Executive Summary

Q2 2025 GAAP EPS was $0.05 and distributable earnings per share were $0.05, with net income to common of $2.5M and distributable earnings of $2.77M . Consensus EPS for Q2 2025 was $0.075*, and revenue estimate was $7.96M*, so results were a miss on both EPS and revenue, driven by lower net interest income and higher operating expenses (see Financial Results) . Values retrieved from S&P Global.
Net interest income declined to $6.96M from $7.74M in Q1, reflecting portfolio paydowns, lower exit fees ($0.4M vs $0.75M prior quarter), and reduction in secured financing balances .
Book value per common share fell to $3.27 from $3.29 in Q1 and $3.40 in Q4 2024, while the proportion of performing loans decreased to 86.6% and eight loans were risk-rated “5” totaling $124.1M, underscoring continued credit normalization .
Dividend was $0.06 for Q2 (declared June 20); the company announced a subsequent Q3 cut to $0.04, a likely stock reaction catalyst signaling tighter earnings capacity while preserving liquidity .

What Went Well and What Went Wrong

What Went Well

Positive distributable earnings and GAAP profitability: $2.77M distributable earnings ($0.05 per share) and $2.51M GAAP net income ($0.05 per share) .
Specific reserves decreased by ~$3.5M QoQ to $7.6M, reflecting improved asset recovery view and transfers of two loans to REO; management achieved a positive resolution on a previously “5”-rated Philadelphia loan (borrower resumed payments) .
Financing costs remain contained with effective securitization cost of funds of SOFR +1.79% and +3.19% for the two structures, and no repo financing, reducing margin call risk .
- “We continue to maintain a conservative liquidity posture… holding a meaningful balance of unrestricted cash to preserve flexibility and optionality in managing the more challenged credits” .

What Went Wrong

Net interest income declined to $6.96M as portfolio UPB shrank with payoffs ($63.4M) and lower exit fees ($0.4M vs $0.75M), pressuring earnings vs estimates .
Operating expenses rose to ~$3.2M vs $2.6M in Q1 (manager fees and reimbursements), contributing to EPS/revenue misses .
Asset quality pressure: performing loans fell to 86.6% and eight loans rated “5” totaled ~$124.1M (13% of UPB), with multiple assets in monetary/default status and two foreclosures to REO (San Antonio and Houston) .

Financial Results

Income Statement Metrics vs Prior Periods and Estimates

Metric	Q4 2024	Q1 2025	Q2 2025	Q2 2025 Consensus*	Commentary
Revenue ($USD)	N/A	$6,879,210*	$6,879,210*	$7,958,850*	Revenue shortfall reflects lower UPB and exit fees; values from S&P Global.
Net Interest Income ($USD)	N/A	$7,735,000	$6,961,000	N/A	Sequential decline driven by paydowns and lower exit fees.
GAAP Net Income to Common ($USD)	$3,604,879	$(1,707,526)	$2,506,000	N/A	Return to profitability in Q2.
GAAP EPS ($USD)	$0.07	$(0.03)	$0.05	$0.075*	EPS missed consensus due to lower NII and higher OpEx.
Distributable Earnings ($USD)	$5,382,456	$4,021,203	$2,771,648	N/A	Decline consistent with NII trends and credit provisioning.

Values retrieved from S&P Global (asterisked cells).

KPIs and Balance Sheet

KPI	Q4 2024	Q1 2025	Q2 2025
Distributable EPS ($)	$0.10	$0.08	$0.05
Dividend per Common Share ($)	$0.08	$0.08	$0.06
Book Value per Common Share ($)	$3.40	$3.29	$3.27
Cash & Cash Equivalents ($M)	N/A	$63.5	$59.4
Leverage Ratio (Liabilities/Equity, x)	3.7x	3.6x	3.3x
% Performing Loans	90.8%	89.3%	86.6%
Loans Risk-Rated “5” (# / $M UPB)	7 / $108.4	7 / $108.4	8 / $124.1

Portfolio Composition (Q2 2025)

Metric	Q2 2025
Loan Portfolio Carrying Value ($M)	$905.4
UPB ($M)	$924.2
Property Type Mix (% of carrying value)	Multifamily 90.6%, Seniors Housing & Healthcare 8.8%, Self Storage 0.7%
Top Geography (% of carrying value)	FL 21.7%, NJ 12.6%, GA 6.4%, PA 5.4%, Other 22.3%
Weighted Avg Note Rate	SOFR + 3.56%
Weighted Avg Remaining Initial Term	5 months (18 months with extensions)
Performing Loans (%)	86.6%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Dividend per Common Share	Q2 2025	$0.08 (Q1 2025 actual)	$0.06 (declared June 20)	Lowered
Dividend per Common Share	Q3 2025	$0.06 (Q2 2025 actual)	$0.04 (declared Sept 16)	Lowered
Revenue/Earnings Guidance	FY/Qtr	None provided	None provided	Maintained (no formal guidance)
Financing Outlook	FY 2025	Pursuing new secured financing; potential return to CRE CLO market	Continued pursuit; CLO market seeing ~$17B YTD issuance; flexibility sought via bank/private credit	Constructive backdrop (qualitative)

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current Period (Q2 2025)	Trend
Macro rates/tariffs	Cautious on rate path; tariffs impacting sentiment	Inflation moderating; rates elevated; geopolitical/tariff uncertainties persist	Stable caution
Asset management/credit	Increased specific reserves; 7 loans rated “5”; proactive borrower engagement	Eight “5” loans ($124.1M); two foreclosures to REO; one cured; weighted avg risk rating 3.5	Mixed: selective progress amid pressure
Liquidity/capital	Held ~$64M cash; voluntary de‑leveraging in LMF	~$59M cash; leverage down to 3.3x; match-term, non‑recourse financing; no repo	Conservative stance maintained
Financing/CLO market	Exploring bank/private credit bridge; target CLO issuance later in 2025	CLO issuance robust (~$17B YTD 2025); monitoring return as repeat issuer, subject to pricing	More constructive
Dividend policy	Q1 dividend $0.08	Q2 dividend $0.06; subsequent Q3 cut to $0.04	More conservative
Revenue drivers	Q4 exit fees ~$1.1M; Q1 ~$0.7M; NII $7.7M	Exit fees ~$0.4M; NII $7.0M; portfolio paydowns	Headwind

Management Commentary

CEO tone on the macro and financing backdrop: “Inflation has continued to moderate, though rates remain elevated… issuance volumes have been encouraging… supports our outlook for a potential return to the securitization market as a repeat issuer” .
Active asset management as a core strategy: “A proactive approach allows us to identify and act on potential credit events… and in appropriate cases, REO strategies that maximize long term recovery” .
Liquidity posture: “We continue to maintain a conservative liquidity posture this quarter holding a meaningful balance of unrestricted cash” .
CFO on earnings drivers: “Our Q2 net interest income was $7.0M… average outstanding UPB declined… we recognized approximately $400,000 of exit fees during Q2 compared to approximately $750,000 in the prior quarter… operating expenses… $3.2M in Q2 versus $2.6M in Q1” .
Portfolio credit update: “As of June 30, we had eight loans risk rated a five with an aggregate principal balance of approximately $124,000,000” and detailed resolutions including two foreclosures to REO and one cure .

Q&A Highlights

Q2 call: no questions were asked during the session .
Prior quarter context (Q1): analysts focused on financing options (bank/private credit vs CLO) and timing for resolutions of problem loans; management reiterated pursuit of flexible financing ahead of next CLO and expected resolutions over 3–6 months, highlighting sponsor capital constraints as a key driver of non‑accruals and deterioration .

Estimates Context

EPS: Q2 2025 GAAP EPS was $0.05 vs consensus $0.075* → bold miss. Revenue: $6.88M* vs consensus $7.96M* → bold miss. Values retrieved from S&P Global.

Metric	Q2 2025 Actual	Q2 2025 Consensus*	Beat/Miss
EPS ($)	$0.05	$0.075*	Miss
Revenue ($USD)	$6,879,210*	$7,958,850*	Miss

Drivers: Lower average UPB from payoffs, reduced exit fee recognition, and higher operating expenses compressed earnings power relative to expectations .

Key Takeaways for Investors

Earnings power compressed: sequential declines in net interest income and exit fees, combined with higher operating expenses, resulted in EPS and revenue misses vs S&P Global consensus; monitor trajectory of UPB and exit fee activity .
Credit stabilization efforts ongoing: specific reserves declined QoQ due to REO transfers and one loan cure, but eight loans remain at “5” risk rating; asset outcomes (REO dispositions/modifications) are near‑term catalysts for book value and earnings variability .
Balance sheet prudence: leverage reduced to 3.3x and cash remains strong ($59.4M); absence of repo financing reduces forced selling/margin call risk—supportive in a choppy credit environment .
Dividend reset: Q2 cut to $0.06 and subsequent Q3 cut to $0.04 signal an intent to preserve capital amid lower distributable earnings; this can weigh on income investors near‑term but enhances flexibility for credit resolutions .
Financing optionality: management is actively pursuing new secured financing and views the CLO market as constructive; a successful financing could unlock reinvestment capacity and support earnings normalization .
Portfolio mix advantageous: ~91% multifamily exposure and no office/retail/hospitality loans may mitigate sector‑specific stress; focus remains on multifamily credit opportunities .
Trading implications: near‑term stock narrative hinges on credit outcomes (REO sales/modifications), financing execution, and distributable earnings trajectory; watch for updates on loan resolutions and any return to securitization issuance .

Note: Asterisked values are retrieved from S&P Global.

Sources:
- Q2 2025 8‑K and supplemental: **[1547546_0001104659-25-075733_tm2522889d1_8k.htm:1]** **[1547546_0001104659-25-075733_tm2522889d1_ex99-1.htm:1]** **[1547546_0001104659-25-075733_tm2522889d1_ex99-2.htm:3]** **[1547546_0001104659-25-075733_tm2522889d1_ex99-2.htm:2]** **[1547546_0001104659-25-075733_tm2522889d1_ex99-2.htm:4]** **[1547546_0001104659-25-075733_tm2522889d1_ex99-2.htm:5]** **[1547546_0001104659-25-075733_tm2522889d1_ex99-2.htm:8]** **[1547546_0001104659-25-075733_tm2522889d1_ex99-2.htm:9]**
- Q2 2025 press releases: **[1547546_20250808NY47624:0]** **[1547546_20250808NY47624:1]** **[1547546_20250808NY47624:2]** **[1547546_20250806NY46041:0]** **[1547546_20250806NY46041:1]**
- Q2 2025 earnings call transcript: **[1547546_2070862_0]** **[1547546_2070862_1]** **[1547546_2070862_2]** **[1547546_2070862_3]**
- Q1 2025 8‑K and supplemental: **[1547546_0001104659-25-047377_tm2514782d1_ex99-1.htm:0]** **[1547546_0001104659-25-047377_tm2514782d1_ex99-1.htm:1]** **[1547546_0001104659-25-047377_tm2514782d1_ex99-2.htm:2]** **[1547546_0001104659-25-047377_tm2514782d1_ex99-2.htm:3]** **[1547546_0001104659-25-047377_tm2514782d1_ex99-2.htm:4]**
- Q4 2024/Full year 2024 press release: **[1547546_20250319NY45400:0]** **[1547546_20250319NY45400:2]**
- Q3 2025 dividend change press release: **[1547546_20250916NY74286:0]**
- S&P Global consensus and actuals (no citations): GetEstimates outputs for Q2 2025 and forward periods.

Lument Finance Trust, Inc. (LFT)·Q2 2025 Earnings Summary