Franklin BSP Realty Trust (NYSE:FBRT) FY Conference November 20, 2025 10:55 AM ET Company ParticipantsLindsey Crabbe - Director of Investor RelationsConference Call ParticipantsNone - AnalystNone - Analyst 1ModeratorAll right, everybody. Thank you, guys, for joining us and for your patience. Our next presenting company is Franklin BSP Realty Trust, traded on the New York Stock Exchange under the ticker symbol FBRT. Presenting for the company today is Lindsey Crabbe, Director of Investor Relations.Lindsey Cr ...

Financial Performance - As of September 30, 2025, the book value per share decreased to $14.51 from $15.09 as of December 31, 2024, primarily due to dividends paid exceeding net income and dilution from the issuance of Class A Units related to the NewPoint acquisition [299]. - The fully-converted book value per share as of September 30, 2025, was $14.29, down from $15.19 as of December 31, 2024, reflecting the impact of the NewPoint acquisition and the issuance of additional shares [300]. - Interest income for the nine months ended September 30, 2025, totaled $331.2 million, a decrease of $67.1 million compared to $398.3 million for the same period in 2024 [336]. - Interest expense for the nine months ended September 30, 2025, was $217.3 million, down from $257.9 million in 2024, reflecting a decrease of $40.6 million [338]. - GAAP net income for Q3 2025 was $17,616,000, a decrease from $30,173,000 in Q3 2024, while for the nine months ended September 30, 2025, it was $65,705,000 compared to $62,235,000 in 2024 [418]. - Distributable Earnings for Q3 2025 were $26,701,000, significantly improving from a loss of $3,959,000 in Q3 2024, and for the nine months ended September 30, 2025, it was $49,472,000 compared to $69,438,000 in 2024 [418]. Acquisition and Business Expansion - The Company acquired NewPoint Holdings JV LLC on July 1, 2025, which added a servicing portfolio of $47.3 billion as of September 30, 2025, enhancing the Company's agency mortgage loan capabilities [305]. - The NewPoint acquisition is expected to complement the Company's existing business by providing bridge loan borrowers with refinancing options through agency mortgage loans [305]. - The Company issued 8,385,951 Class A Units to NewPoint equity holders during the acquisition, with potential cash distributions to Class A Unit holders aligned with common stock distributions [309]. - The company acquired NewPoint Holdings JV LLC for $297.3 million during the nine months ended September 30, 2025 [402]. Loan Portfolio and Risk Management - The total fair value of commercial mortgage loans held for sale increased to $619.0 million as of September 30, 2025, compared to $87.3 million as of December 31, 2024 [312]. - The company had four non-performing loans with a total amortized cost of $100.7 million as of September 30, 2025 [313]. - The company is exposed to credit risk due to loan defaults, which are influenced by various factors including borrower financial condition and regional economics [421]. - The company’s agency business, following the NewPoint acquisition, focuses on the origination and servicing of agency mortgages, which may increase credit risk due to risk-sharing obligations [422]. - Interest rate risk management includes entering into hedge contracts to mitigate the impact of interest rate fluctuations on earnings and cash flows [425]. Employee and Management Structure - The Company had 218 employees as of September 30, 2025, all of whom are employees of NewPoint [298]. - The Company is externally managed by Benefit Street Partners L.L.C., which provides investment and management services [296]. - The Company operates primarily through two business units: Commercial Real Estate Financing and Agency Business, focusing on various debt investments and agency mortgage products [294]. Financial Obligations and Capital Management - As of September 30, 2025, the company had a total of $4.81 billion in contractual obligations and commitments [408]. - The company must distribute at least 90% of its taxable income to maintain its REIT status, which includes distributions to avoid federal income taxes [393][406]. - The company has a share repurchase program authorized for $65 million, with $31.1 million remaining available as of September 30, 2025 [409]. - The company expects to utilize additional debt and equity financing as a source of capital, with a target leverage level of between one to three times book value of equity [381]. Market and Economic Conditions - New tax legislation effective July 4, 2025, includes a permanent extension of the 20% deduction for qualified REIT dividends and increases the REIT asset test limit for taxable REIT subsidiaries from 20% to 25% [310]. - The company is actively monitoring the SOFR (Secured Overnight Financing Rate) trends, as many loans are indexed to this rate, impacting overall interest expenses [327].

Core Viewpoint - Franklin BSP Realty Trust (FBRT) is trading at a significant double-digit discount to its book value while offering a double-digit dividend yield that is not fully supported by its commercial real estate (CRE) credit portfolio [1] Group 1: Company Overview - FBRT is currently experiencing a deep discount in its trading price relative to its book value [1] - The company has declared a quarterly cash dividend, contributing to its appeal for income-focused investors [1] Group 2: Market Context - The equity market serves as a mechanism for wealth creation or destruction over the long term, influenced by daily price fluctuations [1] - Pacifica Yield is focused on long-term wealth creation by targeting undervalued high-growth companies, high-dividend stocks, REITs, and green energy firms [1]

Financial Data and Key Metrics Changes - The company reported GAAP net income of $17.6 million, or $0.13 per fully converted common share, with distributable earnings of $26.7 million, or $0.22 per fully converted share [11] - Distributable earnings included $1.7 million of realized losses related to a REO sale, which adjusted the distributable earnings to $0.23 per fully converted share when excluding this loss [11] - Book value at quarter end was $14.29 per fully converted share, with a decrease attributed to dividend undercoverage and the NewPoint acquisition [11] Business Line Data and Key Metrics Changes - NewPoint contributed $9.3 million to distributable earnings in its first full quarter, with a record volume of $2.2 billion in originations [6][13] - The core portfolio size declined slightly, ending the quarter at $4.4 billion across 147 loans, with multifamily assets making up 75% of the portfolio [18] - The company originated approximately $304 million in new loan commitments during the quarter, funding $196 million primarily in multifamily [6] Market Data and Key Metrics Changes - The CRE market is seeing a reset, with borrowers and lenders adjusting asset valuations, particularly outside of the office sector [18] - The average cost of debt on the core portfolio was SOFR +231 basis points, with net leverage at 2.55 times and recourse leverage at 0.84 times [14] - The company expects to return its core portfolio to a target size of at least $5 billion over the next few quarters [7] Company Strategy and Development Direction - The company is focused on integrating NewPoint, redeploying liquidity, and leveraging expanded capabilities to grow earnings and book value [10] - The integration of NewPoint is expected to generate $0.04 to $0.06 per fully converted share annually to earnings once the migration of loan servicing is complete [16] - The company is exploring additional investment opportunities outside of whole loans, including CMBS B-pieces and CRE CLO bond investments [19] Management's Comments on Operating Environment and Future Outlook - Management views the third quarter as transitional but believes it sets the stage for stronger results ahead [9] - The company is optimistic about the contribution from NewPoint growing over time, with expectations for it to be accretive to GAAP earnings and book value per share in the first half of 2026 [17] - Management noted that while the market is competitive, they continue to find attractive opportunities for risk-adjusted returns [19] Other Important Information - The company has resumed share repurchases, buying back 540,000 shares for approximately $6 million, with $25.6 million remaining on the buyback allocation [9] - The company sold two properties from its REO portfolio during the quarter and has more slated to close in Q4 [8] Q&A Session Summary Question: What led to the higher origination volumes and expectations for Q4? - Management indicated that they cultivated the balance sheet and converted loans from floating rates into CMBS products, leading to a strong Q4 outlook [29] Question: What should be expected regarding the compensation and benefits expense line item? - Management stated that expenses will trend with volume and will be variable, making it difficult to extrapolate from Q3 alone [32] Question: Are repayments expected to remain elevated in Q4? - Management expects repayments to be in line with previous quarters, noting variability as year-end approaches [38] Question: What is the target size for the core portfolio? - The company is targeting a stabilized portfolio size of between $5 billion and $5.5 billion [40] Question: Is the record quarter for NewPoint a sustainable run rate? - Management cautioned that while it was a great quarter, it may not be repeatable every quarter and advised looking at overall annual guidance [43]

Core Insights - The company successfully closed the acquisition of NewPoint, which contributed significantly to its earnings and loan origination capacity [3][25][23] - The third quarter was characterized as a transitional period, with a focus on integrating NewPoint and managing legacy portfolio issues [4][25] - The company expects to return its core portfolio size to at least $5 billion in the coming quarters [2][34] Financial Performance - The company reported GAAP net income of $17.6 million, or $0.13 per fully converted common share, with distributable earnings of $26.7 million, or $0.22 per share [7][8] - The average risk rating of the loan portfolio remained stable at 2.3, with a slight decline in the core portfolio size due to liquidity management for acquisitions [1][2] - Book value at quarter end was $14.29 per fully converted share, impacted by dividend under coverage and the NewPoint acquisition [8] Loan Origination and Portfolio Management - The company originated approximately $304 million in new loan commitments during the quarter, primarily in multifamily, and funded $196 million of those [2][18] - The average cost of debt on the core portfolio was SOFR plus 2.31, with 75% of the core book financed through non-recourse structures [11][12] - The company has resumed share repurchases, buying back 540,000 shares for approximately $6 million, with $25.6 million remaining on the buyback allocation [5] NewPoint Integration and Contributions - NewPoint achieved a record volume quarter with $2.2 billion in originations, contributing $9.3 million to distributable earnings in its first full quarter [3][10] - The integration of NewPoint is progressing well, with expectations for increased earnings contributions linked to agency and FHA origination volume [14][23] - The migration of Franklin BSP Realty Trust's loan servicing is underway, expected to enhance earnings by $0.04 to $0.06 per share annually once completed [13][14] Market Conditions and Future Outlook - The company is observing a healthier CRE market with improved borrower-lender dynamics, particularly in multifamily assets [15][17] - The fourth quarter pipeline is strong, with approximately $120 million in new loan commitments already closed [18] - The company anticipates that the recent CLO transactions will generate additional cash and reduce financing costs, contributing to future earnings growth [9][10]

Financial Performance - GAAP Net Income was $176 million, or $012 per diluted common share[12] - Distributable Earnings reached $267 million, or $022 per fully converted share, including $17 million of realized losses[12] - Distributable Earnings before realized losses amounted to $284 million, or $023 per fully converted share[12] - A Q3 2025 cash dividend of $0355 per share was declared, representing an annualized yield of 100% on fully-converted book value per share[12] Capitalization and Liquidity - Fully-converted book value per share stood at $1429, compared to $1482 in Q2 2025[12] - Net debt to equity ratio was 25x, while recourse net debt to equity was 08x[12] - 77% of financing sources are non-mark-to-market on the core book[12] - Liquidity totaled $522 million, including $117 million in cash and $21 million available for CLO reinvestment/ramp[12] Portfolio and Investments - The Core Portfolio's principal balance decreased by $113 million during the quarter, closing $304 million of new loan commitments and funding $196 million of principal balance[12] - Loan repayments of $275 million were received[12] - Agency originated $22 billion of new loan commitments under programs with Fannie Mae, Freddie Mac, and HUD[12]

Core Viewpoint - Franklin BSP (FBRT) reported quarterly earnings of $0.22 per share, missing the Zacks Consensus Estimate of $0.24 per share, but showing an improvement from a loss of $0.1 per share a year ago [1] Group 1: Earnings Performance - The quarterly earnings surprise was -8.33%, and the company had a previous quarter surprise of -12.9% with actual earnings of $0.27 per share against an expectation of $0.31 [1][2] - Over the last four quarters, Franklin BSP has surpassed consensus EPS estimates only once [2] Group 2: Revenue Performance - Franklin BSP posted revenues of $89.55 million for the quarter ended September 2025, exceeding the Zacks Consensus Estimate by 80.54%, compared to $49.67 million in the same quarter last year [2] - The company has topped consensus revenue estimates two times over the last four quarters [2] Group 3: Stock Performance and Outlook - Franklin BSP shares have declined approximately 14.6% since the beginning of the year, while the S&P 500 has gained 17.2% [3] - The company's future stock performance will largely depend on management's commentary during the earnings call and the earnings outlook [3][4] Group 4: Earnings Estimates - The current consensus EPS estimate for the upcoming quarter is $0.32 on revenues of $57.1 million, and for the current fiscal year, it is $0.70 on revenues of $206.1 million [7] - The estimate revisions trend for Franklin BSP was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Group 5: Industry Context - The REIT and Equity Trust industry is currently in the top 37% of over 250 Zacks industries, suggesting that stocks in the top 50% outperform those in the bottom 50% by more than 2 to 1 [8]

Financial Performance - Reported GAAP net income of $17.6 million for Q3 2025, down from $24.4 million in Q2 2025, representing a decrease of 28.8%[2] - Distributable Earnings of $26.7 million, or $0.22 per diluted common share, compared to $29.0 million, or $0.27 per diluted common share in Q2 2025, reflecting a decrease of 7.9%[3] - Net income attributable to Franklin BSP Realty Trust, Inc. for the three months ended September 30, 2025, was $17,314, down from $31,614 in 2024, reflecting a decline of 45%[32] - Basic earnings per share for the three months ended September 30, 2025, was $0.12, compared to $0.30 for the same period in 2024, a decrease of 60%[32] - GAAP net income for Q3 2025 was $17,616,000, a decrease of 41.5% compared to $30,173,000 in Q3 2024[34] - The company reported a GAAP net income per share, diluted, of $0.12 for Q3 2025, down from $0.30 in Q3 2024[34] - Distributable Earnings for Q3 2025 were $26,701,000, compared to a loss of $3,959,000 in Q3 2024[34] - Distributable Earnings to Common for the nine months ended September 30, 2025, was $34,049,000, down from $54,681,000 in the same period of 2024[34] - The Distributable Earnings per share, fully converted, was $0.22 for Q3 2025, compared to $(0.10) in Q3 2024[34] - The company experienced a 6.1% return on equity (ROE) for Distributable Earnings in Q3 2025, compared to (2.6)% in Q3 2024[34] Revenue and Income Sources - Total income for the nine months ended September 30, 2025, was $193,924, an increase of 16.6% from $166,372 in the same period of 2024[32] - Net interest income for the three months ended September 30, 2025, was $29,675, a decrease of 33% compared to $44,258 for the same period in 2024[32] - The company reported a net interest expense of $76,492 for the three months ended September 30, 2025, down from $89,884 in 2024, a decrease of 15%[32] - Mortgage servicing rights generated revenue of $19,745 for the three months ended September 30, 2025, with no revenue reported in the same period of 2024[32] Assets and Liabilities - Total assets increased to $6,218,475, up from $6,002,386 as of December 31, 2024, representing a growth of approximately 3.6%[28] - Total liabilities increased to $4,562,706 as of September 30, 2025, from $4,392,581 as of December 31, 2024, marking a rise of approximately 3.9%[28] - Total stockholders' equity decreased to $1,472,184 as of September 30, 2025, down from $1,512,562 as of December 31, 2024, a decline of approximately 2.7%[28] Loan Commitments and Transactions - Closed $304.2 million of new loan commitments with a weighted average spread of 511 basis points during Q3 2025[6] - Originated $2.2 billion of new loan commitments under programs with Fannie Mae, Freddie Mac, and HUD, with a servicing portfolio of $47.3 billion as of September 30, 2025[5] - Closed an approximately $1.1 billion commercial real estate mortgage securitization transaction on October 15, 2025[11] Other Financial Metrics - Declared a common stock cash dividend of $0.355, representing an annualized yield of 10.0% on book value[6] - Acquired NewPoint Holdings for $425 million, with integration progressing well[4] - Recognized a benefit for credit losses of $0.6 million, including a $1.5 million general allowance benefit[9] - The allowance for loss sharing increased to $22,555 as of September 30, 2025, compared to no allowance as of December 31, 2024[28] - Unrealized losses on financial instruments amounted to $1,888,000 in Q3 2025, compared to $2,486,000 in Q3 2024[34] - Non-cash compensation expense increased to $5,185,000 in Q3 2025 from $2,134,000 in Q3 2024[34] - The average common stock and common stock equivalents were 1,385,374 shares in Q3 2025, compared to 1,349,076 shares in Q3 2024[34] - The company recorded a realized loss adjustment on loans and REO of $(1,656,000) in Q3 2025, compared to $(36,433,000) in Q3 2024[34]

Core Insights - Franklin BSP Realty Trust, Inc. reported a GAAP net income of $17.6 million for Q3 2025, a decrease from $24.4 million in Q2 2025, with diluted earnings per share (EPS) of $0.12 compared to $0.19 in the previous quarter [2][3] Financial Performance - Distributable Earnings for Q3 2025 were $26.7 million, or $0.22 per diluted common share, down from $29.0 million, or $0.27 per diluted common share in Q2 2025 [3] - The company declared a common stock cash dividend of $0.355, representing an annualized yield of 10.0% on book value, with a book value of $14.29 per diluted common share [7][11] Portfolio and Investment Activity - The company closed $304.2 million in new loan commitments and funded $195.7 million in principal balance on new and existing loans during Q3 2025 [5][7] - The core portfolio consists of a principal balance of $4.4 billion across 147 loans, with 75.0% collateralized by multifamily properties [7] - The agency segment originated $2.2 billion in new loan commitments under programs with Fannie Mae, Freddie Mac, and HUD, with a servicing portfolio of $47.3 billion [8] Subsequent Events - On October 15, 2025, the company closed a $1.1 billion commercial real estate mortgage securitization transaction [13] - The company has $25.6 million remaining under its $65.0 million share repurchase program, which extends through December 31, 2026 [12] Allowance for Credit Losses - The company recognized a benefit for credit losses of $0.6 million, which included a $1.5 million general allowance benefit and a $1.0 million net benefit allowance for loss sharing [10]

Core Viewpoint - Franklin BSP Realty Trust, Inc. (FBRT) is set to release its third quarter 2025 financial results on October 29, 2025, followed by a conference call on October 30, 2025, to discuss these results [1]. Group 1: Financial Results Announcement - The third quarter 2025 results will be announced after the close of trading on October 29, 2025 [1]. - A conference call and live audio webcast will take place on October 30, 2025, at 9:00 a.m. ET to discuss the financial results [1]. Group 2: Conference Call Details - Participants can find all conference call and webcast information on the company's website [2]. - Pre-registration for the call and webcast is encouraged, with options to join via a domestic or international dial-in number [2]. - The call will also be accessible via live webcast, and a slide presentation with supplemental information will be available on the company's website [3]. Group 3: Company Overview - Franklin BSP Realty Trust, Inc. is a real estate investment trust that manages a diversified portfolio of commercial real estate debt in the U.S. [4]. - As of June 30, 2025, the company had approximately $5.6 billion in assets [4]. - FBRT is externally managed by Benefit Street Partners L.L.C., a subsidiary of Franklin Resources, Inc. [4].