Arbor(ABR) - 2025 Q2 - Quarterly Results

Financial Highlights and Key Developments Arbor Realty Trust reported a significant year-over-year decline in Q2 2025 net income and distributable earnings, alongside key financing activities Key Financial Metrics | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income | $24.0 million | $47.4 million | | Net Income per Diluted Share | $0.12 | $0.25 | | Distributable Earnings | $52.1 million | $91.6 million | | Distributable Earnings per Diluted Share | $0.25 | $0.45 | | Dividend Declared per Share | $0.30 | $0.43 | - The company strengthened its balance sheet through two major financing activities: closing its first build-to-rent collateralized securitization vehicle for $801.9 million and issuing $500.0 million of 7.875% senior unsecured notes due 2030[3] - Key portfolio metrics for Q2 2025 include a servicing portfolio of approximately $33.76 billion and a structured loan portfolio of about $11.61 billion, with originations of $857.1 million in agency loans and $716.5 million in structured loans[3] - During the quarter, the company foreclosed on six loans totaling $188.2 million and sold four real estate owned (REO) properties for $114.5 million[3] Business Segment Performance The company's Agency and Structured segments showed varied performance in loan origination, portfolio growth, and net income contributions Net Income by Business Segment (Q2 2025) | Segment (Q2 2025) | Net Income Attributable to Common Stockholders | | :--- | :--- | | Agency Business | $16.7 million | | Structured Business | $9.3 million | Agency Business The Agency Business experienced significant loan origination growth, primarily from Fannie Mae, expanding its servicing portfolio and increasing CECL allowance Agency Loan Origination Volume (in thousands) | Agency Loan Volume (in thousands) | Q2 2025 | Q1 2025 | | :--- | :--- | :--- | | Fannie Mae | $683,206 | $357,811 | | Freddie Mac | $150,339 | $178,020 | | Total Originations | $857,097 | $605,908 | Fee-Based Servicing Portfolio Metrics | Fee-Based Servicing Portfolio | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Total UPB | $33.76 billion | $33.48 billion | | Weighted Avg. Fee (bps) | 37.4 | 37.5 | | Weighted Avg. Life (years) | 6.5 | 6.7 | - The total CECL allowance for loss-sharing obligations related to the Fannie Mae portfolio was $54.8 million, representing 0.24% of the Fannie Mae servicing portfolio as of June 30, 2025[7] Structured Business The Structured Business portfolio grew to $11.61 billion with new originations, but faced credit quality stress from non-performing loans and a significant CECL provision Structured Portfolio Metrics (UPB in thousands) | Structured Portfolio (UPB in thousands) | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Total Portfolio | $11,609,235 | $11,489,393 | | Q2 Originations | $716,544 | $747,121 | | Q2 Loan Runoff | $519,709 | $421,941 | - The weighted average yield on the loan portfolio decreased from 8.15% in Q1 2025 to 7.95% in Q2 2025, primarily due to an increase in non-performing and foreclosed loans[10] - As of June 30, 2025, the company had nineteen non-performing loans with a UPB of $471.8 million, a decrease from twenty-three loans with a UPB of $511.1 million at the end of Q1 2025, with a total allowance for loan losses of $243.3 million[11] - During Q2, eight loans with a total UPB of $251.9 million were modified for borrowers experiencing financial difficulty, primarily involving additional capital investment from the borrowers and temporary rate relief[13] Financing Activities and Dividend The company actively managed its capital structure in Q2 2025, completing a significant securitization, issuing senior unsecured notes, and declaring a dividend - In May 2025, the company closed its first build-to-rent collateralized securitization vehicle, totaling $801.9 million, with investment-grade notes placed at an initial weighted average spread of 2.48% over SOFR[16][17] - In July 2025, the company issued $500.0 million of 7.875% senior unsecured notes due 2030, using the proceeds to pay down debt and for general corporate purposes[18] - The Board of Directors declared a quarterly cash dividend of $0.30 per share of common stock, payable on August 29, 2025, to stockholders of record on August 15, 2025[19] Consolidated Financial Statements The consolidated financial statements reflect a year-over-year decrease in net interest income and net income, with slight asset and liability growth, and decreased equity Consolidated Statements of Income Net interest income and net income attributable to common stockholders significantly decreased in Q2 2025, driven by lower interest income and higher credit loss provisions Consolidated Statements of Income (in thousands) | ($ in thousands) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Interest Income | $68,725 | $87,961 | | Total Other Revenue | $61,685 | $65,142 | | Total Other Expenses | $91,909 | $93,563 | | Net Income Attributable to Common Stockholders | $23,952 | $47,397 | | Diluted EPS | $0.12 | $0.25 | Consolidated Balance Sheets As of June 30, 2025, total assets were $13.56 billion, total liabilities $10.47 billion, and total equity decreased to $3.09 billion from year-end 2024 Consolidated Balance Sheets (in thousands) | ($ in thousands) | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Assets | $13,563,039 | $13,490,981 | | Loans and investments, net | $11,333,023 | $11,033,997 | | Real estate owned, net | $365,186 | $176,543 | | Total Liabilities | $10,469,176 | $10,339,011 | | Securitized debt | $3,510,865 | $4,622,489 | | Total Equity | $3,093,863 | $3,151,970 | Non-GAAP Financial Measures The company provides distributable earnings as a non-GAAP measure to evaluate operating performance and dividend capacity, adjusting GAAP net income for specific non-cash items - Management defines distributable earnings as GAAP net income adjusted for items such as depreciation, non-cash stock-based compensation, MSR income and amortization, unrealized derivative gains/losses, deferred taxes, and CECL provisions (adjusted for realized losses)[38] Reconciliation of Distributable Earnings Q2 2025 distributable earnings were $52.1 million ($0.25/share), significantly lower than Q2 2024, reflecting adjustments for non-cash items Reconciliation of Distributable Earnings (in thousands) | Reconciliation ($ in thousands) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net income attributable to common stockholders | $23,952 | $47,397 | | Income from mortgage servicing rights | ($10,930) | ($14,534) | | Amortization and write-offs of MSRs | $19,825 | $19,518 | | Depreciation and amortization | $6,582 | $3,044 | | Provision for credit losses, net | $8,435 | $31,457 | | Distributable earnings | $52,069 | $91,565 | | Diluted distributable earnings per share | $0.25 | $0.45 |