Good day, and welcome to the Franklin BSP Realty Trust Third Quarter 2025 Earnings Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Lindsay Crabbe, Director of Investor Relations. Please go ahead.

Good morning, and welcome to FBRT's third quarter earnings call. Thank you, Cindy, for hosting our call today. As the operator mentioned, I'm Lindsay Crabbe. With me on the call today are Richard Byrne, Chairman and CEO of FBRT; Jerry Baglien, Chief Financial Officer and Chief Operating Officer of FBRT; and Michael Comparato, President of FBRT. Before we begin, I want to mention that some of today's comments are forward-looking statements and are based on certain assumptions. Those comments and assumptions are subject to inherent risks and uncertainties as described in our most recently filed SEC periodic reports and actual future results may differ materially. The information conveyed on this call is current only as of the date of this call, October 30, 2025. The company assumes no obligation to update any statements made during this call, including any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Additionally, we will refer to certain non-GAAP financial measures, which are reconciled to GAAP figures in our earnings release and supplementary slide deck, each of which are available on our website at www.fbrtreit.com. We will refer to the supplementary slide deck on today's call. With that, I will turn the call over to Rich Byrne.

Great. Thanks, Lindsay, and good morning, everyone. I'm going to start on Slide 4 by reviewing our third quarter results. And then as always, we will open the call up for everyone's questions. I'll begin with key developments from the third quarter. Jerry is going to walk through our financial results, including NewPoint's strong contribution to its first full quarter with us at FBRT. And Mike is going to provide updates on several more topics, including market conditions, our watch list and our REO activity. But to start, as we previously said, the third quarter was a transitional period for FBRT. It was highlighted by the successful closing, as I said, of our acquisition of NewPoint, which occurred on the first day of the quarter, July 1. The NewPoint integration so far is going exceptionally well. NewPoint had a record volume quarter. It was actually the highest in its history with $2.2 billion of originations. This resulted in $1.8 billion increase in the agency servicing portfolio. In total, NewPoint contributed $9.3 million to distributable earnings in its first full quarter as part of our company. Overall, our distributable earnings were $0.22 per fully converted share. Jerry is going to provide additional details on distributable earnings as well as NewPoint. As expected, maintaining liquidity for the acquisition limited our new loan originations early in the quarter. As such, our core portfolio size declined slightly. We originated approximately $304 million in new loan commitments in the quarter and funded $196 million of those, primarily in multifamily with the bulk of our origination activity occurring mid-quarter or later. And we received $275 million in loan repayments. We expect our core portfolio to return to its target size of at least $5 billion over the next few quarters. At quarter end, we had $522 million of available liquidity. But following quarter end, we closed our 12th CRE CLO, which refinanced several older CLOs past their reinvestment periods. While these CLO calls will result in some noncash extinguishment debt charges in the fourth quarter, the transaction lowers our interest expense and adds approximately $1 billion of origination capacity to our total loan portfolio. Our average risk rating held steady at 2.3. We continue to make progress on the legacy portfolio and actively manage our watch list and REO assets. Three new loans were added to the watch list this quarter, while one was removed following full repayment. We expect to remove several watch list loans in Q4 via loan modifications or asset sales. On the REO front, we sold 2 properties this quarter and have a few more slated to close in Q4. You'll hear a lot more about that momentarily. As these legacy issues are resolved, additional capital will be available for us to deploy into our core portfolio. Post interest rate hike originations now represent approximately 60% of our book. Importantly, we have resumed share repurchases in Q4. We view our stock as significantly discounted and believe it's an important activity supported at these levels. Through October 24, we have repurchased 540,000 shares for approximately $6 million and have $25.6 million remaining on our buyback allocation. Our Board of Directors expanded our buyback authorization through December of next year. While this was a transitional quarter, we view it as one that sets the stage for stronger results ahead. We're focused on integrating NewPoint, redeploying liquidity and leveraging our expanded capabilities to grow earnings and book value as we move through the remainder of this year and well beyond. With that, I'll pass things over to Jerry.

Great. Thanks, Rich. I appreciate everyone being on the call today. I'll continue to walk through the third quarter financial results, and I'm going to start on Slide 6. FBRT reported GAAP net income of $17.6 million or $0.13 per fully converted common share. Distributable earnings for the quarter were $26.7 million or $0.22 per fully converted share. Distributable earnings for this quarter include $1.7 million of realized losses related to a REO sale. Excluding this realized loss, distributable earnings were $0.23 per fully converted share. Book value at quarter end was $14.29 per fully converted share, and the decrease in book value per share was caused by under coverage of the dividend and by the NewPoint acquisition. In regards to the dividend under coverage, the key drivers we outlined last quarter to move toward coverage remain intact, and I'll highlight some of the progress we've made on those fronts. At the end of the third quarter, we issued an approximately $1.1 billion CRE CLO, which settled on October 15. The transaction carries an initial advance rate of 88% and a weighted average interest cost of SOFR plus 1.61%, before accounting for discount and transaction costs. The CLO has a 30-month reinvestment period, meaning it should be an accretive liability for us for 3 to 5 years. In conjunction with the new CLO, we also financed approximately $500 million of assets with the money center bank. Together, these financings allowed us to call several older CLOs, generating roughly $250 million of cash and reduce our financing cost by about 65 basis points. Combined, these transactions are expected to add an incremental $0.05 to $0.07 per share of quarterly earnings once this cash is deployed into new assets. We expect to begin realizing this benefit in early 2026. Mike will provide more details on our REO portfolio, but we did reduce our REO balance this quarter through an additional asset sale. We continue to sell REO and redeploy that capital into new originations. We estimate this activity can contribute approximately $0.08 to $0.12 per share per quarter to distributable earnings over time. We also saw a strong contribution from NewPoint in its first full quarter as part of FBRT, generating $9.3 million of distributable earnings or $0.09 per fully converted share. Beyond the immediate earnings contribution, NewPoint is already driving meaningful intangible benefits, including increased deal flow for balance sheet lending, stronger customer relationships, additional CMBS opportunities and access to a much larger real estate platform we can leverage both operationally and strategically across our business. Moving to Slide 8. Our average cost of debt on our core portfolio was SOFR plus 2.31%. As I mentioned, FL12 closed shortly after quarter end on October 15. We've been a consistent leader and repeat issuer in the CRE CLO market, and this transaction was met with very strong investor demand. With the addition of FL12, approximately 75% of our core book is now financed through nonrecourse non-mark-to-market structures, and we have reinvestment capacity available on 2 of our CLOs. Our net leverage position ended the quarter at 2.55x with our recourse leverage standing at 0.84x. Turning to Slide 11 for updates on NewPoint. With the acquisition closing on July 1, we now have a full quarter of results to share, along with progress on our integration efforts. Agency volume came in at the high end of our range at $2.2 billion of new loan origination in the quarter. You can see the breakdown of those volumes by agency on the slide. We now expect full year originations to come in toward the upper end of our initial guidance. We recorded $19.7 million of MSR income in the third quarter, representing an average MSR rate of approximately 91 basis points. At September 30, our MSR portfolio was valued at approximately $221 million with an implied life of 6.6 years. The change in value of the MSR portfolio provided a $0.04 increase to book value this quarter. NewPoint managed a servicing portfolio that was $47.3 billion at quarter end. Integration work is well underway across our business. The migration of BSP loan servicing began during the third quarter with full completion expected by the first quarter of 2026. Once complete, the full migration of FBRT's loan servicing book is expected to generate $0.04 to $0.06 per fully converted share annually to earnings. We expect NewPoint's earning contribution to FBRT to grow meaningful over time as income is directly linked to cumulative agency and FHA origination volume and the expansion of the servicing portfolio. We continue to expect NewPoint to be accretive to GAAP earnings and book value per share in the first half of 2026 and accretive to distributable earnings in the second half of 2026. With that, I'll turn it over to Mike to give you an update on our portfolio.

Thanks, Jerry, and good morning, everybody. I'm going to start on Slide 13. Our core portfolio ended the quarter at $4.4 billion across 147 loans with multifamily assets making up 75% of the portfolio. More broadly across the CRE market, we are seeing a continuation of the trend we noted last quarter. After years of pause, borrowers and lenders are finally resetting, marking assets somewhat realistically with the exception of office and moving capital again. It's a necessary step towards a healthier market. Spreads on whole loan origination have tightened to levels that are less than compelling at the moment. Leverage returns are still in an acceptable range, but they are no longer the euphoric levels we enjoyed in 2023 and 2024. While we have capital to deploy, we are being thoughtful as to pacing given the spread environment. We're confident in our ability to continue to underwrite attractive and differentiated deal flow. In addition, we are also considering additional investment opportunities outside of the whole loan space, ranging from CMBSB pieces, horizontal risk retention investments as well as SASB and CRE CLO bond investments. As always, we are trying to find the best risk-adjusted returns for our capital. Multifamily fundamentals continue to improve. New supply is slowing, concessions are generally burning off and rent growth is reappearing in some markets. Quality assets are leasing well. Differentiation is back and higher quality assets in stronger markets are outperforming as they should. Even with the increased competition and tighter spread environment, we continue to find attractive opportunities for FBRT. During the quarter, we originated 11 loans at a weighted average spread of 447 basis points and a mezzanine loan at a spread just over 1,300 basis points, resulting in a combined weighted average spread of 511 basis points on all loans originated in this quarter. These spreads were achieved due to a focus on construction financing given the tightening of spreads in the traditional bridge loan market. We're encouraged by the strength of our fourth quarter pipeline, and we've already closed approximately $120 million of new loan commitments through today's call. Our conduit business had a very strong quarter, reflecting improved CMBS market liquidity and healthy investor demand. If market conditions hold, our CMBS performance in the fourth quarter could be one of the strongest quarters in the history of the company. Loans originated prior to the interest rate hikes now represent approximately 40% of our total loan commitments. The majority of this collateral is multifamily totaling $1.6 billion or approximately 80%, followed by hospitality at $178 million or approximately 10%. At quarter end, 82% of these legacy loans were risk rated at 2 to 3, largely consistent with last quarter. The overall composition and performance of this group remains stable, and we continue to make progress addressing these positions requiring additional attention, which are reflected on our watch list. Notably, post quarter end, our net lease headquarter office asset paid off in full. The remaining office loan exposure is now only $70 million across 4 loans with an average loan size of $17.6 million. Office loan exposure is now only 1.6% of our entire portfolio, and we expect this figure to shrink again in the fourth quarter. Slide 17 summarizes our watch list. We had 10 positions on our watch list at the end of the quarter, and we continue to actively manage each, and borrower engagement remains high. One multifamily loan originated in July 2021 paid off in full this quarter. Within the remaining positions, one is a Georgia office building that was extended in January and has remained current on all payments. The 307-unit student housing property in Norfolk, Virginia has now been stabilized at approximately 92% occupancy and the sponsor is looking to liquidate the asset in the coming quarters. The Phoenix office building is under contract with a meaningful nonrefundable deposit, and we expect to be repaid in full in early November. The remaining watchlist loans are multifamily assets originated in 2021 and 2022, and we remain in active dialogue with the borrowers. We expect 2 assets to be sold in Q4. Unfortunately, one appears it will be a short sale, and we have accordingly marked down the position by $2.3 million this quarter. Reiterating last quarter's call, while the watch list count ticked up slightly, requests for modifications continue to slow, which is another sign that FBRT is in the later innings of this cycle. While we are not completely out of the woods, we get closer to the edge of the woods with every passing quarter. Slide 18 covers our foreclosure REO portfolio, which has 9 foreclosure REO positions at quarter end compared to 10 last quarter. We sold 1 multifamily asset during the quarter at our debt basis and have 4 additional assets under PSA. Two PSAs are nonrefundable, and we expect closing in the next 2 weeks. Our team continues to work diligently to enhance value and optimize execution before bringing properties to market. Our largest REO asset in Raleigh, North Carolina is now operating at 91% occupancy. We will be exploring options for this asset in Q1 next year. This could be an outright sale, but we will also explore joint venture opportunities as we think this is a very unique asset. Finally, I'll spend a minute on NewPoint. The acquisition of NewPoint has made us one of, if not the largest middle market lenders in the country with over 300 employees. We are extremely encouraged by the origination activity we saw in the third quarter. We are already seeing meaningful cross-selling and collaboration between the platforms and my confidence and conviction in the acquisition continues to grow. As we have spent more time with the company, it is clear that we have some of the most talented people in the industry, including, but not limited to, Jerry Borger, our President of Agency Lending; Rob Rozak, the President of Affordable; and Eric Lindauer, our Head of Healthcare and FHA Lending. These leaders are bringing new products to our platform and give us yet another offering to our clients from what we've already believed to be a market-leading product offering. This is truly just the beginning of what NewPoint can bring to FBRT. As Rich mentioned, the third quarter was very much a construction zone for FBRT. We are now highly focused on playing offense. Our integration plan with NewPoint is on track, and we firmly believe FBRT has more tailwinds than headwinds. We are excited to continue the path to dividend coverage. And with that, I'd like to turn the call back to the operator to begin the Q&A session.

First question comes from Matthew Erdner of JonesTrading.

I appreciate the comments as always. I'd like to kind of touch on the origination volumes and what led to the higher end of your range? And then also what's going to lead to the higher end of the range in 4Q? Is it just a matter of you guys kind of winning the deals and being more competitive there? Or is the market really starting to open up?

Yes, I think we've just been able to cultivate the balance sheet. We've been able to convert a handful of loans from a floating rate basis into our CMBS product. And that usually has incrementally less competition than a widely marketed deal. So I think, again, subject to market conditions holding, if we can execute where we stand today we're close, Q4 will be a monster quarter for us in the CMBS group.

Got it. That's good color there. And then I'm guessing that kind of plays into what you were saying about alternative investments and kind of, I guess, not necessarily going away from the core portfolio, but while spreads are tight, explore those other options.

Yes. I don't want to mislead. We are actively, actively originating in our core business, which is originating whole loans for the balance sheet. I think we're seeing some opportunities in markets where things haven't tightened as much as they have on the traditional bridge lending side of things. So if we can find better returns with the same or better overall credit and liquidity profile, we're going to explore those things. And I think, again, that's always been kind of the pitch of what differentiates BSP. We're not a one-hit wonder. We literally can do anything and everything within the capital stack and along the life cycle of an asset. So we're just waking up every day, looking to find what we think are the best risk-adjusted returns and focusing our efforts in those areas.

Great. That's helpful. And then, Jerry, I have one quick one for you, and then I'll step out. As it relates to the comp and benefits expense line item, what should we expect there kind of going forward? And how should we think about that overall?

It's going to be variable for one. So think of it trending with volume, right? A lot of our volume drives the comp since it's directly tied to profit share on what we're originating. So you can, to some extent, flex off what you're seeing. I will say that it will be a little bit trickier than that because you'll kind of scale throughout the year in terms of people hitting hurdles and stuff like that in terms of volume targets and things like that. So you might scale into a greater share in the second half of the year than the first half. So it won't be easy to extrapolate just off what you see in Q3. I think you're going to need to see a few quarters to kind of get the normal range. But you can kind of back in this quarter to see the general share on that in terms of how it's going to weigh.

The next question comes from Timothy D'Agostino of B. Riley Securities.

The first one, just on repayments, $275 million in the quarter. I was wondering if in the fourth quarter, you are still seeing elevated repayments as of October end.

Jerry, do we have a quarter-to-date repayment summary? I feel like we've not have...

We do. I would expect repayments are relatively in line with what we've seen throughout the year. In terms of kind of pace, I don't think we've been markedly off what we've seen throughout the earlier portion of the year. I would say fourth quarter is also one of the tougher ones to predict because you get more variability in people trying to close things out before the end of the year. So it could certainly change because we still have 2 full months left. But I would say if you're run rating, it wouldn't be too far off.

Okay. Great. And then just a quick follow-up. On the core portfolio, is there like a target size that you are aiming for? I think right now, the portfolio is about $4.4 billion. I was wondering if throughout '26 or later on, if there's a level you would like to reach.

Yes. I think overall, we're targeting a stabilized portfolio size on a whole loan basis of between $5 billion and $5.5 billion.

The next question comes from Chris Muller of Citizens Capital Markets.

Congrats on a nice quarter here. So great to hear the record quarter for NewPoint. And I guess even though it was a record quarter for them, do you guys view this as a good run rate going forward? Or could there be some further upside to volumes with the NewPoint acquisition?

Chris, thank you for your question. We completed a significant transaction in the third quarter, and we are actively seeking large opportunities when they arise. However, I don't expect this level of performance to be consistent every quarter. As Jerry mentioned, we shouldn't use one quarter to predict future results. We do not anticipate NewPoint achieving $8 billion in origination by 2026. While this was an exceptional quarter and we are enthusiastic about the ongoing cross-selling efforts, with them originating bridge loans for us and us originating agency loans for them, I believe this performance may be an exception. I suggest looking at the overall annual guidance that Jerry has historically provided.

Got it. And given the large transaction that was in there, those usually have lower margins with them. Was that the case here, so we could see some margin improvement going forward?

Yes. There is slight margin tightening on that individual transaction.

Got it. And then I guess just the other one I have here is more of a broader question. With all the talk of the GSEs coming out of conservatorship, can you guys share your thoughts on that? And if it does happen, what type of impact to the market would you expect?

Yes. I mean we've been getting that question for a while. I think it's obviously difficult to answer overall. So this is completely just personal speculation. Several administrations have talked about doing this. It is untangling a very complicated web. Where I do feel very confident is that this administration is not going to do something that is going to disrupt the mortgage market and mess with people's homes and disrupt the market overall. My guess would be if this is figured out that the solution there could be an explicit guarantee rather than the implicit guarantee. I think that's the easiest way to solve any sort of volatility or concern. But again, I'm still skeptical that this happens or happens quickly because I do think it's a very, very complicated web to untangle.

This concludes our question-and-answer session. I would like to turn the conference back over to Lindsey Crabbe for any closing remarks.

We appreciate you joining our call today. Please reach out if you have any further questions. Thank you and have a great day.