Franklin BSP Realty Trust(FBRT) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Financial Results This section details the company's Q2 2025 financial performance, including key highlights, portfolio activities, capital management, and subsequent strategic events Financial Highlights For the second quarter of 2025, Franklin BSP Realty Trust reported a slight increase in GAAP net income to $24.4 million, though diluted EPS decreased to $0.19, with Distributable Earnings reaching $29.0 million, or $0.27 per share, recovering from a loss in the previous quarter Financial Performance Overview | Metric | Q2 2025 | Q1 2025 | | :--- | :--- | :--- | | GAAP Net Income | $24.4 million | $23.7 million | | Diluted EPS | $0.19 | $0.20 | | Distributable Earnings | $29.0 million | $(6.2) million | | Distributable EPS | $0.27 | $(0.12) | Key Financial Ratios | Metric | Value | | :--- | :--- | | GAAP ROE | 5.5% | | Distributable Earnings ROE | 7.3% | | Book Value per Diluted Share | $14.82 | Portfolio and Investment Activity During the quarter, the company's core portfolio principal balance stood at $4.5 billion across 145 loans, with loan repayments significantly outpacing new loan commitments, and a $1.5 million benefit for credit losses recognized - The core portfolio consists of 145 loans with a principal balance of $4.5 billion, primarily composed of senior mortgage loans (99.1%) and floating-rate loans (88.1%), with a strong concentration in multifamily properties (74.0%)[7] - Investment activity included closing $60.8 million in new loan commitments, funding $90.6 million on new and existing loans, and receiving $316.8 million in loan repayments[4] - As of June 30, 2025, the company had eight loans on its watch list (one rated 5, seven rated 4) and held ten foreclosure REO positions valued at $246.2 million[4][5] - A benefit for credit losses of $1.5 million was recognized, resulting from a $2.6 million general allowance benefit partially offset by a $1.1 million specific allowance provision[6] Capital and Shareholder Returns The company maintained strong shareholder returns, declaring a common stock cash dividend of $0.355, which translates to an annualized 9.6% yield on its book value of $14.82 per share, with $31.1 million remaining under its share repurchase program - Declared a common stock cash dividend of $0.355, representing an annualized 9.6% yield on book value[7] - Book value was $14.82 per diluted common share on a fully converted basis as of June 30, 2025[9] - As of July 28, 2025, $31.1 million remains available under the company's $65.0 million share repurchase program[9] Subsequent Events On July 1, 2025, after the quarter's end, the company finalized its acquisition of NewPoint Holdings JV LLC for a total consideration of $428.2 million, paid through a combination of cash and equity units - Completed the acquisition of NewPoint Holdings JV LLC on July 1, 2025[10] - The total consideration was $428.2 million, comprised of $337.3 million in cash and 8,385,951 Class A Units of FBRT OP LLC[10] Non-GAAP Financial Measures The company utilizes "Distributable Earnings," a non-GAAP metric that adjusts GAAP net income for certain non-cash items, providing a clearer view of operational performance and dividend capacity for a REIT - Distributable Earnings is defined as GAAP net income adjusted for items including non-cash CLO amortization, unrealized gains/losses on loans and derivatives (including CECL reserves), non-cash equity compensation, and depreciation[11] - The company believes Distributable Earnings is a useful metric for investors as it has historically been an indicator of common dividends per share and helps evaluate performance by excluding certain non-cash GAAP adjustments[13] Consolidated Financial Statements This section presents the company's detailed balance sheets, statements of operations, and reconciliation of GAAP net income to distributable earnings for the reported periods Consolidated Balance Sheets As of June 30, 2025, the company's total assets decreased to $5.63 billion from $6.00 billion, primarily due to a reduction in commercial mortgage loans, while total liabilities also decreased to $4.04 billion from $4.39 billion, largely due to a decline in collateralized loan obligations Balance Sheet Summary | Balance Sheet Item (in thousands) | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Assets | $5,630,218 | $6,002,386 | | Commercial mortgage loans, net | $4,482,201 | $4,908,667 | | Cash and cash equivalents | $414,085 | $184,443 | | Total Liabilities | $4,044,832 | $4,392,581 | | Collateralized loan obligations | $3,043,604 | $3,628,270 | | Total Equity | $1,495,638 | $1,520,057 | Consolidated Statements of Operations For the second quarter of 2025, the company reported net income of $24.4 million, a significant improvement from a net loss of $3.8 million in Q2 2024, primarily driven by a $1.5 million benefit for credit losses compared to a $32.2 million provision in the prior year Income Statement Summary | Income Statement Item (in thousands) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Interest Income | $40,958 | $46,813 | | Total Expenses | $29,560 | $17,721 | | (Provision)/benefit for credit losses | $1,487 | $(32,178) | | Net Income/(Loss) | $24,384 | $(3,765) | | Net Income/(Loss) Applicable to Common Stock | $16,453 | $(8,923) | | Diluted EPS | $0.19 | $(0.11) | Reconciliation of GAAP Net Income to Distributable Earnings The company reconciled its Q2 2025 GAAP Net Income of $24.4 million to Distributable Earnings of $29.0 million, primarily by adding back non-cash compensation and reversing the provision for credit losses, resulting in Distributable Earnings per share of $0.27 Distributable Earnings Reconciliation | Reconciliation Item (in thousands) | Q2 2025 | | :--- | :--- | | GAAP Net Income (Loss) | $24,384 | | (Reversal of)/provision for credit losses | $(1,487) | | Non-cash compensation expense | $2,316 | | Unrealized (gain)/loss on financial instruments | $(2,531) | | Realized gain/(loss) adjustment on loans and REO | $3,886 | | Distributable Earnings | $29,005 |