yields the Company is able to achieve in its securities investments, and the Company’s cost of borrowing directly impacts its net income. The Company’s interest income stream from loans and securities is generally fixed over the life of its assets, whereas it uses floating-rate debt to finance a significant portion of its investments. Another component of interest rate risk is the effect changes in interest rates will have on the market value of the assets the Company acquires. The Company faces the risk that the market value of its assets will increase or decrease at different rates than that of its liabilities, including its hedging instruments. The Company mitigates interest rate risk through utilization of hedging instruments, primarily interest rate swap and futures agreements. Interest rate swap and futures agreements are utilized to hedge against future interest rate increases on the Company’s borrowings and potential adverse changes in the value of certain assets that result from interest rate changes. The Company generally seeks to hedge assets that have a duration longer than five years, including newly originated conduit first mortgage loans, securities in the Company’s CMBS portfolio if long enough in duration, and most of its U.S. Agency Securities portfolio.

The following table summarizes the change in net income for a 12-month period commencing March 31, 2017 and the change in fair value of our investments and indebtedness assuming an increase or decrease of 100 basis points in the LIBOR interest rate on March 31, 2017 , both adjusted for the effects of our interest rate hedging activities ($ in thousands):



	Projected change in net income(1)			Projected change in portfolio value

Change in interest rate:
Decrease by 1.00%	$	(5,316	)	$	29,375
Increase by 1.00%	8,334			(28,796		)


(1)	Subject to limits for floors on our floating rate investments and indebtedness.

Market Value Risk

The Company’s securities investments are reflected at their estimated fair value. The change in estimated fair value of securities available-for-sale is reflected in accumulated other comprehensive income. The change in estimated fair value of Agency interest-only securities is recorded in current period earnings. The estimated fair value of these securities fluctuates primarily due to changes in interest rates and other factors. Generally, in a rising interest rate environment, the estimated fair value of these securities would be expected to decrease; conversely, in a decreasing interest rate environment, the estimated fair value of these securities would be expected to increase. As market volatility increases or liquidity decreases, the market value of the Company’s assets may be adversely impacted. The Company’s fixed rate mortgage loan portfolio is subject to the same risks. However, to the extent those loans are classified as held for sale, they are reflected at the lower of cost or market. Otherwise, held for investment mortgage loans are reflected at values equal to the unpaid principal balances net of certain fees, costs and loan loss allowances.

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Liquidity Risk

Market disruptions may lead to a significant decline in transaction activity in all or a significant portion of the asset classes in which the Company invests and may at the same time lead to a significant contraction in short-term and long-term debt and equity funding sources. A decline in liquidity of real estate and real estate-related investments, as well as a lack of availability of observable transaction data and inputs, may make it more difficult to sell the Company’s investments or determine their fair values. As a result, the Company may be unable to sell its investments, or only be able to sell its investments at a price that may be materially different from the fair values presented. Also, in such conditions, there is no guarantee that the Company’s borrowing arrangements or other arrangements for obtaining leverage will continue to be available or, if available, will be available on terms and conditions acceptable to the Company. In addition, a decline in market value of the Company’s assets may have particular adverse consequences in instances where it borrowed money based on the fair value of its assets. A decrease in the market value of the Company’s assets may result in the lender requiring it to post additional collateral or otherwise sell assets at a time when it may not be in the Company’s best interest to do so. The Company’s captive insurance company subsidiary, Tuebor, is subject to state regulations which require that dividends may only be made with regulatory approval. The Company’s broker-dealer subsidiary, LCS, is also required to be compliant with FINRA and SEC regulations which require that dividends may only be made with regulatory approval.

Credit Risk

The Company is subject to varying degrees of credit risk in connection with its investments. The Company seeks to manage credit risk by performing deep credit fundamental analyses of potential assets and through ongoing asset management. The Company’s investment guidelines do not limit the amount of its equity that may be invested in any type of its assets; however, investments greater than a certain size are subject to approval by the Risk and Underwriting Committee of the board of directors.

Credit Spread Risk

Credit spread risk is the risk that interest rate spreads between two different financial instruments will change. In general, fixed-rate commercial mortgages and CMBS are priced based on a spread to Treasury or interest rate swaps. The Company generally benefits if credit spreads narrow during the time that it holds a portfolio of mortgage loans or CMBS investments, and the Company may experience losses if credit spreads widen during the time that it holds a portfolio of mortgage loans or CMBS investments. The Company actively monitors its exposure to changes in credit spreads and the Company may enter into credit total return swaps or take positions in other credit related derivative instruments to moderate its exposure against losses associated with a widening of credit spreads.

Risks Related to Real Estate

Real estate and real estate-related assets, including loans and commercial real estate-related securities, are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; environmental conditions; competition from comparable property types or properties; changes in tenant mix or performance and retroactive changes to building or similar codes. In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay the underlying loans, which could also cause the Company to suffer losses.

Covenant Risk

In the normal course of business, the Company enters into loan and securities repurchase agreements and credit facilities with certain lenders to finance its real estate investment transactions. These agreements contain, among other conditions, events of default and various covenants and representations. If such events are not cured by the Company or waived by the lenders, the lenders may decide to curtail or limit extension of credit, and the Company may be forced to repay its advances or loans. In addition, the Company’s Notes are subject to covenants, including limitations on the incurrence of additional debt, restricted payments, liens, sales of assets, affiliate transactions and other covenants typical for financings of this type. The Company’s failure to comply with these covenants could result in an event of default, which could result in the Company being required to repay these borrowings before their due date. As of March 31, 2017 , the Company believes it was in compliance with all covenants.

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Diversification Risk

The assets of the Company are concentrated in the real estate sector. Accordingly, the investment portfolio of the Company may be subject to more rapid change in value than would be the case if the Company were to maintain a wide diversification among investments or industry sectors. Furthermore, even within the real estate sector, the investment portfolio may be relatively concentrated in terms of geography and type of real estate investment. This lack of diversification may subject the investments of the Company to more rapid change in value than would be the case if the assets of the Company were more widely diversified.

Concentrations of Market Risk

Concentrations of market risk may exist with respect to the Company’s investments. Market risk is a potential loss the Company may incur as a result of change in the fair values of its investments. The Company may also be subject to risk associated with concentrations of investments in geographic regions and industries.

Regulatory Risk

The Company established a broker-dealer subsidiary, LCS, which was initially licensed and capitalized to do business in July 2010. LCS is required to be compliant with FINRA and SEC requirements on an ongoing basis and is subject to multiple operating and reporting requirements to which all broker-dealer entities are subject. Additionally, Ladder Capital Asset Management LLC (“LCAM”) is a registered investment adviser. LCAM is required to be compliant with SEC requirements on an ongoing basis and is subject to multiple operating and reporting requirements to which all registered investment advisers are subject. In addition, Tuebor is subject to state regulation as a captive insurance company. If LCS, the Adviser or Tuebor fail to comply with regulatory requirements, they could be subject to loss of their licenses and registration and/or economic penalties.

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Item 4. Controls and Procedures

Disclosure Controls and Procedures

The Company’s management, with the participation of the Chief Executive Officer and the Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as required by Rules 13a-15 and 15d-15 under the Exchange Act as of March 31, 2017 . Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective, as of March 31, 2017 , to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended March 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II - Other Information

Item 1. Legal Proceedings

From time to time, we may be involved in litigation and claims incidental to the conduct of our business in the ordinary course. Further, certain of our subsidiaries, including our registered broker-dealer, registered investment advisers and captive insurance company, are subject to scrutiny by government regulators, which could result in enforcement proceedings or litigation related to regulatory compliance matters. We are not presently a party to any material enforcement proceedings, litigation related to regulatory compliance matters or any other type of material litigation matters. We maintain insurance policies in amounts and with the coverage and deductibles we believe are adequate, based on the nature and risks of our business, historical experience and industry standards.

Item 1A. Risk Factors

There have been no material changes during the three months ended March 31, 2017 to the risk factors previously disclosed in Item 1A of our Annual Report.

Item 2. Unregistered Sale of Securities

None.

Stock Repurchases

On October 30, 2014, our board of directors authorized the Company to make up to $50.0 million in repurchases of the Company’s Class A common stock from time to time without further approval. Stock repurchases by the Company are generally made in open market transactions at prevailing market prices but may also be made in privately negotiated transactions or otherwise. The timing and amount of purchases are determined based upon prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. During the three months ended March 31, 2017 , there were no repurchases of Class A common stock by the Company.

Item 3. Defaults Upon Senior Securities

None.

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Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

EXHIBIT INDEX



EXHIBIT NO.		DESCRIPTION
4.1		Indenture for the 2022 Notes, dated as of March 16, 2017, among Ladder Capital Finance Holdings LLLP, and Ladder Capital Finance Corporation as co-issuers, and Wilmington Trust, National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on March 16, 2017)
10.1		Stockholders Agreement, dated as of March 3, 2017, by and between Ladder Capital Corp and RREF II Ladder LLC (incorporated by reference to Exhibit 99.1 to the Company’s Form 8-K filed on March 3, 2017)
10.2		Second Amended and Restated Registration Rights Agreement, dated as of March 3, 2017, by and among Ladder Capital Corp, Ladder Capital Finance Holdings LLLP and each of the Ladder Investors (as defined therein) (incorporated by reference to Exhibit 99.2 to the Company’s Form 8-K filed on March 3, 2017)
31.1		Certification of Brian Harris pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Marc Fox pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*		Certification of Brian Harris pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*		Certification of Marc Fox pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

* The certifications attached hereto as Exhibits 32.1 and 32.2 are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed ‘filed’ for purposes of Section 18 of the Exchange Act, nor shall they be deemed incorporated by reference in any filing under the Securities Act, except as shall be expressly set forth by specific reference in such filing.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	LADDER CAPITAL CORP
	(Registrant)


Date: May 9, 2017	By:	/s/ BRIAN HARRIS
		Brian Harris
		Chief Executive Officer

Date: May 9, 2017	By:	/s/ MARC FOX
		Marc Fox
		Chief Financial Officer

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Part I - Financial Information Item 1. Financial Statements (unaudited)Note 6, Investment in Unconsolidated Joint Ventures Note 2. Significant Accounting Policies Note 2, Significant Accounting Policies Note 7, Debt Obligations, Net Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part II - Other Information Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sale Of Securities Item 3. Defaults Upon Senior Securities Item 4. Mine Safety Disclosures Item 5. Other Information Item 6. Exhibits

LADR 10-Q Quarter ended March 31, 2017