Franklin BSP Realty Trust, Inc. 10-K

Item 9A. 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 Annual Report on Form 10-K. 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. Internal Control Over Financial Reporting Management's Annual Reporting on Internal Controls over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act. In connection with the preparation of our Annual Report on Form 10-K, our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In making that assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013). Based on its assessment, our management concluded that, as of December 31, 2021, our internal control over financial reporting was effective. 56 Table of Contents The rules of the SEC do not require, and this Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Changes in Internal Control Over Financial Reporting During the quarter ended December 31, 2021, 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. Item 9B. Other Information. None. 57 Table of Contents Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. None. 58 Table of Contents PART III Item 10. Directors, Executive Officers and Corporate Governance. Directors The table set forth below lists the name and age of each of our current directors and the position and office that each director currently holds with the Company: Name Age Position(s) Richard J. Byrne 60 Chairman of the Board of Directors, Chief Executive Officer and President Jamie Handwerker 60 Director, Compensation Committee Chair Peter J. McDonough 63 Director, Nominating and Corporate Governance Committee Chair Buford H. Ortale 60 Director, Audit Committee Chair Elizabeth K. Tuppeny 61 Lead Independent Director Pat Augustine 59 Director Gary Keiser 78 Director Michelle P. Goolsby 63 Director Business Experience of Directors The name, principal occupation for the last five years, selected biographical information and the period of service of our directors are set forth below. Richard J. Byrne Richard J. Byrne has served as Chairman of the Board of Directors, Chief Executive Officer and President of the Company since September 2016. Mr. Byrne has served as the President of the Advisor since 2013. He has also served as Chairman of the Board of Directors, Chief Executive Officer and President of the Business Development Corporation of America since November 2016, Broadtree Residential, Inc. since February 2020 and Franklin BSP Capital Corp since December 2020. Prior to joining the Advisor, Mr. Byrne was Chief Executive Officer of Deutsche Bank Securities, Inc. He was also the Co-Head of Global Capital Markets at Deutsche Bank. Before joining Deutsche Bank, Mr. Byrne was Global Co-Head of the Leveraged Finance Group and Global Head of Credit Research at Merrill Lynch & Co. He was also a perennially top-ranked credit analyst. Mr. Byrne earned an M.B.A. from the Kellogg School of Management at Northwestern University and a B.A. from Binghamton University. Mr. Byrne is a member of the Boards of Directors of Wynn Resorts, Limited (NASDAQ: WYNN) and New York Road Runners. We believe that Mr. Byrne’s current and prior experience as a director and Chief Executive Officer of the Company, and his significant investment banking experience in real estate make him well qualified to serve as a member of our Board. Pat Augustine Pat Augustine has served as an independent director of the Company since October 2021. He previously served as a member of the Board of Directors of Capstead Mortgage Corporation (NYSE: CMO) from 2020 until its merger with the Company in 2021. Mr. Augustine spent most of his career in structured finance beginning in 1985 at Salomon Brothers during the developmental phase of the mortgage-backed securities market. From 1996 until 2007, Mr. Augustine built the securities business at NationsBank, now Bank of America, where he ran sales, trading and research for structured products. Between 2009 and 2011, Mr. Augustine served as Head of Structured Product and Credit Portfolio Management at Swiss RE Insurance Asset Management where he was primarily responsible for oversight of residential and commercial mortgage-related products. Most recently, he served as founder of Meridian Enterprises where he built, owned and operated Planet Fitness franchises before selling to a private equity firm in 2019. Mr. Augustine holds a BA in Economics from Duquesne University and an MBA from Emory University. Mr. Augustine has a depth of specialty-finance related experience. 59 Table of Contents Michelle P. Goolsby Michelle P. Goolsby has served as an independent director of the Company since October 2021. She previously served as a member of the Board of Directors of Capstead Mortgage Corporation (NYSE: CMO) from 2012 until its merger with the Company in 2021. Ms. Goolsby was a partner and investment committee member for Greenmont Capital Partners II, a private equity firm, from 2008 to 2019. From 1998 to 2008, Ms. Goolsby served as an executive vice president of Dean Foods Company (NYSE: DF) where she was responsible for corporate development, legal, corporate governance, ethics and compliance, government relations and corporate affairs. Prior to 1998, Ms. Goolsby provided legal representation for public and privately-held entities, including real estate investment trusts, in connection with securities offerings, financings, mergers, acquisitions and divestitures. Ms. Goolsby previously served as a director of WhiteWave Foods Company (NYSE: WWAV), a consumer-packaged food and beverage company, and served as a member of the Advisory Board of the successor company, Danone North America. Ms. Goolsby serves on the board of Simply Good Foods Company (NASDAQ: SMPL) and has served as a member of the Audit Committee, the Nominating and Governance Committee and as Chair of the Corporate Responsibility and Sustainability Committee. She also serves on the board of SACHEM, Inc., a privately-held chemical science technology company. Ms. Goolsby brings a diverse background of executive leadership experience, and has worked extensively with management teams and boards on matters involving risk management, strategy, compensation and corporate governance. In addition, she has significant experience in corporate financing and other capital markets transactions, including transactions on behalf of public and privately-held real estate entities. Jamie Handwerker Jamie Handwerker has served as an independent director of the Company since September 2016. Ms. Handwerker is a partner of KSH Capital, providing real estate entrepreneurs with capital and expertise to seed or grow their platform. Prior to joining KSH, Ms. Handwerker was a Senior Vice President and Principal of Cramer Rosenthal McGlynn (CRM) LLC, a New York-based asset management firm, which serves as investment adviser to institutions, as well as individual and family trusts. Ms. Handwerker was the portfolio manager for the CRM Windridge Partners hedge funds since she founded the Funds in June 2000. The funds were long/short US equity hedge funds, focused on real estate and consumer companies, generating absolute returns. Prior to joining CRM in April 2002, Ms. Handwerker managed Windridge Partners, L.P, as a Managing Director and Portfolio Manager with ING Furman Selz Asset Management LLC, a New York based holding company operating as a wholly-owned subsidiary of the Dutch financial conglomerate, ING Group. Ms. Handwerker previously was a Managing Director and Senior Equity Research Analyst (Sell-Side) from 1994 to 2000 at the international corporate and investment bank ING Barings and its predecessor, Furman Selz, LLC where she exclusively focused on real estate companies, including the REIT industry. She received a B.A. in Economics from the University of Pennsylvania. Ms. Handwerker serves on the Board of Trustees of Lexington Realty Trust (NYSE: LXP). She also is a member of the University of Pennsylvania School of Arts & Sciences Board of Overseers and is the Founder and Chairperson of Penn Arts & Sciences Professional Women’s Alliance, as well as being involved in other charitable endeavors. We believe Ms. Handwerker’s extensive experience in real estate venture capital, asset management and portfolio management described above make her well qualified to serve as a member of our Board. Gary Keiser Gary Keiser has served as an independent director of the Company since October 2021. He previously served as a member of the Board of Directors of Capstead Mortgage Corporation (NYSE: CMO) from 2004 until its merger with the Company in 2021. Gary Keiser served as an audit partner at Ernst & Young LLP from 1980 until his retirement in 2000. Mr. Keiser began his career with Ernst & Young LLP in 1967. He also serves on several governmental, non-profit and private company boards. Mr. Keiser worked in the public accounting profession for his entire career, focusing a significant amount of his time on real estate and real estate finance clients, and has a wealth of accounting, mortgage banking and real estate experience. Table of Contents Peter J. McDonough Peter J. McDonough has served as an independent director of the Company since April 2016. Mr. McDonough brings innovative thinking to transform business performance from diverse experiences leading global organizations in industries such as Biotechnology, Personal Care Products, Consumer Appliances, Power Tools and Beverage Alcohol. In 2022, Peter retired from his position as Chief Executive Officer of Trait Biosciences, a Los Alamos, NM biotechnology research organization developing Intellectual Property associated with the formulation of CBD Health & Wellness Products. Before joining Trait, Peter served as President, Chief Marketing and Innovation Officer for Diageo North America ($5+ Billion Revenue) from 2009 to 2015. While in this role he was responsible for over-seeing North America’s largest portfolio of premium spirits and beer brands. In his diverse career, Peter has served as a senior leader in seven different industries, gaining cultural insights while residing in the Pacific Rim, Central Europe and numerous American cities. After teaching at The University of Canterbury’s Graduate School of Business in Christchurch, New Zealand, Peter was appointed to serve as Procter & Gamble’s Vice President of European Marketing overseeing the brand marketing function for Duracell Batteries and Braun Appliances ($1.3 Billion Annual Revenues). Prior to his overseas roles Peter served as Gillette's Head of North American Marketing where he launched industry leading brands such as Mach3 Turbo and Venus Razors ($1.3 Billion Annual Revenues). Earlier in his career, he served as Director of North American Marketing at Black & Decker where he was involved in launching the DeWalt Power Tool Company. Mr. McDonough is an alumnus of Cornell University and holds a Master of Business Administration from the Wharton School of Business at the University of Pennsylvania. He currently serves on corporate boards including The Splash Beverage Group (NYSE: SBEV) and Copalli Spirits. He previously served on the Board of Directors for not-for-profit organizations such as The AdCouncil of America, Effies Worldwide Inc and The Children’s Trust Fund of Massachusetts. We believe Mr. McDonough’s extensive experience as an executive officer and/or director of the companies described above and his significant business accomplishments make him well qualified to serve as a member of our Board. Buford H. Ortale Buford H. Ortale has served as an independent director of the Company since September 2016. Mr. Ortale is a private equity investor based in Nashville, Tennessee. He is a partner in NTR, a private equity firm focused on the energy space as well as a partner in Armour Capital Management, LP, the external manager of a residential mortgage REIT with over $8 billion in assets. Mr. Ortale began his career with Merrill Lynch’s Merchant Banking Group in New York in 1987. He was subsequently a founder and managing director of NationsBanc’s (Bank of America) High Yield Bond Group. In 1996 he formed Sewanee Ventures, a private equity investment vehicle that he still manages today. Mr. Ortale’s activities have included investments in startup venture backed companies, LBO’s, real estate development, and real estate acquisition. He currently serves on the board of directors Waitr Holdings, Inc. (NASDAQ: WTRH), an on-demand food ordering and delivery company, and Broadtree Residential, Inc., a private multifamily REIT. He is currently a board advisor to Western Express (a privately owned $700 million trucking company) and a board member of Intrensic (a police bodycam and digital evidence management company) and Remote Care Partners (a private healthcare company in the remote health monitoring space). He received his B.A. from Sewanee: The University of the South and a Masters of Business Administration from Vanderbilt University. We believe Mr. Ortale’s extensive experience as a private equity investor and banker described above make him well qualified to serve as a member of our Board of Directors. Table of Contents Elizabeth K. Tuppeny Elizabeth K. Tuppeny has served as an independent director of the Company and its predecessor since January 2013. Ms. Tuppeny has been the chief executive officer and founder of Domus, Inc. (“Domus”), a full-service marketing communications agency, since 1993. Her company works at the C-Suite level with clients such as Chevron; Citibank; ConAgra; Diageo; DuPont; Epson; Mattel; Merck; Merrill Lynch; Procter & Gamble; Ralph Lauren and Westinghouse. Real Estate clients include Ritz Carlton Residences; S&H Associates; and PMC Real Estate. Ms. Tuppeny has 30 years of experience in the branding and advertising industries, with a focus on Fortune 50 companies. Ms. Tuppeny also served for three years on the board of the Philadelphia Industrial Development Council, a public-private economic development organization, wherein she evaluated and approved 500+ industrial and commercial real estate transactions worth over a billion dollars. Ms. Tuppeny currently serves as the Lead Director of New York City REIT, Inc. (NYSE: NYC), a public real estate investment trust with a portfolio of high-quality commercial real estate located within the five boroughs of New York City, particularly in Manhattan, and Ms. Tuppeny is also an independent director and Chair of the Nominating and Governance Committee of Healthcare Trust, Inc. (Nasdaq: HTIA), a publicly registered real estate investment trust focused on acquiring a diversified portfolio of healthcare real estate, with an emphasis on seniors housing and medical office buildings, located in the United States. Ms. Tuppeny previously served as an independent Director on the board of directors of American Realty Capital Trust IV. Ms. Tuppeny has served on the boards of directors and advisory committees for the Arthur Ashe Foundation, Avenue of the Arts, Drexel Medical School, Philadelphia Hospitality Cabinet, Pennsylvania Commission for Women, Penn Relays and the Police Athletic League. Ms. Tuppeny was the recipient of the national Stevie Award as the nation’s top woman entrepreneur in 2004 and was named as a “Top Woman in Philadelphia Business” in 1996, one of the “Top 50 Women in Pennsylvania” in 2004 and as the “Businessperson of the Year” in 2003 by the Greater Philadelphia Chamber of Commerce. Ms. Tuppeny has taught at New York University, University of Pennsylvania and Temple University, and received her undergraduate degree from the University of Pennsylvania, Annenberg School of Communications. We believe that Ms. Tuppeny’s prior and current experience as an independent director of the companies described above, as chief executive officer and founder of Domus, and in evaluating healthcare-related real estate business development applications, make her well qualified to serve on our Board. Executive Officers The following table presents certain information concerning each of our executive officers serving in such capacity: Name Age Position(s) Richard J. Byrne 61 Chairman of the Board of Directors, Chief Executive Officer and President Jerome S. Baglien 45 Chief Financial Officer, Chief Operating Officer and Treasurer Richard J. Byrne Please see above for biographical information about Mr. Byrne. Jerome S. Baglien Jerome S. Baglien has served as Chief Financial Officer and Treasurer of the Company since September 2016, and as Chief Operating Officer of the Company since December 2021. Mr. Baglien is a Managing Director and Chief Financial Officer of Real Estate of the Advisor. Prior to joining the Advisor in 2016, Mr. Baglien was director of fund finance for GTIS Partners LP (“GTIS”), where he oversaw all finance and operations for GTIS funds. Previously, he was an accounting manager at iStar Inc. with oversight of loans and special investments. Mr. Baglien received a Masters of Business Administration from Kellstadt Graduate School of Business at DePaul University and a Bachelor of Science in Accounting from the University of Oregon. Audit Committee The Company’s Board of Directors has a standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Audit Committee consists of Mr. Ortale, Ms. Handwerker, Mr. Keiser, Mr. McDonough and Ms. Tuppeny, each of whom is “independent” within the meaning of the applicable (i) provisions set forth in the Audit Committee charter, (ii) requirements set forth in the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and (iii) the rules and regulations of the SEC. Mr. Ortale is the chair of our Audit Committee. The Board has determined that Mr. Ortale, Ms. Handwerker and Mr. Keiser are each qualified as an “Audit Committee financial expert” as defined in Item 407(d)(5) of Regulation S-K and the rules and regulations of the SEC. Code of Ethics The Board of Directors maintains a Code of Ethics is applicable to our directors, officers, our Advisor and employees of the Advisor performing substantial services for the Company. It covers topics including, but not limited to, conflicts of interest, confidentiality of information, full and fair disclosure, reporting of violations and compliance with laws and regulations. Table of Contents The Code of Ethics is available on the Company’s website at www.fbrtreit.com by clicking on “Governance – Governance Documents – Code of Ethics.” We intend to disclose on this website any amendment to, or waiver of, any provision of this Code of Ethics applicable to our directors and executive officers that would otherwise be required to be disclosed under the rules of the SEC. You may also obtain a copy of the Code of Ethics by writing to our secretary at: Franklin BSP Realty Trust, Inc., 1345 Avenue of the Americas, Suite 32A, New York, New York 10105, Attention: Micah Goodman, Secretary. A waiver of the Code of Ethics for our Chief Executive Officer may be made only by the Board of Directors or the appropriate committee of the Board and will be promptly disclosed to the extent required by law. A waiver of the Code of Ethics for all other person may be made only by our Chief Executive Officer and shall be discussed with the Board or a committee of the Board as appropriate. Item 11. Executive Compensation. 2021 Executive Officer Compensation We currently have no employees. Our Advisor, through its employees, performs our day-to-day management functions. Our current non-employee executive officers, Richard J. Byrne and Jerome S. Baglien, are each employees of our Advisor and in 2021 did not receive any compensation directly from the Company for the performance of their duties as executive officers of the Company. As a result of our not paying any compensation directly to our executive officers in 2021, we have not included in this Annual Report on Form 10-K a “Compensation Discussion and Analysis” section or a report of the Compensation Committee. Director Compensation The following table sets forth information regarding compensation of our independent directors during the fiscal year ended December 31, 2021. Mr. Byrne received no additional compensation for serving as a director. Name Fees Paid in Cash* Stock Awards Total Elizabeth K. Tuppeny $ 190,000 $ 50,000 $ 240,000 Buford H. Ortale $ 190,000 $ 50,000 $ 240,000 Peter J. McDonough $ 190,000 $ 50,000 $ 240,000 Jamie Handwerker $ 190,000 $ 50,000 $ 240,000 Pat Augustine** $ 22,120 $ — $ 22,120 Michelle P. Goolsby** $ 22,120 $ — $ 22,120 Gary Keiser** $ 22,120 $ — $ 22,120 ________________________ * Includes a special, one-time supplemental director fee of $50,000 to Ms. Tuppeny, Mr. Ortale, Mr. McDonough and Ms. Handwerker in recognition of the significant incremental work required of the Board and its committees during the Company’s merger with Capstead and the listing of the Company’s common stock on the NYSE . ** Messrs, Augustine, Keiser and Ms. Goolsby joined the Board in October 2021, and received an annual cash retainer prorated for the amount of time they served on the Board during 2021. We currently pay to each of our independent directors the fees described in the table below. All directors also receive reimbursement of reasonable out of pocket expenses incurred in connection with attendance at meetings of our Board of Directors. If a director also is our employee or an employee of our Advisor or any of its affiliates, or is otherwise not independent, we do not pay compensation for services rendered as a director. Name Fees Earned or Paid in Cash ($) Restricted Shares Independent Directors A yearly retainer of $110,000 for each independent director; $20,000 for the Lead Independent Director and the chairs of the Audit Committee, Nominating and Corporate Governance Committee and Compensation Committee; and $5,000 for each member of a committee who is not serving as a chair. On the date of the annual meeting of stockholders, each independent director receives an annual grant of $50,000 in restricted shares of Common Stock based on the lower of the most recent GAAP book value or net asset value per share. The restricted shares vest on the anniversary of the grant date. Now that the Company's common stock is listed on the NYSE, commencing in 2022, the annual grant will be valued on the basis of the closing price of our common stock on the date of grant. Table of Contents Equity Compensation Plan Information The following table provides information about our common stock that may be issued under our equity compensation plans as of December 31, 2021: Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted-Average Exercise of Price of Outstanding Options, Warrants, and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans Equity compensation plans approved by security holders — — — Equity compensation plans not approved by security holders (1) — — 9,443,936 Total — — 9,443,936 ________________________ (1) The number of securities remaining available for future issuance consists of an aggregate of 3,943,936 shares issuable under our employee and director incentive restricted share plan (“RSP”) and 5,500,000 shares issuable under the Franklin BSP Realty Trust, Inc. 2021 Equity Incentive Plan. Each of our equity compensation plans were adopted and approved by our Board of Directors prior to the listing of our common stock on the NYSE. The RSP will expire on February 7, 2023. Compensation Committee Interlocks and Insider Participation The Board of Directors has a standing Compensation Committee, which is currently comprised of Ms. Handwerker, Mr. Augustine, Mr. McDonough, Mr. Ortale and Ms. Tuppeny, with Ms. Handwerker serving as the committee’s chairperson. All Compensation Committee members meet the independence criteria set forth in the listing standards of the NYSE. No current or former employee of the Company serves on the Compensation Committee. The Committee members have no interlocking relationships as defined by the SEC. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The following table sets forth information regarding the beneficial ownership of our Common Stock and our Series F Preferred Stock, including shares which may be acquired by such persons within 60 days, by: • each of our executive officers and directors; and • all of our executive officers and directors as a group. Table of Contents The percentage ownership set forth below is based on 43,957,363 shares of Common Stock and 39,733,299 shares of Series F Preferred Stock outstanding as of February 17, 2022. Each share of Series F Preferred Stock votes on an as-converted basis with the Common Stock, voting as a single class. Each share of Series F Preferred Stock will automatically convert into one share of Common Stock on April 19, 2022. Beneficial Owner (1) Number of Shares of Common Stock Beneficially Owned Percent of Class Number of Shares of Series F Preferred Stock Beneficially Owned Percent of Class Pat Augustine 7,653 (2) * — — Jerome S. Baglien 283 * 2,506 * Richard J. Byrne 13,330 * 117,770 Michelle P. Goolsby 26,305 (2) * — — Jamie Handwerker 4,399 (3) * 14,430 * Gary Keiser 33,187 (2) * — — Peter J. McDonough 4,399 (3) * 14,429 * Buford H. Ortale 4,398 (3) * 14,416 * Elizabeth K. Tuppeny 4,650 (3) * 16,684 * All directors and executive officers as a group (9 persons) 98,604 (4) * 180,235 * ________________________ * Less than 1%. (1) The business address of each individual or entity listed in the table 1345 Avenue of the Americas, Suite 32A, New York, New York 10105. (2) Includes 2,403 unvested restricted shares scheduled to vest on June 3, 2022. (3) Includes 2,796 unvested restricted shares scheduled to vest on June 3, 2022. (4) Includes 18,393 unvested restricted shares scheduled to vest on June 3, 2022. The following table sets forth information regarding the beneficial ownership of our Common Stock and our Series C Preferred Stock, Series D Preferred Stock and Series F Preferred Stock (such preferred stock collectively, the “Voting Preferred Stock”), which votes as a single class with Common Stock on an as-converted basis, in each case including shares which may be acquired by such persons within 60 days, by each person known by us to be the beneficial owner of more than 5% of the outstanding shares of Common Stock or any class of the Voting Preferred Stock. Beneficial Owner Number of Shares of Common Stock Beneficially Owned Percent of Class Number of Shares of Series C Preferred Stock Beneficially Owned Percent of Class Number of Shares of Series D Preferred Stock Beneficially Owned Percent of Class Number of Shares of Series F Preferred Stock Beneficially Owned Percent of Class BlackRock, Inc. (1) 7,002,427 15.9 % — — — — — — The Vanguard Group (2) 3,588,587 8.2 % Security Benefit Life Insurance Company (3) — — — — 17,950 100.0 % — — Penn Mutual Life Insurance Company (4) — * 1,000 71.5 % — — — — Vesta Global Stability Fund LP (5) — — 400 28.5 % — — — — Howard University Endowment Fund (6) — * — — — — 2,179,465 5.5 % ________________________ Table of Contents * Less than 1%. (1) This information is based on a Schedule 13G/A filed with the SEC on January 27, 2022, by BlackRock, Inc. (“Blackrock”). Blackrock reported that it has sole voting power with respect to 6,965,313 shares, shared voting power with respect to 0 shares, sole dispositive power with respect to 7,002,427 shares and shared dispositive power with respect to 0 shares. The address of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055. (2) This information is based on a Schedule 13G filed with the SEC on February 9, 2022 by The Vanguard Group (“Vanguard”). Vanguard reported that it has sole voting power with respect to 0 shares, shared voting power with respect to 28,577 shares, sole dispositive power with respect to 3,527,307 shares and shared dispositive power with respect to 61,280 shares. The address of Vanguard is 100 Vanguard Blvd. Malvern, PA 19355. (3) The business address of Security Benefit Life Insurance Company is One SW Security Benefit Place, Topeka, KS 66636. (4) The business address of Penn Mutual Life Insurance Company is 600 Dresher Road, Suite 100, Horsham, PA 19044. (5) The business address of Vesta Global Stability Fund LP is 330 5 th Ave SW, Suite 640, Calgary, AB T2P 0L4, Canada. (6) The business address of Howard University Endowment Fund is 2244 10th St NW Suite 302, Washington DC 20001-4012. Item 13. Certain Relationships and Related Transactions, and Director Independence. Certain Relationships and Related Transactions Executive Officers Richard J. Byrne our Chief Executive Officer and President, is the president of our Advisor. Jerome S. Baglien, our Chief Financial Officer, Chief Operating Officer and Treasurer, is the chief financial officer and chief operating officer of the Advisor’s commercial real estate group. Our Advisor is an affiliate of Franklin Templeton. Advisor The Advisor manages our day to day operations pursuant to the Amended and Restated Advisory Agreement, dated January 19, 2018, as amended August 18, 2021 (the “Advisory Agreement”). Our Advisor is responsible for identifying, originating, acquiring and asset managing investments on our behalf. Under the Advisory Agreement, the Advisor is entitled to an asset management fee equal to one and one-half percent (1.5%) of Equity (as defined in the Advisory Agreement) and an annual subordinated performance fee equal to fifteen percent (15%) of the Total Return (as defined in the Advisory Agreement) over a six percent (6%) per annum hurdle, subject to certain limitations. The Company or the Operating Partnership continues to pay directly or reimburse the Advisor for all the expenses paid or actually incurred by the Advisor in connection with the services it provides to the Company and the Operating Partnership pursuant to the Advisory Agreement, subject to certain limitations. For the year ended December 31, 2021, pursuant to the terms of the Amended Advisory Agreement, the Company paid total asset management fees of $28.1 million, acquisition expenses of approximately $1.2 million, reimbursements for administrative expenses and personnel costs of approximately $7.7 million, and other related party expenses, primarily related to reimbursable costs incurred for the increase in loan origination activities, of approximately $0.4 million. Indemnification Agreements We have entered into an indemnification agreement with each of our directors and officers providing for indemnification of such directors and officers consistent with the provisions of our Charter. No amounts have been paid by us pursuant to these indemnification agreements. Certain Conflict Resolution Procedures Every transaction that we enter into with our Advisor or its affiliates will be subject to an inherent conflict of interest. Our Board of Directors may encounter conflicts of interest in enforcing our rights against any affiliate in the event of a default by or disagreement with an affiliate or in invoking powers, rights or options pursuant to any agreement between us and our Advisor or any of its affiliates. In order to reduce or eliminate certain potential conflicts of interest, our Nominating and Corporate Governance Committee charter contains a number of requirements, including that: • the committee shall review and evaluate the terms and conditions of, and determine the advisability of, any related party transaction; • unless the Board appoints a special committee of independent directors to negotiate any related party transaction, the committee shall negotiate the terms and conditions of any related party transaction, and if the committee deems appropriate, but subject to the limitations of applicable law, shall recommend to the Board the execution and delivery of documents in connection with any related party transaction on behalf of the Company; • the committee shall determine whether any related party transaction is fair to, and in the best interest of the Company; • the committee shall recommend to the Board what action, if any should be taken by the Board with respect to any related party transaction pursuant to the Company’s Charter; Table of Contents • the committee shall review, evaluate and approve of any potential conflicts brought to its attention and shall report the results of its consideration of any such conflict to the Board; and • the committee shall review, on a quarterly basis, the services provided by the Advisor, the reasonableness of the Advisor’s or its affiliates’ fees and expenses, the reasonableness of the Company’s expenses and the allocation of expenses among the Company and its affiliates and among accounting categories, and report its findings to the Board. These responsibilities have also been codified in the Related Party Transactions Policy adopted by our Nominating and Corporate Governance Committee. Pursuant to the Related Party Transactions Policy, all related party transactions (as defined by Item 404(a) of Regulation S-K) must be approved by either the Nominating and Corporate Governance Committee or a majority of the disinterested members of the Board. As a general rule, any director who has a direct or indirect material interest in such related party transaction should not participate in the Nominating and Corporate Governance Committee or Board action regarding whether to approve the transaction. Any payment of fees and reimbursements to the Advisor pursuant to and in accordance with the Advisory Agreement are deemed to have been approved in accordance with the Related Party Transactions Policy. Our independent directors have determined that all our transactions and relationships with our Advisor and their respective affiliates during the year ended December 31, 2021 were fair and were approved in accordance with the applicable Company policies. Director Independence Under our Corporate Governance Guidelines and NYSE rules, a majority of our directors must be “independent.” A director is not independent unless the Board affirmatively determines that he or she does not have a “material relationship” with us and the director must meet the bright-line test for independence set forth by the NYSE rules. A relationship with the Advisor or an affiliate thereof (other than service as an independent director or trustee for another company managed by the Advisor) is treated as a relationship with the Company. Our Corporate Governance Guidelines also require all members of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee to be “independent” directors. Based upon its review, the Board has affirmatively determined that each of Messrs. Augustine, Keiser, McDonough and Ortale, and each of Mses. Goolsby, Handwerker and Tuppeny is independent under all applicable criteria for independence set forth in the listing standards of the NYSE, including with respect to committee service. In making its independence determinations, the Board considered and reviewed all information known to it, including information identified through directors’ questionnaires. There are no familial relationships between any of our directors and executive officers. Item 14. Principal Accounting Fees and Services. The Audit Committee of the Board of Directors has selected and appointed Ernst and Young LLP (“EY”) as our independent registered public accounting firm to audit our consolidated financial statements for the year ending December 31, 2022. EY has been our independent registered accounting firm since 2017. The following table shows the fees billed by EY for the years ended December 31, 2021 and December 31, 2020 for each of the following categories of services: 2021 2020 Audit Fees (1) $ 2,435,000 $ 1,357,600 Audit-Related Fees (2) 911,901 20,000 Tax Fees (3) 713,762 408,328 Total $ 4,060,663 $ 1,785,928 ________________________ (1) Audit fees relate to audits of the Company’s annual consolidated financial statements and reviews of the Company’s quarterly consolidated financial statements, comfort letters, and consents related to SEC registration statements. (2) Audit-Related fees relate to assurance and related services that are traditionally performed by the independent registered public accounting firm and includes due diligence and debt compliance reporting. (3) Tax fees primarily relate to preparation of tax returns, assistance with federal and state income tax filing calendar, compliance services, tax planning and modeling services, assistance with tax audits, tax advice related to mergers, and routine on-call tax services concerning issues, as requested by the Company, when such projects are not covered by a separate agreement and do not involve any significant tax planning or projects . Pre-Approval Policies and Procedures In accordance with our Audit Committee’s Audit and Non-Audit Services Pre-Approval Policy, all audit and non-audit services performed for us by our independent registered public accounting firm were pre-approved by the Audit Committee of our board of directors, which concluded that the provision of such services by EY was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions. Table of Contents The Audit and Non-Audit Services Pre-Approval Policy provides for categorical pre-approval of specified audit and permissible non-audit services. Services to be provided by the independent registered public accounting firm that are not within the category of pre-approved services must be approved by the Audit Committee prior to engagement, regardless of the service being requested or the dollar amount involved. The Audit Committee must provide separate pre-approval of engagements for the performance of audit and non-audit services if (i) the type of service to be provided by the independent auditor has not received pre-approval as specifically set forth in the Audit and Non-Audit Services Pre-Approval Policy or (ii) the performance of such service would cause the aggregate annual fee, as applicable, to exceed the maximum fee level established for such type of service by the Audit Committee; provided that the Audit Committee determines that the provision of such services will not impair the auditors’ independence. The Audit Committee may delegate pre-approval authority to one or more of its members. The member or members to whom such authority is delegated shall report any pre-approval decisions to the Audit Committee at its next scheduled meeting. The Audit Committee does not delegate to management its responsibilities to pre-approve services to be performed by the independent registered public accounting firm. Table of Contents PART IV Item 15. Exhibits and Financial Statement Schedules. (a) Financial Statement Schedules See the Index to Consolidated Financial Statements on page F-1 of this report. (b) Exhibits See the Index to Exhibit below. Item 16. Form 10-K Summary. None. INDEX TO EXHIBITS The following exhibits are included in this Annual Report on Form 10-K for the year ended December 31, 2021 (and are numbered in accordance with Item 601 of Regulation S-K). Exhibit No. Description 2.1 Agreement and Plan of Merger, dated as of July 25, 2021, by and among Benefit Street Partners Realty Trust, Inc., Rodeo Sub I, LLC, Capstead Mortgage Corporation and Benefit Street Partners L.L.C. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC on July 26, 2021). 2.2 First Amendment to Agreement and Plan of Merger, dated September 22, 2021, by and among Benefit Street Partners Realty Trust, Inc., Rodeo Sub I, LLC, Capstead Mortgage Corporation and Benefit Street Partners L.L.C. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC on September 22, 2021). 3.1 Articles of Amendment and Restatement, effective March 10, 2021 (incorporated by reference to Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 11, 2021). 3.2 Articles of Amendment to the Articles of Amendment and Restatement of Benefit Street Partners Realty Trust, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on October 8, 2021). 3.3 Articles Supplementary dated October 18, 2019, relating to Series C 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 October 18, 2019). 3.4 Articles Supplementary dated March 17, 2021, relating to Series D 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 March 19, 2021). 3.5 Articles Supplementary of Franklin BSP Realty Trust, Inc., effective October 19, 2021, relating to Series E Cumulative Redeemable Preferred Stock (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on October 21, 2021 ) . 3.6 Articles Supplementary of Franklin BSP Realty Trust, Inc., effective October 12, 2021, relating to Series F Convertible Preferred Stock (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed with the SEC on October 8, 2021). 3.7 Amended and Restated Bylaws of Franklin BSP Realty Trust, Inc. (incorporated by reference to Exhibit 3.3 to the Current Report on Form 8-K filed with the SEC on October 8, 2021). 4.1 Amended and Restated Agreement of Limited Partnership of Benefit Street Partners Realty Operating Partnership, L.P., dated as of December 31, 2014 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 6, 2015). 4.2 Amendment No. 1 to the Amended and Restated Agreement of Limited Partnership of Benefit Street Partners Realty Operating Partnership, L.P., dated as of February 9, 2017 (incorporated by reference to Exhibit 4.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on March 29, 2017). 4.3* Description of Securities of the Registrant 10.1† Amended and Restated Employee and Director Incentive Restricted Share Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on March 29, 2017). 10.2† Form of Director Restricted Share Award Agreement (incorporated by reference to Exhibit 10.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on March 29, 2017). 10.3 Uncommitted Master Repurchase Agreement, dated as of June 18, 2014, between the Company JPM Loan, LLC and JPMorgan Chase Bank, National Association. (incorporated by reference to Exhibit 10.9 to the Pre-Effective Amendment No. 1 to Post-Effective Amendment No. 7 to our Registration Statement on Form S-11 filed with the SEC on July 11, 2014). 10.4 Amendment No.1 to Master Repurchase Agreement, dated as of June 24, 2015, by and between the Company, JPM Loan, LLC and JP Morgan Chase Bank, National Association (incorporated by reference to Exhibit 10.11 to the Pre-Effective Amendment No.1 to Post-Effective Amendment No.12 to our Registration Statement on Form S-11 filed with the SEC on July 8, 2015). 10.5 Amendment No. 2 to Master Repurchase Agreement, dated as of September 28, 2015, between the Company, JPM Loan, LLC and JPMorgan Chase Bank, National Association (incorporated by reference to Exhibit 10.12 to the Pre-Effective Amendment No. 1 to Post-Effective Amendment No. 13 filed with the SEC on October 8, 2015). 69 Table of Contents 10.6 Amendment No. 3 to Master Repurchase Agreement, dated as of December 30, 2015, between the Company, JPM Loan, LLC and JPMorgan Chase Bank, National Association (incorporated by reference to Exhibit 10.11 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on March 11, 2016). 10.7 Amendment No. 4 to Master Repurchase Agreement, dated as of October 5, 2016, between the Company, JPM Loan, LLC and JPMorgan Chase Bank, National Association (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 12, 2016). 10.8 Guarantee Agreement, dated as of June 18, 2014, between the Company and JPMorgan Chase Bank, National Association (incorporated by reference to Exhibit 10.10 to Pre-Effective Amendment No. 1 to Post-Effective Amendment No. 8 to our Registration Statement on Form S-11 filed with the SEC on October 8, 2014). 10.9 Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 filed with the SEC on November 14, 2016). 10.10 Amended and Restated Uncommitted Master Repurchase Agreement, dated as of June 12, 2017, by and between BSPRT JPM Loan, LLC and JP Morgan Chase Bank, National Association (incorporated by reference to Exhibit 10.2 to Amendment No. 1 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 filed with the SEC on August 23, 2017). 10.11 Amendment No. 5 to Amended and Restated Uncommitted Master Repurchase Agreement, dated as of October 6, 2020, by and between BSPRT JPM Loan, LLC and JP Morgan Chase Bank, National Association (incorporated by reference to Exhibit 10.11 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 11, 2021). 10.12 Amended and Restated Guarantee Agreement, dated as of June 12, 2017, by and between the Company and JPMorgan Chase Bank, National Association. 10.13 Master Repurchase and Securities Contract, dated as of June 15, 2017, between BSPRT USB Loan, LLC and U.S. Bank National Association (incorporated by reference to Exhibit 10.4 to Amendment No. 1 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 filed with the SEC on August 23, 2017). 10.14 Payment Guaranty, dated as of June 15, 2017, by and between the Company and U.S. Bank National Association (incorporated by reference to Exhibit 10.5 to Amendment No. 1 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 filed with the SEC on August 23, 2017 . 10.15 Master Repurchase Agreement, dated as of August 31, 2017, by and among Column Financial, Inc., Credit Suisse AG, Alpine Securitization Ltd., the Company and BSPRT Finance Sub-Lender I, LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on September 7, 2017). 10.16 Guaranty, dated as of August 31, 2017, by and between the Company and Column Financial, Inc (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on September 7, 2017). 10.17 Credit Agreement, dated as of September 19, 2017, by and among the Company, BSPRT BB Loan, LLC, BSPRT Finance Sub-Lender II, L.L.C., Barclays Bank PLC, as sole lead arranger and bookrunner, Barclays Bank PLC, as administrative agent, and the lenders from time to time partiers thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on September 25, 2017).. 10.18 Guarantee and Collateral Agreement, dated as of September 19, 2017, by and among the Company, BSPRT BB Loan, LLC, BSPRT Finance Sub-Lender II, L.L.C. and Barclays Bank PLC, as administrative agent for the secured parties (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on September 25, 2017). 10.19 Indenture, dated as of November 29, 2017, by and among BSPRT 2017-FL2 Issuer, Ltd., as issuer, BSPRT 2017-FL2 Co-Issuer, LLC, as co-issuer, Benefit Street Partners Realty Operating Partnership, L.P., as advancing agent, and U.S. Bank National Association, as trustee, note administrator and custodian (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 5, 2017). 10.20 Amended and Restated Advisory Agreement, dated as of January 19, 2018, by and among Benefit Street Partners Realty Trust, Benefit Street Partners Realty Operating Partnership, L.P. and Benefit Street Partners, L.L.C (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 23, 2018). 10.21 .Indenture, dated as of October 12, 2018, by and among BSPRT 2018-FL4 Issuer, Ltd., BSPRT 2018-FL4 Co-Issuer, LLC, Benefit Street Partners Realty Operating Partnership, L.P., as advancing agent, and U.S. Bank National Association, as trustee, note administrator and custodian (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 filed with the SEC on November 9, 2018). 10.22 Master Repurchase and Securities Contract, dated November 21, 2018, among the Company, BSPRT WFB LOAN, LLC and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.29 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on March 29, 2019). 10.23 Guarantee Agreement, dated November 21, 2018, between the Company and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.30 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on March 29, 2019). 10.24 Master Repurchase and Securities Contract, dated March 15, 2019, among the Company, BSPRT BB FLOAT, LLC, BSPRT BB Fixed, LLC and BARCLAYS BANK PLC (incorporated by reference to Exhibit 10.31 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on March 29, 2019). 10.25 Guarantee Agreement, dated March 15, 2019, between the Company and BARCLAYS BANK PLC (incorporated by reference to Exhibit 10.32 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on March 29, 2019). 70 Table of Contents 10.26 Indenture, dated as of May 30, 2019, by and among BSPRT 2010-FL5 Issuer, Ltd., BSPRT 2019-FL5 Co-Issuer, LLC, Benefit Street Partners Realty Operating Partnership, L.P., as advancing agent, and U.S. Bank National Association, as trustee, note administrator and custodian (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on June 5, 2019). 10.27 Loan and Security Agreement, dated February 11, 2020 and as amended by Agreement of Amendment dated March 26, 2020, among BSPRT OP SUB I, LLC, Benefit Street Partners Realty Trust, Inc., Benefit Street Partners Realty Trust LP, LLC, Benefit Street Partners Realty Operating Partnership, L.P., and Security Benefit Life Insurance Company and the other lenders from time to time parties thereto, and Cortland Capital Market Services LLC, as administrative agent (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 filed with the SEC on May 15, 2020). 10.28 Loan and Security Agreement, dated as of February 11, 2020, as amended by that certain Agreement of Amendment No. 1, dated March 26, 2020 and that certain Consent and Amendment No. 2 to Loan and Security Agreement, dated as of July 14, 2020, among BSPRT OP Sub I, LLC, Benefit Street Partners Realty Trust, Inc., Benefit Street Partners Realty Trust LP, LLC, and Benefit Street Partners Realty Operating Partnership, L.P. and Security Benefit Life Insurance Company and the other lenders from time to time parties thereto, and Cortland Capital Market Services LLC, as administrative agent (incorporated by reference to Exhibit 10.29 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 11, 2021). 10.29 Purchase and Exchange Agreement, dated March 15, 2021, by and between Benefit Street Partners Realty Trust, Inc. and Security Benefit Life Insurance Company (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on March 19, 2021). 10.30 Indenture, dated as of March 25, 2021, by and among BSPRT 2021-FL6 Issuer, Ltd., BSPRT 2021-FL6 Co-Issuer, LLC, Benefit Street Partners Realty Operating Partnership, L.P., as advancing agent, and U.S. Bank National Association, as trustee, note administrator and custodian (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on March 30, 2021). 10.31 Amendment No. 1 to Amended and Restated Advisory Agreement, dated August 18, 2021, by and among Benefit Street Partners Realty Trust, Inc., Benefit Street Partners Realty Operating Partnership, L.P. and Benefit Street Partners L.L.C. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on August 18, 2021). 10.32 Third Amendment to Credit Agreement, dated as of September 8, 2021, among the Company, BSPRT BB Loan, LLC and Barclays Bank PLC (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, filed with the SEC on November 10, 2021). 10.33† Franklin BSP Realty Trust, Inc. 2021 Equity Incentive Plan (incorporated by reference to Exhibit 99.1 to the Registrant’s Registration Statement on Form S-8 filed with the SEC on November 12, 2021). 10.34* First Amendment to Fee Letter and Second Amendment to Master Repurchase Agreement, dated November 23, 2021, by and among BSPRT BB FLOAT , LLC, and BSPRT BB FIXED, LLC, and Barclays Bank PLC. 10.35* Second Amendment to Fee Letter and Third Amendment to Master Repurchase Agreement, dated December 3, 2021, by and among BSPRT BB FLOAT, LLC, BSPRT BB FIXED, LLC, and Barclays Bank PLC. 10.36 Indenture, dated as of December 21, 2021, by and among BSPRT 2021-FL7 Issuer, Ltd., BSPRT 2021-FL7 Co-Issuer, LLC, Benefit Street Partners Realty Operating Partnership, L.P., as advancing agent, and U.S. Bank National Association, as trustee, note administrator and custodian (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 21, 2021. 10.37* Fourth Amendment to Credit Agreement, dated December 1, 2021, among BSPRT BB LOAN, LLC, BSPRT FINANCE SUB-LENDER II, LLC, FRANKLIN BSP REALTY TRUST, INC., and Barclays Bank PLC. 10.38* Amendment No. 10 To Pricing Side Letter, dated as of November 3, 2021, among Column Financial, Inc., Credit Suisse AG, Alpine Securitization LTD, BSPRT FINANCE SUB-LENDER I, LLC, BSPRT CS LOAN, LLC, and Franklin BSP Realty Trust, Inc. 10.39* First Amendment to Guarantee Agreement, entered into as of September 30, 2021, by Benefit Street Partners Realty Trust, Inc., and Wells Fargo Bank, National Association. 10.40* Master Repurchase and Securities Contract, dated as of October 18, 2021 between BSPRT WF Loan, LLC and Wells Fargo Bank National Association. 10.41* Amendment No. 2 to Master Repurchase and Securities Contract, dated as of November 19, 2021, between BSPRT WFB Loan, LLC and Wells Fargo Bank, National Association. 10.42* Amendment No. 1 to Amended and Restated Guarantee Agreement, entered into as of September 29, 2021 between Benefit Street Partners Realty Trust, Inc., and JPMorgan Chase Bank, National Association. 10.43* Amendment No. 7 to Amended and Restated Uncommitted Master Repurchase Agreement, entered into as of September 29, 2021 between BSPRT JPM Loan, LLC, and JPMorgan Chase Bank, National Association. 10.44* Amendment No. 8 to Amended and Restated Uncommitted Master Repurchase Agreement, entered into as of October 20, 2021 between BSPRT JPM Loan, LLC, and JPMorgan Chase Bank, National Association. 10.45*† Form of Restricted Share Unit Award Agreement pursuant to the Franklin BSP Realty Trust, Inc. 2021 Equity Incentive Plan. 21* Subsidiaries of the Registrant 23.1* Consent of Ernst & Young LLP 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. 71 Table of Contents 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 Annual Report on Form 10-K for the year ended December 31, 2021 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. ____________________________________________ * Filed herewith. † Indicates management contract or compensatory plan or arrangement. 72 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Franklin BSP Realty Trust, Inc. Date: February 25, 2022 By /s/ Richard J. Byrne Richard J. Byrne Chief Executive Officer and President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Name Capacity Date /s/ Richard J. Byrne Chairman, Chief Executive Officer and President February 25, 2022 Richard J. Byrne (Principal Executive Officer) /s/ Jerome S. Baglien Chief Financial Officer, Chief Operating Officer and Treasurer (Principal Financial and Accounting Officer) February 25, 2022 Jerome S. Baglien /s/ Elizabeth K. Tuppeny Lead Independent Director February 25, 2022 Elizabeth K. Tuppeny /s/ Pat Augustine Director February 25, 2022 Pat Augustine /s/ Michelle Goolsby Director February 25, 2022 Michelle Goolsby /s/ Jamie Handwerker Director February 25, 2022 Jamie Handwerker /s/ Gary Keiser Director February 25, 2022 Gary Keiser /s/ Peter McDonough Director February 25, 2022 Peter McDonough /s/ Buford Ortale Director February 25, 2022 Buford Ortale 73 Table of Contents FRANKLIN BSP REALTY TRUST, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm, Ernst & Young LLP (PCAOB ID 42 ) F- 2 Consolidated Balance Sheets F- 5 Consolidated Statements of Operations F- 7 Consolidated Statements of Comprehensive Income F- 8 Consolidated Statements of Changes in Stockholders' Equity F- 9 Consolidated Statements of Cash Flows F- 11 Notes to Consolidated Financial Statements F- 13 Financial Statement Schedule: Schedule IV: Mortgage Loans on Real Estate F- 64 F-1 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Franklin BSP Realty Trust, Inc.: Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Franklin BSP Realty Trust, Inc. (formerly Benefit Street Partners Realty Trust, Inc.) (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule IV (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. Adoption of new accounting standard As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for credit losses in 2020. As explained below, auditing the Company’s allowance for credit losses – commercial mortgage loans held for investment was a critical audit matter. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. F-2 Table of Contents Allowance for credit losses – Commercial mortgage loans held-for-investment Description of the Matter Allowance for credit losses– Commercial mortgage loans held-for-investment totaled $15.8 million as of December 31, 2021. As disclosed in Note 2 to the consolidated financial statements, the allowance for credit losses for the Commercial mortgage loans held-for-investment carried at amortized cost, represents a lifetime estimate of expected credit losses. The allowance for credit losses is established for current expected credit losses on the Company’s loan portfolio by utilizing expected loss models. When determining expected losses, the Company uses an economic scenario over a reasonable and supportable forecast period and then fully reverts to historical loss experience to estimate losses over the remaining asset lives. The modeled results are then evaluated to determine if adjustments are needed for certain qualitative factors. Auditing the Allowance for credit losses– Commercial mortgage loans held-for-investment was complex due to the use of intricate expected loss models and the highly judgmental nature of the economic scenario and qualitative factors. How We Addressed the Matter in Our Audit With the support of specialists, we assessed the economic scenario by, among other procedures, evaluating management’s methodology and agreeing a sample of key economic variables used to external sources. We also performed and considered the results of various sensitivity analyses and analytical procedures, including comparison of a sample of the key economic variables to alternative external sources, historical statistics and peer real estate investment trust information. With respect to expected loss models, with the support of specialists, we evaluated model calculation design and re-performed the calculation for the models. We also tested the appropriateness of a sample of key inputs and assumptions used in these models by agreeing significant inputs and underlying data to internal and external sources, as well as recalculating when required. We evaluated the overall allowance amount, including model estimates, qualitative factors, and whether the recorded allowance for credit losses appropriately reflects expected credit losses on the loan portfolio. We reviewed historical loss statistics, peer real estate investment trust information, subsequent events and transactions and considered whether they corroborate or contradict the Company’s measurement of the allowance for credit losses. F-3 Table of Contents Accounting for the Company’s acquisition of Capstead Mortgage Corporation and subsequent impairment of certain acquired assets Description of the Matter On October 19, 2021, the Company completed its merger with Capstead Mortgage Corporation (”CMO”). As disclosed in Note 18 to the consolidated financial statements, the transaction was accounted for as an asset acquisition based on the Company’s qualitative evaluation that substantially all of the fair value of the gross assets acquired was concentrated in a group of similar identifiable assets. Accordingly, the acquired net assets were fair valued and the Company determined that the consideration paid exceeded the fair value of the net assets acquired resulting in a premium. The premium paid by the Company was allocated to the basis of qualifying assets acquired by the Company. The qualifying assets were subsequently tested for recoverability and determined to be impaired at December 31, 2021 resulting in the recognition of impairment expense by the Company. Auditing the Company's accounting for its asset acquisition was complex due to the qualitative factors considered by the Company in determining that substantially all of the fair value of the gross assets acquired was concentrated in a group of similar identifiable assets and the determination that no material intangible assets were acquired. Further, the determination of the appropriate grouping of acquired long-lived assets for the subsequent impairment review required a significant amount of judgment. Auditing the fair value of the net assets acquired, the allocation of the premium to qualifying assets, and the determination of the grouping of long-lived assets for the subsequent impairment review related to certain acquired long-lived assets was complex. How We Addressed the Matter in Our Audit To test the Company’s accounting for its acquisition of CMO, we performed audit procedures that included, among others, inspecting minutes of board of directors’ meetings, executed transaction agreements, and transfer agent documentation to test the authorization and execution of the transaction and the consideration paid. We evaluated management’s determination that substantially all of the fair value of the gross assets acquired was concentrated in a group of similar identifiable assets and the determination that no material intangible assets were acquired. Additionally, we evaluated the Company’s measurement of the acquired assets, at fair value, at the acquisition date, the allocation of the related purchase premium to qualifying assets and the determination of the grouping of the acquired assets for purposes of the subsequent impairment review of certain acquired long-lived assets. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2017. New York, New York February 25, 2022 F-4 Table of Contents FRANKLIN BSP REALTY TRUST, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) December 31, 2021 December 31, 2020 ASSETS Cash and cash equivalents $ 154,929 $ 82,071 Restricted cash 13,270 10,070 Commercial mortgage loans, held for investment, net of allowance of $ 15,827 and $ 20,886 as of December 31, 2021 and December 31, 2020, respectively 4,211,061 2,693,848 Commercial mortgage loans, held for sale, measured at fair value 34,718 67,649 Real estate securities, trading, measured at fair value 4,566,871 — Real estate securities, available for sale, measured at fair value, amortized cost of $ — and $ 179,392 as of December 31, 2021 and December 31, 2020, respectively — 171,136 Derivative instruments, measured at fair value 436 25 Other real estate investments, measured at fair value 2,074 2,522 Receivable for loan repayment (1) 252,351 98,551 Accrued interest receivable 30,109 15,295 Prepaid expenses and other assets 13,595 8,538 Intangible lease asset, net of amortization 48,472 13,546 Real estate owned, net of depreciation 90,048 26,510 Cash collateral receivable from derivative counterparties 56,767 — Total assets $ 9,474,701 $ 3,189,761 LIABILITIES AND STOCKHOLDERS' EQUITY Collateralized loan obligations $ 2,162,190 $ 1,625,498 Repurchase agreements - commercial mortgage loans 1,019,600 276,340 Repurchase agreements - real estate securities 4,178,784 186,828 Mortgage note payable 23,998 29,167 Other financing and loan participation - commercial mortgage loans 37,903 31,379 Unsecured debt 148,594 — Derivative instruments, measured at fair value 32,295 403 Interest payable 2,692 2,110 Distributions payable 30,346 15,688 Accounts payable and accrued expenses 12,705 5,125 Due to affiliates 17,538 9,525 Total liabilities $ 7,666,645 $ 2,182,063 Redeemable convertible preferred stock Series A, $ 0.01 par value, 60,000 authorized and none issued or outstanding as of December 31, 2021 and 40,515 issued and outstanding as of December 31, 2020 $ — $ 202,292 Redeemable convertible preferred stock Series C, $ 0.01 par value, 20,000 authorized and 1,400 issued and outstanding as of December 31, 2021 and December 31, 2020 6,971 6,962 Redeemable convertible preferred stock Series D, $ 0.01 par value, 20,000 authorized and 17,950 issued and outstanding as of December 31, 2021 and none issued or outstanding as of December 31, 2020 89,684 — Equity: Preferred stock, $ 0.01 par value, 10,000,000 authorized, none issued and outstanding as of December 31, 2021 and December 31, 2020, 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 December 31, 2021 and none issued or outstanding as of December 31, 2020 258,742 — Series F Preferred stock, $ 0.01 par value, 40,000,000 authorized and 39,733,299 issued and outstanding as of December 31, 2021 and none issued or outstanding as of December 31, 2020 710,431 — Common stock, $ 0.01 par value, 900,000,000 shares authorized, 43,965,928 and 44,510,051 issued and outstanding as of December 31, 2021 and December 31, 2020, respectively 441 446 Additional paid-in capital 903,264 912,725 Accumulated other comprehensive income (loss) ( 62 ) ( 8,256 ) Accumulated deficit ( 167,179 ) ( 106,471 ) Total stockholders' equity $ 1,705,637 $ 798,444 Non-controlling interest $ 5,764 $ — Total equity $ 1,711,401 $ 798,444 Total liabilities, redeemable convertible preferred stock and equity $ 9,474,701 $ 3,189,761 ___________________ F-5 Table of Contents (1) Includes $ 187.0 million and $ 98.6 million of cash held by the servicer related to CLO loan payoffs as of December 31, 2021 and December 31, 2020, as well as $ 65.3 million of RMBS principal paydowns receivable as of December 31, 2021. The accompanying notes are an integral part of these consolidated financial statements. F-6 Table of Contents FRANKLIN BSP REALTY TRUST, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share data) Year Ended December 31, 2021 2020 2019 Interest Income: Interest income $ 216,890 $ 179,872 $ 195,299 Less: Interest expense 60,835 66,556 90,418 Net interest income 156,055 113,316 104,881 Revenue from real estate owned 4,759 4,299 3,169 Total Income $ 160,814 $ 117,615 $ 108,050 Expenses: Asset management and subordinated performance fee 28,110 15,178 16,226 Acquisition expenses 1,203 696 900 Administrative services expenses 7,658 13,120 16,363 Impairment of acquired assets 88,282 — — Professional fees 11,650 10,964 11,631 Real estate owned operating expenses — 3,653 2,802 Depreciation and amortization 2,107 2,233 507 Other expenses 3,946 3,312 3,771 Total expenses $ 142,956 $ 49,156 $ 52,200 Other (income)/loss: Provision/(benefit) for credit losses ( 5,192 ) 13,296 3,007 Impairment losses on real estate owned assets — 398 — Realized (gain)/loss on extinguishment of debt — ( 3,678 ) — Realized (gain)/loss on sale of real estate securities 1,376 10,137 0 Realized (gain)/loss on sale of commercial mortgage loans, held for sale ( 26 ) ( 184 ) 25 Realized (gain)/loss on sale of real estate owned assets, held for sale ( 9,809 ) ( 1,851 ) — Realized (gain)/loss on sale of commercial mortgage loans, held for sale, measured at fair value ( 24,208 ) ( 15,931 ) ( 37,832 ) Unrealized (gain)/loss on commercial mortgage loans, held for sale, measured at fair value ( 469 ) 75 ( 312 ) Unrealized (gain)/loss on other real estate investments, measured at fair value 19 32 ( 47 ) Trading (gain)/loss 34,752 — — Unrealized (gain)/loss on derivatives ( 7,402 ) 995 ( 1,722 ) Realized (gain)/loss on derivatives ( 484 ) 12,486 4,324 Total other (income)/loss $ ( 11,443 ) $ 15,775 $ ( 32,557 ) Income before taxes 29,301 52,684 88,407 Provision/(benefit) for income tax 3,599 ( 2,062 ) $ 4,483 Net income $ 25,702 $ 54,746 $ 83,924 Net income/(loss) applicable to common stock $ ( 7,885 ) $ 39,826 $ 66,914 Basic net income per share $ ( 0.18 ) $ 0.90 $ 1.60 Diluted net income per share $ ( 0.18 ) $ 0.90 $ 1.60 Basic weighted average shares outstanding 43,419,209 44,384,813 41,859,142 Diluted weighted average shares outstanding 43,434,731 44,398,879 41,871,646 The accompanying notes are an integral part of these consolidated financial statements. F-7 Table of Contents FRANKLIN BSP REALTY TRUST, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Dollars In thousands) Year Ended December 31, 2021 2020 2019 Net income $ 25,702 $ 54,746 $ 83,924 Unrealized gain/(loss) on available for sale securities 8,256 ( 7,278 ) ( 978 ) Amounts related to cash flow hedges: Change in net unrealized gain or loss ( 852 ) — — Reclassification adjustment for amounts included in net income/(loss) 790 — — $ 8,194 $ ( 7,278 ) $ ( 978 ) Comprehensive income attributable to Franklin BSP Realty Trust, Inc. $ 33,896 $ 47,468 $ 82,946 The accompanying notes are an integral part of these consolidated financial statements. F-8 Table of Contents FRANKLIN BSP REALTY TRUST, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (In thousands, except share data) F-9 Table of Contents Common Stock Number of Shares Par Value Additional Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Preferred E Preferred F Total Stockholders' Equity Non-Controlling Interest Total Equity Balance, December 31, 2018 39,303,710 $ 395 $ 827,558 $ ( 459 ) $ ( 94,266 ) $ — $ — $ 733,228 $ — $ 733,228 Issuance of common stock 4,601,904 46 76,846 — — — — 76,892 — 76,892 Common stock repurchases ( 741,853 ) ( 7 ) ( 13,806 ) — — — — ( 13,813 ) — ( 13,813 ) Common stock issued through distribution reinvestment plan 746,654 7 13,903 — — — — 13,910 — 13,910 Share-based compensation 6,400 — 156 — — — — 156 — 156 Offering costs — — ( 1,347 ) — — — — ( 1,347 ) — ( 1,347 ) Net income — — — — 83,924 — — 83,924 — 83,924 Distributions declared — — — — ( 75,626 ) — — ( 75,626 ) — ( 75,626 ) Other comprehensive income — — — ( 519 ) — — — ( 519 ) — ( 519 ) Balance, December 31, 2019 43,916,815 $ 441 $ 903,310 $ ( 978 ) $ ( 85,968 ) $ — $ — $ 816,805 $ — $ 816,805 Issuance of common stock 650,034 6 10,880 — — — — 10,886 — 10,886 Common stock repurchases ( 579,467 ) ( 6 ) ( 10,253 ) — — — — ( 10,259 ) — ( 10,259 ) Common stock issued through distribution reinvestment plan 511,899 5 8,809 — — — — 8,814 — 8,814 Share-based compensation 10,770 — 193 — — — — 193 — 193 Offering costs — — ( 214 ) — — — — ( 214 ) — ( 214 ) Net income — — — — 54,746 — — 54,746 — 54,746 Distributions declared — — — — ( 67,488 ) — — ( 67,488 ) — ( 67,488 ) Cumulative-effect adjustment upon adoption of ASU 2016-13 (Note 2) — — — — ( 7,761 ) — — ( 7,761 ) — ( 7,761 ) Other comprehensive income — — — ( 7,278 ) — — — ( 7,278 ) — ( 7,278 ) Balance, December 31, 2020 44,510,051 $ 446 $ 912,725 $ ( 8,256 ) $ ( 106,471 ) $ — $ — $ 798,444 $ — $ 798,444 Issuance of preferred stock — — — — — 258,742 710,431 969,173 — 969,173 Issuance of common stock 31,887,442 319 579,207 — — — — 579,526 — 579,526 Common stock repurchases ( 648,837 ) ( 6 ) ( 11,411 ) — — — — ( 11,417 ) — ( 11,417 ) Common stock issued through distribution reinvestment plan 289,755 3 5,107 — — — — 5,110 — 5,110 Share-based compensation 11,184 — 211 — — — — 211 — 211 Offering costs — — ( 68 ) — — — — ( 68 ) — ( 68 ) Exchanged for series F preferred stock ( 39,733,299 ) ( 397 ) ( 710,034 ) — — — — ( 710,431 ) — ( 710,431 ) Preferred A conversion to common stock 7,649,632 76 127,527 — — — — 127,603 127,603 Net income — — — — 25,702 — — 25,702 — 25,702 Distributions declared — — — — ( 86,410 ) — — ( 86,410 ) — ( 86,410 ) Other comprehensive income — — — 8,194 — — — 8,194 — 8,194 Non-controlling interest — — — — — — — — 5,764 5,764 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 The accompanying notes are an integral part of these consolidated financial statements. F-10 Table of Contents FRANKLIN BSP REALTY TRUST, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) For the Years Ended December 31, 2021 2020 2019 Cash flows from operating activities: Net income $ 25,702 $ 54,746 $ 83,924 Adjustments to reconcile net income to net cash provided by operating activities: Premium amortization and (discount accretion), net ( 7,035 ) ( 5,999 ) ( 6,144 ) Accretion of deferred commitment fees ( 10,139 ) ( 6,410 ) ( 2,754 ) Amortization of deferred financing costs 9,203 9,585 9,584 Share-based compensation 211 193 156 Realized (gain)/loss from sale of real estate securities 1,376 10,137 — Realized (gain)/loss from sale of real estate owned, held for sale ( 9,809 ) ( 1,851 ) — Realized (gain)/loss from extinguishment of debt — ( 3,678 ) — Realized (gain)/loss on swap terminations ( 616 ) — — Unrealized (gain)/loss on commercial mortgage loans held for sale ( 469 ) 75 ( 359 ) Unrealized (gain)/losses on derivative instruments ( 7,402 ) 995 ( 1,722 ) Unrealized loss on other real estate securities 19 32 — Realized and unrealized gain/loss on real estate securities, trading 34,752 — — Depreciation and amortization 2,107 2,233 — Recognition of deferred rent revenue — ( 150 ) — Increase/(decrease) for credit losses ( 5,192 ) 13,296 3,007 Impairment losses on real estate owned assets — 398 — Origination of commercial mortgage loans, held for sale ( 420,673 ) ( 267,553 ) ( 1,020,702 ) Proceeds from sale of commercial mortgage loans, held for sale 454,073 312,206 975,243 Severance and deferred compensation ( 22,168 ) — — Changes in assets and liabilities: Accrued interest receivable ( 4,675 ) 7,423 ( 765 ) Prepaid expenses and other assets 94,864 ( 7,079 ) ( 4,020 ) Accounts payable and accrued expenses 3,640 ( 5,837 ) 6,428 Due to affiliates 8,013 4,736 1,560 Interest payable 715 ( 2,164 ) 1,933 Net cash (used in)/provided by operating activities $ 146,497 $ 115,334 $ 45,369 Cash flows from investing activities: Cash acquired through merger $ 174,083 $ — $ — Origination and purchase of commercial mortgage loans, held for investment ( 2,881,852 ) ( 1,281,158 ) ( 1,321,644 ) Principal repayments received on commercial mortgage loans, held for investment 1,225,645 1,228,225 756,141 Purchase/repayment of other real estate investments 426 — ( 2,511 ) Purchase of real estate owned and capital expenditures ( 134,052 ) ( 2,824 ) ( 42,018 ) Proceeds from sale of real estate owned, held for sale 29,912 22,472 — Proceeds from sale of commercial mortgage loans, held for sale 52,615 77,164 — Purchase of real estate securities — ( 148,580 ) ( 369,911 ) Principal repayments received on real estate securities — — Proceeds from sale/repayment of real estate securities 2,059,418 346,201 9,369 Principal collateral on mortgage investments 541,313 — — Purchase of derivative instruments 1,239 ( 813 ) 1,333 Net cash (used in)/provided by investing activities $ 1,068,747 $ 240,687 $ ( 969,241 ) Cash flows from financing activities: Cash consideration paid in merger $ ( 20,485 ) $ — $ — F-11 Table of Contents FRANKLIN BSP REALTY TRUST, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Proceeds from issuance of common stock — 10,672 75,545 Proceeds from issuances of convertible preferred stock 15,000 47 63,197 Common stock repurchases ( 11,417 ) ( 10,259 ) ( 13,813 ) Borrowings under collateralized loan obligation 1,410,173 — 639,899 Repayments of collateralized loan obligation ( 869,887 ) ( 182,680 ) ( 343,191 ) Borrowings on repurchase agreements - commercial mortgage loans 1,874,694 682,970 1,035,524 Repayments of repurchase agreements - commercial mortgage loans ( 1,131,434 ) ( 659,173 ) ( 932,420 ) Borrowings on repurchase agreements - real estate securities 13,553,886 2,675,218 1,570,331 Repayments of repurchase agreements - real estate securities ( 15,983,193 ) ( 2,882,749 ) ( 1,220,511 ) Proceeds from other financing and loan participation - commercial mortgage loans 6,524 31,379 — Repayments on other financing and loan participation - commercial mortgage loans — — ( 10,000 ) Borrowings on unsecured debt 210,000 — — Repayments on unsecured debt ( 160,000 ) — — Borrowing on mortgage note payable 23,940 11,712 29,167 Payments of deferred financing costs ( 9,285 ) ( 349 ) ( 4,540 ) Cash collateral received on interest rate swaps 11,138 — — Proceeds from interest rate swap settlements 9,115 — — Distributions paid ( 67,955 ) ( 49,790 ) ( 60,613 ) Net cash (used in)/provided by financing activities: $ ( 1,139,186 ) $ ( 373,002 ) $ 828,575 Net change in cash, cash equivalents and restricted cash $ 76,058 $ ( 16,981 ) $ ( 95,297 ) Cash, cash equivalents and restricted cash, beginning of period 92,141 109,122 204,419 Cash, cash equivalents and restricted cash, end of period $ 168,199 $ 92,141 $ 109,122 Supplemental disclosures of cash flow information: Taxes paid $ 140 $ 4,400 $ — Interest paid 51,050 59,819 78,901 Supplemental disclosures of non-cash flow information: Common stock issued through distribution reinvestment plan $ 5,110 $ 8,814 $ 13,903 Commercial mortgage loans transferred from held for investment to held for sale 52,615 76,979 — Distribution payable 30,346 15,688 6,912 Commercial mortgage loans transferred from held for sale to held for investment — — 10,072 Real estate owned received in foreclosure — 35,411 8,110 Issuances of common stock due to merger 579,526 — — Issuances of Series E preferred stock due to merger 258,742 — — Unsecured debt assumed due to merger 98,574 — — Exchanged for Series F preferred stock 710,431 — — Conversion of Preferred A stock to common stock ( 127,603 ) — — Reconciliation of cash, cash equivalents and restricted cash at end of period: Cash and cash equivalents $ 154,929 $ 82,071 $ 87,246 Restricted cash 13,270 10,070 21,876 Cash, cash equivalents and restricted cash, end of period $ 168,199 $ 92,141 $ 109,122 The accompanying notes are an integral part of these consolidated financial statements. F-12 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 Note 1 - Organization and Business Operations Franklin BSP Realty Trust, Inc., formerly known as Benefit Street Partners 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, collateralized debt obligations ("CDOs") and other securities. As a result of the October 2021 acquisition of Capstead, the Company acquired and continues to hold a significant portfolio of Residential Mortgage Backed Securities (“RMBS”) in the form of the ARM Agency Securities. The Company also owns real estate acquired by the Company through foreclosure and deed in lieu of foreclosure, and purchased for investment, typically subject to triple net leases. On October 19, 2021, the Company completed a merger with Capstead Mortgage Corporation (“Capstead”) pursuant to which Capstead merged into a wholly-owned subsidiary of the Company, and the Company’s common stock commenced trading on the NYSE under the ticker “FBRT”. The Capstead assets acquired in the merger consist primarily of cash and residential adjustable-rate mortgage pass-through securities ("ARM Agency Securities") issued and guaranteed by government-sponsored enterprises or by an agency of the federal government. The Company intends to reinvest the cash and proceeds from dividends, interest, repayments and sales of the assets acquired in the merger into its own investment strategies. Refer to Note 18 - Merger with Capstead for additional information. Note 2 - Summary of Significant Accounting Policies Basis of Accounting The Company's 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") and pursuant to the requirements for reporting on Form 10-K and Regulation S-X, as appropriate. 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. F-13 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 In response to the global coronavirus (COVID-19) pandemic, numerous countries, including the U.S., have declared national emergencies with respect to COVID-19 and 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 method investments and the fair value estimates of the Company’s assets and liabilities. Actual results could materially 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. 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. Acquisition Expenses 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. 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 at amortized cost less a specific 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. F-14 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 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 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 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. Amounts capitalized to real estate owned 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 December 31, 2021. The Company’s real estate owned assets are depreciated or amortized using the straight-line method over the following useful lives: Building 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. Real estate owned assets that are probable to be sold within one year are reported as held for sale. Real estate owned assets classified as held for sale are measured at the lower of its carrying amount or fair value less cost 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. F-15 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 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") 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 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 lease assets in the accompanying consolidated balance sheets and are amortized to expense over the remaining terms of the respective leases. Credit Losses In June 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments-Credit Losses, which amends the credit impairment model for financial instruments. The Company adopted ASU 2016-13 on January 1, 2020. The allowance for credit losses required under ASU 2016-13 is deducted from the respective loans’ 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. As reflected in the consolidated statements of changes in stockholders' equity and Note 3 - Commercial Mortgage Loans, the guidance also required a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption. The following discussion highlights changes to the Company’s accounting policies as a result of this adoption. Allowance for credit losses The 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 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 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 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. F-16 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 In measuring the 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 2020 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. The modeled results are then evaluated to determine if adjustments are needed for certain qualitative factors. For financial instruments assessed on an individual basis, including when it is probable that the Company will be unable to collect the full payment of principal and interest on the instrument, the Company applies a discounted cash flow (“DCF”) methodology. For financial instruments where the borrower is experiencing financial difficulty based on the Company’s assessment at the reporting date and the 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 at the reporting date when determining the allowance for credit losses. In developing the allowance 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/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. Changes in the allowance 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 receivable as it is timely, following three months time, reversed against interest income when a loan, real estate security or preferred equity investment is placed on nonaccrual status. The Company did not record reversals of accrued interest receivable during the year ended December 31, 2020. Loans are charged off against the Provision/(benefit) for credit losses when all or a portion of the principal amount is determined to be uncollectible. Past due and nonaccrual status Loans are placed on nonaccrual status and considered non-performing when full payment of principal and interest is unpaid for 90 days or more or where reasonable doubt exists as to timely collection, unless the loan is both well secured and in the process of collection. Interest received on nonaccrual status loans are accounted for under the cost-recovery method, until qualifying for return to accrual. Upon restructuring the nonaccrual loan, the Company may return a loan to accrual status when repayment of principal and interest is reasonably assured. F-17 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 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 Company’s commercial real estate securities were classified as available for sale 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 fair value option for its real estate securities, and as a result, any unrealized gains or losses on such real estate securities will be recorded in the Company’s consolidated statements of operations. No such election has been made to date. Related discounts, premiums and acquisition expenses on investments are amortized or accreted over the life of the investment using the effective interest method. Amortization and accretion is 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 securities are included in the Company’s consolidated statements of operations. 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 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 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 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. Trading In the merger with Capstead, the Company acquired a portfolio of ARM Agency Securities classified as trading and recorded at fair value on the balance sheet with trading gains and losses on the paydowns and sales of these securities recorded in the Company's consolidated statements of operations. 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. F-18 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 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") 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 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. Share Repurchase Program Until the merger with Capstead, the Company had a Share Repurchase Program (the "SRP") that enabled stockholders to sell their shares to the Company, subject to certain conditions. Refer to Note 9 - Stock Transactions for a description of the SRP. Under the SRP, when a stockholder requested a redemption and the redemption was approved by the board of directors, the Company reclassified such obligation from equity to a liability based on the settlement value of the obligation. Shares repurchased under the SRP have the status of authorized but unissued shares. 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 A convertible preferred stock (“Series A Preferred Stock”), Series C convertible preferred stock (the “Series C Preferred Stock,”) and Series D convertible preferred stock ("Series D 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 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 Preferred Stock are included within Series A Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, respectively, on the Company’s consolidated balance sheets. Distribution Reinvestment Plan Pursuant to the terms of the Company's distribution reinvestment plan ("DRIP") in effect until December 17, 2021, stockholders had the option to elect to reinvest distributions by purchasing 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”). Shares of common stock purchased through the Amended DRIP for dividend reinvestments will be supplied either directly by the Company as newly issued shares or via purchases by the Amended 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 the average price per share of shares purchased; if the shares are purchased directly from the Company, the purchase price will 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. Share-Based Compensation The Company has share-based incentive plans for certain of the Company's directors, officers and employees of the Advisor and its affiliates. Share-based awards are measured at the grant date fair value and are recognized as compensation expense on a on a straight line basis over the related vesting period of the award. See Note 12 - Share-Based Compensation. F-19 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 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 is instead taxed as a 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 income tax provision/(benefit) for the years ended December 31, 2021, December 31, 2020 and December 31, 2019 were $ 3.6 million, $( 2.1 ) million and $ 4.5 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. 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 and credit derivatives on various indices including CMBX and CDX. The Company recognizes all derivatives on the consolidated balance sheets at fair value. With the exception of the Company’s unsecured debt-related interest rate swap agreements, the Company does not designate its 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 on derivative instruments in the accompanying consolidated statements of operations. For the derivatives that are designated as an accounting hedge, the Company must document at inception that the hedge relationship is highly effective and must continue to monitor ongoing effectiveness on at least a quarterly basis. As long as the hedge relationship remains highly effective, changes in fair value are recorded in accumulated other comprehensive income. 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 and cash collateral receivable from derivative counterparties on the Company’s consolidated balance sheets. The Company's interest rate swaps hedging repurchase agreements acquired in the merger with Capstead are recorded net of variation margin and accrued interest per the legal definition of these cleared swaps as settling on a daily basis. 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 Company’s Series A Preferred Stock, Series C Preferred Stock and Series D 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 the Company’s Series A Preferred Stock, Series C Preferred Stock and Series D Preferred Stock , except when doing so would be anti-dilutive. F-20 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 Reportable Segments The Company has determined that it has four reportable segments based on how the chief operating decision maker reviews and manages the business. The four 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. • 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, CDO notes and other securities. As a result of the October 2021 acquisition of Capstead, the Company acquired and continues to hold a significant portfolio of Residential Mortgage Backed Securities (“RMBS”) in the form of the ARM Agency Securities. The Company intends to reinvest 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 December 31, 2021, all of the real estate securities in this segment were ARM Agency Securities acquired in the Capstead acquisition. • The commercial conduit business in the Company's TRS, which is focused on originating and subsequently selling fixed-rate commercial real estate loans into the CMBS securitization market. • 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 classes of redeemable convertible preferred stock are classified outside of permanent equity in the consolidated balance sheets. Series A Preferred Stock The Series A Preferred Stock ranked senior to the Common Stock and the Company’s Series F Convertible Preferred Stock (“Series F Preferred Stock”), and on parity with all other outstanding classes of preferred stock of the Company (including the Series C and Series D 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 A Preferred Stock was 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 A Preferred Stock into Common Stock. Dividends on the Series A Preferred Stock, which were typically declared and paid quarterly, accrued at a rate equal to the greater of (i) an annual amount equal to 4.0 % of the liquidation preference per share (subject to a 1.0 % increase in the event of the ratings for the Series A Preferred Stock decreases below a certain threshold) and (ii) the dividends that would have been paid had such share of Series A 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 A Preferred Stock is not outstanding for the full quarter. Dividends are paid in arrears. On October 19, 2021, each share of Series A Preferred Stock converted into 299.2 shares of common stock, pursuant to the terms of the Articles Supplementary for the Series A Preferred Stock, and no shares of Series A Preferred Stock were outstanding as of December 31, 2021. Series C Preferred Stock The Series C Preferred Stock ranks senior to the Common Stock and Series F Preferred Stock and on parity with the Series D Preferred Stock and the Company’s 7.50 % Series E Cumulative Redeemable Preferred Stock (“Series E 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 C 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 C Preferred Stock into the Common Stock. Dividends on the Series C 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 C 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 C 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. F-21 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 Each outstanding share of Series C Preferred Stock will convert into 299.2 shares of common stock, subject to anti-dilution adjustments described in the Articles Supplementary for the Series C Preferred Stock, on October 19, 2022 or, upon the election of the Company upon 10 days’ notice to the holders, on or after April 19, 2022. 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. Holders of the Series C 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 C Preferred Stock will be equal to the number of shares of common stock a share of Series C 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 C 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 C Preferred Stock and to take certain actions materially adverse to the holders of the Series C Preferred Stock. Series D Preferred Stock The Series D 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 D Preferred Stock are substantially the same as the terms of the Series C Preferred Stock, except that the holders of the Series D Preferred Stock have the option to accelerate the mandatory conversion date, which is October 19, 2022, to a date no earlier than April 19, 2022. Convertible Preferred Stock Series F Preferred Stock On October 12, 2021, as contemplated by the Merger Agreement with Capstead, the Company completed its previously-announced stock dividend on the outstanding shares of Common Stock, which stock dividend was paid at a rate of nine shares of the Company’s newly issued Series F Convertible Preferred Stock (“Series F Preferred Stock”) for each share of Common Stock issued and outstanding. The Series F Preferred Stock ranks 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 is $ 2.00 . Dividends on the Series F Preferred Stock are equal to, and will be paid at the same time as, dividends that are authorized and declared on the Company’s common stock. The Series F Preferred Stock ranks 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). F-22 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 Each share (or fractional share) of Series F Preferred Stock shall automatically convert into one share of Common Stock (or equivalent fractional share, as applicable) upon the earlier of (i) April 19, 2022, (ii) three business days prior to a liquidation, dissolution or winding up of the Company in the event that the Company’s board of directors determines (which determination will be conclusive) that the liquidating distribution per share in respect of such converted share of Series F Preferred Stock (or fractional share) would be in an amount in excess of the liquidation preference of $ 2.00 per share or (iii) immediately prior to the effective time of a qualifying change of control, provided that the consideration per share payable in connection with such change in control in respect of such converted share of Series F Preferred Stock (or fractional share) is an amount in excess of the liquidation preference of $ 2.00 . The Series F Preferred Stock has no stated maturity and is 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) 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 F Preferred Stock will be 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 is required to take certain actions materially adverse to the holders of the Series F Preferred Stock. The complete terms of the Series A Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F 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. The below table summarizes the timing of the conversion of the Company’s outstanding classes of convertible preferred stock into common stock: Series/Shares Outstanding at 12/31/21 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 to April 19, 2022 299.2 shares of Common Stock Redeemable Convertible Series D Preferred Stock / 17,950 shares outstanding October 19, 2022, subject to the holder’s right to accelerate the conversion to April 19, 2022 299.2 shares of Common Stock Series F Preferred Stock/ 39,733,299 shares outstanding April 19, 2022 1 share of Common Stock *Subject to anti-dilution adjustments as set forth in Articles Supplementary. Accounting Pronouncements Not Yet Adopted On March 12, 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 and other interbank offered rates to alternative reference rates. The guidance is effective upon issuance and generally can be applied through December 31, 2022. The Company has not adopted any of the optional expedients or exceptions through December 31, 2021, but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period as circumstances evolve. F-23 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 Note 3 - Commercial Mortgage Loans The following table is a summary of the Company's commercial mortgage loans, held for investment, carrying values by class (dollars in thousands): December 31, 2021 December 31, 2020 Senior loans $ 4,204,464 $ 2,698,823 Mezzanine loans 22,424 15,911 Total gross carrying value of loans 4,226,888 2,714,734 Less: Allowance for credit losses (1) 15,827 20,886 Total commercial mortgage loans, held for investment, net $ 4,211,061 $ 2,693,848 ________________________ (1) As of December 31, 2021 and 2020, there have been no specific reserves for loans in non-performing status. As of December 31, 2021 and December 31, 2020, the Company's total commercial mortgage loan portfolio, excluding commercial mortgage loans accounted for under the fair value option, was comprised of 165 and 130 loans, respectively. 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 December 31, 2021 and 2020 (dollars in thousands): Year Ended December 31, 2021 MultiFamily Retail Office Industrial Mixed Use Hospitality Self Storage Manufactured Housing Total Beginning Balance $ 3,095 $ 404 $ 1,575 $ 3,795 $ 132 $ 11,646 $ 117 $ 122 $ 20,886 Current Period: Provision/(benefit) for credit losses 6,875 ( 116 ) ( 799 ) ( 3,709 ) 37 ( 7,049 ) 35 ( 44 ) ( 4,770 ) Write offs ( 289 ) — — — — — — — ( 289 ) Ending Balance $ 9,681 $ 288 $ 776 $ 86 $ 169 $ 4,597 $ 152 $ 78 $ 15,827 Year Ended December 31, 2020 MultiFamily Retail Office Industrial Mixed Use Hospitality Self Storage Manufactured Housing Total Beginning Balance $ 322 $ 202 $ 249 $ 23 $ 4 $ 103 $ — $ 18 $ 921 Cumulative-effect adjustment upon adoption of ASU 2016-13 3,220 386 1,966 434 9 739 399 58 7,211 Current Period: Provision/(benefit) for credit losses ( 447 ) ( 184 ) ( 640 ) 3,338 119 11,231 ( 282 ) 46 13,181 Write offs — — — — — ( 427 ) — — ( 427 ) Ending Balance $ 3,095 $ 404 $ 1,575 $ 3,795 $ 132 $ 11,646 $ 117 $ 122 $ 20,886 The Company recorded a decrease in its allowance for credit losses during the year ended December 31, 2021 of $ 4.8 million. The primary driver for the improvement in the reserve balance is the positive economic outlook since the end of the prior year. F-24 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 The following table presents the activity in the Company's allowance for credit losses for the unfunded loan commitments, which is presented in accounts payable and accrued expenses in the consolidated balance sheets as of December 31, 2021 and 2020 (dollars in thousands): Year Ended December 31, 2021 MultiFamily Retail Office Industrial Mixed Use Hospitality Self Storage Manufactured Housing Total Beginning Balance $ 85 $ — $ 47 $ 418 $ 14 $ 101 $ — $ — $ 665 Current Period: Provision/(benefit) for credit losses 52 1 ( 34 ) ( 415 ) ( 4 ) ( 22 ) — — ( 422 ) Ending Balance $ 137 $ 1 $ 13 $ 3 $ 10 $ 79 $ — $ — $ 243 Year Ended December 31, 2020 MultiFamily Retail Office Industrial Mixed Use Hospitality Self Storage Manufactured Housing Total Beginning Balance $ — $ — $ — $ — $ — $ — $ — $ — $ — Cumulative-effect adjustment upon adoption of ASU 2016-13 239 40 150 30 1 57 28 5 550 Current Period: Provision/(benefit) for credit losses ( 154 ) ( 40 ) ( 103 ) 388 13 44 ( 28 ) ( 5 ) 115 Ending Balance $ 85 $ — $ 47 $ 418 $ 14 $ 101 $ — $ — $ 665 The following table represents the composition by loan type of the Company's commercial mortgage loans portfolio, excluding commercial mortgage loans, held for investment (dollars in thousands): December 31, 2021 December 31, 2020 Loan Type Par Value Percentage Par Value Percentage Multifamily $ 2,953,938 69.6 % $ 1,202,694 44.2 % Office 485,575 11.4 % 517,464 19.0 % Hospitality 460,884 10.9 % 403,908 14.8 % Retail 104,990 2.5 % 78,550 2.9 % Industrial 88,956 2.1 % 243,404 8.9 % Mixed Use 62,965 1.5 % 102,756 3.8 % Self Storage 56,495 1.3 % 86,424 3.2 % Manufactured Housing 29,159 0.7 % 71,263 2.6 % Land — — % 16,400 0.6 % Total $ 4,242,962 100.0 % $ 2,722,863 100.0 % F-25 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 December 31, 2021 December 31, 2020 Loan Region Par Value Percentage Par Value Percentage Southwest $ 1,764,905 41.6 % $ 515,392 18.9 % Southeast 1,106,439 26.2 % 796,908 29.3 % Mideast 646,125 15.2 % 473,514 17.4 % Far West 301,040 7.1 % 415,173 15.2 % Great Lakes 183,930 4.3 % 199,203 7.3 % Various 68,896 1.6 % 136,855 5.0 % New England 67,651 1.6 % 69,675 2.6 % Plains 60,225 1.4 % 116,143 4.3 % Rocky Mountain 43,751 1.0 % — — % Total $ 4,242,962 100.0 % $ 2,722,863 100.0 % As of December 31, 2021 and 2020, the Company's total commercial mortgage loans, held for sale, measured at fair value was comprised of one and three loans, respectively. As of December 31, 2021 and 2020, the contractual principal outstanding of commercial mortgage loans, held for sale, measured at fair value was $ 34.3 million and $ 67.6 million, respectively. As of December 31, 2021 and 2020, none of the Company's commercial mortgage loans, held for sale, measured at fair value were in default or greater than 90 days past due. The following table represents the composition by loan type of the Company's commercial mortgage loans, held for sale, measured at fair value (dollars in thousands): December 31, 2021 December 31, 2020 Loan Type Par Value Percentage Par Value Percentage Office $ 34,250 100.0 % $ — — % Industrial — — % 67,550 99.9 % Multifamily — — % 100 0.1 % Total $ 34,250 100.0 % $ 67,650 100.0 % December 31, 2021 December 31, 2020 Loan Region Par Value Percentage Par Value Percentage Southeast $ 34,250 100.0 % $ — — % Far West — — % 58,500 86.5 % Great Lakes — — % 9,150 13.5 % Total $ 34,250 100.0 % $ 67,650 100.0 % Loan Credit Quality and Vintage The following tables present the amortized cost of our commercial mortgage loans, held for investment as of December 31, 2021 and 2020, by loan type, year of origination and the Company’s internal risk rating at the corresponding balance sheet date. F-26 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 2021 2020 2019 2018 2017 Prior 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 F-27 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 December 31, 2020 2020 2019 2018 2017 2016 2015 Prior Total Multifamily: Risk Rating: 1-2 internal grade $ 583,550 $ 349,588 $ 188,975 $ — $ — $ — $ 3,488 $ 1,125,601 3-4 internal grade — — 35,887 37,812 — — — 73,699 Total Multifamily Loans $ 583,550 $ 349,588 $ 224,862 $ 37,812 $ — $ — $ 3,488 $ 1,199,300 Retail: Risk Rating: 1-2 internal grade $ 13,277 $ 22,760 $ 16,400 $ — $ — $ — $ — $ 52,437 3-4 internal grade — 12,872 29,425 — — — — 42,297 Total Retail Loans $ 13,277 $ 35,632 $ 45,825 $ — $ — $ — $ — $ 94,734 Office: Risk Rating: 1-2 internal grade $ 244,301 $ 160,709 $ 61,169 $ 40,846 $ — $ — $ — $ 507,025 3-4 internal grade — — — 8,392 — — — 8,392 Total Office Loans $ 244,301 $ 160,709 $ 61,169 $ 49,238 $ — $ — $ — $ 515,417 Industrial: Risk Rating: 1-2 internal grade $ 119,193 $ 89,590 $ — $ — $ — $ 33,655 $ — $ 242,438 3-4 internal grade — — — — — — — — Total Industrial Loans $ 119,193 $ 89,590 $ — $ — $ — $ 33,655 $ — $ 242,438 Mixed Use: Risk Rating: 1-2 internal grade $ 30,246 $ — $ 59,451 $ 12,839 $ — $ — $ — $ 102,536 3-4 internal grade — — — — — — — — Total Mixed Use Loans $ 30,246 $ — $ 59,451 $ 12,839 $ — $ — $ — $ 102,536 Hospitality: Risk Rating: 1-2 internal grade $ 26,878 $ 10,547 $ — $ — $ — $ — $ — $ 37,425 3-4 internal grade — 160,079 115,026 90,612 — — — 365,717 Total Hospitality Loans $ 26,878 $ 170,626 $ 115,026 $ 90,612 $ — $ — $ — $ 403,142 Self Storage: Risk Rating: 1-2 internal grade $ 41,305 $ — $ 44,908 $ — $ — $ — $ — $ 86,213 3-4 internal grade — — — — — — — — Total Self Storage Loans $ 41,305 $ — $ 44,908 $ — $ — $ — $ — $ 86,213 Manufactured Housing: Risk Rating: 1-2 internal grade $ 25,905 $ 45,049 $ — $ — $ — $ — $ — $ 70,954 3-4 internal grade — — — — — — — — F-28 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 Total Manufactured Housing Loans $ 25,905 $ 45,049 $ — $ — $ — $ — $ — $ 70,954 Total $ 1,084,655 $ 851,194 $ 551,241 $ 190,501 $ — $ 33,655 $ 3,488 $ 2,714,734 Past Due Status The following table presents an aging summary of the loans amortized cost basis at December 31, 2021 (dollars in thousands): Multifamily Retail Office Industrial Mixed Use Hospitality Self Storage Manufactured Housing Total Status: Current $ 2,941,220 $ 104,725 $ 484,158 $ 31,906 $ 62,720 $ 402,784 $ 56,330 $ 29,037 $ 4,112,880 1-29 days past due (1) — — — 56,933 — — — — 56,933 30-59 days past due — — — — — — — — — 60-89 days past due — — — — — — — — — 90-119 days past due — — — — — — — — — 120+ days past due (2) — — — — — 57,075 — — 57,075 Total $ 2,941,220 $ 104,725 $ 484,158 $ 88,839 $ 62,720 $ 459,859 $ 56,330 $ 29,037 $ 4,226,888 ________________________ (1) For the year ended December 31, 2021, interest income recognized on this loan was $ 3.1 million. (2) For the year ended December 31, 2021, there was no interest income recognized on this loan. As of December 31, 2021, the Company had one loan on non-accrual status with a total cost basis of $ 57.1 million for which there was no related allowance for credit losses. As of December 31, 2020, the Company had two loans on non-accrual status with a total cost basis of $ 94.9 million for which there was no related allowance for credit losses. 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. 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 December 31, 2021 and 2020, the weighted average risk ratings of loans were 2.1 and 2.2 , respectively. F-29 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 The following table represents the allocation by risk rating for the Company's commercial mortgage loans, held for investment, (dollars in thousands): December 31, 2021 December 31, 2020 Risk Rating Number of Loans Par Value Risk Rating Number of Loans Par Value 1 — $ — 1 — $ — 2 148 3,903,047 2 104 2,232,045 3 16 282,840 3 22 384,040 4 1 57,075 4 4 106,778 5 — — 5 — — 165 $ 4,242,962 130 $ 2,722,863 For the years ended December 31, 2021 and December 31, 2020, the activity in the Company's commercial mortgage loans, held for investment portfolio, net of allowance, was as follows (dollars in thousands): Year Ended December 31, 2021 2020 Balance at Beginning of Year $ 2,693,848 $ 2,762,042 Cumulative-effect adjustment upon adoption of ASU 2016-13 — ( 7,211 ) Acquisitions and originations 2,897,002 1,287,720 Principal repayments ( 1,286,598 ) ( 1,223,490 ) Discount accretion/premium amortization 7,038 6,146 Loans transferred from/(to) commercial real estate loans, held for sale ( 52,615 ) ( 76,979 ) Net fees capitalized into carrying value of loans ( 15,150 ) ( 6,562 ) (Provision)/benefit for credit losses 4,770 ( 13,181 ) Charge-off from allowance 289 427 Transfer to real estate owned ( 37,523 ) ( 35,064 ) Balance at End of Year $ 4,211,061 $ 2,693,848 During the year ended December 31, 2021, the Company wrote off a commercial mortgage loan, held for investment, with a carrying value of $ 37.8 million in exchange for the possession of a REO investment at a fair value of $ 37.5 million, comprised of $ 33.0 million of real property (land, building and improvements) and $ 4.5 million of personal property (furniture, fixture, and equipment) at the time of transfer. The transfer occurred when the Company took possession of the property by completing a foreclosure transaction in January 2021, resulting in a $ 0.3 million impairment loss at the time of transfer. Since the foreclosure was entered into due to the borrower experiencing financial difficulty and the recorded investment in the receivable was more than the fair value for the collateral collected, the transaction qualifies as a TDR. The Company accounted for the REO acquired during the year ended December 31, 2021 as an asset acquisition. The Company subsequently sold this REO asset during the year ended December 31, 2021 for a $ 0.8 million gain, presented net of direct selling costs associated with the disposition of the asset, included within Realized gain/loss on sale of real estate owned assets, held for sale in the Company's consolidated statements of operations. F-30 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 Note 4 - Real Estate Securities As of December 31, 2021 the Company did not hold any real estate securities, available for sale, measured at fair value. The following is a summary of the Company's real estate securities, available for sale, measures at fair value as of December 31, 2020 (dollars in thousands): December 31, 2020 Type Interest Rate Maturity Par Value Fair Value CMBS 1 3.0 % 5/15/2022 $ 13,250 $ 12,657 CMBS 2 2.2 % 6/26/2025 10,800 10,335 CMBS 3 2.5 % 2/15/2036 40,000 38,292 CMBS 4 1.9 % 6/15/2037 8,000 7,892 CMBS 5 2.1 % 9/15/2037 24,000 23,297 CMBS 6 2.3 % 6/15/2034 12,000 11,580 CMBS 7 1.5 % 12/15/2036 20,000 18,975 CMBS 8 1.8 % 12/15/2036 25,000 23,268 CMBS 9 2.3 % 3/15/2035 25,665 24,840 The Company classified its CMBS investments 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) as of December 31, 2020. The weighted average contractual maturity for CLO investments included within the CMBS portfolio as of December 31, 2020 was 14 years. The weighted average contractual maturity for single asset single borrower "SASB" investments as of December 31, 2020 was 14 years. The following table shows the amortized cost, allowance for expected credit losses, unrealized gain/(loss) and fair value of the Company's CMBS investments by investment type as of December 31, 2020 (dollars in thousands): Amortized Cost Credit Loss Allowance Unrealized Gain Unrealized Loss Fair Value December 31, 2020 CLO $ 123,444 $ — $ — ( 4,888 ) $ 118,556 SASB 55,948 — — ( 3,368 ) 52,580 Total $ 179,392 $ — $ — $ ( 8,256 ) $ 171,136 As of December 31, 2021 the Company did not hold any real estate securities, CMBS. As of December 31, 2020, the Company held 9 CMBS positions with an amortized cost basis of $ 179.4 million and an unrealized loss of $ 8.3 million of which 7 positions had an unrealized loss for a period greater than twelve months. F-31 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 The following table provides information on the unrealized losses and fair value on the Company's real estate securities, CMBS, available for sale that were in an unrealized loss position, and for which an allowance for credit losses has not been recorded, in each case as of December 31, 2020 (amounts in thousands): Fair Value Unrealized Loss Securities with an unrealized loss less than 12 months Securities with an unrealized loss greater than 12 months Securities with an unrealized loss less than 12 months Securities with an unrealized loss greater than 12 months December 31, 2020 CLOs $ 63,131 $ 55,425 $ ( 2,824 ) $ ( 2,064 ) SASB — 52,580 — ( 3,368 ) Total $ 63,131 $ 108,005 $ ( 2,824 ) $ ( 5,432 ) As of December 31, 2021 the Company did not hold any real estate securities, CMBS. As of December 31, 2020, there were seven securities, respectively with unrealized losses for a period greater than twelve months reflected in the table above. After evaluating the securities, the Company concluded that the unrealized losses reflected above were noncredit-related and would be recovered from the securities’ estimated future cash flows. The Company considered a number of factors in reaching this conclusion, including that the Company did not intend to sell the securities, it was not considered more likely than not that we would be forced to sell the securities prior to recovering our amortized cost, the portfolio is made up of investment grade securities of recent originations and higher tranches, and that there were no material credit events that would have caused us to otherwise conclude that the Company would not recover our cost. The allowance for credit losses is calculated using a discounted cash flow approach and is measured as the difference between the original cash flows expected to be collected to the revised cash flows expected to be collected discounted using the effective interest rate, limited by the amount that the fair value is less than the amortized cost basis. Significant judgment is used in projecting cash flows. As a result, actual income and/or credit losses could be materially different from what is currently projected and/or reported. The following table provides information on the amounts of gain/(loss) on the Company's real estate securities, CMBS, available for sale, recorded in other comprehensive income (dollars in thousands): Year Ended December 31, 2021 2020 2019 Unrealized gain/(loss) available for sale securities $ — $ ( 8,026 ) $ ( 978 ) Reclassification of net (gain)/loss on available for sale securities included in net income (loss) 8,256 748 — Unrealized gain/(loss) available for sale securities, net of reclassification adjustment $ 8,256 $ ( 7,278 ) $ ( 978 ) The amounts reclassified for net (gain)/loss on available for sale securities are included in the realized (gain)/loss on sale of real estate securities in the Company's consolidated statements of operations. The Company's unrealized gain/(loss) on available for sale securities is net of tax. Due to the Company's designation as a REIT, there was no tax impact on unrealized gain/(loss) on available for sale securities. The deterioration in fair value of real estate securities for both collateralized loan obligations and other securities as of December 31, 2020 can be attributed mainly to the market down-turn and volatility as a result of high unemployment and credit uncertainties related to the outbreak of COVID-19. F-32 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 Real Estate Securities Classified As Trading The following is a summary of the Company's real estate mortgage backed securities ("RMBS") classified by collateral type and interest rate characteristics (dollars in thousands): Carrying Amount Average Yield (1) December 31, 2021 Agency Securities: Fannie Mae/Freddie Mac ARMs $ 4,246,803 2.23 % Ginnie Mae ARMs 320,068 2.72 % $ 4,566,871 2.26 % December 31, 2020 Agency Securities: Fannie Mae/Freddie Mac ARMs $ — — % Ginnie Mae ARMs — — % $ — — % ________________________ (1) Average yield is presented for the year then ended, and is based on the cash component of interest income expressed as a percentage on average cost basis (the “cash yield”). On October 19, 2021, the Company completed the Capstead merger pursuant to which the Company acquired a portfolio of adjustable-rate mortgage ("ARM") securities issued and guaranteed by government sponsored enterprises, either Fannie Mae or Freddie Mac, or by an agency of the federal government, Ginnie Mae. Together, these securities are referred to as “Agency Securities,” and are considered to have limited, if any, credit risk because the timely payment of principal and interest is guaranteed. The maturity of Agency Securities is directly affected by prepayments of principal on the underlying mortgage loans. Consequently, actual maturities will be significantly shorter than the portfolio’s weighted average contractual maturity of 310 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 (“LIBOR”) 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”), or (iii) adjust monthly based on specified margins over indices such as one-month LIBOR, 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. During 2021, the Company sold trading securities using the specific identification method for proceeds totaling $ 1.9 billion recognizing $ 0.1 million in net realized gains. Subsequent to year end, the Company sold trading securities using the same method for proceeds totaling $ 1.8 billion recognizing $ 12 million in net realized losses. The Company did not own any trading securities during 2020 or 2019. F-33 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 Note 5 - Real Estate Owned The following table summarizes the Company's real estate owned assets as of December 31, 2021 (dollars in thousands): As of December 31, 2021 Acquisition Date Property Type Primary Location(s) Land Building and Improvements Furniture, Fixtures and Equipment Accumulated Depreciation Real Estate Owned, net September 2021 (1) Industrial Jeffersonville, GA $ 3,436 $ 84,259 $ 2,928 $ ( 575 ) $ 90,048 $ 3,436 $ 84,259 $ 2,928 $ ( 575 ) $ 90,048 ________________________ (1) Refer to Note 2 for the useful life of the above asset. The following table summarizes the Company's real estate owned assets as of December 31, 2020 (dollars in thousands): As of December 31, 2020 Acquisition Date Property Type Primary Location(s) Land Building and Improvements Furniture, Fixtures and Equipment Accumulated Depreciation Real Estate Owned, net October 2019 (1) Office Jeffersonville, IN $ 1,887 $ 21,989 $ 3,565 $ ( 931 ) $ 26,510 $ 1,887 $ 21,989 $ 3,565 $ ( 931 ) $ 26,510 ________________________ (1) Refer to Note 2 for the useful life of the above asset. Depreciation expense for the years ended December 31, 2021 and 2020 totaled $ 1.0 million. During the year ended December 31, 2021, the Company sold the real estate owned asset in Jeffersonville, IN to a third party, resulting in a $ 8.6 million gain recognized within Realized gain/loss on sale of real estate owned assets, held for sale in the consolidated statements of operations. In August 2021 the Company and an investment fund managed by the Advisor entered into a joint venture agreement and formed a joint venture entity, Jeffersonville Member, LLC (the "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 affiliated fund 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 affiliated fund made up the remaining $ 29.8 million composed of a $ 24.0 million mortgage note payable and $ 5.7 million in equity. The Company has control of Jeffersonville JV with 79 % ownership and, therefore, consolidates Jeffersonville JV on its consolidated balance sheet. The Company's $ 88.7 million mortgage note payable to Jeffersonville JV is eliminated in consolidation (see Note 7 - Debt). F-34 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 Note 6 - Leases Intangible Lease Asset The following table summarizes the Company's intangible lease asset recognized in the consolidated balance sheets as of December 31, 2021 (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 $ ( 720 ) $ 48,472 $ 49,192 $ ( 720 ) $ 48,472 The following table summarizes the Company's intangible lease asset recognized in the consolidated balance sheets as of December 31, 2020 (dollars in thousands): Acquisition Date Property Type Primary Location(s) Intangible Lease Asset, Gross Accumulated Amortization Intangible Lease Asset, Net of Amortization October 2019 Office Jeffersonville, IN $ 14,509 $ ( 963 ) $ 13,546 $ 14,509 $ ( 963 ) $ 13,546 Rental Income On September 17, 2021, the Company purchased an industrial facility that was 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 four consecutive five -year terms. The remaining lease term is 16.8 years. Rental income for this operating lease for the year ended December 31, 2021 totaled $ 2.6 million and is included in Revenue from real estate owned in the consolidated statements of operations. On October 15, 2019, the Company purchased an office building that was subject to an existing triple net lease. The minimum rental amount due under the lease was subject to annual increases of 1.5 %. The initial term of the lease expires in 2037 and contained renewal options for four consecutive five -year terms. The Company sold the real estate owned asset during the year ended December 31, 2021 (see Note 5 - Real Estate Owned). Rental income for this lease for the years ended December 31, 2021 and 2020 totaled $ 2.1 million and $ 2.9 million, respectively. Rental income is included in Revenue from real estate owned in the consolidated statements of operations. The following table summarizes the Company's schedule of future minimum rents to be received under the lease (dollars in thousands): Minimum Rents December 31, 2021 2022 $ 9,248 2023 9,248 2024 9,248 2025 9,248 2026 and beyond 118,683 Total minimum rent $ 155,675 Amortization Expense Intangible lease assets are amortized using the straight-line method over the contractual life of the lease, of a period up to 20 years. The weighted average life of the intangible asset as of December 31, 2021 is approximately 16.8 years. Amortization expense for the years ended December 31, 2021 and 2020 totaled $ 1.1 million and $ 0.8 million, respectively. F-35 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 The following table summarizes the Company's expected amortization for intangible assets over the next five years, assuming no further acquisitions or dispositions (dollars in thousands): December 31, 2021 2022 $ ( 2,880 ) 2023 ( 2,880 ) 2024 ( 2,880 ) 2025 ( 2,880 ) 2026 ( 2,880 ) Note 7 - Debt Repurchase Agreements - 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 (the "CS Repo Facility" and together with JPM Repo Facility, USB Repo Facility, WF Repo Facility, Barclays Revolver Facility, and Barclays Repo Facility, the "Repo Facilities"). The Repo 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 % of the principal amount of the mortgage loan being pledged. The details of the Company's Repo Facilities at December 31, 2021 and December 31, 2020 are as follows (dollars in thousands): 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 (2) 300,000 137,364 3,446 2.43 % 9/30/2022 WF Repo Facility (3) 450,000 186,734 2,090 1.64 % 11/21/2023 Barclays Revolver Facility (4) 250,000 166,700 1,976 6.12 % 9/20/2023 Barclays Repo Facility (5) 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. Includes amortization of deferred financing costs. (2) On August 12, 2021, the Company exercised the extension option upon the satisfaction of certain conditions, and extended the term maturity to September 30, 2022. Additionally, on November 3, 2021 the committed financing amount was amended from $ 200 million to $ 300 million with the option to increase to $ 400 million at the Company's discretion. (3) On November 19, 2021 the committed financing amount was increased from $ 275 million to $ 450 million. There are three more one -year extension options available at the Company's discretion. (4) On September 8, 2021, the Company amended the maturity date to September 20, 2023. On December 1, 2021 the committed financing amount was increased from $ 100 million to $ 250 million. 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. (5) On December 3, 2021 the Company amended the maturity date to March 14, 2025 and the committed financing amount was increased from $ 300 million to $ 500 million. There are two one -year extension options available at the Company's discretion. F-36 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 As of December 31, 2020 Repurchase Facility Committed Financing Amount Outstanding Interest Expense (1) Ending Weighted Average Interest Rate Term Maturity JPM Repo Facility (2) $ 300,000 $ 113,884 $ 5,020 2.54 % 10/6/2022 USB Repo Facility (3) 100,000 5,775 599 2.40 % 6/15/2021 CS Repo Facility (4) 200,000 106,971 3,539 2.84 % 8/19/2021 WF Repo Facility (5) 175,000 27,150 1,041 2.50 % 11/21/2021 Barclays Revolver Facility (6) 100,000 — 387 N/A 9/20/2021 Barclays Facility (7) 300,000 22,560 1,046 2.51 % 3/15/2022 Total $ 1,175,000 $ 276,340 $ 11,632 ________________________ (1) For the year ended December 31, 2020. Includes amortization of deferred financing costs. (2) On October 6, 2020 the maturity date was amended to October 6, 2022. (3) On June 9, 2020, the Company exercised the extension option upon the satisfaction of certain conditions, and extended the term maturity to June 15, 2021. (4) On August 28, 2020, the Company exercised the extension option upon the satisfaction of certain conditions, and extended the term maturity to August 19, 2021. Additionally, in 2020 the committed financing amount was downsized from $ 300 million to $ 200 million. (5) On November 17, 2020, the Company exercised the extension option upon the satisfaction of certain conditions, and extended the term maturity to November 21, 2021. There are two more one -year extension options available at the Company's discretion. (6) There is one one -year extension option available at the Company's discretion. (7) Includes two one -year extensions at the Company's option. 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 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 December 31, 2021 and December 31, 2020, the Company is in compliance with all debt covenants. Other financing and loan participation - 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") via a participation agreement. Since origination, the Company's outstanding loan increased resultant of future fundings, leading to an increase in amount outstanding via the participation agreement. The Company incurred $ 0.9 million of interest expense on SNB for the year ended December 31, 2021. As of December 31, 2021 and December 31, 2020 the outstanding participation balance was $ 37.9 million and $ 31.4 million, respectively. The loan matures on February 9, 2023. Mortgage Note Payable On October 15, 2019, the Company obtained a commercial mortgage loan for $ 29.2 million related to the real estate owned portfolio. The Company incurred $ 0.9 million of interest expense for the twelve months ended December 31, 2021. As of December 31, 2021 the loan has been assumed by the purchaser of the underlying asset and is no longer held by the Company (see Note 5 - Real Estate Owned). On September 17, 2021, the Company, in connection with the consolidating 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 (see Note 5 - Real Estate Owned). As of December 31, 2021 the Company incurred $ 0.2 million of interest expense, of which $ 0.2 million is eliminated in consolidation, for the twelve months ended December 31, 2021. The remaining mortgage note payable of $ 24 million is included in the consolidated balance sheets under the caption Mortgage note payable. As of December 31, 2021 , the loan accrued interest at an annual rate of 3.1 % and matures on October 9, 2024. F-37 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 Unsecured Debt In the merger with Capstead, we acquired 30 -year junior subordinated notes issued in 2005 and 2006 and maturing in 2035 and 2036, with a total face amount of $ 100 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) were as follows (dollars in thousands): December 31, 2021 December 31, 2020 Borrowings Outstanding Average Rate Borrowings Outstanding Average Rate Junior subordinated notes maturing in: October 2035 ($ 35,000 face amount) $ 34,470 7.86 % $ — — % December 2035 ($ 40,000 face amount) 39,474 7.63 % — — % September 2036 ($ 25,000 face amount) 24,650 7.67 % — — % $ 98,594 7.72 % $ — — % 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, 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 $ 2.0 million of interest expense on the lending agreement with SBL for the twelve months ended December 31, 2021. As of December 31, 2021 the outstanding balance was $ 50.0 million. 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 December 31, 2021 and 2020 (dollars in thousands): Weighted Average Counterparty Amount Outstanding Accrued Interest Collateral Pledged (1) Interest Rate Days to Maturity As of December 31, 2021 JP Morgan Securities LLC $ 19,025 $ 261 $ 24,087 1.14 % 10 Wells Fargo Securities, LLC — — — N/A N/A Goldman Sachs International — 37 — N/A N/A Barclays Capital Inc. 15,286 526 19,131 1.21 % 14 Credit Suisse AG — — — N/A N/A Citigroup Global Markets, Inc. — 81 — N/A N/A Total/Weighted Average $ 34,311 $ 905 $ 43,218 1.17 % 12 As of December 31, 2020 JP Morgan Securities LLC $ 33,791 $ 1,668 $ 43,612 1.75 % 31 Wells Fargo Securities, LLC — 1,057 — N/A N/A Goldman Sachs International 22,440 455 30,794 1.68 % 16 Barclays Capital Inc. 76,809 2,102 97,244 1.71 % 33 Credit Suisse AG — 905 — N/A N/A Citigroup Global Markets, Inc. 53,788 2,532 71,723 — 29 Total/Weighted Average $ 186,828 $ 8,719 $ 243,373 1.71 % 33 F-38 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 ________________________ (1) Includes $ 43.2 million and $ 72.2 million of CLO notes, held by the Company, which is eliminated within the Real estate securities, at fair value line of the consolidated balance sheets as of as of December 31, 2021 and December 31, 2020, respectively. Repurchase Agreements - Real Estate Securities Classified As Trading In the merger with Capstead, we acquired 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. 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. 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 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 % December 31, 2020 Repurchase arrangements secured by Agency securities with maturities of 30 days or less $ — $ — $ — — % $ — $ — $ — — Average repurchase agreements outstanding were $ 3.97 billion in 2021. Average repurchase agreements outstanding differed from respective year-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. Collateralized Loan Obligation On December 14, 2021, the Company called all of the outstanding notes issued by BSPRT 2018-FL3 Issuer, Ltd., a wholly owned indirect subsidiary of the Company. The outstanding principal of the notes on the date of the call was $ 99.3 million. The Company recognized all the remaining unamortized deferred financing costs of $ 4.6 million recorded within the Interest expense line of the consolidated statements of operations, which was a non-cash charge. F-39 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 As of December 31, 2021 and December 31, 2020 the notes issued by BSPRT 2018-FL4 Issuer, Ltd. and BSPRT 2018-FL4 Co-Issuer, LLC, each wholly owned indirect subsidiaries of the Company, are collateralized by interests in a pool of 31 and 59 mortgage assets having a principal balance of $ 503.3 million and $ 852.09 million, respectively (the "2018-FL4 Mortgage Assets"). The sale of the 2018-FL4 Mortgage Assets to BSPRT 2018-FL4 Issuer, Ltd. is governed by a Mortgage Asset Purchase Agreement dated as of October 12, 2018, between the Company and BSPRT 2018-FL4 Issuer, Ltd. As of December 31, 2021 and December 31, 2020, 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 48 and 54 mortgage assets having a principal balance of $ 589.0 million and $ 799.77 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, Ltd. On March 25, 2021, BSPRT 2021-FL6 Issuer, Ltd. and BSPRT 2021-FL6 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 $ 645.8 million principal balance secured floating rate notes, of which $ 573.1 million were purchased by third party investors and $ 72.6 million were purchased by a wholly owned subsidiary of the OP. In addition, concurrently with the issuance of these notes, BSPRT 2021-FL6 Issuer, Ltd. also issued 54,250 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 2021-FL6 Issuer, Ltd. and BSPRT 2021-FL6 Co-Issuer, LLC are disregarded entities. As of December 31, 2021, the notes issued by BSPRT 2021-FL6 Issuer, Ltd. and BSPRT 2021-FL6 Co-Issuer, LLC, are collateralized by interests in a pool of 44 mortgage assets having a principal balance of $ 682.3 million (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. On December 21, 2021, BSPRT 2021-FL7 Issuer, Ltd. and BSPRT 2021-FL7 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 $ 817.9 million principal balance secured floating rate notes, of which $ 722.3 million were purchased by third party investors and $ 95.6 million were purchased by a wholly owned subsidiary of the OP. In addition, concurrently with the issuance of the notes, BSPRT 2021-FL7 Issuer, Ltd. also issued 82,125 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 2021-FL7 Issuer, Ltd. and BSPRT 2021-FL7 Co-Issuer, LLC are disregarded entities. As of December 31, 2021, the notes issued by BSPRT 2021-FL7 Issuer, Ltd. and BSPRT 2021-FL7 Co-Issuer, LLC, are collateralized by interests in a pool of 47 mortgage assets having a principal balance of $ 871.4 million (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 December 21, 2021, between the Company and BSPRT 2021-FL7 Issuer, Ltd. F-40 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 The Company, through its wholly-owned subsidiaries, holds the preferred equity tranches of the above CLOs of approximately $ 329.2 million and $ 256.9 million as of December 31, 2021 and December 31, 2020, respectively. 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), respectively, as of December 31, 2021 (dollars in thousands): 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 73,813 1M LIBOR + 130 9/15/2035 2018-FL4 Issuer Tranche B 56,446 56,446 1M LIBOR + 160 9/15/2035 2018-FL4 Issuer Tranche C 68,385 68,385 1M LIBOR + 210 9/15/2035 2018-FL4 Issuer Tranche D 57,531 57,531 1M LIBOR + 275 9/15/2035 2018-FL4 Issuer Tranche E 28,223 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-S 76,950 76,950 1M LIBOR + 148 5/15/2029 2019-FL5 Issuer Tranche B 50,000 50,000 1M LIBOR + 140 5/15/2029 2019-FL5 Issuer Tranche C 61,374 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 20,250 1M LIBOR + 285 5/15/2029 2021-FL6 Issuer Tranche A 367,500 367,500 1M LIBOR + 110 3/15/2036 2021-FL6 Issuer Tranche A-S 86,625 86,625 1M LIBOR + 130 3/15/2036 2021-FL6 Issuer Tranche B 33,250 33,250 1M LIBOR + 160 3/15/2036 2021-FL6 Issuer Tranche C 41,125 41,125 1M LIBOR + 205 3/15/2036 2021-FL6 Issuer Tranche D 44,625 44,625 1M LIBOR + 300 3/15/2036 2021-FL6 Issuer Tranche E 11,375 11,375 1M LIBOR + 350 3/15/2036 2021-FL7 Issuer Tranche A 508,500 508,500 1M LIBOR + 132 12/21/2038 2021-FL7 Issuer Tranche A-S 13,500 13,500 1M LIBOR + 165 12/21/2038 2021-FL7 Issuer Tranche B 52,875 52,875 1M LIBOR + 205 12/21/2038 2021-FL7 Issuer Tranche C 66,375 66,375 1M LIBOR + 230 12/21/2038 2021-FL7 Issuer Tranche D 67,500 67,500 1M LIBOR + 275 12/21/2038 2021-FL7 Issuer Tranche E 13,500 13,500 1M LIBOR + 340 12/21/2038 $ 2,672,174 $ 2,179,514 ________________________ (1) Excludes $ 320.6 million of CLO notes, held by the Company, which are eliminated within the collateralized loan obligation line of the consolidated balance sheets as of December 31, 2021. F-41 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 The following table represents the terms of the notes issued by the 2017-FL1 Issuer, 2017-FL2 Issuer, 2018-FL3 Issuer, 2018-FL4 Issuer, and 2019-FL5 Issuer (the "CLOs), respectively, as of December 31, 2020 (dollars in thousands): CLO Facility Tranche Par Value Issued Par Value Outstanding (1) Interest Rate Maturity Date 2018-FL3 Issuer Tranche A 286,700 161,745 1M LIBOR + 105 10/15/2034 2018-FL3 Issuer Tranche A-S 77,775 77,775 1M LIBOR + 135 10/15/2034 2018-FL3 Issuer Tranche B 41,175 41,175 1M LIBOR + 165 10/15/2034 2018-FL3 Issuer Tranche C 39,650 39,650 1M LIBOR + 255 10/15/2034 2018-FL3 Issuer Tranche D 42,700 42,700 1M LIBOR + 345 10/15/2034 2018-FL4 Issuer Tranche A 416,827 416,659 1M LIBOR + 105 9/15/2035 2018-FL4 Issuer Tranche A-S 73,813 73,813 1M LIBOR + 130 9/15/2035 2018-FL4 Issuer Tranche B 56,446 56,446 1M LIBOR + 160 9/15/2035 2018-FL4 Issuer Tranche C 68,385 68,385 1M LIBOR + 210 9/15/2035 2018-FL4 Issuer Tranche D 57,531 57,531 1M LIBOR + 275 9/15/2035 2019-FL5 Issuer Tranche A 407,025 407,025 1M LIBOR + 115 5/15/2029 2019-FL5 Issuer Tranche A-S 76,950 76,950 1M LIBOR + 148 5/15/2029 2019-FL5 Issuer Tranche B 50,000 50,000 1M LIBOR + 140 5/15/2029 2019-FL5 Issuer Tranche C 61,374 61,373 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 3,000 1M LIBOR + 285 5/15/2029 $ 1,825,201 $ 1,639,227 ________________________ (1) Excludes $ 267.1 million of CLO notes, held by the Company, which are eliminated within the collateralized loan obligation line of the consolidated balance sheets as of December 31, 2020. F-42 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 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 December 31, 2021 and December 31, 2020 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) December 31, 2021 December 31, 2020 Cash and cash equivalents (1) $ 187,668 $ 99,025 Commercial mortgage loans, held for investment, net (2) 2,629,431 2,044,956 Accrued interest receivable 5,918 5,626 Total Assets $ 2,823,017 $ 2,149,607 Liabilities Notes payable (3)(4) $ 2,482,762 $ 1,892,616 Accrued interest payable 1,598 1,240 Total Liabilities $ 2,484,360 $ 1,893,856 ________________________ (1) Includes $ 187.0 million and $ 98.6 million of cash held by the servicer related to CLO loan payoffs as of December 31, 2021 and December 31, 2020. (2) The balance is presented net of allowance for credit losses of $ 8.7 million and $ 19.4 million as of December 31, 2021 and December 31, 2020, respectively. (3) Includes $ 320.6 million and $ 267.1 million of CLO notes, held by the Company, which are eliminated within the collateralized loan obligation line of the consolidated balance sheets as of December 31, 2021 and December 31, 2020. (4) The balance is presented net of deferred financing cost and discount of $ 17.3 million and $ 13.7 million as of December 31, 2021 and December 31, 2020, respectively. F-43 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 Note 8 - Earnings Per Share The Company uses the two-class method in calculating basic and diluted earnings per share. Net income 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 years ended December 31, 2021, 2020 and 2019, respectively (dollars in thousands, except share amounts): Year Ended December 31, Numerator 2021 2020 2019 Net income $ 25,702 $ 54,746 $ 83,924 Less: Preferred stock dividends 33,587 14,920 15,337 Less: Undistributed earnings allocated to preferred stock — — 1,673 Net income/(loss) attributable to common shareholders (for basic and diluted earnings per share) $ ( 7,885 ) $ 39,826 $ 66,914 Denominator Weighted-average common shares outstanding for basic earnings per share 43,419,209 44,384,813 41,859,142 Effect of dilutive shares: Unvested restricted shares 15,521 14,066 12,504 Weighted-average common shares outstanding for diluted earnings per share 43,434,731 44,398,879 41,871,646 Basic earnings per share $ ( 0.18 ) $ 0.90 $ 1.60 Diluted earnings per share $ ( 0.18 ) $ 0.90 $ 1.60 Note 9 - Stock Transactions As of December 31, 2021 and December 31, 2020, the Company had 43,965,928 and 44,510,051 shares of common stock outstanding, respectively, including shares issued pursuant to the Company's distribution reinvestment plan (the "DRIP"), share repurchases and unvested restricted shares. As of each of December 31, 2021 and December 31, 2020, the Company had 1,400 shares of Series C Preferred Stock outstanding. Additionally, as of December 31, 2021, the Company had 17,950 shares of Series D Preferred Stock, 39,733,299 shares of Series F Preferred Stock and 10,329,039 shares of Series E Preferred Stock outstanding. As of December 31, 2020 the Company had 0 shares of Series D Preferred Stock, Series F Preferred Stock, and Series E Preferred Stock outstanding. As of December 31, 2021 the Company had 0 shares of Series A Preferred Stock outstanding. The following tables present the activity in the Company's Series A Preferred Stock for the periods ended December 31, 2021 and December 31, 2020, (dollars in thousands, except share amounts). In March 2021, we exchanged 14,949 shares of Series A Preferred Stock for an equivalent amount of shares of Series D Preferred Stock and sold 3,000 new shares of Series D Preferred Stock for total proceeds of $ 14.0 million, representing the $ 15.0 million aggregate liquidation preference per share of the 3,000 shares of Series D Preferred Stock sold less the accrued and unpaid dividends on the surrendered shares of Series A Preferred Stock: F-44 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 Series A Preferred Stock Shares Amount Beginning Balance, December 31, 2020 40,515 $ 202,292 Surrender of Series A Preferred Stock in exchange for Series D Preferred Stock ( 14,950 ) ( 74,748 ) Conversion of Preferred Stock (1) ( 25,567 ) ( 127,603 ) Dividends paid in Preferred Stock 2 5 Offering costs — ( 14 ) Amortization of offering costs — 68 Ending Balance, December 31, 2021 — $ — ________________________ (1) In connection with the listing of the Common Stock on the NYSE, on October 19, 2021 immediately prior to the closing of the Capstead merger, each outstanding share of Series A Preferred Stock automatically converted into 299.2 shares of Common Stock, pursuant to the terms of the Series A Preferred Stock, resulting in the issuance of 7,649,632 shares of Common Stock. Series A Preferred Stock Shares Amount Beginning Balance, December 31, 2019 40,500 $ 202,144 Issuance of Preferred Stock 14 70 Dividends paid in Preferred Stock 1 7 Offering costs — ( 23 ) Amortization of offering costs — 94 Ending Balance, December 31, 2020 40,515 $ 202,292 The following tables present the activity in the Company's Series C Preferred Stock for the periods ended December 31, 2021 and December 31, 2020, (dollars in thousands, except share amounts): Series C Preferred Stock Shares Amount Beginning Balance, December 31, 2020 1,400 $ 6,962 Issuance of Preferred Stock — — Dividends paid in Preferred Stock — — Offering costs — — Amortization of offering costs — 9 Ending Balance, December 31, 2021 1,400 $ 6,971 Series C Preferred Stock Shares Amount Beginning Balance, December 31, 2019 1,400 $ 6,966 Issuance of Preferred Stock — — Dividends paid in Preferred Stock — — Offering costs — ( 11 ) Amortization of offering costs — 7 Ending Balance, December 31, 2020 1,400 $ 6,962 F-45 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 The following table presents the activity in the Company's Series D Preferred Stock for the period ended December 31, 2021 (dollars in thousands, except share amounts): Series D Preferred Stock Shares Amount Balance, December 31, 2020 — $ — Issuance of Preferred Stock 17,950 89,748 Dividends paid in Preferred Stock — — Offering Costs — ( 82 ) Amortization of offering costs — 18 Ending Balance, December 31, 2021 17,950 $ 89,684 As of December 31, 2020 the Company did not have any Series D Preferred Stock outstanding. Common Stock and Series F Preferred Stock Recapitalization In accordance with the terms of the Merger Agreement (as defined below), on October 6, 2021, the Company filed Articles of Amendment to the Company’s Charter (the “Articles of Amendment”) with the State Department of Assessments and Taxation of Maryland (the “SDAT”) to effect (a) a Company name change and (b) a one-for-ten reverse stock split (the “Reverse Stock Split”). Pursuant to the Articles of Amendment, effective as of 9:00 a.m. eastern time on October 12, 2021, the Company’s name changed to “Franklin BSP Realty Trust, Inc.,” and effective as of the close of business on October 12, 2021, each outstanding share of the Company’s Common Stock, automatically combined into 1/10th of a share of Common Stock. Fractional shares that were created as a result of the Reverse Stock Split remained outstanding. As a result of the Reverse Stock Split, the number of outstanding shares of Common Stock of the Company as of the date of the Reverse Stock Split were reduced to approximately 4.5 million shares. In addition, also on October 6, 2021 the Company filed Articles Supplementary (the “Articles Supplementary”) to the Company’s charter with the SDAT, with an effective date of October 12, 2021. The Articles Supplementary (a) reclassified 50,000,000 shares of authorized but unissued shares of Common Stock as preferred stock, $ 0.01 par value per share, as a result of which the Company is authorized to issue 900,000,000 shares of Common Stock and 100,000,000 shares of preferred stock under the charter, and (b) designated and classified 40,000,000 shares of preferred stock as a new series of Series F Preferred Stock, with the rights, preferences and obligations set forth in the Articles Supplementary. Also in accordance with the terms of the Merger Agreement, on October 4, 2021, the Board declared a stock dividend (the “Stock Dividend”) on the outstanding shares of Common Stock, payable at a rate of nine shares of Series F Preferred Stock for each share of Common Stock issued and outstanding following the Reverse Stock Split on October 12, 2021. The record date used to determine the list of holders of Common Stock eligible to receive the Stock Dividend (following the Reverse Stock Split) was set by the Board as October 7, 2021. As a result of the Reverse Stock Split, holders of Common Stock collectively received 39,733,298 shares of Series F Preferred Stock. The Reverse Stock Split and Stock Dividend resulted in each stockholder of Common Stock having the same economic value of equity securities in the Company as such holder did prior to the Reverse Stock Split and Stock Dividend, except that each such holder now has 10 % of their holdings in Common Stock and 90 % of their holdings in Series F Preferred Stock. Each share (or fractional share) of Series F Preferred Stock will automatically convert into one share of Common Stock (or equivalent fractional share, as applicable) on April 19, 2022. Issuance of Common Stock and Series E Preferred Stock in the Merger with Capstead Mortgage Corporation On October 19, 2021 (the “Closing Date”), the Company consummated the transactions contemplated by that certain Agreement and Plan of Merger, dated as of July 25, 2021, as amended pursuant to that certain First Amendment to Agreement and Plan of Merger, dated as of September 22, 2021 (as amended, the “Merger Agreement”), by and among the Company, Rodeo Sub I, LLC (“Merger Sub”), Capstead Mortgage Corporation (“Capstead”) and, solely for the purposes set forth therein, the Advisor. Pursuant to the Merger Agreement, on the Closing Date, Capstead merged with and into Merger Sub, with Merger Sub continuing as the surviving company (the “Merger”). At the effective time of the merger (the "Effective Time"), each outstanding share of common stock, par value $ 0.01 per share, of Capstead (the “Capstead Common Stock”) (other than shares held by the Company or Merger Sub or by any wholly owned subsidiary of the Company or Merger Sub or any wholly owned subsidiary of Capstead immediately prior to the Effective Time, which were automatically canceled and retired and ceased to exist) was cancelled and converted into the right to receive: F-46 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 • from the Company, (A) 0.3288 newly-issued shares of the Company's Common Stock (the “Per Share Stock Payment”); and (B) a cash amount equal to $ 0.21 per share (the “Per Share Cash Payment” and together with the Per Share Stock Payment, the “Per Common Share FBRT Payment”); and • from the Advisor, a cash amount equal to $ 0.73 per share (the “Advisor Cash Payment” and together with the Per Common Share FBRT Payment, the “Total Per Common Share Payment”). No fractional shares of Common Stock were issued in the Merger, and the value of any fractional interests to which a former holder of Capstead Common Stock is otherwise entitled will be paid in cash. Additionally, at the Effective Time, (i) each outstanding share of Capstead’s 7.50 % Series E Cumulative Redeemable Preferred Stock, $ 0.10 par value per share (“Capstead Preferred Stock”), was cancelled and converted into the right to receive one newly-issued share of the Company's Series E Preferred Stock, which has the rights, preferences, and privileges and voting powers materially the same as those of the Capstead Preferred Stock. The Company filed Articles Supplementary to the Company’s charter with the SDAT, with an effective date of October 19, 2021, which designated and classified 10,329,039 shares of preferred stock as a new series of Series E Preferred Stock, with the rights, preferences and obligations set forth in the Articles Supplementary. Furthermore, effective immediately prior to the Effective Time, all outstanding restricted stock under Capstead’s Amended and Restated 2014 Flexible Incentive Plan (the “Capstead Plan”) automatically became fully vested and non-forfeitable, and all shares of Capstead Common Stock represented thereby became eligible to receive the Total Per Common Share Payment. Also effective immediately prior to the Effective Time, all outstanding awards of performance units under the Capstead Plan automatically became earned and vested at the conversion rate of one share of Capstead Common Stock for each outstanding performance unit, and all shares of Capstead Common Stock represented thereby became eligible to receive the Total Per Common Share Payment. Each outstanding dividend equivalent right under the Capstead Plan was automatically cancelled as of the Effective Time; provided that any accrued amounts that were not paid as of immediately prior to the Effective Time were paid to the holders thereof at the Effective Time (or will be as soon as practicable thereafter but in no event later than the first payroll date following the Effective Time). The issuances of shares of Common Stock and Series E Preferred Stock in connection with the Merger were registered under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to the Company’s registration statement on Form S-4 (Registration No. 333-258947), which was declared effective by the U.S. Securities and Exchange Commission (the “SEC”) on September 3, 2021 (as amended or supplemented, the “S-4 Registration Statement”). The proxy statement/prospectus included in the S-4 Registration Statement contains additional information regarding the Merger. Per the terms of the transactions described in the Merger Agreement, approximately 31.9 million shares of Common Stock were issued in connection with the Merger to former Capstead common stockholders, and the Company paid $ 20.5 million in cash payments to former Capstead common stockholders. In addition, the Company issued 10.3 million shares of Series E Preferred Stock to former holders of Capstead Preferred Stock. In addition, both the Company’s Common Stock and Series E Preferred Stock were listed on the New York Stock Exchange (“NYSE”) on October 19, 2021, under the ticker symbols “FBRT” and “FBRT PRE,” respectively. 7.50% Series E cumulative redeemable 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 Series F Preferred Stock and on a parity with the Series C Preferred Stock and Series D 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. F-47 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 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”. Share Repurchase Program Prior to the listing of the Common Stock on the NYSE on October 19, 2021, the Company maintained a share repurchase program (the “SRP”) that enabled stockholders to sell their shares to the Company. The following table reflects the number of shares repurchased under the SRP cumulatively through December 31, 2021: Number of Requests Number of Shares Repurchased Average Price per Share Cumulative as of December 31, 2020 8,094 4,121,735 $ 19.88 January 1 - January 31, 2021 (1) 1,355 525,580 17.53 February 1 - February 28, 2021 — — N/A March 1 - March 31, 2021 (1) — — N/A April 1 - April 30, 2021 — — N/A May 1 - May 31, 2021 (1) — — N/A June 1 - June 30, 2021 — — N/A July 1 - July 31, 2021 (2) 1,424 123,257 17.88 August 1 - August 31, 2021 — — N/A September 1 - September 30, 2021 (2) — — N/A October 1 - October 31, 2021 — — N/A November 1 - November 30, 2021 — — N/A December 1 - December 31, 2021 — — N/A Cumulative as of December 31, 2021 10,873 4,770,572 $ 19.57 ________________________ (1) Reflects shares repurchased pursuant to repurchase requests submitted for the second semester of 2020, including 15,772 and 3,784 shares which for administrative reasons were processed in March 2021 and May 2021, respectively. Pursuant to the terms of the SRP, the Company is only authorized to repurchase up to the amount of proceeds reinvested through our DRIP during the applicable semester. As a result, redemption requests in the amount of 1,881,556 shares were not fulfilled for the second semester of 2020. (2 ) Reflects shares repurchased pursuant to repurchase requests submitted for the first semester of 2021, including 1,776 shares which for administrative reasons were processed in September 2021 . Pursuant to the terms of the SRP, the Company is only authorized to repurchase up to the amount of proceeds reinvested through our DRIP during the applicable semester. As a result, redemption requests in the amount of 761 shares were not fulfilled for the first semester of 2021. The Company’s board of directors has authorized a $ 65 million share repurchase program that will become operative following the conclusion of the $ 35 million open market share purchase program the Advisor agreed to implement in connection with the Capstead acquisition. 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 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 and the Advisor will be determined by the respective teams responsible at the Company and the Advisor, as applicable, in their reasonable business judgment and consistent with the exercise of their legal duties and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The Company share repurchase program does not obligate the Company to acquire any particular amount of common stock. The Company’s and the Advisor’s share purchase programs will remain open until at least November 2022 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. F-48 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 Note 10 - Commitments and Contingencies Unfunded Commitments Under Commercial Mortgage Loans As of December 31, 2021 and 2020, the Company had the below unfunded commitments to the Company's borrowers (dollars in thousands): Funding Expiration December 31, 2021 December 31, 2020 2021 $ — $ 59,692 2022 25,864 91,420 2023 123,860 69,880 2024 271,056 7,700 2025 and beyond 37,325 — $ 458,105 $ 228,692 The borrowers are 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 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. Capstead Merger Litigation Five lawsuits were filed by purported stockholders of Capstead with respect to the Capstead merger. The first suit, styled as Shiva Stein v. Capstead Mortgage Corporation, et al., No. 1:21-cv-7306 (the “Stein Lawsuit”), was filed in the United States District Court for the Southern District of New York on August 31, 2021, and asserted claims against Capstead, members of the Capstead board of directors (the “Capstead Board”) and the Company. The second suit, styled as Matthew Hopkins v. Capstead Mortgage Corporation, et al., No. 1:21-cv-07369 (the “Hopkins Lawsuit”), was filed in the United States District Court for the Southern District of New York on September 1, 2021, and asserted claims against Capstead, members of the Capstead Board, the Company and the Advisor. The third suit, styled as Bryan Harrington v. Capstead Mortgage Corporation, et al., No. 1:21-cv-05080 (the “Harrington Lawsuit”), was filed in the United States District Court for the Eastern District of New York on September 11, 2021, and asserted claims against Capstead and members of the Capstead Board. The fourth suit, styled as Randy Gill v. Capstead Mortgage Corporation, et al., No. 1:21-cv-07973 (the “Gill Lawsuit”), was filed in the United States District Court for the Southern District of New York on September 24, 2021, and asserted claims against Capstead and members of the Capstead Board. The fifth suit, styled as Jordan Wilson v. Capstead Mortgage Corporation, et al., No. 1:21-cv-08147-UA (the “Wilson Lawsuit”), was filed in the United States District Court for the Southern District of New York on October 1, 2021, and asserted claims against Capstead and members of the Capstead Board. Capstead also received demand letters from two purported stockholders, Brett Braafhart and Angelo Fisichella, threatening to assert claims against Capstead and members of the Capstead Board (such demand letters, together with the Stein Lawsuit, the Hopkins Lawsuit, the Harrington Lawsuit, the Gill Lawsuit and the Wilson Lawsuit, the “Lawsuits”). Each of the Lawsuits alleged that certain of the disclosures in the Capstead proxy statement related to the merger were deficient, and sought preliminary and injunctive relief. While Capstead believed that the disclosures set forth in the proxy statement complied fully with applicable law, in order to address certain disclosure claims in the Lawsuits, minimize the cost, risk and uncertainty inherent in litigation, avoid nuisance and preclude any efforts to delay the completion of the merger, Capstead voluntarily supplemented the proxy statement with certain supplemental disclosures. The Company, as successor to Capstead in the merger, believes the claims asserted in the Lawsuits are without merit and expressly denies all allegations in the Lawsuits, including that any additional disclosure was or is required. Subsequent to the completion of the Capstead merger, each of the Stein Lawsuit, the Hopkins Lawsuit, the Harrington Lawsuit, the Gill Lawsuit and the Wilson Lawsuit was voluntarily dismissed without prejudice. F-49 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 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. • 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 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. The table below shows the costs incurred due to arrangements with our Advisor and its affiliates during the years ended December 31, 2021, 2020 and 2019 and the associated payable as of December 31, 2021 and 2020 (dollars in thousands): Year Ended December 31, Payable as of December 31, 2021 2020 2019 2021 2020 Acquisition expenses (1) $ 1,203 $ 696 $ 900 $ — $ — Administrative services expenses 7,658 13,120 16,363 — 2,940 Asset management and subordinated performance fee 28,110 15,178 16,226 15,595 4,773 Other related party expenses (2)(3) 355 703 1,610 1,943 1,812 Total related party fees and reimbursements $ 37,326 $ 29,697 $ 35,099 $ 17,538 $ 9,525 ________________________ (1) Total acquisition fees and expenses paid during the years ended December 31, 2021, 2020 and 2019 were $ 15.0 million, $ 7.1 million and $ 8.4 million respectively, of which $ 13.8 million, $ 6.4 million and $ 7.5 million were capitalized within the commercial mortgage loans, held for investment line of the consolidated balance sheets for the years ended December 31, 2021, 2020 and 2019. (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) The related party payable includes $ 1.9 million and $ 1.8 million, respectively, of payments made by the Advisor to third party vendors on behalf of the Company. The payables as of December 31, 2021 and 2020 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 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 $ 2.0 million and $ 0.2 million of interest expense on the lending agreement with SBL for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021 there was a $ 50.0 million outstanding balance under the lending agreement. SBL is an entity that also holds 17,950 of the Company’s outstanding shares of Series D Preferred Stock of which, 14,950 shares were acquired in exchange for an equivalent number of shares of Series A Preferred Stock in March 2021. SBL also acquired an additional 3,000 shares of Series D Preferred Stock at the liquidation preference of $ 15.0 million (net of accrued and unpaid dividends on the exchanged Series A Preferred Stock) in such transaction. F-50 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 In August 2021 the Company and an investment fund managed by the Advisor entered into a joint venture agreement and formed a joint venture entity, Jeffersonville Member, LLC (the "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 affiliated fund 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 affiliated fund made up the remaining $ 29.8 million composed of a $ 24.0 million mortgage note payable and $ 5.7 million in equity. The Company has control of Jeffersonville JV with 79 % ownership and, therefore, consolidates Jeffersonville JV on its consolidated balance sheet. The Company's $ 88.7 million mortgage note payable to Jeffersonville JV is eliminated in consolidation (see Note 7 - Debt). Note 12 - Share-Based Compensation Share Plan The Company maintains the Franklin BSP Realty Trust, Inc. 2021 Equity Incentive Plan (the “2021 Incentive Plan”), pursuant to which the Company may, 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 of 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 units and cash bonus awards. The maximum number of shares of common stock available for issuance under the 2021 Incentive Plan is 5,500,000 shares. No awards had been made under the 2021 Incentive Plan as of December 31, 2021 . 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 also has an employee and director incentive restricted share plan (the "RSP"), which provides 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 5.0 % of the Company’s authorized common shares pursuant to the Offering, 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. 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 restricted 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. As of December 31, 2021, the Company had granted 56,060 restricted shares to its independent directors, of which 5,333 were forfeited and 39,543 have vested, leaving a balance of 11,184 unvested restricted shares. As of December 31, 2020, the Company had granted 44,876 restricted shares to its independent directors, of which 5,333 were forfeited and 27,823 had vested, leaving a balance of 11,720 unvested restricted shares. The compensation expense associated with the restricted share grants was $ 0.2 million, $ 0.2 million and $ 0.2 million, for the years ended December 31, 2021, 2020 and 2019, respectively and are included within Other expenses line on the consolidated statements of operations. 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. F-51 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 • 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. 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. 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 CMBS 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. As of December 31, 2020, the Company obtained third party pricing for determining the fair value of each CMBS 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 RMBS are classified in Level II 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, 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. 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 in Level I of the fair value hierarchy. F-52 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 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 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 in Level II of the fair value hierarchy. The fair value of exchange-traded swap agreements 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 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 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. 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 during the years ended December 31, 2021 and December 31, 2020. F-53 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 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 December 31, 2021 and December 31, 2020 (dollars in thousands): December 31, 2021 Total Level I Level II Level III Assets, at fair value Real estate securities, available for sale, measured at fair value $ — $ — $ — $ — Real estate securities, trading, measured at fair value 4,566,871 — 4,566,871 — Commercial mortgage loans, held for sale, measured at fair value 34,718 — — 34,718 Other real estate investments, measured at fair value 2,074 — — 2,074 Treasury note futures 124 — 124 — Interest rate swaps 312 — 312 — Total assets, at fair value $ 4,604,099 $ — $ 4,567,307 $ 36,792 Liabilities, at fair value Credit default swaps $ 1,142 $ — $ 1,142 $ — Treasury note futures — — — — Unsecured debt-related interest rate swap agreements 31,153 — 31,153 — Total liabilities, at fair value $ 32,295 $ — $ 32,295 $ — December 31, 2020 Assets, at fair value Real estate securities, available for sale, measured at fair value $ 171,136 $ — $ 171,136 $ — Real estate securities. trading, measured at fair value — — — — Commercial mortgage loans, held for sale, measured at fair value 67,649 — — 67,649 Other real estate investments, measured at fair value 2,522 — — 2,522 Interest rate swaps 25 — 25 — Total assets, at fair value $ 241,332 $ — $ 171,161 $ 70,171 Liabilities, at fair value Credit default swaps $ 297 $ — $ 297 $ — Treasury note futures 106 106 — — Unsecured debt-related interest rate swap agreements — — — — Total liabilities, at fair value $ 403 $ 106 $ 297 $ — F-54 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 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 December 31, 2021 and December 31, 2020 (dollars in thousands). Asset Category Fair Value Valuation Methodologies Unobservable Inputs (1) Weighted Average (2) Range 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 % December 31, 2020 Commercial mortgage loans, held for sale, measured at fair value $ 67,649 Discounted Cash Flow Yield 16.6 % 15.6 % - 17.6 % Other real estate investments, measured at fair value 2,522 Broker Quotes Yield 13.2 % 12.2 % - 14.2 % ________________________ (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. F-55 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 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 December 31, 2021 and December 31, 2020 for which the Company has used Level III inputs to determine fair value (dollars in thousands): 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 (2) — — Total realized and unrealized gain/(loss) included in earnings: Realized gain/(loss) on sale of commercial mortgage loan, 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 ) Cash repayments/receipts — — Transfers out of Level III (2) — — Ending Balance, December 31, 2021 $ 34,718 $ 2,074 December 31, 2020 Commercial mortgage loans, held for sale, measured at fair value Other real estate investments, measured at fair value Beginning balance, January 1, 2020 $ 112,562 $ 2,557 Transfers into Level III (2) 23,625 — Total realized and unrealized gain/(loss) included in earnings: Realized gain/(loss) on sale of commercial mortgage loan, held for sale 15,931 — Unrealized gain/(loss) on commercial mortgage loans, held for sale and other real estate investments ( 75 ) ( 32 ) Net accretion — ( 3 ) Purchases (1) 267,552 — Sales / paydowns (1) ( 328,321 ) — Cash repayments/receipts — — Transfers out of Level III (2) ( 23,625 ) — December 31, 2020 balance (2) $ 67,649 $ 2,522 ________________________ (1) Excluded from Purchases and Sales/paydowns are $ 679.1 million and $ 682.0 million, respectively, of loans that collateralize a CMBS investment required to be consolidated in connection with the Company's retention of the B tranche during the year ended December 31, 2020. Upon disposition of the B tranche during the year ended December 31, 2020, the Company recognized a gain of $ 2.8 million that is recorded in Realized gain/loss on sale of real estate securities on the consolidated statements of operations. (2) Transfers in and transfers out include transfers between Commercial mortgage loans, held for sale and Commercial mortgage loans, held for investment. F-56 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 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 repurchase agreements approximate their carrying value on the consolidated balance sheets due to their short-term nature, and are measured using Level II inputs. 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 December 31, 2021 and 2020 (dollars in thousands): Level Carrying Amount Fair Value December 31, 2021 Commercial mortgage loans, held for investment (1) Asset III $ 4,226,888 $ 4,249,118 Collateralized loan obligations Liability III 2,162,190 2,181,571 Mortgage note payable Liability III 23,998 23,998 Other financing and loan participation - commercial mortgage loans Liability III 37,903 37,903 Unsecured debt Liability III 148,594 125,400 December 31, 2020 Commercial mortgage loans, held for investment (1) Asset III $ 2,714,734 $ 2,724,039 Collateralized loan obligation Liability III 1,625,498 1,606,478 Mortgage Note Payable Liability III 29,167 29,167 Other financing and loan participation - commercial mortgage loans Liability III 31,379 31,379 ________________________ (1) The carrying value is gross of $ 15.8 million and $ 20.9 million of allowance for credit losses as of December 31, 2021 and December 31, 2020, respectively. 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 December 31, 2021, the Mortgage note payable was initially recorded at transaction proceeds, which are considered to be the best initial estimate of fair value. The fair value of the unsecured borrowings is based on discounted cash flows using Company estimates for market yields on similarly structured debt instruments. F-57 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 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 December 31, 2021, the net premiums received on derivative instrument assets were $ 6.5 million. The following derivative instruments were outstanding as of December 31, 2021 and December 31, 2020 (dollars in thousands): Fair Value Contract type Notional Assets Liabilities As of December 31, 2021 Credit default swaps $ 47,000 $ — $ 1,142 Interest rate swaps 3,649,500 312 — Interest rate swaps on unsecured debt 100,000 — 31,153 Treasury note futures 360 124 — Total $ 3,796,860 $ 436 $ 32,295 As of December 31, 2020 Credit default swaps $ 46,000 $ — $ 297 Interest rate swaps 32,517 25 — Treasury note futures 43,500 — 106 Total $ 122,017 $ 25 $ 403 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 year ended December 31, 2021 and December 31, 2020: Year Ended December 31, 2021 Year Ended December 31, 2020 Contract type Unrealized (Gain)/Loss Realized (Gain)/Loss Unrealized (Gain)/Loss Realized (Gain)/Loss Credit default swaps $ ( 101 ) $ 650 $ ( 143 ) $ 323 Interest rate swaps ( 7,070 ) 70 296 7,463 Treasury note futures ( 231 ) ( 1,478 ) 842 4,665 Options — 274 — 35 Total $ ( 7,402 ) $ ( 484 ) $ 995 $ 12,486 The following table includes disclosures regarding components of unsecured debt-related effects on interest expense and other comprehensive income for the year ended December 31, 2021 and December 31, 2020: Year Ended December 31, 2021 Year Ended December 31, 2020 Related to the statement of operations Amount of loss reclassified from other comprehensive income (1) $ ( 790 ) $ — Related to other comprehensive income Amount of gain/(loss) recognized in other comprehensive income $ ( 852 ) $ — ________________________ (1) Included in interest expense in the consolidated statements of operations F-58 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 The merger with Capstead has expanded the Company's portfolio of derivatives to additionally hedge 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. Subsequent to the completion of the merger through December 31, 2021, the Company did not enter into any additional swap agreements and no swaps had matured. In the fourth quarter of 2021, the Company terminated $ 600 million notional amount of swaps related to the ARM portfolio requiring fixed-rate interest payments averaging 0.3 %. Subsequent to December 31, 2021, the Company entered into swap agreements with notional amounts totaling $ 1 billion requiring fixed-rate interest payments averaging 0.98 % and terminated $ 2.90 billion notional amount of swaps requiring fixed-rate interest payments averaging 0.28 %. At December 31, 2021, the Company’s trading securities portfolio financing-related swap positions, all of which were either SOFR or OIS-indexed, had the following characteristics (dollars in thousands): Period of Contract Expiration Swap Notional Amounts Average Fixed Rates Second quarter 2022 $ 400,000 0.02 % Third quarter 2022 1,200,000 0.01 % Fourth quarter 2022 800,000 0.07 % First quarter 2023 50,000 0.13 % Second quarter 2023 350,000 0.20 % Third quarter 2023 100,000 0.03 % Fourth quarter 2023 374,500 0.09 % First quarter 2024 150,000 0.28 % Second quarter 2024 225,000 0.32 % $ 3,649,500 The Company has three-month LIBOR-indexed, pay-fixed, receive-variable, interest rate swap agreements with notional amounts totaling $ 100 million and average fixed rates of 4.09 % with 20 -year payment terms coinciding with the floating-rate terms of the Company’s unsecured debt that mature in 2035 and 2036. These derivatives, which are designated as cash flow hedges for accounting purposes, hedge the variability of the underlying benchmark interest rate associated with the floating-rate terms of these long-term borrowings. Subsequent to year-end, the Company terminated the entirety of its $ 100 million notional amount of unsecured debt-related swap agreements. Interest rate swap agreements are measured at fair value on a recurring basis primarily using Level Two Inputs in accordance with ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820). In determining fair value estimates for swaps, 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 December 31, 2021, 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. F-59 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 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 December 31, 2021 and December 31, 2020 (dollars in thousands): Gross Amounts Not Offset on the Balance Sheet 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 December 31, 2021 Derivative instruments, at fair value $ 436 $ — $ 436 $ — $ — $ 436 December 31, 2020 Derivative instruments, at fair value $ 25 $ — $ 25 $ — $ — $ 25 Gross Amounts Not Offset on the Balance Sheet Liabilities Gross Amounts of Recognized Liabilities Gross Amounts Offset on the Balance Sheet Net Amount of Assets Presented on the Balance Sheet Financial Instruments Cash Collateral (1) Net Amount 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 — December 31, 2020 Repurchase agreements, commercial mortgage loans $ 276,340 $ — $ 276,340 $ 496,030 $ 5,016 $ — Repurchase agreements, real estate securities 186,828 — 186,828 245,956 1,146 — Derivative instruments, at fair value 403 — 403 — 3,435 — ________________________ (1) These cash collateral amounts are recorded within the Restricted cash, Accounts payable and accrued expenses and Cash collateral receivable from derivative counterparties balances on the consolidated balance sheets. F-60 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 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, subordinate mortgages, mezzanine loans and participations in such loans. • 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, CDO notes and other securities. As a result of the October 2021 acquisition of Capstead, the Company acquired and continues to hold a significant portfolio of Residential Mortgage Backed Securities (“RMBS”) in the form of the ARM Agency Securities. As of December 31, 2021, all of the real estate securities in this segment were ARM Agency Securities acquired in the Capstead acquisition. • 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 real estate owned business represents real estate acquired by the Company through foreclosure, deed in lieu of foreclosure, or purchase. The following table represents the Company's operations by segment for the years ended December 31, 2021, December 31, 2020 and December 31, 2019 (dollars in thousands): December 31, 2021 Total Real Estate Debt and Other Real Estate Real Estate Securities TRS Real Estate Owned Interest income $ 216,890 $ 189,090 $ 24,740 $ 3,060 $ — Revenue from real estate owned 4,759 — — — 4,759 Interest expense 60,835 54,774 3,682 992 1,387 Net income/(loss) 25,702 86,863 ( 85,381 ) 13,149 11,071 Total assets as of December 31, 2021 9,474,701 4,205,883 5,054,394 72,840 141,584 December 31, 2020 Interest income $ 179,872 $ 165,907 $ 10,854 $ 3,111 $ — Revenue from real estate owned 4,299 — — — 4,299 Interest expense 66,556 54,480 7,914 2,185 1,977 Net income/(loss) 54,746 66,383 ( 7,207 ) ( 5,559 ) 1,129 Total assets as of December 31, 2020 3,189,761 2,866,790 175,088 105,364 42,519 December 31, 2019 Interest income $ 195,299 $ 181,434 $ 6,149 $ 7,716 $ — Revenue from real estate owned 3,169 — — — 3,169 Interest expense 90,418 83,597 2,911 3,670 240 Net income/(loss) 83,924 61,936 3,238 19,130 ( 380 ) Total assets as of December 31, 2019 3,540,620 2,964,233 388,170 131,193 57,024 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. F-61 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 Note 17 - 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 is instead taxed as a 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 income tax expense (benefit) for the years ended December 31, 2021, December 31, 2020 and December 31, 2019 were $ 3.6 million, $( 2.1 ) million and $ 4.5 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, 2018 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. Components of the provision for income taxes consist of the following (dollars in thousands): Year Ended December 31, 2021 2020 2019 Current expense/(benefit) U.S. Federal $ 3,093 $ ( 2,086 ) $ 4,076 State and local 349 370 397 Total current expense/(benefit) $ 3,442 $ ( 1,716 ) $ 4,473 Deferred expense/(benefit) U.S. Federal $ ( 1 ) $ — $ 10 State and local 158 ( 346 ) — Total deferred expense/(benefit) $ 157 $ ( 346 ) $ 10 Provision for income tax expense/(benefit) $ 3,599 $ ( 2,062 ) $ 4,483 The tax characteristics of $ 1.26 distributions per common share declared during 2021 was $ 1.22 ordinary income and $ 0.04 capital gain. The tax characteristics of the $ 353.08 distributions per share of Series A Preferred stock declared during 2021 was $ 343.03 ordinary income and $ 10.05 capital gain. The tax characteristics of the $ 377.02 per share of Series C Preferred Stock and Series D Preferred stock declared during 2021 was $ 366.29 ordinary income and $ 10.73 capital gain. The tax characteristics of the $ 0.35 distributions per share of Series F Preferred stock declared during 2021 was $ 0.34 ordinary income and $ 0.01 capital gain. The tax characteristics of the $ 0.47 distributions per share of Series E Preferred stock declared during 2021 was $ 0.46 ordinary income and $ 0.01 capital gain. The ordinary income per share of each stockholder represents the amount of ordinary dividends that may be eligible for the 20% deduction applicable to qualified REIT dividends under Section 199A. The tax characteristics of the $ 1.30 distributions per common share declared during 2020 was $ 1.24 ordinary income and $ 0.06 capital gain. Of the $ 1.24 of ordinary income, $ 1.24 represents the amount of the ordinary dividend that may be eligible for the 20% deduction applicable to qualified REIT dividends under Internal Revenue Code Section 199A. The tax characteristics of the $ 390.48 distributions per share of Series A Preferred Stock and Series C Preferred Stock declared during 2020 was $ 370.93 ordinary income and $ 19.55 capital gain. Of the $ 370.93 of ordinary income, $ 370.93 represents the amount of the ordinary dividend that may be eligible for the 20% deduction applicable to qualified REIT dividends under Section 199A. 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. F-62 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The Company utilized the carryback provision in the CARES Act relating to the 2020 tax year NOL and is awaiting the refund. Note 18 - Merger with Capstead On October 19, 2021, the Company, Rodeo Sub I, LLC, a wholly-owned subsidiary of the Company (“Merger Sub”), Capstead Mortgage Corporation (“Capstead”), and the Advisor completed the Merger pursuant to the terms of the Merger Agreement. On the Closing Date, Capstead merged with and into Merger Sub, with Merger Sub continuing as the surviving company. Asset Acquisition The Company accounted for the acquisition of Capstead in accordance with Accounting Standards Codification Topic 805, “Business Combinations,” which is referred to as ASC 805. The Company determined the transaction did not meet the definition of a business combination under ASC 805 and was accounted for as an asset acquisition since substantially all of the fair value of the gross assets acquired was concentrated in a group of similar identifiable assets, a portfolio of agency mortgage-backed securities, which Capstead previously recognized as available for sale. In an asset acquisition, goodwill is not recognized, and any excess consideration transferred over the fair value of the net identifiable assets acquired is allocated on a relative fair value basis to the acquired assets. The Company measured the cost of the net identifiable assets acquired on the basis of the fair value of the consideration given, inclusive of transaction costs, which was determined to be more reliably measurable. The fair value of the consideration paid of $ 870.1 million was comprised of $ 579.5 million of Common Stock, $ 258.7 million of Series E Preferred Stock, $ 20.5 million of Per Share Cash Payment, and $ 11.3 million of transaction costs. As the cost of the acquisition exceeded the fair value of the net identifiable assets acquired, the Company allocated the difference on the basis of relative fair values to certain assets which were not carried at fair value. The amount of excess consideration, including the Company's transaction costs, was capitalized on the balance sheet as a long-lived asset at the time of acquisition. In the fourth quarter of 2021, the Company concluded the long-lived asset had no potential value to the generation of future cash flows and fully impaired the asset, recognizing an expense totaling $ 88.3 million in the consolidated statements of operations with an associated reduction in stockholders' equity. Included in the expense was $ 15.9 million of consideration associated with change-in-control severance payments and accelerated equity award vesting paid to former Capstead employees upon the completion of the merger. The allocation of the purchase price to assets acquired and liabilities assumed is as follows (amounts in thousands): Assets Acquired As of October 19, 2021 Cash and cash equivalents $ 174,083 Real estate securities, trading, measured at fair value 6,841,482 Prepaid expenses and other assets 275,127 Cash collateral receivable from derivative counterparties 68,969 Liabilities Assumed Repurchase agreements and secured borrowings - real estate securities 6,421,262 Unsecured borrowings 98,574 Derivative instruments, measured at fair value 31,091 Distributions payable 1,345 Accounts payable and accrued expenses 25,606 Net Assets Acquired 781,783 Note 19 - Subsequent Events The Company has evaluated subsequent events through the filing of this Annual Report on Form 10-K. F-63 Table of Contents FRANKLIN BSP REALTY TRUST, INC. SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE December 31, 2021 (Dollars in thousands) Description Property Type Face Amount Carrying Amount Interest Rate Payment Terms Maturity Date Senior Debt 1 Hospitality $ 4,858 $ 4,858 1 month LIBOR + 4.00% Amortizing Balloon 12/9/2023 Senior Debt 2 Hospitality 57,075 57,075 1 month LIBOR + 5.19% Interest Only 6/9/2019 Senior Debt 3 Multifamily 26,568 26,568 1 month LIBOR + 4.50% Interest Only 12/31/2022 Senior Debt 4 Hospitality 22,150 22,150 1 month LIBOR + 6.00% Interest Only 1/9/2023 Senior Debt 5 Office 6,901 6,901 1 month LIBOR + 5.15% Interest Only 3/9/2022 Senior Debt 6 Multifamily 36,822 36,822 1 month LIBOR + 3.00% Interest Only 3/9/2022 Senior Debt 7 Multifamily 37,025 37,025 1 month LIBOR + 3.00% Interest Only 11/9/2022 Senior Debt 8 Hospitality 22,355 22,355 1 month LIBOR + 3.50% Interest Only 3/9/2023 Senior Debt 9 Office 20,685 20,685 1 month LIBOR + 3.75% Interest Only 9/9/2022 Senior Debt 10 Office 15,722 15,722 1 month LIBOR + 3.40% Amortizing Balloon 9/9/2022 Senior Debt 11 Retail 29,500 29,452 6.50% Interest Only 9/9/2023 Senior Debt 12 Multifamily 27,488 27,488 1 month LIBOR + 3.35% Interest Only 11/9/2022 Senior Debt 13 Hospitality 8,285 8,285 1 month LIBOR + 4.85% Amortizing Balloon 1/9/2023 Senior Debt 14 Office 7,125 7,125 1 month LIBOR + 3.90% Interest Only 2/9/2022 Senior Debt 15 Hospitality 13,972 13,972 1 month LIBOR + 4.47% Interest Only 4/9/2022 Senior Debt 16 Retail 11,924 11,924 1 month LIBOR + 3.95% Interest Only 4/9/2022 Senior Debt 17 Office 42,631 42,601 1 month LIBOR + 3.50% Interest Only 5/9/2022 Senior Debt 18 Retail 8,203 8,203 1 month LIBOR + 8.00% Interest Only 9/9/2022 Senior Debt 19 Hospitality 10,580 10,570 1 month LIBOR + 4.50% Interest Only 6/9/2022 Senior Debt 20 Hospitality 19,900 19,884 1 month LIBOR + 4.15% Interest Only 6/9/2022 Senior Debt 21 Office 39,650 39,597 1 month LIBOR + 4.01% Interest Only 6/9/2022 Senior Debt 22 Hospitality 20,930 20,900 1 month LIBOR + 3.75% Interest Only 8/9/2022 Senior Debt 23 Hospitality 13,000 12,982 1 month LIBOR + 2.94% Interest Only 10/9/2022 Senior Debt 24 Hospitality 4,987 4,988 1 month LIBOR + 4.25% Interest Only 7/9/2023 Senior Debt 25 Hospitality 12,750 12,734 1 month LIBOR + 4.45% Interest Only 8/9/2022 Senior Debt 26 Hospitality 10,845 10,845 1 month LIBOR + 4.50% Interest Only 2/9/2022 Senior Debt 27 Retail 9,400 9,388 1 month LIBOR + 4.20% Interest Only 9/9/2022 Senior Debt 28 Hospitality 34,053 34,053 1 month LIBOR + 3.99% Amortizing Balloon 11/9/2022 Senior Debt 29 Industrial 56,933 56,933 1 month LIBOR + 3.75% Interest Only 12/9/2021 Senior Debt 30 Office 21,825 21,777 1 month LIBOR + 3.50% Interest Only 12/9/2022 Senior Debt 31 Hospitality 7,100 7,088 1 month LIBOR + 4.00% Interest Only 12/9/2022 Senior Debt 32 Multifamily 15,342 15,309 1 month LIBOR + 2.75% Interest Only 12/9/2022 Senior Debt 33 Multifamily 27,650 27,601 1 month LIBOR + 3.15% Interest Only 12/9/2022 Senior Debt 34 Multifamily 27,094 27,064 1 month LIBOR + 2.70% Interest Only 12/9/2022 Senior Debt 35 Multifamily 9,016 9,016 1 month LIBOR + 3.95% Interest Only 12/9/2022 Senior Debt 36 Multifamily 25,000 24,999 1 month LIBOR + 3.30% Interest Only 1/9/2023 Senior Debt 37 Office 25,802 25,699 1 month LIBOR + 4.35% Interest Only 1/9/2024 Senior Debt 38 Multifamily 15,150 15,128 1 month LIBOR + 3.10% Interest Only 2/9/2023 Senior Debt 39 Office 58,714 58,491 1 month LIBOR + 3.70% Interest Only 2/9/2023 Senior Debt 40 Multifamily 11,739 11,723 1 month LIBOR + 3.15% Interest Only 8/9/2022 Senior Debt 41 Office 28,083 28,025 1 month LIBOR + 2.70% Interest Only 2/9/2023 Senior Debt 42 Manufactured Housing 1,359 1,359 5.50% Interest Only 5/9/2025 F-64 Table of Contents Description Property Type Face Amount Carrying Amount Interest Rate Payment Terms Maturity Date Senior Debt 43 Multifamily 7,060 7,054 1 month LIBOR + 4.75% Interest Only 5/9/2022 Senior Debt 44 Industrial 17,038 16,983 1 month LIBOR + 6.25% Interest Only 7/9/2023 Senior Debt 45 Multifamily 4,300 4,289 1 month LIBOR + 5.50% Interest Only 2/9/2023 Senior Debt 46 Manufactured Housing 7,680 7,658 1 month LIBOR + 4.50% Interest Only 8/9/2023 Senior Debt 47 Mixed Use 30,465 30,326 1 month LIBOR + 5.15% Interest Only 8/9/2023 Senior Debt 48 Hospitality 27,000 26,921 1 month LIBOR + 6.50% Interest Only 9/9/2023 Senior Debt 49 Multifamily 50,000 49,911 1 month LIBOR + 6.69% Interest Only 9/9/2022 Senior Debt 50 Self Storage 29,895 29,807 1 month LIBOR + 5.00% Interest Only 9/9/2023 Senior Debt 51 Multifamily 14,183 14,150 1 month LIBOR + 4.75% Interest Only 9/9/2022 Senior Debt 52 Manufactured Housing 3,400 3,393 1 month LIBOR + 5.00% Interest Only 9/9/2022 Senior Debt 53 Multifamily 27,550 27,500 1 month LIBOR + 5.75% Interest Only 9/9/2022 Senior Debt 54 Manufactured Housing 5,020 5,004 1 month LIBOR + 5.25% Interest Only 10/9/2023 Senior Debt 55 Office 18,603 18,542 1 month LIBOR + 4.50% Interest Only 10/9/2023 Senior Debt 56 Office 67,651 67,384 5.15% Interest Only 10/9/2025 Senior Debt 57 Office 30,900 30,748 1 month LIBOR + 5.20% Interest Only 10/9/2023 Senior Debt 58 Self Storage 11,600 11,574 1 month LIBOR + 4.76% Interest Only 11/9/2022 Senior Debt 59 Manufactured Housing 5,000 4,957 1 month LIBOR + 5.90% Interest Only 5/9/2023 Senior Debt 60 Office 12,750 12,705 1 month LIBOR + 5.00% Interest Only 11/9/2023 Senior Debt 61 Multifamily 43,320 43,151 1 month LIBOR + 4.35% Interest Only 11/9/2023 Senior Debt 62 Multifamily 37,674 37,539 1 month LIBOR + 4.45% Interest Only 11/9/2023 Senior Debt 63 Multifamily 8,763 8,730 1 month LIBOR + 5.50% Interest Only 11/9/2023 Senior Debt 64 Retail 11,963 11,928 1 month LIBOR + 4.87% Interest Only 5/9/2022 Senior Debt 65 Multifamily 5,730 5,712 1 month LIBOR + 5.00% Interest Only 6/9/2023 Senior Debt 66 Multifamily 18,800 18,658 1 month LIBOR + 4.00% Interest Only 12/9/2024 Senior Debt 67 Industrial 14,985 14,923 1 month LIBOR + 4.50% Interest Only 12/9/2023 Senior Debt 68 Office 11,981 11,932 1 month LIBOR + 5.50% Interest Only 1/9/2024 Senior Debt 69 Multifamily 11,820 11,769 1 month LIBOR + 4.55% Interest Only 2/9/2024 Senior Debt 70 Multifamily 21,000 20,920 1 month LIBOR + 4.60% Interest Only 1/9/2024 Senior Debt 71 Office 26,000 25,932 1 month LIBOR + 5.00% Interest Only 1/9/2023 Senior Debt 72 Multifamily 54,500 54,422 1 month LIBOR + 3.80% Interest Only 2/9/2023 Senior Debt 73 Multifamily 11,672 11,620 1 month LIBOR + 3.50% Interest Only 2/9/2024 Senior Debt 74 Multifamily 21,000 20,956 1 month LIBOR + 4.95% Interest Only 8/9/2022 Senior Debt 75 Office 43,751 43,518 1 month LIBOR + 3.94% Interest Only 3/9/2024 Senior Debt 76 (3) Multifamily — — 1 month LIBOR + 7.25% Interest Only 2/9/2024 Senior Debt 77 Multifamily 5,400 5,384 1 month LIBOR + 5.25% Interest Only 2/9/2023 Senior Debt 78 Hospitality 23,000 22,914 1 month LIBOR + 5.79% Interest Only 3/9/2024 Senior Debt 79 Multifamily 32,856 32,742 1 month LIBOR + 6.75% Interest Only 3/9/2023 Senior Debt 80 Multifamily 12,325 12,278 1 month LIBOR + 4.50% Interest Only 3/9/2024 Senior Debt 81 Multifamily 6,300 6,262 1 month LIBOR + 5.35% Interest Only 9/9/2023 Senior Debt 82 Multifamily 31,023 30,955 1 month LIBOR + 3.00% Interest Only 4/9/2024 Senior Debt 83 Multifamily 11,936 11,881 1 month LIBOR + 4.25% Interest Only 4/9/2024 Senior Debt 84 Multifamily 5,575 5,556 1 month LIBOR + 4.50% Interest Only 4/9/2023 Senior Debt 85 Multifamily 53,178 53,081 1 month LIBOR + 3.00% Interest Only 4/9/2023 Senior Debt 86 Multifamily 14,045 14,012 1 month LIBOR + 3.39% Interest Only 4/9/2024 Senior Debt 87 Multifamily 8,301 8,263 1 month LIBOR + 3.80% Interest Only 4/9/2024 F-65 Table of Contents Description Property Type Face Amount Carrying Amount Interest Rate Payment Terms Maturity Date Senior Debt 88 Multifamily 13,582 13,533 1 month LIBOR + 4.50% Interest Only 10/9/2023 Senior Debt 89 Multifamily 18,277 18,200 1 month LIBOR + 5.25% Interest Only 4/9/2024 Senior Debt 90 Multifamily 17,985 17,938 1 month LIBOR + 3.60% Interest Only 4/9/2024 Senior Debt 91 Multifamily 41,823 41,808 1 month LIBOR + 2.95% Interest Only 4/9/2026 Senior Debt 92 Hospitality 25,785 25,686 1 month LIBOR + 5.60% Interest Only 5/9/2023 Senior Debt 93 Mixed Use 32,500 32,395 1 month LIBOR + 3.70% Interest Only 7/9/2023 Senior Debt 94 Multifamily 12,688 12,636 1 month LIBOR + 3.75% Interest Only 4/9/2023 Senior Debt 95 Multifamily 70,620 70,570 1 month LIBOR + 2.95% Interest Only 4/9/2026 Senior Debt 96 Multifamily 20,321 20,168 1 month LIBOR + 3.35% Interest Only 5/9/2024 Senior Debt 97 Multifamily 28,318 28,299 1 month LIBOR + 2.95% Interest Only 4/9/2026 Senior Debt 98 Multifamily 34,998 34,984 1 month LIBOR + 2.95% Interest Only 4/9/2026 Senior Debt 99 Multifamily 32,557 32,546 1 month LIBOR + 2.95% Interest Only 4/9/2026 Senior Debt 100 Hospitality 25,771 25,563 1 month LIBOR + 9.00% Interest Only 5/9/2024 Senior Debt 101 Self Storage 15,000 14,948 1 month LIBOR + 4.26% Interest Only 5/9/2023 Senior Debt 102 Multifamily 24,248 24,142 1 month LIBOR + 3.25% Interest Only 6/9/2023 Senior Debt 103 Office 6,800 6,774 1 month LIBOR + 5.25% Interest Only 11/9/2023 Senior Debt 104 Multifamily 12,792 11,546 1 month LIBOR + 6.50% Interest Only 6/9/2024 Senior Debt 105 Multifamily 10,391 10,339 1 month LIBOR + 3.15% Interest Only 7/9/2024 Senior Debt 106 Hospitality 17,449 17,346 1 month LIBOR + 5.35% Interest Only 6/9/2023 Senior Debt 107 Hospitality 28,000 27,807 1 month LIBOR + 6.25% Interest Only 6/9/2024 Senior Debt 108 Multifamily 31,900 31,716 1 month LIBOR + 3.15% Interest Only 7/9/2026 Senior Debt 109 Multifamily 37,260 37,164 1 month LIBOR + 3.40% Interest Only 6/9/2024 Senior Debt 110 (4) Multifamily — — 1 month LIBOR + 8.00% Interest Only 8/9/2024 Senior Debt 111 Multifamily 29,500 29,370 1 month LIBOR + 2.88% Interest Only 8/9/2024 Senior Debt 112 Multifamily 10,050 10,009 1 month LIBOR + 4.50% Interest Only 8/9/2023 Senior Debt 113 Multifamily 13,259 13,168 1 month LIBOR + 3.75% Interest Only 10/9/2023 Senior Debt 114 Multifamily 29,250 29,103 1 month LIBOR + 3.00% Interest Only 9/9/2024 Senior Debt 115 Multifamily 34,077 33,789 1 month LIBOR + 3.15% Interest Only 10/9/2024 Senior Debt 116 Multifamily 42,850 42,677 1 month LIBOR + 3.40% Interest Only 9/9/2023 Senior Debt 117 Multifamily 35,020 34,859 1 month LIBOR + 3.64% Interest Only 10/9/2024 Senior Debt 118 Multifamily 8,500 8,460 1 month LIBOR + 3.75% Interest Only 9/9/2024 Senior Debt 119 Multifamily 14,200 14,130 1 month LIBOR + 3.15% Interest Only 9/9/2023 Senior Debt 120 Multifamily 13,350 13,284 1 month LIBOR + 3.75% Interest Only 10/9/2023 Senior Debt 121 Multifamily 66,650 66,002 1 month LIBOR + 3.25% Interest Only 10/9/2024 Senior Debt 122 Multifamily 18,750 18,688 1 month LIBOR + 2.95% Interest Only 10/9/2024 Senior Debt 123 Multifamily 9,099 9,036 1 month LIBOR + 3.75% Interest Only 10/9/2024 Senior Debt 124 Multifamily 26,160 26,024 1 month LIBOR + 3.20% Interest Only 10/9/2024 Senior Debt 125 Hospitality 17,370 17,292 1 month LIBOR + 5.25% Interest Only 10/9/2023 Senior Debt 126 Hospitality 16,500 16,423 1 month LIBOR + 7.10% Interest Only 11/9/2023 Senior Debt 127 Multifamily 13,168 13,097 1 month LIBOR + 3.40% Interest Only 10/9/2023 Senior Debt 128 Multifamily 88,500 88,499 1 month LIBOR + 2.75% Interest Only 10/9/2024 Senior Debt 129 Multifamily 56,150 55,878 1 month LIBOR + 3.10% Interest Only 10/9/2024 Senior Debt 130 Multifamily 36,750 36,540 1 month LIBOR + 2.90% Interest Only 11/9/2026 Senior Debt 131 Multifamily 52,192 51,872 1 month LIBOR + 3.10% Interest Only 12/9/2023 Senior Debt 132 Multifamily 37,100 36,940 1 month LIBOR + 2.90% Interest Only 12/9/2024 F-66 Table of Contents Description Property Type Face Amount Carrying Amount Interest Rate Payment Terms Maturity Date Senior Debt 133 Multifamily 60,267 60,005 1 month LIBOR + 2.85% Interest Only 11/9/2023 Senior Debt 134 Multifamily 30,600 30,543 1 month LIBOR + 2.65% Interest Only 11/9/2023 Senior Debt 135 Multifamily 30,650 30,476 1 month LIBOR + 3.25% Interest Only 12/9/2024 Senior Debt 136 Multifamily 62,850 62,556 1 month LIBOR + 3.35% Interest Only 12/9/2023 Senior Debt 137 Multifamily 42,474 42,231 1 month LIBOR + 3.00% Interest Only 12/9/2023 Senior Debt 138 Multifamily 46,080 45,821 1 month LIBOR + 2.75% Interest Only 11/9/2025 Senior Debt 139 Multifamily 28,880 28,745 1 month LIBOR + 2.90% Interest Only 12/9/2024 Senior Debt 140 Manufactured Housing 6,700 6,666 1 month LIBOR + 4.50% Interest Only 12/9/2024 Senior Debt 141 Multifamily 58,680 58,393 1 month LIBOR + 3.45% Interest Only 1/9/2024 Senior Debt 142 Multifamily 26,600 26,459 1 month LIBOR + 2.90% Interest Only 12/9/2023 Senior Debt 143 Multifamily 12,478 12,393 1 month LIBOR + 3.20% Interest Only 12/9/2024 Senior Debt 144 Multifamily 35,996 35,801 1 month LIBOR + 3.00% Interest Only 12/9/2024 Senior Debt 145 Multifamily 32,250 32,068 1 month LIBOR + 3.20% Interest Only 12/9/2023 Senior Debt 146 Multifamily 38,631 38,394 1 month LIBOR + 2.90% Interest Only 12/9/2023 Senior Debt 147 Multifamily 64,281 63,917 1 month LIBOR + 2.88% Interest Only 12/9/2023 Senior Debt 148 Multifamily 62,003 61,654 1 month LIBOR + 2.88% Interest Only 12/9/2023 Senior Debt 149 Multifamily 16,570 16,467 1 month SOFR + 3.50% Interest Only 1/9/2024 Senior Debt 150 Multifamily 56,930 56,757 1 month LIBOR + 2.75% Interest Only 12/9/2024 Senior Debt 151 Multifamily 65,000 64,592 1 month SOFR + 5.14% Interest Only 7/9/2023 Senior Debt 152 Multifamily 22,240 22,122 1 month SOFR + 2.96% Interest Only 1/9/2024 Senior Debt 153 Multifamily 25,573 25,441 1 month SOFR + 2.96% Interest Only 1/9/2025 Senior Debt 154 Multifamily 31,678 31,383 1 month SOFR + 3.20% Interest Only 1/9/2024 Senior Debt 155 Multifamily 78,050 77,650 1 month SOFR + 3.45% Interest Only 1/9/2027 Senior Debt 156 Multifamily 77,870 77,632 1 month LIBOR + 3.21% Interest Only 1/9/2025 Senior Debt 157 Multifamily 24,000 23,881 1 month SOFR + 3.11% Interest Only 1/9/2024 Senior Debt 158 Retail 31,000 30,845 1 month SOFR + 3.29% Interest Only 1/9/2025 Senior Debt 159 Multifamily 47,444 47,208 1 month SOFR + 2.86% Interest Only 1/9/2024 Senior Debt 160 Multifamily 36,824 36,639 1 month SOFR + 2.86% Interest Only 1/9/2024 Senior Debt 161 Hospitality 17,169 17,169 5.99% Amortizing Balloon 10/6/2023 Mezzanine Loan 1 Multifamily 6,500 6,488 1 month LIBOR + 10.25% Interest Only 9/9/2022 Mezzanine Loan 2 Multifamily 3,000 3,000 1 month LIBOR + 9.20% Interest Only 3/9/2022 Mezzanine Loan 3 Multifamily 10,000 9,951 1 month SOFR + 15.29% Interest Only 7/9/2023 Mezzanine Loan 4 Retail 3,000 2,985 1 month SOFR + 12.00% Interest Only 1/9/2025 $ 4,242,962 $ 4,226,888 F-67