Lument Finance Trust (NYSE:LFT) reported a GAAP net loss for both the fourth quarter and full year of 2025 as management emphasized active asset management, improving credit market conditions, and a focus on resolving legacy problem assets.
Quarterly results and dividend
For the fourth quarter of 2025, the company reported a net loss to common stockholders of $8.9 million, or $0.17 per share. For the full year 2025, it reported a GAAP net loss of $0.14 per share.
Net interest income, expenses, and credit loss provisions
CFO Jim Briggs said fourth-quarter net interest income was $5.3 million, slightly higher than the $5.1 million recorded in the third quarter. He noted the weighted average coupon of the loan portfolio declined sequentially to 717 basis points from 777 basis points, attributing the change to lower spreads on newly acquired loans and a decline in the SOFR benchmark rate.
Total operating expenses, including fees to the external manager, increased to $3.8 million from $3.1 million in the prior quarter. Briggs said the quarter included one-time legal expenses related to REO assets, costs related to the company’s LFT 2021-FL1 redemption in November, and expenses tied to a financing initiative the company elected not to proceed with after securing more attractive terms through other facilities.
Management said the difference between reported net income and Distributable Earnings in the fourth quarter was primarily driven by:
- $8.6 million of unrealized provision for credit losses
- $200,000 realized loss on sale of REO
- $296,000 of depreciation on REO
As of December 31, 2025, the company had eight loans risk rated 5, all collateralized by multifamily assets. After evaluating those loans individually, the company recorded the $8.6 million provision for credit losses during the quarter. Briggs said the specific allowance for credit losses increased to $17.6 million as of year-end, compared with $8.3 million as of September 30, 2025. The general allowance for credit losses decreased to $5.0 million from $5.7 million, driven by transfers to specific evaluation, payoffs, and changes to the macroeconomic forecast.
Book value of common stock at quarter-end was $159 million, or $3.03 per share, down from $3.25 per share at September 30, 2025. Total book equity was approximately $219 million.
Portfolio activity and credit metrics
President Greg Calvert said the company acquired or funded $400 million of loan assets in the fourth quarter, with most of the volume tied to collateral for its LMNT 2025-FL3 CLO transaction. The company also had $104 million of loan payoffs during the quarter.
As of December 31, 2025, the loan portfolio consisted of 61 floating-rate loans with an aggregate unpaid principal balance of approximately $1.1 billion. Calvert said the portfolio had a weighted average floating rate of 333 basis points over SOFR and an unamortized aggregate purchase discount of $1.7 million. The weighted average remaining term was approximately 21 months, assuming all extension options are exercised.
The portfolio was indexed entirely to one-month SOFR, and 93% was collateralized by multifamily properties. Calvert also highlighted a significant shift in risk grades quarter-over-quarter, with 83% of loans risk graded 3 or better at year-end, compared with 46% as of September 30. The weighted average risk rating improved to 3.2 from 3.6, which he attributed primarily to the acquisition of additional loans from an affiliate of the manager in connection with the CLO execution.
Calvert said one loan (UPB of $9.8 million) improved from a risk rating of 5 to a 4 or better rating following a loan modification that included a partial paydown in exchange for an extension through the fourth quarter of 2026.
At quarter-end, the company’s eight risk-rated 5 loans totaled approximately $117 million, or about 10% of the portfolio UPB. Calvert provided details that included:
- One loan in maturity default downgraded during the quarter: $22 million (Arlington, Texas)
- One loan in monetary default downgraded during the quarter: $18 million (Tampa, Florida)
- Three maturity-default loans continuing at risk rating 5: $40 million aggregate (Philadelphia; Colorado Springs; Cedar Park, Texas)
- Three monetary-default loans continuing at risk rating 5: $38 million aggregate (Des Moines; Tallahassee, Florida; Ypsilanti, Michigan)
Financing actions, CLO execution, and liquidity
CEO Jim Flynn described a commercial real estate environment in which capital markets liquidity has improved, although transaction activity remains below historical averages due to pricing discovery and an elevated cost of capital. He said multifamily fundamentals are stabilizing after the peak of the recent supply cycle, with new deliveries expected to decline meaningfully into late 2026 and 2027 due to sharply reduced starts.
Flynn highlighted several balance sheet and financing actions. In November 2025, the company entered into an uncommitted master repurchase agreement with JPMorgan Chase providing up to $450 million of borrowing capacity to finance certain commercial mortgage-related assets. In early December, it entered into a facility with Northeast Bank providing up to $50 million in advances, which Flynn said adds flexibility to resolve REO holdings and support asset management outcomes.
Also in December, the company executed the LMNT 2025-FL3 CLO, a $664 million transaction with an effective advance rate of 88% and a weighted average cost of funds of approximately 191 basis points over SOFR, including fees and transaction costs. The initial collateral pool consisted of 32 first-lien floating-rate mortgage loans and participations secured by 49 multifamily and commercial real estate properties across the U.S. Management said part of the collateral was already owned by LFT, while the remainder was acquired at fair market value plus accrued interest from an affiliate of its external manager. The weighted average collateral spread was approximately 321 basis points over one-month SOFR, and the CLO includes a 30-month reinvestment period through June 2028.
In February, the company redeemed remaining outstanding loans and notes of its LMF 2023-1 financing transaction and refinanced the underlying pool with existing warehouse facilities, which Flynn said was driven by the relatively high cost of capital and low current leverage in that structure. Subsequent to quarter-end, LFT amended its secured corporate term loan, extending maturity to 2030 and providing $2.3 million of incremental liquidity before fees and expenses; the term loan now bears an interest rate of 9.75%.
Flynn said the company ended 2025 with approximately $23 million of unrestricted cash, and management characterized liquidity—along with available warehouse capacity—as appropriate for portfolio management, asset resolution, and selective deployment.
Q&A: deployment, leverage, non-accruals, and dividend coverage
During the question-and-answer session, management discussed how it is evaluating new capital deployment amid elevated rate volatility, emphasizing sponsor quality, market fundamentals, supply and demand dynamics, and deal structures such as interest rate caps and leverage discipline.
Asked about leverage, management said asset-level leverage in bridge lending has declined since 2023–2024, with many deals in the 60% to low 70% range and “very few” in the 80% range or higher. At the corporate level, management said it does not anticipate material changes to fully deployed leverage, while noting CLO leverage is slightly higher than historic norms.
In response to a question on non-accruals, management said year-end non-accrual UPB was $102 million and the earnings drag was approximately $0.02.
On the path back to dividend coverage, management said it is likely to be “a little bit of both” portfolio cleanup and redeployment. Management said that on a fully deployed basis it believes the dividend would be more than covered, and discussed expectations around timing of resolutions and payoffs, redeployment into new performing assets, and the potential for future portfolio-level financing, including a possible new CLO or other broader financing structure.
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.
