Franklin BSP Realty Trust, Inc. Q1 FY2026 earnings call

Mike mentioned key developments in the first quarter against a complex macro backdrop, commercial real estate having gone through correction, origination activity outpacing repayments, equity investments showing meaningful appreciation. Jerry walked through financial results: gap net income $12.3 million, distributable earnings $13.5 million, book value per share increased to $14.18, repurchased nearly $40 million of common stock, net leverage ended at 2.84 times. Brian provided portfolio update: core portfolio grew, office exposure extremely limited, originated 26 loans with multifamily accounting for 92% of production, reduced REO count, sold largest REO position shortly after quarter end.

Core portfolio finished Q1 at roughly $4.6 billion. Core loan portfolio grew by $173 million during the quarter. Distributable earnings from Newpoint totaled $5.6 million. Agency origination volume was $646 million in Q1. MSR portfolio was valued at approximately $217 million and generated $6.7 million of income in Q1. NewPoint's servicing portfolio totaled $58.1 billion at quarter end.

Expect earnings to benefit from larger core portfolio and more stable contribution from Newpoint over 2026. Board reauthorized Share Repurchase Program with $50 million available through December 31, 2026. Expect equity allocation of portfolio to increase throughout 2026, and strategically exit equity investments if pricing is compelling.

Complex macro backdrop with geopolitical uncertainty and ongoing conflict adding market volatility. Legacy positions need to be worked through as lenders move beyond extend and pretend. Interest rate volatility impacting origination volumes and different business segments.

Q: Matthew Erdner from Jones Trading asked about timing of Newpoint loans transfer and normalization.

A: Jerry said transfer occurred mid-first quarter, not capturing full benefit in Q1, full benefit to be seen in latter half of 2026.

Q: Timothy D'Agostino from B. Reilly Securities asked about capital management and dividend.

A: Mike said dividend cut was to stop burning book value during transition, share repurchases are considered as best investment option.

Q: John Nicodemus from BTIG asked about watch list loans downgrades.

A: Mike said due to borrower behavior, one loan defaulted then came current but risk rated 4, another major sponsor defaulted leading to potential loss.

Q: Chris Muller from J&P Securities asked about specific CISO reserves and Newpoint origination dip.

A: Jerry said specific reserve increase due to one position, Newpoint origination dip due to seasonality and interest rate volatility.

Q: Gabe Pogge from Raymond James asked about market color and equity investments.

A: Mike said market has tale of two days for different vintage products, equity investments considered based on long-term ownership and inflation hedge