Business Wire | Nov 8, 2021 04:07PM EST

Broadmark Realty Capital Announces Third Quarter 2021 Results

Nov. 08, 2021

SEATTLE--(BUSINESS WIRE)--Nov. 08, 2021--Broadmark Realty Capital Inc. (NYSE: BRMK) (the "Company"), an internally managed secured real estate finance company, today announced operating results for the quarter ended September 30, 2021.

Jeff Pyatt, President and Chief Executive Officer of Broadmark, commented, "We achieved record origination volume this quarter, reflecting an active construction market and strong demand for our loans. In addition to expanding into new geographic markets, we have continued to use our increased size, scale and expertise to access a larger pool of borrowers with excellent credit and collateral. We are seeing attractive financing opportunities across all of our property types, including residential and commercial, as supply and demand fundamentals remain highly favorable for new construction. With the support of these long-term trends as well as our low-leverage balance sheet, we believe we are well positioned to continue this pace of activity and deliver highly attractive risk-adjusted returns to our shareholders."

Third Quarter 2021 Financial Highlights

* Total revenue of $30.6 million for the three months ended September 30, 2021. * Net income attributable to common stockholders of $21.7 million, or $0.16 per diluted common share. * Distributable earnings prior to realized loss on investments, a non-GAAP financial measure, of $24.6 million, or $0.19 per diluted common share.

Third Quarter 2021 Loan Portfolio Highlights

* New originations and amendments totaling $337.0 million, with a weighted average loan to value of 59.0%. * Interest income of $22.8 million and fee income of $7.7 million. * Originated the Company's first loans in Nevada and Minnesota with additional state expansion planned for the fourth quarter. * Total loan portfolio of $1.5 billion across 17 states and the District of Columbia.

Loan PortfolioAs of September 30, 2021, the principal outstanding on loans in contractual default status placed on non-accrual status was $162.6 million. During and subsequent to the third quarter, the Company foreclosed on two loans and received total pay offs on seven loans in default with total commitment of $50.5 million (including four that were paid off in early fourth quarter).

Balance Sheet Activity and LiquidityAt September 30, 2021, the Company had cash and cash equivalents of $37.4 million. The Company also had no debt outstanding and remained undrawn on its $135.0 million line of credit as of September 30, 2021. Subsequent to September 30, 2021, the Company drew $50.0 million on the line of credit and repaid the balance in full, as of October 31, 2021, upon receipt of loan pay-offs.

DividendOn October 14, 2021, the Company's board of directors declared a monthly cash dividend of $0.07 per common share payable on November 15, 2021 to stockholders of record as of October 29, 2021.

Additional InformationThe Company has posted supplemental financial information to provide additional disclosure on its website at www.broadmark.com. These materials can be found on the Investors section of the website under the "Financials" tab.

Conference Call and Webcast InformationThe Company will host a live conference call and webcast today at 5:00 p.m. Eastern time. To listen to the live webcast, go to the Investors section of the Company's website at www.broadmark.com at least 15 minutes prior to the scheduled start time in order to register and install any necessary audio software.

To Participate in the Telephone Conference Call:Dial in at least 15 minutes prior to start time. Domestic: 1-877-407-9039 International: 1-201-689-8470

Conference Call Playback:Domestic: 1-844-512-2921 International: 1-412-317-6671 Passcode: 13723798 The playback can be accessed through November 22, 2021.

Forward Looking StatementsThis press release contains certain "forward-looking statements" within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Forward-looking statements reflect the Company's current views with respect to, among other things, capital resources, portfolio performance and projected results of operations. In some cases, you can identify these forward-looking statements by the use of terminology such as "outlook," "believes," "expects," "potential," "continues," "may," "will," "should," "could," "seeks," "approximately," "predicts," "intends," "plans," "estimates," "anticipates" or the negative version of these words or other comparable words or phrases. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their respective dates.

These forward-looking statements are based largely on the Company's current beliefs, assumptions and expectations concerning future developments and their potential effects on the Company. There can be no assurance that future developments affecting the Company will be those that it has anticipated. Factors that may cause actual results to vary from the Company's forward-looking statements include, but are not limited to:

* the magnitude, duration and severity of the novel coronavirus ("COVID-19") pandemic; * disruptions in the Company's business operations, including construction lending activity, relating to COVID-19; * adverse impact of COVID-19 on the value of the Company's goodwill; * the impact of actions taken by governments, businesses, and individuals in response to COVID-19; * the current and future health and stability of the economy and residential housing market, including any extended slowdown in the real estate markets as a result of COVID-19; * changes in laws or regulations applicable to the Company's business, employees lending activities, including current and future laws, regulations and orders that limit the Company's ability to operate in light of COVID-19; * defaults by borrowers in paying debt service on outstanding indebtedness; * the adequacy of collateral securing the Company's loans and declines in the value of real estate property securing the Company's loans; * availability of origination and acquisition opportunities acceptable to the Company; * potential mismatches in the timing of asset repayments and the maturity of the associated financing agreements; * increased competition from entities engaged in construction lending activities; * general economic uncertainty and the effect of general economic conditions on the real estate and real estate capital markets in particular; * general and local commercial and residential real estate property conditions; * changes in U.S. federal government policies; * changes in U.S. federal, state and local governmental laws and regulations that impact the Company's business, assets or classification as a real estate investment trust; * the Company's ability to pay, maintain or grow the dividend in the future; * changes in interest rates; * the availability of, and costs associated with, sources of liquidity; * compliance with covenants contained in the Company's debt documents; * the adequacy of the Company's policies, procedures and systems for managing risk effectively; * the ability to manage future growth; * changes in personnel and availability of qualified personnel; and * other factors set forth in the Company's periodic filings with the Securities and Exchange Commission.

Should one or more of these risks or uncertainties materialize, or should any of the assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

The Company uses its website and social media channels as channels of distribution of Company information. The information that the Company posts through these channels may be deemed material. Accordingly, the Company encourages investors and others interested in the Company to routinely monitor these channels, in addition to following the Company's press releases, Securities and Exchange Commission filings and public conference calls and webcasts. In addition, you may automatically receive email alerts and other information about the Company when you enroll your email address by visiting the "Email Alerts" section of the Company's website at http://ir.broadmark.com/resources/email-alerts. The contents of the Company's website and social media channels are not, however, incorporated by reference into this press release.

About Broadmark Realty CapitalBroadmark Realty Capital Inc. (NYSE: BRMK) is an internally managed commercial real estate finance company that offers short-term, first deed of trust loans secured by real estate to fund the acquisition, renovation, rehabilitation or development of residential or commercial properties. Broadmark Realty Capital manages and services its loan portfolio across a variety of market conditions and economic cycles.

BROADMARK REALTY CAPITAL INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data, unaudited)

September December 30, 2021 31, 2020

Assets

Cash and cash equivalents $ 37,376 $ 223,375

Mortgage notes receivable, net 923,521 798,486

Interest and fees receivable, net 14,766 14,357

Investment in real property, net 52,470 8,473

Right-of-use assets 6,114 -

Goodwill 136,965 136,965

Other assets 7,566 5,663

Total assets $ 1,178,778 $ 1,187,319



Liabilities and Equity

Accounts payable and accrued liabilities $ 7,987 $ 4,946

Lease liabilities 8,100 -

Dividends payable 9,289 7,952

Total liabilities $ 25,376 $ 12,898

Commitments and contingencies

Preferred stock, $0.001 par value, 100,000,000shares authorized, no shares issued and - - outstanding at September 30, 2021 and December31, 2020

Common stock, $0.001 par value, 500,000,000shares authorized, 132,684,541 and 132,532,383 132 132 shares issued and outstanding at September 30,2021 and December 31, 2020, respectively

Additional paid in capital 1,216,192 1,213,987

Accumulated deficit (62,922 ) (39,698 )

Total equity 1,153,402 1,174,421

Total liabilities and equity $ 1,178,778 $ 1,187,319

BROADMARK REALTY CAPITAL INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except share and per share data, unaudited)

Three Months Ended Nine Months Ended

September 30, September 30, September 30, September 30, 2021 2020 2021 2020

Revenues:

Interest income $ 22,846 $ 21,844 $ 66,481 $ 68,577

Fee income 7,748 7,139 22,764 21,244

Total revenue $ 30,594 $ 28,983 $ 89,245 $ 89,821

Other income (expense):

Change in fairvalue of warrant 1,244 1,948 (2,490 ) 5,094 liabilities

Expenses:

Impairment:

Provision for(reversal of) 2,607 (2,932 ) 5,373 5,724 credit losses,net

Operating expenses:

Compensation andemployee 4,025 5,160 11,254 11,397 benefits

General and 3,521 3,199 9,810 9,977 administrative

Total expenses 10,153 5,427 26,437 27,098

Income before 21,685 25,504 60,318 67,817 income taxes

Income tax - - - - provision

Net income $ 21,685 $ 25,504 $ 60,318 $ 67,817

Earnings per common share:

Basic $ 0.16 $ 0.19 $ 0.45 $ 0.51

Diluted $ 0.16 $ 0.19 $ 0.45 $ 0.51

Weighted-averageshares of commonstock outstanding,basic anddiluted:

Basic 132,658,661 132,282,252 132,575,852 132,156,844

Diluted 132,752,471 132,316,746 132,663,437 132,207,605

BROADMARK REALTY CAPITAL INC. RECONCILIATION OF NET INCOME TO DISTRIBUTABLE EARNINGS (in thousands, except for per share amounts)

Definition of Distributable Earnings

The Company has elected to present "distributable earnings," a supplemental non-GAAP financial measure used by management to evaluate the Company's operating performance. The Company defines distributable earnings as net income attributable to common stockholders adjusted for: (i) impairment recorded on the Company's investments; (ii) unrealized gains or losses on the Company's investments (including provision for credit losses) and warrant liabilities; (iii) new public company transition expenses; (iv) non-capitalized transaction-related and other one-time expenses; (v) non-cash stock-based compensation; (vi) depreciation and amortization including amortization of the Company's intangible assets; and (vii) deferred taxes, which are subject to variability and generally not indicative of future economic performance or representative of current operations.

During the nine months ended September 30, 2021 and 2020, provision for credit losses, net was $5.4 and $5.7 million, respectively, which has been excluded from distributable earnings consistent with other unrealized gains (losses) pursuant to the Company's policy for reporting distributable earnings. The Company expects to recognize such potential credit losses in distributable earnings if and when such amounts are deemed nonrecoverable upon a realization event. This is generally upon charge-off of principal at the time of loan repayment or upon sale of real property owned by the Company and the amount of proceeds is less than the principal outstanding at the time of foreclosure.

Management believes that the adjustments to compute "distributable earnings" specified above allow investors and analysts to readily identify and track the operating performance of the Company's assets, assist in comparing the operating results between periods, and enable investors to evaluate the Company's current performance using the same measure that management uses to operate the business. Distributable earnings excludes certain recurring items, such as unrealized gains and losses (including provision for credit losses) and non-capitalized transaction-related expenses, because they are not considered by management to be part of the Company's primary operations for the reasons described herein. As such, distributable earnings is not intended to reflect all of the Company's activity and should be considered as only one of the factors used by management in assessing the Company's performance, along with GAAP net income which is inclusive of all of the Company's activities.

As a REIT, the Company is required to distribute at least 90% of its annual REIT taxable income and to pay tax at regular corporate rates to the extent that it annually distributes less than 100% of such taxable income. Given these requirements and its belief that dividends are generally one of the principal reasons stockholders invest in its common stock, the Company generally intends to attempt to pay dividends to its stockholders in an amount equal to its net taxable income, if and to the extent authorized by the Company's board of directors. Distributable earnings is one of many factors considered by the Company's board of directors in declaring dividends and, while not a direct measure of taxable income, over time, the measure can be considered a useful indicator of the Company's dividends.

Distributable earnings does not represent, and should not be considered as a substitute for, or superior to, net income or as a substitute for, or superior to, cash flows from operating activities, each as determined in accordance with GAAP, and the Company's calculation of this measure may not be comparable to similarly entitled measures reported by other companies.

The table below is a reconciliation of distributable earnings to the most directly comparable GAAP financial measure:

Three Months Ended Nine Months Ended

(dollars inthousands, except September 30, September 30, September 30, September 30, share and per 2021 2020 2021 2020share data)

Net incomeattributable to $ 21,685 $ 25,504 $ 60,318 $ 67,817 commonstockholders

Adjustments fornon-distributable earnings:

Stock-basedcompensation 891 1,913 2,552 3,794 expense

New publiccompany expenses^ - 684 953 2,750 (1)

Non-capitalizedtransaction and 489 - 489 - other one-timeexpenses^(2)

Change in fairvalue of warrant (1,244 ) (1,948 ) 2,490 (5,094 )liabilities

Depreciation and 146 103 577 (682 )amortization

Provision for(reversal of) 2,607 (2,932 ) 5,373 5,724 credit losses,net

Distributableearnings prior torealized $ 24,574 $ 23,324 $ 72,752 $ 74,309 loss oninvestments

Realized credit (695 ) - (2,096 ) (1,233 )losses^(3)

Distributable $ 23,879 $ 23,324 $ 70,656 $ 73,076 earnings

Distributableearnings perdiluted share ofcommon stock $ 0.19 $ 0.18 $ 0.55 $ 0.56 prior to realizedloss oninvestments

Distributableearnings per $ 0.18 $ 0.18 $ 0.53 $ 0.55 diluted share ofcommon stock

Weighted-averagenumber of sharesof common stockoutstanding,basic and diluted

Basic 132,658,661 132,282,252 132,575,852 132,156,844

Diluted 132,752,471 132,316,746 132,663,437 132,207,605

(1)

Expenses directly related to professional fees in connection with our new public company reporting procedures, the design and implementation of internal controls under Section 404 of the Sarbanes-Oxley Act and the implementation of the CECL standard.

(2)

Includes other one-time expenses primarily related to the liquidation of the Private REIT.

(3)

Represents credit losses recorded in the provision for credit losses and recognized in distributable earnings upon charge-off of principal at the time of loan repayment or upon sale of real property where proceeds received are less than the principal outstanding.

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CONTACT: Investor Relations InvestorRelations@broadmark.com 206-623-7782

CONTACT: Media Relations Jason Chudoba 646-277-1249