On Friday, Lument Finance Trust (NYSE:LFT) discussed second-quarter financial results during its earnings call. The full transcript is provided below.
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Summary
Lument Finance Trust announced a 10-for-1 reverse stock split to maintain NYSE listing requirements and improve market orderliness.
The company reported a net loss of $9.2 million, or $0.18 per share, in Q2 2026, with a decline in net interest income due to lower average performing loan balances.
Strategic focus remains on resolving legacy assets, protecting book value, and redeploying capital into high-quality multifamily investments, aiming for full capital deployment by 2027.
Six loans were risk-rated 5, with specific reserves totaling $7.4 million, representing 18% of the associated UPB.
The company faces investor concerns over declining book value and calls for potential mergers or asset sales to enhance shareholder value.
Full Transcript
Jim Flynn (Chief Executive Officer)
We're being disciplined on timing and asset selection, but we are also focused on ensuring that the Company's capital is put back to work as efficiently and quickly as possible. Our Board of Directors recently approved a 10 for 1 reverse stock split of our common stock after having determined that such actions were in the best interest of the Company and its stockholders, providing flexibility to maintain compliance with the applicable New York Stock Exchange listing requirements and support an efficient public market for the Company's common stock.
The reverse stock split is expected to become effective at the close of business on Wednesday, September 9th, and the Company's common stock is expected to begin trading on a split-adjusted basis on the New York Stock Exchange at the opening of trading on Thursday, September 10th. Under the existing ticker symbol LFT, the reverse stock split will affect all stockholders uniformly and will not alter any stockholder's percentage ownership interest in the Company, except with respect to treatment of fractional shares, which will be paid out in cash.
We have also posted for our investors a reverse stock split FAQ document on our website. We believe the reverse stock split is an important step toward reducing technical pressure on the public stock price and supporting a more orderly market for our shares. While this action does not change the underlying economics of the Company, we believe it helps address one of the external pressures on the stock and allows investors to focus more clearly on the value of the portfolio, our asset resolution progress, and our earnings trajectory.
Our priorities remain unchanged. We are committed to resolving legacy assets, protecting book value, and thoughtfully redeploying capital into high-quality multifamily investments. We appreciate the continued patience and support of our investors and capital partners as we execute on this plan. While we recognize the resolution of our non-performing and REO assets remains challenging, we are seeing improving momentum in deal resolutions and sales activity as those resolutions occur.
We intend to reinvest capital efficiently and on a disciplined basis. We remain committed to fully deploying our capital in 2027, which we believe will be an important driver of improved earnings and, over time, enhanced shareholder value. We recognize there is still work to do and the timing of certain NPL and REO resolutions remains subject to submarket conditions. That said, we believe the Company has the support of its capital partners, a clear path to redeployment, and the platform capabilities necessary to move forward constructively.
With that, I'd like to turn the call over to Jim Briggs, who will provide details regarding our financial results. Jim?
Jim Briggs (Chief Financial Officer)
Thanks, Jim. Good morning. Last night we filed our quarterly report on Form 10-Q and provided a supplemental investor presentation on our website, which we'll be referring to during our remarks. The Supplemental Investor Presentation has been uploaded to the webcast as well. For your reference, on pages four through seven of the presentation, you'll find key updates and an earnings summary for the quarter. For the second quarter of 2026, we reported net loss to common stockholders of 9.2 million, or $0.18 per share.
We reported a distributable loss of 5.3 million, or $0.10 per share. There are a few Q2 P&L items I'd like to highlight. For Q2, net interest income was 4.5 million, a sequential decline from 5.7 million recorded in Q1. This was primarily driven by a lower average performing loan balance quarter over quarter, as we chose to build liquidity during the quarter rather than reinvest principal repayments from loans held outside of CLO. The ending outstanding UPB of the total portfolio was approximately 1 billion compared to 1.13 billion as of March 31st. The weighted average coupon of our loan portfolio declined to 704 basis points compared to 709 basis points in the prior quarter due to payoffs of higher spread loans relative to newly acquired assets, as well as a slight decline in the average SOFR rate during the period. Although we had greater payoffs compared to Q1, our exit fee income was relatively flat to prior quarter, and recognition of extension fee income was down by about 300,000 quarter over quarter.
Our total operating expenses, including fees to our manager, were higher quarter on quarter at 3.9 million versus 3.7 million. The primary driver was higher reimbursable expenses compared to Q1, driven primarily by resource allocation. The difference between reported GAAP net loss and distributable loss during the quarter was primarily attributable to an 8.6 million net provision for credit losses recorded in the period, 5.1 million of realized losses on mortgage loans and REO included in distributable, and 390,000 of depreciation on REO.
The 8.6 million in net provision for credit losses recorded during the quarter, which was excluded from distributable earnings, was driven primarily by specific reserves on risk-rated 5 loans. As of June 30, we had six loans risk-rated 5, all collateralized by multifamily assets. Greg will provide a bit more detail in his remarks. We evaluated our risk-rated 5 loans individually to determine whether asset-specific reserves were necessary during the quarter.
We recorded specific provisions related to two loans downgraded to a 5 risk rating in the quarter and three loans that were already risk-rated 5 at March 31, including one property that was foreclosed upon and transferred to REO during the period. Specific reserves totaled 7.4 million at quarter end, representing approximately 18% of the associated UPB of specifically evaluated assets. The 5.1 million in realized losses included in distributable earnings related to three assets that were fully resolved in the quarter.
These included discounted payoffs on two previously 5 risk-rated loans, one in Philadelphia and one in Des Moines, with proceeds generally consistent with their March 31 net carrying values. In addition, we sold one REO property in San Antonio for 12.1 million and recognized a small GAAP gain on that sale. The realized losses reflected in distributable earnings this period were primarily attributable to prior period reserves and impairments recorded on those assets.
At quarter end, our CLOs' capital was substantially fully deployed at an 88% advance rate and a cost of funds of SOFR plus 191. As of June 30, a portion of our loan and REO portfolio were pledged to warehouse facilities that provided financing at an effective advance rate of 68% and a weighted average cost of funds of SOFR plus 209. We ended Q2 with an unrestricted cash balance of 29 million, and FL3 was substantially fully deployed. The Company's total book equity at the end of the quarter was approximately 205 million.
The total book value of common stock was approximately 145 million, or $2.76 per share, decreasing sequentially from $2.97 a share at March 31. I will now turn the call over to Greg Halbert to provide details on the Company's investment activity and portfolio performance during the quarter.
Greg Halbert
Thank you, Jim. During the second quarter, LFT acquired or funded four loans with an aggregate UPB of 91 million and experienced 184 million of loan payoffs. As of June 30, our total loan portfolio consisted of 51 floating-rate loans with an aggregate unpaid principal balance of approximately 1 billion, a weighted average floating rate of 330 basis points over SOFR, and an unamortized aggregate purchase discount of approximately 800,000. The weighted average remaining term of our book at quarter end was approximately 18 months, assuming all available extensions are exercised by our borrowers.
One hundred percent of the portfolio was indexed to one-month SOFR, and 91.7% of the portfolio was collateralized by multifamily properties. As of June 30, approximately 81% of the loans in our portfolio were risk-rated at 3 or better compared to 77% as of March 31. Our weighted average risk rating quarter over quarter remained stable at 3.1. During the quarter, we had several positive asset resolutions, including the resolutions of the two loan assets Jim mentioned in his remarks, which had been risk-rated 5 as of March 31 and for which we received payoff proceeds consistent with March 31 net carrying values.
As of June 30, we had six risk-rated 5 loans with an average principal amount of 98 million, or approximately 10% of the unpaid principal balance of our quarter-end investment portfolio. Loans with an aggregated UPB of 62 million were also risk-rated 5 as of the prior quarter due to either maturity or monetary default. Two of these loans with an aggregate UPB of 36 million were downgraded to a 5 risk rating for the first time due to monetary default as of quarter end.
The REO portfolio in total consisted of four multifamily properties with an aggregate carrying value of approximately 61.6 million and a weighted average occupancy rate of approximately 67%. During the period we completed a sale of one San Antonio REO asset with a carrying value of 12.2 million. We also foreclosed on a multifamily property in Arlington, Texas. The 15.7 million dollar loan associated with that property had been risk-rated 5 as of March 31.
Subsequent to quarter end we foreclosed on a multifamily property in Dallas, Texas. This property had a 21.9 million dollar mortgage loan associated with it and was risk-rated 5 as of June 30. We have been very active in seeking positive asset resolutions and maximizing recovery values and are pleased with the significant progress we have made so far. Yet we understand that there is still more work to be done on behalf of our shareholders. With that, I'll pass it back to Jim Flynn for his closing remarks and questions.
Jim Flynn (Chief Executive Officer)
Thanks, Greg. I'd like to thank everyone for joining us today for your continued partnership and support. We recognize and appreciate the patience of our investors as we work through our legacy assets and reposition the Company for improved earnings. We remain focused on resolving those challenged assets, redeploying capital efficiently, and moving the Company toward a fully invested, higher-earnings portfolio in 2027. Importantly, we continue to have the support of our capital partners as we move forward, and we believe the actions we are taking today position LFT to create value for our shareholders over time.
With that, I'll ask the operator to open the call for questions.
OPERATOR (Operator)
Thank you, ladies and gentlemen. We will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on the touchtone phone. Should you wish to cancel your request, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. Once again, that is star one should you wish to ask a question. Your first question is from Steven. Your line is now open.
Steven, Individual Investor
Yes. Hello. I've been a shareholder for many, many years and I see the book value declining, you know, considerably along with the stock price, which is what I'm concerned about. And your dividend, which I bought many years ago, has declined also significantly. I see what you're paying now. And my question is, I don't know how you're going to continue to pay that. And a very simple question I have. It's just a size of scale. I don't think there's any company that's smaller than your company as far as assets and market cap in this particular space.
There's another company I own, Cherry Hill, which recently made a merger with MIT. And my question is, I see your expenses going up. I don't blame you. You know, inflation is there. People got to burn money. Everything costs money these days. But do you see an opportunity to merge with another company because the scale just doesn't make sense? Or just sell the assets, since you said the book value is $2.70. Thank you.
Jim Flynn (Chief Executive Officer)
Thank you. Thank you for the question. Thank you for your time as a shareholder. We appreciate that support. I think that you've certainly identified a challenge which we've discussed in the past, which is our size and compared to many of the larger competitors in the space that, you know, that is accurate. It's also one of the reasons, you know, our portfolio, you know, probably on average has distressed assets in the same relative percentages as the peer set.
Our challenge is our size. And so we've held liquidity on our books and not redeployed that capital. So that's further suppressed earnings in addition to losses that have been taken on underperforming loans. So that's one of the drivers, as you point out, and as we move through these assets and redeploy capital, we should be able to improve earnings as we move forward. In terms of evaluating potential M&A opportunities or other strategic alternatives, that is something that we continue to do with our bankers, with anyone that has discussions with us, with our board.
All of those options are evaluated as they come up. Unfortunately, over the past couple of years, we've been unable to execute on any of those that were discussed. And to the extent something came forward, we certainly would discuss that with the board and take any alternatives that could create shareholder value seriously, and we'll continue to do so as we move forward.
Steven, Individual Investor
The other question is how about just, you know, wrapping up and selling the assets at 275 before they get any lower?
Jim Flynn (Chief Executive Officer)
So that's a fair question, certainly a consideration of our board and the management and discussions with the board. The one caveat I would say is if you take a look at the market, the market for selling portfolios of assets of this type, particularly some of the older vintage multifamily assets, if we were to attempt to sell that into the market, it might be difficult to sell the entire portfolio at those recoverable values. But as you point out, I think, you know, to the extent there's a strategic investor or someone that we were able to find, it would be something we would have to consider as a management team and a board concern.
Steven, Individual Investor
I have is the book value not just of you, but of many of these companies in the space that they are overinflated. The book value should be what you should be able to receive, in my opinion.
Jim Flynn (Chief Executive Officer)
Well, we believe that our book value does represent what we will receive on these assets.
Steven, Individual Investor
Okay, I think enough of your time. I appreciate, I appreciate you answering my questions. As I said, I've been a shareholder prior to when you raised money. If you read so offering. So you can see how long I go back and this has been the most disappointing REIT that I have. I have significant portfolio of REITs and this is the most significant, you know, hopefully, you know, you could turn this around. I remember when I bought this, everybody said you were conservative and that this would be a very, very good management company. And that's why I bought the stock. So hopefully you guys can turn it around or make a decision to look out for the shareholders instead of having the increase in expenses. That's sort of like an insult to me as a shareholder. You know, everybody has to suffer.
The stock is down, but I think the employees, the management should take some responsibility. And the best responsibility is one word, money. So that's all the questions I have. I appreciate the time that I had here and I appreciate your answers. And again, I hope you look out for the shareholders. That's my concern. Thank you very much.
Jim Flynn (Chief Executive Officer)
Thank you. We appreciate both your questions and your time as an investor.
OPERATOR (Operator)
Thank you. Your next question is from Lee Zolch from Ubercap. Your line is now open.
Lee Zolch
Good morning. Is the 121525 stock repurchase program still in effect.
Jim Flynn (Chief Executive Officer)
Is the 10 million there to buy common shares. I'll defer to Jim Briggs on the timing of that agreement. But in general, the question around repurchasing shares and other strategic alternatives are all on the table in discussions with our board to answer. I think the underlying question is the technical question on whether that agreement is
Jim Briggs (Chief Financial Officer)
still, that is still open. Yes.
OPERATOR (Operator)
Thank you. Thank you. Your next question is from John Power from Redwood Fund. Your line is now open.
John Power
Good morning. Thank you for your time. So if the stock buyback plan is still open and your stock is trading for 25% of NAV, why hasn't the board and management actually made any stock repurchases in the open market?
Jim Flynn (Chief Executive Officer)
So any discussion around stock repurchases or other alternatives also has to reflect a full view of liquidity and maintain liquidity to make sure that we can resolve underperforming assets. But certainly our current stock price does not reflect what we believe is the fair value of our assets. And it is something that we will continue to discuss with the board around whether we take any action in that regard.
John Power
So any thoughts on how to close that gap?
Jim Flynn (Chief Executive Officer)
I mean, there are several. Right. So certainly, you know, you mentioned stock repurchase would certainly help. The primary way for us to improve book value is to work through assets and get them resolved off our books and redeployed efficiently. Today we have, you know, roughly a billion of assets outstanding, including non-performing loans. We should be closer to 1.4. That's a significant drag on earnings. Not to mention that a portion of those assets are some 300 million, including REO, are inefficiently financed or not financed at all.
That is the biggest drag on our earnings. And so working through these assets, I should point out, having three resolutions last quarter, we expect to have several more here over the next quarter or two and really move through that legacy portfolio which will allow us to move forward with redeploying that capital efficiently. That's the biggest drag. But along the way we're going to continue to see if there are, you know, certain other potential opportunities to enhance the book value or the trading price of our shares relative to book value.
John Power
Okay, thank you.
Jim Flynn (Chief Executive Officer)
And we appreciate you having holding these calls and talking to shareholders and investors. Thank you. Thank you for your support.
OPERATOR (Operator)
Thank you. Your next question is from Greg Bennett. Your line is open.
Greg Bennett
Hey, good morning. On your supplemental data, when you have a closing date for a loan and then you have maturity date, you look at some of these loans that were done in 21, let's say, I take it this is the problem per fold. Am I correct that most of these problem loans are the ones that were done in 21 and 22? Would that be correct?
Jim Flynn (Chief Executive Officer)
That would generally be correct. Maybe into early 23. But that is generally the kind of the, across the industry and our portfolio, the time of the most challenged assets, typically valuation issues, meaning they were overvalued to begin with.
Greg Bennett
So when we're looking at these and the maturity date, there's some that I'll see that the closing date was 21, but they will have an, how many of these have an extension? I guess what I'm trying to get at, you take a loan that was done in 21 and you see that the maturity date is 27. Now that would have been a six-year loan. Does that maturity date, should there be an asterisk next to that which tells us that you actually did a loan extension that we could identify.
Maybe these were the weaker loans. The maturity date, does the maturity date include a loan extension or is that what the original term was?
Jim Flynn (Chief Executive Officer)
Yeah. So it would be what the current maturity date is in the supplemental. And if I, if I, I'll ask the team to step in if I say anything wrong. But most of our bridge loans have a total maturity of five years, usually three years initial term with two one-year extensions. Occasionally it's two with three one-year extensions and the outside maturity date is listed as that five-year period. But for any loan that has gone through a modification with an extended maturity date, the maturity date in the supplemental would be listed as the current maturity date.
We can provide that data in future supplementals. To be clear. But for loans that were done in 21 that have a maturity date of 27, that would be an extension. Because we don't have any loans that have an initial maturity beyond five years.
Greg Bennett
Okay. I don't know. Okay, go ahead. Sorry. Oh, go ahead, finish.
Jim Flynn (Chief Executive Officer)
Well, I was just gonna say, I don't, I suspect that someone doesn't have the data right at their fingertips, but we can certainly provide that in the future. But so if anyone else on the team has that, meaning the number of extensions, some of those have extended before too, right at the end of the three years. And then they get an initial period because of some agreement that they've reached with us on an extension. Typically a pay down.
Greg Bennett
Yeah. So the problem loan or the problem loans have to do with just the management of a property that has finished its remodeling or its construction, or that they're just not managed well, or is it because they're still using a loan to put capital renovation into the property?
Jim Flynn (Chief Executive Officer)
So any troubled loan we're generally no longer advancing on. In terms of the last question, in terms of management, it's a bit of a mixed bag. Certainly in some cases it's due to management. Most often it's because sponsors have themselves run out of capital. These are not their only properties or only loans, and they just no longer have the capital to commit to the assets that they have, whether in our portfolio or others. And what happens when sponsors no longer invest capital, even minor things, is properties deteriorate which make it harder to rent new units.
And so I think the answer to your question is in many cases it is bad management. It's not necessarily that sponsors don't know how to do it or what to do. It's that they no longer have the resources as they've held onto these assets for an extended period, waiting for the market to turn better. The submarket that they're in, thinking places like Houston or San Antonio and those types of markets that have struggled and so they just kind of run out of money and resources.
Doesn't mean they don't know. In many cases it doesn't mean that they don't know what they're doing. It just means that they no longer have capital. And that's a challenging environment where you've had cap rates expand, you've had increases in interest rates, and so that sponsor doesn't have capital to put into the asset. We are trying to work with them to exit the asset, hopefully at our loan proceeds. But at this point, in many cases, as we've seen below loan proceeds, and that process is frankly a challenging one with some sponsors who are unwilling to cut their losses, so to speak, and move on.
That's something that has accelerated a bit here in 2026, moving toward a resolution. But that is the biggest problem that sponsors acquired assets at valuation levels that have since declined meaningfully. Their expenses have gone up and their resources have been drained.
Greg Bennett
Going forward, when you do commit to loans, I mean, obviously there's a lack of confidence based on the stock price. So I'm wondering from a management point of view or from, you know, from ORIX, your sponsor, if there's some way of. Well, first of all, you know, the commitment going forward that maybe you only invest in two rated loans, you know, to try to improve, I guess what the quality of the portfolio is. I don't know if that would matter or not.
And then the other thing is. Go ahead.
Jim Flynn (Chief Executive Officer)
Well, I was going to say we've certainly evaluated investment criteria and have considered sponsor strength as one of the key components here in terms of common themes among struggling assets. Again, I think the portfolio for multifamily assets across the entire industry, not just Lument Finance Trust's portfolio, has seen significant struggles in assets that were acquired during that period identified in the ’21 to ’23 period. They were acquired at a time of lower interest rates, lower expenses, and lower cap rates.
All three of those things have moved meaningfully against those owners. And so we've taken a particularly closer look and identified stronger sponsors on newer assets — those with deeper pockets, more capital, more experience — and those that have not necessarily grown as significantly as many investors, many sponsors did during that period. So that is certainly something that we have done. And if you look at our portfolio that's been invested since that period, it's performed quite well.
Steven, Individual Investor
One thought I have — and I don't know if this is available or not — but part of the reason for investing in your company had to have been the relationship with Lument and then the parent company, you know, ORIX. And I don't know — I mean this would be self‑serving — but since the insiders own roughly, if you think about it, the insiders own roughly 45% of this company, the publicly traded company, with ORIX, I guess, the largest shareholder, if there's some way — if there's some way to build investor confidence — backing the price of ORIX, or the sponsor basically — I don't know how you would do it, but taking back these assets for, like, a preferred stock in the company and allow the parent company to work this out. I mean, they're the ones who put these loans on. I mean, they were the ones — you didn't buy these from a broker. I mean, part of the appeal of investing in this is that you weren't relying on third parties to bring you these deals. These were all underwritten and done in‑house by the parent company, which we pay a management fee. That might be a crazy idea, but the idea — closing the discount — is not going to happen until we see the tide turning.
And the way to turn the tide faster would be, I think, to eliminate the lack of confidence that investors — we're a small group now and with the reverse split we're going to be even smaller. So is that possible to do that?
Jim Flynn (Chief Executive Officer)
Well, is it possible? I'm sure it's possible. But in terms of looking at the portfolio and finding ways for, whether through our parent or other investors, to find ways to basically — what I would say is to kind of box that risk or move that risk — of those, you know, what is now a shrinking part of the portfolio but still having a meaningful impact on earnings both, again, as I said, in losses and from effectively and efficiently deploying capital.
What you describe — minus the, I won't say the parent is committing to doing anything like that — but the idea of trying to box that risk into a portfolio of loans that could be set aside and worked through is something that we certainly have been and are evaluating. And to the extent we could figure something out that's accretive to the shareholders, we certainly would like to do so and we'll explore that opportunity as we move forward here. So I think your question and your thought is a good one, and there are opportunities we're looking at with investors about ways that we could possibly do that or something like that.
Steven, Individual Investor
Yeah. You know, in your comments you frame that the outlook is starting to look more positive for some of these problem loans. But I mean, I see the San Antonio property paid off $11 million, whatever. But I — so you have that. So now you're down to, what, $50 million of real estate owned or — man, I don't know. I don't have a sense necessarily that real estate owned or problem assets is necessarily getting better. Is that…
Jim Flynn (Chief Executive Officer)
So what's happening — what's starting to turn — again, we're looking at markets that have not seen good news for several years that we're seeing, you know, occupancy increasing, vacancy declining, absorption increasing, limited supply contracting or being limited. Right? So those dynamics are starting to happen in markets that haven't seen that for years. And so, to clarify maybe my remarks, what we're starting to see is some positive momentum in markets that have struggled for years in rental growth, occupancy, vacancy, and deal momentum.
We're starting to see a few deals get done. What we've seen for a couple of years now is assets go under contract, or at least initial LOIs, for sale — these are performing and non‑performing — and those sales fall through for whatever reason. Usually something in diligence comes up or the market just moves against and the buyer walks away. What we've seen in a couple of instances, including this quarter, is that we got to a resolution. It's not positive relative to the original loan amount, but it's positive to move the asset off our books, to recapture that liquidity, and to be able to redeploy it into performing assets.
So, to be clear, it's more about resolving — having these assets continue to remain on the books and lingering is a drag at any value. So, you know, optimistic is the wrong word. But there are signs in these markets that we could see some deal momentum. Now, I would also offer that we're not the only lender that are trying to sell or dispose of assets in these markets. And so that's also put — that has put some pressure going back quarters now. But even as we go forward, we'll continue to see other lenders kind of having the same experience, which means we might see some struggling or distressed assets coming to market from several lenders in the same places. That would be the only caveat. But, to be clear, I'm not suggesting that these are complete turnaround stories. It's just relative to where we are, we're starting to see some aspects change.
Steven, Individual Investor
Okay. Hey, one other comment for trying to build investor confidence. Is there any way — these loans that are underwritten by the parent — is there any provision in there, going forward? These aren't bought from brokers, you guys are underwriting it, where the trust has a put provision that if we don't like the way this is turning out, we do have the ability to put some of these loans back to the parent? I mean, that would be something…
Jim Flynn (Chief Executive Officer)
That would — I mean, the loans are underwritten by Lument, which is owned by ORIX, and we underwrite the loans. Obviously, I don't think that that is a market provision. You know, having a put right back to the manager when a loan goes bad would be a challenge to get our parent, or probably any parent, to agree to. But certainly evaluating when assets have gone bad, how we can revise underwriting standards or look at assets differently — we'll continue to do.
As I said earlier, we will continue to explore all opportunities and options to speedily move these resolutions off the balance sheet with the help of existing and/or new investors. But we have not found an opportunity to date that has been something that we feel would be accretive to shareholder value. Hopefully we can do so here in the coming quarters, but we haven't been able to as of yet.
Steven, Individual Investor
Okay, thanks. One other question — distributable loss. I don't think — I'm not familiar with that term. What does that mean to a shareholder in a company? The terminology distributable loss — it sounds like free cash flow — but is that something when you get your year‑end taxes, 1099, that that's considered a loss? Do you know, for individual investors, what that might mean?
John Power
So the distributable — sorry, the distributable loss — and, you know, I'm not a tax expert — but distributable loss is a GAAP concept and it's not a tax concept.
Steven, Individual Investor
Okay, that's fine. All right, that's good. Are you. Thank you for having — yeah, thank you for having the call. Hopefully — I guess I'm getting off this call and I'm not sensing that necessarily the tide is necessarily turning, but I guess we'll see in the next couple quarters.
Jim Flynn (Chief Executive Officer)
Yes, thank you, and certainly appreciate your support.
OPERATOR (Operator)
Thank you. Your next question is from Martin Brody. Your line is open.
Martin Brody
Yeah, hi, good morning. Well, the last caller asked many questions I was going to ask. I'm a long‑suffering shareholder too. I go back to several name changes — Poor Oaks, I think it was originally. So, in the middle of June — the 25th, June 15 — the quarter was almost over and you declared a second‑quarter dividend of 4 cents, which thrilled me at the time. But it sort of misled me a little bit because I was assuming if you're paying $0.04 then at least you had some positive income or earnings available for distribution.
Can you tell me why you did that when — as I said — the quarter was almost over? So you clearly knew the state of income and expenses at that point.
Jim Flynn (Chief Executive Officer)
So whenever we discuss the dividend, we share with our board and discuss with the board the current projections for the quarter and for the dividend year and, frankly, for the future. Based on the projections at the time, we felt that 4‑cent dividend was appropriate for the quarter based on where we expected things to be. A few of the resolutions resulted in bigger losses upon ultimate sale or payoff than we were expecting. And as we go through the dividend discussion in our next quarter with the board, we'll evaluate the current projections for this quarter and for the next several quarters and go through the same discussion we do each quarter.
It's a quarterly discussion based on, you know, not just that quarter but the year‑anticipated and expected returns.
Martin Brody
Okay, next question is — this is probably impossible — but you have an outside manager of which you pay a considerable fee to, and I understand that, but that's, you know, taking a larger and larger percentage of income. Is it possible to internalize management?
Jim Flynn (Chief Executive Officer)
I'm sorry, is it possible for — can you — I missed the last part?
Martin Brody
Internalize management to lower the fee? No, internalize — internalize. Both actually — thanks for bringing that up — lower the fee and internalize management. Both ways would save money, of course.
Jim Flynn (Chief Executive Officer)
Yeah, well, I don't think that that is likely, but what I would point out — I think internalizing management would actually increase fees. You know, there's a cap on reimbursable fees and expenses that a standalone public company of this size would likely go beyond. But there's currently no plans to internalize the manager.
Martin Brody
Okay, not quite sure it would. Seems like a fairly simple business, but maybe I'm wrong. One last question has to do with stock trade. So at the end of June — I think it was the day before it went ex‑dividend — there was a 5‑million‑share print at the end of the day, which is, as you know, massive. And in fact a year ago, approximately the same time, there was also a 5‑million‑share print. And I was surprised that there was no reporting of this. Can you shed any light on that? I'm sure you're aware of it.
John Power
Yeah, I can answer that, Jim. LFT — a year ago, a little over a year ago at this point, as you point out — there was a big print at the end of June. LFT had been added to the FTSE Russell 3000. So what you saw a year ago and change, and what you saw this past June, was the effects of any activity from that rebalancing and index funds that were indexing to the Russell 3000 that we were in. So, yeah, that explains that big print June of ’25 when LFT was added, and when LFT was pulled out, that became effective at the close of business on that day that you saw the big print.
So there was a lot of activity that day as well.
OPERATOR (Operator)
Thank you. Thank you. There are no further questions at this time. Please proceed with the closing remarks.
Jim Flynn (Chief Executive Officer)
I want to thank our investors for joining today. Again, for your patience. Appreciate the questions and feedback and support, and we will continue to work to improve the earnings profile, with intent to increase our trading price relative to book value. Thank you all, and we'll speak next quarter.
OPERATOR (Operator)
Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may now disconnect your lines.
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