Arbor Realty (ABR) Earnings Call Transcript

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DATE

Friday, Feb. 27, 2026, at 10 a.m. ET

CALL PARTICIPANTS

• President & Chief Executive Officer — Ivan Kaufman
• Chief Financial Officer — Paul Elenio

TAKEAWAYS

• Total Nonperforming Assets -- Concluded the year at approximately $1.1 billion, combining $570 million in delinquencies and $500 million in OREO assets, representing an 11% sequential reduction or $130 million lower than the previous quarter.
• Agency Origination Volume -- Achieved $1.6 billion for the quarter and $5 billion for the year, up 13.5% from the prior year.
• Balance Sheet Loan Runoff -- Generated $2 billion runoff in 2025, including $1.5 billion from the legacy portfolio, with expectations for similar runoff in the next year.
• Distributable Earnings -- Reported $46.3 million, or $0.22 per share, for the quarter, excluding $12.4 million in one-time realized losses and $7.3 million in tax income from the Homewood asset sale.
• Agency Servicing Portfolio -- Closed at $36.2 billion, reflecting 8% growth and producing an annual gross predictable annuity income of approximately $120 million, with servicing fees averaging 35.6 basis points and an estimated six-year remaining life.
• Stock Buyback Activity -- Utilized the 10b5-1 plan to repurchase about $20 million of stock at an average price of $7.40, equating to 64% of book value; $120 million remains authorized for repurchases.
• Impairments and Reserves -- Recorded $20.5 million of REO impairments, raising total reserves on the REO book to about $75 million life-to-date; added a $3 million reserve for a new delinquency, offset by a $9 million reserve recovery from the Homewood asset.
• Balance Sheet Investment Portfolio -- Increased to $12.1 billion at year-end, with average yield declining to 7.08% from 7.27% sequentially, attributed mainly to lower SOFR.
• Debt Profile -- Total core asset debt stood near $10.5 billion with a 6.45% cost of debt at year-end, down from 6.72% three months earlier.
• Net Interest Spread -- Overall spot net interest spread rose slightly to 0.63% from 0.55% in the previous quarter.
• Originations Across Business Lines -- Funded $8.5 billion across agency, bridge, SFR, construction, mezzanine, and preferred equity for 2025; SFR production contributed $580 million in Q4 alone.
• Non-Interest-Earning Asset Drag -- Management identified $80 million to $100 million in annual pre-tax earnings drag, translating to $0.40-$0.48 per share, due to nonperforming loans and OREO, with a clear resolution path over the next quarters.
• Agency Margin Trends -- Q4 agency gain-on-sale margin reached 1.36%, lifted from prior quarter levels due to fewer low-margin portfolio deals.
• Legacy Loan Structure -- Of $5 billion in legacy assets, $1.5 billion is performing, $570 million is delinquent, and $3 billion is on modified terms—half accruing at full rate and half at partial pay rates.
• Single-Family Rental (SFR) Portfolio -- No recorded delinquencies or credits on watch-list; management stated SFR book is “spotless from a credit perspective.”
• Geographic Credit Weakness -- CEO Kaufman noted “soft” markets in Houston, San Antonio, parts of Dallas, Atlanta, and certain areas of Florida, citing immigration-related disruptions and lower occupancy.
• Dividend Outlook -- CFO Elenio explained the dividend is assessed from a long-term perspective, acknowledging current distributable earnings per share below the dividend but expecting run-rate improvement as assets are resolved.

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RISKS

• CFO Elenio stated that nonperforming and OREO assets are "creating a temporary drag between $80 million to $100 million annually, or roughly $0.40 to $0.48 a share," directly impacting current earnings below the dividend payout.
• CEO Kaufman cautioned resolution timing, explaining, What used to take us 90 days to resolve a loan, it is taking more like 120 days. indicating prolonged asset resolutions that may delay earnings recovery.
• Management acknowledged that agency business faces “a few penny drag” on gain-on-sale income in Q1 due to seasonal originations, with CFO Elenio calling Q1 the first quarter that could be our low watermark, though.
• CEO Kaufman highlighted ongoing geographic softness, particularly in Houston, citing Yes. I would say that there are certain markets that are soft like Houston. And that is a factor of the history of Houston being boom and bust. But more significantly by it being very adversely affected by the issues with immigration. That got hit on both sides. First, under the prior administration, you had a significant number of immigration centers next to a lot of properties, took over the properties, damaged those severely. And then under the current administration, you are seeing a lot of ICE raids in those areas. You are seeing that in areas of Texas, eastern primarily, San Antonio a little bit and even in Dallas, which is shocking. So you are seeing properties that were 90% occupied. Next day, they are back down to 65% to 70%.

SUMMARY

Arbor Realty Trust (NYSE:ABR) emphasized an 11% reduction in nonperforming assets sequentially, with a clear path to resolving remaining $1.1 billion of such assets in upcoming quarters. Dividend sustainability is under temporary pressure as distributable earnings per share remain below the current payout, but management expects future income to recover as legacy issues are addressed. Strategic use of stock buybacks at a 36% book value discount during Q4, totaling $20 million, is projected to be accretive to book value and returns, with $120 million still available.

• CFO Elenio reported $21 million in Q4 gain-on-sale income from $1.5 billion in loan sales, while agency servicing rights contributed $20 million of Q4 income tied to $1.6 billion in committed loans.
• The company maintains $8.5 billion total 2025 originations across diversified lending, with SFR and construction pipelines expected to deliver $1.5 billion-$2 billion and up to $1 billion, respectively, in 2026.
• Management projects agency servicing fee compression to persist through year-end as legacy higher-fee loans run off, then expects stabilization.
• No single-family rental delinquencies or credit issues were reported, and management clarified build-to-rent is unlikely to face policy headwinds from proposed institutional purchase bans.
• Yield compression on balance sheet investments was primarily attributed to lower SOFR rates, with spot net interest spread showing slight sequential improvement.

INDUSTRY GLOSSARY

• OREO: "Other Real Estate Owned" refers to foreclosed properties owned by the company, typically after unsuccessful loan recovery processes.
• MSR: "Mortgage Servicing Rights" are contractual rights to service mortgage loans in exchange for a fee, recognized as an asset on the balance sheet.
• SOFR: "Secured Overnight Financing Rate" is the interest rate benchmark that replaced LIBOR for many U.S. dollar-based financial transactions, especially loans.
• SFR: "Single-Family Rental," here referring to the build-to-rent segment of single-family housing developed and financed as rental communities.

Full Conference Call Transcript

Paul Elenio: Okay. Thank you, Angela, and good morning, everyone, and welcome to the quarterly earnings call for Arbor Realty Trust, Inc. This morning, we will discuss the results for the quarter and year ended 12/31/2025. With me on the call today is Ivan Kaufman, our President and Chief Executive Officer. Before we begin, I need to inform you that statements made in this earnings call may be deemed forward-looking statements that are subject to risks and uncertainties including information about possible or assumed future results of our business, financial condition, liquidity, results of operations, plans and objectives. These statements are based on our beliefs, assumptions and expectations of our future performance taking into account the information currently available to us.

Factors that could cause actual results to differ materially from Arbor Realty Trust, Inc.’s expectations in these forward-looking statements are detailed in our SEC reports. Listeners are cautioned not to place undue reliance on these forward-looking statements which speak only as of today. Arbor Realty Trust, Inc. undertakes no obligation to publicly update or revise these forward-looking statements to reflect events or circumstances after today or the occurrences of unanticipated events. I will now turn the call over to Arbor Realty Trust, Inc.’s President and CEO, Ivan Kaufman.

Ivan Kaufman: Thank you, Paul, and thanks to everyone for joining us on today's call. Today, we will focus on how we closed out 2025 as well as our outlook for 2026, especially in the first half of the year. As we discussed in the past, we believe we are in the bottom of the cycle and are working very hard to accelerate the resolution of our nonperforming and subperforming loans into performing assets and improve our rate of income for the future. This is a top priority for us as these loans are having a tremendous drag on our earnings.

In fact, as Paul will lay out in more detail, we estimate as we resolve these loans we will add back as much as $100,000,000 of income to our annual run rate, or about $0.48 a share. This is an important point and we believe we have a clear path to resolving the majority of these loans over the next few quarters, which will put us in a position to start to build back up our run rate of interest income. Additionally, we also have a very active originations business with several diverse platforms and will continue to contribute to growing our income streams and increase our future earnings.

We ended the year with $570,000,000 in delinquencies and around $500,000,000 of OREO assets for total nonperforming assets of roughly $1,100,000,000. These numbers are down by over $130,000,000 from the last quarter, an 11% reduction. This is strong progress in one quarter. And again, our goal is to continue to accelerate the resolution of our non-interest-earning assets and redeploy the capital into performing loans and grow our run rate of income. In fact, we have a line of sight into roughly $100,000,000 to $150,000,000 of delinquencies that we expect to resolve by March end and another $100,000,000 to $150,000,000 we believe will resolve in the next 90 days.

Also, we are very optimistic we can reduce our REO assets to around $250,000,000 to $300,000,000 by the 2026 even after adding an additional $100,000,000 to $200,000,000 of REO assets along the way, mostly all of which are already reflected in the $570,000,000 of delinquent loans reported by year end. This estimated pace of resolutions will go a long way towards significantly reducing the drag on earnings and increasing our run rate of income for the future. We continue to focus heavily on legacy assets, which currently sit around $5,000,000,000. $570,000,000 of these loans are delinquent that we are actively working through and $1,500,000,000 is performing in accordance with the original terms.

The other $3,000,000,000 have been modified to pay and accrue structures. Roughly half of these loans, we are currently accruing the full rate of interest; on the other half, we are being more conservative and only recording the pay rate of interest. We generated around $2,000,000,000 of runoff in 2025 in our balance sheet loan book, approximately $1,500,000,000 of which is related to the legacy book. Given these and given where rates are today, we believe we will experience similar runoff in 2026, which will continue to reduce our legacy book down to a much smaller number by year end.

Certainly, if rates come down even further, we could accelerate the runoff process as well as further reduce the legacy book. We are closely monitoring the performance of these assets. And while we believe we will experience some additional delinquencies as we work through the bottom of the cycle, we are seeing steady progress on the bulk of this portfolio, which we believe indicates that the worst is behind us. One of the ways we are resolving our legacy book is by resetting the rates to current market, which puts these loans in a position to positively cover debt service from property operations without a shortfall.

This, combined with having the right guarantees and requiring the borrowers to commit significant additional capital to support their deals, gives us comfort about how these loans will perform going forward. This strategy does temporarily affect our earnings; we are resetting these loans to lower rates. However, this will result in improved terms from our line lenders and greatly limit the potential risk of future losses, which is very important and will allow us to preserve our book value. As Paul will discuss in more detail, we produced distributable earnings of $0.22 a share in the fourth quarter.

As stated earlier, our earnings are being greatly affected by the significant drag from our non-interest-earning assets, which is something we are working very hard to chip away at over the next several quarters. And we continue to make progress resolving our legacy issues and grow our new business volumes. It is very important to highlight that despite the significant drag we are currently experiencing, we still produced strong earnings of over $200,000,000 last year and have managed through this very long elevated rate environment without a material decline in book value, unlike the rest of our peers who have experienced significant book value deterioration. Despite these accomplishments, we are trading at a significant discount to book value.

We believe our stock is substantially undervalued, especially in light of our extremely valuable agency business and diverse and growing business platforms compared to most of our peers with monoline businesses. One of the opportunities available to us right now is to resolve nonperforming assets and use a portion of those proceeds to buy back stock at a significant discount to book value. This is a tremendous trade for us, as it allows us to actually grow our book value and generate mid-teens returns on our investment. We have approximately $120,000,000 left in our buyback plan, and in the fourth quarter, we entered into a 10b5-1 plan that allows us to purchase stock in a blackout period.

We purchased roughly $20,000,000 of stock in the few months under this program at an average price of $7.40, or 64% of book value. We will continue to evaluate the strategy in the future as it is highly accretive to both earnings and book value at these levels. Turning now to the production numbers of 2025 with our different business lines. We had a very active, strong fourth quarter in our agency platform with $1,600,000,000 origination volume, which puts us at $5,000,000,000 for the year. This is a 13.5% increase from our 2024 production numbers in what was a very challenging rate environment for the majority of the year.

We are extremely pleased with these results and believe this is a real testament to the value of our franchise and the resiliency of our originations, having worked with a loyal borrower base that we have cultivated over many years. We have a large pipeline, which combined with the current rate environment and the fact that the agencies have increased their caps by 20% for 2026, gives us confidence in our ability to produce very strong volume numbers again in 2026. As we talked about in the past, our servicing portfolio, which is now over $36,000,000,000 and grew another 8% in 2025, generates a very predictable and growing annuity of over $128,000,000 a year of income.

This annuity, combined with the earnings on our escrow balance, generates about $200,000,000 a year in annual cash earnings. This is in addition to the strong gain-on-sale margins we generate from our originations platform. It is extremely important to emphasize our agency business generates approximately 50% of our net revenues, the vast majority of which occurs before we even turn the lights on every day. In the balance sheet lending business, we originated $340,000,000 of volume in the fourth quarter, closing out 2025 with $1,200,000,000 of production. This business continues to be incredibly competitive and with consistent concessions being given on credit and structure.

This is not something we will sacrifice to win a deal, and as a result, we are being very highly selective and are focusing our attention on larger deals with higher quality sponsors. This will likely result in originations similar to 2026 volume of approximately $1,000,000,000 to $1,500,000,000, which we can easily scale up as the landscape becomes more constructive throughout the year. The bridge lending business is a very important part of our overall strategy as it generates strong levered returns on our capital in the short term, while continuing to build up a pipeline of future agency deals.

And with the significant efficiencies we continue to see in the securitization market and with our line lenders, we are able to produce strong returns on our capital despite the competitive landscape. We continue to do an excellent job in growing our single-family rental business. We originated approximately $580,000,000 in new business in the fourth quarter in 2025. We also had a very strong pipeline, giving us comfort that we will be able to produce approximately $1,500,000,000 to $2,000,000,000 in volume again in 2026.

This is a great business as it offers returns on our capital through construction, bridge and permanent lending opportunities and generates strong levered returns in the short term while providing significant long-term benefits by diversifying our income streams. And again, with the enhanced efficiencies we are seeing in the securitization market and in our bank lines, we are generating mid to high teens returns on our capital, which will contribute to increased future earnings, especially as we continue to scale up this business. Over the last several months, we received a lot of questions from investors on how the President’s potential ban on institutional single-family home purchases would affect our SFR business.

First of all, we are not entirely sure what, if anything, transpires and that it is just the political noise ahead of the midterm elections. Clearly, there is a serious housing shortage in the country, and we applaud any effort to address this very important issue. We want to make it clear that we do not traffic in scattered-site single-family businesses like Invitation Homes. We focus on build-to-rent business, which we believe is actually being excluded from this proposed ban. These are 200 to 300 homes in communities that are built by experienced developers and are commercial properties more akin to multifamily.

Therefore, we believe we will not be affected by any efforts to ban large institutions from buying and aggregating single-family homes and that this build-to-rent business will continue to be a very attractive solution when dealing with supply issues in the market. In the construction lending business, we are having great success in growing out this platform with a real influx of new opportunities that we are seeing due to larger loans on high-quality assets with very experienced developers. We closed out the year with around $500,000,000 of production, and also a very large pipeline, giving us the comfort that we can meaningfully grow this platform and produce between $750,000,000 and $1,000,000,000 of production in 2026.

And so between our agency business, bridge lending business, SFR and construction platform, plus our mezz and PE businesses, we originated $8,500,000,000 in volume in 2025 in a very difficult environment for the majority of the year. And again, we are confident in our ability to produce consistent volumes in 2026 and potentially even some room for growth depending on how the market conditions evolve over the balance of the year. In summary, we had a very active and productive year with many notable accomplishments. Clearly, the outlook for the interest rate environment has improved from where it was at this time last year, and we are feeling more optimistic as a result.

We believe this will allow us to continue to grow our origination volume and generate strong returns on our capital from the significant improvements in efficiencies we continue to create on the right side of our balance sheet. We have also done a great job on preserving our book value even in the face of an unprecedented elevated rate environment and reductions in property values that we have experienced over the last several years. We believe we have ring-fenced the majority of our delinquencies and have a clear path to resolving these assets over the next few quarters, which again will allow us to significantly reduce the drag on earnings and grow our future run rate of income.

I will now turn the call over to Paul to take you through the financial results.

Paul Elenio: Okay. Thank you, Ivan. In the fourth quarter, we produced distributable earnings of $46,300,000, or $0.22 per share, excluding one-time realized losses of $12,400,000 from the resolution of certain delinquent and REO assets that were previously reserved for, and $7,300,000 of income we generated through reduced tax expense in the fourth quarter from the sale of the Homewood asset. On our last quarter's earnings call, we guided to $15,000,000 to $20,000,000 in realized losses in Q4 depending on how quickly we could liquidate certain assets. We had $12,400,000 in the fourth quarter, and have liquidated two other assets in January for approximately $10,000,000 in losses for 2026, all of which had been previously reserved for.

On our last call, we discussed how our decision to accelerate the resolution process of certain loans resulted in a temporary increase in our delinquencies. We guided that this would reduce our fourth quarter earnings by approximately $0.05 to $0.06 a share. This, combined with a few new delinquencies as well as some reduced rates on modified loans, resulted in an additional $0.02 of drag for Q4, which was in line with our expectations. And although we expect to have some delinquencies as we work through the bottom of the cycle, we are working very hard to continue to resolve more delinquencies than new ones that come on.

This process takes time, which could temporarily affect our earnings; however, we are making meaningful progress and have a clear line of sight to resolving the bulk of these assets over the next few quarters, which will increase our run rate of income for the future. As disclosed in our press release, we have roughly $600,000,000 of delinquencies and $500,000,000 of OREO assets on our books at 12/31/2025. Currently, these assets are not producing income, and some of the REO assets are actually generating negative NOI as we work through the process of stabilizing these assets and improving occupancy.

We estimate that these assets are creating a temporary drag between $80,000,000 to $100,000,000 annually, or roughly $0.40 to $0.48 a share, which translates into $0.10 to $0.12 a quarter of additional income that we are optimistic we will be able to create as we resolve the vast majority of these assets over the next several quarters. With respect to accrued interest on modified loans, in the fourth quarter, we reversed approximately $4,000,000 of previously accrued interest on new delinquencies during the quarter, which, as we discussed earlier, is reflective of where we are in the cycle.

This adjustment, combined with $7,000,000 in back interest collected on a loan payoff in the fourth quarter, has resulted in total accrued interest on modified loans remaining relatively flat quarter over quarter, even after accruing an additional $10,000,000 in interest on modified loans that are performing in accordance with their terms. In the fourth quarter, we reported an additional $20,500,000 of impairment on our REO book to properly mark these assets to where we think we can effectuate a sale as we look to dispose of certain of these assets quickly and create interest-earning assets for the future. This puts our reserves at roughly $75,000,000 life to date on our REO book.

As Ivan mentioned, we are expecting to take back roughly another $100,000,000 to $200,000,000 of assets as we work through the bottom of the cycle, $50,000,000 to $75,000,000 of which will likely happen by the end of the first quarter. Most of these assets are already reflected in the $600,000,000 of delinquencies we reported at year end. And we are working very diligently to dispose of these assets quickly, which we believe will put our REO book at between $250,000,000 and $300,000,000 by the 2026.

We also booked another $3,000,000 specific reserve on a new delinquency in the fourth quarter, which was offset by a $9,000,000 recovery of a previous reserve on the Homewood asset that we sold in the fourth quarter. We expect to book a similar level of reserves and impairments over the next few quarters, which is consistent with our strategy of accelerating the resolution of our problem loans as we look to mark certain loans that we are marketing for disposition to where we think we can execute a sale. In our agency business, we had another outstanding quarter with $1,600,000,000 originations, and $1,500,000,000 in loan sales, which generated $21,000,000 in gain-on-sale income in the fourth quarter.

The margin on this business was 1.36%, up from the prior quarter due to some large off-market portfolio deals we were able to cap in the third quarter, which contained lower margins and smaller servicing fees. We also recorded $20,000,000 of mortgage servicing rights income related to $1,600,000,000 of committed loans in the fourth quarter, representing an average MSR rate of around 1.24%. Our fee-based servicing portfolio grew 8% in 2025 to approximately $36,200,000,000 at December 31, on very strong 2025 originations. This portfolio has a weighted average servicing fee of 35.6 basis points and an estimated remaining life of six years and will continue to generate a predictable annuity income going forward around $120,000,000 gross annually.

In our balance sheet lending operation, our investment portfolio grew to $12,100,000,000 at December 31, from originations outpacing runoff for the fourth straight quarter. Our all-in yield on this portfolio was 7.08% at December 31, compared to 7.27% at September 30, mainly due to a decline in SOFR. The average balance in our core investments was $11,840,000,000 this quarter compared to $11,760,000,000 last quarter, from growth in our portfolio. The average yield in these assets increased to 7.38% from 6.95% last quarter, mainly due to the significant nonrecurring adjustments we booked in the third quarter, including reversing $18,000,000 of accrued interest, which was partially offset by a decline in SOFR in the fourth quarter.

Total debt on our core assets was approximately $10,500,000,000 at December 31. The only cost of debt was approximately 6.45% at 12/31 versus 6.72% at 9/30, mainly due to a reduction in SOFR, which was offset slightly by the new unsecured debt we issued in December. The average balance on our debt facilities was approximately $10,100,000,000 for the fourth quarter compared to $10,000,000,000 in the third quarter, mainly due to funding our fourth quarter growth.

The average cost of funds in our debt facility was 6.66% in the fourth quarter compared to 6.88% for the third quarter, excluding interest expense from levering our REO book, the debt balance of which is separately stated on our balance sheet, and therefore not included in our total debt on core assets. This decrease is mostly due to a reduction in SOFR. And our overall spot net interest spreads were up slightly to 0.63% at December 31 compared to 0.55% at September 30.

So in summary, we had a productive year and have made considerable progress and have a clear line of sight to resolving the vast majority of our delinquencies over the next few quarters, which, when completed, will significantly reduce the drag on our earnings. This, combined with the growth in our origination platforms, will go a long way towards allowing us to grow our run rate of income in the future. That completes our prepared remarks for this morning. I will now turn it back to the operator to take any questions you may have at this time. Angelo?

Operator: Thank you. So others can hear your questions clearly, please ensure you are unmuted. We will take our first question from Chris Moeller with Citizens Capital Markets. Your line is now open.

Chris Moeller: Hey, guys. Thanks for taking the question and congrats on a really solid quarter here. So I guess on the GSE business, your guys' full year originations in 2025 were about $5,000,000,000, but the FHFA increased caps pretty substantially Ivan mentioned in his prepared remarks. So I guess how are you guys thinking about 2026 GSE originations relative to that $5,000,000,000 number?

Ivan Kaufman: I think that a lot will be dependent on interest rates and also the GSEs’ increase in the cap. Also, they have a parallel match on affordability. So you have to be able to originate at least overall certain affordability percentages to be able to get to that cap. I think we are feeling fairly comfortable. Our pipeline is fairly strong. And I think targeting similar levels that we had last year, if these levels remain in this space, would be something that we feel comfortable with.

Chris Moeller: Got it. And then I guess looking at the servicing portfolio, fees have compressed a little bit there. Do you expect that dynamic to continue into 2026? Or are servicing fees starting to bottom out? And can you just talk about what's driving that compression?

Paul Elenio: Sure. Hey, Chris, it is Paul. So a couple of things. There are two components that are driving the compression in the servicing fees. One, obviously, rates have gone up over the last two years; there is a lot more five- and seven-year product being done in the agencies versus traditionally what was 10-year, 9.5-year yield maintenance product. So it is a little bit shorter on the curve, and therefore, the servicing fees are changing over that period of time. Secondly, during the COVID era, servicing fees were very, very high from the agencies. They have cut them back pretty substantially to more in the range of 45 to 50 basis points on Fannie.

But I think it is just a matter of getting some higher servicing fee loans back from the pre-COVID days running off, and then the new products coming on the shorter part of the curve, it is also coming on at the more normalized servicing fees. We have run a model. We think this starts to bottom out towards the end of the year and then kind of levels off. So I think it compresses a little bit for the balance of the year as you flush out some of those higher servicing fee loans that are older and you are putting on the product that is more in today's market.

But I think by the end of the year, we will start to see that level off and then you do not have that compression anymore.

Chris Moeller: Got it. That is very helpful. Thanks for taking the questions and congrats again on a great quarter.

Paul Elenio: Thanks. Thanks, Chris.

Operator: Thank you. And we will take our next question from Gabe Poggi with Raymond James. Your line is now open.

Gabe Poggi: Hey, guys. Good morning. Thanks for taking the questions. I want to ask a little bit about your SFR book. You obviously made a lot of loans in the fourth quarter. Who knows what happens out of D.C. Have you seen any credit issues in your build-to-rent borrowers? And if so, any geographic color? Or is everything kind of just been holding and pretty good on that front? And I have got a follow-up to that.

Ivan Kaufman: I mean, I will give you the overall view. Our SFR book is really outstanding. It is probably the best performing book we have. The loans generally have institutional backup behind the sponsors. They are not syndicated loans and are usually lower leverage.

Paul Elenio: Yes. I do have some stats. So as Ivan said, it has been an exceptional book for us. Obviously, the levered returns are real high, Gabe, on that book. We have done a nice job of putting together a first-of-its-kind securitization on the build-to-rent business earlier in the year. So we have been at the cutting edge of how to lever these things appropriately and get strong returns. I mean the returns are mid-teens on this business. And as I look at the book, not a single delinquent loan or a loan on our watch list is one of this type of product. So this product has been spotless from a credit perspective.

And like we said, it is a great business that we are able to scale.

Gabe Poggi: Thank you. And then a quick follow-up. Just on the delinquent/REO book, is there any kind of geographic color that you can provide where you may be seeing more pockets of weakness? And I know the Sun Belt has gone through a lot. Is there any state, city, MSA, etc. that is weaker or stronger than the other? Any color there would be helpful.

Ivan Kaufman: Yes. I would say that there are certain markets that are soft like Houston. And that is a factor of the history of Houston being boom and bust. But more significantly by it being very adversely affected by the issues with immigration. That got hit on both sides. First, under the prior administration, you had a significant number of immigration centers next to a lot of properties, took over the properties, damaged those severely. And then under the current administration, you are seeing a lot of ICE raids in those areas. You are seeing that in areas of Texas, eastern primarily, San Antonio a little bit and even in Dallas, which is shocking.

So you are seeing properties that were 90% occupied. Next day, they are back down to 65% to 70%. Also seeing a little bit of that in the Atlanta area too, and in certain pockets of Florida. But those would be the markets that have the most significant softness.

Gabe Poggi: Thank you.

Ivan Kaufman: Thank you.

Operator: We will move next to Jade Rahmani with KBW. Your line is now open.

Jade Rahmani: Thank you very much. About credit, you mentioned you expect another tough couple of quarters, but the worst generally seems to be behind the company. At the same time, in this year-to-date economy, multifamily fundamentals have been pretty weak looking at new lease growth, and then the economy is sending a lot of mixed signals with weak trends on the hiring side and the K-shaped recovery with the low end of the consumer suffering. So are you seeing any additional headwinds year to date? How have the trends been so far in 2026?

Ivan Kaufman: So we have seen tremendous headwinds over the last couple of years due to higher interest rates and distress on borrowers and due to the softness in the economy and bad credit and just poor operations. We think we are at the bottom. We are seeing a firming up of economic occupancy. We are seeing the properties stabilize. And in our case, what we have made a decision is anytime I am not pleased with an operator or they do not have enough capital, we are stepping in and we are seeing good results with our efforts. We are also seeing liquidity return to the market.

And when we do market a distressed asset, when we get it back, we are seeing multiple, multiple bids. We are seeing pretty good price discovery. So we think we are in a bottom. We are being very aggressive, and we are pleased with the results when we get our hands on these properties.

Jade Rahmani: Thank you. In terms of the current earnings level, you mentioned there is $0.48 in untapped earnings trapped inside of these NPLs. Yet earnings remain below the dividend. Could you give any thoughts as well that the dividend was maintained, but that was for the 2025. Are your thoughts around the likelihood of the dividend being maintained in 2026?

Ivan Kaufman: Yes, I will let Paul answer most of that. But our goal is to facilitate the resolution of the drag on earnings. The quicker we do that, the quicker we will have line of sight. And every day and every month matters. What used to take us 90 days to resolve a loan, it is taking more like 120 days. So it takes us about 90 days to get on-site the property. And then the marketing process takes us around 90 days. We are marking our book, and we took additional marks because we are trying to market to a level where we think we can get rid of these assets quickly.

So the whole concept is how quickly we can get to that resolution, how fast we can take that drag on earnings as to how they are returning. Paul, do you want to give some comments?

Paul Elenio: Sure. Jade, so Ivan is correct. Just to level set, we look at the dividend and the Board looks at the dividend from a more long-term perspective. So obviously, we have purposely accelerated the resolution of these delinquencies to put them behind us and get our run rate back up. That has temporarily certainly hit our earnings, and I laid out in my commentary it is about $80,000,000 to $100,000,000. It will all determine how long it takes us to get that resolved. We have clear line of sight right now. We did resolve $350,000,000 of delinquent loans and REO loans in Q4.

We put on another $270,000,000, which was the wave, the one more wave we said we were going to have in the fourth quarter. We think the lion's share of this is behind us, and now our job is to continue to resolve those assets at a quick pace. If we can resolve them very quickly, the run rate will get up quicker. If it takes a little longer, it takes a little longer. But again, we look at it more long term. A couple of other things I will mention is, yes, we put up $0.22 today. The good news is we have seen our net interest income level here.

So we have gotten good net interest income for Q4. I am kind of projecting that to probably stay in that range for Q1 and then hopefully it starts to run up in Q2, Q3 and Q4 when we start resolving a lot of these loans. The first quarter could be our low watermark though. As we have mentioned in the past, the agency business is very seasonal. We did do a pretty large number of volume in Q4 of $1.6. The first quarter is normally much lighter; if you go back and look at last year's numbers, we did $600,000,000 in Q1. I think we will do $750,000,000 to $800,000,000 in Q1 this year, and then run back up.

So we will see a couple of penny drag, the gain-on-sale number being lower in Q1 just because of seasonality. But nothing to do with further delinquencies. We think we have ring-fenced everything, and we think that we have got a clear path to resolution. So again, we look at it long term. We expect to be able to resolve these things quickly. If we are right, our numbers will get up quicker. If it takes a little longer, it will take a little longer and we will evaluate it. But again, it is too early for us to say that we are not going to be able to earn that back in a reasonable period of time.

Jade Rahmani: Fair enough. Thanks for taking the questions.

Ivan Kaufman: Thank you.

Operator: At this time, there are no further questions in queue. I will now turn the meeting back to Ivan Kaufman for any closing remarks.

Ivan Kaufman: Well, thank you, everybody, for your time today. It has been a bouncy road a little bit. And we do feel that we have ring-fenced our issues and have clear line of sight to how to resolve those issues and get back to getting rid of the negative variable earnings. It is just a matter of what the timing is. We are aggressive, and we will look to facilitate that. And once again, thank you, and everybody have a great weekend. Bye.

Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

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