UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2024~~2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to____

Commission file number: 001-35845

LUMENT FINANCE TRUST, INC.

(Exact name of registrant as specified in its charter)


Maryland						45-4966519
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


230 Park Avenue, 20th Floor, New York, New York						10169
(Address of principal executive offices)						(Zip code)

Registrant’s Telephone Number, including area code (212) 317-5700

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class:

Trading Symbol(s)

Name of Exchange on Which Registered:

Common Stock, par value $0.01 per share

LFT

New York Stock Exchange

7.875% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share

LFTPrA

New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ or No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ or No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ or No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ or No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐			Accelerated filer ☐
Non-accelerated filer ☒			Smaller reporting company ☒
			Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ or No ý

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $7368.80 million as of June 30, ~~2024~~2025 (the last business day of the registrant's most recently completed second fiscal quarter) based on the closing sale price on the New York Stock Exchange on that date.

As of March 17, ~~2025~~2026, there were 52,~~309~~399,~~209~~265 outstanding shares of common stock, $0.01 par value.

TABLE OF CONTENTS

		Page
	PART I
Item 1.	Business	1
Item 1A.	Risk Factors	6
Item 1B.	Unresolved Staff Comments	31
Item 1C.	Cybersecurity	31
Item 2.	Properties	32
Item 3.	Legal Proceedings	3332
Item 4.	Mine Safety Disclosures	3332
	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	3433
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3534
Item 8.	Financial Statements and Supplementary Data	49
Item 7A.	Quantitative and Qualitative Disclosure About Market Risks	51
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	49
Item 8.	Financial Statements and Supplementary Data	50
Item 9A.	Controls and Procedures	49
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	50
Item 9B.	Other Information	49
Item 9A.	Controls and Procedures	50
Item 9B.	Other Information	51
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	5052
Item 11.	Executive Compensation	5052
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	5052
Item 13.	Certain Relationships and Related Transactions, and Director Independence	5052
Item 14.	Principal Accounting Fees and Services	5052
	PART IV
Item 15.	Exhibits, Financial Statements and Schedules	5153
Item 16.	Form 10-K Summary	5153

Cautionary Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K contains certain forward-looking statements intended to qualify for the safe harbor contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act, as amended. Forward-looking statements are subject to risks and uncertainties. These forward-looking statements include information about possible or assumed future results of our business, financial conditions, liquidity, results of operations, plans and objectives. In addition, our management may from time to time make oral forward-looking statements. You can identify forward-looking statements by use of words such as "believe," "expect," "anticipate," "estimate," "project," "plan," "continue," "intend," "should," "may," "will," "seek," "would," "could" or similar expressions or other comparable terms, or by discussions of strategy, plans or intentions.

These forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. These beliefs, assumptions and expectations are subject to risks and uncertainties and change as a result of many possible events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity and results of ~~operation~~operations may vary materially from those expressed in our forward-looking statements. Factors that may cause actual results to vary from our forward-looking statements include, but are not limited to:

•the risks, uncertainties and factors set forth in Part I, Item 1A. "Risk Factors" in this Annual Report on Form 10-K;

•the general political, economic and competitive conditions in the markets in which we invest;

•the level and volatility of prevailing interest rates and credit spreads could reduce our ability to generate income on our loans and other investments, which could lead to a significant decrease in our results of operations, cash flows and the market value of our investments and could materially impair our ability to pay distributions to our stockholders;

•adverse changes in the real estate and real estate capital markets;

•difficulty in obtaining financing or raising capital;

•reductions in the yield on our investments and an increase in the cost of our financing;

•defaults by borrowers in paying debt service on outstanding indebtedness;

•adverse legislative or regulatory developments;

•changes in our business, investment strategies or target assets;

•increased competition from entities engaged in mortgage lending or investing in our target assets;

•global economic trends and economic conditions, including heightened inflation, slower growth or recession, changes to fiscal and monetary policy, higher interest rates, labor shortages, currency fluctuations and challenges in global supply chain;

•acts of God such as hurricanes, earthquakes, fires, pandemics such as COVID-19 and other natural disasters, acts of war and/or terrorism and other events that may cause unanticipated and uninsured performance declines and/or losses to us or to the owners and operators of the real estate securing our investments;

•deterioration in the performance of the property securing our investments that may cause deterioration in the performance of our investments and, potentially, principal losses to us;

•difficulty in redeploying the proceeds from repayment of our existing loans and investments may cause financial performance and returns to investors to suffer;

•we are dependent on our Manager and its access to Lument's investment professionals and resources and may not find a suitable replacement for the Manager if the Management Agreement is terminated, or if key personnel leave the employment of Lument or otherwise become unavailable to us;

•difficulty in successfully managing our growth, including integrating new assets into our existing systems;

•authoritative generally accepted accounting principles ("GAAP"), or policy changes from such standard-setting bodies as the Financial Accounting Standards Board ("FASB"), the U.S. Securities Exchange Commission ("SEC"), the Internal Revenue Service ("IRS"), the New York Stock Exchange ("NYSE"), or other authorities that we are subject to; and

•our qualification as a real estate investment trust ("REIT") for U.S. federal income tax purposes under the Internal Revenue Code of 1986, as amended ("the "Code"), and our exclusion from registration under the Investment Company Act of 1940, as amended (the "Investment Company Act").

These and other risks, uncertainties and factors, including the risk factors described in Part 1I, Item 1A - "Risk Factors" and Part 2II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Annual Report on Form 10-K, could cause our actual results to differ materially from those projected in any forward-looking statements we make. All subsequent written and oral forward-looking statements that we make, or that are attributable to us, are expressly qualified in their entirety by this cautionary notice. Any forward-looking statement speaks only as of the date on which it is made. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

PART I

ITEM 1. BUSINESS

References herein to "Lument Finance Trust," "Company," "LFT," "we," "us," or "our" refer to Lument Finance Trust, Inc., a Maryland corporation, and its subsidiaries unless the context specifically requires otherwise.

Our Company

We are a REIT focused on investing in, originating, financing and managing a portfolio of commercial real estate ("CRE") debt investments. We primarily invest in or originate transitional floating rate CRE mortgage loans with an emphasis on middle-market multifamily assets. We may also invest in other CRE-related investments including mezzanine loans, preferred equity, commercial mortgage-backed securities ("CMBS"), fixed rate loans, construction loans and other CRE debt instruments.

We are externally managed by our manager, Lument Investment Management, LLC (the "Manager" or "Lument IM") pursuant to the terms of our ~~management~~Management ~~agreement~~Agreement (the "Management Agreement"). Our Manager is a subsidiary of Lument Real Estate Capital Holdings, LLC ("Lument"). Lument is a subsidiary of ORIX Corporation USA ("ORIX USA"), a diversified financial company and a subsidiary of ORIX Corporation ("ORIX"). ORIX is a publicly traded, Tokyo-based international financial services company with assets in excess of $~~107~~116 billion as of December ~~2024~~2025 and was ranked number ~~379~~405 on Forbes' ~~2024~~2025 Global 2000: World's Biggest Public Companies.

We are a Maryland corporation that was formed in March 2012 and commenced operations in May 2012. We have elected to be taxed as a REIT for U.S. federal income tax purposes. Our common stock is traded on the NYSE under the symbol "LFT" and our 7.875% Series A Cumulative Redeemable Preferred Stock ("Series A Preferred Stock") is traded on the NYSE under the symbol "LFTPrA."

Our Manager and Lument

We are externally managed and advised by our Manager, a subsidiary of Lument. As of December 31, ~~2024~~2025, Lument had ~~approximately~~over ~~600~~550 employees located in over 30 offices throughout the United States. We have access to an extensive loan origination platform through our affiliation with Lument, ~~which is~~ a premier national mortgage originator and asset manager. Lument's origination teams employ a relationship-focused approach to lending opportunities and focus on speed and certainty of execution for its borrower clients, thereby strengthening Lument's reputation as a reliable counterparty and encouraging repeat business.

Our Manager implements our business strategy, performs investment advisory services with respect to our assets, and is responsible for performing all of our day-to-day operations. Our Manager is an investment adviser registered with the SEC and is subject to the supervision and oversight of our board of directors and has only such functions and authority as our board of directors delegates to it. Pursuant to athe ~~management~~Management ~~agreement~~Agreement between our Manager and us, our Manager is entitled to receive a base management fee, an incentive fee, and certain expense reimbursements.

Our Investment Strategy

We invest primarily in transitional floating rate CRE mortgage loans with an emphasis on middle-market multifamily assets. We may also invest in other CRE-related investments including mezzanine loans, preferred equity, CMBS, fixed rate loans, construction loans and other CRE debt instruments. We finance our ~~current~~ investments in transitional multifamily and other CRE loans ~~primarily~~ through matched term non-recourse secured borrowings, including CRE collateralized loan obligations ("CLO"), which are not subject to margin calls or additional collateralization requirements~~. We~~ ~~may~~and ~~utilize warehouse~~ repurchase ~~agreements~~facilities, orwhich ~~other~~are ~~forms~~only ofsubject ~~financing~~to incredit ~~the future~~marks. Our primary sources of income are net interest from our investment portfolio and non-interest income from our mortgage loan-related activities. Net interest income represents the interest we earn on investments less the expense of funding these investments.

Our investments typically have the following characteristics:

•Sponsors with experience in particular real estate sectors and geographic markets;

•Located in U.S. markets with multiple demand drivers, such as growth in employment and household formation;

•Fully funded principal balance greater than $5 million and generally less than $75 million;

•Loan to Value ratio up to 85% of as-is value and up to 75% of as-stabilized value;

•Floating rate loans tied to one-month term Secured Overnight Financing Rate ("SOFR") and/or any applicable replacement index in the future; and

•Three-year term with two one-year extension options.

We believe that our current investment strategy provides significant opportunities to achieve attractive risk-adjusted returns for our stockholders over time. However, to capitalize on the investment opportunities at different points in the economic and real estate investment cycle, we may modify or expand our investment strategy. We believe that the flexibility of our strategy, which is supported by the significant CRE experience of Lument's investment team, and the extensive resources of ORIX USA, will allow us to take advantage of changing market conditions to maximize risk-adjusted returns to our stockholders.

Our Target Assets

Commercial Mortgage Loans. We intend to continue to focus on selectively acquiring first mortgage loans sourced by our Manager and its affiliates and through directly originating first mortgage loans on our balance sheet. These loans are secured by a first mortgage lien on a commercial property, may vary in duration, predominantly bear interest at a floating rate, may provide for regularly scheduled principal amortization and typically require a balloon payment of principal at maturity. These investments may comprise whole commercial mortgage loans or participations representing portions of whole commercial mortgage loans.

Other Commercial Real Estate-Related Debt Instruments. We also expect to opportunistically originate and selectively acquire other CRE-related debt instruments, subject to maintaining our qualification as a REIT for U.S. federal income tax purposes and our exclusion or exemption from regulation under the Investment Company Act, including, but not limited to, the following:

•Mezzanine Loans. These are loans made to the owner of a mortgage borrower and secured by a pledge of the equity interests in the mortgage borrower. These loans are subordinate to a first mortgage loan but senior to the borrower’s equity. These loans may be tranched into senior and junior mezzanine loans, with the junior mezzanine lenders secured by a pledge of the equity in the senior mezzanine borrower. Following a default on a mezzanine loan, and subject to the negotiated terms with the mortgage lender or other senior lenders, the mezzanine lender generally has the right to foreclose on its equity interest in the mortgage borrower and become the owner of the property, directly or indirectly, subject to the lien of the first mortgage loan and any debt senior to it, including any outstanding senior mezzanine debt. In addition, the mezzanine lender typically has additional rights relative to the more senior lenders, including the right to cure defaults under the mortgage loan and any senior mezzanine loan and purchase the mortgage loan and any senior mezzanine loan, in each case under certain circumstances following a default on the mortgage loan. Unlike a B Note holder, the mezzanine lender typically has the authority to administer its own loan, independent from the administration of the mortgage loan.

•Preferred Equity. These are investments subordinate to any mezzanine loan, but senior to the owners’ common equity. Preferred equity investments typically pay a dividend, rather than interest payments, and often provide for the accrual of such dividends if cash flow is insufficient to pay such amounts on a current basis. Preferred equity interests are not secured by the underlying real estate, but upon the occurrence of an issuer’s failure to make payments required by the terms of the preferred equity instrument or certain other specified events of default, the preferred equity holder typically has the right to effectuate a change of control with respect to the ownership of the property, which would include the ability of the preferred equity holder to sell the property to realize its investment. Preferred equity is generally subject to mandatory redemption by the issuer at the end of a specified term.

•Secured Real Estate Securities. These are securities, which may take the form of CMBS or CLOs that are collateralized by pools of CRE debt instruments, often first mortgage loans. The underlying loans are aggregated into a pool and sold as securities to investors. Under the pooling and servicing agreements that govern these pools, the loans are administered by a trustee and servicers, which act on behalf of all investors and distribute the underlying cash flows from the pools of debt instruments to the different classes of securities in accordance with their seniority and ratings.

•Miscellaneous Debt Instruments. This would encompass any other CRE-related debt instruments, if necessary, to maintain our qualification as a REIT for U.S. federal income tax purposes or our exclusion or exemption from regulation under the Investment Company Act.

The allocation of our capital among our target assets will depend on prevailing market conditions at the time we invest and may change over time in response to different prevailing market conditions. In the future, we may invest in assets other than our target assets or change our target assets, in each case subject to maintaining our qualification as a REIT for U.S. federal income tax purposes and our exclusion or exemption from regulation under the Investment Company Act.

Our Portfolio

Transitional Multifamily and Commercial Real Estate Loans

As of December 31, ~~2024~~2025, our mortgage loan investment portfolio consisted of 6561 senior secured floating rate loans with an aggregate unpaid principal balance of $1.1 billion, collectively having a weighted average coupon of 87.12% and a weighted average term to maturity of 2.1.7 years. As of December 31, ~~2024~~2025, 92.37% of the portfolio was supported by multifamily assets.

During ~~2024~~2025, the Company originated or acquired $58403.49 million in loans, ~~and~~ realized $~~391~~266.06 million of loan repayments and transitioned $62.6 million in loans to real estate owned. This activity resulted in a net ~~repayments~~loan principal balance increase of $~~332~~74.67 million. The following table details the overall statistics of our loan portfolio as of December 31, ~~2024~~2025:

								Weighted Average
Loan Type	Unpaid Principal Balance		Carrying Value(1)		Loan Count	Floating Rate Loan %		Coupon(2)		Term (Years)(3)
December 31, 2024
December 31, 2025
Loans held-for-investment
Senior secured loans(4)	$	1,~~065~~140,~~563~~268,~~646~~217	$	1,~~060~~136,~~123~~706,~~298~~113	6561	100.0	%	87.12	%	2.1.7
Allowance for credit losses	N/A		$	(1122,~~320~~658,~~220~~121)
	$	1,~~065~~140,~~563~~268,~~646~~217	$	1,~~048~~114,~~803~~047,~~078~~992	6561	100.0	%	87.12	%	2.1.7

(1) Carrying Value includes $31,~~466~~657,~~214~~584 in unaccreted purchase discounts as of December 31, ~~2024~~2025.

(2) Weighted average coupon assumes applicable 30-day term SOFR of 43.5185% as of December 31, ~~2024~~2025, inclusive of weighted average interest rate floor of 02.6318%. As of December 31, ~~2024~~2025, 100.0% of the investments by total investment exposure earned a floating rate indexed to 30-day term SOFR.

(3) Weighted average remaining term assumes all extension options are exercised by the borrower; provided, however, that our loans may be repaid prior to such date.

(4) As of December 31, ~~2024~~2025, $1856,~~049~~064,~~886,009~~487 of the outstanding senior secured loans were held in VIEs and $(1257,~~082~~983,~~931)~~507 of the outstanding senior secured loans were held outside of VIEs.

The charts below present the geographic dispersion of our loan portfolio and the property types securing our loan portfolio as of December 31, ~~2024~~2025:

Real Estate Owned

As of December 31, 2025, we owned three multifamily properties with an aggregate carrying value of $49.1 million.

MSRs

As of December 31, ~~2024~~2025, the Company retained the servicing rights associated with residential mortgage loans ("MSRs") having an aggregate unpaid principal balance of approximately $6254.16 million that we had previously transferred to three residential mortgage loan securitization trusts. The carrying value of these MSRs at December 31, ~~2024~~2025 was approximately $0.6 million. The Company ceased the aggregation of residential mortgage loans in 2016 and, other than servicing our existing portfolio, we do not anticipate any residential loan activity going forward.

For additional information regarding our portfolio as of December 31, 2025, see Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Our Financing Strategy

We seek to use leverage to increase potential returns to our stockholders. We may use non-recourse CRE CLOs, secured revolving repurchase agreements, term loan facilities, warehouse facilities, asset-specific financing structures and other forms of leverage. As of December 31, ~~2024~~2025, our assets were financed with match term, non-recourse CRE CLO and ~~secured~~securitized ~~financings~~debt obligations, an uncommitted master repurchase agreement, a term lending agreement and ~~one~~a senior corporate credit facility.

The goal of our leverage strategy is to ensure that, at all times, our leverage ratio is appropriate for the level of risk inherent in the investment portfolio and that each asset class has individual leverage targets that we believe are appropriate. We generally seek, to the extent possible, to match-fund and match-index our investments by minimizing the differences between the duration and indices of our investments and those of our liabilities. We also seek to minimize our exposure to mark-to-market risk.

While our organizational documents and our investment guidelines do not place any limits on the maximum amount of leverage that we may use, our financing facilities require us to maintain particular debt-to-equity leverage ratios. We may change our financing strategy and leverage without the consent of our stockholders.

During the year ended December 31, 2025, we:

•Entered into a new $450 million Uncommitted Master Repurchase Agreement (the "Repurchase Agreement");

•Entered into a new $50 million term lending agreement (the "Loan Agreement"); and

•Entered into and closed a $663.8 million managed CLO with 30-month reinvestment period providing $585.0 million of non-mark-to-market financing equating to an effective 88.12% advance rate, at a weighted average cost of capital of 30-day term SOFR plus 1.91% before transaction costs.

The following table details our outstanding financing arrangements as of December 31, 2025:


	Portfolio Financing Outstanding Principal Balance		Portfolio Financing Maximum Borrowing Capacity
Collateralized loan obligations	$	584,983,000	$	584,983,000
Collateralized commercial real estate financing	$	169,655,462	$	169,655,462
Uncommitted master repurchase agreements	$	177,193,781	$	450,000,000
Secured lending agreements	$	17,000,000	$	50,000,000
Secured term loan	$	47,750,000	$	47,750,000
Total portfolio financing	$	996,582,243	$	1,302,388,462

Investment Guidelines

Under the ~~management~~Management ~~agreement~~Agreement with our Manager, our Manager will be required to manage our business in accordance with certain investment guidelines and policies that have been approved by our board of directors, including each of our independent directors. Under these investment guidelines and policies:

•We will not make an investment that would cause us to fail to qualify as a REIT for U.S. federal income tax purposes.

•We will not make an investment that would cause us to be regulated as an “investment company” under the Investment Company Act.

•We are permitted to invest in residential mortgage-backed securities, multi-family mortgage-backed securities, commercial mortgage-backed securities, residential mortgage loans, multi-family mortgage loans, CRE mortgage loans, mortgage servicing rights and other mortgage or real estate-related investments.

•Our Manager may invest the net proceeds of any offerings of our securities in interest-bearing, short-term investments, including money market accounts or funds, that are consistent with our intention to qualify as a REIT for U.S. federal income tax purposes and maintain an exemption from registration under the Investment Company Act.

These investment guidelines may be amended, restated, modified, supplemented or waived by our board of directors (which must include a majority of the independent directors of our board of directors) without the approval of our stockholders.

Competition

We are engaged in a competitive business. In our investing activities, we compete for opportunities with a variety of institutional investors, including other REITs, specialty finance companies, public and private funds, commercial and investment banks, commercial finance and insurance companies and other financial institutions. Several other REITs and other investment vehicles have raised significant amounts of capital and may have investment objectives that overlap with ours, which may create additional competition for investment opportunities. Some competitors may have a lower cost of funds and broader access to funding sources, such as the U.S. Government, that are not available to us. Many of our competitors are not subject to the operating constraints associated with REIT compliance or maintenance of an exclusion from regulation under the Investment Company Act. We could face increased competition from banks due to future legislative developments, such as amendments to key provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act"), including provisions setting forth capital and risk retention requirements. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of loans and investments and offer more attractive pricing or other terms than we would. Furthermore, competition for investments we target may lead to decreasing yields, which may further limit our ability to generate targeted returns.

We believe access to our Manager's professionals and their industry expertise and relationships provide us with competitive advantages in assessing risks and determining appropriate pricing for potential investments. We believe these relationships will enable us to compete effectively for attractive investment opportunities. However, we may not be able to achieve our business goals or expectations due to the competitive risks that we face.

Sustainability

We are committed to investing and operating sustainably as we believe it improves long-term financial performance, mitigates risk, and helps create better outcomes for our ~~shareholders~~stockholders.

Our day-to-day operations are managed by our Manager, a subsidiary of ORIX USA, which is committed to driving a culture and approach that seeks responsible creation of long-term value by engaging constructively with our stakeholders and by incorporating generally accepted sustainability factors, including environmental, financial, governance, operational, reputational, and/or social factors, and ethics considerations into investment decisions.

We believe the efficiency and resiliency of our operations also depend on strategies and processes we seek to develop and maintain around various sustainability matters. These initiatives are implemented by our Manager with oversight from our board of directors.

Corporate Offices and Personnel

We were formed as a Maryland corporation in 2012. Our corporate headquarters are located at 230 Park Avenue, 20th Floor, New York, NY 10169 and our telephone number is (212) 317-5700. We are externally managed by our Manager pursuant to the ~~management~~Management ~~agreement~~Agreement between us and our Manager. We have no employees. Our executive officers, all of whom were provided by our Manager, are employees of Lument.

Government Regulation

Our operations are subject, in certain instances, to supervision and regulation by U.S. and other governmental authorities, and may be subject to various laws and judicial and administrative decisions imposing various requirements and restrictions, which among other things: (i) regulate credit-granting activities; (ii) establish maximum interest rates, finance charges and other charges; (iii) require disclosures to customers; (iv) govern secured transactions; and (v) set collections, foreclosure, repossession and claims-handling procedures and other trade practices. We are also required to comply with certain provisions of the Equal Credit Opportunity Act that are applicable to commercial loans. We intend to conduct our business so that neither we nor any of our subsidiaries are required to register as an investment company under the Investment Company Act.

In our judgment, existing statutes and regulations have not had a material adverse effect on our business. In recent years, legislators in the United States and in other countries have said that greater regulation of financial services firms is needed, particularly in areas such as risk management, leverage and disclosure. While we expect that additional new regulations in these areas may be adopted and existing ones may change in the future, it is not possible at this time to forecast the exact nature of any future legislation, regulations, judicial decisions, orders or interpretations, nor their impact upon our future business, financial condition, or results of operations or prospects.

Taxation of the Company

We elected to be taxed as a REIT commencing with our short taxable year ended December 31, 2012, and comply with the provisions of the Code with respect thereto. Accordingly, we are generally not subject to U.S. federal income tax on the REIT taxable income that we currently distribute to our stockholders so long as we maintain our qualification as a REIT. Our continued qualification as a REIT depends on our ability to meet, on a continuing basis, various complex requirements under the Code relating to, among other things, the source of our gross income, the composition and values of our assets, our distribution levels and the concentration of ownership of our capital stock. Even if we maintain our qualification as a REIT, we may be subject to some U.S. federal, state and local taxes on our income.

~~Taxable income generated by our taxable REIT subsidiary ("TRS"), is subject to regular corporate income tax. For the fiscal year 2024, our TRS did not generate taxable income.~~4

stockholders so long as we maintain our qualification as a REIT. Our continued qualification as a REIT depends on our ability to meet, on a continuing basis, various complex requirements under the Code relating to, among other things, the source of our gross income, the composition and values of our assets, our distribution levels and the concentration of ownership of our capital stock. Even if we maintain our qualification as a REIT, we may be subject to some U.S. federal, state and local taxes on our income.

Taxable income generated by our taxable REIT subsidiary ("TRS"), is subject to regular corporate income tax. For the fiscal year 2025, our TRS did not generate taxable income.

Qualification as a REIT

Continued qualification as a REIT requires that we satisfy a variety of tests relating to our income, assets, distributions and ownership. The significant tests are summarized below.

Income Tests. To maintain our REIT qualification, we must satisfy two gross income requirements on an annual basis. First, at least 75% of our gross income for each taxable year, excluding gross income from sales of inventory or dealer property in "prohibited transactions" (as defined herein), discharge of indebtedness and certain hedging transactions, generally must be derived from investments relating to real property or mortgages on real property, including interest income derived from mortgage loans secured by real property (including certain types of mortgage-backed securities), rents from real property, dividends received from other REITs, and gains from the sale of designated real estate assets, as well as, specified income from temporary investments. Second, at least 95% of our gross income in each taxable year, excluding gross income from "prohibited transactions", discharge of indebtedness and certain hedging transactions, must be derived from some combination of income that qualifies under the 75% gross income test described above, as well as, other dividends, interest, and gain from the sale or disposition of stock or securities, which need not have any relation to real property. Income and gain from certain hedging transactions will be excluded from both the numerator and the denominator for purposes of both the 75% and 95% gross income tests.

Asset Tests. At the close of each calendar quarter, we must also satisfy five tests relating to the nature of our assets. First, at least 75% of the value of our total assets must be represented by some combination of designated real estate assets, cash, cash items, U.S. Government securities and, under some circumstances, stock or debt instruments purchased with new capital. Second, the value of any one issuer’s securities that we own may not exceed 5% of the value of our total assets. Third, we may not own more than 10% of any one issuer’s outstanding securities, as measured by either value (the "10% of value asset test") or voting power. The 5% and 10% asset tests do not apply to securities that qualify under the 75% asset test or to securities of a TRS and qualified REIT subsidiaries, and the 10% of value asset test does not apply to "straight debt" having specified characteristics and to certain other securities. Fourth, the aggregate value of all securities of TRSs that we hold may not exceed 2025% of the value of our total assets. Fifth, not more than 25% of the value of our total assets may be represented by debt instruments of publicly offered REITs to the extent those debt instruments would not be real estate assets but for the inclusion of debt instruments of publicly offered REITs in the meaning of real estate assets.

Distribution Requirements. To maintain our REIT qualification, we are required to distribute dividends, other than capital gain dividends, to our stockholders in an amount at least equal to: (1) the sum of (a) 90% of our REIT taxable income computed without regard to our net capital gains and the deduction for dividends paid, and (b) 90% of our net income, if any, (after tax) from foreclosure property; minus (2) the sum of specified items of non-cash income that exceeds a certain percentage of our income.

Ownership. To maintain our REIT status, we must not be deemed to be closely held and must have more than 100 stockholders. The closely held prohibition requires that not more than 50% of the value of our outstanding shares be owned by five or fewer "individuals" (as defined for this purpose to include certain trusts and foundations) during the last half of our taxable year. The "more than 100 stockholders" rule requires that we have at least 100 stockholders for at least 335 days of a taxable year. Failure to satisfy either of these rules would cause us to fail to maintain our qualification for taxation as a REIT unless certain relief provisions are available.

Taxation of REIT Dividends

REIT dividends (other than capital gain dividends) received by non-corporate taxpayers may be eligible for a 20% deduction. This deduction is only applicable to investors of LFT that receive dividends and does not have any impact on us. Without further legislation, the deduction would sunset after 2025. Investors should consult their own tax advisors regarding the effect of this change on their effective tax rate with respect to REIT dividends.

Access to our Periodic SEC Reports and Other Corporate Information

Our internet website address is www.lumentfinancetrust.com. We make available free of charge, through our website, our annual report on Form 10-K, our quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments thereto that we file pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. Our Code of Business Conduct and Ethics and Policy Against Insider Trading and our Corporate Governance Guidelines, along with the charters of our Audit, Compensation and Nominating and Corporate Governance Committees, are also available on our website. Information on our website is neither part of nor incorporated into this Annual Report on Form 10-K. For further information on our Manager, please see the Manager's Form ADV filed with the SEC which can be found at https://adviserinfo.sec.gov/firm/summary/306487.

Website Disclosure

We use our website (www.lumentfinancetrust.com) as a channel of distribution of company information. The information we post through this channel may be deemed material. Accordingly, investors should monitor this channel, in addition to following our press releases, SEC filings, public conference calls, and webcasts. In addition, you may automatically receive email alerts and other information about Lument Finance Trust, Inc. when you enroll your email address by visiting "Investor Relations & Email Alerts" section of our website at https://www.lumentfinancetrust.com/investor-relations/email-alerts/. The contents of our website and any alerts are not, however, a part of this report.

ITEM 1A. RISK FACTORS

Set forth below are the risks that we believe are material to stockholders. You should carefully consider the following risk factors identified in or incorporated by reference into any other documents filed by us with the SEC in evaluating our company and our business. If any of the following risks occur, our business, financial condition, results of operations and our ability to make distributions to our stockholders could be adversely affected. In that case, the trading price of our stock could decline. The risk factors described below are not the only risks that may affect us. Additional risks and uncertainties not presently known to us also may adversely affect our business, financial condition, results of operations and our ability to make distributions to our stockholders.

Summary Risk Factors

Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows, and prospects. These risks are discussed more fully below and include, but are not limited to, risks related to:

Risks Related to Our Investment Strategy and Our Businesses

•We may be unable to operate our business successfully or generate sufficient revenue to make or sustain distributions to our stockholders.

•If we fail to develop, enhance and implement strategies to adapt to changing conditions in the mortgage industry and capital markets, our business, financial condition, results of operations and our ability to make distributions to our ~~stockholder~~stockholders may be adversely affected.

•We may change our target assets, investment or financing strategies and other operational policies without stockholder consent, which may adversely affect our business, financial condition, results of operations and our ability to make distributions to our stockholders.

•Our floating-rate commercial mortgage loans are subject to various risks, such as interest rate risk, prepayment risk, real estate risk and credit risk.

•Difficulty in redeploying the proceeds from repayments of our existing loans and investments may cause our financial performance and returns to investors to suffer.

•Transitional mortgage loans involve greater risk than conventional mortgage loans.

•An increase in interest rates may cause a decrease in the volume of certain of our target assets, which could adversely affect our ability to acquire assets that satisfy our investment objectives and to generate income and make distributions to our stockholders.

•Fluctuations in interest rates could reduce our ability to generate income on our loans and other investments, which could adversely affect our ability to acquire assets that satisfy our investment objectives and to generate income and make distributions to our stockholders.

•~~Our~~We have in the past and may in the future acquire ownership of property securing our loans through foreclosure or deed-in-lieu of foreclosure. When we take title to the property securing one of our loans, and if we do not or cannot sell the property, we own and operate them as "real estate ~~investments~~owned" or "REO." Our REO assets are subject to risks particular to real property. These risks may result in a reduction or elimination of, or return from, a loan secured by a particular property.

•Changes in laws and regulations governing our operations, changes in the interpretation thereof or newly enacted laws or regulations and any failure by us to comply with these laws or regulations, could require changes in certain of our business practices, negatively impact our operations, cash flow or financial condition, impose additional costs on us, subject us to increased competition or otherwise adversely affect our business.

Risks Related to Financing and Hedging

•Our strategy involves leverage, which may amplify losses and there is no specific limit on the amount of leverage we may use.

•We may incur significant additional debt in the future, which will subject us to increased risk of loss and may reduce cash available for distributions to our stockholders.

•There can be no assurance that our Manager will be able to prevent mismatches in the maturities of our assets and liabilities.

•We have financed, and may in the future seek to finance, certain of our CRE loans via CLOs or secured financings and such transactions involve risks, including that the sponsor of such transactions will receive distributions from the CLO or secured financing only if the CLO or secured financing generates enough income to pay all the investors in senior tranches and all CLO or secured financing expenses.

•Master repurchase agreements, credit facilities, or other financings that we use or may use in the future to finance our assets may require us to provide additional collateral or pay down debt.

•Lenders generally require us to enter into restrictive covenants relating to our operations.

•An increase in our borrowing costs relative to the interest that we receive on investments in our mortgage related investments may adversely affect our profitability and cash available for distributions to our stockholders.

•We have utilized and may utilize in the future non-recourse securitizations to finance our loans and investments, which may expose us to risks that could result in losses.

•Our loans and investments may be subject to fluctuations in interest rates that may not be adequately protected, or protected at all, by our hedging strategies.

Risks Associated with Our Relationship with Our Manager

•Our board of directors has approved very broad investment guidelines for our Manager and will not approve each investment and financing decision made by our Manager.

•We are dependent on our Manager and its key personnel for our success.

•There are conflicts of interest in our relationship with our Manager, ORIX and ORIX affiliates that could result in decisions that are not in the best interests of our stockholders.

Risks Related to Our Securities

•An increase in interest rates may have an adverse effect on the market price of our stock and our abilities to make distributions to stockholders.

•We have not established a minimum distribution payment level on our common stock and we cannot assure you of our ability to make distributions in the future, or that our board of directors will not reduce distributions in the future regardless of such ability.

•Future offerings of debt or equity securities that rank senior to our common stock may adversely affect the market price of our common stock.

Risks Related to Our Organization and Structure

•Because of their significant ownership of our common stock, Lument Investment Holdings, LLC, an affiliate of our Manager, and Hunt Investors (as described herein) have the ability to influence the outcome of matters that require a vote of stockholders, including change of control.

•Stockholders have limited control over changes in our policies and procedures.

•Maintenance of our exclusion from the Investment Company Act will impose limits on our business.

•Ownership limitations may restrict change of control or business combination opportunities in which our stockholders might receive a premium for their shares.

Tax Risks

•If we fail to ~~continue~~remain toqualified ~~qualify~~ as a REIT, wewill ~~would~~ be ~~taxed~~subject atto ~~corporate~~U.S, ~~rates~~federal ~~and~~income ~~would~~tax ~~not~~as bea ~~able~~regular tocorporation ~~take~~and ~~certain~~could ~~deductions~~face ~~when~~a ~~computing~~substantial ~~our~~tax ~~taxable income~~liability..

•If we fail to ~~continue~~remain toqualified ~~qualify~~ as a REIT, we may default on our current financing facilities and be required to liquidate our assets, and we may face delays or ~~inabilities~~inability to procure future financing.

•Complying with REIT requirements may cause us to forgo otherwise attractive opportunities and may require us to dispose of our target assets sooner than originally anticipated.

•Qualifying as a REIT involves highly technical and complex provisions of the Code.

Risks Related to Our Investment Strategies and Our Businesses

We may not be able to operate our businesses successfully or generate sufficient revenue to make or sustain distributions to our stockholders.

We cannot assure you that we will be able to operate our businesses successfully or implement our operating policies and strategies. Our Manager may not be able to successfully execute our investment and financing strategies as described in this Annual Report on Form 10-K, which could result in a loss of some or all of your investment. Our results of operations depend on several factors, including our Manager's ability to execute on our investment and financing strategies, the availability of opportunities for the acquisition of target assets, the level and volatility of interest rates, the availability of adequate short and long-term financing, conditions in the financial markets and economic conditions. Our revenues will depend, in large part, on our Manager's ability to execute on our investment and financing strategies, and our ability to acquire assets at favorable spreads over our borrowing costs. If our Manager is unable to execute on our investment and financing strategies, or we are unable to acquire assets that generate favorable spreads, our results of operations may be adversely affected, which could adversely affect our ability to make or sustain distributions to our stockholders.

We seek to generate current income and attractive risk-adjusted returns for our stockholders. However, the assets that we acquire may not appreciate in value and, in fact, may decline in value, and the assets that we acquire have experienced and may in the future continue to experience defaults of interest and/or principal payments. Accordingly, we may not be able to realize gains or income from our assets. Any income that we do realize may not be sufficient to offset other losses that we experience.

If we fail to develop, enhance and implement strategies to adapt to changing conditions in the mortgage industry and capital markets, our business, financial condition, results of operations and our ability to make distributions to our stockholders may be adversely affected.

The manner in which we compete and the products for which we compete are affected by changing conditions, which can take the form of trends or sudden changes in our industry, regulatory environment, changes in the role of government-sponsored enterprises, changes in the role of credit rating agencies or their rating criteria or process, or the U.S. economy more generally. If we do not effectively respond to these changes, or if our strategies to respond to these changes are not successful, our business, financial condition, results of operations and our ability to make distributions to our stockholders may be adversely affected.

We may change our target assets, investment or financing strategies and other operational policies without stockholder consent, which may adversely affect our business, financial condition, results of operations and our ability to make distributions to our stockholders.

We may change any of our strategies, policies or procedures with respect to investments, acquisitions, growth, operations, indebtedness, capitalization, distributions, financing strategy and leverage at any time without the consent of our stockholders, which could result in an investment portfolio with a different, and possibly greater, risk profile. A change in our target assets, investment strategy or guidelines, financing strategy or other operational policies may increase our exposure to interest rate risk, default risk and real estate market fluctuations. Furthermore, a change in our asset allocation could result in our making investments in asset categories different from those described in this Annual Report on Form 10-K. In addition, our charter provides that our board of directors may revoke or otherwise terminate our REIT election, without approval of our stockholders, if it determines that it is no longer in our best interests to maintain our REIT qualification. These changes could adversely affect our business, financial condition, results of operations and our ability to make distributions to our stockholders.

Our portfolio of assets may be concentrated in terms of credit risk.

Although as a general policy we seek to acquire and hold a diverse portfolio of assets, we are not required to observe specific diversification criteria, except as may be set forth in the investment guidelines adopted by our board of directors. Therefore, our asset portfolio may at times be concentrated in certain property types that are subject to higher risk of foreclosure or secured by properties concentrated in a limited number of geographic locations. To the extent that our portfolio is concentrated in any one region or type of security, downturns relating generally to such region or type of security may result in defaults on some of our assets within a short time period, which could have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our stockholders. Our portfolio may contain other concentrations of risk, and we may fail to identify, detect or hedge against those risks, resulting in large or unexpected losses. Lack of diversification can increase the correlation of non-performance and foreclosure risks among our investments.

Our floating-rate commercial mortgage loans are subject to various risks, such as interest rate risk, prepayment risk, real estate risk and credit risk.

Generally, our business model is such that rising interest rates will generally increase our net interest income, while declining rates will generally decrease our net interest income. As of December 31, ~~2024~~2025, 100.0% of our loans by principal balance and all of our collateralized loan obligations and ~~secured~~financing ~~financings~~arrangements were indexed to 30-day ~~term~~Term SOFR. Accordingly, our interest expense will generally increase as interest rates increase and decrease as interest rates decline.

In recent years, interest rates had remained at relatively low levels on a historical basis. However, since 2022, in light of increasing inflation, the U.S. Federal Reserve increased benchmark interest rates eleven times. These increases increased our borrowers' interest payments, adversely affected commercial property real estate values, and could result in loan non-performance, modification, defaults, foreclosures, and/or property sales, which could result in us realizing losses on our investments.

~~remained~~In ~~elevated~~recent years, ~~with~~interest ~~the~~rates ~~U.S.~~had ~~Federal~~remained ~~Reserve~~at ~~indicating~~relatively inlow ~~2025~~levels anon ~~expectation~~a ofhistorical ~~slower rate decreases moving forward~~basis. ~~A slower-than-expected decrease~~However, orbetween a2022 ~~further~~and ~~increase~~late 2024, in ~~interest~~light ~~rates~~of ~~would~~increasing ~~continue~~inflation, tothe ~~present a challenge to real estate valuation~~U.S. InFederal aReserve ~~period~~increased ofbenchmark ~~declining~~ interest rates, ~~our~~eleven ~~interest~~times. Although ~~income~~these onrates ~~floating-rate~~were ~~investments~~subsequently ~~would~~cut ~~generally~~several ~~decrease,~~times ~~while~~beginning ~~any decrease~~ in ~~the~~late ~~interest~~2024, weoverall ~~are~~these ~~charged~~increases onincreased our ~~floating-rate~~borrowers' ~~CLO~~interest orpayments, ~~securitized~~adversely ~~financing~~affected ~~may~~commercial beproperty ~~subject~~real toestate ~~floors~~values, and ~~may~~could ~~not~~result ~~compensate for such decrease~~ in ~~interest~~loan ~~income. However~~non-performance, ~~rate~~modification, ~~floors~~defaults, ~~relating~~foreclosures, toand/or ~~our~~property ~~loan~~sales, ~~portfolio~~which ~~may~~could ~~offset~~result ~~some~~in ofus ~~the~~realizing ~~impact~~losses ~~from~~on ~~declining~~our ~~rates~~investments.

Although decelerating, inflation remains above the U.S. Federal Reserve's target levels with the U.S. Federal Reserve indicating in 2025 an expectation of slower rate decreases moving forward. A slower-than-expected decrease, or a further increase, in interest rates would continue to present a challenge to real estate valuation. In a period of declining interest rates, our interest income on floating-rate investments would generally decrease, while any decrease in the interest we are charged on our floating-rate CLO or securitized financing may be subject to floors and may not compensate for such decrease in interest income. However, rate floors relating to our loan portfolio may offset some of the impact from declining rates.

We are subject to prepayment risk associated with the terms of our CLOs and secured financings. Due to the generally short-term nature of transitional floating rate-commercial mortgage loans, our CLOs and secured financings include a reinvestment period during which principal repayments and prepayments on our commercial mortgage loans may be reinvested in similar assets, subject to meeting certain eligibility criteria. While the interest-rate spreads of our CLOs are fixed until they are repaid, the terms, including spreads, of newly originated loans are subject to uncertainty based on a variety of factors, including market and competitive conditions. To the extent that such conditions result in lower spreads on the assets in which we reinvest, we may be subject to a reduction in interest income in the future.

The market values of commercial mortgage assets are subject to volatility and may be adversely affected by real estate risks, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; and retroactive changes to building or similar codes. In addition, decreases in property values reduce the value of the collateral and potential proceeds available to a borrower to repay the underlying loans, which could also cause us to suffer losses.

Our commercial mortgage loans and other investments are also subject to credit risk. The performance and value of our loans and other investments depend upon the sponsor's ability to operate properties that serve as our collateral so that they produce cash flows adequate to pay interest and principal to us. To monitor this risk, the Manager's asset management team reviews our portfolio and maintains regular contact with borrowers, co-lenders and local market experts to monitor the performance of the underlying collateral, anticipate borrower, property and market issues and, to the extent necessary or appropriate, enforce our rights as lender.

Transitional mortgage loans involve greater risk than conventional mortgage loans.

The typical borrower in a transitional mortgage loan has usually identified an asset which the borrower believes is undervalued or that has been under-managed or is undergoing a repositioning plan including a potential capital improvement. If the market in which the asset is located fails to perform according to the borrower's projections, or if the borrower fails to improve the quality of the asset's management and/or value of the asset, the borrower may not receive a sufficient return on the asset to satisfy the transitional mortgage loan, and we bear the risk that we may not recover some or all of our investment.

In addition, borrowers typically use the proceeds of a conventional mortgage to repay a transitional mortgage loan. Transitional mortgage loans therefore are subject to the risk of a borrower's inability to obtain permanent financing to repay the transitional mortgage loan. Risks of cost overruns and renovations of properties in transition may result in significant losses. The renovation, refurbishment or expansion of a property by a borrower involves risks of cost overruns and non-completion. Estimates of the costs of improvements to bring an acquired property up to the standards established for the market position intended for the property may prove inaccurate. Other risks may include rehabilitation costs exceeding original estimates, possibly making a project uneconomical, environmental risks, delays in legal and other approvals (e.g., for condominiums) and rehabilitation and subsequent leasing of the property not being completed on schedule. If such renovation is not completed in a timely manner, or if it costs more than expected, the borrower may experience a prolonged impairment of net operating income and may not be able to make payments on our investment on a timely basis or at all. In the event of any default under transitional mortgage loans that may be held by us, we bear the risk of loss of principal and non-payment of interest and fees to the extent of any deficiency between the value of the mortgage collateral and the principal amount and unpaid interest on the transitional loan. To the extent we suffer such losses with respect to these transitional mortgage loans, it could adversely affect our results of operations and financial condition.

Fluctuations in interest rates could reduce our ability to generate income on our loans and other investments, which could adversely affect our ability to acquire assets that satisfy our investment objectives and to generate income and make distributions to our stockholders.

In recent years, interest rates had remained at relatively low levels on a historical basis. However, ~~since~~between 2022 and late 2024, in light of increasing inflation, the U.S. Federal Reserve increased benchmark interest rates eleven times. These increases increased our borrowers' interest payments, adversely affected commercial property real estate values, and could result in loan non-performance, modification, defaults, foreclosures, and/or property sales, which could result in us realizing losses on our investments.

Notwithstanding the current period of relatively high interest rates, the U.S. Federal Reserve began decreasing rates in 2024. Although decelerating, inflation remains above the U.S. Federal Reserve's target levels. Despite multiple federal fund rate decreases over the course of 2024 and 2025, interest rates have remained elevated, with the U.S. Federal Reserve indicating in ~~2025~~2026 an expectation of slower rate decreases moving forward. A slower-than-expected decrease, or a further increase, in interest rates would continue to present a challenge to real estate valuation.

Our business model is such that rising interest rates will generally increase our net interest income, while declining rates will generally decrease our net interest income. As of December 31, ~~2024~~2025, 100% of our loans by unpaid principal balance earned a floating rate of interest and were financed with liabilities that require interest payments based on floating rates, which resulted in an amount of net equity that is positively correlated to rising interest rates.

In a declining interest rate environment, our interest income generally decreases as index rates decrease. The interest rates we pay under our current financing facilities are floating-rate. Accordingly, in a declining interest rate environment our interest expense will generally decrease as interest rates decrease. Generally, borrowers may repay their loans prior to their stated final maturities. In periods of declining interest rates and/or credit spreads, prepayment rates on loans generally increase. If general interest rates and credit spreads decline at the same time, the proceeds of such prepayments received during such periods are likely to be reinvested by us in assets yielding less than the yields on the assets that were prepaid. We may not be able to reinvest the principal repaid at the same or higher yield of the original investment.

Rising interest rates generally reduce the demand for mortgage loans due to the higher cost of borrowing. A reduction in the volume of mortgage loans originated may affect the volume of transitional floating-rate multifamily and CRE loans and other mortgage related investments available to us, which could adversely affect our ability to acquire assets that satisfy our investment objectives. Rising interest rates may also cause our assets that were issued prior to an interest rate increase to provide yields that are below prevailing market interest rates. If rising interest rates cause us to be unable to acquire a sufficient volume of transitional floating-rate multifamily and CRE loans and other mortgage related investments with a yield that is above our borrowing cost, our ability to satisfy our investment objectives and to generate income and make distributions to our stockholders may be adversely affected.

The relationship between short-term and longer-term interest rates is often referred to as the "yield curve." Ordinarily, short-term interest rates are lower than longer-term interest rates. If short-term interest rates rise disproportionately relative to longer-term interest rates (a flattening of the yield curve), our borrowing costs may increase more rapidly than the interest income earned on our assets. Because some of our future investments may bear interest based on longer-term rates than our borrowings, a flattening of the yield curve would tend to decrease our net income and the market value of our net assets. Additionally, to the extent cash flows from investments that return scheduled and unscheduled principal are reinvested, the spread between the yields on the new investments and available borrowing rates may decline, which would likely decrease our net income. It is also possible that short-term interest rates may exceed longer-term interest rates (a yield curve inversion), in which event our borrowing costs may exceed our interest income and we could incur operating losses. Given the current state of the U.S. economy due to inflationary pressures, there can be no guarantee that the yield curve will not become and/or remain inverted.

The timing of loan repayment is difficult to predict and may adversely affect our financial performance and cash flows.

Our floating-rate mortgage loans are secured by commercial real estate assets. Generally, our mortgage loan borrowers may repay their loans prior to their stated maturities. In periods of declining interest rates and/or credit spreads, prepayment rates on loans will generally increase. If general interest rates or credit spreads decline at the same time, the proceeds of such prepayments received during such periods may not be reinvested for some period of time or may be reinvested by us in assets with lower yields than the assets that were prepaid. In periods of increasing interest rates and/or credit spreads, prepayment rates on loans will generally decrease, which could impact our liquidity, or increase our potential exposure to loan non-performance. Prepayment rates on loans may be affected by a number of factors including, but not limited to, the then-current level of interest rates and credit spreads, fluctuations in asset values, the availability of mortgage credit, the relative economic vitality of the area in which the related properties are located, the servicing of the loans, possible changes in tax laws, other opportunities for investment, and other economic, social, geographic, demographic and legal and other factors beyond our control. Consequently, such prepayment rates can vary significantly from period-to-period and cannot be predicted with certainty. No strategy can completely insulate us from prepayment or other such risks, and faster or slower prepayments may adversely affect our profitability and cash available for distribution to our stockholders. Our loans often contain call protection or yield maintenance provisions that require a certain minimum amount of interest due to us regardless of when the loan is repaid. These include prepayment fees expressed as a percentage of the unpaid principal balance, or the amount of foregone net interest income due us from the date of repayment through a date that is frequently 12 or 18 months after the origination date. Loans that are outstanding beyond the end of the call protection or yield maintenance period can be repaid with no prepayment fees or penalties. The absence of call protection or yield maintenance provisions may expose us to the risk of early repayment of loans and the inability to redeploy capital accretively.

Difficulty in redeploying the proceeds from repayments of our existing loans and investments may cause our financial performance and returns to investors to suffer.

As our loans and investments are repaid, we will have to redeploy the proceeds we receive into new loans and investments (which can include future fundings associated with our existing loans), repay borrowings under our credit facilities, pay dividends to our stockholders or repurchase outstanding shares of our class A common stock. It is possible that we will fail to identify reinvestment options that would provide returns or a risk profile that is comparable to the asset that was repaid. If we fail to redeploy the proceeds we receive from repayment of a loan in equivalent or better alternatives, our financial performance and returns to investors could suffer.

~~Our~~We have in the past and may in the future acquire ownership of property securing our loans through foreclosure or deed-in-lieu foreclosure. When we take title to the property securing one of our loans, and if we do not or cannot sell the property, we own and operate the property as "real estate ~~investments~~owned" or "REO." Our REO assets are subject to risks particular to real property. These risks may result in a reduction or elimination of, our return from, a loan secured by a particular property.

~~Real~~If we acquire ownership of properties securing our loans through foreclosure or deed-in-lieu of foreclosure and own real estate ~~investments~~directly, as we have done and may do in the future, we are subject to ~~various~~risks particular to owning real property. Taking title to, owning and operating real property involves risks that are different (and in many ways more significant) than the risks faced in owning a loan secured by that property. The process of taking title to a property, including: through foreclosure or deed-in-lieu of foreclosure, subjects us to the risk of incurring significant costs, including transaction costs such as legal fees and transfer taxes, and in the case of foreclosures, litigation costs. Once owned, the costs associated with operating and redeveloping the property, including any operating shortfalls, the costs of financings, and significant capital expenditures, could materially and adversely affect our results of operations, financial condition and liquidity. In addition, at such time that we elect to sell such property, the liquidation proceeds upon sale of the underlying real estate may not be sufficient to recover our cost basis, resulting in a loss to us. Furthermore, any costs or delays involved in the maintenance or liquidation of the underlying property will further reduce the net proceeds and, thus, increase the loss.

Ownership and operation of real estate are subject to various risks, including:

•tenant mix and tenant bankruptcies;

•property management decisions, including with respect to capital improvements, particularly in older building structures;

•renovations or repositionings during which operations may be limited or halted completely;

•property location and condition, including, without limitation, any need to address environmental contamination or climate-related risks at a property

•competition from comparable types of properties

•adverse changes in national and local economic and market conditions;

•changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance with laws and regulations, fiscal policies and ordinances;

•changes in interest rates, and in the state of the credit, securitization, debt and equity capital markets, including diminished availability or lack of debt financing for commercial real estate;

•global trade disruption, supply chain issues, significant introductions to trade barriers and bilateral trade frictions;

•declines in regional or local real estate values or rental or occupancy rates;

•increases in the costs and/or reduced availability of property-related insurance coverage

•changes in real estate tax rates, tax credits and other operating expenses;

•costs of remediation and liabilities associated with environmental conditions such as indoor mold;

•the potential for uninsured or under-insured property losses

•acts of God, including earthquakes, floods, fires and other natural disasters, which may result in uninsured losses;

•acts of war or terrorism, including the consequences of terrorist attacks; and

•social unrest and civil disturbances.

If any of these or similar events occur, we may not realize our anticipated return on our investments, and we may incur a loss on these investments. The ability of a borrower to repay these loans or other financial assets is dependent upon the income or assets of these borrowers.

The impact of any future terrorist attacks, the occurrence of a natural disaster, a significant climate change, health concerns regarding pandemic diseases or changes in laws and regulations expose us to certain risks.

Terrorist attacks, the anticipation of any such attacks, and the consequences of any military or other response by the United States and its allies may have an adverse impact on the U.S. financial markets and the economy in general. We cannot predict the severity of the effect that any such future events would have on the U.S. financial markets, the economy or our business. Any future terrorist attacks could adversely affect the credit quality of some of our loans and investments. Some of our loans and investments will be more susceptible to such adverse effects than others, particularly those secured by properties in major cities or properties that are prominent landmarks or public attractions. We may suffer losses as a result of the adverse impact of any future terrorist attacks and these losses may adversely impact our results of operations.

Moreover, the enactment of the Terrorism Risk Insurance Act of 2002, or TRIA, requires insurers to make terrorism insurance available under their property and casualty insurance policies and provides federal compensation to insurers for insured losses. TRIA was scheduled to expire at the end of 2020 but was reauthorized, with some adjustments to its provisions, in December 2019 for seven years through December 31, 2027. However, this legislation does not regulate the pricing of such insurance and there is no assurance that this legislation will be extended beyond 2027. The absence of affordable insurance coverage may adversely affect the general real estate lending market, lending volume and the market’s overall liquidity and may reduce the number of suitable investment opportunities available to us and the pace at which we are able to make investments. If the properties that we invest in are unable to obtain affordable insurance coverage, the value of those investments could decline and in the event of an uninsured loss, we could lose all or a portion of our investment.

9In addition, the occurrence of a natural disaster (such as an earthquake, fire, tornado, hurricane, or a flood) or a significant adverse climate change may cause a sudden decrease in the value of real estate in the area or areas affected and would likely reduce the value of the properties securing debt instruments that we purchase. Because certain natural disasters are not typically covered by the standard hazard insurance policies maintained by borrowers, the affected borrowers may have to pay for any repairs themselves. Borrowers may decide not to repair their property or may stop paying their mortgages under those circumstances. This would likely cause defaults and credit loss severities to increase.

affordable insurance coverage, the value of those investments could decline and in the event of an uninsured loss, we could lose all or a portion of our investment.

In addition, the occurrence of a natural disaster (such as an earthquake, tornado, hurricane, or a flood) or a significant adverse climate change may cause a sudden decrease in the value of real estate in the area or areas affected and would likely reduce the value of the properties securing debt instruments that we purchase. Because certain natural disasters are not typically covered by the standard hazard insurance policies maintained by borrowers, the affected borrowers may have to pay for any repairs themselves. Borrowers may decide not to repair their property or may stop paying their mortgages under those circumstances. This would likely cause defaults and credit loss severities to increase.

The occurrence of unforeseen or catastrophic events, including the emergence of a pandemic, such as coronavirus, or other widespread health emergency (or concerns over the possibility of such emergency) could create economic and financial disruptions, and could lead to operational difficulties that could impair our ability to manage our business.

Lack of diversification in the number of assets we acquire would increase our dependence on relatively few individual assets.

Our management objectives and policies do not place a limit on the size of the amount of capital used to support, or the exposure to (by any other measure), any individual asset or any group of assets with similar characteristics or risks. In addition, because we are a small company, we may be unable to sufficiently deploy capital into assets or asset groups. As a result, our portfolio may be concentrated in a small number of assets or may be otherwise undiversified, increasing the risk of loss and the magnitude of potential losses to us and our stockholders if one or more of these assets perform poorly.

Investments in non-conforming and non-investment grade rated CRE loans or securities involve increased risk of loss.

Certain CRE debt investments may not conform to conventional loan standards applied by traditional lenders and either will not be rated (as is typically the case for private loans) or will be rated as non-investment grade by the rating agencies. Private loans often are not rated by credit rating agencies. Non-investment grade ratings typically result from the overall leverage of the loans, the lack of a strong operating history for the properties underlying the loans, the borrowers’ credit history, the underlying properties’ cash flow or other factors. As a result, these investments should be expected to have a higher risk of default and loss than investment-grade rated assets. Any loss we incur may be significant and may adversely affect our results of operations and financial condition. There are no limits on the percentage of unrated or non-investment grade rated assets we may hold in our investment portfolio.

We may invest in transitional multifamily loans, CRE loans, CRE debt securities and other similar structured finance investments, which are secured by income producing properties. Such loans are typically made to single-asset entities, and the repayment of the loan is dependent principally on the net operating income from the performance and value of the underlying property. The volatility of income performance results and property values may adversely affect our transitional multifamily loans, CRE loans and CRE debt securities and similar structured finance investments.

Our transitional multifamily and CRE loans are secured by the underlying commercial property and, in each case, are subject to risks of delinquency, foreclosure and loss. Transitional multifamily loans, CRE loans, CRE debt securities and other similar structured finance investments generally have a higher principal balance and the ability of a borrower to repay a loan secured by an income-producing property typically is dependent upon the successful operation of the property rather than upon the existence of independent income or assets of the borrower. If the net operating income of the property is reduced, the borrower’s ability to repay the loan may be impaired. Net operating income of an income-producing property can be affected by, among other things: tenant mix, success of tenant businesses, property management decisions, property location and condition, competition from comparable types of properties, changes in laws that increase operating expenses or limit rents that may be charged, any need to address environmental contamination at the property, changes in national, regional or local economic conditions and/or specific industry segments, declines in regional or local real estate values and declines in regional or local rental or occupancy rates, increases in interest rates, real estate tax rates and other operating expenses, changes in governmental rules, regulations and fiscal policies, including environmental and/or tax legislation, and acts of God, terrorism, social unrest and civil disturbances.

Multifamily and CRE property values and net operating income derived therefrom are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions; changes in tax laws; local real estate conditions; changes or continued weakness in specific industry segments; perceptions by prospective tenants, retailers and shoppers of the safety, convenience, services and attractiveness of the property; the willingness and ability of the property’s owner to provide capable management and adequate maintenance; construction quality, age and design; demographic factors; retroactive changes to building or similar codes; and increases in operating expenses (such as energy costs).

Declines in the borrowers’ net operating income and/or declines in property values of collateral securing transitional multifamily loans, CRE loans or CRE debt securities and other similar structured finance investments could result in defaults on such loans, declines in our book value from reduced earnings and/or reductions to the market value of the investment.

Our target assets may include CRE loans which are funded with interest reserves and borrowers may be unable to replenish such interest reserves once they run out.

We invest in transitional CRE and we expect that borrowers may be required to post reserves to cover interest and operating expenses until the property cash flows are projected to increase sufficiently to cover debt service costs. We may also require the borrower to replenish reserves if they become depleted due to underperformance or if the borrower wishes to exercise extension options under the loan. Revenues on the properties underlying any CRE loan investments may decrease in an economic downturn which would make it more difficult for borrowers to meet their payment obligations to us. Some borrowers may have difficulty servicing our debt and may not have sufficient capital to replenish reserves, which could have a significant impact on our operating results and cash flows.

We may not have control over certain of our loans and investments.

Our ability to manage our portfolio of loans and investments may be limited by the form in which they are made. In certain situations, we may:

•acquire investments subject to rights of senior classes, special servicers or collateral managers under intercreditor, servicing agreements or securitization documents;

•pledge our investments as collateral for financing arrangements;

•acquire only a minority and/or non-controlling participation in an underlying investment;

•co-invest with others through partnership, joint ventures or other entities, thereby acquiring non-controlling interests; or

•rely on independent third-party management or servicing with respect to the management of an asset.

Therefore, we may not be able to exercise control over all aspects of our loans or investments. Such financial assets may involve risks not present in investments where senior creditors, junior creditors, servicers or third-party controlling investors are not involved. Our rights to control the process following a borrower default may be subject to the rights of senior or junior creditors or servicers whose interests may not be aligned with ours. A partner or co-venturer may have financial difficulties resulting in a negative impact on such asset, may have economic or business interests or goals that are inconsistent with ours, or may be in a position to take action contrary to our investment objectives.

Changes in laws or regulations governing our operations, changes in the interpretation thereof or newly enacted laws or regulations and any failure by us to comply with these laws or regulations, could require changes to certain of our business practices, negatively impact our operations, cash flow or financial condition, impose additional costs on us, subject us to increased competition or otherwise adversely affect our business.

The laws and regulations governing our operations, as well as their interpretation, may change from time to time, and new laws and regulations may be enacted. Accordingly, any change in these laws or regulations, changes in their interpretation, or newly enacted laws or regulations and any failure by us to comply with these laws or regulations, could require changes to certain of our business practices, negatively impact our operations, cash flow or financial condition, impose additional costs on us or otherwise adversely affect our business. For example, from time to time the market for real estate debt transactions has been adversely affected by a decrease in the availability of senior and subordinated financing for transactions, in part in response to regulatory pressures on providers of financing to reduce or eliminate their exposure to such transactions. Furthermore, if regulatory capital requirements, whether under the Dodd-Frank Act, Basel III (i.e., the framework for a comprehensive set of capital and liquidity standards for internationally active banking organizations, which was adopted in June 2011 by the Basel Committee on Banking Supervision, an international body comprised of senior representatives of bank supervisory authorities and central banks from 27 countries, including the United States) or other regulatory action, are imposed on private lenders that provide us with funds, or were to be imposed on us, they or we may be required to limit, or increase the cost of, financing they provide to us or that we provide to others. Among other things, this could potentially increase our financing costs, reduce our ability to originate or acquire loans and reduce our liquidity or require us to sell assets at an inopportune time or price.

Various laws and regulations currently exist that restrict the investment activities of banks and certain other financial institutions but do not apply to us, which we believe creates opportunities for us to participate in certain investments that are not available to these more regulated institutions. Any deregulation of the financial industry, including by amending the Dodd-Frank Act, may decrease the restrictions on banks and other financial institutions and would create more competition for investment opportunities that were previously not available to the financial industry. For example, in 2018, a bill was signed into law that eased the regulation and oversight of certain banks under the Dodd-Frank Act.

There has been increasing commentary amongst regulators and intergovernmental institutions on the role of nonbank institutions in providing credit and, particularly, so-called “shadow banking,” a term generally taken to refer to credit intermediation involving entities and activities outside the regulated banking system. For example, in August 2013, the Financial Stability Board issued a policy framework for strengthening oversight and regulation of “shadow banking” entities. The report outlined initial steps to define the scope of the shadow banking system and proposed general governing principles for a monitoring and regulatory framework. Other regulators, such as the U.S. Federal Reserve, and international organizations, such as the International Organization of Securities Commissions, are studying the shadow banking system. In addition, Congress has also been focused on "shadow banking," including the reintroduction of the Shadow Banking Loophole Act in early 2026, and may in the future enact this or other related legislation. At this time, it is too early to assess whether any rules, regulations, or ~~regulations~~other legislation will be proposed or to what extent any finalized legislation, rules or regulations will have on the nonbank lending market. If rules, regulations or ~~regulations~~legislation were to extend to us or our affiliates the regulatory and supervisory requirements, such as capital and liquidity standards, currently applicable to banks, then the regulatory and operating costs associated therewith could adversely impact the implementation of our investment strategy and our returns. In an extreme eventuality, it is possible that such regulations could render the continued operation of our company unviable.

In the United States, the process established by the Dodd-Frank Act for designation of systemically important nonbank firms has provided a means for ensuring that the perimeter of prudential regulation can be extended as appropriate to cover large shadow banking institutions. The Dodd-Frank Act established the Financial Stability Oversight Council (the “FSOC”), which is comprised of representatives of all the major U.S. financial regulators, to act as the financial system’s systemic risk regulator. The FSOC has the authority to review the activities of nonbank financial companies predominantly engaged in financial activities and designate those companies as “systemically important financial institutions” (“SIFIs”) for supervision by the Federal Reserve. Such designation is applicable to companies where material distress or failure could pose risk to the financial stability of the United States. On December 18, 2014, the FSOC released a notice seeking public comment on the potential risks posed by aspects of the asset management industry, including whether asset management products and activities may pose potential risks to the U.S. financial system in the areas of liquidity and redemptions, leverage, operational functions, and resolution, or in other areas. On April 18, 2016, the FSOC released an update on its multi-year review of asset management products and activities and created an interagency working group to assess potential risks associated with certain leveraged funds. On December 4, 2019, the FSOC issued final guidance regarding the FSOC’s procedures for designating nonbank financial companies as SIFIs. This guidance implemented reforms to the FSOC’s prior SIFI designation approach by shifting from an “entity-based” approach to an “activities-based” approach whereby the FSOC will primarily focus on regulating activities that pose systematic risk to the financial stability of the United States, rather than designations of individual firms. Under the guidance, designation of a nonbank financial company as a SIFI would only occur if the FSOC determined that the expected benefits justify the expected costs of the designation. While the impact of this guidance cannot be known at this time, increased regulation of nonbank credit extension could negatively impact our operations, cash flows or financial condition, impose additional costs on us, intensify the regulatory supervision of us or otherwise adversely affect our business.

the Financial Stability Oversight Council (the “FSOC”), which is comprised of representatives of all the major U.S. financial regulators, to act as the financial system’s systemic risk regulator. The FSOC has the authority to review the activities of nonbank financial companies predominantly engaged in financial activities and designate those companies as “systemically important financial institutions” (“SIFIs”) for supervision by the Federal Reserve. Such designation is applicable to companies where material distress or failure could pose risk to the financial stability of the United States. On December 18, 2014, the FSOC released a notice seeking public comment on the potential risks posed by aspects of the asset management industry, including whether asset management products and activities may pose potential risks to the U.S. financial system in the areas of liquidity and redemptions, leverage, operational functions, and resolution, or in other areas. On April 18, 2016, the FSOC released an update on its multi-year review of asset management products and activities and created an interagency working group to assess potential risks associated with certain leveraged funds. On December 4, 2019, the FSOC issued final guidance regarding the FSOC’s procedures for designating nonbank financial companies as SIFIs. This guidance implemented reforms to the FSOC’s prior SIFI designation approach by shifting from an “entity-based” approach to an “activities-based” approach whereby the FSOC will primarily focus on regulating activities that pose systematic risk to the financial stability of the United States, rather than designations of individual firms. Under the guidance, designation of a nonbank financial company as a SIFI would only occur if the FSOC determined that the expected benefits justify the expected costs of the designation. While we have not been impacted by this legislation to date, increased regulation of nonbank credit extension could negatively impact our operations, cash flows or financial condition, impose additional costs on us, intensify the regulatory supervision of us or otherwise adversely affect our business.

Changes in laws or regulations governing the operations of borrowers could affect our returns with respect to those borrowers.

Government counterparties or agencies may have the discretion to change or increase regulation of a borrower’s operations, or implement laws or regulations affecting a borrower’s operations, separate from any contractual rights it may have. A borrower could also be materially and adversely affected as a result of statutory or regulatory changes or judicial or administrative interpretations of existing laws and regulations that impose more comprehensive or stringent requirements on such company. Governments have considerable discretion in implementing regulations, for example, the possible imposition or increase of taxes on income earned by a borrower or gains recognized by us on our investment in such borrower, that could impact a borrower’s business as well as our return on our investment with respect to such borrower. Changes in government rules, regulations and fiscal policies, including increases in property taxes, changes in zoning laws and increasing costs to comply with environmental law could increase operating expenses for our borrowers. Likewise, changes in rent control or rent stabilization laws or other residential landlord/tenant laws could result in lower revenue growth or significant unanticipated expenditures for our borrowers. These initiatives and any other future enactments of rent control or rent stabilization laws or other laws regulating multifamily housing may reduce our borrowers’ rental revenues or increase their operating costs. Such laws and regulations may limit our borrowers’ ability to charge market rents, increase rents, evict tenants or recover increases in their operating costs, which may, in turn, impact our return on our investment with respect to such borrowers.

Climate change, climate change-related initiatives and regulations and the increased focus on sustainability issues may adversely affect our business and financial results and damage our reputation.

~~Recently,~~There ~~there~~is ~~has~~continued ~~been growing~~ concern from advocacy groups, government agencies and the general public over the effects of climate change on the environment. Transition risks associated with climate change include higher energy costs, ~~such~~higher ascosts of supply chain services, increased frequency of supply chain disruptions and new or more stringent environmental regulations. For example, government restrictions, standards or regulations intended to reduce greenhouse gas emissions and potential climate change impacts, are emerging and may increase in the future in the form of restrictions or additional requirements on the development of commercial real estate (e.g. "green building codes" or other standards on water and energy usage and efficiency). Such restrictions and requirements could increase our costs or require additional technology and capital investments by our ~~borrowers~~property owners, which could adversely affect our results of operations. This is a particular concern in the western and northeastern United States, where some of the most extensive and stringent environmental, health and safety laws and building construction standards in the U.S. have been enacted and where we have properties securing our investment portfolio.

Additionally, sustainability-related matters and our response to these matters could harm our business, including in areas such as diversity, equity and inclusion, human rights, climate change and environmental stewardship, support for local communities, corporate governance and transparency and considering sustainability-related factors in our investment processes. If we are unable to adequately address such sustainability-related matters or we or our borrowers fail or are perceived to fail to comply with all laws, regulations, policies and related interpretation, it could negatively impact our reputation and our business results.

Further, significant physical effects of climate change including extreme weather events such as hurricanes, floods, droughts or fires, can also have an adverse impact on certain of our borrowers' properties. As the effects of climate change increase, we can expect the frequency and impact of weather and climate related events and conditions to increase as well. For example, unseasonal or extreme weather events could have a material impact on our properties. resulting in increased costs to remedy or repair impacts or from investments made in advance of such events to minimize potential damage. Additionally, there may be actual or threatened damage related to actual or forecasted extreme weather events that could increase the cost of, or render unavailable, insurance on favorable terms on the properties underlying our investments. Repair, remediation or insurance expenses could reduce net operating income of properties and the value of our investment related to such properties. While the geographic distribution of our portfolio somewhat limits our physical climate risk, some physical risk is inherent in the properties of our borrowers, particularly in certain borrowers' locations and in the unknown potential for extreme weather or other events that could occur related to climate change.

We may be subject to lender liability claims, and if we are held liable under such claims, we could be subject to losses.

In recent years, judicial decisions have upheld the right of borrowers to sue lending institutions on the basis of various evolving legal theories, collectively termed "lender liability." Generally, lender liability is founded on the premise that a lender has either violated a duty, whether implied or contractual, of good faith and fair dealing owed to the borrower or has assumed a degree of control over the borrower resulting in the creation of a fiduciary duty owed to the borrower or its other creditors or stockholders. We cannot assure prospective investors that such claims will not arise or that we will not be subject to significant liability if a claim of this type did arise.

Our investments in CRE CLOs and other similar structured finance investments, as well as those we structure, sponsor or arrange, pose additional risks, including the risks of the securitization process and the risk that the special servicer, Lument Real Estate Capital, LLC ("LREC"), an affiliate of our Manager, may take actions that could adversely affect our interests.

We have invested in, and may from time to time in the future invest in, CRE CLOs, other similar structured finance investments, and other similar securities, and our investments may consist of subordinated classes of securities in a structured finance investment secured by a pool of CRE loans or investments. Accordingly, such securities may be the first or among the first to bear the loss upon a restructuring or liquidation of the underlying collateral and the last to receive payment of interest and principal, with only a nominal amount of equity or other debt securities junior to such positions. The estimated fair values of such subordinated interests tend to be much more sensitive to adverse economic downturns and underlying borrower developments than more senior securities. A projection of an economic downturn, for example, could cause a decline in the price of lower credit quality CLOs or other similar secured financings because the ability of borrowers to make principal and interest payments on the underlying pool of assets may be impaired.

values of such subordinated interests tend to be much more sensitive to adverse economic downturns and underlying borrower developments than more senior securities. A projection of an economic downturn, for example, could cause a decline in the price of lower credit quality CLOs or other similar secured financings because the ability of borrowers to make principal and interest payments on the underlying pool of assets may be impaired.

Subordinate interests such as the subordinated classes of securities in our CRE CLOs and other secured financings generally are not actively traded and are relatively illiquid investments. Volatility in trading markets for these subordinated securities may cause the value of these investments to decline. In addition, if the value of the underlying pool of assets declines and, as a result, less collateral value is available to satisfy interest and principal payments and any other fees in connection with such financings, we may incur significant losses.

With respect to the CRE CLOs and other secured financings we have sponsored and in which we have retained subordinated classes of equity and debt, control over the related underlying loans will be exercised through LREC, Lument IM or another special servicer or collateral manager designated by a “directing certificate holder” or a “controlling class representative,” or otherwise pursuant to the related securitization documents. We have in the past and may in the future acquire or retain classes of CRE CLOs and other secured financing, for which we may not have the right to appoint the directing certificate holder or otherwise direct the special servicing or collateral management. With respect to the management and servicing of those loans, the related special servicer or collateral manager may take actions that could adversely affect our interests. See “—Risks Related to Financing and Hedging—We have financed, and may in the future seek to finance, CRE loans and investments through non-recourse secured financings, including CRE CLOs, and such transactions involve significant risks and expose us to losses.”

If the loans that we originate or acquire do not comply with applicable laws, we may be subject to penalties, which could materially and adversely affect us.

Loans that we originated or acquired, or may in the future originate or acquire, currently are or may be directly or indirectly subject to U.S. federal, state or local governmental laws. Real estate lenders and borrowers may be responsible for compliance with a wide range of laws intended to protect the public interest, including, without limitation, the Truth in Lending, Equal Credit Opportunity, Fair Housing and Americans with Disabilities Acts and local zoning laws (including, but not limited to, zoning laws that allow permitted non-conforming uses). If we or any other person fails to comply with such laws in relation to a loan that we have originated or acquired, legal penalties may be imposed, which could materially and adversely affect us. Additionally, jurisdictions with "one action," "security first" and/or "anti-deficiency rules" may limit our ability to foreclose on a real property or to realize on obligations secured by a real property. In the future, new laws may be enacted or imposed by U.S. federal, state or local governmental entities, and such laws could have a material adverse effect on us.

If we are unable to implement and maintain effective internal controls over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected.

As a public company, we are required to maintain internal controls over financial reporting and to report any material weaknesses in such internal controls. In addition, we are required to furnish a report by management on the effectiveness of our internal controls over financial reporting, pursuant to Section 404 of the Sarbanes-Oxley Act. In the future, our independent registered public accounting firm may be required to formally attest to the effectiveness of our internal controls over financial reporting on an annual basis. The process of designing, implementing and testing the internal controls over financial reporting required to comply with this obligation is time consuming, costly and complicated. If we identify a material weakness in our internal controls over financial reporting, if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or to assert that our internal controls over financial reporting are effective or, if required, our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected. We could also become subject to investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.

controls over financial reporting on an annual basis. The process of designing, implementing and testing the internal controls over financial reporting required to comply with this obligation is time consuming, costly and complicated. If we identify a material weakness in our internal controls over financial reporting, if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or to assert that our internal controls over financial reporting is effective or, if required, our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected. We could also become subject to investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.

We depend on our accounting services provider for assistance with the preparation of our financial statements, access to appropriate accounting technology and assistance with portfolio valuation.

Pursuant to our agreement with SS&C Technologies ("SS&C"), SS&C currently maintains our general ledger and all related accounting records, reconciles all broker and custodial statements we routinely receive, provides us with monthly portfolio, cash and position reports, assists us with portfolio valuations, prepares draft quarterly financial statements for our review and provides us with access to data and technology services to facilitate the preparation of our annual financial statements. If our agreement with SS&C were to be terminated and no suitable replacement can be timely engaged, we may not be able to timely and accurately prepare our financial statements.

We operate in a highly competitive market for investment opportunities and competition may limit our ability to acquire desirable investments in assets we target and could also affect the pricing of these securities.

We are engaged in a competitive business. In our investing activities, we compete for opportunities with a variety of institutional investors, including other REITs, specialty finance companies, public and private funds (including other funds managed by Lument IM and its affiliates), commercial and investment banks, commercial finance and insurance companies and other financial institutions. Several other REITs and other investment vehicles have raised significant amounts of capital, and may have investment objectives that overlap with ours, which may create additional competition for investment opportunities. Some competitors may have a lower cost of funds and broader access to funding sources, such as the U.S. Government, that are not available to us. Many of our competitors are not subject to the operating constraints associated with REIT compliance or maintenance of an exclusion from regulation under the Investment Company Act. We could face increased competition from banks due to future legislative developments, such as amendments to key provisions of the Dodd-Frank Act, including, provisions setting forth capital and risk retention requirements. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of loans and investments and offer more attractive pricing or other terms than we would. Furthermore, competition for investments we target may lead to decreasing yields, which may further limit our ability to generate targeted returns. We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our stockholders. Also, as a result of this competition, desirable investments in these assets may be limited in the future and we may not be able to take advantage of attractive investment opportunities from time to time, as we can provide no assurance that we will be able to identify and make investments that are consistent with our investment objectives.

A prolonged economic recession and declining real estate values could impair our assets and harm our operations.

The risks associated with our business are more severe during economic recessions and are compounded by declining real estate values. The transitional multifamily and other CRE loans in which we may invest will be particularly sensitive to these risks. Declining real estate values will likely reduce the level of new mortgage loan originations since borrowers often use appreciation in the value of their existing properties to support the purchase of additional properties. Borrowers will also be less able to pay principal and interest on loans underlying the securities in which we invest if the value of residential real estate weakens further. Further, declining real estate values significantly increase the likelihood that we will incur losses on the transitional multifamily and other CRE loans in the event of default because the value of collateral on the mortgages underlying such securities may be insufficient to cover the outstanding principal amount of the loan. Any sustained period of increased payment delinquencies, foreclosures or losses could have an adverse effect on our business, financial condition, results of operations and our ability to make distributions to our stockholders.

In addition, political leaders in the U.S. and certain foreign countries have recently been elected on protectionist platforms, fueling doubts about the future of global free trade. The U.S. government has indicated its continued intent to alter its approach to international trade policy and in some cases to renegotiate certain existing trade agreements with foreign countries, and may continue to do so in the future. In addition, the U.S. government has recently imposed tariffs on imports of foreign goods and has indicated a willingness to impose additional tariffs on imports of non-U.S. products. Some foreign governments, including China, have instituted retaliatory tariffs on U.S. goods and have indicated a willingness to impose additional tariffs on U.S. products. Global trade disruption, significant introductions of trade barriers and bilateral trade frictions, together with any future downturns in the global economy, could result in an economic recession and a decline in real estate values that could impair the value of our loans and harm our operations and our ability to make distributions to our stockholders.

The lack of liquidity in our investments may adversely affect our business.

We acquire assets that are not liquid or publicly traded. A lack of liquidity may result from the absence of a willing buyer or an established market for these assets, as well as legal or contractual restrictions on resale or the unavailability of financing for these assets. In addition, mortgage-related assets generally experience periods of illiquidity. Further, validating third-party pricing for illiquid assets may be more subjective than for liquid assets. Any illiquidity of our investments may make it difficult for us to sell such investments if the need or desire arises. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we have previously recorded our investments. Further, we may face other restrictions on our ability to liquidate an investment in a business entity to the extent that we or our Manager has or could be attributed with material, non-public information regarding such business entity. If we are unable to sell our assets at favorable prices or at all, it could adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders. Assets that are illiquid are more difficult to finance, and to the extent that we use leverage to finance assets that become illiquid, we may lose that leverage or have it reduced. Assets tend to become less liquid during times of financial stress, which is often the time that liquidity is most needed. As a result, our ability to vary our portfolio in response to changes in economic and other conditions may be relatively limited, which could adversely affect our business, financial condition, results of operations and our ability to make distributions to our stockholders.

Our investment in CRE debt securities and other similar structured finance investments may be subject to losses.

We may acquire CRE debt securities and other similar structured finance investments. In general, losses on a mortgaged property securing a mortgage loan included in a securitization will be borne first by the equity holder of the property, then by a cash reserve fund or letter of credit, if any, then by the holder of a mezzanine loan or B-Note, if any, then by the "first loss" subordinated security holder and then by the holder of a higher-rated security. In the event of default and the exhaustion of any equity support, reserve fund, letter of credit, mezzanine loans or B-Notes, and any classes of securities junior to those in which we invest, we will not be able to recover all of our investment in the securities we purchase. In addition, if the underlying mortgage portfolio has been overvalued by the originator, or if the values subsequently decline, less collateral is available to satisfy interest and principal payments due on the related CRE debt securities and other similar structured finance investments. The prices of lower credit quality securities are generally less sensitive to interest rate changes than more highly rated investments, but more sensitive to adverse economic downturns or individual issuer developments.

~~Provisions~~Increases ~~for~~in ~~credit~~our ~~losses~~CECL ~~are~~reserves ~~difficult~~have had and could continue to ~~estimate~~have an adverse effect on our business, financial condition and results of operations.

13Our CECL reserves required under the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 326 "Financial Instruments - Credit Loses," or ASC 326, reflect our current estimate of potential credit losses related to our loans' included in our consolidated balance sheets. Changes to our CECL reserves are recognized through net income on our consolidated statements of operations. See Notes 2 and 3 to our consolidated financial statements for discussion of our CECL reserves.

~~Our~~While ~~provision~~ASC 326 does not require any particular method for determining the allowance for credit losses, isit ~~evaluated~~does specify the allowance should be based on arelevant ~~quarterly~~information ~~basis. The~~about ~~determination~~past events, including historical loss experience, current portfolio and market conditions, and reasonable and supportable forecasts for the expected contractual term adjusted for prepayment and extensions, where applicable, of each loan. Because our ~~provision~~methodology for determining the allowance for credit losses ~~requires~~may usdiffer tofrom ~~make~~the ~~certain~~methodologies ~~estimates~~employed ~~and~~by ~~judgments~~other companies, ~~which~~our allowance for credit losses may not be ~~difficult~~comparable towith ~~determine. Our~~the ~~estimates~~allowance ~~and~~for ~~judgments~~credit ~~are~~losses ~~based~~reported onby other companies. In addition, other than a ~~number~~few ofnarrow ~~factors~~exceptions, ~~including~~ASC ~~assumptions~~326 ~~regarding~~requires ~~projected~~that ~~cash~~all ~~flow~~financial ~~from~~instruments subject to the ~~collateral~~CECL ~~securing~~model ~~our~~have some amount of reserve to reflect the GAAP Principle underlying the CECL model that all loans, ~~capitalization~~debt ~~rates~~securities, ~~leasing~~and similar assets have some inherent risk of loss, ~~creditworthiness~~regardless of ~~major~~credit ~~tenants~~quality, ~~occupancy~~subordinate ~~rates~~capital, ~~likelihood~~or ofother ~~repayment~~mitigating infactors. Accordingly, ~~full~~the atadoption of the ~~maturity~~CECL ofmodel ahas ~~loan~~materially affected, ~~availability~~and ofwill ~~financing,~~continue ~~exit~~to ~~plan~~materially affect, ~~actions~~how ofwe ~~other~~determine ~~lenders~~our ~~and~~allowance ~~other~~for ~~factors~~credit ~~deemed~~losses ~~necessary~~and bycould ~~Management,~~require ~~all~~us ofto ~~which~~significantly ~~remain~~increase ~~uncertain~~our allowance and ~~are~~recognize ~~subjective~~provisions for credit losses earlier in the lending cycle. ~~Our~~Moreover, ~~estimates~~the ~~and~~CECL ~~judgments~~model may ~~not~~create bemore ~~correct~~volatility ~~and,~~in ~~therefore,~~the level of our ~~results~~allowance for credit losses. If we are required to materially increase our level of ~~operations~~allowance ~~and~~for credit losses for any reason, such increase could adversely affect our business, financial condition ~~could~~and beresults ~~severely~~of ~~impacted~~operations.

~~Accounting~~CECL ~~standards~~reserves ~~have~~are ~~required~~difficult us to increase our allowance for credit losses which has had an adverse effect on our business and results of operation and may in the future have a material adverse effect on our business, financial condition and results of operationsestimate.

InOur ~~June~~CECL ~~2016,~~reserves ~~the~~are ~~Financial~~evaluated ~~Accounting~~on ~~Standards~~a ~~Board~~quarterly ~~issued~~basis. The ~~Accounting~~determination ~~Standards~~of ~~Update~~our ~~2016-13~~CECL reserves requires us to make certain estimates and judgments, orwhich ~~ASU~~may ~~2016-13~~be difficult to determine. ~~ASU~~Our ~~2016-13~~estimates ~~significantly~~and ~~changed~~judgments ~~how~~are ~~entities~~based ~~measured~~on ~~credit~~a ~~losses~~number ~~for~~of ~~most~~factors, ~~financial~~including ~~assets~~assumptions ~~and~~regarding ~~certain~~projected ~~other~~cash ~~instruments~~flow ~~that~~from ~~are~~the ~~not~~collateral ~~measured~~securing atour ~~fair~~loans, ~~value~~capitalization ~~through~~rates, ~~net~~leasing, ~~income. ASU~~occupancy ~~2016-13~~rates, ~~replaced~~likelihood ~~the~~of ~~incurred~~repayment ~~loss~~in ~~model~~full ~~under~~at ~~previous~~the ~~guidance~~maturity ~~with~~of a ~~current~~loan, ~~expected~~availability ~~credit~~of ~~loss~~financing, orexit ~~CECL~~plan, ~~model~~actions ~~for~~of ~~instruments~~other ~~measure~~lenders atand ~~amortized~~other ~~cost,~~factors ~~and~~deemed ~~required~~necessary ~~entities~~by tomanagement, ~~record~~all ~~allowances~~of ~~for~~which ~~available-for-sale~~remain ~~debt~~uncertain ~~securities~~and ~~rather~~are ~~than~~subjective. In ~~reduce~~determining the ~~carrying~~adequacy ~~amount~~of our CECL reserves, aswe ~~they~~rely ~~previously~~on ~~did~~our ~~under~~experience ~~the~~and ~~other-than-temporary~~our ~~impairment~~evaluation ~~model~~of economic conditions and market factors. If our assumptions prove to be incorrect, our CECL reserves may not be sufficient to cover losses inherent in our loan portfolio and adjustment may be necessary to allow for different

The allowance for credit losses required under ASU 2016-13 is a valuation account that is deducted from the related loans' and debt securities' amortized cost basis on our consolidated balance sheets, and which will reduce our total stockholders' equity. 14

~~While~~economic ASU 2016-13 does not require any particular method for determining the allowance for credit losses, it does specify the allowance should be based on relevant information about past events, including historical loss experience, current portfolio and market conditions, ~~and~~or ~~reasonable~~adverse ~~and~~developments ~~supportable~~in ~~forecasts~~our ~~for the expected contractual term adjusted for prepayment and extensions, where applicable, of each~~ loan~~. Because~~ our methodology for determining the allowance for credit losses may differ from the methodologies employed by other companies, our allowance for credit losses may not be comparable with the allowance for credit losses reported by other companiesportfolio. In ~~addition~~Consequently, ~~other than~~ a ~~few~~problem ~~narrow~~with ~~exceptions,~~one ~~ASU~~or ~~2016-13~~more ~~requires that all financial instruments subject to the CECL model have some amount of reserve to reflect the GAAP Principle underlying the CECL model that all~~ loans, debt securities, and similar assets have some inherent risk of loss, regardless of credit quality, subordinate capital, or other mitigating factors. Accordingly, the adoption of the CECL model has materially affected, and will continue to materially affect, how we determine our allowance for credit losses and could require us to significantly increase ~~our allowance and recognize provisions for credit losses earlier in~~ the ~~lending cycle. Moreover, the CECL model may create more volatility in the~~ level of our ~~allowance~~CECL ~~for credit losses~~reserves. If weOur ~~are~~estimates ~~required~~and tojudgments ~~materially~~may ~~increase~~not ~~our~~be ~~level~~correct ofand, ~~allowance for credit losses for any reason~~therefore, ~~such~~our ~~increase~~results ~~could~~of ~~adversely~~operations ~~affect~~and ~~our business,~~ financial condition ~~and~~could ~~results~~be ofseverely ~~operations~~impacted.

Our Manager's due diligence may not reveal all of the risks associated with such assets and may not reveal other weaknesses in such assets, which could lead to losses.

Before acquiring certain assets, such as transitional multifamily and other CRE loans or other mortgage-related assets, our Manager conducts (either directly or using third parties) due diligence. Such due diligence may include (1) an assessment of the strengths and weaknesses of the asset’s credit profile, (2) a review of all or merely a subset of the documentation related to the asset, or (3) other reviews that we or our Manager may deem appropriate to conduct. There can be no assurance that we or our Manager will conduct any specific level of due diligence, or that, among other things, the due diligence process will uncover all relevant facts and potential liabilities or that any purchase will be successful, which could result in losses on these assets, which, in turn, could adversely affect our financial condition and results of operations.

Our Manager utilizes analytical models and data in connection with the valuation of certain of our assets, and any incorrect, misleading or incomplete information used in connection therewith would subject us to potential risks.

Given the complexity of certain of our target assets, our Manager may rely heavily on analytical models and information and data supplied by third parties. Models and data are used to value potential target assets, potential credit risks and reserves and also in connection with hedging our acquisitions. Many of the models are based on historical trends. These trends may not be indicative of future results. Furthermore, the assumptions underlying the models may prove to be inaccurate, causing the models to also be incorrect. In the event models and data prove to be incorrect, misleading or incomplete, any decisions made in reliance thereon expose us to potential risks. For example, by relying on incorrect models and data, especially valuation models, our Manager may be induced to buy for us certain target assets at prices that are too high, to sell certain other assets at prices that are too low or to miss favorable opportunities altogether. Similarly, any hedging based on faulty models and data may prove to be unsuccessful.

Any credit ratings assigned to our investments will be subject to ongoing evaluations and revisions and we cannot assure you that those ratings will not be downgraded.

Some of our investments may be rated by Moody’s Investors Service, Fitch Ratings, Standard & Poor’s, Kroll Bond Rating Agency, DBRS, Inc., Egan Jones, or other rating agencies. Any credit ratings on our investments are subject to ongoing evaluation by credit rating agencies, and we cannot assure you that any such ratings will not be changed or withdrawn by a rating agency in the future if, in its judgment, circumstances warrant. If rating agencies assign a lower-than-expected rating or reduce or withdraw, or indicate that they may reduce or withdraw, their ratings of our investments in the future, the value of these investments could significantly decline, which would adversely affect the value of our investment portfolio and could result in losses upon disposition or the failure of borrowers to satisfy their debt service obligations to us.

We may be exposed to environmental liabilities with respect to properties to which we take title.

In the course of our business, we have taken and may in the future take title to real estate, and, if we do take title, we could be subject to environmental liabilities with respect to these properties. In such a circumstance, we may be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination, or we may be required to investigate or clean up hazardous or toxic substances or chemical releases at a property. The costs associated with investigation or remediation activities could be substantial. If we ever become subject to significant environmental liabilities, our business, financial condition, results of operations and our ability to make distributions to our stockholders could be adversely affected.

The properties underlying our CRE loans may be subject to other unknown liabilities that could adversely affect the value of these properties, and as a result, our investments.

Properties underlying our commercial real estate loans may be subject to other unknown or unquantifiable liabilities that may adversely affect the value of our investments. Such defects or deficiencies may include title defects, title disputes, liens or other encumbrances on the mortgaged properties. The discovery of such unknown defects, deficiencies and liabilities could affect the ability of our borrowers to make payments to us or could affect our ability to foreclose and sell the underlying properties, which could adversely affect our results of operations and financial condition.

We may be affected by deficiencies in foreclosure practices of third parties, as well as related delays in the foreclosure process.

There continues to be uncertainty around the timing and ability of servicers to remove delinquent borrowers from their homes, so that they can liquidate the underlying properties and ultimately pass the liquidation proceeds through to owners of the mortgage loans. Given the magnitude of the housing crisis, and in response to the well-publicized failures of many servicers to follow proper foreclosure procedures (such as "robo-signing"), mortgage servicers are being held to much higher foreclosure-related documentation standards than they previously were. However, because many mortgages have been transferred and assigned multiple times (and by means of varying assignment procedures) throughout the origination, warehouse and securitization processes, mortgage servicers may have difficulty furnishing the requisite documentation to initiate or complete foreclosures. This leads to stalled or suspended foreclosure proceedings, and ultimately additional foreclosure-related costs. Foreclosure-related delays also tend to increase ultimate loan loss severities as a result of property deterioration, amplified legal and other costs, and other factors. Many factors delaying foreclosure, such as borrower lawsuits and judicial backlog and scrutiny, are outside of servicers’ control and have delayed, and will likely continue to delay, foreclosure processing in both judicial states (where foreclosures require court involvement) and non-judicial states.

We may find it necessary or desirable to foreclose on certain of the loans we acquire. Whether or not we have participated in the negotiation of the terms of any such loans, we cannot assure you as to the adequacy of the protection of the terms of the applicable loan, including the validity or enforceability of the loan and the maintenance of the anticipated priority and perfection of the applicable security interests. Furthermore, claims may be asserted by lenders or borrowers that might interfere with enforcement of our rights. Borrowers may resist foreclosure actions by asserting numerous claims, counterclaims and defenses against us, including, without limitation, lender liability claims and defenses, even when the assertions may have no basis in fact, in an effort to prolong the foreclosure action and seek to force the lender into a modification of the loan or a favorable buy-out of the borrower's position in the loan. In some states, foreclosure actions can take several years or more to litigate. A servicer’s failure to remove delinquent borrowers from their homes in a timely manner could increase our costs, adversely affect the value of the property and mortgage loans and have an adverse effect on our results of operations and business. In addition, foreclosure may create a negative public perception of the collateral property, resulting in a diminution of its value. Even if we are successful in foreclosing on a mortgage loan, the liquidation proceeds upon sale of the underlying real estate may not be sufficient to recover our investment. Any costs or delays involved in the foreclosure of the loan or a liquidation of the underlying property will reduce the net proceeds realized and, thus, increase the potential for loss.

foreclosure may create a negative public perception of the collateral property, resulting in a diminution of its value. Even if we are successful in foreclosing on a mortgage loan, the liquidation proceeds upon sale of the underlying real estate may not be sufficient to recover our investment. Any costs or delays involved in the foreclosure of the loan or a liquidation of the underlying property will reduce the net proceeds realized and, thus, increase the potential for loss.

Insurance on mortgage loans and real estate securities collateral may not cover all losses.

There are certain types of losses, generally of a catastrophic nature, such as earthquakes, floods, fires, hurricanes, terrorism or acts of war, which may be uninsurable or not economically insurable. Inflation, changes in building codes and ordinances, environmental considerations and other factors, including terrorism or acts of war, also might result in insurance proceeds insufficient to repair or replace a property if it is damaged or destroyed. Under these circumstances, the insurance proceeds received with respect to a property relating to one of our investments might not be adequate to restore our economic position with respect to our investment. Any uninsured loss could result in the loss of cash flow from, and the asset value of, the affected property and the value of our investment related to such property.

The allocation of the net proceeds of any equity offering among our target assets, and the timing of the deployment of these proceeds is subject to, among other things, then prevailing market conditions and the availability of target assets.

Our allocation of the net proceeds from any equity offering among our target assets is subject to our investment guidelines and maintenance of our REIT qualification. Our Manager will make determinations as to the percentage of our equity that will be invested in each of our target assets and the timing of the deployment of the net proceeds of our equity offerings. These determinations will depend on then prevailing market conditions and may change over time in response to opportunities available in different interest rate, economic and credit environments. Until appropriate assets can be identified, our Manager may decide to use the net proceeds of our offerings to pay down our short-term debt or to invest the net proceeds in interest-bearing short-term investments, including funds, which are consistent with maintenance of our REIT qualification. These investments are expected to provide a lower net return than we seek to achieve from our target assets. Prior to the time we have fully used the net proceeds of our offerings to acquire our target assets, we may fund our monthly and/or quarterly distributions out of such net proceeds.

Real estate valuation is inherently subjective and uncertain.

The valuation of real estate and therefore the valuation of any collateral underlying our loans is inherently subjective due to, among other factors, the individual nature of each property, its location, the expected future rental revenues from that particular property and the valuation methodology adopted. As a result, the valuations of the real estate assets against which we will make or acquire loans are subject to a large degree of uncertainty and are made on the basis of assumptions and methodologies that may not prove to be accurate, particularly in periods of volatility, low transaction flow or restricted debt availability in the commercial or residential real estate markets.

We may invest in CMBS which are subordinate in right of payment to more senior securities.

Our investments may include subordinated tranches of CMBS, which are a subordinated class of security in a structure of securities collateralized by a pool of mortgage loans and, accordingly, isare the first or among the first to bear the loss upon a restructuring or liquidation of the underlying collateral and the last to receive payment of interest and principal. Additionally, estimated fair value of these subordinated interests tend to be more sensitive to changes in economic conditions than more senior securities. As a result, such subordinated interests generally are not actively traded and may not provide holders thereof with liquid investments.

Changes in prepayment rates may adversely affect our profitability.

Our business is primarily focused on originating, investing in, financing and managing floating-rate mortgage loans secured by multifamily properties and other CRE assets. Generally, our mortgage loan borrowers may repay their loans prior to their stated maturities. Changes in prepayment rates are difficult to predict. In periods of declining interest rates and/or credit spreads, prepayment rates on loans generally increase. If general interest rates and credit spreads decline at the same time, the proceeds of such prepayments received during such periods are likely to be reinvested in assets yielding less than the yields on the assets that were prepaid. We may not be able to reinvest the principal repaid at the same or higher yield of the original investments. Conversely, in periods of rising interest rates, prepayments are likely to decrease and the number of our borrowers who exercise extension options, which could extend beyond the term of certain secured financing agreements we use to finance our loan investments, is likely to increase. This could have a negative impact on our results of operations, and in some situations, we may be forced to sell assets to maintain adequate liquidity, which could cause us to incur losses. Prepayments can also occur when borrowers default on their mortgages and the mortgages are prepaid from the proceeds of a foreclosure sale of the property, or when borrowers sell the property and use the sale proceeds to prepay the mortgage. Prepayment rates may also be affected by conditions in the financial markets, general economic conditions and the relative interest rates on commercial mortgages, which could lead to an acceleration of the payment of the related principal. While we will seek to manage prepayment risk, in selecting our real estate investments we must balance prepayment risk against other risks, the potential returns of each investment and the cost of hedging our risks. Additionally, we are subject to prepayment risk associated with the terms of our CLOs and secured financings. Due to the generally short-term nature of transitional floating-rate commercial mortgage loans, our CLOs and secured financings include a reinvestment period during which principal repayments and prepayments on our commercial mortgage loans may be reinvested in similar assets, subject to meeting certain eligibility criteria. While the interest-rate spreads of our CLOs and secured financings are fixed until they are repaid, the terms, including spreads, of newly originated loans are subject to uncertainty based on a variety of factors, including market and competitive conditions. To the extent that such conditions result in lower spreads on the assets in which we reinvest, we may be subject to a reduction in interest income in the future. No strategy can completely insulate us from prepayment or other such risks, and we may deliberately retain exposure to prepayment or other risks.

assets that were prepaid. We may not be able to reinvest the principal repaid at the same or higher yield of the original investments. Conversely, in periods of rising interest rates, prepayments are likely to decrease and the number of our borrowers who exercise extension options, which could extend beyond the term of certain secured financing agreements we use to finance our loan investments, is likely to increase. This could have a negative impact on our results of operations, and in some situations, we may be forced to sell assets to maintain adequate liquidity, which could cause us to incur losses. Prepayments can also occur when borrowers default on their mortgages and the mortgages are prepaid from the proceeds of a foreclosure sale of the property, or when borrowers sell the property and use the sale proceeds to prepay the mortgage. Prepayment rates may also be affected by conditions in the financial markets, general economic conditions and the relative interest rates on commercial mortgages, which could lead to an acceleration of the payment of the related principal. While we will seek to manage prepayment risk, in selecting our real estate investments we must balance prepayment risk against other risks, the potential returns of each investment and the cost of hedging our risks. Additionally, we are subject to prepayment risk associated with the terms of our CLOs and secured financings. Due to the generally short-term nature of transitional floating-rate commercial mortgage loans, our CLOs and secured financings include a reinvestment period during which principal repayments and prepayments on our commercial mortgage loans may be reinvested in similar assets, subject to meeting certain eligibility criteria. While the interest-rate spreads of our CLOs and secured financings are fixed until they are repaid, the terms, including spreads, of newly originated loans are subject to uncertainty based on a variety of factors, including market and competitive conditions. To the extent that such conditions result in lower spreads on the assets in which we reinvest, we may be subject to a reduction in interest income in the future. No strategy can completely insulate us from prepayment or other such risks, and we may deliberately retain exposure to prepayment or other risks.

We are highly dependent on communications and information systems. Systems failures could significantly disrupt our operations, which may, in turn, negatively affect the market price of our equity securities and our ability to make distributions.

Our business is highly dependent on the communications and information systems of our Manager. Any failure or interruption of our Manager’s systems could have a material adverse effect on our operating results and negatively affect the market price of our equity securities and our ability to make distributions.

The occurrence of cyber-incidents, or a deficiency in our Manager's cybersecurity or those of any of our third-party service providers, could negatively affect our business by causing a disruption to our operations, a compromise of our confidential information or damage to our business relationships or reputation, all of which could negatively impact our business and results of operations.

A cyber-incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of our or our Manager's information resources or those of our third party service providers. A cyber-incident can be an intentional attack or an unintentional event and can include gaining unauthorized access to a system to disrupt operations, corrupt data or steal confidential information. The primary risks that could directly result from a cyber-incident include operational interruption and private data exposure. Our Manager has implemented processes, procedures and controls to help mitigate these risks, but these measures, as well as our increased awareness of the risk of a cyber-incident, do not guarantee that our business and results of operations will not be negatively impacted by such an incident.

Social, political, and economic instability, unrest, and other circumstances beyond our control could adversely affect our business operations.

Our business may be adversely affected by social, political, and economic instability, unrest, or disruption, including protests, demonstrations, strikes, riots, civil disturbance, disobedience, insurrection and looting in geographic regions where the properties securing our investments are located. Such events may result in property damage and destruction and in restrictions, curfews, or other governmental actions that could give rise to significant changes in regional and global economic conditions and cycles, which may adversely affect our financial condition and operations.

Any or all of the foregoing could have material adverse effect on our financial condition, results of operations and cash flows, or the market price of our common stock. Additional risks and uncertainties not currently known to us, or that we presently deem to be immaterial, may also have potential to materially adversely affect our business, financial condition and results of operations.

Risks Related to Financing and Hedging

Our strategy involves leverage, which may amplify losses, and there is no specific limit on the amount of leverage that we may use.

We leverage our portfolio investments in our target assets principally through borrowings under collateralized loan obligations, master repurchase agreements and other financing arrangements. Our leverage (on both a GAAP and non-GAAP basis) currently ranges, and we expect that it will continue to range, between three and six times the amount of our stockholders’ equity. We will incur this leverage by borrowing against a substantial portion of the market or face value of our assets. Our leverage, which is fundamental to our investment strategy, creates significant risks.

To the extent that we incur leverage, we may incur substantial losses if our borrowing costs increase. Our borrowing costs may increase for any of the following, or other, reasons:

•short-term interest rates increase;

•the market value of our securities decreases;

•interest rate volatility increases;

•the availability of financing in the market decreases; or

•changes in advance rates.

Our return on our investments and cash available for distributions may be reduced if market conditions cause the cost of our financing to increase relative to the income that can be derived from the assets acquired, which could adversely affect the price of our equity securities. In addition, our debt service payments will reduce cash flow available for distributions to stockholders. In addition, if the cost of our financing increases, we may not be able to meet our debt service obligations. To the extent that we cannot meet our debt service obligations, we risk the loss of some or all of our assets to satisfy our debt obligations. To the extent we are compelled to liquidate qualified REIT assets to repay debts, our compliance with the REIT rules regarding our assets and our sources of income could be negatively affected, which would jeopardize our qualification as a REIT. Losing our REIT status would cause us to lose tax advantages applicable to REITs and would decrease our overall profitability and distributions to our stockholders.

We may incur significant additional debt in the future, which will subject us to increased risk of loss and may reduce cash available for distributions to our stockholders.

Subject to market conditions and availability, we may incur significant additional debt in the future. Although we are not required by our board of directors to maintain any particular assets-to-equity leverage ratio, the amount of leverage we may deploy for particular assets will depend upon our Manager’s assessment of the credit and other risks of those assets. Our board of directors may establish and change our leverage policy at any time without stockholder approval. Incurring debt could subject us to many risks that, if realized, would adversely affect us, including the risk that:

•our cash flow from operations may be insufficient to make required payments of principal and interest on the debt or we may fail to comply with all of the other covenants contained in the debt, which is likely to result in (1) acceleration of such debt (and any other debt containing a cross-default or cross-acceleration provision) that we may be unable to repay from internal funds or to refinance on favorable terms, or at all, (2) our inability to borrow unused amounts under our financing arrangements, even if we are current in payments on borrowings under those arrangements, and/or (3) the loss of some or all of our assets to foreclosure or sale;

•our debt may increase our vulnerability to adverse economic and industry conditions with no assurance that investment yields will increase with higher financing costs;

•we may be required to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations, investments, stockholder distributions or other purposes;

•we may not be able to refinance debt that matures prior to the investment it was used to finance on favorable terms or at all; and

•we may be required to maintain specified minimum levels of liquidity, and as a result, we may not be able to leverage our assets as fully as we would otherwise choose, which could reduce our return on assets; if we are unable to meet these collateral obligations, our financial condition and prospects could deteriorate significantly.

There can be no assurance that our Manager will be able to prevent mismatches in the maturities of our assets and liabilities.

Because we employ financial leverage in funding our portfolio, mismatches in the maturities of our assets and liabilities can create risk in the need to continually renew or otherwise refinance our liabilities. Our net interest margins will be dependent upon a positive spread between the returns on our asset portfolio and our overall cost of funding. Our Manager’s risk management tools include software and services licensed or purchased from third parties, in addition to proprietary systems and analytical methods developed internally. There can be no assurance that these tools and the other risk management techniques described above will protect us from asset/liability risks.

portfolio and our overall cost of funding. Our Manager’s risk management tools include software and services licensed or purchased from third parties, in addition to proprietary systems and analytical methods developed internally. There can be no assurance that these tools and the other risk management techniques described above will protect us from asset/liability risks.

Lenders generally require us to enter into restrictive covenants relating to our operations.

When we obtain financing, lenders typically impose restrictions on us that would affect our ability to incur additional debt, our capability to make distributions to stockholders and our flexibility to determine our operating policies. Loan documents we execute may contain negative covenants that limit, among other things, our ability to repurchase stock, distribute more than a certain amount of our funds from operations and employ leverage beyond certain amounts.

We have financed, and may in the future seek to finance, CRE loans and investments through non-recourse secured financings, including CRE CLOs, and such transactions involve significant risks and expose us to losses.

We have financed, and may in the future seek to finance, CRE loans and investments through non-recourse secured financings, including CRE CLOs. These financing transactions involve originating or acquiring a pool of CRE loans, contributing such loans to a special-purpose entity and selling bonds issued by the special-purpose entity that are secured, on a non-recourse basis, by the pool of CRE loans. As the sponsor of these financing transactions, we generally retain the equity securities of the special-purpose issuing entity and potentially other subordinated tranches of securities issued by the special-purpose issuing entity. Because of the interests we retain, in particular with respect to equity or similar subordinated tranches, actions taken by our Manager or any entity that acts as special servicer may in the future conflict with our interests. See “—Risks Related to Our Investment Strategies and Our Businesses—Our investments in CRE CLOs and other similar structured finance investments, as well as those we structure, sponsor or arrange, pose additional risks, including the risks of the securitization process and the risk that the special servicer, Lument Real Estate Capital, LLC ("LREC"), an affiliate of our Manager, may take actions that could adversely affect our interests.”

The inability to consummate CRE CLOs or other secured financings of our CRE loans and investments could require us to seek other forms of potentially less attractive financing or to liquidate assets at an inopportune time or an unfavorable price, which could adversely affect our performance and our ability to grow our business. Moreover, conditions in the capital markets, including volatility and disruption in the capital and credit markets may not permit us to consummate a CRE CLO or other secured financing at any particular time or on terms favorable to us even if we have sufficient eligible assets. We may also suffer losses if the value of the mortgage loans we acquire declines prior to financing those assets with a CRE CLO or secured financing. Declines in the value of a mortgage loan can be due to, among other things, changes in interest rates and changes in the credit quality of the loan. In addition, we may suffer a loss due to the incurrence of transaction costs related to executing these transactions. To the extent that we incur a loss executing or participating in future CRE CLOs or other secured financings for the reasons described above or for other reasons, it could materially and adversely impact our business and financial condition. In addition, the inability to securitize our portfolio may hurt our performance and our ability to grow our business.

The CRE CLOs and other secured financings we have entered into, and may in the future enter into, include certain interest coverage tests, overcollateralization coverage tests or other tests that, if not met, may result in a change in the priority of distributions, which may result in the reduction or elimination of distributions to the subordinate debt and equity tranches retained by us until the tests have been met or certain senior classes of securities have been paid in full. Accordingly, if such tests are not satisfied, we, as holders of the subordinate debt and equity interests in the applicable CRE CLO or secured financing, may experience a significant reduction in our cash flow from those interests.

Our inability to meet certain financial covenants related to our credit agreements could adversely affect our business, financial condition and results.

In connection with our credit and guaranty agreement, we are required to maintain certain financial covenants with respect to our net worth, asset values, loan portfolio composition, leverage ratios and debt service coverage levels. Compliance with these financial covenants will depend on market factors and the strength of our business and operating results. Various risks, uncertainties and events beyond our control could affect our ability to comply with our financial covenants. Failure to comply with our financial covenants could result in an event of default, termination of the credit facility and acceleration of all amounts owing under our credit facility and gives the counterparty the right to exercise certain other remedies under the credit agreement, unless we were able to negotiate a waiver. Any such waiver could be conditioned on an amendment to our credit facility and any related guaranty agreement on terms that may be unfavorable to us. If we are unable to negotiate a covenant waiver or replace or refinance our assets under a new credit facility on favorable terms or at all, our financial condition, results of operations and cash flows could be adversely affected.

17We have entered into, and may in the future enter into, repurchase agreements, and our rights under such repurchase agreements may be subject to effects of the bankruptcy laws in the event of the bankruptcy or insolvency of us or our counterparties under the repurchase agreements.

negotiate a waiver. Any such waiver could be conditioned on an amendment to our credit facility and any related guaranty agreement on terms that may be unfavorable to us. If we are unable to negotiate a covenant waiver or replace or refinance our assets under a new credit facility on favorable terms or at all, our financial condition, results of operations and cash flows could be adversely affected.

We may enter into repurchase agreements, and our rights under such repurchase agreements may be subject to the effects of the bankruptcy laws in the event of the bankruptcy or insolvency of us or our counterparties under the repurchase agreements.

In the event of our insolvency or bankruptcy, certain repurchase agreements may qualify for special treatment under Title 11 of the United States Code, as amended, or the U.S. Bankruptcy Code, the effect of which, among other things, would be to allow the lender under the applicable repurchase agreement to avoid the automatic stay provisions of the U.S. Bankruptcy Code and to take possession of and liquidate the assets that we have pledged under their repurchase agreements. In the event of the insolvency or bankruptcy of a lender during the term of a repurchase agreement, the lender may be permitted, under applicable insolvency laws, to repudiate the contract, and our claim against the lender for damages may be treated simply as an unsecured creditor. In addition, if the lender is a broker or dealer subject to the Securities Investor Protection Act of 1970, or an insured depository institution subject to the Federal Deposit Insurance Act, our ability to exercise our rights to recover our securities under a repurchase agreement or to be compensated for any damages resulting from the lender’s insolvency may be further limited by those statutes. These claims would be subject to significant delay and, if and when received, may be substantially less than the damages we actually incur.

Master repurchase agreements, credit facilities, or other financings that we use or may use in the future to finance our assets may require us to provide additional collateral or pay down debt.

~~Master~~We have entered into an uncommitted master repurchase agreement with JPMorgan Chase Bank, National Association and a term financing agreement with Northeast Bank. Our master repurchase agreement, term financing agreement, and additional repurchase agreements or other ~~financing~~financings we may enter into in the future, involve the risk that the market value of the assets pledged or sold by us to the provider of the financing may decline in value, in which case the lender or counterparty may require us to provide additional collateral or lead to margin calls that may require us to repay all or a portion of the funds advanced. We may not have the funds available to repay our debt at that time, which would likely result in defaults unless we are able to raise the funds from alternative sources, including by selling assets at a time when we might not otherwise choose to do so and when we may not be able to do so on favorable terms or at all. Posting additional collateral would reduce our cash available to make other, higher yielding investments, thereby decreasing our return on equity. If we cannot meet these requirements, the lender or counterparty could accelerate our indebtedness, increase the interest rate on advanced funds and terminate our ability to borrow funds from it, which could materially and adversely affect our financial condition and ability to implement our investment strategy. In the case of repurchase transactions, if the value of the underlying security has declined as of the end of that term, or if we default on our obligations under the repurchase agreement, we will likely incur a loss on our repurchase transactions.

meet these requirements, the lender or counterparty could accelerate our indebtedness, increase the interest rate on advanced funds and terminate our ability to borrow funds from it, which could materially and adversely affect our financial condition and ability to implement our investment strategy. In the case of repurchase transactions, if the value of the underlying security has declined as of the end of that term, or if we default on our obligations under the repurchase agreement, we will likely incur a loss on our repurchase transactions.

Interest rate fluctuations could increase our borrowing costs, which could lead to a significant decrease in our results of operations, cash flows and the market value of investments.

To the extent that our financing costs are determined by reference to floating rates, such as SOFR or a Treasury index, the amount of such costs will depend on the level and movement of interest rates. In recent years, interest rates had remained at relatively low levels on a historical basis. However, ~~since~~between ~~January~~ 2022 and late 2024, in light of increasing inflation, the U.S. Federal Reserve has increased interest rates eleven times. In a period of rising interest rates, our interest expense on floating-rate debt would increase, while any additional interest income we earn on our floating-rate investments may be subject to caps and may not compensate for such increase in interest expense. Specifically, in a rising interest environment, our interest income on our current portfolio is expected to increase. Notwithstanding the current period of relatively high interest rates, the U.S. Federal Reserve began decreasing rates in 2024. Although decelerating, inflation remains above the U.S. Federal Reserve’s target levels. Despite multiple federal ~~fund~~funds rate decreases over the course of 2024 and 2025, interest rates have remained elevated, with the U.S. Federal Reserve indicating in early ~~2025~~2026 an expectation of slower rate decreases moving forward. A slower‐than‐expected decrease, or a further increase, in interest rates would continue to present a challenge to real estate valuations. In a period of declining interest rates, our interest income on floating-rate investments would generally decrease, while any decrease in the interest we are charged on our floating-rate debt may be subject to floors and may not compensate for such decrease in interest income. However, rate floors relating to our loan portfolio may offset some of the impact from declining rates. In addition, interest we are charged on our fixed-rate debt would not change. Any such scenario could adversely affect our results of operations and financial condition.

We have utilized and may utilize in the future non-recourse securitizations to finance our loans and investments, which may expose us to risks that could result in losses.

We have utilized and may utilize in the future, non-recourse securitizations of our portfolio ~~investment~~investments to generate cash for funding new loans and investments and other purposes. These transactions generally involve creating a special-purpose entity, contributing a pool of our assets to the entity, and selling interest in the entity on a non-recourse basis to purchasers (whom we would expect to be willing to accept a lower interest to invest in investment-grade loan pools). We would expect to retain all or a portion of the equity and potentially other tranches in the securitized pool of loans or investments. In addition, we have retained in the past and may in the future retain a pari passu participation in the securitized pool of loans.

Prior to any such financing, we may use short-term facilities to finance the acquisition of assets until a sufficient quantity of investments have been accumulated, at which time we would refinance these facilities through a securitization, such as a CMBS, or issuance of CLOs or secured financings, or the private placement of loan participations or other long-term financing. As a result, we would be subject to the risk that we would not be able to acquire, during the period that our short-term facilities are available, a sufficient amount of eligible investment to maximize the efficiency of a CMBS, CLO or other private placement issuance. We also would be subject to the risk that we would not be able to obtain short-term credit facilities or would not be able to renew any short-term credit facilities after they expire should we find it necessary to extend our short-term credit facilities to allow more time to seek and acquire the necessary eligible investment for a long-term financing. The inability to consummate securitizations of our portfolio to finance our loans and investments on a long-term basis could require us to seek other forms of potentially less attractive financing or to liquidate assets at an inopportune time or price, which could adversely affect our performance and our ability to grow our business. Moreover, conditions in the capital markets, including volatility and disruption in the capital and credit markets, may not permit a non-recourse securitization at any particular time or may make the issuance of any such securitization less attractive to us even when we do have sufficient eligible assets. We may also suffer losses if the value of the mortgage loans we acquire declines prior to securitization. Declines in the value of a mortgage loan can be due to, among other things, changes in interest rates and changes in the credit quality of the loan. In addition, we may suffer a loss due to the incurrence of transaction costs related to executing these transactions. To the extent that we incur a loss executing or participating in future securitizations for the reasons described above or for other reasons, it could materially and adversely impact our business and financial condition. In addition, the inability to securitize our portfolio may hurt our performance and our ability to grow our business.

18In addition, the securitization of our portfolio might magnify our exposure to losses because any equity interest or other subordinate interest we retain in the issuing entity would be subordinate to the notes issued to investors and we would, therefore, absorb all of the losses sustained with respect to a securitized pool of assets before the owners of the notes experience any losses. Moreover, the Dodd-Frank Act contains a risk retention requirement for all asset-backed securities, which requires both public and private securitizers to retain not less than 5% of the credit risk of the assets collateralizing any asset-backed issuance. Significant restrictions exist, and additional restrictions may be added in the future, regarding who may hold risk retention interest, the structure of the entities that hold risk retention interest and when and how such risk retention interests may be transferred. Therefore, such risk retention interests will generally be illiquid. As a result of the risk retention requirements, we have and may in the future be required to purchase and retain certain interests in a securitization into which we sell mortgage loans and/or when we act as an issuer, may be required to sell certain interests in a securitization at prices below levels that such interests have historically yielded and/or may be required to enter into certain arrangements related to risk retention that we have not historically been required to enter into. Accordingly, the risk retention rules may increase our potential liabilities and/or reduce our potential profits in connection with securitization of mortgage loans. It is likely, therefore, that these risk retention rules will increase the administrative and operational cost of asset securitizations.

In addition, the securitization of our portfolio might magnify our exposure to losses because any equity interest or other subordinate interest we retain in the issuing entity would be subordinate to the notes issued to investors and we would, therefore, absorb all of the losses sustained with respect to a securitized pool of assets before the owners of the notes experience any losses. Moreover, the Dodd-Frank Act, contains a risk retention requirement for all asset-backed securities, which requires both public and private securitizers to retain not less than 5% of the credit risk of the assets collateralizing any asset-backed issuance. Significant restrictions exist, and additional restrictions may be added in the future, regarding who may hold risk retention interest, the structure of the entities that hold risk retention interest and when and how such risk retention interests may be transferred. Therefore, such risk retention interests will generally be illiquid. As a result of the risk retention requirements, we have and may in the future be required to purchase and retain certain interests in a securitization into which we sell mortgage loans and/or when we act as an issuer, may be required to sell certain interests in a securitization at prices below levels that such interests have historically yielded and/or may be required to enter into certain arrangements related to risk retention that we have not historically been required to enter into. Accordingly, the risk retention rules may increase our potential liabilities and/or reduce our potential profits in connection with securitization of mortgage loans. It is likely, therefore, that these risk retention rules will increase the administrative and operational cost of asset securitizations.

The failure of assets subject to repurchase agreements to qualify as real estate assets could adversely affect our ability to qualify as a REIT.

We may enter into financing arrangements that are structured as sale and repurchase agreements pursuant to which we would nominally sell certain of our assets to a counterparty and simultaneously enter into an agreement to repurchase these assets at a later date in exchange for a purchase price. Economically, these agreements are financings which are secured by the assets sold pursuant thereto. We believe that we would be treated for REIT asset and income test purposes as the owner of the assets that are the subject of any such sale and repurchase agreement notwithstanding that such agreements may transfer record ownership of the assets to the counterparty during the term of the agreement. It is possible, however, that the IRS could assert that we did not own the assets during the term of the sale and repurchase agreement, in which case we could fail to qualify as a REIT.

We may enter into hedging transactions that expose us to contingent liabilities in the future, which may adversely affect our financial results or cash available for distribution to stockholders.

We may engage in hedging transactions intended to hedge various risks to our portfolio, including the exposure to adverse changes in interest rates. Our hedging activity varies in scope based on, among other things, the level and volatility of interest rates, the type of assets held and other changing market conditions. Although these transactions are intended to reduce our exposure to various risks, hedging may fail to protect or could adversely affect us because, among other things:

•hedging can be expensive, particularly during periods of volatile or rapidly changing interest rates;

•available hedges may not correspond directly with the risks for which protection is sought;

•the duration of the hedge may not match the duration of the related liability;

•the amount of income that a REIT may earn from certain hedging transactions is limited by U.S. federal income tax provisions governing REITs;

•the credit quality of a hedging counterparty may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; and

•the hedging counterparty may default on its obligation to pay.

Subject to maintaining our qualification as a REIT, there are no current limitations on the hedging transactions that we may undertake. However, our Manager’s reliance on the CFTC’s December 7, 2012 no action letter relieving CPOs of mortgage REITs from the obligation to register with the CFTC as CPOs depends on the satisfaction of several conditions, including that we comply with additional limitations on our hedging activity. The letter limits the initial margin and premiums required to establish our Manager’s commodity interest positions to no more than 5% of the fair market value of our total assets and limits the net income derived annually from our commodity interest positions that are not qualifying hedging transactions to less than 5% of our gross income.

Therefore, our and our Manager’s reliance on this no action letter places additional restrictions on our hedging activity. Our hedging transactions could require us to fund large cash payments in certain circumstances (e.g., the early termination of the hedging instrument caused by an event of default or other early termination event or a demand by a counterparty that we make increased margin payments). Our ability to fund these obligations will depend on the liquidity of our assets and access to capital at the time. The need to fund these obligations could adversely affect our financial condition. Further, hedging transactions, which are intended to limit losses, may result in losses, which would adversely affect our earnings and could in turn reduce cash available for distribution to stockholders.

Hedging instruments involve various kinds of risk because they are not always traded on regulated exchanges, guaranteed by an exchange or its clearinghouse or regulated by any U.S. or foreign governmental authorities. The CFTC is still in the process of proposing rules under the Dodd-Frank Act that may make our hedging more difficult or increase our costs. Furthermore, the enforceability of agreements underlying hedging transactions may depend on compliance with applicable statutory and commodity and other regulatory requirements and, depending on the identity of the counterparty, applicable international requirements. The business failure of a hedging counterparty will most likely result in its default. Default by a hedging counterparty may result in the loss of unrealized profits and force us to cover our commitments, if any, at the then current market price. Although we generally seek to reserve the right to terminate our hedging positions, it may not always be possible to dispose of or close out a hedging position without the consent of the hedging counterparty, and we may not be able to enter into an offsetting contract in order to cover our risk. We cannot assure you that a liquid secondary market will exist for hedging instruments purchased or sold, and we may be required to maintain a position until exercise or expiration, which could result in losses.

Hedging against interest rate exposure may adversely affect our earnings, which could reduce our cash available for distribution to our stockholders, and such transactions may fail to protect us from the losses that they were designed to offset.

Subject to maintaining our qualification as a REIT and exemption from registration under the Investment Company Act, we may employ techniques that limit the adverse effects of rising interest rates on a portion of our short-term repurchase agreements and on a portion of the value of our assets. In general, our interest rate risk mitigation strategy depends on our view of our entire portfolio, consisting of assets, liabilities and derivative instruments, in light of prevailing market conditions. We could misjudge the condition of our portfolio or the market. Our interest rate risk mitigation activity varies in scope based on the level and volatility of interest rates and principal repayments, the type of securities held and other changing market conditions. Our actual interest rate risk mitigation decisions are determined in light of the facts and circumstances existing at the time and may differ from our currently anticipated strategy. These techniques may include purchasing or selling futures contracts, entering into interest rate swap, interest rate cap or interest rate floor agreements, swaptions, purchasing put and call options on securities or securities underlying futures contracts, or entering into forward rate agreements.

Because a mortgage borrower typically has no restrictions on when a loan may be paid off either partially or in full, there are no perfect interest rate risk mitigation strategies, and interest rate risk mitigation may fail to protect us from loss. Alternatively, we may fail to properly assess a risk to our portfolio or may fail to recognize a risk entirely leaving us exposed to losses without the benefit of any offsetting interest rate mitigation activities. The derivative instruments we select may not have the effect of reducing our interest rate risk. The nature and timing of interest rate risk mitigation transactions may influence the effectiveness of these strategies. Poorly designed strategies or improperly executed transactions could actually increase our risk and losses. In addition, interest rate risk mitigation activities could result in losses if the event against which we mitigate does not occur.

Our loans and investments may be subject to fluctuations in interest rates that may not be adequately protected, or protected at all, by our hedging strategies.

Our assets include loans with either floating interest rates or fixed interest rates. Floating rate loans earn interest at rates that adjust from time to time based upon an index (typically term SOFR). These floating rate loans are insulated from changes in value specifically due to changes in interest rates; however, the coupons they earn fluctuate based upon interest rates and, in a declining and/or low-interest rate environment, these loans will earn lower rates of interest and this will impact our operating performance. Fixed interest rate loans, however, do not have adjusting interest rates and the relative value of the fixed cash flows from these loans will decrease as prevailing interest rates rise or increase as prevailing interest rates fall, causing potentially significant changes in value. We may employ various hedging strategies to limit the effects of changes in interest rates (and in some cases credit spreads), including engaging in interest rate swaps, caps, floors and other interest rate derivative products. We believe that no strategy can completely insulate us from the risks associated with interest rate changes and there is a risk that such strategies may provide no protection at all and potentially compound the impact of changes in interest rates. Hedging transactions involve certain additional risks such as counterparty risk, leverage risk, the legal enforceability of hedging contracts, the early repayment of hedged transactions and the risk that unanticipated and significant changes in interest rates may cause a significant loss of basis in the contract and a change in current period expense. We cannot make assurances that we will be able to enter into hedging transactions or that such hedging transactions will adequately protect us against the foregoing risks.

Accounting for derivatives under GAAP may be complicated. Any failure by us to meet the requirements for applying hedge accounting in accordance with GAAP could adversely affect our earnings. Derivatives are required to be highly effective in offsetting changes in the value or cash flows of the hedged items (and appropriately designated and/or documented as such). If it is determined that a derivative is not highly effective at hedging the designated exposure, hedge accounting is discontinued and the changes in fair value of the instrument are included in our reported net income.

Risks Associated with Our Relationship with Our Manager

Our board of directors has approved very broad investment guidelines for our Manager and will not approve each investment and financing decision made by our Manager.

Our Manager is authorized to follow very broad investment guidelines. Our board of directors periodically reviews and updates our investment guidelines and our investment portfolio but does not generally review or approve specific investments. In addition, in conducting periodic reviews, our board of directors may rely primarily on information provided to them by our Manager. Furthermore, our Manager may use complex strategies, and transactions entered into by our Manager may be costly, difficult or impossible to unwind by the time they are reviewed by our board of directors. Our Manager will have great latitude within the broad parameters of our investment guidelines in determining the types and amounts of mortgage related investments it may decide are attractive investments for us, which could result in investment returns that are substantially below expectations or that result in losses, which would adversely affect our business operations and results. In addition, our Manager may invest up to $75 million in any investment on our behalf without restriction and generally without prior approval of our board of directors. Our Manager is generally permitted to invest our assets in its discretion, provided that such investments comply with our investment guidelines. Our Manager’s failure to generate attractive risk-adjusted returns on an investment which represents a significant dollar amount would adversely affect us. Further, decisions made and investments and financing arrangements entered into by our Manager may not fully reflect the best interests of our stockholders.

within the broad parameters of our investment guidelines in determining the types and amounts of mortgage related investments it may decide are attractive investments for us, which could result in investment returns that are substantially below expectations or that result in losses, which would adversely affect our business operations and results. In addition, our Manager may invest up to $75 million in any investment on our behalf without restriction and generally without prior approval of our board of directors. Our Manager is generally permitted to invest our assets in its discretion, provided that such investments comply with our investment guidelines. Our Manager’s failure to generate attractive risk-adjusted returns on an investment which represents a significant dollar amount would adversely affect us. Further, decisions made and investments and financing arrangements entered into by our Manager may not fully reflect the best interests of our stockholders.

We are dependent on our Manager and its key personnel for our success.

We have no separate facilities and are completely reliant on our Manager. All of our officers are employees of an affiliate of our Manager. Our Manager has significant discretion as to the implementation of our investment and operating policies and strategies. Accordingly, we believe that our success will depend to a significant extent upon the efforts, experience, diligence, skill and network of business contacts of the officers and key personnel of our Manager. The officers and key personnel of our Manager evaluate, negotiate, close and monitor our investments; therefore, our success will depend on their continued service. The departure of any of the officers or key personnel of our Manager could have a material adverse effect on our performance. In addition, there can be no assurance that our Manager will remain our investment manager or that we will continue to have access to our Manager’s officers and professionals. The initial term of our ~~management~~Management ~~agreement~~Agreement with our Manager ~~matured~~expired on January 3, 2023, and automatically renewed for a one-year renewal term on such date and will automatically renew every year thereafter unless it is terminated in accordance with its terms. If the ~~management~~Management ~~agreement~~Agreement is terminated and no suitable replacement is found to manage us, we may not be able to execute our business plan.

There are conflicts of interest in our relationship with our Manager, ORIX and ORIX affiliates that could result in decisions that are not in the best interests of our stockholders.

We are subject to conflicts of interests arising out of our relationship with our Manager, including our Manager's ultimate parent, ORIX, and its affiliates. We are managed by our Manager, an ORIX affiliate, and our executive officers are employees of one or more affiliates of our Manager. There is no guarantee that the policies and procedures adopted by us, the terms and conditions of the Management Agreement or the policies and procedures adopted by our Manager, ORIX and their respective affiliates, will enable us to identify, adequately address or mitigate all potential conflicts of interest. Some examples of conflicts of interest that may arise by virtue of our relationship with our Manager and ORIX include:

•Affiliated Service Providers: Our Manager uses ORIX for certain investment and non-investment related services including, but not limited to, underwriting, credit risk, legal and compliance and related support services, general services, human resources, portfolio transaction services, finance and accounting, audit, administrative services, and information and technology support services. Such arrangements may create a conflict as our Manager could be viewed as placing the interests of other ORIX affiliates ahead of the Company’s interests. Furthermore, LREC, an ORIX affiliate, acts as servicer with respect to mortgage assets held by the Company, and servicer and special servicer with respect to the mortgage assets for ~~the~~our ~~2021-FL1~~securitized ~~CLO~~debt obligations and ~~the~~secured ~~LMF~~financing ~~2023-1 Financing~~agreements. Such affiliate relationships may influence our Manager in deciding whether to select a service provider because our Manager may have financial or other business incentives to recommend and engage an ORIX affiliate, even if another person or vendor may be more qualified to provide the applicable service, or may provide such service at a more favorable rate or arrangement.

20•Shared Personnel: In addition to responsibilities with respect to the management and investment activities of LFT, the Manager, its affiliates and their personnel could have similar responsibilities with respect to ORIX and its affiliates and could have other business commitments. Conflicts of interest may arise as a result of certain personnel serving in dual or multiple capacities (e.g. officers, directors, principals, employees, partners, managers, members, agents, nominees), including with respect to the allocation of time, services and resources of such personnel. Dual role situations exist across the business. In serving in these multiple capacities, personnel may have obligations to Lument, ORIX or their affiliates, the fulfillment of which may not be in the best interest of the Company.

•~~Shared~~ORIX's ~~Personnel~~Investment Advisory and Proprietary Activities: InORIX ~~addition~~makes investments pursuant to ~~responsibilities~~an ~~with~~investment ~~respect~~strategy that is similar to the ~~management~~investment ~~and~~strategy ~~investment~~implemented ~~activities~~by ofLument IM with respect to LFT. Therefore, ~~the~~ORIX ~~Manager,~~or ~~its~~an ~~affiliates~~affiliate ~~and~~may ~~their~~originate ~~personnel~~opportunities ~~could~~that ~~have~~are ~~similar~~suitable ~~responsibilities~~for ~~with~~LFT ~~respect~~but are allocated to entities primarily owned by ORIX ~~and~~or its affiliates. ORIX invests and ~~could~~trades ~~have~~in securities, real estate, loans or other ~~business~~financial ~~commitments.~~interests ~~Conflicts~~and ofmakes ~~interest~~other ~~may~~investments ~~arise~~for asits aown ~~result~~investment vehicles utilizing strategies and types of ~~certain~~securities ~~personnel~~that, ~~serving~~from intime ~~dual~~to time, compete or ~~multiple~~will ~~capacities~~be (ein conflict with the Manager’s activities on behalf of LFT.g. ~~officers,~~Our ~~directors,~~Manager ~~principals,~~may ~~employee,~~be ~~partners,~~incentivized ~~managers,~~by ~~members,~~virtue ~~agents,~~of ~~nominees)~~its ~~including~~relationship with ~~respect~~ORIX and its affiliates to compete less vigorously with ORIX for investment opportunities or otherwise conduct its activities in a manner that may disadvantage the ~~allocation~~Company. Our Manager may also provide advice or take action in performance of ~~time,~~its ~~services~~duties for ORIX and ~~resources~~its investment vehicles that may differ from the timing and nature of ~~such~~actions ~~personnel.~~taken ~~Dual~~by ~~role~~the ~~situations~~Manager ~~exist~~with ~~across~~respect to the ~~business~~Company. In ~~serving~~some ininstances, ~~these~~such ~~multiple~~actions ~~capacities~~could be adverse to the Company, ~~personnel~~and ~~may~~the ~~have~~Manager ~~obligations~~has an incentive to ~~Lument~~favor the interests of its affiliates in such circumstances. As a general matter, decisions with respect to ORIX orand ~~their~~its affiliates’ proprietary accounts are made by the ORIX investment committee, which is different from the ~~fulfillment~~investment committee making investment decisions for the Manager on behalf of ~~which~~the Company. In addition, the portfolio strategies that the Manager or its affiliates use could conflict with the transactions and strategies the Manager employs in managing the Company and may ~~not~~affect bethe prices and availability of securities and other financial instruments in which the ~~best~~Manager ~~interest~~invests on behalf of the Company.

•ORIX's Investment Advisory and Proprietary Activities: ORIX makes investments pursuant to an investment strategy that is similar to the investment strategy implemented by Lument IM with respect to LFT. Therefore, ORIX or an affiliate may originate opportunities that are suitable for LFT but are allocated to entities primarily owned by ORIX or its affiliates. ORIX invests and trades in securities, real estate, loans or other financial interests and makes other investments for its own investment vehicles utilizing strategies and types of securities that, from time to time, compete or will be in conflict with the Manager’s activities on behalf of LFT. Our Manager may be incentivized by virtue of its relationship with ORIX and its affiliates to compete less vigorously with ORIX for investment opportunities, or otherwise conduct its activities in a manner that may disadvantage the Company. Our Manager may also provide advice or take action in performance of its duties for ORIX and its investment vehicles that may differ from the timing and nature of actions taken by the Manager with respect to the Company. In some instances, such actions could be adverse to the Company, and the Manager has an incentive to favor the interests of its affiliates in such circumstances. As a general matter, decisions with respect to ORIX and its affiliates’ proprietary accounts are made by the ORIX investment committee, which is different from the investment committee making investment decisions on behalf of the Manager for the Company. In addition, the portfolio strategies that the Manager or its affiliates use could conflict with the transactions and strategies the Manager employs in managing the Company and may affect the prices and availability of securities and other financial instruments in which the Manager invests on behalf of the Company.

ORIX or its affiliates invest, and will likely continue to invest, in some of the same loans as the Company, sometimes at the same time and as part of the same transaction and at other times before or after the Company invests. Since decisions with respect to ORIX and its affiliates’ proprietary accounts are made by a different investment committee than the committee making decisions on behalf of the Company, these decisions could result in the Company having a different outcome than ORIX’s accounts, including that the Company’s account value could be adversely impacted in comparison to ORIX’s accounts. In addition, there is some overlap in the investment committee compositions between the ORIX, Lument and Lument IM investment committees, and members of each committee currently serve and may continue to serve as observers of the other committees.

In addition, we are expected, from time to time, to make an investment in, or a loan to, other companies in which ORIX and its affiliates (each, an “Investing Party”) are also expected to invest, or already have invested, in a different part of the capital structure, which may mean that an Investing Party's interest in such a company may have different rights, preferences and privileges than the company interests held by us. There may be instances where such a company becomes insolvent or bankrupt or where an Investing Party’s interests in such a company may otherwise conflict with the interests of other Investing Parties. To the extent that LFT holds securities or other financial interests (e.g., bank debt) in a company with rights, preferences and privileges that are different than interests held by an Investing Party in the same company, the Manager and its affiliates may be presented with decisions when LFT’s interests and the interests of the Investing Parties conflict. It is possible that our interest may be subordinated or otherwise adversely affected by virtue of other Investing Parties’ involvement and actions relating to such investment, in a bankruptcy proceeding or otherwise. From time to time, we also expect to hold an interest in the more senior portion of an issuer’s capital structure while another Investing Party holds a more junior security of that issuer. Because ORIX is the owner of the Manager, the Manager would experience a conflict of interest in making determinations regarding the senior securities we held, as decisions to enforce remedies or take other actions against the obligors under such senior securities or the related collateral could adversely impact the value of the more junior securities. In such situations, the Manager may be incentivized to decline to enforce such remedies or take such actions on behalf of the senior securities we hold in order to protect the value of the junior securities, which could adversely affect our return. Because our Manager is an ORIX subsidiary, it may be incentivized to make decisions for the benefit of one Investing Party to our detriment if dissatisfaction would cause one of the Investing Parties to redeem capital or discontinue its relationship with ORIX or its affiliates.

•Allocation of Investment Opportunities: Certain conflicts of interest may arise from the fact that ORIX, its affiliates, and our Manager may provide investment management and other services both to us and to other persons or entities, including without limitation, proprietary accounts of ORIX, other clients of the Manager that may be established in the future or clients of affiliates of the Manager, whether or not the investment objectives or policies of such other persons or entities are similar to ours. Because our Manager is affiliated with ORIX, it may have an incentive to retain more favorable investment opportunities for ORIX and its affiliates. LFT may not have exclusivity over otherwise suitable investment opportunities, and there is no guarantee that LFT will be able to participate in all investment opportunities that may fall within our investment objectives.

Limits on investments or investment decisions by ORIX not to participate in certain investments will, in certain cases, significantly constrain our Manager’s ability to make investments on behalf of the Company, particularly with regard to opportunities involving the extension of larger loans. These restrictions could prevent the Company from participating in an attractive investment opportunity in which it would have otherwise participated. The Manager or its affiliates, from time to time, originate loans in which participations and/or assignments may be purchased by the Company. The ability of the Company to invest in such loans will be dependent upon the ability of the Manager to secure financing for such origination, either from another affiliate of the Manager or from a third party. There can be no guarantee that any affiliate of the Manager will be willing or able to make such financing available or that financing from a third party will be available on commercially reasonable terms. If such financing is not available or is not available on terms that are commercially reasonable for purposes of the origination of the loans, the Manager or its affiliates will be unable to originate loans, which may have a material adverse effect on LFT.

When a loan is originated at a time when the Company does not have capacity to make such loan, Lument may originate the loans, which could potentially be sold to the Company when capacity becomes available in the future. Per our Manager's allocation policy for the Company, after origination Lument has no obligation to sell or transfer assets to the Company. Allocations with regard to these loans will be made in our Manager's sole discretion and the Manager may allocate to other entities, including ORIX affiliates or their clients, even if such action would be detrimental to the Company.

~~negotiated~~rights, ~~with~~preferences ~~such~~and ~~borrowers,~~privileges that are different than interests held by an Investing Party in ~~certain~~the ~~circumstances~~same itcompany, the Manager and its affiliates may be ~~customary~~presented orwith ~~beneficial~~decisions ~~for~~when ~~legal,~~LFT’s ~~tax,~~interests ~~regulatory~~and the interests of the Investing Parties conflict. It is possible that our interest may be subordinated or otherwise adversely affected by virtue of other ~~reasons~~Investing ~~for~~Parties’ involvement and actions relating to such ~~transactions~~investment, in a bankruptcy proceeding or otherwise. From time to ~~involve~~time, ~~both~~we also expect to hold an interest in the ~~Company~~more ~~and~~senior portion of an ~~affiliated~~issuer’s ~~lender~~capital structure while another Investing Party holds a more junior security of that issuer. Because ORIX is the owner of the Manager, orthe ~~proceeds~~Manager ~~from~~would ~~one~~experience ~~transaction~~a ~~may~~conflict beof ~~used~~interest in making determinations regarding the senior securities we held, as decisions to ~~pay~~enforce ~~off~~remedies ~~another~~or take other actions against the obligors under such ~~transaction.~~senior Insecurities ~~connection~~or ~~with~~the related collateral could adversely impact the value of the more junior securities. In such ~~transactions~~situations, the Manager ~~will~~may ~~share~~be ~~information~~incentivized ~~about~~to ~~LFT~~decline ~~and~~to ~~its~~enforce ~~assets~~such ~~with~~remedies ~~Affiliated~~or ~~Mortgage~~take ~~Providers~~such actions on behalf of the senior securities we hold in order to ~~facilitate~~protect ~~such~~the ~~financing~~value ~~and~~of ~~enable~~the junior securities, which could adversely affect our return. Because our Manager is an ORIX subsidiary, it may be incentivized to make decisions for the ~~Affiliated~~benefit ~~Mortgage~~of ~~Providers~~one Investing Party to ~~market~~our ~~their~~detriment ~~services~~if dissatisfaction would cause one of the Investing Parties to ~~prospective~~redeem ~~third-party~~capital ~~clients~~or discontinue its relationship with ORIX or its affiliates.

Limits on investments or investment decisions by ORIX not to participate in certain investments will, in certain cases, significantly constrain our Manager’s ability to make investments on behalf of the Company, particularly with regard to opportunities involving the extension of larger loans. These restrictions could prevent the Company from participating in an attractive investment opportunity in which it would have otherwise participated. The Manager or its affiliates, from time to time, sources loans in which participations and/or assignments may be purchased by the Company. The ability of the Company to invest in such loans will be dependent upon the ability of the Manager to secure financing for such loans, either from another affiliate of the Manager or from a third party. There can be no guarantee that any affiliate of the Manager will be willing or able to make such financing available or that financing from a third party will be available on commercially reasonable terms. If such financing is not available or is not available on terms that are commercially reasonable,loan participations or assignments will not be available for the Company to purchase, which may have a material adverse effect on LFT.

In the event the Manager or its affiliates source a loan at a time when the Company does not have capacity to make such loan, an ORIX affiliate may initially fund the loan, with the potential for a subsequent sale of the loan or a loan participation to the Company when capacity becomes available in the future. Per our Manager's allocation policy for the Company, the Manager or its affiliates have no obligation to sell or transfer any assets to the Company.

•Affiliate Financing: Certain ORIX affiliates are providers of mortgage financing for commercial real estate, conventional and affordable multifamily and seniors housing, and healthcare providers, and originate and service loans for various multifamily properties (“Affiliated Mortgage Providers”). These Affiliated Mortgage Providers provide mortgage financing to third parties and other ORIX affiliates that seek to lend to existing borrowers of LFT assets when a loan is nearing maturity or the borrower is seeking alternative financing. While the terms of such financings are negotiated with such borrowers, in certain circumstances it may be customary or beneficial for legal, tax, regulatory or other reasons for such transactions to involve both the Company and an affiliated lender, or proceeds from one transaction may be used to pay off another such transaction. In connection with such transactions, the Manager will share information about LFT and its assets with Affiliated Mortgage Providers to facilitate such financing and enable the Affiliated Mortgage Providers to market their services to prospective third-party clients.

In addition, certain loans held by the Company provide for the payment of an exit fee by the borrower. The Company has agreed to waive such exit fees if a borrower refinances the applicable loan with permanent financing provided by the Manager or any of its affiliates. To the extent such an exit fee is waived as a result of a borrower refinancing the applicable loan with permanent financing from the Manager or any of its affiliates, the expenses reimbursable to the Manager for the quarter in which such exit fee was waived shall be reduced by an amount equal to 50% of the amount of any waived exit fee, capped at a waived exit fee of 1%.

•Principal Trades: ~~Our~~As ~~Manager~~discussed ~~and~~above, ~~its~~from ~~affiliates~~time ~~will~~to ~~act~~time, inthe ~~multiple~~Manager ~~capacities~~will ~~and~~cause ~~effect~~the ~~transactions~~Company ~~with~~to buy a loan or ~~ORIX~~loan ~~and~~participation ~~its~~from ~~affiliates~~an ~~that~~affiliate ~~may~~of ~~have~~the ~~multiple~~Manager, ~~interests~~Lument inStructured aFinance, ~~given~~LLC ~~transaction~~("LSF"). A ~~Specifically,~~conflict ~~loans~~of interest will arise from ~~Lument~~such ~~Structured~~principal ~~Finance,~~transactions ~~LLC,~~because a Manager affiliate is on one side of the transaction and the Company is on the other side of the transaction. Pursuant to Section 206(3) of the Investment Advisers Act of 1940, ~~will~~as beamended, ~~sold~~the Manager is required to provide disclosure to the Company, that it is acting as principal and athe ~~conflict~~potential ~~will~~conflicts that arise ~~when~~from asuch ~~Manager~~transaction ~~affiliate~~and isobtain prior consent from the Company for all such principal transactions on ~~one~~a ~~side~~transaction-by-transaction ofbasis. In the event that the Company declines to provide consent to a principal transaction ~~and~~in respect of the purchase of a loan or loan participation, the Manager ~~may~~will ~~prioritize~~be ~~its~~unable ~~interests~~to ~~over~~consummate ~~those~~the ofinvestment for the Company. and the opportunity will not be available to the Company.

•Information Barriers: Our Manager and ORIX currently operate without information barriers across the business. Consequently, in the event ORIX or its affiliates, including our Manager, acquires confidential or material non-public information, our Manager may be restricted in acquiring or disposing of investments on our behalf until such time as the information becomes public or is no longer deemed material. Due to these restrictions, our Manager may not be able to initiate a transaction on our behalf that it otherwise might initiate and may not be able to purchase or sell an investment that it might have purchased or sold, which could negatively affect our investment results.

•Broad Activities: ORIX engages in a broad range of financial activities, including but not limited to billions of invested or committed capital on behalf of clients and its own proprietary accounts utilizing various investment funds, vehicles, REITs, and accounts. ORIX continues to expand its range of activities and will not be restricted in the scope of business or performance of its services, even if such activities may overlap, compete or conflict with the Company’s business.

•Pre-existing Relationships: The Manager and its affiliates have pre-existing relationships with a significant number of loan obligors. In servicing and administering the loans, each of the Manager and its affiliates may take into account these relationships or the relationships of its affiliates with obligors or issuers and their respective affiliates, which can create a conflict of interest. Various affiliates of the Manager also have relationships with investors, including institutional investors and their senior management. The existence and development of these relationships can potentially influence whether or not the Manager undertakes a particular investment and, if so, the form and level of such investment.

with investors, including institutional investors and their senior management. The existence and development of these relationships can potentially influence whether or not the Manager undertakes a particular investment and, if so, the form and level of such investment.

The incentive fee payable to our Manager under the Management Agreement is payable quarterly and is based on our core earnings and, therefore, may cause our Manager to select investments in more risky assets to increase its incentive compensation.

Our Manager is entitled to receive incentive compensation based upon our achievement of targeted levels of core earnings. In evaluating investments and other management strategies, the opportunity to earn incentive compensation based on core earnings may lead our Manager to place undue emphasis on the maximization of core earnings at the expense of other criteria, such as preservation of capital, in order to achieve higher incentive compensation. Investments with higher yield potential are generally riskier or more speculative. This could result in increased risk to the value of our investment portfolio.

Core earnings is not a measure calculated in accordance with GAAP and is defined in our Management Agreement in this Annual Report on Form 10-K.

The Management Agreement with our Manager may be costly and difficult to terminate, including for our Manager’s poor performance.

The Management Agreement automatically renews for successive one year terms beginning January 3, 2023 and each January 3 thereafter, unless it is sooner terminated upon written notice delivered to the ~~Company or~~ Manager, asby ~~applicable,~~the Company no later than 180 days prior to a renewal date either (i) ~~by the Company~~ upon the affirmative vote of at least two-thirds (2/3) of the independent directors of the Board or (ii) by a vote of at least two-thirds of the Company's outstanding shares of common stock (excluding those shares held by the Manager or an affiliate thereof), in either case based upon a determination that (a) the Manager’s performance is unsatisfactory and materially detrimental to the Company or (b) the compensation payable to the Manager under the Management Agreement is not fair to the Company (provided that in the instance of (b), we shall not have the right to terminate the Management Agreement if the Manager agrees to continue to provide services under the Management Agreement at fees that at least two-thirds of the independent directors of the Board determine to be fair, provided further that in the instance of (b), the Manager will be afforded the opportunity to renegotiate its compensation prior to termination) ~~or (ii) by the Manager~~. We may also terminate the Management Agreement at any time, including during the initial term, without the payment of any termination fee, with at least 30 days’ prior written notice from us "for cause" as described in the Management Agreement. In the event of a termination of the Manager other than a termination for cause, we are required to pay a termination fee to the Manager. The termination fee is equal to three times the sum of (a) the average annual Base Management Fee and (b) the average annual Incentive Compensation, in each case, earned by the Manager during the twenty-four month period immediately preceding the effective date of termination, calculated as of the end of the most recently completed fiscal quarter before the effective date of termination. Our Manager may terminate the Management Agreement upon written notice delivered no later than 180 days prior to a renewal date.

Our Manager’s liability is limited under the Management Agreement and we have agreed to indemnify our Manager and its affiliates against certain liabilities. As a result, we could experience poor performance or losses for which our Manager would not be liable.

Pursuant to the Management Agreement, our Manager does not assume any responsibility other than to render the services called for thereunder and will not be responsible for any action of our board of directors in following or declining to follow its advice or recommendations. Our Manager maintains a contractual as opposed to a fiduciary relationship with us, although our officers who are also employees of an affiliate of our Manager will have a fiduciary duty to us under Maryland ~~Law~~law, as our officers. Under the terms of the Management Agreement, our Manager, its officers, members, managers, directors, personnel, trustees, partners, stockholders, equity holders, any person controlling or controlled by our Manager and any person providing sub-advisory services to our Manager will not be liable to us, our directors, our stockholders or any partners for acts or omissions performed in accordance with and pursuant to the ~~management~~Management ~~agreement~~Agreement, except because of acts or omissions constituting bad faith, willful misconduct, gross negligence or reckless disregard of their duties under the Management Agreement, as determined by a final non-appealable order of a court of competent jurisdiction. In addition, we have agreed to indemnify our Manager, its officers, stockholders, members, managers, directors, personnel, trustees, partners, stockholders, equity holders, any person controlling or controlled by our Manager and any person providing sub-advisory services to our Manager with respect to all expenses, losses, damages, liabilities, demands, charges and claims arising from acts or omissions of our Manager not constituting bad faith, willful misconduct, gross negligence or reckless disregard of duties, performed in good faith in accordance with and pursuant to the Management Agreement. As a result, we could experience poor performance or losses for which our Manager would not be liable.

controlled by our Manager and any person providing sub-advisory services to our Manager with respect to all expenses, losses, damages, liabilities, demands, charges and claims arising from acts or omissions of our Manager not constituting bad faith, willful misconduct, gross negligence or reckless disregard of duties, performed in good faith in accordance with and pursuant to the management agreement. As a result, we could experience poor performance or losses for which our Manager would not be liable.

Our Manager is subject to extensive regulation as an investment adviser, which could adversely affect its ability to manage our business.

Our Manager is an investment adviser registered with the SEC and is subject to regulation by various regulatory authorities that are charged with protecting the interests of its clients, including us. Our Manager could be subject to civil liability, criminal liability or sanction, including revocation or denial of its registration as an investment adviser, revocation of the licenses of its employees, censures, fines or temporary suspension or permanent bar from conducting business, if it is found to have violated any of the laws or regulations applicable to it. Any such liability or sanction could adversely affect its ability to manage our business.

Employee litigation and unfavorable publicity could negatively affect our future business.

Employees may, from time to time, bring lawsuits against us or our Manager regarding injury, creation of a hostile work place, discrimination, wage and hour, sexual harassment and other employment issues. In recent years there has been an increase in the number of discrimination and harassment claims generally. Coupled with the expansion of social media platforms and similar devices that allow individuals access to a broad audience, these claims have had a significant negative impact on some businesses. Companies that have faced employment or harassment related lawsuits have had to terminate management or other key personnel and have suffered reputational harm that has negatively impacted their sales. If we were to face any employment-related claims, our business could be negatively affected.

Risks Related to Our Securities

The market price and trading volume of our securities may vary substantially.

Our common stock is listed on the NYSE under the symbol "LFT." Stock markets, including the NYSE, have experienced significant price and volume fluctuations over the past several years. As a result, the market price of our securities has been and is likely to continue to be similarly volatile, and investors in our securities have experienced since the initial offering of our securities and may continue to experience a decrease in the value of their securities. Accordingly, no assurance can be given as to the ability of our stockholders to sell their securities or the price that our stockholders may obtain for their securities.

Some of the factors that negatively affect the market price of our securities include:

•changes in our dividend rates or frequency of payments thereof;

•actual or anticipated variations in our quarterly operating results;

•changes in our earnings estimates or publication of research reports about us or the real estate industry;

•changes in market valuations of similar companies;

•adverse market reaction to any increased indebtedness we incur in the future;

•additions to or departures of our Manager’s key personnel;

•actions by our stockholders;

•speculation in the press or investment community;

•trading prices of common and preferred equity securities issued by REITs and other similar companies;

•failure to satisfy REIT requirements;

•general economic and financial conditions;

•government action or regulation; and

•our issuance of additional preferred equity or debt securities.

Market factors unrelated to our performance could negatively impact the market price of our securities, and broad market fluctuations could also negatively impact the market price of our securities.

Market factors unrelated to our performance could negatively impact the market price of our securities. One of the factors that investors may consider in deciding whether to buy or sell our securities is our distribution rate as a percentage of our stock price relative to market interest rates. If market interest rates increase, prospective investors may demand a higher distribution rate or seek alternative investments paying higher distributions or interest. As a result, interest rate fluctuations and conditions in the capital markets can affect the market value of our securities. In addition, the stock market has experienced extreme price and volume fluctuations that have affected the market price of many companies in industries similar or related to ours and that have been unrelated to these companies’ operating performances. These broad market fluctuations could reduce the market price of our securities. Furthermore, our operating results and prospects may be below the expectations of public market analysts and investors or may be lower than those of companies with comparable market capitalizations, which could lead to a material decline in the market price of our securities.

The performance of our securities may be affected by the performance of our investments, which may be speculative and aggressive compared to other types of investments.

The investments we make in accordance with our investment objectives may result in a greater amount of risk as compared to alternative investment options, including relatively higher risk of volatility or loss of principal. Our investments may be speculative and aggressive, and therefore an investment in our securities may not be suitable for someone with lower risk tolerance.

One of the factors that investors may consider in deciding whether to buy or sell shares of our securities is our distribution rate as a percentage of the trading price of our securities relative to market interest rates and distribution rates of our competitors. If the market price of our securities is based primarily on the earnings and return that we derive from our investments and income with respect to our investments and our related distributions to stockholders, and not from the market value of the investments themselves, then interest rate fluctuations and capital market conditions are likely to adversely affect the market price of our securities. For instance, if market rates rise without an increase in our distribution rate, the market price of our securities could decrease as potential investors may require a higher distribution yield on our securities or seek other securities paying higher distributions or interest. In addition, rising interest rates would result in increased interest expense on our variable rate debt, thereby reducing cash flow and our ability to service our indebtedness and make distributions to our stockholders.

would result in increased interest expense on our variable rate debt, thereby reducing cash flow and our ability to service our indebtedness and make distributions to our stockholders.

An increase in interest rates may have an adverse effect on the market price of our stock and our ability to make distributions to our stockholders.

One of the factors that investors may consider in deciding whether to buy or sell shares of our stock is our dividend rate, or our future expected dividend rate, as a percentage of our common stock price, relative to market interest rates. If market interest rates increase, prospective investors may demand a higher dividend rate on our shares or seek alternative investments paying higher dividends or interest. As a result, interest rate fluctuations and capital market conditions can affect the market price of our stock independent of the effects such conditions may have on our portfolio.

We have not established a minimum distribution payment level on our common stock and we cannot assure you of our ability to make distributions in the future, or that our board of directors will not reduce distributions in the future regardless of such ability.

We intend to announce quarterly dividends in arrears on a quarterly basis to holders of our common stock. If substantially all of our taxable income has not been paid by the close of any calendar year, we intend to declare a special dividend to holders of our common stock prior to December 31st of the current year, to achieve this result.

We have not established a minimum distribution payment level on our common stock and our ability to make distributions has been and in the future may be adversely affected by the risk factors described in this Annual Report on Form 10-K. All distributions to our common stockholders will be made at the discretion of our board of directors and will depend on our earnings, our financial condition, maintenance of our REIT status and such other factors as our board of directors may deem relevant from time to time. There can be no assurance of our ability to make distributions to our common stockholders, or that our board of directors will not determine to reduce such distributions, in the future. In addition, some of our distributions to our common stockholders may continue to include a return of capital.

Future offerings of debt or equity securities that rank senior to our common stock may adversely affect the market price of our common stock.

If we decide to issue additional equity securities or to issue debt in the future that rank senior to our common stock, it is likely that they will be governed by an indenture or other instrument containing covenants restricting our operating flexibility. Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our common stock and may result in dilution to owners of our common stock. We and, indirectly, our stockholders, will bear the cost of issuing and servicing such securities. Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus holders of our common stock will bear the risk of our future offerings reducing the market price of our common stock and diluting the value of their stock holdings in us. Furthermore, the compensation payable to our Manager will increase as a result of future issuances of our equity securities even if the issuances are dilutive to existing stockholders.

diluting the value of their stock holdings in us. Furthermore, the compensation payable to our Manager will increase as a result of future issuances of our equity securities even if the issuances are dilutive to existing stockholders.

Risks Related to Our Organization and Structure

Because of their significant ownership of our common stock, Lument Investment Holdings, LLC, an affiliate of our Manager, and the Hunt Investors have the ability to influence the outcome of matters that require a vote of our stockholders, including a change of control.

Lument Investment Holdings, LLC and Hunt Companies Equity Holdings, LLC and James C. Hunt (together, the "Hunt Investors") hold a significant interest in our outstanding common stock. As of March 1, ~~2025~~2026, Lument Investment Holdings, LLC owned 27.43% of our outstanding common stock and the Hunt Investors owned 12.23% of our outstanding common stock. In addition, James C. Hunt, is a member of our board of directors. As a result, each of Lument Investment Holdings, LLC and the Hunt Investors has the ability to influence the outcome of matters that require a vote of our stockholders, including election of our board of directors and other corporate transactions, regardless of whether others believe that the transaction is in our best interests.

Maintenance of our exclusion from the Investment Company Act will impose limits on our business; we have not sought formal guidance from the staff of the SEC as to our treatment of loans in securitization trusts and there can be no assurance that the staff will not adopt a contrary interpretation which could cause us to sell material amounts of our assets and to change our investment strategy.

We intend to conduct our operations so that neither we nor our subsidiaries are required to register as investment companies under the Investment Company Act. Section 3(a)(1)(A) of the Investment Company Act defines an investment company as any issuer that is or holds itself out as being engaged primarily in the business of investing, reinvesting or trading in securities. We believe that we do not meet the definition of investment company under Section 3(a)(1)(A) of the Investment Company Act because we do not engage primarily, or hold ourselves out as being engaged primarily, in the business of investing, reinvesting or trading in securities. Rather, we are primarily engaged in a non-investment company ~~businesse~~business related to real estate.

Section 3(a)(1)(C) of the Investment Company Act defines an investment company as any issuer that is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the value of the issuer’s total assets (exclusive of U.S. Government securities and cash items) on an unconsolidated basis. Excluded from the term “investment securities,” among other things, are U.S. Government securities and securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act. We intend to conduct our operations so that we do not come within the definition of an investment company under Section 3(a)(1)(C) of the Investment Company Act, or we otherwise qualify for an exclusion from the definition. We generally rely on guidance published by the SEC or its staff or on our own analyses to determine whether we fall outside of this definition, including, for example, whether a particular subsidiary is a “majority-owned subsidiary” or “wholly-owned subsidiary” (as those terms are defined in and interpreted under the Investment Company Act) for this purpose.

We hold our assets primarily through our direct or indirect subsidiaries, certain of which we believe are excluded from the definitions of investment company pursuant to Section 3(c)(5)(C) of the Investment Company Act. As interpreted by the SEC staff, this exception generally requires that at least 55% of the subsidiary’s total assets be comprised of certain qualifying real estate interests, and at least 80% of the subsidiary’s total assets be comprised of qualifying real estate interests and, as needed, certain real estate-related assets. We generally rely on guidance published by the SEC or its staff, or on our own analyses, to determine which assets are qualifying real estate assets and real estate-related assets.

Certain of our subsidiaries may seek to rely on Rule 3a-7 under the Investment Company Act. Rule 3a-7 under the Investment Company Act is available to certain structured financing vehicles that are engaged in the business of holding financial assets that, by their terms, convert into cash within a finite time period and that issue fixed income securities entitling holders to receive payments that depend primarily on the cash flows from these assets, provided that, among other things, the structured finance vehicle does not engage in certain portfolio management practices resembling those employed by management investment companies (e.g., mutual funds). Accordingly, each such subsidiary’s ability to acquire and dispose of assets is limited. As a result of this limitation as well as others imposed by the rule, these subsidiaries may suffer losses on their assets and we may in turn suffer losses.

We and/or certain of our subsidiaries may seek to rely on the exclusion from the definition of investment company provided by Section 3(c)(6). As a general matter, this section excepts any company primarily engaged, directly or through majority-owned subsidiaries, in one or more other business excepted under the Investment Company Act (including Section 3(c)(5)(C)) or in one or more of such businesses together with an additional business or businesses other than investing, reinvesting, owning, holding, or trading in securities. Little interpretive guidance has been issued by the SEC or its staff with respect to Section 3(c)(6).

SEC and staff no-action and other guidance under the Investment Company Act is based in large part on specific factual situations, some of which differ from the factual situations we and our subsidiaries face from time to time. As a result, we apply SEC or staff guidance that relates to other factual situations by analogy. A number of the staff no-action positions were issued more than twenty years ago. There may be no guidance from the SEC staff that applies directly to our factual situations. No assurance can be given that the SEC or its staff will concur with our analysis, conclusions or approach. In addition, the SEC or its staff may, in the future, issue further guidance that may require us and/or our subsidiaries to re-classify our assets; modify our organizational structure; acquire or sell assets; or make other changes for purposes of the Investment Company Act, any or all of which could materially and adversely affect us. For example, on August 31, 2011, the SEC issued a concept release and request for comments regarding the Section 3(c)(5)(C) exclusion (Release No. IC-29778) in which it solicited public comment on a wide range of issues relating to Section 3(c)(5)(C), including the nature of the assets that qualify for purposes of the exclusion and whether mortgage REITs should be regulated in a manner similar to registered investment companies.

Conducting our business so that we are not required to register under the Investment Company Act limits, among other things: the types of businesses in which we may engage through our subsidiaries; our organizational structure and business strategy; and the types of assets we and our subsidiaries originate, acquire or sell; and the timing of such originations, acquisitions and dispositions (including doing so when we would not otherwise choose to do so). We cannot assure you that we would be able to complete any such originations, acquisitions or dispositions on favorable terms, or at all. Any or all of the above could materially and adversely affect us.

Although we monitor our holdings and organizational structure for ongoing compliance with the above, there can be no assurance that we will be able to continue to avoid registration as an investment company, or that the laws and regulations governing, or regulatory guidance pertaining to, investment company status will not change in a manner that materially and adversely affects us. If the fair market value or income potential of our assets changes, we may need to increase or decrease our holdings of certain of our assets to maintain our exclusion from the Investment Company Act.

If it were established that we were an unregistered investment company, there would be a risk that we would be subject to monetary penalties and injunctive relief in an action brought by the SEC, that we would be unable to enforce contracts with third parties, that third parties could seek to obtain rescission of transactions undertaken during the period for which it was established that we were an unregistered investment company. In addition, in this case, we would need to register as an investment company under the Investment Company Act, modify our operations, perhaps significantly, to seek to continue to avoid being required to register under the Investment Company Act, or seek some form of exemptive or other relief from the SEC or its staff. If we were required to register as an investment company under the Investment Company Act, we would become subject to substantial regulation with respect to our capital structure (including our ability to use borrowings), management, operations, transactions with affiliated persons (as defined in the Investment Company Act) and portfolio composition, including disclosure requirements and restrictions with respect to diversification and industry concentration and other matters. Compliance with the Investment Company Act would, accordingly, limit our ability to make certain investments and require us to significantly restructure our business strategy. Any of the foregoing results would have a material adverse effect on us.

Since we are not expected to be subject to the Investment Company Act and the rules and regulations promulgated thereunder, we will not be subject to its substantive provisions, and thus investors will not receive the protections that the Investment Company Act provides to investors in registered investment companies.

Our authorized but unissued shares of common and preferred stock may prevent a change in our control.

Our charter authorizes us to issue additional authorized but unissued shares of common or preferred stock. In addition, our board of directors may, without stockholder approval, amend our charter to increase the aggregate number of our shares of stock or the number of shares of stock of any class or series that we have authority to issue and classify or reclassify any unissued shares of common or preferred stock and set the preferences, rights and other terms of the classified or reclassified shares. As a result, our board of directors may establish a series of common or preferred stock that could delay or prevent a transaction or a change in control that might involve a premium price for our share class or of common stock or otherwise be in the best interest of our stockholders.

Ownership limitations may restrict change of control or business combination opportunities in which our stockholders might receive a premium for their shares.

In order for us to maintain our REIT qualification for each taxable year after December 31, 2012, during the last half of any taxable year no more than 50% in value of our outstanding capital stock may be owned, directly or indirectly, by five or fewer individuals. "Individuals" for this purpose include natural persons, private foundations, some employee benefit plans and trusts, and some charitable trusts. To assist us in maintaining our qualification as a REIT among other purposes and subject to certain exceptions, our charter generally prohibits any person from directly or indirectly owning more than 9.8% in value or in number of shares, whichever is more restrictive, of the outstanding shares of our common stock or more than 9.8% in value or in number of shares, whichever is more restrictive, of the outstanding shares of our capital stock. On February 17, 2022, in connection with the closing of our rights offering, in which we issued and sold an aggregate of 27,277,269 shares of our common stock, our board of directors adopted resolutions decreasing the common stock ownership limit and the aggregate stock ownership limit from 9.8% to 8.75% for all stockholders who are not excepted holders. The ownership limitations in our charter could have the effect of discouraging a takeover or other transaction in which holders of our equity securities might receive a premium for their shares over the then prevailing market price or which holders might believe to be otherwise in their best interests.

Our board of directors has granted exemptions to the aggregate stock ownership limit and the common stock ownership limit in our charter to (i) XL Bermuda Ltd, (ii) Lument Investment Holdings, LLC, an affiliate of our Manager, and (iii) the Hunt Investors.

Certain provisions of Maryland law may limit the ability of a third party to acquire control of our company.

Certain provisions of the Maryland General Corporation Law ("MGCL") may have the effect of delaying, deferring or preventing a transaction or a change of control of our company that might involve a premium price for holders of our equity securities or otherwise be in their best interests.

Subject to certain limitations, provisions of the MGCL prohibit certain business combinations between us and an "interested stockholder" (defined generally as any person who beneficially owns 10% or more of the voting power of our outstanding voting stock or an affiliate or associate of ours who beneficially owned 10% or more of the voting power of our then outstanding stock during the two-year period immediately prior to the date in question) or an affiliate of the interested stockholder for five years after the most recent date on which the stockholder became an interested stockholder. After the five-year period, business combinations between us and an interested stockholder or an affiliate of the interested stockholder must generally either provide a minimum price to our stockholders (as defined in the MGCL) in the form of cash or other consideration in the same form as previously paid by the interested stockholder or be recommended by our board of directors and approved by the affirmative vote of at least 80% of the votes entitled to be cast by holders of our outstanding shares of voting stock and at least two-thirds of the votes entitled to be cast by stockholders other than the interested stockholder and its affiliates and associates. These provisions of the MGCL relating to business combinations do not apply, however, to business combinations that are approved or exempted by our board of directors prior to the time that the interested stockholder becomes an interested stockholder. Pursuant to the statute, our board of directors has by resolution exempted business combinations between us and the XL Companies and certain affiliates thereof, the parent of which is AXA SA, between us and Hunt Investors and affiliates thereof and between us and Lument Investment Holdings, LLC and affiliates thereof. Consequently, the five-year prohibition and the supermajority vote requirements will not apply to business combinations between us and the exempted parties. As a result, the exempted companies may be able to enter into business combinations with us that may not be in the best interest of our stockholders without compliance by us with the supermajority vote requirements and other provisions of the statute. However, our board of directors may repeal or modify these exemptions at any time in the future, in which case the applicable provisions of this statute will become applicable to business combinations between us and the previously exempted parties.

The "control share" provisions of the MGCL provide that holders of "control shares" of a Maryland corporation (defined as shares which, when aggregated with other shares controlled by the stockholder (except solely by virtue of a revocable proxy), entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a "control share acquisition" (defined as the direct or indirect acquisition of ownership or control of "control shares") have no voting rights with respect to such shares except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding votes entitled to be cast by the acquirer of control shares, our officers and our employees who are also our directors. Our bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of shares of our stock. There can be no assurance that this provision will not be amended or eliminated at any time in the future.

Additionally, Title 3, Subtitle 8 of the MGCL permits our board of directors, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to elect to be subject to certain provisions relating to corporate governance that may have the effect of delaying, deferring or preventing a transaction or a change of control of our company that might involve a premium to the market price of our equity securities or otherwise be in our stockholders’ best interests. Those provisions are (i) a classified board; (ii) a two-thirds vote requirement for removing a director; (iii) a requirement that the number of directors be fixed only by vote of the directors; (iv) a requirement that a vacancy on the board be filled only by affirmative vote of a majority of the remaining directors in office and for the remainder of the full term of the class of directors in which the vacancy occurred; (v) and a majority requirement for the calling of a special meeting of stockholders. We are subject to all of those provisions except for a classified board, either by provisions of our charter and bylaws unrelated to Subtitle 8 or by reason of an election in our charter to be subject to certain provisions of Subtitle 8.

directors be fixed only by vote of the directors; (iv) a requirement that a vacancy on the board be filled only by affirmative vote of a majority of the remaining directors in office and for the remainder of the full term of the class of directors in which the vacancy occurred; (v) and a majority requirement for the calling of a special meeting of stockholders. We are subject to all of those provisions except for a classified board, either by provisions of our charter and bylaws unrelated to Subtitle 8 or by reason of an election in our charter to be subject to certain provisions of Subtitle 8.

Stockholders have limited control over changes in our policies and operations.

Our board of directors determines our major policies, including with regard to financing, growth, debt capitalization, REIT qualification and distributions. Our board of directors may amend or revise these and other policies without a vote of the stockholders. Under our charter and the MGCL, our common stockholders generally have a right to vote only on the following matters:

•the election or removal of directors;

•the amendment of our charter, except that our board of directors may amend our charter without stockholder approval to:

◦change our name;

◦change the name or other designation or the par value of any class or series of stock and the aggregate par value of our stock;

◦increase or decrease the aggregate number of shares of stock that we have the authority to issue; and

◦increase or decrease the number of our shares of any class or series of stock that we have the authority to issue;

•our liquidation and dissolution; and

•our being a party to a merger, consolidation, sale or other disposition of all or substantially all of our assets or statutory share exchange.

All other matters are subject to the discretion of our board of directors.

Our charter contains provisions that make removal of our directors difficult, which could make it difficult for stockholders to effect changes in management.

Our charter provides that, subject to the rights of any class or series of preferred stock, a director may be removed only by the affirmative vote of at least two-thirds of all the votes entitled to be cast generally in the election of directors. Our charter and bylaws provide that vacancies generally may be filled only by a majority of the remaining directors in office, even if less than a quorum. These requirements make it more difficult to change management by removing and replacing directors and may prevent a change in control that is in the best interests of stockholders.

Our rights and stockholders’ rights to take action against directors and officers are limited, which could limit recourse in the event of actions not in the best interests of stockholders.

As permitted by Maryland law, our charter eliminates the liability of our directors and officers to us and our stockholders for money damages, except for liability resulting from:

•actual receipt of an improper benefit or profit in money, property or services; or

•a final judgment based upon a finding of active and deliberate dishonesty by the director or officer that was material to the cause of action adjudicated.

In addition, our charter requires us, to the maximum extent permitted by Maryland law, to indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, pay or reimburse reasonable expenses in advance of final disposition of a proceeding to any individual who is a present or former director or officer and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity or any individual who, while a director or officer and at our request, serves or has served as a director, officer, partner, trustee of another corporation, REIT, partnership, joint venture, trust, employee benefit plan or any other enterprise and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity. Maryland law permits indemnification of our directors and officers in connection with a proceeding, unless it is established that (i) the act or omission of the individual was material to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty, or the individual actually received an improper personal benefit in money, property or services, or (ii) in the case of a criminal proceeding, the individual had reasonable cause to believe that the act or omission was unlawful. As part of these indemnification obligations, we may be obligated to fund the defense costs incurred by our directors and officers.

We also are permitted to purchase and maintain insurance or provide similar protection on behalf of any directors, officers, employees and agents, including our Manager and its affiliates, against any liability asserted which was incurred in any such capacity with us or arising out of such status. This may result in us having to expend significant funds, which will reduce the available cash for distribution to our stockholders.

We have made, and in the future may make, distributions of offering proceeds, borrowings or the sale of assets to the extent that distributions exceed earnings or cash flow from our operations.

We have made, and in the future may make, distributions of offering proceeds, borrowings or the sale of assets to the extent that distributions exceed earnings or cash flow from our operations. Such distributions reduce the amount of cash we have available for investing and other purposes and could be dilutive to our financial results. In addition, funding our distributions from our net proceeds may constitute a return of capital to our investors, which would have the effect of reducing each stockholder’s basis in its shares of equity securities.

We are a "smaller reporting company” and we have availed and may continue to avail ourselves of the reduced disclosure requirements, which may make the Company’s securities less attractive to investors.

As a "smaller reporting company," the Company has relied on exemptions from certain disclosure requirements that are applicable to other public companies. The Company may continue to rely on such exemptions for so long as the Company remains a "smaller reporting company." These exemptions include reduced financial disclosure and reduced disclosure obligations regarding executive compensation. We may continue to rely on such exemptions for so long as we remain a smaller reporting company under applicable SEC rules and regulations. The Company’s reliance on these exemptions may result in the public finding the Company’s securities to be less attractive and adversely impact the market price of the Company’s securities or the trading market thereof.

We are subject to financial reporting and other requirements for which our accounting, internal audit and other management systems and resources may not be adequately prepared.

We are subject to reporting and other obligations under the Exchange Act, including the requirements of Section 404 of the Sarbanes-Oxley Act. These reporting and other obligations may place significant demands on our management, administrative, operational, internal audit and accounting resources and cause us to incur significant expenses. We may need to upgrade our systems or create new systems, implement additional financial and management controls, reporting systems and procedures, expand or outsource our internal audit function and hire additional accounting, internal audit and finance staff. If we are unable to accomplish these objectives in a timely and effective fashion, our ability to comply with the financial reporting requirements and other rules that apply to reporting companies could be impaired. Any failure to maintain effective internal controls could have a material adverse effect on our business, financial condition and results of operations and our ability to make distributions to our stockholders.

We are required to make critical accounting estimates and judgments, and our financial statements may be materially affected if our estimates or judgments prove to be inaccurate.

Financial statements prepared in accordance with GAAP require the use of estimates, judgments and assumptions that affect the reported amounts. Different estimates, judgments and assumptions reasonably could be used that would have a material effect on our financial statements, and changes in these estimates, judgments and assumptions are likely to occur from period to period in the future. Significant areas of accounting requiring the application of management’s judgment include, but are not limited to, (1) determining the fair value of our investments, (2) assessing the adequacy of the allowance for credit losses or credit reserves and (3) appropriately consolidating VIEs for which we have determined we are the primary beneficiary. These estimates, judgments and assumptions are inherently uncertain, and, if they prove to be inaccurate, then we face the risk that charges to income will be required. In addition, because we have limited operating history in some of these areas and limited experience in making these estimates, judgments and assumptions, the risk of future charges to income may be greater than if we had more experience in these areas. Any such charges could significantly harm our business, financial condition, results of operations and our ability to make distributions to our stockholders. See "Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies" for a discussion of the accounting estimates, judgments and assumptions that we believe are the most critical to an understanding of our business, financial condition and results of operations.

Tax Risks

If we fail to remain qualified as a REIT, we will be subject to U.S. federal income tax as a regular corporation and could face a substantial tax liability, which would reduce the amount of cash available for distribution to our stockholders.

We elected to be taxed as a REIT commencing with our short taxable year ended December 31, 2012, and our subsidiary, Lument Commercial Mortgage Trust, Inc. elected to be taxed as a REIT commencing with its short taxable year ended December 31, 2018 and, in each case, to comply with the provisions of the Internal Revenue Code with respect thereto. Our and its continued qualification as a REIT will depend on our and its satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis. Our and its ability to satisfy the asset tests depends upon our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and for which we will not obtain independent appraisals. Our compliance with the REIT income and quarterly asset requirements also depends upon our ability to successfully manage the composition of our income and assets on an ongoing basis. Further, there can be no assurance that the U.S. Internal Revenue Service, or the IRS, will not contend that our interests in subsidiaries or in securities of other issuers will not cause a violation of the REIT requirements.

If we were to fail to maintain our REIT qualification in any taxable year and were not able to qualify for, or fail to satisfy the requirements of certain statutory relief provisions, we would be subject to U.S. federal income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates, and dividends paid to our stockholders would not be deductible by us in computing our taxable income. Any resulting corporate tax liability could be substantial and would reduce the amount of cash available for distribution to our stockholders, which in turn could have an adverse impact on the value of our equity securities. Unless we were entitled to relief under certain Internal Revenue Code provisions, we also would be disqualified from re-electing to be taxed as a REIT for the four taxable years following the year in which we failed to qualify as a REIT.

Furthermore, any REIT in which we invest directly or indirectly, including Lument Commercial Mortgage Trust, the REIT through which we own our interests in our CLOs and secured financings, is independently subject to, and must comply with, the same REIT requirements that we must satisfy in order to qualify as a REIT. If the subsidiary fails to qualify as a REIT and certain statutory relief provisions do not apply, then (a) the subsidiary REIT would become subject to U.S. federal income tax, (b) the subsidiary REIT will be disqualified from treatment as a REIT for the four taxable years following the year during which qualification was lost, (c) our investment in the subsidiary REIT could cease to be a qualifying asset for purposes of the asset tests applicable to REITs and any dividend income or gains derived by us from such subsidiary REIT may cease to be treated as income that qualifies for purposes of the 75% gross income test, and (d) we may fail certain of the asset or income tests applicable to REITs, in which event we will fail to qualify as REIT unless we are able to avail ourselves of certain statutory relief provisions.

If we fail to remain qualified as a REIT, we may default on our current financing facilities and be required to liquidate our assets, and we may face delays or inability to procure future financing.

Failure to remain qualified as a REIT could result in an event of default under our credit facility, CLOs and secured financings, and we may be required to liquidate all or substantially all of our assets, unless we were able to negotiate a waiver. Any such waiver could be conditioned on an amendment to our CLOs, secured financing or credit facility and any related guaranty agreements on terms that may be unfavorable to us. If we are unable to negotiate a waiver or replace or refinance our assets under a new credit facility, CLO or secured financing on favorable terms or at all, our financial conditions, results of operations and cash flows could be adversely affected.

The failure of assets subject to repurchase agreements to qualify as real estate assets could adversely affect our ability to qualify as a REIT.

Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.

The maximum tax rate applicable to income from "qualified dividends" payable to U.S. stockholders that are individuals, trusts and estates is 20%, exclusive of a 3.8% investment tax surcharge. Dividends payable by REITs, however, generally are not eligible for the reduced rates. Thus, the more favorable rates applicable to regular corporate qualified dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our equity securities. However, non-corporate U.S. taxpayers may be entitled to claim a deduction in determining their taxable income of up to 20% of "qualified REIT dividends" (~~other~~generally, ~~than~~dividends received by a REIT stockholder that are not designated as capital gain dividends) ~~received~~or byqualified ~~non-corporate~~dividend ~~taxpayers~~income), ~~may~~subject beto ~~eligible~~certain ~~for~~limitations. Although athe ~~20%~~reduced ~~deduction~~U. ~~This~~S. ~~deduction~~federal isincome ~~only~~tax rate applicable to ~~investors~~qualified dividend income does not adversely affect the taxation of ~~LFT~~REITs ~~that~~or ~~receive~~dividends payable by REITs, the more favorable rates applicable to regular corporate qualified dividends could cause investors who are individuals, trusts and ~~does~~estates ~~not~~to ~~have~~perceive ~~any~~investments ~~impact~~in onREITs ~~us. Without~~to ~~further~~be ~~legislation~~relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the ~~deduction~~value ~~would~~of ~~sunset~~the ~~after~~shares ~~2025~~of REITs, including our stock. Investors should consult their own tax advisors regarding ~~the effect of this change on~~ their effective tax rate with respect to REIT dividends.

REIT distribution requirements could adversely affect our ability to execute our business plan.

We generally must distribute annually at least 90% of our REIT taxable income determined without regard to the deduction for dividends paid and excluding net capital gain and 90% of our net income, if any, (after tax) from foreclosure property, in order for us to maintain our REIT qualification. To the extent that we satisfy such distribution requirements but distribute less than 100% of our REIT taxable income we will be subject to U.S. federal income tax on our undistributed taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount specified under U.S. federal income tax laws. We intend to make distributions to our stockholders to comply with the REIT requirements of the Internal Revenue Code.

From time to time, differences in timing between our recognition of taxable income and our actual receipt of cash may occur. If we do not have other funds available in these situations we could be required to borrow funds on unfavorable terms, sell investments at disadvantageous prices or distribute amounts that would otherwise be invested in future acquisitions, capital expenditures or repayment of debt, make a taxable distribution of our shares as part of a distribution in which stockholders may elect to receive shares or (subject to certain limits) cash or use cash reserves, in order to make distributions sufficient to enable us to pay out enough of our taxable income to satisfy the REIT distribution requirement and to avoid the U.S. federal income tax and the 4% excise tax in a particular year. These alternatives could increase our costs or reduce our equity. Thus, compliance with the REIT requirements may hinder our ability to grow, which could adversely affect the value of our equity securities.

Even if we remain qualified as a REIT, we may face other tax liabilities that reduce our cash flow.

Even if we remain qualified for taxation as a REIT, we may be subject to certain U.S. federal, state and local taxes on our income and assets, including taxes on any undistributed income, tax on certain types of income including as a result of a foreclosure, and state or local income, property and transfer taxes, such as mortgage recording taxes. Any of these taxes would decrease cash available for distribution to our stockholders.

Complying with REIT requirements may cause us to forgo otherwise attractive opportunities and may require us to dispose of our target assets sooner than originally anticipated.

To maintain our qualification as a REIT, we must satisfy five tests relating to the nature of our assets at the end of each calendar quarter. First, at least 75% of the value of our total assets must consist of cash, cash items, government securities and real estate assets, including certain mortgage loans and securities and debt instruments issued by publicly offered REITs. Second, we may not own more than 10% of any one issuer’s outstanding securities, as measured by either value or voting power. Third, no more than 5% of the value of our total assets can consist of the securities of any one issuer. Fourth, no more than 2025% of our total assets can be represented by securities of one or more TRSs. Fifth, not more than 25% of our assets may consist of debt instruments issued by publicly offered REITs to the extent that such debt instruments constitute "real estate assets" for purposes of the 75% asset test described above only because of the express inclusion of "debt instruments issued by publicly offered REITs" in the definition. If we fail to comply with these requirements at the end of any calendar quarter, we will lose our REIT qualification unless we are able to qualify for certain statutory relief provisions, which may involve paying taxes and penalties. In order to comply with the asset tests, we may be required to liquidate from our investment portfolio otherwise attractive investments. These actions could have the effect of reducing our income and the amount available for distribution to our stockholders.

In addition to the asset tests set forth above, to maintain our REIT qualification, we must continually satisfy tests concerning, among other things, the sources of our income, the amounts we distribute to our stockholders and the ownership of our stock. We may be unable to pursue investments that would be otherwise advantageous to us in order to satisfy the income test, the asset tests, and the other REIT requirements. Thus, compliance with the REIT requirements may hinder our ability to make certain attractive investments. If we fail to comply with any of these other REIT requirements at the end of any fiscal year, we will lose our REIT qualification unless we are able to satisfy or qualify for certain statutory relief provisions which may involve paying taxes and penalties.

We may be required to report taxable income for certain investments in excess of the economic income we ultimately realize from them.

We may continue to acquire mortgage-backed securities in the secondary market for less than their face amount. In addition, as a result of our ownership of certain mortgage-backed securities, we may be treated for tax purposes as holding certain debt instruments acquired in the secondary market for less than their face amount. The discount at which such securities or debt instruments are acquired may reflect doubts about their ultimate collectability rather than current market interest rates. The amount of such discount will nevertheless generally be treated as "market discount" for U.S. federal income tax purposes. Accrued market discount is generally reported as income when, and to the extent that, any payment of principal of the mortgage-backed security or debt instrument is made. If we collect less on the mortgage-backed security or debt instrument than our purchase price plus the market discount we had previously reported as income, we may not be able to benefit from any offsetting loss deductions.

In addition, as a result of our ownership of certain mortgage-backed securities, we may be treated for tax purposes as holding distressed debt investments that are subsequently modified by agreement with the borrower. If the amendments to the outstanding debt are "significant modifications" under applicable U.S. Treasury Department regulations, the modified debt may be considered to have been reissued to us at a gain in a debt-for-debt exchange with the borrower. In that event, we may be required to recognize taxable gain to the extent the principal amount of the modified debt exceeds our adjusted tax basis in the unmodified debt, even if the value of the debt or the payment expectations have not changed.

Moreover, some of the mortgage-backed securities that we acquire may have been issued with original issue discount. We will be required to report such original issue discount based on a constant yield method and will be taxed based on the assumption that all future projected payments due on such mortgage-backed securities will be made. If such mortgage-backed securities turn out not to be fully collectible, an offsetting loss deduction will become available only in the later year that lack of collectability is provable.

Finally, in the event that any debt instruments or mortgage-backed securities acquired by us are delinquent as to mandatory principal and interest payments, or in the event a borrower with respect to a particular debt instrument acquired by us encounters financial difficulty rendering it unable to pay stated interest as due, we may nonetheless be required to continue to recognize the unpaid interest as taxable income as it accrues, despite doubt as to its ultimate collectability. Similarly, we may be required to accrue interest income with respect to subordinate mortgage-backed securities at the stated rate regardless of whether corresponding cash payments are received or are ultimately collectible. In each case, while we would in general ultimately have an offsetting loss deduction available to us when such interest was determined to be uncollectable, the utility of that deduction could depend on our having taxable income in that later year or thereafter.

The "taxable mortgage pool" rules may increase the taxes that we or our stockholders may incur, and may limit the manner in which we effect future securitizations.

Securitizations by us or our subsidiaries could result in the creation of taxable mortgage pools for U.S. federal income tax purposes, resulting in "excess inclusion income." As a REIT, so long as we own 100% of the equity interests in a taxable mortgage pool, we generally would not be adversely affected by the characterization of the securitization as a taxable mortgage pool. Certain categories of stockholders, however, such as non-U.S. stockholders eligible for treaty or other benefits, stockholders with net operating losses, and certain tax-exempt U.S. stockholders that are subject to unrelated business income tax, could be subject to increased taxes on a portion of their dividend income from us that is attributable to the excess inclusion income. In the case of a stockholder that is a REIT, a regulated investment company, or RIC, common trust fund or other pass-through entity, our allocable share of our excess inclusion income could be considered excess inclusion income of such entity. In addition, to the extent that our stock is owned by tax-exempt "disqualified organizations," such as certain government-related entities and charitable remainder trusts that are not subject to tax on unrelated business income, we may incur a corporate level tax on a portion of any excess inclusion income. Because this tax generally would be imposed on us, all of our stockholders, including stockholders that are not disqualified organizations, generally would bear a portion of the tax cost associated with the classification of us or a portion of our assets as a taxable mortgage pool. A RIC, or other pass-through entity owning our stock in record name will be subject to tax at the highest U.S. federal corporate tax rate on any excess inclusion income allocated to their owners that are disqualified organizations. Moreover, we could face limitations in selling equity interests in these securitizations to outside investors, or selling any debt securities issued in connection with these securitizations that might be considered to be equity interests for tax purposes. Finally, if we were to fail to maintain our REIT qualification, any taxable mortgage pool securitizations would be treated as separate taxable corporations for U.S. federal income tax purposes that could not be included in any consolidated U.S. federal income tax return. These limitations may prevent us from using certain techniques to maximize our returns from securitization transactions.

Liquidation of our assets may jeopardize our REIT qualification.

To maintain our qualification as a REIT, we must comply with requirements regarding our assets and our sources of income. If we liquidate our investments including to repay obligations to our lenders, we may be unable to comply with these requirements, ultimately jeopardizing our qualification as a REIT, or we may be subject to a 100% tax on any resultant gain if we sell assets that are treated as dealer property or inventory.

Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities.

The REIT provisions of the Internal Revenue Code substantially limit our ability to hedge our assets and liabilities. Under these provisions, any income from a hedging transaction we enter into to manage risk of interest rate changes with respect to borrowings made or to be made to acquire or carry real estate assets does not constitute "gross income" for purposes of the 75% or 95% gross income tests, if certain requirements are met. To the extent that we enter into other types of hedging transactions, the income from those transactions is likely to be treated as non-qualifying income for purposes of both of the REIT gross income tests.

Qualifying as a REIT involves highly technical and complex provisions of the Internal Revenue Code.

Qualification as a REIT involves the application of highly technical and complex Internal Revenue Code provisions for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize our REIT qualification. Our qualification as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis. In addition, our ability to satisfy the requirements to maintain our REIT qualification depends in part on the actions of third parties over which we have no control or only limited influence, including in cases where we own an equity interest in an entity that is classified as a partnership for U.S. federal income tax purposes. Thus, while we intend to continue to operate so that we will qualify as a REIT, given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations, and the possibility of future changes in our circumstances, no assurance can be given that we will maintain our qualification for any particular year.

We may incur a significant tax liability as a result of selling assets that might be subject to the prohibited transactions tax if sold directly by us.

A REIT’s net income from "prohibited transactions" is subject to a 100% tax. In general, "prohibited transactions" are sales or other dispositions of assets held primarily for sale to customers in the ordinary course of business. There is a risk that certain loans that we are treating as owning for U.S. federal income tax purposes and certain property received upon foreclosure of these loans will be treated as held primarily for sale to customers in the ordinary course of business. Although we expect to avoid the prohibited transactions tax by contributing those assets to our TRS and conducting the marketing and sale of those assets through that TRS, no assurance can be given that the IRS will respect the transaction by which those assets are contributed to our TRS. Even if those contribution transactions are respected, our TRS will be subject to U.S. federal, state and local corporate income tax and may incur a significant tax liability as a result of those sales.

We may be subject to adverse legislative or regulatory tax changes that could increase our tax liability, reduce our operating flexibility and reduce the market price of shares of our equity securities.

The present U.S,. federal income tax treatments of REITs may be modified, possibly with retroactive effect, by legislative, judicial, or administrative action at any time, which could affect the U.S. federal income tax treatment of an investment in us. The U.S. federal income tax rules dealing with REITs constantly are under review by persons involved in the legislative process, the IRS, and the U.S. Treasury, which results in statutory changes as well as frequent revisions to regulations and interpretations. We cannot predict when or if any new U.S. federal income tax law, regulation or administrative interpretation, or any amendment to any existing U.S. federal tax law, regulations or administrative interpretations, will be adopted, promulgated of become effective and any such law, regulation or interpretation may take effect retroactively. Future revisions in the U.S. federal tax laws and interpretations thereof could affect or cause us to change our investments and commitments and affect the tax considerations of an investments in us.

Any such revisions could have an adverse effect on an investment in our shares or on the market value or the resale potential of our assets. You are urged to consult with your tax advisor with respect to the impact of such revisions on your investment in our shares and the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in our shares.30

Onare ~~August~~under ~~14,~~review ~~2022,~~by ~~President~~persons ~~Biden~~involved ~~signed~~in ~~into law~~ the ~~Inflation~~legislative ~~Reduction~~process, ~~Act~~the ~~of 2022 ("IRA"). The IRA includes numerous tax provisions that impact corporations~~IRS, ~~including~~and the ~~implementation~~U.S. ofTreasury, awhich ~~corporate~~results ~~alternative~~in ~~minimum~~statutory ~~tax~~changes as well as afrequent 1%revisions ~~excise~~to ~~tax~~regulations ~~on certain stock repurchases~~ and ~~economically similar transactions~~interpretations. ~~However,~~We ~~REITs~~cannot ~~are~~predict ~~excluded~~when ~~from~~or ~~the~~if ~~definition~~any ofnew anU.S. ~~"applicable~~federal ~~corporation"~~income ~~and~~tax ~~therefore~~law, ~~are~~regulation ~~not~~or ~~subject~~administrative tointerpretation, ~~the~~or ~~corporate~~any ~~alternative~~amendment ~~minimum~~to ~~tax. Additionally,~~any ~~the~~existing 1%U.S. ~~excise~~federal tax ~~specifically~~law, ~~does~~regulations ~~not~~or ~~apply~~administrative tointerpretations, ~~stock~~will ~~repurchases~~be byadopted, ~~REITs. Any~~promulgated ~~TRSs~~ of ~~ours~~become ~~operate~~effective asand ~~standalone~~any ~~corporations~~such ~~and~~law, ~~therefore~~regulation ~~could~~or beinterpretation ~~adversely~~may ~~affected~~take byeffect ~~the IRA~~retroactively. WeFuture ~~will~~revisions ~~continue~~in ~~to analyze and monitor~~ the ~~application~~U.S. offederal ~~the~~tax ~~IRA~~laws toand ~~our~~interpretations ~~business,~~thereof ~~however,~~could ~~the~~affect ~~effect~~or ofcause ~~these~~us ~~changes~~to onchange ~~the value of~~ our ~~assets,~~investments ~~shares~~and ofcommitments ~~our~~and ~~common~~affect ~~stock~~the ortax ~~market~~considerations ~~conditions~~of ~~generally,~~an isinvestments ~~uncertain~~in us.

Although REITs generally receive certain tax advantage compared to entities taxed as regular corporations, it is possible that future legislation would result in a REIT having fewer tax advantages, and it could become more advantageous for a company that invests in real estate to elect to be treated for U.S. federal income tax purpose as a corporation. Our charter provides our board of directors with the power, under certain circumstances, to revoke or otherwise terminate our REIT election and cause us to be taxed as a regular corporation, without the vote of our stockholders. Our board of directors has duties to us and could only cause such changes in our tax treatment if it determines in good faith that such changes are in our best interest.

Distributions to tax-exempt investors may be classified as unrelated business taxable income, or UBTI, as defined under Section 512(a) of the Internal Revenue Code.

Neither ordinary nor capital gain distributions with respect to our stock nor gain from the sale of stock should generally constitute UBTI to a tax-exempt investor. However, there are certain exceptions to this rule, including: (1) part of the income and gain recognized by certain qualified employee pension trusts with respect to our stock may be treated as UBTI if shares of our stock are predominantly held by qualified employee pension trusts, and we are required to rely on a special look-through rule for purposes of meeting one of the REIT ownership tests, and we are not operated in a manner to avoid treatment of such income or gain as UBTI; (2) part of the income and gain recognized by a tax-exempt investor with respect to our stock would constitute UBTI if the investor incurs debt in order to acquire the stock; (3) part or all of the income or gain recognized with respect to our stock by social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts and qualified group legal services plans which are exempt from U.S. federal income taxation under the Internal Revenue Code may be treated as UBTI; ~~and~~ (4) to the extent that we are (or a part of us, or a disregarded subsidiary of ours, is) a "taxable mortgage pool," or if we hold residual interests in a REMIC,; and (5) a portion of the distributions paid to a tax-exempt stockholder that is allocable to excess inclusion income may be treated as UBTI.

The value of our assets represented by our TRS is required to be limited and a failure to comply with this and certain other rules governing transactions between a REIT and its TRSs would jeopardize our REIT qualification and may result in the application of a 100% excise tax.

A REIT may own up to 100% of the stock of one or more TRSs. Other than certain activities relating to lodging and healthcare facilities, a TRS generally may engage in any business and may hold assets and earn income that would not be qualifying assets or income if held or earned directly by a REIT. No more than 25% (20% for the taxable years beginning before January 1, 2026) of the value of a REIT’s assets may consist of stock or securities of one or more TRSs. In addition, the TRS rules limit the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. The rules also impose a 100% excise tax on certain transactions between a TRS and its parent REIT, or by a TRS on behalf of its parent REIT, that are not conducted on an arm’s-length basis.

Our current TRS, and any future TRSs, will pay U.S. federal, state and local income tax on their respective taxable incomes, if any. We anticipate that the aggregate value of the securities of our TRS will be less than 2025% of the value of our total assets (including our TRS securities). Furthermore, we intend to monitor the value of our investments in our TRS for the purpose of ensuring compliance with TRS-ownership limitations. In addition, we will review all our transactions with our TRS to ensure that they are entered into on arm’s-length terms to avoid incurring the 100% excise tax described above. There can be no assurance, however, that we will be able to continue to comply with the TRS-ownership limitation or to avoid application of the 100% excise tax discussed above.

transactions with our TRS to ensure that they are entered into on arm’s-length terms to avoid incurring the 100% excise tax described above. There can be no assurance, however, that we will be able to continue to comply with the TRS-ownership limitation or to avoid application of the 100% excise tax discussed above.

Your investment has various U.S. federal income tax risks.

We urge you to consult your tax advisor concerning the effects of U.S. federal, state, local and ~~foreign~~non U.S. tax laws to you with regard to an investment in shares of our stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 1C. CYBERSECURITY

As an externally managed company, our day-to-day operations are managed by our Manager and our executive officers under the supervision of our board of directors and its committees. Our executive officers are senior investment professionals provided to us through our Manager pursuant to our ~~management~~Management ~~agreement~~Agreement with our Manager. Our business is highly dependent on the communications and information systems of our Manager, its affiliates and third-party service providers. Our Manager is an affiliate of ORIX USA, a diversified financial company and subsidiary of ORIX and participates in and is subject to ORIX USA's cybersecurity program. Accordingly, we rely and our Manager relies on ORIX USA and its cybersecurity risk management program to identify, assess and manage material risks to our business from cybersecurity threats.

To date, cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected ~~nor, are they reasonably likely to materially affect~~ the Company, including our business strategy, results of operations or financial condition. For a discussion of how risks from cybersecurity threats affect our business see, "Part I. Item IA1A. Risk Factors - the occurrence of cyber-incidents, or a deficiency in our Manager's Cybersecurity or those of any of our third party service providers, could negatively affect our business by causing a disruption to our operations, a compromise of our confidential information or damage to our business relationships or reputation, all of which could negatively impact our business and results of operations” in this Annual Report on Form 10-K.

Cybersecurity Governance

Our board of directors is responsible for directing and overseeing our risk management. Our board of directors administers this oversight function directly, with support from its committees. In particular, the audit committee of our board of directors (the “Audit Committee”) has the responsibility to consider and discuss our major financial risk exposures and the steps our Manager should take, or is required to take, to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. Our Audit Committee also monitors compliance with legal and regulatory requirements, in addition to overseeing the performance of our internal audit function.

Pursuant to the Management Agreement, our Manager is responsible for identifying, assessing, and managing our material risks from cybersecurity threats. Our Manager relies on ORIX USA and ORIX USA Information Technology and Cybersecurity Team, including the ORIX USA Chief Technology Officer ("CTO"), to provide us with a comprehensive cybersecurity risk management program.

Periodically, at least annually, ORIX USA's CTO and/or other members of the ORIX USA Information Technology and Cybersecurity Team will present to the Audit Committee on various topics relating to ORIX USA's technology risks, including ORIX USA's cybersecurity program (including the results of cybersecurity tabletop exercises), cybersecurity issues (including those relating to data protection, insider threats, regulatory changes and geopolitical cyber threat management) and risk management (including the results of periodic technology audits).

Cybersecurity Risk Management and Strategy

ORIX USA has engaged HCLTech ("HCL") to manage all infrastructure and cybersecurity services for ORIX USA and its subsidiaries, under the governance of the ORIX information and cybersecurity leadership team. HCL has over twenty-~~five~~eight years' experience in cybersecurity, ~~nine~~ten ~~cybersecurity~~Cybersecurity ~~delivery~~Fusion ~~centers~~Centers ("CSFC") strategically placed across the globe, and employs over 78,000 cybersecurity professionals. The ORIX information and cybersecurity leadership team and HCL are considered the "ORIX USA Information Technology and Cybersecurity Team".

HCL ~~will~~delivers ~~deliver the~~ managed security services to ORIX USA from its Offshore Management Center ("OMC") and ~~Cybersecurity~~CSFCs ~~Fusion~~providing ~~Centers~~24x7 operations including security information and event management (~~CSFC~~"SIEM") ~~providing~~and ~~24x7~~security ~~operations~~orchestration, ~~that~~automation and response ("SOAR") platforms which cover ORIX USA's cybersecurity landscape including network security, email security, endpoint security, data security, application security, cloud security, privileged access management, vulnerability management, cybersecurity incident response, cybersecurity third-party risk, cybersecurity awareness training, phishing simulations and identity and access management.

The ORIX USA CTO, leads the ORIX USA Information Technology and Cybersecurity Team responsible for managing information security at ORIX USA's asset management business, including its cybersecurity strategy and program, which encompasses ~~annual~~quarterly ~~employee training about~~ cybersecurity ~~risks~~awareness and new employee onboarding about ORIX USA's security policies. The ORIX USA Information Technology and Cybersecurity Team's responsibilities cover three main areas: (i) operations and engineering, (ii) threat detection and response, and (iii) governance. The ORIX USA CTO leads the cybersecurity team with over ~~four~~five years of experience at ORIX USA and 18 prior years of experience at a large asset management firm. This cybersecurity program is aligned with the NIST Cybersecurity Framework ("NIST CSF"), emphasizing training and development.

ORIX USA employs a 'defense in depth' cybersecurity strategy and program based on the NIST CSF, which includes multiple layers of security policies, protections, and controls designed to safeguard the confidentiality, integrity, and availability of infrastructure, network and information assets from malware and threats. This includes the deployment of next generation firewalls, web application firewalls, email protection technologies, DLP technologies, internet proxy, and next generation antivirus and endpoint detection and response ("EDR") systems.

Our firewalls (intrusion detection systems and intrusion prevention systems) are designed to secure the organization's perimeter complemented by an antivirus and EDR platform designed to detect malware and threats on systems. Web application firewalls are designed to protect external facing applications, while our email security gateway utilizes machine learning and multilayered detection techniques designed to filter malicious emails.

31Mobile device management software is employed with the objective of protecting corporate email and data on mobile devices and is designed to prevent unauthorized data transfer.

~~The~~ ORIX USA ~~Information~~maintains ~~Technology~~a ~~and~~cybersecurity ~~Cybersecurity~~incident ~~Team~~response ~~monitors~~capability ~~security~~that ~~events~~includes ~~via~~detailed apolicies, ~~SIEM~~plans ~~(security~~and ~~information~~modular run books and ~~event~~maps ~~management)~~designed around different types of cybersecurity incidents. The plan and ~~SOAR~~run ~~(security~~books ~~orchestration~~are tested annually through cybersecurity tabletop simulations where incident response, ~~automation~~technical, and ~~response)~~executive ~~platform~~team members go through real-world scenarios focused on current cybersecurity threats. ORIX ~~Mobile~~USA’s ~~device~~cybersecurity incident response plan provides for escalation of identified cybersecurity threats and incidents, including, as appropriate, to our management. ~~software~~These isdiscussions ~~employed~~provide ~~with~~a mechanism for the ~~objective~~identification of ~~protecting~~ ~~corporate~~cybersecurity ~~email~~threats and ~~data~~incidents, onassessment ~~mobile~~of ~~devices~~cybersecurity risk profile or certain newly identified risks relevant to our Company, and isevaluation of the adequacy of our cybersecurity program, including risk mitigation, compliance and controls. ~~designed~~ORIX USA has established a notification decision framework to ~~prevent~~determine ~~unauthorized~~when ~~data~~to ~~transfer~~send notifications regarding certain cybersecurity incidents, with different severity thresholds triggering notification to different recipient groups, including our Manager and officers of LFT.

ORIX USA maintains a cybersecurity incident response capability that includes detailed policies, plans and modular run books and maps designed around different types of cybersecurity incidents. The plan and run books are tested annually through cybersecurity tabletop simulations where incident response technical, and executive team members go through real-world scenarios focused on current cybersecurity threats. ORIX USA’s cybersecurity incident response plan provides for escalation of identified cybersecurity threats and incidents, including, as appropriate, to our management. These discussions provide a mechanism for the identification of cybersecurity threats and incidents, assessment of cybersecurity risk profile or certain newly identified risks relevant to our Company, and evaluation of the adequacy of our cybersecurity program, including risk mitigation, compliance and controls. ORIX USA has established a notification decision framework to determine when to send notifications regarding certain cybersecurity incidents, with different severity thresholds triggering notification to different recipient groups, including our Manager and officers of LFT.

ITEM 2. PROPERTIES

We ~~do not own any real estate or other physical properties. We~~ maintain our corporate headquarters at 230 Park Avenue, 20th Floor, New York, NY 10169 in office space furnished to us by our Manager. We reimburse our Manager under the Management Agreement between us for lease and other related expenses incurred in furnishing us with our offices. We believe that our property is maintained in good condition and is suitable and adequate for our purposes. For an overview of our real estate investments, see Note 5 to our consolidated financial statements.

ITEM 3. LEGAL PROCEEDINGS

From time to time, we are or may become involved in various claims and legal actions arising in the ordinary course of business. As of December 31, 2025, we were not involved in any material legal proceedings.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

On March 17, 2026, the last reported sales price for our common stock on the New York Stock Exchange under the symbol "LFT" was $1.38.

Holders

At December 31, 2025, there were 52,399,265 shares of our common stock outstanding. As of March 17, 2026, there were 14 registered holders of our common stock. The number of beneficial stockholders is substantially greater than the number of holders of record as a large portion of our stock is held in "street name" through banks or broker dealers.

Dividends

Dividends on our common stock are paid on a quarterly basis.

All dividend distributions are made with the authorization of the board of directors at its discretion and depend on such items as our REIT taxable earnings, financial condition, maintenance of REIT status, and other factors that the board of directors may deem relevant from time to time.

The holders of our common stock share proportionally on a per share basis in all declared dividends on our common stock. We are required to distribute to our stockholders as dividends at least 90% of our REIT taxable income, computed without regard to our net capital gains and the deduction for dividends paid, and 90% of our net income, if any (after tax) from foreclosure property in order to maintain our qualification as a REIT. See Item 1A, "Risk Factors," and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations," of this Annual Report on Form 10-K, for information regarding the sources of funds used for dividends and for a discussion of factors, if any, which may adversely affect our ability to pay dividends at the same level in 2026 and thereafter.

The following table presents cash dividends declared on our common stock from January 1, 2024 through December 31, 2025:

Common Dividends Declared per Share

Declaration Date

Amount

Record Date

Date of Payment

March 15, 2024

0.07

March 28, 2024

April 15, 2024

June 13, 2024

0.08

June 28, 2024

July 15, 2024

September 16, 2024

0.08

September 30, 2024

October 15, 2024

December 12, 2024

0.08

December 31, 2024

January 15, 2025

December 12, 2024

0.09

December 31, 2024

January 15, 2025

March 19, 2025

0.08

March 31, 2025

April 15, 2025

June 20, 2025

0.06

June 30, 2025

July 15, 2025

September 16, 2025

0.04

September 30, 2025

October 15, 2025

December 11, 2025

0.04

December 31, 2025

January 15, 2026

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

On December 16, 2015, we announced a share repurchase program, pursuant to which our Board authorized us to repurchase up to $10 million of our common shares. Under this program, we have discretion to determine the dollar amount of common shares to be repurchased and the timing of any repurchases in compliance with applicable law and regulations. The program does not have an expiration date.

The Company did not purchase any common shares under the plan during the twelve months ended December 31, 2025.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our consolidated financial statements and the accompanying notes included in this Annual Report on Form 10-K. The following discussion contains forward-looking statements that reflect our current expectations, estimates, forecasts and projections.

Overview

We are a Maryland corporation that is focused on investing in, originating, financing and managing a portfolio of CRE debt investments.

In January 2020, we entered into a series of transactions with subsidiaries of ORIX USA, a diversified financial company with the ability to provide investment capital and asset management services to clients in the corporate, real estate and municipal finance sectors. We entered into a new ~~management~~Management ~~agreement~~Agreement with Lument IM, while another affiliate of ORIX USA purchased an ownership stake of approximately 5.0% through a privately placed stock issuance. On February 22, 2022, the affiliate purchased an additional 13,071,895 shares of common stock from the transferable common stock rights offering, increasing its beneficial ownership in the Company to approximately 27.4%. These transactions have enhanced the scale of LFT and are expected to generate ~~shareholder~~stockholder value through leveraging ORIX USA's expansive originations, asset management and servicing platform.

Lument IM is an affiliate of Lument, a nationally recognized leader in multifamily and seniors housing and health care finance. The Company leverages Lument's broad platform and significant expertise when originating and underwriting investments.

We invest primarily in transitional floating rate CRE mortgage loans with an emphasis on middle market multifamily assets. We may also invest in other CRE-related investments including mezzanine loans, preferred equity, commercial mortgage-backed securities, fixed rate loans, construction loans and other CRE debt instruments. We finance our current investments in transitional multifamily and other CRE loans ~~primarily~~ through ~~matched~~CRE ~~term non-recourse secured borrowings, including~~ CLOs, ~~which~~and ~~are not subject to margin calls or additional collateralization requirements. We may utilize warehouse repurchase agreements or~~ other forms of secured financing ~~in the future~~agreements. Our primary sources of income are net interest from our investment portfolio and non-interest income from our mortgage loan-related activities. Net interest income represents the interest income we earn on investments less the expense of funding these investments.

Our investments typically have the following characteristics:

•Sponsors with experience in particular real estate sectors and geographic markets;

•Located in U.S. markets with multiple demand drivers, such as growth in employment and household formation;

•Fully funded principal balance greater than $5 million and generally less than $75 million;

•Loan to Value ratio up to 85% of as-is value and up to 75% of as stabilized value;

•Floating rate loans tied to one-month term SOFR, and/or in the future potentially other index replacement; and

•Three-year term with two one-year extension options.

We believe that our current investment strategy provides significant opportunities to achieve attractive risk-adjusted returns for our stockholders over time. However, to capitalize on the investment opportunities at different points in the economic and real estate investment cycle, we may modify or expand our investment strategy. We believe that the flexibility of our strategy, which is supported by significant CRE experience of Lument's investment team, and the extensive resources of ORIX USA, will allow us to take advantage of changing market conditions to maximize risk-adjusted returns to our stockholders.

We have elected to be taxed as a REIT and comply with the provisions of the Internal Revenue Code with respect thereto. Accordingly, we are generally not subject to federal income tax on our REIT taxable income that we currently distribute to our stockholders so long as we maintain our qualification as a REIT. Our continued qualification as a REIT depends on our ability to meet, on a continuing basis, various complex requirements under the Internal Revenue Code relating to, among other things, the source of our gross income, the composition and values of our assets, our distribution levels and the concentration of ownership of our capital stock. Even if we maintain our qualification as a REIT, we may become subject to some federal, state and local taxes on our income generated in our wholly owned TRS, Five Oaks Acquisition Corp. ("FOAC").

Recent Developments

~~The~~2025 ~~last~~was ~~several~~marked ~~quarters have been characterized~~ by significant volatility in global markets, driven by ~~heightened~~tariffs ~~inflation,~~and ~~higher~~international ~~interest~~trade ~~rates~~policy and disputes, ~~slowing~~political ~~economic~~and ~~growth~~regulatory uncertainty, geopolitical ~~uncertainty~~conditions, ~~and~~elevated ~~instability~~interest inrates, ~~the~~and ~~banking~~inflation. ~~sector~~Collectively, ~~following~~these ~~multiple~~market ~~bank~~dynamics ~~failures.~~have ~~Inflation~~posed ~~reached~~challenges ~~generational~~to ~~highs~~commercial inreal ~~many~~estate ~~economies,~~values ~~prompting~~and ~~central~~transaction ~~banks~~activity. toHowever, ~~take~~the ~~monetary~~Federal ~~policy~~Reserve ~~tightening~~decreased ~~actions~~interest ~~that~~rates ~~have~~in 2024 and ~~are~~2025, ~~likely~~which tohas ~~continue~~contributed to ~~create~~an ~~headwinds~~improvement toin ~~economic~~the ~~growth~~cost and availability of debt.

~~Notwithstanding~~Thus ~~the~~far, ~~current~~2026 ~~period~~has ofbeen ~~relatively~~marked ~~high~~by ~~interest~~additional ~~rates,~~policy-driven ~~the~~uncertainty ~~U.S.~~and ~~Federal~~market ~~Reserve~~volatility, ~~began~~including ~~decreasing~~with ~~rates~~respect into ~~2024. Although~~international ~~decelerating,~~trade ~~inflation~~policy ~~remains~~and ~~above~~geopolitical ~~the U~~conditions.S. The Federal Reserve's ~~target~~recently ~~levels. Despite~~held ~~multiple~~interest ~~federal~~rates ~~fund~~steady ~~rate~~for ~~decreases~~the ~~over~~first ~~the~~time ~~course~~since ofJuly ~~2024,~~2025. ~~interest~~While ~~rates~~some officials have ~~remained~~expressed ~~elevated,~~support ~~with~~for ~~the~~additional ~~U.S.~~decreases ~~Federal~~in ~~reserve~~interest ~~indicating~~rates in ~~2025~~2026, another ~~expectation~~officials ofhave ~~slower~~expressed ~~rate~~opposition ~~decreases~~to ~~moving~~additional ~~forward~~decreases. ~~Although~~ ~~our~~As ~~business~~a ~~model~~result, issignificant ~~such~~uncertainty ~~that~~exists ~~higher~~with ~~interest~~respect ~~rates~~to ~~will~~the timing, ~~all~~direction ~~else~~and ~~being~~extent ~~equal~~of any future interest rate changes, ~~correlate~~in addition to ~~increases~~uncertainty inrelated ~~our~~to ~~net~~international ~~income~~trade policy, ~~interest~~the ~~rates~~political ~~remaining~~and ~~elevated~~regulatory ~~for~~environment, angeopolitical ~~extended~~events, ~~period~~and ofinflation. ~~time~~Our ~~may~~continued ~~adversely~~monitoring ~~affect~~of ~~our~~these ~~existing~~and ~~borrowers.~~other ~~Additionally,~~conditions ~~higher~~will ~~interest~~continue ~~rates~~to ~~and~~inform ~~unpredictable~~our ~~geopolitical~~loan ~~landscape~~origination ~~may~~volumes, ~~cause~~liquidity, ~~further~~and ~~dislocation~~capital allocation in ~~the~~ 2026.

322025 Highlights

~~capital~~Operating markets resulting in a continual reduction of available liquidity and an increase in borrowing costs. A lack of liquidity for a prolonged period of time could limit our ability to grow our business. It remains difficult to predict the full impact of recent events and any future changes in interest rate or inflation.Results

~~2024~~•Net ~~Highlights~~loss attributable to common stockholders of $7.5 million, or $0.14 per share of common stock

~~Operating~~•Distributable ~~results~~Earnings of $7.6 million, or $0.14 per share of common stock

•~~Net~~Declared ~~income~~aggregate ~~attributable~~quarterly to common ~~stockholders~~dividends of $1711.9 5 million, or $0.3422 per share of common stock. The fourth quarter dividend of $0.04 per share of common stock produced an annualized yield of 11.3% on our closing stock price as of December 31, 2025

•~~Distributable~~Book ~~Earnings~~value of common stock as of December 31, 2025 was $23159.2 0 million, or $03.4403 per share of book value of common stock

•Declared aggregate quarterly common dividends of $16.2 million, or $0.31 per share of common stock in addition to a special dividend of $4.7 million, or $0.09 per share of common stock. In the second quarter we increased the common dividend from $0.07 per share of common stock to $0.08 per share of common stock, a 14% increase from the first quarter. The fourth quarter dividend of $0.08 per share of common stock produced an annualized yield of 12.4% on our closing stock price as of December 31, 202434

•Book value of common stock as of December 31, 2024 was $177.8 million, or $3.40 per share of book value of common stock

Investment Activity

•~~Acquired~~We ~~three~~acquired sixteen loans with an initial unpaid principal balance of $58359.45 million and a weighted average interest rate of 30-day term SOFR plus 2.97%, nine funded advances with an initial unpaid principal balance of $30.8 million and a weighted average interest rate of 30-day term SOFR plus 3.3562% and we originated four loans with an unpaid principal balance of $13.7 million and a weighted average interest rate of 30-day term SOFR plus 3.14%

•Experienced $~~391~~266.0 6 million in loan payoffs and transitioned $62.6 million of loans with unpaid principal balance at time of foreclosure to real estate owned

•$1.1 billion senior loan portfolio is 100% floating rate with an average spread to 30-day term SOFR of 3.5833%, excluding unamortized purchase discounts of $31.5 7 million and deferred loan fees of $10.2 8 million as of December 31, ~~2024~~2025

•Multifamily assets represent 92.37% of loan portfolio

Portfolio Financing

•Non-mark-to-market financing is $0800.80 million ~~billion~~ with an average spread to 30-day term SOFR of 2.2624% as of December 31, ~~2024~~2025, representing ~~100~~80% of our secured financings

~~ITEM~~•Redeemed 3.the ~~LEGAL~~2021-FL1 ~~PROCEEDINGS~~CLO

~~From~~•Entered ~~time~~into toa ~~time,~~new ~~we are or may become involved in various claims and legal actions arising in the ordinary course of business. As of December~~$450 ~~31,~~million ~~2024,~~uncommitted wemaster ~~were~~repurchase ~~not involved in any material legal proceedings.~~agreement

~~ITEM~~•Entered 4.into ~~MINE~~a ~~SAFETY~~new ~~DISCLOSURES~~$50 million term lending agreement for financing of non-performing loans and REO

~~Not~~•Entered ~~applicable~~into and closed a $663.8 million managed CRE CLO with a 30-month reinvestment period providing $585.0 million of non-mark-to-market financing equating to an 88.12% advance rate, at a weighted average cost of capital of 30-day term SOFR plus 1.91% before transaction costs.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

On March 17, 2025, the last reported sales price for our common stock on the New York Stock Exchange under symbol "LFT" was $2.74.

Holders

At December 31, 2024, there were 52,309,209 shares of our common stock outstanding. As of March 17, 2025, there were 17 registered holders. The number of beneficial stockholders is substantially greater than the number of holders of record as a large portion of our stock is held in "street name" through banks or broker dealers.

Dividends

Dividends on our common stock are paid on a quarterly basis.

The holders of our common stock share proportionally on a per share basis in all declared dividends on our common stock. We are required to distribute to our stockholders as dividends at least 90% of our REIT taxable income, computed without regard to our net capital gains and the deduction for dividends paid, and 90% of our net income, if any (after tax) from foreclosure property in order to maintain our qualification as a REIT. See Item 1A, "Risk Factors," and Item 7, “Management’s Discussion and Analysis of Financial Conditions and Results of Operations," of this Annual Report on Form 10-K, for information regarding the sources of funds used for dividends and for a discussion of factors, if any, which may adversely affect our ability to pay dividends at the same level in 2025 and thereafter.

The following table presents cash dividends declared on our common stock from January 1, 2023 through December 31, 2024:

Common Dividends Declared per Share

Declaration Date

Amount

Record Date

Date of Payment

March 16, 2023

0.06

March 31, 2023

April 17, 2023

June 14, 2023

0.06

June 30, 2023

July 17, 2023

September 14, 2023

0.07

September 29, 2023

October 16, 2023

December 14, 2023

0.07

December 29, 2023

January 16, 2024

March 15, 2024

0.07

March 28, 2024

April 15, 2024

June 13, 2024

0.08

June 28, 2024

July 15, 2024

September 16, 2024

0.08

September 30, 2024

October 15, 2024

December 12, 2024

0.08

December 31, 2024

January 15, 2025

December 12, 2024

0.09

December 31, 2024

January 15, 2025

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The Company did not purchase any common shares under the plan during the twelve months ended December 31, 2024.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Factors Impacting Our Operating Results

Market conditions. The results of our operations are and will continue to be affected by a number of factors and primarily depend on, among other things, the level of our net interest income, the market value of our assets and the supply of, and demand for, our target assets in the marketplace. Our net interest income, will vary primarily as a result of changes in market interest rates and prepayment speeds, and by the ability of the borrowers underlying our commercial mortgage loans to continue making payments in accordance with the contractual terms of their loans, which may be impacted by unanticipated credit events experienced by such borrowers. During the year ended December 31, 2025, we foreclosed on four multifamily properties as result of the borrowers' inability to make payments, reducing our interest income accordingly. Interest rates vary according to the type of investment, conditions in the financial markets, competition and other factors, none of which can be predicted with any certainty. Our operating results will also be affected by general U.S. real estate fundamentals and the overall U.S. economic environment. In particular, our strategy is influenced by the specific characteristics of the underlying real estate markets, including prepayment rates, credit market conditions and interest rates. This year has been characterized by significant volatility in global markets, driven by investor concerns over inflation, rising interest rates, slowing economic growth, increased tariffs, trade tensions, geopolitical uncertainty and ~~instability~~political inand ~~the~~regulatory ~~banking sector~~uncertainties.

Changes in market interest rates. Generally, our business model is such that rising interest rates will increase our net interest income, while declining interest rates will decrease our net interest income. As of December 31, ~~2024~~2025, 99.9% of our investments by total investment exposure earned a floating rate of interest, of which 100.0% were indexed to 30-day term SOFR, and all of our collateralized loan obligations and secured financings were indexed to 30-day term SOFR, and as a result we are less sensitive to variability in our net interest income resulting from interest rate changes. As of December 31, ~~2024~~2025, 99100.0% of the loans in our commercial mortgage loan portfolio are structured with SOFR floors with a weighted average SOFR floor of 02.6318%, ~~none~~ of which ~~currently~~18.8% ~~has~~had aan interest rate floor greater than the current spot interest rate. When interest rates are above our average interest rate floor, an increase in interest rates will increase our interest income. Alternatively, when interest rates are below our average interest rate floor, an increase in interest rates will decrease our net interest income until such time as interest rates rise above our average interest rate floor. Although our Manager is currently originating loans with SOFR floors, there can be no assurance that we will continue to obtain SOFR floors on future originations or acquisitions. Similarly, net interest income is also impacted by the spread in our commercial mortgage loan portfolio. As of December 31, ~~2024~~2025, the weighted average spread of our commercial loan portfolio was 3.5833%, but there is no assurance that these spreads will be maintained as market environments fluctuate.

~~The~~After ~~U.S.~~a ~~Federal~~prolonged ~~Reserve~~period ~~maintained the federal funds target range at 0.0% to 0.25% for much~~ of ~~2021. However,~~rising ~~beginning~~interest ~~in March 2022~~rates, the ~~U.S.~~ Federal Reserve ~~raised~~began ~~the~~lowering ~~federal~~interest ~~funds~~rates ~~rate~~in ~~eleven times, increasing the federal funds target range to 5.25% to 5.50%. On~~ September 18, 2024 ~~the U.S. Federal Reserve lowered interest rates~~ by 0.50% and on each of November 7, 2024 and December 18, 2024, respectively, the Federal Reserve lowered interest rates by 0.25%. InAdditionally, ~~January~~on each of September 17, 2025, October 29, 2025 and December 10, 2025, respectively, the U.S. Federal Reserve ~~declined~~lowered tothe ~~make~~federal ~~any~~funds ~~additional~~rate ~~changes~~by 0.25% to ~~interest~~a ~~rates,~~current ~~holding the federal funds~~ target range atof 43.2550% to- 43.5075%. ~~Therefore,~~Interest ~~interest~~ rates to remain elevated, and the timing, direction and extent of any future interest rate changes remain uncertain.

In addition to the risk related to fluctuations in cash flows associated with movement in interest rates, there is also the risk of non-performance on floating rate assets. In the case of a significant increase in interest rates or the continued elevation in current rates, the additional debt service payments due from our borrowers may strain the operating cash flows of the real estate assets underlying our mortgages and/or impact their ability to be refinanced at such higher interest rates, potentially, contribute to non-performance or, in severe cases, default. This risk is partially mitigated during the underwriting process, which generally includes a requirement for our borrowers to purchase interest rate cap contracts with an unaffiliated third-party, provide an interest rate reserve deposit, and/or provide other structural protections. As of December 31, ~~2024~~2025, 7972.76% of our performing loans have interest rate caps with a weighted-average strike price of 23.49%.

Credit risk. Our commercial mortgage loans and other investments are also subject to credit risk. The performance and value of our loans and other investments depend upon the sponsor's ability to operate properties that serve as our collateral so that they produce cash flows adequate to pay interest and principal due to us. To monitor this risk, the Manager's asset management team reviews our portfolio and maintains regular contact with borrowers, co-lenders and local market experts to monitor the performance of the underlying collateral, anticipate borrower, property and market issues and, to the extent necessary or appropriate, enforce our rights as lender. The market values of commercial mortgage assets are subject to volatility and may be adversely affected by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; and retroactive changes to building or similar codes. In addition, decreases in property values reduce the value of the collateral and potential proceeds available to a borrower to repay the underlying loans, which could also cause us to suffer losses. As of December 31, ~~2024~~2025, 97.8% of the commercial mortgage loans in our portfolio were current as to principal and interest. Additionally, we have reviewed the loans designated as Default Risk for ~~impairment. Impairment~~specific ofcredit ~~these loans, which are collateral dependent, is measured by comparing the estimated fair value of the underlying collateral, less costs to sell, to the book value of the respective loan~~reserves. We can provide no assurances that our borrowers will remain current as to principal and interest, or that we will not enter into forbearance agreements or loan modifications in order to protect the value of our commercial mortgage loan assets. Should that occur, it could have a material negative impact on our results of operations.

Liquidity and financing markets. Liquidity is a measurement of our ability to meet potential cash requirements, including ongoing commitments to pay dividends, fund investments and repay borrowings and other general business needs. Our primary sources of liquidity have been proceeds of common or preferred stock issuance, net proceeds from corporate debt obligations, net cash provided by operating activities and other financing arrangements. We finance our commercial mortgage loans primarily with non-recourse secured borrowings, the maturities of which are matched to the maturities of the loans, and which are not subject to margin calls or additional collateralization requirements. However, to the extent that we seek to invest in additional commercial mortgage loans, outside of our secured borrowings, we will in part be dependent on our ability to issue additional collateralized loan obligations, to secure alternative financing facilities or to raise additional common or preferred equity. The expectation of slower interest rate decreases moving forward and unpredictable geopolitical landscape may cause a further dislocation in the capital markets resulting in a continual reduction of available liquidity and an increase in borrowing costs. A lack of liquidity for a prolonged period could limit our ability to grow our business. Additionally, the CRE CLOs and other secured financings we have entered into, and may in the future enter into, include certain interest coverage tests, overcollateralization coverage tests or other tests that, if not met, may result in a change in the priority of distributions, which may result in the reduction or elimination of distributions to the subordinate debt and equity tranches retained by us until the tests have been met or certain senior classes of securities have been paid in full. Accordingly, if such tests are not satisfied, we, as holders of the subordinate debt and equity interests in the applicable CRE CLO or secured financing, may experience a significant reduction in our cash flow from those interests, which would impact our liquidity.

~~general,~~Impairment anof ~~increase~~these inloans, ~~prepayment~~which ~~rates~~are ~~accelerates~~collateral ~~the~~dependent, ~~amortization~~is ofmeasured ~~purchase~~by ~~premiums,~~comparing ~~thereby reducing~~ the ~~interest~~estimated ~~income~~fair ~~earned~~value onof the ~~assets. Conversely,~~underlying ~~discounts on such assets are accreted into interest income. In general~~collateral, anless ~~increase~~costs into ~~prepayment rates accelerates the accretion of purchase discounts~~sell, ~~thereby~~to ~~increasing~~ the ~~interest~~book ~~earned~~value onof the ~~assets.~~respective ~~We have acquired twenty-nine loans and seventeen funded~~ loan ~~advances with an initial aggregate unpaid principal balance of $473~~.1 We ~~million~~can ~~with~~provide anno ~~aggregate~~assurances ~~purchase~~that ~~discount of $8.1 million. All of~~ our ~~other~~borrowers ~~commercial~~will ~~mortgage~~remain ~~loans~~current ~~were~~as ~~acquired~~to atprincipal ~~par.~~and ~~As of December 31~~interest, ~~2024,~~or ~~our~~that ~~aggregate unaccreted purchase discount was $3.5 million, and accordingly~~ we dowill not ~~believe~~enter ~~this~~into toforbearance beagreements aor ~~material~~loan ~~risk~~modifications toin ~~interest~~order ~~income for us at present. Additionally, we are subject~~ to ~~prepayment~~protect ~~risk associated with~~ the ~~terms~~value of our ~~secured borrowings. Due to shorter maturities of transitional floating-rate~~ commercial mortgage ~~loans,~~loan ~~our secured borrowings include a reinvestment period during which principal repayments and prepayments on our commercial mortgage loans may be reinvested in similar~~ assets~~, subject to meeting certain eligibility criteria~~. ~~The reinvestment period for the 2021-FL1 CLO expired in December 2023 and for LMF 2023-1 remains in place through July 2025.~~ ~~While~~Should ~~the~~that ~~interest rate spreads of our secured borrowings are fixed until they are repaid~~occur, ~~the~~it ~~terms,~~could ~~including~~have ~~spreads, of newly originated loans are subject to uncertainty based on~~ a ~~variety~~material ofnegative ~~factors,~~impact ~~including market and competitive conditions, which remain uncertain and volatile in the current inflationary environment. To the extent that such conditions result in lower spreads~~ on ~~the assets in which we reinvest, we may be subject to a reduction in interest income in the future. However,~~ our ~~loan~~results ~~agreements~~of ~~provide for prepayment penalties which are intended to offset any potential reduction in future interest income~~operations.

Liquidity and financing markets. Liquidity is a measurement of our ability to meet potential cash requirements, including ongoing commitments to pay dividends, fund investments and repay borrowings and other general business needs. Our primary sources of liquidity have been proceeds of common or preferred stock issuance, net proceeds from corporate debt obligations, net cash provided by operating activities and other financing arrangements. We finance our commercial mortgage loans with non-recourse secured borrowings, the maturities of which are matched to the maturities of the loans, and which are not subject to margin calls or additional collateralization requirements, as well as, a master repurchase agreement and a term financing agreement. However, to the extent that we seek to invest in additional commercial mortgage loans, outside of our secured borrowings, we will in part be dependent on our ability to issue additional collateralized loan obligations, master repurchase agreements, to secure alternative financing facilities or to raise additional common or preferred equity. The expectation of slower interest rate decreases moving forward and unpredictable geopolitical landscape may cause a further dislocation in the capital markets resulting in a continual reduction of available liquidity and an increase in borrowing costs. A lack of liquidity for a prolonged period could limit our ability to grow our business. Additionally, the CRE CLOs and other secured financings we have entered into, and may in the future enter into, include certain interest coverage tests, overcollateralization coverage tests or other tests that, if not met, may result in a change in the priority of distributions, which may result in the reduction or elimination of distributions to the subordinate debt and equity tranches retained by us until the tests have been met or certain senior classes of securities have been paid in full. Accordingly, if such tests are not satisfied, we, as holders of the subordinate debt and equity interests in the applicable CRE CLO or secured financing, may experience a significant reduction in our cash flow from those interests, which would impact our liquidity. In addition, our secured financing 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 will 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.

Prepayment speeds. Prepayment risk is the risk that principal will be repaid at a different rate than anticipated, causing the return on certain investments to be less than expected. As we receive prepayments of principal on our assets, any premiums paid on such assets are amortized against interest income. In general, an increase in prepayment rates accelerates the amortization of purchase premiums, thereby reducing the interest income earned on the assets. Conversely, discounts on such assets are accreted into interest income. In general, an increase in prepayment rates accelerates the accretion of purchase discounts, thereby increasing the interest earned on the assets. We have acquired twenty-nine loans and nineteen funded loan advances with an initial aggregate unpaid principal balance of $474.1 million with an aggregate purchase discount of $8.2 million. All of our other commercial mortgage loans were acquired at par. As of December 31, 2025, our aggregate unaccreted purchase discount was $1.7 million, and accordingly we do not believe this to be a material risk to interest income for us at present. Additionally, we are subject to prepayment risk associated with the terms of our secured borrowings. Due to shorter maturities of transitional floating-rate commercial mortgage loans, our secured borrowings include a reinvestment period during which principal repayments and prepayments on our commercial mortgage loans may be reinvested in similar assets, subject to meeting certain eligibility criteria. The reinvestment period for LMF 2023-1 Financing expired in July 2025 and LMNT 2025-FL3 remains in place through May 2028. Currently, the interest rate spreads of our secured borrowings are fixed until they are repaid, the terms, including spreads, of newly originated loans are subject to uncertainty based on a variety of factors, including market and competitive conditions, which remain uncertain and volatile in the current inflationary environment. To the extent that such conditions result in lower spreads on the assets in which we reinvest during active reinvestment periods, we may be subject to a reduction in interest income in the future. To the extent any loans are permanently financed by the Manager or any of its affiliates, the prepayment penalties will be waived, resulting in a reduction to reimbursed expense by an amount equal to 50% of the amount of any such waived fee capped at a waived fee of 1%.

Changes in market value of our assets. We account for our commercial mortgage loans at amortized cost. As such, our earnings will generally not be directly impacted by changes in the market values of these loans. However, if a loan is classified as impaired as the result of adverse credit performance, an allowance is recorded to reduce the carrying value through a charge to the provision for credit losses. Impairment is typically measured by comparing the estimated fair value of the underlying collateral, less costs to sell, to the book value of the respective loan. Provisions for credit losses will directly impact our earnings.

Governmental actions. Since 2008, when both Fannie Mae and Freddie Mac were placed under the conservatorship of the U.S. government, there have been a number of proposals to reform the U.S. housing finance system in general, and Fannie Mae and Freddie Mac in particular. We anticipate debate on residential housing and mortgage reform to continue through ~~2025~~2026 and beyond, but a deep divide persists between factions in Congress and as such it remains unclear what shape any reform would take and what impact, if any, reform would have on mortgage REITs.

Key Financial ~~Measure~~Measures and Indicators

As a real estate investment trust, we believe the key financial measures and indicators for our business are earnings per share, dividends declared, Distributable Earnings, and book value per share of common stock. For the three months ended December 31, ~~2024~~2025, we recorded ~~earnings~~loss per share of $0.0716, declared a quarterly common dividend of $0.0804 per share, ~~declared a one-time special dividend of $0.09 per share,~~ and reported $0.1001 per share of Distributable ~~Earnings~~Loss. In addition, our book value per share was $3.4003 per share. For the year ended December 31, ~~2024~~2025, we recorded ~~earnings~~loss per share of $0.3414, declared aggregate common dividends of $0.4022 per share, and reported $0.4414 per share of Distributable Earnings.

As further described below, Distributable Earnings is a measure that is not prepared in accordance with GAAP, which helps us to evaluate our performance excluding the effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current loan portfolio and operations. In addition, Distributable Earnings is a performance metric we consider when declaring our dividends.

Earnings (Loss) Per Share and Dividends Declared

The following table sets forth the calculation of basic and diluted net income per share and dividends declared per share:

	Three Months EndedDecember 31,		Year EndedDecember 31,
	2024		2024		2023
Net income attributable to common stockholders	$	3,604,879	$	17,909,190	$	14,974,496
Weighted-average shares outstanding, basic and diluted	52,300,100		52,274,904		52,231,296
Net income per share, basic and diluted	$	0.07	$	0.34	$	0.29
Dividends declared per share	$	0.17	$	0.40	$	0.26

Distributable Earnings


	Three Months Ended December 31,		Year Ended December 31,
	2025		2025		2024
Net (loss) income attributable to common stockholders	$	(8,942,111)	$	(7,485,309)	$	17,909,190
Weighted-average shares outstanding, basic and diluted	52,381,724		52,344,316		52,274,904
Net (loss) income per share, basic and diluted	$	(0.17)	$	(0.14)	$	0.34
Dividends declared per share	$	0.04	$	0.22	$	0.40

Distributable Earnings (Loss)

Distributable Earnings is a non-GAAP financial measure, which we define as GAAP net income (loss) attributable to holders of common stock, or, without duplication, owners of our subsidiaries, computed in accordance with GAAP, including realized losses not otherwise included in GAAP net income (loss) and excluding (i) non-cash equity compensation, (ii) depreciation and amortization, (iii) any unrealized gains or losses or other similar non-cash items that are included in net income for that applicable reporting period, regardless of whether such items are included in other comprehensive income (loss) or net income (loss), and (iv) one-time events pursuant to changes in GAAP and certain material non-cash income or expense items after discussions with the Board and approved by a majority of the Company's independent directors.

While Distributable Earnings excludes the impact of any unrealized provisions for credit losses, any credit losses are charged off and realized through Distributable Earnings when deemed non-recoverable. Non-recoverability is determined (i) upon the resolution of a loan (i.e. when the loan is repaid, fully or partially, or in the case of foreclosures, when the underlying asset is sold), or (ii) with respect to any amount due under any loan, when such amount is determined to be non-collectible.

We believe that Distributable Earnings provides meaningful information to consider in addition to our net income (loss) and cash flows from operating activities determined in accordance with GAAP. We believe Distributable Earnings is a useful financial metric for existing and potential future holders of our common stock as historically, over time, Distributable Earnings has been a strong indicator of our dividends per share. As a REIT, we generally must distribute annually at least 90% of our taxable income, subject to certain adjustments, and therefore we believe our dividends are one of the principal reasons stockholders may invest in our common stock. Refer to Note 16 to our consolidated financial statements for further discussion of our distribution requirements as a REIT. Furthermore, Distributable Earnings help us to evaluate our performance excluding the effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current loan portfolio and operations and is a performance metric we consider when declaring our dividends.

Distributable Earnings does not represent net income (loss) or cash generated from operating activities and should not be considered as an alternative to GAAP net income (loss), or an indication of GAAP cash flows from operations, a measure of our liquidity, or an indication of funds available for our cash needs. In addition, our methodology for calculating Distributable Earnings may differ from the methodologies employed by other companies to calculate the same or similar performance measures, and accordingly, our reported Distributable Earnings may not be comparable to the Distributable Earnings reported by other companies.

The following table provides a reconciliation of Distributable Earnings to GAAP net income:

	Three Months EndedDecember 31,		Year EndedDecember 31,
	2024		2024		2023
	2025		2025		2024
Net income attributable to common stockholders	$	3,604,879	$	17,909,190	$	14,974,496
Net (loss) income attributable to common stockholders	$	(8,942,111)	$	(7,485,309)	$	17,909,190
Realized loss on commercial mortgage loans	—		—		(4,271,672)
Realized loss on sale of real estate owned	(200,196)		(200,196)		—
Unrealized gain (loss) on mortgage servicing rights	(811,~~978)~~367		4295,~~686~~041		~~103~~42,~~684~~686
Unrealized provision for credit losses	18,~~781~~628,~~098~~158		514,~~275~~390,~~122~~927		25,~~524~~275,~~216~~122
Recognized compensation expense related to restricted common stock	—		—		6,194
Depreciation and amortization of real estate owned	295,698		779,260		—
Adjustment for (provision for) income taxes	56,~~457~~629		188,~~808~~193		518,~~723~~808
Distributable Earnings	$	5(200,~~382,456~~455)	$	237,~~245~~587,~~806~~916	$	1323,~~342~~245,~~641~~806
Weighted-average shares outstanding, basic and diluted	52,~~300~~381,~~100~~724		52,~~274~~344,~~904~~316		52,~~231~~274,~~296~~904
Distributable Earnings per share, basic and diluted	$	~~0.10~~—	$	0.4414	$	0.2644

Book Value Per Share

The following table calculates our book value per share:

December 31, 2024

December 31, 2023

December 31, 2025

December 31, 2024

Total stockholders' equity

~~237~~218,~~799~~987,~~532~~218

~~240~~237,~~692~~799,~~880~~532

Less preferred stock (liquidation preference of $25.00 per share)

(60,000,000)

Total common stockholders' equity

~~177~~158,~~799~~987,~~532~~218

~~180~~177,~~692~~799,~~880~~533

Common stock outstanding

52,~~309~~399,~~209~~265

52,~~248~~309,~~631~~209

Book value per share(1)

3.4003

3.4640

(1) Book value as of December 31, ~~2024~~2025 and December 31, ~~2023~~2024 includes the impact of an estimated CECL allowance of $1122,~~320~~658,~~220~~121 or $0.2243 per common share and $611,~~059~~320,~~006~~220, or $0.1222 per common share, respectively.

Investment Portfolio

Commercial Mortgage Loans

As of December 31, ~~2024~~2025, we have determined that we are the primary beneficiary of the ~~2021~~LMF 2023-~~FL1~~1 ~~CLO~~Financing and ~~LMF~~LMNT ~~2023~~2025-1FL3 ~~Financing~~CLO based on our obligation to absorb losses derived from ownership of our residual interests. Accordingly, the Company consolidated the assets, liabilities, income and expenses of the underlying issuing entities and the collateralized loan obligations.

The following table details our loan activity by unpaid principal balance:

	Year Ended December 31, 2024
	Year Ended December 31, 2025
Balance at December 31, 2023	$	1,383,881,197
Purchases and advances	58,423,744
Proceeds from principal repayments	(391,025,468)
Origination and other loan fees	(1,487,623)
Accretion of purchase discount	3,534,649
Accretion of deferred loan fees	737,793
Provision for credit losses	(5,261,214)
Balance at December 31, 2024	$	1,048,803,078
Purchases and fundings	403,888,645
Proceeds from principal repayments	(266,906,712)
Transfer to Real Estate Owned	(62,580,330)
Charge-offs	3,110,581
Purchase discount	(111,184)
Origination and other loan fees	(2,418,752)
Accretion of purchase discount	1,919,809
Accretion of deferred loan fees	2,791,339
Provision for credit losses	(14,448,482)
Balance at December 31, 2025	$	1,114,047,992

The following table details overall statistics for our loan portfolio as of December 31, ~~2024~~2025 and December 31, ~~2023~~2024:


								Weighted Average
Loan Type	Unpaid Principal Balance		Carrying Value(1)		Loan Count	Floating Rate Loan %		Coupon(2)		Term (Years)(3)	LTV(4)
December 31, 2025
Loans held-for-investment
Senior secured loans(5)	$	1,140,268,217	$	1,136,706,113	61	100.0	%	7.2	%	1.7	68.9	%
Allowance for credit losses	N/A		$	(22,658,121)
	$	1,140,268,217	$	1,114,047,992	61	100.0	%	7.2	%	1.7	68.9	%

								Weighted Average
Loan Type	Unpaid Principal Balance		Carrying Value(1)		Loan Count	Floating Rate Loan %		Coupon(2)		~~Term~~Life (Years)(3)	LTV(4)
December 31, 2024
Loans held-for-investment
Senior secured loans(5)	$	1,065,563,646	$	1,060,123,298	65	100.0	%	8.1	%	2.1	72.5	%
Allowance for credit losses	N/A		$	(11,320,220)
	$	1,065,563,646	$	1,048,803,078	65	100.0	%	8.1	%	2.1	72.5	%

								Weighted Average
Loan Type	Unpaid Principal Balance		Carrying Value		Loan Count	Floating Rate Loan %		Coupon(1)		Life (Years)(2)	LTV(3)
December 31, 2023
Loans held-for-investment
Senior secured loans(4)	$	1,397,385,160	$	1,389,940,203	88	100.0	%	8.9	%	2.9	71.5	%
Allowance for credit losses	N/A		$	(6,059,006)
	$	1,397,385,160	$	1,383,881,197	88	100.0	%	8.9	%	2.9	71.5	%

(1) Carrying Value includes $1,657,584 and $3,466,214 in unaccreted purchase discounts as of December 31, 2025 and December 31, 2024, respectively.

(12) ~~Carrying~~Weighted ~~Value~~average ~~includes~~coupon $assumes applicable 30-day term SOFR of 3.85% and 4.51% as of December 31,~~466,214~~ 2025 and $7December 31,~~000~~ 2024,~~863~~ inrespectively, ~~unaccreted~~inclusive ~~purchase~~of ~~discounts~~weighted asaverage interest rate floor of 2.18% and 0.63%, respectively. As of December 31, ~~2024~~2025 and December 31, ~~2023~~2024, ~~respectively~~100.0% of the investments by total investment exposure earned a floating rate indexed to 30-day term SOFR.

(2) Weighted average coupon assumes applicable 30-day term SOFR of 4.51% and 5.33% as of December 31, 2024 and December 31, 2023, respectively, inclusive of weighted average interest rate floor of 0.63% and 0.38%, respectively. As of December 31, 2024 and December 31, 2023, 100.0% of the investments by total investment exposure earned a floating rate indexed to 30-day term SOFR.

(3) Weighted average remaining term assumes all extension options are exercised by the borrower; provided, however, that our loans may be repaid prior to such date.

(4) LTV as of the date the loan was originated and is calculated after giving effect to capex and earnout reserves, if applicable. LTV has not been updated for any subsequent draws or loan modifications and is not reflective of any changes in value which may have occurred subsequent to origination date.

(5) As of December 31, ~~2024~~2025, $1856,~~049~~064,~~886,009~~487 of the outstanding senior secured loans were held in VIEs and $(1257,~~082~~983,~~931)~~507 of the outstanding senior secured loans were held outside of VIEs. As of December 31, ~~2023~~2024, $1,~~375~~049,~~277~~886,~~312~~009 of the outstanding senior secured loans were held in VIEs and $8(1,~~603~~082,~~886~~931) of the outstanding senior secured loans were held outside of VIEs.

~~The~~Portfolio ~~table~~Surveillance ~~below~~and ~~sets~~Credit ~~forth additional information relating to the Company's portfolio as of December 31, 2024:~~Quality

Loan #	Form of Investment	Origination Date	Total Loan Commitment(1)	Committed Principal Amount(2)	Current Principal Amount	Location	Property Type	Coupon	Max Remaining Term (Years)	LTV(3)
1	Senior secured	December 16, 2021	54,455,784	52,725,000	51,375,000	Daytona Beach, FL	Multifamily	1mS + 3.2	2.1	71.7	%
2	Senior secured	March 22, 2022	32,996,700	32,053,323	31,876,243	Seneca, SC	Multifamily	1mS + 3.4	2.3	74.5	%
3	Senior secured	June 28, 2022	33,550,000	31,940,124	31,602,807	Dallas, TX	Multifamily	1mS + 3.9	2.6	71.6	%
4	Senior secured	June 8, 2021	31,401,983	31,400,000	29,543,565	Miami, FL	Multifamily	1mS + 3.3	1.6	74.3	%
5	Senior secured	August 25, 2022	30,700,000	29,955,208	28,653,440	Wilmington, NC	Multifamily	1mS + 4.0	2.8	71.5	%
6	Senior secured	December 29, 2021	29,549,146	27,549,146	27,549,145	Multi, NC	Multifamily	1mS + 4.0	2.1	59.9	%
7	Senior secured	April 19, 2024	27,120,000	27,120,000	27,120,000	Battle Creek, MI	Multifamily	1mS + 3.1	2.9	74.0	%
8	Senior secured	June 7, 2021	28,425,000	27,032,982	26,609,785	San Antonio, TX	Multifamily	1mS + 3.5	1.6	80.0	%
9	Senior secured	November 2, 2021	26,049,291	26,049,291	26,049,291	Melbourne, FL	Multifamily	1mS + 3.8	1.9	72.1	%
10	Senior secured	August 26, 2021	25,163,008	25,163,008	24,468,032	Clarkston, GA	Multifamily	1mS + 3.6	1.7	79.0	%
11	Senior secured	October 18, 2021	28,250,000	24,252,193	23,348,000	Cherry Hill, NJ	Multifamily	1mS + 3.1	1.9	72.4	%
12	Senior secured	August 26, 2021	23,370,000	23,065,021	22,872,354	Union City, GA	Multifamily	1mS + 3.5	1.8	70.4	%
13	Senior secured	March 22, 2022	22,845,000	22,308,996	21,934,375	York, PA	Multifamily	1mS + 3.3	2.3	79.2	%
14	Senior secured	November 16, 2021	21,975,000	21,975,000	21,916,753	Dallas, TX	Multifamily	1mS + 3.3	2.0	73.5	%

We did not have any impaired loans, non-accrual loans, or loans in maturity default other than the loans discussed below as of December 31, 2025 or December 31, 2024.

As of December 31, 2025, we had aggregate specific allowance of credit losses of $17.6 million due to management's: (1) continued identification of one loan collateralized by two multifamily properties in Philadelphia, PA ($1.3 million specific allowance) with an aggregate unpaid balance of $15.5 million as risk rated "5" due to maturity default; (2) continued identification of one loan collateralized by a multifamily property in Colorado Springs, CO ($2.4 million

15	Senior secured	July 8, 2022	23,095,000	22,118,543	21,818,465	Arlington, TX	Multifamily	1mS + 3.8	2.7	67.1	%
16	Senior secured	April 27, 2022	53,470,000	49,050,000	21,739,237	North Brunswick, NJ	Multifamily	1mS + 3.4	2.4	79.9	%
17	Senior secured	August 31, 2021	21,750,000	21,725,235	21,644,684	Houston, TX	Multifamily	1mS + 3.4	1.8	74.2	%
18	Senior secured	November 29, 2022	21,283,348	20,360,000	20,360,000	Glendale, WI	Healthcare	1mS + 4.0	2.0	45.0	%
19	Senior secured	November 5, 2021	20,965,000	19,625,274	19,625,274	Orlando, FL	Multifamily	1mS + 3.1	1.9	78.1	%
20	Senior secured	April 13, 2022	20,651,725	18,989,494	18,989,494	Decatur, GA	Multifamily	1mS + 3.6	2.4	75.7	%
21	Senior secured	November 21, 2022	21,135,000	18,920,000	18,920,000	Houston, TX	Healthcare	1mS + 4.0	2.0	67.0	%
22	Senior secured	November 23, 2021	19,925,000	19,119,983	18,834,024	Orange, NJ	Multifamily	1mS + 3.3	2.0	78.0	%
23	Senior secured	February 2, 2022	19,740,000	19,328,491	18,660,822	Houston, TX	Multifamily	1mS + 3.5	2.2	77.5	%
24	Senior secured	February 11, 2022	20,165,000	19,695,670	18,599,480	Tampa, FL	Multifamily	1mS + 3.6	2.3	78.0	%
25	Senior secured	April 30, 2024	19,000,000	18,500,000	18,303,744	Garfield, NJ	Multifamily	1mS + 3.5	1.4	66.1	%
26	Senior secured	March 31, 2022	18,140,000	16,956,276	16,956,276	Tallahassee, FL	Multifamily	1mS + 3.3	2.3	74.8	%
27	Senior secured	November 10, 2022	18,590,000	16,690,000	16,690,000	Austin, TX	Healthcare	1mS + 4.0	2.0	65.0	%
28	Senior secured	December 1, 2021	16,071,800	16,039,141	15,449,323	Horn Lake, MS	Multifamily	1mS + 3.4	2.0	75.7	%
29	Senior secured	February 1, 2022	16,160,000	15,792,145	15,400,000	San Antonio, TX	Multifamily	1mS + 3.5	2.2	79.8	%
30	Senior secured	April 6, 2022	16,400,000	16,079,676	15,347,180	Vineland, NJ	Multifamily	1mS + 3.8	2.3	77.0	%
31	Senior secured	December 2, 2021	16,250,000	15,010,343	15,010,343	Colorado Springs, CO	Multifamily	1mS + 3.1	2.0	72.5	%
32	Senior secured	February 22, 2022	18,241,527	15,524,795	15,000,000	Philadelphia, PA	Multifamily	1mS + 3.8	2.3	80.0	%
33	Senior secured	June 15, 2022	15,371,600	15,100,334	14,511,455	Denton, TX	Multifamily	1mS + 3.9	2.6	73.0	%
34	Senior secured	July 26, 2022	17,100,000	14,886,485	14,351,599	Atlanta, GA	Multifamily	1mS + 3.7	2.7	65.2	%
35	Senior secured	April 27, 2022	15,000,000	14,171,704	14,171,704	Houston, TX	Multifamily	1mS + 3.7	2.4	79.6	%
36	Senior secured	November 21, 2022	15,735,000	14,030,000	14,030,000	Southlake, TX	Healthcare	1mS + 4.0	2.0	48.0	%
37	Senior secured	December 28, 2021	14,000,000	14,000,000	14,000,000	Houston, TX	Multifamily	1mS + 3.3	2.1	71.2	%
38	Senior secured	April 12, 2021	13,666,721	13,666,721	13,666,721	Cedar Park, TX	Multifamily	1mS + 3.9	1.4	66.7	%
39	Senior secured	June 10, 2022	15,250,000	14,598,318	13,625,505	Blakely, PA	Multifamily	1mS + 3.9	2.6	75.0	%
40	Senior secured	October 6, 2023	13,191,852	13,191,852	13,191,852	Garfield, NJ	Multifamily	1mS + 4.0	0.8	65.5	%
41	Senior secured	December 20, 2024	60,000,000	58,265,271	13,000,000	Olympia, WA	Multifamily	1mS + 3.8	5.1	68.5	%
42	Senior secured	December 28, 2021	38,800,000	37,613,170	12,322,717	Houston, TX	Multifamily	1mS + 3.3	2.1	71.2	%
43	Senior secured	January 25, 2022	13,000,000	12,406,810	12,249,079	Corpus Christi, TX	Multifamily	1mS + 3.6	2.2	78.8	%
44	Senior secured	May 12, 2022	12,750,000	11,926,591	11,926,591	Ypsilanti, MI	Multifamily	1mS + 3.5	2.5	68.4	%
45	Senior secured	December 10, 2021	13,000,000	11,815,776	11,662,582	Los Angeles, CA	Multifamily	1mS + 3.6	2.1	67.9	%
46	Senior secured	March 4, 2022	12,047,625	11,738,608	11,467,505	Houston, TX	Multifamily	1mS + 3.5	2.3	78.3	%

specific allowance; non-accrual cash basis) with an aggregate unpaid balance of $10.5 million as risk rated "5" due to monetary default; (3) identification of two loans collateralized by two multifamily properties in Arlington, TX ($3.6 million specific allowance; non-accrual cash basis) and Cedar Park, TX (no specific allowance; non-accrual cash basis) with an aggregate unpaid balance of $35.5 million as risk rated "5" due to maturity default and (4) identification of four loans collateralized by four multifamily properties in Des Moines, IA ($0.5 million specific allowance; non-accrual cash basis), Tampa, FL ($0.9 million specific allowance; non-accrual cash basis), Tallahassee, FL ($3.0 million specific allowance; non-accrual cash basis) and Ypsilanti, MI ($5.9 million specific allowance; non-accrual cash basis) with an aggregate principal balance of $55.8 million as risk rated "5" due to monetary default.

We recorded $0.8 million in cash basis income received on non-accrual loans during the year ended December 31, 2025, subsequent to their determination to be risk rated "5" loans and we received $0.3 million of cash proceeds from such loans that were applied as a reduction to the amortized cost basis of the respective loan.

As of December 31, 2024, we had aggregate specific allowance for credit losses of $3.8 million due to management's identification of: (1) three loans collateralized by four multifamily properties in Philadelphia, PA ($0.1 million specific allowance; non-accrual cost recovery), Orlando, FL ($0.4 million specific allowance; non-accrual cash basis) and Colorado Springs, CO ($1.1 million specific allowance; non-accrual cash basis) with an aggregate unpaid principal balance of $45.1 million as risk rated "5" due to monetary default; (2) one collateralized by two healthcare properties in Polk County, FL ($0.6 million specific allowance; non-accrual cash basis) with an aggregate unpaid principal balance of $6.1 million as risk rated "5" due to monetary default and (3) two loan collateralized by two multifamily properties in Dallas, TX (no specific allowance) and San Antonio, TX ($1.6 million specific allowance; non-accrual cash basis) with an aggregate unpaid principal balance of $47.0 million as risk rated "5" due to technical default.

No income was recorded on these loans subsequent to their determination to be a risk rated "5" loan and we received $0.8 million of cash proceeds from such loans that were applied as a reduction to the amortized cost basis of the respective loan.

In the second quarter of 2025, the $15.4 million San Antonio, TX ($2.4 million specific allowance) loan and a loan collateralized by a multifamily property in Houston, TX with an aggregate unpaid principal balance of $11.5 million ($0.5 million specific reserve) were foreclosed on, with ownership and deed to the property being taken by two newly formed subsidiaries of the Company. Additionally, in the third quarter of 2025, two loans collateralized by two multifamily properties in San Antonio, TX ($0.2 million specific allowance) with aggregate unpaid principal balance of $35.7 million were foreclosed on, with ownership and deed to the property being taken by two newly formed subsidiaries of the Company.

Our Manager's asset management team proactively manages the Company's investment portfolio. The asset management team, together with our Manager's underwriting and servicing teams, monitors the credit performance of the investment portfolio, working closely with borrowers to manage all of our positions and monitor financial performance of our collateral assets, including execution of business plans and daily activities within our investment portfolio.

Loan modifications and amendments are commonplace in the transitional lending business. We may amend or modify a loan depending on the loan's specific facts and circumstances. These loan modifications typically include additional time for a borrower to refinance or sell their property, adjustment or waiver of performance tests that are prerequisite to the extension of a loan maturity, modification of terms of interest rate cap agreements, and/or deferral of scheduled principal payments. In exchange for a modification, we often receive a partial repayment of principal, a cash infusion to replenish interest or capital improvement reserves, termination of all or a portion of the remaining unfunded loan commitment, additional call protection and/or an increase in the loan coupon or additional fees. We continue to work with our borrowers to address issues as they arise while seeking to preserve the credit attributes of our loans. However, we cannot assure you that these efforts will be successful, and we may experience payment delinquencies, defaults, foreclosures or losses.

As discussed in Note 2 to our consolidated financial statements, our Manager performs a quarterly review of our loan portfolio, assesses the performance of each loan, and assigns a risk rating between "1" and "5," from less risk to greater risk. The weighted average risk rating of our total loan exposure was 3.2 and 3.5 as of December 31, 2025 and December 31, 2024, respectively. The change in underlying risk rating consisted of loans that paid off with a risk rating of "2" of $27.1 million, a risk rating of "3" of $208.2 million, a risk rating of "4" of $23.2 million and a risk rating of "5" of $8.1 million, offset by funding of loans with a risk rating of "2" of $96.1 million, a risk rating of "3" of $306.8 million and a risk rating of "5" of $0.9 million during the year ended December 31, 2025. Additionally, $34.3 million of loans with a risk rating of "3" transitioned to a risk rating of "2", $42.9 million of loans with a risk rating of "3" transitioned to a risk rating of "4", $13.7 million of loans transitioned from a risk rating of "3" to a risk rating of "5", $114.5 million of loans transitioned from a risk rating of "4" to a risk rating of "3", and $77.2 million of loans transitioned from a risk rating of "4" to a risk rating of "5" and $49.2 million of loans transitioned from a risk rating of "5" to a risk rating of "3". Further, $35.7 million of loans with a risk rating of "3", $11.5 million of loans with a risk rating of "4" and $15.4 million of loans with a risk rating of "5" were foreclosed and moved to REO. The following table presents the principal balance and net book value based on our internal risk ratings:


December 31, 2025
				Amortized Cost by Year of Origination
Risk Rating	Number of Loans	Outstanding Principal		2025		2024	2022		2021
1	—	$	—	$	—	—	$	—	$	—
2	9	161,089,912		43,904,254		48,438,856	68,375,256		—
3	38	752,514,730		182,723,449		133,591,415	134,038,225		297,723,546
4	6	109,281,497		—		—	73,034,316		34,009,099
5	8	117,382,078		—		—	84,542,855		13,666,721
	61	$	1,140,268,217	$	226,627,703	182,030,271	$	359,990,652	$	345,399,366

Real Estate Owned

During the year ended December 31, 2025, Lument Real Estate Capital, LLC ("LREC"), as special servicer for 2021-FL1 CLO foreclosed on two multifamily bridge loans located in San Antonio, TX with an aggregate net carrying value of $39.5 million, net of specific CECL reserves of $2.4 million, with ownership and deed to the properties being taken by newly formed subsidiaries of the Company. Additionally, LREC, as special servicer for LMF 2023-1 Financing foreclosed on two multifamily bridge loans located in Houston, TX and San Antonio, TX with aggregate net carrying value of $19.9 million, net of specific CECL reserves of $0.7 million, with ownership and deed to the properties being taken by a newly formed subsidiaries of the Company.

47	Senior secured	October 28, 2021	12,250,000	12,020,228	11,202,535	Tampa, FL	Multifamily	1mS + 3.1	1.9	75.7	%
48	Senior secured	April 23, 2021	11,600,000	11,464,693	10,986,357	Tualatin, OR	Multifamily	1mS + 3.3	1.4	73.9	%
49	Senior secured	May 3, 2022	11,349,250	11,056,240	10,818,945	Port Richey, FL	Multifamily	1mS + 3.6	2.4	79.1	%
50	Senior secured	September 30, 2021	11,300,000	11,022,226	10,795,000	Clearfield, UT	Multifamily	1mS + 3.3	1.8	68.0	%
51	Senior secured	December 29, 2021	11,000,000	10,795,116	10,615,094	Phoenix, AZ	Multifamily	1mS + 3.8	2.1	75.9	%
52	Senior secured	June 28, 2022	10,531,845	10,531,845	10,531,845	Colorado Springs, CO	Multifamily	1mS + 3.9	2.6	73.1	%
53	Senior secured	January 14, 2022	10,234,000	9,902,979	9,609,250	Houston, TX	Multifamily	1mS + 3.6	2.2	78.8	%
54	Senior secured	July 14, 2022	10,153,000	9,719,457	9,429,206	Bradenton, FL	Multifamily	1mS + 3.9	2.7	74.4	%
55	Senior secured	August 5, 2022	10,232,000	9,127,649	9,127,649	San Antonio, TX	Multifamily	1mS + 4.4	2.7	75.0	%
56	Senior secured	June 22, 2022	9,772,000	8,593,992	8,175,500	Des Moines, IA	Multifamily	1mS + 4.0	2.6	72.0	%
57	Senior secured	May 26, 2022	8,149,098	8,149,098	8,116,833	Haltom City, TX	Multifamily	1mS + 4.0	2.5	74.4	%
58	Senior secured	September 28, 2021	8,125,000	7,286,000	7,286,000	Chicago, IL	Multifamily	1mS + 3.8	1.8	75.9	%
59	Senior secured	July 1, 2021	7,285,000	7,285,000	7,169,838	Harker Heights, TX	Multifamily	1mS + 3.7	1.6	72.3	%
60	Senior secured	October 7, 2022	7,000,000	7,000,000	7,000,000	Fairborn, OH	Multifamily	1mS + 4.1	0.9	79.1	%
61	Senior secured	October 24, 2022	6,100,000	6,100,000	6,100,000	Various, FL	Healthcare	1mS + 4.5	0.9	71.0	%
62	Senior secured	June 3, 2022	6,067,500	6,067,500	6,067,500	Deer Park, NY	Self Storage	1mS + 3.6	2.5	72.5	%
63	Senior secured	May 21, 2021	6,937,427	6,937,427	5,994,000	Youngtown, AZ	Multifamily	1mS + 3.8	1.5	71.4	%
64	Senior secured	April 30, 2021	5,472,000	5,472,000	5,285,500	Daytona Beach, FL	Multifamily	1mS + 3.8	1.4	77.4	%
65	Senior secured	October 6, 2023	4,808,148	4,808,148	4,808,148	Garfield, NJ	Multifamily	1mS + 4.0	0.8	65.5	%

The fair value of the REO at time of foreclosure was determined using the income approach, market approach, or a combination thereof. The significant unobservable input for the income capitalization approach is the overall capitalization rate assumption, used in the direct capitalization method, which was 6.25%-7.40%. The significant unobservable input used for the market approach is the price per unit from an appraisal or broker opinion of value.

On December 22, 2025, the Company sold the properties located in San Antonio, TX held by a subsidiary of the Company to a third party for $8.2 million and recognized a $0.5 million realized loss on the sale of the property. The realized loss on the sale of the property is included within realized loss on real estate owned in the Company's consolidated statements of operations.

At December 31, 2025, our REO assets were comprised of three multifamily properties held within various subsidiaries of the Company. A summary of our REO assets is as follows:


	December 31, 2025		December 31, 2024
Real estate owned, held-for-investment
Land	$	4,278,272	$	—
Building	22,907,888		—
Less: Accumulated depreciation and amortization	(347,150)		—
Total	$	26,839,010	$	—

Real estate owned, held-for-sale
Real estate owned, held-for-sale	$	24,099,072	$	—
Total	$	24,099,072	$	—

At December 31, 2025, our REO properties had a weighted average occupancy rate of approximately 69.1%.

We recorded depreciation and amortization expense related to the REO assets of $0.8 million for the year ended December 31, 2025, recorded as "net income (expense) from real estate owned operations" in the consolidated statement of operations. Additionally, we recorded operating income of $3.3 million and operating expense of $3.0 million for the year ended December 31, 2025, recorded as "Net income (expense) from real estate owned operations" in the consolidated statement of operations.

The table below sets forth additional information relating to the Company's portfolio as of December 31, 2025:


Loan #	Form of Investment	Origination Date	Total Loan Commitment(1)	Committed Principal Amount(2)	Current Principal Amount	Location	Property Type	Coupon	Max Remaining Term (Years)	LTV(3)		Loan/Investment Per Unit(4)	Risk Rating
Senior Secured Loans
1	Senior secured	January 31, 2025	43,655,000	43,655,000	43,655,000	Los Angeles, CA	Multifamily	1mS + 3.0	2.7	66.1	%	$285,327/unit	3
2	Senior secured	July 31, 2025	40,000,000	40,000,000	40,000,000	Lincoln Park, NJ	Multifamily	1mS + 2.8	3.2	62.9	%	$227,273/unit	3
3	Senior secured	December 23, 2024	36,800,000	36,800,000	36,800,000	Macon, GA	Multifamily	1mS + 2.9	4.1	66.1	%	$131,429/unit	3
4	Senior secured	January 16, 2025	36,000,000	36,000,000	36,000,000	Noblesville, IN	Multifamily	1mS + 2.6	2.2	67.6	%	$162,162/unit	3
5	Senior secured	January 29, 2025	39,800,000	35,500,000	35,500,000	Manchaca, TX	Multifamily	1mS + 3.0	3.2	52.2	%	$104,412/unit	3
6	Senior secured	December 16, 2021	36,350,000	36,350,000	35,000,000	Daytona Beach, FL	Multifamily	1mS + 3.2	1.1	71.7	%	$141,129/unit	3
7	Senior secured	March 22, 2022	32,203,323	32,103,323	31,627,625	Seneca, SC	Multifamily	1mS + 3.4	1.3	74.5	%	$263,564/unit	4
8	Senior secured	June 28, 2022	29,940,124	29,940,125	29,623,930	Dallas, TX	Multifamily	1mS + 3.4	1.6	71.6	%	$95,870/unit	3
9	Senior secured	June 8, 2021	31,400,000	31,400,000	29,543,566	Miami, FL	Multifamily	1mS + 3.3	0.3	74.3	%	$126,255/unit	3
10	Senior secured	April 3, 2025	27,500,000	27,500,000	27,500,000	Lockport, IL	Multifamily	1mS + 2.8	2.3	64.5	%	$245,536/unit	2
11	Senior secured	November 2, 2021	26,049,291	26,049,291	26,049,291	Melbourne, FL	Multifamily	1mS + 3.2	0.2	72.1	%	$113,752/unit	3
12	Senior secured	September 17, 2024	25,500,000	25,500,000	25,500,000	Marysville, OH	Multifamily	1mS + 2.9	1.8	73.8	%	$186,131/unit	2
13	Senior secured	April 27, 2022	24,525,000	24,525,000	24,525,000	North Brunswick, NJ	Multifamily	1mS + 3.4	1.4	79.9	%	$96,937/unit	3


14	Senior secured	August 26, 2021	25,163,008	25,163,008	24,468,032	Clarkston, GA	Multifamily	1mS + 3.6	2.7	79.0	%	$86,155/unit	4
15	Senior secured	December 20, 2024	23,500,000	23,391,109	23,370,018	Olympia, WA	Multifamily	1mS + 3.8	4.1	68.5	%	$83,764/unit	3
16	Senior secured	October 18, 2021	24,252,193.15	24,252,193	23,348,000	Cherry Hill, NJ	Multifamily	1mS + 3.1	0.9	72.4	%	$132,659/unit	3
17	Senior secured	December 29, 2021	25,000,000	23,000,000	23,000,000	Spring Lake, NC	Multifamily	1mS + 4.0	1.1	59.9	%	$147,436/unit	3
18	Senior secured	August 26, 2021	23,065,020.96	23,065,021	22,872,354	Union City, GA	Multifamily	1mS + 3.5	1.3	70.4	%	$77,797/unit	3
19	Senior secured	December 6, 2024	24,889,294	22,080,778	21,990,281	Groveport, OH	Multifamily	1mS + 3.5	3.1	51.5	%	$133,274/unit	3
20	Senior secured	November 16, 2021	21,975,000	21,975,000	21,916,753	Dallas, TX	Multifamily	1mS + 3.3	1.0	73.5	%	$101,466/unit	3
21	Senior secured	July 8, 2022	22,118,543.44	22,118,543	21,818,465	Arlington, TX	Multifamily	1mS + 3.8	1.7	67.1	%	$97,404/unit	5
22	Senior secured	August 31, 2021	21,750,000	21,725,235	21,644,684	Houston, TX	Multifamily	1mS + 3.4	0.1	74.2	%	$83,249/unit	3
23	Senior secured	March 22, 2022	21,808,995.9	21,808,996	21,442,771	York, PA	Multifamily	1mS + 3.3	0.3	79.2	%	$148,908/unit	3
24	Senior secured	November 29, 2022	20,360,000	20,360,000	20,360,000	Glendale, WI	Healthcare	1mS + 4.0	1.0	45.0	%	$242,381/unit	3
25	Senior secured	November 5, 2021	19,625,273.67	19,625,274	19,625,274	Orlando, FL	Multifamily	1mS + 3.1	0.9	78.1	%	$129,969/unit	3
26	Senior secured	November 21, 2022	18,920,000	18,920,000	18,920,000	Houston, TX	Healthcare	1mS + 4.0	1.0	67.0	%	$236,500/unit	2
27	Senior secured	November 10, 2022	18,590,000	18,590,000	18,590,000	Austin, TX	Healthcare	1mS + 4.0	1.0	65.0	%	$281,667/unit	2
28	Senior secured	February 11, 2022	19,445,669.78	19,445,670	18,363,394	Tampa, FL	Multifamily	1mS + 3.6	1.3	78.0	%	$136,025/unit	5
29	Senior secured	November 23, 2021	18,619,982.52	18,619,983	18,341,502	Orange, NJ	Multifamily	1mS + 3.3	1.0	78.0	%	$166,741/unit	3
30	Senior secured	February 2, 2022	18,578,490.49	18,578,490	17,936,729	Houston, TX	Multifamily	1mS + 3.5	1.6	77.5	%	$72,326/unit	4
31	Senior secured	March 26, 2025	17,780,000	17,780,000	17,780,000	Kannapolis, NC	Multifamily	1mS + 2.9	2.3	60.4	%	$179,596/unit	3
32	Senior secured	December 20, 2024	17,010,000	17,010,000	17,010,000	Lafayette, IN	Multifamily	1mS + 2.7	2.1	68.0	%	$118,125/unit	2
33	Senior secured	March 31, 2022	18,140,000	16,956,276	16,956,276	Tallahassee, FL	Multifamily	1mS + 3.0	1.3	74.8	%	$88,314/unit	5
34	Senior secured	March 28, 2025	16,500,000	16,500,000	16,500,000	Lansing, MI	Multifamily	1mS + 2.9	2.3	73.5	%	$189,655/unit	2
35	Senior secured	December 16, 2021	16,375,000	16,375,000	16,375,000	Daytona Beach, FL	Multifamily	1mS + 3.2	1.1	71.7	%	$66,028/unit	3
36	Senior secured	November 21, 2022	15,735,000	15,735,000	15,735,000	Southlake, TX	Healthcare	1mS + 4.0	1.0	48.0	%	$172,912/unit	2
37	Senior secured	February 22, 2022	18,241,527	15,524,795	15,524,795	Philadelphia, PA	Multifamily	1mS + 3.8	1.3	80.0	%	$337,496/unit	5
38	Senior secured	April 6, 2022	16,161,567	16,161,567	15,347,180	Vineland, NJ	Multifamily	1mS + 3.8	0.5	77.0	%	$113,683/unit	2
39	Senior secured	April 27, 2022	14,171,703.99	14,171,704	14,171,704	Houston, TX	Multifamily	1mS + 3.7	1.4	79.6	%	$88,573/unit	4
40	Senior secured	December 28, 2021	13,864,376	13,864,376	13,864,376	Houston, TX	Multifamily	1mS + 3.3	0.2	71.2	%	$35,825/unit	3
41	Senior secured	April 12, 2021	17,000,000	13,666,721	13,666,721	Cedar Park, TX	Multifamily	1mS + 3.9	0.4	66.7	%	$113,889/unit	5
42	Senior secured	December 20, 2024	13,000,000	13,000,000	13,000,000	Olympia, WA	Multifamily	1mS + 3.8	4.1	68.5	%	$46,595/unit	3
43	Senior secured	July 26, 2022	13,880,000	13,386,484	12,905,495	Atlanta, GA	Multifamily	1mS + 3.7	1.7	65.2	%	$126,524/unit	3
44	Senior secured	November 5, 2024	13,090,000	12,851,563	12,851,563	El Paso, TX	Multifamily	1mS + 3.8	1.9	69.9	%	$52,887/unit	3
45	Senior secured	December 28, 2021	12,203,341	12,203,341	12,203,341	Houston, TX	Multifamily	1mS + 3.3	0.2	71.2	%	$31,533/unit	3


46	Senior secured	May 12, 2022	11,926,591.01	11,926,591	11,926,591	Ypsilanti, MI	Multifamily	1mS + 3.5	1.5	68.4	%	$70,992/unit	5
47	Senior secured	October 10, 2024	12,100,000	11,550,000	11,550,000	Cottonwood, AZ	Multifamily	1mS + 3.3	3.9	38.5	%	$49,359/unit	3
48	Senior secured	January 25, 2022	11,406,810.12	11,406,810	11,261,792	Corpus Christi, TX	Multifamily	1mS + 3.6	2.5	78.8	%	$67,436/unit	4
49	Senior secured	October 28, 2021	12,203,838.59	12,203,839	11,202,535	Tampa, FL	Multifamily	1mS + 3.1	0.9	75.7	%	$164,743/unit	3
50	Senior secured	May 3, 2022	11,056,240.59	11,056,240	10,818,945	Port Richey, FL	Multifamily	1mS + 3.6	1.4	79.1	%	$117,597/unit	3
51	Senior secured	June 28, 2022	10,531,845	10,531,845	10,531,845	Colorado Springs, CO	Multifamily	1mS + 3.9	1.6	73.1	%	$114,477/unit	5
52	Senior secured	September 30, 2021	10,022,225.63	10,022,225	9,815,615	Clearfield, UT	Multifamily	1mS + 3.3	0.8	68.0	%	$129,153/unit	4
53	Senior secured	July 14, 2022	9,843,891.34	9,843,891	9,429,206	Bradenton, FL	Multifamily	1mS + 3.9	1.7	74.4	%	$112,252/unit	3
54	Senior secured	June 22, 2022	9,772,000	8,593,992	8,593,992	Des Moines, IA	Multifamily	1mS + 4.0	1.6	72.0	%	$63,191/unit	5
55	Senior secured	April 15, 2024	8,500,000	8,500,000	8,500,000	Meridian, ID	Healthcare	1mS + 4.7	0.9	54.0	%	$283,333/unit	3
56	Senior secured	December 19, 2025	6,960,000	6,960,000	6,960,000	San Antonio, TX	Multifamily	1mS + 2.8	4.1	76.5	%	$48,333/unit	3
57	Senior secured	October 7, 2022	6,816,701	6,816,701	6,816,701	Fairborn, OH	Multifamily	1mS + 4.1	P-1M-6D	79.1	%	$200,491/unit	3
58	Senior secured	September 18, 2024	6,000,000	6,000,000	6,000,000	Vallejo, CA	Multifamily	1mS + 3.4	1.3	71.2	%	$105,263/unit	3
59	Senior secured	December 19, 2024	5,987,732	5,987,732	5,987,732	Bellflower, CA	Multifamily	1mS + 2.5	2.1	30.4	%	$33,265/unit	2
60	Senior secured	December 29, 2021	4,549,146	4,549,146	4,549,146	Multi, NC	Multifamily	1mS + 4.0	1.1	59.9	%	$29,161/unit	3
61	Senior secured	October 27, 2025	53,100,000	53,100,000	3,100,000	Columbus, OH	Multifamily	1mS + 2.4	2.9	75.0	%	$11,654/unit	3
Total/Weighted Average			1,221,313,747	1,202,277,878	1,140,268,220			1mS + 3.3	1.7	68.9	%		3
Real Estate Owned(5)
1	Real Estate Owned	February 01, 2022	N/A	12,957,120	12,957,120	San Antonio, TX	Multifamily	N/A	N/A	N/A		$76,218/unit
2	Real Estate Owned	March 04, 2022	N/A	11,000,000	11,000,000	Houstin, TX	Multifamily	N/A	N/A	N/A		$76,923/unit
3	Real Estate Owned	June 07, 2021	N/A	26,585,176	26,585,176	San Antonio, TX	Multifamily	N/A	N/A	N/A		$66,297/unit
Total				50,542,296	50,542,296

(1) Total Loan Commitment represents the total commitment of the entire whole loan originated. See Note 11 Commitments and Contingencies to our consolidated financial statements for further discussion of unfunded commitments.

(2) Committed Principal Amount includes funded participations by LFT-affiliated entities and third parties that are syndicated/sold.

(3) LTV as of the date the loan was originated by a ~~Hunt/~~ORIX affiliate and is calculated after giving effect to capex and earn-out reserves, if applicable. LTV has not been updated for any subsequent draws or loan modifications and is not reflective of any changes in value, which may have occurred subsequent to origination date.

We(4) Loan ~~did~~Per ~~not~~Unit ~~have~~is ~~any~~based ~~impaired~~on ~~loans,~~the ~~non-accrual~~current ~~loans,~~principal oramount ~~loans~~divided inby ~~maturity default other than~~ the ~~loans~~property's ~~discussed~~current ~~below~~unit ~~as of December 31, 2024 or December 31, 2023~~count.

~~During~~(5) Committed ~~the~~Principal period ended December 31, 2024, management identified a loan, collateralized by two multifamily properties in Philadelphia, PA, with an unpaid aggregate principal value of $15.0 million as requiring individual evaluation for a specific allowance for credit losses due to monetary default, and aCurrent ~~resulting~~Principal ~~risk~~Amount ~~rating of "5"; a specific allowance of $0.1 million~~ for ~~credit~~Real ~~losses~~Estate ~~was~~Owned ~~required~~represent ~~after analysis of~~ the ~~underlying~~balances ~~collateral~~at ~~value. This~~time ~~loan has been on non-accrual status since June 30, 2024 as a result~~ of ~~monetary default, with interest collections accounted for under the cost recovery method~~foreclosure. ~~During the year ended December 31, 2024, the Company applied $0.8 million in interest received from the borrower as a reduction in the carrying basis of this loan.~~

During the period ended December 31, 2024, management identified a loan, collateralized by a multifamily property in Dallas, TX, with an unpaid aggregate principal value of $31.6 million as requiring individual evaluation for a specific allowance for credit losses due to technical default, and a resulting risk rating of "5"; however, no specific allowance for credit losses was required after analysis of the underlying collateral value.

During the period ended December 31, 2024, management identified a loan, collateralized by a multifamily property in Orlando, FL, with an unpaid aggregate principal value of $19.6 million as requiring individual evaluation for a specific allowance for credit losses due to monetary default, and a resulting risk rating of "5"; a specific allowance of $0.4 million for credit losses was required after analysis of the underlying collateral value. This loan was placed on non-accrual status as of December 31, 2024 as a result of the monetary default, with interest recorded as income on a cash basis.

During the period ended December 31, 2024, management identified a loan, collateralized by a multifamily property in San Antonio, TX, with an unpaid aggregate principal value of $15.4 million as requiring individual evaluation for a specific allowance for credit losses due to technical default, and a resulting risk rating of "5"; a specific allowance of $1.6 million for credit losses was required after analysis of the underlying collateral value. This loan was placed on non-accrual status as of December 31, 2024 as a result of the technical default, with interest recorded as income on a cash basis.

During the period ended December 31, 2024, management identified a loan, collateralized by two healthcare properties in Polk County, FL, with an unpaid aggregate principal value of $6.1 million as requiring individual evaluation for a specific allowance for credit losses due to monetary default, and a resulting risk rating of "5"; a specific allowance of $0.6 million for credit losses was required after analysis of the underlying collateral value. This loan was placed on non-accrual status as of December 31, 2024 as a result of the monetary default, with interest recorded as income on a cash basis.

During the period ended December 31, 2024, management identified a loan, collateralized by a multifamily property in Colorado Springs, CO, with an unpaid aggregate principal value of $10.5 million as requiring individual evaluation for a specific allowance for credit losses due to monetary default, and a resulting risk rating of "5"; a specific allowance of $1.1 million for credit losses was required after analysis of the underlying collateral value. This loan was placed on non-accrual status as of December 31, 2024 as a result of the monetary default, with interest recorded as income on a cash basis.

In February 2023, in connection with the sale of the office building collateralizing an impaired loan by the borrower to an unaffiliated third-party, the Company accepted a discounted payoff of approximately $6.0 million on the impaired loan, which had an unpaid principal balance of $10.3 million. A specific allowance for credit loss of $4.3 million was recorded for this impaired loan in the year ended December 31, 2023. Upon the discounted payoff, a $4.3 million charge off against the allowance for credit losses was recorded, with de minimis impact to income in the year ended December 31, 2024.

Throughout 2023, management identified one loan, collateralized by a multifamily property in Columbus, Ohio, with an initial unpaid principal value of $12.8 million as impaired due to monetary default resulting in a risk rating of "5." In the first quarter of 2023, this loan was placed on non-accrual status with interest collections accounted for under the cost recovery method. As of December 31, 2023, the carrying value of this loan was $8.9 million, which reflected a $5.0 million payment received on November 25, 2023 under an insurance claim, of which $3.1 million was applied to carrying value reduction and a $1.9 million payable established primarily related to a tenant settlement. As of December 31, 2023, no specific reserves were required after analysis of the underlying collateral value. In the first quarter of 2024, we received additional insurance proceeds in the amount of $13.8 million which reduced the carrying value of this loan to $0, and after taking into consideration repayment of an interest rate cap and certain legal and other costs and amounts deemed recoverable, resulting in the recognition of approximately $2.8 million of income in the quarter ended March 31, 2024.

During the period ended December 31, 2023, management identified one loan, collateralized by a multifamily property in Virginia Beach, VA, with an unpaid principal balance of $36.8 million as impaired due to monetary default resulting in a risk rating of "5"; however, no specific asset reserves were required after analysis of underlying collateral value. This loan was on non-accrual status as a result of monetary default and impaired loan classification. In the first quarter of 2024, the Company and the borrower entered into a loan modification and the loan was returned to accrual status. In connection with the modification, the borrower, among other things, made a principal payment of approximately $3.6 million and brought current any past due interest, escrows and reserves, which resulted in interest of approximately $0.5 million that was unpaid as of December 31, 2023 recognized as income in the quarter ended March 31, 2024. The note rate on the loan was amended to SOFR + 400 basis points from SOFR + 327 basis points and the stated maturity date of the loan was amended to April 5, 2024, with the ability for borrower to extend, under certain conditions, to May 3, 2024. On May 3, 2024, the loan repaid in full according to the terms of the loan modification.

Our Manager's asset management team pro-actively manages the Company's investment portfolio. The asset management team, together with our Manager's underwriting and servicing teams, monitors the credit performance of the investment portfolio, working closely with borrowers to manage all of our positions and monitor financial performance of our collateral assets, including execution of business plans and daily activities within our investment portfolio.

Loan modifications and amendments are commonplace in the transitional lending business. We may amend or modify a loan depending on the loan's specific facts and circumstances. These loan modifications typically include additional time for a borrower to refinance or sell their property, adjustment or waiver of performance tests that are prerequisite to the extension of a loan maturity, modification of terms of interest rate cap agreements, and/or deferral of scheduled principal payments. In exchange for a modification, we often receive a partial repayment of principal, a cash infusion to replenish interest or capital improvement reserves, termination of all or a portion of the remaining unfunded loan commitment, additional call protection and/or an increase in the loan coupon or additional fees. We continue to work with our borrowers to address issues as they arise while seeking to preserve the credit attributes of our loan. However, we cannot assure you that these efforts will be successful, and we may experience payment delinquencies, defaults, foreclosures or losses.

As discussed in Note 2 to our consolidated financial statements, our Manager performs a quarterly review of our loan portfolio, assesses the performance of each loan, and assigns a risk rating between "1" and "5," from less risk to greater risk. The weighted average risk rating of our total loan exposure was 3.5 as of December 31, 2024 and December 31, 2023, respectively. The change in underlying risk rating consisted of loans that paid off with a risk rating of "3" of $277.5 million, a risk rating of "4" of $67.1 million and a risk rating of "5" of $45.7 million, offset by purchases of commercial mortgage loans with a risk rating of "2" of $27.1 million and a risk rating of "3" of $31.3 million during the year ended December 31, 2024. Additionally, $7.0 million of loans with a risk rating of "2" transitioned to a risk rating of "3", $225.7 million of loans with a risk rating of "3" transitioned to a risk rating of "4", $6.1 million of loans transitioned from a risk rating of "3" to a risk rating of "5", $67.8 million of loans transitioned from a risk rating of "4" to a risk rating of "3", and $92.2 million of loans transitioned from a risk rating of "4" to a risk rating of "5". The following table presents the principal balance and net book value based on our internal risk ratings:

December 31, 2024
				Amortized Cost by Year of Origination
Risk Rating	Number of Loans	Outstanding Principal		2024		2023		2022		2021
1	—	$	—	$	—	$	—	$	—	$	—
2	3	57,840,000		27,048,495		—		30,416,761		—
3	40	616,637,103		31,019,735		17,973,555		266,895,843		294,277,177
4	16	292,826,616		—		—		140,183,307		147,641,857
5	6	98,259,927		—		—		74,158,849		19,187,499
	65	$	1,065,563,646	$	58,068,230	$	17,973,555	$	511,654,760	$	461,106,533

Total Financing

41Our financing arrangements include our term loan facility, collateralized loan obligations, secured financings, term lending agreement and master repurchase agreement. All of our current financing arrangements are not subject to credit or capital markets mark-to-market provisions with the exception of our master repurchase agreement.

Our financing arrangements include our term loan facility, collateralized loan obligations and secured financings. All of our current financing arrangements are not subject to credit or capital markets mark-to-market provisions.

The following table summarizes our financing agreements:

	December 31, 2024									December 31, 2023
		Maximum		Collateral		Borrowings				Borrowings
	Non-/Mark-to-Market	Facility Size(1)		Assets(2)		Outstanding		Available		Outstanding
Collateralized loan obligations	Non-Mark-to-Market	$	1,000,000,000	$	681,368,674	$	679,248,696	$	—	$	1,000,000,000
Secured Financings	Non-Mark-to-Market	386,300,000		384,194,972		386,300,000		—		386,300,000
Secured term loan	Non-Mark-to-Market	47,750,000		N/A		47,750,000		—		47,750,000
		$	1,434,050,000			$	1,113,298,696	$	—	$	1,434,050,000


	December 31, 2025									December 31, 2024
		Maximum		Collateral		Borrowings				Borrowings
	Non-/Mark-to-Market	Facility Size(1)		Assets(2)		Outstanding		Available		Outstanding
Collateralized loan obligations	Non-Mark-to-Market	$	663,810,950	$	646,244,711	$	584,983,000	$	—	$	679,248,696
Master repurchase agreement	Mark-to-Market	450,000,000		259,571,503		177,193,781		272,806,219		—
Secured financings	Non-Mark-to-Market	238,255,462		226,839,353		169,655,462		—		386,300,000
Secured lending agreement	Mark-to-Market	50,000,000		34,650,632		17,000,000		33,000,000		—
Secured term loan	Non-Mark-to-Market	47,750,000		N/A		47,750,000		—		47,750,000
		$	1,449,816,412			$	996,582,243	$	305,806,219	$	1,113,298,696

(1) Maximum facility size represents the largest amount of borrowings under a given facility once sufficient collateral assets have been approved by the lender and pledged by us.

(2) Represents the principal balance of the collateral assets.

Collateralized Loan Obligations and Secured Financings

On June 14, 2021, the Company completed the 2021-FL1 CLO, issuing eight tranches of CLO notes through two newly-formed wholly-owned subsidiaries totaling $903.8 million. Of the total CLO notes issued $833.8 million were investment grade notes issued to third party investors and $70 million were below investment-grade notes retained by us. In addition, a $96.25 million equity interest in the portfolio was retained by us. The financing had an initial two-and-a-half year reinvestment period that ~~allows~~allowed principal proceeds of the loan obligations to be reinvested in qualifying replacement loan obligations, subject to the satisfaction of certain conditions set forth in the indenture. Thereafter, the outstanding debt balance ~~will~~was be reduced as loans ~~are~~were repaid. Initially, the proceeds of the issuance of the securities also included $330.3 million for the purpose of acquiring additional loan obligations for a period up to 180 days from the CLO closing date, resulting in the issuer owning loan obligations with a face value of $1.0 billion, representing leverage of 83%. On November 18, 2025, the Company optionally redeemed the 2021-FL1 CLO in full.

On July 12, 2023, the Company entered into and closed a matched-term non-recourse collateralized commercial real estate financing (the "LMF 2023-1 Financing"), secured by $386.4 million of first lien floating-rate multifamily mortgage assets and is not subject to margin calls or additional collateralization requirements. In connection with the LMF 2023-1 Financing, approximately $270.4 million of an investment-grade rated senior secured floating rate loan was provided by a private lender and approximately $47.3 million of investment-grade rated notes (collectively, the "Senior Debt") were issued and sold to an affiliate of LFT's external manager, Lument IM. A consolidated subsidiary of LFT retained the subordinate interests in the issuing vehicle of approximately $68.6 million. The Senior Debt has an initial weighted average spread of approximately 0314.~~0314~~0 basis points over 30-day term SOFR, excluding fees and transaction costs. The Senior Debt matures on the payment date in July 2032, unless it is sooner repaid or redeemed in accordance with its terms. The financing ~~has~~had an initial two-year reinvestment period that ~~allows~~allowed principal proceeds of the loan obligations to be reinvested in qualifying replacement loan obligations, subject to the satisfaction of certain conditions set forth in the indenture. Thereafter, the outstanding debt balance will be reduced as loans are repaid.

~~The~~On ~~following~~December ~~table~~10, ~~presents~~2025, ~~certain~~the ~~loan~~Company ~~and~~completed ~~borrowing~~the ~~characteristics~~LMNT 2025-FL3 CLO, issuing eight tranches of ~~2021~~ CLO notes totaling $620.7 million through a newly formed wholly-~~FL1~~owned subsidiary. Of the total CLO notes issued, $585.0 million were investment grade notes issued to third party investors and ~~LMF~~$35.7 ~~2023~~million were below investment-grade and were retained by us. In addition, we retained a $43.1 ~~Financing~~million income note. The financing has an initial two-and-a-half year reinvestment period that allows principal proceeds of the loan obligations to be in reinvested in qualifying replacement loan obligations, subject to the satisfaction of certain conditions set forth in the indenture. Thereafter, the outstanding debt balance will be reduced as loans are repaid. Initially, the proceeds of ~~December 31~~the issuance of the securities also included $5.8 million for the purpose of acquiring additional loan obligations for a period up to 180 days from the CLO closing date, ~~2024:~~resulting in the issuer owning obligations with a face value of $663.8 million, representing leverage of 88%. The investment grade notes had an initial weighted average spread of approximately 190.5 basis points over 30-day term SOFR, excluding fees and transaction costs. The investment grade notes mature on the payment date in July 2043, unless it is sooner repaid or redeemed in accordance with their terms.

As of December 31, 2024
Collateralized Loan Obligations	Count	Principal Value	Carrying Value(1)	Wtd. Avg. Coupon(2)
Collateral (loan investments)	65	1,065,563,646	1,049,886,009	8.08	%
Debt (notes issued)(1)	2	830,698,696	828,390,189	6.66	%

The following table presents certain loan and borrowing characteristics of LMF 2023-1 Financing and LMNT 2025-FL3 CLO as of December 31, 2025:

(1) The carrying value of the collateral is net of purchase discounts of $3,577,206 and allowance for credit loss of $11,320,220 as of December 31, 2024. The carrying value for LMF 2023-1 Financing is net of debt issuance costs of $2,308,507 as of December 31, 2024.


As of December 31, 2025
Collateralized Loan Obligations	Count	Principal Value(1)	Carrying Value(2)	Wtd. Avg. Coupon(3)
Collateral (loan investments)	44	873,054,065	856,064,489	7.11	%
Collateral (REO assets)	1	11,467,505	10,906,169	N/A
Financing provided	2	754,638,462	748,433,484	5.98	%

(21) ~~Weighted~~ The ~~average~~principal ~~coupon~~value ~~assumes~~for ~~applicable~~Collateral ~~30-day~~(REO ~~term~~assets) ~~SOFR~~is ~~of 4.51% as of December 31, 2024, inclusive of weighted average interest rate floors of 0.63%. As of December 31, 2024, 100.0% of~~ the ~~investments~~initial byloan ~~total~~ exposure ~~earned a floating rate indexed to 30-day term SOFR~~. ~~Weighted average coupon for the financings assumes applicable 30-day term SOFR of 4.40% as of December 31, 2024 and spread of 2.26% as of December 31, 2024.~~

(2) The carrying value of the collateral is net of unaccreted purchase discounts of $1,595,224 and allowance for credit loss of $15,394,353 as of December 31, 2025. The carrying value for LMF 2023-1 Financing is net of debt issuance costs of $1,292,096 and the carrying value of LMNT 2025-FL3 CLO is net of debt issuance costs of $4,912,883 as of December 31, 2025.

(3) Weighted average coupon assumes applicable 30-day term SOFR of 3.86% as of December 31, 2025,inclusive of weighted average interest rate floors of 2.55%. As of December 31, 2025, 100.0% of the investments by total exposure earned a floating rate indexed to 30-day term SOFR. Weighted average coupon for the financings assumes applicable 30-day term SOFR of 3.74% as of December 31, 2025 and spread of 2.24% as of December 31, 2025.

Master Repurchase and Secured Lending Agreements

On November 3, 2025, LCMT Warehouse, LLC, an indirect wholly owned subsidiary of the Company, entered into an Uncommitted Master Repurchase Agreement ("Repurchase Agreement") with JPMorgan Chase Bank, N.A.. The Repurchase Agreement provides up to $450 million to finance first mortgage

loans, controlling loan participations and other commercial mortgage loan debt instruments secured by commercial real estate, as described in more detail in the Repurchase Agreement. Advances under the Repurchase Agreement accrue interest at per annum rates equal to term SOFR plus a spread to be determined on a case-by-case basis. The initial maturity date of the Repurchase Agreement is November 3, 2028, with two (2) one-year extensions at the Company's option, which may be exercised upon the satisfaction of certain conditions, described in more detail in the Repurchase Agreement.

On December 10, 2025, LCMT NPL Warehouse, LLC, an indirect wholly owned subsidiary of the Company, entered into a loan agreement ("Loan Agreement") with Northeast Bank. The Loan Agreement provides for up to $50 million in maximum aggregate advances over a 36-month draw period to finance first mortgage loans and controlling first mortgage loan participations secured by commercial real estate. Each collateral loan financed under the Loan Agreement will be classified as a performing or non-performing loan, as described in more detail in the Loan Agreement. The Loan Agreement also provides financing for commercial REO properties, with related REO entities joining as borrowers under the Loan Agreement from time to time, as described in more detail in the Loan Agreement.

The following table presents certain loan and borrowing characteristics of the Repurchase Agreement and Loan Agreement as of December 31, 2025:



As of December 31, 2025
Secured Financing Agreements	Count	Principal Value(1)	Carrying Value(2)	Wtd. Avg Coupon(3)
Collateral (loan investments)	18	294,222,135	285,812,826	7.23	%
Financing provided(4)	2	194,193,781	191,943,220	5.73	%

(1) Principal value of the Repurchase Agreement was $177,193,781 and the principal value of the Loan Agreement was $17,000,000 as of December 31, 2025.

(2) Net of $2.3 million unamortized deferred financing costs as of December 31, 2025.

(3) Weighted average funding cost for the Repurchase Agreement assumes applicable 30-day term SOFR of 3.73% as of December 31, 2025 and a spread of 1.85%. Weighted average funding cost for the Loan Agreement assumes applicable 30-day term SOFR of 3.73% as of December 31, 2025 and a spread of 3.50%.

(3) Borrowings under the Repurchase Agreement are on a partial (25%) recourse basis. This Agreement contains defined mark-to-market provisions that permit the lender to issue margin calls based on credit marks.

Secured Term Loan

In January 2020, we entered into a $40.25 million secured term loan with an initial maturity of February 2025. In April 2021, we entered into an amendment, providing, among other things, an incremental secured term loan in the amount of $7.5 million and a one-year maturity extension to February 2026. In August 2021, the Company drew down the $7.5 million incremental secured term loan. In February 2026, the Company entered into certain additional amendments that extended the maturity to February 20, 2030. In addition, the February 2026 amendments provided the Company with an incremental secured term loan in the aggregate principal amount of $2,25 million, which the Company drew upon on February 23, 2026.

~~Borrowings~~As most recently amended, borrowings under the Secured Term ~~Loan~~Loans bear interest at a fixed rate of 79.2575% ~~for~~per ~~the six-year period following the initial draw-down~~annum, which is subject to step up by 0.2550% per annum for the first ~~four~~three months after ~~the~~February ~~sixth~~20, ~~anniversary of the borrowing of the Senior Secured Term Loan~~2029, ~~then~~with byfurther ~~0.375%~~step ~~for~~ups ~~the~~of ~~following four months, then by~~ 0.50% ~~for~~per ~~the~~annum ~~last~~every ~~four~~three months thereafter until the maturity date..

The Credit Agreement contains affirmative and negative covenants binding the Company and its subsidiaries that are customary for credit facilities of this type, including, but not limited to: minimum asset coverage ratio; minimum unencumbered assets ratio; maximum total net leverage ratio, minimum tangible net worth; and an interest charge coverage ratio. As of December 31, ~~2024~~2025 and December 31, ~~2023~~2024, we were in compliance with these covenants.

The Credit Agreement contains events of default that are customary for facilities of this type, including, but not limited to, nonpayment of principal, interest, fees and other amounts when due, violation of covenants, cross default with material indebtedness, and change of control.

The following table presents certain borrowing characteristics of the Secured Term Loan as of December 31, 2025:


	As of December 31, 2025
	Outstanding Balance		Carrying Value		Coupon
Secured Term Loan	$	47,750,000	$	47,719,279	8.38	%

FOAC and Changes to Our Residential Mortgage Loan Business

In June 2013, we established FOAC as a TRS to increase the range of our investments in mortgage-related assets. Until August 1, 2016, FOAC aggregated mortgage loans primarily for sale into securitization transactions, with the expectation that we would purchase the subordinated tranches issued by the related securitization trusts, and that these would represent high quality credit investments for our portfolio. Residential mortgage loans for which FOAC owns the MSRs continue to be directly serviced by two licensed sub-servicers since FOAC does not directly service any residential mortgage loans.

We previously determined to cease the aggregation of prime jumbo loans for the foreseeable future, and therefore no longer maintain warehouse financing to acquire prime jumbo loans. We do not expect the previous changes to our mortgage loan business strategy to impact the existing MSRs that we own, nor the securitizations we have sponsored to date.

Pursuant to a Master Agreement dated June 15, 2016, as amended on August 29, 2016, January 30, 2017 and June 27, 2018, among MAXEX, LLC ("MAXEX"), MAXEX Clearing LLC, MAXEX's wholly-owned clearinghouse subsidiary and FOAC, FOAC provided seller eligibility review services under which it reviewed, approved and monitored sellers that sold loans via MAXEX Clearing LLC. To the extent that a seller approved by FOAC fails to honor its obligations to repurchase a loan based on an arbitration finding that it breached its representations and warranties, FOAC was obligated to backstop the seller's repurchase obligation. The term of such backstop guarantee was the earlier of the contractual maturity of the underlying mortgage and its repayment in full. However, the incidence of claims for breaches of representations and warranties over time is considered unlikely to occur more than five years from the sale of a mortgage. FOAC's obligations to provide such seller eligibility review and backstop guarantee services terminated on November 28, 2018. Pursuant to an Assumption Agreement dated December 31, 2018, among MAXEX Clearing LLC and FOAC, MAXEX Clearing LLC assumed all of FOAC's obligations under its backstop guarantees and agreed to indemnify and hold FOAC harmless against any losses, liabilities, costs, expenses and obligations under the backstop guarantee. FOAC paid MAXEX Clearing LLC, as the replacement backstop provider, a fee of $426,770 (the "Alternative Backstop Fee"). MAXEX Clearing LLC represented to FOAC in the Assumption Agreement that it (i) is rated at least "A" (or equivalent) by at least one nationally recognized statistical rating agency or (ii) has (a) adjusted tangible net worth of at least $20.0 million and (b) minimum available liquidity equal to the greater of (x) $5.0 million and (y) 0.1% multiplied by the scheduled unpaid principal balance of each outstanding loan covered by the backstop guarantees. MAXEX's chief financial officer is required to certify ongoing compliance by MAXEX Clearing LLC with the aforementioned criteria on a quarterly basis and if MAXEX Clearing LLC fails to satisfy such criteria, MAXEX Clearing LLC is required to deposit into an escrow account for FOAC's benefit an amount equal to the greater of (A) the unamortized Alternative Backstop Fee for each outstanding loan covered by the backstop guarantee and (B) the product of 0.01% multiplied by the scheduled unpaid principal balance of each outstanding loan covered by the backstop guarantees. See Note 10 to our consolidated financial statements included in this Annual Report for a further description of MAXEX.

However, the incidence of claims for breaches of representations and warranties over time is considered unlikely to occur more than five years from the sale of a mortgage. FOAC's obligations to provide such seller eligibility review and backstop guarantee services terminated on November 28, 2018. Pursuant to an Assumption Agreement dated December 31, 2018, among MAXEX Clearing LLC and FOAC, MAXEX Clearing LLC assumed all of FOAC's obligations under its backstop guarantees and agreed to indemnify and hold FOAC harmless against any losses, liabilities, costs, expenses and obligations under the backstop guarantee. FOAC paid MAXEX Clearing LLC, as the replacement backstop provider, a fee of $426,770 (the "Alternative Backstop Fee"). MAXEX Clearing LLC represented to FOAC in the Assumption Agreement that it (i) is rated at least "A" (or equivalent) by at least one nationally recognized statistical rating agency or (ii) has (a) adjusted tangible net worth of at least $20.0 million and (b) minimum available liquidity equal to the greater of (x) $5.0 million and (y) 0.1% multiplied by the scheduled unpaid principal balance of each outstanding loan covered by the backstop guarantees. MAXEX's chief financial officer is required to certify ongoing compliance by MAXEX Clearing LLC with the aforementioned criteria on a quarterly basis and if MAXEX Clearing LLC fails to satisfy such criteria, MAXEX Clearing LLC is required to deposit into an escrow account for FOAC's benefit an amount equal to the greater of (A) the unamortized Alternative Backstop Fee for each outstanding loan covered by the backstop guarantee and (B) the product of 0.01% multiplied by the scheduled unpaid principal balance of each outstanding loan covered by the backstop guarantees. See Note 10 to our consolidated financial statements included in this Annual Report for a further description of MAXEX.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with GAAP, which requires the use of estimates and assumptions that involve the exercise of judgment and use of assumptions as to future uncertainties. Accounting estimates and assumptions discussed in this section are those that we consider to be the most critical to understanding our financial statements because they involve significant judgments and uncertainties that could affect our reported assets and liabilities, as well as our reported revenues and expenses. All of these estimates reflect our best judgments about current, and for some estimates, future economic and market conditions and their effects based on information available as of the date of the financial statements. If conditions change from those expected, it is possible that the judgments and estimates described below could change, which may result in a change in our interest income recognition, allowance for credit losses, future impairment of our investments, and valuation of our investment portfolio, among other effects. We believe that the following accounting policies are among the most important to the portrayal of our financial condition and results of operations and require the most difficult, subjective or complex judgments:

Commercial Mortgage Loans Held-for-Investment

OnThe ~~January 1, 2023, the~~ Company ~~adopted~~recognizes ~~Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13")~~ and ~~amendments,~~measures ~~which replaces~~ the ~~incurred~~allowance ~~loss~~for ~~methodology~~credit ~~with~~losses anunder ~~expected loss model known as~~ the Current Expected Credit Loss ("CECL") model~~. CECL~~ ~~amends~~which amended the previous credit loss model to reflect a reporting entity's current estimate of all expected credit losses, not only based on historical experience and current economic conditions, but also by including reasonable and supportable forecasts incorporating forward-looking information. The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost, and off-balance credit exposures such as unfunded loan commitments. The allowance for credit losses required under the FASB ASC ~~2016~~Topic "Financial Instruments -13 Credit Losses," or ASC 326, is included in "Allowance for credit losses" on our consolidated balance sheets. The allowance for credit losses attributed to unfunded loan commitments is included in "Other liabilities" inon the consolidated balance sheets. The change to the allowance for credit loss recorded on January 1, 2023 is reflected as a direct charge to retained earnings on our consolidated statements of changes in equity; however subsequent changes to the allowance for credit losses are recognized through net income on our consolidated statements of operations. In connection with the adoption of ASU 2016-13, we recorded a $3.6 million decrease to accumulated earnings as of January 1, 2023.

The Company's ~~implementation~~estimates ~~process~~the ~~included~~allowance afor ~~selection~~credit oflosses for its portfolio on a collective basis, including unfunded loan commitments, for loans that share similar risk characteristics. The calculation is applied at the loan level. The allowance for credit losses estimation methodology used by LFT includes a probability of default and loss given default method utilizing a widely used third-party analytical model with historical loan losses for over 125,000 ~~completion~~commercial ~~and~~real ~~documentation~~estate loans dating back to 1998. Within this data set, we focused our historical loss information on the most relevant subset of ~~policies~~available ~~and~~CRE ~~procedures~~data, ~~changes~~which we determined based on loan metrics that are most comparable to ~~internal~~our ~~reporting~~loan ~~processes~~portfolio ~~and~~including ~~related~~asset ~~internal~~type, ~~controls~~spread to interest rate, unpaid principal balance and ~~additional~~origination ~~disclosures~~loan-to-value, or LTV. AThe ~~control~~Company ~~framework~~uses ~~for~~this ~~governance,~~proxy data set, ~~forecast~~or ~~and~~variants ~~model~~of ~~controls~~it, ~~was~~unless ~~developed~~the toCompany ~~support~~develops its own sufficient history of realized losses. The Company determined the key variables driving its allowance for credit losses ~~process~~estimate are debt service coverage ratio and LTV ratio. ~~Determining~~Other annotable variables include property type, property location and loan vintage. The Company determines its allowance for credit loss estimate ~~requires~~based ~~significant~~on ~~judgment~~the ~~and~~weighting aof ~~variety~~multiple ofmacroeconomic ~~subjective~~forecast ~~assumptions,~~scenarios ~~including~~driven by macroeconomic variables such as gross domestic product (i"GDP"), ~~determination~~unemployment ofrate, ~~relevant~~federal ~~historical~~funds ~~loan~~target ~~loss~~rate ~~data~~and ~~sets,~~core personal consumption expenditure (ii"PCE") among others, during the ~~current~~reasonable ~~credit~~and ~~quality~~supportable offorecast ~~loans~~period. The reasonable and ~~operating~~supportable ~~performance~~forecast ofperiod ~~loan~~is ~~collateral~~currently ~~and~~one year, however, the Company's ~~expectations~~regularly ofevaluates ~~performance~~the reasonable and ~~(iii)~~supportable ~~expectation~~forecast period to determine if a change is needed based on our assessment of ~~macroeconomic~~the most likely scenario of assumptions and plausible outcomes for the U.S. economy. For the period beyond which the Company is able to make reasonable and supportable forecasts, the Company reverts, on a straight-line basis over four quarters, to the ~~relevant~~historical ~~time~~loss ~~period~~information derived from CRE data set.

~~The~~Any ~~Company~~loans ~~estimates~~considered ~~the~~to ~~allowance~~be ~~for~~a ~~credit~~Default ~~losses~~Risk ~~for~~or ~~its~~otherwise ~~portfolio~~deemed onto abe ~~collective~~collateral ~~basis,~~dependent ~~including~~will ~~unfunded~~be ~~loan~~individually ~~commitments,~~evaluated for ~~loans~~a ~~that~~specific ~~share~~allowance ~~similar~~for ~~risk~~credit ~~characteristics~~losses. ~~The~~A ~~calculation~~loan is ~~applied~~considered atcollateral ~~the~~dependent ~~loan~~when ~~level. The~~the ~~allowance~~Company ~~for~~determines ~~credit~~that ~~losses~~the ~~estimation~~facts ~~methodology~~and ~~used~~circumstances ~~by LFT includes a probability~~ of ~~default~~the ~~and~~loan ~~loss~~deem ~~given~~the ~~default~~debtor ~~method~~to ~~utilizing~~be aexperiencing ~~widely~~financial ~~used~~difficulty ~~third-party~~and ~~analytical~~repayment ~~model~~is ~~with~~expected ~~historical loan losses for over 125,000 commercial real estate loans dating back~~ to ~~1998. Within~~be ~~this~~provided ~~data~~substantially ~~set,~~through ~~we focused our historical loss information on~~ the ~~most~~sale ~~relevant~~or ~~subset~~operation of ~~available~~the ~~CRE~~collateral. If ~~data,~~a ~~which we determined based on~~ loan ~~metrics~~is ~~that~~considered ~~are most comparable~~ to ~~our~~be ~~loan~~collateral ~~portfolio including asset type~~dependent, ~~spread~~a tospecific ~~interest~~allowance ~~rate,~~for ~~unpaid~~credit ~~principal~~losses ~~balance~~is ~~and~~recorded ~~origination loan-~~to~~-value,~~ orreduce ~~LTV. The~~the ~~Company~~carrying ~~expects~~value toof ~~use~~the ~~this~~loan ~~proxy~~through ~~data~~a ~~set,~~charge orto ~~variants of it, unless~~ the ~~Company~~provision ~~develops~~for ~~its~~(reversal ~~own sufficient history~~ of) ~~realized~~credit losses. The ~~Company~~specific ~~determined the key variables driving its~~ allowance for credit losses ~~estimate~~is ~~are~~measured ~~debt~~by ~~service~~comparing ~~coverage~~the ~~ratio~~estimated ~~and~~fair ~~LTV~~value ~~ratio. Other~~of ~~notable~~the ~~variables~~underlying ~~include property type~~collateral, ~~property~~less ~~location~~costs ~~and~~to ~~loan~~sell, ~~vintage. The~~to ~~Company~~the ~~determines~~amortized ~~its~~cost ~~allowance~~of ~~for credit loss estimate based on~~ the ~~weighting~~respective ofloan. These ~~multiple~~valuations ~~macroeconomic~~require ~~forecast~~significant ~~scenarios~~judgments, ~~driven~~which byinclude ~~macroeconomic~~assumptions ~~variables~~regarding ~~such~~capitalization asrates, ~~gross~~market ~~domestic product ("GDP")~~rents, ~~unemployment~~occupancy ~~rate~~rates, ~~federal funds target rate~~ and ~~core~~other ~~personal~~factors ~~consumption~~deemed ~~expenditure~~necessary ~~("CPR")~~by ~~among others, during~~ the ~~reasonable and supportable forecast period~~Manager. ~~The~~Actual ~~reasonable and supportable forecast period is currently one year~~losses, ~~however, the Company regularly evaluates the reasonable and supportable forecast period to determine~~ if aany, ~~change~~could isultimately ~~needed~~differ ~~based~~from onestimated ~~our assessment of the most likely scenario of assumptions and plausible outcomes for the U~~losses.~~S. economy.~~ ~~For the~~

period beyond which the Company is able to make reasonable and supportable forecasts, the Company reverts, on a straight-line basis over four quarters, to the historical loss information derived from CRE data set.

Any loans considered to be a Default Risk or otherwise deemed to be collateral dependent will be individually evaluated for a specific allowance for credit losses. A loan is considered collateral dependent when the Company determines that the facts and circumstances of the loan deem the debtor to be experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. If a loan is considered to be collateral dependent, a specific allowance for credit losses is recorded to reduce the carrying value of the loan through a charge to the provision for (reversal of) credit losses. The specific allowance for credit losses is measured by comparing the estimated fair value of the underlying collateral, less costs to sell, to the amortized cost of the respective loan. These valuations require significant judgments, which include assumptions regarding capitalization rates, leasing, creditworthiness of major tenants, occupancy rates, availability of financing, exit plan, actions of other lenders, and other factors deemed necessary by the Manager. Actual losses, if any, could ultimately differ from estimated losses.

Prior to the adoption of ASU 2016-13, the Company established an allowance for credit loss under the incurred loss model which required analysis of Default Risk loans and those determined to be collateral dependent in a manner consistent with the specific allowance described above. In addition, the Company evaluated the entire loan portfolio to determine whether the portfolio had any impairment that required a valuation allowance on the remainder of the portfolio.

The following table illustrates the day-one financial statement impact of the adoption of ASU 2016-13 on January 1, 2023:

	Pre-adoption		Transition adjustment		Post-adoption
Assets
Commercial mortgage loans, held-for-investment	$	1,076,148,186	$	—	$	1,076,148,186
Less: Allowance for credit losses	(4,258,668)		(3,549,501)		(7,808,169)
Commercial mortgage loans, held-for-investment, net	$	1,071,889,518	$	(3,549,501)	$	1,068,340,017
Liabilities
Other liabilities(1)	$	583,989	$	41,939	$	625,928
Equity
Accumulated earnings	$	31,250,852	$	(3,591,440)	$	27,659,412

(1) Includes reserve for unfunded loan commitments

Quarterly, the Company assesses the risk factors of each loan classified as held-for-investment and assigns a risk rating based on a variety of factors, including, without limitation, debt-service coverage ratio ("DSCR"), loan-to-value ratio ("LTV"), property type, geographic and local market dynamics, physical condition, leasing and tenant profile, adherence to business plan and exit plan, maturity default risk and project sponsorship. The Company's loans are rated on a 5-point scale, from least risk to greatest risk, respectively, which ratings are described as follows:

1.Very Low Risk: exceeds expectations and is outperforming underwriting or it is very likely that the underlying loan can be refinanced easily in the period's prevailing capital market conditions

2.Low Risk: meeting or exceeding underwritten expectations

3.Moderate Risk: in-line with underwritten expectations or the sponsor may be in the early stages of executing the business plan and the loan structure appropriately mitigates additional risks

4.High Risk: potential risk of default, a loss may occur in the event of default

5.Default Risk: imminent risk of default, a loss is likely in the event of default

Capital Allocation

The following tables set forth our allocated capital by investment type at December 31, ~~2024~~2025 and December 31, ~~2023~~2024:

This information represents non-GAAP financial measures within the meaning of Item 10(e) of Regulation S-K, as promulgated by the SEC. We believe that this non-GAAP information enhances the ability of investors to better understand the capital necessary to support each income-earning asset category, and thus our ability to generate operating earnings. While we believe that the non-GAAP information included in this report provides supplemental information to assist investors in analyzing our portfolio, these measures are not in accordance with GAAP, and they should not be considered a substitute for, or superior to, our financial information calculated in accordance with GAAP.


	December 31, 2025
	Commercial Mortgage Loans			Real Estate Owned			MSRs			Unrestricted Cash(1)			Total(2)
Carrying Value	$	1,114,047,992		$	50,938,082		$	554,246		$	23,112,995		$	1,188,653,315
Collateralized Loan Obligations	(580,070,117)			—			—			—			(580,070,117)
Secured Financings	(160,587,813)			(7,775,554)			—			—			(168,363,367)
Master Repurchase Agreement	(157,077,346)			(18,127,523)			—			—			(175,204,869)
Term Lending Agreement	(16,738,351)			—			—			—			(16,738,351)
Other(3)	19,118,787			—			—			(4,094,489)			15,024,298
Restricted Cash	3,505,087			—			—			—			3,505,087
Capital Allocated	$	222,198,239		$	25,035,005		$	554,246		$	19,018,506		$	266,805,996
% Capital	83.3		%	9.4		%	0.2		%	7.1		%	100.0		%


	December 31, 2024
	Commercial Mortgage Loans			MSRs			Unrestricted Cash(1)			Total(2)
Carrying Value	$	1,048,803,078		$	649,287		$	69,173,444		$	1,118,625,809
Collateralized Loan Obligations	(828,390,189)			—			—			(828,390,189)
Other(3)	3,334,458			—			(10,591,605)			(7,257,147)
Restricted Cash	2,390,654			—			—			2,390,654
Capital Allocated	$	226,138,001		$	649,287		$	58,581,839		$	285,369,127
% Capital	79.3		%	0.2		%	20.5		%	100.0		%

	December 31, 2024
	Commercial Mortgage Loans			MSRs			Unrestricted Cash(1)			Total(2)
Market Value	$	1,048,803,078		$	649,287		$	69,173,444		$	1,118,625,809
Collateralized Loan Obligations	(828,390,189)			—			—			(828,390,189)
Other(3)	3,334,458			—			(10,591,605)			(7,257,147)
Restricted Cash	2,390,654			—			—			2,390,654
Capital Allocated	$	226,138,001		$	649,287		$	58,581,839		$	285,369,127
% Capital	79.3		%	0.2		%	20.5		%	100.0		%

	December 31, 2023
	Commercial Mortgage Loans			MSRs			Unrestricted Cash(1)			Total(2)
Market Value	$	1,383,881,197		$	691,973		$	51,247,063		$	1,435,820,233
Collateralized Loan Obligations	(1,146,210,752)			—			—			(1,146,210,752)
Other(3)	4,592,267			—			(6,459,271)			(1,867,004)
Restricted Cash	270,129			—			—			270,129
Capital Allocated	$	242,532,841		$	691,973		$	44,787,792		$	288,012,606
% Capital	84.2		%	0.2		%	15.6		%	100.0		%

1.Includes cash and cash equivalents.

2.Includes the carrying value of our Secured Term Loan.

3.Includes principal and interest receivable, prepaid and other assets, interest payable, dividends payable and accrued expenses and other liabilities.

Results of Operations

The table below presents certain information from our Consolidated Statement of Operations for the years ended December 31, ~~2024~~2025 and December 31, ~~2023~~2024:

	Year EndedDecember 31,				Increase (Decrease)
	2024		2023		Dollars		Percentage
	2025		2024		Dollars		Percentage
Revenues:
Interest income:
Commercial mortgage loans held-for-investment	$	~~119~~76,~~400~~653,~~799~~371	$	~~106~~119,~~821~~400,~~510~~799	$	12(42,~~579~~747,~~289~~428)	12(36)	%
Cash and cash equivalents	2,~~728~~349,~~098~~744		2,~~372~~728,~~488~~098		~~355~~(378,~~610~~354)		15(14)	%
Interest expense:
Collateralized loan obligations	(77,002,847)		(71,041,861)		(5,960,986)		8	%
Collateralized loan obligations and secured financings	(47,616,516)		(77,002,847)		29,386,331		(38)	%
Secured term loan	(3,769,441)		(3,759,141)		(10,300)		nm%
Master repurchase and term lending agreements	(2,268,542)		—		(2,268,542)		N/A
Net interest income	41,356,609		34,392,996		6,963,613		20	%
Secured term loan	(4,004,854)		(3,769,441)		(235,413)		6	%
Net interest income	25,113,203		41,356,609		(16,243,406)		(39)	%
Expenses:
Management and incentive fees	64,~~630~~595,~~571~~458		46,~~335~~630,~~904~~571		(2,~~294~~035,~~667~~113)		53(31)	%
General and administrative expenses	43,~~398~~947,~~409~~859		34,~~620~~398,~~589~~409		~~777~~(450,~~820~~550)		21(10)	%
Operating expenses reimbursable to Manager	1,~~799~~723,~~570~~142		1,~~897~~799,~~699~~570		(9876,~~129~~428)		(54)	%
Other operating expenses	234,483		2,158,488		(1,924,005)		(89)	%
Compensation expense	445,000		241,194		203,806		84	%
Total expenses	13,508,033		12,253,874		1,254,159		10	%
Other income (loss):
Provision for credit losses	(5,275,122)		(2,524,216)		(2,750,906)		109	%
Change in unrealized gain (loss) on mortgage servicing rights	(42,686)		(103,684)		60,998		(59)	%
Servicing income, net	137,230		208,997		(71,767)		(34)	%
Total other (loss)	(5,180,578)		(2,418,903)		(2,761,675)		114	%
Net income before provision for income taxes	22,667,998		19,720,219		2,947,779		15	%
Benefit from income taxes	(18,808)		(5,723)		(13,085)		229	%
Net income	22,649,190		19,714,496		2,934,694		15	%

4546

Other operating expenses	1,810,372		234,483		1,575,889	672	%
Compensation expense	445,001		445,000		1	—	%
Total expenses	12,521,832		13,508,033		(986,201)	(7)	%
Other income (loss):
Provision for credit losses	(14,390,928)		(5,275,122)		(9,115,806)	173	%
Net income (expense) from real estate owned operations	(472,023)		—		(472,023)	N/A
Change in unrealized gain (loss) on mortgage servicing rights	(95,041)		(42,686)		(52,355)	123	%
Loss on real estate owned	(547,447)		—		(547,447)	N/A
Servicing income, net	176,952		137,230		39,722	29	%
Total other (loss)	(15,328,487)		(5,180,578)		(10,147,909)	196	%
Net income before provision for income taxes	(2,737,116)		22,667,998		(25,405,114)	(112)	%
Benefit from income taxes	(8,193)		(18,808)		10,615	(56)	%
Net income	(2,745,309)		22,649,190		(25,394,499)	(112)	%
Dividends to preferred stockholders	(4,740,000)		(4,740,000)		—	nm%
Net income attributable to common stockholders	$	17(7,~~909~~485,~~190~~309)	$	1417,~~974~~909,~~496~~190	2(25,~~934~~394,~~694~~499)	20(142)	%
Earnings per share:
Net income attributable to common stockholders (basic and diluted)	$	17(7,~~909~~485,~~190~~309)	$	1417,~~974~~909,~~496~~190
Weighted average number of shares of common stock outstanding	52,~~274~~344,~~904~~316		52,~~231~~274,~~296~~904
Basic and diluted income per share	$	0.34	$	0.29
Basic and diluted income (loss) per share	$	(0.14)	$	0.34
Dividends declared per share of common stock	$	0.4022	$	0.2640

N/A -not applicable, no prior period comparison

nm - not meaningful

Net Income Summary

For the year ended December 31, ~~2024~~2025, our net ~~income~~loss attributable to common stockholders was $17(7,~~909~~485,~~190~~309), or $0.3414 basic and diluted net ~~income~~loss per average share, compared with net income of $1417,~~974~~909,~~496~~190, or $0.2934 basic and diluted net income per share, for the year ended December 31, ~~2023~~2024. The principal drivers of this net income variance were ana ~~increase~~decrease in net interest income from $3441,~~392~~356,~~996~~609 for the year ended December 31, ~~2023~~2024 to $4125,~~356~~113,~~609~~203 for the year ended December 31, ~~2024~~2025 ~~which~~and ~~more than offset~~ an increase in total other loss from $25,~~418~~180,~~903~~578 for the year ended December 31, ~~2023~~2024 to $515,~~180~~328,~~578~~487 for the year ended December 31, ~~2024~~2025 ~~and~~due anto ~~increase~~specific inreserves ~~total~~taken ~~expenses~~on ~~from~~risk-rated ~~$12,253,874~~"5" ~~for~~multifamily ~~the~~loans ~~year~~and ~~ended~~realized ~~December 31,~~loss ~~2023~~on toreal ~~$13,508,033~~estate ~~for the year ended December 31, 2024~~owned.

Net Interest Income

For the years ended December 31, ~~2024~~2025 and December 31, ~~2023~~2024, our net interest income was $4125,~~356~~113,~~609~~203 and $3441,~~392~~356,~~996~~609, respectively. The ~~increase~~decrease was primarily due to (i) a $44284.19 million ~~increase~~decrease in weighted-average principal balance of our loan portfolio resulting in a decrease to interest income of $35.2 million; (ii) an increase in interest income adjustment due to non-accrual loans of $3.3 million; (iii) a ~~16bps~~97bps ~~increase~~decrease in weighted-average floating rate of our loan portfolio; (~~iii~~iv) a 7bps ~~increase~~decrease in weighted-average spread on the loan portfolio; (ivv) ana ~~increase~~decrease in exit~~/extension~~ fees of $1.10 million for our loan portfolio for the year-ended December 31, ~~2024~~2025, compared to the corresponding period in ~~2023~~2024; ~~and~~ (vvi) a decrease in accretion of purchase discount of $21.56 million for the year-ended December 31, ~~2024~~2025, compared to the corresponding period in ~~2023,~~2024; ~~and~~ (vivii) a 20bps increase in weighted-average spread of our secured borrowing liabilities and (viii) one-time income of $2.85 million related to the resolution of the defaulted Columbus, Ohio loan for the year ended December 31, 2025. This was partially offset by (i) a $18264.03 million ~~increase~~decrease in weighted-average principal balance of our secured borrowings resulting in a decrease to interest expense of $25.2 million; (ii) a ~~24bps~~100bps ~~increase~~decrease in weighted-average floating rate for our secured borrowings for the year-ended December 31, ~~2024~~2025, compared to the corresponding period in ~~2023~~2024; ~~and~~ (iii) aan ~~37bps~~ increase in ~~weighted-average~~extension ~~spread~~fees ~~for~~of $2.0 ~~our~~million ~~secured~~and ~~borrowing~~(iv) ~~liabilities~~a ~~for~~$1.7 ~~the~~million ~~year~~reduction ~~ended~~in ~~December 31,~~deferred ~~2024~~financing ~~compared to the corresponding period in 2023~~costs.

As disclosed above, we experienced ana ~~increase~~decrease of $1.10 million in exit ~~and extension~~ fees for the year ended December 31, ~~2024~~2025. For the year ended December 31, ~~2024~~2025, we experienced loan payoffs on 2331 loans with net principal balances of $~~314~~185.54 million which generated exit fees of $21.67 million included in interest income and 56 loans with net principal balances of $4681.92 million which waived exit fees of $0.68 million resulting in a reduction to expense reimbursement of $0.34 million included in operating expenses reimbursable to Manager. For the year ended December 31, 2024 we experienced extensions on 17 loans with net principal balances of $289.6 million which generated $1.4 million in deferred extension fees of which $0.5 million was accreted to interest income. For the year ended December 31, ~~2023,~~ we experienced loan payoffs on 1223 loans with a net principal ~~balance~~balances of $~~152~~314.65 million which generated exit fees of $12.96 million included in interest income and 75 loans with a net principal ~~balance~~balances of $~~112~~46.79 million which waived exit fees of $1.0.6 million resulting in a reduction to expense reimbursement of $0.53 million included in operating expenses reimbursable to Manager.

Expenses

We incurred management and incentive fees of $64,~~630~~595,~~571~~458 for the year ended December 31, ~~2024~~2025, representing amounts payable to our Manager under our ~~management~~Management ~~agreement~~Agreement. We also incurred operating expenses of $67,~~877~~926,~~462~~374, of which $1,~~799~~723,~~570~~142 was payable to our Manager and $56,~~077~~203,~~892~~232 was payable to third parties.

For the year ended December 31, ~~2023~~2024, we incurred management and incentive fees of $46,~~335~~630,~~904~~571, representing amounts payable to our Manager under our ~~management~~Management ~~agreement~~Agreement. We also incurred operating expenses of $76,~~917~~877,~~970~~462, of which $1,~~897~~799,~~699~~570 was payable to our Manager and $65,~~020~~077,~~271~~892 was payable to third parties.

The year-over-year ~~increase~~decrease in expenses primarily reflects ~~earned~~a ~~incentive~~decrease ~~fees~~to ofincentive, ~~$2.2 million as well as an increase in~~ accounting, administration, audit, ~~management~~professional, ~~professional~~investor relations and ~~secured~~CLO ~~financing~~ fees, which more than offset aan ~~decrease~~increase in legal, ~~insurance,~~fees and discontinued deal costs ~~and reimbursable fees~~.

Other ~~Loss~~Income and Expense

For the year ended December 31, 2024, we incurred other loss of $5,180,578. This loss was primarily driven by provision for credit losses of $5,275,122 primarily due to specific reserves taken on risk-rated "5" multifamily loans, changes in macroeconomic assumptions employed in determining the Company's model-based general reserve and the impact of net unrealized losses on mortgage servicing rights of $42,686 as a result of reduction in principal balance in the period which more than offset mortgage servicing income of $137,230.47

For the year ended December 31, ~~2023~~2025, we incurred other loss of $215,~~418~~328,~~903~~487. This loss was primarily driven by provision for credit losses of $214,~~524~~390,~~216~~928 primarily ~~related~~due to anspecific ~~increase~~reserves intaken ~~loan~~on ~~portfolio~~risk-rated as"5" amultifamily ~~result~~loans, ofchanges ~~the~~in ~~loans~~macroeconomic ~~acquired~~assumptions employed in determining the ~~LMF~~Company's ~~2023~~model-1based ~~Financing~~general asreserve, ~~well~~net asexpense ~~changes~~from inreal ~~macroeconomic~~estate ~~forecast~~owned operations of $472,023, realized loss on sale of real estate owned of $547,447 and the impact of net unrealized losses on mortgage servicing rights of $~~103~~95,~~684~~041 as a result of a reduction in principal balance in the period which more than offset ~~net~~ mortgage servicing income of $~~208~~176,~~997~~952.

For the year ended December 31, 2024, we incurred other loss of $5,180,578. This loss was primarily driven by provision for credit losses of $5,275,122 primarily due to specific reserves taken on risk-rated "5" multifamily loans, changes in macroeconomic assumptions employed in determining the Company's model-based general reserve and the impact of net unrealized losses on mortgage servicing rights of $42,686 as a result of a reduction in principal balance in the period which more than offset net mortgage servicing income of $137,230.

The year-over-year decrease in other loss was primarily due to the change in provision for credit losses.

Income Tax Expense

For the year ended December 31, ~~2024~~2025 the Company recognized a provision for income taxes in the amount of $188,~~808~~193 and for the year ended December 31, ~~2023~~2024, the Company recognized a provision for income taxes in the amount of $518,~~723~~808. The year-over-year ~~increase~~decrease in tax expense primarily reflects the change in gross deferred revenue at FOAC due to the change in unrealized loss on mortgage servicing rights.

Liquidity and Capital Resources

Liquidity is a measurement of our ability to meet potential cash requirements, including ongoing commitments to pay dividends, fund investments, comply with margin requirements, if any, and repay borrowings and other general business needs. Our primary sources of liquidity have been met with net proceeds of common or preferred stock issuance, net proceeds from debt offerings and net cash provided by operating activities, primarily derived from our retained beneficial interest in CRE CLOs and secured financings. We finance our commercial mortgage loans ~~primarily~~ with non-recourse match term secured borrowings, which are not subject to margin calls or additional collateralization requirements. Onand ~~June~~repurchase 14facilities, ~~2021,~~which weare ~~closed~~only ~~the~~subject ~~2021-FL1 CLO issuing eight tranches of CLO notes totaling $903.8 million. Of the total CLO notes issued $833.8 million were investment grade notes issued~~ to ~~third-party~~credit ~~investors and $70~~risk.0 ~~million were below investment-grade notes retained by us.~~ On July 12, 2023, we closed LMF 2023-1 Financing, placing $270.4 million of an investment-grade rated senior secured floating-rate loan with a private lender, issued and sold approximately $47.3 million of investment-grade rated notes to an affiliate of our Manager and retained the subordinate interests in the issuing vehicle of approximately $68.6 million. On December 10, 2025, we closed the LMNT 2025-FL3 CLO issuing eight tranches of CLO notes totaling $620.7 million. Of the total CLO notes issued $585.0 million were investment grade notes issued to third-party investors and $35.7 million were below investment-grade notes retained by us. In addition, we retained a $43.1 million income note. On August 23, 2021 we drew an additional $7.5 million of our Secured Term Loan pursuant to the Third Amendment. As of December 31, ~~2024~~2025, our balance sheet included $47.8 million of a secured term loan and $0.8 billion in collateralized loan financing, gross of discounts and debt issuance costs. Our secured term loan ~~matures~~matured in February 2026, ~~our~~and ~~collateralized~~was ~~loan~~amended at such time to extend the maturity to February 2030. Our collateralized financing is ~~term~~match-~~matched~~termed and matures in ~~2039~~2032 or later and our collateralized loan financing is ~~match~~term-~~termed~~matched and matures in ~~2032~~2043 or later. On November 3, 2025, we entered into an Uncommitted Master Repurchase Agreement providing up to $450 million to finance first mortgage loans, controlling loan participations and other commercial mortgage loan debt instruments secured by commercial real estate. On December 10, 2025, we entered into a loan agreement providing up to $50 million to finance first mortgage loans and controlling first mortgage loan participations secured by commercial real estate. However, to the extent that we seek to invest in additional commercial mortgage loans, we will in part be dependent on our ability to issue additional collateralized loan obligations, to secure alternative financing facilities or to raise additional common or preferred equity. Notwithstanding the current period of relatively high interest rates, the U.S. Federal Reserve began decreasing rates in 2024. Although decelerating, inflation remains above the U.S. Federal Reserve's target levels. Despite multiple federal ~~fund~~funds rate decreases over the course of 2024 and 2025, interest rates have remained elevated~~, with the U~~.S. Although ~~Federal~~capital ~~Reserve~~markets ~~indicating~~have inlargely ~~2025~~adjusted anto ~~expectation~~a ~~of slower rate decreases moving forward. The~~ higher-for-longer interest rate environment and ~~unpredictable~~persistent geopolitical ~~landscape~~uncertainty, unexpected ~~may~~market ~~cause~~dislocations acould ~~further~~reduce ~~dislocation in the capital markets resulting in a continual reduction of available~~ liquidity and anfurther ~~increase~~affect in borrowing costs. A lack of liquidity for a prolonged period of time could limit our ability to grow this business.

Our primary driver of cash flows from operating activities is from interest received from the junior retained notes and ~~preferred~~income ~~shares~~notes of our CRE CLO and secured financing and the senior loans financed by our secured financing agreements. The CRE CLOs and other secured financings we have entered into, and may in the future enter into, include certain interest coverage tests, overcollateralization coverage tests, financial or other tests that, if not met, may result in a change in the priority of distributions, which may result in the reduction or elimination of distributions to the subordinate debt and equity tranches retained by us until the tests have been met or certain senior classes of securities have been paid in full. Accordingly, if such tests are not satisfied, we, as holders of the subordinate debt and equity interests in the applicable CRE CLO or secured financing, may experience a significant reduction in our cash flow from those interests, which would negatively impact our liquidity. In addition, our secured financing 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 will 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.

If we were required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we previously recorded our assets, particularly in a financial market that has been significantly disrupted and less liquid as a result of the current inflationary environment. Assets that are illiquid are more difficult to finance, and to the extent that we use leverage to finance assets that become illiquid, we may lose that leverage or have it reduced if such leverage is, at least in part, dependent on the market value of our assets. Assets tend to become less liquid during times of financial stress, which is often the time that liquidity is most needed. As a result, our ability to sell assets or vary our portfolio in response to changes in economic and other conditions may be limited by liquidity constraints, which could adversely affect our results of operations and financial condition. We seek to limit our exposure to illiquidity risk to the extent possible, by ensuring that the secured borrowings that we use to finance our commercial mortgage loans are not subject to margin calls or other limitations that are dependent on the market value of the related loan collateral.

We intend to continue to maintain a level of liquidity in relation to our assets that enables us to meet reasonably anticipated investment requirements, margin requirements and unforeseen business needs but that also allows us to be substantially invested in our target assets. We may misjudge the appropriate amount of our liquidity by maintaining excessive liquidity, which would lower our investment returns, or by maintaining insufficient liquidity, which would force us to liquidate assets into unfavorable market conditions and harm our operating results. As of December 31, ~~2024~~2025, we had unrestricted cash and cash equivalents of $6923.21 million, compared to $5169.2 million as of December 31, ~~2023~~2024.

As of December 31, 2024, we had $47.8 million in outstanding principal under our Senior Secured Term Loan, with a borrowing rate of 7.25%. As of December 31, 2024, the ratio of our recourse debt to equity was 0.2:1. 48

As of December 31, ~~2024~~2025, we ~~consolidated~~had ~~the assets and liabilities of the 2021-FL1 CLO and LMF 2023-1 collateralized financings~~$47.8 ~~The~~million ~~assets~~in ofoutstanding ~~the~~principal ~~2021-FL1~~under ~~CLO~~our ~~and~~Senior ~~LMF~~Secured ~~2023-1~~Term ~~are restricted and can only be used to fulfill their respective obligations~~Loan, ~~and~~with ~~accordingly~~a ~~the~~borrowing ~~obligations~~rate of ~~the trust, which we classify as collateralized loan obligations, do not have any recourse to us as the consolidator of the trust~~7. 25%. As of December 31, ~~2024~~2025, the ~~carrying~~ratio ~~value~~ of ~~these~~our ~~non-~~recourse ~~liabilities aggregated to $828.4 million. As of December 31, 2024, our total~~ debt to equity ~~ratio~~ was 30.72:1 ~~on a GAAP basis~~.

As of December 31, ~~2024~~2025, ~~LCMT~~we ~~had~~consolidated $6the assets and liabilities of the LMF 2023-1 Financing and LMNT 2025-FL3 CLO collateralized financings.7 ~~million~~The assets of ~~unfunded~~the ~~commitments~~LMF ~~related~~2023-1 Financing and LMNT 2025-FL3 CLO are restricted and can only be used to ~~loans~~fulfill ~~held~~their inrespective ~~LFT~~obligations, ~~2021~~and accordingly the obligations of the trust, which we classify as collateralized loan obligations, do not have any recourse to us as the consolidator of the trust. As of December 31, 2025, the carrying value of these non-~~FL1~~recourse liabilities aggregated to $748.4 million. As of December 31, ~~Ltd~~2025, our total debt to equity ratio was 3. 4:1 on a GAAP basis.

Cash Flows

The following table sets forth changes in cash, cash equivalents and restricted cash for the years ended December 31, ~~2024~~2025 and December 31, ~~2023~~2024:

	For the years ended December 31,
	2024	2023
	2025	2024
Cash Flows From Operating Activities	27,129,666	24,738,341
Cash Flows Provided By Operating Activities	10,098,533	27,129,666
Cash Flows From Investing Activities	334,089,347	(316,720,169)
Cash Flows (Used In)/Provided By Investing Activities	(142,919,473)	334,089,347
Cash Flow

Filing Compare · Lument Finance Trust, Inc.