Arbor Realty Trust (NYSE:ABR) executives emphasized progress resolving non-performing assets and outlined expectations for improved earnings power as delinquent loans and real estate owned (REO) are worked out, during the company’s fourth-quarter 2025 earnings call.
Management focuses on resolving non-performing assets
President and CEO Ivan Kaufman said the company believes it is “in the bottom of the cycle” and is prioritizing the conversion of non-performing and sub-performing loans into performing assets, describing the current portfolio drag as “a tremendous drag on our earnings.” Kaufman said management estimates that resolving these assets could add back as much as $100 million of income to the annual run rate, or about $0.48 per share.
Management also said it expects additional REO to come onto the balance sheet during the workout process, but still targets reducing REO to about $250 million to $300 million by the end of 2026.
Fourth-quarter distributable earnings and credit-related items
Chief Financial Officer Paul Elenio reported fourth-quarter distributable earnings of $46.3 million, or $0.22 per share, excluding one-time realized losses of $12.4 million tied to the resolution of certain delinquent and REO assets that had been previously reserved for. Elenio also noted $7.3 million of income in the quarter from reduced tax expense related to the sale of the Homewood asset.
Elenio said Arbor previously guided to $15 million to $20 million in realized losses for the fourth quarter, depending on asset liquidation timing. He added the company liquidated two additional assets in January for approximately $10 million in losses expected to be reflected in the first quarter of 2026, and said these, too, had been previously reserved for.
On credit, Elenio said the decision to accelerate resolutions temporarily raised delinquencies and reduced fourth-quarter earnings by about $0.05 to $0.06 per share, with an additional $0.02 of drag from a few new delinquencies and reduced rates on modified loans. He also cited a fourth-quarter reversal of about $4 million of previously accrued interest on new delinquencies, partially offset by $7 million of back interest collected on a loan payoff.
The CFO said non-performing assets were creating a temporary annual earnings drag of about $80 million to $100 million, or roughly $0.40 to $0.48 per share, which he said equates to about $0.10 to $0.12 per quarter of potential income as the assets are resolved over the next several quarters.
Arbor recorded an additional $20.5 million of impairment on its REO book in the fourth quarter to mark assets for planned dispositions, bringing REO reserves to roughly $75 million life-to-date. Elenio said the company expects to book similar levels of reserves and impairments over the next few quarters as it continues to mark and market assets for sale.
Originations: agency strength and selective balance sheet growth
Management highlighted production across Arbor’s platforms in 2025. In the agency business, Kaufman said fourth-quarter originations were $1.6 billion, bringing full-year agency production to $5.0 billion, a 13.5% increase from 2024. He also pointed to the agencies increasing caps by 20% for 2026 as a supportive factor for activity, alongside what he described as a large pipeline.
Elenio said the fourth quarter included $1.5 billion in loan sales, generating $21 million in gain-on-sale income, with a margin of 1.36%. He also reported $20 million of mortgage servicing rights (MSR) income related to $1.6 billion of committed loans in the quarter, representing an average MSR rate of about 1.24%.
Arbor’s fee-based servicing portfolio grew 8% in 2025 to approximately $36.2 billion at December 31, according to Elenio, with a weighted average servicing fee of 35.6 basis points and an estimated remaining life of six years. Kaufman said the servicing portfolio generates a “predictable and growing annuity,” while Elenio estimated it generates around $120 million gross annually.
In balance sheet lending, Kaufman said Arbor originated $340 million in the fourth quarter and $1.2 billion for 2025, describing the market as “incredibly competitive” with concessions on credit and structure. He said Arbor is staying selective and expects 2026 originations of about $1.0 billion to $1.5 billion in that segment, with the ability to scale up if conditions improve.
Single-family rental, construction, and market color
Arbor also discussed its single-family rental (SFR) and construction platforms. Kaufman said the company originated approximately $1.6 billion in SFR volume in 2025, including $80 million in the fourth quarter, and said it expects $1.5 billion to $2.0 billion of SFR volume again in 2026. Addressing investor questions about a potential ban on institutional single-family home purchases, Kaufman said Arbor focuses on build-to-rent communities—described as 200–300 home developments that are “commercial properties more akin to multifamily”—and said the company believes it would not be affected by efforts to restrict large institutions from buying scattered-site homes.
On credit performance, Elenio said the build-to-rent/SFR book has had “not a single delinquent loan or a loan on our watch,” calling it “spotless from a credit perspective.”
In construction lending, Kaufman said Arbor produced about $500 million in 2025 and expects $750 million to $1.0 billion in 2026, citing a large pipeline and opportunities for larger loans on high-quality assets with experienced developers.
During Q&A, management provided geographic color on areas of weakness tied to certain non-performing assets, citing softness in Houston and some impact in parts of San Antonio and Dallas, as well as pockets in Atlanta and Florida. Kaufman described instances of sharp occupancy declines in certain properties in those markets.
Capital allocation and dividend perspective
Management also discussed share repurchases, with Kaufman stating Arbor had about $120 million remaining under its buyback plan. He said the company purchased roughly $20 million of stock in recent months under a 10b5-1 plan at an average price of $7.40, which he described as 64% of book value.
On the dividend, Elenio said the board evaluates it from a “more long-term perspective,” acknowledging that accelerating resolutions has temporarily pressured earnings. He said first-quarter 2026 could represent a “low watermark,” noting seasonality in the agency business and projecting first-quarter agency volume of about $750 million to $800 million versus $1.6 billion in the fourth quarter. Elenio added that net interest income had “leveled off” in the fourth quarter and he expected it to stay in that range in the first quarter, with potential improvement later in the year as resolutions progress.
About Arbor Realty Trust (NYSE:ABR)
Arbor Realty Trust, Inc (NYSE: ABR) is a real estate investment trust specializing in the origination, acquisition, financing, structuring and management of commercial real estate loans and securities. The company focuses primarily on multifamily and commercial mortgage lending, targeting properties such as apartment communities, senior housing and healthcare facilities. Through both agency and non-agency channels, Arbor Realty Trust seeks to deliver liquidity solutions to borrowers while generating stable, risk-adjusted returns for its shareholders.
Core business activities include originating first-mortgage loans secured by multifamily and mixed-use properties, as well as providing mezzanine financing and preferred equity investments.
