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

Our results of operations are materially affected by conditions in the mortgage market, the residential and commercial real estate markets, the financial markets and the economy generally. Difficult market conditions, as well as inflation, energy costs, geopolitical issues, health epidemics and outbreaks of contagious diseases, unemployment and the availability and cost of credit, can contribute to increased volatility and diminished expectations for the economy and markets. The U.S. mortgage market has been severely affected by changesexperienced, in the lendingpast, landscapea variety of difficulties and haschallenging experiencedeconomic conditions, including defaults, credit losses and significant liquidity concerns,concerns. Certain commercial banks, investment banks, insurance companies, and theremortgage-related isinvestment novehicles assurance(including thatpublicly traded mortgage REITs) have incurred extensive losses from exposure to mortgage markets as a result of these conditionsdifficulties haveand fully stabilized or that existing conditions will not worsen.conditions. Disruptions in mortgage markets negatively impact new demand for real estate. Further, disruptions in the broader financial markets, including the occurrence of unforeseen or catastrophic events such as the effects of widespread health emergencies, geopolitical tensions or terrorist attacks, could adversely affect our business and operations. Any such disruption could adversely impact our ability to raise capital, cause increases in borrower defaults and decreases in the value of our assets, cause continued interest rate volatility and movements that could make obtaining financing or refinancing our debt obligations more challenging or more expensive, and could lead to operational difficulties that could impair our ability to manage our business. A deterioration of the LMM or LMM ABS markets or the broader financial markets may cause us to experience losses related to our assets and to sell assets at a loss. Our profitability may be materially adversely affected if we are unable to obtain cost effective financing. A continuation or increase in the volatilityVolatility and deterioration in the LMM and LMM ABS markets as well as the broader financial markets may adversely affect the performance and fair market values of our LMM loan and LMM ABS assets and may adversely affect our results of operations and credit availability, which may reduce earnings and, in turn, cash available for distribution to our stockholders.

As of December 31, 2024,2025, the weighted average loan-to-value (“LTV”) on the originated portfolio was 68.3%.76.0%. The weighted average LTV ofon our acquired loans was 80.4%97.4% as of December 31, 2024.2025. LTV is calculated by dividing the current carrying amountUPB by the most recent collateral value received. The most recent value for performing loans is often the third-party as-is valuation utilized during the original underwriting process. If such LMM loans with higher LTV ratios become delinquent, we may experience greater credit losses compared to lower-leveraged properties. Additional risks inherent in the acquisition of delinquent LMM loans include undisclosed claims, undisclosed tax liens that may have priority, higher legal costs and greater difficulties in determining the value of the underlying property.

We finance the acquisition of a significant portion of our commercial and residential mortgage loans, MBS and other assets with our repurchase agreements, credit facilities, and other financing agreements. Disruptions and uncertainty in the financial and banking sectors, including due to regional bank failures or decreased consumer confidence in the banking system, may hinder our ability to access capital on reasonable terms or at all. The U.S. and global financial and banking sectors have at times experienced periods of increased turmoil and volatility and may experience similar periods of disruption in the future due to factors beyond our control. Such periods of increased turmoil and volatility may adversely impact liquidity in the financial markets and make financings less attractive or, in some cases, unavailable. If our financing counterparties become capital constrained, tighten their lending standards or become insolvent, they may be unable or unwilling to fulfill their commitments to us. Although our financing counterparties are primarily large national banks, a material disruption to the banking system and financial markets could result in liquidity issues across the sector, which could adversely impact our access to capital and our cost of borrowing and adversely affect us, our business or our results of operations.

We are exposed to fluctuations in foreign currency exchange rates, particularly with respect to the Euro (“EUR”) and the Pound Sterling (“GBP”). Any significant change in the value of the currencies of the countries in which we do business could have a material adverse effect on our business, financial condition and results of operations. For example, geopolitical tensions and changes in monetary policies have caused increased volatility in global currency exchange rates thatand havefuture resultedadverse consequences arising from such events may include continued volatility in theexchange strengthening of the U.S. dollar against the foreign currencies in which we conduct business.rates. We currently hold, and may acquire in the future, investments that are denominated in GBP and EURs (including loans secured by assets located in the United Kingdom or Europe), as well as equity interests in real estate properties located in Europe. Our assets and liabilities denominated in GBP may be subject to increased risks related to these currency rate fluctuations and our net assets in U.S. dollar terms may decline. Currency volatility may mean that our assets and liabilities are adversely affected by market movements and may make it more difficult, or more expensive, for us to execute appropriate currency hedging policies.

Current or futureFuture pandemics and epidemics may adversely affect our borrowers, the real estate industry and global markets, and our business and operations, financial condition, results of operations, liquidity and capital resources.

Current or futureFuture outbreaks of highly infectious diseases could materially and adversely impact the value of our assets, our business, financial condition and results of operations and cash flows, and both our and Waterfall’s ability to operate successfully. Such outbreaks and the actual and potential restrictions intended to prevent and mitigate such outbreaks could impact our business in the following ways:

We are an approved Freddie Mac seller/servicer. As an approved seller/servicer, we are required to conduct certain aspects of our operations in accordance with applicable policies and guidelines published by Freddie Mac and we are required to pledge a certain amount of cash to Freddie Mac to collateralize potential obligations to it. Freddie Mac performed an audit during 20242025 and as a result of that audit, ReadyCap Commercial and RedReady StoneCapital Affordable received an overall assessment of Satisfactory. Failure to maintain our status as an approved seller/servicer would mean we would not be able to sell mortgage loans to Freddie Mac, could result in us being required to re-purchase loans previously sold to Freddie Mac, or could otherwise restrict our business and investment options and could harm our business and expose us to losses or other claims. Freddie Mac may, in the future, require us to hold additional capital or pledge additional cash or assets in order to maintain approved seller/servicer status, which, if required, would adversely impact our financial results. Loans sold to Freddie Mac that may be required to be re-purchased as of December 31, 20242025 included 6149 loans with a combined unpaid principal balance of $203.2$159.4 million.

We are subject to the unique risks related to integrating a constructingconstruction lending platform into our existing operations and the origination and ownership of construction loans.

Construction loans are subject to additional risks as compared to loans secured by existing structures or land. Of the loans we held as of December 31, 2024, 5.3% were more than 60 days delinquent and 17.9% of those loans were acquired as a result of the Mosaic Mergers and the Broadmark Merger. Construction budgets may be unrealistic or unforeseen variables may arise, prolonging the development and increasing the costs of the construction project, which may delay the borrower’s ability to sell or rent the finished property, which would be the source of funds for repayment of the loan. While we expect to have reasonable procedures in place to manage construction funding loans, there can be no certainty that we will not suffer losses on construction loans. In addition, if a builder fails to complete a project, we may be required to complete the project. Any such default could result in a substantial increase in costs in excess of the original budget and delays in completion of the project. As described elsewhere in this Form 10-K, certain of our construction loans pay PIK interest which is computed at the contractual rate specified in each loan agreement and added to the principal balance of the loan, rather than these loans paying cash interest payments. This may impact our liquidity and our ability to comply with the terms of our existing financing facilities and make us more reliant upon new financing facilities which may not be available on attractive terms.

AlthoughNew we believe that we are currently one of only a handful of active market participantsentrants in the secondary LMM loan market, new entrants in this market could adversely impact our ability to acquire and originate LMM loans at attractive prices. In acquiring and originating our target assets, we may compete with numerous regional and community banks, specialty finance companies, savings and loan associations, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, other lenders and other entities, and we expect that others may be organized in the future. The effect of the existence of additional REITs and other institutions may be increased competition for the available supply of LMM assets suitable for purchase, which may cause the price for such assets to rise, which may limit our ability to generate desired returns. Additionally, origination of LMM loans by our competitors may increase the availability of LMM loans which may result in a reduction of interest rates on LMM loans. Some competitors may have a lower cost of funds and access to funding sources that may not be available to us. Many of our competitors are not subject to the operating constraints associated with REIT tax compliance or maintenance of an exemption from the 1940 Act. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of LMM loans and ABS assets and establish more relationships than us.

We may acquire ABS securities, where the underlying pool of assets consists primarily of LMM loans. The structure of an ABS, and the terms of the investors’ interest in the underlying collateral, can vary widely depending on the type of collateral, the desires of investors and the use of credit enhancements. Individual transactions can differ markedly in both structure and execution. Important determinants of the risk associated with issuing or holding ABS include: (i) the relative seniority or subordination of the class of ABS held by an investor, (ii) the relative allocation of principal, and interest payments in the priorities by which such payments are made under the governing documents, (iii) the effect of credit losses on both the issuing vehicle and investors’ returns, (iv) whether the underlying collateral represents a fixed set of specific assets or accounts, (v) whether the underlying collateral assets are revolving or closed-end, (vi) the terms (including maturity of the ABS) under which any remaining balance in the accounts may revert to the issuing vehicle and (vii) the extent to which the entity that sold the underlying collateral to the issuing vehicle is obligated to provide support to the issuing vehicle or to investors. With respect to some types of ABS, the foregoing risks are more closely correlated with similar risks on corporate bonds of similar terms and maturities than with the performance of a pool of similar assets. In addition, certain ABS (particularly subordinated ABS) provide that the non-payment of interest thereon in cash will not constitute an event of default in certain circumstances, and the holders of such ABS will not have available to them any associated default remedies. Interest not paid in cash will generally be capitalized and added to the outstanding principal balance of the related security. Deferral of interest through such capitalization will reduce the yield on such ABS.

On August 1, 2023, Fitch downgraded the U.S. government’s sovereign credit rating to AA+, down one notch from its highest rating of AAA, citing the country’s growing debt obligations, deterioration in governance and political polarization. On November 10, 2023, Moody’s lowered the U.S. government’s credit rating outlook from “stable” to “negative”. Concerns related to political turmoil, federal borrowing and the federal budget deficit have increased the possibility of futureadditional credit rating downgrades and economic slowdowns in the U.S. Although U.S. lawmakers passed legislation to raise the federal debt ceiling on multiple occasions, ratings agencies have lowered or threatened to lower the long-term sovereign credit rating on the U.S. The impact of this or any further downgrades byto Fitchthe andU.S. Moody’s,government’s andsovereign anycredit future downgrades by Fitch, Moody’srating or otherits ratingsperceived agencies,creditworthiness could affect the terms or stability of securities issued or guaranteed by the federal government and the valuation or liquidity of our portfolio, and could result in our counterparties requiring additional collateral for our borrowings. Further, increased instability in political and financial market conditions could result in higher interest rates and a reduction in the availability of credit, increasing our borrowing costs. If we cannot acquire, make or sell government-guaranteed or other loans, we may generate less interest income and fewer origination fees, our ability to generate gains on sales of loans may decrease and our loan acquisitions, originations and results of operations may be adversely affected.

We bear the risk of being unable to dispose of our assets at advantageous times or in a timely manner because LMM loans and ABS assets generally experience periods of illiquidity, including the recent period of delinquencies and defaults with respect to residential mortgage loans.illiquidity. We believe that we are currently one of only a handful of active market participants in the secondary LMM loan market and the lack of liquidity may result from the absence of a willing buyer or an established market for these assets, as well as legal or contractual restrictions on resale or the unavailability of financing for these assets. As a result, our ability to vary our portfolio in response to changes in economic and other conditions may be relatively limited, which may cause us to incur losses.

We intend to conduct our operations so that we do not come within the definition of an investment company under Section 3(a)(1)(C) of the 1940 Act because fewer than 40% of our total assets on an unconsolidated basis will consist of “investment securities.” The securities issued to us by any wholly-owned or majority-owned subsidiary that we currently own or may form in the future that is excluded from the definition of “investment company” by Section 3(c)(1) or 3(c)(7) of the 1940 Act, together with any other investment securities we may own, may not have a value in excess of 40% of the value of our total assets on an unconsolidated basis. We will monitor our holdings to ensure continuing and ongoing compliance with this test.test (or such other statutory exception that may be applicable to our business, e.g., Section 3(c)(6) of the 1940 Act). However, qualification for exclusion from registration under the 1940 Act will limit our ability to make certain investments. In addition, we believe that we will not be considered an investment company under Section 3(a)(1)(A) of the 1940 Act because we will not engage primarily or hold ourselves out as being engaged primarily in the business of investing, reinvesting or trading in securities. Rather, we will be primarily engaged in the non-investment company businesses of our subsidiaries, and thus the type of businesses in which we may engage through our subsidiaries is limited.

In connection with the Section 3(a)(1)(c) analysis, the determination of whether an entity is a majority-owned subsidiary of our Company is made by us. The 1940 Act defines a majority-owned subsidiary of a person as a company 50% or more of the outstanding voting securities of which are owned by such person, or by another company which is a majority-owned subsidiary of such person. The 1940 Act further defines voting securities as any security presently entitling the owner or holder thereof to vote for the election of directors of a company. We will treat companies in which we own at least a majority of the outstanding voting securities as majority-owned subsidiaries for purposes of the 40% test. We willmay also treat securitization trusts as majority-owned subsidiaries for purposes of this analysis even where the securities issued by such trusts do not meet the definition of voting securities under the 1940 Act only in cases where this conclusion is supported by an opinion of counsel that the trust certificates or other interests issued by such securitization trusts are the functional equivalent of voting securities and that,we inhold anya event,majority of such securitization trusts should be considered to be majority-owned subsidiaries for purposes of this analysis.interests. We have not requested the SEC, or its staff, to concur or approve our treatment of any securitization trust or other company as a majority-owned subsidiary and neither the SEC nor its staff has done so. If the SEC, or its staff, were to disagree with our treatment of one of more companies as majority-owned subsidiaries, we would need to adjust our strategy and our assets in order to continue to pass the 40% test. Any such adjustment in our strategy could have a material adverse effect on us.

We believe that certain of our subsidiaries qualify to be excluded from the definition of investment company under the 1940 Act pursuant to Section 3(c)(5)(C) of the 1940 Act, which is available for entities “primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.” This exception generally requires that at least 55% of such subsidiaries’ assets must be comprised of qualifying assets and at least 80% of their total assets must be comprised of qualifying assets and real estate-related assets under the 1940 Act. We will treat as qualifying assets for this purpose LMM loans and other mortgages, in each case meeting certain other qualifications based upon SEC staff guidance and no-action letters. Although SEC staff no-action letters have not specifically addressed the categorization of these types of assets, weWe will also treat as qualifying assets for this purpose bridge loans wholly-secured by first priority liens on real estate that provide interim financing to borrowers seeking short-term capital (with terms of generally up to three years), MBS representing ownership of an entire pool of mortgage loans, and real estate-owned properties that may be acquired in connection with mortgage loan foreclosures. We expect each of our subsidiaries relying on Section 3(c)(5)(C) may invest an additional 25% of its assets in either qualifying assets or in other types of mortgages, interests in MBS or other securitizations, securities of REITs, and other real estate-related assets. We expect each of our subsidiaries relying on Section 3(c)(5)(C) to rely on guidance published by the SEC, or its staff, or if such guidance has not been published, on our own analyses to determine which assets are qualifying real estate assets and real estate-related assets. To the extent that the SEC, or its staff, publishes new or different guidance with respect to these matters, we may be required to adjust our strategy accordingly. Although we intend to monitor our portfolio periodically and prior to each investment acquisition, there can be no assurance that we will be able to maintain an exclusion for these subsidiaries. In addition, we may be limited in our ability to make certain investments and these limitations could result in the subsidiary holding assets we might wish to sell or selling assets we might wish to hold.

In 2011, the SEC solicited public comment on a wide range of issues relating to Section 3(c)(5)(C) of the 1940 Act, including the nature of the assets that qualify for purposes of the exclusion and whether mortgage REITs should be regulated in a manner similar to registered investment companies. There can be no assurance that the laws and regulations governing the 1940 Act status of REITs, including the SEC, or its staff, providing more specific or different guidance regarding this exclusion, will not change in a manner that adversely affects our operations. If our Company or our subsidiaries fail to maintain an exception or exemption from the 1940 Act, we could, among other things, be required either to (i) change the manner in which we conduct our operations to avoid being required to register as an investment company, (ii) effect sales of our assets in a manner that, or at a time when, we would not otherwise choose to do so, or (iii) register as an investment company, any of which would negatively affect the value of our shares of common stock, the sustainability of our business model, and our ability to make distributions which would have an adverse effect on our business and the value of our shares of common stock.

We and certain of our subsidiaries may in addition to, or alternatively rely on the exclusion from the definition of investment company provided by Section 3(c)(6) to the extent that they hold mortgage assets through majority-owned subsidiaries that rely on Section 3(c)(5)(C). Little interpretive guidance has been issued by the SEC, or its staff, with respect to Section 3(c)(6) and any guidance published by the SEC, or its staff, could require us to adjust our strategy accordingly. Although little interpretive guidance has been issued with respect to Section 3(c)(6), we believe that we or certain of our subsidiaries may rely on Section 3(c)(6) if, among other things, 55% of the assets of such subsidiariesentity consist of, and at least 55% of the income of such subsidiaries are derived from, qualifying real estate investment assets owned by wholly-owned or majority-owned subsidiaries of such subsidiaries.entity.

Qualification for exemption from registration under the 1940 Act will limit our ability to make certain investments. For example, these restrictions willcan limit the ability of our subsidiaries to invest directly in MBS that represent less than the entire ownership in a pool of mortgage loans, debt and equity tranches of securitizations and MBS, and real estate companies or in assets not related to real estate.

Further, if the SEC determined that we were an unregistered investment company, we wouldcould be subject to monetary penalties and injunctive relief in an action brought by the SEC, we would potentially be unable to enforce contracts with third parties and third parties could seek to obtain rescission of transactions undertaken during the period for which it was established that we were an unregistered investment company. Any of these results would have a material adverse effect on us. Since we are not expected to be subject to the 1940 Act and the rules and regulations promulgated thereunder, we will not be subject to its substantive provisions, including provisions requiring diversification of investments, limiting leverage and restricting investments in illiquid assets.

Cybersecurity risk and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of the security, confidentiality, availability, or integrity of our Company, employee, customer, or third-party confidential information and/or damage to our reputation or business relationships, any of which could negatively impact our financial results.

Our risk of a cyber incident or disruption, particularly through cyber-attacks or cyber intrusions, including by computer hackers,threat actors, nation-state affiliated actors, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.increased, particularly given the increased use of artificial intelligence (“AI”) by threat actors to perpetuate cyberattacks. The result of these incidents may include disrupted operations, misstated or unreliable financial data, lost profit, increased expenses, disrupted market price of our common stock, misappropriation of assets, liability for stolen assets or information, increased cybersecurity protection and insurance cost, regulatory enforcement, litigation and damage to our relationships. These risks require continuous and likely increasing attention and other resources from us to, among other actions, identify and quantify these risks, upgradeenhance and expand our technological capabilities, systems and processes to adequately address them and provide periodic training for our employees to assist them in detecting phishing, malware and other schemes. Such attention diverts time and other resources from other activities and there is no assurance that our efforts will be effective. Potential sources for disruption, damage or failure of our information technology systems include, without limitation, computer viruses,malware, cyber incidents, phishing attempts, brute force attacks, exploiting software vulnerabilities (including “zero-day attacks”), supply chain attacks, human error, natural disasters and defects in design. In addition, we cannot be certain that our existing cyber insurance coverage will continue to be available on acceptable terms or that our insurers will not deny coverage as to all or part of any future claim or loss.

Additionally, the integration of past and future acquisitions, including the contemplated acquisition of UDF IV,acquisitions may require the devotion of significant management attention and resources. Past and potential difficulties we may encounter in the integration process include, but are not limited to, the following:

•the risk of litigationlitigation, legal claims or other judicial or administrative proceedings arising from the divestiture; and

The following discussion should be read in conjunction with our consolidated financial statements and accompanying Notes included in Item 8, “Financial Statements and Supplementary Data,” of this Form 10-K. The discussion and analysis of our financial condition and results of operations is for the year ended December 31, 20242025 compared with the year ended December 31, 2023.2024. Discussions of our financial condition and results of operations for the year ended December 31, 20232024 compared with the year ended December 31, 20222023 that have been omitted under this item can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K/A for the year ended December 31, 2023,2024, which was filed with the Securities and Exchange Commission on FebruarySeptember 28,30, 2024.2025.

We are a multi-strategy real estate finance company that originates, acquires, finances, and services LMM loans, SBA loans, construction loans, USDA loans and, to a lesser extent, MBS collateralized primarily by LMM loans, or other real estate-related investments. Our loans generally range in original principal amounts up to $40 million and are used by businesses to purchase real estate used in their operations or by investors seeking to acquire multi-family, office, retail, mixed use or warehouse properties. Our objective is to provide attractive risk-adjusted returns to our stockholders primarily through dividends, as well as through capital appreciation.stockholders. In order to achieve this objective, we continueintend to grow our investment portfolio and believe that the breadth of our full-service real estate finance platform will allow us to adapt to market conditions and deploy capital in our asset classes and segments with the most attractive risk-adjusted returns.

OurWe completed the disposition of our Residential Mortgage Banking segment meetseffective theon criteriaJune to30, be2025. In connection with this sale, we classified asour heldResidential forMortgage saleBanking and presentedsegment as a discontinued operation. For all periods presented, the operating results for these operations have been removed from continuing operations. TheOur MD&A has been adjusted to exclude discontinued operations unless otherwise noted. We report our activities in the following two operating segments:

•LMM Commercial Real Estate. We originate LMM loans across the full life-cycle of an LMM property including construction, bridge, stabilized and agency loan origination channels through our subsidiary, ReadyCap Commercial.Commercial, LLC. These originated loans are generally held-for-investment or placed into securitization structures. As part of this segment, we originate and service multi-family loan products under the Freddie Mac SBL program. These originated loans are held for sale, and subsequently sold to Freddie Mac. We provide construction and permanent financing for the preservation and construction of affordable housing, primarily utilizing tax-exempt bonds through RedReady Stone,Capital Affordable, a subsidiary. In addition, we acquire LMM loans as part of our business strategy. We hold performing LMM loans to term and seek to maximize the value of the non-performing LMM loans acquired by us through borrower-based resolution strategies. We typically acquire non-performing loans at a discount to their unpaid principal balance when we believe that resolution of the loans will provide attractive risk-adjusted returns.

•Small Business Lending. We acquire, originate and service owner-occupied loans guaranteed by the SBA under the SBA Section 7(a) Program through our subsidiary, ReadyCap Lending.Lending, LLC. We hold an SBA license as one of only 2016 non-bank Small Business Lending Companies and have been granted preferred lender status by the SBA. These originated loans are either held-for-investment, placed into securitization structures, or sold. In addition, we acquire, originate and service USDA loans through our subsidiary, MadisonReadyCap One,Commercial, as well as originate and service small business loans through our subsidiary iBusiness Funding LLC.

We are organized and conduct our operations to qualify as a REIT under the Code.Internal Revenue Code of 1986, as amended. To qualify as a REIT, we are required to annually distribute substantially all of our net taxable income, excluding capital gain, to stockholders. To the extent that we do not distribute all of our net capital gain, or distribute at least 90%, but less than 100%, of our REIT taxable income, as adjusted, we will be required to pay U.S. federal corporate income tax on the undistributed income. We are organized in a traditional umbrella partnership REIT (UpREIT) format pursuant to which we serve as the general partner of, and conduct substantially all of our business through, Sutherland Partners, LP (our “operating partnership.partnership”). We also intend to operate our business in a manner that will permit us to be excluded from registration as an investment company under the 1940 Act.

Funding Circle is an online lending platform that originates and services small business loans. The Funding Circle Acquisition integrates Funding Circle’s loan origination servicing platform with the Company’s Lending as a Service ("LaaS") and LenderAI product offerings. Refer to Notes 1 and 5, included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Form 10-K, for more information about the Funding Circle Acquisition and the assets acquired and liabilities assumed as a result of the Funding Circle Acquisition.

•our potential entry into certain hedging arrangements related to the delivery of shares of common stock upon vesting of certain performance-based equity awards and restricted stock awards and the risk that such arrangements may not have the desired impact and may expose us to additional risks, including the failure of the counterparty to perform under the contracts;

Changes in Market Interest Rates. We own and expect to acquire or originate fixed rate and floating rate loans with maturities ranging from two to 30 years. Our loans typically have amortization periods of 15 to 30 years or balloon payments due in two to 10 years. Fixed rate loans bear interest that is fixed for the term of the loan and we typically utilize derivative financial and hedging instruments in an effort to hedge the interest rate risk associated with such fixed rate loans. As of MarchJune 31,30, 2026, all fixed rate loans are match funded in securitization. Floating rate loans generally have an adjustable interest rate equal to the sum of a fixed spread plus an index rate, such as the Secured Overnight Financing Rate (“SOFR”), which typically resets monthly. As of MarchJune 31,30, 2026, approximately 80%81% of the loans in our portfolio were floating rate loans, and 20%19% were fixed rate loans, based on carrying value.

Current market conditions. During the firstsecond quarter, macroeconomic concerns persisted including global market volatility, uncertainty about trade policies, geopolitical tensions, inflationary pressures and interest rates. The U.S.

Federal Reserve did not decreaseheld interest rates insteady during the quarter and there is uncertainty regarding if and when decreases will occur. Although the full impact of these changes remains uncertain and difficult to predict, concerns and uncertainties about the economic outlook may adversely impact our financial condition, results of operations and cash flows.

As a real estate finance company, we believe the key financial measures and indicators for our business are earnings per share, dividends declared per share, distributable earnings, return on equity, and net book value per share. As further described below, distributable earnings isand adistributable measurereturn thaton isequity are measures which are not prepared in accordance with GAAP. We use distributable earnings to evaluate our performance and determine dividends, excluding the effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current loan activity and operations. We use distributable return on equity because we believe it is the most relevant metric for determining ongoing profitability period over period. Refer to “—Non- GAAPNon-GAAP Financial Measures” below for a reconciliation of net income to distributable earnings.earnings and for the calculation of distributable return on equity.

As of MarchJune 31,30, 2026, total assets in our consolidated balance sheet were $6.3 billion, a decrease of $1.5 billion from December 31, 2025, primarily reflecting a decrease in Assets of consolidated VIEs, Loans, held for sale and Loans, net.

Assets of consolidated VIEs decreased $1.0$0.9 billion, primarily due to the collapse of RCMF 2021-FL7, RCMF 2023- FL11 andFL11, RCMF 2023-FL12 and RCMT 2016-3 and paydowns on securitized loans.loans, partially offset by the closing of RCLT 2026-4. Loans, held for sale decreased $0.2$0.3 billion, primarily due to loans sold, partially offset by loans transferred from Loans, net. Loans, net decreased $0.1 billion, primarily due to loan sales andsales, loans transferred from Loans, net to Loans, held for sale, and the closing of RCLT 2026-4, partially offset by the collapse of RCMF 2021-FL7, RCMF 2023-FL112023-FL11, RCMF 2023-FL12 and RCMFRCMT 2023-FL12.2016-3.

As of MarchJune 31,30, 2026, total liabilities in our consolidated balance sheet were $4.9 billion, a decrease of $1.3$1.2 billion from December 31, 2025, primarily reflecting a decrease in SecuritizedSecured debt obligations of consolidated VIEs, netborrowings and Secured borrowings. Securitized debt obligations of consolidated VIEs, netnet, partially offset by an increase in Guaranteed loan financing. Secured borrowings decreased $0.6$0.9 billion due to the collapseclosing of RCMFRCLT 2021-FL7, RCMF 2023-FL112026-4 and RCMF 2023-FL12. Secured borrowings decreased $0.5 billion due to payoffs, partially offset by the collapse of RCMF 2021-FL7, RCMF 2023-FL112023-FL11, RCMF 2023-FL12 and RCMT 2016-3. Securitized debt obligations of consolidated VIEs, net decreased $0.5 billion due to the collapse of RCMF 2023-FL12.2021-FL7, RCMF 2023-FL11, RCMF 2023-FL12 and RCMT 2016-3, partially offset by the closing of RCLT 2026-4. Guaranteed loan financing increased $0.4 billion due to the closing of RCLT 2026-4.

As of MarchJune 31,30, 2026, total stockholders’ equity was $1.4$1.3 billion, a decrease of $0.2$0.3 billion from December 31, 2025, primarily due to net losses.

Q1Provision 2026for versusloan Q1 2025. Interest incomelosses of $58.9$13.7 million represented an increase of $8.5 million, primarily due to an increase in asset specific reserves. Non-interest loss of $19.3 million represented a decrease of $66.1$17.3 million, primarily due to decreasedan increase in the valuation recovery and income from the Portland mixed-use asset, partially offset by an increase in realized losses on financial instruments related to loan balancessales. primarily driven by loan sales and an increased balance of loans on non-accrual status driven by a higher probability that principal and interest will not be collected under the original contractual terms. InterestNon-interest expense of $80.7 million represented a decrease of $39.7 million, driven by decreased loan balances and interest rates. Provision for loan losses of $66.5$32.7 million represented an increase of $184.5 million, due to changes in the forecasted macroeconomic inputs for reserve modeling and an increase in asset specific reserves, partially offset by loans transferred from Loans, net to Loans, held for sale. Non-interest loss of $68.0 million represented a decrease of $46.5 million, primarily due to a decrease in the transfer of Loans, net to Loans, held for sale and the recovery of the valuation allowance from loans sold, partially offset by net realized losses on financial instruments and real estate owned driven by loan sales. Non-interest expense of $40.9 million represented an increase of $13.2$5.2 million, due to an increase in other operating expenses primarily driven by hoteloperating expenses.costs and depreciation related to the Portland mixed-use asset.

Q1Q2 2026 versus Q1Q2 2025. Interest income of $22.8$23.5 million represented a decrease of $7.2$7.0 million, primarily due to decreaseda decrease in average loan balances and a decrease in interest rates. Interest expense of $16.2$17.6 million represented a decrease of $4.0$2.1 million, driven by decreaseda decrease in average loan balances and a decrease in interest rates. Provision for loan losses of $4.4$7.9 million represented aan decreaseincrease of $4.0$4.4 million, due to an increase in asset specific reserves and changes in the forecasted macroeconomic inputs for reserve modeling, partially offset by an increase in specific loan reserves.modeling. Non-interest income of $19.1$10.1 million represented a decrease of $17.4$14.0 million, primarily due to a decrease in netrealized realizedand unrealized gains on financial instruments.instruments, partially offset by servicing income. Non-interest expense of $29.2$28.2 million wasrepresented essentiallyan unchangedincrease fromof the$0.4 priormillion, yeardue period.to increases in loan servicing expense, partially offset by decreases in loan origination expenses.

Unallocated -– Corporate.

Q1Q2 2026 versus Q1Q2 2025. Non-interest income of $0.9$0.8 million represented aan decreaseincrease of $102.8$15.0 millionmillion, primarily due to a lower gain on bargain purchase recognized from the UDF IV Merger in the prior year period,period. Such gain on bargain purchase was primarily driven by a discount in UDF IV’s market valuation due to factors such as the illiquid nature of UDF IV’s shares, and a change in our stock price between the date of the agreement and the closing date of the UDF IV Merger.Merger, when compared to the respective prior year period gain on bargain purchase recognized from the Funding Circle Acquisition. Non-interest expense of $12.6$16.7 million represented aan decreaseincrease of $2.2$1.6 million, primarily due to an increase in employee compensation and benefits, partially offset by decreased transactionmanagement related expenses.fees.

Q1Q2 2026 versus Q1Q2 2025. Consolidated net loss of $200.1$99.7 million for the threesecond monthsquarter ended March 31,of 2026 represented an increase of $282.1$46.0 million from the threesecond monthsquarter ended March 31,of 2025, primarily due to provisionnet for loanrealized losses dueon tofinancial changesinstruments, a decrease in thenet forecastedinterest macroeconomic inputs for reserve modelingincome and an increase in assetother specificoperating reserves,expenses and provision for loan losses, partially offset by a decrease in the provision for loan losses related to loans transferred from Loans, net to Loans, held for sale, a gain on bargain purchase recognized from the UDF IV Merger in the prior year period, primarily driven by a discount in UDF IV’s market valuation due to factors such as the illiquid nature of UDF IV’s shares, and a change in our stock price between the date of the agreement and the closing date of the UDF IV Merger and net realized losses on financial instruments and real estate owned driven by loan sales, partially offset by decrease in the valuation allowance related to the transfer of Loans, net to Loans, held for sale driven by loan sales.allowance. Consolidated distributable lossesloss before realized losses of $49.2$35.1 million for the threesecond monthsquarter ended March 31,of 2026 represented an increase of $53.3$22.4 million from the threesecond monthsquarter ended March 31,of 2025. The increasedecrease in the distributable earnings reconciling items is primarily due to ana increasedecrease in the provisionvaluation forallowance, loanpartially losses,offset a gain on bargain purchase recognized from the UDF IV Merger in the prior year period andby realized losses on sale of investments, partially offset by a decrease in the valuation allowance related to the transfer of Loans, net to Loans, held for sale.investments. Consolidated distributable lossesloss of $159.8$73.6 million for the threesecond monthsquarter ended March 31,of 2026 represented an increase of $148.5$53.8 million from the threesecond monthsquarter ended March 31,of 2025 due to certain charge-offs and losses realized on sales of real estate owned assets and LMM loans.

We believe that our ability to extend our credit and warehouse facilities and our sources of liquiditycapital will provide sufficient liquidity to fund ongoing obligations and address upcoming debt maturities, including the approximately $450.0 million of debt maturing in 2026. We had approximately $200.0$124.0 million of unrestricted cash and approximately $700.0$690.0 million of unencumbered assets as of MarchJune 31,30, 2026. WeWith the successful execution of our liquidity initiatives including portfolio sales and runoff, along with optimizing financing on CRE loans, we expect approximatelyto $450be millionwell in net liquidity from portfolio maturities and pending asset resolutions over the next 12 months, and may also sell additional assets. We expect the combination of these itemspositioned to de-leveraddress theour balanceupcoming sheet,debt which may impact book value depending on the size, timing and pricing of such actions.maturities. We expect to utilize these resources, together with our access to the capital markets, to meet our liquidity needs.

ThreeSix Months Ended MarchJune 31,30, 2026. Cash andCash, cash equivalents and restricted cash as of MarchJune 31,30, 2026, decreased by $8.3$71.8 million to $241.2$177.8 million from December 31, 2025, primarily due to net cash used for financing activities, partially offset by net cash provided by investing and operating activities. The net cash used for financing activities primarily reflected net repayments of secured borrowings and repayments of securitized debt obligations of consolidated VIEs and net repayments of secured borrowings.VIEs. The net cash provided by investing activities primarily reflected proceeds from disposition and principal payments of loans, partially offset by net cash used for loan originations. The net cash provided by operating activities primarily reflected the sale of Loans, held for sale, realized losses on financial instruments and provision for loan losses, partially offset by net losses.

ThreeSix Months Ended MarchJune 31,30, 2025. Cash andCash, cash equivalents and restricted cash as of MarchJune 31,30, 2025, increased by $65.6$39.7 million to $248.4$222.5 million from December 31, 2024, primarily due to net cash provided by investing and operating activities, partially offset by net cash used for financing activities. The net cash provided by investing activities primarily reflected proceeds from disposition and principal payments of loans, partially offset by net cash used for loan originations. The net cash provided by operating activities reflected a valuation allowance related to the transfer of Loans, net to Loans held for sale, the sale of Loans, held for sale,sale and net income, partially offset by a recovery of loan losses related to the transfer of Loans, net to Loans, held for sale and a bargain purchase gain in connection with the UDF IV Merger, which was primarily driven by a discount in UDF IV’s market valuation due to factors such as the illiquid nature of UDF IV’s shares and a change in our stock price between the date of the agreement and the closing date of the merger. The net cash used for financing activities primarily reflected repayments of securitized debt obligations of consolidated VIEs, partially offset by net proceeds from secured borrowings.

As of MarchJune 31,30, 2026, we had a total leverage ratio of 3.0x and recourse leverage ratio of 1.8x.1.7x. Our operating segments have different levels of recourse debt according to the differentiated nature of each segment. Our LMM Commercial Real Estate and Small Business Lending segments have recourse leverage ratios of 0.7x0.6x and 0.2x, respectively. The remaining recourse leverage ratio is from our corporate debt offerings.

The net decrease in the outstanding balances during the firstsecond quarter of 2026 was primarily due to the salespaydowns and paydownssales of warehouse loans,loans partially offset byand the collapsewind-down of RCMFrepurchase 2021-FL7, RCMF 2023-FL11 and RCMF 2023- FL12.facilities.

Paycheck Protection Program Liquidity Facility borrowings. The Company uses the PPPLF from the Federal Reserve to finance PPP loans. The program charges an interest rate of 0.35%. As of MarchJune 31,30, 2026, we had approximately $3.8 million outstanding under this credit facility.facility was fully repaid.

In addition, in connection with the merger among the Company, Broadmark Realty Capital Inc. (“Broadmark”), and Ready Capital Investments, LLC (formerly known as “RCC Merger Sub, LLC,LLC”), a wholly owned subsidiary of the operating partnership (“RCCReady MergerCapital SubInvestments”), in which Broadmark merged with and into RCCReady MergerCapital Sub,Investments, with RCCReady MergerCapital SubInvestments remaining as a wholly owned subsidiary of the operating partnership (the “Broadmark Merger”), RCCReady MergerCapital SubInvestments assumed Broadmark’s obligations on certain senior unsecured notes. The note purchase agreement governing these notes contains financial covenants that require compliance with leverage and coverage ratios and maintenance of minimum tangible net worth, as well as other customary affirmative and negative covenants.

Other than the items referenced above, there have been no material changes to our contractual obligations for the three months ended MarchJune 31,30, 2026. Refer to Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations," in the Company's Form 10-K for further details. As of the date of this Form 10-Q, we had no off-balance sheet arrangements, other than as disclosed.