Broadmark Realty Capital Inc.

For Q3 2022, Broadmark reported total revenue of $27.1 million and net income of $2.6 million, or approximately $0.02 per diluted common share. Distributable earnings prior to realized loss on investments were $18 million, or $0.14 per diluted common share. Interest income was $20.7 million and fee income was $6.4 million. Cash compensation and employee benefits were $2.7 million, G&A was $3 million, and total cash comp plus G&A improved 3.4% sequentially; management kept full-year 2022 cash comp and G&A guidance at approximately $24 million. Originations totaled 18 loans with an average size of $7.8 million at a 12.9% unlevered yield, and the weighted average term at origination was 14 months. As of September 30, Broadmark had $61 million of cash, a fully undrawn $135 million credit facility, and total liquidity of $196 million. The company also cited $100 million of five-year 5% fixed coupon senior unsecured notes outstanding and a debt-to-equity ratio of 8.8%. The contractual default rate was 19% of the total portfolio by value, and the company ended the quarter with 11 foreclosed properties carrying $93.5 million. Management said the quarter-over-quarter increase in the CECL reserve was about $0.07 per diluted share, driven primarily by a $9.1 million specific reserve on a Colorado hotel loan; they also noted a 13% increase in the general reserve due to macroeconomic factors. For the fourth quarter / near term, management did not provide formal revenue or EPS guidance, but said origination yields were around 12% to 13% and that they continue to expect about $24 million of full-year 2022 cash compensation and G&A expense.

Jeffrey Pyatt framed the quarter as a period of significant leadership transition but said the company’s core underwriting discipline, short-duration lending model, and low-leverage balance sheet remain unchanged. He emphasized that Broadmark has successfully navigated multiple cycles, originated over $4 billion in loans since inception, and believes it can use the current dislocation to position itself for future growth. His tone was defensive but confident, stressing continuity, discipline, and long-term value creation.

David Schneider focused on the quarter’s numbers and the pressure from nonperforming assets. He walked through the $27.1 million of revenue, $2.6 million of net income, $18 million of distributable earnings, and the roughly $0.07 per share CECL hit, including the $9.1 million reserve tied to the Colorado hotel loan. He also highlighted liquidity of $196 million, the 8.8% debt-to-equity ratio, and said the company is preserving capital while slowing payoffs in October as takeout financing weakens. On costs, he reiterated the full-year target of about $24 million for cash compensation and G&A and said the new leadership structure should not materially increase expenses.

Analysts pressed management on the CEO change, including why it happened now and whether strategic direction would change; management said the board and Brian Ward mutually agreed it was the right time and that they do not plan to unwind the company’s underlying strategy. Questions also focused on the rising default rate, with David Schneider saying about $40 million of the quarterly increase came from a deliberate decision to move seven loans into default faster to pressure exits and accelerate resolutions. Analysts asked about the new share repurchase plan versus making new loans, and management said buybacks are simply another capital-allocation lever, while the main business remains originating loans. There was also discussion of the dividend, with management saying the board reviews it monthly and aims for sustainability and coverage by distributable EPS, but gave no specific change.