cnls20260630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2026

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission file number: 000-56755

CNL STRATEGIC RESIDENTIAL CREDIT, INC.

(Exact name of registrant as specified in its charter)

Maryland

33-3001463

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

CNL Center at City Commons

450 South Orange Avenue, Ste 1400

Orlando, Florida

32801

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code (407) 650-1000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 12, 2026, the Company had 977,638 Class E shares and 243,800 Class FA shares.

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CNL Strategic Residential Credit, Inc.

INDEX

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Consolidated Balance Sheets	2
	Consolidated Statement of Operations	3
	Consolidated Statements of Stockholders’ Equity	4
	Consolidated Statement of Cash Flows	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	30
Item 4.	Controls and Procedures	33
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	35
Item 6.	Exhibits	35
Exhibit Index		36
Signatures		37

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PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

CNL Strategic Residential Credit, Inc.

CONSOLIDATED BALANCE SHEETS

	*June 30,*
	*2026*		*December 31,*
	*(unaudited)*		*2025*
ASSETS
Residential mortgage loans - at fair value	$	44,917,370	$	—
Mortgage servicing rights investments - at fair value		9,177,251		—
Cash		8,283,311		203,272
Receivables		867,602		66
Deferred financing costs		46,402		68,487
Prepaids and other assets		679,421		—
Due from related parties		1,109,163		—
Total assets	$	65,080,520	$	271,825
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Repurchase agreement, net of deferred financing costs of $356,856 (Note 4)	$	37,386,903	$	—
Accounts payable and accrued liabilities		185,029		68,675
Total liabilities		37,571,932		68,675
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, $0.001 par value, 100,000,000 shares authorized and unissued		—		—
Class E common stock, $0.001 par value, 50,000,000 shares authorized; 966,038 and 8,000 shares issued and outstanding, respectively		966		8
Class FA common stock, $0.001 par value, 100,000,000 shares authorized; 121,068 and 0 shares issued and outstanding, respectively		121		—
Class A common stock, $0.001 par value, 200,000,000 shares authorized and unissued		—		—
Class T common stock, $0.001 par value, 200,000,000 shares authorized and unissued		—		—
Class D common stock, $0.001 par value, 200,000,000 shares authorized and unissued		—		—
Class I common stock, $0.001 par value, 250,000,000 shares authorized and unissued		—		—
Additional paid-in capital, in excess of par		27,135,569		199,992
Retained earnings		371,932		3,150
Total stockholders’ equity		27,508,588		203,150
Total liabilities and stockholders’ equity	$	65,080,520	$	271,825

See accompanying notes to consolidated financial statements.

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CNL Strategic Residential Credit, Inc.

CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

	*Quarter Ended*		*Six Months Ended*
	*June 30,*		*June 30,*
	*2026*		*2026*
Interest Income, net:
Interest income	$	788,828	$	1,014,388
Interest expense		565,075		726,771
Net Interest Income		223,753		287,617

Other Income, net:
Unrealized gain on residential mortgage loans, mortgage servicing rights investments and derivatives, net		698,452		636,794
Income from mortgage servicing rights investments		317,600		558,160
Realized gain on residential mortgage loans		26,383		26,383
Other Income, net		1,042,435		1,221,337

Operating Expenses:
Professional services		223,024		770,318
Investment expenses		142,113		284,370
Director fees and expenses		49,250		175,245
General and administrative		46,605		83,762
Custodian fees		6,635		14,872
Total return incentive fees		8,216		9,008
Organization expense		5,298		7,134
Base management fees		5,518		6,966
Other expenses		1,908		5,478
Operating Expenses		488,567		1,357,153
Expense support		163,079		1,055,318
Net Expenses		325,488		301,835
Income Before Income Tax Expense		940,700		1,207,119
Income tax expense		683		683
Net Income	$	940,017	$	1,206,436

Earnings per common share
Class E	$	0.90	$	1.39
Class FA	$	1.21	$	2.13

Weighted average number of shares of common stock outstanding (basic and diluted)
Class E		966,038		817,833
Class FA		54,753		33,901

See accompanying notes to consolidated financial statements.

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CNL Strategic Residential Credit, Inc.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)

QUARTER AND six months ended June 30, 2026 and 2025

	*Common Stock*
					*Additional*						*Total*
	*Number*		*Par*		*Paid-In*			*Retained*			*Stockholders’*
	*of Shares*		*Value*		*Capital*			*Earnings*			*Equity*
Balance as of March 31, 2026		997,967	$	998	$	24,940,188		$	(58,508	)	$	24,882,678
Net income		—		—		—			940,017			940,017
Issuance of common stock		88,743		89		2,213,411			—			2,213,500
Distributions declared ⁽¹⁾		—		—		—			(509,577	)		(509,577	)
Issuance of common stock through distribution reinvestment plan		396		—		9,875			—			9,875
Offering costs		—		—		(27,905	)		—			(27,905	)
Balance as of June 30, 2026		1,087,106	$	1,087	$	27,135,569		$	371,932		$	27,508,588

	*Common Stock*
					*Additional*				*Total*
	*Number*		*Par*		*Paid-In*		*Retained*		*Stockholders’*
	*of Shares*		*Value*		*Capital*		*Earnings*		*Equity*
Balance as of March 31, 2025		8,000	$	8	$	199,992	$	—	$	200,000
Net income		—		—		—		—		—
Issuance of common stock		—		—		—		—		—
Balance as of June 30, 2025		8,000	$	8	$	199,992	$	—	$	200,000

See accompanying notes to consolidated financial statements.

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CNL Strategic Residential Credit, Inc.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)

QUARTER AND six months ended June 30, 2026 and 2025

	*Common Stock*
					*Additional*						*Total*
	*Number*		*Par*		*Paid-In*			*Retained*			*Stockholders’*
	*of Shares*		*Value*		*Capital*			*Earnings*			*Equity*
Balance as of January 1, 2026		8,000	$	8	$	199,992		$	3,150		$	203,150
Net income		—		—		—			1,206,436			1,206,436
Issuance of common stock		1,078,710		1,079		26,958,371			—			26,959,450
Distributions declared ⁽¹⁾		—		—		—			(837,654	)		(837,654	)
Issuance of common stock through distribution reinvestment plan		396		—		9,875			—			9,875
Offering costs		—		—		(32,669	)		—			(32,669	)
Balance as of June 30, 2026		1,087,106	$	1,087	$	27,135,569		$	371,932		$	27,508,588

	Common Stock
					Additional				Total
	*Number*		*Par*		*Paid-In*		*Retained*		*Stockholders’*
	*of Shares*		*Value*		*Capital*		*Earnings*		*Equity*
Balance as of January 21, 2025		—	$	—	$	—	$	—	$	—
Net income		—		—		—		—		—
Issuance of common stock		8,000		8		199,992		—		200,000
Balance as of June 30, 2025		8,000	$	8	$	199,992	$	—	$	200,000

FOOTNOTES:

⁽¹⁾	Distributions declared for the six months ended June 30, 2026 at $0.16667 per share of Class E common stock (the “Class E shares”) and Class FA common stock (the “Class FA shares”) on February 25, 2026, March 26, 2026, April 27, 2026, May 26, 2026 and June 23, 2026.

See accompanying notes to consolidated financial statements.

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CNL Strategic Residential Credit, Inc.

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

	*Six Months Ended*
	*June 30,*
	*2026*
Operating Activities:
Net income	$	1,206,436
Adjustments to reconcile net income to net cash used in operating activities:
Net amortization of discounts on residential mortgage loans		(81,751	)
Net realized gain on residential mortgage loans		(26,383	)
Net unrealized gain on residential mortgage loans, mortgage servicing rights investments and derivative contracts		(636,794	)
Amortization of deferred financing costs		130,355
Net change in:
Increase in receivables		(571,453	)
Increase in prepaid and other assets		(54,225	)
Increase in due from related parties		(1,122,131	)
Increase in accounts payable and accrued liabilities		184,654
Net cash used in operating activities		(971,292	)
Investing Activities:
Purchases of residential mortgage loans		(29,945,586	)
Proceeds from residential mortgage loans		351,075
Purchases of mortgage servicing rights investments		(9,223,645	)
Net cash used in investing activities		(38,818,156	)
Financing Activities:
Proceeds from issuance of common stock		26,959,450
Distributions paid, net of distributions reinvested		(827,779	)
Principal payments on repurchase agreement		(283,005	)
Borrowings under line of credit		6,700,000
Repayments of line of credit		(6,700,000	)
Proceeds from investments sold under agreement to repurchase		22,573,948
Deferred financing costs		(533,426	)
Offering costs paid in connection with issuance of common stock		(19,701	)
Net cash provided by financing activities		47,869,487
Net increase in cash		8,080,039
Cash, beginning of period		203,272
Cash, end of period	$	8,283,311

Supplemental disclosure of cash flow information and non-cash investing activities:
Cash paid for interest	$	561,786
Investing in securities using a repurchase agreement	$	15,452,816
Amounts incurred but not paid (including amounts due to related parties):
Accrued but unpaid offering costs	$	(12,968	)

See accompanying notes to consolidated financial statements.

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CNL STRATEGIC RESIDENTIAL CREDIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

QUARTER AND SIX MONTHS ENDED JUNE 30, 2026

1. Organization

CNL Strategic Residential Credit, Inc. (the “Company”) is a Maryland corporation formed on January 21, 2025. The Company and its subsidiaries are externally managed by CNL Residential Credit Manager, LLC (the “Advisor”), an affiliate of CNL Financial Group, LLC, and by Balbec Capital Management, L.P. (the “Sub-Advisor” and together with the Advisor, the “Advisors”), an affiliate of Balbec Capital, L.P. The Advisors are registered as investment advisers under the Investment Advisers Act of 1940, as amended.

The Company has entered into an advisory agreement (as the same may be amended or restated from time to time, the “Advisory Agreement”) with the Advisor, pursuant to which the Advisor is responsible for the overall management of the Company’s activities. The Company has also entered into an administrative services agreement (as the same may be amended or restated from time to time, the “Administrative Services Agreement”) with the Advisor, pursuant to which the Advisor will provide administrative services to the Company. The Company and the Advisor have entered into a sub-advisory agreement (as the same may be amended or restated from time to time, the “Sub-Advisory Agreement”) with the Sub-Advisor, pursuant to which the Sub-Advisor is responsible for the day-to-day management of the Company’s assets.

The Company’s investment strategy is to acquire, finance and manage a diversified portfolio of primarily U.S. performing and re-performing whole loan mortgages, mortgage servicing rights (“MSRs”) and residential mortgage-backed securities (“RMBS”). The Company has structured some of its investments in MSRs through other entities for which the returns are based on underlying MSR cash flows.

On March 26, 2025 (date of capitalization), the Company was capitalized with investments of $100,000 by the Advisor and $100,000 by an affiliate of the Sub-Advisor.

In September 2025, the Company commenced a private offering of its shares of common stock in reliance on an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), to investors who are accredited investors (as defined in Regulation D under the Securities Act) (the “Private Offering”). On January 29, 2026, the Company held an initial closing for Class E shares and Class FA shares in the Private Offering. As of June 30, 2026, the Company has raised aggregate gross proceeds from the Private Offering of $26,969,325, including $9,875 received through our distribution reinvestment plan.

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying financial statements have been prepared in accordance with principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company. In the opinion of management, all normal and recurring adjustments necessary to present fairly the financial condition of the Company at June 30, 2026 and results of operations for all periods presented have been made.

The consolidated statement of operations and consolidated statement of cash flows are not comparative due to minimal activity prior to the initial closing for Class E and Class FA shares on January 29, 2026. There was no activity for the quarter and six months ended June 30, 2025 in the consolidated statement of operations. The only activity for the six months ended June 30, 2025 in the consolidated statement of cash flows was the financing cash inflow relating to the initial capitalization of the Company of $100,000 by the Advisor and $100,000 by an affiliate of the Sub-Advisor.

The consolidated financial statements of the Company include the direct wholly owned subsidiaries that were formed to facilitate the Company’s investment strategy. All intercompany accounts and transactions have been eliminated. In addition, the Company consolidates entities established to facilitate transactions related to the acquisition and securitization of residential whole loans.

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CNL STRATEGIC RESIDENTIAL CREDIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

QUARTER AND SIX MONTHS ENDED JUNE 30, 2026

The Company consolidates all entities in which it has a controlling financial interest through majority ownership or voting rights and variable interest entities for which it is the primary beneficiary. In determining whether the Company has a controlling financial interest in a partially owned entity and the requirement to consolidate the accounts of that entity, it considers whether the entity is a variable interest entity (“VIE”) and whether the Company is the primary beneficiary. The Company is the primary beneficiary of a VIE when it has (i) the power to direct the most significant activities impacting the economic performance of the VIE and (ii) the obligation to absorb losses or receive benefits significant to the VIE. Entities that do not qualify as VIEs are generally considered voting interest entities (“VOEs”) and are evaluated for consolidation under the voting interest model. VOEs are consolidated when the Company controls the entity through a majority voting interest or other means.

As of June 30, 2026, the Company has consolidated one VIE of which the Company is the primary beneficiary, see Note 8, Variable Interest Entity.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements, the reported amounts of revenues and expenses during the reporting periods and the disclosure of contingent liabilities.

Cash

Cash consists of cash on deposit with financial institutions. The Company deposits its cash with highly-rated banking corporations and, at times, cash deposits may exceed the insured limits under applicable law.

Fair Value Measurements

The Company reports various investments at fair value in accordance with Accounting Standards Codification (“ASC”) 820, Fair Value Measurement. A fair value measurement represents the price at which an orderly transaction would occur between willing market participants at the measurement date. This definition of fair value focuses on exit price and prioritizes the use of market‑based inputs over entity‑specific inputs when determining fair value. In addition, the framework for measuring fair value establishes a three‑level hierarchy for fair value measurements based upon the observability of inputs to the valuation of an asset or liability as of the measurement date. See Note 6, Fair Value Measurements, for further discussion on fair value measurements.

The Company accounts for any purchases or sales of investments on a trade date basis. At the time of disposition, realized gains or losses on sales of investments are determined based on a specific identification basis and will be recorded as a component of “Realized gain on residential mortgage loans” in the consolidated statements of operations.

Residential Mortgage Loans and Mortgage Servicing Rights Investments at Fair Value

The Company’s investments in residential mortgage loans and mortgage servicing rights investments are recorded using the fair value option in ASC Topic 825 - Financial Instruments and therefore recorded at fair value in the consolidated balance sheets. Changes in fair value are reported in “Unrealized gain on residential mortgage loans, mortgage servicing rights investments and derivatives” in the consolidated statements of operations. See Note 7, Related Party Arrangements, for additional information on the mortgage servicing rights investments.

The residential mortgage loans are actively managed and monitored and, as appropriate, certain interest rate risks of the loans may be mitigated through the use of derivatives and mortgage servicing rights investments. The Company has elected not to designate the derivatives as qualifying accounting hedges, and therefore, they are carried at fair value. The changes in fair value of the loans are largely offset by changes in the fair value of the derivatives and mortgage servicing rights investments. The fair value option allows the Company to reduce the accounting volatility that would otherwise result from the asymmetry created by accounting for the financial instruments at the lower of cost or fair value and the derivatives at fair value.

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CNL STRATEGIC RESIDENTIAL CREDIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

QUARTER AND SIX MONTHS ENDED JUNE 30, 2026

Derivative Financial Instruments, at Fair Value

The Company uses interest rate futures derivative instruments to economically hedge a portion of its exposure to market risks, including interest rate risk. Derivatives are accounted for in accordance with ASC 815, Derivatives and Hedging, which requires recognition of all derivatives as either assets or liabilities at fair value on the consolidated balance sheets. These derivative financial instrument contracts are not designated as hedges for GAAP purposes; therefore, all changes in fair value are reported in “Unrealized loss on residential mortgage loans, mortgage servicing rights investments and derivatives” in the consolidated statements of operations. See Note 5, Derivative Financial Instruments, for further information.

Unrealized Gain (Loss)

The following table summarizes components of unrealized gain on residential mortgage loans, mortgage servicing rights investments and derivatives for the six months ended June 30, 2026:

	*Six Months Ended*
	*June 30,*
	*2026*
Unrealized gain on residential mortgage loans	$	57,992
Unrealized loss on mortgage servicing rights investments		(46,394	)
Unrealized gain on interest rate futures		625,196
Total unrealized gain on residential mortgage loans, mortgage servicing rights investments and derivatives, net	$	636,794

Revenue Recognition

Income from Residential Mortgage Loans

Interest income on residential mortgage loans is recognized using the effective interest method over the life of the loans. Interest income recognition is suspended when residential mortgage loans are placed on non-accrual status. Generally, residential mortgage loans and commercial mortgage loans are placed on non-accrual status when delinquent for more than ninety (90) days or when determined not to be probable of full collection. Interest accrued, but not collected, at the date residential mortgage loans are placed on non-accrual status is reversed against interest income and subsequently recognized only to the extent it is received in cash or until it qualifies for return to accrual status. Interest received after the loan becomes past due or impaired is applied to outstanding interest receivable, if applicable, and subsequently recognized as interest income as received.

Income from Mortgage Servicing Rights Investments

Income from mortgage servicing rights investments is recognized monthly based on the available cash in the special-purpose entities, which is based on cash receipts for certain MSR participation interests. Distributions that represent returns of capital in excess of profits and losses are credited to the investment cost rather than income. See Note 7, Related Party Arrangements, for further information.

Interest income on Cash

Interest income on money market and Insured Cash Sweep accounts is recognized on an accrual basis to the extent that the Company earns interest on cash deposited.

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CNL STRATEGIC RESIDENTIAL CREDIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

QUARTER AND SIX MONTHS ENDED JUNE 30, 2026

Accounts Receivable

The following table summarizes components of accounts receivable at June 30, 2026 and December 31, 2025:

	*June 30,*		*December 31,*
	*2026*		*2025*
Interest receivable	$	502,149	$	—
Principal receivable		296,084		—
Other receivables		69,369		66
Total accounts receivable	$	867,602	$	66

Organization and Offering Expenses

The Advisor and Sub-Advisor have agreed to advance organization and offering expenses associated with one or more of the Company’s offerings, including its Private Offering (including legal, accounting, and other expenses attributable to the organization, but excluding upfront selling commissions, dealer manager fees and shareholder servicing fees). Organization and offering expenses are recorded to the accompanying balance sheets only to the extent the Company receives gross proceeds and they do not exceed 1.5% of the cumulative gross proceeds from its offerings unless otherwise waived by the Advisor.

When recorded by the Company, organizational expenses are expensed as incurred, and offering expenses are charged to shareholders’ equity as incurred. Recognized amounts due to the Advisor but not paid are recognized as a liability on the balance sheet.

See Note 7, Related Party Arrangements for further information.

Repurchase Agreements

At times, the Company finances purchases of residential mortgage loans through the use of a repurchase agreement. The repurchase agreements are treated as collateralized financing transactions, which expire within approximately two years or less and are carried at their contractual amounts. Interest paid and accrued in accordance with repurchase agreements is recorded as interest expense.

Deferred Financing Costs

Financing costs, including upfront fees, commitment fees and legal fees related to borrowings (as further described in Note 4, Financing Arrangements) are deferred and amortized over the life of the related financing arrangement using the effective yield method. The amortization of deferred financing costs is included in interest expense in the Company’s consolidated statements of operations.

Earnings Per Share

Earnings per common share is determined by dividing net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period.

Distributions

The Company’s board of directors has declared and intends to continue to declare distributions based on monthly record dates. The Company’s distributions are paid in the same month as the declared record date. Distributions are made on all classes of the Company’s shares at the same time.

The Company has adopted a distribution reinvestment plan that provides for reinvestment of distributions on behalf of stockholders at the stockholders’ election for all share classes except for Class E.

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CNL STRATEGIC RESIDENTIAL CREDIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

QUARTER AND SIX MONTHS ENDED JUNE 30, 2026

Income Taxes

Prior to January 1, 2026, the Company was subject to U.S. federal and state income taxes as a taxable corporation. The Company intends to elect to be taxed as a REIT under the Internal Revenue Code commencing with its taxable year ending December 31, 2026 and generally will not be subject to U.S. federal corporate income taxes on its taxable income to the extent it annually distributes its net taxable income to its stockholders and maintains its qualification as a REIT.

In connection with that election, RCRED TRS Holding, Inc. ("TRS"), a wholly owned corporate subsidiary organized in 2025, elected taxable REIT subsidiary status effective January 1, 2026. TRS is subject to U.S. federal, state and local income taxes. Accordingly, beginning in 2026, the Company’s income tax provision will primarily relate to taxes incurred by TRS and certain state and local taxes.

The Company has not yet filed its initial tax return.

Risks and Uncertainties

The Company’s investment activities expose it to various types of risks that are associated with the financial instruments in which it invests. The significant types of financial risks to which the Company is exposed include, but are not limited to, credit risk, interest rate risk, liquidity risk and prepayment risk. Certain aspects of those risks are addressed below.

Credit Risk

Investment portfolios with debt instruments are subject to credit risk. Financial strength and solvency of a debtor influence credit risk. In addition, lack or inadequacy of collateral or credit enhancement for a debt instrument may affect its credit risk. Credit risk may change over the life of an instrument.

Interest Rate Risk

The Company is subject to interest rate risk, and typically the value of interest bearing securities (e.g., residential mortgage loans) will change inversely with changes in interest rates. As interest rates rise, the market value of fixed income securities tends to decrease and vice versa.

Subject to maintaining its qualification as a REIT and maintaining its exclusion from regulation as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”), the Company may utilize various derivative instruments and other hedging instruments to mitigate interest rate risk.

Liquidity Risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities or contingent liabilities. Among other things, liquidity could be impaired by an inability to access secured and unsecured sources of financing or to sell assets.

The Company has a financing facility that is structured as a repurchase agreement with a financial institution to finance the residential whole loans which are pledged as collateral. Amounts available to be borrowed under the repurchase agreement are dependent upon the fair value of the securities pledged as collateral, which fluctuates with changes in interest rates, type of security and liquidity conditions within the bank, mortgage finance and real estate industries. If the fair value of the pledged securities declines, lenders will typically require the Partnership to post additional collateral or pay down borrowings to re-establish agreed upon collateral requirements (“margin calls”).

If the fair value of the pledged securities increases, lenders may release collateral back to the Company. The repurchase agreement includes various financial and liquidity covenants for which the failure to comply would constitute an event of default. As of June 30, 2026, the Company was in compliance with all covenants.

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CNL STRATEGIC RESIDENTIAL CREDIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

QUARTER AND SIX MONTHS ENDED JUNE 30, 2026

Prepayment Risk

The frequency at which prepayments occur on residential mortgage loans will be affected by a variety of factors including the prevailing level of interest rates as well as economic, demographic, tax, social, legal, and other factors. Generally, mortgage obligors tend to prepay their mortgages when prevailing mortgage rates fall below the interest rates on their mortgage loans. The adverse effects of prepayments may impact the Company in two ways. First, particular investments may experience outright losses, as in the case of an interest‑only security in an environment of faster actual or anticipated prepayments. Second, particular investments may underperform relative to the financial instruments that the Company may have constructed to reduce specific financial risks for these investments, resulting in a loss to the Company.

Segment Reporting

An operating segment is defined as a component of a public entity that engages in business activities from which it may recognize revenues and incur expenses, has operating results that are regularly reviewed by the public entity’s chief operating decision maker (“CODM”) to make decisions about resources to be allocated to the segment and assess its performance, and has discrete financial information available. The Company’s CODM is its Chief Financial Officer. The Company has determined it currently operates in a single operating segment and has one reportable segment, which is to acquire, invest in, and finance mortgage-related assets. The CODM reviews net income on the Company's portfolio of residential mortgage loans, residential mortgage loans in securitization trusts, RMBS, and other assets as presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. Net income as used by the CODM in this context is consistent with that presented within the Company’s consolidated financial statements. Segment assets are reflected on the accompanying Balance Sheet as “total assets” and significant segment expenses are consistent with the accompanying statement of operations.

Recently Issued Accounting Standards Updates

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (or “ASU 2024-03”). The amendments in ASU 2024-03 primarily require entities to disclose additional details regarding certain expenses on both an annual and interim basis. ASU 2024-03 is effective for public business entities for fiscal years beginning after December 15, 2026. Early adoption is permitted. The Company has not completed an analysis of the impact of ASU 2024-03 but does not expect that the adoption of ASU 2024-03 will have a significant impact on its consolidated financial statement disclosures.

3. Residential Mortgage Loans and Mortgage Servicing Rights Investments - at Fair Value

Residential Mortgage Loans - at Fair Value

Residential mortgage loans are measured at fair value. The Company’s residential mortgage loans are primarily acquired loans on one-to-four family residential properties that are not considered to meet the definition of a “Qualified Mortgage” in accordance with guidelines adopted by the Consumer Financial Protection Bureau (“Non-QM loans”), a portion of which are performing or re-performing scratch and dent (S&D) mortgage loans. S&D mortgage loans are loans that contain imperfections, such as underwriting errors, incomplete documentation, or minor compliance issues identified after the loan was closed and funded. These flaws do not necessarily mean the borrower is in default; many S&D loans are still performing, meaning payments are being made on time.

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QUARTER AND SIX MONTHS ENDED JUNE 30, 2026

The following table sets forth the cost, unpaid principal balance, net discount on mortgage loans purchased, fair value, weighted average interest rate and weighted average remaining contractual maturity of the Company’s residential mortgage loan portfolio as of June 30, 2026:

	*June 30,*
	*2026*
Acquisition cost	$	44,751,243

Unpaid principal balance	$	47,122,776
Net discount on mortgage loans purchased		(2,263,398	)
Change in fair value		57,992
Fair Value	$	44,917,370

Weighted average interest rate		5.86	%

Weighted average remaining contractual maturity (years)		27.5

The following table sets forth data regarding the number of residential mortgage loans secured by residential real property which are 90 or more days past due and the recorded investment and unpaid principal balance of such loans as of June 30, 2026.

	June 30,
	2026
Number of mortgage loans 90 or more days past due		2
Recorded investment in mortgage loans 90 or more days past due	$	465,633
Unpaid principal balance of loans 90 or more days past due	$	505,228

No residential mortgage loans as of June 30, 2026 are in foreclosure proceedings.

Mortgage Servicing Rights Investments - at Fair Value

During 2026, the Company invested $6,749,861 in two special-purpose entities managed by Bungalow Residential, LLC or Bungalow Funding, LLC that acquire MSR participation interests for Federal Home Loan Mortgage Corporation mortgage loans for specified Servicing Concentration Risk (“SCR”) pools in exchange for an upfront cash payment. During 2026, RCRED NES acquired $2,473,784 in MSR participation interests for Federal Home Loan Mortgage Corporation mortgage loans for specified SCR pools in exchange for an upfront cash payment. Bungalow Residential, LLC and Bungalow Funding, LLC are affiliates of Balbec.

4. Financing Arrangements

Line of Credit

On December 31, 2025, the Company and Valley National Bank, a Tennessee banking corporation, (referred to as “Valley National Bank”) entered into a loan and security agreement (the “Loan Agreement”) for a revolving line of credit (the “Line of Credit”) for up to $15,000,000, subject to the Company’s available borrowing base. On May 22, 2026, the Loan Agreement was amended to permit the extension of credit of up to $5,000,000 to be used to satisfy Company liquidity covenants under existing repurchase agreement facilities (the “Amendment”). The available borrowing base will be equal to 100% of the amount held with the Company’s escrow agent, UMB Bank, N.A. The Company is required to pay interest on any borrowed amounts under the Line of Credit at a rate per year equal to the term secured overnight financing rate plus 2.75%.

Advances under the Line of Credit shall be repaid upon the earlier of the following: (i) 90 days from the date such advance was made or (ii) the Line of Credit maturity date. Unless extended, the Line of Credit has a maturity date of December 31, 2026. In connection with the Line of Credit, the Company paid a commitment fee to Valley National Bank of $37,500 plus the payment of Valley National Bank’s expenses associated with the Line of Credit of $31,175 in January 2026. In connection with the Amendment, the Company paid Valley National Bank’s expenses associated with the Amendment of $14,588 in June 2026. The unamortized commitment fee and deferred costs are included in “Deferred financing cost” in the Company’s consolidated balance sheets as of June 30, 2026.

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The Company may prepay, without penalty, all or any part of the borrowings under the Loan Agreement at any time. Under the Loan Agreement, the Company is required to comply with certain covenants including the requirement to provide certain financial and compliance reports to Valley National Bank. As described in the Loan Agreement, the Company is required to maintain cash accounts with Valley National Bank, including to repay outstanding borrowings with proceeds from the Company’s offering as they are swept at the end of the month, as a pledge of collateral to pay down the outstanding debt to the extent there are any borrowings outstanding under the Loan Agreement.

The Company had borrowed and repaid $6,700,000 under the Line of Credit for the period ended June 30, 2026. No amounts under the Line of Credit were outstanding as of June 30, 2026. No cash collateral was pledged as of June 30, 2026.

Repurchase Agreement

On January 30, 2026, RCRED Craftsman Administrator, LLC (“Craftsman”), an indirect, wholly-owned special-purpose financing subsidiary of the Company, entered into the master repurchase agreement (together with the related transaction documents, the “Repurchase Agreement”), with Goldman Sachs Bank USA (“Goldman Sachs”), to finance the acquisition by Craftsman of eligible loans as more particularly described in the Repurchase Agreement. The Repurchase Agreement provides for asset purchases by Goldman Sachs for a maximum amount of up to $400 million. Advances under the Repurchase Agreement accrue interest at a per annum rate equal to the Term SOFR (as defined in the Repurchase Agreement) plus a price differential margin as agreed upon by Goldman Sachs and Craftsman for each transaction. The maturity date of the facility is January 30, 2028, unless extended or earlier terminated in accordance with the terms of the Repurchase Agreement. In connection with the Repurchase Agreement, the Company provided a Guaranty (the “Guaranty”), which may become full recourse to the Company upon the occurrence of certain events as described in the Guaranty. The Repurchase Agreement and the Guaranty contain representations, warranties, covenants, events of default and indemnities that are customary for agreements of their type. The Guaranty requires that the Company’s cash liquidity shall not at any time fall below (i) for the six months following January 30, 2026, $5,000,000 and (ii) thereafter, $10,000,000.

On July 16, 2026, the Company and Goldman Sachs entered into an Amended and Restated Guaranty Agreement (“Guaranty Amendment”) which amends the Guaranty Agreement (the “Guaranty Agreement”) previously entered into by such parties to provide a guaranty to the Repurchase Agreement. The Guaranty Amendment extends the period during which the Company is required to maintain a lower cash liquidity covenant under the Guaranty Agreement to eleven months following January 30, 2026.

In connection with the Repurchase Agreement, the Company incurred legal fees of $450,538. The unamortized commitment fee and deferred costs are included in “Repurchase agreement, net of deferred financing costs” in the Company’s consolidated balance sheets as of June 30, 2026.

Amounts available to be borrowed under the Repurchase Agreement are dependent upon the fair value of the securities pledged as collateral, which fluctuates with changes in interest rates, type of security and liquidity conditions within the bank, mortgage finance and real estate industries. If the fair value of the pledged securities declines, lenders will typically require the Company to post additional collateral or pay down borrowings to re-establish agreed upon collateral requirements. If the fair value of the pledged securities increases, lenders may release collateral back to the Company. As of June 30, 2026, the Company was in compliance with all covenants.

The following table summarizes certain characteristics of the Repurchase Agreement as of June 30, 2026:

Asset Based Financing

Portfolio Pledged as Collateral

Weighted

Average

Interest

Maturity

Collateral

Interest

Principal

Rate

Date

Type

Principal

Fair Value

Rate

Repurchase agreement

37,743,759

5.51% (SOFR + 1.65% - 1.90%)

1/30/2028

Residential mortgage loans

47,122,776

44,917,370

5.86

Principal receivable

296,084

n/a

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QUARTER AND SIX MONTHS ENDED JUNE 30, 2026

5. Derivative Financial Instruments

The Company hedges a portion of its interest rate exposure by entering into interest rate futures contracts. Interest rate futures contracts are exchange-traded agreements that can be settled in cash based on interest rate movements at a future date. Due to the fact that interest rate futures contracts are exchange traded, there is minimal counterparty risk because the clearing house guarantees against default.

The unrealized gain or loss is equal to the value of the contract on the period-end date and changes to the value are recorded in net changes in unrealized gain or loss on investments in the consolidated statement of operations.

Notional amounts are the underlying reference amounts to indices or equities upon which the fair value of the derivative contracts traded by the Company are based. While notional amounts do not represent the current fair value and are not necessarily indicative of the future cash flows of the Company’s derivative contracts, the underlying price changes in relation to the variables specified by the notional amounts affect the fair value of these derivative financial instruments.

The following table sets forth the derivative instruments presented on the consolidated balance sheet and notional amounts as of June 30, 2026:

		*Derivatives Not Designated as Hedging Instruments*			*Number of Contracts*				Assets ⁽¹⁾				*Liabilities*				*Long Exposure*				*Short Exposure*
June 30, 2026		Interest rate futures				6			$	625,196			$	—			$	—			$	45,174,000

The gains arising from these derivative instruments in the consolidated statement of operations for the six months ended June 30, 2026 are set forth as follows:

				*Net Change in Unrealized*
	*Derivatives Not Designated*	*Net Realized Gains (Losses)*		*Appreciation (Depreciation)*
	*as Hedging Instruments*	*on Derivative Instruments*		on Derivative Instruments ⁽²⁾
June 30, 2026	Interest rate futures	$	—	$	625,196

The Company held no derivative instruments as of December 31, 2025 or for the six months ended June 30, 2025.

FOOTNOTES:

⁽¹⁾

Amounts related to the interest rate futures held by the Company are recorded at fair value and included in prepaid and other assets in the accompanying consolidated balance sheets.

⁽²⁾

Amounts related to the interest rate futures held by the Company are recorded at fair value and included in unrealized gain on investments, net in the accompanying consolidated statement of operations.

6. Fair Value Measurement

Definition and Hierarchy

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable or unobservable:

•

Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity.

•

Unobservable inputs are inputs that reflect the reporting entity’s own assumptions.

A fair value hierarchy for inputs is implemented in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs are used when available. The availability of valuation techniques and the ability to attain observable inputs can vary from investment to investment and are affected by a wide variety of factors, including the type of investment, whether the investment is newly issued and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the transaction.

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The fair value hierarchy is categorized into three broad levels based on the inputs as follows:

Level 1 - Valuations based on unadjusted, quoted prices in active markets for identical assets and liabilities.

Level 2 - Valuations based on quoted prices in an inactive market, or on models whose inputs are observable either directly or indirectly for substantially the full term of the assets and liabilities. Level 2 inputs include (i) quoted prices for similar assets in active markets; (ii) quoted prices for identical or similar assets in markets that are not active; (iii) inputs that are derived principally from or corroborated by observable market data by correlation or other means; and (iv) inputs other than quoted prices that are observable for the assets.

Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level of input that is significant to the fair value measurement. Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, and other factors. The availability of observable inputs is affected by a variety of factors. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each asset.

The Company’s board of directors is responsible for determining in good faith the fair value of the Company’s Level 3 investments in accordance with the Company’s valuation policy and procedures approved by the board of directors, based on, among other factors, the input of the Advisor, the Sub-Advisor, the Company’s audit committee, and independent third-party valuation firms. The determination of the fair value of the Company’s Level 3 assets for which market prices are not available, requires judgment.

For most of the Company’s assets, market prices will not be available. Due to the inherent uncertainty of determining the fair value of assets that do not have a readily available market value, the fair value of the assets may differ significantly from the values that would have been used had a readily available market value existed for such assets, and the differences could be material. Furthermore, through the valuation process, the Company’s board of directors may determine that the fair value of the Company’s Level 3 assets differs materially from the values that were provided by independent valuation firms.

For financial reporting purposes, the Company follows a fair value hierarchy established under GAAP that is used to determine the fair value of financial instruments. This hierarchy prioritizes relevant market inputs in order to determine an “exit price” at the measurement date, or the price at which an asset could be sold or a liability could be transferred in an orderly process that is not a forced liquidation or distressed sale. Level 1 inputs are observable inputs that reflect quoted prices for identical assets or liabilities in active markets. Level 2 inputs are observable inputs other than quoted prices for an asset or liability that are obtained through corroboration with observable market data. Level 3 inputs are unobservable inputs (e.g., the Company’s own data or assumptions) that are used when there is little, if any, relevant market activity for the asset or liability required to be measured at fair value.

In certain cases, inputs used to measure fair value fall into different levels of the fair value hierarchy. In such cases, the level at which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input requires judgment and considers factors specific to the asset or liability being measured.

Valuation Techniques and Inputs

Following are descriptions of the valuation methodologies used to measure the Company’s assets and liabilities measured at fair value:

Residential Mortgage Loans - The Company recognizes residential mortgage loans at fair value. Residential mortgage loans are categorized as Level 3 in the fair value hierarchy and valued using a Discounted Cash Flow ("DCF") approach in which the expected future cash flows (principal, interest, prepayments) are discounted to present value using a market participant discount rate.

Mortgage Servicing Rights Investments - Mortgage servicing rights investments' values are based on an evaluation of the net assets of the special-purpose entity holding the MSR participation interests, whereby the entity assets are valued by the present value of future cash flows from servicing certain loans, adjusted for prepayment, default risk, and servicing costs. Mortgage servicing rights investments are categorized as Level 3 in the fair value hierarchy.

Futures Contracts - Futures contracts that are traded on an exchange are valued at their last reported sales price as of the valuation date. Listed futures contracts are categorized in Level 1 of the fair value hierarchy.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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The following table sets forth information about the Company’s financial assets and liabilities measured at fair value as of June 30, 2026:

	*As of June 30, 2026*
	*Level 1*		*Level 2*		*Level 3*		*Total*
Assets, at fair value
Residential mortgage loans, at fair value	$	—	$	—	$	44,917,370	$	44,917,370
Mortgage servicing rights investments, at fair value		—		—		9,177,251		9,177,251
Other assets, at fair value ⁽¹⁾		625,196		—		—		625,196
Total assets, at fair value	$	625,196	$	—	$	54,094,621	$	54,719,817

FOOTNOTES:

⁽¹⁾	Represents unrealized gain on interest futures contracts.

The following table provides a reconciliation of investments for which Level 3 inputs were used in determining fair value for the six months ended June 30, 2026:

	*Six Months Ended June 30, 2026*
	*Residential*			*Mortgage*
	*Mortgage*			*Servicing Rights*
	*Loans*			*Investments*			*Total*
Fair value balance as of January 1, 2026	$	—		$	—		$	—
Additions		45,398,402			9,223,645			54,622,047
Principal repayment		(194,194	)		—			(194,194	)
Discount amortization, net		81,751			—			81,751
Disposals		(426,581	)		—			(426,581	)
Net change in fair value		57,992			(46,394	)		11,598
Fair value balance as of June 30, 2026	$	44,917,370		$	9,177,251		$	54,094,621

The ranges of unobservable inputs used in the fair value measurement of the Company’s Level 3 investments as of June 30, 2026, were as follows:

*As of June 30, 2026*
			*Principal*
	*Fair*		*Valuation*	*Unobservable*
Investment	*Value*		*Technique*	*Inputs*	*Range*		*Average*
Residential mortgage loans, at fair value	$	44,917,370	DCF	Discount Rate		6.50% - 7.50%		7.00	%
				Expected Life (years)	4.5 - 6.5 years		5.5 years
Mortgage servicing rights investments, at fair value		9,177,251	DCF	Discount Rate		9.01% - 9.02%		9.01	%
				Expected Life (years)	4.1 - 8.4 years		7.7 years
				Prepayment rate (CPR)		5.21% - 7.58%		7.21	%
				Default Rate (CDR)		0.12% - 0.13%		0.13	%
	$	54,094,621

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7. Related Party Arrangements

Equity Transactions

On March 26, 2025, the Company was capitalized through the purchase by the Advisor of 4,000 Class E shares for an aggregate purchase price of $100,000 and by Balbec Capital Holdings, L.P. (“Balbec”), an affiliate of the Company’s Sub-Advisor, of 4,000 Class E shares for an aggregate purchase price of $100,000. On January 29, 2026, the Company held an initial closing for its Private Offering. The initial closing included purchases of 96,000 Class E shares for an aggregate purchase price of $2,400,000 from each of the Advisor and Balbec.

When recorded by the Company, operational expenses are expensed as incurred. Any amounts due to the Advisor and Sub-Advisor but not paid are recognized as a liability on the balance sheet.

Mortgage Servicing Rights Investments Purchases

Organizational and Offering Expenses Waiver

In order to maximize cash available for investment during the launch of the Company, the Advisor and Sub-Advisor have provided written notice to the Company of their agreement to waive the organization and offering reimbursement related to January 2026 cumulative gross proceeds of $367,589 to which they are entitled under the Advisory Agreement and Sub-Advisory Agreement, respectively.

Distributions

Individuals and entities affiliated with the Advisor and Sub-Advisor owned approximately 236,000 shares as of June 30, 2026. These individuals and entities received distributions from the Company of approximately $118,000 and $196,667 during the quarter and six months ended June 30, 2026.

Summary of Related Party Fees and Expenses

Organization and Offering Reimbursement

The Company will reimburse the Advisor and the Sub-Advisor, along with their respective affiliates, for the organization and offering costs (other than selling commissions and dealer manager fees) they have incurred on the Company’s behalf only to the extent that such expenses do not exceed 1.5% of the cumulative gross proceeds from the Private Offering.

As of June 30, 2026, the Advisor has incurred organization and offering expenses on the Company’s behalf of approximately $196,249 and $1,554,010, respectively. As of June 30, 2026, the Sub-Advisor has incurred organization and offering expenses on the Company’s behalf of approximately $85,430 and $5,206, respectively. These organization and offering expenses are not recorded on the accompanying consolidated balance sheets because of the limit of 1.5% of the cumulative gross proceeds from the Private Offering.

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Base Management Fees

The Company pays each of the Advisor and the Sub-Advisor 50% of the total base management fee for their services under the Advisory Agreement and Sub-Advisory Agreement subject to any reduction or deferral of any such fees pursuant to the expense support and conditional reimbursement agreement between the Company, the Advisor and the Sub-Advisor, as amended (the “Expense Support and Conditional Reimbursement Agreement”). The management fee shall be calculated for each share class at an annual rate of (i) 1.25% of NAV for Class A common stock (the “Class A shares”), Class I common stock (the “Class I shares”), Class D common stock (the “Class D shares”) and Class T common stock (the “Class T shares”) (collectively, the “Non-Founder Shares”), and (ii) 1.00% of NAV for the Class FA shares (collectively, the “Founder Shares”) in each case, per annum and payable monthly in arrears and before giving effect to any accruals for the management fee, stockholder servicing fees and total return incentive fee. No management fee will be payable with respect to Class E shares.

Total Return Incentive Fees

The Company also pays each of the Advisor and the Sub-Advisor 50% of the total return incentive fee for their services under the Advisory Agreement and the Sub-Advisory Agreement.

The total return incentive fee is based on the Total Return to Stockholders (as defined below) for each share class in any calendar year, payable annually in arrears. The Company will accrue (but not pay) the total return incentive fee on a monthly basis, to the extent that it is earned on an annualized basis. The Company will perform a final reconciliation of the total return incentive fee calculation at the completion of each calendar year and the total return incentive fee shall be due and payable to the Advisor no later than ninety (90) calendar days following the end of the applicable calendar year. The total return incentive fee may be reduced or deferred by the Advisor and the Sub-Advisor under the Advisory Agreement, Sub-Advisory Agreement and the Expense Support and Conditional Reimbursement Agreement described below.

For purposes of this calculation, “Total Return to Stockholders” for each annualized period is calculated for each share class as (i) the change in the net asset value for such share class over such applicable period plus (ii) total distributions for such share class over such applicable period. The terms “Total Return to Non-Founder Stockholders” and “Total Return to Founder Stockholders” mean the Total Return to Stockholders specifically attributable to each particular share class of Non-Founder Shares or Founder Shares, as applicable.

The total return incentive fee for each share class is calculated as follows:

•

No total return incentive fee will be payable in any calendar year in which the annualized Total Return to Stockholders of a particular share class does not exceed 6% (the “Annual Preferred Return”). No total return incentive fee will be payable with respect to Class E shares.

•

As it relates to the Non-Founder Shares, all of the Total Return to Stockholders with respect to each particular share class of Non-Founder Shares, if any, that exceeds the Annual Preferred Return, but is less than or equal to 7.06%, or the “Non-Founder breakpoint,” in any calendar year, will be payable to the Advisors. 15% of the Total Return to Non-Founder Stockholders of a particular share class of Non-Founder Shares, calculated at each share class level based on the Total Return to Stockholders on Non-Founder Shares, if any, that exceeds the Non-Founder breakpoint, will be payable to the Advisors.

•

As it relates to Founder Shares, all of the Total Return to Founder Stockholders with respect to each particular share class of Founder Shares, if any, that exceeds the Annual Preferred Return, but is less than or equal to 6.86%, or the “Founder breakpoint,” in any calendar year, will be payable to the Advisors. 12.50% of the Total Return to Founder Stockholders of Founder Shares, calculated at each share class level based on the Total Return to Stockholders on Founder Shares, if any, that exceeds the Founder breakpoint, will be payable to the Advisors.

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•

For purposes of calculating the Total Return to Stockholders, the change in the Company’s net asset value is subject to a High Water Mark. The “High Water Mark” is equal to the highest year-end net asset value, for each share class of the Company since inception, adjusted for any special distributions resulting from the sale of the Company’s assets, provided such adjustment is approved by the Company’s board of directors. If, as of each calendar year end, the Company’s net asset value for the applicable share class is (A) above the High Water Mark, then, for such calendar year, the Total Return to Stockholders calculation will include the increase in the Company’s net asset value for such share class in excess of the High Water Mark, and (B) if the Company’s net asset value for the applicable share class is below the High Water Mark, for such calendar year, (i) any increase in the Company’s per share net asset value will be disregarded in the calculation of Total Return to Stockholders for such share class while (ii) any decrease in the Company’s per share net asset value will be included in the calculation of Total Return to Stockholders for such share class. For the year ending December 31, 2026, the High Water Marks which will apply to the incentive fee calculation will be $24.75 for Class FA, A, T, D and I shares.

Expense Support and Conditional Reimbursement

The Company entered into the Expense Support and Conditional Reimbursement Agreement with the Advisor and Sub-Advisor, which became effective on May 6, 2025, pursuant to which each of the Advisor and the Sub-Advisor agrees to reduce the payment of base management fees, total return incentive fees and the reimbursements of reimbursable expenses due to the Advisor and the Sub-Advisor under the Advisory Agreement and the Sub-Advisory Agreement, as applicable, to the extent that the Company’s annual regular cash distributions exceed its annual net income (with certain adjustments). The amount of such expense support is equal to the annual (calendar year) excess, if any, of (a) the distributions (as defined in the Expense Support and Conditional Reimbursement Agreement) declared and paid (net of the Company’s distribution reinvestment plan) to shareholders minus (b) the available operating funds, as defined in the Expense Support and Conditional Reimbursement Agreement (the “Expense Support”). For the calendar year ending December 31, 2026, the Expense Support amount may be equal to any negative available operating funds.

The Expense Support amount is borne equally by the Advisor and the Sub-Advisor and is calculated as of the last business day of the calendar year. Until the Expense Support and Conditional Reimbursement Agreement is terminated, the Advisor and Sub-Advisor shall equally conditionally reduce the payment of fees and reimbursements of reimbursable expenses in an amount equal to the conditional waiver amount (as defined in and subject to limitations described in the Expense Support and Conditional Reimbursement Agreement). The term of the Expense Support and Conditional Reimbursement Agreement includes an initial term of three years and will automatically renew for successive one-year terms. Expense support is paid by the Advisor and Sub-Advisor annually in arrears.

If, on the last business day of the calendar year, the annual (calendar year) year-to-date available operating funds exceed the sum of the annual (calendar year) year-to-date distributions paid per share class (the “Excess Operating Funds”), the Company uses such Excess Operating Funds to pay the Advisor and the Sub-Advisor all or a portion of the outstanding unreimbursed Expense Support amounts for each share class, as applicable, subject to certain conditions (the “Conditional Reimbursements”) as described further in the Expense Support and Conditional Reimbursement Agreement. The Company’s obligation to make Conditional Reimbursements shall automatically terminate and be of no further effect three years following the date on which the Expense Support amount was provided and to which such Conditional Reimbursement relates, as described further in the Expense Support and Conditional Reimbursement Agreement.

Administrative Services Fees

The Company pays the Advisor administrative services fees at an annual rate of 0.25% per annum of the NAV for each share class of the Company’s common stock. Administrative services fees are payable monthly in arrears.

Master Servicing Fees

PRP Advisors LLC, an affiliate of Balbec, is the master servicer for the Company’s residential mortgage loans and receives a fee for its services. The Company pays the Sub-Advisor for these fees at an annual rate of 0.25% per annum, calculated monthly based on the prior month’s fair value of residential mortgage loans, paid quarterly in arrears.

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CNL STRATEGIC RESIDENTIAL CREDIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

QUARTER AND SIX MONTHS ENDED JUNE 30, 2026

Related party fees and expenses incurred for the six months ended June 30, 2026, are summarized below:

		*Quarter Ended*		*Six Months Ended*
		*June 30,*		*June 30,*
Related Party	*Source Agreement & Description*	*2026*		*2026*
*Advisory Agreement and Sub-Advisory Agreement:*
Advisor and Sub-Advisor	Organization reimbursement⁽¹⁾	$	5,298	$	7,134
	Offering reimbursement		27,905		32,669
	Base management fees⁽¹⁾		5,518		6,966
	Total return incentive fees⁽¹⁾		8,216		9,008
*Amended and Restated Expense Support and Conditional Reimbursement Agreement:*
Advisor and Sub-Advisor	Expense support		163,079		1,055,318
Administrative Services Agreement:
Advisor	Administrative services fees⁽¹⁾		16,668		32,415
Advisory Agreement:
Advisor	Operating, administrative and compliance services⁽¹⁾		17,690		220,087
Master Servicing Agreement:
Sub-Advisor	Master servicing fees⁽¹⁾		22,690		28,982
Sub-Advisory Agreement:
Sub-Advisor	Operating services⁽¹⁾		134,487		157,727

FOOTNOTE:

⁽¹⁾

Expenses subject to Expense Support, if applicable.

The following table presents amounts due (to) from related parties net as of June 30, 2026:

	*Six Months Ended*
	*June 30,*
	*2026*
Due from related parties:
Expense support	$	1,055,318
Due from affiliate		134,086
Due from advisor		93,937
Total due from related parties		1,283,341
Due to related parties:
Total return incentive fees	$	(9,008	)
Base management fees		(4,896	)
Organization and offering expenses		(15,315	)
Accrued administrative services fee		(5,616	)
Accrued master servicing fee		(28,982	)
Due to sub-advisor		(110,361	)
Total due to related parties		(174,178	)
Due from related parties, net	$	1,109,163

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CNL STRATEGIC RESIDENTIAL CREDIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

QUARTER AND SIX MONTHS ENDED JUNE 30, 2026

8. Variable Interest Entity

The Company consolidates the assets, liabilities and the results of operations of Bungalow FHLMC RCRED NES, LLC ("RCRED NES"). RCRED NES acquires MSR participation interests for Federal Home Loan Mortgage Corporation mortgage loans for specified SCR pools in exchange for an upfront cash payment.

With respect to RCRED NES, its assets may only be used to satisfy its obligations. To the extent any cash or other consideration received by RCRED NES is insufficient to pay expenses, the Company would be required to make capital contributions in respect to such expenses. The creditors of RCRED NES have no recourse to the Company’s general assets with the exception of a partial guarantee related to a loan held by Bungalow Funding, LLC and Bungalow FHLMC TES Fund, LLC (collectively “Bungalow Group”). See Note 9, Commitments and Contingencies for further information.

The aggregate carrying amount and major classifications of the consolidated assets that could be used to settle obligations of the VIE as of June 30, 2026, were as follows:

	*As of June 30,*
	*2026*
Assets:
Mortgage servicing rights investments - at fair value	$	2,474,905
Accounts receivable	$	41,955

9. Commitments and Contingencies

The Company routinely enters into forward flow agreements with sellers, representing commitments to purchase qualifying accounts monthly within specified ranges and for an agreed minimum time period and price (as a percentage of face value). As of June 30, 2026, the Company had approximately $21,661,339 in commitments with US counterparties to purchase US mortgage loans.

During the six months ended June 30, 2026, RCRED Georgian 2026 Trust executed six forward trade contracts with Barclays Bank PLC (“Barclays”) to purchase residential mortgage whole loans with an aggregate unpaid principal balance of $16,256,252 within 90 days from the date the residential mortgage whole loans were purchased, unless mutually agreed to by RCRED Georgian 2026 Trust and Barclays.

The Company provided a partial guarantee related to a loan held by Bungalow Group. Bungalow Group must maintain certain covenants, including a minimum ratio of asset value to debt outstanding, adjusted equity and liquidity, at all times. If Bungalow Group breaches any covenant for any reason, the Company is required to fund up to 25% of the maximum loan amount (no amounts were outstanding as of June 30, 2026) to Bungalow Group to bring it into compliance and/or repay Bungalow Group’s lender. As of June 30, 2026, there was no debt balance outstanding at Bungalow Group linked to this guarantee, so the guarantee is for $0.

See Note 7, Related Party Transactions for information on contingent amounts due to the Advisor and Sub-Advisor for the reimbursement of organization and offering costs with respect to the Private Offering.

As of June 30, 2026, the Company is not subject to any material litigation nor is the Company aware of any material litigation threatened against it.

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CNL STRATEGIC RESIDENTIAL CREDIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

QUARTER AND SIX MONTHS ENDED JUNE 30, 2026

10. Equity

As of January 21, 2025, the Company was authorized to issue 1,000,000,000 shares of common stock, $0.001 par value per share, currently classified as Class E shares, Class FA shares, Class A shares, Class T shares, Class D shares, and Class I shares. As of January 21, 2025, the Company was authorized to issue 100,000,000 shares of preferred stock.

The Class E shares, Class FA shares, Class A shares, Class T shares, Class D shares, and Class I shares, all of which are collectively referred to herein as shares of common stock, have identical rights and privileges, including identical voting rights, but have differing fees that are payable on a class-specific basis. The per share amount of distributions on Class E shares, Class FA shares, Class A shares, Class T shares, Class D shares, and Class I shares will likely differ because of different class-specific expenses and distribution and stockholder servicing fees for each share class.

The following table describes the number of shares of each class of the Company’s common stock authorized and issued and outstanding as of June 30, 2026 and December 31, 2025:

	*As of*
	*June 30, 2026*				*December 31, 2025*
	*Shares*		*Shares Issued*		*Shares*		*Shares Issued*
	*Authorized*		*and Outstanding*		*Authorized*		*and Outstanding*
Class E		50,000,000		966,038		50,000,000		8,000
Class FA		100,000,000		121,068		100,000,000		—
Class A		200,000,000		—		200,000,000		—
Class T		200,000,000		—		200,000,000		—
Class D		200,000,000		—		200,000,000		—
Class I		250,000,000		—		250,000,000		—

11. Concentration Risk

Residential Mortgage Loans

As of June 30, 2026, the Company had geographical concentrations accounting for 10% or more of the unpaid principal balance of its residential mortgage loans as follows:

	Type of Concentration	As of June 30, 2026
State of California	Geographical		19.4	%
State of Florida	Geographical		13.7	%

Mortgage Servicing Rights Investments

As of June 30, 2026, the Company had geographical concentrations accounting for 10% or more of its MSR participation interests for the underlying Federal Home Loan Mortgage Corporation mortgage loans' unpaid principal balance as follows:

	Type of Concentration	As of June 30, 2026
State of California	Geographical		30.7	%
State of Kansas	Geographical		16.5	%

The Company considered counterparty risk regarding sub-servicers of underlying MSR participation interests for Federal Home Loan Mortgage Corporation mortgage loans managed by Bungalow Group. Bungalow Group relies on sub-servicers who are also government-sponsored entities approved to service the underlying MSRs.

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CNL STRATEGIC RESIDENTIAL CREDIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

QUARTER AND SIX MONTHS ENDED JUNE 30, 2026

12. Subsequent Events

Offerings

In July 2026, the Company’s board of directors approved new per share offering prices for each share class in the Private Offering. The new offering prices are effective as of July 31, 2026. The following table provides the new offering prices and applicable upfront selling commissions and dealer manager fees for each share class available in the Private Offering:

	Class FA		Class A		Class T		Class I
Effective July 31, 2026:
Offering Price, Per Share	$	24.99	$	27.31	$	26.24	$	24.99
Selling Commissions, Per Share		—		1.64		0.79		—
Dealer Manager Fees, Per Share		—		0.68		0.46		—

Capital Transactions

During the period July 1, 2026 through August 12, 2026, the Company received additional net proceeds from the Private Offering and distribution reinvestment plan of the following:

	*Proceeds from Private Offering*								*Distribution Reinvestment Plan*				*Total*
							*Net*				*Net*				*Net*		*Average*
							*Proceeds*				*Proceeds*				*Proceeds*		*Net*
			*Gross*		*Sales*		to				to				to		*Proceeds*
Share Class	*Shares*		*Proceeds*		*Load*		*Company*		*Shares*		*Company*		*Shares*		*Company*		*per Share*
Class E		11,600	$	290,000	$	—	$	290,000		—	$	—		11,600	$	290,000	$	25.00
Class FA		122,229		3,054,500		—		3,054,500		503		12,577		122,732		3,067,077	$	24.99
		133,829	$	3,344,500	$	—	$	3,344,500		503	$	12,577		134,332	$	3,357,077	$	24.99

Investments

In July and August 2026, the Company purchased $36,776,971 in residential mortgage whole loans.

Repurchase Agreement

In July and August 2026, Craftsman drew an additional $28,940,050 on the Repurchase Agreement to purchase additional securities.

On July 16, 2026, the Company and Goldman Sachs entered into a Guaranty Amendment which amends the Guaranty Agreement previously entered into by such parties to provide a guaranty to the Repurchase Agreement. The Guaranty Amendment extends the period during which the Company is required to maintain a lower cash liquidity covenant under the Guaranty Agreement to eleven months following January 30, 2026.

Forward Trades

In August 2026, Craftsman purchased all residential mortgage loans subject to forward trade contracts with Barclays outstanding as of June 30, 2026.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion is based on the unaudited consolidated financial statements as of June 30, 2026 and December 31, 2025, and for the quarter and six months ended June 30, 2026. Amounts as of December 31, 2025 included in the unaudited consolidated statements of assets and liabilities have been derived from the audited consolidated financial statements as of that date. This information should be read in conjunction with the accompanying unaudited consolidated financial statements and the notes thereto, as well as the audited consolidated financial statements, notes and management’s discussion and analysis included in our Annual Report on Form 10-K for the year ended December 31, 2025 (our “Form 10-K”). Capitalized terms used in this Item 2 have the same meaning as in the accompanying unaudited financial statements unless otherwise defined herein.

Statement Regarding Forward Looking Information

In this quarterly report for the quarterly period ended June 30, 2026 (this “Form 10-Q”), references to “Company,” “we,” “us,” or “our business” refer to CNL Strategic Residential Credit, Inc. and its subsidiaries; references to the “Advisor” refer to CNL Residential Credit Manager, LLC, an affiliate of CNL Financial Group, LLC; references to the “Sub-Advisor” refer to Balbec Capital Management, L.P., an affiliate of Balbec Capital, L.P.

Certain statements in this Form 10-Q contain forward-looking statements within the meaning of the federal securities laws and the Private Securities Litigation Reform Act of 1995. Some of the statements in this Form 10-Q constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this Form 10-Q may include statements as to:

•

our future operating results;

•

our business prospects and the prospects of the assets in which we may invest;

•

the impact of the investments that we expect to make;

•

our ability to raise sufficient capital to execute our investment strategy;

•

our ability to source adequate investment opportunities to efficiently deploy capital;

•

our expected financing arrangements;

•

the effect of global and national economic and market conditions generally upon our operating results, including, but not limited to, changes with respect to inflation, interest rate changes and supply chain disruptions, and changes in government rules, tax policy, government agencies, regulations and fiscal and trade policies;

•

the adequacy of our cash resources, financing sources and working capital;

•

the timing and amount of cash flows, distributions and dividends, if any, from our investments;

•

our contractual arrangements and relationships with third parties;

•

actual and potential conflicts of interest with the Advisor, the Sub-Advisor or any of their respective affiliates;

•

the dependence of our future success on the general economy and its effect on the assets in which we may invest;

•

our use of financial leverage;

•

the ability of the Advisor and the Sub-Advisor to locate suitable investments for us and to manage and administer our investments;

•

the ability of the Advisor, the Sub-Advisor or their respective affiliates to attract and retain highly talented professionals;

•

our ability to structure investments in a tax-efficient manner and the effect of changes to tax legislation and our tax position; and

•

the tax status of the assets in which we may invest.

Our forward-looking statements are not guarantees of our future performance and shareholders are cautioned not to place undue reliance on any forward-looking statements. While we believe our forward-looking statements are reasonable, such statements are inherently susceptible to uncertainty and changes in circumstances. As with any projection or forecast, forward-looking statements are necessarily dependent on assumptions, data and/or methods that may be incorrect or imprecise, and may not be realized. Our forward-looking statements are based on our current expectations and a variety of risks, uncertainties and other factors, many of which are beyond our ability to control or accurately predict.

Important factors that could cause our actual results to vary materially from those expressed or implied in our forward-looking statements include, but are not limited to, the factors listed and described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the “Risk Factors” sections of the Company’s documents filed from time to time with the U.S. Securities and Exchange Commission, including, but not limited to, our Form 10-K and this Form 10-Q.

All written and oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by these cautionary statements. Forward-looking statements speak only as of the date on which they are made; we undertake no obligation to, and expressly disclaim any obligation to, update or revise forward-looking statements to reflect new information, changed assumptions, the occurrence of subsequent events, or changes to future operating results over time unless otherwise required by law.

Overview

We are a real estate finance company. Our investment strategy is to acquire, finance and manage a diversified portfolio of primarily U.S. performing and re-performing whole mortgage loans, MSRs and RMBS. The Company has structured some of its investments in MSRS through other entities for which the returns are based on underlying MSR cash flows. Our overall objective is to generate attractive risk-adjusted returns with high current income for our stockholders, through cash distributions and capital appreciation, across interest rate and credit cycles. Our specific investment objectives are to construct a diversified residential credit portfolio that will enable us to:

◦

provide current income in the form of regular, stable cash distributions to achieve an attractive distribution rate;

◦

preserve and protect invested capital by focusing on residential credit assets that are primarily amortizing and thus provide current cash-flow; and

◦

mitigate downside risk through conservative loan-to-value (“LTV”) ratios and effectively manage any interest rate and credit sensitivities.

We cannot assure investors that we will achieve our investment objectives.

We intend to elect and qualify to be taxed as a REIT under the Internal Revenue Code commencing with our taxable year ending December 31, 2026.

Our board of directors will at all times have ultimate oversight and policy-making authority over us, including responsibility for governance, financial controls, compliance and disclosure. Pursuant to the Advisory Agreement and the Sub-Advisory Agreement, however, we have delegated to the Advisor, and the Advisor in turn has delegated to the Sub-Advisor, subject to the oversight of the Advisor, the authority to source, evaluate and monitor our investment opportunities and make decisions related to the acquisition, management, financing and disposition of our assets, in accordance with our investment objectives, strategy and guidelines, policies and limitations, subject to oversight by our board of directors.

Liquidity and Capital Resources

General

Our primary use of cash will be for (i) acquisition of residential mortgage loans, MSRs, RMBS, and other residential debt investments, (ii) the cost of operations (including the management fee and the total return incentive fee), (iii) debt service of any borrowings, (iv) periodic repurchases, including under our share purchase plan, and (v) cash distributions (if any) to the holders of our shares to the extent authorized by our board of directors and declared by us.

In light of the current economic environment, impacted by high interest rates, inflationary pressures, energy price volatility due to the conflict in the Middle East and the impact of natural disasters and geopolitical events on the global economy, we are closely monitoring overall liquidity levels to be in a position to enact changes to ensure adequate liquidity going forward.

As of June 30, 2026 and December 31, 2025, we had cash of $8,283,311 and $203,272, respectively.

Sources of Liquidity and Capital Resources

Offerings. We received $26,959,450 in net proceeds during the six months ended June 30, 2026, from the Private Offering.

Investments. We received $22,573,948 in proceeds from securities sold under the Repurchase Agreement during the six months ended June 30, 2026.

Borrowings. We borrowed and repaid $6,700,000 during the six months ended June 30, 2026.

Uses of Liquidity and Capital Resources

Investments. We purchased $29,945,586 and $9,223,645 of residential mortgage loans and mortgage servicing rights investments, respectively, during the six months ended June 30, 2026.

Distributions. We paid distributions to our stockholders, net of distributions reinvested of $827,779 during the six months ended June 30, 2026.

Principal Payments. We paid $283,005 in principal payments on the Repurchase Agreement during the six months ended June 30, 2026.

Deferred Financing Costs. We paid $533,426 in deferred financing costs during the six months ended June 30, 2026.

Results of Operations

The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and notes thereto.

The following table summarizes our operating results for the quarter and six months ended June 30, 2026:

	Quarter Ended			Six Months Ended
	June 30,			June 30,
	2026			2026
Interest income	$	788,828		$	1,014,388
Interest expense		(565,075	)		(726,771	)
Net interest income		223,753			287,617
Other income		1,042,435			1,221,337
Operating expenses		(488,567	)		(1,357,153	)
Expense support		163,079			1,055,318
Net expenses		(325,488	)		(301,835	)
Income before income tax expense		940,700			1,207,119
Income tax expense		(683	)		(683	)
Net income	$	940,017		$	1,206,436

Net Interest Income

The following table summarizes our net interest income for the quarter and six months ended June 30, 2026:

	Quarter Ended		Six Months Ended
	June 30,		June 30,
	2026		2026
Interest income
Residential mortgage loans	$	731,444	$	908,297
Cash		57,384		106,091
Interest income		788,828		1,014,388
Interest expense
Repurchase agreement		545,288		662,489
Line of credit		19,787		64,282
Interest expense		565,075		726,771
Net interest income	$	223,753	$	287,617

For the quarter and six months ended June 30, 2026, we generated $788,828 and $1,014,388, respectively, in interest income driven by purchases of residential mortgage loans during January through April 2026. As of June 30, 2026, the weighted average interest rate of residential mortgage loans was 5.86%. We utilized the Repurchase Agreement primarily to purchase additional residential mortgage loans during February through April 2026. As of June 30, 2026, the weighted average interest rate for the repurchase agreement was 5.51% (SOFR + 1.65% - 1.90%).

Other Income/(Loss), net

The following table summarizes our other income/(loss), net for the quarter and six months ended June 30, 2026:

	Quarter Ended		Six Months Ended
	June 30,		June 30,
	2026		2026
Other Income
Unrealized gain on residential mortgage loans, mortgage servicing rights investments and derivatives, net	$	698,452	$	636,794
Income from mortgage servicing rights investments		317,600		558,160
Realized gain on residential mortgage loans		26,383		26,383
Other Income	$	1,042,435	$	1,221,337

For the quarter and six months ended June 30, 2026, we recognized $698,452 and $636,794, respectively, in unrealized gain on residential mortgage loans, mortgage servicing rights investments and derivatives. See additional discussion below. For the quarter and six months ended June 30, 2026, we generated $317,600 and $558,160, respectively, of income driven by purchases of mortgage servicing rights investments in January and April 2026.

The following table summarizes components of unrealized gain on residential mortgage loans, mortgage servicing rights investments and derivatives for the quarter and six months ended June 30, 2026:

	Quarter Ended		Six Months Ended
	June 30,		June 30,
	2026		2026
Unrealized gain on residential mortgage loans	$	191,388	$	57,992
Unrealized gain (loss) on mortgage servicing rights investments		13,379		(46,394	)
Unrealized gain on interest rate futures		493,685		625,196
Total unrealized gain on residential mortgage loans, mortgage servicing rights investments and derivatives, net	$	698,452	$	636,794

Unrealized appreciation on our portfolio is based on the current fair value of our investments as determined by our board of directors based on inputs from the Sub-Advisor and our independent valuation firm and consistent with our valuation policy.

During the quarter and six months ended June 30, 2026, we recognized a net change in unrealized appreciation of approximately $698,452 and $636,794. The residential loan portfolio and the mortgage servicing rights investments are a natural hedge to each other and move in the opposite direction in value in response to changes in interest rates. As such, during the six months ended June 30, 2026, our investment in the residential loan portfolio had $57,992 in unrealized gains while our investment in the mortgage servicing rights investments had $46,394 in unrealized loss, primarily due to changes in interest rates. The majority of the gross unrealized gain ($625,196) was a result of the increase in the value of the interest rate futures, primarily due to the market rate being higher than the agreed upon rates in these contracts.

Net Operating Expenses

The following table summarizes our operating expenses for the quarter and six months ended June 30, 2026:

	Quarter Ended		Six Months Ended
	June 30,		June 30,
	2026		2026
Professional services	$	223,024	$	770,318
Investment expenses		142,113		284,370
Director fees and expenses		49,250		175,245
General and administrative		46,605		83,762
Custodian fees		6,635		14,872
Total return incentive fees		8,216		9,008
Organization expense		5,298		7,134
Base management fees		5,518		6,966
Other expenses		1,908		5,478
Operating expenses		488,567		1,357,153
Expense support		163,079		1,055,318
Net Expenses	$	325,488	$	301,835

We consider the following expense categories to be relatively fixed in the near term: general and administrative services and director fees and expenses. Variable operating expenses include professional services, investment expenses, base management fees and total return incentive fees. We expect these variable operating expenses to increase in connection with the growth in our asset base (investment expenses, total return incentive fees and base management fees), the number of stockholders and open accounts (custodian fees) and the complexity of our investment processes and capital structure (professional services). Expense support was recorded to cover expenses and cash distributions limited to operating expenses less investment expenses during the quarter and six months ended June 30, 2026 in accordance with the Expense Support and Conditional Reimbursement Agreement.

Our Portfolio

As of June 30, 2026, our portfolio consisted of approximately $54,094,621 of residential mortgage loans and other target assets.

The following table sets forth additional information regarding our portfolio, including the manner in which our equity capital was allocated among investment types, as of June 30, 2026:

	Fair Value		Collateralized Debt		Allocated Capital		% of Total Capital
Portfolio:
Residential mortgage loans	$	44,917,370	$	37,743,759	$	7,173,611		29.1	%
Mortgage servicing rights investments		9,177,251		—		9,177,251		37.3	%
Target assets		54,094,621		37,743,759		16,350,862		66.4	%

Cash		8,283,311		—		8,283,311		33.6	%
Total	$	62,377,932	$	37,743,759	$	24,634,173		100.0	%

Residential Mortgage Loans

The following table sets forth additional information on the residential mortgage loans in our portfolio as of June 30, 2026:

	Portfolio Range	Portfolio Weighted Average
Unpaid principal balance ("UPB")	$66,551 - $1,931,212	$354,523
Interest rate	2.25% - 8.75%	5.86%
Maturity date	12/1/2034 - 3/1/2066	12/20/2053
FICO score	481 - 818	715
Loan-to-value	12.10% - 147.70%	71.30%
Home value	$125,000 - $2,500,000	$812,298
Percentage of loans 90+ days delinquent (based on UPB)	N/A	1.10%

The following chart illustrates additional characteristics of our residential mortgage loans in our portfolio that we owned directly as of June 30, 2026, based on the geographic region (percentages are based on the aggregate unpaid principal balance of such loans):

Hedging Activities

As of June 30, 2026, we had not entered into any derivatives or other financial instruments with the exception of interest rate futures. With respect to any potential financings, general increases in interest rates over time may cause the interest expense associated with our borrowings to increase, and the value of our debt investments to decline. We may seek to stabilize our financing costs as well as any potential decline in our assets by entering into derivatives, swaps or other financial products in an attempt to hedge our interest rate risk. In the event we pursue any assets outside of the U.S., we may have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the U.S. dollar. We, may in the future, enter into derivatives or other financial instruments in an attempt to hedge any such foreign currency exchange risk. It is difficult to predict the impact hedging activities may have on our results of operations.

Seasonality

We do not anticipate that seasonality will have a significant effect on our results of operations.

Critical Accounting Policies and Use of Estimates

Our most critical accounting policies involve decisions and assessments that could affect our reported assets and liabilities, as well as our reported revenues and expenses. We believe that all of the decisions and assessments upon which our financial statements are based are reasonable at the time made and based upon information available to us at that time. Our critical accounting policies and accounting estimates will be expanded over time as we continue to implement our business and operating strategy. Our significant accounting policies are described in Part I—Item 1. “Financial Statements– Notes to Consolidated Financial Statements (unaudited)—Note 2. Summary of Significant Accounting Policies.”

Item 3. Quantitative and Qualitative Disclosures About Market Risks

Market risk is the exposure to loss resulting from changes in interest rates, commodity prices, equity prices, real estate values and other market-based risks. We expect that our primary market risk exposure will be credit risk, interest rate risk, liquidity risk, prepayment risk and extension risk.

We will seek to manage these risks while, at the same time, seeking to provide an opportunity to stockholders to realize attractive returns through ownership of our shares. Many of these risks have been magnified due to the continuing uncertainties caused by the recent geopolitical events; however, while we continue to monitor the geopolitical events, their impact on such risks remains uncertain and difficult to predict.

Credit Risk

We assume credit risk through our investment in mortgage loans and other mortgage-related assets. Credit losses on mortgage loans can occur for many reasons, including: fraud; poor underwriting; poor servicing practices; weak economic conditions; increases in payments required to be made by borrowers; declines in the value of real estate; declining rents on residential rental properties; natural disasters, including the effects of climate change (including flooding, drought, wildfires, and severe weather) and other natural events; uninsured property loss; over-leveraging of the borrower; costs of remediation of environmental conditions, such as indoor mold; changes in zoning or building codes and the related costs of compliance; acts of war or terrorism; changes in legal protections for lenders and other changes in law or regulation; and personal events affecting borrowers, such as reduction in income, job loss, divorce or health problems. In addition, the amount and timing of credit losses could be affected by loan modifications, delays in the liquidation process, documentation errors and other actions by servicers. Weakness in the U.S. economy or the housing market could cause our credit losses to increase beyond levels that we currently anticipate.

In addition, rising interest rates may increase the credit risks associated with certain residential whole mortgage loans. This is especially true if the interest rate is adjustable for many of the loans that we may acquire or in the securitization entity we may sponsor in the future. In addition, the loans we pledge to secure loan financing lines may have adjustable interest rates. Accordingly, when short-term interest rates rise, required monthly payments from homeowners will rise under the terms of these adjustable-rate mortgages, and this may increase borrower delinquencies and defaults.

Within a securitization of residential whole mortgage loans, various securities are created, each of which has varying degrees of credit risk. We may own the securities in which there is more (or the most) concentrated credit risk associated with the underlying residential whole mortgage loans. In general, losses on an asset securing a loan or loan included as collateral to a securitization will be borne first by the owner of the property (i.e., the owner will first lose any equity invested in the property) and, thereafter, by the first loss security holder, and then by holders of more senior securities. In the event the losses incurred upon default on the loan exceed any classes in which we invest, we may not be able to recover all of our investment in the securities we hold. In addition, if the underlying properties have been overvalued by the originating appraiser or if the values subsequently decline and, as a result, less collateral is available to satisfy interest and principal payments due on the related security, then the first-loss securities may suffer a total loss of principal, followed by losses on the second-loss and then third-loss securities (or other residential securities that we own). In addition, with respect to residential securities we own, we may be subject to risks associated with the determination by a loan servicer to discontinue servicing advances (advances of mortgage interest payments not made by a delinquent borrower) if they deem continued advances to be unrecoverable, which could reduce the value of these securities or impair our ability to project and realize future cash flows from these securities.

Investments in subordinated RMBS involve greater credit risk than the senior classes of the issue or series. Many of the default-related risks of whole mortgage loans will be magnified in subordinated securities. Default risks may be further pronounced in the case of RMBS by, or evidencing an interest in, a relatively small or less diverse pool of underlying mortgage loans. Certain subordinated securities absorb all losses from default before any other class of securities is at risk, particularly if such securities have been issued with little or no credit enhancement or equity. In addition, principal payments on subordinated securities may be subject to a “lockout” period in which some or all of the principal payments are directed to the related senior securities. This lock-out period may be for a set period of time and/or may be determined based on pool performance criteria such as losses and delinquencies. Such securities therefore possess some of the attributes typically associated with equity investments. We believe any potential defaults on the underlying collateral will be minor as the underlying loans had significant equity at the time of deal closing, leading many borrowers with large incentives to reperform. In cases where that is not possible, we believe the recovery of the unpaid principal balance of the loan is likely given the low LTV ratio of the collateral.

Interest Rate Risk

Interest rate risk is highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond our control. A significant portion of our assets and liabilities, including our whole mortgage loans, investment securities, loan financing lines, and security repurchase facilities, are interest earning or interest bearing and, as a result, we are subject to risks arising from fluctuations in the prevailing levels of market interest rates. In addition, our financing arrangements, if any, may have a variable rate component or include rates which reset monthly and add additional risk due to fluctuations in market interest rates. As of June 30, 2026, we had $37,743,759 of our financing arrangements subject to variable interest rates or rates which reset monthly. Any excess cash and cash equivalents of ours are invested in instruments earning short-term market interest rates.

We estimate that as of June 30, 2026, a 100 basis point decline in the SOFR rate would result in a decrease in the “Interest expense” in our consolidated statements of operations of $103,273 and a 100 basis point increase in the SOFR rate would result in an increase in the “Interest expense” in our consolidated statements of operations of $103,273.

Subject to qualifying and maintaining our qualification as a REIT and maintaining our exclusion from regulation as an investment company under the Investment Company Act, we may utilize various derivative instruments and other hedging instruments to mitigate interest rate risk.

Liquidity Risk

An insufficient secondary market may prevent the liquidation of an asset or limit the funds that can be generated from selling an asset. A portion of our assets are designated as illiquid and may be subject to high liquidity risk.

Prepayment Risk

The frequency at which prepayments occur on loans held, MSRs, and loans underlying RMBS will be affected by a variety of factors, including the prevailing level of interest rates as well as economic, demographic, tax, social, legal and other factors. Generally, mortgage obligors tend to prepay their mortgage loans when prevailing mortgage rates fall below the interest rates on their mortgage loans.

Generally, whole mortgage loans and RMBS purchased at a premium are adversely affected by faster than anticipated prepayments, and whole mortgage loans and RMBS purchased at a discount are adversely affected by slower than anticipated prepayments. The adverse effects of prepayments may impact us in two ways. First, particular investments may experience outright losses, as in the case of an interest-only security in an environment of faster actual or anticipated prepayments. Second, particular investments may underperform relative to the financial instruments that the Advisor and the Sub-Advisor may have constructed to reduce specific financial risks for these investments, resulting in a loss to us. In particular, prepayments (at par) may limit the potential upside of many whole mortgage loans and RMBS to their principal or par amounts, whereas their corresponding hedges, if any, often have the potential for unlimited loss.

Extension Risk

The Sub-Advisor computes the projected weighted average life of our investments based on assumptions regarding the rate at which the borrowers will prepay the underlying mortgage loans. In general, when fixed rate or adjustable-rate or hybrid mortgage loans or other mortgage-related assets are acquired via borrowings, we may, but are not required to, enter into an interest rate swap agreement or other economic hedging instrument that attempts to fix our borrowing costs for a period close to the anticipated average life of the fixed rate portion of the related assets, in each case subject to qualifying and maintaining our qualification as a REIT and maintaining our exclusion from regulation as an investment company under the Investment Company Act. This strategy is designed to protect us from rising interest rates as the borrowing costs are managed to maintain a net interest spread for the duration of the fixed rate portion of the related assets. However, if prepayment rates decrease in a rising interest rate environment, the life of the fixed rate portion of the related assets could extend beyond the term of the swap agreement or other hedging instrument. This could have an adverse impact on our results of operations, as borrowing costs would no longer be fixed after the end of the hedging instrument while the income earned on the fixed and adjustable-rate or hybrid assets would remain fixed. In extreme situations, we may be forced to sell assets to maintain adequate liquidity, which could cause us to incur losses.

Concentration of Credit Risk

In the normal course of business, we may hold our cash balances with financial institutions, which at times may exceed federally insured limits. We are subject to credit risk to the extent any financial institution with which we conduct business is unable to fulfill contractual obligations on our behalf. Management will monitor the financial condition of such financial institutions and does not anticipate any losses from these counterparties.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, including our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Form 10-Q. Based upon that evaluation, our management, including our principal executive officer and principal financial officer, concluded that our disclosure controls and procedures are effective at the reasonable assurance level as of the end of the period covered by this Form 10-Q to provide reasonable assurance that information required to be disclosed by us in the reports we filed under the Securities Exchange Act of 1934, as amended (“Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the relevant SEC rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file and submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We may from time to time be a party to legal proceedings which arise in the ordinary course of our business. Management is not aware of any current or pending legal proceedings to which we or any of our subsidiaries are a party or to which any of our property is subject, the outcome of which would, in management’s judgment based on information currently available, have a material adverse effect on our results of operations or financial condition, nor is management aware of any such legal proceedings contemplated by governmental authorities.

Item 1A. Risk Factors

Except as set forth below, there have been no material changes in our assessment of our risk factors from those set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

Our portfolio is concentrated, and may continue to be concentrated, by geographic location, increasing our risk of loss if there are adverse developments or greater risks affecting the particular concentration, including due to natural disasters, terrorist events, climate change, or any other adverse event specific to those locations.

As of June 30, 2026, more than 5% of the unpaid principal balance of the loans underlying our portfolio were located in each of California, Florida, Georgia, Hawaii, New Jersey, New York and Texas. As a result, our portfolio is concentrated, and may continue to be concentrated, by geographic location, increasing our risk of loss if there are adverse developments or greater risks affecting the particular geographic location. Accordingly, adverse conditions in the areas where the properties securing or otherwise underlying our investments are concentrated (including unemployment rates, changing demographics and other factors) and local real estate conditions (such as oversupply or reduced demand) may have an adverse effect on the value of our investments, any of which may materially and adversely affect us.

The occurrence of a natural disaster (such as an earthquake, tornado, hurricane, flood, landslide, or wildfire), or the effects of climate change (including flooding, drought, and severe weather), may cause decreases in the value of real estate (including sudden or abrupt changes) and would likely reduce the value of the properties underlying our portfolio that we own directly. For example, in recent years, hurricanes have caused widespread flooding in Florida and Texas, and wildfires and mudslides in California, including the wildfires experienced in southern California in January 2025, have destroyed or damaged thousands of homes. Since certain natural disasters may not typically be covered by the standard insurance policies maintained by borrowers, or borrowers may not be able to purchase insurance against certain hazards at all, the borrowers themselves may have to pay for repairs due to the disasters. Borrowers may not repair their property or may become unable or unwilling to pay their mortgage loans under those circumstances, especially if the property is damaged. This would likely cause foreclosures to increase and lead to higher credit losses on our loans or other investments.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

We were capitalized through the purchase by the Advisor and Sub-Advisor 8,000 shares of Class E shares for the aggregate consideration of $200,000 in March 2025.

In September 2025, we commenced a private offering of Class E, Class FA, Class A, Class T, Class D and Class I shares (the “Private Offering”) exempt from the registration requirements pursuant to Rule 506(b) under Regulation D of the Securities Act of 1933, as amended (the “Securities Act”). The shares of common stock are offered through our managing dealer, CNL Securities Corp., a registered broker dealer and an affiliate of the Advisor.

On January 29, 2026, we held an initial closing for the Private Offering and issued 958,038 Class E shares and 14,200 Class FA shares at a purchase price of $25.00 per share for aggregate gross offering proceeds of $24,305,950. We did not pay any selling commissions or managing dealer fees for the Class E shares or Class FA shares issued in the initial closing. The initial closing included purchases of $2,400,000 for Class E shares from each of the Advisor and Balbec, an affiliate of the Sub-Advisor, for an aggregate total investment of $2,500,000 from each of the Advisor and Balbec.

From the initial closing through June 30, 2026, we issued 121,068 additional Class FA shares in the Private Offering at a purchase price of $24.93 per share for aggregate gross offering proceeds of $3,018,375, including $9,875 received through our distribution reinvestment plan. We did not pay any selling commissions or managing dealer fees for the Class FA shares issued.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Item 6. Exhibits

The exhibits required by this item are set forth in the Exhibit Index attached hereto and are filed or incorporated as part of this report.

EXHIBIT INDEX

The following exhibits are filed or incorporated as part of this Form 10-Q for CNL Strategic Residential Credit, Inc.:

Exhibit No.		Description
3.1		Articles of Amendment and Restatement of CNL Strategic Residential Credit, Inc. (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form 10 (File No. 000-56755) filed with the SEC on June 2, 2025).

3.2		Bylaws of CNL Strategic Residential Credit, Inc. (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form 10 (File No. 000-56755) filed with the SEC on June 2, 2025).

4.1		Amended and Restated Distribution Reinvestment Plan of CNL Strategic Residential Credit, Inc. (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K (File No. 000-56755) filed with the SEC on September 24, 2025).

4.2		Share Repurchase Plan of CNL Strategic Residential Credit, Inc. (incorporated by reference to Exhibit 4.2 to the Registration Statement on Form 10 (File No. 000-56755) filed with the SEC on June 2, 2025).

10.1		First Amendment to Loan and Security Agreement dated May 22, 2026, by and among the Company, the Guarantor (as defined therein), and Valley National Bank (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 000-56755) filed with the SEC on May 22, 2026).

31.1*		Certification of Chief Executive Officer of CNL Strategic Residential Credit, Inc., Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Chief Financial Officer of CNL Strategic Residential Credit, Inc., Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of Chief Executive Officer and Chief Financial Officer of CNL Strategic Residential Credit, Inc., Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101*		The following materials from CNL Strategic Residential Credit, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, formatted in iXBRL (Inline eXtensible Business Reporting Language); (i) Consolidated Balance Sheets, (ii) Consolidated Statement of Operations, (iii) Consolidated Statements of Stockholders’ Equity, (iv) Consolidated Statement of Cash Flows, and (v) Notes to the Consolidated Financial Statements.

104*		Cover Page Interactive Data File included as Exhibit 101 (embedded within the Inline XBRL document)

*	Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, on the 13^th day of August, 2026.

	CNL STRATEGIC RESIDENTIAL CREDIT, INC.

	By:	/s/ Chirag J. Bhavsar
		CHIRAG J. BHAVSAR
		Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Tammy J. Tipton
		TAMMY J. TIPTON
		Chief Financial Officer
		(Principal Financial and Accounting Officer)