Please ensure Javascript is enabled for purposes of website accessibility

Arbor Realty Trust (ABR) Q2 2021 Earnings Call Transcript

By Motley Fool Transcribing – Aug 3, 2021 at 9:31PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

ABR earnings call for the period ending June 30, 2021.

Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Arbor Realty Trust (ABR -0.34%)
Q2 2021 Earnings Call
Jul 30, 2021, 10:00 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Good morning, ladies and gentlemen, and welcome to the second-quarter 2021 Arbor Realty Trust earnings conference call. [Operator instructions] I'll now turn the call over to your speaker today, Paul Elenio, chief financial officer. Please begin, sir.

Paul Elenio -- Chief Financial Officer

OK. Thank you, Britney, 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 June 30, 2021. 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.

10 stocks we like better than Arbor Realty Trust
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.* 

They just revealed what they believe are the ten best stocks for investors to buy right now... and Arbor Realty Trust wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of June 7, 2021

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 -- President and Chief Executive Officer

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 outstanding quarter with many significant accomplishments, including exceptional operating results, which continues to demonstrate our unique ability to consistently generate high quarterly earnings and deliver outsized returns in every market cycle. I can't stress enough the importance of having multiple products with diverse income streams, which allows us to consistently grow our earnings and dividends, while others in our space have experienced little or no growth at all. We have a much higher quality of earnings with consistent dividend growth and a very low dividend payout ratio, which is why we strongly believe we should consistently trade at a substantial premium and much lower dividend yield than our peer group.

We also remain extremely well positioned for continued success, giving us great confidence that we will produce outstanding results for the balance of 2021. Our tremendous operating results combined with our strong outlook has allowed us to once again increase our dividend to $0.35 per share. This is our fifth consecutive quarterly dividend increase and our ninth increase in the last 12 quarters, all while continuing to maintain the lowest dividend payout ratio in the industry. We built a premium operating platform, focusing on the right asset classes with very stable liability structures and active balance sheet, GSE agency business, private label program and single-family rental platform producing a long track record of exceptional performance with consistent earnings and dividend growth.

As a result, we have been the top-performing REIT in our space for each and every one of the last five years. Before we dive into the details of our quarterly results and the significant growth we continue to experience in all areas of our business, I want to highlight some of our more notable second-quarter accomplishments. We had a very active and successful quarter in many areas of our business. We produced tremendous transaction volumes originating in excess of $3 billion in new loans and investments this quarter, including over $1.8 billion in balance sheet loan originations, which is a new record.

And just as importantly, our pipeline is currently at all-time highs. As a result, we were very active in the capital markets, successfully raising approximately $400 million of accretive capital in the second quarter to fund this growth. We issued $140 million of common equity, $175 million of five year, 5% unsecured debt and $230 million of new 6.375% perpetual preferred equity, which will allow us to fund our growing pipeline of loans and investments and be extremely accretive to our future earnings and dividends. In fact, this capital was $0.08 to $0.10 accretive in our annual earnings run rate, allowing us to increase our dividend again this quarter.

Every time we raise capital is to fund our growing balance sheet loan business, which is not only high accretive to our current earnings and dividends, but also allows us to build a pipeline for two to three years of new GSE agency loans, showing the long-term growth of our platform and creating higher quality earnings and dividends in the future. We were also very successful in continuing to access the CLO securitization market in the second quarter, closing our 15th largest CLO to date, totaling $815 million with very favorable terms and pricing. We have consistently been a leader in the CLO securitization market as financing a high-quality balance sheet portfolio with the appropriate liability structures continues to be one of our key business strategies. The utilization of these vehicles has contributed greatly to our success by allowing us to appropriately match-fund our assets with nonrecourse, non-mark-to-market long-term debt and generate very attractive levered returns on our capital and provide us with a rock-solid balance sheet.

And in the second quarter, we are very pleased to have closed our second private label securitization totaling $450 million with very effective execution, which contributed greatly to our second-quarter earnings and continues to demonstrate the strength and diversity of our versatile lending platform. Turning now to our second-quarter performance, as Paul will discuss in more detail, our quarterly financial results were once again truly remarkable. We produced distributable earnings of $0.45 per share, which is incredible accomplishment and well in excess of our current dividend, representing a payout ratio of around 78%. Our ability to consistently generate exceptional results and increase our dividend is a true testament to the value of our franchise and the many diverse income streams we have created.

We continue to realize significant benefits from many areas of our diverse operating platform, continued growth in our GSE agency platform which produces strong margins and increased servicing fees, significant contributions from our private label program, record growth and significant benefits from the size and scale of our balance sheet business as well as superior execution on our liability structures, strong performance of our multifamily focused portfolio with very few delinquencies and substantial income from our residential businesses. And these reoccurring benefits, combined with our versatile originations platform, strong pipeline and credit quality of our portfolio puts us in a unique position to be able to continue to produce significant distributable earnings going forward as we're extremely well positioned for future growth and success. And our balance sheet business, we're seeing tremendous growth as deal flows continues to really exceed our expectations. We grew our balance sheet loan book another 18% in the second quarter on record quarterly volume of $1.8 billion and have grown at 35% already this year to $7.4 billion in June -- as of June 30.

Our pipeline is also at an all-time high, which will allow us to meaningfully grow our loan book for the balance of the year. This unprecedented growth has significantly increased our run rate of net interest income going forward. And again, very importantly, these balance sheet loans also create substantial pipeline of future GSE agency loan origination volumes and long-dated servicing revenues, further increasing our future earnings and dividends. It is also very important to stress that over 90% of our book are senior bridge loans, and more importantly, 87% of our portfolio is in multifamily assets, which has been the most resilient asset class in all cycles and continues to significantly outperform all of asset classes in this cycle as well.

Additionally, as we have mentioned in the past, we have very little exposure to the asset classes that have been affected the most by the recession, such as retail and hospitality. And we also have adequate reserves against our positions. During the height of pandemic, we recorded a $7.5 million specific reserve on one of our hotel assets and subsequently used our own capital purchased remaining note at a discount. We worked very hard on the transaction, and I'm extremely pleased to report the successful sale of our position in the second quarter, allowing us to reverse the full $7.5 million reserve, collect approximately $3.5 million of unpaid interest and free up approximately $60 million of our invested capital that we'll redeploy into our balance sheet lending business and generate strong levered returns on this capital.

We have always provided ourselves on investing heavily in our asset management function, and this incredibly successful workout further demonstrates the value of our unique franchise. We continue to experience growth in our GSE agency platform, and we are seeing significant increased momentum in our private label program as well. We originated approximately $925 million in agency loans in the second quarter and $1.3 billion, including our private label business. We are also off to a very good start in the third quarter, and we are expecting to close approximately $300 million of agency loans and $400 million of private label business in July.

Equally as important, we have a robust pipeline, giving us confidence in our ability to produce significant agency and private label volumes for this balance of the year. Our GSE agency platform continues to offer a premium value as it requires limited capital and generates significant long-dated, predictable income streams and produces significant annual cash flow. Additionally, our $26 billion GSE agency servicing portfolio, which has grown 20% in the last year is mostly prepayment-protected and generates approximately $120 million a year and growing reoccurring cash flow, which is up 25% from $95 million annually last year. This is in addition to the strong gain-on-sale margins we continue to generate from our origination platform, which combined with new and increased servicing revenues will continue to contribute greatly to our earnings and dividends.

We're also very pleased with the significant growth we are seeing in our single-family rental platform. In the second quarter, we closed another $110 million of single-family rental product and currently have well over $1 billion of additional deals in our pipeline, making us very optimistic about the growth in this segment of our business. We also believe we are the leader in the single-family build-to-rent space, which provides us with the opportunity to originate construction, bridge and permanent loans on the same transaction. Again, we are very excited about the growth in this platform, and are confident this business will be a significant driver of yet another source of income, further diversifying our lending platform.

In summary, we had an exceptional quarter and are well positioned to have another outstanding second quarter -- second half of the year. We have a very versatile operating platform that is multifamily centric with a strong pipeline, significant servicing income, sizable balance sheet portfolio, single-family rental platform and residential mortgage business, providing us many diverse and growing business lines that position us exceptionally well for continued future success. And we are confident that a superior multi-tiered operating platform will allow us to continue to generate high-quality earnings and dividends and preserve our long-term standing as the best-performing company in our space. I will now turn the call over to Paul to take you through our financial results.

Paul Elenio -- Chief Financial Officer

OK. Thank you, Ivan. As Ivan mentioned, we had another exceptional quarter, producing distributable earnings of $69 million or $0.45 per share. These results once again translated into industry high ROEs of approximately 17% for the quarter and allowed us to increase our dividend to an annual run rate of $1.40 a share.

And this quarterly dividend increase reflects our fifth consecutive quarterly increase and our 21st increase in the last 10 years. Our financial results continue to benefit greatly from many aspects of our diverse business model, including significant growth in our agency, private label and balance sheet business platforms that produce substantial gain on sales margins, long-dated servicing income and strong levered returns on our capital, the income we continue to generate from our residential banking joint venture and the credit quality of our portfolio. As we guided to on our last call, we did see some more normalized results from our residential banking business joint venture as volumes and margins return to more normalized levels. We recorded approximately $5 million of income from this investment in the second quarter, which contributed approximately $0.03 a share on a tax-effected basis to our distributable earnings.

And based on the current market conditions, we expect this trend to continue for the balance of the year, resulted in estimated income from this investment of between $4 million to $5 million a quarter going forward. Our adjusted book value at June 30 was approximately $11.35, adding back roughly $61 million of noncash general CECL reserves on a tax-effected basis. This is up approximately 5% from $10.86 last quarter, largely due to our second-quarter capital raises, the significant earnings we generated in the second quarter in excess of our dividend, as well as from the successful recovery of a $7.5 million reserve on a hotel asset during the quarter. And as a reminder, we have very little remaining exposure to the asset classes that have been affected the most by the recession, such as retail and hospitality.

Our total exposure to these asset classes is approximately $100 million or about 1% of our portfolio, which we believe we have adequately reserved for giving us great confidence that our adjusted book value accurately reflects the impact of the recession. Looking at the results from our GSE agency business. We originated $925 million of loans and recorded $1 billion of loan sales in the second quarter. The margin on our GSE agency loan sales was up significantly to approximately 1.83% in the second quarter from 1.47% in the first quarter, mainly due to a higher percentage of FHA loan sales in the second quarter, which carry a much higher profit margin.

Additionally, as Ivan mentioned, we were very active in our private label program, originating $377 million of new loans in the second quarter as well as completing our second private label securitization totaled $450 million with very effective execution, resulting in an all-in margin for the second quarter of 2.37% on our total loan sales. And in the second quarter, we also recorded $26 million of mortgage servicing rights income related to $1.2 billion of committed loans, representing an average MSR rate of around 2.20% compared to 2.53% last quarter, mainly due to a higher mix of FHA and private label loans in the second quarter that contain a lower servicing fee. Our servicing portfolio did grow another 2% this quarter to $26 billion at June 30, with a weighted average servicing fee of around 46 basis points and an estimated remaining life of nine years. This portfolio will continue to generate a predictable annuity of income going forward around $120 million gross annually, which is up approximately $25 million or 25% on an annual basis from the same time last year.

Additionally, prepayment fees related to certain loans that have yield maintenance provisions did increase this quarter to $4.2 million compared to $2.7 million from last quarter. We also continue to see very positive trends related to our GSE agency business collections, which we believe reflects the strength of our borrowers and the quality of our portfolio. We only have a handful of delinquent loans outstanding and extremely low forbearance numbers in our portfolio through June 30. Loans in forbearance represent less than 0.3% of our $19.2 billion Fannie loan book and around 2.5% of our $4.7 billion Freddie Mac loan book, which is down substantially from March as we have had no new request for forbearances in the last several months, and a significant amount of our loans have completed the program and are now current.

In our balance sheet lending operation, we grew our portfolio 18% to $7.4 billion in the second quarter on record quarterly volume of $1.8 billion. Our $7.4 billion investment portfolio had an all-in yield of 5.33% at June 30 compared to 5.65% at March 31, mainly due to higher rates on runoff as compared to new originations during the quarter. The average balance in our core investments was up to $6.6 billion this quarter, from $5.9 billion last quarter, mainly due to a significant growth we experienced in both the first and second quarters. The average yield on these investments was up to 5.85% for the second quarter compared to 5.72% for the first quarter mainly due to receiving $3.5 million in back interest from the successful workout of a hotel asset and for more acceleration of fees from early runoff in the second quarter, which was partially offset by higher interest rates on runoff as compared to originations in the second quarter.

Total debt on our core assets was approximately $6.4 billion at June 30, with an all-in debt cost of approximately 2.79%, which was down from a debt cost of around 2.9% at March 31, mainly due to a reduction in cost of funds from our new CLO vehicle and reduced rates in our warehouse and repurchase agreements during the second quarter. The average balance on our debt facilities was up to approximately $5.9 billion for the second quarter from $5.2 billion for the first quarter, mostly due to financing the growth in our portfolio and issuing $175 million of new unsecured notes during the second quarter. And the average cost of funds in our debt facilities decreased to 2.89% for the second quarter from 2.99% for the first quarter. Overall, net interest spreads in our core assets increased to 2.96% this quarter compared to 2.73% last quarter, again mainly due to interest collected on the sale of our position in a hotel asset and more acceleration of fees from early runoff in the second quarter.

And our overall spot net interest spreads were down to 2.54% at June 30 from 2.75% at March 31 due to yield compression on new originations as compared to runoff. Lastly, the average leverage ratio on our core lending assets, including the trust preferred and perpetual preferred stock as equity was up slightly to 84% in the second quarter from 83% in the first quarter. And our overall debt-to-equity ratio on a spot basis was flat at 2.9:1 at both June 30 and March 31, excluding general CECL reserves. That completes our prepared remarks for this morning.

I'll now turn it back to the operator to take any questions you may have at this time. Britney?

Questions & Answers:


[Operator instructions] And we will take our first question from Steve Delaney with JMP Securities. Your line is now open.

Steve Delaney -- JMP Securities -- Analyst

Thanks and good morning Ivan and Paul. And it's getting redundant, but I have to say, congrats on another excellent quarter. The thing that struck me this quarter, looking over the results is, not only are you doing the basic blocking and tackling, but the level of sophistication, tapping the capital markets for various transactions just continues to improve. So props on all that.

Speaking of the capital markets transaction, and I think all of us have been interested in your private label program that you started last summer, or that you had your first transaction. Can you comment a little bit, you mentioned better execution, but could you comment a little bit maybe specifically like where you saw AAAs go out relative to swaps? And I think the thing that I'd really like to know is, how do you estimate what your pre-loss return might be on the approximate eight and a half percent B-piece that you're holding on to? Thanks.

Ivan Kaufman -- President and Chief Executive Officer

Sure. I don't have in front of me exactly where we executed the AAAs until we can furnish that to you. But we have very, very good execution. Our first private label deal came out during the initial aspects of COVID.

It was the first of our brand. This is our second deal. And of course, will be a serial issue based on our pipeline. And the more we issue, the better our execution.

So we're really pleased with where we're trading. And we're really pleased with the reception. And it's both our name and reputation in the multifamily market, the fact that we're a big CLO issue, there's a lot of cross-over buyers, and we expect our execution to get better and better each time. And then we're even evaluating whether we want to do a public deal which even improves our execution given the flow that we have.

So we're optimistic about our market participation relative to the expected losses.

Steve Delaney -- JMP Securities -- Analyst

Or -- pre the return actually, pre-loss return.

Ivan Kaufman -- President and Chief Executive Officer

Yes, we -- I think where we calculate holding the B piece is that anywhere between a 10% and a 12% return factor, the losses and prepayments. And as you know, our loss history on our multifamily portfolio is nominal, next to nothing. But that's all factored in. We carry it at the proper return.

And there are a lot of efficiencies by generating and holding our own B piece with the new Dodd-Frank rules and stuff, that gives us a competitive advantage in the market as well.

Steve Delaney -- JMP Securities -- Analyst

Yes. And I guess one of the benefits here, I mean, obviously, you still do your CLO business, but these are fixed rate loans with longer duration than you would see in your bridge portfolio, right? I mean, so you're putting a 10% to 12% return, but it's something I think you're probably looking at a much longer life to that investment, I assume then when you when you put a CLO together?

Ivan Kaufman -- President and Chief Executive Officer

Yeah, it's an average life of probably nine years on a 10% to 12% coupon, which is very hard to get that kind of return for that kind of term. So we're pretty pleased with that element of it. And once again, the further long-dated income streams that we're getting not only on servicing, but on that portion of the B piece, which we own, control and created. And anything we create is what we consider to be a superior product and better risk-adjusted returns.

Steve Delaney -- JMP Securities -- Analyst

Right. And it sounds like based on the July originations, I think you mentioned, or Paul did $400 million. It would seem likely that you'll be doing at least one more of these before the end of 2021, I assume. What are you...

Ivan Kaufman -- President and Chief Executive Officer

Yes, we're optimistic. Yes, we're optimistic based on pipe margin that we can protect the market. Yes.

Steve Delaney -- JMP Securities -- Analyst

OK. And just one final thing. I'll leave the details to others. But obviously, a change at the top of the FHA in the last month or so.

Any thoughts on maybe help what policy shifts you might expect over the next year or so from Sandra Thompson compared to Calabria, who I think we all know was a bit of a hawk with respect to GSE risk taking or volumes or that type of thing. So just curious with your -- how you -- what your initial reaction was to that change? And whether how it might impact your business one way or the other?

Ivan Kaufman -- President and Chief Executive Officer

Yes, I think it's good for the GSE business and for us. And in particular, there's going to be more and more of an effort on the affordable side and putting more money toward the affordable aspect of GSE business. And we think it's going to be a more favorable environment for firms like us and I think it will be more lucrative.

Steve Delaney -- JMP Securities -- Analyst

Thank you, Ivan and congrats again, Paul.

Paul Elenio -- Chief Financial Officer

Thanks, Steve.


We will take our next question from Stephen Laws with Raymond James. Your line is now open.

Stephen Laws -- Raymond James & Associates -- Analyst

Thank you. Good morning and to echo Steve's comments, these are very repetitive calls but for good reasons. So congratulations on another continued growth and another strong quarter. And thinking about the SFR opportunities, what is the pipeline there? What's the competition like? It seems like a number of competitors continue to talk about opportunities there.

And kind of as you stand today, when you put a new dollar to work, where do you think those ROEs can go as you scale that business?

Ivan Kaufman -- President and Chief Executive Officer

The SFR business is a very attractive business segment right now especially the build-to-rent communities. We got in early, got aggressive early and built up a nice pipeline. Spreads have compressed quite a bit. But then again, our borrowing and our liability structure has gotten more competitive.

What we like about the business, specifically on the build to rent, the construction component requires more expertise, not everybody is in it. Once you do the construction loan, you end up with a bridge loan on a takeout loan. We have locked up and have great relationships with a lot of the key players in the market. And I think good players in the market.

There's a lot of new entrants, you have to proceed with caution. Late entrants into the market is not always the best person to do business with. So I think we're pretty pleased with the pipeline we have and we're pleased with the opportunities that we have and the spreads we have. There will be some compression because it is more competitive and we'll just be selective.

We're just thrilled that we were early in. We're able to develop these great relationships and create some borrower loyalty on our side of the coin.

Stephen Laws -- Raymond James & Associates -- Analyst

Thanks, Ivan. Paul, to touch on prepayment, I think there's some -- I noted in the Q, there is some prepay income, but I think it was a historical comparison. So the portfolio growth, I'm not surprised that's up. But can you talk about the expected repayments and maybe early income from any early repayments as we think about the portfolio maturing in the next six to 12 months?

Paul Elenio -- Chief Financial Officer

Sure. So Steve, you're right. Prepayments on the servicing side or runoff on the servicing side was almost double what it was last quarter. As you remember from last quarter, I thought last quarter was surprisingly light at around $400 million, came in around $800 million this quarter.

And what was interesting, a little interesting phenomenon occurred, we did, as you mentioned, get a little bit more prepayment fees than I expected, that we modeled and that we were getting over the last few quarters. And when I went and looked at certain of those transactions, it wasn't that people were refiling away from us. Again, we're really focus, laser-focused on retaining the business. So if someone's going to refi, we want to make sure we get that opportunity.

But we saw a little bit in the second quarter and I don't know if it's a trend that will continue. It's hard to predict. It's there was a lot more sale volume at really appreciated values and people were fine writing those yield maintenance checks when they were getting significant increases in the value of their properties. So that was a little phenomenon we saw.

Like Ivan's view on whether we think that continues, it's hard to predict but that's kind of what we saw in the second quarter.

Stephen Laws -- Raymond James & Associates -- Analyst

Great. Thanks for your time Ivan and Paul. Appreciate it.

Ivan Kaufman -- President and Chief Executive Officer

Thanks, Steve.


And we will take our next question from Rick Shane with J.P. Morgan. Your line is now open.

Rick Shane -- J.P. Morgan -- Analyst

Hey, guys. Thanks for taking my question this morning. Actually, just one quick detail. You guys have gone through everything thoroughly.

When we look at the capitalization rate on the MSR for the quarter, it was down a little bit sequentially. Just curious, looking at the fees and duration of the servicing rights, I don't see any change there. So I'm just curious what's driving that? Is it a more conservative assumption or are we missing something?

Paul Elenio -- Chief Financial Officer

Hey, Rick. It's Paul. Thanks for the question. Good to hear from you again.

No, as I mentioned in my commentary, it was just mix. In the quarter, we had more committed loans because that's how we do our MSR capitalization is on committed loans. We had more committed loans on the private label side and on the FHA side of the business. So they drove higher margins, but they also drove lower MSR rates only because the FHA deals and the private label deals have like a 20 basis point servicing fee and Fannie is up in the 50s.

So it's just a matter of mix. If that mix changes and it likely will over time, it will be more normalized. It just happened to be a specific quarter where we had more mix in the lower servicing fee earning assets.

Rick Shane -- J.P. Morgan -- Analyst

Got it. And when we think about the private label, there's nothing from a duration perspective that's materially different than the rest of the portfolio. I know there's a lot of protection on the agency business. I want to make sure I understand the private label business as well in terms of pre-payment protections.

Ivan Kaufman -- President and Chief Executive Officer

It's the same, if not greater, pre-payment protection. So you have some options on some of the agency business to pay off less penalty toward the end of the term. This is a little bit longer in duration. I would say it's probably 10% to 15% longer in duration.

Rick Shane -- J.P. Morgan -- Analyst

Terrific. Hey, guys. Thank you so much for the question. Appreciate the time this morning.

Ivan Kaufman -- President and Chief Executive Officer

Thanks, Rick.


And we will take our final question from Jade Rahmani with KBW. Your line is now open.

Ryan Tomasello -- KBW -- Analyst

Hi, everyone. This is Ryan Tomasello on for Jade. Ivan, I was wondering if you can just discuss your general outlook for GSEs, the GSEs in the second half of the year in terms of volumes and overall performance?

Ivan Kaufman -- President and Chief Executive Officer

I think the GSE business is going to be stronger in the second half than it was in the first half. Out of the gate, specifically in the second quarter, the GSEs widened their margins. And I also think that we're dealing with some residual collaborator issues. It's my feeling based on lower interest rates and then wanting to meet their volume targets that there will be a little bit more GSE originations in the first half, particularly everybody is loading up right now, building up their pipeline.

I think you'll see a little bit more activity. And I think some of the barriers that Calabria was bringing to the table, I think, are being stripped away at this point and you have kind of the existing regime, which has been in place under Sandra Thompson, probably will go back to a little bit of the historical way of operating. So I'm very optimistic that the GSE business for the balance of the year will be as strong, if not stronger than it was in the first half of the year.

Ryan Tomasello -- KBW -- Analyst

And can you talk about some of the technology initiatives that you have been investing behind, specifically in the small balance lending space? And I guess just overall, how you're thinking about technology investments generally across the Arbor platform going forward?

Ivan Kaufman -- President and Chief Executive Officer

I think the way we're approaching technology is we have a goal of where we want to be in two or three years in terms of eliminating certain redundancy functions as well as personnel functions. And that's piece by piece. We think there's going to be a lot of advancement on the servicing side, on the origination side and the way we use data. We have a three year plan, and we're doing it piece by piece by piece, making continual improvements.

As technology improves, it facilitates our ability to implement the different processes and smooth out our workflow processes. But I believe we can continue to grow our business and maintain a very small and incremental build to our personnel taking advantage of those different technologies across the spectrum. But it's not an overnight thing. It's progress made in each segment of the business and then running them all in tandem and having that benefit the whole process.

Ryan Tomasello -- KBW -- Analyst

Great. And then final one for me regarding the private label business. I was wondering if you see an opportunity, Ivan to partner with other nonbank lenders on private label CMBS issuance to scale volumes for that platform?

Ivan Kaufman -- President and Chief Executive Officer

I think that's something that we will look to do in the future. What we wanted to do is get our brand going, use our own originations. We do work with a lot of brokers who can turn it up. We're always cautious on having too big of a pipeline and being able to execute the market very effectively.

I think once we do our third one and if we end up looking and doing public deals, then maybe we'll consider co-originating with a few others. At the end of the day, we will own and hold our own B pieces. So we're very particular who we partner with, who underwrites the loans and who originates them. So we'll proceed with caution as we build that process and our brand up.

Ryan Tomasello -- KBW -- Analyst

Great. Thanks for taking the questions.

Ivan Kaufman -- President and Chief Executive Officer

Thanks, Ryan.


And I would now like to turn the program over to Ivan Kaufman for any additional or closing remarks.

Ivan Kaufman -- President and Chief Executive Officer

Yes. Well, thanks again for everybody participating and investing with us and following us. And I guess the reoccurring theme from everybody in what we've been able to do is have consistent dividend increases, which is really a unique thing in our space. We're the only company, as I mentioned in my prepared statements that does not only have a stable dividend and why we think we should be trading at a premium.

But more importantly, we have exhibited unprecedented growth on a consistent basis. And thanks again for your confidence and look forward to our next earnings call. Thank you very much. Have a great day.

Duration: 24 minutes

Call participants:

Paul Elenio -- Chief Financial Officer

Ivan Kaufman -- President and Chief Executive Officer

Steve Delaney -- JMP Securities -- Analyst

Stephen Laws -- Raymond James & Associates -- Analyst

Rick Shane -- J.P. Morgan -- Analyst

Ryan Tomasello -- KBW -- Analyst

More ABR analysis

All earnings call transcripts

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Arbor Realty Trust Stock Quote
Arbor Realty Trust
$14.59 (-0.34%) $0.05

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.