Franklin BSP Realty Trust, Inc. 10-K

Item 9A. Controls and Procedures. Disclosure Controls and Procedures We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports we file and submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in accordance with SEC guidelines and that such information is communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure based on the definition of "disclosure controls and procedures" in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures in reaching that level of reasonable assurance. In accordance with Rules 13a-15(b) and 15d-15(b) of 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. Our internal control system is designed to provide reasonable assurance to our management and the board of directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. 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, 2022. 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, 2022, our internal control over financial reporting was effective. Our independent registered public accounting firm, Ernst and Young LLP (“EY”), has audited the effectiveness of our internal control over financial reporting as of December 31, 2022, as stated in its report which is included herein. Changes in Internal Control Over Financial Reporting During the quarter ended December 31, 2022, 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. 55 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 Internal Control Over Financial Reporting We have audited Franklin BSP Realty Trust, Inc.’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Franklin BSP Realty Trust, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria. We also have audited in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, 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, 2022, and the related notes and financial statement schedule IV and our report dated March 16, 2023 expressed an unqualified opinion thereon . Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Reporting on Internal Controls over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP New York, New York March 16, 2023 56 Table of Contents Item 9B. Other Information. None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not applicable. 57 Table of Contents PART III Item 10. Directors, Executive Officers and Corporate Governance. 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. 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. The other information required by this item is hereby incorporated by reference to the material appearing in the Proxy Statement for the 2023 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A under the Exchange Act. Item 11. Executive Compensation. The information required by this item is hereby incorporated by reference to the material appearing in the Proxy Statement for the 2023 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A under the Exchange Act. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Except as set forth below, the information required by this item is hereby incorporated by reference to the material appearing in the Proxy Statement for the 2023 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A under the Exchange Act. 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, 2022: Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (1) Weighted-Average Exercise of Price of Outstanding Options, Warrants, and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (2) Equity compensation plans approved by security holders — — — Equity compensation plans not approved by security holders 492,107 — 8,923,690 Total 492,107 — 8,923,690 ________________________ (1) Represents unvested and outstanding restricted stock units issued under the Franklin BSP Realty Trust, Inc. 2021 Equity Incentive Plan. One share of the Company’s common stock will be issued for each restricted stock unit that vests. (2) The number of securities remaining available for future issuance consists of an aggregate of 3,915,797 shares issuable under our employee and director incentive restricted share plan (“RSP”), which expired on February 7, 2023 and 5,007,893 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. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required by this item is hereby incorporated by reference to the material appearing in the Proxy Statement for the 2023 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A under the Exchange Act. Item 14. Principal Accounting Fees and Services. The information required by this item is hereby incorporated by reference to the material appearing in the Proxy Statement for the 2023 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A under the Exchange Act. 58 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. INDEX TO EXHIBITS The following exhibits are included in this Annual Report on Form 10-K for the year ended December 31, 2022 (and are numbered in accordance with Item 601 of Regulation S-K). Exhibit No. Description 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 (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 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). 3.4 Articles Supplementary of Franklin BSP Realty Trust, Inc., dated June 21, 2022, relating to Series H Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on June 24, 2022). 3.5 Amendment No. 1 to Articles Supplementary of Franklin BSP Realty Trust, Inc., effective January 19, 2023, relating to Series H Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on January 20, 2023). 3.6 Articles Supplementary of Franklin BSP Realty Trust, Inc. effective October 12, 2022, relating to Series I Convertible Preferred Stock (incorporate d by reference to Exhibit 3.1 to the Current Report on Form 8-K Filed with the SEC on October 14, 2022). 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 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). 10.2† 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). 10.3† 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). 10.4† 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). 10.5† Form of Restricted Share Unit Award Agreement pursuant to the Franklin BSP Realty Trust, Inc. 2021 Equity Incentive Plan.(incorporated by reference to Exhibit 10.45 to the Registrant’s Annual Report on Form 10-K filed with the SEC on February 25, 2022). 10.6 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). 10.7 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). 10.8 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). 59 Table of Contents 10.9 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). 10.10 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. 10.11 Indenture, dated as of February 15, 2022, by and among BSPRT 2022-FL8 Issuer, Ltd., BSPRT 2022-FL8 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 February 18, 2022). 10.12 Indenture, dated as of June 29, 2022, by and among BSPRT 2022-FL9 Issuer, LLC, Benefit Street Partners Realty Operating Partnership, L.P., as advancing agent, U.S. Bank Trust Company, National Association, as trustee and note administrator, and U.S. Bank National Association as custodian (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 1, 2022). 10.13 Exchange Agreement, dated June 21, 2022, by and between Franklin BSP Realty Trust, Inc. and the holder of the Company’s Series D Convertible Preferred Stock (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on June 24, 2022) . 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. 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, 202 2 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. Item 16. Form 10-K Summary None. 60 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: March 16, 2023 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 March 16, 2023 Richard J. Byrne (Principal Executive Officer) /s/ Jerome S. Baglien Chief Financial Officer, Chief Operating Officer and Treasurer (Principal Financial and Accounting Officer) March 16, 2023 Jerome S. Baglien /s/ Elizabeth K. Tuppeny Lead Independent Director March 16, 2023 Elizabeth K. Tuppeny /s/ Pat Augustine Director March 16, 2023 Pat Augustine /s/ Joe Dumars Director March 16, 2023 Joe Dumars /s/ Jamie Handwerker Director March 16, 2023 Jamie Handwerker /s/ Gary Keiser Director March 16, 2023 Gary Keiser /s/ Peter McDonough Director March 16, 2023 Peter McDonough /s/ Buford Ortale Director March 16, 2023 Buford Ortale 61 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- 4 Consolidated Statements of Operations F- 5 Consolidated Statements of Comprehensive Income F- 6 Consolidated Statements of Changes in Stockholders' Equity F- 7 Consolidated Statements of Cash Flows F- 9 Notes to Consolidated Financial Statements F- 11 Financial Statement Schedule: Schedule IV: Mortgage Loans on Real Estate F- 61 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. (the Company) as of December 31, 2022 and 2021, 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, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 16, 2023 expressed an unqualified opinion thereon. 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 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. 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 Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate. F-2 Table of Contents Allowance for credit losses Description of the Matter As of December 31, 2022, the allowance for credit losses totaled $40.8 million comprising a general allowance component and a specific allowance component of $26.6 million and $14.2 million, respectively. As disclosed in Note 2 to the consolidated financial statements, the general allowance for credit losses for the Company’s financial instruments carried at amortized cost, such as loans held for investment, represents a lifetime estimate of expected credit losses. In measuring the general allowance for credit losses for commercial mortgage loans held for investment, the Company primarily applies a probability of default/loss given model for loans that are collectively assessed (“expected loss model”). The Company’s expected loss model uses historical loss rates, forecasting the loss parameters using a scenario-based statistical approach over a reasonable and supportable forecast period of twelve months (the “economic scenario”), followed by an immediate reversion to average historical losses. Also as disclosed in Note 2, for commercial loans 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, a specific allowance for credit losses is assessed by comparing the estimated fair value of the underlying collateral, less costs to sell, to the book value of the respective loan. The estimated fair value of the collateral at the reporting date when determining the allowance for credit losses requires judgment, which includes assumptions regarding the market capitalization rates. Auditing the Allowance for credit losses was complex due to the use of the expected loss model and the judgmental nature of the economic scenario. For the specific allowance, determining the fair value of the collateral may consider a number of assumptions including, but not limited to, the market capitalization rates. Such assumptions are generally based on current market conditions and are subject to economic and market uncertainties which leads to a high degree of subjectivity. How We Addressed the Matter in Our Audit For the general allowance, these procedures included, among others, understanding, evaluating the design, and testing the operating effectiveness of controls, including the significant assumptions related to the selection of the economic scenario. 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 the expected loss model, with the support of specialists, we evaluated the model calculation design and the model output for reasonableness. We also tested the appropriateness of a sample of key inputs used in the model, agreed significant inputs and underlying data to internal and external sources, as well as performed recalculations when required. With the support of our specialists, we evaluated the general allowance amount, including model estimates, and whether the recorded Allowance for credit losses appropriately reflects expected credit losses on the portfolio of financial instruments carried at amortized cost. 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 general Allowance for credit losses. For the specific allowance, these procedures included understanding, evaluating the design, and testing the operating effectiveness of controls related to the specific allowance for credit losses, including the significant assumptions related to market capitalization rates used to determine the fair value of the collateral. Supported by a specialist, these procedures also included, among others, evaluating the appropriateness of the methodologies used by management, testing the completeness and accuracy of the data, and evaluating the reasonableness of the significant assumptions by considering external market data. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2017. New York, New York March 16, 2023 F-3 Table of Contents FRANKLIN BSP REALTY TRUST, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) December 31, 2022 December 31, 2021 ASSETS Cash and cash equivalents $ 179,314 $ 154,929 Restricted cash 11,173 13,270 Commercial mortgage loans, held for investment, net of allowance for credit losses of $ 40,848 and $ 15,827 as of December 31, 2022 and December 31, 2021, respectively 5,228,928 4,211,061 Commercial mortgage loans, held for sale, measured at fair value 15,559 34,718 Real estate securities, trading, measured at fair value 235,728 4,566,871 Real estate securities, available for sale, measured at fair value, amortized cost of $ 220,635 as of December 31, 2022 221,025 — Derivative instruments, measured at fair value 415 436 Other real estate investments, measured at fair value — 2,074 Receivable for loan repayment (1) 42,557 252,351 Accrued interest receivable 34,007 30,109 Prepaid expenses and other assets 15,795 13,595 Intangible lease asset, net of amortization 54,831 48,472 Real estate owned, net of depreciation 127,772 90,048 Real estate owned, held for sale 36,497 — Cash collateral receivable from derivative counterparties — 56,767 Total assets $ 6,203,601 $ 9,474,701 LIABILITIES AND STOCKHOLDERS' EQUITY Collateralized loan obligations $ 3,121,983 $ 2,162,190 Repurchase agreements - commercial mortgage loans 680,859 1,019,600 Repurchase agreements - real estate securities 440,008 4,178,784 Mortgage note payable 23,998 23,998 Other financing and loan participation - commercial mortgage loans 76,301 37,903 Unsecured debt 98,695 148,594 Derivative instruments, measured at fair value 64 32,295 Interest payable 12,715 2,692 Distributions payable 36,317 30,346 Accounts payable and accrued expenses 17,668 12,705 Due to affiliates 15,429 17,538 Intangible lease liability, net of depreciation 6,428 — Total liabilities $ 4,530,465 $ 7,666,645 Redeemable convertible preferred stock: Redeemable convertible preferred stock Series C, $ 0.01 par value, 20,000 authorized and 1,400 issued and outstanding as of December 31, 2021 $ — $ 6,971 Redeemable convertible preferred stock Series D, $ 0.01 par value, 20,000 authorized and 17,950 issued and outstanding as of December 31, 2021 — 89,684 Redeemable convertible preferred stock Series H, $ 0.01 par value, 20,000 authorized and 17,950 issued and outstanding as of December 31, 2022 89,748 — Redeemable convertible preferred stock Series I, $ 0.01 par value, 1,000 authorized and 1,000 issued and outstanding as of December 31, 2022 5,000 — Total redeemable convertible preferred stock $ 94,748 $ 96,655 Equity: 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, 2022 and 2021 $ 258,742 $ 258,742 Series F Preferred stock, $ 0.01 par value, 40,000,000 authorized, 39,733,299 issued and outstanding as of December 31, 2021 — 710,431 Common stock, $ 0.01 par value, 900,000,000 shares authorized, 82,992,784 and 43,965,928 issued and outstanding as of December 31, 2022 and 2021 , respectively 826 441 Additional paid-in capital 1,602,247 903,264 Accumulated other comprehensive income (loss) 390 ( 62 ) Accumulated deficit ( 299,225 ) ( 167,179 ) Total stockholders' equity $ 1,562,980 $ 1,705,637 Noncontrolling interest 15,408 5,764 Total equity 1,578,388 1,711,401 Total liabilities, redeemable convertible preferred stock and equity $ 6,203,601 $ 9,474,701 _______________________________________________________________________ (1) Includes $ 42.5 million and $ 187.0 million of cash held by the servicer related to the CLOs as of December 31, 2022 and 2021, respectively, as well as $ 0.1 million and $ 65.3 million of RMBS principal paydowns receivable as of December 31, 2022 and 2021, respectively. The accompanying notes are an integral part of these consolidated financial statements. F-4 Table of Contents FRANKLIN BSP REALTY TRUST, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share data) Year Ended December 31, 2022 2021 2020 Interest Income: Interest income $ 357,705 $ 216,890 $ 179,872 Less: Interest expense 165,708 60,835 66,556 Net interest income 191,997 156,055 113,316 Revenue from real estate owned 9,655 4,759 4,299 Total Income $ 201,652 $ 160,814 $ 117,615 Expenses: Asset management and subordinated performance fee 26,157 28,110 15,178 Acquisition expenses 1,360 1,203 696 Administrative services expenses 12,928 7,658 13,120 Impairment of acquired assets — 88,282 — Professional fees 22,566 11,650 10,964 Share-based compensation expense 2,519 — — Real estate owned operating expenses — — 3,653 Depreciation and amortization 5,408 2,107 2,233 Other expenses 6,572 3,946 3,312 Total expenses $ 77,510 $ 142,956 $ 49,156 Other (income)/loss: Provision/(benefit) for credit losses 36,115 ( 5,192 ) 13,296 Impairment losses on real estate owned assets — — 398 Realized (gain)/loss on extinguishment of debt ( 15 ) — ( 3,678 ) Realized (gain)/loss on sale of commercial mortgage loans, held for sale 354 ( 26 ) ( 184 ) Realized (gain)/loss on sale of real estate owned assets, held for sale — ( 9,809 ) ( 1,851 ) Realized (gain)/loss on sale of other real estate investments, measured at fair value 33 — — Realized (gain)/loss on sale of commercial mortgage loans, held for sale, measured at fair value ( 2,358 ) ( 24,208 ) ( 15,931 ) Unrealized (gain)/loss on commercial mortgage loans, held for sale, measured at fair value 511 ( 469 ) 75 Unrealized (gain)/loss on other real estate investments, measured at fair value 659 19 32 Trading (gain)/loss 119,220 36,128 10,137 Unrealized (gain)/loss on derivatives 15,840 ( 7,402 ) 995 Realized (gain)/loss on derivatives ( 60,033 ) ( 484 ) 12,486 Total other (income)/loss $ 110,326 $ ( 11,443 ) $ 15,775 Income/(loss) before taxes 13,816 29,301 52,684 Provision/(benefit) for income tax ( 399 ) 3,599 $ ( 2,062 ) Net income/(loss) $ 14,215 $ 25,702 $ 54,746 Net (income)/loss attributable to noncontrolling interest 216 — — Net income/(loss) attributable to Franklin BSP Realty Trust, Inc. $ 14,431 $ 25,702 $ 54,746 Net income/(loss) attributable to common shareholders $ ( 27,310 ) $ ( 7,885 ) $ 39,826 Basic net income per share $ ( 0.38 ) $ ( 0.18 ) $ 0.90 Diluted net income per share $ ( 0.38 ) $ ( 0.18 ) $ 0.90 Basic weighted average shares outstanding 71,628,365 43,419,209 44,384,813 Diluted weighted average shares outstanding 71,628,365 43,434,731 44,398,879 The accompanying notes are an integral part of these consolidated financial statements. F-5 Table of Contents FRANKLIN BSP REALTY TRUST, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Dollars In thousands) Year Ended December 31, 2022 2021 2020 Net income $ 14,215 $ 25,702 $ 54,746 Unrealized gain/(loss) on available for sale securities $ 390 $ 8,256 $ ( 7,278 ) Amounts related to cash flow hedges: Change in net unrealized gain/(loss) $ ( 220 ) $ ( 852 ) $ — Reclassification adjustment for amounts included in net income/(loss) 282 790 — $ 62 $ ( 62 ) $ — Comprehensive (income)/loss attributable to noncontrolling interest $ 216 $ — $ — Comprehensive income attributable to Franklin BSP Realty Trust, Inc. $ 14,883 $ 33,896 $ 47,468 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 CHANGES IN STOCKHOLDERS' EQUITY (In thousands, except share data) Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income/(Loss) Accumulated Deficit Preferred E Preferred F Total Stockholders' Equity Noncontrolling Interest Total Equity Number of Shares Par Value 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/(loss) — — — — 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/(loss) — — — ( 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 ) Common stock 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/(loss) — — — — 25,702 — — 25,702 — 25,702 Distributions declared — — — — ( 86,410 ) — — ( 86,410 ) — ( 86,410 ) Other comprehensive income/(loss) — — — 8,194 — — — 8,194 — 8,194 Contributions in noncontrolling interest, net — — — — — — — — 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-7 Table of Contents FRANKLIN BSP REALTY TRUST, INC. THE ACCOMPANYING CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (In thousands, except share data) Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income/(Loss) Accumulated Deficit Preferred E Preferred F Total Stockholders' Equity Noncontrolling Interest Total Equity Number of Shares Par Value Balance, December 31, 2021 43,965,928 $ 441 $ 903,264 $ ( 62 ) $ ( 167,179 ) $ 258,742 $ 710,431 $ 1,705,637 $ 5,764 $ 1,711,401 Issuance of common stock — — — — — — — — — — Common stock repurchases ( 1,416,369 ) ( 14 ) ( 16,565 ) — — — — ( 16,579 ) — ( 16,579 ) Common stock issued through distribution reinvestment plan 73,501 1 999 — — — — 1,000 — 1,000 Share-based compensation 516,887 — 2,519 — — — — 2,519 — 2,519 Offering costs — — — — ( 91 ) — — ( 91 ) — ( 91 ) Preferred F exchanged for common stock 39,733,299 397 710,034 — — — ( 710,431 ) — — Preferred C exchanged for common stock 119,538 1 1,996 — — — — 1,997 — 1,997 Net income/(loss) attributable to Franklin BSP Realty Trust, Inc. — — — — 14,431 — — 14,431 — 14,431 Net (income)/loss attributable to noncontrolling interest — — — — — — — — 216 216 Distributions declared — — — — ( 146,386 ) — — ( 146,386 ) — ( 146,386 ) Other comprehensive income/(loss) — — — 452 — — — 452 — 452 Contributions in noncontrolling interest, net — — — — — — — — 9,428 9,428 Balance, December 31, 2022 82,992,784 $ 826 $ 1,602,247 $ 390 $ ( 299,225 ) $ 258,742 $ — $ 1,562,980 $ 15,408 $ 1,578,388 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 CASH FLOWS (In thousands) For the Years Ended December 31, 2022 2021 2020 Cash flows from operating activities: Net income/(loss) $ 14,215 $ 25,702 $ 54,746 Adjustments to reconcile net income to net cash provided by operating activities: Premium amortization and (discount accretion), net ( 12,619 ) ( 7,035 ) ( 5,999 ) Accretion of deferred commitment fees ( 9,450 ) ( 10,139 ) ( 6,410 ) Amortization of deferred financing costs 11,490 9,203 9,585 Share-based compensation 2,519 211 193 Realized (gain)/loss from sale of real estate owned, held for sale — ( 9,809 ) ( 1,851 ) Realized (gain)/loss from sale of other real estate investments, measured at fair value 33 — — Realized (gain)/loss from extinguishment of debt ( 15 ) — ( 3,678 ) Realized (gain)/loss on swap terminations ( 55,301 ) ( 616 ) — Realized (gain)/loss on sale of commercial mortgage loans, held for sale 354 — — Trading (gain)/loss 119,220 36,128 10,137 Unrealized (gain)/loss on commercial mortgage loans held for sale, measured at fair value 511 ( 469 ) 75 Unrealized (gain)/losses on derivative instruments 15,840 ( 7,402 ) 995 Unrealized loss on other real estate investments, measured at fair value 659 19 32 Depreciation and amortization 5,329 2,107 2,233 Recognition of deferred rent revenue — — ( 150 ) Provision/(benefit) for credit losses 36,115 ( 5,192 ) 13,296 Impairment losses on real estate owned assets — — 398 Origination of commercial mortgage loans, held for sale, measured at fair value ( 366,692 ) ( 420,673 ) ( 267,553 ) Proceeds from sale of commercial mortgage loans, held for sale, measured at fair value 384,808 454,073 312,206 Severance and deferred compensation — ( 22,168 ) — Changes in assets and liabilities: Accrued interest receivable ( 563 ) ( 4,675 ) 7,423 Prepaid expenses and other assets ( 6,879 ) 94,864 ( 7,079 ) Accounts payable and accrued expenses 5,027 3,640 ( 5,837 ) Due to affiliates ( 2,109 ) 8,013 4,736 Interest payable 10,023 715 ( 2,164 ) Net cash (used in)/provided by operating activities $ 152,515 $ 146,497 $ 115,334 Cash flows from investing activities: Cash acquired through merger $ — $ 174,083 $ — Origination and purchase of commercial mortgage loans, held for investment ( 2,227,723 ) ( 2,881,852 ) ( 1,281,158 ) Principal repayments received on commercial mortgage loans, held for investment 1,258,393 1,225,645 1,228,225 Principal repayments received on commercial mortgage loans, held for sale, measured at fair value 532 — — Proceeds from (purchase)/sale of other real estate investments 2,045 426 — Purchase of real estate owned and capital expenditures ( 663 ) ( 134,052 ) ( 2,824 ) Proceeds from sale of real estate owned, held for sale — 29,912 22,472 Proceeds from sale of commercial mortgage loans, held for sale 9,344 52,615 77,164 Purchase of real estate securities ( 220,630 ) — ( 148,580 ) Proceeds from sale/(repayment) of real estate securities 3,731,716 2,059,418 346,201 Principal collateral on mortgage investments 545,416 541,313 — Proceeds from sale/(purchase) of derivative instruments ( 1,165 ) 1,239 ( 813 ) Net cash (used in)/provided by investing activities $ 3,097,265 $ 1,068,747 $ 240,687 Cash flows from financing activities: Cash consideration paid in merger $ — $ ( 20,485 ) $ — Proceeds from issuance of common stock — — 10,672 Proceeds from issuances of redeemable convertible preferred stock — 15,000 47 Payments for common stock repurchases ( 16,579 ) ( 11,417 ) ( 10,259 ) F-9 Table of Contents FRANKLIN BSP REALTY TRUST, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Borrowings on collateralized loan obligations 1,630,639 1,410,173 — Repayments of collateralized loan obligations ( 662,410 ) ( 869,887 ) ( 182,680 ) Borrowings on repurchase agreements - commercial mortgage loans 1,918,631 1,874,694 682,970 Repayments of repurchase agreements - commercial mortgage loans ( 2,257,372 ) ( 1,131,434 ) ( 659,173 ) Borrowings on repurchase agreements - real estate securities 18,457,406 13,553,886 2,675,218 Repayments of repurchase agreements - real estate securities ( 22,196,183 ) ( 15,983,193 ) ( 2,882,749 ) Proceeds from other financing and loan participation - commercial mortgage loans 38,537 6,524 31,379 Repayments on other financing and loan participation - commercial mortgage loans ( 139 ) — — Borrowings on unsecured debt — 210,000 — Repayments of unsecured debt ( 50,000 ) ( 160,000 ) — Borrowing on mortgage note payable — 23,940 11,712 Payments of deferred financing costs ( 15,232 ) ( 9,285 ) ( 349 ) Cash collateral received on interest rate swaps 56,767 11,138 — Proceeds from interest rate swap settlements 8,478 9,115 — Distributions to noncontrolling interest ( 745 ) — — Contributions from noncontrolling interest 125 — — Distributions paid ( 139,415 ) ( 67,955 ) ( 49,790 ) Net cash (used in)/provided by financing activities: $ ( 3,227,492 ) $ ( 1,139,186 ) $ ( 373,002 ) Net change in cash, cash equivalents and restricted cash $ 22,288 $ 76,058 $ ( 16,981 ) Cash, cash equivalents and restricted cash, beginning of period 168,199 92,141 109,122 Cash, cash equivalents and restricted cash, end of period $ 190,487 $ 168,199 $ 92,141 Reconciliation of cash, cash equivalents and restricted cash: Cash and cash equivalents, beginning of period $ 154,929 $ 82,071 $ 87,246 Restricted cash, beginning of period 13,270 10,070 21,876 Cash, cash equivalents and restricted cash, beginning of period $ 168,199 $ 92,141 $ 109,122 Cash and cash equivalents, end of period $ 179,314 $ 154,929 $ 82,071 Restricted cash, end of period 11,173 13,270 10,070 Cash, cash equivalents and restricted cash, end of period $ 190,487 $ 168,199 $ 92,141 Supplemental disclosures of cash flow information: Cash payments for income taxes $ 1,199 $ 140 $ 4,400 Cash payments for interest 144,195 51,050 59,819 Supplemental disclosures of non-cash flow information: Common stock issued through distribution reinvestment plan $ 1,963 $ 5,110 $ 8,814 Commercial mortgage loans transferred from held for investment to held for sale 9,296 52,615 76,979 Distribution payable 36,317 30,346 15,688 Net assets acquired through foreclosure 79,481 — 35,411 Transfer of net assets to real estate owned, held for sale 36,497 — — Conversion of Series F preferred stock to common stock 710,431 — Conversion of Series D preferred stock to Series H preferred stock 89,748 — — Partial conversion of Series C preferred stock to Series I preferred stock 5,000 — — Partial conversion of Series C preferred stock to common stock 1,997 — — 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 Series A preferred stock to common stock — ( 127,603 ) — The accompanying notes are an integral part of these consolidated financial statements. F-10 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 Note 1 - Organization and Business Operations Franklin BSP Realty Trust, Inc., (the "Company") is a real estate finance company that primarily originates, acquires and manages a diversified portfolio of commercial real estate debt investments secured by properties located within and outside the United States. The Company is a Maryland corporation and has made tax elections to be treated as a real estate investment trust (a "REIT") for U.S. federal income tax purposes since 2013. The Company believes that it has qualified as a REIT and intends to continue to meet the requirements for qualification and taxation as a REIT. Substantially all of the Company's business is conducted through Benefit Street Partners Realty Operating Partnership, L.P. (the “OP”), a Delaware limited partnership. The Company is the sole general partner and directly or indirectly holds all of the units of limited partner interests in the OP. In addition, the Company, through one or more subsidiaries which are treated as a taxable REIT subsidiary (a “TRS”), is indirectly subject to U.S. federal, state and local income taxes. The Company has no employees. Benefit Street Partners L.L.C. serves as the Company's advisor (the "Advisor") pursuant to an advisory agreement, as amended on August 18, 2021 (the "Advisory Agreement"). The Advisor, an investment adviser registered with the SEC, is a credit-focused alternative asset management firm. Established in 2008, the Advisor's credit platform manages funds for institutions and high-net-worth investors across various credit funds and complementary strategies including high yield, levered loans, private/opportunistic debt, liquid credit, structured credit and commercial real estate debt. These strategies complement each other as they all leverage the sourcing, analytical, compliance, and operational capabilities that encompass the platform. The Advisor manages the Company's affairs on a day-to-day basis. The Advisor receives compensation fees and reimbursements for services related to the investment and management of the Company's assets and the operations of the Company. The advisor is a wholly-owned subsidiary of Franklin Resources, Inc., which together with its various subsidiaries operates as "Franklin Templeton”. The Company invests in commercial real estate debt investments, which may include first mortgage loans, subordinated mortgage loans, mezzanine loans and participations in such loans. The Company also originates conduit loans which the Company intends to sell through its TRS into commercial mortgage-backed securities ("CMBS") securitization transactions. Historically this business has focused primarily on CMBS, commercial real estate collateralized loan obligation bonds ("CRE CLO bonds"), collateralized debt obligations ("CDOs") and other securities. As a result of the October 2021 acquisition of Capstead Mortgage Corporation ("Capstead"), the Company acquired a portfolio of residential mortgage backed securities (“RMBS”) in the form of residential adjustable-rate mortgage pass-through securities ("ARM Agency Securities" or "ARMs") issued and guaranteed by government-sponsored enterprises or by an agency of the federal government. Although the Company continues to hold a small portion of this portfolio it does not intend to do so long-term and intends to reinvest proceeds from this portfolio in its other businesses. The Company also owns real estate that was either acquired by the Company through foreclosure or deed in lieu of foreclosure, or that was purchased for investment, primarily subject to triple net leases. On October 19, 2021, the Company completed a merger with 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 consisted primarily of cash and ARM Agency Securities issued and guaranteed by government-sponsored enterprises or by an agency of the federal government. Although the Company continues to hold a small portion of this portfolio it does not intend to do so long-term and intends to reinvest proceeds from this portfolio in its other businesses. 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-11 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company, the OP and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. In determining whether the Company has a controlling financial interest in a joint venture and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the other partners or members, as well as whether the entity is a variable interest entity ("VIE") for which the Company is the primary beneficiary. The Company has determined the OP is a VIE of which the Company is the primary beneficiary. Substantially all of the Company's assets and liabilities are held by the OP. The Company consolidates all entities that it controls through either majority ownership or voting rights. In addition, the Company consolidates all VIEs of which the Company is considered the primary beneficiary. VIEs are entities in which equity investors (i) do not have the characteristics of a controlling financial interest and/or (ii) do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The entity that consolidates a VIE is its primary beneficiary and is generally the entity with (i) the power to direct the activities that most significantly affect the VIE’s economic performance and (ii) the right to receive benefits from the VIE or the obligation to absorb losses of the VIE that could be significant to the VIE. Non-controlling interest represents the equity of consolidated joint ventures that are not owned by the Company. The accompanying consolidated financial statements include the accounts of collateralized loan obligations ("CLOs") issued and securitized by wholly owned subsidiaries of the Company. The Company has determined the CLOs are VIEs of which the Company's subsidiary is the primary beneficiary. The assets and liabilities of the CLOs are consolidated in the accompanying consolidated balance sheets in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidation. Certain prior year balances have been reclassified in order to conform to the current period presentation. For the years ended December 31, 2021 and 2020, Realized (gain)/loss on sale of real estate securities of $ 1.4 million and $ 10.1 million respectively, was reclassified to Trading (gain)/loss in our consolidated statements of operations. 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 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-12 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 Held for Sale - Commercial mortgage loans that are intended to be sold in the foreseeable future are reported as held for sale and are 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, Measured at Fair Value - 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, held for investment - Amounts capitalized to real estate owned, held for investment consist of the cost of acquisition or construction, any tenant improvements or major improvements, betterments that extend the useful life of the related asset, and transaction costs associated with the acquisition of an individual asset that does not qualify as a business combination. All repairs and maintenance are expensed as incurred. Additionally, the Company capitalizes interest while the development, or redevelopment, of a real estate owned asset is in progress. No development or redevelopments of real estate owned assets are in progress as of December 31, 2022. The Company’s real estate owned, held for investment 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, held for sale - 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. 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-13 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 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 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 The allowance for credit losses required under ASU 2016-13 is deducted from the respective loan's amortized cost basis on the Company’s consolidated balance sheets. General allowance for credit losses The general allowance for credit losses for the Company’s financial instruments carried at amortized cost and off-balance sheet credit exposures, such as loans held for investment and unfunded loan commitments represents a lifetime estimate of expected credit losses. Factors considered by the Company when determining the general provision for credit losses reserve include loan-specific characteristics such as loan-to-value (“LTV”) ratio, vintage year, loan term, property type, occupancy and geographic location, financial performance of the borrower, expected payments of principal and interest, as well as internal or external information relating to past events, current conditions and reasonable and supportable forecasts. The general allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist for multiple financial instruments. If similar risk characteristics do not exist, the Company measures the general allowance for credit losses on an individual instrument basis. The determination of whether a particular financial instrument should be included in a pool can change over time. If a financial asset’s risk characteristics change, the Company evaluates whether it is appropriate to continue to keep the financial instrument in its existing pool or evaluate it individually. F-14 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 In measuring the general allowance for credit losses for financial instruments including our unfunded loan commitments that share similar risk characteristics, the Company primarily applies a probability of default (“PD”)/loss given default (“LGD”) model for instruments that are collectively assessed, whereby the provision 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 2018 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. Specific allowance for credit losses For financial instruments where the borrower is experiencing financial difficulty based on the Company’s assessment at the reporting date 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 provision for credit losses. For financial instruments which the Company identifies reasonable doubt as to whether the collection of contractual components can be satisfied, a loan specific allowance for credit losses analysis is performed. Determining whether a specific allowance for credit losses for a loan is required entails significant judgment from management and is based on several factors including (i) the underlying collateral performance, (ii) discussions with the borrower, (iii) borrower events of default, and (iv) other facts that impact the borrower’s ability to pay the contractual amounts due under the terms of the loan. If a loan is determined to have a specific allowance for credit losses, the specific allowance for credit losses is recorded as a component of our Current Expected Credit Loss ("CECL") reserve by applying the practical expedient for collateral dependent loans. The CECL reserve is assessed on an individual basis for such loans by comparing the estimated fair value of the underlying collateral, less costs to sell, to the book value of the respective loan. These valuations require judgments, which include assumptions regarding capitalization rates, discount rates, leasing, creditworthiness of major tenants, occupancy rates, availability and cost of financing, exit plans, loan sponsorship, actions of other lenders, and other factors deemed relevant by the Company. Actual losses, if any, could ultimately differ materially from these estimates. The Company only expects to write-off specific provisions if and when such amounts are deemed non-recoverable. Non-recoverability is generally determined at the time a loan is settled, or in the case of foreclosure, when the underlying asset is sold. Non-recoverability may also be concluded if, in the Company's determination, it is deemed certain that all amounts due will not be collected. If a loan is determined to be impaired based on the above considerations, management records a write-off through a charge to the allowance for credit losses and the respective loan balance. Risk Rating In developing the provision 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 provision for credit losses. This methodology results in loans being segmented by risk classification into risk rating categories that are associated with estimated probabilities of default and principal loss. Risk rating categories range from "1" to "5" with "1" representing the lowest risk of loss and "5" representing the highest risk of loss with the ratings updated quarterly. At the time of origination or purchase, loans held for investment are ranked as a “2” and will move accordingly going forward based on the ratings which are defined as follows: 1. Very Low Risk- Investment exceeding fundamental performance expectations and/or capital gain expected. Trends and risk factors since time of investment are favorable. 2. Low Risk- Performing consistent with expectations and a full return of principal and interest expected. Trends and risk factors are neutral to favorable. 3. Average Risk- Performing investments requiring closer monitoring. Trends and risk factors show some deterioration. 4. High Risk/Delinquent/Defaulted/Potential for Loss- Underperforming investment with the potential of some interest loss but still expecting a positive return on investment. Trends and risk factors are negative. 5. Impaired/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 provision for credit losses. F-15 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 Changes in the provision 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 a provision for credit losses for accrued interest receivable as balances are written off in a timely manner when loans, real estate securities or preferred equity investments are designated as non-performing and placed on non-accrual or cost recovery status within 90 days of becoming past due. Non-performing status The Company designates loans as non-performing when (i) full payment of principal and coupon interest components become 90-days past due ("non-accrual status"); or (ii) the Company has reasonable doubt as to whether the collection of contractual components can be satisfied ("cost recovery status"). When a loan is designated as non-performing and placed on non-accrual status, interest is only recognized as income when payment has been received. Loans designated as non-performing and placed on non-accrual status are removed from their non-performing designation when collection of principal and coupon interest components have been satisfied. When a loan is designated as non-performing and placed on cost recovery status, the cost-recovery method is applied to which receipt of principal or coupon interest is recorded as a reduction to the amortized cost until collection of all contractual components are reasonably assured. Troubled Debt Restructuring (“TDR”) The Company classifies an individual financial instrument as a TDR when it has a reasonable expectation that the financial instrument’s contractual terms will be modified in a manner that grants concession to the borrower who is experiencing financial difficulty. Concessions could include term extensions, payment deferrals, interest rate reductions, principal forgiveness, forbearance, or other actions designed to maximize the Company’s collection on the financial instrument. The Company determines the provision 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 real estate securities were classified as available for sale ("AFS") and carried at fair value, and subsequently any unrealized gains or losses are recognized as a component of accumulated other comprehensive income or loss. The Company elected the fair value option for its real estate securities, available for sale, and as a result, any unrealized gains or losses on such real estate securities will be recorded in the Company’s consolidated statements of comprehensive income. Related discounts, premiums and acquisition expenses on investments are amortized or accreted over the life of the investment using the effective interest method. Amortization 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 provision for credit losses including but not limited to; performance of the underlying assets in the security, borrower financial resources and investment in collateral, collateral type, credit ratings, project economics and geographic location as well as national and regional economic factors. The non-credit loss component of the unrealized loss within the Company’s AFS portfolio is recognized as an adjustment to the individual security’s asset balance with an offsetting entry to accumulated other comprehensive income in the consolidated balance sheets. F-16 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 Trading In the merger with Capstead, the Company acquired a portfolio of residential mortgage pass-through securities consisting primarily of ARM Agency Securities issued and guaranteed by government-sponsored enterprises, either Fannie Mae, Freddie Mac, or by an agency of the federal government, Ginnie Mae. ARM Agency Securities and are classified as "trading". ARM Agency Securities are recorded at fair value on the balance sheets with trading gains and losses due to fair value changes and sales of these securities recorded in the Company's consolidated statements of operations. The Company calculates trading gains and losses on the sales of ARM Agency Securities based on the specific identification method. Fair values fluctuate with current and projected changes in interest rates, prepayment expectations and other factors such as market liquidity conditions and the perceived credit quality of agency securities. Judgment is required to interpret market data and develop estimated fair values, particularly in circumstances of deteriorating credit quality and market liquidity. Repurchase Agreements Commercial mortgage loans and real estate securities sold under repurchase agreements have been treated as collateralized financing transactions because the Company maintains effective control over the transferred securities. Commercial mortgage loans and real estate securities financed through a repurchase agreement remain on the Company’s consolidated balance sheets as an asset and cash received from the purchaser is recorded as a liability. Interest paid in accordance with repurchase agreements is recorded in interest expense on the Company's consolidated statements of operations. Deferred Financing Costs The deferred financing costs related to the Company's various Master Repurchase Agreements as well as certain prepaid subscription costs are included in Prepaid expenses and other assets on the consolidated balance sheets. Deferred financing cost on the Company's 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. Offering and Related Costs Since 2018, the Company has from time to time offered, shares of the Company’s common stock or one or more series of its preferred stock, including its former Series C convertible preferred stock (the “Series C Preferred Stock,”), former Series D convertible preferred stock (the “Series D Preferred Stock”), Series H convertible preferred stock (the “Series H Preferred Stock”) and former Series I convertible preferred stock (the “Series I Preferred Stock”) in private placements exempt from the registration requirements of the Securities Act of 1933, as amended. In connection with these offerings, the Company incurred various offering costs. These offering costs include but are not limited to legal, accounting, printing, mailing and filing fees, and diligence expenses of broker-dealers. Offering costs for the common stock are recorded in the Company’s stockholders’ equity, while the offering costs for the Series C Preferred Stock and Series D Preferred Stock are included within Series C Preferred Stock and Series D Preferred Stock, respectively, on the Company’s consolidated balance sheets. Offering costs for the Series H Preferred Stock and Series I Preferred Stock were expensed to the Company's consolidated statement of operations. Equity Incentive Plan The Company maintains the Franklin BSP Realty Trust, Inc. 2021 Equity Incentive Plan (the “2021 Incentive Plan”), pursuant to which the Company has granted and may in the future, from time to time, grant equity awards to the Company’s directors, officers and employees (if it ever has employees), employees of the Advisor and its affiliates, or certain of the Company’s consultants, advisors or other service providers to the Company or an affiliate of the Company. The 2021 Incentive Plan, which is administered by the Compensation Committee of the board 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, long-term incentive plan units and cash bonus awards. In January 2022, the Company issued for the first time under the 2021 Incentive Plan awards of restricted stock units ("RSUs") to its officers and certain other personnel of the Advisor who provide services to the Company. These awards are service-based and vest in equal annual installments beginning on the anniversary of the date of grant over a period of three years , subject to continuing service. One share of the Company’s common stock will be issued for each unit that vests. These awards also grant non-forfeitable dividend equivalent rights equal to the cash dividend paid in the ordinary course on a common share to the Company's common shareholders. Upon termination for any reason, all unvested RSUs will be forfeited by the grantee, who will be given no further rights to such RSUs. The fair value of the RSUs are expensed over the vesting period, which are included in share-based compensation expense on the consolidated statements of operations. F-17 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 Restricted Share Plan The Company also had an Amended and Restated Employee and Director Incentive Restricted Share Plan (the "RSP"), which provided the Company with the ability to grant awards of restricted shares to the Company’s directors, officers and employees (if the Company ever has employees), employees of the Advisor and its affiliates, employees of entities that provide services to the Company, directors of the Advisor or of entities that provide services to the Company, the Advisor and its affiliates. The total number of common shares granted under the RSP shall not exceed 5 % of the Company’s authorized common shares, and in any event, will not exceed 4.0 million shares (as such number may be adjusted for stock splits, stock distributions, combinations and similar events). The RSP expired on February 7, 2023. Restricted share awards entitle the recipient to receive common shares from the Company under terms that provide for vesting over a specified period of time or upon attainment of pre-established performance objectives. Such awards would typically be forfeited with respect to the unvested shares upon the termination of the recipient’s employment or other relationship with the Company. Restricted shares may not, in general, be sold or otherwise transferred until restrictions are removed and the shares have vested. Holders of restricted shares may receive cash distributions prior to the time that the restrictions on the shares have lapsed. Any distributions payable in common shares shall be subject to the same restrictions as the underlying restricted shares. The fair value of the restricted share awards are expensed over the vesting period, which are included in share-based compensation expense on the consolidated statements of operations. Distribution Reinvestment Plan The Company maintains a dividend reinvestment plan ("DRIP") pursuant to which stockholders may reinvest dividends into shares of common stock. Shares of common stock purchased through the DRIP for dividend reinvestments are supplied either directly by the Company as newly issued shares or via purchases by the DRIP administrator of shares of common stock on the open market, at the Company’s option. If the shares are purchased in the open market, the purchase price is the average price per share of shares purchased; if the shares are purchased directly from the Company, the purchase price is generally 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 DRIP at any time in its sole discretion. Income Taxes The Company has conducted its operations to qualify as a REIT for U.S. federal income tax purposes beginning with its taxable year ended December 31, 2013. As a REIT, if the Company meets certain organizational and operational requirements and distributes at least 90 % of its "REIT taxable income" (determined before the deduction of dividends paid and excluding net capital gains) to its stockholders in a year, it will not be subject to U.S. federal income tax to the extent of the income that it distributes. However, even if the Company qualifies for taxation as a REIT, it may be subject to certain state and local taxes on income in addition to U.S. federal income and excise taxes on its undistributed income. The Company, through its TRSs, is indirectly subject to U.S. federal, state and local income taxes. The Company’s TRSs are not consolidated for U.S. federal income tax purposes, but are instead taxed as C corporations. For financial reporting purposes, the TRSs are consolidated and a provision for current and deferred taxes is established for the portion of earnings recognized by the Company with respect to its interest in its TRSs. Total income tax provision/(benefit) for the years ended December 31, 2022, December 31, 2021 and December 31, 2020 were $( 0.4 ) million, $ 3.6 million and $( 2.1 ) million, respectively. The Company uses a more-likely-than-not threshold for recognition and derecognition of tax positions taken or to be taken in a tax return. The Company has assessed its tax positions for all open tax years beginning with December 31, 2017 and concluded that there were no uncertainties to be recognized. The Company’s accounting policy with respect to interest and penalties related to tax uncertainties is to classify these amounts as provision for income taxes. The Company utilizes the TRSs to reduce the impact of the prohibited transaction tax and to avoid penalty for the holding of assets not qualifying as real estate assets for purposes of the REIT asset tests. Any income associated with a TRS is fully taxable because the TRS is subject to federal and state income taxes as a domestic C corporation based upon its net income. 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. F-18 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 The Company recognizes all derivatives on the consolidated balance sheets at fair value. The Company does not designate derivatives as hedges to qualify for hedge accounting for financial reporting purposes and therefore any net payments under, or fluctuations in the fair value of these derivatives have been recognized currently in unrealized (gain)/loss on derivative instruments in the accompanying consolidated statements of operations. The Company records derivative asset and liability positions on a gross basis with any collateral posted with or received from counterparties recorded separately within Restricted cash on the Company’s consolidated balance sheets. Certain derivatives that the Company has entered into are subject to master netting agreements with its counterparties, allowing for netting of the same transaction, in the same currency, on the same date. Per Share Data The Company’s Series H Preferred Stock and Series I Preferred Stock are each considered a participating security and the Company calculates basic earnings per share using the two-class method. The Company’s dilutive earnings per share calculation is computed using the more dilutive result of the treasury stock method, assuming the participating security is a potential common share, or the two-class method, assuming the participating security is not converted. The Company calculates basic earnings per share by dividing net income applicable to common stock for the period by the weighted-average number of shares of common stock outstanding for that period. Diluted earnings per share reflects the potential dilution that could occur from shares outstanding if potential shares of common stock with a dilutive effect have been issued in connection with the restricted stock plan or upon conversion of the outstanding shares of the Company’s Series H Preferred Stock and Series I Preferred Stock , except when doing so would be anti-dilutive. Reportable Segments The Company has determined that it has 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, CRE CLO bonds, CDO notes and other securities. As a result of the October 2021 acquisition of Capstead, the Company acquired and continues to hold a portfolio of RMBS in the form of the ARM Agency Securities. The Company has, and intends to reinvest the cash and proceeds from dividends, interest, repayments and sales of these assets into its other segments and does not intend to continue to invest in ARM Agency Securities or RMBS in general. • 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 C Preferred Stock Pursuant to the terms of the Series C Preferred Stock, 400 outstanding shares of Series C Preferred Stock each converted into 299.2 shares of common stock on October 19, 2022, while 1,000 shares of Series C Preferred Stock were exchanged for an equal number of shares of the Company’s newly created Series I Preferred Stock, $ 0.01 par value per share, on October 20, 2022. Series D Preferred Stock All of the shares of the Series D Preferred Stock were exchanged for an equivalent number of shares of Series H Preferred Stock on June 24, 2022. F-19 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 Series H Preferred Stock The Series H Preferred Stock ranks senior to the Common Stock and on parity with the Series I Preferred Stock and the Company’s 7.50 % 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 H 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 H Preferred Stock into the Common Stock. Dividends on the Series H 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 H 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 H 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. On June 24, 2022, the Company issued 17,950 shares of Series H Preferred Stock to the holder of the Series D Preferred Stock in exchange for an equal amount of shares of Series D Preferred Stock. The exchange was undertaken to accommodate the holder’s request to extend the mandatory conversion date set forth in the terms of the Series D Preferred Stock, which was set to occur on October 19, 2022, to January 19, 2023. The Company received no consideration for the exchange. On January 19, 2023, the Series H Preferred Stock was amended such that the mandatory conversion date was extended by one year, to January 19, 2024. The Series H Preferred Stock is on parity with the Series I Preferred Stock and Series E Preferred Stock with respect to preference on liquidation and dividend rights. Unless earlier converted, the Series H Preferred Stock will automatically convert into common stock at a rate of 299.2 shares of common stock per share of Series H Preferred Stock (subject to adjustments as described in the Articles Supplementary for the Series H Preferred Stock) on January 19, 2024. The holder of the Series H Preferred Stock has the right to convert up to 4,487 shares of Series H Preferred Stock one time in each calendar month through December 2023, upon 10 business days’ advance notice to the Company. Holders of the Series H 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 H Preferred Stock will be equal to the number of shares of common stock a share of Series H 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 H 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 H Preferred Stock and to take certain actions materially adverse to the holders of the Series H Preferred Stock. Series I Preferred Stock On October 20, 2022, 1,000 shares of Series C Preferred Stock were exchanged for an equal number of shares of the Company’s newly created Series I Preferred Stock. The exchange was undertaken to accommodate the holder’s request to extend the mandatory conversion date set forth in the terms of the Series C Preferred Stock, which was set to occur on October 19, 2022, to January 19, 2023. There were no other material differences between the terms of the Series C Preferred Stock and Series I Preferred Stock. The Company received no consideration for the exchange. The Series I Preferred Stock was parity with the Series H Preferred Stock and Series E Preferred Stock with respect to preference on liquidation and dividend rights. The terms of the Series I Preferred Stock were substantially the same as the Series H Preferred Stock, except that the holders of the Series I Preferred Stock have the option to accelerate the mandatory conversion date, which is January 19, 2023, upon at least 10 days' written notice. On January 19, 2023, all of the 1,000 outstanding shares of the Series I Preferred Stock converted by their terms into 299.2 shares of common stock per share of Series I Preferred Stock. Automatically Convertible Preferred Stock - Series F Preferred Stock On April 19, 2022, all of the 39,733,299 outstanding shares of the Company’s Series F Preferred Stock, $ 0.01 par value, automatically converted on a one -for-one basis into an equal amount of shares of Common Stock, pursuant to the terms of the Articles Supplementary of the Series F Preferred Stock. There are no shares of Series F Preferred Stock outstanding. F-20 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 Perpetual Preferred Stock—Series E Preferred Stock The Series E Preferred Stock has no stated maturity and is not subject to any sinking fund or mandatory redemption. The Series E Preferred Stock ranks, with respect to rights to the payment of dividends and the distribution of assets upon its liquidation, dissolution or winding up, senior to the common stock and on a parity with the Series I Preferred Stock and Series H Preferred Stock. The liquidation preference is $ 25.00 per share, plus an amount equal to any accumulated and unpaid dividends. Holders of shares of the Series E Preferred Stock are entitled to receive, when, as and if authorized by our board of directors and declared by the Company, out of funds legally available for the payment of dividends, cumulative cash dividends at the rate of 7.50 % of the $ 25.00 per share liquidation preference per annum (equivalent to $ 1.875 per annum per share). Dividends on the Series E Preferred Stock are cumulative and payable quarterly in arrears. Dividends on the Series E Preferred Stock will accumulate whether or not the Company has earnings, whether or not there are funds legally available for the payment of those dividends and whether or not those dividends are declared. 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”. Accounting Pronouncements Not Yet Adopted In March 2022, the FASB issued ASU 2022-02 "Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures," or ASU 2022-02. ASU 2022-02 eliminates the accounting guidance for troubled debt restructurings and requires disclosure of current-period gross write-offs by year of loan origination. Additionally, ASU 2022-02 updates the accounting for credit losses under ASC 326 and adds enhanced disclosures with respect to loan refinancing and restructuring in the form of principal forgiveness, interest rate concessions, other-than-insignificant payment delays, or term extensions when the borrower is experiencing financial difficulties. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022. The amendments should be applied prospectively, however for the recognition and measurement of troubled debt restructurings, the entity has the option to apply a modified retrospective transition method, resulting in a cumulative-effect adjustment to retained earnings in the period of adoption. We are currently evaluating what impact, if any ASU 2022-02 will have on our consolidated financial statements. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides temporary optional expedients and exceptions to the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London interbank offered rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The guidance is effective upon issuance and generally can be elected over time through December 31, 2024, as extended under ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 . The Company has not adopted any of the optional expedients or exceptions through December 31, 2022, but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period as circumstances evolve. F-21 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 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, 2022 December 31, 2021 Senior loans $ 5,251,464 $ 4,204,464 Mezzanine loans 18,312 22,424 Total gross carrying value of loans 5,269,776 4,226,888 General allowance for credit losses 26,624 15,827 Specific allowance for credit losses (1) 14,224 — Less: Allowance for credit losses 40,848 15,827 Total commercial mortgage loans, held for investment, net $ 5,228,928 $ 4,211,061 ________________________ (1) As of December 31, 2022, the Company recorded a specific reserve with respect to a retail loan designated as non-performing. As of December 31, 2022 and 2021, the Company's total commercial mortgage loan portfolio, held for investment, was composed of 161 and 165 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, 2022 and 2021 (dollars in thousands): Year Ended December 31, 2022 MultiFamily Retail Office Industrial Mixed Use Hospitality Self Storage Manufactured Housing Total Beginning Balance $ 9,681 $ 288 $ 776 $ 86 $ 169 $ 4,597 $ 152 $ 78 $ 15,827 Changes: General allowance/(benefit) for credit losses 11,485 89 ( 106 ) 173 ( 122 ) ( 533 ) ( 142 ) ( 47 ) 10,797 Specific allowance/(benefit) for credit losses — 25,281 — — — — — — 25,281 Write offs from specific allowance for credit losses — ( 11,057 ) — — — — — — ( 11,057 ) Ending Balance $ 21,166 $ 14,601 $ 670 $ 259 $ 47 $ 4,064 $ 10 $ 31 $ 40,848 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 Changes: General allowance/(benefit) for credit losses 6,875 ( 116 ) ( 799 ) ( 3,709 ) 37 ( 7,049 ) 35 ( 44 ) ( 4,770 ) Write offs from general allowance for credit losses ( 289 ) — — — — — — — ( 289 ) Ending Balance $ 9,681 $ 288 $ 776 $ 86 $ 169 $ 4,597 $ 152 $ 78 $ 15,827 The Company recorded an increase in its general allowance for credit losses during the year ended December 31, 2022 of $ 10.8 million. The primary driver for the higher reserve balance is the change in economic outlook since the end of the prior year coupled with the increase in overall portfolio of commercial mortgage loans, held for investment as of December 31, 2022. F-22 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 As of December 31, 2022, the Company identified a commercial mortgage loan, held for investment secured by a portfolio of retail properties, that was assigned a risk rating of “5” due to certain conditions that negatively impacted the underlying collateral property’s cash flows. Since the loan was considered a collateral-dependent asset under GAAP, as of December 31, 2022, a specific provision for credit losses of $ 14.2 million was recorded based on the difference between the Company’s estimation of the fair value of the underlying collateral property, less costs to sell, and the loan’s amortized cost basis. As of December 31, 2022, the loan has a fully funded outstanding principal balance of $ 63.6 million, and carrying value of $ 46.1 million. The significant unobservable inputs to the discounted cash flow model used to estimate the fair value of the retail properties collateralizing the loan included a capitalization rate, which ranged from 4.75 %- 6.50 %. The following table presents the activity in the Company' s allowance for credit losses for the unfunded loan commitments, which is included in accounts payable and accrued expenses in the consolidated balance sheets as of December 31, 2022 and 2021 (dollars in thousands): Year Ended December 31, 2022 MultiFamily Retail Office Industrial Mixed Use Hospitality Self Storage Manufactured Housing Total Beginning Balance $ 137 $ 1 $ 13 $ 3 $ 10 $ 79 $ — $ — $ 243 Changes: General allowance/(benefit) for credit losses 28 ( 37 ) 73 — ( 10 ) ( 18 ) — 1 37 Ending Balance $ 165 $ ( 36 ) $ 86 $ 3 $ — $ 61 $ — $ 1 $ 280 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 Changes: General allowance/(benefit) for credit losses 52 1 ( 34 ) ( 415 ) ( 4 ) ( 22 ) — — ( 422 ) Ending Balance $ 137 $ 1 $ 13 $ 3 $ 10 $ 79 $ — $ — $ 243 The following table represents the composition by loan collateral type and region of the Company's commercial mortgage loans, held for investment portfolio (dollars in thousands): December 31, 2022 December 31, 2021 Loan Collateral Type Par Value Percentage Par Value Percentage Multifamily $ 4,030,975 76.1 % $ 2,953,938 69.6 % Hospitality 510,566 9.7 % 460,884 10.9 % Office 405,705 7.7 % 485,575 11.4 % Retail 120,017 2.3 % 104,990 2.5 % Industrial 93,035 1.8 % 88,956 2.1 % Other 128,676 2.4 % 148,619 3.5 % Total $ 5,288,974 100.0 % $ 4,242,962 100.0 % December 31, 2022 December 31, 2021 Loan Region Par Value Percentage Par Value Percentage Southeast $ 2,229,756 42.2 % $ 1,106,439 26.2 % Southwest 1,763,492 33.3 % 1,764,905 41.6 % Mideast 706,192 13.4 % 646,125 15.2 % Far West 234,891 4.4 % 301,040 7.1 % Great Lakes 162,162 3.1 % 183,930 4.3 % Various 192,481 3.6 % 240,523 5.6 % Total $ 5,288,974 100.0 % $ 4,242,962 100.0 % F-23 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 As of December 31, 2022 and 2021, the Company's total commercial mortgage loans, held for sale, measured at fair value was composed of two loans and one loan, respectively. As of December 31, 2022 and 2021, the contractual principal outstanding of commercial mortgage loans, held for sale, measured at fair value was $ 15.6 million and $ 34.3 million, respectively. As of December 31, 2022 and 2021, none of the Company's commercial mortgage loans, held for sale, measured at fair value were in default or greater than ninety days past due. The following table represents the composition by loan collateral type and region of the Company's commercial mortgage loans, held for sale, measured at fair value (dollars in thousands): December 31, 2022 December 31, 2021 Loan Collateral Type Par Value Percentage Par Value Percentage Retail $ 12,000 76.8 % $ — — % Office 3,625 23.2 % 34,250 100.0 % Total $ 15,625 100.0 % $ 34,250 100.0 % December 31, 2022 December 31, 2021 Loan Region Par Value Percentage Par Value Percentage Southeast $ 15,625 100.0 % $ 34,250 100.0 % Loan Credit Quality and Vintage The following tables present the amortized cost of our commercial mortgage loans, held for investment as of December 31, 2022 and 2021, by loan collateral type, the Company’s internal risk rating and year of origination. The risk ratings are updated as of December 31, 2022. F-24 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 As of December 31, 2022 2022 2021 2020 2019 2018 2017 Total Multifamily: Risk Rating: 1-2 internal grade $ 1,511,181 $ 2,184,362 $ 74,372 $ — $ 34,668 $ — $ 3,804,583 3-4 internal grade — 167,707 10,807 — 34,731 — 213,245 Total Multifamily Loans $ 1,511,181 $ 2,352,069 $ 85,179 $ — $ 69,399 $ — $ 4,017,828 Retail: Risk Rating: 1-2 internal grade $ 22,275 $ 33,884 $ — $ — $ — $ — $ 56,159 3-4 internal grade — — — — — — — 5 internal grade 60,304 — — — — — 60,304 Total Retail Loans $ 82,579 $ 33,884 $ — $ — $ — $ — $ 116,463 Office: Risk Rating: 1-2 internal grade $ — $ 50,351 $ 189,740 $ 66,110 $ 18,683 $ — $ 324,884 3-4 internal grade — — 54,533 25,748 — 80,281 Total Office Loans $ — $ 50,351 $ 244,273 $ 91,858 $ 18,683 $ — $ 405,165 Industrial: Risk Rating: 1-2 internal grade $ 77,762 $ — $ 14,955 $ — $ — $ — $ 92,717 3-4 internal grade — — — — — — — Total Industrial Loans $ 77,762 $ — $ 14,955 $ — $ — $ — $ 92,717 Mixed Use: Risk Rating: 1-2 internal grade $ 19,939 $ 32,463 $ — $ — $ — $ — $ 52,402 3-4 internal grade — — — — — — — Total Mixed Use Loans $ 19,939 $ 32,463 $ — $ — $ — $ — $ 52,402 Hospitality: Risk Rating: 1-2 internal grade $ 137,055 $ 160,397 $ — $ 49,564 $ 22,116 $ — $ 369,132 3-4 internal grade 32,305 — — 28,882 — 78,867 140,054 Total Hospitality Loans $ 169,360 $ 160,397 $ — $ 78,446 $ 22,116 $ 78,867 $ 509,186 Self Storage: Risk Rating: 1-2 internal grade $ — $ 14,986 $ 29,858 $ — $ — $ — $ 44,844 3-4 internal grade — — — — — — — Total Self Storage Loans $ — $ 14,986 $ 29,858 $ — $ — $ — $ 44,844 Manufactured Housing: Risk Rating: 1-2 internal grade $ 10,479 $ 6,677 $ 6,344 $ — $ — $ — $ 23,500 3-4 internal grade — — 7,671 — — — 7,671 Total Manufactured Housing Loans $ 10,479 $ 6,677 $ 14,015 $ — $ — $ — $ 31,171 Total $ 1,871,300 $ 2,650,827 $ 388,280 $ 170,304 $ 110,198 $ 78,867 $ 5,269,776 F-25 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 December 31, 2021 2021 2020 2019 2018 2017 2016 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-26 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 Past Due Status The following table presents an aging summary of the loans amortized cost basis at December 31, 2022 (dollars in thousands): Multifamily Retail Office Industrial Mixed Use Hospitality Self Storage Manufactured Housing Total Status: Current $ 4,017,828 $ 56,159 $ 405,165 $ 92,717 $ 52,402 $ 452,111 $ 44,844 $ 31,171 $ 5,152,397 1-29 days past due — — — — — — — — — 30-59 days past due — — — — — — — — — 60-89 days past due — — — — — — — — — 90-119 days past due — — — — — — — — — 120+ days past due (1) — 60,304 — — — 57,075 — — 117,379 Total $ 4,017,828 $ 116,463 $ 405,165 $ 92,717 $ 52,402 $ 509,186 $ 44,844 $ 31,171 $ 5,269,776 ________________________ (1) For the year ended December 31, 2022, there was no interest income recognized on these loans. Non-performing Status The following table presents the amortized cost basis of the loans on nonaccrual status as of December 31, 2022 and December 31, 2021 (dollars in thousands): December 31, 2022 December 31, 2021 Non-performing loan amortized cost at beginning of year, January 1 $ 57,075 $ 94,887 Addition of non-performing loan amortized cost 60,304 — Less: Removal of non-performing loan amortized cost — 37,812 Non-performing loan amortized cost at end of period $ 117,379 $ 57,075 As of December 31, 2022, the Company had two loans with a total amortized cost basis of $ 117.4 million designated as non-performing status. One loan is for a hotel property located in New York, NY, which was placed on non-accrual status in 2019 and had an amortized cost basis of $ 57.1 million as of December 31, 2022. No specific allowance for credit losses has been recorded on the loan. The Company did no t recognize any interest income on the non-accrual loan during the year ended December 31, 2022. The second loan relates to a commercial mortgage loan with a fully funded outstanding principal balance of $ 63.6 million collateralized by a portfolio of retail properties in various locations throughout the United States. The loan has been assigned a risk rating of “5” and concurrently, the Company elected to apply a practical expedient for collateral dependent assets in which the allowance for credit losses is calculated as the difference between the estimated fair value of the underlying collateral, less estimated cost to sell, and the amortized cost basis of the individual loan. The loan was evaluated in accordance with ASC 310 - Receivables and was determined to be a TDR. As of December 31, 2022, the Company has recorded a specific allowance for credit losses of $ 14.2 million on this loan. Further, the Company has designated the loan as non-performing and placed the loan on cost recovery status by ceasing the recognition of interest income. Any contractual amounts received are accounted for under the cost-recovery method, until the loan qualifies for return to accrual status. As of December 31, 2022, the Company has received $ 8.0 million in cost recovery proceeds, which reduced the amortized cost of the loan. As of December 31, 2021, the Company had one loan, the hotel property in New York, NY, with a carrying value of $ 57.1 million, designated as non-performing, which had no specific allowance for credit losses. F-27 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 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/Defaulted/Potential For Loss - Underperforming investment with the potential of some interest loss but still expecting a positive return on investment. Trends and risk factors are negative. 5 Impaired/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, 2022 and 2021, the weighted average risk ratings of loans were 2.2 and 2.1 , respectively. The following table represents the allocation by risk rating for the Company's commercial mortgage loans, held for investment, (dollars in thousands): December 31, 2022 December 31, 2021 Risk Rating Number of Loans Par Value Risk Rating Number of Loans Par Value 1 — $ — 1 — $ — 2 141 4,783,568 2 148 3,903,047 3 15 281,071 3 16 282,840 4 4 160,695 4 1 57,075 5 1 63,640 5 — — 161 $ 5,288,974 165 $ 4,242,962 F-28 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 For the years ended December 31, 2022 and December 31, 2021, the activity in the Company's commercial mortgage loans, held for investment portfolio, net of provision for credit losses, was as follows (dollars in thousands): Year Ended December 31, 2022 2021 Amortized cost, Beginning of Year $ 4,226,888 $ 2,714,734 Acquisitions and originations 2,247,613 2,897,002 Principal repayments ( 1,109,769 ) ( 1,286,598 ) Discount accretion/premium amortization 12,614 7,038 Loans transferred from/(to) commercial real estate loans, held for sale ( 9,296 ) ( 52,615 ) Net fees capitalized into carrying value of loans ( 13,775 ) ( 15,150 ) Transfer to real estate owned ( 80,460 ) ' (1) ( 37,523 ) Cost recovery ( 4,039 ) — Amortized cost, End of Year $ 5,269,776 $ 4,226,888 Allowance for credit losses, Beginning of Year $ ( 15,827 ) $ ( 20,886 ) General (provision)/benefit for credit losses ( 10,797 ) 4,770 Specific (provision)/benefit for credit losses ( 25,281 ) — Write offs from specific allowance for credit losses 11,057 ' (1) — Write offs from general allowance for credit losses — 289 Allowance for credit losses, End of Year $ ( 40,848 ) $ ( 15,827 ) Balance at End of Year $ 5,228,928 $ 4,211,061 ________________________ (1) See Note 5 - Real Estate Owned for details. F-29 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 Note 4 - Real Estate Securities Real Estate Securities Classified As Trading The following is a summary of the Company's RMBS classified by collateral type and interest rate characteristics as of December 31, 2022 (dollars in thousands): Carrying Amount Average Yield (1) December 31, 2022 Agency Securities: Fannie Mae/Freddie Mac ARMs $ 235,728 2.42 % 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 % ________________________ (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”). The maturity of ARM Agency Securities is directly affected by prepayments of principal on the underlying mortgage loans. Consequently, actual maturities may be significantly shorter than the portfolio’s weighted average contractual maturity of 182 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 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. For the year ended December 31, 2022 and 2021, the Company sold trading securities totaling $ 3.8 billion and $ 1.9 billion. For the year ended December 31, 2022 and 2021, the Company recognized trading losses on ARM Agency Securities of $ 119.2 million and $ 34.8 million, respectively, due to principal paydowns, changes in market values, and sales of these securities, and were included in Trading (gain)/loss in the Company's consolidated statements of operations. The Company did not own any trading securities during 2020. Real Estate Securities Classified As Available For Sale The following is a summary of the Company's real estate securities, available for sale, measured at fair value as of December 31, 2022 (dollars in thousands): December 31, 2022 Type Interest Rate Maturity Par Value Fair Value CRE CLO bond 1 7.1 % 8/19/2035 $ 40,000 $ 39,795 CRE CLO bond 2 7.6 % 8/19/2035 25,000 25,010 CRE CLO bond 3 8.4 % 8/19/2035 10,000 10,056 CRE CLO bond 4 7.4 % 10/25/2039 36,700 36,990 CRE CLO bond 5 8.0 % 10/25/2039 35,000 35,298 CRE CLO bond 6 8.6 % 10/25/2039 14,300 14,221 CRE CLO bond 7 7.3 % 10/19/2039 60,000 59,655 $ 221,000 $ 221,025 F-30 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 The Company classified its CRE CLO bonds as available for sale and reported them at fair value in the consolidated balance sheets with changes in fair value recorded in accumulated other comprehensive income/(loss) as of December 31, 2022. The weighted average contractual maturity for CRE CLO investments included within the CRE CLO bond portfolio as of December 31, 2022 was 15.4 years. As of December 31, 2021, the Company did not hold any Real Estate Securities classified as Available for Sale. The following table shows the amortized cost, allowance for expected credit losses, unrealized gain/(loss) and fair value of the Company's CRE CLO bonds by investment type as of December 31, 2022 (dollars in thousands): Amortized Cost Credit Loss Allowance Unrealized Gain Unrealized (Loss) Fair Value December 31, 2022 CLO $ 220,635 $ — $ 833 ( 443 ) $ 221,025 As of December 31, 2022, the Company held seven CRE CLO bonds with an amortized cost basis of $ 220.6 million and a net unrealized gain of $ 0.39 million, three of which were held in an unrealized loss position of $ 0.4 million. As of December 31, 2022, zero positions had an unrealized loss for a period greater than twelve months. As of December 31, 2022, the fair value of the Company's CRE CLO bonds that were in an unrealized loss position for less than twelve months, and for which an allowance for credit loss has not been recorded was $ 113.7 million. Note 5 - Real Estate Owned Real Estate Owned, Held for Investment The following table summarizes the Company's real estate owned, held for investment assets as of December 31, 2022 (dollars in thousands): As of December 31, 2022 Acquisition Date (1) Property Type Primary Location(s) Land Building and Improvements Furniture, Fixtures and Equipment Accumulated Depreciation Real Estate Owned, net September 2021 Industrial Jeffersonville, GA $ 3,436 $ 84,259 $ 2,928 $ ( 2,877 ) $ 87,746 Various (2) Retail Various 9,105 31,036 — ( 115 ) 40,026 $ 12,541 $ 115,295 $ 2,928 $ ( 2,992 ) $ 127,772 ________________________ (1) Refer to Note 2 for the useful life of the above assets. (2) As discussed below, ten retail properties associated with a loan secured by the Walgreen's Portfolio (defined below) were foreclosed upon during the quarter ended December 31, 2022. The properties are located throughout the country. 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 (1) Property Type Primary Location(s) Land Building and Improvements Furniture, Fixtures and Equipment Accumulated Depreciation Real Estate Owned, net September 2021 Industrial Jeffersonville, GA $ 3,436 $ 84,259 $ 2,928 $ ( 575 ) $ 90,048 ________________________ (1) Refer to Note 2 for the useful life of the above asset. Depreciation expense for the years ended December 31, 2022 and 2021 totaled $ 2.4 million and $ 1.0 million, respectively. 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 non-controlling interest. 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-31 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 As disclosed in Note 3 - Commercial Mortgage Loans in April 2022, the Company fully funded a $ 113.2 million first mortgage loan, collateralized by 24 retail properties with various locations throughout the United States (the "Walgreens Portfolio"). During the quarter ended December 31, 2022, through foreclosures, the Company acquired ten of the 24 properties and as a result recorded at fair value $ 40.1 million of real estate owned, held for investment. These properties are held through a joint venture entity, BSPRT Walgreens Portfolio, LLC (the "Walgreens JV"), formed by the Company and an affiliate of the Company. The Company has 75.618 % ownership interest in the Walgreens Portfolio, while the affiliated fund has 24.242 % interest. The Company has control of the Walgreens Portfolio as the majority owner in the joint venture and, therefore, consolidates the Walgreens Portfolio on its consolidated balance sheet. As of December 31, 2022, the Company recorded $ 10.5 million in non-controlling interest related to the Walgreens Portfolio on its consolidated balance sheets as of December 31, 2022. Subsequent to year ended December 31, 2022, the Walgreens JV obtained legal ownership of four additional properties. We are engaged in ongoing litigation relating to a loan secured by the retail properties located throughout the United States, as more fully described in "Part I, Item 3. Legal Proceedings". Real Estate Owned, Held for Sale During the year ended December 31, 2022, the Company entered into agreements with two borrowers to voluntarily transfer their assets in exchange for the removal of the borrowers' obligation to repay all of the associated commercial mortgage loans receivable with an amortized cost of $ 36.9 million, in aggregate, provided by the Company. One of the voluntary transfers collateralized by a multifamily portfolio was the result of the borrower experiencing financial difficulty and the recorded investment in the receivable was more than the fair value, less estimated costs to sell, for the collateral collected. Therefore, the voluntary transfer qualified as a TDR. The Company accounted for both voluntary transfers and the real estate owned acquired as asset acquisitions. The voluntary transfers resulted in a total realized loss of $ 0.4 million, in aggregate, and was recognized in Realized (gain)/loss on sale of commercial mortgage loan, held for sale in the consolidated statements of operations for the year ended December 31, 2022. As of December 31, 2022, the Company has designated the properties included within the real estate owned business segment as held for sale in accordance with ASC 360. The properties are currently being marketed and sales are probable to occur within one year. As of December 31, 2022, the Company recognized an unrealized loss of $ 0.7 million on real estate owned, held for sale assets resulting in a carrying value of $ 36.5 million, in aggregate. There was no real estate owned, held for sale on the Company's consolidated balance sheets as of December 31, 2021. F-32 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 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, 2022 and 2021 (dollars in thousands): Identified intangible assets: December 31, 2022 December 31, 2021 Gross amount 58,542 49,192 Accumulated amortization ( 3,711 ) ( 720 ) Total, net $ 54,831 $ 48,472 Identified intangible liabilities: Gross amount 6,507 $ — Accumulated amortization ( 79 ) — Total, net $ 6,428 $ — Rental Income On September 17, 2021, the Company purchased an industrial facility that is subject to an existing triple net lease. The minimum rental amount due under the lease is subject to annual increases of 2.0 %. The initial term of the lease expires in 2038 and contains renewal options for four consecutive five-year terms. The remaining lease term is 15.8 years. Rental income for this operating lease for the year ended December 31, 2022 and 2021 totaled $ 9.2 million and $ 2.6 million. Rental income is included in Revenue from real estate owned in the consolidated statements of operations. During the quarter ended December 31, 2022, the Company acquired ten retail properties through foreclosures that were each subject to triple net leases. The initial terms of the leases expire in March 2034 and contain renewal options for eleven consecutive five-year terms. The remaining lease term is 11.3 years. Rental income for these operating leases for the year ended December 31, 2022 totaled $ 0.4 million. The following table summarizes the Company's schedule of future minimum rents to be received under the lease (dollars in thousands): Future Minimum Rents December 31, 2022 2023 $ 10,494 2024 10,655 2025 10,820 2026 10,987 2027 and beyond 132,525 Total minimum rent $ 175,481 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, 2022 is approximately 15.1 years. Amortization expense for the years ended December 31, 2022 and 2021 totaled $ 3.0 million and $ 1.1 million, respectively. F-33 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 Amortization of acquired below-market leases, net of acquired above-market leases, resulted in an increase to rental revenues of $ 0.1 million for the year ended December 31, 2022. The following table summarizes the Company's expected acquired below (above) market leases, net amortization over the next five years, assuming no further acquisitions or dispositions (dollars in thousands): Amortization Expense - Acquired below (above) market leases, net December 31, 2022 2023 $ ( 576 ) 2024 ( 576 ) 2025 ( 576 ) 2026 ( 576 ) 2027 ( 576 ) The following table summarizes the Company's expected other identified intangible assets, net amortization over the next five years, assuming no further acquisitions or dispositions (dollars in thousands): Amortization Expense - Other identified intangible assets December 31, 2022 2023 $ 3,707 2024 3,707 2025 3,707 2026 3,707 2027 3,707 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, WF Repo Facility, Barclays Revolver Facility, and Barclays Repo Facility, collectively, 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 75 % of the principal amount of the mortgage loan being pledged. F-34 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 The details of the Company's Repo Facilities at December 31, 2022 and 2021 are as follows (dollars in thousands): As of December 31, 2022 Repurchase Facility Committed Financing Amount Outstanding Interest Expense (1) Ending Weighted Average Interest Rate Term Maturity JPM Repo Facility (2) $ 500,000 $ 275,423 $ 11,773 7.42 % 10/6/2024 CS Repo Facility (3) 600,000 168,046 8,676 7.12 % 10/31/2023 WF Repo Facility (4) 500,000 79,807 7,492 7.11 % 11/21/2023 Barclays Revolver Facility (5) 250,000 — 1,267 N/A 9/20/2023 Barclays Repo Facility (6) 500,000 157,583 8,997 6.75 % 3/14/2025 Total $ 2,350,000 $ 680,859 $ 38,205 ________________________ (1) For the year ended December 31, 2022. Includes amortization of deferred financing costs. (2) With one-year extension option available at the Company's discretion. On July 7, 2022, the committed financing was increased from $ 400 million to $ 500 million. Additionally, on December 12, 2022, the Company extended the maturity date to October 6, 2024. (3) On July 12, 2022, the committed financing was increased from $ 300 million to $ 600 million. Additionally, on November 1, 2022 the maturity date was extended to October 31, 2023. (4) On May 12, 2022, the committed financing amount was increased from $ 450 million to $ 500 million. There are three more one-year extension options available at the Company's discretion. (5) The Company may increase the total commitment amount by an amount between $ 100 million and $ 150 million for three month intervals, on an unlimited basis prior to maturity. (6) There are two one-year extension options available at the Company's discretion. As of December 31, 2021 Repurchase Facility Committed Financing Amount Outstanding Interest Expense (1) Ending Weighted Average Interest Rate Term Maturity JPM Repo Facility $ 400,000 $ 136,470 $ 5,178 2.13 % 10/6/2022 CS Repo Facility 300,000 137,364 3,446 2.43 % 9/30/2022 WF Repo Facility 450,000 186,734 2,090 1.64 % 11/21/2023 Barclays Revolver Facility 250,000 166,700 1,976 6.12 % 9/20/2023 Barclays Repo Facility 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. 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, 2022 and 2021, 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 a regional bank via a participation agreement. Since inception, the Company's outstanding loan increased resultant of future fundings, leading to an increase in amount outstanding via the participation agreement. The Company incurred $ 1.7 million and $ 0.9 million of interest expense on the regional bank term loan for the year ended December 31, 2022 and 2021, respectively. As of December 31, 2022 and 2021 the outstanding participation balance was $ 59.2 million and $ 37.9 million, respectively. The loan accrued interest at an annual rate of one-month LIBOR + 2.20 % and matures on June 9, 2023. F-35 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 On February 10, 2022, the Company transferred $ 38.0 million of its interest in a term loan to a regional bank via a participation agreement. Since inception, the Company's outstanding loan could increase as a result of future fundings, which could lead to an increase in amount outstanding via the participation agreement. The Company incurred $ 0.5 million of interest expense on the regional bank term loan for the year ended December 31, 2022. As of December 31, 2022, the outstanding participation balance was $ 17.1 million. The loan accrued interest at an annual rate of one-month SOFR + 4.01 % and matures on May 1, 2025. Mortgage Note Payable On September 17, 2021, the Company, in connection with the consolidated joint venture (as discussed in Note 5 - Real Estate Owned), originated a $ 112.7 million mortgage note payable, of which $ 88.7 million is eliminated in our consolidated financial statements (see Note 5 - Real Estate Owned). As of December 31, 2022 and 2021, t he remaining outstanding mortgage note payable of $ 24.0 million is included in the consolidated balance sheet. As of December 31, 2022 , the loan accrued interest at an annual rate of Libor + 3.0 %, which is eliminated in our consolidated financial statements, and matures on October 9, 2024. Unsecured Debt As of December 31, 2022, the Company had outstanding 30-year junior subordinated notes issued in 2005 and 2006 and maturing in 2035 and 2036, respectively, with a total face amount of $ 100.0 million. Note balances net of deferred issuance costs, and related weighted average interest rates as of the indicated dates (calculated including issuance cost amortization and adjusted for the effects of related derivatives held as cash flow hedges prior to termination) were as follows (dollars in thousands): December 31, 2022 December 31, 2021 Borrowings Outstanding Weighted Average Borrowings Outstanding Weighted Average Junior subordinated notes maturing in: October 2035 ($ 35,000 face amount) $ 34,508 8.25 % $ 34,470 7.86 % December 2035 ($ 40,000 face amount) 39,513 8.39 % 39,474 7.63 % September 2036 ($ 25,000 face amount) 24,674 8.39 % 24,650 7.67 % $ 98,695 8.34 % $ 98,594 7.72 % The notes are currently redeemable, in whole or in part, without penalty, at the Company’s option. Interest paid on unsecured debt, including related derivative cash flows, totaled $ 5.7 million and $ 0.6 million for the twelve months ended December 31, 2022 and 2021, respectively. The Company entered into a $ 100.0 million lending and security agreement with Security Benefit Life Insurance Company ("SBL") in February 2020, which was amended in March and August 2020. The Company incurred $ 1.0 million and $ 2.0 million of interest expense on the lending agreement with SBL for the twelve months ended December 31, 2022 and 2021 respectively. In November 2022, the lending and security agreement with SBL was terminated by the Company. 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. F-36 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 Below is a summary of the Company's MRAs as of December 31, 2022 and 2021 (dollars in thousands): Weighted Average Counterparty Amount Outstanding Accrued Interest Collateral Pledged (1) Interest Rate Days to Maturity As of December 31, 2022 JP Morgan Securities LLC $ 103,513 $ 1,281 $ 120,751 5.34 % 22 Barclays Capital Inc. 119,351 1,646 144,778 5.18 % 50 Total/Weighted Average $ 222,864 $ 2,927 $ 265,529 5.25 % 37 As of December 31, 2021 JP Morgan Securities LLC $ 19,025 $ 261 $ 24,087 1.14 % 10 Goldman Sachs International — 37 — N/A N/A Barclays Capital Inc. 15,286 526 19,131 1.21 % 14 Citigroup Global Markets, Inc. — 81 — N/A N/A Total/Weighted Average $ 34,311 $ 905 $ 43,218 1.71 % 33 ___________________________________________________________________ (1) Includes $ 67.1 million and $ 43.2 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 December 31, 2022 and 2021, respectively. Repurchase Agreements - Real Estate Securities Classified As Trading The Company pledges its real estate securities classified as trading as collateral for repurchase agreements with commercial banks and other financial institutions. Repurchase arrangements entered into by the Company involve the sale and a simultaneous agreement to repurchase the transferred assets at a future date and are accounted for as financings. 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. F-37 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 Repurchase agreements (and related pledged collateral, including accrued interest receivable), classified by remaining maturities, and related weighted average borrowing rates as of the indicated dates were as follows (dollars in thousands): Amount Outstanding Accrued Interest Collateral Pledged Weighted Average Interest Rates December 31, 2022 Repurchase arrangements secured by Agency securities with maturities of 30 days or less $ 172,144 $ 544 $ 180,400 4.25 % Repurchase arrangements secured by Agency securities with maturities of 31 to 90 days 45,000 114 47,210 4.51 % $ 217,144 $ 658 $ 227,610 4.30 % December 31, 2021 Repurchase arrangements secured by Agency securities with maturities of 30 days or less $ 4,144,473 $ 8,908 $ 4,327,020 0.13 % Average repurchase agreements outstanding were $ 1.0 billion and $ 4.0 billion during the year ended December 31, 2022 and 2021, respectively. 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. Interest paid on repurchase agreements, including related derivative payments, totaled $ 8.5 million and $ 1.24 million during the twelve months ended December 31, 2022 and 2021, respectively. Collateralized Loan Obligation On May 13, 2022, the Company called all of the outstanding notes issued by BSPRT 2018-FL4 Issuer, Ltd., a wholly owned indirect subsidiary of the Company. The outstanding principal of the notes on the date of the call was $ 69.5 million. The Company recognized all the remaining unamortized deferred financing costs of $ 5.2 million recorded within the Interest expense line of the consolidated statements of operations, which was a non-cash charge. As of December 31, 2022 and 2021, 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 25 and 48 mortgage assets having a principal balance of $ 378.8 million and $ 589.0 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. As of December 31, 2022 and 2021 , the notes issued by BSPRT 2021-FL6 Issuer, Ltd. and BSPRT 2021-FL6 Co-Issuer, LLC, each wholly owned indirect subsidiaries of the Company , are collateralized by interests in a pool of 58 and 44 mortgage assets having a principal balance of $ 691.1 million and $ 682.3 million, respectively, (the "2021-FL6 Mortgage Assets"). The sale of the 2021-FL6 Mortgage Assets to BSPRT 2021-FL6 Issuer, Ltd. is governed by a Collateral Interest Purchase Agreement dated as of March 25, 2021, between the Company and BSPRT 2021-FL6 Issuer, Ltd. As of December 31, 2022 and 2021 , the notes issued by BSPRT 2021-FL7 Issuer, Ltd. and BSPRT 2021-FL7 Co-Issuer, LLC, each wholly owned indirect subsidiaries of the Company , are collateralized by interests in a pool of 39 and 47 mortgage assets having a principal balance of $ 899.7 million and $ 871.4 million, respectively, (the "2021-FL7 Mortgage Assets"). The sale of the 2021-FL7 Mortgage Assets to BSPRT 2021-FL7 Issuer, Ltd. is governed by a Collateral Interest Purchase Agreement dated as of March 25, 2021, between the Company and BSPRT 2021-FL7 Issuer, Ltd. On February 15, 2022, BSPRT 2022-FL8 Issuer, Ltd. and BSPRT 2022-FL8 Co-Issuer, LLC, both wholly owned indirect subsidiaries of the Company entered into an indenture with the OP, as advancing agent and U.S. Bank National Association, as note administrator and trustee, which governs the issuance of approximately $ 1.1 billion principal balance secured floating rate notes, of which $ 960.0 million were purchased by third party investors and $ 132.0 million were purchased by a wholly owned subsidiary of the OP. In addition, concurrently with the issuance of the notes, BSPRT 2022-FL8 Issuer, Ltd. also issued 108,000 preferred shares, par value of $ 0.001 per share and with an aggregate liquidation preference and notional amount equal to $ 1,000 per share, which were not offered as part of closing the indenture. For U.S. federal income tax purposes, BSPRT 2022-FL8 Issuer, Ltd. and BSPRT 2022-FL8 Co-Issuer, LLC are disregarded entities. F-38 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 As of December 31, 2022, the notes issued by BSPRT 2022-FL8 Issuer, Ltd. and BSPRT 2022-FL8 Co-Issuer, LLC, are collateralized by interests in a pool of 39 mortgage assets having a principal balance of $ 1.2 billion, respectively, (the "2022-FL8 Mortgage Assets"). The sale of the 2022-FL8 Mortgage Assets to BSPRT 2022-FL8 Issuer, Ltd. is governed by a Collateral Interest Purchase Agreement dated as of December 21, 2021, between the Company and BSPRT 2022-FL8 Issuer, Ltd. On June 29, 2022, BSPRT 2022-FL9 Issuer, LLC, a wholly-owned indirect subsidiary of the Company, entered into an indenture with the OP, as advancing agent, U.S. Bank Trust Company, National Association, as trustee and note administrator, and U.S. Bank National Association, as custodian and in other capacities, which governs the issuance of approximately $ 740.9 million principal balance secured floating rate notes, of which $ 670.6 million were purchased by third party investors and $ 70.3 million were purchased by a wholly-owned subsidiary of the OP. In addition, concurrently with the issuance of the notes, BSPRT 2022-FL9 Issuer, LLC also issued 62,246 preferred shares, par value of $ 0.001 per share and with an aggregate liquidation preference and notional amount equal to $ 1,000 per share, which were not offered as part of closing the indenture. For U.S. federal income tax purposes, BSPRT 2022-FL9 Issuer, LLC is a disregarded entity. As of December 31, 2022, the notes issued by BSPRT 2022-FL9 Issuer, LLC are collateralized by interests in a pool of 50 mortgage assets having a principal balance of $ 797.5 million, respectively, (the "2022-FL9 Mortgage Assets"). The sale of the 2022-FL9 Mortgage Assets to BSPRT 2022-FL9 Issuer, LLC is governed by a Collateral Interest Purchase Agreement, dated as of June 29, 2022, by and among FBRT Sub REIT, BSPRT 2022-FL9 Issuer, LLC, the OP, and BSPRT 2022-FL9 Seller, LLC. F-39 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 The Company, through its wholly-owned subsidiaries, holds the preferred equity tranches of the above CLOs of approximately $ 401.8 million and $ 329.2 million as of December 31, 2022 and 2021, respectively. The following table represents the terms of the notes issued by 2019-FL5 Issuer, 2021-FL6 Issuer, 2021-FL7 Issuer, 2022-FL8 Issuer and 2022-FL9 Issuer (collectively the "CLOs"), respectively, as of December 31, 2022 (dollars in thousands): CLO Facility Tranche Par Value Issued Par Value Outstanding (1) Interest Rate Maturity Date 2019-FL5 Issuer Tranche A $ 407,025 $ — 1M LIBOR + 115 5/15/2029 2019-FL5 Issuer Tranche A-S 76,950 73,715 1M LIBOR + 148 5/15/2029 2019-FL5 Issuer Tranche B 50,000 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 2022-FL8 Issuer Tranche A 690,000 690,000 1M SOFR + 150 2/15/2037 2022-FL8 Issuer Tranche A-S 66,000 66,000 1M SOFR + 185 2/15/2037 2022-FL8 Issuer Tranche B 55,500 55,500 1M SOFR + 205 2/15/2037 2022-FL8 Issuer Tranche C 67,500 67,500 1M SOFR + 230 2/15/2037 2022-FL8 Issuer Tranche D 81,000 81,000 1M SOFR + 280 2/15/2037 2022-FL9 Issuer Tranche A 423,667 423,667 1M SOFR + 255 5/15/2039 2022-FL9 Issuer Tranche A-S 96,380 96,380 1M SOFR + 310 5/15/2039 2022-FL9 Issuer Tranche B 42,166 42,166 1M SOFR + 360 5/15/2039 2022-FL9 Issuer Tranche C 48,189 48,189 1M SOFR + 415 5/15/2039 2022-FL9 Issuer Tranche D 49,194 49,194 1M SOFR + 505 5/15/2039 2022-FL9 Issuer Tranche E 11,041 11,043 1M SOFR + 565 5/15/2039 $ 3,601,586 — $ 3,147,728 ________________________ (1) Excludes $ 453.4 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, 2022. F-40 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 The following table represents the terms of the notes issued by the 2018-FL4 Issuer, 2019-FL5 Issuer, 2021-FL6 Issuer and 2021-FL7 Issuer, 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, 2022 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, 2022 and 2021 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, 2022 December 31, 2021 Cash and cash equivalents (1) $ 43,246 $ 187,668 Commercial mortgage loans, held for investment, net (2) 3,942,918 2,629,431 Accrued interest receivable 15,444 5,918 Total Assets $ 4,001,608 $ 2,823,017 Liabilities Notes payable (3)(4) $ 3,601,102 $ 2,482,762 Accrued interest payable 10,582 1,598 Total Liabilities $ 3,611,684 $ 2,484,360 ________________________ (1) Includes $ 42.5 million and $ 187.0 million of cash held by the servicer related to CLO loan payoffs as of December 31, 2022 and 2021, respectively. (2) The balance is presented net of allowance for credit losses of $ 13.2 million and $ 8.7 million as of December 31, 2022 and 2021, respectively. (3) Includes $ 453.4 million and $ 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, 2022 and 2021, respectively. (4) The balance is presented net of deferred financing cost and discount of $ 19.2 million and $ 17.3 million as of December 31, 2022 and 2021, respectively. F-42 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 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, 2022, 2021 and 2020, respectively (dollars in thousands, except share amounts): Year Ended December 31, Numerator 2022 2021 2020 Net income/(loss) $ 14,215 $ 25,702 $ 54,746 Net (income)/loss from noncontrolling interest 216 — — Less: Preferred stock dividends 41,741 33,587 14,920 Less: Undistributed earnings allocated to preferred stock — — — Net income/(loss) attributable to common shareholders (for basic and diluted earnings per share) $ ( 27,310 ) $ ( 7,885 ) $ 39,826 Denominator Weighted-average common shares outstanding for basic earnings per share 71,628,365 43,419,209 44,384,813 Effect of dilutive shares: Unvested restricted shares and stock units (1) — 15,521 14,066 Weighted-average common shares outstanding for diluted earnings per share 71,628,365 43,434,731 44,398,879 Basic earnings per share $ ( 0.38 ) $ ( 0.18 ) $ 0.90 Diluted earnings per share $ ( 0.38 ) $ ( 0.18 ) $ 0.90 _________________________________________________________ (1) The effect of dilutive shares excluded an aggregate of 476,653 weighted average restricted shares and stock units for year ended December 31, 2022, as the effect was anti-dilutive. Additionally, the effect of dilutive shares excluded an aggregate of 17,521,845 weighted average common equivalent of convertible preferred shares for the year ended December 31, 2022, as the effect was anti-dilutive. F-43 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 Note 9 - Redeemable Convertible Preferred Stock and Equity Transactions The following table presents the summary of the Company's outstanding shares of Redeemable Convertible Preferred Stock, Perpetual Preferred Stock, Automatically Convertible Preferred Stock and Common Stock as of December 31, 2022 and December 31, 2021 (dollars in thousands, except share amounts): Balance as of Shares Outstanding as of Fourth Quarter 2022 Dividend/Distribution Per Share (6) December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 Redeemable Convertible Preferred Stock Series C Preferred Stock (1) $ — $ 6,971 — 1,400 n/a Series D Preferred Stock (2) $ — $ 89,684 — 17,950 n/a Series H Preferred Stock (2) $ 89,748 $ — 17,950 — $ 106.22 Series I Preferred Stock (1) $ 5,000 $ — 1,000 — $ 106.22 Perpetual Preferred Stock Series E Preferred Stock $ 258,742 $ 258,742 10,329,039 10,329,039 $ 0.46875 Automatically Convertible Preferred Stock Series F Preferred Stock (3) $ — $ 710,431 — 39,733,299 n/a Common Stock Common Stock - at par value (4)(5) $ 826 $ 441 82,992,784 43,965,928 $ 0.355 _________________________________________________________ (1) On October 19, 2022, 400 shares of the Company's Series C Preferred Stock each automatically converted into 299.2 shares of Common Stock, pursuant to the terms of the Series C Preferred Stock, resulting in the issuance of 119,538 shares of Common Stock. The remaining 1,000 outstanding shares of Series C Preferred Stock were exchanged by the holder for an equal number of the Company's newly created Series I Preferred Stock, all of which automatically converted into 299.2 shares of Common Stock on January 19, 2023, pursuant to the terms of the Series I Preferred Stock, resulting in the issuance of 299,200 shares of Common Stock. (2) 17,950 shares of Series D Preferred Stock were issued in March 2021, all of which were exchanged for an equal number of shares of Series H Preferred Stock in June 2022. Unless earlier converted by the holder, each share of the Series H Preferred Stock will automatically convert into 299.2 shares of Common Stock on January 19, 2024, pursuant to the terms of the Series H Preferred Stock. (3) On April 19, 2022, all of the 39,733,299 outstanding shares of the Company’s Series F Preferred Stock automatically converted on a one -for-one basis into an equal amount of shares of Common Stock, pursuant to the terms of the Articles Supplementary of the Series F Preferred Stock. (4) Common Stock include shares issued pursuant to the Company's distribution reinvestment plan (the "DRIP") and unvested restricted shares. (5) During the year ended December 31, 2022, the Company repurchased 1,416,369 shares of Common Stock at an average price of $ 11.71 per share, for a total of $ 16.6 million. All of these shares were retired upon settlement, reducing the total outstanding shares as of December 31, 2022. See discussion in the "Stock Repurchases" section below. (6) As declared by the Company's board of directors. Distributions In order to maintain its election to qualify as a REIT, the Company must currently distribute, at a minimum, an amount equal to 90 % of its taxable income, without regard to the deduction for distributions paid and excluding net capital gains. The Company must distribute 100 % of its taxable income (including net capital gains) to avoid paying corporate U.S. federal income taxes. Distribution payments are dependent on the availability of funds. The Company's board of directors may reduce the amount of distributions paid or suspend distribution payments at any time, and therefore, distributions payments are not assured. Dividends on the Company’s outstanding shares of preferred stock, to the extent not declared by the board of directors quarterly, will accrue, and dividends may not be paid on the Company's common stock to the extent there are accrued and unpaid dividends on the preferred stock. The amount of dividends paid on the Company’s Series H Preferred Stock and Series I Preferred Stock are generally in an amount equal to the dividends a holder of such preferred stock would have received if the preferred stock had been converted into common stock in accordance with its terms, except when the amount of common stock dividends are below the threshold stated in the terms of such preferred stock. F-44 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 The Company distributed $ 87.8 million of common stock dividends during the year ended December 31, 2022, composed of $ 85.8 million in cash and $ 2.0 million in shares of common stock issued under the DRIP. The Company distributed $ 53.1 million of common stock dividends during the year ended December 31, 2021, composed of $ 48.0 million in cash and $ 5.1 million in shares of common stock issued under the DRIP. As of December 31, 2022 and December 31, 2021, the Company had declared but unpaid common stock distributions of $ 29.5 million and $ 12.5 million, respectively, and $ 4.8 million of declared but unpaid Series E Preferred Stock distributions. Additionally, as of December 31, 2022 the Company had declared but unpaid Series H Preferred stock distributions of $ 1.9 million and declared but unpaid Series I Preferred stock distributions of $ 0.1 million. As of December 31, 2021, the Company had declared but unpaid Series C Preferred Stock distributions of $ 0.1 million, $ 1.5 million of declared but unpaid Series D Preferred Stock distributions and $ 11.3 million of declared but unpaid Series F Preferred Stock distributions. These amounts are included in Distributions payable on the Company’s consolidated balance sheets. Preferred Stock The following tables present the activity in the Company's Series C Preferred Stock for the years ended December 31, 2022 and 2021 (dollars in thousands, except share amounts): For the Years Ended December 31, 2022 December 31, 2021 Shares Amount Shares Amount Balance at Beginning of Period 1,400 $ 6,971 1,400 $ 6,962 Converted into Common Stock ( 400 ) ( 1,997 ) — — Exchanged for Series I Preferred Stock ( 1,000 ) ( 5,000 ) — — Amortization of offering costs — 26 — 9 Balance at End of Period — $ — 1,400 $ 6,971 The following table presents the activity in the Company's Series D Preferred Stock for the years ended December 31, 2022 and 2021 (dollars in thousands, except share amounts): For the Years Ended December 31, 2022 December 31, 2021 Shares Amount Shares Amount Balance at Beginning of Period 17,950 $ 89,684 — $ — Issuance of Preferred Stock — — 17,950 89,748 Exchanged for Series H Preferred Stock ( 17,950 ) ( 89,748 ) — — Offering costs — — — ( 82 ) Amortization of offering costs — 64 — 18 Balance at End of Period — $ — 17,950 $ 89,684 The following table presents the activity in the Company's Series E Preferred Stock for the years ended December 31, 2022 and 2021 (dollars in thousands, except share amounts): For the Years Ended December 31, 2022 December 31, 2021 Shares Amount Shares Amount Balance at Beginning of Period 10,329,039 $ 258,742 — $ — Issuance of Preferred Stock — — 10,329,039 258,742 Balance at End of Period 10,329,039 $ 258,742 10,329,039 $ 258,742 F-45 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 The following table presents the activity in the Company's Series F Preferred Stock for the years ended December 31, 2022 and 2021 (dollars in thousands, except share amounts): For the Years Ended December 31, 2022 December 31, 2021 Shares Amount Shares Amount Balance at Beginning of Period 39,733,299 $ 710,431 — $ — Issuance of Preferred Stock — — 39,733,299 710,431 Automatically converted into Common Stock ( 39,733,299 ) ( 710,431 ) — — Balance at End of Period — $ — 39,733,299 $ 710,431 The following table presents the activity in the Company's Series H Preferred Stock for the years ended December 31, 2022 and 2021 (dollars in thousands, except share amounts): For the Years Ended December 31, 2022 December 31, 2021 Shares Amount Shares Amount Balance at Beginning of Period — $ — — $ — Issuance of Series H Preferred Stock in exchange for Series D Preferred Stock 17,950 89,748 — — Balance at End of Period 17,950 $ 89,748 — $ — The following table presents the activity in the Company's Series I Preferred Stock for the years ended December 31, 2022 and 2021 (dollars in thousands, except share amounts): For the Years Ended December 31, 2022 December 31, 2021 Shares Amount Shares Amount Balance at Beginning of Period — $ — — $ — Issuance of Series I Preferred Stock in exchange for Series C Preferred Stock 1,000 5,000 — — Balance at End of Period 1,000 $ 5,000 — $ — Stock Repurchases The Company’s board of directors has authorized a $ 65 million share repurchase program of the Company’s common stock. The Company’s share repurchase program authorizes share repurchases at prices below the most recently reported book value per share as determined in accordance with GAAP. Purchases made under the program may be made through open market, block, and privately negotiated transactions, including Rule 10b5-1 plans, as permitted by securities laws and other legal requirements. The timing, manner, price and amount of any purchases by the Company will be determined by the Company in its reasonable business judgment and consistent with the exercise of its legal duties and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The share repurchase program does not obligate the Company to acquire any particular amount of common stock. The Company share repurchase program will remain open until at least December 31, 2023 or until the capital committed to the applicable repurchase program has been exhausted, whichever is sooner. Repurchases under the Company’s share repurchase program may be suspended from time to time at the Company’s discretion without prior notice. F-46 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 The following table is a summary of the Company’s repurchase activity of its common stock during the year ended December 31, 2022: For the Year Ended December 31, 2022 Shares Amount Authorized repurchase amount — $ 65,000 Repurchases paid (1)(2) 1,416,369 ( 16,579 ) Remaining as of December 31, 2022 $ 48,421 _________________________________________________________ (1) Amount includes commissions paid associated with share repurchases . (2) For the year ended December 31, 2022, the average purchase price was $ 11.71 per share. As of December 31, 2022, the Company had $ 48.4 million remaining under the share repurchase program. Accumulated Other Comprehensive Income/(Loss) The following tables set forth the changes in accumulated other comprehensive income/(loss) by component (dollars in thousands): For the Years Ended December 31, 2022 December 31, 2021 December 31, 2020 Total Available for Sale Securities Cash Flow Hedges Total Available for Sale Securities Cash Flow Hedges Total Available for sale securities Cash Flow Hedges Balance at Beginning of Period $ ( 62 ) $ — $ ( 62 ) $ ( 8,256 ) $ ( 8,256 ) $ — $ ( 978 ) $ ( 978 ) $ — Other comprehensive income/(loss) 170 390 ( 220 ) 7,404 8,256 ( 852 ) ( 7,278 ) ( 7,278 ) — Reclassification adjustment for amounts included in net income/(loss) 282 — 282 790 — 790 — — — Balance at End of Period $ 390 $ 390 $ — $ ( 62 ) $ — $ ( 62 ) $ ( 8,256 ) $ ( 8,256 ) $ — Note 10 - Commitments and Contingencies Unfunded Commitments Under Commercial Mortgage Loans As of December 31, 2022 and 2021, the Company had the below unfunded commitments to the Company's borrowers (dollars in thousands): Funding Expiration December 31, 2022 December 31, 2021 2022 — 25,864 2023 73,921 123,860 2024 312,009 271,056 2025 70,429 12,808 2026 and beyond 9,629 24,517 $ 465,988 $ 458,105 The borrowers are generally required to meet or maintain certain metrics in order to qualify for the unfunded commitment amounts. Litigation and Regulatory Matters The Company is not presently named as a defendant in any material litigation arising outside the ordinary course of business. However, the Company is involved in routine litigation arising in the ordinary course of business, none of which the Company believes, individually or in the aggregate, will have a material impact on the Company’s financial condition, operating results or cash flows. F-47 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 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 (as defined in the Advisory Agreement) exceeds 6.0 % per annum, our Advisor will be entitled to 15.0 % of the excess total return; provided that in no event will the annual subordinated performance fee payable to our Advisor exceed 10.0 % of the aggregate total return for such year. • The Company reimburses the Advisor for insourced expenses incurred by the Advisor on the Company's behalf related to selecting, evaluating, originating and acquiring investments in an amount up to 0.5 % of the principal amount funded by the Company to originate or acquire commercial mortgage loans and up to 0.5 % of the anticipated net equity funded by the Company to acquire real estate securities investments. The table below shows the costs incurred due to arrangements with our Advisor and its affiliates during the years ended December 31, 2022, 2021 and 2020 and the associated payable as of December 31, 2022 and 2021 (dollars in thousands): Year Ended December 31, Payable as of December 31, 2022 2021 2020 2022 2021 Acquisition expenses (1) $ 1,360 $ 1,203 $ 696 $ — $ — Administrative services expenses 12,928 7,658 13,120 3,526 — Asset management and subordinated performance fee 26,157 28,110 15,178 8,843 15,595 Other related party expenses (2)(3) 875 355 703 3,060 1,943 Total related party fees and reimbursements $ 41,320 $ 37,326 $ 29,697 $ 15,429 $ 17,538 ________________________ (1) Total acquisition fees and expenses paid during the years ended December 31, 2022, 2021 and 2020 were $ 11.7 million, $ 15.0 million and $ 7.1 million respectively, of which $ 10.3 million, $ 13.8 million and $ 6.4 million were capitalized within the commercial mortgage loans, held for investment and real estate securities, available for sale, measured at fair value lines of the consolidated balance sheets for the years ended December 31, 2022, 2021 and 2020. (2) These are related to reimbursable costs incurred related to the increase in loan origination activities and are included in Other expenses in the Company's consolidated statements of operations. (3) As of December 31, 2022 and December 31, 2021, the related party payables include $ 2.9 million and $ 1.9 million of payments made by the Advisor to third party vendors on behalf of the Company. The payables as of December 31, 2022 and 2021 in the table above are included in Due to affiliates on the Company's consolidated balance sheets. Other Transactions The Company entered into a $ 100.0 million lending and security agreement with Security Benefit Life Insurance Company ("SBL") in February 2020, which was amended in March and August 2020. The Company incurred $ 1.0 million and $ 2.0 million of interest expense on the lending agreement with SBL for the twelve months ended December 31, 2022 and 2021 respectively. In November 2022, the lending and security agreement with SBL was terminated by the Company. As of December 31, 2021 the outstanding balance was $ 50.0 million. As of the beginning of 2022, SBL held 17,950 shares of the Company's outstanding shares of Series D Preferred Stock. On June 24, 2022, all 17,950 outstanding shares of Series D Preferred Stock were exchanged for an equal amount of shares of Series H Preferred Stock for no consideration (see Note 2 - Summary of Significant Accounting Policies). F-48 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 In August 2021 the Company and an affiliate of the Company entered into a joint venture agreement and formed a joint venture entity, Jeffersonville Member, LLC (the "Jeffersonville JV") 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 affiliate 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). As discussed below, in the first quarter of 2022, pursuant to the 2021 Incentive Plan, the Company issued awards of restricted stock units to its officers and certain other personnel of the Advisor who provide services to the Company under the Advisory Agreement (see Note 12 - Share-Based Compensation). As of December 31, 2022, our commercial mortgage loans, held for investment, includes an aggregate of $ 122.9 million carrying value of loans to affiliates of our Advisor. The Company recognized $ 5.5 million interest income from these loans for the year ended December 31, 2022, in the Company’s consolidated statements of operations. As disclosed in Note 3 - Commercial Mortgage Loans in April 2022, the Company fully funded a $ 113.2 million first mortgage consisting of 24 retail properties with various locations throughout the United States. The Company entered into a joint venture agreement and formed a joint venture entity, BSPRT Walgreens Portfolio, LLC (the "Walgreens Portfolio") to acquire 75.618 % ownership interest in the Walgreens Portfolio, while the affiliated fund has 24.242 % interest (see Note 5 - Real Estate Owned). Note 12 - Share-Based Compensation Share Plan The Company's equity incentive plans provide the Company with the ability to grant equity-based awards to its directors, officers and employees (if the Company ever has employees), employees of the Advisor and its affiliates, or certain of the Company's consultants, employees of entities that provide services to the Company, directors of the Advisor or of entities that provide services to the Company, the Advisor and its affiliates. Under the Company's RSP, the total number of common shares granted shall not exceed 5 % of the Company’s authorized common shares, and in any event, will not exceed 4.0 million shares (as such number may be adjusted for stock splits, stock distributions, combinations and similar events). The RSP expired on February 7, 2023. Under the Company's 2021 Incentive Plan, as of December 31, 2022 , there were 5,007,893 shares of common stock remaining available for issuance. The Board may amend, suspend or terminate the 2021 Incentive Plan at any time; provided that no amendment, suspension or termination may impair rights or obligations under any outstanding award without the participant’s consent or violate the 2021 Incentive Plan’s prohibition on repricing. Service-based Restricted Stock and Restricted Stock Units During the year ended December 31, 2022 , in accordance with the Company's RSP, the Company issued awards of restricted stock to its non-employee directors, and in accordance with the 2021 Incentive Plan, the Company issued awards of RSUs to its officers and certain other personnel of the Advisor who provide services to the Company under the Advisory Agreement. F-49 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 Restricted Stock and RSU activity issued under the RSP and 2021 Incentive Plan for the year ended December 31, 2022 is summarized below: Shares Outstanding RSP 2021 Incentive Plan Weighted Average Grant Date Fair Value Unvested equity awards outstanding as of December 31, 2021 11,184 — $ 17.88 Grants 28,143 492,107 14.10 Forfeitures — — — Vested ( 18,393 ) — 16.14 Unvested equity awards outstanding as of December 31, 2022 20,934 492,107 $ 14.11 During the year ended December 31, 2022, the Company recognized compensation expense associated with the equity awards of $ 2.5 million, which is included in share-based compensation expense on the consolidated statements of operations. Unrecognized estimated compensation expense for these awards totaled $ 5.8 million as of December 31, 2022, to be expensed over a weighted average period of 1.5 years. Note 13 - Fair Value of Financial Instruments GAAP establishes a hierarchy of valuation techniques based on the observability of inputs used in measuring financial instruments at fair values. GAAP establishes market-based or observable inputs as the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs. The three levels of the hierarchy are described below: • Level I - Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. • Level II - Inputs (other than quoted prices included in Level I) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life. • Level III - Unobservable inputs that reflect the entity's own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques. 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 CRE CLO bonds, recorded in real estate securities, available for sale, measured at fair value on the consolidated balance sheets are valued utilizing both observable and unobservable market inputs. These factors include projected future cash flows, ratings, subordination levels, vintage, remaining lives, credit issues, and recent trades of similar real estate securities. Depending upon the significance of the fair value inputs used in determining these fair values, these real estate securities are classified in either Level II or Level III of the fair value hierarchy. The Company obtains third party pricing for determining the fair value of each CRE CLO investment, resulting in a Level II classification. F-50 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 Real estate securities classified as trading, RMBS, are measured at fair value by utilizing a third party pricing service to obtain a current estimated price of the securities. The third party pricing service utilizes relevant market information and interest rate movements and applies its internal pricing application to the evaluation to test against internal tolerances and parameters. The RMBS are classified in Level III 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 price, which are considered to be the best initial estimate of fair value. The Company engaged the services of a third party independent valuation firm to determine fair value of certain investments held by the Company. Fair value is determined using a discounted cash flow model that primarily considers changes in interest rates and credit spreads, weighted average life and current performance of the underlying collateral. Commercial mortgage loans held for sale, measured at fair value that are originated in the last month of the reporting period are held and marked to the transaction price. The Company classified the commercial mortgage loans held for sale, measured at fair value as Level III. Other real estate investments, measured at fair value on the consolidated balance sheets are valued using unobservable inputs. The Company engaged the services of a third party independent valuation firm to determine fair value of certain investments, including preferred equity investments, held by the Company. Fair value is determined using a discounted cash flow model that primarily considers changes in interest rates and credit spreads, weighted average life and current performance of the underlying collateral. The Company classified the other real estate investments, measured at fair value as Level III. The fair value for Treasury note futures is derived using market prices. Treasury note futures trade on the Chicago Mercantile Exchange (“CME”). The instruments are a variety of recently issued 10-year U.S. Treasury notes. The future contracts are liquid and are centrally cleared through the CME. Treasury note futures are generally categorized in Level I of the fair value hierarchy. The fair value for credit default swaps and interest rate swaps contracts are derived using pricing models that are widely accepted by marketplace participants. Credit default swaps and some interest rate swaps are traded in the over the counter ("OTC") market. The pricing models take into account multiple inputs including specific contract terms, interest rate yield curves, interest rates, credit curves, recovery rates, and/or current credit spreads obtained from swap counterparties and other market participants. Most inputs into the models are not subjective as they are observable in the marketplace or set per the contract. Valuation is primarily determined by the difference between the contract spread and the current market spread. The contract spread (or rate) is generally fixed and the market spread is determined by the credit risk of the underlying debt or reference entity. If the underlying indices are liquid and the OTC market for the current spread is active, credit default swaps and interest rate swaps are categorized in Level II of the fair value hierarchy. If the underlying indices are illiquid and the OTC market for the current spread is not active, credit default swaps are categorized in Level III of the fair value hierarchy. The credit default swaps and interest rate swaps are generally categorized in Level II of the fair value hierarchy. The fair value of exchange-traded swap agreements economically hedging RMBS repurchase agreements are calculated using the net discounted future fixed cash payments and the discounted future variable cash receipts which are based on expected future interest rates derived from observable market interest rate curves. The Company also incorporates both its own nonperformance risk and its counterparties’ nonperformance risk in determining fair value. In considering the effect of nonperformance risk, the Company considered the impact of netting and credit enhancements, such as collateral postings and guarantees, and has concluded that counterparty risk is not significant to the overall valuation. Interest rate swap agreements economically hedging the Company's RMBS repurchase agreements are measured at fair value on a recurring basis primarily using Level II inputs. The fair value of these derivatives are calculated including accrued interest and net of variation margin amounts received or paid through the exchange, resulting in a significantly reduced fair value amount representing the unsettled fair value of these derivatives on the consolidated balance sheets. A review of the fair value hierarchy classification is conducted on a quarterly basis. Changes in the type of inputs may result in a reclassification for certain assets or liabilities. The Company's policy with respect to transfers between levels of the fair value hierarchy is to recognize transfers into and out of each level as of the beginning of the reporting period. Material transfers between levels within the fair value hierarchy during the year ended December 31, 2022 were specifically related to the transfer of ARM Agency Securities from Level II to Level III. There were no material transfers between levels within the fair value hierarchy during the year ended December 31, 2021. F-51 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 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, 2022 and December 31, 2021 (dollars in thousands): December 31, 2022 Total Level I Level II Level III Assets, at fair value Real estate securities, available for sale, measured at fair value $ 221,025 $ — $ 221,025 $ — Real estate securities, trading, measured at fair value 235,728 — — 235,728 Commercial mortgage loans, held for sale, measured at fair value 15,559 — — 15,559 Other real estate investments, measured at fair value — — — — Treasury note futures 91 91 — — Interest rate swaps 90 — 90 — Credit default swaps 234 — 234 — Total assets, at fair value $ 472,727 $ 91 $ 221,349 $ 251,287 Liabilities, at fair value Credit default swaps $ 64 $ — $ 64 $ — Total liabilities, at fair value $ 64 $ — $ 64 $ — December 31, 2021 Assets, 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 Interest rate swaps 312 — 312 — Treasury note futures 124 — 124 — Total assets, at fair value $ 4,604,099 $ — $ 4,567,307 $ 36,792 Liabilities, at fair value Credit default swaps $ 1,142 $ — $ 1,142 $ — Unsecured debt-related interest rate swap agreements 31,153 — 31,153 — Total liabilities, at fair value $ 32,295 $ — $ — $ — 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, 2022 and December 31, 2021 (dollars in thousands). F-52 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 The following table contains the Level III inputs used to value assets and liabilities on a recurring and nonrecurring basis or where the Company discloses fair value as of December 31, 2022: Asset Category Fair Value Valuation Methodologies Unobservable Inputs (1) Weighted Average (2) Range December 31, 2022 Commercial mortgage loans, held for sale, measured at fair value $ 15,559 Discounted Cash Flow Yield 7.2 % 6.3 % - 7.7 % Real estate securities, trading, measured at fair value 235,728 Discounted Cash Flow Yield 3.3 % 2.0 % - 6.5 % Other real estate investments, measured at fair value — Discounted Cash Flow Yield N/A N/A 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 % ________________________ (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. There were no assets measured at fair value on a nonrecurring basis on our consolidated balance sheets as of December 31, 2022. 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, 2022 and December 31, 2021 for which the Company has used Level III inputs to determine fair value (dollars in thousands): December 31, 2022 Commercial mortgage loans, held for sale, measured at fair value Real estate securities, trading, measured at fair value Other real estate investments, measured at fair value Beginning balance, January 1, 2022 $ 34,718 $ — $ 2,074 Transfers into Level III (1) — 4,566,871 — Total realized and unrealized gain/(loss) included in earnings: Realized gain/(loss) on sale of commercial mortgage loan, held for sale 2,358 — — Realized gain/(loss) on sale of real estate securities — — ( 33 ) Unrealized gain/(loss) on commercial mortgage loans, held for sale and other real estate investments ( 511 ) — 4 Trading gain/(loss) — ( 119,220 ) — Net accretion — — — Purchases 366,692 — — Sales / paydowns ( 387,698 ) ( 4,211,923 ) ( 2,045 ) Cash repayments/receipts — — — Transfers out of Level III — — — Ending balance, December 31, 2022 $ 15,559 $ 235,728 $ — ________________________ (1) Transfers into Level III include transfers related to ARM Agency Securities transferred from Level II. There were no transfers out of Level III as of December 31, 2022. F-53 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 December 31, 2021 Commercial mortgage loans, held for sale, measured at fair value Real estate securities, trading, measured at fair value Other real estate investments, measured at fair value Beginning balance, January 1, 2021 $ 67,649 $ — $ 2,522 Transfers into Level III (1) — — — Total realized and unrealized gain/(loss) included in earnings: Realized gain/(loss) on sale of commercial mortgage 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 (1) — — — Ending balance, December 31, 2021 $ 34,718 $ — $ 2,074 ________________________ (1) There were no transfers in or out of Level III as of 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 Company's financial assets and liabilities that are not reported at fair value on the consolidated balance sheets are reported below as of December 31, 2022 and 2021 (dollars in thousands): Level Carrying Amount Fair Value December 31, 2022 Commercial mortgage loans, held for investment (1) Asset III $ 5,269,776 $ 5,278,495 Collateralized loan obligations Liability III 3,121,983 3,055,810 Mortgage note payable Liability III 23,998 23,998 Other financing and loan participation - commercial mortgage loans Liability III 76,301 76,301 Unsecured debt Liability III 98,695 66,300 December 31, 2021 Commercial mortgage loans, held for investment (1) Asset III $ 4,226,888 $ 4,249,118 Collateralized loan obligation 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 ________________________ (1) The carrying value is gross of $ 40.8 million and $ 15.8 million of allowance for credit losses as of December 31, 2022 and December 31, 2021, respectively. F-54 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 Repurchase agreements - commercial mortgage loans of $ 680.9 million and $ 1.02 billion as of December 31, 2022 and 2021, respectively, and repurchase agreements - real estate securities of $ 440.0 million and $ 4.2 billion as of December 31, 2022 and 2021, respectively, are not carried at fair value and include accrued interest expense, which are presented in Note 7 – Debt. For these instruments, carrying value generally approximates fair value and are classified as Level III. The fair value of the commercial mortgage loans, held for investment is estimated using a discounted cash flow analysis, based on the Advisor's experience with similar types of investments. The Company estimates the fair value of the collateralized loan obligations using external broker quotes. The fair value of the other financing and loan participation-commercial mortgage loans is generally estimated using a discounted cash flow analysis. At December 31, 2022, 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. 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. The following derivative instruments were outstanding as of December 31, 2022 and December 31, 2021 (dollars in thousands): Fair Value Contract type Notional Assets Liabilities As of December 31, 2022 Credit default swaps $ 18,000 $ 234 $ 64 Interest rate swaps 9,800 90 — Treasury note futures 3,500 91 — Total $ 31,300 $ 415 $ 64 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 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, 2022 and December 31, 2021: Year Ended December 31, 2022 Year Ended December 31, 2021 Contract type Unrealized (Gain)/Loss Realized (Gain)/Loss Unrealized (Gain)/Loss Realized (Gain)/Loss Credit default swaps $ ( 147 ) $ 405 $ ( 101 ) $ 650 Interest rate swaps 15,954 ( 59,499 ) ( 7,070 ) 70 Treasury note futures 33 ( 939 ) ( 231 ) ( 1,478 ) Options — — — 274 Total $ 15,840 $ ( 60,033 ) $ ( 7,402 ) $ ( 484 ) F-55 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 The Company may engage in residential mortgage investment-related derivative agreements that economically hedge the variability of the underlying benchmark interest rate of current and forecasted 30- to 90-day repurchase agreements. The Company may attempt to mitigate exposure to higher interest rates primarily by entering into pay-fixed, receive-variable, interest rate swap agreements for terms between eighteen months and three years . From an economic perspective, this hedge relationship establishes a relatively stable fixed rate on related debt because the variable-rate payments received on the swap agreements offset a significant portion of the interest accruing on the debt, leaving the fixed-rate swap payments as the Company’s effective borrowing rate. Additionally, changes in fair value of these derivatives tend to offset opposing changes in fair value of the Company’s residential mortgage investments that can occur in response to changes in market interest rates. During the year ended December 31, 2022, the Company paired out of the entirety of its ARM portfolio-related swap agreements and does not hold any derivative positions related to the trading securities as of December 31, 2022. Interest rate swap agreements are measured at fair value on a recurring basis primarily using Level II 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 economically hedging repurchase agreements is calculated including accrued interest and net of variation margin amounts received or paid through the exchange. F-56 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 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, 2022 and 2021 (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, 2022 Derivative instruments, at fair value $ 415 $ — $ 415 $ — $ — $ 415 December 31, 2021 Derivative instruments, at fair value $ 436 $ — $ 436 $ — $ — $ 436 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, 2022 Repurchase agreements, commercial mortgage loans $ 680,859 $ — $ 680,859 $ 961,528 $ 5,032 $ — Repurchase agreements, real estate securities 440,008 — 440,008 493,138 — — Derivative instruments, at fair value 64 — 64 — 729 — 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 — ________________________ (1) Included in Restricted cash in the Company's consolidated balance sheets. F-57 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 Note 16 - Segment Reporting The Company conducts its business through the following segments: • The real estate debt business focuses on originating, acquiring and asset managing commercial real estate debt investments, including first mortgages, 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, CRE CLO bonds, CDO notes and other securities. As a result of the October 2021 acquisition of Capstead, the Company acquired a portfolio of ARM Agency Securities. • 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, 2022, 2021 and 2020 (dollars in thousands): December 31, 2022 Total Real Estate Debt and Other Real Estate Real Estate Securities TRS Real Estate Owned Interest income $ 357,705 $ 320,546 $ 30,203 $ 6,956 $ — Revenue from real estate owned 9,655 — — — 9,655 Interest expense 165,708 151,675 11,203 1,643 1,187 Net income/(loss) 14,215 78,252 ( 69,155 ) 2,736 2,382 Total assets as of December 31, 2022 6,203,601 5,444,152 474,231 63,307 221,911 December 31, 2021 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 For the purposes of the table above, management fees have been allocated to the business segments using an agreed upon percentage of each respective segment's prior period equity. Administrative fees have been allocated to the business segments using a percentage derived from taking the respective business segment's prior period equity as a percent of consolidated equity and multiplying it by the Company's total administrative fee. F-58 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 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, 2022, December 31, 2021 and December 31, 2020 were $( 0.4 ) million, $ 3.6 million and $( 2.1 ) million, respectively. As of December 31, 2022, our taxable REIT subsidiaries have an estimated $ 0.4 million of federal net operating loss ("NOL") carryforwards and $ 4.0 million of state and local NOL carryforwards. The NOL carryforwards are subject to certain limitations. 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, 2022 2021 2020 Current expense/(benefit) U.S. Federal $ ( 65 ) $ 3,093 $ ( 2,086 ) State and local ( 167 ) 349 370 Total current expense/(benefit) $ ( 232 ) $ 3,442 $ ( 1,716 ) Deferred expense/(benefit) U.S. Federal $ ( 99 ) $ ( 1 ) $ — State and local ( 68 ) 158 ( 346 ) Total deferred expense/(benefit) $ ( 167 ) $ 157 $ ( 346 ) Provision for income tax expense/(benefit) $ ( 399 ) $ 3,599 $ ( 2,062 ) The tax characteristics of the $ 1.42 distributions per common share declared during 2022 was $ 1.42 ordinary income. The tax characteristics of the $ 318.66 distributions per share of Series C Preferred stock declared during 2022 was $ 318.66 ordinary income. The tax characteristics of the $ 106.22 per share of Series I Preferred Stock declared during 2022 was $ 106.22 ordinary income. The Series D Preferred Stock was exchanged for an equivalent number of shares of Series H Preferred Stock on June 24, 2022 and the tax characteristics of the $ 424.86 per share declared during 2022 was $ 424.86 ordinary income. The tax characteristics of the $ 0.355 distributions per share of Series F Preferred stock declared during 2022, prior to converting on a one-for-one basis into shares of Common Stock, was $ 0.355 ordinary income. The tax characteristics of the $ 1.875 distributions per share of Series E Preferred stock declared during 2022 was $ 1.875 ordinary income. 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 $ 1.26 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. F-59 Table of Contents FRANKLIN BSP REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022 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. 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. Note 18 - Subsequent Events The Company has evaluated subsequent events through the filing of this Annual Report on Form 10-K. F-60 Table of Contents FRANKLIN BSP REALTY TRUST, INC. SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE December 31, 2022 (Dollars in thousands) Description Property Type Face Value Amortized Cost Index Spread Payment Terms Maturity Date Senior Debt 1 Hospitality $ 4,822 $ 4,822 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 34,668 34,668 1 month SOFR 3.03 % Interest Only 9/9/2023 Senior Debt 4 Multifamily 34,731 34,731 1 month LIBOR 3.00 % Interest Only 2/9/2023 Senior Debt 5 Hospitality 22,116 22,116 1 month LIBOR 3.50 % Interest Only 3/9/2023 Senior Debt 6 Office 18,683 18,683 1 month SOFR 4.75 % Interest Only 9/9/2023 Senior Debt 7 Office 7,035 7,035 1 month LIBOR 3.90 % Interest Only 2/9/2023 Senior Debt 8 Office 43,886 43,886 1 month SOFR 3.56 % Interest Only 5/9/2023 Senior Debt 9 Hospitality 9,531 9,531 1 month SOFR 5.57 % Interest Only 4/9/2023 Senior Debt 10 Hospitality 19,352 19,352 1 month SOFR 3.84 % Interest Only 8/9/2023 Senior Debt 11 Hospitality 12,980 12,980 1 month SOFR 3.02 % Interest Only 10/9/2023 Senior Debt 12 Hospitality 4,988 4,988 1 month LIBOR 4.25 % Interest Only 7/9/2023 Senior Debt 13 Hospitality 31,597 31,597 1 month SOFR 5.25 % Amortizing Balloon 11/9/2024 Senior Debt 14 Office 15,188 15,188 1 month SOFR 4.00 % Interest Only 12/9/2023 Senior Debt 15 Office 25,802 25,748 1 month LIBOR 4.35 % Interest Only 1/9/2024 Senior Debt 16 Office 63,811 63,789 1 month LIBOR 3.70 % Interest Only 2/9/2023 Senior Debt 17 Multifamily 10,807 10,807 1 month SOFR 4.25 % Interest Only 8/9/2023 Senior Debt 18 Office 36,362 36,356 1 month LIBOR 2.70 % Interest Only 2/9/2023 Senior Debt 19 Manufactured Housing 1,331 1,331 5.50 % Interest Only 5/9/2025 Senior Debt 20 Manufactured Housing 7,680 7,671 1 month LIBOR 4.50 % Interest Only 8/9/2023 Senior Debt 21 Self Storage 29,895 29,858 1 month LIBOR 5.00 % Interest Only 9/9/2023 Senior Debt 22 Multifamily 14,550 14,550 1 month SOFR 4.83 % Interest Only 3/9/2023 Senior Debt 23 Manufactured Housing 5,020 5,013 1 month LIBOR 5.25 % Interest Only 10/9/2023 Senior Debt 24 Office 18,203 18,176 1 month LIBOR 4.50 % Interest Only 10/9/2023 Senior Debt 25 Office 65,519 65,321 5.15 % Interest Only 10/9/2025 Senior Debt 26 Office 35,000 34,932 1 month LIBOR 5.21 % Interest Only 10/9/2023 Senior Debt 27 Office 12,750 12,729 1 month LIBOR 5.00 % Interest Only 11/9/2023 Senior Debt 28 Multifamily 38,927 38,864 1 month LIBOR 4.45 % Interest Only 11/9/2023 Senior Debt 29 Industrial 14,985 14,955 1 month LIBOR 4.50 % Interest Only 12/9/2023 Senior Debt 30 Multifamily 12,280 12,253 1 month LIBOR 4.55 % Interest Only 2/9/2024 Senior Debt 31 Multifamily 21,000 20,959 1 month LIBOR 4.60 % Interest Only 1/9/2024 Senior Debt 32 Office 12,971 12,969 1 month LIBOR 5.00 % Interest Only 1/9/2023 Senior Debt 33 Office 43,751 43,622 1 month LIBOR 3.94 % Interest Only 3/9/2024 Senior Debt 34 Multifamily 12,892 12,707 1 month LIBOR 7.25 % Interest Only 2/9/2024 Senior Debt 35 Multifamily 5,400 5,398 1 month LIBOR 5.25 % Interest Only 2/9/2023 Senior Debt 36 Hospitality 23,000 22,952 1 month LIBOR 5.79 % Interest Only 3/9/2024 Senior Debt 37 Multifamily 34,750 34,732 1 month LIBOR 6.75 % Interest Only 3/9/2023 Senior Debt 38 Multifamily 12,325 12,299 1 month LIBOR 4.50 % Interest Only 3/9/2024 Senior Debt 39 Multifamily 5,575 5,571 1 month LIBOR 4.50 % Interest Only 4/9/2023 Senior Debt 40 Multifamily 55,000 54,979 1 month LIBOR 3.00 % Interest Only 4/9/2023 Senior Debt 41 Multifamily 14,465 14,446 1 month LIBOR 3.39 % Interest Only 4/9/2024 Senior Debt 42 Multifamily 8,676 8,654 1 month LIBOR 3.80 % Interest Only 4/9/2024 Senior Debt 43 Multifamily 13,582 13,560 1 month LIBOR 4.50 % Interest Only 10/9/2023 Senior Debt 44 Multifamily 18,653 18,610 1 month LIBOR 6.25 % Interest Only 12/9/2023 Senior Debt 45 Multifamily 19,536 19,510 1 month LIBOR 3.60 % Interest Only 4/9/2024 Senior Debt 46 Multifamily 43,096 43,084 1 month LIBOR 2.95 % Interest Only 4/9/2026 Senior Debt 47 Hospitality 25,785 25,759 1 month LIBOR 5.60 % Interest Only 5/9/2023 Senior Debt 48 Mixed Use 32,500 32,463 1 month LIBOR 3.70 % Interest Only 7/9/2023 Senior Debt 49 Multifamily 75,591 75,553 1 month LIBOR 2.95 % Interest Only 4/9/2026 Senior Debt 50 Multifamily 20,960 20,871 1 month LIBOR 3.35 % Interest Only 5/9/2024 Senior Debt 51 Multifamily 30,231 30,216 1 month LIBOR 2.95 % Interest Only 4/9/2026 Senior Debt 52 Multifamily 35,466 35,455 1 month LIBOR 2.95 % Interest Only 4/9/2026 F-61 Table of Contents Description Property Type Face Value Amortized Cost Index Spread Payment Terms Maturity Date Senior Debt 53 Multifamily 33,588 33,579 1 month LIBOR 2.95 % Interest Only 4/9/2026 Senior Debt 54 Hospitality 25,771 25,645 1 month LIBOR 9.00 % Interest Only 5/9/2024 Senior Debt 55 Self Storage 15,000 14,986 1 month LIBOR 4.26 % Interest Only 5/9/2023 Senior Debt 56 Multifamily 25,198 25,165 1 month LIBOR 3.25 % Interest Only 6/9/2023 Senior Debt 57 Office 6,742 6,730 1 month LIBOR 5.25 % Interest Only 11/9/2023 Senior Debt 58 Multifamily 111,226 110,462 1 month LIBOR 6.50 % Interest Only 6/9/2024 Senior Debt 59 Multifamily 11,069 11,037 1 month LIBOR 3.15 % Interest Only 7/9/2024 Senior Debt 60 Hospitality 19,640 19,608 1 month LIBOR 5.35 % Interest Only 6/9/2023 Senior Debt 61 Hospitality 33,000 32,883 1 month LIBOR 6.25 % Interest Only 6/9/2024 Senior Debt 62 Multifamily 27,202 26,944 1 month LIBOR 8.00 % Interest Only 8/9/2024 Senior Debt 63 Multifamily 15,874 15,833 1 month LIBOR 3.75 % Interest Only 10/9/2023 Senior Debt 64 Multifamily 30,420 30,326 1 month LIBOR 3.00 % Interest Only 9/9/2024 Senior Debt 65 Multifamily 40,046 39,859 1 month LIBOR 3.15 % Interest Only 10/9/2024 Senior Debt 66 Multifamily 42,850 42,778 1 month LIBOR 3.40 % Interest Only 9/9/2023 Senior Debt 67 Multifamily 36,760 36,655 1 month LIBOR 3.64 % Interest Only 10/9/2024 Senior Debt 68 Multifamily 8,500 8,475 1 month LIBOR 3.75 % Interest Only 9/9/2024 Senior Debt 69 Multifamily 14,200 14,171 1 month LIBOR 3.15 % Interest Only 9/9/2023 Senior Debt 70 Multifamily 13,667 13,639 1 month LIBOR 3.75 % Interest Only 9/9/2023 Senior Debt 71 Multifamily 67,138 66,715 1 month LIBOR 3.25 % Interest Only 10/9/2024 Senior Debt 72 Multifamily 10,268 10,226 1 month LIBOR 3.75 % Interest Only 10/9/2024 Senior Debt 73 Hospitality 32,527 32,305 1 month SOFR 6.73 % Interest Only 2/9/2024 Senior Debt 74 Multifamily 26,698 26,610 1 month LIBOR 3.20 % Interest Only 10/9/2024 Senior Debt 75 Hospitality 17,122 17,088 1 month LIBOR 5.25 % Interest Only 10/9/2023 Senior Debt 76 Hospitality 16,500 16,463 1 month LIBOR 7.10 % Interest Only 11/9/2023 Senior Debt 77 Multifamily 88,500 88,500 1 month LIBOR 2.75 % Interest Only 10/9/2024 Senior Debt 78 Multifamily 56,150 55,974 1 month LIBOR 3.10 % Interest Only 10/9/2024 Senior Debt 79 Multifamily 37,882 37,714 1 month LIBOR 2.90 % Interest Only 11/9/2026 Senior Debt 80 Multifamily 54,151 53,994 1 month LIBOR 3.10 % Interest Only 12/9/2023 Senior Debt 81 Multifamily 37,886 37,779 1 month LIBOR 2.90 % Interest Only 12/9/2024 Senior Debt 82 Multifamily 65,741 65,619 1 month LIBOR 2.85 % Interest Only 11/9/2023 Senior Debt 83 Multifamily 30,600 30,573 1 month LIBOR 2.65 % Interest Only 11/9/2023 Senior Debt 84 Multifamily 31,662 31,545 1 month LIBOR 3.25 % Interest Only 12/9/2024 Senior Debt 85 Multifamily 62,850 62,712 1 month LIBOR 3.35 % Interest Only 11/9/2023 Senior Debt 86 Multifamily 43,745 43,626 1 month LIBOR 3.00 % Interest Only 12/9/2023 Senior Debt 87 Multifamily 46,221 46,027 1 month LIBOR 2.75 % Interest Only 11/9/2025 Senior Debt 88 Multifamily 86,000 85,745 1 month SOFR 3.24 % Interest Only 3/9/2024 Senior Debt 89 Multifamily 29,821 29,730 1 month LIBOR 2.90 % Interest Only 12/9/2024 Senior Debt 90 Manufactured Housing 6,700 6,677 1 month LIBOR 4.50 % Interest Only 12/9/2024 Senior Debt 91 Multifamily 58,680 58,532 1 month LIBOR 3.45 % Interest Only 1/9/2024 Senior Debt 92 Multifamily 26,966 26,896 1 month LIBOR 2.90 % Interest Only 12/9/2023 Senior Debt 93 Multifamily 13,535 13,478 1 month LIBOR 3.20 % Interest Only 12/9/2024 Senior Debt 94 Multifamily 37,133 37,002 1 month LIBOR 3.00 % Interest Only 12/9/2024 Senior Debt 95 Multifamily 33,581 33,491 1 month LIBOR 3.20 % Interest Only 12/9/2023 Senior Debt 96 Multifamily 40,231 40,115 1 month LIBOR 2.90 % Interest Only 12/9/2023 Senior Debt 97 Multifamily 66,202 66,024 1 month LIBOR 2.88 % Interest Only 12/9/2023 Senior Debt 98 Multifamily 63,722 63,549 1 month LIBOR 2.88 % Interest Only 12/9/2023 Senior Debt 99 Multifamily 16,909 16,855 1 month SOFR 3.50 % Interest Only 1/9/2024 Senior Debt 100 Multifamily 57,660 57,544 1 month LIBOR 2.75 % Interest Only 12/9/2024 Senior Debt 101 Multifamily 65,953 65,810 1 month SOFR 6.03 % Interest Only 7/9/2023 Senior Debt 102 Multifamily 22,240 22,179 1 month SOFR 2.96 % Interest Only 1/9/2024 Senior Debt 103 Multifamily 25,746 25,656 1 month SOFR 2.96 % Interest Only 1/9/2025 Senior Debt 104 Multifamily 31,678 31,526 1 month SOFR 3.20 % Interest Only 1/9/2024 Senior Debt 105 Multifamily 78,050 77,724 1 month SOFR 3.45 % Interest Only 1/9/2027 Senior Debt 106 Multifamily 80,714 80,552 1 month SOFR 3.21 % Interest Only 1/9/2025 Senior Debt 107 Multifamily 24,000 23,939 1 month SOFR 3.10 % Interest Only 1/9/2024 Senior Debt 108 Retail 31,000 30,894 1 month SOFR 3.29 % Interest Only 1/9/2025 Senior Debt 109 Multifamily 37,793 37,531 1 month SOFR 3.55 % Interest Only 11/9/2023 F-62 Table of Contents Description Property Type Face Value Amortized Cost Index Spread Payment Terms Maturity Date Senior Debt 110 Multifamily 22,965 22,891 1 month SOFR 2.95 % Interest Only 2/9/2024 Senior Debt 111 Multifamily 10,669 10,637 1 month SOFR 3.30 % Interest Only 2/9/2024 Senior Debt 112 Multifamily 47,444 47,323 1 month SOFR 2.86 % Interest Only 1/9/2024 Senior Debt 113 Multifamily 36,824 36,729 1 month SOFR 2.86 % Interest Only 1/9/2024 Senior Debt 114 Hospitality 10,493 10,452 1 month SOFR 5.30 % Interest Only 2/9/2025 Senior Debt 115 Retail 22,377 22,268 1 month SOFR 4.95 % Interest Only 4/9/2024 Senior Debt 116 Multifamily 82,000 81,884 1 month SOFR 3.20 % Interest Only 2/9/2024 Senior Debt 117 Industrial 55,000 54,832 1 month SOFR 3.50 % Interest Only 3/9/2024 Senior Debt 118 Multifamily 39,004 38,870 1 month SOFR 3.10 % Interest Only 3/9/2024 Senior Debt 119 Multifamily 34,823 34,711 1 month SOFR 2.95 % Interest Only 3/9/2024 Senior Debt 120 Mixed Use 19,000 18,942 1 month SOFR 3.42 % Interest Only 3/9/2024 Senior Debt 121 Multifamily 85,500 85,373 1 month SOFR 3.15 % Interest Only 3/9/2024 Senior Debt 122 Multifamily 31,282 31,228 1 month SOFR 3.30 % Interest Only 4/9/2024 Senior Debt 123 Hospitality — — 1 month SOFR 7.05 % Interest Only 6/9/2025 Senior Debt 124 Multifamily — — 1 month SOFR 6.75 % Interest Only 8/9/2024 Senior Debt 125 Hospitality 43,344 43,265 1 month SOFR 4.90 % Interest Only 4/9/2023 Senior Debt 126 Hospitality 11,250 11,152 1 month SOFR 5.22 % Interest Only 11/9/2025 Senior Debt 127 Multifamily 5,132 4,699 1 month SOFR 7.02 % Interest Only 6/9/2024 Senior Debt 128 Multifamily 27,722 27,595 1 month SOFR 6.05 % Interest Only 6/9/2023 Senior Debt 129 Multifamily 56,616 56,384 1 month SOFR 3.95 % Interest Only 5/9/2025 Senior Debt 130 Multifamily 28,650 28,465 1 month SOFR 4.00 % Interest Only 11/9/2024 Senior Debt 131 Multifamily 50,137 49,812 1 month SOFR 6.70 % Interest Only 3/9/2024 Senior Debt 132 Multifamily 12,242 12,192 1 month SOFR 3.55 % Interest Only 5/9/2024 Senior Debt 133 Retail 63,640 60,304 1 month SOFR 4.50 % Interest Only 5/9/2023 Senior Debt 134 Industrial 23,050 22,930 1 month SOFR 4.90 % Interest Only 9/9/2024 Senior Debt 135 Multifamily 19,441 19,366 1 month SOFR 3.50 % Interest Only 6/9/2024 Senior Debt 136 Multifamily 17,600 17,569 1 month SOFR 4.55 % Interest Only 5/9/2023 Senior Debt 137 Multifamily 28,640 28,503 1 month SOFR 3.65 % Interest Only 6/9/2024 Senior Debt 138 Multifamily 16,843 16,756 1 month SOFR 3.65 % Interest Only 6/9/2024 Senior Debt 139 Multifamily 70,750 70,503 1 month SOFR 3.80 % Interest Only 6/9/2024 Senior Debt 140 Multifamily 81,271 80,939 1 month SOFR 3.95 % Interest Only 6/9/2024 Senior Debt 141 Multifamily 43,651 43,475 1 month SOFR 3.95 % Interest Only 6/9/2024 Senior Debt 142 Multifamily 56,547 56,311 1 month SOFR 3.95 % Interest Only 6/9/2024 Senior Debt 143 Multifamily 20,325 20,237 1 month SOFR 3.95 % Interest Only 6/9/2024 Senior Debt 144 Multifamily 128,324 127,678 1 month SOFR 3.95 % Interest Only 6/9/2024 Senior Debt 145 Multifamily 56,000 55,800 1 month SOFR 3.80 % Interest Only 6/9/2024 Senior Debt 146 Multifamily 11,675 11,647 1 month SOFR 4.45 % Interest Only 11/9/2024 Senior Debt 147 Multifamily 69,200 68,622 1 month SOFR 3.45 % Interest Only 6/9/2024 Senior Debt 148 Multifamily 173,389 172,791 1 month SOFR 6.52 % Interest Only 4/16/2023 Senior Debt 149 Hospitality 29,644 29,366 1 month SOFR 6.94 % Interest Only 8/9/2025 Senior Debt 150 Hospitality 13,410 13,314 1 month SOFR 5.75 % Interest Only 4/9/2024 Senior Debt 151 Manufactured Housing 10,550 10,479 1 month SOFR 4.75 % Interest Only 9/9/2024 Senior Debt 152 Multifamily 47,293 47,142 1 month SOFR 4.20 % Interest Only 1/9/2025 Senior Debt 153 Multifamily 51,000 50,753 1 month SOFR 3.75 % Interest Only 12/9/2024 Senior Debt 154 Multifamily 15,150 15,074 1 month SOFR 4.25 % Interest Only 1/9/2025 Senior Debt 155 Hospitality 28,300 28,163 1 month SOFR 5.25 % Interest Only 1/9/2024 Senior Debt 156 Hospitality 16,970 16,970 5.99 % Amortizing Balloon 10/6/2023 Mezzanine Loan 1 Multifamily 3,000 3,000 1 month SOFR 9.23 % Interest Only 9/9/2023 Mezzanine Loan 2 Multifamily 10,000 9,982 1 month SOFR 16.29 % Interest Only 7/9/2023 Mezzanine Loan 3 Retail 3,000 2,989 1 month SOFR 12.00 % Interest Only 1/9/2025 Mezzanine Loan 4 Mixed Use 1,000 997 1 month SOFR 11.00 % Interest Only 3/9/2024 Mezzanine Loan 5 Hospitality 1,350 1,344 1 month SOFR 9.25 % Interest Only 11/9/2025 $ 5,288,974 $ 5,269,776 For the activity within the Company's loan portfolio during the years ended December 31, 2022 and December 31, 2021, refer to Note 3 - Commercial Mortgage Loans on the consolidated financials of Form 10-K. F-63