Key Highlights

● Ladder rose Friday on a day when most Russell 2000 small caps fell.

● Third-quarter distributable earnings were $0.35 a share, or $0.38 before a credit-loss charge-off.

● New investments topped $700 million, and a Jacksonville office sale added $31 million.

● The vast majority of Ladder's interest-earning assets carry floating rates.

Results lift the shares

Ladder Capital (NYSE:LADR) rose on Friday to $9.19, one of the gainers on the Russell 2000 on a day when most small caps fell, according to market data. The commercial real estate finance company reported third-quarter distributable earnings of $0.35 a share, or $0.38 before a credit-loss charge-off.

On a GAAP basis, Ladder reported pre-tax income of $67.3 million, or $0.53 a share. The company made more than $700 million in new investments during the quarter, and the sale of an office property in Jacksonville added $31 million. The vast majority of its interest-earning assets carry floating rates.

Ladder Capital is an internally managed real estate investment trust that lends to commercial property owners, primarily through senior first-mortgage loans, and also owns a portfolio of real estate and securities. Distributable earnings is the measure many mortgage REITs use to gauge the income available to pay dividends. Because REITs must distribute most of their taxable income to shareholders, investors tend to focus closely on whether distributable earnings comfortably cover the payout.

Built for higher rates

The floating-rate profile matters in the current environment. When rates rise, interest income on floating-rate loans generally rises with them. Chief Executive Brian Harris indicated that Ladder's balance sheet is positioned to benefit from higher rates, according to a summary of the company's remarks.

Rates have been a dominant market theme. The Federal Reserve raised rates by a quarter point in September, its first hike in three years, and markets still price another hike by December. The 10-year Treasury yield topped 5.3 earlier in October, its highest since 2002, before easing to roughly 5.1 by Friday's close. Fed Chair Kevin Warsh, speaking at an IMF gathering in Bangkok, declined to preview the October decision. "I don't prejudge meetings," he said.

Ladder was not the only small financial name to gain. Independent Bank Corp (NASDAQ:INDB) rose after third-quarter adjusted earnings of $1.90 a share beat the $1.85 estimate. Larger regional banks including Regions Financial (NYSE:RF), Citizens Financial (NYSE:CFG), M&T Bank (NYSE:MTB) and Truist Financial (NYSE:TFC) also reported on Friday, and financials were among the sectors that attracted buying.

Small caps broadly lower

Ladder's gain stood out against a weak tape. The Russell 2000 opened higher but reversed, closing down 45.90 points at about 2,721, though one source put the close at 2,719.57. The small-cap benchmark lost about 85.6 points over the week.

The S&P 500 fell 84.62 points to 7,659.44, the Dow Jones Industrial Average slipped 175.28 points to 52,002.41, and the Nasdaq Composite dropped 572.99 points to 26,140.03. Chip, software and AI-infrastructure stocks led the selling on concerns about how the artificial-intelligence build-out will be financed, while energy, utilities, staples and financials drew buyers. The Cboe Volatility Index rose 3.53 points to 19.99.

Ladder Tracks Bank Results and Rates

More financial-sector earnings are due next week, including Fifth Third (NASDAQ:FITB) on Oct 19, KeyCorp (NYSE:KEY) and Synchrony (NYSE:SYF) on Oct 20, Capital One (NYSE:COF) on Oct 20 after the close, and Blackstone (NYSE:BX) and Huntington (NASDAQ:HBAN) on Oct 22, offering further reads on credit and lending conditions. The Fed's next rate decision is Oct 28, with personal consumption expenditures data and the first estimate of third-quarter GDP due Oct 29.

For Ladder, the path of short-term rates and the pace of new lending are likely to remain central to how investors view the shares.