Lument Finance Trust(LFT)

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Lument Finance Trust(LFT) - 2019 Q3 - Earnings Call Transcript
2019-11-12 05:21
Financial Data and Key Metrics Changes - For Q3 2019, the company reported net income of $2.2 million or $0.09 per share, an increase of $0.03 per share quarter-over-quarter [6] - Core earnings for the quarter were $2.3 million or $0.10 per share, up $0.01 from the previous quarter [6][9] - Comprehensive income to common stockholders was $2.2 million or $0.09 per share compared to $3.5 million or $0.15 per share for Q3 2018 [9] - Book value per share at quarter end was $4.61, slightly up from $4.60 in Q2 [10] Business Line Data and Key Metrics Changes - The company acquired and funded $62 million of floating rate CRE loans, with 94% of these loans being multifamily [11] - The overall loan portfolio increased from 88% to 92% multifamily [11] - The total portfolio of floating rate loans had an outstanding principal balance of $560 million at quarter end [14] Market Data and Key Metrics Changes - The weighted average spread on new loans was 315 basis points above LIBOR, reflecting a decline from previous quarters [11][22] - The company experienced $95 million in loan payoffs during the quarter, indicating strong borrower performance [12] Company Strategy and Development Direction - The company aims to continue investing in high-quality floating rate first mortgage investments and remains focused on multifamily assets [11] - The management is exploring refinancing options for their first CLO, indicating a proactive approach to capital management [15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's growth prospects and investment activities, highlighting the importance of scale in the current market environment [17][46] - The company is working through the details of a potential business combination with ORIX, which management believes could be beneficial due to increased scale and resources [46][47] Other Important Information - The company noted that competitive markets are pressuring origination activity and loan spreads, leading to a cautious approach in evaluating new investment opportunities [7] - There were no defaults or delinquencies in the loan portfolio, and performance remained stable over the quarter [14] Q&A Session Summary Question: Inquiry about investment spreads - Management noted a decline in spreads on new originations from over 350 to 315 basis points, reflecting market compression [22] Question: Dividend target - Management indicated that the dividend target of 8% to 9% of book value is at the Board's discretion and aims to remain competitive within the market [24] Question: Loan participation details - The company sold a performing loan participation to manage asset concentration within their CLOs [28][31] Question: Pipeline and CLO capacity - Management reported over $200 million in loans under application, with a significant pickup in pipeline activity [33] Question: ORIX business combination implications - Management acknowledged that while there are competitive aspects, the combination with ORIX is largely seen as complementary and beneficial for scale [46][47]
Lument Finance Trust(LFT) - 2019 Q3 - Quarterly Report
2019-11-07 21:08
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ____________ Commission File No. 001-35845 HUNT COMPANIES FINANCE TRUST, INC. (Exact name of registrant as specified in its charter) (State or other juri ...
Lument Finance Trust(LFT) - 2019 Q2 - Quarterly Report
2019-08-07 20:06
[PART I - Financial Information](index=3&type=section&id=PART%20I%20-%20Financial%20Information) This section provides a comprehensive overview of the company's financial performance and position, including detailed statements and explanatory notes [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents unaudited condensed consolidated financial statements, including balance sheets, income, comprehensive income, equity, and cash flows, with detailed notes on accounting policies and financial disclosures [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This chapter details the company's financial position, presenting assets, liabilities, and equity as of June 30, 2019, and December 31, 2018 Condensed Consolidated Balance Sheets (June 30, 2019 vs. December 31, 2018) | Metric | June 30, 2019 (unaudited) | December 31, 2018 (1) | | :------------------------------------------ | :------------------------ | :------------------------ | | **ASSETS** | | | | Cash and cash equivalents | $7,164,246 | $7,882,862 | | Restricted cash | $42,877,535 | $51,330,950 | | Commercial mortgage loans held-for-investment | $599,770,362 | $555,172,891 | | Receivables held in securitization trusts | — | $24,357,335 | | Mortgage servicing rights | $3,158,669 | $3,997,786 | | Total assets | $657,354,399 | $679,352,035 | | **LIABILITIES** | | | | Collateralized loan obligations, net | $504,946,473 | $503,978,918 | | Secured Term Loan, net | $39,229,194 | — | | Multi-family securitized debt obligations | — | $19,231,331 | | Total liabilities | $548,488,277 | $529,148,697 | | **EQUITY** | | | | Preferred Stock | — | $37,156,972 | | Total stockholders' equity | $108,766,622 | $150,103,838 | | Total liabilities and equity | $657,354,399 | $679,352,035 | - Total assets decreased by approximately **$22 million** from December 31, 2018, to June 30, 2019, primarily due to a decrease in restricted cash and the elimination of receivables held in securitization trusts, partially offset by an increase in commercial mortgage loans held-for-investment[10](index=10&type=chunk) - Total liabilities increased by approximately **$19 million**, driven by the introduction of a Secured Term Loan and an increase in Collateralized Loan Obligations, while Multi-family securitized debt obligations were eliminated[10](index=10&type=chunk) - Total stockholders' equity decreased significantly by over **$41 million**, largely due to the redemption of Preferred Stock[10](index=10&type=chunk) [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This chapter outlines the company's financial performance, including net interest income, other income, expenses, and net income for the reported periods Condensed Consolidated Statements of Operations (Three Months Ended June 30) | Metric | June 30, 2019 | June 30, 2018 | | :------------------------------------------ | :------------ | :------------ | | Net interest income | $4,046,715 | $4,569,910 | | Total other income (loss) | $(273,654) | $(23,670,368) | | Total expenses | $2,176,146 | $2,389,605 | | Net income (loss) | $1,394,170 | $(21,490,063) | | Net income (loss) attributable to common stockholders | $1,390,378 | $(22,360,789) | | Basic and diluted income (loss) per share | $0.06 | $(0.94) | | Dividends declared per share of common stock | $0.08 | $0.06 | Condensed Consolidated Statements of Operations (Six Months Ended June 30) | Metric | June 30, 2019 | June 30, 2018 | | :------------------------------------------ | :------------ | :------------ | | Net interest income | $8,253,262 | $7,687,482 | | Total other income (loss) | $(420,538) | $(12,260,128) | | Total expenses | $4,824,107 | $5,602,417 | | Net income (loss) | $2,868,937 | $(10,175,063) | | Net income (loss) attributable to common stockholders | $(708,355) | $(11,926,298) | | Basic and diluted income (loss) per share | $(0.03) | $(0.51) | | Dividends declared per share of common stock | $0.15 | $0.16 | - For the three months ended June 30, 2019, the company reported a net income of **$1.39 million**, a significant improvement from a net loss of **$21.49 million** in the prior year, primarily driven by a substantial reduction in 'Total other income (loss)' from a loss of **$23.67 million** to a loss of **$0.27 million**[12](index=12&type=chunk) - For the six months ended June 30, 2019, the company's net income improved to **$2.87 million** from a net loss of **$10.18 million** in the prior year, largely due to a decrease in 'Total other income (loss)' and 'Total expenses', alongside an increase in 'Net interest income'[12](index=12&type=chunk) [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) This chapter presents the company's comprehensive income (loss), including net income and other comprehensive income components for the specified periods Condensed Consolidated Statements of Comprehensive Income (Loss) (Three Months Ended June 30) | Metric | June 30, 2019 | June 30, 2018 | | :------------------------------------------ | :------------ | :------------ | | Net income (loss) | $1,394,170 | $(21,490,063) | | Total other comprehensive income (loss) | — | $23,483,141 | | Comprehensive income (loss) attributable to common stockholders | $1,390,378 | $1,122,352 | Condensed Consolidated Statements of Comprehensive Income (Loss) (Six Months Ended June 30) | Metric | June 30, 2019 | June 30, 2018 | | :------------------------------------------ | :------------ | :------------ | | Net income (loss) | $2,868,937 | $(10,175,063) | | Total other comprehensive income (loss) | — | $12,617,794 | | Comprehensive income (loss) attributable to common stockholders | $(708,355) | $691,496 | - For the three and six months ended June 30, 2019, the company reported no 'Total other comprehensive income (loss)', a significant change from the prior year periods which included substantial other comprehensive income related to available-for-sale securities[14](index=14&type=chunk) [Condensed Consolidated Statement of Changes in Equity](index=7&type=section&id=Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Equity) This chapter details changes in the company's equity, reflecting impacts from net income, preferred stock redemption, and dividend declarations Condensed Consolidated Statement of Changes in Equity (Six Months Ended June 30, 2019) | Metric | December 31, 2018 | June 30, 2019 | | :------------------------------------------ | :---------------- | :------------ | | Total Equity | $150,203,338 | $108,866,122 | | Redemption of preferred stock, net | — | $(40,250,000) | | Net income (loss) | — | $1,474,767 | | Common dividends declared | — | $(1,658,136) | | Preferred dividends declared | — | $(480,472) | - Total equity decreased from **$150.2 million** at December 31, 2018, to **$108.9 million** at June 30, 2019, primarily due to the redemption of preferred stock totaling **$40.25 million**[16](index=16&type=chunk) - The company declared common dividends of **$1.66 million** and preferred dividends of **$0.48 million** during the first three months of 2019, and additional common dividends of **$1.78 million** and preferred dividends of **$3,792** in the second quarter[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This chapter summarizes the company's cash inflows and outflows from operating, investing, and financing activities for the reported periods Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30) | Metric | June 30, 2019 | June 30, 2018 | | :------------------------------------------ | :------------ | :------------ | | Net cash provided by operating activities | $2,334,539 | $5,806,962 | | Net cash (used in) provided by investing activities | $(6,808,188) | $1,262,623,696 | | Net cash (used in) financing activities | $(4,698,382) | $(1,232,740,493) | | Net increase in cash, cash equivalents and restricted cash | $(9,172,031) | $35,690,165 | | Cash, cash equivalents and restricted cash, end of period | $50,041,781 | $81,312,767 | - Net cash provided by operating activities decreased from **$5.8 million** in 2018 to **$2.3 million** in 2019[20](index=20&type=chunk) - Investing activities shifted from a significant cash inflow of **$1.26 billion** in 2018 (due to sales of available-for-sale securities) to a net cash outflow of **$6.8 million** in 2019 (due to purchases of commercial mortgage loans)[20](index=20&type=chunk) - Financing activities also saw a major shift, from a net cash outflow of **$1.23 billion** in 2018 (due to principal repayments of repurchase agreements) to a net cash outflow of **$4.7 million** in 2019 (due to preferred stock redemption and dividends paid, partially offset by secured term loan proceeds)[20](index=20&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements [NOTE 1 – ORGANIZATION AND BUSINESS OPERATIONS](index=11&type=section&id=NOTE%201%20%E2%80%93%20ORGANIZATION%20AND%20BUSINESS%20OPERATIONS) This note describes the company's business, its REIT status, and significant corporate actions during the reporting period - Hunt Companies Finance Trust, Inc. (the 'Company') is a Maryland corporation focused on investing in, financing, and managing transitional multi-family and other commercial real estate loans. It operates as a REIT and is externally managed by Hunt Investment Management, LLC[23](index=23&type=chunk)[24](index=24&type=chunk) - On February 14, 2019, the Company redeemed all 1,610,000 shares of its outstanding 8.75% Series A Cumulative Redeemable Preferred Stock for **$40.25 million**, funded by a new secured term loan and working capital[25](index=25&type=chunk) - On March 18, 2019, the Company entered into a support agreement with its Manager to reduce the reimbursement cap by **25% per annum** (up to **$568,000 annually**) until aggregate support reached approximately **$1.96 million**[26](index=26&type=chunk) [NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=11&type=section&id=NOTE%202%20-%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the key accounting principles and policies applied in preparing the condensed consolidated financial statements - The financial statements are prepared in accordance with GAAP for interim reporting, with certain information condensed or omitted. The operating results for interim periods are not indicative of full-year results[27](index=27&type=chunk) - The Company consolidates Variable Interest Entities (VIEs) where it is the primary beneficiary, such as Hunt CRE 2017-FL1, Ltd. and Hunt CRE 2018-FL2, Ltd., based on its obligation to absorb losses from preferred share ownership. Maximum exposure to loss from CLOs was **$124.05 million** at June 30, 2019[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) - The Company no longer consolidates certain multi-family and residential securitization trusts (FREMF 2011-K13, CSMC 2014-OAK1, FREMF 2012-KF01) as it is no longer the primary beneficiary, reducing its maximum exposure to loss from consolidated trusts to **$0** at June 30, 2019[31](index=31&type=chunk) - Commercial mortgage loans held-for-investment are carried at amortized cost, with interest income recognized using the effective interest method. Loans are assessed quarterly for impairment, but no impairments were recognized as of June 30, 2019[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk) - Mortgage Servicing Rights (MSRs) are reported at fair value using a third-party pricing service and discounted cash flow models. The Company redeemed all 1,610,000 shares of its 8.75% Series A Cumulative Redeemable Preferred Stock on February 14, 2019[45](index=45&type=chunk)[58](index=58&type=chunk) - The Company maintains its REIT status by meeting specific income, asset, and distribution requirements. A failure to meet the **75% gross income test** in 2018 resulted in a **$1.96 million** tax liability, which was paid on April 12, 2019[59](index=59&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk) - The Company adopted ASU 2018-13 (Fair Value Measurement) early, which reduced disclosure requirements but had no impact on financial condition or results of operations. It continues to assess the impact of ASU 2016-13 (Credit Losses), effective for fiscal years beginning after December 15, 2019[68](index=68&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk) [NOTE 3 – COMMERCIAL MORTGAGE LOANS HELD-FOR-INVESTMENT](index=16&type=section&id=NOTE%203%20%E2%80%93%20COMMERCIAL%20MORTGAGE%20LOANS%20HELD-FOR-INVESTMENT) This note provides details on the company's commercial mortgage loan portfolio, including its characteristics, activity, and risk profile Commercial Mortgage Loans Held-for-Investment Characteristics | Metric | June 30, 2019 | December 31, 2018 | | :------------------------------------------ | :------------ | :------------ | | Unpaid Principal Balance | $599,770,362 | $555,172,891 | | Loan Count | 47 | 44 | | Weighted Average Floating Rate Loan % | 100.0% | 100.0% | | Weighted Average Coupon | 6.5% | 6.4% | | Weighted Average Life (Years) | 3.8 | 4.1 | Commercial Mortgage Loan Portfolio Activity (Six Months Ended June 30, 2019) | Activity | Amount | | :------------------------------------------ | :------------ | | Balance at December 31, 2018 | $555,172,891 | | Purchases | $117,536,027 | | Proceeds from principal repayments | $(72,938,556) | | Balance at June 30, 2019 | $599,770,362 | - The commercial mortgage loan portfolio increased by **$44.6 million**, from **$555.2 million** at December 31, 2018, to **$599.8 million** at June 30, 2019, with **47 loans** compared to **44**[71](index=71&type=chunk)[73](index=73&type=chunk) - The average risk rating of the commercial mortgage loan portfolio was **2.9** (Moderate Risk) at June 30, 2019, with **89.4% of loans** rated 3 or better, indicating a stable risk profile[73](index=73&type=chunk) Commercial Mortgage Loan Geographic and Property Type Concentration (June 30, 2019) | Geography | % of Carrying Value | | :------------------------------------------ | :------------------ | | Southwest | 35.5% | | South | 21.0% | | Midwest | 17.1% | | Mid-Atlantic | 12.3% | | West | 7.7% | | Various | 6.4% | | **Collateral Property Type** | | | Multi-Family | 88.4% | | Office | 5.6% | | Retail | 4.2% | | Self-Storage | 1.1% | | Mixed-Use | 0.7% | [NOTE 4 AVAILABLE-FOR-SALE SECURITIES](index=18&type=section&id=NOTE%204%20AVAILABLE-FOR-SALE%20SECURITIES) This note clarifies the company's position on available-for-sale securities, noting their absence in the current reporting period - As of June 30, 2019, and December 31, 2018, the Company no longer held any available-for-sale (AFS) securities[76](index=76&type=chunk) Net Realized Gain (Loss) from Sale of AFS Securities (Three and Six Months Ended June 30, 2018) | Metric | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2018 | | :------------------------------------------ | :------------------------------- | :----------------------------- | | AFS securities sold, at cost | $1,113,596,615 | $1,260,655,159 | | Proceeds from AFS securities sold | $1,083,104,038 | $1,227,314,575 | | Net realized gain (loss) on sale of AFS securities | $(30,492,577) | $(33,340,584) | [NOTE 5 – THE FREMF TRUSTS](index=18&type=section&id=NOTE%205%20%E2%80%93%20THE%20FREMF%20TRUSTS) This note discusses the status of FREMF Trusts, indicating the company no longer holds these trusts as of the reporting date - The Company no longer held any FREMF Trusts as of June 30, 2019, following the sale of underlying Multi-Family MBS of the FREMF 2011-K13 trust in May 2018 and the full repayment of the FREMF 2012-KF01 trust on January 25, 2019[78](index=78&type=chunk) Condensed Consolidated Balance Sheets of FREMF Trusts (December 31, 2018) | Metric | December 31, 2018 | | :------------------------------------------ | :---------------- | | Total assets | $24,357,335 | | Total liabilities | $19,595,186 | | Equity | $4,762,149 | | Total liabilities and equity | $24,357,335 | Condensed Consolidated Statements of Operations of FREMF Trusts (Six Months Ended June 30) | Metric | June 30, 2019 | June 30, 2018 | | :------------------------------------------ | :------------ | :------------ | | Net interest income | $78,361 | $1,037,566 | | Net income (loss) | $772,700 | $(6,659,666) | [NOTE 6 - RESIDENTIAL MORTGAGE LOAN SECURITIZATION TRUSTS](index=20&type=section&id=NOTE%206%20-%20RESIDENTIAL%20MORTGAGE%20LOAN%20SECURITIZATION%20TRUSTS) This note confirms the company no longer holds residential mortgage loan securitization trusts as of the reporting period - As of June 30, 2019, the Company no longer held any residential mortgage loan securitization trusts, following the sale of underlying Non-Agency RMBS of the CSMC 2014-OAK1 Trust effective June 18, 2018[82](index=82&type=chunk) Condensed Consolidated Statements of Operations of Residential Mortgage Loan Securitization Trusts (Six Months Ended June 30, 2018) | Metric | Six Months Ended June 30, 2018 | | :------------------------------------------ | :----------------------------- | | Net interest income | $416,381 | | Unrealized gain (loss) on residential loans held in securitization trusts | $5,650,199 | | Net income (loss) | $6,045,694 | [NOTE 7 - USE OF SPECIAL PURPOSE ENTITIES AND VARIABLE INTEREST ENTITIES](index=22&type=section&id=NOTE%207%20-%20USE%20OF%20SPECIAL%20PURPOSE%20ENTITIES%20AND%20VARIABLE%20INTEREST%20ENTITIES) This note explains the company's consolidation of Variable Interest Entities (VIEs) and their associated assets and liabilities - The Company consolidates Hunt CRE 2017-FL1, Ltd. and Hunt CRE 2018-FL2, Ltd. as Variable Interest Entities (VIEs) where it is the primary beneficiary. The assets of these trusts are restricted to fulfill their obligations, and the third-party obligations do not have recourse to the Company[87](index=87&type=chunk) VIE Assets and Liabilities (June 30, 2019 vs. December 31, 2018) | Metric | June 30, 2019 | December 31, 2018 | | :------------------------------------------ | :------------ | :------------ | | **ASSETS** | | | | Cash, cash equivalents and restricted cash | $42,877,534 | $51,330,950 | | Loans held for investment | $591,350,135 | $550,555,503 | | Total Assets | $636,784,226 | $636,951,486 | | **LIABILITIES** | | | | Collateralized loan obligations | $504,946,473 | $503,978,918 | | Total Liabilities | $505,746,758 | $504,846,712 | | Equity | $131,037,468 | $132,104,774 | - The carrying value of collateral (loan investments) for these CLOs was **$591.4 million** at June 30, 2019, with corresponding debt (notes issued) carrying value of **$504.9 million**[89](index=89&type=chunk) [NOTE 8 - RESTRICTED CASH](index=24&type=section&id=NOTE%208%20-%20RESTRICTED%20CASH) This note clarifies the nature and purpose of restricted cash held within the company's consolidated Variable Interest Entities - Restricted cash is held within Hunt CRE 2017-FL1, Ltd. and Hunt CRE 2018-FL2, Ltd. for reinvestment in qualifying commercial mortgage loans during their initial reinvestment periods of **30 and 36 months**, respectively[93](index=93&type=chunk) [NOTE 9 - SECURED TERM LOAN](index=24&type=section&id=NOTE%209%20-%20SECURED%20TERM%20LOAN) This note details the company's Secured Term Loan, including its proceeds, interest rate, maturity, and collateral - On February 14, 2019, the Company drew **$40.25 million** from a Secured Term Loan, generating net proceeds of **$39.2 million**. The loan has a **6-year maturity** and bears a fixed interest rate of **7.25%** for the first five years[94](index=94&type=chunk)[95](index=95&type=chunk) - The Secured Term Loan is secured by substantially all assets of the Credit Parties and is subject to customary affirmative and negative covenants, with which the Company was in compliance as of June 30, 2019[95](index=95&type=chunk)[96](index=96&type=chunk) [NOTE 10 - DERIVATIVE INSTRUMENTS HEDGING AND NON-HEDGING](index=24&type=section&id=NOTE%2010%20-%20DERIVATIVE%20INSTRUMENTS%20HEDGING%20AND%20NON-HEDGING) This note confirms the absence of derivative instruments held by the company as of the current reporting period - The Company did not hold any derivative instruments as of June 30, 2019, having previously used them to mitigate interest rate risk[98](index=98&type=chunk)[100](index=100&type=chunk) Gains and Losses on Derivative Instruments (Six Months Ended June 30, 2018) | Metric | Amount of realized gain (loss) | Amount of unrealized appreciation (depreciation) | Total | | :------------------------------------------ | :----------------------------- | :--------------------------------------------- | :------ | | Futures (Interest rate) | $25,984,870 | $(5,349,613) | $20,635,257 | [NOTE 11 - MSRs](index=25&type=section&id=NOTE%2011%20-%20MSRs) This note provides information on the company's Mortgage Servicing Rights (MSRs), including their fair value and related servicing income - The Company's Mortgage Servicing Rights (MSRs) are held and managed at its Taxable REIT Subsidiary (TRS), Five Oaks Acquisition Corp. (FOAC), with sub-servicers performing servicing activities[102](index=102&type=chunk) MSR Activity (Six Months Ended June 30) | Metric | June 30, 2019 | June 30, 2018 | | :------------------------------------------ | :------------ | :------------ | | Balance at beginning of period | $3,997,786 | $2,963,861 | | Changes in fair value due to valuation inputs or assumptions | $(589,660) | $336,406 | | Other changes to fair value | $(249,457) | $(219,783) | | Balance at end of period | $3,158,669 | $4,105,613 | | Loans associated with MSRs | $381,847,136 | $428,153,251 | | MSR values as percent of loans | 0.83% | 0.96% | Servicing Income, Net (Six Months Ended June 30) | Metric | June 30, 2019 | June 30, 2018 | | :------------------------------------------ | :------------ | :------------ | | Servicing income, net | $433,679 | $416,382 | [NOTE 12 - FAIR VALUE](index=27&type=section&id=NOTE%2012%20-%20FAIR%20VALUE) This note presents the fair value hierarchy and quantitative information for the company's financial instruments and mortgage servicing rights Fair Value Hierarchy Levels (June 30, 2019) | Asset/Liability | Level 1 | Level 2 | Level 3 | Balance | | :------------------------------------------ | :------ | :------ | :-------- | :-------- | | Mortgage servicing rights | — | — | $3,158,669 | $3,158,669 | Quantitative Information about Significant Unobservable Inputs for MSRs (June 30, 2019) | Valuation Technique | Unobservable Input | Range | Weighted Average | | :------------------------------------------ | :----------------- | :------ | :--------------- | | Discounted cash flow | Constant prepayment rate | 7.2 - 26.2% | 13.1% | | Discount rate | | 12.0% | 12.0% | Fair Value of Financial Instruments (June 30, 2019) | Instrument | Carrying Value | Face Amount | Fair Value | | :------------------------------------------ | :------------- | :---------- | :--------- | | **Assets:** | | | | | Cash and cash equivalents | $7,164,246 | $7,146,246 | $7,146,246 | | Restricted cash | $42,877,535 | $42,877,535 | $42,877,535 | | Commercial mortgage loans held-for-investment | $599,770,362 | $599,770,362 | $599,770,362 | | **Liabilities:** | | | | | Collateralized loan obligations | $504,946,473 | $510,181,000 | $509,822,129 | | Secured Term Loan | $39,229,194 | $40,250,000 | $41,500,576 | [NOTE 13 RELATED PARTY TRANSACTIONS](index=29&type=section&id=NOTE%2013%20RELATED%20PARTY%20TRANSACTIONS) This note details transactions with related parties, including management fees, expense reimbursements, and loan purchases from affiliates - The Company is externally managed by Hunt Investment Management, LLC (the 'Manager') and pays an annual base management fee of **1.50% of Stockholders' Equity**, payable quarterly. An incentive fee of **20% of Core Earnings** exceeding an **8% per annum** threshold is also paid[109](index=109&type=chunk) Management Fees Incurred (Six Months Ended June 30) | Metric | June 30, 2019 | June 30, 2018 | | :------------------------------------------ | :------------ | :------------ | | Management fees incurred | $1,119,623 | $1,180,326 | | Reimbursable expenses incurred | $1,057,037 | $1,316,925 | - The Manager agreed to reduce the reimbursement cap by **25% per annum** (up to **$568,000 annually**) until aggregate support reached approximately **$1.96 million**, with **$89,379** in expense reimbursement exceeding the cap as of June 30, 2019[114](index=114&type=chunk) - The Company recognized **$7,587** in compensation expense related to restricted common stock for the six months ended June 30, 2019[118](index=118&type=chunk) - Hunt CRE 2017-FL1, Ltd. and Hunt CRE 2018-FL2, Ltd. purchased a total of **$90.138 million** in loans from Hunt Finance Company (HFC), LLC, an affiliate of the Manager, during the first and second quarters of 2019[120](index=120&type=chunk)[122](index=122&type=chunk) [NOTE 14 - GUARANTEES](index=33&type=section&id=NOTE%2014%20-%20GUARANTEES) This note discusses the company's guarantee obligations, particularly the termination of backstop services to MAXEX - The Company, through FOAC, previously provided seller eligibility review and backstop services to MAXEX, but MAXEX Clearing LLC assumed all of FOAC's backstop obligations on December 31, 2018, for a fee of **$426,770**[125](index=125&type=chunk) - The maximum potential future payment under the outstanding backstop guarantees was estimated at **$1.41 billion** as of June 30, 2019, though the Company believes this is not indicative of actual potential losses, especially given MAXEX Clearing LLC's assumption of obligations[126](index=126&type=chunk) [NOTE 15 - COMMITMENTS AND CONTINGENCIES](index=33&type=section&id=NOTE%2015%20-%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines the company's unfunded commitments related to loans held in its consolidated trusts - As of June 30, 2019, the Company had **$31.6 million** in unfunded commitments related to loans held in Hunt CRE 2017-FL1, Ltd., and HFC (an affiliate) had **$51.0 million** in unfunded commitments for loans in Hunt CRE 2018-FL2, Ltd.[128](index=128&type=chunk)[129](index=129&type=chunk) [NOTE 16 - EQUITY](index=33&type=section&id=NOTE%2016%20-%20EQUITY) This note provides details on the company's equity, including common stock, preferred stock redemption, and dividend declarations - The Company had **23,687,664 shares** of common stock issued and outstanding as of June 30, 2019. Warrants to purchase **3,753,492 shares** of common stock were terminated on January 18, 2018[131](index=131&type=chunk)[132](index=132&type=chunk) - The Board authorized a stock repurchase program for up to **$10 million**. As of June 30, 2019, **$9.4 million** remained authorized, with no repurchases made during the three or six months ended June 30, 2019[133](index=133&type=chunk) - All **1,610,000 shares** of 8.75% Series A Cumulative Redeemable Preferred Stock were redeemed on February 14, 2019[134](index=134&type=chunk) Cash Dividends Declared on Common Stock (Six Months Ended June 30, 2019) | Declaration Date | Record Date | Payment Date | Dividend Amount | Cash Dividend Per Weighted Average Share | | :------------------------------------------ | :------------ | :----------- | :-------------- | :--------------------------------------- | | March 18, 2019 | March 29, 2019 | April 15, 2019 | $1,658,136 | $0.07000 | | June 10, 2019 | June 28, 2019 | July 15, 2019 | $1,776,575 | $0.07500 | - Non-controlling interests of **$99,500** relate to HCMT Preferred Shares issued by Hunt Commercial Mortgage Trust, a subsidiary, with cumulative annual dividends of **12%**[136](index=136&type=chunk) [NOTE 17 - EARNINGS PER SHARE](index=35&type=section&id=NOTE%2017%20-%20EARNINGS%20PER%20SHARE) This note presents the calculation of basic and diluted earnings per share for the company's common stockholders Earnings Per Share (Three Months Ended June 30) | Metric | June 30, 2019 | June 30, 2018 | | :------------------------------------------ | :------------ | :------------ | | Net income (loss) attributable to common stockholders | $1,390,378 | $(22,360,789) | | Basic and diluted income (loss) per share | $0.06 | $(0.94) | Earnings Per Share (Six Months Ended June 30) | Metric | June 30, 2019 | June 30, 2018 | | :------------------------------------------ | :------------ | :------------ | | Net income (loss) attributable to common stockholders | $(708,355) | $(11,926,298) | | Basic and diluted income (loss) per share | $(0.03) | $(0.51) | - Unvested restricted shares are considered participating securities and are included in the computation of basic and diluted earnings per share[137](index=137&type=chunk) [NOTE 18 - SEGMENT REPORTING](index=35&type=section&id=NOTE%2018%20-%20SEGMENT%20REPORTING) This note confirms the company operates as a single reporting segment focused on mortgage-related investments - The Company operates as a single reporting segment, investing in a portfolio of commercial mortgage loans and other mortgage-related investments[138](index=138&type=chunk) [NOTE 19 - INCOME TAXES](index=35&type=section&id=NOTE%2019%20-%20INCOME%20TAXES) This note details the company's income tax provisions, REIT election status, and tax liabilities incurred - The Company maintains its REIT election, generally avoiding federal income tax at the corporate level by distributing at least **90%** of its taxable earnings. Certain activities are conducted through a Taxable REIT Subsidiary (TRS) which is subject to corporate tax[139](index=139&type=chunk) - The Company failed the **75% Income Test** for the 2018 tax year due to non-qualified income from hedging strategy gains, resulting in a **$1.96 million** tax liability that was paid on April 12, 2019[141](index=141&type=chunk) - For the six months ended June 30, 2019, the Company recognized a provision for income taxes of **$139,680**[215](index=215&type=chunk) [NOTE 20 - SUBSEQUENT EVENTS](index=37&type=section&id=NOTE%2020%20-%20SUBSEQUENT%20EVENTS) This note confirms that no material subsequent events requiring disclosure occurred through the financial statements' issuance date - The Company reviewed subsequent events through the issuance date of the financial statements and determined that no events occurred requiring accrual or additional disclosure[142](index=142&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, operations, and liquidity, focusing on its strategic shift to commercial real estate loans, market impacts, and financing strategies [Overview](index=38&type=section&id=Overview) This section provides a high-level summary of the company's business, investment strategy, and REIT tax status - The Company is a Maryland corporation focused on investing in, financing, and managing transitional multi-family and other commercial real estate loans[147](index=147&type=chunk) - In January 2018, the Company entered into transactions with Hunt Companies, Inc. affiliates, including a new management agreement and a strategic shift to reallocate capital into commercial mortgage loan assets, completing the sale of Agency, Non-Agency RMBS, and Multi-Family MBS assets by June 30, 2019[148](index=148&type=chunk) - The investment strategy focuses on transitional multi-family and other commercial real estate loans, and other mortgage-related investments like MSRs and CMBS, financed primarily through match-term collateralized loan obligations[149](index=149&type=chunk) - The Company elected to be taxed as a REIT, generally avoiding federal income tax on distributed REIT taxable income, but its wholly-owned taxable REIT subsidiary (FOAC) is subject to federal, state, and local taxes[153](index=153&type=chunk) [Second Quarter 2019 Summary](index=39&type=section&id=Second%20Quarter%202019%20Summary) This section summarizes key financial and operational highlights for the second quarter of 2019, including loan portfolio growth and dividend increases - The loan portfolio increased by **$14.0 million** to **$599.8 million**, driven by **$52.9 million** in loan purchases, partially offset by **$38.9 million** in loan payoffs[154](index=154&type=chunk) - On June 10, 2019, the Company announced a **7.1% dividend increase** to **$0.075 per share** of common stock, marking its second consecutive dividend increase[154](index=154&type=chunk) [Factors Impacting Our Operating Results](index=39&type=section&id=Factors%20Impacting%20Our%20Operating%20Results) This section discusses key factors influencing operating results, such as net interest income, market values, credit risk, liquidity, and prepayment risk - Operating results are primarily influenced by net interest income, market value of assets, and supply/demand for target assets, with net interest income varying due to market interest rates, prepayment speeds, and borrower payment ability[155](index=155&type=chunk) - Rising interest rates generally increase net interest income, while declining rates decrease it, as most of the investment portfolio and collateralized loan obligations are indexed to **30-day LIBOR**[156](index=156&type=chunk) - Commercial mortgage loans are subject to credit risk, monitored by the Manager's asset management team through reviews of collateral performance and borrower contact[157](index=157&type=chunk) - Liquidity is maintained through common/preferred stock issuances, corporate debt, operating activities, and financing arrangements, with commercial mortgage loans primarily financed by match-term collateralized loan obligations not subject to margin calls[158](index=158&type=chunk) - Prepayment risk is considered minimal for commercial mortgage loans acquired at par. Collateralized loan obligations include a reinvestment period, but lower spreads on reinvested assets could reduce future interest income[159](index=159&type=chunk) - Commercial mortgage loans are accounted for at amortized cost, with impairment recognized through a provision for loan losses if the estimated fair value of collateral is less than the book value[160](index=160&type=chunk) [Investment Portfolio](index=39&type=section&id=Investment%20Portfolio) This section details the composition and performance of the company's investment portfolio, including commercial mortgage loans and collateralized loan obligations [Commercial Mortgage Loans](index=39&type=section&id=Commercial%20Mortgage%20Loans) This section provides an overview of the company's commercial mortgage loan portfolio, including its consolidation and key statistics - The Company is the primary beneficiary of Hunt CRE 2017-FL1, Ltd. and Hunt CRE 2018-FL2, Ltd., consolidating their assets, liabilities, income, and expenses[163](index=163&type=chunk) Commercial Mortgage Loan Activity (December 31, 2018 to June 30, 2019) | Metric | Amount | | :------------------------------------------ | :------------ | | Balance at December 31, 2018 | $555,172,891 | | Purchases, net | $117,536,027 | | Proceeds from principal repayments | $(72,938,556) | | Balance at June 30, 2019 | $599,770,362 | Loan Portfolio Statistics (June 30, 2019 vs. December 31, 2018) | Metric | June 30, 2019 | December 31, 2018 | | :------------------------------------------ | :------------ | :------------ | | Unpaid Principal Balance | $599,770,362 | $555,172,891 | | Loan Count | 47 | 44 | | Weighted Average Coupon | 6.5% | 6.4% | | Weighted Average Life (Years) | 3.8 | 4.1 | [Mortgage-Backed Securities](index=42&type=section&id=Mortgage-Backed%20Securities) This section reports on the company's mortgage-backed securities investments, noting their decrease to zero by June 30, 2019 - On a non-GAAP basis, MBS investments decreased from **$4.8 million** as of December 31, 2018, to **$0 million** as of June 30, 2019, due to the repayment of the consolidated Multi-Family MBS trust investment[169](index=169&type=chunk) Non-GAAP MBS Investment Portfolio (December 31, 2018) | Metric | Amount (in thousands) | | :------------------------------------------ | :-------------------- | | Principal Balance | $8,146 | | Amortized Cost | $5,456 | | Fair Value | $4,762 | | Weighted Average Coupon | 4.76% | | Average Yield | 7.10% | [Collateralized Loan Obligations](index=43&type=section&id=Collateralized%20Loan%20Obligations) This section details the company's collateralized loan obligations, their carrying amount, and their role in financing commercial mortgage loans - As of June 30, 2019, the carrying amount of collateralized loan obligations was **$504.9 million**, with an outstanding principal balance of **$510.2 million**[178](index=178&type=chunk) - The Company aims to enhance returns on commercial mortgage loan investments through securitizations (CLOs) and may use long-term warehouse repurchase agreement financing[178](index=178&type=chunk) [FOAC and Our Residential Mortgage Loan Business](index=43&type=section&id=FOAC%20and%20Our%20Residential%20Mortgage%20Loan%20Business) This section describes FOAC's role in managing MSRs and the termination of its residential mortgage loan securitization activities - FOAC, a Taxable REIT Subsidiary, previously aggregated mortgage loans for securitization but ceased this activity for prime jumbo loans. It continues to own and manage MSRs through licensed sub-servicers[179](index=179&type=chunk)[180](index=180&type=chunk) - FOAC's obligations for seller eligibility review and backstop services to MAXEX terminated on November 28, 2018, with MAXEX Clearing LLC assuming all backstop guarantees for a fee of **$426,770**[181](index=181&type=chunk)[182](index=182&type=chunk) [Multi-Family Loan Consolidation Reporting Requirements](index=44&type=section&id=Multi-Family%20Loan%20Consolidation%20Reporting%20Requirements) This section addresses the company's reporting status regarding multi-family loan consolidation, noting the deconsolidation of a key trust - As of June 30, 2019, the Company is no longer the primary beneficiary of the FREMF 2012-KF01 Trust, following the full repayment of its first-loss tranche on January 30, 2019[183](index=183&type=chunk) Reconciliation of Net Investment in Consolidated Trusts (December 31, 2018) | Metric | Amount | | :------------------------------------------ | :------------ | | Receivables held in securitization trusts, at fair value | $24,357,335 | | Multi-family securitized debt obligations | $19,595,186 | | Net investment amount of Multi-Family MBS trusts held by us | $4,762,149 | [Equity and Book Value Per Share](index=44&type=section&id=Equity%20and%20Book%20Value%20Per%20Share) This section provides an overview of the company's equity and book value per common share, highlighting recent changes Equity and Book Value Per Share | Metric | June 30, 2019 | March 31, 2019 | | :------------------------------------------ | :------------ | :------------- | | Equity | $108.9 million | $109.3 million | | Book value per common share (basic and fully diluted) | $4.60 | $4.61 | - Equity decreased by **$0.4 million**, and book value per common share decreased by **0.2%** from the previous quarter, primarily due to a **$459,119** reduction in MSR valuation[186](index=186&type=chunk) [Critical Accounting Policies and Estimates](index=44&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section outlines the significant accounting policies and estimates that require complex judgments in financial statement preparation - The financial statements are prepared under GAAP, requiring complex and subjective decisions and estimates, particularly concerning fair value of assets/liabilities, credit losses, and prepayment rates[187](index=187&type=chunk) [Capital Allocation](index=44&type=section&id=Capital%20Allocation) This section details how the company allocates its capital across various investment types, including commercial mortgage loans and MSRs Allocated Capital by Investment Type (Non-GAAP Basis, June 30, 2019) | Investment Type | Market Value | Equity Allocated | % Equity | | :------------------------------------------ | :----------- | :--------------- | :------- | | Commercial Mortgage Loans | $599,770,362 | $139,496,317 | 128.1% | | MSRs | $3,158,669 | $3,158,669 | 2.9% | | Credit Facility | — | $(39,285,935) | (36.1)% | | Unrestricted Cash | $7,164,246 | $5,497,071 | 5.1% | | Restricted Cash | $42,877,535 | $42,877,535 | — | | Total | $610,093,277 | $108,866,122 | 100.0% | - Commercial Mortgage Loans represent the largest allocation of equity at **128.1%**, while the Credit Facility has a negative equity allocation of **(36.1)%**[188](index=188&type=chunk) [Results of Operations](index=45&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, including net income, interest income, other income, and expenses for the reporting periods [Net Income Summary](index=47&type=section&id=Net%20Income%20Summary) This section summarizes the company's net income (loss) attributable to common stockholders and basic/diluted earnings per share Net Income (Loss) Attributable to Common Stockholders (Six Months Ended June 30) | Metric | June 30, 2019 | June 30, 2018 | | :------------------------------------------ | :------------ | :------------ | | Net loss attributable to common stockholders | $(708,355) | $(11,926,298) | | Basic and diluted net loss per average share | $(0.03) | $(0.51) | Net Income (Loss) Attributable to Common Stockholders (Three Months Ended June 30) | Metric | June 30, 2019 | June 30, 2018 | | :------------------------------------------ | :------------ | :------------ | | Net income attributable to common stockholders | $1,390,378 | $(22,360,789) | | Basic and diluted net income (loss) per average share | $0.06 | $(0.94) | - The significant improvement in net income/loss is attributed to a decrease in total other loss and total expenses, and an increase in net interest income, but comparability is limited due to portfolio reallocation and trust deconsolidations[194](index=194&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk) [Interest Income and Interest Expense](index=47&type=section&id=Interest%20Income%20and%20Interest%20Expense) This section details the company's interest income and expense, explaining the factors influencing their changes Interest Income and Expense (Six Months Ended June 30) | Metric | June 30, 2019 | June 30, 2018 | | :------------------------------------------ | :------------ | :------------ | | Interest income | $20,271,666 | $39,066,414 | | Interest expense | $12,018,404 | $31,378,932 | Interest Income and Expense (Three Months Ended June 30) | Metric | June 30, 2019 | June 30, 2018 | | :------------------------------------------ | :------------ | :------------ | | Interest income | $10,289,117 | $17,550,953 | | Interest expense | $6,242,402 | $12,981,043 | - The decrease in interest income and expense is primarily due to the deconsolidation of multi-family and residential mortgage loan securitization trusts and the reallocation of capital from the legacy AFS portfolio to commercial mortgage loans, with CLO financing replacing repurchase agreement financing[197](index=197&type=chunk)[198](index=198&type=chunk) [Net Interest Income](index=47&type=section&id=Net%20Interest%20Income) This section analyzes the company's net interest income, highlighting trends and factors affecting its performance Net Interest Income (Six Months Ended June 30) | Metric | June 30, 2019 | June 30, 2018 | | :------------------------------------------ | :------------ | :------------ | | Net interest income | $8,253,262 | $7,687,482 | Net Interest Income (Three Months Ended June 30) | Metric | June 30, 2019 | June 30, 2018 | | :------------------------------------------ | :------------ | :------------ | | Net interest income | $4,046,715 | $4,569,910 | - Net interest income increased for the six-month period but decreased for the three-month period, influenced by the sales of legacy portfolios, trust deconsolidations, and the acquisition/closing of CLOs[199](index=199&type=chunk)[200](index=200&type=chunk) [Other Income (Loss)](index=48&type=section&id=Other%20Income%20%28Loss%29) This section details the components of other income (loss), including realized losses on investments and changes in MSR fair value Other Income (Loss) (Six Months Ended June 30) | Metric | June 30, 2019 | June 30, 2018 | | :------------------------------------------ | :------------ | :------------ | | Total other income (loss) | $(420,538) | $(12,260,128) | | Net realized losses on investments | $(709,439) | $(33,345,288) | | Net unrealized losses on mortgage servicing rights | $(839,117) | — | | Net unrealized gains on multi-family mortgage loans | $694,339 | — | | Net mortgage servicing income | $433,679 | $416,382 | Other Income (Loss) (Three Months Ended June 30) | Metric | June 30, 2019 | June 30, 2018 | | :------------------------------------------ | :------------ | :------------ | | Total other income (loss) | $(273,654) | $(23,670,368) | | Net unrealized losses on mortgage servicing rights | $(459,119) | — | | Net mortgage servicing income | $185,465 | $196,404 | - The period-over-period decrease in other loss was primarily due to the sale of the Agency RMBS portfolio and concurrent closeout of related interest rate hedges, along with the deconsolidation of multi-family and residential securitization trusts[203](index=203&type=chunk)[206](index=206&type=chunk) [Expenses](index=48&type=section&id=Expenses) This section provides a breakdown of the company's expenses, including management fees and operating expenses Expenses (Six Months Ended June 30) | Metric | June 30, 2019 | June 30, 2018 | | :------------------------------------------ | :------------ | :------------ | | Management fees | $1,119,623 | $1,180,326 | | Operating expense (reimbursable to Manager) | $1,057,037 | $1,316,925 | | Operating expense (payable directly by us) | $2,647,447 | $3,105,166 | | Total expenses | $4,824,107 | $5,602,417 | Expenses (Three Months Ended June 30) | Metric | June 30, 2019 | June 30, 2018 | | :------------------------------------------ | :------------ | :------------ | | Management fees | $566,164 | $604,191 | | Operating expense (reimbursable to Manager) | $517,000 | $570,833 | | Operating expense (payable directly by us) | $1,092,982 | $1,214,581 | | Total expenses | $2,176,146 | $2,389,605 | - The period-over-period decrease in operating expenses reflects limitations on Manager expense reimbursement and other operating efficiencies[210](index=210&type=chunk)[213](index=213&type=chunk) [Impairment](index=48&type=section&id=Impairment) This section confirms that no impairment losses were recognized on securities or loans held-for-investment during the reporting periods - The Company did not recognize any 'Other-Than-Temporary Impairment' (OTTI) losses for securities or any impairments on loans held-for-investment for the three and six months ended June 30, 2019, or June 30, 2018[214](index=214&type=chunk) [Income Tax (Benefit) Expense](index=48&type=section&id=Income%20Tax%20%28Benefit%29%20Expense) This section details the company's income tax provision and its implications for the reporting periods Income Tax Provision (Three and Six Months Ended June 30, 2019) | Period | Income Tax Provision | | :------------------------------------------ | :------------------- | | Six months ended June 30, 2019 | $139,680 | | Three months ended June 30, 2019 | $202,745 | [Other Comprehensive Income](index=48&type=section&id=Other%20Comprehensive%20Income) This section reports on the company's other comprehensive income, noting its absence in the current reporting period - For the three and six months ended June 30, 2019, the Company did not record any Other Comprehensive Income (OCI)[218](index=218&type=chunk) - For the six months ended June 30, 2018, OCI was **$12.62 million**, primarily from reclassification adjustments for realized gain on AFS securities[217](index=217&type=chunk) [Net Income (Loss) and Return on Equity](index=49&type=section&id=Net%20Income%20%28Loss%29%20and%20Return%20on%20Equity) This section presents the company's net income (loss) attributable to common stockholders and the corresponding annualized return on equity Net Income (Loss) Attributable to Common Stockholders and Annualized Return on Equity (Six Months Ended June 30) | Metric | June 30, 2019 | June 30, 2018 | | :------------------------------------------ | :------------ | :------------ | | Net loss attributable to common stockholders | $(708,355) | $(11,926,298) | | Annualized loss on average stockholders' equity | 0.62% | 10.41% | | Comprehensive income attributable to common stockholders (2018) | — | $691,496 | | Annualized gain on average stockholders' equity (2018) | — | 0.60% | Net Income (Loss) Attributable to Common Stockholders and Annualized Return on Equity (Three Months Ended June 30) | Metric | June 30, 2019 | June 30, 2018 | | :------------------------------------------ | :------------ | :------------ | | Net gain attributable to common stockholders | $1,390,378 | $(22,360,789) | | Annualized gain (loss) on average shareholders' equity | 2.44% | (38.71)% | | Comprehensive income attributable to common stockholders (2018) | — | $1,122,352 | | Annualized gain on average stockholders' equity (2018) | — | 1.94% | [Liquidity and Capital Resources](index=49&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's sources of liquidity, capital structure, and ability to meet short-term and long-term financial obligations - The Company's primary liquidity sources include equity issuances, corporate debt, operating cash flow, and financing arrangements. As of June 30, 2019, it had no repurchase agreement financing outstanding, relying on collateralized loan obligations for commercial mortgage loans[223](index=223&type=chunk) - Unrestricted cash and cash equivalents were **$7.2 million** at June 30, 2019, down from **$7.9 million** at December 31, 2018[225](index=225&type=chunk) - Outstanding principal under the Senior Secured Term Loan was **$40.2 million** at June 30, 2019, with a recourse debt to equity ratio of **0.4:1**[226](index=226&type=chunk) - The total debt to equity ratio on a GAAP basis was **5.0:1** at June 30, 2019, including non-recourse collateralized loan obligations of **$504.9 million**[227](index=227&type=chunk) - The Company expects current liquidity and borrowing capacity to meet short-term requirements but will depend on additional debt financing and equity capital for long-term needs, while maintaining REIT qualification requires distributing at least **90%** of REIT taxable income[228](index=228&type=chunk)[229](index=229&type=chunk)[230](index=230&type=chunk) [Off-Balance Sheet Arrangements](index=49&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of off-balance sheet arrangements or guarantees with unconsolidated entities - As of June 30, 2019, the Company did not maintain relationships with unconsolidated entities or financial partnerships for off-balance sheet arrangements, nor had it guaranteed obligations or committed funding to such entities[231](index=231&type=chunk) [Distributions](index=50&type=section&id=Distributions) This section outlines the company's dividend policy and recent cash dividend declarations to common stockholders - The Company intends to continue regular quarterly distributions to common stockholders, aiming to distribute at least **90%** of its REIT taxable income annually to maintain REIT qualification[232](index=232&type=chunk) - On June 10, 2019, a cash dividend of **$0.075 per common share** was declared for the second quarter of 2019, paid on July 15, 2019[233](index=233&type=chunk) [Inflation](index=50&type=section&id=Inflation) This section assesses the impact of inflation on the company's operations, noting its primary sensitivity to interest rates - The Company's performance is primarily influenced by interest rates rather than inflation, as its assets and liabilities are interest rate sensitive. Inflation has not had a material impact on operations during the last two fiscal years[234](index=234&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risks](index=50&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risks) This section states that there are no applicable quantitative and qualitative disclosures about market risks for the reporting period - This item is not applicable for the current report[235](index=235&type=chunk) [Item 4. Controls and Procedures](index=50&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the company's disclosure controls and procedures, identifying material weaknesses in internal control over financial reporting related to REIT tax compliance and the depth/timeliness of account balance reviews. It also outlines the remediation efforts undertaken to address these weaknesses [Evaluation of Disclosure Controls and Procedures](index=50&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section details the assessment of disclosure controls and procedures, identifying material weaknesses in internal control over financial reporting - Management concluded that disclosure controls and procedures were not effective as of June 30, 2019, due to material weaknesses in internal control over financial reporting[237](index=237&type=chunk) - A material weakness exists due to a lack of appropriate resources for and supervision of third-party tax specialists, leading to continued REIT tax compliance matters, including a failure of the **75% Income Test** in 2018[238](index=238&type=chunk) - Another material weakness relates to ineffective internal controls over the depth and timeliness of account balance reviews, which previously led to errors in reporting credit reserves and realized losses on RMBS IOs, requiring restatement of financial statements for prior periods[239](index=239&type=chunk)[240](index=240&type=chunk) [Changes in Internal Control Over Financial Reporting](index=51&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section outlines the remediation efforts undertaken to address identified material weaknesses in internal control over financial reporting - To remediate the tax compliance weakness, the Manager now employs a senior-level tax accountant to coordinate and supervise third-party tax advisors and improve communication of REIT tax compliance matters[241](index=241&type=chunk) - To address account balance review deficiencies, the Company implemented a more robust accounting system, formalized enhanced written policies and procedures, and increased the frequency of certain review controls from quarterly to monthly[242](index=242&type=chunk) - The identified material weaknesses will not be considered remediated until new controls are fully implemented, operational for a sufficient period, tested, and deemed effective by management[243](index=243&type=chunk) [PART II - Other Information](index=37&type=section&id=PART%20II%20-%20Other%20Information) This section provides additional disclosures on legal proceedings, risk factors, equity sales, defaults, and other relevant information [Item 1. Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently subject to any material legal proceedings, nor is its Manager aware of any such proceedings - Neither the Company nor its Manager is subject to any material legal proceedings as of the report date[245](index=245&type=chunk) [Item 1A. Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2018 - No material changes to the Risk Factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2018[246](index=246&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report for the period - None to report for unregistered sales of equity securities and use of proceeds[246](index=246&type=chunk) [Item 3. Defaults Upon Senior Securities](index=37&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities to report for the period - None to report for defaults upon senior securities[247](index=247&type=chunk) [Item 4. Mine Safety Disclosures](index=37&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable[248](index=248&type=chunk) [Item 5. Other Information](index=37&type=section&id=Item%205.%20Other%20Information) There is no other information to report for the period - None to report for other information[249](index=249&type=chunk) [Item 6. Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed or furnished with the report, including various corporate documents, certifications, and XBRL taxonomy documents - The exhibits listed in the accompanying Index of Exhibits are filed or furnished as part of this report[250](index=250&type=chunk) [SIGNATURES](index=53&type=section&id=SIGNATURES) This section contains the official signatures of the company's authorized officers, affirming the report's accuracy and completeness - The report is duly signed on behalf of Hunt Companies Finance Trust, Inc. by James P. Flynn, Chief Executive Officer, and James A. Briggs, Interim Chief Financial Officer, on August 7, 2019[255](index=255&type=chunk)[257](index=257&type=chunk)
Lument Finance Trust(LFT) - 2019 Q1 - Earnings Call Presentation
2019-05-13 17:26
DIHUNT | --- | --- | --- | --- | |-------------------------------|-------|-------|-------| | | | | | | | | | | | Hunt Companies Finance Trust | | | | | Q1 2019 Earnings Supplemental | | | | | May 2019 | | | | | | | | | | | | | | www.huntcompaniesfinancetrust.com Disclaimer This presentation, any related webcast/conference call, and other oral statements made by our representatives from time to time may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as ...
Lument Finance Trust(LFT) - 2019 Q1 - Quarterly Report
2019-05-10 20:15
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ____________ Commission File No. 001-35845 HUNT COMPANIES FINANCE TRUST, INC. (Exact name of registrant as specified in its charter) (State or other jurisdic ...
Lument Finance Trust(LFT) - 2018 Q4 - Annual Report
2019-03-18 20:51
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 OR ¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to____ Commission file number: 001-35845 HUNT COMPANIES FINANCE TRUST, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorpo ...