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What changed in ADAMAS TRUST, INC.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of ADAMAS TRUST, INC.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+720 added−653 removedSource: 10-K (2026-02-20) vs 10-K (2025-02-21)

Top changes in ADAMAS TRUST, INC.'s 2025 10-K

720 paragraphs added · 653 removed · 500 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

72 edited+30 added−36 removed33 unchanged
Biggest changeGovernment or GSE; • “non-QM loans” refers to residential loans that are not deemed “qualified mortgage,” or “QM,” loans under the rules of the Consumer Financial Protection Bureau; • “POs” refers to mortgage-backed securities that represent the right to the principal component of the cash flow from a pool of mortgage loans; • “RMBS” refers to residential mortgage-backed securities backed by adjustable-rate, hybrid adjustable-rate or fixed-rate residential loans; • “second mortgages” refers to liens on residential properties that are subordinate to more senior mortgages or loans; and • “Variable Interest Entity” or “VIE” refers to an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties.
Biggest changeGovernment or GSE; • “non-QM loans” refers to residential loans that are not deemed “qualified mortgage,” or “QM,” loans under the rules of the Consumer Financial Protection Bureau; • “POs” refers to mortgage-backed securities that represent the right to the principal component of the cash flow from a pool of mortgage loans; • “RMBS” refers to residential mortgage-backed securities backed by adjustable-rate, hybrid adjustable-rate or fixed-rate residential loans; • “second mortgages” refers to liens on residential properties that are subordinate to more senior mortgages or loans; • “TBAs” refers to to-be-announced securities that are forward contracts for the purchase or sale of Agency fixed-rate RMBS at a predetermined price, face amount, issuer, coupon, and stated maturity on an agreed-upon future date; • “TBA dollar roll income” refers to the difference in price between two TBA contracts with the same terms but different settlement dates that are simultaneously bought and sold; and • “Variable Interest Entity” or “VIE” refers to an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties.
If we or one or more of our subsidiaries fail to maintain an exclusion or exception from the Investment Company Act, we could, among other things, be required either (a) to substantially change the manner in which we conduct our operations to avoid being required to register as an investment company, (b) to effect sales of our assets in a manner that, or at a time when, we would not otherwise choose to do so, or (c) to register as an investment company, any of which could negatively affect the value of our common stock, the sustainability of our business model, and our ability to make distributions.
If we or one or more of our subsidiaries fail to maintain an exclusion or exception from the Investment Company Act, we could, among other things, be required either (a) to substantially change the manner in which we conduct our operations to avoid being required to register as an investment company, (b) to effect sales of our assets in a manner that, or at a time when, we would not otherwise choose to do so, or (c) to register as an investment company, any of which could negatively affect the value of our common stock, the sustainability of our business model, and our ability to make distributions, among other things.
Our financings for residential loans and investment securities may also include longer-term structured debt financing, such as CDOs where the assets we intend to finance are contributed to a special purpose entity (“SPE”) and serve as collateral for the financing. We issue CDOs through securitizations for the primary purpose of obtaining longer-term non-recourse financing on these assets.
Our financings for residential loans and investment securities may also include longer-term structured debt financing, such as securitizations where the assets we intend to finance are contributed to a special purpose entity (“SPE”) and serve as collateral for the financing. We issue debt through securitizations for the primary purpose of obtaining longer-term non-recourse financing on these assets.
We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K relating to amendments to or waivers from any provision of either of these Code of Ethics applicable to our principal executive officer, principal financial officer, principal accounting officer and other persons performing similar functions by posting such information on our website at www.nymtrust.com, under “Governance Documents”.
We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K relating to amendments to or waivers from any provision of either of these Code of Ethics applicable to our principal executive officer, principal financial officer, principal accounting officer and other persons performing similar functions by posting such information on our website at www.adamasreit.com, under “Governance Documents”.
BUSINESS Certain Defined Terms In this Annual Report on Form 10-K we refer to New York Mortgage Trust, Inc., together with its consolidated subsidiaries, as “we,” “us,” “Company,” or “our,” unless we specifically state otherwise or the context indicates otherwise, and we refer to our wholly-owned taxable real estate investment trust (“REIT”) subsidiaries as “TRSs” and our wholly-owned qualified REIT subsidiaries as “QRSs.” In addition, the following defines certain of the commonly used terms in this report: • “ABS” refers to debt and/or equity tranches of securitizations backed by various asset classes including, but not limited to, automobiles, aircraft, credit cards, equipment, franchises, recreational vehicles and student loans; • “Agency ARMs” refers to Agency RMBS comprised of adjustable-rate and hybrid adjustable-rate RMBS; • “Agency fixed-rate RMBS” refers to Agency RMBS comprised of fixed-rate RMBS; • “Agency RMBS” refers to RMBS representing interests in or obligations backed by pools of residential loans guaranteed by a government sponsored enterprise (“GSE”), such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”), or an agency of the U.S. government, such as the Government National Mortgage Association ("Ginnie Mae"); • “ARMs” refers to adjustable-rate residential loans; • “business purpose loans” refers to (i) short-term loans that are collateralized by residential properties and are made to investors who intend to rehabilitate and sell the residential property for a profit or (ii) loans that finance (or refinance) non-owner occupied residential properties that are rented to one or more tenants; • “CDO” refers to collateralized debt obligation and includes debt that permanently finances the residential loans held in Consolidated SLST, the Company's residential loans held in securitization trusts and a non-Agency RMBS re-securitization that we consolidate, or consolidated, in our financial statements in accordance with GAAP; • “CMBS” refers to commercial mortgage-backed securities comprised of commercial mortgage pass-through securities issued by a GSE, as well as PO, IO, or mezzanine securities that represent the right to a specific component of the cash flow from a pool of commercial mortgage loans; • “Consolidated Real Estate VIEs” refers to Consolidated VIEs that own multi-family properties; • “Consolidated SLST” refers to Freddie Mac-sponsored residential loan securitizations, comprised of seasoned re-performing and non-performing residential loans, of which we own the first loss subordinated securities and certain IOs, that we consolidate in our financial statements in accordance with GAAP; • “Consolidated VIEs” refers to VIEs where the Company is the primary beneficiary, as it has both the power to direct the activities that most significantly impact the economic performance of the VIE and a right to receive benefits or absorb losses of the entity that could be potentially significant to the VIE and that we consolidate in our financial statements in accordance with GAAP; • “excess mortgage servicing spread” or “excess MSR” refers to the difference between the contractual servicing fee with Fannie Mae, Freddie Mac or Ginnie Mae and the base servicing fee that is retained as compensation for servicing or subservicing the related mortgage loans pursuant to the applicable servicing contract; • “GAAP” refers to generally accepted accounting principles within the United States; • “IOs” refers collectively to interest only and inverse interest only mortgage-backed securities that represent the right to the interest component of the cash flow from a pool of mortgage loans; • “MBS” refers to mortgage-backed securities; 4 Table of Contents • “Mezzanine Lending” refers, collectively, to preferred equity and mezzanine loan investments in multi-family properties; • “MSRs” refers to mortgage servicing rights that represent the contractual right to service residential loans; • “multi-family CMBS” refers to CMBS backed by commercial mortgage loans on multi-family properties; • “non-Agency RMBS” refers to RMBS that are not guaranteed by any agency of the U.S.
BUSINESS Certain Defined Terms In this Annual Report on Form 10-K we refer to Adamas Trust, Inc., together with its consolidated subsidiaries, as “Adamas,” “we,” “us,” “Company,” or “our,” unless we specifically state otherwise or the context indicates otherwise, and we refer to our wholly-owned taxable real estate investment trust (“REIT”) subsidiaries as “TRSs” and our wholly-owned qualified REIT subsidiaries as “QRSs.” In addition, the following defines certain of the commonly used terms in this report: • “ABS” refers to debt and/or equity tranches of securitizations backed by various asset classes including, but not limited to, automobiles, aircraft, credit cards, equipment, franchises, recreational vehicles and student loans; • “Agency ARMs” refers to Agency RMBS comprised of adjustable-rate and hybrid adjustable-rate RMBS; • “Agency fixed-rate RMBS” refers to Agency RMBS comprised of fixed-rate RMBS; • “Agency investments” refers to Agency RMBS and TBAs; • “Agency RMBS” refers to RMBS representing interests in or obligations backed by pools of residential loans guaranteed by a government sponsored enterprise (“GSE”), such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”), or an agency of the U.S. government, such as the Government National Mortgage Association (“Ginnie Mae”); • “ARMs” refers to adjustable-rate residential loans; • “business purpose loans” refers to (i) short-term loans that are collateralized by residential properties and are made to investors who intend to rehabilitate and sell the residential property for a profit or (ii) loans that finance (or refinance) non-owner occupied residential properties that are rented to one or more tenants; • “CDO” refers to collateralized debt obligation and includes debt that permanently finances the residential loans held in Consolidated SLST, the Company's residential loans held in securitization trusts and a non-Agency RMBS re-securitization that we consolidate, or consolidated, in our financial statements in accordance with GAAP; • “CMBS” refers to commercial mortgage-backed securities comprised of commercial mortgage pass-through securities issued by a GSE, as well as PO, IO, or mezzanine securities that represent the right to a specific component of the cash flow from a pool of commercial mortgage loans; • “Consolidated Real Estate VIEs” refers to Consolidated VIEs that own multi-family properties; • “Consolidated SLST” refers to Freddie Mac-sponsored residential loan securitizations, comprised of seasoned re-performing and non-performing residential loans, of which we own the first loss subordinated securities and certain IOs, that we consolidate in our financial statements in accordance with GAAP; • “Consolidated VIEs” refers to VIEs where the Company is the primary beneficiary, as it has both the power to direct the activities that most significantly impact the economic performance of the VIE and a right to receive benefits or absorb losses of the entity that could be potentially significant to the VIE and that we consolidate in our financial statements in accordance with GAAP; • “Constructive” refers to Constructive Loans, LLC, a wholly-owned subsidiary through which the Company originates business purpose loans for residential real estate investors; • “excess mortgage servicing spread” or “excess MSR” refers to the difference between the contractual servicing fee with Fannie Mae, Freddie Mac or Ginnie Mae and the base servicing fee that is retained as compensation for servicing or subservicing the related mortgage loans pursuant to the applicable servicing contract; • “GAAP” refers to generally accepted accounting principles within the United States; 4 Table of Contents • “IOs” refers collectively to interest only and inverse interest only mortgage-backed securities that represent the right to the interest component of the cash flow from a pool of mortgage loans; • “MBS” refers to mortgage-backed securities; • “Mezzanine Lending” refers, collectively, to preferred equity and mezzanine loan investments in multi-family properties; • “MSRs” refers to mortgage servicing rights that represent the contractual right to service residential loans; • “multi-family CMBS” refers to CMBS backed by commercial mortgage loans on multi-family properties; • “non-Agency RMBS” refers to RMBS that are not guaranteed by any agency of the U.S.
As a result, we cannot predict the percentage of our capital that will be invested in any particular investment at any given time. For more information regarding our portfolio as of December 31, 2024, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below.
As a result, we cannot predict the percentage of our capital that will be invested in any particular investment at any given time. For more information regarding our portfolio as of December 31, 2025, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below.
Our Corporate Governance Guidelines and Code of Business Conduct and Ethics and the charters of our Audit, Compensation and Nominating and Corporate Governance Committees are available on our website and are available in print to any stockholder upon request in writing to New York Mortgage Trust, Inc., c/o Secretary, 90 Park Avenue, Floor 23, New York, New York, 10016.
Our Corporate Governance Guidelines and Code of Business Conduct and Ethics and the charters of our Audit, Compensation and Nominating and Corporate Governance Committees are available on our website and are available in print to any stockholder upon request in writing to Adamas Trust, Inc., c/o Secretary, 90 Park Avenue, Floor 23, New York, New York, 10016.
As it relates to the variable-rate mortgages payable in our Consolidated Real Estate VIEs, the joint venture entities may be required by the lender to enter into interest rate cap contracts. In addition, with respect to one of our financings under repurchase agreements, the lender has, in the past, required us to enter into an interest rate cap contract.
As it relates to the variable-rate mortgages payable in our Consolidated Real Estate VIEs, the entities may be required by the lender to enter into interest rate cap contracts. In addition, with respect to one of our financings under repurchase agreements, the lender has, in the past, required us to enter into an interest rate cap contract.
Pursuant to the terms of the operating agreement for the joint venture, subject to certain conditions, the other investors in the joint venture have the ability to sell their ownership interests to us, at their election, on an annual basis at the current fair value of the interests in the joint venture.
Pursuant to the terms of the operating agreement for the entity, subject to certain conditions, the other investors in the entity have the ability to sell their ownership interests to us, at their election, on an annual basis at the current fair value of their interests. Joint Venture Equity.
Accordingly, we do not expect to be subject to federal income tax on our REIT taxable income that we currently distribute to our stockholders if certain asset, income, distribution and ownership tests and record keeping requirements are fulfilled.
Accordingly, we do not expect to be subject to U.S. federal income tax on our REIT taxable income that we currently distribute to our stockholders if certain asset, income, distribution and ownership tests and record keeping requirements are fulfilled.
The repurchase agreements have terms ranging from 30 days to 24 months and bear interest rates that are linked to the Secured Overnight Funding Rate (“SOFR”), a short-term market interest rate used to determine short term loan rates.
The repurchase agreements and warehouse facilities have terms ranging from 30 days to 24 months and bear interest rates that are linked to the Secured Overnight Funding Rate (“SOFR”), a short-term market interest rate used to determine short-term loan rates.
As part of our longer-term master repurchase agreements that finance certain of our credit assets, such as residential loans, we have provided a guarantee with respect to certain terms of some of these longer-term borrowings incurred by certain of our subsidiaries and we may provide similar guarantees in connection with future financings.
As part of our longer-term master repurchase agreements that finance certain of our credit assets, such as residential loans, we have provided a guarantee with respect to certain terms incurred by certain of our subsidiaries and we may provide similar guarantees in connection with future financings.
Actual results and outcomes could differ materially from those projected in these forward-looking statements due to a variety of factors, including, without limitation: • changes in our business and investment strategy; • inflation and changes in interest rates and the fair market value of our assets, including negative changes resulting in margin calls relating to the financing of our assets; • changes in credit spreads; • changes in the long-term credit ratings of the U.S., Fannie Mae, Freddie Mac, and Ginnie Mae; • general volatility of the markets in which we invest; • changes in prepayment rates on the loans we own or that underlie our investment securities; • increased rates of default, delinquency or vacancy and/or decreased recovery rates on or at our assets; • our ability to identify and acquire our targeted assets, including assets in our investment pipeline; • our ability to dispose of assets from time to time on terms favorable to us; • changes in our relationships with our financing counterparties and our ability to borrow to finance our assets and the terms thereof; • changes in our relationships with and/or the performance of our operating partners; • our ability to predict and control costs; • changes in laws, regulations or policies affecting our business; • our ability to make distributions to our stockholders in the future; • our ability to maintain our qualification as a REIT for federal tax purposes; • our ability to maintain our exemption from registration under the Investment Company Act; • impairments in the value of the collateral underlying our investments; • our ability to manage or hedge credit risk, interest rate risk, and other financial and operational risks; • our exposure to liquidity risk, risks associated with the use of leverage, and market risks; and 15 Table of Contents • risks associated with investing in real estate assets, including changes in business conditions and the general economy, the availability of investment opportunities and the conditions in markets for residential loans, mortgage-backed securities, structured multi-family investments and other assets in which we invest.
Actual results and outcomes could differ materially from those projected in these forward-looking statements due to a variety of factors, including, without limitation: • changes in our business and investment strategy; • inflation and changes in interest rates and the fair market value of our assets, including negative changes resulting in margin calls relating to the financing of our assets; • changes in credit spreads; • changes in the long-term credit ratings of the U.S., Fannie Mae, Freddie Mac, and Ginnie Mae; • general volatility of the markets in which we invest; • changes in prepayment rates on the loans we own or that underlie our investment securities; • increased rates of default, delinquency or vacancy and/or decreased recovery rates on or at our assets; • our ability to identify and acquire our targeted assets, including assets in our investment pipeline; • our ability to dispose of assets from time to time on terms favorable to us; • changes in our relationships with our financing counterparties and our ability to borrow to finance our assets and the terms thereof; • changes in our relationships with and/or the performance of our operating partners; • our ability to predict and control costs; • changes in laws, regulations or policies affecting our business; • our ability to make distributions to our stockholders in the future; • our ability to maintain our qualification as a REIT for U.S. federal income tax purposes; • our ability to maintain our exemption from registration under the Investment Company Act; • impairments and declines in the value of the collateral underlying our investments; • changes in the benefits we anticipate from the acquisition of Constructive; • our ability to effectively integrate Constructive into our Company and the risks associated with the ongoing operation thereof; 15 Table of Contents • our ability to manage or hedge credit risk, interest rate risk, and other financial and operational risks; • our exposure to liquidity risk, risks associated with the use of leverage, and market risks; and • risks associated with investing in real estate assets and/or operating companies, including changes in business conditions and the general economy, the availability of investment opportunities and conditions in markets for residential loans, mortgage-backed securities, structured multi-family investments and other assets that we own or in which we invest.
While we expect that additional new legislative and regulatory reforms in these areas will be adopted and existing legislation and regulations may change in the future, it is not possible at this time to forecast the exact nature of any future legislation, regulations, judicial decisions, orders or interpretations, nor their impact upon our future business, financial condition, or results of operations or prospects.
While additional new legislative and regulatory reforms in these areas may be adopted and existing legislation and regulations may change in the future, it is not possible at this time to forecast the exact nature of any future legislation, regulations, judicial decisions, orders or interpretations, nor their impact upon our future business, financial condition, or results of operations or prospects.
Operating and Regulatory Structure REIT Qualification We have elected to be treated as a REIT under Sections 856 through 859 of the Internal Revenue Code.
Operating and Regulatory Structure REIT Qualification We have elected to be treated as a REIT under Sections 856 through 860 of the Internal Revenue Code.
Although we do not directly originate or service residential loans, we must comply with various federal and state laws, rules and regulations as a result of owning MBS, residential loans and MSRs, including, among others, rules promulgated under The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), and the Gramm-Leach-Bliley Financial Modernization Act of 1999.
We originate loans through Constructive and, although we do not directly service residential loans, we must comply with various federal and state laws, rules and regulations as a result of owning RMBS, residential loans and MSRs, including, among others, rules promulgated under The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), and the Gramm-Leach-Bliley Financial Modernization Act of 1999.
Securitizations provide less or no exposure to collateral repricing determinations of financing counterparties or rapid liquidity reductions in repurchase agreement financing markets.
Securitizations provide little to no exposure to collateral repricing determinations of financing counterparties or rapid liquidity reductions in repurchase agreement financing markets.
We typically do not take delivery of TBAs, but rather settle with our trading counterparties on a net basis prior to the forward settlement date. Although TBAs are liquid and have quoted market prices and represent the most actively traded class of RMBS, the use of TBAs exposes us to increased market value risk. We currently do not hold TBAs.
We typically do not take delivery of TBAs, but rather settle with our trading counterparties on a net basis prior to the forward settlement date. Although TBAs are liquid and have quoted market prices and represent the most actively traded class of RMBS, the use of TBAs exposes us to increased market value risk. We may also utilize U.S.
We also own Agency IOs that represent the right to receive the interest portion of the cash flow from a pool of mortgage loans issued or guaranteed by Freddie Mac or Ginnie Mae.
We also own Agency IOs that represent the right to receive the interest portion of the cash flow from a pool of mortgage loans issued or guaranteed by Freddie Mac or Ginnie Mae. In addition, we may invest in Agency TBAs.
We do not directly service the mortgage loans we acquire, and instead contract with fully licensed third-party subservicers to handle substantially all servicing functions. Set forth below is a description of the investments that substantially comprise our single-family investment portfolio. Residential Loans .
We do not directly service the mortgage loans we acquire, and instead contract with licensed third-party subservicers to handle substantially all servicing functions. Set forth below is a description of the investments that substantially comprise our single-family investment portfolio. 7 Table of Contents Agency RMBS.
We define credit assets as (i) residential loans, including business purpose loans, (ii) non-Agency RMBS, (iii) structured multi-family property investments and (iv) other mortgage-, residential housing- and credit-related assets that contain credit risk.
We define credit assets as (i) residential loans, including business purpose loans, which may be originated by Constructive, (ii) non-Agency RMBS, (iii) structured multi-family property investments and (iv) other mortgage-, residential housing- and credit-related assets that contain credit risk.
Prior to deploying capital to any of the assets we target or determining to dispose of any of our investments, our management team will consider, among other things, the availability of suitable investments, the amount and nature of anticipated cash flows from the asset, our ability to finance or borrow against the asset and the terms of such financing, the related capital requirements, the credit risk, prepayment risk, hedging risk, interest rate risk, fair value risk and/or liquidity risk related to the asset or the underlying collateral, the composition of our investment portfolio, the background experience and track record of our partners (if applicable), REIT qualification, the maintenance of our exclusion from registration as an investment company under the Investment Company Act and other regulatory requirements and future general market conditions.
In these cases, we may agree to invest in these assets akin to a "general partner"-like capital contribution as part of the agreement to manage the assets. 6 Table of Contents Prior to deploying capital to any of the assets we target or determining to dispose of any of our investments, our management team will consider, among other things, the availability of suitable investments, the amount and nature of anticipated cash flows from the asset, our ability to finance or borrow against the asset and the terms of such financing, the related capital requirements, the credit risk, prepayment risk, hedging risk, interest rate risk, fair value risk and/or liquidity risk related to the asset or the underlying collateral, the composition of our investment portfolio, the background experience and track record of our partners (if applicable), REIT qualification, the maintenance of our exclusion from registration as an investment company under the Investment Company Act and other regulatory requirements and future general market conditions.
This involves, among other things, performing due diligence on the servicer prior to their engagement, assigning the appropriate servicer on each loan based on certain characteristics and monitoring each servicer's performance on an ongoing basis. Agency RMBS.
This involves, among other things, performing due diligence on the servicer prior to their engagement, assigning the appropriate servicer on each loan based on certain characteristics and monitoring each servicer's performance on an ongoing basis. Non-Agency RMBS. Our non-Agency RMBS are collateralized by residential credit assets.
Our investment strategy does not, subject to our investment guidelines, continued compliance with applicable REIT tax requirements and the maintenance of our exclusion from registration as an investment company under the Investment Company Act, limit the amount of our capital that may be invested in any of these investments or in any particular class or type or geographic concentration of assets.
Subject to our investment guidelines, continued compliance with applicable REIT tax requirements, and our exclusion from registration as an investment company under the Investment Company Act, our investment strategy does not limit the amount of capital we may invest in any particular investment, asset class or type, or geographic concentration.
We also may invest, from time to time, based on market conditions, in other multi-family investments, structured investments in other property categories, equity and debt securities issued by entities that invest in residential and commercial real estate or in other mortgage-, real estate- and credit-related assets, and certain alternative investments not described here, subject to maintaining our qualification as a REIT and the maintenance of our exclusion from regulation as an investment company under the Investment Company Act or otherwise.
We also may invest, from time to time, based on market conditions, in other multi-family investments, structured investments in other property categories, equity and debt securities issued by entities that invest in residential and commercial real estate or in other mortgage-, real estate- and credit-related assets, and certain alternative investments not described here, subject to maintaining our qualification as a REIT and the maintenance of our exclusion from regulation as an investment company under the Investment Company Act or otherwise. 9 Table of Contents Our Financing Strategy We employ leverage as part of our financing strategy and strive to maintain and achieve a balanced and diverse funding mix to finance our assets and operations.
We generally need to distribute at least 90% of our ordinary taxable income each year (subject to certain adjustments) to our stockholders in order to qualify as a REIT under the Internal Revenue Code.
We generally need to distribute at least 90% of our ordinary taxable income each year (subject to certain adjustments) to our stockholders in order to qualify as a REIT under the Internal Revenue Code. Our ability to make distributions to our stockholders depends, in part, upon the performance of our investment portfolio.
Our Company recourse leverage ratio does not include debt associated with the CDOs or other non-recourse debt, such as mortgages payable on real estate and non-recourse repurchase agreement financing. Our portfolio recourse leverage ratio, which represents our outstanding recourse repurchase agreements divided by our total stockholders' equity, was approximately 2.9 to 1 as of December 31, 2024.
As of December 31, 2025, our Company recourse leverage ratio, which represents our total recourse debt divided by our total stockholders' equity, was approximately 5.0 to 1. Our Company recourse leverage ratio does not include debt associated with securitizations or other non-recourse debt, such as mortgages payable on real estate and non-recourse repurchase agreement financing.
We make available free of charge, through our internet website, our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and any amendments thereto that we file or furnish pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. 13 Table of Contents We have adopted a Code of Business Conduct and Ethics that applies to our executive officers, including our principal executive officer, principal financial officer, principal accounting officer and to our other employees.
We make available free of charge, through our internet website, our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and any amendments thereto that we file or furnish pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
Accordingly, our failure to qualify as a REIT could have a material adverse impact on our results of operations and our ability to pay distributions, if any, to our stockholders. Investment Company Act Exclusion We conduct our operations so that neither we nor any of our subsidiaries are required to register as an “investment company” under the Investment Company Act.
Accordingly, our failure to qualify as a REIT could have a material adverse impact on our results of operations and our ability to pay distributions, if any, to our stockholders. 12 Table of Contents Investment Company Act Exclusion We conduct our operations so that neither we nor any of our subsidiaries are required to register as an “investment company” under the Investment Company Act because we and our subsidiaries either do not come within the definition of “investment company” under the Investment Company Act or qualify for an exemption or exclusion from registration under the Investment Company Act.
In managing our portfolio of Agency RMBS, we expect to employ leverage through the use of repurchase agreements to generate risk-adjusted returns, subject to general and capital market conditions, among other factors. Non-Agency RMBS. Our non-Agency RMBS are collateralized by residential credit assets.
In managing our portfolio of Agency RMBS, we expect to employ leverage through the use of repurchase agreements to generate risk-adjusted returns, while maintaining liquidity and flexibility, subject to general and capital market conditions, among other factors. Residential Loans .
We and certain of our subsidiaries rely upon the exemption from registration as an investment company under the Investment Company Act pursuant to Section 3(c)(5)(C) of the Investment Company Act. We have in the past and may in the future conduct our operations so that we are not considered an investment company under Section 3(a)(1)(C) of the Investment Company Act.
We and certain of our subsidiaries have in the past and may in the future conduct our operations so that we are not considered an investment company under Section 3(a)(1) of the Investment Company Act.
In connection with our acquisitions of residential loans, we or a third-party due diligence firm perform an independent review of the mortgage file to assess the state of mortgage loan files, the servicing of the mortgage loan and compliance with existing guidelines, as well as our ability to enforce the contractual rights in the mortgage.
In connection with our acquisitions of residential loans, we or a third-party due diligence firm perform an independent review of the mortgage loan files to assess, where applicable, the value and condition of the underlying property, the completeness of the loan file package, the historical servicing of the mortgage loan, the compliance of the loan with existing guidelines and our ability to enforce the contractual rights associated with the mortgage.
Our portfolio of residential loans consists of (i) short-term business purpose loans with terms generally of 12 to 24 months that are collateralized by residential properties and made to investors who intend to rehabilitate and sell the property for a profit, or "business purpose bridge loans," (ii) business purpose loans that finance (or refinance) non-owner occupied residential properties that are rented to one or more tenants, or "business purpose rental loans," (iii) performing residential mortgage loans that consist of GSE-eligible mortgage loans, non-QM loans that predominantly meet our underwriting guidelines, loans originally underwritten to GSE or another program's guidelines but are either undeliverable to the GSE or ineligible for a program due to certain underwriting or compliance errors, and investor loans generally underwritten to our program guidelines, (iv) seasoned re-performing, non-performing and other delinquent mortgage loans secured by first liens on one- to four-family properties, which were purchased at a discount to the aggregate principal amount outstanding, which we believe provides us with downside protection while we work to rehabilitate these loans to performing status and (v) second mortgages that had combined loan-to-value ratios of 95% at origination and predominantly met our underwriting guidelines.
Our portfolio of residential loans consists of (i) short-term business purpose loans with terms generally of 12 to 24 months that are collateralized by residential properties and made to investors who intend to rehabilitate and sell the property for a profit, or "business purpose bridge loans," (ii) business purpose loans that finance (or refinance) non-owner occupied residential properties that are or will be rented to one or more tenants, or "business purpose rental loans," (iii) performing residential mortgage loans that consist of GSE-eligible mortgage loans, non-QM loans that predominantly meet our underwriting guidelines, loans originally underwritten to GSE or another program's guidelines but are either undeliverable to the GSE or ineligible for a program due to certain underwriting or compliance errors, and investor loans generally underwritten to our program guidelines, (iv) seasoned performing, re-performing, non-performing and other delinquent mortgage loans secured by first liens on residential properties and (v) second mortgages.
Our targeted investments include (i) residential loans, including business purpose loans, (ii) Agency RMBS, (iii) non-Agency RMBS, (iv) structured multi-family property investments such as preferred equity in, and mezzanine loans to, owners of multi-family properties and (v) certain other mortgage-, residential housing- and credit-related assets and s trategic investments in companies from which we purchase, or may in the future purchase, our targeted assets .
Our targeted assets include (i) Agency RMBS, (ii) residential loans, including business purpose loans, (iii) non-Agency RMBS and (iv) certain other mortgage-, residential housing- and credit-related assets, as well as s trategic investments in companies from which we purchase, or may in the future purchase, our targeted assets .
However, we may make additional protective capital contributions to our existing joint venture equity investments in accordance with agreements to which we are a party and we may agree to make common equity investments in multi-family properties akin to a "general partner"-like capital contribution in connection with one or more agreements to manage third party investments in multi-family properties.
However, we may agree to make common equity investments in multi-family properties akin to a "general partner"-like capital contribution in connection with one or more agreements to manage third party investments in multi-family properties.
Subject to maintaining our qualification as a REIT and the maintenance of our exclusion from registration as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”), we also may opportunistically acquire and manage various other types of mortgage-, residential housing- and other credit-related or alternative investments that we believe will compensate us appropriately for the risks associated with them, including, without limitation, CMBS, collateralized mortgage obligations, MSRs, excess mortgage servicing spreads, securities issued by newly originated securitizations, including credit sensitive securities from these securitizations, ABS and debt or equity investments in alternative assets or businesses.
Subject to maintaining our qualification as a REIT and the maintenance of our exclusion from registration as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”), we also may opportunistically acquire and manage various other types of mortgage-, residential housing- and other credit-related or alternative investments that we believe will compensate us appropriately for the risks associated with them, including, without limitation, CMBS, collateralized mortgage obligations, MSRs, excess mortgage servicing spreads, preferred equity and joint venture equity investments in multi-family properties, securities issued by newly originated securitizations, including credit sensitive securities from these securitizations, ABS and debt or equity investments in alternative assets or businesses. 5 Table of Contents We have elected to be taxed as a REIT for U.S. federal income tax purposes and have complied, and intend to continue to comply, with the provisions of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), with respect thereto.
Corporate Offices We were formed as a Maryland corporation in 2003. Our corporate headquarters are located at 90 Park Avenue, New York, New York, 10016 and our telephone number is (212) 792-0107. We also maintain offices in Charlotte, North Carolina and Woodland Hills, California. Access to Our Periodic SEC Reports and Other Corporate Information Our internet website address is www.nymtrust.com.
Our corporate headquarters are located at 90 Park Avenue, New York, NY, 10016 and our telephone number is (212) 792-0107. We also maintain offices in Charlotte, NC, Woodland Hills, CA and Oakbrook Terrace, IL. Access to Our Periodic SEC Reports and Other Corporate Information Our internet website address is www.adamasreit.com.
Currently, our maximum leverage ratios for each eligible investment are (i) 15:1 in the case of more liquid Agency securities, (ii) between 4:1 and 6:1 in the case of our more illiquid assets, such as our non-Agency RMBS and (iii) 8:1 in the case of our residential loans. Our target total debt leverage ratio should not be greater than 4:1.
Currently, our maximum leverage ratios for each eligible asset portfolio are (i) 15:1 in the case of more liquid Agency securities, (ii) between 1:1 and 4:1 in the case of our more illiquid assets, such as our non-Agency RMBS and multi-family investments and (iii) 8:1 in the case of our residential loans.
Investment Portfolio Our portfolio is substantially comprised of investments in two asset categories: single-family and multi-family residential investments. 6 Table of Contents Single-Family Investments We have deep experience managing different whole loan strategies across the credit spectrum.
Investment Portfolio Our portfolio is substantially comprised of investments in two asset categories: single-family and multi-family residential investments. Single-Family Investments We have deep experience managing a diversified portfolio of mortgage-related single-family residential assets across the credit spectrum, including whole loan investments and investments in Agency and non-Agency RMBS.
We also obtain certain representations and warranties from each seller with respect to the mortgage loans, as well as the enforceability of the lien on the mortgaged property. In addition, as part of our process, we focus on selecting a servicer with the appropriate expertise to mitigate losses and maximize our overall return on these residential loans.
In addition, as part of our process, we focus on selecting a servicer with the appropriate expertise to mitigate losses and maximize our overall return on these residential loans.
Our leveraged Agency RMBS portfolio is primarily comprised of Agency fixed-rate RMBS and Agency ARMs, the principal and interest of which are guaranteed by Fannie Mae or Freddie Mac. The Agency fixed-rate RMBS have been primarily backed by 15-year and 30-year residential fixed-rate mortgage loans, while the Agency ARMs have primarily included interest reset periods up to 120 months.
The Agency fixed-rate RMBS have been primarily backed by 15-year and 30-year residential fixed-rate mortgage loans, while the Agency ARMs have primarily included interest reset periods up to 120 months.
In most cases under repurchase agreements, the financial institution that serves as a counterparty will generally agree to provide us with financing based on the market value of the assets that we pledge as collateral, less a “haircut.” The market value of the collateral represents the price of such collateral obtained from generally recognized sources or the most recent closing bid quotation from such source plus accrued income.
In most cases under these agreements and facilities, the financial institution that serves as a counterparty will generally agree to provide us with financing based on the market value of the assets that we pledge as collateral, less a “haircut.” The market value of the collateral represents the price of such collateral that is determined by the financing counterparty.
We are a co-manager of the joint venture and, as of December 31, 2024, owned an approximate 27% common equity interest in the joint venture. We also held approximately $139.4 million of preferred equity interests in this joint venture as of December 31, 2024.
We are a co-manager of the entity and, as of December 31, 2025, owned an approximate 27% common equity interest and approximately $144.1 million of preferred equity interests in the entity, respectively.
We do not anticipate making additional joint venture equity investments in multi-family properties that make us a majority or significant minority common equity owner in the future in light of the strategic repositioning of our business discussed above.
We completed our disposition of the majority of our ownership interests in our joint venture equity investments in multi-family properties during the year ended December 31, 2025. We do not anticipate making additional joint venture equity investments in multi-family properties that make us a majority or significant minority common equity owner in the future.
Moreover, our employees are offered regular opportunities to participate in professional development programs and opportunities that may improve employee engagement, effectiveness and well-being. 11 Table of Contents We are committed to maintaining workplaces that are inclusive and free from discrimination or harassment based on age, disability, race, ethnicity, gender identification or expression, national origin, sexual orientation, religion, pregnancy, marital and familial status and other statuses protected by law.
We are committed to maintaining workplaces that are inclusive and free from discrimination or harassment based on age, disability, race, ethnicity, gender identification or expression, national origin, sexual orientation, religion, pregnancy, marital and familial status and other statuses protected by law.
Our approach to leverage is based on the type of asset, underlying collateral and overall market conditions with the intent of obtaining more permanent, longer-term financing for our more illiquid assets.
To achieve this, we rely primarily on a combination of short-term and long-term repurchase agreements and structured financings, including securitizations and long-term senior and subordinated debt. Our approach to leverage is based on the type of asset, underlying collateral and overall market conditions with the intent of obtaining more permanent, longer-term financing for our more illiquid assets.
In light of current market and financing conditions, we are presently focused on acquiring assets with less price sensitivity to credit deterioration, such as Agency RMBS, and shorter duration assets that generate higher portfolio turnover, such as business purpose loans, that will better enable us to reposition our portfolio in a volatile and changing interest rate environment.
In light of current market and financing conditions, we are presently focused on acquiring assets with less price sensitivity to credit deterioration, such as Agency RMBS, and higher quality business purpose loans, including those sourced through Constructive, that will position our portfolio to better withstand economic stress.
We have also adopted a Code of Ethics for senior financial officers, including the principal financial officer.
We have adopted a Code of Business Conduct and Ethics that applies to our executive officers, including our principal executive officer, principal financial officer, principal accounting officer and to our other employees. We have also adopted a Code of Ethics for senior financial officers, including the principal financial officer.
We intend to continue, subject to market conditions, to focus on assets, many of which we have originated or sourced through proprietary channels, that we believe will deliver more attractive risk-adjusted returns over time. In particular, we seek investment opportunities in markets where we believe we have a competitive advantage due to operational barriers to entry.
We also intend to continue, subject to market conditions, to focus on credit assets, many of which we have originated or sourced through proprietary channels, including through our wholly-owned subsidiary, Constructive, that we believe will deliver more attractive risk-adjusted returns over time.
We may consolidate certain multi-family joint venture equity investments and certain preferred equity investments on which a default has occurred into our consolidated financial statements in accordance with GAAP. As a result, the real estate assets held by these entities, and the corresponding mortgages payable that finance the real estate assets, are included in our consolidated balance sheets.
Due to certain control provisions, we consolidated certain joint ventures into our consolidated financial statements in accordance with GAAP. As a result, the real estate assets held by these entities, and the corresponding mortgages payable that financed the real estate assets, were included in our consolidated balance sheets.
Our ability to make distributions to our stockholders depends, in part, upon the performance of our investment portfolio. 12 Table of Contents As a REIT, we generally are not subject to U.S. federal income tax on our REIT taxable income that we distribute currently to our stockholders.
As a REIT, we generally are not subject to U.S. federal income tax on our REIT taxable income that we distribute currently to our stockholders.
This target may be adjusted from time to time by our Board of Directors depending on the composition of our overall portfolio, market conditions and such other factors deemed relevant by our Board of Directors. 9 Table of Contents As of December 31, 2024, our Company recourse leverage ratio, which represents our total recourse debt divided by our total stockholders' equity, was approximately 3.0 to 1.
Our target total debt leverage ratio should not be greater than 6:1. This target may be adjusted from time to time by our Board of Directors depending on the composition of our overall portfolio, market conditions and such other factors deemed relevant by our Board of Directors.
Selecting assets with lower credit exposure, either through agency guarantees, structure or collateral quality, can also reduce the overall risk profile of the portfolio and raise our interest income levels.
Selecting assets with lower credit exposure, either through agency guarantees, structure or collateral quality, can also reduce the overall risk profile of the portfolio and raise our interest income levels. Since our inception in 2003, we have benefited from being able to flexibly move in and out of new niche investment opportunities as market conditions permit.
Many of our repurchase agreements require us to deposit additional collateral pursuant to a margin call if the market value of our pledged collateral declines as a result of market conditions or due to principal repayments. Interest rates and haircuts will depend on the underlying collateral pledged.
Most of our repurchase agreements and warehouse facilities include margin-type provisions that require the posting of additional collateral or repayment of a portion of outstanding borrowings if the market value of our pledged collateral declines as a result of market conditions or due to principal repayments. Applicable interest rates and haircuts vary based on the underlying collateral pledged.
The variable rate we pay or receive under our swap agreements has the effect of offsetting the repricing characteristics and cash flows of our financing arrangements. We may use TBAs, swaptions, futures and options on futures to hedge market value risk for certain of our strategies.
The variable rate we pay or receive under our swap agreements has the effect of offsetting the repricing characteristics and cash flows of our financing arrangements. We may use TBAs as part of our Agency RMBS strategy to enhance the overall yield of the portfolio.
We have made, and may in the future make, investments in the debt and/or equity of other entities engaged in single-family loan-related businesses, such as loan originators. As of December 31, 2024, we owned a 50% equity interest in an entity that originates residential loans.
Other Investments We have made, and may in the future make, investments in the debt and/or equity of other entities engaged in single-family loan-related businesses, such as loan originators. In the future, we may also acquire investments that are structured with terms that reflect a combination of the investment structures described above.
In pursuing credit assets, we target assets that we believe will provide an attractive total rate of return, as compared to assets that strictly provide net interest spread.
In pursuing credit assets, we target assets that we believe will provide an attractive total rate of return, as compared to assets that strictly provide net interest spread. We also own and manage investments in multi-family and single-family rentals. In 2022, we determined to strategically reposition our business through the opportunistic disposition of certain multi-family investments.
As a result, the real estate assets held by these entities, and the corresponding mortgages payable that finance the real estate assets, are included in our consolidated balance sheets. 8 Table of Contents In December 2021, we entered into a joint venture that presently owns 10 multi-family properties in six states, including Texas, Florida and Kentucky.
As a result, the real estate assets held by these entities, and the corresponding mortgages payable that finance the real estate assets, are included in our consolidated balance sheets.
The existence of these entities, as well as the possibility of additional entities forming in the future, may increase the competition for the acquisition of residential mortgage assets, resulting in higher prices and lower yields on such assets.
The existence of these entities, as well as the possibility of additional entities forming in the future, may increase the competition for the acquisition of residential mortgage assets, resulting in higher prices and lower yields on such assets. 11 Table of Contents Human Capital As of December 31, 2025, we had 221 full-time employees, including our executive management team, 160 (or 72%) of which are directly engaged in the operations of Constructive.
As of December 31, 2024, we owned 526 single-family rental properties, the majority of which are located in Illinois and Maryland. 7 Table of Contents Multi-Family Investments We seek to position our multi-family credit investment platform in the marketplace as a real estate investor focused on debt and equity transactions.
As of December 31, 2025, we owned 471 single-family rental properties, the majority of which are located in Illinois and Maryland. 8 Table of Contents Multi-Family Investments As of December 31, 2025, our multi-family investment portfolio consists of credit-oriented investments such as preferred equity investments and a cross-collateralized preferred equity and joint venture equity investment (or a "cross-collateralized mezzanine lending investment") in multi-family properties.
Our employees include investment portfolio and finance professionals, asset management and servicing professionals, accountants, analysts, administrative staff and our corporate management team. We believe that our employees are our greatest asset and recognize that our achievements and growth as a business are made possible by the recruitment, hiring, training, development and retention of our dedicated employees.
We believe that our employees are our greatest asset and recognize that our achievements and growth as a business are made possible by the recruitment, hiring, training, development and retention of our dedicated employees. As part of our ongoing business, we evaluate and modify our internal processes to improve employee engagement, productivity and efficiency, which benefit our operations.
We generally seek to acquire pools of single-family residential loans through proprietary sourcing channels from select mortgage loan originators and secondary market institutions, including through bulk purchases and/or flow arrangements, which may occur through originators in which we hold an equity investment.
We also acquire single-family residential loans through a combination of proprietary sourcing channels, including relationships with select mortgage loan originators and secondary market institutions through bulk purchases and/or flow arrangements, as well as through Constructive, our wholly-owned business purpose loan originator.
Even if we maintain our qualification as a REIT, we expect to be subject to some federal, state and local taxes on our income generated in our TRSs. 5 Table of Contents Our Investment Strategy Our strategy is to own and manage a portfolio of primarily mortgage-related single-family and multi-family residential assets that include elements of credit risk and/or interest rate risk.
Our Investment Strategy Our strategy is to own and manage a diversified portfolio of primarily mortgage-related single-family residential assets that include elements of credit risk and/or interest rate risk. As part of this strategy, we own and manage a leveraged portfolio of Agency investments primarily comprised of Agency fixed-rate RMBS and Agency ARMs that provide coupon income.
We expect to allocate more capital to investments in single-family credit assets relative to multi-family credit assets in 2025 and subsequent years, with multi-family assets becoming a smaller part of our balance sheet. Since our inception in 2003, we have benefited from being able to flexibly move in and out of new niche investment opportunities as market conditions permit.
We have allocated, and expect to continue to allocate, more capital to investments in single-family residential assets relative to multi-family assets in 2025 and subsequent years, with multi-family assets continuing to become a smaller part of our balance sheet. We may pursue opportunistic acquisitions of other types of assets and sectors that meet our investment criteria.
As of December 31, 2024, we did not own mezzanine loans. Joint Venture Equity. As of December 31, 2024, we owned joint venture equity investments in entities that own multi-family properties. Joint venture equity is a direct common equity ownership interest in an entity that owns a property.
We have historically also owned joint venture equity investments in entities that own multi-family properties. Joint venture equity is a direct common equity ownership interest in an entity that owns a property. In this type of investment, the return of capital to us was variable and was made on a pro rata basis between us and our operating partners.
Preferred equity typically has loan-to-value ratios of 70% to 90% when combined with the first-mortgage loan amount. We expect our preferred equity investments will have mandatory redemption dates that will generally be coterminous with the maturity date for the first-mortgage loan on the property, and we intend to hold these investments until the mandatory redemption date. Mezzanine Loans .
These investments are generally structured alongside a senior mortgage loan and, when combined with such loan, typically result in total loan-to-value ratios ranging from approximately 70% to 90%. Preferred equity investments generally include mandatory redemption provisions aligned with the maturity of the related senior mortgage financing, and we generally intend to hold such investments until their contractual redemption dates.
Treasury futures or invest in other types of mortgage derivative securities. 10 Table of Contents We use interest rate swaps to hedge the variable cash flows associated with our variable-rate borrowings.
We may also enter into other mortgage-related derivative instruments. In addition, Constructive may enter into interest rate lock commitments (“IRLCs”) in connection with the origination of business purpose loans. We primarily use interest rate swaps to hedge the variable cash flows associated with our variable-rate borrowings.
We have made in the past, and may make in the future, mezzanine loans that are senior to the operating partner’s equity in, and subordinate to a first-mortgage loan on, a multi-family property. These loans are secured by pledges of ownership interests, in whole or in part, in entities that directly or indirectly own the real property.
Mezzanine loans, when held, are typically senior to the borrower’s equity interests and subordinate to a senior mortgage loan and are generally secured by pledges of ownership interests in the property-owning entities.
We monitor all at-risk or short-term borrowings to ensure that we have adequate liquidity to satisfy margin calls and liquidity covenant requirements. We rely on repurchase agreements to fund the purchase of investment securities, a portion of our residential loans and single-family rental properties.
We rely on repurchase agreements to fund the purchase of investment securities, a portion of our residential loans and single-family rental properties. In addition, Constructive utilizes warehouse facilities to fund the origination of business purpose loans prior to their sale or retention on our balance sheet.
These derivative instruments may include interest rate swaps, interest rate caps, credit default swaps, futures and options contracts such as options on credit default swap indices, equity index options, swaptions and options on futures. We may also pursue forward-settling purchases or sales of Agency RMBS where the underlying pools of mortgage loans are “To-Be-Announced,” or TBAs, purchase options on U.S.
We do not apply hedge accounting to our derivative instruments, and changes in fair value are recognized in current period earnings. Our derivative instruments may include interest rate swaps, interest rate caps, TBAs, credit default swaps, U.S. Treasury and commodity futures and options contracts such as options on credit default swap indices, equity index options, swaptions and options on futures.
We currently own, and may originate in the future, preferred equity investments in entities that directly or indirectly own multi-family properties. Preferred equity is not secured, but holders have priority relative to the common equity on cash flow distributions and proceeds from capital events.
Preferred equity investments are not secured by mortgages on the underlying real estate; however, they generally have priority over common equity with respect to cash flow distributions and proceeds from capital events.
For more information regarding our outstanding financing instruments at December 31, 2024, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below. Our Hedging Strategy We enter into derivative financial instruments in connection with our risk management activities.
For more information regarding our outstanding financing instruments at December 31, 2025, see Item 7.
Removed
General We are an internally-managed REIT for U.S. federal income tax purposes, in the business of acquiring, investing in, financing and managing primarily mortgage-related single-family and multi-family residential assets. Our objective is to deliver long-term stable distributions to our stockholders over changing economic conditions through a combination of net interest spread and capital gains from a diversified investment portfolio.
Added
General We are an internally-managed REIT for U.S. federal income tax purposes focused on strategically deploying capital across complementary businesses to generate durable earnings and long-term value for stockholders through disciplined portfolio management and an operating platform designed to capture opportunities across real estate and capital markets.
Removed
Our investment portfolio includes credit sensitive single-family and multi-family assets, as well as more traditional types of fixed-income investments that provide coupon income, such as Agency RMBS. We intend to focus on our core portfolio strengths of single-family and multi-family residential assets, which we believe will deliver better risk-adjusted returns over time.
Added
Our current investment portfolio includes credit sensitive single-family and multi-family assets, as well as other types of fixed-income investments such as Agency RMBS. Through our wholly-owned subsidiary, Constructive, we also originate business purpose loans for residential real estate investors. On September 3, 2025, we changed our name from New York Mortgage Trust, Inc. to Adamas Trust, Inc.
Removed
We have elected to be taxed as a REIT for U.S. federal income tax purposes and have complied, and intend to continue to comply, with the provisions of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), with respect thereto.
Added
Even if we maintain our qualification as a REIT, we expect to be subject to some U.S. federal, state and local taxes on our income generated in our TRSs. We operate in two segments: investment portfolio and Constructive. Our segments are based on our organizational structure and the nature of the business activities.
Removed
We also own and manage a leveraged portfolio of Agency securities primarily comprised of Agency fixed-rate RMBS and Agency ARMs, and we may pursue opportunistic acquisitions of other types of assets that meet our investment criteria.
Added
Our investment portfolio, which includes primarily mortgage-related residential assets, generates revenues, including interest income, net income (loss) from real estate and other income, for us. We derive the substantial portion of our revenues and income from our investment portfolio. Our investment portfolio is described in greater detail under “Investment Portfolio” below.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks Related to Our Business • Declines in the market values of assets in our investment portfolio may adversely affect periodic reported results and credit availability. • We may experience losses if we inaccurately estimate the loss-adjusted yields of our investments in credit sensitive assets. • Interest rate increases may decrease the availability of certain of our targeted assets. • Interest rate mismatches between the interest-earning assets held in our investment portfolio and the borrowings used to fund the purchases of those assets may reduce our net income or result in a loss during periods of changing interest rates. • Our portfolio of assets may at times be concentrated in certain asset types or secured by properties concentrated in a limited number of real estate sectors or geographic areas, which increases our exposure to economic downturns and risks associated with the real estate and lending industries in general. • Our portfolio of business purpose loans exposes us to risks that are different from the risks involved with our traditional investments in residential mortgage loans. • Our investments may include subordinated tranches of RMBS, CMBS and ABS, which are subordinate in right of payment to more senior securities that have greater risk of loss than other investments. • Prepayment rates can change, adversely affecting the performance of our assets. • We have experienced and may experience in the future increased volatility in our GAAP results of operations as we have elected fair value option for the majority of our investments. • The failure of third-party service providers to perform a variety of services on which we rely may adversely impact our business and financial results. • Our preferred equity and mezzanine loan investments involve greater risks of loss than more senior loans secured by income-producing properties. • Declining real estate valuations and impairment charges to real estate assets have adversely affected our earnings and financial condition in the past and may adversely affect our earnings and financial condition in the future. • Our investments in multi-family properties are subject to the ability of the property owner to generate net income from operating the property as well as the risks of delinquency, default and foreclosure. • Our operating partners could subject us to liabilities in excess of those contemplated or prevent us from taking actions which are in the best interests of our stockholders. • Our real estate and real estate-related assets are subject to risks particular to real property. • Due diligence as a part of our acquisition or underwriting process may be limited, may not reveal all of the risks associated with such assets and may not reveal other weaknesses in such assets, which could lead to material losses. • The lack of liquidity in certain of our assets may adversely affect our business. • The use of models in connection with the valuation of our assets subjects us to potential risks in the event that such models are incorrect, misleading or based on incomplete information. • Our investments in residential loans are difficult to value and are dependent upon the borrower’s ability to service or refinance their debt. • Competition may prevent us from acquiring assets on favorable terms or at all. • System failures and other operational disruptions in our information and communications systems and those of our third-party service providers could significantly disrupt our business.
Biggest changeRisks Related to Our Business • Declines in the market values of our investments may adversely affect periodic reported results and credit availability. • Interest rate mismatches between the interest-earning assets held in our investment portfolio and the borrowings used to fund the purchases of those assets may reduce our net income or result in a loss during periods of changing interest rates. • We may experience losses if we inaccurately estimate the loss-adjusted yields of our investments in credit sensitive assets. • Interest rate increases may decrease the availability of certain of our targeted assets. • Our investment portfolio may at times be concentrated in certain asset types or secured by properties concentrated in a limited number of real estate sectors or geographic areas, which increases our exposure to economic downturns and risks associated with the real estate and lending industries in general. • Prepayment rates can change, adversely affecting the performance of our assets. • Our portfolio of business purpose loans exposes us to risks that are different from the risks involved with our traditional investments in residential mortgage loans. • Our investments may include subordinated tranches of RMBS, CMBS and ABS, which are subordinate in right of payment to more senior securities that have greater risk of loss than other investments. • We have experienced and may experience in the future increased volatility in our GAAP results of operations as we have elected fair value option for the majority of our investments. • The failure of third-party service providers to perform a variety of services on which we rely may adversely impact our business and financial results. • Due diligence as a part of our acquisition or underwriting process may be limited, may not reveal all of the risks associated with such assets and may not reveal other weaknesses in such assets, which could lead to material losses. • The lack of liquidity in certain of our assets may adversely affect our business. • The use of models in connection with the valuation of our assets subjects us to potential risks in the event that such models are incorrect, misleading or based on incomplete information. • Our investments in residential loans are difficult to value and are dependent upon the borrower’s ability to service or refinance their debt. • Our preferred equity investments involve greater risks of loss than more senior loans secured by income-producing properties. • Our real estate and real estate-related assets are subject to risks particular to real property. • Competition may prevent us from acquiring assets on favorable terms or at all. • System failures and other operational disruptions in our information and communications systems and those of our third-party service providers could significantly disrupt our business.
Generally, “discount” assets (assets whose principal or par amounts exceed their market values) are adversely affected by slower-than-anticipated prepayments. Because our portfolio is comprised of both discount assets and premium assets, our portfolio may be adversely affected by changes in prepayments in any interest rate environment.
Generally, “discount” assets (assets whose principal or par amounts exceed their market values) are adversely affected by slower-than-anticipated prepayments. Because our portfolio is comprised of both premium assets and discount assets, our portfolio may be adversely affected by changes in prepayments in any interest rate environment.
Furthermore, any costs or delays involved in the completion of a foreclosure of the loan or a liquidation of the underlying property will further reduce the proceeds and thus increase the loss.
Furthermore, any costs or delays involved in the completion of a foreclosure of the loan or a liquidation of the underlying property will further reduce the proceeds and thus increase the loss.
Further, if real estate or joint venture equity investments are determined to no longer meet the criteria to be accounted for as held for sale, they are returned to held and used at the lower of (a) their carrying amount before they were classified as held for sale, adjusted for any depreciation (amortization) expense that would have been recognized had the assets remained in their previous classification, or (b) their fair value at the date of the subsequent decision not to sell the real estate or joint venture equity investment, and downward adjustments, if any, are reported in loss on reclassification of disposal group in the consolidated statements of operations.
Further, if real estate investments are determined to no longer meet the criteria to be accounted for as held for sale, they are returned to held and used at the lower of (a) their carrying amount before they were classified as held for sale, adjusted for any depreciation (amortization) expense that would have been recognized had the assets remained in their previous classification, or (b) their fair value at the date of the subsequent decision not to sell the real estate or joint venture equity investment, and downward adjustments, if any, are reported in loss on reclassification of disposal group in the consolidated statements of operations.
Ginnie Mae, which guarantees MBS backed by federally insured or guaranteed loans primarily consisting of loans insured by the Federal Housing Administration (the “FHA”) or guaranteed by the Department of Veterans Affairs (“VA”), is part of a U.S. Government agency and its guarantees are backed by the full faith and credit of the United States.
Ginnie Mae, which guarantees MBS backed by federally insured or guaranteed loans primarily consisting of loans insured by the Federal Housing Administration (the “FHA”) or guaranteed by the Department of Veterans Affairs (“VA”), is part of a U.S. Government agency and its guarantees are backed by the full faith and credit of the United States. The U.S.
Risks Related To Our Organization, Our Structure and Other Risks • We may change our investment, financing, or hedging strategies and asset allocation and operational and management policies without stockholder consent. • Maintenance of our Investment Company Act exemption imposes limits on our operations. • The accrual of dividends on certain of our series of preferred stock at a floating rate in the future could adversely affect our ability to make cash distributions at our intended levels, or at all, or otherwise materially adversely affect our earnings, cash flows or financial condition. • Mortgage loan modification programs and future legislative action may adversely affect the value of, and the returns on, our targeted assets. • We could be subject to liability for potential violations of predatory lending laws, which could materially adversely affect our business, financial condition and results of operations, and our ability to make distributions to our stockholders. • Our business is subject to extensive regulation. • Certain provisions of Maryland law and our charter and bylaws could hinder, delay or prevent a change in control which could have an adverse effect on the value of our securities. • The stock ownership limit imposed by our charter may inhibit market activity in our common stock and may restrict our business combination opportunities.
Risks Related To Our Organization, Our Structure and Other Risks • We may change our investment, financing, or hedging strategies and asset allocation and operational and management policies without stockholder consent. • Maintenance of our Investment Company Act exemption imposes significant limits on our operations. • The accrual of dividends on certain of our series of preferred stock at a floating rate in the future could adversely affect our ability to make cash distributions at our intended levels, or at all, or otherwise materially adversely affect our earnings, cash flows or financial condition. • Mortgage loan modification programs and future legislative action may adversely affect the value of, and the returns on, our targeted assets. • We could be subject to liability for potential violations of predatory lending laws, which could materially adversely affect our business, financial condition and results of operations, and our ability to make distributions to our stockholders. • Our business is subject to extensive regulation. • Certain provisions of Maryland law and our charter and bylaws could hinder, delay or prevent a change in control which could have an adverse effect on the value of our securities. • The stock ownership limit imposed by our charter may inhibit market activity in our common stock and may restrict our business combination opportunities.
If we are not able to renew or roll our existing repurchase agreements or arrange for new financing on terms acceptable to us, or if we default on our financial covenants, are otherwise unable to access funds under our financing arrangements, or if we are required to post more collateral or face larger haircuts on our financings, we may have to dispose of assets at significantly depressed prices and at inopportune times, which could cause significant losses, and may also force us to curtail our asset acquisition activities.
If we are not able to renew or roll our existing financing agreements or arrange for new financing on terms acceptable to us, or if we default on our financial covenants, are otherwise unable to access funds under our financing arrangements, or if we are required to post more collateral or face larger haircuts on our financings, we may have to dispose of assets at significantly depressed prices and at inopportune times, which could cause significant losses, and may also force us to curtail our asset acquisition activities.
Continued volatility or disruption in the credit or finance markets or a downturn in the global economy could materially adversely affect one or more of our lenders and could cause lenders to be unwilling or unable to provide us with financing, to increase the costs of that financing or make the terms less attractive, or to become insolvent.
Volatility or disruption in the credit or finance markets or a downturn in the global economy could materially adversely affect one or more of our lenders and could cause lenders to be unwilling or unable to provide us with financing, to increase the costs of that financing or make the terms less attractive, or to become insolvent.
We sometimes utilize non-recourse securitizations and recourse structured financings of our investments in residential loans or investment securities to the extent consistent with the maintenance of our REIT qualification and exclusion from registration under the Investment Company Act in order to generate cash for funding new investments and/or to leverage existing assets.
We utilize non-recourse securitizations and recourse structured financings of our investments in residential loans or investment securities to the extent consistent with the maintenance of our REIT qualification and exclusion from registration under the Investment Company Act in order to generate cash for funding new investments and/or to leverage existing assets.
If we have a right of first refusal or buy/sell right to buy out an operating partner, we may be unable to finance such a buy-out if it becomes exercisable or we may be required to purchase such interest at a time when it would not otherwise be in our best interest to do so.
Additionally, if we have a right of first refusal or buy/sell right to buy out an operating partner, we may be unable to finance such a buy-out if it becomes exercisable or we may be required to purchase such interest at a time when it would not otherwise be in our best interest to do so.
We are unable to predict whether United States federal, state or local authorities, or other pertinent bodies, will enact legislation, laws, rules, regulations, handbooks, guidelines or similar provisions that will affect our business or require changes in our practices in the future, and any such changes could materially and adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders. 41 Table of Contents Certain provisions of Maryland law and our charter and bylaws could hinder, delay or prevent a change in control which could have an adverse effect on the value of our securities.
We are unable to predict whether United States federal, state or local authorities, or other pertinent bodies, will enact legislation, laws, rules, regulations, handbooks, guidelines or similar provisions that will affect our business or require changes in our practices in the future, and any such changes could materially and adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders. 42 Table of Contents Certain provisions of Maryland law and our charter and bylaws could hinder, delay or prevent a change in control which could have an adverse effect on the value of our securities.
Moreover, while we intend to continue to operate so to qualify as a REIT for U.S. federal income tax purposes, given the highly complex nature of the rules governing REITs, there can be no assurance that we will so qualify in any taxable year. 42 Table of Contents If we fail to qualify as a REIT in any taxable year and we do not qualify for certain statutory relief provisions, we would be subject to U.S. federal income tax on our taxable income at regular corporate rates.
Moreover, while we intend to continue to operate so to qualify as a REIT for U.S. federal income tax purposes, given the highly complex nature of the rules governing REITs, there can be no assurance that we will so qualify in any taxable year. 43 Table of Contents If we fail to qualify as a REIT in any taxable year and we do not qualify for certain statutory relief provisions, we would be subject to U.S. federal income tax on our taxable income at regular corporate rates.
Should we choose to redeem a series of our preferred stock at the conclusion of its Fixed Rate Period to avoid additional or unpredictable dividend expenses or for other strategic reasons, we may be forced to raise additional funds or sell assets at unfavorable times or on unfavorable terms to us. 40 Table of Contents Mortgage loan modification programs and future legislative action may adversely affect the value of, and the returns on, our targeted assets.
Should we choose to redeem a series of our preferred stock at the conclusion of its Fixed Rate Period to avoid additional or unpredictable dividend expenses or for other strategic reasons, we may be forced to raise additional funds or sell assets at unfavorable times or on unfavorable terms to us. 41 Table of Contents Mortgage loan modification programs and future legislative action may adversely affect the value of, and the returns on, our targeted assets.
These risks may increase in the future as we continue to increase our reliance on the internet and use of web-based product offerings and on the use of cybersecurity.
These risks may increase in the future as we continue to increase our reliance on the internet and use of web-based product offerings and on the use of cybersecurity tools.
Although we have no current intention of paying dividends in our own stock, if in the future we choose to pay dividends in our own stock, our stockholders may be required to pay tax in excess of the cash that they receive. 43 Table of Contents Dividends payable by REITs do not qualify for the reduced tax rates on dividend income from regular corporations.
Although we have no current intention of paying dividends in our own stock, if in the future we choose to pay dividends in our own stock, our stockholders may be required to pay tax in excess of the cash that they receive. 44 Table of Contents Dividends payable by REITs do not qualify for the reduced tax rates on dividend income from regular corporations.
If market interest rates increase, prospective investors may demand a higher dividend rate on our shares or seek alternative investments paying higher dividends or interest. As a result, interest rate fluctuations and capital market conditions can affect the market price of our securities independent of the effects such conditions may have on our portfolio. 49 Table of Contents Item 1B.
If market interest rates increase, prospective investors may demand a higher dividend rate on our shares or seek alternative investments paying higher dividends or interest. As a result, interest rate fluctuations and capital market conditions can affect the market price of our securities independent of the effects such conditions may have on our portfolio. 51 Table of Contents Item 1B.
When we do choose to hedge, hedging may fail to protect or could materially adversely affect us because, among other things: • we may fail to correctly assess the degree of correlation between the performance of the instruments used in the hedging strategy and the performance of the assets in the portfolio being hedged; • we may fail to recalculate, re-adjust and execute hedges in an efficient and timely manner; • the hedging transactions may actually result in poorer overall performance for us than if we had not engaged in the hedging transactions; • interest rate hedging can be expensive, particularly during periods of volatile interest rates; • available hedges may not correspond directly with the risks for which protection is sought; • the durations of the hedges may not match the durations of the related assets or liabilities being hedged; • many hedges are structured as over-the-counter contracts with counterparties whose creditworthiness is not guaranteed, raising the possibility that the hedging counterparty may default on their payment obligations; and • to the extent that the creditworthiness of a hedging counterparty deteriorates, it may be difficult or impossible to terminate or assign any hedging transactions with such counterparty.
When we do choose to hedge, hedging may fail to protect or could materially adversely affect us because, among other things: • we may fail to correctly assess the degree of correlation between the performance of the instruments used in the hedging strategy and the performance of the assets in the portfolio being hedged; • we may fail to recalculate, re-adjust and execute hedges in an efficient and timely manner; • the hedging transactions may actually result in poorer overall performance for us than if we had not engaged in the hedging transactions; • hedging can be expensive, particularly during periods of volatility; • available hedges may not correspond directly with the risks for which protection is sought; • the durations of the hedges may not match the durations of the related assets or liabilities being hedged; • many hedges are structured as over-the-counter contracts with counterparties whose creditworthiness is not guaranteed, raising the possibility that the hedging counterparty may default on their payment obligations; and • to the extent that the creditworthiness of a hedging counterparty deteriorates, it may be difficult or impossible to terminate or assign any hedging transactions with such counterparty.
As part of our acquisition or underwriting process for certain assets, including, without limitation, residential loans, direct and indirect multi-family property investments, non-Agency RMBS, CMBS, ABS or other mortgage-, residential housing- or other credit-related assets, we may conduct (either directly or using third parties) certain due diligence.
As part of our acquisition or underwriting process for certain assets, including, without limitation, residential loans, non-Agency RMBS, indirect multi-family property investments, CMBS, ABS or other mortgage-, residential housing- or other credit-related assets, we may conduct (either directly or using third parties) certain due diligence.
As a result, we may not recover some or all of our investment, which could result in significant losses. 26 Table of Contents Declining real estate valuations and impairment charges to real estate assets have adversely affected our earnings and financial condition in the past and may adversely affect our earnings and financial condition in the future.
As a result, we may not recover some or all of our investment, which could result in significant losses. 25 Table of Contents Declining real estate valuations and impairment charges to real estate assets have adversely affected our earnings and financial condition in the past and may adversely affect our earnings and financial condition in the future.
We leverage our equity through borrowings, generally through the use of repurchase agreements, longer-term structured debt, such as CDOs and other forms of secured debt, or corporate-level debt, such as senior unsecured notes and convertible notes. We may, in the future, utilize other forms of borrowing.
We leverage our equity through borrowings, generally through the use of repurchase agreements, warehouse facilities, longer-term structured debt, such as CDOs and other forms of secured debt, or corporate-level debt, such as senior unsecured notes and convertible notes. We may, in the future, utilize other forms of borrowing.
Disruptive events, including events similar to these, could have a material adverse impact on our liquidity and could lead to significant losses, a rapid deterioration of our financial condition and possibly require us to file for protection under the U.S. Bankruptcy Code.
Disruptive events, including events similar to these, could have a material adverse impact on our liquidity and could lead to significant losses, a rapid deterioration of our financial condition and possibly require us to file for protection under the U.S.
If an SPE defaults on its obligations and we have guaranteed the satisfaction of that obligation, we may be materially adversely affected. In connection with our securitizations, we generally are required to prepare disclosure documentation for investors, including term sheets and offering memoranda, which contain information regarding the securitization generally, the securities being issued, and the assets being securitized.
If an SPE defaults on its obligations and we have guaranteed the satisfaction of that obligation, we may be materially adversely affected. 35 Table of Contents In connection with our securitizations, we generally are required to prepare disclosure documentation for investors, including term sheets and offering memoranda, which contain information regarding the securitization generally, the securities being issued, and the assets being securitized.
The liquidation proceeds upon sale of such real estate may not be sufficient to recover our cost basis in the loan, and any costs or delays involved in the foreclosure or liquidation process may increase losses. 21 Table of Contents A certain portion of the loans we own or seek to acquire have been purchased by us at a discount to par value.
The liquidation proceeds upon sale of such real estate may not be sufficient to recover our cost basis in the loan, and any costs or delays involved in the foreclosure or liquidation process may increase losses. A certain portion of the loans we own or seek to acquire have been purchased by us at a discount to par value.
To the extent we suffer such losses with respect to these loans, our business, results of operations and financial condition may be materially adversely affected. Our investments may include subordinated tranches of RMBS, CMBS and ABS, which are subordinate in right of payment to more senior securities and have greater risk of loss than other investments.
To the extent we suffer such losses with respect to these loans, our business, results of operations and financial condition may be materially adversely affected. 22 Table of Contents Our investments may include subordinated tranches of RMBS, CMBS and ABS, which are subordinate in right of payment to more senior securities and have greater risk of loss than other investments.
These climate-related financial risks could, in turn, lead to reductions in our revenues and increased rates of default or delinquency and/or decreased recovery rates on our assets, any of which could cause a decline in the market value of our common stock and negatively impact our ability to pay dividends to our stockholders. We are dependent on certain key personnel.
These climate-related financial risks could, in turn, lead to reductions in our revenues and increased rates of default or delinquency and/or decreased recovery rates on our assets, any of which could cause a decline in the market value of our common stock and negatively impact our ability to pay dividends to our stockholders. 49 Table of Contents We are dependent on certain key personnel.
In addition, mezzanine loans and preferred equity investments are often used to achieve a very high leverage on large commercial projects, resulting in less equity in the property and increasing the risk of loss of principal or investment.
In addition, preferred equity investments are often used to achieve a very high leverage on large commercial projects, resulting in less equity in the property and increasing the risk of loss of principal or investment.
As a result, our ability to vary our portfolio in response to changes in economic and other conditions may be relatively limited, which could materially adversely affect our results of operations and financial condition.
As a result, our ability to vary our portfolio in response to changes in economic and other conditions may be relatively limited, which could materially adversely affect our results of operations, cash flow and financial condition.
In the event any of these factors cause the securitization entities in which we own subordinated securities to experience losses, the market value of our assets, our business, financial condition and results of operations and ability to make distributions to our stockholders may be materially adversely affected. 23 Table of Contents Prepayment rates can change, adversely affecting the performance of our assets.
In the event any of these factors cause the securitization entities in which we own subordinated securities to experience losses, the market value of our assets, our business, financial condition and results of operations and ability to make distributions to our stockholders may be materially adversely affected. Prepayment rates can change, adversely affecting the performance of our assets.
This could increase the cost of our hedging activities or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear. The failure of certain investments subject to a repurchase agreement to qualify as real estate assets would adversely affect our ability to qualify as a REIT.
This could increase the cost of our hedging activities or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear. 45 Table of Contents The failure of certain investments subject to a repurchase agreement to qualify as real estate assets would adversely affect our ability to qualify as a REIT.
Additional risks and uncertainties not presently known to us, or not presently deemed material by us, also may materially adversely affect our business, liquidity, operating results, prospects, financial condition and ability to make distributions to our stockholders. 18 Table of Contents Risks Related to Our Business Declines in the market values of assets in our investment portfolio may adversely affect periodic reported results and credit availability, which may reduce our earnings, book value and the market value of our securities and, in turn, may constrain our liquidity and cash available for distribution to our stockholders.
Additional risks and uncertainties not presently known to us, or not presently deemed material by us, also may materially adversely affect our business, liquidity, operating results, prospects, financial condition and ability to make distributions to our stockholders. 18 Table of Contents Risks Related to Our Business Declines in the market values of our investments may adversely affect periodic reported results and credit availability, which may reduce our earnings, book value and the market value of our securities and, in turn, may constrain our liquidity and cash available for distribution to our stockholders.
See “-Our business is subject to risks particular to real property and real estate-related assets.” Residential loans are subject to increased risks of loss. We acquire and manage residential loans, including performing, re-performing, non-performing and business purpose loans and loans that may not meet or conform to the underwriting standards of any GSE.
See “-Our business is subject to risks particular to real property and real estate-related assets.” Residential loans are subject to increased risks of loss. We acquire and manage residential loans, including performing, re-performing, non-performing and business purpose loans, which we also originate, and loans that may not meet or conform to the underwriting standards of any GSE.
The capital and credit markets have experienced unprecedented levels of volatility and disruption in recent years that has generally negatively impacted the availability and/or terms of financing from time-to-time.
The capital and credit markets have experienced significant levels of volatility and disruption in recent years that has generally negatively impacted the availability and/or terms of financing from time-to-time.
The “taxable mortgage pool” rules may increase the taxes that we or our stockholders may incur, and may limit the manner in which we effect future securitizations. 45 Table of Contents Our securitizations have, and could in the future, result in the creation of taxable mortgage pools (“TMPs”), for U.S. federal income tax purposes.
The “taxable mortgage pool” rules may increase the taxes that we or our stockholders may incur, and may limit the manner in which we effect future securitizations. Our securitizations have, and could in the future, result in the creation of taxable mortgage pools (“TMPs”), for U.S. federal income tax purposes.
Because our repurchase agreements typically have terms of one year or less, our repurchase agreement counterparties may respond to market conditions in a manner that makes it more difficult for us to renew or replace on a continuous basis our maturing short-term financings and such counterparties have imposed and may in the future impose more onerous conditions when rolling such financings.
Because these financing agreements typically have terms of one year or less, our counterparties may respond to market conditions in a manner that makes it more difficult for us to renew or replace on a continuous basis our maturing short-term financings and such counterparties have imposed and may in the future impose more onerous conditions when rolling such financings.
Tax Risks • Failure to remain qualified as a REIT would adversely affect our operations and ability to make distributions. • REIT distribution requirements could adversely affect our liquidity. • Dividends payable by REITs do not qualify for the reduced tax rates on dividend income from regular corporations. • Complying with REIT requirements may cause us to forego or liquidate otherwise attractive investments. • The failure of certain investments subject to a repurchase agreement to qualify as real estate assets would adversely affect our ability to qualify as a REIT. • We could fail to continue to qualify as a REIT if the IRS successfully challenges our treatment of our mezzanine loans. • We may incur a significant tax liability as a result of selling assets that might be subject to the prohibited transactions tax if sold directly by us. • Our qualification as a REIT could be jeopardized as a result of our interests in joint ventures or preferred equity. • We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our common stock.
Tax Risks • Failure to remain qualified as a REIT would adversely affect our operations and ability to make distributions. • REIT distribution requirements could adversely affect our liquidity. • Dividends payable by REITs do not qualify for the reduced tax rates on dividend income from regular corporations. • Complying with REIT requirements may cause us to forego or liquidate otherwise attractive investments. • The failure of certain investments subject to a repurchase agreement to qualify as real estate assets would adversely affect our ability to qualify as a REIT. • We may incur a significant tax liability as a result of selling assets that might be subject to the prohibited transactions tax if sold directly by us. • Our qualification as a REIT could be jeopardized as a result of our interests in joint ventures or preferred equity. • We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our common stock.
If we foreclose on underlying properties, we, through a designated servicer that we retain, will have to manage these properties and may not be able to sell them. We may work with our third-party servicers and seek to help a borrower to refinance an NPL or RPL to realize greater value from such loan.
If we foreclose on underlying properties, we, through a designated servicer that we retain, will have to manage these properties and may not be able to sell them. 29 Table of Contents We may work with our third-party servicers and seek to help a borrower to refinance an NPL or RPL to realize greater value from such loan.
Moreover, as of December 31, 2024, significant portions of the properties that secure our residential loans, including loans that secure Consolidated SLST, were concentrated in California, Florida, Texas, New York, New Jersey, Pennsylvania and Illinois among other states. California is particularly susceptible to earthquake and wildfire risks while Florida and Texas are susceptible to hurricane, wind and flood risks.
Moreover, as of December 31, 2025, significant portions of the properties that secure our residential loans, including loans that secure Consolidated SLST, were concentrated in California, Florida, Texas, New York, New Jersey, Pennsylvania and Ohio among other states. California is particularly susceptible to earthquake and wildfire risks while Florida and Texas are susceptible to hurricane, wind and flood risks.
This release suggests that the SEC may modify the exclusion relied upon by companies similar to us that invest in mortgage loans and mortgage-backed securities, although no such action has been taken at this time.
This release suggests that the SEC may modify the exclusion relied upon by companies similar to us that invest in mortgage loans and MBS, although no such action has been taken at this time.
Impairment charges, such as those incurred in 2024 and 2023, adversely affected our financial condition, results of operations, book value, cash available for distribution, including cash available for us to pay distributions to our stockholders, and per share trading price of our common stock. Such impairment charges could adversely affect our earnings and financial condition in the future.
Impairment charges, such as those incurred in recent years, adversely affected our financial condition, results of operations, book value, cash available for distribution, including cash available for us to pay distributions to our stockholders, and per share trading price of our common stock. Such impairment charges could adversely affect our earnings and financial condition in the future.
In some states, foreclosure actions can sometimes take several years or more to litigate. Foreclosure may create a negative public perception of the related mortgaged property, resulting in a decrease in its value.
In some states, foreclosure actions can sometimes take several years or more to litigate. 24 Table of Contents Foreclosure may create a negative public perception of the related mortgaged property, resulting in a decrease in its value.
More recently, Fitch Ratings downgraded the U.S.'s long-term credit rating in August 2023 from “AAA” to “AA+” due primarily to expected fiscal deterioration and the erosion of governance that has led to repeated debt limit standoffs. The impact of any further downgrades to the U.S.
More recently, Fitch Ratings downgraded the U.S.'s long-term credit rating in August 2023 from “AAA” to “AA+” due primarily to expected fiscal deterioration and the erosion of governance that has led to repeated debt limit standoffs.
There can be no assurance that we will conduct any specific level of due diligence, or that, among other things, the due diligence process will uncover all relevant facts, the materials provided to us or that we review will be accurate and complete or that any purchase or our projection for that purchase will prove successful, which could result in losses on these assets, which, in turn, could adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.
There can be no assurance that we will conduct any specific level of due diligence, or that, among other things, the due diligence process will uncover all relevant facts, the materials provided to us or that we review will be accurate and complete or that any purchase or our projection for that purchase will prove successful, which could result in losses on these assets, which, in turn, could adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders. 28 Table of Contents The lack of liquidity in certain of our assets may adversely affect our business.
The market value of our investment portfolio may move inversely with changes in interest rates. We anticipate that increases in interest rates will generally tend to decrease our net income and the market value of our investment portfolio.
The market value of our investments may move inversely with changes in interest rates. We anticipate that increases in interest rates will generally tend to decrease our net income and the market value of our investments.
Certain of our assets may generate substantial mismatches between REIT taxable income and available cash. Such assets could include mortgage-backed securities we hold that have been issued at a discount and require the accrual of taxable income in advance of the receipt of cash.
Certain of our assets may generate substantial mismatches between REIT taxable income and available cash. Such assets could include MBS we hold that have been issued at a discount and require the accrual of taxable income in advance of the receipt of cash.
These types of assets involve a higher degree of risk than senior mortgage lending secured by income-producing real property, because the loan may become unsecured or our equity investment may be effectively extinguished as a result of foreclosure by the senior lender.
These types of assets involve a higher degree of risk than senior mortgage lending secured by income-producing real property because our equity investment may be effectively extinguished as a result of foreclosure by the senior lender.
Finally, we may not be able to sell our interest in a venture if we desire to exit the venture without our operating partner's consent. Our business is subject to risks particular to real property and real estate-related assets.
Finally, we may not be able to sell our interest in a venture if we desire to exit the venture without our operating partner's consent. 27 Table of Contents Our business is subject to risks particular to real property and real estate-related assets.
Moreover, even if the “protective” TRS election were to be effective in the event of the failure of our subsidiary REIT to qualify as a REIT, such subsidiary REIT would be subject to U.S. federal income tax and applicable state and local taxes on its taxable income at regular corporate rates and we cannot assure you that we would not fail to satisfy the requirement that not more than 20% of the value of our total assets may be represented by the securities of one or more TRSs.
Moreover, even if the “protective” TRS election were to be effective in the event of the failure of our subsidiary REIT to qualify as a REIT, such subsidiary REIT would be subject to U.S. federal income tax and applicable state and local taxes on its taxable income at regular corporate rates and we cannot assure you that we would not fail to satisfy the requirement that not more than 20% (25% for taxable years beginning on or after January 1, 2026) of the value of our total assets may be represented by the securities of one or more TRSs.
Where senior debt exists, the presence of intercreditor arrangements, which in this case are arrangements between the lender of the senior loan and the mezzanine lender or preferred equity investor that stipulate the rights and obligations of the parties, may limit our ability to amend our loan documents, assign our loans, accept prepayments, exercise our remedies or control decisions made in bankruptcy proceedings relating to borrowers or preferred equity issuers.
Where senior debt exists, the presence of intercreditor arrangements, which in this case are arrangements between the lender of the senior loan and the preferred equity investor that stipulate the rights and obligations of the parties, may limit our ability to amend our investment documents, assign or transfer our interests, accept prepayments, exercise our remedies or control decisions made in bankruptcy proceedings relating to preferred equity issuers.
The frequency at which prepayments (including both voluntary prepayments by the borrowers and liquidations due to defaults and foreclosures) occur on the residential loans we own and those that underlie our RMBS and some of the multi-family real estate investments and loans we originate or acquire is difficult to predict and is affected by a variety of factors, including the prevailing level of interest rates as well as economic, demographic, tax, social, legal, legislative and other factors.
The frequency at which prepayments (including both voluntary prepayments by the borrowers and liquidations due to defaults and foreclosures) occur on the residential loans we own and those that underlie our RMBS and some of the multi-family investments we have originated or acquired is difficult to predict and is affected by a variety of factors, including the prevailing level of interest rates as well as economic, demographic, tax, social, legal, legislative and other factors.
Some of the factors that could result in fluctuations in the price or trading volume of our securities include, among other things: actual or anticipated changes in our current or future financial performance or capitalization; actual or anticipated changes in our current or future dividend yield; and changes in market interest rates and general market and economic conditions.
Some of the factors that could result in fluctuations in the price or trading volume of our securities include, among other things: actual or anticipated changes in our current or future financial performance or capitalization; actual or anticipated changes in our current or future dividend yield; changes in demand for the assets we acquire; and changes in market interest rates and general market and economic conditions.
As of December 31, 2024, 49% of our total investment portfolio was comprised of what we refer to as "credit assets." Despite our efforts to manage credit risk, there are many aspects of credit risk that we cannot control.
As of December 31, 2025, 35% of our total investment portfolio was comprised of what we refer to as "credit assets." Despite our efforts to manage credit risk, there are many aspects of credit risk that we cannot control.
If a borrower defaults on our mezzanine loan or debt senior to our loan, or in the event of a borrower bankruptcy, our mezzanine loan or preferred equity investment will be satisfied only after the senior debt, in the case of a mezzanine loan, or all senior and subordinated debt, in the case of a preferred equity investment, is paid in full.
If a borrower defaults on our preferred equity investment or debt senior to our loan, or in the event of an operating partner bankruptcy, our preferred equity investment will be satisfied only after all senior and subordinated debt is paid in full.
Changes in the market values of assets in our investment portfolio where the Company elected the fair value option will be reflected in earnings and changes in the market values of assets in our investment portfolio where the Company did not elect the fair value option will be reflected in stockholders’ equity.
Changes in the market values of our investments where the Company elected the fair value option will be reflected in earnings and changes in the market values of our investments where the Company did not elect the fair value option will be reflected in stockholders’ equity.
If we are faced with a larger haircut in order to roll a financing with a particular counterparty, or in order to move a financing from one counterparty to another, then we would need to make up the difference between the two haircuts in the form of cash, which could similarly require us to dispose of assets at significantly depressed prices and at inopportune times, which could cause significant losses.
If we are faced with a larger haircut in order to roll a financing with a particular counterparty, or in order to move a financing from one counterparty to another, then we would need to make up the difference between the two haircuts in the form of cash, which could similarly require us to dispose of assets at significantly depressed prices and at inopportune times, which could cause significant losses. 33 Table of Contents Issues related to financing are exacerbated in times of significant dislocation in the financial markets.
Maintenance of our Investment Company Act exemption imposes limits on our operations. We have conducted and intend to continue to conduct our operations so as not to become regulated as an investment company under the Investment Company Act. We believe that there are a number of exclusions under the Investment Company Act that are applicable to us.
We have conducted and intend to continue to conduct our and our subsidiaries' operations so as not to become regulated as an investment company under the Investment Company Act. We believe that there are a number of exclusions under the Investment Company Act that are applicable to us.
Actions by one of our operating partners or one of the property managers of the multi-family properties in which we invest, which are generally out of our control, might subject us to liabilities in excess of those contemplated and thus reduce our investment returns.
Actions by our operating partners or the property managers of the multi-family properties which underlie our investments are generally out of our control and may subject us to liabilities in excess of those contemplated and thus reduce our investment returns.
Notwithstanding the IRS’s determination in the private letter rulings described above, it is possible that the IRS could successfully assert that any excess MSRs that we acquire do not qualify for purposes of the 75% REIT asset test and income from such MSRs does not qualify for purposes of the 75% and/or 95% gross income tests, which could cause us to be subject to a penalty tax and could adversely impact our ability to qualify as a REIT. 46 Table of Contents We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our common stock.
Notwithstanding the IRS’s determination in the private letter rulings described above, it is possible that the IRS could successfully assert that any excess MSRs that we acquire do not qualify for purposes of the 75% REIT asset test and income from such MSRs does not qualify for purposes of the 75% and/or 95% gross income tests, which could cause us to be subject to a penalty tax and could adversely impact our ability to qualify as a REIT.
A higher interest rate environment, which we have experienced since 2022, generally results in a reduction in the demand for mortgage loans due to the higher cost of borrowing and new construction redevelopment or renovation.
A higher interest rate environment, which we have experienced since 2022, generally results in a reduction in the demand for mortgage loans due to the higher cost of borrowing.
Issues related to financing are exacerbated in times of significant dislocation in the financial markets. It is possible that our financing counterparties will become unwilling or unable to provide us with financing, and we could be forced to sell our assets at an inopportune time when prices are depressed or markets are illiquid, which could cause significant losses.
It is possible that our financing counterparties will become unwilling or unable to provide us with financing, and we could be forced to sell our assets at an inopportune time when prices are depressed or markets are illiquid, which could cause significant losses.
Some of the multi-family real estate investments and loans we may originate may allow the borrower to make prepayments without incurring a prepayment penalty and some may include provisions allowing the borrower or operating partner to extend the term of the loan or instrument beyond the originally scheduled maturity.
Some of the multi-family investments we have originated and hold allow the borrower or operating partner to make prepayments without incurring a prepayment penalty and some may include provisions allowing the borrower or operating partner to extend the term of the instrument beyond the originally scheduled maturity.
We may be liable for losses suffered by individuals whose identities are stolen as a result of a breach of the security of the systems that we or third parties, operating partners, companies in which we invest and service providers of ours store this information on, and any such liability could be material.
We may also experience security breaches that may remain undetected for an extended period. 30 Table of Contents We may be liable for losses suffered by individuals whose identities are stolen as a result of a breach of the security of the systems that we or third parties, operating partners, companies in which we invest and service providers of ours store this information on, and any such liability could be material.
Similarly, our joint venture equity and Mezzanine Lending investments may require the consent of our operating partner or a lender to transfer or sell our investment and may also be less attractive to a buyer due to certain contractual provisions.
Similarly, our multi-family investments may require the consent of our operating partner or a lender to transfer or sell our investment and may also be less attractive to a buyer due to certain contractual provisions.
We leverage our equity, which can exacerbate any losses we incur on our current and future investments and may reduce cash available for distribution to our stockholders.
Bankruptcy Code. 34 Table of Contents We leverage our equity, which can exacerbate any losses we incur on our current and future investments and may reduce cash available for distribution to our stockholders.
It is possible, however, that the IRS could successfully assert that we do not own the investments during the term of the repurchase agreement, in which case our ability to continue to qualify as a REIT could be adversely affected. 44 Table of Contents We could fail to continue to qualify as a REIT if the IRS successfully challenges our treatment of our mezzanine loans.
It is possible, however, that the IRS could successfully assert that we do not own the investments during the term of the repurchase agreement, in which case our ability to continue to qualify as a REIT could be adversely affected.
Moreover, because our management has great latitude within our investment guidelines in determining the types and amounts of assets in which to invest and leverage to employ on our behalf, there can be no assurance that our management will not make or approve investments that result in returns that are substantially below expectations or result in losses, which would materially adversely affect our business, results of operations, financial condition and ability to make distributions to our stockholders.
Moreover, because our management has great latitude within our investment guidelines in determining the types and amounts of assets in which to invest and leverage to employ on our behalf, there can be no assurance that our management will not make or approve investments that result in returns that are substantially below expectations or result in losses, which would materially adversely affect our business, results of operations, financial condition and ability to make distributions to our stockholders. 40 Table of Contents Maintenance of our exemption from registration as an investment company under the Investment Company Act imposes significant limits on our operations.
Our preferred equity and mezzanine loan investments involve greater risks of loss than more senior loans secured by income-producing properties. We own and make preferred equity investments in entities that own multi-family property.
Our preferred equity investments involve greater risks of loss than more senior loans secured by income-producing properties. We own preferred equity investments in entities that own one or more multi-family properties.
Pursuant to the operating agreement for one of our joint venture investments, third party investors have the ability to sell their ownership interests to us at their election once a year subject to annual minimum and maximum amount limitations and we are obligated to purchase such interests for cash.
Pursuant to the operating agreement for our cross-collateralized mezzanine lending investment, third party investors have the ability to sell their ownership interests to us at their election once a year subject to annual minimum and maximum amount limitations and we are obligated to purchase such interests for cash.
Moreover, as a non-controlling equity investor in a residential loan originator, our investment in the loan originator, business and reputation could be negatively impacted if such originator fails to comply with such federal, state and local laws, rules and regulations or receives negative media or marketing attention related to its operations.
Moreover, as an owner of a residential loan originator, our business and reputation could be negatively impacted if such originator fails to comply with such federal, state and local laws, rules and regulations or receives negative media or marketing attention related to its operations.
We cannot assure you that we will have access to such equity or debt capital on favorable terms (including, without limitation, cost and term) at the desired times, or at all, which may cause us to curtail our investment activities and/or dispose of assets, which could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders. 33 Table of Contents The repurchase agreements that we use to finance our investments may require us to provide additional collateral, which could reduce our liquidity and harm our financial condition.
We cannot assure you that we will have access to such equity or debt capital on favorable terms (including, without limitation, cost and term) at the desired times, or at all, which may cause us to curtail our investment activities and/or dispose of assets, which could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.
We consider such owners (or other owners in the case of joint venture equity investments) to be our operating partners with respect to the acquisition, improvement or financing of the underlying properties, as the case may be. We may also make indirect investments in properties through other arrangements.
We own preferred equity investments in owners of multi-family properties as part of our investment strategy. We consider such owners to be our operating partners with respect to the acquisition, improvement, operating or financing of the underlying properties, as the case may be. We may also make indirect investments in properties through other arrangements.
The lack of liquidity in certain of our assets may adversely affect our business. Many of the assets we own or acquire may be subject to legal, contractual and other restrictions on resale or will otherwise be less liquid than publicly traded securities.
Many of the assets we own or acquire may be subject to legal, contractual and other restrictions on resale or will otherwise be less liquid than publicly traded securities.
Such volatility or disruption could also limit or halt our access to securitization financing. Although we finance some of our assets with longer-term financing, we have also historically relied on access to short-term borrowings in the form of repurchase agreements to finance our investments.
Such volatility or disruption could also limit or halt our access to securitization financing. Although we finance some of our assets with longer-term financing, we have also historically relied on access to short-term borrowings, including repurchase agreements to finance our investments and warehouse facilities in the case of Constructive to fund its operations.
If the market value of those assets declines, the lender may require us to post additional collateral to support the loan, which would reduce our liquidity and limit our ability to leverage our assets.
If the market value of those assets declines, the lender may require us to post additional collateral to support the loan, as has occurred in the past, which reduces our liquidity and may limit our ability to leverage our assets.
Our ability to sell RPLs for a profit depends on the borrower continuing to make payments. An RPL could become a NPL, which could reduce our earnings. Our investments in residential whole loans may require us to engage in workout negotiations, restructuring and/or the possibility of foreclosure. These processes may be lengthy and expensive.
An RPL could become a NPL, which could reduce our earnings. Our investments in residential whole loans may require us to engage in workout negotiations, restructuring and/or the possibility of foreclosure. These processes may be lengthy and expensive.
Furthermore, because the techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. We may also experience security breaches that may remain undetected for an extended period.
Furthermore, because the techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures.
Risks Related to Debt Financing and Our Use of Hedging Strategies • Our access to financing sources may not be available on favorable terms or at all. • The repurchase agreements that we use to finance our investments may require us to provide additional collateral, which could reduce our liquidity and harm our financial condition. • We leverage our equity, which can exacerbate any losses we incur on our current and future investments and may reduce cash available for distribution to our stockholders. • If we are unable to leverage our equity to the extent we currently anticipate, the returns on certain of our assets could be diminished, which may limit or eliminate our ability to make distributions to our stockholders. • We directly or indirectly utilize non-recourse securitizations and recourse structured financings and such structures expose us to risks that could result in losses to us. 17 Table of Contents • If a counterparty to our repurchase transactions defaults on its obligation to resell the pledged assets back to us at the end of the transaction term or if we default on our obligations under the repurchase agreement, we may incur losses. • Our use of repurchase agreements to borrow funds may give our lenders greater rights in the event that either we or a lender files for bankruptcy. • Negative impacts on our business may cause us to default on certain financial covenants contained in our financing arrangements. • Hedging against interest rate and market value changes as well as other risks may materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.
Risks Related to Debt Financing and Our Use of Hedging Strategies • Our access to financing sources may not be available on favorable terms or at all. • The repurchase agreements that we use to finance our investments may require us to provide additional collateral, which could reduce our liquidity and harm our financial condition. • We leverage our equity, which can exacerbate any losses we incur on our current and future investments and may reduce cash available for distribution to our stockholders. • If we are unable to leverage our equity to the extent we currently anticipate, the returns on certain of our assets could be diminished, which may limit or eliminate our ability to make distributions to our stockholders. • We directly or indirectly utilize non-recourse securitizations and recourse structured financings and such structures expose us to risks that could result in losses to us. • If a counterparty to our repurchase transactions defaults on its obligation to resell the pledged assets back to us at the end of the transaction term or if we default on our obligations under the repurchase agreement, we may incur losses. • Our use of repurchase agreements to borrow funds may give our lenders greater rights in the event that either we or a lender files for bankruptcy. • Negative impacts on our business may cause us to default on certain financial covenants contained in our financing arrangements. • Hedging against interest rate and market value changes as well as other risks may materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders. 17 Table of Contents Risks Associated With Adverse Developments in the Mortgage, Real Estate, Credit and Financial Markets Generally • Difficult conditions in the mortgage, real estate, and financial markets and the economy generally may cause us to experience losses in the future. • We cannot predict the effect that changes in government policies, laws or regulations or the U.S. political environment will have on our business and the markets in which we operate. • The downgrade, or perceived potential downgrade, of the credit ratings of the U.S. and the failure to resolve issues related to U.S. fiscal and debt policies may materially adversely affect our business, liquidity, financial condition and results of operations. • Changes in laws and regulations affecting the relationship between Fannie Mae, Freddie Mac and Ginnie Mae and the U.S.
With prevailing mortgage interest rates having risen in a meaningful way from their recent low levels, these risks may be exacerbated. The effect of the above would likely serve to make the refinancing of NPLs and RPLs potentially more difficult and less profitable for us.
With prevailing mortgage interest rates remaining meaningfully elevated from their recent low levels in 2020 through part of 2022, these risks may be exacerbated. The effect of the above would likely serve to make the refinancing of NPLs and RPLs potentially more difficult and less profitable for us.
Government will ultimately take with respect to these entities. Fannie Mae, Freddie Mac and Ginnie Mae could each be dissolved, and the U.S. Government could determine to stop providing liquidity support of any kind to the mortgage market. If Fannie Mae, Freddie Mac or Ginnie Mae were eliminated, or their structures were to change radically, or the U.S.
Government will ultimately take with respect to these entities. 39 Table of Contents Fannie Mae, Freddie Mac and Ginnie Mae could each be dissolved, and the U.S. Government could determine to stop providing liquidity support of any kind to the mortgage market.
We are a small company and are substantially dependent upon the efforts of our Chief Executive Officer, Jason T. Serrano, our President, Nicholas Mah, and certain other key individuals employed by us. The sudden loss of Messrs.
We are substantially dependent upon the efforts of our Chief Executive Officer, Jason T. Serrano, our President, Nicholas Mah, and certain other key individuals employed by us. The sudden loss of Messrs. Serrano or Mah or any key personnel of our Company could have a material adverse effect on our operations.
Further, our lenders could require us to enter into negative covenants, including restrictions on our ability to distribute funds or to employ leverage, which could inhibit our ability to satisfy the 90% distribution requirement. We may satisfy the 90% distribution test with taxable distributions of our stock or debt securities.
Further, our lenders could require us to enter into negative covenants, including restrictions on our ability to distribute funds or to employ leverage, which could inhibit our ability to satisfy the 90% distribution requirement.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeDespite the implementation of our security measures, we cannot guarantee that a significant cyberattack will not occur. A successful attack on our information technology systems could have significant consequences for our business. While we devote resources to our security measures to protect our systems and information, these measures cannot provide absolute security. No security measure is infallible.
Biggest changeHowever, we acknowledge that cybersecurity threats are continually evolving and the possibility of future cybersecurity incidents remains. Despite the implementation of our security measures, we cannot guarantee that a significant cyberattack will not occur. A successful attack on our information technology systems could have significant consequences for our business.
We monitor our information technology systems, including through the use of information security procedures and risk management systems, and implement initiatives aimed at improving our cybersecurity measures. Our process for assessing, identifying, managing and addressing information security risks include: • Internalization of Information Security Management .
We monitor our information technology systems, including through the use of information security procedures and risk management systems, and implement initiatives aimed at improving our cybersecurity measures. Our process for assessing, identifying, managing and addressing information security risks include: • Information Security Management .
The Company completes an annual enterprise risk assessment that includes cybersecurity risks and mitigants. The results of the enterprise risk assessment are shared with the Board of Directors on an annual basis. • Implemented Programs for a Hybrid Work Environment. We have implemented initiatives relating to mobile device management, cloud storage services, endpoint protection, and identity and access management.
The Company completes an enterprise risk assessment on a biennial basis that includes cybersecurity risks and mitigants. The results of each enterprise risk assessment are shared with the Board of Directors. • Implemented Programs for a Hybrid Work Environment. We have implemented initiatives relating to mobile device management, cloud storage services, endpoint protection, and identity and access management.
The IRP is designed to minimize the operational and financial impacts of an information security incident and is designed to be activated when a local incident responder determines that an incident has occurred. Similarly, our BCP provides details on information security incident response and subsequent business recovery actions. • Risk Identification and Mitigation.
The IRP is designed to minimize the operational and financial impacts of an information security incident and is designed to be activated when a local incident responder determines that an incident has occurred. Similarly, our BCP provides details on information security incident response and subsequent business recovery actions. 52 Table of Contents • Risk Identification and Mitigation.
The DRP prioritizes the swift recovery of information technology systems, data, and infrastructure and the efficient restoration of servers and applications to their normal operational state in the event of a significant disaster. • Insurance . We maintain a breach response insurance policy. 50 Table of Contents • Enterprise Risk Assessment .
The DRP prioritizes the swift recovery of information technology systems, data, and infrastructure and the efficient restoration of servers and applications to their normal operational state in the event of a significant disaster. • Insurance . We maintain a breach response insurance policy. • Enterprise Risk Assessment .
We have internalized our information security oversight by hiring a full time Head of Information Technology that has over 20 years of experience in managing information technology and guiding organizations through technology strategy, cybersecurity risk mitigation, information technology process improvement initiatives and digital transformations. He also possesses relevant experience in improving a company's cybersecurity posture and data privacy policies.
Our information security oversight is managed by a full time Head of Information Technology that has over 20 years of experience in managing information technology and guiding organizations through technology strategy, cybersecurity risk mitigation, information technology process improvement initiatives and digital transformations. He also possesses relevant experience in improving a company's cybersecurity posture and data privacy policies.
The consultant also assists us in managing cybersecurity risks associated with third-party service providers by administering a due diligence questionnaire for the Company's third-party service providers that includes a cybersecurity risk assessment and provides guidance for remediation of security gaps. • Current Plans and Procedures .
The Senior Cybersecurity Engineer also assists in managing cybersecurity risks associated with third-party service providers by administering a due diligence questionnaire for the Company's third-party service providers that includes a cybersecurity risk assessment and provides guidance for remediation of security gaps. • Third-Party Consultant. We also engage a third-party information security consultant to assist in managing our risk posture.
As of the date of this Report, though the Company and our service providers have experienced certain cybersecurity incidents, we are not aware of any previous cybersecurity incidents that have materially affected or are reasonably likely to materially affect the Company. However, we acknowledge that cybersecurity threats are continually evolving and the possibility of future cybersecurity incidents remains.
As of the date of this Annual Report on Form 10-K, though the Company and our service providers have experienced certain cybersecurity incidents, we are not aware of any previous cybersecurity incidents that have materially affected or are reasonably likely to materially affect the Company.
He holds a Bachelor of Science degree in Information Systems and oversees all of our information security initiatives, assesses cybersecurity risks, provides cybersecurity plans, identifies opportunities for the implementation of additional cybersecurity measures and provides cybersecurity training to our employees and executives. • Third-Party Consultant. We engage a third-party information security consultant to assist in managing our risk posture.
He holds a Bachelor of Science degree in Information Systems and oversees all of our information security initiatives, assesses cybersecurity risks, provides cybersecurity plans and identifies opportunities for the implementation of additional cybersecurity measures.
This consultant conducts periodic tests and analyses of our defensive and detective information security controls, including annual penetration tests and risk assessments as well as regular vulnerability scans and assessments. The consultant also provides live, interactive annual information security training to our employees and executive officers and monitors the effectiveness of such training through quarterly phishing campaigns.
The Senior Cybersecurity Engineer provides live, interactive annual information security training to our employees and executive officers and monitors the effectiveness of such training through quarterly phishing campaigns.
The Company has implemented and maintains an incident response plan (“IRP”) and a Business Continuity Plan (“BCP”).
This consultant conducts periodic tests and analyses of our defensive and detective information security controls, including annual penetration tests and risk assessments as well as regular vulnerability scans and assessments. • Current Plans and Procedures . The Company has implemented and maintains an incident response plan (“IRP”) and a business continuity plan (“BCP”).
Added
Our Information Technology team also includes a Senior Cybersecurity Engineer who has over 20 years of experience in Information Technology and Cybersecurity and holds multiple cybersecurity certifications such as Certified Ethical Hacker (CEH), Certified Information Systems Security Professional (CISSP) and Certified Cloud Security Professional (CCSP). He also holds a Bachelor of Science degree in Information Systems.
Added
While we devote resources to our security measures to protect our systems and information, these measures cannot provide absolute security. No security measure is infallible.

Item 2. Properties

Properties — owned and leased real estate

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Biggest change"Exhibits and Financial Statement Schedules—Schedule III—Real Estate and Accumulated Depreciation" for additional information on our single-family rental homes and consolidated multi-family properties, both in this Annual Report on Form 10-K, which are incorporated herein by reference.
Biggest change"Exhibits and Financial Statement Schedules—Schedule III—Real Estate and Accumulated Depreciation" for additional information on our single-family rental homes and consolidated multi-family properties, both in this Annual Report on Form 10-K, which are incorporated herein by reference. As of December 31, 2025, our principal executive and administrative offices are located in leased space at 90 Park Avenue, New York, NY 10016.
Item 2. PROPERTIES The Company has residential properties (or real estate owned) that it acquires, from time to time, through or in lieu of foreclosures on mortgage loans, or in connection with its investments in single-family rental homes and consolidated multi-family properties. See Part II, Item 7.
Item 2. PROPERTIES The Company has residential properties (or real estate owned) that it acquires, from time to time, through or in lieu of foreclosures on mortgage loans, or in connection with its investments in single-family rental homes and consolidated multi-family properties. 53 Table of Contents See Part II, Item 7.
Removed
As of December 31, 2024, our principal executive and administrative offices are located in leased space at 90 Park Avenue, New York, New York 10016. We also maintain offices in Charlotte, North Carolina and Woodland Hills, California.
Added
We also maintain offices in Charlotte, NC, Woodland Hills, CA and Oakbrook Terrace, IL.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAs of the date of this Annual Report on Form 10-K, we do not believe that any of our current legal proceedings, individually or in the aggregate, will have a material adverse effect on our operations, financial condition or cash flows. Item 4. MINE SAFETY DISCLOSURES Not applicable. 51 Table of Contents PART II
Biggest changeAs of the date of this Annual Report on Form 10-K, we do not believe that any of our current legal proceedings, individually or in the aggregate, will have a material adverse effect on our operations, financial condition or cash flows. Item 4. MINE SAFETY DISCLOSURES Not applicable. 54 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe graph assumes (i) that the value of the investment in the Company’s common stock and each of the indices was $100 as of December 31, 2019 and (ii) the reinvestment of all dividends. 52 Table of Contents 12/19 12/20 12/21 12/22 12/23 12/24 New York Mortgage Trust, Inc. 100.00 63.89 70.69 56.00 53.07 42.78 Russell 2000 100.00 119.96 137.74 109.59 128.14 142.93 FTSE Nareit Mortgage REITs 100.00 81.23 93.93 68.94 79.52 79.80 The foregoing graph shall not be deemed incorporated by reference by any general statement incorporating by reference this Annual Report on Form 10-K into any filing under the Securities Act or under the Exchange Act, except to the extent we specifically incorporate this information by reference, and shall not otherwise by deemed "filed" with the SEC or deemed "soliciting material" under those acts. 53 Table of Contents Purchases of Equity Securities by the Issuer and Affiliated Purchasers Common Stock In February 2022, the Board of Directors approved a $200.0 million common stock repurchase program.
Biggest changeThe graph assumes (i) that the value of the investment in the Company’s common stock and each of the indices was $100 as of December 31, 2020 and (ii) the reinvestment of all dividends. 55 Table of Contents 12/20 12/21 12/22 12/23 12/24 12/25 Adamas Trust, Inc. 100.00 110.65 87.66 83.07 66.96 91.34 Russell 2000 100.00 114.82 91.35 106.82 119.14 134.40 FTSE Nareit Mortgage REITs 100.00 115.64 84.86 97.89 98.24 113.98 The foregoing graph shall not be deemed incorporated by reference by any general statement incorporating by reference this Annual Report on Form 10-K into any filing under the Securities Act or under the Exchange Act, except to the extent we specifically incorporate this information by reference, and shall not otherwise by deemed "filed" with the SEC or deemed "soliciting material" under those acts. 56 Table of Contents Purchases of Equity Securities by the Issuer and Affiliated Purchasers Common Stock In February 2022, the Board of Directors approved a $200.0 million common stock repurchase program.
The program, which expires on March 31, 2026, allows the Company to make repurchases of shares of common stock, from time to time, in open market transactions, through privately negotiated transactions or block trades or other means, in accordance with applicable securities laws and the rules and regulations of Nasdaq.
The program, which expires on March 31, 2027, allows the Company to make repurchases of shares of common stock, from time to time, in open market transactions, through privately negotiated transactions or block trades or other means, in accordance with applicable securities laws and the rules and regulations of Nasdaq.
The program, which expires on March 31, 2026, allows the Company to make repurchases of shares of preferred stock, from time to time, in open market transactions, through privately negotiated transactions or block trades or other means, in accordance with applicable securities laws and the rules and regulations of Nasdaq.
The program, which expires on March 31, 2027, allows the Company to make repurchases of shares of preferred stock, from time to time, in open market transactions, through privately negotiated transactions or block trades or other means, in accordance with applicable securities laws and the rules and regulations of Nasdaq.
Securities Authorized for Issuance Under Equity Compensation Plans The following table sets forth information as of December 31, 2024 with respect to compensation plans under which equity securities of the Company are authorized for issuance. The Company has no such plans that were not approved by security holders.
Securities Authorized for Issuance Under Equity Compensation Plans The following table sets forth information as of December 31, 2025 with respect to compensation plans under which equity securities of the Company are authorized for issuance. The Company has no such plans that were not approved by security holders.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters Our common stock is traded on the Nasdaq Global Select Market under the trading symbol “NYMT”.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters Our common stock is traded on the Nasdaq Global Select Market under the trading symbol “ADAM”.
During the three months ended December 31, 2024, the Company did not repurchase any shares of its preferred stock pursuant to the preferred stock repurchase program.
During the three months ended December 31, 2025, the Company did not repurchase any shares of its preferred stock pursuant to the preferred stock repurchase program.
As of December 31, 2024, we had 90,574,996 shares of common stock outstanding and there were approximately 140 registered holders of record of our common stock, which does not reflect the beneficial ownership of shares held in nominee name, which we are unable to estimate. We intend to pay regular quarterly dividends to holders of shares of our common stock.
As of December 31, 2025, we had 90,303,863 shares of common stock outstanding and there were approximately 117 registered holders of record of our common stock, which does not reflect the beneficial ownership of shares held in nominee name, which we are unable to estimate. We intend to pay regular quarterly dividends to holders of shares of our common stock.
During the three months ended December 31, 2024, the Company did not repurchase any shares of its common stock pursuant to the common stock repurchase program. As of December 31, 2024, $189.7 million of the approved amount remained available for the repurchase of shares of the Company's common stock under the common stock repurchase program.
During the three months ended December 31, 2025, the Company did not repurchase any shares of its common stock pursuant to the common stock repurchase program. As of December 31, 2025, $188.2 million of the approved amount remained available for the repurchase of shares of the Company's common stock under the common stock repurchase program.
Plan Category Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights Weighted Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance under Equity Compensation Plan Equity compensation plans approved by security holders 2,440,418 $ — 5,093,685 Performance Graph The following line graph sets forth, for the period from December 31, 2019 through December 31, 2024, a comparison of the percentage change in the cumulative total stockholder return on the Company’s common stock compared to the cumulative total return of the Russell 2000 Index and the FTSE National Association of Real Estate Investment Trusts Mortgage REIT (“FTSE Nareit Mortgage REITs”) Index.
Plan Category Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights Weighted Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance under Equity Compensation Plan Equity compensation plans approved by security holders 4,246,184 $ — 3,088,129 Performance Graph The following line graph sets forth, for the period from December 31, 2020 through December 31, 2025, a comparison of the percentage change in the cumulative total stockholder return on the Company’s common stock compared to the cumulative total return of the Russell 2000 Index and the FTSE National Association of Real Estate Investment Trusts Mortgage REIT (“FTSE Nareit Mortgage REITs”) Index.
As of December 31, 2024, $97.6 million of the approved amount remained available for the repurchase of shares of preferred stock under the preferred stock repurchase program. 54 Table of Contents Item 6. [RESERVED] 55 Table of Contents
As of December 31, 2025, $97.6 million of the approved amount remained available for the repurchase of shares of preferred stock under the preferred stock repurchase program. 57 Table of Contents Item 6. [RESERVED] 58 Table of Contents

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. [ Reserved ] 55 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 56 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 116 Item 8. Financial Statements and Supplementary Data 122 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 123 Item 9A. Controls and Procedures 124
Biggest changeItem 6. [ Reserved ] 58 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 59 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 125 Item 8. Financial Statements and Supplementary Data 131 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 132 Item 9A. Controls and Procedures 133

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe previously described increase in cost of financing combined with the decrease in yield to reduce net interest spread in 2023. 80 Table of Contents A reconciliation of GAAP interest income to adjusted interest income, GAAP interest expense to adjusted interest expense and GAAP total net interest income (loss) to adjusted net interest income (loss) for the years ended December 31, 2024, 2023 and 2022, respectively, is presented below (dollar amounts in thousands): Years Ended December 31, 2024 2023 2022 Single-Family Multi-Family Corporate/Other Total Single-Family Multi-Family Corporate/Other Total Single-Family Multi-Family Corporate/Other Total GAAP interest income $ 383,972 $ 10,755 $ 6,553 $ 401,280 $ 244,891 $ 13,707 $ 62 $ 258,660 $ 238,915 $ 13,499 $ 5,974 $ 258,388 GAAP interest expense (290,483) — (26,942) (317,425) (176,890) — (15,244) (192,134) (119,809) (152) (9,458) (129,419) GAAP total net interest income (loss) $ 93,489 $ 10,755 $ (20,389) $ 83,855 $ 68,001 $ 13,707 $ (15,182) $ 66,526 $ 119,106 $ 13,347 $ (3,484) $ 128,969 GAAP interest income $ 383,972 $ 10,755 $ 6,553 $ 401,280 $ 244,891 $ 13,707 $ 62 $ 258,660 $ 238,915 $ 13,499 $ 5,974 $ 258,388 Adjusted for: Consolidated SLST CDO interest expense (26,491) — — (26,491) (24,506) — — (24,506) (25,145) — — (25,145) Adjusted interest income $ 357,481 $ 10,755 $ 6,553 $ 374,789 $ 220,385 $ 13,707 $ 62 $ 234,154 $ 213,770 $ 13,499 $ 5,974 $ 233,243 GAAP interest expense $ (290,483) $ — $ (26,942) $ (317,425) $ (176,890) $ — $ (15,244) $ (192,134) $ (119,809) $ (152) $ (9,458) $ (129,419) Adjusted for: Consolidated SLST CDO interest expense 26,491 — — 26,491 24,506 — — 24,506 25,145 — — 25,145 Net interest benefit of interest rate swaps 26,593 — 4,322 30,915 9,642 — 2,445 12,087 — — — — Adjusted interest expense $ (237,399) $ — $ (22,620) $ (260,019) $ (142,742) $ — $ (12,799) $ (155,541) $ (94,664) $ (152) $ (9,458) $ (104,274) Adjusted net interest income (loss) (1) $ 120,082 $ 10,755 $ (16,067) $ 114,770 $ 77,643 $ 13,707 $ (12,737) $ 78,613 $ 119,106 $ 13,347 $ (3,484) $ 128,969 (1) Adjusted net interest income (loss) is calculated by subtracting adjusted interest expense from adjusted interest income.
Biggest changeA reconciliation of GAAP interest income to adjusted interest income, GAAP interest expense to adjusted interest expense and GAAP total net interest income (loss) to adjusted net interest income (loss) for the years ended December 31, 2025, 2024 and 2023, respectively, is presented below (dollar amounts in thousands): For the Year Ended December 31, 2025 Agency Single-Family Credit Multi-Family Credit Corporate/Other Total GAAP interest income $ 306,128 $ 276,976 $ 8,642 $ 10,202 $ 601,948 GAAP interest expense (211,169) (202,735) — (38,743) (452,647) GAAP total net interest income (loss) $ 94,959 $ 74,241 $ 8,642 $ (28,541) $ 149,301 GAAP interest income $ 306,128 $ 276,976 $ 8,642 $ 10,202 $ 601,948 Adjusted for: Consolidated SLST CDO interest expense — (37,547) — — (37,547) TBA dollar roll income 85 — — — 85 Adjusted interest income $ 306,213 $ 239,429 $ 8,642 $ 10,202 $ 564,486 GAAP interest expense $ (211,169) $ (202,735) $ — $ (38,743) $ (452,647) Adjusted for: Consolidated SLST CDO interest expense — 37,547 — — 37,547 Net interest benefit of interest rate swaps 13,437 1,051 — 1,544 16,032 Adjusted interest expense $ (197,732) $ (164,137) $ — $ (37,199) $ (399,068) Adjusted net interest income (loss) (1) $ 108,481 $ 75,292 $ 8,642 $ (26,997) $ 165,418 85 Table of Contents For the Year Ended December 31, 2024 Agency Single-Family Credit Multi-Family Credit Corporate/Other Total GAAP interest income $ 156,706 $ 227,277 $ 10,755 $ 6,542 $ 401,280 GAAP interest expense (124,415) (172,102) — (20,908) (317,425) GAAP total net interest income (loss) $ 32,291 $ 55,175 $ 10,755 $ (14,366) $ 83,855 GAAP interest income $ 156,706 $ 227,277 $ 10,755 $ 6,542 $ 401,280 Adjusted for: Consolidated SLST CDO interest expense — (26,491) — — (26,491) Adjusted interest income $ 156,706 $ 200,786 $ 10,755 $ 6,542 $ 374,789 GAAP interest expense $ (124,415) $ (172,102) $ — $ (20,908) $ (317,425) Adjusted for: Consolidated SLST CDO interest expense — 26,491 — — 26,491 Net interest benefit of interest rate swaps 26,593 704 — 3,618 30,915 Adjusted interest expense $ (97,822) $ (144,907) $ — $ (17,290) $ (260,019) Adjusted net interest income (loss) (1) $ 58,884 $ 55,879 $ 10,755 $ (10,748) $ 114,770 For the Year Ended December 31, 2023 Agency Single-Family Credit Multi-Family Credit Corporate/Other Total GAAP interest income $ 51,271 $ 193,620 $ 13,707 $ 62 $ 258,660 GAAP interest expense (41,011) (140,492) — (10,631) (192,134) GAAP total net interest income (loss) $ 10,260 $ 53,128 $ 13,707 $ (10,569) $ 66,526 GAAP interest income $ 51,271 $ 193,620 $ 13,707 $ 62 $ 258,660 Adjusted for: Consolidated SLST CDO interest expense — (24,506) — — (24,506) Adjusted interest income $ 51,271 $ 169,114 $ 13,707 $ 62 $ 234,154 GAAP interest expense $ (41,011) $ (140,492) $ — $ (10,631) $ (192,134) Adjusted for: Consolidated SLST CDO interest expense — 24,506 — — 24,506 Net interest benefit of interest rate swaps 9,642 — — 2,445 12,087 Adjusted interest expense $ (31,369) $ (115,986) $ — $ (8,186) $ (155,541) Adjusted net interest income (loss) (1) $ 19,902 $ 53,128 $ 13,707 $ (8,124) $ 78,613 (1) Adjusted net interest income (loss) is calculated by subtracting adjusted interest expense from adjusted interest income. 86 Table of Contents Earnings Available for Distribution Beginning with the quarter ended March 31, 2025, we present earnings available for distribution attributable to Company's common stockholders ("EAD") (and by calculation, EAD per common share) as a supplemental non-GAAP financial measure comparable to GAAP net income (loss) attributable to Company's common stockholders.
See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Balance Sheet Analysis—Equity Investments in Multi-Family Entities" for a reconciliation of equity investments in consolidated multi-family properties and disposal group held for sale to the Company's consolidated financial statements. (2) Represents the Company's equity investments in consolidated multi-family properties that are held for sale in disposal group.
See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Balance Sheet Analysis—Equity Investments in Multi-Family Entities" for a reconciliation of equity investments in consolidated multi-family properties and disposal group held for sale to the Company's consolidated financial statements. (2) Represents the Company's equity investments in consolidated multi-family properties that are held for sale in disposal group.
Subsequent changes in fair value are reported in current period earnings and presented in unrealized (losses) gains, net on the Company’s consolidated statements of operations.
Subsequent changes in fair value are reported in current period earnings and presented in unrealized gains (losses), net on the Company’s consolidated statements of operations.
We have placed a greater emphasis on procuring, where appropriate, longer-termed and/or more committed financing arrangements for our credit investments, such as securitizations, term financings and corporate debt securities that provide less or no exposure to fluctuations in the collateral repricing determinations of financing counterparties or rapid liquidity reductions in repurchase agreement financing markets.
We have placed a greater emphasis on procuring, where appropriate, longer-termed and/or more committed financing arrangements for certain of our credit investments, such as securitizations, term financings and corporate debt securities that provide less or no exposure to fluctuations in the collateral repricing determinations of financing counterparties or rapid liquidity reductions in repurchase agreement financing markets.
Government, may materially adversely affect our business, financial condition and results of operations, and our ability to pay dividends to our shareholders” in Part I, Item “1A. Risk Factors” in this Annual Report on Form 10-K. The scope and nature of the actions the Federal Reserve and other governmental authorities will ultimately undertake are unknown and will continue to evolve.
Government, may materially adversely affect our business, financial condition and results of operations, and our ability to pay dividends to our shareholders” in Part I, Item “1A. Risk Factors” of this Annual Report on Form 10-K. The scope and nature of the actions the Federal Reserve or other governmental authorities will ultimately undertake are unknown and will continue to evolve.
See Note 14 in the Notes to Consolidated Financial Statements for further information regarding our CDOs. We also exclude mortgages payable on real estate as they are non-recourse debt for which we have no obligation for repayment. See Note 15 in the Notes to Consolidated Financial Statements for further information regarding our mortgages payable on real estate.
See Note 14 in the Notes to Consolidated Financial Statements for further information regarding our CDOs. We also exclude mortgages payable on real estate as they are non-recourse debt for which we have no obligation for repayment.
During the year ended December 31, 2024, the Company invested in a subordinated security issued by a Freddie Mac-sponsored residential loan securitization, resulting in the initial consolidation of $285.1 million of residential loans and $275.2 million of CDOs in the VIE.
During the year ended December 31, 2024, the Company invested in a subordinated security issued by a Freddie Mac-sponsored residential loan securitization, resulting in the initial consolidation of approximately $285.1 million of residential loans and approximately $275.2 million of CDOs in the VIE.
See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Balance Sheet Analysis—Equity Investments in Multi-Family Entities" for a reconciliation of equity investments in consolidated multi-family properties and disposal group held for sale to the Company's consolidated balance sheets.
(8) See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Balance Sheet Analysis—Equity Investments in Multi-Family Entities" for a reconciliation of equity investments in consolidated multi-family properties and disposal group held for sale to the Company's consolidated balance sheets.
The Company has purchased credit default swap index contracts under which a counterparty, in exchange for a premium, agrees to compensate the Company for the financial loss associated with the occurrence of a credit event in relation to a notional value of an index.
The Company has also purchased credit default swap index contracts under which a counterparty, in exchange for a premium, agrees to compensate the Company for the financial loss associated with the occurrence of a credit event in relation to a notional value of an index.
(3) The actual maturity of the Company's CDOs is primarily determined by the rate of principal prepayments on the assets of the issuing entity. The CDOs are also subject to redemption prior to the stated maturity according to the terms of the respective governing documents.
(3) The actual maturity of the Company's CDOs are primarily determined by the rate of principal prepayments on the assets of the issuing entity. The CDOs are also subject to redemption prior to the stated maturity according to the terms of the respective governing documents.
(3) Includes residential loans and real estate owned with an aggregate fair value of $524.6 million and single-family rental properties with a net carrying value of $134.6 million as of December 31, 2024.
Includes residential loans and real estate owned with an aggregate fair value of $524.6 million and single-family rental properties with a net carrying value of $134.6 million as of December 31, 2024.
(3) Adjusted book value per common share is calculated using the adjusted book value and the common shares outstanding for the periods indicated. 83 Table of Contents Critical Accounting Estimates We prepare our consolidated financial statements in conformity with GAAP, which requires the use of estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
(3) Adjusted book value per common share is calculated using the adjusted book value and the common shares outstanding for the periods indicated. 90 Table of Contents Critical Accounting Estimates We prepare our consolidated financial statements in conformity with GAAP, which requires the use of estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Projected interest payments are based on interest rates in effect and outstanding balances as of December 31, 2024. (2) We exclude our CDOs from the contractual obligations disclosed in the table above as this debt is non-recourse and not cross-collateralized and, therefore, must be satisfied exclusively from the proceeds of the residential loans and non-Agency RMBS held in securitization trusts.
Projected interest payments are based on interest rates in effect and outstanding balances as of December 31, 2025. (2) We exclude our CDOs from the contractual obligations disclosed in the table above as this debt is non-recourse and not cross-collateralized and, therefore, must be satisfied exclusively from the proceeds of the residential loans and non-Agency RMBS held in securitization trusts.
Based on current market conditions, our current investment portfolio, new investment initiatives, expectations to dispose of assets from time to time on terms favorable to us, leverage ratio and available and future possible financing arrangements, we believe our existing cash balances, funds available under our various financing arrangements and cash flows from operations will meet our liquidity requirements for at least the next 12 months.
Based on current market conditions, our current investments, new investment initiatives, expectations to dispose of assets from time to time on terms favorable to us, leverage ratio and available and future possible financing arrangements, we believe our existing cash balances, funds available under our various financing arrangements and cash flows from operations will meet our liquidity requirements for at least the next 12 months.
Refer to Item 7A., "Quantitative and Qualitative Disclosures about Market Risk—Fair Value Risk" for a quantitative interest rate sensitivity analysis of our investment portfolio. 84 Table of Contents Revenue Recognition Investment Securities Issued by Consolidated SLST Interest income on first loss subordinated securities and certain IOs issued by Consolidated SLST is recognized based on the securities' effective yield.
Refer to Item 7A., "Quantitative and Qualitative Disclosures about Market Risk—Fair Value Risk" for a quantitative interest rate sensitivity analysis of our investment portfolio. 91 Table of Contents Revenue Recognition - Investment Securities Issued by Consolidated SLST Interest income on first loss subordinated securities and certain IOs issued by Consolidated SLST is recognized based on the securities' effective yield.
We provide the following non-GAAP financial measures, in total and by investment category, for the respective periods: • adjusted interest income – calculated as our GAAP interest income reduced by the interest expense recognized on Consolidated SLST CDOs, • adjusted interest expense – calculated as our GAAP interest expense reduced by the interest expense recognized on Consolidated SLST CDOs and adjusted to include the net interest component of interest rate swaps, • adjusted net interest income (loss) – calculated by subtracting adjusted interest expense from adjusted interest income, • yield on average interest earning assets – calculated as the quotient of our adjusted interest income and our average interest earning assets and excludes all Consolidated SLST assets other than those securities owned by the Company, • average financing cost – calculated as the quotient of our adjusted interest expense and the average outstanding balance of our interest bearing liabilities, excluding Consolidated SLST CDOs and mortgages payable on real estate, and • net interest spread – calculated as the difference between our yield on average interest earning assets and our average financing cost.
We provide the following non-GAAP financial measures, in total and by investment category, for the respective periods: • adjusted interest income – calculated as our GAAP interest income reduced by the interest expense recognized on Consolidated SLST CDOs and adjusted to include TBA dollar roll income, • adjusted interest expense – calculated as our GAAP interest expense reduced by the interest expense recognized on Consolidated SLST CDOs and adjusted to include the net interest component of interest rate swaps, • adjusted net interest income (loss) – calculated by subtracting adjusted interest expense from adjusted interest income, • yield on average interest earning assets – calculated as the quotient of our adjusted interest income and our average interest earning assets and excludes all Consolidated SLST assets other than those securities owned by the Company, • average financing cost – calculated as the quotient of our adjusted interest expense and the average outstanding balance of our interest bearing liabilities, excluding Consolidated SLST CDOs and mortgages payable on real estate, and • net interest spread – calculated as the difference between our yield on average interest earning assets and our average financing cost.
Beginning in 2023 and through the year ended December 31, 2024, we have been expanding our holdings of Agency RMBS, which is more liquid than many if not all of the investments in our portfolio of credit investments. To expand our Agency RMBS portfolio, we have utilized mark-to-market repurchase agreement financing with terms of 30 days to 90 days.
Beginning in 2023 and through the year ended December 31, 2025, we have been expanding our holdings of Agency RMBS, which is more liquid than many if not all of the credit investments in our portfolio. To expand our Agency RMBS portfolio, we have utilized mark-to-market repurchase agreement financing with terms of 30 days to 90 days.
In considering additional adjustments to the target range for the federal funds rate, the Federal Reserve stated that it will carefully assess incoming data, the evolving outlook, and the balance of risks to the Federal Reserve’s dual mandate of achieving maximum employment and inflation at a rate of two percent over the longer run.
In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Federal Reserve stated that it will carefully assess incoming data, the evolving outlook, and the balance of risks to the Federal Reserve’s dual mandate of achieving maximum employment and inflation at a rate of two percent over the longer run.
The Company expects to roll outstanding amounts under its repurchase agreements into new repurchase agreements or other financings, or to repay outstanding amounts, prior to or at maturity. As of December 31, 2024, the Company had no repurchase agreement exposure where the amount of investment securities at risk was in excess of 5% of the Company's stockholders’ equity.
The Company expects to roll outstanding amounts under its repurchase agreements into new repurchase agreements or other financings, or to repay outstanding amounts, prior to or at maturity. As of December 31, 2025, the Company had no repurchase agreement exposure where the amount of investment securities at risk was in excess of 5% of the Company's stockholders’ equity.
(4) The Company has elected the fair value option for CDOs issued by its non-Agency RMBS re-securitization ( see Note 17 ) .
The Company has elected the fair value option for CDOs issued by its non-Agency RMBS re-securitization ( see Note 17 ) .
Accordingly, the Company determined that certain joint venture equity investments met the criteria to be classified as held for sale and the assets and liabilities of the respective Consolidated VIEs are included in assets and liabilities of disposal group held for sale on the accompanying consolidated balance sheets as of December 31, 2024 and 2023.
Accordingly, the Company determined that certain joint venture equity investments met the criteria to be classified as held for sale and the assets and liabilities of the respective Consolidated VIEs are included in assets and liabilities of disposal group held for sale on the accompanying consolidated balance sheets as of December 31, 2025 and 2024.
(7) See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Balance Sheet Analysis—Equity Investments in Multi-Family Entities" for a reconciliation of equity investments in consolidated multi-family properties and disposal group held for sale to the Company's consolidated balance sheets. 61 Table of Contents Current Market Conditions and Commentar y The results of our business operations are affected by a number of factors, many of which are beyond our control, and primarily depend on, among other things, the level of our net interest income and the market value of our assets, which are driven by numerous factors including changes in interest rates and the supply and demand for mortgage, housing and credit assets in the marketplace, our ability to identify and acquire assets on favorable terms, our ability to dispose of assets from time to time on favorable terms, the ability of our operating partners, tenants and borrowers of our loans and those that underlie our investment securities to meet their payment obligations, the terms and availability of adequate financing and capital, general economic and real estate conditions (both on a national and local level), the impact of government actions in the real estate, mortgage, credit and financial markets, and the credit performance of our credit sensitive assets.
See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Balance Sheet Analysis—Equity Investments in Multi-Family Entities" for a reconciliation of equity investments in consolidated multi-family properties and disposal group held for sale to the Company's consolidated balance sheets. 64 Table of Contents Current Market Conditions and Commentar y The results of our business operations are affected by a number of factors, many of which are beyond our control, and primarily depend on, among other things, the level of our net interest income and the market value of our assets, which are driven by numerous factors including changes in interest rates and the supply and demand for mortgage-, housing- and credit-related assets in the marketplace, market volatility, our ability to identify and acquire assets on favorable terms, our ability to dispose of assets from time to time on favorable terms, the ability of our operating partners, tenants and borrowers of our loans and those that underlie our investment securities to meet their payment obligations, our ability to control operating costs, the terms and availability of adequate financing and capital, general economic and real estate conditions (both on a national and local level), the impact of government actions in the real estate, mortgage, credit and financial markets, and the credit performance of our credit sensitive assets.
The Company is required to reconsider its evaluation of whether to consolidate a VIE each reporting period, based upon changes in the facts and circumstances pertaining to the VIE. As of December 31, 2024 and 2023, we owned 100% of the first loss subordinated securities of Consolidated SLST.
The Company is required to reconsider its evaluation of whether to consolidate a VIE each reporting period, based upon changes in the facts and circumstances pertaining to the VIE. As of December 31, 2025 and 2024, we owned 100% of the first loss subordinated securities of Consolidated SLST.
The selected historical operating and balance sheet data for the years ended and as of December 31, 2024, 2023, 2022, 2021 and 2020 have been derived from our historical financial statements. Prior year information has been conformed to current year financial statement presentation.
The selected historical operating and balance sheet data for the years ended and as of December 31, 2025, 2024, 2023, 2022 and 2021 have been derived from our historical financial statements. Prior year information has been conformed to current year financial statement presentation.
Although our estimates contemplate conditions as of December 31, 2024 and how we expect them to change in the future, it is reasonably possible that actual conditions could be different than anticipated in those estimates, which could materially affect reported amounts of assets, liabilities and accumulated other comprehensive loss at the date of the consolidated financial statements and the reported amounts of income, expenses and other comprehensive income (loss) during the periods presented.
Although our estimates contemplate conditions as of December 31, 2025 and how we expect them to change in the future, it is reasonably possible that actual conditions could be different than anticipated in those estimates, which could materially affect reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of income, expenses and other comprehensive income (loss) during the periods presented.
Our short-term (the 12 months ending December 31, 2025) and long-term (beyond December 31, 2025) liquidity requirements include ongoing commitments to repay borrowings, fund and maintain investments, comply with margin requirements, fund our operations, pay dividends to our stockholders and other general business needs.
Our short-term (the 12 months ending December 31, 2026) and long-term (beyond December 31, 2026) liquidity requirements include ongoing commitments to repay borrowings, fund and maintain investments, comply with margin requirements, fund our operations, pay dividends to our stockholders and other general business needs.
We continue to seek out assets and markets that provide compelling risk-adjusted returns through residential loan repurchase agreement financing with terms of one year or more or sustainable non-mark-to-market financing arrangements, including securitizations and non-mark-to-market repurchase agreement financing.
We continue to seek out assets and markets that provide compelling risk-adjusted returns through residential loan repurchase agreement financing with terms of one year or more or sustainable non-mark-to-market financing arrangements, including securitizations and non-mark-to-market repurchase agreement or warehouse facility financing.
As of December 31, 2024, we had assets available to be posted as margin which included liquid assets, such as unrestricted cash and cash equivalents, and unencumbered investment securities that could be monetized to pay down or collateralize a liability immediately.
As of December 31, 2025, we had assets available to be posted as margin which included liquid assets, such as unrestricted cash and cash equivalents, and unencumbered investment securities that could be monetized to pay down or collateralize a liability immediately.
There can be no assurance as to how, in the long term, these and other actions, as well as the negative impacts from ongoing geopolitical instability and uncertainty surrounding inflation, interest rates and the outlook for the U.S. and global economies, will affect the efficiency, liquidity and stability of the financial, credit and mortgage markets, and thus, our business.
There can be no assurance as to how, in the long term, these and other actions, as well as the negative impacts from ongoing geopolitical instability and uncertainty surrounding inflation, interest rates, U.S. tariff and trade policies and the outlook for the U.S. and global economies, will affect the efficiency, liquidity and stability of the financial, credit and mortgage markets, and thus, our business.
Because a portion of our assets are financed through repurchase agreements or CDOs, a portion of the proceeds from any sales of or principal repayments on our assets may be used to repay balances under these financing sources.
Because a portion of our assets are financed through repurchase agreements, warehouse facilities or CDOs, a portion of the proceeds from any sales of or principal repayments on our assets may be used to repay balances under these financing sources.
We believe that the presentation of adjusted book value per common share provides a useful measure for investors and us as it provides a consistent measure of our value, allows management to effectively consider our financial position and facilitates the comparison of our financial performance to that of our peers. 82 Table of Contents A reconciliation of GAAP book value to adjusted book value and calculation of adjusted book value per common share as of December 31, 2024 and 2023, respectively, is presented below (amounts in thousands, except per share data).
We believe that the presentation of adjusted book value per common share provides a useful measure for investors and us as it provides a consistent measure of our value, allows management to effectively consider our financial position and facilitates the comparison of our financial performance to that of our peers. 89 Table of Contents A reconciliation of GAAP book value to adjusted book value and calculation of adjusted book value per common share as of December 31, 2025 and 2024, respectively, is presented below (amounts in thousands, except per share data).
Additionally, a significant portion of cash flows from the sale of real estate held in Consolidated VIEs, if any, were used to repay outstanding mortgages payable on real estate held in Consolidated VIEs. Cash Flows from Financing Activities During the year ended December 31, 2024, our net cash flows provided by financing activities were $2.2 billion.
Additionally, a significant portion of cash flows from the sale of real estate held in Consolidated VIEs, if any, were used to repay outstanding mortgages payable on real estate held in Consolidated VIEs. Cash Flows from Financing Activities During the year ended December 31, 2025, our net cash flows provided by financing activities were $2.8 billion.
A number of the tables contain a “change” column that indicates the amount by which results from the year ended December 31, 2024 are greater or less than the results from the year ended December 31, 2023.
A number of the tables contain a “change” column that indicates the amount by which results from the year ended December 31, 2025 are greater or less than the results from the year ended December 31, 2024.
This was partially offset by paydowns on and extinguishment of CDOs, payments made on Consolidated SLST CDOs, net payments made on mortgages payable on real estate and dividend payments on both common and preferred stock. 111 Table of Contents Liquidity – Financing Arrangements As of December 31, 2024, we have outstanding short-term repurchase agreement financing on our investment securities, a form of collateralized short-term financing, with multiple financial institutions.
This was partially offset by paydowns on and extinguishment of CDOs, payments made on Consolidated SLST CDOs, net payments made on mortgages payable on real estate and dividend payments on both common and preferred stock. 119 Table of Contents Liquidity – Financing Arrangements As of December 31, 2025, we have outstanding short-term repurchase agreement financing on our investment securities, a form of collateralized short-term financing, with multiple financial institutions.
In addition, in the event a repurchase agreement counterparty defaults on its obligation to “re-sell” or return to us the assets that are securing the financing at the end of the term of the repurchase agreement, we would incur a loss on the transaction equal to the amount of “haircut” associated with the short-term repurchase agreement, which we sometimes refer to as the “amount at risk.” At December 31, 2024, we had longer-term repurchase agreements with initial terms of up to two years with multiple third-party financial institutions that are secured by certain of our residential loans, real estate owned and single-family rental properties.
In addition, in the event a repurchase agreement counterparty defaults on its obligation to “re-sell” or return to us the assets that are securing the financing at the end of the term of the repurchase agreement, we would incur a loss on the transaction equal to the amount of “haircut” associated with the short-term repurchase agreement, which we sometimes refer to as the “amount at risk.” At December 31, 2025, we had longer-term repurchase agreements with initial terms of up to three years with multiple third-party financial institutions that are secured by certain of our residential loans, real estate owned and single-family rental properties in our investment portfolio.
Subject to maintaining our qualification as a REIT and the maintenance of our exclusion from registration as an investment company under the Investment Company Act, we also may opportunistically acquire and manage various other types of mortgage-, residential housing- and other credit-related or alternative investments that we believe will compensate us appropriately for the risks associated with them, including, without limitation, CMBS, collateralized mortgage obligations, MSRs, excess mortgage servicing spreads, securities issued by newly originated securitizations, including credit sensitive securities from these securitizations, ABS and debt or equity investments in alternative assets or businesses.
Subject to maintaining our qualification as a REIT and the maintenance of our exclusion from registration as an investment company under the Investment Company Act, we also may opportunistically acquire and manage various other types of mortgage-, residential housing- and other credit-related or alternative investments that we believe will compensate us appropriately for the risks associated with them, including, without limitation, CMBS, collateralized mortgage obligations, MSRs, excess mortgage servicing spreads, preferred equity and joint venture equity investments in multi-family properties, securities issued by newly originated securitizations, including credit sensitive securities from these securitizations, ABS and debt or equity investments in alternative assets or businesses.
Unless otherwise specified, references in this section to increases or decreases in 2024 refer to the change in results for the year ended December 31, 2024 when compared to the year ended December 31, 2023.
Unless otherwise specified, references in this section to increases or decreases in 2025 refer to the change in results for the year ended December 31, 2025 when compared to the year ended December 31, 2024.
Weakening multi-family housing fundamentals, including, among other things, increasing supply of apartments and declining rents in the markets or submarkets in which we invest, increasing interest rates, widening capitalization rates and reduced liquidity for owners of multi-family properties, may cause our operating partners to fail to meet their obligations to us and/or contribute to reduced cash flows from and/or valuation declines for multi-family properties, and in turn, many of the multi-family investments that we own.
Weakening multi-family housing fundamentals, including, among other things, increasing supply of apartments and declining rents in the markets or submarkets in which we invest, increasing interest rates, widening capitalization rates and reduced liquidity for owners of multi-family properties, may cause our operating partners to fail to meet their obligations to us and/or contribute to reduced cash flows from and/or valuation declines for multi-family properties, and in turn, many of the multi-family investments that we own. 66 Table of Contents Credit Spreads.
For a discussion related to our results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022, please refer to Part II, Item 7.
For a discussion related to our results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023, please refer to Part II, Item 7.
As of December 31, 2024 , all of the Company's investment securities are accounted for using the fair value option. 76 Table of Contents Analysis of Changes in GAAP Book Value The following table analyzes the changes in GAAP book value of our common stock for the year ended December 31, 2024 (amounts in thousands, except per share): Year Ended December 31, 2024 Amount Shares Per Share (1) Beginning Balance $ 1,025,502 90,675 $ 11.31 Common stock issuance, net (2) 6,068 487 Common stock repurchases (3,493) (587) Balance after share activity 1,028,077 90,575 11.35 Adjustment of redeemable non-controlling interest to estimated redemption value (10,613) (0.12) Dividends and dividend equivalents declared (73,073) (0.81) Net change in accumulated other comprehensive loss: Investment securities available for sale (3) 4 — Net loss attributable to Company's common stockholders (103,785) (1.14) Ending Balance $ 840,610 90,575 $ 9.28 (1) Outstanding shares used to calculate book value per common share for the year ended December 31, 2024 are 90,574,996.
The following table analyzes the changes in GAAP book value of our common stock for the year ended December 31, 2024 (amounts in thousands, except per share): Year Ended December 31, 2024 Amount Shares Per Share (1) Beginning Balance $ 1,025,502 90,675 $ 11.31 Common stock issuance, net (2) 6,068 487 Common stock repurchases (3,493) (587) Balance after share activity 1,028,077 90,575 11.35 Adjustment of redeemable non-controlling interest to estimated redemption value (10,613) (0.12) Dividends and dividend equivalents declared (73,073) (0.81) Net change in accumulated other comprehensive loss: Investment securities available for sale (3) 4 — Net loss attributable to Company's common stockholders (103,785) (1.14) Ending Balance $ 840,610 90,575 $ 9.28 (1) Outstanding shares used to calculate book value per common share for the year ended December 31, 2024 are 90,574,996.
Our cash flow provided by operating activities differs from our net income due to these primary factors: (i) differences between (a) accretion, amortization, depreciation and recognition of income and losses recorded with respect to our investments and (b) the cash received therefrom and (ii) unrealized gains and losses on our investments (including impairment of real estate and loss on reclassification of disposal group).
Our cash flow provided by operating activities differs from our net income due to these primary factors: (i) differences between (a) accretion, amortization, depreciation and recognition of income and losses recorded with respect to our investments and (b) the cash received therefrom and (ii) unrealized gains and losses on our investments (including impairment of real estate).
The main sources of cash flows from financing activities were proceeds received from repurchase agreements and proceeds from the issuance of CDOs and senior unsecured notes.
The main sources of cash flows from financing activities were proceeds received from repurchase agreements and warehouse facilities and proceeds from the issuance of CDOs and senior unsecured notes.
By excluding our share of cumulative non-cash depreciation and amortization expenses related to real estate held at the end of the period for which an impairment has not been recognized, adjusted book value reflects the value, at their undepreciated basis, of our single-family rental properties and joint venture equity investments that the Company has determined to be recoverable at the end of the period.
By excluding our share of cumulative non-cash depreciation and amortization expenses related to real estate held at the end of the period for which an impairment has not been recognized, adjusted book value reflects the value, at their undepreciated basis, of our single-family rental properties, joint venture equity investments and cross-collateralized mezzanine lending investment that the Company has determined to be recoverable at the end of the period.
(5) Represents the Company's outstanding recourse repurchase agreement financing divided by the Company’s total stockholders’ equity. 70 Table of Contents Results of Operations The following discussion provides information regarding our results of operations for the years ended December 31, 2024 and 2023, including a comparison of year-over-year results and related commentary.
(5) Represents the Company's outstanding recourse repurchase agreement financing divided by the Company’s total stockholders’ equity. 73 Table of Contents Results of Operations The following discussion provides information regarding our results of operations for the years ended December 31, 2025 and 2024, including a comparison of year-over-year results and related commentary.
This was partially offset by principal repayments received on residential loans and investment securities, net proceeds from the sale of residential loans and real estate, net variation margin and payments received on derivative instruments and return of capital from equity investments.
This was partially offset by principal repayments received on residential loans, investment securities and preferred equity investments, net proceeds from the sale of investment securities, residential loans and real estate, net payments received from derivative instruments and return of capital from equity investments.
During the year ended December 31, 2024, the Company reduced the fair value of one defaulted preferred equity investment to zero as a result of developments with respect to the property, its financing and market conditions. This investment represents 1.8% of the total investment amount of the Mezzanine Lending portfolio.
During the year ended December 31, 2024, the Company reduced the fair value of one defaulted preferred equity investment to zero as a result of developments with respect to the property, its financing and market conditions. This investment represents 3.0% of the total investment amount of the Mezzanine Lending portfolio.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 23, 2024 and is available on the SEC’s website at www.sec.gov.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on February 21, 2025 and is available on the SEC’s website at www.sec.gov.
As of December 31, 2024, CDOs with an aggregate outstanding face amount of $1.5 billion contain an interest rate step-up feature whereby the interest rate increases by either 1.00%, 1.50%, 2.00%, or 3.00% on defined dates ranging between 24 months and 48 months after issuance, if the notes are not redeemed before such dates.
As of December 31, 2025, CDOs with an aggregate outstanding face amount of $1.9 billion contain an interest rate step-up feature whereby the interest rate increases by either 1.00%, 1.50%, or 3.00% on defined dates ranging between 24 months and 48 months after issuance, if the notes are not redeemed before such dates.
As a result of this transfer, we adjusted the carrying value of the long-lived assets in the Consolidated Real Estate VIE to the lower of the carrying amount before the assets were classified as held for sale adjusted for depreciation and amortization expense that would have been recognized had the assets been continuously classified as held and used and the fair value of the assets at the date of the transfer and recognized an approximately $14.6 million loss on reclassification of disposal group.
As a result of this transfer, we adjusted the carrying value of the long-lived assets in the Consolidated Real Estate VIE to the lower of the carrying amount before the assets were classified as held for sale adjusted for depreciation and amortization expense that would have been recognized had the assets been continuously classified as held and used and the fair value of the assets at the date of the transfer and recognized an approximately $14.6 million loss on reclassification of disposal group during the year ended December 31, 2024.
However, unlike our use of the fair value option for the assets in our investment portfolio, certain CDOs issued by our residential loan securitizations, certain senior unsecured notes and subordinated debentures that finance our investment portfolio assets are carried at amortized cost in our consolidated financial statements.
However, unlike our use of the fair value option for these assets, certain CDOs issued by our residential loan securitizations, certain senior unsecured notes and subordinated debentures that finance our investments are carried at amortized cost in our consolidated financial statements.
Preferred equity investments in the amounts of $73.4 million and $104.2 million are included in equity investments on the accompanying consolidated balance sheets as of December 31, 2024 and 2023, respectively. (2) The difference between the fair value and investment amount consists of any unrealized gain or loss. (3) Based upon investment amount and contractual preferred return rate.
Preferred equity investments in the amounts of $24.7 million and $73.4 million are included in equity investments on the accompanying consolidated balance sheets as of December 31, 2025 and 2024, respectively. (2) The difference between the fair value and investment amount consists of any unrealized gain or loss. (3) Based upon investment amount and contractual preferred return rate.
Accordingly, the Company consolidated the assets, liabilities, income and expenses of these VIEs in the accompanying consolidated financial statements with non-controlling interests for the third-party ownership of the joint ventures' membership interests.
Accordingly, the Company consolidated the assets, liabilities, income and expenses of these VIEs in the accompanying consolidated financial statements with non-controlling interests for the third-party ownership of the entities' membership interests.
Adjusted Net Interest Income (Loss) and Net Interest Spread Financial results for the Company during a given period include the net interest income earned on our investment portfolio of residential loans, investment securities and preferred equity investments and mezzanine loans, where the risks and payment characteristics are equivalent to and accounted for as loans (collectively, our “interest earning assets”).
Adjusted Net Interest Income (Loss) and Net Interest Spread Financial results for the Company during a given period include the net interest income earned on our investments, such as residential loans, residential loans held for sale, investment securities and preferred equity investments and mezzanine loans, where the risks and payment characteristics are equivalent to and accounted for as loans (collectively, our “interest earning assets”).
The expiration dates of both stock repurchase programs were extended from March 31, 2025 to March 31, 2026. 67 Table of Contents Capital Allocation The following provides an overview of the allocation of our total equity as of December 31, 2024 and 2023, respectively.
The expiration dates of both stock repurchase programs were extended from March 31, 2026 to March 31, 2027. 70 Table of Contents Capital Allocation The following provides an overview of the allocation of our total equity as of December 31, 2025 and 2024, respectively.
Tightening credit spreads generally increase the value of many of our credit sensitive assets, while widening credit spreads tend to have a negative impact on the value of many of our credit sensitive assets. 63 Table of Contents Financing Markets.
Tightening credit spreads generally increase the value of many of our credit sensitive assets, while widening credit spreads tend to have a negative impact on the value of many of our credit sensitive assets. Financing Markets.
(4) Average Interest Bearing Liabilities for the respective periods include repurchase agreements, residential loan securitization and non-Agency RMBS re-securitization CDOs, Convertible Notes, senior unsecured notes and subordinated debentures and exclude Consolidated SLST CDOs and mortgages payable on real estate as the Company does not directly incur interest expense on these liabilities that are consolidated for GAAP purposes.
(4) Average Interest Bearing Liabilities for the respective periods include repurchase agreements and warehouse facilities, residential loan securitization and non-Agency RMBS re-securitization CDOs, senior unsecured notes and subordinated debentures, to the extent applicable, and exclude Consolidated SLST CDOs and mortgages payable on real estate as the Company does not directly incur interest expense on these liabilities that are consolidated for GAAP purposes.
Subordinated Debentures As of December 31, 2024, certain of our wholly-owned subsidiaries had trust preferred securities outstanding of $45.0 million with a weighted average interest rate of 8.54% which are due in 2035. The securities are fully guaranteed by us with respect to distributions and amounts payable upon liquidation, redemption or repayment.
Subordinated Debentures As of December 31, 2025, certain of our wholly-owned subsidiaries had trust preferred securities outstanding of $45.0 million with a weighted average interest rate of 7.85% which are due in 2035. The securities are fully guaranteed by us with respect to distributions and amounts payable upon liquidation, redemption or repayment.
The Company did not repurchase any shares of its preferred stock during the year ended December 31, 2024. As of December 31, 2024, $97.6 million of the approved amount remained available for the repurchase of shares of preferred stock under the preferred stock repurchase program. The preferred stock repurchase program expires on March 31, 2026.
The Company did not repurchase any shares of its preferred stock during the year ended December 31, 2025. As of December 31, 2025, $97.6 million of the approved amount remained available for the repurchase of shares of preferred stock under the preferred stock repurchase program. The preferred stock repurchase program expires on March 31, 2027.
As of December 31, 2024, CDOs with an aggregate outstanding face amount of $70.9 million contain an interest rate step-up feature whereby the interest rate increases by 3.00% beginning July 2027, if the notes are not redeemed before such date.
As of December 31, 2025, CDOs with an aggregate outstanding face amount of $65.3 million contain an interest rate step-up feature whereby the interest rate increases by 3.00% beginning July 2027, if the notes are not redeemed before such date.
As of December 31, 2024, we had an aggregate amount at risk under repurchase agreements secured by residential loans, real estate owned and single-family rental properties of approximately $162.8 million, which represents the difference between the carrying value of the collateral pledged and the outstanding balance of our repurchase agreements.
As of December 31, 2025, we had an aggregate amount at risk under repurchase agreements and warehouse facilities secured by residential loans, real estate owned and single-family rental properties of approximately $133.8 million, which represents the difference between the carrying value of the collateral pledged and the outstanding balance of our repurchase agreements and warehouse facilities.
The Company determined that these joint venture entities are VIEs and that the Company is the primary beneficiary of all but two of these VIEs, resulting in consolidation of the VIEs where we are the primary beneficiary, including their assets, liabilities, income and expenses, in our consolidated financial statements in accordance with GAAP.
The Company determined that these entities are VIEs and that the Company is or was the primary beneficiary of all but two of these VIEs, resulting in consolidation of the VIEs where we are or were the primary beneficiary, including their assets, liabilities, income and expenses, in our consolidated financial statements in accordance with GAAP.
(4) The Company's net equity investment as of December 31, 2024 consists of $151.2 million of net equity investments in consolidated multi-family properties (including its preferred equity investment in a Consolidated VIE) and $19.5 million of net equity investments in disposal group held for sale.
The Company's net equity investment as of December 31, 2024 consists of $151.2 million of net equity investments in consolidated multi-family properties (including its preferred equity investment in a Consolidated VIE) and $19.5 million of net equity investments in disposal group held for sale. (4) See "Mezzanine Lending" above for description of preferred equity investment in Consolidated VIE.
The repurchase agreements secured by residential loans, real estate owned and single-family rental properties contain various covenants, including among other things, the maintenance of certain amounts of liquidity and stockholders' equity (as defined in the respective agreements).
The repurchase agreements and warehouse facilities secured by residential loans, residential loans held for sale, real estate owned and single-family rental properties contain various covenants, including among other things, the maintenance of certain amounts of liquidity and stockholders' equity (as defined in the respective agreements).
We will continue to explore additional financing arrangements to further strengthen our balance sheet and position ourselves for future investment opportunities, including, without limitation, additional issuances of our equity and debt securities and longer-termed financing arrangements; however, no assurance can be given that we will be able to access any such financing, or the size, timing or terms thereof. 110 Table of Contents Cash Flows and Liquidity for the Year Ended December 31, 2024 During the year ended December 31, 2024, net cash, cash equivalents and restricted cash decreased by $1.6 million.
We will continue to explore additional financing arrangements to further strengthen our balance sheet and position ourselves for future investment opportunities, including, without limitation, additional issuances of our equity and debt securities and longer-termed financing arrangements; however, no assurance can be given that we will be able to access any such financing, or the size, timing or terms thereof. 118 Table of Contents Cash Flows and Liquidity for the Year Ended December 31, 2025 During the year ended December 31, 2025, net cash, cash equivalents and restricted cash increased by $13.4 million.
During the terms of the repurchase agreements, proceeds from the residential loans, real estate owned and single-family rental properties will be applied to pay any price differential, if applicable, and to reduce the aggregate repurchase price of the collateral.
During the terms of the repurchase agreements and warehouse facilities, proceeds from the residential loans, residential loans held for sale, real estate owned and single-family rental properties will be applied to pay any price differential, if applicable, and to reduce the aggregate repurchase price of the collateral.
Our investment in Consolidated SLST as of December 31, 2024 and 2023 was limited to the RMBS comprised of first loss subordinated securities and IOs issued by the respective securitizations with an aggregate net carrying value of $148.5 million and $157.2 million, respectively.
Our investment in Consolidated SLST as of December 31, 2025 and 2024 was limited to the RMBS comprised of first loss subordinated securities and certain IOs issued by the respective securitizations with an aggregate net carrying value of $151.5 million and $148.5 million, respectively.
The Company determined that it gained the power to direct the activities, and became primary beneficiary, of the VIE and consolidated the VIE into its consolidated financial statements. During the year ended December 31, 2024, the Company negotiated a short-term maturity extension on one preferred equity investment that included an increase in preferred return rate to a current market rate.
The Company determined that it has the power to direct the activities of the VIE and consolidates this VIE into its consolidated financial statements. During the year ended December 31, 2024, the Company negotiated a short-term maturity extension on one preferred equity investment that included an increase in preferred return rate to a current market rate.
These measures remove the impact of Consolidated SLST that we consolidate in accordance with GAAP and include the net interest component of interest rate swaps utilized to hedge the variable cash flows associated with our variable-rate borrowings, which is included in gains (losses) on derivative instruments, net in the Company's consolidated statements of operations.
These measures remove the impact of Consolidated SLST that we consolidate in accordance with GAAP and include both the net interest component of interest rate swaps utilized to hedge the variable cash flows associated with our variable-rate borrowings and dollar roll income associated with TBAs, which are included in (losses) gains on derivative instruments, net in the Company's consolidated statements of operations.
(3) Excludes cash in the amount of $21.3 million held in the Company's equity investments in consolidated multi-family properties and equity investments in consolidated multi-family properties in disposal group held for sale. Restricted cash of $143.5 million is included in the Company's accompanying consolidated balance sheets in other assets.
(3) Excludes cash in the amount of $6.6 million held in the Company's equity investments in consolidated multi-family properties and equity investments in consolidated multi-family properties in disposal group held for sale. Restricted cash of $161.6 million is included in the Company's accompanying consolidated balance sheets in other assets.
As of December 31, 2024, Consolidated SLST subordinated bonds with a fair value of $114.0 million were held in a non-Agency RMBS re-securitization (see “Investment Securities Financing—Collateralized Debt Obligations” below). 96 Table of Contents Investment Securities Financing Repurchase Agreements As of December 31, 2024, the Company had $3.5 billion outstanding under repurchase agreements with third-party financial institutions to fund a portion of its investment securities available for sale and certain securities owned in Consolidated SLST.
As of December 31, 2025 and 2024, Consolidated SLST subordinated bonds with a fair value of $121.7 million and $114.0 million, respectively, were held in a non-Agency RMBS re-securitization (see “Investment Securities Financing—Collateralized Debt Obligations” below). 97 Table of Contents Investment Securities Financing Repurchase Agreements As of December 31, 2025, the Company had $6.2 billion outstanding under repurchase agreements with third-party financial institutions to fund a portion of its investment securities available for sale and certain securities owned in Consolidated SLST.
Commitment to Fund Business Purpose Loans As of December 31, 2024, the Company had commitments to fund up to $220.8 million of additional advances on existing business purpose loans. These commitments are generally subject to loan agreements with terms that must be met before we fund advances on the commitment.
Commitment to Fund Business Purpose Loans As of December 31, 2025, the Company had commitments to fund up to $149.4 million of additional advances on existing business purpose loans. These commitments are generally subject to loan agreements with terms that must be met before we fund advances on the commitment.
As of December 31, 2024, our Company recourse leverage ratio, which represents our total outstanding recourse repurchase agreement financing, subordinated debentures and senior unsecured notes divided by our total stockholders' equity, was approximately 3.0 to 1.
As of December 31, 2025, our Company recourse leverage ratio, which represents our total outstanding recourse repurchase agreement financing and warehouse facility financing, subordinated debentures and senior unsecured notes divided by our total stockholders' equity, was approximately 5.0 to 1.
A discussion of significant accounting policies is included in “Note 2 — Summary of Significant Accounting Policies” included in Item 8 of this Annual Report on Form 10-K. 86 Table of Contents Balance Sheet Analysis As of December 31, 2024, we had approximately $9.2 billion of total assets.
A discussion of significant accounting policies is included in “Note 2 — Summary of Significant Accounting Policies” included in Item 8 of this Annual Report on Form 10-K. 93 Table of Contents Balance Sheet Analysis As of December 31, 2025, we had approximately $12.6 billion of total assets.
We fund our investing and operating activities with a combination of cash flow from operations, proceeds from common and preferred equity and debt securities offerings, including senior unsecured notes and subordinated debentures, short-term and longer-term repurchase agreements and CDOs. A detailed discussion of our liquidity and capital resources is provided in “Liquidity and Capital Resources” elsewhere in this section.
We fund our investing and operating activities with a combination of cash flow from operations, proceeds from common and preferred equity and debt securities offerings, short-term and longer-term repurchase agreements and warehouse facilities and CDOs. A detailed discussion of our liquidity and capital resources is provided in “Liquidity and Capital Resources” elsewhere in this section.
By excluding the cumulative adjustment of redeemable non-controlling interests to estimated redemption value, adjusted book value more closely aligns the accounting treatment applied to these real estate assets and reflects our joint venture equity investment at its undepreciated basis.
By excluding the cumulative adjustment of redeemable non-controlling interests to estimated redemption value, adjusted book value more closely aligns the accounting treatment applied to these real estate assets and reflects our cross-collateralized mezzanine lending investment at its undepreciated basis.
For business purpose bridge loans, the Company calculates LTV as the ratio of the maximum unpaid principal balance of the loan, including unfunded commitments, to the estimated “after repaired” value of the collateral securing the related loan. 88 Table of Contents Characteristics of Our Acquired Residential Loans: Loan to Value at Purchase (1) December 31, 2024 December 31, 2023 50% or less 9.0 % 13.6 % >50% - 60% 9.7 % 10.9 % >60% - 70% 21.7 % 22.4 % >70% - 80% 38.0 % 29.5 % >80% - 90% 12.7 % 11.8 % >90% - 100% 4.7 % 6.0 % > 100% 4.2 % 5.8 % Total 100.0 % 100.0 % (1) For second mortgages, the Company calculates the combined LTV.
For business purpose bridge loans, the Company calculates LTV as the ratio of the maximum unpaid principal balance of the loan, including unfunded commitments, to the estimated “after repaired” value of the collateral securing the related loan. 100 Table of Contents Characteristics of Our Acquired and Originated Residential Loans: Loan to Value at Purchase (1) December 31, 2025 December 31, 2024 50% or less 7.4 % 9.0 % >50% - 60% 8.3 % 9.7 % >60% - 70% 21.7 % 21.7 % >70% - 80% 46.7 % 38.0 % >80% - 90% 9.6 % 12.7 % >90% - 100% 3.7 % 4.7 % > 100% 2.6 % 4.2 % Total 100.0 % 100.0 % (1) For second mortgages, the Company calculates the combined LTV.
Single-Family Homes and Residential Mortgage Market. Throughout 2024, the residential real estate market remained competitive for home buyers. Data released by the S&P Dow Jones Indices for their S&P CoreLogic Case-Shiller National Home Price NSA Indices for October 2024 showed that, on average, home prices increased 4.2% for the 20-City Composite over October 2023.
Single-Family Homes and Residential Mortgage Market . Throughout 2025, the residential real estate market remained competitive for home buyers. Data released by the S&P Dow Jones Indices for their S&P Cotality Case-Shiller U.S. National Home Price NSA Indices for October 2025 showed that, on average, home prices increased 1.3% for the 20-City Composite over October 2024.
The Company remains economically exposed to the subordinated positions in the portion of Consolidated SLST transferred to the securitization and continues to consolidate Consolidated SLST. 97 Table of Contents The following table presents a summary of CDOs issued by our non-Agency RMBS re-securitization as of December 31, 2024: December 31, 2024 Outstanding Face Amount Carrying Value Interest Rate (1)(2) Stated Maturity (3) Non-Agency RMBS re-securitization at fair value (4) $ 70,867 $ 70,757 7.38 % 2064 (1) Interest rate is calculated using the outstanding face amount and stated interest rate of notes issued by the securitization and not owned by the Company.
The Company remains economically exposed to the subordinated positions in the portion of Consolidated SLST transferred to the securitization and continues to consolidate Consolidated SLST. 98 Table of Contents The following table presents a summary of CDOs issued by our non-Agency RMBS re-securitization as of December 31, 2025 and 2024, respectively (dollar amounts in thousands): Outstanding Face Amount Carrying Value Interest Rate (1)(2) Stated Maturity (3) December 31, 2025 $ 65,331 $ 65,276 7.38 % 2064 December 31, 2024 70,867 70,757 7.38 % 2064 (1) Interest rate is calculated using the outstanding face amount and stated interest rate of notes issued by the securitization and not owned by the Company.
As of December 31, 2024, the weighted average interest rate for repurchase agreements secured by investment securities was 4.84%.
As of December 31, 2025, the weighted average interest rate for repurchase agreements secured by investment securities was 4.11%.
(2) Represents the weighted average debt service coverage ratio ("DSCR") of the underlying properties and excludes properties that are subject to a senior construction loan agreement. (3) DSCR affected by non-recurring expenses during the year ended December 31, 2024. (4) DSCR for this property affected by recent senior loan and Mezzanine Lending modifications.
(2) Represents the weighted average debt service coverage ratio ("DSCR") of the underlying properties and excludes properties that are subject to a senior construction loan agreement. (3) DSCR affected by non-recurring expenses during the year ended December 31, 2024.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe Company may also be required by lenders on repurchase agreements for residential loans to enter into interest rate cap contracts. 116 Table of Contents We utilize a model-based risk analysis system to assist in projecting interest rate-sensitive asset and liability portfolio performances over a scenario of different interest rates.
Biggest changeConversely, in a rising interest rate environment, loan origination volumes and gain on sale margins typically decline, and the fair value of these assets decreases, which can adversely affect Constructive’s results of operations. 125 Table of Contents We utilize a model-based risk analysis system to assist in projecting interest rate-sensitive asset and liability performance over a scenario of different interest rates.
Conversely, residential mortgage assets purchased for less than their then current balance, such as many of our residential loans, exhibit higher yields due to faster prepayments. Furthermore, actual prepayment speeds may differ from our modeled prepayment speed projections impacting the effectiveness of any hedges we may have in place to mitigate financing and/or fair value risk.
Conversely, residential mortgage assets purchased for less than their then current balance, such as many of our residential loans, may exhibit higher yields due to faster prepayments. Furthermore, actual prepayment speeds may differ from our modeled prepayment speed projections impacting the effectiveness of any hedges we may have in place to mitigate financing and/or fair value risk.
Fluctuations in interest rates will impact both the level of income and expense recorded on most of our assets and liabilities and the market value of all or substantially all of our interest-earning assets and interest-bearing liabilities, which in turn could have a material adverse effect on our net income, operating results, or financial condition. 117 Table of Contents Liquidity Risk Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain investments, pay dividends to our stockholders and other general business needs.
Fluctuations in interest rates will impact both the level of income and expense recorded on most of our assets and liabilities and the market value of all or substantially all of our interest-earning assets and interest-bearing liabilities, which in turn could have a material adverse effect on our net income, operating results, or financial condition. 126 Table of Contents Liquidity Risk Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain investments, pay dividends to our stockholders and other general business needs.
Actual results may differ materially from these projections due to changes in our portfolio assets and borrowings mix and due to developments in the domestic and global financial, mortgage and real estate markets.
Actual results may differ materially from these projections due to changes in our assets and borrowings mix and due to developments in the domestic and global financial, mortgage and real estate markets.
Although the use of a model to perform market value sensitivity analysis is widely accepted as a tool in identifying potential risk in a changing interest rate environment, it should be noted that the model does not take into consideration changes that may occur such as, but not limited to, changes in portfolio composition, financing strategies, market spreads, business volumes or overall market liquidity.
Although the use of a model to perform market value sensitivity analysis is widely accepted as a tool in identifying potential risk in a changing interest rate environment, it should be noted that the model does not take into consideration changes that may occur such as, but not limited to, changes in asset composition, financing strategies, market spreads, business volumes or overall market liquidity.
(2) Certain assumptions have been made in connection with the calculation of the information set forth in the table and, as such, there can be no assurance that assumed events will occur or that other events will not occur that would affect the outcomes. The base interest rate scenario assumes interest rates as of December 31, 2024.
(2) Certain assumptions have been made in connection with the calculation of the information set forth in the table and, as such, there can be no assurance that assumed events will occur or that other events will not occur that would affect the outcomes. The base interest rate scenario assumes interest rates as of December 31, 2025.
For example, we hold residential loans and RMBS, some of which may have fixed rates or interest rates that adjust on various dates that are not synchronized to the adjustment dates on our repurchase agreements. In general, the re-pricing of our repurchase agreements occurs more quickly than the re-pricing of our variable-interest rate assets.
For example, we hold residential loans and RMBS, some of which may have fixed rates or interest rates that adjust on various dates that are not synchronized to the adjustment dates on our repurchase agreements. In general, the re-pricing of our repurchase agreements and warehouse facilities occurs more quickly than the re-pricing of our variable-interest rate assets.
Accordingly, we make extensive use of an earnings simulation model to further analyze our level of interest rate risk. 120 Table of Contents Capital Market Risk We are exposed to risks related to the equity capital markets, and our related ability to raise capital through the issuance of our common stock, preferred stock or other equity instruments.
Accordingly, we make extensive use of an earnings simulation model to further analyze our level of interest rate risk. 129 Table of Contents Capital Market Risk We are exposed to risks related to the equity capital markets, and our related ability to raise capital through the issuance of our common stock, preferred stock or other equity instruments.
Based on the currently uncertain market environment, we expect the capital markets to remain volatile and uncertain at varying levels for the near future and this may adversely affect our ability to access capital to fund our operations, meet our obligations and make distributions to our stockholders. 121 Table of Contents
Based on the currently uncertain market environment, we expect the capital markets to remain volatile and uncertain at varying levels for the near future and this may adversely affect our ability to access capital to fund our operations, meet our obligations and make distributions to our stockholders. 130 Table of Contents
In general, we expect that, over time, changes in the net fair value of our portfolio attributable to interest rate changes may be offset, to the degree we are hedged, by changes in the value of our interest rate swaps or other financial instruments used for hedging purposes.
In general, we expect that, over time, changes in the net fair value of our net assets attributable to interest rate changes may be offset, to the degree we are hedged, by changes in the value of our interest rate swaps or other financial instruments used for hedging purposes.
In selecting the credit sensitive assets in our portfolio, we seek to identify and invest in assets with characteristics that we believe offset or limit our exposure to defaults. 118 Table of Contents We seek to manage credit risk through our pre-acquisition or pre-funding due diligence process, and by factoring projected credit losses into the purchase price we pay or loan terms we negotiate for all of our credit sensitive assets.
In selecting credit sensitive assets, we seek to identify and invest in assets with characteristics that we believe offset or limit our exposure to defaults. 127 Table of Contents We seek to manage credit risk through our pre-acquisition or pre-funding due diligence process, and by factoring projected credit losses into the purchase price we pay or loan terms we negotiate for all of our credit sensitive assets.
Additionally, if one or more of our repurchase agreement counterparties chooses not to provide ongoing funding, we may be unable to replace the financing through other lenders on favorable terms or at all.
Additionally, if one or more of our repurchase agreement or warehouse facility counterparties chooses not to provide ongoing funding, we may be unable to replace the financing through other lenders on favorable terms or at all.
Assumptions for interest rate-sensitive liabilities relate to, among other things, anticipated interest rates, collateral requirements as a percentage of repurchase agreement financings and amounts and terms of borrowings. As these assumptions may not be realized, adjusted net interest income results may therefore be significantly different from the annualized adjusted net interest income produced in our analyses.
Assumptions for interest rate-sensitive liabilities relate to, among other things, anticipated interest rates, collateral requirements as a percentage of repurchase agreement and warehouse facility financings and amounts and terms of borrowings. As these assumptions may not be realized, adjusted net interest income results may therefore be significantly different from the adjusted net interest income produced in our analyses.
We plan to meet liquidity through normal operations with the goal of avoiding unplanned sales of assets or emergency borrowing of funds. We are subject to “margin call” risk on a significant portion of our repurchase agreements and certain derivative instruments.
We plan to meet liquidity through normal operations with the goal of avoiding unplanned sales of assets or emergency borrowing of funds. We are subject to “margin call” risk on a significant portion of our repurchase agreements, warehouse facilities and derivative instruments.
Computation of the cash flows for interest rate-sensitive assets that may affect annualized adjusted net interest income are based on assumptions related to, among other things, prepayment speeds, slope of the yield curve, and composition and size of our portfolio.
Computation of the cash flows for interest rate-sensitive assets that may affect adjusted net interest income are based on assumptions related to, among other things, prepayment speeds, slope of the yield curve, and composition and size of our invested assets.
Developments in the financial markets include the likelihood of changing interest rates and the relationship of various interest rates and their impact on our portfolio yield, cost of funds and cash flows. The analytical methods that we use to assess and mitigate these market risks should not be considered projections of future events or operating performance.
Developments in the financial markets include the likelihood of changing interest rates and the relationship of various interest rates and their impact on our asset yields, cost of funds and cash flows. The analytical methods that we use to assess and mitigate these market risks should not be considered projections of future events or operating performance.
The floating rates that become effective at the conclusion of the fixed rate period on our Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock subject us to interest rate risk and could significantly increase the cost of dividends on such preferred stock.
The floating rates that became or will become effective at the conclusion of the fixed rate period on our Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock subject us to interest rate risk and could significantly increase the cost of dividends on such preferred stock.
Any future period of payment deferrals, forbearance, delinquencies, defaults, foreclosures or losses will likely adversely affect our net interest income and adjusted net interest income from multi-family loans, residential loans, and our RMBS investments and rental income and reduce the distributions we receive from our joint venture equity investments in multi-family apartment communities, the fair value of these assets, our ability to liquidate the collateral that may underlie these investments or obtain additional financing and the future profitability of our investments.
Any future period of payment deferrals, forbearance, delinquencies, defaults, foreclosures or losses will likely adversely affect our net interest income and adjusted net interest income from our residential loans, RMBS investments and multi-family loans and rental income and reduce the distributions we receive from our Mezzanine Lending and cross-collateralized mezzanine lending investments in multi-family apartment communities, the fair value of these assets, our ability to liquidate the collateral that may underlie these investments or obtain additional financing and the future profitability of our investments.
We also utilize longer-termed and/or more committed financing arrangements for certain of our credit investments, such as securitizations, term financings and corporate debt securities that provide less or no exposure to fluctuations in the collateral repricing determinations of financing counterparties or rapid liquidity reductions in repurchase agreement financing markets. These financings may involve greater expense relative to repurchase agreement funding.
We also utilize longer-termed and/or more committed financing arrangements for certain of our credit investments, such as securitizations, term financings and corporate debt securities that provide less or no exposure to fluctuations in the collateral repricing determinations of financing counterparties or rapid liquidity reductions in repurchase agreement financing markets.
We also formulate annual budgets and performance goals alongside our operating partners for use in measuring the ongoing investment performance and credit quality of our investments. Additionally, the Company's preferred equity and equity investments typically provide us with various rights and remedies to protect our investment.
We also formulate annual budgets and performance goals alongside our operating partners for use in measuring the ongoing investment performance and credit quality of our investments. Additionally, the Company's Mezzanine Lending and cross-collateralized mezzanine lending investments typically provide us with various rights and remedies to protect our investment.
While this table reflects the estimated impact of interest rate changes on the static portfolio, we actively manage our portfolio and continuously make adjustments to the size and composition of our asset and derivative hedge portfolios and interest-bearing liabilities. Actual results could differ significantly from those estimated in the table.
While this table reflects the estimated impact of interest rate changes on the static investment portfolio and residential loans held for sale, we actively manage our investments and continuously make adjustments to the size and composition of our asset and derivative hedge portfolios and interest-bearing liabilities. Actual results could differ significantly from those estimated in the table.
We undertake an in-depth assessment of the underlying collateral and securitization structure when investing in these assets, which may include modeling defaults, prepayments and losses across different scenarios. In addition, we are exposed to credit risk in our Mezzanine Lending and equity investments in owners of multi-family properties, including joint venture equity investments in multi-family apartment communities.
We undertake an in-depth assessment of the underlying collateral and securitization structure when investing in these assets, which may include modeling defaults, prepayments and losses across different scenarios. In addition, we are exposed to credit risk in our Mezzanine Lending and cross-collateralized mezzanine lending investments in owners of multi-family properties.
Such increased dividend costs could have an impact on net aggregate GAAP book value and adjusted book value. Our net interest income, adjusted net interest income and the fair value of our assets and our financing activities could be negatively affected by volatility in interest rates, as was the case in 2024.
Such increased dividend costs could have an impact on net aggregate GAAP book value and adjusted book value and our ability to make distributions to our stockholders. Our net interest income, adjusted net interest income and the fair value of our assets and our financing activities could be negatively affected by volatility in interest rates.
Based on the results of the model, the instantaneous changes in interest rates specified below would have had the following effect on adjusted net interest income based on our assets and liabilities as of December 31, 2024 (dollar amounts in thousands): Changes in Interest Rates (basis points) Changes in Adjusted Net Interest Income (1) (2) +200 $ (80,917) +100 $ (40,271) -100 $ 40,450 -200 $ 80,939 (1) Represents a non-GAAP financial measure.
Based on the results of the model, the instantaneous changes in interest rates specified below would have had the following effect on adjusted net interest income based on our assets and liabilities as of December 31, 2025 (dollar amounts in thousands): Changes in Interest Rates (basis points) Changes in Adjusted Net Interest Income (1) (2) +200 $ (135,741) +100 $ (67,840) -100 $ 67,831 -200 $ 135,720 (1) Represents a non-GAAP financial measure.
Fair Value Changes Changes in Interest Rates Changes in Fair Value (1) Percentage Change in Portfolio Fair Value (1) (basis points) (dollar amounts in thousands) +200 $(163,842) (2.82)% +100 $(63,153) (1.09)% Base — -100 $91,842 1.58% -200 $123,573 2.12% (1) Includes residential loans, Mezzanine Lending investments, investment securities, derivatives, mortgage servicing rights, residential loan securitizations, non-Agency RMBS re-securitization and senior unsecured notes at fair value.
Fair Value Changes Changes in Interest Rates Percentage Change in Portfolio Fair Value (1) (basis points) +200 (2.23)% +100 (1.59)% Base — -100 0.30% -200 0.79% (1) Includes residential loans, residential loans held for sale, Mezzanine Lending investments, investment securities, interest rate-sensitive derivatives, mortgage servicing rights, residential loan securitizations, non-Agency RMBS re-securitization and senior unsecured notes at fair value.
The table below presents the sensitivity of the fair value of our portfolio as of December 31, 2024, using a discounted cash flow simulation model assuming an instantaneous interest rate shift. Application of this method results in an estimation of the fair market value change of our assets, liabilities and hedging instruments per 100 basis point shift in interest rates.
Application of this method results in an estimation of the fair market value change of our assets, liabilities and hedging instruments per 100 basis point shift in interest rates.
Minor changes in assumptions or estimation methodologies can have a material effect on these derived or estimated fair values. 119 Table of Contents Our fair value estimates and assumptions are indicative of the interest rate and business environments as of December 31, 2024 and do not take into consideration the effects of subsequent changes.
Our fair value estimates and assumptions are indicative of the interest rate and business environments as of December 31, 2025 and do not take into consideration the effects of subsequent changes.
Fair Value Risk Changes in interest rates, market liquidity, credit quality and other factors also expose us to market value (fair value) fluctuation on our assets, liabilities and hedges.
We believe Constructive’s disciplined underwriting standards, which emphasize borrower credit quality, collateral valuation, and adherence to investor guidelines, mitigate these risks and support the credit quality of its loan production. 128 Table of Contents Fair Value Risk Changes in interest rates, market liquidity, credit quality and other factors also expose us to market value (fair value) fluctuation on our assets, liabilities and hedges.
Certain of our consolidated multi-family properties with variable-rate mortgages payable have entered into interest rate cap contracts as required by the respective mortgage loan agreements.
A consolidated multi-family property with variable-rate mortgages payable has entered into interest rate cap contracts as required by its mortgage loan agreement. The Company may also be required by lenders on repurchase agreements for residential loans to enter into interest rate cap contracts.
As a result, we believe our market value (fair value) risk has significantly increased.
As a result, we believe our market value (fair value) risk has significantly increased. Minor changes in assumptions or estimation methodologies can have a material effect on these derived or estimated fair values.
Added
Constructive’s primary exposure to interest rate risk arises from the impact of interest rate changes on its operating results and the fair value of its assets, including residential loans held for sale and IRLCs.
Added
In a declining interest rate environment, Constructive generally experiences higher loan origination volumes, improved gain on sale margins and increases in the fair value of its residential loans held for sale and IRLCs.
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These financings may at times involve greater expense relative to repurchase agreement funding.
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Constructive is also exposed to credit risk through its origination and sale of business purpose loans. This risk arises from potential borrower defaults while loans are held for sale. Although Constructive sells these loans to third-party investors in the secondary market without recourse, it provides customary representations and warranties regarding borrower credit information, loan documentation, and collateral quality.
Added
If these representations are breached, or if early payment defaults occur, Constructive may be required to repurchase the affected loans or indemnify investors for losses. Constructive records a provision for potential losses associated with these obligations based on historical experience and management’s assessment of incurred losses on previously sold loans that remain outstanding.
Added
The extent of such losses is influenced by economic conditions, housing market trends, investor repurchase practices, interest rate movements and the types of loans that are held for sale.
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The table below presents the sensitivity of the fair value of our net assets as of December 31, 2025, using a discounted cash flow simulation model assuming an instantaneous interest rate shift.

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