CMTG

• Strategic Progress & Core Priorities: Management's 2026 strategic priorities continue to be turning over the loan portfolio, resolving watchlist loans, repositioning REO assets, and deleveraging the balance sheet to enable future new capital allocation. The firm achieved $482 million of total loan and REO resolutions in Q2 2026, including 3 watchlist loans, reducing leverage and increasing liquidity. Year-to-date 2026 through end of July, the firm has resolved 10 loans totaling $1 billion of pre-charge-off UPB, 7 of which are watchlist loans totaling $647 million of UPB. Watchlist loan exposure has declined steadily from $2.7 billion at end-2024 to $1.7 billion at end-2025 to $1.1 billion as of Q2 2026 post-July resolutions.

• Credit & Valuation Adjustments: Lender-driven sale processes for portfolio assets revealed that some near-term market pricing fell short of management expectations, particularly for Sunbelt multifamily assets. Management took additional specific CECL reserves in Q2 2026 on certain office and Sunbelt multifamily loans, and reduced the carrying value of two REO assets reclassified to held for sale. Total provisions and write-downs resulted in a Q2 2026 book value of $8.58 per share, driven by adjustments to 9 loan and REO positions. Four loans were downgraded, with a total of $183 million in additional specific CECL provisions ($1.26 per share) taken in the quarter, plus a $30 million loss ($0.21 per share) recognized on REO reclassified to held for sale.

• Balance Sheet & Liquidity: In Q2 2026, the firm reduced outstanding net financings by ~$66 million, increasing the net debt-to-equity ratio to 2.0x from 1.7x at end-Q1 2026 due to book value declines from provisions. Post-July 2026 resolutions and additional financing repayments, the pro forma net debt-to-equity ratio fell back to 1.7x. Liquidity increased from $116 million in early May to $168 million as of July 24, up from $103 million at quarter end. The firm holds an unencumbered asset pool of $509 million, with planned sales of select assets expected to generate an additional $140 million in liquidity.

• Post-Quarter End Activity: Three watchlist loans and two additional performing loans were resolved in July 2026 post-quarter end, including a $70.7 million San Francisco office loan sale, a $70 million discounted payoff on a Salt Lake City multifamily loan, and full repayment of two multifamily loans totaling $223 million UPB.

• Management expects to be positioned to make new capital allocation decisions (including potential new loan originations, additional deleveraging, select REO asset investment, and share repurchases) in the coming quarters, with new originations likely to begin in late 2026 to early 2027, after meeting key milestones of further reducing watchlist assets, completing REO monetization, and deleveraging the corporate balance sheet.
• The loan portfolio is expected to continue to shrink significantly from its current $3.1 billion UPB size through the end of 2026 and into early 2027, as remaining watchlist assets are resolved and performing loans are refinanced/repayed, until the firm returns to active origination mode to rebuild the portfolio.
• Management acknowledges that returning to a largely performing portfolio, executing accretive transactions like share buybacks, and ultimately resuming dividend payments will take time, but expects continued execution of current strategic priorities will position the firm to meet these long-term objectives.

Claris Mortgage Trust is structured as a single mortgage and real estate investment portfolio, so separate product segment financial data is not provided in the call. Overall firm performance: GAAP net loss of $1.81 per share, distributable loss of $0.63 per share, and distributable loss of $0.07 per share prior to realized gains/losses. As of June 30 2026 after July resolutions, the total portfolio consists of 23 loans with $3.1 billion of unpaid principal balance (UPB) and 9 REO assets with a total carrying value of $724 million. The NYC hotel REO portfolio contributed $0.03 per share of distributable earnings, a $0.05 per share improvement from Q1 2026 and a $0.02 per share improvement from Q2 2025. Multifamily REO portfolio operating performance was in line with Q1 2026 results. Overall specific CECL reserves at quarter end totaled $517 million, equal to an average 32% of related UPB; general CECL reserves remained static at ~$50 million, increasing from 2.3% to 2.9% of UPB for loans subject to the general reserve quarter over quarter.

• Persistent above-target inflation, elevated interest rates, and ongoing geopolitical volatility have created significant pricing volatility in commercial real estate and loan markets, leading to wider bid-ask spreads and lower near-term market pricing than management expectations for some assets, particularly office and Sunbelt multifamily.
• Elevated interest rates increase investor return thresholds and create negative leverage environments for some asset classes, limiting equity capital availability for transactions even as debt capital remains widely available.
• Multifamily assets in the Sunbelt face ongoing elevated new supply deliveries through 2026 and 2027, which puts downward pressure on valuations even while overall absorption remains strong; performance is highly fragmented across sub-markets based on local supply, demand, and policy conditions.
• Management does not control the timeline of all portfolio resolutions (dependent on market conditions and borrower refinancing/asset sale activity), so the timing of returning to new originations and achieving strategic goals remains uncertain.
• While management has taken significant write-downs based on current market pricing from active sale processes, further book value declines are possible if market conditions worsen or remaining assets take longer to resolve than expected.

Q: What types of buyers are active in current sale processes, and has recent rate volatility had a chilling effect on transaction activity and pricing? / A: Most active buyers are local general partner operators focused on working out distressed assets, who partner with limited partner capital primarily from private family offices and individual private investors; there is far less participation from private equity and hedge funds currently. Rate volatility has raised investor return requirements, as LP investors are holding back allocations to wait for perceived better future opportunities. This pricing pressure is reflected in the additional CECL reserves the firm took this quarter, but management remains committed to turning over the portfolio at current market prices. Pricing is highly volatile currently, and the firm will take reserves to hold assets if bids are well below long-term value rather than selling at a discount.

Q: What is the timeline for resuming new loan originations, and what milestones need to be met before this happens? / A: Management is targeting new origination capability in late 2026 to early 2027. Before resuming originations, the firm plans to further reduce watchlist asset levels, continue executing REO monetization, and fully deleverage the balance sheet including both asset-level financings and the corporate term facility. The exact timeline is not fixed because the firm does not unilaterally control all resolution timelines, which depend on market conditions.

Q: How has credit performance trended relative to first quarter expectations, and where do management expect book value to trough? / A: The only material worsening is that buyer return expectations have increased since the start of the year, requiring further price cuts and write-downs to transact, which is reflected in the current lower book value. The pace of transaction activity remains strong, with $1 billion in year-to-date resolutions, and refinancing activity for performing loans remains robust. Management cannot give an exact trough level for book value, but notes that it has already taken significant aggressive write-downs based on active sale process pricing, and believes most of the required adjustment is now complete. Further small declines are possible if the firm continues to operate at a loss for additional quarters, but a large share of the write-down work is behind the firm.

Q: What is management's outlook for multifamily credit losses and Sunbelt cap rates? / A: Multifamily performance is extremely sub-market specific. The Sunbelt is facing elevated new unit deliveries through 2026 and 2027 (60% of total U.S. new supply), with pressure on lower quality assets despite strong overall absorption. If interest rates continue rising, Sunbelt multifamily cap rates will likely increase; if rates stabilize, there is optimism that the recent drop in new construction starts will rebalance supply and demand by late 2027. Outcomes are highly dependent on local supply/demand and policy, leading to the disparate loss severity seen across the industry.