Lument Finance Trust's Q2 2025: Key Contradictions in Economic Outlook, Asset Management, and Credit Risk

Earnings and Financial Performance:
- Lument Finance Trust reported net income of $2.5 million or $0.05 per share and distributable earnings of $2.8 million or $0.05 per share in the second quarter of 2025.
- The decline in net interest income was driven by a decrease in the average outstanding unpaid principal balance (UPB) and the use of principal loan repayments to pay down securitization liabilities.

Loan Payoffs and Portfolio Composition:
- The company experienced $63 million in loan payoffs during the second quarter.
- Approximately 91% of the portfolio was collateralized by multifamily properties, reflecting the stable nature of this segment.

Credit Quality and Risk Ratings:
- As of June 30, 63% of loans in the portfolio were risk-rated at 3 or better, and the weighted average risk rate remained stable at 3.5.
- The decrease in specific reserves by $3.5 million is attributed to the transfer of two assets to REO and an improved view of asset recovery.

Liquidity and Capital Structure:
- The company held $59 million in unrestricted cash and had a total equity of approximately $231 million at the end of the quarter.
- The effective leverage provided by securitizations was 75% with a weighted average cost of funds of SOFR plus 233 basis points.