Earnings Call Transcript
Ladder Capital Corp (LADR)
Earnings Call Transcript - LADR Q1 2023
Operator, Operator
Good afternoon. And welcome to Ladder Capital Corp's Earnings Call for the First Quarter of 2023. As a reminder, today's call is being recorded. This afternoon, Ladder released its financial results for the quarter-ended March 31, 2023. Before the call begins, I'd like to call your attention to the customary Safe Harbor disclosure in our earnings release regarding forward-looking statements. Today's call may include forward-looking statements and projections, and we refer you to our most recent Form 10-K for important factors that could cause actual results to differ materially from these statements and projections. We do not undertake any obligation to update our forward-looking statements or projections unless required by law. In addition, Ladder will discuss certain non-GAAP financial measures on this call, which management believes are relevant to assessing the company's financial performance. 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. These measures are reconciled to GAAP figures in our supplemental presentation, which is available in the investor relations section of our website. We also refer you to our Form 10-K and earnings supplement presentation for definitions of certain metrics which we may cite on today's call. At this time, I'd like to turn the call over to Ladder's President, Pamela McCormack.
Pamela McCormack, President
Thank you and good afternoon, everyone. We are pleased to report that for the first quarter of 2023, Ladder generated distributable earnings of $47.2 million or $0.38 per share, reflecting an after-tax return on equity of 12.3%. Our dividend remains well covered from net interest margin and net rental income. As of March 31, Ladder had over $600 million, or more than 10% of our assets in cash and cash equivalents, with $950 million of same-day liquidity, including our unsecured revolver. Ladder remains modestly levered, with an adjusted leverage ratio of 1.8 times and 1.1 times net of cash and securities at quarter-end. Subsequent to quarter-end, we were able to leverage the company by paying down loans on securities by $87 million, both bringing our adjusted leverage ratio down to 1.7 times and reducing our interest expense by approximately $1.2 million per quarter. In the first quarter, we originated a $15 million multifamily balance sheet loan and funded $19 million on existing commitments. In addition, we've continued to see liquidity for our existing loans. Repayments in the first quarter and through April totaled over $147 million, with $72 million of repayments on office loans, including the full payoff of five office loans. As of March 31, Ladder's balance sheet loan portfolio totaled $3.8 billion with a weighted average coupon of 8.72%. In addition to strong liquidity, we have modest future funding commitments of $290 million, and more than half of this commitment is contingent upon creative good news leasing. We are well positioned to transact as activity resumes in the market. In the meantime, we've been keenly focused on asset management and our significant insider ownership in Ladder helps ensure our full alignment with shareholders in proactively managing any potential risks on our balance sheet. We're currently seeing stable performance in our loan portfolio, including for our office loans, which currently comprise 24% of the portfolio. Notably, 76% of our office loans were originated post-COVID and 56% are located in the Sunbelt. While we will continue to monitor the pressures on real estate valuations, we did not have a need to take any specific impairments in the quarter. As Paul will discuss, the increase in the general portion of our CECL reserve reflects our view of macro market conditions. Our focus on dollars per foot or basis landing in the middle market continues to allow us to both demonstrate a meaningful distinction between the default and a loss on a given loan, and further underscores Ladder's sustained credit performance. Turning to our other business segments, our real estate portfolio continues to contribute to distributable earnings by generating $13 million of net rental income in the quarter, and our securities portfolio ended the quarter with a balance of $520 million. In furtherance of our goal of becoming an investment-grade company, we have maintained a modest use of leverage coupled with a thoughtful composition of unsecured and non-recourse, non-mark-to-market debt, anchored by $1.6 billion of long-term unsecured bonds with bond maturity not until October of 2025. During the quarter, we repurchased $59 million of outstanding bonds at a discount, resulting in a $9.2 million gain and highlighting the dynamic nature of our business model. In conclusion, we like our positioning; our dividend is well covered from a primarily senior secured asset base that is demonstrating stable credit performance. We delivered an ROE in excess of 12%, we have modest leverage, and we have robust liquidity. With that, I'll turn the call over to Paul.
Paul Miceli, CFO
Thank you, Pamela. In the first quarter, Ladder's diverse business model performed well, generating distributable earnings of $47.2 million, or $0.38 per share. Our net interest margin continued to increase and benefited from rising rates and a liability structure with approximately 50% at fixed rate. Our $3.8 billion balance sheet loan portfolio is primarily floating rate and diverse in terms of collateral and geography. The portfolio decreased by $97 million in the first quarter due to $131 million of proceeds from loan pay downs, offset by $34 million from the origination of one loan and funding on existing commitments. In the first quarter, we increased our CECL reserve by 25% to $25.5 million driven by the current market outlook. Overall, we continue to believe the credit of our loan portfolio benefits from granularity with an average loan size of $25 million, and over 84% of the portfolio was originated post-COVID, with limited exposure to any single sponsor or market. Our $900 million real estate segment also continues to provide stable net operating income to our earnings. The portfolio includes 156 net leased properties with strong investment-grade tenants that have long-term leases, representing 73% of the segments. As of March 31, the carrying value of our securities portfolio was $520 million and was comprised of 84% triple A rated securities and 99.5% investment-grade rated securities. In the first quarter, we received $60 million of pay downs on these positions as their seniority and short-dated maturity continue to demonstrate steady amortization. As of March 31, we had $950 million of same-day liquidity and our adjusted leverage ratio was 1.8 times. This liquidity represents cash and cash equivalents plus our undrawn corporate revolver capacity of $324 million with maturity in 2027. Unsecured corporate bonds anchor our capital structure with $1.6 billion outstanding or 38% of our debt. The weighted average maturity of these unsecured bonds is 4.5 years, and they maintain an attractive fixed-rate cost of capital at 4.7% average coupon. As Pamela discussed, in the first quarter, we repurchased $58.7 million in principle of unsecured bonds at 3.6% of par. The retirement of such debt at a discount generated $9.2 million of gains. As of March 31, our unencumbered asset pool stood at $2.9 billion, or over 50% of our balance sheet. 74% of this unencumbered asset pool was comprised of first mortgage loans and cash and cash equivalents. We believe our liquidity position and large pool of high-quality unencumbered assets continue to provide Ladder with strong financial flexibility and is reflected in our corporate credit rating that is one notch from investment grade from two of three rating agencies. During the first quarter, we repurchased $2.3 million of our common stock at a weighted average price of $9.14. Our share buyback program authorization of $50 million has $44 million of remaining capacity as of March 31, 2023. Our undepreciated book value per share was $13.64 at quarter end based on $126.9 million shares outstanding as of March 31. Finally, our dividend remains well covered. In the first quarter, Ladder declared a $0.23 per share dividend which was paid on April 17, 2023. For more details on our first quarter operating results, please refer to our earnings supplement which is available on our website, as well as our 10-Q. With that, I will turn the call over to Brian.
Brian Harris, CEO
Thanks, Paul. We're particularly pleased with our strong performance in the first quarter, especially considering the stress in the banking system that we witnessed toward the end of the quarter. As a few bank failures roiled the financial markets in March, we took comfort in the strength of our balance sheet. When volatility in the corporate bond markets caused indiscriminate selling of bonds and for sellers trying to raise liquidity, we stepped in and purchased about $59 million of our outstanding corporate bonds, generating a $9 million gain in the quarter while decreasing our overall leverage and interest costs. This action was available to us because we had over $1 billion of liquidity at the time, strong credit performance for our asset base, and very modest adjusted leverage of 1.8 times. Our strong balance sheet allowed us to take advantage of the market dislocation in March, and we will continue to seize upon opportunities like this as the year unfolds. We expect that our careful attention to credit liquidity and leverage will continue to lead to strong performance at Ladder. Because our earnings are positively correlated to increases in short-term interest rates, we again saw a meaningful increase in our net interest income that rose to $43 million in the first quarter versus $37.3 million in the fourth quarter, and versus $9.2 million in the first quarter of 2022. We easily covered our quarterly cash dividend of $0.23 per share with our $0.38 per share of distributable earnings per share. Our 12.3% ROAE also compares favorably to last quarter's 10.2% and versus 8.4% in the first quarter of 2022. We stand ready to lend on quality assets that carry modest leverage, but transaction activity has been somewhat slow. We are seeing loan requests and are not having any arguments over the level of interest rates that we charge, but there is still a sticking point in the size of the loan requested. Borrowers are consistently requesting higher loan amounts than we are comfortable making, regardless of the rates offered to us. We expect to see lower loan amounts become acceptable as time goes by, and a likely mild recession takes hold. With not much further to add in a quarter that speaks for itself, I'll leave you with two data points to consider when comparing our stock to other investments. The first is our dividend coverage of 165%, and the second is our modest adjusted leverage of just 1.7 times today. With unencumbered assets of $2.9 billion, including cash at $626 million at the end of the first quarter, we are very well positioned to take advantage of market dislocations or the return to more tranquil market conditions. As regional and community banks contract a bit, now fully aware of how mobile their deposit bases are, we expect demand for our type of mortgage lending program to increase in the years ahead. We're very well capitalized, and the competitive forces in the current market are rather muted. This should bode well for Ladder going forward, and we're looking forward to meeting that demand with our lending capabilities. Let's now turn to Q&A.
Operator, Operator
Ladies and gentlemen, we will now start the question-and-answer session. Our first question today comes from Jade Rahmani from KBW. Please proceed with your question.
Jade Rahmani, Analyst
Thank you very much. Not sure if the 10-Q is filed, I didn't see it, so I apologize if it was. But any credit changes of loans, risk ratings, any updates that we should be aware of?
Brian Harris, CEO
No, Jade, this is Brian. Well go ahead, you can answer.
Paul Miceli, CFO
Yeah, I was going to say no. No non-accrual loans, no specific impairments.
Jade Rahmani, Analyst
Okay. How would you say that the credit cycle is playing out versus your expectations? Clearly, there's a lot of headlines. But there are sizable increases in non-performance. We've seen earnings from the banks, which are taking up reserves quite meaningfully. Some of the mortgage REITs have booked either losses or meaningful upticks in reserves. A couple others have not. But just curious as to how the credit trends are bearing versus your expectations for the market?
Brian Harris, CEO
Sure, I would say that, obviously, you move interest rates up at the pace that they've been moved up over the last year. And you're going to feel obviously, a lot of dollars going into the lender column as opposed to equity column. So there's a little bit of stress in the system for sure. I find though, that there's a lot of equity and a lot of capital in the system also. If sponsors are having trouble extending or refinancing, it does seem to me that if they have capital available, they're willing to protect the assets at this point. And when I say the assets, where I'm really talking about multifamily and office here. The industrial sector we're not seeing a lot of stress in that area at all. Retail is holding up very well also, and hotels, I don't think I've seen hotels doing much better than this in a long time. But like everybody worries about the office side, I think the office side is a little overcooked on the media side where they're telling you the world is ending. I do think there are some big cities and there's some big loans, where this is a bit more of a social story more than it is a real estate story, at this point. You've got depleted amounts of the population returning to work in some of these cities. But I don't think it's necessarily a return to work problem. I think it has more to do with the specific cities; for instance, San Francisco, I don't think could be doing worse, whereas New York is doing okay, Miami's doing very well. So it all depends really on where you are and what the population trends are as far as their attitudes towards returning to work. But so far, at least as far as the performance in our portfolio, specifically, we do seem lease has been signed that anybody who doesn't know and assigning leases is wrong. We are seeing it being slower in the office side in particular. However, oddly, the rental rates that are being charged by landlords are actually higher than we were anticipating in most cases. So it's a little bit of a mixed bag, certainly. But I would say that so far, at least at the portfolio of Ladder, if sponsors have capital, and most do, they are protecting. And so far, most of them what I would call the damage is being incurred on the equity side of the equation as opposed to on the debt side.
Jade Rahmani, Analyst
Thank you very much for taking the questions; I'll get back in the queue.
Operator, Operator
And our next question comes from Sarah Barcomb from BTIG. Please go ahead with your question.
Sarah Barcomb, Analyst
Hi, everyone. Thanks for taking the question. So you mentioned earlier in the script that you have a little over $40 million of capacity on the stock repurchase authorization. That's something that you guys have been doing pretty consistently. I'm just curious how you're viewing the stock price now, if we could expect the pace of stock repurchases to ramp up in the near term and how you're thinking about that.
Paul Miceli, CFO
We have usually plenty of room for that. The Board of Directors gives us a lot of leeway there. We look at the stock as another investment. At various times, and depending on what our capital situation is around cash and what our expectations are for disbursements of investments, we've become more or less aggressive in the area, given the current pricing conditions. Where I see things at this point, at least over the last couple of weeks, I'd imagine we'd be back involved in the next quarter or so. But I wouldn't try to indicate to you that an already undersized company is looking to get a whole lot smaller. You did see us buy a sizable portion of our debt back. At that time, the debt was yielding pretty close to what the equity was yielding. So we had a preference for the debt side.
Sarah Barcomb, Analyst
Okay. And just to kind of move over to the multifamily book. We've received some questions on some of the perhaps more aggressive Sunbelt multifamily lending that might have happened during the rapid rent growth in the ultra-low interest rate period. Can you speak to any exposure that you might have to perhaps negative leverage deals that might have been done during that period and any risk there might be in the portfolio?
Paul Miceli, CFO
Well, we did see a big run-up in prices. And we saw a lot of loan requests for 80% leverage on a purchase price of a property that sold three years prior at half the price it was being sold at in 2021. We tended to avoid those transactions, unless there was a reason that we could point to concrete-wise as to why we would expect the population of that area and the demand side of rental apartments and the income side that might be able to absorb getting to those apartments at those rents. We didn't do a lot of that. In fact, we pretty much toward the end of '21, I believe, we noticed that spreads were widening in the CLO market. A lot of lenders interpreted that to mean it was just the end of the year, and that's what happens when LIBOR and so forget to the end of the year. We did not interpret it that way. So we pretty much began bowing out of stabilized debt yields of six around that time. We began using an eight on stabilized debt yield on the exit. So we don't have a lot of it. We also introduced the program because caps were so expensive, where we were funding construction loan takeouts, where we were funding brand new apartment buildings with CLOs, and the only thing they had to do was lease them up. We were writing two-year fixed rate loans. So a lot of our exposure is in that area, and they'll be coming due in '24 in all likelihood. And I've seen the business plans, they're doing fine. We've had a couple of management misses where you saw some delinquencies pop up inexplicably, but then they solved it the following month; there was a computer problem. So we don't have a lot of exposure that I'm worried about. If I told you, and I don't have a number for you here, but if I had a concern, it would be on the Class C garden-style apartment in a high-crime neighborhood from 2019, where we're 80% levered on a 30,000 unit going into the property because there's a belief that the crime problem is going to be solved and they're going to be able to charge higher rents. So I would look to the vintage as of 2018 and 2019 that have not refinanced yet as potentially where trouble could be lurking. But as far as where we are very attuned to, the debt yield on the exit, and began addressing that in late 2021. So I don't really feel like we have a lot of exposure there.
Sarah Barcomb, Analyst
Right, thanks for that color.
Paul Miceli, CFO
Yeah.
Operator, Operator
And our next question comes from Matthew Howlett from B. Riley. Please go ahead with your question.
Matthew Howlett, Analyst
Thanks for taking my question. First, on payments. I mean, there were 131 for the quarter; that's pretty steady. What's the outlook on the repayment rate? And, Brian, I mean, how much are you willing to deliver the company? I mean, you talked about origination are going to come back. And so would you look to buy securities? How low would you look to take leverage if these repayments keep coming out and the market for origination isn't that good?
Paul Miceli, CFO
I feel like we're as levered as we need to be at this point. You never have to say the word you feel over-capitalized, but because it could bite you in the butt one day. But to me, it feels like, given the opportunity set that's out there, the return to borrowing at levels that we're comfortable with has been a little slow. I think it's inevitable that it's coming. So I want to hang on to a lot of dry powder at Ladder, and we're ready to make loans. But I do think that there is a bit of a plateau here, where buyers and sellers are not quite in sync. Although the lenders are beginning to push the issue a little bit. So I think we'll start seeing a pickup in activity there. Interestingly enough, we actually did start seeing some loan quotes go out the door in the last month or so. And we were fine on rate; we were not getting to the proceeds requested. We did see other lenders getting to the loan proceeds that were requested, at least in the application phase, they haven't closed yet. Interestingly enough, several of the lenders that were getting those proceeds were names I had never heard of. So there's also a group of investors, I think that's getting into the business now thinking it's a great time to make a loan, and I tend to agree with that. But it still really requires caution.
Matthew Howlett, Analyst
Would you buy back that you ran out of stock? But you've always been opportunistic. Would you look at buying securities, real estate? I mean, obviously, First Republic, there's talk of $100 billion coming out of them, CMBS. And anything opportunistic-wise that you could do with the excess capital?
Paul Miceli, CFO
Yeah, I'd love to. And we're on the FDIC list for taking a look at some of the portfolios, especially here in New York out of the Signature Bank portfolio. We haven't seen anything and $100 billion coming out of First Republic. Obviously, we're not going to tangle with that. So we do think it's almost everything is opportunistic right now. There is no regular way lending going on at all. Nobody is borrowing 65% at SOFR plus 300 on an acquisition. It's very much a special situations market. Sometimes those special situations involve our own debt when the high-yield market is selling off indiscriminately. Those bounce prices have bounced back quite a bit here, although still quite attractive, in my opinion. We're mortgage lenders at heart; we understand the securities business too. The securities business is attractive, but it does require quite a bit of leverage. I'm a little bit concerned about some of the attitudes towards leverage in some of the banks. It's not that they're not lending, they started charging a lot. You might have heard Pamela mention that we paid off a lot of our securities repos subsequent to the end of the quarter. The reason why is banks are charging 6.1% for financing triple A bonds that were earning 7.3% on. They have 85% subordination because their CLOs from 2019. So we just think that rather than pay the 6.1%, we'll just pay that off, and we'll collect the 7.3% unlevered. So they're very attractive; you can lever yourself into the 20s if you want. Obviously, that's a situation open to us. But to me, I am a little bit concerned when I hear that First Republic probably might be selling $100 billion of loans and securities. That is not a constructive environment for us to be stepping in, thinking that spreads can't widen, because they certainly could.
Matthew Howlett, Analyst
Make sense. And the last question are a lot of your competitors and peers; they talk about just only doing multifamily, because you have the GSE takeout there. I mean, does it sound like that you're open to everything? And are you quoting tells you look at office? And then long term, is there any major impact on your model if the banks end up with higher regulation or they curtail lending?
Paul Miceli, CFO
Well, the regional banks are certainly going to wind up with crypto lending and higher regulation. So I think in the initial phase of whatever they're going to go through, I don't believe they're going to stop lending. I mean, they're still banks. And I think that they have now noticed that their deposit base can be pretty tricky. I think they'll all be running and they'll be paying higher deposit rates to hang on to deposits. They'll also be lending more conservatively, which may cause some difficulty in refinancing our loans, although frankly, we haven't seen that yet. There are plenty of other lenders too; there are tons of small banks that don't have any problems along the lines of what you read about in the newspapers. Long term, I think it's positive for us, because I think it's another example of regulation, leverage, and past mistakes forcing a lot of the mortgage lending apparatus in the United States outside of the banking system. Since we service that mid-market borrower base, I think it'll come right to us, and that's very helpful so short term, it's not helpful on re-fi. Long term, it's extraordinarily helpful.
Matthew Howlett, Analyst
Great, and then, just on the quote; are you looking, are you still lending to all sectors or something that you won't do now?
Paul Miceli, CFO
We haven't originated any loans outside of multifamily in the last quarter. It might seem strange, but I have mixed feelings about office spaces. I believe they'll be okay, rents aren't declining, and people are returning to work. However, I think the narrative surrounding this is exaggerated. My portfolio of office loans is performing reasonably well. We focus on selecting more offers based on the specifics of location rather than just basic supply and demand. I’m not talking about specific street corners, but rather the city itself. I can't see us making a loan in San Francisco, though I would consider purchasing a building there. I think Ladder could make such a move since the outcome isn’t black and white. The issues facing some major cities are manageable and I believe they'll eventually be resolved. However, Chicago has recently regressed, so I don’t anticipate us lending there anytime soon, nor in San Francisco, Portland, Seattle, Los Angeles, DC, and certain areas of New York. Regarding the hotel sector, I apologize for not mentioning it earlier, but they are performing well. I do foresee a mild recession ahead and interest rates are quite high. The American consumer seems eager to travel and vacation, which aligns with our preference for drive-thru and resort markets over inner-city locations. I noticed a property with around 700 rooms change ownership in a city center, which is challenging. Therefore, those are the types of situations we plan to avoid. However, we do like brands such as Garden Inns and Courtyards.
Matthew Howlett, Analyst
That makes a lot of sense. I really appreciate that.
Paul Miceli, CFO
Sure.
Operator, Operator
Our next question is a follow-up from Jade Rahmani from KBW. Please go ahead with your follow-up.
Jade Rahmani, Analyst
Sure, I wanted to ask just two strategic questions. One, do you see an opportunity to raise a fund, raise third-party capital and maybe invest in office repositioning or some kind of contrarian or distressed oriented fund, since de novo pools of capital tend to do pretty well at this point in the cycle?
Paul Miceli, CFO
Certainly, there is an opportunity to do that. However, we haven't been very active in that area due to the need for systems and controls. We have previously managed outside funds before going public, and we see it as a good opportunity. But considering our asset base, it's important to note that we were involved in lending operations at two major Swiss banks for 15 years. We observe a significant volume of large loans and promising opportunities. If we were to pursue a $400 million recapitalization on an undervalued office property, our approach would likely involve purchasing it and then distributing it to high net worth individuals, funds, or insurance companies to syndicate rather than raising money for a fund. From my experience with startups, established asset management organizations tend to raise money quickly because they have dedicated systems and personnel. Being a smaller operation with about 60 employees, we lack the comprehensive presentations and accounting systems that investors often seek. Nonetheless, we believe we can manage substantial transactions within our current REIT structure. We plan to participate actively and aim for larger transactions, syndicating them afterward instead of pre-raising funds, which can be time-consuming. Historically, when we launched Ladder in 2008, we noticed securities were quite affordable. The outside fund we raised primarily catered to wealthy individuals rather than institutions. While institutions recognized our expertise, we faced delays due to their advisors and lengthy due diligence processes, causing us to miss timely opportunities. These markets can shift rapidly, and we tend to excel in such environments. Currently, we have enough capital to initiate projects that appear attractive, and if we require more, we expect to secure it without issues, though we're not planning to establish a fund at this time.
Jade Rahmani, Analyst
Okay, and then on the M&A side, is merging with another company something that is interesting to you? They're planning and mortgage REITs trading at below your valuation. And bigger seems to be better, although it could jeopardize the investment-grade goal, but just wanted to get your thoughts on that.
Paul Miceli, CFO
Yeah, I mean, there's a couple of names that I have written on the back of my hand that I think about once in a while. It really isn't so much that I think I understand the company so well; it's just I understand the people who run the company pretty well. Some of them are pretty talented people. I doubt that the problems they're seemingly having are nearly as bad as what the stock prices would indicate. So I think about it; it's certainly not outside of our wheelhouse. I always thought by this point, the first thing we might look at would be a residential platform. But the residential platform seems to have a lot of leverage in them, and you've seen us get away from that over the last few years. So unless something just walks through the door that looks pretty cheap, we're not going to do it as a capital raise, where we buy a residential platform and just sell all their balance and then use the cash for commercials. I do think we could run a very attractive residential platform, especially now with some of the changes taking place in residential lending. But it is a long-duration asset. I think we said before why we haven't been in that business, and here it is again, it's that long-duration risk, interest rate risk, and management is very difficult to do. You see a couple of banks now in some trouble, and you see a couple of banks not in trouble that have huge losses that have not been realized yet. This is a good time to get into the residential space though.
Jade Rahmani, Analyst
Thanks for taking the questions.
Operator, Operator
Our next question comes from Chris Muller from JMP Securities. Please go ahead with your question.
Chris Muller, Analyst
Yes, thanks for taking the question. I said a quick one on what would make you guys more comfortable in getting aggressive on the lending side. Last year, you guys were able to put out some pretty big origination volumes. So is it more the Fed pausing, or I guess what type of things would make you more comfortable stepping back on the gas there? Thanks.
Brian Harris, CEO
I think if we, as Pamela mentioned, transaction volume has been muted; that sentence can represent a lot of things. There's a lot of people looking to refinance loans; the loans were written in a zero-interest-rate environment, and there's difficulty unless they've executed perfectly and possibly even done better, it's very difficult for them to handle today's rates based on the size of the loan they want. I think where we get much more comfortable is seeing acquisitions of assets today, with today's underwriting, with new equity going in, and a very sober loan request. So when Pamela mentioned that the transaction volume has been muted, not only has the loan side been slow, but the acquisition side has been very slow too, and you can even see it on the residential side; new mortgages are falling because rates have gone up. So it isn't that we're uncomfortable; we're very comfortable lending in this kind of market and even going into a recession. I tend to believe it's hard to write a very bad loan in a market like this because every assumption you use is probably a little bit worse than what will actually happen. But we're just not seeing a lot of properties change hands. So what we're primarily focused on right now is acquisitions, and there just aren't many of them.
Chris Muller, Analyst
Got it. That's helpful. And then just quickly on the dividend, can you just remind me when you guys address either a special dividend or dividend increase? Is that an annual thing? Do you look at it quarterly? When does the board look at that? Just seeing the pace of distributable earnings above that dividend, looks like there could be something that needs to be done there. Thanks.
Brian Harris, CEO
We look at it quarterly, usually right before the dividend declaration date. I'd imagine the first couple of weeks of June, we'll take a look at it again. Last year, we raised their dividend twice for a total of 15% versus where we started the year at. We'll be revisiting it again in June here. We took a look at it in March, and earnings looked pretty good. Then I guess it was Silicon Valley Bank that got in trouble around March 10. I think all of the bonds and all of the stock we bought back took place after March 10. When we figured out our next dividend calculation, the market was a little up in the air. We wound up supplementing the earnings of this quarter greatly in the last two weeks, largely as a result of the turmoil in the banking sector. I think we'll be revisiting it again in June in the first two weeks of the month.
Chris Muller, Analyst
Thanks for taking the question, guys. And congrats on a nice quarter.
Brian Harris, CEO
Thank you.
Operator, Operator
And our next question comes from Derek Hewett from Bank of America. Please go ahead with your question.
Derek Hewett, Analyst
Good afternoon, everyone. You had mentioned earlier bank behavior with securities repo tightening caused you to repay that source of funding on the securities book, but what about the bank behavior on the loan repo facilities? Are you seeing any changes in the banks' behavior in regards to maybe advance rates, maturity extensions, requiring higher spreads in terms of their thoughts on the loan repo facilities?
Paul Miceli, CFO
Pamela, I think you deal more with that than I do. I can answer it, but I think you'd do a better job with it. So I'm going to ask Pamela.
Pamela McCormack, President
Yeah. And Paul, feel free to add in. But to summarize, we are not experiencing significant issues. First, we have a very limited amount of repo outstanding. In the first quarter, as Paul confirmed, we did not face any margin calls. There is at least one lender reviewing their multifamily exposure and considering adjustments based on yield, as we understand it. However, we have not processed any margin calls to date.
Derek Hewett, Analyst
Okay.
Paul Miceli, CFO
Yeah, I can answer a little more there. I think it would be hard to replicate though the lending criteria that we've got right now in place on some of those. I think that they're tighter now in standard and the rates are higher. On the security side, the only thing that really happened was the rate went up. The spread went up. They didn't pull back on the advance rate. So it's not a credit conversation; it's a liquidity conversation. As a result of that, we just pulled back.
Pamela McCormack, President
To be clear, we also funded some additional revenue. I think it was important for us to demonstrate the capabilities we have there and the capacity. We funded some repos recently and have a ton of capacity there. If anything, I think it's probably true for us and our peers, we're seeing people looking to open up new lines with us at this time. They're anxious to lend is the way I would describe it.
Derek Hewett, Analyst
Okay, thank you. And then within the office portfolio, is there any way to kind of segment what the kind of the higher risk, like risk-rated four or five office loans are since the 10-Q is not out yet?
Brian Harris, CEO
We don't use that kind of criteria. Paul, do you have some information about how many of our loans were written after the pandemic? If you hear my dog, I'm sorry, that's live calling. But Paul didn't have like 76% of our loans in the office sector were written after March of 21. So yeah, so we don't have them rated the way other people do it. But last call, if you remember, we went through our five largest exposures. In fact, today, I think it was today or yesterday, I saw an article in the Wall Street Journal saying some of the Sunbelt office markets look like they're losing some of their momentum. The place where we have our most exposure was on the bottom of that chart is in Miami, not losing its momentum. We're not having a lot of trouble with office despite what's in the news. We're reviewing business plans; we're sending people out to see properties. There are leases being signed, even in New York City, even in mid-block buildings in the garment district. It is just not as bad as what's being portrayed in the press.
Derek Hewett, Analyst
Okay, thank you.
Operator, Operator
Ladies and gentlemen. With that, we'll end today's question and answer session. I'd like to hand the floor back over to Brian Harris for any closing comments.
Brian Harris, CEO
I'll just wish you all well and thank you for getting on the call and missing the Amazon action today. I know that they're releasing too, but thanks for hanging with us. This was a good market for us. We don't mind rough weather, and as long as we keep our focus on credit, quality, liquidity, and leverage, we expect to be very, very profitable in the year and the quarters ahead here. So thank you.
Operator, Operator
Ladies and gentlemen, with that, we will conclude today's conference call. We do thank you for joining. You may now disconnect your lines.