Company: ABR-PF
Filing Date: 2025-05-02
Form Type: 10-Q
Source: 0001628280-25-021683
Chunk: 3

Company: ARBOR REALTY TRUST INC
Filing Date: 2025-05-02
Form: 10-Q
Item: Part I, Item 2
Chunk 3
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 quarterly dividend of $0.43 per share. 

Current Market Conditions, Risks and Recent Trends

The Federal Reserve lowered the federal funds rate three times during 2024 for a total reduction of 100 basis points, which marked the first rate cut since 2020, and it is possible that they will continue to reduce short term rates in 2025. Although short term rates have declined 100 basis points, we currently remain in a high interest rate environment which could remain for longer than expected if inflation and other economic indicators do not continue to meet the Federal Reserve’s expectations. These adverse economic conditions have resulted in, and may continue to result in, a dislocation in capital markets, declining real estate values of certain asset classes, increased payment delinquencies and defaults and increased loan modifications and foreclosures, all of which has impacted, and may continue to impact, our future results of operations, financial condition, business prospects and our ability to make distributions to our stockholders. We employ rigorous risk management and underwriting practices to proactively maintain the quality of our loan portfolio and work very closely with borrowers to mitigate potential losses, while safeguarding the integrity of our portfolio, which may include modifying original loan terms. Given the current elevated interest rate environment, we cannot guarantee that our loan portfolio will perform under the current loan terms.

There has been a high level of interest rate volatility and uncertainty since the announcement of the current administration's imposition of increased tariffs. Over the last six months the five and ten-year interest rates have increased substantially with the ten-year rate moving from a low of 3.60% in September 2024 to a high of 4.80% in January 2025 and the forward yield curve is predicting the ten-year rate will likely remain elevated for the balance of 2025. Additionally, the short term rate curve is currently expected to continue to decrease by approximately another 90 basis points in 2025. As a result of the significant volatility in rates and the uncertainty of the outcome of the tariff negotiations, it is very difficult to predict where short and long term rates will settle for the remainder of the year. This current unpredictable interest rate environment is creating increased headwinds for commercial real estate and is likely to result in decreased origination volumes, especially in our GSE/Agency business in 2025, which is a highly profitable segment of our overall business. This rate environment will also have a negative impact on the ability for borrowers to refinance our balance sheet loans with fixed rate agency product, which