Franklin BSP Realty Trust(FBRT) - 2025 Q3 - Quarterly Report

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].