Arbor Realty Trust Inc (ABR) Q3 2025 Earnings Call Highlights: Strong Loan Originations Amidst ...

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Distributable Earnings: $73 million or $0.35 per share for the third quarter. Lexford Investment Gain: $48 million gain from asset sale. Agency Loan Originations: $2 billion in the third quarter. Single Family Rental Business Originations: $150 million in Q3, $200 million in October. Construction Lending Originations: $145 million in Q3, $65 million in October. Balance Sheet Lending Portfolio: Grew to $11.67 billion as of September 30th. Fee-Based Servicing Portfolio: $35.2 billion as of September 30th. Net Loan Loss Reserves: Additional $20 million recorded in Q3. Delinquencies: Increased to $750 million as of September 30th. REO Assets: $470 million as of September 30th, with an additional $150 million expected in Q4. Net Interest Spread: 0.55% as of September 30th.

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Release Date: October 31, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Arbor Realty Trust Inc (NYSE:ABR) issued a new $1 billion CLO with favorable terms, enhancing liquidity by $75 million. The company realized a $48 million gain from the sale of a portion of the Lexford portfolio, countering previous short-seller claims. Arbor Realty Trust Inc (NYSE:ABR) achieved a strong third quarter in its agency business, originating $2 billion in loans, the second-highest production quarter in its history. The company is optimistic about the interest rate environment, expecting it to improve origination volumes and earnings. Arbor Realty Trust Inc (NYSE:ABR) has a diversified business model, allowing it to manage and resolve legacy assets effectively without significant book value deterioration.

Negative Points

The company is experiencing elevated delinquencies, with $750 million in delinquencies as of September 30, 2025. Interest income decreased due to reversals of accrued interest and modifications at lower rates, impacting earnings. Arbor Realty Trust Inc (NYSE:ABR) anticipates fluctuations in quarterly earnings due to the resolution of problem loans. The competitive lending environment has led to reduced margins in some areas, affecting profitability. The company is facing challenges in certain markets, such as San Antonio and Houston, due to external factors impacting asset performance.

Q & A Highlights

Q: Can you provide an estimate of how stable the remaining performing loans in your portfolio are, and how many additional loan modifications might be needed in the next few quarters? A: Ivan Kaufman, CEO, explained that the stability of loans depends on the market. Modifications often require borrowers to bring capital to the table, and if interest rates remain elevated, further modifications might be necessary. The company is aggressive in managing assets that are not improving due to poor management or lack of capital. They expect to resolve about $500 million of delinquencies within 45 days and anticipate another wave in the fourth quarter. By the end of the first quarter next year, they aim to have a more stable run rate and improved income-producing assets.

Story Continues

Q: Is the current level of interest income for the third quarter a reasonable baseline to use going forward? A: Paul Elenio, CFO, clarified that the $18 million accrued interest reversal is a one-time adjustment, but it will result in a $4 million reduction in interest income going forward. Additionally, modifications and delinquencies will reduce interest income by $16 million on a run rate basis. However, they have already improved this by $3 million through loan repositioning, and they expect further improvements as they resolve more delinquencies.

Q: What drove the increase in credit loss provisions for the agency multi-family business, and is this a headwind going forward? A: Ivan Kaufman noted that the increase in provisions is reflective of peak stress in the cycle, particularly in markets like New York City due to rent control issues. Paul Elenio added that they expect similar reserves in the fourth quarter, with potential reductions in the first quarter as stress levels decrease.

Q: Can you provide more details on the Homewood sale and its impact on distributable income? A: Paul Elenio explained that the Homewood loans were written down to $50 million from $128 million, with most reserves taken before COVID. The sale for $59 million will result in a $9 million reserve reversal and a $1 million distributable earnings charge. Additionally, they will benefit from a $7.5 million tax deduction.

Q: With the stock trading below book value and an optimistic outlook for next year, are you considering using capital for share buybacks? A: Ivan Kaufman stated that they have a share buyback program and will evaluate the best use of capital. Insiders, including Kaufman, continue to buy stock when it is below book value, and they view this as an opportunity.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

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