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 non-performing loans are creating a temporary drag of $80 million-$100 million annually, translating to about $0.40-$0.48 per share [27][29] Business Line Data and Key Metrics Changes - The agency platform had a strong Q4 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 aims to resolve non-performing loans to improve income, estimating an addition of $100 million to annual run rate income as these loans are resolved [4][5] - The strategy includes resetting interest rates on current loans to market spreads to enhance performance and reduce future loss risks [9][10] - The company plans to continue its buyback program, having purchased approximately $20 million of stock at an average price of $7.40, which is 64% of book value [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 stabilizing properties [21][53] - The company is focused on resolving legacy issues and growing new business volumes, with a clear path to resolving the majority of delinquent assets in the coming quarters [10][35] - Management expressed confidence in the performance of the single-family rental (SFR) book, which has shown strong returns and no delinquent loans [46] Other Important Information - The company has approximately $120 million left in its buyback plan and is actively evaluating this strategy [12] - The agency business generates about 50% of net revenues, with a significant portion occurring before daily operations begin [14] Q&A Session Summary Question: How are you thinking about 2026 GSE originations relative to the $5 billion number? - Management indicated that 2026 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 changes in loan products and expects this dynamic to level off towards 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 institutional backing for the sponsors [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 [56][58]