Rithm Property Trust Inc.

Previous wording

In this quarterly report on Form 10-Q, unless the context indicates otherwise, references to “Rithm Property Trust,” “we,” the “Company,” “our” and “us” refer to the activities of and the assets and liabilities of the business and operations of Rithm Property Trust Inc. and its subsidiaries (formerly Great Ajax Corp.); references to “Rithm” refer to Rithm Capital Corp., a Delaware corporation and the parent entity of RCM GA and its subsidiaries; references to “Operating Partnership” refer to Great Ajax Operating Partnership L.P., a Delaware limited partnership; references to our “Former Manager” refer to Thetis Asset Management LLC, a Delaware limited liability company; references to “RCM GA” or our “Manager” refer to RCM GA Manager LLC; references to our “Servicer” or “Newrez” refer to Newrez LLC, a Delaware limited liability company and an affiliate of RCM GA; and references to “Gregory” or our “Former Servicer” refer to Gregory Funding LLC, an Oregon limited liability company.

Current wording

In this quarterly report on Form 10-Q, unless the context indicates otherwise, references to “Rithm Property Trust,” “we,” the “Company,” “our” and “us” refer to the activities of and the assets and liabilities of the business and operations of Rithm Property Trust Inc. and its subsidiaries (formerly Great Ajax Corp.); references to “Rithm” refer to Rithm Capital Corp., a Delaware corporation and the parent entity of RCM GA, and its subsidiaries; references to “Operating Partnership” refer to Great Ajax Operating Partnership L.P., a Delaware limited partnership; references to our “Former Manager” refer to Thetis Asset Management LLC, a Delaware limited liability company; references to “RCM GA” or our “Manager” refer to RCM GA Manager LLC; references to our “Servicer” or “Newrez” refer to Newrez LLC, a Delaware limited liability company and an affiliate of RCM GA; and references to our “Former Servicer” refer to Gregory Funding LLC, an Oregon limited liability company.

Previous wording

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the interim consolidated financial statements and related notes included in Item 1.Consolidated interim financial statements of this report and in Item 8. Financial statements and supplementary data in our most recent Annual Report, as well as other cautionary statements and risks described elsewhere in this report and our most recent Annual Report.

Current wording

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the interim consolidated financial statements and related notes included in Item 1.Consolidated interim financial statements of this report and in Item 8. Financial statements and supplementary data in our most recent Annual Report, as well as other cautionary statements and risks described elsewhere, including under “Risk Factors” in this report and our most recent Annual Report.

Previous wording

On June 11, 2024, we completed a strategic transaction with Rithm (the “Strategic Transaction”). The Strategic Transaction included (i) the entry into the Securities Purchase Agreement, dated February 26, 2024 (the “SPA”), by and among the Company, the Operating Partnership, the Former Manager and Rithm, which provided for, among other things, the sale of $14.0 million of the Company’s Common Stock to Rithm at a price of $4.87 per share (which represents the trailing five-day average closing price of the Company’s Common Stock on NYSE) as of the date of the SPA, and (ii) upon the approval of our stockholders on May 20, 2024, the entry into the Management Agreement with RCM GA, under which RCM GA became our new external manager. In connection with the Strategic Transaction, we terminated our existing management contract with the Former Manager in exchange for approximately 3.2 million shares of our Common Stock and $0.6 million in cash. For a full description of the components of the Strategic Transaction, see our Definitive Proxy Statement filed with the Securities and Exchange Commission on April 10, 2024. In addition, in connection with the Strategic Transaction, we changed our principal place of business and corporate headquarters to 799 Broadway, 8th Floor, New York, NY 10003. On December 2, 2024, we rebranded and changed our name to Rithm Property Trust Inc. from Great Ajax Corp.

Current wording

On June 11, 2024, we completed a strategic transaction with Rithm (the “Strategic Transaction”). The Strategic Transaction included (i) the entry into the Securities Purchase Agreement, dated February 26, 2024 (the “SPA”), by and among the Company, the Operating Partnership, the Former Manager and Rithm, which provided for, among other things, the sale of $14.0 million of the Company’s common stock (“Common Stock”) to Rithm at a price of $4.87 per share (which represents the trailing five-day average closing price of the Company’s Common Stock on the New York Stock Exchange) as of the date of the SPA, and (ii) upon the approval of our stockholders on May 20, 2024, the entry into the Management Agreement with RCM GA, under which RCM GA became our new external manager. In connection with the Strategic Transaction, we terminated our existing management contract with the Former Manager in exchange for approximately 3.2 million shares of our Common Stock and $0.6 million in cash. For a full description of the components of the Strategic Transaction, see our Definitive Proxy Statement filed with the Securities and Exchange Commission on April 10, 2024. In addition, in connection with the Strategic Transaction, we changed our principal place of business and corporate headquarters to 799 Broadway, 8th Floor, New York, NY 10003. On December 2, 2024, we rebranded and changed our name to Rithm Property Trust Inc. from Great Ajax Corp.

Previous wording

The Company conducts substantially all of its business through our Operating Partnership and its subsidiaries. The Company, through a wholly-owned subsidiary, Great Ajax Operating LLC, is the sole general partner of the Operating Partnership. GA-TRS LLC (“GA-TRS”) is a wholly-owned subsidiary of the Operating Partnership that owns an equity interest in the Former Manager and previously owned an equity interest in the Former Servicer. GAJX Real Estate Corp. (“GAJX”) is a wholly-owned subsidiary of the Operating Partnership formed to own, maintain, improve and sell real estate owned (“REO”) properties acquired by the Company. The Company elected to treat GA-TRS and GAJX as taxable REIT subsidiaries under the Internal Revenue Code. Great Ajax Funding LLC is a wholly-owned subsidiary of the Operating Partnership formed to act as the depositor of mortgage loans into securitization trusts and to hold the subordinated securities issued by such trusts and any additional trusts the Company may form for additional secured borrowings. AJX Mortgage Trust I and AJX Mortgage Trust II are wholly-owned subsidiaries of the Operating Partnership formed to hold mortgage loans used as collateral for financings under the Company’s repurchase agreements. In addition, the Company, through its Operating Partnership, holds REO properties acquired upon the foreclosure or other settlement of its owned NPLs.

Current wording

The Company conducts substantially all of its business through our Operating Partnership and its subsidiaries. The Company, through a wholly-owned subsidiary, Great Ajax Operating LLC, is the sole general partner of the Operating Partnership. GA-TRS LLC (“GA-TRS”) is a wholly-owned subsidiary of the Operating Partnership that owns an equity interest in the Former Manager and previously owned an equity interest in the Former Servicer. GAJX Real Estate Corp. (“GAJX”) is a wholly-owned subsidiary of the Operating Partnership formed to own, maintain, improve and sell real estate owned (“REO”) properties acquired by the Company. The Company elected to treat GA-TRS and GAJX as taxable REIT subsidiaries under the Internal Revenue Code. Great Ajax Funding LLC is a wholly-owned subsidiary of the Operating Partnership formed to act as the depositor of mortgage loans into securitization trusts and to hold the subordinated securities issued by such trusts and any additional trusts the Company may form for additional secured bonds payable. AJX Mortgage Trust I and AJX Mortgage Trust II are wholly-owned subsidiaries of the Operating Partnership formed to hold mortgage loans used as collateral for financings under the Company’s repurchase agreements. In addition, the Company, through its Operating Partnership, holds REO properties acquired upon the foreclosure or other settlement of its owned NPLs.

Previous wording

Our Operating Partnership, through interests in certain entities as of March 31, 2025, owns 99.9% of Great Ajax II REIT Inc., which owns Great Ajax II Depositor LLC, which then acts as the depositor of mortgage loans into securitization trusts and holds subordinated securities issued by such trusts. Similarly, as of March 31, 2025, the Operating Partnership wholly-owned Great Ajax III Depositor LLC, which was formed to act as the depositor for a single joint venture with our partners. We have securitized mortgage loans through these securitization trusts and retained subordinated securities from the secured borrowings. These trusts are considered to be variable interest entities (“VIEs”), and we have determined that we are the primary beneficiary of the VIEs.

Current wording

Our Operating Partnership, through interests in certain entities as of June 30, 2025, owns 99.9% of Great Ajax II REIT Inc., which owns Great Ajax II Depositor LLC, which then acts as the depositor of mortgage loans into securitization trusts and holds subordinated securities issued by such trusts. The Operating Partnership wholly-owns Great Ajax III Depositor LLC, which was formed to act as the depositor for a single joint venture with our partners. We have securitized mortgage loans through these securitization trusts and retained subordinated securities from the secured bonds payable. These trusts are considered to be variable interest entities (“VIEs”), and we have determined that we are the primary beneficiary of the VIEs.

Previous wording

The following table outlines the carrying value of our portfolio of mortgage loan assets, investments in securities, equity method investments and REO as of March 31, 2025 and December 31, 2024 ($ in millions):

Current wording

The following table outlines the carrying value of our portfolio of mortgage loan assets, investments in securities, other investments and REO as of June 30, 2025 and December 31, 2024:

Previous wording

The U.S. economy contracted during the first quarter of 2025 as real gross domestic product fell an annualized 0.3% due to a surge in imports at the start of the year ahead of the imposition of tariffs. Longer-term Treasury yields fell during the first quarter, primarily due to lower real yields from Treasury Inflation Protected Securities (“TIPS”). The unemployment rate increased slightly to 4.2% in March 2025 from 4.1% in December 2024. In addition to the low unemployment rate, other signs of labor market stability during the first quarter included solid payroll growth, continued low levels of claims for unemployment benefits and an only modestly lower ratio of job openings to unemployed job seekers. The outlook for the economy is more uncertain than usual given changes in policies related to global trade.

Current wording

Real gross domestic product (“GDP”) rose an annualized 3.0% in the second quarter of 2025 largerly due to a decline in imports that added 5.2% points to the change in real GDP. This drop in imports followed an increase in the first quarter of 2025 that was the result of the front running of tariffs. Longer-term Treasury yields were relatively unchanged during the second quarter of 2025, as an increase in real yields from Treasury Inflation Protected Securities (“TIPS”) was offset by a decline in the implied inflation breakeven. The unemployment rate fell slightly with overall labor market stability during the second quarter of 2025, including solid employment growth, continued low levels of claims for unemployment benefits and a modestly higher ratio of job openings to unemployed job seekers. Though fiscal policy uncertainty has been reduced by the passage of the One Big Beautiful Bill Act in early July 2025, the outlook for the economy remains uncertain given shifting policies related to global trade.

Previous wording

Progress towards lower inflation resumed in the first quarter of 2025. The 12-month increase in the overall Consumer Price Index (“CPI”) was 2.4% in March 2025 versus 2.9% in December 2024, while core CPI price inflation (excluding food and energy prices) for March 2025 was at 2.8%, below the 3.2% core CPI inflation rate reported for December 2024. The moderation in CPI inflation was driven by a decline in energy prices and slower gains in services prices, including shelter.

Current wording

Inflation picked up in the second quarter of 2025 with the 12-month increase in the overall Consumer Price Index (“CPI”) rising to 2.7% in June 2025 from 2.4% in March 2025. Core CPI price inflation (excluding food and energy prices) rose slightly to 2.9% in June 2025 from 2.8% in March 2025. The faster gains in CPI prices were driven by higher energy and other goods prices and slower disinflation in services prices.

Previous wording

The nominal 10-year Treasury yield fell to 4.23% at the end of March 2025 from 4.58% in December 2024. Most of this decline was due to lower real yields from TIPS, which dropped to 1.85% in March 2025 from 2.24% in December 2024. The 10-year breakeven inflation rate was 2.38% in March 2025 versus 2.34% in December 2024.

Current wording

The nominal 10-year Treasury yield was relatively unchanged at 4.24% at the end of June 2025 versus 4.23% at the end of March 2025. The real yields on 10-year TIPS rose to 1.95% in June 2025 from 1.85% in March 2025, whereas the 10-year breakeven inflation rate was 2.29% in June 2025, a decline from 2.38% in March 2025.

Previous wording

Average payrolls growth rose an average of 152,000 jobs per month in the first quarter of 2025 versus an average of 168,000 jobs per month in 2024. The unemployment rate remained relatively unchanged since December 2024 at 4.2% in March 2025. Judged by the ratio of job openings to unemployed job seekers, which fell to 1.07 in March 2025 from 1.10 in December 2024, the labor market loosened modestly during the first quarter. Also, year-over-year growth in average hourly earnings was 3.8% in March 2025, easing from the 4.0% wage rate in December 2024.

Current wording

Nonfarm payrolls rose an average of 150,000 jobs per month in the second quarter of 2025 versus an average of 111,000 jobs per month in the first quarter of 2025. The unemployment rate decreased slightly to 4.1% in June 2025 from 4.2% in March 2025. Based upon the ratio of job openings to unemployed job seekers, which rose to 1.06 in June 2025 from 1.02 in March 2025, the labor market did not loosen further during the second quarter of 2025. Nonetheless, year-over-year growth in average hourly earnings was 3.7% in June 2025, a slowing from the 3.9% wage rate growth reported for March 2025.

Previous wording

Total home sales (new and existing) averaged 4.81 million units in the first quarter of 2025, only modestly lower than the average of 4.84 million in the fourth quarter of 2024. Nonetheless, home sales remain at a low level with total sales in a range of 4.5 million and 5.1 million since the beginning of 2023. Home price growth moderated further with the 12-month increase in the median resale price of an existing home at 2.7% in March 2025, which compares to 5.8% in December 2024.

Current wording

Total home sales (new and existing) averaged 4.64 million units in the second quarter of 2025, 2.9% lower than the average of 4.78 million in the first quarter of 2025. Home sales remain at a low level with total sales in a range of 4.5 million and 5.1 million since the beginning of 2023. Home price growth moderated further with the 12-month increase in the median resale price of an existing home at 2.0% in June 2025, which compares to 2.6% in March 2025. The 30-year fixed mortgage rate rose modestly to 6.77% at the end of the second quarter of 2025 from 6.65% at the end of the first quarter of 2025.

Previous wording

The economic conditions discussed above influence our investment strategy and results. Following 100 basis points of rate cuts in the last four months of 2024, the Federal Open Market Committee (“FOMC”) has indicated that monetary policy is well positioned to wait for greater clarity on the effects of the trade, immigration, fiscal and regulatory policies of the new administration before making any further adjustments. The 30-year fixed mortgage rate fell to 6.65% at the end of the first quarter of 2025 from 6.85% at the end of 2024.

Current wording

The economic conditions discussed above influence our investment strategy and results. Following 100 basis points of rate cuts in the final four months of 2024, the majority of the Federal Open Market Committee (“FOMC”) participants continue to wait for greater clarity with respect to the effects of government policies before making any further adjustments to the federal funds rate. The FOMC’s June 2025 Summary of Economic Projections contained a median forecast of two quarter-point rate cuts before the end of 2025.

Previous wording

Acquisitions— In light certain financial challenges, including the significant losses we have incurred to date and limited sources of financing, we do not expect to be able to acquire significant new commercial mortgage assets in the near future.

Current wording

Acquisitions— In light of certain financial challenges, including the significant losses we have previously incurred and potentially limited sources of financing, we expect our ability to acquire significant new commercial mortgage assets in the near future to be limited.

Previous wording

Financing— We previously securitized our whole loan portfolios, primarily as a financing tool, when economically efficient to create long-term, fixed rate, non-recourse financing with moderate leverage, while retaining one or more tranches of the subordinate mortgage-backed securities (“MBS”) so created. The secured borrowings are structured as debt financings and not sales through a real estate mortgage investment conduit. We completed the securitization transactions pursuant to Rule 144A under the Securities Act of 1933, as amended, in which we issued notes primarily secured by seasoned, performing and non-performing mortgage loans primarily secured by first liens on one-to-four family residential properties. Currently there is substantial uncertainty in the securitization markets which has limited our access to financing.

Current wording

Financing— We previously securitized our whole loan portfolios, primarily as a financing tool, when economically efficient to create long-term, fixed rate, non-recourse financing with moderate leverage, while retaining one or more tranches of the subordinate mortgage-backed securities (“MBS”) so created. The secured bonds payable are structured as debt financings and not sales through a real estate mortgage investment conduit. We completed the securitization transactions pursuant to Rule 144A under the Securities Act of 1933, as amended, in which we issued notes primarily secured by seasoned, performing and NPLs primarily secured by first liens on one-to-four family residential properties. Currently there is substantial uncertainty in the securitization markets which has limited our access to financing.

Previous wording

Expenses— Our expenses primarily consist of the fees and expenses payable by us under the Management Agreement and the servicing agreements transferred by Gregory to Newrez pursuant to a Servicing Transfer Agreement (the “Servicing Agreements”). Additionally, our Former Manager incurred and our Manager incurs direct, out-of-pocket costs and expenses related to managing our business, which are contractually reimbursable by us. Additionally, pursuant to the Management Agreement, we also pay all of the Manager’s costs and expenses and reimburse the Manager (to the extent incurred by the Manager) on a monthly basis for the costs and expenses of providing services under the Management Agreement, including reimbursing the Manager or its affiliates, as applicable, for our allocable share of the compensation (whether paid in cash, stock or other forms), including annual base salary, bonus, any related withholding taxes and employee benefits, paid to (i) the Manager’s personnel serving as our chief financial officer based on the percentage of his or her time spent managing the Company’s affairs and (ii) other corporate finance, tax, accounting, middle office, internal audit, legal, risk management, operations, compliance and other non-investment personnel of the Manager and its affiliates who spend all or a portion of their time managing our affairs. Loan transaction expense is the cost of performing due diligence on pools of mortgage loans. Professional fees are primarily for legal, accounting and tax services. Real estate operating expense consists of the ownership and operating costs of our REO properties and includes any charges for impairments to the carrying value of these assets, which may be significant. Interest expense, which is subtracted from our Interest income to arrive at Net interest income, consists of the costs to borrow money.

Current wording

Expenses— Our expenses primarily consist of the fees and expenses payable by us under the Management Agreement and the servicing agreements transferred by our Former Servicer to Newrez pursuant to a Servicing Transfer Agreement (the “Servicing Agreements”). Additionally, our Former Manager incurred, and our Manager incurs, direct, out-of-pocket costs and expenses related to managing our business, which are contractually reimbursable by us. Additionally, pursuant to the Management Agreement, we also pay all of the Manager’s costs and expenses and reimburse the Manager (to the extent incurred by the Manager) on a monthly basis for the costs and expenses of providing services under the Management Agreement, including reimbursing the Manager or its affiliates, as applicable, for our allocable share of the compensation (whether paid in cash, stock or other forms), including annual base salary, bonus, any related withholding taxes and employee benefits, paid to the Manager for corporate finance, tax, accounting, middle office, internal audit, legal, risk management, operations, compliance and other non-investment personnel of the Manager and its affiliates who spend all or a portion of their time managing our affairs. Loan transaction expense is the cost of performing due diligence on pools of mortgage loans. Professional fees are primarily for legal, accounting and tax services. Real estate operating expense consists of the ownership and operating costs of our REO properties and includes any charges for impairments to the carrying value of these assets, which may be significant. Interest expense, which is subtracted from our Interest income to arrive at Net interest income, consists of the costs to borrow money.

Previous wording

The Company’s significant accounting policies are described detail in Note 2 — Basis of Presentation and Significant Accounting Policies to the consolidated financial statements included in our Annual Report. As disclosed in the Note 2, the preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ significantly from those estimates. The Company believes that the following discussion addresses the Company’s most critical accounting policies, which are those that are most important to the presentation of the Company’s financial condition and results of operations and require management’s most difficult, subjective and complex judgments.

Current wording

The Company’s significant accounting policies are described detail in Note 2 — Basis of Presentation and Significant Accounting Policies to the consolidated financial statements included in our Annual Report. As disclosed in Note 2, the preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ significantly from those estimates. The Company believes that the following discussion addresses the Company’s most critical accounting policies, which are those that are most important to the presentation of the Company’s financial condition and results of operations and require management’s most difficult, subjective and complex judgments.

Previous wording

Our net loss is primarily generated from net interest income offset by losses on mark-to-market adjustments on mortgage loans held for sale and CMBS, losses on the sale of our mortgage loans and securities, as well as servicing fee expense, management fee expense and general and administrative expenses. Changes in various factors such as market interest rates, prepayment speeds, estimated future cash flows and credit quality could affect the amount of net interest income for a given period. Changes in market interest rates directly impact the borrowing cost on our repurchase lines of credit.

Current wording

Changes in various factors such as market interest rates, prepayment speeds, estimated future cash flows and credit quality could affect the amount of net interest income for a given period. Changes in market interest rates directly impact the borrowing cost on our repurchase financing agreements.

Previous wording

Net interest income before the allowance for credit losses increased by $2.2 million from the prior year period, primarily as a result of reinvesting net proceeds from sales of residential mortgage loans and RMBS into higher yielding CMBS with lower cost financing.

Current wording

Net interest income increased by $3.9 million and by $6.0 million for the three and six months ended June 30, 2025, from the respective prior year periods, primarily as a result of reinvesting net proceeds from sales of residential mortgage loans and RMBS into higher yielding CMBS with lower cost of financing.

Previous wording

The interest income detail and interest expense for the three months ended March 31, 2025 and 2024, are presented in the table below ($ in thousands):

Current wording

The interest income detail and interest expense for the three and six months ended June 30, 2025 and 2024 are presented in the table below:

Previous wording

Our interest expense decreased for the three months ended March 31, 2025, versus the comparable period in 2024, due to lower average carrying balance of secured borrowings and borrowings under repurchase transactions, primarily due to paydowns and asset sales.

Current wording

Our interest expense decreased for the three and six months ended June 30, 2025, versus the comparable periods in 2024, due to lower average carrying balance of secured bonds payable, primarily due to paydowns and asset sales, and a lower cost of financing for repurchase financing agreements.

Previous wording

The average carrying balances for our portfolio and debt are included in the table below ($ in thousands):

Current wording

The average carrying balances for our portfolio and debt are included in the table below:

Previous wording

The average carrying balance of our mortgage loan portfolio decreased for the three months ended March 31, 2025, versus the comparable period in 2024, primarily due to loan sales and paydowns, as we reposition our balance sheet into investments in CMBS. Additionally, the average carrying balances of our RMBS and beneficial interests decreased for the three months ended March 31, 2025, as compared to 2024 balances, due to paydowns, sales and redemptions, partially offset by investments in CMBS.

Current wording

The average carrying balance of our mortgage loan portfolio decreased for the six months ended June 30, 2025, versus the comparable period in 2024, primarily due to loan sales and paydowns, partially offset by the increase in debt securities, as we reposition our balance sheet into investments in CMBS.

Previous wording

Loans held-for-sale are not subject to accounting under Accounting Standards Update 2016-13, Financial Instruments - Credit Losses(known as CECL), as a result in the three months ended March 31, 2024, the allowance on loans classified as held-for-sale was reversed and reclassified to the mark-to-market loss recorded during the same period. This mark-to-market loss did not re-occur in the three months ended March 31, 2025.

Current wording

Mortgage loans held-for-sale, net are not subject to CECL, as a result in the six months ended June 30, 2024, the allowance on loans classified as held-for-sale was reversed and reclassified to the mark-to-market loss recorded during the same period. We recorded no allowance for credit losses on our mortgage loans held-for-investment, net and beneficial interests’ portfolio in the three and six months ended June 30, 2025 and three months ended June 30, 2024, as compared to allowance of $4.2 million for the six months ended June 30, 2024.

Previous wording

Our other loss increased for the three months ended March 31, 2025, versus the comparable period in 2024, primarily due to loss on the sale of our legacy RMBS and mark-to-market losses on securities carried at fair value, partially offset by other miscellaneous income. The loss on sale of securities was reclassified from other comprehensive income. A breakdown of other (loss)/income is provided in the table below ($ in thousands):

Current wording

A breakdown of other income (loss) is provided in the table below:

Previous wording

Our loan portfolio activity for the three months ended March 31, 2025 and 2024, is presented below ($ in thousands):

Current wording

Our loan portfolio activity for the three and six months ended June 30, 2025 and 2024, is presented below:

Previous wording

As of March 31, 2025 and December 31, 2024, our loan portfolios consisted of the following ($ in thousands):

Current wording

As of June 30, 2025 and December 31, 2024, our loan portfolio consisted of the following:

Previous wording

(1)At March 31, 2025 and December 31, 2024, our loan portfolio consists of fixed rate (62.6% of unpaid principal balance (“UPB”)), ARM (7.1% of UPB) and Hybrid ARM (30.3% of UPB); and fixed rate (62.6% of UPB), ARM (7.3% of UPB) and Hybrid ARM (30.1% of UPB), respectively.

Current wording

(1)At June 30, 2025 and December 31, 2024, our loan portfolio consists of fixed rate (62.7% of unpaid principal balance (“UPB”)), ARM (6.9% of UPB) and Hybrid ARM (30.5% of UPB); and fixed rate (62.6% of UPB), ARM (7.3% of UPB) and Hybrid ARM (30.1% of UPB), respectively.

Previous wording

The following tables present certain characteristics about our mortgage loans by year of origination as of March 31, 2025 and December 31, 2024, respectively ($ in thousands):

Current wording

The following tables present certain characteristics about our mortgage loans by year of origination as of June 30, 2025 and December 31, 2024, respectively:

Previous wording

Our primary sources of funds are cash provided by net interest income, sales and repayments of our investments, debt financing sources, including secured borrowings and repurchase lines of credit, and the issuance of equity securities when feasible and appropriate. Our total cash and cash equivalents at March 31, 2025 was $97.4 million.

Current wording

Our primary sources of funds are cash provided by net interest income, sales and repayments of our investments, debt financing sources, including secured bonds payable and repurchase financing agreements, and the issuance of equity securities when feasible and appropriate. Our total cash and cash equivalents at June 30, 2025 was $98.6 million.

Previous wording

We also may have difficulty accessing the capital markets on favorable terms or at all. Additionally, market events, including inflation and the related Federal Reserve bank actions, may still adversely impact our future operating cash flows due to the inability of some of our borrowers to make scheduled payments on time or at all, and through increased interest rates on secured borrowings and repurchase lines of credit.

Current wording

We also may have difficulty accessing the capital markets on favorable terms or at all. Additionally, market events, including inflation and the related Federal Reserve bank actions, may still adversely impact our future operating cash flows due to the inability of some of our borrowers to make scheduled payments on time or at all, and through increased interest rates on secured bonds payable and repurchase financing agreements.

Previous wording

During the quarter ended March 31, 2025, we issued 2,084,232 shares of 9.875% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, $0.01 par value per share, with a liquidation preference of $25.00 per share (the “Series C Preferred Stock”), with 400,000 of such shares of Series C Preferred Stock sold to certain affiliates of the Manager at the public offering price of $25.00 per share. Total net proceeds to the Company from the issuance of the Series C Preferred stock were $50.8 million, after deducting underwriting discounts and offering expenses.

Current wording

During the six months ended June 30, 2025, we issued 2,084,232 shares of 9.875% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, $0.01 par value per share, with a liquidation preference of $25.00 per share (the “Series C Preferred Stock”), with 400,000 of such shares of Series C Preferred Stock sold to certain affiliates of the Manager at the public offering price of $25.00 per share. Total net proceeds to the Company from the issuance of the Series C Preferred stock were $50.8 million, after deducting underwriting discounts and offering expenses.

Previous wording

Currently, our primary sources of financing are repurchase lines of credit and secured borrowings. As of March 31, 2025, our RMBS and CMBS portfolios had outstanding financing on repurchase lines of credit of $345 million which generally have 90-day terms and are subject to margin calls. Under secured borrowings agreements, we sell a security to a counterparty and concurrently agree to repurchase the same security at a later date for a higher specified price. The sale price represents financing proceeds and the difference between the sale and repurchase prices represents interest on the financing. The price at which the security is sold generally represents the market value of the security less a discount or “haircut,” which can range broadly. During the term of the secured financing agreement, the counterparty holds the security as collateral. If the agreement is subject to margin calls, the counterparty monitors and calculates what it estimates to be the value of the collateral during the term of the agreement. If this value declines by more than a de minimis threshold, the counterparty could require us to post additional collateral, or margin, in order to maintain the initial haircut on the collateral. This margin is typically required to be posted in the form of cash and cash equivalents. We seek to maintain adequate cash reserves and other sources of available liquidity to meet any margin calls or related requirements resulting from decreases in value related to a reasonably possible (in our judgment) change in interest rates.

Current wording

Currently, our primary sources of financing are repurchase financing agreements and secured bonds payable. As of June 30, 2025, our RMBS and CMBS portfolios had outstanding financing on repurchase financing agreements of $341.1 million which generally have 90-day terms and are subject to margin calls. Under secured bonds payable agreements, we sell a security to a counterparty and concurrently agree to repurchase the same security at a later date for a higher specified price. The sale price represents financing proceeds and the difference between the sale and repurchase prices represents interest on the financing. The price at which the security is sold generally represents the market value of the security less a discount or “haircut,” which can range broadly. During the term of the secured financing agreement, the counterparty holds the security as collateral. If the agreement is subject to margin calls, the counterparty monitors and calculates what it estimates to be the value of the collateral during the term of the agreement. If this value declines by more than a de minimis threshold, the counterparty could require us to post additional collateral, or margin, in order to maintain the initial haircut on the collateral. This margin is typically required to be posted in the form of cash and cash equivalents. We seek to maintain adequate cash reserves and other sources of available liquidity to meet any margin calls or related requirements resulting from decreases in value related to a reasonably possible (in our judgment) change in interest rates.

Previous wording

Our mortgage loan portfolio is primarily financed through secured borrowings. Under our secured borrowings, we sell mortgage loans to a special purpose entity which then issues senior and subordinated notes secured by the mortgage loans. The notes are generally fixed rate and are non-recourse. The senior notes are subject to varying call provisions that we control. We hold the non-rated subordinate classes in all of our secured borrowings.

Current wording

Our mortgage loan portfolio is primarily financed through secured bonds payable. Under our secured bonds payable, we sell mortgage loans to a special purpose entity which then issues senior and subordinated notes secured by the mortgage loans. The notes are generally fixed rate and are non-recourse. The senior notes are subject to varying call provisions that we control. We hold the non-rated subordinate classes in all of our secured bonds payable.

Previous wording

We are not required by our investment guidelines to maintain any specific debt-to-equity ratio, and we believe that the appropriate leverage for the particular assets we hold depends on the credit quality and risk of those assets, as well as the general availability and terms of stable and reliable financing for those assets. We do, however, have debt covenants related to our various borrowing arrangements that have minimum liquidity and tangible net worth requirements, as well as maximum leverage ratio requirements. Generally, we are required to maintain minimum levels of Liquidity (as defined in the indenture governing our senior unsecured notes due 2027 (“2027 Notes”)) (in cash and cash equivalents) and tangible net worth of $30.0 million and $240.0 million, respectively. Similarly, our Consolidated Recourse Indebtedness to our Stockholders’ Equity ratio (as defined in the indenture governing the 2027 Notes) cannot exceed 4.0 to 1.0, excluding our secured borrowings.

Current wording

We are not required by our investment guidelines to maintain any specific debt-to-equity ratio, and we believe that the appropriate leverage for the particular assets we hold depends on the credit quality and risk of those assets, as well as the general availability and terms of stable and reliable financing for those assets. We do, however, have debt covenants related to our various borrowing arrangements that have minimum liquidity and tangible net worth requirements, as well as maximum leverage ratio requirements. Generally, we are required to maintain minimum levels of Liquidity (as defined in the indenture governing our senior unsecured notes due 2027 (“2027 Notes”)) (in cash and cash equivalents) and tangible net worth of $30.0 million and $240.0 million, respectively. Similarly, our Consolidated Recourse Indebtedness to our Stockholders’ Equity ratio (as defined in the indenture governing the 2027 Notes) cannot exceed 4.0 to 1.0, excluding our secured bonds payable.

Previous wording

With respect to the next 12 months, we expect that our cash on hand, combined with our cash flow provided by our investments and our ability to roll our repurchase lines of credit will be sufficient to satisfy our anticipated liquidity needs with respect to our current investment portfolio, including related financings, potential margin calls, and operating expenses. Our ability to roll over short-term borrowings is critical to our liquidity outlook. We have a significant number of near-term maturities, which we expect to be able to refinance. If we cannot repay or refinance our debt on favorable terms, we will need to seek out other sources of liquidity. While it is inherently more difficult to forecast beyond the next 12 months, we currently expect to meet our long-term liquidity requirements through our cash on hand and, if needed, additional borrowings, proceeds received from secured financing agreements and other financings, proceeds from equity offerings and the liquidation or refinancing of our assets.

Current wording

With respect to the next 12 months, we expect that our cash on hand, combined with our cash flow provided by our investments and our ability to roll our repurchase financing agreements will be sufficient to satisfy our anticipated liquidity needs with respect to our current investment portfolio, including related financings, potential margin calls, and operating expenses. Our ability to roll over short-term borrowings is critical to our liquidity outlook. We have a significant number of near-term maturities, which we expect to be able to refinance. If we cannot repay or refinance our debt on favorable terms, we will need to seek out other sources of liquidity. While it is inherently more difficult to forecast beyond the next 12 months, we currently expect to meet our long-term liquidity requirements through our cash on hand and, if needed, additional borrowings, proceeds received from secured financing agreements and other financings, proceeds from equity offerings and the liquidation or refinancing of our assets.

Previous wording

Net cash used in operating activities decreased by $6.6 million in the three months ended March 31, 2025, as compared to cash used in the three months ended March 31, 2024, primarily driven by lower interest expense and lower other expenses.

Current wording

Net cash from operating activities decreased by $9.6 million in the six months ended June 30, 2025, as compared to net cash provided by operating activities in the six months ended June 30, 2024, primarily driven by net interest income and the timing of payment of certain expenses.

Previous wording

Net cash from investing activities decreased by $108.7 million in the three months ended March 31, 2025, as compared to cash flow generated in the three months ended March 31, 2024, primarily due to increased purchases of investments in CMBS and equity method investments.

Current wording

Net cash from investing activities decreased by $381.4 million in the six months ended June 30, 2025, as compared to cash flow generated in the six months ended June 30, 2024, primarily due to lower proceeds from sales of mortgage loans and increased investment into CMBS and other holdings in the current year period.

Previous wording

Net cash from financing activities increased by $88.1 million in the three months ended March 31, 2025, as compared to cash used in the three months ended March 31, 2024, primarily due to issuance of our Series C Preferred Stock in the first quarter of 2025 and changes in net cash flows on repurchase transactions.

Current wording

Net cash from financing activities increased by $406.2 million in the six months ended June 30, 2025, as compared to cash used in the six months ended June 30, 2024, primarily due redemption of our 2024 Notes, net outflows of cash related to our repurchase financings, as well as redemption of senior convertible notes in the prior year period; the cash inflow for the current year period was primarily driven by issuance of our Series C Preferred Stock in the first quarter of 2025.

Previous wording

We generally need to distribute at least 90% of our taxable income each year (subject to certain adjustments) to our shareholders to qualify as a REIT under the Internal Revenue Code. This distribution requirement limits our ability to retain earnings and thereby replenish or increase capital to support our activities. Dividends declared in the three months ended March 31, 2025, were $2.8 million on Common Stock, and in the same period the Company accrued $350.0 thousand on Series C Preferred Stock dividend.

Current wording

We generally need to distribute at least 90% of our taxable income each year (subject to certain adjustments) to our shareholders to qualify as a REIT under the Internal Revenue Code. This distribution requirement limits our ability to retain earnings and thereby replenish or increase capital to support our activities. Dividends declared in the six months ended June 30, 2025, were $5.5 million on Common Stock, and in the same period the Company accrued $1.6 million on Series C Preferred Stock dividend.

Previous wording

The following table presents summarized financial information for the guarantors and our Operating Partnership, on a combined basis after eliminating (i) intercompany transactions and balances among the guarantor entities and (ii) equity in earnings from, and any investments in, any subsidiary that is a non-guarantor ($ in thousands):

Current wording

The following table presents summarized financial information for the guarantors and our Operating Partnership, on a combined basis after eliminating (i) intercompany transactions and balances among the guarantor entities and (ii) equity in earnings from, and any investments in, any subsidiary that is a non-guarantor: