Financial Data and Key Metrics Changes - FBRT reported GAAP earnings of $0.30 per diluted common share and distributable earnings of negative $0.10 per diluted common share for Q3 2024 [18] - Distributable earnings excluding realized losses were $0.31 per diluted common share, which excludes $36.4 million of losses related to the REO Walgreens portfolio [19] - Net interest income was slightly lower quarter-over-quarter due to a decrease in loan portfolio size [20] Business Line Data and Key Metrics Changes - The company added $380 million in new loan commitments during the quarter, primarily in the multifamily sector [22] - Loan repayments totaled $510 million in Q3, with $40 million coming from office loans [22] - Approximately 40% of the portfolio was originated after January 2023, indicating a shift towards higher quality loans [10] Market Data and Key Metrics Changes - The average cost of debt on the core portfolio remained flat at SOFR plus 2.03% [23] - The company closed a $1 billion CRE CLO with an 86.5% advance rate and a weighted average cost of funds of SOFR+199 [24] - The multifamily sector accounted for 74% of the core portfolio, with a focus on favorable supply-demand dynamics [27][29] Company Strategy and Development Direction - FBRT is focused on addressing legacy loans and enhancing credit quality through new originations and loan modifications [17][40] - The company aims to liquidate its REO portfolio quickly and reinvest proceeds into new originations [37] - The management believes in a proactive approach to resolving issues rather than "extend and pretend" strategies [34] Management's Comments on Operating Environment and Future Outlook - The management expressed concerns about the office sector, predicting that delinquencies could surpass historical highs [33] - They anticipate a stabilization in market conditions, particularly in the multifamily sector, with potential rent increases from 2026 to 2028 [29] - The management remains confident in the earnings power of the platform once REO assets are resolved [66] Other Important Information - The company has $1.1 billion in available liquidity, which is expected to be deployed in the near future [15] - The board has extended the stock buyback allocation through December 31, 2025, with $31 million remaining [16] Q&A Session Summary Question: Can you provide additional color on the conduit business and expectations going forward? - The conduit had an exceptional third quarter, but rates may impact future performance. CMBS remains one of the cheapest financing options [42] Question: How do you view the available-for-sale securities and their management going forward? - The company has not been active buyers recently due to aggressive credit spread tightening, viewing the bond portfolio as a liquidity management tool [43] Question: Can you discuss the sentiment in lease-up and potential timing of monetizations for REOs? - Four properties are under contract, with hopes to complete sales by the end of Q1 next year. The focus is on stabilizing and quickly liquidating REO assets [46] Question: What are the expectations around repayments and portfolio growth in the next quarters? - The company expects normalized repayments and aims to replace what's paying off to avoid shrinking the portfolio [48] Question: Is the outlook for increasing leverage realistic for 2025? - The management believes there is significant earnings power without needing to increase leverage, focusing on high-quality new loans [55] Question: How is the conduit business performing in terms of locked pipeline and hedges? - The conduit business is well-managed, with no locked or committed loans currently, and the focus is on selling loans to manage exposure [58]

Core Viewpoint - Franklin BSP (FBRT) reported a quarterly loss of $0.10 per share, significantly missing the Zacks Consensus Estimate of $0.26, and down from earnings of $0.43 per share a year ago, indicating a negative earnings surprise of -138.46% [1] Financial Performance - The company posted revenues of $49.67 million for the quarter ended September 2024, missing the Zacks Consensus Estimate by 0.86%, and down from $62.39 million in the same quarter last year [2] - Over the last four quarters, Franklin BSP has consistently failed to surpass consensus EPS and revenue estimates [2] Stock Performance - Franklin BSP shares have declined approximately 3.9% since the beginning of the year, contrasting with the S&P 500's gain of 20.1% [3] Future Outlook - The company's earnings outlook will be crucial for determining the stock's immediate price movement, with current consensus EPS estimates at $0.41 for the coming quarter and $1.38 for the current fiscal year [4][7] - The estimate revisions trend for Franklin BSP is currently mixed, resulting in a Zacks Rank 3 (Hold), suggesting the shares are expected to perform in line with the market in the near future [6] Industry Context - The REIT and Equity Trust industry, to which Franklin BSP belongs, is currently ranked in the bottom 44% of over 250 Zacks industries, indicating potential challenges ahead [8]

Financial Performance - Reported GAAP net income of $30.2 million for Q3 2024, compared to a loss of $(3.8) million in Q2 2024[2] - Diluted earnings per share (EPS) of $0.30 for Q3 2024, up from $(0.11) in Q2 2024[2] - Net income attributable to Franklin BSP Realty Trust, Inc. for the three months ended September 30, 2024, was $31,614 thousand, slightly down from $31,767 thousand in the prior year[13] - GAAP net income for the three months ended September 30, 2024, was $30.173 million, a decrease from $30.995 million in the same period of 2023[15] - Distributable earnings for the nine months ended September 30, 2024, were $69.438 million, down from $150.247 million in 2023[15] - Distributable earnings per share, fully converted, was $(0.10) for the three months ended September 30, 2024, compared to $0.43 in 2023[15] - The GAAP net income return on equity (ROE) for the three months ended September 30, 2024, was 7.9%, slightly up from 7.7% in 2023[15] Portfolio and Assets - Core portfolio principal balance of $5.2 billion as of September 30, 2024, with 99% in senior mortgage loans and 95% floating rate[4] - Total assets increased to $6,334,976 thousand as of September 30, 2024, up from $5,955,180 thousand as of December 31, 2023, representing a growth of approximately 6.35%[12] - Total liabilities increased to $4,720,994 thousand as of September 30, 2024, compared to $4,279,223 thousand as of December 31, 2023, reflecting an increase of approximately 10.3%[12] - Total stockholders' equity decreased to $1,524,234 thousand as of September 30, 2024, down from $1,586,209 thousand as of December 31, 2023[12] Revenue and Income - Total income for the three months ended September 30, 2024, was $49,670 thousand, down 20.4% from $62,386 thousand in the same period last year[13] - Net interest income for the three months ended September 30, 2024, was $44,258 thousand, a decrease of 25.1% compared to $59,069 thousand for the same period in 2023[13] - Revenue from real estate owned for the three months ended September 30, 2024, was $5,412 thousand, an increase of 63.4% from $3,317 thousand in the same period last year[13] Expenses and Losses - Interest expense rose to $89,884 thousand for the three months ended September 30, 2024, compared to $77,973 thousand in the same period of 2023, marking an increase of 15.5%[13] - The company reported a provision for credit losses of $268 thousand for the three months ended September 30, 2024, compared to a benefit of $(2,379) thousand in the same period last year[13] - Recognized a net benefit for credit losses of $0.3 million during the quarter[5] - The company recorded a realized cash loss adjustment on REO of $(40.113) million for the nine months ended September 30, 2024[15] - Unrealized losses on financial instruments amounted to $8.435 million for the nine months ended September 30, 2024, compared to $7.208 million in 2023[15] Liquidity and Dividends - Total liquidity of $1.1 billion, including $346 million in cash and cash equivalents[4] - Declared a cash dividend of $0.355 per common share for Q3 2024, representing an annualized yield of 9.3% on book value[4] Transactions and Commitments - Closed $380 million in new loan commitments in Q3 2024, totaling $1.6 billion for the first three quarters of 2024[4] - Closed a $1.024 billion managed Commercial Real Estate CLO, resulting in financing of $886.2 million[4] - Sold 16 of 21 retail properties in the Walgreens Portfolio for $60.9 million during Q3 2024[5] Other Adjustments - The company has $11.9 million of GAAP loss adjustments that would run through distributable earnings if cash losses are realized[14] - The company amortized CLO issuance costs over the expected lifetime of the CLOs starting Q1 2024, making previous adjustments unnecessary[14] - The company recovered $5.1 million of loan workout charges during the second quarter of 2023[14]

Core Thesis - Franklin BSP Realty Trust's profitability has been misrepresented by GAAP net income, with core profitability being significantly better, leading to a pessimistic market valuation that is beginning to correct itself [1][7] Profitability Analysis - Over the last five years, Franklin's GAAP net income increased from $66.91 million in 2019 to $68.96 million in the trailing twelve months (TTM), compounding at 0.5% annually, while net operating profit after tax (NOPAT) rose from $84.27 million to $94 million, compounding at 1.84% annually [2] - NOPAT margin has declined from 42.26% in 2019 to 17.11% in the TTM, indicating a decrease in profitability relative to operating revenue [2] - The company's invested capital turns improved from 0.21 in 2019 to 0.29 in the TTM, but returns on invested capital (ROIC) fell from 8.76% to 4.88% during the same period [2] Economic Value Creation - Management has generated economic earnings, but the firm experienced an economic loss of -$65.74 million from 2019 to TTM, with a loss of -$42.88 million in the TTM period alone [3][4] - Franklin's historical ROIC is close to its weighted average cost of capital (WACC), making it sensitive to declines in profitability or increases in WACC, which occurred in 2022 [4] Free Cash Flow (FCF) Generation - Free cash flow generation has been poor, improving from -$73 million in 2019 to -$3.57 million in the TTM, with a yield on FCF of -0.32% [4] Valuation Metrics - The economic book value (EBV) indicates that Franklin is undervalued, with a price-to-economic-book-value ratio of 1.16, suggesting attractiveness for potential investors [5] - If the stock price reaches $18.26, it would signal the end of the current buy opportunity, and shareholders should consider exiting their positions [5][7]

Financial Performance - GAAP Net Income (Loss) was $(3.8) million, or $(0.11) per diluted common share and $(0.08) per fully converted share[9] - Distributable Earnings were $32.4 million, or $0.31 per fully converted share[9] - A cash dividend of $0.355 per share was declared, representing an annualized yield of 9.3% on book value per share, fully converted[9] - GAAP and Distributable Earnings dividend coverage were (22%) and 87%, respectively[9] - Book value per share, fully converted, was $15.27, compared to $15.68 last quarter[9] Capitalization and Liquidity - Net debt to equity was 2.7x, while recourse net debt to equity was 0.6x[9] - 80% of financing sources are non-mark-to-market on the core book[9, 13] - Liquidity was $0.7 billion, including $95 million in cash and $31 million in CLO reinvestment available[9] Portfolio and Investment Activity - The core portfolio's principal balance increased by $195 million during the quarter[9] - $622 million of new loan commitments were closed, and $615 million of principal balance was funded, including future funding on existing loans[9] - Loan repayments of $240 million were received[9] - Year-to-date, $1.2 billion of new loan commitments were originated, and $1.0 billion of principal balance on new loans was funded[9] - The core portfolio consists of 153 CRE loans with a $5.4 billion principal balance, averaging $36 million in size, with 74% in multifamily properties[9]

Company Performance - Franklin BSP (FBRT) reported quarterly earnings of $0.31 per share, missing the Zacks Consensus Estimate of $0.41 per share, and down from $0.66 per share a year ago, representing an earnings surprise of -24.39% [1] - The company posted revenues of $50.89 million for the quarter ended June 2024, missing the Zacks Consensus Estimate by 8.32%, and down from $84.03 million year-over-year [2] - Over the last four quarters, Franklin BSP has surpassed consensus EPS estimates only once and has topped consensus revenue estimates just once [2] Market Comparison - Franklin BSP shares have increased approximately 3.7% since the beginning of the year, while the S&P 500 has gained 14% [3] - The current consensus EPS estimate for the upcoming quarter is $0.42 on revenues of $56 million, and for the current fiscal year, it is $1.66 on revenues of $221.8 million [7] Industry Outlook - The REIT and Equity Trust industry, to which Franklin BSP belongs, is currently in the top 33% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that the industry outlook can significantly impact stock performance [5][8]

Financial Performance - The book value per share decreased to $15.18 as of June 30, 2024, down from $15.71 as of December 31, 2023[116]. - The fully-converted book value per share was $15.27 as of June 30, 2024, down from $15.77 as of December 31, 2023[117]. - Net interest income for Q2 2024 was $133.5 million, a decrease of $19.3 million from $152.9 million in Q2 2023, primarily due to an increase in non-accrual loans totaling $225.4 million[144]. - Interest income for the six months ended June 30, 2024 was $264.1 million, down from $283.4 million in 2023, a decrease of $19.3 million due to loans placed on non-accrual status[155]. - Distributable Earnings for the six months ended June 30, 2024, were $73,399 million, down from $108,259 million in 2023, representing a decrease of approximately 32.3%[199]. - The company reported a ROE of (2.0)% for GAAP Net Income/(Loss) in Q2 2024, compared to 9.8% in Q2 2023[199]. - Distributable Earnings Per Share, Fully Converted, was $0.31 for Q2 2024, down from $0.66 in Q2 2023, a decline of approximately 53%[199]. Loan Portfolio - As of June 30, 2024, the total carrying value of commercial mortgage loans held for investment was $5,347.4 million, an increase from $4,989.8 million as of December 31, 2023[122]. - The company had 153 commercial mortgage loans held for investment as of June 30, 2024, up from 144 as of December 31, 2023[122]. - The weighted average coupon for commercial mortgage loans held for investment was 9.0% as of June 30, 2024, compared to 9.2% as of December 31, 2023[122]. - The company had 25 properties classified as real estate owned, held for sale, with combined carrying values of $271.3 million as of June 30, 2024, compared to $103.7 million as of December 31, 2023[122]. - The company held 153 commercial mortgage loans for investment and four commercial mortgage loans held for sale as of June 30, 2024, compared to 156 and one, respectively, in the previous year[144]. - The total par value of loans is $5,438,885, with an amortized cost of $5,427,931[133]. - The effective yield across all loans is 9.00%[133]. - The average loan-to-value ratio is 63.4%[133]. - The majority of loans are in the multifamily sector, with significant amounts in Texas[133]. Debt and Financing - Senior Debt stands at 52 million with an interest rate of Adj. 1M SOFR Term + 2.88%[1]. - The company reported a total par value of $1.2 billion across various senior debt instruments, with an average interest rate of approximately 3.5%[132]. - The company has a senior debt ratio of 8.45% and a debt service coverage ratio of 73.3%[1]. - The adjusted debt service coverage ratio improved to 8.33% with a coverage ratio of 74.8%[1]. - The company has extended the maturity dates for several loans, with the latest maturity set for 2028, enhancing liquidity[132]. - The company reported a loan-to-value (LTV) ratio of 44.0% for its commercial mortgage loans as of June 30, 2024[135]. - The net debt-to-equity ratio increased to 2.7x as of June 30, 2024, up from 2.3x at the end of 2023[176]. - Total leverage ratio rose to 2.8x as of June 30, 2024, compared to 2.5x at the end of 2023[176]. Real Estate and Investments - The company had $215.3 million in real estate securities available for sale as of June 30, 2024, down from $242.6 million as of December 31, 2023[122]. - The total fair value of real estate owned, held for investment, was $155.8 million as of June 30, 2024, including net real estate owned of $114.5 million and intangible lease assets of $41.3 million[136]. - Revenue from real estate owned for Q2 2024 was $4.1 million, down from $6.4 million in Q2 2023, a decrease of $2.3 million attributed to a one-time revenue catch-up in 2023[147]. - Revenue from real estate owned for the six months ended June 30, 2024 was $8.8 million, down from $9.8 million in 2023, a decrease of $1.0 million due to reduced rental revenue[157]. Credit Losses and Provisions - Provision for credit losses increased to $32.2 million in Q2 2024 from $21.6 million in Q2 2023, with specific provision rising to $33.0 million from $11.9 million[147]. - The company experienced a provision for credit losses of $32,178 million in Q2 2024, compared to $21,624 million in Q2 2023, indicating an increase of approximately 48.5%[199]. - General provision for credit losses was $2.1 million in the first half of 2024, significantly lower than $13.3 million in the same period of 2023[157]. Market and Economic Conditions - The company is exposed to significant credit risk due to potential loan defaults, which are influenced by various economic factors[200]. - The company faces capital market risks that may affect its ability to finance operations through debt instruments[201]. - The company is actively managing its interest rate exposure, with most loans linked to the 1M SOFR Term rate[132]. Dividends and Shareholder Returns - The company declared a Q2 2024 dividend of $0.355 per share on common stock, equivalent to $1.42 per annum[186]. - During the six months ended June 30, 2024, the company paid $58.9 million in common stock distributions, compared to $58.3 million in the same period of 2023[186]. - The company has a quarterly cash dividend of $0.355 per share of common stock, with a share repurchase program authorized for $65 million, of which $31.1 million remained available as of June 30, 2024[193].

Liquidity ($M) $1,038 $787 $11 $240 Unrestricted Total CLO Reinvestment Financing Liquidity Cash Available Available & In Progress(1) • 6 mezzanine loans; average UPB (2) of $5M Overview 426-Unit Apartment Core Portfolio – Risk Ratings B E N E F I T S T R E E T P A R T N E R S | A L C E N T R A 20 Appendix Appendix FBRT 1Q 2024 Financial Update Portfolio Overview Collateral by Region By State B E N E F I T S T R E E T P A R T N E R S | A L C E N T R A 15 B E N E F I T S T R E E T P A R T N E R S | A L C E N ...

Franklin BSP (FBRT) came out with quarterly earnings of $0.41 per share, missing the Zacks Consensus Estimate of $0.42 per share. This compares to earnings of $0.44 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -2.38%. A quarter ago, it was expected that this real estate investment trust would post earnings of $0.42 per share when it actually produced earnings of $0.39, delivering a surprise of -7.14%.Over the last four quar ...

Reported GAAP net income of $35.8 million for the three months ended March 31, 2024, compared to $30.0 million for the three months ended December 31, 2023. Reported diluted earnings per share ("EPS") to common stockholders of $0.35 for the three months ended March 31, 2024, compared to $0.28 for the three months ended December 31, 2023. Reported Distributable Earnings (a non-GAAP financial measure) of $41.0 million, or $0.41 per diluted common share on a fully converted basis , for the three months ended M ...