Arbor Realty Trust Reports Third Quarter 2021 Results and Increases Quarterly Dividend to $0.36 per Share
Company Highlights:
- Diversified, annuity-based operating platform with a multifamily focus that continues to produce strong distributable earnings and dividends in all cycles
- GAAP net income of
$0.51 and distributable earnings of$0.47 per diluted common share1 - Raised cash dividend on common stock to
$0.36 per share, our sixth consecutive quarterly increase - Raised 414 million of accretive growth capital:
$270 million from issuance of 4.50% senior unsecured notes due in 2026$144 million from offering of 6.25% Series E preferred stock
- GAAP net income of
Structured Business:
- Segment income of
$48.1 million - Record loan originations of
$2.47 billion - Structured loan portfolio of over
$9 billion on growth of 24% - Closed a
$1.50 billion collateralized securitization vehicle, our largest to date
Agency Business:
- Segment income of
$33.1 million - Loan originations of
$1.80 billion and a servicing portfolio of over$26 billion
Recent Developments:
- Raised an additional
$201 million of accretive growth capital through the issuance of 6.25% Series F preferred stock - Closed our 3rd private label securitization totaling
$535 million
Agency Business
Loan Origination Platform
| Agency Loan Volume (in thousands) | ||||||
| Quarter Ended | ||||||
| Fannie Mae | $ | 719,730 | $ | 637,494 | ||
| Private Label | 625,176 | 377,184 | ||||
| Freddie Mac | 307,664 | 155,914 | ||||
| FHA | 84,430 | 130,764 | ||||
| SFR-Fixed Rate | 67,227 | 11,996 | ||||
| Total Originations | $ | 1,804,227 | $ | 1,313,352 | ||
| Total Loan Sales | $ | 1,006,958 | $ | 1,482,110 | ||
| Total Loan Commitments | $ | 1,856,474 | $ | 1,194,344 | ||
For the quarter ended
At
In
Fee-Based Servicing Portfolio
The Company’s fee-based servicing portfolio totaled
| Fee-Based Servicing Portfolio ($ in thousands) | |||||||||||||
| As of |
As of |
||||||||||||
| UPB | Wtd. Avg. Fee | Wtd. Avg. Life (in years) | UPB | Wtd. Avg. Fee | Wtd. Avg. Life (in years) | ||||||||
| Fannie Mae | $ | 19,271,527 | 0.532 | % | 8.4 | $ | 19,191,969 | 0.532 | % | 8.3 | |||
| Freddie Mac | 4,726,587 | 0.281 | % | 9.8 | 4,708,457 | 0.285 | % | 9.8 | |||||
| Private Label | 1,176,391 | 0.200 | % | 8.8 | 1,176,627 | 0.200 | % | 9.0 | |||||
| FHA | 933,519 | 0.156 | % | 21.4 | 882,899 | 0.157 | % | 21.0 | |||||
| SFR-Fixed Rate | 104,094 | 0.200 | % | 5.7 | 75,103 | 0.200 | % | 5.9 | |||||
| Total | $ | 26,212,118 | 0.457 | % | 9.1 | $ | 26,035,055 | 0.459 | % | 9.0 | |||
Loans sold under the Fannie Mae program contain an obligation to partially guarantee the performance of the loan (“loss-sharing obligations”), and includes
Structured Business
Portfolio and Investment Activity
- Strong growth in the portfolio of
$1.78 billion , or 24.1% - Originated 118 loans totaling
$2.47 billion , consisted primarily of multifamily bridge loans totaling$2.37 billion - Payoffs and pay downs on 54 loans totaling
$567.9 million - Committed to fund one
$17.6 million single-family rental build-to-rent loan
At
The average balance of the Company’s loan and investment portfolio during the third quarter of 2021, excluding loan loss reserves, was
During the third quarter of 2021, the Company recorded a
Financing Activity
The Company completed its largest collateralized securitization vehicle to date totaling $1.50 billion of real estate related assets and cash. Investment grade-rated notes totaling $1.24 billion were issued, and the Company retained subordinate interests in the issuing vehicle of $262.5 million. The facility has a two-and-a-half-year asset replenishment period and an initial weighted average interest rate of 1.31% over LIBOR, excluding fees and transaction costs.
The balance of debt that finances the Company’s loan and investment portfolio at
Capital Markets
The Company raised a significant amount of accretive growth capital primarily through the following transactions:
The Company issued
The Company completed a public offering of 5.75 million shares of its 6.25% Series E cumulative redeemable preferred stock, including the underwriters’ exercise of their over-allotment option, generating net proceeds of
In
Dividends
The Company announced today that its Board of Directors has declared a quarterly cash dividend of
Earnings Conference Call
The Company will host a conference call today at
A telephonic replay of the call will be available until
About
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, changes in economic conditions generally, and the real estate markets specifically, in particular, due to the uncertainties created by the COVID-19 pandemic, continued ability to source new investments, changes in interest rates and/or credit spreads, and other risks detailed in Arbor’s Annual Report on Form 10-K for the year ended
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 the last page of this release.
| Contact: 516-506-4422 pelenio@arbor.com |
| Consolidated Statements of Income - (Unaudited) | |||||||||||||||||
| ($ in thousands—except share and per share data) | |||||||||||||||||
| Quarter Ended |
Nine Months Ended |
||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||
| Interest income | $ | 125,480 | $ | 81,701 | $ | 321,772 | $ | 253,307 | |||||||||
| Interest expense | 55,560 | 37,888 | 144,122 | 129,172 | |||||||||||||
| Net interest income | 69,920 | 43,813 | 177,650 | 124,135 | |||||||||||||
| Other revenue: | |||||||||||||||||
| Gain on sales, including fee-based services, net | 16,334 | 19,895 | 86,102 | 60,566 | |||||||||||||
| Mortgage servicing rights | 32,453 | 42,357 | 95,688 | 96,708 | |||||||||||||
| Servicing revenue, net | 20,088 | 13,348 | 50,939 | 40,156 | |||||||||||||
| Property operating income | - | 1,033 | - | 3,976 | |||||||||||||
| Loss on derivative instruments, net | (1,492 | ) | (753 | ) | (7,320 | ) | (58,852 | ) | |||||||||
| Other income, net | 2,195 | 1,050 | 4,140 | 3,404 | |||||||||||||
| Total other revenue | 69,578 | 76,930 | 229,549 | 145,958 | |||||||||||||
| Other expenses: | |||||||||||||||||
| Employee compensation and benefits | 41,973 | 32,962 | 128,647 | 101,652 | |||||||||||||
| Selling and administrative | 11,757 | 9,356 | 33,707 | 29,013 | |||||||||||||
| Property operating expenses | 149 | 1,300 | 421 | 4,778 | |||||||||||||
| Depreciation and amortization | 1,807 | 1,922 | 5,349 | 5,830 | |||||||||||||
| Provision for loss sharing (net of recoveries) | (3,272 | ) | (2,227 | ) | (1,070 | ) | 21,706 | ||||||||||
| Provision for credit losses (net of recoveries) | (3,799 | ) | (7,586 | ) | (12,689 | ) | 59,510 | ||||||||||
| Total other expenses | 48,615 | 35,727 | 154,365 | 222,489 | |||||||||||||
| Income before extinguishment of debt, sale of real estate, income from equity affiliates, and income taxes | |||||||||||||||||
| 90,883 | 85,016 | 252,834 | 47,604 | ||||||||||||||
| Loss on extinguishment of debt | - | - | (1,370 | ) | (3,546 | ) | |||||||||||
| (Loss) gain on sale of real estate | - | (1,868 | ) | 1,228 | (1,868 | ) | |||||||||||
| Income from equity affiliates | 5,086 | 32,358 | 32,095 | 56,758 | |||||||||||||
| Provision for income taxes | (9,905 | ) | (17,785 | ) | (33,356 | ) | (15,493 | ) | |||||||||
| Net income | 86,064 | 97,721 | 251,431 | 83,455 | |||||||||||||
| Preferred stock dividends | 4,913 | 1,888 | 13,216 | 5,665 | |||||||||||||
| Net income attributable to noncontrolling interest | 8,347 | 13,836 | 26,806 | 11,012 | |||||||||||||
| Net income attributable to common stockholders | $ | 72,804 | $ | 81,997 | $ | 211,409 | $ | 66,778 | |||||||||
| Basic earnings per common share | $ | 0.51 | $ | 0.72 | $ | 1.57 | $ | 0.60 | |||||||||
| Diluted earnings per common share | $ | 0.51 | $ | 0.72 | $ | 1.56 | $ | 0.59 | |||||||||
| Weighted average shares outstanding: | |||||||||||||||||
| Basic | 142,624,300 | 113,766,446 | 134,437,663 | 111,775,436 | |||||||||||||
| Diluted | 160,270,905 | 133,997,087 | 152,691,461 | 132,401,315 | |||||||||||||
| Dividends declared per common share | $ | 0.35 | $ | 0.31 | $ | 1.02 | $ | 0.91 | |||||||||
| Consolidated Balance Sheets | ||||||||||
| ($ in thousands—except share and per share data) | ||||||||||
| 2021 | 2020 | |||||||||
| (Unaudited) | ||||||||||
| Assets: | ||||||||||
| Cash and cash equivalents | $ | 380,730 | $ | 339,528 | ||||||
| Restricted cash | 569,928 | 197,470 | ||||||||
| Loans and investments, net (allowance for credit losses of |
8,993,790 | 5,285,868 | ||||||||
| Loans held-for-sale, net | 1,274,234 | 986,919 | ||||||||
| Capitalized mortgage servicing rights, net | 417,283 | 379,974 | ||||||||
| Securities held-to-maturity, net (allowance for credit losses of |
112,735 | 95,524 | ||||||||
| Investments in equity affiliates | 91,846 | 74,274 | ||||||||
| Due from related party | 12,664 | 12,449 | ||||||||
| 101,933 | 105,451 | |||||||||
| Other assets | 214,441 | 183,529 | ||||||||
| Total assets | $ | 12,169,584 | $ | 7,660,986 | ||||||
| Liabilities and Equity: | ||||||||||
| Credit and repurchase facilities | $ | 3,399,711 | $ | 2,234,883 | ||||||
| Collateralized loan obligations | 4,715,804 | 2,517,309 | ||||||||
| Senior unsecured notes | 1,102,578 | 662,843 | ||||||||
| Convertible senior unsecured notes, net | 258,001 | 267,973 | ||||||||
| Junior subordinated notes to subsidiary trust issuing preferred securities | 142,192 | 141,656 | ||||||||
| Due to related party | 4,384 | 2,365 | ||||||||
| Due to borrowers | 93,544 | 89,325 | ||||||||
| Allowance for loss-sharing obligations | 62,828 | 64,303 | ||||||||
| Other liabilities | 255,135 | 197,644 | ||||||||
| Total liabilities | 10,034,177 | 6,178,301 | ||||||||
| Equity: | ||||||||||
| Preferred stock, cumulative, redeemable, |
||||||||||
| shares issued and outstanding by period, respectively: | ||||||||||
| Special voting preferred shares, 16,325,095 and 17,560,633 shares | ||||||||||
| 8.25% Series A, 0 and 1,551,500 shares | ||||||||||
| 7.75% Series B, 0 and 1,260,000 shares | ||||||||||
| 8.50% Series C, 0 and 900,000 shares | ||||||||||
| 6.375% Series D, 9,200,000 and 0 shares | ||||||||||
| 6.25% Series E, 5,750,000 and 0 shares | 361,635 | 89,472 | ||||||||
| Common stock, |
||||||||||
| and 123,181,173 shares issued and outstanding, respectively | 1,430 | 1,232 | ||||||||
| Additional paid-in capital | 1,635,134 | 1,317,109 | ||||||||
| Retained earnings (accumulated deficit) | 10,674 | (63,442 | ) | |||||||
| 2,008,873 | 1,344,371 | |||||||||
| Noncontrolling interest | 126,534 | 138,314 | ||||||||
| Total equity | 2,135,407 | 1,482,685 | ||||||||
| Total liabilities and equity | $ | 12,169,584 | $ | 7,660,986 | ||||||
| Statement of Income Segment Information - (Unaudited) | |||||||||||||||||
| (in thousands) | |||||||||||||||||
| Quarter Ended |
|||||||||||||||||
| Structured Business | Agency Business | Other / Eliminations (1) | Consolidated | ||||||||||||||
| Interest income | $ | 114,710 | $ | 10,770 | $ | - | $ | 125,480 | |||||||||
| Interest expense | 50,823 | 4,737 | - | 55,560 | |||||||||||||
| Net interest income | 63,887 | 6,033 | - | 69,920 | |||||||||||||
| Other revenue: | |||||||||||||||||
| Gain on sales, including fee-based services, net | - | 16,334 | - | 16,334 | |||||||||||||
| Mortgage servicing rights | - | 32,453 | - | 32,453 | |||||||||||||
| Servicing revenue | - | 34,960 | - | 34,960 | |||||||||||||
| Amortization of MSRs | - | (14,872 | ) | - | (14,872 | ) | |||||||||||
| Loss on derivative instruments, net | - | (1,492 | ) | - | (1,492 | ) | |||||||||||
| Other income, net | 2,168 | 27 | - | 2,195 | |||||||||||||
| Total other revenue | 2,168 | 67,410 | - | 69,578 | |||||||||||||
| Other expenses: | |||||||||||||||||
| Employee compensation and benefits | 14,082 | 27,891 | - | 41,973 | |||||||||||||
| Selling and administrative | 5,718 | 6,039 | - | 11,757 | |||||||||||||
| Property operating expenses | 149 | - | - | 149 | |||||||||||||
| Depreciation and amortization | 634 | 1,173 | - | 1,807 | |||||||||||||
| Provision for loss sharing (net of recoveries) | - | (3,272 | ) | - | (3,272 | ) | |||||||||||
| Provision for credit losses (net of recoveries) | (3,445 | ) | (354 | ) | - | (3,799 | ) | ||||||||||
| Total other expenses | 17,138 | 31,477 | - | 48,615 | |||||||||||||
| Income before income from equity affiliates and income taxes | |||||||||||||||||
| 48,917 | 41,966 | - | 90,883 | ||||||||||||||
| Income from equity affiliates | 5,086 | - | - | 5,086 | |||||||||||||
| Provision for income taxes | (622 | ) | (9,283 | ) | - | (9,905 | ) | ||||||||||
| Net income | 53,381 | 32,683 | - | 86,064 | |||||||||||||
| Preferred stock dividends | 4,913 | - | - | 4,913 | |||||||||||||
| Net income attributable to noncontrolling interest | - | - | 8,347 | 8,347 | |||||||||||||
| Net income attributable to common stockholders | $ | 48,468 | $ | 32,683 | $ | (8,347 | ) | $ | 72,804 | ||||||||
| (1) Includes certain income or expenses not allocated to the two reportable segments. Amount reflects income attributable to the noncontrolling interest holders. | |||||||||||||||||
| Balance Sheet Segment Information - (Unaudited) | ||||||||||||
| (in thousands) | ||||||||||||
| Structured Business | Agency Business | Consolidated | ||||||||||
| Assets: | ||||||||||||
| Cash and cash equivalents | $ | 162,870 | $ | 217,860 | $ | 380,730 | ||||||
| Restricted cash | 552,706 | 17,222 | 569,928 | |||||||||
| Loans and investments, net | 8,993,790 | - | 8,993,790 | |||||||||
| Loans held-for-sale, net | - | 1,274,234 | 1,274,234 | |||||||||
| Capitalized mortgage servicing rights, net | - | 417,283 | 417,283 | |||||||||
| Securities held-to-maturity, net | - | 112,735 | 112,735 | |||||||||
| Investments in equity affiliates | 91,846 | - | 91,846 | |||||||||
| 12,500 | 89,433 | 101,933 | ||||||||||
| Other assets | 136,653 | 90,452 | 227,105 | |||||||||
| Total assets | $ | 9,950,365 | $ | 2,219,219 | $ | 12,169,584 | ||||||
| Liabilities: | ||||||||||||
| Debt obligations | $ | 8,515,801 | $ | 1,102,485 | $ | 9,618,286 | ||||||
| Allowance for loss-sharing obligations | - | 62,828 | 62,828 | |||||||||
| Other liabilities | 225,088 | 127,975 | 353,063 | |||||||||
| Total liabilities | $ | 8,740,889 | $ | 1,293,288 | $ | 10,034,177 | ||||||
| Reconciliation of Distributable Earnings to GAAP Net Income - (Unaudited) | |||||||||||||||
| ($ in thousands—except share and per share data) | |||||||||||||||
| Quarter Ended |
Nine Months Ended |
||||||||||||||
| 2021 |
2020 |
2021 |
2020 |
||||||||||||
| Net income attributable to common stockholders | $ | 72,804 | $ | 81,997 | $ | 211,409 | $ | 66,778 | |||||||
| Adjustments: | |||||||||||||||
| Net income attributable to noncontrolling interest | 8,347 | 13,836 | 26,806 | 11,012 | |||||||||||
| Income from mortgage servicing rights | (32,453 | ) | (42,357 | ) | (95,688 | ) | (96,708 | ) | |||||||
| Deferred tax provision (benefit) | 6,256 | 3,853 | 10,692 | (5,172 | ) | ||||||||||
| Amortization and write-offs of MSRs | 23,757 | 15,456 | 62,088 | 48,739 | |||||||||||
| Depreciation and amortization | 2,705 | 2,867 | 8,137 | 8,731 | |||||||||||
| Loss on extinguishment of debt | - | - | 1,370 | 3,546 | |||||||||||
| Provision for credit losses, net | (9,867 | ) | (11,137 | ) | (18,210 | ) | 79,144 | ||||||||
| Loss on derivative instruments, net | 1,492 | 753 | 1,484 | 44,113 | |||||||||||
| Stock-based compensation | 2,612 | 1,854 | 7,986 | 7,286 | |||||||||||
| Loss on redemption of preferred stock | - | - | 3,479 | - | |||||||||||
| Distributable earnings (1) | $ | 75,653 | $ | 67,122 | $ | 219,553 | $ | 167,469 | |||||||
| Diluted distributable earnings per share (1) | $ | 0.47 | $ | 0.50 | $ | 1.44 | $ | 1.26 | |||||||
| Diluted weighted average shares outstanding (1) | 160,270,905 | 133,997,087 | 152,691,461 | 132,401,315 | |||||||||||
| (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 distributable earnings because management believes it is an important supplemental measure of the Company's operating performance and is useful to investors, analysts and other parties in the evaluation of REITs and their ability to provide dividends to stockholders. Dividends are one of the principal reasons investors invest in REITs. To maintain REIT status, REITs are required to distribute at least 90% of their REIT-taxable income. The Company considers distributable earnings in determining its quarterly dividend and believes that, over time, distributable earnings is a useful indicator of the Company's dividends per share. | |||||||||||||||
| The Company defines distributable earnings as net income (loss) attributable to common stockholders computed in accordance with GAAP, adjusted for accounting items such as depreciation and amortization (adjusted for unconsolidated joint ventures), non-cash stock-based compensation expense, income from MSRs, amortization and write-offs of MSRs, gains/losses on derivative instruments primarily associated with Private Label loans not yet sold and securitized, the tax impact on cumulative gains/losses on derivative instruments associated with Private Label loans sold during the periods presented, changes in fair value of GSE-related derivatives that temporarily flow through earnings, deferred tax provision (benefit), CECL provisions for credit losses (adjusted for realized losses as described below) and amortization of the convertible senior notes conversion option. The Company also adds back one-time charges such as acquisition costs and one-time gains/losses on the early extinguishment of debt and redemption of preferred stock. | |||||||||||||||
| The Company reduces distributable earnings for realized losses in the period management determines that a loan is deemed nonrecoverable. Loans are deemed nonrecoverable upon the earlier of: (i) when the loan receivable is settled (i.e. when the loan is repaid, or in the case of foreclosure, when the underlying asset is sold); or (ii) when management determines that it is nearly certain that all amounts due will not be collected. The realized loss amount is equal to the difference between the cash received, or expected to be received, and the book value of the asset. | |||||||||||||||
| Distributable earnings is not intended to be an indication of the Company's cash flows 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 distributable earnings may be different from the calculations used by other companies and, therefore, comparability may be limited. | |||||||||||||||
Source: Arbor Realty Trust
