Ready Capital Corp 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements Except where the context suggests otherwise, the terms “Company,” “we,” “us” and “our” refer to Ready Capital Corporation and its subsidiaries. We make forward-looking statements in this Quarterly Report on Form 10-Q (the “Form 10-Q”) within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We intend such statements to be covered by the safe harbor provisions for forward- looking statements contained therein. Forward-looking statements contained in this Form 10-Q reflect our current views about future events and are inherently subject to substantial risks and uncertainties, many of which are difficult to predict and beyond our control, that may cause our actual results to materially differ. These forward-looking statements include information about possible or assumed future results of our operations, financial condition, liquidity, plans and objectives. When we use the words “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “could,” “would,” “may,” “potential” or other comparable terminology, we intend to identify forward-looking statements, although not all forward-looking statements may contain such words. Statements regarding the following subjects, among others, may be forward-looking, and the occurrence of events impacting these subjects, or otherwise impacting our business, may cause our financial condition, liquidity and consolidated results of operations to vary materially from those expressed in, or implied by, any such forward-looking statements: • our investment objectives and business strategy; • our expected leverage; • our expected investments; • estimates or statements relating to, and our ability to make, future distributions; • projected capital and operating expenditures; • our ability to use our liquidity and capital resources, including cash on hand, anticipated net payments from the loan portfolio, debt financings and proceeds from the potential disposition of assets, to provide liquidity to fund ongoing obligations and address upcoming debt maturities; • our ability to utilize liquidity and capital resources, together with our access to the capital markets and potentially other balance-sheet actions, such as adjustments to our dividend rate, to meet our liquidity needs; • availability of qualified personnel; • prepayment rates; • projected default rates; • increased rates of default and/or decreased recovery rates on our investments; • changes in interest rates, interest rate spreads, the yield curve or prepayment rates; • our potential entry into certain hedging arrangements related to the delivery of shares of common stock upon vesting of certain performance-based equity awards and restricted stock awards and the risk that such arrangements may not have the desired impact and may expose us to additional risks, including the failure of the counterparty to perform under the contracts; • the impact of inflation on our business; • tariffs imposed or threatened to be imposed by the current presidential administration; 64 • changes in prepayments or acceleration of the disposition of our assets; • risks associated with achieving expected synergies, cost savings and other benefits from recent acquisitions , including the acquisition of United Development Funding IV ( “ UDF IV ”) ; • risks associated with the completed divestiture of our Residential Mortgage Banking segment ; • market, industry and economic trends; • our ability to compete in the marketplace; • the availability of attractive risk-adjusted investment opportunities in lower-to-middle-market commercial real estate loans (“LMM”), loans guaranteed by the U.S. Small Business Administration (the “SBA”) under its Section 7(a) loan program (the “SBA Section 7(a) Program”), mortgage backed securities (“MBS”) , residential mortgage loans and other real estate-related investments that satisfy our investment objectives and strategies; • general volatility of the capital markets; • changes in our investment objectives and business strategy; • the availability, terms and deployment of capital; • the availability of suitable investment opportunities; • market developments and actions recently taken and which may be taken by the U.S. Government, including pursuant to policies of the U.S. administration, the U.S. Department of the Treasury (“Treasury”) and the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Federal National Mortgage Association (“Fannie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”), the Government National Mortgage Association (“Ginnie Mae”), Federal Housing Administration (“FHA”) Mortgagee, USDA, U.S. Department of Veterans Affairs (“VA”) and the U.S. Securities and Exchange Commission (“SEC”); • our ability to obtain a license for the Freddie Mac Conventional Small program, which is replacing the Freddie Mac Small Balance Loan program that expired on April 30, 2026; • applicable regulatory changes; • changes in our assets, interest rates or the general economy; • mortgage loan modification programs and future legislative actions; • our ability to maintain our qualification as a real estate investment trust (“REIT”) and limitations on our business as a result of our qualifications as a REIT; • our ability to maintain our exemption from qualification under the Investment Company Act of 1940, as amended (the “1940 Act”); • factors described in our Annual Report on Form 10-K, including those set forth under the captions “Risk Factors” and “ Business ”; • our dependence on our external advisor, Waterfall Asset Management, LLC (“Waterfall” or the “Manager”), and our ability to find a suitable replacement if we or Waterfall were to terminate the management agreement we have entered into with Waterfall (the “management agreement”); 65 • the degree and nature of our competition, including competition for LMM loans, MBS, residential mortgage loans, construction loans and other real estate-related investments that satisfy our investment objectives and strategies; • geopolitical events such as acts of terrorism, war or other military conflict, and the related impact on macroeconomic conditions; and • the impact of future pandemics and epidemics on our borrowers, the real estate industry and global markets, and on our business and operations, financial condition, results of operations, liquidity and capital resources. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements, and we caution readers not to place undue reliance on any forward-looking statements. These forward-looking statements apply only as of the date of this Form 10- Q. We are not obligated, and do not intend, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by law. Refer to Item 1A. “Risk Factors” and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (our “Form 10-K”). Introduction Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our interim consolidated financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Our MD&A is presented in five main sections: • Overview • Results of Operations • Liquidity and Capital Resources • Contractual Obligations and Off-Balance Sheet Arrangements • Critical Accounting Estimates The following discussion should be read in conjunction with our unaudited interim consolidated financial statements and accompanying Notes included in Part I, Item 1, “Financial Statements,” of this Form 10-Q and with Items 6, 7, 8, and 9A of our Form 10-K. Refer to “Forward-Looking Statements” in this Form 10-Q and in our Form 10-K and “Critical Accounting Estimates” in our Form 10-K for certain other factors that may cause actual results to differ, materially, from those anticipated in the forward-looking statements included in this Form 10-Q. Overview Our Business We are a multi-strategy real estate finance company that originates, acquires, finances, and services LMM loans, SBA loans, construction loans and , to a lesser extent, MBS collateralized primarily by LMM loans, or other real estate-related investments. Our loans generally range in original principal amounts up to $40 million and are used by businesses to purchase real estate used in their operations or by investors seeking to acquire multi-family, office, retail, mixed use or warehouse properties. Our objective is to provide attractive risk-adjusted returns to our stockholders. In order to achieve this objective, we intend to grow our investment portfolio and believe that the breadth of our full-service real estate finance platform will allow us to adapt to market conditions and deploy capital in our asset classes and segments with the most attractive risk-adjusted returns. We completed the disposition of our Residential Mortgage Banking segment effective on June 30, 2025. In connection with this sale, we classified our Residential Mortgage Banking segment as a discontinued operation. For all periods presented, the operating results for these operations have been removed from continuing operations. Our MD&A has been adjusted to exclude discontinued operations unless otherwise noted. We report our activities in the following two operating segments: 66 • LMM Commercial Real Estate. We originate LMM loans across the full life-cycle of an LMM property including construction, bridge, stabilized and agency loan origination channels through our subsidiary, ReadyCap Commercial, LLC . These originated loans are generally held-for-investment or placed into securitization structures. As part of this segment, we service Freddie Mac multi-family loan products. We provide construction and permanent financing for the preservation and construction of affordable housing, primarily utilizing tax-exempt bonds through Ready Capital Affordable, a subsidiary. In addition, we acquire LMM loans as part of our business strategy. We hold performing LMM loans to term and seek to maximize the value of the non-performing LMM loans acquired by us through borrower-based resolution strategies. We typically acquire non-performing loans at a discount to their unpaid principal balance (“UPB”) when we believe that resolution of the loans will provide attractive risk-adjusted returns. • Small Business Lending . We acquire, originate and service owner-occupied loans guaranteed by the SBA under the SBA Section 7(a) Program through our subsidiary, ReadyCap Lending, LLC . We hold an SBA license as one of only 16 non-bank Small Business Lending Companies and have been granted preferred lender status by the SBA. These originated loans are either held-for-investment, placed into securitization structures, or sold . In addition, we originate and service small business loans through our subsidiary iBusiness Funding LLC and we service USDA loans through our subsidiary, ReadyCap Commercial . We are organized and conduct our operations to qualify as a REIT under the Internal Revenue Code of 1986, as amended . To qualify as a REIT, we are required to annually distribute substantially all of our net taxable income, excluding capital gain, to stockholders. To the extent that we do not distribute all of our net capital gain, or distribute at least 90%, but less than 100%, of our REIT taxable income, as adjusted, we will be required to pay U.S. federal corporate income tax on the undistributed income. We are organized in a traditional umbrella partnership REIT ( UpREIT) format pursuant to which we serve as the general partner of, and conduct substantially all of our business through, Sutherland Partners, LP ( our “operating partnership”) . We also intend to operate our business in a manner that will permit us to be excluded from registration as an investment company under the 194 0 Act. For additional information on our business, refer to Part I, Item 1, “Business” in our Form 10-K. Acquisitions United Development Funding IV. On March 13, 2025, pursuant to the terms of the Agreement and Plan of Merger, dated as of November 29, 2024, by and among the Company, UDF IV, and RC Merger Sub IV, LLC, a wholly owned subsidiary of the Company (“RC Merger Sub IV”), the Company acquired UDF IV , a real estate investment trust providing capital solutions to residential real estate developers and regional homebuilders, (the “UDF IV Merger”). At the effective time of the UDF IV Merger (the “Effective Time”), each outstanding common share of beneficial interest, par value $0.01 per share, of UDF IV (“UDF IV Common Shares”), excluding any UDF IV Common Shares held by UDF IV, the Company, RC Merger Sub IV or their subsidiaries, was automatically cancelled and retired and converted into the right to receive (i) 0.416 shares of Company common stock, (ii) 0.416 contingent value rights (“CVRs”) representing the potential right to receive additional shares of Company common stock after the end of each of (1) the period beginning on October 1, 2024, and ending on December 31, 2025 and (2) the three subsequent calendar years, based, in part, upon cash proceeds received by the Company and its subsidiaries in respect of a portfolio of five UDF IV loans and (iii) cash consideration in lieu of any fractional shares of Company common stock . Refer to Notes 1 and 5, included in Part I, Item 1, “Financial Statements,” of this Form 10-Q, for more information about the UDF IV Merger and the assets acquired and liabilities assumed as a result of the UDF IV Merger . Factors Impacting Operating Results We expect that our results of operations will be affected by a number of factors and will primarily depend on the level of interest income from our assets, the market and fair value of our assets and the supply of, and demand for, LMM loans, SBA loans, construction loans, MBS and other assets we may acquire in the future, demand for housing, population trends, construction costs, the availability of alternative real estate financing from other lenders, changes in credit spreads, and the financing and other costs associated with our business. These factors may have an impact on our ability to originate new loans or the performance of our existing loan portfolio. Our net investment income, which includes the amortization of purchase premiums and accretion of purchase discounts, varies primarily as a result of changes in market interest rates, the rate at which our distressed assets are liquidated and the prepayment speed of our performing assets. Interest rates and prepayment speeds 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 may also be 67 impacted by changes in our provision for loan losses. Increases in the provision for loan loss are primarily driven by a deterioration in the contractual performance of a loan. Macroeconomic factors including interest rates and inflation, as well as supply absorption and cap rate movements, may contribute to a deterioration in a loan’s contractual performance. In certain circumstances, the Company may choose to modify a loan which had experienced financial difficulty due to the factors previously described. Our operating results may also be impacted by our available borrowing capacity, conditions in the financial markets, credit losses in excess of initial estimates or unanticipated credit events experienced by borrowers whose loans are held directly by us or are included in our MBS. Difficult market conditions as well as inflation, energy costs, geopolitical issues, health epidemics and outbreaks of contagious diseases, unemployment and the availability and cost of credit are factors which could also impact our operating results. For additional information about certain risks we face, including market risk, credit risk, interest rate risk, liquidity risk, off-balance sheet risk and prepayment risk, refer to Note 23, included in Part I, Item 1, “Financial Statements,” and Part I, Item 3, “Quantitative and Qualitative Disclosures About Market Risk,” of this Form 10-Q, as well as Part I, Item 1A, “Risk Factors” in our Form 10-K. Changes in Market Interest Rates. We own and expect to acquire or originate fixed rate and floating rate loans with maturities ranging from two to 30 years. Our loans typically have amortization periods of 15 to 30 years or balloon payments due in two to 10 years. Fixed rate loans bear interest that is fixed for the term of the loan and we typically utilize derivative financial and hedging instruments in an effort to hedge the interest rate risk associated with such fixed rate loans. As of March 31, 2026 , all fixed rate loans are match funded in securitization. Floating rate loans generally have an adjustable interest rate equal to the sum of a fixed spread plus an index rate, such as the Secured Overnight Financing Rate (“SOFR”) , which typically resets monthly. As of March 31, 2026 , approximat e ly 80% of the loans in our portfolio were floating rate loans, and 20% wer e fixed rate loans, based on carrying value. Current market conditions. During the first quarter, macroeconomic concerns persisted including global market volatility, uncertainty about trade policies , geopolitical tensions , inflationary pressures and interest rates. The U.S. Federal Reserve did not decrease interest rates in the quarter and there is uncertainty regarding if and when decreases will occur . Although the full impact of these changes remains uncertain and difficult to predict, concerns and uncertainties about the economic outlook may adversely impact our financial condition, results of operations and cash flows. Results of Operations Key Financial Measures and Indicators As a real estate finance company, we believe the key financial measures and indicators for our business are earnings per share, dividends declared per share, distributable earnings, return on equity, and net book value per share. As further described below, distributable earnings is a measure that is not prepared in accordance with GAAP. We use distributable earnings to evaluate our performance and determine dividends, excluding the effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current loan activity and operations. Refer to “—Non- GAAP Financial Measures” below for a reconciliation of net income to distributable earnings. 68 The table below sets forth certain information on our operating results. Three Months Ended March 31, ($ in thousands, except share data) 2026 2025 Net Income (loss) from continuing operations $ (200,087) $ 82,410 Earnings per common share from continuing operations - basic $ (1.25) $ 0.47 Earnings per common share from continuing operations - diluted $ (1.25) $ 0.46 Distributable earnings before realized losses $ (49,208) $ 4,140 Distributable earnings before realized losses per common share - basic $ (0.33) $ 0.00 Distributable earnings before realized losses per common share - diluted $ (0.33) $ 0.00 Distributable earnings $ (159,834) $ (11,384) Distributable earnings per common share - basic $ (1.00) $ (0.09) Distributable earnings per common share - diluted $ (1.00) $ (0.09) Dividends declared per common share $ 0.01 $ 0.125 Dividend yield (1) 2.5 % 9.8 % Return on equity from continuing operations (59.0) % 18.4 % Distributable return on equity before realized losses (15.0) % (0.9) % Distributable return on equity (47.3) % (3.1) % Book value per common share $ 7.43 $ 10.61 (1) Dividend yield is based on the respective period end closing share price. Our Loan Pipeline We have a large and active pipeline of potential acquisition and origination opportunities that are in various stages of our investment process. We refer to assets as being part of our acquisition or origination pipeline if (i) an asset or portfolio opportunity has been presented to us and we have determined, after a preliminary analysis, that the assets fit within our investment strategy and exhibit the appropriate risk/reward characteristics (ii) in the case of acquired loans, we have executed a non-disclosure agreement or an exclusivity agreement and commenced the due diligence process or we have executed more definitive documentation, such as a letter of intent (“LOI”); and (iii) in the case of originated loans, we have issued an LOI, and the borrower has paid a deposit. We operate in a competitive market for investment opportunities and competition may limit our ability to originate or acquire the potential investments in the pipeline. The consummation of any of the potential loans in the pipeline depends upon, among other things, one or more of the following: available capital and liquidity, our Manager’s allocation policy, satisfactory completion of our due diligence investigation and investment process, approval of our Manager’s Investment Committee, market conditions, our agreement with the seller on the terms and structure of such potential loan, and the execution and delivery of satisfactory transaction documentation. Historically, we have acquired less than a majority of the assets in our pipeline at any one time and there can be no assurance the assets currently in our pipeline will be acquired or originated by us in the future. The table below presents information on our investment portfolio originations (based on fully committed amounts). Three Months Ended March 31, (in thousands) 2026 2025 Loan originations: LMM loans $ 287,581 $ 78,657 SBL loans 176,749 387,388 Total loan investment activity $ 464,330 $ 466,045 69 Balance Sheet Analysis and Metrics (in thousands) March 31, 2026 December 31, 2025 $ Change % Change Assets Cash and cash equivalents $ 200,430 $ 207,841 $ (7,411) (3.6) % Restricted cash 38,906 39,746 (840) (2.1) Loans, net (including $462 and $737 held at fair value) 3,350,560 3,500,298 (149,738) (4.3) Loans, held for sale (including $87,198 and $73,094 held at fair value and net of valuation allowance of $74,315 and $67,612) 360,228 585,820 (225,592) (38.5) Mortgage-backed securities 31,649 34,501 (2,852) (8.3) Investment in unconsolidated joint ventures (including $5,517 and $5,737 held at fair value) 167,251 161,424 5,827 3.6 Derivative instruments 4,104 6,740 (2,636) (39.1) Servicing rights 123,687 126,279 (2,592) (2.1) Real estate owned 610,215 620,225 (10,010) (1.6) Other assets 466,383 508,238 (41,855) (8.2) Assets of consolidated VIEs 960,875 1,978,684 (1,017,809) (51.4) Total Assets $ 6,314,288 $ 7,769,796 $ (1,455,508) (18.7) % Liabilities Secured borrowings 2,321,443 2,788,926 (467,483) (16.8) Securitized debt obligations of consolidated VIEs, net 526,535 1,174,785 (648,250) (55.2) Senior secured notes, net 723,707 722,729 978 0.1 Corporate debt, net 536,972 652,487 (115,515) (17.7) Guaranteed loan financing 501,736 524,091 (22,355) (4.3) Contingent consideration 20,441 18,698 1,743 9.3 Derivative instruments 948 1,432 (484) (33.8) Dividends payable 3,685 3,633 52 1.4 Loan participations sold 56,616 56,616 — — Due to third parties 12,304 3,135 9,169 292.5 Accounts payable and other accrued liabilities 161,201 171,636 (10,435) (6.1) Total Liabilities $ 4,865,588 $ 6,118,168 $ (1,252,580) (20.5) % Preferred stock Series C, liquidation preference $25.00 per share 8,361 8,361 — — Commitments & contingencies Stockholders’ Equity Preferred stock Series E, liquidation preference $25.00 per share 111,378 111,378 — — Common stock, $0.0001 par value, 500,000,000 shares authorized, 165,255,559 and 163,010,012 shares issued and outstanding, respectively 17 17 — — Additional paid-in capital 2,265,534 2,264,355 1,179 0.1 Retained deficit (1,012,927) (807,522) (205,405) 25.4 Accumulated other comprehensive loss (24,476) (24,196) (280) 1.2 Total Ready Capital Corporation equity 1,339,526 1,544,032 (204,506) (13.2) Non-controlling interests 100,813 99,235 1,578 1.6 Total Stockholders’ Equity $ 1,440,339 $ 1,643,267 $ (202,928) (12.3) % Total Liabilities, Redeemable Preferred Stock, and Stockholders’ Equity $ 6,314,288 $ 7,769,796 $ (1,455,508) (18.7) % As of March 31, 2026 , total assets in our consolidated balance sheet were $6.3 billion , a decrease of $1.5 billion from December 31, 2025 , primarily reflecting a decrease in Assets of consolidated VIEs, Loans, held for sale and Loans, net. Assets of consolidated VIEs decreased $1.0 billion , primarily due to the collapse of RCMF 2021-FL7 , RCMF 2023- FL11 and RCMF 2023-FL12 and paydowns on securitized loans. Loans, held for sale decreased $0.2 billion , primarily due to loans sold, partially offset by loans transferred from Loans, net. Loans, net decreased $0.1 billion , primarily due to loan sales and loans transferred from Loans, net to Loans, held for sale, partially offset by the collapse of RCMF 2021-FL7, RCMF 2023-FL11 and RCMF 2023-FL12. As of March 31, 2026 , total liabilities in our consolidated balance sheet were $4.9 billion , a decrease of $1.3 billion from December 31, 2025 , primarily reflecting a decrease in Securitized debt obligations of consolidated VIEs, net and Secured borrowings. Securitized debt obligations of consolidated VIEs, net decreased $0.6 billion due to the collapse of 70 RCMF 2021-FL7, RCMF 2023-FL11 and RCMF 2023-FL12. Secured borrowings decreased $0.5 billion due to payoffs, partially offset by the collapse of RCMF 2021-FL7, RCMF 2023-FL11 and RCMF 2023-FL12. As of March 31, 2026 , total stockholders’ equity was $1.4 billion , a decrease of $0.2 billion from December 31, 2025 , primarily due to net losses. Selected Balance Sheet Information by Business Segment. The table below presents certain selected balance sheet data by business segments, with the remaining amounts reflected in Unallocated –Corporate . (in thousands) LMM Commercial Real Estate Small Business Lending Total March 31, 2026 Assets Loans, net $ 3,111,107 $ 1,056,768 $ 4,167,875 Loans, held for sale 281,520 78,708 360,228 MBS 31,649 — 31,649 Investment in unconsolidated joint ventures 166,950 301 167,251 Servicing rights 60,008 63,679 123,687 Real estate owned 624,960 543 625,503 Liabilities Secured borrowings 2,001,132 320,311 2,321,443 Securitized debt obligations of consolidated VIEs 460,971 65,564 526,535 Senior secured notes, net 716,054 7,653 723,707 Corporate debt, net 536,972 — 536,972 Guaranteed loan financing — 501,736 501,736 Loan participations sold 56,616 — 56,616 In the table above, • Loans, net includes assets of consolidated VIEs. • Loans, held for sale includes assets of consolidated VIEs, net of valuation allowance. • Real estate owned includes assets of consolidated VIEs. 71 Statement of Operations Analysis and Metrics Three Months Ended March 31, (in thousands) 2026 2025 $ Change Interest income LMM commercial real estate $ 58,893 $ 124,973 $ (66,080) Small business lending 22,837 29,994 (7,157) Total interest income $ 81,730 $ 154,967 $ (73,237) Interest expense LMM commercial real estate (80,672) (120,354) 39,682 Small business lending (16,162) (20,112) 3,950 Total interest expense $ (96,834) $ (140,466) $ 43,632 Net interest income before (provision for) recovery of loan losses $ (15,104) $ 14,501 $ (29,605) (Provision for) recovery of loan losses LMM commercial real estate (66,523) 117,941 (184,464) Small business lending (4,384) (8,373) 3,989 Total (provision for) recovery of loan losses $ (70,907) $ 109,568 $ (180,475) Net interest income (loss) after (provision for) recovery of loan losses $ (86,011) $ 124,069 $ (210,080) Non-interest income (loss) LMM commercial real estate (68,004) (114,475) 46,471 Small business lending 19,053 36,449 (17,396) Unallocated corporate income 934 103,762 (102,828) Total non-interest income (loss) $ (48,017) $ 25,736 $ (73,753) Non-interest expense LMM commercial real estate (40,939) (27,763) (13,176) Small business lending (29,212) (30,060) 848 Unallocated corporate expenses (12,582) (14,779) 2,197 Total non-interest expense $ (82,733) $ (72,602) $ (10,131) Net income (loss) before provision for income taxes LMM commercial real estate (197,245) (19,678) (177,567) Small business lending (7,868) 7,898 (15,766) Unallocated corporate expenses (11,648) 88,983 (100,631) Total net income (loss) before provision for income taxes $ (216,761) $ 77,203 $ (293,964) 72 Results of Operations – Supplemental Information. Realized and unrealized gains (losses) on financial instruments are recorded in the consolidated statements of operations and classified based on the nature of the underlying asset or liability. The table below presents the components of realized and unrealized gains (losses) on financial instruments. Three Months Ended March 31, (in thousands) 2026 2025 $ Change Realized gain (loss) on financial instruments Creation of mortgage servicing rights SBA - 7(a) $ 1,412 $ 4,859 $ (3,447) Multi-family 1,673 515 1,158 USDA 470 750 (280) Small business loans 440 544 (104) Total Creation of mortgage servicing rights $ 3,995 $ 6,668 $ (2,673) Loans SBA - 7(a) 5,164 18,937 (13,773) Multi-family 164 413 (249) USDA 671 179 492 Total loans $ 5,999 $ 19,529 $ (13,530) Gain on sale business SBA - 7(a) 6,576 23,796 (17,220) Multi-family 1,837 928 909 USDA 1,141 929 212 Small business loans 440 544 (104) Total gain on sale business $ 9,994 $ 26,197 $ (16,203) Loans, held for sale Bridge (23,131) (16,885) (6,246) Construction — (19) 19 Other (3,481) — (3,481) Total loans, held for sale $ (26,612) $ (16,904) $ (9,708) Loans, net Bridge (47,730) (393) (47,337) Fixed rate 135 (13) 148 Construction (1,074) (145) (929) Other (3) (70) 67 Total loans, net $ (48,672) $ (621) $ (48,051) Net realized gain (loss) on derivatives, at fair value $ (82) $ 1,946 $ (2,028) Net realized gain (loss) - all other $ 5,287 $ 51 $ 5,236 Net realized gain (loss) on financial instruments $ (60,085) $ 10,669 $ (70,754) Unrealized gain (loss) on financial instruments Loans, held for sale Fixed rate — 10 (10) Freddie Mac (54) (309) 255 SBA - 7(a) 1,360 (1,169) 2,529 Other 405 — 405 Total Loans, held for sale $ 1,711 $ (1,468) $ 3,179 Net unrealized gain (loss) on preferred equity, at fair value $ (7,236) $ — $ (7,236) Net unrealized gain (loss) on derivatives, at fair value $ 1,520 $ (515) $ 2,035 Net unrealized gain (loss) - all other $ (2,915) $ 233 $ (3,148) Net unrealized gain (loss) on financial instruments $ (6,920) $ (1,750) $ (5,170) LMM Commercial Real Estate Segment Results. Q1 2026 versus Q1 2025 . Interest income of $58.9 million represented a decrease of $66.1 million , primarily due to decreased loan balances primarily driven by loan sales and an increased balance of loans on non-accrual status driven by a higher probability that principal and interest will not be collected under the original contractual terms. Interest expense of $80.7 million represented a decrease of $39.7 million , driven by decreased loan balances and interest rates. Provision for loan losses of $66.5 million represented an increase of $184.5 million , due to changes in the forecasted macroeconomic inputs for reserve modeling and an increase in asset specific reserves, partially offset by loans transferred from Loans, net to Loans, held for sale . Non-interest loss of $68.0 million represented a decrease of $46.5 million , primarily due to a decrease in the transfer of Loans, net to Loans, held for sale and the recovery of the valuation allowance from loans sold, partially offset by n et realized losses on financial instruments and real estate owned driven by 73 loan sales . Non-interest expense of $40.9 million represented an increase of $13.2 million , due to an increase in other operating expenses primarily driven by hotel expenses. Small Business Lending Segment Results. Q1 2026 versus Q1 2025 . Interest income of $22.8 million represented a decrease of $7.2 million , primarily due to decreased loan balances and interest rates. Interest expense of $16.2 million represented a decrease of $4.0 million , driven by decreased loan balances and interest rates. Provision for loan losses of $4.4 million represented a decrease of $4.0 million , due to changes in the forecasted macroeconomic inputs for reserve modeling, partially offset by an increase in specific loan reserves. Non-interest income of $19.1 million represented a decrease of $17.4 million , primarily due to a decrease in n et realized gains on financial instruments . Non-interest expense of $29.2 million was essentially unchanged from the prior year period. Unallocated - Corporate. Q1 2026 versus Q1 2025 . Non-interest income of $0.9 million represented a decrease of $102.8 million due to a gain on bargain purchase recognized from the UDF IV Merger in the prior year period, primarily driven by a discount in UDF IV’s market valuation due to factors such as the illiquid nature of UDF IV’s shares, and a change in our stock price between the date of the agreement and the closing date of the UDF IV Merger . Non-interest expense of $12.6 million represented a decrease of $2.2 million , primarily due to decreased transaction related expenses. Non-GAAP financial measures We believe that providing investors with distributable earnings, formerly referred to as core earnings, gives investors greater transparency into the information used by management in our financial and operational decision-making, including the determination of dividends. We calculate distributable earnings as GAAP net income (loss) excluding the following: i) any unrealized gains or losses on certain MBS not retained by us as part of our loan origination businesses ii) any realized gains or losses on sales of certain MBS iii) any unrealized gains or losses on Residential MSRs from discontinued operations iv) any unrealized change in current expected credit loss reserve and valuation allowances v) any unrealized gains or losses on de-designated cash flow hedges vi) any unrealized gains or losses on foreign exchange hedges vii) any unrealized gains or losses on certain unconsolidated joint ventures viii) any non-cash compensation expense related to stock-based incentive plan ix) any unrealized gains or losses on preferred equity , at fair value x) any unrealized gain or losses or other non-cash items related to real estate owned xi) one-time non-recurring gains or losses, such as gains or losses on discontinued operations, bargain purchase gains, or merger related expenses In calculating distributable earnings, net income (in accordance with GAAP) is adjusted to exclude unrealized gains and losses on MBS acquired by us in the secondary market but is not adjusted to exclude unrealized gains and losses on MBS retained by us as part of our loan origination businesses, where we transfer originated loans into an MBS securitization and retain an interest in the securitization. In calculating distributable earnings, we do not adjust net income (in accordance with GAAP) to take into account unrealized gains and losses on MBS retained by us as part of our loan origination businesses because we consider the unrealized gains and losses that are generated in the loan origination and securitization process to be a fundamental part of this business and an indicator of the ongoing performance and credit quality of our historical loan originations. In calculating distributable earnings, net income (in accordance with GAAP) is adjusted to exclude realized gains and losses on certain MBS securities due to a variety of reasons which may include collateral type, duration, and size. In addition, in calculating distributable earnings, net income (in accordance with GAAP) is adjusted to exclude unrealized gains or losses on residential MSRs, held at fair value from discontinued operations. Servicing rights relating 74 to our small business commercial business are accounted for under ASC 860, Transfer and Servicing. In calculating distributable earnings, we do not exclude realized gains or losses on commercial MSRs, as servicing income is a fundamental part of our business and an indicator of the ongoing performance. Furthermore, we believe it is useful to present distributable earnings before realized losses on certain investments, such as charge-offs and losses realized on sales of real estate owned assets and LMM loans, to reflect our direct operating results. We utilize distributable earnings before realized losses as an additional performance metric to consider when assessing our ability to declare and pay dividends. Distributable earnings and distributable earnings before realized losses are non-U.S. GAAP financial measures and because these non-U.S. GAAP measures are incomplete measures of our financial performance and involve differences from net income computed in accordance with U.S. GAAP, they should be considered along with, but not as alternatives to, our net income as measures of our financial performance. In addition, because not all companies use identical calculations, our presentations of distributable earnings and distributable earnings before realized losses may not be comparable to other similarly-titled measures of other companies. To qualify as a REIT, we must distribute to our stockholders each calendar year dividends equal to at least 90% of our REIT taxable income (including certain items of non-cash income), determined without regard to the deduction for dividends paid and excluding net capital gain. There are certain items, including net income generated from the creation of MSRs, that are included in distributable earnings but are not included in the calculation of the current year’s taxable income. These differences may result in certain items that are recognized in the current period’s calculation of distributable earnings not being included in taxable income, and thus not subject to the REIT dividend distribution requirement, until future years. The table below presents a reconciliation of net income to distributable earnings before realized losses and distributable earnings. Three Months Ended March 31, (in thousands) 2026 2025 $ Change Net income (loss) $ (200,087) $ 81,965 $ (282,052) Reconciling items: Unrealized (gain) loss on MSR - discontinued operations — 8,952 (8,952) Unrealized (gain) loss on joint ventures (1,137) 5,639 (6,776) Increase (decrease) in CECL reserve 26,673 (112,127) 138,800 Increase (decrease) in valuation allowance 6,557 99,718 (93,161) Non-recurring REO impairment (469) 2,346 (2,815) Depreciation and amortization on real estate owned 1,576 — 1,576 Non-cash compensation 1,629 1,785 (156) Unrealized (gain) loss on preferred equity, at fair value 7,236 — 7,236 Merger transaction costs and other non-recurring expenses 654 2,993 (2,339) Bargain purchase (gain) loss — (102,471) 102,471 Realized losses on sale of investments 119,520 20,084 99,436 Total reconciling items $ 162,239 $ (73,081) $ 235,320 Income tax adjustments (11,360) (4,744) (6,616) Distributable earnings (loss) before realized losses $ (49,208) $ 4,140 $ (53,348) Realized losses on sale of investments, net of tax (110,626) (15,524) (95,102) Distributable earnings (loss) $ (159,834) $ (11,384) $ (148,450) Less: Distributable earnings attributable to non-controlling interests 1,725 1,985 (260) Less: Income attributable to participating shares 2,059 2,228 (169) Distributable earnings (loss) attributable to common stockholders $ (163,618) $ (15,597) $ (148,021) Distributable earnings (loss) before realized losses on investments, net of tax per common share - basic $ (0.33) $ 0.00 $ (0.33) Distributable earnings (loss) before realized losses on investments, net of tax per common share - diluted $ (0.33) $ 0.00 $ (0.33) Distributable earnings (loss) per common share - basic $ (1.00) $ (0.09) $ (0.91) Distributable earnings (loss) per common share - diluted $ (1.00) $ (0.09) $ (0.91) Q1 2026 versus Q1 2025 . Consolidated net loss of $200.1 million for the three months ended March 31, 2026 represented an increase of $282.1 million from the three months ended March 31, 2025 , primarily due to provision for 75 loan losses due to changes in the forecasted macroeconomic inputs for reserve modeling and an increase in asset specific reserves, partially offset by a decrease in the provision for loan losses related to loans transferred from Loans, net to Loans, held for sale, a gain on bargain purchase recognized from the UDF IV Merger in the prior year period, primarily driven by a discount in UDF IV’s market valuation due to factors such as the illiquid nature of UDF IV’s shares, and a change in our stock price between the date of the agreement and the closing date of the UDF IV Merger and net r ealized losses on financial instruments and real estate owned driven by loan sales , partially offset by decrease in the valuation allowance related to the transfer of Loans, net to Loans, held for sale driven by loan sales. Consolidated distributable losses before realized losses of $49.2 million for the three months ended March 31, 2026 represented an increase of $53.3 million from the three months ended March 31, 2025 . The increase in the distributable earnings reconciling items is primarily due to an increase in the provision for loan losses, a gain on bargain purchase recognized from the UDF IV Merger in the prior year period and realized losses on sale of investments, partially offset by a decrease in the valuation allowance related to the transfer of Loans, net to Loans, held for sale . Consolidated distributable losses of $159.8 million for the three months ended March 31, 2026 represented an increase of $148.5 million from the three months ended March 31, 2025 due to certain charge-offs and losses realized on sales of real estate owned assets and LMM loans. Incentive distribution payable to our Manager Under the partnership agreement of our operating partnership, our Manager, the holder of the Class A special unit in our operating partnership, is entitled to receive an incentive distribution, distributed quarterly in arrears in an amount, not less than zero, equal to the difference between (i) the product of (A) 15% and (B) the difference between (x) IFCE (as described below) of our operating partnership, on a rolling four-quarter basis and before the incentive distribution for the current quarter, and (y) the product of (1) the weighted average of the issue price per share of common stock or operating partnership unit (“OP unit”) (without double counting) in all of our offerings multiplied by the weighted average number of shares of common stock outstanding (including any restricted shares of common stock and any other shares of c ommon stock underlying awards granted under our 2013 Equity Incentive Plan, our 2023 Equity Incentive Plan and Broadmark's 2019 Stock Incentive Plan (the “Broadmark Equity Plan”), and OP units (without double counting) in such quarter and (2) 8%, and (ii) t he sum of any incentive distribution paid to our Manager with respect to the first three quarters of such previous four quarters; provided, however, that no incentive distribution is payable with respect to any calendar quarter unless cumulative IFCE is greater than zero for the most recently completed 12 calendar quarters. The incentive distribution shall be calculated within 30 days after the end of each quarter and such calculation shall promptly be delivered to our Company. We are obligated to pay the incentive distribution 50% in cash and 50% in either common stock or OP units, as determined in our discretion, within five business days after delivery to our Company of the written statement from the holder of the Class A special unit setting forth the computation of the incentive distribution for such quarter. Subject to certain exceptions, our Manager may not sell or otherwise dispose of any portion of the incentive distribution issued to it in common stock or OP units until after the three-year anniversary of the date that such shares of common stock or OP units were issued to our Manager. The price of shares of our common stock for purposes of determining the number of shares payable as part of the incentive distribution is the closing price of such shares on the last trading day prior to the approval by our Board of the incentive distribution. For purposes of determining the incentive distribution payable to our Manager, incentive fee core earnings (“IFCE”) is defined under the partnership agreement of the operating partnership as GAAP net income (loss) of the operating partnership excluding non-cash equity compensation expense, the expenses incurred in connection with the operating partnership's formation or continuation, the incentive distribution, real estate depreciation and amortization (to the extent that we forecloses on any properties underlying our assets ) and any unrealized gains, losses, or other non-cash items recorded in the period, regardless of whether such items are included in other comprehensive income or loss, or in net income. The amount will be adjusted to exclude one-time events pursuant to changes in GAAP and certain other non- cash charges after discussions between our Manager and our independent directors and after approval by a majority of the independent directors. Liquidity and Capital Resources Liquidity is a measure of our ability to turn non-cash assets into cash and to meet potential cash requirements. We use significant cash to purchase LMM loans and other target assets, originate new LMM loans, pay dividends, repay principal and interest on our borrowings, fund our operations and meet other general business needs. Certain of our loans pay PIK interest rather than cash interest payments and from time to time, we may grant concessions to borrowers experiencing significant financial difficulties in the form of modified terms such as interest rate reductions and other 76 terms described elsewhere in this Form 10-Q . These factors may increase our reliance on our primary sources of liquidity, including our existing cash balances, borrowings, including securitizations, re-securitizations, repurchase agreements, warehouse facilities, bank credit facilities and other financing agreements (including term loans and revolving facilities), the net proceeds of offerings of equity and secured and unsecured debt securities , and net cash provided by operating and investing activities. We believe that our sources of liquidity will provide sufficient liquidity to fund ongoing obligations and address upcoming debt maturities, including the approximately $450.0 million of debt maturing in 2026. We had approximately $200.0 million of unrestricted cash and approximately $700.0 million of unencumbered assets as of March 31, 2026 . We expect approximately $450 million in net liquidity from portfolio maturities and pending asset resolutions over the next 12 months, and may also sell additional assets. We expect the combination of these items to de-lever the balance sheet, which may impact book value depending on the size, timing and pricing of such actions. We expect to utilize these resources, together with our access to the capital markets, to meet our liquidity needs . We are continuing to monitor the impact of shifts in interest rates, credit spreads and inflation on the Company, the borrowers underlying our real estate-related assets, the tenants in the properties we own, our financing sources, and the economy as a whole. Because the severity, magnitude and duration of these economic events remain uncertain, rapidly changing and difficult to predict, the impact on our operations and liquidity also remains uncertain and difficult to predict . Cash flow Three Months Ended March 31, 2026 . Cash and cash equivalents as of March 31, 2026 , decreased by $8.3 million to $241.2 million from December 31, 2025 , primarily due to net cash used for financing activities, partially offset by net cash provided by investing and operating activities. T he net cash used for financing activities primarily reflected repayments of securitized debt obligations of consolidated VIEs and net repayments of secured borrowings. The net cash provided by investing activities primarily reflected proceeds from disposition and principal payments of loans, partially offset by net cash used for loan originations. The net cash provided by operating activities primarily reflected the sale of Loans, held for sale, realized losses on financial instruments and provision for loan losses, partially offset by net losses . Three Months Ended March 31, 2025 . C ash and cash equivalents as of March 31, 2025 , increased by $65.6 million to $248.4 million from December 31, 2024 , primarily due to net cash provided by investing and operating activities, partially offset by net cash used for financing activities. The net cash provided by investing activities primarily reflected proceeds from disposition and principal payments of loans, partially offset by net cash used for loan originations. The net cash provided by operating activities reflected a valuation allowance related to the transfer of Loans, net to Loans held for sale, the sale of Loans, held for sale, and net income, partially offset by a recovery of loan losses related to the transfer of Loans, net to Loans, held for sale and a bargain purchase gain in connection with the UDF IV Merger, which was primarily driven by a discount in UDF IV’s market valuation due to factors such as the illiquid nature of UDF IV’s shares and a change in our stock price between the date of the agreement and the closing date of the merger . The net cash used for financing activities primarily reflected repayments of securitized debt obligations of consolidated VIEs, partially offset by net proceeds from secured borrowings. Financing Strategy and Leverage In addition to raising capital through offerings of our public equity and debt securities, we finance our investment portfolio through securitization and secured borrowings. We generally seek to match-fund our investments to minimize the differences in the terms of our investments and our liabilities. Our secured borrowings have various recourse levels including full recourse, partial recourse and non-recourse, as well as varied mark-to-market provisions including full mark-to-market, credit mark only and non-mark-to-market. Securitizations allow us to match fund loans pledged as collateral on a long-term, non-recourse basis. Securitization structures typically consist of trusts with principal and interest collections allocated to senior debt and losses on liquidated loans to equity and subordinate tranches, and provide debt equal to 50% to 90% of the cost basis of the assets. We also finance originated SBL with secured borrowings until the loans are sold, generally within 30 days. 77 As of March 31, 2026 , we had a total leverage ratio of 3.0x and recourse leverage ratio of 1.8x . Our operating segments have different levels of recourse debt according to the differentiated nature of each segment. Our LMM Commercial Real Estate and Small Business Lending segments have recourse leverage ratios of 0.7x and 0.2x , respectively. The remaining recourse leverage ratio is from our corporate debt offerings. Secured Borrowings Credit Facilities and Other Financing Agreements. We utilize credit facilities and other financing arrangements to finance our business. The financings are collateralized by the underlying mortgages, assets, related documents, and instruments, and typically contain index-based financing rate and terms, haircut and collateral posting provisions which depend on the types of collateral and the counterparties involved. These agreements often contain customary negative covenants and financial covenants, including maintenance of minimum liquidity, minimum tangible net worth, maximum debt to net worth ratio and current ratio and limitations on capital expenditures, indebtedness, distributions, transactions with affiliates and maintenance of positive net income. The table below presents certain characteristics of our credit facilities and other financing arrangements. Pledged Assets Carrying Value at Lenders (1) Asset Class Current Maturity (2) Pricing (3) Facility Size Carrying Value March 31, 2026 December 31, 2025 3 SBA loans April 2026 to June 2027 SOFR + 2.55% Prime - 0.82% $ 335,000 $ 382,817 $ 301,025 $ 307,522 1 LMM loans - USD May 2026 SOFR + 1.35% 40,000 8,490 8,277 16,425 1 LMM loans - Non-USD (4) January 2027 EURIBOR + 3.00% 58,696 21,356 29,413 29,965 2 USDA loans June 2027 - August 2028 SOFR + 2.75% 198,500 33,851 19,285 31,204 Total borrowings under credit facilities and other financing agreements $ 632,196 $ 446,514 $ 358,000 $ 385,116 (1) Represents the total number of facility lenders. (2) Current maturity does not reflect extension options available beyond original commitment terms. (3) Asset class pricing is determined using an index rate plus a weighted average spread. (4) Non-USD denominated credit facilities have been converted into USD for purposes of this disclosure. Repurchase Agreements. Under the loan repurchase facilities and securities repurchase agreements, we may be required to pledge additional assets to our counterparties in the event that the estimated fair value of the existing pledged collateral under such agreements declines and such lenders demand additional collateral, which may take the form of additional assets or cash. Generally, the loan repurchase facilities and securities repurchase agreements contain a SOFR- based financing rate, term and haircuts depending on the types of collateral and the counterparties involved. The loan repurchase facilities also include financial maintenance covenants. If the estimated fair values of the assets increase due to changes in market interest rates or other market factors, lenders may release collateral back to us. Margin calls may result from a decline in the value of the investments securing the loan repurchase facilities and securities repurchase agreements, prepayments on the loans securing such investments and from changes in the estimated fair value of such investments generally due to principal reduction of such investments from scheduled amortization and resulting from changes in market interest rates and other market factors. Counterparties also may choose to increase haircuts based on credit evaluations of our Company and/or the performance of the assets in question. Historically, disruptions in the financial and credit markets have resulted in increased volatility in these levels, and this volatility could persist as market conditions continue to change. Should prepayment speeds on the mortgages underlying our investments or market interest rates suddenly increase, margin calls on the loan repurchase facilities and securities repurchase agreements could result, causing an adverse change in our liquidity position. To date, we have satisfied all of our margin calls and have never sold assets in response to any margin call under these borrowings. Our borrowings under repurchase agreements are renewable at the discretion of our lenders and, as such, our ability to roll-over such borrowings are not guaranteed. The terms of the repurchase transaction borrowings under our repurchase agreements generally conform to the terms in the standard master repurchase agreement as published by the Securities Industry and Financial Markets Association, as to repayment, margin requirements and the segregation of all assets we have initially sold under the repurchase transaction. In addition, each lender typically requires that we include supplemental terms and conditions to the standard master repurchase agreement. Typical supplemental terms and conditions, which differ by lender, may include changes to the margin maintenance requirements, required haircuts and 78 purchase price maintenance requirements, requirements that all controversies related to the repurchase agreement be litigated in a particular jurisdiction, and cross default and setoff provisions. We maintain certain assets, which, from time to time, may include cash, unpledged LMM loans, LMM ABS and short- term investments (which may be subject to various haircuts if pledged as collateral to meet margin requirements) and collateral in excess of margin requirements held by our counterparties, or collectively, the “Cushion”, to meet routine margin calls and protect against unforeseen reductions in our borrowing capabilities. Our ability to meet future margin calls will be impacted by the Cushion, which varies based on the fair value of our investments, our cash position and margin requirements. Our cash position fluctuates based on the timing of our operating, investing and financing activities and is managed based on our anticipated cash needs. The table below presents certain characteristics of our repurchase agreements. Pledged Assets Carrying Value at Lenders (1) Asset Class Current Maturity (2) Pricing (3) Facility Size Carrying Value March 31, 2026 December 31, 2025 7 LMM loans June 2026 - September 2028 SOFR + 2.56% $ 3,425,000 $ 2,997,237 $ 1,841,176 $ 2,277,028 5 MBS April 2026 - September 2026 5.38% 122,267 212,800 122,267 126,782 Total borrowings under repurchase agreements $ 3,547,267 $ 3,210,037 $ 1,963,443 $ 2,403,810 (1) Represents the total number of facility lenders. (2) Current maturity does not reflect extension options available beyond original commitment terms. (3) Asset class pricing is determined using an index rate plus a weighted average spread. Collateralized borrowings under repurchase agreements The table below presents the amount of collateralized borrowings outstanding under repurchase agreements as of the end of each quarter, the average amount of collateralized borrowings outstanding under repurchase agreements during the quarter and the highest balance of any month end during the quarter. (in thousands) Quarter End Balance Average Balance in Quarter Highest Month End Balance in Quarter Q2 2024 2,087,661 2,058,766 2,087,661 Q3 2024 1,882,327 1,971,347 2,049,273 Q4 2024 1,718,131 1,795,627 1,846,677 Q1 2025 2,425,258 1,922,525 2,425,258 Q2 2025 3,135,931 2,673,449 3,135,931 Q3 2025 2,460,953 2,699,935 3,021,745 Q4 2025 2,403,810 2,402,929 2,431,561 Q1 2026 1,963,443 2,178,978 2,628,893 The net decrease in the outstanding balances during the first quarter of 2026 was primarily due to the sales and paydowns of warehouse loans, partially offset by the collapse of RCMF 2021-FL7, RCMF 2023-FL11 and RCMF 2023- FL12. Paycheck Protection Program Liquidity Facility borrowings. The Company uses the PPPLF from the Federal Reserve to finance PPP loans. The program charges an interest rate of 0.35%. As of March 31, 2026 , we had approximately $3.8 million outstanding under this credit facility. 79 Senior Secured Notes and Corporate Debt, Net The table below presents information about senior secured notes and corporate debt issued through public and private transactions . (in thousands) Coupon Rate Maturity Date March 31, 2026 Senior secured notes principal amount (1) 4.50 % 10/20/2026 $ 350,000 Senior secured notes principal amount (2) 9.375 % 3/1/2028 270,000 Term loan principal amount (3) SOFR + 5.50% 4/12/2029 115,250 Unamortized discount (1,747) Unamortized deferred financing costs (9,796) Total senior secured notes, net $ 723,707 Corporate debt principal amount (4) 5.50 % 12/30/2028 110,000 Corporate debt principal amount (5) 6.20 % 7/30/2026 67,443 Corporate debt principal amount (6) 7.375 % 7/31/2027 100,000 Corporate debt principal amount (7) 5.00 % 11/15/2026 100,000 Corporate debt principal amount (8) 9.00 % 12/15/2029 129,371 Unamortized discount - corporate debt (4,600) Unamortized deferred financing costs - corporate debt (1,492) Junior subordinated notes principal amount (9) SOFR + 3.10% 3/30/2035 15,000 Junior subordinated notes principal amount (10) SOFR + 3.10% 4/30/2035 21,250 Total corporate debt, net $ 536,972 Total carrying amount of debt $ 1,260,679 (1) Interest on the senior secured notes is payable semiannually on April 20 and October 20 of each year. (2) Interest on the senior secured notes is payable semiannually on March 1 and September 1 of each year. (3) Interest on the term loan is payable quarterly on January 12, April 12, July 12 and October 12 of each year. (4) Interest on the corporate debt is payable semiannually on June 30 and December 30 of each year. (5) Interest on the corporate debt is payable quarterly on January 30, April 30, July 30, and October 30 of each year. (6) Interest on the corporate debt is payable semiannually on January 31 and July 31 of each year. (7) Interest on the corporate debt is payable semiannually on May 15 and November 15 of each year; assumed as part of the Broadmark Merger (as defined below). (8) Interest on the corporate debt is payable quarterly on March 15, June 15, September 15, and December 15 of each year. (9) Interest on the Junior subordinated notes I-A is payable quarterly on March 30, June 30, September 30, and December 30 of each year. (10) Interest on the Junior subordinated notes I-B is payable quarterly on January 30, April 30, July 30, and October 30 of each year. The table below presents the contractual maturities for senior secured notes and corporate debt. (in thousands) March 31, 2026 2026 $ 517,443 2027 100,000 2028 380,000 2029 244,621 2030 — Thereafter 36,250 Total contractual amounts $ 1,278,314 Unamortized deferred financing costs, discounts, and premiums, net (17,635) Total carrying amount of debt $ 1,260,679 ReadyCap Holdings 4.50% senior secured notes due 2026. On October 20, 2021, ReadyCap Holdings, an indirect subsidiary of the Company, completed the offer and sale of $350.0 million of its 4.50% Senior Secured Notes due 2026 (the “2026 Senior Secured Notes”). The 2026 Senior Secured Notes are fully and unconditionally guaranteed by the Company, each direct parent entity of ReadyCap Holdings, and other direct or indirect subsidiaries of the Company from time to time that is a direct parent entity of Sutherland Asset III, LLC or otherwise pledges collateral to secure the 2026 Senior Secured Notes (collectively, the “2026 SSN Guarantors”). ReadyCap Holdings’ and the 2026 SSN Guarantors’ respective obligations under the 2026 Senior Secured Notes are secured by a perfected first-priority lien on certain capital stock and assets (collectively, the “2026 SSN Collateral”) owned by certain subsidiaries of the Company. The 2026 Senior Secured Notes are redeemable by ReadyCap Holdings’ following a non-call period, through the payment of the outstanding principal balance of the 2026 Senior Secured Notes plus a “make-whole” or other premium that decreases the closer the 2026 Senior Secured Notes are to maturity. ReadyCap Holdings is required to offer to repurchase the 2026 Senior Secured Notes at 101% of the principal balance of the 2026 Senior Secured Notes in the 80 event of a change in control and a downgrade of the rating on the 2026 Senior Secured Notes in connection therewith, as set forth more fully in the note purchase agreement governing the 2026 Senior Secured Notes. The 2026 Senior Secured Notes were issued pursuant to a note purchase agreement, which contains certain customary negative covenants and requirements relating to the collateral and the Company, ReadyCap Holdings, and the 2026 SSN Guarantors, including maintenance of minimum liquidity, minimum tangible net worth, maximum debt to net worth ratio, and limitations on transactions with affiliates. ReadyCap Holdings 9.375% senior secured notes due 2028. On February 21, 2025, ReadyCap Holdings completed the offer and sale of $220.0 million of its 9.375% Senior Secured Notes due 2028 (the “2028 Senior Secured Notes” and, with the 2026 Senior Secured Notes, collectively, the “Senior Secured Notes”) for net proceeds of $216.7 million before expenses. The 2028 Senior Secured Notes are fully and unconditionally guaranteed by the Company and other direct or indirect subsidiaries of the Company from time to time that pledge collateral to secure the 2028 Senior Secured Notes (collectively, the “2028 SSN Guarantors”). ReadyCap Holdings’ and the 2028 SSN Guarantors’ respective obligations under the 2028 Senior Secured Notes are secured by a perfected first-priority lien on certain capital stock and assets (collectively, the “2028 SSN Collateral”) owned by certain subsidiaries of the Company. The 2028 Senior Secured Notes are redeemable by ReadyCap Holdings following a non-call period, through the payment of the outstanding principal balance of the 2028 Senior Secured Notes plus a “make-whole” or other premium that decreases the closer the 2028 Senior Secured Notes are to maturity. ReadyCap Holdings is required to offer to repurchase the 2028 Senior Secured Notes at 101% of the principal balance of the 2028 Senior Secured Notes in the event of a change in control and a downgrade of the rating on the 2028 Senior Secured Notes in connection therewith, as set forth more fully in the note purchase agreement governing the 2028 Senior Secured Notes. The 2028 Senior Secured Notes were issued pursuant to a note purchase agreement, which contains certain customary negative covenants and requirements relating to the collateral and the Company, ReadyCap Holdings, and the 2028 SSN Guarantors, including maintenance of minimum tangible net worth, maximum debt to net worth ratio, unencumbered cash and asset requirements, and limitations on transactions with affiliates. On April 16, 2025, ReadyCap Holdings issued an additional $50.0 million in aggregate principal amount of its 2028 Senior Secured Notes for net proceeds of $49.3 million before expenses. The additional notes are fungible with and treated as a single series of debt securities as the Company’s 2028 Senior Secured Notes issued on February 21, 2025. The Company used the net proceeds from the issuance of the additional notes to repay its indebtedness and for general corporate purposes. Ready Term Holdings, LLC (“Ready Term Holdings”) term loan due 2029. On April 12, 2024, Ready Term Holdings, an indirect subsidiary of the Company, entered into a credit agreement which provides for a delayed draw term loan to the Company in an aggregate principal amount not to exceed $115.25 million (the “Term Loan”). The Term Loan is fully and unconditionally guaranteed by the Company and other direct or indirect subsidiaries of the Company from time to time that pledge collateral to secure the Term Loan (collectively, the “Term Loan Guarantors”). Ready Term Holdings’ and the Term Loan Guarantors’ respective obligations under the Term Loan are secured by a perfected first-priority lien on certain capital stock and assets (collectively, the “Term Loan Collateral”) owned by certain subsidiaries of the Company. The Term Loan matures on April 12, 2029, and may be drawn at any time on or prior to January 12, 2025, subject to the satisfaction of customary conditions. The Company borrowed $75.0 million in connection with the initial closing of the Term Loan. On August 19, 2024, the Company borrowed an additional $20.0 million. The Term Loan bears interest on the outstanding principal amount thereof at a rate equal to (a) SOFR plus 5.50% per annum or (b) base rate plus 4.50% per annum; provided that if at any time the Term Loan is rated below investment grade, the interest rate shall increase to (x) SOFR plus 6.50% per annum or (y) base rate plus 5.50% per annum until the rating is no longer below investment grade. In connection with the entry into the credit agreement, the Company also agreed to pay certain upfront fees on the 81 initial borrowing date. The Company will also pay, with respect to any unused portion of the Term Loan, a commitment fee of 1.00% per annum. The Term Loan was issued pursuant to a credit agreement, which contains certain customary representations and warranties and affirmative and negative covenants and requirements relating to the collateral and the Company, Ready Term Holdings, and the Term Loan Guarantors, including maintenance of a minimum asset coverage ratio and a maximum debt to equity ratio. Corporate debt We issue senior unsecured notes in public and private transactions. The notes are governed by a base indenture and supplemental indentures. Often, the notes are redeemable by us following a non-call period, through the payment of the outstanding principal balance plus a “make-whole” or other premium that typically decreases the closer the notes are to maturity. We are often required to offer to repurchase the notes, in some cases at 101% of the principal balance of the notes, in the event of a change in control or fundamental change pertaining to our company, as defined in the applicable supplemental indentures. The notes rank equal in right of payment to any of our existing and future unsecured and unsubordinated indebtedness; effectively junior in right of payment to any of our existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all existing and future indebtedness, other liabilities (including trade payables) and (to the extent not held by us) preferred stock, if any, of our subsidiaries. The supplemental indentures governing the notes often contain customary negative covenants and financial covenants relating to maintenance of minimum liquidity, minimum tangible net worth, maximum debt to net worth ratio and limitations on transactions with affiliates. In addition, in connection with the merger among the Company, Broadmark Realty Capital Inc. (“Broadmark”), and RCC Merger Sub, LLC, a wholly owned subsidiary of the operating partnership (“RCC Merger Sub”), in which Broadmark merged with and into RCC Merger Sub, with RCC Merger Sub remaining as a wholly owned subsidiary of the operating partnership (the “Broadmark Merger”), RCC Merger Sub assumed Broadmark’s obligations on certain senior unsecured notes. The note purchase agreement governing these notes contains financial covenants that require compliance with leverage and coverage ratios and maintenance of minimum tangible net worth, as well as other customary affirmative and negative covenants. Securitization transactions Our Manager’s extensive experience in loan acquisition, origination, servicing and securitization strategies has enabled us to complete several securitizations of LMM and SBA loan assets since January 2011. These securitizations allow us to match fund the LMM and SBA loans on a long-term, non-recourse basis. The assets pledged as collateral for these securitizations were contributed from our portfolio of assets. By contributing these LMM and SBA assets to the various securitizations, these transactions created capacity for us to fund other investments. 82 The table below presents information on the securitization structures and related issued tranches of notes to investors. (in millions) Collateral Asset Class Issuance Active / Collapsed Bonds Issued Trusts (Firm sponsored) Waterfall Victoria Mortgage Trust 2011-1 (SBC1) LMM Acquired loans February 2011 Collapsed $ 40.5 Waterfall Victoria Mortgage Trust 2011-3 (SBC3) LMM Acquired loans October 2011 Collapsed 143.4 Sutherland Commercial Mortgage Trust 2015-4 (SBC4) LMM Acquired loans August 2015 Collapsed 125.4 Sutherland Commercial Mortgage Trust 2018 (SBC7) LMM Acquired loans November 2018 Collapsed 217.0 ReadyCap Lending Small Business Trust 2015-1 (RCLT 2015-1) Acquired SBA 7(a) loans June 2015 Collapsed 189.5 ReadyCap Lending Small Business Loan Trust 2019-2 (RCLT 2019-2) Originated SBA 7(a) loans, Acquired SBA 7(a) loans December 2019 Active 131.0 ReadyCap Lending Small Business Loan Trust 2023-3 (RCLT 2023-3) Originated SBA 7(a) loans, Acquired SBA 7(a) loans July 2023 Active 132.0 Real Estate Mortgage Investment Conduits (REMICs) ReadyCap Commercial Mortgage Trust 2014-1 (RCMT 2014-1) LMM Originated conventional September 2014 Collapsed 181.7 ReadyCap Commercial Mortgage Trust 2015-2 (RCMT 2015-2) LMM Originated conventional November 2015 Collapsed 218.8 ReadyCap Commercial Mortgage Trust 2016-3 (RCMT 2016-3) LMM Originated conventional November 2016 Active 162.1 ReadyCap Commercial Mortgage Trust 2018-4 (RCMT 2018-4) LMM Originated conventional March 2018 Active 165.0 Ready Capital Mortgage Trust 2019-5 (RCMT 2019-5) LMM Originated conventional January 2019 Active 355.8 Ready Capital Mortgage Trust 2019-6 (RCMT 2019-6) LMM Originated conventional November 2019 Active 430.7 Ready Capital Mortgage Trust 2022-7 (RCMT 2022-7) LMM Originated conventional April 2022 Active 276.8 Waterfall Victoria Mortgage Trust 2011-2 (SBC2) LMM Acquired loans March 2011 Collapsed 97.6 Sutherland Commercial Mortgage Trust 2018 (SBC6) LMM Acquired loans August 2017 Collapsed 154.9 Sutherland Commercial Mortgage Trust 2019 (SBC8) LMM Acquired loans June 2019 Active 306.5 Sutherland Commercial Mortgage Trust 2020 (SBC9) LMM Acquired loans June 2020 Collapsed 203.6 Sutherland Commercial Mortgage Trust 2021 (SBC10) LMM Acquired loans May 2021 Active 232.6 Collateralized Loan Obligations (CLOs) Ready Capital Mortgage Financing 2017– FL1 LMM Originated bridge August 2017 Collapsed 198.8 Ready Capital Mortgage Financing 2018 – FL2 LMM Originated bridge June 2018 Collapsed 217.1 Ready Capital Mortgage Financing 2019 – FL3 LMM Originated bridge April 2019 Collapsed 320.2 Ready Capital Mortgage Financing 2020 – FL4 LMM Originated bridge June 2020 Collapsed 405.3 Ready Capital Mortgage Financing 2021 – FL5 LMM Originated bridge March 2021 Collapsed 628.9 Ready Capital Mortgage Financing 2021 – FL6 LMM Originated bridge August 2021 Collapsed 652.5 Ready Capital Mortgage Financing 2021 – FL7 LMM Originated bridge November 2021 Collapsed 927.2 Ready Capital Mortgage Financing 2022 – FL8 LMM Originated bridge March 2022 Collapsed 1,135.0 Ready Capital Mortgage Financing 2022 – FL9 LMM Originated bridge June 2022 Collapsed 754.2 Ready Capital Mortgage Financing 2022 – FL10 LMM Originated bridge October 2022 Collapsed 860.1 Ready Capital Mortgage Financing 2023 – FL11 LMM Originated bridge February 2023 Collapsed 586.0 Ready Capital Mortgage Financing 2023 – FL12 LMM Originated bridge June 2023 Collapsed 648.6 Trusts (Non-firm sponsored) Freddie Mac Small Balance Mortgage Trust 2016-SB11 Originated agency multi-family January 2016 Active 110.0 Freddie Mac Small Balance Mortgage Trust 2016-SB18 Originated agency multi-family July 2016 Active 118.0 Freddie Mac Small Balance Mortgage Trust 2017-SB33 Originated agency multi-family June 2017 Active 197.9 Freddie Mac Small Balance Mortgage Trust 2018-SB45 Originated agency multi-family January 2018 Active 362.0 Freddie Mac Small Balance Mortgage Trust 2018-SB52 Originated agency multi-family September 2018 Active 505.0 Freddie Mac Small Balance Mortgage Trust 2018-SB56 Originated agency multi-family December 2018 Active 507.3 Key Commercial Mortgage Trust 2020-S3 (1) LMM Originated conventional September 2020 Active 263.2 (1) Contributed portion of assets into trust We used the proceeds from the sale of the tranches issued to purchase and originate LMM and SBL loans . We are the primary beneficiary of all firm sponsored securitizations; therefore they are consolidated in our financial statements. Contractual Obligations and Off-Balance Sheet Arrangements Other than the items referenced above, there have been no material changes to our contractual obligations for the three months ended March 31, 2026 . Refer to Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations," in the Company's Form 10-K for further details. As of the date of this Form 10-Q, we had no off-balance sheet arrangements, other than as disclosed. 83 Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with GAAP, which requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We believe that all of the decisions and assessments upon which our consolidated financial statements are based were reasonable at the time made, based upon information available to us at that time. The following discussion describes the critical accounting estimates that apply to our operations and require complex management judgment. This summary should be read in conjunction with our accounting policies and use of estimates included in “Notes to Consolidated Financial Statements, Note 3 – Summary of Significant Accounting Policies” included in Item 8, “Financial Statements and Supplementary Data,” in the Company’s Form 10-K. Allowance for credit losses The allowance for credit losses consists of the allowance for losses on loans and lending commitments accounted for at amortized cost. Such loans and lending commitments are reviewed quarterly considering credit quality indicators, including probable and historical losses, collateral values, LTV ratio and economic conditions. The allowance for credit losses increases through provisions charged to earnings and reduced by charge-offs, net of recoveries. We utilize loan loss forecasting models for estimating expected life-time credit losses, at the individual loan level, for its loan portfolio. The Current Expected Credit Loss (“CECL”) forecasting methods used by the Company include (i) a probability of default and loss given default method using underlying third-party CMBS/CRE loan database with historical loan losses and (ii) probability weighted expected cash flow method, depending on the type of loan and the availability of relevant historical market loan loss data. We might use other acceptable alternative approaches in the future depending on, among other factors, the type of loan, underlying collateral, and availability of relevant historical market loan loss data. We estimate the CECL expected credit losses for our loan portfolio at the individual loan level. Significant inputs to our forecasting methods include (i) key loan-specific inputs such as LTV, vintage year, loan-term, underlying property type, occupancy, geographic location, and others, and (ii) a macro-economic forecast. These estimates may change in future periods based on available future macro-economic data and might result in a material change in our future estimates of expected credit losses for its loan portfolio. In certain instances, we consider relevant loan-specific qualitative factors to certain loans to estimate its CECL expected credit losses. We consider loan investments that are both (i) expected to be substantially repaid through the operation or sale of the underlying collateral, and (ii) for which the borrower is experiencing financial difficulty, to be “collateral- dependent” loans. For such loans that we determine that foreclosure of the collateral is probable, we measure the expected losses based on the difference between the fair value of the collateral (less costs to sell the asset if repayment is expected through the sale of the collateral) and the amortized cost basis of the loan as of the measurement date. For collateral-dependent loans that we determine foreclosure is not probable, we apply a practical expedient to estimate expected losses using the difference between the collateral’s fair value (less costs to sell the asset if repayment is expected through the sale of the collateral) and the amortized cost basis of the loan. While we have a formal methodology to determine the adequate and appropriate level of the allowance for credit losses, estimates of inherent loan losses involve judgment and assumptions as to various factors, including current economic conditions. Our determination of adequacy of the allowance for credit losses is based on quarterly evaluations of the above factors. Accordingly, the provision for loan losses will vary from period to period based on management's ongoing assessment of the adequacy of the allowance for credit losses. Significant judgment is required when evaluating loans for impairment; therefore, actual results over time could be materially different. Refer to “Notes to Consolidated Financial Statements, Note 6 – Loans and Allowance for Credit Losses” included in this Form 10-Q for results of our loan impairment evaluation . 84 Valuation of financial assets and liabilities carried at fair value We measure our MBS, derivative assets and liabilities, and any assets or liabilities where we have elected the fair value option at fair value, including certain loans we have originated that are expected to be sold to third parties or securitized in the near term. We have established valuation processes and procedures designed so that fair value measurements are appropriate and reliable, that they are based on observable inputs where possible, that the valuation approaches are consistently applied, and the assumptions and inputs are reasonable. We also have established processes to provide that the valuation methodologies, techniques and approaches for investments that are categorized within Level 3 of the ASC 820 Fair Value Measurement fair value hierarchy (the “fair value hierarchy”) are fair, consistent and verifiable. Our processes provide a framework that ensures the oversight of our fair value methodologies, techniques, validation procedures, and results. When actively quoted observable prices are not available, we either use implied pricing from similar assets and liabilities or valuation models based on net present values of estimated future cash flows, adjusted as appropriate for liquidity, credit, market and/or other risk factors. Refer to “Notes to Consolidated Financial Statements, Note 7 – Fair Value Measurements” included in Item 8, “Financial Statements and Supplementary Data,” in the Form 10-K for a more complete discussion of our critical accounting estimates as they pertain to fair value measurements. Servicing rights impairment Servicing rights, at amortized cost, are initially recorded at fair value and subsequently carried at amortized cost. For purposes of testing our servicing rights, carried at amortized cost, for impairment, we first determine whether facts and circumstances exist that would suggest the carrying value of the servicing asset is not recoverable. If so, we then compare the net present value of servicing cash flow with its carrying value. The estimated net present value of servicing cash flows of the intangibles is determined using discounted cash flow modeling techniques which require management to make estimates regarding future net servicing cash flows, taking into consideration historical and forecasted loan prepayment rates, delinquency rates and anticipated maturity defaults. If the carrying value of the servicing rights exceeds the net present value of servicing cash flows, the servicing rights are considered impaired and an impairment loss is recognized in earnings for the amount by which carrying value exceeds the net present value of servicing cash flows. We monitor the actual performance of our servicing rights by regularly comparing actual cash flow, credit, and prepayment experience to modeled estimates. Significant judgment is required when evaluating servicing rights for impairment therefore, actual results over time could be materially different. Refer to “Notes to Consolidated Financial Statements, Note 8 – Servicing Rights” included in this Form 10-Q for a more complete discussion of our critical accounting estimates as they pertain to servicing rights impairment. Refer to “Notes to Consolidated Financial Statements, Note 4– Recent Accounting Pronouncements” included in Item 8, “Financial Statements and Supplementary Data,” in the Company’s Form 10-K for a discussion of recent accounting developments and the expected impact to the Company.