Ares Commercial Real Estate Corp

Previous wording

We are a specialty finance company primarily engaged in directly originating and investing in commercial real estate (“CRE”) loans and related investments. We are externally managed by ACREM, a subsidiary of Ares Management Corporation (NYSE: ARES) (“Ares Management”), a publicly traded, leading global alternative asset manager, pursuant to the terms of the amended and restated management agreement dated July 26, 2022, between us and our Manager (the “Management Agreement”). From the commencement of our operations in late 2011, we have been primarily focused on directly originating and managing a diversified portfolio of CRE debt-related investments for our own account.

Current wording

We are a specialty finance company primarily engaged in directly originating and investing in commercial real estate (“CRE”) loans and related investments. We are externally managed by ACREM, a subsidiary of Ares Management Corporation (NYSE: ARES) (“Ares Management”), a publicly traded, leading global alternative investment manager, pursuant to the terms of the amended and restated management agreement dated July 26, 2022, between us and our Manager (the “Management Agreement”). From the commencement of our operations in late 2011, we have been primarily focused on directly originating and managing a diversified portfolio of CRE debt-related investments for our own account.

Previous wording

•We closed a $50.0 million senior mortgage loan on a multifamily property located in Massachusetts.

Current wording

•We closed a $50.0 million senior mortgage loan as part of a co-investment on a mixed-use property located in New York.

Previous wording

In March 2024, we received a discounted payoff on a senior mortgage loan with outstanding principal of $56.9 million, which was collateralized by an office property located in Illinois. The discounted payoff was received in conjunction with a sale of the office property by the borrower. At the time of the discounted payoff, the senior mortgage loan was in default due to the failure of the borrower to repay the outstanding principal balance of the loan by the February 2024 maturity date. For the nine months ended September 30, 2024, we recognized a realized loss of $43.1 million in our consolidated statements of operations upon the payoff of the senior mortgage loan as the carrying value exceeded the net proceeds from the payoff of the loan.

Current wording

•We received a discounted payoff of a $28.2 million senior mortgage loan, which was collateralized by a multifamily property in Pennsylvania, in conjunction with the sale of the multifamily property by the borrower. At the time of the discounted payoff, the senior mortgage loan was on non-accrual status. For the three months ended March 31, 2026, we received $0.4 million of interest payments in cash on the senior Pennsylvania loan that was recognized as a reduction to the Carrying Value of the loan and the borrower was current on all contractual interest payments. We recognized a realized loss of $3.3 million as the Carrying Value exceeded the net proceeds from the payoff of the loan.

Previous wording

In September and October 2025, the Federal Reserve resumed its monetary easing cycle with an aggregate 50 basis point rate reduction. While the Federal Reserve has signaled a willingness to further reduce interest rates in 2025, there is no certainty that there will be a decrease in interest rates or of the magnitude or pace of potential decreases, especially if inflation accelerates.

Current wording

While the Federal Reserve has signaled a potential for interest rate reductions in 2026, there is no certainty that there will be a decrease in interest rates or of the magnitude or pace of potential decreases, especially if inflation accelerates.

Previous wording

Rising operating costs, such as property insurance and raw material costs for property development and improvements, placed pressure on cash flow performance across many real estate property types in the third quarter of 2025. Although certain markets are showing a recovery, office properties nationally continue to experience challenges driven by remote work and elevated costs to operate, improve or repurpose these office properties. These factors have largely resulted in lower demand for office space and have driven elevated levels of vacancy rates and default rates. Offsetting some of these challenges, there has been a significant decline in new commercial real estate development that began in 2023 and has continued benefitting existing in-demand property types. Ultimately, this lack of new future inventory may result in a shortage of contemporary, in-demand properties in the years to come, furthering the disparity between supply and demand dynamics. In addition, there is a significant amount of unspent capital targeting commercial real estate properties that could support values and elevate transaction activities.

Current wording

Rising operating costs, such as property insurance and raw material costs for property development and improvements, placed pressure on cash flow performance across many real estate property types. Although certain markets are showing a recovery, office properties nationally continue to experience challenges driven by remote work and elevated costs to operate, improve or repurpose these office properties. These factors have largely resulted in lower demand for office space and have driven elevated levels of vacancy rates and default rates. Offsetting some of these challenges, there has been a significant decline in new commercial real estate development that began in 2023 and has continued benefitting existing in-demand property types. Ultimately, this lack of new future inventory may result in a shortage of contemporary, in-demand properties in the years to come, furthering the disparity between supply and demand dynamics. In addition, there is a significant amount of unspent capital targeting commercial real estate properties that could support values and elevate transaction activities.

Previous wording

While lower market rates and increased capital markets liquidity support commercial real estate property transactions and values, uncertainty remains around proposed U.S. trade and economic policies and their potential impact to the U.S. economy. Should these economic factors become more acute, the commercial real estate market we service may be further adversely impacted.

Current wording

Uncertainty around U.S. economic and foreign policies, international relations and their potential impact to the U.S. economy has increased risk. Should the risks from these factors become more acute, the commercial real estate market we service may be adversely impacted.

Previous wording

On July 31, 2024, our board of directors extended the Repurchase Program of up to $50.0 million, which was expected to be in effect until July 31, 2025, or until the approved dollar amount had been used to repurchase shares. On July 30, 2025, our board of directors further extended the Repurchase Program of up to $50.0 million, which is expected to be in effect until July 31, 2026, or until the approved dollar amount has been used to repurchase shares. Pursuant to the Repurchase Program, we may repurchase shares of our common stock in amounts, at prices and at such times as we deem appropriate, subject to market conditions and other considerations, including all applicable legal requirements. Repurchases may include purchases on the open market or privately negotiated transactions, under Rule 10b5-1 trading plans, under accelerated share repurchase programs, in tender offers and otherwise. The Repurchase Program does not obligate us to acquire any particular amount of shares of our common stock and may be modified or suspended at any time at our discretion. During the three and nine months ended September 30, 2025, we did not repurchase any shares through the Repurchase Program.

Current wording

On July 30, 2025, our board of directors extended the Repurchase Program of up to $50.0 million, which is expected to be in effect until July 31, 2026, or until the approved dollar amount has been used to repurchase shares. Pursuant to the Repurchase Program, we may repurchase shares of our common stock in amounts, at prices and at such times as we deem appropriate, subject to market conditions and other considerations, including all applicable legal requirements. Repurchases may include purchases on the open market or privately negotiated transactions, under Rule 10b5-1 trading plans, under accelerated share repurchase programs, in tender offers and otherwise. The Repurchase Program does not obligate us to acquire any particular amount of shares of our common stock and may be modified or suspended at any time at our discretion. During the three months ended March 31, 2026, we did not repurchase any shares through the Repurchase Program.

Previous wording

As of September 30, 2025, our portfolio included 27 loans held for investment, excluding 193 loans that were repaid, sold, converted to real estate owned or written-off since inception. As of September 30, 2025, the aggregate originated commitment under these loans at closing was approximately $1.4 billion and outstanding principal was $1.3 billion. During the nine months ended September 30, 2025, we funded approximately $114.8 million of outstanding principal, received repayments of $498.4 million of outstanding principal and wrote-off one loan with $4.6 million of outstanding principal. As of September 30, 2025, 80.5% of our loans have SOFR floors, with a weighted average floor of 1.04%, calculated based on loans with SOFR floors. References to SOFR or “S” are to 30-day SOFR (unless otherwise specifically stated).

Current wording

As of March 31, 2026, our portfolio included 35 loans held for investment, excluding 197 loans that were repaid, sold, converted to real estate owned or written-off since inception. As of March 31, 2026, the aggregate originated commitment under these loans at closing was approximately $1.9 billion and outstanding principal was $1.7 billion. During the three months ended March 31, 2026, we funded approximately $201.7 million of outstanding principal and received repayments of $94.3 million of outstanding principal. As of March 31, 2026, 88.5% of our loans have SOFR floors, with a weighted average floor of 1.64%, calculated based on loans with SOFR floors. References to SOFR or “S” are to 30-day SOFR (unless otherwise specifically stated).

Previous wording

(1)The difference between the Carrying Amount and the Outstanding Principal amount of the loans held for investment consists of unamortized purchase discounts, deferred loan fees and origination costs and cost-recovery proceeds.

Current wording

(1)The difference between the Carrying Value and the Outstanding Principal amount of the loans held for investment consists of unamortized purchase discounts, deferred loan fees and origination costs and cost-recovery proceeds.

Previous wording

On October 28, 2025, we closed a $100.0 million senior mortgage loan on a portfolio of industrial properties located in Georgia. At closing, the outstanding principal balance was $96.4 million. The loan has a per annum interest rate of SOFR plus 2.25%.

Current wording

On April 16, 2026, we closed a $69.7 million senior mortgage loan as part of a co-investment on a portfolio of self storage properties located in various states. At closing, the outstanding principal balance was $64.7 million. The loan has a per annum interest rate of SOFR plus 2.70%.

Previous wording

Our board of directors declared a regular cash dividend of $0.15 per common share for the fourth quarter of 2025. The fourth quarter 2025 dividend will be payable on January 15, 2026 to common stockholders of record as of December 31, 2025.

Current wording

Our board of directors declared a regular cash dividend of $0.15 per common share for the second quarter of 2026. The second quarter 2026 dividend will be payable on July 15, 2026 to common stockholders of record as of June 30, 2026.

Previous wording

The following table sets forth a summary of our consolidated results of operations for the three and nine months ended September 30, 2025 and 2024 ($ in thousands):

Current wording

The following table sets forth a summary of our consolidated results of operations for the three months ended March 31, 2026 and 2025 ($ in thousands):

Previous wording

The following tables set forth select details of our consolidated results of operations for the three and nine months ended September 30, 2025 and 2024 ($ in thousands):

Current wording

The following tables set forth select details of our consolidated results of operations for the three months ended March 31, 2026 and 2025 ($ in thousands):

Previous wording

For the three months ended September 30, 2025 and 2024, net interest margin was approximately $8.5 million and $11.9 million, respectively. For the three months ended September 30, 2025 and 2024, interest income of $23.3 million and $39.3 million, respectively, was generated by weighted average earning assets of $1.3 billion and $2.0 billion, respectively, offset by $14.8 million and $27.4 million, respectively, of interest expense, unused fees and amortization of deferred loan costs. The weighted average borrowings under the Secured Funding Agreements, Notes Payable, the Secured Term Loan and securitization debt, as applicable, were $0.8 billion for the three months ended September 30, 2025 and $1.4 billion for the three months ended September 30, 2024. The decrease in net interest margin for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 is due to a decrease in our weighted average earning assets and weighted average borrowings for the three months ended September 30, 2025 and a decrease in SOFR rates on our loans held for investment for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024.

Current wording

For the three months ended March 31, 2026 and 2025, net interest margin was approximately $7.5 million and $9.3 million, respectively. For the three months ended March 31, 2026 and 2025, interest income of $24.9 million and $27.5 million, respectively, was generated by weighted average earning assets of $1.7 billion and $1.5 billion, respectively, offset by $17.4 million and $18.2 million, respectively, of interest expense, unused fees and amortization of deferred loan costs. The weighted average borrowings under the Secured Funding Agreements, the Secured Term Loan and securitization debt, as applicable, were $1.2 billion for the three months ended March 31, 2026 and $1.1 billion for the three months ended March 31, 2025. The decrease in net interest margin for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 is primarily due to a decrease in SOFR rates on our loans held for investment and a decrease in the weighted average interest-bearing cash and cash equivalents balances held for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025.

Previous wording

On September 19, 2024, we acquired legal title to a multi-building office property located in North Carolina through a deed in lieu of foreclosure. Prior to September 19, 2024, the office property collateralized a $68.6 million senior mortgage loan that we held that was in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the May 2024 maturity date. In conjunction with the deed in lieu of foreclosure, we derecognized the $68.6 million senior mortgage loan and recognized the office property as real estate owned. Revenues from this property consist primarily of rental revenue from operating leases. For the three and nine months ended September 30, 2025, revenue from real estate owned related to this property was $2.4 million and $7.1 million, respectively. For both the three and nine months ended September 30, 2024, revenue from real estate owned related to this property was $0.3 million.

Current wording

On September 19, 2024, we acquired legal title to a multi-building office property located in North Carolina through a deed in lieu of foreclosure. Prior to September 19, 2024, the office property collateralized a $68.6 million senior mortgage loan that we held that was in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the May 2024 maturity date. In conjunction with the deed in lieu of foreclosure, we derecognized the $68.6 million senior mortgage loan and recognized the office property as real estate owned. Revenues from this property consist primarily of rental revenue from operating leases. For the three months ended March 31, 2026 and 2025, revenue from real estate owned related to this property was $2.7 million and $2.4 million, respectively.

Previous wording

On September 8, 2023, we acquired legal title to a mixed-use property located in Florida through a consensual foreclosure. Prior to September 8, 2023, the mixed-use property collateralized an $82.9 million senior mortgage loan that we held that was in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the February 2023 maturity date. In conjunction with the consensual foreclosure, we derecognized the $82.9 million senior mortgage loan and recognized the mixed-use property as real estate owned. Revenues from this property consist primarily of rental revenue from operating leases. For the three and nine months ended September 30, 2025, revenue from real estate owned related to this property was $3.3 million and $9.8 million, respectively. For the three and nine months ended September 30, 2024, revenue from real estate owned related to this property was $3.3 million and $9.9 million, respectively.

Current wording

On September 8, 2023, we acquired legal title to a mixed-use property located in Florida through a consensual foreclosure. Prior to September 8, 2023, the mixed-use property collateralized an $82.9 million senior mortgage loan that we held that was in maturity default due to the failure of the borrower to repay the outstanding principal balance of the loan by the February 2023 maturity date. In conjunction with the consensual foreclosure, we derecognized the $82.9 million senior mortgage loan and recognized the mixed-use property as real estate owned. Revenues from this property consist primarily of rental revenue from operating leases. For the three months ended March 31, 2026 and 2025, revenue from real estate owned related to this property was $3.2 million and $3.3 million, respectively.

Previous wording

See the Related Party Expenses, Other Expenses and Expenses from Real Estate Owned discussions below for the cause of the changes in operating expenses for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024, respectively.

Current wording

See the Related Party Expenses, Other Expenses and Expenses from Real Estate Owned discussions below for the cause of the changes in operating expenses for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

Previous wording

For the three months ended September 30, 2025, related party expenses included $2.4 million in management fees due to our Manager pursuant to the Management Agreement. No incentive fees were incurred for the three months ended September 30, 2025. For the three months ended September 30, 2025, related party expenses also included $0.8 million for our share of allocable general and administrative expenses for which we were required to reimburse our Manager pursuant to the Management Agreement. For the three months ended September 30, 2024, related party expenses included $2.7 million in management fees due to our Manager pursuant to the Management Agreement. No incentive fees were incurred for the three months ended September 30, 2024. For the three months ended September 30, 2024, related party expenses also included $0.9 million for our share of allocable general and administrative expenses for which we were required to reimburse our Manager pursuant to the Management Agreement. The decrease in management fees for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 primarily relates to a decrease in our weighted average stockholders’ equity for the three months ended September 30, 2025 as a result of realized losses on loans and the sale of real estate owned. The decrease in allocable general and administrative expenses due to our Manager for the three months ended September 30,

Current wording

For the three months ended March 31, 2026, related party expenses included $2.4 million in management fees due to our Manager pursuant to the Management Agreement. No incentive fees were incurred for the three months ended March 31, 2026. For the three months ended March 31, 2026, related party expenses also included $0.8 million for our share of allocable general and administrative expenses for which we were required to reimburse our Manager pursuant to the Management Agreement. For the three months ended March 31, 2025, related party expenses included $2.6 million in management fees due to our Manager pursuant to the Management Agreement. No incentive fees were incurred for the three months ended March 31, 2025. For the three months ended March 31, 2025, related party expenses also included $1.0 million for our share of allocable general and administrative expenses for which we were required to reimburse our Manager pursuant to the Management Agreement. The decrease in management fees for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 primarily relates to a decrease in our weighted average stockholders’ equity for the three months ended March 31, 2026 as a result of realized losses on loans. The decrease in allocable general and administrative expenses due to our Manager for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 relates to changes in the mix of employees of our Manager that allocated time to us.

Previous wording

For the nine months ended September 30, 2025 and 2024, professional fees were $2.1 million and $2.0 million, respectively, which was relatively consistent year-over-year. For the nine months ended September 30, 2025 and 2024, general and administrative expenses were $5.4 million and $6.0 million, respectively. The decrease in general and administrative expenses for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 primarily relates to a decrease in stock-based compensation expense due to a reduction in the weighted average grant date fair value for restricted stock and restricted stock unit awards granted after September 30, 2024.

Current wording

For the three months ended March 31, 2026 and 2025, professional fees were $0.8 million and $0.9 million, respectively, which was relatively consistent for both periods. For the three months ended March 31, 2026 and 2025, general and administrative expenses were $1.4 million and $1.7 million, respectively. The decrease in general and administrative expenses for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 primarily relates to a decrease in stock-based compensation expense due to a reduction in the weighted average grant date fair value for restricted stock and restricted stock unit awards granted after March 31, 2025 and a reduction in various operating expenses for the three months ended March 31, 2026.

Previous wording

For thethree and nine months ended September 30, 2025 and 2024, expenses from real estate owned were comprised of the following ($ in thousands):

Current wording

For thethree months ended March 31, 2026 and 2025, expenses from real estate owned were comprised of the following ($ in thousands):

Previous wording

For both the three months ended September 30, 2025 and 2024, mixed-use property operating expenses were $1.2 million. For the nine months ended September 30, 2025 and 2024, mixed-use property operating expenses were $3.5 million and $3.4 million, respectively, which was relatively consistent year-over-year. Mixed-use property operating expenses consisted primarily of expenses incurred in the day-to-day operation of our mixed-use property, including common area maintenance costs, property taxes and insurance. Common area maintenance costs include items such as maintenance and repairs, utilities, janitorial services, security and property management fees.

Current wording

For both the three months ended March 31, 2026 and 2025, mixed-use property operating expenses were $1.2 million. Mixed-use property operating expenses consisted primarily of expenses incurred in the day-to-day operation of our mixed-use property, including common area maintenance costs, property taxes and insurance. Common area maintenance costs include items such as maintenance and repairs, utilities, janitorial services, security and property management fees.

Previous wording

For the three and nine months ended September 30, 2025, office property operating expenses were $1.3 million and $3.7 million, respectively, which consisted of operating expenses for our multi-building office property that was acquired on September 19, 2024. For the three and nine months ended September 30, 2024, office property operating expenses were $0.8 million and $0.9 million, respectively, which consisted of operating expenses for our office property that was acquired on June 12, 2024 and sold on November 15, 2024 and our multi-building office property that was acquired on September 19, 2024. Office property operating expenses consisted primarily of expenses incurred in the day-to-day operation of our office properties, including common area maintenance costs, property taxes and insurance. Common area maintenance costs include items such as maintenance and repairs, utilities, janitorial services, security and property management fees. The increase in office property operating expenses for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024 is primarily due to the three and nine months ended September 30, 2024 only including operating expenses related to the multi-building office property for the period September 19, 2024 to September 30, 2024 as we did not acquire legal title to the multi-building office property until September 19, 2024.

Current wording

For the three months ended March 31, 2026 and 2025, office property operating expenses were $1.0 million and $1.1 million, respectively, which was relatively consistent for both periods and consists of operating expenses for our multi-building office property that was acquired on September 19, 2024. Office property operating expenses consisted primarily of expenses incurred in the day-to-day operation of our office property, including common area maintenance costs, property taxes and insurance. Common area maintenance costs include items such as maintenance and repairs, utilities, janitorial services, security and property management fees.

Previous wording

For the three and nine months ended September 30, 2025, depreciation and amortization expense was $2.0 million and $6.4 million, respectively, and relate primarily to our mixed-use property acquired on September 8, 2023 and our multi-building office property acquired on September 19, 2024. For the three and nine months ended September 30, 2024, depreciation and amortization expense was $1.2 million and $3.2 million, respectively, and relate primarily to our mixed-use property acquired on September 8, 2023 and our multi-building office property acquired on September 19, 2024. The increase in depreciation and amortization expense for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024 is primarily due to the three and nine months ended September 30, 2024 only including depreciation and amortization expense related to the multi-building office property for the period September 19, 2024 to September 30, 2024 as we did not acquire legal title to the multi-building office property until September 19, 2024.

Current wording

For the three months ended March 31, 2026, depreciation and amortization expense was $0.9 million and relates primarily to our mixed-use property acquired on September 8, 2023. For the three months ended March 31, 2026, no depreciation or amortization expense was incurred for our multi-building office property acquired on September 19, 2024 as the multi-building office property was classified as real estate owned held for sale. For the three months ended March 31, 2025, depreciation and amortization expense was $2.2 million and related primarily to our mixed-use property acquired on September 8, 2023 and our multi-building office property acquired on September 19, 2024.

Previous wording

For the three months ended September 30, 2025 and 2024, the (provision for) reversal of current expected credit losses, net was $2.2 million and $(7.5) million, respectively. For the three months ended September 30, 2025, the net reversal of current expected credit losses is primarily due to a realized loss on an office loan, resulting in a reversal of the associated CECL Reserve, shorter average remaining loan term, loan repayments, a relative improvement in the near-term macroeconomic forecasts and other loan-specific attributes during the three months ended September 30, 2025. These factors were partially offset by new loan closings and other loan-specific attributes during the three months ended September 30, 2025. For the three months ended September 30, 2024, the provision for current expected credit losses was primarily due to an increase in the CECL Reserve for risk rated “5” loans in the portfolio as a result of the impact of the current macroeconomic environment, including higher inflation and interest rates, and more particularly, volatility and reduced liquidity in the office sector and other loan-specific attributes during the three months ended September 30, 2024. These factors were partially offset by a realized loss on a risk rated “5” loan, resulting in a reversal of the associated CECL Reserve, shorter average remaining loan term and loan repayments during the three months ended September 30, 2024.

Current wording

For the three months ended March 31, 2026 and 2025, the net (provision for) reversal of current expected credit losses was $(11.1) million and $5.3 million, respectively. For the three months ended March 31, 2026, the net provision for current expected credit losses is primarily due to changes in loan and collateral specific attributes and new loan closings during the three months ended March 31, 2026. These factors were partially offset by a realized loss on a multifamily loan, resulting in a reversal of the associated CECL Reserve, shorter average remaining loan term, loan repayments, a relative improvement in the near-term macroeconomic forecasts and changes in loan and collateral specific attributes during the three months ended March 31, 2026. For the three months ended March 31, 2025, the net reversal of current expected credit losses was primarily due to a relative improvement in the near-term macroeconomic forecasts, shorter average remaining loan term and loan repayments during the three months ended March 31, 2025.

Previous wording

The CECL Reserve takes into consideration our estimates relating to the impact of macroeconomic conditions on CRE properties and is not specific to any loan losses or impairments on our loans held for investment, unless the Company determines that a specifically identifiable reserve is warranted for a select asset. Additionally, the CECL Reserve is not an indicator of what we expect our CECL Reserve would have been absent the current and potential future impacts of macroeconomic conditions.

Current wording

The CECL Reserve takes into consideration our estimates relating to the impact of macroeconomic conditions on CRE properties and is not specific to any loan losses or impairments on our loans held for investment, unless we determine that a specifically identifiable reserve is warranted for a select asset. Additionally, the CECL Reserve is not an indicator of what we expect our CECL Reserve would have been absent the current and potential future impacts of macroeconomic conditions.

Previous wording

In February 2024, we received a discounted payoff on a senior mortgage loan with outstanding principal of $18.8 million, which was collateralized by a multifamily property located in Washington. The discounted payoff was received in conjunction with a sale of the multifamily property by the borrower. At the time of the discounted payoff, the senior mortgage loan was in default due to the failure of the borrower to repay the outstanding principal balance of the loan by the September 2023 maturity date. For the nine months ended September 30, 2024, we recognized a realized loss of $1.7 million in our consolidated statements of operations upon the payoff of the senior mortgage loan as the carrying value exceeded the net proceeds from the payoff of the loan.

Current wording

In March 2026, we received a discounted payoff on a senior mortgage loan with outstanding principal of $28.2 million, which was collateralized by a multifamily property located in Pennsylvania. The discounted payoff was received in conjunction with the sale of the multifamily property by the borrower. For the three months ended March 31, 2026, we recognized a realized loss of $3.3 million in our consolidated statements of operations upon the payoff of the senior mortgage loan as the Carrying Value exceeded the net proceeds from the payoff of the loan.

Previous wording

Our primary sources of cash generally consist of unused borrowing capacity under our Secured Funding Agreements, payments of principal and interest we receive on our portfolio of assets, cash generated from our operating activities and the net proceeds of future equity offerings, if any. Principal repayments from mortgage loans in securitizations where we retain the subordinate securities are applied sequentially, first used to pay down the senior notes, and accordingly, we will not receive any proceeds from repayment of loans in the securitizations until all senior notes are repaid in full.

Current wording

Our primary sources of cash generally consist of unused borrowing capacity under our Secured Funding Agreements, payments of principal and interest we receive on our portfolio of assets, cash generated from our operating activities and the net proceeds of future equity offerings, if any.

Previous wording

We expect our primary sources of cash to continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities for at least the next 12 months and thereafter for the foreseeable future. As a result of the current macroeconomic environment, certain borrowers have been unable to make interest and principal payments timely, including at the maturity date of the borrower’s loan. We increase our CECL Reserve from time to time, as necessary, to reflect this risk. Our Secured Funding Agreements contain margin call provisions following the occurrence of certain mortgage loan credit events. If we are unable to make the required payment or if we fail to meet or satisfy any of the covenants in our Financing Agreements, we would be in default under these agreements, and our lenders could elect to declare outstanding amounts due and payable, terminate their commitments, require the posting of additional collateral, including cash to satisfy margin calls, and enforce their interests against existing collateral. For example, certain of our Financing Agreements contain (i) negative covenants that limit, among other things, our ability to repurchase our common stock, make distributions to our stockholders, employ leverage beyond certain amounts, sell assets, engage in mergers or consolidations, grant liens, and enter into transactions with affiliates (including amending the Management Agreement in a material respect) and (ii) operating and financial covenants, including those requiring us to maintain a certain tangible net worth, asset coverage ratio, total net leverage ratio and loan concentration. We are also subject to cross-default and acceleration rights with respect to our Financing Agreements. If we experience borrower default as a result of the current macroeconomic conditions or otherwise, we may not be able to negotiate modifications to our borrowings with our lenders or receive financing from our Secured Funding Agreements with respect to our commitments to fund our loans held for investment in the future. See “Summary of Financing Agreements” below for a description of our Financing Agreements.

Current wording

We expect our primary sources of cash to continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities for at least the next 12 months and thereafter for the foreseeable future. As a result of the commercial real estate environment during 2025 and 2026, certain borrowers have been unable to make interest and principal payments timely, including at the maturity date of the borrower’s loan. We increase our CECL Reserve from time to time, as necessary, to reflect this risk. Our Secured Funding Agreements contain margin call provisions following the occurrence of certain mortgage loan credit events. If we are unable to make the required payment or if we fail to meet or satisfy any of the covenants in our Financing Agreements, we would be in default under these agreements, and our lenders could elect to declare outstanding amounts due and payable, terminate their commitments, require the posting of additional collateral, including cash to satisfy margin calls, and enforce their interests against existing collateral. For example, certain of our Financing Agreements contain (i) negative covenants that limit, among other things, our ability to repurchase our common stock, make distributions to our stockholders, employ leverage beyond certain amounts, sell assets, engage in mergers or consolidations, grant liens, and enter into transactions with affiliates (including amending the Management Agreement in a material respect) and (ii) operating and financial covenants, including those requiring us to maintain a certain tangible net worth, asset coverage ratio, total net leverage ratio and loan concentration. We are also subject to cross-default and acceleration rights with respect to our Financing Agreements. If we experience borrower default as a result of macroeconomic conditions or otherwise, we may not be able to negotiate modifications to our borrowings with our lenders or receive financing from our Secured Funding Agreements with respect to our commitments to fund our loans held for investment in the future. See “Summary of Financing Agreements” below for a description of our Financing Agreements.

Previous wording

Subject to maintaining our qualification as a REIT and our exemption from registration under the 1940 Act, we expect that our primary sources of liquidity will be financing, to the extent available to us, through credit, secured funding and other lending facilities, other sources of private financing, including warehouse and repurchase facilities, and public or private offerings of our equity or debt securities. Macroeconomic conditions may impair our ability to access the financing and capital markets. Furthermore, we have sold, and may continue to sell certain of our mortgage loans, or interests therein, in order to manage liquidity needs. Subject to maintaining our qualification as a REIT, we may also change our dividend practice, including by reducing the amount of, or temporarily suspending, our future dividends or making dividends that are payable in cash and shares of our common stock for some period of time. We may also continue or discontinue share repurchases under the Repurchase Program. In addition, our FL4 CLO Securitization contains certain senior note overcollateralization ratio tests. To the extent we fail to meet these tests, amounts that would otherwise be used to make payments on the subordinate securities that we hold will be used to repay principal on the more senior securities to the extent necessary to satisfy any senior note overcollateralization ratio and we may incur significant losses. Our sources of liquidity may be impacted to the extent we do not receive cash payments that we would otherwise expect to receive from the FL4 CLO Securitization if these tests were met.

Current wording

Subject to maintaining our qualification as a REIT and our exemption from registration under the 1940 Act, we expect that our primary sources of liquidity will be financing, to the extent available to us, through credit, secured funding and other lending facilities, other sources of private financing, including warehouse and repurchase facilities, and public or private offerings of our equity or debt securities. Macroeconomic conditions may impair our ability to access the financing and capital markets. Furthermore, we have sold, and may continue to sell certain of our mortgage loans, or interests therein, in order to manage liquidity needs. Subject to maintaining our qualification as a REIT, we may also change our dividend practice, including by reducing the amount of, or temporarily suspending, our future dividends or making dividends that are payable in cash and shares of our common stock for some period of time. We may also continue or discontinue share repurchases under the Repurchase Program.

Previous wording

As of November 4, 2025, we had approximately $131 million in liquidity including $76 million of cash, which includes restricted amounts that are available to repay collateralized loan obligation securitization debt, and $55 million of availability under our Secured Funding Agreements.

Current wording

As of May 4, 2026, we had approximately $101 million in liquidity including $24 million of cash and $77 million of availability under our Secured Funding Agreements.

Previous wording

The following table sets forth changes in cash, cash equivalents and restricted cash for the nine months ended September 30, 2025 and 2024 ($ in thousands):

Current wording

The following table sets forth changes in cash, cash equivalents and restricted cash for the three months ended March 31, 2026 and 2025 ($ in thousands):

Previous wording

During the nine months ended September 30, 2025 and 2024, cash, cash equivalents and restricted cash increased (decreased) by $57.6 million and $(38.1) million, respectively.

Current wording

During the three months ended March 31, 2026 and 2025, cash, cash equivalents and restricted cash increased by $67.2 million and $62.8 million, respectively.

Previous wording

For the nine months ended September 30, 2025 and 2024, net cash provided by operating activities totaled $16.7 million and $28.5 million, respectively. For the nine months ended September 30, 2025, adjustments to net income (loss) related to operating activities primarily included the net reversal of current expected credit losses of $27.7 million, accretion of discounts, deferred loan origination fees and costs of $3.2 million, amortization of deferred financing costs of $3.6 million, depreciation and amortization of real estate owned of $6.5 million and realized losses on loans of $34.6 million. For the nine months ended September 30, 2024, adjustments to net income (loss) related to operating activities primarily included the net reversal of current expected credit losses of $17.2 million, accretion of discounts, deferred loan origination fees and costs of $3.7 million, amortization of deferred financing costs of $4.0 million and realized losses on loans of $67.9 million.

Current wording

For the three months ended March 31, 2026 and 2025, net cash provided by (used in) operating activities totaled $(56.6) million and $8.0 million, respectively. For the three months ended March 31, 2026, adjustments to net income (loss) related to operating activities primarily included the origination of a loan held for sale with a carrying amount of $60.5 million, the net provision for current expected credit losses of $11.1 million, accretion of discounts, deferred loan origination fees and costs of $1.2 million, amortization of deferred financing costs of $1.1 million, realized losses on loans of $3.3 million and change in other assets of $3.5 million. For the three months ended March 31, 2025, adjustments to net income (loss) related to operating activities primarily included the net reversal of current expected credit losses of $5.3 million, accretion of discounts, deferred loan origination fees and costs of $1.3 million, amortization of deferred financing costs of $1.2 million and change in other assets of $1.6 million.

Previous wording

For the nine months ended September 30, 2025, net cash provided by investing activities totaled $438.2 million and was primarily related to cash received from principal collections and cost-recovery proceeds on loans held for investment exceeding the cash used for the origination and funding of loans held for investment. For the nine months ended September 30, 2024, net cash provided by investing activities totaled $255.2 million and was primarily related to cash received from principal collections and cost-recovery proceeds on loans held for investment and from the sale of loans held for sale exceeding the cash used for the origination and funding of loans held for investment.

Current wording

For the three months ended March 31, 2026, net cash used in investing activities totaled $89.8 million and was primarily related to cash used for the origination and funding of loans held for investment exceeding cash received from principal collections and cost-recovery proceeds on loans held for investment. For the three months ended March 31, 2025, net cash provided by investing activities totaled $298.7 million and was primarily related to cash received from principal collections and cost-recovery proceeds on loans held for investment exceeding the cash used for the origination and funding of loans held for investment.

Previous wording

For the nine months ended September 30, 2025, net cash used in financing activities totaled $397.3 million and was primarily related to repayments of our Secured Funding Agreements of $195.6 million, repayments of debt of consolidated VIEs of $338.3 million, repayments of our Secured Term Loan of $30.0 million and dividends paid of $30.6 million, partially offset by proceeds from our Secured Funding Agreements of $200.1 million. For the nine months ended September 30, 2024, net cash used in financing activities totaled $321.8 million and was primarily related to repayments of our Secured Funding Agreements of $113.7 million, repayments of our Notes Payable of $105.0 million, repayments of debt of consolidated VIEs of $148.7 million, repayments of our Secured Term Loan of $20.0 million and dividends paid of $45.8 million, partially offset by proceeds from our Secured Funding Agreements of $114.5 million.

Current wording

For the three months ended March 31, 2026, net cash provided by financing activities totaled $213.6 million and was primarily related to proceeds from our Secured Funding Agreements of $333.0 million partially offset by repayments of our Secured Funding Agreements of $9.1 million, repayments of debt of consolidated VIEs of $99.9 million and dividends paid of $8.4 million. For the three months ended March 31, 2025, net cash used in financing activities totaled $244.0 million and was primarily related to repayments of our Secured Funding Agreements of $28.9 million, repayments of debt of consolidated VIEs of $304.0 million, repayments of our Secured Term Loan of $10.0 million and dividends paid of $13.9 million, partially offset by proceeds from our Secured Funding Agreements of $114.8 million.

Previous wording

(1)In February 2025, we amended the master repurchase funding facility with Wells Fargo Bank, National Association (the “Wells Fargo Facility”) to, among other things, extend the initial maturity date and funding period of the Wells Fargo Facility to February 10, 2028, subject to two 12-month extensions, each of which may be exercised at our option provided that certain conditions are met and applicable extension fees are paid. The maximum commitment may be increased to up to $500.0 million at our option, subject to the satisfaction of certain conditions, including payment of an upsize fee.

Current wording

(1)The maturity date of the master repurchase funding facility with Wells Fargo Bank, National Association (the “Wells Fargo Facility”) is subject to two 12-month extensions, each of which may be exercised at our option provided that certain conditions are met and applicable extension fees are paid.

Previous wording

(2)The maturity date of the master repurchase facility with Citibank, N.A. (the “Citibank Facility”) is subject to two 12-month extensions, each of which may be exercised at our option provided that certain conditions are met and applicable extension fees are paid. The Citibank Facility has an accordion provision such that the maximum commitment may be increased to up to $425.0 million by up to two increments of $50.0 million with the consent of Citibank, subject to the satisfaction of certain conditions, including payment of an upsize fee.

Current wording

(2)The maturity date of the master repurchase facility with Citibank, N.A. (the “Citibank Facility”) is subject to two 12-month extensions, each of which may be exercised at our option provided that certain conditions are met and applicable extension fees are paid. In March 2026, we exercised each of our two $50.0 million accordion options on the Citibank Facility to increase the maximum commitment from $325.0 million to $425.0 million with payment of an upsize fee.

Previous wording

(3)In February 2025, we exercised our 12-month extension option to extend the maturity date of the secured revolving funding facility with City National Bank (the "CNB Facility") to March 10, 2026. The interest rate on advances under the CNB Facility is a per annum rate equal to the sum of, at our option, either (a) a SOFR-based rate plus 3.25% or (b) a base rate plus 2.25%, in each case, subject to an interest rate floor. The amount immediately available under the CNB Facility at any given time can fluctuate based on the fair value of the collateral in the borrowing base that secures the CNB Facility. As of September 30, 2025, there was no immediate availability under the CNB Facility based on the fair value of the collateral in the borrowing base at such time. The amount immediately available under the CNB Facility may be increased to up to $75.0 million by the pledge of additional collateral into the borrowing base in accordance with the CNB Facility agreement.

Current wording

(3)In March 2026, we amended the secured revolving funding facility with City National Bank (the “CNB Facility”) to, among other things, extend the maturity date to December 31, 2026. The interest rate on advances under the CNB Facility is a per annum rate equal to the sum of, at our option, either (a) a SOFR-based rate plus 3.25% or (b) a base rate plus 2.25%, in each case, subject to an interest rate floor. The amount immediately available under the CNB Facility at any given time can fluctuate based on the fair value of the collateral in the borrowing base that secures the CNB Facility. As of March 31, 2026, there was $51.1 million of immediate availability under the CNB Facility based on the fair value of the collateral in the borrowing base at such time. The amount immediately available under the CNB Facility may be increased to up to $75.0 million by the pledge of additional collateral into the borrowing base in accordance with the CNB Facility agreement.

Previous wording

(4)In June 2025, we amended the master repurchase and securities contract with Morgan Stanley (the “Morgan Stanley Facility”) to, among other things, (1) extend the initial maturity date to July 16, 2026, subject to one 12-month extension, which may be exercised at our option provided that certain conditions are met and the applicable extension fee is paid and (2) reduce the commitment from $250.0 million to $150.0 million, which includes an accordion provision such that the maximum commitment may be increased to up to $250.0 million at our option, subject to the satisfaction of certain conditions, including payment of an upsize fee.

Current wording

(4)In January 2026, we exercised our $100.0 million accordion option on the master repurchase and securities contract with Morgan Stanley (the “Morgan Stanley Facility”) to increase the maximum commitment from $150.0 million to $250.0 million with payment of an upsize fee. Subsequently, in March 2026, we amended the Morgan Stanley Facility to, among other things, (1) increase the maximum commitment from $250.0 million to $350.0 million and include an accordion provision such that the maximum commitment may be increased to up to $400.0 million at our option, subject to the satisfaction of certain conditions, including payment of an upsize fee and (2) extend the initial maturity date to July 16, 2029, subject to one 12-month extension, which may be exercised at our option provided that certain conditions are met and the applicable extension fee is paid.

Previous wording

(5)The maturity date of the Credit and Guaranty Agreement with the lenders referred to therein and Cortland Capital Market Services LLC, as administrative agent and collateral agent for the lenders (the “Secured Term Loan”) is November 12, 2026. Advances under the Secured Term Loan are set to the following fixed rates: (i) 4.50% per annum until May 1, 2025 and (ii) after May 1, 2025 through November 12, 2026, the interest rate increases 0.25% every three months. The Secured Term Loan has a contingent interest rate increase of 4.00% if the outstanding principal amount of the Secured Term Loan is not paid down to the following amounts on specific dates as follows: (i) $120.0 million as of February 1, 2025, (ii) $110.0 million as of May 1, 2025, (iii) $100.0 million as of August 1, 2025 and (iv) $90.0 million as of November 1, 2025. In each of January 2025, April 2025 and July 2025, we elected to repay $10.0 million of outstanding principal on the Secured Term Loan at par.

Current wording

(5)The maturity date of the Credit and Guaranty Agreement with the lenders referred to therein and Cortland Capital Market Services LLC, as administrative agent and collateral agent for the lenders (the “Secured Term Loan”) is November 12, 2026. Advances under the Secured Term Loan are set to the following fixed rates: (i) 4.50% per annum until May 1, 2025 and (ii) after May 1, 2025 through November 12, 2026, the interest rate increases 0.25% every three months.