Broadmark Realty Capital Announces Third Quarter 2021 Results

Rhea-AI Summary

Broadmark Realty Capital Inc. (NYSE: BRMK) reported strong financial results for Q3 2021, reflecting record loan originations of $337 million amid a robust construction market. Total revenue reached $30.6 million, while net income was $21.7 million or $0.16 per diluted share. The company achieved a total loan portfolio of $1.5 billion across 17 states, with interest income at $22.8 million. A monthly dividend of $0.07 per share was declared, payable on November 15, 2021. The company maintains a low-leverage balance sheet with no debt outstanding as of September 30, 2021.

Positive

• Record loan originations of $337 million in Q3 2021.
• Total revenue of $30.6 million for Q3 2021.
• Net income of $21.7 million, or $0.16 per diluted share.
• Strong loan portfolio of $1.5 billion across 17 states.
• Monthly dividend of $0.07 per share declared.

Negative

• Principal outstanding on loans in default was $162.6 million.

– Produced Record for New Loan Originations –

SEATTLE--(BUSINESS WIRE)-- Broadmark Realty Capital Inc. (NYSE: BRMK) (the “Company”), an internally managed secured real estate finance company, today announced operating results for the quarter ended September 30, 2021.

Jeff Pyatt, President and Chief Executive Officer of Broadmark, commented, “We achieved record origination volume this quarter, reflecting an active construction market and strong demand for our loans. In addition to expanding into new geographic markets, we have continued to use our increased size, scale and expertise to access a larger pool of borrowers with excellent credit and collateral. We are seeing attractive financing opportunities across all of our property types, including residential and commercial, as supply and demand fundamentals remain highly favorable for new construction. With the support of these long-term trends as well as our low-leverage balance sheet, we believe we are well positioned to continue this pace of activity and deliver highly attractive risk-adjusted returns to our shareholders."

Third Quarter 2021 Financial Highlights

• Total revenue of $30.6 million for the three months ended September 30, 2021.
• Net income attributable to common stockholders of $21.7 million, or $0.16 per diluted common share.
• Distributable earnings prior to realized loss on investments, a non-GAAP financial measure, of $24.6 million, or $0.19 per diluted common share.

Third Quarter 2021 Loan Portfolio Highlights

• New originations and amendments totaling $337.0 million, with a weighted average loan to value of 59.0%.
• Interest income of $22.8 million and fee income of $7.7 million.
• Originated the Company's first loans in Nevada and Minnesota with additional state expansion planned for the fourth quarter.
• Total loan portfolio of $1.5 billion across 17 states and the District of Columbia.

Loan Portfolio
As of September 30, 2021, the principal outstanding on loans in contractual default status placed on non-accrual status was $162.6 million. During and subsequent to the third quarter, the Company foreclosed on two loans and received total pay offs on seven loans in default with total commitment of $50.5 million (including four that were paid off in early fourth quarter).

Balance Sheet Activity and Liquidity
At September 30, 2021, the Company had cash and cash equivalents of $37.4 million. The Company also had no debt outstanding and remained undrawn on its $135.0 million line of credit as of September 30, 2021. Subsequent to September 30, 2021, the Company drew $50.0 million on the line of credit and repaid the balance in full, as of October 31, 2021, upon receipt of loan pay-offs.

Dividend
On October 14, 2021, the Company’s board of directors declared a monthly cash dividend of $0.07 per common share payable on November 15, 2021 to stockholders of record as of October 29, 2021.

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: 13723798
The playback can be accessed through November 22, 2021.

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:

• the magnitude, duration and severity of the novel coronavirus (“COVID-19”) pandemic;
• disruptions in the Company’s business operations, including construction lending activity, relating to COVID-19;
• adverse impact of COVID-19 on the value of the Company’s goodwill;
• the impact of actions taken by governments, businesses, and individuals in response to COVID-19;
• the current and future health and stability of the economy and residential housing market, including any extended slowdown in the real estate markets as a result of COVID-19;
• changes in laws or regulations applicable to the Company’s business, employees lending activities, including current and future laws, regulations and orders that limit the Company’s ability to operate in light of COVID-19;
• defaults by borrowers in paying debt service on outstanding indebtedness;
• the adequacy of collateral securing the Company’s loans and declines in the value of real estate property securing the Company’s loans;
• 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;
• increased competition from entities engaged in construction lending activities;
• 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 an internally managed commercial real estate finance company that offers short-term, first deed of trust loans secured by real estate to fund the acquisition, renovation, rehabilitation or development of residential or commercial properties. Broadmark Realty Capital manages and services its loan portfolio across a variety of market conditions and economic cycles.

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

		September 30, 2021				December 31, 2020
Assets
Cash and cash equivalents		$	37,376			$	223,375
Mortgage notes receivable, net			923,521				798,486
Interest and fees receivable, net			14,766				14,357
Investment in real property, net			52,470				8,473
Right-of-use assets			6,114				—
Goodwill			136,965				136,965
Other assets			7,566				5,663
Total assets		$	1,178,778			$	1,187,319
Liabilities and Equity
Accounts payable and accrued liabilities		$	7,987			$	4,946
Lease liabilities			8,100				—
Dividends payable			9,289				7,952
Total liabilities		$	25,376			$	12,898
Commitments and contingencies
Preferred stock, $0.001 par value, 100,000,000 shares authorized, no shares issued and outstanding at September 30, 2021 and December 31, 2020			—				—
Common stock, $0.001 par value, 500,000,000 shares authorized, 132,684,541 and 132,532,383 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively			132				132
Additional paid in capital			1,216,192				1,213,987
Accumulated deficit			(62,922	)			(39,698	)
Total equity			1,153,402				1,174,421
Total liabilities and equity		$	1,178,778			$	1,187,319

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

		Three Months Ended								Nine Months Ended
		September 30, 2021				September 30, 2020				September 30, 2021				September 30, 2020
Revenues:
Interest income		$	22,846			$	21,844			$	66,481			$	68,577
Fee income			7,748				7,139				22,764				21,244
Total revenue		$	30,594			$	28,983			$	89,245			$	89,821
Other income (expense):
Change in fair value of warrant liabilities			1,244				1,948				(2,490	)			5,094
Expenses:
Impairment:
Provision for (reversal of) credit losses, net			2,607				(2,932	)			5,373				5,724
Operating expenses:
Compensation and employee benefits			4,025				5,160				11,254				11,397
General and administrative			3,521				3,199				9,810				9,977
Total expenses			10,153				5,427				26,437				27,098
Income before income taxes			21,685				25,504				60,318				67,817
Income tax provision			—				—				—				—
Net income		$	21,685			$	25,504			$	60,318			$	67,817
Earnings per common share:
Basic		$	0.16			$	0.19			$	0.45			$	0.51
Diluted		$	0.16			$	0.19			$	0.45			$	0.51
Weighted-average shares of common stock outstanding, basic and diluted:
Basic			132,658,661				132,282,252				132,575,852				132,156,844
Diluted			132,752,471				132,316,746				132,663,437				132,207,605

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

Definition of Distributable Earnings

The Company has elected to present “distributable earnings,” a supplemental non-GAAP financial measure 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 nine months ended September 30, 2021 and 2020, provision for credit losses, net was $5.4 and $5.7 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. As such, distributable earnings is 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 is one of many factors considered by the Company’s board of directors in declaring dividends and, while not a direct measure of taxable income, over time, the measure can be considered a useful indicator of the Company’s dividends.

Distributable earnings does 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 this measure 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								Nine Months Ended
(dollars in thousands, except share and per share data)		September 30, 2021				September 30, 2020				September 30, 2021				September 30, 2020
Net income attributable to common stockholders		$	21,685			$	25,504			$	60,318			$	67,817
Adjustments for non-distributable earnings:
Stock-based compensation expense			891				1,913				2,552				3,794
New public company expenses(1)			—				684				953				2,750
Non-capitalized transaction and other one-time expenses(2)			489				—				489				—
Change in fair value of warrant liabilities			(1,244	)			(1,948	)			2,490				(5,094	)
Depreciation and amortization			146				103				577				(682	)
Provision for (reversal of) credit losses, net			2,607				(2,932	)			5,373				5,724
Distributable earnings prior to realized loss on investments		$	24,574			$	23,324			$	72,752			$	74,309
Realized credit losses(3)			(695	)			—				(2,096	)			(1,233	)
Distributable earnings		$	23,879			$	23,324			$	70,656			$	73,076
Distributable earnings per diluted share of common stock prior to realized loss on investments		$	0.19			$	0.18			$	0.55			$	0.56
Distributable earnings per diluted share of common stock		$	0.18			$	0.18			$	0.53			$	0.55
Weighted-average number of shares of common stock outstanding, basic and diluted
Basic			132,658,661				132,282,252				132,575,852				132,156,844
Diluted			132,752,471				132,316,746				132,663,437				132,207,605

(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 liquidation of the Private REIT.
(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.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20211108006030/en/

Investor Relations

InvestorRelations@broadmark.com

206-623-7782

Media Relations

Jason Chudoba

646-277-1249

Source: Broadmark Realty Capital Inc.

FAQ

What are the Q3 2021 financial results for Broadmark Realty Capital (BRMK)?

Broadmark Realty Capital reported total revenue of $30.6 million and net income of $21.7 million for Q3 2021.

How much was the loan origination volume for Broadmark Realty Capital in Q3 2021?

The company achieved record loan originations totaling $337 million in Q3 2021.

What is the dividend declared by Broadmark Realty Capital for November 2021?

Broadmark Realty Capital declared a monthly dividend of $0.07 per common share, payable on November 15, 2021.

What is the loan portfolio size of Broadmark Realty Capital (BRMK) as of Q3 2021?

As of September 30, 2021, Broadmark Realty Capital had a total loan portfolio of $1.5 billion.

What was the status of loans in default for Broadmark Realty Capital in Q3 2021?

The company had $162.6 million in principal outstanding on loans in default as of September 30, 2021.