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Item 7. Management’s Discussion and Analysis

2024-02-26 compared with 2023-03-16 · 503 added, 505 removed, 364 unchanged (73% of the section changed)

24 unchanged sentences

The Company invests in commercial real estate debt investments, which may include first mortgage loans, subordinated mortgage loans, mezzanine loans and participations in such loans.

The Company also originates conduit loans which the Company intends to sell through its TRS into commercial mortgage-backed securities ("CMBS") securitization transactions at a profit.

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 the remaining portion of the portfolio in its other businesses.

The Company also owns real estate which it acquires through foreclosure and deed in lieu of foreclosure, and which it purchases for investment, typically subject to triple net leases.

Impact of the Capstead Acquisition

During 2022, the Company recognized trading losses on RMBS totaling $119.2 million related to principal paydowns, changes in market price and losses on sales, net of portfolio-related derivative gains of $37.9 million for a total loss of $81.3 million related to the ARM Agency Securities portfolio.

Given that the Capstead portfolio has been almost entirely liquidated and that we do not intend to continue to invest in ARM Agency Securities, we do not believe these 2022 trading losses are indicative of our future results.

As of December 31, 2023, the Company has fully disposed of all of its ARM Agency Securities and is continuing to reinvest the proceeds from the sale of these securities 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.

Book Value Per Share

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

The following table calculates the Company's book value per share as of December 31, 2023 and 2022 (in thousands, except share and per share amounts):

December 31, 2023 December 31, 2022

4 unchanged sentences

Book value per share $ 15.71 $ 15.72

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

The following table calculates the Company's fully-converted book value per share as of December 31, 2023 and 2022 (in thousands, except share and per share amounts):

December 31, 2023 December 31, 2022

4 unchanged sentences

Series I convertible preferred stock — 299,200

Series C convertible preferred stock — 418,880

Series D convertible preferred stock — 5,370,640

Series F convertible preferred stock — 39,733,299

Total outstanding shares 88,122,411 88,662,624

2 unchanged sentences

________________________

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

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

(2) Excluding the amounts for accumulated depreciation and amortization of real property of $9.4 million and $5.2 million as of December 31, 2023 and 2022, respectively, would result in a fully-converted book value per share of $15.88 and $15.84 as of December 31, 2023 and 2022, respectively.

6 unchanged sentences

In addition, other companies may utilize different estimates, which may impact the comparability of our results of operations to those of companies in similar businesses.

Set forth below is a summary of the critical accounting estimates and critical accounting policies that management believes are important to the preparation of our financial statements.

Set forth below is a summary of the critical accounting estimates that management believes are important to the preparation of our financial statements and require complex management judgment.

The Company’s significant accounting policies, including recently issued accounting pronouncements, are more fully described in Note 2 – Summary of Critical Accounting Policies to the accompanying consolidated financial statements included in this Annual Report on Form 10-K.

Credit Losses - Estimating Credit Losses

The provision 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 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 provision 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 provision for credit losses on an individual instrument basis.

General allowance for credit losses

The general allowance for credit losses for the Company’s financial instruments carried at amortized cost and off-balance sheet credit exposures, such as loans held for investment and unfunded loan commitments represents a lifetime estimate of expected credit losses.

Factors considered by the Company when determining the general allowance for credit losses reserve include loan-specific characteristics such as loan-to-value (“LTV”) ratio, vintage year, loan term, property type, occupancy and geographic location, financial performance of the borrower, expected payments of principal and interest, as well as internal or external information relating to past events, current conditions and forward looking information through the use of projected macroeconomic scenarios over the 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.

In measuring the provision 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.

In measuring the general allowance for credit losses for financial instruments such as loans held for investment and 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 to determine the general allowance for credit losses principally utilizes historical loss rates derived from a commercial mortgage backed securities database with historical losses from 2002 to 2021 provided by a reputable third party, forecasting the loss parameters based on a projected macroeconomic scenario using a probability-based statistical approach over a reasonable and supportable forecast period of twelve months, followed by an immediate reversion to average historical losses.

For financial instruments assessed on an individual basis, including when it is probable that the Company will be unable to collect the full payment of principal and interest on the instrument, the Company applies a discounted cash flow (“DCF”) methodology.

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

Specific Allowance for credit losses

For loans held for investment 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.

The estimated fair value of underlying collateral requires 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.

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.

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The Company allocates the purchase price of acquired real estate assets based on the fair value of the acquired land, building, furniture, fixtures and equipment.

Real estate owned assets are depreciated using the straight-line method over estimated useful lives of up to 40 years for buildings and improvements and up to 15 years for furniture, fixtures and equipment.

Real estate owned assets, held for investment are depreciated using the straight-line method over estimated useful lives of up to 40 years for buildings and improvements and up to 15 years for furniture, fixtures and equipment.

Renovations and/or replacements that improve or extend the life of the real estate owned assets are capitalized and depreciated over their estimated useful lives.

9 unchanged sentences

On the acquisition date, all of our real estate securities will be classified as available for sale ("AFS") and will be carried at fair value, with any unrealized gains or losses reported as a component of accumulated other comprehensive income or loss.

However, we may elect to transfer these assets to trading securities, and as a result, any unrealized gains or losses on such real estate securities will be recorded as unrealized gains or losses on investments in our consolidated statements of operations.

Related discounts, premiums, and acquisition expenses on investments are amortized over the life of the investment using the effective interest method.

3 unchanged sentences

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 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.

Any impairment that is not credit-related is recognized in other comprehensive income, while credit-related impairment is recognized as an allowance in the consolidated balance sheets with a corresponding adjustment in 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.

1 unchanged sentence

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 other comprehensive income in the consolidated balance sheets.

Real estate securities for which the fair value option has been elected are not evaluated for other-than-temporary impairment as changes in fair value are recorded in our consolidated statement of operations.

Real Estate Securities - Classified As Trading - Estimating Fair Value

In the merger with Capstead, we acquired a portfolio of ARM Agency Securities classified as trading and recorded at fair value on the balance sheet with trading gains and losses due to fair value changes and sales of these securities recorded in the Company's consolidated statements of operations.

Fair values fluctuate with current and projected changes in interest rates, prepayment expectations and other factors such as market liquidity conditions and the perceived credit quality of agency securities.

Judgment is required to interpret market data and develop estimated fair values, particularly in circumstances of deteriorating credit quality and market liquidity.

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/(loss) in the consolidated balance sheets.

Real estate securities for which the fair value option has been elected are not evaluated for other-than-temporary impairment as changes in fair value are recorded in the consolidated statement of operations.

Results of Operations

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As a result of the October 2021 acquisition of Capstead, the Company acquired a portfolio of ARM Agency Securities.

• The 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 portfolio was completely divested by the third quarter of 2023.

• The commercial real estate conduit business operated through the Company's TRS, which is focused on generating risk-adjusted returns by originating and subsequently selling fixed-rate commercial real estate loans into the CMBS securitization market at a profit.

The TRS may also hold certain mezzanine loans that don't qualify as good REIT assets due to any potential loss from foreclosure.

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

5 unchanged sentences

Interest Income/Expense (2)(3)

WA Yield / Financing Cost (3)

Avg Yield/Financing Cost (4)

Average Carrying Value (1)

Interest Income/Expense (2)

WA Yield / Financing Cost (3)

Avg Yield/Financing Cost (4)

Interest-earning assets:

Real estate debt (5)

$ 5,038,267 $ 530,116 10.5 % $ 4,917,287 $ 320,546 6.5 %

Real estate conduit 16,408 2,244 13.7 % 97,556 6,956 7.1 %

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

(3) Excludes other income on the real estate owned business segment.

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

(5) The collateral sale of a Brooklyn hotel loan in April 2023, which allowed the company to recover its full investment, resulted in $15.5 million and $4.9 million in coupon and default interest income, respectively, recognized in the Company's real estate debt segment during the year ended December 31, 2023.

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

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Interest Income

Interest income for the years ended December 31, 2022 and 2021 totaled $357.7 million and $216.9 million, respectively.

This increase was primarily due to an increase of $2.1 billion in the average carrying value of our interest-earning assets and an approximate 160 basis point increase in daily average LIBOR/SOFR rates.

As of December 31, 2022, our portfolio consisted of (i) 161 commercial mortgage loans, held for investment, (ii) two commercial mortgage loans, held for sale, measured at fair value, (iii) seven investments in CRE CLO bonds and (iv) 202 RMBS investments.

Interest income for the years ended December 31, 2023 and 2022 totaled $552.5 million and $357.7 million, respectively, an increase of $194.8 million due primarily to an approximate 330 basis point increase in daily average SOFR and SOFR equivalent rates and the impact of $20.4 million from the collateral sale of the Brooklyn hotel loan in April 2023.

As of December 31, 2023, our portfolio consisted of (i) 144 commercial mortgage loans, held for investment and (ii) seven real estate securities, available for sale, measured at fair value.

As of December 31, 2022, our portfolio consisted of (i) 161 commercial mortgage loans, held for investment, (ii) two commercial mortgage loans, held for sale, measured at fair value, (iii) seven real estate securities, available for sale, measured at fair value and (iv) ARMs.

Interest Expense

Interest expense for the years ended December 31, 2022 and 2021 totaled $165.7 million and $60.8 million, respectively.

This increase was primarily due to an increase of $1.7 billion in the average carrying value of our interest-bearing liabilities and an approximate 160 basis point increase in daily average LIBOR/SOFR rates.

Provision/Benefit for Credit losses - CECL allowance, net

Provision for credit losses for the year ended December 31, 2022 was $36.1 million compared to a benefit of $5.2 million for the year ended December 31, 2021, which represents an increase of $41.3 million.

The increase is primarily due to (i) $16.0 million higher general provision for credit losses in 2022 compared to 2021, due to the increase in the total carrying value of our portfolio and a more pessimistic view of the macroeconomic scenario utilized for the CECL model as well as (ii) a $25.3 million of specific provision for credit losses during 2022 related to a loan secured by a portfolio of twenty-four properties that are net leased, as more fully described in "Part I, Item 3.

Legal Proceedings".

There was no specific provision for credit losses in 2021.

Realized Gain/Loss on Real Estate Owned Assets, Held for Sale

Realized gain on the sale of two real estate owned assets, held for sale, located in Jeffersonville, IN and Kansas City, MO amounted to $9.8 million for the year ended December 31, 2021.

There were no sales of real estate owned assets, held for sale, for the year ended December 31, 2022.

Realized Gain/Loss on Commercial Mortgage Loans, Held for Sale, measured at Fair Value

Realized gain on commercial mortgage loans held for sale, measured at fair value at the TRS for the year ended December 31, 2022 was $2.4 million compared to $24.2 million for the year ended December 31, 2021.

The $21.8 million decrease in realized gain was primarily due to the difference in proceeds received between the $368.9 million of total sales of five fixed-rate commercial real estate loans into the CMBS securitization market during the year ended December 31, 2022 compared to the $453.6 million total sales of five such loans during the year ended December 31, 2021.

Total proceeds received for the year ended December 31, 2022 were $370.2 million compared to $478.3 million for the year ended December 31, 2021.

Interest expense for the years ended December 31, 2023 and 2022 totaled $305.6 million and $160.5 million, respectively, an increase of $145.1 million due primarily to an increase of $256.1 million in the average carrying value of our collateralized loan obligations coupled with an approximate 330 basis point increase in average SOFR and SOFR equivalent rates partially offset by a decrease of $1.1 billion in the average carrying values of our repurchase agreements - commercial mortgage loans and real estate securities.

Revenue from Real Estate Owned

For the years ended December 31, 2023 and 2022, revenue from real estate owned was $17.0 million and $9.7 million, respectively, an increase of $7.3 million due primarily to rental income obtained from additional retail properties acquired as real estate owned.

Provision/(Benefit) for Credit losses

Provision for credit losses was $33.7 million during the year ended December 31, 2023 compared to a provision of $36.1 million during the year ended December 31, 2022.

The following paragraphs set forth explanations for changes in the general and specific reserves for the years ended December 31, 2023 and 2022.

For the years ended December 31, 2023 and 2022, the increases in general CECL allowance of $21.4 million and $10.8 million, respectively, were primarily related to a more pessimistic view of the macroeconomic scenario utilized for the CECL model.

For the year ended December 31, 2023, this was partially offset by a decrease in the size of our loan portfolio compared to the preceding period.

For the year ended December 31, 2023, the increase in specific CECL allowance of $12.3 million was primarily related to one office loan located in Portland, OR.

For the year ended December 31, 2022, a specific CECL provision of $25.3 million was recorded for the loan collateralized by the Walgreens Portfolio.

Realized Gain/(Loss) on Extinguishment of Debt

Realized gain on extinguishment of debt for the year ended December 31, 2023 of $2.2 million was primarily related to the redemption of $17.5 million par value unsecured debt at a price equal to 75% of par value coupled with the repurchases of $2.3 million of bonds of BSPRT 2021-FL7 and $8.25 million of bonds of BSPRT 2019-FL5 partially offset by the redemption of BSPRT 2019-FL5.

Realized loss on extinguishment of debt for the year ended December 31, 2022 of $5.2 million was primarily related to the redemption of BSPRT 2018-FL4.

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

Realized gain on sale of available for sale trading securities for the year ended December 31, 2023 of $0.1 million was primarily related to the sale of 12 CRE CLO bonds.

There were no sales of available for sale trading securities during the year ended December 31, 2022.

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

Realized gain on commercial mortgage loans, held for sale, measured at fair value for the year ended December 31, 2023 of $3.9 million was related to the sale of $118.1 million in principal amount of commercial real estate loans into the CMBS securitization market resulting in proceeds of $122.1 million.

Realized gain on commercial mortgage loans, held for sale,

measured at fair value for the year ended December 31, 2022 of $2.4 million was related to the sale of $368.9 million in principal amount of commercial real estate loans into the CMBS securitization market resulting in proceeds of $370.2 million.

Gain/(Loss) on Other Real Estate Investments

Loss on other real estate investments for the year ended December 31, 2023 was $7.1 million compared to $0.7 million for the year ended December 31, 2022.

For the year ended December 31, 2023, the loss was primarily the result of the sale of two real estate owned, held for sale properties located in New Rochelle, NY and St.

Louis, MO, respectively, resulting in a total loss of $3.3 million, in addition to a $4.0 million impairment loss on our real estate owned, held for sale asset related to the Walgreens Portfolio.

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

Unrealized loss on commercial mortgage loans, held for sale, measured at fair value, at the TRS for the year ended December 31, 2022 was $0.5 million compared to an unrealized gain of $0.5 million for the year ended December 31, 2021.

The $1.0 million increase in loss primarily resulted from the reversal of unrealized gain/loss due to the sale of fixed-rate commercial real estate loans into the CMBS securitization.

The Company did not hold any commercial mortgage loans, held for sale, measured at fair value as of December 31, 2023.

Unrealized gain for the year ended December 31, 2023 was $44.0 thousand related to the reversal of prior year unrealized gain/loss on a sale of a commercial real estate loan into the CMBS securitization market made in the first quarter of 2023.

Comparatively, unrealized gain for the year ended December 31, 2022 was $0.5 million related to changes in fair market values on loans held in the Company's TRS coupled with the reversal of unrealized gain/loss on a sale of commercial real estate loans into the CMBS securitization market.

Trading Gain/(Loss)

Trading loss for the year ended December 31, 2022 of $119.2 million is attributable to principal paydowns, changes in market values and losses on sales of ARM Agency Securities.

For the year ended December 31, 2021 we had a trading loss of $36.1 million included within the consolidated statements of operations.

The loss was primarily attributable to principal paydowns, changes in market values and losses on sales of ARM Agency Securities coupled with $1.4 million in losses attributable to nine CRE CLO bonds sold during the year ended December 31, 2021.

Trading loss for the years ended December 31, 2023 and 2022 of $0.6 million and $119.2 million, respectively, was attributable to $17.6 million and $480.2 million of principal paydowns, respectively, $218.2 million and $3.8 billion of sales of ARM Agency Securities, respectively, and changes in market values on these securities.

We sold all remaining assets from our ARMs portfolio in the third quarter of 2023.

Net Result from Derivative Transactions

Net result from derivative transactions for our ARMs portfolio for the year ended December 31, 2022 of $44.2 million is composed of a realized gain of $60.0 million partially offset by an unrealized loss of $15.8 million primarily due to termination and settlement of our interest rate swap positions throughout the year.

This is compared to a net result on our derivative portfolio of $7.9 million composed of a realized gain of $0.5 million primarily due to termination and settlement of our interest rate swap positions coupled with an unrealized gain of $7.4 million primarily due to increasing values on our interest rate swap portfolio.

Net result from derivative transactions for the year ended December 31, 2023 of a $0.9 million gain was composed of a realized gain of $1.0 million due primarily to the termination and settlement of interest rate swap positions partially offset by an unrealized loss of $0.1 million.

This is compared to a net gain on our derivative portfolio of $44.2 million composed of a realized gain of $60.0 million due primarily to the termination and settlement of interest rate swap positions specifically designed to hedge the ARMs portfolio partially offset by an unrealized loss of $15.8 million for the year ended December 31, 2022.

(Provision)/Benefit for Income Tax

Benefit for income tax for the year ended December 31, 2022 was $0.4 million compared to provision for income tax of $3.6 million for the year ended December 31, 2021.

The difference is due to change in taxable income/(loss) at our TRS.

Net Income/Loss Attributable to Noncontrolling Interest

Net loss attributable to noncontrolling interest in our consolidated joint ventures for the year ended December 31, 2022 amounted to $0.2 million.

Benefit for income tax for the year ended December 31, 2023 was $2.8 million compared to a benefit of $0.4 million for the year ended December 31, 2022.

The difference is due to change in taxable income/loss in our TRS segment.

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

Net loss attributable to non-controlling interest in our consolidated joint ventures for the year ended December 31, 2023 amounted to $0.7 million compared to a net loss attributable to non-controlling interest of $0.2 million for the year ended December 31, 2022.

Preferred Share Dividends

Preferred share dividends were $27.0 million for the year ended December 31, 2023 compared to $41.7 million for the year ended December 31, 2022, a decrease of $14.7 million due primarily to fewer preferred shares outstanding following the automatic conversion into Common Stock of the Company's Series F Convertible Preferred Stock in April 2022, Series C Convertible Preferred Stock in October 2022 and Series I Convertible Preferred Stock in January 2023 (see Note 9 - Redeemable Convertible Preferred Stock and Equity Transactions).

Expenses from Operations

Expenses from operations for the years ended December 31, 2022 and 2021 were made up of the following (dollars in thousands):

Expenses from operations for the years ended December 31, 2023 and 2022 consisted of the following (dollars in thousands):

Year Ended December 31,

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Administrative services expenses 14,440 12,928

Impairment of acquired assets — 88,282

Professional fees 15,270 22,566

Share-based compensation expense 2,519 —

Real estate owned operating expenses — —

Share-based compensation 4,761 2,519

Depreciation and amortization 7,128 5,408

1 unchanged sentence

Total expenses from operations $ 87,822 $ 77,510

The decrease in our expenses from operations was primarily related to impairment of acquired assets, all due to the merger with Capstead during the year ended December 31, 2021.

This decrease is partially offset by professional fees, which increased due to legal costs incurred associated with the ongoing recovery efforts related to a hotel loan and the retail loan placed on non-performing status.

Additionally, there were higher administrative services expenses due to an increase in operational activity for The Company.

There was also an increase in depreciation and amortization expense which was primarily due to a full year of expenses related to one real estate owned asset during the year December 31, 2022, compared to only one quarter of expenses from the same real estate owned asset during the year December 31, 2021 as this asset was acquired during September 2021.

Lastly, the increase in our other operating expenses is primarily due to an increase in our equity base size of our investment vehicles.

The increase in operating expense was primarily related to (i) an increase in asset management and subordinated performance fees due to incentive fees incurred during the year ended December 31, 2023 and (ii) an increase in other expenses due to expenses incurred in order to operate various REO investments in our portfolio partially offset by (iii) a decrease in professional fees primarily related to the reduction in legal costs associated with our recovery efforts related to a hotel asset and the Walgreens Portfolio.

Comparison of the Three Months Ended December 31, 2023 to the Three Months Ended September 30, 2023

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Interest Income/Expense (2)(3)

WA Yield / Financing Cost (3)(4)

Avg Yield/Financing Cost (4)(5)

Average Carrying Value (1)

Interest Income/Expense (2)(3)

WA Yield / Financing Cost (3)(4)

Avg Yield/Financing Cost (4)(5)

Interest-earning assets:

19 unchanged sentences

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

(3) Excludes other income on the real estate owned business segment.

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

3 unchanged sentences

Interest Income

Interest income for the three months ended December 31, 2022 and September 30, 2022 totaled $118.1 million and $94.1 million, respectively.

This increase was primarily due to an increase of $151.0 million in the average carrying value of our interest-earning assets and an approximate 140 basis point increase in daily average LIBOR/SOFR rates.

Interest income for the three months ended December 31, 2023 and September 30, 2023 totaled $132.0 million and $137.0 million, respectively, a decrease of $5.0 million due primarily to payoffs of two loans occurring in the third quarter of 2023 resulting in approximately $6.3 million of income.

As of December 31, 2023, our portfolio consisted of (i) 144 commercial mortgage loans, held for investment and (ii) seven real estate securities, available for sale, measured at fair value.

As of September 30, 2023, our portfolio consisted of (i) 145 commercial mortgage loans, held for investment, (ii) one commercial mortgage loan, held for sale, measured at fair value and (iii) six real estate securities, available for sale, measured at fair value.

Interest Expense

Interest expense for the three months ended December 31, 2022 and September 30, 2022 totaled $64.3 million and $46.2 million, respectively.

This increase was primarily due to an increase of $98.4 million in the average carrying value of our interest-bearing liabilities and an approximate 140 basis point increase in daily average LIBOR/SOFR rates.

Provision/Benefit for Credit losses - CECL allowance, net

Provision for credit losses for the three months ended December 31, 2022 was $5.1 million compared to a benefit of $0.6 million for the three months ended September 30, 2022, an increase of $5.7 million.

The increase is primarily due to (i) $7.2 million higher general provision for credit losses in the fourth quarter compared to third quarter of 2022, due to the increase in the total carrying value of our portfolio and a more pessimistic view of the macroeconomic scenario utilized for the CECL model, partially offset by (ii) $1.5 million reversal of the specific provision for credit losses in the fourth quarter compared to third quarter of 2022 due to cost recovery proceeds related to the Walgreens properties.

Realized Gain/Loss on Commercial Mortgage Loans, Held for Sale, measured at Fair Value

Realized loss on commercial mortgage loans held for sale, measured at fair value at the TRS for the three months ended December 31, 2022 was $2.5 million compared to a realized gain of $4.8 million for the three months ended September 30, 2022.

The $7.3 million decrease is primarily due to the difference in proceeds received between the one $52.5 million sale of fixed-rate commercial real estate loans into the CMBS securitization market during the three months ended December 31, 2022 compared to the one $78.5 million sale during the three months ended September 30, 2022.

Total proceeds received for the three months ended December 31, 2022 were $50.0 million compared to $82.3 million for the three months ended September 30, 2022.

Interest expense for the three months ended December 31, 2023 and September 30, 2023 totaled $81.2 million and $78.0 million, respectively, an increase of $3.2 million due primarily to an increase of $534.6 million in the average carrying value of our collateralized loan obligations partially offset by a decrease of $465.8 million in the average carrying value of our repurchase agreements - commercial mortgage loans.

Revenue from Real Estate Owned

For the three months ended December 31, 2023 and September 30, 2023, revenue from real estate owned was $4.0 million and $3.3 million, respectively, an increase of $0.7 million due primarily to rental income obtained from the acquisition of an additional property as real estate owned.

(Provision)/Benefit for Credit losses

Provision for credit losses was $5.4 million during the three months ended December 31, 2023 compared to a provision of $2.4 million during three months ended September 30, 2023.

The following paragraphs set forth explanations for changes in the general and specific reserves for the three months ended December 31, 2023 and September 30, 2023.

For the three months ended December 31, 2023 and September 30, 2023, the increases in general allowance of $5.4 million and $2.8 million, respectively, were primarily related to a more pessimistic view of the macroeconomic scenario utilized for the CECL model.

For the three months ended December 31, 2023, this was coupled with increases in the size of our loan portfolio compared to the preceding period.

For the three months ended December 31, 2023, the Company did not recognize specific CECL benefit or provisions.

Comparatively, for the three months ended September 30, 2023, the Company recognized $0.4 million of specific CECL benefit on one office loan located in Portland, OR.

Realized Gain/(Loss) on Extinguishment of Debt

The Company did not realized a gain or loss on extinguishment of debt for the three months ended December 31, 2023.

Realized loss on extinguishment of debt for the three months ended September 30, 2023 of $2.8 million was related to redemption of BSPRT 2019-FL5.

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

Realized loss on sale of available for sale trading securities for the three months ended December 31, 2023 of $30.0 thousand was primarily related to the sale of two CRE CLO bonds .

Realized loss on sale of available for sale trading securities for the three months ended September 30, 2023 of $0.5 million was primarily related to the sale of six CRE CLO bonds.

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

Realized gain on commercial mortgage loans, held for sale, measured at fair value for the three months ended December 31, 2023 of $0.8 million was related to the sale of $26.3 million in principal amount of commercial real estate loans into the CMBS securitization market resulting in proceeds of $27.0 million.

Realized gain on commercial mortgage loans, held for sale, measured at fair value for the three months ended September 30, 2023 of $0.9 million was related to the sale of $34.3 million in principal amount of commercial real estate loans into the CMBS securitization market resulting in proceeds of $35.3 million.

Gain/(Loss) on Other Real Estate Investments

Gain on other real estate investments for the three months ended December 31, 2023 was $0.1 million.

This is compared to a loss of $4.1 million for the three months ended September 30, 2023 primarily due to an impairment on the Walgreens Portfolio, real estate owned, held for sale asset.

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

Unrealized gain on commercial mortgage loans, held for sale, measured at fair value, at the TRS for the three months ended December 31, 2022 was $3.2 million compared to $0.1 million for the three months ended September 30, 2022.

The $3.1 million increase is primarily resulting from the reversal of unrealized gain/loss on sale due to the fixed-rate commercial real estate loans into the CMBS securitization.

The Company did not have any commercial mortgage loans, held for sale, measured at fair value held in an unrealized gain or loss position as of December 31, 2023 and September 30, 2023.

Trading Gain/(Loss)

Trading loss for the three months ended December 31, 2022 was $5.5 million compared to $2.7 million for the three months ended September 30, 2022.

The increase of $2.8 million is primarily attributable to losses due to changes in market values of the ARM Agency Securities.

The Company did not experience any trading losses during the three months ended December 31, 2023.

Trading loss for the three months ended September 30, 2023 of $2.6 million was attributable to $2.6 million of principal paydowns, $122.8 million of sales of ARM Agency Securities, and changes in market values on these securities.

Net Result from Derivative Transactions

Net result from derivative transactions for three months ended December 31, 2022 of a $0.6 million loss is composed of a realized gain of $2.4 million offset by an unrealized loss of $3.0 million primarily due to termination and settlement of our interest rate swap positions throughout the quarter.

This is compared to a realized loss of $1.6 million offset by an unrealized gain of $1.6 million for the three months ended September 30, 2022 primarily due to termination and settlement of our interest rate swap positions despite increasing values on our interest rate swap portfolio.

Net result from derivative transactions for the three months ended December 31, 2023 of a $0.3 million gain was composed primarily of realized gains related to the termination and settlement of interest rate swap positions.

This is compared to a net loss on our derivative portfolio of $0.1 million composed of a realized gain of $0.1 million due primarily to the termination and settlement of interest rate swap positions offset by an unrealized loss of $0.2 million for the three months ended September 30, 2023 .

(Provision)/Benefit for Income Tax

Benefit for income tax for the three months ended December 31, 2022 was $0.7 million compared to provision for income tax of $0.4 million for the three months ended September 30, 2022.

The difference is due to change in taxable income/(loss) at our TRS.

Net Income/Loss Attributable to Noncontrolling Interest

Net loss attributable to noncontrolling interest in our consolidated joint ventures for the three months ended December 31, 2022 amounted to $0.2 million.

Benefit for income tax for the three months ended December 31, 2023 was $0.3 million compared to a benefit of $1.8 million for the three months ended September 30, 2023.

The difference is due to change in taxable income/loss in our TRS segment.

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

Net income attributable to non-controlling interest in our consolidated joint ventures for the three months ended December 31, 2023 amounted to $16 thousand.

Comparatively, for the three months ended September 30, 2023, net loss attributable to non-controlling interest amounted to $0.8 million.

Preferred Share Dividends

Preferred share dividends were $6.7 million for each of the three months ended December 31, 2023 and September 30, 2023.

(see Note 9 - Redeemable Convertible Preferred Stock and Equity Transactions).

Expenses from operations

Expenses from operations for the three months ended December 31, 2022 and September 30, 2022 were made up of the following (dollars in thousands):

Expenses from operations for the three months ended December 31, 2023 and September 30, 2023 consisted of the following (dollars in thousands):

Three Months Ended

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Professional fees 3,509 4,153

Share-based compensation expense 669 —

Share-based compensation 1,256 1,255

Depreciation and amortization 1,614 1,513

1 unchanged sentence

Total expenses from operations $ 20,856 $ 21,567

The overall increase in our expenses from operations is primarily related to an increase in administrative services expenses due to higher Advisor personnel costs during the fourth quarter of 2022, an increase in depreciation and amortization expense due to the ten retail properties related to the Walgreens loan that were acquired through foreclosures during the three months ended December 31, 2022 and higher share-based compensation expense due to RSUs granted to management during the year.

Overall, operating expenses were consistent with prior quarter, with a decrease of approximately $0.8 million due to a decrease in other expenses from REO that was offset by Asset management and subordinated performance fee increases due to incentive fees.

Comparison of the Year Ended December 31, 2022 to the Year Ended December 31, 2021

See Part II, Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on February 25, 2022, for a discussion of the comparison of the year ended December 31, 2021 to the year ended December 31, 2020.

As of December 31, 2022 and 2021, our portfolio consisted of 161 and 165 commercial mortgage loans, respectively, excluding commercial mortgage loans accounted for under the fair value option.

The commercial mortgage loans held for investment as of December 31, 2022 and December 31, 2021 had a total carrying value, net of allowance for credit losses, of $5,228.9 million and $4,211.1 million, respectively.

As of December 31, 2022 and 2021 our total commercial mortgage loans, held for sale, measured at fair value, composed of two loans with total fair value of $15.6 million and one loan with total fair value of $34.7 million, respectively.

As of December 31, 2022 and 2021 we had real estate securities, trading, measured at fair values of $235.7 million and $4.6 billion, respectively, due to the Company's progress in selling down the ARM Agency Securities portfolio acquired from Capstead.

As of December 31, 2022, we had $221.0 million of real estate securities, available for sale, measured at fair value.

As of December 31, 2021, our other real estate investments, measured at fair value, was composed of one investment with a total fair value of $2.1 million.

As of December 31, 2022 and 2021, our real estate owned, held for investment composed of eleven and one investments, respectively with carrying values of $127.8 million and $90.0 million, respectively.

As of December 31, 2022, we had two properties classified as real estate owned, held for sale with a combined fair value of $36.5 million.

As of December 31, 2022, we 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 provision for credit losses has been recorded on the loan.

The Company did not recognize any interest income on the non-accrual loan during the twelve months 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 Walgreens retail properties in various locations throughout the United States.

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 provision for credit losses of $14.2 million on this loan.

Further, the Company designated the loan as non-performing and placed the loan on cost recovery status by ceasing the recognition of interest income.

As of December 31, 2022, the Company has received $8.0 million in cost recovery, which reduced the amortized cost of the loan.

During the year ended December 31, 2022, the net change in specific reserve was due to cost recovery proceeds received during the year, offset by a wider cap rate on the assumed value of the assets.

As of December 31, 2022, the amortized cost of the loan was $46.1 million, net of the specific allowance for credit losses.

See "Part I, Item 3.

Legal Proceedings" of this Annual Report on Form 10-K for more information about this loan and related litigation.

Future developments related to these non-performing loans could have a material impact on our future results.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on March 16, 2023, for a discussion of the comparison of the year ended December 31, 2022 to the year ended December 31, 2021.

As of December 31, 2023 and 2022, our portfolio consisted of 144 and 161 commercial mortgage loans, held for investment, respectively.

The commercial mortgage loans held for investment, net of allowance for credit losses, as of December 31, 2023 and 2022 had a total carrying value of $4,989.8 million and $5,228.9 million, respectively.

As of December 31, 2023 the Company did not hold any commercial mortgage loans, held for sale.

As of December 31, 2022, the contractual principal balance outstanding of commercial mortgage loans, held for sale, measured at fair value was $15.6 million, comprised of two loans, neither of which were in default or greater than ninety days past due.

As of December 31, 2023 and 2022, we had $242.6 million and $221.0 million, respectively, of real estate securities, available for sale, measured at fair value.

As of December 31, 2023 and 2022, our real estate owned, held for investment portfolio was composed of three and 11 properties, respectively, with carrying values of $115.8 million and $127.8 million, respectively.

As of December 31, 2023 and 2022, we had 23 and two properties classified as real estate owned, held for sale, respectively, with combined carrying values of $103.7 million and $36.5 million, respectively.

As of December 31, 2023, the Company did not hold any real estate securities, trading, measured at fair value.

As of December 31, 2022, the Company had real estate securities, trading, measured at fair value of $235.7 million.

During the year ended December 31, 2023, the Company fully disposed of the remaining ARM Agency Securities portfolio acquired from the Capstead merger that resulted in (i) $17.6 million of principal paydowns, (ii) $218.2 million of sales and (iii) $0.6 million of net trading losses related to principal paydowns, changes in market values and sales of these securities.

As of December 31, 2023, we had two loans, designated as non-performing status with a total amortized cost of $78.2 million.

As of December 31, 2023, no specific allowance for credit losses were recorded on the two non-performing loans, all of which were senior mortgage notes secured by multifamily properties.

As of December 31, 2023 and 2022, our commercial mortgage loans, held for investment, excluding commercial mortgage loans on non-performing status, had a weighted average coupon of 9.2% and 8.3% and a weighted average remaining life of 0.9 years and 1.4 years, respectively.

As of December 31, 2022, the value of the Company’s residential ARM Agency Securities portfolio was $235.7 million, compared to $4.6 billion as of December 31, 2021.

The reduction in the value of this portfolio during the twelve months ended December 31, 2022, is due in part to (i) $480.2 million of principal paydowns, (ii) $3.8 billion of sales and (iii) $119.2 million of trading losses related to principal paydowns, changes in market values, and sales of these securities.

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

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

(1) Regions included:

3 unchanged sentences

The following table shows selected data from our commercial mortgage loans, held for investment in our portfolio as of December 31, 2023 (dollars in thousands):

Loan Type Property Type Par Value Interest Rate (1)

Loan Type Risk Rating (1)

Property Type State Par Value Amortized

Cost Origination Date (2)

Fully Extended Maturity (3)

Interest Rate (4) (5)

Effective Yield (6)

Loan to Value (7)

Senior Debt 1 Hospitality $4,822 1 month LIBOR + 4.00% 8.39% 77.0%

Senior Debt 2 Hospitality 57,075 1 month LIBOR + 5.19% 9.58% 51.8%

Senior Debt 3 Multifamily 34,668 1 month SOFR + 3.03% 7.39% 63.7%

Senior Debt 4 Multifamily 34,731 1 month LIBOR + 3.00% 7.39% 83.6%

Senior Debt 5 Hospitality 22,116 1 month LIBOR + 3.50% 7.89% 68.8%

Senior Debt 6 Office 18,683 1 month SOFR + 4.75% 9.11% 70.0%

Senior Debt 7 Office 7,035 1 month LIBOR + 3.90% 8.29% 67.6%

Senior Debt 8 Office 43,886 1 month SOFR + 3.56% 7.92% 71.0%

Senior Debt 9 Hospitality 9,531 1 month SOFR + 5.57% 9.93% 68.7%

Senior Debt 10 Hospitality 19,352 1 month SOFR + 3.84% 8.20% 62.6%

Senior Debt 11 Hospitality 12,980 1 month SOFR + 3.02% 7.38% 56.4%

Senior Debt 12 Hospitality 4,988 1 month LIBOR + 4.25% 8.64% 47.7%

Senior Debt 13 Hospitality 31,597 1 month SOFR + 5.25% 9.61% 31.0%

Senior Debt 14 Office 15,188 1 month SOFR + 4.00% 8.36% 70.9%

Senior Debt 15 Office 25,802 1 month LIBOR + 4.35% 8.74% 64.9%

Senior Debt 16 Office 63,811 1 month LIBOR + 3.70% 8.09% 65.7%

Senior Debt 17 Multifamily 10,807 1 month SOFR + 4.25% 8.61% 72.4%

Senior Debt 18 Office 36,362 1 month LIBOR + 2.70% 7.09% 71.4%

Senior Debt 19 Manufactured Housing 1,331 5.50% 5.50% 62.8%

Senior Debt 20 Manufactured Housing 7,680 1 month LIBOR + 4.50% 8.89% 66.7%

Senior Debt 21 Self Storage 29,895 1 month LIBOR + 5.00% 9.39% 58.8%

Senior Debt 22 Multifamily 14,550 1 month SOFR + 4.83% 9.19% 70.0%

Senior Debt 23 Manufactured Housing 5,020 1 month LIBOR + 5.25% 9.64% 65.9%

Senior Debt 24 Office 18,203 1 month LIBOR + 4.50% 8.89% 47.9%

Senior Debt 25 Office 65,519 5.15% 5.15% 52.5%

Senior Debt 26 Office 35,000 1 month LIBOR + 5.21% 9.60% 66.0%

Senior Debt 27 Office 12,750 1 month LIBOR + 5.00% 9.39% 67.8%

Senior Debt 28 Multifamily 38,927 1 month LIBOR + 4.45% 8.84% 66.5%

Senior Debt 29 Industrial 14,985 1 month LIBOR + 4.50% 8.89% 66.3%

Senior Debt 30 Multifamily 12,280 1 month LIBOR + 4.55% 8.94% 73.0%

Senior Debt 31 Multifamily 21,000 1 month LIBOR + 4.60% 8.99% 66.7%

Senior Debt 32 Office 12,971 1 month LIBOR + 5.00% 9.39% 63.9%

Senior Debt 33 Office 43,751 1 month LIBOR + 3.94% 8.34% 53.9%

Senior Debt 34 (2)

Multifamily 12,892 1 month LIBOR + 7.25% 11.64% —%

Senior Debt 35 Multifamily 5,400 1 month LIBOR + 5.25% 9.64% 83.1%

Senior Debt 36 Hospitality 23,000 1 month LIBOR + 5.79% 10.18% 57.2%

Senior Debt 37 Multifamily 34,750 1 month LIBOR + 6.75% 11.14% 78.2%

Senior Debt 38 Multifamily 12,325 1 month LIBOR + 4.50% 8.89% 83.3%

Senior Debt 39 Multifamily 5,575 1 month LIBOR + 4.50% 8.89% 83.6%

Senior Debt 40 Multifamily 55,000 1 month LIBOR + 3.00% 7.39% 71.6%

Senior Debt 41 Multifamily 14,465 1 month LIBOR + 3.39% 7.78% 70.6%

Senior Debt 42 Multifamily 8,676 1 month LIBOR + 3.80% 8.19% 69.9%

Senior Debt 43 Multifamily 13,582 1 month LIBOR + 4.50% 8.89% 76.7%

Senior Debt 44 Multifamily 18,653 1 month LIBOR + 6.25% 10.64% 67.0%

Senior Debt 45 Multifamily 19,536 1 month LIBOR + 3.60% 7.99% 70.8%

Senior Debt 46 Multifamily 43,096 1 month LIBOR + 2.95% 7.34% 71.6%

Loan Type Property Type Par Value Interest Rate (1)

Senior Debt 1 3 Hospitality Wisconsin $4,586 $4,586 11/30/2017 3/9/2024 Adj.

1M SOFR Term + 4.00% 9.47% 77.0%

Senior Debt 2 3 Multifamily Ohio 35,212 35,212 4/23/2018 9/9/2025 1M SOFR Term + 4.50% 9.85% 83.6%

Senior Debt 3 2 Hospitality Louisiana 21,796 21,796 6/28/2018 3/9/2025 1M SOFR Term + 4.25% 9.60% 68.8%

Senior Debt 4 2 Office New Jersey 13,937 13,937 8/28/2018 9/9/2024 1M SOFR Term + 5.50% 10.85% 70.0%

Senior Debt 5 2 Office Maryland 41,185 41,185 4/30/2019 5/9/2025 1M SOFR Term + 3.56% 8.91% 71.0%

Senior Debt 6 4 Hospitality Texas 18,398 18,398 7/18/2019 1/9/2024 1M SOFR Term + 3.84% 9.19% 62.6%

Senior Debt 7 2 Hospitality Michigan 12,900 12,900 9/17/2019 10/9/2025 1M SOFR Term + 4.41% 9.76% 56.4%

Senior Debt 8 2 Hospitality New York 4,805 4,805 7/9/2019 7/9/2025 1M SOFR Term + 5.25% 10.60% 47.7%

Senior Debt 9 2 Office Arizona 14,852 14,852 11/22/2019 12/9/2024 1M SOFR Term + 4.00% 9.35% 70.9%

Senior Debt 10 4 Office Georgia 24,444 24,442 12/17/2019 1/9/2025 Adj.

1M SOFR Term + 4.35% 9.82% 64.9%

Senior Debt 11 2 Manufactured Housing Arkansas 1,301 1,301 4/22/2020 5/9/2025 5.50% 5.50% 62.8%

Senior Debt 12 3 Self Storage New York 27,440 27,440 9/3/2020 1/9/2026 Adj.

1M SOFR Term + 5.00% 10.47% 58.8%

Senior Debt 13 3 Office Texas 17,103 17,103 10/6/2020 10/9/2025 Adj.

1M SOFR Term + 4.50% 9.97% 47.9%

Senior Debt 14 2 Office Massachusetts 63,274 63,146 10/8/2020 10/9/2025 5.15% 5.15% 52.5%

Senior Debt 15 3 Office Michigan 30,186 30,186 10/14/2020 7/9/2025 1M SOFR Term + 2.81% 8.16% 66.0%

Senior Debt 16 2 Office Texas 9,175 9,175 11/6/2020 11/9/2025 Adj.

1M SOFR Term + 5.00% 10.47% 67.8%

Senior Debt 17 2 Multifamily Texas 12,550 12,547 1/22/2021 2/9/2026 Adj.

1M SOFR Term + 4.55% 10.02% 73.0%

Senior Debt 18 2 Multifamily Florida 21,000 21,000 12/31/2020 1/9/2025 Adj.

1M SOFR Term + 4.60% 10.07% 66.7%

Senior Debt 19 2 Office California 10,855 10,855 12/31/2020 1/9/2024 1M SOFR Term + 5.56% 10.91% 63.9%

Senior Debt 20 4 Office Colorado 44,913 44,892 3/1/2021 3/9/2026 Adj.

1M SOFR Term + 3.97% 9.43% 53.9%

Senior Debt 21 3 Multifamily Arizona 34,476 34,457 2/2/2021 2/9/2026 1M SOFR Term + 8.00% 13.35% N/A

Senior Debt 22 2 Hospitality North Carolina 23,000 22,992 2/24/2021 3/9/2024 Adj.

1M SOFR Term + 5.79% 11.26% 57.2%

Senior Debt 23 2 Multifamily Texas 34,750 34,750 3/5/2021 3/9/2024 1M SOFR Term + 4.10% 9.45% 78.2%

Senior Debt 24 3 Multifamily Texas 55,000 55,000 3/16/2021 5/9/2026 1M SOFR Term + 4.00% 9.35% 71.6%

Senior Debt 25 2 Multifamily Texas 14,700 14,696 3/15/2021 4/9/2026 Adj.

1M SOFR Term + 3.39% 8.86% 70.6%

Senior Debt 26 2 Multifamily Pennsylvania 8,898 8,893 3/23/2021 4/9/2026 Adj.

1M SOFR Term + 3.80% 9.27% 69.9%

Senior Debt 27 2 Multifamily Texas 19,804 19,798 3/25/2021 4/9/2026 Adj.

1M SOFR Term + 3.60% 9.07% 70.8%

Senior Debt 28 2 Multifamily Texas 43,246 43,237 4/1/2021 4/9/2026 Adj.

1M SOFR Term + 2.95% 8.42% 71.6%

Senior Debt 29 2 Hospitality Louisiana 25,700 25,700 4/15/2021 5/9/2026 Adj.

1M SOFR Term + 5.60% 11.07% 61.0%

Senior Debt 30 2 Mixed Use Washington 32,500 32,500 6/30/2021 1/9/2026 Adj.

1M SOFR Term + 3.70% 9.17% 69.7%

Senior Debt 31 2 Multifamily Texas 75,927 75,901 3/31/2021 4/9/2026 Adj.

1M SOFR Term + 2.95% 8.42% 72.6%

Senior Debt 32 3 Multifamily Texas 20,450 20,426 4/22/2021 5/9/2026 Adj.

1M SOFR Term + 3.60% 9.07% 67.7%

Senior Debt 33 2 Multifamily Texas 30,320 30,310 3/31/2021 4/9/2026 Adj.

1M SOFR Term + 2.95% 8.42% 70.4%

Senior Debt 34 2 Multifamily Texas 35,466 35,459 4/1/2021 4/9/2026 Adj.

1M SOFR Term + 2.95% 8.42% 71.7%

Loan Type Risk Rating (1)

Property Type State Par Value Amortized

Cost Origination Date (2)

Fully Extended Maturity (3)

Interest Rate (4) (5)

Effective Yield (6)

Loan to Value (7)

Senior Debt 47 Hospitality 25,785 1 month LIBOR + 5.60% 9.99% 61.0%

Senior Debt 48 Mixed Use 32,500 1 month LIBOR + 3.70% 8.09% 69.7%

Senior Debt 49 Multifamily 75,591 1 month LIBOR + 2.95% 7.34% 72.6%

Senior Debt 50 Multifamily 20,960 1 month LIBOR + 3.35% 7.74% 67.7%

Senior Debt 51 Multifamily 30,231 1 month LIBOR + 2.95% 7.34% 70.4%

Senior Debt 52 Multifamily 35,466 1 month LIBOR + 2.95% 7.34% 71.7%

Senior Debt 53 Multifamily 33,588 1 month LIBOR + 2.95% 7.34% 72.2%

Senior Debt 54 Hospitality 25,771 1 month LIBOR + 9.00% 13.39% 74.2%

Senior Debt 55 Self Storage 15,000 1 month LIBOR + 4.26% 8.65% 74.6%

Senior Debt 56 Multifamily 25,198 1 month LIBOR + 3.25% 7.64% 70.8%

Senior Debt 57 Office 6,742 1 month LIBOR + 5.25% 9.64% 67.3%

Senior Debt 58 (2)

Multifamily 111,226 1 month LIBOR + 6.50% 10.89% —%

Senior Debt 59 Multifamily 11,069 1 month LIBOR + 3.15% 7.54% 75.6%

Senior Debt 60 Hospitality 19,640 1 month LIBOR + 5.35% 9.74% 56.8%

Senior Debt 61 Hospitality 33,000 1 month LIBOR + 6.25% 10.64% 59.2%

Senior Debt 62 (2)

Multifamily 27,202 1 month LIBOR + 8.00% 12.39% —%

Senior Debt 63 Multifamily 15,874 1 month LIBOR + 3.75% 8.14% 76.9%

Senior Debt 64 Multifamily 30,420 1 month LIBOR + 3.00% 7.39% 73.5%

Senior Debt 65 Multifamily 40,046 1 month LIBOR + 3.15% 7.54% 71.0%

Senior Debt 66 Multifamily 42,850 1 month LIBOR + 3.40% 7.79% 79.9%

Senior Debt 67 Multifamily 36,760 1 month LIBOR + 3.64% 8.03% 66.0%

Senior Debt 68 Multifamily 8,500 1 month LIBOR + 3.75% 8.14% 79.4%

Senior Debt 69 Multifamily 14,200 1 month LIBOR + 3.15% 7.54% 79.8%

Senior Debt 70 Multifamily 13,667 1 month LIBOR + 3.75% 8.14% 64.2%

Senior Debt 71 Multifamily 67,138 1 month LIBOR + 3.25% 7.64% 77.1%

Senior Debt 72 Multifamily 10,268 1 month LIBOR + 3.75% 8.14% 70.0%

Senior Debt 73 Hospitality 32,527 1 month SOFR + 6.73% 11.09% 55.8%

Senior Debt 74 Multifamily 26,698 1 month LIBOR + 3.20% 7.59% 77.3%

Senior Debt 75 Hospitality 17,122 1 month LIBOR + 5.25% 9.64% 61.0%

Senior Debt 76 Hospitality 16,500 1 month LIBOR + 7.10% 11.49% 73.0%

Senior Debt 77 Multifamily 88,500 1 month LIBOR + 2.75% 7.14% 50.3%

Senior Debt 78 Multifamily 56,150 1 month LIBOR + 3.10% 7.49% 78.9%

Senior Debt 79 Multifamily 37,882 1 month LIBOR + 2.90% 7.29% 72.2%

Senior Debt 80 Multifamily 54,151 1 month LIBOR + 3.10% 7.49% 67.2%

Senior Debt 81 Multifamily 37,886 1 month LIBOR + 2.90% 7.29% 72.0%

Senior Debt 82 Multifamily 65,741 1 month LIBOR + 2.85% 7.24% 70.6%

Senior Debt 83 Multifamily 30,600 1 month LIBOR + 2.65% 7.04% 59.1%

Senior Debt 84 Multifamily 31,662 1 month LIBOR + 3.25% 7.64% 80.0%

Senior Debt 85 Multifamily 62,850 1 month LIBOR + 3.35% 7.74% 78.0%

Senior Debt 86 Multifamily 43,745 1 month LIBOR + 3.00% 7.39% 74.8%

Senior Debt 87 Multifamily 46,221 1 month LIBOR + 2.75% 7.14% 68.1%

Senior Debt 88 Multifamily 86,000 1 month SOFR + 3.24% 7.59% 60.0%

Senior Debt 89 Multifamily 29,821 1 month LIBOR + 2.90% 7.29% 74.2%

Senior Debt 90 Manufactured Housing 6,700 1 month LIBOR + 4.50% 8.89% 77.9%

Senior Debt 91 Multifamily 58,680 1 month LIBOR + 3.45% 7.84% 74.8%

Senior Debt 92 Multifamily 26,966 1 month LIBOR + 2.90% 7.29% 72.1%

Senior Debt 93 Multifamily 13,535 1 month LIBOR + 3.20% 7.59% 62.4%

Senior Debt 94 Multifamily 37,133 1 month LIBOR + 3.00% 7.39% 73.3%

Loan Type Property Type Par Value Interest Rate (1)

Senior Debt 35 2 Multifamily Texas 33,588 33,582 4/1/2021 4/9/2026 Adj.

1M SOFR Term + 2.95% 8.42% 72.2%

Senior Debt 36 2 Multifamily Florida 152,112 151,644 5/26/2021 6/9/2026 1M SOFR Term + 4.55% 9.90% 47.8%

Senior Debt 37 2 Hospitality Florida 36,750 36,713 5/20/2021 6/9/2026 Adj.

1M SOFR Term + 6.25% 11.72% 59.2%

Senior Debt 38 2 Multifamily North Carolina 35,116 34,990 7/22/2021 3/9/2027 Adj.

1M SOFR Term + 8.00% 13.47% N/A

Senior Debt 39 2 Multifamily Texas 16,453 16,453 10/6/2021 10/9/2026 Adj.

1M SOFR Term + 3.75% 9.22% 76.9%

Senior Debt 40 2 Multifamily Pennsylvania 47,984 47,901 9/10/2021 10/9/2026 Adj.

1M SOFR Term + 3.15% 8.62% 71.0%

Senior Debt 41 2 Multifamily South Carolina 41,650 41,650 9/2/2021 9/9/2025 Adj.

1M SOFR Term + 3.40% 8.87% 79.9%

Senior Debt 42 3 Multifamily Texas 34,760 34,713 9/20/2021 10/9/2024 Adj.

1M SOFR Term + 3.64% 9.11% 66.0%

Senior Debt 43 2 Multifamily Oregon 8,500 8,489 9/8/2021 9/9/2026 Adj.

1M SOFR Term + 3.75% 9.22% 79.4%

Senior Debt 44 2 Multifamily Texas 14,890 14,890 9/9/2021 9/9/2026 Adj.

1M SOFR Term + 3.15% 8.62% 79.8%

Senior Debt 45 2 Multifamily South Carolina 69,500 69,312 9/20/2021 10/9/2026 Adj.

1M SOFR Term + 3.25% 8.72% 77.1%

Senior Debt 46 2 Multifamily Georgia 11,325 11,306 9/22/2021 10/9/2026 Adj.

1M SOFR Term + 3.75% 9.22% 70.0%

Senior Debt 47 2 Multifamily Texas 27,199 27,160 9/30/2021 10/9/2026 Adj.

1M SOFR Term + 3.20% 8.67% 77.3%

Senior Debt 48 2 Hospitality Texas 17,122 17,122 9/30/2021 10/9/2026 Adj.

1M SOFR Term + 5.25% 10.72% 61.0%

Senior Debt 49 2 Multifamily Texas 56,150 56,071 9/30/2021 10/9/2026 Adj.

1M SOFR Term + 3.10% 8.57% 78.9%

Senior Debt 50 2 Multifamily Texas 38,242 38,116 10/14/2021 11/9/2026 Adj.

1M SOFR Term + 2.90% 8.37% 72.2%

Senior Debt 51 3 Multifamily Texas 55,394 55,394 11/23/2021 1/9/2027 Adj.

1M SOFR Term + 3.10% 8.57% 67.2%

Senior Debt 52 3 Multifamily Arizona 38,153 38,101 11/16/2021 12/9/2026 Adj.

1M SOFR Term + 2.90% 8.37% 72.0%

Senior Debt 53 2 Multifamily Texas 68,165 68,165 10/29/2021 11/9/2026 Adj.

1M SOFR Term + 2.85% 8.32% 70.6%

Senior Debt 54 2 Multifamily Texas 32,567 32,510 11/23/2021 12/9/2026 Adj.

1M SOFR Term + 3.25% 8.72% 80.0%

Senior Debt 55 2 Multifamily South Carolina 61,600 61,600 11/10/2021 11/9/2026 Adj.

1M SOFR Term + 3.35% 8.82% 78.0%

Senior Debt 56 2 Multifamily Texas 44,987 44,987 11/16/2021 12/9/2026 Adj.

1M SOFR Term + 3.00% 8.47% 74.8%

Senior Debt 57 2 Multifamily Texas 47,147 47,019 11/9/2021 11/9/2026 Adj.

1M SOFR Term + 2.75% 8.22% 68.1%

Senior Debt 58 2 Multifamily New Jersey 86,000 85,959 2/25/2022 3/9/2026 1M SOFR Term + 3.24% 8.59% 60.0%

Senior Debt 59 3 Manufactured Housing Georgia 6,700 6,688 12/13/2021 12/9/2026 Adj.

1M SOFR Term + 4.50% 9.97% 77.9%

Senior Debt 60 2 Multifamily Texas 58,680 58,677 12/10/2021 1/9/2027 Adj.

1M SOFR Term + 3.45% 8.92% 74.8%

Senior Debt 61 2 Multifamily Georgia 26,068 26,068 11/30/2021 3/9/2024 Adj.

1M SOFR Term + 2.90% 8.37% 72.1%

Senior Debt 62 2 Multifamily Kentucky 14,933 14,905 11/19/2021 12/9/2026 Adj.

1M SOFR Term + 3.20% 8.67% 62.4%

Senior Debt 63 2 Multifamily Texas 38,283 38,219 11/22/2021 12/9/2026 Adj.

1M SOFR Term + 3.00% 8.47% 73.3%

Senior Debt 64 4 Multifamily Texas 42,235 42,234 11/18/2021 1/9/2027 Adj.

1M SOFR Term + 2.90% 8.37% 71.7%

Senior Debt 65 3 Multifamily Texas 69,415 69,415 11/30/2021 12/9/2026 Adj.

1M SOFR Term + 2.88% 8.35% 74.8%

Senior Debt 66 2 Multifamily Texas 66,742 66,742 11/30/2021 12/9/2026 Adj.

1M SOFR Term + 2.88% 8.35% 75.5%

Senior Debt 67 2 Multifamily Texas 17,145 17,144 12/30/2021 1/9/2027 1M SOFR Term + 3.50% 8.85% 71.7%

Senior Debt 68 3 Multifamily Michigan 59,232 59,175 12/9/2021 12/9/2026 Adj.

1M SOFR Term + 2.75% 8.22% 73.9%

Senior Debt 69 3 Multifamily Pennsylvania 22,240 22,239 12/16/2021 1/9/2027 1M SOFR Term + 2.96% 8.31% 79.4%

Senior Debt 70 3 Multifamily Texas 25,241 25,195 12/16/2021 1/9/2027 1M SOFR Term + 2.96% 8.31% 72.9%

Loan Type Risk Rating (1)

Property Type State Par Value Amortized

Cost Origination Date (2)

Fully Extended Maturity (3)

Interest Rate (4) (5)

Effective Yield (6)

Loan to Value (7)

Senior Debt 95 Multifamily 33,581 1 month LIBOR + 3.20% 7.59% 74.5%

Senior Debt 96 Multifamily 40,231 1 month LIBOR + 2.90% 7.29% 71.7%

Senior Debt 97 Multifamily 66,202 1 month LIBOR + 2.88% 7.27% 74.8%

Senior Debt 98 Multifamily 63,722 1 month LIBOR + 2.88% 7.27% 75.5%

Senior Debt 99 Multifamily 16,909 1 month SOFR + 3.50% 7.86% 71.7%

Senior Debt 100 Multifamily 57,660 1 month LIBOR + 2.75% 7.14% 73.9%

Senior Debt 101 Multifamily 65,953 1 month SOFR + 6.03% 10.39% 74.7%

Senior Debt 102 Multifamily 22,240 1 month SOFR + 2.96% 7.32% 79.4%

Senior Debt 103 Multifamily 25,746 1 month SOFR + 2.96% 7.32% 72.9%

Senior Debt 104 Multifamily 31,678 1 month SOFR + 3.20% 7.56% 74.2%

Senior Debt 105 Multifamily 78,050 1 month SOFR + 3.45% 7.81% 78.8%

Senior Debt 106 Multifamily 80,714 1 month SOFR + 3.21% 7.57% 76.1%

Senior Debt 107 Multifamily 24,000 1 month SOFR + 3.10% 7.46% 72.7%

Senior Debt 108 Retail 31,000 1 month SOFR + 3.29% 7.65% 42.5%

Senior Debt 109 Multifamily 37,793 1 month SOFR + 3.55% 7.91% 66.2%

Senior Debt 110 Multifamily 22,965 1 month SOFR + 2.95% 7.31% 65.6%

Senior Debt 111 Multifamily 10,669 1 month SOFR + 3.30% 7.66% 75.7%

Senior Debt 112 Multifamily 47,444 1 month SOFR + 2.86% 7.22% 68.2%

Senior Debt 113 Multifamily 36,824 1 month SOFR + 2.86% 7.22% 69.7%

Senior Debt 114 Hospitality 10,493 1 month SOFR + 5.30% 9.66% 68.2%

Senior Debt 115 Retail 22,377 1 month SOFR + 4.95% 9.31% 63.3%

Senior Debt 116 Multifamily 82,000 1 month SOFR + 3.20% 7.56% 74.5%

Senior Debt 117 Industrial 55,000 1 month SOFR + 3.50% 7.86% 70.1%

Senior Debt 118 Multifamily 39,004 1 month SOFR + 3.10% 7.46% 74.1%

Senior Debt 119 Multifamily 34,823 1 month SOFR + 2.95% 7.31% 63.1%

Senior Debt 120 Mixed Use 19,000 1 month SOFR + 3.42% 7.78% 65.1%

Senior Debt 121 Multifamily 85,500 1 month SOFR + 3.15% 7.51% 69.6%

Senior Debt 122 Multifamily 31,282 1 month SOFR + 3.30% 7.66% 76.9%

Senior Debt 123 (2)(4)

Hospitality — 1 month SOFR + 7.05% 11.41% —%

Senior Debt 71 2 Multifamily Texas 32,428 32,425 12/16/2021 1/9/2027 1M SOFR Term + 3.20% 8.55% 74.2%

Senior Debt 72 2 Multifamily Florida 78,416 78,167 12/21/2021 1/9/2027 1M SOFR Term + 3.45% 8.80% 78.8%

Senior Debt 73 2 Multifamily North Carolina 81,247 81,164 12/15/2021 1/9/2027 1M SOFR Term + 3.21% 8.56% 76.1%

Senior Debt 74 2 Multifamily North Carolina 24,000 23,999 12/17/2021 1/9/2027 1M SOFR Term + 3.10% 8.45% 72.7%

Senior Debt 75 2 Retail New York 31,000 30,946 12/23/2021 1/9/2027 1M SOFR Term + 3.29% 8.64% 42.5%

Senior Debt 76 3 Multifamily Texas 38,511 38,511 5/12/2022 8/9/2027 1M SOFR Term + 3.55% 8.90% 66.2%

Senior Debt 77 2 Multifamily Georgia 23,855 23,848 1/28/2022 2/9/2027 1M SOFR Term + 2.95% 8.30% 65.6%

Senior Debt 78 2 Multifamily North Carolina 11,100 11,097 1/14/2022 2/9/2027 1M SOFR Term + 3.30% 8.65% 75.7%

Senior Debt 79 3 Multifamily Texas 47,444 47,442 12/21/2021 1/9/2027 1M SOFR Term + 2.86% 8.21% 68.2%

Senior Debt 80 2 Multifamily Texas 36,824 36,821 12/22/2021 1/9/2027 1M SOFR Term + 2.86% 8.21% 69.7%

Senior Debt 81 2 Hospitality North Carolina 10,504 10,481 1/19/2022 2/9/2027 1M SOFR Term + 5.30% 10.65% 68.2%

Senior Debt 82 2 Multifamily Florida 82,000 81,989 2/10/2022 2/9/2027 1M SOFR Term + 3.20% 8.55% 74.5%

Senior Debt 83 2 Industrial Arizona 55,000 54,973 3/15/2022 3/9/2027 1M SOFR Term + 3.50% 8.85% 70.1%

Senior Debt 84 2 Multifamily Texas 39,864 39,843 3/14/2022 3/9/2027 1M SOFR Term + 3.10% 8.45% 74.1%

Senior Debt 85 2 Multifamily Arizona 35,220 35,202 3/2/2022 3/9/2027 1M SOFR Term + 2.95% 8.30% 63.1%

Senior Debt 86 2 Mixed Use New York 19,000 18,991 3/7/2022 3/9/2026 1M SOFR Term + 3.42% 8.78% 65.1%

Senior Debt 87 2 Multifamily North Carolina 85,500 85,480 2/24/2022 3/9/2027 1M SOFR Term + 3.15% 8.50% 69.6%

Senior Debt 88 2 Multifamily North Carolina 31,900 31,888 3/29/2022 4/9/2027 1M SOFR Term + 3.30% 8.65% 76.9%

Senior Debt 89 2 Hospitality Colorado 30,021 29,741 5/20/2022 6/9/2027 1M SOFR Term + 7.05% 12.40% N/A

Senior Debt 90 2 Multifamily Texas 13,558 12,691 7/20/2022 4/9/2027 1M SOFR Term + 6.75% 12.10% N/A

Senior Debt 91 2 Hospitality Georgia 43,457 43,457 3/30/2022 4/9/2027 1M SOFR Term + 4.90% 10.25% 61.1%

Senior Debt 92 2 Hospitality New York 15,634 15,568 11/8/2022 11/9/2027 1M SOFR Term + 5.34% 10.69% 57.7%

Senior Debt 93 3 Multifamily Nevada 35,949 35,949 6/3/2022 6/9/2027 1M SOFR Term + 6.05% 11.40% 62.4%

Senior Debt 94 3 Multifamily Virginia 56,616 56,479 4/29/2022 5/9/2027 1M SOFR Term + 3.95% 9.30% 73.2%

Senior Debt 95 3 Multifamily Texas 29,905 29,816 10/21/2022 11/9/2027 1M SOFR Term + 4.00% 9.35% 70.9%

Senior Debt 96 2 Multifamily North Carolina 56,859 56,806 8/23/2022 9/9/2027 1M SOFR Term + 6.70% 12.05% 46.5%

Senior Debt 97 2 Multifamily Texas 12,536 12,523 5/2/2022 5/9/2027 1M SOFR Term + 3.55% 8.90% 67.7%

Senior Debt 98 2 Industrial Florida 18,724 18,673 9/13/2022 9/9/2027 1M SOFR Term + 4.90% 10.25% 64.6%

Senior Debt 99 2 Multifamily Tennessee 19,899 19,875 5/18/2022 6/9/2027 1M SOFR Term + 3.50% 8.85% 64.5%

Senior Debt 100 3 Multifamily Texas 28,979 28,936 5/26/2022 6/9/2027 1M SOFR Term + 3.65% 9.00% 71.0%

Senior Debt 101 3 Multifamily Texas 17,330 17,303 5/26/2022 6/9/2027 1M SOFR Term + 3.65% 9.00% 73.9%

Senior Debt 102 2 Multifamily Georgia 70,750 70,673 5/18/2022 6/9/2027 1M SOFR Term + 3.80% 9.15% 77.9%

Senior Debt 103 4 Multifamily North Carolina 83,914 83,810 6/1/2022 6/9/2027 1M SOFR Term + 3.95% 9.30% 71.8%

Senior Debt 104 3 Multifamily North Carolina 45,469 45,414 6/1/2022 6/9/2027 1M SOFR Term + 3.95% 9.30% 75.9%

Senior Debt 105 4 Multifamily North Carolina 58,003 57,930 6/1/2022 6/9/2027 1M SOFR Term + 3.95% 9.30% 73.7%

Senior Debt 106 3 Multifamily North Carolina 20,716 20,688 6/1/2022 6/9/2027 1M SOFR Term + 3.95% 9.30% 75.1%

Loan Type Risk Rating (1)

Property Type State Par Value Amortized

Cost Origination Date (2)

Fully Extended Maturity (3)

Interest Rate (4) (5)

Effective Yield (6)

Loan to Value (7)

Senior Debt 107 2 Multifamily Various 146,810 146,608 6/1/2022 6/9/2027 1M SOFR Term + 3.95% 9.30% 67.8%

Senior Debt 108 2 Multifamily Kentucky 56,000 55,938 6/1/2022 6/9/2027 1M SOFR Term + 3.80% 9.15% 73.8%

Senior Debt 109 2 Multifamily North Carolina 11,675 11,661 11/3/2022 11/9/2027 1M SOFR Term + 4.45% 9.80% 74.8%

Senior Debt 110 2 Multifamily Georgia 70,750 70,569 6/14/2022 6/9/2027 1M SOFR Term + 3.45% 8.80% 71.6%

Senior Debt 111 2 Hospitality District of Columbia 39,525 39,346 8/2/2022 8/9/2027 1M SOFR Term + 6.94% 12.29% 71.2%

Senior Debt 112 (8)

Multifamily — 1 month SOFR + 6.75% 11.11% —%

Senior Debt 125 Hospitality 43,344 1 month SOFR + 4.90% 9.26% 61.1%

Senior Debt 126 Hospitality 11,250 1 month SOFR + 5.22% 9.58% 57.7%

Senior Debt 127 Multifamily 5,132 1 month SOFR + 7.02% 11.38% 15.9%

Senior Debt 128 Multifamily 27,722 1 month SOFR + 6.05% 10.41% 62.4%

Senior Debt 129 Multifamily 56,616 1 month SOFR + 3.95% 8.31% 73.2%

Senior Debt 130 Multifamily 28,650 1 month SOFR + 4.00% 8.36% 70.9%

Senior Debt 131 Multifamily 50,137 1 month SOFR + 6.70% 11.06% 46.5%

Senior Debt 132 Multifamily 12,242 1 month SOFR + 3.55% 7.91% 67.7%

2 Multifamily Pennsylvania — — 2/17/2023 9/9/2026 1M SOFR Term + 6.31% 11.66% N/A

Senior Debt 113 2 Hospitality Alabama 16,270 16,249 9/20/2022 10/9/2027 1M SOFR Term + 5.75% 11.10% 62.1%

Senior Debt 114 2 Manufactured Housing Florida 11,617 11,587 9/13/2022 9/9/2027 1M SOFR Term + 4.75% 10.10% 53.8%

Senior Debt 115 (8)

Retail 63,640 1 month SOFR + 4.50% 8.86% N/A

Senior Debt 134 Industrial 23,050 1 month SOFR + 4.90% 9.26% 64.6%

Senior Debt 135 Multifamily 19,441 1 month SOFR + 3.50% 7.86% 64.5%

Senior Debt 136 Multifamily 17,600 1 month SOFR + 4.55% 8.91% 67.2%

Senior Debt 137 Multifamily 28,640 1 month SOFR + 3.65% 8.01% 71.0%

Senior Debt 138 Multifamily 16,843 1 month SOFR + 3.65% 8.01% 73.9%

Senior Debt 139 Multifamily 70,750 1 month SOFR + 3.80% 8.16% 77.9%

Senior Debt 140 Multifamily 81,271 1 month SOFR + 3.95% 8.31% 71.8%

Senior Debt 141 Multifamily 43,651 1 month SOFR + 3.95% 8.31% 75.9%

Senior Debt 142 Multifamily 56,547 1 month SOFR + 3.95% 8.31% 73.7%

Loan Type Property Type Par Value Interest Rate (1)

2 Hospitality Texas — — 1/31/2023 11/9/2027 1M SOFR Term + 7.50% 12.85% 6.2%

Senior Debt 116 2 Multifamily North Carolina 48,764 48,684 12/29/2022 1/9/2028 1M SOFR Term + 4.20% 9.55% 70.1%

Senior Debt 117 2 Multifamily South Carolina 51,000 50,875 12/2/2022 12/9/2027 1M SOFR Term + 3.75% 9.10% 64.6%

Senior Debt 118 2 Multifamily South Carolina 14,635 14,594 12/16/2022 1/9/2027 1M SOFR Term + 4.25% 9.60% 68.1%

Senior Debt 119 2 Hospitality North Carolina 28,300 28,297 12/15/2022 1/9/2025 1M SOFR Term + 5.25% 10.60% 54.9%

Senior Debt 120 2 Multifamily Arizona 55,500 55,353 4/10/2023 4/9/2026 1M SOFR Term + 3.85% 9.20% 44.7%

Senior Debt 121 2 Hospitality Florida 10,500 10,465 4/4/2023 4/9/2028 1M SOFR Term + 5.50% 10.85% 39.6%

Senior Debt 122 2 Hospitality Various 120,000 119,559 2/9/2023 2/9/2028 1M SOFR Term + 4.90% 10.25% 53.6%

Senior Debt 123 2 Multifamily Florida 64,500 64,388 4/19/2023 5/9/2025 1M SOFR Term + 5.00% 10.35% 62.3%

Senior Debt 124 2 Hospitality New York 39,549 39,661 4/17/2023 12/27/2024 1M SOFR Term + 3.75% 9.10% 39.1%

Senior Debt 125 2 Multifamily District of Columbia 21,700 21,616 6/30/2023 7/9/2027 1M SOFR Term + 3.95% 9.30% 29.4%

Senior Debt 126 2 Manufactured Housing Florida 21,449 21,296 7/28/2023 8/9/2028 1M SOFR Term + 4.25% 9.60% 43.2%

Senior Debt 127 2 Multifamily New York 19,793 19,881 6/28/2023 7/9/2028 4.75% 4.75% 85.7%

Senior Debt 128 2 Multifamily Texas 78,996 78,664 8/1/2023 8/9/2028 1M SOFR Term + 3.20% 8.55% 58.7%

Senior Debt 129 2 Hospitality Florida 23,000 22,861 8/10/2023 8/9/2028 1M SOFR Term + 5.45% 10.80% 72.8%

Senior Debt 130 2 Hospitality Georgia 12,420 12,322 8/17/2023 9/9/2028 1M SOFR Term + 4.85% 10.20% 53.5%

Senior Debt 131 2 Multifamily Texas 38,750 38,572 10/18/2023 11/9/2026 1M SOFR Term + 4.50% 9.85% 62.4%

Senior Debt 132 2 Hospitality Florida 31,300 31,078 10/17/2023 11/9/2028 1M SOFR Term + 4.25% 9.60% 48.9%

Senior Debt 133 2 Multifamily Texas 42,750 42,555 10/17/2023 11/9/2026 1M SOFR Term + 3.85% 9.20% 61.4%

Senior Debt 134 2 Multifamily Texas 17,119 16,966 10/12/2023 10/9/2028 1M SOFR Term + 3.20% 8.55% 55.1%

Senior Debt 135 2 Multifamily Texas 21,000 20,887 12/6/2023 12/9/2026 1M SOFR Term + 3.75% 9.10% 63.6%

Senior Debt 136 2 Hospitality Tennessee 41,071 40,855 11/14/2023 12/9/2028 1M SOFR Term + 3.65% 9.00% 50.0%

Senior Debt 137 2 Hospitality Nevada 25,750 25,595 12/15/2023 1/9/2028 1M SOFR Term + 3.95% 9.30% 42.4%

Senior Debt 138 3 Hospitality Illinois 16,566 16,563 12/4/2017 10/6/2025 5.99% 5.99% 52.9%

Mezzanine Loan 1 2 Retail New York 3,000 2,994 12/23/2021 1/9/2027 1M SOFR Term + 12.00% 17.35% 46.6%

Mezzanine Loan 2 2 Mixed Use New York 1,000 1,000 3/7/2022 3/9/2026 1M SOFR Term + 11.00% 16.35% 68.5%

Mezzanine Loan 3 2 Hospitality New York 1,350 1,346 11/8/2022 11/9/2027 1M SOFR Term + 9.25% 14.60% 64.6%

Mezzanine Loan 4 (8)

2 Hospitality Texas — — 1/31/2023 11/9/2027 1M SOFR Term + 10.00% 15.35% 6.2%

Mezzanine Loan 5 3 Multifamily Ohio 2,378 2,378 3/9/2023 9/9/2025 1M SOFR Term + 4.50% 9.85% 58.2%

Loan Type Risk Rating (1)

Property Type State Par Value Amortized

Cost Origination Date (2)

Fully Extended Maturity (3)

Interest Rate (4) (5)

Effective Yield (6)

Loan to Value (7)

Senior Debt 143 Multifamily 20,325 1 month SOFR + 3.95% 8.31% 75.1%

Senior Debt 144 Multifamily 128,324 1 month SOFR + 3.95% 8.31% 67.8%

Senior Debt 145 Multifamily 56,000 1 month SOFR + 3.80% 8.16% 73.8%

Senior Debt 146 Multifamily 11,675 1 month SOFR + 4.45% 8.81% 74.8%

Senior Debt 147 Multifamily 69,200 1 month SOFR + 3.45% 7.81% 71.6%

Senior Debt 148 Multifamily 173,389 1 month SOFR + 6.52% 10.88% 50.1%

Senior Debt 149 Hospitality 29,644 1 month SOFR + 6.94% 11.30% 71.2%

Senior Debt 150 Hospitality 13,410 1 month SOFR + 5.75% 10.11% 62.1%

Senior Debt 151 Manufactured Housing 10,550 1 month SOFR + 4.75% 9.11% 53.8%

Senior Debt 152 Multifamily 47,293 1 month SOFR + 4.20% 8.56% 70.1%

Senior Debt 153 Multifamily 51,000 1 month SOFR + 3.75% 8.11% 64.6%

Senior Debt 154 Multifamily 15,150 1 month SOFR + 4.25% 8.61% 68.1%

Senior Debt 155 Hospitality 28,300 1 month SOFR + 5.25% 9.61% 54.9%

Senior Debt 156 Hospitality 16,970 5.99% 5.99% 52.9%

Mezzanine Loan 1 Multifamily 3,000 1 month SOFR + 9.23% 13.59% 62.2%

Mezzanine Loan 2 Multifamily 10,000 1 month SOFR + 16.29% 20.65% 86.2%

Mezzanine Loan 3 Retail 3,000 1 month SOFR + 12.00% 16.36% 46.6%

Mezzanine Loan 4 Mixed Use 1,000 1 month SOFR + 11.00% 15.36% 68.5%

Mezzanine Loan 5 Hospitality 1,350 1 month SOFR + 9.25% 13.61% 64.6%

Mezzanine Loan 6 2 Multifamily District of Columbia 11,700 11,655 6/30/2023 7/9/2027 1M SOFR Term + 3.95% 9.30% 45.2%

$5,045,036 $5,036,942 9.18% 65.4%

_______________________

(1) Our floating rate loan agreements contain the contractual obligation for the borrower to maintain an interest rate cap to protect against rising interest rates.

(1) For a discussion of risk ratings, see Note 3 - Commercial Mortgage Loans in our Consolidated Financial Statements included in this Form 10-K.

(2) Date loan was originated or acquired by us.

The origination or acquisition date is not updated for subsequent loan modifications.

(3) Fully extended maturity assumes all extension options are exercised by the borrower;

provided, however, that our loans may be repaid prior to such date.

(4) Our floating rate loan agreements generally contain the contractual obligation for the borrower to maintain an interest rate cap to protect against rising interest rates.

In a simple interest rate cap, the borrower pays a premium for a notional principal amount based on a capped interest rate (the “cap rate”).

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When interest rates rise, the value of an interest rate cap will increase, thereby reducing the borrower's exposure to rising interest rates.

(2) Loan to value percentage is from metrics at origination.

Predevelopment construction loans at origination will not have an LTV and therefore is nil.

(3) Loan was designated as non-performing and placed on cost recovery status.

In this instance, the assumed collateral value was less than the value of the loan, therefore the LTV at origination is not relevant.

(5) On March 5, 2021, the Financial Conduct Authority of the U.K.

(the “FCA”) announced that LIBOR tenors would cease to be published or no longer be representative.

The Alternative Reference Rates Committee (the “ARRC”) interpreted this announcement to constitute a benchmark transition event.

The benchmark index of LIBOR interest rate will convert from LIBOR to compounded SOFR, plus a benchmark adjustment of 11.448 basis points.

As of December 31, 2023, all of our commercial mortgage loans, held for investment which had been indexed at LIBOR were converted to SOFR utilizing the 11.448 basis points adjustment and the applicable spreads remain unchanged.

The loans which have the SOFR adjustment are indicated with "Adj.

1M SOFR Term."

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

(7) Loan-to-value percentage ("LTV") represents the ratio of the loan amount to the appraised value of the property at the time of origination.

However, for predevelopment construction loans at origination, LTV is not applicable and is therefore nil.

(8) Commitment on the loan was unfunded as of December 31, 2023.

(5) Effective yield is calculated as the spread of the loan plus the higher of any applicable index or index floor.

The following table shows selected data from our commercial mortgage loans, held for sale, measured at fair value as of December 31, 2022 (dollars in thousands):

Loan Type Property Type Par Value Interest Rate Effective Yield Loan to Value (1)

TRS Senior Debt 1 Retail $12,000 7.05% 7.05% 43.5%

TRS Senior Debt 2 Office 3,625 6.35% 6.35% 51.42%

$15,625 6.89% 45.32%

________________________

(1) Loan to value percentage is from metrics at origination.

The following table shows selected data from our real estate owned, held for investment assets in our portfolio as of December 31, 2023 (dollars in thousands):

Type Property Type Carrying Value

Real Estate Owned 1 Industrial $ 87,746

Real Estate Owned 2 Retail 40,026

The following table shows selected data from our real estate owned, held for sale assets in our portfolio as of December 31, 2022 (dollars in thousands):

Type Property Type Carrying Value

Real Estate Owned, held for sale Various $ 36,497

The following is a summary of the Company's RMBS, all of which were ARM Agency Securities, classified by collateral type and interest rate characteristics as of December 31, 2022 (dollars in thousands):

Type Carrying Amount Average

Agency Securities:

Fannie Mae/Freddie Mac ARMs $ 235,728 2.42%

Type Acquisition Date Primary Location(s) Property Type Real Estate Owned, Net Intangible Lease Asset, Net Total

Real Estate Owned 1 September 2021 Jeffersonville, GA Industrial $ 85,444 $ 42,713 $ 128,157

Real Estate Owned 2 August 2023 Portland, OR Office 18,531 — 18,531

Real Estate Owned 3 October 2023 Lubbock, TX Multifamily 11,855 80 11,935

$ 115,830 $ 42,793 $ 158,623

(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 following table shows selected data from our real estate owned, held for sale assets in our portfolio as of December 31, 2023 (dollars in thousands):

Type Acquisition Date Primary Location(s) Property Type Assets, Net Liabilities, Net

Real Estate Owned, held for sale 1 Various Various Retail $ 103,657 $ 12,297

The following table shows selected data from our real estate securities, CRE CLO bonds, measured at fair value as of December 31, 2023 (dollars in thousands):

Type Par Value Interest Rate Effective Yield

Type Interest Rate Maturity Par Value Fair Value Effective Yield

CRE CLO bond 1 1 month SOFR + 2.78% 8/19/2035 $ 30,000 $ 30,040 8.14%

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CRE CLO bond 7 1 month SOFR + 3.10% 9/19/2038 12,000 11,969 8.46%

$ 243,340 $ 242,569 8.12%

Liquidity and Capital Resources

Our expected material cash requirements over the next twelve months and thereafter are composed of (i) contractually obligated expenditures, including payments of principal and interest and contractually-obligated fundings on our loans;

Our expected material cash requirements over the next twelve months and thereafter are composed of (i) contractually obligated payments, including payments of principal and interest and contractually-obligated fundings on our loans;

(ii) other essential expenditures, including operating and administrative expenses and dividends paid in accordance with REIT distribution requirements;

and (iii) opportunistic expenditures, including new loans.

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

and (iii) opportunistic investments, including new loans.

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

We may from time to time purchase or retire outstanding debt securities and repurchase or redeem our equity securities.

Such purchases, if any, will depend on prevailing market conditions, liquidity requirements and other factors.

We closely monitor our liquidity position and believe that we have sufficient current liquidity and access to additional liquidity to meet our financial obligations for the next 12 months and beyond.

Debt-to-Equity Ratio and Total Leverage Ratio

The following table presents our debt-to-equity and total leverage ratios:

December 31, 2023 December 31, 2022

Net debt-to-equity ratio (1)

Total leverage ratio (2)

________________________

(1) Represents (i) total outstanding borrowings under secured financing arrangements, including collateralized loan obligations, repurchase agreements - commercial mortgage loans, repurchase agreements - real estate securities, asset-specific financing arrangements, and unsecured debt, less cash and cash equivalents, to (ii) total equity and total redeemable convertible preferred stock, at period end .

Recourse net debt-to-equity ratio was 0.2x and 0.7x as of December 31, 2023 and December 31, 2022, respectively.

(2) Represents (i) total outstanding borrowings under secured financing arrangements, including collateralized loan obligations, repurchase agreements - commercial mortgage loans, repurchase agreements - real estate securities, asset-specific financing arrangements, and unsecured debt, to (ii) total equity and total redeemable convertible preferred stock, at period end.

Recourse leverage ratio was 0.4x and 0.8x as of December 31, 2023 and December 31, 2022, respectively.

Sources of Liquidity

Our primary sources of liquidity include unrestricted cash, capacity in our collateralized loan obligations available for reinvestment, and funds available and in progress on financing lines.

Our current sources of near-term liquidity as of December 31, 2023 and December 31, 2022 are set forth in the following table (dollars in millions):

December 31, 2023 December 31, 2022

Unrestricted cash $ 338 $ 179

CLO reinvestment available (1)

Financings available & in progress (2)

Total $ 1,524 $ 1,017

________________________

(1) See discussion below for further information on the Company's collateralized loan obligations.

(2) Represents cash available to invest at a market advance rate utilizing available capacity on financing lines.

We expect to use additional debt and equity financing as a source of capital.

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We anticipate that our debt and equity financing sources and our anticipated cash generated from operations will be adequate to fund our anticipated uses of capital.

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

We have an effective shelf registration statement for offerings of equity securities that is not limited on the amount of securities we may issue.

We also have authorized an at-the-market sales program ("ATM") pursuant to which we may sell up to $200 million of shares of our common stock from time to time.

We have not sold any shares of common stock under the ATM to date.

We also may access liquidity through our dividend reinvestment and stock purchase plan ("DRIP"), which includes a direct stock purchase option.

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

Collateralized Loan Obligations

During the twelve months ended December 31, 2022, the Company raised $960.0 million of capital through the issuance of BSPRT 2022-FL8 Issuer, Ltd.

and $670.6 million of capital through the issuance of BSPRT 2022-FL9 Issuer, LLC.

During the year ended December 31, 2023, the Company raised $896.6 million through the issuance of BSPRT 2023-FL10 Issuer, LLC.

Additionally, as of December 31, 2023, the Company had $54.5 million of reinvestment capital available across all outstanding collateralized loan obligations.

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.

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

The Repo Facilities generally provide that in the event of a decrease in the value of our collateral, the lenders can demand additional collateral.

Should the value of our collateral decrease as a result of deteriorating credit quality, resulting margin calls may cause an adverse change in our liquidity position.

The details of our 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 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.

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 consolidating joint venture (as discussed in Note 5 - Real Estate Owned), originated a $112.7 million mortgage note payable, of which $88.7 million is eliminated in 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%, of which the interest accrued on the $88.7 million 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

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.

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 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.

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):

Outstanding Accrued

Interest Collateral

Pledged Weighted Average

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 %

The following table shows the par value outstanding for each CLO and the respective reinvestment end dates (dollars in millions):

CLO Name Debt Amount Reinvestment End Date

2019-FL5 Issuer (1)

2021-FL6 Issuer $ 558.0 Ended

2021-FL7 Issuer $ 720.0 01/08/24

2022-FL8 Issuer $ 960.0 03/08/24

2022-FL9 Issuer $ 670.6 07/08/24

2023-FL10 Issuer $ 689.3 04/08/25

________________________

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.

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

Future agreements are dependent upon the willingness of lenders to participate in the financing of mortgage investments, lender collateral requirements and the lenders’ determination of the fair value of the investments pledged as collateral, which fluctuates with changes in interest rates and liquidity conditions within the commercial banking and mortgage finance industries.

None of our repurchase agreement counterparties are obligated to renew or otherwise enter into new agreements at the conclusion of existing borrowings.

To help mitigate exposure to rising short-term interest rates, the Company may economically hedge the portfolio of repurchase agreements using derivatives supplemented with longer-maturity repurchase agreements when available at attractive rates and terms.

As of December 31, 2022, the Company does not hold any derivative positions related to the trading securities.

Repurchase Agreements

The following tables summarize our Repurchase Agreements, Commercial Mortgage Loans, Trading Securities and our MRAs for the years ended December 31, 2022, 2021 and 2020 respectively:

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

Repurchase Agreements and Revolving Credit Facilities ("Repo and Revolving Credit Facilities")

The Repo and Revolving Credit 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 that typically range between 60% to 75% of the principal amount of the mortgage loan being pledged.

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

The Repo and Revolving Credit Facilities generally provide that in the event of a decrease in the value of our collateral, the lenders can demand additional collateral.

Should the value of our collateral decrease as a result of deteriorating credit quality, resulting margin calls may cause an adverse change in our liquidity position.

The following tables summarize our Repo and Revolving Credit Facilities and our master repurchase agreements ("MRAs") for the years ended December 31, 2023, 2022, and 2021, respectively:

As of December 31, 2023

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Repurchase Agreements, Real Estate Securities 107,934 176,993 240,010 174,055 217,389 209,025 349,878 263,769

Repurchase Agreements, Real Estate Securities Classified As Trading $ 1,659,931 $ 240,000 $ 225,000 $ 217,144 $ 3,055,413 $ 1,818,495 $ 230,010 $ 220,102

Repurchase Agreements, Real Estate Securities held as trading 121,000 113,000 — — 149,387 117,159 57 —

Total $ 833,355 $ 985,032 $ 489,355 $ 473,762 $ 1,092,076 $ 1,122,843 $ 1,166,864 $ 541,937

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Repurchase Agreements, Real Estate Securities 54,610 53,288 112,613 222,864 44,744 54,033 53,688 174,389

Repurchase Agreements, Real Estate Securities Classified As Trading $ — $ — $ — $ 4,144,473 $ — $ — $ — $ 4,266,556

Repurchase Agreements, Real Estate Securities held as trading 1,659,931 240,000 225,000 217,144 3,055,413 1,818,495 230,011 220,102

Total $ 2,237,431 $ 1,125,322 $ 1,037,021 $ 1,120,867 $ 3,913,301 $ 2,706,865 $ 993,378 $ 1,123,820

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Repurchase Agreements, Real Estate Securities 88,272 46,510 46,531 34,311 123,322 57,301 46,527 37,735

Repurchase Agreements, Real Estate Securities held as trading — — — 4,144,473 — — — 4,266,556

Total $ 241,197 $ 333,972 $ 596,687 $ 5,198,384 $ 463,807 $ 340,192 $ 378,398 $ 5,264,020

The use of our repurchase facilities is dependent upon a number of factors including but not limited to:

The use of our warehouse lines is dependent upon a number of factors including but not limited to:

origination volume, loan repayments and prepayments, our use of other financing sources such as collateralized loan obligations, our liquidity needs and types of loan assets and underlying collateral that we hold.

During the twelve months ended December 31, 2023, the maximum monthly average outstanding balance was $1.2 billion, of which $0.9 billion was related to repurchase agreements on our commercial mortgage loans and $0.3 billion for repurchase agreements on our real estate securities.

During the twelve months ended December 31, 2021, the maximum monthly average outstanding balance was $5.84 billion , of which $0.68 billion was related to repurchase agreements on our commercial mortgage loans and $0.04 billion for repurchase agreements on our real estate securities and $5.12 billion for repurchase agreements on our real estate securities held for trading.

During the twelve months ended December 31, 2020, the maximum monthly average outstanding balance was $721.0 million, of which $268.2 million was related to repurchase agreements on our commercial mortgage loans and $452.8 million for repurchase agreements on our real estate securities.

Cash Flows for the Year Ended December 31, 2022

Net cash provided by operating activities for the year ended December 31, 2022 was $152.5 million.

Cash inflows were primarily driven by net income of $14.2 million, net proceeds of $18.1 million related to originations and sales of commercial mortgage loans, measured at fair value and $119.2 million related to trading losses on real estate securities.

Net cash provided by investing activities for the year ended December 31, 2022 was $3,097.3 million.

Cash inflows were primarily driven by proceeds from principal repayments of $1,258.4 million received on commercial mortgage loans, held for investment, proceeds received from the sale of real estate securities of $3,731.7 million, $545.4 million received from principal collateral on mortgage investments and proceeds from sale of commercial mortgage loans, held for sale, of $9.3 million.

During the twelve months ended December 31, 2022, the maximum monthly average outstanding balance was $5.3 billion, of which $1.1 billion was related to repurchase agreements on our commercial mortgage loans and $4.2 billion for repurchase agreements on our real estate securities.

During the twelve months ended December 31, 2021, the maximum monthly average outstanding balance was $5.8 billion , of which $0.7 billion was related to repurchase agreements on our commercial mortgage loans and $5.1 billion for repurchase agreements on our real estate securities.

Distributions

In order to maintain our election to qualify as a REIT, we must currently distribute, at a minimum, an amount equal to 90% of our taxable income, without regard to the deduction for distributions paid and excluding net capital gains.

The Company must distribute 100% of its taxable income (including net capital gains) to avoid paying corporate U.S.

federal income taxes.

Distributions on our common stock are payable when declared by our board of directors.

Dividends payable on each share of Series H convertible preferred stock ("Series H Preferred Stock") is generally equal to the quarterly dividend that would have been paid had such share of preferred stock been converted to a share of common stock, except to the extent common stock dividends have been reduced below certain specified levels.

To the extent dividends on shares of preferred stock are not authorized and declared by our board of directors and paid by the Company monthly, the dividend amounts will accrue.

Holders of shares of the Company's 7.50% Series E Cumulative Redeemable Preferred Stock ("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).

In December 2023, the Company's board of directors declared the following:

(i) a fourth quarter 2023 dividend of $0.355 per share on the Company's common stock (equivalent to $1.42 per annum), (ii) a fourth quarter 2023 dividend of $106.22 per share on the Company’s Series H Preferred Stock, and (iii) a fourth quarter 2023 dividend of $0.46875 per share on the Company’s Series E Preferred Stock, all of which were paid in January 2024 to holders of record as of December 31, 2023.

Under the Company's dividend reinvestment and direct stock purchase plan ("DRIP"), the Company may elect to supply shares for reinvestment via newly issued shares of common stock under the DRIP or via shares of common stock acquired by the DRIP administrator on the open market.

During the years ended December 31, 2023, 2022 and 2021, the Company issued 61,866 shares, 72,764 shares and zero shares, respectively, of common stock under the dividend reinvestment component of DRIP.

During the year ended December 31, 2023 and 2022, the Company paid an aggregate of $118.0 million and $87.8 million, respectively, of common stock distributions.

The following table sets forth changes in cash, cash equivalents and restricted cash for the years ended December 31, 2023 and 2022:

For the Year Ended December 31,

Cash Flows From Operating Activities $ 197,387 $ 152,515

Cash Flows From Investing Activities 380,807 3,097,265

Cash Flows From Financing Activities (424,994) (3,227,492)

Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash $ 153,200 $ 22,288

Cash Flows from Operating Activities

Our cash flows from operating activities were primarily driven by net income of $144.5 million, net proceeds of $19.5 million related to originations and sales of commercial mortgage loans, measured at fair value and $33.7 million related to provision for credit losses which is a non-cash transaction.

During the year ended December 31, 2022, cash flows from operating activities were primarily driven by net income of $14.2 million, net proceeds of $18.1 million related to originations and sales of commercial mortgage loans, measured at fair value and $119.2 million related to trading losses on real estate securities.

Cash Flows from Investing Activities

Our cash flows from investing activities consisted of cash inflows primarily driven by proceeds from principal repayments of $1,065.5 million received on commercial mortgage loans, held for investment, proceeds received from the sale of real estate securities of $418.8 million, proceeds from the sale of other real estate investments of $39.8 million and $17.7 million received from principal collateral on mortgage investments.

Inflows were partially offset by the origination and acquisition of $936.3 million of commercial mortgage loans, held for investment and the purchase of real estate securities for $223.8 million.

Net cash used in financing activities for the year ended December 31, 2022 was $3,227.5 million.

Cash outflows were primarily driven by net repayments on repurchase agreements for real estate securities and commercial mortgage loans of $3,738.8 million and $338.7 million, respectively, $139.4 million in cash distributions to stockholders and $16.6 million of common stock repurchases.

During the year ended December 31, 2022, cash inflows were primarily driven by proceeds from principal repayments of $1,258.4 million received on commercial mortgage loans, held for investment, proceeds received from the sale of real estate securities of $3,731.7 million, $545.4 million received from principal collateral on mortgage investments and proceeds from sale of commercial mortgage loans, held for sale, of $9.3 million.

Inflows were partially offset by the origination and acquisition of $2,227.7 million of commercial mortgage loans, held for investment and the purchase of real estate securities for $220.6 million.

Cash Flows from Financing Activities

Our cash outflows from financing activities were primarily driven by net repayments on repurchase agreements for real estate securities, commercial mortgage loans and other financings of $266.0 million, $381.2 million and $39.8 million, respectively, $144.3 million in cash distributions to stockholders, repayments on unsecured debt of $13.4 million, deferred financing cost payments of $12.9 million and $12.5 million of common stock repurchases.

Outflows were partially offset by net proceeds of $448.1 million received from repurchase agreements on CLOs.

During the year ended December 31, 2022, cash outflows were primarily driven by net payments on repurchase agreements for real estate securities and commercial mortgage loans of $3,738.8 million and $$338.7 million, respectively, $139.4 million in cash distributions to stockholders and $16.6 million of common stock repurchases.

Outflows were partially offset by $38.5 million of proceeds received from borrowings on other financing and loan participation for commercial mortgage loans and net proceeds of $968.2 million received from repurchase agreements on CLOs.

Cash Flows for the Year Ended December 31, 2021

Net cash provided by operating activities for the year ended December 31, 2021 was $146.5 million.

Cash inflows were primarily driven by net income of $25.7 million, net proceeds of $33.4 million related to originations and sales of commercial mortgage loans, measured at fair value and $36.1 million related to trading losses on real estate securities.

Net cash provided by investing activities for the year ended December 31, 2021 was $1,068.7 million.

Cash inflows were primarily driven by proceeds from principal repayments of $1,225.6 million received on commercial mortgage loans, held for investment, proceeds received from the sale/repayment of real estate securities of $2,059.4 million, $541.3 million received from principal collateral on mortgage investments and cash acquired of $174.1 million related to the merger with Capstead.

Inflows were partially offset by the origination and acquisition of $2,881.9 million of commercial mortgage loans.

Net cash used in financing activities for the year ended December 31, 2021 was $1,139.2 million.

Cash outflows were primarily driven by net payment on CMBS repurchase agreements of $2,429.3 million, $68.0 million in cash distributions to stockholders and $11.4 million of stock repurchases.

Outflows were offset by $6.5 million of proceeds received from borrowing on other financing and loan participation for commercial mortgage loans, $23.9 million from borrowing on mortgage note payable and net proceeds of $743.3 million and $540.3 million received from repurchase agreements on commercial mortgage loans and CLOs, respectively.

Election as a REIT

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(1) The allocation of our unfunded loan commitments is based on the earlier of the commitment expiration date or the loan maturity date.

(2) Excludes $453.4 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.

(2) Excludes $495.0 million of CLO notes, held by the Company, which are eliminated in Collateralized loan obligations in the consolidated balance sheets as of December 31, 2023.

In addition to its cash requirements, the Company pays a quarterly dividend and has an existing share repurchase authorization.

As of December 31, 2022, the Company’s quarterly cash dividend was $0.355 per share of common stock (which was paid on an as-converted basis on the Company’s shares of Series H convertible preferred stock ("Series H Preferred Stock") and Series I convertible preferred stock ("Series I Preferred Stock"), and $0.46875 per share on the Company’s shares of 7.50% Series E Cumulative Redeemable Preferred Stock ("Series E Preferred Stock").

As of December 31, 2023, the Company’s quarterly cash dividend was $0.355 per share of common stock (which was paid on an as-converted basis on the Company’s shares of Series H Preferred Stock), and $0.46875 per share on the Company’s shares of Series E Preferred Stock.

The payment of future dividends is subject to declaration by the Board of Directors.

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• 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.

Lending Agreement with Stockholder

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 years 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).

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.

Other Transactions

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.

In the third quarter of 2021, the Company and an affiliate of the Company entered into 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 affiliated fund made up the remaining $29.8 million composed of a $24.0 million mortgage note payable and $5.8 million in non-controlling interest.

The Company has majority control of Jeffersonville JV and, therefore, consolidates the accounts of Jeffersonville JV in its consolidated financial statements.

The Company's $88.7 million mortgage note payable to Jeffersonville JV is eliminated in consolidation (see Note 7 - Debt).

As discussed below, in the first quarter of 2022, pursuant to the Franklin BSP Realty Trust, Inc.

2021 Equity 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).

Pursuant to the Company's 2021 Incentive Plan, in the first quarter of 2023, 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.

As of December 31, 2023, our commercial mortgage loans, held for investment, includes an aggregate of $124.1 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.

The Company recognized $10.0 million and $5.0 million in interest income from these loans for the year ended December 31, 2023 and 2022 respectively, in the 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 the Walgreens Portfolio 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 to acquire 75.618% ownership interest in the Walgreens Portfolio, while the affiliated fund has 24.242% interest (see Note 5 - Real Estate Owned).

The table below shows the costs incurred due to arrangements with our Advisor and its affiliates during the years ended December 31, 2023, 2022 and 2021 and the associated amounts payable as of December 31, 2023 and 2022 (dollars in thousands).

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______________________

(1) Total acquisition fees and expenses paid during the years ended December 31, 2022, 2021 and 2020 were $11.7 million, $15 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 for the increase in loan origination activities and are included in Other expenses in the Company's consolidated statements of operations.

(1) Total acquisition fees and expenses paid during the years ended December 31, 2023, 2022 and 2021 were $5.8 million, $11.7 million and $15.0 million respectively, of which $4.6 million, $10.3 million and $13.8 million were capitalized in Commercial mortgage loans, held for investment and Real estate securities, available for sale, measured at fair value in the consolidated balance sheets for the years ended December 31, 2023, 2022 and 2021.

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

(3) As of December 31, 2023 and December 31, 2022, the related party payable includes $0.7 million and $2.9 million, respectively, of payments made by the Advisor to third party vendors on behalf of the Company.

The amounts payable as of December 31, 2022 and 2021 in the table above are included in Due to affiliates on the Company's consolidated balance sheets.

The payables as of December 31, 2023 and 2022 in the table above are included in Due to affiliates in the consolidated balance sheets.

Off Balance Sheet Arrangements

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Distributable Earnings and Run-Rate Distributable Earnings

Distributable Earnings is a non-GAAP measure, which the Company defines as GAAP net income (loss), adjusted for (i) non-cash CLO amortization acceleration and amortization over the expected useful life of the Company's CLOs, (ii) unrealized gains and losses on loans, derivatives and ARMs, including CECL reserves and impairments, (iii) non-cash equity compensation expense, (iv) depreciation and amortization, (v) non-cash subordinated performance fee accruals, (vi) loan workout charges, (vii) certain other non-cash items, and (viii) impairments of acquisition assets related to the Capstead merger.

Further, Run-Rate Distributable Earnings, a non-GAAP measure, presents Distributable Earnings before trading and derivative gain/loss on ARMs.

Distributable Earnings is a non-GAAP measure, which the Company defines as GAAP net income (loss), adjusted for (i) non-cash CLO amortization acceleration and amortization over the expected useful life of the Company's CLOs, (ii) unrealized gains and losses on loans, derivatives and ARMs, including CECL reserves and impairments, (iii) non-cash equity compensation expense, (iv) depreciation and amortization, (v) subordinated performance fee accruals/(reversal), (vi) loan workout charges, (vii) realized gains and losses on debt extinguishment and CLO calls, (viii) actual realized cash loss on a specific real estate owned ("REO") investment, (ix) impairments of acquisition assets related to the Capstead merger and (x) certain other non-cash items.

Further, Run-Rate Distributable Earnings, a non-GAAP measure, presents Distributable Earnings before (i) trading and derivative gain/loss on ARMs and (ii) realized cash gain/loss adjustments on REO.

The Company believes that Distributable Earnings and Run-Rate Distributable Earnings provide meaningful information to consider in addition to the disclosed GAAP results.

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Further, Distributable Earnings helps investors evaluate performance excluding the effects of certain transactions and GAAP adjustments that the Company does not believe are necessarily indicative of current loan portfolio performance and the Company's operations and is one of the performance metrics the Company's board of directors considers when dividends are declared.

The Company believes Run-Rate Distributable Earnings is a useful financial metric because it presents the Distributable Earnings of its core businesses, net of the impacts of the realized trading and derivative gain/loss on the residential adjustable-rate mortgage securities acquired from Capstead, which the Company is actively in the process of liquidating from its portfolio.

The Company believes Run-Rate Distributable Earnings is a useful financial metric because it presents the Distributable Earnings of its core businesses, net of the impacts of realized cash gain/loss adjustments on REO as well as the realized trading and derivative gain/loss on the residential adjustable-rate mortgage securities acquired from Capstead Mortgage Corporation, which the Company has liquidated from its portfolio.

Distributable Earnings and Run-Rate Distributable Earnings do not represent net income (loss) and should not be considered as an alternative to GAAP net income (loss).

The methodology for calculating Distributable Earnings and Run-Rate Distributable Earnings may differ from the methodologies employed by other companies and thus may not be comparable to the Distributable Earnings reported by other companies.

The following table provides a reconciliation of GAAP net income to Distributable Earnings for the years ended December 31, 2022, December 31, 2021 and December 31, 2020 (dollars in thousands):

The following table provides a reconciliation of GAAP net income to Distributable Earnings for the years ended December 31, 2023, 2022, and 2021 (dollars in thousands):

Year Ended December 31,

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Subordinated performance fee (3)

6,171 (8,380) 9,846

Non-Cash Compensation Expense 4,762 3,485 —

Increase/(decrease) in provision for credit losses 36,115 (5,192) 13,296

Loan Workout Charges (3)

Impairment losses on real estate owned assets — — 398

(Reversal of)/Provision for credit losses 33,738 36,115 (5,192)

Loan workout charges/(loan workout recoveries) (4)

(5,105) 5,104 —

Realized (gain)/loss on debt extinguishment / CLO call (2,201) — —

Realized trading and derivatives (gain)/loss on ARMs 677 21,726 13,600

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Realized trading and derivatives gain/(loss) on ARMs (677) (21,726) (13,600)

Realized cash gain/(loss) adjustment on REO (6)

Distributable Earnings $ 189,510 $ 116,076 $ 133,812

7.5% Cumulative Redeemable Preferred Stock, Series E Dividend $ (19,367) $ (19,367) (4,842)

Noncontrolling interests in joint ventures net (income)/loss 216 — —

Depreciation and amortization attributed to noncontrolling interests of joint ventures (1,415) — —

Distributable Earnings attributable to stockholders and noncontrolling interests 95,510 128,970 72,040

Non-controlling interests in joint ventures net (income)/loss (602) 216 —

Depreciation and amortization attributed to non-controlling interests of joint ventures (31) (1,415) —

Distributable Earnings to Common 169,510 95,510 128,970

Average Common Stock and Common Stock Equivalents 1,403,558 1,456,871 1,146,009

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(2) Represents unrealized gains and losses on (i) commercial mortgage loans, held for sale, measured at fair value, (ii) other real estate investments, measured at fair value and (iii) derivatives.

(3) Represents loan workout expenses the Company incurred, which the Company deems likely to be recovered.

(3) Represents accrued and unpaid subordinated performance fee.

In addition, reversal of subordinated performance fee represents cash payments of the subordinated performance fee made during the period.

(4) Represents loan workout charges the Company incurred, which the Company deemed likely to be recovered.

Reversal of loan workout charges represent recoveries received.

During the second quarter of 2023, the Company recovered $5.1 million of loan workout charges, in aggregate, related to the loan workout charges incurred in 2022.

(5) Distributable Earnings before realized trading and derivative gain/loss on residential adjustable-rate mortgage securities (“Run-Rate Distributable Earnings”) (a non-GAAP financial measure).

(5) Fully Converted assumes conversion of our Series H and Series I Preferred Stock, which by their terms automatically convert to common stock in the future, and the vesting of the Company's outstanding equity compensation awards.

(6) Represents the actual realized cash loss on a specific REO investment.

(7) Fully Converted assumes conversion of our series of convertible preferred stock and full vesting of our outstanding equity compensation awards.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis