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Item 2. Management’s Discussion and Analysis

2026-08-06 compared with 2026-05-14 · 145 added, 79 removed, 217 unchanged (51% of the section changed)

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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes and other information included in this Quarterly Report on Form 10-Q (the “Quarterly Report”).

This discussion and analysis contains forward-looking statements that involve risks and uncertainties which could cause our actual results to differ materially from those anticipated in these forward-looking statements, including, but not limited to, risks and uncertainties discussed under the heading “Cautionary Note Regarding Forward-Looking Statements,” in this Form 10-Q, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025.

This discussion and analysis contains forward-looking statements that involve risks and uncertainties which could cause our actual results to differ materially from those anticipated in these forward-looking statements, including, but not limited to, risks and uncertainties discussed under the heading “Cautionary Note Regarding Forward-Looking Statements” in this Form 10-Q, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025 and our other filings with the SEC.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Quarterly Report”), filed by Sunrise Realty Trust, Inc.

(the “Company,” “SUNS,” “we,” “us,” and “our”), and the information incorporated by reference herein, or made in other reports, filings with the SEC, and press releases contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and we intend such statements to be covered by the safe harbor provisions contained therein.

These forward-looking statements are based on our current intent, belief, expectations and views of future events.

The forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results or performance, and may contain the words “believe,” “anticipate,” “expect,” “estimate,” “project,” “could,” “would,” “will,” “can,” “continuing,” “may,” “aim,” “intend,” “ongoing,” “plan,” “predict,” “potential,” “should,” “seeks,” “likely to” or words or phrases of similar meaning.

Specifically, this Quarterly Report includes forward-looking statements regarding (i) our portfolio and strategies for the growth of our commercial real estate lending business;

(ii) our working capital, liquidity and capital requirements;

(iii) potential state and federal legislative and regulatory matters;

(iv) our expectations and estimates regarding certain tax, legal and accounting matters, including the impact on our financial statements and/or those of our borrowers;

(v) the amount, collectability and timing of cash flows, if any, from our loans;

(vi) our expected ranges of originations and repayments;

(vii) estimates relating to our ability to make distributions to our shareholders in the future;

and (viii) our investment strategy.

These forward-looking statements reflect management’s current views about future events, and are subject to risks, uncertainties and assumptions.

Our actual results may differ materially from the future results and events expressed or implied by the forward-looking statements.

Key factors that could prevent us from achieving our goals, and cause the assumptions underlying forward-looking statements and the actual results to differ materially from those expressed in or implied by those forward-looking statements include, but are not limited to, the following:

• our ability to identify a successful business and investment strategy and execute on our strategy;

• the ability of our Manager to locate suitable loan opportunities for us and to monitor and actively manage our portfolio and implement our investment strategy;

• our ability to successfully complete our proposed Merger (as defined below) and/or realize all of the expected benefits or that such benefits may take longer to realize than expected (including because we expect to incur significant costs associated with such Merger);

• our ability to consummate the sale of the San Antonio hotel property on acceptable terms, or at all;

• our ability to meet our expected ranges of originations and repayments;

• our ability to obtain our target mix of loan and collateral types with our expected ranges of yields;

• the allocation of loan opportunities to us by our Manager and our ability to close those loans;

• changes in general economic conditions, in our industry and in the commercial finance and commercial real estate markets;

• we have limited history of operating as an independent company, and our historical financial information is not necessarily representative of the results that we would have achieved as a separate, publicly traded company and may not be a reliable indicator of our future results;

• the state of the U.S.

economy generally or in the specific geographic regions in which we operate, including as a result of the impact of natural disasters;

• the impact of a protracted decline in the liquidity of credit markets on our business;

• the amount, collectability and timing of our cash flows, if any, from our loans and other investments, including investments in real estate acquired through foreclosure and held through joint ventures;

• our ability to obtain and maintain competitive financing arrangements;

• our ability to achieve our expected leverage;

• changes in the value of our loans and other investments, including investments in real estate acquired through foreclosure and held through joint ventures;;

• losses that may be exacerbated due to the concentration of our portfolio in a limited number of loans and borrowers;

• our investment and underwriting process;

• the rates of default or recovery rates on our loans, including our ability to realize value from collateral and real estate acquired through foreclosure;

• the degree to which our hedging strategies may or may not protect us from interest rate volatility;

• the availability of investment opportunities in mortgage-related and real estate-related instruments and other securities, and our ability to reinvest proceeds from loan repayments, sales and other realizations in a timely manner and on favorable terms;

• interest rate mismatches between our loans and our borrowings used to fund such loans;

• the departure of any of the executive officers or key personnel supporting and assisting us from our Manager or its affiliates;

• impact of and changes in governmental regulations, tax law and rates, accounting guidance, tariffs and similar matters;

• the impact of a changing interest rate and inflation environment on our results of operations, cash flows and the market value of our loans;

• our ability to maintain our exemption from registration under the Investment Company Act of 1940 (the “Investment Company Act”);

• our ability to qualify and maintain our qualification as a real estate investment trust (a “REIT”) for U.S.

federal income tax purposes;

• estimates relating to our ability to make distributions to our shareholders in the future;

• our understanding of our competition;

• market trends in our industry, interest rates, real estate values, the securities markets or the general economy;

• we may issue shares of preferred or common stock in the future, which could dilute your percentage ownership of SUNS;

• use of proceeds of our securities offerings;

• litigation, including costs associated with prosecuting or defending claims and any adverse outcomes.

The above list of factors is not exhaustive or necessarily in order of importance.

Actual results may differ materially from those expressed in or implied by these forward-looking statements as a result of various risks and uncertainties, including, without limitation, those described below and elsewhere in this Quarterly Report, including in Part II, Item 1A, “Risk Factors,” and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, including in the section entitled “Risk Factors,” as well as in our subsequent filings with the SEC.

These forward-looking statements speak only as of the date of this Quarterly Report.

Except as required by applicable law, we undertake no obligation to update or revise any forward-looking statements contained in this Quarterly Report to reflect events or circumstances after the date of this Quarterly Report or to reflect the occurrence of unanticipated events.

SUNS is a Maryland corporation that was formed on August 28, 2023 and that made its first investment in January 2024.

We are a real estate focused debt fund, actively pursuing opportunities to finance transitional commercial real estate projects located across the Southern U.S.

We are a real estate focused debt fund, actively pursuing opportunities to finance transitional commercial real estate

projects located across the Southern U.S.

We are an integral part of the platform of affiliated asset managers under the Tannenbaum Capital Group (“TCG”).

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We target a portfolio net internal rate of return (“IRR”) in the low-teens, which we believe may increase to the mid-teens after including total interest and other revenue from the portfolio, including loans funded from drawing on our leverage, net of our interest expense from our portfolio lenders.

targeting a near to mid-term target capitalization of one-third equity, one-third secured debt availability and one-third unsecured debt.

We are also targeting a near to mid-term target capitalization of one-third equity, one-third secured debt availability and one-third unsecured debt.

We do not expect to be fully drawn on our secured debt availability and, as a result, we are targeting an expected leverage ratio of 1.5:1 debt-to-equity.

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and (2) the date on which we have issued more than $1 billion in non-convertible debt securities during the prior three-year period.

Developments During the First Quarter March 31, 2026:

Updates to Our Loan Portfolio During the First Quarter March 31, 2026

In January 2026, we and an affiliated co-investor entered into and exited a $21.6 million senior bridge loan to finance the acquisition of a ranch located in Colorado.

We committed a total of $14.0 million, and an affiliated co-investor committed the remaining $7.6 million, funding $14.0 million and $7.6 million, respectively, upon closing.

The senior bridge loan was issued at a discount of 3.0% and matures in July 2026.

The senior bridge loan was fully paid off four days after closing in January 2026.

In February 2026, we and an affiliated co-investor entered into a $69.3 million subordinate B-note secured by a portfolio of 15 hotel properties.

We committed approximately $48.3 million, and an affiliated co-investor committed the remaining $21.0 million, funding $45.3 million and $19.7 million, respectively, upon closing.

The financing also included approximately $336.7 million of Senior A-note debt held by an unaffiliated third party and will refinance existing indebtedness on the properties.

The loan bears interest at a rate of SOFR plus 8.25%, with a rate index floor of 3.00%.

The subordinate B-note is secured by a first mortgage (and lease-hold mortgage on two properties) and related collateral interests pursuant to the terms of the credit agreement and related loan documents.

The proceeds of the loan will be used to refinance existing debt, provides an “earn out” and stabilizes the assets.

In February 2026, we and the affiliate co-lender on our senior hospitality loan in San Antonio, Texas (the “San Antonio Loan”) San Antonio loan, formed 123 Lex Ave Holdings LLC (the “Lex Ave JV”).

In connection with the formation of the Lex Ave JV, the underlying hotel property securing the loan was acquired through a credit bid equal to the aggregate unpaid principal balance of approximately $40.6 million.

Upon foreclosure, legal title to the property was obtained by the lenders and was contemporaneously contributed to the Lex Ave JV.

Following the contribution, we hold a 65.0% ownership interest in the Lex Ave JV.

As a result of these transactions, we derecognized the San Antonio loan from its consolidated balance sheet.

In March 2026, our secured mortgage loan for a class A multi-family residential development in Dallas, Texas was repaid in full.

The outstanding principal on the date of repayment was approximately $45.0 million.

We received and recognized approximately $1.2 million relating to the repayment premium.

Developments During the Second Quarter June 30, 2026:

Updates to Our Loan Portfolio During the Second Quarter June 30, 2026

On April 1, 2026, our senior loan for a residential property in Austin, TX was repaid in full.

The outstanding principal balance of the senior secured term loan on the date of repayment was approximately $14.1 million.

Dividends Declared Per Share

During the three months ended March 31, 2026 and 2025, we declared the following cash dividends:

During the three and six months ended June 30, 2026 and 2025, we declared the following cash dividends:

Date Declared Payable to Shareholders of Record at the Close of Business on Payment Date Amount per Share Total Amount

March 4, 2025 March 31, 2025 April 15, 2025 $ 0.30 $ 4,026,448

June 13, 2025 June 30, 2025 July 15, 2025 0.30 4,026,353

2025 Period Subtotal $ 0.60 $ 8,052,801

March 10, 2026 March 31, 2026 April 15, 2026 $ 0.30 $ 4,055,897

June 15, 2026 June 30, 2026 July 15, 2026 $ 0.30 $ 4,055,220

2026 Period Subtotal $ 0.60 $ 8,111,117

Recent Developments

On April 1, 2026, our senior loan for a residential property in Austin, TX was repaid in full.

The outstanding principal balance of the senior secured term loan on the date of repayment was approximately $14.1 million.

On May 21, 2026, we, through our investment in the Lex Ave JV, entered into a definitive agreement (the “Agreement”) to sell the San Antonio hotel property for a purchase price of $41.0 million, subject to closing costs and other transaction expenses, and customary closing conditions.

Based on our 65.0% ownership interest in the Lex Ave JV, we expect to receive total consideration of approximately $26.7 million, subject to our proportionate share of such closing costs and transaction expenses.

Under the terms of the Agreement, the purchaser paid a $4.0 million earnest money deposit upon execution of the Agreement, with the remaining purchase price to be funded at closing through approximately $5.0 million of purchaser cash and a $32.0 million senior secured loan to be originated by us and our affiliate co-lender in proportion to our respective ownership interests in the Lex Ave JV.

On July 30, 2026, we, through our investment in the Lex Ave JV, entered into an amendment to the Agreement to grant the purchaser an exclusive option to purchase the San Antonio hotel property on or before September 30, 2026.

In connection with the amendment, the $4.0 million earnest money deposit was released and the purchaser made an additional $2.0 million payment, with the remaining purchase price to be funded at closing through approximately $3.0 million of purchaser cash and a $32.0 million senior secured loan from us and our affiliate co-lender.

No assurance can be given that the transaction will close on the currently contemplated terms or at all.

On July 17, 2026, our senior term loan and a residential development project revolver for various residential development projects in Palm Beach Gardens, FL were repaid in full.

The outstanding principal balances of the senior term loan and residential development project revolver on the date of repayment were approximately $31.6 million and $23.8 million, respectively.

In connection with the repayment, we recognized approximately $0.2 million of default interest and breakage fees.

As previously reported, on August 5, 2026, we entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which we will acquire Southern Realty Trust Inc.

(“SRT”), subject to the approval of our stockholders and the approval of the SRT stockholders.

Under the terms of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each outstanding share of SRT common stock will be converted into the right to receive the following:

(i) 1.45 shares, or approximately 8.4 million shares in aggregate, of our common stock;

and (ii) from the Manager, an amount in cash per share equal to $0.05.

Further, in the Merger Agreement, we have agreed to take all necessary corporate action so that upon and after the effective time of the Merger, the size of our Board of Directors will be increased by one member (the “SRT Director Designee”).

The SRT Director Designee will be appointed to our Board of Directors.

Key Financial Measures and Indicators

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We believe that book value per share is helpful to shareholders in evaluating our growth as we scale our equity capital base and continue to invest in our target investments.

The book value per share of our Common Stock as of March 31, 2026 and December 31, 2025 was approximately $13.50 and $13.56, respectively.

The book value per share of our Common Stock as of June 30, 2026 and December 31, 2025 was approximately $13.45 and $13.56, respectively.

Non-GAAP Metrics

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We caution readers that our methodology for calculating Distributable Earnings may differ from the methodologies employed by other REITs to calculate the same or similar supplemental performance measures, and as a result, our reported Distributable Earnings may not be comparable to similar measures presented by other REITs.

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

The following table provides a reconciliation of GAAP net income to Distributable Earnings for the three and six months ended June 30, 2026 and 2025:

Three months ended

June 30, Six months ended

2026 2025 2026 2025

Net income $ 3,076,025 $ 3,358,314 $ 7,329,375 $ 6,457,751

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Our operating results may also be impacted by credit losses in excess of initial anticipations or unanticipated credit events experienced by our borrowers.

Results of Operations f or the three months ended March 31, 2026 and 2025

The following table summarizes our consolidated results of operations for the three months ended March 31, 2026 and 2025:

Results of Operations f or the three and six months ended June 30, 2026 and 2025

The following table summarizes our consolidated results of operations for the three and six months ended June 30, 2026 and 2025:

Three months ended

June 30, Six months ended

2026 2025 2026 2025

Interest income $ 8,564,695 $ 6,752,679 $ 18,837,381 $ 11,711,202

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Provision for current expected credit losses (557,248) (468,493) (617,531) (586,141)

Equity in earnings of unconsolidated real estate joint venture 32,287 — 32,287 —

Net income $ 3,076,025 $ 3,358,314 $ 7,329,375 $ 6,457,751

Our net income allocable to our common shareholders for the three months ended March 31, 2026, was approximately $4.3 million, or $0.32 per basic weighted average common share, compared to net income allocable to our common shareholders of approximately $3.1 million, or $0.27 per basic weighted average common share for the three months ended March 31, 2025.

Our net income allocable to our common shareholders for the three and six months ended June 30, 2026, was approximately $3.1 million and $7.3 million, or $0.23 and $0.54 per basic weighted average common share, respectively, compared to net income allocable to our common shareholders of approximately $3.4 million and $6.5 million, or $0.25 and $0.52 per basic weighted average common share, respectively, for the three and six months ended June 30, 2025.

Interest income.

Interest income increased approximately $5.3 million, or 107.2%, for the three months ended March 31, 2026, as compared to the same period in the prior year.

Interest income increased approximately $1.8 million, or 26.8%, for the three months ended June 30, 2026, as compared to the three months ended June 30, 2025.

Interest income increased approximately $7.1 million, or 60.8%, for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025.

The increase reflects a higher average investment balance driven by increased capital deployment.

In addition, the Company recognized approximately $1.2 million of repayment premium income related to the early repayment of a $45.0 million secured mortgage loan in March 2026.

In addition, we recognized approximately $1.2 million of repayment premium income related to the early repayment of a $45.0 million secured mortgage loan in March 2026.

Interest expense.

Interest expense increased approximately $2.6 million for the three months ended March 31, 2026, compared to the same period in 2025, primarily driven by increased utilization of the Company’s lines of credit to support portfolio growth.

Interest expense increased approximately $1.7 million and $4.3 million for the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025, respectively, primarily driven by increased utilization of our lines of credit to support portfolio growth.

Management and incentive fees.

Management and incentive fees increased approximately $1.6 million for the three months ended March 31, 2026, compared to the same period in 2025.

Base Management Fees incurred for the three months ended March 31, 2026 were approximately $0.7 million.

Incentive Fees incurred for the three months ended March 31, 2026 were approximately $0.9 million.

For the three months ended March 31, 2025 , approximately $0.6 million of Base Management Fees and $0.3 million of Incentive Fees were waived.

Management and incentive fees increased approximately $0.2 million and $1.8 million for the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025, respectively.

Base Management Fees incurred for the three and six months ended June 30, 2026 were approximately $0.7 million and $1.4 million, respectively, as compared $0.7 million, during both the three and six months ended June 30, 2025.

The increase compared to the six months ended June 30, 2025 was driven by the waiver of approximately $7.3 thousand and $0.6 million of Base Management Fees for the three and six months ended June 30, 2025, respectively.

Incentive Fees incurred for the three and six months ended June 30, 2026 were approximately $0.2 million and $1.1 million, respectively.

There were no incentive fees incurred during the three and six months ended June 30, 2025 due to the waiver of approximately $0.2 million and $0.5 million of Incentive Fees, respectively.

General and administrative expenses .

General and administrative expenses increased $149.8 thousand and $139.8 thousand during the three and six months ended June 30, 2026, respectively, compared to the three and six months ended June 30, 2025, primarily driven by higher reimbursable payroll and bonus costs payable to the Manager under the Management Agreement.

Professional fees.

Professional fees decreased $(0.2) million during the three months ended March 31, 2026, as compared to the same period in 2025.

Professional fees were relatively consistent during the three months ended June 30, 2026, compared to the corresponding period in 2025, and decreased $(0.2) million during the six months ended June 30, 2026, compared to

the six months ended June 30, 2025.

The year-to-date decrease was primarily attributable to higher professional fees incurred during the first quarter of 2025 in connection with our first annual Form 10-K and proxy statement filing following our transition to a public company.

Provision for current expected credit losses.

The provision for current expected credit losses for the three months ended March 31, 2026 was approximately $0.1 million.

The CECL Reserve balance as of March 31, 2026 was approximatel y $0.6 million, or 0.19%, of our total loans held at carrying value of approximately $296.8 million and was bifurcated between (i) the current expected credit loss reserve (contra-asset) related to outstanding balances on loans held at carrying value of $0.3 million and (ii) a liability for unfunded commitments of approximately $0.2 million .

The liability is based on the unfunded portion of loan commitments over the full contractual period over which we are exposed to credit risk through a current obligation to extend credit.

Management considered the likelihood that funding will occur, and if funded, the expected credit loss on the funded portion when determining the amount to allocate to its CECL Reserve.

The provision for current expected credit losses increased $(88.8) thousand and $(31.4) thousand during the three and six months ended June 30, 2026, respectively, as compared to the three and six months ended June 30, 2025.

The CECL Reserve balance as of June 30, 2026 was approximatel y $1.1 million, or 0.37%, of our total loans held at carrying value of approximately $296.8 million and was bifurcated between (i) the current expected credit loss reserve (contra-asset) related to outstanding balances on loans held at carrying value of $0.9 million and (ii) a liability for unfunded commitments of approximately $0.2 million.

The liability for unfunded commitments represents expected credit losses on the unfunded portion of loan commitments over the contractual period during which we are exposed to credit risk through our obligation to extend credit.

In estimating this liability, we consider the likelihood that commitments will be funded and, if funded, the expected credit losses on the funded portion of those commitments.

We continuously evaluate the credit quality of each loan by assessing the risk factors of each loan.

Loan Portfolio

The table below summarizes our total loan portfolio as of March 31, 2026, unless otherwise specified.

The table below summarizes our total loan portfolio as of June 30, 2026, unless otherwise specified.

Loan Type Location Original Funding Date Loan Maturity Current Commitments as of 06/30/2026 % of Total Principal Balance as of 06/30/2026 Cash Interest Rate PIK Fixed/

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Senior mortgage loans:

Residential Austin, TX 7/3/2024 7/3/2027 $ 14,087,288 3.5% $ 14,087,288 9.8% N/A Floating No 11%

Residential Palm Beach Gardens, FL (2)

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Estimated YTM is based on current management estimates and assumptions, which may change.

Estimated YTM is calculated using the interest rate as of March 31, 2026 applied through maturity.

Estimated YTM is calculated using the interest rate as of June 30, 2026 applied through maturity.

Actual results could differ from those estimates and assumptions.

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Under each credit facility, the borrower is able to re-draw funds after repayment through maturity.

The actual YTM is presented based on repayment of the facilities on July 17, 2026.

(3) If the Company holds both the A-note and B-note, the loan is categorized as a senior mortgage loan.

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Loans Held for Investment at Carrying Value

As of March 31, 2026 and December 31, 2025, our portfolio included 15 and 16 loans held at carrying value, respectively.

The aggregate originated commitment under these loans was approximately $397.1 million and $420.7 million, respectively, and outstanding principal was approximately $299.3 million and $305.5 million, respectively, as of March 31, 2026 and 2025 .

During the three months ended March 31, 2026 , we funded approximately $90.2 million of new loans and additional principal on existing loans and had approximately $70.1 million of principal repayments of loans held at carrying value.

As of March 31, 2026 and December 31, 2025, approximately 96% and 96%, respectively, of our loans held at carrying value had floating interest rates.

As of March 31, 2026, t hese floating benchmark rates included one-month SOFR quoted at 3.7% and subject to a weighted average floor of 3.9% and U.S.

As of June 30, 2026 and December 31, 2025, our portfolio included 14 and 16 loans held at carrying value, respectively.

The aggregate originated commitment under these loans was approximately $377.4 million and $420.7 million, respectively, and outstanding principal was approximately $298.7 million and $305.5 million, respectively, as of June 30, 2026 and December 31, 2025.

During the six months ended June 30, 2026 , we funded approximately $115.6 million of new loans and additional principal on existing loans and had approximately $96.1 million of principal repayments of loans held at carrying value.

As of June 30, 2026 and December 31, 2025, approximately 96.1% and 96.4%, respectively, of our loans held at carrying value had floating interest rates.

As of June 30, 2026, t hese floating benchmark rates included one-month SOFR quoted at 3.7% and subject to a weighted average floor of 3.9% and U.S.

prime rate subject to a weighted average floor of 8.0% and quoted at 6.75% based on outstanding principal.

The following tables summarize our loans held at carrying value as of March 31, 2026 and December 31, 2025 :

As of March 31, 2026

The following tables summarize our loans held at carrying value as of June 30, 2026 and December 31, 2025 :

As of June 30, 2026

Principal (1)

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(1) The difference between the carrying value and the outstanding principal amount of the loans consists of unaccreted OID and loan origination costs.

(2) Weighted average remaining life is calculated based on the carrying value of each respective group of loans as of March 31, 2026 and December 31, 2025 .

(2) Weighted average remaining life is calculated based on the carrying value of each respective group of loans as of June 30, 2026 and December 31, 2025 .

(3) Senior mortgage loans include senior loans that also have a contiguous subordinate loan because as a whole, the expected credit quality of the subordinate loan is more similar to that of a senior loan.

(4) If the Company holds both the A-note and B-note, the loan is categorized as a senior mortgage loan.

The following table presents changes in loans held at carrying value as of and for the three months ended March 31, 2026:

The following table presents changes in loans held at carrying value as of and for the six months ended June 30, 2026:

Principal Original Issue

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PIK interest 78,549 — 78,549

Total loans held at carrying value at March 31, 2026 $ 299,286,738 $ (2,445,708) $ 296,841,030

Total loans held at carrying value at June 30, 2026 $ 298,664,348 $ (1,910,850) $ 296,753,498

Collateral Overview

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If we do not or cannot sell a foreclosed property, we would then come to own and operate it as “real estate owned” (“REO”).

During the three months ended March 31, 2026 , the Company acquired one REO asset through foreclosure proceedings and contemporaneously contributed such asset to the Lex Ave JV (see Note 6).

During the six months ended June 30, 2026 , we acquired one REO asset through foreclosure proceedings and contemporaneously contributed such asset to the Lex Ave JV (see Note 6).

We may pursue a sale of a defaulted loan if we believe that a sale would yield higher proceeds or that a sale could be accomplished more quickly than a foreclosure proceeding while yielding proceeds comparable to what would be expected from a foreclosure sale.

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Our primary sources of cash generally consist of net proceeds of future debt or equity offerings, debt financing, including borrowings under a senior secured revolving credit facility (the “Revolving Credit Facility”) and an unsecured revolving credit facility (the “SRTF Credit Facility”), the net proceeds of future debt or equity offerings, including in connection with our ATM Program, payments of principal and interest we receive on our portfolio of assets and cash generated from our operating results.

As of March 31, 2026 and December 31, 2025, all of our cash was unrestricted and totaled approximately $5.7 million and $6.4 million, respectively.

As of March 31, 2026, we believe that our cash on hand, capacity available under the Revolving Credit Facility, SRTF Credit Facility and cash flows from operations will be sufficient to satisfy the operating requirements of our business through at least the next twelve months.

As of June 30, 2026 and December 31, 2025, all of our cash was unrestricted and totaled approximately $5.6 million and $6.4 million, respectively.

As of June 30, 2026, we believe that our cash on hand, capacity available under the Revolving Credit Facility, SRTF Credit Facility and cash flows from operations will be sufficient to satisfy the operating requirements of our business through at least the next twelve months.

Capital Markets

Given the nature of our business, we constantly explore both the public and private capital markets to raise capital, subject to market and other considerations.

There were no capital markets transactions completed during the three months ended March 31, 2026.

There were no capital markets transactions completed during the six months ended June 30, 2026 .

Our registration statement on Form S-3 (File No.

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We may also access liquidity through our at-the-market offering program (the “ATM Program”), established in August 2025, pursuant to which we may offer and sell, from time to time, up to $50.0 million of our common stock.

No shares were sold under the ATM Program during the three months ended March 31, 2026 .

On September 3, 2025, the Company also established a dividend reinvestment plan (the “DRIP”).

The DRIP allows shareholders to reinvest all or a portion of their cash dividends in additional shares of the Company’s common stock (which shares, at the Company’s option, are either newly issued directly from the Company or purchased by the plan administrator in the open market).

No shares were sold under the ATM Program during the six months ended June 30, 2026 .

On September 3, 2025, we also established a dividend reinvestment plan (the “DRIP”).

The DRIP allows shareholders to reinvest all or a portion of their cash dividends in additional shares of our common stock (which shares, at our option, are either newly issued directly from us or purchased by the plan administrator in the open market).

A total of 1,000,000 shares of common stock has been registered for issuance under the DRIP.

No shares were issued under the DRIP during the three months ended March 31, 2026.

No shares were issued under the DRIP during the six months ended June 30, 2026.

We intend to raise future equity capital and issue debt securities in order to fund our future investments in loans.

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(i) maintain liquidity equal to the greater of (A) $5 million and (B) an amount equal to 10% of the outstanding obligations thereunder so long as we maintain at least $5 million in qualified cash, (ii) maintain a quarterly debt service coverage ratio of at least 1.50 to 1.0 and (iii) maintain a leverage ratio of not more than 3.25x measured as of the end of each fiscal quarter.

As of March 31, 2026, we had $88.1 million of outstanding borrowings under the Revolving Credit Facility and $76.9 million availability under our Revolving Credit Facility, which may be borrowed, repaid and redrawn (subject to a borrowing base based on eligible loan obligations held by the Company and subject to the satisfaction of other conditions provided under the Revolving Credit Agreement).

To the best of our knowledge, as of March 31, 2026 , we were in compliance in all material respects with all covenants contained in our Revolving Credit Agreement.

As of June 30, 2026, we had $82.6 million of outstanding borrowings under the Revolving Credit Facility and $82.4 million availability under our Revolving Credit Facility, which may be borrowed, repaid and redrawn (subject to a borrowing base based on eligible loan obligations held by us and subject to the satisfaction of other conditions provided under the Revolving Credit Agreement).

To the best of our knowledge, as of June 30, 2026 , we were in compliance in all material respects with all covenants contained in our Revolving Credit Agreement.

SRTF Credit Facility

On December 9, 2024, we entered into the SRTF Credit Facility, which provides for an unsecured revolving credit facility with a $75.0 million commitment, which may be borrowed, repaid and redrawn, subject to a draw fee and the other conditions provided in the SRTF Credit Agreement .

As of March 31, 2026, we had $51.4 million of outstanding borrowings under the SRTF Credit Facility and $23.6 million availability under our SRTF Credit Facility.

As of June 30, 2026, we had $59.1 million of outstanding borrowings under the SRTF Credit Facility and $15.9 million availability under our SRTF Credit Facility.

Other Credit Facilities, Warehouse Facilities and Repurchase Agreements

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We expect that these facilities will typically have maturities ranging from two to five years and may accrue interest at either fixed or floating rates.

As of March 31, 2026 , we believe that our cash on hand, capacity available under our Revolving Credit Facility and SRTF Credit Facility, and cash flows from operations will be sufficient to service our outstanding debt during the next twelve months.

The following table sets forth changes in cash and cash equivalents for the three months ended March 31, 2026 and 2025:

Three Months Ended

As of June 30, 2026 , we believe that our cash on hand, capacity available under our Revolving Credit Facility and SRTF Credit Facility, and cash flows from operations will be sufficient to service our outstanding debt during the next twelve months.

The following table sets forth changes in cash and cash equivalents for the six months ended June 30, 2026 and 2025:

Six months ended

Net cash provided by (used in) operating activities $ 1,536,202 $ (1,237,338)

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Net Cash Provided by (Used in) Operating Activities

Net cash provided by operating activities during the three months ended March 31, 2026 was approximately $1.2 million, compared to net cash used in operating activities of approximately $(0.9) million for the three months ended March 31, 2025.

The increase of approximately $2.1 million period over period was primarily due to an increase in interest income, partially offset by higher management and incentive fees paid.

Net cash provided by operating activities during the six months ended June 30, 2026 was approximately $1.5 million, compared to net cash used in operating activities of approximately $(1.2) million for the six months ended June 30, 2025.

The increase of approximately $2.8 million period over period was primarily due to an increase in net interest income, partially offset by higher management and incentive fees paid.

Net Cash Used in Investing Activities

Net cash used in investing activities during the three months ended March 31, 2026 was approximately $(15.1) million, compared to $(95.7) for the three months ended March 31, 2025.

The decrease in net cash used of approximately $80.6 million was primarily due to an increase in principal repayments on loans of approximately $61.1 million and a decrease in issuance and fundings on loans of approximately $19.6 million.

Net cash used in investing activities during the six months ended June 30, 2026 was approximately $(13.4) million, compared to $(108.9) million for the six months ended June 30, 2025.

The decrease in net cash used of approximately $95.4 million was primarily due to an increase in principal repayments on loans of approximately $84.6 million and a decrease in issuance and fundings on loans of approximately $12.1 million, partially offset by $(1.3) million of contributions to unconsolidated real estate joint venture.

Net Cash Provided by (Used in) Financing Activities

Net cash provided by financing activities during the three months ended March 31, 2026 was approximately $13.1 million, compared to net cash used in financing activities of $(86.3) million for the three months ended March 31, 2025.

The decrease in cash used in financing activities of approximately $99.5 million was primarily due to an increase of $167.0 million in repayments on the revolving credit facilities, partially offset by a decrease of $(72.6) million from offering proceeds relating to the January 2025 Offering.

Net cash provided by financing activities during the six months ended June 30, 2026 was approximately $11.1 million, compared to net cash used in financing activities of $(68.9) million for the six months ended June 30, 2025.

The decrease in cash used in financing activities of approximately $80.0 million was primarily due to an increase of $144.2 million in repayments on the revolving credit facilities and $9.4 million increase in borrowings on the revolving credit facilities, partially offset by a decrease of $(72.6) million from offering proceeds relating to the January 2025 Offering.

Contractual Obligations, Other Commitments, and Off-Balance Sheet Arrangements

Our contractual obligations as of March 31, 2026 are as follows:

As of March 31, 2026

Our contractual obligations as of June 30, 2026 are as follows:

As of June 30, 2026

1 year 1-3 years 3-5 years More than

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Total $ 10,196,410 $ 68,712,023 $ — $ — $ 78,908,433

As of March 31, 2026 , all unfunded commitments were related to our total loan commitments and were available for funding in less than three years.

As of June 30, 2026 , all unfunded commitments were related to our total loan commitments and were available for funding in less than three years.

We may enter into certain contracts that may contain a variety of indemnification obligations.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis