Q4 2025 Franklin BSP Realty Trust Inc Earnings Call

February 12, 2026

Operator: Good day, and welcome to the Franklin BSP Realty Trust Q4 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, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Lindsey Crabbe, Director of IR. Please go ahead.

Speaker #2: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad.

Speaker #2: To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Lindsey Crabbe, Director of IR.

Speaker #2: Please go ahead. Good morning and welcome to FBRT's 4th Quarter earnings call. Thank you, Megan, for hosting our call today. As the operator mentioned, I'm Lindsey Crabbe.

Lindsey Crabbe: 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 Lindsey Crabbe. With me on the call today are Richard Byrne, Chairman of FBRT; Michael Comparato, Chief Executive Officer of FBRT; Jerome Baglien, Chief Financial Officer and Chief Operating Officer of FBRT; and Brian Buffone, President of FBRT. Before we begin, I want to mention that some of today's comments are forward-looking statements and are based on certain assumptions. Those comments and assumptions are subject to inherent risks and uncertainties, as described in our most recently filed SEC periodic reports, and actual future results may differ materially. The information conveyed on this call is current only as of the date of this call, February 12, 2026.

Speaker #2: With me on the call today are Richard Byrne, Chairman of FBRT; Michael Comparato, Chief Executive Officer of FBRT; Jerry Baglien, Chief Financial Officer and Chief Operating Officer of FBRT; and Brian Bethone, President of FBRT.

Speaker #2: Before we begin, I want to mention that some of today's comments are forward-looking statements and are based on certain assumptions. Those comments and assumptions are subject to inherent risks and uncertainties, as described in our most recently filed FEC periodic report.

Speaker #2: And actual future results may differ materially. The information conveyed on this call is current only as of date of this call, February 12th, 2026.

Speaker #2: 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.

Lindsey Crabbe: The company assumes no obligation to update any statements made during this call, including any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Additionally, we will refer to certain non-GAAP financial measures, which are reconciled to GAAP figures in our earnings release and supplementary slide deck, each of which are available on our website at www.fbrtreit.com. We will refer to the supplementary slide deck on today's call. With that, I will turn the call over to Rich Byrne.

Speaker #2: 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.fbrtreat.com.

Speaker #2: We will refer to the supplementary slide deck on today's call. With that, I will turn the call over to Rich Byrne.

Speaker #3: Great. Thanks, Lindsey, 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.

Richard Byrne: Great. Thanks, Lindsey, 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 Buffone will assume the role of President. Brian is a seasoned real estate veteran and a long-standing member of our investment team.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: He brings deep commercial real estate expertise to strong command of capital markets and, of course, a proven track record. Concurrently with that, Mike with Mike's promotion, Brian Bethone will assume the role of President.

Speaker #3: Brian is a seasoned real estate veteran and a longstanding member of our investment team. His experience institutional knowledge and investment acumen will continue to be invaluable as we execute our strategy and serve our investors.

Richard Byrne: His experience, institutional knowledge, and investment 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #4: Thanks, Rich. Good morning, everybody. And before Mike prepared remarks, I want to thank Rich for his years of service as FBRT's CEO, which has been an integral part of the company becoming a middle market leader in the commercial real estate finance market.

Michael Comparato: Thanks, Rich. Good morning, everybody. Before my prepared remarks, I want to thank Rich for his years of service as FBRT's 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.

Speaker #4: 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.

Speaker #4: Brian has been a longtime leader within Benefit Street and will now be playing a much more prominent role in FBRT. Now onto the company.

Speaker #4: For several quarters, we have discussed our earnings undercovering our dividend. After thoughtful analysis, we decided it was no longer prudent to sacrifice book value to pay that dividend.

Michael Comparato: Accordingly, management has recommended and the board has approved a reset of the quarterly dividend to $0.20 per common share beginning Q1 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.

Speaker #4: 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.

Speaker #4: 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.

Speaker #4: 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.

Speaker #4: 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.

Michael Comparato: 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 REIT. 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.

Speaker #4: REO liquidations are taking longer than originally anticipated, keeping equity locked and underperforming investments. We continue to make very good progress on the REO liquidation front.

Speaker #4: 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 REIT.

Speaker #4: Today, we are a commercial real estate investment platform. This means a lower overall dividend yield, but significantly more earnings stability and stronger long-term book value growth.

Speaker #4: 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.

Speaker #4: This type of revenue typically trades at a lower yield than pure-play mortgage REITs, since it produces a much more consistent and predictable ongoing cash flow stream.

Michael Comparato: This type of revenue typically trades at a lower yield than pure-play mortgage REITs, 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 REIT operations, plus that recurring revenue stream business. As we scale NewPoint, 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.

Speaker #4: 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 REIT operations plus that recurring revenue stream business.

Speaker #4: As we scale NewPoint, its contribution over time will continue to increase and be a creative to overall earnings. We have also recently made a few strategic investments in commercial real estate equity investments.

Speaker #4: 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 in book 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.

Michael Comparato: An agency servicing platform and select equity investments are key to a strategy that delivers stronger long-term growth in book 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 REITs. We are positioning the company with a differentiated mix of dividend yield, stability, and growth, which traditional mortgage REITs 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.

Speaker #4: 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 REITs.

Speaker #4: We are positioning the company with a differentiated mix of dividend yield, stability, and growth, which traditional mortgage REITs do not provide. Looking ahead, our focus is on balancing attractive current income with disciplined book value growth.

Speaker #4: 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 to comment on overall market conditions.

Michael Comparato: 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 CMBS 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.

Speaker #4: Market conditions overall continue to improve. Liquidity is abundant, and virtually any capital markets transactions from CMBS to SASB to CRECLO is met with a deluge of orders driving spreads tighter.

Speaker #4: 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.

Speaker #4: 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 CRECLOs.

Speaker #4: 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.

Speaker #4: 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.

Michael Comparato: 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. Brian is going to address a few of our watchlist 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.

Speaker #4: Brian is going to address a few of our watchlist 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.

Speaker #5: 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 gap net income of $18.4 million, or $0.13 per fully converted common share.

Jerome Baglien: Great. Thanks, Mike. I appreciate everyone being on the call today. I'm gonna 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 per 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.

Speaker #5: Distributable earnings for the quarter were $17.9 million, or $0.12 per fully converted share. Turning to distributable, we had earnings we had distributable earnings, which included $9.8 million of realized losses.

Speaker #5: 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 were $0.22 per fully converted share, or nearly flat to where we were last quarter.

Speaker #5: 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.

Jerome Baglien: Early in Q4, we completed a $1 billion CLO, FL Twelve, 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 originations 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 NewPoint 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 watchlist loans.

Speaker #5: With this transaction, we called several older CLOs that were past the reinvestments periods, which produced a debt extinguishment charge that I mentioned, of $0.07 per share.

Speaker #5: The new CLO should lower financing costs in 2026. And additionally, add meaningful origination capacity. We grew the core portfolio slightly in Q4 as originations outpaced payoffs.

Speaker #5: 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 NewPoint acquisition.

Speaker #5: During the quarter, we recorded a net CISL benefit of $4.8 million. However, that included $3.0 million of loan-specific reserves for four watchlist loans. One of those loans was subsequently transferred to REO, and the associated specific reserve was charged off.

Jerome Baglien: 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 repurchases through December 31, 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 2 of our CLOs.

Speaker #5: 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 repurchases through December 31st of 2026, to further support the stock price.

Speaker #5: 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.

Speaker #5: 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.

Jerome Baglien: 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 the quarter and paired with higher tax reserves at the TRS that reduced NewPoint's reported earnings in Q4. We expect NewPoint'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.

Speaker #5: Turning to slide 11 for updates on NewPoint. NewPoint contributed modestly in Q4. This was expected, given a lower origination cadence in the quarter, and paired with higher tax reserves at the TRS that reduced NewPoint's reported earnings in Q4.

Speaker #5: We expect NewPoint's distributable earnings contribution to operate in a run rate of approximately 25 to 33 million dollars 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.

Speaker #5: 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.

Jerome Baglien: 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. NewPoint managed a servicing portfolio that was $47.8 billion at quarter end. The NewPoint BSP integration work continues to move forward. We made significant progress on the migration of BSP's loans and that servicing book onto NewPoint, and we're on pace to complete that transition by the middle of the first quarter. The addition of the BSP loans will increase NewPoint's servicing book by approximately $10 billion and help to contribute to the increase in earnings power of NewPoint in 2026.

Speaker #5: NewPoint managed a servicing portfolio that was $47.8 billion at quarter-end. The NewPoint BSP integration work continues to move forward. We've made significant progress on the migration of BSP's loans and that servicing book onto NewPoint, and we're on pace to complete that transition by the middle of the first quarter.

Speaker #5: The addition of the BSP loans will increase NewPoint's servicing book by approximately $10 billion and help to contribute to the increase in earnings power of NewPoint in 2026.

Speaker #5: We remain confident NewPoint is a 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.

Jerome Baglien: We remain confident NewPoint 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.

Speaker #5: 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.

Brian Buffone: 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. 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.

Speaker #5: 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.

Speaker #5: 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.

Speaker #5: 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.

Brian Buffone: 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. Our pre-rate lock book represents roughly 32% of the total loans, loan commitments of $1.3 billion in multifamily, or 82% of that pre-rate lock book. Credit mix remains steady. 76% of those legacy loans are risk graded 2 or 3 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 3 loans, with an average loan size of $19 million. That's down from $130 million in the prior quarter due to 2 office loans paying off in full during Q4.

Speaker #5: Our pre-rate hype book represents roughly 32% of the total loan commitments, of $1.3 billion in multifamily or 82% of that pre-rate hype book. Credit mix remains steady, 76% of those legacy loans are risk-rated 2 or 3 at quarter-end, and we're continuing to work through the positions that need extra attention on the watchlist.

Speaker #5: Importantly, the office loan exposure is now only 57 million dollars 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.

Speaker #5: 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 watchlist.

Brian Buffone: Credit quality across the portfolio remains stable, with an average risk rating of 2.4 at quarter end. 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.

Speaker #5: 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.

Speaker #5: A notable change on our watchlist 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.

Speaker #5: That loan will stay on non-accrual. 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.

Brian Buffone: 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.

Speaker #5: 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.

Speaker #5: We added a new property to our foreclosure REO in Q4, a Texas multifamily asset, however, it has already under LOI and we expect resolution to that asset in the first half of this year.

Speaker #5: 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 the turn it back over to the operator to begin the Q&A session.

Speaker #1: 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 were using a speakerphone, please pick up your hands up before pressing the keys.

Operator: 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.

Speaker #1: 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.

Speaker #1: The first question comes from Matthew Erdner with Jones Trading. Please go ahead.

Speaker #4: 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.

Matthew Erdner: 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, you know, I guess, muted origination somewhat?

Speaker #4: You guys have mentioned or kind of hinted at laying off the gas a little bit there. It looks like conduit was pretty successful. So how should we think about capital allocation this quarter if the core portfolio has muted originations somewhat?

Michael Comparato: 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, 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, we're kind of focusing on the other aspects of, of our business where we can originate as well, whether that's construction lending, you know, some other, other areas that, that we're active.

Speaker #3: Hey, Mike. Good morning. Thanks for the question. I don't want to take the prepared remarks out of context. We have the pedal to the floor on origination.

Speaker #3: Our goal is to get assets up to a level where we're meaningfully growing earnings, and we can only do that by closing loans, obviously.

Speaker #3: I think the point of the message was we are not actively chasing the 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, some other areas that we're active.

Speaker #3: 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 looks like, so that we aren't dropping to the tightest spreads that the market is. We have to selectively pick a few where we compete there, but generally, we're trying to play a little bit wider.

Michael Comparato: 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 looks like, so that we, you know, aren't dropping to the, 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.

Speaker #4: Right. Yeah. That makes sense there. And then I guess turning to kind of the dividend reset, should we kind of expect that to be a good baseline for run rate earnings going forward?

Matthew Erdner: Right. Yeah, that, 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, to get back to that $0.20 coverage?

Speaker #4: And then I guess within that, following up on the last question, what's an ideal portfolio size that you're looking to get that core back to by the end of the year to get back to that 20 cents coverage?

Speaker #3: Well, we're at we're above 20 cents 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.

Michael Comparato: Well, we're at. You know, we're above $0.20 today. 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, you know, 1 or 2 trough quarters, right? That is, the earnings potential of this company hasn't changed, right? We fully 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.

Speaker #3: 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.

Speaker #3: Right? We laid out the path to getting back to 35, 36 cents; we still believe with conviction that we have that earnings ability to get back to that level.

Speaker #3: 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.

Michael Comparato: 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-thirties. 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.

Speaker #3: We just did not want to continue shrinking the size the balance sheet of the company paying out cash over distributing because it just makes it even harder to get back to that level.

Speaker #3: So we've talked about for several quarters the borrower behavior and the unpredictability of borrowers; the same, unfortunately, has been true on the REO disposition.

Speaker #3: We have made tremendous progress and just when you think you're selling another asset or two or three, 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.

Michael Comparato: 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.

Speaker #3: 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.

Speaker #3: I think earnings are going in one direction from here. And that is higher.

Speaker #4: Got it. That's very helpful. I appreciate the comments as always.

Matthew Erdner: Got it. That, that's very helpful. I appreciate the comments, as always.

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

Speaker #1: The next question comes from Steve Delaney with Citizens JMP Securities. Please go ahead.

Speaker #5: Good morning, everyone, and congratulations on all the promotions. We heard about last night. Well-deserved. Just looking at the where you're trying to allocate capital.

Steve DeLaney: 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 know, you're primarily, you know, a lender, I guess, as we think about it, while some of it is maybe more like the multifamily and doing the NewPoint business, like, maybe like a WD or somebody like that. I think that's certainly value added. But the one you have one investment REO. Is that gonna be a one-and-done thing, or should we expect that, going forward, you will have some percentage of your capital in direct real estate investments for the carry plus the potential capital gain? Thanks.

Speaker #5: And I hear you loud and clear about the excessive competition and maybe traditional bridge loan products. You have your primarily a lender, I guess, as we think about it, while some of it is maybe

Speaker #1: Any more like the multifamily and doing the new point business . Like maybe like a WD or somebody like that . I think that's certainly value added .

Speaker #1: But the one you have , one investment , Oreo , is that going to be a one and done thing , or should we expect that going forward you will have a some percentage of your capital in direct real estate investments for the carry plus the potential capital gain Thanks

Speaker #2: Thanks , Steve . Good morning a lot there . Let me let me try to answer it . So we actually have more than one equity investment on the on the books .

Michael Comparato: Thanks, Steve. Good morning. A lot there. Let me, let me try to answer it. So, we actually have more than one equity investment on the, on the books. We bought, two large assets, I think both in 2025, that are in joint ventures, so they, they might be booked slightly differently, but, I believe those... I believe we have roughly, you know, $400 to 500 million of gross assets, that owned. I, I don't know the percentage off the top of my head, but,

Speaker #2: We bought two large assets . I think both in 2025 . That are in joint ventures . So they might be booked slightly differently .

Speaker #2: But I believe those—I believe we have roughly $400 to $500 million of gross assets that are owned. 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.

Steve DeLaney: Okay.

Michael Comparato: We do have more equity investments on the book today than just that one Academy Sports distribution facility. You know, we 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 NewPoint operations. Let's put a dividend yield of, you know, 8% to 10% on our mortgage REIT 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 REITs trade, but those also are, you know, positions for growth in the company.

Speaker #2: Academy Sports distribution facility . You know , we have appreciate you . Pointing out Walker Dunlop . And I think that's part of my , you know , message in the prepared remarks .

Speaker #2: 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 .

Speaker #2: Right . Like let's put a dividend yield of 4% or 5% on the new point operations . Let's put a dividend yield of 8 to 10% on our mortgage rate operations .

Speaker #2: 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 REIT's trade .

Speaker #2: But those also are , no positions for growth in the company . It's going to take us time to to educate the market on that front and let you know , let them see that .

Michael Comparato: It's gonna 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 $1 billion 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.

Speaker #2: 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 FBG .

Speaker #2: I think we've bought close to $1 billion of commercial real estate assets in the last 18 months . So again , a longer winded answer here .

Speaker #2: But yes, I think that you should expect to see a slightly higher allocation of the book to some select equity investments over the next few years.

Speaker #1: Now , that's very helpful . And it was a 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 Oreo .

Steve DeLaney: No, that's very helpful, and it was a twisted kind of question to begin with, but I appreciate the color especially on the investment side, on the investment REO.

Speaker #2: Yeah . And I would just add I , you know , you're not going to wake up one morning and see FBG have 25% of its equity invested in equity investments , right .

Michael Comparato: Yeah, and I would just add, you know, what you're not gonna 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 yeah, 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.

Speaker #2: That is not happening anytime soon . You know , could we have 5% , you know , 10% a few years from now , possibly .

Speaker #2: But you know , we are no , we are not on the path to , you know , Starwood . I think they're at like 50% equity investments .

Speaker #2: That is not the that is not the goal or expectation .

Speaker #1: Got it . You're still going to be a finance company primarily . So okay . So and on your agency business with Newpoint , will we be able I have not forgive me , but I haven't been through the deck yet .

Steve DeLaney: Got it. You're still gonna be a finance company primarily, so.

Michael Comparato: Yeah.

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

Speaker #1: 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 , etc.

Speaker #1: ? Will we see sort of what your little WD component of the of the , of the company looks like , you know , in terms of the TRS

Speaker #2: Jerry, you want to take that?

Michael Comparato: Jerry, you wanna take that?

Speaker #3: Sure. Yeah. There's a page in the supplemental deck, and there's obviously going to be more information in the 10-K that'll give you more segment information on the details within that operating segment for us.

Jerome Baglien: Sure. Yeah, we, well, there's a page in the supplemental deck, and there's obviously gonna be more information in the 10-K that'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 by its components, servicing, gain on sale, and you can see the cost structure as well. 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 2026 as well, to just help put a guidepost out there for kinda where we see things.

Speaker #3: So you'll be able to see some of the volume information we break out. You know, the income buys component, servicing gain on sale.

Speaker #3: And you can see the cost structure as well . 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 .

Speaker #1: Well, congrats on the progress, and we applaud what you're doing. You know, we've got 22 plain vanilla commercial mortgage rates.

Steve DeLaney: Well, congrats on the progress, and we applaud what you're doing. You know, we've got 22 plain vanilla commercial mortgage REITs, 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.

Speaker #1: 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 .

Speaker #1: Thanks for your time this morning .

Speaker #2: Thanks .

Michael Comparato: Thanks, Steve.

Speaker #4: Steve

Speaker #5: Our next question comes from John Nicodemus with BTIG. Please go ahead.

Operator: Our next question comes from John Nigro Demas with BTIG. Please go ahead.

Speaker #6: 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 .

Thomas Catherwood: 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 8 to 12 cents a BE 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.

[Analyst] (BTIG): 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 8 to 12 cents a BE 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.

Speaker #6: You estimated that there was 8 to $0.12 of D per quarter that could be unlocked from reinvesting equity tied up in non-performing loans .

Speaker #6: And Rio , based on progress , your team has made since then . Where do you estimate that figure stands today Thanks

Michael Comparato: 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.

Speaker #2: 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 you've hit the crux of exactly why we concluded to a dividend cut .

Speaker #2: Is that it's that earnings . Is there . It's it's black and white . It's not questionable . It's just a matter of when do we recoup it .

Speaker #2: And unfortunately, just taking a little bit longer than we had anticipated. So, Jerry, I don't know. Do you have the number?

Speaker #2: I know obviously we have the numbers , but I don't know if you have them at your fingertips .

Speaker #3: We have the numbers . I would say the range is not substantially changed . And Mike's right . It's been it's not that the the quantum is necessarily changed .

Jerome Baglien: We have the numbers. I would say the range has not substantially changed, and Mike's right. It's been... it's not that the quantum has necessarily changed, it's the timing to unlock that the balance of that earning power, whether it's resolutions have taken longer, or we've kinda cycled through additional assets as we kind of work down through the balance of our legacy portfolio. You know, our ability to kinda 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.

Speaker #3: It's the timing to unlock that the balance of that earning power , whether it's resolutions have taken longer , we've kind of cycled through additional assets as we kind of work down through the balance of our legacy portfolio .

Speaker #3: You know , our our ability to to kind of take that back and redeploy in our core portfolio is still there . We're really we're really working with time more than we're working with a change in potential earnings power .

Speaker #3: With that equity that's there

Speaker #6: Great . Thanks , Mike and Jerry . And 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 .

Thomas Catherwood: Great. 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 NewPoint. 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. Just curious, what was driving those changes, as we look toward 2026 in NewPoint? Thanks.

[Analyst] (BTIG): Great. 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 NewPoint. 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. Just curious, what was driving those changes, as we look toward 2026 in NewPoint? Thanks.

Speaker #6: 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 .

Speaker #6: You put out in September , which just curious what was driving those changes as we look toward 2026 . And point . Thanks .

Speaker #3: I think we were guiding 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 .

Jerome Baglien: I think we were guiding 2025 before. In 2025, I think we're kind of middle of that range.

Michael Comparato: ... 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 give annual projections is because this business will have some chunky quarters, right? We wanted to kind of give a bit of a range there.

Jerome Baglien: ... 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 give annual projections is because this business will have some chunky quarters, right? We wanted to kind of give a bit of a range there.

Speaker #3: I think this year we were at the high end of what we provided for everybody on a 2025 year to date total , obviously is a little chunkier in how it came in the two quarters , and one of the reasons we gave annual projections is because this business will have some chunky quarters , right ?

Speaker #3: We 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 the end distributable performance .

Michael Comparato: 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. Rather than kind of be overly specific, we wanted 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. You know, putting that $10 billion of our own book onto the business is gonna be a pretty big driver in terms of additional income growth that we should see through the balance of 2026.

Jerome Baglien: 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. Rather than kind of be overly specific, we wanted 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. You know, putting that $10 billion of our own book onto the business is gonna be a pretty big driver in terms of additional income growth that we should see through the balance of 2026.

Speaker #3: So rather than kind of be overly specific , we wanted to put a decent range on there to kind of cover the various outcomes .

Speaker #3: I think in terms of one of the other upsides is the servicing integration that I mentioned . 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 .

Speaker #6: Great. Super helpful. Jerry, thanks for the time.

Lindsey Crabbe: Great. Super helpful, Jerry. Thanks for the time.

[Analyst] (BTIG): Great. Super helpful, Jerry. Thanks for the time.

Speaker #7: Yep .

Michael Comparato: Yep.

Speaker #5: Our next question comes from Timothy D'Agostino with B Riley Securities . Please go ahead .

Operator: Our next question comes from Timothy D'Agostino with B. Riley Securities. Please go ahead.

Speaker #8: Yeah . Hi . Thank you . Congrats on the quarter . And the the promotions and transitions . You know , looking at the results for 25 at at Fannie Mae , understanding that multifamily volume was a lot higher this year compared to years past .

Matt Howlett: Yeah. Hi, thank you. Congrats on the quarter and the promotions and transitions. You know, looking at the results for 2025 at Fannie Mae, and understanding how that multifamily 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 2026, if that momentum from 2025 is still carrying over. And if you could provide any color on kind of how you're feeling about the year ahead in that channel. Thank you.

Timothy D'Agostino: Yeah. Hi, thank you. Congrats on the quarter and the promotions and transitions. You know, looking at the results for 2025 at Fannie Mae, and understanding how that multifamily 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 2026, if that momentum from 2025 is still carrying over. And if you could provide any color on kind of how you're feeling about the year ahead in that channel. Thank you.

Speaker #8: I just wanted to get the 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 on kind of how you're feeling about the year ahead in that in that channel .

Speaker #8: Thank you

Speaker #2: 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 .

Michael Comparato: 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 ten-year was at 4.25. I said, "You know, if the ten-year dropped to 4 percent flat, I think you would see volume just go through the roof. And if you see the ten-year go to 4.5, you know, I think things are gonna 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.

Speaker #2: I was talking about this with someone the other day when the ten year is at four and a quarter , I said , you know , if the ten year drop to 4% flat , I think you would see volume just go through the roof .

Speaker #2: And if you see the ten-year go to four and a half, I think things are going to come to a screeching halt.

Speaker #2: 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 .

Michael Comparato: And if they go lower, I think you're going to see just a massive, massive amount of volume come through the market. And unfortunately, if they go higher, we're gonna see the opposite. So, if you could tell me where the ten-year is going for the next 6 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.

Speaker #2: And if they go lower , I think you're going to see a just a massive , massive amount of volume come through the market .

Speaker #2: And unfortunately , if they go higher , we're going to see the opposite . So if you could tell me where the ten year is going for the next 6 to 12 months , I could give you a much better answer .

Speaker #2: But it is just incredibly rate sensitive . At the moment . And I think that's for all of our all of our businesses .

Speaker #8: Okay , awesome . Thank you for that . And then sorry if I missed it earlier in the call . But regarding the loan portfolio payoffs persisted at a pretty high rate .

Matt Howlett: Okay. Awesome. Thank you for that. And then, sorry if 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 2026? Just kind of any color on repayments to the portfolio. Thank you.

Timothy D'Agostino: Okay. Awesome. Thank you for that. And then, sorry if 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 2026? Just kind of any color on repayments to the portfolio. Thank you.

Speaker #8: However , unfunded volume obviously came in just above that are most of the repayments behind you ? Do you think we could still see some some some higher figures in the first half of 26 ?

Speaker #8: Just kind of any color on repayments ? The portfolio . Thank you .

Speaker #2: 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 .

Michael Comparato: 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, 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 $0.97.

Speaker #2: As Brian mentioned , I think we're down to 32% of the portfolio being backward looking and honestly , I think this is just where the market is completely mispricing and misunderstanding FPR 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 .

Speaker #2: 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 $0.97.

Speaker #2: Look at Ari . I mean , look at what they saw . What a theme . Bought Ari loans for the disconnects between our book value and our share price is it's inexplicable .

Michael Comparato: Look at ARI. I mean, look at what they sold, what Athene bought ARI loans for. The disconnect between our book value and our share price is, it, it's 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 gonna have to show it to the market, which we plan on doing in 2026.

Speaker #2: So we will just continue to do what we do . We will continue to deliver on the Rio portfolio . We will continue to just recycle out of those legacy positions .

Speaker #2: 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 .

Speaker #2: 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 .

Speaker #2: I have the highest of conviction that we are right in that regard . But we got to get through it , which which we will do in the next few quarters .

Michael Comparato: I have the highest conviction that we are right in that regard, but we got to get through it, which we will do in the next few quarters.

Speaker #8: Okay , great . Thank you so much for answering the questions and congrats again on all the promotions . Thank you

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

Timothy D'Agostino: Okay, great. Thank you so much for answering the questions, and congrats again on all the promotions. Thank you.

Speaker #5: This concludes our question and answer session . I would like to turn the conference back over to Lindsey Crabbe for any closing remarks .

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

Speaker #8: We appreciate you joining us today. Please reach out if you have any further questions. Thanks, and have a great day.

Lindsey Crabbe: We appreciate you joining us today. Please reach out if you have any further questions. Thanks, and have a great day.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Q4 2025 Franklin BSP Realty Trust Inc Earnings Call

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