Franklin BSP Realty Trust - Q4 2025

Transcript

Operator (participant)

Good day, and welcome to the Franklin BSP Realty Trust Fourth Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Lindsey Crabbe, Director of IR. Please go ahead.

Lindsey Crabbe (Director of Investor Relations)

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

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

Richard Byrne (Chairman)

Great. Thanks, Lindsey, and good morning, everyone, and thank you for joining us today. Before we begin, I'd first like to share some important management updates with you. We announced all of these the other day. First, I'm pleased to announce that Mike Comparato, who many of you already know very well, has been appointed Chief Executive Officer. This is effective immediately. Mike currently leads our commercial real estate practice at Benefit Street Partners and has been instrumental in building and scaling that platform to what it is today. He brings deep commercial real estate expertise, a strong command of capital markets, and of course, a proven track record. Concurrently with that, with Mike's promotion, Brian Buffone will assume the role of President. Brian is a seasoned real estate veteran and a long-standing member of our investment team.

His experience, institutional knowledge, and investment acumen will continue to be invaluable as we execute our strategy and serve our, our investors. Together, these appointments represent a natural progression of FBRT's leadership, and I am excited to say, leave the company well-positioned to execute its strategy in a dynamic market. I will remain actively engaged as Chairman, focused on strategic oversight and supporting Mike and Brian through this transition. With that, let me turn the rest of the call over to Mike.

Michael Comparato (CEO)

Thanks, Rich. Good morning, everybody. Before my prepared remarks, I want to thank Rich for his years of service as FBRT's CEO. Rich has been an integral part of the company becoming a middle-market leader in the commercial real estate finance market, and we all appreciate his dedication over the years to the company's success. I also want to take a brief moment and congratulate Brian on being promoted to president of FBRT. Brian has been a longtime leader within Benefit Street and will now be playing a much more prominent role in FBRT. Now on to the company. For several quarters, we have discussed our earnings undercovering our dividend. After thoughtful analysis, we decided it was no longer prudent to sacrifice book value to pay that dividend.

Accordingly, management has recommended, and the board has approved, a reset of the quarterly dividend to $0.20 per common share beginning the first quarter of 2026. The company continues to have earnings power to support a meaningfully higher dividend than $0.20. That has not changed. But in the near term, rather than returning capital to shareholders by over-distributing, we want to stabilize our book value and better match our current earnings to our dividend. Our priorities are sustainable dividend coverage, book value growth, and building more consistent, durable earnings. The dividend reset is driven by several factors. The recent declines in SOFR, the timing of our originations and repayments, and the overall size of our loan portfolio have impacted short-term returns.

In addition, spreads are at multi-decade tights, which means that new loans coming into the portfolio are generally making lower returns than loans that are paying off. REO liquidations are taking longer than originally anticipated, keeping equity locked in underperforming investments. We continue to make very good progress on the REO liquidation front, unfortunately, just at a slower pace than desired. Lastly, but most importantly, with our acquisition of NewPoint, we made the intentional decision to no longer be a pure play mortgage REIT. Today, we are a commercial real estate investment platform. This means a lower overall dividend yield, but significantly more earning stability and stronger long-term book value growth. This cannot be overstated. We are a different company today than we were six or nine months ago. ... In acquiring NewPoint, we have intentionally traded some higher near-term returns from credit investments for steadier recurring servicing and fee revenue.

This type of revenue typically trades at a lower yield than pure play mortgage REITs, since it produces a much more consistent and predictable ongoing cash flow stream. When looking at our company and dividend yield today versus where we have been, the overall picture should be viewed based on a blend of our mortgage REIT operations plus that recurring revenue stream business. As we scale on NewPoint, its contribution over time will continue to increase and be accretive to overall earnings. We have also recently made a few strategic investments in commercial real estate equity investments. In the current market environment, equity investments yield lower current returns in credit investments, but should provide longer term growth and upside in earnings.

An agency servicing platform and select equity investments are key to a strategy that delivers stronger long-term growth in book value for our shareholders over time, and creates a company where the total return should be more meaningful than just our dividend returns to shareholders. We fully recognize we must demonstrate FBRT's repositioning to the market, and the team is working around the clock to do so. Again, FBRT should no longer be compared to pure play mortgage REITs. We are positioning the company with a differentiated mix of dividend yield, stability, and growth, which traditional mortgage REITs do not provide. Looking ahead, our focus is on balancing attractive current income with disciplined book value growth. We believe this approach strengthens the durability of our model and better aligns our yield strategy with the business we are building.

Before turning the call over to Jerry and Brian, I want to take a minute just on overall market conditions. Market conditions overall continue to improve. Liquidity is abundant and virtually any capital markets transactions, from CMBS to SASB to CRE CLO, is met with a deluge of orders, driving spreads tighter. As a result, we are witnessing spreads that are the tightest we've seen since pre-GFC days. We are also seeing regional banks slowly return to the market, primarily in the multifamily space. Their financing quotes typically come with large depository relationships and recourse, but we are hearing about banks quoting whole loans with the same pricing as AAA-rated bonds on CRE CLOs. We are reluctant to chase spreads to the levels that are currently being bid in the market today for commodity multifamily loans. The returns are anemic, and if SOFR continues to fall, they only get worse.

However, saying all of that, given the breadth of our product offerings, we are still able to originate ample loans that fit not only our credit criteria, but also generate returns that are significantly more interesting for our investors. Brian is going to address a few of our watchlist positions, as well as provide some updates on the REO portfolio. But first, I'll turn the call over to Jerry to walk through our financial results in more detail.

Jerome Baglien (CFO and COO)

Great. Thanks, Mike. I appreciate everyone being on the call today. I'm going to go through the financial results for the quarter. FBRT reported GAAP net income of $18.4 million, or $0.13 per fully converted common share. Distributable earnings for the quarter were $17.9 million, or $0.12 per fully converted share. Turning to distributable earnings, which included $9.8 million of realized losses. Now, $7.7 million of that was related to debt extinguishments and the balance to REO sales. If you take these out, our distributable earnings was $0.22 per fully converted share, or nearly flat to where we were last quarter. Timing was the primary driver of the quarter-over-quarter change in distributable earnings.

Early in Q4, we completed a $1 billion CLO, FL12, that increased our non-recourse financing capacity. With this transaction, we called several older CLOs that were past the reinvestment periods, which produced a debt extinguishment charge that I mentioned of $0.07 per share. The new CLO should lower financing costs in 2026 and additionally add meaningful origination capacity. We grew the core portfolio slightly in Q4 as originations outpaced payoffs. The principal balance rose modestly as we originated about $528 million of new commitments, while receiving roughly $510 million of loan repayments. A small but important reversal from Q3, when the core portfolio declined as we conserved liquidity for the NewPoint acquisition. During the quarter, we recorded a net CECL benefit of $4.8 million. However, that included $3 million of loan-specific reserves for four watch list loans.

One of those loans was subsequently transferred to REO, and the associated specific reserve was charged off. Importantly, we continued our share buybacks in Q4, repurchasing $14.4 million of common stock, which contributed $0.05 to book value. Subsequent to quarter end, our board reauthorized the company's share repurchase program, providing $50 million available for future share repurchases through December 31st, 2026 to further support the stock price. Book value per share ended the quarter at $14.15, reflecting our dividend outpacing our earnings. Net leverage remains well within our targets and ended the quarter at 2.5x, with recourse leverage standing at 0.81x.

We have ample financing capacity and liquidity, with reinvestment available on two of our CLOs. As we redeploy the capacity created by our financing actions, we expect earnings to benefit in 2026 as our core loan portfolio grows and we see a more stabilized contribution from NewPoint. Turning to Slide 11 for updates on NewPoint. NewPoint contributed modestly in Q4. This was expected given a lower origination cadence in the quarter and paired with higher tax reserves at the TRS that reduced NewPoint's reported earnings in Q4. We expect NewPoint's distributable earnings contribution to operate at a run rate of approximately $25 million-$33 million per year. Agency volume came in at $1.1 billion of new loan originations in the quarter. We expect agency volumes to be between $4.5 billion-$5.5 billion in 2026.

At quarter end, the MSR portfolio was valued at approximately $220 million and generated $8.8 million of income in Q4, reflecting an average MSR rate of approximately 82 basis points, and the implied life of that portfolio was 6.4 years. NewPoint managed a servicing portfolio that was $47.8 billion at quarter end. The NewPoint BSP integration work continues to move forward. We made significant progress on the migration of BSP's loans and that servicing book onto NewPoint, and we're on pace to complete that transition by the middle of the first quarter. The addition of the BSP loans will increase NewPoint's servicing book by approximately $10 billion and help to contribute to the increase in earnings power of NewPoint in 2026.

We remain confident NewPoint is very accretive over the long term as origination and servicing volumes grow and integration synergies continue to build. With that, I'll turn it over to Brian to give you an update on our portfolio.

Brian Buffone (President)

Thanks, Jerry. Good morning, everyone. I just quickly want to start by saying thank you to Rich and Mike for their kind words and support earlier. And as I step into this role, I look forward to continuing to execute our strategy alongside Mike and the broader FBRT team. I'll start on slide 15. Our core portfolio finished Q4 at roughly $4.4 billion, with about 77% of our loans backed by multifamily assets and very limited office exposure. During the quarter, we originated 37 loans at a weighted average spread of 284 basis points, with multifamily representing 76% of our new loan originations. Our pipeline is robust, but given current spreads, we are selective on pacing, as Mike mentioned earlier.

Our conduit business had an incredible quarter, one of the largest in the history of the company, and that reflects an improved CMBS market liquidity and healthy investor demand. Our pre-rate lock book represents roughly 32% of the total loans, loan commitments of $1.3 billion in multifamily, or 82% of that pre-rate lock book. Credit mix remains steady. 76% of those legacy loans are risk graded two or three at quarter end, and we're continuing to work through the positions that need extra attention on the watch list. Importantly, the office loan exposure is now only $57 million across three loans, with an average loan size of $19 million. That's down from $130 million in the prior quarter due to two office loans paying off in full during the fourth quarter.

Credit quality across the portfolio remains stable, with an average risk rating of 2.4 at quarter end. During the quarter, two loans were removed from the watch list. One was repaid in full, and the other was taken as REO and subsequently sold, while two new multifamily assets were added. Borrower engagement remains high, and we are actively working towards resolution on each position. A notable change on our watch list was the Georgia office loan that was extended 18 months in exchange for a 5% principal paydown. That original loan amount of $27.5 million has now been paid down to $21.1 million, and the borrower continues to make monthly debt service payments. That loan will stay on nonaccrual. On slide 19, I'll cover our foreclosure REO portfolio.

Our foreclosure REO balance declined to seven positions at quarter end, down from nine in the last quarter, reflecting continued progress resolving those legacy assets. During the quarter, the team moved three assets off the REO list, selling them at our adjusted debt basis. Remaining reserves related to those assets were charged to distributable earnings this quarter, which contributed to our realized loss. We added a new property to our foreclosure REO in Q4, a Texas multifamily asset. However, it is already under LOI, and we expect resolution to that asset in the first half of this year. We remain highly focused on resolving the remaining positions so we can redeploy that capital into our core loan portfolio. And with that, I'd like to turn it back over to the operator to begin the Q&A session.

Operator (participant)

We will now begin the question-and-answer session. To ask a question, you may press Star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press Star, then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Matthew Erdner with JonesTrading. Please go ahead.

Matthew Erdner (Director of Equity Research in Speciality Finance and Real Estate)

Hey, good morning, guys. Thanks for taking the question. Rich, congrats on a great run as well, and Mike and Brian, you guys also. I want to touch on spreads and kind of the compression there. You know, you guys have mentioned or kind of hinted at, you know, laying off the gas a little bit there. You know, it looks like Conduit was pretty successful, you know. So how should we think about capital allocation this quarter, you know, if the core portfolio has, I guess, muted origination somewhat?

Michael Comparato (CEO)

Hey, Matt. Good morning. Thanks for the question. I don't, I don't want to take the prepared remarks out of context. We have the pedal to the floor on origination. Our goal is to get, you know, assets up to a level where we're, you know, meaningfully growing earnings, and we can only do that by closing loans, obviously. I think the, you know, the, the point of the message was, you know, we are not actively chasing the, you know, commodity 88-mi-an-hour fastball over the fat part of the plate, multifamily loan. We're, we're kind of focusing on the other aspects of, of our business where we can originate as well, whether that's construction lending, you know, some other, other areas that, that we're active.

So, we've got. I think we've got a $1.7 billion under application pipeline, so we are by no means slowing down. We're just kind of changing the mix of what the origination looks like so that we, you know, aren't dropping to the tightest spreads that the market is. You know, we have to selectively pick a few where we compete there, but generally, we're trying to play a little bit wider.

Matthew Erdner (Director of Equity Research in Speciality Finance and Real Estate)

Right. Yeah, that makes sense there. You know, and then I guess turning to kind of the dividend reset, you know, should we kind of expect that to be a good baseline for run rate earnings going forward? And then I guess within that, you know, following up on the last question, you know, what's an ideal portfolio size that you're looking to get that core back to by the end of the year, you know, to get back to that $0.20 coverage?

Michael Comparato (CEO)

Well, we're at... You know, we're above $0.20 today. And so let me answer the question backwards. I think our goal by year end would be to have the book, our core book between $4.8 billion and $5 billion overall. With respect to earnings, look, we fully expect this to be, you know, one or two trough quarters, right? That is, the earnings potential of this company hasn't changed, right? We laid out the path to getting back to $0.35-$0.36. We still believe, you know, with conviction, that we have that earnings ability, you know, to get back to that level. The issue is, it's just taking us a little bit longer to get there than we had hoped.

So I'm expecting that we are fully growing earnings over the course of the next several quarters on this path back to that kind of mid-thirties. We just did not want to continue shrinking the size, you know, the balance sheet of the company, paying out cash over distributing, because it just makes it even harder to get back to that level. So, you know, we've talked about for several quarters the, you know, borrower behavior and the unpredictability of borrowers. The same, unfortunately, has been true on the REO disposition. We have made tremendous progress, and just when you think you're selling another asset or two or three, you know, a buyer zigs instead of zags.

So we're navigating what I would say is a significantly better market than what it was two years ago, but it's still just taking us a little longer than we had hoped. So very long-winded answer. Apologize for that. But no, I would not view this as the steady state earnings of the company. I think earnings are going in one direction from here, and that is higher.

Matthew Erdner (Director of Equity Research in Speciality Finance and Real Estate)

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

Operator (participant)

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

Steve Delaney (Managing Director and Senior Equity Analyst)

Good morning, everyone, and congratulations on all the promotions that we heard about last night. Well deserved. Just looking at the way you're trying to allocate capital, and I hear you loud and clear about the excessive competition and maybe traditional bridge loan products. You—you know, you're primarily, you know, a lender, I guess, as we think about it, while some of it is maybe more like the multifamily and doing the NewPoint business, like maybe like a WD or somebody like that. I think that's certainly value added. But the one—you have one investment REO. Is that going to be a one-and-done thing, or should we expect that going forward, you will have some percentage of your capital in direct real estate investments for the carry plus the potential capital gain? Thank you.

Michael Comparato (CEO)

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

Steve Delaney (Managing Director and Senior Equity Analyst)

Okay.

Michael Comparato (CEO)

We do have more equity investments on the book today than just that one Academy Sports distribution facility. You know, we have. Appreciate you, you know, pointing out Walker & Dunlop, and I think that's part of my, you know, message in the prepared remarks, you know, they're trading at a 4% dividend yield. So what we're trying to get the market to view us as, as really this conglomerate within the commercial real estate, right? Like, let's put a dividend yield of 4% or 5% on the NewPoint operations. Let's put a dividend yield of, you know, 8%-10% on our mortgage REIT operations, and let's put a dividend yield of, you know, 4% or 5% on the equity investments that we have, because that's where equity REITs trade. But those also are, you know, positions for growth in the company.

It's going to take us time to educate the market on that front and let you know let them see that, and we have to prove it, and I think we'll do that. But, yes, we are primarily a debt shop. That said, we do make a lot of equity investments in other vehicles outside of FBRT. I think we've bought close to $1 billion of commercial real estate assets in the last 18 months. So, again, a longer-winded answer here, but yes, I think that you should expect to see a slightly higher allocation of the book to some equity-select equity investments over the next few years.

Steve Delaney (Managing Director and Senior Equity Analyst)

Now, that's very helpful, and it was a twisted kind of question to begin with, but I appreciate the color that on the, especially on the investment side, on the investment REO.

Michael Comparato (CEO)

Yeah, and I would just add, you know, you're not going to wake up one morning and see FBRT have 25% of its equity invested in equity investments, right? That is not happening anytime soon. You know, could we have 5%, you know, 10% a few years from now? Possibly. But, yeah, we are not on the path to, you know, Starwood. I think they're at, like, 50% equity investments. That is not the goal or expectation.

Steve Delaney (Managing Director and Senior Equity Analyst)

Got it. You're still going to be a finance company primarily. So, okay.

Michael Comparato (CEO)

Yeah.

Steve Delaney (Managing Director and Senior Equity Analyst)

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

Michael Comparato (CEO)

Jerome, you want to take that?

Jerome Baglien (CFO and COO)

Sure. Yeah, we- well, there's a page in the supplemental deck, and there's obviously going to be more information in the 10-K that'll give you more segment information on the details within that operating segment for us. So you'll be able to see some of the volume information we break out. You know, the income by its components, servicing, gain on sale, and you can see the cost structure as well. So hopefully that should be helpful in answering some of the questions. And additionally, we gave kind of a high level range for volume and expected income contribution in 2026 as well, to just help put a guidepost out there for kind of where we see things.

Steve Delaney (Managing Director and Senior Equity Analyst)

Well, congrats on the progress, and we applaud what you're doing. You know, we've got 22 plain vanilla commercial mortgage REITs, and I think that's enough. So it'll be exciting to see how you guys position the company over the next year or two. Thanks for your time this morning.

Michael Comparato (CEO)

Thanks, Steve.

Operator (participant)

Our next question comes from John Nicodemus with BTIG. Please go ahead.

John Nicodemus (Director and Equity Research Analyst)

Morning, everyone, and, first of all, Rich, all the best in your role as chairman, and congrats to Mike and Brian in your new roles. Earlier in 2025, you estimated that there was $0.08-$0.12 of BE per quarter that could be unlocked from reinvesting equity tied up in non-performing loans in REO. Based on progress your team has made since then, where do you estimate that figure stands today? Thanks.

Michael Comparato (CEO)

I think we're actually slightly higher than that today. I don't know if I have the number. Jerry, I don't know if you have the number at your fingertips, but, John, I think you've hit the crux of exactly why, you know, we concluded to a dividend cut, is that it's, you know, that earnings is there. It's black and white. It's not questionable. It's just a matter of when do we recoup it? And unfortunately, just taking a little bit longer than we had anticipated. So, Jerry, I don't know, do you have the number? I know obviously we have the numbers, but I don't know if you have them at your fingertips.

Jerome Baglien (CFO and COO)

We have the numbers. I would say the range has not substantially changed, and Mike's right. It's been... It's not that the quantum has necessarily changed. It's the timing to unlock that, the balance of that earning power, whether it's resolutions have taken longer, we've kind of cycled through additional assets as we kind of work down through the balance of our legacy portfolio. You know, our ability to kind of take that back and redeploy in our core portfolio is still there. We're really working with time more than we're working with a change in potential earnings power with that equity that's there.

John Nicodemus (Director and Equity Research Analyst)

Great. Thanks, Mike and Jerry. The timing, being the key driver makes a lot of sense. And then, Jerry, something that you touched on earlier, just about the 2026 full year guidance for, the volumes and distributable earnings contribution from NewPoint. Noticed, you know, the volume had come down a bit, and then the earnings contribution had come up from the deck you put out in September. I'm just curious what was driving those changes, as we look toward 2026 in NewPoint. Thanks.

Jerome Baglien (CFO and COO)

I think we were guiding 2025 before. And in 2025, I think we're kind of middle of that range. So-

Michael Comparato (CEO)

... essentially, we bumped it up a little bit from where we are today, kind of what we hit in 2025, kind of based on, you know, all the scaling that we've talked about plenty of times on our calls over the last year or so. The range is also again, it's up a little bit from where we were this year. I think this year we were at the high end of what we provided for everybody on a 2025 year-to-date total. Obviously, it's a little chunkier in how it came in the two quarters. One of the reasons we give annual projections is because this business will have some chunky quarters, right? We wanted to kind of give a bit of a range there.

And then, you know, the reason we kind of simplified it into two line items is just the mix can obviously change quite a bit in terms of the end distributable performance. So rather than kind of be overly specific, we wanted to put a decent range on there to kind of cover the various outcomes. I think in terms of one of the other upsides is the servicing integration that I mentioned. You know, putting that $10 billion of our own book onto the business is going to be a pretty big driver in terms of additional income growth that we should see through the balance of 2026.

John Nicodemus (Director and Equity Research Analyst)

Great. Super helpful, Jerry. Thanks for the time.

Jerome Baglien (CFO and COO)

Yep.

Operator (participant)

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

Timothy D'Agostino (Research Analyst of Asset Managers, Insurance, Mortgage Finance, and Speciality Finance)

Yeah. Hi, thank you. Congrats on the quarter and the promotions and transitions. You know, looking at the results for 2025 at Fannie Mae, and understanding kind of that multifamily volume was a lot higher this year compared to years past. I just wanted to get the overall sense of how that business is progressing year to date in 2026, if that momentum from 2025 is still carrying over. And if you could provide any color on kind of how you're feeling about the year ahead in that channel. Thank you.

Michael Comparato (CEO)

So I think unfortunately, we're living in a world that is highly, highly tethered to rates, and the slightest of move. I mean, this is probably more so than ever in my career. I was talking about this to someone the other day when the ten-year was at 4.25. I said, "You know, if, if the ten-year dropped to 4% flat, I think you would see volume just go through the roof. And if you see the ten-year go to 4.5, you know, I think things are going to come to a screeching halt." And it's just shocking that a 25 basis point move in either direction could have that outcome. We are in an incredibly rate sensitive environment, and everybody has been sitting and waiting and waiting and waiting for rates to go lower.

And if they go lower, I think you're going to see a just a massive, massive amount of volume come through the market. And unfortunately, if they go higher, we're going to see the opposite. So, if you could tell me where the 10-year is going for the next six to 12 months, I could give you a much better answer. But it is just incredibly rate sensitive at the moment. And I think that's for all of our, all of our businesses.

Timothy D'Agostino (Research Analyst of Asset Managers, Insurance, Mortgage Finance, and Speciality Finance)

Okay, awesome. Thank you for that. And then, sorry if I missed it earlier in the call, but regarding the loan portfolio, payoffs persisted at a pretty high rate. However, funded volume obviously came in just above that. Are most of these repayments behind you? Do you think we could still see some higher figures in the first half of 2026? Just kind of any color on repayments to the portfolio. Thank you.

Michael Comparato (CEO)

Yeah. So, you know, repayments are obviously a blessing and a curse. We are, you know, cycling through the legacy portfolio. I think we are, you know, head and shoulders above the, the balance of the industry in terms of addressing that legacy portfolio. As Brian mentioned, I think we're down to 32%, of the portfolio being backward-looking. And look, honestly, I think this is just where the market is completely mispricing and misunderstanding FBRT. We talked about it a few earnings calls ago, but, you know, the market right now is looking at a dividend yield, albeit a lower one, given the cut, but it's just not factoring in the overall return. And if you look at the company as a collection of loans, if you took a loan portfolio of this quality out to the market today, it would trade at $0.97.

Look at ARI. I mean, look at what they sold, what Athene bought ARI loans for. The disconnect between our book value and our share price is, it, it's inexplicable. So we will just continue to do what we do. We will continue to deliver on the REO portfolio. We will continue to just recycle out of those legacy positions. But we re-underwrite this portfolio and risk rate it every single quarter, and short of a black swan event that I cannot predict, there is absolutely no way that the book value disconnect is anywhere close. It's not even a fraction, of what the losses we will realize, as we cycle through this. So, we're going to have to show it to the market, which we plan on doing in 2026.

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

Timothy D'Agostino (Research Analyst of Asset Managers, Insurance, Mortgage Finance, and Speciality Finance)

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

Operator (participant)

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

Lindsey Crabbe (Director of Investor Relations)

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

Operator (participant)

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