Business Wire | Nov 10, 2021 04:33PM EST

Franklin BSP Realty Trust, Inc. Announces Third Quarter 2021 Results

Nov. 10, 2021

NEW YORK--(BUSINESS WIRE)--Nov. 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.

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.

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.

FRANKLIN BSP REALTY TRUST, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

September 30, December 31, 2021 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 3,247,646 2,693,848 September 30, 2021 and December 31, 2020,respectively

Commercial mortgage loans, held for sale, 99 67,649 measured at fair value

Real estate securities, available for sale,measured at fair value, amortized cost of $0 and - 171,136 $179,392 as of September 30, 2021 and December31, 2020, respectively

Derivative instruments, measured at fair value - 25

Other real estate investments, measured at fair 2,547 2,522 value

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 550,156 276,340 loans

Repurchase agreements - real estate securities 46,531 186,828

Mortgage note payable 23,998 29,167

Other financing and loan participation - 37,434 31,379 commercial mortgage loans

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 theConsolidated Financial Statements included in the Form 10-Q)

Redeemable convertible preferred stock Series A,$0.01 par value, 60,000 authorized and 25,567and 40,515 issued and outstanding as of $ 127,603 $ 202,292 September 30, 2021 and December 31, 2020,respectively

Redeemable convertible preferred stock Series C,$0.01 par value, 20,000 authorized and 1,400 6,969 6,962 issued and outstanding as of September 30, 2021and December 31, 2020, respectively

Redeemable convertible preferred stock Series D,$0.01 par value, 20,000 authorized and 17,950issued and outstanding as of September 30, 2021 89,677 - and none issued or outstanding as of December31, 2020, respectively

Equity:

Preferred stock, $0.01 par value, 50,000,000authorized and none issued or outstanding as of - - September 30, 2021 and December 31, 2020,respectively

Common stock, $0.01 par value, 949,999,000shares authorized, 44,162,657 and 44,510,051 443 446 shares issued and outstanding as of September30, 2021 and December 31, 2020, respectively

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 $ 3,635,478 $ 3,189,761 preferred stock and equity

(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.

^ Includes $123.3 million and $98.6 million of cash held by servicer related(1) to the CLOs as of September 30, 2021 and December 31, 2020, respectively.

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

FRANKLIN BSP REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)

Three Months Ended Nine Months Ended September 30, September 30,

2021 2020 2021 2020

Income:

Interest income $ 47,747 $ 44,414 $ 138,969 $ 135,509

Less: Interest 11,988 15,113 35,994 54,740 expense

Net interest income 35,759 29,301 102,975 80,769

Revenue from real 1,015 1,017 2,447 3,474 estate owned

Total income $ 36,774 $ 30,318 $ 105,422 $ 84,243

Expenses:

Asset management andsubordinated 8,265 3,749 19,682 11,399 performance fee

Acquisition expenses 690 166 1,012 483

Administrative 2,980 3,128 9,532 10,180 services expenses

Professional fees 2,488 2,470 7,262 8,476

Real estate owned - 509 - 3,250 operating expenses

Depreciation and - 591 812 1,765 amortization

Other expenses 709 571 2,115 3,213

Total expenses $ 15,132 $ 11,184 $ 40,415 $ 38,766

Other (income)/loss:

Provision/(benefit) (1,613 ) (3,710 ) (5,452 ) 14,929 for credit losses

Impairment losses onreal estate owned - - - 398 assets

Realized (gain)/losson extinguishment of - - - (438 )debt

Realized (gain)/losson sale of real - 4,390 1,375 10,137 estate securities

Realized (gain)/losson sale of commercial (206 ) - (206 ) (252 )mortgage loan heldfor sale

Realized (gain)/losson sale of real (8,698 ) (1,424 ) (9,810 ) (1,424 )estate owned assets,held for sale

Realized (gain)/losson sale of commercialmortgage loan, held (9,061 ) (1,940 ) (22,211 ) (11,106 )for sale, measured atfair value

Unrealized (gain)/loss on commercialmortgage loans, held 1,104 (263 ) - 76 for sale, measured atfair value

Unrealized (gain)/loss on other realestate investments, (1 ) (6 ) (27 ) 37 measured at fairvalue

Unrealized (gain)/ (1,428 ) (4,310 ) (374 ) 625 loss on derivatives

Realized (gain)/loss 1,902 4,722 (357 ) 13,050 on derivatives

Total other (income)/ $ (18,001 ) $ (2,541 ) $ (37,062 ) $ 26,032 loss

Income before taxes 39,643 21,675 102,069 19,445

Provision/(benefit) 1,148 178 3,418 (2,466 )for income tax

Net income $ 38,495 $ 21,497 $ 98,651 $ 21,911

Net income applicable $ 29,490 $ 16,739 $ 75,905 $ 10,466 to common stock



Basic earnings per $ 0.67 $ 0.38 $ 1.72 $ 0.24 share

Diluted earnings per $ 0.67 $ 0.38 $ 1.71 $ 0.24 share

Basic weightedaverage shares 44,185,241 44,405,196 44,245,733 44,348,282 outstanding

Diluted weightedaverage shares 44,200,563 44,421,084 44,261,469 44,361,739 outstanding

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

RECONCILIATION OF GAAP NET INCOME TO DISTRIBUTABLE EARNINGS

(In thousands, except share and per share data)

(Unaudited)

Three Months Ended Nine Months Ended September September 30, 30,

2021 2020 2021 2020

GAAP Net Income $ 38,495 $ 21,497 $ 98,651 $ 21,911

Adjustments:

CLO amortization (867 ) (691 ) (2,401 ) 953 acceleration ^(1)

Unrealized (gain)/loss on financial (325 ) (4,579 ) (401 ) 738 instruments ^(2)

Incentive fees 4,280 - 8,046 -

Depreciation and - 591 812 1,765 amortization

Increase/(decrease)in provision for (1,613 ) (3,710 ) (5,452 ) 14,929 credit losses

Impairment losses onreal estate owned - - - 398 assets

Distributable $ 39,970 $ 13,108 $ 99,255 $ 40,694 earnings

Average Equity $ 1,063,428 $ 974,733 $ 1,044,583 $ 966,519

Annualized GAAP ROE 14.5 % 8.8 % 12.6 % 3.0 %

Annualizeddistributable 15.0 % 5.4 % 12.7 % 5.5 %earnings ROE

Distributable $ 0.69 $ 0.23 $ 1.73 $ 0.71 earnings per share

(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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211110006380/en/

CONTACT: Investor Relations Contact: Lindsey Crabbe l.crabbe@benefitstreetpartners.com (214) 874-2339