Lument Finance Trust, Inc. Q3 FY2024 earnings call

• US Economic outlook: Cautiously optimistic with soft landing likelihood, multifamily market fundamentals strong, asset cap rates stabilizing.
• Portfolio activity: $51 million in loan payoffs, redeployed into $45 million loans with weighted average coupon of SOFR plus 323 basis points. Portfolio had a weighted average remaining term of approximately 28 months.
• Financial results: Q3 net income $5.1 million ($0.10 per share), distributable earnings $5.5 million ($0.10 per share). Net interest income flat, operating expenses $2.9 million (down from $3.5 million in Q2) due to lower incentive fees. Allowance for credit losses increased.
• Loan risk ratings: 4 loans risk rated 5, with one $20.3 million loan near Augusta, Georgia resolved post-quarter end.

For the third quarter of 2024, Lument Finance Trust reported GAAP net income of $0.10 and distributable earnings of $0.10 per share of common stock. The net interest income in Q3 was $9.5 million, largely flat from Q2. The portfolio consisted of 75 floating rate loans with an aggregate unpaid principal balance of approximately $1.2 billion, with 100% indexed to one-month SOFR and 93% collateralized by multifamily properties. The weighted average floating note rate was SOFR plus 353 basis points. The CLO financing had a weighted average cost of funds of SOFR plus 214 basis points.

• Expect to continue delivering stable dividend by focusing on multifamily credit. Manager's origination pipeline ramping up.
• Evaluating alternatives for CLO securitization to align financing strategy. Portfolio expected to trend back toward $1.5 billion with potential refinancing.

• Forward-looking statements subject to risks in SEC filings, particularly from Form 10-K Risk Factors.
• Economic uncertainties, market volatility, interest rate changes, and loan-specific risks related to risk-rated loans.

Q: Jason Weaver asked about pipeline visibility after quarter-end and CLO financing costs.

A: Jim Flynn and Zachary Halpern discussed pipeline activity with expectations of closings in December and Q1, and CLO financing costs at SOFR plus 214 vs. market comments on lower rates.

Q: Stephen Laws inquired about CLO financing and 4-rated loans.

A: Jim Flynn discussed evaluating CLO transaction considerations and Jim Briggs explained risk rating process for 4-rated loans.

Q: Steve Delaney asked about bridge market opportunity and portfolio growth.

A: Jim Flynn compared current bridge market risk-return to past, and discussed portfolio potential to trend toward $1.5 billion with refinancing.

Q: Brad Capuzion asked about credit outlook and investment activity.

A: Jim Flynn stated belief peak stress in multifamily credit reached, and reinvestment activity tied to payoffs and CLO reinvestment period.