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

•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 stockholderstockholders may be adversely affected.

•OurWe 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 investmentsowned" 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.

•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.

•If we fail to continueremain to qualifyqualified as a REIT, we wouldwill be taxedsubject atto corporateU.S, ratesfederal income tax as a regular corporation and wouldcould notface bea ablesubstantial totax take certain deductions when computing our taxable income.liability..

•If we fail to continueremain to qualifyqualified as a REIT, we may default on our current financing facilities and be required to liquidate our assets, and we may face delays or inabilitiesinability to procure future financing.

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.

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 securedfinancing financingsarrangements were indexed to 30-day termTerm 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, sincebetween 2022,2022 and late 2024, in light of increasing inflation, the U.S. Federal Reserve increased benchmark interest rates eleven times. TheseAlthough these rates were subsequently cut several times beginning in late 2024, overall 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, interest rates have remained elevated,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.

In recent years, interest rates had remained at relatively low levels on a historical basis. However, sincebetween 2022,2022 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 2024,2024 and 2025, interest rates have remained elevated, with the U.S. Federal Reserve indicating in 20252026 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.

OurWe 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 investmentsowned" 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.

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

In 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.

Our transitional multifamily and CRE loans are secured by the underlying commercial property and, in each casecase, 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.

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 rulesrules, regulations, or regulationsother legislation will be proposed or to what extent any finalized legislation, rules or regulations will have on the nonbank lending market. If rulesrules, regulations or regulationslegislation 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 thewe impacthave ofnot been impacted by this guidancelegislation cannotto be known at this time,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.

Recently,There thereis has been growingcontinued concern from advocacy groups, government agencies and the general public over the effects of climate change on the environment. Transition risks,risks suchassociated aswith climate change include higher energy costs, higher costs 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.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 environmentalenvironmental, health and safety laws and building construction standards in the U.S. have been enacted and where we have properties securing our investment portfolio.

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.

Loans that we originated or acquired, or may in the future originate or acquireacquire, 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.

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 isare 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.

AccountingIncreases standardsin our CECL reserves have requiredhad usand could continue to increase our allowance for credit losses which has hadhave 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 operations.

While ASUASC 2016-13326 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 reasonable and supportable forecasts 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 companies. In addition, other than a few narrow exceptions, ASUASC 2016-13326 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 for credit losses. If we are required to materially increase our level of allowance for credit losses for any reason, such increase could adversely affect our business, financial condition and results of operations.

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.

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.

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.

Our strategy involves leverage, which may amplify losseslosses, 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.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.

We have entered into, and may in the future enter intointo, 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.

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.

MasterWe 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 financingfinancings 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.

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, sincebetween January2022 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 fundfunds rate decreases over the course of 2024,2024 and 2025, interest rates have remained elevated, with the U.S. Federal Reserve indicating in early 20252026 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 of our portfolio investmentinvestments 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.

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,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.

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 managementManagement agreementAgreement with our Manager maturedexpired 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 managementManagement agreementAgreement is terminated and no suitable replacement is found to manage us, we may not be able to execute our business plan.

•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 theour 2021-FL1securitized CLOdebt obligations and thesecured LMFfinancing 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.

•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, employee,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.

•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,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 for the Manager 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.

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, originatesources 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,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 reasonablereasonable,loan participations or assignments will not be available for purposes of the origination of the loans, the Manager or its affiliates will be unableCompany to originate loans,purchase, which may have a material adverse effect on LFT.

WhenIn the event the Manager or its affiliates source a loan is originated at a time when the Company does not have capacity to make such loan, Lumentan ORIX affiliate may originateinitially fund the loans,loan, whichwith couldthe potentiallypotential befor solda 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, afterthe originationManager Lumentor hasits affiliates have no obligation to sell or transfer any 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.

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,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 instabilitypolitical inand theregulatory 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, 99.0%100.0% of the loans in our commercial mortgage loan portfolio are structured with SOFR floors with a weighted average SOFR floor of 0.63%, none2.18%, of which currently18.8% hashad 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 3.58%,3.33%, but there is no assurance that these spreads will be maintained as market environments fluctuate.

TheAfter U.S.a prolonged period of rising interest rates, the Federal Reserve maintainedbegan thelowering federalinterest funds target range at 0.0% to 0.25% for much of 2021. However, beginningrates in March 2022, the U.S. Federal Reserve raised the federal funds rate 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, Januaryon each of September 17, 2025, October 29, 2025 and December 10, 2025, respectively, the U.S. Federal Reserve declined to make any additional changes to interest rates, holdinglowered the federal funds rate by 0.25% to a current target range atof 4.25%3.50% - 3.75%. Interest rates to 4.50%. Therefore, interest rates 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,rates potentially,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, 79.7%72.6% of our performing loans have interest rate caps with a weighted-average strike price of 2.4%.3.9%.

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.specific Impairmentcredit of 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. 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.reserves.

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.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 seventeennineteen funded loan advances with an initial aggregate unpaid principal balance of $473.1$474.1 million with an aggregate purchase discount of $8.1$8.2 million. All of our other commercial mortgage loans were acquired at par. As of December 31, 2024,2025, our aggregate unaccreted purchase discount was $3.5$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 theLMF 2021-FL12023-1 CLOFinancing expired in DecemberJuly 20232025 and forLMNT LMF 2023-12025-FL3 remains in place through JulyMay 2025.2028. WhileCurrently, 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,reinvest during active reinvestment periods, we may be subject to a reduction in interest income in the future. However,To ourthe loanextent agreementsany provideloans forare permanently financed by the Manager or any of its affiliates, the prepayment penalties whichwill arebe intendedwaived, resulting in a reduction to offsetreimbursed expense by an amount equal to 50% of the amount of any potentialsuch reductionwaived infee futurecapped interestat income.a waived fee of 1%.

Key Financial MeasureMeasures 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 earningsloss per share of $0.07,$0.16, declared a quarterly common dividend of $0.08 per share, declared a one-time special dividend of $0.09$0.04 per share, and reported $0.10$0.01 per share of Distributable Earnings.Loss. In addition, our book value per share was $3.40$3.03 per share. For the year ended December 31, 2024,2025, we recorded earningsloss per share of $0.34,$0.14, declared aggregate common dividends of $0.40$0.22 per share, and reported $0.44$0.14 per share of Distributable Earnings.

Earnings (Loss) Per Share and Dividends Declared

Distributable Earnings (Loss)

As of December 31, 2024,2025, we have determined that we are the primary beneficiary of the 2021-FL1 CLO and LMF 2023-1 Financing and LMNT 2025-FL3 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.

(5) As of December 31, 2025, $856,064,487 of the outstanding senior secured loans were held in VIEs and $257,983,507 of the outstanding senior secured loans were held outside of VIEs. As of December 31, 2024, $1,049,886,009 of the outstanding senior secured loans were held in VIEs and $(1,082,931) of the outstanding senior secured loans were held outside of VIEs. As of December 31, 2023, $1,375,277,312 of the outstanding senior secured loans were held in VIEs and $8,603,886 of the outstanding senior secured loans were held outside of VIEs.

This Quarterly Report on Form 10-Q contains 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 condition, 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 the negative of these words and phrases or similar words and phrases, or by discussions of strategy, plans or intentions. Statements regarding the following subjects, among others, may be forward-looking: statements regarding the Company's plans, intentions, expectations, objectives or ability to regain compliance with the NYSE's continued listing standards, including a potential reverse stock split and intention to consider alternatives to cure the NYSE continued listing requirement deficiency, the return on equity; the yield on investments; the ability to borrow to finance assets; and risks associated with investing in real estate assets, including changes in business conditions, changes in interest rates or inflation and any resulting effect on our borrowers or liquidity, and the general economy. Forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us on the date of this quarterly report. Actual results may differ from expectations, estimates and projections. Readers are cautioned not to place undue reliance on forward-looking statements in this quarterly report and should consider carefully the risk factors described in Part I, Item IA "Risk Factors" in our annual report on Form 10-K for the year ended December 31, 2025 in evaluating these forward-looking statements. Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond our control. It is not possible to predict or identify all such risks. Additional information concerning these and other risk factors are contained in our 2025 10-K10-K, which is available on the Securities and Exchange Commission's website at www.sec.gov.

2025 was marked by significant volatility in global markets, driven by tariffs and international trade policy and disputes,tariff-related developments, geopolitical uncertainty, political and regulatory uncertainty, geopolitical conditions,developments, elevated interest rates,rates and inflation.persistent inflationary pressures. Collectively, these marketfactors dynamics have posed challengescontributed to challenging conditions across commercial real estate valuesmarkets, including lower transaction activity, constrained capital availability and transactionpressure activity.on However,property thevalues Federalin Reservecertain decreasedsectors. Despite these challenges, capital markets generally adapted to a higher-for-longer interest ratesrate environment, and improvements in 2024financing andmarket 2025,conditions whichsupported has contributed to an improvement in the cost andgreater availability of debt.debt capital for commercial real estate investments.

FirstSecond Quarter 2026 Summary

•Distributable EarningsLoss of $1.1$5.3 million, or $0.02$0.10 per share of common stock

•On MarchJune 19,12, 2026, the Company announced its firstsecond quarter common dividend of $0.04 per share of common stock

•On MarchJune 19,12, 2026, the Company announced its firstsecond quarter preferred dividend of $0.49219 per share of Series A Preferred Stock

•Book value of common stock as of MarchJune 31,30, 2026 was $156.0$144.7 million, or $2.97$2.76 per share of common stock

•$1.1$991.7 billionmillion senior loan portfolio is 100% floating rate with an average spread to 30-day term Secured Overnight Financing Rate ("SOFR") of 3.31%,3.30%, excluding unamortized purchase discounts of $1.3$0.8 million and deferred loan fees of $1.0$0.9 million as of MarchJune 31,30, 2026

•Non-mark-to-market financing is $0.6 billion with an average spread to 30-day term SOFR of 2.00%1.95% as of MarchJune 31,30, 2026, representing 66%71% of our secured financings

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 period ended MarchJune 31,30, 2026, we foreclosed on one multifamily property as a 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. ThisThe yearpast hastwo years have 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 political and regulatory 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 MarchJune 31,30, 2026, 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 MarchJune 31,30, 2026, 100.0% of the loans in our commercial mortgage loan portfolio are structured with SOFR floors with a weighted average SOFR floor of 2.25%,2.70%, of which 27.5%24.7% had an 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 MarchJune 31,30, 2026, the weighted average spread of our commercial loan portfolio was 3.31%,3.30%, but there is no assurance that these spreads will be maintained as market environments fluctuate.

After a prolonged period of rising interest rates, the Federal Reserve began lowering interest rates on September 18, 2024 by 0.50% and on each of November 7, 2024 and December 18, 2024, respectively, the Federal Reserve lowered interest rates by 0.25%. Additionally, on each of September 17, 2025, October 29, 2025 and December 10, 2025, respectively, the U.S. Federal Reserve lowered the federal funds rate by 0.25% to a current target range of 3.50% - 3.75%. However, to date in 2026, the Federal Reserve has determined to hold interest rates steady. That said, interest rates to remain elevated, and the timing, direction and extent of any future interest rate changes remainremains 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, which could 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 MarchJune 31,30, 2026, 73.5%67.3% of our performing loans have interest rate caps with a weighted-average strike price of 2.9%.2.7%.

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 MarchJune 31,30, 2026, 93.0%93.1% 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 specific credit reserves. Impairment of 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. 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 withthrough non-recourse secured borrowings, the maturities of which are matched to the maturities of the loans,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. Our liquidity may also be utilized from time to time to acquire or repurchase commercial mortgage loans from our CRE CLO or other financing arrangements, which could reduce capital otherwise available for new investment opportunities. 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 twenty funded loan advances with an initial aggregate unpaid principal balance of $475.2 million with an aggregate purchase discount of $8.3 million. All of our other commercial mortgage loans were acquired at par. As of MarchJune 31,30, 2026, our aggregate unaccreted purchase discount was $1.3$0.8 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%.

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 MarchJune 31,30, 2026, we recorded earningsloss per share of $0.02,$0.18, declared a quarterly common dividend of $0.04 per share, and reported $0.02$0.10 per share of Distributable Earnings.Loss. In addition, our book value per share was $2.97.$2.76.

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 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 and is a performance metric we consider when declaring our dividends.

(1) Book value as of MarchJune 31,30, 2026 and December 31, 2025 includes the impact of an estimated CECL allowance of $19,543,903$21,248,582 or $0.37$0.40 per common share and $22,658,121 or $0.43 per common share, respectively.

As of MarchJune 31,30, 2026, we have determined that we are the primary beneficiary of the LMNT 2025-FL3 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, collateralized loan obligations and secured financings.

The following table details overall statistics for our loan portfolio as of MarchJune 31,30, 2026 and December 31, 2025:

(1) Carrying Value includes $1,255,406$815,303 and $1,657,584 in unamortized purchase discounts as of MarchJune 31,30, 2026 and December 31, 2025, respectively.

(2) Weighted average coupon assumes applicable 30-day term Secured Overnight Financing Rate ("SOFR") of 3.67%3.61% and 3.85% as of MarchJune 31,30, 2026 and December 31, 2025, respectively, inclusive of weighted average interest rate floors of 2.25%2.70% and 2.18%, respectively. As of MarchJune 31,30, 2026 and December 31, 2025, 100.0% of the investments by total investment exposure earned a floating rate indexed to 30-day term SOFR.

(4) LTV is 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 MarchJune 31,30, 2026, $655,905,141$642,093,223 of the outstanding senior secured loans were held in VIEs and $452,155,924$349,571,603 of the outstanding senior loans were held outside of VIEs. As of December 31, 2025, $856,064,487 of the outstanding senior secured loans were held in VIEs and $257,983,507 of the outstanding senior secured loans were held outside VIEs.

We did not have any impaired loans, non-accrual loans, or loans in maturity default other than the loans discussed below as of MarchJune 31,30, 2026 or December 31, 2025.

As of MarchJune 31,30, 2026, we had aggregate specific allowance of credit losses of $15.8$17.4 million due to management's: (1) continued identification of one loan collateralized by twoone multifamily propertiesproperty 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) 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$13.7 million as risk rated "5" due to maturity default and; (42) continued identification of fourthree loans collateralized by fourthree multifamily properties in Des Moines, IA ($0.5 million specific allowance; non-accrual cash basis), Tampa, FL ($1.4$3.2 million specific allowance; non-accrual cash basis), Tallahassee, FL ($3.0$3.5 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 $56.9$48.3 million as risk rated "5" due to monetary default and (3) identified 2 loans collateralized by 2 multifamily properties in Houston, TX ($2.0 million specific allowance; non-accrual cash basis) and Dallas, TX ($2.8 million specific allowance; non-accrual cash basis) with an aggregate principal balance of $36.1 million as risk rated "5" due to monetary default.

We recorded $0.5$0.3 million in cash basis income received on non-accrual loans during the period ended MarchJune 31,30, 2026.

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 average risk rating of the portfolio declined during the threesix months ended MarchJune 31,30, 2026. The change in underlying risk rating consisted of loans that paid off with a risk rating of "2" of $15.3 million, a risk rating of "3" of $46.8$192.4 million and a risk rating of "5" of $24.1 million during the threesix months ended MarchJune 31,30, 2026.2026, partially offset by funding of loans with a risk rating of "3" of $137.5 million and a risk rating of "5" of $1.1 million. Additionally, $94.5$17.0 million of loans with a risk rating of "2" transitioned to a risk rating of "3," $62.1 million of loans with a risk rating of "3" transitioned to a risk rating of "2," $69.6$58.5 million of loans with a risk rating of "3" transitioned to a risk rating of "44," and$21.9 $9.8million of loans with a risk rating of "3" transitioned to a risk rating of "5," $41.4 million of loans with a risk rating of "4" transitioned to a risk rating of "3" and $14.2 million of loans with a risk rating of "4" transitioned to a risk rating of "5". Further, $10.5$32.4 million of loans with a risk rating of "5" were foreclosed and moved to REO.

During the periodsix months ended MarchJune 31,30, 2026, Lument Real Estate Capital, LLC ("LREC"), as special servicer for LCMT Warehouse, LLC and LCMT NPL Warehouse, LLC, an indirect wholly owned subsidiarysubsidiaries of the Company, foreclosed on atwo multifamily bridge loanloans located in Colorado Springs, CO,CO and Arlington, TX, with an aggregate net carrying value of $8.2$25.2 million, net of specific reserves of $2.4$7.5 million, with ownership and deed to the properties being taken by a newly formed subsidiarysubsidiaries of the Company.

During the year ended December 31, 2025, 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 two2 multifamily bridge loans located in Houston, TX and San Antonio, TX with an 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 newly formed subsidiaries of the Company.

The fair value of the REO at the 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%.7.40%. The significant unobservable input used for the market approach is the price per unit from an appraisal or broker opinion of value.

At MarchJune 31,30, 2026 and December 31, 2025, our REO assets were comprised of four and three multifamily properties, respectively, held within various subsidiaries of the Company. A summary of our REO assets is as follows:

At MarchJune 31,30, 2026 and December 31, 2025, our REO properties had a weighted average occupancy rate of approximately 72.3%66.7% and 69.1%, respectively.

We recorded depreciation and amortization expense related to the REO assets of $0.3$0.4 million and $0.7 million for the three months and six months ended MarchJune 31,30, 2026, respectively, recorded as "net income (expense) from real estate owned operations" in the consolidated statement of operations. Additionally, we recorded operating income of $1.6$1.7 million and $3.4 million and operating expense of $1.4$1.6 million and $3.0 million for the three months and six months ended MarchJune 31,30, 2026, respectively, 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 MarchJune 31,30, 2026:

(3)LTV is as of the date the loan was originated by aan 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 the origination date.

(5)Committed Principal and Current Principal Amount for Real Estate Owned represent the balances at the time of foreclosure.

(2) Represents the principal balance of the collateral assets.assets and cash held by Northeast Bank related to the financing of a loan that paid off on June 30, 2026.

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 was 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 had an initial weighted average spread of approximately 314 basis points over 30-day term SOFR, excluding fees and transaction costs. The Senior Debt matured on the payment date in July 2032, unless it was repaid or redeemed sooner in accordance with its terms. The financing had an initial two-year reinvestment period that 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 was reduced as loans were repaid. On February 20, 2026, the Company redeemed the LMF 2023-1 Financing in full and expensed the remaining $1.2 million of deferred financing costs intoas a loss on extinguishment of debt on the consolidated statements of operations.

On December 10, 2025, the Company completed the LMNT 2025-FL3 CLO, issuing eight tranches of CLO notes through a newly formed wholly-owned subsidiary 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 and retained by us. In addition, a $43.1 million income note was retained by us. The financing has an initial two-and-a-half year reinvestment period that allows 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. Initially, the proceeds of the issuance of the securities included $5.8 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 collateral interests with a face value of $663.8 million, representing effective leverage of 88%. The investment grade notes have 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 will mature on the payment date in July 2043, unless sooner repaid or redeemed in accordance with their terms.

The following table presents certain loan and borrowing characteristics of LMNT 2025-FL3 CLO as of MarchJune 31,30, 2026:

(1) The carrying value of the collateral is net of allowance for credit loss of $19,543,903$4,315,326 as of MarchJune 31,30, 2026. The carrying value for LMNT 2025-FL3 CLO is net of debt issuance costs of $4,680,172$4,296,482 for MarchJune 31,30, 2026.

(2) Weighted average coupon for loan investments assumes applicable 30-day term SOFR of 3.67%3.61% as of MarchJune 31,30, 2026, inclusive of weighted average interest rate floors of 2.66%3.22% and spreads of 3.21%.3.26%. Weighted average coupon for the financings assumes applicable 30-day term SOFR of 3.67%3.64% as of MarchJune 31,30, 2026 and spreads of 1.91% as of MarchJune 31,30, 2026.

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 as described in more detail in the Repurchase Agreement. 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. On May 14, 2026, the Company and JPMorgan Chase Bank, N.A. entered into an amendment to the Guarantee Agreement which waived the maximum total net leverage ratio covenant for the period ended March 31, 2026, and amended the maximum total net leverage ratio for the remainder of the 2026 fiscal year. On August 12, 2026, the Company and JPMorgan Chase Bank, N.A. entered into a second amendment to the Guarantee Agreement which amended the minimum interest coverage ratio for the periods ending June 30, 2026, September 30, 2026, December 31, 2026 and March 31, 2027. As of June 30, 2026 and December 31, 2025, we were in compliance with these covenants.