GENERAL: 800.ARBOR.10

Arbor Realty Trust Reports Second Quarter Results and Increases Quarterly Dividend to $0.29 per Share

Aug 2, 2019

Company Highlights:

  • GAAP net income of $0.31 and AFFO of $0.33 per diluted common share1
  • Declares a cash dividend on common stock of $0.29 per share, our third increase in the past year, representing a 16% increase from a year ago
  • Raised $115.6 million of capital in a common stock offering
  • Improved funding sources by reducing pricing, increasing capacity and extending the maturities of existing facilities

     Agency Business

  • Segment income of $15.6 million
  • Loan originations of $1.29 billion
  • Servicing portfolio of $19.46 billion, up 3% from 1Q19 and 14% from a year ago

     Structured Business

  • Segment income of $19.9 million
  • Strong portfolio growth of 15% on record originations of $1 billion
  • Closed an eleventh collateralized securitization vehicle totaling $650.0 million

UNIONDALE, N.Y., Aug. 02, 2019 (GLOBE NEWSWIRE) -- Arbor Realty Trust, Inc. (NYSE: ABR), today announced financial results for the second quarter ended June 30, 2019.  Arbor reported net income for the quarter of $28.9 million, or $0.31 per diluted common share, compared to $17.2 million, or $0.25 per diluted common share for the quarter ended June 30, 2018. Adjusted funds from operations (“AFFO”) for the quarter was $37.9 million, or $0.33 per diluted common share, compared to $26.4 million, or $0.29 per diluted common share for the quarter ended June 30, 2018.1

Agency Business

Loan Origination Platform

Agency Loan Volume  (in thousands)
    Quarter Ended
    June 30,
 2019
  March 31,
 2019
Fannie Mae $   937,977   $   546,886
Freddie Mac     234,851       192,492
FHA       43,558       1,110
CMBS/Conduit     71,900       105,425
Total Originations $   1,288,286   $   845,913
         
Total Loan Sales $   923,046   $   1,101,766
         
Total Loan Commitments $   1,302,128   $   846,963
 

For the quarter ended June 30, 2019, the Agency Business generated revenues of $52.7 million, compared to $47.2 million for the first quarter of 2019. Gain on sales, including fee-based services, net was $14.2 million for the quarter, reflecting a margin of 1.54% on loan sales, compared to $16.4 million and 1.49% for the first quarter of 2019. Income from mortgage servicing rights was $18.7 million for the quarter, reflecting a rate of 1.44% as a percentage of loan commitments, compared to $14.2 million and 1.68% for the first quarter of 2019. 

At June 30, 2019, loans held-for-sale was $601.8 million which was primarily comprised of unpaid principal balances totaling $597.3 million, with financing associated with these loans totaling $597.2 million.

Fee-Based Servicing Portfolio

Our fee-based servicing portfolio totaled $19.46 billion at June 30, 2019, an increase of 3% from March 31, 2019, primarily a result of $1.29 billion of new loan originations, net of $635.6 million in portfolio runoff during the quarter. Servicing revenue, net was $12.6 million for the quarter and consisted of servicing revenue of $24.9 million, net of amortization of mortgage servicing rights totaling $12.3 million.

    Fee-Based Servicing Portfolio ($ in thousands)
    As of June 30, 2019   As of March 31, 2019
    UPB Wtd. Avg.
Fee
Wtd. Avg.
Life (in years)
  UPB Wtd. Avg.
Fee
Wtd. Avg.
Life (in years)
Fannie Mae   $   14,122,916 0.495 % 7.8   $   13,719,351 0.507 % 7.6
Freddie Mac       4,657,097 0.301 % 10.9       4,515,829 0.303 % 10.8
FHA       684,527 0.153 % 19.1       648,583 0.155 % 19.6
Total   $   19,464,540 0.436 % 9.0   $   18,883,763 0.446 % 8.7

Loans sold under the Fannie Mae program contain an obligation to partially guarantee the performance of the loan (“loss-sharing obligations”). At June 30, 2019, the Company’s allowance for loss-sharing obligations was $34.4 million, representing 0.24% of the Fannie Mae servicing portfolio.

Structured Business

Portfolio and Investment Activity

  • Originated 47 loans totaling $1.01 billion, of which 37 were bridge loans for $942.7 million
  • Payoffs and pay downs on 43 loans totaling $503.1 million

At June 30, 2019, the loan and investment portfolio’s unpaid principal balance, excluding loan loss reserves, was $3.93 billion, with a weighted average current interest pay rate of 6.64%, compared to $3.41 billion and 7.05% at March 31, 2019.  Including certain fees earned and costs associated with the loan and investment portfolio, the weighted average current interest pay rate was 7.34% at June 30, 2019, compared to 7.71% at March 31, 2019.

The average balance of the Company’s loan and investment portfolio during the second quarter of 2019, excluding loan loss reserves, was $3.62 billion with a weighted average yield of 8.24%, compared to $3.34 billion and 7.84% for the first quarter of 2019. The increase in average yield was primarily due to higher fees on loan payoffs in the second quarter as compared to the first quarter, largely the result of default interest received.

At June 30, 2019, the Company’s total loan loss reserves were $71.1 million on five loans with an aggregate carrying value before loan loss reserves of $131.3 million. The Company also had two non-performing loans with a carrying value of $2.5 million, net of related loan loss reserves of $1.7 million.

Financing Activity 

The Company completed its eleventh collateralized securitization vehicle (“CLO XI”) totaling $650.0 million of real estate related assets and cash. Investment grade-rated notes totaling $533.0 million were issued, and the Company retained subordinate interests in the issuing vehicle of $117.0 million. The facility has a three-year asset replenishment period and an initial weighted average interest rate of 1.44% over LIBOR, excluding fees and transaction costs.

The Company completed the unwind of CLO VI, redeeming $250.3 million of outstanding notes repaid with proceeds received from the refinancing of CLO VI’s outstanding assets primarily within CLO XI, which has an interest rate 104 basis points lower than CLO VI. As a result of this transaction, the Company recognized an expense of $1.2 million from the acceleration of deferred fees.

The balance of debt that finances the Company’s loan and investment portfolio at June 30, 2019 was $3.62 billion with a weighted average interest rate including fees of 4.96% as compared to $3.13 billion and a rate of 5.22% at March 31, 2019. The average balance of debt that finances the Company’s loan and investment portfolio for the second quarter of 2019 was $3.35 billion, as compared to $2.96 billion for the first quarter of 2019. The average cost of borrowings for the second quarter was 5.35%, compared to 5.24% for the first quarter of 2019. The increase in average costs was primarily due to the acceleration of fees related to the early repayment of debt.

The Company is subject to various financial covenants and restrictions under the terms of its collateralized securitization vehicles and financing facilities. The Company believes it was in compliance with all financial covenants and restrictions as of June 30, 2019 and as of the most recent collateralized securitization vehicle determination dates in July 2019.

Capital Markets

The Company issued 9.2 million shares of our common stock receiving net proceeds of $115.6 million. The proceeds were primarily used to make investments and for general corporate purposes.

Dividends

The Company announced today that its Board of Directors has declared a quarterly cash dividend of $0.29 per share of common stock for the quarter ended June 30, 2019, representing an increase of 4% over the prior quarter dividend of $0.28 per share and 16% from a year ago. The dividend is payable on September 3, 2019 to common stockholders of record on August 15, 2019. The ex-dividend date is August 14, 2019.

The Company also announced today that its Board of Directors has declared cash dividends on the Company's Series A, Series B and Series C cumulative redeemable preferred stock reflecting accrued dividends from June 1, 2019 through August 31, 2019. The dividends are payable on September 3, 2019 to preferred stockholders of record on August 15, 2019. The Company will pay total dividends of $0.515625, $0.484375 and $0.53125 per share on the Series A, Series B and Series C preferred stock, respectively.

Earnings Conference Call

The Company will host a conference call today at 10:00 a.m. Eastern Time. A live webcast of the conference call will be available at www.arbor.com in the investor relations area of the website. Those without web access should access the call telephonically at least ten minutes prior to the conference call. The dial-in numbers are (866) 516-5034 for domestic callers and (678) 509-7613 for international callers. Please use participant passcode 6947538.

After the live webcast, the call will remain available on the Company's website through August 31, 2019.  In addition, a telephonic replay of the call will be available until August 9, 2019. The replay dial-in numbers are (855) 859-2056 for domestic callers and (404) 537-3406 for international callers. Please use passcode 6947538.

About Arbor Realty Trust, Inc.

Arbor Realty Trust, Inc. (NYSE:ABR) is a nationwide real estate investment trust and direct lender, providing loan origination and servicing for multifamily, seniors housing, healthcare and other diverse commercial real estate assets. Headquartered in New York, Arbor manages a multibillion-dollar servicing portfolio, specializing in government-sponsored enterprise products. Arbor is a Fannie Mae DUS® lender and Freddie Mac Optigo Seller/Servicer. Arbor’s product platform also includes CMBS, bridge, mezzanine and preferred equity lending. Rated by Standard and Poor’s and Fitch Ratings, Arbor is committed to building on its reputation for service, quality and customized solutions with an unparalleled dedication to providing our clients excellence over the entire life of a loan.

Safe Harbor Statement

Certain items in this press release may constitute forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.  These statements are based on management’s current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Arbor can give no assurance that its expectations will be attained.  Factors that could cause actual results to differ materially from Arbor’s expectations include, but are not limited to, continued ability to source new investments, changes in interest rates and/or credit spreads, changes in the real estate markets, and other risks detailed in Arbor’s Annual Report on Form 10-K for the year ended December 31, 2018 and its other reports filed with the SEC. Such forward-looking statements speak only as of the date of this press release. Arbor expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Arbor’s expectations with regard thereto or change in events, conditions, or circumstances on which any such statement is based.

1. Non-GAAP Financial Measures

During the quarterly earnings conference call, the Company may discuss non-GAAP financial measures as defined by SEC Regulation G. In addition, the Company has used non-GAAP financial measures in this press release. A supplemental schedule of non-GAAP financial measures and the comparable GAAP financial measure can be found on page 11 of this release.

Contacts:  
Arbor Realty Trust, Inc.
Paul Elenio, Chief Financial Officer
516-506-4422
pelenio@arbor.com
Investors:
The Ruth Group
Janhavi Mohite
646-536-7026
jmohite@theruthgroup.com
Media:
Bonnie Habyan, Chief Marketing Officer
516-506-4615
bhabyan@arbor.com
 
   



 
 ARBOR REALTY TRUST, INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF INCOME - (UNAUDITED) 
($ in thousands—except share and per share data)
                   
      Quarter Ended   Six Months Ended
      June 30,   June 30,
        2019       2018       2019       2018  
                   
Interest income   $   82,171     $   59,295     $   153,448     $   110,908  
Interest expense       48,284         37,884         90,149         71,271  
  Net interest income       33,887         21,411         63,299         39,637  
                   
Other revenue:                
Gain on sales, including fee-based services, net       14,211         15,622         30,600         33,815  
Mortgage servicing rights       18,709         17,936         32,941         37,571  
Servicing revenue, net       12,612         10,871         26,164         20,418  
Property operating income       3,147         2,964         5,950         5,874  
Other income, net       1,393         (470 )       (734 )       2,408  
  Total other revenue       50,072         46,923         94,921         100,086  
                   
Other expenses:                
Employee compensation and benefits       29,022         26,815         60,786         56,309  
Selling and administrative       10,481         8,873         20,242         17,789  
Property operating expenses       2,691         2,856         5,086         5,652  
Depreciation and amortization       1,909         1,845         3,821         3,691  
Impairment loss on real estate owned       1,000         2,000         1,000         2,000  
Provision for loss sharing  (net of recoveries)       368         348         822         821  
Provision for loan losses (net of recoveries)       -          (2,127 )       -          (1,802 )
  Total other expenses       45,471         40,610         91,757         84,460  
                   
Income before extinguishment of debt, income from                
  equity affiliates and income taxes       38,488         27,724         66,463         55,263  
Loss on extinguishment of debt       -          -          (128 )       -   
Income from equity affiliates       3,264         1,387         5,415         2,132  
(Provision for) benefit from income taxes       (4,350 )       (4,499 )       (4,341 )       4,285  
                   
Net income       37,402         24,612         67,409         61,680  
                   
Preferred stock dividends       1,888         1,888         3,777         3,777  
Net income attributable to noncontrolling interest       6,598         5,557         12,066         14,547  
Net income attributable to common stockholders   $   28,916     $   17,167     $   51,566     $   43,356  
                   
Basic earnings per common share   $   0.32     $   0.26     $   0.59     $   0.68  
Diluted earnings per common share   $   0.31     $   0.25     $   0.57     $   0.66  
                   
Weighted average shares outstanding:                
  Basic       89,955,923         65,683,057         87,567,171         63,773,306  
  Diluted       113,624,384         90,055,170         110,779,680         87,420,543  
                   
Dividends declared per common share   $   0.28     $   0.25     $   0.55     $   0.46  
                   



 
 ARBOR REALTY TRUST, INC. AND SUBSIDIARIES 
 CONSOLIDATED BALANCE SHEETS 
($ in thousands—except share and per share data)
               
          June 30,   December 31,
            2019       2018  
          (Unaudited)    
Assets:        
Cash and cash equivalents   $   198,917     $   160,063  
Restricted cash       316,455         180,606  
Loans and investments, net       3,836,554         3,200,145  
Loans held-for-sale, net       601,827         481,664  
Capitalized mortgage servicing rights, net       276,648         273,770  
Securities held to maturity, net       86,017         76,363  
Investments in equity affiliates       31,159         21,580  
Real estate owned, net       13,382         14,446  
Due from related party       16,986         1,287  
Goodwill and other intangible assets       113,364         116,165  
Other assets        110,421         86,086  
  Total assets   $   5,601,730     $   4,612,175  
               
Liabilities and Equity:        
Credit facilities and repurchase agreements   $   1,621,678     $   1,135,627  
Collateralized loan obligations       1,875,444         1,593,548  
Debt fund       68,422         68,183  
Senior unsecured notes       210,963         122,484  
Convertible senior unsecured notes, net       253,729         254,768  
Junior subordinated notes to subsidiary trust issuing preferred securities       140,587         140,259  
Due to related party       7,219         -   
Due to borrowers       92,296         78,662  
Allowance for loss-sharing obligations       34,417         34,298  
Other liabilities       110,997         118,780  
  Total liabilities       4,415,752         3,546,609  
               
Equity:        
  Arbor Realty Trust, Inc. stockholders' equity:        
    Preferred stock, cumulative, redeemable, $0.01 par value: 100,000,000        
      shares authorized; special voting preferred shares; 20,484,094 and        
      20,653,584 shares issued and outstanding, respectively; 8.25% Series A,            
      $38,787,500 aggregate liquidation preference; 1,551,500 shares issued and            
      outstanding; 7.75% Series B, $31,500,000 aggregate liquidation preference;            
      1,260,000 shares issued and outstanding; 8.50% Series C, $22,500,000            
      aggregate liquidation preference; 900,000 shares issued and outstanding       89,501         89,502  
    Common stock, $0.01 par value: 500,000,000 shares authorized; 94,225,567            
      and 83,987,707 shares issued and outstanding, respectively       942         840  
    Additional paid-in capital       998,897         879,029  
    Accumulated deficit       (72,321 )       (74,133 )
Total Arbor Realty Trust, Inc. stockholders’ equity       1,017,019         895,238  
               
Noncontrolling interest       168,959         170,328  
Total equity       1,185,978         1,065,566  
               
Total liabilities and equity   $   5,601,730     $   4,612,175  
               



 
 ARBOR REALTY TRUST, INC. AND SUBSIDIARIES 
 STATEMENT OF INCOME SEGMENT INFORMATION - (Unaudited) 
(in thousands)
                   
      Quarter Ended June 30, 2019
                   
      Structured
Business
  Agency
Business
  Other /
Eliminations (1)
  Consolidated
                   
Interest income   $   76,144   $   6,027     $   -      $   82,171  
Interest expense       44,716       3,568         -          48,284  
  Net interest income       31,428       2,459         -          33,887  
                   
Other revenue:                
Gain on sales, including fee-based services, net       -        14,211         -          14,211  
Mortgage servicing rights       -        18,709         -          18,709  
Servicing revenue       -        24,936         -          24,936  
Amortization of MSRs       -        (12,324 )       -          (12,324 )
Property operating income       3,147       -          -          3,147  
Other income, net       290       1,103         -          1,393  
  Total other revenue       3,437       46,635         -          50,072  
                   
Other expenses:                
Employee compensation and benefits       6,815       22,207         -          29,022  
Selling and administrative       5,328       5,153         -          10,481  
Property operating expenses       2,691       -          -          2,691  
Depreciation and amortization       509       1,400         -          1,909  
Impairment loss on real estate owned       1,000       -          -          1,000  
Provision for loss sharing (net of recoveries)       -        368         -          368  
  Total other expenses       16,343       29,128         -          45,471  
                   
Income before income from equity affiliates and                
  income taxes       18,522       19,966         -          38,488  
Income from equity affiliates       3,264       -          -          3,264  
Provision for income taxes       -        (4,350 )       -          (4,350 )
                   
Net income       21,786       15,616         -          37,402  
                   
Preferred stock dividends       1,888       -          -          1,888  
Net income attributable to noncontrolling interest     -        -          6,598         6,598  
Net income attributable to common stockholders   $   19,898   $   15,616     $   (6,598 )   $   28,916  
                   
(1) Includes certain income or expenses not allocated to the two reportable segments. Amount reflects income attributable to the noncontrolling interest holders.
                   



 
 ARBOR REALTY TRUST, INC. AND SUBSIDIARIES 
 BALANCE SHEET SEGMENT INFORMATION - (Unaudited) 
(in thousands)
             
    June 30, 2019
    Structured
Business
  Agency
Business
  Consolidated
Assets:            
Cash and cash equivalents   $   116,282   $   82,635   $   198,917
Restricted cash       315,195       1,260       316,455
Loans and investments, net       3,836,554       -        3,836,554
Loans held-for-sale, net       -        601,827       601,827
Capitalized mortgage servicing rights, net     -        276,648       276,648
Securities held to maturity, net       10,000       76,017       86,017
Investments in equity affiliates       31,159       -        31,159
Goodwill and other intangible assets       12,500       100,864       113,364
Other assets        110,205       30,584       140,789
Total assets   $   4,431,895   $   1,169,835   $   5,601,730
             
Liabilities:            
Debt obligations   $   3,573,659   $   597,164   $   4,170,823
Allowance for loss-sharing obligations       -        34,417       34,417
Other liabilities       162,859       47,653       210,512
Total liabilities   $   3,736,518   $   679,234   $   4,415,752
             



               
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
Supplemental Schedule of Non-GAAP Financial Measures - (Unaudited)
Funds from Operations ("FFO") and Adjusted Funds from Operations ("AFFO")
 ($ in thousands—except share and per share data) 
 
               
  Quarter Ended   Six Months Ended
June 30, June 30,
    2019       2018       2019       2018  
Net income attributable to common stockholders $   28,916     $   17,167     $   51,566     $   43,356  
               
Adjustments:              
Net income attributable to noncontrolling interest     6,598         5,557         12,066         14,547  
Impairment loss on real estate owned     1,000         2,000         1,000         2,000  
Depreciation - real estate owned     176         178         350         356  
Depreciation - investments in equity affiliates     128         125         252         250  
               
Funds from operations  (1) $   36,818     $   25,027     $   65,234     $   60,509  
               
Adjustments:              
Income from mortgage servicing rights     (18,709 )       (17,936 )       (32,941 )       (37,571 )
Impairment loss on real estate owned     (1,000 )       (2,000 )       (1,000 )       (2,000 )
Deferred tax provision (benefit)     918         185         (3,250 )       (13,135 )
Amortization and write-offs of MSRs     16,914         17,203         33,654         33,879  
Depreciation and amortization     2,549         2,255         5,113         4,511  
Net (gain) loss on changes in fair value of derivatives     (1,103 )       587         1,362         (2,057 )
Stock-based compensation     1,502         1,100         5,258         3,645  
               
Adjusted funds from operations  (1) $   37,889     $   26,421     $   73,430     $   47,781  
               
Diluted FFO per share  (1) $   0.32     $   0.28     $   0.59     $   0.69  
               
Diluted AFFO per share  (1) $   0.33     $   0.29     $   0.66     $   0.55  
               
Diluted weighted average shares outstanding  (1)     113,624,384         90,055,170         110,779,680         87,420,543  
               
(1) Amounts are attributable to common stockholders and OP Unit holders. The OP Units are redeemable for cash, or at the Company's option for shares of the Company's common stock on a one-for-one basis.
               
The Company is presenting FFO and AFFO because management believes they are important supplemental measures of the Company’s operating performance in that they are frequently used by analysts, investors and other parties in the evaluation of REITs.  The National Association of Real Estate Investment Trusts, or NAREIT, defines FFO as net income (loss) attributable to common stockholders (computed in accordance with GAAP), excluding gains (losses) from sales of depreciated real properties, plus impairments of depreciated real properties and real estate related depreciation and amortization, and after adjustments for unconsolidated ventures. 
 
The Company defines AFFO as funds from operations adjusted for accounting items such as non-cash stock-based compensation expense, income from mortgage servicing rights ("MSRs"), changes in fair value of certain derivatives that temporarily flow through earnings, amortization and write-offs of MSRs, deferred taxes and the amortization of the convertible senior notes conversion option. The Company also adds back one-time charges such as acquisition costs and impairment losses on real estate and gains (losses) on sales of real estate. The Company is generally not in the business of operating real estate property and has obtained real estate by foreclosure or through partial or full settlement of mortgage debt related to the Company's loans to maximize the value of the collateral and minimize the Company's exposure.  Therefore, the Company deems such impairment and gains (losses) on real estate as an extension of the asset management of its loans, thus a recovery of principal or additional loss on the Company's initial investment.
 
FFO and AFFO are not intended to be an indication of the Company's cash flow from operating activities (determined in accordance with GAAP) or a measure of its liquidity, nor is it entirely indicative of funding the Company's cash needs, including its ability to make cash distributions.  The Company’s calculation of FFO and AFFO may be different from the calculations used by other companies and, therefore, comparability may be limited. 


 

 

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Source: Arbor Realty Trust