Lument Finance Trust(US:LFT)2019-11-12 05:21Financial 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]