Thank you, Pamela. In the fourth quarter of 2024 ladder generated 33.6 million of distributable earnings or $0.27 per share of distributable EPS. Achieving a return on average equity of 8.9% for 2024 distributable earnings sold 153.9 million or $1.21 per share of distributable EPS achieving a 9.9% return on average equity.
Our 2024 earnings were driven by net interest income on loans, securities and cash alongside stable net operating income from our real estate portfolio. Delivering a strong return on equity.
This performance was achieved while delivering our balance sheet, maintaining steady book value and dividend coverage and preserving a significant cash balance allowing us to adopt an offensive strategy by the fourth quarter of 2024.
As of December 31, 2024 Ladder's balance sheet was comprised of 27% cash and cash equivalent totaling $1.3 billion with $2.2 billion of total liquidity.
As Pamela discussed, we further fortified La Ladder's balance sheet through the upsize of our unsecured revolver to $850 million. And over 2.6 times increase including a reduced interest rate to silver plus 170 basis points with a further reduction to silver plus 125 basis points on achieving an investment grade credit rating from two rating agencies.
We are pleased with this outcome and deeply appreciate the strong support from our 10 bank syndicate.
We extend our gratitude to our banking partners as of December 31st 2024 our adjusted leverage ratio was 1.4 times with the total gross leverage ratio of 2.0 times which would trend down in 2024 as we leverage our balance sheet and amassed a large liquidity position overall. In 2024 we paid down over $1.1 billion in secured debt and issued $500 million in unsecured bonds due in 2031.
As of December 31, 2024 65% of our debt was comprised of unsecured corporate bonds with a weighted average remaining maturity of 3.7 years at an attractive weighted average fixed rate coupon of 5.2% in the fourth quarter of 2024. We repurchased 26 million in principal value of our 2025 bonds which were in October, of which 296 million in principle remains outstanding in 2024.
Both Moody's and Fitch play out on positive outlook and Moody's upgraded and un notched the rating on our bonds to Be an One aligning our bonds with our corporate credit rating one notch for investment grade and S&P upgraded our credit rating in 2024 as well.
We believe the rating agencies recognize ladder's long track record as a disciplined and prudent manager of capital demonstrated since the inception of our business and specifically, since we received our first credit rating over 12 years ago, we believe Ladder's business model is an internally managed company with an unwavering focus on three investment strategies within commercial real estate. Coupled with our focus on financing, with unsecured debt, a modest leverage level position as well for achieving our long held strategic goal of becoming an investment grade credit.
We continue to believe in an investment grade credit rating will open ladder up to broader opportunities for growth along with access to the investment grade capital markets with the goal of achieving a more attractive cost of capital and hence return on equity to shareholders over time.
As Pamela discussed our three segments performed well. In 2024 our loan portfolio paid down meaningfully in 2024 and closed the year with $1.6 billion with a $1.6 billion balance with a 9.3% yield that is mid market lending focus and flexible balance sheet helped us achieve a 50% reduction of our loan portfolio through payouts, generating meaningful liquidity and allowing for us to pivot to focus on origination in the bridg and conduit lending space.
In 2024 latter originated $145 million of loans across seven positions. The majority of which was originated in the fourth quarter.
We're hopeful originations will outpace payoffs in the coming quarters.
As of December 31, 2024 we had two loans totaling $77 million non accrual including the addition of a $16 million loan in the fourth quarter, collateralized by two residential and retail mixed use properties in New York City.
No specific impairments were identified in the fourth quarter and our general fee for reserve remained at $52 million unchanged from the prior quarter.
We continue to hold this level of reserve. Given the continued macroeconomic shift that persists in the global economy.
We believe this reserve level is adequate to cover any potential loss in our loan portfolio.
As of December 31, 2024 the carrying value of our securities portfolio is $1.1 billion in 24. In 2024 we rotated capital into a securities and more than doubled our holdings as our loan book continued to pay off par. We geared up for new lending opportunities by the fourth quarter.
As of December 31st, 2024 98% of the securities portfolio is investment grade rated with 91% being a rated the entire portfolio of predominantly AAA securities is unlevered and readily financeable, providing additional source of potential liquidity complementing the $2.2 billion of same day liquidity we remain.
Our $904 million real estate segment continue to generate stable net operating income. In 2024 the portfolio includes 150 net lease properties, primarily investment grade credits committed to long term leases with an average remaining lease term of 7.6 years.
As Pamela discussed in 2024 we executed the sale of four multi family assets previously foreclosed on the sales proceed. The $43.6 million generating a net gain of $2.7 million for distributive earnings.
Further, we sold six net lease properties in 2024 for $57.4 million of proceeds generating $6.8 million of gains for distributable earnings and $22.3 million dollars of net gain for GAAP, which includes the recapture of previously recorded depreciation and amortization of funds.
As of December 31st 2024 our unencumbered asset posted at $3.8 billion or 77% of total assets.
81% of this unencumbered asset pool is comprised of first mortgage loans, securities and unrestricted cash and cash equivalents.
Overall.
We believe our significant liquidity position which includes our recently upsized revolving credit facility, large pool of high quality unencumbered assets and best in class capital structure. One national investment grade position ladder with strong financial flexibility and ready access to capital as we focus on deployment within our three segments in 2025 as of December 31, 2024 Ladders underappreciated book value per share was $13.88 which is net of the $0.41 per share. Cecil General Reserve established in the fourth quarter of 2024. We repurchased $6 million or 532,000 shares of our common stock at a weighted average price of $11.27 per share for the year ended December 31, 2024 we were purchased $8 million of our common stock or 711,000 shares at a weighted average price of $11.31 per share.
As of December 31, 2024 $67.6 million remains outstanding on Ladder's current stock repurchase program.
Finally, in 2024 our dividend remained well covered and in the fourth quarter, Ladder declared a $0.23 per share dividend which was paid on January 15, 2025.
For details on our fourth quarter and full year 2024 operating results. Please refer to our earnings supplement which is available on our website. The latter's annual report on form 10-K which we expect to file in the coming days with that. I will turn the call over to Brian.
Thanks Paul.
We believe Ladder's middle market by design lending model was on full display during 2024 smaller loan sizes enabled us to diversify our sponsor and geographic exposure and enabled our borrowers to have a relatively easier time refinancing loans coming due. Last year, we also took some big steps to further strengthen our liability set. Having issued a $500 million unsecured corporate bond that closed in July followed by an upsizing of our revolver to $850 million in December.
These events in a generally difficult year for commercial real estate investors enabled Ladder to be a bright spot as our liquidity position. So throughout the year, as loans paid off while we were very modestly levered throughout the year after March of 2023 when the regional bank funding model was disrupted and pushed to the breaking point for certain banks that failed. We heard the expression stay alive till 25 as it became harder for sponsors to refinance loans coming due.
By early 2024 the industry seemed to think the fed was going to cut short term interest rates 6 to 8 times. In response to a slowing economy and tame inflation figures except the fed never went beyond 100 basis points of rate cuts during all of 2024.
I bring up these past events to highlight that most of our sponsors on loans coming due in 2024 did not see the need to stay alive until 25 and they paid off $1.7 billion of our loans with $1.1 billion of the total received in the second half of the year as cash proceeds from loan payoffs outpaced new originations. We purchased $911 million of AAA rated securities over the last seven months including January of 25 at a weighted average unlevered yield of 6.48%.
We believe these yields are attractive from a historical perspective and also added to interest income the day after we acquired most of them, it takes 60 to 90 days to close a loan after we receive an application. And while our pipeline of loans under application currently stands at just over 250 million, it is growing at a rapid rate, and we believe that new loan originations will soon outpace loans paying off to fund new loan investments.
We will first move cash out of our T bills earning an average of 4.32%. Additionally, we have the option to sell or finance some of our securities which could provide up to $1 billion of additional liquidity to support continued loan growth in our pipeline.
While we expect our loan inventory to build throughout 2025 this will take some time but we expect it to be readily observable from the second quarter on. While the lag from application to loan closing takes a while, there are plenty of good alternatives available to us including additional securities to manage the lag from the loan origination process.
Overall, we plan to migrate our capital into higher concentrations of the balance sheet loans and out of short term T bills and securities. We intend to accomplish all of this while maintaining low leverage with high amounts of liquidity and investing in the highest quality assets. We can find that we believe present optimal risk reward relationships for our shareholders.
We look forward to replenishing our asset base with higher interest rates in place. We have limited upcoming loan maturities with plenty of room to add new investments and grow our balance sheet. Latter has a differentiated business model with a long track record of allocating investment dollars among securities loans and real estate and primarily funded by longer term unsecured corporate and nonmark to market debt with low leverage.
As Paul discussed, we've been buying back stock and paying down debt with excess liquidity and we plan to continue this strategy when market conditions present us with opportunities to enhance shareholder value.
We've waited a long time to be in the position we are in today armed with large amounts of liquidity and low leverage in a relatively high interest rate environment. We are therefore optimistic that 2025 will be a very strong year for the latter. I'd like to take this time now to thank everybody for tuning in on this call and to thank our employees for 2024 and the effort they put forth I'll turn it back over to the operator.
Operator
Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue, you may press star two. If you would like to remove your question from the queue and for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key One moment while we pull for questions.
Our first question is from Jade Rami with JB W Please proceed.
Thank you very much. I wanted to ask about the CM BS Conduit business for the market. CM BS issuance was up about 100% in 2024.
Latter competes probably more than most mortgage rates with regional banks. Therefore, do you see an opportunity to increase CM BS Conduit originations meaningfully. As banks still have been pulling back and yet are more willing to let loans come to maturity now.
Thanks J it's Brian. Yeah, I think so. We the there's a shortage of fixed income investments that which is causing a great tightening to be going on in credit spreads almost everywhere. I that business in the conduit and securitization works better when the yield curve is steeper.
So while we're no longer inverted after being that way for years, Yeah, it's improving, I would say, but we're not there yet. I think you know, when we take a look at where, when we reverse things as to, what break evens are on loans that we could be making on a five or a 10-year fixed rate basis.
You know, it's not terribly attractive, it's not that it's not attractive at all. It's just that there are the other investments we make seem to be a more profitable, all allocation of our capital. So I wouldn't expect this to come out too strong in the very near future. However, as the curve steepens, you'll see us waiting in there a little bit more.
Thank you very much and then just on the reserve in dollars, it was unchanged, there was no new provisioning's, which means that the reserve level, increased quite meaningfully. Are you planning to maintain it at that level or do you see the potential for releasing some of those reserves with the significant repayments that have been received?
Well, I think yes, it is a higher percentage at this point and we did leave it there because all the potential problems that we see as possible, need for, for reserves, they're still there. Those were not the loans that paid off. However, the loans that did pay off, obviously, the denominator is getting smaller. So I think we're well covered.
I don't think we'll get through all of that in the last column, it's a little hard to gauge as to where, what quarter, things could start changing, but I don't really see it increasing unless something that we're not expecting happens in the economy and in our inventory. I think it's far more likely probability that towards, at some point we'll probably be releasing reserves back in, but I don't see that number going up.
Thank you very much.
Operator
Our next question is from Tom Catherwood with BT IG. Please proceed.
Thank you and good morning, everybody. Brian appreciated the detail on originations and the lag between applications and closings on the origination front.
We're hearing of yields tightening somewhat especially for multi family kind of two parts A are, are you seeing that as well? And then b how is it impacting your pipeline and, and the types of properties that you're willing to lend on?
Okay. Credit spreads are tightening. I don't think interest rates are the actual rate on the loans that people are paying is up near 7%. And that's not, that's not very low relative to our recent past. So gotta be a little cautious around when we talk about credit spreads, tightening and interest rates at prevailing on in the mortgage market.
So I think the borrowing world would like to hope that with the new administration and some of the comments made today by you know, the treasury secretary that, that rates might be coming down on the 10 year. I personally don't see that because of the deficit situation that the US is in and how they're going to have to issue, to pay their interest at this point. So I, as far as property types go, yes, multi family is definitely the tightest, obviously the safest because people have to live somewhere. But, for us, I don't think we ever red line anything other than high crime.
That is something we try to avoid because it's very difficult to come back from a criminal reputation in any building or any neighborhood. But I we're not overly targeting multi family, we seem to be writing more multi family and industrial, but I think that's a condition of stability, not necessarily where we're preferencing things if a retail comes in that we happen to like or, or if an office building comes in that we happen to like, we, we'll put a number on it and you know, we won't sacrifice credit at any rate.
But if the asset looks to be recalibrated into today's market, then sure we're, we're happy to lend on it. I don't see office spreads terribly tighter at all. In fact, I'm not even sure I would say that it's a reasonable thought that you can refinance an office building. So, yeah, those that is a bit of an outlier right now. Although you are seeing some very large c SASB deals getting done. I think Brian Park is in the market right now. MetLife Building is coming down the pipe. So, this is improving.
There's no, there is no doubt about it. The defroster is on, and I suspect that we will start the wading into some other product types and in a more meaningful way. But I do think we are still a little bit hesitant around very large cities where they're having problems with their capital flight where a lot of rich people are leaving and also to the extent that they haven't got their crime under control.
So, you know, we're, we're going to continue to avoid, downtown L A and you know, sir, no need to name the cities. But you know, we are happy to write loans in what I call the flyover states where, very few people actually go in the midwest. We happen to like those economies that doing pretty well.
Appreciate those thoughts, Brian and maybe sticking with the borrower profiles in your pipeline. Are you seeing borrowers that maybe last year would have likely done five year fixed rate loans? Now looking for transitional floating rate loans to provide more flexibility or, or is that kind of not a trend that you, that you've seen crop up yet?
We have seen that I would say to, to some extent in that, I think borrowers have been through something here, especially long time owners of real estate. And, sometimes, especially the generational wealth families that have owned real estate for many, many years, they're requiring, cash in on refinances and they're also having to spend a lot of money on operating expenses which they weren't used to spending over the last couple of decades.
So, I do think what's causing it is not necessarily spreads. I think that there's people gravitating towards the floating rate and five-year part of the world because they want to sell the property. Not because they necessarily think interest rates are going to go lower.
They've hit a point where they can get a short extension from a bank having said that I think we are very kind. We actually quoted a few and have a few on our balance sheet now where we've written some one and two year fixed rate loans that are fully prepayable. And we provide that slightly higher rates than the, than what a conduit or floating rate loan would be.
But the reason why is there's no prepayment penalty or lock out. So, we simply make the coupon plus, you know, the fees we charge to originate the loan and the, I think you'll see that picking up more, more. So in the, in the year ahead.
Got it. I appreciate the answers. That's it for me. Thanks everyone.
Operator
As a reminder to star one on your telephone keypad. If you would like to ask a question. Our next question is from Steve Delaney with citizens. J MP. Please proceed.
Thanks. Good morning, everyone. Congratulations on a great close to 2024.
Just looking back over the last two years with all the volatility that we've had in the market from all corners. I think the most remarkable thing that I noticed is that you've been able despite the re problems, et cetera to maintain a book value per share in the neighborhood of 1,370 over the last two years. And I don't think you have any peers that have been able to do that.
So and it jumps off the page to me is, is just an a great accomplishment and we've got to go forward and now operate in this, the new 2025. The one thing that has you play more defense, your loan book has, has dropped from about 3.9 billion at the end of 22 to about 1.6 billion. Pretty, pretty significant reduction in direct lending.
I guess my question is, and you do a lot of things, but I, in my mind, I see direct lending as you sort of the heart and soul, your, your core competency for all commercial mortgage res can you in 2025 do you think net you can grow your loan book by as much as 1 billion? And if right, what would you expect your average return on equity on the loans you might make in 2025? So two part question, can you do a billion net? And what would you expect to earn on that? Thank you.
Okay. Thanks Steve and yes, we have noticed that book value. In fact, the Pamela has a chart that she sent around to the whole group of people, kind of demonstrating that and we were quite proud of it. Obviously, we got paid back at a better rate than a lot of other people did. But obviously some that comes with something else and that, as you said, the loan portfolio has dropped quite a bit.
What's, what's interesting is if you parse out the drop in 3.9 down to 1.6 billion. So we are probably one of the most unlevered companies in the space providing and as reflected in our dividend, which is I think is one of the lowest in the space. But right now, I think we would like to tell you that with so far at 4.3% I think I might have that right.
At 300 over that would get you to 7.3% unlevered throw in a point each year for fees maybe or even a half point that gets you to 78, maybe eight and a quarter. So that's the unlevered return that we would be targeting. That said, I most loans that we're writing are not 300 over, they're more in the 275 area. But as rates rise and we think they will, then those spreads will tighten. It, if they don't just go up one for one and if rates fall, those spreads will widen.
So, the yield that I think we're targeting on an unlevered basis is, is probably something, 8.5. Now when you get paid off on a billion dollars' worth of loans that are yielding 9%. If you put the money into a money market fund, you'll get about 4%. Right. And its a, ultimately you lose 500 basis points of net interest margin by holding cash instead of the loans by taking the stop and, and understanding the time delay in application to closing, and taking a comfortable place to go. And there are two T bills at 432 and, you know AAA securities floating rate which the business is picking up.
So, there's more cl Oz going on right now. So, for instance, in 2025 just in the month of January, we have so far this year, we have purchased $228 million of AAA securities and the average spread there is 140 the credit spread, and the average yield is 578. And that's interesting because you say, all right, 140 spread.
And I'm telling you that we're trying to write loans at 300 over about half of what A AAA is yielding to you. So, because those spreads are still relatively high and keep in mind if I just add that 228 million to what we bought in the 3rd and 4th quarter of this year, we've actually purchased about $950 million of securities and the average yield on those is 646. So, we don't go from 9 to 0 or 9 to 4 on the net interest margin.
We go from 9 to 6.5 and then we'll hold there for a little while until we find attractive ways to deploy that capital into higher yielding loans. But I think what you're seeing right now at Ladder is we went from the All right, let's make sure we were good on credit. We tell people we were, let's make sure we are. Okay. Check that box because we just got paid a lot back in a year.
Earnings, push downward a little bit, but benefited by the fact that the short term interest rates are quite high. The curve is still rather flat. And you know, we will be moved. You're going to start to see us move out of securities and t bills and into loans. Will we add a billion? I can't imagine.
We won't. II think we will add a billion. And in the, in 2024 to illustrate this, we originated, I think it was $128 million in the fourth quarter and very small amount in the second quarter. But the 1st and 3rd quarters, we didn't originate any loans. That's not going to happen again. And I suspect that 128 million in the fourth quarter, we, that we will dwarf that number going forward.
And when I say we've got 250 million under app right now that that number could double in two weeks and probably will. Because we're, the world is waking up and brokers and borrowers are starting to notice that latter is holding a lot of capital and has a very flexible and balance sheet where we can do a lot of different things because we're not beholden to the securitization market or the repo market, both of which we rarely, we rarely visit anymore.
We've got some cl Os outstanding too that have been paying off rapidly. So, we could call one of those. So I would tell you for the tail end of February, we're probably going to cut some expenses on the interest side and pay some things off. We'll continue to acquire securities as long as they're in this neighborhood. But our preference and, and our push right now under Adam Cipher's or donation group is to add bridge loans in the 275 ideally 300 area.
Right now, there's a little too much pressure on that for me to tell you we're going to do 300. It's probably going to look like 275. So, but, but good normal recovery end of cycle, turn, gather cash, harvest your loan portfolio, then move into security. So, you're not earning zero while you're shopping for new loans and then oh, never ever compromise the credit side of the business at any price.
And you keep your, you get your principal back, you're going to be ahead of 90% of the competitors. So we'll focus that and we're not overly concerned about how fast that happens. These assets are. We don't have to figure out where we can write loans today. We have to figure out where they can pay us off in 2 to 3 years. And that's a slight detail that a lot of people overlook, but pretty comfortable with our ability to do this. I love the position we're in right now. We have access to every debt market out there.
Some of them are quite inexpensive right now. We could probably borrow more right now, but we obviously don't need any additional cash. And the only thing staring at us is we got a little less than 300 million coming due at the end of October in the corporate bond market which we already have covered if we want.
And you know, with that upsizing of the revolver to 825 million, we really don't have to keep a lot of cash on hand anymore. So we're really looking for full deployment here and, you can do some math on if you add $3 billion you know, to your balance sheet at a net spread of 200 basis points. You know, you start adding some numbers up meaningfully here and that, that's what I think we're looking.
Forward.
To.
Fine. Thanks. Thanks for all that color. Just to be clear that 8% yield, bridge loan yield would, would move up to what low double digits when you put a little leverage on it depending on the nature of the leverage.
Right?
That's correct. And by the way, I'd also note too the $950 million of securities we purchased. They have right now, these are AAA, they have a six and a almost 6.5% yield if we put leverage on that, that goes to 11. So, and re easily fable and so we may not just sell them.
They, the spreads continue to tighten AAA at 140 which is where we've been buying them in the in 2025 that those are still quite wide, not, they're not as wide as they were in 2022 where, where CL OS are being originated at 225 on AAA, but they're still pretty attractive. I suspect that AAA spread on CL OS will probably get down around 115, 125.
Thanks for the call.
Operator
Our final question is a follow up from Jade Ramey with KBW. Please proceed.
Thank you very much. Wanted to ask a strategic question. Given the high cash balance, when you look at the commercial mortgage rates based, the three names that have traded at material premiums to book value were Starwood due to its diversification BXMT due to its scale and Arbor which is due to the agency service business.
And I was wondering on the agency servicing business which is in multi family. Do you see any opportunity to partner with ad lender? Say a walker and dunlop? There could be a lot of potential value creation if Ladder were to co originate loans and participate in, the downstream servicing economics. The XMT has established a relationship with M&T curious if that's something you think is reasonable to.
Pursue.
It's reasonable to pursue it. We don't have anything like that underway right now and I do see you, you're seeing, I think that M&T thing that you saw it with somebody that's a tie up. There were quite a few of those going on a couple of months ago.
I haven't heard of too many recently but I suspect, there, there's a lot of money moving into the private capital market right now and, and some, a lot of it is moving. It's not like the big banks are making loans anymore. They're kind of just making the introductions and going to the rating agencies and then let the market tell borrow where the, where the rates are.
But I do think when we have been approached by some parties who are flush with cash, think real estate is an opportunity, a little hard to figure out how to get an, a team in place when there's losses in a lot of places right now. So, we are getting a little bit of attention where people I would, would probably like to see us do a sidecar with them where we manage some funds for them, where we each own part of it.
And I suspect that'll come more from the insurance side rather than from the servicing side. But we're open to suggestions and, if we appear to be a little less interested in that then perhaps you might think we would be, I mean, that's very good income inside of a re but I would say that given the amount of capital we've got right now. It's we're a little hard pressed to do anything other than something that's very attractive to our shares and our shareholders. So, I suspect if we get through about $2 billion of new originations that then that probably will become a little more interesting.
And right now, we really do like the tar, the investment environment that we're in and we're fortunate to have all this capital. I don't think we want to start exporting our expertise or our capital to a, to a third party, but I do think that you could see us with an insurance company along the lines of what some of our competitors do. I think Apollo has an insurance company. They invest Benefit Street does too. But so we, we'd be happy to do something like that, but we're not underway in any discussions on that right now.
Thanks a lot.
Operator
We have reached the end of our question-and-answer session. I would like to turn the call back over to Brian Harris for closing remarks.
Just thanks for listening in. It's been a while since we've spoken to our investors on the on the equity side. And we look forward to the year ahead.
We're already coming out of the shoot in very good order. And I think that these numbers of origination that we're looking at will go up dramatically in the in the year ahead. So, get on the train with us and we appreciate having you. And thanks again for a fruitful 24.
Operator
Thank you. This will conclude today's conference. You may disconnect your lines at this time and thank you for your participation.
