Franklin BSP Realty Trust, Inc. (FBRT) FY 2024 MD&A

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the accompanying financial statements of Franklin BSP Realty Trust, Inc. the notes thereto and other financial information included elsewhere in this Annual Report on Form 10-K.

As used herein, the terms "the Company," "we," "our" and "us" refer to Franklin BSP Realty Trust, Inc., a Maryland corporation and, as required by context, to Benefit Street Partners Realty Operating Partnership, L.P., a Delaware limited partnership, which we refer to as the "OP," and to its subsidiaries. We are externally managed by Benefit Street Partners L.L.C. (our "Advisor").

This discussion contains forward-looking statements reflecting the Company’s current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the sections of this Annual Report on Form 10-K entitled “Risk Factors” and “Forward-Looking Statements.”

Overview

The Company is a Maryland corporation and has made tax elections to be treated as a real estate investment trust ("REIT") for U.S. federal income tax purposes since 2013. The Company, through one or more subsidiaries which are each treated as a TRS, is indirectly subject to U.S. federal, state and local income taxes. We commenced business in May 2013. We primarily originate, acquire and manage a diversified portfolio of commercial real estate debt investments secured by properties located within and outside of the United States. Substantially all of our business is conducted through the OP, a Delaware limited partnership. We are the sole general partner and directly or indirectly hold all of the units of limited partner interests in the OP.

The Company has no employees. We are managed by our Advisor pursuant to the Advisory Agreement. Our Advisor manages our affairs on a day-to-day basis. The Advisor receives compensation and fees for services related to the investment and management of our assets and our operations.

The Advisor, an SEC-registered investment adviser, is a credit-focused alternative asset management firm. The Advisor manages funds for institutions and high-net-worth investors across various credit funds and complementary strategies including high yield, levered loans, private / opportunistic debt, liquid credit, structured credit and commercial real estate debt. These strategies complement each other as they all leverage the sourcing, analytical, compliance, and operational capabilities that encompass the Advisor’s robust platform. The Advisor is a wholly-owned subsidiary of Franklin Resources, Inc., which together with its various subsidiaries operates as "Franklin Templeton".

The Company invests in commercial real estate debt investments, which may include first mortgage loans, subordinated mortgage loans, mezzanine loans and participations in such loans. The Company also originates conduit loans which the Company intends to sell through its TRS into CMBS securitization transactions. Historically this business has focused primarily on CMBS, CMBS bonds, CDOs and other securities. 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.

Book Value Per Share

The following table calculates the Company's book value per share as of December 31, 2024 and 2023 (in thousands, except share and per share amounts):

25

The following table calculates the Company's fully-converted book value per share as of December 31, 2024 and 2023 (in thousands, except share and per share amounts):

________________________

(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 $13.8 million and $9.4 million as of December 31, 2024 and 2023, respectively, would result in a fully-converted book value per share of $15.35 and $15.88 as of December 31, 2024 and 2023, respectively.

Critical Accounting Estimates

Our financial statements are prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"), which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Critical accounting estimates are those that require the application of management’s most difficult, subjective or complex judgments on matters that are inherently uncertain and that may change in subsequent periods. In preparing the financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. In preparing the financial statements, management has utilized available information, including our past history, industry standards and the current economic environment, among other factors, in forming its estimates and judgments, giving due consideration to materiality. Actual results may differ from these estimates. 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 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 Significant Accounting Policies to the accompanying consolidated financial statements included in this Annual Report on Form 10-K.

Credit Losses - Estimating Credit Losses

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 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.

26

Table of Contents

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.

Specific Allowance for credit losses

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

Risk Rating

In developing the provision for credit losses for its loans held for investment, the Company performs a comprehensive analysis of its loan portfolio and assigns risk ratings to loans that incorporate management's current judgments about their credit quality based on all known and relevant internal and external factors that may affect collectability, using similar factors as those in developing the provision for credit losses. This methodology results in loans being segmented by risk classification into risk rating categories that are associated with estimated probabilities of default and principal loss. Risk rating categories range from "1" to "5" with "1" representing the lowest risk of loss and "5" representing the highest risk of loss with the ratings updated quarterly.

The Company designates loans as non-performing when (i) full payment of principal and coupon interest components become 90-days past due ("non-accrual status"); or (ii) the Company has reasonable doubt as to whether the collection of contractual components can be satisfied ("cost recovery status"). When a loan is designated as non-performing and placed on non-accrual status, interest is only recognized as income when payment has been received. Loans designated as non-performing and placed on non-accrual status are removed from their non-performing designation when collection of principal and coupon interest components have been satisfied. When a loan is designated as non-performing and placed on cost recovery status, the cost-recovery method is applied to which receipt of principal or coupon interest is recorded as a reduction to the amortized cost until collection of all contractual components are reasonably assured.

Real Estate Owned - Estimating Fair Value and Holding Period

Real estate owned assets, held for investment are carried at their estimated fair value at acquisition and presented net of accumulated depreciation and impairment charges. 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.

27

Table of Contents

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. Real estate owned revenue is recognized when the Company satisfies a performance obligation by transferring a promised good or service to a customer. The Company is considered to have satisfied all performance obligation at a point in time.

Real estate owned assets that are probable to be sold within one year are reported as held for sale. Real estate owned assets classified as held for sale are measured at the lower of its carrying value or estimated fair value less cost to sell. Real estate owned assets are not depreciated or amortized while classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be accrued. Upon the disposition of a real estate owned asset, the Company calculates realized gains and losses as net proceeds received less the carrying value of the real estate owned asset. Net proceeds received are net of direct selling costs associated with the disposition of the real estate owned asset.

Real Estate Securities - Estimating Fair Value

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 the 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. Amortization is reflected as an adjustment to Interest income in the consolidated statements of operations.

Credit Impairment Analysis of Real Estate Securities

Real estate securities for which the fair value option has not been elected will be periodically evaluated for credit impairment. 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 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.

The Company analyzes the AFS security portfolio on a periodic basis for credit losses at the individual security level using the same criteria described above for those amortized cost financial assets subject to an allowance for credit losses including but not limited to; performance of the underlying assets in the security, borrower financial resources and investment in collateral, collateral type, credit ratings, project economics and geographic location as well as national and regional economic factors.

The non-credit loss component of the unrealized loss within the Company’s AFS portfolio is recognized as an adjustment to the individual security’s asset balance with an offsetting entry to Accumulated other comprehensive income/(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

The Company conducts its business through the following segments:

•The real estate debt business focuses on originating, acquiring and asset managing commercial real estate debt investments, including first mortgages, subordinate mortgages, mezzanine loans and participations in such loans.

•The real estate securities business focuses on investing in and asset managing real estate securities. Historically this business has focused primarily on CMBS, CMBS bonds, CDO notes, and other securities.

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

28

Table of Contents

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.

Comparison of the Year Ended December 31, 2024 to the Year Ended December 31, 2023

Net Interest Income

Net interest income is generated on our interest-earning assets less related interest-bearing liabilities and is recorded as part of our real estate debt, real estate securities and TRS segments.

The following table presents the average balance of interest-earning assets less related interest-bearing liabilities, associated interest income and expense and corresponding yield earned and incurred for the years ended December 31, 2024 and 2023 (dollars in thousands):

________________________

(1) Based on amortized cost for real estate debt and real estate securities and principal amount for interest-bearing liabilities. Amounts are calculated based on daily averages for the years ended December 31, 2024 and 2023, respectively.

(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.

(7) Calculated by dividing net interest income/spread by the average interest-earning assets less average interest-bearing liabilities.

Interest Income

Interest income for the years ended December 31, 2024 and 2023, totaled $526.1 million and $552.5 million, respectively, a decrease of $26.4 million. The decrease was primarily due to the recognition of a non-recurring item of $20.4 million of interest income from the sale of a Brooklyn hotel asset in the second quarter of 2023, coupled with an increase in the number of non-performing loans in 2024, which averaged $190.9 million in principal for the year ended December 31, 2024. As of December 31, 2024, our portfolio consisted of (i) 155 commercial mortgage loans, held for investment, (ii) 11 real estate securities, available for sale, measured at fair value, and (iii) three commercial mortgage loans, held for sale, measured at fair value. 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.

29

Table of Contents

Interest Expense

Interest expense for the years ended December 31, 2024 and 2023 totaled $338.5 million and $305.6 million, respectively, an increase of $32.9 million. The increase was primarily due to an increase of $429.6 million in the average carrying value of our collateralized loan obligations ("CLOs") coupled with an increase in deferred fee amortization due to the utilization of expected duration of our CLOs compared to contractual duration, partially offset by a decrease of $144.0 million in the average carrying values of our repurchase agreements - commercial mortgage loans and real estate securities.

Revenue from Real Estate Owned

Revenue from real estate owned for the years ended December 31, 2024 and 2023 totaled $22.8 million and $17.0 million, respectively. The $5.8 million increase was primarily the result of rental income from obtaining possession of additional multifamily properties brought on as real estate owned, through foreclosure or deed-in-lieu of foreclosure, for the year ended December 31, 2024.

Provision/(Benefit) for Credit losses

Provision for credit losses for the years ended December 31, 2024 and 2023 totaled $35.7 million and $33.7 million, respectively.

General benefit for credit losses was $0.3 million for the year ended December 31, 2024 compared to a general provision of $21.4 million for the year ended December 31, 2023. The $21.7 million decrease in general reserve was primarily due to the portfolio turnover of older vintage loans with newly originated loans coupled with a more favorable macro-economic outlook compared to the preceding period.

For the year ended December 31, 2024, the increase in specific reserve of $36.0 million was primarily related to two non-performing loans collateralized by office properties located in Colorado and Georgia. For the year ended December 31, 2023, the increase in specific reserve of $12.3 million, compared to the prior year, was primarily related to one office loan located in Oregon.

Realized Gain/(Loss) on Extinguishment of Debt

The Company did not realize a gain or loss on extinguishment of debt for the year ended December 31, 2024. 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 repurchase of the Class E notes in our BSPRT 2021-FL7 CLO and $8.3 million of bonds of our BSPRT 2019-FL5 CLO partially offset by the redemption of BSPRT 2019-FL5.

Realized Gain/(Loss) on Real Estate Securities, Available for Sale

Realized gain on real estate securities, available for sale for the year ended December 31, 2024 of $0.1 million was primarily related to the sale of six CMBS bonds. Realized gain on real estate securities, available for sale for the year ended December 31, 2023 of $0.1 million was primarily related to the sale of 12 CMBS bonds.

Realized Gain/(Loss) on Sale of Commercial Mortgage Loans, Held for Investment

Realized gain on commercial mortgage loans, held for investment, for the year ended December 31, 2024 of $0.1 million was related to the disposition of two senior and one mezzanine commercial mortgage loans. The Company did not have any dispositions of commercial mortgage loans for the year ended December 31, 2023.

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, 2024 of $13.1 million was related to the sale of $271.2 million in principal amount of commercial real estate loans into the CMBS securitization market resulting in proceeds of $284.3 million. 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.

Gain/(Loss) on Other Real Estate Investments

Loss on other real estate investments for the year ended December 31, 2024 was $8.0 million primarily due to sales and write offs related to the Walgreens Portfolio coupled with the onboarding of real estate owned, held for sale multifamily properties. This is compared to a loss of $7.1 million for the year ended December 31, 2023 related to a sale of one real estate owned, held for sale property located in New Rochelle, NY resulting in a loss of $1.2 million in addition to impairments of our real estate owned, held for sale assets of $1.9 million related to the St. Louis, MO office property and $4.0 million related to the Walgreens Portfolio.

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

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, 2024 and 2023. For the year ended December 31, 2023, unrealized gain on commercial

30

Table of Contents

mortgage loans, held for sale, measured at fair value was $43.8 thousand primarily related to the reversal of unrealized gain/loss on sales of commercial real estate loans into the CMBS securitization market.

Trading Gain/(Loss)

The Company did not hold any trading securities as of December 31, 2024 and 2023. Trading loss for the year ended December 31, 2023 of $0.6 million was attributable to principal paydowns, changes in market values and gains on sales 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 ARM.

Net Result from Derivative Transactions

Net result from derivative transactions for the year ended December 31, 2024 of a $0.2 million loss was composed of a realized loss of $1.3 million due primarily to the termination and settlement of credit default swaps and treasury yields, partially offset by an unrealized gain of $1.1 million. This is compared to a net gain on our derivative portfolio of $0.9 million 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 for the year ended December 31, 2023.

(Provision)/Benefit for Income Tax

Provision for income tax for the year ended December 31, 2024 was $1.1 million compared to a benefit of $2.8 million for the year ended December 31, 2023. The difference is due to changes 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 years ended December 31, 2024 and 2023 totaled $3.5 million and $0.7 million, respectively.

Preferred Share Dividends

Preferred share dividends were $27.0 million for the years ended December 31, 2024 and 2023.

Expenses from Operations

Expenses from operations for the years ended December 31, 2024 and 2023 consisted of the following (dollars in thousands):

For the year ended December 31, 2024, we incurred asset management and subordinated performance fees and administrative services expenses of $26.0 million and $9.7 million, respectively, which are payable to our Advisor under our asset management agreement. For the year ended December 31, 2024 compared to 2023, asset management and incentive fees decreased due to the decrease in net income and applicable equity used to calculate the performance fee, coupled with a decrease in administrative services expenses due to less time spent on asset workout. Refer to Note 11 - Related Party Transactions and Arrangements for a summary of the Company's Advisory Agreement with the Advisor and a description of how our fees are calculated.

The decrease in operating expense was partially offset by (i) an increase in share-based compensation due to equity awards issued under the Company's 2021 Incentive Plan during the year ended December 31, 2024 and (ii) an increase in other expenses related to property operating expenses and third party management fees incurred in order to operate various real estate owned investments in our portfolio.

31

Table of Contents

Comparison of the Three Months Ended December 31, 2024 to the Three Months Ended September 30, 2024

Net Interest Income

Net interest income is generated on our interest-earning assets less related interest-bearing liabilities and is recorded as part of our real estate debt, real estate securities and TRS segments.

The following table presents the average balance of interest-earning assets less related interest-bearing liabilities, associated interest income and expense and corresponding yield earned and incurred for the three months ended December 31, 2024 and three months ended September 30, 2024 (dollars in thousands):

________________________

(1) Based on amortized cost for real estate debt and real estate securities and principal amount for interest-bearing liabilities. Amounts are calculated based on daily averages for the three months ended December 31, 2024 and September 30, 2024, respectively.

(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) Annualized.

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

(7) Calculated by dividing net interest income/spread by the average interest-earning assets less average interest-bearing liabilities.

Interest Income

Interest income for the three months ended December 31, 2024 and September 30, 2024 totaled $127.8 million and $134.1 million, respectively, a decrease of $6.3 million. The decrease was primarily due to an approximate 59 basis point decrease in daily average SOFR and SOFR equivalent rates coupled with a $274.4 million decrease in the average carrying value of our real estate debt. As of December 31, 2024, our portfolio consisted of (i) 155 commercial mortgage loans, held for investment, (ii) 11 real estate securities, available for sale, measured at fair value, and (iii) three commercial mortgage loans, held for sale, measured at fair value. As of September 30, 2024, our portfolio consisted of (i) 157 commercial mortgage loans, held for investment and (ii) ten real estate securities, available for sale, measured at fair value.

Interest Expense

Interest expense for the three months ended December 31, 2024 and September 30, 2024 totaled $80.5 million and $89.9 million, respectively, a decrease of $9.4 million due primarily to a decrease of $585.9 million in the carrying value of our repurchase agreements - commercial mortgage loans, partially offset by an increase of $455.2 million in the average carrying value of our collateralized loan obligations.

32

Table of Contents

Revenue from Real Estate Owned

For the three months ended December 31, 2024 and September 30, 2024, revenue from real estate owned was $8.7 million and $5.4 million, respectively. The $3.3 million increase was primarily the result of rental income from onboarding multifamily properties brought on as real estate owned, through foreclosure or deed-in-lieu of foreclosure, during the three months ended December 31, 2024.

(Provision)/Benefit for Credit losses

Provision for credit losses was $0.9 million during the three months ended December 31, 2024 compared to a benefit of $0.3 million during the three months ended September 30, 2024.

For the three months ended December 31, 2024 and September 30, 2024, general benefit for credit losses was $1.6 million and $0.8 million, respectively, an increase in benefit of $0.8 million primarily due to the portfolio turnover of older vintage loans with newly originated loans coupled with a more favorable macro-economic outlook compared to the preceding period.

For the three months ended December 31, 2024 and September 30, 2024, specific provision for credit losses was $2.5 million and $0.5 million, respectively. For the three months ended December 31, 2024, the specific provision was primarily related to a non-performing loan collateralized by a multifamily property located in Texas. For the three months ended September 30, 2024, the specific provision was primarily related to foreclosures on multifamily properties located in Oklahoma and North Carolina.

Realized Gain/(Loss) on Real Estate Securities, Available for Sale

The Company did not realize a gain or loss on real estate securities, available for sale for the three months ended December 31, 2024. Realized gain on real estate securities, available for sale for the three months ended September 30, 2024 of $0.1 million was primarily related to the sale of two CMBS bonds.

Realized Gain/(Loss) on Sale of Commercial Mortgage Loans, Held for Investment

Realized gain on commercial mortgage loans, held for investment, for the three months ended December 31, 2024 of $0.1 million was related to the disposition of two senior and one mezzanine commercial mortgage loans. The Company did not record any realized gains or losses on dispositions of commercial mortgage loans for the three months ended September 30, 2024.

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

The Company did not realize any gain or loss on commercial mortgage loans, held for sale, measured at fair value for the three months ended December 31, 2024. Realized gain on commercial mortgage loans, held for sale, measured at fair value for the three months ended September 30, 2024 of $6.2 million was related to the sale of $131.6 million in principal amount of commercial real estate loans into the CMBS securitization market resulting in proceeds of $137.8 million.

Gain/(Loss) on Other Real Estate Investments

Gain on other real estate investments for the three months ended December 31, 2024 was $0.5 million primarily due to the onboarding of real estate owned, held for sale, multifamily properties partially offset by losses on the sales of three, held for sale, multifamily properties and one, held for sale, retail property from our Walgreens Portfolio. This is compared to a loss of $2.2 million for the three months ended September 30, 2024 primarily due to write offs related to the Walgreens Portfolio coupled with the onboarding of real estate owned, held for sale, multifamily properties.

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

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, 2024. Unrealized loss on commercial mortgage loans, held for sale, measured at fair value, for the three months ended September 30, 2024 was $0.6 million which is attributable to the reversal of previous unrealized gains due to sales into the CMBS securitization market.

33

Table of Contents

Net Result from Derivative Transactions

Net result from derivative transactions for the three months ended December 31, 2024 of a $1.0 million gain was composed primarily of unrealized gains on mark to market on credit default swaps, treasury note futures, and options. This is compared to a net loss on our derivative portfolio of $1.3 million composed of a realized loss of $1.6 million primarily related to the termination and settlement of credit default swaps and treasury note futures, partially offset by an unrealized gain of $0.3 million for the three months ended September 30, 2024.

(Provision)/Benefit for Income Tax

Provision for income tax for each of the three months ended December 31, 2024 and September 30, 2024, was $0.2 million.

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

Net loss attributable to non-controlling interest in our consolidated joint ventures for the three months ended December 31, 2024 and September 30, 2024 totaled $0.4 million and $1.4 million, respectively.

Expenses from operations

Expenses from operations for the three months ended December 31, 2024 and September 30, 2024 consisted of the following (dollars in thousands):

For the three months ended December 31, 2024, we incurred asset management and subordinated performance fees and administrative services expenses of $6.9 million and $2.3 million, respectively, which are payable to our Advisor under our asset management agreement. For the three months ended December 31, 2024 compared to September 30, 2024, asset management and incentive fees increased due to actual net income surpassing previously projected net income, while administrative services expenses decreased due to increases of non-reimbursable expenses. Refer to Note 11 - Related Party Transactions and Arrangements for a summary of the Company's Advisory Agreement with the Advisor and a description of how our fees are calculated.

The increase in operating expense was also partially related to an increase in other expenses due to expenses related to property operating expenses and third party management fees incurred in order to operate various real estate owned investments in our portfolio.

34

Table of Contents

Comparison of the Year Ended December 31, 2023 to the Year Ended December 31, 2022

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, 2023, filed with the Securities and Exchange Commission on February 26, 2024, for a discussion of the comparison of the year ended December 31, 2023 to the year ended December 31, 2022.

35

Table of Contents

Portfolio

As of December 31, 2024 and 2023, our portfolio consisted of 155 and 144 commercial mortgage loans, held for investment, respectively. The commercial mortgage loans held for investment, net of allowance for credit losses, as of December 31, 2024 and 2023, had a total carrying value of $4,908.7 million and $4,989.8 million, respectively. As of December 31, 2024, our commercial mortgage loans, held for sale, measured at fair value, were comprised of three loans with a total fair value of $87.3 million. As of December 31, 2023, the Company did not hold any commercial mortgage loans, held for sale, measured at fair value. As of December 31, 2024 and 2023, we had $203.0 million and $242.6 million, respectively, of real estate securities, available for sale, measured at fair value. As of December 31, 2024 and 2023, our real estate owned, held for investment portfolio was composed of three properties, with carrying values of $113.2 million and $115.8 million, respectively. As of December 31, 2024 and 2023, we had twelve and twenty-three properties classified as real estate owned, held for sale, respectively, with combined carrying values of $222.9 million and $103.7 million, respectively.

As of December 31, 2024, we had three loans (one secured by a multifamily property and two secured by office properties), designated as non-performing status with a total amortized cost of $133.2 million. 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, 2024, three loans designated as non-performing and put on cost recovery status were determined to have a combined $31.2 million specific allowance for credit losses. During the year ended 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, 2024 and 2023, our commercial mortgage loans, held for investment, excluding commercial mortgage loans on non-performing status, had a weighted average coupon of 8.0% and 9.2%, respectively, and a weighted average remaining life of 1.1 years and 0.9 years, respectively.

36

Table of Contents

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, 2024 and 2023:

37

Table of Contents

An investments region classification is defined according to the below map based on the location of investments secured property.

38

Table of Contents

39

Table of Contents

The following charts show the par value by contractual maturity year for the investments in our portfolio as of December 31, 2024 and 2023:

40

Table of Contents

The following table shows selected data from our commercial mortgage loans, held for investment in our portfolio as of December 31, 2024 (dollars in thousands):

41

Table of Contents

42

Table of Contents

_______________________

(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.

43

Table of Contents

(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”). When the floating rate exceeds the cap rate, the borrower receives a payment from the cap counterparty equal to the difference between the floating rate and the cap rate on the same notional principal amount for a specified period of time. When interest rates rise, the value of an interest rate cap will increase, thereby reducing the borrower's exposure to rising interest rates.

(5) As of December 31, 2024, 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) 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, 2024.

The following table shows selected data from our commercial mortgage loans, held for sale, measured at fair value as of December 31, 2024 (dollars in thousands):

________________________

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

The following table shows selected data from our real estate owned, held for investment assets in our portfolio as of December 31, 2024 (dollars in thousands):

The following table shows selected data from our real estate owned, held for sale assets in our portfolio as of December 31, 2024 (dollars in thousands):

44

Table of Contents

The following table shows selected data from our real estate securities, available for sale, measured at fair value as of December 31, 2024 (dollars in thousands):

45

Table of Contents

Liquidity and Capital Resources

Overview

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 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:

________________________

(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 0.3x and 0.2x as of December 31, 2024 and 2023, 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 0.4x as of December 31, 2024 and 2023, 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, 2024 and 2023 are set forth in the following table (dollars in millions):

________________________

(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. Our board of directors currently intends to operate at a leverage level of between one to three times book value of equity. However, our board of directors may change this target without shareholder approval. 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.

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.

46

Table of Contents

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 year ended December 31, 2024, the Company raised $1.0 billion through the issuance of our CLO, BSPRT 2024-FL11 Issuer, LLC. Additionally, as of December 31, 2024, the Company had $12.2 million of reinvestment capital available across all outstanding collateralized loan obligations. The following table shows the par value outstanding for each CLO and the respective reinvestment end dates (dollars in millions):

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, 2024, 2023, and 2022, respectively:

47

Table of Contents

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, 2024, the maximum monthly average outstanding balance was $1.1 billion, of which $0.8 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, 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, 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.

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.

48

Table of Contents

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 2024, the Company's board of directors declared the following: (i) a fourth quarter 2024 dividend of $0.355 per share on the Company's common stock (equivalent to $1.42 per annum), (ii) a fourth quarter 2024 dividend of $106.22 per share on the Company’s Series H Preferred Stock, and (iii) a fourth quarter 2024 dividend of $0.46875 per share on the Company’s Series E Preferred Stock, all of which were paid in January 2025 to holders of record as of December 31, 2024.

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. For the year ended December 31, 2024, 0 and 163,952 shares of common stock were issued by the Company and purchased in the open market by the DRIP administrator and allocated to DRIP participants, respectively, under the dividend reinvestment component of DRIP.

During the year ended December 31, 2024 and 2023, the Company paid an aggregate of $117.9 million and $118.0 million, respectively, of common stock distributions.

Cash Flows

The following table sets forth changes in cash, cash equivalents and restricted cash for the years ended December 31, 2024 2023, and 2022, respectively

Cash Flows from Operating Activities

During the year ended December 31, 2024, cash inflows of $57.2 million from operating activities were primarily driven by (i) net income of $92.4 million and (ii) certain non-cash expenses, partially offset by net cash outlay of $74.1 million related to originations, sales and repayment of commercial mortgage loans, held for sale, measured at fair value.

During the year ended December 31, 2023, cash inflows of $197.4 million from operating activities were primarily driven by (i) net income of $144.5 million, (ii) net proceeds of $19.5 million related to originations, sales and repayment of commercial mortgage loans, held for sale, measured at fair and (iii) certain non-cash expenses.

Cash Flows from Investing Activities

During the year ended December 31, 2024 cash outflows of $155.5 million from investing activities were primarily driven by (i) the origination and purchase of commercial mortgage loans, held for investment for $1.8 billion, (ii) the purchase of real estate securities, available for sale for $79.5 million and (iii) the purchase of equity method investment in real estate for $13.4 million. Outflows were partially offset by (i) proceeds from principal repayments of $1.5 billion received on commercial mortgage loans, held for investment, (ii) proceeds received from the sale or paydown of real estate securities, available for sale of $120.0 million, (iii) proceeds from the sale of real estate owned, held for sale assets of $34.4 million and (iv) proceeds from the sale of commercial mortgage loans, held for investment of $33.4 million.

During the year ended December 31, 2023, cash inflows of $380.8 million from investing activities were primarily driven by (i) proceeds from principal repayments of $1.1 billion received on commercial mortgage loans, held for investment, (ii) proceeds from the sale or paydown of real estate securities, available for sale of $418.8 million, (iii) proceeds from the sale of real estate owned, held for sale assets of $39.8 million and (iv) $17.7 million received from principal collateral on mortgage investments. Inflows were partially offset by (i) the origination and purchase of commercial mortgage loans, held for investment for $936.3 million and (ii) the purchase of real estate securities, available for sale for $223.8 million.

49

Table of Contents

Cash Flows from Financing Activities

During the year ended December 31, 2024 cash outflows of $48.6 million from financing activities were primarily driven by (i) repayments on our other financings of $23.7 million, (ii) $144.9 million of distributions paid to shareholders, (iii) $16.2 million of distributions paid to non-controlling interest, (iv) payments of deferred financing costs of $9.3 million and (v) $4.9 million of common stock repurchases. Outflows were partially offset by (i) net borrowings on collateralized loan obligations of $59.1 million, (ii) net borrowings on repurchase agreements for real estate securities of $62.6 million and (iii) net borrowings on repurchase agreements and revolving credit facilities for commercial mortgage loans of $30.1 million.

During the year ended December 31, 2023, cash outflows of $425.0 million from financing activities were primarily driven by (i) net repayments on repurchase agreements for real estate securities of $266.0 million, (ii) net repayments on repurchase agreements and revolving credit facilities for commercial mortgage loans of $381.2 million, (iii) net repayments on our other financings of $39.8 million, (iv) $144.3 million of distributions paid to shareholders, (v) repayments on unsecured debt of $13.4 million, (vi) payments of deferred financing costs of $12.9 million and (vii) $12.5 million of common stock repurchases. Outflows were partially offset by net borrowings on collateralized loan obligations of $448.1 million.

Election as a REIT

We elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code commencing with the taxable year ended December 31, 2013. As a REIT, if we meet certain organizational and operational requirements and distribute at least 90% of our "REIT taxable income" (determined before the deduction of dividends paid and excluding net capital gains) to our stockholders in a year, we will not be subject to U.S. federal income tax to the extent of the income that we distribute. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and property, and U.S. federal income and excise taxes on our undistributed income.

Contractual Obligations and Commitments

Our contractual obligations, excluding interest obligations (as amounts are not fixed or determinable), as of December 31, 2024 are summarized as follows (dollars in thousands):

________________________

(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 $532.4 million of CLO notes, held by the Company, which are eliminated in Collateralized loan obligations in the consolidated balance sheets as of December 31, 2024.

In addition to its cash requirements, the Company pays a quarterly dividend and has an existing share repurchase authorization. As of December 31, 2024, 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. The Company’s Board of Directors also has authorized a $65 million share repurchase program, of which $31.1 million remained available as of December 31, 2024. The authorization does not obligate the Company to acquire any specific number of shares.

50

Table of Contents

Related Party Arrangements

Benefit Street Partners L.L.C.

Amended Advisory Agreement

Refer to “Note 11 - Related Party Transactions and Arrangements” for a summary of the Company’s Advisory Agreement with the Advisor and amounts paid to the Advisor pursuant to the Advisory Agreement for the years ended December 31, 2024 and December 31, 2023.

The Nominating and Corporate Governance Committee (the “Committee”) of the Company's board of directors, which consists solely of the Company’s independent directors, negotiated, approved and recommended that the board of directors approve, the amended Advisory Agreement. The Committee engaged independent legal counsel to assist the Committee in negotiating the amended Advisory Agreement.

Pursuant to the amended Advisory Agreement, the Advisor provides the daily management for the Company and the Operating Partnership, including an investment program consistent with the investment objectives and policies of the Company as determined and adopted from time to time by the board of directors. The initial term of the amended Advisory Agreement was three-years and was automatically renewed for an additional one-year period on January 19, 2025 and will continue to automatically renew for additional one-year periods unless either party elects not to renew.

The Company may terminate the amended Advisory Agreement for a Cause Event (as defined in the amended Advisory Agreement) without payment of a termination fee. Following the expiration of a term, and upon 180 days’ prior written notice, the Company may, without cause, elect not to renew the amended Advisory Agreement upon the determination by two-thirds of the Company’s independent directors that (i) there has been unsatisfactory performance by the Advisor or (ii) that the asset management fee and annual subordinated performance fee payable to the Advisor are not fair, subject to certain conditions. In such case, the Company shall be obligated to pay a termination fee.

During the term of the amended Advisory Agreement, the Advisor shall not, directly or indirectly, manage or advise another REIT that is engaged in the business of the Company in any geographical region in which the Company has a significant investment, or provide any services related to fixed-rate conduit lending to any other person, subject to certain conditions.

Off Balance Sheet Arrangements

We had no off balance sheet arrangements as of December 31, 2024 and through the date of the filing of this Form 10-K.

Non-GAAP Financial Measures

Distributable Earnings and Distributable Earnings to Common

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 and derivatives, including CECL reserves and impairments, net of realized gains and losses, as described further below, (iii) non-cash equity compensation expense, (iv) depreciation and amortization, (v) subordinated performance fee accruals/(reversal), (vi) realized gains and losses on debt extinguishment and CLO calls, and (vii) certain other non-cash items. Further, Distributable Earnings to Common, a non-GAAP measure, presents Distributable Earnings net of (i) perpetual preferred stock dividend payments and (ii) non-controlling interests in joint ventures.

As noted above, we exclude unrealized gains and losses on loans and other investments, including CECL reserves and impairments, from our calculation of Distributable Earnings and include realized gains and losses. The nature of these adjustments is described more fully in the footnotes to our reconciliation tables. GAAP loan loss reserves and any property impairment losses have been excluded from Distributable Earnings consistent with other unrealized losses pursuant to our existing definition of Distributable Earnings. We expect to only recognize such potential credit or property impairment losses in Distributable Earnings if and when such amounts are deemed nonrecoverable upon a realization event. This is generally at the time a loan is repaid, or in the case of a foreclosure or other property, when the underlying asset is sold. Amounts may also be deemed non-recoverable if, in our determination, it is nearly certain the carrying amounts will not be collected or realized. The realized loss amount reflected in Distributable Earnings will generally equal the difference between the cash received and the

Distributable Earnings basis of the asset. The timing of any such loss realization in our Distributable Earnings may differ materially from the timing of the corresponding loss reserves, charge-offs or impairments in our consolidated financial statements prepared in accordance with GAAP.

51

Table of Contents

The Company believes that Distributable Earnings and Distributable Earnings to Common provide meaningful information to consider in addition to the disclosed GAAP results. The Company believes Distributable Earnings and Distributable Earnings to Common are useful financial metrics for existing and potential future holders of its common stock as historically, over time, Distributable Earnings to Common has been an indicator of common dividends per share. As a REIT, the Company generally must distribute annually at least 90% of its taxable income, subject to certain adjustments, and therefore believes dividends are one of the principal reasons stockholders may invest in its common stock. Further, Distributable Earnings to Common 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.

Distributable Earnings and Distributable Earnings to Common 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 Distributable Earnings to Common 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 and Distributable Earnings to Common for the years ended December 31, 2024, 2023, and 2022 (dollars in thousands):

________________________

(1) Before Q1 2024, we adjusted GAAP income for non-cash CLO amortization acceleration to effectively amortize the issuance costs of our CLOs over the expected lifetime of the CLOs. We assume our CLOs will be outstanding for approximately four years and amortized the financing costs over approximately four years in our distributable earnings as compared to effective yield methodology in our GAAP earnings. Starting in Q1 2024, we amortized the issuance costs incurred on our CLOs over the expected lifetime of the CLOs in our GAAP presentation, making our previous adjustment no longer necessary.

(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 accrued and unpaid subordinated performance fee. In addition, reversal of subordinated performance fee represents cash payment obligations during the period.

52

Table of Contents

(4) Represents amounts deemed nonrecoverable upon a realization event, which is generally at the time a loan is repaid, or in the case of a foreclosure or other property, when the underlying asset is sold. Amounts may also be deemed non-recoverable if, in our determination, it is nearly certain the carrying amounts will not be collected or realized upon sale. Amount may be different than the GAAP basis. As of December 31, 2024, the Company has $11.9 million of GAAP loss adjustments that would run through distributable earnings if and when cash losses are realized.

(5) 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.

(6) Represents the average of all classes of equity except the Series E Preferred Stock.

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