Velocity Financial, Inc.: Form 10-Q for the period ended Sep 30, 2025

The following discussion should be read in conjunction with the information included in our Annual Report on Form 10-K for the year ended December 31, 2024, as well as the unaudited financial statements included elsewhere in this Quarterly Report on Form 10-Q (the “Quarterly Report”).

In addition, the statements and assumptions in this Quarterly Report that are not statements of historical fact are forward-looking statements within the meaning of federal securities laws. In particular, statements about our plans, strategies and prospects as well as estimates of industry growth for the next quarter and beyond are forward-looking statements. For important information regarding these forward-looking statements, please see the discussion below under the caption “Forward-Looking Statements.”

References to “the Company,” “Velocity,” “we,” “us” and “our” refer to Velocity Financial, Inc. and include all of its consolidated subsidiaries, unless otherwise indicated or the context requires otherwise.

Business

We are a vertically integrated real estate finance company founded in 2004. We primarily originate and manage investor loans secured by 1-4 unit residential rental and commercial properties, which we refer to collectively as investor real estate loans. We originate loans nationwide across our extensive network of independent mortgage brokers which we have built and refined over the 21 years since our inception. Our objective is to be the preferred and one of the most recognized brands in our core market, particularly within our network of mortgage brokers.

We operate in a large and highly fragmented market with substantial demand for financing and limited supply of institutional financing alternatives. We have developed the highly specialized skill set required to effectively compete in this market, which we believe has afforded us a durable business model capable of generating attractive risk-adjusted returns for our stockholders throughout various business cycles. We offer competitive pricing to our borrowers by pursuing low-cost financing strategies and by driving front-end process efficiencies through customized technology designed to control the cost of originating a loan. Furthermore, by originating loans through our efficient and scalable network of approved mortgage brokers, we are able to maintain a wide geographical presence and nimble operating infrastructure capable of reacting quickly to changing market environments.

Our primary source of revenue is interest income earned on our loan portfolio. Our typical loan is secured by a first lien on the underlying property with a personal guarantee, and based on all loans in our portfolio as of September 30, 2025, has an average balance of approximately $393 thousand. As of September 30, 2025, our loan portfolio totaled $6.3 billion of UPB on properties in 48 states and the District of Columbia. The total portfolio had a weighted average loan-to-value ratio, or LTV at origination, of 65.5%, of which the 1-4 unit residential rental loans, which we refer to as investor 1-4 loans, represented 49.2% of the UPB. For the three and nine months ended September 30, 2025, the annualized yields on our total portfolio were 9.54% and 9.44%, respectively.

We fund our portfolio primarily through a combination of committed and uncommitted secured warehouse facilities, securitized debt, corporate debt, and equity. The securitized debt market is our primary source of long-term financing. We have successfully executed 44 securitized debt transactions, resulting in a total of over $9.9 billion in gross debt proceeds from May 2011 through September 2025. We may also continue to sell loans from time to time for cash in lieu of holding the loans in our loan portfolio.

One of our core profitably measurements is our portfolio related net interest margin, which measures the difference between interest income earned on loans and interest expense paid on portfolio-related debt, relative to the amount of loans outstanding over the period. Our portfolio-related debt consists of warehouse facilities and securitized debt and excludes corporate debt. For the three and nine months ended September 30, 2025, our annualized portfolio related net interest margin were 3.65% and 3.62%, respectively, compared to 3.60% and 3.50% for the three and nine months ended September 30, 2024, respectively. We generate profits to the extent that our portfolio related net interest income exceeds our interest expense on corporate debt, provision for credit losses and operating expenses. For the three and nine months ended September 30, 2025, including net income attributable to noncontrolling interest, we generated pre-tax income of $35.4 million and $96.2 million, and net income of $25.4 million and $70.2 million, respectively. For the three and nine months ended September 30, 2024, including net income attributable to noncontrolling interest, we generated pre-tax income of $21.2 million and $64.4 million, and net income of $15.8 million and $47.8 million, respectively.

On December 28, 2021, the Company acquired an 80% ownership interest in Century Health & Housing Capital, LLC (“Century”). Century is a licensed Ginnie Mae issuer/servicer that provides government-insured Federal Housing Administration (“FHA”) mortgage financing for multifamily housing, senior housing and long-term care/assisted living facilities. Century originates loans through its borrower-direct origination channel and services the loans through its in-house servicing platform, which enables the formation of long-term relationships with its clients and drives strong portfolio retention. Century earns origination fees and servicing fees from the mortgage servicing rights on its servicing portfolio.

Items Affecting Comparability of Results

Due to a number of factors, our historical financial results may not be comparable, either from period to period, or to our financial results in future periods. We have summarized the key factors affecting the comparability of our financial results below.

Recent Developments

Continued Market Uncertainties

Our operational and financial performance will depend on certain market developments, including the impact of tariffs, the actions of the Federal Reserve, the Russia/Ukraine war, the ongoing conflicts in the Middle East, the prolonged government shutdown, heightened stress in the real estate and corporate debt markets, and macroeconomic conditions and market fundamentals, which can all affect each of these factors and potentially impact our business performance.

Critical Accounting Policies and Use of Estimates

The preparation of financial statements in accordance with U.S. GAAP requires certain judgments and assumptions, based on information available at the time of preparation of the consolidated financial statements, in determining accounting estimates used in preparation of the consolidated financial statements. The following discussion addresses the accounting policies that we believe apply to us based on the nature of our operations. Our most critical accounting policies involve decisions and assessments that could affect our reported assets and liabilities, as well as our reported revenues and expenses. We believe that all the decisions and assessments used to prepare our financial statements are based upon reasonable assumptions given the information available at that time.

These policies and estimates relate to the allowance for credit losses and fair value option accounting. Our critical accounting policies and estimates are described in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC.

How We Assess Our Business Performance

Net income is the primary metric by which we assess our business performance. Accordingly, we closely monitor the primary drivers of net income which consist of the following:

Net Interest Income

Net interest income is the largest contributor to our net income and is monitored both on an absolute basis and relative to provision for credit losses and operating expenses. We generate net interest income to the extent that the rate at which we lend in our portfolio exceeds the cost of financing our portfolio, which we primarily achieve through long-term securitized debt. Accordingly, we closely monitor the financing markets and maintain consistent dialogue with investors and financial institutions as we evaluate our financing sources and cost of funds.

To evaluate net interest income, we measure and monitor: (1) the yields on our loans, (2) the costs of our funding sources, (3) our net interest spread and (4) our net interest margin. Net interest spread measures the difference between the rates earned on our loans and the rates paid on our funding sources. Net interest margin measures the difference between our annualized interest income and annualized interest expense, or net interest income, as a percentage of average loans outstanding over the specified time period.

Periodic changes in net interest income are primarily driven by: (1) origination volume and changes in average outstanding loan balances and (2) interest rates and changes in interest earned on our portfolio or paid on our debt. Historically, origination volume and portfolio size have been the largest contributors to the growth in our net interest income. We measure net interest income before and after interest expense related to our corporate debt and before and after our provision for credit losses.

Credit Losses

We strive to minimize actual credit losses through our rigorous screening and underwriting process and life of loan portfolio management and special servicing practices. We closely monitor the credit performance of our loan portfolio, including delinquency rates and expected and actual credit losses, as a key factor in assessing our overall business performance.

Operating Expenses

We incur operating expenses from compensation and benefits related to our employee base, rent and other occupancy costs associated with our leased facilities, our third-party primary loan servicing vendors, professional fees to the extent we utilize third-party legal, consulting and advisory firms, and costs associated with the resolution and disposition of real estate owned, and securitization expenses, among other items. We monitor and strive to prudently manage operating expenses and to balance current period profitability with investment in the continued development of our platform. Because volume and portfolio size determine the magnitude of the impact of each of the above factors on our earnings, we also closely monitor origination volume along with all key terms of new loan originations, such as interest rates, loan-to-value ratios, estimated credit losses and expected duration.

Factors Affecting Our Results of Operations

Our results of operations depend on, among other things, the level of our net interest income, the credit performance of our loan portfolio and the efficiency of our operating platform. These measures are affected by various factors, including the demand for investor real estate loans, the competitiveness of the market for originating or acquiring investor real estate loans, the cost of financing our portfolio, operating costs, the availability of funding sources and the underlying performance of the collateral supporting our loans. While we have been successful at managing these elements in the past, there are certain circumstances beyond our control, including the ongoing geopolitical conflicts, the changing economic policies, an expected recession, and macroeconomic conditions and market fundamentals, which can all affect each of these factors and potentially impact our business performance.

Competition

The investor real estate loan market is highly competitive which could affect our profitability and growth. We believe we compete favorably through diversified borrower access driven by our extensive network of mortgage brokers and by emphasizing a high level of real estate and financial expertise, customer service, and flexibility in structuring transactions, as well as by attracting and retaining experienced managerial and marketing personnel. However, some of our competitors may be better positioned to market their services and financing programs because of their ability to offer more favorable rates and terms and other services.

Availability and Cost of Funding

Our primary funding sources have historically included cash from operations, warehouse facilities, term securitized debt, corporate debt, and equity. We believe we have an established brand in the term securitized debt market and that this market will continue to support our portfolio growth with long-term financing. Changes in macroeconomic conditions can adversely impact our ability to issue securitized debt and, thereby, limit our options for long-term financing. In consideration of this potential risk, we have entered into a credit facility for longer-term financing that will provide us with capital resources to fund loan growth in the event we are not able to issue securitized debt.

All our warehouse repurchase and revolving loan facilities have interest payment obligations tied to the Secured Overnight Offering Rate (“SOFR”).

Loan Performance

We underwrite and structure our loans to minimize potential losses. We believe our fully amortizing loan structures and avoidance of large balloon payments, coupled with meaningful borrower equity in properties, limit the probability of losses and that our proven in-house asset management capability allows us to minimize potential losses in situations where there is insufficient equity in the property. Our income is highly dependent upon borrowers making their payments and resolving delinquent loans as favorably as possible. Macroeconomic conditions can, however, impact credit trends in our core market and adversely affect financial results.

Macroeconomic Conditions

The investor real estate loan market may be impacted by a wide range of macroeconomic factors such as interest rates, residential and commercial real estate prices, home ownership and unemployment rates, and availability of credit, among others. We believe our prudent underwriting, conservative loan structures and interest rate protections, and proven in-house asset management capability leave us well positioned to manage changing macroeconomic conditions.

Portfolio and Asset Quality

Key Portfolio Statistics

($ in thousands)

(A) Reflects the UPB of loans 90 days or more past due or placed on nonaccrual status. Includes $31.6 million, $31.7 million and $43.2 million of COVID-19 forbearance-granted loans 90 days or more past due or placed on nonaccrual status as of September 30, 2025, June 30, 2025, and September 30, 2024, respectively.

Total Loans. Total loans reflects the aggregate UPB at the end of the period. It excludes deferred origination costs, acquisition discounts, fair value adjustments and allowance for credit losses.

Loan Count. Loan count reflects the number of loans at the end of the period. It includes all loans with an outstanding principal balance.

Average Loan Balance. Average loan balance reflects the average UPB at the end of the period (i.e., total loans divided by loan count).

Weighted Average Loan-to-Value. Loan-to-value, or LTV, reflects the ratio of the original loan amount to the appraised value of the underlying property at the time of origination. In instances where the LTV at origination is not available for an acquired loan, the LTV reflects our best estimate of value at the time of acquisition. Weighted average LTV is calculated for the population of loans outstanding at the end of each specified period using the original loan amounts and appraised LTVs at the time of origination of each loan. LTV is a key statistic because requiring the borrower to invest more equity in the collateral minimizes our exposure for future credit losses.

Weighted Average Coupon. Weighted average coupon reflects the weighted average loan rate at the end of the period.

Nonperforming Loans. Loans that are 90 or more days past due, in bankruptcy, in foreclosure, or not accruing interest, are considered nonperforming loans. The dollar amount of nonperforming loans presented in the table above reflects the UPB of all loans that meet this definition.

Originations and Acquisitions

The following table presents new loan originations including unfunded commitments and acquisitions and includes average loan size, weighted average coupon and weighted average loan-to-value for the periods indicated:

($ in thousands)

During the third quarter of 2025, loan originations including unfunded commitments increased $13.6 million and $262.2 million from the quarters ended June 30, 2025 and September 30, 2024, respectively.

Loans Held for Investment

Our total portfolio of loans held for investment consists of both loans held for investment carried at amortized cost and loans held for investment at fair value, which are presented in the Consolidated Balance Sheets as “Loans held for investment, at amortized cost” and “Loans held for investment, at fair value,” respectively. The following table shows the various components of loans held for investment as of the dates indicated:

(In thousands)

The following table illustrates the contractual maturities of our loans held for investment in aggregate UPB and as a percentage of total held for investment loan portfolio as of the dates indicated:

($ in thousands)

Charge-offs, Gain (Loss) on REO

Our actual charge-offs have been minimal as a percentage of nonperforming loans held for investment. The valuation impact to our earnings from loans becoming REO or in REO is a combination of: (1) loan charge-offs, (2) gain on transfer to REO included in “Gain on disposition of loans” in the Consolidated Statements of Income, (3) net valuation adjustments on REO, and (4) net gain or loss on sale of REO.

The table below shows our actual charge-offs, gain on transfer of nonperforming loans to REO, net valuation adjustments on REO, and gain on sale of REO, for the periods indicated:

($ in thousands)

(1) Reflects the monthly average of nonperforming loans held for investment, excluding FVO loans, during the period.

(2) Reflects annualized charge-offs to average nonperforming loans held for investment, excluding FVO loans, for the period.

Allowance for Credit Losses

For the September 30, 2025 current expected credit loss (“CECL”) estimate, we considered a severe stress scenario with a seven-quarter reasonable and supportable forecast period followed by a three-quarter straight-line reversion period. Management concluded that applying the severe stress scenario was appropriate and reflected the uncertainties of a volatile market in light of the economic uncertainties surrounding tariffs and federal government layoffs and prolonged shutdown, contributing to a forecasted decreasing GDP and rising unemployment.

For the June 30, 2025 CECL estimate, we considered a severe stress scenario with a seven-quarter reasonable and supportable forecast period followed by a three-quarter straight-line reversion period. Management concluded that applying the severe stress scenario was appropriate and reflected the uncertainties of a volatile market in light of the announced tariffs and federal government layoffs, contributing to a forecasted decreasing GDP and rising unemployment.

For the March 31, 2025 CECL estimate, we considered a severe stress scenario with a seven-quarter reasonable and supportable forecast period followed by a three-quarter straight-line reversion period. Management concluded that applying the severe stress scenario was appropriate and reflected the uncertainties of a volatile market in light of the announced tariffs and federal government layoffs, contributing to a forecasted decreasing GDP and rising unemployment.

Our allowance for credit losses as of September 30, 2025 was $4.6 million compared to $4.9 million as of September 30, 2024. The decrease in allowance for credit losses from September 30, 2024 was primarily due to a decrease in the amortized cost loan portfolio subject to CECL, and the removal of COVID pandemic era data from the macroeconomic forecasts in the latest CECL model update. We strive to minimize actual credit losses through our rigorous screening and underwriting process, life of loan portfolio management and special servicing practices. Additionally, we believe borrower equity of 25% to 40% provides significant protection against credit losses. The various scenarios, the weighting of scenarios, as well as the forecast period and reversion to historical loss are subject to change as conditions in the market change and our ability to forecast as economic events evolve.

To estimate the allowance for credit losses in our portfolio of loans held for investment carried at amortized cost, we follow a detailed internal review process, considering a number of different factors including, but not limited to, our ongoing analyses of loans, historical loss rates, relevant environmental factors, relevant market research, trends in delinquencies, effects and changes in credit concentrations, and ongoing evaluation of fair values.

The following table illustrates the activity in our allowance for credit losses of loans held for investment, excluding loans held for investment, at fair value over the periods indicated:

($ in thousands)

(1) Reflects the UPB of loans held for investment at amortized cost.

(2) Annualized.

The allowance for credit losses was 0.22% of total UPB of loans held for investment carried at amortized cost as of September 30, 2025. Nonperforming loans were 12.3% of total UPB of loans held for investment carried at amortized cost as of September 30, 2025. We believe the allowance for credit losses is adequate because historically, most loans that become nonperforming resolve prior to converting to REO. This is due to low LTVs at origination and active management of our portfolio. Historically, our actual annual charge-offs rate was 0.07% over the last six years.

Credit Quality – Loans Held for Investment

The following table provides delinquency information on our loans held for investment by UPB as of the dates indicated:

($ in thousands)

(A) Balance includes $129.3 million UPB of loans held for investment at amortized cost as of September 30, 2025, $130.5 million as of June 30, 2025, and $153.9 million as of September 30, 2024 in our COVID-19 forbearance program.

Loans that are 90+ days past due, in bankruptcy, in foreclosure, or not accruing interest are considered nonperforming loans. Nonperforming loans were $614.2 million, or 9.8% of our held for investment loan portfolio as of September 30, 2025, compared to $601.8 million, or 10.3% as of June 30, 2025, and $503.9 million, or 10.6% as of September 30, 2024. The increase in total nonperforming loans as of September 30, 2025 compared to June 30, 2025 and September 30, 2024 was due to an increase in the size of our portfolio and management’s decision to move loans into foreclosure early in the delinquency process.

Resolution of Nonperforming Assets

Historically, most loans that become nonperforming resolve prior to converting to REO. This is due to low LTVs at origination and our active management of the portfolio. The following tables summarize the resolution activities of loans that became nonperforming prior to the beginning of the periods indicated or became nonperforming and subsequently resolved during the periods indicated. We resolved $108.0 million of long-term and short-term nonperforming assets for the quarter ended September 30, 2025, which was higher compared to $104.0 million for the quarter ended June 30, 2025, and $68.6 million for the quarter ended September 30, 2024. From these resolution activities, we realized net gains of $2.8 million, $3.6 million, and $2.3 million for the quarters ended September 30, 2025, June 30, 2025, and September 30, 2024, respectively. This is largely the result of collecting default interest and prepayment penalties in excess of the principal on loans and selling our REOs at prices higher than their carrying value.

The table below includes resolutions of our long-term nonperforming loans and REOs for the periods indicated:

($ in thousands)

Short-term loans, or loans with a maturity of two-year or less, do not require prepayment fees and usually result in a lower gain when paid in full, as compared to long-term loans. The table below includes resolutions of our short-term nonperforming loans and REOs, and loans granted a COVID-19 forbearance in 2020, for the periods indicated:

($ in thousands)

Real Estate Owned, Net (“REO”)

REO includes real estate we acquire through foreclosure or by deed-in-lieu of foreclosure. REO assets are initially recorded at fair value, less estimated costs to sell on the date of foreclosure. Adjustments that reduce the carrying value of the loan to the fair value of the real estate at the time of foreclosure are recognized as charge-offs in the allowance for credit losses. Gains at the time of foreclosure are recognized in other operating income. After foreclosure, we periodically obtain new valuations and any subsequent changes to fair value, less estimated costs to sell, are reflected as valuation adjustments, included in “Real estate owned, net” in the Consolidated Statements of Income.

As of September 30, 2025, REO included 223 properties with a lower of cost or estimated fair value of $113.7 million compared to 175 properties with a lower of cost or estimated fair value of $93.4 million as of June 30, 2025, and 112 properties with a lower of cost or estimated fair value of $62.4 million as of September 30, 2024.

Concentrations – Loans Held for Investment

As of September 30, 2025, our held for investment loan portfolio was concentrated in Investor 1-4 loans, representing 49.3% of the UPB. Mixed use and Retail properties represented 10.7% and 10.2%, respectively, of the UPB. No other property type represented more than 10.0% of our held for investment loan portfolio. Geographically, the principal balance of our loans held for investment were concentrated 21.1% in California, 13.8% in New York, 12.3% in Florida, 7.4% in New Jersey, and 6.0% in Texas.

($ in thousands)

(1) All other properties individually comprise less than 5.0% of the total unpaid principal balance.

($ in thousands)

(1) All other states individually comprise less than 5.0% of the total unpaid principal balance.

Key Performance Metrics

($ in thousands)

(1) Percentages are annualized.

Average Loans

Average loans reflects the daily average of total outstanding loans, including both loans held for investment and loans held for sale, as measured by UPB, over the specified time period.

Portfolio Yield

Portfolio yield is an annualized measure of the total interest income earned on our loan portfolio as a percentage of average loans over the given period. Interest income includes interest earned on performing loans, cash interest received on nonperforming loans, default interest and prepayment fees. The increase in our portfolio yield for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 was primarily driven by the increase in weighted average loan coupons. Portfolio yield for the three months ended September 30, 2025 decreased slightly from three months ended June 30, 2025 mainly attributable to less interest income and default interest collected on nonperforming loans.

Average Debt — Portfolio Related and Total Company

Portfolio-related debt consists of borrowings related directly to financing our loan portfolio, which includes our warehouse facilities and securitized debt. Total company debt consists of portfolio-related debt and corporate debt. The measures presented here reflect the monthly average of all portfolio-related and total company debt, as measured by outstanding principal balance, over the specified time period.

Cost of Funds — Portfolio Related and Total Company

Portfolio related cost of funds is an annualized measure of the interest expense incurred on our portfolio-related debt as a percentage of average portfolio-related debt outstanding over the given period. Total company cost of funds is an annualized measure of the interest expense incurred on our portfolio-related debt and corporate debt outstanding over the given period. Interest expense includes the amortization of expenses incurred in connection with our portfolio related financing activities and corporate debt. Through the issuance of long-term securitized debt, we have been able to fix a significant portion of our borrowing costs over time. The strong credit performance on our securitized debt has allowed us to issue debt at attractive rates.

Our portfolio related cost of funds slightly increased to 6.27% for the three months ended September 30, 2025 from 6.24% for the prior quarter and 6.15% for the three months ended September 30, 2024. The increase was primarily due to higher securitized debt interest expense.

Net Interest Margin — Portfolio Related and Total Company

Portfolio related net interest margin measures the difference between the interest income earned on our loan portfolio and the interest expense paid on our portfolio-related debt as a percentage of average loans over the specified time period. Total company net interest margin measures the difference between the interest income earned on our loan portfolio and the interest expense paid on our portfolio-related debt and corporate debt as a percentage of average loans over the specified time period.

Over the periods shown in the tables below, portfolio related net interest margin increased to 3.65% for the three months ended September 30, 2025 from 3.60% for the three months ended September 30, 2024. Portfolio related net interest margin increased to 3.62% for the nine months ended September 30, 2025 from 3.50% for the nine months ended September 30, 2024. The increases were primarily due to higher average yields and balances.

Total company net interest margin of 3.25% for the three months ended September 30, 2025 increased from 3.06% for the three months ended September 30, 2024. Total company net interest margin of 3.18% for the nine months ended September 30, 2025 increased from 2.96% for the nine months ended September 30, 2024. The increases were primarily due to the higher increase in the average yields on our loan portfolio than the increase in our average cost of funds.

The following tables show the average outstanding balance of our loan portfolio and portfolio-related debt, together with interest income and the corresponding yield earned on our portfolio, and interest expense and the corresponding rate paid on our portfolio-related debt for the periods indicated:

($ in thousands)

(1) Annualized.

(2) Net interest spread - portfolio related is the difference between the rate earned on our loan portfolio and the interest rates paid on our portfolio-related debt.

(3) Net interest spread - total company is the difference between the rate earned on our loan portfolio and the interest rates paid on our total debt.

($ in thousands)

47

(1) Annualized.

(2) Net interest spread - portfolio related is the difference between the rate earned on our loan portfolio and the interest rates paid on our portfolio-related debt.

(3) Net interest spread - total company is the difference between the rate earned on our loan portfolio and the interest rates paid on our total debt.

Charge-Offs

Our annualized charge-offs rate over average loans held for investment carried at amortized cost for the three months ended September 30, 2025 decreased to 0.13% as compared to 0.31% for the three months ended June 30, 2025 and increased from 0.05% for the three months ended September 30, 2024. The charge-offs rate reflects year-to-date annualized charge-offs as a percentage of average loans held for investment at amortized cost, for the respective quarters. We do not record charge-offs on loans carried at estimated fair value and loans held for sale.

Return on Average Equity

Pre-tax return on average equity and return on average equity reflect income before income taxes and net income including income attributable to noncontrolling interest, respectively, as a percentage of the monthly average total stockholders’ equity including noncontrolling interest over the specified period. Pre-tax return on average equity and return on average equity decreased during the quarter ended September 30, 2025 as compared to the quarter ended June 30, 2025 primarily due to a higher tax rate and the higher average shareholders' equity. Pre-tax return on average equity and return on average equity increased as compared to the quarter ended September 30, 2024 primarily due to improved operating margins.

($ in thousands)

(1) Annualized.

Components of Results of Operations

Interest Income

We accrue interest on the UPB of our loans in accordance with the individual terms and conditions of each loan, discontinuing interest and reversing previously accrued interest once a loan becomes 90 days or more past due (nonaccrual status). When a loan is placed on nonaccrual status, the accrued and unpaid interest is reversed as a reduction to interest income and accrued interest receivable. Interest income is subsequently recognized only to the extent that cash payments are received or when the loan has returned to accrual status. Payments received on nonaccrual loans are first applied to interest due, then principal. Interest accrual resumes once a borrower has made all principal and interest payments due, bringing the loan back to current status.

Interest income on loans held for investment is comprised of interest income on loans and prepayment fees, less the amortization of deferred net costs related to the origination of loans carried at amortized cost. Interest income on loans held for sale is comprised of interest income earned on loans prior to their sale. The net fees and costs associated with loans held for sale carried at the lower of cost or fair value, are deferred as part of the carrying value of the loan and recognized as a gain or loss on the sale of the loan. The fees and costs associated with loans carried at fair value are recognized and expensed as incurred.

Interest Expense — Portfolio Related

Portfolio related interest expense is incurred on the debt we obtained to fund our loan origination and portfolio activities and consists of our warehouse facilities and securitized debt. Portfolio related interest expense also includes the amortization of other comprehensive income or loss from terminated derivative instruments, amortization of expenses incurred as a result of issuing the debt when the debt is carried at amortized cost. Other comprehensive income or loss, and deferred debt issuance costs are amortized using the level yield method. Key drivers of interest expense include the debt amounts outstanding, interest rates, other comprehensive income or loss from terminated derivative instruments, and the mix of our securitized debt and warehouse liabilities.

Net Interest Income — Portfolio Related

Portfolio related net interest income represents the difference between interest income and portfolio related interest expense.

Interest Expense — Corporate Debt

Interest expense on corporate debt primarily consists of interest expense paid with respect to the 2022 Term Loan and the 2024 Term Loan (“Corporate Debt”), as reflected in “Secured financing, net” on our Consolidated Balance Sheets, and the related amortization of deferred debt issuance costs.

Net Interest Income

Net interest income represents the difference between portfolio related net interest income and interest expense on corporate debt.

Provision for Credit Losses

Under the CECL methodology, the allowance for credit losses is calculated using a third-party model with our historical loss rates by segment, loan position as of the balance sheet date, and assumptions from us. We do not record provision for credit losses on loans held for sale, or loans carried at fair value.

Other Operating Income

Gain (Loss) on Disposition of Loans. When we sell a loan held for sale, we record a gain or loss that reflects the difference between the proceeds received for the sale of the loans and their respective carrying values. The gain or loss that we ultimately realize on the sale of our loans held for sale is primarily determined by the terms of the originated loans, current market interest rates and the sale price of the loans. In addition, when we transfer a loan to REO, we record the REO at its fair value, less estimated costs to sell, at the time of the transfer. The difference between the fair value of the real estate and the carrying value of the loan is recorded as a gain or a loan charge-off.

Unrealized Gain (Loss) on Fair Value Loans. We have elected to apply fair value option accounting to all our originated mortgage loans on a go-forward basis beginning October 1, 2022. We have elected to account for certain purchased distressed loans at fair value using FASB ASC Topic 825, Financial Instruments (ASC 825). We regularly estimate the fair value of these loans. Changes in fair value, subsequent to initial recognition of fair value loans are reported as “Unrealized gain (loss) on fair value loans,” a component of other operating income within the Consolidated Statements of Income.

Unrealized Gain (Loss) on Mortgage Servicing Rights. We have elected to record our mortgage servicing rights using the fair value measurement method. Changes in fair value are reported as “Unrealized gain (loss) on mortgage servicing rights,” a component of other operating income within the Consolidated Statements of Income.

Unrealized Gain (Loss) on Fair Value Securitized Debt. We have elected to apply fair value option accounting to securitized debt issued effective January 1, 2023 when the underlying collateral is also carried at fair value. We regularly estimate the fair value of securitized debt. Changes in fair value subsequent to initial recognition of fair value securitized debt are reported as “Unrealized gain (loss) on fair value securitized debt,” a component of other operating income within the Consolidated Statements of Income.

Origination Income. Fee income related to our loan origination activities.

Interest Income on Cash Balance. Interest income on bank balances.

Other Income. Other income primarily consists of servicing fee income and other miscellaneous income. Century earns servicing fees for servicing mortgage loans for others.

Operating Expenses

Compensation and Employee Benefits. Costs related to employee compensation, commissions and related employee benefits, such as health, retirement, and payroll taxes.

Origination Expenses. Costs related to our loan origination activities.

Securitization Expenses. Costs related to issuance of our securitized debt.

Loan Servicing. Costs related to our third-party servicers.

Professional Fees. Costs related to professional services, such as external audits, legal fees, tax, compliance and outside consultants.

Rent and Occupancy. Costs related to occupying our locations, including rent, maintenance and property taxes.

Real Estate Owned, Net. Costs related to our real estate owned, net, including gains (losses) on disposition of REO, maintenance of REO properties, and taxes and insurance.

Other Operating Expenses. Other operating expenses consist of general and administrative costs such as travel and entertainment, marketing, data processing, insurance and office equipment.

Provision for Income Taxes

The provision for income taxes consists of the current and deferred U.S. federal and state income taxes we expect to pay, currently and in future years, with respect to the net income for the year. The amount of the provision is derived by adjusting our reported net income with various permanent differences. The tax-adjusted net income amount is then multiplied by the applicable federal and state income tax rates to arrive at the provision for income taxes.

Consolidated Results of Operations

The following table summarizes our unaudited consolidated results of operations for the periods indicated:

(In thousands)

Net Interest Income — Portfolio Related

(In thousands)

Portfolio related net interest income is the largest contributor to our net income. Our portfolio related net interest income increased 34.0% to $55.2 million from $41.2 million for the three months ended September 30, 2025 and 2024, respectively. Our portfolio related net interest income increased 33.1% to $152.6 million from $114.6 million for the nine months ended September 30, 2025 and 2024, respectively.

Interest Income. Interest income increased by $39.0 million to $144.1 million for the three months ended September 30, 2025, compared to $105.1 million for the three months ended September 30, 2024, attributable to higher average loan portfolio balances and yield. For the three months ended September 30, 2025, the average loan yield was 9.54% compared to 9.18% for the three months ended September 30, 2024. Interest income increased by $105.1 million to $398.4 million for the nine months ended September 30, 2025, compared to $293.4 million for the nine months ended September 30, 2024. The increase in interest income for the nine months ended September 30, 2025 was primarily attributable to higher portfolio balances due to loan originations and higher average loan yield.

The following tables distinguish between the changes in interest income attributable to changes in average loan balance (volume) and the changes in interest income attributable to changes in annualized yield (rate) for the three and nine months ended September 30, 2025 and 2024.

($ in thousands)

(1) Annualized.

($ in thousands)

(1) Annualized.

Interest Expense — Portfolio Related. Portfolio related interest expense, which consists of interest incurred on our warehouse facilities and securitized debt, increased to $88.9 million for the three months ended September 30, 2025 from $63.9 million for the three months ended September 30, 2024. Portfolio related interest expense increased to $245.8 million for the nine months ended September 30, 2025 from $178.7 million for the nine months ended September 30, 2024. The increases were primarily attributable to a higher loan portfolio being financed and increased interest rates.

The following tables present information regarding portfolio related interest expense and distinguish between the changes in interest expense attributable to changes in the average outstanding debt balance (volume) and changes in cost of funds (rate) for the three and nine months ended September 30, 2025 and 2024.

($ in thousands)

(1) Includes securitized debt and warehouse agreements.

(2) Annualized.

($ in thousands)

(1) Includes securitized debt and warehouse agreements.

(2) Annualized.

Net Interest Income After Provision for Credit Losses

(In thousands)

Interest Expense — Corporate Debt. Corporate debt interest expense remained consistent at $6.1 million for each of the three months ended September 30, 2025 and 2024. Corporate debt interest expense increased to $18.4 million for the nine months ended September 30, 2025, compared to $17.7 million for the nine months ended September 30, 2024, primarily due to the issuance of $75.0 million of additional secured debt in February 2024.

Provision for Credit Losses. Our provision for credit losses increased to $0.4 million for the three months ended September 30, 2025 from a $0.1 million reversal of provision for the three months ended September 30, 2024, due mainly to an increase in individually-assessed allowance. Our provision for credit losses increased to $3.9 million for the nine months ended September 30, 2025 from $1.2 million for the nine months ended September 30, 2024. The increased provision for credit losses was primarily attributable to charge-offs taken during the quarter ended June 30, 2025 and an increase in the individually-assessed allowance.

Other Operating Income

The $16.3 million increase in total other operating income from the three months ended September 30, 2024 to the three months ended September 30, 2025 was primarily due to improved securitized bond prices resulting in lower unrealized loss on fair value securitized debt and increased loan origination fee income, offset by lower unrealized gain on fair value loans. The $41.3 million increase from the nine months ended September 30, 2024 to the nine months ended September 30, 2025 was mainly due to increased origination volumes driving a higher unrealized gain on fair value loans and an increase in loan origination fee income.

(In thousands)

Gain on Disposition of Loans. Gain on disposition of loans increased by $2.3 million to $4.6 million for the three months ended September 30, 2025 compared to $2.3 million for the three months ended September 30, 2024. Gain on disposition of loans increased by $6.5 million to $13.7 million for the nine months ended September 30, 2025 compared to $7.2 million for the nine months ended September 30, 2024. The increases were primarily due to the increase in gain on transfer to REO upon foreclosure.

Unrealized Gain on Fair Value Loans. Unrealized gain on fair value loans decreased by $4.5 million to $31.0 million for the three months ended September 30, 2025 compared to $35.5 million for the three months ended September 30, 2024. The decrease was mainly driven by a higher nonperforming loan balance. Unrealized gain on fair value loans increased by $24.1 million to $95.7 million for the nine months ended September 30, 2025 compared to $71.6 million for the nine months ended September 30, 2024. The increase was mainly driven by new loan originations.

Unrealized Loss on Fair Value Securitized Debt. Unrealized loss on fair value securitized debt decreased by $15.0 million to $10.0 million for the three months ended September 30, 2025 from $25.0 million for the three months ended September 30, 2024. Unrealized loss on fair value securitized debt decreased by $0.7 million to $31.3 million for the nine months ended September 30, 2025 from $32.0 million for the nine months ended September 30, 2024. The decreases in unrealized loss on fair value securitized debt were primarily attributable to the decrease in market interest rates and spreads.

Unrealized Gain (Loss) on Mortgage Servicing Rights. Unrealized loss on mortgage servicing rights was $0.3 million for the three months ended September 30, 2025 as compared to $1.0 million for the three months ended September 30, 2024. The decrease in unrealized loss on mortgage servicing rights was mainly driven by an increase in the loan servicing portfolio. Unrealized loss on mortgage servicing rights was $1.1 million for the nine months ended September 30, 2025 as compared to $0.9 million for the nine months ended September 30, 2024. The increase in unrealized loss on mortgage servicing rights resulted from an increase in prepayment rate.

Origination Fee Income. Origination fee income increased by $3.0 million to $9.7 million for the three months ended September 30, 2025 compared to $6.7 million for the three months ended September 30, 2024. Origination fee income increased by $10.6 million to $27.3 million for the nine months ended September 30, 2025 compared to $16.8 million for the nine months ended September 30, 2024. The increases were driven by higher loan originations.

Interest Income on Cash Balance. Interest income on cash balance decreased by $0.1 million to $1.6 million for the three months ended September 30, 2025 compared to $1.7 million for the three months ended September 30, 2024. Interest income on cash balance decreased by $0.6 million to $4.4 million for the nine months ended September 30, 2025 compared to $5.0 million for the nine months ended September 30, 2024. The decreases were attributable to a decrease in interest rates.

Other Income. Other income was $0.6 million and $0.5 for the three months ended September 30, 2025 and 2024, respectively. Other income increased to $1.6 million for the nine months ended September 30, 2025 compared to $1.4 million for the nine months ended September 30, 2024. The increase was mainly driven by higher servicing fee income from the increase in our loan servicing portfolio.

Operating Expenses

Operating expenses are presented in the following table. Changes in operating expenses comparing to the same period prior year are discussed below.

(In thousands)

Compensation and Employee Benefits. Compensation and employee benefits increased by $5.7 million to $23.3 million for the three months ended September 30, 2025 compared to $17.6 million for the three months ended September 30, 2024. Compensation and employee benefits increased by $18.1 million to $67.6 million for the nine months ended September 30, 2025 compared to $49.5 million for the nine months ended September 30, 2024. The increases were mainly driven by higher headcount and commissions expense as loan originations increased.

Origination Expenses. Origination expenses increased by $0.3 million to $1.2 million for the three months ended September 30, 2025 from $0.9 million for the three months ended September 30, 2024. Origination expenses increased by $0.9 million to $3.2 million for the nine months ended September 30, 2025 from $2.3 million for the nine months ended September 30, 2024. The increases in origination expenses were due to higher loan originations.

Securitization Expenses. Securitization expenses were $6.4 million for the three months ended September 30, 2025 compared to $3.2 million for the three months ended September 30, 2024. Securitization expenses were $22.0 million for the nine months ended September 30, 2025 compared to $12.3 million for the nine months ended September 30, 2024. The increases in securitization expenses resulted from more securitization transactions and securitized debt issued in 2025 as compared to the prior year.

Loan Servicing. Loan servicing expenses increased to $7.7 million for the three months ended September 30, 2025 from $5.7 million for the three months ended September 30, 2024. Loan servicing expenses increased to $24.0 million for the nine months ended September 30, 2025 from $15.6 million for the nine months ended September 30, 2024. The increases were primarily attributable to the growth of our loan portfolio.

Professional Fees. Professional fees decreased to $0.9 million for the three months ended September 30, 2025 compared to $2.3 million for the three months ended September 30, 2024. Professional fees were $4.7 million and $6.1 million for the nine months ended September 30, 2025 and 2024, respectively. The decreases were primarily attributable to lower legal fees.

Rent and Occupancy. Rent and occupancy expenses decreased to $0.3 million for the three months ended September 30, 2025 compared to $0.5 million for the three months ended September 30, 2024. Rent and occupancy expenses decreased to $0.8 million for the nine months ended September 30, 2025 compared to $1.6 million for the nine months ended September 30, 2024. The decreases resulted from the relocation to offices with less space and lower rent expense.

Real Estate Owned, Net. Net expenses of real estate owned increased to $7.9 million for the three months ended September 30, 2025 from $2.0 million for the three months ended September 30, 2024. Net expenses of real estate owned increased to $14.3 million for the nine months ended September 30, 2025 from $5.8 million for the nine months ended September 30, 2024. The increases were mainly due to the increase in REOs combined with higher valuation adjustments.

Other Operating Expenses. Other operating expenses increased to $2.7 million for the three months ended September 30, 2025 from $2.5 million for the three months ended September 30, 2024. Other operating expenses increased to $8.0 million for the nine months ended September 30, 2025 from $7.3 million for the nine months ended September 30, 2024. The increases were mainly due to higher information technology maintenance and data processing costs.

Income Tax Expense. Income tax expense was $10.0 million and $5.6 million for the three months ended September 30, 2025 and 2024, respectively, and $26.0 million and $16.7 million for the nine months ended September 30, 2025 and 2024, respectively. Our annual consolidated effective tax rates were 27.4% and 28.5% for the years 2025 and 2024, respectively.

Quarterly Results of Operations

The following table sets forth certain unaudited financial information for each of the last eight completed quarters. The quarterly information has been prepared on the same basis as the consolidated financial statements and includes all adjustments (consisting of normal recurring adjustments) that, in the opinion of management, are necessary for a fair presentation of the information presented. This information should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report. Operating results for interim periods are not necessarily indicative of the results that may be expected for a full year.

($ in thousands)

(Unaudited)

54

Liquidity and Capital Resources

Sources and Uses of Liquidity

We fund our lending activities primarily through borrowings under our warehouse repurchase facilities, securitized debt, other corporate-level debt, equity and debt securities, and net cash provided by operating activities to manage our business. We use cash to originate and acquire investor real estate loans, repay principal and interest on our borrowings, fund our operations and meet other general business needs.

Cash and Cash Equivalents

Our total liquidity was $143.5 million as of September 30, 2025, comprised of $99.0 million in cash and $44.5 million in borrowings from available warehouse capacity on unencumbered loans. Our additional available warehouse capacity as of September 30, 2025, was $555.8 million, bringing total liquidity plus available warehouse capacity to $699.3 million.

We had cash of $99.0 million and $44.1 million, excluding restricted cash of $18.8 million and $23.2 million as of September 30, 2025 and 2024, respectively.

Cash Flows

The following table summarizes the net cash provided by (used in) operating activities, investing activities and financing activities for the periods indicated:

(In thousands)

Cash flows from operating activities primarily includes net income adjusted for: (1) cash used for origination of held for sale loans and the related cash proceeds from the sales of such loans, (2) non-cash items including valuation changes, provision for credit losses, discount accretion, and amortization of debt issuance discount and costs, and (3) changes in the balances of operating assets and liabilities.

For the nine months ended September 30, 2025, our net cash provided by operating activities consisted mainly of $70.2 million in net income, $47.0 million in proceeds from sale of loans held for sale, and $31.3 million change in valuation of securitized debt at fair value, partially offset by $95.7 million change in valuation of loans carried at fair value and $47.9 million in origination of loans held for sale.

For the nine months ended September 30, 2025, our net cash used in investing activities consisted mainly of $2.0 billion in cash used to originate loans held for investment at fair value, partially offset by $0.7 billion in cash received from payments of loans held for investment.

For the nine months ended September 30, 2025, our net cash provided by financing activities consisted mainly of $2.1 billion in borrowings from our warehouse and repurchase facilities and $2.0 billion in proceeds from issuing securitized debt. The cash generated was partially offset by repayments of $2.1 billion and $0.7 billion, on our warehouse and repurchase facilities and securitized debt, respectively.

During the nine months ended September 30, 2025 and 2024, we generated approximately $47.0 million and $5.3 million, respectively, of net cash and cash equivalents on operating, investing and financing activities.

Warehouse Facilities

As of September 30, 2025, we had five non-mark-to-market warehouse facilities, one mark-to-market warehouse facility, and one modified mark-to-market warehouse facility to support our loan origination and acquisition facilities. The maturity of our warehouse facilities ranges from one to three years. The borrowings are collateralized primarily by performing loans. All warehouse facilities are based on SOFR, plus margins ranging from 1.60% to 4.00%. Borrowing under these facilities was $334.7 million with $600.3 million of available capacity as of September 30, 2025.

Six warehouse facilities fund less than 100% and one warehouse facility funds at 100% of the principal balance of the mortgage loans we own, requiring us to use working capital to fund the remaining portion. We may need to use additional working capital if loans become delinquent, because the amount permitted to be financed by the facilities may change based on the delinquency performance of the pledged collateral.

All borrower payments on loans financed under the warehouse facilities are segregated into pledged accounts with the loan servicer. All principal amounts in excess of the interest due are applied to reduce the outstanding borrowings under the warehouse facilities. The warehouse facilities also contain customary covenants, including financial covenants that require us to maintain minimum liquidity, a minimum net worth, a maximum debt-to-net worth ratio and a ratio of a minimum earnings before interest, taxes, depreciation and amortization of interest expense. If we fail to meet any of the covenants, or otherwise default under the facilities, the lenders have the right to terminate their facility and require immediate repayment, which may require us to sell our loans at less than optimal terms. As of September 30, 2025, we were in compliance with these covenants.

Securitized debt

From May 2011 through September 2025, we have completed 44 transactions, issuing $9.9 billion in principal amount of securities to third parties. All borrower payments are segregated into remittance accounts at the primary servicer and remitted to the trustee of each trust monthly. We are the sole beneficial interest holder of the applicable trusts, which are variable interest entities included in our consolidated financial statements. The transactions are accounted for as secured borrowings under U.S. GAAP. The following table summarizes the securities issued, securities retained by us at the time of the securitization, as of September 30, 2025 and December 31, 2024, and the stated maturity for each securitized debt. The securities are callable by us when the stated principal balance is less than a certain percentage, ranging from 10% to 30%, of the original stated principal balance of loans at issuance. As a result, the actual maturity date of the securities issued will likely be earlier than their respective stated maturity date.

(In thousands)

(1) The outstanding bond balances associated with the Trusts were paid off when collapsed.

(2) The retained securities owned by this trust were returned to their respective issuing trusts.

The following table summarizes outstanding bond balances for each securitized debt as of September 30, 2025 and December 31, 2024:

(In thousands)

(1) The outstanding bond balances associated with the Trusts were paid off when collapsed.

As of September 30, 2025 and December 31, 2024, the weighted average annualized rates on the securities and certificates for the Trusts were as follows:

Our intent is to use the proceeds from the issuance of new securities primarily to repay our warehouse borrowings and originate new investor real estate loans in accordance with our underwriting guidelines, as well as for general corporate purposes. Our financing sources may include borrowings in the form of additional bank credit facilities (including term loans and revolving credit facilities), agreements, warehouse facilities and other sources of private financing. We also plan to continue using securitized debt as long-term financing for our portfolio, and we do not plan to structure any securitized debt as sales or utilize off-balance-sheet vehicles. We believe any financing of assets and/or securitized debt we may undertake will be sufficient to fund our working capital requirements.

Secured Financing (Corporate Debt)

On March 15, 2022, we entered into a five-year $215.0 million syndicated corporate debt agreement, the (“the 2022 Term Loan”). The 2022 Term Loan bears interest at a fixed rate of 7.125% and matures on March 15, 2027. Interest on the 2022 Term Loan is paid every six months.

On February 5, 2024, the Company entered into a five-year $75.0 million syndicated corporate debt agreement, (“the 2024 Term Loan”). The 2024 Term Loan bears interest at 9.875% and matures on February 15, 2029. Interest on the 2024 Term Loan is paid every six months.

At-The-Market Equity Offering Program

On September 3, 2021, we entered into separate Equity Distribution Agreements with counterparties to establish an at-the-market equity offering program (“ATM Program”) where we may issue and sell, from time to time, shares of our common stock. Our ATM Program allows for aggregate gross sales of our common stock of up to $50,000,000 provided that the number of shares sold under the ATM Program does not exceed 4,000,000.

On May 3, 2024, we entered into separate Equity Distribution Agreements, each as amended by Amendment No. 1 to such agreement, dated December 12, 2024, with counterparties to establish a successor ATM Program, with substantially the same terms as the prior Equity Distribution Agreements noted above, under which we may issue and sell, from time to time, shares of our common stock up to $50,000,000 provided that the number of shares sold under the ATM Program does not exceed 4,000,000.

On April 11, 2025, we entered into separate Amendment No. 2 (the “Amendments”) to the Equity Distribution Agreements, each dated as of May 3, 2024, each as amended by Amendment No. 1 thereto, each dated December 12, 2024. The Amendments increased the maximum aggregate offering amount of shares of the Company’s common stock that may be sold pursuant to the Equity Distribution Agreements, from $50,000,000 to $100,000,000, and increased the maximum number of shares that may be sold pursuant to the Equity Distribution Agreements from 4,000,000 to 6,000,000.

The following table summarizes the activity in our ATM Program for the periods indicated:

(In thousands, except per share amount)

Contractual Obligations and Commitments

On March 15, 2022, we entered into a five-year $215.0 million syndicated corporate debt agreement, the (“the 2022 Term Loan”). The 2022 Term Loan bears interest at a fixed rate of 7.125% and matures on March 15, 2027. Interest on the 2022 Term Loan is paid every six months.

On February 5, 2024, the Company entered into a five-year $75.0 million syndicated corporate debt agreement, (“the 2024 Term Loan”). The 2024 Term Loan bears interest at 9.875% and matures on February 15, 2029. Interest on the 2024 Term Loan is paid every six months.

As of September 30, 2025, we maintained warehouse facilities to finance our investor real estate loans and had approximately $334.7 million in outstanding borrowings with $600.3 million of available capacity under our warehouse and repurchase facilities.

Off-Balance-Sheet Arrangements

At no time have we maintained any relationships with unconsolidated entities or financial partnerships, such as entities referred to as structured finance, 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, we have never guaranteed any obligations of unconsolidated entities or entered into any commitment or intent to provide funding to any such entities.

Forward-Looking Statements

This Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. All statements (other than statements of historical facts) in this Quarterly Report regarding the prospects of the industry and our prospects, plans, financial position and business strategy may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “should,” “expect,” “intend,” “will,” “estimate,” “anticipate,” “plan,” “believe,” “predict,” “potential” or “continue” or the negatives of these terms or variations of them or similar terminology. Forward-looking statements may contain expectations regarding our operations, including our loan originations, our ability to resolve non-performing loans and avoid losses on non-performing loans and the disposition of REOs and other results, and may include statements of future performance, plans and objectives. Forward looking statements also include statements pertaining to our strategies for future funding and development of our business and products, including the future results of our at-the-market equity offering program. Although we believe that the expectations reflected in these forward-looking statements have a reasonable basis, we cannot provide any assurance that these expectations will prove to be correct. Such statements reflect the current views of our management with respect to our operations, results of operations and future financial performance. It is possible that the actual results may differ, possibly materially, from the anticipated results indicated in these forward-looking statements. Information regarding important factors that could cause actual results to differ, perhaps materially, from those in our forward-looking statements is contained in this Quarterly Report and other documents we file. You should read and interpret any forward-looking statement together with these documents, including the following:

• the description of our business contained in our Annual Report on Form 10-K for the year ended December 31, 2024 and filed with the Securities and Exchange Commission on March 12, 2025
• the discussion of our analysis of financial condition and results of operations contained in this Quarterly Report under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
• the notes to the consolidated financial statements contained in this Quarterly Report
• cautionary statements we make in our public documents, reports and announcements

Any forward-looking statement speaks only as of the date on which that statement is made. We will not update any forward-looking statement to reflect events or circumstances that occur after the date on which the statement is made, except as required by applicable law.

Evaluation of Disclosure Controls and Procedures.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this report. Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports 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, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer to allow timely decisions regarding required disclosure. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

In accordance with Rule 13a-15(b) of the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this quarterly report and has concluded that our disclosure controls and procedures, as of such date, were effective to accomplish their objectives at a reasonable assurance level. Management concluded that the consolidated financial statements for the periods covered by and included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.

Changes in Internal Control over Financial Reporting.

During the period to which this report relates, there have not been any changes in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or that are reasonably likely to materially affect, such controls.