# EDGAR Filing Document

**Accession Number:** 0001547546
**File Stem:** 0001628280-25-051669
**Filing Date:** 2025-11
**Character Count:** 287226
**Document Hash:** 0bfda96b2db5d24b39cf196db7686933
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001628280-25-051669.hdr.sgml**: 20251112

**ACCESSION NUMBER**: 0001628280-25-051669

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 85

**CONFORMED PERIOD OF REPORT**: 20250930

**FILED AS OF DATE**: 20251112

**DATE AS OF CHANGE**: 20251112

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Lument Finance Trust, Inc.
- **CENTRAL INDEX KEY:** 0001547546
- **STANDARD INDUSTRIAL CLASSIFICATION:** REAL ESTATE INVESTMENT TRUSTS [6798]
- **ORGANIZATION NAME:** 05 Real Estate & Construction
- **EIN:** 454966519
- **STATE OF INCORPORATION:** MD
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-35845
- **FILM NUMBER:** 251474039

**BUSINESS ADDRESS:**
- **STREET 1:** 230 PARK AVENUE
- **STREET 2:** 23RD FLOOR
- **CITY:** NEW YORK
- **STATE:** NY
- **ZIP:** 10169
- **BUSINESS PHONE:** (212) 588-2051

**MAIL ADDRESS:**
- **STREET 1:** 230 PARK AVENUE
- **STREET 2:** 23RD FLOOR
- **CITY:** NEW YORK
- **STATE:** NY
- **ZIP:** 10169

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Hunt Companies Finance Trust, Inc.
- **DATE OF NAME CHANGE:** 20180525

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Five Oaks Investment Corp.
- **DATE OF NAME CHANGE:** 20120417

?xml version='1.0' encoding='ASCII'? oaks-20250930

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-Q**

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

**For the quarterly period ended September 30, 2025** 

**OR**

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

**For the transition period from ________ to ____________** 

**Commission File No. 001-35845**![Logo.jpg](oaks-20250930_g1.jpg)

**LUMENT FINANCE TRUST, INC.**

(Exact name of registrant as specified in its charter)

---

| | |
|:---|:---|
| **Maryland** | **45-4966519** |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |

---

---

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

---

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

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

---

| | | |
|:---|:---|:---|
| **Title of Each Class:** | **Trading Symbol(s)** | **Name of Exchange on Which Registered:** |
| Common Stock, par value $0.01 per share | LFT | New York Stock Exchange |
| 7.875% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share | LFTPrA | New York Stock Exchange |

---

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

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

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

---

| | |
|:---|:---|
| Large accelerated filer ☐ | Accelerated Filer ☐ |
| Non-accelerated Filer ⌧ | Smaller reporting company ☒ |
| | Emerging growth company ☐ |

---

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

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

---

| | |
|:---|:---|
| **Class** | **Outstanding at November 10, 2025** |
| Common stock, $0.01 par value | 52364930 |

---

------

**LUMENT FINANCE TRUST, INC.**

**TABLE OF CONTENTS**

---

| | | |
|:---|:---|:---|
| **<u>PART I - Financial Information</u>** | **<u>PART I - Financial Information</u>** | |
| Item 1. | <u>[Financial Statements](#if5f1d733e3a043e0baefb60a030f9040_10)</u> |  |
|  | <u>[Consolidated Balance Sheets as of September 30, 2025 (unaudited) and December 31, 2024](#if5f1d733e3a043e0baefb60a030f9040_13)</u> | [1](#if5f1d733e3a043e0baefb60a030f9040_13) |
|  | <u>[Consolidated Statements of Operations for the three and nine months ended September 30, 2025 (unaudited) and September 30, 2024 (unaudited)](#if5f1d733e3a043e0baefb60a030f9040_16)</u> | [2](#if5f1d733e3a043e0baefb60a030f9040_16) |
|  | <u>[Consolidated Statements of Changes in Equity for the three and nine months ended September 30, 2025 (unaudited) and September 30, 2024 (unaudited)](#if5f1d733e3a043e0baefb60a030f9040_19)</u> | [3](#if5f1d733e3a043e0baefb60a030f9040_19) |
|  | <u>[Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 (unaudited) and September 30, 2024 (unaudited)](#if5f1d733e3a043e0baefb60a030f9040_22)</u> | [5](#if5f1d733e3a043e0baefb60a030f9040_22) |
|  | <u>[Notes to Unaudited Consolidated Financial Statements](#if5f1d733e3a043e0baefb60a030f9040_25)</u> | [6](#if5f1d733e3a043e0baefb60a030f9040_25) |
| Item 2. | <u>[Management's Discussion and Analysis of Financial Condition and Results of Operations](#if5f1d733e3a043e0baefb60a030f9040_85)</u> | [25](#if5f1d733e3a043e0baefb60a030f9040_85) |
| Item 3. | <u>[Quantitative and Qualitative Disclosures about Market Risks](#if5f1d733e3a043e0baefb60a030f9040_88)</u> | [43](#if5f1d733e3a043e0baefb60a030f9040_88) |
| Item 4. | <u>[Controls and Procedures](#if5f1d733e3a043e0baefb60a030f9040_91)</u> | [44](#if5f1d733e3a043e0baefb60a030f9040_91) |
| **<u>[PART II - Other Information](#if5f1d733e3a043e0baefb60a030f9040_94)</u>** | **<u>[PART II - Other Information](#if5f1d733e3a043e0baefb60a030f9040_94)</u>** | [44](#if5f1d733e3a043e0baefb60a030f9040_94) |
| Item 1. | <u>[Legal Proceedings](#if5f1d733e3a043e0baefb60a030f9040_97)</u> | [44](#if5f1d733e3a043e0baefb60a030f9040_97) |
| Item 1A. | <u>Risk Factors</u> | [44](#if5f1d733e3a043e0baefb60a030f9040_103) |
| Item 2. | <u>[Unregistered Sales of Equity Securities and Use of Proceeds](#if5f1d733e3a043e0baefb60a030f9040_79)</u> | [44](#if5f1d733e3a043e0baefb60a030f9040_103) |
| Item 3. | <u>[Defaults Upon Senior Securities](#if5f1d733e3a043e0baefb60a030f9040_106)</u> | [44](#if5f1d733e3a043e0baefb60a030f9040_106) |
| Item 4. | <u>[Mine Safety Disclosures](#if5f1d733e3a043e0baefb60a030f9040_109)</u> | [44](#if5f1d733e3a043e0baefb60a030f9040_109) |
| Item 5. | <u>[Other Information](#if5f1d733e3a043e0baefb60a030f9040_112)</u> | [44](#if5f1d733e3a043e0baefb60a030f9040_112) |
| Item 6. | <u>[Exhibits](#if5f1d733e3a043e0baefb60a030f9040_115)</u> | [45](#if5f1d733e3a043e0baefb60a030f9040_115) |
| <u>[Signatures](#if5f1d733e3a043e0baefb60a030f9040_118)</u> |  | [46](#if5f1d733e3a043e0baefb60a030f9040_118) |

---

------

**PART I - FINANCIAL INFORMATION**

**Item 1. Financial Statements** 

**LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES**

Consolidated Balance Sheets

---

| | | |
|:---|:---|:---|
| | **September 30, 2025**<sup>(1)</sup> | **December 31, 2024**<sup>(1)</sup> |
| | (unaudited) | |
| **ASSETS** |  |  |
| Cash and cash equivalents | $56022352 | $69173444 |
| Restricted cash | 823644 | 2390654 |
| Commercial mortgage loans held-for-investment, at amortized cost | 835863888 | 1060123298 |
| &nbsp;&nbsp;&nbsp;Less: Allowance for credit losses | (14020408) | (11320220) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commercial mortgage loans held-for-investment, net of allowance for credit losses | 821843480 | 1048803078 |
| Real estate owned, held-for-investment, net | 49258301 |  |
| Real estate owned, held-for-sale | 8871841 |  |
| Mortgage servicing rights, at fair value | 565613 | 649287 |
| Accrued interest receivable | 4413591 | 5945874 |
| Investment related receivable | 10615094 |  |
| Other assets | 3305441 | 1632041 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $955719357 | $1128594378 |
| **LIABILITIES AND EQUITY** |  |  |
| **LIABILITIES** |  |  |
| Collateralized loan obligations and secured financings, net | 669775299 | 828390189 |
| Secured term loan, net | 47656470 | 47470094 |
| Accrued interest payable | 2017943 | 2697963 |
| Dividends payable | 3095889 | 9890066 |
| Fees and expenses payable to Manager | 1451325 | 1574218 |
| Other liabilities<sup>(2)</sup> | 1650130 | 672816 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 725647056 | 890695346 |
| **COMMITMENTS AND CONTINGENCIES (NOTES 10 & 11)** |  |  |
| **EQUITY** |  |  |
| Preferred Stock: par value $0.01 per share; 50,000,000 shares authorized; 7.875% Series A Cumulative Redeemable, $60,000,000 aggregate liquidation preference, 2,400,000 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively | 57254935 | 57254935 |
| Common Stock: par value $0.01 per share; 450,000,000 shares authorized,52,364,930 and 52,309,209 shares issued and outstanding, at September 30, 2025 and December 31, 2024, respectively | 523651 | 523093 |
| Additional paid-in capital | 314837047 | 314700120 |
| Cumulative distributions to stockholders | (217677774) | (204701714) |
| Accumulated earnings | 75034942 | 70023098 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stockholders' equity | 229972801 | 237799532 |
| Noncontrolling interests | $99500 | $99500 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total equity | $230072301 | $237899032 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and equity | $955719357 | $1128594378 |

---

*(1) &nbsp;&nbsp;&nbsp;&nbsp;Our consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs") as the Company was the primary beneficiary of these VIEs. As of September 30, 2025 and December 31, 2024, assets of consolidated VIEs totaled $894,395,215 and $1,058,138,406, respectively and the liabilities of consolidated VIEs totaled $672,585,820 and $831,001,605 respectively. See Note 4 for further discussion.*

*(2) &nbsp;&nbsp;&nbsp;&nbsp;Includes $9,554 and $57,554 of Current Expected Credit Loss ("CECL") allowance related to unfunded commitments on commercial mortgage loans, net as of September 30, 2025 and December 31, 2024, respectively.*

The accompanying notes are an integral part of these unaudited consolidated financial statements.

------

**LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES**

Consolidated Statements of Operations (Unaudited)

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended September 30, 2025** | **Three Months Ended September 30, 2024** | **Nine Months Ended September 30, 2025** | **Nine Months Ended September 30, 2024** |
| **Revenues:** | | | | |
| &nbsp;&nbsp;&nbsp;Interest income: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commercial mortgage loans held-for-investment | $17696281 | $28926111 | $59357526 | $93553383 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents | 592519 | 744724 | 1820049 | 2197768 |
| &nbsp;&nbsp;&nbsp;Interest expense: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Collateralized loan obligations and secured financings | (12213561) | (19238862) | (38496809) | (60929273) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Secured term loan | (1023777) | (947510) | (2933991) | (2821931) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest income | 5051462 | 9484463 | 19746775 | 31999947 |
| **Expenses:** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Management and incentive fees | 1099959 | 1126820 | 3515799 | 5507768 |
| &nbsp;&nbsp;&nbsp;General and administrative expenses | 1144444 | 1160346 | 3075465 | 3425430 |
| &nbsp;&nbsp;&nbsp;Operating expenses reimbursable to Manager | 451778 | 418553 | 1351199 | 1293627 |
| &nbsp;&nbsp;&nbsp;Other operating expenses | 269732 | 80098 | 411491 | 138036 |
| &nbsp;&nbsp;&nbsp;Compensation expense | 111250 | 111250 | 333750 | 333750 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total expenses | 3077163 | 2897067 | 8687704 | 10698611 |
| **Other income and expense:** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Release of (provision for) credit losses, net | 29660 | (317448) | (5762769) | (3494024) |
| &nbsp;&nbsp;&nbsp;Net income (expense) from real estate owned operations | (188945) |  | (327722) |  |
| &nbsp;&nbsp;&nbsp;Change in unrealized loss on mortgage servicing rights | (24700) | (46017) | (83674) | (51664) |
| &nbsp;&nbsp;&nbsp;Servicing income, net | 50423 | 60283 | 128502 | 117056 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other income and expense | (133562) | (303182) | (6045663) | (3428632) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income before provision for income taxes | 1840737 | 6284214 | 5013408 | 17872704 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Benefit from (provision for) income taxes | 2902 | (3489) | (1564) | (13351) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income | 1843639 | 6280725 | 5011844 | 17859353 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends accrued to preferred stockholders | (1185042) | (1185041) | (3555042) | (3555041) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income attributable to common stockholders | $658597 | $5095684 | $1456802 | $14304312 |
| Earnings per share: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Net income attributable to common stockholders (basic and diluted) | $658597 | $5095684 | $1456802 | $14304312 |
| &nbsp;&nbsp;&nbsp;&nbsp;Weighted average number of shares of common stock outstanding | 52352469 | 52283669 | 52331709 | 52266444 |
| &nbsp;&nbsp;&nbsp;&nbsp;Basic and diluted income per share | $0.01 | $0.10 | $0.03 | $0.27 |
| &nbsp;&nbsp;&nbsp;Dividends declared per share of common stock | $0.04 | $0.08 | $0.18 | $0.23 |

---

The accompanying notes are an integral part of these unaudited consolidated financial statements.

------

**LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES**

Consolidated Statement of Changes in Equity

(unaudited)

---

| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Preferred Stock** | **Preferred Stock** | **Common Stock** | **Common Stock** | **Additional<br>Paid-in<br>Capital** | **Cumulative<br>Distributions to<br>Stockholders** | **Accumulated Earnings** | **Total Stockholders' Equity** | **Noncontrolling interests** | **Total<br>Equity** |
| | **Shares** | **Value** | **Shares** | **Par Value** | **Additional<br>Paid-in<br>Capital** | **Cumulative<br>Distributions to<br>Stockholders** | **Accumulated Earnings** | **Total Stockholders' Equity** | **Noncontrolling interests** | **Total<br>Equity** |
| **Balance at December 31, 2024** | **2400000** | $**57254935** | **52309209** | $**523093** | $**314700120** | $**(204701714)** | $**70023098** | $**237799532** | $**99500** | $**237899032** |
| Issuance of common stock |  |  | 15263 | 153 | 42339 |  |  | $42492 |  | $42492 |
| Net loss |  |  |  |  |  |  | (522568) | $(522568) |  | $(522568) |
| Common dividends declared |  |  |  |  |  | (4185958) |  | $(4185958) |  | $(4185958) |
| Preferred dividends declared |  |  |  |  |  | (1184958) |  | (1184958) |  | $(1184958) |
| **Balance at March 31, 2025** | **2400000** | $**57254935** | **52324472** | $**523246** | $**314742459** | $**(210072630)** | $**69500530** | $**231948540** | $**99500** | $**232048040** |
| Issuance of common stock |  |  | 16574 | 166 | 42330 |  |  | $42496 |  | $42496 |
| Net income |  |  |  |  |  |  | 3690773 | $3690773 |  | $3690773 |
| Common dividends declared |  |  |  |  |  | (3140463) |  | $(3140463) |  | $(3140463) |
| Preferred dividends declared |  |  |  |  |  | (1185042) |  | $(1185042) |  | $(1185042) |
| **Balance at June 30, 2025** | **2400000** | $**57254935** | **52341046** | $**523412** | $**314784789** | $**(214398135)** | $**73191303** | $**231356304** | $**99500** | $**231455804** |
| Issuance of common stock, net |  |  | 23884 | 239 | 52258 |  |  | $52497 |  | $52497 |
| Net income |  |  |  |  |  |  | 1843639 | $1843639 |  | $1843639 |
| Common dividends declared |  |  |  |  |  | (2094597) |  | $(2094597) |  | $(2094597) |
| Preferred dividends declared |  |  |  |  |  | (1185042) |  | $(1185042) |  | $(1185042) |
| **Balance at September 30, 2025** | **2400000** | **57254935** | **52364930** | **523651** | **314837047** | **(217677774)** | **75034942** | **229972801** | **99500** | **230072301** |

---

The accompanying notes are an integral part of these unaudited consolidated financial statements.

------

**LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES**

Consolidated Statement of Changes in Equity

(unaudited)

---

| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Preferred Stock** | **Preferred Stock** | **Common Stock** | **Common Stock** | **Additional<br>Paid-in<br>Capital** | **Cumulative<br>Distributions to<br>Stockholders** | **Accumulated<br>Earnings** | **Total Stockholders' Equity** | **Noncontrolling interests** | **Total<br>Equity** |
| | **Shares** | **Value** | **Shares** | **Value** | **Additional<br>Paid-in<br>Capital** | **Cumulative<br>Distributions to<br>Stockholders** | **Accumulated<br>Earnings** | **Total Stockholders' Equity** | **Noncontrolling interests** | **Total<br>Equity** |
| **Balance at December 31, 2023** | **2400000** | $**57254935** | **52248631** | $**522487** | $**314587299** | $**(179045749)** | $**47373908** | $**240692880** | $**99500** | $**240792380** |
| Issuance of common stock |  |  | 8684 | 87 | 19860 |  |  | 19947 |  | **19947** |
| Cost of issuing common stock |  |  |  |  | (14196) |  |  | (14196) |  | **(14196)** |
| Net income |  |  |  |  |  |  | 6980182 | 6980182 |  | **6980182** |
| Common dividends declared |  |  |  |  |  | (3658012) |  | (3658012) |  | **(3658012)** |
| Preferred dividends declared |  |  |  |  |  | (1184999) |  | (1184999) |  | **(1184999)** |
| **Balance at March 31, 2024** | **2400000** | $**57254935** | **52257315** | $**522574** | $**314592963** | $**(183888760)** | $**54354090** | $**242835802** | $**99500** | $**242935302** |
| Issuance of common stock |  |  | 17915 | 179 | 42315 |  |  | 42494 |  | **42494** |
| Cost of issuing common stock |  |  |  |  | (14196) |  |  | (14196) |  | **(14196)** |
| Net income |  |  |  |  |  |  | 4598446 | 4598446 |  | **4598446** |
| Common dividends declared |  |  |  |  |  | (4182019) |  | (4182019) |  | **(4182019)** |
| Preferred dividends declared |  |  |  |  |  | (1185001) |  | (1185001) |  | **(1185001)** |
| **Balance at June 30, 2024** | **2400000** | $**57254935** | **52275230** | $**522753** | $**314621082** | $**(189255780)** | $**58952536** | $**242095526** | $**99500** | $**242195026** |
| Issuance of common stock |  |  | 16877 | 169 | 42327 |  |  | 42496 |  | **42496** |
| Cost of issuing common stock |  |  |  |  | (5616) |  |  | (5616) |  | **(5616)** |
| Net income |  |  |  |  |  |  | 6280725 | 6280725 |  | **6280725** |
| Common dividends declared |  |  |  |  |  | (4183368) |  | (4183368) |  | **(4183368)** |
| Preferred dividends declared |  |  |  |  |  | (1185041) |  | (1185041) |  | **(1185041)** |
| **Balance at September 30, 2024** | **2400000** | $**57254935** | **52292107** | $**522922** | $**314657793** | $**(194624189)** | $**65233261** | $**243044722** | $**99500** | $**243144222** |

---

The accompanying notes are an integral part of these unaudited consolidated financial statements.

------

**LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES**

Consolidated Statements of Cash Flows

(unaudited)

---

| | | |
|:---|:---|:---|
| | **Nine Months Ended<br>September 30, 2025** | **Nine Months Ended<br>September 30, 2024** |
| **Cash flows from operating activities:** | | |
| &nbsp;&nbsp;&nbsp;Net income | $5011844 | $17859353 |
| &nbsp;&nbsp;&nbsp;Adjustments to reconcile net income to net cash provided by operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accretion of commercial mortgage loans held-for-investment discounts | (1537970) | (2656178) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accretion of deferred loan fees | (2120794) | (172598) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of deferred offering costs |  | (34008) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of deferred financing costs | 946596 | 2847760 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provision for credit losses, net | 5810769 | 3456487 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 483562 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unrealized loss on mortgage servicing rights | 83674 | 51664 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-cash compensation expense | 137484 | 104938 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net change in: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued interest receivable | 1532284 | 1765615 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other assets | (1673400) | 463947 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued interest payable | (680020) | (939642) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fees and expenses payable to Manager | (122893) | (100929) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other liabilities | 977314 | (1845591) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by operating activities | 8848450 | 20800818 |
| **Cash flows from investing activities:** |  |  |
| &nbsp;&nbsp;&nbsp;Purchase and funding of commercial mortgage loans held-for-investment | (3605000) | (45423744) |
| &nbsp;&nbsp;&nbsp;Principal payments from commercial mortgage loans held-for-investment | 156526714 | 247009674 |
| &nbsp;&nbsp;&nbsp;Restricted cash assumed from acquisition of real estate owned | 1717750 |  |
| &nbsp;&nbsp;&nbsp;Capital expenditures on real estate owned, held-for-investment | (861706) |  |
| &nbsp;&nbsp;&nbsp;Deferred loan fees | 1801036 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by investing activities | 155578794 | 201585930 |
| **Cash flows from financing activities:** |  |  |
| &nbsp;&nbsp;&nbsp;Payment of collateralized loan obligations and secured financings | (159375110) | (193776773) |
| &nbsp;&nbsp;&nbsp;Dividends paid on common stock | (16218986) | (11497434) |
| &nbsp;&nbsp;&nbsp;Dividends paid on preferred stock | (3551250) | (3551250) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash (used in) financing activities | (179145346) | (208825457) |
| Net (decrease) increase in cash, cash equivalents and restricted cash | (14718102) | 13561291 |
| Cash, cash equivalents and restricted cash, beginning of period | 71564098 | 51517192 |
| Cash, cash equivalents and restricted cash, end of period | $56845996 | $65078483 |
| **Supplemental disclosure of cash flow information** |  |  |
| &nbsp;&nbsp;&nbsp;Cash paid for interest | $41164453 | $61843086 |
| **Non-cash investing and financing activities information** |  |  |
| &nbsp;&nbsp;&nbsp;Dividends declared but not paid at end of period | $3095889 | $5184660 |
| &nbsp;&nbsp;&nbsp;Transfer of senior loan to real estate owned, held-for-investment | $48880159 | $— |
| &nbsp;&nbsp;&nbsp;Transfer of senior loan to real estate owned, held-for-sale | $8871841 | $— |
| &nbsp;&nbsp;&nbsp;Loan principal payments held by a servicer | $10615094 | $18822381 |
| &nbsp;&nbsp;&nbsp;Accrued capital expenditures on real estate owned | $15256 | $— |

---

The accompanying notes are an integral part of these unaudited consolidated financial statements.

------

**LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

September 30, 2025

**NOTE 1 – ORGANIZATION AND BUSINESS OPERATIONS**

Lument Finance Trust, Inc. (together with its consolidated subsidiaries, the "Company" or "LFT"), is a Maryland corporation that focuses primarily on investing in, originating, financing, and managing a portfolio of commercial real estate ("CRE") debt investments. The Company is externally managed by Lument Investment Management (the "Manager" or "Lument IM"). The Company's common stock is listed on the NYSE under the symbol "LFT."

The Company was incorporated on March 28, 2012 and commenced operations on May 16, 2012. The Company began trading as a publicly traded company on March 22, 2013.

The Company has elected to be taxed as a real estate investment trust ("REIT") and to comply with Sections 856 through 859 of the Internal Revenue Code of 1986, as amended, (the "Code"). Accordingly, the Company generally will not be subject to U.S. federal income tax to the extent of its distributions to stockholders and for so long as certain asset, income and share ownership tests are met.

Our Chief Executive Officer is the Chief Operating Decision Maker ("CODM") who allocates resources and assesses financial performance. The CODM reviews net income (loss) attributable to LFT and assesses the performance of LFT's current portfolio of leveraged commercial real estate loans and real estate owned properties and makes operating decisions accordingly. As a result, LFT conducts its business as a single operating segment. All expense categories on the Consolidated Statements of Operations are significant and there are no other significant expenses that would require disclosure.

**NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

***Basis of Presentation***

The unaudited consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and note disclosures normally included in the financial statements prepared under GAAP have been condensed or omitted. In the opinion of management, all adjustments considered necessary for a fair presentation of the Company's financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These consolidated financial statements should be read in conjunction with the Company's financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the Securities and Exchange Commission ("SEC") on March 19, 2025.

***Principles of Consolidation***

The accompanying consolidated financial statements of the Company include the accounts of the Company and all subsidiaries which it controls (i) through voting or similar rights or (ii) by means other than voting rights if the Company is the primary beneficiary of a variable interest entity ("VIE"). All significant intercompany transactions have been eliminated on consolidation.

***Use of Estimates***

The financial statements have been prepared on the accrual basis of accounting in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires the Company to make a number of significant estimates. These include estimates of fair value of certain assets and liabilities, amount and timing of credit losses, prepayment rates, and other estimates that affect the reported amounts of certain assets and liabilities as of the date of the financial statements and the reported amounts of certain revenues and expenses during the reported period. It is likely that changes in these estimates (e.g. valuation changes due to supply and demand, credit performance, prepayments, interest rates, or other reasons) will occur in the near term. The Company's estimates are inherently subjective in nature and actual results could differ from its estimates and the differences may be material.

***VIEs***

An entity is considered a VIE when any of the following applies: (1) the equity investors (if any) lack one or more essential characteristics of a controlling financial interest; (2) the equity investment at risk is not sufficient to finance that entity's activities without additional subordinated financial support; or (3) the equity investors have voting rights that are not proportionate to their economic interests and the activities of the entity involve or are conducted on behalf of an investor with a disproportionately small voting interest. The Company consolidates VIEs in which it is the primary beneficiary. The primary beneficiary is defined as the entity having both the following characteristics: (1) the power to direct activities that, when taken together, most significantly impact the VIE performance; and (2) the obligation to absorb losses and right to receive returns from the VIE that would be significant to the VIE.

The Company evaluates quarterly its junior retained notes and preferred shares of LFT CRE 2021-FL1, Ltd. and LFT CRE 2021-FL1, LLC (together, the "2021-FL1 CLO") and LMF 2023-1, LLC ("LMF 2023-1 Financing") for potential consolidation. At September 30, 2025, the Company determined it was the primary beneficiary of 2021-FL1 CLO and LMF 2023-1 Financing based on its power to direct the activities that most significantly impact the economic performance of 2021-FL1 CLO and LMF 2023-1 Financing and its obligation to absorb losses derived from ownership of its junior retained notes and preferred shares. Accordingly, the Company consolidated the assets, liabilities, income and expenses of the underlying issuing entities.

***Collateralized Loan Obligations and Secured Financings***

Collateralized loan obligations ("CLO") and secured financings represent third-party liabilities of 2021-FL1 CLO and LMF 2023-1 Financing. The 2021-FL1 CLO and LMF 2023-1 Financing are VIEs and Management has determined that the Company is the primary beneficiary of the 2021-FL1 CLO and LMF 2023-1 Financing. Accordingly, the Company consolidates the assets, liabilities (other than the below investment grade-rated notes and preferred shares of the 2021-FL1 CLO and LMF 2023-1 Financing retained by the Company that are eliminated on consolidation), income and expense of the 2021-FL1 CLO and LMF 2023-1 Financing. The third-party obligations of the 2021-FL1 CLO and LMF 2023-1 Financing do not have any recourse to the Company as the consolidator of the CLO and secured financing issuing entities. The third-party obligations of the 2021-FL1 CLO and LMF 2023-1 Financing are carried at their outstanding unpaid principal balances, net of any deferred financing costs. Any premiums, discounts or deferred financing costs associated with these third-party obligations are amortized to interest expense using the effective interest method over the expected average life of the related obligations, or on a

------

**LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

September 30, 2025

**NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**

straight-line basis when it approximates the effective interest method. The Company's maximum exposure to loss from CLO and secured financings was $234,850,000 at September 30, 2025 and December 31, 2024, respectively.

***Cash and Cash Equivalents and Restricted Cash***

Cash and cash equivalents at the time of purchase include cash held in bank accounts on an overnight basis and other short term deposit accounts with banks having maturities of 90 days or less at time of acquisition. The Company maintains its cash and cash equivalents in highly rated financial institutions, and at times, these balances exceed insurable amounts.

Restricted cash includes cash held within 2021-FL1 CLO and LMF 2023-1 Financing as of September 30, 2025 and December 31, 2024, respectively.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the statement of cash flows:

---

| | | |
|:---|:---|:---|
| | **September 30, 2025** | **December 31, 2024** |
| Cash and cash equivalents | $56022352 | $69173444 |
| Restricted cash 2021-FL1 CLO<sup>(1)</sup> | $666573 | $234229 |
| Restricted cash LMF 2023-1 Financing<sup>(2)</sup> | $157071 | $2156425 |
| **Total cash, cash equivalents and restricted cash** | $**56845996** | $**71564098** |

---

*(1)&nbsp;&nbsp;&nbsp;&nbsp;Includes $426,089 due to LREC as special servicer for our REO properties*

*(2)&nbsp;&nbsp;&nbsp;&nbsp;Includes $157,071 due to LREC as special servicer for our REO properties*

***Deferred Offering Costs***

Direct costs incurred to issue shares classified as equity, such as legal and accounting fees, are deducted from the related proceeds and the net amount recorded as stockholders' equity. Accordingly, payments made by the Company in respect of such costs related to the issuance of shares are recorded as an asset in the accompanying consolidated balance sheets in the line item "Other assets", for subsequent deduction from the related proceeds upon closing of the offering. To the extent that certain costs, in particular legal fees, are known to have been accrued but have not yet been invoiced and paid, they are included in "Other accounts payable and accrued expenses" on the accompanying consolidated balance sheets.

***Fair Value Measurements***

The "Fair Value Measurements and Disclosures" Topic 820 of the FASB, or ASC 820, defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurement under GAAP. Specifically, the guidance defines fair value based on exit price, or the price that would be received upon the sale of an asset or the transfer of a liability in an orderly transaction between market participants at measurement date. ASC 820 specifies a hierarchy of valuation techniques based on the inputs used in measuring fair value.

Valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable market data from independent sources, while unobservable inputs reflect the Company's market assumptions. The three levels are defined as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• **Level 1 Inputs** *–* Quoted prices for identical instruments in active markets.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*•* **Level 2 Inputs** – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• **Level 3 Inputs** – Instruments with primarily unobservable value drivers.

Pursuant to ASC 820, we disclose fair value information about financial instruments, which are not otherwise reported at fair value in our consolidated balance sheet, to the extent it is practicable to estimate fair value for those certain instruments.

The following methods and assumptions are used to estimate the fair value of each class of financial instrument, for which it is practicable to estimate that value:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• **Cash and cash equivalents**: The carrying amount of cash and cash equivalents approximates fair value.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• **Restricted cash**: The carrying amount of restricted cash approximates fair value.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• **Commercial mortgage loans**: The Company considers commercial mortgage loans to be Level 3 assets in the fair value hierarchy as such assets are illiquid, structured investments that are specific to the sponsor, underlying property and its operating performance. The Company determines the fair value of commercial mortgage loans by utilizing a pricing model based on discounted cash flow methodologies using discount rates, which reflect estimates of current market interest rates that would be offered for loans with similar characteristics and credit quality. Additionally, the Company may record fair value adjustments on a non-recurring basis when it has determined it necessary to record a specific impairment reserve or charge-off against a loan and the Company measures such specific reserve or charge-off using the fair value of the loan's collateral. To determine the fair value of loan collateral, the Company employs the income capitalization approach, appraised values, broker opinion of value, sale offers, letters of intention to purchase, or other valuation benchmarks, as applicable, depending upon the nature of such collateral and other relevant market factors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• **Mortgage servicing rights ("MSRs")**: The Company classifies MSR's as Level 3 assets in the fair value hierarchy. The Company determines the fair value of MSRs from a third-party pricing service on a recurring basis. The third-party pricing service uses common market pricing methods that include using discounted cash flow models to calculate present value, estimated net servicing income and observed market pricing for MSR purchase and sale transactions. The model considers contractually specified servicing fees, prepayment assumptions, delinquency rates, late charges, other ancillary revenue, costs to service and other economic factors.

------

**LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

September 30, 2025

**NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• **Collateralized loan obligations and secured financings**: The Company determines the fair value of collateralized loan obligations and secured financings by utilizing a third-party pricing service. In determining the value of a particular investment, pricing service providers may use market spreads, inventory levels, trade and bid history, as well as market insight from clients, trading desks and global research platform.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• **Secured term loan**: The Company determines the fair value of its secured term loan based on a discounted cash flow methodology.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• **Other assets and liabilities:** Subject to fair value measurement, including receivables, payables and accrued liabilities have carrying amounts that approximate fair value due to their short-term nature.

***Commercial Mortgage Loans Held-for-Investment***

Commercial mortgage loans held-for-investment represent floating-rate transitional loans and other commercial mortgage loans purchased or originated by the Company. These loans include loans sold into securitizations that the Company consolidates. Commercial mortgage loans held-for-investment are intended to be held-to-maturity and, accordingly, are carried at their unpaid principal balances, adjusted for net unamortized loan fees and costs (in respect of originated loans), premiums and discounts (in respect of purchased loans) and impairment, if any. Commercial mortgage loans held-for-investment principal repayments received after remittance dates are held by the servicer and reported as "Investment related receivable" in the consolidated balance sheets.

Interest income is recognized as revenue using the effective interest method and is recorded on the accrual basis according to the terms of the underlying loan agreement. Any fees, costs, premiums and discounts associated with these loan investments are deferred and amortized over the term of the loan on a straight-line basis approximating the effective interest method. Income accrual is generally suspended and loans are placed on non-accrual status on the earlier of the date at which payment has become 90 days past due or when full and timely collection of interest and principal is considered not probable. The Company may return a loan to accrual status when repayment of principal and interest is reasonably assured under the terms of the underlying loan agreement.

The Company recognizes and measures the allowance for credit losses under the Current Expected Credit Loss ("CECL") model which amended the previous credit loss model to reflect a reporting entity's current estimate of all expected credit losses, not only based on historical experience and current economic conditions, but also by including reasonable and supportable forecasts incorporating forward-looking information. The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost, and off-balance credit exposures such as unfunded loan commitments. The allowance for credit losses required under ASC 326 is included in "Allowance for credit losses" on our consolidated balance sheets. The allowance for credit losses attributed to unfunded loan commitments is included in "Other liabilities" on the consolidated balance sheets.

The Company estimates the allowance for credit losses for its portfolio on a collective basis, including unfunded loan commitments, for loans that share similar risk characteristics. The calculation is applied at the loan level. The allowance for credit losses estimation methodology used by LFT includes a probability of default and loss given default method utilizing a widely used third-party analytical model with historical loan losses for over 125,000 commercial real estate loans dating back to 1998. Within this data set, we focused our historical loss information on the most relevant subset of available CRE data, which we determined based on loan metrics that are most comparable to our loan portfolio including asset type, spread to interest rate, unpaid principal balance and origination loan-to-value, or LTV. The Company expects to use this proxy data set, or variants of it, unless the Company develops its own sufficient history of realized losses. The Company determined the key variables driving its allowance for credit losses estimate are debt service coverage ratio and LTV ratio. Other notable variables include property type, property location and loan vintage. The Company determines its allowance for credit loss estimate based on the weighting of multiple macroeconomic forecast scenarios driven by macroeconomic variables such as gross domestic product ("GDP"), unemployment rate, federal funds target rate and core personal consumption expenditure ("CPR") among others, during the reasonable and supportable forecast period. The reasonable and supportable forecast period is currently one year, however, the Company regularly evaluates the reasonable and supportable forecast period to determine if a change is needed based on our assessment of the most likely scenario of assumptions and plausible outcomes for the U.S. economy. For the period beyond which the Company is able to make reasonable and supportable forecasts, the Company reverts, on a straight-line basis over four quarters, to the historical loss information derived from CRE data set.

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

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

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.**Low Risk**: meeting or exceeding underwritten expectations

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.**Moderate Risk**: consistent with underwritten expectations or the sponsor may be in the early stages of executing the business plan and the loan structure appropriately mitigates additional risks

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

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

***Real Estate Owned***

To maximize recovery from a defaulted loan, the Company may assume legal title or physical possession of the underlying collateral through foreclosure or the execution of a deed in lieu of foreclosure. Real estate acquired through a foreclosure or by deed in lieu of foreclosure is classified as real estate owned,

------

**LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

September 30, 2025

**NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**

net ("REO") in the consolidated balance sheets. REO assets are initially recognized at estimated fair value in accordance with ASC Topic 805, "*Business Combinations*" and are shown net of accumulated depreciation and impairment charges.

REO assets held for use, except for land, are depreciated using the straight-line method over their estimated useful lives ranging from seven to thirty-nine years. Renovations and/or replacements that improve or extend the life of the REO asset are capitalized and depreciated over their estimated useful lives. The cost of ordinary repairs and maintenance are expensed as incurred. REO assets are classified as held for sale in the period when they meet the criteria under ASC Topic 360, "*Property, Plant and Equipment*." Once a REO asset is classified as held for sale, depreciation is suspended and the asset is reported at the lower of carrying value or fair value less cost to sell.

REO assets are reviewed for impairment each quarter if events or circumstances change indicating that the carrying amount of an asset may not be recoverable. The Company recognizes impairment if the undiscounted estimated cash flows to be generated by an asset is less than the carrying amount of such asset. Measurement of impairment is based on the asset's estimated fair value. The evaluation of anticipated future cash flows is highly subjective and is based in part on assumptions regarding future occupancy, rental rates, capital requirements and anticipated holding periods that could differ materially from actual results.

Real estate is classified as held-for-sale when we commit to a plan of sale, the asset is available for immediate sale, there is an active program to locate a buyer, and it is probable the sale will be completed within one year. Real estate assets that are expected to be disposed of are valued at the lower of the asset's carrying amount or its fair value less costs to sell.

We recognize sales of real estate properties, including the respective gains and losses, upon closing, when control of the asset transfers to the buyer, when it is probable that we will collect substantially all of the agreed upon consideration, and we are not obligated to perform significant activities after the sale.

***Mortgage Servicing Rights, at Fair Value***

Mortgage servicing rights ("MSRs") are associated with residential mortgage loans that the Company historically purchased and subsequently sold or securitized. MSRs are held and managed at Five Oaks Acquisition Corp. ("FOAC"), the Company's taxable REIT subsidiary ("TRS"). As the owner of MSRs, the Company is entitled to receive a portion of the interest payments from the associated residential mortgage loan, and is obligated to service, directly or through a subservicer, the associated loan. MSRs are reported at fair value. Residential mortgage loans for which the Company owns the MSRs are directly serviced by two subservicers retained by the Company. The Company does not directly service any residential mortgage loans.

MSR income is recognized at the contractually agreed upon rate, net of the costs of sub-servicers retained by the Company.

***Secured Term Loan***

The Company and certain of its subsidiaries are party to a $47.75 million credit and guaranty agreement with the lenders referred to therein and Cortland Capital Service LLC, as administrative agent and collateral agent for the lenders (the "Secured Term Loan"). The Secured Term Loan is carried at its unpaid principal balance, net of deferred financing costs. Deferred financing costs associated with this liability are amortized to interest expense on a straight-line basis when it approximates the effective interest method. See Note 6 for additional information related to the Secured Term Loan.

***Common Stock***

At September 30, 2025 and December 31, 2024, the Company was authorized to issue up to 450,000,000 shares of common stock, par value $0.01 per share. The Company had 52,364,930 and 52,309,209 shares of common stock issued and outstanding at September 30, 2025 and December 31, 2024, respectively.

***Stock Repurchase Program***

On December 15, 2015, the Company's Board of Directors (the "Board") authorized a stock repurchase program ("Repurchase Program") to repurchase up to $10 million of the Company's outstanding common stock. Subject to applicable securities laws, repurchase of common stock under the Repurchase Program may be made at times and in amounts as the Company deems appropriate, using available cash resources. Shares of common stock repurchased by the Company under the Repurchase Program, if any, will be canceled and, until reissued by the Company, will be deemed to be authorized but unissued shares of common stock. The Repurchase Program may be suspended or discontinued by the Company at any time and without prior notice.

***Preferred Stock***

At September 30, 2025 and December 31, 2024, the Company was authorized to issue up to 50,000,000 shares of preferred stock, par value $0.01 per share, with such designations, voting and other rights and preferences as may be determined from time to time by the Board. On May 5, 2021, the Company issued 2,400,000 shares of 7.875% Series A Cumulative Redeemable Preferred Stock ("Series A Preferred Stock"). The Company had 2,400,000 shares of preferred stock issued and outstanding at September 30, 2025 and December 31, 2024, respectively. Our preferred stock is classified as permanent equity and carried at its liquidation preference less offering costs. See Note 12 for additional information related to our Series A Preferred Stock.

***Income Taxes***

The Company has elected to be taxed as a REIT under the Code for U.S. federal income tax purposes, commencing with the Company's short taxable period ended December 31, 2012. A REIT is generally taxable as a U.S. C-Corporation; however, so long as the Company qualifies as a REIT it is entitled to a special deduction for dividends paid to stockholders not otherwise available to corporations. Accordingly, the Company generally will not be subject to U.S. federal income tax to the extent its distributions to stockholders equals, or exceeds, its REIT taxable income for the year. In addition, the Company must continue to meet certain REIT qualification requirements with respect to distributions, as well as certain asset, income and share ownership tests, in accordance

------

**LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

September 30, 2025

**NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**

with Sections 856 through 860 of the Code, as summarized below. In addition, the TRS is maintained to perform certain services and earn income for the Company that the Company is not permitted to engage in as a REIT.

To maintain its qualification as a REIT, the Company must meet certain requirements, including but not limited to the following: (i) distribute at least 90% of its REIT taxable income to its stockholders; (ii) invest at least 75% of its assets in REIT qualifying assets, with additional restrictions with respect to asset concentration risk; and (iii) earn at least 95% of its gross income from qualifying sources of income, including at least 75% from qualifying real estate and real estate related sources. Regardless of the REIT election, the Company may also be subject to certain state, local, and franchise taxes. Under certain circumstances, federal income and excise taxes may be due on its undistributed taxable income. If the Company were to fail to meet these requirements, it would be subject to U.S. federal income tax as a U.S. C-Corporation, which could have a material adverse impact on its results of operations and amounts available for distributions to its stockholders.

Certain activities of the Company are conducted through a TRS and therefore are taxed as a standalone U.S. C-Corporation. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The TRS is not subject to a distribution requirement with respect to its REIT owner. The TRS may retain earnings annually, resulting in an increase in the consolidated book equity of the Company without a corresponding distribution requirement by the REIT. If the TRS generates net income, and declares dividends to the Company, such dividends will be included in its taxable income and necessitate a distribution to its stockholders in accordance with the REIT distribution requirements.

The Company assesses its tax positions for all open tax years and determines whether the Company has any material unrecognized liabilities in accordance with ASC 740, Income Taxes. The Company records these liabilities to the extent it deems them more likely than not to be incurred. The Company's accounting policy with respect to interest and penalties is to classify these amounts as other interest expense.

***Earnings per Share***

The Company calculates basic and diluted earnings per share by dividing net income (loss) attributable to common stockholders for the period by the weighted-average shares of the Company's common stock outstanding for that period. Diluted earnings per share considers the effect of dilutive instruments, such as warrants, stock options, and unvested restricted stock, but uses the average share price for the period in determining the number of incremental shares that are to be added to the weighted-average number of shares outstanding. See Note 13 for details of the computation of basic and diluted earnings per share.

***Stock-Based Compensation***

The Company is required to recognize compensation costs related to to stock-based payment transactions in the consolidated financial statements. The Company accounts for share-based compensation using the fair-value based methodology prescribed by ASC 718, *Share-Based Payment* ("ASC 718"). Compensation cost related to restricted common stock issued to the Company's independent directors is measured at its estimated fair value at the grant date and amortized and expensed over the vesting period. See Note 9 for details of stock-based awards issuable under the Company's prior equity incentive plan, which expired on December 18, 2022 and is no longer being used to issue new equity awards.

***Comprehensive Income (Loss) Attributable to Common Stockholders***

For the three and nine months ended September 30, 2025 and 2024, comprehensive (loss) income equaled net (loss) income; therefore, a separate statement of comprehensive income is not included in the accompanying consolidated financial statements.

***Recently Issued and/or Adopted Accounting Standards***

***Income Taxes***

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures." ASU 2023-09 improves the transparency of income tax disclosures related to rate reconciliation and income taxes. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. For entities other than public business entities, the amendments are effective for annual periods beginning after December 15, 2025. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments should be applied prospectively, however retrospective application is permitted. The Company adopted this ASU effective January 1, 2025, with no material impact on our consolidated financial statements.

***Income Statement***

In November 2024, the FASB issued ASU 2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40)." ASU 2024-03 requires a public business entity to provide disaggregated disclosures, in the notes to the financial statements, of certain categories of expenses that are included in expense line items on the face of the income statement. The guidance is effective on either a prospective basis, with the option for retrospective application, for annual periods beginning after December 15, 2026, for interim periods within fiscal years beginning after December 15, 2027, and early adoption is permitted. The Company has not early adopted ASU 2024-03 and does not expect the adoption of ASU 2024-03 to have a material impact on our consolidated financial statements.

**NOTE 3 - COMMERCIAL MORTGAGE LOANS HELD-FOR-INVESTMENT**

------

**LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

September 30, 2025

**NOTE 3 - COMMERCIAL MORTGAGE LOANS HELD-FOR-INVESTMENT (Continued)**

The following tables summarize certain characteristics of the Company's investments in commercial mortgage loans as of September 30, 2025 and December 31, 2024:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | | | | **Weighted Average** | **Weighted Average** | **Weighted Average** |
| **Loan Type** |<br>**Unpaid Principal Balance** |<br>**Carrying Value**<sup>(1)</sup> |<br>**Loan Count** | **Floating Rate Loan %** | **Coupon**<sup>(2)</sup> | **Term**<br> **(Years)**<sup>(3)</sup> |
| **<u>September 30, 2025</u>** | | | | | | |
| &nbsp;&nbsp;&nbsp;Loans held-for-investment |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Senior secured loans<sup>(4)</sup> | $839749478 | $835863888 | 51 | 100.0% | 7.8% | 1.3 |
| &nbsp;&nbsp;&nbsp;&nbsp;Allowance for credit losses | N/A | (14020408) |  |  |  |  |
|  | **839749478** | **821843480** | **51** | 100.0% | 7.8% | 1.3 |

---

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | | | | **Weighted Average** | **Weighted Average** | **Weighted Average** |
|<br>**Loan Type** |<br>**Unpaid Principal Balance** |<br>**Carrying Value**<sup>(1)</sup> |<br>**Loan Count** | **Floating Rate Loan %** | **Coupon**<sup>(2)</sup> | **Term**<br> **(Years)**<sup>(3)</sup> |
| **<u>December 31, 2024</u>** | | | | | | |
| &nbsp;&nbsp;&nbsp;Loans held-for-investment |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Senior secured loans<sup>(4)</sup> | $1065563646 | $1060123298 | 65 | 100.0% | 8.1% | 2.1 |
| &nbsp;&nbsp;&nbsp;Allowance for credit losses | N/A | (11320220) |  |  |  |  |
|  | **1065563646** | **1048803078** | **65** | 100.0% | 8.1% | 2.1 |

---

*(1)&nbsp;&nbsp;&nbsp;&nbsp;Carrying Value includes $1,928,239 and $3,466,214 in unamortized purchase discounts as of September 30, 2025 and December 31, 2024, respectively.*

*(2)&nbsp;&nbsp;&nbsp;&nbsp;Weighted average coupon assumes applicable 30-day term Secured Overnight Financing Rate ("SOFR") of 4.22% and 4.51% as of September 30, 2025 and December 31, 2024, respectively, inclusive of weighted average interest rate floor of 1.36% and 0.63%, respectively. As of September 30, 2025 and December 31, 2024, 100.0% of the investments by total investment exposure earned a floating rate indexed to 30-day term SOFR.* 

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

*(4)&nbsp;&nbsp;&nbsp;&nbsp;As of September 30, 2025, $819,117,267 of the outstanding senior secured loans were held in VIEs and $2,726,213 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.*

***Activity:*** For the nine months ended September 30, 2025, the loan portfolio activity was as follows:

---

| | |
|:---|:---|
| | **Commercial Mortgage Loans Held-for-Investment** |
| **Balance at December 31, 2024** | $**1048803078** |
| Purchases, advances and originations | 3605000 |
| Principal payments | (167141808) |
| Transfer to Real Estate Owned | (62580330) |
| Charge-offs | 3110581 |
| Origination and other loan fees | (1801036) |
| Accretion of purchase discount | 1537970 |
| Accretion of deferred loan fees | 2120794 |
| Provision for credit losses | (5810769) |
| **Balance at September 30, 2025** | $**821843480** |

---

***Loan Risk Ratings:*** As further described in Note 2, the Company evaluates the commercial mortgage loan portfolio on a quarterly basis and assigns a risk rating based on a variety of factors. The following table presents the principal balance and net book value of the loan portfolio based on the Company's internal risk ratings as of September 30, 2025 and December 31, 2024:

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | **September 30, 2025** | **September 30, 2025** | **September 30, 2025** | **September 30, 2025** | **September 30, 2025** | **September 30, 2025** | **September 30, 2025** |
| | | | **Amortized Cost by Year of Origination** | **Amortized Cost by Year of Origination** | **Amortized Cost by Year of Origination** | **Amortized Cost by Year of Origination** | **Amortized Cost by Year of Origination** |
|<br>**Risk Rating** |<br>**Number of Loans** |<br>**Outstanding Principal** | **2025** | **2024** | **2023** | **2022** | **2021** |
| 1 |  | $— | $— | $— | $— | $— | $— |

---

------

**LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

September 30, 2025

**NOTE 3 - COMMERCIAL MORTGAGE LOANS HELD-FOR-INVESTMENT (Continued)**

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| 2 | 6 | 68592180 | 3589519 |  |  | 64377719 |  |
| 3 | 18 | 310374570 |  | 31128363 | 17986869 | 156538080 | 102005156 |
| 4 | 20 | 374220488 |  |  |  | 127592859 | 241752690 |
| 5 | 7 | 86562240 |  |  |  | 52900197 | 23972028 |
|  | **51** | $**839749478** | $**3589519** | $**31128363** | $**17986869** | $**401408855** | $**367729874** |

---

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
| | | | **Amortized Cost by Year of Origination** | **Amortized Cost by Year of Origination** | **Amortized Cost by Year of Origination** | **Amortized Cost by Year of Origination** |
|<br>**Risk Rating** |<br>**Number of Loans** |<br>**Outstanding Principal** | **2024** | **2023** | **2022** | **2021** |
| 1 |  | $— | $— | $— | $— | $— |
| 2 | 3 | 57840000 | 27048495 |  | 30416761 |  |
| 3 | 40 | 616637103 | 31019735 | 17973555 | 266895843 | 294277177 |
| 4 | 16 | 292826616 |  |  | 140183307 | 147641857 |
| 5 | 6 | 98259927 |  |  | 74158849 | 19187499 |
|  | **65** | $**1065563646** | $**58068230** | $**17973555** | $**511654760** | $**461106533** |

---

As of September 30, 2025, the average risk rating of the commercial mortgage loan portfolio was 3.6 (Moderate Risk), weighted by investment carrying value, with 45.7% of commercial loans held-for-investment rated 3 (Moderate Risk) or better by the Company's Manager.

As of December 31, 2024, the average risk rating of the commercial mortgage loan portfolio was 3.5 (Moderate Risk), weighted by investment carrying value, with 63.7% of commercial loans held-for-investment rated 3 (Moderate Risk) or better by the Company's Manager.

The average risk rating of the portfolio increased during the nine months ended September 30, 2025. The change in underlying risk rating consisted of loans that paid off with a risk rating of "2" of $27.1 million, a risk rating of "3" of $115.0 million, a risk rating of "4" of $22.7 million and a risk rating of "5" of $2.0 million during the nine months ended September 30, 2025, partially offset by funding of loans with a risk rating of "2" of $3.6 million. Additionally, $34.3 million of loans with a risk rating of "3" transitioned to a risk rating of "2," $203.8 million of loans with a risk rating of "3" transitioned to a risk rating of "4", $13.7 million of loans with a risk rating of "3" transitioned to a risk rating of "5," $96.2 million of loans with a risk rating of "4" transitioned to a risk rating of "3", $47.4 million of loans with a risk rating of "4" transitioned to a risk rating of "5" and $55.3 million of loans with a risk rating of "5" transitioned to a risk rating of "4". Further, $35.7 million of loans with a risk rating of "3", $11.5 million of loans with a risk rating of "4" and $15.4 million of loans with a risk rating of "5" were foreclosed and moved to REO.

***Concentration of Credit Risk:*** The following tables present the geographic and property types of collateral underlying the Company's commercial mortgage loans as a percentage of the loans' carrying value as of September 30, 2025 and December 31, 2024:

***Loans Held-for-Investment***

---

| | | |
|:---|:---|:---|
| | **September 30, 2025** | **December 31, 2024** |
| **<u>Geography</u>** | | |
| South | 39.9% | 36.6% |
| Southwest | 29.6 | 32.9 |
| Mid-Atlantic | 20.5 | 16.1 |
| Midwest | 6.1 | 7.7 |
| West | 3.9 | 6.7 |
| Total | 100.0% | 100.0% |

---

---

| | | |
|:---|:---|:---|
| | **September 30, 2025** | **December 31, 2024** |
| **<u>Collateral Property Type</u>** | | |
| Multifamily | 89.6% | 92.3% |
| Seniors Housing and Healthcare | 9.7 | 7.1 |
| Self-Storage | 0.7 | 0.6 |
| Total | 100.0% | 100.0% |

---

***Allowance for Credit Losses:***

The following table presents the changes for the three and nine months ended September 30, 2025 and September 30, 2024 in the provision for credit losses on loans held-for-investment:

------

**LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

September 30, 2025

**NOTE 3 - COMMERCIAL MORTGAGE LOANS HELD-FOR-INVESTMENT (Continued)**

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three months ended** | **Three months ended** | **Nine months ended** | **Nine months ended** |
| | **September 30, 2025** | **September 30, 2024** | **September 30, 2025** | **September 30, 2024** |
| Allowance for credit losses at beginning of period | $14252268 | $9193174 | $11320220 | $6059006 |
| (Release of) Provision for credit losses | (31664) | 322319 | 5810769 | 3456487 |
| Charge offs | (200196) |  | (3110581) |  |
| Allowance for credit losses at end of period | $**14020408** | $**9515493** | $**14020408** | $**9515493** |

---

The following table presents the changes for the three and nine months ended September 30, 2025 and September 30, 2024 in the provision for credit losses on the unfunded commitments of the Company's loans held-for-investment:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three months ended** | **Three months ended** | **Nine months ended** | **Nine months ended** |
| | **September 30, 2025** | **September 30, 2024** | **September 30, 2025** | **September 30, 2024** |
| Allowance for credit losses at beginning of period | $7550 | $86055 | $57554 | $43647 |
| (Release of) provision for credit losses | 2004 | (4871) | (48000) | 37537 |
| Allowance for credit losses at end of period | $**9554** | $**81184** | $**9554** | $**81184** |

---

The following tables present the allowance for credit losses for loans held-for-investment as of September 30, 2025 and December 31, 2024:

---

| | | | |
|:---|:---|:---|:---|
| | **September 30, 2025** | **September 30, 2025** | **September 30, 2025** |
| | **General Reserve** | **Specific Reserve** | **Total Reserve** |
| Allowance for credit losses: |  |  |  |
| Loans held for investment | $5699313 | $8321095 | $14020408 |
| Unfunded loan commitments | 9554 |  | 9554 |
| Total allowance for credit losses | $5708867 | $8321095 | $14029962 |
| Total unpaid principal balance | $753187238 | $86562240 | $839749478 |

---

---

| | | | |
|:---|:---|:---|:---|
| | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
| | **General Reserve** | **Specific Reserve** | **Total Reserve** |
| Allowance for credit losses: |  |  |  |
| Loans held for investment | $7544969 | $3775251 | $11320220 |
| Unfunded loan commitments | 57554 |  | 57554 |
| Total allowance for credit losses | $7602523 | $3775251 | $11377774 |
| Total unpaid principal balance | $967303719 | $98259927 | $1065563646 |

---

During the three months ended September 30, 2025, the Company recorded a decrease of $0.2 million in the allowance for credit losses, comprised of a decrease to general CECL reserves of $0.9 million and an increase to specific reserves of $0.7 million, bringing the total allowance for credit losses to $14.0 million as of September 30, 2025. For the three months ended September 30, 2025, the Company's estimate of expected credit losses decreased primarily due to charge-off of specific reserves related to one loan foreclosed on in the period, additional specific reserves taken on three loans, transfers of loans in and out of specific evaluation and changes in macroeconomic assumptions employed in determining the Company's model-based general reserve.

We did not have any impaired loans, non-accrual loans, or loans in maturity default other than the loans discussed below as of September 30, 2025 or December 31, 2024.

During the period ended September 30, 2025, management continued to identify a loan, collateralized by a multifamily property in Colorado Springs, CO, with an unpaid principal value of $10.3 million as requiring individual evaluation for a specific allowance for credit losses due to monetary default, and a resulting risk rating of "5"; a specific allowance of $1.3 million for credit losses was required after analysis of the underlying collateral value. This loan has been on non-accrual status since December 31, 2024 as a result of the monetary default, with interest recorded as income on a cash basis. During the three and nine months ended September 30, 2025, the Company recognized $0.1 million and $0.3 million of interest on this loan, respectively.

During the period ended September 30, 2025, management continued to identify a loan, collateralized by a multifamily property in Ypsilanti, MI, with an unpaid principal value of $11.9 million as requiring individual evaluation for a specific allowance for credit losses due to monetary default, and a resulting risk rating of "5"; a specific allowance of $4.1 million for credit losses was required after analysis of the underlying collateral value. This loan has been on non-accrual status since March 31, 2025 as a result of the monetary default, with interest recorded as income on a cash basis. During the three months ended September 30, 2025, the Company has not recognized interest on this loan.

During the period ended September 30, 2025, management continued to identify a loan, collateralized by a multifamily property in Cedar Park, TX, with an unpaid principal value of $13.7 million as requiring individual evaluation for a specific allowance for credit losses due to monetary default, and a resulting

------

**LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

September 30, 2025

**NOTE 3 - COMMERCIAL MORTGAGE LOANS HELD-FOR-INVESTMENT (Continued)**

risk rating of "5"; however, no specific allowance for credit losses was required after analysis of the underlying collateral value. This loan was placed on non-accrual status as of June 30, 2025, as a result of the monetary default, with interest recorded as income on a cash basis. During the three months ended September 30, 2025, the Company recognized $0.2 million of interest on this loan.

During the period ended September 30, 2025, management continued to identify a loan, collateralized by a multifamily property in Des Moines, IA, with an unpaid principal value of $8.2 million as requiring individual evaluation for a specific allowance for credit losses due to monetary default, and a resulting risk rating of "5"; however, no specific allowance for credit losses was required after analysis of the underlying collateral value. This loan was placed on non-accrual status as of June 30, 2025, as a result of the monetary default, with interest recorded as income on a cash basis. During the three months ended September 30, 2025, the Company has not recognized interest on this loan.

During the period ended September 30, 2025, management identified a loan, collateralized by a multifamily property in Clearfield, UT, with an unpaid principal value of $10.3 million as requiring individual evaluation for a specific allowance for credit losses due to maturity default, and a resulting risk rating of "5"; however, no specific allowance for credit losses was required after analysis of the underlying collateral value.

During the period ended September 30, 2025, management identified a loan, collateralized by two multifamily properties in Tallahassee, FL, with an unpaid principal value of $17.0 million as requiring individual evaluation for a specific allowance for credit losses due to monetary default, and a resulting risk rating of "5"; a specific allowance of 2.9 million for credit losses was required after analysis of the underlying collateral value. This loan was placed on non-accrual status as of September 30, 2025, as a result of the monetary default, with interest recorded as income on a cash basis. During the three months ended September 30, 2025, the Company has not recognized interest on this loan.

During the period ended December 31, 2024, management identified a loan, collateralized by two multifamily properties in Philadelphia, PA, with an unpaid aggregate principal value of $15.0 million as requiring individual evaluation for a specific allowance for credit losses due to monetary default, and a resulting risk rating of "5"; a specific allowance of $0.1 million for credit losses was required after analysis of the underlying collateral value. This loan was placed on non-accrual status as of June 30, 2024, as a result of the monetary default, with interest collections accounted for under the cost recovery method. In the second quarter of 2025, this loan transitioned to a risk rating of "4", was performing on its interest payments and was returned to accrual status. During the period ended September 30, 2025, management identified this loan as requiring individual evaluation for a specific allowance for credit losses due to maturity default, and a resulting risk rating of "5"; however, no specific allowance for credit losses was required after analysis of the underlying collateral value.

During the period ended December 31, 2024, management identified a loan, collateralized by a multifamily property in Dallas, TX, with an unpaid principal value of $31.6 million as requiring individual evaluation for a specific allowance for credit losses due to technical default, and a resulting risk rating of "5"; however, no specific allowance for credit losses was required after analysis of the underlying collateral value. In the first quarter of 2025, this loan was modified as discussed below and transitioned to a risk rating of "3".

During the period ended December 31, 2024, management identified a loan, collateralized by two healthcare properties in Polk County, FL, with an unpaid aggregate principal value of $6.1 million as requiring individual evaluation for a specific allowance for credit losses due to monetary default, and a resulting risk rating of "5"; a specific allowance of $0.6 million for credit losses was required after analysis of the underlying collateral value. This loan was placed on non-accrual as of December 31, 2024 as a result of the monetary default, with interest recorded as income on a cash basis. In the first quarter of 2025, this loan transitioned to a risk rating of "4", is performing on its interest payments and was returned to accrual status.

During the period ended December 31, 2024, management identified a loan, collateralized by a multifamily property in San Antonio, TX, with an unpaid principal value of $15.4 million as requiring individual evaluation for a specific allowance for credit losses due to technical default, and a resulting risk rating of "5"; a specific allowance of $2.4 million for credit losses was required after analysis of the underlying collateral value. This loan was placed on non-accrual status as of December 31, 2024 as a result of the technical default, with interest recognized as income on a cash basis. In the second quarter of 2025, this loan was foreclosed on, with ownership and deed to the property being taken by a newly formed subsidiary of 2021-FL1 CLO.

During the period ended March 31, 2025, management identified a loan, collateralized by a multifamily property in Houston, TX, with an unpaid principal value of $11.5 million as requiring individual evaluation for a specific allowance for credit losses due to monetary default, and a resulting risk rating of "5"; a specific allowance of $0.5 million for credit losses was required after analysis of the underlying collateral value. In the second quarter of 2025, this loan was foreclosed on, with ownership and deed to the property being taken by a newly formed subsidiary of LMF 2023-1 Financing.

During the period ended December 31, 2024, management identified a loan, collateralized by a multifamily property in Orlando, FL, with an unpaid principal balance of $19.6 million as requiring individual evaluation for a specific allowance for credit losses due to maturity default, and a resulting risk rating of "5"; however, no specific allowance for credit losses were required after analysis of the underlying collateral. In the third quarter of 2025, this loan transitioned to a risk rating of "4".

During the period ended March 31, 2025, management identified a loan, collateralized by a multifamily property in Clarkston, GA, with an unpaid principal value of $24.5 million as requiring individual evaluation for a specific allowance for credit losses due to monetary default, and a resulting risk rating of "5"; a specific allowance of $3.8 million for credit losses was required after analysis of the underlying collateral value. In the third quarter of 2025, as a result of a loan modification, this loan transitioned to a risk rating of "4". The loan is performing on its interest payments and was returned to accrual status. Additionally, due to this transition, the prior specific allowance of $3.8 million was reversed in the quarter.

During the period ended June 30, 2025, management identified a loan, collateralized by a multifamily property in San Antonio, TX, with an unpaid principal value of $26.6 million as requiring individual evaluation for a specific allowance for credit losses due to monetary default, and a resulting risk rating of "5"; however, no specific allowance for credit losses was required after analysis of the underlying collateral value. In the third quarter of 2025, this loan was foreclosed on, with ownership of the property being taken by a newly formed subsidiary of 2021-FL1 CLO.

During the period ended June 30, 2025, management identified a loan, collateralized by a multifamily property in San Antonio, TX, with an unpaid principal value of $9.1 million as requiring individual evaluation for a specific allowance for credit losses due to monetary default, and a resulting risk rating of

------

**LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

September 30, 2025

**NOTE 3 - COMMERCIAL MORTGAGE LOANS HELD-FOR-INVESTMENT (Continued)**

"5"; a specific allowance of 0.2 million for credit losses was required after analysis of the underlying collateral value. In the third quarter of 2025, this loan was foreclosed on, with ownership of the property being taken by a newly formed subsidiary of LMF 2023-1 Financing.

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

***Specific Allowance for Credit Losses***

The Company has elected to apply a practical expedient for collateral dependent assets in which the allowance for credit losses is calculated as the difference between the estimated fair value of the underlying collateral, less estimated costs to sell, and the amortized cost basis of the loan. As such, these loans receivable are measured at fair value on a nonrecurring basis using significant unobservable inputs and are classified as Level 3 assets in the fair value hierarchy. The fair value of the underlying collateral is 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 ranged from 5.50%-8.60%. The significant unobservable input used for the market approach is the price per unit from a broker opinion of value and third-party offers. As of September 30, 2025, the unpaid principal balance of default risk loans was $86.6 million, amortized cost of $76.9 million and fair value of $80.4 million.

***Loan Modifications Pursuant to ASC 326***

The Company may amend or modify a loan depending on the loan's specific facts and circumstances. These loan modifications typically include additional time for a borrower to refinance or sell their property, adjustment or waiver of performance tests that are prerequisite to the extension of a loan maturity, modification of terms of interest rate cap agreements, and/or deferral of scheduled principal payments. In exchange for a modification, we often receive a partial repayment of principal, a cash infusion to replenish interest or capital improvement reserves, termination of all or a portion of the remaining unfunded loan commitment, additional call protection and/or an increase in the loan coupon or additional fees.

In March 2025, in connection with a loan assumption, the Company modified a risk-rated 5 multifamily loan located in Dallas, TX, with an outstanding principal balance of $31.9 million. The terms of the modification included, among other things, a $2.0 million principal repayment, a term extension of two years, a reduction in credit spread from 3.9% to 3.4% and a purchase of a replacement interest rate cap.

**NOTE 4 - USE OF SPECIAL PURPOSE ENTITIES AND VARIABLE INTEREST ENTITIES**

We account for CLO transactions and secured financings on our consolidated balance sheet as financing facilities. The issuing entities for our CLOs and secured financings are VIEs for which we are the primary beneficiary and are consolidated in our financial statements. The investment grade tranches are treated as secured financings and are non-recourse to us. See Note 2 ("Summary of Significant Accounting Policies - Principles Consolidation - VIE") for further discussion.

On June 14, 2021, the Company completed the 2021-FL1 CLO, issuing eight tranches of CLO notes through two newly formed wholly-owned subsidiaries totaling $903.8 million. Of the total CLO notes issued $833.8 million were investment grade notes issued to third party investors and $70 million were below investment-grade notes retained by us. In addition, a $96.25 million equity interest in the portfolio was retained by us. The financing had an initial two-and-a-half year reinvestment period, which expired in December 2023, 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 will be reduced as loans are repaid. Initially, the proceeds of the issuance of the securities also included $330.3 million for the purpose of acquiring additional loan obligations for a period up to 180 days from the 2021-FL1 CLO closing date, resulting in the issuer owning loan obligations with a face value of $1.0 billion, representing leverage of 83%.

On July 12, 2023, the Company entered into and closed a matched-term, non-recourse collateralized commercial real estate financing (the "LMF 2023-1 Financing"), secured by $386.4 million of first lien floating-rate multifamily mortgage assets and is not subject to margin calls or additional collateralization requirements. In connection with the LMF 2023-1 Financing, approximately $270.4 million of an investment-grade rated senior secured floating rate loan was provided by a private lender and approximately $47.3 million of investment-grade rated notes (collectively, the "Senior Debt") were issued and sold to an affiliate of LFT's external manager, Lument IM. A consolidated subsidiary of LFT retained the subordinate interests in the issuing vehicle of approximately $68.6 million. The Senior Debt has an initial weighted average spread of approximately 314 basis points over 30-day term SOFR, excluding fees and transaction costs. The Senior Debt matures on the payment date in July 2032, unless it is repaid or redeemed sooner in accordance with its terms. The financing has an initial two-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. Through September 2025, as permitted by the LMF 2023-1 Financing Indenture, and as directed by Lument IM, $44.8 million in payments were made on the Class A Loans utilizing loan repayment proceeds in the LMF 2023-1 Financing, reducing the principal balance of such loans to $225.6 million.

The 2021-FL1 CLO and LMF 2023-1 Financing are subject to collateralization and coverage tests that are customary for these types of securitizations. As of September 30, 2025 and December 31, 2024, all such collateralization and coverage tests in the 2021-FL1 CLO and LMF 2023-1 Financing were met.

The carrying values of the Company's total assets and liabilities related to the 2021-FL1 CLO and LMF 2023-1 Financing at September 30, 2025 and December 31, 2024, included the following VIE assets and liabilities:

---

| | | |
|:---|:---|:---|
| **ASSETS** | **September 30, 2025** | **December 31, 2024** |
| &nbsp;&nbsp;&nbsp;Cash, cash equivalents and restricted cash | $824398 | $2391042 |
| &nbsp;&nbsp;&nbsp;Other assets | 1315309 |  |
| &nbsp;&nbsp;&nbsp;Accrued interest receivable | 4393005 | 5861355 |
| &nbsp;&nbsp;&nbsp;Investment related receivable | 10615094 |  |
| &nbsp;&nbsp;&nbsp;Loans held for investment, net of allowance for credit losses | 819117267 | 1049886009 |

---

------

**LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

September 30, 2025

**NOTE 4 – USE OF SPECIAL PURPOSE ENTITIES AND VARIABLE INTEREST ENTITIES (Continued)**

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;Real estate owned, held-for-investment, net | 49258301 | **—** |
| &nbsp;&nbsp;Real estate owned, held-for-sale | $8871841 | $— |
| **Total Assets** | $**894395215** | $**1058138406** |
| **LIABILITIES** |  |  |
| &nbsp;&nbsp;&nbsp;Accrued interest payable | $1923935 | $2611416 |
| &nbsp;&nbsp;Collateralized loan obligations and secured financings<sup>(1)</sup> | 669775299 | 828390189 |
| &nbsp;&nbsp;&nbsp;Other liabilities | 886586 |  |
| **Total Liabilities** | $**672585820** | $**831001605** |
| &nbsp;&nbsp;&nbsp;Equity | 221809395 | 227136801 |
| **Total liabilities and equity** | $**894395215** | $**1058138406** |

---

*(1) &nbsp;&nbsp;&nbsp;&nbsp;The stated maturity of the collateral loan obligations per the terms of the underlying collateralized loan obligation agreement is June 14, 2039 for the 2021-FL1 CLO and the stated maturity of the secured financing per the terms of the underlying indenture is July 20, 2032.*

The following tables present certain loan and borrowing characteristics of the 2021-F1 CLO and LMF 2023-1 Financing as of September 30, 2025 and December 31, 2024:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **As of September 30, 2025** | **As of September 30, 2025** | **As of September 30, 2025** | **As of September 30, 2025** | **As of September 30, 2025** |
| **Collateralized Loan Obligations/Financings** | **Count** | **Principal Value**<sup>(1)</sup> | **Carrying Value**<sup>(2)</sup> | **Wtd. Avg. Coupon**<sup>(3)</sup> |
| Collateral (loan investments) | 49 | $836144479 | $819117267 | 7.77% |
| Collateral (REO assets) | 2 | $62580330 | $58130142 | N/A |
| Financing provided | 2 | $671323586 | $669775299 | 6.45% |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| **As of December 31, 2024** | **As of December 31, 2024** | **As of December 31, 2024** | **As of December 31, 2024** | **As of December 31, 2024** |
| **Collateralized Loan Obligations/Financings** | **Count** | **Principal Value** | **Carrying Value**<sup>(1)</sup> | **Wtd. Avg. Coupon**<sup>(2)</sup> |
| Collateral (loan investments) | 65 | $1065563646 | $1049886009 | 8.08% |
| Financing provided | 2 | $830698696 | $828390189 | 6.66% |

---

*(1) &nbsp;&nbsp;&nbsp;&nbsp;The principal value for Collateral (REO assets) is the initial loan exposure*

*(2) &nbsp;&nbsp;&nbsp;&nbsp;The carrying value of the collateral is net of unaccreted purchase discounts of $1,928,239 and $3,466,214 and allowance for credit loss of $14,015,792 and $11,320,220 as of September 30, 2025 and December 31, 2024, respectively. The carrying value for LMF 2023-1 Financing is net of debt issuance costs of $1,548,287 and 2,308,507 for September 30, 2025 and December 31, 2024, respectively.*

*(3)&nbsp;&nbsp;&nbsp;&nbsp;Weighted average coupon for loan investments assumes applicable 30-day term SOFR of 4.22% and 4.51% as of September 30, 2025 and December 31, 2024, respectively, inclusive of weighted average interest rate floors of 1.37% and 0.63%, and spreads of 3.55% and 3.53%, respectively. Weighted average coupon for the financings assumes applicable 30-day term SOFR of 4.15% and 4.40% as of September 30, 2025 and December 31, 2024, respectively and spreads of 2.30% and 2.26% for September 30, 2025 and December 31, 2024, respectively.*

The statement of operations related to the 2021-FL1 CLO and LMF 2023-1 Financing for the three and nine months ended September 30, 2025 and September 30, 2024 include the following income and expense items:

---

| | | |
|:---|:---|:---|
| **Statements of Operations** | **Three Months Ended September 30, 2025** | **Three Months Ended September 30, 2024** |
| Interest income | $16696312 | $28149522 |
| Interest expense | (12174275) | (19238862) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net interest income | $4522037 | $8910660 |
| Less: |  |  |
| Release of (provision for) credit losses | 32826 | (322319) |
| Income from real estate owned operations | 1567335 |  |
| Expenses from real estate owned operations | (1411495) |  |
| Depreciation and amortization from real estate owned | (344785) |  |
| General and administrative fees | (200614) | (206347) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net income | $4165304 | $8381994 |

---

------

**LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

September 30, 2025

**NOTE 4 – USE OF SPECIAL PURPOSE ENTITIES AND VARIABLE INTEREST ENTITIES (Continued)**

---

| | | |
|:---|:---|:---|
| **Statements of Operations** | **Nine Months Ended September 30, 2025** | **Nine Months Ended September 30, 2024** |
| Interest income | $56057639 | $88462443 |
| Interest expense | (38457523) | (60929273) |
| Net interest income | $17600116 | $27533170 |
| Less: |  |  |
| Provision for credit losses | (5806153) | (3456487) |
| Income from real estate owned operations | 1567335 |  |
| Expenses from real estate owned operations | (1411495) |  |
| Depreciation and amortization from real estate owned | (483562) |  |
| General and administrative fees | (611675) | (719195) |
| Net income | $10854566 | $23357488 |

---

**NOTE 5 - REAL ESTATE OWNED**

A summary of our REO assets is as follows:

---

| | | |
|:---|:---|:---|
| | **September 30, 2025** | **December 31, 2024** |
|<br>**Real estate owned, held-for-investment** | | |
| Land | $5877407 | $— |
| Building | 43864456 |  |
| Less: Accumulated depreciation and amortization | (483562) |  |
| Total | $**49258301** | $**—** |
| **Real estate owned, held-for-sale** |  |  |
| Real estate owned, held-for-sale | $8871841 | $— |
| Total | $**8871841** | $**—** |

---

At September 30, 2025, our REO assets were comprised of four multifamily properties held within 2021-FL1 CLO and LMF 2023-1 Financing.

During the nine months ended September 30, 2025, Lument Real Estate Capital, LLC ("LREC"), as special servicer for 2021-FL1 CLO foreclosed on two multifamily bridge loans with aggregate net carrying value of $39.5 million, net of specific CECL reserves of $2.4 million, with ownership and deed to the property being taken by a newly formed subsidiary of 2021-FL1 CLO. Additionally, LREC, as special servicer for LMF 2023-1 Financing foreclosed on two multifamily bridge loans with aggregate net carrying value of $19.9 million, net of specific CECL reserves of $0.7 million, with ownership and deed to the property being taken by a newly formed subsidiary of LMF 2023-1 Financing.

The fair value of the underlying collateral is 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 ranged from 6.25%-7.40%. The significant unobservable input used for the market approach is the price per unit from an appraisal or broker opinion of value.

At September 30, 2025, our REO properties had a weighted average occupancy rate of approximately 73.5%.

We recorded depreciation and amortization expense related to the REO assets of $0.3 million and $0.5 million for the three and nine months ended September 30, 2025, 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 million for the three and nine months ended September 30, 2025, respectively, recorded as ""net income (expense) from real estate owned operations" and operating expense of $1.4 million for the three and nine months ended September 30, 2025, respectively, recorded as "net income (expense) from real estate owned operations" in the consolidated statement of operations.

**NOTE 6 - RESTRICTED CASH**

2021-FL1 CLO was actively managed with an initial reinvestment period of 30 months which expired in December 2023. Restricted cash held in 2021-FL1 CLO primarily represents proceeds from interest and principal repayments held by the servicer which are to be submitted during the subsequent remittance cycle and cash payable to LREC as special servicer for our REO properties.

LMF 2023-1 Financing was actively managed with an initial reinvestment period of 24 months which expired in July 2025. Restricted cash held in LMF 2023-1 Financing primarily represents proceeds from interest and principal repayments held by the servicer which are to be submitted during the subsequent remittance cycle and cash payable to LREC as special servicer for our REO properties.

**NOTE 7 - SECURED TERM LOAN**

On January 15, 2019, the Company, together with its FOAC and Lument CMT Equity subsidiaries (together with the Company, the "Credit Parties"), entered into the Secured Term Loan, as amended on February 13, 2019, July 9, 2020, April 21, 2021 and February 22, 2022 with the lenders party thereto and

------

**LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

September 30, 2025

**NOTE 7 – SECURED TERM LOAN (Continued)**

Cortland Capital Market Services, LLC, as administrative agent (in such capacity, the "Agent"), providing for a term facility ("Credit Agreement") to be drawn in an aggregate principal amount of $40.25 million with a maturity of 6 years.

On February 14, 2019, the Company drew on the Secured Term Loan in the aggregate principal amount of $40.25 million generating net proceeds of $39.2 million. The outstanding balance of the Secured Term Loan in the table below is presented gross of deferred financing costs $93,530 and $279,906 at September 30, 2025 and December 31, 2024, respectively.

In response to the continued COVID-19 pandemic, on July 9, 2020, the Company entered into the Second Amendment to the Credit and Guaranty Agreement. This amendment provides the Company with additional flexibility to effectively manage any potential borrower distress related to COVID-19 that were not originally contemplated in loan documentation.

On April 21, 2021, the Company, together with its Credit Parties, entered into an amendment (the "Third Amendment") to the Credit and Guaranty Agreement. The amendment, among other things, (i) provides the Company with an incremental secured term loan in the aggregate principal amount of $7.5 million; (ii) extends the maturity date of the Secured Term Loan from February 14, 2025 to February 14, 2026; (iii) amends certain asset concentration limits and (iv) amends certain financial covenants. On May 5, 2021 the Third Amendment became effective. On August 23, 2021, the Company drew down the $7.5 million incremental secured term loan.

On February 22, 2022, the Company, together with its Credit Parties, entered into an amendment (the "Fourth Amendment") to the Credit and Guaranty Agreement. This amendment waived the step-down provisions of the maximum total net leverage financial covenant in connection with the February 2022 rights offering, however, the step-down provision remains in place for future capital raises.

As of September 30, 2025 and December 31, 2024, the outstanding balance and total commitment under the Credit Agreement consisted of the following:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **September 30, 2025** | **September 30, 2025** | **December 31, 2024** | **December 31, 2024** |
| | **Outstanding Balance** | **Total Commitment** | **Outstanding Balance** | **Total Commitment** |
| Secured Term Loan | $47750000 | $47750000 | $47750000 | $47750000 |
| Total | $47750000 | $47750000 | $47750000 | $47750000 |

---

The borrowings under the Secured Term Loan are joint and several obligations of the Credit Parties. In addition, the Credit Parties' obligations under the Secured Term Loan are secured by substantially all the assets of the Credit Parties through pledge and security documentation. Amounts advanced under the Secured Term Loan are subject to compliance with a borrowing base comprised of assets of the Credit Parties and certain of their subsidiaries, and include senior and subordinated CRE mortgage loans, preferred equity in CRE assets (directly or indirectly), CRE construction mortgage loans and certain types of equity interests (the "Eligible Assets"). Borrowings under the Secured Term Loan bear interest at a fixed rate of 7.25% for the six-year period following the initial draw-down, which is subject to step up by 0.25% for the first four months after the sixth anniversary of the borrowing of the Senior Secured Term Loan, then by 0.375% for the following four months, then by 0.50% for the last four months until maturity. On February 24, 2025 the interest rate on the Secured Term Loan stepped up to 7.50% and on June 23, 2025 the interest rate stepped up to 7.85%.

The Credit Agreement contains affirmative and negative covenants binding the Company and its subsidiaries that are customary for credit facilities of this type, including, but not limited to: minimum asset coverage ratio; minimum unencumbered assets ratio; maximum total net leverage ratio; minimum tangible net worth; and an interest charge coverage ratio. As of September 30, 2025 and December 31, 2024 we were in compliance with these covenants.

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

**NOTE 8 - MORTGAGE SERVICING RIGHTS**

As of September 30, 2025, the Company retained the servicing rights associated with an aggregate principal balance of $56,121,981 of residential mortgage loans that the Company had previously transferred to residential mortgage loan securitization trusts. The Company's MSRs are held and managed at the Company's TRS, and the Company employs two licensed sub-servicers to perform the related servicing activities.

The following table presents the Company's MSR activity for the nine months ended September 30, 2025 and the nine months ended September 30, 2024:

---

| | | |
|:---|:---|:---|
| | **September 30, 2025** | **September 30, 2024** |
| Balance at beginning of period | $649287 | $691973 |
| &nbsp;&nbsp;&nbsp;Changes in fair value due to: |  |  |
| &nbsp;&nbsp;&nbsp;Changes in valuation inputs or assumptions used in valuation model | (20842) | (13202) |
| &nbsp;&nbsp;Other changes to fair value<sup>(1)</sup> | (62832) | (38462) |
| Balance at end of period | $**565613** | $**640309** |
| Loans associated with MSRs<sup>(2)</sup> | $56121981 | $63448342 |
| MSR values as percent of loans<sup>(3)</sup> | 1.01% | 1.01% |

---

*(1)Amounts represent changes due to realization of expected cash flows and prepayment of principal of the underlying loan portfolio.*

*(2)Amounts represent the unpaid principal balance of loans associated with MSRs outstanding at September 30, 2025 and September 30, 2024, respectively.*

------

**LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

September 30, 2025

**NOTE 8 – MORTGAGE SERVICING RIGHTS (Continued)**

*(3)Amounts represent the carrying value of MSRs at September 30, 2025 and September 30, 2024, respectively, divided by the outstanding balance of the loans associated with these MSRs.*

The following table presents the servicing income recorded on the Company's consolidated statements of operations for the three and nine months ended September 30, 2025 and September 30, 2024:

---

| | | |
|:---|:---|:---|
| | **Three Months Ended<br>September 30, 2025** | **Three Months Ended<br>September 30, 2024** |
| Servicing income, net | $50423 | $60283 |
| **Total servicing income** | $**50423** | $**60283** |

---

---

| | | |
|:---|:---|:---|
| | **Nine Months Ended September 30, 2025** | **Nine Months Ended September 30, 2024** |
| Servicing income, net | $128502 | $117056 |
| **Total servicing income** | $**128502** | $**117056** |

---

**NOTE 9 - FAIR VALUE**

The following tables summarize the valuation of the Company's assets and liabilities carried at fair value on a recurring basis within the fair value hierarchy levels as of September 30, 2025 and December 31, 2024:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **September 30, 2025** | **September 30, 2025** | **September 30, 2025** | **September 30, 2025** |
| | **Quoted prices in<br>active markets<br>for identical assets<br>Level 1** | **Significant<br>other observable<br>inputs<br>Level 2** | **Unobservable<br>inputs<br>Level 3** | **Balance as of September 30, 2025** |
| Assets: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Mortgage servicing rights | $— | $— | $565613 | $565613 |
| **Total** | $**—** | $**—** | $**565613** | $**565613** |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
| | **Quoted prices in<br>active markets<br>for identical assets<br>Level 1** | **Significant<br>other observable<br>inputs<br>Level 2** | **Unobservable<br>inputs<br>Level 3** | **Balance as of**<br>**December 31, 2024** |
| Assets: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Mortgage servicing rights | $— | $— | $649287 | $649287 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $**—** | $**—** | $**649287** | $**649287** |

---

As of September 30, 2025 and December 31, 2024, the Company had $565,613 and $649,287, respectively, in Level 3 assets. The Company's Level 3 assets are comprised of MSRs. For more detail about Level 3 assets, also see Notes 2 and 7.

The following table provides quantitative information about the significant unobservable inputs used in the fair value measurement of the Company's MSRs classified as Level 3 fair value assets at September 30, 2025 and December 31, 2024:

---

| | | | |
|:---|:---|:---|:---|
| **As of September 30, 2025** | **As of September 30, 2025** | **As of September 30, 2025** | **As of September 30, 2025** |
| **Valuation Technique** | **Unobservable Input** | **Range** | **Weighted Average** |
| Discounted cash flow | Constant prepayment rate | 7.0 - 8.5% | 7.8% |
|  | Discount rate | 12.0% | 12.0% |

---

---

| | | | |
|:---|:---|:---|:---|
| **As of December 31, 2024** | **As of December 31, 2024** | **As of December 31, 2024** | **As of December 31, 2024** |
| **Valuation Technique** | **Unobservable Input** | **Range** | **Weighted Average** |
| Discounted cash flow | Constant prepayment rate | 7.0 - 8.6% | 7.9% |
|  | Discount rate | 12.0% | 12.0% |

---

As discussed in Note 2, GAAP requires disclosure of fair value information about financial instruments, whether or not recognized in the consolidated balance sheets, for which it is practicable to estimate that value. The following table details the carrying amount, face amount and fair value of the financial instruments described in Note 2:

------

**LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

September 30, 2025

**NOTE 9 – FAIR VALUE (Continued)**

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **September 30, 2025** | **September 30, 2025** | **September 30, 2025** | **September 30, 2025** |
| | **Level in Fair Value Hierarchy** | **Carrying Value** | **Face Amount** | **Fair Value** |
| Assets: |  |  |  |  |
| Cash and cash equivalents | 1 | $56022352 | $56022352 | $56022352 |
| Restricted cash | 1 | 823644 | 823644 | 823644 |
| Commercial mortgage loans held-for-investment, net | 3 | 821843480 | 839749478 | 827538619 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** |  | $**878689476** | $**896595474** | $**884384615** |
| Liabilities: |  |  |  |  |
| Collateralized loan obligations and secured financings | 2 | $669775299 | $671323586 | $670188972 |
| Secured Term Loan | 3 | 47656470 | 47750000 | 47661606 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** |  | $**717431769** | $**719073586** | $**717850578** |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
| | **Level in Fair Value Hierarchy** | **Carrying Value** | **Face Amount** | **Fair Value** |
| Assets: |  |  |  |  |
| Cash and cash equivalents | 1 | $69173444 | $69173444 | $69173444 |
| Restricted cash | 1 | 2390654 | 2390654 | 2390654 |
| Commercial mortgage loans held-for-investment, net | 3 | 1048803078 | 1065563644 | 1061313204 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** |  | $**1120367176** | $**1137127742** | $**1132877302** |
| Liabilities: |  |  |  |  |
| Collateralized loan obligations and secured financings | 2 | $828390189 | $830698696 | $824857756 |
| Secured term loan | 3 | 47470094 | 47750000 | 47227497 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** |  | $**875860283** | $**878448696** | $**872085253** |

---

Estimates of cash and cash equivalents and restricted cash are measured using quoted prices, or Level 1 inputs. Estimates of the fair value of collateralized loan obligations and secured financings are measured using observable, quoted market prices, in active markets, or Level 2 inputs. All other fair value significant estimates are measured using unobservable inputs, or Level 3 inputs. See Note 2 for further discussion regarding fair value measurement of certain of our assets and liabilities.

**NOTE 10 - RELATED PARTY TRANSACTIONS**

***Management and Incentive Fee***

The Company is externally managed and advised by the Manager. Pursuant to the terms of the management agreement, the Company pays the Manager a management fee equal to 1.5% of stockholders' equity per annum, calculated and payable quarterly (0.375% per quarter) in arrears. For purposes of calculating the management fee, the Company's stockholders' equity includes the sum of the net proceeds from all issuances of the Company's equity securities since inception (allocated on a pro rata daily basis for such issuances during the fiscal quarter of any such issuance), plus the Company's retained earnings at the end of the most recently completed calendar quarter (without taking into account any non-cash equity compensation expense incurred in current or prior periods), less any amount that the Company paid for repurchases of the Company's common stock since inception, and excluding any unrealized gains, losses or other items that did not affect realized net income (regardless of whether such items were included in other comprehensive income or loss, or in net income). This amount will be adjusted to exclude one-time events pursuant to changes in GAAP and certain non-cash items after discussions between the Manager and the Company's independent directors and approval by a majority of the Company's independent directors. To the extent asset impairment reduces the Company's retained earnings at the end of any completed calendar quarter, it will reduce the management fee for such quarter. The Company's stockholders' equity for the purposes of calculating the management fee could be greater than the amount of stockholders' equity shown on the consolidated financial statements. Additionally, starting in the first full calendar quarter following January 3, 2020, the Company was also required to pay the Manager a quarterly incentive fee equal to 20% of the excess of Core Earnings (as defined in the management agreement) over the product of (i) stockholders' equity as of the end of such fiscal quarter, and (ii) 8% per annum. The initial term of our management agreement expired on January 3, 2023, with automatic, one-year renewals thereafter.

For the three months ended September 30, 2025, the Company incurred management fees of $1,099,959 (September 30, 2024: $1,114,137), recorded as "Management and incentive fees" in the consolidated statements of operations, of which $1,110,000 (September 30, 2024: $1,100,000) was accrued but had not been paid, and was included in "Fees and expenses payable to Manager" in the consolidated balance sheets.

For the three months ended September 30, 2025, the Company did not incur any incentive fees and for the three months ended September 30, 2024, the Company incurred incentive fees of $12,683, recorded as "Management and incentive fees" in the consolidated statement of operations, all of which had been paid in the period.

------

**LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

September 30, 2025

**NOTE 10 - RELATED PARTY TRANSACTIONS (Continued)**

For the nine months ended September 30, 2025, the Company incurred management fees of $3,314,712 (September 30, 2024: $3,323,333), recorded as "Management and incentive fees" in the consolidated statements of operations, of which $1,110,000 (September 30, 2024: $1,100,000), was accrued but had not been paid, included in "Fees and expenses payable to Manager" in the consolidated balance sheets.

For the nine months ended September 30, 2025, the Company incurred incentive fees of $201,087 (September 30, 2024: $2,184,435), recorded as "Management and incentive fees" in the consolidated statement of operations, all of which was paid in the period. The Manager agreed to waive $453,222 in incentive fees that otherwise would have been incurred with respect to the nine months ended September 30, 2025.

***Expense Reimbursement***

Pursuant to the management agreement, the Company is required to reimburse the Manager for operating expenses related to the Company incurred by the Manager, including accounting, auditing and tax services, technology and office facilities, operations, compliance, legal and filing fees, loan servicing fees and miscellaneous general and administrative costs, including the cost of non-investment management personnel of the Manager who spend all or a portion of their time managing the Company's affairs. The Manager has agreed to certain limitations on manager expense reimbursement from the Company.

For the three months ended September 30, 2025, the Company incurred reimbursable expenses of $451,778 (September 30, 2024: $418,553), recorded as "Operating expenses reimbursable to Manager" in the consolidated statements of operations, of which $341,325 (September 30, 2024: $386,946) was accrued but had not yet been paid, included in "fees and expenses payable to Manager" in the consolidated balance sheets. Per the management agreement, any exit fees waived by the Company as a result of permanent financing by the Manager or any of its affiliates shall result in a reduction to reimbursed expenses by an amount equal to 50% of the amount of any such waived exit fee capped at a waived exit fee of 1%. For the three months ended September 30, 2025 the Company waived $377,351 in gross exit fees, reducing reimbursed expenses by $188,675 and for the three months ended September 30, 2024, the Company waived $228,108 in gross exit fees, reducing reimbursed expenses by $114,054.

For the nine months ended September 30, 2025, the Company incurred reimbursable expenses of $1,351,199 (September 30, 2024: $1,293,627), recorded as "Operating expenses reimbursable to Manager" in the consolidated statements of operations, of which $341,325 (September 30, 2024: $386,946) was accrued but had not yet been paid, included in "fees and expenses payable to Manager" in the consolidated balance sheets. Per the management agreement, any exit fees waived by the Company as a result of permanent financing by the Manager or any of its affiliates shall result in a reduction to reimbursed expenses by an amount equal to 50% of the amount of any such waived exit fee capped at a waived exit fee of 1%. For the nine months ended September 30, 2025, the Company waived $449,049 in gross exit fees, reducing reimbursed expenses by $224,524 and for the nine months ended September 30, 2024, the Company waived $631,215 in gross exit fees, reducing reimbursed expenses by $315,608.

***Lument Real Estate Capital, LLC***

LREC, an affiliate of our Manager, was appointed the servicer and special servicer with respect to mortgage assets for the 2021-FL1 CLO in June 2021 and LMF 2023-1 Financing in July 2023 and continues to serve in this role. During the three and nine months ended September 30, 2025, LREC received servicing fees, inclusive of both servicing and special servicing fees, of $159,167 and $465,187, respectively, compared to $165,960 and $557,409, respectively, for the three and nine months ended September 30, 2024.

In connection with its role as servicer and special servicer with respect to mortgage assets held in the 2021-FL1 CLO and the LMF 2023-1 Financing, LREC is paid certain fees by the 2021-FL1 CLO and the LMF 2023-1 Financing depending upon the specific services rendered, including servicing fees, special servicing fees, workout fees and liquidation fees. In addition, LREC, as servicer and/or special servicer may be entitled to retain certain fees or portions thereof paid by borrowers, including modification, waiver, assumption, transfer, processing, consent, review and similar fees, defeasance fees, late fees and application fees.

LREC was also appointed as servicer with respect to mortgage assets held by the Company and its other subsidiaries in August 2022. The Company pays LREC's servicing fees, if any.

***Lument IM***

Lument IM was appointed as the collateral manager with respect to the 2021-FL1 CLO in June 2021 and LMF 2023-1 Financing in July 2023, and continues to serve in this role. Lument IM has agreed to waive all its entitlements to collateral management fees for so long as Lument IM or an affiliate is the collateral manager and also the manager of the Company.

In connection with the LMF 2023-1 Financing, Lument IM absorbed approximately $1.1 million in debt issuance costs for which it did not seek reimbursement from the Company.

***Hunt Companies, Inc.***

One of the Company's directors is also Chief Executive Officer and President of Hunt Companies, Inc. ("Hunt") and is a member of the Hunt Board of Directors, with which affiliates of the Manager have a commercial business relationship. The Manager's affiliates provide servicing with respect to mortgage assets of Hunt and may from time to time sell commercial mortgage loans to Hunt or various of its subsidiaries and affiliates.

**NOTE 11 - GUARANTEES**

The Company, through FOAC, is party to customary and standard loan repurchase obligations in respect of residential mortgage loans that it has sold into securitizations or to third parties, to the extent it is determined that there has been a breach of standard seller representations and warranties in respect of such loans. To date, the Company has not been required to repurchase any loan due to a claim of breached seller representations and warranties.

------

**LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

September 30, 2025

**NOTE 11 - GUARANTEES (Continued)**

In July 2016, the Company announced that it would no longer aggregate and securitize residential mortgage loans; however, the Company sought to capitalize on its infrastructure and knowledge to become the provider of seller eligibility review and backstop services to MAXEX. MAXEX's wholly owned clearinghouse subsidiary, MAXEX Clearing LLC, formerly known as Central Clearing and Settlement LLC ("MAXEX Clearing LLC"), functions as the central counterparty with which buyers and sellers transact, and acts as the buyer's counterparty for each transaction. Pursuant to a Master Agreement dated June 15, 2016, as amended August 29, 2016, January 30, 2017 and June 27, 2018, among MAXEX, MAXEX Clearing LLC and FOAC (the "Master Agreement"), FOAC provided seller eligibility review services under which it reviewed, approved and monitored sellers that sold loans via MAXEX Clearing LLC. Once approved, and having signed the standardized loan sale contract, the seller sold loan(s) to MAXEX Clearing LLC, and MAXEX Clearing LLC simultaneously sold loan(s) to the buyer on substantially the same terms including representations and warranties. The Master Agreement was terminated on November 28, 2018 (the "MAXEX Termination Date"). To the extent that a seller approved by FOAC prior to the MAXEX Termination Date failed to honor its obligations to repurchase a loan based on an arbitration finding that it breached its representations and warranties, FOAC was obligated to backstop the seller's repurchase obligation. The term of the backstop guarantee is the earlier of the contractual maturity of the underlying mortgage, or its earlier repayment in full; however, the incidence of claims for breaches of representations and warranties over time is considered unlikely to occur more than five years from the sale of the mortgage. All of the underlying mortgages have either repaid in full or have aged beyond the five years from the sale of the mortgage. FOAC's obligation to provide further seller eligibility review and backstop guarantee services terminated on the MAXEX Termination Date. Pursuant to an Assumption Agreement dated December 31, 2018, among MAXEX Clearing LLC and FOAC, MAXEX Clearing LLC assumed all of FOAC's obligations under its backstop guarantees and agreed to indemnify and hold FOAC harmless against any losses, liabilities, costs, expenses and obligations under the backstop guarantee. FOAC paid MAXEX Clearing LLC, as the replacement backstop provider, a fee of $426,770 (the "Alternate Backstop Fee"). MAXEX Clearing LLC represented to FOAC in the Assumption Agreement that it (i) is rated at least "A" (or equivalent) by at least one nationally recognized statistical rating agency or (ii) has (a) adjusted tangible net worth of at least $20 million and (b) minimum available liquidity equal to the greater of (x) $5 million and (y) 0.1% multiplied by the scheduled unpaid principal balance of each outstanding loan covered by the backstop guarantees. MAXEX's chief financial officer is required to certify ongoing compliance by MAXEX Clearing LLC with the aforementioned criteria on a quarterly basis and if MAXEX Clearing LLC fails to satisfy such criteria, MAXEX Clearing LLC is required to deposit into an escrow account for FOAC's benefit an amount equal to the greater of (A) the unamortized Alternate Backstop Fee for each outstanding loan covered by the backstop guarantee and (B) the product of 0.01% multiplied by the scheduled unpaid principal balance of each outstanding loan covered by the backstop guarantees.

The maximum potential amount of future payments that the Company could be required to make under the outstanding backstop guarantees, which represents the outstanding balance of all underlying mortgage loans sold by approved sellers to MAXEX Clearing LLC, was estimated to be $0 million and $12.2 million as of September 30, 2025 and December 31, 2024, respectively, although the Company believes those amounts are not indicative of the Company's actual potential losses. Amounts payable in excess of the outstanding principal balance of the related mortgage, for example any premium paid by the loan buyer or costs associated with collecting mortgage payments, are not currently estimable. Amounts that may become payable under the backstop guarantee are normally recoverable from the related seller, as well as from any payments received on (or from the sale of property securing) the mortgage loan repurchased and, as noted above, MAXEX Clearing LLC has assumed all of FOAC's obligations in respect of its backstop guarantees. Pursuant to the Master Agreement, FOAC is required to maintain minimum available liquidity equal to the greater of (i) $5.0 million or (ii) 0.10% of the aggregate unpaid principal balance of loans backstopped by FOAC, either directly or through a credit support agreement acceptable by MAXEX. As of September 30, 2025, the Company was not aware of any circumstances expected to lead to the triggering of a backstop guarantee obligation.

In addition, the Company enters into or may enter into certain contracts that contain a variety of indemnification obligations, principally with the Manager, brokers and counterparties to repurchase agreements. The maximum potential future payment amount the Company could be required to pay under these indemnification obligations is unlimited. The Company has not incurred any costs to defend lawsuits or settle claims related to the indemnification obligations. As a result, the estimated fair value of these agreements is minimal. Accordingly, the Company recorded no liabilities for these agreements as of September 30, 2025.

**NOTE 12 - COMMITMENTS AND CONTINGENCIES**

***Litigation***

From time to time, LFT may be involved in various claims and legal actions arising in the ordinary course of business. LFT establishes an accrued liability for legal proceedings only when those matters present loss contingencies that are both probable and reasonably estimable.

As of September 30, 2025, LFT was not involved in any material legal proceedings regarding claims or legal actions against LFT.

***Unfunded Commitments***

As of September 30, 2025, LCMT had $3.1 million of unfunded commitments related to loans held in 2021-FL1 CLO. These commitments are not reflected in the Company's consolidated balance sheets.

As of September 30, 2025, LSF, an affiliate of the Manager, had $9.3 million of unfunded commitments related to loans held in the 2021-FL1 CLO. These commitments are not reflected on the Company's consolidated balance sheets.

As of September 30, 2025, LSF had $4.8 million of unfunded commitments related to loans held in LMF 2023-1 Financing. These commitments are not reflected on the Company's consolidated balance sheets.

As of December 31, 2024, LCMT had $6.7 million of unfunded commitments related to loans held in 2021-FL1 CLO. These commitments are not reflected in the Company's consolidated balance sheets.

As of December 31, 2024, LSF had $28.2 million of unfunded commitments related to loans held in 2021-FL1 CLO. These commitments are not reflected on the Company's consolidated balance sheets.

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**LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

September 30, 2025

**NOTE 12 COMMITMENTS AND CONTINGENCIES**

As of December 31, 2024, LSF had $16.4 million of unfunded commitments related to loans held in LMF 2023-1 Financing. These commitments are not reflected on the Company's consolidated balance sheets.

Future loan fundings comprise funding for capital improvements, leasing costs, interest and carry costs, and fundings will vary depending on the progress of the business plan and cash flows at the mortgage assets. Therefore, the exact timing and amounts of such future loan fundings are uncertain and will depend on the current and future performance of the underlying mortgage assets.

**NOTE 13 - EQUITY**

***Common Stock***

The Company has 450,000,000 authorized shares of common stock, par value $0.01 per share, with 52,364,930 and 52,309,209 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively.

***Stock Repurchase Program***

On December 15, 2015, the Board authorized a stock repurchase program (the "Repurchase Program"), to repurchase up to $10 million of the Company's outstanding common stock. Shares of the Company's common stock may be purchased in the open market, including through block purchases, or through privately negotiated transactions, or pursuant to any trading plan that may be adopted in accordance with Rule 10b-18(b)(1) of the Securities Exchange Act of 1934, as amended. The timing, manner, price and amount of any repurchases will be determined at the Company's discretion and the program may be suspended, terminated or modified at any time for any reason. Among other factors, the Company intends to only consider repurchasing shares of the Company's common stock when the purchase price is less than the Company's estimate of the Company's current net asset value per common share. Shares of common stock repurchased by the Company under the Repurchase Program, if any, will be canceled and, until reissued by the Company, will be deemed to be authorized but unissued shares of the Company's common stock. No share repurchases have been made since January 19, 2016. Through September 30, 2025, the Company had repurchased 126,856 shares of common stock at a weighted average share price of $5.09. As of September 30, 2025, $9.4 million of common stock remained authorized for future share repurchase under the Repurchase Program.

***Preferred Stock***

At September 30, 2025 and December 31, 2024, the Company was authorized to issue up to 50,000,000 shares of preferred stock, par value $0.01 per share, with 2,400,000 shares of Series A Preferred Stock issued and outstanding as of September 30, 2025 and December 31, 2024, respectively. Voting and other rights and preferences will be determined by the Company's Board of Directors upon issuance.

***Distributions to stockholders***

For the taxable year to date, the Company has declared dividends to common stockholders totaling $9,421,018, or $0.18 per share. The following table presents cash dividends declared by the Company on its common stock during the nine months ended September 30, 2025:

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| | | | | |
|:---|:---|:---|:---|:---|
| **Declaration Date** | **Record Date** | **Payment Date** | **Dividend Amount** | **Cash Dividend Per Weighted Average Share** |
| March 19, 2025 | March 31, 2025 | April 15, 2025 | $4185958 | $0.080 |
| June 20, 2025 | June 30, 2025 | July 15, 2025 | $3140463 | $0.060 |
| September 16, 2025 | September 30, 2025 | October 15, 2025 | $2094597 | $0.040 |

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The following table presents cash dividends declared by the Company on its Series A Preferred stock for the nine months ended September 30, 2025:

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| | | | | |
|:---|:---|:---|:---|:---|
| **Declaration Date** | **Record Date** | **Payment Date** | **Dividend Amount** | **Cash Dividend Per Weighted Average Share** |
| March 19, 2025 | April 1, 2025 | April 15, 2025 | $1181250 | $0.49219 |
| June 20, 2025 | July 1, 2025 | July 15, 2025 | $1181250 | $0.49219 |
| September 16, 2025 | October 1, 2025 | October 15, 2025 | $1181250 | $0.49219 |

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***Non-controlling interests***

On November 29, 2018, LCMT, which is an indirect wholly-owned subsidiary of the Company that has elected to be taxed as a REIT for U.S. Federal income tax purposes, issued 125 shares of Series A Preferred Shares ("LCMT Preferred Shares"). Net proceeds to LCMT were $99,500 representing $125,000 in equity raised, less $25,500 in expenses and is reflected as "Non-controlling interests" in the Company's consolidated balance sheets. Dividends on the LCMT Preferred Shares are cumulative annually, in an amount equal to 12% of the initial purchase price plus any accrued unpaid dividends. The LCMT Preferred Shares are redeemable at any time by LCMT. The redemption price through December 31, 2020 was 1.1x the initial purchase price plus all accrued and unpaid dividends, and the initial purchase price plus all accrued and unpaid dividends thereafter. The holders of the LCMT Preferred Shares have limited voting rights, which do not entitle the holders to participate or otherwise direct the management of LCMT or the Company. The LCMT Preferred Shares are not convertible into or exchangeable for any other property or securities of LCMT or the Company. Dividends on the LCMT Preferred Shares, which amounted to $15,000 for the year ended December 31, 2024, are reflected in "Dividends to preferred stockholders" in the Company's consolidated statements of operations. As of September 30, 2025, LCMT had $3,791 in accrued dividends on the LCMT Preferred Shares which are reflected in "dividends to preferred stockholders" in the Company's consolidated statements of operations of which $3,791 were accrued and unpaid dividends on the LCMT Preferred Shares which are reflected in "Dividends payable" in the Company's consolidated balance sheet.

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**LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

September 30, 2025

**NOTE 13– EQUITY (Continued)**

***Independent Directors Stock-for-Fees Program***

Upon the recommendation of the Compensation Committee of the Board, on April 20, 2023, the Board adopted the Independent Directors Stock-for-Fees Program (the "Stock-for-Fees Program"). The purpose of the Stock-for-Fees Program is to promote the long-term success of the Company and further align the interests of the Company's independent directors with the interests of its stockholders by providing the independent directors with an opportunity to elect to receive their Director Fees (as defined below) in the form of shares of common stock.

Pursuant to the Stock-for-Fees Program, an independent director may elect to exchange all or a portion of such director's unpaid Director Fees for the right to receive payment of such unpaid fees in the form of shares of common stock. Such election will apply to all Director Fees that would otherwise have been paid (but for such election) in the fiscal quarter that commences after the date the independent director's election form is filed with and received by the Company and will continue for each fiscal quarter through and until the fiscal quarter that commences after such time as the director files a new election form that is received by the Company modifying or terminating such prior election or, if earlier, the date such director terminates service on the Board. Unless otherwise approved by the Board, an election by an independent director will be made only in an open trading window pursuant to the Company's insider trading policy. Unless otherwise approved by the Board, an independent director may not make more than one election in any six-month period of time. Any Director Fees that an independent director elects to receive in the form of shares of common stock are referred to as "Exchanged Fees."

Upon any Exchange Date (as defined below) that occurs after an independent director files an election form that is received by the Company, the independent director will be entitled to receive a number of shares of common stock determined by dividing (i) the amount of the Exchanged Fees that would otherwise have been paid to the independent director in cash on such Exchange Date but for such election, by (ii) the Fair Market Value (as defined below) of a share of common stock as of such Exchange Date, and rounded down to the nearest whole share. Any fractional amount less than the Fair Market Value of a share of common stock as of such Exchange Date will be paid in cash. Any shares of common stock acquired by an independent director pursuant to the Stock-for-Fees Program will be fully vested.

The maximum aggregate number of shares of common stock issuable pursuant to the Stock-for-Fees Program is 2,611,555. The maximum aggregate number of shares issuable to an independent director pursuant to the Stock-for-Fees Program shall not exceed 522,311 shares of common stock. The Company issued 60,578 shares with a weighted-average share price of $2.43 in 2024 and has issued 55,721 shares with a weighted-average price of $2.47 pursuant to the Stock-for-Fees Program during the nine months ended September 30, 2025.

For purposes of this Stock-for-Fees Program, the following definitions apply:

"Director Fees" means the annual retainer and meeting fees, to the extent otherwise payable in cash, payable to an independent director for services as a member of the Board.

"Exchange Date" means any date on which the Company pays Director Fees to independent directors.

"Fair Market Value" means, with respect to an Exchange Date, the average of the closing prices of a share of the Company's common stock as reported on the composite tape for securities listed on the NYSE for the period of ten trading days ending on the trading day immediately preceding the Exchange Date.

**NOTE 14 - EARNINGS PER SHARE**

In accordance with ASC 260, outstanding instruments that contain rights to non-forfeitable dividends are considered participating securities. The Company is required to apply the two-class method or the treasury stock method of computing basic and diluted earnings per share when there are participating securities outstanding. The Company has determined that outstanding unvested restricted shares issued under the Manager Equity Plan are participating securities, and they are therefore included in the computation of basic and diluted earnings per share. The following tables provide additional disclosure regarding the computation for the three and nine months ended September 30, 2025 and September 30, 2024:

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended September 30, 2025** | **Three Months Ended September 30, 2025** | **Three Months Ended September 30, 2024** | **Three Months Ended September 30, 2024** |
| Net (loss) income |  | $1843639 |  | $6280725 |
| Less dividends: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Common stock | $2094597 |  | $4183368 |  |
| &nbsp;&nbsp;&nbsp;Preferred stock | 1185042 |  | 1185041 |  |
|  |  | 3279639 |  | 5368409 |
| **Undistributed (deficit) earnings** |  | $**(1436000)** |  | $**912316** |

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---

| | | | | |
|:---|:---|:---|:---|:---|
| | Unvested Share-Based<br>Payment Awards | Common Stock | Unvested Share-Based<br>Payment Awards | Common Stock |
| Distributed earnings | $0.00 | $0.04 | $0.00 | $0.08 |
| Undistributed (deficit) earnings | 0.00 | (0.03) | 0.00 | 0.02 |
| **Total** | $**0.00** | $**0.01** | $**0.00** | $**0.10** |

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---

| | | |
|:---|:---|:---|
| | For the three months ended September 30, | For the three months ended September 30, |
| | **2025** | **2024** |
| Basic weighted average shares of common stock | 52352469 | 52283669 |
| Diluted weighted average shares of common stock outstanding | **52352469** | **52283669** |

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---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Nine Months Ended September 30, 2025** | **Nine Months Ended September 30, 2025** | **Nine Months Ended September 30, 2024** | **Nine Months Ended September 30, 2024** |
| Net income (loss) |  | 5011844 |  | $17859353 |
| Less dividends paid: |  |  |  |  |
| Common stock | $9421018 |  | $12023399 |  |
| Preferred stock | 3555042 |  | 3555041 |  |
| Redemption of preferred stock offering costs |  |  |  |  |
|  |  | 12976060 |  | 15578440 |
| **Undistributed earnings (deficit)** |  | $**(7964216)** |  | $**2280913** |

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| | | | | |
|:---|:---|:---|:---|:---|
| | Unvested Share-Based<br>Payment Awards | Common Stock | Unvested Share-Based<br>Payment Awards | Common Stock |
| Distributed earnings | $— | $0.18 | $— | $0.23 |
| Undistributed (deficit) earnings | $— | $(0.15) | $— | $0.04 |
| **Total** | $**—** | $**0.03** | $**—** | $**0.27** |

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| | | |
|:---|:---|:---|
| | For the nine months ended September 30, | For the nine months ended September 30, |
| | **2025** | **2024** |
| Basic weighted average shares of common stock | 52331709 | 52266444 |
| Diluted weighted average shares of common stock outstanding | **52331709** | **52266444** |

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**NOTE 15 - INCOME TAXES**

The Company has elected to be treated as a REIT under U.S. federal income tax laws. As a REIT, the Company must generally distribute annually at least 90% of our taxable income, subject to certain adjustments and excluding any capital net gain, in order for U.S. federal income tax not to apply to our earnings that we distribute. To the extent that we satisfy this distribution requirement, but distribute less than 100% of our net taxable income, we will be subject to U.S. federal income tax on our undistributed taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount specified under U.S. federal tax laws.

Certain activities of the Company that produce prohibited income are conducted through a TRS, FOAC, to protect REIT election and FOAC is therefore subject to tax as a U.S. C-Corporation. To maintain our REIT election, the Company must continue to meet certain ownership, asset and income requirements set forth in the Code. As further discussed below, the Company may be subject to non-income taxes on excess amounts of assets or income that cause a failure of any of the REIT testing requirements. As of September 30, 2025 and December 31, 2024, we were in compliance with all REIT requirements.

As of September 30, 2025, tax years 2021 through 2024 remain subject to examination by taxing authorities.

**NOTE 16 - SUBSEQUENT EVENTS**

On November 3, 2025, LCMT Warehouse, LLC ("Seller"), an indirect wholly owned subsidiary of the Company, entered into an Uncommitted Master Repurchase Agreement ("Repurchase Agreement") with JPMorgan Chase Bank, National Association ("Buyer" or "JPM"). 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 between Seller and Buyer. The initial maturity date of the Repurchase Agreement is November 3, 2028, with two (2) one-year extensions at Seller's option, which may be exercised upon the satisfaction of certain conditions as described in more detail in the Repurchase Agreement.

In connection with the Repurchase Agreement, the Company entered into a Guarantee Agreement (the "Guarantee") with JPM, under which the Company guarantees the Seller's payment and performance obligations under the Repurchase Agreement. Subject to certain exceptions, the maximum liability of the Company under the Guarantee will not exceed 25% of the then currently unpaid aggregate repurchase price of all purchased loans with respect to transactions then outstanding and related obligations under the Repurchase Agreement.

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***ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS***

*In this Quarterly Report on Form 10-Q, or this "report," we refer to Lument Finance Trust as "we," "us," or "our," unless we specifically state otherwise or the context indicates otherwise. We refer to our external manager, Lument Investment Management, as our "Manager" or "Lument IM".*

*The following discussion should be read in conjunction with our consolidated financial statements and the accompanying notes to our financial statements, which are included in Item 1 of this report, as well as information contained in our Annual Report on Form 10-K for the year ended December 31, 2024, or our 2024 10-K, filed with the Securities and Exchange Commission, or SEC, on March 19, 2025.*

**Forward-Looking Statements**

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 the 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: 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, 2024, as updated by our quarterly report on Form 10-Q for the quarter ended March 31, 2025, and/or as disclosed in any subsequent filings with the SEC, 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 2024 10-K and subsequent filings with the SEC, which are available on the SEC's website at <u>www.sec.gov</u>.

**Overview** 

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

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

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

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

Our investments typically have the following characteristics:

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

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

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

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Floating rate loans tied to one-month term SOFR, and/or an applicable replacement index in the future; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Three-year term with two one-year extension options.

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

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

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**Recent Developments**

The last several quarters have been characterized by significant volatility in U.S. and global markets, driven by heightened inflation, higher interest rates, slowing economic growth, increased tariffs, trade tensions, geopolitical conditions and political and regulatory uncertainties. These conditions have adversely impacted, and may continue to adversely impact, the U.S. and global economies, the real estate industry and our borrowers, and the performance of the properties securing our loans. Collectively, these market dynamics pose challenges to commercial real estate values and transaction activity.

Notwithstanding the current period of relatively high interest rates, the U.S. Federal Reserve began decreasing rates in 2024. Although decelerating, inflation remains above the U.S. Federal Reserve's target levels. Despite multiple federal fund rate decreases over the course of 2024 and 2025, interest rates have remained elevated. Although our business model is such that higher interest rates will, all else being equal, correlate to increases in our net income, interest rates remaining elevated for an extended period of time may adversely affect our existing borrowers. Additionally, higher interest rates and unpredictable geopolitical landscape may cause 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 of time could limit our ability to grow our business. It remains difficult to predict the full impact of recent events and any future changes in interest rates or inflation.

**Third Quarter 2025 Summary** 

*Operating Results*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**•** Net income attributable to common stockholders of $0.7 million, or $0.01 per share of common stock

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Distributable Earnings of $1.0 million, or $0.02 per share of common stock

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• On September 16, 2025, the Company announced its third quarter common dividend of $0.04 per share of common stock

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• On September 16, 2025, the Company announced its third quarter preferred dividend of $0.49219 per share of Series A Preferred Stock

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Book value of common stock as of September 30, 2025 was $170.0 million, or $3.25 per share of common stock

*Investment Activity*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Experienced $48.8 million in loan payoffs

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• $0.8 billion senior loan portfolio is 100% floating rate with an average spread to 30-day term SOFR of 3.55%, excluding unamortized purchase discounts of $1.9 million as of September 30, 2025

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Multifamily assets represent 89.6% of loan portfolio

*Portfolio Financing*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Non-mark-to-market financing is $0.7 billion as of September 30, 2025, representing 100% of our secured financings

**Factors Impacting Our Operating Results**

*Market conditions*. The results of our operations are and will continue to be affected by a number of factors and primarily depend on, among other things, the level of our net interest income, the market value of our assets and the supply of, and demand for, our target assets in the marketplace. Our net interest income, will vary primarily as a result of changes in market interest rates and prepayment speeds, and by the ability of the borrowers underlying our commercial mortgage loans to continue making payments in accordance with the contractual terms of their loans, which may be impacted by unanticipated credit events experienced by such borrowers. 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 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 September 30, 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 September 30, 2025, 100% of the loans in our commercial mortgage loan portfolio are structured with SOFR floors with a weighted average SOFR floor of 1.36%, none of which currently has a 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 September 30, 2025, the weighted average spread of our commercial loan portfolio was 3.55%, but there is no assurance that these spreads will be maintained as market environments fluctuate.

The U.S. Federal Reserve maintained the federal funds target range at 0.0% to 0.25% for much of 2021. However, beginning 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 November 7, 2024 and December 18, 2024, respectively, the Federal Reserve lowered interest rates by 0.25%. Additionally, on September 17, 2025 and October 29, 2025, respectively, the U.S. Federal Reserve lowered the federal funds rate by 0.25% to a current target range of 3.75% to 4.00%. Interest rates continue to remain elevated, and the timing, direction and extent of any future interest rate changes remain uncertain.

In addition to the risk related to fluctuations in cash flows associated with movement in interest rates, there is also the risk of non-performance on floating rate assets. In the case of a significant increase in interest rates or the continued elevation in current rates, the additional debt service payments due from our borrowers may strain the operating cash flows of the real estate assets underlying our mortgages and/or impact their ability to be refinanced at such higher interest rates, potentially, contribute to non-performance or, in severe cases, default. This risk is partially mitigated during the underwriting process, which generally includes a requirement for our borrowers to purchase interest rate cap contracts with an unaffiliated third-party, provide an interest rate reserve deposit, and/or provide other structural protections. As of September 30, 2025, 60.6% of our performing loans have interest rate caps with a weighted-average strike price of 2.27%.

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*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 September 30, 2025, 92.7% 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 primarily with non-recourse secured borrowings, the maturities of which are matched to the maturities of the loans, and which are not subject to margin calls or additional collateralization requirements. However, to the extent that we seek to invest in additional commercial mortgage loans, outside of our secured borrowings, we will in part be dependent on our ability to issue additional collateralized loan obligations, to secure alternative financing facilities or to raise additional common or preferred equity. The expectation of slower interest rate decreases moving forward and unpredictable geopolitical landscape may cause a further dislocation in the capital markets resulting in a continual reduction of available liquidity and an increase in borrowing costs. A lack of liquidity for a prolonged period could limit our ability to grow our business. Additionally, the CRE CLOs and other secured financings we have entered into, and may in the future enter into, include certain interest coverage tests, overcollateralization coverage tests or other tests that, if not met, may result in a change in the priority of distributions, which may result in the reduction or elimination of distributions to the subordinate debt and equity tranches retained by us until the tests have been met or certain senior classes of securities have been paid in full. Accordingly, if such tests are not satisfied, we, as holders of the subordinate debt and equity interests in the applicable CRE CLO or secured financing, may experience a significant reduction in our cash flow from those interests, which would impact our liquidity.

*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 seventeen funded loan advances with an initial aggregate unpaid principal balance of $473.1 million with an aggregate purchase discount of $8.1 million. All of our other commercial mortgage loans were acquired at par. As of September 30, 2025, our aggregate unaccreted purchase discount was $1.9 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 the 2021-FL1 CLO expired in December 2023 and for LMF 2023-1 Financing in July 2025, accordingly any principal prepayments received on our loan portfolio will be used to paydown their related secured borrowings. 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. However, our loan agreements provide for prepayment penalties which are intended to offset any potential reduction in future interest income. To the extent any loans are permanently refinanced by the Manager or any of its affiliates, the prepayment penalties will be waived resulting in a reduction to reimbursed expenses by an amount equal to 50% of the amount of any such waived fee capped at a waived fee of 1%.

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

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

**Key Financial Measure 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 September 30, 2025, we recorded earnings per share of $0.01, declared a quarterly common dividend of $0.04 per share, and reported $0.02 per share of Distributable Earnings. In addition, our book value per share was $3.25.

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

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**Earnings Per Share and Dividends Declared**

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

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| | | |
|:---|:---|:---|
| | **Three Months Ended** | **Three Months Ended** |
| | **September 30, 2025** | **June 30, 2025** |
| Net income attributable to common stockholders | $658597 | $2505731 |
| Weighted-average shares outstanding, basic and diluted | 52352469 | 52332304 |
| Net (loss) income per share, basic and diluted | $0.01 | $0.05 |
| Dividends declared per share | $0.04 | $0.06 |

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**Distributable Earnings**

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

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

We believe that Distributable Earnings provides meaningful information to consider in addition to our net income (loss) and cash flows from operating activities determined in accordance with GAAP. We believe Distributable Earnings is a useful financial metric for existing and potential future holders of our common stock as historically, over time, Distributable Earnings has been a strong indicator of our dividends per share. As a REIT, we generally must distribute annually at least 90% of our taxable income, subject to certain adjustments, and therefore we believe our dividends are one of the principal reasons stockholders may invest in our common stock. Refer to Note 14 to our consolidated financial statements for further discussion of our distribution requirements as a REIT. Furthermore, Distributable Earnings help us to evaluate our performance excluding the effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current loan portfolio and operations and is a performance metric we consider when declaring our dividends.

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

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

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| | | |
|:---|:---|:---|
| | **Three Months Ended** | **Three Months Ended** |
| | **September 30, 2025** | **June 30, 2025** |
| Net income attributable to common stockholders | $658597 | $2505731 |
| Unrealized loss on mortgage servicing rights | 24700 | 36456 |
| Unrealized release of (provision for) credit losses | (29660) | 94768 |
| Depreciation and amortization of real estate owned | 344785 | 138777 |
| Adjustment for income taxes | (2902) | (4084) |
| Distributable Earnings | $995520 | $2771648 |
| Weighted-average shares outstanding, basic and diluted | 52352469 | 52332304 |
| Distributable Earnings per share, basic and diluted | $0.02 | $0.05 |

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**Book Value Per Share**

The following table calculates our book value per share:

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| | | |
|:---|:---|:---|
| | **September 30, 2025** | **December 31, 2024** |
| Total stockholders' equity | $229972801 | $237799532 |
| Less preferred stock (liquidation preference of $25.00 per share) | (60000000) | (60000000) |
| Total common stockholders' equity | 169972801 | 177799532 |
| Shares of common stock issued and outstanding at period end | 52364930 | 52309209 |
| Book value per share of common stock<sup>(1)</sup> | $3.25 | $3.40 |

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*(1)&nbsp;&nbsp;&nbsp;&nbsp;Book value as of September 30, 2025 and December 31, 2024 includes the impact of an estimated CECL allowance of $14,020,408 or $0.27 per common share and $11,320,220 or $0.22 per common share, respectively.*

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**Investment Portfolio**

***Commercial Mortgage Loans***

As of September 30, 2025, we have determined that we are the primary beneficiary of the 2021-FL1 CLO and the LMF 2023-1 Financing 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 our loan activity by unpaid principal balance:

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| | |
|:---|:---|
| | **Commercial Mortgage Loans Held-for-Investment** |
| **Balance at December 31, 2024** | $**1048803078** |
| Purchases and fundings | 3605000 |
| Proceeds from principal repayments | (167141808) |
| Transfer to Real Estate Owned | (62580330) |
| Charge-offs | 3110581 |
| Origination and other fees | (1801036) |
| Accretion of purchase discount | 1537970 |
| Accretion of deferred loan fees | 2120794 |
| Provision for credit losses, net | (5810769) |
| **Balance at September 30, 2025** | $**821843480** |

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The following table details overall statistics for our loan portfolio as of September 30, 2025 and December 31, 2024:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | | | | **Weighted Average** | **Weighted Average** | **Weighted Average** |
| **Loan Type** |<br>**Unpaid Principal Balance** |<br>**Carrying Value**<sup>(1)</sup> |<br>**Loan Count** | **Floating Rate Loan %** | **Coupon**<sup>(2)</sup> | **Term**<br> **(Years)**<sup>(3)</sup> |
| **<u>September 30, 2025</u>** | | | | | | |
| &nbsp;&nbsp;&nbsp;<u>Loans held-for-investment</u> |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Senior secured loans<sup>(4)</sup> | $839749478 | $835863888 | 51 | 100.0% | 7.8% | 1.3 |
| &nbsp;&nbsp;&nbsp;Allowance for credit losses | N/A | $(14020408) |  |  |  |  |
|  | $**839749478** | $**821843480** | **51** | 100.0% | 7.8% | 1.3 |

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | | | | **Weighted Average** | **Weighted Average** | **Weighted Average** |
|<br>**Loan Type** |<br>**Unpaid Principal Balance** |<br>**Carrying Value**<sup>(1)</sup> |<br>**Loan Count** | **Floating Rate Loan %** | **Coupon**<sup>(2)</sup> | **Term**<br> **(Years)**<sup>(3)</sup> |
| **<u>December 31, 2024</u>** | | | | | | |
| &nbsp;&nbsp;&nbsp;<u>Loans held-for-investment</u> |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Senior secured loans<sup>(4)</sup> | $1065563646 | $1060123298 | 65 | 100.0% | 8.1% | 2.1 |
| &nbsp;&nbsp;&nbsp;Allowance for credit losses | N/A | $(11320220) |  |  |  |  |
|  | $**1065563646** | $**1048803078** | **65** | 100.0% | 8.1% | 2.1 |

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*(1)&nbsp;&nbsp;&nbsp;&nbsp;Carrying Value includes $1,928,239 and $3,466,214 in unamortized purchase discounts as of September 30, 2025 and December 31, 2024, respectively.*

*(2)&nbsp;&nbsp;&nbsp;&nbsp;Weighted average coupon assumes applicable 30-day term Secured Overnight Financing Rate ("SOFR") of 4.22% and 4.51% as of September 30, 2025 and December 31, 2024, respectively, inclusive of weighted average interest rate floors of 1.36% and 0.63%, respectively. As of September 30, 2025 and December 31, 2024, 100.0% of the investments by total investment exposure earned a floating rate indexed to 30-day term SOFR.* 

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

*(4)&nbsp;&nbsp;&nbsp;&nbsp;As of September 30, 2025, $819,117,267 of the outstanding senior secured loans were held in VIEs and $2,726,213 of the outstanding senior 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 VIEs.*

The table below sets forth additional information relating to the Company's portfolio as of September 30, 2025:

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| | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Loan #** | **Form of Investment** | **Origination Date** | **Total Loan Commitment**<sup>(1)</sup> | **Committed Principal/Investment Amount**<sup>(2)</sup> | **Current Principal/Investment Amount** | **Location** | **Property Type** | **Coupon** | **Max Remaining Term (Years)** | **LTV**<sup>(3)</sup> | **Loan/Investment**<br>**Per Unit**<sup>(4)</sup> | **Risk Rating** |
| **Senior Secured Loans** |  |  |  |  |  |  |  |  |  |  |  |  |

---

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| | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| 1 | Senior secured | December 16, 2021 | $52725000 | $52725000 | $51375000 | Daytona Beach, FL | Multifamily | 1mS + 3.2 | 1.3 | 71.7% | $207,157/unit | 3 |
| 2 | Senior secured | March 22, 2022 | $32203323 | $32103323 | $31627625 | Seneca, SC | Multifamily | 1mS + 3.4 | 1.6 | 74.5% | $263,564/unit | 3 |
| 3 | Senior secured | June 28, 2022 | $31550000 | $29940125 | $29623930 | Dallas, TX | Multifamily | 1mS + 3.4 | 1.8 | 71.6% | $95,870/unit | 4 |
| 4 | Senior secured | June 8, 2021 | $31401983 | $31400000 | $29543566 | Miami, FL | Multifamily | 1mS + 3.3 | 0.1 | 74.3% | $126,255/unit | 4 |
| 5 | Senior secured | December 29, 2021 | $29549146 | $27549146 | $27549146 | Multi, NC | Multifamily | 1mS + 4.0 | 1.3 | 59.9% | $176,597/unit | 3 |
| 6 | Senior secured | November 2, 2021 | $26049291 | $26049291 | $26049291 | Melbourne, FL | Multifamily | 1mS + 3.2 | 1.2 | 72.1% | $113,752/unit | 4 |
| 7 | Senior secured | August 26, 2021 | $25163008 | $25163008 | $24468032 | Clarkston, GA | Multifamily | 1mS + 3.6 | 2.9 | 79.0% | $86,155/unit | 4 |
| 8 | Senior secured | October 18, 2021 | $24252193 | $24252193 | $23348000 | Cherry Hill, NJ | Multifamily | 1mS + 3.1 | 1.2 | 72.4% | $132,659/unit | 3 |
| 9 | Senior secured | August 26, 2021 | $23370000 | $23065021 | $22872354 | Union City, GA | Multifamily | 1mS + 3.5 | 1.0 | 70.4% | $77,797/unit | 4 |
| 11 | Senior secured | November 16, 2021 | $21975000 | $21975000 | $21916753 | Dallas, TX | Multifamily | 1mS + 3.3 | 1.3 | 73.5% | $101,466/unit | 4 |
| 12 | Senior secured | July 8, 2022 | $23095000 | $22118543 | $21818465 | Arlington, TX | Multifamily | 1mS + 3.8 | 1.9 | 67.1% | $97,404/unit | 4 |
| 13 | Senior secured | April 27, 2022 | $49050000 | $49050000 | $21739237 | North Brunswick, NJ | Multifamily | 1mS + 3.4 | 1.7 | 79.9% | $85,926/unit | 4 |
| 14 | Senior secured | August 31, 2021 | $21750000 | $21725235 | $21644684 | Houston, TX | Multifamily | 1mS + 3.4 | 0.1 | 74.2% | $83,249/unit | 4 |
| 10 | Senior secured | March 22, 2022 | $22308996 | $21808996 | $21442771 | York, PA | Multifamily | 1mS + 3.3 | 0.6 | 79.2% | $148,908/unit | 3 |
| 15 | Senior secured | November 29, 2022 | $21283348 | $20360000 | $20360000 | Glendale, WI | Healthcare | 1mS + 4.0 | 1.3 | 45.0% | $242,381/unit | 3 |
| 16 | Senior secured | November 5, 2021 | $20965000 | $19625274 | $19625274 | Orlando, FL | Multifamily | 1mS + 3.1 | 1.2 | 78.1% | $129,969/unit | 4 |
| 17 | Senior secured | November 21, 2022 | $21135000 | $18920000 | $18920000 | Houston, TX | Healthcare | 1mS + 4.0 | 1.3 | 67.0% | $236,500/unit | 2 |
| 19 | Senior secured | February 11, 2022 | $19445670 | $19445670 | $18363394 | Tampa, FL | Multifamily | 1mS + 3.6 | 1.5 | 78.0% | $136,025/unit | 4 |
| 20 | Senior secured | November 23, 2021 | $19425000 | $18619983 | $18341502 | Orange, NJ | Multifamily | 1mS + 3.3 | 1.3 | 78.0% | $166,741/unit | 4 |
| 21 | Senior secured | April 30, 2024 | $19000000 | $18500000 | $18303744 | Garfield, NJ | Multifamily | 1mS + 3.5 | 0.7 | 66.1% | $228,797/unit | 3 |
| 18 | Senior secured | February 2, 2022 | $19740000 | $18578490 | $17936729 | Houston, TX | Multifamily | 1mS + 3.5 | 1.8 | 77.5% | $72,326/unit | 4 |
| 22 | Senior secured | March 31, 2022 | $18140000 | $16956276 | $16956276 | Tallahassee, FL | Multifamily | 1mS + 3.0 | 1.6 | 74.8% | $88,314/unit | 5 |
| 23 | Senior secured | November 10, 2022 | $16690000 | $16690000 | $16690000 | Austin, TX | Healthcare | 1mS + 4.0 | 1.3 | 65.0% | $252,879/unit | 2 |
| 24 | Senior secured | December 1, 2021 | $16039141 | $16039141 | $15449323 | Horn Lake, MS | Multifamily | 1mS + 3.4 | 1.3 | 75.7% | $107,287/unit | 4 |
| 25 | Senior secured | April 6, 2022 | $16161567 | $16161567 | $15347180 | Vineland, NJ | Multifamily | 1mS + 3.8 | 0.8 | 77.0% | $113,683/unit | 2 |
| 26 | Senior secured | February 22, 2022 | $18241527 | $15524795 | $15000000 | Philadelphia, PA | Multifamily | 1mS + 3.8 | 0.1 | 80.0% | $326,087/unit | 5 |
| 27 | Senior secured | June 15, 2022 | $15371600 | $15100334 | $14511455 | Denton, TX | Multifamily | 1mS + 3.9 | 1.8 | 73.0% | $109,109/unit | 3 |
| 29 | Senior secured | April 27, 2022 | $14171704 | $14171704 | $14171704 | Houston, TX | Multifamily | 1mS + 3.7 | 1.7 | 79.6% | $88,573/unit | 4 |
| 30 | Senior secured | November 21, 2022 | $14030000 | $14030000 | $14030000 | Southlake, TX | Healthcare | 1mS + 4.0 | 1.3 | 48.0% | $154,176/unit | 2 |
| 31 | Senior secured | December 28, 2021 | $13864376 | $13864376 | $13864376 | Houston, TX | Multifamily | 1mS + 3.3 | 0.1 | 71.2% | $35,825/unit | 4 |
| 32 | Senior secured | April 12, 2021 | $13666721 | $13666721 | $13666721 | Cedar Park, TX | Multifamily | 1mS + 3.9 | 0.7 | 66.7% | $113,889/unit | 5 |
| 33 | Senior secured | June 10, 2022 | $15250000 | $14598318 | $13625505 | Blakely, PA | Multifamily | 1mS + 3.9 | 1.8 | 75.0% | $136,255/unit | 3 |

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| | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| 34 | Senior secured | October 6, 2023 | $13191852 | $13191852 | $13191852 | Garfield, NJ | Multifamily | 1mS + 4.5 | 0.2 | 65.5% | $151,630/unit | 3 |
| 35 | Senior secured | December 20, 2024 | $60000000 | $59693454 | $13000000 | Olympia, WA | Multifamily | 1mS + 3.8 | 4.3 | 68.5% | $46,595/unit | 3 |
| 28 | Senior secured | July 26, 2022 | $17100000 | $13386484 | $12905495 | Atlanta, GA | Multifamily | 1mS + 3.7 | 1.9 | 65.2% | $126,524/unit | 3 |
| 36 | Senior secured | December 28, 2021 | $37248794 | $37248794 | $12203341 | Houston, TX | Multifamily | 1mS + 3.3 | 0.1 | 71.2% | $31,533/unit | 4 |
| 37 | Senior secured | May 12, 2022 | $11926591 | $11926591 | $11926591 | Ypsilanti, MI | Multifamily | 1mS + 3.5 | 1.8 | 68.4% | $70,992/unit | 5 |
| 38 | Senior secured | January 25, 2022 | $12000000 | $11406810 | $11261792 | Corpus Christi, TX | Multifamily | 1mS + 3.6 | 2.8 | 78.8% | $67,436/unit | 3 |
| 39 | Senior secured | October 28, 2021 | $12250000 | $12127916 | $11202535 | Tampa, FL | Multifamily | 1mS + 3.1 | 1.2 | 75.7% | $164,743/unit | 4 |
| 40 | Senior secured | May 3, 2022 | $11056241 | $11056240 | $10818945 | Port Richey, FL | Multifamily | 1mS + 3.6 | 1.7 | 79.1% | $117,597/unit | 3 |
| 41 | Senior secured | June 28, 2022 | $10531845 | $10531845 | $10531845 | Colorado Springs, CO | Multifamily | 1mS + 3.9 | 1.8 | 73.1% | $114,477/unit | 5 |
| 42 | Senior secured | September 30, 2021 | $10522226 | $10522226 | $10305308 | Clearfield, UT | Multifamily | 1mS + 3.3 | 1.1 | 68.0% | $135,596/unit | 5 |
| 43 | Senior secured | July 14, 2022 | $10153000 | $9843891 | $9429206 | Bradenton, FL | Multifamily | 1mS + 3.9 | 1.9 | 74.4% | $112,252/unit | 3 |
| 44 | Senior secured | June 22, 2022 | $9772000 | $8593992 | $8175500 | Des Moines, IA | Multifamily | 1mS + 4.0 | 1.8 | 72.0% | $60,114/unit | 5 |
| 45 | Senior secured | September 28, 2021 | $8125000 | $7286000 | $7286000 | Chicago, IL | Multifamily | 1mS + 3.8 | 1.1 | 75.9% | $269,852/unit | 4 |
| 46 | Senior secured | October 7, 2022 | $7000000 | $7000000 | $7000000 | Fairborn, OH | Multifamily | 1mS + 4.1 | 0.2 | 79.1% | $205,882/unit | 3 |
| 47 | Senior secured | October 24, 2022 | $6100000 | $6100000 | $6100000 | Various, FL | Healthcare | 1mS + 4.5 | 0.2 | 71.0% | $135,556/unit | 4 |
| 48 | Senior secured | June 3, 2022 | $6067500 | $5815886 | $5815886 | Deer Park, NY | Self Storage | 1mS + 3.6 | 1.8 | 72.5% | $10,770/unit | 3 |
| 49 | Senior secured | October 6, 2023 | $4808148 | $4808148 | $4808148 | Garfield, NJ | Multifamily | 1mS + 4.5 | 0.2 | 65.5% | $55,266/unit | 3 |
| 50 | Senior secured | May 1, 2025 | $1900000 | $1900000 | $1900000 | Austin, TX | Healthcare | 1mS + 4.0 | 1.3 | 65.0% | $28,788/unit | 2 |
| 51 | Senior secured | May 1, 2025 | $1705000 | $1705000 | $1705000 | Southlake, TX | Healthcare | 1mS + 4.0 | 1.3 | 48.0% | $18,736/unit | 2 |
| **Total/Weighted Average** |  |  | $**978521791** | $**953922659** | $**839749481** |  |  | **1mS + 3.5** | **1.3** | **71.7%** |  | **4** |
| **Real Estate Owned** |  |  |  |  |  |  |  |  |  |  |  |  |
| 1 | Real Estate Owned | February 1, 2022 | N/A | $12957120 | $12957120 | San Antonio, TX | Multifamily | N/A | N/A | N/A | $76,218/unit |  |
| 2 | Real Estate Owned | March 4, 2022 | N/A | $11000000 | $11000000 | Houston, TX | Multifamily | N/A | N/A | N/A | $76,923/unit |  |
| 3 | Real Estate Owned | June 7, 2021 | N/A | $26585176 | $26585176 | San Antonio, TX | Multifamily | N/A | N/A | N/A | $66,297/unit |  |
| 4 | Real Estate Owned | August 5, 2022 | N/A | $8927453 | $8927453 | San Antonio, TX | Multifamily | N/A | N/A | N/A | $61,996/unit |  |
| **Total** |  |  |  | $**59469749** | $**59469749** |  |  |  |  |  |  |  |

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

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

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

*(4)&nbsp;&nbsp;&nbsp;&nbsp;Loan Per Unit is based on the current principal amount divided by the property's current unit count.*

We did not have any impaired loans, non-accrual loans, or loans in maturity default other than the loans discussed below as of September 30, 2025 or December 31, 2024.

During the period ended September 30, 2025, management continued to identify a loan, collateralized by a multifamily property in Colorado Springs, CO, with an unpaid principal value of $10.3 million as requiring individual evaluation for a specific allowance for credit losses due to monetary default, and a resulting risk rating of "5"; a specific allowance of $1.3 million for credit losses was required after analysis of the underlying collateral value. This loan has

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been on non-accrual status since December 31, 2024 as a result of the monetary default, with interest recorded as income on a cash basis. During the three and nine months ended September 30, 2025, the Company recognized $0.1 million and $0.3 million of interest on this loan, respectively.

During the period ended September 30, 2025, management continued to identify a loan, collateralized by a multifamily property in Ypsilanti, MI, with an unpaid principal value of $11.9 million as requiring individual evaluation for a specific allowance for credit losses due to monetary default, and a resulting risk rating of "5"; a specific allowance of $4.1 million for credit losses was required after analysis of the underlying collateral value. This loan has been on non-accrual status since March 31, 2025 as a result of the monetary default, with interest recorded as income on a cash basis. During the three months ended September 30, 2025, the Company has not recognized interest on this loan.

During the period ended September 30, 2025, management continued to identify a loan, collateralized by a multifamily property in Cedar Park, TX, with an unpaid principal value of $13.7 million as requiring individual evaluation for a specific allowance for credit losses due to monetary default, and a resulting risk rating of "5"; however, no specific allowance for credit losses was required after analysis of the underlying collateral value. This loan was placed on non-accrual status as of June 30, 2025, as a result of the monetary default, with interest recorded as income on a cash basis. During the three months ended September 30, 2025, the Company recognized $0.2 million of interest on this loan.

During the period ended September 30, 2025, management continued to identify a loan, collateralized by a multifamily property in Des Moines, IA, with an unpaid principal value of $8.2 million as requiring individual evaluation for a specific allowance for credit losses due to monetary default, and a resulting risk rating of "5"; however, no specific allowance for credit losses was required after analysis of the underlying collateral value. This loan was placed on non-accrual status as of June 30, 2025, as a result of the monetary default, with interest recorded as income on a cash basis. During the three months ended September 30, 2025, the Company has not recognized interest on this loan.

During the period ended September 30, 2025, management identified a loan, collateralized by a multifamily property in Clearfield, UT, with an unpaid principal value of $10.3 million as requiring individual evaluation for a specific allowance for credit losses due to maturity default, and a resulting risk rating of "5"; however, no specific allowance for credit losses was required after analysis of the underlying collateral value.

During the period ended September 30, 2025, management identified a loan, collateralized by two multifamily properties in Tallahassee, FL, with an unpaid principal value of $17.0 million as requiring individual evaluation for a specific allowance for credit losses due to monetary default, and a resulting risk rating of "5"; a specific allowance of 2.9 million for credit losses was required after analysis of the underlying collateral value. This loan was placed on non-accrual status as of September 30, 2025, as a result of the monetary default, with interest recorded as income on a cash basis. During the three months ended September 30, 2025, the Company has not recognized interest on this loan.

During the period ended December 31, 2024, management identified a loan, collateralized by two multifamily properties in Philadelphia, PA, with an unpaid aggregate principal value of 15.0 million as requiring individual evaluation for a specific allowance for credit losses due to monetary default, and a resulting risk rating of "5"; a specific allowance of 0.1 million for credit losses was required after analysis of the underlying collateral value. This loan was placed on non-accrual status as of June 30, 2024, as a result of the monetary default, with interest collections accounted for under the cost recovery method. In the second quarter of 2025, this loan transitioned to a risk rating of "4", was performing on its interest payments and was returned to accrual status. During the period ended September 30, 2025, management identified this loan as requiring individual evaluation for a specific allowance for credit losses due to maturity default, and a resulting risk rating of "5"; however, no specific allowance for credit losses was required after analysis of the underlying collateral value.

During the period ended December 31, 2024, management identified a loan, collateralized by a multifamily property in Dallas, TX, with an unpaid principal value of $31.6 million as requiring individual evaluation for a specific allowance for credit losses due to technical default, and a resulting risk rating of "5"; however, no specific allowance for credit losses was required after analysis of the underlying collateral value. In the first quarter of 2025, this loan was modified as discussed below and transitioned to a risk rating of "3".

During the period ended December 31, 2024, management identified a loan, collateralized by two healthcare properties in Polk County, FL, with an unpaid aggregate principal value of $6.1 million as requiring individual evaluation for a specific allowance for credit losses due to monetary default, and a resulting risk rating of "5"; a specific allowance of $0.6 million for credit losses was required after analysis of the underlying collateral value. This loan was placed on non-accrual as of December 31, 2024 as a result of the monetary default, with interest recorded as income on a cash basis. In the first quarter of 2025, this loan transitioned to a risk rating of "4", is performing on its interest payments and was returned to accrual status.

During the period ended December 31, 2024, management identified a loan, collateralized by a multifamily property in San Antonio, TX, with an unpaid principal value of $15.4 million as requiring individual evaluation for a specific allowance for credit losses due to technical default, and a resulting risk rating of "5"; a specific allowance of $2.4 million for credit losses was required after analysis of the underlying collateral value. This loan was placed on non-accrual status as of December 31, 2024 as a result of the technical default, with interest recognized as income on a cash basis. In the second quarter of 2025, this loan was foreclosed on, with ownership and deed to the property being taken by a newly formed subsidiary of 2021-FL1 CLO.

During the period ended March 31, 2025, management identified a loan, collateralized by a multifamily property in Houston, TX, with an unpaid principal value of $11.5 million as requiring individual evaluation for a specific allowance for credit losses due to monetary default, and a resulting risk rating of "5"; a specific allowance of $0.5 million for credit losses was required after analysis of the underlying collateral value. In the second quarter of 2025, this loan was foreclosed on, with ownership and deed to the property being taken by a newly formed subsidiary of LMF 2023-1 Financing.

During the period ended December 31, 2024, management identified a loan, collateralized by a multifamily property in Orlando, FL, with an unpaid principal balance of 19.6 million as requiring individual evaluation for a specific allowance for credit losses due to maturity default, and a resulting risk rating of "5"; however, no specific allowance for credit losses were required after analysis of the underlying collateral. In the third quarter of 2025, this loan transitioned to a risk rating of "4".

During the period ended March 31, 2025, management identified a loan, collateralized by a multifamily property in Clarkston, GA, with an unpaid principal value of $24.5 million as requiring individual evaluation for a specific allowance for credit losses due to monetary default, and a resulting risk rating of "5"; a specific allowance of $3.8 million for credit losses was required after analysis of the underlying collateral value. In the third quarter of 2025, as a result of a loan modification, this loan transitioned to a risk rating of "4". The loan is performing on its interest payments and was returned to accrual status. Additionally, due to this transition, the prior specific allowance of $3.8 million was reversed in the quarter.

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During the period ended June 30, 2025, management identified a loan, collateralized by a multifamily property in San Antonio, TX, with an unpaid principal value of $26.6 million as requiring individual evaluation for a specific allowance for credit losses due to monetary default, and a resulting risk rating of "5"; however, no specific allowance for credit losses was required after analysis of the underlying collateral value. In the third quarter of 2025, this loan was foreclosed on, with ownership of the property being taken by a newly formed subsidiary of 2021-FL1 CLO.

During the period ended June 30, 2025, management identified a loan, collateralized by a multifamily property in San Antonio, TX, with an unpaid principal value of $9.1 million as requiring individual evaluation for a specific allowance for credit losses due to monetary default, and a resulting risk rating of "5"; a specific allowance of 0.2 million for credit losses was required after analysis of the underlying collateral value. In the third quarter of 2025, this loan was foreclosed on, with ownership of the property being taken by a newly formed subsidiary of LMF 2023-1 Financing.

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

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

In March 2025, in connection with a loan assumption, the Company modified a risk-rated 5 multifamily loan located in Dallas, TX, with an outstanding principal balance of $31.9 million. The terms of the modification included, among other things, a $2.0 million principal repayment, a term extension of two years, a reduction in credit spread from 3.9% to 3.4% and a purchase of a replacement interest rate cap.

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 increased during the nine months ended September 30, 2025. The change in underlying risk rating consisted of loans that paid off with a risk rating of "2" of $27.1 million, a risk rating of "3" of $115.0 million, a risk rating of "4" of $22.7 million and a risk rating of "5" of $2.0 million during the nine months ended September 30, 2025, partially offset by funding of loans with a risk rating of "2" of $3.6 million. Additionally, $34.3 million of loans with a risk rating of "3" transitioned to a risk rating of "2," $203.8 million of loans with a risk rating of "3" transitioned to a risk rating of "4", $13.7 million of loans with a risk rating of "3" transitioned to a risk rating of "5," $96.2 million of loans with a risk rating of "4" transitioned to a risk rating of "3", $47.4 million of loans with a risk rating of "4" transitioned to a risk rating of "5" and $55.3 million of loans with a risk rating of "5" transitioned to a risk rating of "4". Further, $35.7 million of loans with a risk rating of "3", $11.5 million of loans with a risk rating of "4" and $15.4 million of loans with a risk rating of "5" were foreclosed and moved to REO. The following table presents the principal balance and net book value based on the Company's internal risk ratings as of September 30, 2025:

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | **September 30, 2025** | **September 30, 2025** | **September 30, 2025** | **September 30, 2025** | **September 30, 2025** | **September 30, 2025** | **September 30, 2025** |
| | | | **Amortized Cost by Year of Origination** | **Amortized Cost by Year of Origination** | **Amortized Cost by Year of Origination** | **Amortized Cost by Year of Origination** | **Amortized Cost by Year of Origination** |
|<br>**Risk Rating** |<br>**Number of Loans** |<br>**Outstanding Principal** | **2025** | **2024** | **2023** | **2022** | **2021** |
| 1 |  | $— | $— | $— | $— | $— | $— |
| 2 | 6 | 68592180 | 3589519 |  |  | 64377719 |  |
| 3 | 18 | 310374570 |  | 31128363 | 17986869 | 156538080 | 102005156 |
| 4 | 20 | 374220488 |  |  |  | 127592859 | 241752690 |
| 5 | 7 | 86562240 |  |  |  | 52900197 | 23972028 |
|  | **51** | $**839749478** | $**3589519** | $**31128363** | $**17986869** | $**401408855** | $**367729874** |

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***Real Estate Owned***

A summary of our REO assets is as follows:

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| | | |
|:---|:---|:---|
| | **September 30, 2025** | **December 31, 2024** |
|<br>**Real estate owned, held-for-investment** | | |
| Land | $5877407 | $— |
| Building | 43864456 |  |
| Less: Accumulated depreciation and amortization | (483562) |  |
| Total | $**49258301** | $**—** |
| **Real estate owned, held-for-sale** |  |  |
| Real estate owned, held-for-sale | $**8871841** | $**—** |
| Total | $**8871841** | $**—** |

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At September 30, 2025, our REO assets were comprised of four multifamily properties held within 2021-FL1 CLO and LMF 2023-1 Financing.

During the nine months ended September 30, 2025, Lument Real Estate Capital, LLC ("LREC"), as special servicer for 2021-FL1 CLO foreclosed on two multifamily bridge loans with aggregate net carrying value of $39.5 million, net of specific CECL reserves of $2.4 million, with ownership and deed to the

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property being taken by a newly formed subsidiary of 2021-FL1 CLO. Additionally, LREC, as special servicer for LMF 2023-1 Financing foreclosed on two multifamily bridge loans with aggregate net carrying value of $19.9 million, net of specific CECL reserves of $0.7 million, with ownership and deed to the property being taken by a newly formed subsidiary of LMF 2023-1 Financing.

The fair value of the underlying collateral is 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 ranged from 6.25%-7.40%. The significant unobservable input used for the market approach is the price per unit from an appraisal or broker opinion of value.

At September 30, 2025, our REO properties had a weighted average occupancy rate of approximately 73.5%.

We recorded depreciation and amortization expense related to the REO assets of $0.3 million and $0.5 million for the three and nine months ended September 30, 2025, 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 million for the three and nine months ended September 30, 2025, respectively, recorded as ""net income (expense) from real estate owned operations" and operating expense of $1.4 million for the three and nine months ended September 30, 2025, respectively, recorded as "net income (expense) from real estate owned operations" in the consolidated statement of operations.

**Total Financing**

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

The following table summarizes our financing agreements:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **September 30, 2025** | **September 30, 2025** | **September 30, 2025** | **September 30, 2025** | **September 30, 2025** | **December 31, 2024** |
| | | | | **Borrowings** | **Borrowings** | **Borrowings** |
| |<br>**Non-/Mark-to-Market** | **Maximum**<br>**Facility Size**<sup>(1)</sup> | **Collateral**<br>**Assets**<sup>(2)</sup> | **Outstanding** | **Available** | **Outstanding** |
| Collateralized loan obligations | Non-Mark-to-Market | $602870982 | $605985901 | $602870982 | $— | $679248696 |
| Secured Financings | Non-Mark-to-Market | 303302604 | 292738907 | 303302604 |  | 386300000 |
| Secured term loan | Non-Mark-to-Market | 47750000 | N/A | 47750000 |  | 47750000 |
|  |  | $953923586 |  | $953923586 | $— | $1113298696 |

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*(1)&nbsp;&nbsp;&nbsp;&nbsp;Maximum facility size represents the largest amount of borrowings under a given facility once sufficient collateral assets have been approved by the lender and pledged by us. Collateralized loan obligations maximum facility size reduced by repayment of Class A Notes of $397.1 million and secured financings maximum facility size reduced by repayment of Class A Loans of $44.8 million. Includes $166.3 million in collateralized loan obligations retained interests and $83.0 million in secured financings retained interests that are eliminated in consolidation in our balance sheets at September 30, 2025 and December 31, 2024, respectively.*

*(2)&nbsp;&nbsp;&nbsp;&nbsp;Represents the principal balance of the collateral assets.* 

***Collateralized Loan Obligations and Secured Financings***

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

On 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 are 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 notes in the issuing vehicle of approximately

$68.6 million. The Senior Debt has an initial weighted average spread of approximately 314 basis points over 30-day term SOFR, excluding fees and transaction costs. The Senior Debt matures on the payment date in July 2032, unless it is sooner repaid or redeemed in accordance with its terms. The financing 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 will be reduced as loans are repaid.

The following table presents certain loan and borrowing characteristics of 2021-FL1 CLO and LMF 2023-1 Financing as of September 30, 2025:

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| | | | | |
|:---|:---|:---|:---|:---|
| **As of September 30, 2025** | **As of September 30, 2025** | **As of September 30, 2025** | **As of September 30, 2025** | **As of September 30, 2025** |
| **Collateralized Loan Obligations/Financings** | **Count** | **Principal Value**<sup>(1)</sup> | **Carrying Value**<sup>(2)</sup> | **Wtd. Avg. Coupon**<sup>(3)</sup> |
| Collateral (loan investments) | 49 | $836144479 | $819117267 | 7.77% |
| Collateral (REO assets) | 2 | $62580330 | $58130142 | N/A |
| Financing provided | 2 | $671323586 | $669775299 | 6.45% |

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*(1) &nbsp;&nbsp;&nbsp;&nbsp;The principal value for Collateral (REO assets) is the initial loan exposure*

*(2) &nbsp;&nbsp;&nbsp;&nbsp;The carrying value of the collateral is net of unaccreted purchase discounts of $1,928,239 and allowance for credit loss of $14,020,408 as of September 30, 2025. The carrying value for LMF 2023-1 Financing is net of debt issuance costs of $1,548,287 for September 30, 2025.*

*(3)&nbsp;&nbsp;&nbsp;&nbsp;Weighted average coupon for loan investments assumes applicable 30-day term SOFR of 4.22% as of September 30, 2025, inclusive of weighted average interest rate floors of 1.37% and spreads of 3.55%. Weighted average coupon for the financings assumes applicable 30-day term SOFR of 4.15% as of September 30, 2025 and spreads of 2.30% as of September 30, 2025.*

**Secured Term Loan**

In January 2020, we entered into a $40.25 million secured term loan with an initial maturity of February 2025. In April 2021, we entered into an amendment, providing, among other things, an incremental secured term loan in the amount of $7.5 million and a one-year maturity extension to February 2026. In August 2021, the Company drew down the $7.5 million incremental secured term loan.

Borrowings under the Secured Term Loan bear interest at a fixed rate of 7.25% for the six-year period following the initial draw-down, which is subject to step up by 0.25% for the first four months after the sixth anniversary of the borrowing of the Senior Secured Term Loan, then by 0.375% for the following four months, then by 0.50% for the last four months until maturity. On February 24, 2025, the interest rate on the Secured Term Loan stepped up to 7.50% and on June 23, 2025 the interest rate stepped up to 7.85%.

The Credit Agreement contains affirmative and negative covenants binding the Company and its subsidiaries that are customary for credit facilities of this type, including, but not limited to: minimum asset coverage ratio; minimum unencumbered assets ratio; maximum total net leverage ratio, minimum tangible net worth; and an interest charge coverage ratio. As of September 30, 2025 and December 31, 2024, we were in compliance with these covenants.

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

**FOAC and Changes to Our Residential Mortgage Loan Business**

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

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

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

**Critical Accounting Policies and Estimates** 

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

***Commercial Mortgage Loans Held-for-Investment***

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The Company recognizes and measures the allowance for credit losses under the Current Expected Credit Loss ("CECL") model which amended the previous credit loss model to reflect a reporting entity's current estimate of all expected credit losses, not only based on historical experience and current economic conditions, but also by including reasonable and supportable forecasts incorporating forward-looking information. The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost, and off-balance credit exposures such as unfunded loan commitments. The allowance for credit losses required under ASU 2016-13 is included in "Allowance for credit losses" on our consolidated balance sheets. The allowance for credit losses attributed to unfunded loan commitments is included in "Other liabilities" on the consolidated balance sheets.

The Company estimates the allowance for credit losses for its portfolio on a collective basis, including unfunded loan commitments, for loans that share similar risk characteristics. The calculation is applied at the loan level. The allowance for credit losses estimation methodology used by LFT includes a probability of default and loss given default method utilizing a widely used third-party analytical model with historical loan losses for over 125,000 commercial real estate loans dating back to 1998. Within this data set, we focused our historical loss information on the most relevant subset of available CRE data, which we determined based on loan metrics that are most comparable to our loan portfolio including asset type, spread to interest rate, unpaid principal balance and origination loan-to-value, or LTV. The Company expects to use this proxy data set, or variants of it, unless the Company develops its own sufficient history of realized losses. The Company determined the key variables driving its allowance for credit losses estimate are debt service coverage ratio and LTV ratio. Other notable variables include property type, property location and loan vintage. The Company determines its allowance for credit loss estimate based on the weighting of multiple macroeconomic forecast scenarios driven by macroeconomic variables such as gross domestic product ("GDP"), unemployment rate, federal funds target rate and core personal consumption expenditure ("CPR") among others, during the reasonable and supportable forecast period. The reasonable and supportable forecast period is currently one year, however, the Company regularly evaluates the reasonable and supportable forecast period to determine if a change is needed based on our assessment of the most likely scenario of assumptions and plausible outcomes for the U.S. economy. For the period beyond which the Company is able to make reasonable and supportable forecasts, the Company reverts, on a straight-line basis over four quarters, to the historical loss information derived from CRE data set.

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

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

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.**Low Risk**: meeting or exceeding underwritten expectations

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

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

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

**Capital Allocation**

The following tables set forth our allocated capital by investment type at September 30, 2025 and December 31, 2024:

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

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **September 30, 2025** | **September 30, 2025** | **September 30, 2025** | **September 30, 2025** | **September 30, 2025** |
| | **Commercial Mortgage Loans** | **Real Estate Owned** | **MSRs** | **Unrestricted Cash**<sup>(1)</sup> | **Total**<sup>(2)</sup> |
| Carrying Value | $821843480 | $58130142 | $565613 | $56022352 | $936561587 |
| Collateralized Loan Obligations | (669775299) |  |  |  | (669775299) |
| Other<sup>(3)</sup> | 13104750 |  |  | (2985911) | 10118839 |
| Restricted Cash | 823644 |  |  |  | 823644 |
| Capital Allocated | $**165996575** | $**58130142** | $**565613** | $**53036441** | $**277728771** |
| % Capital | **59.8%** | **20.9%** | **0.2%** | **19.1%** | **100.0%** |

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| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
| | **Commercial Mortgage Loans** | **MSRs** | **Unrestricted Cash**<sup>(1)</sup> | **Total**<sup>(2)</sup> |
| Carrying Value | $1048803078 | $649287 | $69173444 | $1118625809 |
| Collateralized Loan Obligations | (828390189) |  |  | (828390189) |
| Other<sup>(3)</sup> | 3334458 |  | (10591605) | (7257147) |
| Restricted Cash | 2390654 |  |  | 2390654 |
| Capital Allocated | $**226138001** | $**649287** | $**58581839** | $**285369127** |
| % Capital | **79.3%** | **0.2%** | **20.5%** | **100.0%** |

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*(1)Includes cash and cash equivalents.*

*(2)Includes the carrying value of our Secured Term Loan.*

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

**Results of Operations**

The table below presents information from our Statement of Operations for the three months ended September 30, 2025 and June 30, 2025, respectively:

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| | | |
|:---|:---|:---|
| | **Three Months Ended September 30, 2025** | **Three Months Ended June 30, 2025** |
| | (unaudited) | (unaudited) |
| **Revenues:** |  |  |
| &nbsp;&nbsp;&nbsp;Interest income: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commercial mortgage loans held-for-investment | $17696281 | $19976355 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents | 592519 | 602563 |
| &nbsp;&nbsp;&nbsp;Interest expense: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Collateralized loan obligations and secured financings | (12213561) | (12646774) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Secured Term Loan | (1023777) | (971365) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest income | 5051462 | 6960779 |
| **Expenses:** |  |  |
| &nbsp;&nbsp;&nbsp;Management and incentive fees | 1099959 | 1302526 |
| &nbsp;&nbsp;&nbsp;General and administrative expenses | 1144444 | 1006961 |
| &nbsp;&nbsp;&nbsp;Operating expenses reimbursable to Manager | 451778 | 494801 |
| &nbsp;&nbsp;&nbsp;Other operating expenses | 269732 | 240527 |
| &nbsp;&nbsp;&nbsp;Compensation expense | 111250 | 111250 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total expenses | 3077163 | 3156065 |
| **Other income and expense:** |  |  |
| &nbsp;&nbsp;&nbsp;Release of (provision for) credit losses, net | 29660 | (94768) |
| &nbsp;&nbsp;&nbsp;Net income (expense) from real estate owned operations | (188945) |  |
| &nbsp;&nbsp;&nbsp;Change in unrealized (loss) gain on mortgage servicing rights | (24700) | (36456) |
| &nbsp;&nbsp;&nbsp;Servicing income, net | 50423 | 13199 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other income and expense | (133562) | (118025) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income (loss) before provision for income taxes | 1840737 | 3686689 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provision for income taxes | 2902 | 4084 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income (loss) | 1843639 | 3690773 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends accrued to preferred stockholders | (1185042) | (1185042) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income (loss) attributable to common stockholders | $658597 | $2505731 |
| Earnings per share: |  |  |
| &nbsp;&nbsp;&nbsp;Net income (loss) attributable to common stockholders (basic and diluted) | $658597 | $2505731 |
| &nbsp;&nbsp;&nbsp;&nbsp;Weighted average number of shares of common stock outstanding | 52352469 | 52332304 |
| &nbsp;&nbsp;&nbsp;&nbsp;Basic and diluted income per share | $0.01 | $0.05 |
| &nbsp;&nbsp;&nbsp;Dividends declared per share of common stock | $0.04 | $0.06 |

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***Three Months Ended September 30, 2025 Compared to Three Months Ended June 30, 2025***

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<u>Net Income (Loss) Summary</u>

For the three months ended September 30, 2025, our net income attributable to common stockholders was $642,231, or $0.01 basic and diluted net income per average share, compared with net loss of $2,505,731, or $0.05 basic and diluted net loss per average share, for the three months ended June 30, 2025. The principal driver of this net income decrease were a decrease in net interest income from $6,960,779 for the three months ended June 30, 2025 to $5,051,462 for the three months ended September 30, 2025.

<u>Net Interest Income</u>

For the three months ended September 30, 2025 and the three months ended June 30, 2025, our net interest income was $5,051,462 and $6,960,779, respectively. The decrease was primarily due to (i) an $61.2 million decrease in weighted-average principal balance of our loan portfolio resulting in a decrease in interest income of $1.0 million; (ii) a decrease in interest income adjustments due to non-accrual loans of $0.8 million; (iii) a decrease in exit fees of $0.3 million; and (iv) a $0.3 million decrease in accretion of purchase discount. This was partially offset by (i) a $37.8 million decrease in weighted-average principal balance of our secured borrowings resulting in a decrease in interest expense of $0.5 million and (ii) an increase in extension fees of $0.3 million.

As disclosed above, we experienced a decrease in exit fees in the three months ended September 30, 2025. For the three months ended September 30, 2025, we experienced loan payoffs on five loans with net principal balances of $11.0 million which generated exit fees of $0.1 million included in interest income and two loans with net unpaid principal balance of $37.7 million which waived exit fees of $0.4 million resulting in a reduction to expense reimbursement of $0.2 million included in operating expenses reimbursable to Manager. For the three months ended June 30, 2025, we experienced loan payoffs on nine loans with net principal balances of $63.4 million which generated exit fees of $0.4 million included in interest income.

<u>Expenses</u>

For the three months ended September 30, 2025, we incurred management and incentive fees of $1,099,959 representing amounts payable to our Manager under our management agreement. We also incurred operating expenses of $2,182,515, of which $451,778 was payable to our Manager and $1,730,735 was payable directly by us.

For the three months ended June 30, 2025, we incurred management and incentive fees of $1,302,526 representing amounts payable to our Manager under our management agreement. We also incurred operating expenses of $1,853,359 of which $494,801 was payable to our Manager and $1,358,738 was payable directly by us.

The period-over-period increase in expenses primarily reflects an increase to accounting, depreciation, investor relations and legal which more than offset a decrease in incentive, reimbursed, CLO, and tax fees.

<u>Other Income and Expense</u>

For the three months ended September 30, 2025, our other income and expense was a loss of $133,562. This was driven primarily by a reversal of provision for credit losses of $29,660 due to a decrease in general CECL reserves as a result of changes in macroeconomic assumptions employed in determining the company's model-based general reserve, partially offset by the increase in specific reserves taken on risk-rated "5" multifamily loans and net servicing income of $50,423, which was more than offset by net expense from real estate owned operations of $188,945 and net unrealized loss on mortgage servicing rights of $24,700 as a result of reduction in principal balances.

For the three months ended June 30, 2025, our other income and expense loss was $118,025. This was primarily driven by provision for credit losses of $94,768 due to an increase in general CECL reserves as a result of changes in macroeconomic assumptions employed in determining the company's model-based general reserve, partially offset by the release specific reserves taken on risk-rated "5" multifamily loans and net unrealized loss on mortgage servicing rights of $36,456, which more than offset net servicing income of $13,199.

The period-over-period decrease in other income and expense was primarily due to the change in provision for credit losses.

<u>Income Tax Provision</u>

For the three months ended September 30, 2025, the Company recognized a benefit for income taxes of $2,902 and for the three months ended June 30, 2025, the Company recognized a benefit for income taxes in the amount of $4,084. The period-over-period decrease in tax benefit primarily reflects the change in gross deferred revenue at FOAC due to the change in unrealized loss on mortgage servicing rights.

The table below presents information from our Statement of Operations for the nine months ended September 30, 2025 and September 30, 2024, respectively:

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| | | |
|:---|:---|:---|
| | **Nine Months Ended September 30, 2025** | **Nine Months Ended September 30, 2024** |
| | (unaudited) | (unaudited) |
| **Revenues:** |  |  |
| &nbsp;&nbsp;&nbsp;Interest income: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commercial mortgage loans held-for-investment | 59357526 | 93553383 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents | 1820049 | 2197768 |
| &nbsp;&nbsp;&nbsp;Interest expense: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Collateralized loan obligations and secured financings | (38496809) | (60929273) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Secured term loan | (2933991) | (2821931) |

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest income | 19746775 | 31999947 |
| **Expenses:** |  |  |
| &nbsp;&nbsp;&nbsp;Management and incentive fees | 3515799 | 5507768 |
| &nbsp;&nbsp;&nbsp;General and administrative expenses | 3075465 | 3425430 |
| &nbsp;&nbsp;&nbsp;Operating expenses reimbursable to Manager | 1351199 | 1293627 |
| &nbsp;&nbsp;&nbsp;Other operating expenses | 411491 | 138036 |
| &nbsp;&nbsp;&nbsp;Compensation expense | 333750 | 333750 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total expenses | 8687704 | 10698611 |
| **Other income and expense:** |  |  |
| &nbsp;&nbsp;&nbsp;Provision for credit losses, net | (5762769) | (3494024) |
| &nbsp;&nbsp;&nbsp;Net income (expense) from real estate owned operations | (327722) |  |
| &nbsp;&nbsp;&nbsp;Change in unrealized (loss) gain on mortgage servicing rights | (83674) | (51664) |
| &nbsp;&nbsp;&nbsp;Servicing income, net | 128502 | 117056 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other income and expense | (6045663) | (3428632) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income before provision for income taxes | 5013408 | 17872704 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provision for income taxes | (1564) | (13351) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income | 5011844 | 17859353 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends accrued to preferred stockholders | (3555042) | (3555041) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net (loss) income attributable to common stockholders | $1456802 | $14304312 |
| Earnings per share: |  |  |
| &nbsp;&nbsp;&nbsp;Net (loss) income attributable to common stockholders (basic and diluted) | $1456802 | $14304312 |
| &nbsp;&nbsp;&nbsp;&nbsp;Weighted average number of shares of common stock outstanding | 52331709 | 52266444 |
| &nbsp;&nbsp;&nbsp;&nbsp;Basic and diluted income per share | $0.03 | $0.27 |
| &nbsp;&nbsp;&nbsp;Dividends declared per share of common stock | $0.18 | $0.23 |

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***Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024***

<u>Net (Loss) Income Summary</u>

For the nine months ended September 30, 2025, our net income attributable to common stockholders was $1,456,802, or $0.03 basic and diluted net income per average share, compared with net income of $14,304,312, or $0.27 basic and diluted net income per average share, for the nine months ended September 30, 2024. The principal drivers of this net income decrease were a decrease in net interest income from $31,999,947 for the nine months ended September 30, 2024 to $19,746,775 for the nine months ended September 30, 2025, and an increase in total other expense from $3,428,632 for the nine months ended September 30, 2024 to $6,045,663 for the nine months ended September 30, 2025 due to specific reserves taken on risk-rated "5" multifamily loans, partially offset by a decrease in total expenses from $10,698,611 for the nine months ended September 30, 2024 to $8,687,704 for the nine months ended September 30, 2025.

<u>Net Interest Income</u>

For the nine months ended September 30, 2025 and the nine months ended September 30, 2024, our net interest income was $19,746,775 and $31,999,947, respectively. The decrease was primarily due to (i) a $269.1 million decrease in weighted-average principal balance of our loan portfolio resulting in a decrease to interest income of $28.5 millions; (ii) a decrease in interest income adjustments due to non-accrual loans of $2.9 million; (iii) a 100bps decrease in weighted-average floating rate of our loan portfolio for the nine months ended September 30, 2025 compared to the corresponding period in 2024 and (iv) a 3bps decrease in weighted-average spread of our loan portfolio; (v) a decrease in exit fees of $0.4 million; (vi) a 23bps increase in weighted-average spread of our secured borrowing liabilities and (vii) one-time income of $2.5 million related to the resolution of the defaulted Columbus, Ohio loans for the nine months ended September 30, 2024. This was partially offset by (i) a $285.7 million decrease in weighted-average principal balance of our secured borrowings resulting in a decrease to interest expense of $20.6 millions; (ii) a 100bps decrease in weighted-average floating rate of secured borrowing liabilities; (iii) an increase in extension fees of $1.2 million and (iv) a $1.9 million reduction in deferred financing costs.

As disclosed above, we experienced a decrease in exit fees in the nine months ended September 30, 2025. For the nine months ended September 30, 2025, we experienced loan payoffs on 24 loans with net principal balances of $121.9 million which generated exit fees of $1.2 million included in interest income and three loans with net unpaid principal balance of $44.9 million which waived exit fees of $0.4 million resulting in a reduction in expense reimbursement of $0.2 million included in operating expenses reimbursable to Manager. For the nine months ended September 30, 2024, we experienced loan payoffs on ten loans with net principal balances of $178.5 million which generated exit fees of $1.6 million included in interest income, four loans with net unpaid principal balance of $49.2 million which waived exit fees of $0.4 million resulting in a reduction to expense reimbursement of $0.2 million included in operating expenses reimbursable to Manager.

<u>Expenses</u>

For the nine months ended September 30, 2025, we incurred management and incentive fees of $3,515,799 representing amounts payable to our Manager under our management agreement. We also incurred operating expenses of $5,171,905, of which $1,351,199 was payable to our Manager and $3,820,706 was payable directly by us.

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For the nine months ended September 30, 2024, we incurred management and incentive fees of $5,507,768 representing amounts payable to our Manager under our management agreement. We also incurred operating expenses of $5,190,843 of which $1,293,627 was payable to our Manager and $3,897,216 was payable directly by us.

The period-over-period decrease in expenses primarily reflects a decrease to incentive, accounting, administration, audit, professional and CLO fees which more than offset an increase in depreciation, legal, tax and investor relations fees.

<u>Other Income and Expense</u>

For the nine months ended September 30, 2025, our other income and expense was a loss of $6,045,663. This loss was primarily driven by provision for credit losses of $5,762,769 due to specific reserves taken on risk-rated "5" multifamily loans, changes in macroeconomic assumptions employed in determining the Company's model-based general reserve, net expense from real estate owned operations of $327,722 and net unrealized loss on mortgage servicing rights of $83,674 as a result of reduction in principal balances, which more than offset net servicing income of $128,502.

For the nine months ended September 30, 2024, our other income and expense was $3,428,632. This loss was driven by provision for credit losses of $3,494,024 due to specific reserves taken on risk-rated "5" multifamily loans, changes in macroeconomic assumptions employed in determining the Company's model-based general reserve and net unrealized loss on mortgage servicing rights of $51,664 as a result of reduction in principal balances, which more than offset net servicing income of $117,056.

The period-over-period decrease to other income and expense was primarily due to the change in the provision for credit losses.

<u>Income Tax Provision</u>

For the nine months ended September 30, 2025, the Company recognized a provision for income taxes of $1,564 and for the nine months ended September 30, 2024, the Company recognized a provision for income taxes in the amount of $13,351. The period-over-period decrease in tax provision primarily reflects the change in gross deferred revenue at FOAC due to the change in unrealized loss on mortgage servicing rights.

**Liquidity and Capital Resources**

Liquidity is a measurement of our ability to meet potential cash requirements, including ongoing commitments to pay dividends, fund investments, comply with margin requirements, if any, and repay borrowings and other general business needs. Our primary sources of liquidity have been met with net proceeds of common or preferred stock issuance, net proceeds from our term loan and net cash provided by operating activities, primarily derived from our retained beneficial interest in CRE CLOs and secured financings. We currently finance our commercial mortgage loans primarily with non-recourse match term secured borrowings, which are not subject to margin calls or additional collateralization requirements. On June 14, 2021, we closed the 2021-FL1 CLO issuing eight tranches of CLO notes totaling $903.8 million. Of the total CLO notes issued $833.8 million were investment grade notes issued to third-party investors and $70.0 million were below investment-grade notes retained by us. On July 12, 2023, we closed the LMF 2023-1 Financing placing $270.4 million of an investment-grade rated senior secured floating-rate loan with a private lender, issued and sold approximately $47.3 million of investment-grade rated notes to an affiliate of our Manager and retained the subordinate interests in the issuing vehicle of approximately $68.6 million. On August 23, 2021 we drew an additional $7.5 million of our Secured Term Loan pursuant to the Third Amendment. As of September 30, 2025, our balance sheet included $47.8 million of a secured term loan and $0.7 billion in collateralized loan financing, gross of discounts and debt issuance costs. Our secured term loan matures in February 2026, our collateralized loan financing is term-matched and matures in 2039 or later and our collateralized financing is match-termed and matures in 2032 or later. However, to the extent that we seek to invest in additional commercial mortgage loans, we will in part be dependent on our ability to issue additional collateralized loan obligations, secure alternative financing facilities or to raise additional common or preferred equity. Notwithstanding the current period of relatively high interest rates, the U.S. Federal Reserve began decreasing rates in 2024. Although decelerating, inflation remains above the U.S. Federal Reserve's target levels. Despite multiple federal fund rate decreases over the course of 2024 and 2025, interest rates have remained elevated. Although capital markets have largely adjusted to a higher-for-longer rate environment and persistent geopolitical uncertainty, unexpected market dislocations could reduce liquidity and further affect borrowing costs. A lack of liquidity for a prolonged period of time could limit our ability to grow this business.

Our primary driver of cash flows from operating activities is from interest received from the junior retained notes and preferred shares of our CRE CLO and secured financing. Additionally, the CRE CLOs and other secured financings we have entered into, and may in the future enter into, include certain interest coverage tests, over collateralization 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 negatively impact our liquidity. In order to mitigate the risk of such tests not being satisfied, or to prevent the failure of such tests, the Company amongst other things, may elect to utilize unrestricted cash to purchase defaulted mortgage assets or credit risk mortgage assets (as such terms are used in respective indentures) out of the 2021-FL1 CLO or LMF 2023-1 Financing, such that the resulting buyout proceeds are used to pay down the outstanding bonds of the 2021-FL1 CLO or LMF 2023-1 Financing or otherwise to allow such tests to be satisfied. There is currently a heightened possibility that the Company may use unrestricted cash in such a manner.

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

We intend to continue to maintain a level of liquidity in relation to our assets that enables us to meet reasonably anticipated investment requirements and unforeseen business needs, but that also allows us to be substantially invested in our target assets. We may misjudge the appropriate amount of our liquidity by maintaining excessive liquidity, which would lower our investment returns, or by maintaining insufficient liquidity, which would force us to liquidate assets

------

into unfavorable market conditions and harm our operating results. As of September 30, 2025, we had unrestricted cash and cash equivalents of $56.0 million, compared to $69.2 million as of December 31, 2024.

As of September 30, 2025, we had $47.8 million in outstanding principal under our Senior Secured Term Loan, with a borrowing rate of 7.875%. As of September 30, 2025, the ratio of our recourse debt to equity was 0.2:1.

As of September 30, 2025, we consolidated the assets and liabilities of the 2021-FL1 CLO and LMF 2023-1 Financing. The assets of the 2021-FL1 CLO and LMF 2023-1 Financing are restricted and can only be used to fulfill their respective obligations, and accordingly the obligations of the trust, which we classify as collateralized loan obligations, do not have any recourse to us as the consolidator of the trust. As of September 30, 2025, the carrying value of these non-recourse liabilities aggregated to $669.8 million. As of September 30, 2025, our total debt to equity ratio was 3.1:1 on a GAAP basis.

As of September 30, 2025, LCMT had $3.1 million of unfunded commitments related to loans held in LFT 2021-FL1, Ltd.

**Cash Flows**

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

---

| | | |
|:---|:---|:---|
| | **Nine Months Ended September 30, 2025** | **Nine Months Ended September 30, 2025** |
| | **2025** | **2024** |
| Cash Flows Provided By Operating Activities | $8848450 | $20800818 |
| Cash Flows Provided By Investing Activities | 155578794 | 201585930 |
| Cash Flows (Used In) Financing Activities | (179145346) | (208825457) |
| Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash | $(14718102) | $13561291 |

---

During the nine months ended September 30, 2025, cash, cash equivalents and restricted cash decreased by $14.7 million and for the nine months ended September 30, 2024, cash, cash equivalents and restricted cash increased by $13.6 million.

***Operating Activities***

For the nine months ended September 30, 2025 and 2024, net cash provided by operating activities totaled $9.7 million and $20.8 million, respectively. For the nine months ended September 30, 2025, our cash flows from operating activities were primarily driven by interest received from the junior retained notes and preferred shares of the 2021-FL1 CLO and LMF 2023-1 Financing of $18.0 million, interest received on cash accounts of $1.8 million exceeding cash interest expense paid on our Secured Term Loan of $2.7 million, management and incentive fees of $3.5 million, expense reimbursements of $1.5 million and other operating expenditures of $3.5 million. For the nine months ended September 30, 2024, our cash flows from operating activities were primarily driven by interest received from the junior retained notes and preferred shares of the 2021-FL1 CLO and LMF 2023-1 of $29.9 million, interest received from our senior secured loans held outside VIE's we consolidate of $2.7 million and interest received on cash accounts of $2.2 million exceeding cash interest expense paid on our Secured Term Loan of $2.7 million, management and incentive fees of $5.5 million, expense reimbursement of $1.4 million and other operating expenditures of $4.5 million.

***Investing Activities***

For the nine months ended September 30, 2025, net cash provided by investing activities totaled $154.7 million. This was the result of principal repayment of commercial mortgage loans held for investment during the period. For the nine months ended September 30, 2024, net cash provided by investing activities totaled $201.6 million. This was the result of principal repayment of commercial mortgage loans held for investment during the period.

***Financing Activities***

For the nine months ended September 30, 2025, net cash used in financing activities totaled $179.1 million and primarily related to repayment of the outstanding debt related to the 2021-FL1 CLO and the LMF 2023-1 Financing of $159.4 million, payments of common stock dividends of $16.2 million and payments of preferred stock dividends of $3.6 million. For the nine months ended September 30, 2024, net cash used in financing activities totaled $208.8 million primarily related to repayment of the outstanding debt related to the 2021-FL1 CLO of $193.8 million, payments of common stock dividends of $11.5 million and payment of preferred stock dividends of $3.6 million.

**Forward-Looking Statements Regarding Liquidity** 

Based upon our current portfolio and leverage rate, we believe that the net proceeds of our prior equity sales, combined with cash flow from operations and available borrowing capacity will be sufficient to enable us to meet anticipated short-term (one year or less) liquidity requirements to fund our investment activities, pay fees under our management agreement, fund our distributions to stockholders and for other general corporate expenses.

Our ability to meet our long-term (greater than one year) liquidity and capital resource requirements will be subject to, amongst other things, obtaining additional debt financing and equity capital. We may increase our capital resources by obtaining long-term credit facilities, additional collateralized loan obligations or making additional public or private offerings of equity or debt securities, possibly including classes of preferred stock, common stock and senior or subordinated notes.

To maintain our qualification as a REIT, we generally must distribute annually at least 90% of our "REIT taxable income" (determined without regard to the deduction for dividends paid and excluding net capital gain). These distribution requirements limit our ability to retain earnings and thereby replenish or increase capital for operations.

**Off-Balance Sheet Arrangements** 

------

As of September 30, 2025, we did not maintain any relationships with unconsolidated financial partnerships, or special purpose or variable interest entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Further, as of September 30, 2025, we had not guaranteed any obligations of unconsolidated entities or entered into any commitment or intent to provide funding to any such entities.

In connection with the provision of seller eligibility and backstop guarantee services provided to MAXEX, we previously accounted for the related non-contingent liability at its fair value on our consolidated balance sheet as a liability. As of September 30, 2025, pursuant to an Assumption Agreement dated December 31, 2018, among MAXEX Clearing LLC and FOAC, MAXEX Clearing LLC assumed all of FOAC's obligations under its backstop guarantees and agreed to indemnify and hold FOAC harmless against any losses, liabilities, costs, expenses and obligations under the backstop guarantee, see Note 10 for further information.

**Distributions** 

We intend to continue to make regular quarterly distributions to holders of our common stock. U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its "REIT taxable income" (determined without regard to the deduction for dividends paid and excluding net capital gain) and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its "REIT taxable income." We have historically made regular monthly distributions, but with effect from the third quarter of 2018 we now make regular quarterly distributions, to our stockholders in an amount equal to all or substantially all of our taxable income. Although FOAC no longer aggregates and securitizes residential mortgages, it continues to generate taxable income from MSRs and other mortgage-related activities. This taxable income will be subject to regular corporate income taxes. We generally anticipate the retention of profits generated and taxed at FOAC. Before we make any distribution on our common stock, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating requirements and any debt service obligations on debt payable. If cash available for distribution to our stockholders is less than our taxable income, we could be required to sell assets or borrow funds to make cash distributions, or we may make a portion of the required distribution in the form of a taxable stock distribution or distribution of debt securities.

If substantially all of our taxable income has not been paid by the close of any calendar year, we may declare a special dividend prior to the end of such calendar year, to achieve this result. On September 16, 2025, we announced that our Board had declared a cash dividend rate for the third quarter of 2025 of $0.04 per share of common stock which was paid on October 15, 2025 and declared a cash dividend rate for the third quarter of 2025 of $0.49219 per share of Series A Preferred Stock which was paid on October 15, 2025.

------

***ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS***

Not applicable.

------

***ITEM 4. CONTROLS AND PROCEDURES***

**Evaluation of Disclosure Controls and Procedures**

Our management is responsible for establishing and maintaining disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e)) under the Securities Exchange Act of 1934, as amended, or Exchange Act, that are designed to ensure that information we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of management, including our principal executive officer and principal financial officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to paragraph (b) of Exchange Act Rules 13a-15 or 15d-15 as of September 30, 2025. Based upon our evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of September 30, 2025.

**Changes in Internal Control Over Financial Reporting**

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rule 13a-15 or 15d-15 that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

**PART II - OTHER INFORMATION**

**Item 1. Legal Proceedings**

From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. As of the date hereof, neither we nor, to our knowledge, our Manager, are subject to any legal proceedings that we or our Manager considers to be material (individually or in the aggregate).

**Item 1A. Risk Factors**

Other than items noted below, except for the Risk Factors disclosed in Part II, Item 1A of the Company's Quarterly Report on Form 10-Q for the period ended March 31, 2025, which are hereby incorporated by reference into this Part II, Item 1A of this Form 10-Q, there have been no material changes to the Company's risk factors since the Company's Annual Report on Form 10-K for the year ended December 31, 2024.

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

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

**Item 2. Unregistered Sales of Equity Securities and Use of Proceeds**

None.

**Item 3. Defaults Upon Senior Securities**

None.

**Item 4. Mine Safety Disclosures**

Not applicable.

**Item 5. Other Information**

During the quarter ended September 30, 2025, none of our directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K).

------

**Item 6. Exhibits**

The exhibits listed on the accompanying Index of Exhibits are filed or furnished herewith, as applicable, as a part of this report. Such Index is incorporated herein by reference.

**EXHIBIT INDEX**

---

| | |
|:---|:---|
| **Exhibit<br>Number** | **Exhibit Description** |
| 4.1 | <u>[Supplemental Indenture, dated as of August 22, 2025, by and among LMF 2023-1, LLC, Lument Commercial Mortgage Trust, as advancing agent, Wilmington Trust, National Association, as trustee and Computershare Trust Company, National Association, as not administrator and custodian](exhibit41.htm)</u> |
| 10.1 | <u>[Uncommitted Master Repurchase Agreement, dated as of November 3, 2025, by and between LCMT Warehouse, LLC and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 10.1 to the registrant's report on Form 8-K (File No. 001-35845) which was filed with the SEC on November 7, 2025.](https://www.sec.gov/Archives/edgar/data/1547546/000110465925108539/tm2530566d1_ex10-1.htm)</u> |
| 10.2 | <u>[Guaranty Agreement, dated as of November 3, 2025, by and between Lument Finance Trust, Inc. and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 10.2 to the registrant's report on Form 8-K (File No. 001-35845) which was filed with the SEC on November 7, 2025.](https://www.sec.gov/Archives/edgar/data/1547546/000110465925108539/tm2530566d1_ex10-2.htm)</u> |
| 31.1\* | <u>[Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.](lft10-q20250930_ex31x1.htm)</u> |
| 31.2\* | <u>[Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.](lft10-q20250930_ex31x2.htm)</u> |
| 32.1\*\* | <u>[Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.](lft10-q20250930_ex32x1.htm)</u> |
| 32.2\*\* | <u>[Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.](lft10-q20250930_ex32x2.htm)</u> |
| 101.INS\* | XBRL Instance Document |
| 101.SCH\* | XBRL Taxonomy Extension Schema Document |
| 101.CAL\* | XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF\* | XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB\* | XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE\* | XBRL Taxonomy Extension Presentation Linkbase Document |

---

\* &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Filed herewith

\*\* &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furnished herewith

\*\*\* &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management contract or compensatory plan in which directors and/or executive officers are eligible to participate

------

**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

---

| | | |
|:---|:---|:---|
| | **LUMENT FINANCE TRUST, INC.** | **LUMENT FINANCE TRUST, INC.** |
| Dated: November 12, 2025 | By | /s/ James P. Flynn |
|  |  | James P. Flynn |
|  |  | Chief Executive Officer and Chairman of the Board (Principal Executive Officer) |
| Dated: November 12, 2025 | By | /s/ James A. Briggs |
|  |  | James A. Briggs |
|  |  | Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |

---

## Exhibit 4.1

**&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibit 4.1**

**SUPPLEMENTAL INDENTURE**

This SUPPLEMENTAL INDENTURE, dated as of August __, 2025 (this "<u>Supplemental Indenture</u>"), by and among LMF 2023-1, LLC, as issuer (the "<u>Issuer</u>"), LUMENT COMMERCIAL MORTGAGE TRUST, as advancing agent (the "<u>Advancing Agent</u>"), WILMINGTON TRUST, NATIONAL ASSOCIATION, as trustee (the "<u>Trustee</u>"), and COMPUTERSHARE TRUST COMPANY, NATIONAL ASSOCIATION, as note administrator (in such capacity, the "<u>Note Administrator</u>") and as custodian (in such capacity, the "<u>Custodian</u>"), amends the Indenture, dated as of July 12, 2023 (the "<u>Indenture</u>"), by and among the Issuer, the Advancing Agent, the Trustee, the Note Administrator and the Custodian.

**RECITALS**

WHEREAS, <u>Section 8.1(b)</u> of the Indenture provides that without prior notice to, and without the consent of, the Class A Lenders or the Holders of any Notes, and without satisfaction of the Rating Agency Condition, the Issuer, when authorized by Board Resolutions of the Issuer, the Advancing Agent, the Trustee, the Note Administrator and the Custodian may enter into one or more indentures to correct any defect or ambiguity in the Indenture in order to address any manifest error, omission or mistake in any provision of the Indenture;

WHEREAS, in accordance with the Indenture, by the execution and delivery of this Supplemental Indenture, the parties hereby amend the Indenture to the extent and on the terms set forth in this Supplemental Indenture;

NOW, THEREFORE, in consideration of the mutual agreements herein contained and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, each party hereto agrees as follows for the benefit of the other parties and for the benefit of the Noteholders:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.<u>Defined Terms</u>. Capitalized terms used in this Supplemental Indenture, and not defined herein shall have the meanings assigned to such terms in the Indenture.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.<u>Amendments</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The definition of "Interest Accrual Period" in <u>Section 1.1</u> of the Indenture is hereby deleted in its entirety and replaced with the following:

**"<u>Interest Accrual Period</u>": With respect to the Class A Loans and the Notes and each Payment Date, the period from and including the immediately preceding Payment Date to, but excluding, such Payment Date.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.<u>Effectiveness</u>.

The Issuer hereby confirms to the other parties hereto that the conditions precedent to the effectiveness of this Supplemental Indenture have been satisfied.

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.<u>Effect on Successors and Assigns</u>.

The provisions of this Supplemental Indenture shall be binding upon and inure to the benefit of the respective successors and assigns of the parties hereto, and all such provisions shall inure to the benefit of the Trustee and Noteholders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.<u>Counterparts and Signatures</u>.

This Supplemental Indenture shall be valid, binding and enforceable against a party when executed and delivered by an authorized individual on behalf of such party by means of (i) an original manual signature, (ii) a faxed, scanned or photocopied manual signature or (iii) any other electronic signature permitted by the U.S. Electronic Signatures in Global and National Commerce Act, state enactments of the Uniform Electronic Transactions Act, and/or any other relevant electronic signature law, including any relevant provisions of the UCC (collectively, "<u>Signature Law</u>"), in each case, to the extent applicable; <u>provided</u> that original manual signatures shall be used for execution or indorsement of writings when required under the UCC or other Signature Law due to the character or intended character of the writings. Each faxed, scanned or photocopied manual signature, or other electronic signature, shall for all purposes have the same validity and legal effect as an original manual signature, and shall be equally admissible for evidentiary purposes. Each party hereto shall be entitled to conclusively rely upon, and shall have no liability with respect to, any faxed, scanned or photocopied manual signature, or other electronic signature, of any other party and shall have no duty to investigate, confirm or otherwise verify the validity or authenticity thereof. Delivery of an executed counterpart of a signature page of this Supplemental Indenture in Portable Document Format (PDF) by electronic transmission shall be as effective as delivery of a manually executed original counterpart to this Supplemental Indenture. This Supplemental Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.<u>Headings</u>.

The headings in this Supplemental Indenture are for purposes of reference only and shall not otherwise affect the meaning or interpretation of any provision hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.<u>Indenture in Full Force and Effect as Amended</u>.

Upon execution of this Supplemental Indenture, the Indenture shall be, and be deemed to be, modified and amended in accordance with this Supplemental Indenture. Except as specifically amended hereby, all of the terms and conditions of the Indenture are in all respects ratified and confirmed, and all the terms, provisions and conditions thereof shall be and remain in full force and effect. All references to the Indenture in any other document or instrument shall be deemed to mean the Indenture as amended by this Supplemental Indenture. This Supplemental Indenture shall not constitute a novation of the Indenture but shall constitute an amendment thereof. The parties hereto agree to be bound by the terms and obligations of the Indenture, as amended by this Supplemental Indenture, as though the terms and obligations of the Indenture were set forth herein.

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.<u>Governing Law</u>.

THIS SUPPLEMENTAL INDENTURE AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION WITH THIS SUPPLEMENTAL INDENTURE, THE RELATIONSHIP OF THE PARTIES, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY CONFLICTS OF LAW PRINCIPLES OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

*Signature pages follow.*

------

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and delivered as of the day and year first above written.

LMF 2023-1, LLC, as Issuer

By:&nbsp;&nbsp;&nbsp;&nbsp; <u>/s/ James A. Briggs&nbsp;&nbsp;&nbsp;&nbsp;</u><br>Name: James A. Briggs<br>Title: Chief Financial Officer

LUMENT COMMERCIAL MORTGAGE TRUST, as Advancing Agent

By:&nbsp;&nbsp;&nbsp;&nbsp; <u>/s/ James A. Briggs&nbsp;&nbsp;&nbsp;&nbsp;</u><br>Name: James A. Briggs<br>Title: Chief Financial Officer

WILMINGTON TRUST, NATIONAL ASSOCIATION, as Trustee

By:&nbsp;&nbsp;&nbsp;&nbsp; <u>/s/ Jacob Stapleford&nbsp;&nbsp;&nbsp;&nbsp;</u><br>Name: Jacob Stapleford<br>Title: Assistant Vice President

COMPUTERSHARE TRUST COMPANY, N.A., as Note Administrator and as Custodian

By:&nbsp;&nbsp;&nbsp;&nbsp; <u>/s/ Eric Jacobson&nbsp;&nbsp;&nbsp;&nbsp;</u><br>Name: Eric Jacobson<br>Title: Vice President

## Exhibit 31.1

**EXHIBIT 31.1**

**Certification in the Form Provided by Rule 15d-14(a)**

**of the Securities Exchange Act of 1934**

I, James P. Flynn, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2025 of Lument Finance Trust, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over the financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | |
|:---|:---|
| Date: November 12, 2025 | /s/ James P. Flynn |
| | James P. Flynn |
| | Chief Executive Officer |

---

## Exhibit 31.2

**EXHIBIT 31.2**

 **Certification in the Form Provided by Rule 15d-14(a)**

**of the Securities Exchange Act of 1934**

I, James A. Briggs, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2025 of Lument Finance Trust, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over the financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | |
|:---|:---|
| Date: November 12, 2025 | /s/ James A. Briggs |
| | James A. Briggs |
| | Chief Financial Officer |

---

## Exhibit 32.1

**EXHIBIT 32.1**

**CERTIFICATION PURSUANT TO**

**18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Quarterly Report of Lument Finance Trust, Inc. (the "Company") on Form 10-Q for the period ended September 30, 2025, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, James P. Flynn, as Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

---

| | |
|:---|:---|
| Date: November 12, 2025 | /s/ James P. Flynn |
| | James P. Flynn |
| | Chief Executive Officer |

---

## Exhibit 32.2

**EXHIBIT 32.2**

**CERTIFICATION PURSUANT TO**

**18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Quarterly Report of Lument Finance Trust, Inc. (the "Company") on Form 10-Q for the period ended September 30, 2025, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, James A. Briggs, as Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

---

| | |
|:---|:---|
| Date: November 12, 2025 | /s/ James A. Briggs |
| | James A. Briggs |
| | Chief Financial Officer |

---

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