Q1 2024 Arbor Realty Trust Inc Earnings Call

Participants

Paul Elenio; Chief Financial Officer; Arbor Realty Trust Inc

Ivan Kaufman; Chairman of the Board, President, Chief Executive Officer; Arbor Realty Trust Inc

Steve DeLaney; Analyst; JMP Securities

Stephen Laws; Analyst; Raymond James Financial, Inc.

Brian Violino; Analyst; Wedbush Securities

Jade Rahmani; Analyst; Keefe, Bruyette & Woods, Inc.

Lee Cooperman; Private Investor; Omega Family Office, Inc.

Rick Shane; Analyst; JPMorgan Chase & Co.

Crispin Love; Analyst; Piper Sandler Companies

Presentation

Operator

Good morning, ladies and gentlemen, and welcome to the First Quarter 2024 Arbor Realty Trust Earnings Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions) I would now like to turn the call over to your speaker today, Paul Elenio, Chief Financial Officer. Please go ahead.

Paul Elenio

Okay. Thank you, James, 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 31st, 2024. 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 doing 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 beliefs, assumptions, and expectations of future performance, taking into account 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 to everyone for joining us on today's call. As you can see from this morning's press release, we had another very strong quarter despite extremely challenging environment. O ur diversified business model with many countercyclical income streams to once again generated distributable earnings in excess of our dividend with a payout ratio of around 90% from first quarter.
This is clearly well above the performance swap peers, most of which are paying dividends out of capital quarter forced to cut their dividend substantially. And just as importantly, in a time of tremendous stress, we've managed to maintain our book value of the last 15 months while recorded reserves for potential future losses, which clearly differentiates differentiates us from everyone else in our peer group, t he vast majority of which have experienced significant book value erosion in this environment.
On the last call, we gave guidance that the first two quarters of this year would be the most challenging part of the cycle, and we are a period of peak stress. We also mentioned that if rates stay higher for longer, that dislocation potentially leak into third and possibly even the fourth quarter as well. And given the recent backup in rates combined with the Fed somewhat more hawkish you on the timing of potential rate cuts in 2024, we believe this is a distinct possibility shutdown.
We have been preparing for this. As a result, we have been extremely active over the last four months and working through our balance sheet ballpark with governments that demonstrated tremendous patients and Poise dealing with the most recent wave of delinquencies. Again, our goal is to maximize shareholder value v ery often. It's not just the value of the collateral, but the recourse provisions that we evaluate and determine how to approach each individual circumstance.
The short-term nature of having a delinquent loan will not impact our decision making process to achieve the correct economic result on a transaction. With this philosophy in mind, we had a tremendous amount of success in the first quarter, working through a substantial amount of our delinquencies and modifying these loans by getting bars to bring a significant amount of fresh equity to the table and recapitalizing their deals.
As a result, in the first quarter, we successfully modified 40 loans totaled $1.9 billion, which fresh capital being brought to the table in every one of these deals. This includes cash to purchase the low interest rate caps, fund interest rate and then ratio of reserves bring any past due loans and pay down balances where appropriate.
In fact, bars objected approximately $45 million of new capital into these deals with $1.65 billion of these laws purchasing new interest rate caps. We have also been highly effective refinance some deals for our agency business as well as leveraging our long-term standing relationships.
Many quality sponsors to step in and take over assets that are underperforming and assumed debt. It's difficult and complicated work in an extremely challenging environment. I can't say enough about the efforts put forth by our entire organization and have successfully managing through the teeth of this dislocation. We're very pleased with the success we have had to date and expect to remain extremely busy over the next few months and steadfast now approach as we continue to manage through the back balance of this downturn.
Clearly in this environment, having adequate liquidity is paramount to our success. As a result, we have focused heavily on maintaining a very strong liquidity position. Currently, we have approximately $1 billion of cash between $800 million of corporate cash and $600 million of cash and our CLOs that result in additional cash equivalent of approximately $150 million. And having this level of liquidity is crucial in this environment as it provides us with the flexibility needed to manage through this downturn.
Taking advantage of opportunities will exist in this market to generate superior returns on capital. As you may recall, a few months back, we allocated $150 million of our capital stock buyback to us to buy back stock knowing full well that will be volatility in the market allow us to potentially repurchase our stock at discounts to book value and generate high double digit returns on capital.
In April, we repurchased approximately $11.4 million of stock at an average price of $12.19 with a 4% book value and generating a current dividend yield of 14% and the yield of approximately 16% on distributable earnings. This is a tremendous return on capital and with around 138 million of remaining capital a vailable for this strategy will continue to be opportunistic in our approach to buying back stock at a valid utility process. We also continue to do an excellent job of deleveraging our balance sheet, reducing our exposure to short-term debt.
We're down to approximately $2.6 billion in outstandings with our commercial with our commercial banks from a peak of around $4.2 billion, and we have 72% of our secured indebtedness and non-mark-to-market non-recourse log cost CLO vehicles. CLO vehicles are major part of our business strategy as they provide this trend dislocation due to the nature of the non mark-to-market non-recourse elements.
In addition, they contribute significantly to providing a low-cost alternative to warehouse banks, which at times in times like this have fluctuating pricing leverage points and parameters. In fact, one of the significant drop drivers of our income streams are low cost CLO vehicles as well as a fixed rate debt and equity instruments. We have that make up a big part of our capital structure.
We have a very strategic approach to capitalizing on our business with a substantial amount of our low-cost long-dated funding sources, which has allowed us to continue to generate outsized returns on capital.
Turning now to our first quarter performance, as Paul will discuss in more detail, we had a very strong first quarter producing distributable earnings of $0.48 per share, representing a payout ratio of around $0.90, c learly have the wherewithal to create a large cushion between our earnings and dividends over the last summer.
Several of us very well in this location and believe that this cushion, combined with our diversified business model uniquely positions us as one of the only companies in this space with the ability to continue to provide a sustainable dividend. GSE agency business, we had a relatively strong first quarter despite interest rates remaining stubbornly high. We reached $850 million in the first quarter.
Our pipeline remains elevated. Traditionally, first quarter production numbers are normally lower than the rest of the year, and certainly, the backup in rates has not helped this trend. Despite the current rate environment, we continue to remain a lot to maintain a large pipeline, and we are not seeing significant fallout in this market rally deals as just being pushed out further.
We have also done a great job in converting our balance sheet loans at the agency product, which has always been one of our key strategies and a significant differentiator from our peers. That's also very important to emphasize that a significant portion of our business is in the workforce housing part of the market.
As you know, Fannie and Freddie have a very specific mandate to address our workforce flash affordable housing needs, which is a major issue in the United States, making offer a great partner that can venues to fill a very important mandate for the federal agencies as well as a social needs of society. And again, the agency business of the premium values are requires limited capital and generate significant long-dated predictable income streams and produces significant annual cash flow.
To this point point, our $31 billion fee based services portfolio, which grew 9% year over year, generates approximately $122 million a year reoccurring cash flow. We also generate significant earnings on our escrow and cash balances, which acts as a natural hedge against interest rates. In fact, we are now earning 5% on around $2.8 billion, which combined with our servicing and cover the annuity total.
Approximately $260 million of annual gross cash earnings were $1.25 a share. This is an addition to strong gain on sale margins we generate from our originations platform, an extremely important to emphasize that our agency business generates 40% of our net revenues, the vast, vast majority of which occurs before we even can analyze each day.
This is completely in the car platform is something we feel is not being fully reflected in our valuation and our balance sheet business. We continue to focus on working through our loan book and converting our multifamily bridge loans into Agency products allow us to do delever our balance sheet and produce significant long day income streams.
In the first quarter we produced another $540 million of balance sheet, run off $210 million, roughly 40% of which was recaptured into new agency loan originations. With today's high interest rates, we are chipping away at converting logs agencies, but if the 10-year gets back to 4%, again, it will become far more meaningful. And every quarter point drop in interest rates from now will accelerate this conversion process significantly.
A s we touched on the last quarter, w e are well positioned to step back to the lending market and garner accretive opportunities continue to grow our platform. We believe that the type of markets you can originate some of the highest quality loans with attractive returns, which will allow us to grow our balance sheet and build up our pipeline of future agency deals. In our single-family rental business.
We're off to a great start this year as we continue to be the leader and a lender of choice in the premium markets we traffic and we have a very strong first quarter with $172 million of fundings and a lot of $412 million of commitments signed up. We also have a large pipeline or may committed to this business added off the street turns out that capital through construction bridge and permanent lending opportunities and generate strong levels of returns in the short term, while providing significant long-term benefits by further diversifying our income trends.
We are also very excited about the opportunities we're starting to see in our newly added construction lending business. This is a business we believe we can produce very accretive returns on capital by generating 10% to 12% unlevered returns initially and eventually mid-to high returns on capital. Once we leverage this business, we have started to see a nice increase in our pipeline of potential deals was roughly $200 million under application and another $300 million in annualized at a certain number of additional deals we are currently screening.
We believe this product is very appropriate for our platform as it offers the best returns on capital for construction bridge and permanent agency lending opportunities. In summary, we had a very productive first quarter are working exceptionally hard to manage through the balance of this dislocation. We understand very well as challenges that lie ahead.
I feel we are very well positioned. Our earnings exceeded our dividend or a run rate. We are invested in the right asset class with very stable liability structures, highlighted by a significant amount of nonrecourse non-mark-to-market CLO debt with pricing that is well below the car market. We also we're also well capitalized with significant liquidity out of the best in class asset management function and seasoned executive team for giving us confidence in our ability to manage through the cycle and continue to be the top performer company in our space.
I'll now turn the call over to Paul, who will take you through the financial results.

Paul Elenio

Thans, Ivan. And as Ivan mentioned, we had another very strong quarter producing distributable earnings of $97 million or 47 $0.47 per share and $0.48 per share, excluding a $1.6 million realized loss on a previously reserved for non-performing loan that paid off and it's like this count in the first quarter. These results translated into our leads are approximately 17% for the first quarter and resulted in a dividend payout ratio of around 90%.
As Ivan mentioned, we successfully modified 40 loans in the first quarter totaling $1.9 billion, all within invested additional capital as part of the month, the Canadian terms $1.1 billion. In these ones, we required mines to invest additional capital that we can do deals with us, providing some form of temporary relief to obtain full feature the dairy to modify and an average to approximately 7% with only around 2% of the regional subset of these loans totaling $113 million, made up the vast majority of our less than 60 day delinquencies at December 31st, which we received all has to interest on these loans importance of the modified terms.
Last quarter, we disclosed two pools of loans that are relevant in total delinquencies in our balance sheet loan book, our 60 plus day delinquencies and loan that was less than 60 days past due that we were only reporting interest income on the extent cash was received in 60 plus day delinquent loans or nonperforming loans were approximately $275 million last quarter, and the less than 60 days past due loans were $57 million.
N onperforming loan numbers are now $465 million this quarter to approximately $175 million of loans, progressing from less than 60 days delinquent greater than 60 days past due and roughly $50 million of net new additions for the quarter. The less than 60 days past due loans on non-accrual loans came down to $489 million this quarter, mostly the $713 million of loans being successfully mine site.
As I mentioned earlier in mind that $175 million of loans moving the 60 plus days delinquent, which was partially offset by price totaling $420 million of new loans this quarter than we did not accrue interest on. So in summary, our total delinquencies are down 23% from $1.23 billion last quarter to $954 million. Physical one, which is significant progress, again, deliver tremendous success we had in modifying resolving loans and and the continued strong collection efforts.
And while we expect to continue to make considerable progress in resolving these delinquencies at the same time, we do anticipate that moving new delinquencies in this challenging environment. We also continue to build our CECL reserves, recording an additional $18 million on our balance sheet loan book in the first quarter.
We feel it's very important to emphasize that despite booking approximately $108 million CECL reserves across our platform in the last 15 months, $80 million, which was in our balance sheet business, we still grew our book value per share and 1% to $12.64 a share at $3.31 2024 from $4.53 a share at $12.31 2022, which is well above the performance of our peers, the vast majority of which have experienced significant book value erosion in this market.
Additionally, we are one of the only companies in our space that has seen significant book value appreciation over the last five years with 36% growth during that time period versus our peers whose values have declined an average of approximately 18%. And our agency business, we had a solid first quarter with $850 million in originations and $1.1 billion of loan sales.
The margin on these loan sales team and 1.54% this quarter compared to 1.32% last quarter, mainly due to some larger deals in the fourth quarter and that carry lower margins. We also recorded $10.2 million of mortgage servicing rights income related to $775 million of committed loans in the first quarter, representing an average MSR rate of around 1.31% compared to 1.55% last quarter, mainly due to a higher percentage of Fannie Mae loan commitments in the fourth quarter, which contain higher servicing fees have been a servicing portfolio also grew to approximately $31.1 billion in March 31st, with a weighted average estimated remaining life of around eight years.
This portfolio will continue to generate predictable annuity of income going forward of around $122 million gross annually. And this income stream, combined with our earnings interest grows and gain on sale margins represent 40% of our net revenues in our balance sheet. Lending operation are $12 million.
Investment portfolio had an all-in yield of 8.81% at March 31st compared to 8.9% at December 31st, due to a combination of an increase in nonperforming loans and some new loans that we did not did not make their full payment as of March 31st that we decided not to accrue for, which was partially offset by modifications in the first quarter on the vast majority of our less than 60 days past due loans from us garner, the average balance in our core investments was 12.5 million this quarter compared to 13 billion last quarter, still run off exceeding originations in the fourth and first quarters.
The average yield on these assets increased to nine point for 4% from 9.31% last quarter due to the successful modification of the bulk of our past due loans, allowing us to collect a majority of the bank interest owned on our fourth quarter delinquencies, which was partially offset by an increase in nonperforming loans and some new non-accrual loans in the first quarter. Total debt on our core assets decreased to approximately $11.1 billion at March 31st from $11.6 billion at December 31st.
The all-in cost of debt was flat at approximately 7.4 or 5% at $12.31 and $3.31. The average balance and our debt facilities is approximately $11.4 million for the first quarter compared to $11.8 million last quarter. The average cost of funds and our debt facilities was basically flat at 7.5% for the first quarter compared to 7.48% in the fourth quarter.
Our overall net interest spreads in our core assets increased 1.94% to 1.94% this quarter, the 1.3% last quarter, again from the successful modification of the majority of our past due loans from last quarter and our overall spot net interest spreads were down to 1.37% at March 31st from 1.53% at December 31st. Mostly doing an increase in nonperforming loans during the quarter.
Lastly, as we continue to shrink our balance sheet loan book by moving loans to our agency business, we have delevered our business 20% over the last 15 months to a leverage ratio of 3.2 to 1 from a peak of around 4.0 to 1. Equally as important unleveraged consensus around 72%, non-recourse nonmarket the market CLO debt with pricing that is below the current market, providing strong unlevered returns on our capital. That completes our prepared remarks this morning, and I'll now turn it back to the operator to take any questions you may have at this time.

Question and Answer Session

Operator

(Operator Instructions) Steve DeLaney, Citizens JMP.

Steve DeLaney

Morning, everyone. Thank you. Great effort on the modifications in the first quarter, I just want to be clear, and Paul, appreciate that paragraph. I believe that that is new, but I'm pretty sure we understand it. In each of those cases, the borrowers put additional capital into to the transactions.

Paul Elenio

That's correct. In fact, we just do we disclose in the prepared remarks in Ireland section that $1.9 billion that we modified every single one of those deals requiring borrowers to bring capital to the table. And and the capital that was injected in those deals was $45 million or Steve, I want to give you -- I wonder if you want to shed a little light on that.

Ivan Kaufman

As you can go back to my earnings script, I think about three or four quarters ago when people talk about how complex and difficult market was, I think I gave a perspective that in general, you know, bars going to have to contribute about 3% of capital to the table. And that capital is generally going to be used by interest rate caps and that differential to wear rates rates are too this elevator environment and were normal pay rate would be on the high fours, low fives. So that's kind of reflective of the capital that's needed to buy caps or right-size assets. That's the products that level on an annual basis of the recapitalization that's needed in this current elevated interest rate environment.

Steve DeLaney

Appreciate that. And further, we understand that 23 of the 39 are now on paid and accrued, is that while they will pay some of the new agreed to just accrued some portion of the cash payment required, is that correct?

Paul Elenio

That is correct. And as I said in my can commentary, Steve and those loans were floating rate loans from anywhere from three and quarter over the fourth quarter of ours. And those guys are paying after 9% and we modified the deals, we modified it to a payout of about 7% was less than 2% being deferred. And so we've got we're getting a really strong period on those deals.

Steve DeLaney

That's good color. Thank you, Paul. And just a quick follow-up for my second question, Ivan, the new construction loan product. Strategically, obviously credit is higher and given the CRE market uncertainties that are out there. But we hear banks are really pulling back broadly on commercial real estate. I work for a bank each state on that opportunity largely being created the void that with banks pulling back and companies like Arbor are going to have to step in and provide capital for for CRE and multifamily construction loans.

Ivan Kaufman

Without a doubt, I mean, the landscape for regional banks is not good for another regional failed and fill the last week. There's been a series of failures, the commercial real estate book that exists in the banks, troubled, and I don't think there's much activity going on. So we've we've created a program to step in and fill that void. Our single-family data rent business exploded into some other regionals.
We're doing that and the construction lending activity is an okay business. How it's a decent business is a lot of work, a lot of labor. What makes the most attractive for us? As we said in my comments, three returns on capital, the construction lending life, which is a decent level business, but we talk about the labor and everything else that goes along with that. I'm not sure I would love that business. But when you add the fact that you could do a stabilized bridge loan and then ultimately do agency loan, that's an extraordinarily exciting business for our platform.

Steve DeLaney

Great progress this past year.

Ivan Kaufman

Thank you, Steve.

Operator

Stephen Laws with Raymond James.

Stephen Laws

Good morning. I appreciate the comments in the details you've already provided. No, Paul, I wanted to touch base on net interest income on our interest income, pretty big lift. Can you talk about the mix there? As far as I think you mentioned in your prepared remarks, some of that was the recovery of some interest from delinquent loans from Q4 to help us to that is taken calm and how much of that is possibly fees on modifications? How do we think about the mix of interest income?

Paul Elenio

So the so there's a mix issue as you laid out, Steve, and I think that it's really important to talk about the success we had in the first quarter on a substantial amount of what I'll call the non-accrual loans we disclosed last quarter. So just give me some color. We had 957 million of loans that were less than 60 days past due to the last quarter. That was not did not accrue all the interest to the extent that they made some payments. And at the full payment, we elected to be conservative and not none of that interest income that that interest income that we did not work on.
Those loans was $12 million during the quarter. We modified and seven 12 million of those 977 million of loans, and we've got $10 million in bank interest. So the first quarter was listed by 10 million of back interest that was collected on loans that we did not previously accrued. And then that was offset by the fact that we have a new mortgage loans, 489 of non-accrual loans and some more non-performing loans that net of the payments they made this quarter was was around another, not an eight or $9 million we didn't accrue.
So the way the way I look at net interest income for the quarter is we had a list of around $10 million payments back. We had a little bit of the drag of about$ 8 million on new loans and then at an acceleration fees as a little bit lighter this quarter, I think by $1 million now that's how you get to a flat number. And I think the way I look at it going forward is that we just keep rolling.
We keep rolling these loans and we keep working. And so now we have a new list of loans that we're working through now and we'll take some time, but we're optimistic we'll be able to get through multiple for these loans in and get a successful outcome on those. So it's a little bit choppy. I understand that that would happen. So we did have a lot of success this quarter. Getting defaulted loans are delinquent loans in the prior quarter to be completely paid back. When we modify the disease and condition of our myhive, you got to bring a long-term incentive or they're all that long term.

Stephen Laws

Great. Really helpful color. And you guys mentioned a couple of times in the prepared remarks about the dividend and earnings covering the build. Can you talk about your cash earnings maybe now that you've got some deferred interest and picking company thinking about cash earnings versus distribution versus the dividend level as we kind of move over the balance of the year, which I don't know, you mentioned, given this rate environment, we still have a little bit of work to do over the next couple of quarters.
So can you give you some color on a couple of things you pointed out?

Paul Elenio

We did not modify a $1.9 billion loans during the quarter, $1 billion, one of them. We gained some form of we believe that we believe for the quarter would have accrued to about $4 million. But what we do here at armor and adding in more detail is we spent a lot of individual mode in determining whether we think that deferred interest is going to be collectible and it's done on a case-by-case basis.
Sometimes, we're more conservative on deals that are then than maybe others would be. So that $4 million we have accrued interest. We only include $2.5 million for the quarter, and so we did not accrue $1.5 million. So that's the that's the that's when hit the first quarter on those assets.
But I'll say, listen, this is a myriad of different things that go into distributor will go into gas going into cash, for instance. So there's there's $2.5 million in earnings that is being accrued, but there was $10 million or $11 million that came in from last quarter that we weren't accruing. In addition to that, we booked specific reserves on our Agency book of another $2.9 million.
If you look at our debt has definitely gone foreclosure process with the agencies. We take that as the distributable loss, even though the cash has been sent out. So we feel good about our cash position. If you look at our cash flow from operations has seen very strong and we certainly feel we have plenty of cash to cover our dividend until there's a mix of different things that go in and out of the numbers.
But that's kind of a flavor, Steve, does that helps you?

Stephen Laws

Yes, that's great. And one final, if I can sneak it in your can you talk about the CLO, how many loans and the buyout during the quarter and then the 600 million of sale of liquidity, how do you intend to use that? And then can you put modified loan side into the CLOs are how we use that, that flexibility? Thank you.

Paul Elenio

So I'll give you the buyout numbers, and I'll let Ivan talk about the strategy in the CLO vehicles. So in the buyout numbers for the quarter, r emember from our last quarter disclosure, we told you we bought $90 million of loans out of our CLOs in February. That part of the first quarter numbers. Those those loans where we weren't and review. Think elsewhere.
We bought another $15 million one loan out in March, and that alone has been banked one of our warehouse facilities and then enable we bought another $120 million. And total purchases through April from January to April were $223 million, but with only $20 million of those loans haven't been reworked and rebound in April and $120 million.
We bought out $100 million. It was one deal in that deal in early April was recap with a significant amount of capital, both in table. I think it was $10 million to $15 million. Loan was weaker and paid down to $95 million. So we have $100 million of loans now, $95 million alone performing and so from plus 300.
And we have a whole host of new equity in their with new sponsors. That be also the $223 million we repurchased CLOs. Since January to today, only $20 million of those loans having and we worked and relever it, and we're working on those now. And I think the color on the strategy in vehicles, listen, we're very sensitive to the cash we have in our CLOs are utilizing those vehicles because a low-cost vehicles and we work extremely hard and producing new loans.
So let mandate or taking loans that are currently on our balance sheet that fit those parameters. So it's our job to maximize the value of those. We've done a pretty good job. We feel relatively comfortable at based on our pipeline of new opportunities in existing opportunities that will variable there effectively utilize that cash in the vehicle, but make no mistake about it.
It's a business objective of ours that really adds to our income stream by leveraging off the low cost vehicles that are in place.

Stephen Laws

I appreciate the comments this morning and thank you.

Paul Elenio

Thanks, Steve.

Operator

Brian Violino, Wedbush Securities.

Brian Violino

Great. Good morning. Thanks for taking my question. It sounds like you anticipate that the loan loss allowance is going to continue to increase in some form in the near term. Just wondering just some thoughts on expectations for where the reserve might go from here and any dynamics of our modifications could impact your CECL reserve and going forward?

Paul Elenio

So let me just give a little overview and I covered it in my comments in this elevated interest rate environment. We expect if it stays this way that you'll see a consistency in the next few quarters? We've seen in the first quarter, we've talked historically over the last several earnings calls that the first second quarter would be the toughest. Clearly, the first quarter showed a little greater stress than the fourth quarter to the SEC.
And if rates stay elevated, I mean, clearly the news that came out and the drop in a 10 year and a change today, there's a lot of optimism already and it dropped, as I mentioned, not only my comments will have to signal Second impact and it just doesn't impact, you know, the ability to convert off-balance sheet. It's an optimism in the market and returned to liquidity a nd the ability of people are recapped deals.
So everything will have to do if interest rates. But if they stay in the range that we've seen in the first quarter, we expect the next few quarters to be pretty consistent with the first quarter. No, I'd agree with that, Brian. That's that's how we're looking at it. So reserves will be obviously, based on where the macro environment goes. And if interest rates stay elevated, we could see some additional reserves kind of in line what we've seen. But it'll all be based on what we see over the next couple of quarters.

Brian Violino

Great. Thanks for taking my question.

Operator

Jade Rahmani, KBW.

Jade Rahmani

Thank you very much and taking a step back for a moment, would you say and I would say you've been ahead of the curve in expecting no credit issues. Would you say credit performance to date is in line better or worse than what you'd have expected? Compared to say what you thought in the fall and maybe you could think about certain aspects that's at the borrower wherewithal, liquidity in the multifamily space, which is very strong underlying property level cash flow.
And finally, evaluations cap rates. How would you think about about where things are tracking?

Ivan Kaufman

Yes. Sounds like you are going to be a college professor quite equipped for that, but I'll give you a little bit of a few in terms of the things that impacted us that we couldn't anticipate, I think COVID at a huge impact on the market. That point, could we anticipate and the impacts really or tendency that was able to be subsidize their rent payments and not pay rents for many years and then all the sudden start to have to pay rent. So I think there was a higher level of delinquencies that were anticipated.
Nobody quite understood that somebody elevated occupancies and rent increases were a result of government subsidies and people artificially being able to stay at this, but really not have the income streams. And then the combination and some of the jurisdiction of the court systems not affecting people and having a lot of economic vacancy, which we really historically haven't had.
Those have been on a dissipated issues and those have created elevated delinquencies. And if you combine that with elevated short-term interest rates, those are complexities that occurred. In a ddition, you've had a lot of elevated insurance costs and a lot of areas, Southeast areas like that. Nobody anticipated insurance costs going up to those categories. So those were running anticipated issues that occurred. Now we've experienced and I think we've covered a little bit on the call.
I think there's a lot of elevated for the industry to the brokerage industry, which has now been dealt with through the agencies. So they were a lot of elevated purchase prices, things of that nature. So those are currently unanticipated things that occurred in the market that have created additional stress beyond what we anticipated. And that's kind of my overall comment is top of the things that we didn't anticipate that we're dealing with that created additional stress.
And in terms of the future outlook, you say, you would expect this quarter next quarter to be peak stress unless elevated interest rate. It's possible that extend into the third quarter and fourth, but in terms of the actual credit outcomes in our losses that you're taking seats, or was there what do you think it make that worse? Or would you say you're expecting it to be the next few quarters to be pretty similar to what happened this quarter?
I can only tell you how we feel based on our current book and our work with full knowledge of our problems in this interest rate environment for all interest rate environment as a lot to do with the ability for people to recap their loans, clearly of short-term rates go down by 0.5 to 3 points I mentioned earlier becomes point point and a half and a level of optimism to resolve paperless laws and the ability to attract capital becomes very simple.
If short-term rates were 3% and five and a quarter, people wouldn't have to be recapping the loans they have to cash flow of laws or the marginal. At this level, people have to bring three points tabled by interest rate cap to bring up to a neutral cash level. So that's why we're talking about it as things exist today.

Jade Rahmani

Thank you. And just lastly, on cash flow from operations and something I look at closely and clearly the servicing portfolio as well as the GSE business overall helps support the cash flow. I did that then in the first quarter and I think usually the use of working capital dividends cost about 400 million per quarter. Do you expect cash flow from operations to match the dividend on a full-year basis?

Ivan Kaufman

We do. I mean, I think when you look at the cash flow, you get to back out certain items like changes in in other assets and liabilities. And I think if you do that, we're still above the dividend. So we do expect it to continue that way. Obviously, the market get significantly more stressed than there is more a cool features than our than there are now than that and that could change.
But right now, we don't see a runway for that would be low. And then our dividend.

Jade Rahmani

Thanks very much.

Operator

Lee Cooperman, Omega Family Office.

Lee Cooperman

Ivan, I'm just curious how things are evolving in a manner that you expected? And if you were very negative a year ago and you're very correct. And I know you have $100 million left of the repurchase program and you bought stock at 2019. If things evolve their manner, where you would want to continue to buy back stock i f we got back down here, or do you think things should be differently than you anticipated?

Ivan Kaufman

So I think buying back stock below book is extremely attractive to us. As I mentioned in my comments, it becomes very complicated for us. Now when we buy back stock market in a blackout period, it's done on a program basis. They're all very, very often know this is this is very sensitive subject, very, very often most city attacks, a commodity company or blackout periods raising.
Most of the publications come out a week before. And so we're not allowed to comment for a week or month. They know we can't comment. So what kind of defense was only defense. We have a buyback program, but we can't be in a position will pull wakes up one day and say I want to buy this much back that day.
We have computer-driven program as you come to your comment very specifically over $138 million that we will buy back to buy back generally what we're in a blackout period below book. If the stock gets hit anything substantially, I would go to the Board needs to buy back more. I think it's a great return on investment.

Lee Cooperman

Basically their judgment means you have confidence in the realistic value of your book. You think 64 is a real number currently for the weakness in the environment, which have been very great. And I congratulate you. You've been a good steward of the shareholders' money.

Ivan Kaufman

Thank you, Lee.

Operator

Rick Shane, JPMorgan.

Rick Shane

Hey, guys. Thanks for taking my questions this afternoon or this morning. After $1.9 billion in mode during the quarter, I'm curious. How much for loans that were less than 60 days delinquent and how much more on loans more than 60 days delinquent? And what are the $1.9 billion, how much were in the CLOs?

Paul Elenio

Yes. So let me give some numbers really appreciate the question. So as I said in my prepared remarks, at the end of the $1.9 billion, we marketed $1.1 billion, then we might even with some form of rate relief. But out of the one nine, $713 million of those loans were less than 60 days delinquent, and we weren't accruing from the prior quarter. Another, I think $40 million of loans were loans that were non-core performing that we were able to modify take out of our nonperforming bucket, although new loans came in.
And so that's the market and how we look at the at the modifications as far as how many were in the CLO, we don't have that here because I tried to give you guys numbers. I think we've got a little bit off track last quarter talking about CLO debt agencies. And I think what people care about is total delinquencies, whether they're going to see a lower number.
And that's what we're giving you, which is that $954 million I disclosed today, $464 million in nonperforming integrated and 60 and 49 that are less than 60, which is all inclusive of loans, whether they're in the CLOs on our balance sheet in a way outlined, I can't tell you exactly, but I would say the majority of those loans will probably in the CLOs because the bulk of our loans are financed in the CLOs.

Rick Shane

Got it. Yes, that makes sense to. And again, I do I would agree with you that the the commentary you had casing and I think everybody spent a lot of time trying to parse it out. So I appreciate you trying to put it in sort of a clearer context this quarter.
I would say it's interesting as you've been providing that on in some of the detail, I've been trying to tie it out to on what's stated either in the press release or the 10-Q and some of it's there are some of it's not it would be great, if I may.
On a go forward basis, we can see that because it's just a lot easier to sort of match up if we can see in print and understanding what's going on there. Take everything into that kind of to react to that comment in the press release, it's a little bit less disclosure, but in Q2 it's very robust. And I think tell me if I'm wrong and you reiterated that we do talk about the buckets of loans we might and we have three buckets in the queue.
You'll see a subset of the loans is the $713 million less than six. So I tried to roll it forward for you guys basically saying, hey, we had $937 million of loans that were less than 60 days that are non-core bucket. That's in the Q that's now at 49. And how you get there is $175 million of loans moved up 713 loans or margin and 420 million loans were added in the same for the nonperforming bucket. So I do think it's all there.

Paul Elenio

Yes, we can have a discussion offline in every region. Again, you don't think that's correct. Happy to take any suggestion that had approved the improved disclosure. But we tried we hard to be very transparent and we really can follow the numbers that I just wasn't able to find the for 89, I think in that. And but I'll go back on that. Yes, it's definitely in a paragraph there.
You'll see in fact, strange question was the repurchase that you guys have cited in the first quarter or second quarter to date? I'm sorry, what was that question a gain?

Rick Shane

Reconciled in the near the share repurchases, the $12 million of share repurchases in Q1 or Q2? It was Q2 in April.

Paul Elenio

Okay. Yes, it's funny. I couldn't find it in the cash-flow statement. I the way I read it. I thought it was in Q1 and then didn't see in the cash-flow statement and that makes sense. And in the press release, solid should see in April then. Okay. Again, we're moving pretty fast in press releases for me.

Rick Shane

And last question, I think you talked a little bit about some of the competitors, some some of the peer performance, et cetera. On. one thing I would note is that you guys in the quarter modified $1.9 billion of loans and retained the 45 million hours of infusion, primarily in the form of caps. They're not a lot of pure disclosure on that.
The only one that equates to about a 2.4%, consistent with your sort of 3% of replacement of expiring, perhaps the only other peer that week 5 million of our margin in the quarter, $125 million of capital infusion. So almost 10 times the amount of on a percentage basis.
I'm just curious if you clearly are getting additional interest rate caps, but given the movement in cap rates, does it make sense to be more aggressive in terms of gaining additional equity paydowns and equity investments or bond paydowns as well. I would love to get as much as we can.

Paul Elenio

So you have to be very pragmatic about how to improve your position on each loan. You have to keep in mind that we have a lot of good borrowers who are failing their assets substantially. I can't speak for the other peers. I can't speak for the assets you're referring to. I can only speak to our book to the fact that we continue to prove our book and our and we look at each one individually and trying to improve the position of each individual long. So we're satisfied with the work we've done and you have to look at the context of, you know, what we're doing in each particular circumstance and how if we're trying to improve our position on that loan. We've got a good job with it.

Rick Shane

Got it. And I apologize. But the nice thing about getting to go fast is that I'd like to ask one extra question. Look, you guys have been very clear about the opportunity associated with our rates coming down. I presume mobile, you have a lot of borrowers to our goals on had been bullish on rates. And I do wonder with the change in tone over the last two or three months.
Are you finding that you have borrowers who are sort of hang on waiting for an inflection in rates and are now sort of throwing their hands up and saying wait a second? We've been paying out of pocket for a while and this no longer makes sense is that a conversation that's picking up?

Paul Elenio

This has been going on for two years has been extraordinarily volatile. And clearly we've had a recent move up in rates and rates to volatile. They go up. They go down were as high as five went down to 3.5 and volatility is good. It gets people to move out today. The biggest and harvesting right now is extraordinarily inverted yield curve is net of five and a quarter so forth yet, you know, 4% to 3.5%, you pay 0.5% as opposed to a fixed rate loan, which maybe you're paying high fives.
It's a lot to carry. People have been carrying for a long period of time. Spire early remarks. If you combine the economic occupancy of people have been fighting at some point, a rise in expenses, spent a lot of low to carry able to carry a lot of strengths. I do think we're seeing more per ton economic occupancy. I think the trend is clearly our friend, it take insurance costs.
Finally, a stock price more significantly. I think people are focusing on improving their assets and the performance to their assets. I think there was a period of time where now people are putting a lot of time and effort to buying assets to not running their assets. I think the attention has changed, but now they're really running their assets, improving operations.
So a lot has to do with where the yields volatility. People feel allows the one days at the next say they feel better. And right now I will tell you that you've seen a 20 basis point drop in the 10 year in the last five or seven days. I guarantee you people are going to lock in some nuances, convert, bring capital to the table, and I'll have a nice fixed rate loan shift further drop in the 10 year. I think there's a lot more optimism. The best thing that we can say is a drop in the short term rates of cap rates.
Cap costs went up significantly when the boot changed and we had a bar was related to buy a cap and bring money to the table is waiting weighted cost of another $500,000. I think where the trend changes in terms of what cap costs are going to be, it could be a lot easier for borrowers. So not an answer in a vacuum million that I suppose we look at optimism is a good thing. And I understand what you're saying from a rate perspective is perhaps it pessimism as a lender to get your borrowers to start to move that.
I can tell you one thing. The bars will you shouldn't take a 4% in our 10 year at market rates in our 60 days ago when it hit 40% jump in also keep one thing in mind of 4%, 10-year spreads were about 20 basis points tighter. So 4% is almost equivalent to three seven five three. It is spread through about 20 basis points tighter right now. So 4% a lot more attractive than it was six to nine months ago.

Rick Shane

I certainly appreciate the questions. We got to get another one, but I do want to mention and I don't know if it's apples to apples. You're referring to that disclosed more capital injected, but is that has significant momentum office exposure.

Paul Elenio

That capital injection is going to be in a different ratio than for multi, but that's just some. And I think it manner it is and it is.

Rick Shane

Thank you.

Operator

Crispin Love, Piper Sandler.

Crispin Love

Thanks. Good morning, everyone. Appreciate taking my question is on following up on, I believe Stephen's question earlier in the 10 Q, it looks like you're deferring interest until maturity on about a 1 billion of the modified loans. And so just looking at the first quarter, you had 320 million total interest income. Can you just break out how much of that was picked on a dollar basis and how you'd expect to trend over the remainder of the year?

Paul Elenio

Yes, that's what I tried to do early interest and so on that $1.1 billion that we had about 1.6% deferral that number for the quarter, because it wasn't a full quarter. We knew the mines was like $4 million and only only $2.5 million, if we actually came to an income, we deferred $1.5 million. So we probably got I just annualize that and then it's hard for me to give you a number because new loans will come on.
Other loans will get resolved. And in addition to that, and we've done a nice job of with strong collection efforts and collecting non-accrual loans in the subsequent quarter. So we have some success in the second quarter on the non-core loans of 400 million, 9 million that we're not accruing interest on the national help that number. So it's very hard to predict what that's going to look like.
We're going to keep an eye on it, but that's kind of how I would want to now take a $1 billion and one 86 and one and that on a run rate. And then there's some portion of that that we're not accruing, as I mentioned, because we look at it on an individual basis.

Crispin Love

Okay, great. Is it just be clear, are you saying that $4 million, w hat can I just wanted to make sure I have that number correctly. I give or take a look at the numbers, but that's about right. Okay, perfect. And then can you just disclose what your average net interest margins are on the modified loans is before and after the modifications on approximate level?

Paul Elenio

Well, I tried to get an idea of the best they could. So these were three 25 to 4 25 floating deals. And so that's anywhere with 5.33. That's anywhere from, call it 8.5 to 9.5, and now they're paying 6.95. And we're deferring 1.80. So it's the same number we should split between pay and I recall.

Crispin Love

Right, okay. That makes sense. And that's against kind of a cost of borrowing in the 7.5% radios, right?

Paul Elenio

Of course, the total borrowings. But like and a lot of these loans are going to be lower, which is a lot lot less than that number book indicate.

Crispin Love

Perfect. Thank you. Appreciate you taking my questions.

Operator

That will conclude the question-and-answer session. I will now turn the call over to Ivan Kaufman, CEO, for any additional closing remarks.

Ivan Kaufman

Okay. Thank you, everybody, for your time. And I wish everybody a good weekend.

Operator

This does conclude today's conference call. Thank you for your participation. You may now disconnect.