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Broadmark Realty Capital Announces First Quarter 2022 Results

BRMK

- Completes New Originations and Amendments of $189.6 Million -
- Total Active Loan Portfolio of $1.6 Billion Across 20 States -

Broadmark Realty Capital Inc. (NYSE: BRMK) (the “Company”),an internally managed secured real estate finance company, today announced operating results for the quarter ended March 31, 2022.

Brian Ward, the Company’s Chief Executive Officer, commented, “In the first quarter, we completed total originations that approached $190 million, at an average unlevered yield in excess of 10.0%. While the broader commercial real estate lending markets remain fiercely competitive, we continue to be selective with our investments as global, macro-economic risks escalate. Specifically, we are pursuing prudent, high-yield investments in the smaller- to middle-market space that we expect will generate strong returns for our shareholders as we move ahead. We also remain well-positioned with our balance sheet at an enterprise leverage ratio of roughly 8%, which allows us to take advantage of future opportunities that may arise. As such, rising rates do not materially impact our balance sheet, and our shorter-duration loans operate as a natural hedge against rapid rate movements. Our fortress balance sheet offers a material difference and our balanced approach to risk and return, together with significant financial capacity, puts us in an ideal position for future growth through all parts of the cycle.”

First Quarter 2022 Financial and Loan Portfolio Highlights

  • Total revenue of $29.9 million for the quarter ended March 31, 2022, comprised of interest income of $24.1 million and fee income of $5.8 million.
  • Net income attributable to common stockholders of $18.1 million, or $0.14 per diluted common share.
  • Distributable earnings prior to realized loss on investments, a non-GAAP financial measure, of $22.1 million, or $0.17 per diluted common share.
  • New originations and amendments of $189.6 million, at a weighted average loan-to-value of 61.8%.

Balance Sheet Activity and Liquidity

At March 31, 2022, the Company had cash and cash equivalents of $97.4 million and a fully undrawn $135.0 million credit facility, or $232.4 million in total liquidity, with $591.9 million of unfunded loan commitments on balance sheet.

Loan Portfolio

As of March 31, 2022, a total of 26 loans were in contractual default, entailing $187.8 million in total commitment, or 11.8% of the portfolio based on total commitment. During the first quarter of 2022, the Company resolved $36 million of loans in contractual default.

Completion of Leadership Transition Plan

As previously announced, on March 1, 2022, Brian P. Ward joined the Company as Chief Executive Officer and a member of its Board of Directors. Mr. Ward previously served as Chief Executive Officer of Trimont Real Estate Advisors, a commercial real estate asset management firm with aggregate invested capital under management of $168 billion.

Dividend

On March 15, 2022, the Company’s Board of Directors declared a cash dividend of $0.07 per common share payable on April 15, 2022 to stockholders of record as of March 31, 2022, and on April 18, 2022, the Board of Directors declared a cash dividend of $0.07 per common share payable on May 16, 2022 to stockholders of record as of April 29, 2022.

Additional Information

The Company has posted supplemental financial information to provide additional disclosure on its website at www.broadmark.com. These materials can be found on the Investors section of the website under the “Financials” tab.

Conference Call and Webcast Information

The Company will host a live conference call and webcast today at 5:00 p.m. Eastern time. To listen to the live webcast, go to the Investors section of the Company’s website at www.broadmark.com at least 15 minutes prior to the scheduled start time in order to register and install any necessary audio software.

To Participate in the Telephone Conference Call:
Dial in at least 15 minutes prior to start time.
Domestic: 1-877-407-9039
International: 1-201-689-8470

Conference Call Playback:
Domestic: 1-844-512-2921
International: 1-412-317-6671
Passcode: 13728555
The playback can be accessed through May 23, 2022.

Forward Looking Statements

This press release contains certain “forward-looking statements” within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Forward-looking statements reflect the Company’s current views with respect to, among other things, capital resources, portfolio performance and projected results of operations. In some cases, you can identify these forward-looking statements by the use of terminology such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words or phrases. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their respective dates.

These forward-looking statements are based largely on the Company’s current beliefs, assumptions and expectations concerning future developments and their potential effects on the Company. There can be no assurance that future developments affecting the Company will be those that it has anticipated. Factors that may cause actual results to vary from the Company’s forward-looking statements include, but are not limited to:

  • mitigation of loan default rates and ability to timely resolve loans in contractual default status with positive economic outcomes;
  • the adequacy of collateral securing the Company's loans and declines in the value of real estate property securing the Company's loans;
  • increased competition from entities engaged in construction lending activities;
  • availability of origination and acquisition opportunities acceptable to the Company;
  • potential mismatches in the timing of asset repayments and the maturity of the associated financing agreements;
  • disruptions in the Company's business operations, including construction lending activity, relating to the COVID-19 pandemic;
  • the current and future health and stability of the economy and residential housing market, including potential impacts on the real estate markets as a result of COVID-19;
  • general economic uncertainty and the effect of general economic conditions on the real estate and real estate capital markets in particular;
  • general and local commercial and residential real estate property conditions;
  • changes in U.S. federal government policies;
  • changes in U.S. federal, state and local governmental laws and regulations that impact the Company's business, assets or classification as a real estate investment trust;
  • the Company's ability to pay, maintain or grow the dividend in the future;
  • changes in interest rates;
  • the availability of, and costs associated with, sources of liquidity;
  • compliance with covenants contained in the Company's debt documents;
  • the adequacy of the Company's policies, procedures and systems for managing risk effectively;
  • the ability to manage future growth;
  • changes in personnel and availability of qualified personnel; and
  • other factors set forth in the Company's periodic filings with the Securities and Exchange Commission.

Should one or more of these risks or uncertainties materialize, or should any of the assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

The Company uses its website and social media channels as channels of distribution of Company information. The information that the Company posts through these channels may be deemed material. Accordingly, the Company encourages investors and others interested in the Company to routinely monitor these channels, in addition to following the Company’s press releases, Securities and Exchange Commission filings and public conference calls and webcasts. In addition, you may automatically receive email alerts and other information about the Company when you enroll your email address by visiting the “Email Alerts” section of the Company’s website at http://ir.broadmark.com/resources/email-alerts. The contents of the Company’s website and social media channels are not, however, incorporated by reference into this press release.

About Broadmark Realty Capital

Broadmark Realty Capital Inc. (NYSE: BRMK) is a specialty real estate finance company, providing financing solutions generally in the $2 to $50 million range across the entire debt capital stack for commercial and residential real estate opportunities throughout the United States. Broadmark is particularly well equipped to address complex financing requirements that require rapid response, investing across a variety of market conditions and economic cycles.

BROADMARK REALTY CAPITAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data, unaudited)

March 31, 2022

December 31, 2021

Assets

Cash and cash equivalents

$

97,407

$

132,889

Mortgage notes receivable, net

931,431

901,350

Interest and fees receivable, net

19,517

17,526

Investment in real property, net

63,586

68,067

Right-of-use assets

5,917

6,016

Goodwill

136,965

136,965

Other assets

8,121

8,342

Total assets

$

1,262,944

$

1,271,155

Liabilities and stockholders' equity

Senior unsecured notes, net

$

97,360

$

97,223

Dividends payable

9,297

9,291

Accounts payable and accrued liabilities

9,094

8,180

Lease liabilities

7,879

7,993

Total liabilities

$

123,630

$

122,687

Commitments and contingencies

Stockholders' equity:

Preferred stock, $0.001 par value, 100,000,000 shares authorized, no shares issued and outstanding at March 31, 2022 and December 31, 2021

Common stock, $0.001 par value, 500,000,000 shares authorized, 132,793,442 and 132,716,338 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

132

132

Additional paid in capital

1,217,614

1,216,957

Accumulated deficit

(78,432

)

(68,621

)

Total stockholders' equity

1,139,314

1,148,468

Total liabilities and stockholders' equity

$

1,262,944

$

1,271,155

BROADMARK REALTY CAPITAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share data, unaudited)

Three Months Ended

March 31, 2022

March 31, 2021

Revenues:

Interest income

$

24,110

$

22,017

Fee income

5,763

7,451

Total revenues

$

29,873

$

29,468

Expenses:

Compensation and employee benefits

5,078

3,446

General and administrative

2,851

2,653

Interest expense

2,115

280

Total expenses

10,044

6,379

Impairment:

Provision for credit losses, net

1,747

2,708

Other (expense) income:

Change in fair value of warrant liabilities

(8

)

Income before provision for income taxes

18,074

20,381

Income tax provision

Net income

$

18,074

$

20,381

Earnings per common share:

Basic

$

0.14

$

0.15

Diluted

$

0.14

$

0.15

Weighted-average shares of common stock outstanding, basic and diluted:

Basic

132,769,876

132,550,227

Diluted

132,836,771

132,678,812

BROADMARK REALTY CAPITAL INC.
RECONCILIATION OF NET INCOME TO DISTRIBUTABLE EARNINGS
(in thousands, except for per share amounts, unaudited)

Definition of Distributable Earnings

The Company has elected to present “distributable earnings” and “distributable earnings prior to realized loss on investments”, supplemental non-GAAP financial measures used by management to evaluate the Company’s operating performance. The Company defines distributable earnings as net income attributable to common stockholders adjusted for: (i) impairment recorded on the Company’s investments; (ii) unrealized gains or losses on the Company’s investments (including provision for credit losses) and warrant liabilities; (iii) new public company transition expenses; (iv) non-capitalized transaction-related and other one-time expenses; (v) non-cash stock-based compensation; (vi) depreciation and amortization including amortization of the Company’s intangible assets; and (vii) deferred taxes, which are subject to variability and generally not indicative of future economic performance or representative of current operations.

During the three months ended March 31, 2022 and 2021, provision for credit losses, net was $1.7 and $2.7 million, respectively, which has been excluded from distributable earnings consistent with other unrealized gains (losses) pursuant to the Company’s policy for reporting distributable earnings. The Company expects to recognize such potential credit losses in distributable earnings if and when such amounts are deemed nonrecoverable upon a realization event. This is generally upon charge-off of principal at the time of loan repayment or upon sale of real property owned by the Company and the amount of proceeds is less than the principal outstanding at the time of foreclosure.

Management believes that the adjustments to compute “distributable earnings” specified above allow investors and analysts to readily identify and track the operating performance of the Company’s assets, assist in comparing the operating results between periods, and enable investors to evaluate the Company’s current performance using the same measure that management uses to operate the business. Distributable earnings excludes certain recurring items, such as unrealized gains and losses (including provision for credit losses) and non-capitalized transaction-related expenses, because they are not considered by management to be part of the Company’s primary operations for the reasons described herein. However, management has elected to also present distributable earnings prior to realized loss on investments because it believes the Company’s investors use such measure to evaluate and compare the performance of the Company and its peers. As such, distributable earnings and distributable earnings prior to realized loss on investments are not intended to reflect all of the Company’s activity and should be considered as only one of the factors used by management in assessing the Company’s performance, along with GAAP net income which is inclusive of all of the Company’s activities.

As a REIT, the Company is required to distribute at least 90% of its annual REIT taxable income and to pay tax at regular corporate rates to the extent that it annually distributes less than 100% of such taxable income. Given these requirements and its belief that dividends are generally one of the principal reasons stockholders invest in its common stock, the Company generally intends to attempt to pay dividends to its stockholders in an amount equal to its net taxable income, if and to the extent authorized by the Company’s board of directors. Distributable earnings and distributable earnings prior to realized loss on investments are one of many factors considered by the Company’s board of directors in declaring dividends and, while not direct measures of taxable income, over time, the measures can be considered useful indicators of the Company’s dividends.

Distributable earnings and distributable earnings prior to realized loss on investments do not represent, and should not be considered as a substitute for, or superior to, net income or as a substitute for, or superior to, cash flows from operating activities, each as determined in accordance with GAAP, and the Company’s calculation of these measures may not be comparable to similarly entitled measures reported by other companies.

The table below is a reconciliation of distributable earnings to the most directly comparable GAAP financial measure:

Three Months Ended

(dollars in thousands, except share and per share data)

March 31, 2022

March 31, 2021

Net income attributable to common stockholders

$

18,074

$

20,381

Adjustments for non-distributable earnings:

Stock-based compensation expense

985

737

New public company expenses(1)

664

Non-capitalized transaction and other one-time expenses(2)

1,027

Change in fair value of warrant liabilities

8

Depreciation and amortization

219

163

Provision for credit losses, net

1,747

2,708

Distributable earnings prior to realized loss on investments:

$

22,060

$

24,653

Realized credit losses(3)

(2,451

)

(1,401

)

Distributable earnings:

$

19,609

$

23,252

Distributable earnings per diluted share of common stock prior to realized loss on investments

$

0.17

$

0.19

Distributable earnings per diluted share of common stock

$

0.15

$

0.18

Weighted-average number of shares of common stock outstanding, basic and diluted

Basic

132,769,876

132,550,227

Diluted

132,836,771

132,678,812

(1)

Expenses directly related to professional fees in connection with our new public company reporting procedures, the design and implementation of internal controls under Section 404 of the Sarbanes-Oxley Act and the implementation of the CECL standard.

(2)

Includes other one-time expenses primarily related to the various costs associated with the search for and hiring of our new CEO.

(3)

Represents credit losses recorded in the provision for credit losses and recognized in distributable earnings upon charge-off of principal at the time of loan repayment or upon sale of real property where proceeds received are less than the principal outstanding.