Lument Finance Trust (NYSE:LFT) reported a third-quarter loss as credit-loss provisions and property impairments weighed on results, while executives said resolving troubled legacy assets remains the company’s priority.
The commercial real estate lender reported a net loss attributable to common shareholders of $13.5 million, or $2.57 per share, for the third quarter of 2026. Its distributable loss was $700,000, or $0.13 per share. Per-share figures reflect the company’s 1-for-10 reverse stock split completed Sept. 9.
Chief Executive Officer Jim Flynn said the company suspended its third-quarter common dividend to preserve liquidity and operating flexibility. He told analysts that the board has not set a specific earnings threshold for reinstating it, instead emphasizing progress on asset resolutions and the company’s liquidity needs.
“It’s really about maintaining liquidity and flexibility to resolve those assets,” Flynn said. Once the company and its board are comfortable with that position, they will assess distributable earnings and make a dividend decision, he said.
Credit provisions and impairments
Chief Financial Officer Jim Briggs said the difference between the GAAP and distributable losses primarily reflected an $8.6 million provision for credit losses, $3.9 million in impairments on real estate owned, or REO, and $318,000 of depreciation on REO.
The company’s general credit-loss reserve rose by $2.8 million during the quarter to $6.6 million, primarily because of an increase in high-risk loans and changes to macroeconomic assumptions, Briggs said. Its specific allowance increased to $20.5 million from $17.4 million at the end of June.
The specific provision was primarily related to two loans that remained in the highest-risk category from the prior quarter, reflecting changes in collateral values, Briggs said. Lument also charged off $2.8 million of specific allowance associated with a loan it foreclosed on during the period.
Common book value fell to $24.97 per share at Sept. 30 from a reverse-split-adjusted $27.57 at June 30. Net interest income increased modestly to $4.6 million from $4.5 million in the second quarter, while operating expenses were $4 million, compared with $3.9 million.
High-risk loans and property sales
President Greg Calvert said Lument acquired or funded four loans with an aggregate unpaid principal balance of $67 million during the quarter and received $79 million in loan payoffs. At quarter end, the portfolio consisted of 51 floating-rate loans totaling approximately $981 million; 93% were backed by multifamily properties.
About 70% of loans were risk-graded three or better, down from 81% at June 30. Six loans totaling $94 million were in the highest-risk category, representing approximately 10% of the portfolio’s unpaid principal balance.
Five of those loans, totaling $76 million, had also been in the highest-risk category in the prior quarter and were on nonaccrual status, Calvert said. The sixth, an $18 million loan, was downgraded because of a maturity default, although the borrower was current on interest payments and no specific credit-loss allowance was recorded for it during the period.
Lument also held five multifamily REO properties with a combined carrying value of $77 million and weighted average occupancy of approximately 67%. Four, carrying a combined value of $49.8 million, were classified as held for sale.
Flynn said the company was pursuing sales of at least four properties but noted that disagreements between buyers and sellers over pricing have made transactions difficult. He added that borrower bankruptcies and the time required to gain control of assets have delayed some resolutions.
“We don’t think things are going to get materially better by waiting,” Flynn said, adding that the company wants to move assets off its books and redeploy the capital. He said Lument hopes to make significant progress through 2027, while cautioning that timing depends on market conditions and gaining control of properties.
Liquidity and shareholder questions
Lument ended the quarter with approximately $27 million in unrestricted cash. Flynn said the board decided to continue the preferred dividend for the quarter, but stressed that future payments are quarterly board decisions.
Asked about the company’s unused buyback authorization, Flynn said repurchasing shares would be mathematically accretive at current prices and that management and the board had evaluated the option. For now, he said, the focus is on preserving liquidity to resolve portfolio issues.
Analysts and an investor also pressed executives for details on loans that matured after quarter end. Portfolio Manager Zach Halpern said he had not been given clearance to discuss specific current-quarter activity. Calvert said the loans under discussion included performing loans receiving extensions, loans awaiting refinancing or sales, and a handful in workout situations. Executives said they would provide more detail on maturities in a future update.
About Lument Finance Trust (NYSE:LFT)
Lument Finance Trust, Inc. is a real estate investment trust that focuses primarily on financing multifamily and other commercial real estate properties. The company invests in mortgage loans and related real estate debt investments, with an emphasis on generating income from a diversified portfolio of commercial real estate credit assets. Its investments generally include floating-rate, first-mortgage loans secured by multifamily properties, as well as other commercial real estate loans and mortgage-related securities.
