0001562528us-gaap:~~LoanOriginationCommitmentsMember2022-06-30~~FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)
☒x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2022~~2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-40923

FRANKLIN BSP REALTY TRUST, INC.

(Exact name of registrant as specified in its charter)


Maryland						46-1406086
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

1345 Avenue of the Americas, Suite 32A New York, New York						10105
(Address of Principal Executive Office)						(Zip Code)

(212) 588-6770

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	FBRT	New York Stock Exchange
7.50% Series E Cumulative Redeemable Preferred Stock, par value $0.01 per share	FBRT PRE	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act:


~~Large accelerated~~Large-accelerated filer ox			Accelerated filer o
Non-accelerated filer xo			Smaller reporting company ☐
			Emerging growth filer ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒x

The number of shares of the registrant's common stock, $0.01 par value, outstanding as of July ~~29, 2022~~26, 2023 was ~~83,776,580.~~82,210,624.

FRANKLIN BSP REALTY TRUST, INC.

TABLE OF CONTENTS

Table of Contents

PART I. Item 1. Consolidated Financial Statements and Notes (unaudited)

FRANKLIN BSP REALTY TRUST, INC.

CONSOLIDATED BALANCE SHEETS

(InUnaudited, in thousands, except share and per share data)


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
ASSETS	ASSETS	(Unaudited)				ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	445,812	$	154,929	Cash and cash equivalents	$	224,696	$	179,314
Restricted cash	Restricted cash	11,354		13,270		Restricted cash	7,444		11,173
Commercial mortgage loans, held for investment, net of allowance of $47,025 and $15,827 as of June 30, 2022 and December 31, 2021, respectively		5,182,535		4,211,061
Commercial mortgage loans, held for investment, net of allowance for credit losses of $38,932 and $40,848 as of June 30, 2023 and December 31, 2022, respectively						Commercial mortgage loans, held for investment, net of allowance for credit losses of $38,932 and $40,848 as of June 30, 2023 and December 31, 2022, respectively	5,023,579		5,228,928
Commercial mortgage loans, held for sale, measured at fair value	Commercial mortgage loans, held for sale, measured at fair value	129,275		34,718		Commercial mortgage loans, held for sale, measured at fair value	34,250		15,559
Real estate securities, trading, measured at fair value		270,381		4,566,871
Real estate securities, trading, measured at fair value (includes pledged assets of $118,455 and $227,610 as of June 30, 2023 and December 31, 2022, respectively)						Real estate securities, trading, measured at fair value (includes pledged assets of $118,455 and $227,610 as of June 30, 2023 and December 31, 2022, respectively)	125,215		235,728
Real estate securities, available for sale, measured at fair value, amortized cost of $192,471 and $220,635 as of June 30, 2023 and December 31, 2022, respectively (includes pledged assets of $181,463 and $198,429 as of June 30, 2023 and December 31, 2022, respectively)						Real estate securities, available for sale, measured at fair value, amortized cost of $192,471 and $220,635 as of June 30, 2023 and December 31, 2022, respectively (includes pledged assets of $181,463 and $198,429 as of June 30, 2023 and December 31, 2022, respectively)	191,849		221,025
Derivative instruments, measured at fair value						Derivative instruments, measured at fair value	251		415

Derivative instruments, measured at fair value		2,622		436
Other real estate investments, measured at fair value		—		2,074
Receivable for loan repayment (1)	Receivable for loan repayment (1)	44,729		252,351		Receivable for loan repayment (1)	66,835		42,557
Accrued interest receivable	Accrued interest receivable	22,899		30,109		Accrued interest receivable	38,348		34,007
Prepaid expenses and other assets	Prepaid expenses and other assets	14,697		13,595		Prepaid expenses and other assets	15,862		15,795
Intangible lease asset, net of amortization	Intangible lease asset, net of amortization	47,033		48,472		Intangible lease asset, net of amortization	66,008		54,831
Real estate owned, net of depreciation	Real estate owned, net of depreciation	88,897		90,048		Real estate owned, net of depreciation	179,252		127,772
Real estate owned, held for sale						Real estate owned, held for sale	11,760		36,497

Cash collateral receivable from derivative counterparties		1,672		56,767

Total assets	Total assets	$	6,261,906	$	9,474,701	Total assets	$	5,985,349	$	6,203,601
LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY					LIABILITIES AND STOCKHOLDERS' EQUITY
Collateralized loan obligations	Collateralized loan obligations	$	3,203,577	$	2,162,190	Collateralized loan obligations	$	3,031,984	$	3,121,983
Repurchase agreements - commercial mortgage loans	Repurchase agreements - commercial mortgage loans	832,034		1,019,600		Repurchase agreements - commercial mortgage loans	695,039		680,859
Repurchase agreements - real estate securities	Repurchase agreements - real estate securities	293,288		4,178,784		Repurchase agreements - real estate securities	289,993		440,008
Mortgage note payable	Mortgage note payable	23,998		23,998		Mortgage note payable	23,998		23,998
Other financing and loan participation - commercial mortgage loans	Other financing and loan participation - commercial mortgage loans	47,181		37,903		Other financing and loan participation - commercial mortgage loans	82,348		76,301
Unsecured debt	Unsecured debt	98,645		148,594		Unsecured debt	81,246		98,695
Derivative instruments, measured at fair value	Derivative instruments, measured at fair value	510		32,295		Derivative instruments, measured at fair value	299		64
Interest payable	Interest payable	4,859		2,692		Interest payable	12,669		12,715
Distributions payable	Distributions payable	36,801		30,346		Distributions payable	36,221		36,317
Accounts payable and accrued expenses	Accounts payable and accrued expenses	13,568		12,705		Accounts payable and accrued expenses	12,460		17,668
Due to affiliates	Due to affiliates	19,754		17,538		Due to affiliates	15,929		15,429

Intangible lease liability, net of amortization						Intangible lease liability, net of amortization	13,664		6,428
Total liabilities	Total liabilities	$	4,574,215	$	7,666,645	Total liabilities	$	4,295,850	$	4,530,465
Commitment and contingencies (See Note 10)		0		0
Commitments and Contingencies						Commitments and Contingencies
Redeemable convertible preferred stock:	Redeemable convertible preferred stock:					Redeemable convertible preferred stock:
Redeemable convertible preferred stock Series C, $0.01 par value, 20,000 authorized and 1,400 issued and outstanding as of June 30, 2022 and December 31, 2021		$	6,975	$	6,971
Redeemable convertible preferred stock Series D, $0.01 par value, 20,000 authorized and 17,950 issued and outstanding as of December 31, 2021		—		89,684
Redeemable convertible preferred stock Series H, $0.01 par value, 20,000 authorized and 17,950 issued and outstanding as of June 30, 2022		89,748		—
Redeemable convertible preferred stock Series H, $0.01 par value, 20,000 authorized and 17,950 issued and outstanding as of June 30, 2023 and December 31, 2022						Redeemable convertible preferred stock Series H, $0.01 par value, 20,000 authorized and 17,950 issued and outstanding as of June 30, 2023 and December 31, 2022	$	89,748	$	89,748
Redeemable convertible preferred stock Series I, $0.01 par value, none authorized and outstanding as of June 30, 2023, 1,000 authorized and 1,000 issued and outstanding as of December 31, 2022						Redeemable convertible preferred stock Series I, $0.01 par value, none authorized and outstanding as of June 30, 2023, 1,000 authorized and 1,000 issued and outstanding as of December 31, 2022	—		5,000
Total redeemable convertible preferred stock	Total redeemable convertible preferred stock	$	96,723	$	96,655	Total redeemable convertible preferred stock	$	89,748	$	94,748
Equity:	Equity:					Equity:
Preferred stock, $0.01 par value, 10,000,000 authorized and none issued or outstanding as of June 30, 2022 and December 31, 2021, respectively		$	—	$	—
Preferred stock, $0.01 par value; 100,000,000 shares authorized, 7.5% Cumulative Redeemable Preferred Stock, Series E, 10,329,039 shares issued and outstanding as of June 30, 2022 and December 31, 2021		258,742		258,742
Series F Preferred stock, $0.01 par value, 40,000,000 authorized, none issued or outstanding as of June 30, 2022, and 39,733,299 issued and outstanding as of December 31, 2021		—		710,431
Common stock, $0.01 par value, 900,000,000 shares authorized, 84,226,628 and 43,965,928 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		838		441

Preferred stock, $0.01 par value; 100,000,000 shares authorized, 7.5% Cumulative Redeemable Preferred Stock, Series E, 10,329,039 shares issued and outstanding as of June 30, 2023 and December 31, 2022						Preferred stock, $0.01 par value; 100,000,000 shares authorized, 7.5% Cumulative Redeemable Preferred Stock, Series E, 10,329,039 shares issued and outstanding as of June 30, 2023 and December 31, 2022	$	258,742	$	258,742
Common stock, $0.01 par value, 900,000,000 shares authorized, 83,019,881 and 82,992,784 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively						Common stock, $0.01 par value, 900,000,000 shares authorized, 83,019,881 and 82,992,784 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	822		826
Additional paid-in capital	Additional paid-in capital	1,614,610		903,264		Additional paid-in capital	1,600,036		1,602,247
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	—		(62)		Accumulated other comprehensive income (loss)	(1,299)		390
Accumulated deficit	Accumulated deficit	(288,986)		(167,179)		Accumulated deficit	(288,380)		(299,225)
Total stockholders' equity	Total stockholders' equity	$	1,585,204	$	1,705,637	Total stockholders' equity	$	1,569,921	$	1,562,980
Non-controlling interest	Non-controlling interest	5,764		5,764		Non-controlling interest	29,830		15,408
Total equity	Total equity	$	1,590,968	$	1,711,401	Total equity	$	1,599,751	$	1,578,388
Total liabilities, redeemable convertible preferred stock and equity	Total liabilities, redeemable convertible preferred stock and equity	$	6,261,906	$	9,474,701	Total liabilities, redeemable convertible preferred stock and equity	$	5,985,349	$	6,203,601

_________________________________________________________

(1) Includes ~~$43.7~~$66.1 million and ~~$187.0~~$42.5 million of cash held by servicer related to the CLOs as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, as well as ~~$1.0~~$0.8 million and ~~$65.3~~$0.1 million of RMBS principal paydowns receivable as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Income:
Income										Income
Interest income	Interest income	$	70,213	$	48,985	$	145,471	$	91,222	Interest income	$	152,892	$	70,213	$	283,428	$	145,471
Less: Interest expense	Less: Interest expense	32,807		12,637		55,287		24,006		Less: Interest expense	75,299		32,807		146,374		55,287
Net interest income	Net interest income	37,406		36,348		90,184		67,216		Net interest income	77,593		37,406		137,054		90,184
Revenue from real estate owned	Revenue from real estate owned	2,312		716		4,624		1,432		Revenue from real estate owned	6,438		2,312		9,750		4,624
Total income	Total income	$	39,718	$	37,064	$	94,808	$	68,648	Total income	$	84,031	$	39,718	$	146,804	$	94,808
Expenses:
Expenses										Expenses
Asset management and subordinated performance fee	Asset management and subordinated performance fee	$	6,601	$	6,001	$	13,346	$	11,417	Asset management and subordinated performance fee	$	8,900	$	6,601	$	16,985	$	13,346
Acquisition expenses	Acquisition expenses	319		169		634		322		Acquisition expenses	283		319		661		634
Administrative services expenses	Administrative services expenses	3,048		3,078		6,401		6,552		Administrative services expenses	3,398		3,048		7,427		6,401
Professional fees	Professional fees	8,736		2,777		15,395		4,774		Professional fees	2,794		8,054		7,608		14,213

Share-based compensation										Share-based compensation	1,228		682		2,250		1,182
Depreciation and amortization	Depreciation and amortization	1,296		406		2,591		812		Depreciation and amortization	2,196		1,296		4,001		2,591
Other expenses	Other expenses	1,663		911		3,425		1,406		Other expenses	4,301		1,663		6,467		3,425
Total expenses	Total expenses	$	21,663	$	13,342	$	41,792	$	25,283	Total expenses	$	23,100	$	21,663	$	45,399	$	41,792
Other (income)/loss:
Provision/(benefit) for credit losses		$	32,530	$	(1,508)	$	31,575	$	(3,839)
Other income/(loss)										Other income/(loss)
(Provision)/benefit for credit losses										(Provision)/benefit for credit losses	$	(21,624)	$	(32,530)	$	(25,984)	$	(31,575)
Realized gain/(loss) on extinguishment of debt										Realized gain/(loss) on extinguishment of debt	270		15		5,037		15
Realized gain/(loss) on sale of available for sale trading securities										Realized gain/(loss) on sale of available for sale trading securities	—		—		596		—
Realized gain/(loss) on sale of commercial mortgage loans, held for sale										Realized gain/(loss) on sale of commercial mortgage loans, held for sale	—		39		—		39

Realized (gain)/loss on extinguishment of debt		(15)		—		(15)		—

Realized (gain)/loss on sale of commercial mortgage loans, held for sale		(39)		—		(39)		—
Realized (gain)/loss on sale of real estate owned assets, held for sale		—		(1,112)		—		(1,112)
Realized (gain)/loss on sale of commercial mortgage loans, held for sale, measured at fair value		1,833		(6,520)		(56)		(13,150)
Realized (gain)/loss on other real estate investments, measured at fair value		—		—		33		—
Unrealized (gain)/loss on commercial mortgage loans, held for sale, measured at fair value		2,797		(625)		3,736		(1,104)
Unrealized (gain)/loss on other real estate investments, measured at fair value		—		(20)		(4)		(26)
Trading (gain)/loss		22,538		315		110,973		1,375
Unrealized (gain)/loss on derivatives		9,427		3,163		14,390		1,054
Realized (gain)/loss on derivatives		(25,193)		(281)		(59,223)		(2,259)
Total other (income)/loss		$	43,878	$	(6,588)	$	101,370	$	(19,061)
Realized gain/(loss) on sale of commercial mortgage loans, held for sale, measured at fair value										Realized gain/(loss) on sale of commercial mortgage loans, held for sale, measured at fair value	2,094		(1,833)		2,094		56
Unrealized gain/(loss) on commercial mortgage loans, held for sale, measured at fair value										Unrealized gain/(loss) on commercial mortgage loans, held for sale, measured at fair value	(303)		(2,797)		44		(3,736)
Gain/(loss) on other real estate investments										Gain/(loss) on other real estate investments	(1,691)		—		(3,030)		(29)
Trading gain/(loss)										Trading gain/(loss)	(946)		(22,538)		2,022		(110,973)
Unrealized gain/(loss) on derivatives										Unrealized gain/(loss) on derivatives	393		(9,427)		73		(14,390)
Realized gain/(loss) on derivatives										Realized gain/(loss) on derivatives	573		25,193		617		59,223
Total other income/(loss)										Total other income/(loss)	$	(21,234)	$	(43,878)	$	(18,531)	$	(101,370)
Income/(loss) before taxes	Income/(loss) before taxes	(25,823)		30,310		(48,354)		62,426		Income/(loss) before taxes	39,697		(25,823)		82,874		(48,354)
Provision/(benefit) for income tax		(114)		300		(138)		2,270
(Provision)/benefit for income tax										(Provision)/benefit for income tax	(53)		114		609		138
Net income/(loss)	Net income/(loss)	$	(25,709)	$	30,010	$	(48,216)	$	60,156	Net income/(loss)	$	39,644	$	(25,709)	$	83,483	$	(48,216)

Net (income)/loss attributable to non-controlling interest										Net (income)/loss attributable to non-controlling interest	(41)		—		(50)		—
Net income/(loss) attributable to Franklin BSP Realty Trust, Inc.										Net income/(loss) attributable to Franklin BSP Realty Trust, Inc.	$	39,603	$	(25,709)	$	83,433	$	(48,216)
Less: Preferred stock dividends										Less: Preferred stock dividends	6,749		6,955		13,497		27,966

Net income/(loss) applicable to common stock	Net income/(loss) applicable to common stock	$	(32,664)	$	22,998	$	(76,182)	$	46,402	Net income/(loss) applicable to common stock	$	32,854	$	(32,664)	$	69,936	$	(76,182)

Basic earnings per share	Basic earnings per share	$	(0.43)	$	0.52	$	(1.27)	$	1.05	Basic earnings per share	$	0.39	$	(0.43)	$	0.83	$	(1.27)
Diluted earnings per share	Diluted earnings per share	$	(0.43)	$	0.52	$	(1.27)	$	1.05	Diluted earnings per share	$	0.39	$	(0.43)	$	0.83	$	(1.27)
Basic weighted average shares outstanding	Basic weighted average shares outstanding	75,837,621		44,262,934		59,985,361		44,276,480		Basic weighted average shares outstanding	82,252,979		75,837,621		82,512,434		59,985,361
Diluted weighted average shares outstanding	Diluted weighted average shares outstanding	75,837,621		44,278,939		59,985,361		44,292,427		Diluted weighted average shares outstanding	82,252,979		75,837,621		82,512,434		59,985,361

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Net income/(loss)	Net income/(loss)	$	(25,709)	$	30,010	$	(48,216)	$	60,156	Net income/(loss)	$	39,644	$	(25,709)	$	83,483	$	(48,216)

Unrealized gain/(loss) on available for sale securities		$	—	$	214	$	—	$	8,256
Amounts related to available for sale real estate securities:										Amounts related to available for sale real estate securities:
Change in net unrealized gain/(loss)										Change in net unrealized gain/(loss)	$	636	$	—	$	(1,012)	$	—
Reclassification adjustment for amounts included in net income/(loss)										Reclassification adjustment for amounts included in net income/(loss)	—		—		(677)		—
											$	636	$	—	$	(1,689)	$	—
Amounts related to cash flow hedges:	Amounts related to cash flow hedges:									Amounts related to cash flow hedges:
Change in net unrealized gain/(loss)	Change in net unrealized gain/(loss)	—		—		(220)		—		Change in net unrealized gain/(loss)	$	—	$	—	$	—	$	(220)
Reclassification adjustment for amounts included in net income/(loss)	Reclassification adjustment for amounts included in net income/(loss)	—		—		282		—		Reclassification adjustment for amounts included in net income/(loss)	—		—		—		282
		$	—	$	—	$	62	$	—		$	—	$	—	$	—	$	62
Comprehensive (income)/loss attributed to non-controlling interest										Comprehensive (income)/loss attributed to non-controlling interest	$	(41)	$	—	$	(50)	$	—
Comprehensive income/(loss) attributable to Franklin BSP Realty Trust, Inc.	Comprehensive income/(loss) attributable to Franklin BSP Realty Trust, Inc.	$	(25,709)	$	30,224	$	(48,154)	$	68,412	Comprehensive income/(loss) attributable to Franklin BSP Realty Trust, Inc.	$	40,239	$	(25,709)	$	81,744	$	(48,154)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(In thousands, except share data)

(Unaudited)


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income/(Loss)		Accumulated Deficit		Preferred E		Total Stockholders' Equity		Non-Controlling Interest		Total Equity
	Number of Shares	Par Value
Balance, December 31, 2022	82,992,784	$	826	$	1,602,247	$	390	$	(299,225)	$	258,742	$	1,562,980	$	15,408	$	1,578,388

Common stock repurchases	(313,411)	(3)		(3,664)		—		—		—		(3,667)		—		(3,667)

Share-based compensation	442,419	—		1,022		—		—		—		1,022		—		1,022
Shares canceled for tax withholding on vested equity rewards	(57,021)	—		(812)		—		—		—		(812)		—		(812)
Series I preferred stock exchanged for common stock	299,200	3		4,997		—		—		—		5,000		—		5,000

Net income/(loss) attributable to Franklin BSP Realty Trust, Inc.	—	—		—		—		43,830		—		43,830		—		43,830
Net income/(loss) attributable to non-controlling interest	—	—		—		—		—		—		—		9		9
Distributions declared	—	—		—		—		(36,367)		—		(36,367)		—		(36,367)
Other comprehensive income/(loss)	—	—		—		(2,325)		—		—		(2,325)		—		(2,325)
Contributions in non-controlling interest, net	—	—		—		—		—		—		—		5,851		5,851
Balance, March 31, 2023	83,363,971	$	826	$	1,603,790	$	(1,935)	$	(291,762)	$	258,742	$	1,569,661	$	21,268	$	1,590,929

Common stock repurchases	(444,726)	(5)		(5,490)		—		—		—		(5,495)		—		(5,495)
Common stock issued through distribution reinvestment plan	61,866	1		768		—		—		—		769		—		769
Share-based compensation	38,770	—		1,227		—		—		—		1,227		—		1,227


Offering costs	—	—		(259)		—		—		—		(259)		—		(259)
Net income/(loss) attributable to Franklin BSP Realty Trust, Inc.	—	—		—		—		39,603		—		39,603		—		39,603
Net income/(loss) attributable to non-controlling interest	—	—		—		—		—		—		—		41		41
Distributions declared	—	—		—		—		(36,221)		—		(36,221)		—		(36,221)
Other comprehensive income/(loss)	—	—		—		636		—		—		636		—		636
Contributions in non-controlling interest, net	—	—		—		—		—		—		—		8,521		8,521
Balance, June 30, 2023	83,019,881	$	822	$	1,600,036	$	(1,299)	$	(288,380)	$	258,742	$	1,569,921	$	29,830	$	1,599,751

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(In thousands, except share data)

(Unaudited)

~~(Unaudited)~~

Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Preferred E Preferred F Total Stockholders' Equity Non-Controlling Interest Total Equity
Number of Shares Par Value
Balance, December 31, 2021 43,965,928 $ 441 $ 903,264 $ (62) $ (167,179) $ 258,742 $ 710,431 $ 1,705,637 $ 5,764 $ 1,711,401
Issuance of common stock — — — — — — — — — —
Common stock repurchases — — — — — — — — — —
Common stock issued through distribution reinvestment plan 5,982 — 91 — — — — 91 — 91
Share-based compensation 499,217 — 500 — — — — 500 — 500
Offering costs — — — — — — — — — —
Net income/(loss) — — — — (22,507) — — (22,507) — (22,507)
Distributions declared — — — — (36,743) — — (36,743) — (36,743)
Other comprehensive income — — — 62 — — — 62 — 62
Balance, March 31, 2022 44,471,127 $ 441 $ 903,855 $ — $ (226,429) $ 258,742 $ 710,431 $ 1,647,040 $ 5,764 $ 1,652,804
Issuance of common stock — — — — — — — — — —
Common stock repurchases 743 — — — — — — — — —
Common stock issued through distribution reinvestment plan — — — — — — — — — —
Share-based compensation 21,459 — 721 — — — — 721 — 721
Preferred F exchanged for common stock 39,733,299 397 710,034 — — — (710,431) — — —
Offering costs — — — — — — — — — —
Net income/(loss) — — — — (25,709) — — (25,709) — (25,709)
Distributions declared — — — — (36,848) — — (36,848) — (36,848)
Other comprehensive income — — — — — — — — — —
Balance, June 30, 2022 84,226,628 $ 838 $ 1,614,610 $ — $ (288,986) $ 258,742 $ — $ 1,585,204 $ 5,764 $ 1,590,968
Balance, December 31, 2020 44,510,051 $ 446 $ 912,725 $ (8,256) $ (106,471) $ — $ — $ 798,444 $ — $ 798,444
Issuance of common stock — — — — — — — — — —
Common stock repurchases (521,796) (5) (9,142) — — — — (9,147) — (9,147)
Common stock issued through distribution reinvestment plan 147,404 2 2,583 — — — — 2,585 — 2,585
Share-based compensation — — 55 — — — — 55 — 55
Offering costs — — (21) — — — — (21) — (21)
Net income/(loss) — — — — 30,146 — — 30,146 — 30,146
Distributions declared — — — — (15,644) — — (15,644) — (15,644)
Other comprehensive income — — — 8,042 — — — 8,042 — 8,042
Balance, March 31, 2021 44,135,659 $ 443 $ 906,200 $ (214) $ (91,969) $ — $ — $ 814,460 $ — $ 814,460
Issuance of common stock 504 — — — — — — — — —
Common stock repurchases (3,784) — (66) — — — — (66) — (66)
Common stock issued through distribution reinvestment plan 141,270 1 2,523 — — — — 2,524 — 2,524
Share-based compensation 11,184 — 53 — — — — 53 — 53
Offering costs — — (21) — — — — (21) — (21)
Net income/(loss) — — — — 30,010 — — 30,010 — 30,010
Distributions declared — — — — (15,898) — — (15,898) — (15,898)
Other comprehensive income — — — 214 — — — 214 — 214
Balance, June 30, 2021 44,284,833 $ 444 $ 908,689 $ — $ (77,857) $ — $ — $ 831,276 $ — $ 831,276


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income/(Loss)		Accumulated Deficit		Preferred E		Preferred F		Total Stockholders' Equity		Non-Controlling Interest		Total Equity
	Number of Shares	Par Value
Balance, December 31, 2021	43,965,928	$	441	$	903,264	$	(62)	$	(167,179)	$	258,742	$	710,431	$	1,705,637	$	5,764	$	1,711,401


Common stock issued through distribution reinvestment plan	5,982	—		91		—		—		—		—		91		—		91
Share-based compensation	499,217	—		500		—		—		—		—		500		—		500

Net income/(loss)	—	—		—		—		(22,507)		—		—		(22,507)		—		(22,507)
Distributions declared	—	—		—		—		(36,743)		—		—		(36,743)		—		(36,743)
Other comprehensive income/(loss)	—	—		—		62		—		—		—		62		—		62
Balance, March 31, 2022	44,471,127	$	441	$	903,855	$	—	$	(226,429)	$	258,742	$	710,431	$	1,647,040	$	5,764	$	1,652,804

Common stock repurchases	743	—		—		—		—		—		—		—		—		—

Share-based compensation	21,459	—		721		—		—		—		—		721		—		721
Preferred F exchanged for common stock	39,733,299	397		710,034		—		—		—		(710,431)		—		—		—

Net income/(loss)	—	—		—		—		(25,709)		—		—		(25,709)		—		(25,709)
Distributions declared	—	—		—		—		(36,848)		—				(36,848)		—		(36,848)

Balance, June 30, 2022	84,226,628	$	838	$	1,614,610	$	—	$	(288,986)	$	258,742	$	—	$	1,585,204	$	5,764	$	1,590,968

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


		Six Months Ended June 30,					Six Months Ended June 30,
		2022		2021			2023		2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income/(loss)	Net income/(loss)	$	(48,216)	$	60,156	Net income/(loss)	$	83,483	$	(48,216)
Adjustments to reconcile net income to net cash (used in)/provided by operating activities:	Adjustments to reconcile net income to net cash (used in)/provided by operating activities:					Adjustments to reconcile net income to net cash (used in)/provided by operating activities:
Premium amortization and (discount accretion), net	Premium amortization and (discount accretion), net	$	(5,209)	$	(2,853)	Premium amortization and (discount accretion), net	$	(6,244)	$	(5,209)
Accretion of deferred commitment fees	Accretion of deferred commitment fees	(4,279)		(3,930)		Accretion of deferred commitment fees	(5,073)		(4,279)
Amortization of deferred financing costs	Amortization of deferred financing costs	8,017		2,715		Amortization of deferred financing costs	3,893		8,017
Share-based compensation	Share-based compensation	1,221		108		Share-based compensation	2,250		1,221

Realized (gain)/loss from sale of real estate owned, held for sale		—		(1,112)
Realized (gain)/loss from sale of other real estate investments		33		—
Realized (gain)/loss on extinguishment of debt	Realized (gain)/loss on extinguishment of debt	(15)		—		Realized (gain)/loss on extinguishment of debt	(5,037)		(15)
Realized (gain)/loss on swap terminations	Realized (gain)/loss on swap terminations	(53,771)		—		Realized (gain)/loss on swap terminations	—		(53,771)
Realized and unrealized gain/loss on real estate securities, trading		110,973		1,375
Realized (gain)/loss on sale of available for sale trading securities						Realized (gain)/loss on sale of available for sale trading securities	(596)		—
Realized (gain)/loss on sale of commercial mortgage loans, held for sale						Realized (gain)/loss on sale of commercial mortgage loans, held for sale	(2,094)		—
Unrealized (gain)/loss from commercial mortgage loans, held for sale	Unrealized (gain)/loss from commercial mortgage loans, held for sale	3,736		(1,104)		Unrealized (gain)/loss from commercial mortgage loans, held for sale	(44)		3,736
Unrealized (gain)/loss from derivative instruments	Unrealized (gain)/loss from derivative instruments	14,390		1,054		Unrealized (gain)/loss from derivative instruments	(73)		14,390
Unrealized (gain)/loss from other real estate investments		(4)		(26)
(Gain)/loss from other real estate investments						(Gain)/loss from other real estate investments	3,030		29
Trading (gain)/loss						Trading (gain)/loss	(2,022)		110,973
Depreciation and amortization	Depreciation and amortization	2,591		812		Depreciation and amortization	3,554		2,591

Provision/(benefit) for credit losses	Provision/(benefit) for credit losses	31,575		(3,839)		Provision/(benefit) for credit losses	25,984		31,575

Origination of commercial mortgage loans, held for sale	Origination of commercial mortgage loans, held for sale	(336,545)		(252,145)		Origination of commercial mortgage loans, held for sale	(76,250)		(336,545)
Proceeds from sale of commercial mortgage loans, held for sale		238,252		243,867
Proceeds from sale or repayment of commercial mortgage loans, held for sale						Proceeds from sale or repayment of commercial mortgage loans, held for sale	59,697		238,252
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Accrued interest receivable	Accrued interest receivable	11,489		1,814		Accrued interest receivable	732		11,489
Prepaid expenses and other assets	Prepaid expenses and other assets	(3,185)		2,170		Prepaid expenses and other assets	(1,375)		(3,185)
Accounts payable and accrued expenses	Accounts payable and accrued expenses	537		3,048		Accounts payable and accrued expenses	(6,105)		537
Due to affiliates	Due to affiliates	2,216		3,166		Due to affiliates	500		2,216
Interest payable	Interest payable	2,167		(1,066)		Interest payable	196		2,167
Net cash (used in)/provided by operating activities	Net cash (used in)/provided by operating activities	$	(24,027)	$	54,210	Net cash (used in)/provided by operating activities	$	78,406	$	(24,027)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Origination and purchase of commercial mortgage loans, held for investment	Origination and purchase of commercial mortgage loans, held for investment	$	(1,536,424)	$	(917,176)	Origination and purchase of commercial mortgage loans, held for investment	$	(472,342)	$	(1,536,424)
Principal repayments received on commercial mortgage loans, held for investment	Principal repayments received on commercial mortgage loans, held for investment	678,187		468,689		Principal repayments received on commercial mortgage loans, held for investment	591,364		678,187
Proceeds from (purchase)/sale of other real estate investments		2,045		—
Proceeds from sale of other real estate investments						Proceeds from sale of other real estate investments	22,344		2,045

Proceeds from sale of real estate owned, held for sale		—		10,810
Purchase of real estate securities		—		—
Purchase of real estate owned and capital expenditures						Purchase of real estate owned and capital expenditures	(645)		—
Purchase of real estate securities, available for sale						Purchase of real estate securities, available for sale	(100,267)		—
Proceeds from sale of commercial mortgage loans, held for sale	Proceeds from sale of commercial mortgage loans, held for sale	4,074		—		Proceeds from sale of commercial mortgage loans, held for sale	—		4,074
Proceeds from sale/repayment of real estate securities		3,731,717		178,017
Proceeds from sale/(repayment) of real estate securities, available for sale, measured at fair value						Proceeds from sale/(repayment) of real estate securities, available for sale, measured at fair value	127,660		—
Proceeds from sale/(repayment) of real estate securities, trading, at fair value						Proceeds from sale/(repayment) of real estate securities, trading, at fair value	97,487		3,731,717
Principal collateral on mortgage investments	Principal collateral on mortgage investments	518,120		—		Principal collateral on mortgage investments	14,399		518,120
Proceeds from (purchase)/sale of derivative instruments		(1,476)		848
Proceeds from sale/(purchase) of derivative instruments						Proceeds from sale/(purchase) of derivative instruments	472		(1,476)
Net cash (used in)/provided by investing activities	Net cash (used in)/provided by investing activities	$	3,396,243	$	(258,812)	Net cash (used in)/provided by investing activities	$	280,472	$	3,396,243
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:

Proceeds from issuances of common stock						Proceeds from issuances of common stock	$	5,000	$	—
Proceeds from issuances of redeemable convertible preferred stock	Proceeds from issuances of redeemable convertible preferred stock	$	—	$	15,000	Proceeds from issuances of redeemable convertible preferred stock	(5,000)		—
Common stock repurchases		—		(9,213)
Payments for common stock repurchases						Payments for common stock repurchases	(9,162)		—
Shares cancelled for tax withholding on vested equity rewards						Shares cancelled for tax withholding on vested equity rewards	(812)		—
Borrowings on collateralized loan obligations	Borrowings on collateralized loan obligations	1,623,933		612,723		Borrowings on collateralized loan obligations	—		1,623,933
Repayments of collateralized loan obligations	Repayments of collateralized loan obligations	(579,939)		(274,636)		Repayments of collateralized loan obligations	(89,888)		(579,939)
Borrowings on repurchase agreements - commercial mortgage loans	Borrowings on repurchase agreements - commercial mortgage loans	1,487,264		397,392		Borrowings on repurchase agreements - commercial mortgage loans	417,476		1,487,264
Repayments of repurchase agreements - commercial mortgage loans		(1,674,830)		(386,270)
Borrowings on repurchase agreements - real estate securities		17,146,290		175,801

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


Repayments of repurchase agreements - commercial mortgage loans						Repayments of repurchase agreements - commercial mortgage loans	(403,296)		(1,674,830)
Borrowings on repurchase agreements - real estate securities						Borrowings on repurchase agreements - real estate securities	596,187		17,146,290
Repayments of repurchase agreements - real estate securities	Repayments of repurchase agreements - real estate securities	(21,031,786)		(316,118)		Repayments of repurchase agreements - real estate securities	(746,202)		(21,031,786)
Proceeds from other financing and loan participation - commercial mortgage loans	Proceeds from other financing and loan participation - commercial mortgage loans	9,278		5,726		Proceeds from other financing and loan participation - commercial mortgage loans	—		9,278
Borrowings on unsecured debt		—		100,000

Borrowings on other financing						Borrowings on other financing	46,842		—
Repayments on other financing						Repayments on other financing	(40,795)		—

Repayments of unsecured debt	Repayments of unsecured debt	(50,000)		(100,000)		Repayments of unsecured debt	(13,367)		(50,000)
Borrowing on mortgage note payable		—		—

Payments of deferred financing costs	Payments of deferred financing costs	(8,457)		(4,380)		Payments of deferred financing costs	(2,034)		(8,457)
Payments of offering costs						Payments of offering costs	(259)		—
Cash collateral received on interest rate swaps	Cash collateral received on interest rate swaps	55,095		—		Cash collateral received on interest rate swaps	—		55,095
Proceeds from interest rate swap settlements	Proceeds from interest rate swap settlements	6,948		—		Proceeds from interest rate swap settlements	—		6,948

Distributions paid	Distributions paid	(67,045)		(25,964)		Distributions paid	(71,915)		(67,045)
Net cash (used in)/provided by financing activities:	Net cash (used in)/provided by financing activities:	$	(3,083,249)	$	190,061	Net cash (used in)/provided by financing activities:	$	(317,225)	$	(3,083,249)
Net change in cash, cash equivalents and restricted cash	Net change in cash, cash equivalents and restricted cash	288,967		(14,541)		Net change in cash, cash equivalents and restricted cash	41,653		288,967
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	168,199		92,141		Cash, cash equivalents and restricted cash, beginning of period	190,487		168,199
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	$	457,166	$	77,600	Cash, cash equivalents and restricted cash, end of period	$	232,140	$	457,166

Reconciliation of cash, cash equivalents and restricted cash:						Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents, beginning of period						Cash and cash equivalents, beginning of period	179,314		154,929
Restricted cash, beginning of period						Restricted cash, beginning of period	11,173		13,270
Cash, cash equivalents and restricted cash, beginning of period						Cash, cash equivalents and restricted cash, beginning of period	$	190,487	$	168,199

Cash and cash equivalents, end of period						Cash and cash equivalents, end of period	224,696		445,812
Restricted cash, end of period						Restricted cash, end of period	7,444		11,354
Cash, cash equivalents and restricted cash, end of period						Cash, cash equivalents and restricted cash, end of period	$	232,140	$	457,166

Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:					Supplemental disclosures of cash flow information:
Taxes paid		$	3,116	$	79
Interest paid		45,103		22,356
Cash payments for income taxes						Cash payments for income taxes	$	313	$	3,116
Cash payments for interest						Cash payments for interest	142,527		45,103

Supplemental disclosures of non - cash flow information:	Supplemental disclosures of non - cash flow information:					Supplemental disclosures of non - cash flow information:
Distribution payable	Distribution payable	$	36,801	$	16,099	Distribution payable	$	36,221	$	36,801
Common stock issued through distribution reinvestment plan	Common stock issued through distribution reinvestment plan	91		5,109		Common stock issued through distribution reinvestment plan	769		91

Loans transferred to commercial real estate loans, held for sale		4,074		—
Real estate owned received in foreclosure						Real estate owned received in foreclosure	58,976		—
Loans transferred to real estate owned, held for sale						Loans transferred to real estate owned, held for sale	—		4,074
Loans transferred to real estate owned, held for investment						Loans transferred to real estate owned, held for investment	59,655		—
Conversion of Series F Preferred Stock to Common Stock	Conversion of Series F Preferred Stock to Common Stock	710,431		—		Conversion of Series F Preferred Stock to Common Stock	—		710,431
Conversion of Series D Preferred Stock to Series H Preferred Stock		89,748		—
Exchange of Series D Preferred Stock for Series H Preferred Stock						Exchange of Series D Preferred Stock for Series H Preferred Stock	—		89,748

Reconciliation of cash, cash equivalents and restricted cash at end of period:
Cash and cash equivalents		$	445,812	$	63,277
Restricted cash		11,354		14,323
Cash, cash equivalents and restricted cash, end of period		$	457,166	$	77,600

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2022~~2023

(Unaudited)

Note 1 - Organization and Business Operations

Franklin BSP Realty Trust, Inc., (the "Company") is a real estate finance company that primarily originates, acquires and manages a diversified portfolio of commercial real estate debt investments secured by properties located within and outside the United States. The Company is a Maryland corporation and has made tax elections to be treated as a real estate investment trust (a "REIT") for U.S. federal income tax purposes since 2013.

The Company believes that it has qualified as a REIT and intends to continue to meet the requirements for qualification and taxation as a REIT. Substantially all of the Company's business is conducted through Benefit Street Partners Realty Operating Partnership, L.P. (the “OP”), a Delaware limited partnership. The Company is the sole general partner and directly or indirectly holds all of the units of limited partner interests in the OP. In addition, the Company, through one or more subsidiaries which are treated as a taxable REIT subsidiary (a “TRS”), is indirectly subject to U.S. federal, state and local income taxes.

The Company has no employees. Benefit Street Partners L.L.C. serves as the Company's advisor (the "Advisor") pursuant

to an advisory agreement, as amended on August 18, 2021 (the "Advisory Agreement"). The Advisor, an investment adviser registered with the SEC, is a credit-focused alternative asset management firm.

Established in 2008, the Advisor's credit platform manages funds for institutions and high-net-worth investors across various credit funds and complementary strategies including high yield, levered loans, private/opportunistic debt, liquid credit, structured credit and commercial real estate debt. These strategies complement each other as they all leverage the sourcing, analytical, compliance, and operational capabilities that encompass the platform. The Advisor manages the Company's affairs on a day-to-day basis. The Advisor receives compensation fees and reimbursements for services related to the investment and management of the Company's assets and the operations of the Company. The advisor is a wholly-owned subsidiary of Franklin Resources, Inc., which together with its various subsidiaries operates as "Franklin Templeton”.

The Company invests in commercial real estate debt investments, which may include first mortgage loans, subordinated mortgage loans, mezzanine loans and participations in such loans. The Company also originates conduit loans which the Company intends to sell through its TRS into commercial mortgage-backed securities ("CMBS") securitization transactions. Historically this business has focused primarily on CMBS, ~~unsecured REIT debt,~~commercial real estate collateralized loan obligation bonds ("CRE CLO bonds"), collateralized debt obligations ("CDOs") and other securities. As a result of the October 2021 acquisition of Capstead Mortgage Corporation ("Capstead"), the Company acquired ~~and continues to hold~~ a portfolio of residential mortgage backed securities (“RMBS”) in the form of residential adjustable-rate mortgage pass-through securities ("ARM Agency Securities" or "ARMs") issued and guaranteed by government-sponsored enterprises or by an agency of the federal government. Although the Company continues to hold a small portion of this portfolio it does not intend to do so long-term and intends to reinvest proceeds from this portfolio in its other businesses. The Company also owns real estate that was either acquired by the Company through foreclosure or deed in lieu of foreclosure, or that was purchased for investment, ~~typically~~primarily subject to triple net leases.

Note 2 - Summary of Significant Accounting Policies

Basis of Accounting

The Company's unaudited consolidated financial statements and related footnotes have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America ("GAAP") for interim financial statements and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X, as appropriate. Accordingly, the consolidated financial statements may not include all of the information and notes required by GAAP for annual consolidated financial statements.

These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of, and for the year ended December 31, ~~2021,~~2022, which are included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on ~~February 25, 2022.~~March 16, 2023.

Use of Estimates

GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities as of the date of the financial statements and the reported amounts of income and expenses during the reported periods. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ materially. In the opinion of management, the interim data includes all adjustments, of a normal and recurring nature, necessary for a fair statement of the results for the periods presented. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the entire year or any subsequent interim periods.

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2022~~2023

(Unaudited)

The global coronavirus (COVID-19) pandemic has caused economic disruptions and changes to the real estate market. Certain jurisdictions, including those where our corporate headquarters and/or properties that secure our investments, or properties that the Company owns, are located, have at times imposed “stay-at-home” guidelines or orders or other restrictions to help prevent its spread. The effects of COVID-19 may negatively and materially impact significant estimates and assumptions used by the Company including, but not limited to estimates of expected credit losses, valuation of our equity investments and the fair value estimates of the Company's assets and liabilities. Actual results could differ from those estimates.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company, the OP and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. In determining whether the Company has a controlling financial interest in a joint venture and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the other partners or members, as well as whether the entity is a variable interest entity ("VIE") for which the Company is the primary beneficiary.

The Company has determined the OP is a VIE of which the Company is the primary beneficiary. Substantially all of the Company's assets and liabilities are held by the OP.

The Company consolidates all entities that it controls through either majority ownership or voting rights. In addition, the Company consolidates all VIEs of which the Company is considered the primary beneficiary. VIEs are entities in which equity investors (i) do not have the characteristics of a controlling financial interest and/or (ii) do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The entity that consolidates a VIE is its primary beneficiary and is generally the entity with (i) the power to direct the activities that most significantly affect the VIE’s economic performance and (ii) the right to receive benefits from the VIE or the obligation to absorb losses of the VIE that could be significant to the VIE. Non-controlling interest represents the equity of a consolidated joint ~~venture~~ventures that isare not owned by the Company.

The accompanying consolidated financial statements include the accounts of collateralized loan obligations ("CLOs") issued and securitized by wholly owned subsidiaries of the Company. The Company has determined the CLOs are VIEs of which the Company's subsidiary is the primary beneficiary. The assets and liabilities of the CLOs are consolidated in the accompanying consolidated balance sheets in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidation.

Reclassifications

Certain prior year balances have been reclassified in order to conform to the current period presentation. For the six months ended June 30, 2022, Unrealized gain/(loss) on other real estate investments, measured at fair value of ($4.0) thousand, was reclassified to Gain/(loss) on other real estate investments on the consolidated statements of operations. For the six months ended June 30, 2022, Realized gain/(loss) on other real estate investments, measured at fair value of $33 thousand was reclassified to Gain/(loss) on other real estate investments on the consolidated statements of operations. For the three and six months ended June 30, 2022, $0.7 million and $1.2 million, respectively was reclassified from Professional fees to Share-based compensation on the consolidated statements of operations.

Acquisition Expenses

~~The~~For commercial mortgage loans, held for investment the Company capitalizes certain direct costs relating to loan origination activities. The cost is amortized over the life of the loan and recognized in interest income in the Company's consolidated statements of operations. Acquisition expenses paid on future funding amounts are expensed within the acquisition expenses line in the Company's consolidated statements of operations.

Cash and Cash Equivalents

Cash consists of amounts deposited with high quality financial institutions. These deposits are guaranteed by the Federal Deposit Insurance Company up to an insurance limit. Cash equivalents include short-term, liquid investments in money market funds with original maturities of 90 days or less when purchased.

Restricted Cash

Restricted cash primarily consists of cash pledged as margin on repurchase agreements and derivative transactions. The duration of this restricted cash generally matches the duration of the related repurchase agreements or derivative transaction.

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Commercial Mortgage Loans

Held for Investment - Commercial mortgage loans that are held for investment purposes and are anticipated to be held until maturity, are carried at cost, net of unamortized acquisition expenses, discounts or premiums and unfunded commitments. Commercial mortgage loans, held for investment ~~purposes,~~ are ~~carried~~reported at amortized cost less an allowance for credit losses. Interest income is recorded on the accrual basis and related discounts, premiums and acquisition expenses on investments are amortized over the life of the investment using the effective interest method. Amortization or accretion is reflected as an adjustment to interest income in the Company’s consolidated statements of operations. Guaranteed loan commitment fees payable by the borrower upon maturity are accreted over the life of the investment using the effective interest method. The accretion of guaranteed loan commitment fees is recognized in interest income in the Company's consolidated statements of operations.

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Held for Sale - Commercial mortgage loans that are intended to be sold in the foreseeable future are reported as held for sale and are ~~transferred at fair value and~~ recorded at the lower of cost or fair value with changes recorded through the statements of operations. Unamortized loan origination costs for commercial mortgage loans held for sale that are carried at the lower of cost or fair value are capitalized as part of the carrying value of the loans and recognized upon the sale of such loans. Amortization of origination costs ceases upon transfer of commercial mortgage loans to held for sale.

Held for Sale, ~~Accounted for Under the~~Measured at Fair Value ~~Option~~ - The fair value option provides an option to irrevocably elect fair value as an alternative measurement for selected financial assets, financial liabilities, and written loan commitments. The Company has elected to measure commercial mortgage loans held for sale in the Company's TRS under the fair value option. These commercial mortgage loans are included in ~~the~~ Commercial mortgage loans, held for sale, measured at fair value in the consolidated balance sheets. Interest income received on commercial mortgage loans, held for sale, measured at fair value is recorded on the accrual basis of accounting and is included in ~~interest~~Interest income in the consolidated statements of operations. Costs to originate these investments are expensed when incurred.

Real estate owned

The Company classifies its real estate owned as long-lived assets held for investment or as long-lived assets held for sale. Held for investment assets are stated at cost, as adjusted for any impairment loss, less accumulated depreciation.

Real estate owned, ~~is classified as~~ held for sale in the period in which the six criteria under ASC Topic 360, "Property, Plant, and Equipment" are met: (1) we commit to a plan and have the authority to sell the asset; (2) the asset is available for sale in its current condition; (3) we have initiated an active marketing plan to locate a buyer for the asset; (4) the sale of the asset is both probable and expected to qualify for full sales recognition within a period of 12 months; (5) the asset is being actively marketed for sale at a price that is reflective of its current fair value; and (6) we do not anticipate changes to our plan to sell the asset. Held for sale assets are carried at the lower of depreciated cost or estimated fair value, less estimated costs to sell.

investment - Amounts capitalized to real estate owned, held for investment consist of the cost of acquisition or construction, any tenant improvements or major improvements, betterments that extend the useful life of the related asset, and transaction costs associated with the acquisition of an individual asset that does not qualify as a business combination. All repairs and maintenance are expensed as incurred. Additionally, the Company capitalizes interest while the development, or redevelopment, of a real estate owned asset is in progress. No development or redevelopments of real estate owned assets are in progress as of June 30, ~~2022.~~2023.

The Company’s real estate owned, held for investment assets are depreciated or amortized using the straight-line method over the following useful lives:


Buildings			40 years
Furniture, fixtures, and equipment			15 years
Site Improvements			5 - 25 years
Intangible lease assets			Lease term

The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of the real estate and related intangible assets of either operating properties or properties under construction in which the Company has an ownership interest, either directly or through investments in joint ventures, may not be recoverable. When indicators of potential impairment are present, management assesses whether the respective carrying values will be recovered from the undiscounted future operating cash flows expected from the use of the asset and its eventual disposition for assets held for use, or from the estimated fair values, less costs to sell, for assets held for sale. In the event that the expected undiscounted future cash flows for assets held for use or the estimated fair value, less costs to sell, for assets held for sale do not exceed the respective asset carrying value, management adjusts such assets to the respective estimated fair values and recognizes an impairment loss. Estimated fair values are calculated based on the following information, depending upon availability, in order of preference: (i) recently quoted market prices, (ii) market prices for comparable properties, or (iii) the present value of undiscounted cash flows, including estimated sales value (which is based on key assumptions such as estimated market rents, lease-up periods, estimated lease terms, and capitalization and discount rates) less estimated selling costs.

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Real estate owned, ~~assets that are probable to be sold within one year are reported as~~ held for ~~sale.~~ sale - Real estate owned ~~assets~~is classified as held for sale in the period in which the six criteria under ASC Topic 360, "Property, Plant, and Equipment" are ~~measured~~met: (1) we commit to a plan and have the authority to sell the asset; (2) the asset is available for sale in its current condition; (3) we have initiated an active marketing plan to locate a buyer for the asset; (4) the sale of the asset is both probable and expected to qualify for full sales recognition within a period of 12 months; (5) the asset is being actively marketed for sale at a price that is reflective of its current fair value; and (6) we do not anticipate changes to our plan to sell the asset. Held for sale assets are carried at the lower of ~~its carrying amount~~depreciated cost or estimated fair value, less ~~cost~~estimated costs to sell.

Real estate owned assets are not depreciated or amortized while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be accrued. Upon the disposition of a real estate owned asset, the Company calculates ~~realized~~ gains and losses as net proceeds received less the carrying value of the real estate owned asset. Net proceeds received are net of direct selling costs associated with the disposition of the real estate owned asset.

~~Table~~ Gains and losses on real estate owned, held for sale are included in Gain/(loss) on other real estate investments on the consolidated statements of ~~Contents~~

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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~~(Unaudited)~~

operations.

Fair Value of Assets and Liabilities of Acquired Properties

Upon the acquisition of real properties, the Company records the fair value of properties (plus any related acquisition costs) allocated based on relative fair value as tangible assets, consisting of land and building, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases and the value of in-place leases, based on their estimated fair values. Substantially all of the Company’s property acquisitions qualify as asset acquisitions under ~~Accounting Standards Codification ("ASC")~~ASC 805, Business Combinations.

The estimated fair values of the tangible assets of an acquired property are determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to land and building based on management’s determination of the estimated fair value of these assets. Management relies on a sales comparison approach using closed land sales and listings in determining the land value and determines the as-if-vacant estimated fair value of a property using methods similar to those used by independent appraisers. Factors considered by management in performing these analyses include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance, and other operating expenses and estimates of lost rental revenue during the expected lease-up periods based on current market demand. Management also estimates the cost to execute similar leases including leasing commissions, legal, and other related costs.

The estimated fair values of above-market and below-market in-place leases are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of market rates for the corresponding in-place leases, measured over a period equal to the remaining terms of the leases, taking into consideration the probability of renewals for any below-market leases. The capitalized above-market and below-market lease values are recorded as intangible lease assets or liabilities and amortized as an adjustment to rental revenues over the remaining terms of the respective leases.

The estimated fair values of in-place leases include an estimate of the direct costs associated with obtaining the acquired or "in place" tenant and estimates of opportunity costs associated with lost rentals that are avoided by acquiring an in-place lease. The amount capitalized as direct costs associated with obtaining a tenant include commissions, tenant improvements, and other direct costs and are estimated based on management’s consideration of current market costs to execute a similar lease. These direct lease origination costs are included in ~~deferred~~Deferred lease costs in the accompanying consolidated balance sheets and are amortized to expense over the remaining terms of the respective leases. The value of opportunity costs is calculated using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease. These lease intangibles are included in ~~intangible~~Intangible lease assets in the accompanying consolidated balance sheets and are amortized to expense over the remaining terms of the respective leases.

Credit Losses

The ~~allowances~~allowance for credit losses required under ~~Accounting Standards Update ("ASU") No.~~ASU 2016-13 ~~Financial Instruments Credit Losses, are~~is deducted from the respective ~~loans’~~loan's amortized cost basis on the Company’s consolidated balance sheets. ~~The allowance for credit losses attributed to unfunded loan commitments is included in Accounts payable and accrued expenses on the consolidated balance sheets.~~

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General allowance for credit losses

The general allowance for credit losses for the Company’s financial instruments carried at amortized cost and off-balance sheet credit exposures, such as loans held for investment and unfunded loan commitments represents a lifetime estimate of expected credit losses. Factors considered by the Company when determining the general allowance for credit losses reserve include loan-specific characteristics such as loan-to-value (“LTV”) ratio, vintage year, loan term, property type, occupancy and geographic location, financial performance of the borrower, expected payments of principal and interest, as well as internal or external information relating to past events, current conditions and reasonable and supportable forecasts.

The general allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist for multiple financial instruments. If similar risk characteristics do not exist, the Company measures the general allowance for credit losses on an individual instrument basis. The determination of whether a particular financial instrument should be included in a pool can change over time. If a financial asset’s risk characteristics change, the Company evaluates whether it is appropriate to continue to keep the financial instrument in its existing pool or evaluate it individually.

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In measuring the general allowance for credit losses for financial instruments including our unfunded loan commitments that share similar risk characteristics, the Company primarily applies a probability of default (“PD”)/loss given default (“LGD”) model for instruments that are collectively assessed, whereby the allowance for credit losses is calculated as the product of PD, LGD and exposure at default (“EAD”). The Company’s model principally utilizes historical loss rates derived from a commercial mortgage backed securities database with historical losses from ~~1998 to 2022~~2001 - 2021 provided by a reputable third party, forecasting the loss parameters using a scenario-based statistical approach over a reasonable and supportable forecast period of twelve months, followed by an immediate reversion to average historical losses. ~~For~~

When a borrower is experiencing financial ~~instruments assessed on an individual~~difficulties and a loan is modified, the effect of the modification will be included in the Company’s assessment of the CECL allowance for loan losses. If the Company provides principal forgiveness, the amortized cost basis ~~including~~of the loan is written off against the allowance for loan losses. Generally, when ~~it is probable that~~modifying loans, the Company will ~~be unable~~seek to ~~collect~~protect its position by requiring incremental pay downs, additional collateral or guarantees and, in some cases, lookback features or equity interests to offset the ~~full payment~~effects of ~~principal and interest on~~modifications granted should conditions impacting the ~~instrument, the Company applies a discounted cash flow (“DCF”) methodology.~~loan improve.

Specific allowance for credit losses

For financial instruments where the borrower is experiencing financial difficulty based on the Company’s assessment at the reporting date ~~the~~and repayment is expected to be provided substantially through the operation or sale of the collateral, the Company may elect to use as a practical expedient the fair value of the collateral ~~as of~~at the reporting date when determining a specific allowance for credit losses.

For financial instruments which the Company identifies reasonable doubt as to whether the collection of contractual components can be satisfied, a loan specific allowance analysis is performed. Determining whether a specific allowance for credit losses for a loan is required entails significant judgment from management and is based on several factors including (i) the underlying collateral performance, (ii) discussions with the borrower, (iii) borrower events of default, and (iv) other facts that impact the borrower’s ability to pay the contractual amounts due under the terms of the loan. If a loan is determined to have a specific allowance for current losses, the specific allowance for current losses is recorded as a component of our Current Expected Credit Loss ("CECL") reserve by applying the practical expedient for collateral dependent loans. The CECL reserve is assessed on an individual basis for such loans by comparing the estimated fair value of the underlying collateral, less costs to sell, to the book value of the respective loan. These valuations require ~~significant~~ judgments, which include assumptions regarding capitalization rates, discount rates, leasing, creditworthiness of major tenants, occupancy rates, availability and cost of financing, exit plans, loan sponsorship, actions of other lenders, and other factors deemed relevant by the Company. Actual losses, if any, could ultimately differ materially from these estimates. The Company only expects to write-off specific allowances for current losses if and when such amounts are deemed non-recoverable. Non-recoverability is generally determined at the time a loan is settled, or in the case of foreclosure, when the underlying asset is sold. Non-recoverability may also be concluded if, in the Company's determination, it is deemed certain that all amounts due will not be collected. If a loan is determined to be impaired based on the above considerations, management records a write-off through a charge to the ~~"Specific allowance~~"Allowance for credit losses" and the respective loan balance.

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Risk Rating

In developing the allowances for credit losses for its loans held for investment, the Company performs a comprehensive analysis of its loan portfolio and assigns risk ratings to loans that incorporate management's current judgments about their credit quality based on all known and relevant internal and external factors that may affect collectability, using similar factors as those in developing the allowance for credit losses. This methodology results in loans being segmented by risk classification into risk rating categories that are associated with estimated probabilities of default and principal loss. Risk rating categories range from "1" to "5" with "1" representing the lowest risk of loss and "5" representing the highest risk of loss with the ratings updated quarterly. At the time of origination or purchase, loans held for investment are ranked as a “2” and will move accordingly going forward based on the ratings which are defined as follows:

1.Very Low Risk- Investment exceeding fundamental performance expectations and/or capital gain expected. Trends and risk factors since time of investment are favorable.

2.Low Risk- Performing consistent with expectations and a full return of principal and interest expected. Trends and risk factors are neutral to favorable.

3.Average Risk- Performing investments requiring closer monitoring. Trends and risk factors show some deterioration.

4.High Risk/Delinquent/Defaulted/Potential for Loss- Underperforming investment with the potential of some interest loss but still expecting a positive return on investment. Trends and risk factors are negative.

5.Impaired/~~Defaulted/~~Loss Likely- Underperforming investment with expected loss of interest and some principal.

The Company also considers qualitative and environmental factors, including, but not limited to, economic and business conditions, nature and volume of the loan portfolio, lending terms, volume and severity of past due loans, concentration of credit and changes in the level of such concentrations in its determination of the allowance for credit losses.

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~~(Unaudited)~~

Changes in the allowances for credit losses for the Company’s financial instruments are recorded in Provision/(benefit) for credit losses on the consolidated statements of operations with a corresponding offset to the financial instrument’s amortized cost recorded on the consolidated balance sheets, or as a component of Accounts payable and accrued expenses for unfunded loan commitments.

The Company has elected to not measure an allowance for credit losses for accrued interest ~~receivables~~receivable as balances are written off in a timely manner when loans, real estate securities or preferred equity investments are designated as non-performing and placed on non-accrual or cost recovery status within 90 days of becoming past due.

Non-performing status

The Company designates loans as non-performing when (i) full payment of principal ~~and~~and/or coupon interest components become 90-days past due ("non-accrual status"); or (ii) the Company has reasonable doubt as to whether the collection of contractual components can be satisfied ("cost recovery status"). When a loan is designated as non-performing and placed on non-accrual status, interest is only recognized as income when payment has been received. Loans designated as non-performing and placed on non-accrual status are removed from their non-performing designation when collection of principal and coupon interest components have been satisfied. When a loan is designated as non-performing and placed on cost recovery status, the cost-recovery method is applied to which receipt of principal or coupon interest is recorded as a reduction to the amortized cost until collection of all contractual components are reasonably assured.

~~Troubled Debt Restructuring (“TDR”)~~

The Company classifies an individual financial instrument as a TDR when it has a reasonable expectation that the financial instrument’s contractual terms will be modified in a manner that grants concession to the borrower who is experiencing financial difficulty. Concessions could include term extensions, payment deferrals, interest rate reductions, principal forgiveness, forbearance, or other actions designed to maximize the Company’s collection on the financial instrument. The Company determines the allowance for credit losses for financial instruments that are TDRs individually.

Real Estate Securities

Available For Sale

~~On the acquisition date, all of the~~The Company’s ~~commercial~~ real estate securities ~~were~~are classified as available for sale ("AFS") and carried at fair ~~value, and subsequently any unrealized gains or losses are recognized as a component of accumulated other comprehensive income or loss. The Company may elect the~~value. Changes in fair value ~~option~~of available for ~~its~~sale real estate securities ~~and as a result, any unrealized gains or losses on such real estate securities will be recorded~~are recognized in the ~~Company’s~~ consolidated statements of ~~operations. No such election was made as of June 30, 2022.~~comprehensive income. Related discounts, premiums and acquisition expenses on investments are amortized or accreted over the life of the investment using the effective interest method. Amortization isand accretion are reflected as an adjustment to interest income in the Company’s consolidated statements of operations. The Company uses the specific identification method in determining the cost relief for real estate securities sold. Realized gains and losses from the sale of ~~real estate~~available for sale securities are included in the Company’s consolidated statements of operations.

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AFS real estate securities which have experienced a decline in the fair value below their amortized cost basis (i.e., impairment) are evaluated each reporting period to determine whether the decline in fair value is due to credit-related factors. ~~Any impairment that is not credit-related is~~Changes in market value are recognized in accumulated other comprehensive income, while credit-related impairment is recognized as an allowance on the consolidated balance sheets with a corresponding adjustment on the consolidated statements of operations. If the Company intends to sell an impaired real estate security or more likely than not will be required to sell such a security before recovering its amortized cost basis, the entire impairment amount is recognized in the consolidated statements of operations with a corresponding adjustment to the security’s amortized cost basis.

The Company analyzes the AFS ~~security~~real estate securities portfolio on a periodic basis for credit losses at the individual security level using the same criteria described above for those amortized cost financial assets subject to ~~an allowance~~a provision for credit losses including but not limited to; performance of the underlying assets in the security, borrower financial resources and investment in collateral, collateral type, credit ratings, project economics and geographic location as well as national and regional economic factors.

The non-credit loss component of the unrealized loss within the Company’s AFS portfolio is recognized as an adjustment to the individual security’s asset balance with an offsetting entry to accumulated other comprehensive income in the consolidated balance sheets.

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Trading

In the merger with Capstead, the Company acquired a portfolio of residential mortgage pass-through securities consisting primarily of adjustable-rate mortgage ("ARM") securities issued and guaranteed by government-sponsored enterprises, either Fannie Mae, Freddie Mac, or by an agency of the federal government, Ginnie Mae. Together these securities are referred to as "ARM Agency Securities" and are classified as "trading".

ARM Agency Securities are recorded at fair value and are classified as trading on the balance sheet with trading gains and losses ~~on the paydowns~~due to fair value changes and sales of these securities recorded in the Company's consolidated statements of operations. The Company calculates trading gains and losses on the sales of ARM Agency Securities based on the specific identification method. Fair values fluctuate with current and projected changes in interest rates, prepayment expectations and other factors such as market liquidity conditions and the perceived credit quality of agency securities. Judgment is required to interpret market data and develop estimated fair values, particularly in circumstances of deteriorating credit quality and market liquidity.

Repurchase Agreements

Commercial mortgage loans and real estate securities sold under repurchase agreements have been treated as collateralized financing transactions because the Company maintains effective control over the transferred securities. Commercial mortgage loans and real estate securities financed through a repurchase agreement remain on the Company’s consolidated balance sheets as an asset and cash received from the purchaser is recorded as a liability. Interest paid in accordance with repurchase agreements is recorded in interest expense on the Company's consolidated statements of operations.

Deferred Financing Costs

The deferred financing costs related to the Company's various Master Repurchase Agreements as well as certain prepaid subscription costs are included in Prepaid expenses and other assets on the consolidated balance sheets. Deferred financing cost on the Company's ~~collateralized loan obligations ("CLO")~~CLOs are netted against the Company's CLO payable in the Collateralized loan obligations on the consolidated balance sheets. Deferred financing costs are amortized over the terms of the respective financing agreement using the effective interest method and included in ~~interest~~Interest expense on the Company's consolidated statements of operations. Unamortized deferred financing costs are generally expensed when the associated debt is refinanced or repaid before maturity.

Offering and Related Costs

Since 2018, the Company has from time to time offered, ~~and may in the future offer,~~ shares of the Company’s common stock or one or more series of its preferred stock, including its Series ~~C convertible preferred stock (the “Series C Preferred Stock,”), former Series D convertible preferred stock (the “Series D Preferred Stock”), and Series~~ H convertible preferred stock (the “Series H Preferred Stock”) and former Series I convertible preferred stock (the “Series I Preferred Stock”) in private placements exempt from the registration requirements of the Securities Act of 1933, as amended. In connection with these offerings, the Company ~~incurs~~incurred various offering costs. These offering costs include but are not limited to legal, accounting, printing, mailing and filing fees, and diligence expenses of broker-dealers. Offering costs for the common stock are recorded in the Company’s stockholders’ equity, while the offering costs for the Series C Preferred Stock and Series D Preferred Stock are included within Series C Preferred Stock and Series D Preferred Stock, respectively, on the Company’s consolidated balance sheets.equity. Offering costs for the Series H Preferred Stock and Series I Preferred Stock were expensed to the Company's consolidated statement of operations.

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Equity Incentive Plan

The Company maintains the Franklin BSP Realty Trust, Inc. 2021 Equity Incentive Plan (the “2021 Incentive Plan”), pursuant to which the Company has granted and may in the future, from time to time, grant equity awards to the Company’s directors, officers and employees (if it ever has employees), employees of the Advisor and its affiliates, or certain of the Company’s consultants, advisors or other service providers to the Company or an affiliate of the Company. The 2021 Incentive Plan, which is administered by the Compensation Committee of the ~~Board~~board of ~~Directors,~~directors, provides for the grant of awards of share options, share appreciation rights, restricted shares, restricted share units, deferred share units, unrestricted shares, dividend equivalent rights, performance shares and other performance-based awards, other equity-based awards, ~~LTIP~~long-term incentive plan units and cash bonus awards.

In January 2022 and 2023, the Company issued ~~for the first time~~ under the 2021 Incentive Plan awards of restricted stock units ("RSUs") to its officers and certain other personnel of the Advisor who provide services to the Company. These awards are service-based and vest in equal annual installments beginning on the anniversary of the date of grant over a period of three years, subject to continuing service. One share of the Company’s common stock ~~will be~~is issued for each unit that vests. These awards also grant non-forfeitable dividend equivalent rights equal to the cash dividend paid in the ordinary course on a common share to the Company's common shareholders. Upon termination for any reason, all unvested RSUs will be forfeited by the grantee, who will be given no further rights to such RSUs. The fair value of the RSUs is expensed over the vesting period, which are included in Share-based compensation expense on the consolidated statements of operations.

Restricted Share Plan

The Company also ~~has~~had an Amended and Restated Employee and Director Incentive Restricted Share Plan (the "RSP"), which ~~provides~~provided the Company with the ability to grant awards of restricted shares to the Company’s directors, officers and employees (if the Company ever has employees), employees of the Advisor and its affiliates, employees of entities that provide services to the Company, directors of the Advisor or of entities that provide services to the Company, the Advisor and its affiliates. The total number of common shares granted under the RSP shall not exceed 5% of the Company’s authorized common shares, and in any event, will not exceed 4.0 million shares (as such number may be adjusted for stock splits, stock distributions, combinations and similar events). The RSP ~~will expire~~expired on February 7, 2023.

Restricted share awards entitle the recipient to receive common shares from the Company under terms that provide for vesting over a specified period of time or upon attainment of pre-established performance objectives. Such awards would typically be forfeited with respect to the unvested shares upon the termination of the recipient’s employment or other relationship with the Company. Restricted shares may not, in general, be sold or otherwise transferred until restrictions are removed and the shares have vested. Holders of restricted shares may receive cash distributions prior to the time that the restrictions on the shares have lapsed. Any distributions payable in common shares shall be subject to the same restrictions as the underlying restricted shares. The fair value of the restricted share awards are expensed over the vesting period.

Distribution Reinvestment Plan

~~Pursuant to the terms of the Company's distribution~~The Company maintains a dividend reinvestment plan ("DRIP") ~~in effect until December 17, 2021,~~pursuant to which stockholders ~~had the option to elect to~~may reinvest ~~distributions by purchasing~~dividends into shares of common stock in lieu of receiving cash. No dealer manager fees or selling commissions were paid with respect to shares purchased pursuant to the DRIP. The purchase price for shares purchased through the DRIP was the lesser of (i) the Company’s most recent estimated per share NAV, and (ii) the Company’s GAAP book value per share. The Company had the right to amend any aspect of the DRIP or terminate the DRIP with ten days’ notice to participants. Shares issued under the DRIP were recorded to equity in the consolidated balance sheets in the period distributions are declared.

~~On December 17, 2021, the Company amended and restated the DRIP (the “Amended DRIP”) in recognition of the listing of the Company’s common stock on the New York Stock Exchange (“NYSE”).~~stock. Shares of common stock purchased through the ~~Amended~~ DRIP for dividend reinvestments are supplied either directly by the Company as newly issued shares or via purchases by the DRIP administrator of shares of common stock on the open market, at the Company’s option. If the shares are purchased in the open market, the purchase price ~~will be~~is the average price per share of shares purchased; if the shares are purchased directly from the Company, the purchase price ~~will~~is generally be the average of the daily high and low sales prices for a share of common stock reported by the NYSE on the dividend payment date authorized by the Company’s board of directors. The Company may suspend, modify or terminate the ~~Amended~~ DRIP at any time in its sole discretion.

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~~(Unaudited)~~

Income Taxes

The Company has conducted its operations to qualify as a REIT for U.S. federal income tax purposes beginning with its taxable year ended December 31, 2013. As a REIT, if the Company meets certain organizational and operational requirements and distributes at least 90% of its "REIT taxable income" (determined before the deduction of dividends paid and excluding net capital gains) to its stockholders in a year, it will not be subject to U.S. federal income tax to the extent of the income that it distributes. However, even if the Company qualifies for taxation as a REIT, it may be subject to certain state and local taxes on income in addition to U.S. federal income and excise taxes on its undistributed income. The Company, through its TRSs, is indirectly subject to U.S. federal, state and local income taxes. The Company’s TRSs are not consolidated for U.S. federal income tax purposes but are instead taxed as C corporations. For financial reporting purposes, the TRSs are consolidated and a provision for current and deferred taxes is established for the portion of earnings recognized by the Company with respect to its interest in its TRSs. Total (Provision)/benefit for income tax ~~(benefit)/provision~~ for the three and six months ended June 30, 2023 was $(0.1) million and $0.6 million, respectively. Total (Provision)/benefit for income tax for the three and six months ended June 30, 2022 ~~and June 30, 2021~~ was ~~$(0.1)~~$0.1 million and ~~$0.3~~$0.1 million, respectively.

The Company uses a more-likely-than-not threshold for recognition and derecognition of tax positions taken or to be taken in a tax return. The Company has assessed its tax positions for all open tax years beginning with December 31, 2017 and concluded that there were no uncertainties to be recognized. The Company’s accounting policy with respect to interest and penalties related to tax uncertainties is to classify these amounts as provision for income taxes.

The Company utilizes the TRSs to reduce the impact of the prohibited transaction tax and to avoid penalty for the holding of assets not qualifying as real estate assets for purposes of the REIT asset tests. Any income associated with a TRS is fully taxable because the TRS is subject to federal and state income taxes as a domestic C corporation based upon its net income.

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FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)

Derivatives and Hedging Activities

In the normal course of business, the Company is exposed to the effect of interest rate changes and may undertake a strategy to limit these risks through the use of derivatives. The Company uses derivatives primarily to economically hedge against interest rates, CMBS spreads and macro market risk in order to minimize volatility. The Company may use a variety of derivative instruments that are considered conventional, including but not limited to: Treasury note futures, interest rate swaps, and credit derivatives on various indices including CMBX and CDX.

The Company recognizes all derivatives on the consolidated balance sheets at fair value. The Company does not designate derivatives as hedges to qualify for hedge accounting for financial reporting purposes and therefore any net payments under, or fluctuations in the fair value of these derivatives have been recognized currently in unrealized ~~(gain)/loss~~gain/(loss) on derivative instruments in the accompanying consolidated statements of operations. The Company records derivative asset and liability positions on a gross basis with any collateral posted with or received from counterparties recorded separately within Restricted cash on the Company’s consolidated balance sheets. Certain derivatives that the Company has entered into are subject to master netting agreements with its counterparties, allowing for netting of the same transaction, in the same currency, on the same date.

Per Share Data

The ~~Series C Preferred Stock, Series D Preferred Stock (when it was outstanding), and~~Company’s Series H Preferred Stock and Series I Preferred Stock are each considered a participating security and the Company calculates basic earnings per share using the two-class method. The Company’s dilutive earnings per share calculation is computed using the more dilutive result of the treasury stock method, assuming the participating security is a potential common share, or the two-class method, assuming the participating security is not converted. The Company calculates basic earnings per share by dividing net income applicable to common stock for the period by the weighted-average number of shares of common stock outstanding for that period. Diluted earnings per share reflects the potential dilution that could occur from shares outstanding if potential shares of common stock with a dilutive effect have been issued in connection with the restricted stock plan or upon conversion of the outstanding shares of ~~Series C Preferred Stock, Series D Preferred Stock (when it was outstanding) and~~ the Company’s Series H Preferred Stock and Series I Preferred Stock, except when doing so would be anti-dilutive.

Reportable Segments

The Company has determined that it has 4four reportable segments based on how the chief operating decision maker reviews and manages the business. The 4four reporting segments are as follows:

•The real estate debt business which is focused on originating, acquiring and asset managing commercial real estate debt investments, including first mortgage loans, subordinate mortgages, mezzanine loans and participations in such loans.

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~~FRANKLIN BSP REALTY TRUST, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2022~~

~~(Unaudited)~~

•The real estate securities business focuses on investing in and asset managing real estate securities. ~~Historically this~~This business has focused primarily on CMBS, ~~unsecured REIT debt,~~CRE CLO bonds, CDO notes and other securities. As a result of the October 2021 acquisition of Capstead, the Company ~~acquired and continues to hold~~also holds a small portfolio of ~~RMBS in the form of the~~ ARM Agency Securities. The Company has and intends to reinvest the cash and proceeds from dividends, interest, repayments and sales of ~~these assets~~our ARM Agency Securities into ~~its~~ other segments and does not intend to continue to invest in ARM Agency Securities or RMBS in general. ~~As of June 30, 2022, all of the real estate securities in this segment were ARM Agency Securities acquired in the Capstead acquisition.~~

•The commercial real estate conduit business in the Company's TRS, which is focused on generating risk-adjusted returns by originating and subsequently selling fixed-rate commercial real estate loans into the CMBS securitization ~~market.~~market at a profit. The TRS may also hold certain mezzanine loans that don't qualify as good REIT assets due to any potential loss from foreclosure.

•The real estate owned business represents real estate acquired by the Company through foreclosure, deed in lieu of foreclosure, or purchase.

See Note 16 -– Segment Reporting for further information regarding the Company's segments.

Redeemable Convertible Preferred Stock

The Company’s outstanding ~~Series C and Series H~~ classes of redeemable convertible preferred stock are classified outside of permanent equity in the consolidated balance sheets.

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FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)

Series CH Preferred Stock

The Series CH Preferred Stock ranks senior to the Common Stock and on parity with the Series HI Preferred Stock and the Company’s 7.50% Series E Cumulative Redeemable Preferred Stock (“("Series E Preferred ~~Stock”~~Stock") with respect to priority in dividends and in the distribution of assets in the event of the liquidation, dissolution or winding-up of the Company. The liquidation preference of each share of Series CH Preferred Stock is the greater of (i) $5,000 plus accrued and unpaid dividends, and (ii) the amount that would be received upon a conversion of the Series CH Preferred Stock into the Common Stock.

Dividends on the Series CH Preferred Stock, which are typically declared and paid quarterly, accrue at a rate equal to the greater of (i) an annual amount equal to 4.0% of the liquidation preference per share and (ii) the dividends that would have been paid had such share of Series CH Preferred Stock been converted into a share of common stock on the first day of such quarter, subject to proration in the event the share of Series CH preferred stock is not outstanding for the full quarter. Dividends are paid in arrears. Dividends will accumulate and be cumulative from the most recent date to which dividends had been paid.

~~Each outstanding share of~~On January 19, 2023, the Series CH Preferred Stock ~~shall~~was amended such that the mandatory conversion date was extended by one year, to January 19, 2024. Unless earlier converted, the Series H Preferred Stock will automatically convert into common stock at a rate of 299.2 shares of common stock ~~(the “Conversion Rate”), subject~~per share of Series H Preferred Stock (subject to ~~anti-dilution~~ adjustments as described in the Articles Supplementary for the Series CH Preferred Stock) on January 19, 2024. The holder of the Series H Preferred Stock ~~on October 19, 2022 or at any~~has the right to convert up to 4,487 shares of Series H Preferred Stock one time ~~before then~~in each calendar month through December 2023, upon ~~the election of the Company with~~ 10 business days’ ~~prior~~advance notice to the ~~holders.~~

In the event of the sale of all or substantially all of the business or assets of the Company (by sale, merger, consolidation or otherwise) or the acquisition by any person of more than 50% of the total economic interests or voting power of all securities of the Company (a “ Change of Control”), in each case prior to the automatic conversion dates set forth above, each holder of Series C Preferred Stock will have the right, prior to consummation of such transaction, to convert its Series C Preferred Stock into common stock at the Conversion Rate. In addition, in the event of a change of control (as defined in the Articles Supplementary of the Series C Preferred Stock) of the Advisor or a Change of Control that is not a "Liquidity Event" and that is related to the removal of the Advisor, both the Company and the holder shall have the right, prior to consummation of the transaction, to require the redemption of the Series C Preferred Stock for the liquidation preference. A "Liquidity Event" is defined as (i) the listing of the Common Stock on a national securities exchange or quotation on an electronic inter-dealer quotation system; (ii) a merger or business combination involving the Company pursuant to which outstanding shares of Common Stock are exchanged for securities of another company which are listed on a national securities exchange or quoted on an electronic inter-dealer quotation system; or (iii) any other transaction or series of transaction that results in all shares of Common Stock being transferred or exchanged for cash or securities which are listed on a national securities exchange or quoted on an electronic inter-dealer quotation system.Company.

Holders of the Series CH Preferred Stock (voting as a single class with holders of common stock) are entitled to vote on each matter submitted to a vote of the stockholders of the Company upon which the holders of common stock are entitled to vote. The number of votes applicable to a share of outstanding Series CH Preferred Stock will be equal to the number of shares of common stock a share of Series CH Preferred Stock could have been converted into as of the record date set for purposes of such stockholder vote (rounded down to the nearest whole number of shares of common stock). In addition, the affirmative vote of the holders of two-thirds of the outstanding shares of Series CH Preferred Stock, voting as a single class with other shares of parity preferred stock, is required to approve the issuance of any equity securities senior to the Series CH Preferred Stock and to take certain actions materially adverse to the holders of the Series CH Preferred Stock.

~~Table of Contents~~

~~FRANKLIN BSP REALTY TRUST, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2022~~

~~(Unaudited)~~

Series ~~D Preferred Stock~~

~~The Series D Preferred Stock was exchanged for an equivalent number of shares of Series H Preferred Stock on June 24, 2022.~~

~~Series H~~I Preferred Stock

On ~~June 24, 2022, the Company issued 17,950 shares of Series H Preferred Stock to the holder of the Series D Preferred Stock in exchange for an equal amount of shares of Series D Preferred Stock.~~

The exchange was undertaken to accommodate the holder’s request to extend the mandatory conversion date set forth in the terms of the Series D Preferred Stock, which was set to occur on October 19, 2022, to January 19, ~~2023. There are no other material differences between the terms of the Series D Preferred Stock and Series H Preferred Stock. The Company received no consideration for the exchange.~~

The Series H Preferred Stock is on parity with the Series C Preferred Stock and Series E Preferred Stock with respect to preference on liquidation and dividend rights. The terms of the Series H Preferred Stock are substantially the same as the Series C Preferred Stock and the Series D Preferred Stock, except that the holders of the Series H Preferred Stock have the option to accelerate the mandatory conversion date, which is January 23, 2022, upon at least 10 days' written notice.

~~Automatically Convertible Preferred Stock - Series F Preferred Stock~~

The Series F Preferred Stock ranked junior to all other outstanding classes of the Company’s preferred stock with respect to priority in dividends and in the distribution of assets in the event of the liquidation, dissolution or winding-up of the Company. The liquidation preference of each share of Series F Preferred Stock was $2.00.

Dividends on the Series F Preferred Stock were equal to, and were paid at the same time as, dividends that were authorized and declared on the Company’s common stock. The Series F Preferred Stock ranked senior to the Company’s Common Stock with respect to the distribution of assets upon any liquidation, dissolution or winding up of the Company (other than a liquidation, dissolution or winding up of the Company that results in the automatic conversion of such Series F Preferred Stock into Common Stock).

~~The Series F Preferred Stock had no stated maturity and was not redeemable.~~

Holders of Series F Preferred Stock (voting as a single class with holders of Common Stock and other series of Company equity securities entitled to vote with the common stockholders) were entitled to vote on each matter submitted to a vote of the stockholders of the Company upon which the holders of Common Stock are entitled to vote. The number of votes applicable to a share of outstanding Series F Preferred Stock would have been equal to the number of shares of Common Stock a share of Series F Preferred Stock could have been converted into as of the record date set for purposes of such stockholder vote (rounded down to the nearest whole number of shares of Common Stock). In addition, the affirmative vote of the holders of two-thirds of the outstanding shares of Series F Preferred Stock would have been required to take certain actions materially adverse to the holders of the Series F Preferred Stock.

~~On April 19, 2022,~~2023, all of the ~~39,733,299~~1,000 outstanding shares of the ~~Company’s~~ Series FI Preferred Stock ~~automatically~~ converted ~~on a 1-for-one basis~~by their terms into ~~an equal amount of~~299.2 shares of ~~Common Stock, pursuant to the terms of the Articles Supplementary of the Series F Preferred Stock. There are no shares~~common stock per share of Series FI Preferred ~~Stock outstanding following the conversion.~~Stock.

Perpetual Preferred Stock—Series E Preferred Stock

The Series E Preferred Stock has no stated maturity and is not subject to any sinking fund or mandatory redemption. The Series E Preferred Stock ranks, with respect to rights to the payment of dividends and the distribution of assets upon its liquidation, dissolution or winding up, senior to the common stock and on a parity with the Series CI Preferred Stock and Series H Preferred Stock. The liquidation preference is $25.00 per share, plus an amount equal to any accumulated and unpaid dividends.

Holders of shares of the Series E Preferred Stock are entitled to receive, when, as and if authorized by our board of directors and declared by the Company, out of funds legally available for the payment of dividends, cumulative cash dividends at the rate of 7.50% of the $25.00 per share liquidation preference per annum (equivalent to $1.875 per annum per share). Dividends on the Series E Preferred Stock are cumulative and payable quarterly in arrears.

Dividends on the Series E Preferred Stock will accumulate whether or not the Company has earnings, whether or not there are funds legally available for the payment of those dividends and whether or not those dividends are declared.

~~Table of Contents~~

~~FRANKLIN BSP REALTY TRUST, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2022~~

~~(Unaudited)~~

The Company may, at its option, upon not less than 30 nor more than 60 days’ written notice, redeem the Series E Preferred Stock, in whole or in part, at any time or from time to time, for cash at a redemption price of $25.00 per share, plus any accumulated and unpaid dividends thereon to, but not including, the date fixed for redemption. Upon a change of control of the Company, in the event the Company does not redeem the Series E Preferred Stock, a holder of Series E Preferred Stock will have the right to convert to Common Stock upon the terms set forth in the applicable Articles Supplementary.

The Series E Preferred Stock is listed on the New York Stock Exchange under the symbol “FBRT PRE”.

~~Summary~~

Table of ~~Preferred Stock Conversion Terms~~Contents

The complete terms of the Series C Preferred Stock, Series H Preferred Stock and Series E Preferred Stock are set forth in the Articles Supplementary applicable to each class, which have been filed as exhibits to the Company’s periodic reports filed pursuant to the Securities Exchange Act of 1934, as amended.FRANKLIN BSP REALTY TRUST, INC.

~~The below table summarizes the timing of the conversion of the Company’s outstanding classes of convertible preferred stock into common stock:~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


~~Series/Shares Outstanding at 6/30/22~~	~~Conversion Date~~	Conversion Amount Per One Share of Preferred*
~~Redeemable Convertible Series C Preferred Stock / 1,400 shares outstanding~~	~~October 19, 2022, subject to the Company’s right to accelerate the conversion~~	~~299.2 shares of Common Stock~~
~~Redeemable Convertible Series H Preferred Stock / 17,950 shares outstanding~~	~~January 19,~~June 30, 2023 ~~subject to the holder's right to accelerate the conversion~~	~~299.2 shares of Common Stock~~

*Subject to anti-dilution adjustments as set forth in Articles Supplementary.(Unaudited)

Recently Issued Accounting Pronouncements ~~Not Yet Adopted~~

In March 2022, the FASB issued ASU 2022-02 "Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures," or ASU 2022-02. ASU 2022-02 eliminates the accounting guidance for troubled debt restructurings ("TDR") and requires disclosure of current-period gross write-offs by year of loan origination. Additionally, ASU 2022-02 updates the accounting for credit losses under ASC 326 and adds enhanced disclosures with respect to loan refinancing and restructuring in the form of principal forgiveness, interest rate concessions, other-than-insignificant payment delays, or term extensions when the borrower is experiencing financial difficulties. On January 1, 2023, the Company adopted ASU 2022-02 ~~is effective for fiscal years beginning after December 15, 2022,~~on a prospective basis and ~~early~~the adoption ~~is permitted. The amendments should be applied prospectively, however for~~had no significant impact to the recognition and measurement of troubled debt restructurings, the entity has the option to apply a modified retrospective transition method, resulting in a cumulative-effect adjustment to retained earnings in the period of adoption. We are currently evaluating what impact, if any ASU 2022-02 will have on ourCompany's consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from ~~LIBOR~~the London interbank offered rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The guidance is effective upon issuance and generally can be ~~applied~~elected over time through December 31, ~~2022.~~2024, as extended under ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. The Company has not adopted any of the optional expedients or exceptions through June 30, ~~2022,~~2023, but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period as circumstances evolve.

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FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2022~~2023

(Unaudited)

Note 3 - Commercial Mortgage Loans

Commercial Mortgage Loans, Held for Investment

The following table is a summary of the Company's commercial mortgage loans, held for investment, carrying values by class (dollars in thousands):

June 30, 2022 December 31, 2021
Senior loans $ 5,212,612 $ 4,204,464
Mezzanine loans 16,948 22,424
Total gross carrying value of loans 5,229,560 4,226,888
General allowance for credit losses 18,594 15,827
Specific allowance for credit losses (1)
28,431 —
Less: Total Allowance for Credit Losses 47,025 15,827
Total commercial mortgage loans, held for investment, net $ 5,182,535 $ 4,211,061
~~_________________________________________________________~~


	June 30, 2023		December 31, 2022
Senior loans	$	5,032,536	$	5,251,464
Mezzanine loans	29,975		18,312
Total gross carrying value of loans	5,062,511		5,269,776
General allowance for credit losses	38,932		26,624
Specific allowance for credit losses	—		14,224
Less: Allowance for credit losses	38,932		40,848
Total commercial mortgage loans, held for investment, net	$	5,023,579	$	5,228,928

~~(1)As of~~For the six months ended June 30, 2023 and year ended December 31, 2022, the ~~Company recorded a specific reserve with respect to a retail loan designated~~activity in the Company's commercial mortgage loans, held for investment carrying values, was as ~~non-performing.~~follows (dollars in thousands):


	Six Months Ended June 30, 2023		Year Ended December 31, 2022
Amortized cost, beginning of period	$	5,269,776	$	4,226,888
Acquisitions and originations	474,380		2,247,613
Principal repayments	(613,660)		(1,109,769)
Discount accretion/premium amortization	6,934		12,614
Loans transferred from/(to) commercial real estate loans, held for sale	—		(9,296)
Net fees capitalized into carrying value of loans	(2,038)		(13,775)
Transfer to real estate owned	(59,655)		(80,460)
Cost recovery	(1,333)		(4,039)
Principal charge-off	(11,893)		—
Amortized cost, end of period	$	5,062,511	$	5,269,776
Allowance for credit losses, beginning of period	$	(40,848)	$	(15,827)
General (provision)/benefit for credit losses	(12,308)		(10,797)
Specific (provision)/benefit for credit losses	(12,728)		(25,281)
Write offs from specific allowance for credit losses	26,952		11,057
Allowance for credit losses, end of period	$	(38,932)	$	(40,848)
Total commercial mortgage loans, held for investment, net	$	5,023,579	$	5,228,928

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company's total commercial mortgage loan, ~~portfolio,~~ held for investment portfolio, was comprised of ~~174~~156 and ~~165~~161 loans, respectively.

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FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)

Allowance for Credit Losses

The following table presents the activity in the Company's allowance for credit losses, excluding the unfunded loan commitments, as of June 30, ~~2022~~2023 (dollars in thousands):


		MultiFamily		Retail		Office		Industrial		Mixed Use		Hospitality		Self-Storage		Manufactured Housing		Total			MultiFamily		Retail		Office		Industrial		Mixed Use		Hospitality		Self-Storage		Manufactured Housing		Total
December 31, 2021		$	9,681	$	288	$	776	$	86	$	169	$	4,597	$	152	$	78	$	15,827
December 31, 2022																				December 31, 2022	$	21,166	$	14,601	$	670	$	259	$	47	$	4,064	$	10	$	31	$	40,848
Changes:																				Changes:
General allowance/(benefit) for credit losses																				General allowance/(benefit) for credit losses	(1,759)		(343)		2,986		(205)		30		1,342		45		31		2,127
Specific allowance/(benefit) for credit losses																				Specific allowance/(benefit) for credit losses	—		835		—		—		—		—		—		—		835
Write offs against specific allowance for credit losses																				Write offs against specific allowance for credit losses	—		(15,059)		—		—		—		—		—		—		(15,059)
March 31, 2023																				March 31, 2023	$	19,407	$	34	$	3,656	$	54	$	77	$	5,406	$	55	$	62	$	28,751
Changes:	Changes:																			Changes:
General provision/(benefit) for credit losses	General provision/(benefit) for credit losses	32		234		(103)		15		(108)		(807)		(110)		(47)		(894)		General provision/(benefit) for credit losses	10,328		269		(2,779)		10		—		2,321		(11)		43		10,181
March 31, 2022		$	9,713	$	522	$	673	$	101	$	61	$	3,790	$	42	$	31	$	14,933
Changes:
General provision/(benefit) for credit losses		4,595		(128)		(48)		(18)		(22)		(687)		(23)		(8)		3,661
Specific provision/(benefit) for credit losses		—		28,431		—		—		—		—		—		—		28,431
June 30, 2022		$	14,308	$	28,825	$	625	$	83	$	39	$	3,103	$	19	$	23	$	47,025
Specific allowance/(benefit) for credit losses																				Specific allowance/(benefit) for credit losses	—		—		11,893		—		—		—		—		—		11,893
Write offs against specific allowance for credit losses																				Write offs against specific allowance for credit losses	—		—		(11,893)		—		—		—		—		—		(11,893)
June 30, 2023																				June 30, 2023	$	29,735	$	303	$	877	$	64	$	77	$	7,727	$	44	$	105	$	38,932

The Company recorded an increase in its general provision for credit losses excluding the unfunded loan commitments during the three and six months ended June 30, ~~2022~~2023 of ~~$3.7~~$10.2 million and ~~$2.8~~$12.3 million, respectively. The primary driver for the higher reserve balance is the change in economic outlook since the end of the prior ~~year.~~year offset slightly by the decrease in loan portfolio.

During the ~~quarter~~year ended ~~June 30,~~December 31, 2022, the Company identified a commercial mortgage loan, held for investment secured by ~~a portfolio of~~ 24 retail properties, that was assigned a risk rating of “5” due to certain conditions that negatively impacted the underlying collateral property’s cash flows. ~~Since the~~The loan was ~~considered~~evaluated in accordance with ASC 310 - Receivables and was determined to be a ~~collateral-dependent asset under GAAP, a~~TDR. As of December 31, 2022, the specific allowance for ~~credit~~current losses ~~of $28.4 million~~remaining was ~~recorded based on~~$14.2 million. During the difference between the Company’s estimation of the fair value of the underlying collateral property, less costs to sell, and the loan’s amortized cost basis. As of June 30, 2022, the loan has a fully funded outstanding principal balance of $113.2 million, and an amortized cost of $82.2 million. The significant unobservable inputs to the discounted cash flow model used to estimate the fair value of the loan included a capitalization rate, which ranged from 5.25%-5.50%.

~~Table of Contents~~

~~FRANKLIN BSP REALTY TRUST, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2022~~

~~(Unaudited)~~

~~The following table presents the activity in the Company's allowance for credit losses, for the unfunded loan commitments, as of June 30, 2022 (dollars in thousands):~~

Three Months Ended June 30, 2022
MultiFamily Retail Office Industrial Mixed Use Hospitality Self-Storage Manufactured Housing Total
December 31, 2021 $ 137 $ 1 $ 13 $ 3 $ 10 $ 79 $ — $ — $ 243
Changes:
General provision/(benefit) for credit losses (32) 15 (4) (2) (10) (28) — — (61)
March 31, 2022 $ 105 $ 16 $ 9 $ 1 $ — $ 51 $ — $ — $ 182
Changes:
General provision/(benefit) for credit losses 443 (1) 1 (1) — (4) — — 438
June 30, 2022 $ 548 $ 15 $ 10 $ — $ — $ 47 $ — $ — $ 620

~~The following tables represent the composition by loan type and region of the Company's commercial mortgage loans, held for investment portfolio (dollars in thousands):~~

June 30, 2022 December 31, 2021
Loan Type Par Value Percentage Par Value Percentage
Multifamily $ 3,923,800 74.7 % $ 2,953,938 69.6 %
Hospitality 491,699 9.4 % 460,884 10.9 %
Office 464,607 8.8 % 485,575 11.4 %
Retail 180,551 3.4 % 104,990 2.5 %
Industrial 69,985 1.3 % 88,956 2.1 %
Mixed Use 52,500 1.0 % 62,965 1.5 %
Self Storage 44,895 0.9 % 56,495 1.3 %
Manufactured Housing 24,145 0.5 % 29,159 0.7 %
Total $ 5,252,182 100.0 % $ 4,242,962 100.0 %

June 30, 2022 December 31, 2021
Loan Region Par Value Percentage Par Value Percentage
Southwest $ 1,894,147 36.1 % $ 1,764,905 41.6 %
Southeast 1,888,060 36.0 % 1,106,439 26.2 %
Mideast 773,923 14.7 % 646,125 15.2 %
Far West 244,131 4.6 % 301,040 7.1 %
Great Lakes 168,058 3.2 % 183,930 4.3 %
Various 117,698 2.2 % 68,896 1.6 %
New England 66,594 1.3 % 67,651 1.6 %
Plains 55,820 1.1 % 60,225 1.4 %
Rocky Mountain 43,751 0.8 % 43,751 1.0 %
Total $ 5,252,182 100.0 % $ 4,242,962 100.0 %

As of June 30, 2022 and December 31, 2021, the Company's total commercial mortgage loans, held for sale, measured at fair value were comprised of 6 loans and 1 loan, respectively. As of June 30, 2022 and December 31, 2021, the contractual principal outstanding of commercial mortgage loans, held for sale, measured at fair value was $132.5 million and $34.3 million, respectively. As of June 30, 2022 and December 31, 2021, none of the Company's commercial mortgage loans, held for sale, measured at fair value were in default or greater than ninety days past due.

~~Table of Contents~~

~~FRANKLIN BSP REALTY TRUST, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2022~~

~~(Unaudited)~~

~~The following tables represent the composition by loan type and region of the Company's commercial mortgage loans, held for sale, measured at fair value (dollars in thousands):~~

June 30, 2022 December 31, 2021
Loan Type Par Value Percentage Par Value Percentage
Retail $ 109,489 82.6 % $ — — %
Hospitality 13,058 9.9 % — — %
Multifamily 9,990 7.5 % — — %
Office — — % 34,250 100.0 %
Total $ 132,537 100.0 % $ 34,250 100.0 %

June 30, 2022 December 31, 2021
Loan Region Par Value Percentage Par Value Percentage
Southeast $ 98,037 73.9 % $ 34,250 100.0 %
Southwest 18,500 14.0 % — — %
Far West 16,000 12.1 % — — %
Total $ 132,537 100.0 % $ 34,250 100.0 %

~~Table of Contents~~

~~FRANKLIN BSP REALTY TRUST, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2022~~

~~(Unaudited)~~

~~Loan Credit Quality and Vintage~~

The following tables present the amortized cost of our commercial mortgage loans, held for investment as of June 30, 2022 and December 31, 2021, by loan type, the Company’s internal risk rating and year of origination. The risk ratings are updated as of June 30, 2022.

As of June 30, 2022
2022 2021 2020 2019 2018 2017 Total
Multifamily:
Risk Rating:
1-2 internal grade $ 1,113,595 $ 2,466,174 $ 141,680 $ 40,685 $ 77,535 $ — $ 3,839,669
3-4 internal grade — 18,561 11,645 — 37,025 — 67,231
Total Multifamily Loans $ 1,113,595 $ 2,484,735 $ 153,325 $ 40,685 $ 114,560 $ — $ 3,906,900
Retail:
Risk Rating:
1-2 internal grade $ 20,500 $ 33,856 $ 4,498 $ 8,203 $ — $ — $ 67,057
3-4 internal grade — — — — — — —
5 internal grade 110,626 — — — — — 110,626
Total Retail Loans $ 131,126 $ 33,856 $ 4,498 $ 8,203 $ — $ — $ 177,683
Office:
Risk Rating:
1-2 internal grade $ — $ 50,334 $ 214,654 $ 107,154 $ 36,176 $ — $ 408,318
3-4 internal grade — — 29,609 25,723 — — 55,332
Total Office Loans $ — $ 50,334 $ 244,263 $ 132,877 $ 36,176 $ — $ 463,650
Industrial:
Risk Rating:
1-2 internal grade $ 54,763 $ — $ 14,939 $ — $ — $ — $ 69,702
3-4 internal grade — — — — — — —
Total Industrial Loans $ 54,763 $ — $ 14,939 $ — $ — $ — $ 69,702
Mixed Use:
Risk Rating:
1-2 internal grade $ 19,914 $ 32,429 $ — $ — $ — $ — $ 52,343
3-4 internal grade — — — — — — —
Total Mixed Use Loans $ 19,914 $ 32,429 $ — $ — $ — $ — $ 52,343
Hospitality:
Risk Rating:
1-2 internal grade $ 86,773 $ 155,181 $ 26,943 $ 33,838 $ — $ — $ 302,735
3-4 internal grade — — — 56,579 52,097 78,985 187,661
Total Hospitality Loans $ 86,773 $ 155,181 $ 26,943 $ 90,417 $ 52,097 $ 78,985 $ 490,396
Self-Storage:
Risk Rating:
1-2 internal grade $ — $ 14,967 $ 29,832 $ — $ — $ — $ 44,799
3-4 internal grade — — — — — — —
Total Self-Storage Loans $ — $ 14,967 $ 29,832 $ — $ — $ — $ 44,799
Manufactured Housing:
Risk Rating:
1-2 internal grade $ — $ 6,671 $ 17,416 $ — $ — $ — $ 24,087
3-4 internal grade — — — — — — —
Total Manufactured Housing Loans $ — $ 6,671 $ 17,416 $ — $ — $ — $ 24,087
Total $ 1,406,171 $ 2,778,173 $ 491,216 $ 272,182 $ 202,833 $ 78,985 $ 5,229,560

~~Table of Contents~~

~~FRANKLIN BSP REALTY TRUST, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2022~~

~~(Unaudited)~~

As of December 31, 2021
2021 2020 2019 2018 2017 Total
Multifamily:
Risk Rating:
1-2 internal grade $ 2,438,376 $ 270,953 $ 103,989 $ 90,877 $ — $ 2,904,195
3-4 internal grade — — — 37,025 — 37,025
Total Multifamily Loans $ 2,438,376 $ 270,953 $ 103,989 $ 127,902 $ — $ 2,941,220
Retail:
Risk Rating:
1-2 internal grade $ 33,830 $ 11,928 $ 29,515 $ 29,452 $ — $ 104,725
3-4 internal grade — — — — — —
Total Retail Loans $ 33,830 $ 11,928 $ 29,515 $ 29,452 $ — $ 104,725
Office:
Risk Rating:
1-2 internal grade $ 50,291 $ 253,759 $ 136,800 $ 43,308 $ — $ 484,158
3-4 internal grade — — — — — —
Total Office Loans $ 50,291 $ 253,759 $ 136,800 $ 43,308 $ — $ 484,158
Industrial:
Risk Rating:
1-2 internal grade $ — $ 31,906 $ — $ — $ — $ 31,906
3-4 internal grade — — 56,933 — — 56,933
Total Industrial Loans $ — $ 31,906 $ 56,933 $ — $ — $ 88,839
Mixed Use:
Risk Rating:
1-2 internal grade $ 32,395 $ 30,325 $ — $ — $ — $ 62,720
3-4 internal grade — — — — — —
Total Mixed Use Loans $ 32,395 $ 30,325 $ — $ — $ — $ 62,720
Hospitality:
Risk Rating:
1-2 internal grade $ 153,032 $ 26,920 $ 34,054 $ — $ — $ 214,006
3-4 internal grade — — 113,961 52,790 79,102 245,853
Total Hospitality Loans $ 153,032 $ 26,920 $ 148,015 $ 52,790 $ 79,102 $ 459,859
Self-Storage:
Risk Rating:
1-2 internal grade $ 14,948 $ 41,382 $ — $ — $ — $ 56,330
3-4 internal grade — — — — — —
Total Self-Storage Loans $ 14,948 $ 41,382 $ — $ — $ — $ 56,330
Manufactured Housing:
Risk Rating:
1-2 internal grade $ 6,665 $ 22,372 $ — $ — $ — $ 29,037
3-4 internal grade — — — — — —
Total Manufactured Housing Loans $ 6,665 $ 22,372 $ — $ — $ — $ 29,037
Total $ 2,729,537 $ 689,545 $ 475,252 $ 253,452 $ 79,102 $ 4,226,888

~~Table of Contents~~

~~FRANKLIN BSP REALTY TRUST, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2022~~

~~(Unaudited)~~

~~Past Due Status~~

~~The following table presents an aging summary of the loans amortized cost basis at June 30, 2022 (dollars in thousands):~~

Multifamily Retail Office Industrial Mixed Use Hospitality Self-Storage Manufactured Housing Total
Status:
Current $ 3,906,900 $ 177,683 $ 463,650 $ 69,702 $ 52,343 $ 433,321 $ 44,799 $ 24,087 $ 5,172,485
1-29 days past due — — — — — — 0 — —
30-59 days past due — — — — — — — — —
60-89 days past due — — — — — — — — —
90-119 days past due — — — — — — — — —
120+ days past due (1)
— — — — — 57,075 — — 57,075
Total $ 3,906,900 $ 177,683 $ 463,650 $ 69,702 $ 52,343 $ 490,396 $ 44,799 $ 24,087 $ 5,229,560
~~_________________________________________________________~~

~~(1)~~ ~~For the three and~~ six months ended June 30, ~~2022, there was no interest income recognized on this loan.~~

~~Non-performing Status~~

~~The following table presents~~2023, the ~~beginning~~Company recorded an additional $0.8 million to the specific allowance for current losses and ~~ending~~charged off the remaining $15.1 million which directly reduced the amortized cost basis of the ~~loans on nonaccrual status as~~loan. As of ~~June 30, 2022 and~~ December 31, ~~2021 (dollars in thousands):~~

June 30, 2022 December 31, 2021
Non-performing loan carrying value at beginning of period $ 57,075 $ 94,887
Addition of non-performing loan carrying value 110,626 —
Less: Removal of non-performing loan carrying value — 37,812
Non-performing loan carrying value at end of period $ 167,701 $ 57,075

~~As of June 30,~~ 2022, ten retail properties were foreclosed upon and therefore transferred to real estate owned, held for investment. During the Company had 2 loans with a total amortized cost basis of $167.7 million designated as non-performing status. One loan is for a hotel property located in New York, NY, which was placed on non-accrual status in 2019 and had an amortized cost basis of $57.1 million as of June 30, 2022. NaN specific allowance for credit losses has been recorded on the loan. The Company did 0t recognize any interest income on the non-accrual loan during the quartersix months ended June 30, ~~2022.~~ 2023, the remaining 14 retail properties were transferred to real estate owned, held for investment as a result of foreclosures and deeds-in-lieu.

In ~~addition, during the quarter ended June 30, 2022,~~February 2020, the Company originated a first mortgage loan secured by an office property in Portland, OR. In February 2023, the fully committed $37.3 million senior loan was restructured as a result of financial difficulty to a $25.0 million committed senior loan. In connection with the restructuring, the Company committed a ~~fully funded outstanding principal balance~~$10.1 million mezzanine note. In accordance with the adoption of ~~$113.2 million collateralized by~~ASU 2022-02, we classified the restructuring as a ~~portfolio~~continuation of ~~retail properties in various locations throughout~~an existing loan on the ~~United States. The~~senior loan ~~has been~~and new loan for the mezzanine note. During the three months ended June 30, 2023, the Company assigned the senior and mezzanine notes a risk rating of ~~“5”~~"5" and ~~concurrently,~~placed the loan on cost recovery status. The Company elected to apply a practical expedient for collateral dependent assets in which the allowance for credit losses is calculated as the difference between the estimated fair value of the underlying collateral, less estimated cost to sell, and the amortized cost basis of the ~~individual~~ loan. ~~At June 30, 2022,~~As a result, the Company recorded a specific allowance for credit losses of ~~$28.4~~$11.9 million on ~~the~~this loan. ~~Further, during the quarter ended~~As of June 30, ~~2022,~~2023, the Company ~~designated~~recorded cost recoveries of $0.7 million and charged off the loan as non-performing and placed the loan on cost recovery status by ceasing the recognition of interest income. Any contractual amounts received are accounted for under the cost-recovery method, until the loan qualifies for return to accrual status. During the quarter ended June 30, 2022, the Company received $1.2 million in interest on this loan which reduces the amortized cost of the loan.

~~As of December 31, 2021, the Company had 1 loan, the hotel property in New York City, with a carrying value of $57.1 million, designated as non-performing, which had 0~~ specific allowance for credit ~~losses.~~losses of $11.9 million (comprised of $7.6 million on the mezzanine note and $4.3 million on the senior note), resulting in an amortized cost basis of the loan to $20.4 million.

2420

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2022~~2023

(Unaudited)

The following table presents the activity in the Company's allowance for credit losses for the unfunded loan commitments, which is included in Accounts payable and accrued expenses in the consolidated balance sheets as of June 30, 2023 (dollars in thousands):


	MultiFamily		Retail		Office		Industrial		Mixed Use		Hospitality		Self-Storage		Manufactured Housing		Total
December 31, 2022	$	165	$	(36)	$	86	$	3	$	—	$	61	$	—	$	1	$	280
Changes:
General allowance/(benefit) for credit losses	579		36		804		—		—		(21)		—		—		1,398
March 31, 2023	$	744	$	—	$	890	$	3	$	—	$	40	$	—	$	1	$	1,678
Changes:
General provision/(benefit) for credit losses	352		2		(826)		—		—		23		—		(1)		(450)
June 30, 2023	$	1,096	$	2	$	64	$	3	$	—	$	63	$	—	$	—	$	1,228

The following tables represent the composition by loan collateral type and region of the Company's commercial mortgage loans, held for investment portfolio (dollars in thousands):


	June 30, 2023				December 31, 2022
Loan Collateral Type	Par Value		Percentage		Par Value		Percentage
Multifamily	$	3,938,973	77.4	%	$	4,030,975	76.1	%
Hospitality	583,744		11.5	%	510,566		9.7	%
Office	326,526		6.4	%	405,705		7.7	%
Retail	50,156		1.0	%	120,017		2.3	%
Industrial	78,050		1.5	%	93,035		1.8	%
Other	108,641		2.2	%	128,676		2.4	%



Total	$	5,086,090	100.0	%	$	5,288,974	100.0	%


	June 30, 2023				December 31, 2022
Loan Region	Par Value		Percentage		Par Value		Percentage
Southeast	$	2,116,194	41.6	%	$	2,229,756	42.2	%
Southwest	1,788,685		35.2	%	1,763,492		33.3	%
Mideast	562,079		11.1	%	706,192		13.4	%
Far West	202,114		4.0	%	234,891		4.4	%
Great Lakes	162,479		3.2	%	162,162		3.1	%
Various	254,539		4.9	%	192,481		3.6	%



Total	$	5,086,090	100.0	%	$	5,288,974	100.0	%

Commercial Mortgage Loans, Held for Sale, Measured at Fair Value

As of June 30, 2023 and December 31, 2022, the contractual principal outstanding of commercial mortgage loans, held for sale, measured at fair value was $34.3 million and $15.6 million, respectively, which were comprised of one and two loans, respectively. As of June 30, 2023 and December 31, 2022, none of the Company's commercial mortgage loans, held for sale, measured at fair value were in default or greater than ninety days past due.

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)

The following tables represent the composition by loan collateral type and region of the Company's commercial mortgage loans, held for sale, measured at fair value (dollars in thousands):


	June 30, 2023				December 31, 2022
Loan Collateral Type	Par Value		Percentage		Par Value		Percentage
Hospitality	34,250		100.0	%	—		—	%
Retail	$	—	—	%	$	12,000	76.8	%
Office	—		—	%	3,625		23.2	%




Total	$	34,250	100.0	%	$	15,625	100.0	%


	June 30, 2023				December 31, 2022
Loan Region	Par Value		Percentage		Par Value		Percentage
Southeast	$	34,250	100.0	%	$	15,625	100.0	%

Credit Characteristics

As part of the Company's process for monitoring the credit quality of its commercial mortgage loans, excluding those held for sale, measured at fair value, it performs a quarterly loan portfolio assessment and assigns risk ratings to each of its loans. The loans are scored on a scale of 1 to 5 as ~~follows:~~


~~Investment Rating~~						~~Summary Description~~
1						~~Very Low Risk~~ ~~- Investment exceeding fundamental performance expectations and/or capital gain expected. Trends and risk factors since time of investment are favorable.~~
2						~~Low Risk~~ ~~- Performing consistent with expectations and a full return of principal and interest expected. Trends and risk factors are neutral to favorable.~~
3						~~Average Risk~~ ~~- Performing investments requiring closer monitoring. Trends and risk factors show some deterioration.~~
4						~~High Risk/Delinquent/Potential For Loss~~ ~~- Underperforming investment with the potential of some interest loss but still expecting a positive return on investment. Trends and risk factors are negative.~~
5						~~Impaired/Defaulted/Loss Likely~~ ~~- Underperforming investment with expected loss of interest and some principal.~~

described in Note 2 – Summary of Significant Accounting Policies.

All commercial mortgage loans, excluding loans classified as commercial mortgage loans, held for sale, measured at fair value within the consolidated balance sheets, are assigned an initial risk rating of 2. As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the weighted average risk rating of ~~the~~ loans was ~~2.1.~~2.2 and 2.2, respectively.

The following table represents the allocation by risk rating for the Company's commercial mortgage loans, held for investment (dollars in thousands):


June 30, 2022					December 31, 2021
June 30, 2023									June 30, 2023				December 31, 2022
Risk Rating	Risk Rating	Number of Loans	Par Value		Risk Rating	Number of Loans	Par Value		Risk Rating	Number of Loans	Par Value		Risk Rating	Number of Loans	Par Value
1	1	—	$	—	1	—	$	—	1	2	$	61,526	1	—	$	—
2	2	156	4,828,561		2	148	3,903,047		2	127	4,343,059		2	141	4,783,568
3	3	16	253,346		3	16	282,840		3	22	535,339		3	15	281,071
4	4	1	57,075		4	1	57,075		4	4	113,204		4	4	160,695
5	5	1	113,200		5	—	—		5	1	32,962		5	1	63,640
		174	$	5,252,182		165	$	4,242,962		156	$	5,086,090		161	$	5,288,974

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)

Loan Credit Quality and Vintage

The following tables present the amortized cost of our commercial mortgage loans, held for investment as of June 30, 2023 and December 31, 2022, by loan collateral type, the Company’s internal risk rating and year of origination. The risk ratings are updated as of June 30, 2023.


As of June 30, 2023
	2023		2022		2021		2020		2019		Prior		Total

Multifamily:
Risk Rating:
1-2 internal grade	$	172,656	$	1,346,198	$	1,910,726	$	35,451	$	—	$	—	$	3,465,031
3-4 internal grade	—		56,430		339,087		—		—		69,603		465,120
Total Multifamily Loans	$	172,656	$	1,402,628	$	2,249,813	$	35,451	$	—	$	69,603	$	3,930,151

Retail:
Risk Rating:
1-2 internal grade	—		16,089		$	33,911	$	—	$	—	$	—	$	50,000


Total Retail Loans	$	—	$	16,089	$	33,911	$	—	$	—	$	—	$	50,000

Office:
Risk Rating:
1-2 internal grade	$	—	$	—	$	6,694	$	122,987	$	56,406	$	18,557	$	204,644
3-4 internal grade	—		—		44,837		17,994		25,774		—		88,605
5 internal grade	—		—		—		20,384		—		—		20,384
Total Office Loans	$	—	$	—	$	51,531	$	161,365	$	82,180	$	18,557	$	313,633
Office:
Current-period gross charge-offs	$	—	$	—	$	—	$	11,893	$	—	$	—	$	11,893

Industrial:
Risk Rating:
1-2 internal grade	$	—	$	77,865	$	—	$	—	$	—	$	—	$	77,865

Total Industrial Loans	$	—	$	77,865	$	—	$	—	$	—	$	—	$	77,865

Hospitality:
Risk Rating:
1-2 internal grade	$	168,167	$	151,668	$	141,413	$	—	$	49,400	$	21,956	$	532,604
3-4 internal grade	—		—		—		—		28,068		21,668		49,736
Total Hospitality Loans	$	168,167	$	151,668	$	141,413	$	—	$	77,468	$	43,624	$	582,340

Other:
Risk Rating:
1-2 internal grade	$	—	$	30,463	$	32,498	$	1,316	$	—	$	—	$	64,277
3-4 internal grade	—		—		6,682		37,563		—		—		44,245
Total Other Loans	$	—	$	30,463	$	39,180	$	38,879	$	—	$	—	$	108,522


Total	$	340,823	$	1,678,713	$	2,515,848	$	235,695	$	159,648	$	131,784	$	5,062,511

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)


As of December 31, 2022
	2022		2021		2020		2019		2018		2017		Total

Multifamily:
Risk Rating:
1-2 internal grade	$	1,511,181	$	2,184,362	$	74,372	$	—	$	34,668	$	—	$	3,804,583
3-4 internal grade	—		167,707		10,807		—		34,731		—		213,245
Total Multifamily Loans	$	1,511,181	$	2,352,069	$	85,179	$	—	$	69,399	$	—	$	4,017,828

Retail:
Risk Rating:
1-2 internal grade	$	22,275	$	33,884	$	—	$	—	$	—	$	—	$	56,159
3-4 internal grade	—		—		—		—		—		—		—
5 internal grade	60,304		—		—		—		—		—		60,304
Total Retail Loans	$	82,579	$	33,884	$	—	$	—	$	—	$	—	$	116,463

Office:
Risk Rating:
1-2 internal grade	$	—	$	50,351	$	189,740	$	66,110	$	18,683	$	—	$	324,884
3-4 internal grade	—		—		54,533		25,748		—		—		80,281
Total Office Loans	$	—	$	50,351	$	244,273	$	91,858	$	18,683	$	—	$	405,165

Industrial:
Risk Rating:
1-2 internal grade	$	77,762	$	—	$	14,955	$	—	$	—	$	—	$	92,717
3-4 internal grade	—		—		—		—		—		—		—
Total Industrial Loans	$	77,762	$	—	$	14,955	$	—	$	—	$	—	$	92,717






Hospitality:
Risk Rating:
1-2 internal grade	$	137,055	$	160,397	$	—	$	49,564	$	22,116	$	—	$	369,132
3-4 internal grade	32,305		—		—		28,882		—		78,867		140,054
Total Hospitality Loans	$	169,360	$	160,397	$	—	$	78,446	$	22,116	$	78,867	$	509,186

Other:
Risk Rating:
1-2 internal grade	$	30,418	$	54,126	$	36,202	$	—	$	—	$	—	$	120,746
3-4 internal grade	—		—		7,671		—		—		—		7,671
Total Other Loans	$	30,418	$	54,126	$	43,873	$	—	$	—	$	—	$	128,417






Total	$	1,871,300	$	2,650,827	$	388,280	$	170,304	$	110,198	$	78,867	$	5,269,776

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)

Past Due Status

The following table presents an aging summary of the loans amortized cost basis as of June 30, 2023 (dollars in thousands):


	Multifamily			Retail		Office			Industrial		Mixed Use		Hospitality		Self-Storage		Manufactured Housing		Total
Status:
Current	$	3,930,149		$	29,616	$	313,632		$	77,865	$	52,463	$	576,766	$	29,885	$	26,176	$	5,036,552
1-29 days past due	—			—		—			—		—		—				—		—
30-59 days past due	—			—		—			—		—		—		—		—		—
60-89 days past due	—			—		—			—		—		—		—		—		—
90-119 days past due	—			—		—			—		—		—		—		—		—
120+ days past due	5,575		(1)	—		20,384		(2)	—		—		—		—		—		25,959
Total	$	3,935,724		$	29,616	$	334,016		$	77,865	$	52,463	$	576,766	$	29,885	$	26,176	$	5,062,511

_________________________________________________________

(1) Subsequent to June 30, 2023, the full outstanding principal balance of $5.6 million was received.

(2) For the three months ended June 30, 2023, there was no interest income recognized on this loan.

Non-performing Status

The following table presents the amortized cost basis of the loans on nonaccrual status as of June 30, 2023 and December 31, 2022 (dollars in thousands):


	June 30, 2023		December 31, 2022
Non-performing loan amortized cost at beginning of year, January 1	$	117,379	$	57,075
Addition of non-performing loan amortized cost	20,384		60,304
Less: Removal of non-performing loan amortized cost	117,379		—
Non-performing loan amortized cost at end of period	$	20,384	$	117,379

As of June 30, 2023, the Company had one loan with a total amortized cost basis of $20.4 million designated as non-performing status. The loan is for an office property located in Portland, OR (see discussion above under the "Allowance for Credit Losses" section).

During the six months ended June 30, 2023, the Company removed two loans with a total amortized cost of $117.4 million from non-performing status. One loan was collateralized by a hotel property located in New York City which was placed on non-accrual status in 2019 and had an amortized cost basis of $57.1 million as of December 31, 2022. During the three months ended June 30, 2023, as a result of the sale of the hotel property, the Company recovered the full principal amount of its loan (equal to the carrying cost of the loan as of December 31, 2022) and $20.5 million of additional proceeds which was recognized in Interest income on the Company's consolidated statements of operations.

The second loan which was removed from non-performing status related to a commercial mortgage loan with an amortized cost basis of $60.3 million as of December 31, 2022 collateralized by a portfolio of retail properties (the "Walgreens Portfolio") in various locations throughout the United States. The Company designated the loan as non-performing and placed the loan on cost recovery status during the second quarter of 2022 and ~~year ended December 31, 2021,~~ceased the ~~activity in the Company's commercial mortgage loans, held for investment portfolio was as follows (dollars in thousands):~~

Six Months Ended June 30, 2022 Year Ended December 31, 2021
Balance at Beginning of Year $ 4,211,061 $ 2,693,848
Acquisitions and originations 1,546,969 2,897,002
Principal repayments (533,638) (1,286,598)
Discount accretion/premium amortization 5,209 7,038
Loans transferred from/(to) commercial real estate loans, held for sale (4,074) (52,615)
Net fees capitalized into carrying value of loans (10,546) (15,150)
General (provision)/benefit for credit losses (2,767) 4,770
Specific (provision)/benefit for credit losses (28,431) —
Cost recovery (1,248) —
Charge-off from allowance — 289
Transfer to real estate owned — (37,523)
Balance at End of Period $ 5,182,535 $ 4,211,061
recognition of interest income.

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2022~~2023

(Unaudited)

Note 4 - Real Estate Securities

Real Estate Securities Classified As Trading

The following is a summary of the Company's RMBS classified by collateral type and interest rate characteristics as of June 30, 2023 and December 31, 2022 (dollars in thousands):


		Carrying Amount		Average Yield (1)			Carrying Amount		Average Yield (1)
June 30, 2022
June 30, 2023						June 30, 2023
Agency Securities:	Agency Securities:					Agency Securities:
Fannie Mae/Freddie Mac ARMs	Fannie Mae/Freddie Mac ARMs	$	270,381	2.40	%	Fannie Mae/Freddie Mac ARMs	$	125,215	3.50	%

December 31, 2021
December 31, 2022						December 31, 2022
Agency Securities:	Agency Securities:					Agency Securities:
Fannie Mae/Freddie Mac ARMs	Fannie Mae/Freddie Mac ARMs	$	4,246,803	2.23	%	Fannie Mae/Freddie Mac ARMs	$	235,728	2.42	%
Ginnie Mae ARMs		320,068		2.72	%
		$	4,566,871	2.26	%

(1) Average yield is presented for the ~~year~~period then ended and is based on the cash component of interest income expressed as a percentage on average cost basis (the “cash yield”).

The maturity of ~~the Company's~~ ARM Agency Securities is directly affected by prepayments of principal on the underlying mortgage loans. Consequently, actual maturities may be significantly shorter than the portfolio’s ~~June 30, 2022~~ weighted average contractual maturity of ~~187~~206 months.

The Company's ARM Agency Securities are backed by residential mortgage loans that have coupon interest rates that adjust at least annually to more current interest rates or begin doing so after an initial fixed-rate period. After the initial fixed-rate period, if applicable, mortgage loans underlying ARM securities typically either (i) adjust annually based on specified margins over the one-year ~~London interbank offered rate~~Secured Overnight Financing Rate (“~~LIBOR”~~SOFR”) or the one-year Constant Maturity U.S. Treasury Note Rate (“CMT”), (ii) adjust semiannually based on specified margins over ~~six-month LIBOR or~~ the six-month ~~Secured Overnight Financing Rate (“SOFR”),~~SOFR, or (iii) adjust monthly based on specified margins over indices such as one-month ~~LIBOR,~~SOFR, the Eleventh District Federal Reserve Bank Cost of Funds Index, or over a rolling twelve month average of the one-year CMT index, usually subject to periodic and lifetime limits, or caps, on the amount of such adjustments during any single interest rate adjustment period and over the contractual term of the underlying loans.

The Company did not sell any trading securities during the three months ended June 30, 2023. During the six months ended June 30, 2023, the Company sold trading securities totaling $95.5 million. During the three and six months ended June 30, 2022, the Company sold trading securities ~~using the specific identification method for proceeds~~ totaling $1.6 billion and $3.8 billion, respectively. For the three and six months ended June 30, 2023, the Company recognized net trading losses on ARM Agency Securities of $0.9 million and net trading gains of $2.0 million, respectively, compared to net trading losses of $22.5 million and $111.0 million recognized for the three and six months ended June 30, 2022, respectively, due to principal paydowns, changes in market values and sales of these securities, which were included in Trading gain/(loss) in the Company's consolidated statements of operations.

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)

Real Estate Securities Classified As Available For Sale

The following is a summary of the Company's real estate securities, available for sale, measured at fair value, as of June 30, 2023 and December 31, 2022 (dollars in thousands):


June 30, 2023
Type	Interest Rate	Maturity	Par Value		Fair Value
CRE CLO bond 1	7.9%	8/19/2035	$	40,000	$	39,540
CRE CLO bond 2	8.3%	8/19/2035	25,000		24,827
CRE CLO bond 3	8.0%	10/19/2039	28,340		28,391
CRE CLO bond 4	7.9%	2/19/2038	5,885		5,840
CRE CLO bond 5	8.5%	2/19/2038	14,382		14,270
CRE CLO bond 6	11.3%	1/25/2037	10,900		10,386
CRE CLO bond 7	6.9%	11/15/2036	4,300		4,219
CRE CLO bond 8	6.7%	1/15/2037	14,800		14,530
CRE CLO bond 9	8.3%	5/25/2038	50,000		49,846
			$	193,607	$	191,849

December 31, 2022
Type	Interest Rate	Maturity	Par Value		Fair Value
CRE CLO bond 1	7.1%	8/19/2035	$	40,000	$	39,795
CRE CLO bond 2	7.6%	8/19/2035	25,000		25,010
CRE CLO bond 3	8.4%	8/19/2035	10,000		10,056
CRE CLO bond 4	7.4%	10/25/2039	36,700		36,990
CRE CLO bond 5	8.0%	10/25/2039	35,000		35,298
CRE CLO bond 6	8.6%	10/25/2039	14,300		14,221
CRE CLO bond 7	7.3%	10/19/2039	60,000		59,655
			$	221,000	$	221,025

The Company classified its CRE CLO bonds as available for sale and reported them at fair value in the consolidated balance sheets with changes in fair value recorded in accumulated other comprehensive income/(loss). The weighted average contractual maturity for CLO investments included within the CRE CLO bonds portfolio as of June 30, 2023 and December 31, 2022 was 14 years and 15.4 years, respectively.

The following table shows the amortized cost, allowance for expected credit losses, unrealized gain/(loss) and fair value of the Company's CRE CLO bonds by investment type as of June 30, 2023 and December 31, 2022 (dollars in thousands):


	Amortized Cost		Credit Loss Allowance		Unrealized Gain		Unrealized (Loss)		Fair Value




June 30, 2023
CLO	$	192,471	$	—	$	510	$	(1,132)	$	191,849


December 31, 2022
CLO	$	220,635	$	—	$	833	$	(443)	$	221,025

As of June 30, 2023, the Company held nine CRE CLO bonds with an amortized cost basis of $192.5 million and a net unrealized loss of $0.6 million, seven of which were held in a gross unrealized loss position of $1.1 million. As of December 31, 2022, the Company held seven CRE CLO bonds with an amortized cost basis of $220.6 million and a net unrealized gain of $0.39 million, three of which were held in a gross unrealized loss position of $0.40 million. As of June 30, 2023 and December 31, 2022, zero positions had an unrealized loss for a period greater than twelve months. As of June 30, 2023 and December 31, 2022, the fair value of the Company's CRE CLO bonds that were in an unrealized loss position for less than twelve months, and for which an allowance for credit loss has not been recorded was $153.1 million and $113.7 million, respectively.

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2022~~2023

(Unaudited)

Note 5 - Real Estate Owned

Real Estate Owned, Held for Investment

The following table summarizes the Company's real estate owned, ~~asset,~~ held for investment assets as of June 30, ~~2022~~2023 (dollars in thousands):


Acquisition Date		Property Type	Primary Location(s)	Land		Building and Improvements		Furniture, Fixtures and Equipment		Accumulated Depreciation		Real Estate Owned, net
As of June 30, 2023														As of June 30, 2023
Acquisition Date (1)														Acquisition Date (1)	Property Type	Primary Location(s)	Land		Building and Improvements		Furniture, Fixtures and Equipment		Accumulated Depreciation		Real Estate Owned, net
September 2021	September 2021	Industrial	Jeffersonville, GA	$	3,436	$	84,259	$	2,928	$	(1,726)	$	88,897	September 2021	Industrial	Jeffersonville, GA	$	3,436	$	84,259	$	2,928	$	(4,028)	$	86,595
Various (2)														Various (2)	Retail	Various	20,113		73,368		—		(824)		92,657
																	$	23,549	$	157,627	$	2,928	$	(4,852)	$	179,252

________________________

See notes below.

The following table summarizes the Company's real estate owned, ~~asset,~~ held for investment assets as of December 31, ~~2021~~2022 (dollars in thousands):


Acquisition Date		Property Type	Primary Location(s)	Land		Building and Improvements		Furniture, Fixtures and Equipment		Accumulated Depreciation		Real Estate Owned, net
As of December 31, 2022														As of December 31, 2022
Acquisition Date (1)														Acquisition Date (1)	Property Type	Primary Location(s)	Land		Building and Improvements		Furniture, Fixtures and Equipment		Accumulated Depreciation		Real Estate Owned, net
September 2021	September 2021	Industrial	Jeffersonville, GA	$	3,436	$	84,259	$	2,928	$	(575)	$	90,048	September 2021	Industrial	Jeffersonville, GA	$	3,436	$	84,259	$	2,928	$	(2,877)	$	87,746
Various (2)														Various (2)	Retail	Various	9,105		31,036		—		(115)		40,026
																	$	12,541	$	115,295	$	2,928	$	(2,992)	$	127,772

________________________

(1) Refer to Note 2 for the useful life of the above assets.

(2) As discussed below, 24 and ten retail properties associated with the loan secured by the Walgreen's Portfolio were foreclosed upon as of June 30, 2023 and December 31, 2022, respectively. The properties are located throughout the United States of America.

Depreciation expense for the three and six months ended June 30, 2023 totaled $1.0 million and $1.9 million, respectively. Depreciation expense for the three and six months ended June 30, 2022 totaled $0.6 million and ~~$1.2 million, respectively. Depreciation expense for the three and six months ended June 30, 2021 totaled $0.2 million and $0.4~~$2.4 million, respectively.

In ~~August~~the third quarter of 2021, the Company and an affiliate of the Company entered into a joint venture agreement and formed a joint venture entity, Jeffersonville Member, LLC (the ~~"Jeffersonville JV"~~“Jeffersonville JV”) to acquire a $139.5 million triple net lease property in Jeffersonville, GA. The Company has a 79% interest in the Jeffersonville JV, while the affiliate has a 21% interest. The Company invested a total of $109.8 million, made up of $88.7 million in debt and $21.1 million in equity, representing 79% of the ownership interest in the Jeffersonville JV. The ~~affiliate~~affiliated fund made up the remaining $29.8 million composed of a $24.0 million mortgage note payable and ~~$5.7~~$5.8 million in ~~equity.~~non-controlling interest. The Company has majority control of Jeffersonville JV ~~with 79% ownership~~ and, therefore, consolidates the accounts of Jeffersonville JV oninto its consolidated ~~balance sheet.~~financial statements. The Company's $88.7 million mortgage note payable to Jeffersonville JV is eliminated in consolidation (see Note 7 -– Debt).

In November 2022, the Company and an affiliate of the Company entered into a joint venture agreement and formed a joint venture entity, BSPRT Walgreens Portfolio, LLC (the "Walgreens JV") to acquire the retail Walgreens Portfolio consisting of 24 retail properties with various locations throughout the United States. The Company has a 76% interest in the Walgreens JV, while the affiliate has a 24% interest. As of December 31, 2022, through foreclosures, the Company had acquired ten of the 24 properties, and the Company acquired the remaining 14 properties during the six months ended June 30, 2023. As a result, the Company recorded real estate owned, held for investment, at fair value of $93.5 million and $40.1 million, as of June 30, 2023 and December 31, 2022, respectively. The Company has control of all 24 Walgreens properties, acquired through foreclosures, in the Walgreens Portfolio and has majority control in the joint venture and, therefore, consolidates the accounts of Walgreens JV into its consolidated financial statements. As of June 30, 2023 and December 31, 2022, the Company recorded $24.9 million and $10.5 million, respectively, in non-controlling interest related to the Walgreens JV on its consolidated balance sheets.

We are engaged in ongoing litigation relating to the Walgreens JV, as more fully described in "Part II, Item 1. Legal Proceedings".

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2022~~2023

(Unaudited)

Real Estate Owned, Held for Sale

As of December 31, 2022, the carrying value on Real estate owned, held for sale assets was $36.5 million consisting of two properties. In June 2023, the Company sold one real estate owned, held for sale multifamily asset located in New Rochelle, NY for $22.8 million and realized net cash proceeds of $22.3 million. The transaction resulted in a loss of $1.2 million included in Gain/(loss) on other real estate investments in the Company's consolidated financial statements of operations for the six months ended June 30, 2023. As of June 30, 2023, and the carrying value of the Company's Real estate owned, held for sale assets was $11.8 million, consisting of one office property located in St. Louis, MO. During the three and six months ended, the Company recorded an impairment loss of $1.9 million included in Gain/(loss) on other real estate investments in the Company's consolidated financial statements of operations for the St. Louis, MO office property. Refer to Note 13 – Fair Value of Financial Instruments for further discussion on the properties fair value recording.

Note 6 - Leases

Intangible Lease ~~Asset~~Assets and Liabilities

The following table summarizes the Company's identified intangible lease ~~asset~~assets (primarily in-place leases) and liabilities (primarily below-market leases) recognized in the consolidated balance sheets as of June 30, 2023 and December 31, 2022 (dollars in thousands):

Acquisition Date Property Type Primary Location(s) Intangible Lease Asset, Gross Accumulated Amortization Intangible Lease Asset, Net of Amortization
September 2021 Industrial Jeffersonville, GA $ 49,192 $ (2,159) $ 47,033


Identified intangible assets:	June 30, 2023		December 31, 2022
Gross amount	$	71,860	$	58,542
Accumulated amortization	(5,852)		(3,711)
Total, net	$	66,008	$	54,831

~~The following table summarizes the Company's intangible lease asset recognized in the consolidated balance sheets as of December 31, 2021 (dollars in thousands):~~


Identified intangible liabilities:
Gross amount	$	14,189	$	6,507
Accumulated amortization	(525)		(79)
Total, net	$	13,664	$	6,428

Rental Income

~~On September 17,~~In the third quarter of 2021, the Company ~~through the joint venture described in Note 5 - Real Estate Owned,~~ purchased an industrial ~~facility~~distribution center that is subject to an existing triple net lease. The minimum rental amount due under the lease is subject to annual increases of 2.0%. The initial term of the lease expires in 2038 and contains renewal options for 4four consecutive ~~five-year~~five-year terms. The remaining lease term is ~~16.3~~15.3 years. Rental income for this operating lease ~~totaled $2.3 million and $0.7 million~~ for the three months ended June 30, 2023 and 2022 ~~and 2021, respectively, and $4.6~~totaled $2.3 million ~~and $1.4 million~~in both years. Rental income for this operating lease for the six months ended June 30, 2023 and 2022 ~~and 2021, respectively.~~totaled $4.6 million in both years. Rental income is included in Revenue from real estate owned in the consolidated statements of operations.

~~The following table summarizes~~Beginning in the ~~Company's schedule~~fourth quarter of ~~future minimum rents~~2022, the Company foreclosed upon retail properties in the Walgreens Portfolio that were each subject to ~~be received under the lease as described above (dollars in thousands):~~

Future Minimum Rents June 30, 2022
2022 (July - December) $ 3,957
2023 8,046
2024 8,207
2025 8,372
2026 8,539
2027 and beyond 114,981
Total future minimum rent $ 152,102

~~AmortizationExpense~~

~~Intangible lease assets are amortized using the straight-line method over the shorter of the contractual life of the lease and 20 years. The weighted average life of the intangible asset as~~triple net leases. As of June 30, 2023 and December 31, 2022, ~~is approximately 16.3 years. Amortization expense totaled $0.7 million~~24 and ~~$0.2 million~~ten retail properties, respectively, were foreclosed upon. The initial terms of the leases were set to expire in March 2034 and contained renewal options for 11 consecutive five-year terms. Rental income for these operating leases for the three ~~months ended June 30, 2022~~ and ~~2021, respectively, and $1.4 million and $0.4 million for the~~ six months ended June 30, ~~2022~~2023 totaled $1.5 million and ~~2021, respectively, which~~$2.3 million, respectively. In June 2023, the Company executed an amendment to the leases that is ~~included in Depreciation and amortization expense in~~effective July 1, 2023, applicable to all 24 properties within the ~~consolidated statements~~Walgreens Portfolio. The amendment granted a rental abatement period of ~~operations.~~

~~The following table summarizes~~15 months to the ~~Company's expected amortization for intangible assets~~lessees. In accordance with ASC 842, the Company will use the straight-line method to recognize the rental income over the ~~next five years, assuming no further acquisitions or dispositions (dollars~~life of the leases through the current maturity date. Additionally, the amendment modified the initial term of the lease to expire in ~~thousands):~~

Amortization Expense June 30, 2022
2022 (July - December) $ (1,440)
2023 (2,880)
2024 (2,880)
2025 (2,880)
2026 (2,880)
June 2038 and contains renewal options for ten consecutive five-year terms. The remaining lease term is 15 years.

2829

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2022~~2023

(Unaudited)

The following table summarizes the Company's schedule of future minimum rents on its real estate owned, held for investment properties to be recognized (dollars in thousands):


Future Minimum Rents	June 30, 2023
2023 (July - December)	$	6,771
2024	13,677
2025	13,841
2026	14,008
2027	14,179
2028 and beyond	163,697
Total future minimum rent	$	226,173

AmortizationExpense

Intangible lease assets are amortized using the straight-line method over the remaining term of the lease. The weighted average life of the intangible assets as of June 30, 2023 is approximately 15.3 years. Amortization expense for the three and six months ended June 30, 2023 totaled $1.2 million and $2.1 million, respectively. Amortization expense for the three and six months ended June 30, 2022 totaled $0.7 million and $1.4 million, respectively.

Amortization of acquired below-market leases, net of acquired above-market leases, resulted in an increase to rental revenues of $0.3 million and $0.4 million, respectively, for the three and six months ended June 30, 2023. There was no amortization of acquired below-market leases for the three and six months ended June 30, 2022. The following table summarizes the Company's expected acquired below (above) market leases, net amortization over the next five years, assuming no further acquisitions or dispositions (dollars in thousands):


Amortization Expense - Acquired below (above) market leases, net	June 30, 2023
2023 (July - December)	$	(640)
2024	(1,281)
2025	(1,281)
2026	(1,281)
2027	(1,281)

The following table summarizes the Company's expected other identified intangible assets, net amortization over the next five years, assuming no further acquisitions or dispositions (dollars in thousands):


Amortization Expense - Other identified intangible assets	June 30, 2023
2023 (July - December)	$	2,464
2024	4,928
2025	4,928
2026	4,928
2027	4,928

Note 7 - Debt

Repurchase Agreements and Revolving Credit Facilities - Commercial Mortgage Loans

The Company has entered into repurchase facilities with JPMorgan Chase Bank, National Association (the "JPM Repo Facility"), Barclays Bank PLC (the "Barclays Revolver Facility" and the "Barclays Repo Facility"), Wells Fargo Bank, National Association (the "WF Repo Facility"), and ~~Credit Suisse AG~~Atlas SP Partners (the ~~"CS~~"Atlas Repo Facility" and together with JPM Repo Facility, WF Repo Facility, Barclays Revolver Facility, and Barclays Repo Facility, collectively, the "Repo and Revolving Credit Facilities").

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FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)

The Repo and Revolving Facilities are financing sources through which the Company may pledge one or more mortgage loans to the financing entity in exchange for funds typically at an advance rate of between 65% to ~~80%~~75% of the principal amount of the mortgage loan being pledged. These loans are all floating rate at the Secured Overnight Financing Rate ("SOFR") plus an applicable spread.

The details of the Company's Repo and Revolving Credit Facilities atas of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 are as follows (dollars in thousands):


As of June 30, 2022
Repurchase Facility		Committed Financing		Amount Outstanding		Interest Expense (1)		Ending Weighted Average Interest Rate		Term Maturity
As of June 30, 2023											As of June 30, 2023
Repurchase and Revolving Credit Facility											Repurchase and Revolving Credit Facility	Committed Financing		Amount Outstanding		Interest Expense (1)		Ending Weighted Average Interest Rate		Term Maturity
JPM Repo Facility (2)	JPM Repo Facility (2)	$	400,000	$	282,646	$	3,548	4.09	%	10/6/2022	JPM Repo Facility (2)	$	500,000	$	279,980	$	11,899	8.46	%	10/6/2024

CS Repo Facility (3)		300,000		205,615		2,749		3.74	%	9/30/2022
Atlas Repo Facility (3)											Atlas Repo Facility (3)	600,000		53,313		3,784		7.60	%	3/15/2024
WF Repo Facility (4)	WF Repo Facility (4)	500,000		184,091		4,268		3.58	%	11/21/2023	WF Repo Facility (4)	500,000		191,808		5,527		7.91	%	11/21/2023
Barclays Revolver Facility (5)	Barclays Revolver Facility (5)	250,000		—		1,015		N/A		9/20/2023	Barclays Revolver Facility (5)	250,000		—		514		N/A		9/20/2024
Barclays Repo Facility (6)	Barclays Repo Facility (6)	500,000		159,682		4,172		3.62	%	3/14/2025	Barclays Repo Facility (6)	500,000		169,938		6,711		7.65	%	3/14/2025
Total	Total	$	1,950,000	$	832,034	$	15,752				Total	$	2,350,000	$	695,039	$	28,435

________________________________________________________

(1) For the six months ended June 30, ~~2022.~~2023. Includes amortization of deferred financing costs.

(2)With ~~one-year~~one-year extension option available at the Company's discretion. ~~Additionally, subsequent to quarter end, on July 7, 2022, the committed financing was increased from~~ ~~$400 million to $500 million.~~

(3)~~Subsequent to quarter end, on July 11, 2022,~~ On March 17, 2023, the maturity date was extended to ~~July 11,~~March 15, 2024. During the first quarter of 2023, ~~and the committed financing~~this repurchase facility was ~~increased~~transferred from ~~$300 million~~ Credit Suisse to ~~$600 million.~~Atlas SP Partners.

(4) ~~On May 12, 2022, the committed financing amount was increased from $450 million to $500 million.~~ There are 3three more ~~one-year~~one-year extension options available at the Company's discretion.

(5) The Company may increase the total commitment amount by an amount between $100 million and $150 million for three month intervals, on an unlimited basis prior to maturity. Additionally, on April 24, 2023, the Company extended the maturity date to September 20, 2024.

(6)There are 2 ~~one-year~~two one-year extension options available at the Company's discretion.


As of December 31, 2022
Repurchase and Revolving Credit Facility	Committed Financing		Amount Outstanding		Interest Expense(1)		Ending Weighted Average Interest Rate		Term Maturity
JPM Repo Facility	$	500,000	$	275,423	$	11,773	7.42	%	10/6/2024

Credit Suisse Repo Facility	600,000		168,046		8,676		7.12	%	10/31/2023
WF Repo Facility	500,000		79,807		7,492		7.11	%	11/21/2023
Barclays Revolver Facility	250,000		—		1,267		N/A		9/20/2023
Barclays Repo Facility	500,000		157,583		8,997		6.75	%	3/14/2025
Total	$	2,350,000	$	680,859	$	38,205

~~Table of Contents~~

~~FRANKLIN BSP REALTY TRUST, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2022~~

~~(Unaudited)~~

As of December 31, 2021
Repurchase Facility Committed Financing Amount Outstanding
Interest Expense (1)
Ending Weighted Average Interest Rate Term Maturity
JPM Repo Facility $ 400,000 $ 136,470 $ 5,178 2.13 % 10/6/2022
CS Repo Facility 300,000 137,364 3,446 2.43 % 9/30/2022
WF Repo Facility (2)
450,000 186,734 2,090 1.64 % 11/21/2023
Barclays Revolver Facility (3)
250,000 166,700 1,976 6.12 % 9/20/2023
Barclays Repo Facility (4)
500,000 392,332 4,057 1.76 % 3/14/2025
Total $ 1,900,000 $ 1,019,600 $ 16,747
~~________________________________________________________~~

(1) For the year ended December 31, ~~2021.~~2022. Includes amortization of deferred financing costs.

~~(2)~~ ~~There are 3 more~~ ~~one-year extension options available at the Company's discretion.~~

~~(3)~~ ~~The Company may increase the total commitment amount by an amount between $100 million and $150 million for~~ ~~three~~ ~~month intervals, on an unlimited basis prior to maturity.~~

~~(4)~~ ~~There are 2~~ ~~one-year extension options available at the Company's discretion.~~

The Company expects to use the advances from the Repo Facilities to finance the acquisition or origination of eligible loans, including first mortgage loans, subordinated mortgage loans, mezzanine loans and participation interests therein.

The Repo and Revolving Credit Facilities generally provide that in the event of a decrease in the value of the Company's collateral, the lenders can demand additional collateral. As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company is in compliance with all debt covenants.

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)

Other ~~financing and loan participation~~financings - Commercial Mortgage Loans

On March 23, 2020, the Company transferred $15.2 million of its interest in a term loan to ~~Sterling National Bank ("SNB")~~a regional bank via a participation agreement. Since inception, the Company's outstanding loan increased as a result of future fundings, leading to an increase in amount outstanding via the participation agreement. On June 15, 2023, the Company extended this loan from its original maturity of June 9, 2023 to December 9, 2023. The Company incurred ~~$0.3~~$1.3 million and ~~$0.5~~$2.1 million of interest expense on the ~~SNB~~regional bank term loan for the three and six months ended June 30, ~~2022.~~2023, respectively. As of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 the outstanding participation balance was ~~$40.0 million.~~$61.9 million and $59.2 million, respectively. The loan accrued interest at an annual rate of one-month ~~LIBOR~~SOFR +2.20% ~~and matures on February 9, 2023.~~(7.75% as of June 30, 2023).

On February 10, 2022, the Company transferred $38.0 million of its interest in a term loan to ~~Customers Bank~~a regional bank via a participation agreement. Since inception, the Company's outstanding loan ~~increased~~could increase as a result of future fundings, ~~leading~~which could lead to an increase in amount outstanding via the participation agreement. The Company incurred ~~$0.1~~$0.3 million and ~~$0.1~~$0.9 million of interest expense on the ~~Customers Bank~~regional bank term loan for the three and six months ended June 30, ~~2022.~~2023, respectively. As of June 30, 2023 and December 31, 2022, the outstanding participation balance was ~~$7.2 million.~~$20.4 millionand$17.1 million, respectively. The loan accrued interest at an annual rate of one-month SOFR + 4.01% (9.17% as of June 30, 2023) and matures on May 1, 2025.

Mortgage Note Payable

On September 17, 2021, the Company, in connection with the consolidated joint venture (as discussed in Note 5 - Real Estate Owned), originated a $112.7 million mortgage note payable, of which $88.7 million is eliminated in ~~consolidation~~our consolidated financial statements (see Note 5 - Real Estate Owned). ~~The~~As of June 30, 2023 and December 31, 2022, the remaining outstanding mortgage note payable of $24.0 million is ~~recorded on~~included in the consolidated balance sheet. As of June 30, ~~2022,~~2023, the loan accrued interest at an annual rate of ~~3.1%~~SOFR + 3.0%, which is eliminated in our consolidated financial statements, and matures on October 9, 2024.

~~Table of Contents~~

~~FRANKLIN BSP REALTY TRUST, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2022~~

~~(Unaudited)~~

Unsecured Debt

As of June 30, ~~2022,~~2023, the Company had outstanding 30-year junior subordinated notes issued in 2005 and 2006 and maturing in 2035 and 2036, respectively, with a total face amount of ~~$100.0~~$82.5 million. Note balances net of deferred issuance costs, and related weighted average interest rates as of the indicated dates (calculated including issuance cost amortization and adjusted for the effects of related derivatives held as cash flow hedges prior to termination) were as follows (dollars in thousands):


		As of June 30, 2022				As of December 31, 2021					As of June 30, 2023				As of December 31, 2022
		Borrowings Outstanding		Average Rate		Borrowings Outstanding		Average Rate			Borrowings Outstanding		Weighted Average Rate		Borrowings Outstanding		Weighted Average Rate
Junior subordinated notes maturing in:	Junior subordinated notes maturing in:									Junior subordinated notes maturing in:
October 2035 ($35,000 face amount)		$	34,489	3.73	%	$	34,470	7.86	%
October 2035 ($17,500 face amount)										October 2035 ($17,500 face amount)	$	17,028	9.40	%	$	34,508	8.25	%
December 2035 ($40,000 face amount)	December 2035 ($40,000 face amount)	39,493		3.49	%	39,474		7.63	%	December 2035 ($40,000 face amount)	39,532		9.18	%	39,513		8.39	%
September 2036 ($25,000 face amount)	September 2036 ($25,000 face amount)	24,663		3.49	%	24,650		7.67	%	September 2036 ($25,000 face amount)	24,686		9.19	%	24,674		8.39	%
		$	98,645	3.57	%	$	98,594	7.72	%		$	81,246	9.23	%	$	98,695	8.34	%

The notes are currently redeemable, in whole or in part, without penalty, at the Company’s option.

~~Pursuant to a lending and security agreement with Security Benefit Life Insurance Company ("SBL"), which was entered into in February 2020 and amended in March and August 2020,~~ During the six months ended June 30, 2023 the Company ~~may borrow up to $100.0~~recognized a realized gain on extinguishment for debt in the amount of $4.4 million as a result of the repurchase of $17.5 million par value unsecured debt at a ~~rate of one-month LIBOR + 4.5%. The facility has a maturity of February 10, 2023 and is secured by a pledge of equity interests in certain of the Company’s subsidiaries. The Company incurred $0.3~~price equal to 75% par. Interest paid on unsecured debt, including related derivative cash flows, totaled $1.72 million and ~~$0.6~~$3.98 million ~~of interest expense on the lending agreement with SBL~~ for the three and six months ended June 30, ~~2022. As of June 30, 2022 there was no outstanding balance.~~2023, respectively.

Repurchase Agreements - Real Estate Securities

The Company has entered into various Master Repurchase Agreements (the "MRAs") that allow the Company to sell real estate securities while providing a fixed repurchase price for the same real estate securities in the future. The repurchase contracts on each security under an MRA generally mature in 30-90 days and terms are adjusted for current market rates as necessary.

~~Below is a summary of the Company's MRAs as of June 30, 2022 and December 31, 2021 (dollars in thousands):~~

Weighted Average
Counterparty Amount Outstanding Interest Expense
Collateral Pledged (1)
Interest Rate Days to Maturity
As of June 30, 2022
JP Morgan Securities LLC $ 18,857 $ 141 $ 23,668 2.19 % 13
Goldman Sachs International — — — N/A N/A
Barclays Capital Inc. 34,431 235 43,023 2.34 % 1
Citigroup Global Markets, Inc. — — — N/A N/A
Total/Weighted Average $ 53,288 $ 376 $ 66,691 2.29 % 5
As of December 31, 2021
JP Morgan Securities LLC $ 19,025 $ 261 $ 24,087 1.14 % 10
Goldman Sachs International — 37 — N/A N/A
Barclays Capital Inc. 15,286 526 19,131 1.21 % 14
Citigroup Global Markets, Inc. — 81 — N/A N/A
Total/Weighted Average $ 34,311 $ 905 $ 43,218 1.71 % 12
~~________________________________________________________~~

~~(1)~~ ~~Includes~~ ~~$66.7 million~~ ~~and $43.2 million of CLO notes, held by the Company, which~~ These agreements are ~~eliminated within the real estate securities,~~floating rate at ~~fair value line in the consolidated balance sheets as of June 30, 2022 and December 31, 2021, respectively.~~SOFR or LIBOR plus an applicable spread.

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FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2022~~2023

(Unaudited)

Below is a summary of the Company's MRAs as of June 30, 2023 and December 31, 2022 (dollars in thousands):


							Weighted Average
Counterparty	Amount Outstanding		Interest Expense		Collateral Pledged (1)		Interest Rate		Days to Maturity
As of June 30, 2023
JP Morgan Securities LLC	$	110,218	$	2,153	$	124,272	6.07	%	17

Barclays Capital Inc.	66,775		1,565		81,390		6.07	%	12

Total/Weighted Average	$	176,993	$	3,718	$	205,662	6.07	%	15

As of December 31, 2022
JP Morgan Securities LLC	$	103,513	$	1,281	$	120,751	5.34	%	22


Barclays Capital Inc.	119,351		1,646		144,778		5.18	%	50


Total/Weighted Average	$	222,864	$	2,927	$	265,529	5.25	%	37

________________________________________________________

(1) Includes $24.2 million and $67.1 million of CLO notes, held by the Company, which is eliminated within the Real estate securities, trading, at fair value line of the consolidated balance sheets as of June 30, 2023 and December 31, 2022, respectively.

Repurchase Agreements - Real Estate Securities Classified As Trading

The Company pledges its real estate securities classified as trading as collateral for repurchase agreements with commercial banks and other financial institutions. Repurchase arrangements entered into by the Company involve the sale and a simultaneous agreement to repurchase the transferred assets at a future date and are accounted for as ~~financings.~~financing agreements. The Company maintains the beneficial interest in the specific securities pledged during the term of each repurchase arrangement and receives the related principal and interest payments.

The terms and conditions of repurchase agreements are negotiated on a transaction-by-transaction basis when each such agreement is initiated or renewed. The amount borrowed is generally equal to the fair value of the securities pledged, as determined by the lending counterparty, less an agreed-upon discount, referred to as a “haircut.” Interest rates are generally fixed based on prevailing rates corresponding to the terms of the borrowings. Interest may be paid monthly or at the termination of an agreement at which time the Company may enter into a new agreement at prevailing haircuts and rates with the same lending counterparty or repay that counterparty and negotiate financing with a different lending counterparty. None of the Company’s lending counterparties are obligated to renew or otherwise enter into new agreements at the conclusion of existing agreements. In response to declines in fair value of pledged securities due to changes in market conditions or the publishing of monthly security pay-down factors, lending counterparties typically require the Company to post additional securities as collateral, pay down borrowings or fund cash margin accounts with the counterparties in order to re-establish the agreed-upon collateral requirements. These actions are referred to as margin calls. Conversely, in response to increases in fair value of pledged securities, the Company routinely margin calls its lending counterparties in order to have previously pledged collateral returned.

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)

Repurchase agreements (and related pledged collateral, including accrued interest receivable), classified by ~~collateral type and~~ remaining maturities, and related weighted average borrowing rates as of the indicated dates were as follows (dollars in thousands):

Collateral Type Collateral
Carrying
Amount Accrued
Interest
Receivable Borrowings
Outstanding Average
Borrowing
Rates
As of June 30, 2022
Repurchase arrangements secured by Agency securities with maturities of 30 days or less $ 252,500 $ 471 $ 240,000 1.63 %
As of December 31, 2021
Repurchase arrangements secured by Agency securities with maturities of 30 days or less $ 4,327,020 $ 8,908 $ 4,144,473 0.13 %


	Amount Outstanding		Accrued Interest Receivable		Collateral Carrying Amount		Weighted Average Borrowing Rates
As of June 30, 2023
Repurchase arrangements secured by trading securities with maturities of 30 days or less	$	113,000	$	370	$	118,455	5.25	%

As of December 31, 2022
Repurchase arrangements secured by trading securities with maturities of 30 days or less	$	172,144	$	544	$	180,400	4.25	%
Repurchase arrangements secured by trading securities with maturities of 31 to 90 days	45,000		114		47,210		4.51	%
	$	217,144	$	658	$	227,610	4.30	%

Average repurchase agreements outstanding were ~~$732~~$117.2 million and ~~$4.0 billion~~$220.1 million during the three months ended June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. Average repurchase agreements outstanding differed from respective quarter-end balances during the indicated periods primarily due to changes in portfolio levels and differences in the timing of portfolio acquisitions relative to portfolio runoff and asset sales. Interest paid on repurchase agreements, including related derivative payments, totaled $1.74 million and $3.78 million during the three and six months ended June 30, 2023, respectively.

Collateralized Loan ~~Obligations~~Obligation

On May 13, 2022, the Company called all of the outstanding notes issued by BSPRT 2018-FL4 Issuer, Ltd., a wholly owned indirect subsidiary of the Company. The outstanding principal of the notes on the date of the call was $69.5 million. The Company recognized all the remaining unamortized deferred financing costs of $5.2 million recorded within the Interest expense line of the consolidated statements of operations, which was a non-cash charge.

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the notes issued by BSPRT 2019-FL5 Issuer, Ltd. and BSPRT 2019-FL5 Co-Issuer, LLC, each wholly owned indirect subsidiaries of the Company, are collateralized by interests in a pool of 3520 and 4825 mortgage assets having a principal balance of ~~$482.0~~$320.1 million and ~~$589.0~~$378.8 million respectively (the "2019-FL5 Mortgage Assets"). The sale of the 2019-FL5 Mortgage Assets to BSPRT 2019-FL5 Issuer, Ltd. is governed by a Mortgage Asset Purchase Agreement dated as of May 30, 2019, between the Company and BSPRT 2019-FL5 ~~Issuer.~~Issuer, Ltd.

On July 17, 2023, the Company called all of the outstanding notes issued by BSPRT 2019-FL5 Issuer, Ltd., a wholly owned indirect subsidiary of the Company. The outstanding principal of the notes on the date of the call was $122.0 million. The Company will recognize all the remaining unamortized deferred financing costs of $2.9 million as Interest expense in the Company's consolidated statements of operations in the third quarter of 2023, which will be a non-cash charge.

As of June 30, ~~2022~~2023 and December 31, ~~2021~~2022, the notes issued by BSPRT 2021-FL6 Issuer, Ltd. and BSPRT 2021-FL6 Co-Issuer, LLC, each wholly owned indirect subsidiaries of the Company, are collateralized by interests in a pool of 5962 and 4458 mortgage assets having a principal balance of ~~$691.4~~$661.9 million and ~~$682.3~~$691.1 million respectively (the "2021-FL6 Mortgage Assets"). The sale of the 2021-FL6 Mortgage Assets to BSPRT 2021-FL6 Issuer, Ltd. is governed by a Collateral Interest Purchase Agreement dated as of March 25, 2021, between the Company and BSPRT 2021-FL6 Issuer, Ltd.

~~Table of Contents~~

~~FRANKLIN BSP REALTY TRUST, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2022~~

~~(Unaudited)~~

As of June 30, ~~2022~~2023 and December 31, ~~2021~~2022, the notes issued by BSPRT 2021-FL7 Issuer, Ltd. and BSPRT 2021-FL7 Co-Issuer, LLC, each wholly owned indirect subsidiaries of the Company, are collateralized by interests in a pool of 4537 and 4739 mortgage assets having a principal balance of ~~$898.8~~$883.4 million and ~~$871.4~~$899.7 million respectively (the "2021-FL7 Mortgage Assets"). The sale of the 2021-FL7 Mortgage Assets to BSPRT 2021-FL7 Issuer, Ltd. is governed by a Collateral Interest Purchase Agreement dated as of March 25, 2021, between the Company and BSPRT 2021-FL7 Issuer, Ltd.

On February 15, 2022, BSPRT 2022-FL8 Issuer, Ltd. and BSPRT 2022-FL8 Co-Issuer, LLC, both wholly owned indirect subsidiaries of the Company entered into an indenture with the OP, as advancing agent and U.S. Bank National Association, as note administrator and trustee, which governs the issuance of approximately $1.1 billion principal balance secured floating rate notes, of which ~~$960.0 million~~ ~~were purchased by third party investors and~~ ~~$132.0 million~~ were purchased by a wholly owned subsidiary of the OP. In addition, concurrently with the issuance of the notes, BSPRT 2022-FL8 Issuer, Ltd. also issued 108,000 preferred shares, par value of $0.001 per share and with an aggregate liquidation preference and notional amount equal to $1,000 per share, which were not offered as part of closing the indenture. For U.S. federal income tax purposes, BSPRT 2022-FL8 Issuer, Ltd. and BSPRT 2022-FL8 Co-Issuer, LLC are disregarded entities.

As of June 30, ~~2022~~2023 and ,December 31, 2022, the notes issued by BSPRT 2022-FL8 Issuer, Ltd. and BSPRT 2022-FL8 Co-Issuer, LLC, are collateralized by interests in a pool of 3238 and 39 mortgage assets having a principal balance of $1.2 billion and $1.2 billion, respectively (the "2022-FL8 Mortgage Assets"). The sale of the 2022-FL8 Mortgage Assets to BSPRT 2022-FL8 Issuer, Ltd. is governed by a Collateral Interest Purchase Agreement dated as of December 21, 2021, between the Company and BSPRT 2022-FL8 Issuer, Ltd.

On June 29, 2022, BSPRT 2022-FL9 Issuer, LLC, a wholly-owned indirect subsidiary of the Company, entered into an indenture with the OP, as advancing agent, U.S. Bank Trust Company, National Association, as trustee and note administrator, and U.S. Bank National Association, as custodian and in other capacities, which governs the issuance of approximately $740.9 million principal balance secured floating rate notes, of which $670.6 million were purchased by third party investors and $70.3 million were purchased by a wholly-owned subsidiary of the OP. In addition, concurrently with the issuance of the notes, BSPRT 2022-FL9 Issuer, LLC also issued 62,246 preferred shares, par value of $0.001 per share and with an aggregate liquidation preference and notional amount equal to $1,000 per share, which were not offered as part of closing the indenture. For U.S. federal income tax purposes, BSPRT 2022-FL9 Issuer, LLC is a disregarded entity.

As of June 30, 2023 and December 31, 2022, the notes issued by BSPRT 2022-FL9 Issuer, LLC are collateralized by interests in a pool of 2451 and 50 mortgage assets having a principal balance of ~~$802.3~~$802.6 million and $797.5 million, respectively (the "2022-FL9 Mortgage Assets"). The sale of the 2022-FL9 Mortgage Assets to BSPRT 2022-FL9 Issuer, LLC is governed by a Collateral Interest Purchase Agreement, dated as of June 29, 2022, by and among FBRT Sub REIT, BSPRT 2022-FL9 Issuer, LLC, the OP, and BSPRT 2022-FL9 Seller, LLC.

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FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2022~~2023

(Unaudited)

The Company, through its wholly-owned subsidiaries, holds the preferred equity tranches of the above CLOs of approximately $401.8 million and ~~$329.2~~$401.8 million as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. The following table represents the terms of the notes issued by 2019-FL5 Issuer, 2021-FL6 Issuer, 2021-FL7 Issuer, 2022-FL8 Issuer and 2022-FL9 Issuer (collectively the "CLOs"), ~~respectively,~~ as of June 30, ~~2022~~2023 (dollars in thousands):

CLO Facility

Tranche

Par Value Issued

Par Value Outstanding (1)

Interest Rate

Maturity Date

CLO Facility

Tranche

Par Value Issued

Par Value Outstanding (1)

Interest Rate (2)

Maturity Date

2019-FL5 Issuer

Tranche A

407,025

79,236

1M LIBOR + 115

5/15/2029

2019-FL5 Issuer

Tranche A-S

76,950

1M LIBOR + 148

5/15/2029

2019-FL5 Issuer

Tranche B

50,000

1M LIBOR + 140

5/15/2029

2019-FL5 Issuer

Tranche C

61,374

1M LIBOR + 200

5/15/2029

2019-FL5 Issuer

Tranche D

48,600

5,000

1M LIBOR + 240

5/15/2029

2019-FL5 Issuer

Tranche E

20,250

1M LIBOR + 285

5/15/2029

2019-FL5 Issuer (3)

Tranche A

407,025

—

1M LIBOR + 115

5/15/2029

2019-FL5 Issuer (3)

Tranche A-S

76,950

—

1M LIBOR + 148

5/15/2029

2019-FL5 Issuer (3)

Tranche B

50,000

43,665

1M LIBOR + 140

5/15/2029

2019-FL5 Issuer (3)

Tranche C

61,374

1M LIBOR + 200

5/15/2029

2019-FL5 Issuer (3)

Tranche D

48,600

5,000

1M LIBOR + 240

5/15/2029

2019-FL5 Issuer (3)

Tranche E

20,250

12,000

1M LIBOR + 285

5/15/2029

2021-FL6 Issuer

Tranche A

367,500

1M LIBOR + 110

3/15/2036

2021-FL6 Issuer

Tranche A

367,500

1M LIBOR + 110

3/15/2036

2021-FL6 Issuer

Tranche A-S

86,625

1M LIBOR + 130

3/15/2036

2021-FL6 Issuer

Tranche A-S

86,625

1M LIBOR + 130

3/15/2036

2021-FL6 Issuer

Tranche B

33,250

1M LIBOR + 160

3/15/2036

2021-FL6 Issuer

Tranche B

33,250

1M LIBOR + 160

3/15/2036

2021-FL6 Issuer

Tranche C

41,125

1M LIBOR + 205

3/15/2036

2021-FL6 Issuer

Tranche C

41,125

1M LIBOR + 205

3/15/2036

2021-FL6 Issuer

Tranche D

44,625

1M LIBOR + 300

3/15/2036

2021-FL6 Issuer

Tranche D

44,625

1M LIBOR + 300

3/15/2036

2021-FL6 Issuer

Tranche E

11,375

1M LIBOR + 350

3/15/2036

2021-FL6 Issuer

Tranche E

11,375

1M LIBOR + 350

3/15/2036

2021-FL7 Issuer

Tranche A

508,500

1M LIBOR + 132

12/21/2038

2021-FL7 Issuer

Tranche A

508,500

1M LIBOR + 132

12/15/2038

2021-FL7 Issuer

Tranche A-S

13,500

1M LIBOR + 165

12/21/2038

2021-FL7 Issuer

Tranche A-S

13,500

1M LIBOR + 165

12/15/2038

2021-FL7 Issuer

Tranche B

52,875

1M LIBOR + 205

12/21/2038

2021-FL7 Issuer

Tranche B

52,875

1M LIBOR + 205

12/15/2038

2021-FL7 Issuer

Tranche C

66,375

1M LIBOR + 230

12/21/2038

2021-FL7 Issuer

Tranche C

66,375

1M LIBOR + 230

12/15/2038

2021-FL7 Issuer

Tranche D

67,500

1M LIBOR + 275

12/21/2038

2021-FL7 Issuer

Tranche D

67,500

1M LIBOR + 275

12/15/2038

2021-FL7 Issuer

Tranche E

13,500

1M LIBOR + 340

12/21/2038

2021-FL7 Issuer

Tranche E

13,500

11,250

1M LIBOR + 340

12/15/2038

2022-FL8 Issuer

Tranche A

690,000

1M LIBOR + 150

2/15/2037

2022-FL8 Issuer

Tranche A

690,000

1M AVG SOFR + 150

2/15/2037

2022-FL8 Issuer

Tranche A-S

66,000

1M LIBOR + 185

2/15/2037

2022-FL8 Issuer

Tranche A-S

66,000

1M AVG SOFR + 185

2/15/2037

2022-FL8 Issuer

Tranche B

55,500

1M LIBOR + 205

2/15/2037

2022-FL8 Issuer

Tranche B

55,500

1M AVG SOFR + 205

2/15/2037

2022-FL8 Issuer

Tranche C

67,500

1M LIBOR + 230

2/15/2037

2022-FL8 Issuer

Tranche C

67,500

1M AVG SOFR + 230

2/15/2037

2022-FL8 Issuer

Tranche D

81,000

81,000��

1M LIBOR + 350

2/15/2037

2022-FL8 Issuer

Tranche D

81,000

1M AVG SOFR + 280

2/15/2037

2022-FL9 Issuer

Tranche A

423,667

1M LIBOR + 255

5/15/2039

2022-FL9 Issuer

Tranche A

423,667

1M Term SOFR + 230

5/15/2039

2022-FL9 Issuer

Tranche A-S

96,380

1M LIBOR + 310

5/15/2039

2022-FL9 Issuer

Tranche A-S

96,380

1M Term SOFR + 287

5/15/2039

2022-FL9 Issuer

Tranche B

42,166

1M LIBOR + 360

5/15/2039

2022-FL9 Issuer

Tranche B

42,166

1M Term SOFR + 337

5/15/2039

2022-FL9 Issuer

Tranche C

48,189

1M LIBOR + 415

5/15/2039

2022-FL9 Issuer

Tranche C

48,189

1M Term SOFR + 392

5/15/2039

2022-FL9 Issuer

Tranche D

49,194

1M LIBOR + 505

5/15/2039

2022-FL9 Issuer

Tranche D

49,194

1M Term SOFR + 481

5/15/2039

2022-FL9 Issuer

Tranche E

11,041

1M LIBOR + 565

5/15/2039

2022-FL9 Issuer

Tranche E

11,041

11,043

1M Term SOFR + 541

5/15/2039

3,601,586

3,230,197

3,601,586

3,057,178

________________________________________________________

(1) Excludes $~~453.4~~463.9 million of CLO notes, held by the Company, which are eliminated within the collateralized loan obligations line in the consolidated balance sheet as of June 30, ~~2022.~~2023.

(2) On March 5, 2021, the Financial Conduct Authority of the U.K. (the “FCA”) announced that LIBOR tenors relevant to 2019-FL5 Issuer, 2021-FL6 Issuer, and 2021-FL7 Issuer would cease to be published or no longer be representative after June 30, 2023. The Alternative Reference Rates Committee (the “ARRC”) interpreted this announcement to constitute a benchmark transition event. The benchmark index of 1M LIBOR interest rate will convert from LIBOR to compounded SOFR, plus a benchmark adjustment of 11.448 basis points with a lookback period equal to the number of calendar days in the applicable interest accrual period plus two SOFR business days, conforming with the indenture agreement and recommendations from the ARRC. Compounded SOFR for any interest accrual period shall be the “30-Day Average SOFR” as published by the Federal Reserve Bank of New York on each benchmark determination date. Subsequent to the period ended June 30, 2023, the Company converted the indices for 2021-FL6 Issuer and 2021-FL7 Issuer to 1M Term SOFR + 11.448 basis points and the applicable spreads remains unchanged.

(3) On July 17, 2023, the Company called all of the outstanding notes issued by BSPRT 2019-FL5 Issuer, Ltd., a wholly owned indirect subsidiary of the Company.

3435

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FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2022~~2023

(Unaudited)

The following table represents the terms of the notes issued by ~~2018-FL4 Issuer, 2019-FL5 Issuer, 2021-FL6 Issuer and 2021-FL7 Issuer,~~the CLOs as of December 31, ~~2021~~2022 (dollars in thousands):

CLO Facility

Tranche

Par Value Issued

Par Value Outstanding (1)

Interest Rate

Maturity Date

CLO Facility

Tranche

Par Value Issued

Par Value Outstanding (1)

Interest Rate

Maturity Date

2018-FL4 Issuer

Tranche A

416,827

75,263

1M LIBOR + 105

9/15/2035

2018-FL4 Issuer

Tranche A-S

73,813

1M LIBOR + 130

9/15/2035

2018-FL4 Issuer

Tranche B

56,446

1M LIBOR + 160

9/15/2035

2018-FL4 Issuer

Tranche C

68,385

1M LIBOR + 210

9/15/2035

2018-FL4 Issuer

Tranche D

57,531

1M LIBOR + 275

9/15/2035

2018-FL4 Issuer

Tranche E

28,223

1M LIBOR + 305

9/15/2035

2019-FL5 Issuer

Tranche A

407,025

299,529

1M LIBOR + 115

5/15/2029

2019-FL5 Issuer

Tranche A

407,025

—

1M LIBOR + 115

5/15/2029

2019-FL5 Issuer

Tranche A-S

76,950

1M LIBOR + 148

5/15/2029

2019-FL5 Issuer

Tranche A-S

76,950

73,715

1M LIBOR + 148

5/15/2029

2019-FL5 Issuer

Tranche B

50,000

1M LIBOR + 140

5/15/2029

2019-FL5 Issuer

Tranche B

50,000

1M LIBOR + 140

5/15/2029

2019-FL5 Issuer

Tranche C

61,374

1M LIBOR + 200

5/15/2029

2019-FL5 Issuer

Tranche C

61,374

1M LIBOR + 200

5/15/2029

2019-FL5 Issuer

Tranche D

48,600

5,000

1M LIBOR + 240

5/15/2029

2019-FL5 Issuer

Tranche D

48,600

5,000

1M LIBOR + 240

5/15/2029

2019-FL5 Issuer

Tranche E

20,250

1M LIBOR + 285

5/15/2029

2019-FL5 Issuer

Tranche E

20,250

1M LIBOR + 285

5/15/2029

2021-FL6 Issuer

Tranche A

367,500

1M LIBOR + 110

3/15/2036

2021-FL6 Issuer

Tranche A

367,500

1M LIBOR + 110

3/15/2036

2021-FL6 Issuer

Tranche A-S

86,625

1M LIBOR + 130

3/15/2036

2021-FL6 Issuer

Tranche A-S

86,625

1M LIBOR + 130

3/15/2036

2021-FL6 Issuer

Tranche B

33,250

1M LIBOR + 160

3/15/2036

2021-FL6 Issuer

Tranche B

33,250

1M LIBOR + 160

3/15/2036

2021-FL6 Issuer

Tranche C

41,125

1M LIBOR + 205

3/15/2036

2021-FL6 Issuer

Tranche C

41,125

1M LIBOR + 205

3/15/2036

2021-FL6 Issuer

Tranche D

44,625

1M LIBOR + 300

3/15/2036

2021-FL6 Issuer

Tranche D

44,625

1M LIBOR + 300

3/15/2036

2021-FL6 Issuer

Tranche E

11,375

1M LIBOR + 350

3/15/2036

2021-FL6 Issuer

Tranche E

11,375

1M LIBOR + 350

3/15/2036

2021-FL7 Issuer

Tranche A

508,500

1M LIBOR + 132

12/21/2038

2021-FL7 Issuer

Tranche A

508,500

1M LIBOR + 132

12/21/2038

2021-FL7 Issuer

Tranche A-S

13,500

1M LIBOR + 165

12/21/2038

2021-FL7 Issuer

Tranche A-S

13,500

1M LIBOR + 165

12/21/2038

2021-FL7 Issuer

Tranche B

52,875

1M LIBOR + 205

12/21/2038

2021-FL7 Issuer

Tranche B

52,875

1M LIBOR + 205

12/21/2038

2021-FL7 Issuer

Tranche C

66,375

1M LIBOR + 230

12/21/2038

2021-FL7 Issuer

Tranche C

66,375

1M LIBOR + 230

12/21/2038

2021-FL7 Issuer

Tranche D

67,500

1M LIBOR + 275

12/21/2038

2021-FL7 Issuer

Tranche D

67,500

1M LIBOR + 275

12/21/2038

2021-FL7 Issuer

Tranche E

13,500

1M LIBOR + 340

12/21/2038

2021-FL7 Issuer

Tranche E

13,500

1M LIBOR + 340

12/21/2038

2022-FL8 Issuer

Tranche A

690,000

1M SOFR + 150

2/15/2037

2022-FL8 Issuer

Tranche A-S

66,000

1M SOFR + 185

2/15/2037

2022-FL8 Issuer

Tranche B

55,500

1M SOFR + 205

2/15/2037

2022-FL8 Issuer

Tranche C

67,500

1M SOFR + 230

2/15/2037

2022-FL8 Issuer

Tranche D

81,000

1M SOFR + 280

2/15/2037

2022-FL9 Issuer

Tranche A

423,667

1M SOFR + 255

5/15/2039

2022-FL9 Issuer

Tranche A-S

96,380

1M SOFR + 310

5/15/2039

2022-FL9 Issuer

Tranche B

42,166

1M SOFR + 360

5/15/2039

2022-FL9 Issuer

Tranche C

48,189

1M SOFR + 415

5/15/2039

2022-FL9 Issuer

Tranche D

49,194

1M SOFR + 505

5/15/2039

2022-FL9 Issuer

Tranche E

11,041

11,043

1M SOFR + 565

5/15/2039

2,672,174

2,179,514

3,601,586

3,147,728

________________________________________________________

(1) Excludes ~~$320.6~~$453.4 million of CLO notes, held by the Company, which are eliminated within the collateralized loan obligations line in the consolidated balance sheet as of December 31, ~~2021.~~2022.

3536

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2022~~2023

(Unaudited)

The below table reflects the total assets and liabilities of the Company's outstanding CLOs. The CLOs are considered VIEs and are consolidated into the Company's consolidated financial statements as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 as the Company is the primary beneficiary of the VIE. The Company is the primary beneficiary of the CLOs because (i) the Company has the power to direct the activities that most significantly affect the VIE’s economic performance and (ii) the right to receive benefits from the VIEs or the obligation to absorb losses of the VIEs that could be significant to the VIE. The VIE's are non-recourse to the Company.


Assets (dollars in thousands)	Assets (dollars in thousands)	June 30, 2022		December 31, 2021		Assets (dollars in thousands)	June 30, 2023		December 31, 2022
Cash (1)	Cash (1)	$	44,778	$	187,668	Cash (1)	$	66,877	$	43,246
Commercial mortgage loans, held for investment, net (2)	Commercial mortgage loans, held for investment, net (2)	3,256,709		2,629,431		Commercial mortgage loans, held for investment, net (2)	3,839,734		3,942,918
Accrued interest receivable	Accrued interest receivable	7,333		5,918		Accrued interest receivable	16,570		15,444
Total Assets	Total Assets	$	3,308,820	$	2,823,017	Total Assets	$	3,923,181	$	4,001,608

Liabilities (dollars in thousands)	Liabilities (dollars in thousands)					Liabilities (dollars in thousands)
Notes payable (3)(4)		$	3,663,930	$	2,482,762
Notes payable, net (3)(4)						Notes payable, net (3)(4)	$	3,502,260	$	3,601,102
Accrued interest payable	Accrued interest payable	3,089		1,598		Accrued interest payable	11,694		10,582
Total Liabilities	Total Liabilities	$	3,667,019	$	2,484,360	Total Liabilities	$	3,513,954	$	3,611,684

________________________________________________________

(1) Includes ~~$43.7~~$66.1 million and ~~$187.0~~$42.5 million of cash held by the servicer related to CLO loan payoffs as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

(2) The balance is presented net of allowance for credit losses of ~~$5.5~~$21.5 million and ~~$8.7~~$13.2 million as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

(3) Includes ~~$453.4~~$463.9 million and ~~$320.6~~$453.4 million of CLO notes, held by the Company, which are eliminated within the collateralized loan ~~obligations~~obligation line of the consolidated balance sheets as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

(4) The balance is presented net of deferred financing cost and discount of ~~$19.6~~$25.2 million and ~~$17.3~~$19.2 million as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

3637

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FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2022~~2023

(Unaudited)

Note 8 - Earnings Per Share

The Company uses the two-class method in calculating basic and diluted earnings per share. Net income/(loss) is allocated between our common stock and other participating securities based on their participation rights. Diluted net income per share has been computed using the weighted average number of shares of common stock outstanding and other dilutive securities. The following table presents a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations and the calculation of basic and diluted earnings per share for the three and six months ended June 30, ~~2022~~2023 and June 30, ~~2021~~2022 (in thousands, except share and per share data):

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Numerator
Net income/(loss) $ (25,709) $ 30,010 $ (48,216) $ 60,156
Less: Preferred stock dividends 6,955 3,725 27,966 7,236
Less: Undistributed earnings allocated to preferred stock — 3,287 — 6,518
Net income/(loss) attributable to common stockholders (for basic and diluted earnings per share) $ (32,664) $ 22,998 $ (76,182) $ 46,402
Denominator
Weighted-average common shares outstanding for basic earnings per share 75,837,621 44,262,934 59,985,361 44,276,480
Effect of dilutive shares (1):

Unvested restricted shares — 16,005 — 15,947
Weighted-average common shares outstanding for diluted earnings per share 75,837,621 44,278,939 59,985,361 44,292,427
Basic earnings per share $ (0.43) $ 0.52 $ (1.27) $ 1.05
Diluted earnings per share $ (0.43) $ 0.52 $ (1.27) $ 1.05
~~________________________~~


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Numerator
Net income/(loss)	$	39,644	$	(25,709)	$	83,483	$	(48,216)
Net (income)/loss from noncontrolling interest	(41)		—		(50)		—
Less: Preferred stock dividends	6,749		6,955		13,497		27,966

Net income/(loss) applicable to common stock	$	32,854	$	(32,664)	$	69,936	$	(76,182)
Less: Participating securities' share in earnings	526		—		1,325		—
Net income/(loss) applicable to common stockholders (basic & diluted earnings per share)	$	32,328	$	(32,664)	$	68,611	$	(76,182)

Denominator
Weighted-average common shares outstanding for basic earnings per share	82,252,979		75,837,621		82,512,434		59,985,361
Weighted-average common shares outstanding for diluted earnings per share	82,252,979		75,837,621		82,512,434		59,985,361

Basic earnings per share	$	0.39	$	(0.43)	$	0.83	$	(1.27)
Diluted earnings per share	$	0.39	$	(0.43)	$	0.83	$	(1.27)

~~(1)~~The effect of the dilutive shares excluded restricted shares and stock units for the three months ended June 30, 2023 and June 30, 2022 of 797,497 and 508,990 respectively, as the effect was anti-dilutive. The effect of the weighted average dilutive shares excluded restricted shares and stock units for the six months ended June 30, 2023 and June 30, 2022 of 754,487 and 439,013 respectively, as the effect was anti-dilutive.

The effect of the dilutive shares excluded the weighted average common equivalent of convertible preferred shares for the three months ended June 30, 2023 of 5,370,640 as the effect was anti-dilutive. The effect of dilutive shares excluded ~~an aggregate of 508,990 and 439,013~~the weighted average ~~restricted stock units~~common equivalent of convertible preferred shares for the ~~three and~~ six months ended June 30, 2022 ~~respectively,~~of 5,400,395 as ~~their~~the effect was anti-dilutive.

~~Note 9 - Stock Transactions~~

As of June 30, 2022 and December 31, 2021, the Company had 84,226,628 and 43,965,928 shares of common stock outstanding, respectively, including shares issued pursuant to the Company's distribution reinvestment plan (the "DRIP") and unvested restricted shares.

As of June 30, 2022 and December 31, 2021, the Company had 1,400 shares of Series C Preferred Stock outstanding and 10,329,039 shares of Series E Preferred Stock outstanding. As of June 30, 2022, the Company had 17,950 shares of Series H Preferred Stock outstanding (none outstanding as of December 31, 2021). In addition, as of December 31, 2021, the Company had 17,950 shares of Series D Preferred Stock outstanding and 39,733,299 shares of Series F Preferred Stock outstanding (none outstanding as of June 30, 2022).

3738

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2022~~2023

(Unaudited)

~~The following tables present the activity in the Company's Series C~~Note 9 – Redeemable Convertible Preferred Stock ~~for the six-month periods ended June 30, 2022~~ and ~~2021 (dollars in thousands, except share amounts):~~

Shares Amount
Balance, December 31, 2021 1,400 $ 6,971
Issuance of Preferred Stock — —
Dividends paid in Preferred Stock — —
Offering costs — —
Amortization of offering costs — 4
Ending Balance, June 30, 2022 1,400 $ 6,975
Shares Amount
Balance, December 31, 2020 1,400 $ 6,962
Issuance of Preferred Stock — —
Dividends paid in Preferred Stock — —
Offering costs — —
Amortization of offering costs — 4
Ending Balance, June 30, 2021 1,400 $ 6,966
Equity Transactions

The following table presents the ~~activity in~~summary of the Company's ~~Series D~~outstanding shares of Redeemable Convertible Preferred Stock, ~~for the six-month periods ended~~Perpetual Preferred Stock and Common Stock as of June 30, ~~2022~~2023 and ~~2021 (dollars in thousands, except share amounts):~~

Shares Amount
Balance, December 31, 2021 17,950 $ 89,684
Issuance of Preferred Stock — —
Dividends paid in Preferred Stock — —
Exchanged for Series H Preferred Stock (17,950) (89,748)
Offering costs — —
Amortization of offering costs — 64
Ending balance, June 30, 2022 — $ —
Shares Amount
Balance, December 31, 2020 — $ —
Issuance of Preferred Stock 17,950 89,748
Dividends paid in Preferred Stock — —
Offering costs — (83)
Amortization of offering costs — 5
Ending Balance, June 30, 2021 17,950 $ 89,670

~~Table of Contents~~

~~FRANKLIN BSP REALTY TRUST, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2022~~

~~(Unaudited)~~

~~The following table presents the activity in the Company's Series E Preferred Stock for the six-month periods ended June 30,~~December 31, 2022 (dollars in thousands, except share amounts):

Shares Amount
Balance, December 31, 2021 10,329,039 $ 258,742
Issuance of Preferred Stock — —
Dividends paid in Preferred Stock — —
Offering costs — —
Amortization of offering costs — —
Ending balance, June 30, 2022 10,329,039 $ 258,742

~~As of June 30, 2021 the Company did not have any Series E Preferred Stock outstanding.~~


	Balance as of				Shares Outstanding as of		Second Quarter 2023 Dividend/Distribution Per Share (4)
	June 30, 2023		December 31, 2022		June 30, 2023	December 31, 2022
Redeemable Convertible Preferred Stock:
Series H Preferred Stock	$	89,748	$	89,748	17,950	17,950	$	106.22
Series I Preferred Stock (1)	$	—	$	5,000	—	1,000	106.22
Perpetual Preferred Stock:
Series E Preferred Stock	$	258,742	$	258,742	10,329,039	10,329,039	$	0.46875
Common Stock:
Common Stock - at par value (2)(3)	$	822	$	826	83,019,881	82,992,784	$	0.355

_________________________________________________________

~~The following table presents the activity in the Company's Series F Preferred Stock for the six-month periods ended June 30, 2022 (dollars in thousands, except share amounts):~~(1)
Shares Amount
Balance, December 31, 2021 39,733,299 $ 710,431
Issuance of Preferred Stock — —
Dividends paid in Preferred Stock — —
Automatically converted into Common Stock (39,733,299) (710,431)
Offering costs — —
Amortization of offering costs — —
Ending balance, June 30, 2022 — $ —

On ~~April~~January 19, ~~2022,~~2023, all ~~of the 39,733,299~~1,000 outstanding shares of the ~~Company’s~~Company's Series FI Preferred Stock each automatically converted ~~on a 1-for-one basis~~ into ~~an equal amount of~~299.2 shares of ~~Common Stock,~~common stock, pursuant to the terms of the ~~Articles Supplementary~~Series I Preferred Stock, resulting in the issuance of ~~the Series F Preferred Stock. There are no~~299,200 shares of ~~Series F Preferred~~common stock.

(2) Common Stock includes shares issued pursuant to the DRIP and unvested restricted shares.

(3) During the three and six months ended June 30, 2023, the Company repurchased 444,726 and 758,137 shares, respectively, of common stock at an average price of $12.36 per share and $12.08 per share, respectively, for a total of $5.5 million and $9.2 million, respectively. All of these shares were retired upon settlement, reducing the total outstanding ~~following the conversion.~~

Asshares as of June 30, ~~2021 the Company did not have any Series F Preferred Stock outstanding.~~

~~The following table presents the activity~~2023. See discussion in the "Stock Repurchases" section below.

(4) As declared by the Company's ~~Series H Preferred Stock for the six-month periods ended June 30, 2022 (dollars in thousands, except share amounts):~~

Shares Amount
Balance, December 31, 2021 — $ —
Issuance of Series H Preferred Stock in exchange for Series D Preferred Stock 17,950 89,748
Dividends paid in Preferred Stock — —
Offering costs — —
Amortization of offering costs — —
Ending balance, June 30, 2022 17,950 $ 89,748

Asboard of ~~June 30, 2021 the Company did not have any Series H Preferred Stock outstanding.~~directors.

Distributions

In order to maintain its election to qualify as a REIT, the Company must currently distribute, at a minimum, an amount equal to 90% of its taxable income, without regard to the deduction for distributions paid and excluding net capital gains. The Company must distribute 100% of its taxable income (including net capital gains) to avoid paying corporate U.S. federal income taxes. Distribution payments are dependent on the availability of funds. The Company's board of directors may reduce the amount of distributions paid or suspend distribution payments at any time, and therefore, distributions payments are not assured.

~~Table of Contents~~

~~FRANKLIN BSP REALTY TRUST, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2022~~

~~(Unaudited)~~

Quarterly distributions are paid at a quarterly rate of $0.355 per share of common stock (equivalent to $1.42 per annum). In June 2022, the Company's board of directors declared the following second quarter 2022 dividends: (i) a quarterly cash dividend of $0.355 per share on the Company's common stock (equivalent to $1.42 per annum), (ii) a second quarter 2022 dividend of $106.22 per share on the Company’s Series C Preferred Stock and Series H Preferred Stock, and (iii) a second quarter 2022 dividend of $0.46875 per share on the Company’s Series E Preferred Stock, all of which were paid in July 2022 to holders of record on June 30, 2022. Distribution payments are dependent on the availability of funds. The board of directors may reduce the amount of distributions paid or suspend distribution payments at any time, and therefore, distribution payments are not assured. Dividends on the Company’s outstanding shares of preferred stock, to the extent not declared by the board of directors quarterly, will accrue, and dividends may not be paid on the Company's common stock to the extent there are accrued and unpaid dividends on the preferred stock. The amount of dividends paid on the Company’s Series ~~C Preferred Stock and Series~~ H Preferred Stock ~~are~~is generally in an amount equal to the dividends a holder of such preferred stock would have received if the preferred stock had been converted into common stock in accordance with its terms, except when the amount of common stock dividends are below the threshold stated in the terms of such preferred stock.

The Company distributed $59.1 million of common stock dividends during the six months ended June 30, 2023, comprised of $58.3 million in cash and $0.8 million in shares of common stock issued under the DRIP. The Company distributed $28.3 million of common stock dividends during the six months ended June 30, 2022, comprised of $28.1 million in cash and $0.2 million in shares of common stock issued under the DRIP. The Company distributed $24.4 million of common stock dividends during the six months ended June 30, 2021, comprised of $19.3 million in cash and $5.1 million in shares of common stock issued under the DRIP.

As of June 30, ~~2022 and December 31, 2021,~~2023, the Company had declared but unpaid common stock distributions of ~~$29.9~~$29.5 million, declared but unpaid Series E Preferred Stock distributions of $4.8 million and ~~$12.5 million, respectively. Additionally, as~~declared but unpaid Series H Preferred Stock distributions of ~~June 30, 2022 and~~$1.9 million. As of December 31, ~~2021,~~2022, the Company had declared but unpaid ~~Series C Preferred Stock~~common stock distributions of ~~$0.2~~$29.5 million, ~~and $0.1 million, respectively, $4.8 million of~~ declared but unpaid Series E Preferred ~~stock~~Stock distributions ~~and $1.9~~of $4.8 million, ~~and $0.0 million, respectively, of~~ declared but unpaid Series H Preferred ~~stock distributions. In addition, as~~Stock Distributions of ~~December 31, 2021, the Company had $1.5~~$1.9 million ofand declared but unpaid Series DI Preferred stock distributions ~~and $11.3 million~~ of ~~declared but unpaid Series F Preferred Stock distributions.~~$0.1 million. These amounts are included in Distributions payable on the Company’s consolidated balance sheets.

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)

Stock Repurchases

The Company’s board of directors has authorized a $65 million share repurchase program of the Company’s common stock. The Company’s share repurchase program authorizes share repurchases at prices below the most recently reported book value per share as determined in accordance with GAAP. Purchases made under the program may be made through open market, block, and privately negotiated transactions, including Rule 10b5-1 plans, as permitted by securities laws and other legal requirements. The timing, manner, price and amount of any purchases by the Company will be determined by the Company in its reasonable business judgment and consistent with the exercise of its legal duties and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The share repurchase program does not obligate the Company to acquire any particular amount of common stock. The Company share repurchase program will remain open until at least December 31, 2023 or until the capital committed to the applicable repurchase program has been exhausted, whichever is sooner. Repurchases under the Company’s share repurchase program may be suspended from time to time at the Company’s discretion without prior notice.

The following table is a summary of the Company’s repurchase activity of its common stock during the six months ended June 30, 2023 (dollars in thousands, except share amounts):


	For the Six Months Ended June 30, 2023
	Shares	Amount (2)
Beginning of period, authorized repurchase amount (1)		$	48,421
Repurchases paid	758,137	(9,161)

Remaining as of June 30, 2023		$	39,260

(1)Amount includes commissions paid associated with share repurchases.

(2) For the six months ended June 30, 2023, the average purchase price was $12.08 per share.

As of June 30, 2023, the Company had $39.3 million remaining under the share repurchase program.

Accumulated Other Comprehensive Income/(Loss)

The following tables set forth the changes in accumulated other comprehensive income/(loss) by component (dollars in thousands).


	For the Three Months Ended
	June 30, 2023						June 30, 2022
(dollars in thousands)	Total		Available for Sale Securities		Cash Flow Hedges		Total		Available for Sale Securities		Cash Flow Hedges
Balance, Beginning of Period	$	(1,935)	$	(1,935)	$	—	$	—	$	—	$	—
Other comprehensive income/(loss)	636		636		—		—		—		—
Reclassification adjustment for amounts included in net income/(loss)	—		—		—		—		—		—
Balance, End of Period	$	(1,299)	$	(1,299)	$	—	$	—	$	—	$	—

	For the Six Months Ended
	June 30, 2023						June 30, 2022
	Total		Available for Sale Securities		Cash Flow Hedges		Total		Available for Sale Securities		Cash Flow Hedges
Balance, Beginning of Period	$	390	$	390	$	—	$	(62)	$	—	$	(62)
Other comprehensive income/(loss)	(1,012)		(1,012)		—		(220)		—		(220)
Reclassification adjustment for amounts included in net income/(loss)	(677)		(677)		—		282		—		282
Balance, End of Period	$	(1,299)	$	(1,299)	$	—	$	—	$	—	$	—

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)

Note 10 - Commitments and Contingencies

Unfunded Commitments Under Commercial Mortgage Loans

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had the below unfunded commitments to the Company's borrowers (dollars in thousands):

Funding Expiration June 30, 2022 December 31, 2021
2022 $ 13,956 $ 25,864
2023 119,831 123,860
2024 347,941 271,056
2025 and beyond 32,292 37,325
$ 514,020 $ 458,105


Funding Expiration	June 30, 2023		December 31, 2022
2023 (July - December)	$	32,764	$	73,921
2024	304,224		312,009
2025	96,319		70,429
2026 and beyond	9,214		9,629
	$	442,521	$	465,988

The borrowers are generally required to meet or maintain certain metrics in order to qualify for the unfunded commitment amounts.

Litigation and Regulatory Matters

The Company is not presently ~~involved~~named as a defendant in any material litigation arising outside the ordinary course of business. However, the Company is involved in routine litigation arising in the ordinary course of business, none of which the Company believes, individually or in the aggregate, will have a material impact on the Company’s financial condition, operating results or cash flows. Please refer to "Part II, Item 1. Legal Proceedings" for more details about the Company's ongoing litigation matters.

Note 11 - Related Party Transactions and Arrangements

Advisory Agreement Fees and Reimbursements

Pursuant to the Advisory Agreement, the Company is required to make the following payments and reimbursements to the Advisor:

•The Company reimburses the Advisor’s costs of providing services pursuant to the Advisory Agreement, except the salaries and benefits paid by the Advisor to the Company’s executive officers.

~~Table of Contents~~

~~FRANKLIN BSP REALTY TRUST, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2022~~

~~(Unaudited)~~

•The Company pays the Advisor, or its affiliates, a monthly asset management fee equal to one-twelfth of 1.5% of stockholders' equity as calculated pursuant to the Advisory Agreement.

•The Company will pay the Advisor an annual subordinated performance fee calculated on the basis of total return to stockholders, payable monthly in arrears, such that for any year in which total return on stockholders’ capital (as defined in the Advisory Agreement) exceeds 6.0% per annum, our Advisor will be entitled to 15.0% of the excess total return; provided that in no event will the annual subordinated performance fee payable to our Advisor exceed 10.0% of the aggregate total return for such year.

•The Company reimburses the Advisor for insourced expenses incurred by the Advisor on the Company‘s behalf related to selecting, evaluating, originating and acquiring investments in an amount up to 0.5% of the principal amount funded by the Company to originate or acquire commercial mortgage loans and up to 0.5% of the anticipated net equity funded by the Company to acquire real estate securities investments.

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FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)

The table below shows the costs incurred due to arrangements with our Advisor and its affiliates during the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 and the associated payable as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (dollars in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,				Payable as of					Three Months Ended June 30,				Six Months Ended June 30,				Payable as of
		2022		2021		2022		2021		June 30, 2022		December 31, 2021			2023		2022		2023		2022		June 30, 2023		December 31, 2022
Acquisition expenses (1)	Acquisition expenses (1)	$	319	$	169	$	634	$	322	$	—	$	—	Acquisition expenses (1)	$	283	$	319	$	661	$	634	$	—	$	—
Administrative services expenses	Administrative services expenses	3,048		3,078		6,401		6,552		3,048		—		Administrative services expenses	3,398		3,048		7,427		6,401		3,398		3,526
Asset management and subordinated performance fee	Asset management and subordinated performance fee	6,601		6,001		13,346		11,417		13,985		15,595		Asset management and subordinated performance fee	8,900		6,601		16,985		13,346		10,767		8,843
Other related party expenses (2)(3)	Other related party expenses (2)(3)	228		7		481		36		2,721		1,943		Other related party expenses (2)(3)	339		228		550		481		1,764		3,060
Total related party fees and reimbursements	Total related party fees and reimbursements	$	10,196	$	9,255	$	20,862	$	18,327	$	19,754	$	17,538	Total related party fees and reimbursements	$	12,920	$	10,196	$	25,623	$	20,862	$	15,929	$	15,429

_________________________________________________________

(1) Total acquisition expenses paid during the three months ended June 30, 2023 and 2022 ~~and 2021~~ were ~~$4.0~~$1.8 million and ~~$2.0~~$4.0 million, respectively, of which $1.5 million and $3.7 million, ~~and $1.8 million~~respectively, were capitalized within the commercial mortgage loans, held for investment ~~line~~and real estate securities, available for sale, measured at fair value lines of the consolidated balance sheets. Total acquisition expenses paid during the six months ended June 30, 2023 and 2022 ~~and 2021~~ were ~~$7.2~~$2.9 million and ~~$4.6~~$7.2 million, respectively, of which ~~$6.6~~$2.2 million and ~~$4.3~~$6.6 million were capitalized within the commercial mortgage loans, held for investment line of the consolidated balance sheets.

(2) These are related to reimbursable costs incurred related to the increase in loan origination activities and are included in Other expenses in the Company's consolidated statements of operations.

(3) As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the related party payables include ~~$3.2~~$1.6 million and ~~$1.9~~$2.9 million, respectively, of payments made by the Advisor to third party vendors on behalf of the Company. ~~As of June 30, 2022, the related party payables had been partially offset by $0.6 million of receivables due from the Advisor.~~

The payables as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, in the table above are included in Due to affiliates on the Company's consolidated balance sheets.

Other Transactions

~~Pursuant to a lending and security agreement with SBL, which was entered into in February 2020 and amended in March and August 2020,~~In the ~~Company may borrow up to $100.0 million at a rate~~third quarter of one-month LIBOR + 4.5%. The facility has a maturity of February 10, 2023 and is secured by a pledge of equity interests in certain of the Company’s subsidiaries. The Company incurred $0.3 million and $0.6 million in interest expense on the lending agreement with SBL for the three and six months ended June 30, 2022, respectively. As of June 30, 2022 there were no amounts outstanding under the lending agreement.

As of the beginning of 2022, SBL held 17,950 shares of the Company's outstanding shares of Series D Preferred Stock. On June 24, 2022, all 17,950 outstanding shares of Series D Preferred Stock were exchanged for an equal amount of shares of Series H Preferred Stock for no consideration (see Note 2 - Summary of Significant Accounting Policies).

~~Table of Contents~~

~~FRANKLIN BSP REALTY TRUST, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2022~~

~~(Unaudited)~~

~~In August~~ 2021, the Company and an affiliate of the Company entered into ~~a joint venture agreement and formed a joint venture entity,~~the Jeffersonville ~~Member, LLC (the "Jeffersonville JV")~~JV to acquire a $139.5 million triple net lease property in Jeffersonville, GA. The Company has a 79% interest in the Jeffersonville JV, while the affiliate has a 21% interest. The Company invested a total of $109.8 million, made up of $88.7 million in debt and $21.1 million in equity, representing 79% of the ownership interest in the Jeffersonville JV. The ~~affiliate~~affiliated fund made up the remaining $29.8 million composed of a $24.0 million mortgage note payable and ~~$5.7~~$5.8 million in ~~equity.~~non-controlling interest. The Company has majority control of Jeffersonville JV ~~with 79% ownership~~ and, therefore, consolidates the accounts of Jeffersonville JV oninto its consolidated ~~balance sheet.~~financial statements. The Company's $88.7 million mortgage note payable to Jeffersonville JV is eliminated in consolidation (see Note 7 -– Debt).

As discussed below, ~~in the first quarter of 2022,~~ pursuant to the 2021 Incentive Plan, the Company issued awards of restricted stock units to its officers and certain other personnel of the Advisor who provide services to the Company under the Advisory ~~Agreement (see~~Agreement. See Note 12 -– Share-based ~~Compensation).~~Compensation for further information regarding this agreement.

As of June 30, 2023 and December 31, 2022, our commercial mortgage loans, held for investment, includes an aggregate of ~~$122.3~~$123.6 million and $122.9 million, respectively, carrying value of loans to affiliates of our Advisor. The Company recognized $2.5 million and $4.8 million of interest income from these loans for the three and six months ended June 30, 2023, respectively, and $1.1 million and $1.8 million of interest income from these loans for the three and six months ended June 30, 2022, respectively, in the Company’s consolidated statements of operations.

~~As of June 30,~~In November 2022, ~~a beneficial owner of more than 10% of our outstanding common stock acquired~~the Company and an ~~aggregate of $21.3 million~~affiliate of the ~~notes issued under~~Company entered into the Walgreens JV to acquire 24 retail properties with various locations throughout the United States. The Company has a 76% interest in the Walgreens JV, while the affiliate has a 24% interest. The Company has majority control of Walgreens JV and, therefore, consolidates the accounts of Walgreens JV into our ~~$1.1 billion 2022-FL8 CLO Facility.~~consolidated financial statements. See Note 5 – Real Estate Owned for further information regarding this joint venture.

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2022~~2023

(Unaudited)

Note 12 - Share-based Compensation

Share Plans

The Company's ~~equity incentive plans provide~~2021 Incentive plan provides the Company with the ability to grant equity-based awards to its directors, officers and employees (if the Company ever has employees), employees of the Advisor and its affiliates, or certain of the Company's consultants, employees of entities that provide services to the Company, directors of the Advisor or of entities that provide services to the Company, the Advisor and its affiliates.

Under the Company's RSP, the total number of common shares granted shall not exceed 5% of the Company’s authorized common shares, and in any event, will not exceed 4.0 million shares (as such number may be adjusted for stock splits, stock distributions, combinations and similar events). The RSP will expire on February 7, 2023.

Under the Company's 2021 Incentive Plan, as of June 30, ~~2022,~~2023, there ~~were 5,007,893 shares~~were 4,526,704 shares of common stock remaining available for issuance. The Board may amend, suspend or terminate the 2021 Incentive Plan at any time; provided that no amendment, suspension or termination may impair rights or obligations under any outstanding award without the participant’s consent or violate the 2021 Incentive Plan’s prohibition on repricing. The Company's previous plan, the RSP, expired on February 7, 2023.

Service-based Restricted Stock and Restricted Stock Units

In ~~the first quarter of 2022, in~~ accordance with the 2021 Incentive Plan, the Company issued awards of RSUs to its officers and certain other personnel of the Advisor who provide services to the Company under the Advisory Agreement.

Restricted Stock and RSU activity issued under the RSP and 2021 Incentive Plan, respectively, for the ~~six-month period~~six months ended June 30, 2023 and 2022 isare summarized below:


		Number of shares	Weighted Avg Grant Date Fair Value			Shares Outstanding				Second Quarter 2023 Weighted Average Grant Date Fair Value
Unvested RSU awards outstanding at December 31, 2021		—	$	—
						For the Six Months Ended
						June 30, 2023		June 30, 2022
						RSP	2021 Incentive Plan	RSP	2021 Incentive Plan	Second Quarter 2023 Weighted Average Grant Date Fair Value
Unvested equity awards outstanding at beginning of period					Unvested equity awards outstanding at beginning of period	20,934	492,107	11,184	—
Grants	Grants	492,107	14.34		Grants	—	481,189	28,143	492,107
Forfeitures	Forfeitures	—	—		Forfeitures	—	—	—	—
Vested	Vested	—	—		Vested	(20,934)	(164,039)	(18,393)	—	14.34
Unvested RSU awards outstanding at June 30, 2022		492,107	$	14.34
Unvested equity awards outstanding at end of period					Unvested equity awards outstanding at end of period	—	809,257	20,934	492,107	$	14.18

~~During~~The Company recognized compensation expense associated with equity awards of $1.2 million and $2.3 million during the three and six months ended June 30, ~~2022,~~2023, respectively, compared to $0.6 million and $1.1 million during the ~~Company recognized~~ ~~compensation expense associated with the RSUs of $0.6~~three and ~~$1.0 million,~~six months ended June 30, 2022, respectively, which is included in ~~Other expenses~~Share-based compensation expense on the consolidated statements of operations. Unrecognized estimated compensation expense for these awards totaled ~~$6.1~~$9.6 million atas of June 30, ~~2022,~~2023 to be expensed over a weighted average period of ~~1.7~~1.5 years. The fair value of equity awards that vested during the six months ended June 30, 2023 was $2.7 million.

Note 13 - Fair Value of Financial Instruments

GAAP establishes a hierarchy of valuation techniques based on the observability of inputs used in measuring financial instruments at fair values. GAAP establishes market-based or observable inputs as the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs. The three levels of the hierarchy are described below:

•Level I - Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

•Level II - Inputs (other than quoted prices included in Level I) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

•Level III - Unobservable inputs that reflect the entity's own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)

The determination of where an asset or liability falls in the above hierarchy requires significant judgment and factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter.

~~Table of Contents~~

~~FRANKLIN BSP REALTY TRUST, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2022~~

~~(Unaudited)~~

The Company has implemented valuation control processes to validate the fair value of the Company's financial instruments measured at fair value including those derived from pricing models. These control processes are designed to assure that the values used for financial reporting are based on observable inputs wherever possible. In the event that observable inputs are not available, the control processes are designed to assure that the valuation approach utilized is appropriate and consistently applied and the assumptions are reasonable.

Financial Instruments Measured at Fair Value on a Recurring Basis

CRE CLO bonds, recorded in real estate securities, available for sale, measured at fair value on the consolidated balance

sheets are valued utilizing both observable and unobservable market inputs. These factors include projected future cash flows, ratings, subordination levels, vintage, remaining lives, credit issues, and recent trades of similar real estate securities. Depending upon the significance of the fair value inputs used in determining these fair values, these real estate securities are classified in either Level II or Level III of the fair value hierarchy. The Company obtains third party pricing for determining the fair value of each CRE CLO investment, resulting in a Level II classification.

Real estate securities classified as trading, RMBS, are measured at fair value by utilizing a third party pricing service to obtain a current estimated ~~liquid~~ price of the securities. The third party pricing service utilizes relevant market information and interest rate movements and applies its internal pricing application to the evaluation to test against internal tolerances and parameters. The RMBS are classified in Level IIIII of the fair value hierarchy.

Commercial mortgage loans held for sale, measured at fair value in the Company's TRS are initially recorded at transaction ~~proceeds,~~price, which are considered to be the best initial estimate of fair value. The Company engaged the services of a third party independent valuation firm to determine fair value of certain investments held by the Company. Fair value is determined using a discounted cash flow model that primarily considers changes in interest rates and credit spreads, weighted average life and current performance of the underlying collateral. Commercial mortgage loans held for sale, measured at fair value that are originated in the last month of the reporting period are held and marked to the transaction ~~proceeds.~~price. The Company classified the commercial mortgage loans held for sale, measured at fair value as Level III.

Other real estate investments, measured at fair value on the consolidated balance sheets are valued using unobservable inputs. The Company engaged the services of a third party independent valuation firm to determine fair value of certain investments, including preferred equity investments, held by the Company. Fair value is determined using a discounted cash flow model that primarily considers changes in interest rates and credit spreads, weighted average life and current performance of the underlying collateral. The Company classified the other real estate investments, measured at fair value as Level III.

The fair value for Treasury note futures is derived using market prices. Treasury note futures trade on the Chicago Mercantile Exchange (“CME”). The instruments are a variety of recently issued 10-year U.S. Treasury notes. The future contracts are liquid and are centrally cleared through the CME. Treasury note futures are generally categorized inas Level III of the fair value hierarchy.

The fair value for credit default swaps and interest rate swaps contracts are derived using pricing models that are widely accepted by marketplace participants. Credit default swaps and some interest rate swaps are traded in the ~~OTC~~over the counter ("OTC") market. The pricing models take into account multiple inputs including specific contract terms, interest rate yield curves, interest rates, credit curves, recovery rates, and/or current credit spreads obtained from swap counterparties and other market participants. Most inputs into the models are not subjective as they are observable in the marketplace or set per the contract. Valuation is primarily determined by the difference between the contract spread and the current market spread. The contract spread (or rate) is generally fixed and the market spread is determined by the credit risk of the underlying debt or reference entity. If the underlying indices are liquid and the OTC market for the current spread is active, credit default swaps and interest rate swaps are categorized in Level II of the fair value hierarchy. If the underlying indices are illiquid and the OTC market for the current spread is not active, credit default swaps are categorized in Level III of the fair value hierarchy. The credit default swaps and interest rate swaps are generally categorized inas Level II of the fair value hierarchy.

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)

The fair value of exchange-traded swap agreements economically hedging RMBS repurchase agreements are calculated using the net discounted future fixed cash payments and the discounted future variable cash receipts which are based on expected future interest rates derived from observable market interest rate curves. The Company also incorporates both its own nonperformance risk and its counterparties’ nonperformance risk in determining fair value. In considering the effect of nonperformance risk, the Company considered the impact of netting and credit enhancements, such as collateral postings and guarantees, and has concluded that counterparty risk is not significant to the overall valuation. Interest rate swap agreements economically hedging the Company's RMBS repurchase agreements are measured at fair value on a recurring basis primarily using Level II inputs. The fair value of these derivatives ~~are~~is calculated including accrued interest and net of variation margin amounts received or paid through the exchange, resulting in ~~separately presenting on the balance sheet~~ a significantly reduced fair value amount representing the unsettled fair value of these ~~derivatives.~~derivatives on the consolidated balance sheets.

A review of the fair value hierarchy classification is conducted on a quarterly basis. Changes in the type of inputs may result in a reclassification for certain assets or liabilities. The Company's policy with respect to transfers between levels of the fair value hierarchy is to recognize transfers into and out of each level as of the beginning of the reporting period. There were no material transfers between levels within the fair value hierarchy for the period ended June 30, ~~2022 and~~2023. Material transfers between levels within the fair value hierarchy during the period ended December 31, ~~2021.~~

~~Table~~2022 were specifically related to the transfer of ~~Contents~~

~~FRANKLIN BSP REALTY TRUST, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2022~~

~~(Unaudited)~~

ARM Agency Securities from Level II to Level III.

The following table presents the Company's financial instruments carried at fair value on a recurring basis in the consolidated balance sheets by its level in the fair value hierarchy as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (dollars in thousands):


		Total		Level I		Level II		Level III			Total		Level I		Level II		Level III
June 30, 2022
June 30, 2023										June 30, 2023
Assets, at fair value	Assets, at fair value									Assets, at fair value

Real estate securities, available for sale, measured at fair value										Real estate securities, available for sale, measured at fair value	$	191,849	$	—	$	191,849	$	—
Real estate securities, trading, measured at fair value	Real estate securities, trading, measured at fair value	$	270,381	$	—	$	270,381	$	—	Real estate securities, trading, measured at fair value	125,215		—		—		125,215
Commercial mortgage loans, held for sale, measured at fair value	Commercial mortgage loans, held for sale, measured at fair value	129,275		—		—		129,275		Commercial mortgage loans, held for sale, measured at fair value	34,250		—		—		34,250
Derivatives instruments, measured at fair value:
Credit default swaps		33		—		33		—

Interest rate swaps	Interest rate swaps	2,589		—		2,589		—		Interest rate swaps	251		—		251		—

Total assets, at fair value	Total assets, at fair value	$	402,278	$	—	$	273,003	$	129,275	Total assets, at fair value	$	351,564	$	—	$	192,099	$	159,465

Liabilities, at fair value	Liabilities, at fair value									Liabilities, at fair value
Derivatives instruments, measured at fair value:

Interest rate swaps		$	510	$	—	$	510	$	—
Credit default swaps										Credit default swaps	$	299	$	—	$	299	$	—

Total liabilities, at fair value	Total liabilities, at fair value	$	510	$	—	$	510	$	—	Total liabilities, at fair value	$	299	$	—	$	299	$	—

December 31, 2021
December 31, 2022										December 31, 2022
Assets, at fair value	Assets, at fair value									Assets, at fair value

Real estate securities, available for sale, measured at fair value										Real estate securities, available for sale, measured at fair value	$	221,025	$	—	$	221,025	$	—
Real estate securities, trading, measured at fair value	Real estate securities, trading, measured at fair value	$	4,566,871	$	—	$	4,566,871	$	—	Real estate securities, trading, measured at fair value	235,728		—		—		235,728
Commercial mortgage loans, held for sale, measured at fair value	Commercial mortgage loans, held for sale, measured at fair value	34,718		—		—		34,718		Commercial mortgage loans, held for sale, measured at fair value	15,559		—		—		15,559
Other real estate investments, measured at fair value		2,074		—		—		2,074

Derivatives instruments, measured at fair value:
Treasury note futures										Treasury note futures	91		91		—		—
Interest rate swaps	Interest rate swaps	312		—		312		—		Interest rate swaps	90		—		90		—
Treasury note futures		124		—		124		—
Credit default swaps										Credit default swaps	234		—		234		—
Total assets, at fair value	Total assets, at fair value	$	4,604,099	$	—	$	4,567,307	$	36,792	Total assets, at fair value	$	472,727	$	91	$	221,349	$	251,287

Liabilities, at fair value	Liabilities, at fair value									Liabilities, at fair value
Derivatives instruments, measured at fair value:

Credit default swaps	Credit default swaps	$	1,142	$	—	$	1,142	$	—	Credit default swaps	$	64	$	—	$	64	$	—

Unsecured debt-related interest rate swap agreements		31,153		—		31,153		—
Total liabilities, at fair value	Total liabilities, at fair value	$	32,295	$	—	$	32,295	$	—	Total liabilities, at fair value	$	64	$	—	$	64	$	—

Both observable and unobservable inputs may be used to determine the fair value of positions that the Company has classified within the Level III category. As a result, the unrealized gains and losses for assets and liabilities within the Level III category may include changes in fair value that were attributable to both observable and unobservable inputs. The following table summarizes the valuation method and significant unobservable inputs used for the Company’s financial instruments that are categorized within Level III of the fair value hierarchy as of June 30, 2023 and December 31, 2022 (dollars in thousands).

Asset Category Fair Value Valuation Methodologies
Unobservable Inputs (1)
Weighted Average (2)
Range
June 30, 2022
Commercial mortgage loans, held for sale, measured at fair value $ 129,275 Discounted Cash Flow Yield 3.1% 2.7% - 6.3%
December 31, 2021
Commercial mortgage loans, held for sale, measured at fair value $ 34,718 Discounted Cash Flow Yield 3.4% 3.2% - 4.2%
Other real estate investments, measured at fair value 2,074 Discounted Cash Flow Yield 10.9% 9.9% - 11.9%

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)

The following table contains the Level III inputs used to value assets and liabilities on a recurring basis or where the Company discloses fair value as of June 30, 2023:


Asset Category	Fair Value		Valuation Methodologies	Unobservable Inputs (1)	Weighted Average (2)	Range
June 30, 2023
Commercial mortgage loans, held for sale, measured at fair value	$	34,250	Discounted Cash Flow	Yield	8.5%	8.2% - 8.7%
Real estate securities, trading, measured at fair value	125,215		Discounted Cash Flow	Yield	3.7%	2.0% - 7.5%


December 31, 2022
Commercial mortgage loans, held for sale, measured at fair value	$	15,559	Discounted Cash Flow	Yield	7.2%	6.3% - 7.7%
Real estate securities, trading, measured at fair value	235,728		Discounted Cash Flow	Yield	3.3%	2.0% - 6.5%

________________________________________________________

(1) In determining certain inputs, the Company evaluates a variety of factors including economic conditions, industry and market developments, market valuations of comparable companies and company specific developments including exit strategies and realization opportunities. The Company has determined that market participants would take these inputs into account when valuing the investments.

(2) Inputs were weighted based on the fair value of the investments included in the range.

~~Table of Contents~~

~~FRANKLIN BSP REALTY TRUST, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2022~~

~~(Unaudited)~~

Increases or decreases in any of the above unobservable inputs in isolation would result in a lower or higher fair value measurement for such assets. The following table presents additional information about the Company’s financial instruments which are measured at fair value on a recurring basis as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 for which the Company has used Level III inputs to determine fair value (dollars in thousands):


		June 30, 2022					June 30, 2023
		Commercial Mortgage Loans, held for sale, measured at fair value		Other Real Estate Investments, measured at fair value			Commercial Mortgage Loans, held for sale, measured at fair value		Real estate securities, trading, measured at fair value
Beginning balance, January 1, 2022		$	34,718	$	2,074
Beginning balance, January 1, 2023						Beginning balance, January 1, 2023	$	15,559	$	235,728
Transfers into Level III (1)	Transfers into Level III (1)	—		—		Transfers into Level III (1)	—		—
Total realized and unrealized gain/(loss) included in earnings:	Total realized and unrealized gain/(loss) included in earnings:					Total realized and unrealized gain/(loss) included in earnings:
Realized gain/(loss) on sale of commercial mortgage loans, held for sale, and other real estate investments		56		(33)
Realized gain/(loss) on sale of commercial mortgage loans, held for sale						Realized gain/(loss) on sale of commercial mortgage loans, held for sale	2,094		—
Realized gain/(loss) on sale of available for sale trading securities						Realized gain/(loss) on sale of available for sale trading securities	—		—
Unrealized gain/(loss) on commercial mortgage loans, held for sale and other real estate investments	Unrealized gain/(loss) on commercial mortgage loans, held for sale and other real estate investments	(3,736)		4		Unrealized gain/(loss) on commercial mortgage loans, held for sale and other real estate investments	44		—
Net accretion		—		—
Trading gain/(loss)						Trading gain/(loss)	—		2,022

Purchases	Purchases	336,545		—		Purchases	76,250		—
Sales / paydowns	Sales / paydowns	(238,308)		(2,045)		Sales / paydowns	(59,697)		(112,535)

Transfers out of Level III (1)	Transfers out of Level III (1)	—		—		Transfers out of Level III (1)	—		—
Ending Balance, June 30, 2022		$	129,275	$	—

		December 31, 2021
		Commercial Mortgage Loans, held for sale, measured at fair value		Other Real Estate Investments, measured at fair value
Beginning balance, January 1, 2021		$	67,649	$	2,522
Transfers into Level III (1)		—		—
Total realized and unrealized gain/(loss) included in earnings:
Realized gain/(loss) on sale of commercial mortgage loans, held for sale		24,208		—
Unrealized gain/(loss) on commercial mortgage loans, held for sale and other real estate investments		469		(19)
Net accretion		—		(3)
Purchases		420,673		—
Sales / paydowns		(478,281)		(426)

Transfers out of Level III (1)		—		—
Ending Balance, December 31, 2021		$	34,718	$	2,074
Ending Balance, June 30, 2023						Ending Balance, June 30, 2023	$	34,250	$	125,215

(1) There were no transfers in or out of Level III as of June 30, 2023.

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)


	December 31, 2022
	Commercial Mortgage Loans, held for sale, measured at fair value		Real estate securities, trading, measured at fair value		Other real estate investments, measured at fair value
Beginning balance, January 1, 2022	$	34,718	$	—	$	2,074
Transfers into Level III (1)	—		4,566,871		—
Total realized and unrealized gain/(loss) included in earnings:
Realized gain/(loss) on sale of commercial mortgage loans, held for sale	2,358		—		—
Realized gain/(loss) on sale of available for sale trading securities	—		—		(33)
Unrealized gain/(loss) on commercial mortgage loans, held for sale and other real estate investments	(511)		—		4
Trading gain/(loss)	—		(119,220)		—
Net accretion	—		—		—
Purchases	366,692		—		—
Sales / paydowns	(387,698)		(4,211,923)		(2,045)

Transfers out of Level III	—		—		—
Ending Balance, December 31, 2022	$	15,559	$	235,728	$	—

(1) Transfers ~~in and transfers out~~into Level III include transfers ~~between Commercial mortgage loans, held for sale and Commercial mortgage loans, held for investment.~~related to ARM Agency Securities transferred from Level II.

The fair value of cash and cash equivalents and restricted cash are measured using observable quoted market prices, or Level I inputs and their carrying value approximates their fair value. The fair value of borrowings under repurchase agreements approximate their carrying value on the consolidated balance sheets due to their short-term nature and are measured using Level IIIII inputs.

4647

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2022~~2023

(Unaudited)

Financial Instruments Measured at Fair Value on a Nonrecurring Basis

Real Estate Owned, held for sale, recorded in Real estate owned, held for sale on the consolidated balance sheets are valued at fair value on a non-recurring basis in accordance with ASC 820. Under ASC 820, the Company may utilize the income, market or cost approach (or combination thereof) to determine the fair value of real estate owned. The Company deems the inputs used in these approaches to be unobservable quantitative inputs. Therefore, the Company classifies the fair value of real estate owned, held for sale within Level II of the fair value hierarchy. As of June 30, 2023, the Company had one office property located in St. Louis, MO measured at fair value on a nonrecurring basis on our consolidated balance sheets with a fair value less estimated costs to sell of $11.8 million. During the three months ended June 30, 2023, the carrying value of the office property was written down to its estimated fair value less estimated cost to sell utilizing the market approach with an unobservable input based on the purchase price defined in a purchase and sale agreement. As a result, the Company recorded a loss of $1.9 million included in Gain/(loss) on other real estate investments in the Company's consolidated financial statements of operations. As of December 31, 2022, the Company had no assets measured at fair value on a nonrecurring basis on our consolidated balance sheets.

Financial Instruments Not Measured at Fair Value

The fair values of the Company's commercial mortgage loans, held for investment and collateralized loan obligations, which are not reported at fair value on the consolidated balance sheets are reported below as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (dollars in thousands):


				June 30, 2022				December 31, 2021							June 30, 2023				December 31, 2022
			Level	Carrying Amount (1)		Fair Value		Carrying Amount (1)		Fair Value				Level	Carrying Amount (1)		Fair Value		Carrying Amount (1)		Fair Value
Commercial mortgage loans, held for investment	Commercial mortgage loans, held for investment	Asset	III	$	5,229,560	$	5,227,413	$	4,226,888	$	4,249,118	Commercial mortgage loans, held for investment	Asset	III	$	5,062,511	$	5,063,613	$	5,269,776	$	5,278,495
Collateralized loan obligations	Collateralized loan obligations	Liability	III	3,203,577		3,133,894		2,162,190		2,181,571		Collateralized loan obligations	Liability	III	3,031,984		2,969,339		3,121,983		3,055,810
Mortgage note payable	Mortgage note payable	Liability	III	23,998		23,998		23,998		23,998		Mortgage note payable	Liability	III	23,998		23,998		23,998		23,998
Other financing and loan participation - commercial mortgage loans	Other financing and loan participation - commercial mortgage loans	Liability	III	47,181		47,181		37,903		37,903		Other financing and loan participation - commercial mortgage loans	Liability	III	82,348		82,348		76,301		76,301
Unsecured debt	Unsecured debt	Liability	III	98,645		75,500		148,594		125,400		Unsecured debt	Liability	III	81,246		63,300		98,695		66,300

________________________________________________________

(1) The carrying value is gross of ~~$47.0~~$38.9 million and ~~$15.8~~$40.8 million of allowance for credit losses as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

Repurchase agreements - commercial mortgage loans of $695.0 million and $680.9 million as of June 30, 2023 and December 31, 2022, respectively, and repurchase agreements - real estate securities of $290.0 million and $440.0 million as of June 30, 2023 and December 31, 2022, respectively, are not carried at fair value and does not include accrued interest expense, which are presented in Note 7 – Debt. For these instruments, carrying value generally approximates fair value and are classified as Level III.

The fair value of the commercial mortgage loans, held for investment is estimated using a discounted cash flow analysis, based on the Advisor's experience with similar types of investments. The Company estimates the fair value of the collateralized loan obligations using external broker quotes. The ~~fair value of the other financing and loan participation-commercial mortgage loans is generally estimated using a discounted cash flow analysis. At June 30, 2022, the~~ Mortgage note payable was recorded at transaction proceeds, which are considered to be the best initial estimate of fair value. The fair value of the other financing and loan participation-commercial mortgage loans is generally estimated using a discounted cash flow analysis. The fair value of the unsecured debt is based on discounted cash flows using Company estimates for market yields on similarly structured debt instruments.

~~Table of Contents~~

~~FRANKLIN BSP REALTY TRUST, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2022~~

~~(Unaudited)~~

Note 14 - Derivative Instruments

The Company uses derivative instruments primarily to manage the fair value variability of fixed rate assets caused by interest rate fluctuations and overall portfolio market risk.

~~As of June 30, 2022, the net premiums received on derivative instrument assets were $0.5 million.~~

The following derivative instruments were outstanding as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (dollars in thousands):

June 30, 2022 December 31, 2021
Fair Value Fair Value
Contract type Notional
Assets
Liabilities Notional
Assets
Liabilities
Credit default swaps $ 45,000 $ 1,431 $ — $ 47,000 $ — $ 1,142
Interest rate swaps (1)
138,850 1,191 — 3,649,500 312 —
Interest rate swaps (1)
139,500 — 510 — — —
Interest rate swaps on unsecured debt — — — 100,000 — 31,153
Treasury note futures — — — 360 124 —
Total $ 323,350 $ 2,622 $ 510 $ 3,796,860 $ 436 $ 32,295
~~________________________________________________________~~

~~(1)~~ ~~As of~~ ~~June 30, 2022, asset vs. liability notional breakout for interest rate swaps assets was $138.9 million and $139.5 million, respectively.~~

The following table indicates the net realized and unrealized gains and losses on derivatives, by primary underlying risk exposure, as included in loss on derivative instruments in the consolidated statements of operations for the three and six months ended June 30, 2022 and June 30, 2021:

Three Months Ended June 30, 2022 Six Months Ended June 30, 2022
Contract type Unrealized (Gain)/Loss Realized (Gain)/Loss Unrealized (Gain)/Loss Realized (Gain)/Loss
Credit default swaps $ (654) $ 151 $ (555) $ 47
Interest rate swaps 10,081 (25,344) 14,821 (58,331)
Treasury note futures — — 124 (939)
Total $ 9,427 $ (25,193) $ 14,390 $ (59,223)
Three Months Ended June 30, 2021 Six Months Ended June 30, 2021
Contract type Unrealized (Gain)/Loss Realized (Gain)/Loss Unrealized (Gain)/Loss Realized (Gain)/Loss
Credit default swaps $ (15) $ 188 $ (178) $ 643
Interest rate swaps 2,169 (357) 1,304 (1,278)
Treasury note futures 1,009 (112) (72) (1,624)
Total $ 3,163 $ (281) $ 1,054 $ (2,259)

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2022~~2023

(Unaudited)


	June 30, 2023						December 31, 2022
			Fair Value						Fair Value
Contract type	Notional		Assets		Liabilities		Notional		Assets		Liabilities
Credit default swaps	$	20,000	$	—	$	299	$	18,000	$	234	$	64
Interest rate swaps	28,700		251		—		9,800		90		—
Treasury note futures	—		—		—		3,500		91		—
Total	$	48,700	$	251	$	299	$	31,300	$	415	$	64

The following table ~~includes information regarding components of unsecured debt-related effects~~indicates the net realized and unrealized gains and losses on ~~interest expense and other comprehensive income for the three months ended June 30, 2022 and June 30, 2021:~~

~~Three Months Ended June 30, 2022~~

~~Three Months Ended June 30, 2021~~

~~Six Months Ended June 30, 2022~~

~~Six Months Ended June 30, 2021~~

~~Related to the statement of operations~~

~~Amount of net loss reclassified from other comprehensive income~~ ~~(1)~~

—

~~(282)~~

—

~~Related to other comprehensive income~~

~~Amount of gain/(loss) recognized in other comprehensive income~~

—

~~(220)~~

—

~~________________________________________________________~~

~~(1)~~ ~~Included~~derivatives, by primary underlying risk exposure, as included in ~~interest expense~~Loss on derivative instruments in the ~~Company's~~ consolidated statements of operations

~~The Company did not hold any unsecured-debt related swaps at quarter-end June 30, 2022.~~

The Company's portfolio of derivatives additionally hedges the variability of the underlying benchmark interest rate of current and forecasted 30- to 90-day repurchase agreements. The Company attempts to mitigate exposure to higher interest rates primarily by entering into pay-fixed, receive-variable, interest rate swap agreements for terms between eighteen months and three years. From an economic perspective, this hedge relationship establishes a relatively stable fixed rate on related debt because the variable-rate payments received on the swap agreements offset a significant portion of the interest accruing on the debt, leaving the fixed-rate swap payments as the Company’s effective borrowing rate. Additionally, changes in fair value of these derivatives tend to offset opposing changes in fair value of the Company’s residential mortgage investments that can occur in response to changes in market interest rates.

~~During~~ the three and six months ended June 30, ~~2022, the Company entered into swap agreements with notional amounts totaling $200 million~~2023 and $1.3 billion, respectively, requiring fixed-rate interest payments averaging 2.84% and 1.36%. No swaps had matured during this time. During the three and six months ended June 30, 2022, the Company terminated $1.8 billion and $5.4 billion notional amount of derivatives related to the ARM portfolio, respectively, requiring fixed-rate interest payments averaging 0.75% and 0.57%. At June 30, 2022, the Company held one trading securities portfolio financing-related swap position maturing in the second quarter of 2024 with a notional amount of $100 million requiring a fixed-rate interest payment of 3.08%.2022:

~~0Interest~~


	Three Months Ended June 30, 2023				Three Months Ended June 30, 2022
Contract type	Unrealized Gain/(Loss)		Realized Gain/(Loss)		Unrealized Gain/(Loss)		Realized Gain/(Loss)
Credit default swaps	$	(60)	$	14	$	654	$	(151)
Interest rate swaps	453		559		(10,081)		25,344


Total	$	393	$	573	$	(9,427)	$	25,193

	Six Months Ended June 30, 2023				Six Months Ended June 30, 2022
Contract type	Unrealized Gain/(Loss)		Realized Gain/(Loss)		Unrealized Gain/(Loss)		Realized Gain/(Loss)
Credit default swaps	$	3	$	14	$	555	$	(47)
Interest rate swaps	161		559		(14,821)		58,331
Treasury note futures	(91)		44		(124)		939

Total	$	73	$	617	$	(14,390)	$	59,223

Interest rate swap agreements are measured at fair value on a recurring basis primarily using Level ~~Two~~II Inputs in accordance with ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820). In determining fair value estimates for swaps, ~~The~~the Company utilizes the standard methodology of netting the discounted future fixed cash payments and the discounted future variable cash receipts which are based on expected future interest rates derived from observable market interest rate curves. The Company also incorporates both its own nonperformance risk and its counterparties’ nonperformance risk in determining fair value. In considering the effect of nonperformance risk, the Company considered the impact of netting and credit enhancements, such as collateral postings and guarantees, and has concluded that counterparty risk is not significant to the overall valuation.

The fair value of exchange-traded swap agreements hedging repurchase agreements is calculated including accrued interest and net of variation margin amounts received or paid through the exchange, resulting in separately presenting on the balance sheet a fair value amount representing the unsettled fair value of these derivatives. Non-exchange traded swap agreements held as cash flow hedges of unsecured debt are reported at fair value calculated excluding accrued interest. At June 30, 2022, cash collateral receivable from derivative counterparties includes initial margin for all derivatives and variation margin for non-exchange traded derivatives. Accrued interest for non-exchange traded swap agreements is included in accounts payable and accrued expenses in the Company's consolidated balance sheets.

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2022~~2023

(Unaudited)

Note 15 - Offsetting Assets and Liabilities

The Company's consolidated balance sheets used a gross presentation of repurchase agreements and collateral pledged. The table below provides a gross presentation, the effects of offsetting and a net presentation of the Company's derivative instruments and repurchase agreements within the scope of ASC 210-20, Balance Sheet—Offsetting, as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (dollars in thousands):


		Gross Amounts of		Gross Amounts Offset on the		Net Amount of Assets Presented on the		Gross Amounts Not Offset on the Balance Sheet														Gross Amounts Not Offset on the Balance Sheet
Assets	Assets	Recognized Assets		Balance Sheet		Balance Sheet			Financial Instruments		Cash Collateral (1)		Net Amount		Assets	Gross Amounts of Recognized Assets		Gross Amounts Offset on the Balance Sheet		Net Amount of Assets Presented on the Balance Sheet			Financial Instruments		Cash Collateral (1)		Net Amount
June 30, 2022
June 30, 2023															June 30, 2023
Derivative instruments, at fair value	Derivative instruments, at fair value	$	2,622	$	—	$	2,622		$	—	$	—	$	2,622	Derivative instruments, at fair value	$	251	$	—	$	251		$	—	$	—	$	251
December 31, 2021
December 31, 2022															December 31, 2022
Derivative instruments, at fair value	Derivative instruments, at fair value	$	436	$	—	$	436		$	—	$	—	$	436	Derivative instruments, at fair value	$	415	$	—	$	415		$	—	$	—	$	415

_________________________________________________________

Gross Amounts of Gross Amounts Offset on the Net Amount of Liabilities Presented on the Gross Amounts Not Offset on the Balance Sheet
Liabilities Recognized Liabilities Balance Sheet Balance Sheet Financial Instruments
Cash Collateral (1)
Net Amount
June 30, 2022
Repurchase agreements - commercial mortgage loans $ 832,034 $ — $ 832,034 $ 1,217,398 $ 5,010 $ —
Repurchase agreements - real estate securities 293,288 — 293,288 319,191 — —
Derivative instruments, at fair value 510 — 510 — 4,168 —
December 31, 2021
Repurchase agreements - commercial mortgage loans $ 1,019,600 $ — $ 1,019,600 $ 1,460,317 $ 5,015 $ —
Repurchase agreements - real estate securities 4,178,784 — 4,178,784 4,370,239 — —
Derivative instruments, at fair value 32,295 — 32,295 — 64,393 —
See notes below.


							Gross Amounts Not Offset on the Balance Sheet
Liabilities	Gross Amounts of Recognized Liabilities		Gross Amounts Offset on the Balance Sheet		Net Amount of Liabilities Presented on the Balance Sheet		Financial Instruments		Cash Collateral (1)		Net Amount
June 30, 2023
Repurchase agreements - commercial mortgage loans	$	695,039	$	—	$	695,039	$	695,039	$	—	$	—
Repurchase agreements - real estate securities	289,993		—		289,993		289,993		—		—
Derivative instruments, at fair value	299		—		299		—		299		—
December 31, 2022
Repurchase agreements - commercial mortgage loans	$	680,859	$	—	$	680,859	$	680,859	$	—	$	—
Repurchase agreements - real estate securities	440,008		—		440,008		440,008		—		—
Derivative instruments, at fair value	64		—		64		—		64		—

_________________________________________________________

(1) Included in Restricted cash in the Company's consolidated balance sheets.

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)

Note 16 - Segment Reporting

The Company conducts its business through the following ~~reporting~~ segments:

•The real estate debt business focuses on originating, acquiring and asset managing commercial real estate debt investments, including first ~~mortgage loans,~~mortgages, subordinate mortgages, mezzanine loans and participations in such loans.

•The commercial real estate conduit business operated through the Company's TRS, which is focused on generating risk-adjusted returns by originating and subsequently selling fixed-rate commercial real estate loans into the CMBS securitization market at a profit. The TRS may also hold certain mezzanine loans that don't qualify as good REIT assets due to any potential loss from foreclosure.

•The real estate owned business represents real estate acquired by the Company through foreclosure, deed in lieu of foreclosure, or purchase.

Profit or loss on segment operations is measured by Net income/(loss) included in the consolidated statements of operations. The following table represents the Company's operations by segment for the three and six months ended June 30, 2023 and 2022 (dollars in thousands):















Three Months Ended June 30, 2023	Total		Real Estate Debt and Other Real Estate Investments		Real Estate Securities		TRS		Real Estate Owned
Interest income	$	152,892	$	147,258	$	4,012	$	748	$	874
Revenue from real estate owned	6,438		—		—		—		6,438
Interest expense	75,299		70,963		3,542		301		493
Net income/(loss)	39,644		46,742		(569)		(7,378)		849
Total assets as of June 30, 2023	5,985,349		5,317,608		323,429		80,351		263,961
Three Months Ended June 30, 2022
Interest income	$	70,213	$	62,801	$	4,891	$	2,521	$	—
Revenue from real estate owned	2,312		—		—		—		2,312
Interest expense	32,807		29,980		2,458		131		238
Net income/(loss)	(25,709)		(11,564)		(14,913)		(5)		773
Total assets as of December 31, 2022	6,203,601		5,444,152		474,231		63,307		221,911

Six Months Ended June 30, 2023	Total		Real Estate Debt and Other Real Estate Investments		Real Estate Securities		TRS		Real Estate Owned
Interest income	$	283,428	$	273,207	$	7,580	$	1,070	$	1,571
Revenue from real estate owned	9,750		—		—		—		9,750
Interest expense	146,374		137,921		6,988		517		948
Net income/(loss)	83,483		90,273		2,726		(10,692)		1,176
Total assets as of June 30, 2023	5,985,349		5,317,608		323,429		80,351		263,961
Six Months Ended June 30, 2022
Interest income	$	145,471	$	118,488	$	23,776	$	3,207	$	—
Revenue from real estate owned	4,624		—		—		—		4,624
Interest expense	55,287		49,444		5,074		337		432
Net income/(loss)	(48,216)		10,528		(60,224)		(112)		1,592
Total assets as of December 31, 2022	6,203,601		5,444,152		474,231		63,307		221,911

For the purposes of the table above, management fees have been allocated to the business segments using an agreed upon percentage of each respective segment's prior period equity. Administrative fees have been allocated to the business segments using a percentage derived from taking the respective business segment's prior period equity as a percent of consolidated equity and multiplying it by the Company's total administrative fee.

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2022~~2023

(Unaudited)

~~The following table represents the Company's operations by segment for the three and six months ended June 30, 2022 and June 30, 2021 (dollars in thousands):~~

Three Months Ended June 30, 2022 Total Real Estate Debt and Other Real Estate Investments Real Estate Securities TRS Real Estate Owned
Interest income $ 70,213 $ 62,801 $ 4,891 $ 2,521 $ —
Revenue from real estate owned 2,312 — — — 2,312
Interest expense 32,807 29,980 2,458 131 238
Net income/(loss) (25,709) (11,564) (14,913) (5) 773
Total assets as of June 30, 2022 6,261,906 5,599,132 288,110 233,331 141,333
Three Months Ended June 30, 2021
Interest income $ 48,985 $ 48,023 $ 36 $ 926 $ —
Revenue from real estate owned 716 — — — 716
Interest expense 12,637 11,722 279 248 388
Net income/(loss) 30,010 27,066 (1) 1,911 1,034
Total assets as of December 31, 2021 9,474,701 4,205,883 5,054,394 72,840 141,584
Six Months Ended June 30, 2022 Total Real Estate Debt and Other Real Estate Investments Real Estate Securities TRS Real Estate Owned
Interest income $ 145,471 $ 118,488 $ 23,776 $ 3,207 $ —
Revenue from real estate owned 4,624 — — — 4,624
Interest expense 55,287 49,444 5,074 337 432
Net income/(loss) (48,216) 10,528 (60,224) (112) 1,592
Total assets as of June 30, 2022 6,261,906 5,599,132 288,110 233,331 141,333
Six Months Ended June 30, 2021
Interest income $ 91,222 $ 88,780 $ 460 $ 1,982 $ —
Revenue from real estate owned 1,432 — — — 1,432
Interest expense 24,006 22,297 460 580 669
Net income/(loss) 60,156 50,097 (455) 9,450 1,064
Total assets as of December 31, 2021 9,474,701 4,205,883 5,054,394 72,840 141,584

For the purposes of the table above, any expenses not associated with a specific segment have been allocated to the business segments using a percentage derived by using the sum of commercial mortgage loans originated during the year as the denominator and commercial mortgage loans, held for investment, net of allowance and commercial mortgage loans, held for sale, measured at fair value as numerator.

Note 17 - Subsequent Events

~~The Company has evaluated subsequent events through~~Subsequent to the ~~filing of this Quarterly Report on Form 10-Q. Based on this evaluation, there were no subsequent events from~~quarter ended June 30, ~~2022 through~~2023, the ~~date the financial statements were issued.~~following event took place:

FL5 CLO Redemption - see Note 7 - Debt for details.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the accompanying financial statements of Franklin BSP Realty Trust, Inc. the notes thereto and other financial information included elsewhere in this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021~~2022 filed with the U.S. Securities and Exchange Commission (the "SEC") on ~~February 25, 2022.~~March 16, 2023.

As used herein, the terms "the Company," "we," "our" and "us" refer to Franklin BSP Realty Trust, Inc., a Maryland corporation and, as required by context, to Benefit Street Partners Realty Operating Partnership, L.P., a Delaware limited partnership, which we refer to as the "OP," and to its subsidiaries. We are externally managed by Benefit Street Partners L.L.C. (our "Advisor").

Certain statements included in this Quarterly Report on Form 10-Q are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of the Company and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as "may," "will," "seeks," "anticipates," "believes," "estimates," "expects," "plans," "intends," "should" or similar expressions. Actual results may differ materially from those contemplated by such forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.

Our forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements, and thus our investors should not place undue reliance on these statements. We believe these factors include but are not limited to those described under the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, as such factors may be updated from time to time in our periodic filings with the Securities and Exchange Commission (the “SEC”), which are accessible on the SEC’s website at http://www.sec.gov. These factors include:

•our business and investment strategy;

•our ability to make investments in a timely manner or on acceptable terms;

•the impact of ~~the COVID-19 pandemic;~~national health crises;

•current credit market conditions and our ability to obtain long-term financing for our investments in a timely manner and on terms that are consistent with what we project when we invest;

•the effect of general market, real estate market, economic and political conditions, including changing interest rate environments and inflation;

•our ability to make scheduled payments on our debt obligations;

•our ability to generate sufficient cash flows to make distributions to our stockholders;

•our ability to generate sufficient debt and equity capital to fund additional investments;

•our ability to refinance our existing financing arrangements;

•our ability to recover unpaid principal on defaulted loans;

•our ability to successfully and in a timely matter reinvest the dividend, interest, principal and sales proceeds from the assets acquired in the merger with Capstead Mortgage Corporation in a manner consistent with our investment strategies;

•adverse changes in the value of the assets acquired in the merger with Capstead Mortgage Corporation prior to the time such assets are monetized and reinvested in in a manner consistent with our investment strategies;

•the degree and nature of our competition;

•the availability of qualified personnel;

•our ability to recover or mitigate estimated losses on non-performing assets;

•we may be deemed to be an investment company under the Investment Company Act of 1940, as amended (the "Investment Company Act"), and thus subject to regulation under the Investment Company Act;

•our ability to maintain our qualification as a real estate investment trust ("REIT"); and

•other factors set forth under the caption "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Currently, one of the most significant factors that could cause actual outcomes to differ materially from our forward-looking statements is the continuing adverse effect of the current pandemic of the novel coronavirus, or COVID-19, on the financial condition, operating results and cash flows of the Company, its borrowers, the real estate market, the global economy and the financial markets. The extent to which the COVID-19 pandemic continues to impact us and our borrowers will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, including resurgences of the virus and its variants, the speed, effectiveness and adoption of vaccine (including boosters) and treatment developments and the direct and indirect economic effects of the pandemic and containment measures, among others.

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Table of Contents

Overview

The Company is a Maryland corporation and has made tax elections to be treated as a ~~REIT~~real estate investment trust ("REIT") for U.S. federal income tax purposes since 2013. The Company, through one or more subsidiaries which are each treated as a taxable REIT subsidiary ("TRS"), is indirectly subject to U.S. federal, state and local income taxes. We commenced business in May 2013. We primarily originate, acquire and manage a diversified portfolio of commercial real estate debt investments secured by properties located within and outside of the United States. ~~Commercial real estate debt investments may include first mortgage loans, subordinated mortgage loans, mezzanine loans and participations in such loans.~~ Substantially all of our business is conducted through the OP, a Delaware limited partnership. We are the sole general partner and directly or indirectly hold all of the units of limited partner interests in the OP.

The Company has no employees. We are managed by our Advisor pursuant to an Advisory Agreement ~~as amended on August 18, 2021~~ (the "Advisory Agreement"). Our Advisor manages our affairs on a day-to-day basis. The Advisor receives compensation and fees for services related to the investment and management of our assets and our operations.

The Advisor, an SEC-registered investment adviser, is a credit-focused alternative asset management firm. The Advisor manages funds for institutions and high-net-worth investors across various credit funds and complementary strategies including high yield, levered loans, private / opportunistic debt, liquid credit, structured credit and commercial real estate debt. These strategies complement each other as they all leverage the sourcing, analytical, compliance, and operational capabilities that encompass the Advisor’s robust platform. The Advisor is a wholly-owned subsidiary of Franklin Resources, Inc., which together with its various subsidiaries operates as ~~“Franklin Templeton.”~~"Franklin Templeton".

The Company invests in commercial real estate debt investments, which may include first mortgage loans, subordinated mortgage loans, mezzanine loans and participations in such loans. The Company also originates conduit loans which the Company intends to sell through its TRS into commercial mortgage-backed securities ("CMBS") securitization transactions at a profit. Historically this business has focused primarily on CMBS, ~~unsecured REIT debt,~~commercial real estate collateralized loan obligation bonds ("CRE CLO bonds"), collateralized debt obligations ("CDOs") and other securities. As a result of the October 2021 acquisition of Capstead Mortgage Corporation ~~(“Capstead”~~("Capstead"), the Company acquired ~~and continues to hold~~ a portfolio of residential ~~mortgage backed~~mortgage-backed securities ~~(“RMBS”~~("RMBS") in the form of residential adjustable-rate mortgage pass-through securities (“("ARM Agency ~~Securities”~~Securities" or "ARMs") issued and guaranteed by government-sponsored enterprises or by an agency of the federal government. Although the Company continues to hold a small portion of this portfolio it does not intend to do so long-term and intends to reinvest proceeds from the remaining portion of the portfolio in its other businesses. The Company also owns real estate which it acquires through foreclosure and deed in lieu of foreclosure, and which it purchases for investment, typically subject to triple net leases.

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Book Value Per Share

The following table calculates our book value per share as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 ($ in thousands, except per share data):


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Stockholders' equity applicable to common stock	Stockholders' equity applicable to common stock	$	1,326,462	$	736,464	Stockholders' equity applicable to common stock	$	1,311,179	$	1,304,238

Shares:	Shares:					Shares:
Common stock	Common stock	83,709,798		43,951,382		Common stock	82,210,624		82,479,743
Restricted stock		516,830		14,546
Equity compensation awards (restricted stock and restricted stock units)						Equity compensation awards (restricted stock and restricted stock units)	809,257		513,041
Total outstanding	Total outstanding	84,226,628		43,965,928		Total outstanding	83,019,881		82,992,784
Book value per share	Book value per share	$	15.75	$	16.75	Book value per share	$	15.79	$	15.72

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The following table calculates our fully-converted book value per share as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 ($ in thousands, except per share data):


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Stockholders' equity applicable to convertible common stock	Stockholders' equity applicable to convertible common stock	$	1,423,185	$	1,543,550	Stockholders' equity applicable to convertible common stock	$	1,400,927	$	1,398,986

Shares:	Shares:					Shares:
Common stock	Common stock	83,709,798		43,951,382		Common stock	82,210,624		82,479,743
Equity compensation awards (restricted stock and restricted stock units)	Equity compensation awards (restricted stock and restricted stock units)	516,830		14,546		Equity compensation awards (restricted stock and restricted stock units)	809,257		513,041
Series C convertible preferred stock		418,880		418,880
Series D convertible preferred stock		—		5,370,640
Series F convertible preferred stock		—		39,733,299
Series H convertible preferred stock	Series H convertible preferred stock	5,370,640		—		Series H convertible preferred stock	5,370,498		5,370,640
Series I convertible preferred stock						Series I convertible preferred stock	—		299,200
Total outstanding	Total outstanding	90,016,148		89,488,747		Total outstanding	88,390,379		88,662,624
Fully-converted book value per share (1)		$	15.81	$	17.25
Fully-converted book value per share (1) (2)						Fully-converted book value per share (1) (2)	$	15.85	$	15.78

(1) Fully-converted book value per share reflects full conversion of our outstanding series of convertible preferred stock and vesting of our outstanding equity compensation awards.

(2) Excluding the amounts for accumulated depreciation and amortization of real property of $8.0 million and $5.2 million as of June 30, 2023 and December 31, 2022, respectively, would result in a fully-converted book value per share of $15.94 and $15.84 as of June 30, 2023 and December 31, 2022, respectively.

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Critical Accounting Estimates

Our financial statements are prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"), which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Critical accounting estimates are those that require the application of management’s most difficult, subjective or complex judgments on matters that are inherently uncertain and that may change in subsequent periods. In preparing the financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. In preparing the financial statements, management has utilized available information, including our past history, industry standards and the current economic environment, among other factors, in forming its estimates and judgments, giving due consideration to materiality. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of our results of operations to those of companies in similar businesses.

During the six months ended June 30, ~~2022,~~2023, there were no material changes to our critical accounting estimates as compared to the critical accounting estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

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Portfolio

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, our portfolio consisted of ~~174~~156 and ~~165~~161 commercial mortgage loans, respectively, excluding commercial mortgage loans accounted for under the fair value option. The ~~commercial~~Commercial mortgage loans, held for investment, ~~as of June 30, 2022 and December 31, 2021 had a total carrying value,~~ net of allowance for credit losses, as of ~~$5,182.5~~June 30, 2023 and December 31, 2022 had a total carrying value of $5,023.6 million and ~~$4,211.1~~$5,228.9 million, respectively. As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, our total commercial mortgage loans, held for sale, measured at fair value, was comprised of ~~six loans with total fair value of $129.3 million and~~ one loan with total fair value of ~~$34.7~~$34.3 million and two loans with total fair value of $15.6 million, respectively. As of June 30, ~~2022~~2023 and December 31, ~~2021~~2022, we had $191.8 million and $221.0 million, respectively, of Real estate securities, available for sale, measured at fair value. As of June 30, 2023 and December 31, 2022, our real estate owned, held for investment portfolio was composed of 25 and 11 investments, respectively, with carrying values of $179.3 million and $127.8 million, respectively. As of June 30, 2023 and December 31, 2022, we had one and two properties classified as real estate owned, held for sale, respectively, with combined carrying values of $11.8 million and $36.5 million, respectively.

As of June 30, 2023 and December 31, 2022 we had real estate securities, trading, measured at fair ~~value~~values of ~~$270.4~~$125.2 million and ~~$4.6 billion, respectively,~~$235.7 million, respectively. The decline in the size of this portfolio is due to the Company's progress in selling down the ARM Agency Securities portfolio acquired from ~~Capstead.~~ the Capstead merger. The reduction in the value of this portfolio during the six months ended June 30, 2023, is due in part to (i) $15.0 million of principal paydowns, (ii) $95.5 million of sales and (iii) $2.0 million of net trading gains related to principal paydowns, changes in market values and sales of these securities.

As of June 30, ~~2022~~2023, we had ~~no other real estate investments, measured at fair value. As of December 31, 2021, our other real estate investments, measured at fair value, were comprised of~~ one ~~investment with a total fair value of $2.1 million.~~ loan, an office property located in Portland, OR, which was designated as non-performing status in May 2023. As of June 30, ~~2022 and December 31, 2021, our real estate owned, held for investment portfolio comprised of one investment with a carrying value of $88.9 million and $90.0 million, respectively.~~

~~As of June 30, 2022,~~2023, the Company ~~had two loans with~~recorded a total carrying value of $167.7 million designated as non-performing status. One loan is for a hotel property located in New York, NY, which was placed on non-accrual status in 2019 and had an amortized cost of $57.1 million as of June 30, 2022. No specific allowance for credit losses ~~has been~~of $11.9 million on this loan. During the three months ended June 30, 2023, the Company recorded cost recoveries of $0.7 million related to the loan and charged off the specific allowance for credit losses of $11.9 million (comprised of $7.6 million on the ~~loan.~~mezzanine note and $4.3 million on the senior note), resulting in an amortized cost basis of the loan to $20.4 million. The Company did not recognize any interest income on the non-accrual loan during the ~~quarter~~three months ended June 30, 2022. In addition, during the quarter ended June 30, 2022, the Company originated a loan with a fully funded principal balance of $113.2 million secured by a portfolio of retail properties in various locations throughout the United States. At June 30, 2022, the Company recorded a specific allowance for credit losses of $28.4 million on the loan. Further, during the quarter ended June 30, 2022, the Company designated the loan as non-performing and placed the loan on cost recovery status by ceasing the recognition of interest income. During the quarter ended June 30, 2022, the Company received $1.2 million in interest which reduced the amortized cost of the loan. At June 30, 2022, the amortized costs of the loan were $82.2 million, net of the specific allowance for credit losses. See "Part II, Item 1. Legal Proceedings" of this Quarterly Report on Form 10-Q for more information about this loan and related litigation.2023, (see Note 3 – Commercial Mortgage Loans).

As of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 our commercial mortgage loans, held for investment excluding commercial mortgage loans ~~accounted for under the fair value option,~~on non-performing status, had a weighted average coupon of ~~5.6%~~9.1% and ~~4.3%~~8.3%, respectively, and a weighted average remaining life of ~~1.8~~1.1 years and ~~2.1~~1.4 years, respectively.

As of June 30, 2022, the value of the Company’s residential ARM Agency Securities portfolio was $270.4 million, compared to $4.6 billion as of December 31, 2021. The reduction in the value of this portfolio in the second quarter is due in part to (i) $115 million of principal paydowns and (ii) $1.6 billion of sales. During that period, the Company experienced trading losses of $22.5 million related to these assets.

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The following charts summarize our commercial mortgage loans, held for investment, by coupon rate type, collateral type and geographical region as of June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:

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An investments region classification is defined according to the below map based on the location of investments secured property.

6061

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The following charts show the par value by contractual maturity year for the commercial mortgage loans held for investments (excluding commercial mortgage loans in principal default) in our portfolio as of June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:

6162

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The following table shows selected data from our commercial mortgage loans, held for investment in our portfolio as of June 30, ~~2022~~2023 (dollars in thousands):

Loan Type Property Type Par Value
Interest Rate (1)
Effective Yield Loan to Value
Senior Debt 1 Hospitality $4,839 1 month LIBOR + 4.00% 5.8% 77.0%
Senior Debt 2 Hospitality 57,075 1 month LIBOR + 5.19% 7.0% 51.8%
Senior Debt 3 Multifamily 14,493 1 month LIBOR + 4.50% 6.3% 22.4%
Senior Debt 4 Hospitality 22,037 1 month LIBOR + 6.00% 7.8% 48.1%
Senior Debt 5 Multifamily 35,745 1 month LIBOR + 3.00% 4.8% 63.7%
Senior Debt 6 Multifamily 37,025 1 month LIBOR + 3.00% 4.8% 83.6%
Senior Debt 7 Hospitality 22,275 1 month LIBOR + 3.50% 5.3% 68.8%
Senior Debt 8 Office 20,559 1 month LIBOR + 3.75% 5.8% 70.0%
Senior Debt 9 Office 15,617 1 month LIBOR + 3.40% 5.3% 67.5%
Senior Debt 10 Multifamily 27,297 1 month LIBOR + 3.35% 5.3% 73.0%
Senior Debt 11 Hospitality 7,785 1 month SOFR + 4.85% 6.8% 62.5%
Senior Debt 12 Office 7,080 1 month LIBOR + 3.90% 6.0% 67.6%
Senior Debt 13 Office 42,979 1 month LIBOR + 3.50% 5.8% 71.0%
Senior Debt 14 Retail 8,203 1 month LIBOR + 8.00% 9.8% 51.6%
Senior Debt 15 Hospitality 10,580 1 month LIBOR + 4.50% 6.8% 68.7%
Senior Debt 16 Office 36,150 1 month SOFR + 5.50% 7.2% 68.2%
Senior Debt 17 Hospitality 20,930 1 month LIBOR + 3.75% 6.1% 62.6%
Senior Debt 18 Hospitality 13,000 1 month LIBOR + 2.94% 5.4% 56.4%
Senior Debt 19 Hospitality 4,988 1 month LIBOR + 4.25% 6.5% 47.7%
Senior Debt 20 Hospitality 33,838 1 month LIBOR + 3.99% 5.8% 31.0%
Senior Debt 21 Office 20,968 1 month LIBOR + 3.50% 5.4% 70.9%
Senior Debt 22 Hospitality 7,100 1 month LIBOR + 4.00% 5.8% 70.3%
Senior Debt 23 Multifamily 16,261 1 month LIBOR + 2.75% 4.5% 71.7%
Senior Debt 24 Multifamily 24,439 1 month SOFR + 3.30% 5.0% 75.5%
Senior Debt 25 Office 25,802 1 month LIBOR + 4.35% 6.1% 64.9%
Senior Debt 26 Office 61,585 1 month LIBOR + 3.70% 5.5% 65.7%
Senior Debt 27 Multifamily 11,648 1 month LIBOR + 3.15% 4.9% 72.4%
Senior Debt 28 Office 29,641 1 month LIBOR + 2.70% 4.5% 71.4%
Senior Debt 29 Manufactured Housing 1,345 5.50% 5.5% 62.8%
Senior Debt 30 Manufactured Housing 7,680 1 month LIBOR + 4.50% 6.3% 66.7%
Senior Debt 31 Hospitality 27,000 1 month LIBOR + 6.50% 8.3% 62.7%
Senior Debt 32 Self Storage 29,895 1 month LIBOR + 5.00% 6.8% 58.8%
Senior Debt 33 Multifamily 14,183 1 month LIBOR + 4.75% 6.5% 70.0%
Senior Debt 34 Manufactured Housing 3,400 1 month LIBOR + 5.00% 6.8% 58.6%
Senior Debt 35 Manufactured Housing 5,020 1 month LIBOR + 5.25% 7.0% 65.9%
Senior Debt 36 Office 18,403 1 month LIBOR + 4.50% 6.3% 47.9%
Senior Debt 37 Office 66,594 5.15% 5.2% 52.5%
Senior Debt 38 Office 30,990 1 month LIBOR + 5.20% 7.0% 66.0%
Senior Debt 39 Office 12,750 1 month LIBOR + 5.00% 6.8% 67.8%
Senior Debt 40 Multifamily 44,211 1 month LIBOR + 4.35% 6.1% 73.2%
Senior Debt 41 Multifamily 38,184 1 month LIBOR + 4.45% 6.2% 66.5%
Senior Debt 42 Retail 4,498 1 month LIBOR + 4.87% 6.7% 75.0%
Senior Debt 43 Multifamily 5,730 1 month LIBOR + 5.00% 6.8% 73.5%
Senior Debt 44 Multifamily 18,800 1 month LIBOR + 4.00% 5.8% 79.7%
Senior Debt 45 Industrial 14,985 1 month LIBOR + 4.50% 6.3% 66.3%
Senior Debt 46 Office 11,981 1 month LIBOR + 5.50% 7.3% 68.8%
Senior Debt 47 Multifamily 11,918 1 month LIBOR + 4.55% 6.3% 73.0%
Senior Debt 48 Multifamily 21,000 1 month LIBOR + 4.60% 6.4% 66.7%
Senior Debt 49 Office 12,971 1 month LIBOR + 5.00% 6.8% 63.9%
Senior Debt 50 Multifamily 11,671 1 month LIBOR + 3.50% 5.3% 60.1%
Senior Debt 51 Multifamily 21,000 1 month LIBOR + 4.95% 6.7% 84.2%
Senior Debt 52 Office 43,751 1 month LIBOR + 3.94% 5.7% 53.9%
Senior Debt 53 (2)
Multifamily 7,981 1 month LIBOR + 7.25% 9.0% —%
Senior Debt 54 Multifamily 5,400 1 month LIBOR + 5.25% 7.0% 83.1%
Senior Debt 55 Hospitality 23,000 1 month LIBOR + 5.79% 7.6% 57.2%
Senior Debt 56 Multifamily 34,750 1 month LIBOR + 6.75% 8.5% 78.2%

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Loan Type Property Type Par Value
Interest Rate (1)
Effective Yield Loan to Value
Senior Debt 57 Multifamily 12,325 1 month LIBOR + 4.50% 6.3% 83.3%
Senior Debt 58 Multifamily 6,300 1 month LIBOR + 5.35% 7.1% 84.0%
Senior Debt 59 Multifamily 31,803 1 month LIBOR + 3.00% 4.8% 74.3%
Senior Debt 60 Multifamily 12,038 1 month LIBOR + 4.25% 6.0% 76.4%
Senior Debt 61 Multifamily 5,575 1 month LIBOR + 4.50% 6.3% 83.6%
Senior Debt 62 Multifamily 53,933 1 month LIBOR + 3.00% 4.8% 71.6%
Senior Debt 63 Multifamily 14,045 1 month LIBOR + 3.39% 5.2% 70.6%
Senior Debt 64 Multifamily 8,569 1 month LIBOR + 3.80% 5.6% 69.9%
Senior Debt 65 Multifamily 13,582 1 month LIBOR + 4.50% 6.3% 76.7%
Senior Debt 66 Multifamily 18,653 1 month LIBOR + 5.25% 7.0% 67.0%
Senior Debt 67 Multifamily 18,805 1 month LIBOR + 3.60% 5.4% 70.8%
Senior Debt 68 Multifamily 42,481 1 month LIBOR + 2.95% 4.7% 71.6%
Senior Debt 69 Hospitality 25,785 1 month LIBOR + 5.60% 7.4% 61.0%
Senior Debt 70 Mixed Use 32,500 1 month LIBOR + 3.70% 5.5% 69.7%
Senior Debt 71 Multifamily 12,997 1 month LIBOR + 3.75% 5.5% 63.2%
Senior Debt 72 Multifamily 72,906 1 month LIBOR + 2.95% 4.7% 72.6%
Senior Debt 73 Multifamily 20,960 1 month LIBOR + 3.35% 5.1% 67.7%
Senior Debt 74 Multifamily 29,809 1 month LIBOR + 2.95% 4.7% 70.4%
Senior Debt 75 Multifamily 35,466 1 month LIBOR + 2.95% 4.7% 71.7%
Senior Debt 76 Multifamily 33,044 1 month LIBOR + 2.95% 4.7% 72.2%
Senior Debt 77 Hospitality 25,771 1 month LIBOR + 9.00% 10.8% 74.2%
Senior Debt 78 Self Storage 15,000 1 month LIBOR + 4.26% 6.1% 74.6%
Senior Debt 79 Multifamily 24,579 1 month LIBOR + 3.25% 5.0% 70.8%
Senior Debt 80 Office 6,786 1 month LIBOR + 5.25% 7.0% 67.3%
Senior Debt 81 (2)
Multifamily 75,202 1 month LIBOR + 6.50% 8.3% —%
Senior Debt 82 Multifamily 10,769 1 month LIBOR + 3.15% 4.9% 75.6%
Senior Debt 83 Hospitality 19,640 1 month LIBOR + 5.35% 7.1% 56.8%
Senior Debt 84 Hospitality 28,000 1 month LIBOR + 6.25% 8.0% 59.2%
Senior Debt 85 Multifamily 32,453 1 month LIBOR + 3.15% 4.9% 73.0%
Senior Debt 86 Multifamily 37,924 1 month LIBOR + 3.40% 5.2% 75.6%
Senior Debt 87 (2)
Multifamily 10,084 1 month LIBOR + 8.00% 9.8% —%
Senior Debt 88 Multifamily 29,500 1 month LIBOR + 2.88% 4.7% 68.0%
Senior Debt 89 Multifamily 15,101 1 month LIBOR + 3.75% 5.5% 76.9%
Senior Debt 90 Multifamily 30,133 1 month LIBOR + 3.00% 4.8% 73.5%
Senior Debt 91 Multifamily 35,713 1 month LIBOR + 3.15% 4.9% 71.0%
Senior Debt 92 Multifamily 42,850 1 month LIBOR + 3.40% 5.2% 79.9%
Senior Debt 93 Multifamily 36,509 1 month LIBOR + 3.64% 5.4% 66.0%
Senior Debt 94 Multifamily 8,500 1 month LIBOR + 3.75% 5.5% 79.4%
Senior Debt 95 Multifamily 14,200 1 month LIBOR + 3.15% 4.9% 79.8%
Senior Debt 96 Multifamily 13,666 1 month LIBOR + 3.75% 5.5% 64.2%
Senior Debt 97 Multifamily 66,650 1 month LIBOR + 3.25% 5.0% 77.1%
Senior Debt 98 Multifamily 19,023 1 month LIBOR + 2.95% 4.7% 72.1%
Senior Debt 99 Multifamily 9,778 1 month LIBOR + 3.75% 5.5% 70.0%
Senior Debt 100 Hospitality 34,013 1 month SOFR + 6.73% 8.4% 55.8%
Senior Debt 101 Multifamily 26,340 1 month LIBOR + 3.20% 5.0% 77.3%
Senior Debt 102 Hospitality 17,122 1 month LIBOR + 5.25% 7.0% 61.0%
Senior Debt 103 Hospitality 16,500 1 month LIBOR + 7.10% 8.9% 73.0%
Senior Debt 104 Multifamily 13,168 1 month LIBOR + 3.40% 5.2% 78.2%
Senior Debt 105 Multifamily 88,500 1 month LIBOR + 2.75% 4.5% 50.3%
Senior Debt 106 Multifamily 56,150 1 month LIBOR + 3.10% 4.9% 78.9%
Senior Debt 107 Multifamily 37,051 1 month LIBOR + 2.90% 4.7% 72.2%
Senior Debt 108 Multifamily 53,085 1 month LIBOR + 3.10% 4.9% 67.2%
Senior Debt 109 Multifamily 37,100 1 month LIBOR + 2.90% 4.7% 72.0%
Senior Debt 110 Multifamily 63,151 1 month LIBOR + 2.85% 4.6% 70.6%
Senior Debt 111 Multifamily 30,600 1 month LIBOR + 2.65% 4.4% 59.1%
Senior Debt 112 Multifamily 31,033 1 month LIBOR + 3.25% 5.0% 80.0%
Senior Debt 113 Multifamily 62,850 1 month LIBOR + 3.35% 5.1% 78.0%
Senior Debt 114 Multifamily 43,228 1 month LIBOR + 3.00% 4.8% 74.8%


Loan Type	Property Type	Par Value	Interest Rate (1) (2)	Effective Yield (3)	Loan to Value (4)
Senior Debt 1	Hospitality	$4,804	Adj. 1M SOFR Term + 4.00%	9.26%	77.0%
Senior Debt 2	Multifamily	34,391	1M SOFR Term + 3.03%	8.17%	63.7%
Senior Debt 3	Multifamily	35,212	1M SOFR Term + 4.50%	9.64%	74.9%
Senior Debt 4	Hospitality	21,956	1M SOFR Term + 4.25%	9.39%	66.7%
Senior Debt 5	Office	18,557	1M SOFR Term + 4.75%	9.89%	70.0%
Senior Debt 6	Office	41,386	1M SOFR Term + 3.56%	8.70%	71.0%
Senior Debt 7	Hospitality	8,834	1M SOFR Term + 5.57%	10.71%	47.6%
Senior Debt 8	Hospitality	19,235	1M SOFR Term + 3.84%	8.98%	62.6%
Senior Debt 9	Hospitality	12,939	1M SOFR Term + 4.41%	9.55%	56.4%
Senior Debt 10	Hospitality	5,157	1M SOFR Term + 4.25%	9.39%	47.7%
Senior Debt 11	Hospitality	31,304	1M SOFR Term + 5.25%	10.39%	26.2%
Senior Debt 12	Office	15,020	1M SOFR Term + 4.00%	9.14%	70.9%
Senior Debt 13	Office	25,802	Adj. 1M SOFR Term + 4.35%	9.61%	64.9%
Senior Debt 14	Office	32,962	1M SOFR Term + 4.93%	10.07%	158.5%
Senior Debt 15	Manufactured Housing	1,316	5.50%	5.50%	62.8%
Senior Debt 16	Manufactured Housing	7,680	Adj. 1M SOFR Term + 4.50%	9.76%	56.8%
Senior Debt 17	Self Storage	29,895	Adj. 1M SOFR Term + 5.00%	10.26%	58.8%
Senior Debt 18	Multifamily	14,451	1M SOFR Term + 4.83%	9.97%	67.7%
Senior Debt 19	Office	18,003	Adj. 1M SOFR Term + 4.50%	9.76%	47.9%
Senior Debt 20	Office	64,406	5.15%	5.15%	52.5%
Senior Debt 21	Office	35,000	Adj. 1M SOFR Term + 5.21%	10.47%	66.0%
Senior Debt 22	Office	12,750	Adj. 1M SOFR Term + 5.00%	10.26%	67.8%
Senior Debt 23	Multifamily	12,363	Adj. 1M SOFR Term + 4.55%	9.81%	73.0%
Senior Debt 24	Multifamily	21,000	Adj. 1M SOFR Term + 4.60%	9.86%	66.7%
Senior Debt 25	Office	11,027	1M SOFR Term + 5.56%	10.70%	63.9%
Senior Debt 26	Office	44,913	Adj. 1M SOFR Term + 3.97%	9.22%	53.9%
Senior Debt 27 (4)	Multifamily	20,514	1M SOFR Term + 8.00%	13.14%	N/A
Senior Debt 28	Hospitality	23,000	Adj. 1M SOFR Term + 5.79%	11.05%	57.2%
Senior Debt 29	Multifamily	34,750	1M SOFR Term + 4.10%	9.24%	78.2%
Senior Debt 30	Multifamily	12,325	Adj. 1M SOFR Term + 4.50%	9.76%	83.3%
Senior Debt 31	Multifamily	5,575	Adj. 1M SOFR Term + 4.50%	9.76%	83.6%
Senior Debt 32	Multifamily	55,000	1M SOFR Term + 4.00%	9.14%	71.6%
Senior Debt 33	Multifamily	14,700	Adj. 1M SOFR Term + 3.39%	8.65%	70.6%
Senior Debt 34	Multifamily	8,898	Adj. 1M SOFR Term + 3.80%	9.06%	69.9%
Senior Debt 35	Multifamily	18,653	Adj. 1M SOFR Term + 6.25%	11.51%	67.0%
Senior Debt 36	Multifamily	19,804	Adj. 1M SOFR Term + 3.60%	8.86%	70.8%
Senior Debt 37	Multifamily	43,246	Adj. 1M SOFR Term + 2.95%	8.21%	71.6%
Senior Debt 38	Hospitality	25,700	Adj. 1M SOFR Term + 5.60%	10.86%	61.0%
Senior Debt 39	Mixed Use	32,500	Adj. 1M SOFR Term + 3.70%	8.96%	69.7%
Senior Debt 40	Multifamily	75,768	Adj. 1M SOFR Term + 2.95%	8.21%	72.6%
Senior Debt 41	Multifamily	20,960	Adj. 1M SOFR Term + 3.35%	8.61%	67.7%
Senior Debt 42	Multifamily	30,320	Adj. 1M SOFR Term + 2.95%	8.21%	70.4%
Senior Debt 43	Multifamily	35,466	Adj. 1M SOFR Term + 2.95%	8.21%	71.7%

Table of Contents

Loan Type Property Type Par Value
Interest Rate (1)
Effective Yield Loan to Value
Senior Debt 115 Multifamily 46,080 1 month LIBOR + 2.75% 4.5% 68.1%
Senior Debt 116 Multifamily 86,000 1 month SOFR + 3.24% 4.9% 60.0%
Senior Debt 117 Multifamily 29,119 1 month LIBOR + 2.90% 4.7% 74.2%
Senior Debt 118 Manufactured Housing 6,700 1 month LIBOR + 4.50% 6.3% 77.9%
Senior Debt 119 Multifamily 58,680 1 month LIBOR + 3.45% 5.2% 74.8%
Senior Debt 120 Multifamily 26,600 1 month LIBOR + 2.90% 4.7% 72.1%
Senior Debt 121 Multifamily 12,804 1 month LIBOR + 3.20% 5.0% 62.4%
Senior Debt 122 Multifamily 36,444 1 month LIBOR + 3.00% 4.8% 73.3%
Senior Debt 123 Multifamily 32,250 1 month LIBOR + 3.20% 5.0% 74.5%
Senior Debt 124 Multifamily 38,935 1 month LIBOR + 2.90% 4.7% 71.7%
Senior Debt 125 Multifamily 65,344 1 month LIBOR + 2.88% 4.7% 74.8%
Senior Debt 126 Multifamily 62,003 1 month LIBOR + 2.88% 4.7% 75.5%
Senior Debt 127 Multifamily 16,570 1 month SOFR + 3.50% 5.2% 71.7%
Senior Debt 128 Multifamily 56,930 1 month LIBOR + 2.75% 4.5% 73.9%
Senior Debt 129 Multifamily 65,000 1 month SOFR + 6.14% 7.8% 74.7%
Senior Debt 130 Multifamily 22,240 1 month SOFR + 2.96% 4.7% 79.4%
Senior Debt 131 Multifamily 25,746 1 month SOFR + 2.96% 4.7% 72.9%
Senior Debt 132 Multifamily 31,678 1 month SOFR + 3.20% 4.9% 74.2%
Senior Debt 133 Multifamily 78,050 1 month SOFR + 3.45% 5.1% 78.8%
Senior Debt 134 Multifamily 77,870 1 month SOFR + 3.21% 4.9% 76.1%
Senior Debt 135 Multifamily 24,000 1 month SOFR + 3.10% 4.8% 72.7%
Senior Debt 136 Retail 31,000 1 month SOFR + 3.29% 5.0% 42.5%
Senior Debt 137 Multifamily 36,950 1 month SOFR + 3.55% 5.2% 66.2%
Senior Debt 138 Multifamily 22,301 1 month SOFR + 2.95% 4.6% 65.6%
Senior Debt 139 Multifamily 10,600 1 month SOFR + 3.30% 5.0% 75.7%
Senior Debt 140 Multifamily 47,444 1 month SOFR + 2.86% 4.6% 68.2%
Senior Debt 141 Multifamily 36,824 1 month SOFR + 2.86% 4.6% 69.7%
Senior Debt 142 Hospitality 10,300 1 month SOFR + 5.30% 7.0% 68.2%
Senior Debt 143 Retail 20,650 1 month SOFR + 4.95% 6.6% 63.3%
Senior Debt 144 Multifamily 82,000 1 month SOFR + 3.20% 4.9% 74.5%
Senior Debt 145 Industrial 55,000 1 month SOFR + 3.50% 5.2% 70.1%
Senior Debt 146 Multifamily 38,497 1 month SOFR + 3.10% 4.8% 74.1%
Senior Debt 147 Multifamily 34,000 1 month SOFR + 2.95% 4.6% 63.1%
Senior Debt 148 Mixed Use 19,000 1 month SOFR + 3.42% 5.1% 65.1%
Senior Debt 149 Multifamily 85,500 1 month SOFR + 3.15% 4.8% 69.6%
Senior Debt 150 Multifamily 31,095 1 month SOFR + 3.30% 5.0% 76.9%
Senior Debt 151 (2)(4)
Hospitality — 1 month SOFR + 7.05% 8.7% —%
Senior Debt 152 Hospitality 43,051 1 month SOFR + 4.90% 6.6% 61.1%
Senior Debt 153 Multifamily 1,911 1 month SOFR + 7.02% 8.7% 15.9%
Senior Debt 154 Multifamily 18,044 1 month SOFR + 6.05% 7.7% 62.4%
Senior Debt 155 Multifamily 56,616 1 month SOFR + 3.95% 5.6% 73.2%
Senior Debt 156 Multifamily 11,780 1 month SOFR + 3.55% 5.2% 67.7%
Senior Debt 157 (3)
Retail 113,200 1 month SOFR + 4.50% 6.2% N/A
Senior Debt 158 Multifamily 19,348 1 month SOFR + 3.50% 5.2% 63.9%
Senior Debt 159 Multifamily 17,600 1 month SOFR + 4.55% 6.2% 67.2%
Senior Debt 160 Multifamily 27,763 1 month SOFR + 3.65% 5.3% 71.0%
Senior Debt 161 Multifamily 16,843 1 month SOFR + 3.65% 5.3% 73.9%
Senior Debt 162 Multifamily 70,750 1 month SOFR + 3.80% 5.5% 77.9%
Senior Debt 163 Multifamily 80,866 1 month SOFR + 3.95% 5.6% 71.8%
Senior Debt 164 Multifamily 43,434 1 month SOFR + 3.95% 5.6% 75.9%
Senior Debt 165 Multifamily 56,334 1 month SOFR + 3.95% 5.6% 70.7%
Senior Debt 166 Multifamily 20,240 1 month SOFR + 3.95% 5.6% 75.1%
Senior Debt 167 Multifamily 126,600 1 month SOFR + 3.95% 5.6% 67.5%
Senior Debt 168 Multifamily 56,000 1 month SOFR + 3.80% 5.5% 73.8%
Senior Debt 169 Multifamily 69,200 1 month SOFR + 3.45% 5.1% 71.6%
Senior Debt 170 Hospitality 17,070 5.99% 6.0% 52.9%
Mezzanine Loan 1 Multifamily 3,000 1 month LIBOR + 9.20% 11.0% 62.2%
Mezzanine Loan 2 Multifamily 10,000 1 month SOFR + 16.29% 18.0% 86.2%


Loan Type	Property Type	Par Value	Interest Rate (1) (2)	Effective Yield (3)	Loan to Value (4)
Senior Debt 44	Multifamily	33,588	Adj. 1M SOFR Term + 2.95%	8.21%	72.2%
Senior Debt 45	Office	6,699	Adj. 1M SOFR Term + 5.25%	10.51%	67.3%
Senior Debt 46	Multifamily	143,417	1M SOFR Term + 4.75%	9.89%	43.0%
Senior Debt 47	Hospitality	22,475	Adj. 1M SOFR Term + 5.35%	10.61%	56.8%
Senior Debt 48	Hospitality	36,750	Adj. 1M SOFR Term + 6.25%	11.51%	59.2%
Senior Debt 49 (4)	Multifamily	35,116	Adj. 1M SOFR Term + 8.00%	13.26%	N/A
Senior Debt 50	Multifamily	16,389	Adj. 1M SOFR Term + 3.75%	9.01%	76.9%
Senior Debt 51	Multifamily	30,420	Adj. 1M SOFR Term + 3.00%	8.26%	73.5%
Senior Debt 52	Multifamily	44,510	Adj. 1M SOFR Term + 3.15%	8.41%	71.0%
Senior Debt 53	Multifamily	42,850	Adj. 1M SOFR Term + 3.40%	8.66%	79.9%
Senior Debt 54	Multifamily	36,760	Adj. 1M SOFR Term + 3.64%	8.90%	66.0%
Senior Debt 55	Multifamily	8,500	Adj. 1M SOFR Term + 3.75%	9.01%	79.4%
Senior Debt 56	Multifamily	14,592	Adj. 1M SOFR Term + 3.15%	8.41%	79.8%
Senior Debt 57	Multifamily	14,200	Adj. 1M SOFR Term + 3.75%	9.01%	64.2%
Senior Debt 58	Multifamily	69,500	Adj. 1M SOFR Term + 3.25%	8.51%	77.1%
Senior Debt 59	Multifamily	10,568	Adj. 1M SOFR Term + 3.75%	9.01%	70.0%
Senior Debt 60	Multifamily	27,015	Adj. 1M SOFR Term + 3.20%	8.46%	77.3%
Senior Debt 61	Hospitality	17,122	Adj. 1M SOFR Term + 5.25%	10.51%	61.0%
Senior Debt 62	Hospitality	16,500	Adj. 1M SOFR Term + 7.10%	12.36%	73.0%
Senior Debt 63	Multifamily	56,150	Adj. 1M SOFR Term + 3.10%	8.36%	78.9%
Senior Debt 64	Multifamily	37,882	Adj. 1M SOFR Term + 2.90%	8.16%	72.2%
Senior Debt 65	Multifamily	54,994	Adj. 1M SOFR Term + 3.10%	8.36%	67.2%
Senior Debt 66	Multifamily	38,039	Adj. 1M SOFR Term + 2.90%	8.16%	72.0%
Senior Debt 67	Multifamily	67,259	Adj. 1M SOFR Term + 2.85%	8.11%	70.6%
Senior Debt 68	Multifamily	32,148	Adj. 1M SOFR Term + 3.25%	8.51%	80.0%
Senior Debt 69	Multifamily	62,850	Adj. 1M SOFR Term + 3.35%	8.61%	78.0%
Senior Debt 70	Multifamily	44,243	Adj. 1M SOFR Term + 3.00%	8.26%	74.8%
Senior Debt 71	Multifamily	46,952	Adj. 1M SOFR Term + 2.75%	8.01%	68.1%
Senior Debt 72	Multifamily	86,000	1M SOFR Term + 3.24%	8.38%	60.0%
Senior Debt 73	Multifamily	30,164	Adj. 1M SOFR Term + 2.90%	8.16%	74.2%
Senior Debt 74	Manufactured Housing	6,700	Adj. 1M SOFR Term + 4.50%	9.76%	77.9%
Senior Debt 75	Multifamily	58,680	Adj. 1M SOFR Term + 3.45%	8.71%	74.8%
Senior Debt 76	Multifamily	27,850	Adj. 1M SOFR Term + 2.90%	8.16%	72.1%
Senior Debt 77	Multifamily	14,933	Adj. 1M SOFR Term + 3.20%	8.46%	62.4%
Senior Debt 78	Multifamily	37,870	Adj. 1M SOFR Term + 3.00%	8.26%	73.3%
Senior Debt 79	Multifamily	33,921	Adj. 1M SOFR Term + 3.20%	8.46%	74.5%
Senior Debt 80	Multifamily	41,196	Adj. 1M SOFR Term + 2.90%	8.16%	71.7%
Senior Debt 81	Multifamily	66,871	Adj. 1M SOFR Term + 2.88%	8.14%	74.8%
Senior Debt 82	Multifamily	64,074	Adj. 1M SOFR Term + 2.88%	8.14%	75.5%
Senior Debt 83	Multifamily	17,019	1M SOFR Term + 3.50%	8.64%	71.7%
Senior Debt 84	Multifamily	57,660	Adj. 1M SOFR Term + 2.75%	8.01%	73.9%
Senior Debt 85	Multifamily	67,599	1M SOFR Term + 6.03%	11.17%	74.7%
Senior Debt 86	Multifamily	22,240	1M SOFR Term + 2.96%	8.10%	79.4%
Senior Debt 87	Multifamily	25,746	1M SOFR Term + 2.96%	8.10%	72.9%
Senior Debt 88	Multifamily	31,678	1M SOFR Term + 3.20%	8.34%	74.2%

Table of Contents

Loan Type Property Type Par Value
Interest Rate (1)
Effective Yield Loan to Value
Mezzanine Loan 3 Retail 3,000 1 month SOFR + 12.00% 13.7% 46.6%
Mezzanine Loan 4 Mixed Use 1,000 1 month SOFR + 11.00% 12.7% 68.5%
$5,252,182 5.6% 66.5%


Loan Type	Property Type	Par Value	Interest Rate (1) (2)	Effective Yield (3)	Loan to Value (4)
Senior Debt 89	Multifamily	78,050	1M SOFR Term + 3.45%	8.59%	78.8%
Senior Debt 90	Multifamily	81,247	1M SOFR Term + 3.21%	8.35%	76.1%
Senior Debt 91	Multifamily	24,000	1M SOFR Term + 3.10%	8.24%	72.7%
Senior Debt 92	Retail	31,000	1M SOFR Term + 3.29%	8.43%	42.5%
Senior Debt 93	Multifamily	38,234	1M SOFR Term + 3.55%	8.69%	66.2%
Senior Debt 94	Multifamily	23,433	1M SOFR Term + 2.95%	8.09%	65.6%
Senior Debt 95	Multifamily	10,775	1M SOFR Term + 3.30%	8.44%	75.7%
Senior Debt 96	Multifamily	47,444	1M SOFR Term + 2.86%	8.00%	68.2%
Senior Debt 97	Multifamily	36,824	1M SOFR Term + 2.86%	8.00%	69.7%
Senior Debt 98	Hospitality	10,504	1M SOFR Term + 5.30%	10.44%	68.2%
Senior Debt 99	Retail	16,156	1M SOFR Term + 4.95%	10.09%	63.3%
Senior Debt 100	Multifamily	82,000	1M SOFR Term + 3.20%	8.34%	74.5%
Senior Debt 101	Industrial	55,000	1M SOFR Term + 3.50%	8.64%	70.1%
Senior Debt 102	Multifamily	39,325	1M SOFR Term + 3.10%	8.24%	74.1%
Senior Debt 103	Multifamily	35,119	1M SOFR Term + 2.95%	8.09%	63.1%
Senior Debt 104	Mixed Use	19,000	1M SOFR Term + 3.42%	8.56%	65.1%
Senior Debt 105	Multifamily	85,500	1M SOFR Term + 3.15%	8.29%	69.6%
Senior Debt 106	Multifamily	31,282	1M SOFR Term + 3.30%	8.44%	76.9%
Senior Debt 107 (4)	Hospitality	10,769	1M SOFR Term + 7.05%	12.19%	N/A
Senior Debt 108 (4)(5)	Multifamily	—	1M SOFR Term + 6.75%	11.89%	N/A
Senior Debt 109	Hospitality	43,457	1M SOFR Term + 4.90%	10.04%	61.1%
Senior Debt 110	Hospitality	14,178	1M SOFR Term + 5.22%	10.36%	57.7%
Senior Debt 111	Multifamily	8,181	1M SOFR Term + 7.02%	12.16%	15.9%
Senior Debt 112	Multifamily	35,052	1M SOFR Term + 6.05%	11.19%	62.4%
Senior Debt 113	Multifamily	56,616	1M SOFR Term + 3.95%	9.09%	73.2%
Senior Debt 114	Multifamily	29,077	1M SOFR Term + 4.00%	9.14%	70.9%
Senior Debt 115	Multifamily	54,360	1M SOFR Term + 6.70%	11.84%	46.5%
Senior Debt 116	Multifamily	12,447	1M SOFR Term + 3.55%	8.69%	67.7%
Senior Debt 117	Industrial	23,050	1M SOFR Term + 4.90%	10.04%	64.6%
Senior Debt 118	Multifamily	19,660	1M SOFR Term + 3.50%	8.64%	64.5%
Senior Debt 119	Multifamily	17,600	1M SOFR Term + 4.55%	9.69%	67.2%
Senior Debt 120	Multifamily	28,979	1M SOFR Term + 3.65%	8.79%	71.0%
Senior Debt 121	Multifamily	17,330	1M SOFR Term + 3.65%	8.79%	73.9%
Senior Debt 122	Multifamily	70,750	1M SOFR Term + 3.80%	8.94%	77.9%
Senior Debt 123	Multifamily	82,949	1M SOFR Term + 3.95%	9.09%	71.8%
Senior Debt 124	Multifamily	44,015	1M SOFR Term + 3.95%	9.09%	75.9%
Senior Debt 125	Multifamily	57,130	1M SOFR Term + 3.95%	9.09%	73.7%
Senior Debt 126	Multifamily	20,490	1M SOFR Term + 3.95%	9.09%	75.1%
Senior Debt 127	Multifamily	140,051	1M SOFR Term + 3.95%	9.09%	67.8%
Senior Debt 128	Multifamily	56,000	1M SOFR Term + 3.80%	8.94%	73.8%
Senior Debt 129	Multifamily	11,675	1M SOFR Term + 4.45%	9.59%	74.8%
Senior Debt 130	Multifamily	69,200	1M SOFR Term + 3.45%	8.59%	71.6%
Senior Debt 131	Multifamily	30,223	1M SOFR Term + 6.52%	11.67%	50.1%
Senior Debt 132	Hospitality	29,644	1M SOFR Term + 6.94%	12.08%	71.2%
Senior Debt 133 (4)(5)	Multifamily	—	1M SOFR Term + 6.31%	11.45%	N/A

Table of Contents


Loan Type	Property Type	Par Value	Interest Rate (1) (2)	Effective Yield (3)	Loan to Value (4)
Senior Debt 134	Hospitality	14,321	1M SOFR Term + 5.75%	10.89%	62.1%
Senior Debt 135	Manufactured Housing	10,550	1M SOFR Term + 4.75%	9.89%	53.8%
Senior Debt 136 (5)	Hospitality	—	1M SOFR Term + 7.50%	12.64%	6.2%
Senior Debt 137	Multifamily	47,293	1M SOFR Term + 4.20%	9.34%	70.1%
Senior Debt 138	Multifamily	51,000	1M SOFR Term + 3.75%	8.89%	64.6%
Senior Debt 139	Multifamily	14,635	1M SOFR Term + 4.25%	9.39%	68.1%
Senior Debt 140	Hospitality	28,300	1M SOFR Term + 5.25%	10.39%	54.9%
Senior Debt 141	Multifamily	55,500	1M SOFR Term + 3.85%	8.99%	44.8%
Senior Debt 142	Hospitality	10,500	1M SOFR Term + 5.50%	10.64%	39.6%
Senior Debt 143	Hospitality	120,000	1M SOFR Term + 4.90%	10.04%	53.6%
Senior Debt 144	Multifamily	64,500	1M SOFR Term + 5.00%	10.14%	62.3%
Senior Debt 145	Hospitality	38,076	1M SOFR Term + 3.75%	8.89%	39.1%
Senior Debt 146	Multifamily	21,700	1M SOFR Term + 3.95%	9.09%	29.4%
Senior Debt 147	Multifamily	19,793	4.75%	4.75%	85.7%
Senior Debt 148	Hospitality	16,865	5.99%	5.99%	52.9%
Mezzanine Loan 1	Multifamily	3,000	1M SOFR Term + 9.23%	14.37%	62.2%
Mezzanine Loan 2	Multifamily	10,000	1M SOFR Term + 16.29%	21.43%	86.2%
Mezzanine Loan 3	Retail	3,000	1M SOFR Term + 12.00%	17.14%	46.6%
Mezzanine Loan 4	Mixed Use	1,000	1M SOFR Term + 11.00%	16.14%	68.5%
Mezzanine Loan 5	Hospitality	1,350	1M SOFR Term + 9.25%	14.39%	64.6%
Mezzanine Loan 6 (5)	Hospitality	—	1M SOFR Term + 10.00%	15.14%	6.2%
Mezzanine Loan 7 (5)	Multifamily	—	1M SOFR Term + 4.50%	9.64%	74.9%
Mezzanine Loan 8	Multifamily	11,700	1M SOFR Term + 3.95%	9.09%	45.2%
		$5,086,090		9.05%	66.9%

__________________________________________________________

(1)Our floating rate loan agreements generally contain the contractual obligation for the borrower to maintain an interest rate cap to protect against rising interest rates. In a simple interest rate cap, the borrower pays a premium for a notional principal amount based on a capped interest rate (the “cap rate”). When the floating rate exceeds the cap rate, the borrower receives a payment from the cap counterparty equal to the difference between the floating rate and the cap rate on the same notional principal amount for a specified period of time. When interest rates rise, the value of an interest rate cap will increase, thereby reducing the borrower's exposure to rising interest rates.

(2) ~~Loan~~On March 5, 2021, the Financial Conduct Authority of the U.K. (the “FCA”) announced that LIBOR tenors would cease to be published or no longer be representative after June 30, 2023. The Alternative Reference Rates Committee (the “ARRC”) interpreted this announcement to constitute a benchmark transition event. The benchmark index of LIBOR interest rate will convert from LIBOR to compounded SOFR, plus a benchmark adjustment of 11.448 basis points. As of June 30, 2023, our commercial mortgage loans, held for investment which were indexed at LIBOR were converted to SOFR utilizing the 11.448 basis points adjustment and the applicable spreads remains unchanged. The loans which have the SOFR adjustment are indicated with "Adj. 1M SOFR Term."

(2) Effective yield is calculated as the spread of the loan plus the greater of the applicable index or index floor.

(3) Loan-to-value percentage ("LTV") represents the ratio of the loan amount to the appraised value ~~percentage is from metrics~~of the property at the time of origination. ~~Predevelopment~~However, for predevelopment construction loans at origination, ~~will~~LTV is not ~~have an LTV~~applicable and is therefore is nil.

~~(3)~~(4) ~~Loan was designated as non-performing and placed on cost recovery status during the second quarter of 2022. As such, the LTV at origination is not relevant.~~

~~(4)~~ ~~Total commitment~~Commitment on the loan ~~was $41.0 million but~~ was unfunded as of June 30, ~~2022.~~2023.

The following table shows selected data from our commercial mortgage loans, held for sale, measured at fair value as of June 30, ~~2022~~2023 (dollars in thousands):

Loan Type Property Type Par Value Interest Rate Effective Yield
Loan to Value (1)
TRS Senior Debt 1 Hospitality $13,058 5.1% 5.1% 62.4%
TRS Senior Debt 2 Retail 9,989 5.4% 5.4% 57.1%
TRS Senior Debt 3 Retail 16,000 5.7% 5.7% 49.4%
TRS Senior Debt 4 Retail 65,000 5.9% 5.9% 59.6%
TRS Senior Debt 5 Retail 18,500 5.5% 5.5% 49.5%
TRS Senior Debt 6 Multifamily 9,990 5.5% 5.5% 47.6%
$132,537 4.4% 59.2%

Loan Type

Property Type

Par Value

Interest Rate

Effective Yield

Loan to Value (1)

TRS Senior Debt 1

Hospitality

34,250

8.45%

56.52%

__________________________________________________________

(1) ~~Loan~~Loan-to-value percentage (LTV) represents the ratio of the loan amount to the appraised value ~~percentage is from metrics~~of the property at the time of origination.

Table of Contents

The following table shows selected data from our real estate owned, ~~asset~~held for investment assets in our portfolio as of June 30, ~~2022~~2023 (dollars in thousands):

Type

Property Type

Carrying Value

Real Estate Owned 1

Industrial

~~88,897~~86,595

Real Estate Owned 2

Retail

92,657

~~88,897~~179,252

The following table shows selected data from our real estate owned, held for sale assets in our portfolio as of June 30, 2023 (dollars in thousands):

Type

Property Type

Carrying Value

Real Estate Owned, held for sale

Office

11,760

The following is a summary of the Company's RMBS, all of which were ARM Agency Securities, classified by collateral type and interest rate characteristics as of June 30, ~~2022~~2023 (dollars in thousands):
Type Carrying
Amount
Average
Yield (1)
Agency Securities:
Fannie Mae/Freddie Mac ARMs $ 270,381 2.40 %


Type	Carrying Amount		Average Yield (1)

Fannie Mae/Freddie Mac ARMs	$	125,215	3.50	%

(1) Average yield is presented for the period then ended and is based on the cash component of interest income expressed as a percentage on average cost basis (the “cash yield”).

The following table shows selected data from our real estate securities, CRE CLO bonds, measured at fair value as of June 30, 2023 (dollars in thousands):


Type	Interest Rate	Maturity	Par Value		Fair Value		Effective Yield
CRE CLO bond 1	1 month SOFR + 2.78%	8/19/2035	$	40,000	$	39,540	7.9%
CRE CLO bond 2	1 month SOFR + 3.23%	8/19/2035	25,000		24,827		8.4%
CRE CLO bond 3	1 month SOFR + 2.90%	10/19/2039	28,340		28,391		8.0%
CRE CLO bond 4	1 month SOFR + 2.83%	2/19/2038	5,885		5,840		8.0%
CRE CLO bond 5	1 month SOFR + 3.48%	2/19/2038	14,382		14,270		8.6%
CRE CLO bond 6	1 month SOFR + 4.25%	1/25/2037	10,900		10,386		9.4%
CRE CLO bond 7	1 month SOFR + 1.35%	11/15/2036	4,300		4,219		6.6%
CRE CLO bond 8	1 month SOFR + 1.45%	1/15/2037	14,800		14,530		6.5%
CRE CLO bond 9	1 month SOFR + 3.20%	5/25/2038	50,000		49,846		8.3%
			$	193,607	$	191,849

Results of Operations

~~We conduct our~~The Company conducts its business through the following segments:

~~Table of Contents~~

•The real estate securities business focuses on investing in and asset managing real estate securities. Historically this business has focused primarily on CMBS, ~~unsecured REIT debt,~~CRE CLO bonds, CDO notes, and other securities. As a result of the October 2021 acquisition of Capstead, the Company ~~acquired~~also holds a ~~significant~~small portfolio of ARM Agency Securities. The Company has substantially sold down this portfolio and holds only $270.4 million of ARM Agency Securities as of June 30, 2022. The Company has been reinvesting the cash and proceeds from dividends, interest, repayments and sales of these assets into its other segments and does not intend to continue to invest in ARM Agency Securities or RMBS in general. As of June 30, 2022, all of the real estate securities in this segment were ARM Agency Securities acquired in the Capstead acquisition.

•The ~~Conduit~~commercial real estate conduit business operated through the Company's TRS, which is focused on generating ~~superior~~ risk-adjusted returns by originating and subsequently selling fixed-rate commercial real estate loans into the CMBS securitization market at a profit. The TRS may also hold certain mezzanine loans that don't qualify as good REIT assets due to any potential loss from foreclosure.

•The real estate owned business represents real estate acquired by the Company through foreclosure, deed in lieu of foreclosure, or purchase.

Table of Contents

Comparison of the Three Months Ended June 30, ~~2022~~2023 to the Three Months Ended June 30, ~~2021~~2022

Net Interest Income

Net interest income is generated on our interest-earning assets less related interest-bearing liabilities and is recorded as part of our real estate debt, real estate securities and TRS segments.

The following table presents the average balance of interest-earning assets less related interest-bearing liabilities, associated interest income and expense and corresponding yield earned and incurred for the three months ended June 30, ~~2022~~2023 and June 30, ~~2021~~2022 (dollars in thousands):


		Three Months Ended June 30,															Three Months Ended June 30,
		2022							2021								2023							2022
		Average Carrying Value (1)			Interest Income/Expense (2)		WA Yield/Financing Cost (3)(4)		Average Carrying Value (1)			Interest Income/Expense (2)		WA Yield/Financing Cost (3)(4)			Average Carrying Value (1)			Interest Income/Expense (2)		WA Yield/Financing Cost (3)(4)		Average Carrying Value (1)			Interest Income/Expense (2)		WA Yield/Financing Cost (3)(4)
Interest-earning assets:	Interest-earning assets:															Interest-earning assets:
Real estate debt(5)	Real estate debt(5)	$	4,839,568		$	62,801	5.2%		$	3,140,324		$	48,023	6.1%		Real estate debt(5)	$	4,957,208		$	147,258	11.9	%	$	4,839,568		$	62,801	5.2	%
Real estate conduit	Real estate conduit	148,608			2,521		6.8%		89,189			926		4.2%		Real estate conduit	29,446			748		10.2	%	148,608			2,521		6.8	%
Real estate securities	Real estate securities	815,977			4,891		2.4%		6,709			36		2.2%		Real estate securities	272,291			4,012		5.9	%	815,977			4,891		2.4	%
Real Estate Owned																Real Estate Owned	99,252			874		3.5	%	—			—		—	%
Total	Total	$	5,804,153		$	70,213	4.8%		$	3,236,222		$	48,985	6.1%		Total	$	5,358,197		$	152,892	11.4	%	$	5,804,153		$	70,213	4.8	%
Interest-bearing liabilities:	Interest-bearing liabilities:															Interest-bearing liabilities:
Repurchase Agreements - commercial mortgage loans	Repurchase Agreements - commercial mortgage loans	$	834,337		$	8,674	4.2%		$	282,891		$	3,000	4.2%		Repurchase Agreements - commercial mortgage loans	$	668,366		$	15,070	9.0	%	$	834,337		$	8,674	4.2	%
Other financing and loan participation - commercial mortgage loans	Other financing and loan participation - commercial mortgage loans	42,996			360		3.3%		51,547			611		4.7%		Other financing and loan participation - commercial mortgage loans	79,231			1,938		9.8	%	42,996			360		3.3	%
Repurchase Agreements - real estate securities	Repurchase Agreements - real estate securities	786,495			1,330		0.7%		57,301			189		1.3%		Repurchase Agreements - real estate securities	249,732			3,542		5.7	%	786,495			1,330		0.7	%
Collateralized loan obligations	Collateralized loan obligations	2,709,853			21,086		3.1%		2,066,099			8,837		1.7%		Collateralized loan obligations	3,067,338			52,963		6.9	%	2,709,853			21,086		3.1	%
Unsecured debt	Unsecured debt	103,577			1,357		5.2%		—			—		—		Unsecured debt	81,233			1,786		8.8	%	103,577			1,357		5.2	%
Total	Total	$	4,477,258		$	32,807	2.9%		$	2,457,838		$	12,637	2.1%		Total	$	4,145,900		$	75,299	7.3	%	$	4,477,258		$	32,807	2.9	%
Net interest income/spread	Net interest income/spread				$	37,406	1.9%					$	36,348	4.0%		Net interest income/spread				$	77,593	4.1	%				$	37,406	1.9	%
Average leverage % (5)		77.1		%					75.9		%
Weighted average levered yield (6)							11.3	%						18.7	%
Average leverage % (6)																Average leverage % (6)	77.4		%					77.1		%
Weighted average levered yield (7)																Weighted average levered yield (7)						25.6	%						11.3	%

_________________________________________________

(1) Based on amortized cost for real estate debt and real estate securities and principal amount for ~~repurchase agreements.~~interest-bearing liabilities. Amounts are calculated based on daily averages for the three months ended June 30, ~~2022~~2023 and June 30, ~~2021,~~2022, respectively.

(2) Includes the effect of amortization of premium or accretion of discount and deferred fees.

(3) Calculated as interest income or expense divided by average carrying value.

(4) Annualized.

(5) The Company sold the Brooklyn hotel asset in April 2023 resulting in $15.5 million and $4.9 million in coupon and default interest income, respectively, recognized in the Company's real estate debt segment during the three months ended June 30, 2023.

(6)Calculated by dividing total average interest-bearing liabilities by total average interest-earning assets.

~~(6)~~(7) Calculated by dividing net interest income/spread by the ~~net~~ average interest-earning assets ~~and~~less average interest-bearing liabilities.

~~Table of Contents~~

Interest Income

Interest income for the three months ended June 30, ~~2022~~2023 and June 30, ~~2021~~2022 totaled ~~$70.2~~$152.9 million and ~~$49.0~~$70.2 million, respectively, an increase of ~~$21.2~~$82.7 million. This was primarily due to ~~(i) $14.8 million of higher interest income attributed to~~ an increase of ~~$1,699.2~~$117.6 million in the average carrying value of our real estate debt ~~assets,~~coupled with an approximate 420 basis point increase in daily average LIBOR/SOFR rates and additional proceeds of $20.4 million related to proceeds from the Brooklyn hotel sale. As of June 30, 2023, our portfolio consisted of (i) 156 commercial mortgage loans, held for investment, (ii) ~~$4.9 million of higher interest income attributed to an increase of $809.3 million in the average carrying~~one commercial mortgage loan, held for sale, measured at fair value, ~~of our~~(iii) nine real estate securities, ~~portfolio~~available for sale, measured at fair value and ~~(iii) $1.6 million of higher interest income attributable to an increase of $59.4 million in the average carrying value of our conduit portfolio.~~(iv) RMBS. As of June 30, 2022, our portfolio consisted of (i) 174 commercial mortgage loans, held for investment, 6(ii) six commercial mortgage loans, held for sale, measured at fair value and ~~RMBS securities.~~(iii) RMBS.

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Interest Expense

Interest expense for the three months ended June 30, ~~2022~~2023 and June 30, ~~2021~~2022 totaled ~~$32.8~~$75.3 million and ~~$12.6~~$32.8 million, respectively, an increase of ~~$20.2~~$42.5 million. This was primarily due to ~~(i) $7.0 million of higher interest expense attributed to~~ an increase of ~~$643.8~~$357.5 million in the average carrying value of our collateralized loan obligations ~~(ii)~~coupled with an approximate 420 basis point increase in daily average LIBOR/SOFR rates partially offset by a ~~non-cash charge~~decrease of ~~approximately $5.2 million on redemption on one of our CLOs in the three months ended June 30, 2022, (iii) $5.7 million of higher interest expense attributed to an increase of $551.4~~$166.0 million in the average carrying value of our repurchase agreements - commercial mortgage loans.

Revenue from Real Estate Owned

For the three months ended June 30, 2023 and June 30, 2022, revenue from real estate owned was $6.4 million and $2.3 million, respectively. The $4.1 million increase was primarily the result of additional retail properties brought on as real estate owned, held for investment.

(Provision)/Benefit for Credit losses

Provision for credit losses was $21.6 million during the three months ended June 30, 2023 compared to a provision of $32.5 million during the three months ended June 30, 2022. The following paragraphs set forth explanations for changes in the general and specific reserves for the three months ended June 30, 2023 and 2022.

For the three months ended June 30, 2023 and June 30, 2022, the increase in general provision of $9.7 million and $4.1 million, respectively, was primarily due to a more pessimistic view of the macroeconomic scenario utilized for the CECL model. For the three months ended June 30, 2023, this increase was partially offset by a decrease in our loan portfolio compared to the preceding period. Comparatively, for the three months ended June 30, 2022, this increase was primarily the result of an increase in our loan portfolio compared to the preceding period.

For the three months ended June 30, 2023, the Company recognized $11.9 million of additional specific CECL provision on one office loan located in Portland, OR. Comparatively, for the three months ended June 30, 2022, a specific CECL allowance of $28.4 million was recorded for a retail portfolio located throughout the United States (the "Walgreens Portfolio") as the result of fraudulent underwriting documents provided to the Company during origination.

Realized Gain/(Loss) on Extinguishment of Debt

Realized gain on extinguishment of debt for the three months ended June 30, 2023 and June 30, 2022 was $0.3 million and $15.0 thousand, respectively, related to the BSPRT 2021-FL7 E and BSPRT 2018-FL4 D buybacks, respectively.

Realized Gain/(Loss) on Sale of Available for Sale Trading Securities

There were no sales of available for sale trading securities during the three months ended June 30, 2023 and 2022.

Realized Gain/(Loss) on Sale of Commercial Mortgage Loans, Held for Sale, Measured at Fair Value

Realized gain on commercial mortgage loans, held for sale, measured at fair value for the three months ended June 30, 2023 of $2.1 million and ~~(iv) $1.1~~realized loss for three months ended June 30, 2022 of $1.8 million was related to $57.6 million and $162.0 million sales of ~~higher interest expense attributed to an increase of $729.2 million in the average carrying value of our repurchase agreements on~~commercial real estate ~~securities.~~loans into the CMBS securitization market, respectively, with proceeds on the sales of $59.7 million and $160.2 million, respectively.

~~Realized~~Unrealized Gain/~~Loss~~(Loss) on Commercial Mortgage Loans, Held for Sale, Measured at Fair Value

~~Realized~~Unrealized loss on commercial mortgage loans, held for sale, measured at fair value for the three months ended June 30, 2023 and June 30, 2022 was ~~$1.8~~$0.3 million ~~compared~~and $2.8 million, respectively. The $2.5 million decrease in loss was primarily related to the reversal of unrealized gain/loss on sales of commercial real estate loans into the CMBS securitization market.

Gain/(Loss) on Other Real Estate Investments

Loss on other real estate investments for the three months ended June 30, 2023 was $1.7 million due to the decreased fair value on our real estate owned, held for sale property. There was no gain/loss on other real estate investments for the three months ended June 30, 2022.

Trading Gain/(Loss)

Trading loss for the three months ended June 30, 2023 and June 30, 2022 of $0.9 million and $22.5 million, respectively, was attributable to principal paydowns, changes in market values and gains on sales of ARM Agency Securities.

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Net Result from Derivative Transactions

Net result from derivative transactions for the three months ended June 30, 2023 of a $1.0 million gain was composed of a realized gain of ~~$6.5~~$0.6 million primarily due to the termination and settlement of $69.0 million notional amount of our interest rate swap positions coupled with an unrealized gain of $0.4 million. This is compared to a net gain on our derivative portfolio of $15.8 million composed of a realized gain of $25.2 million primarily due to the termination and settlement of $1.8 billion notional amount of our interest rate swap positions designed to hedge the RMBS portfolio partially offset by an unrealized loss of $9.4 million for the three months ended June 30, ~~2021. The $8.3 million decrease was due to the difference in weighted average price between the two sales of fixed-rate commercial real estate loans into the CMBS securitization market during~~2022.

(Provision)/Benefit for Income Tax

Provision for income tax for the three months ended June 30, ~~2022~~2023 was $53.0 thousand compared to ~~the one sale during~~a benefit of $114.0 thousand for the three months ended June 30, ~~2021.~~2022. The ~~weighted average price from sales~~difference is due to change in taxable income/loss at our TRS.

Net (Income)/Loss Attributable to Non-controlling Interest

Net income attributable to non-controlling interest in our consolidated joint ventures for the three months ended June 30, 2023 amounted to $41.0 thousand. There was ~~98.9%~~no net income/loss attributable to non-controlling interest for the three months ended June 30, 2022.

Preferred Share Dividends of Franklin BSP Realty Trust, Inc.

Preferred share dividends were $6.7 million for the three months ended June 30, 2023, compared to $7.0 million for the three months ended June 30, 2022, ~~compared to 106.4% for the three months ended June 30, 2021.~~

~~Trading Gain/Loss~~

For the three months ended June 30, 2022 we had a trading loss of $22.5 million included within the consolidated statements of operations. During the three months ended June 30, 2022, the loss was attributable to $12.8 million of losses due to sales of the ARM Agency Securities, $7.6 million of losses due to change in market values of these securities and $2.1 million of losses due to mortgage prepayments. For the three months ended June 30, 2021, we had a trading loss of $0.3 million, attributable to one sale of a CMBS security.

~~Provision / Benefit for Credit losses - Current Expected Credit Loss ("CECL") allowance, net~~

~~Our CECL allowance increased by $32.5 million during the three months ended June 30, 2022 compared to~~ a decrease of ~~$1.5 million during three months ended June 30, 2021.~~$0.3 million. The ~~increase in CECL allowance recorded during 2022 was largely due to $28.4 million of specific reserve on one asset and $4.1 million of general reserve. The~~ decrease ~~in CECL allowance in 2021 was attributable to the reversal of general reserve.~~

~~For the three months ended June 30, 2022, the increase in general reserve~~ is primarily due to ~~an increase in our portfolio of a more pessimistic view~~the automatic conversion into Common Stock of the ~~macroeconomic scenario utilized for the CECL model. Comparatively, for quarter ended June 30, 2021, the decrease~~Company's Series C Convertible Preferred Stock in ~~general reserve was driven by new loan originations that were partially offset by portfolio seasoning~~October 2022 and ~~accelerated loan repayments.~~

~~As discussed~~Series I Convertible Preferred Stock in "Part II, Item 1. Legal Proceedings" of this Quarterly Report on Form 10-Q, during the quarter ended June 30, 2022, the Company originated a loan for $113.2 million related to a portfolio of net lease retail properties located throughout the country. Subsequent to origination of the loan, the Company determined that the borrower had provided the Company numerous falsifiedJanuary 2023 (see Note 9 – Redeemable Convertible Preferred Stock and forged documents in connection with the underwriting of the loan, that significantly and fraudulently inflated the purported value of the collateral properties. Based on the new knowledge of the lease terms, the loan was assigned a risk rating of “5” and the loan was considered to be “collateral-dependent.” Accordingly, we elected to apply a practical expedient in which the specific allowance for credit losses is calculated as the difference between the fair value of the underlying collateral and the carrying value of the individual loan. At June 30, 2022, we recorded a specific allowance for credit losses of $28.4 million on the loan.

~~Table of Contents~~

Equity Transactions).

Expenses from operations

Expenses from operations for the three months ended June 30, ~~2022~~2023 and ~~June 30, 2021~~2022 consisted of the following (dollars in thousands):


		Three Months Ended June 30,					Three Months Ended June 30,
		2022		2021			2023		2022
Asset management and subordinated performance fee	Asset management and subordinated performance fee	$	6,601	$	6,001	Asset management and subordinated performance fee	$	8,900	$	6,601
Acquisition expenses						Acquisition expenses	283		319
Administrative services expenses	Administrative services expenses	3,048		3,078		Administrative services expenses	3,398		3,048
Acquisition expenses		319		169

Professional fees	Professional fees	8,736		2,777		Professional fees	2,794		8,054
Share-based compensation						Share-based compensation	1,228		682

Depreciation and amortization	Depreciation and amortization	1,296		406		Depreciation and amortization	2,196		1,296
Other expenses	Other expenses	1,663		911		Other expenses	4,301		1,663
Total expenses from operations	Total expenses from operations	$	21,663	$	13,342	Total expenses from operations	$	23,100	$	21,663

~~Overall, our~~The increase in operating expenses ~~increased~~was primarily related to (i) an increase in asset management and subordinated performance fees due to incentive fees incurred for the three months ended June 30, 2023, (ii) an increase in share-based compensation expense due to equity awards issued under the Company's 2021 Incentive Plan during the three months ended June 30, ~~2022, compared~~2023 partially offset by (iii) a decrease in professional fees primarily related to ~~June 30, 2021, primarily due to an increase~~the reduction in ~~our total portfolio size as a result of the Capstead acquisition. Professional fees saw a much higher increase due to~~ legal ~~cost incurred~~costs associated with our recovery efforts related to a hotel asset and the ~~ongoing recovery~~Walgreens Portfolio.

Table of ~~an asset.~~Contents

Comparison of the Six Months Ended June 30, ~~2022~~2023 to the Six Months Ended June 30, 2022

Net Interest Income

Net interest income is generated on our interest-earning assets less related interest-bearing liabilities and is recorded as part of our real estate debt, real estate securities and TRS segments.

The following table presents the average balance of interest-earning assets less related interest-bearing liabilities, associated interest income and expense and corresponding yield earned and incurred for the six months ended June 30, 2023 and June 30, 2022 (dollars in thousands):


	Six Months Ended June 30,
	2023							2022
	Average Carrying Value (1)			Interest Income/Expense (2)		WA Yield/Financing Cost (3)(4)		Average Carrying Value (1)			Interest Income/Expense (2)		WA Yield/Financing Cost (3)(4)
Interest-earning assets:
Real estate debt (5)	$	4,989,919		$	273,207	11.0	%	$	4,601,665		$	118,489	5.1	%
Real estate conduit	22,574			1,070		9.5	%	120,337			3,207		5.3	%
Real estate securities	276,240			7,580		5.5	%	2,001,486			23,775		2.4	%
Real Estate Owned	99,742			1,571		3.2	%	—			—		—	%
Total	$	5,388,475		$	283,428	10.5	%	$	6,723,488		$	145,471	4.3	%
Interest-bearing liabilities:
Repurchase Agreements - commercial mortgage loans	$	669,964		$	29,603	8.8	%	$	823,799		$	16,279	4.0	%
Other financing and loan participation - commercial mortgage loans	75,715			3,378		8.9	%	40,683			587		2.9	%
Repurchase Agreements - real estate securities	262,257			6,989		5.3	%	1,936,934			2,721		0.3	%
Collateralized loan obligations	3,088,627			102,499		6.6	%	2,612,134			33,009		2.5	%
Unsecured debt	89,956			3,905		8.7	%	104,697			2,691		5.1	%
Total	$	4,186,519		$	146,374	7.0	%	$	5,518,247		$	55,287	2.0	%
Net interest income/spread				$	137,054	3.5	%				$	90,184	2.3	%
Average leverage % (6)	77.7		%					82.1		%
Weighted average levered yield (7)						22.8	%						15.0	%

_________________________________________________

(1) Based on amortized cost for real estate debt and real estate securities and principal amount for interest-bearing liabilities. Amounts are calculated based on daily averages for the six months ended June 30, 2023 and June 30, 2022, respectively.

(2) Includes the effect of amortization of premium or accretion of discount and deferred fees.

(3) Calculated as interest income or expense divided by average carrying value.

(4) Annualized.

(6) Calculated by dividing total average interest-bearing liabilities by total average interest-earning assets.

(7) Calculated by dividing net interest income/spread by the average interest-earning assets less average interest-bearing liabilities.

Interest Income

Interest income for the six months ended June 30, 2023 and June 30, 2022 totaled $283.4 million and $145.5 million, respectively, an increase of $138.0 million. This was primarily due to an increase of $388.3 million in the average carrying value of our real estate debt coupled with an approximate 430 basis point increase in daily average LIBOR/SOFR rates and additional proceeds of $20.4 million related to proceeds from the Brooklyn hotel sale. As of June 30, 2023, our portfolio consisted of (i) 156 commercial mortgage loans, held for investment, (ii) one commercial mortgage loans, held for sale, measured at fair value, (iii) nine real estate securities, available for sale, measured at fair value and (iv) RMBS. As of June 30, 2022, our portfolio consisted of (i) 174 commercial mortgage loans, held for investment, (ii) six commercial mortgage loans, held for sale, measured at fair value and (iii) RMBS.

Table of Contents

Interest Expense

Interest expense for the six months ended June 30, 2023 and June 30, 2022 was $146.4 million and $55.3 million, respectively, an increase of $91.1 million. This was primarily due to an increase of $476.5 million in the average carrying value of our collateralized loan obligations coupled with an approximate 430 basis point increase in average LIBOR/SOFR rates partially offset by a decrease of $153.8 million in the average carrying value of our repurchase agreements - commercial mortgage loans and a decrease of $1.7 billion in the average carrying value of our repurchase agreements - real estate securities.

Revenue from Real Estate Owned

For the six months ended June 30, 2023 and June 30, 2022, revenue from real estate owned was $9.8 million and $4.6 million, respectively. The $5.2 million increase was primarily the result of the retail properties brought on as real estate owned, held for investment.

Provision/(Benefit) for Credit losses

Provision for credit losses was $26.0 million during the six months ended June 30, 2023 compared to a provision of $31.6 million during the six months ended June 30, 2022. The following paragraphs set forth explanations for changes in the general and specific reserves for the six months ended June 30, 2023 and June 30, 2022.

For the six months ended June 30, 2023 and June 30, 2022, the increase in general provision of $13.3 million and $3.1 million, respectively, was primarily due to a more pessimistic view of the macroeconomic scenario utilized for the CECL model. For the six months ended June 30, 2023, this was partially offset by a decrease in our loan portfolio compared to the preceding period. Comparatively, for the six months ended June 30, 2022, this increase was primarily the result of an increase in our loan portfolio compared to the preceding period.

For the six months ended June 30, 2023, the increase in specific CECL reserve of $12.7 million was primarily related to the additional specific CECL provision on one office loan located in Portland, OR coupled with higher capitalization rates on the assumed fair value of the properties in the Walgreens Portfolio. Comparatively, for the six months ended June 30, 2022, a specific CECL allowance of $28.4 million was recorded for the loan collateralized by the Walgreens Portfolio as the result of fraudulent underwriting documents provided to the Company during origination.

Realized Gain/(Loss) on Extinguishment of Debt

Realized gain on extinguishment of debt for the six months ended June 30, 2023 and June 30, 2022 was $5.0 million and $15.0 thousand, respectively. This increase is primarily related to the redemption of $17.5 million par value unsecured debt at a price equal to 75% par coupled with the BSPRT 2021-FL7 E buyback.

Realized Gain/(Loss) on Sale of Available for Sale Trading Securities

Realized gain on sale of available for sale trading securities for the six months ended June 30, 2023 of $0.6 million was primarily related to the sale of four CRE CLO bonds. There were no sales of available for sale trading securities during the six months ended June 30, 2022.

Realized Gain/(Loss) on Sale of Commercial Mortgage Loans, Held for Sale, Measured at Fair Value

Realized gain on commercial mortgage loans, held for sale, measured at fair value for the six months ended June 30, 2023 and June 30, 2022 was $2.1 million and $0.1 million, respectively. This increase in gain was related to $57.6 million sales of commercial real estate loans into the CMBS securitization market with proceeds on the sales of $59.7 million

Unrealized Gain/(Loss) on Commercial Mortgage Loans, Held for Sale, Measured at Fair Value

Unrealized gain on commercial mortgage loans, held for sale, measured at fair value for the six months ended June 30, 2023 was $44.0 thousand compared to a loss of $3.7 million for the six months ended June 30, 2022. The $3.8 million increase to a gain was primarily related to the reversal of unrealized gain/loss on sales of commercial real estate loans into the CMBS securitization market.

Gain/(Loss) on Other Real Estate Investments

Loss on other real estate investments for the six months ended June 30, 2023 of $3.0 million compared to $29.0 thousand for the six months ended June 30, 2022, an increase in loss of $3.0 million was the result of a sale on one real estate owned, held for sale property resulting in a loss of $1.2 million in addition to a write-down to fair value of one property of $1.9 million.

Table of Contents

Trading Gain/(Loss)

Trading gain for the six months ended June 30, 2023 of $2.0 million and trading loss for the six months ended June 30, 2022 of $111.0 million was attributable to principal paydowns, changes in market values and gains on sales of ARM Agency Securities.

Net Result from Derivative Transactions

Net result from derivative transactions for the six months ended June 30, 2023 of a $0.7 million gain was composed of a realized gain of $0.6 million primarily due to the termination and settlement of $72.3 million notional amount of our interest rate swap positions coupled with an unrealized gain of $0.1 million. This is compared to a net gain on our derivative portfolio of $44.8 million composed of a realized gain of $59.2 million primarily due to the termination and settlement of $5.4 billion notional amount of our interest rate swap positions designed to hedge the RMBS portfolio partially offset by an unrealized loss of $14.4 million for the six months ended June 30, 2022.

(Provision)/Benefit for Income Tax

Benefit for income tax for the six months ended June 30, 2023 was $0.6 million compared to a benefit of $0.1 million for the six months ended June 30, 2022. The difference is due to change in taxable income/loss at our TRS.

Net (Income)/Loss Attributable to Non-controlling Interest

Net income attributable to non-controlling interest in our consolidated joint ventures for the six months ended June 30, 2023 amounted to $0.1 million. There was no net income/loss attributable to non-controlling interest for the six months ended June 30, 2022.

Preferred Share Dividends of Franklin BSP Realty Trust, Inc.

Preferred share dividends were $13.5 million for the six months ended June 30, 2023 compared to $28.0 million for the six months ended June 30, 2022, a decrease of $14.5 million. The decrease is primarily due to the automatic conversion into Common Stock of the Company's Series F Convertible Preferred Stock in April 2022, Series C Convertible Preferred Stock in October 2022 and Series I Convertible Preferred Stock in January 2023 (see Note 9 – Redeemable Convertible Preferred Stock and Equity Transactions).

Expenses from Operations

Expenses from operations for the six months ended June 30, 2023 and 2022 consisted of the following (dollars in thousands):


	Six Months Ended
	June 30, 2023		June 30, 2022
Asset management and subordinated performance fee	$	16,985	$	13,346
Acquisition expenses	661		634
Administrative services expenses	7,427		6,401

Professional fees	7,608		14,213
Share-based compensation	2,250		1,182

Depreciation and amortization	4,001		2,591
Other expenses	6,467		3,425
Total expenses from operations	$	45,399	$	41,792

The increase in operating expenses was primarily related to (i) an increase in asset management and subordinated performance fees due to incentive fees incurred for the six months ended June 30, 2023, (ii) increase in shared-based compensation expense due to equity awards issued under the Company's 2021 Incentive Plan during the six months ended June 30, 2023 partially offset by (iii) a decrease in professional fees primarily related to the reduction in legal costs associated with our recovery efforts related to a hotel asset and the Walgreens Portfolio.

Table of Contents

Comparison of the Three Months Ended June 30, 2023 to the Three Months Ended March 31, 2023

Net Interest Income

Net interest income is generated on our interest-earning assets less related interest-bearing liabilities and is recorded as part of our real estate debt, real estate securities and TRS segments.

The following table presents the average balance of interest-earning assets less related interest-bearing liabilities, associated interest income and expense and corresponding yield earned and incurred for the ~~six~~three months ended June 30, ~~2022~~2023 and ~~June 30, 2021~~March 31, 2023 (dollars in thousands):


		Six Months Ended June 30,															Three Months Ended
		2022							2021								June 30, 2023							March 31, 2023
		Average Carrying Value (1)			Interest Income/Expense (2)		WA Yield/Financing Cost (3)(4)		Average Carrying Value (1)			Interest Income/Expense (2)		WA Yield/Financing Cost (3)(4)			Average Carrying Value (1)			Interest Income/Expense (2)		WA Yield/Financing Cost (3)(4)		Average Carrying Value (1)			Interest Income/Expense (2)		WA Yield/Financing Cost (3)(4)
Interest-earning assets:	Interest-earning assets:															Interest-earning assets:
Real estate debt(5)	Real estate debt(5)	$	4,601,665		$	118,489	5.1%		$	2,933,212		$	88,780	6.1%		Real estate debt(5)	$	4,957,208		$	147,258	11.9	%	$	5,127,298		$	125,949	9.8	%
Real estate conduit	Real estate conduit	120,337			3,207		5.3%		102,909			1,982		3.9%		Real estate conduit	29,446			748		10.2	%	15,625			322		8.2	%
Real estate securities	Real estate securities	2,001,486			23,775		2.4%		42,987			460		2.1%		Real estate securities	272,291			4,012		5.9	%	280,233			3,568		5.1	%
Real Estate Owned																Real Estate Owned	99,252			874		3.5	%	68,839			697		4.1	%
Total	Total	$	6,723,488		$	145,471	4.3%		$	3,079,108		$	91,222	5.9%		Total	$	5,358,197		$	152,892	11.4	%	$	5,491,995		$	130,536	9.5	%
Interest-bearing liabilities:	Interest-bearing liabilities:															Interest-bearing liabilities:
Repurchase Agreements - commercial mortgage loans	Repurchase Agreements - commercial mortgage loans	$	823,799		$	16,279	4.0%		$	305,681		$	6,623	4.3%		Repurchase Agreements - commercial mortgage loans	$	668,366		$	15,070	9.0	%	$	671,580		$	14,533	8.7	%
Other financing and loan participation - commercial mortgage loans	Other financing and loan participation - commercial mortgage loans	40,683			587		2.9%		48,261			1,138		4.7%		Other financing and loan participation - commercial mortgage loans	79,231			1,938		9.8	%	72,160			1,440		8.0	%
Repurchase Agreements - real estate securities	Repurchase Agreements - real estate securities	1,936,934			2,721		0.3%		90,129			642		1.4%		Repurchase Agreements - real estate securities	249,732			3,542		5.7	%	274,935			3,446		5.0	%
Collateralized loan obligations	Collateralized loan obligations	2,612,134			33,009		2.5%		1,833,607			15,603		1.7%		Collateralized loan obligations	3,067,338			52,963		6.9	%	3,110,153			49,537		6.4	%
Unsecured debt	Unsecured debt	104,697			2,691		5.1%		—			—		—		Unsecured debt	81,233			1,786		8.8	%	98,708			2,119		8.6	%
Total	Total	$	5,518,247		$	55,287	2.0%		$	2,277,678		$	24,006	2.1%		Total	$	4,145,900		$	75,299	7.3	%	$	4,227,536		$	71,075	6.7	%
Net interest income/spread	Net interest income/spread				$	90,184	2.3%					$	67,216	3.8%		Net interest income/spread				$	77,593	4.1	%				$	59,461	2.8	%
Average leverage % (5)		82.1		%					74.0		%
Weighted average levered yield (6)							15.0	%						16.8	%
Average leverage % (6)																Average leverage % (6)	77.4		%					77.0		%
Weighted average levered yield (7)																Weighted average levered yield (7)						25.6	%						18.8	%

_________________________________________________

(1) Based on amortized cost for real estate debt and real estate securities and principal amount for ~~repurchase agreements.~~interest-bearing liabilities. Amounts are calculated based on daily averages for the ~~six~~three months ended June 30, ~~2022~~2023 and ~~June 30, 2021,~~March 31, 2023, respectively.

(2) Includes the effect of amortization of premium or accretion of discount and deferred fees.

(3) Calculated as interest income or expense divided by average carrying value.

(4) Annualized.

(6)Calculated by dividing total average interest-bearing liabilities by total average interest-earning assets.

~~(6)~~(7) Calculated by dividing net interest income/spread by the ~~net~~ average interest-earning assets ~~and~~less average interest-bearing liabilities.

Interest Income

Interest income for the three months ended June 30, 2023 and March 31, 2023 totaled $152.9 million and $130.5 million, respectively, an increase of $22.4 million. This was primarily due to an approximate 46 basis point increase in daily average LIBOR/SOFR rates and additional proceeds of $20.4 million related to proceeds from the Brooklyn hotel sale. As of June 30, 2023, our portfolio consisted of (i) 156 commercial mortgage loans, held for investment, (ii) one commercial mortgage loan, held for sale, measured at fair value, (iii) nine real estate securities, available for sale, measured at fair value and (iv) RMBS. As of March 31, 2023, our portfolio consisted of (i) 157 commercial mortgage loans, held for investment, (ii) two commercial mortgage loans, held for sale, (iii) five real estate securities, available for sale, measured at fair value and (iv) RMBS.

Table of Contents

Interest ~~Income~~Expense

Interest ~~income~~expense for the ~~six~~three months ended June 30, ~~2022~~2023 and ~~June 30, 2021~~March 31, 2023 totaled ~~$145.5~~$75.3 million and ~~$91.2~~$71.1 million, respectively, an increase of ~~$54.3~~$4.2 million. This was primarily due to ~~(i) $29.7 million of higher interest income attributed to~~ an approximate 46 basis point increase ~~of $1,668.5 million~~ in daily average LIBOR/SOFR rates.

Revenue from Real Estate Owned

For the average carrying value of our real estate debt assets, (ii) $23.3 million of higher interest income attributed to an increase of $1,958.5 million in the average carrying value of our real estate securities portfolio and (iii) $1.2 million of higher interest income attributable to an increase of $17.4 million in the average carrying value of our conduit portfolio. As of June 30, 2022, our portfolio consisted of 174 commercial mortgage loans, held for investment, 6 commercial mortgage loans, held for sale, measured at fair value and RMBS securities.

~~Interest Expense~~

~~Interest expense for the six~~three months ended June 30, ~~2022~~2023 and March 31, 2023, our revenue from real estate owned was $6.4 million and $3.3 million, respectively. The $3.1 million increase was primarily the result of an additional retail properties brought on as real estate owned, held for investment.

(Provision)/Benefit for Credit losses

Provision for credit losses was $21.6 million during the three months ended June 30, ~~2021 totaled $55.3~~2023 compared to a provision of $4.4 million during three months ended March 31, 2023. The following paragraphs set forth explanations for changes in the general and specific reserves for the three months ended June 30, 2023 and March 31, 2023.

For the three months ended June 30, 2023 and March 31, 2023, the increase in general provision of $9.7 million and ~~$24.0~~$3.5 million, respectively, ~~an increase of $31.3 million. This~~ was primarily due to ~~(i) $12.2~~a more pessimistic view of the macroeconomic scenario utilized for the CECL model partially offset by a slight decrease in our loan portfolio compared to the preceding periods.

For the three months ended June 30, 2023, the Company recognized $11.9 million of additional CECL provision on one office loan located in Portland, OR. Comparatively, for the three months ended March 31, 2023, the increase in specific CECL allowance of $0.8 million was due to higher ~~interest expense attributed to an increase of $778.5 million in~~capitalization rates on the ~~average carrying~~assumed fair value of our collateralized loan obligations, (ii) a non-cash charge of approximately $5.2 million on redemption on one of our CLOs, (iii) $9.7 million of higher interest expense attributed to an increase of $518.1 million in the ~~average carrying value of our repurchase agreements on commercial mortgage loans and (iv) $2.1 million of higher interest expense attributed to an increase of $1,846.8 million in~~Walgreens Portfolio which was partially offset by the ~~average carrying value of our repurchase agreements on real estate securities.~~cost recovery proceeds received during the quarter.

Realized Gain/~~Loss~~(Loss) on Extinguishment of Debt

Realized gain on extinguishment of debt for the three months ended June 30, 2023 was $0.3 million related to the BSPRT 2021-FL7 E buyback. Realized gain on extinguishment of debt for the three months ended March 31, 2023 was $4.8 million related to the redemption of $17.5 million par value unsecured debt at a price equal to 75% par.

Realized Gain/(Loss) on Sale of Available for Sale Trading Securities

There were no sales of available for sale trading securities during the three months ended June 30, 2023. For the quarter ended March 31, 2023, realized gain on sale of available for sale trading securities of $0.6 million was primarily due to the sale of four CRE CLO bonds.

Realized Gain/(Loss) on Sale of Commercial Mortgage Loans, Held for Sale, Measured at Fair Value

Realized gain on commercial mortgage loans, held for sale, measured at fair value for the ~~six~~three months ended June 30, ~~2022~~2023 of $2.1 million was ~~$0.1 million compared to a realized gain of $13.2 million for the six months ended June 30, 2021. The $13.1 million decrease in realized gain was due~~primarily related to the ~~difference in proceeds received between the three~~$57.6 million sales of ~~fixed-rate~~ commercial real estate loans into the CMBS securitization market ~~during~~with proceeds on the six months ended June 30, 2022 compared to the two sales during the six months ended June 30, 2021. Proceeds from sale were $238.3 million for the six months ended June 30, 2022 compared to $256.7 million for the three months ended June 30, 2021.

~~Trading Gain/Loss~~

For the six months ended June 30, 2022 we had a trading loss of $111 million included within the consolidated statements of operations. During the six months ended June 30, 2022, the loss was attributable to $36.9 million of losses due to sales of the ARM Agency Securities, $62.2 million of losses due to change in market values of these securities and $11.9 million of losses due to mortgage prepayments. For the six months ended June 30, 2021 we had a trading loss of $1.4 million, attributable to nine$59.7 million. There were no sales of ~~CMBS securities.~~

~~Provision / Benefit for Credit losses - CECL allowance, net~~

Our CECL allowance increased by $31.6 million during the six months ended June 30, 2022 compared to a decrease of $3.8 million during six months ended June 30, 2021. The increase in CECL allowance recorded during 2022 was largely due to $28.4 million of specific reserve on one asset and $3.1 million of general reserve. The decrease in CECL allowance in 2021 was attributable to the reversal of general reserve.

For the six months ended June 30, 2022, the increase in general reserve is primarily due to an increase in our portfolio and election of a more pessimistic view of the macroeconomic scenario utilized for the CECL model. Comparatively, for the six months ended June 30, 2021, the decrease in general reserve was driven by new loan originations that were partially offset by portfolio seasoning and accelerated loan repayments.

Refer to "Comparison of the Three Months Ended June 30, 2022 to the Three Months Ended June 30, 2021" section above for explanation of the $28.4 million specific allowance for credit losses recognized during the six months ended June 30, 2022.

~~Table of Contents~~

~~Expenses from operations~~

~~Expenses from operations for the six months ended June 30, 2022 and June 30, 2021 consisted of the following (dollars in thousands):~~

Six Months Ended June 30,
2022 2021
Asset management and subordinated performance fee $ 13,346 $ 11,417
Administrative services expenses 6,401 6,552
Acquisition expenses 634 322
Professional fees 15,395 4,774
Depreciation and amortization 2,591 812
Other expenses 3,425 1,406
Total expenses from operations $ 41,792 $ 25,283

Overall, our operating expenses increased during the six months ended June 30, 2022, compared to June 30, 2021, primarily due to an increase in our total portfolio size as a result of the Capstead acquisition. Professional fees saw a much higher increase due to legal cost incurred associated with the ongoing recovery of an asset.

~~Comparison of the Three Months Ended June 30, 2022 to the Three Months Ended March 31, 2022~~

~~Net Interest Income~~

~~Net interest income is generated on our interest-earning assets less related interest-bearing liabilities and is recorded as part of our real estate debt, real estate securities and TRS segments.~~

Three Months Ended
June 30, 2022 March 31, 2022
Average Carrying Value (1)
Interest Income/Expense (2)
WA Yield/Financing Cost (3)(4)
Average Carrying Value (1)
Interest Income/Expense (2)
WA Yield/Financing Cost (3)(4)
Interest-earning assets:
Real estate debt $ 4,839,568 $ 62,801 5.2% $ 4,361,119 $ 55,687 5.1%
Real estate conduit 148,608 2,521 6.8% 92,071 686 3.0%
Real estate securities 815,977 4,891 2.4% 3,199,826 18,885 2.4%
Total $ 5,804,153 $ 70,213 4.8% $ 7,653,016 $ 75,258 3.9%
Interest-bearing liabilities:
Repurchase Agreements - commercial mortgage loans $ 834,337 $ 8,674 4.2% $ 813,144 $ 7,605 3.7%
Other financing and loan participation - commercial mortgage loans 42,996 360 3.3% 38,344 376 3.9%
Repurchase Agreements - real estate securities 786,495 1,330 0.7% 3,100,157 1,391 0.2%
Collateralized loan obligations 2,709,853 21,086 3.1% 2,513,330 11,774 1.9%
Unsecured debt 103,577 1,357 5.2 105,829 1,334 5.0%
Total $ 4,477,258 $ 32,807 2.9% $ 6,570,804 $ 22,480 1.4%
Net interest income/spread $ 37,406 1.9% $ 52,778 2.5%
Average leverage % (5)
77.1 % 85.9 %
Weighted average levered yield (6)
11.3 % 19.5 %
~~_________________________________________________~~

~~(1)~~ Based on amortized cost for real estate debt and real estate securities and principal amount for repurchase agreements. Amounts are calculated based on daily averages for the three months ended June 30, 2022 and March 31, 2022, respectively.

~~(2)~~ ~~Includes the effect of amortization of premium or accretion of discount and deferred fees.~~

~~(3)~~ ~~Calculated as interest income or expense divided by average carrying value.~~

~~(4)~~ ~~Annualized.~~

~~(5)~~ ~~Calculated by dividing total average interest-bearing liabilities by total average interest-earning assets.~~

~~(6)~~ ~~Calculated by dividing net interest income/spread by the net average interest-earning assets and average interest-bearing liabilities.~~

~~Table of Contents~~

~~Interest Income~~

Interest income for the three months ended June 30, 2022 and March 31, 2022 totaled $70.2 million and $75.3 million, respectively, a decrease of $5.1 million. This was primarily due to (i) $14.0 million of lower interest income attributed to a decrease of $2,383.8 million in the average carrying value of our real estate securities portfolio and partially offset by (ii) $7.1 million of higher interest income attributed to an increase of $478.4 million in the average carrying value of our real estate debt assets and (iii) $1.8 million of interest higher income attributable to an increase of $56.5 million in the average carrying value of our conduit portfolio. As of June 30, 2022, our portfolio consisted of 174 commercial mortgage loans, held for investment, 6 commercial mortgage loans, held for sale, measured at fair value ~~and RMBS securities.~~

~~Interest Expense~~

~~Interest expense~~ for ~~the~~ three months ended ~~June 30, 2022 and~~ March 31, 2022 totaled $32.8 million and $22.5 million, respectively, an increase of $10.3 million. This was primarily due to (i) $9.3 million of higher interest expense attributed to an increase of $196.5 million in the average carrying value of our collateralized loan obligations and (ii) $1.1 million of higher interest expense attributed to an increase of $21.2 million in the average carrying value of our repurchase agreements on commercial mortgage loans.2023.

~~Realized~~Unrealized Gain/~~Loss~~(Loss) on Commercial Mortgage Loans, Held for Sale, Measured at Fair Value

~~Realized~~Unrealized loss on commercial mortgage loans, held for sale, measured at fair value for the three months ended June 30, ~~2022~~2023 was ~~$1.8~~$0.3 million compared to a ~~realized~~ gain of ~~$1.9~~$0.3 million for the three months ended March 31, ~~2022.~~2023. The ~~$3.7 million~~$650.0 thousand decrease to a loss was ~~due~~primarily related to the ~~difference in weighted average price between the two~~reversal of unrealized gain/loss on sales of ~~fixed-rate~~ commercial real estate loans into the CMBS securitization ~~market during the three months ended June 30, 2022 compared to the one sale during the three months ended March 31, 2022. The weighted average price from sales was 98.9%~~market.

Gain/(Loss) on Other Real Estate Investments

Loss on other real estate investments for the three months ended June 30, ~~2022 compared~~2023 and March 31, 2023 was $1.7 million and $1.3 million, respectively. The $0.4 million increase in loss is a result of additional loss on our real estate owned, held for sale asset due to ~~102.4%~~decreases in fair values.

Trading Gain/(Loss)

Trading loss for the three months ended June 30, 2023 of $0.9 million and trading gain for the three months ended March 31, ~~2022.~~

~~Trading Gain/Loss~~

~~For the three months ended June 30, 2022 we had a trading loss~~2023 of ~~$22.5~~$3.0 million ~~included within the consolidated statements of operations compared to a trading loss of $88.4 million for the three months ended March 31, 2022. During the three months ended June 30, 2022, the loss~~ was attributable to ~~$12.8 million of losses due to sales of the ARM Agency Securities, $7.6 million of losses due to change~~principal paydowns, changes in market values ~~of these securities~~ and ~~$2.1 million of~~ losses ~~due to mortgage prepayments. For the three months ended March 31, 2022, the loss was attributable to $24.1 million of losses due to~~on sales of ~~the~~ ARM Agency ~~Securities, $54.6 million of losses due to change in market values of these securities and $9.7 million of losses due to mortgage prepayments.~~

~~Provision / Benefit for Credit losses - CECL allowance, net~~

Our CECL allowance increased by $32.5 million during the three months ended June 30, 2022 compared to a decrease of $1.0 million during three months ended March 31, 2022. The increase in CECL allowance recorded during the three months ended June 30, 2022 was largely due to $28.4 million of specific reserve on one asset and $4.1 million of general reserve. The decrease in CECL allowance during the three months ended March 31, 2022 was attributable to the reversal of general reserve.

For the three months ended June 30, 2022, the increase in general reserve is primarily due to an increase in our portfolio and election of a more pessimistic view of the macroeconomic scenario utilized for the CECL model. Comparatively, for the three months ended March 31, 2022, the decrease in general reserve was driven by new loan originations that were partially offset by portfolio seasoning and accelerated loan repayments.

7175

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Net Result from Derivative Transactions

Net result from derivative transactions for the three months ended June 30, 2023 of a $1.0 million gain was composed of a realized gain of $0.6 million primarily due to the termination and settlement of $69.0 million notional amount of our interest rate swap positions coupled with an unrealized gain of $0.4 million. This is compared to a net loss on our derivative portfolio of $0.3 million composed of a realized gain of $44.0 thousand primarily due to the termination and settlement of $3.3 million of our interest rate swap positions offset by an unrealized loss of $0.3 million for the three months ended March 31, 2023 .

(Provision)/Benefit for Income Tax

Provision for income tax for the three months ended June 30, 2023 was $0.1 million compared to a benefit of $0.7 million for the three months ended March 31, 2023. The difference is due to change in taxable income/loss at our TRS.

Net Income/(Loss) Attributable to Non-controlling Interest

Net loss attributable to non-controlling interest in our consolidated joint ventures for the three months ended June 30, 2023 and March 31, 2023 amounted to $41.0 thousand and $9.0 thousand, respectively.

Preferred Share Dividends of Franklin BSP Realty Trust, Inc.

Preferred share dividends were $6.7 million for the three months ended June 30, 2023 compared to $6.7 million for the three months ended March 31, 2023. (see Note 9 – Redeemable Convertible Preferred Stock and Equity Transactions).

Expenses from operations

Expenses from operations for the three months ended June 30, ~~2022~~2023 and March 31, ~~2022~~2023 consisted of the following (dollars in thousands):

Three Months Ended
June 30, 2022 March 31, 2022
Asset management and subordinated performance fee $ 6,601 $ 6,745
Administrative services expenses 3,048 3,353
Acquisition expenses 319 315
Professional fees 8,736 6,659
Depreciation and amortization 1,296 1,295
Other expenses 1,663 1,762
Total expenses from operations $ 21,663 $ 20,129


	Three Months Ended
	June 30, 2023		March 31, 2023
Asset management and subordinated performance fee	$	8,900	$	8,085
Acquisition expenses	283		378
Administrative services expenses	3,398		4,029

Professional fees	2,794		4,814
Share-based compensation	1,228		1,022

Depreciation and amortization	2,196		1,805
Other expenses	4,301		2,166
Total expenses from operations	$	23,100	$	22,299

The increase in our operating expenses ~~from operations~~ was primarily related to an increase in other expenses primarily related to the ~~increase~~recognition of property operations for one of our real estate owned, held for investment properties partially offset by a decrease in professional fees ~~of $2.1 million from additional~~is primarily related to the reduction in legal ~~cost incurred~~costs associated with ~~the ongoing~~our recovery ofefforts related to a hotel ~~asset.~~asset and the Walgreens Portfolio.

Liquidity and Capital Resources

Overview

Our expected material cash requirements over the next twelve months and thereafter are ~~comprised~~composed of (i) contractually obligated expenditures, including payments of principal and interest and contractually-obligated fundings on our loans; (ii) other essential expenditures, including operating and administrative expenses and dividends paid in accordance with REIT distribution requirements; and (iii) opportunistic expenditures, including new loans.

Our contractually obligated expenditures primarily consist of payment obligations under the debt financing arrangements which are set forth below, including in the table under “Contractual Obligations and Commitments.”

We expect to use additional debt and equity financing as a source of capital. Our board of directors currently intends to operate at a leverage level of between one to three times book value of equity. However, our board of directors may change this target without shareholder approval. We ~~believe that the recent listing of our common stock will improve our access to capital through public offerings of our securities. We~~ anticipate that our debt and equity financing sources and our anticipated cash generated from operations will be adequate to fund our anticipated uses of capital.

Table of Contents

In addition to our current mix of financing sources, we may also access additional forms of financings, including credit facilities, securitizations, public and private, secured and unsecured debt issuances by us or our subsidiaries, or through capital recycling initiatives whereby we sell certain assets in our portfolio and reinvest the proceeds in assets with more attractive risk-adjusted returns.

Collateralized Loan Obligations

During the six months ended June 30, ~~2022,~~2023, the Company raised ~~$1.2 billion of~~no capital through ~~the issuance of BSPRT 2022-FL8 Issuer, Ltd. and~~ ~~$802.3 million of capital through the issuance of BSPRT 2022-FL9 Issuer, LLC.~~CLO issuances. Additionally, as of June 30, ~~2022,~~2023, the Company had ~~$43.7~~$55.0 million of reinvestment capital available across all outstanding collateralized loan obligations.

CLO Name

Debt Amount

Reinvestment End Date

BSPRT 2019 FL5 (1)

122.04

Ended

BSPRT 2021 FL6

584.50

9/15/23

BSPRT 2021 FL7

720.00

12/15/23

BSPRT 2022 FL8

960.00

2/15/24

BSPRT 2022 FL9

670.64

7/15/24

(1) On July 17, 2023, the Company called all of the outstanding notes issued by BSPRT 2019-FL5 Issuer, Ltd, a wholly owned indirect subsidiary of the Company.

Repurchase Agreements and Revolving Credit Facilities, Commercial Mortgage Loans

~~As of June 30, 2022 we have~~The Company has entered into repurchase facilities with JPMorgan Chase Bank, National Association (the "JPM Repo Facility"), Barclays Bank PLC (the "Barclays Revolver Facility" and the "Barclays Repo Facility"), Wells Fargo Bank, National Association (the "WF Repo Facility"), and ~~Credit Suisse AG~~Atlas SP Partners (the ~~"CS~~"Atlas Repo Facility" and together with JPM Repo Facility, WF Repo Facility, Barclays Revolver Facility, and Barclays Repo Facility, collectively, the "Repo and Revolving Credit Facilities").

The Repo Facilities are financing sources through which wethe Company may pledge one or more mortgage loans to the financing entity in exchange for funds typically at an advance rate of between 65% to ~~80%~~75% of the principal amount of the mortgage loan being pledged.

We expect to use the advances from these Repo and Revolving Credit Facilities to finance the acquisition or origination of eligible loans, including first mortgage loans, subordinated mortgage loans, mezzanine loans and participation interests therein.

~~Table of Contents~~

The Repo and Revolving Credit Facilities generally provide that in the event of a decrease in the value of our collateral, the lenders can demand additional collateral. Should the value of our collateral decrease as a result of deteriorating credit quality, resulting margin calls may cause an adverse change in our liquidity position.

Table of Contents

The details of our Repo and Revolving Credit Facilities atas of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 are as follows (dollars in thousands):


As of June 30, 2022
Repurchase Facility		Committed Financing		Amount Outstanding		Interest Expense (1)		Ending Weighted Average Interest Rate		Maturity
As of June 30, 2023											As of June 30, 2023
Repurchase and Revolving Credit Facility											Repurchase and Revolving Credit Facility	Committed Financing		Amount Outstanding		Interest Expense (1)		Ending Weighted Average Interest Rate		Term Maturity
JPM Repo Facility(2)	JPM Repo Facility(2)	$	400,000	$	282,646	$	3,548	4.09	%	10/6/2022	JPM Repo Facility (2)	$	500,000	$	279,980	$	11,899	8.46	%	10/6/2024

CS Repo Facility (3)		300,000		205,615		2,749		3.74	%	9/30/2022
Atlas Repo Facility (3)											Atlas Repo Facility (3)	600,000		53,313		3,784		7.60	%	3/15/2024
WF Repo Facility (4)	WF Repo Facility (4)	500,000		184,091		4,268		3.58	%	11/21/2023	WF Repo Facility (4)	500,000		191,808		5,527		7.91	%	11/21/2023
Barclays Revolver Facility (5)	Barclays Revolver Facility (5)	250,000		—		1,015		N/A		9/20/2023	Barclays Revolver Facility (5)	250,000		—		514		N/A		9/20/2024
Barclays Repo Facility (6)	Barclays Repo Facility (6)	500,000		159,682		4,172		3.62	%	3/14/2025	Barclays Repo Facility (6)	500,000		169,938		6,711		7.65	%	3/14/2025
Total	Total	$	1,950,000	$	832,034	$	15,752				Total	$	2,350,000	$	695,039	$	28,435

________________________________________________________

(1) For the six months ended June 30, ~~2022.~~2023. Includes amortization of deferred financing costs.

(2)With one-year extension option available at the Company's discretion. ~~Additionally, subsequent to quarter end, on July 7, 2022, the committed financing was increased from~~ ~~$400 million to $500 million.~~

(4) ~~On May 12, 2022, the committed financing amount was increased from $450 million to $500 million.~~ There are three more one-year extension options available at the Company's discretion.

(6) ~~There are~~ ~~two~~ ~~one-year-year extension options available at the Company's discretion.~~

~~(1)~~ ~~For the year ended December 31, 2020. Includes amortization of deferred financing costs.~~

~~(2)~~ ~~There are three more one-year extension options available at the Company's discretion.~~

~~(3)~~ ~~The Company may increase the total commitment amount by an amount between $100 million and $150 million for three month intervals, on an unlimited basis prior to maturity.~~

~~(4)~~There are two one-year extension options available at the Company's discretion.


As of December 31, 2022
Repurchase and Revolving Credit Facility	Committed Financing		Amount Outstanding		Interest Expense(1)		Ending Weighted Average Interest Rate		Term Maturity
JPM Repo Facility	$	500,000	$	275,423	$	11,773	7.42	%	10/6/2024

Credit Suisse Repo Facility	600,000		168,046		8,676		7.12	%	10/31/2023
WF Repo Facility	500,000		79,807		7,492		7.11	%	11/21/2023
Barclays Revolver Facility	250,000		—		1,267		N/A		9/20/2023
Barclays Repo Facility	500,000		157,583		8,997		6.75	%	3/14/2025
Total	$	2,350,000	$	680,859	$	38,205

(1) For the year ended December 31, 2022. Includes amortization of deferred financing costs.

Other ~~financing and loan participation~~financings - Commercial Mortgage Loans

On March 23, 2020, the Company transferred $15.2 million of its interest in a term loan to ~~Sterling National Bank ("SNB")~~a regional bank via a participation agreement. Since inception, the Company's outstanding loan increased as a result of future fundings, leading to an increase in amount outstanding via the participation agreement. The Company incurred ~~$0.3~~$1.3 million and ~~$0.5~~$2.1 million of interest expense on the ~~SNB~~regional bank term loan for the three and six months ended June 30, ~~2022.~~2023, respectively. As of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 the outstanding participation balance was ~~$40.0~~$61.9 million and ~~$37.9~~$59.2 million, respectively. The loan accrued interest at an annual rate of one-month ~~LIBOR + 2.20%~~SOFR +2.20% (7.75% as of June 30, 2023) and matures on ~~February~~December 9, 2023.

~~Table of Contents~~

Table of Contents

Mortgage Note Payable

On September 17, 2021, the Company, in connection with the ~~consolidating~~consolidated joint venture (as discussed in Note 5 - Real Estate Owned), originated a $112.7 million mortgage note payable, of which $88.7 million is eliminated in ~~consolidation~~our consolidated financial statements (see Note 5 - Real Estate Owned). ~~The~~As of June 30, 2023 and December 31, 2022, the remaining outstanding mortgage note payable of $24.0 million is ~~disclosed on~~included in the consolidated balance sheet. As of June 30, ~~2022,~~2023, the loan accrued interest at an annual rate of ~~3.1%~~SOFR + 3.0%, which is eliminated in our consolidated financial statements, and matures on October 9, 2024.

Unsecured Debt

AtAs of June 30, ~~2022,~~2023, the Company held 30-year junior subordinated notes issued in 2005 and 2006 and maturing in 2035 and 2036, respectively, with a total face amount of ~~$100.0~~$82.5 million. Note balances net of deferred issuance costs, and related weighted average interest rates as of the indicated dates (calculated including issuance cost amortization and adjusted for the effects of related derivatives held as cash flow ~~hedges)~~hedges prior to termination) were as follows (dollars in thousands):


		As of June 30, 2022				As of December 31, 2021					As of June 30, 2023				As of December 31, 2022
		Borrowings Outstanding		Average Rate		Borrowings Outstanding		Average Rate			Borrowings Outstanding		Weighted Average Rate		Borrowings Outstanding		Weighted Average Rate
Junior subordinated notes maturing in:	Junior subordinated notes maturing in:									Junior subordinated notes maturing in:
October 2035 ($35,000 face amount)		$	34,489	3.73	%	$	34,470	7.86	%
October 2035 ($17,500 face amount)										October 2035 ($17,500 face amount)	$	17,028	9.40	%	$	34,508	8.25	%
December 2035 ($40,000 face amount)	December 2035 ($40,000 face amount)	39,493		3.49	%	39,474		7.63	%	December 2035 ($40,000 face amount)	39,532		9.18	%	39,513		8.39	%
September 2036 ($25,000 face amount)	September 2036 ($25,000 face amount)	24,663		3.49	%	24,650		7.67	%	September 2036 ($25,000 face amount)	24,686		9.19	%	24,674		8.39	%
		$	98,645	3.57	%	$	98,594	7.72	%		$	81,246	9.23	%	$	98,695	8.34	%

The notes are currently redeemable, in whole or in part, without penalty, at the Company’s option. During the six months ended June 30, 2023 the Company recognized a realized gain on extinguishment of debt in the amount of $4.4 million as a result of the redemption of $17.5 million par value unsecured debt at a price equal to 75% par. Interest paid on unsecured debt, including related derivative cash flows, totaled ~~$2.8 million during the six months ended June 30, 2022.~~

Pursuant to a lending and security agreement with Security Benefit Life Insurance Company ("SBL"), which was entered into in February 2020 and amended in March and August 2020, the Company may borrow up to $100.0 million at a rate of one-month LIBOR + 4.5%. The facility has a maturity of February 10, 2023 and is secured by a pledge of equity interests in certain of the Company’s subsidiaries. The Company incurred $0.3$1.72 million and ~~$0.6~~$3.98 million ~~of interest expense on the lending agreement with SBL~~ for the three and six months ended June 30, ~~2022. As of June 30, 2022 there was no outstanding balance.~~2023, respectively.

Repurchase Agreements - Real Estate Securities

~~Table of Contents~~

These agreements are floating rate at SOFR or LIBOR plus an applicable spread.

Below is a summary of the Company's MRAs as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (dollars in thousands):


								Weighted Average										Weighted Average
Counterparty	Counterparty	Amount Outstanding		Interest Expense		Collateral Pledged (1)		Interest Rate		Days to Maturity	Counterparty	Amount Outstanding		Interest Expense		Collateral Pledged (1)		Interest Rate		Days to Maturity
As of June 30, 2022
As of June 30, 2023											As of June 30, 2023
JP Morgan Securities LLC	JP Morgan Securities LLC	$	18,857	$	141	$	23,668	2.19	%	13	JP Morgan Securities LLC	$	110,218	$	2,153	$	124,272	6.07	%	17

Goldman Sachs International		—		—		—		N/A		N/A
Barclays Capital Inc.	Barclays Capital Inc.	34,431		235		43,023		2.34	%	1	Barclays Capital Inc.	66,775		1,565		81,390		6.07	%	12

Citigroup Global Markets, Inc.		—		—		—		N/A		N/A
Total/Weighted Average	Total/Weighted Average	$	53,288	$	376	$	66,691	2.29	%	5	Total/Weighted Average	$	176,993	$	3,718	$	205,662	6.07	%	15

As of December 31, 2021
As of December 31, 2022											As of December 31, 2022
JP Morgan Securities LLC	JP Morgan Securities LLC	$	19,025	$	261	$	24,087	1.14	%	10	JP Morgan Securities LLC	$	103,513	$	1,281	$	120,751	5.34	%	22

Goldman Sachs International		—		37		—		N/A		N/A

Barclays Capital Inc.	Barclays Capital Inc.	15,286		526		19,131		1.21	%	14	Barclays Capital Inc.	119,351		1,646		144,778		5.18	%	50

Citigroup Global Markets, Inc.		—		81		—		N/A		N/A

Total/Weighted Average	Total/Weighted Average	$	34,311	$	905	$	43,218	1.71	%	12	Total/Weighted Average	$	222,864	$	2,927	$	265,529	5.25	%	37

________________________________________________________

(1) Includes ~~$66.7~~$24.2 million and ~~$43.2~~$67.1 million of CLO notes, held by the Company, which ~~are~~is eliminated within the ~~real~~Real estate securities, trading, at fair value line inof the consolidated balance sheets as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

Table of Contents

Repurchase Agreements - Real Estate Securities Classified As Trading

As a result of the Capstead merger which closed on October 19, 2021, the Company acquired a significant portfolio of ARM Agency Securities which the Company accounts for as real estate securities classified as trading. The Company pledges its real estate securities classified as trading as collateral for repurchase agreements with commercial banks and other financial institutions. Repurchase arrangements entered into by the Company involve the sale and a simultaneous agreement to repurchase the transferred assets at a future date and are accounted for as financings. The Company maintains the beneficial interest in the specific securities pledged during the term of each repurchase arrangement and receives the related principal and interest payments.

~~Table of Contents~~

Repurchase agreements (and related pledged collateral, including accrued interest receivable), classified by collateral type and remaining maturities, and related weighted average borrowing rates as of the indicated dates were as follows (dollars in thousands):

Collateral Type Collateral
Carrying
Amount Accrued
Interest
Receivable Borrowings
Outstanding Average
Borrowing
Rates
As of June 30, 2022
Repurchase arrangements secured by Agency securities with maturities of 30 days or less $ 252,500 $ 471 $ 240,000 1.63 %
$ 252,500 $ 471 $ 240,000 1.63 %
As of December 31, 2021
Repurchase arrangements secured by Agency securities with maturities of 30 days or less $ 4,327,020 $ 8,908 $ 4,144,473 0.13 %
$ 4,327,020 $ 8,908 $ 4,144,473 0.13 %


	Amount Outstanding		Accrued Interest Receivable		Collateral Carrying Amount		Weighted Average Borrowing Rates
As of June 30, 2023
Repurchase arrangements secured by trading securities with maturities of 30 days or less	$	113,000	$	370	$	118,455	5.25	%

As of December 31, 2022
Repurchase arrangements secured by trading securities with maturities of 30 days or less	$	172,144	$	544	$	180,400	4.25	%
Repurchase arrangements secured by trading securities with maturities of 31 to 90 days	45,000		114		47,210		4.51	%
	$	217,144	$	658	$	227,610	4.30	%

As of June 30, 2022, the Company’s repurchase agreements collateralized by RMBS totaled $240 million with 2 counterparties at average rates of 1.63%, before the effects of currently-paying interest rate swap agreements. Average repurchase agreements outstanding were ~~$732~~$117.2 million inand $220.1 million during the ~~second quarter of 2022.~~three months ended June 30, 2023 and December 31, 2022, respectively. Average repurchase agreements outstanding differed from respective ~~period-end~~quarter-end balances during the indicated periods primarily due to changes in portfolio levels and differences in the timing of portfolio acquisitions relative to portfolio runoff and asset sales. Interest paid on repurchase agreements, including related ~~Derivative cash flows,~~derivative payments, totaled ~~$5.2~~$1.74 million and $3.78 million during the three and six months ended June 30, ~~2022.~~2023, respectively.

The Company finances its residential mortgage investments primarily by borrowing under repurchase arrangements, the terms and conditions of which are negotiated on a transaction-by-transaction basis, when each such agreement is initiated or renewed.

Future agreements are dependent upon the willingness of lenders to participate in the financing of mortgage investments, lender collateral requirements and the lenders’ determination of the fair value of the investments pledged as collateral, which fluctuates with changes in interest rates and liquidity conditions within the commercial banking and mortgage finance industries. None of our repurchase agreement counterparties are obligated to renew or otherwise enter into new agreements at the conclusion of existing borrowings.

Table of Contents

To help mitigate exposure to rising short-term interest rates, wethe Company may economically hedge the portfolio of repurchase agreements using derivatives supplemented with longer-maturity repurchase agreements when available at attractive rates and terms. AtAs of June 30, ~~2022,~~2023, the Company held $100 million notional amount of portfolio financing-related interest rate swap agreements with contract expirations occurring at various dates through the Second quarter 2024 and a weighted average expiration of 23.9 months. At June 30, 2022, we expect to have no net cash obligationsdid not hold any derivative positions related to ~~repurchase agreement-related interest rate swap agreements after considering~~ the ~~variable-rate payments owed to us under the agreements’ terms based on market interest rate expectations as of quarter-end.~~trading securities.

~~Table of Contents~~

Repurchase Agreements and Revolving Credit Facilities - Commercial Mortgage Loans

The following tables summarize our Repurchase Agreements, Commercial Mortgage Loans and our MRAs for the six months ended June 30, 2023, 2022, ~~2020~~ and ~~2019,~~2021, respectively:


		As of June 30, 2022							As of June 30, 2023
		Amount Outstanding		Average Outstanding Balance								Amount Outstanding				Average Outstanding Balance
		Q1			Q2		Q1			Q2				Q1		Q2			Q1		Q2
Repurchase Agreements, Commercial Mortgage Loans		$	522,890		$	832,034	$	813,144		$	834,337
Repurchase Agreements and Revolving Credit Facilities, Commercial Mortgage Loans													Repurchase Agreements and Revolving Credit Facilities, Commercial Mortgage Loans	$	604,421	$	695,039		$	725,300	$	796,659
Repurchase Agreements, Real Estate Securities	Repurchase Agreements, Real Estate Securities	$	54,610		$	53,288	$	44,744		$	54,033		Repurchase Agreements, Real Estate Securities	$	107,934	$	176,993		$	217,389	$	209,025
Repurchase Agreements, Real Estate Securities held as trading	Repurchase Agreements, Real Estate Securities held as trading	$	1,659,931		$	240,000	$	3,055,413		$	1,818,495		Repurchase Agreements, Real Estate Securities held as trading	$	121,000	$	113,000		$	149,387	$	117,159
		As of June 30, 2021
		Amount Outstanding		Average Outstanding Balance					As of June 30, 2022
		Q1			Q2		Q1			Q2				Amount Outstanding				Average Outstanding Balance
Repurchase Agreements, Commercial Mortgage Loans		$	152,925		$	287,462	$	340,485		$	282,891
														Q1		Q2			Q1		Q2
Repurchase Agreements and Revolving Credit Facilities, Commercial Mortgage Loans													Repurchase Agreements and Revolving Credit Facilities, Commercial Mortgage Loans	$	522,890	$	832,034		$	813,144	$	834,337
Repurchase Agreements, Real Estate Securities	Repurchase Agreements, Real Estate Securities	$	88,272		$	46,510	$	123,322		$	57,301		Repurchase Agreements, Real Estate Securities	$	54,610	$	53,288		$	44,744	$	54,033
Repurchase Agreements, Real Estate Securities held as trading													Repurchase Agreements, Real Estate Securities held as trading	$	1,659,931	$	240,000		$	3,055.413	$	1,818,495
		As of June 30, 2020
		Amount Outstanding		Average Outstanding Balance					As of June 30, 2021
		Q1			Q2		Q1			Q2				Amount Outstanding				Average Outstanding Balance
Repurchase Agreements, Commercial Mortgage Loans		$	234,524		$	226,224	$	282,282		$	238,280
														Q1		Q2			Q1		Q2
Repurchase Agreements and Revolving Credit Facilities, Commercial Mortgage Loans													Repurchase Agreements and Revolving Credit Facilities, Commercial Mortgage Loans	$	152,925	$	287,462		$	340,485	$	282,891
Repurchase Agreements, Real Estate Securities	Repurchase Agreements, Real Estate Securities	$	496,880		$	333,256	$	412,809		$	351,202		Repurchase Agreements, Real Estate Securities	$	88,272	$	46,510		$	123,322	$	57,301

The use of our warehouse lines is dependent upon a number of factors including but not limited to: origination volume, loan repayments and prepayments, our use of other financing sources such as collateralized loan obligations, our liquidity needs and types of loan assets and underlying collateral that we hold.

During the six months ended June 30, 2023, the maximum average outstanding balance was $1.1 billion, of which $0.7 billion was related to repurchase agreements on our commercial mortgage loans and $0.4 billion for repurchase agreements on our real estate securities.

During the six months ended June 30, 2022, the maximum average outstanding balance was $5.3 billion, of which $1.1 billion was related to repurchase agreements on our commercial mortgage loans and $4.2 billion for repurchase agreements on our real estate securities.

During the six months ended June 30, 2021, the maximum average outstanding balance was $475.5 million, of which $363.6 million was related to repurchase agreements on our commercial mortgage loans and $111.9 million for repurchase agreements on our real estate securities.

During the six months ended June 30, 2020, the maximum average outstanding balance was $721.0 million, of which $452.8 million was related to repurchase agreements on our commercial mortgage loans and $268.2 million for repurchase agreements on our real estate securities.

Distributions

In order to maintain our election to qualify as a REIT, we must currently distribute, at a minimum, an amount equal to 90% of our taxable income, without regard to the deduction for distributions paid and excluding net capital gains. The Company must distribute 100% of its taxable income (including net capital gains) to avoid paying corporate U.S. federal income taxes.

Distributions on our common stock ~~and Series F Preferred Stock~~ are payable when ~~authorized and~~ declared by our board of directors.

Table of Contents

Dividends payable on each share of Series ~~C and Series~~ H Preferred Stock ~~are~~is generally equal to the quarterly dividend that would have been paid had such share of preferred stock been converted to a share of common stock, except to the extent common stock dividends have been reduced below certain specified levels. To the extent dividends on shares of preferred stock are not authorized and declared by our board of directors and paid by the Company monthly, the dividend amounts will accrue.

~~Table of Contents~~

In June ~~2022,~~2023, the Company's board of directors declared the ~~following~~following: (i) a second quarter ~~2022 dividends: (i) a quarterly cash~~2023 dividend of $0.355 per share on the Company's common stock (equivalent to $1.42 per annum), (ii) a second quarter ~~2022~~2023 dividend of $106.22 per share on the Company’s Series ~~C Preferred Stock and Series~~ H Preferred Stock, and (iii) a second quarter ~~2022~~2023 dividend of $0.46875 per share on the Company’s Series E Preferred Stock, all of which were paid in July ~~2022~~2023 to holders of record on June 30, ~~2021.~~2023.

The below table shows the distributions paid on shares outstanding of common stock during the six months ended June 30, ~~2022~~2023 and June 30, ~~2021~~2022 (dollars in thousands):

Six Months Ended June 30, 2022
Payment Date Amount Paid in Cash Amount Issued under DRIP
January 7, 2022 $ 12,435 $ 91
April 11, 2022 15,616 112
Total $ 28,051 $ 203


	Six Months Ended June 30, 2023
Payment Date	Amount Paid in Cash		Amount Issued under DRIP
January 10, 2023	$	29,462	$	—
April 10, 2023	28,850		768


Total	$	58,312	$	768

Six Months Ended June 30, 2021
Payment Date Amount Paid in Cash Amount Issued under DRIP
January 4, 2021 $ 9,652 $ 2,584
April 1, 2021 9,603 2,530
Total $ 19,255 $ 5,114


	Six Months Ended June 30, 2022
Payment Date	Amount Paid in Cash		Amount Issued under DRIP
January 7, 2022	$	12,435	$	91
April 11, 2023	15,616		112


Total	$	28,051	$	203

Cash Flows

Cash Flows for the Six Months Ended June 30, 2023

Net cash provided by operating activities for the six months ended June 30, 2023 was $78.4 million. Cash inflows were primarily driven by net income of $83.5 million, offset by certain non-cash income.

Net cash provided by investing activities for the six months ended June 30, 2023 was $280.5 million. Cash inflows were primarily driven by (i) the sale of real estate securities, trading, at fair value of $97.5 million, (ii) sale of real estate securities, available for sale, measured at fair value of $127.7 million, (iii) principal repayments on commercial mortgage loans, held for investment of $591.4 million, (iv) proceeds from sale of other real estate investments of $22.3 million and (v) principal collateral received on mortgage investments of $14.4 million. Inflows were offset by proceeds for originations and purchases of $472.3 million of commercial mortgage loans, held for investment, $100.3 million for the purchase of real estate securities and purchase of real estate owned and capital expenditures of $0.6 million.

Net cash used in financing activities for the six months ended June 30, 2023 was $317.2 million. Cash outflows were primarily driven by (i) our net repayments on CMBS MRAs of $150.0 million, (ii) net repayments from borrowings on unsecured debt of $13.4 million, (iii) net repayments from borrowings on collateralized loan obligations of $89.9 million and (iv) the $71.9 million used for cash distributions to stockholders.

Cash Flows for the Six Months Ended June 30, 2022

Net cash used in operating activities for the six months ended June 30, 2022 ~~was~~was $24.0 ~~million.~~million. Cash outflows were primarily driven by net loss of $48.2 million, coupled with net outflows of ~~$98.3~~$98.3 million related to originations of and proceeds from sales of commercial mortgage loans, measured at fair value and realized gains of $53.8 million on swap terminations. This is partially offset by non-cash adjustments of ~~$111.0~~$111.0 million and ~~$14.4~~$14.4 million related to trading losses on real estate securities and derivative instruments, respectively, ~~$31.6~~$31.6 million increase in provision for credit losses and ~~$13.2~~$13.2 million net changes of assets and liabilities.

Table of Contents

Net cash provided by investing activities for the six months ended June 30, 2022 was $3,396.2 million. Cash inflows were primarily driven by the sale of real estate securities of ~~$3,731.7~~$3,731.7 million, principal repayments on commercial mortgage loans, held for investment of $678.2 million, principal collateral received on mortgage investments of ~~$518.1~~$518.1 million and ~~$4.1~~$4.1 million received from sale of commercial mortgage loans, held for sale. Inflows were offset by proceeds for ~~originations~~origination and ~~purchases~~ purchase of $1,536.4 million of commercial mortgage loans, held for investment.

Net cash used in financing activities for the six months ended June 30, 2022 ~~was~~was $3,083.2 ~~million.~~million. Cash outflows were primarily driven by our net repayments on CMBS MRAs ofof $3,885.5 million, net repayments from borrowings on repurchase agreements - commercial mortgage loans and unsecured debt of ~~$187.6~~$187.6 million and $50.0 million, respectively, and $67.0 million was used for cash distributions to ~~stockholders.~~stockholders. Outflows were offset by net borrowings on CLOs of $1,044.0 million and a total of $62.0 million of cash collateral and proceeds received on interest rate swaps and settlements.

~~Cash Flows for the Six Months Ended June 30, 2021~~

Net cash provided by operating activities for the six months ended June 30, 2021 was $54.2 million. Cash inflows were primarily driven by net income of $60.2 million, partially offset by net outflows of $8.3 million related to originations of and proceeds from sales of commercial mortgage loans, measured at fair value.

Net cash used in investing activities for the six months ended June 30, 2021 was $258.8 million. Cash outflows were primarily driven by origination and purchase of $917.2 million of commercial mortgage loans, held for investment. Outflows were offset by proceeds from the sale/repayment of real estate securities of $178.0 million, principal repayments on commercial mortgage loans, held for investment of $468.7 million and proceeds from sale of real estate owned, held for sale of $10.8 million.

~~Table of Contents~~

Net cash provided by financing activities for the six months ended June 30, 2021 was $190.1 million. Cash inflows were primarily driven by proceeds from borrowings on CLOs and repurchase agreements - commercial mortgage loans of $338.1 million and $11.1 million, respectively, and proceeds from issuances of redeemable convertible preferred stock of $15.0 million. Inflows were offset by net repayments on our CMBS MRAs of $140.3 million. Additionally, $26.0 million was used in cash distributions to stockholders and $9.2 million was used for stock repurchases.

Election as a REIT

We elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code commencing with the taxable year ended December 31, 2013. As a REIT, if we meet certain organizational and operational requirements and distribute at least 90% of our "REIT taxable income" (determined before the deduction of dividends paid and excluding net capital gains) to our stockholders in a year, we will not be subject to U.S. federal income tax to the extent of the income that we distribute. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and property, and U.S. federal income and excise taxes on our undistributed income.

Contractual Obligations and Commitments

Our contractual obligations, excluding interest obligations (as amounts are not fixed or determinable), as of June 30, ~~2022~~2023 are summarized as follows (dollars in thousands):


		Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years		Total			Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years		Total
Unfunded loan commitments (1)	Unfunded loan commitments (1)	$	13,956	$	467,772	$	32,292	$	—	514,020		Unfunded loan commitments (1)	$	32,764	$	400,543	$	9,214	$	—	$	442,521
Repurchase agreements - commercial mortgage loans	Repurchase agreements - commercial mortgage loans	488,261		343,773		—		—		832,034		Repurchase agreements - commercial mortgage loans	191,808		503,231		—		—		695,039
Repurchase agreements - real estate securities	Repurchase agreements - real estate securities	293,288		—		—		—		293,288		Repurchase agreements - real estate securities	289,993		—		—		—		289,993
CLOs (2)	CLOs (2)	—		—		—		3,230,197		3,230,197		CLOs (2)	122,039		—		—		2,935,139		3,057,178
Mortgage Note Payable	Mortgage Note Payable	—		—		—		23,998		23,998		Mortgage Note Payable	—		—		—		23,998		23,998
Unsecured debt	Unsecured debt	—		—		—		98,645		98,645		Unsecured debt	—		—		—		81,246		81,246
Other financing and loan participation - commercial mortgage loans	Other financing and loan participation - commercial mortgage loans	—		7,151		40,030		—		47,181		Other financing and loan participation - commercial mortgage loans	61,919		—		20,429		—		82,348
Total	Total	$	795,505	$	818,696	$	72,322	$	3,352,840	$	5,039,363	Total	$	698,523	$	903,774	$	29,643	$	3,040,383	$	4,672,323

________________________________________________________

(1) The allocation of our unfunded loan commitments is based on the earlier of the commitment expiration date or the loan maturity date.

(2) Excludes ~~$453.4~~$463.9 million of CLO notes, held by the Company, which are eliminated within the collateralized loan obligations line of the consolidated balance sheet as of June 30, ~~2022.~~2023. This reflects the contractual CLO maturity dates.

In addition to its cash requirements, the Company pays a quarterly dividend and has an existing share repurchase authorization. As of June 30, ~~2022,~~2023, the Company’s quarterly cash dividend was $0.355 per share of common stock (which was paid on an as-converted basis on the Company’s shares of Series ~~C Preferred Stock and Series~~ H ~~Preferred Stock),~~convertible preferred stock, and $0.46875 per share on the Company’s shares of 7.50% Series E Cumulative Redeemable Preferred Stock ("Series E Preferred ~~Stock.~~Stock"). The payment of future dividends is subject to declaration by the ~~Board~~board of ~~Directors.~~directors. The Company’s ~~Board~~board of ~~Directors~~directors also has authorized a $65.0 million share repurchase program, ~~that is currently operative following the conclusion~~ of ~~the $35.0~~which $39.3 million ~~open market share purchase program the Advisor implemented in connection with the Company’s merger with Capstead.~~remained available as of June 30, 2023. The authorization does not obligate ~~the~~the Company to acquire any specific number of shares.

Related Party Arrangements

Refer to “Note 11 -– Related Party Transactions and Arrangements” for a summary of the Company’s related party arrangements.

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Non-GAAP Financial Measures

Distributable Earnings and Run-Rate Distributable Earnings

Distributable Earnings is a non-GAAP measure, which ~~we define~~the Company defines as GAAP net income (loss), adjusted for (i) non-cash CLO amortization acceleration and amortization over ~~our~~the expected useful life of ~~our~~the Company's CLOs, (ii) unrealized gains and losses on loans, derivatives and ARMs, including CECL reserves and impairments, (iii) non-cash equity compensation expense, (iv) depreciation and amortization, (v) ~~non-cash incentive~~subordinated performance fee ~~accruals,~~accruals/(reversal), (vi) loan workout charges, (vii) realized gains and losses on debt extinguishment, (viii) certain other non-cash items, and ~~(vii)~~(ix) impairments of acquisition assets related to the Capstead merger. Further, Run-Rate Distributable Earnings, a non-GAAP measure, presents Distributable Earnings before trading and derivative gain/loss on ~~residential adjustable-rate mortgage securities.~~ARMs.

~~We believe~~The Company believes that Distributable Earnings and Run-Rate Distributable Earnings provide meaningful information to consider in addition to ~~our~~the disclosed GAAP results. ~~We believe~~The Company believes Distributable Earnings is a useful financial metric for existing and potential future holders of ~~our~~its common stock as historically, ~~overtime,~~over time, Distributable Earnings has been an indicator of ~~our~~ dividends per share. As a REIT, wethe Company generally must distribute annually at least 90% of ~~our net~~its taxable income, subject to certain adjustments, and therefore ~~we believe our~~believes dividends are one of the principal reasons stockholders may invest in ~~our~~its common stock. Further, Distributable Earnings helps ~~us to~~investors evaluate ~~our~~ performance excluding the effects of certain transactions and GAAP adjustments that wethe Company does not believe are ~~not~~ necessarily indicative of ~~our~~ current loan portfolio performance and the Company's operations and is one of the performance metrics ~~we consider~~the Company's board of directors considers when ~~declaring our dividends. We believe~~dividends are declared. The Company believes Run-Rate Distributable Earnings is a useful financial metric because it presents the Distributable Earnings of ~~our~~its core businesses, net of the impacts of the realized trading and derivative gain/loss on the residential adjustable-rate mortgage securities we acquired from Capstead, ~~that we are currently~~which the Company is actively in the process of liquidating from ~~our~~its portfolio.

Distributable Earnings and Run-Rate Distributable Earnings do not represent net income (loss) and should not be considered as an alternative to GAAP net income (loss). ~~Our~~The methodology for calculating Distributable Earnings and Run-Rate 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.

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The following table provides a reconciliation of GAAP net income to Distributable Earnings and Run-Rate Distributable Earnings as of the three and six months ended June 30, ~~2022~~2023 and June 30, ~~2021~~2022 (amounts in thousands, except share and per share data):

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
GAAP Net Income $ (25,709) $ 30,010 $ (48,216) $ 60,156
Adjustments:
CLO amortization acceleration (1)
3,202 (839) 2,225 (1,534)
Unrealized (gain)/loss on financial instruments (2)
12,224 2,518 18,122 1,299
Unrealized (gain)/loss reversal - ARMs 7,658 — 35,120 —
Incentive fees (3,456) 2,104 (3,456) 3,765
Depreciation and amortization 1,296 406 2,591 812
Increase/(decrease) in provision for credit losses 32,530 (1,508) 31,575 (3,839)
Loan Workout Charges (3)
3,000 — 4,900 —
Realized trading and derivatives (gain)/loss on ARMs (5,946) — 22,082 —
Run Rate Distributable Earnings (4)
$ 24,799 $ 32,691 $ 64,943 $ 60,659
Realized trading and derivatives gain/(loss) on ARMs 5,946 — (22,082) —
Distributable Earnings $ 30,745 $ 32,691 $ 42,861 $ 60,659
Average Equity $ 1,470,643 $ 1,047,109 $ 1,495,106 $ 1,035,161
7.5% Cumulative Redeemable Preferred Stock, Series E Dividend $ 4,842 $ — $ 9,683 $ —
GAAP Net Income (Loss) ROE (8.3)% 11.5% (7.7)% 11.6%
Run-Rate Distributable Earnings ROE 5.4% 12.5% 7.4% 11.7%
Distributable Earnings ROE 7.0% 12.5% 4.4% 11.7%
GAAP Net Income Per Share, Fully Converted $ (0.34) $ 0.52 $ (0.64) $ 1.05
Run-Rate Distributable Earnings Per Share, Fully Converted $ 0.22 $ 0.57 $ 0.61 $ 1.06
Distributable Earnings Per Share, Fully Converted $ 0.29 $ 0.57 $ 0.37 $ 1.06


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
GAAP Net Income (Loss)	$	39,644	$	(25,709)	$	83,483	$	(48,216)
Adjustments:
CLO amortization acceleration (1)	(1,197)		3,202		(2,665)		2,225
Unrealized (gain)/loss on financial instruments (2)	1,601		12,224		2,913		18,122
Unrealized (gain)/loss - ARMs	1,149		7,658		415		35,120
Subordinated performance fee (3)	2,614		(3,456)		2,020		(3,456)
Non-Cash Compensation Expense	1,228		—		2,250		—
Depreciation and amortization	2,196		1,296		4,001		2,591
(Reversal of)/Provision for credit losses	21,624		32,530		25,984		31,575
Loan workout charges/(loan workout recoveries) (4)	(5,105)		3,000		(5,105)		4,900
Realized gain on debt extinguishment	(270)		—		(5,037)		—
Realized trading and derivatives (gain)/loss on ARMs	(202)		(5,946)		(2,436)		22,082
Run Rate Distributable Earnings (5)	$	63,282	$	24,799	$	105,823	$	64,943
Realized trading and derivatives gain/(loss) on ARMs	202		5,946		2,436		(22,082)
Distributable Earnings	$	63,484	$	30,745	$	108,259	$	42,861
7.5% Cumulative Redeemable Preferred Stock, Series E Dividend	(4,842)		(4,842)		(9,683)		$	(9,683)
Noncontrolling interests in joint ventures net income/(loss)	(41)		—		(50)		—
Depreciation and amortization attributed to noncontrolling interests of joint ventures	(426)		—		(787)		—
Distributable Earnings to Common	$	58,175	$	25,903	$	97,739	$	33,178
Average Common Stock & Common Stock Equivalents	1,413,493		1,470,643		1,408,571		1,495,106
GAAP Net Income/(Loss) ROE	9.8%		(8.3)%		5.2%		(3.9)%
Run-Rate Distributable Earnings ROE	16.4%		5.4%		6.8%		3.7%
Distributable Earnings ROE	16.5%		7.0%		6.9%		2.2%
GAAP Net Income/(Loss) Per Share, Diluted	$	0.39	$	(0.43)	$	0.83	$	(1.27)
GAAP Net Income/(Loss) Per Share, Fully Converted (6)	$	0.39	$	(0.34)	$	0.83	$	(0.64)
Run-Rate Distributable Earnings Per Share, Fully Converted (6)	$	0.66	$	0.22	$	1.07	$	0.61
Distributable Earnings Per Share, Fully Converted (6)	$	0.66	$	0.29	$	1.10	$	0.37

____________________________________________________________

(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 and Run-Rate Distributable Earnings~~distributable earnings as compared to effective yield methodology in our GAAP earnings.

(2) ~~Adjusted for~~Represents unrealized ~~gain/loss~~gains and losses on (i) commercial mortgage loans, held for sale, measured at fair value, (ii) other real estate investments, measured at fair value and ~~unrealized gain/loss on~~(iii) derivatives.

(3)Represents accrued and unpaid subordinated performance fee. In addition, reversal of subordinated performance fee represents cash payments of the subordinated performance fee made during the period.

(4) Represents loan workout ~~expenses~~charges the Company incurred, which the Company ~~deems~~deemed likely to be recovered. Reversal of loan workout charges represent recoveries received. During the second quarter of 2023, the Company recovered $5.1 million of loan workout charges, in aggregate, related to the loan workout charges incurred in the first, second, and ~~is non-recurring in nature.~~third quarters of 2022 amounting to $1.9 million, $3.0 million, and $0.2 million, respectively.

~~(4)~~(5) Distributable Earnings before realized trading and derivative gain/loss on residential adjustable-rate mortgage securities (“Run-Rate Distributable Earnings”) (a non-GAAP financial measure).

(6) Fully Converted assumes conversion of our series of convertible preferred stock and full vesting of our outstanding equity compensation awards.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Credit Risk

Our investments are subject to a high degree of credit risk. Credit risk is the exposure to loss from loan defaults. Default rates are subject to a wide variety of factors, including, but not limited to, borrower financial condition, property performance, property management, supply/demand factors, construction trends, consumer behavior, regional economics, interest rates, the strength of the U.S. economy, and other factors beyond our control. All loans are subject to a certain probability of default. We manage credit risk through the underwriting process, acquiring our investments at the appropriate discount to face value, if any, and establishing loss assumptions. We also carefully monitor the performance of the loans, as well as external factors that may affect their value.

~~Table of Contents~~

Capital Market Risk

We are exposed to risks related to the debt capital markets, and our related ability to finance our business through borrowings under repurchase obligations or other debt instruments. As a REIT, we are required to distribute a significant portion of our taxable income annually, which constrains our ability to accumulate operating cash flow and therefore requires us to utilize debt or equity capital to finance our business. We seek to mitigate these risks by monitoring the debt capital markets to inform our decisions on the amount, timing and terms of capital we raise.

Market uncertainty and volatility may cause fluctuation in market value of certain asset classes within our portfolio. We have and may continue to receive margin calls from our lenders as a result of the decline in the market value of the assets pledged by us to our lenders under our repurchase agreements and warehouse credit facilities, and if we fail to resolve such margin calls when due by payment of cash or delivery of additional collateral, the lenders may exercise remedies including demanding payment by us of our aggregate outstanding financing obligations and/or taking ownership of the loans or other assets securing the applicable obligations and liquidating them at inopportune prices.

Market Risk

As a result of the closing of the Capstead merger on October 19, 2021 we hold ARM Agency ~~Securities.~~securities. Changes in the level of interest rates and spreads can significantly impact the value of these assets. We may utilize a variety of financial instruments in order to limit the adverse effects of interest rates on our results. Since the closing of the merger, we have made significant strides in unwinding our ARMs portfolio and expect to reduce this portfolio and thereby further mitigate our market risk.

Interest Rate Risk

Our market risk arises primarily from interest rate risk relating to interest rate fluctuations. Many factors including governmental monetary and tax policies, domestic and international economic and political considerations and other factors that are beyond our control contribute to interest rate risk. To meet our short and long-term liquidity requirements, we may borrow funds at fixed and variable rates. Our interest rate risk management objectives are to limit the impact of interest rate changes in earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, from time to time, we may enter into interest rate hedge contracts such as swaps, collars and treasury lock agreements in order to mitigate our interest rate risk with respect to various debt instruments. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates. We do not have any foreign denominated investments, and thus, we are not exposed to foreign currency fluctuations.

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, our portfolio included ~~171~~152 and ~~161~~157 variable rate investments, respectively, based on LIBOR and SOFR (or "indexing rates") for various terms. As of June 2023, the Company has fully transitioned all loans on LIBOR indexing rates to SOFR indexing rates. Borrowings under our ~~repurchase agreements~~financing arrangements are ~~also~~ based on ~~LIBOR.~~SOFR. The following table quantifies the potential changes in interest income net of interest expense should interest rates increase by 50 or 100 basis points or decrease by 25 basis points, assuming that our current balance sheet was to remain constant, and no actions were taken to alter our existing interest rate sensitivity. The changes in the portfolio for each basis points increase/decrease is a change from the base scenario.

Estimated Percentage Change in Interest Income Net of Interest Expense
Change in Interest Rates June 30, 2022 December 31, 2021
(-) 25 Basis Points (1.31) % 2.08 %
Base Interest Rate — % — %
(+) 50 Basis Points 2.92 % (1.74) %
(+) 100 Basis Points 6.14 % (1.64) %

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	Estimated Percentage Change in Interest Income Net of Interest Expense
Change in Interest Rates	June 30, 2023		December 31, 2022
(-) 25 Basis Points	(1.55)	%	(1.78)	%
Base Interest Rate	—	%	—	%
(+) 50 Basis Points	3.04	%	3.49	%
(+) 100 Basis Points	6.09	%	6.98	%

Real Estate Risk

The market values of commercial mortgage assets are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, ~~the impacts of the COVID-19 pandemic,~~ national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; changes or continued weakness in specific industry segments; and demographic factors. In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay the underlying loans, which could also cause us to suffer losses.

~~Table of Contents~~

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

In accordance with Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), management with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded, as of the end of such period, that our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in our reports that we file or submit under the Exchange Act.

Changes in Internal Control Over Financial Reporting

During the quarter ended June 30, ~~2022,~~2023, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

Item 1. Legal Proceedings.

Please refer to “Litigation and Regulatory Proceedings” in “Note 10 -– Commitments and Contingencies” to the consolidated financial statements included in this report. The Company believes that these proceedings, individually or in the aggregate, will not have a material impact on the Company’s financial condition, operating results or cash flows.

Loan Fraud Lawsuit

~~On July 26, 2022, the~~The Company ~~(through~~originated a subsidiary) filed a lawsuit in the District Court of Dallas County, Texas, against, among others, the borrower, the individual sponsor of the borrower, and the guarantors under a first priority mortgage loan ~~that the Company, along with a separate fund affiliated with the Company's external manager, originated~~ in April ~~2022. The original principal balance of the Company’s loan is $113.2 million. The loan is~~2022 secured by a portfolio of ~~twenty-four~~24 properties ~~that are~~ net leased to Walgreens (the “Collateral Properties”). As more particularly described under Item 3. Legal Proceedings in ~~more detail in~~our Annual Report on Form 10-K for the ~~complaint filed in Dallas County, in July~~year ended December 31, 2022, due to the sponsor’s fraud and default under the loan, the Company determined that the borrower had provided the Company with numerous falsified and forged documents in connection with the underwriting of the loan. Such documentation significantly and fraudulently inflated the purported valueforeclosed on all of the Collateral Properties ~~by misrepresenting~~in 2022 and 2023. Note that the ~~rent rates~~collectability, if any, of amounts of legal judgments we have achieved to date and ~~maturity dates~~that we may achieve in the future is not currently determinable.

Williamsburg Hotel Bankruptcy Case

The sale of the ~~Walgreens leases at~~Williamsburg Hotel, the ~~Collateral Properties, among other things. On July 27, 2022,~~Company’s Brooklyn hotel asset, by a trustee appointed by the ~~court issued~~United States Bankruptcy Court for the Southern District of New York, was completed on April 18, 2023, after an extensive marketing process, pursuant to the Chapter 11 plan in In re 96 Wythe Acquisition LLC, Case No. 21-22108. The sale closed for a ~~temporary restraining order freezing the assets~~total sale price of $96 million, comprising cash and new indebtedness. As a result of the ~~borrower,~~sale, the ~~borrower’s sponsor~~Company recovered the full principal amount of its loan (equal to the carrying cost of the loan as of December 31, 2022) and ~~his parents, and any~~approximately $20 million of additional proceeds ~~from our loan, pending~~after the ~~next scheduled legal proceeding in August 2022.~~payment of all related closing expenses. The Company ~~has also reported the fraud to criminal authorities and is assisting such authorities with their consideration of the matter. The Company intends~~may elect to pursue ~~all~~additional remedies available ~~legal remedies as set forth in~~under the ~~complaint against any party determined to have been involved in, or that improperly benefited from, the scheme.~~loan documents.

Item 1A. Risk Factors.

Our potential risks and uncertainties are presented in the section entitled "Risk Factors" contained in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. There have been no material changes from these risk factors.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The Advisor committed to a $35 million open market share purchase program in connection with the Capstead acquisition. As of July 8, 2022, the Advisor has purchased its entire $35 million commitment. The Company’s board of directors has authorized a $65 million share repurchase program that ~~has now become operative following the conclusion of the Advisor's purchase program. The Company’s share repurchase program authorizes~~permits share repurchases at prices below the most recently reported book value per share as determined in accordance with GAAP. Purchases made under the Company’s program may be made through open market, block, and privately negotiated transactions, including Rule 10b5-1 plans, as permitted by securities laws and other legal requirements. The timing, manner, price and amount of any purchases by the Company ~~will be~~are determined by the Company in its reasonable business judgment and consistent with the exercise of ~~their~~its legal duties and ~~will be~~are subject to economic and market conditions, stock price, applicable legal requirements and other factors. The ~~Company~~Company's share repurchase program does not obligate the Company to acquire any particular amount of common stock. The Company’s share repurchase ~~programs~~program will remain open until at least ~~November 2022~~December 31, 2023 or until the capital committed to the ~~applicable~~ repurchase program has been exhausted, whichever is sooner. Repurchases under the ~~Company’s~~ share repurchase program may be suspended from time to time at the Company’s discretion without prior notice.

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The following table sets forth purchases of the Company's common stock under the ~~Advisor's~~share purchase ~~program~~programs for the ~~quarter~~three months ended June 30, ~~2022:~~2023:

Total number of shares purchased
Average price paid per share (2)
Total number of shares purchased as part of publicly announced plans or programs (1)
Approximate dollar value of shares that may yet be purchased under the plans or programs (1)
April 1, 2022 - April 30, 2022 751,714 13.42 751,714 17,378,175
May 1, 2022 - May 31, 2022 283,974 13.89 283,974 13,432,878
June 1, 2022 - June 30, 2022 758,817 14.36 758,817 2,535,870
Total 1,794,505 $ 13.89 1,794,505 $ 2,535,870


	Total number of shares purchased	Average price paid per share (2)		Total number of shares purchased as part of publicly announced plans or programs (1)	Approximate dollar value of shares that may yet be purchased under the plans or programs (1)



April 1, 2023 - April 30, 2023	363,422	$	12.35	363,422	$	40,267
May 1, 2023 - May 31, 2023	81,304	12.39		81,304	39,260
June 1, 2023 - June 30, 2023	—	—		—	—



Total	444,726	$	12.36	444,726	$	39,260

_______________________

(1) All of the purchases listed in the table above were made in the open market ~~by the Advisor~~ under the ~~Advisor’s~~Company's share purchase program announced on July 26, 2021, including under a Rule 10b5-1 plan adopted by the ~~Advisor. No shares were repurchased under the Company’s share repurchase program during the period ended June 30, 2022.~~Company. Dollar amounts are in thousands.

(2) The average price paid per share represents the average of the ~~gross~~net purchase price per share, inclusive of any broker’s fees or commissions.

~~Subsequent~~The Company did not repurchase additional shares of common stock through its share repurchase program subsequent to June 30, 2022, the Advisor purchased an aggregate of 190,199 additional shares of the Company’s common stock for an aggregate of $2.5 million at an average price of $13.33 per share . As a result of these purchases the Advisor's $35.0 million commitment has been satisfied and the Advisor's share purchase program has been terminated.2023. As of ~~August 3, 2022, $65.0~~July 26, 2023, $39.3 million remains available under the Company’s share repurchase program.

Unregistered Sales of Equity Securities

Refer to “Note 2 - Summary of Significant Accounting Policies” to our consolidated financial statements included in this Quarterly Report on Form 10-Q for a discussion of the agreement we entered into with SBL on June 21, 2022 pursuant to which SBL agreed to exchange the 17,950 shares of the Series D Preferred Stock it held for an equal amount of Series H Preferred Stock for no consideration. The terms of the Series H Preferred Stock are also described in “Note 2 - Summary of Significant Accounting Policies” to our consolidated financial statements included in this Quarterly Report on Form 10-Q.

~~The exchange was not registered under the Securities Act of 1933, as amended (the “Securities Act”) and was made pursuant to the exemption provided by Section 3(a)(9) of the Securities Act and certain rules and regulations promulgated thereunder.~~None.

Item 3. Defaults upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

~~None.~~During the quarter ended June 30, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

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Item 6. Exhibits.

EXHIBITS INDEX

The following exhibits are included in this Quarterly Report on Form 10-Q for the quarter ended June 30, ~~2022~~2023 (and are numbered in accordance with Item 601 of Regulation S-K).


Exhibit No.						Description
~~3.1~~						~~Amended and Restated Bylaws of Franklin BSP Realty Trust, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on June 16, 2022).~~
~~3.2~~						Articles Supplementary of Franklin BSP Realty Trust, Inc., dated June 21, 2022, relating to Series H Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on June 24, 2022).
~~10.1~~						Exchange Agreement, dated June 21, 2022, by and between Franklin BSP Realty Trust, Inc. and the holder of the Company’s Series D Convertible Preferred Stock (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on June 24, 2022).
~~10.2~~						Indenture, dated as of June 29, 2022, by and among BSPRT 2022-FL9 Issuer, LLC, Benefit Street Partners Realty Operating Partnership, L.P., as advancing agent, U.S. Bank Trust Company, National Association, as trustee and note administrator, and U.S. Bank National Association as custodian (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 1, 2022).
31.1*						Certification of the Principal Executive Officer of the Company pursuant to Securities Exchange Act Rule 13a - 14(a) or 15(d) - 14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Certification of the Principal Financial Officer of the Company pursuant to Securities Exchange Act Rule 13a - 14(a) or 15(d) - 14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32*						Written statements of the Principal Executive Officer and Principal Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*						XBRL (eXtensible Business Reporting Language). The following materials from Benefit Street Partners Realty Trust, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June ~~30, 2022,~~3 0 , 2023, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations and Comprehensive Income (Loss), (iii) the Consolidated Statement of Changes in Equity, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to the Consolidated Financial Statements.
104*						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

____________________________________________

*Filed herewith.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		Franklin BSP Realty Trust, Inc.
~~Dated:~~	~~August 3, 2022~~July 31, 2023	By	/s/ Richard J. Byrne
			Name: Richard J. Byrne
			Title: Chief Executive Officer and President
			(Principal Executive Officer)

~~Dated:~~	~~August 3, 2022~~July 31, 2023	By	/s/ Jerome S. Baglien
			Name: Jerome S. Baglien
			Title: Chief Financial Officer, Chief Operating Officer and Treasurer
			(Principal Financial and Accounting Officer)

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PART I						Page
Item 1. Consolidated Financial Statements and Notes (unaudited)						1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						5253
Item 3. Quantitative and Qualitative Disclosures about Market Risk						8186
Item 4. Controls and Procedures						8387
PART II

Item 1. Legal Proceedings						8488
Item 1A. Risk Factors						8488
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						8488
Item 3. Defaults Upon Senior Securities						8589
Item 4. Mine Safety Disclosures						8589
Item 5. Other Information						8589
Item 6. Exhibits						8690
Signatures						8791


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Preferred E		Preferred F		Total Stockholders' Equity		Non-Controlling Interest		Total Equity
	Number of Shares	Par Value
Balance, December 31, 2021	43,965,928	$	441	$	903,264	$	(62)	$	(167,179)	$	258,742	$	710,431	$	1,705,637	$	5,764	$	1,711,401
Issuance of common stock	—	—		—		—		—		—		—		—		—		—
Common stock repurchases	—	—		—		—		—		—		—		—		—		—
Common stock issued through distribution reinvestment plan	5,982	—		91		—		—		—		—		91		—		91
Share-based compensation	499,217	—		500		—		—		—		—		500		—		500
Offering costs	—	—		—		—		—		—		—		—		—		—
Net income/(loss)	—	—		—		—		(22,507)		—		—		(22,507)		—		(22,507)
Distributions declared	—	—		—		—		(36,743)		—		—		(36,743)		—		(36,743)
Other comprehensive income	—	—		—		62		—		—		—		62		—		62
Balance, March 31, 2022	44,471,127	$	441	$	903,855	$	—	$	(226,429)	$	258,742	$	710,431	$	1,647,040	$	5,764	$	1,652,804
Issuance of common stock	—	—		—		—		—		—		—		—		—		—
Common stock repurchases	743	—		—		—		—		—		—		—		—		—
Common stock issued through distribution reinvestment plan	—	—		—		—		—		—		—		—		—		—
Share-based compensation	21,459	—		721		—		—		—		—		721		—		721
Preferred F exchanged for common stock	39,733,299	397		710,034		—		—		—		(710,431)		—		—		—
Offering costs	—	—		—		—		—		—		—		—		—		—
Net income/(loss)	—	—		—		—		(25,709)		—		—		(25,709)		—		(25,709)
Distributions declared	—	—		—		—		(36,848)		—		—		(36,848)		—		(36,848)
Other comprehensive income	—	—		—		—		—		—		—		—		—		—
Balance, June 30, 2022	84,226,628	$	838	$	1,614,610	$	—	$	(288,986)	$	258,742	$	—	$	1,585,204	$	5,764	$	1,590,968











Balance, December 31, 2020	44,510,051	$	446	$	912,725	$	(8,256)	$	(106,471)	$	—	$	—	$	798,444	$	—	$	798,444
Issuance of common stock	—	—		—		—		—		—		—		—		—		—
Common stock repurchases	(521,796)	(5)		(9,142)		—		—		—		—		(9,147)		—		(9,147)
Common stock issued through distribution reinvestment plan	147,404	2		2,583		—		—		—		—		2,585		—		2,585
Share-based compensation	—	—		55		—		—		—		—		55		—		55
Offering costs	—	—		(21)		—		—		—		—		(21)		—		(21)
Net income/(loss)	—	—		—		—		30,146		—		—		30,146		—		30,146
Distributions declared	—	—		—		—		(15,644)		—		—		(15,644)		—		(15,644)
Other comprehensive income	—	—		—		8,042		—		—		—		8,042		—		8,042
Balance, March 31, 2021	44,135,659	$	443	$	906,200	$	(214)	$	(91,969)	$	—	$	—	$	814,460	$	—	$	814,460
Issuance of common stock	504	—		—		—		—		—		—		—		—		—
Common stock repurchases	(3,784)	—		(66)		—		—		—		—		(66)		—		(66)
Common stock issued through distribution reinvestment plan	141,270	1		2,523		—		—		—		—		2,524		—		2,524
Share-based compensation	11,184	—		53		—		—		—		—		53		—		53
Offering costs	—	—		(21)		—		—		—		—		(21)		—		(21)
Net income/(loss)	—	—		—		—		30,010		—		—		30,010		—		30,010
Distributions declared	—	—		—		—		(15,898)		—		—		(15,898)		—		(15,898)
Other comprehensive income	—	—		—		214		—		—		—		214		—		214
Balance, June 30, 2021	44,284,833	$	444	$	908,689	$	—	$	(77,857)	$	—	$	—	$	831,276	$	—	$	831,276


	June 30, 2022		December 31, 2021
Non-performing loan carrying value at beginning of period	$	57,075	$	94,887
Addition of non-performing loan carrying value	110,626		—
Less: Removal of non-performing loan carrying value	—		37,812
Non-performing loan carrying value at end of period	$	167,701	$	57,075


	Six Months Ended June 30, 2022		Year Ended December 31, 2021
Balance at Beginning of Year	$	4,211,061	$	2,693,848
Acquisitions and originations	1,546,969		2,897,002
Principal repayments	(533,638)		(1,286,598)
Discount accretion/premium amortization	5,209		7,038
Loans transferred from/(to) commercial real estate loans, held for sale	(4,074)		(52,615)
Net fees capitalized into carrying value of loans	(10,546)		(15,150)
General (provision)/benefit for credit losses	(2,767)		4,770
Specific (provision)/benefit for credit losses	(28,431)		—
Cost recovery	(1,248)		—
Charge-off from allowance	—		289
Transfer to real estate owned	—		(37,523)
Balance at End of Period	$	5,182,535	$	4,211,061


Future Minimum Rents	June 30, 2022
2022 (July - December)	$	3,957
2023	8,046
2024	8,207
2025	8,372
2026	8,539
2027 and beyond	114,981
Total future minimum rent	$	152,102


Amortization Expense	June 30, 2022
2022 (July - December)	$	(1,440)
2023	(2,880)
2024	(2,880)
2025	(2,880)
2026	(2,880)


Collateral Type	Collateral Carrying Amount		Accrued Interest Receivable		Borrowings Outstanding		Average Borrowing Rates
As of June 30, 2022
Repurchase arrangements secured by Agency securities with maturities of 30 days or less	$	252,500	$	471	$	240,000	1.63	%

As of December 31, 2021
Repurchase arrangements secured by Agency securities with maturities of 30 days or less	$	4,327,020	$	8,908	$	4,144,473	0.13	%


	Shares	Amount
Balance, December 31, 2021	1,400	$	6,971
Issuance of Preferred Stock	—	—
Dividends paid in Preferred Stock	—	—
Offering costs	—	—
Amortization of offering costs	—	4
Ending Balance, June 30, 2022	1,400	$	6,975

	Shares	Amount
Balance, December 31, 2020	1,400	$	6,962
Issuance of Preferred Stock	—	—
Dividends paid in Preferred Stock	—	—
Offering costs	—	—
Amortization of offering costs	—	4
Ending Balance, June 30, 2021	1,400	$	6,966


Type	Carrying Amount		Average Yield (1)
Agency Securities:
Fannie Mae/Freddie Mac ARMs	$	270,381	2.40	%


Six Months Ended June 30, 2021
Payment Date	Amount Paid in Cash		Amount Issued under DRIP
January 4, 2021	$	9,652	$	2,584
April 1, 2021	9,603		2,530



Total	$	19,255	$	5,114