LFT US Equity☆

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our consolidated financial statements and the accompanying notes included in this Annual Report on Form 10-K. The following discussion contains forward-looking statements that reflect our current expectations, estimates, forecasts and projections.

Overview

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

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

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

We invest primarily in transitional floating rate CRE mortgage loans with an emphasis on middle market multifamily assets. We may also invest in other CRE-related investments including mezzanine loans, preferred equity, commercial mortgage-backed securities, fixed rate loans, construction loans and other CRE debt instruments. We finance our current investments in transitional multifamily and other CRE loans through CRE CLOs and other forms of secured financing agreements. Our primary sources of income are net interest from our investment portfolio and non-interest income from our mortgage loan-related activities. Net interest income represents the interest income we earn on investments less the expense of funding these investments.

Our investments typically have the following characteristics:

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

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

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

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

•Floating rate loans tied to one-month term SOFR, and/or in the future potentially other index replacement; and

•Three-year term with two one-year extension options.

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

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

Recent Developments

2025 was marked by significant volatility in global markets, driven by tariffs and international trade policy and disputes, political and regulatory uncertainty, geopolitical conditions, elevated interest rates, and inflation. Collectively, these market dynamics have posed challenges to commercial real estate values and transaction activity. However, the Federal Reserve decreased interest rates in 2024 and 2025, which has contributed to an improvement in the cost and availability of debt.

Thus far, 2026 has been marked by additional policy-driven uncertainty and market volatility, including with respect to international trade policy and geopolitical conditions. The Federal Reserve recently held interest rates steady for the first time since July 2025. While some officials have expressed support for additional decreases in interest rates in 2026, other officials have expressed opposition to additional decreases. As a result, significant uncertainty exists with respect to the timing, direction and extent of any future interest rate changes, in addition to uncertainty related to international trade policy, the political and regulatory environment, geopolitical events, and inflation. Our continued monitoring of these and other conditions will continue to inform our loan origination volumes, liquidity, and capital allocation in 2026.

2025 Highlights

Operating Results

•Net loss attributable to common stockholders of $7.5 million, or $0.14 per share of common stock

•Distributable Earnings of $7.6 million, or $0.14 per share of common stock

•Declared aggregate quarterly common dividends of $11.5 million, or $0.22 per share of common stock. The fourth quarter dividend of $0.04 per share of common stock produced an annualized yield of 11.3% on our closing stock price as of December 31, 2025

•Book value of common stock as of December 31, 2025 was $159.0 million, or $3.03 per share of book value of common stock

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Investment Activity

•We acquired sixteen loans with an initial unpaid principal balance of $359.5 million and a weighted average interest rate of 30-day term SOFR plus 2.97%, nine funded advances with an initial unpaid principal balance of $30.8 million and a weighted average interest rate of 30-day term SOFR plus 3.62% and we originated four loans with an unpaid principal balance of $13.7 million and a weighted average interest rate of 30-day term SOFR plus 3.14%

•Experienced $266.6 million in loan payoffs and transitioned $62.6 million of loans with unpaid principal balance at time of foreclosure to real estate owned

•$1.1 billion senior loan portfolio is 100% floating rate with an average spread to 30-day term SOFR of 3.33%, excluding unamortized purchase discounts of $1.7 million and deferred loan fees of $0.8 million as of December 31, 2025

•Multifamily assets represent 92.7% of loan portfolio

Portfolio Financing

•Non-mark-to-market financing is $800.0 million with an average spread to 30-day term SOFR of 2.24% as of December 31, 2025, representing 80% of our secured financings

•Redeemed the 2021-FL1 CLO

•Entered into a new $450 million uncommitted master repurchase agreement

•Entered into a new $50 million term lending agreement for financing of non-performing loans and REO

•Entered into and closed a $663.8 million managed CRE CLO with a 30-month reinvestment period providing $585.0 million of non-mark-to-market financing equating to an 88.12% advance rate, at a weighted average cost of capital of 30-day term SOFR plus 1.91% before transaction costs.

Factors Impacting Our Operating Results

Market conditions. The results of our operations are and will continue to be affected by a number of factors and primarily depend on, among other things, the level of our net interest income, the market value of our assets and the supply of, and demand for, our target assets in the marketplace. Our net interest income will vary primarily as a result of changes in market interest rates and prepayment speeds, and by the ability of the borrowers underlying our commercial mortgage loans to continue making payments in accordance with the contractual terms of their loans, which may be impacted by unanticipated credit events experienced by such borrowers. During the year ended December 31, 2025, we foreclosed on four multifamily properties as result of the borrowers' inability to make payments, reducing our interest income accordingly. Interest rates vary according to the type of investment, conditions in the financial markets, competition and other factors, none of which can be predicted with any certainty. Our operating results will also be affected by general U.S. real estate fundamentals and the overall U.S. economic environment. In particular, our strategy is influenced by the specific characteristics of the underlying real estate markets, including prepayment rates, credit market conditions and interest rates. This year has been characterized by significant volatility in global markets, driven by investor concerns over inflation, rising interest rates, slowing economic growth, increased tariffs, trade tensions, geopolitical uncertainty and political and regulatory uncertainties.

Changes in market interest rates. Generally, our business model is such that rising interest rates will increase our net interest income, while declining interest rates will decrease our net interest income. As of December 31, 2025, 99.9% of our investments by total investment exposure earned a floating rate of interest, of which 100.0% were indexed to 30-day term SOFR, and all of our collateralized loan obligations and secured financings were indexed to 30-day term SOFR, and as a result we are less sensitive to variability in our net interest income resulting from interest rate changes. As of December 31, 2025, 100.0% of the loans in our commercial mortgage loan portfolio are structured with SOFR floors with a weighted average SOFR floor of 2.18%, of which 18.8% had an interest rate floor greater than the current spot interest rate. When interest rates are above our average interest rate floor, an increase in interest rates will increase our interest income. Alternatively, when interest rates are below our average interest rate floor, an increase in interest rates will decrease our net interest income until such time as interest rates rise above our average interest rate floor. Although our Manager is currently originating loans with SOFR floors, there can be no assurance that we will continue to obtain SOFR floors on future originations or acquisitions. Similarly, net interest income is also impacted by the spread in our commercial mortgage loan portfolio. As of December 31, 2025, the weighted average spread of our commercial loan portfolio was 3.33%, but there is no assurance that these spreads will be maintained as market environments fluctuate.

After a prolonged period of rising interest rates, the Federal Reserve began lowering interest rates in September 18, 2024 by 0.50% and on each of November 7, 2024 and December 18, 2024, respectively, the Federal Reserve lowered interest rates by 0.25%. Additionally, on each of September 17, 2025, October 29, 2025 and December 10, 2025, respectively, the U.S. Federal Reserve lowered the federal funds rate by 0.25% to a current target range of 3.50% - 3.75%. Interest rates to remain elevated, and the timing, direction and extent of any future interest rate changes remain uncertain.

In addition to the risk related to fluctuations in cash flows associated with movement in interest rates, there is also the risk of non-performance on floating rate assets. In the case of a significant increase in interest rates or the continued elevation in current rates, the additional debt service payments due from our borrowers may strain the operating cash flows of the real estate assets underlying our mortgages and/or impact their ability to be refinanced at such higher interest rates potentially contribute to non-performance or, in severe cases, default. This risk is partially mitigated during the underwriting process, which generally includes a requirement for our borrowers to purchase interest rate cap contracts with an unaffiliated third-party, provide an interest rate reserve deposit, and/or provide other structural protections. As of December 31, 2025, 72.6% of our performing loans have interest rate caps with a weighted-average strike price of 3.9%.

Credit risk. Our commercial mortgage loans and other investments are also subject to credit risk. The performance and value of our loans and other investments depend upon the sponsor's ability to operate properties that serve as our collateral so that they produce cash flows adequate to pay interest and principal due to us. To monitor this risk, the Manager's asset management team reviews our portfolio and maintains regular contact with borrowers, co-lenders and local market experts to monitor the performance of the underlying collateral, anticipate borrower, property and market issues and, to the extent necessary or appropriate, enforce our rights as lender. The market values of commercial mortgage assets are subject to volatility and may be adversely affected by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; and retroactive changes to building or similar codes. In addition, decreases in property values reduce the value of the collateral and potential proceeds available to a borrower to repay the underlying loans, which could also cause us to suffer losses. As of December 31, 2025, 97.8% of the commercial mortgage loans in our portfolio were current as to principal and interest. Additionally, we have reviewed the loans designated as Default Risk for specific credit reserves.

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Impairment of these loans, which are collateral dependent, is measured by comparing the estimated fair value of the underlying collateral, less costs to sell, to the book value of the respective loan. We can provide no assurances that our borrowers will remain current as to principal and interest, or that we will not enter into forbearance agreements or loan modifications in order to protect the value of our commercial mortgage loan assets. Should that occur, it could have a material negative impact on our results of operations.

Liquidity and financing markets. Liquidity is a measurement of our ability to meet potential cash requirements, including ongoing commitments to pay dividends, fund investments and repay borrowings and other general business needs. Our primary sources of liquidity have been proceeds of common or preferred stock issuance, net proceeds from corporate debt obligations, net cash provided by operating activities and other financing arrangements. We finance our commercial mortgage loans with non-recourse secured borrowings, the maturities of which are matched to the maturities of the loans, and which are not subject to margin calls or additional collateralization requirements, as well as, a master repurchase agreement and a term financing agreement. However, to the extent that we seek to invest in additional commercial mortgage loans, outside of our secured borrowings, we will in part be dependent on our ability to issue additional collateralized loan obligations, master repurchase agreements, to secure alternative financing facilities or to raise additional common or preferred equity. The expectation of slower interest rate decreases moving forward and unpredictable geopolitical landscape may cause a further dislocation in the capital markets resulting in a continual reduction of available liquidity and an increase in borrowing costs. A lack of liquidity for a prolonged period could limit our ability to grow our business. Additionally, the CRE CLOs and other secured financings we have entered into, and may in the future enter into, include certain interest coverage tests, overcollateralization coverage tests or other tests that, if not met, may result in a change in the priority of distributions, which may result in the reduction or elimination of distributions to the subordinate debt and equity tranches retained by us until the tests have been met or certain senior classes of securities have been paid in full. Accordingly, if such tests are not satisfied, we, as holders of the subordinate debt and equity interests in the applicable CRE CLO or secured financing, may experience a significant reduction in our cash flow from those interests, which would impact our liquidity. In addition, our secured financing agreements contain margin call provisions following the occurrence of certain mortgage loan credit events. If we are unable to make the required payment or if we fail to meet or satisfy any of the covenants in our financing agreements, we will be in default under these agreements, and our lenders could elect to declare outstanding amounts due and payable, terminate their commitments, require the posting of additional collateral, including cash to satisfy margin calls, and enforce their interests against existing collateral.

Prepayment speeds. Prepayment risk is the risk that principal will be repaid at a different rate than anticipated, causing the return on certain investments to be less than expected. As we receive prepayments of principal on our assets, any premiums paid on such assets are amortized against interest income. In general, an increase in prepayment rates accelerates the amortization of purchase premiums, thereby reducing the interest income earned on the assets. Conversely, discounts on such assets are accreted into interest income. In general, an increase in prepayment rates accelerates the accretion of purchase discounts, thereby increasing the interest earned on the assets. We have acquired twenty-nine loans and nineteen funded loan advances with an initial aggregate unpaid principal balance of $474.1 million with an aggregate purchase discount of $8.2 million. All of our other commercial mortgage loans were acquired at par. As of December 31, 2025, our aggregate unaccreted purchase discount was $1.7 million, and accordingly we do not believe this to be a material risk to interest income for us at present. Additionally, we are subject to prepayment risk associated with the terms of our secured borrowings. Due to shorter maturities of transitional floating-rate commercial mortgage loans, our secured borrowings include a reinvestment period during which principal repayments and prepayments on our commercial mortgage loans may be reinvested in similar assets, subject to meeting certain eligibility criteria. The reinvestment period for LMF 2023-1 Financing expired in July 2025 and LMNT 2025-FL3 remains in place through May 2028. Currently, the interest rate spreads of our secured borrowings are fixed until they are repaid, the terms, including spreads, of newly originated loans are subject to uncertainty based on a variety of factors, including market and competitive conditions, which remain uncertain and volatile in the current inflationary environment. To the extent that such conditions result in lower spreads on the assets in which we reinvest during active reinvestment periods, we may be subject to a reduction in interest income in the future. To the extent any loans are permanently financed by the Manager or any of its affiliates, the prepayment penalties will be waived, resulting in a reduction to reimbursed expense by an amount equal to 50% of the amount of any such waived fee capped at a waived fee of 1%.

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

Governmental actions. Since 2008, when both Fannie Mae and Freddie Mac were placed under the conservatorship of the U.S. government, there have been a number of proposals to reform the U.S. housing finance system in general, and Fannie Mae and Freddie Mac in particular. We anticipate debate on residential housing and mortgage reform to continue through 2026 and beyond, but a deep divide persists between factions in Congress and as such it remains unclear what shape any reform would take and what impact, if any, reform would have on mortgage REITs.

Key Financial Measures and Indicators

As a real estate investment trust, we believe the key financial measures and indicators for our business are earnings per share, dividends declared, Distributable Earnings, and book value per share of common stock. For the three months ended December 31, 2025, we recorded loss per share of $0.16, declared a quarterly common dividend of $0.04 per share, and reported $0.01 per share of Distributable Loss. In addition, our book value per share was $3.03 per share. For the year ended December 31, 2025, we recorded loss per share of $0.14, declared aggregate common dividends of $0.22 per share, and reported $0.14 per share of Distributable Earnings.

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

Earnings (Loss) Per Share and Dividends Declared

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

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Three Months EndedDecember 31, Year EndedDecember 31,

Net (loss) income per share, basic and diluted $ (0.17) $ (0.14) $ 0.34

Dividends declared per share $ 0.04 $ 0.22 $ 0.40

Distributable Earnings (Loss)

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

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

We believe that Distributable Earnings provides meaningful information to consider in addition to our net income (loss) and cash flows from operating activities determined in accordance with GAAP. We believe Distributable Earnings is a useful financial metric for existing and potential future holders of our common stock as historically, over time, Distributable Earnings has been a strong indicator of our dividends per share. As a REIT, we generally must distribute annually at least 90% of our taxable income, subject to certain adjustments, and therefore we believe our dividends are one of the principal reasons stockholders may invest in our common stock. Refer to Note 16 to our consolidated financial statements for further discussion of our distribution requirements as a REIT. Furthermore, Distributable Earnings help us to evaluate our performance excluding the effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current loan portfolio and operations and is a performance metric we consider when declaring our dividends.

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

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

Three Months EndedDecember 31, Year EndedDecember 31,

Realized loss on sale of real estate owned (200,196) (200,196) —

Depreciation and amortization of real estate owned 295,698 779,260 —

Distributable Earnings per share, basic and diluted $ — $ 0.14 $ 0.44

Book Value Per Share

The following table calculates our book value per share:

Book value per share(1) $ 3.03 $ 3.40

(1) Book value as of December 31, 2025 and December 31, 2024 includes the impact of an estimated CECL allowance of $22,658,121 or $0.43 per common share and $11,320,220, or $0.22 per common share, respectively.

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Investment Portfolio

Commercial Mortgage Loans

As of December 31, 2025, we have determined that we are the primary beneficiary of the LMF 2023-1 Financing and LMNT 2025-FL3 CLO based on our obligation to absorb losses derived from ownership of our residual interests. Accordingly, the Company consolidated the assets, liabilities, income and expenses of the underlying issuing entities and the collateralized loan obligations.

The following table details our loan activity by unpaid principal balance:

Proceeds from principal repayments (266,906,712)

Transfer to Real Estate Owned (62,580,330)

Origination and other loan fees (2,418,752)

Accretion of purchase discount 1,919,809

Accretion of deferred loan fees 2,791,339

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

Weighted Average

Loans held-for-investment

Allowance for credit losses N/A $ (22,658,121)

Weighted Average

Loans held-for-investment

Allowance for credit losses N/A $ (11,320,220)

(1) Carrying Value includes $1,657,584 and $3,466,214 in unaccreted purchase discounts as of December 31, 2025 and December 31, 2024, respectively.

(2) Weighted average coupon assumes applicable 30-day term SOFR of 3.85% and 4.51% as of December 31, 2025 and December 31, 2024, respectively, inclusive of weighted average interest rate floor of 2.18% and 0.63%, respectively. As of December 31, 2025 and December 31, 2024, 100.0% of the investments by total investment exposure earned a floating rate indexed to 30-day term SOFR.

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

(4) LTV as of the date the loan was originated and is calculated after giving effect to capex and earnout reserves, if applicable. LTV has not been updated for any subsequent draws or loan modifications and is not reflective of any changes in value which may have occurred subsequent to origination date.

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

Portfolio Surveillance and Credit Quality

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

As of December 31, 2025, we had aggregate specific allowance of credit losses of $17.6 million due to management's: (1) continued identification of one loan collateralized by two multifamily properties in Philadelphia, PA ($1.3 million specific allowance) with an aggregate unpaid balance of $15.5 million as risk rated "5" due to maturity default; (2) continued identification of one loan collateralized by a multifamily property in Colorado Springs, CO ($2.4 million

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specific allowance; non-accrual cash basis) with an aggregate unpaid balance of $10.5 million as risk rated "5" due to monetary default; (3) identification of two loans collateralized by two multifamily properties in Arlington, TX ($3.6 million specific allowance; non-accrual cash basis) and Cedar Park, TX (no specific allowance; non-accrual cash basis) with an aggregate unpaid balance of $35.5 million as risk rated "5" due to maturity default and (4) identification of four loans collateralized by four multifamily properties in Des Moines, IA ($0.5 million specific allowance; non-accrual cash basis), Tampa, FL ($0.9 million specific allowance; non-accrual cash basis), Tallahassee, FL ($3.0 million specific allowance; non-accrual cash basis) and Ypsilanti, MI ($5.9 million specific allowance; non-accrual cash basis) with an aggregate principal balance of $55.8 million as risk rated "5" due to monetary default.

We recorded $0.8 million in cash basis income received on non-accrual loans during the year ended December 31, 2025, subsequent to their determination to be risk rated "5" loans and we received $0.3 million of cash proceeds from such loans that were applied as a reduction to the amortized cost basis of the respective loan.

As of December 31, 2024, we had aggregate specific allowance for credit losses of $3.8 million due to management's identification of: (1) three loans collateralized by four multifamily properties in Philadelphia, PA ($0.1 million specific allowance; non-accrual cost recovery), Orlando, FL ($0.4 million specific allowance; non-accrual cash basis) and Colorado Springs, CO ($1.1 million specific allowance; non-accrual cash basis) with an aggregate unpaid principal balance of $45.1 million as risk rated "5" due to monetary default; (2) one collateralized by two healthcare properties in Polk County, FL ($0.6 million specific allowance; non-accrual cash basis) with an aggregate unpaid principal balance of $6.1 million as risk rated "5" due to monetary default and (3) two loan collateralized by two multifamily properties in Dallas, TX (no specific allowance) and San Antonio, TX ($1.6 million specific allowance; non-accrual cash basis) with an aggregate unpaid principal balance of $47.0 million as risk rated "5" due to technical default.

No income was recorded on these loans subsequent to their determination to be a risk rated "5" loan and we received $0.8 million of cash proceeds from such loans that were applied as a reduction to the amortized cost basis of the respective loan.

In the second quarter of 2025, the $15.4 million San Antonio, TX ($2.4 million specific allowance) loan and a loan collateralized by a multifamily property in Houston, TX with an aggregate unpaid principal balance of $11.5 million ($0.5 million specific reserve) were foreclosed on, with ownership and deed to the property being taken by two newly formed subsidiaries of the Company. Additionally, in the third quarter of 2025, two loans collateralized by two multifamily properties in San Antonio, TX ($0.2 million specific allowance) with aggregate unpaid principal balance of $35.7 million were foreclosed on, with ownership and deed to the property being taken by two newly formed subsidiaries of the Company.

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

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

As discussed in Note 2 to our consolidated financial statements, our Manager performs a quarterly review of our loan portfolio, assesses the performance of each loan, and assigns a risk rating between "1" and "5," from less risk to greater risk. The weighted average risk rating of our total loan exposure was 3.2 and 3.5 as of December 31, 2025 and December 31, 2024, respectively. The change in underlying risk rating consisted of loans that paid off with a risk rating of "2" of $27.1 million, a risk rating of "3" of $208.2 million, a risk rating of "4" of $23.2 million and a risk rating of "5" of $8.1 million, offset by funding of loans with a risk rating of "2" of $96.1 million, a risk rating of "3" of $306.8 million and a risk rating of "5" of $0.9 million during the year ended December 31, 2025. Additionally, $34.3 million of loans with a risk rating of "3" transitioned to a risk rating of "2", $42.9 million of loans with a risk rating of "3" transitioned to a risk rating of "4", $13.7 million of loans transitioned from a risk rating of "3" to a risk rating of "5", $114.5 million of loans transitioned from a risk rating of "4" to a risk rating of "3", and $77.2 million of loans transitioned from a risk rating of "4" to a risk rating of "5" and $49.2 million of loans transitioned from a risk rating of "5" to a risk rating of "3". Further, $35.7 million of loans with a risk rating of "3", $11.5 million of loans with a risk rating of "4" and $15.4 million of loans with a risk rating of "5" were foreclosed and moved to REO. The following table presents the principal balance and net book value based on our internal risk ratings:

Amortized Cost by Year of Origination

1 — $ — $ — — $ — $ —

Real Estate Owned

During the year ended December 31, 2025, Lument Real Estate Capital, LLC ("LREC"), as special servicer for 2021-FL1 CLO foreclosed on two multifamily bridge loans located in San Antonio, TX with an aggregate net carrying value of $39.5 million, net of specific CECL reserves of $2.4 million, with ownership and deed to the properties being taken by newly formed subsidiaries of the Company. Additionally, LREC, as special servicer for LMF 2023-1 Financing foreclosed on two multifamily bridge loans located in Houston, TX and San Antonio, TX with aggregate net carrying value of $19.9 million, net of specific CECL reserves of $0.7 million, with ownership and deed to the properties being taken by a newly formed subsidiaries of the Company.

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The fair value of the REO at time of foreclosure was determined using the income approach, market approach, or a combination thereof. The significant unobservable input for the income capitalization approach is the overall capitalization rate assumption, used in the direct capitalization method, which was 6.25%-7.40%. The significant unobservable input used for the market approach is the price per unit from an appraisal or broker opinion of value.

On December 22, 2025, the Company sold the properties located in San Antonio, TX held by a subsidiary of the Company to a third party for $8.2 million and recognized a $0.5 million realized loss on the sale of the property. The realized loss on the sale of the property is included within realized loss on real estate owned in the Company's consolidated statements of operations.

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

Real estate owned, held-for-investment

Less: Accumulated depreciation and amortization (347,150) —

Real estate owned, held-for-sale

Real estate owned, held-for-sale $ 24,099,072 $ —

At December 31, 2025, our REO properties had a weighted average occupancy rate of approximately 69.1%.

We recorded depreciation and amortization expense related to the REO assets of $0.8 million for the year ended December 31, 2025, recorded as "net income (expense) from real estate owned operations" in the consolidated statement of operations. Additionally, we recorded operating income of $3.3 million and operating expense of $3.0 million for the year ended December 31, 2025, recorded as "Net income (expense) from real estate owned operations" in the consolidated statement of operations.

The table below sets forth additional information relating to the Company's portfolio as of December 31, 2025:

Senior Secured Loans

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Real Estate Owned(5)

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

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

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

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

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

Total Financing

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

The following table summarizes our financing agreements:

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Maximum Collateral Borrowings Borrowings

Non-/Mark-to-Market Facility Size(1) Assets(2) Outstanding Available Outstanding

(1) Maximum facility size represents the largest amount of borrowings under a given facility once sufficient collateral assets have been approved by the lender and pledged by us.

(2) Represents the principal balance of the collateral assets.

Collateralized Loan Obligations and Secured Financings

On June 14, 2021, the Company completed the 2021-FL1 CLO, issuing eight tranches of CLO notes through two newly-formed wholly-owned subsidiaries totaling $903.8 million. Of the total CLO notes issued $833.8 million were investment grade notes issued to third party investors and $70 million were below investment-grade notes retained by us. In addition, a $96.25 million equity interest in the portfolio was retained by us. The financing had an initial two-and-a-half year reinvestment period that allowed principal proceeds of the loan obligations to be reinvested in qualifying replacement loan obligations, subject to the satisfaction of certain conditions set forth in the indenture. Thereafter, the outstanding debt balance was reduced as loans were repaid. Initially, the proceeds of the issuance of the securities also included $330.3 million for the purpose of acquiring additional loan obligations for a period up to 180 days from the CLO closing date, resulting in the issuer owning loan obligations with a face value of $1.0 billion, representing leverage of 83%. On November 18, 2025, the Company optionally redeemed the 2021-FL1 CLO in full.

On July 12, 2023, the Company entered into and closed a matched-term non-recourse collateralized commercial real estate financing (the "LMF 2023-1 Financing"), secured by $386.4 million of first lien floating-rate multifamily mortgage assets and not subject to margin calls or additional collateralization requirements. In connection with the LMF 2023-1 Financing, approximately $270.4 million of an investment-grade rated senior secured floating rate loan was provided by a private lender and approximately $47.3 million of investment-grade rated notes (collectively, the "Senior Debt") were issued and sold to an affiliate of LFT's external manager, Lument IM. A consolidated subsidiary of LFT retained the subordinate interests in the issuing vehicle of approximately $68.6 million. The Senior Debt has an initial weighted average spread of approximately 314.0 basis points over 30-day term SOFR, excluding fees and transaction costs. The Senior Debt matures on the payment date in July 2032, unless it is sooner repaid or redeemed in accordance with its terms. The financing had an initial two-year reinvestment period that allowed principal proceeds of the loan obligations to be reinvested in qualifying replacement loan obligations, subject to the satisfaction of certain conditions set forth in the indenture. Thereafter, the outstanding debt balance will be reduced as loans are repaid.

On December 10, 2025, the Company completed the LMNT 2025-FL3 CLO, issuing eight tranches of CLO notes totaling $620.7 million through a newly formed wholly-owned subsidiary. Of the total CLO notes issued, $585.0 million were investment grade notes issued to third party investors and $35.7 million were below investment-grade and were retained by us. In addition, we retained a $43.1 million income note. The financing has an initial two-and-a-half year reinvestment period that allows principal proceeds of the loan obligations to be in reinvested in qualifying replacement loan obligations, subject to the satisfaction of certain conditions set forth in the indenture. Thereafter, the outstanding debt balance will be reduced as loans are repaid. Initially, the proceeds of the issuance of the securities also included $5.8 million for the purpose of acquiring additional loan obligations for a period up to 180 days from the CLO closing date, resulting in the issuer owning obligations with a face value of $663.8 million, representing leverage of 88%. The investment grade notes had an initial weighted average spread of approximately 190.5 basis points over 30-day term SOFR, excluding fees and transaction costs. The investment grade notes mature on the payment date in July 2043, unless it is sooner repaid or redeemed in accordance with their terms.

The following table presents certain loan and borrowing characteristics of LMF 2023-1 Financing and LMNT 2025-FL3 CLO as of December 31, 2025:

(1) The principal value for Collateral (REO assets) is the initial loan exposure.

(2) The carrying value of the collateral is net of unaccreted purchase discounts of $1,595,224 and allowance for credit loss of $15,394,353 as of December 31, 2025. The carrying value for LMF 2023-1 Financing is net of debt issuance costs of $1,292,096 and the carrying value of LMNT 2025-FL3 CLO is net of debt issuance costs of $4,912,883 as of December 31, 2025.

(3) Weighted average coupon assumes applicable 30-day term SOFR of 3.86% as of December 31, 2025,inclusive of weighted average interest rate floors of 2.55%. As of December 31, 2025, 100.0% of the investments by total exposure earned a floating rate indexed to 30-day term SOFR. Weighted average coupon for the financings assumes applicable 30-day term SOFR of 3.74% as of December 31, 2025 and spread of 2.24% as of December 31, 2025.

Master Repurchase and Secured Lending Agreements

On November 3, 2025, LCMT Warehouse, LLC, an indirect wholly owned subsidiary of the Company, entered into an Uncommitted Master Repurchase Agreement ("Repurchase Agreement") with JPMorgan Chase Bank, N.A.. The Repurchase Agreement provides up to $450 million to finance first mortgage

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loans, controlling loan participations and other commercial mortgage loan debt instruments secured by commercial real estate, as described in more detail in the Repurchase Agreement. Advances under the Repurchase Agreement accrue interest at per annum rates equal to term SOFR plus a spread to be determined on a case-by-case basis. The initial maturity date of the Repurchase Agreement is November 3, 2028, with two (2) one-year extensions at the Company's option, which may be exercised upon the satisfaction of certain conditions, described in more detail in the Repurchase Agreement.

On December 10, 2025, LCMT NPL Warehouse, LLC, an indirect wholly owned subsidiary of the Company, entered into a loan agreement ("Loan Agreement") with Northeast Bank. The Loan Agreement provides for up to $50 million in maximum aggregate advances over a 36-month draw period to finance first mortgage loans and controlling first mortgage loan participations secured by commercial real estate. Each collateral loan financed under the Loan Agreement will be classified as a performing or non-performing loan, as described in more detail in the Loan Agreement. The Loan Agreement also provides financing for commercial REO properties, with related REO entities joining as borrowers under the Loan Agreement from time to time, as described in more detail in the Loan Agreement.

The following table presents certain loan and borrowing characteristics of the Repurchase Agreement and Loan Agreement as of December 31, 2025:

(1) Principal value of the Repurchase Agreement was $177,193,781 and the principal value of the Loan Agreement was $17,000,000 as of December 31, 2025.

(2) Net of $2.3 million unamortized deferred financing costs as of December 31, 2025.

(3) Weighted average funding cost for the Repurchase Agreement assumes applicable 30-day term SOFR of 3.73% as of December 31, 2025 and a spread of 1.85%. Weighted average funding cost for the Loan Agreement assumes applicable 30-day term SOFR of 3.73% as of December 31, 2025 and a spread of 3.50%.

(3) Borrowings under the Repurchase Agreement are on a partial (25%) recourse basis. This Agreement contains defined mark-to-market provisions that permit the lender to issue margin calls based on credit marks.

Secured Term Loan

In January 2020, we entered into a $40.25 million secured term loan with an initial maturity of February 2025. In April 2021, we entered into an amendment, providing, among other things, an incremental secured term loan in the amount of $7.5 million and a one-year maturity extension to February 2026. In August 2021, the Company drew down the $7.5 million incremental secured term loan. In February 2026, the Company entered into certain additional amendments that extended the maturity to February 20, 2030. In addition, the February 2026 amendments provided the Company with an incremental secured term loan in the aggregate principal amount of $2,25 million, which the Company drew upon on February 23, 2026.

As most recently amended, borrowings under the Secured Term Loans bear interest at a fixed rate of 9.75% per annum, which is subject to step up by 0.50% per annum for the first three months after February 20, 2029, with further step ups of 0.50% per annum every three months thereafter until the maturity date..

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

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

The following table presents certain borrowing characteristics of the Secured Term Loan as of December 31, 2025:

Outstanding Balance Carrying Value Coupon

FOAC and Changes to Our Residential Mortgage Loan Business

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

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

Pursuant to a Master Agreement dated June 15, 2016, as amended on August 29, 2016, January 30, 2017 and June 27, 2018, among MAXEX, LLC ("MAXEX"), MAXEX Clearing LLC, MAXEX's wholly-owned clearinghouse subsidiary and FOAC, FOAC provided seller eligibility review services under which it reviewed, approved and monitored sellers that sold loans via MAXEX Clearing LLC. To the extent that a seller approved by FOAC fails to honor its obligations to repurchase a loan based on an arbitration finding that it breached its representations and warranties, FOAC was obligated to backstop the seller's repurchase obligation. The term of such backstop guarantee was the earlier of the contractual maturity of the underlying mortgage and its repayment in full.

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However, the incidence of claims for breaches of representations and warranties over time is considered unlikely to occur more than five years from the sale of a mortgage. FOAC's obligations to provide such seller eligibility review and backstop guarantee services terminated on November 28, 2018. Pursuant to an Assumption Agreement dated December 31, 2018, among MAXEX Clearing LLC and FOAC, MAXEX Clearing LLC assumed all of FOAC's obligations under its backstop guarantees and agreed to indemnify and hold FOAC harmless against any losses, liabilities, costs, expenses and obligations under the backstop guarantee. FOAC paid MAXEX Clearing LLC, as the replacement backstop provider, a fee of $426,770 (the "Alternative Backstop Fee"). MAXEX Clearing LLC represented to FOAC in the Assumption Agreement that it (i) is rated at least "A" (or equivalent) by at least one nationally recognized statistical rating agency or (ii) has (a) adjusted tangible net worth of at least $20.0 million and (b) minimum available liquidity equal to the greater of (x) $5.0 million and (y) 0.1% multiplied by the scheduled unpaid principal balance of each outstanding loan covered by the backstop guarantees. MAXEX's chief financial officer is required to certify ongoing compliance by MAXEX Clearing LLC with the aforementioned criteria on a quarterly basis and if MAXEX Clearing LLC fails to satisfy such criteria, MAXEX Clearing LLC is required to deposit into an escrow account for FOAC's benefit an amount equal to the greater of (A) the unamortized Alternative Backstop Fee for each outstanding loan covered by the backstop guarantee and (B) the product of 0.01% multiplied by the scheduled unpaid principal balance of each outstanding loan covered by the backstop guarantees. See Note 10 to our consolidated financial statements included in this Annual Report for a further description of MAXEX.

Critical Accounting Policies and Estimates

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

Commercial Mortgage Loans Held-for-Investment

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

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

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

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

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

2.Low Risk: meeting or exceeding underwritten expectations

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

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

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

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Capital Allocation

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

Commercial Mortgage Loans Real Estate Owned MSRs Unrestricted Cash(1) Total(2)

Commercial Mortgage Loans MSRs Unrestricted Cash(1) Total(2)

1.Includes cash and cash equivalents.

2.Includes the carrying value of our Secured Term Loan.

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

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

Results of Operations

The table below presents certain information from our Consolidated Statement of Operations for the years ended December 31, 2025 and December 31, 2024:

Year EndedDecember 31, Increase (Decrease)

Revenues:

Interest income:

Interest expense:

Master repurchase and term lending agreements (2,268,542) — (2,268,542) N/A

Expenses:

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Other income (loss):

Net income (expense) from real estate owned operations (472,023) — (472,023) N/A

Earnings per share:

Basic and diluted income (loss) per share $ (0.14) $ 0.34

Dividends declared per share of common stock $ 0.22 $ 0.40

N/A -not applicable, no prior period comparison

nm - not meaningful

Net Income Summary

For the year ended December 31, 2025, our net loss attributable to common stockholders was $(7,485,309), or $0.14 basic and diluted net loss per average share, compared with net income of $17,909,190, or $0.34 basic and diluted net income per share, for the year ended December 31, 2024. The principal drivers of this net income variance were a decrease in net interest income from $41,356,609 for the year ended December 31, 2024 to $25,113,203 for the year ended December 31, 2025 and an increase in total other loss from $5,180,578 for the year ended December 31, 2024 to $15,328,487 for the year ended December 31, 2025 due to specific reserves taken on risk-rated "5" multifamily loans and realized loss on real estate owned.

Net Interest Income

For the years ended December 31, 2025 and December 31, 2024, our net interest income was $25,113,203 and $41,356,609, respectively. The decrease was primarily due to (i) a $284.9 million decrease in weighted-average principal balance of our loan portfolio resulting in a decrease to interest income of $35.2 million; (ii) an increase in interest income adjustment due to non-accrual loans of $3.3 million; (iii) a 97bps decrease in weighted-average floating rate of our loan portfolio; (iv) a 7bps decrease in weighted-average spread on the loan portfolio; (v) a decrease in exit fees of $1.0 million for our loan portfolio for the year-ended December 31, 2025, compared to the corresponding period in 2024; (vi) a decrease in accretion of purchase discount of $1.6 million for the year-ended December 31, 2025, compared to the corresponding period in 2024; (vii) a 20bps increase in weighted-average spread of our secured borrowing liabilities and (viii) one-time income of $2.5 million related to the resolution of the defaulted Columbus, Ohio loan for the year ended December 31, 2025. This was partially offset by (i) a $264.3 million decrease in weighted-average principal balance of our secured borrowings resulting in a decrease to interest expense of $25.2 million; (ii) a 100bps decrease in weighted-average floating rate for our secured borrowings for the year-ended December 31, 2025, compared to the corresponding period in 2024; (iii) an increase in extension fees of $2.0 million and (iv) a $1.7 million reduction in deferred financing costs.

As disclosed above, we experienced a decrease of $1.0 million in exit fees for the year ended December 31, 2025. For the year ended December 31, 2025, we experienced loan payoffs on 31 loans with net principal balances of $185.4 million which generated exit fees of $1.7 million included in interest income and 6 loans with net principal balances of $81.2 million which waived exit fees of $0.8 million resulting in a reduction to expense reimbursement of $0.4 million included in operating expenses reimbursable to Manager. For the year ended December 31, 2024, we experienced loan payoffs on 23 loans with a net principal balances of $314.5 million which generated exit fees of $2.6 million included in interest income and 5 loans with a net principal balances of $46.9 million which waived exit fees of $0.6 million resulting in a reduction to expense reimbursement of $0.3 million included in operating expenses reimbursable to Manager.

Expenses

We incurred management and incentive fees of $4,595,458 for the year ended December 31, 2025, representing amounts payable to our Manager under our Management Agreement. We also incurred operating expenses of $7,926,374, of which $1,723,142 was payable to our Manager and $6,203,232 was payable to third parties.

For the year ended December 31, 2024, we incurred management and incentive fees of $6,630,571, representing amounts payable to our Manager under our Management Agreement. We also incurred operating expenses of $6,877,462, of which $1,799,570 was payable to our Manager and $5,077,892 was payable to third parties.

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

Other Income and Expense

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For the year ended December 31, 2025, we incurred other loss of $15,328,487. This loss was primarily driven by provision for credit losses of $14,390,928 primarily due to specific reserves taken on risk-rated "5" multifamily loans, changes in macroeconomic assumptions employed in determining the Company's model-based general reserve, net expense from real estate owned operations of $472,023, realized loss on sale of real estate owned of $547,447 and the impact of net unrealized losses on mortgage servicing rights of $95,041 as a result of a reduction in principal balance in the period which more than offset mortgage servicing income of $176,952.

For the year ended December 31, 2024, we incurred other loss of $5,180,578. This loss was primarily driven by provision for credit losses of $5,275,122 primarily due to specific reserves taken on risk-rated "5" multifamily loans, changes in macroeconomic assumptions employed in determining the Company's model-based general reserve and the impact of net unrealized losses on mortgage servicing rights of $42,686 as a result of a reduction in principal balance in the period which more than offset net mortgage servicing income of $137,230.

The year-over-year decrease in other loss was primarily due to the change in provision for credit losses.

Income Tax Expense

For the year ended December 31, 2025 the Company recognized a provision for income taxes in the amount of $8,193 and for the year ended December 31, 2024, the Company recognized a provision for income taxes in the amount of $18,808. The year-over-year decrease in tax expense primarily reflects the change in gross deferred revenue at FOAC due to the change in unrealized loss on mortgage servicing rights.

Liquidity and Capital Resources

Liquidity is a measurement of our ability to meet potential cash requirements, including ongoing commitments to pay dividends, fund investments, comply with margin requirements, if any, and repay borrowings and other general business needs. Our primary sources of liquidity have been met with net proceeds of common or preferred stock issuance, net proceeds from debt offerings and net cash provided by operating activities, primarily derived from our retained beneficial interest in CRE CLOs and secured financings. We finance our commercial mortgage loans with non-recourse match term secured borrowings, which are not subject to margin calls or additional collateralization requirements and repurchase facilities, which are only subject to credit risk. On July 12, 2023, we closed LMF 2023-1 Financing, placing $270.4 million of an investment-grade rated senior secured floating-rate loan with a private lender, issued and sold approximately $47.3 million of investment-grade rated notes to an affiliate of our Manager and retained the subordinate interests in the issuing vehicle of approximately $68.6 million. On December 10, 2025, we closed the LMNT 2025-FL3 CLO issuing eight tranches of CLO notes totaling $620.7 million. Of the total CLO notes issued $585.0 million were investment grade notes issued to third-party investors and $35.7 million were below investment-grade notes retained by us. In addition, we retained a $43.1 million income note. On August 23, 2021 we drew an additional $7.5 million of our Secured Term Loan pursuant to the Third Amendment. As of December 31, 2025, our balance sheet included $47.8 million of a secured term loan and $0.8 billion in collateralized loan financing, gross of discounts and debt issuance costs. Our secured term loan matured in February 2026, and was amended at such time to extend the maturity to February 2030. Our collateralized financing is match-termed and matures in 2032 or later and our collateralized loan financing is term-matched and matures in 2043 or later. On November 3, 2025, we entered into an Uncommitted Master Repurchase Agreement providing up to $450 million to finance first mortgage loans, controlling loan participations and other commercial mortgage loan debt instruments secured by commercial real estate. On December 10, 2025, we entered into a loan agreement providing up to $50 million to finance first mortgage loans and controlling first mortgage loan participations secured by commercial real estate. However, to the extent that we seek to invest in additional commercial mortgage loans, we will in part be dependent on our ability to issue additional collateralized loan obligations, secure alternative financing facilities or to raise additional common or preferred equity. Notwithstanding the current period of relatively high interest rates, the U.S. Federal Reserve began decreasing rates in 2024. Although decelerating, inflation remains above the U.S. Federal Reserve's target levels. Despite multiple federal funds rate decreases over the course of 2024 and 2025, interest rates have remained elevated. Although capital markets have largely adjusted to a higher-for-longer interest rate environment and persistent geopolitical uncertainty, unexpected market dislocations could reduce liquidity and further affect borrowing costs. A lack of liquidity for a prolonged period of time could limit our ability to grow this business.

Our primary driver of cash flows from operating activities is from interest received from the junior retained notes and income notes of our CRE CLO and secured financing and the senior loans financed by our secured financing agreements. The CRE CLOs and other secured financings we have entered into, and may in the future enter into, include certain interest coverage tests, overcollateralization coverage tests, financial or other tests that, if not met, may result in a change in the priority of distributions, which may result in the reduction or elimination of distributions to the subordinate debt and equity tranches retained by us until the tests have been met or certain senior classes of securities have been paid in full. Accordingly, if such tests are not satisfied, we, as holders of the subordinate debt and equity interests in the applicable CRE CLO or secured financing, may experience a significant reduction in our cash flow from those interests, which would negatively impact our liquidity. In addition, our secured financing agreements contain margin call provisions following the occurrence of certain mortgage loan credit events. If we are unable to make the required payment or if we fail to meet or satisfy any of the covenants in our financing agreements, we will be in default under these agreements, and our lenders could elect to declare outstanding amounts due and payable, terminate their commitments, require the posting of additional collateral, including cash to satisfy margin calls, and enforce their interests against existing collateral.

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

We intend to continue to maintain a level of liquidity in relation to our assets that enables us to meet reasonably anticipated investment requirements, margin requirements and unforeseen business needs but that also allows us to be substantially invested in our target assets. We may misjudge the appropriate amount of our liquidity by maintaining excessive liquidity, which would lower our investment returns, or by maintaining insufficient liquidity, which would force us to liquidate assets into unfavorable market conditions and harm our operating results. As of December 31, 2025, we had unrestricted cash and cash equivalents of $23.1 million, compared to $69.2 million as of December 31, 2024.

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As of December 31, 2025, we had $47.8 million in outstanding principal under our Senior Secured Term Loan, with a borrowing rate of 7.25%. As of December 31, 2025, the ratio of our recourse debt to equity was 0.2:1.

As of December 31, 2025, we consolidated the assets and liabilities of the LMF 2023-1 Financing and LMNT 2025-FL3 CLO collateralized financings. The assets of the LMF 2023-1 Financing and LMNT 2025-FL3 CLO are restricted and can only be used to fulfill their respective obligations, and accordingly the obligations of the trust, which we classify as collateralized loan obligations, do not have any recourse to us as the consolidator of the trust. As of December 31, 2025, the carrying value of these non-recourse liabilities aggregated to $748.4 million. As of December 31, 2025, our total debt to equity ratio was 3.4:1 on a GAAP basis.

Cash Flows

The following table sets forth changes in cash, cash equivalents and restricted cash for the years ended December 31, 2025 and December 31, 2024:

For the years ended December 31,

During the year ended December 31, 2025, cash, cash equivalents and restricted cash decreased by $44.9 million and for the year ended December 31, 2024, cash, cash equivalents and restricted cash increased by $20.0 million.

Operating Activities

For the years ended December 31, 2025 and December 31, 2024, net cash provided by operating activities totaled $10.0 million and $27.1 million, respectively. For the year ended December 31, 2025, our cash flows from operating activities were primarily driven by interest received from the junior retained notes and preferred shares of the 2021-FL1 CLO, LMF 2023-1 Financing and LMNT 2025-FL3 CLO of $20.4 million interest received from our senior secured loans held outside the VIEs we consolidate of $0.3 million, interest received on cash accounts of $2.3 million and cash received from mortgage servicing rights of $0.2 million exceeding cash interest expense paid on our Secured Term Loan of $3.7 million, management and incentive fees of $4.6 million, expense reimbursements of $1.9 million and other operating expenditures of $5.3 million. For the year ended December 31, 2024, our cash flows from operating activities were primarily driven by $37.8 million of interest received from the junior retained notes and preferred shares of 2021-FL1 CLO and LMF 2023-1 Financing, interest received on cash accounts of $2.7 million, $3.8 million of interest received from our senior secured loans held outside the VIE we consolidate and $0.1 million of cash received from mortgage servicing rights exceeding cash interest expense paid on our Secured Term Loan of $3.5 million, management and incentive fees of $6.6 million, expense reimbursements of $1.8 million and other operating expenditures of $5.3 million.

Investing Activities

For the year ended December 31, 2025, net cash used in investing activities totaled $142.8 million. This was a result of cash used for the purchase and funding of commercial mortgage loans held for investment exceeding the principal repayment of commercial mortgage loans held for investment during the period. For the year ended December 31, 2024, net provided by investing activities totaled $334.1 million. This was a result of cash received from the principal repayment of commercial mortgage loans held-for-investment exceeding the cash used for the purchase and funding of commercial mortgage loans held for investment for the year ended December 31, 2024.

Financing Activities

For the year ended December 31, 2025, net cash provided by financing activities totaled $87.9 million. This was due to proceeds from issuance of collateralized loan obligations of $585.0 million and proceeds from secured financing agreements of $451.0 million which more than offset payments of common stock dividends of $18.3 million, payments of preferred stock dividends of $4.7 million, repayment of collateralized loan obligations of $661.0 million, repayment of secured financing agreements of $256.8 million and payment of debt issuance costs of $7.2 million. For the year ended December 31, 2024, net cash used in financing activities totaled $341.2 million and primarily related to payments of common stock dividends of $15.7 million, payment of preferred stock dividends of $4.7 million and repayment of collateralized loan obligations of $320.8 million.

Contractual Obligations and Commitments

Our contractual obligations as of December 31, 2025 are described in the following table:

Total Less than 1 year 1 to 3 years 3 to 5 years More than 5 years

The table above does not include the related interest expense or extension options, as applicable under the master repurchase agreement, term lending agreement and secured term loan.

We may enter into certain contracts that may contain a variety of indemnification obligations, principally with underwriters and counterparties to repurchase agreements. The maximum potential future payment amount we could be required to pay under these indemnification obligations may be unlimited.

49

Forward-Looking Statements Regarding Liquidity

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

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

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

Off-Balance Sheet Arrangements

As of December 31, 2025, we did not maintain any relationships with unconsolidated financial partnerships, or special purpose or variable interest entities established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Further, as of December 31, 2025, we had not guaranteed any obligations of unconsolidated entities or entered into any commitment or intent to provide funding to any such entities.

In connection with the provision of seller eligibility and backstop guarantee services provided to MAXEX, we previously accounted for the related non-contingent liability at its fair value on our consolidated balance sheet as a liability. As of December 31, 2025, pursuant to an Assumption Agreement dated December 31, 2018, among MAXEX Clearing LLC and FOAC, MAXEX Clearing LLC assumed all of FOAC's obligations under its backstop guarantees and agreed to indemnify and hold FOAC harmless against any losses, liabilities, costs, expenses and obligations under the backstop guarantees. See Note 11 for further information.

Distributions

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

If substantially all of our taxable income has not been paid by the close of any calendar year, we may declare a special dividend prior to the end of such calendar year, to achieve this result. On December 12, 2024, we announced that our board of directors had declared a cash dividend rate for the fourth quarter of 2024 of $0.08 per share of common stock and a one-time special cash dividend of $0.09 per share of common stock.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Not applicable

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Reports of Independent Registered Public Accounting Firm, the Company’s consolidated financial statements and notes to the Company’s consolidated financial statements appear in a separate section of this Form 10-K (beginning on Page F-2 following Part IV). The index to the Company’s consolidated financial statements appears on Page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

Under the supervision and with the participation of management, including our principal executive officer and principal financial officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to paragraph (b) of Exchange Act Rules

50

13a-15 or 15d-15 as of December 31, 2025. Based upon our evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of December 31, 2025.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is also responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Exchange Act Rules 13a-15(f) and 15d-15(f) as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:

•pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

•provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

•provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Under the supervision of our Audit Committee and with the participation of management, including our principal executive officer and principal financial officer, we evaluated the effectiveness, as of December 31, 2025, of our internal control over financial reporting. In making this assessment, management used the criteria set forth in the "Internal Control-Integrated Framework" (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO Framework"). Based on its evaluation under the COSO Framework, our management has concluded that our internal control over financial reporting was effective as of December 31, 2025.

Changes in Internal Control Over Financial Reporting

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

ITEM 9B. OTHER INFORMATION

None.

51

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required to be furnished by this Item 10 will be set forth in the Company's definitive proxy statement for its 2026 Annual Meeting of Stockholders (the "2026 Proxy Statement"), which the Company expects to file within 120 days of the end of its fiscal year December 31, 2025. For the limited purpose of providing the information necessary to comply with this Item 10, the 2026 Proxy Statement is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information required to be furnished by this Item 11 will be set forth in the 2026 Proxy Statement. For the limited purpose of providing the information necessary to comply with this Item 11, the 2026 Proxy Statement is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required to be furnished by this Item 12 will be set forth in the 2026 Proxy Statement. For the limited purpose of providing the information necessary to comply with this Item 12, the 2026 Proxy Statement is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required to be furnished by this Item 13 will be set forth in the 2026 Proxy Statement. For the limited purpose of providing the information necessary to comply with this Item 13, the 2026 Proxy Statement is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required to be furnished by this Item 14 will be set forth in the 2026 Proxy Statement. For the limited purpose of providing the information necessary to comply with this Item 14, the 2026 Proxy Statement is incorporated herein by reference.

52

PART IV

Item 15. Exhibits, Financial Statements and Schedules

(a)Financial Statements.

Page

Financial Statements F-1

Report of Independent Registered Public Accounting Firm F-2

Consolidated Balance Sheets F-4

Consolidated Statements of Operations F-5

Consolidated Statements of Stockholders’ Equity F-6

Consolidated Statements of Cash Flows F-7

Notes to Consolidated Financial Statements F-8

(b)Exhibits.

The Exhibits listed in the Exhibit Index, which appear immediately following the signature pages, are incorporated herein by reference and are filed as part of this Annual Report on Form 10-K.

(c)Schedules.

Schedule IV - Mortgage Loan on Real Estate

Schedules other than the one listed above are omitted because they are not applicable or deemed not material.

53

EXHIBIT INDEX

Exhibit

No. Document

4.3 Description of Securities.*

54

55

19 Lument Finance Trust, Inc. Insider Trading Policy

21.1 List of Subsidiaries of Lument Finance Trust, Inc.*

23.1 Consent of KPMG, LLP *

101.INS Inline XBRL Instance Document*

101.SCH XBRL Taxonomy Extension Schema Document*

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document*

101.DEF XBRL Taxonomy Extension Definition Linkbase Document*

56

101.LAB XBRL Taxonomy Extension Label Linkbase Document*

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document*

* Filed herewith.

** Furnished herewith.

Management contract or compensatory plan or arrangement.

57

Item 16. Form 10-K Summary

None.

58

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

LUMENT FINANCE TRUST, INC.

March 23, 2026 /s/ James P. Flynn

James P. Flynn

Chief Executive Officer and Chairman of the Board (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature Title Date

/s/ James P. Flynn Chief Executive Officer, Chairman of the Board March 23, 2026

James P. Flynn (Principal Executive Officer)

James A. Briggs Principal Accounting Officer)

/s/ James C. Hunt Director March 23, 2026

James C. Hunt

/s/ Marie D. Reynolds Director March 23, 2026

Marie D. Reynolds

/s/ Neil A. Cummins Director March 23, 2026

Neil A. Cummins

/s/ William Houlihan Director March 23, 2026

William Houlihan

/s/ Walter C. Keenan Director

Walter C. Keenan March 23, 2026

59

Contents

Page

Financial Statements

Consolidated Balance Sheets as of December 31, 2025 and December 31, 2024 F-4

Notes to Consolidated Financial Statements F-8

F-1

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Lument Finance Trust, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Lument Finance Trust, Inc. and subsidiaries (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations, changes in equity, and cash flows for the years then ended, and the related notes and financial statement schedule IV (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Assessment of the Allowance for Credit Losses

As discussed in Notes 2 and 3 to the consolidated financial statements, the Company’s allowance for credit losses totaled $22.7 million as of December 31, 2025. This balance includes an allowance for credit losses evaluated on a collective basis (collective ACL) of $5.0 million and an allowance for credit losses individually evaluated (individually evaluated ACL) of $17.6 million. The collective ACL methodology estimates expected credit losses primarily using methods that incorporate a probability of default and loss-given-default utilizing a third-party analytical model (PD and LGD model). Determining an allowance for credit loss estimate requires significant judgment and a variety of subjective assumptions, including (i) determination of relevant historical loan loss data sets, (ii) the current credit quality of loans and operating performance of loan collateral and the Company’s expectations of performance, and (iii) expectation of macroeconomic forecasts over the relevant time period. The Company estimates the allowance for credit losses for its portfolio on a collective basis for loans that share similar risk characteristics. The calculation is applied at the loan level. The Company focused their historical loss information on the most relevant subset of available commercial real estate (CRE) proxy data. The Company determines its estimate based on the weighting of multiple macroeconomic forecast scenarios driven by macroeconomic variables during the reasonable and supportable forecast period. For the period beyond which the Company is able to make reasonable and supportable forecasts, the Company reverts, on a straight-line basis over four quarters, to the historical loss information derived from CRE data set. Commercial mortgage loans held-for-investment which management considers to be a default risk or otherwise deemed collateral dependent are individually evaluated. A loan is considered collateral dependent when the Company determines, based on facts and circumstances, that the debtor is experiencing financial difficulty and that repayment is expected to be substantially provided through the sale or operation of the underlying collateral. The individually evaluated ACL is measured by comparing the estimated fair value of the underlying collateral, less costs to sell, to the amortized cost of the loan. The estimation of the underlying collateral’s fair value requires significant judgment, including assumptions related to capitalization rates, leasing, market rents, occupancy rates, and other factors deemed necessary.

We identified the assessment of the allowance for credit losses as a critical audit matter. A high degree of audit effort, including specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment of the allowance for credit losses due to significant measurement uncertainty. Specifically, for the collective ACL, the assessment encompassed the evaluation of the collective ACL methodology, including the PD and LGD model used to estimate the expected credit losses and the significant assumptions. Such significant assumptions included (1) selection and weighting of macroeconomic forecast scenarios; (2) reasonable and supportable forecast period; (3) reversion period; and (4) the composition of the historical loss proxy data set. The assessment also included an evaluation of the conceptual soundness of the PD and LGD model. With respect to the individually evaluated ACL, the assessment involved, evaluation of the methodology and the significant assumptions used in developing the fair value estimate of the underlying collateral.

The following are the primary procedures we performed to address this critical audit matter. For the collective ACL, we evaluated the Company’s process to develop the collective ACL estimate by testing certain sources of data and assumptions that the Company used and considered the relevance and reliability of such data and assumptions. In addition, we involved credit risk professionals with specialized skills and knowledge, who assisted in:

•evaluating the collective ACL methodology for compliance with U.S. generally accepted accounting principles

•assessing the conceptual soundness of the PD and LGD model by inspecting model documentation to determine whether the model is suitable for its intended use

F-2

•evaluating judgments made by the Company relative to the use of the PD and LGD model by comparing them to relevant Company-specific metrics and trends and the applicable industry practices

•evaluating the selection and weighting of the macroeconomic forecast scenarios used by comparing them to the Company's business environment and relevant industry practices

•evaluating the length of the reasonable and supportable forecast period and the reversion period by comparing to specific portfolio risk characteristics and trends

•assessing the composition of the historical loss proxy data set by comparing to Company and specific portfolio risk characteristics.

For the individually evaluated ACL, we tested certain sources of data used by management in determining fair value of the underlying collateral and assessed its relevance and reliability. In addition, we involved valuation professionals with specialized skills and knowledge who assisted in assessing the valuation of the underlying collateral for a selection of collateral dependent loans by developing an independent estimate of the underlying collateral value based on market assumptions and industry data.

/s/ KPMG LLP

We have served as the Company's auditor since 2019.

New York, New York

March 23, 2026

F-3

LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

ASSETS

Real estate owned, held-for-investment, net 26,839,010 —

Real estate owned, held-for-sale 24,099,072 —

Investment related receivable 15,449,323 —

LIABILITIES AND EQUITY

LIABILITIES:

Secured financing agreements, net 191,943,220 —

COMMITMENTS AND CONTINGENCIES (NOTES 10 & 11)

EQUITY:

(1)Our consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs") as the Company was the primary beneficiary of these VIEs. As of December 31, 2025 and December 31, 2024, assets of the consolidated VIEs totaled $889,507,091 and $1,058,138,406, respectively, and the liabilities of consolidated VIEs totaled $750,274,556 and $831,001,605, respectively. See Note 4 for further discussion.

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

F-4

LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

Revenues:

Interest income:

Interest expense:

Secured financing agreements (2,268,542) —

Expenses:

Other income (loss):

Net income (expense) from real estate owned operations (472,023) —

Change in unrealized (loss) on mortgage servicing rights (95,041) (42,686)

Realized (loss) on sale of real estate owned (547,447) —

Net (loss) income attributable to common stockholders $ (7,485,309) $ 17,909,190

Earnings per share:

Basic and diluted (loss) income per share $ (0.14) $ 0.34

Dividends declared per weighted average share of common stock $ 0.22 $ 0.40

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

F-5

LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

Shares Value Shares Par Value

Restricted stock compensation expense — — — — — — — — — —

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

F-6

LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash provided by operating activities:

Amortization of deferred offering costs — (34,008)

Depreciation and amortization 779,260 —

Loss on sale of real estate owned 547,447 —

Unrealized loss on mortgage servicing rights 95,041 42,686

Net change in:

Cash flows from investing activities:

Purchase of real estate owned (748,101) —

Proceeds from sale of real estate owned 8,156,893 —

Restricted cash assumed from acquisition of real estate owned 1,095,445 —

Capital expenditures on real estate owned, held-for-investment (1,522,391) —

Cash flows from financing activities:

Proceeds from secured financing agreements 450,960,414 —

Proceeds from securitized debt obligations 584,983,000 —

Payment of secured financing agreements (256,766,633) —

Payment of deferred financing costs (7,205,040) —

Supplemental disclosure of cash flow information

Non-cash investing and financing activities information

Dividends declared but not paid at end of period $ 3,093,470 $ 9,890,065

Transfer of senior loans to real estate owned, held-for-sale $ 32,431,860 $ —

Accrued capital expenditures on real estate owned $ 38,476 $ —

Debt issuance costs incurred but not paid at end of period $ 169,762 $ —

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

F-7

LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2025

NOTE 1 - ORGANIZATION AND BUSINESS OPERATIONS

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

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

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

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

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These financial statements have been prepared in accordance with U.S. GAAP and are expressed in United States dollars.

The consolidated financial statements of the Company include the accounts of its subsidiaries.

Principles of Consolidation

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

Use of Estimates

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

Variable Interest Entities

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

The Company performs an ongoing reassessment of whether changes in facts and circumstances regarding its involvement with a VIE cause the Company's consolidation conclusion regarding the VIE to change. At December 31, 2025, the Company determined it was the primary beneficiary of LMF 2023-1, LLC ("LMF 2023-1 Financing") and LMNT 2025-FL3, LLC ("LMNT 2025-FL3 CLO") based on its power to direct the activities that most significantly impact the economic performance of LMF 2023-1 Financing and LMNT 2025-FL3 CLO and its obligation to absorb losses derived from ownership of its junior retained notes and preferred shares. Accordingly, the Company consolidated the assets, liabilities, income and expenses of the underlying issuing entities. Additionally, at December 31, 2025, the Company no longer consolidated LFT CRE 2021-FL1, Ltd. and LFT CRE 2021-FL1, LLC (together, the "2021-FL1 CLO") due to its redemption in the fourth quarter of 2025.

Securitized debt obligations

Collateralized loan obligations ("CLO") and securitized debt obligations represent third-party liabilities of LMF 2023-1 Financing and LMNT 2025-FL3 CLO and prior to its redemption in the fourth quarter of 2025, 2021-FL1 CLO. The LMF 2023-1 Financing and LMNT 2025-FL3 CLO are VIEs and Management has determined that the Company is the primary beneficiary of the LMF 2023-1 Financing and LMNT 2025-FL3 CLO and was the primary beneficiary of 2021-FL1 CLO prior to its redemption. Accordingly, the Company consolidates the assets, liabilities (other than the below investment grade-rated notes of the LMF 2023-1 Financing and LMNT 2025-FL3 CLO and prior to its redemption, 2021-FL1 CLO retained by the Company that are eliminated on consolidation), income and expense of the LMF 2023-1 Financing and LMNT 2025-FL3 CLO and prior to its redemption 2021-FL1 CLO. The third-party obligations of the LMF 2023-1 Financing and LMNT 2025-FL3 CLO do not have any recourse, and prior to its redemption 2021-FL1 CLO did not have any recourse to the Company as the consolidator of the CLO and secured financing issuing entities. The third-party obligations of the LMF 2023-1 Financing and LMNT 2025-FL3 CLO are carried at their outstanding unpaid principal balances and prior to its redemption 2021-FL1 CLO was carried at its outstanding unpaid principal balances, net of any deferred financing costs. Any premiums, discounts or deferred financing costs associated with these third-party

F-8

LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2025

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

obligations are amortized to interest expense using the effective interest method over the expected average life of the related obligations, or on a straight-line basis when it approximates the effective interest method. The Company's maximum exposure to loss from CLO and secured financings was $147,427,950 and $234,850,000 at December 31, 2025 and December 31, 2024, respectively.

In 2025, $427,286 in costs related to a previously contemplated public CRE CLO were expensed as "Other operating expenses" in the statement of operations as a result of abandoning the contemplated transaction due to the then current capital market environment.

Cash and Cash Equivalents and Restricted Cash

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

Restricted cash primarily includes (1) proceeds from principal payments held by the servicer which have yet to be reinvested, (2) interest reserve accounts related to our secured financing agreements and (3) funds on deposit with financial institutions related to real estate owned properties that are held in the Company's consolidated VIEs.

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

Restricted cash held in securitized debt obligations 2,253,629 2,390,654

Deferred Offering Costs

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

Fair Value Measurements

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

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

•Level 1 Inputs - Quoted prices for identical instruments in active markets

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

•Level 3 Inputs - Instruments with primarily unobservable value drivers.

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

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

•Cash and cash equivalents: The carrying amount of cash and cash equivalents approximates fair value.

•Restricted cash: The carrying amount of restricted cash approximates fair value.

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

•Mortgage servicing rights ("MSRs"): The Company classifies MSRs as Level 3 assets in the fair value hierarchy. The Company determines the fair value of MSRs from a third-party pricing service on a recurring basis. The third-party pricing service uses common market pricing methods that include using discounted cash flow models to calculate present value, estimated net servicing income and observed market

F-9

LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2025

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

pricing for MSR purchase and sale transactions. The model considers contractually specified servicing fees, prepayment assumptions, delinquency rates, late charges, other ancillary revenue, costs to service and other economic factors.

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

•Secured financing agreements: The Company determines the fair value based on the rate at which a similar agreement would currently be priced.

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

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

Commercial Mortgage Loans Held-for-Investment

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

Interest income is recognized as revenue using the effective interest method and is recorded on the accrual basis according to the terms of the underlying loan agreement. Any fees, costs, premiums and discounts associated with these loan investments are deferred and amortized over the term of the loan on a straight-line basis approximating the effective interest method. Income accrual is generally suspended and loans are placed on non-accrual status on the earlier

of the date at which payment has become 90 days past due or when full and timely collection of interest and principal is considered not probable. The Company may return a loan to accrual status when repayment of principal and interest is reasonably assured under the terms of the underlying loan agreement.

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

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

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

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

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

2.Low Risk: meeting or exceeding underwritten expectations

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

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

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

F-10

LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2025

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Real Estate Owned

To maximize recovery from a defaulted loan, the Company may assume legal title or physical possession of the underlying collateral through foreclosure or the execution of a deed in lieu of foreclosure. Real estate acquired through a foreclosure or by deed in lieu of foreclosure is classified as real estate owned ("REO"), net in the consolidated balance sheets. REO assets are initially recognized at estimated fair value in accordance with ASC Topic 805, "Business Combinations" and are shown net of accumulated depreciation and impairment charges.

REO assets held for investment, except for land, are depreciated using the straight-line method over their estimated useful lives ranging from seven to thirty-nine years. Renovations and/or replacements that improve or extend the life of the REO asset are capitalized and depreciated over their estimated useful lives. The cost of ordinary repairs and maintenance are expensed as incurred.

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

REO assets are classified as held for sale in the period when they meet the criteria under ASC Topic 360, "Property, Plant and Equipment." Once a REO asset is classified as held for sale, depreciation is suspended and the asset is reported at the lower of carrying value or fair value less cost to sell.

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

Mortgage Servicing Rights, at Fair Value

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

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

Secured Financing Agreements

We record investments financed with secured debt as separate assets and the related borrowings under any secured debt are recorded as separate liabilities on our consolidated balance sheets. Interest income earned on the investments and interest expense incurred on the secured debt are reported separately on our consolidated statements of operations. The secured financing agreements are carried at their unpaid principal balance, net of deferred financing costs. Deferred financing costs associated with these liabilities are amortized ratably or on a straight-line basis over the respective contractual term to interest expense. See Note 7 for additional information related to our secured financing agreements.

Secured Term Loan

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

Common Stock

At December 31, 2025, and December 31, 2024, the Company was authorized to issue up to 450,000,000 shares of common stock, par value $0.01 per share. The Company had 52,399,265 and 52,309,209 shares of common stock issued and outstanding at December 31, 2025 and December 31, 2024, respectively.

Stock Repurchase Program

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

Preferred Stock

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

F-11

LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2025

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes

The Company has elected to be taxed as a REIT under the Code for U.S. federal income tax purposes, commencing with the Company's short taxable period ended December 31, 2012. A REIT is generally taxable as a U.S. C-Corporation; however, so long as the Company qualifies as a REIT it is entitled to a special deduction for dividends paid to stockholders not otherwise available to corporations. Accordingly, the Company generally will not be subject to U.S. federal income tax to the extent its distributions to stockholders equals, or exceeds, its REIT taxable income for the year. In addition, the Company must continue to meet certain REIT qualification requirements with respect to distributions, as well as certain asset, income and share ownership tests, in accordance with Sections 856 through 860 of the Code, as summarized below. In addition, the TRS is maintained to perform certain services and earn income for the Company that the Company is not permitted to engage in as a REIT.

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

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

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

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

Earnings per Share

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

Stock-Based Compensation

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

Comprehensive Income (Loss) Attributable to Common Stockholders

For the years ended December 31, 2025 and December 31, 2024, comprehensive income equaled net income; therefore, a separate statement of comprehensive income is not included in the accompanying consolidated financial statements.

Recently Issued and/or Adopted Accounting Standards

Income Taxes

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

Income Statement

In November 2024, the FASB issued ASU 2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40)." ASU 2024-03 requires a public business entity to provide disaggregated disclosures, in the notes to the financial statements, of certain categories of expense that are included in expense line items on the face of the income statement. The guidance is effective on either a prospective basis, with the option for retrospective application, for annual periods beginning after December 15, 2026, for interim periods within fiscal years beginning after December

F-12

LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2025

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

15, 2027, and early adoption is permitted. The Company has not early adopted ASU 2024-03 and does not expect the adoption of ASU 2024-03 to have a material impact on our consolidated financial statements.

Interim Reporting

In December 2025, the FASB issued ASU No. 2025-11, "Interim Reporting (Topic 270)—Narrow-Scope Improvements", which provides a clearer framework and more consistent application of interim disclosure requirements for public business entities. The guidance is effective for annual periods beginning after December 15, 2027. The guidance is applied prospectively and may be applied retrospectively. Adoption is not expected to have a material impact on our consolidated financial statements.

Codification Improvements

In December 2025, the FASB issued ASU No. 2025-12, Codification Improvements, which refines existing guidance to further enhance the interpretation and application of the Codification. The guidance is effective for annual periods beginning after December 15, 2026. The guidance is applied prospectively and may be applied retrospectively. Adoption is not expected to have a material impact on our consolidated financial statements.

NOTE 3 - COMMERCIAL MORTGAGE LOANS HELD-FOR-INVESTMENT

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

Weighted Average

Loans held-for-investment

Allowance for credit losses N/A $ (22,658,121)

Weighted Average

Loans held-for-investment

(1) Carrying Value includes $1,657,584 and $3,466,214 in unaccreted purchase discounts as of December 31, 2025 and December 31, 2024, respectively.

(2) Weighted average coupon assumes applicable 30-day term Secured Overnight Financing Rate ("SOFR") of 3.85% and 4.51% as of December 31, 2025 and December 31, 2024, respectively, inclusive of weighted average interest rate floor of 2.18% and 0.63%, respectively. As of December 31, 2025 and December 31, 2024, 100.0% of the investments by total investment exposure earned a floating rate indexed to 30-day term SOFR.

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

(4) As of December 31, 2025, $856,064,487 of the carrying value of outstanding senior secured loans were held in VIEs and $257,983,507 of the carrying value of outstanding senior secured loans were held outside of VIEs. As of December 31, 2024, $1,049,886,009 of the carrying value of outstanding senior secured loans were held in VIEs and $(1,082,931) of the carrying value of outstanding senior secured loans were held outside of VIEs.

Activity:For the years endedDecember 31, 2025 and December 31, 2024, the loan portfolio activity was as follows:

F-13

LUMENT FINANCE TRUST, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2025

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

Commercial Mortgage Loans Held-for-Investment

Accretion of purchase discount 3,534,649

Origination and other loan fees (1,487,623)

Accretion of deferred loan fees 737,793

Provision for credit losses (5,261,214)

Transfer to Real Estate Owned (62,580,330)