Lument Finance (LFT) Q2 2026 Earnings Call Transcript

CEO Flynn signals accelerating asset resolutions as multifamily fundamentals improve. Need a quote from a Motley Fool analyst? Email [email protected] Management reported a strategic focus on resolving legacy assets within the multifamily sector while maintaining liquidity on the balance sheet. The company is implementing a 1-for-10 reverse stock split to maintain compliance with New York Stock Exchange listing requirements and reduce technical pressure on the share price. Management stated that improving fundamentals in the multifamily sector, including contracting supply and modest rent growth, are beginning to support resolution activity for challenged investments. The company aims to redeploy capital from resolved assets into multifamily loans to improve the overall earnings profile by 2027. Operator: Good morning, and thank you for joining the Lument Finance Trust Second Quarter 2026 Earnings Call. Today's call is being recorded and will be made available via webcast on the company's website. I would now like to turn the call over to Andrew Tsang with Investor Relations at Lument Investment Management. Please go ahead. Andrew Tsang: Good morning, everyone. Thank you for joining our call to discuss Lument Finance Trust's Second Quarter 2026 Financial Results. With me on the call today are Jim Flynn, our CEO; Jim Briggs, our CFO; Greg Calvert, our President; and Zach Halpern, our Portfolio Manager.

Last evening, we filed our 10-Q with the SEC and issued a press release to provide details on our recent financial results. We also provided a supplemental earnings presentation, which can be found on our website. Before handing the call over to Jim Flynn, I'd like to remind everyone that certain statements made during the course of this call are not based on historical information and may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. These results and uncertainties are discussed in the company's reports filed with the SEC, in particular, the Risk Factors section of our Form 10-K and Form 10-Qs. It is not possible to predict or identify all such risks, and listeners are cautioned not to place undue reliance on these forward-looking statements. The company undertakes no obligation to update any of these forward-looking statements. Further, certain non-GAAP financial measures will be discussed on this conference call. A presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP can be accessed through our filings with the SEC. For the second quarter of 2026, we reported a GAAP net loss of $0.18 and distributable loss of $0.10 per share of common stock. In June, we had declared a quarterly dividend of $0.04 per share with respect to the second quarter, in line with the prior quarterly dividend. I'll now turn the call over to Jim Flynn.

Please go ahead. Recent economic data has increased uncertainty regarding the path of the Fed, including whether short-term rates may remain elevated for longer than previously expected. Long-term rates also remain elevated, continuing to pressure transaction activity and real estate valuations. Within multifamily, fundamentals continue to improve as the sector moves beyond peak supply levels. Rent growth remains modest, long-term demand drivers, including housing affordability challenges, continue to support the multifamily rental sector. Capital markets remain active with liquidity available across warehouse securitization and institutional lending channels strong through the first half of this year. The CRE CLO market continues to be an important source of financing for multifamily mortgage assets and investor demand for floating rate credit remains relatively strong, particularly for repeat issuers with proven track records. Active asset management remains our highest priority. We continue to work closely with borrowers and operating partners to maximize outcomes across both performing and nonperforming investments. We continue to proactively evaluate resolution strategies for legacy assets while maintaining a disciplined approach to credit. While the market for certain legacy assets remain soft, we are beginning to see an acceleration in resolution activity, including both negotiated sales and other paths to monetize or stabilize challenged positions. We continue to work tirelessly to resolve these assets in a manner that protects value, improves liquidity and positions the company to reinvest capital efficiently. On the portfolio side, during the quarter, we were intentional about managing liquidity on our balance sheet to support ongoing portfolio management efforts while selectively redeploying CLO capital when available.

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