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The call presents a mixed picture: management has achieved important operational and regulatory wins (legal dismissals, ~$100M reduction in nonperforming assets, strong CLO execution, diversified origination pipelines and stable funding costs) and has a clear plan to accelerate asset resolutions. However, substantial legacy nonperforming assets (~$1B), ongoing realized losses (~$15M–$25M per quarter), a higher-rate environment that slows resolutions, persistent OREO impairments and a thin net interest spread pose meaningful near-term headwinds. Management’s actions—dividend reset, accelerated dispositions, targeted reserves, and active origination across multiple verticals—are constructive, but material drag is expected through Q2–Q3 before improvement later in 2026 and into 2027.
Management guided that Q1 distributable earnings were $37.4 million, or $0.18 per share, before $23 million of one‑time realized losses, and the Board reset the quarterly dividend to $0.17 per share (which management expects to cover for the rest of 2026); they see Q2 distributable earnings around $0.15 per share (reflecting roughly $0.02 per share of temporary financing drag) with a low point through Q2–Q3 and anticipated improvement in Q4 and into 2027. Key credit and resolution metrics: Q1 ended with about $500 million of delinquent loans and $500 million of REO (≈$1.0 billion total nonperforming assets, down ≈$100 million QoQ or ~9%), with $200 million of resolutions in Q1, line of sight on an additional $200–300 million of delinquencies to resolve in Q2–Q3 plus another ~$100 million by year‑end, expect to take back roughly another $100 million of assets (with $50–75 million likely by end‑Q2) and to reduce REO to roughly $250–300 million by end‑2026. Losses, reserves and impairments: management is reserving for ~$15–25 million of realized losses per quarter for the balance of the year, recorded $12 million of OREO impairments in Q1 and ~$21.5 million total OREO impairments/specific reserves, and carries CECL reserves of $131 million (≈1.1% of the portfolio)—which, together with REO write‑downs, implies roughly 1.7–1.8% coverage of delinquency+REO. Operational and funding metrics: Q1 production totaled $795 million on the agency platform (including an $88 million CMBS brokerage), $350 million closed through May, balance‑sheet originations were $400 million, SFR originations were ~$125 million in Q1 (management expects to exceed ~$300 million in the current quarter), construction closed $113 million in Q1 with a $250 million close expected in Q2 and a 2026 construction target of $750 million–$1 billion; balance‑sheet investment assets ≈$12 billion (all‑in yield 7.03%, avg core yield 7.5%), total debt on core assets ≈$10.7 billion (all‑in cost of debt ~6.4%, avg cost of funds 6.52%), and spot net interest spread flat at 63 bps.
Investigations opened after short reports are believed closed with no action; motion to dismiss class action was granted (claims dismissed without prejudice), removing costly distractions and allowing management to refocus on operations.
Total nonperforming assets fell by approximately $100 million quarter-over-quarter, a ~9% reduction, to roughly $1.0 billion (about $500 million delinquent loans and $500 million REO) as of March 31, 2026.
Completed ~$200 million of resolutions in Q1 (consistent with goals) and have line of sight on an additional $200–300 million to resolve in Q2–Q3 plus another ~$100 million by year-end.
Produced distributable earnings of $37.4 million, or $0.18 per share (excluding one-time realized losses); Board reset quarterly dividend to $0.17 per share, which management expects to be coverable by earnings for the year.
Agency platform total Q1 volume of $795 million (including first CMBS brokerage of $88 million); balance-sheet lending originations $400 million in Q1; SFR originations ~$125 million in Q1 with expectations of a significant increase; construction lending closed $113 million in Q1 with ~$250 million expected in Q2 and a 2026 production target of $750 million–$1 billion.
Priced a CLO in Q1 at 1.73% over index with 88% leverage and a 2.5-year replenishment feature, demonstrating strong access to securitization funding despite geopolitical volatility.
Investment portfolio ~ $12 billion with all-in yield on portfolio ~7.03% (vs 7.08% prior quarter); average core asset yield rose to 7.50% from 7.38%; all-in cost of debt improved slightly to ~6.4% (from 6.45%); average cost of funds down to 6.52% (from 6.66%); spot net interest spread remained stable at 0.63%.
Fee-based servicing portfolio approximately $36.3 billion with a weighted average servicing fee of 35.5 bps and estimated annual gross annuity income of ~ $129 million; recorded $10 million MSR income related to $734 million of committed loans (avg MSR 1.32%).
Thank you for your continued patience. Your meeting will begin shortly. Good morning, ladies and gentlemen, and welcome to the First Quarter 2026 Arbor Realty Trust, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. If you want to remove yourself from the queue, please press 2. Please be advised that today's conference is being recorded.
I would now like to turn the call over to your speaker today, Paula Eliano, Chief Financial Officer. Please go ahead.
Thank you, Stephanie, and good morning, everyone, and welcome to the quarterly earnings call for Arbor Realty Trust, Inc. This morning, we will discuss the results for the quarter ended [inaudible]. Some of those short reports appear to have provoked investigative interest from regulators, as well as class actions and derivative claims from plaintiffs' law firms. We have steadfastly maintained that these attacks and claims made against us were baseless and misleading. We are pleased to report in that regard that we believe any pending investigations that were initiated in the wake of the short reports have now been closed without any action against us. Additionally, and very recently, our motion to dismiss the class action lawsuit against us was granted and the claims dismissed without prejudice. We have been very pleased with these developments. Although our management team never lost sight of our shareholders and their interests during this challenging period, we are happy to put this chapter behind us and ...