Arbor Realty Trust (ABR) Q1 2025 Earnings Call May 02, 2025 10:00 AM ET Company Participants Paul Elenio - EVP & CFOIvan Kaufman - Founder, Chairman & CEOJade Rahmani - Managing DirectorLeon Cooperman - Chairman and CEO Conference Call Participants Steven Delaney - AnalystRick Shane - Analyst Operator Good morning, ladies and gentlemen, and welcome to the First Quarter twenty twenty five Arbor Realty Trust Earnings Conference Call. Please be advised that today's conference is being recorded. I would now lik ...

Financial Data and Key Metrics Changes - The company reported distributable earnings of $57.3 million or $0.28 per share, and $0.31 per share excluding one-time realized losses from the sale of two REO assets [19] - The return on equity (ROE) for the first quarter was approximately 10% [19] - The company anticipates a quarterly distributable earnings guidance of $0.30 to $0.35 for 2025 [19] Business Line Data and Key Metrics Changes - The balance sheet lending platform originated $370 million in new bridge loans during the first quarter, with a full-year guidance of $1.5 billion to $2 billion [12][13] - The agency business had a slow first quarter, producing $6 million in originations and $731 million in loan sales, maintaining strong margins of 1.75% [25] - The investment portfolio grew to $11.5 billion at March 31, with an all-in yield of 7.85% [26] Market Data and Key Metrics Changes - The company experienced a reduction in delinquencies, down 20% to $654 million at March 31 compared to $819 million at December 31 [22] - The average yield on core investments decreased to 8.15% from 8.52% due to a reduction in the average SOFR rate [26] - The overall net interest spread in core assets decreased to 1.26% from 1.44% [28] Company Strategy and Development Direction - The company is focused on resolving REO assets and delinquencies, viewing 2025 as a transitional year to set up for growth in 2026 [18] - The company plans to leverage efficiencies in the securitization market to drive higher returns on capital [6][18] - The strategy includes repositioning underperforming assets to improve occupancy and net operating income (NOI) [11] Management's Comments on Operating Environment and Future Outlook - Management noted significant uncertainty and volatility in the interest rate environment, impacting the ability to predict future performance [8] - The company expects continued challenges in the short term due to the drag on earnings from REO assets and delinquencies [12] - If interest rates decrease, it could positively impact the company's ability to convert non-interest earning assets into income-producing investments [11] Other Important Information - The company has successfully modified $38 million of loans and brought $39 million of loans back to full performance [10] - The company took back $197 million of REO assets in the first quarter, with expectations to increase REO assets to between $400 million and $500 million [52] - The company has managed to deleverage its business by 30%, reducing the leverage ratio to 2.8:1 [29] Q&A Session Summary Question: Outlook for the Bridge Loan Portfolio - Management expects net growth in the bridge loan portfolio in 2025, targeting $1.5 billion to $2 billion in new business [32][34] Question: Reasons for Poor Performance in Previous Vintages - Management attributed poor performance to a combination of market corrections, economic factors, and inexperienced management in the multifamily sector [40][42] Question: Liquidity and NPLs Expectations - The company currently has $325 million in cash and liquidity, with expectations for NPLs to decrease as they work through the REO assets [48][54] Question: Non-Cash Income and Interest - The company reported $15.3 million of non-cash interest during the quarter, which is a moving number based on loan modifications [65][66] Question: Interest Rate Environment - Management discussed the impact of interest rates on business performance, noting that lower rates could enhance earnings potential [72][74]