Paul Elenio; Executive Vice President, Chief Financial Officer; Arbor Realty Trust Inc
Ivan Kaufman; Chairman of the Board, President, Chief Executive Officer; Arbor Realty Trust Inc
Steven DeLaney; Analyst; JMP Securities LLC
Jade Rahmani; Analyst; Keefe, Bruyette & Woods, Inc.
Rick Shane; Analyst; JP Morgan
Leon Cooperman; Analyst; Omega Family Office
Operator
Good morning ladies and gentlemen, and welcome to the first quarter 2025 Arbor Realty Trust earnings conference call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions)
I will now like to turn the call over to your speaker today, Paul Elenio, Chief Financial Officer. Please go ahead.
Paul Elenio
Thank you, David, and 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 March 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'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 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.
Ivan Kaufman
Thank you, Paul, and thanks, everyone, for joining us on today's call. As you can see from this morning's press release, we had an active and productive quarter with many notable accomplishments, including substantial improvements to the right side of our balance sheet and significant progress on working through our delinquencies and REO assets despite the challenging environment.
We have been heavily focused on creating efficiencies in our financing facilities to continue to drive higher returns on our capital. In fact, in March, we announced a transformational deal, in which we entered into a $1.1 billion repurchase facility to finance assets in two of our existing CLO vehicles with JPMorgan. This allowed us to redeem at par and full, all invested capital in these vehicles while creating tremendous efficiencies through significantly reduced pricing enhanced leverage and guaranteed, and generated approximately $80 million of additional liquidity.
Additionally and very significantly, the facility is 88% nonrecourse and provides us with a two year replenishment period to substitute collateral when loans run off. This is essentially like issuing a new CLO with significantly improved terms. And since every loan finance in this facility has been recently appraised, this transaction also very importantly, reinforces the quality of our loan book.
We're extremely pleased with this innovative transaction, and we believe demonstrates the quality of our brand and the depth of our banking relationships and again, will drive higher earnings in the future.
We also saw a very strong demand in our first quarter in the CLO securitization market. We've been the leader in this space for over 20 years and have been extremely active in access in this market. These vehicles are very attractive to us as they allow us to fund our loans with nonrecourse, non-mark-to-market debt with replenishment rights and generate outsized returns on our capital.
And while this market has cooled off a little in the last few weeks, there is a significant amount of liquidity in the space that we expect will drive a very robust CLO market going forward. We will continue to be an active player in this space, which again is a big part of our strategy, and will help drive increased future earnings through these low-cost, long-dated funding sources.
On our last call, we discussed how the significant backup and long-term rates will create substantial headwinds for everybody in this space. We talked about how this environment, which created a very challenging originations climate, as it relates to our agency business, and how it was also going to result in a curtailed ability for borrowers to transition to fixed rate loans and recap their deals.
Since the announcement of the Trump tariffs and the trade wars that have ensued, we have seen a tremendous amount of uncertainty and rate volatility that has resulted a large swing in the 5 and 10 year indexes and what feels like -- feels that time is a constantly changing economic forecast.
It will be very hard to predict where all has settled out for the balance of the year and where interest rates will go as a result. We expect, at least in the short term for there to be a tremendous amount of volatility and uncertainty. We will continue to monitor the market environment and determine the effect that will have on our business for the balance of 2025.
We were very prudent with the guidance we gave on last quarter's call for 2025, which is based on a similar market conditions to what we are experiencing. Very recently, we have seen a reduction in the 5 and 10 year interest rates, which, if this trend continues, will be a positive catalyst for our business by driving increased agency volumes and allow us to move more loans off our balance sheet, which will increase our earnings run rate and position us well for 2026.
We continue to do a very effective job despite the elevated rates of working through our loan portfolio by getting borrowers to recap their deals and purchase interest rate caps as well as bring in new sponsors to take over assets, either consensually or through foreclosure.
These are very important strategies that have resulted in (technical difficulty) I'm sorry, that resulted in our ability to reposition as the performance of these assets is greatly affected by poor management and from being undercapitalized, which resulted a very low occupancy -- I'm sorry, excuse me one second.
These are very important strategies that have resulted in a large portion of our loan book being successfully repositioned as performing assets with enhanced collateral values and experienced sponsors and have created a more predictable future income stream.
We also continue to make progress on the $819 million of loans that will pass through as of December 31, in accordance with our previous guidance. In the first quarter, we successfully modified $38 million of these loans, at $39 million of loans become fully performing again, and took back approximately $197 million of REO assets. $31 million of which we are in the process of bringing responses to operate and assume our debt.
As expected, we did experience additional delinquencies during the quarter of approximately $109 million, bringing our total delinquencies out of March 31 to approximately $654 million. And our plans for resolving our remaining delinquencies are to take back as REO, including bringing new sponsorship approximately 30% of this pool, with the other roughly 65% either paying off or being modified in the future. This would put our REO assets on our balance sheet in the range of $400 million to $500 million, with another roughly $200 million that we will have brought in new sponsorship to operate.
As we discussed on last quarter's call, these REO assets will be heavy lifting position of our loan book, and we estimate it will take approximately 12 to 24 months to reposition as the performance of these assets have been greatly affected by poor management and from being undercapitalized, which has resulted in very low occupancies and NOIs. As a result, these REO assets will temporarily create the greatest drag on our earnings, which is a significant component of our revised guidance for 2025.
We do believe there is a great economic opportunity for us to step in and reposition these assets and significantly grow the occupancy and NOIs over the next 12 to 24 months, which will increase our future earnings substantially.
We are working exceptionally hard in resolving our delinquencies, which have been significantly affected by the higher interest rate environment and again, was factored into our 2024 guidance. As I have said before, if rates come down sooner than we expect, we will have a positive impact on our ability to convert noninterest earning assets into income-producing investments, which will be accretive to our future earnings.
Turning now to our first quarter performance as Paul will discuss in more detail. Our quarterly results were in line with our previous guidance, with us producing distributable earnings of $0.31 per share in the first quarter. Based on these results and the environment we are currently operating, our Board has decided to reset the quarterly dividend to $0.30 a share, which again is in line with our guidance.
We anticipate that the next nine months will continue to be very challenging due to the significant drag on earnings from our REO assets and delinquencies and from the effect the higher interest rate environment is having on our originations business, all of which will make 2025 a transitional year, which is reflected in our revised dividend. As we successfully resolved these assets, and if we continue to see rate relief, we believe we will be well positioned to grow our earnings and dividends again in 2026.
In our balance sheet lending platform, we had an active first quarter, originating $370 million of new bridge loans. Last quarter, we guided to approximately $1.5 billion to $2 billion of bridge loan production for 2025, which we feel we are very on pace to accomplish.
Whether we come in at the low end or the high end of the range is highly dependent upon market conditions and the interest rate environment, which, again, has been extremely volatile and unpredictable lately. This is a very attractive business as it generates a strong, leveraged returns on our capital, and in the short term, while continuing to build up significant pipeline of future agency deals, which is a critical part of our strategy.
As we continue to take advantage of efficiencies in the securitization market with our commercial banks, we could drive higher levered returns and increased returns on our capital substantially.
As we talked about on our last call, we guided to $3.5 billion to $4 billion of agency volume in 2025, which is a much slower start -- with a much slower start in Q1 given the backup of rates that occurred last quarter. The first quarter did comment around what we expected or approximately $600 million of origination volume from the significant increase in the tenure, which has created a very challenging origination plan.
Again, there has been a very significant amount of volatility in the rate environment lately, with some dips in the 5 and 10 year rates that we were able to capitalize on growing our forward pipeline. In fact, our pipeline is approximately $2 billion today, which is up significantly from approximately $1.2 billion in late February when we started our last call. And this robust pipeline gives us confidence in our ability to deliver the range of guidance we gave in 2025 despite the slower first quarter.
We continue to do an excellent job growing our single-family rental business. We had a solid first quarter with approximately $200 million in new business, and our pipeline remains strong. This is a great business that offers returns on our capital through construction, bridge and permanent lending opportunities, and generate strong levered returns in the short term, while providing significant long-term benefits by further diversifying our income streams.
In fact, the business plan is working well as we are starting to see more of our construction loans transition to new bridge loans as well as being able to capture new bridge loan business off of other lenders SFR books because of how vertically integrated we are.
In the first quarter, we closed $131 million of new bridge loans on top of the $270 million that we closed in 2024. And with the enhanced efficiencies we are seeing in the financing side of the business, we are generating mid to high returns on our capital, which will contribute to increased future earnings, especially as we continue to scale up this business.
We also continue to make steady progress in our construction lending business. We believe this product is very appropriate for our platform as it also offers us returns on our capital through construction, bridge and permanent agency lending opportunities and generate mid to high-teens returns on our capital.
We closed $92 million of deals in the first quarter and another $58 million in April. We also have a growing pipeline with roughly $300 million under application and another $500 million of additional deals we are currently screening, which gives us confidence that we will easily make and likely beat the guidance we gave of $250 million to $500 million of production in 2025.
In summary, we have an active and productive first quarter with many notable accomplishments. We continue to execute our business plan very effectively and in line with our objectives and guidance. Clearly, there's been a tremendous amount of volatility in this space, especially as it relates to the outlook of short-term and long-term rates. If the rate environment improves, it will have a positive impact on our business, and our outlook going forward.
Additionally, we continue to see efficiencies in the securitization market and our bank line set, we will continue to be a positive catalyst. As mentioned earlier, we view 2025 as a transitional year in which we will work extremely hard to successfully resolve our REO assets and delinquencies, providing strong earnings foundations, which we can build upon in 2026.
I will now turn the call over to Paul to take you through our financial results. Paul?
Paul Elenio
Thank you, Ivan. In the first quarter, we produced distributable earnings of $57.3 million or $0.28 per share and $0.31 a share, excluding $7 million of onetime realized losses from the sale of two REO assets that we previously reserved for, $6 million of which we guided to on last quarter's call. These results translated into ROEs of approximately 10% for the first quarter.
As Ivan mentioned, we reflected the current environment in our 2025 distributable earnings guidance of $0.30 to $0.35 per quarter. Additionally, as I mentioned on last quarter's call, we were expecting at least the first two quarters of this year to come in at the low end of that guidance due to the challenging climate we're experiencing from elevated rates.
Clearly, rates are playing a big factor in our earnings outlook, and future changes in the interest rate environment will most certainly dictate whether we stay at the low end of the range for the balance of the year or are able to grow our earnings quicker.
In the first quarter, we modified another 21 loans totaling $950 million, and approximately $850 million of these loans, we required borrowers to invest additional capital to recap their deals, with us providing some temporary relief through a paying a full feature.
The pay rates were modified on average to approximately 5.18%, with 2.56% of the residual interest due being deferred until maturity. $55 million of these loans were delinquent last quarter, and are now current in accordance with their modified terms.
In the first quarter, we accrued $15.3 million of interest related to all modifications with paying accrual features, $2.3 million of which is on mezz and PE loans behind agency loans that have a pain accrual feature as part of their normal structure. This leaves $13 million worth of accrued interest in the first quarter related to the modifications of bridge loans, $3.8 million of which is related to our first quarter modifications.
Our total delinquencies are down 20% to $654 million at March 31 compared to $819 million at December 31. These delinquencies are made up of two buckets, loans that are greater than 60 days past due, and loans that are less than 60 days past due that we're not recording interest income on, unless we believe the cash will be received.
The 60-plus day delinquent loans or NPLs were approximately $511 million this quarter compared to $652 million last quarter due to approximately $197 million of loans that we took back as REO and $38 million of modifications during the quarter, which was partially offset by $82 million of loans progressing from less than 60 days delinquent to greater than 60 days past due and $13 million of additional defaults during the quarter.
The second bucket, consisting of loans that are less than 60 days past due, came down to $143 million this quarter from $167 million last quarter due to $38 million of modifications and $82 million of loans progressing to greater than 60 days past due, which was partially offset by approximately $96 million of new delinquencies during the quarter.
And while we were making very good progress in resolving these delinquencies, at the same time, we do anticipate that we will continue to experience some new delinquencies, especially if this current rate environment persists.
In accordance with our plan on resolving certain delinquent loans, we have continued to take back assets as REO, and we expect to take back more over the next few quarters, as Ivan mentioned earlier. The process of foreclosing on and working to improve these assets and create more of a current income stream takes time, which again will temporarily impact our earnings.
In the first quarter, we took back $197 million of REO assets. We've been highly successful at bringing in new sponsors on certain assets to take over the real estate and assume our debt. This strategy is a very effective tool at turning debt capital in a nonperforming loan into an interest-earning asset, which will increase our future earnings.
As Ivan mentioned, we're in the process of bringing in new sponsors on two of the REO assets we took back in the first quarter, which we hope to close by the end of the third quarter. We have no loan loss reserves against these assets as we expect to sell these assets at or above our current debt levels.
As a result of this environment, we recorded an additional $16 million in specific reserves in our balance sheet loan book in the first quarter. And again, we believe we've done a good job of putting the appropriate level of reserves on our assets, which is evident by the transactions we've been able to effectuate to date, at or around our carrying values net of reserves.
In our agency business, we had a slow first quarter as expected due to the significant headwinds from higher rates. We produced $606 million originations and $731 million in loan sales, with very strong margins of 1.75% for the first quarter, which was equal to our margins from last quarter.
We also recorded $8.1 million of mortgage servicing rights income related to $645 million of committed loans in the first quarter, representing an average MSR rate of around 1.26%, which is up from 1% last quarter due to a higher mix of Fannie Mae loans in the first quarter, which contain higher servicing fees.
Our fee-based servicing portfolio is at approximately $33.5 billion at March 31, with a weighted average servicing fee of 37.5 basis points and an estimated remaining life of around seven years. This portfolio will continue to generate a predictable annuity of income going forward of around $126 million gross annually.
In our balance sheet lending operation, our investment portfolio grew to $11.5 billion at March 31 from originations outpacing runoff in the first quarter. Our all-in yield on this portfolio was 7.85% at March 31, compared to 7.80% at December 31, mainly due to taking back nonperforming assets as REO, which are separately stated on our balance sheet, partially offset by some new delinquencies in the first quarter.
The average balance in our core investments was $11.4 billion this quarter compared to $11.5 billion last quarter. The average yield on these assets decreased to 8.15% from 8.52% last quarter, mainly due to a reduction in the average SOFR rate and less back interest collected this quarter on loan modifications and delinquencies versus last quarter.
Total debt on our core assets was approximately $9.5 billion at March 31 and December 31. The all-in cost of debt was down to approximately 6.82% at 3/31 versus 6.88% at 12/31, mainly due to a 40 basis point reduction in rate on the new JPMorgan facility as compared to the rates we were paying on the CLOs at the time they were redeemed.
The average balance on our debt facilities was down to approximately $9.4 billion for the first quarter compared to $9.7 billion in the fourth quarter, mainly due to pay downs in our CLO vehicles from runoff in the fourth and first quarters.
The average cost of funds in our debt facilities was 6.89% in the first quarter compared to 7.08% for the fourth quarter, excluding interest expense from levering our REO assets, the debt balance of which is separately stated on our balance sheet and therefore, not included in our total debt on core assets. This reduction in the average cost of funds was from a decline in SOFR, which was partially offset by the lower rate tranche, lower debt tranche is being paid down from CLO runoff in the first quarter.
Our overall net interest spreads in our core assets was down to 1.26% this quarter from 1.44% last quarter, largely due to more back interest being collected last quarter on delinquent loans, combined with a decline in SOFR.
And our overall spot net interest spread was up to 1.03% at March 31 compared to 0.92% at December 31, from the removal of some loans that went REO and from better pricing on the new JPMorgan line that we closed in March.
And lastly and very significantly, we've managed to delever our business 30% during this very lengthy dislocation to a leverage ratio of 2.8:1 from a peak of around 4.0:1 over two years ago.
That completes our prepared remarks for this morning, and I'll now turn it back to the operator to take any questions you may have at this time. David?
Operator
(Operator Instructions)
Steven DeLaney, Citizens JMP Securities.
Steven DeLaney
Thank you. Good morning, Ivan, Paul, good to be on with you. It sounds like -- I mean, gosh, you covered a lot there in three or four different business lines. But the thing that caught my year, it sounds like the CLO market is very attractive right now in terms of both structure and pricing.
And a lot of folks have pulled back from bridge loans because of the credit problems that occurred on the earlier vintages. I'm just wondering when you look at the bridge portfolio, $11.5 billion, do you expect net growth there in 2025? And do you have a target level for where that portfolio might grow by the end of this year? Thank you.
Ivan Kaufman
Let me give a little bit of an overview of our business and what our outlook is. And I think it's a combination of three factors. Number one, how much new bridge business we expect. And in my comments, it will be about $1.5 billion to $2 billion runoff. I think we did run off of $400 million in the first quarter, $200 million in April. We expect runoff to be anywhere between $1.5 billion to $3 billion, depending on where interest rates are.
And then we're going to fund up our construction business, and we're going to fund up our SFR business. So you're going to see a good net growth number. And then you're going to see the composition of our balance sheet hopefully, by the end of the year or maybe the first quarter, where the majority of what's on our book will be new production as opposed to legacy, and that's transformational when the legacy book gets shrunk to a minority of our book. And that's our goal. That's where we're going.
A lot of this will be fueled by a very robust securitization market. There's been some pull back, as I mentioned in my comments, that with what happened with the tariffs, what was one of the most aggressive securitization markets has been pulled back, but pay very close attention. There are a couple of deals in the market now, but we think they're going to be extraordinarily well received.
The net inflows and outflows on the securitization market is very clear that there's a lot of liquidity, a lot of demand. And we expect as a firm to be able to really benefit of a the leverage from that business as well as the cost of funds in that business, and we think it will be very accretive to earnings. And that's why a lot of what we spoke about was 2025 being a transition year and set us up very, very strongly for 2026.
Steven DeLaney
I mean just a quick follow-up. When you look at the loans that you're making today on the bridge loan side of the business. And clearly, you just said that you expect some growth, and you really found that attractive. Why did so many people -- just in a very simple term, what was the number one or number two, the primary weaknesses on why that 2022, 2023 vintages have performed so poorly? And you're going to obviously planning to correct that with your 2025 loans.
Ivan Kaufman
So I think that's a great question. And I think we all have to understand that on the multifamily side of the business, you had to run from 2010 all the way up to now with very few corrections. And every market has a lot of corrections. I think we're going back to three years from now, two or three years. Everybody would say as they do in every market that things can only get better, right? Rates will never go up and rates will only grow and rents will always rise.
I think the biggest mistakes were always made at the top of the market. Those are the facts. We see it in every curve and everybody says, hey, if I only knew what I know now, I wouldn't have been where I was. It doesn't always work that way. We as a firm, pull back a little quicker than everybody else.
Now the one thing that we've done a great job with is certainly, as you know, the structure of our loans and the recourse of our loans has been very effective and mitigated some of the deterioration and real estate fundamentals. And there has been a deterioration fundamentals, but they're starting to strengthen up again.
I think, after COVID, which nobody could have ever expected, you had a lot of delinquencies, a lot of rent issues, tremendous number of economic vacancy issues due to people not being able to move out the slow core system. You saw all the factors which were anticipated, an increase in insurance rates and increase in tax rates. The insurance was a big factor.
What nobody also anticipated was a number of new entrants into the business and the fact that they didn't have a level of experience in management. And when the trend is only positive, you kind of lose sight of some of the negative factors.
So every cycle, you get better. We've been through a lot of cycles. But I do want to comment on one thing. In our career of this being the fifth cycle we've been through, this is the longest peak to trough. Most of the time, the cycles go for 18 months, 20 months, 16 months, and you recover. This has been over 36 months and still going. There have been bits of recovery, bits of setback. So this is a lot longer of a cycle than most people are accustomed to.
But we're starting to see some elements of recovery. We are starting to see better occupancies and better growth, and things of that nature. But there's a lot to learn from every cycle. Every firm gets better. So that's my commentary on what happened then and hopefully how we're better positioned now.
Steven DeLaney
Thank you very much. I appreciate it.
Paul Elenio
Thanks, Steve.
Operator
Jade Rahmani, KBW.
Jade Rahmani
Thank you very much. Wanted to start with a liquidity update. What are you expecting cash and liquidity to do? Just looking ahead at earnings, the reset dividend, your expectations regarding NPLs and REO?
Paul Elenio
Sure. Hey Jade, it's Paul. So we're sitting right now, as you could see, like $325 million of cash and liquidity. I think one of the things that was in my commentary that's very important to note is that during this lengthy dislocation, we made a strategic decision to delever the business due to the uncertainty, and we delevered that business 30%. In the peak of the market prior to the dislocation occurring, we were 4.0:1 levered and humming along. We're now 2.8 levered, and we've been at that level for a few quarters now.
As with Ivan's commentary on what we're seeing in the securitization market and with the banks being so engaged and so constructive lately, evident by the JPMorgan line we just put in place, which was obviously an extremely good deal for us, we're seeing the opportunity now where leverage -- we can enhance our leverage and grow our liquidity.
So we expect to be able to, over the next 6 to 9, 12 months to totally fully take advantage one, the securitization market and two, the constructiveness of the banks and the liquidity that's out there in the banking system to increase our leverage and grow our liquidity.
Secondly, as Ivan mentioned, runoff is a big part of where our liquidity will go. And it's -- we toggle it based on our origination objectives and what our runoff does. We did have $400 million of runoff in Q1. It was a little light given where interest rates were for the last three or four months. Interest rates have backed off a little bit recently as we said, and we did get about $200 million of runoff in April. So it's -- it could -- runoff could go anywhere from $1.5 billion to $3 billion, depending on where interest rates go, and that's also a source of liquidity.
And then the last piece that I wanted to mention is the debt markets are very, very open and active. As you know, we've been a serial issuer of debt through the unsecured debt market through the preferreds and all those types of instruments, to the converts.
Term Loan B, high-yield debt, convert market, it's all pretty open right now. So we will continue to do what we do, be good stewards of capital. And if we see good growth opportunities and we think there's good origination opportunities and the runoff is slowing, we will continue to access those markets as well. So that's kind of the three pegs of the stool that drive our liquidity and why we feel comfortable we'll have adequate liquidity.
Jade Rahmani
Thanks. You didn't mention NPLs and REO. Could you talk about where you expect each to go? And also proceeds, do you expect proceeds from either category?
Ivan Kaufman
Let me comment on the REO. As I commented on my comments, we expect the REO to go up to between $400 million and $500 million, and we're going to be extraordinarily aggressive. Where there's bad management and when there's asset deterioration to pursue that REO, reposition them.
A lot of them are heavy lift. We started a process. And to the extent that we can reposition those assets, they are timing up liquidity, and we will look to liquidate them once we get to a certain level and generate liquidity there. Paul, you can give a little overview on the NPLs and how that's moving along.
Paul Elenio
Sure. So as we said in the commentary, we're sitting with $511 million of NPLs, about $140 million of less than 60 days, and they go through a natural progression, Jade. And as we laid out, as Ivan laid out in his commentary, we think about 35% of that pool, that $654 million, will take back its REO. We're sitting with $300 million of REO right now on our balance sheet, but $37 million of that, as we mentioned, is going to get sold in the next couple of quarters. And then there's some legacy stuff on there that's been on before the crisis.
So we're sitting at about, call it, $210 million, $220 million of REO after we sell those two from this cycle, and we're expecting to take back about 35% of that $654 million. So that will grow it to the $400 million to $500 million, as Ivan mentioned.
And we know that the NOIs and the occupancy are low, and we're going to work through those assets, put a little money into them, rehab them, get them to a level where they are now contributing to our earnings, and then we'll make a decision whether we want to liquidate them or keep owning and operating them at what level. That's kind of the way we're looking at it.
But as we mentioned, it's a big drag on our 2025 earnings, and that's why we believe it's a transitional year. And that's why we gave the guidance we gave last quarter.
Jade Rahmani
Thanks. If I could ask one more. It's just about the overall economic sensitivity of the portfolio. You mentioned the 36-month cycle, but that's really an interest rate cycle. We haven't even gone through an economic cycle in terms of unemployment spiking or a recession. So could you touch on your views there?
Ivan Kaufman
We're actually seeing the occupancy firm up in a lot of our assets and we're seeing better performance. And I think in many of the markets we've hit bottom that we're seeing, a lot of it was a product of what was, I would say, COVID, post-COVID, the difficulty of getting tenants out, and that is firmed up. So in many ways, we feel we've really bottomed out in a lot of these markets.
With respect to REOs, which we experienced, it was really poor management and what we've seen now is bringing in the right management, we've been able to really take underperforming assets and bring them up to market. A lot of what we have is workforce housing, and we're seeing good data on that in general. So I think we've seen from -- on the economic side of the coin, the worst side of it, and we've been to a very tough side of it.
Jade Rahmani
Thank you very much.
Paul Elenio
Thanks, Jade.
Operator
(Operator Instructions)
Rick Shane, JP Morgan.
Rick Shane
Hey guys, thanks for taking my questions this morning. Look, interaction feedback we're getting, there's a lot of focus on liquidity, dividend, sustainability and noncash income. Cash is down 65% year over year, 38% quarter over quarter. And that I'm not including the restricted cash because of the paydown of the CLO.
Repayments were at their lowest level back to the pandemic at $421 million, I think. Originations in the quarter were $747 million. So you consumed about $300 million on originations. I'm curious, how much of those originations really were on new projects as opposed to reinvesting in existing?
Paul Elenio
Sure. So I can give you some of those numbers, Rick. So of the $747 million that we did in originations, $367 million were brand-new bridge loans, not on existing projects, brand-new bridge loans in the market we're in today. $131 million were bridge loans that came off our SFR business with that business working nicely. So construction got to lease up and then those loans turned into bridge loans.
And then in addition to that, we had about $223 million of fundings on our unfunded SFR business. As you know, we have commitments outstanding, and then we fund that business over time. And then about $19 million was funding on construction loans in our newly created construction business and $4.5 million was met. So pretty much all of that product that I mentioned is a new product to us. It's not on existing.
Rick Shane
Great. That's -- I really appreciate the clarity there, Paul. Second question is you guys reported $57 million of distributable earnings. How much of the reported income was -- or interest was noncash?
Paul Elenio
Yeah. So that's what I put in my commentary. We booked $15.3 million of PIK during the quarter, which was down from last quarter because we make adjustments as we go, some loans pay. And on the amount of loans that we've modified that we have put a pay an accrual feature on, we're accruing about 78% of those loans and about 22% we've put on nonaccrual but it was $15.3 million for the quarter. And as I put in my commentary, a certain amount of that is mezz and PE, which is part of the normal structure and the rest is on our bridge loans.
Rick Shane
Got it. And as we look through the year and look to your guidance both in terms of dividend outlook and expectations of an increase in PE in the back half of the year, is that $15 million run rate a good way to -- is that a good level of expectations?
Paul Elenio
I think it is. It's a hard question because things change, right? So this quarter, if you look at our 10-Q, you'll see we reversed some prior [cool interest on some loans that we moted] and defaulted, and then we had some new ones. So it's a constantly moving number.
And we sit down every quarter and we go through with asset management and we look through and say, which ones do we think are going to pay, which ones we think are going to struggle. Once we think they struggle, we're going to be conservative. But I think that's a pretty good run rate right now.
We may have some more mods in the second quarter, I'm not sure, and you'll have the first quarter mods full effect, but we'll see runoff. We're working on a couple of big deals now that if they get over the line given where interest rates are, we could see a chunk of that get paid. So it's all a moving number. So I would just say that $15 million is probably a good estimate going forward.
Rick Shane
Terrific. Thank you and thank you as always for taking my question.
Paul Elenio
Sure. Thanks, sir.
Operator
Leon Cooperman, Omega Family Office.
Leon Cooperman
Thank you. So far, everything I've heard is in line with what you previously have indicated. I had this discussion in the past is why do you take interest rates are too high. I guess the I way I look at the macro economy, stock market's right near high. The speculation in the market is very rapid. And I see no indication interest rates are too high. Why do you feel the interest rates going to go down?
Ivan Kaufman
It's not that I feel whether they go down or up. It's how we think the business will be managed in a different rate environment. I mean, clearly, when rates moved up as they did three or four months, three months ago on our last quarter, we were very bearish and we gave a certain outlook of cash going forward in our dividend going forward. Rates have improved a little bit and improvement of rate has a dramatic impact on our business.
As I mentioned in my comments, our pipeline grew from $1.2 billion to $2 billion in a very short period of time with that rate down. So I don't -- while I may feel rates may go down, I could just tell you how the different rate environment affects our business. And we're at a point in time with this rate environment where it is today, we feel good about it.
If rates move down even low, we feel better. If rates move back up, we feel worse. So rates have moved from down about 50 basis points. It's had a dramatic impact on us already. If it moves lower, it will have even a better impact. So I comment more in terms of how a this will function in a different rate environment.
Leon Cooperman
Got you. Second question for Paul. I got to this call very late. I apologize because I had another call. What was the book value at the end of the quarter?
Paul Elenio
Sure. The book value was [11.98] at the end of the quarter, Lee.
Leon Cooperman
Right. Okay, [11.98]. And in the past, you had an authorization to buy back stock. Is the current environment such that you would rather keep your liquidity and net by stock back below book value? (multiple speakers) I think the question is.
Ivan Kaufman
Yeah. Leon, clearly, our liquidity is a very important item for us. We'll manage our liquidity, we'll manage our opportunities and we'll keep in line on everything. If we see the stock go down and we have an opportunity to gain liquidity in other areas, it's a good return on investment for how we raise our capital and something we would evaluate.
Leon Cooperman
Got you. So you would not -- you're not committed to do a buyback, but you're going to basically look at the various alternatives in the market environment?
Ivan Kaufman
Correct.
Leon Cooperman
All right. Very good. Thank you.
Ivan Kaufman
Thanks, Leon.
Operator
And there are no further questions on the line at this time. I'll turn the call back to Ivan Kaufman for any closing remarks.
Ivan Kaufman
Okay. Thank you all for your participation today and your support. Look forward to next quarterly call. Everybody, have a great day and a great weekend.
Operator
This does conclude today's program. Thank you for your participation and you may now disconnect.
