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; 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 “RCM GA” or our “Manager” refer to RCM GA Manager LLC; and references to our “Servicer” or “Newrez” refer to Newrez LLC, a Delaware limited liability company and an affiliate of RCM GA.

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; 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 “RCM GA” or our “Manager” refer to RCM GA Manager LLC; references to “Newrez” refer to Newrez LLC, a Delaware limited liability company and an affiliate of RCM GA; references to “Genesis” refer to Genesis Capital LLC, a Delaware limited liability company and an affiliate of RCM GA; and references to our “Servicers” refer to both Newrez and Genesis.

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. The Company has elected to treat certain wholly-owned subsidiaries as taxable REIT subsidiaries (“TRSs”) under the United States Internal Revenue Code of 1986, as amended (the “Code”). These entities are used primarily to hold certain investments and to facilitate the Company’s operations, including activities related to REO properties. 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. AJX Mortgage Trust I is a wholly-owned subsidiary of the Operating Partnership formed to hold mortgage loans used as collateral for financings under the Company’s repurchase agreements.

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. The Company has elected to treat certain wholly-owned subsidiaries as taxable REIT subsidiaries under the United States Internal Revenue Code of 1986, as amended (the “Code”). These entities are used primarily to hold certain investments and to facilitate the Company’s operations, including activities related to real estate owned (“REO”) properties. 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. AJX Mortgage Trust I is a wholly-owned subsidiary of the Operating Partnership formed to hold mortgage loans used as collateral for financings under the Company’s repurchase agreements.

Previous wording

Our Operating Partnership, through interests in certain entities, as of March 31, 2026, held 99.7% of Rithm Property Trust II REIT Inc., which owns Great Ajax II Depositor LLC, formed to act as the depositor of mortgage loans into securitization trusts and to hold the subordinated securities issued by such trusts. Also, as of March 31, 2026, the Operating Partnership wholly-owned Great Ajax III Depositor LLC, which was formed to act as the depositor for a single securitization transaction.

Current wording

Our Operating Partnership, through interests in certain entities, as of June 30, 2026 and December 31, 2025, held 99.7% of Rithm Property Trust II REIT Inc., which owns Great Ajax II Depositor LLC, formed to act as the depositor of mortgage loans into securitization trusts and to hold the subordinated securities issued by such trusts. Also as of June 30, 2026 and December 31, 2025, the Operating Partnership wholly-owned Great Ajax III Depositor LLC, which was formed to act as the depositor for a single securitization transaction.

Previous wording

The Company previously completed a strategic transaction with Rithm (the “Strategic Transaction”) in which (i) the Company entered into a Securities Purchase Agreement with Rithm and pursuant thereto sold shares of its common stock to Rithm, and (ii) the Company entered into a management agreement dated June 11, 2024 (as amended by that First Amendment, dated October 18, 2024, and that Second Amendment, dated February 12, 2026, and as may be further amended, modified or supplemented from time to time, the “Management Agreement”) with RCM GA, pursuant to which RCM GA serves as the Company’s external manager.

Current wording

The Company previously completed a strategic transaction with Rithm in which (i) the Company entered into a Securities Purchase Agreement with Rithm and pursuant thereto sold shares of its common stock to Rithm, and (ii) the Company entered into a management agreement, dated June 11, 2024 (as amended by that First Amendment, dated October 18, 2024, and that Second Amendment, dated February 12, 2026, and as may be further amended, modified or supplemented from time to time, the “Management Agreement”), with RCM GA, pursuant to which RCM GA serves as the Company’s external manager.

Previous wording

As of March 31, 2026, the Company conducted its business through the following segments: (i) Residential and (ii) Commercial. The Company’s Commercial segment is focused on investments in the CRE sector, including originating, acquiring and managing portfolios of CMBS, commercial real property, commercial mortgage loans and other CRE investments. The Residential segment is focused on managing the Company’s legacy residential mortgage portfolio, including whole mortgage loans, RMBS and beneficial interests.

Current wording

The Company conducts its business through the following reportable segments: (i) Residential and (ii) Commercial. The Company’s Commercial segment is focused on investments in the CRE sector, including origination, acquisition and management of portfolios of CMBS, RTLs, commercial real property, commercial mortgage loans and other CRE investments. The Residential segment is focused on managing the Company’s legacy residential mortgage portfolio, including whole mortgage loans, RMBS and beneficial interests.

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, 2026 and December 31, 2025:

Current wording

The following table outlines the carrying value of our portfolio of mortgage loan assets, investments in securities, CRE equity method investments and REO properties as of June 30, 2026 and December 31, 2025:

Previous wording

During the first quarter of 2026, macroeconomic conditions reflected a combination of stable underlying inflation, modest improvement in labor market conditions, and increased volatility in energy prices and interest rates, including uncertainty resulting from the conflict with Iran that began at the end of February 2026. The Federal Reserve maintained the federal funds target range at 3.50%–3.75% during its January and March 2026 meetings following rate cuts in late 2025.

Current wording

During the second quarter of 2026, macroeconomic conditions reflected persistent inflation, an easing in labor force participation and continued volatility in energy prices and interest rates amid the ongoing conflict with Iran. The Federal Reserve maintained the federal funds target range at 3.50%–3.75% during its April and June 2026 meetings, with the June meeting marking the first under new Federal Reserve Chair Kevin Warsh, whose accompanying Summary of Economic Projections signaled a more hawkish policy stance and the potential for a rate increase later in 2026, a reversal from the cutting- cycle expectations that had prevailed as recently as the first quarter; however, in its July meeting, the Federal Reserve continued to maintain the current target range.

Previous wording

Headline inflation increased during the quarter, primarily reflecting higher energy prices, as West Texas Intermediate crude oil prices increased 76.6% during the quarter following the outbreak of the conflict with Iran, while measures of core inflation remained stable. The unemployment rate declined modestly from 4.4% in December 2025 to 4.3% in March 2026, indicating continued stabilization in labor market conditions.

Current wording

Headline inflation increased further during the quarter, primarily reflecting higher energy prices, even as West Texas Intermediate crude oil prices, which had been up as much as 101% following the outbreak of the conflict with Iran, eased to a gain of approximately 70% by the end of the second quarter as ceasefire efforts progressed, though that truce showed signs of strain by quarter-end. Core inflation measures were roughly stable. The unemployment rate declined modestly from 4.3% in March 2026 to 4.2% in June 2026, though the improvement was driven in part by a decline in labor force participation.

Previous wording

Market interest rates increased during the quarter, with the 10-year Treasury yield rising 15 basis points to 4.32%, while market expectations for rate cuts in 2026 declined significantly. Equity markets experienced volatility during the quarter, with the S&P 500 declining 4.6% before partially recovering in April 2026.

Current wording

Market interest rates increased further during the quarter, with the 10-year Treasury yield rising 14 basis points to 4.44%, while market expectations shifted to reflect the possibility of a rate increase later in 2026. Equity markets rallied during the quarter, with the S&P 500 gaining 14.9% and recovering from the prior quarter's decline, driven substantially by strength in technology and artificial intelligence (“AI”) sectors.

Previous wording

Inflation increased during the first quarter of 2026, primarily reflecting higher energy prices following the outbreak of the conflict with Iran. Consumer Price Index (“CPI”) inflation rose from 2.7% in December 2025 to 3.3% in March 2026, driven in part by an increase in energy prices from 2.1% in December 2025 to 12.6% in March 2026 on a year-over-year basis.

Current wording

Inflation increased further during the second quarter of 2026, primarily reflecting higher energy prices amid the ongoing conflict with Iran. Consumer Price Index (“CPI”) inflation rose from 3.3% in March 2026 to 3.5% in June 2026, driven in part by an increase in energy prices from 12.5% in March 2026 to 15.7% in June 2026 on a year-over-year basis.

Previous wording

Core CPI, which excludes food and energy, remained stable at 2.6%, however the Federal Reserve’s preferred measure of underlying inflation, core Personal Consumption Expenditures (“PCE”), increased from 3.0% in December 2025 to 3.2% in March 2026. Other inflation indicators showed modest increases, with producer price inflation rising to 4.0% in March 2026 from 3.2% in December 2025, and import prices increasing 2.1% over the 12 months ended March 31, 2026 after being flat in December 2025.

Current wording

Core CPI, which excludes food and energy, remained essentially flat at 2.6% in June 2026. Core Personal Consumption Expenditures, the Federal Reserve’s preferred measure of underlying inflation, increased 3.3% in June 2026 compared to the prior-year period. Other inflation indicators showed further increases, with producer price inflation rising to 5.5% in June 2026 from 4.3% in March 2026, and import prices increasing 7.1% over the 12 months ending June 30, 2026, compared to 2.3% over the 12 months ending March 31, 2026.

Previous wording

Treasury yields increased during the first quarter of 2026. The ten-year Treasury yield rose 15 basis points to 4.32% from 4.17% at the end of December 2025. Shorter-term yields increased more significantly, with the two-year Treasury yield rising 32 basis points to 3.79%. As a result, the yield curve flattened, with the spread between two-year and ten-year Treasury yields narrowing from 69 basis points to 52 basis points over the quarter. This shift reflects reduced market expectations for interest rate cuts in 2026.

Current wording

Treasury yields increased further during the second quarter of 2026. The ten-year Treasury yield rose 14 basis points to 4.44% from 4.30% at the end of March 2026. Shorter-term yields increased more significantly, with the two-year Treasury yield rising 35 basis points to 4.14%. As a result, the yield curve flattened further, with the spread between two-year and ten-year Treasury yields narrowing from 51 basis points to 30 basis points over the quarter. This shift reflects the more hawkish policy outlook communicated by the Federal Reserve following the change in its leadership.

Previous wording

Labor market conditions improved modestly during the first quarter of 2026. The unemployment rate declined by 0.1 percentage points from 4.4% in December 2025 to 4.3% in March 2026. Job growth strengthened during the quarter, with nonfarm payrolls increasing by an average of 68,000 per month, compared to an average monthly decline of 39,000 during the fourth quarter of 2025. Initial unemployment insurance claims also declined, averaging 212,000 per week during the first quarter of 2026, compared to 222,000 per week in the prior quarter.

Current wording

Labor market conditions continued to stabilize during the second quarter of 2026, though signals were mixed. The unemployment rate declined by 0.1 percentage points from 4.3% in March 2026 to 4.2% in June 2026, aided in part by a decline in labor force participation. Job growth accelerated during the quarter, with non-farm payrolls increasing by an average of 111,000 per month, compared to an average of 73,000 per month during the first quarter of 2026. However, initial unemployment insurance claims increased, averaging 222,000 per week during the second quarter of 2026, compared to 209,000 per week in the prior quarter.

Previous wording

Housing market activity softened during the first quarter of 2026, reflecting higher mortgage rates. Existing home sales declined to an annualized rate of 4.04 million, compared to 4.16 million in the fourth quarter of 2025. New home sales data remains limited due to publication delays, with January 2026 representing the most recent available data. Sales were approximately 587,000 at an annual rate, compared to an average of approximately 709,000 during the fourth quarter of 2025. Home price growth increased modestly, with the median resale price rising 1.4% year-over-year in March 2026, compared to 0.4% in December 2025. Mortgage rates increased during the quarter, with the 30-year fixed rate rising to 6.56% from 6.27%.

Current wording

Housing market activity was mixed during the second quarter of 2026. Existing home sales rose modestly to an annualized rate of 4.09 million, compared to 4.01 million in the first quarter of 2026, though sales remained rangebound amid still-elevated mortgage rates. New home sales declined to an annualized rate of approximately 628,000 in the second quarter of 2026, compared to approximately 659,000 in the first quarter of 2026. Home price growth increased modestly, with the median resale price rising 1.8% year-over-year in June 2026, compared to 1.5% in March 2026. Mortgage rates increased further during the quarter, with the 30-year fixed rate rising to 6.29% from 6.07% at the end of March 2026.

Previous 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, including equity investments, in the near future to be limited.

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, including equity investments and RTLs, 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 RMBS issued by such securitization vehicle. The securitization 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.

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 RMBS issued by such securitization vehicle. The securitizations 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 our former servicer to Newrez pursuant to a servicing transfer agreement (the servicing transfer agreement together with the underlying servicing agreements, the “Servicing Agreements”). Additionally 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.

Current wording

Expenses— Our expenses primarily consist of the fees and expenses payable by us under the Management Agreement and the servicing fees pursuant to our servicing agreements with the Servicers. Additionally 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

Changes in Market Interest Rates— Increases in interest rates, in general, may over time cause: (1) the value of our mortgage loan and RMBS portfolio to further decline; (2) coupons on our adjustable rate mortgage (“ARM”) and Hybrid ARM loans and RMBS to reset, although on a delayed basis, to higher interest rates; (3) impact adversely our ability to securitize, re-securitize or sell our assets on attractive terms; (4) reduce the ability or desire of borrowers to refinance their loans; (5) mortgage related assets may become more illiquid during periods of interest rate volatility; (6) difficulties refinancing our securitizations and increases in the costs of our repurchase facility financings; (7) increase our financing costs as we seek to renew or replace borrowing facilities; and (8) to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements to increase. Conversely, decreases in interest rates, in general, may over time cause: (1) prepayments on our mortgage loan and MBS portfolio to increase, thereby accelerating the accretion of our purchase discounts; (2) the value of our mortgage loan and MBS portfolio to increase; (3) coupons on our ARM and Hybrid ARM mortgage loans and MBS to reset, although on a delayed basis, to lower interest rates; (4) the interest expense associated with our borrowings to decrease; and (5) to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements to decrease.

Current wording

Changes in Market Interest Rates— Increases in interest rates, in general, may over time cause: (1) the value of our mortgage loan and RMBS portfolio to further decline; (2) coupons on our adjustable rate mortgage (“ARM”) and Hybrid ARM loans and RMBS to reset, although on a delayed basis, to higher interest rates; (3) impact adversely our ability to securitize, re-securitize or sell our assets on attractive terms; (4) reduce the ability or desire of borrowers to refinance their loans; (5) mortgage related assets may become more illiquid during periods of interest rate volatility; (6) difficulties refinancing our securitizations and increases in the costs of our repurchase facility financings; (7) increase our financing costs as we seek to renew or replace borrowing facilities; and (8) to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements to increase. Conversely, decreases in interest rates, in general, may over time cause: (1) prepayments on our mortgage loan and mortgage-backed securities (“MBS”) portfolio to increase, thereby accelerating the accretion of our purchase discounts; (2) the value of our mortgage loan and MBS portfolio to increase; (3) coupons on our ARM and Hybrid ARM mortgage loans and MBS to reset, although on a delayed basis, to lower interest rates; (4) the interest expense associated with our borrowings to decrease; and (5) to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements to decrease.

Previous wording

The mortgage and financial sectors operate in a challenging and uncertain economic environment, which can be impacted by a number of factors, including, but not limited to, geopolitical uncertainty. Financial and real estate sectors continue to be affected by, among other things, market volatility, heightened interest rates and inflationary pressures. We believe the estimates and assumptions underlying our consolidated financial statements are reasonable and supportable based on the information available as of March 31, 2026; however, uncertainty over the current macroeconomic conditions makes any estimates and assumptions as of March 31, 2026, inherently less certain than they would be absent the current economic environment. Actual results may materially differ from those estimates. Market volatility and inflationary pressures and their impact on the current financial, economic and capital markets environment, and future developments in these and other areas present uncertainty and risk with respect to our financial condition, results of operations, liquidity and ability to pay distributions.

Current wording

The mortgage, CRE and financial sectors operate in a challenging and uncertain economic environment, which can be impacted by a number of factors, including, but not limited to, geopolitical uncertainty. Financial and real estate sectors continue to be affected by, among other things, market volatility, heightened interest rates and inflationary pressures. We believe the estimates and assumptions underlying our consolidated financial statements are reasonable and supportable based on the information available as of June 30, 2026; however, uncertainty over the current macroeconomic conditions makes any estimates and assumptions as of June 30, 2026, inherently less certain than they would be absent the current economic environment. Actual results may materially differ from those estimates. Market volatility and inflationary pressures and their impact on the current financial, economic and capital markets environment, and future developments in these and other areas present uncertainty and risk with respect to our financial condition, results of operations, liquidity and ability to pay distributions.

Previous wording

Our net loss attributable to common stockholders is primarily generated from net interest income, our operating expenses and other gains and losses, which are primarily related to unrealized and realized gains and losses on our commercial and residential mortgage and debt securities portfolios, including allowance for credit losses on our residential mortgages and beneficial interests, mark-to-market adjustments on RMBS and CMBS carried at fair value, and income from investments in affiliates.

Current wording

Our net income (loss) attributable to common stockholders is primarily generated from net interest income, our operating expenses and other gains and losses, which are primarily related to unrealized and realized gains and losses on our commercial and residential mortgage and debt securities portfolios, including allowance for credit losses on our residential mortgages and beneficial interests, mark-to-market adjustments on RMBS and CMBS carried at fair value, mark-to-market adjustments on RTLs carried at fair value, and income from investments in affiliates.

Previous wording

The following table summarizes the changes in our results of operations for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. Our results of operations are not necessarily indicative of our future performance.

Current wording

The following table summarizes the variances in our results of operations for the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025. Our results of operations are not necessarily indicative of our future performance.

Previous wording

Net interest income decreased by $0.2 million for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, which was primarily driven by a decrease in interest income offset by a decrease in interest expense.

Current wording

Net interest income decreased by $0.2 million for the three months ended June 30, 2026, as compared to the three months ended June 30, 2025, primarily driven by a decrease in interest income, partially offset by a decrease in interest expense.

Previous wording

Interest expense decreased by approximately $0.5 million for the three months ended March 31, 2026, primarily driven by lower average debt balances and reduced financing costs. Secured bonds financing related to RMBS continued to paydown during the year, largely as a result of collateral runoff. The decrease in interest expense related to RMBS and residential mortgage loans was partially offset by an increase in interest expense associated with the financing of CMBS and commercial loan investments. In addition, a decrease in interest rates on repurchase financing agreements further contributed to the overall decline in interest expense.

Current wording

Interest expense decreased by $1.1 million for the three months ended June 30, 2026, as compared to the three months ended June 30, 2025, primarily driven by a decrease in financing costs related to CMBS and commercial loan investments as the underlying collateral was sold, and lower interest rates on repurchase financing agreements. This was partially offset by an increase in financing costs related to RMBS and residential mortgage loans, attributable to additional securities pledged, and continued paydown of secured bonds financing related to RMBS as a result of collateral runoff.

Previous wording

The average carrying balances of our portfolio and debt for the three months ended March 31, 2026 and 2025 are included in the table below:

Current wording

The average carrying balances of our portfolio and debt for the six months ended June 30, 2026 and 2025 are included in the table below:

Previous wording

The decreases in the average carrying value of the mortgage loan portfolio and RMBS for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025 were primarily due to paydowns, while the decrease in the average carrying value of CMBS for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025 was primarily due to sales of securities, combined with loan paydowns.

Current wording

The decrease in the average carrying value of the mortgage loan portfolio for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025, was primarily due to paydowns and sales of loans held-for-sale. The decrease in the average carrying value of CMBS for the same comparative period was primarily due to sales of CMBS, combined with loan paydowns. The increase in the average carrying value of RTLs over the same comparative period was attributable to the acquisition of a portfolio of multifamily RTLs under the Flow MLPA during the current quarter.

Previous wording

The decrease in the average carrying value of secured bonds payable was primarily attributable to loan paydown associated with collateral runoff. In contrast, the average balance of repurchase financing agreements increased as repurchase financing agreement financing was utilized to fund a portion of the Company’s CRE investments.

Current wording

The decrease in the average carrying value of secured bonds payable was primarily attributable to loan paydown associated with collateral runoff. The decrease in the average balance of repurchase financing agreements was primarily due to the sale of CMBS and the payoff of associated borrowings, partially offset by new repurchase financing agreements entered into to fund the purchase of RTLs.

Previous wording

Total expenses increased by $1.1 million for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, primarily due to an increase in general and administrative expenses, and professional fees related to transaction costs in connection with the evaluation of a potential common equity raise during the current period.

Current wording

Total expense increased by $0.5 million for the three months ended June 30, 2026, compared to the three months ended June 30, 2025. This increase was primarily attributable to higher professional fees related to transaction costs associated with investment activity for the period.

Previous wording

Our residential mortgage loan portfolio activity for the three months ended March 31, 2026 and 2025 is presented below:

Current wording

Our residential mortgage loan portfolio activity for the three and six months ended June 30, 2026 and 2025 is presented below:

Previous wording

(1)As of March 31, 2026 and December 31, 2025, our loan portfolio consisted of fixed rate (62.9% of unpaid principal balance (“UPB”)), ARM (6.3% of UPB) and Hybrid ARM (30.8% of UPB); and fixed rate (62.8% of UPB), ARM (6.4% of UPB) and Hybrid ARM (30.8% of UPB), respectively.

Current wording

(1)As of June 30, 2026 and December 31, 2025, our loan portfolio consisted of fixed rate (62.3% of UPB), ARM (6.4% of UPB) and Hybrid ARM (31.3% of UPB); and fixed rate (62.8% of UPB), ARM (6.4% of UPB) and Hybrid ARM (30.8% of UPB), respectively.

Previous wording

The following table identifies our mortgage loans for our top 10 states by number of loans, loan value, collateral value and percentages thereof as of March 31, 2026 and December 31, 2025 ($ in thousands):

Current wording

The following table identifies our residential mortgage loans for our top 10 states by number of loans, loan value, collateral value and percentages thereof as of June 30, 2026 and December 31, 2025 ($ in thousands):

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 bonds payable and repurchase financing agreements, and the issuance of equity securities when feasible and appropriate. Our total cash and cash equivalents at March 31, 2026 was $96.3 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, 2026 was $66.7 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 bonds payable and repurchase financing agreements.

Current wording

We have in the past, and may continue to, have difficulty accessing the capital markets on acceptable terms or at all. Additionally, market events, including inflation and the related Federal Reserve 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

Additionally, in February 2026, the Company’s Board of Directors approved a stock repurchase program, authorizing the repurchase up to an aggregate amount of $10.0 million of its common stock through March 1, 2027. The Company may repurchase shares from time to time through open market purchases, privately negotiated transactions, block trades or other means in accordance with applicable securities laws, subject to market conditions and other considerations.

Current wording

Additionally, in February 2026, the Company’s Board of Directors (the “Board”) approved a stock repurchase program, authorizing the repurchase up to an aggregate amount of $10.0 million of its common stock through March 1, 2027. The Company may repurchase shares from time to time through open market purchases, privately negotiated transactions, block trades or other means in accordance with applicable securities laws, subject to market conditions and other considerations. During the six months ended June 30, 2026, the Company repurchased 15,227 shares of common stock for an aggregate purchase price of $0.2 million.

Previous wording

Currently, our primary sources of financing are repurchase financing agreements and secured bonds payable. As of March 31, 2026, our RMBS and CMBS portfolios had outstanding financing on repurchase financing agreements of $278.0 million, which generally have 90-day terms and are subject to margin calls. Under repurchase financing 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, 2026, our RMBS and CMBS portfolios had outstanding financing on repurchase financing agreements of $211.4 million, which generally have 90-day terms and are subject to margin calls. Under repurchase financing 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

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 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.

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 the Operating Partnership’s 8.875% Senior Notes due 2027 (the “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

Our ability to obtain borrowings and to raise future equity capital is dependent on our ability to access borrowings and the capital markets on attractive terms. We continually monitor market conditions for financing opportunities and at any given time may be entering or pursuing one or more of the transactions described above. Our Manager has extensive long-term relationships with investment banks, brokerage firms and commercial banks, which we believe enhances our ability to source and finance asset acquisitions on attractive terms and access borrowings and the capital markets at attractive levels.

Current wording

In both February and July 2026, we commenced a public offering of our common stock to raise capital to support additional investments, portfolio repositioning and the growth of our business. We elected not to complete the offerings because the market conditions and available pricing did not meet our objectives. We cannot predict whether or when we will be able to raise additional equity capital or the terms on which such capital may be available, and our ability to obtain borrowings and to raise future equity capital is dependent on our ability to access borrowings and the capital markets on acceptable terms. We continually monitor market conditions for financing opportunities and at any given time may be entering or pursuing one or more of the transactions described above. Our Manager has extensive long-term relationships with investment banks, brokerage firms and commercial banks; however, these relationships do not assure that financing will be available in the amounts, at the times or on the terms we seek.

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 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.

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. This assessment does not assume that we will complete an equity offering during that period. Additional capital would, however, be required for us to execute certain elements of our growth and portfolio re-positioning strategy at the pace and scale currently contemplated. 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 from operating activities decreased by $1.4 million in the three months ended March 31, 2026, when compared to the three months ended March 31, 2025. The decrease was primarily driven by higher cash outflows for operating expenses in connection with one-time transaction costs for the period compared to prior years.

Current wording

Net cash used in operating activities increased by $2.3 million in the six months ended June 30, 2026, when compared to the six months ended June 30, 2025. The increase was primarily driven by higher cash outflows for operating expenses in connection with one-time transaction costs for the period compared to prior years.

Previous wording

Net cash from investing activities increased by $150.3 million in the three months ended March 31, 2026, when compared to the three months ended March 31, 2025. The current period included cash proceeds from sales of CMBS of approximately $93.6 million, compared to a cash outflow for purchases of CMBS in the three months ended March 31, 2025 of $46.7 million. Additionally, collections of principal and interest on RMBS increased in the current period due to an increase in borrower payments for the period.

Current wording

Net cash provided by investing activities increased by $107.5 million in the six months ended June 30, 2026, when compared to the six months ended June 30, 2025, primarily attributable to (i) cash proceeds from sales of CMBS of approximately $159.4 million in the current period, compared to cash outflows for purchases of CMBS of $49.1 million in the prior year period, partially offset by (ii) cash outflows of approximately $115.7 million for the purchase of RTLs and subsequent draws, compared to no such activity in the prior year period, and (iii) an increase in collections of principal and interest on RMBS, due to higher borrower payments during the current period.

Previous wording

Net cash from financing activities decreased by $165.5 million in the three months ended March 31, 2026, when compared to the three months ended March 31, 2025. For the period ending March 31, 2025, the primary financing activity consisted of cash proceeds from the issuance of the Series C Preferred Stock of $50.8 million. In addition, financing activities were driven by a net cash outflow of $103.2 million related to repurchase financing agreements, as a result the payoff of repurchase financing agreements associated with the sold CMBS in the current period.

Current wording

Net cash used in financing activities was $118.3 million for the six months ended June 30, 2026, compared to net cash provided by financing activities of $34.3 million for the six months ended June 30, 2025, a decrease of $152.6 million. For the six months ended June 30, 2026, financing activities included a net cash outflow of $152.3 million related to the payoff of repurchase financing agreements associated with the sales and calls of CMBS during the current period. For the six months ended June 30, 2025, financing activities primarily consisted of cash proceeds from the issuance of Series C Preferred Stock of $50.8 million, which did not recur in the current period.