FBRT Posts Q3 2026 Loss as Credit Costs Rise

Franklin BSP Realty Trust reported a third-quarter GAAP net loss as higher credit costs and realized losses weighed on results, while earnings before realized losses remained sufficient to cover the commercial mortgage REIT’s quarterly dividend. The company also expanded its portfolio of foreclosed real estate during the period, highlighting continued credit risk in parts of its predominantly multifamily loan book.

The company recorded a GAAP net loss of $27.0 million for the quarter ended September 30, 2026, compared with net income of $16.3 million in the second quarter. The loss was $0.41 per diluted common share, or $0.36 per share on a fully converted basis.

Distributable Earnings, a non-GAAP measure, fell to $3.3 million from $28.3 million in the prior quarter. After preferred dividends and noncontrolling interests, Distributable Earnings to common shareholders were negative $1.7 million, while fully converted Distributable Earnings were negative $0.02 per share.

Before realized gains and losses, Distributable Earnings totaled $25.8 million, or $0.24 per fully converted share. That represented 118.7% coverage of the $0.20-per-share quarterly dividend. Including realized losses, coverage was negative 9.6%.

The quarter included a $43.1 million adjustment for provisions for credit losses in the company’s reconciliation from GAAP results to Distributable Earnings, along with a $24.2 million realized loss adjustment related to loans and real estate owned. Total allowance for credit losses increased to $72.1 million from $54.7 million at the end of the second quarter, equal to 1.8% of unpaid principal balance. The change reflected a $37.7 million provision and $20.2 million of write-offs.

Foreclosures expand as loan portfolio contracts

FBRT’s core commercial real estate loan portfolio ended the quarter with $4.1 billion of principal balance across 175 loans, down from $4.3 billion at the end of the second quarter. The company funded $248 million on new loans and $38 million on existing loans, while repayments totaled $406 million and transfers associated with real estate owned or foreclosures reduced the balance by another $171 million.

The portfolio remained concentrated in multifamily properties, which represented 83% of principal balance. Senior loans accounted for 99% of the portfolio, and 92% of loans carried floating rates. The weighted average loan-to-value ratio at origination was 64.6%.

Thirteen loans with a combined principal balance of $334 million remained on the watch list, including seven rated 5 and six rated 4. Seven loans were nonperforming. Although three assets were removed from the watch list during the quarter, the number of risk-rated 5 loans increased to seven from five, while the portfolio’s average risk rating remained unchanged at 2.4.

The foreclosure real estate owned portfolio grew to 10 assets from six in the second quarter, with a combined value of $339 million. Four multifamily properties entered foreclosure during the quarter, including assets in Durham, North Carolina; Garland, Texas; and Houston. FBRT also held one investment real estate owned position valued at $114 million.

New core loan commitments totaled $249 million across 17 loans. Multifamily properties represented 97% of those originations, and 81% were located in the Southeast. The loans carried a weighted average spread of 2.66% and an all-in coupon of 6.57% based on September 30 SOFR levels.

NewPoint contributes $11 million of Distributable Earnings

NewPoint, FBRT’s agency and mortgage banking business, generated GAAP net income of $0.2 million and Distributable Earnings of $11.0 million during the quarter. Distributable Earnings before realized gains or losses were $11.2 million, representing a 10.9% return on equity based on the unit’s final purchase price.

The business originated $670.4 million of new loan commitments across 36 transactions under Fannie Mae, Freddie Mac and HUD programs. Its servicing portfolio increased by $1.45 billion during the quarter to $61.29 billion in unpaid principal balance. Mortgage servicing rights, including value associated with commitments, ended the quarter at $209.3 million.

Buybacks support book value

Fully converted book value was $14.26 per share at September 30, up from $14.24 at the end of the second quarter. Adjusted fully converted book value, which excludes accumulated real estate depreciation and amortization and reflects the fair value of mortgage servicing rights above carrying value, rose to $15.13 from $14.74.

FBRT repurchased $60.5 million of common stock at a weighted average price of $8.14 during the quarter. The company said the repurchases added $0.55 to fully converted book value per share. Including the $0.20 dividend and the $0.02 increase in fully converted book value, FBRT calculated an annualized total economic return of 6.2% for the quarter.

The company ended September with $407 million of liquidity, consisting of $101 million of unrestricted cash, $10 million of available collateralized loan obligation reinvestment capacity and $296 million available through financing lines. Total net debt to equity was 2.66 times, while recourse net debt to equity was 0.68 times. About 81% of financing for the core portfolio was non-mark-to-market, and the average cost of debt declined to 6.1% from 6.2% in the second quarter.

FBRT did not provide formal earnings guidance in the presentation. It cautioned that results remain exposed to inflation, changing interest rates, economic contraction, declines in the value of real estate collateral, recoveries on delinquent loans and the financial stability of borrowers. The company also noted that the timing of credit losses under its non-GAAP Distributable Earnings measure can differ materially from their recognition under GAAP.