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Chairman, Chief Executive Officer, and President — Ivan Paul Kaufman
Chief Financial Officer and Treasurer — Paul Anthony Elenio
Ivan Paul Kaufman: Thank you, Stephanie, 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 ended March 31, 2026. Some of the short reports appear to have provoked investigative interest from regulators, as well as class actions and derivative claims from plaintiffs’ law firms. We have steadfastly maintained that these attacks and claims made against us were baseless and misleading. We are pleased to report in that regard that we believe any pending investigations that were initiated in the wake of the short reports have now been closed without any action against us.
Additionally, and very recently, our motion to dismiss the class action lawsuit against us was granted and the claims dismissed without prejudice. We have been very pleased with these developments. Although our management team never lost sight of our shareholders and their interests during this challenging period, we are happy to put this chapter behind us and focus on creating shareholder value free of these costly and unwarranted distractions.
On our last earnings call, we discussed at length how we feel we are at the bottom of the cycle and have ring-fenced the majority of our nonperforming and subperforming loans and are working exceedingly hard at accelerating the resolution of these loans into performing assets, which will allow us to start to build back our run rate of interest income for the future. This is our top priority, as these loans are having a tremendous drag on our earnings. We also mentioned that if rates went down the process would accelerate, and if rates increased, it would lead to a longer period of time needed to resolve these loans.
Unfortunately, given the geopolitical landscape, the five- and ten-year have actually increased roughly 50 basis points in the first quarter, which is certainly pushing our timetable out a little bit. Despite these challenges, we continue to make progress in working through our assets, and again, we believe we have a clear line of sight on resolving a bulk of these assets over the next several quarters. We ended the first quarter with approximately $500 million in delinquencies and around $500 million of REO assets for total nonperforming assets of roughly $1 billion. These numbers are down approximately $100 million from the last quarter, or a 9% reduction in risk.
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. We had $200 million of resolutions, which is consistent with our goal of continuing to shrink our total delinquencies each quarter. Additionally, we have line of sight on roughly another $200 million to $300 million of delinquencies we expect to resolve in the second and third quarter, in addition to another $100 million we believe we have the potential to resolve by the end of the year.
We also remain optimistic that we can reduce our REO assets to around $200 million to $300 million by the end of 2026, even after adding an additional $100 million of REO assets over the next few quarters, which were already reflected in our delinquency numbers at March 31. We have been actively marketing several of these assets for sale, which will go a long way towards helping reduce the drag on earnings and increase our run rate of income for the future. As we discussed in detail on our last quarter, we continue to focus heavily on our legacy portfolio, which currently sits at approximately $5 billion.
Approximately $500 million of these loans are delinquent, which we are working through very aggressively, and $1.5 billion continue to perform in accordance with their original terms. The other $3 billion have modified pay-and-accrue features, of which only half of these loans we are accruing the full rate of interest on. We continue to make progress in reducing the amount of accrued interest outstanding on certain loans by resetting the rates to today’s market spreads and requiring that the borrowers pay down a large portion of the outstanding accrued interest as part of the modified terms.
In fact, we are currently working on several loans totaling approximately $400 million that we think we can modify in the second and third quarter, which will result in receiving approximately $19 million in back accrued interest, reducing the outstanding accrued interest down to around $1.1 billion. This is a very effective strategy that will also put these loans in a much better position to cover our debt service from property operations and is resulting in improved terms from our line lenders.
This, combined with having the proper guarantees and requiring the borrower to commit significant additional capital to support the deals, gives us comfort about how these loans will perform going forward and will greatly limit the potential risk of future losses. As Paul will discuss in more detail, we produced distributable earnings of $0.18 per share in the first quarter. Clearly, our earnings are being greatly affected by the significant drag of our non–interest-earning assets, as well as from resetting legacy loans to today’s market rates. This is something we believe will improve in the next several quarters. We continue to make progress in resolving our legacy issues and growing our business volumes.
Our first quarter numbers were also affected, as we expected, by a normally slow start in the agency business from the seasonal nature of that platform, which was also impacted by the increase in rates. On our last call, we mentioned we would continue to evaluate our dividend policy based on how quickly we think we could resolve our delinquent loans and subperforming loans and reduce that drag on earnings. With the recent increase in rates, as well as the expectation that rates can continue to remain volatile, we are now predicting a slightly longer timeline in resolving these loans. As a result, the Board has decided to reset our quarterly dividend to $0.17 per share.
We believe this is the dividend we will be able to cover from earnings for the rest of the year, with the potential for growth in the later part of the year and in 2027, as we work aggressively to reduce the earnings drag from our legacy assets and improve our run rate of interest income. We also believe it is very prudent in the current environment to retain our capital to fund the growth of the platform and to buy back stock where appropriate, which generates strong risk-adjusted returns on our investment. Turning now to the production numbers for the first quarter in our different business lines.
In our agency platform, we originated $708 million in volume, in addition to our first CMBS brokerage transaction of $88 million, for total first quarter volume of $795 million. These numbers were in line with our previous guidance, as we normally experience a lighter first quarter due to the seasonal nature of the business. Despite the challenging rate environment, we are seeing an influx of new opportunities that are increasing our current pipeline significantly. We are off to a good start for quarter two with $350 million of volume closed through May, and we still feel we could produce similar volumes as last year, with a strong second half of the year, which is obviously great for our platform.
In our balance sheet lending business, we originated $400 million of volume in the first quarter. This business continues to be incredibly competitive, and as a result, we are being highly selective and are focusing our attention on launching deals with high-quality sponsors. 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. With the significant efficiency 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.
In fact, in the first quarter, we issued another CLO with very attractive pricing and terms. We priced the deal at 1.73% over, at 88% leverage, with a 2.5-year replenishment feature. This was an incredible accomplishment, especially in light of the fact that we priced the deal during the height of the Iranian conflict. We continue to have access to this market and are a leader in this space, which allows us to finance our new originations with non-recourse, non–mark-to-market debt and drive higher returns on our capital. In our single-family rental business, we experienced an unusually slow start to the year, which was primarily driven by the noise surrounding the housing bill being considered.
This bill, in its current form, surprisingly does not have a full carve-out for the build-to-rent business as initially expected and definitely kept folks on the sidelines due to this uncertainty. There has been a tremendous amount of talk lately that this bill would not get passed in its current form and that there will be serious considerations to building in the appropriate carve-outs for the build-to-rent business, including removing the for-sale provisions in year seven that currently exist in the proposed legislation. As a result, things are starting to loosen up as people believe this will occur, and we expect to see a real uptick in our new originations in this platform going forward.
We originated approximately $125 million in the first quarter and expect we will see a significant increase in new volume over the next few quarters. This is a great business, as it offers us returns on our capital through construction, bridge, and permanent lending opportunities and generates strong levered returns in the short term, providing significant long-term benefits by further diversifying our income stream. In our construction lending business, we continue to see our share of high-quality deals with very experienced developers. We closed one deal for $113 million in the first quarter and expect to close another $250 million in the second quarter.
Our pipeline continues to grow each day, giving us comfort in our ability to hit our target of between $750 million and $1 billion of production in 2026. In summary, we are laser-focused on resolving our legacy book as quickly as possible, which will reduce the significant drag that these assets are having on our earnings. We believe we have a clear path to resolving the majority of these over the next several quarters, which will set us up nicely to build our earnings base heading into 2027.
We also continue to focus on growing the many different verticals we have and generating strong returns on our capital that are being enhanced by the significant improvements in efficiencies we continue to create on the right side of our balance sheet. We will continue to work exceedingly hard through the bottom of this cycle, and as always, we remain focused on maximizing shareholder value. I will now turn the call over to Paul to take you through the financial results.
Paul Anthony Elenio: Thank you, Ivan. In the first quarter, we produced distributable earnings of $37.4 million, or $0.18 per share, excluding one-time realized losses of $23 million on the resolution of certain delinquent and REO assets. On our last quarter earnings call, we guided to around $10 million of realized losses in Q1, all of which we had previously reserved for. We had some success resolving some loans ahead of schedule, resulting in an additional $13 million in losses in Q1. We will continue to do our best to give guidance on expected resolutions, although it is a very fluid process and often hard to predict the exact timing of these resolutions.
Having said that, our best estimate is a range of approximately $15 million to $25 million of realized losses a quarter for the balance of the year that we will continue to reserve for as we receive more price discovery on these assets. As Ivan mentioned, our first quarter numbers were in line with our expectations, especially given the light first quarter we usually experience in our agency business.
We also expect it will take a little longer to work through our legacy book given the current rate environment, which will likely keep our earnings in a similar range for the next few quarters before we start to see an increase in our run rate towards the end of the year as we reduce the drag on our earnings from our underperforming assets. This should put us in a position to start to show growth in our earnings in 2027 as we realize the full benefit of converting our delinquent assets into performing loans.
With that said, second and third quarters of this year are likely to be our low watermark and hover around $0.17 a share as we continue to reset certain subperforming loans to lower rates that will affect our earnings run rate for the next few quarters. We do expect this number to grow in the fourth quarter, with further upside potential in 2027 as we are working diligently to resolve nearly all of our nonperforming assets over the next several quarters.
We are estimating the second quarter will actually come in around $0.15 a share, as there is roughly $0.02 a share of unusual drag from some inefficiencies related to our financing costs that are resulting in a temporary overlap of interest for a few months. This includes the $100 million ramp feature in our new CLO that we expect to be able to fully utilize by May, and the timing of redrawing on our repo lines to pay off our 4.5% unsecured notes last week, as we used some of the proceeds from the December bond issuance to temporarily pay down higher-cost repo debt until the April notes came due.
Given the nonrecurring nature of this expense, combined with the expectation that we will resolve the bulk of our delinquent loans by the end of the year, we believe we will be able to start to grow our earnings in the fourth quarter with additional upside expected in 2027 as well. In the first quarter, we recorded an additional $12.5 million of impairment on our OREO assets to properly mark these assets to where we think we can effectuate a sale. We have engaged brokers to sell the bulk of these OREO assets quickly and create interest-earning loans for the future.
As Ivan mentioned, we are expecting to take back roughly another $100 million of assets as we work to the bottom of the cycle, $50 million to $75 million of which will likely happen by the end of the second quarter. Most of these assets are already reflected in our delinquent numbers. Again, we are working very diligently to dispose of these assets quickly, with an estimated $100 million to $150 million of sales scheduled in the second quarter and another $200 million to $250 million expected in the third and fourth quarter.
This should put our OREO assets between $250 million and $300 million by the end of 2026 and greatly improve our run rate of income for the future. We also booked another $9 million of specific reserves on our balance sheet loan book, for total OREO impairment and specific reserves of $21.5 million in the first quarter. We expect to book similar levels of reserves and impairments over the next few quarters, which is consistent with our strategy of accelerating the resolution of 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 GSE agency business, we originated $708 million in volume and had $671 million in loan sales in the first quarter. The margins on these loans were very healthy at 1.86% this quarter compared to 1.36% last quarter, which was mostly due to a shift in product mix and loan size, with some larger deals in Q4 that contained lower margins. We also recorded $10 million of mortgage servicing rights income related to $734 million of committed loans in the first quarter, representing an average MSR rate of 1.32%.
Our fee-based services portfolio was $36.3 billion at March 31, with a weighted average servicing fee of 35.5 basis points and an estimated remaining life of six years, continuing to generate a predictable annuity of income of around $129 million gross annually. In our balance sheet lending operation, our investment portfolio was $12 billion at March 31, with an all-in yield on that portfolio of 7.03%, compared to 7.08% at December 31. This was mainly due to resetting rates on certain legacy loans and from the slight decline in SOFR. The average balance in our core investments was $12.04 billion this quarter compared to $11.84 billion last quarter, reflecting the full effect of our fourth quarter growth.
The average yield on these assets increased to 7.50% from 7.38% last quarter, mainly due to significantly more back interest and default interest collected in Q1 on loan resolutions, which was partially offset by a decline in SOFR in the first quarter. Total debt on our core assets was approximately $10.7 billion at March 31. The all-in cost of debt was approximately 6.40% at March 31 versus 6.45% at December 31, mainly due to a reduction in SOFR along with a lower rate on our new CLO issuance in March.
The average balance on our debt facilities was approximately $10.4 billion for the first quarter compared to $10.1 billion in the fourth quarter, mainly due to funding our fourth quarter growth and from a full quarter of the new unsecured debt issued in December. The average cost of funds in our debt facilities was 6.52% in the first quarter, down from 6.66% for the fourth quarter, excluding interest expense from leveraging our OREO assets, the debt balance of which is separately stated in our balance sheet and therefore not included in our total debt on core assets. This decrease is mostly due to a reduction in SOFR, which was partially offset by the unsecured debt we issued in December.
Our overall spot net interest spreads were flat at 0.63% at both March 31 and December 31. In summary, we continue to make steady progress in resolving our delinquencies and are extremely focused on completing the process as quickly as possible, which will significantly reduce the drag on our earnings. This, combined with growing our origination platforms, will go a long way towards allowing us to increase our run rate of income in 2027. We will now open the call for questions.
Operator: Thank you. We will take our first question from Jade Joseph Rahmani with KBW. Please go ahead. Your line is open.
Jade Joseph Rahmani: Thank you very much. Could you comment on the outlook for the single-family-for-rent originations business? And also if you can give any color on the types of borrowers that you are dealing with, the number of properties they hold, what their intended hold period is, and how the financing terms from counterparties are changing the cap rates and return profile of that business.
Ivan Paul Kaufman: Sure. Let me respond to that thought first. Let us talk about the legislation, because I think the business got frozen a little bit initially with the concern and the fear. But the consensus now, a very strong consensus, is those prohibitions that were put into that bill restricting closing or sale are not going to be put in the bill. As a result, we have seen real momentum over the last couple of weeks in that business. We already have about $200 million in the pipeline and expect to exceed $300 million this quarter. So we are back in line and back on pace. Enthusiasm is back in the business.
Most of the people we are dealing with have investors that are institution-based. A lot of them have anywhere between five and thirty assets; that seems to be the typical profile we are dealing with. Some have high-net-worth families behind them, but a lot of them are institution-based. I think it was cap rates, returns, and how we are seeing the financing side of that business, which I think has been really strong, right? Yes. The credit markets are extremely aggressive right now, and cap rates are very aggressive. It is a very well-liked business. We think there is a lot of momentum in the business. So it is still viewed very favorably.
Anything that is completed and goes to a bridge loan is priced extraordinarily competitively, and the agencies, Fannie and Freddie, as well as the CMBS market, love this product.
Jade Joseph Rahmani: Great, and that is really good to hear in terms of the resiliency of that asset class. Just turning to the outlook on credit, you touched on it that the five- and ten-year move this year is slowing the pace of resolution. My main question would be if there are any new delinquencies or new defaults you would expect as a result of where the five- and ten-year are. I imagine there is at least some cohort of borrowers that have been on the fence as to what they are going to do, and the outlook for rates makes a huge difference in their consideration.
Can you comment on how the five- and ten-year move this year has affected the credit outlook?
Ivan Paul Kaufman: I think it is very clear from management’s standpoint that we have taken a look at the change in the rate environment. In the fourth quarter, we clearly had a drop in rates, and there was a lot of liquidity flowing into the sector and a lot of enthusiasm. Now, with the Iran situation and rising rates, and with the approach that rates will remain a little bit higher, we have adjusted our philosophy. We are getting ahead of where we think the market is, and that is why we adjusted our dividend to reflect a more difficult environment. We do not want to be sitting here in the second and third quarter making the adjustments.
We think that this rate environment is going to slow the resolution, it is going to slow liquidity into the sector, and it is going to slow where these resolutions go. In fact, as Paul has guided in his comments, we are expecting to continue to have reserves going into the second, third, and fourth quarter, and that is reflective of where this new environment is. We have made the adjustments. I am not sure everybody else has, but we do think that this new rate environment is going to affect the balance of the year, and that is what we are reflecting in our comments.
Jade Joseph Rahmani: Thanks for taking the questions.
Operator: Thank you. We will take our next question from Chris Moeller with Citizens Capital Markets. Please go ahead. Your line is open.
Chris Moeller: Hey, thanks for taking the questions. I was having some connection issues, so apologies if you already hit on some of this. Looking at originations in the bridge portfolio, average loan size looks to be about $128 million versus $38 million in the fourth quarter. Ivan touched on this a little bit, but was this more opportunistic, or are you intentionally moving up the loan size spectrum and should we expect to see more of this going forward?
Ivan Paul Kaufman: It is a great question. We are definitely going into a larger loan size, but the market is extremely competitive. On each individual loan, you have to make certain credit decisions to bring those loans on. We have chosen to go to larger sponsors and larger deals and be more selective in that sense, to put more management’s attention on each and every loan that we do, and the larger loans give us the ability to do that.
Chris Moeller: Got it. That makes a lot of sense. Gain-on-sale margin stepped up quite a bit in the quarter to 1.86% from 1.36%. Can you remind me if there was a large deal in 4Q numbers, or is something else driving that dynamic?
Ivan Paul Kaufman: That is exactly right, Chris. A couple of things happened. If you go back and look at our margins in 3Q and 4Q, and even 2Q of last year, you will see the pattern. In 1Q and 2Q of last year, the margins were actually very strong. A 1.86% margin is very healthy. We did around 1.75% in the first quarter of last year and around 1.70% in the second quarter of last year. In the third and fourth quarter, you saw that dip to around 1.15% and 1.36%.
In the third and fourth quarter, we had some really large, off-market deals that we were able to get over the line, and we also had a lot more Freddie Mac business in the fourth quarter, which is a different type of business. In the first quarter, we had a lot more Fannie Mae business and a lot more smaller deal size, so we were able to extract the higher margin. It all depends on what is in our pipeline. We do have a lot of large deals in our pipeline that we are working through, and our pipeline is growing each and every day.
You could see that number dip a little bit in the second and third quarter depending on deal size. It is deal size and mix, and to your point, the fourth quarter did have some really large deals in it.
Chris Moeller: Got it. That makes a lot of sense. Appreciate you taking the questions this morning.
Operator: Thank you. We will take our next question from Richard Barry Shane with JPMorgan. Please go ahead. Your line is open.
Richard Barry Shane: Hey, thanks for taking my questions this morning. A couple of different things. In prior calls, you had talked about some fairly substantial capital investments in REO properties. I am curious how much you have spent life-to-date in terms of that CapEx and what you expect going forward, given your sort of expectations for additional REO.
Ivan Paul Kaufman: Sure, Rick. We look at it a couple of different ways. We break down the REO book. As I said in my commentary, we have been in the process recently of engaging brokers and really trying to find people that are interested in these assets—experts in that particular market with that particular asset. We are doing a really nice job of getting a significant amount of bids. There is certainly more capital out there now chasing deals, so we have seen a real influx of opportunities to dispose of the assets quicker, which is why we are guiding to getting our REO book down to roughly $250 million to $300 million.
From a CapEx perspective, there are certain assets that we expect to hold on to. There is a subset of assets within that $250 million to $300 million that we expect to hold a little longer and stabilize, and we are feeding those assets with CapEx. In the quarter, we put about $8 million to $10 million of CapEx into certain assets. We can follow up with life-to-date figures after the call.
Richard Barry Shane: I appreciate you referencing the comment about working with the brokers. That is actually what precipitated my question. I am curious if there is a little bit of a change in strategy here, which instead of investing and trying to potentially optimize outcome on a longer timeline, whether you are taking a “first loss, best loss” approach here and accelerating the disposals.
Ivan Paul Kaufman: A lot of it is asset-specific. If we feel we can get to market with an asset fairly quickly without putting CapEx in, we will do it. Early on, there were certain assets that really required CapEx to put them in a better position. It is really an asset-specific situation, but I would say we are leaning toward the side, as you referenced, that if we can resolve the asset on an accelerated basis at our mark, we are certainly looking to do that. We had a few of those this quarter as part of that $23 million of realized losses, and we continue to push that way.
It is asset-specific, but we are definitely leaning toward resolving them quicker where we can.
Richard Barry Shane: Got it. During the quarter, you sold a property for $25 million and provided a $24.5 million bridge loan, which seems like a fairly aggressive financing structure. As you are resolving the REO, is part of the intention to provide financing for those transactions? Is that type of advance rate going to be typical, and how should we think about that from a credit perspective?
Ivan Paul Kaufman: Once again, it is asset-specific, but a lot has to do with loss structures as well. While it may be a high advance rate, there are capital commitments and guarantees that are required on those loans from the people who are stepping into those transactions. We look at our recoveries and our returns fitted on each particular case. Many times these are with sponsors we have done a lot of business with who have strong balance sheets. While we may give them a high level of leverage going in to create a very seamless process, their commitment to maintain that asset with the right guarantees—CapEx and interest guarantees—helps to offset that high leverage.
Richard Barry Shane: Got it. Last question: if we think about dividend policy going forward—you clearly trued the dividend up to distributable earnings—different commercial mortgage REITs talk about distributable earnings ex realized losses. What should we use as the guidepost for the dividend? Is it distributable earnings, or is there something else? We want to make sure we are looking at the right metrics so that we catch any inflections either up or down going forward.
Paul Anthony Elenio: Good question. We clearly look at distributable earnings ex the one-time realized losses that we have already provided for and that have already reduced book value. That is how we look at it—what we are earning from a cash perspective. In this quarter, we put up $0.18 ex the losses. What I have guided to is a bit of a low watermark in the second and third quarter.
Richard Barry Shane: Absent the $0.02 one-time drag, that probably puts me at $0.15 for the second quarter.
Paul Anthony Elenio: We are really at about $0.17 if you add that back in Q2 and $0.17 in Q3. Then, if we can execute our business strategy effectively—which we are laser-focused on—and really start to turn a lot of these nonperforming assets into performing assets, we will start to see growth in the fourth quarter in that distributable earnings number. We have set the dividend where we think we can earn it for the rest of the year, and we have set it to where we think distributable earnings will be ex those one-time losses.
Operator: Thank you. We will take our next question from an Analyst with Raymond James. Please go ahead. Your line is open.
Analyst: Roughly 40% of your loan portfolio is in Texas and Florida, where there is quite a bit of housing supply across multifamily, SFR, and single-family housing. Can you provide updated commentary on what you are seeing on the ground in those geographies?
Ivan Paul Kaufman: We are really seeing the bottom of the market. Over the last 24 months, there has been an extreme amount of softness that we have seen month over month. I think some of the issues we faced in the Texas market and in the Florida market in particular, and also in the Atlanta market, were related to immigration and issues with the ICE rates that had a real negative impact on the portfolio and accelerated some of the delinquencies. We have had assets that were 90% occupied drop to 75% overnight. Over the last 12 months, the ICE-related factors had a negative impact in those markets.
That is getting behind us at this point, and we are seeing a reset of rental rates and occupancy. We also saw a period of real slowness and issues with respect to tenant credit and the inability to remove non-paying tenants. That has changed; the court system has sped up. The software and discipline put in place to catch fraud and put the right tenant base in place have improved dramatically as well. We are also accelerating our efforts in terms of assets that are not performing properly. We are requiring management changes and/or taking control of these assets. It is generally the case when assets are cash-starved that they get poorly managed.
We have taken very aggressive steps to make those corrections. It is reflected a bit in our forecast because we are taking control of those assets, either directly or indirectly, and during that period we are going to have a little bit of a drag on our earnings while we are doing it. But we are seeing the benefit of our efforts by seeing real stabilization in these assets and growth back in occupancy and operating income.
Operator: Thank you. We will take our next question from Jade Joseph Rahmani with KBW. Go ahead. Your line is open.
Jade Joseph Rahmani: Thank you. I wanted to ask about the CECL reserve or the credit loss reserve. It currently stands at $131 million, which is 1.1% of the portfolio. You said you expect realized losses of about $15 million to $25 million a quarter for the next three quarters, so that is roughly $70 million; assuming that comes out of CECL, there would be a remaining $60 million of CECL, which is 0.6% of the portfolio. Are you going to be taking additional CECL reserves in future quarters, and is there a normalized CECL reserve ratio that should be on this portfolio? You mentioned there is about $1 billion of nonperforming assets including REO and nonaccruals.
Also, can you parse out the weighted average cash pay rate or current pay rate on the portfolio?
Paul Anthony Elenio: Sure. You cannot look at it just on the nonperforming assets or delinquencies; you have to look at it with the REO assets. Yes, we have $130 million of CECL on the balance sheet book, and we have about $481 million of delinquencies on the balance sheet book. But we also have roughly $520 million of REO assets, and we took another $12.5 million of impairment this quarter, after $20.5 million in the prior quarter. Before those loans were transferred to REO, we had booked CECL reserves on those. There is about $85 million of reserves effectively sitting in the REO book—meaning that REO has been written down by approximately $85 million.
You have to take that $85 million and the $130 million and divide it over the combined REO and delinquency book, which puts your ratio more in the 1.7% to 1.8% range, and that is probably the right ratio. On your second point, while we have guided to $15 million to $25 million in realized losses per quarter going forward, not all of those will be delinquencies; some of those will be REO-related. You have to look at those buckets together—that is how we look at it. Regarding the weighted average pay rate: our all-in portfolio yield was 7.03%.
The current pay rate component was about 6.49%, and roughly 25 basis points of that is origination and exit fees that we accrete over time—that is cash. The remaining piece is PIK. During the quarter, we booked about $5 million of PIK interest on our bridge loans. We have about $2 million of PIK interest on our mezz and preferred equity, but that is standard for those products. On the balance sheet bridge business, the PIK for the quarter was down to about $5 million; if you remember going back about a year ago, PIK was probably about $18 million.
It has come down a lot for a few reasons: SOFR has dropped; we worked out a lot of the loans and reset them at current rates; and PIK has been paid or recovered and does not recur going forward after modification. As Ivan mentioned, we are working on some pretty big deals now where we are going to get a fair share of that PIK paid back, and then it will not accrue going forward. I think that $5 million a quarter of balance sheet loan PIK probably trends down toward $4 million a quarter as we continue to resolve and modify loans.
Jade Joseph Rahmani: Okay, great. Thanks for the color.
Operator: I am showing no additional questions at this time. I would like to now turn the conference back to you, Ivan Paul Kaufman, for any additional or closing remarks.
Ivan Paul Kaufman: Thank you, everybody, for your participation today, and have a great weekend.
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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Arbor Realty (ABR) Q1 2026 Earnings Transcript was originally published by The Motley Fool