Franklin BSP Realty Trust, Inc 8-K, filed Nov 12, 2021
Franklin BSP Realty Trust, Inc. (FBRT)
About this 8-K
Franklin BSP Realty Trust, Inc filed this 8-K on November 12, 2021, reporting on events of November 10, 2021.
Items reported
- Item 2.02: Financial results
- Item 9.01: Financial statements and exhibits
UNITED STATES
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Washington, D.C. 20549
FORM
CURRENT REPORT
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Item 2.02 Results of Operations and Financial Condition.
On November 10, 2021, Franklin BSP Realty Trust, Inc. (the “Company”) issued a press release and supplemental slide presentation reporting the Company’s financial results for the three and nine months ended September 30, 2021. Copies of the press release and supplemental slide presentation are attached hereto as Exhibit 99.1 and Exhibit 99.2, respectively, and are incorporated herein by reference.
The information in this Item 2.02 (including Exhibits 99.1 and 99.2) shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| EXHIBIT INDEX | ||
|
Exhibit |
Description | |
| 99.1 | Press Release dated November 10, 2021 announcing the Company’s financial results for the three and nine months ended September 30, 2021 | |
| 99.2 | Supplemental Presentation for the quarter ended September 30, 2021 | |
| 104.1 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| FRANKLIN BSP REALTY TRUST, INC. | ||
| By: | /s/ Jerome S. Baglien | |
| Name: | Jerome S. Baglien | |
| Title: | Chief Financial Officer and Treasurer | |
Date: November 10, 2021
Exhibit 99.1
| Investor Relations Contact: Lindsey Crabbe l.crabbe@benefitstreetpartners.com (214) 874-2339 |  |
Franklin BSP Realty Trust, Inc. Announces Third Quarter 2021 Results
New York City, NY – November 10, 2021 – Franklin BSP Realty Trust, Inc. (NYSE: FBRT) (“FBRT” or the “Company”) today announced financial results for the quarter ended September 30, 2021.
Third Quarter 2021 Summary
| · | GAAP Net Income of $38.5 million or $0.67 per diluted share(1), representing a 14.5% ROE |
| · | Distributable Earnings (a non-GAAP financial measure) of $40.0 million or $0.69 per diluted share(1), representing a 15.0% annualized distributable earnings ROE (a non-GAAP financial measure) |
| · | Book value of $17.78 per diluted share reflecting merger consideration and transaction expenses |
| · | Net core portfolio growth of $138 million bringing our core portfolio to $3.3 billion of principal balance |
| · | Declared and paid a $0.355 cash dividend |
| · | Closed merger with Capstead Mortgage Corporation on October 19, 2021 increasing our total equity to over $1.8 billion |
| · | Successful listing of our common stock on the NYSE on October 19, 2021 |
Richard Byrne, President and Chief Executive Office of FBRT, said “We are pleased to report our third quarter results showcasing another exceptional quarter followed by the close of our merger with Capstead Mortgage Corporation in October, bringing our equity capitalization to over $1.8 billion. Our earnings and book value growth this quarter are representative of our differentiated strategy and strong deal flow. Looking forward into the fourth quarter, our pipeline remains robust at more than $1 billion and since quarter end we have already closed more than $277 million of additional core loan commitments. As the Capstead portfolio continues to decrease due to strategic sales and natural runoff, we expect to put that capital to work into our commercial strategy to deliver long-term value for our stockholders.”
Portfolio and Investment Activity
Core portfolio: For the quarter ended September 30, 2021, we closed $519 million of loan commitments, funded $474 million of principal balance and received loan repayments of $337 million. This activity resulted in net core portfolio growth of $138 million. Our core portfolio at the end of the quarter had 150 loans with an aggregate principal balance of approximately $3.3 billion. The average loan size was $22 million. Over 99% of our aggregate principal balance is in senior mortgage loans with approximately 96% in floating rate loans. When looking at the sector composition of our portfolio, approximately 57% is collateralized by multifamily properties. As of September 30, 2021, we had one non-performing loan.
Conduit: For the quarter ended September 30, 2021, we closed $69 million of fixed rate loans that we sold through our conduit program. For the same period, we sold $145 million of conduit loans for a gain of $8.8 million gross of derivatives.
Book Value
As of September 30, 2021, our diluted book value per common share was $18.60 as compared to $18.28 as of June 30, 2021. Our diluted book value per common share as of September 30, 2021, adjusted for the Capstead merger consideration and transaction expenses, was $17.78.
(1) Diluted per share information in this press release assumes conversion of our Series A, Series C, Series D and Series F preferred shares to common shares.
| 1 |
Distributable Earnings
Distributable Earnings is a non-GAAP measure, which we define as GAAP net income (loss), adjusted for (i) non-cash CLO amortization acceleration and amortization over our expected useful life of our CLOs, (ii) unrealized gains and losses on loans and derivatives, including CECL reserves and impairments, (iii) non-cash equity compensation expense, (iv) depreciation and amortization, (v) non-cash incentive fee accruals, and (vi) certain other non-cash items.
We believe that Distributable Earnings provides meaningful information to consider in addition to our GAAP results. We believe Distributable Earnings is a useful financial metric for existing and potential future holders of our common stock as historically, over time, Distributable Earnings has been an indicator of our dividends per share. As a REIT, we generally must distribute annually at least 90% of our net taxable income, subject to certain adjustments, and therefore we believe our dividends are one of the principal reasons stockholders may invest in our common stock. Further, Distributable Earnings helps us to evaluate our performance excluding the effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current loan portfolio and operations and is one of the performance metrics we consider when declaring our dividends.
Distributable Earnings does not represent net income (loss) and should not be considered as an alternative to GAAP net income (loss). Our methodology for calculating Distributable Earnings may differ from the methodologies employed by other companies and thus may not be comparable to the Distributable Earnings reported by other companies.
Please refer to the financial statements and reconciliation of GAAP net income to distributable earnings included at the end of this release for further information.
Supplemental Information
The Company has published a supplemental earnings presentation for the quarter ended September 30, 2021 on its website to provide additional disclosure and financial information. These materials can be found on the Company’s website at http://www.fbrtreit.com under the Investor Relations tab.
Conference Call and Webcast
The Company will host a conference call and live audio webcast to discuss its financial results on Thursday, November 11, 2021 at 10:00 a.m. ET. Participants are encouraged to pre-register for the call and webcast at https://dpregister.com/sreg/10161768/ef73514ef0. If you are unable to pre-register, the conference call may be accessed by dialing (866) 777-2509 (Domestic) or (412) 317-5413 (International). Ask to join the Franklin BSP Realty Trust conference call. Participant should call in at least five minutes prior to the start of the call.
The call will also be accessible via live webcast at https://ccmediaframe.com/?id=JHQPsiG8. Please allow extra time prior to the call to download and install audio software, if needed. A slide presentation containing supplemental information may also be accessed through the Company’s website in advance of the call.
An audio replay of the live broadcast will be available approximately one hour after the end of the conference call on FBRT’s website. The replay will be available for 90 days on the Company’s website.
About Franklin BSP Realty Trust, Inc.
Franklin BSP Realty Trust, Inc. (NYSE: FBRT) is a real estate investment trust that originates, acquires and manages a diversified portfolio of commercial real estate debt secured by properties located in the United States. As of September 30, 2021, FBRT had over $3 billion of assets. FBRT is externally managed by Benefit Street Partners L.L.C. For further information, please visit www.fbrtreit.com.
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Forward-Looking Statements
This communication includes forward-looking statements. These forward-looking statements generally can be identified by phrases such as “will,” “should,” “expects,” “anticipates,” “foresees,” “forecasts,” “estimates” or other words or phrases of similar import. Similarly, statements herein that describe management’s beliefs, intentions or goals also are forward-looking statements. It is uncertain whether any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do, what impact they will have on the results of operations and financial condition of the Company or the price of FBRT stock. These forward-looking statements involve certain risks and uncertainties, many of which are beyond our control, that could cause actual results to differ materially from those indicated in such forward-looking statements, including but not limited to the risks and important factors contained and identified in FBRT’s filings with the Securities and Exchange Commission (“SEC”), including the proxy statement/prospectus filed with the SEC on September 7, 2021, as supplemented on September 23, 2021, and October 6, 2021, and its Quarterly Reports on Form 10-Q and Annual Report on Form 10-K, any of which could cause actual results to differ materially from the forward-looking statements. The forward-looking statements included in this communication are made only as of the date hereof. FBRT does not undertake any obligation to update the forward-looking statements to reflect subsequent events or circumstances, except as required by law.
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FRANKLIN BSP REALTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
| September 30, 2021 | December 31, 2020 | |||||||
| ASSETS | (Unaudited) | |||||||
| Cash and cash equivalents | $ | 91,374 | $ | 82,071 | ||||
| Restricted cash | 9,531 | 10,070 | ||||||
| Commercial mortgage loans, held for investment, net of allowance of $15,499 and $20,886 as of September 30, 2021 and December 31, 2020, respectively | 3,247,646 | 2,693,848 | ||||||
| Commercial mortgage loans, held for sale, measured at fair value | 99 | 67,649 | ||||||
| Real estate securities, available for sale, measured at fair value, amortized cost of $0 and $179,392 as of September 30, 2021 and December 31, 2020, respectively | — | 171,136 | ||||||
| Derivative instruments, measured at fair value | — | 25 | ||||||
| Other real estate investments, measured at fair value | 2,547 | 2,522 | ||||||
| Receivable for loan repayment (1) | 123,311 | 98,551 | ||||||
| Accrued interest receivable | 17,132 | 15,295 | ||||||
| Prepaid expenses and other assets | 4,023 | 8,538 | ||||||
| Intangible lease asset, net of amortization | 49,192 | 13,546 | ||||||
| Real estate owned, net of depreciation | 90,623 | 26,510 | ||||||
| Total assets | $ | 3,635,478 | $ | 3,189,761 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Collateralized loan obligations | $ | 1,792,353 | $ | 1,625,498 | ||||
| Repurchase agreements - commercial mortgage loans | 550,156 | 276,340 | ||||||
| Repurchase agreements - real estate securities | 46,531 | 186,828 | ||||||
| Mortgage note payable | 23,998 | 29,167 | ||||||
| Other financing and loan participation - commercial mortgage loans | 37,434 | 31,379 | ||||||
| Unsecured debt | 60,000 | — | ||||||
| Derivative instruments, measured at fair value | — | 403 | ||||||
| Interest payable | 972 | 2,110 | ||||||
| Distributions payable | 20,447 | 15,688 | ||||||
| Accounts payable and accrued expenses | 9,318 | 5,125 | ||||||
| Due to affiliates | 17,140 | 9,525 | ||||||
| Total liabilities | $ | 2,558,349 | $ | 2,182,063 | ||||
| Commitment and contingencies (See Note 10 to the Consolidated Financial Statements included in the Form 10-Q) | ||||||||
| Redeemable convertible preferred stock Series A, $0.01 par value, 60,000 authorized and 25,567 and 40,515 issued and outstanding as of September 30, 2021 and December 31, 2020, respectively | $ | 127,603 | $ | 202,292 | ||||
| Redeemable convertible preferred stock Series C, $0.01 par value, 20,000 authorized and 1,400 issued and outstanding as of September 30, 2021 and December 31, 2020, respectively | 6,969 | 6,962 | ||||||
| Redeemable convertible preferred stock Series D, $0.01 par value, 20,000 authorized and 17,950 issued and outstanding as of September 30, 2021 and none issued or outstanding as of December 31, 2020, respectively | 89,677 | — | ||||||
| Equity: | ||||||||
| Preferred stock, $0.01 par value, 50,000,000 authorized and none issued or outstanding as of September 30, 2021 and December 31, 2020, respectively | — | — | ||||||
| Common stock, $0.01 par value, 949,999,000 shares authorized, 44,162,657 and 44,510,051 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively | 443 | 446 | ||||||
| Additional paid-in capital | 906,517 | 912,725 | ||||||
| Accumulated other comprehensive income (loss) | — | (8,256 | ) | |||||
| Accumulated deficit | (59,844 | ) | (106,471 | ) | ||||
| Total stockholders' equity | $ | 847,116 | $ | 798,444 | ||||
| Non-controlling interest | 5,764 | — | ||||||
| Total equity | $ | 852,880 | $ | 798,444 | ||||
| Total liabilities, redeemable convertible preferred stock and equity | $ | 3,635,478 | $ | 3,189,761 | ||||
(1) Includes $123.3 million and $98.6 million of cash held by servicer related to the CLOs as of September 30, 2021 and December 31, 2020, respectively.
| 4 |
FRANKLIN BSP REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Income: | ||||||||||||||||
| Interest income | $ | 47,747 | $ | 44,414 | $ | 138,969 | $ | 135,509 | ||||||||
| Less: Interest expense | 11,988 | 15,113 | 35,994 | 54,740 | ||||||||||||
| Net interest income | 35,759 | 29,301 | 102,975 | 80,769 | ||||||||||||
| Revenue from real estate owned | 1,015 | 1,017 | 2,447 | 3,474 | ||||||||||||
| Total income | $ | 36,774 | $ | 30,318 | $ | 105,422 | $ | 84,243 | ||||||||
| Expenses: | ||||||||||||||||
| Asset management and subordinated performance fee | 8,265 | 3,749 | 19,682 | 11,399 | ||||||||||||
| Acquisition expenses | 690 | 166 | 1,012 | 483 | ||||||||||||
| Administrative services expenses | 2,980 | 3,128 | 9,532 | 10,180 | ||||||||||||
| Professional fees | 2,488 | 2,470 | 7,262 | 8,476 | ||||||||||||
| Real estate owned operating expenses | — | 509 | — | 3,250 | ||||||||||||
| Depreciation and amortization | — | 591 | 812 | 1,765 | ||||||||||||
| Other expenses | 709 | 571 | 2,115 | 3,213 | ||||||||||||
| Total expenses | $ | 15,132 | $ | 11,184 | $ | 40,415 | $ | 38,766 | ||||||||
| Other (income)/loss: | ||||||||||||||||
| Provision/(benefit) for credit losses | (1,613 | ) | (3,710 | ) | (5,452 | ) | 14,929 | |||||||||
| Impairment losses on real estate owned assets | — | — | — | 398 | ||||||||||||
| Realized (gain)/loss on extinguishment of debt | — | — | — | (438 | ) | |||||||||||
| Realized (gain)/loss on sale of real estate securities | — | 4,390 | 1,375 | 10,137 | ||||||||||||
| Realized (gain)/loss on sale of commercial mortgage loan held for sale | (206 | ) | — | (206 | ) | (252 | ) | |||||||||
| Realized (gain)/loss on sale of real estate owned assets, held for sale | (8,698 | ) | (1,424 | ) | (9,810 | ) | (1,424 | ) | ||||||||
| Realized (gain)/loss on sale of commercial mortgage loan, held for sale, measured at fair value | (9,061 | ) | (1,940 | ) | (22,211 | ) | (11,106 | ) | ||||||||
| Unrealized (gain)/loss on commercial mortgage loans, held for sale, measured at fair value | 1,104 | (263 | ) | — | 76 | |||||||||||
| Unrealized (gain)/loss on other real estate investments, measured at fair value | (1 | ) | (6 | ) | (27 | ) | 37 | |||||||||
| Unrealized (gain)/loss on derivatives | (1,428 | ) | (4,310 | ) | (374 | ) | 625 | |||||||||
| Realized (gain)/loss on derivatives | 1,902 | 4,722 | (357 | ) | 13,050 | |||||||||||
| Total other (income)/loss | $ | (18,001 | ) | $ | (2,541 | ) | $ | (37,062 | ) | $ | 26,032 | |||||
| Income before taxes | 39,643 | 21,675 | 102,069 | 19,445 | ||||||||||||
| Provision/(benefit) for income tax | 1,148 | 178 | 3,418 | (2,466 | ) | |||||||||||
| Net income | $ | 38,495 | $ | 21,497 | $ | 98,651 | $ | 21,911 | ||||||||
| Net income applicable to common stock | $ | 29,490 | $ | 16,739 | $ | 75,905 | $ | 10,466 | ||||||||
| Basic earnings per share | $ | 0.67 | $ | 0.38 | $ | 1.72 | $ | 0.24 | ||||||||
| Diluted earnings per share | $ | 0.67 | $ | 0.38 | $ | 1.71 | $ | 0.24 | ||||||||
| Basic weighted average shares outstanding | 44,185,241 | 44,405,196 | 44,245,733 | 44,348,282 | ||||||||||||
| Diluted weighted average shares outstanding | 44,200,563 | 44,421,084 | 44,261,469 | 44,361,739 | ||||||||||||
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RECONCILIATION OF GAAP NET INCOME TO DISTRIBUTABLE EARNINGS
(In thousands, except share and per share data)
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| GAAP Net Income | $ | 38,495 | $ | 21,497 | $ | 98,651 | $ | 21,911 | ||||||||
| Adjustments: | ||||||||||||||||
| CLO amortization acceleration (1) | (867 | ) | (691 | ) | (2,401 | ) | 953 | |||||||||
| Unrealized (gain)/loss on financial instruments (2) | (325 | ) | (4,579 | ) | (401 | ) | 738 | |||||||||
| Incentive fees | 4,280 | — | 8,046 | — | ||||||||||||
| Depreciation and amortization | — | 591 | 812 | 1,765 | ||||||||||||
| Increase/(decrease) in provision for credit losses | (1,613 | ) | (3,710 | ) | (5,452 | ) | 14,929 | |||||||||
| Impairment losses on real estate owned assets | — | — | — | 398 | ||||||||||||
| Distributable earnings | $ | 39,970 | $ | 13,108 | $ | 99,255 | $ | 40,694 | ||||||||
| Average Equity | $ | 1,063,428 | $ | 974,733 | $ | 1,044,583 | $ | 966,519 | ||||||||
| Annualized GAAP ROE | 14.5 | % | 8.8 | % | 12.6 | % | 3.0 | % | ||||||||
| Annualized distributable earnings ROE | 15.0 | % | 5.4 | % | 12.7 | % | 5.5 | % | ||||||||
| Distributable earnings per share | $ | 0.69 | $ | 0.23 | $ | 1.73 | $ | 0.71 | ||||||||
| (1) | Adjusted for non-cash CLO amortization acceleration to effectively amortize issuance costs of our CLOs over the expected lifetime of the CLOs. We assume our CLOs will be outstanding for four years and amortized the financing costs over four years in our distributable earnings as compared to effective yield methodology in our GAAP earnings. |
| (2) | Adjusted for unrealized gains and losses on loans and derivatives. |
| 6 |
Exhibit 99.2
Franklin BSP Realty Trust Supplemental Information Third Quarter 2021
Important Information The information herein relates to the Company’s business and financial information as of September 30 , 2021 and does not reflect subsequent developments . Risk Factors Investing in and owning our common stock involves a high degree of risk . See the section entitled “Risk Factors” in our Annual Report on Form 10 - K filed March 11 , 2021 and in our Quarterly Report on Form 10 - Q filed November 11 , 2021 for a discussion of these risks . Forward - Looking Statements Certain statements included in this presentation are forward - looking statements . Those statements include statements regarding the intent, belief or current expectations of Franklin BSP Realty Trust, Inc . (“FBRT” or the “Company”) and may include the assumptions on which such statements are based, and generally are identified by the use of words such as "may," "will," "seeks," "anticipates," "believes," "estimates," "expects," "plans," "intends," "should" or similar expressions . Actual results may differ materially from those contemplated by such forward - looking statements . Factors that could cause actual outcomes to differ materially from our forward - looking statements include material changes in the value of the securities we acquired in our merger with Capstead Mortgage Corporation, continuing adverse effects from the COVID - 19 pandemic on our financial condition, operating results and cash flows, and the financial stability of our borrowers, and the other factors set forth in the risk factors section of our most recent Form 10 - K and Form 10 - Q . The extent to which these factors impact us and our borrowers will depend on future developments, which are highly uncertain and cannot be predicted with confidence . Further, forward - looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward - looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, except as required by law . Additional Important Information The summary information provided in this presentation does not purport to be complete and no obligation to update or otherwise revise such information is being assumed . Nothing shall be relied upon as a promise or representation as to the future performance of the Company . This summary is not an offer to sell securities and is not soliciting an offer to buy securities in any jurisdiction where the offer or sale is not permitted . This summary is not advice, a recommendation or an offer to enter into any transaction with us or any of our affiliated funds . There is no guarantee that any of the goals, targets or objectives described in this summary will be achieved . The information contained herein is not intended to provide, and should not be relied upon for, accounting, legal, ERISA or tax advice or investment recommendations . Investors should also seek advice from their own independent tax, accounting, financial, ERISA, investment and legal advisors to properly assess the merits and risks associated with their investment in light of their own financial condition and other circumstances . The information contained herein is qualified in its entirety by reference to our most recent Annual Report on Form 10 - K and Quarterly Report on Form 10 - Q . You may obtain a copy of the most recent Annual Report or Quarterly Report by calling ( 844 ) 785 - 4393 and/or visiting www . bsprealtytrust . com . PAST PERFORMANCE IS NOT A GUARANTEE OR INDICATIVE OF FUTURE RESULTS . INVESTMENTS INVOLVE SIGNIFICANT RISKS, INCLUDING LOSS OF THE ENTIRE INVESTMENT . There is no guarantee that any of the estimates, targets or projections illustrated in this summary will be achieved . Any references herein to any of the Company’s past or present investments, portfolio characteristics, or performance, have been provided for illustrative purposes only . It should not be assumed that these investments were or will be profitable or that any future investments will be profitable or will equal the performance of these investments . There can be no guarantee that the investment objective of the Company will be achieved . Any investment entails a risk of loss . An investor could lose all or substantially all of his or her investment . Please refer to our most recent Annual Report on Form 10 - K and Quarterly Report on Form 10 - Q for a more complete list of risk factors . The following slides contain summaries of certain financial information about the Company . The information contained in this presentation is summary information that is intended to be considered in the context of our filings with the Securities and Exchange Commission and other public announcements that we may make, by press release or otherwise, from time to time . 2
Highlights 3
Third Quarter 2021 Highlights 4 1. Assumes conversion of all FBRT preferred shares to common equity (does not include any Capstead equity). Please see appendix for details. 2. Please see appendix for GAAP net income to distributable earnings calculation and definition. 3. FBRT stand alone GAAP book value per share, fully diluted at 9/30 was $18.60 and is prior to merger considerations and transaction expenses. 4. ROE calculated using GAAP or distributable earnings less preferred dividends on an annualized basis over average common equity for the period. F ranklin BSP Realty Trust (“FBRT”) Earnings — GAAP Net Income of $38.5 million or $0.67 per share (1) , 14.5% ROE — Distributable Earnings (2) was $40.0 million, or $0.69 per share (1) , 15.0% ROE — Declared a cash dividend of $0.355 per share, representing a yield of 8.0% on book value per share, fully diluted after merger considerations and transaction expenses — Declared a stub dividend of $0.07 per share for the period 10/1/21 to 10/18/21 Capitalization — Estimated book value per share, fully diluted after merger considerations and transaction expenses is $17.78. (3) — Net debt to equity of 2.2x; recourse net debt to equity is 0.6x Investments — Core portfolio: closed $519 million of loan commitments and funded $474 million of principal balance. Received loan repayments of $337 million for a net core portfolio growth of $138 million in the quarter — Conduit: sold $145 million of conduit loans in the quarter Portfolio — Core portfolio of 150 loans and $3.3 billion of principal balance, average size of $22 million. One investment on non - accrual — Sold an equity investment for a gain of $8.7 million recognized in the quarter Capstead Mortgage Corporation (“Capstead”) Earnings — GAAP Net Income of $10.4 million or $0.06 per share, 3.6% ROE (4) — Core (Distributable) Earnings of $12.1 million or $0.07 per share, 4.7% ROE (4) — Fair market value of securities is $7,134 million at the end of the quarter vs. $7,430 million last quarter — Approximately $798 million principal amount of bonds were paid down during the third quarter, and $541 million principal amount of bonds were acquired Combined 4Q2021 Update (As of Nov, 5) — Core loan portfolio: We have committed $277 million to seven new core loans, and have a strong pipeline of signed applications — Capstead securities: The portfolio was reduced by approximately $1.6 billion through a combination of prepayments and sales.
FBRT Merger with Capstead 5
FBRT Merger with Capstead: Transaction Highlights 6 Compelling Business Combination ▪ Created the 4 th largest publicly - traded commercial mortgage REIT with nearly $2 billion in pro forma equity; new capital is additive to an existing and seasoned book of commercial mortgages focused on multifamily ▪ FBRT shares are listed on the NYSE under the ticker “FBRT” Improved Balance Sheet and Earnings Profile ▪ Reduces estimated leverage, with FBRT net leverage of 2.2x (v. CMO leverage of 7.6x) ▪ Company expects to pay substantially all earnings in the form of dividends Structural Features to Support Stock Price ▪ $100 million post - closing share repurchase commitment, including $35 million funded by Franklin Templeton ▪ Over 90% of legacy FBRT shares subject to 6 - month lock up period after closing World Class Sponsorship with Leading Global Asset Management Platforms, Benefit Street Partners and Franklin Templeton 1 2 3 4 B e n e f i t S t r e e t P A R T N E R S Note: Financial data as of September 2021 The combination of Franklin BSP Realty Trust, Inc. (“FBRT”) and Capstead Mortgage Corporation (“CMO”) created one of the largest publicly traded commercial mortgage real estate investment trusts (“REIT”) and is anticipated to generate significant long - term value for all stockholders
$4.9 $ 4 . 3 $2.3 $ 1 . 9 $ 1 . 7 $ 1 . 5 $ 1 . 4 $ 1 . 3 $ 1 . 2 $ 1 . 1 $ 0 . 9 $ 0 . 7 Starwood Blackstone Apollo CRE Pro Forma BrightSpire Ladder TPG RE Ready KKR Real FBRT Granite Ares Property Mortgage Finance FBRT (1) Capital Capital Corp Finance Capital Estate Point Commercial Trust Trust Trust Finance Mortgage Real Estate Trust Trust FBRT Merger with Capstead: Strategic Combination with Significant Scale 7 Based on Q3 2021 Equity, FBRT is the 4th largest publicly - traded commercial mortgage REIT ~$800 million of equity $ billions, unless otherwise stated Source: Capital IQ. Note: Financial data for competitors as of September 30, 2021 unless unavailable in which case it is as of June 30, 2021. Financial data for FBRT as of September 30, 2021. 1. Pro Forma FBRT includes Capstead equity and does not reflect impact of transaction expenses.
FBRT Merger with Capstead: FBRT Key Differentiators 8 Strong Team/Sponsorship Diversified Portfolio of Senior, Floating Rate Loans Differentiated Strategy is Intended to Produce Best Risk/Reward Attractive NIM Spread & Leverage Conservative and Flexible Balance Sheet Credit Focused Culture
3Q2021 Financial Update Capstead 9
Capstead 3Q 2021 Financial Update: QTD Highlights 10 Income Statement Net interest income $ 15 . 1 Balance Sheet Total securities $ 7 , 134 . 1 Other (expense) / income ( 4 . 7 ) Total assets $ 7 , 464 . 0 GAAP net income $ 10 . 4 Debt GAAP net income per share $ 0 . 0 6 Secured Borrowings 6 , 464 . 0 GAAP return on equity (1) 3 . 6 % Unsecured Borrowings 98 . 6 Adjustments to GAAP net income (2) 1 . 7 Total Debt $ 6 , 562 . 5 Distributable earnings (2) $ 12 . 1 Cash 125 . 2 Distributable earnings per share $ 0 . 0 7 Total equity 842 . 3 Distributable return on equity (1) 4 . 7 % Net debt/equity 7 . 64 x Common book value per share $ 6 . 0 3 Note: All numbers in millions except per share data. 1. Calculated using GAAP net income or distributable earnings less preferred dividends on an annualized basis over average common equity for the period. 2. Adjustments to GAAP net income to distributable earnings include $0.5M of repo swap OCI amortization and $1.2M of unrealized gain on derivative instruments.
3Q2021 Financial Update Franklin BSP Realty Trust (excludes Capstead) 11
FBRT 3Q 2021 Financial Update: QTD Highlights 12 Note: All numbers in millions except per share and share data. 1. Does not include conduit operating expenses which are reported under conduit GAAP net income 2. Assumes conversion of all FBRT preferred shares to common equity (does not include any Capstead equity). Please see appendix for details. 3. Please see appendix for GAAP net income to distributable earnings calculation. 4. Book value per share, fully diluted after merger considerations and transaction expenses. Note: numbers below exclude Capstead Income Statement Balance Sheet Net interest income / other income $35.4 Core loan total commitment $ 518 . 9 Conduit GAAP net income 4.0 Total core portfolio $ 3 , 247 . 6 Operating expenses (1) (12.7) Total assets $ 3 , 635 . 5 Reversal of provision for credit loss 1.6 RE income/gain on sale 10.0 Debt Other income / (loss) 0.2 Collateralized loan obligations 1 , 792 . 4 GAAP net income $38.5 Warehouse 596 . 7 Asset specific financings 61 . 4 GAAP net income per share, fully diluted (2) $0.67 Corporate revolver 60 . 0 GAAP return on equity 14.5% Total Debt $ 2 , 510 . 5 Adjustments to GAAP net income (3) 1.5 Cash 100 . 9 Distributable earnings (3) $40.0 Total equity 1 , 077 . 1 Distributable earnings per share, fully diluted (2) $0.69 Net debt/equity 2 . 24 x Distributable return on equity 15.0% Recourse net debt/equity 0 . 57 x Dividend per share $0.355 Dividend per share yield on book value, adjusted 8.0% Book value per share, fully diluted, post merger (4) $ 17 . 7 8
FBRT 3Q 2021 Financial Update: Core Loan Originations 13 Note: All numbers in millions. Data is for FBRT only and does not include any CMO financials for 9/30/21. Numbers above based on principal balance. 1. Includes full paydowns, partial paydowns and amortization. 3Q 2021 2021 Year to Date Total Com m itment $3,795 $519 Total Com m itment $3,625 (1) (1) Total Com m itment $3,006 $1,608 Total Com m itment $3,795
FBRT 3Q 2021 Financial Update: Core Portfolio Growth 14 Core Portfolio (Principal Balance) $3,27 3 $ 2 , 2 2 2 $ 2 , 7 7 1 $2,72 3 2018 2019 2020 3 Q ' 21 Note: All numbers in millions. Data is for FBRT only and does not include any CMO financials for 9/30/21.
FBRT 3Q 2021 Financial Update: Earnings and Distributions 15 Note: All numbers in millions except per share data. Data is for FBRT only and does not include any CMO results for the quarter ended 9/30/21. 1. Please see appendix for GAAP net income to distributable earnings calculation. 2. Assumes conversion of all FBRT preferred shares to common equity (does not include any Capstead equity). Please see appendix for details. GAAP Net Income ($M) Distributable Earnings ($M) (1) $ 7 .8 $ 21 .5 $ 32 .8 $ 30 .1 $ 30 .0 $ 38 .5 2 Q' 2 0 3 Q' 2 0 4 Q' 2 0 1 Q' 2 1 2 Q ' 2 1 3 Q' 2 1 $ 13 .1 $10.2 $ 31 .3 $ 26 .6 $ 32 .7 $ 40 .0 2 Q' 2 0 3 Q' 2 0 4 Q ' 2 0 1 Q' 2 1 2 Q' 2 1 3 Q ' 2 1 $ 0 . 27 5 $ 0 . 27 5 $0.275 $0.275 $0.275 $0.355 Dividend per share $ 0 . 1 8 $ 0 . 2 3 $0.55 $0.47 $0.57 $0.69 Distributable earnings per share, fully diluted (2) 65% 84% 200% 170% 206% 195% Distributable dividend coverage, fully diluted (2)
Collateralized Loan Obligations 71% W a r eh o u s e 24% Asset Specific Financings 2% C o r p o ra te Revolver 2% FBRT 3Q 2021 Financial Update: Capitalization Overview 16 Note: Data is for FBRT only and does not include any CMO financials for 9/30/21. 1. Commitment for loans. Excludes bond repurchase agreements. 2. Outstanding balance at September 30, 2021 and net of tranches held by FBRT. Warehouse/Revolver/Other JP Morgan $400 million Wells Fargo $175 million Credit Suisse $200 million Barclays (Warehouse) $300 million Barclays (Secured Revolver) $100 million Security Benefit Life Insurance Company (Unsecured Revolver) $100 million Sterling National Bank loan participation $37 million Total $1,312 million Warehouse availability $600 million CLOs (2) BSPRT 2018 - FL3 $189 million BSPRT 2018 - FL4 $470 million BSPRT 2019 - FL5 $566 million BSPRT 2021 - FL6 $585 million Total $1,809 million CLO reinvestment available $1 million Financing Sources FBRT average debt cost including financing costs was 2.1% in 3Q21 vs. 2.1% last quarter Financing Lines Commitment (1) Net Leverage $2.5Bn Total Debt 0 . 57 x 2 . 24 x 0 . 50 x 0 . 00 x 1. 0 0 x 2 . 0 0 x 1.50x 2 . 5 0 x Recourse Leverage Total Leverage
FBRT 3Q 2021 Financial Update: Core Loan Portfolio Composition 17 Note: Data is for FBRT only and does not include any CMO financials for 9/30/21. 1. Excludes the one non - accrual loan. Me z zanine 0.7% Senior 99 .3% New England 2% Mideast 13% Great La kes 4 % P lains 3% S o utheast 32% S o uthwes t 31% Rocky Mountain 2% Far West 11% Variou s 2% Flo a ting 96% F i x ed 4% Portfolio Summary Collateral Summary Collateral by Region Rate Type Portfolio Overview Total portfolio of $3.3 billion 143 senior loans with average size of ~$23 million 7 mezzanine loans with average size of ~$3 million One non - performing loan and 100% interest collected when due (1) M u l ti fam i ly 57% Off ice 16% H o sp it al ity 14% Retail 2% Indus t r i al 4% 4% 2% O ther 1% Self - Storage Mixed - Use
Appendix 18
Appendix: Core Portfolio - FBRT Portfolio Details – Top 15 Loans 19 Loan Type Origination Date Total Commitment Principal Balance Carrying Value Spread All - in Yield (1) Fully Extended Maturity State Collateral Type As - is LTV Loan 1 Senior Loan 9/30/20 $76 $76 $76 + 4.10% + 4.94% 10 / 9 / 2 5 Florida Multifamily 67.9% Loan 2 Senior Loan 7/27/18 85 71 71 + 4.87% + 5.53% 7 / 9 / 2 2 California Mixed Use 49.0% Loan 3 Senior Loan 3/31/21 79 69 69 + 2.95% + 3.30% 4 / 9 / 2 6 Texas Multifamily 72.6% Loan 4 Senior Loan 10/8/20 70 68 68 5.15% 5.35% 10 / 9 / 2 5 Massachusetts Office 52.5% Loan 5 Senior Loan 9/20/21 70 67 66 + 3.25% + 3.84% 10 / 9 / 2 6 South Carolina Multifamily 77.1% Loan 6 Senior Loan 1/22/20 70 58 58 + 3.70% + 5.57% 2 / 9 / 2 5 New Jersey Office 65.7% Loan 7 Senior Loan 9/29/20 58 58 58 + 5.25% + 5.91% 10 / 9 / 2 4 Florida Multifamily 74.7% Loan 8 Senior Loan 12/13/17 57 57 57 + 5.19% + 7.20% 6 / 9 / 2 0 New York Hospitality 51.8% Loan 9 Senior Loan 12/6/19 63 57 57 + 3.75% + 6.37% 12 / 9 / 2 3 Various Industrial 59.7% Loan 10 Senior Loan 9/30/21 59 56 56 + 3.10% + 3.43% 10 / 9 / 2 6 Texas Multifamily 78.9% Loan 11 Senior Loan 2/9/21 55 55 54 + 3.80% + 4.80% 2 / 9 / 2 4 Texas Multifamily 77.0% Loan 12 Senior Loan 3/16/21 55 52 52 + 3.00% + 3.92% 4 / 9 / 2 6 Texas Multifamily 71.6% Loan 13 Senior Loan 8/26/20 50 50 50 + 6.69% + 8.42% 9 / 9 / 2 4 Tennessee Multifamily 80.0% Loan 14 Senior Loan 6/26/20 47 46 46 + 4.75% + 6.41% 7 / 9 / 2 5 Florida Multifamily 69.4% Loan 15 Senior Loan 3/1/21 48 44 43 + 3.94% + 4.64% 3 / 9 / 2 6 Colorado Office 53.9% Loans 16 - 150 Senior & Mezz Loans Various 2,855 2,390 2,383 + 4.30% + 5.64% V a r i o u s Various Various 67.0% CECL Reserve (15) Total/Wtd. avg. $3,795 $3,273 $3,248 + 4.28% + 5.53% 3.2 years 66.9% Note: All numbers in millions. Data is for FBRT only and does not include any CMO financials for 9/30/21. 1. All - in Yield defined as: (1) current spread of the loan plus (2) any applicable LIBOR or LIBOR floor plus (3) origination and exit fees amortized over the initial maturity date of the loan.
Appendix: Core Portfolio - Risk Ratings 20 0 . 0 % Our average risk rating was 2.1 for the quarter vs. 2.2 last quarter 88.6% 9 .6 % 1 . 7 % 0 . 0 % 1 2 3 4 5 # of Loans 0 130 19 1 0 +/ - vs 2Q’21 - +5 - 3 - - Principal Balance $ - $2,901 $316 $57 $ - Non - Accrual - - - 1 - Note: All numbers in millions. Data is for FBRT only and does not include any CMO financials for 9/30/21.
Appendix: Core Portfolio - LIBOR Floors 21 1. 143 floating rate loans represents only loans in the portfolio that have a floating rate and not the total core portfolio of loans. As of 9/30/2021, 124 floating rate loans out of 143 (1) floating rate loans in our portfolio have LIBOR floors activated (all floating rate loans have 1 - month LIBOR as reference index) The weighted average LIBOR floor of our portfolio is 0.67% Number of loans at LIBOR floors 54 43 14 16 14 2 < 0.25% 0.25 - 0.99% 1.00 - 1.49% 1.50 - 1.99% 2.00 - 2.49% 2.50% +
Appendix: Core Portfolio - Case Study: Watch List Loans (Risk Rating 4&5) 22 Investment Brooklyn Hotel Loan Type Floating Rate Senior Loan Investment Date 12/1/2017 Default Date 6/9/2019 Collateral 147 - Key Hotel Loan Purpose Refinance Location Brooklyn, New York Total Commitment $57 million Current Principal Amount $57 million Spread L + 5.2% Loan Risk Rating 4
Appendix: Core Portfolio – Allowance For Loan Loss 23 Allowance for Loan Loss by Collateral Type H o s p it a l it y 41% M u l ti F a m i l y 40% R e t a i l 2% Mixed Use 3% O ff i ce 10% Industrial 2% Ot he r 2% Note: All numbers in millions. Data is for FBRT only and does not include any CMO financials for 9/30/21. $ millions Allowance for Loan Loss Balance at 6/30/21 Reversal of Provision for Credit Los Allowance for Loan Los Portfolio Balan Allow
Appendix: 3Q 2021 Core Originations by Collateral Type 24 Note: All numbers in millions. Data is for FBRT only and does not include any CMO financials for 9/30/21. M u l t i f a m i l y 97% Collateral Type Originated (Total Commitment) Hospitality 3%
Appendix: GAAP Net Income to Distributable Earnings Walk - 3Q21 25 Note: All numbers in millions. Data is for FBRT only and does not include any CMO financials for 9/30/21. 1. Adjusted for incentive fees. 2. Adjusted for reversal of provision for credit loss. 3. Adjusted for non - cash CLO amortization acceleration to effectively amortize issuance costs of our CLOs over the expected lifetime of the CLOs. We assume our CLOs will be outstanding for four years and amortized the financing costs over four years in our distributable earnings as compared to effective yield methodology in our GAAP earnings. 4. Adjusted for unrealized gain and loss on loans and derivatives. GAAP Net Distributable Income Adjustments Earnings $35.4 - $35.4 (12.7) 4.3 (8.5) 1.6 (1.6) - 10.0 - 10.0 0.2 (0.9) (0.7) $34.5 $1.8 $36.3 4.0 (0.3) 3.7 $38.5 $1.5 $40.0 $0.67 $0.69 Core: Net Interest Income Operating Expenses (1) Reversal of provision for credit loss (2) RE Income/gain on sale Other (3) Total Core Other: Conduit (4) Total Earnings Per Share
Appendix: GAAP Net Income to Distributable Earnings Reconciliation Note: All numbers in millions. Data is for FBRT only and does not include any CMO financials for 9/30/21. 1. Adjusted for non - cash CLO amortization acceleration to effectively amortize issuance costs of our CLOs over the expected lifetime of the CLOs. We assume our CLOs will be outstanding for four years and amortized the financing costs over four years in our distributable earnings as compared to effective yield methodology in our GAAP earnings 2. Adjusted for unrealized gain and loss on loans and derivatives. 26 1 Q ' 2 1 2 Q ' 2 1 3 Q ' 21 GAAP Net Income 3 0. 1 30.0 Adjustments: CLO Amortization Acceleration (1) ( 0 . 7 ) Unrealized Gain/(Loss) Reversal (2) Incentive Fees Depreciation & Amortization Reversal of Provision for Credit Loss Distributable Earnings Average Equity GAAP RO Dis
Appendix: FBRT ROE and Earnings Per Share Calculations – 3Q’21 27 Note: All numbers in millions except per share and share data. 3Q'21 GAAP Net Income $ 38 . 5 Distributable Earnings 40 . 0 Average Equity During the Quarter Common 839 . 2 Preferred A 127 . 6 Preferred C 7 . 0 Preferred D 89 . 7 Total, exluding non - controlling interest 1 , 063 . 4 GAAP ROE 14 . 5 % Distributable ROE 15 . 0 % GAAP earnings per share $ 0 . 6 7 Distributable earnings per share $ 0 . 6 9
Appendix: FBRT Income Statement 28
Appendix: FBRT Balance Sheet 29
Appendix: CMO Income Statement 30
Appendix: CMO Balance Sheet 31