Good day, and welcome to the Franklin BSP Realty Trust 4th Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star event 1 on your telephone keypad. To withdraw your question, please press star event 2. Please note this event is being recorded. I would now like to turn the comments over to Lindsay Crabb, Director of IR. Please go ahead.

Good morning, and welcome to FBRT's fourth quarter earnings call. Thank you, Megan, for hosting our call today. As the operator mentioned, I'm Lindsay Crabb. With me on the call today are Richard Byrne, Chairman of FBRT, Michael Comparato, Chief Executive Officer of FBRT, Jerry Bagley, Chief Financial Officer and Chief Operating Officer of FBRT, and Brian Bafum, 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 subscribed in our most recently filed SEC periodic report, and actual future results may differ materially. The information conveyed on this call is current only as the database call, February 12, 2026. 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.sertread.com. We will refer to the supplementary slide deck on today's call. With that, I will turn the call over to Richburn.

Thanks, Lindsay, and good morning, everyone, and thank you for joining us today. Before we begin, I'd first like to share some important management updates with you. We announced all of these the other day. First, I'm pleased to announce that Mike Comparato, who many of you already know very well, has been appointed Chief Executive Officer. This is effective immediately. Mike currently leads our commercial real estate practice at Benefit Street Partners and has been instrumental in building and scaling that platform to what it is today. He brings deep commercial real estate expertise, a strong command of capital markets, and of course, a proven track record. Concurrently with that, with Mike's promotion, Brian Buffon will assume the role of president. Brian is a seasoned real estate veteran and a long-standing member of our investment team. His experience, institutional knowledge, and investment and acumen will continue to be invaluable as we execute our strategy and serve our investors. Together, these appointments represent a natural progression of FBRT's leadership, and I am excited to say leave the company well-positioned to execute its strategy in a dynamic market. I will remain actively engaged as chairman, focused on strategic oversight, and supporting Mike and Brian through this transition. So with that, let me turn the rest of the call over to Mike.

Thanks, Rich. Good morning, everybody. And before my prepared remarks, I want to thank Rich for his years of service as FBRT CEO. Rich has been an integral part of the company becoming a middle market leader in the commercial real estate finance market, and we all appreciate his dedication over the years to the company's success. I also want to take a brief moment and congratulate Brian on being promoted to president of FBRT. Brian has been a longtime leader within Benefit Street and will now be playing a much more prominent role in FBRT. Now on to the company. For several quarters, we have discussed our earnings under covering our dividend. After thoughtful analysis, we decided it was no longer prudent to sacrifice book value to pay that dividend. Accordingly, management has recommended and the board has approved a reset of the quarterly dividend to $0.20 per common share beginning the first quarter of 2026. The company continues to have earnings power to support a meaningfully higher dividend than $0.20. That has not changed. But in the near term, rather than returning capital to shareholders by overdistributing, we want to stabilize our book value and better match our current earnings to our dividend. Our priorities are sustainable dividend coverage, book value growth, and building more consistent durable earnings. The dividend reset is driven by several factors. The recent declines in SOFR, the timing of our originations and repayments, and the overall size of our loan portfolio have impacted short-term returns. In addition, spreads are at multi-decade tights, which means that new loans coming into the portfolio are generally making lower returns than loans that are paying off. REO liquidations are taking longer than originally anticipated, keeping equity locked in underperforming investments. We continue to make very good progress on the REO liquidation front, unfortunately just at a slower pace than desired. Lastly, but most importantly, with our acquisition of NewPoint, we made the intentional decision to no longer be a pure play mortgage read. Today, we are a commercial real estate investment platform. This means a lower overall dividend yield, but significantly more earning stability and stronger long-term book value growth. This cannot be overstated. We are a different company today than we were six or nine months ago. In acquiring NewPoint, we have intentionally traded some higher near-term returns from credit investments for steadier recurring servicing and fee revenue. This type of revenue typically trades at a lower yield than pure claim mortgage rates since it produces a much more consistent and predictable ongoing cash flow stream. When looking at our company and dividend yield today versus where we have been, the overall picture should be viewed based on a blend of our mortgage rate operations plus that recurring revenue stream business. As we scale a new point, its contribution over time will continue to increase and be accretive to overall earnings. We have also recently made a few strategic investments in commercial real estate equity investments. In the current market environment, equity investments yield lower current returns in credit investments, but should provide longer-term growth and upside in earnings. An agency servicing platform and select equity investments are key to a strategy that delivers stronger long-term growth and bulk value for our shareholders over time and creates a company where the total return should be more meaningful than just our dividend returns to shareholders. We fully recognize we must demonstrate FBRT's repositioning to the market, and the team is working around the clock to do so. Again, FBRT should no longer be compared to pure play mortgage rates. We are positioning the company with a differentiated mix of dividend yield, stability, and growth, which traditional mortgage rates do not provide. Looking ahead, our focus is on balancing attractive current income with disciplined book value growth. We believe this approach strengthens the durability of our model and better aligns our yield strategy with the business we are building. Before turning the call over to Jerry and Brian, I want to take a minute just on overall market conditions. Market conditions overall continue to improve. Liquidity is abundant, and virtually any capital markets transactions from CMDS to SASB to CRE CLO is met with a deluge of orders, driving spreads tighter. As a result, we are witnessing spreads that are the tightest we've seen since pre-GFC days. We are also seeing regional banks slowly return to the market, primarily in the multifamily space. Their financing quotes typically come with large depository relationships and recourse, but we are hearing about banks quoting whole loans with the same pricing as AAA-rated bonds on CRE CLOs. We are reluctant to chase spreads to the levels that are currently being bid in the market today for commodity multifamily loans. The returns are anemic, and if SOFR continues to fall, they only get worse. However, saying all of that, given the breadth of our product offerings, we are still able to originate ample loans that fit not only our credit criteria, but also generate returns that are significantly more interesting for our investors. Ryan is going to address a few of our watch list positions, as well as provide some updates on the REO portfolio. But first, I'll turn the call over to Jerry to walk through our financial results in more detail.

Great. Thanks, Mike. I appreciate everyone being on the call today. I'm going to go through the financial results for the quarter. FBRT reported GAAP net income of $18.4 million, or $0.13 per fully converted common share. Distributable earnings for the quarter were $17.9 million, or $0.12 per fully converted share. Turning to distributable, we had distributable earnings, which included $9.8 million of realized losses. Now, $7.7 million of that was related to debt extinguishments and the balance to REO sales. If you take these out, our distributable earnings was $0.22 for a fully converted share, or nearly flat to where we were last quarter. Timing was a primary driver of the quarter over quarter change in distributable earnings. Early in Q4, we completed a $1 billion CLO, FL12, that increased our non-recourse financing capacity. With this transaction, we called several older CLOs that were past the reinvestment periods, which produced a debt extinguishment charge that I mentioned of $0.07 per share. The new CLO should lower financing costs in 2026 and additionally add meaningful origination capacity. We grew the core portfolio slightly in Q4 as origination's outpaced payoffs. The principal balance rose modestly as we originated about $528 million of new commitments while receiving roughly $510 million of loan repayments, a small but important reversal from Q3 when the core portfolio declined as we conserved liquidity for the new point acquisition. During the quarter, we recorded a net CECL benefit of $4.8 million. However, that included $3 million of loan-specific reserves for four watch list loans. One of those loans was subsequently transferred to REO, and the associated specific reserve was charged off. Importantly, we continued our share buybacks in Q4, repurchasing $14.4 million of common stock, which contributed $0.05 to book value. Subsequent to quarter end, our board reauthorized the company's share repurchase program, providing $50 million available for future share or purchases through December 31st of 2026 to further support the stock price. Book value per share ended the quarter at $14.15, reflecting our dividend outpacing our earnings. Net leverage remains well within our targets, ending the quarter at 2.5 times, with recourse leverage standing at 0.81 times. We have ample financing capacity and liquidity, with reinvest available on two of our CLOs. As we redeploy the capacity created by our financing actions, we expect earnings to benefit in 2026, as our core loan portfolio grows and we see a more stabilized contribution from NewPoint. Turning to slide 11 for updates on NewPoint, NewPoint contributed modestly in Q4. This was expected given a lower origination cadence in a quarter and paired with higher tax reserves at the TRS that reduced New Point's reported earnings in Q4. We expect New Point's distributable earnings contribution to operate at a run rate of approximately $25 to $33 million per year. Agency volume came in at $1.1 billion of new loan originations in the quarter. We expect agency volumes to be between $4.5 and $5.5 billion in 2026. At quarter end, the MSR portfolio was valued at approximately $220 million and generated $8.8 million of income in Q4, reflecting an average MSR rate of approximately 82 basis points, and the implied life of that portfolio was 6.4 years. New Point managed a servicing portfolio that was $47.8 billion at quarter end. The New Point BSP integration work continues to move forward. We've made significant progress on the migration of BSP's loans and that servicing book onto New Point, and we're on pace to complete that transition by the middle of the first quarter. The addition of the BSP loans will increase New Point's servicing book by approximately $10 billion and help to contribute to the increase in earnings power of New Point in 2026. We remain confident New Point is very accretive over the long term, as origination and servicing volumes grow and integration synergies continue to build. With that, I'll turn it over to Brian to give you an update on our portfolio.

Thanks, Jerry. Good morning, everyone. I just quickly want to start by saying thank you to Rich and Mike for their kind words and support earlier. And as I step into this role, I look forward to continuing to execute our strategy alongside Mike and the broader FBRT team. I'll start on slide 15. Our core portfolio finished Q4 at roughly $4.4 billion, with about 77% of our loans backed by multifamily assets and very limited office exposure. During the quarter, we originated 37 loans at a weighted average spread of 284 basis points, with multifamily representing 76% of our new loan originations. Our pipeline is robust, but given current spreads, we are selective on pacing, as Mike mentioned earlier. Our conduit business had an incredible quarter, one of the largest in the history of the company, and that reflects an improved CMBS market liquidity and healthy investor demand. A pre-rate hype book represents roughly 32% of the total loan commitments of $1.3 billion of multifamily, or 82% of that pre-rate hype book. Credit mix remains steady, 76% of those legacy loans are risk-rated two or three at quarter end, and we're continuing to work through the positions that need extra attention on the watch list. Importantly, the office loan exposure is now only $57 million across three loans with an average loan size of $19 million. That's down from $130 million in the prior quarter due to two office loans paying off in full during the fourth quarter. Credit quality across the portfolio remains stable with an average risk rating of 2.4 at quarter end. And during the quarter, two loans were removed from the watch list. One was repaid in full and the other was taken as REO and subsequently sold while two new multifamily assets were added. Borrower engagement remains high and we are actively working towards resolution on each position. A notable change on our watch list was the Georgia office loan that was extended 18 months in exchange for a 5% principal paydown. That original loan amount of $27.5 million has now been paid down to $21.1 million, and the borrower continues to make monthly debt service payments. That loan will stay on nonaccrual. On slide 19, I'll cover our foreclosure REO portfolio. Our foreclosure REO balance declined to seven positions at quarter end, down from nine in the last quarter, reflecting continued progress resolving those legacy assets. During the quarter, the team moved three assets off the REO list, selling them at our adjusted debt basis. Remaining reserves related to those assets were charged to distributable earnings this quarter, which contributed to our realized loss. We added a new property to our foreclosure REO in Q4, a Texas multifamily asset. However, it is already under LOI, and we expect resolution to that asset in the first half of this year. We remain highly focused on resolving the remaining positions so we can redeploy that capital into our core loan portfolio.

And with that, I'd like to turn it back over to the operator to begin the Q&A session. we will now begin the question and answer session to ask a question you may press star then one on your telephone keypad if you are using a speakerphone please pick up your handset before pressing the keys if at any time your question has been addressed and you would like to withdraw your question please press star then two at this time we will pause momentarily to assemble our roster the first question comes from matthew erdner with jones trading please go ahead Hey.

Good morning, guys. Thanks for taking the question. Rich, congrats on a great run as well, and Mike and Brian, you guys also. I want to touch on spreads and kind of the compression there. You know, you guys have mentioned or kind of hinted at, you know, laying off the gas a little bit there.

You know, it looks like Conduit was pretty successful, you know, so how should we think about capital allocation this quarter you know if the core portfolio has yeah I guess muted origination somewhat hey Matt good morning thanks for the question I don't I don't want to take the prepared remarks out of context we have the pedal to the floor on origination our goal is to get you know assets up to a level where we're, you know, meaningfully growing earnings, and we can only do that by closing loans, obviously. I think the, you know, the point of the message was, you know, we are not actively chasing the, you know, commodity 88-mile-an-hour fastball over the fat part of the plate, multifamily loan. We're kind of focusing on the other aspects of our business where we can originate as well, whether that's construction lending, you know, some other areas that we're active. So we've got – I think we've got a $1.7 billion under-application pipeline. So we are by no means slowing down. We're just kind of changing the mix of what the origination looked like so that we, you know, aren't dropping to the tightest spreads that the market is. You know, we have to selectively pick a few where we compete there, But generally, we're trying to play a little bit wider.

Right. Yeah, that makes sense there. You know, and then I guess turning to kind of the dividend reset, you know, should we kind of expect that to be a good baseline for run rate earnings going forward? And then I guess within that, you know, following up on the last question, you know, what's an ideal portfolio size that you're looking to get that core back to by the end of the year, you know, to get back to that 20 cents coverage?

Well, we're above $0.20 today, and so let me answer the question backwards. I think our goal by year end would be to have the book, our core book, between $4.8 and $5 billion overall. With respect to earnings, look, we fully expect this to be one or two trough quarters, right? That is, the earnings potential of this company hasn't changed, right? We laid out the path to getting back to $0.35, $0.36. We still believe, you know, with conviction that we have that earnings ability, you know, to get back to that level. The issue is it's just taking us a little bit longer to get there than we had hoped. So I'm expecting that we are fully growing earnings over the course of the next several quarters on this path back to that kind of mid-30s. We just did not want to continue shrinking the size, you know, the balance sheet of the company paying out cash over distributing because it just makes it even harder to get back to that level. So, you know, we've talked about for several quarters the, you know, borrower behavior and the unpredictability of borrowers. The same, unfortunately, has been true on the REO disposition. We have made tremendous progress. And just when you think you're selling another asset or two or three, you know, a buyer zigs instead of zags. So we're navigating what I would say is a significantly better market than what it was two years ago, But it's still just taking us a little longer than we had hoped. So very long-winded answer. Apologize for that. But, no, I would not view this as the steady state earnings of the company. I think earnings are going in one direction from here, and that is higher.

Got it. That's very helpful. I appreciate the comments, as always.

The next question comes from Steve Delaney with Citizens JMP Securities. Please go ahead.

Good morning, everyone, and congratulations on all the promotions that we heard about last night. Well deserved. Just looking at where you're trying to allocate capital, and I hear you loud and clear about the excessive competition and maybe traditional bridge loan products. You have, you're primarily a lender, I guess, as we think about it, while some of it is the multifamily and doing the New Point business, maybe like a WD or somebody like that. I think that's certainly value added. But you have one investment REO. Is that going to be a one-and-done thing, or should we expect that going forward, you will have a sum percentage of your capital in direct real estate investments for the carry plus the potential capital gain? Thanks.

Thanks, Steve. Good morning. A lot there. Let me try to answer it. So we actually have more than one equity investment on the books. We bought two large assets, I think both in 2025, that are in joint ventures. So they might be booked slightly differently, but I believe those, I believe we have roughly, you know, $400 million to $500 million of gross assets that own, I don't know the percentage off the top of my head, but we do have more equity investments on the book today than just that one Academy Sports Distribution Facility. You know, we have appreciate you, you know, pointing out Walker Dunlop, and I think that's part of my, you know, message in the prepared remarks, you know, they're trading at a 4% dividend yield. So what we're trying to get the market to view us as, as really this conglomerate within the commercial real estate, right? Like, let's put a dividend yield of 4% or 5% on the new point operations. Let's put a dividend yield of, you know, 8% to 10% on our mortgage rate operations. And let's put a dividend yield of, you know, 4% or 5% on the equity investments that we have, because that's where equity reach trade, but those also are, you know, positions for growth in the company. It's going to take us time to educate the market on that front and let, you know, let them see that and we have to prove it and I think we'll do that. But yes, we are primarily a debt shop. That said, we do make a lot of equity investments in other vehicles outside of FBRT. I think we've bought close to a billion dollars of commercial real estate assets in the last 18 months. So, again, a longer-winded answer here, but yes, I think that you should expect to see a slightly higher allocation of the book to some equity, select equity investments over the next few years.

Now, that's very helpful and it was a twisted kind of question to begin with, but I appreciate the color that on the, especially on the investment side on the investment REO.

Yeah, and I would just add, you know, you're not going to wake up one morning and see FBRT have 25% of its equity invested in equity investments, right? That is not happening anytime soon. You know, could we have 5%, you know, 10% a few years from now? Possibly. But, you know, we are not on the path to, you know, Starwood. I think they're at like 50% equity investments. That is not the goal or expectation. Got it. You're still going to be a finance company primarily.

Okay, so on your agency business with NewPoint, will we be able – I have not – forgive me, but I haven't been through this act yet. But will we be able to kind of look at that operation in terms of its origination, sale, and servicing business, you know, to Freddie and Fannie, et cetera? Or will we see sort of what your little WD component of the company looks like, you know, in terms of the TRS?

Jerry, you want to say that? Sure.

Yeah, well, there's a page in the supplemental deck, and there's obviously going to be more information in the 10K. It'll give you more segment information on the details within that operating segment for us. So you'll be able to see some of the volume information we break out. you know, the income bias components, servicing, gain on sale, and you can see the cost structure So hopefully that should be helpful in answering some of the questions. And additionally, we gave kind of a high-level range for volume and expected income contribution in 26 as well to just help put a guidepost out there for kind of where we see things.

Well, congrats on the progress, and we applaud what you're doing. We've got 22 plain vanilla commercial mortgage rates, and I think that's enough. So it'll be exciting to see how you guys position the company over the next year or two. Thanks for your time this morning. Thanks, Steve.

Our next question comes from John Nigger-Demus with BTIG. Please go ahead.

Good morning, everyone, and first of all, Rich, all the best in your role as chairman, and congrats to Mike and Brian in your new roles. Earlier in 2025, you estimated that there was $0.812 a B per quarter that could be unlocked from reinvesting equity tied up in non-performing loans in REO. Based on progress your team has made since then, where do you estimate that figure stands today? Thanks.

I think we're actually slightly higher than that today. I don't know if I have the number, Jerry, I don't know if you have the number at your fingertips. But, John, I think you've hit the crux of exactly why, you know, we concluded to a dividend cut is that it's, you know, that earnings is there. It's black and white. It's not questionable. It's just a matter of when do we recoup it. And unfortunately, just taking a little bit longer than we had anticipated. So, Jerry, I don't know. Do you have the number? I know, obviously, we have the numbers, but I don't know if you have them at your fingertips.

We have the numbers. I would say the range has not substantially changed, and Mike's right. It's not that the quantum has necessarily changed. It's the timing to unlock the balance of that earning power, whether it's resolutions that have taken longer, or we've kind of cycled through additional assets as we kind of work down through the balance of our legacy portfolio. You know, our ability to kind of take that back and redeploy in our core portfolio is still there. We're really working with time more than we're working with a change in potential earnings power with that equity that's there.

Thanks, Mike and Jerry. The timing, being the key driver, makes a lot of sense. And then, Jerry, something that you touched on earlier, just about the 2026 full-year guidance for the volumes and distributable earnings contribution from New Point, noticed, you know, the volume had come down a bit and then the earnings contribution had come up from the deck you put out in September. I'm just curious what was driving those changes as we look toward 2026 and New Point.

I think we were going to 25 before. And in 25, I think we're kind of middle of that range. So essentially we bumped it up a little bit from where we are today, kind of what we hit in 25, kind of based on, you know, all the scaling that we've talked about plenty of times on our calls over the last year or so. The range is also, again, it's up a little bit from where we were this year. I think this year we were at the high end of what we provided for everybody on a 2025 year-to-date total. Obviously, it's a little chunkier in how it came in the two quarters. And one of the reasons we get annual projections is because this business will have some chunky quarters, right? We wanted to kind of give a bit of a range there. And then, you know, the reason we kind of simplified it into two line items is just the mix can obviously change quite a bit in terms of the end distributable performance. So rather than kind of be overly specific, we want to put a decent range on there to kind of cover the various outcomes. I think in terms of one of the other upsides is the servicing integration that I mentioned. And, you know, putting that $10 billion of our own book onto the business is going to be a pretty big driver in terms of additional income growth that we should see through the balance of 26.

Great. Super helpful, Jerry. Thanks for the time.

Our next question comes from Timothy Degastino with V-Riley Securities. Please go ahead.

Yeah. Thank you. Congrats on the quarter and the promotions and transitions. You know, looking at the results for 25 at Fannie Mae, understanding how that multi-family volume was a lot higher this year compared to years past, I just wanted to get the overall sense of how that business is progressing year to date in 26, if that momentum from 25 is still carrying over, and if you could provide any color and kind of how you're feeling about the year ahead in that channel.

So I think, unfortunately, we're living in a world that is highly, highly tethered to rates and the slightest of move. I mean, this is probably more so than ever in my career. I was talking about this with someone the other day when the 10-year was at four and a quarter. I said, you know, if the 10-year dropped to 4% flat, I think you would see volume just go through the roof. And if you see the 10-year go to 4.5, I think things are going to come to a screeching halt. And it's just shocking that a 25-basis point move in either direction could have that outcome. We are in an incredibly rate-sensitive environment, and everybody has been sitting and waiting and waiting and waiting for rates to go lower. and if they go lower I think you're going to see a just a massive massive amount of volume come through the market and unfortunately if they go higher we're going to see the opposite so if you could tell me where the 10 years going for the next six to 12 months I could give you a much better answer but it is just incredibly rate sensitive at the moment and I think that's for all of our all of our businesses.

Okay, awesome. Thank you for that. And then sort of I missed it earlier in the call, but regarding the loan portfolio, payoffs persisted at a pretty high rate. However, funded volume obviously came in just above that. Are most of these repayments behind you? Do you think we could still see some higher figures in the first half of 26? Just kind of any color on repayments of the portfolio.

Yeah, so, you know, repayments are obviously a blessing and a curse. We are, you know, cycling through the legacy portfolio. I think we are, you know, head and shoulders above the balance of the industry in terms of addressing that legacy portfolio. As Brian mentioned, I think we're down to 32% of the portfolio being backward looking. And look, honestly, I think this is just where the market is completely mispricing and misunderstanding FBRT. We talked about it a few earnings calls ago, but, you know, the market right now is looking at a dividend yield, albeit a lower one given the cut, but it's just not factoring in the overall return. And if you look at the company as a collection of loans, if you took a loan portfolio of this quality out to the market today, it would trade at 97 cents. Look at ARI. I mean, look at what Athene bought ARI loans for. The disconnect between our book value and our share price is inexplicable. So we will just continue to do what we do. We will continue to deliver on the REO portfolio. We will continue to just recycle out of those legacy positions. But we re-underwrite this portfolio and risk rate it every single quarter. And short of a black swan event that I cannot predict, there is absolutely no way that the book value disconnect is anywhere close. It's not even a fraction of what the losses we will realize as we cycle through this. So we're going to have to show it to the market, which we plan on doing in 2026. I have the highest of conviction that we are right in that regard, but we've got to get through it, which we will do in the next few quarters.

Okay, great. Thank you so much for answering the questions, and congrats again on all the promotions.

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

We appreciate you joining us today. Please reach out if you have any further questions.