Lument Finance Trust, Inc. Q4 FY2025 earnings call

• Market overview: U.S. economy resilient but growth moderating, commercial real estate capital markets improved with increased liquidity but transaction activity below historical averages. Multifamily fundamentals stabilizing with new deliveries expected to decline. • Financing: Lower short-term interest rates constructive for borrowers. CRE CLL market important source of liquidity. Active asset management priority, working with borrowers on modifications, etc. • Portfolio activity: Q4 generated ~$104 million of payoffs, deployed ~$400 million into loan assets, ended with ~$23 million of unrestricted cash. Entered into master repurchase and loan agreements, closed FL3 CLO transaction, redeemed and refinanced a financing transaction, amended term loan. • Asset management: Focus on active management, efficient resolution of legacy positions, disciplined balance sheet management. Portfolio credit metrics improved with acquisition of performing assets, increased reserves on challenge legacy positions.

For the fourth quarter of fiscal year 2025, net loss to common stockholders was $8.9 million, or 17 cents per share. Distributable earnings were approximately zero. The loan portfolio in Q4 had 61 floating rate loans with an aggregate unpaid principal balance of ~$1.1 billion. 93% of the portfolio was collateralized by multifamily properties. Non-accruals had a drag on earnings of about 2 cents with a UPB of $102 million. At year-end, there were 8 risk-rated five loans with an aggregate principal amount of ~$117 million, representing ~10% of the unpaid principal balance of the investment portfolio.

• The Federal Reserve began easing in 2025, forward path of rates expected gradual and data dependent. • Near-term focus on active asset management, efficient resolution of legacy positions, disciplined balance sheet management. • Believe liquidity position appropriate to support portfolio management, asset resolution, and selective capital deployments. • Anticipate market characterized by selectivity with outcomes differentiated by asset quality, sponsorship, and capital structure. • Remain cautious and highly selective in deploying capital with focus on strong credit fundamentals, structural protections, and risk-adjusted returns.

• Risks and uncertainties discussed in company's SEC reports, including risk factors in Form 10-K and 10-Qs. • Market volatility, evolving monetary policy, fiscal dynamics, geopolitical risks can cause actual results to differ from forward-looking statements. • Uneven operating and financing environment, particularly for assets impacted by recent capital structure challenges. • Recovery in commercial real estate credit markets uneven and may take time to fully normalize.

Q: Can you give some context on how you view the risk-reward and opportunity today for new capital deployment against the last few weeks backdrop of elevated rate volatility?

A: Focus on sponsor and market, evaluation of growth expectations, supply and demand dynamics. Deals typically structured with interest rate caps. Most important aspects are sponsor and market.

Q: With the new CLO closed, is there an updated comfort zone for leverage over the near term?

A: On loan level, average leverage at asset level has declined. Regularly seeing assets in 60s and low 70s. Corporately, not anticipating material changes to fully deployed leverage of LFT vehicle.

Q: What was the balance of non-accruals at year-end and how much of a drag on earnings?

A: Non-accruals UPB is $102 million, drag on earnings is about 2 cents.

Q: How are you guys thinking about the path to dividend coverage this year?

A: Probably a little bit of both cleaning up existing portfolio in REO and portfolio growth. Anticipate dividend would be more than covered with timing of asset resolutions, payoffs, redeployment into performing assets, and potential future financing.