Arbor(US:ABR)2026-02-27 16:02Financial Data and Key Metrics Changes - The company reported distributable earnings of $46.3 million or $0.22 per share for Q4 2025, excluding one-time realized losses of $12.4 million and $7.3 million from reduced tax expenses [24][26] - Total non-performing assets were approximately $1.1 billion, down by over $130 million or 11% from the previous quarter [5][6] - The company estimates that resolving non-performing loans could add back as much as $100 million of income to the annual run rate, equating to about $0.48 per share [4][27] Business Line Data and Key Metrics Changes - The agency platform had a strong fourth quarter with $1.6 billion in origination volume, totaling $5 billion for the year, a 13.5% increase from 2024 [13] - The servicing portfolio grew by 8% in 2025 to over $36 billion, generating predictable annual income of over $128 million [14][31] - The balance sheet lending operation's investment portfolio grew to $12.1 billion, with an all-in yield of 7.08% [32][33] Market Data and Key Metrics Changes - The company is optimistic about the origination volume for 2026, targeting similar levels to 2025, contingent on interest rates and GSE caps [37] - The company noted that the interest rate environment has improved compared to the previous year, which is expected to support growth in origination volume [21] Company Strategy and Development Direction - The company is focused on resolving non-performing and sub-performing loans to improve income rates, with a goal to reduce REO assets to around $250 million-$300 million by the end of 2026 [7][11] - The strategy includes resetting interest rates on current loans to market spreads to ensure positive coverage of debt service [9][10] - The company plans to utilize proceeds from liquidating non-performing assets to buy back stock at a significant discount to book value [11][12] Management's Comments on Operating Environment and Future Outlook - Management believes the worst is behind them regarding delinquencies and is seeing steady progress in asset performance [9][21] - The company is experiencing some additional delinquencies but is optimistic about resolving more than are being added [25][53] - Management expressed confidence in the performance of the SFR book, noting it has not seen any delinquent loans [46] Other Important Information - The company has approximately $120 million left in its buyback plan and has already purchased about $20 million of stock at an average price of $7.40 [12] - The company expects to maintain its dividend in 2026, contingent on the resolution of delinquencies and the return to a stronger run rate of income [55][56] Q&A Session Summary Question: How are you thinking about 2026 GSE originations relative to the $5 billion number? - Management indicated that origination levels will depend on interest rates and GSE caps, expressing comfort in targeting similar levels to 2025 if conditions remain stable [37] Question: Do you expect servicing fee compression to continue into 2026? - Management explained that servicing fee compression is driven by the shift to shorter-term products and the normalization of fees post-COVID, with expectations that compression will level off by the end of the year [38][40] Question: Have you seen any credit issues in your build-to-rent borrowers? - Management reported that the SFR book is performing exceptionally well, with no delinquent loans, and highlighted strong returns on this business [45][46] Question: Can you provide geographic color on delinquent/REO book performance? - Management noted softness in markets like Houston and Atlanta, attributing issues to historical boom-bust cycles and immigration-related factors [48][49] Question: What are your thoughts on maintaining the dividend in 2026? - Management stated that the dividend is evaluated from a long-term perspective, with a focus on resolving delinquencies to restore earnings [55][56]