Lument Finance Trust Q1 Earnings Call Highlights

Key Points

• Lument Finance Trust reported a first-quarter GAAP net loss of $0.02 per share, while distributable earnings also came in at $0.02 per share. The company kept its quarterly dividend unchanged at $0.04 per share.
• Net interest income improved sequentially to $5.7 million from $5.4 million, helped by lower funding costs and better leverage. However, book value still slipped to $2.97 per share from $3.03 at year-end.
• Management remained focused on credit проблемs and REO assets, with seven risk-rated 5 loans totaling about $108 million and four REO properties carrying a combined value of $57 million. The company said it continues to redeploy capital into new multifamily loans and expects future dividend coverage to depend on more efficient capital deployment and potential securitization activity.

Lument Finance Trust NYSE: LFT reported a first-quarter 2026 GAAP net loss while management said it continued to focus on resolving legacy credit issues, managing real estate owned assets and selectively redeploying capital into new multifamily loan investments.

Andrew Tsang of Lument Investment Management said the company reported a GAAP net loss of $0.02 per common share and shareholder earnings of $0.02 per common share for the quarter. The company declared a quarterly dividend of $0.04 per common share in March, unchanged from the prior quarter.

Financial Results Show Modest Improvement in Net Interest Income

Chief Financial Officer James Briggs said net loss to common stockholders totaled $1 million, or $0.02 per share. Distributable earnings were $1.1 million, or $0.02 per share.

Net interest income rose sequentially to $5.7 million from $5.4 million in the fourth quarter. Briggs attributed the improvement largely to better leverage and funding costs through the company’s FL3 CRE CLO, the mid-quarter redemption of the remaining LMF financing structure and use of other facilities. The LMF financing had a weighted average cost of funds of SOFR plus 331 basis points at year-end, he said.

The weighted average coupon on the loan portfolio declined to 709 basis points from 717 basis points in the prior quarter. Briggs said the decline reflected payoffs of higher-spread loans relative to newly acquired assets, as well as a lower SOFR benchmark rate during the period.

Total operating expenses, including fees to the company’s manager, were $3.7 million, down slightly from $3.8 million in the fourth quarter. Briggs said other operating expenses declined sequentially, primarily because of discontinued deal costs recorded in the prior quarter, partially offset by higher reimbursable expenses tied to fewer waived exit fees on loan payoffs.

The difference between GAAP net loss and distributable earnings was primarily tied to a $1.3 million unrealized impairment expense on REO assets held for sale, a $1.2 million loss on extinguishment of debt related to unamortized deferred financing costs from the redeemed LMF structure, a $732,000 net release of credit loss provisions and $305,000 of depreciation on REO.

Management Describes Stable but Cautious Market Backdrop

Chief Executive Officer James Flynn said U.S. economic conditions remained “fundamentally stable,” but added that uncertainty continued to outweigh momentum. He said the Federal Reserve has shifted toward a more accommodative stance, but the timing and scale of future rate cuts remain dependent on inflation, labor market data and broader financial stability.

Within multifamily, Flynn said operating fundamentals are gradually stabilizing as the sector moves through the later stages of an elevated supply cycle. He noted that construction starts have declined sharply, which he said should lead to a meaningful reduction in new supply through 2026 and 2027. Rent growth remains modest nationally but is improving in supply-constrained markets, while high-delivery regions continue to face pressure.

Flynn said long-term demand drivers for rental housing remain intact, citing affordability constraints, limited for-sale housing inventory and elevated single-family mortgage rates. However, he said elevated long-term interest rates continue to constrain commercial real estate by anchoring capitalization rates, pressuring asset values and limiting access to attractively priced permanent financing.

Portfolio Remains Concentrated in Multifamily Loans

President Greg Calvert said Lument Finance Trust acquired or funded $48 million of loan assets during the quarter, effectively redeploying approximately the same amount of aggregate principal loan repayments received during the period. Flynn said the company generated $47 million of aggregate payoffs and used reinvestment proceeds to acquire two new multifamily loan assets for $47 million, along with a $1 million minority participation related to an existing loan asset.

As of March 31, the company’s total loan portfolio consisted of 57 floating-rate loans with an aggregate unpaid principal balance of approximately $1.1 billion. The portfolio had a weighted average floating rate of 331 basis points over SOFR and an unamortized aggregate purchase discount of $1.3 million. Calvert said 100% of the portfolio was indexed to one-month SOFR and 93% was collateralized by multifamily properties.

The weighted average remaining term of the portfolio was approximately 19 months, assuming borrowers exercise all available extensions. Approximately 77% of the portfolio was risk rated 3 or better at quarter-end, down from 83% as of Dec. 31. Calvert said the weighted average risk rating improved to 3.1 from 3.2, primarily because one risk-rated 5 loan was transferred to REO during the period.

Briggs said the company ended the quarter with unrestricted cash of $21 million. Total book value of common stock was approximately $156 million, or $2.97 per share, down from $3.03 at Dec. 31.

Credit Issues and REO Assets Remain a Key Focus

As of March 31, Lument Finance Trust had seven loans risk rated 5, all collateralized by multifamily assets. Calvert said those loans had an aggregate principal amount of approximately $108 million, representing about 10% of the unpaid principal balance of the quarter-end investment portfolio.

The risk-rated 5 loans included three loans in maturity default with $51 million of aggregate unpaid principal balance, backed by multifamily properties in Philadelphia, Arlington, Texas, and Cedar Park, Texas. They also included four loans in monetary default with $57 million of aggregate unpaid principal balance, backed by multifamily properties in Tampa, Florida; Des Moines, Iowa; Tallahassee, Florida; and Ypsilanti, Michigan.

Briggs said the company evaluated the seven risk-rated 5 loans individually and recorded approximately $550,000 of specific reserves. That increase was offset by a $1.3 million decrease in the general allowance, primarily driven by changes to the macroeconomic forecast. After a $2.4 million charge-off to the specific allowance for an asset transferred to REO, specific reserves totaled $15.8 million, or about 15% of the associated unpaid principal balance of specifically evaluated assets.

During the quarter, the company foreclosed on one loan backed by a multifamily property in Colorado Springs. Calvert said that asset had an aggregate net carry value of $8.2 million, net of $4.2 million of specific reserves. At quarter-end, the REO portfolio consisted of four multifamily properties with an aggregate carry value of $57 million and a weighted average occupancy rate of 72%.

Briggs said the company completed the sale of a San Antonio REO property at the beginning of May for net proceeds of $12.4 million, with no second-quarter profit-and-loss impact related to the sale. The company also disclosed that, after quarter-end, an Arlington, Texas defaulted loan was foreclosed on. Calvert said that asset had a net carry value of $18.2 million, net of $3.6 million of specific reserves.

Dividend Coverage and Capital Deployment Discussed in Q&A

In response to a question from Val Albar, who was filling in for Jason Weaver of Jones Trading, Flynn said management’s expectation is to ensure that annual earnings cover the annual dividend. He said a key driver of improving dividend coverage would be the ability to deploy capital more efficiently, including through a potential new securitization transaction in the “relative near future,” depending on planned asset-level resolutions.

Flynn said SOFR affects earnings, but added that leverage in securitization, appropriate loan spreads and a healthy capital markets environment on the liability side are larger factors. He said management is reviewing projections with the board over the next several quarters and years, with the goal of fully covering the dividend and, over time, potentially growing it as the portfolio is resolved and reinvested.

Asked by Lee Zoltz of Ober/Cap about the sale of the San Antonio property and the outlook for other REO assets, Flynn said the company evaluates each asset based on whether it can be improved meaningfully within roughly six months without significant capital, whether a longer hold and limited reinvestment could produce better shareholder value, or whether the best option is to resolve and exit quickly. Calvert added that the REO and disposition process is highly specific to each asset, location and market backdrop, and said the company has seen general investor interest in the multifamily assets it has brought to market.

About Lument Finance Trust NYSE: LFT

Lument Finance Trust is a real estate investment trust that focuses on originating and acquiring senior secured loans backed by commercial real estate properties. Listed on the New York Stock Exchange under the ticker LFT, the company seeks to generate attractive risk‐adjusted returns by targeting floating‐rate, first‐mortgage loans across a broad range of property types, including multifamily, office, retail, industrial and hospitality.

The firm's core business activity centers on deploying capital into short‐ and medium‐term financing solutions for institutional real estate owners and developers.

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