ABR 10-K & 10-Q changes, risk factors and insider trading

The commercial real estate markets have experienced a prolonged dislocation due to inflation and high interest rates, which has resulted in decreased real estate values, increased delinquencies and defaults, and a disruption in the capital markets. This environment has had a material adverse effect on our business, results of operations, financial condition, and liquidity. If this environment persists, it is likely we will continue to experience an adverse impact on our business. The risks associated with these types of markets, andalong with other risks related to our business, are described below. The risk factors listed belowpresented should not be considered an all-inclusive list. New risk factorsrisks emerge periodically, and we cannot guarantee that the factors described below list all risks that may become material to us at any later time. Some ofin the future. Certain risk factors discussed below may havealso different impacts onaffect our Structured and Agency Businesses.Businesses differently. Additionally, you should review “Current Market Conditions, Risks and Recent Trends” located in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for afurther discussiondiscussions of the current adverse market conditions that we are currently experiencing, and may continue to experience in the future, that are having an adverse impact on our business.

Risks Related to Our Business. An economic slowdown, a lengthy or severe recession, declining real estate values, or changes in short and/or long termlong-term interest rates could harm our operations, affect our ability to obtain financing on reasonable terms and have other adverse effects on us. If economic conditions deterioratedeteriorate, interest rates remain elevated and/or we experience a turbulent economic environment, we will likely: (1) experience increases in loan loss reserves and other impairments; (2) encounter difficulty estimating loan loss reserves; and (3) experience an increaseincreases in loan delinquenciesdelinquencies, loan modifications and loannonperforming modifications.loans Ifand weforeclosures; are(4) unableexperience increased costs and risks associated with operating, managing and disposing of real estate owned (“REO”) assets; and (5) experience evolving climate-related, environmental and cybersecurity risks affecting us, our borrowers, collateral properties and key third-party service providers. In addition, such conditions may continue to investnegatively excessaffect capitalour liquidity, operating results and credit performance and may negatively impact expected recoveries on acceptablemodified terms, or at all, it would likely result in a declining portfolioloans, and wouldmodified adverselyloans affectmay thecontinue returnsto fromunderperform, ourpotentially investmentsincreasing nonperforming assets, REO, and ourcredit operatingloss results.provisions.

Our business is subject to risk of loss in connection with defaults on loans, failed loan deliveries to GSEs and potential requirements to repurchase loans already sold to GSEs or other issuers of securitizations for a breach of representations or warranties. We are subject to risks of fraud, misrepresentation and other misconduct by borrowers, brokers, guarantors and other third parties, which could increase delinquencies, defaults, restructurings and foreclosures, reduce recoveries on collateral and result in increased costs, repurchase or indemnification obligations, litigation and reputational harm. Certain investments we make, including preferred equity and mezzanine loans, involve a greater risk of loss than traditional mortgage financing and may result in reduced recoveries in the event of borrower distress, bankruptcy or other defaults. If we fail to act proactively with delinquent borrowers in an effort to avoid defaults, the number of delinquent loans could increase, which could have a material adverse effect on our business.

A significant portion of our Agency Business’s revenue is derived from loan servicing fees. Any declines in the value of our servicing portfolio, including agreement terminations from breaches of servicing agreements, or a reduction in the fees paid for servicing the loans could have a material adverse effect on our results of operations and liquidity. Increased loss-sharing obligations under the Fannie Mae DUS program, or changes to required collateral levels, could further adversely affect our liquidity and results of operations.

For most loans we service under the Fannie Mae and HUD programs, we are required to advance payments due to investors if the borrower is delinquent in making such payments, which requirement couldmay adversely impact our liquidity and harm our results of operations.

Risks Related to Our Financing and Hedging Activities. We finance a significant amount of our loans and investments through a variety of means, including CLOs, securitizations, credit facilities, equity capital, senior and convertible debt instruments, and other structured financings.financings, some of which we guarantee. These vehicles may contain restrictive covenants and may require us to provide additional collateral or repurchase assets if the value of pledged assets, some of which we guarantee,assets decline in value. If we are unable to acquire eligible investments, find suitable replacement investments and access financing sources on favorable terms, or at all, we may not be able to obtain the level of leverage necessary to optimize our return on investment and cash available for distribution to our stockholders may decline.

Cybersecurity Risks. If we are unable to safeguard against cybersecurity breaches and cyberattacks with respect to our information systems, our business may be adversely affected. With cyber threats increasing in frequency and severity, potential breaches pose a significant threat to our operations, potentially leading to reputational damage, financial losses, and legal repercussions. Our ability to monitor and influence the cybersecurity practices of third-party providers is limited, and while we seek to influence their practices through cybersecurity requirements and protocols in our contracts with such third-party providers, their security measures may not be sufficient to prevent or mitigate incidents, increasing operational risk. Newly adopted regulatory disclosure requirements may subject us to additional liability in the event of a cybersecurity incident.

Risks Related to Our Status as a REIT. We conduct a substantial portion of our operations to qualify as a REIT under the Internal Revenue Code. If we fail to remain qualified as a REIT, wea greater proportion of our income will be subject to corporate tax and we could face a substantial increase in our tax liability, including taxable mortgage pools resulting from certain of our securitizations. Even if we remain qualified as a REIT, we may face other tax liabilities, including taxes on any undistributed income, tax on income from some activities conducted as a result of a foreclosure, and state or local income, property and transfer taxes, all of which could reduce our cash flow and our distributions to stockholders. Complying with REIT requirements may cause us to forego or liquidate otherwise attractive opportunities and investments.

We may be unable to generate sufficient revenuecash flow from operations to pay our operating expenses and to pay dividends to our stockholders, resulting in the need to borrow funds to satisfy our REIT distribution requirements, which could cause a portion of our distributions to be treated as a return of capital.

General Risks. We are subject to certain general risks, all of which could have an adverse effect on our business, financial condition and results of operations, such as: (1) volatility in our stock price; (2) major public health crisis; (3) global economic and political conditions; (4) major bank failures; (5) losses of key personnel with long standing business relationships; (6) adverse resolutions of lawsuits; (7) terrorist attacks; (8) military conflict; (9) changes to laws and regulations, including environmental, social and governance matters; and (10) the effectiveimpact of the continuing development of artificial intelligence ("AI").

ProlongedA disruptionsprolonged disruption in the financial markets could affect our ability to obtain financing on reasonable terms and have other adverse effects on us and the market price of our common stock.

Commercial real estate can be adversely affected by a lack of liquidity caused by a prolonged economic downturn, which may limit our ability to raise equity or debt in the capital markets or obtain financing on favorable terms, if at all. If we do issue equity, it may be dilutive to our existing stockholders or could result in the issuance of securities that have rights, preferences and privileges that are senior to those of our existing securities. If economic or market conditions deteriorate, lending institutions may choose to exit markets such as repurchase lending, become insolvent, further tighten their lending standards or increase the amount of equity capital required to obtain financing, and such events could make it more difficult for us to obtain financing on favorable terms or at all, in which event our profitability will be adversely affected. These factors may also make it more difficult for our borrowers to repay our loans as they may experience difficulties in selling assets, obtaining other financing or realize increased costs of financing. Disruptions in the financial markets also may have a material adverse effect on the market price of our common stock.

We estimate allowances for credit losses on our loans and investments under the current expected credit loss (“CECL”) methodology based on current expected credit losses for the life of the loan and investment. This process utilizes information obtained from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts about the future and requires certain estimates and judgments, which are more difficult to make during a period in which available commercial real estate credit is limited and commercial real estate transactions have decreased. Our estimates and judgments are based on several factors, including projected cash flows from the collateral securing our loans, debt structure, including the availability of reserves and recourse guarantees, likelihood of repayment in full at loan maturity, potential for refinancing by other lenders and expected market discount rates for varying property types. Our CECL methodology may not fully capture the severity or duration of adverse economic conditions and actual losses could exceed our allowance, particularly if commercial real estate values decline further, interest rates remain elevated, or our borrowers’ business plans fail to stabilize underlying properties. If our estimates and judgments are not correct, our results of operations and financial condition could be severely impacted.

Our financial performance is significantly influenced by movements in both short termshort-term and long termlong-term interest rates. Since the vast majority of our structured loan portfolio is floating rate based on the Secured Overnight Financing Rate ("SOFR") and a greatersignificant portion of our debt balances consist of fixed-rate instruments (such as convertible and senior unsecured notes), a rising interest rate environment generally has a positive impact on our net interest income from our structured loan portfolio. Furthermore, our earnings on escrows and cash balances also benefit from an elevated short termshort-term rate environment. However, a prolonged period of elevated short and long termlong-term interest rates may result in: (1) increased payment delinquencies and defaults; (2) increased loan modifications and foreclosures; (3) an increase in real estate owned ("REO") assets; (4) declining real estate values of certain asset classes; and (5) a dislocation in capital markets, all of which would adversely impact our results of operations, financial condition, business prospects and our ability to make distributions to our stockholders. Conversely, a high long termlong-term interest rate environment would likely have an adverse impact on our fixed rate GSE/Agency business, as it will likely increase delinquencies and make it more costly for borrowers to refinance their balance sheet loans with fixed rate agency product.

Multifamily and commercial property values and net operating income derived from such properties are subject to volatility and may be affected adversely by a number of factors, including fires and other casualties, natural disasters, acts of war and/or terrorism, adverse economic conditions, adoption of, or changes in, rent control or rent stabilization laws, local real estate conditions (such as an oversupply of similar properties), changes or continued weakness in specific industry segments, construction quality, construction cost, age and design, demographic factors, retroactive changes to building or similar codes, increases in operating expenses (such as insurance, energy costs and real estate tax increases) and other factors that may cause unanticipated and uninsured performance declines and/or losses to us or the owners and operators of the real estate securing our investment. In the event a property’s net operating income decreases, a borrower may have difficulty repaying our loan, which could result in losses to us. In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay our loans, which could negatively impact our operating results.

Our ability to manage our structured portfolio of loans and investments may be limited by the form in which they are made. For example, our investments may be subject to rights of senior lenders and servicers under inter-creditor or servicing agreements whose interests may not be aligned with ours. We may co-invest with third parties through participation agreements, partnerships, joint ventures or other entities, and we may have limited control rights. We may rely on independent third partythird-party management or strategic partners with respect to the management of an asset. In such event, we may not be able to exercise sufficient control over the loan or investment and the risks associated therewith. Further, a third partythird-party partner may have financial difficulties that impact our asset or may have economic or business objectives which are inconsistent with ours. In addition, we may, in certain circumstances, be liable for the actions of our third partythird-party partners.

Under the Fannie Mae DUS program, our Agency Business originates and services multifamily loans for Fannie Mae without needing Fannie Mae’s prior approval, as long as the loans meet the underwriting guidelines set forth by Fannie Mae. In return for such delegated authority and the commitment to purchase loans by Fannie Mae, we are required to share risk of loss on loans sold through Fannie Mae and we must provide collateral to Fannie Mae to secure any potential losses. Under the full risk-sharing formula, we absorb the first 5% of any losses on the UPB of a loan at the time of loss settlement, and above 5% we share the loss with Fannie Mae, with our maximum loss capped at 20% of the original UPB of a loan. Our Agency Business has modified its risk-sharing obligations on some Fannie Mae DUS loans to reduce potential loss exposure on those loans.loans, which, in turn, results in a lower servicing fee. In addition, Fannie Mae can increase our risk-sharing obligations or require us to repurchase loans if the loan does not meet specific underwriting criteria or if the loan defaults within 12 months of its sale to Fannie Mae. At December 31, 2024,2025, the Agency Business had pledged $91.5$100.9 million in restricted liquidity as collateral against future losses under $22.73$24.09 billion of loans outstanding that are subject to risk-sharing obligations. Fannie Mae collateral requirements may change in the future. At December 31, 2024,2025, the Agency Business’s allowance for loss-sharing balance was $83.2$97.6 million, which may not be sufficient to cover future loss sharing obligations. While our Agency Business originates loans that meet the underwriting guidelines defined by Fannie Mae, in addition to our own internal underwriting guidelines, underwriting criteria may not always protect against loan defaults. Other factors can lead to a default on a loan, such as a decline in property value, cash flow, occupancy, maintenance needs and other financing obligations. If loan defaults increase, our risk-sharing obligation payments under the Fannie Mae DUS program may increase which could have a material adverse effect on our results of operations and liquidity. In addition, any failure to pay our share of losses under the Fannie Mae DUS program could result in the revocation of our Fannie Mae license and in the exercise of various remedies available to Fannie Mae under the Fannie Mae DUS program, including the transfer of our servicing portfolio to another Fannie Mae approved servicer.

The Agency Business’s results of operations and liquidity could be materially and adversely affected if the GSEs, HUD or institutional investors lower the price they are willing to pay for loans, lower their servicing fees or adversely change the material terms of their loan purchases or servicing arrangements with us. A number of factors determine the price we receive for our agency loans. With respect to Fannie Mae originations, loans are generally sold as Fannie Mae insured securities to third partythird-party investors. For HUD originations, loans are generally sold as Ginnie Mae securities to third partythird-party investors. In both cases, the price paid to us reflects, in part, the competitive market bidding process for these securities.

We must make certain representations and warranties concerning each loan we originate for the GSE or HUD programs. The representations and warranties relate to our practices in the originationorigination, underwriting and servicing of the loans and the accuracy of the information being provided by us. For example, we are generally required to provide the following, among other, representations and warranties: we are authorized to do business and to sell or assign the loan; the loan conforms to the requirements of the GSEs or HUD and certain laws and regulations; the underlying mortgage represents a valid first lien on the property and there are no other liens on the property; the loan documents are valid and enforceable; taxes, assessments, insurance premiums, rents and similar other payments have been paid or escrowed; the property is insured, conforms to zoning laws and remains intact; and we do not know of any issues regarding the loan that are reasonably expected to cause the loan to be delinquent or unacceptable for investment or adversely affect its value.

In the event of a breach of any representation or warranty, whether because of fraud or negligence, investors could, among other things, require us to repurchase the loan or seek indemnification for losses or, in the case of Fannie Mae, increase the level of risk-sharing on the loan. Our obligation to repurchase the loan is independent of our risk-sharing obligations. The GSEs or HUD could require us to repurchase a loan if representations and warranties are breached, even if the loan is not in default. Because many such representations and warranties are based on third partythird-party reports, such as title reports and environmental reports, we may not receive similar representations and warranties from such third parties that would serve as a claim against them. Even if we receive representations and warranties from such third parties or the borrower, our ability to recover on any such claim may be dependent, in part, upon the financial condition and liquidity of such third party or the borrower. Although we believe that we have capable personnel at all levels, use qualified third parties and have established controls to ensure that all loans are originated pursuant to requirements established by the GSEs and HUD, in addition to our own internal requirements, there can be no assurance that we, our employees or third parties will not make mistakes. Any significant repurchase or indemnification obligations imposed on us could have a material adverse effect on the Agency Business.

We finance our Structured Business loans and investments through a variety of means, including CLOs, securitizations, credit facilities, equity capital, and senior and convertible debt instruments. We finance our Agency Business loan originations, prior to sale to, or securitization by, an agency, through credit facilities provided by commercial banks.banks, as well as the As Soon as Pooled ® Plus ("ASAP") agreement we have with Fannie Mae. Our access to these sources of funding can be impacted by conditions in the financing markets that are beyond our control, including lack of liquidity and wider credit spreads, which we have experienced in the past. If these conditions deteriorate, there can be no assurance that any existing agreements will be renewed or extended at expiration and alternative sources of financing may not be available or may not accommodate our needs. This could subject us to an increase in our recourse indebtedness and the risk that debt service on less efficient forms of financing would require a larger portion of our cash flows, thereby reducing cash available for distribution to our stockholders, funds available for operations as well as for future business opportunities.

If the market value of the loans or investments pledged or sold by us to a funding source decline in value, we may be required by the lender to provide additional collateral or pay down a portion of the funds advanced. We may not have the funds available to pay down such future debt, which could result in defaults. Posting additional collateral to support these credit facilities would reduce our liquidity and limit our ability to leverage our assets. In the event we do not have sufficient liquidity to meet such requirements, lenders can accelerate the indebtedness, increase interest rates and terminate our ability to borrow. Further, lenders may require us to maintain a certain amount of uninvested cash or set aside unlevered assets sufficient to maintain a specified liquidity position. As a result, we may not be able to leverage our assets as fullyeffectively as we would choose, which could reduce our return on assets. In the event that we are unable to meet these collateral obligations, our financial condition could deteriorate rapidly.

If any of the loans we originate or acquire and sell or securitize through CLOs do not comply with representations and warranties we make about the loans, the borrowers and the underlying properties, we may be required to repurchase those loans, replace them with substitute loans or indemnify persons for losses or expenses incurred as a result of a breach of a representation or warranty. Repurchased loans typically require a significant allocation of working capital to carry on our books, and our ability to borrow against such assets ismay be limited. Any significant repurchases or indemnification payments could adversely affect our financial condition and operating results.

Our results of operations andoperations, cash flows and liquidity could be adversely affected if thewe are unable to reinvest CLO collateral proceeds in eligible assets during reinvestment periodperiods ofor ourif CLOsreinvestment periods expire without available capacity in existing CLOs,CLOs or theaccess to new CLO issuance ofon newacceptable CLOs.terms.

Securitization transactions also require us to prepare marketing and disclosure materials, including term sheets, offering documents, and prospectuses, that include disclosures regarding the proposed securitization and the assets being securitized. If our marketing and disclosure materials are alleged or found to contain inaccuracies or omissions, we may be liable under federal and state law for damages to third parties that invest in these securitizations, including in circumstances where we relied on a third party in preparing accurate disclosures, and we may incur other expenses and costs in connection with disputing these allegations or settling claims. Additionally, we may retain various third partythird-party service providers when we engage in securitization transactions, including special servicers, trustees, administrative and paying agents, and custodians, among others. We frequently contractually agree to indemnify these service providers against claims and losses they may suffer in connection with the provision of services to us and/or the securitization vehicle. To the extent any of these service providers are liable for damages to third parties that have invested in these securitization transactions, we may incur costs and expenses as a result of these indemnities.

As a result of past dislocation of the credit markets, the securitization market has becomeis subject to additional regulation. In particular, pursuant to the Dodd-Frank Act, various federal agencies have promulgated rules that require issuers in securitizations to retain at least 5% of the risk associated with the securities. To the extent we utilize the securitization market and retain this risk of loss through subordinate interests or B Piece bonds in our securitized debt transactions, thiswe are exposed to losses earlier and to a greater extent than holders of more senior interests, which could reduce our returns on these transactions.

One of our subsidiaries is required to registerregister, and is subject to regulation, under the Investment Advisers Act, and is subject to regulation under that Act.

One of our subsidiaries is subject to the extensive regulation prescribed by the Investment Advisers Act of 1940 (the “Advisers Act”). The SEC oversees our activities as a registered investment adviser under this regulatory regime. A failure to comply with the obligations imposed by the Advisers Act, including recordkeeping, advertising, operating requirements, disclosure obligations and prohibitions on fraudulent activities, could result in fines, censure, suspensions of personnel or investing activities or other sanctions, including revocation of our registration as an investment adviser. The regulations under the Advisers Act are designed to protect investors and other clients, and are not designed to protect holders of our publicly traded stock. Even if a sanction imposed against our subsidiary or its personnel involves a small monetary amount, the adverse publicity related to such sanction could harm our reputation and our relationship with our investors and impede our ability to raise additional capital. In addition, compliance with the Advisers Act may requirerequires us to incur additional costs, and these costs may be material.

In the past, federal legislation has been proposed to reform the housing finance system, including the GSEs. Several of the bills require the wind down or receivership of the GSEs within a specified period of enactment and place certain restrictions on the GSEs’ activities prior to being wound down or placed into receivership. The Trump Administration has made recent comments indicating that housing finance reform may be on its agenda, however, it is unclear at this time what the Trump Administration’s views are with respect to the future of the GSEs.

Cybersecurity incidents and cyberattacks, which include malicious software, ransomware or terrorists attacks, unauthorized attempts to gain access to sensitive, confidential or otherwise protected information related to us and our customers, have been occurring globally at a more frequent and severe level and are expected to continue to increase in frequency and severity in the future. In the course of our business, we gather, transmit and retain confidential information through our information systems.systems and through the systems of various third-party vendors and service providers on whom we rely, including cloud-based technology providers, data processors, property managers, servicers and other counterparties. Although we endeavor to protect confidential information through the implementation of security technologies, processes and procedures, it is possible that an individual or group could penetrate our security systems or those of our third-party providers and access sensitive information about our business, borrowers and employees. Any misappropriation, loss or unauthorized disclosure of confidential information gathered, stored or used by us or by our third-party providers could have a material impact on the operation of our business, including damaging our reputation with our borrowers, employees, third parties and investors. We could also incur significant costs in implementing additional security measures and organizational changes, implementing additional protection technologies, training employees or engaging consultants.consultants and addressing disruptions to critical services, loan closings or servicing activities resulting from cybersecurity incidents involving third-party providers. In addition, we could become subject to litigation from any cybersecurity breach. We have not experienced any material misappropriation, loss or unauthorized disclosure of confidential or personally identifiable information as a result of a cybersecurity breach or otherfrom act,disruptions however,caused aby third-party cybersecurity breach or other act and/or disruption to our information technology systems could have a material adverse effect on our business, financial condition or results of operations.incidents.

You should read the following discussion in conjunction with the sections of this report entitled “Forward-Looking Statements” and” “Risk Factors,” along with the historical consolidated financial statements including related notes, included in this report.

Through our Agency Business, we originate, sell and service a range of multifamily finance products through Fannie Mae and Freddie Mac, Ginnie Mae, FHA and HUD. We retain the servicing rights and asset management responsibilities on substantially all loans we originate and sell under the GSE and HUD programs. We are an approved Fannie Mae DUS lender, seller/servicer nationally, a Freddie Mac Optigo® Conventional Loan and SBL lender, seller/servicer,servicer nationally and a HUD MAP and LEAN senior housing/healthcare lender nationally. We also originate and retain the servicing rights on permanent financing loans underwritten using the guidelines of our existing agency loans sold to the GSEs, which we refer to as “Private Label” loans and originate and sell finance products through CMBS programs. We either sell the Private Label loans instantaneously or pool and securitize them and sell certificates in the securitizations to third partythird-party investors, while retaining the highest risk bottom tranche certificate of the securitization.

Income earned from ourother structured transactions.investments. Our other structured transactionsinvestments are primarily comprised of investments in equity affiliates, which represent unconsolidated joint venture investments formed to acquire, develop and/or sell real estate-related assets. Operating results from these investments can be difficult to predict and can vary significantly period-to-period. WhenWe interest rates rise, the income from these investments can be significantly and negatively impacted, particularly from our investment in a residential mortgage banking business, since rising interest rates generally decrease the demand for residential real estate loans. In addition, wealso periodically receive distributions from our equity investments. It is difficult to forecast the timing of such payments, which can be substantial in any given quarter. We account for structured transactions within our Structured Business.

•Unwound CLOCLOs 15,14, 16 and 19, redeeming the remaining $1.56 billion of outstanding notes,notes and paid down outstanding notes on existing securitizations totaling $1.65$841.7 billionmillion; on our other securitizations;and

•RepurchasedRaised $11.4net proceeds of $70.6 million from the issuance of our5,898,957 shares of common stock under our ATM program at an average price of $12.19$11.97 per share.

•Reduced our balanceBalance sheet portfolio byof 10%$12.11 tobillion, $11.30as loan originations of $3.52 billion onoutpaced loan runoff of $2.69 billion, which outpaced loan originations totaling $1.43$2.21 billion;

•Modified 10643 loans with a total UPB of $4.12$1.71 billion. Borrowersbillion, of 63which of these36 loans withwere a total UPB of $2.39 billion invested additional capitalmodified to recapitalize their deals in exchange forprovide temporary rate relief, which we providedrelief through a pay and accrual feature.feature, Seesee Note 3 for details; and

•LoanServicing portfolio of $36.20 billion (up $2.73 billion) with loan originations totaledtotaling $4.47$5.07 billionbillion, andwhich includes $1.58$669.4 billionmillion of new agencyAgency loans that were recaptured from our Structured Business runoff; andrunoff.

Historically,In thegeneral, higha interestrising or high-interest rate environment has positively impactedimpacts our net interest income since our structured loan portfolio exceeds our corresponding debt balancesbalances, and the vast majority of our loan portfolio is floating rate based on SOFR. Additionally, since a greatersizable portion of our debt consists of fixed-rate instruments (such as convertible and senior unsecured notes), as compared to our structured loan portfolio, the increase in interest income from high interest rates tends to outpace the rise in interest expense on our debt. Furthermore, our earnings on escrows and cash balances also benefit from an elevated rate environment. However, the prolonged period of elevated interest rates has also led to ana significant increase in loan delinquencies, amodifications, decreaseforeclosures and decreases in loan originations and lower cash and escrow balances, which is having, and may continue to have, a negative impact on our net interest income. Additionally, the prolonged high interesthigh-interest rate environment has contributed to a decline in certain commercial real estate values, leading to increased reserves, aswhen the collateral value is considered insufficient to fully repay the loans.

AsThe discussedabove earlier,mentioned the Federal Reserve began lowering short termshort-term interest rates in 2024 and may continue to cut interest rates during 2025. These rate reductions have resulted inresulted, and will continue to resultresult, in a decrease in the net interest income on our floating rate loan book and reductions in the earnings on our cash and escrow balances. For additional details, please see “Quantitative and Qualitative Disclosures about Market Risk” below.

InstabilityThe elevated and volatile interest rates, along with geopolitical uncertainty, has caused some disruptions in certain segments of the financial services, real estate and credit markets. As stated earlier, this environment has also caused a decrease in the bankingperformance sector,of suchcertain asof our assets, leading to increased defaults and delinquencies. If our borrowers and their tenants continue to be impacted by these adverse economic and market conditions, or by the multipleother regionalrisks bankdisclosed failuresin andour consolidations,filings further contributed towith the tighteningSEC, it could have a material adverse effect on our liquidity conditions in the equity and capital marketsresources. andDespite hasthese affectedperiodic thedisruptions, availability,we andhave increasedbeen the cost, of capital. The increased cost of credit, or degradationsuccessful in debtraising financingcapital terms,through hasvarious impacted,vehicles, andwhen mayneeded, to continue to impact,operate and strengthen our ability to identify and execute investments on attractive terms, or at all.business. Additionally, although the majority of our cash is currently on deposit with major financial institutions, our balances often exceed insured limits. We limit the exposure relating to these balances by diversifying them among various counterparties. Generally, deposits may be redeemed upon demand and are maintained at financial institutions with reputable credit andand, thereforetherefore, we believe we bear minimal credit risk.

We are a national originator with Fannie Mae and Freddie Mac, and the GSEs remain the most significant providers of capital to the multifamily market. FHFA set its 20252026 Caps for Fannie Mae and Freddie Mac at $73$88 billion for each enterprise for a total opportunity of $146$176 billion, which is an increase from its 20242025 Caps of $70$73 billion for each enterprise. FHFA stated they will continue to monitor the market and reserves the right to increase the 20252026 Caps if warranted, however, they will not reduce the 20252026 Caps if the market is smaller than initially projected. To promote affordable housing preservation, loans classified as supporting workforce housing properties will be exempt from the 20252026 Caps. Workforce housing loans preserve rents at affordable levels in multifamily properties, typically without the use of public subsidies. The 20252026 Caps will continue to mandate that at least 50% be directed towards mission driven, affordable housing, with affordability levels corresponding to 80%-120% of area median income, depending on the market. Our originations with the GSEs are highly profitable executions as they provide significant gains from the sale of our loans, non-cash gains related to MSRs, and servicing revenues. As discussed above, the current high interest rate environment could lead to a decline in our GSE originations, which could negatively impact our financial results. We are also unsure whether FHFA will impose stricter limitations on GSE multifamily production volume in the future.

Our Structured loan and investment portfolio balance was $11.30$12.11 billion and $12.62$11.30 billion at December 31, 20242025 and 2023,2024, respectively. This decreaseincrease was primarily due to loan runofforiginations exceeding loan originationsrunoff by $1.27$1.31 billion.billion See(see below for details.details), partially offset by loans we foreclosed on and received ownership of the underlying collateral as REO assets.

OurThe portfolio had a weighted average current interest pay rate of 6.90%6.49% and 8.42%6.90% at December 31, 20242025 and 2023,2024, respectively. Including certain fees earned and costs, the weighted average current interest rate was 7.80%7.08% and 8.98%7.80% at December 31, 20242025 and 2023,2024, respectively. Our debt that finances our Structured loan and investment portfolio totaled $9.46$10.46 billion and $11.57$9.46 billion at December 31, 20242025 and 2023,2024, respectively, with a weighted average funding cost of 6.55%6.16% and 7.14%,6.55%, respectively, which excludes financing costs. Including financing costs, the weighted average funding rate was 6.88%6.45% and 7.45%6.88% at December 31, 20242025 and 2023,2024, respectively.

Loans held-for-sale from the Agency Business decreased $115.9$26.7 million, primarily from loan sales exceeding originations by $30.2 million as noted in the following table. Activity from our Agency Business portfolio is comprised of the following ($ in thousands):

Real estate owned, netowned increased $89.6$322.4 million, primarily fromdue to the foreclosure of threesixteen structuredmultifamily bridge loans wheretotaling $441.0 million, through which we took back the underlying collateralcollateral, aspartially REOoffset assets.by the sale of five multifamily properties.

Credit and repurchase facilities increased $321.7$1.59 million,billion, primarily due to refinancing loans from the unwind of three CLOs and loan originations exceeding runoff in our Structured Business, substantiallypartially offset by loanthe salesissuance exceedingof originationsBTR inCLO our1 Agencyand Business.CLO 20.

Securitized debt decreased $2.31$1.15 billion, primarily due to the unwind of CLOthree 15CLOs totaling $1.56 billion and paydowns on our existing securitizations totalingof $1.65$841.7 billion.million, partially offset by the issuances of BTR CLO 1 and CLO 20 where we issued $1.46 billion of notes to third-party investors.

Senior unsecured notes decreasedincreased $97.8$792.9 million, primarily due to theour repaymentissuance of our$900.0 4.75%million andof 5.75%senior notesunsecured totaling $200.0 million,notes, partially offset by the issuance of $100.0 millionsettlement of our 9.00%$95.0 million 7.75% senior unsecured notes.

(2)Delinquent loans reflect loans that are contractually 60 days or more past due. At December 31, 20242025 and 2023,2024, delinquent loans totaled $524.5$959.0 million and $411.1$524.5 million, respectively. At December 31, 2025, there were five loans totaling $56.0 million in bankruptcy and nineteen loans totaling $176.5 million were foreclosed. At December 31, 2024, there were two loans totaling $4.8 million in bankruptcy and six loans totaling $28.2 million have beenwere foreclosed. At December 31, 2023, there were two loans totaling $4.8 million in bankruptcy and no loans in foreclosure.

The decrease in interest income was mainly due to a $166.7$221.8 million decrease from our Structured Business. The decline was primarily fromdue to a decrease in the average yield on core interest-earning assets and, to a lesser extent, a decrease in the average balance of our core interest-earning assets as (loan runoff exceeded loan originations,originations asin well2024) asand alower average bank balances. The decrease in the average yield onwas core interest-earning assetsmainly from a risedecrease in non-performingSOFR, the reversal of interest that was previously accrued on modified loans and othera non-accruedreduction loans.in back interest earned on delinquent and modified loans, as well as an increase in new delinquencies and modified loans at lower rates.

The decrease in interest expense was mainly due to a $98.9$105.0 million decrease from our Structured Business, primarily due to a decline in the average balance of our interest-bearing liabilities (from a decrease in the average loan runoffportfolio and note paydowns in our securitizations) and seniora unsecured notes, partially offset by an increasereduction in the average cost of interest-bearing liabilities,liabilities (mainly from lowera ratedecrease debtin tranches being paid down from CLO runoff.SOFR).

The increasedecrease in gain on sales, including fee-based services, net was primarily due to a 10%15% increasedecrease in the sales margin from 1.48%1.63% to 1.63%,1.38%, partially offset by aan 6%11% decreaseincrease in loan sales volume ($279.5$494.8 million). The decrease in the sales margin was mainly due to the sales volume product mix and larger portfolio deals in 2025 that produced lower margins.

The decreaseincrease in income from MSRs was primarily due to a 15% decreaseincrease in loan commitment volume ($763.2$659.9 million), andpartially offset by a 14%7% decrease in the MSR rate from 1.34%1.15% to 1.15%.1.07%. The decrease in the MSR rate was primarilymainly due to a higherdecrease percentagein ofthe FreddieFannie MacMae loanMSR commitments,rates which containfrom lower servicing fees.rates on newer loans, as a result of larger portfolio deals in 2025 that produced lower MSR rates.

The decrease in servicing revenue, net was primarily due to a decrease in earnings on escrow balances from lower average balances and lowera prepaymentdecrease fees,in the applicable interest rate, partially offset by an increase in servicing fees due to growth in our servicing portfolio.

The (loss)gains gainand losses on derivative instruments in both 20242025 and 20232024 were related to changes in the fair values of our forward sale commitments and swaps held by our Agency Business as a result of changes in market interest rates as well as from the timing of GSE Agency loan sales.rates.

The increasedecrease in employee compensation and benefits expense was primarily due to increasesdecreases in commissions and incentive compensation and commissions from higherlower GSE/Agency loan sales volume and bonus allocation targets and annual merit increases.targets.

Significant Developments During the FirstSecond Quarter of 2026

•We repurchased 4,117,9013,550,691 shares of our common stock under our share repurchase program at a total cost of $30.7$20.8 millionmillion, andexcluding broker commission fees, representing an average cost of $7.46$5.85 per share.

•Balance sheet portfolio of $12.00$12.11 billion,billion; asloan originations of $689.0 million outpaced loan runoff totaling $861.0 million outpaced loan originations of $767.6$539.7 million;

•We foreclosed on and took back the underlying collateral on threefive loans with an aggregate net carrying value of $58.8$110.1 million and recorded a loss of $1.8$2.5 million through provision for credit losses. We sold one of thosetwo foreclosed properties, along with anthree existing REO asset,assets for $33.0$79.8 million and recognized an aggregate lossgain of $2.1$0.1 million through gain (loss) on real estate. See Notes 3 and 9 for details.

Agency Business Activity. Servicing portfolio of $36.31$36.70 billion (up $107.3$393.3 million) with loan originations totaling $707.6$1.08 million, which includes $218.5 million of new Agency loans that were recaptured from our Structured Business runoff.billion.

During 2025, the Federal Reserve lowered the federal funds rate three times for an aggregate 75-basis point reduction. During the first half of 2026, the Federal Reserve maintained the target range for the federal funds rate at 3.50% to 3.75%. Current market expectations generallyremain contemplateuncertain and have shifted during 2026, with the potentialtiming forand andirection of any additional ratemonetary cutpolicy inactions thedependent fourthon quarterinflation, oflabor 2026,market butconditions, thoseeconomic expectationsgrowth mayand abatefinancial ifmarket impactsconditions. Although short-term rates have declined from recenttheir geopolitical events have a longer lasting effect onpeaks, the economic environment and inflationary measurements. However, the elevated rate environment remains elevated, has persistedremained elevated longer than anticipated and could persist even longer if inflation and other key economic indicators do not align with the Federal Reserve’s expectations. While short-term rates have declined,Additionally, long-term rates remain volatile following the current administration’s adoption of increased tariffs, related litigation, geopolitical developments, including the conflict involving Iran,Iran and related energy market volatility, and broader macroeconomic uncertainty. Expectations for long-term rates in 2026 remain mixed, reflecting uncertainty around long-term inflation, fiscal policy, increased federal spending and larger deficits, including the effects of the July 2025 enactment of the OBBBA, as described below. Accordingly, it remains difficult to predict where short- and long-term rates will settle during the remainder of 2026.

This prolonged rate environment has resulted,resulted in, and may continue to result,result inin, higher payment delinquencies and defaults, more loan modifications and foreclosures and declines in real estate values in certain asset classes, which have adversely affected, and may continue to adversely affect, our results of operations, financial condition, business prospects, liquidity and ability to make distributions to stockholders. It has also made it more difficult to resolve delinquent loans, contributing to additional foreclosures and REO assets on our balance sheet. When we take title to assets through foreclosure, we generally seek to dispose of these assets through third-party sales. However, depending on market conditions and asset-specific factors, we may evaluate other alternatives, such as recapitalizations and joint venture structures, intended to optimize recoveries and reduce our REO exposure. These efforts may include enhanced property management, capital improvements and deferred maintenance, re-leasing vacant space, renewing or restructuring leases and other stabilization initiatives designed to improve occupancy, cash flow and marketability.

We continue to apply disciplined underwriting and risk management practices and work closely with borrowers to protect portfolio quality and mitigate potential losses, including, where appropriate, modifying loan terms. However, given the current interest rate environment,environment and inflationary pressures, we cannot assure that our loan portfolio will continue to perform in accordance with current contractual terms.

An elevated rate environment generally benefits our net interest income because our structured loan portfolio exceeds our corresponding debt balances, the substantial majority of our loan portfolio is floating rate based on SOFR and a meaningful portion of our debt, including senior unsecured notes, is fixed rate. As a result, increases in interest income generally tendstend to outpace increases in interest expense, and earnings on our cash and escrow balances also benefit from higher rates. These benefits, however, have been increasingly offset by the adverse effects of a prolonged elevated rate environment, including higher delinquencies, more loan modifications and foreclosures, lower loan originations, reduced cash and escrow balances and pressure on certain commercial real estate values, which can result in higher reserves when collateral values are considered insufficient to fully repay loans.

The recent reductions in short-term interest rates have reduced, and are expected to continue to reduce, net interest income on our floating rate loan portfolio and earnings on our cash and escrow balances. In addition, if short-term interest rates decline further, our interest income and earnings on cash and escrow balances could decline further, while the benefit to our interest expense may be limited to the extent our debt is fixed rate or does not reprice at the same pace. Conversely, if short-term or long-term rates increase, or remain elevated for an extended period, borrower performance, collateral values, loan origination volumes, transaction activity and our ability to resolve delinquent loans could be further adversely affected. For additional information, see “Quantitative and Qualitative Disclosures about Market Risk” below.

Assets — Comparison of balances at MarchJune 31,30, 2026 to December 31, 2025:

Our Structured loan and investment portfolio balance was $12.00 billion andapproximately $12.11 billion at Marchboth 31,June 30, 2026 and December 31, 2025. There was a slight decrease from December 31, 2025, respectively. This decreasewhich was primarily due to loan runoff exceeding loan originations by $93.4 million (see below for details) and by loans we foreclosed on and received ownership of the underlying collateral as REO assets.assets, substantially offset by loan originations exceeding loan runoff by $55.8 million (see below for details).

The portfolio had a weighted average current interest pay rate of 6.50% and 6.49% at bothJune March 31,30, 2026 and December 31, 2025.2025, respectively. Including certain fees earned and costs, the weighted average current interest rate was 7.03%6.95% and 7.08% at MarchJune 31,30, 2026 and December 31, 2025, respectively. Our debt that finances our Structured loan and investment portfolio totaled $10.71$10.48 billion and $10.46 billion at MarchJune 31,30, 2026 and December 31, 2025, respectively, with a weighted average funding cost of 6.13%6.10% and 6.16%, respectively, which excludes financing costs. Including financing costs, the weighted average funding rate was 6.40%6.38% and 6.45%, at MarchJune 31,30, 2026 and December 31, 2025. respectively.

Loans held-for-sale from the Agency Business increaseddecreased $34.1$33.3 million, primarily from loan originationssales exceeding salesoriginations by $36.6$30.1 million as noted in the following table ($ in thousands):

Real estate owned increased $21.8$47.0 million, primarily due to the foreclosure of twoeight multifamily bridge loans totaling $34.0$171.6 million, through which we took back the underlying collateral, partially offset by the sale of oneseven multifamily property.properties for $112.8 million.

Other assets decreased $27.5$20.6 million, primarily due to the payoff of an unsecured line of credit loan.loans and a decrease in interest receivable mainly due to the collection of deferred interest on modified/delinquent loans.

Liabilities – Comparison of balances at MarchJune 31,30, 2026 to December 31, 2025:

Credit and repurchase facilities decreasedincreased $181.7$662.6 million, primarily due to the transfer of loans into arepurchase facilities from the unwind of CLO and loan runoff in our Structured Business portfolio, partially offset by loan originations exceeding sales in our Agency Business.17.

Securitized debt increaseddecreased $463.2$496.0 million, primarily due to the closingunwind of CLO 17 totaling $1.06 billion and paydowns on our existing securitizations totaling $182.7 million, partially offset by the issuance of CLO 21 where we issued $674.0 million of notes to third-party investors, partially offset by paydowns on our existing securitizations of $248.4 million.investors.

Notes payable — real estate owned increased $30.2$47.4 million, primarily due to the addition of notes payable on athree new REO assetassets and additional financing received on two existing REO assets.

Other liabilities decreased $35.1$14.5 million, primarily due to payments of accrued incentive compensation and commissions during the first quarterhalf of 2026, related to 2025 performance.

See Note 16 for details of our issuances of common stock, dividends declared and deferred compensation transactions.

(2)Delinquent loans reflect loans that are contractually 60 days or more past due. At MarchJune 31,30, 2026 and December 31, 2025, delinquent loans totaled $975.4$1.12 millionbillion and $959.0 million, respectively. At MarchJune 31,30, 2026, there were fivefour loans totaling $56.0$22.6 million in bankruptcy and twenty-fiveforty-two loans totaling $313.5$422.2 million were foreclosed. At December 31, 2025, there were five loans totaling $56.0 million in bankruptcy and nineteen loans totaling $176.5 million were foreclosed.

Comparison of Results of Operations for the Three Months Ended MarchJune 31,30, 2026 and 2025

The decrease in interest income was mainly due to a $5.7$10.8 million decrease from our Structured Business. The decline was primarily due to a decrease in the average yield on core interest-earning assets, partially offset by an increase in the average balance of our core interest-earning assets (loan originations exceeded runoff in 2025) and, to a lesser extent, higher average bank balances. The decrease in the average yield was mainly from a decrease in SOFR, a reduction in back interest earned on delinquent and modified loansSOFR and an increase in new delinquencies and modified loans at lower rates.

The increase in interest expense was mainly due to a $9.2$6.2 million increase from our Structured Business, primarily due to an increase in the average balance of our interest-bearing liabilities from an increase in the average loan portfolio and the issuance of senior unsecured notes. This was partially offset by note paydowns in our securitizations, the payoff of our 7.50% convertible senior notes and a reduction in the average cost of interest-bearing liabilities (mainly from a decrease in SOFR).

The decreaseincrease in gain on sales, including fee-based services, net was primarily due to a 8%42% decreaseincrease in loan sales volume ($59.9$336.4 million), partially offset by a 6%21% increasedecrease in the sales margin from 1.75%1.69% to 1.86%.1.33%. The increasedecrease in the sales margin was mainly due to a decrease in the Fannie Mae sales margin, which includes the impact of larger portfolio mixdeals in 2026 that producedproduce higherlower margins.

The increases in property operating income and expenses were due to the addition of several new REO assets. This is also the reason for the increase in depreciation and amortization.

The gains and losses on derivative instruments in 2026 and 2025 were related to changes in the fair values of our forward sale commitments and swaps held by our Agency Business as a result of changes in market interest rates.