Welcome to the Ladder Capital Corporation Earnings Call for the Fourth Quarter 2015. [Operator Instructions]. I would now like to turn the conference over to Ms. Kelly Porcella, Associate General Counsel for Ladder Capital Corporation. Thank you, Ms. Porcella. You may now begin.

Thank you and good afternoon, everyone. I'd like to welcome you to Ladder Capital Corporation's earnings call for the fourth quarter 2015. With me this afternoon, are Brian Harris, the Company's Chief Executive Officer and Marc Fox, the Company's Chief Financial Officer. This afternoon, we released our financial results for the quarter ended December 31, 2015. The earnings release is available in the Investor Relations section of the Company's website and our annual report will be filed with the SEC later this week. Before the call begins, I'd like to remind everyone that certain statements made in the course of this call are not based on historical information and may constitute forward-looking statements. These statements are based on Management's current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. I refer you to Ladder Capital Corporation's Form 10-K for the year ended December 31, 2015, for a more detailed discussion of the risk factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements. The Company undertakes no duty to update any forward-looking statements that may be made during the course of this call. Additionally, certain non-GAAP financial measures will be discussed on this conference call. The Company's presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP are contained in our earnings release. With that, I'll turn the call over to our Chief Executive Officer, Brian Harris.

Thank you, Kelly and thank you, everyone, for listening in on our call today. We're pleased to report that for the fourth quarter of 2015, Ladder reported core earnings of $50.1 million and for the full-year, we earned $191.5 million. Our pretax ROE for 2015, was 12.8% and 12% on an after tax basis. In the fourth quarter, we originated a total of $935 million in loans comprised of $812.8 million of loans targeted for securitization and $122.4 million held for investment on our balance sheet. During the quarter, we participated in three securitizations contributing a total of $604 million, resulting in a gain on sale of $13.3 million, for an average profit margin of 2.2%. For the full-year, we contributed a total of $2.58 billion into 10 securitizations, for a gain on sale of $67.6 million or an average of 2.6% profit margin. All 10 of these securitizations were profitable. In January 2016, we contributed $82.4 million into our first securitization of the year, resulting in a gain of $800,000 or 1% profit margin to start us off. In our securities portfolio, we added $145.6 million and sold $56.7 million, in a relatively quiet fourth quarter. In our real estate portfolio, we added 18 assets at a cost of $52.7 million and during the quarter, we also sold one office building and 41 condominium units for a core gain on sale of $11.6 million. At year-end, we held total assets of $5.89 billion, including $109 million in cash. We had a debt-to-equity ratio of 2.9 to 1. Unfortunately, our current stock price is trading at a fairly steep discount to book value and when we saw our shares trading at 65% of book value in mid-January, we took some steps that seemed prudent against that backdrop. It seemed to…

Thank you and good evening. I will now review Ladder Capital's financial results for the quarter and year ended December 31, 2015. In 2015, Ladder generated core earnings of $50.1 million in the fourth quarter and $191.5 million for the year. These amounts compare to $52.9 million and $219.3 million, for the fourth quarter and calendar year 2014 respectively. Core EPS for the fourth quarter of 2015, was $0.45 per share, compared to $0.32 per share in the same period last year. Core EPS for 2015, was $1.85 a share versus $1.36 per share in 2014. Despite unfavorable market conditions and significant spread widening that affected securitization profit margins during the second half of the year, Ladder generated a 12.8% pretax return on average equity and an after tax ROAE of 12% during 2015, based on an average shareholders' equity balance of approximately $1.5 billion. Looking back at the fourth quarter and calendar year 2015 and comparing the results for the prior year, the financial results were most heavily influenced by less favorable securitization market conditions, higher average level of investment assets held by Ladder during the past year and ongoing cost reduction efforts. Brian has already discussed the conduit market conditions at length, so I will limit my comments. For perspective, in 2014 and 2015, Ladder participated in 10 securitization transactions in each year. The average securitization profit margin in 2014 was 3.65% overall and 4.08% for multi-asset transactions. In 2015, a year in which we only executed multi-asset securitizations, the average securitization profit margin was 2.6%. The impact of 2015's higher levels of investment assets can be seen in the following fourth quarter comparisons. Interest income was $62.9 million in Q4 2015, $6 million higher than in the same quarter in 2014. And net rental income was $14.4…

[Operator Instructions]. Our first question is from Steve DeLaney of JMP Securities. Please go ahead.

Brian, I was intrigued I know this is a time for people to play defense and be cautious but it seems like while you are doing that you are excited about I think to take your words, go on full offense. As you see this playing out in the months ahead, can you give us any sense of where you think the best risk-adjusted returns maybe for Ladder. CMBS seems to be obvious but I'm wondering if you are also seeing better pricing opportunities on senior portfolio loans as well? Thank you.

Sure, Steve. Correct what you said. I think the two products that stand out as having gotten much more opportunistically priced are obviously spread related products in CMBS. As we said we don't own too many longer dated securities, they move around quite a bit in price volatility. I will say that I think some of the longer dated securities that we have been avoiding for the last couple of years are now becoming much more in focus to us because you can imagine the BBB fallen by 35 to 40 points of value. Thankfully we have sidestepped that devaluation but there are some that we might start waiting into there and that will take a little while for them to come back but if we can find good credit instruments I think that we would certainly start moving out on the maturity curve now and having avoided it for a while now. Bridge loans also, I think the securitization market, the so-called conduit business has gotten very, very difficult because of the lack of liquidity and really the gaps and spread widening. And this had a result not only on our corporate bonds that we mentioned we purchased causing the price of those to fall but also its caused a little bit of a liquidity crunch in that a bit of borrowers simply want to refinance into something short term until the volatility blows over. So Bridge loans certainly are the ultimate liquidity experience. If you can provide short term financing that’s prepayable to a borrower you can charge more aggressively for that now. So that is where we're focusing our activities these days.

At the end of year you had $572 million of loans held for sale. We've noted one Deutsche Bank deal that looked like you sold 82 million. I know there is a comp deal in the market this week but thinking about the 572 and the 82 that's been reported, how do we think about the remaining loans? You were definitely sounding like you were pulling back. Is it possible those loans will stay on the balance sheet for some time rather than committing them to a deal? And I assume if they are held on the balance sheet, are you required to mark those to market in some fashion? Thanks.

I'll let Marc answer the mark to market question but first before that I will just say that a lot of loans that we originate and then securitize, they are sold in the same quarter oftentimes and you did see a small contribution from us in a first quarter transaction I think as I said 82 million I think. We may very well hold loans on our balance sheet but I don't you to think we have $572 million on our balance sheet of 10 year products. In fact I'm going to ask Marc to correct me if I'm wrong but I believe the two largest loans that we wrote in the fourth quarter and into the first quarter were $240 million five-year loan that we were securitizing in pieces, so that’s now six months old. I think we did that loan in September and I think we split that loan with another party, I think it was 2/3rds 1/3rd and the other large loan that we've written is a $125 million loans that I believe closed in December or early January and that is also a five-year loan going along with the theme I mentioned there that we will position five-year loans preferably. In that transaction it was a $195 million refinance where the borrower paid down the loan $65 million dollars .So we're pretty comfortable with that from a credit perspective. Again, we have ample financing options and we're very comfortable owning five-year on balance sheet. In fact one of the things that we see many times is we generally run a real estate investment operations but we occasionally access the capital markets to push our ROEs up but when it's not an appropriate thing to do we will certainly happy to hold them on the balance sheet.…

It's nice to know what you are holding has the shorter spread duration than the five-year loans. That’s very helpful. Thank you, Brian.

Okay. Thanks, Steve.

The next question is from Dan Altscher of FBR. Please go ahead.

Brian, in the prepared remarks you talked a lot about some of your own corporate debt that you brought back and the values there seems to be pretty favorable. Can you just maybe give us a little bit of color as to why you chose to get aggressive on the debt as opposed to maybe the common and is that may be -- can you do path that -- the extent of that still traded at discount if you can do that over the common at this point?

I would tell you I don't think we have much of a preference necessarily. We're not actively seeking those investments on the debt side however we occasionally get phone calls where they are being offered. It seems there is a correlation on the 2021 bond to the price of oil and as oil falls that bond sometimes becomes available. I suspect what's happening there is the margin calls in the energy sector are hitting the high yield market and they are selling things to meet those margin calls and our bonds maybe one of the things they offer for sale. So it's a very attractive yield obviously but it's not due to six years and so at a certain price we certainly will act on those. The 2017 bond on the other hand is a fairly high rate bond at 7 -- 3.8s and when you’ve your stock trading at a discount to book value where it was, I think it's prudent to have a lot of cash and I think in general you want people to understand that you are very liquid and you're capable of purchasing things but I think sometimes rather than purchase a mortgage investments, you might want to show cash because the mortgage investments are clearly being discounted by the market. So I felt at one point if we written a $10 million loan the market would've told me it was worth $6.5 million when I left the closing. So sometimes these aberrations take place and we try to take advantage of them. On the other hand the given the 7 and 3.8s bond is due in 19 months if you’re holding a lot of cash and we hold a lot of cash generally you at some point realize that cash you're holding is costing…

I think probably a question for Marc, in the prepared remarks and in the press release you talked about one of the new rules with FHLB being maybe the 40% limit. Can you maybe give us an update as to how much debt is that cap relative to the assets where we have seen them before after the rule right now and if also you can give us an update on what the maturity profile of the advances look like, have you been able to extend those out, do a full 10 plus [Technical Difficulty] at this point? Or are you looking to?

Sure. Let's start with where we're right now. We have about $2 billion worth of borrowing capacity at the FHLB based on the new rule. We've got a little bit more than $1.9 billion outstanding at this point in time. We have maturities that are spread out over a period of time extending all the way through September of 2024. We have gone and since the new rule had the opportunity to move some of our maturities as they have rolled out to date but as you know we can't roll those maturities beyond February 2021. And so at this point, we have about -- it's about 40 different tranches of debt spread over that time frame. I think the biggest tranche we have is $65 million.

I was just hoping to follow-up, I cut you off but also the 40% question as well.

That's how I got to the $2 billion in capacity.

Got it, okay.

And what is our term left, I think he asked that question.

We’re at about 2.5 years on average.

The next question is from Jade Rahmani of KBW. Please go ahead.

I just wanted to ask how much concern related to the real estate cycle declining underwriting standards, commercial real estate valuations do you think is affecting CMBS or would you say it's purely technical? And also related to that in your past securitizations which I know you track as well as across your real estate portfolio are you seeing any signs of credit deterioration, a decline in fundamentals in either your on balance sheet held for investment debt portfolio or your owned real estate?

Okay. I think first I think the problem that we're largely faced with these days is technical however I think that technical problem is being caused by a very real credit event in a sector. I get asked a lot of times is this feel like 1998 or does this feel like 2008 and it feels like 1998 to me when long term capital caused the liquidity problem in the system and it was largely over in 90 days. My general opinion is that because of the decline in prices in many parts of the energy sector I think the coal industry has all but gone bankrupt at this point. Those are real credit events and they are causing liquidity events in other places and you saw what MLP's did, that certainly caused some problems, too. But as far as real estate underneath the reason I call it a technical problem, it's not a technical problem in North Dakota and it's not a technical problem in Houston. So we're seeing inventories and past securitizations were delinquencies are kicking up actually rather rapidly especially in certain oil related cities and some of the fracking towns as far as Ladder goes we do not have exposure to those markets. We do own one coal department store, I think it's in South Dakota but it has a 15 year lease so I wouldn't call that exposure to oil even though it's in the neighborhood where it could be. So we do see some of these areas as definitely getting soft especially as I said Houston in particular is a problematic situation for CMBS because it's a very big city and there are a lot of assets there. But as far as on our balance sheet we're seeing none of that.

Based on your vantage point in your interactions with various players across the securitization markets, what do you think is a reasonable expectation for 2016 securitizations volumes for the broader market? Do you think it's too difficult to say right now or would you be comfortable putting out a number, something maybe in excess of $60 billion or $50 billion? I don’t know what you’re comfortable with that.

Jade, I'm uncomfortable with that question every day. I'm particularly uncomfortable with it now, I have no idea. I tend to think that I will go so far as to say there is going to be very little supply in CMBS in about 60 days and if I'm correct and this is more of a technical event than a credit event with a couple of exceptions understood in the oil sector. I do think the spreads will rapidly come in here pretty soon. We're not necessarily planning for that, I just tend to look out on the calendar on what I know is being securitized and it comes to a pretty abrupt halt because of this violent movement in spreads in the recent past year. So I think the technical nature of this should show up at some point. I know that there are some different views of that but in a world were $4 trillion of sovereign debt is negative, I can't help but think at some point some alternative investment manager who hasn't been in CMBS before might start thinking a 9% BBB secured by real estate in a recovering economy might dollar based, it might be an attractive investment. Unfortunately that alternative investment manager has not found that market yet.

Regarding your core businesses, can you provide a range of how much you think would be reasonable to expect to either originate from on balance sheet loans each quarter and also do you need to ratchet up production in order to keep originators busy and happy?

I think rather than specifically going to those answers I would just tell you that Ladder is a balanced operations so that when one part of our business model turns off be it for whatever reason, usually another one goes on. So we will oftentimes -- when you hear the CMBS I think the commercial mortgage had a headline a couple years ago that said giant loss in CMBS originators. Well it's a zero sum game, if somebody is losing money, somebody's making money. And if you're selling securities and losing a fortune there is a good chance the guy who is buying those securities is probably going to do pretty well and the borrower is going to do well because you can't borrow at that rate anymore. But I think that there is a reset going on right in pricing of liquidity and even to imply that I understand how many bridge loans on the balance sheet we can write at rates I really don't know and the reason why is because the rates are much different than they were even 90 days ago so it's a question of borrowers who have the ability to wait versus borrowers who need to fund right away. In addition I think that the refinance pipeline is certainly slowing down because of where spreads are but let's not forget there is a hell of a lot of loans maturing. So there's going to be a pile up in here soon at some point .So I wouldn't be surprised if this is a drastically lower quarter in the second quarter and maybe part of the third quarter as originations have nearly stopped and I down mean down 20%, I they are down 80%, 90%. So the second quarter will be the first sign of that and the third quarter will probably have some hangover approach to it but I tend to think by the end of the summer, I think most of this will be back under control and back on track in a more normal environment.

In response to Steve's question I think you talked about playing in the gamut across the credit spectrum and you could pursue your own securitizations. It sounded like I felt a hint that you might be interested in the servicing business. Just wanted to ask about that, would you be interested in acquiring or building a special service?

Yes, we have looked at that a couple of times -- when I service I hear [indiscernible] and it's a very good business and there is another balancing component where it kind of works as a hedge against some of the securitization businesses but that we do not have one of those scheduled right now nor are we actively looking at one.

The next question is from Charles Nathan [ph] of Wells Fargo Securities. Please go ahead.

Could you comment on the net lease property acquisitions during the quarter and specifically what types of markets those acquisitions are in and what you're seeing in terms of pricing and sort of how it compares to comparable transactions you might've done in the past?

I think we bought about 17 net lease properties I believe and based on the volume you can tell most of them were rather small individual investments and so as far as geographic go I think we’re spread at least in that quarter across Minnesota and a little bit along the snow belt. Most of those are discount retailers with net leases for probably 15 years. The cap rates we were buying them at were similar if not slightly wider to the ones we had been buying them a year ago and as far as transactions today go, it's fairly muted pipeline at this point, not really because they're not available at those cap rates but the financing rates that go along to fund those purchases have gotten very expensive. So I would say the equity business for us is always hand-in-hand with the debt business and while we're selling some assets too all the time, I think we will always acquire them with an eye I towards what does it cost to finance them. So when the cost to financing those purchases goes up dramatically as it has recently like the rest of the market we too pull to the sideline and our acquisition pipeline falls abruptly.

Okay. As a follow-up we saw one smaller conduit lender close up shop last month and presumably there could be more in light of some of the volatility we've seen in the market so I was wondering if you could comment on the competitive landscape for conduit lenders and whether you see that as an opportunity once things hopefully get back on track in the second half of the year?

Well this will certainly cut the herd for sure. I think there's a couple things going on that impact especially some of the slower conduit players but for instance when a BPs [ph] buyer has a lot of authority and he kicks out 30% of the loans in the pool oftentimes those line lenders that finance those positions will ask those lenders to remove those positions from there lines. So I think that causes one set of problems that was probably largely unanticipated by those lenders. So I think there is no real competitor right now in the conduit business because I don't think anyone is terribly active in the conduit business because the entire sector is being ceded to banks and insurances companies today. We actively write loans that are five years as I mentioned earlier some of the large loans. So we function very much like a bank in shorter term products, five-year and bridge loans. We're happy to write 10-year loans also but we have an eye toward securitization and hedging on those 10 year instruments and it's frankly just it's [indiscernible] right now and that's one of the reasons I think I would just indicate the conduit business is going to take a knee for about 90 days and that will start probably about 45 days from now.

Okay. Finally there's some legislation out there relating to Dodd Frank risk retention and single asset securitizations along with at the BP's could potentially be split. Could you comment on the prospects of that legislation? I know you done some single asset securitizations in the past, how you think about that shaping the market over the next year or so?

I'll answer this for the extent of my knowledge. I believe this came out last night and we have spoken to some government officials regarding exactly this topic but I don't know enough about it right now to see what is actually going to go through and what is going to pass. I think that it's a bit of the big hill to climb but there have been certain things that made it easier especially in the single asset securitization world if it goes that way. But given the recent passage of something which was as early as last night, I really don't feel -- I don’t want to speak on it as an expert. I don't know, our attorneys are downloading that information now.

[Operator Instructions]. Our next question is from Rick Shane of JPMorgan. Please go ahead.

We're starting to see in the mortgage beat space bar little more activity in terms of strategic considerations, changes in structure, sales and acquisition. I'm curious given where you stand right now whether or not you see any opportunities and the other thing I would ask you is -- this is a company that historically was very well funded privately. It appears that most of those original investors have not reduced their positions at all over time. Does it make sense given the valuation to think about bringing this in?

I'm sorry, Rick, what was the last line you said?

Does it make sense to consider something along the lines of taking Ladder private at this point?

That's an interesting question. It's one that has been debated. We do have many of our original investors still. I don't think that the company will go private however if you were to see the price to book value stay very low for very long time and I can't speak on behalf of the owners of those shares but I know the numbers start clicking in my own head and although I’ve never really approached anybody to go about doing that, but you have to believe if you think that your book value is solid and you are trading at a 40-point discount to book value, yes of course, any financial expert would run those numbers in there head. But so does it make sense? Yes, at some point it sure does but I don't see that happening in the near term. I think our objective in the short term here is to really improve book value and get this discount dispensed with and I think we should be a lot to do that because I think one of the things that most of this market doesn't fully understand about Ladder as we’re rather new is our ability to generate cash very quickly. So when we can deleverage the balance sheet by buying our own debt back or our own stock back and make appropriate investments considering where the market is we're not forced to be in anyone business at all and we're pretty comfortable in these volatile markets. They don't particularly bother us.

It's interesting. We understand the strategy and the ability to go to different corners and different markets and I think over the next few months we will really see the benefits of that. I also appreciate at least acknowledging the consideration of taking the company private. I know it's a tough question in a forum like this but it's good to know that you are weighing all the options out there. I assume given the multiple that doing anything despite the fact that you might want to be a little more aggressive offensively in terms of making an acquisition is a little bit difficult.

Yes, of course it is. We would always look at things that realistically we took this company from $1.5 billion in assets to $6 billion in a short period of time. And if you are trading at a premium to book value I think that number goes from $6 billion to $8 billion pretty quickly too but if you’re trading at discount to book value I think you really have to just face the realities of what you're looking at in the market and I think it's time at that point as I heard one other CEO of one of those REITs mention caution is prudent and prudent affects earnings. That’s translated to mean cash and it needs to be around to make sure everybody is safe and we subscribe to that theory. So you will see higher cash balances. The fact that we were able to upsize our unsecured revolver to $143 million is very, very helpful in this market and I think we will continue to do the things we can do while our stock is a little impaired but we're making every effort to move the stock up to book value and then we will start working on our outstanding are ROEs. As a CEO of the place it doesn’t feel like it's an earnings conversation when you make $50 million in the quarter and stock drops 30%. I think it starts how much money are you down and we're happy to take that argument on and we will and when we return the stock to book value we will fighting off the front foot again.

It sounds honestly like the right thing to do. I think you will at least in the short term potentially be surprised by how confused people get by doing the right thing but in the long term it tends to work out.

Rick, we sat around one day, I know Facebook has hackathon's. We literally sit around offices and throw out wild ideas and think about what are the possibilities we can do and one person said, what if we showed up on New Year's Eve with no earnings, no dividend and $1.5 billion in cash and the answer was the stock is up 30%. While I don't want anybody to misinterpret that line, we're not planning to do that. But there is a version of that doesn't involve a dividend cut and doesn't involve any form of selling anything because we have such a short book. Our book pays itself off very quickly. We got paid off today in the $75 million hotel loan it was 50% leverage so we have now another $38 million in cash and frankly I don't have a big pipeline of applications for the conduit securitization business but I have plenty of investment opportunities.

The next question is from Ken Bruce from Bank of America Merrill Lynch. Please go ahead.

You have addressed a lot of the questions so I would try to keep this brief. It sounds like you think that a lot of this dislocation in the market is going to pass over the course of next month and half, two months and because of that you're basically just going to keep your head down and just block and tackle with your lending portfolios in the like instead of CMBS but if that is not the case, if we have this prolonged period of the current market backdrop, what changes if any would you make to your business?

As I said, we're pretty comfortable in times like this so what you are describing is a long period of time where there's a lot of volatility and a lack of liquidity. That would suit us very well. We would be comfortable with that because we stay liquid, we stay very short. We're well financed through various vehicles, as you know we have the federal home loan bank for five more years. So I would tell you that given where securities are trading, where spreads have widened to they are extraordinarily attractive right now. They are rather liquid and they can easily be financed so I think to take your chances on a 10-year conduit loans that has to go to a rating agency and BPs inquisition and partner up with a few people and get sold with AAA's and BBB's and see where the market is, I think that's a tall order when you can simplify buy those securities while the people selling those are suffering. As I said it is a zero-sum game and we're able to acquire highly rated securities at relatively low prices. I don't mean AAA three year securities. Those are selling around at par right now and they are very easy to sell and they are very easy to buy but if you want to extend out on the maturity a little bit more we feel like our credit skills in-house are capable of selecting the right assets that will not have any problems and we will continue to do that.

And in terms of the portfolio I understand but in terms of the operating platform would you make any changes there or do you think would with that business support your footprint?

I don't believe the conduit business is nearly dead. I think this is an interruption I have seen many times. This may seem a little extreme because I don't think we've seen the energy sector collapse like this before but I've certainly seen recessions, I have seen Fed raising rates. I have seen long term capital causing the head of the banks to all meet with Federal Reserve and liquidity problems and they are typically followed by very attractive investment periods. So while I don't think the energy problems is going away anytime soon, I think that at some point there will be tremendous write-downs and once that gets over with I think some of this volatility will slow down. However there are other structural issues that are causing volatility that are not going away. Dodd-Frank, I don't know what it's necessarily intended to do, it is absolutely causing liquidity problems. So I don't want to imply that volatility is going away in 45 days. I just think it's going to settle down but when you think about the investment and liquidity apparatus in the United States, it is drastically impaired.

Right, I guess that's the paradox I mean your business is set up benefits from these situations and it feels at the same time that you have to play bunch of defense when you get into one of these markets and maybe it's just a matter of time of being able to get better price discovery and at least some comfort in terms of where you are transacting everybody is kind of backed into a corner.

We used to do $5 billion and $7 billion transactions in 2006. We can't even approach that but yet you did see Apple do a large corporate bond offering, Exxon did another one the other day. So it isn't like it's gone but I think that the CMBS sector and the REIT sector for that matter having been -- the CMBS world sometimes intersects with high yield and I think that the REIT investor world sometimes interests with MLPs, so I think that’s adding a little bit more pressure and the lack of liquidity in the few areas. The mantra around here is be tight on principle and make sure you get paid back. We're not overly concerned if we have the right interest rate as long as we get paid back and we keep the leverage in the sanity column and that has served us well for decades so we'll continue to do that and we'll be more liquid in these more volatile times that we've set of the organization. Just the fact that we own $2.4 billion in CMBS that has a three-year average life is indicative of a fair understanding that liquidity can evaporate pretty quickly. We didn't become that in the first quarter when we saw liquidity problems, we became that five years when we started buying these things.

The next question is from David Lapierre of Loomis Sayles. Please go ahead.

I appreciate your comments on the FHLB and your funding profile, have you guys seen any changes from the big banks repo lines, on margins or anything there?

We have not. I would hesitate to say it but if anything were slightly more aggressive terms from the banks on highly rated securities. I'm not necessarily seeing any changes in the way we finance our home [ph] loan portfolio or our bridge loan portfolio however the two-year or three year AAA is very easier to finance business today than it was three months ago. I think what you're seeing is a flight to quality there. Banks truly understand that those assets are money good so they are happy to be aggressive around that and I think what you’re seeing is they are less aggressive on the BBBs, BBs and A and AA portions of this sector. So the answer is neutral to positive changes as far as Ladder's inventory goes.

Our final question comes from Joseph Zhu of Frost Investment Advisors. Please go ahead.

Just quick question for you, do you have any off balance sheet unfunded commitment to your borrowers?

Yes, we do but they are pretty limited because we're not a construction lender per se and that’s where you really end up seeing that.

I think the nature of your question is do we have any large commitments and the answer is we have very small ones and we set up a company that way and any time the volatility this company can ship the cash off going out the door very quickly.

Okay. Would you say less or more than maybe $100 million or what is the magnitude of that commitment?

I would think it's much less.

And also looking at the FHLB, the five-year thing, do you have difference in the quarter in terms of the asset encumbered for the line versus an unencumbered assets?

The federal home loan bank is very conservative in what they will finance. They take AAA and AA securities, they do not take single A. securities and they are not aggressive financers of home loans that when we make loans to properties, I tend to prefer multifamily properties as opposed to hotels but obviously the unsecured line is just the unsecured line but the home loan bank is not a very aggressive advanced rate lender. The rates tend to be low but they are certainly not high leverage information at all and I think that's important because one of the things -- we took an unusual step today and we told some people in our largest holdings in securities and the reason we did that is because first of all we wanted them to know how short they were and of course everyone of you can check with the people you know in the mortgage business as to what those might be and we're pretty comfortable with all of you doing that. But I also wanted you to know too that those positions that we own at least in the AAA and AA areas, if we were to remove them from the federal home loan bank and put them on our bank lines, the bank lines are more aggressive on the advanced rate and our actual ROEs would go up and not down.

So in another ways of saying that [indiscernible] the mainly not securities but they are more like loans, right?

It's a combination of securities, loans and real estate.

Looking at your CMBS investment portfolio now and congrats your early kind of position you have been buying that in the past five years but as they mature do you have any big shift in terms of the size and also are you going to be slightly down in credit in terms of buying CMBS bonds going forward?

That is a decision we make on a day-to-day basis. The reason we tend to keep things very short is with enough because they are investments in CMBS, they are really just better than in cash. We don't like holding cash in the bank at zero and we're comfortable with price volatility or lack of price volatility on short AAA's and we can sell them pretty quickly if we need or want to when we see a better investment. Depending on where things are, we will easily move into down in credit if we'd like to. Historically we haven't done that very much. We prefer liquidity, we do feel we can underwrite down credit very comfortably well at today's prices. If everything stayed right where it is right now we would certainly be going longer out on maturity and slightly down in credit, down in credit meaning A and BBB not down in credit unrated and BB.

Thank you. I would now like turn the conference back over to management for any additional closing comments.

That's it from here. And we just want to thank everybody for staying with this and it was rather long call but we felt additional detail was a little helpful here for you and hopefully you thought so too. So thanks very much.

Thank you. Ladies and gentlemen this does conclude today's teleconference. You may disconnect your lines at this time and thank you for your participation.