Arbor Realty Trust

Good morning, ladies and gentlemen, and welcome to the second quarter 2026 Arbor Realty Trust earnings conference call. At this time, all participants are in a listenable mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this period, you will need to press star 1 on your telephone keypad. If you want to remove yourself from the queue, please press star 2. Please be advised that today's conference is being recorded. If you should need operator assistance, please press star 0. I would like to now turn the call over to your speaker today, Paul Elenio, Chief Financial Officer. Please go ahead.

Okay, thank you, Stephanie. Good morning, everyone, and welcome to the quarterly earnings call for Arbor Realty Trust. This morning, we'll discuss the results for the quarter ended June 30th, 2026. 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 risk 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's expectations in these forward-looking statements are detailed in our SEC reports. Listeners are cautioned not to place undue reliance in these forward-looking statements, which speak only as of today. Arbor 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'll now turn the call over to Arbor's President and CEO, Ivan Kaufman.

Thank you, Paul, and thanks to everyone for joining us on today's call. As you can see from this morning's press release, we had a very active quarter in the capital markets and several notable transactions that have allowed us to increase our liquidity and drive higher returns on our capital as we continue to navigate through this extended downturn. First, we were once again successful in unwinding one of our legacy silos by financing these loans through our bank lines with superior terms. In fact, we were able to reduce our pricing by almost 40 basis points and enhance our leverage by nearly 10 points, which allowed us to generate approximately $135 million of additional liquidity and increase returns on our capital. We believe it's very important to point out that we had seven legacy CLOs with $9 billion of collateral in the height of the market and through effective balance sheet management we've deleveraged $7.8 billion of CLOs in addition to adding $2.5 billion of new vehicles for total capital markets transactions of $10 billion over the last 36 months. This leaves us with only one remaining legacy vehicle with $1.2 billion of collateral, which is currently levered at 66% that we also expect to successfully unwind in the near future. We also closed on a $375 million convertible debt offering in early July, which we used the majority of the proceeds to pay off our September bonds earlier this week. This was an exceptional trade that allowed us to raise capital with pricing that is 400 basis points inside of straight debt and buy back a significant amount of our stock at 50% of book value. We used $114 million of proceeds to buy back stock at $5.42 and Thank you for joining us. In fact, the stock would need to trade above $9.28 a share before we would have to issue more shares that we bought back in the deal, effectively creating a convert premium of almost 100% above the current stock price. And just recently, we created another $185 million of liquidity from additional financing proceeds we were able to generate from one of our bank lines on existing collateral. These are extremely important accomplishments that, again, have enhanced our liquidity position and will allow us to work through our legacy loans very aggressively. We have also implemented several cost-saving strategies, given a challenging climate, that will have a very meaningful impact on reducing our expense load going forward. The first of which was a reduction of headcount in certain disciplines in order to property rightsize our staff and payroll to the current environment. This was carried out last month, and we estimate the reoccurring savings after one-time severance payments to be approximately 10 million annually, or 5 cents a share. We will also continue to identify additional opportunities to reduce expenses going forward, which includes a big push to fully integrate AI across all aspects of our business, which will drive additional economies of scale through significant operational and process efficiencies. Turning now to our production numbers for the second quarter and our different business lines. In our agency platform, we originated $1.05 billion in volume in addition to 50 million CMVS brokerage transactions for a total second quarter volume of $1.1 billion. This brings our year-to-date volume to around $1.9 billion, which is up 30% over last year. The elevated rates are certainly affecting our ability to close deals quickly and pushing out the timing somewhat. However, we have a growing pipeline of larger deals, which we expect will result in stronger second half of the year and hopefully allow us to produce similar volumes as we did in 2025, although the exact time of closings is hard to predict in this elevated rate environment. In a balance sheet lending business, we originated $160 million in volume in the second quarter and just over $550 million for the first half of 2026. This business continues to be incredibly competitive, and as a result, we are being highly selective and are focusing our attention on large deals with high-quality sponsors. We guided to between $1 to $1.5 billion in volume for 2026, which was reflective of the current environment. The bridge lending business is an important part of our overall strategy as it generates long-level 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're able to produce strong returns on our capital despite the competitive landscape. In our single-family rental business, we had a strong second quarter and have seen a real uptick in our pipeline now that the housing bill has been passed with the appropriate carve-outs for the built-to-rent businesses we discussed in the past. We originated $315 million of deals in the second quarter and $215 million in the month of July for a total volume year-to-date of $700 million. and again we are starting to see a real increase in our forward pipeline which we expect will result in a very strong second half of the year. This is a great business as it offers us returns on our capital through the construction, bridge, and permanent lending opportunities and generates strong levered returns in the short term for providing significant long-term benefits by further diversifying our income streams. We're also very active in the construction lending business and expect to be able to originate $500 to $750 million of this product as well. On our last earnings call, we discussed at length the effect the increase in interest rates is having on the timing and resolution of our non-performing and sub-performing loan book. We believe in the current rate environment, it will take us four to six quarters from now to resolve the vast majority of these assets, which will allow us to significantly reduce the drag on our earnings and build back our run rate of interest income for the future. Unfortunately, rates continue to remain elevated and volatile given the geopolitical landscape, which is certainly making it more challenging to resolve these loans quickly. Having said that, we feel confident that we have ring-fenced the majority of our issues and have a clear path to a resolution on these assets. The rate increases have laid things a little bit but we are making good progress and again expect to reduce this loan exposure consistently on a quarter by quarter basis. We ended up in the second quarter with approximately $525 million in delinquencies and around $545 million of REO assets for total non-performing assets of roughly $1.07 billion, which is an anomaly from last quarter's numbers as a result of things being slightly delayed due to elevated rates. We have, however, made strong progress in July, resolving 90 million of these assets this month, and have another 105 million scheduled to be resolved next month that we have executed agreements on. This will bring down our non-performing loan book to approximately $875 million, or a 13% reduction from the first quarter. We also have line of sight on an additional two to three hundred million of delinquencies we expect to resolve in the third and fourth quarters in addition to feeling very confident in our ability to reduce our existing REO book down to approximately three hundred million dollars by the end of the year as we have been actively marketing several of these assets for sale. This progress will go a long way towards significantly reducing the drag on earnings and increase our run rate of income for the future. As we discussed in detail on our last few calls, we continue to focus heavily on our legacy portfolio, which is down to $4.7 billion at June 30th from successfully resolving $800 million of these loans in the last quarter. $1.3 billion of the book continues to perform in accordance with their original terms, and $1.1 billion are either delinquent or REO that we have a clear line of sight to resolving over the next several quarters. The other $2.3 billion of this book we have been aggressively working through with the goal of restructuring and resolving 500 million of loans a quarter, which we are on pace to accomplish. This will reduce our legacy book, including our delinquencies and our real assets, down to around $2.4 billion by year end and well below $1 billion by the end of 2027. We also continue to make progress in reducing the amount of accrued interest outstanding on certain loans in this subset by resetting the rates in today's market spreads and requiring that the borrower pay down a large portion of the outstanding accrued interest as part of the modified terms. In fact, of the roughly 600 million of legacy loans we resolved in Q2, on 500 million of these loans we received approximately 15 million of back accrued interest in the second quarter and we'll receive another 10 million in accrued interest by the end of the third quarter. This will reduce our total accrued interest by approximately 25 million dollars and the total loans outstanding with accrued interest down to only 1.1 billion. As Paul will discuss in more detail, we produced distributable earnings of $0.15 a share in the second quarter, which was in line with our expectations and included $0.02 of one-time drag from some inefficiencies in our financing facilities. Clearly, our earnings are being greatly affected by the significant drag from our non-interest earning assets, as well as from resetting legacy loans to today's market rates. We're taking a very aggressive stance with our borrowers and resolving our non-performing loan book. This would continue to affect our core earnings in the short term, which is not something we are focused on. Our goals are always longer term in nature, with our sights set on working through the loan book as quickly as possible, which will reduce the earnings drag from these assets and allow us to start to build back our run rate of interest income and drive higher returns in the future. This again we estimate to take us four to six quarters to accomplish and we are taking a very methodical approach to resolving 500 million of these loans a quarter and bring down the remaining legacy book to a very nominal number relative to our total loan book. In summary, we have made tremendous progress in the capital markets with 12 billion of transactions between the unwind of our legacy CLO vehicles The issuance of new CLOs, the unsecured and convertible debt markets we have accessed, and the efficiency we have been able to generate on our warehouse lines. This has allowed us to increase our liquidity and drive higher returns on our capital. And our agency business and our diversified origination platforms are all performing well despite elevated levels. With respect to our legacy book, we have made significant progress and we have a clear path for producing this loan book on a quarter-by-quarter basis, which will put us in a position by the end of 2027 for this to represent a very nominal portion of our total loan book and allow us to go out earnings run late for the future. I will now turn the call over to Paul to take you through the financial results.