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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):

 

July 29, 2022

 

Arbor Realty Trust, Inc.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

 

maryland

(STATE OF INCORPORATION)

 

001-32136  20-0057959
(COMMISSION FILE NUMBER)  (IRS EMPLOYER ID. NUMBER)

 

333 Earle Ovington Boulevard, Suite 900 11553
Uniondale, New York (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)  

 

(516) 506-4200

(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
  
¨Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
  
¨Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
  
¨Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading symbols   Name of each exchange on which registered
Common Stock, par value $0.01 per share   ABR   New York Stock Exchange
Preferred Stock, 6.375% Series D Cumulative Redeemable, par value $0.01 per share   ABR-PD   New York Stock Exchange
Preferred Stock, 6.25% Series E Cumulative Redeemable, par value $0.01 per share   ABR-PE   New York Stock Exchange
Preferred Stock, 6.25% Series F Fixed-to-Floating Rate Cumulative Redeemable, par value $0.01 per share   ABR-PF   New York Stock Exchange

 

 

 

 

 

Item 2.02Results of Operations and Financial Condition.

 

On July 29, 2022, Arbor Realty Trust, Inc. issued a press release announcing its earnings for the quarter ended June 30, 2022, a copy of which is attached hereto as Exhibit 99.1.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits

 

Exhibit
Number
  Exhibit
99.1   Press Release, dated July 29, 2022.
     
104   Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.

 

 

 

 

EXHIBIT INDEX

 

Exhibit Number

 

99.1   Press Release, dated July 29, 2022.
     
104   Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.

 

 

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  ARBOR REALTY TRUST, INC.
   
   
  By: /s/ Paul Elenio
  Name: Paul Elenio
  Title: Chief Financial Officer

 

Date: July 29, 2022

 

 

 

 

Exhibit 99.1

 

 

Arbor Realty Trust Reports Second Quarter 2022 Results and Increases Dividend for Ninth Consecutive Quarter to $0.39 per Share

 

Company Highlights:

 

·Diversified, annuity-based operating platform with a multifamily focus that generates strong distributable earnings and dividends in all cycles

 

·GAAP net income of $0.41 and distributable earnings of $0.52 per diluted common share1

·Raised cash dividend on common stock to $0.39 per share, our 9th consecutive quarterly increase, representing a 30% increase over that time span

·Distributable earnings well in excess of current dividend, representing a 75% payout ratio

·Structured portfolio net interest income increased $10.8 million compared to 1Q22 from strong portfolio growth and increases in interest rates

 

Structured Business:

 

·Loan portfolio surpasses $15.00 billion, representing growth of 6% on $2.05 billion of loan originations

·Closed a $1.05 billion collateralized securitization vehicle

 

Agency Business:

 

·Loan originations of $1.27 billion and a servicing portfolio of $26.77 billion

 

Uniondale, NY, July 29, 2022 -- Arbor Realty Trust, Inc. (NYSE: ABR), today announced financial results for the second quarter ended June 30, 2022. Arbor reported net income for the quarter of $69.9 million, or $0.41 per diluted common share, compared to net income of $69.1 million, or $0.51 per diluted common share for the quarter ended June 30, 2021. Distributable earnings for the quarter was $93.7 million, or $0.52 per diluted common share, compared to $68.8 million, or $0.45 per diluted common share for the quarter ended June 30, 2021.1

 

 

 

 

Arbor Realty Trust Reports Second Quarter 2022 Results and Increases Dividend for Ninth Consecutive Quarter to $0.39 per Share
   
July 29, 2022 Page 2

 

Agency Business

 

Loan Origination Platform

 

   Agency Loan Volume  (in thousands) 
   Quarter Ended 
   June 30, 2022   March 31, 2022 
Fannie Mae  $665,449   $449,680 
Freddie Mac   407,691    299,072 
Private Label   83,346    72,896 
FHA   78,364    11,990 
SFR-Fixed Rate   34,334    4,871 
Total Originations  $1,269,184   $838,509 
           
Total Loan Sales  $1,030,703   $1,586,715 
           
Total Loan Commitments  $1,184,282   $975,132 

 

For the quarter ended June 30, 2022, the Agency Business generated revenues of $68.8 million, compared to $65.9 million for the first quarter of 2022. Gain on sales, including fee-based services, net on the GSE/Agency business was $16.2 million for the quarter, reflecting a margin of 1.59%, compared to $15.3 million and 1.39% for the first quarter of 2022. Income from mortgage servicing rights was $17.6 million for the quarter, reflecting a rate of 1.48% as a percentage of loan commitments, compared to $15.3 million and 1.57% for the first quarter of 2022.

 

At June 30, 2022, loans held-for-sale was $518.9 million which was primarily comprised of unpaid principal balances (“UPB”) totaling $519.1 million, with financing associated with these loans totaling $455.6 million.

 

Fee-Based Servicing Portfolio

 

The Company’s fee-based servicing portfolio totaled $26.77 billion at June 30, 2022 and excludes $106.0 million of private label loans originated that were not yet securitized. Servicing revenue, net was $20.7 million for the quarter and consisted of servicing revenue of $35.5 million, net of amortization of mortgage servicing rights totaling $14.8 million.

 

 

 

 

Arbor Realty Trust Reports Second Quarter 2022 Results and Increases Dividend for Ninth Consecutive Quarter to $0.39 per Share
   
July 29, 2022 Page 3

 

   Fee-Based Servicing Portfolio ($ in thousands) 
   As of June 30, 2022   As of March 31, 2022 
   UPB   Wtd. Avg. Fee   Wtd. Avg. Life
(years)
   UPB   Wtd. Avg.
Fee
   Wtd. Avg. Life
(years)
 
Fannie Mae  $18,600,196    0.526%   8.2   $18,781,611    0.534%   8.1 
Freddie Mac   4,805,068    0.264%   9.5    4,792,764    0.267%   9.3 
Private Label   2,061,813    0.200%   8.4    2,200,206    0.200%   8.4 
FHA   1,076,237    0.151%   19.5    999,446    0.153%   20.9 
SFR-Fixed Rate   226,568    0.200%   6.3    190,590    0.200%   6.4 
Total  $26,769,882    0.436%   8.9   $26,964,617    0.443%   8.8 

 

Loans sold under the Fannie Mae program contain an obligation to partially guarantee the performance of the loan (“loss-sharing obligations”) and includes $34.3 million for the fair value of the guarantee obligation undertaken at June 30, 2022. The Company recorded a $2.1 million reversal of provision for loss sharing associated with CECL for the second quarter of 2022, which included a $1.2 million recovery. At June 30, 2022, the Company’s total CECL allowance for loss-sharing obligations was $18.7 million, representing 0.10% of the Fannie Mae servicing portfolio.

 

Structured Business

 

Portfolio and Investment Activity

 

   Structured Portfolio Activity ($ in thousands) 
   Quarter Ended 
   June 30, 2022   March 31, 2022 
   UPB   %   UPB   % 
Bridge:                    
Multifamily  $1,892,618    92%  $2,687,309    95%
SFR   154,981    8%   133,407    5%
    2,047,599    100%   2,820,716    100%
                     
Mezzanine/Preferred Equity   -    -%   8,139    <1%
Total Originations  $2,047,599    100%  $2,828,855    100%
Number of Loans Originated   91         125      
SFR Commitments  $185,201        $83,306      
Payoffs and Paydowns  $1,122,407        $666,551      

 

 

 

 

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July 29, 2022 Page 4

 

   Structured Portfolio ($ in thousands) 
   As of June 30, 2022   As of March 31, 2022 
   UPB   % of Total   UPB   % of Total 
Bridge:                    
Multifamily  $13,663,343    91%  $12,712,015    89%
SFR   653,814    5%   521,275    4%
Other   351,261    2%   523,658    4%
    14,668,418    98%   13,756,948    97%
                     
Mezzanine/Preferred Equity   329,273    2%   376,486    3%
SFR Permanent   36,120    <1%   36,362    <1%
Total Portfolio  $15,033,811    100%  $14,169,796    100%

 

At June 30, 2022, the loan and investment portfolio’s unpaid principal balance, excluding loan loss reserves, was $15.03 billion, with a weighted average current interest pay rate of 5.49%, compared to $14.17 billion and 4.38% at March 31, 2022. Including certain fees earned and costs associated with the loan and investment portfolio, the weighted average current interest pay rate was 5.82% at June 30, 2022, compared to 4.74% at March 31, 2022.

 

The average balance of the Company’s loan and investment portfolio during the second quarter of 2022, excluding loan loss reserves, was $14.63 billion with a weighted average yield of 5.26%, compared to $13.02 billion and 4.86% for the first quarter of 2022. The increase in average yield was primarily due to increases in the benchmark index rates in the second quarter of 2022.

 

During the second quarter of 2022, the Company recorded a $4.9 million provision for loan losses associated with CECL, which was net of a $1.5 million loan loss recovery. At June 30, 2022, the Company’s total allowance for loan losses was $121.3 million. The Company had four non-performing loans with a carrying value of $25.2 million, before related loan loss reserves of $5.1 million, which is unchanged from March 31, 2022.

 

Financing Activity

 

The Company completed its 19th collateralized securitization vehicle to date totaling $1.05 billion of real estate related assets and cash. Investment grade-rated notes totaling $872.8 million were issued, and the Company retained subordinate interests in the issuing vehicle of $177.2 million. The facility has a two-year asset replenishment period and an initial weighted average interest rate of 2.36% over term SOFR, excluding fees and transaction costs.

 

 

 

 

Arbor Realty Trust Reports Second Quarter 2022 Results and Increases Dividend for Ninth Consecutive Quarter to $0.39 per Share
   
July 29, 2022 Page 5

 

The balance of debt that finances the Company’s loan and investment portfolio at June 30, 2022 was $13.83 billion with a weighted average interest rate including fees of 4.00% as compared to $12.86 billion and a rate of 2.81% at March 31, 2022. The average balance of debt that finances the Company’s loan and investment portfolio for the second quarter of 2022 was $13.37 billion, as compared to $11.99 billion for the first quarter of 2022. The average cost of borrowings for the second quarter of 2022 was 3.10%, compared to 2.65% for the first quarter of 2022. The increase in average cost was primarily due to increases in the benchmark index rates in the second quarter of 2022.

 

Dividends

 

The Company announced today that its Board of Directors has declared a quarterly cash dividend of $0.39 per share of common stock for the quarter ended June 30, 2022. The dividend is payable on August 31, 2022 to common stockholders of record on August 15, 2022. The ex-dividend date is August 12, 2022.

 

Earnings Conference Call

 

The Company will host a conference call today at 10:00 a.m. Eastern Time. A live webcast and replay of the conference call will be available at www.arbor.com in the investor relations section of the Company’s website, or you can access the call telephonically at least ten minutes prior to the conference call. The dial-in numbers are (800) 459-5346 for domestic callers and (785) 424-1249 for international callers. Please use participant passcode ABRQ222 when prompted by the operator.

 

A telephonic replay of the call will be available until August 5, 2022. The replay dial-in numbers are (800) 938-1601 for domestic callers and (402) 220-1546 for international callers.

 

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, single-family rental (SFR) portfolios, 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 leading Fannie Mae DUS® lender and Freddie Mac Optigo® Seller/Servicer, and an approved FHA Multifamily Accelerated Processing (MAP) lender. Arbor’s product platform also includes bridge, CMBS, mezzanine and preferred equity loans. 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.

 

 

 

 

Arbor Realty Trust Reports Second Quarter 2022 Results and Increases Dividend for Ninth Consecutive Quarter to $0.39 per Share
   
July 29, 2022 Page 6

 

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 December 31, 2021 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 the last page of this release.

 

Contact:

Arbor Realty Trust, Inc.

Paul Elenio, Chief Financial Officer

516-506-4422

pelenio@arbor.com

 

 

 

 

Arbor Realty Trust Reports Second Quarter 2022 Results and Increases Dividend for Ninth Consecutive Quarter to $0.39 per Share
   
July 29, 2022 Page 7

 

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

Consolidated Statements of Income - (Unaudited)

($ in thousands—except share and per share data)

 

   Quarter Ended June 30,   Six Months Ended June 30, 
   2022   2021   2022   2021 
Interest income  $201,328   $105,148   $368,026   $196,292 
Interest expense   107,067    46,378    189,627    88,562 
Net interest income   94,261    58,770    178,399    107,730 
                     
Other revenue:                    
Gain on sales, including fee-based services, net   16,510    40,901    18,166    69,768 
Mortgage servicing rights   17,567    26,299    32,879    63,235 
Servicing revenue, net   20,714    15,315    41,769    30,850 
Property operating income   290    -    586    - 
Gain (loss) on derivative instruments, net   8,606    (2,607)   25,992    (5,828)
Other income, net   (13,249)   1,263    (10,048)   1,943 
Total other revenue   50,438    81,171    109,344    159,968 
                     
Other expenses:                    
Employee compensation and benefits   38,900    43,700    80,925    86,674 
Selling and administrative   13,188    11,133    27,735    21,947 
Property operating expenses   542    129    1,077    272 
Depreciation and amortization   2,031    1,788    4,014    3,543 
Provision for loss sharing (net of recoveries)   (1,949)   549    (2,611)   2,201 
Provision for credit losses (net of recoveries)   5,067    (7,815)   7,426    (8,890)
Total other expenses   57,779    49,484    118,566    105,747 
                     
Income before extinguishment of debt, sale of real estate, income from equity affiliates, and income taxes   86,920    90,457    169,177    161,951 
Loss on extinguishment of debt   -    -    (1,350)   (1,370)
Gain on sale of real estate   -    -    -    1,228 
Income from equity affiliates   6,547    4,759    13,759    27,010 
Provision for income taxes   (5,352)   (10,959)   (13,540)   (23,451)
                     
Net income   88,115    84,257    168,046    165,368 
                     
Preferred stock dividends   11,214    6,414    20,270    8,303 
Net income attributable to noncontrolling interest   6,992    8,717    13,808    18,459 
Net income attributable to common stockholders  $69,909   $69,126   $133,968   $138,606 
                     
Basic earnings per common share  $0.43   $0.51   $0.85   $1.06 
Diluted earnings per common share  $0.41   $0.51   $0.82   $1.06 
                     
Weighted average shares outstanding:                    
Basic   163,044,217    135,262,197    158,258,813    130,276,499 
Diluted   195,013,810    153,616,591    190,357,030    148,818,030 
                     
Dividends declared per common share  $0.38   $0.34   $0.75   $0.67 

 

 

 

 

Arbor Realty Trust Reports Second Quarter 2022 Results and Increases Dividend for Ninth Consecutive Quarter to $0.39 per Share
 
July 29, 2022 Page 8

 

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

($ in thousands—except share and per share data)

 

   June 30,   December 31, 
   2022   2021 
   (Unaudited)      
Assets:          
Cash and cash equivalents  $341,991   $404,580 
Restricted cash   787,952    486,690 
Loans and investments, net (allowance for credit losses of $121,331 and $113,241)   14,832,302    11,981,048 
Loans held-for-sale, net   518,935    1,093,609 
Capitalized mortgage servicing rights, net   411,534    422,734 
Securities held-to-maturity, net (allowance for credit losses of $2,022 and $1,753)   159,686    140,484 
Investments in equity affiliates   90,855    89,676 
Due from related party   53,037    84,318 
Goodwill and other intangible assets   98,414    100,760 
Other assets   284,884    269,946 
Total assets  $17,579,590   $15,073,845 
           
Liabilities and Equity:          
Credit and repurchase facilities  $4,549,460   $4,481,579 
Collateralized loan obligations   7,968,495    5,892,810 
Senior unsecured notes   1,282,498    1,280,545 
Convertible senior unsecured notes, net   263,126    259,385 
Junior subordinated notes to subsidiary trust issuing preferred securities   142,758    142,382 
Due to related party   27,014    26,570 
Due to borrowers   115,990    96,641 
Allowance for loss-sharing obligations   53,053    56,064 
Other liabilities   264,200    287,885 
Total liabilities   14,666,594    12,523,861 
           
Equity:          
Arbor Realty Trust, Inc. stockholders' equity:          
Preferred stock, cumulative, redeemable, $0.01 par value: 100,000,000 shares authorized, shares issued and outstanding by period:   633,684    556,163 
Special voting preferred shares - 16,293,589 and 16,325,095 shares          
6.375% Series D - 9,200,000 shares          
6.25% Series E - 5,750,000 shares          
6.25% Series F - 11,342,000 and 8,050,000 shares          
Common stock, $0.01 par value: 500,000,000 shares authorized - 168,454,805 and 151,362,181 shares issued and outstanding   1,685    1,514 
Additional paid-in capital   2,060,837    1,797,913 
Retained earnings   83,271    62,532 
Total Arbor Realty Trust, Inc. stockholders’ equity   2,779,477    2,418,122 
           
Noncontrolling interest   133,519    131,862 
Total equity   2,912,996    2,549,984 
Total liabilities and equity  $17,579,590   $15,073,845 

 

 

 

 

Arbor Realty Trust Reports Second Quarter 2022 Results and Increases Dividend for Ninth Consecutive Quarter to $0.39 per Share
   
July 29, 2022 Page 9

 

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

Statement of Income Segment Information - (Unaudited)

(in thousands)

 

   Quarter Ended June 30, 2022 
   Structured
Business
   Agency
Business
   Other /
Eliminations (1)
   Consolidated 
Interest income  $192,047   $9,281   $-   $201,328 
Interest expense   103,165    3,902    -    107,067 
Net interest income   88,882    5,379    -    94,261 
                     
Other revenue:                    
Gain on sales, including fee-based services, net   -    16,510    -    16,510 
Mortgage servicing rights   -    17,567    -    17,567 
Servicing revenue   -    35,493    -    35,493 
Amortization of MSRs   -    (14,779)   -    (14,779)
Property operating income   290    -    -    290 
Gain on derivative instruments, net   -    8,606    -    8,606 
Other income, net   (9,328)   (3,921)   -    (13,249)
Total other revenue   (9,038)   59,476    -    50,438 
                     
Other expenses:                    
Employee compensation and benefits   13,866    25,034    -    38,900 
Selling and administrative   6,429    6,759    -    13,188 
Property operating expenses   542    -    -    542 
Depreciation and amortization   858    1,173    -    2,031 
Provision for loss sharing (net of recoveries)   -    (1,949)   -    (1,949)
Provision for credit losses (net of recoveries)   5,088    (21)   -    5,067 
Total other expenses   26,783    30,996    -    57,779 
                     
Income before income from equity affiliates, and income taxes   53,061    33,859    -    86,920 
                     
Income from equity affiliates   6,547    -    -    6,547 
Provision for income taxes   (255)   (5,097)   -    (5,352)
                     
Net income   59,353    28,762    -    88,115 
                     
Preferred stock dividends   11,214    -    -    11,214 
Net income attributable to noncontrolling interest   -    -    6,992    6,992 
Net income attributable to common stockholders  $48,139   $28,762   $(6,992)  $69,909 

 

(1) Includes income allocated to the noncontrolling interest holders not allocated to the two reportable segments.

 

 

 

 

Arbor Realty Trust Reports Second Quarter 2022 Results and Increases Dividend for Ninth Consecutive Quarter to $0.39 per Share
   
July 29, 2022 Page 10

 

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

Balance Sheet Segment Information - (Unaudited)

(in thousands)

 

   June 30, 2022 
   Structured
Business
   Agency
Business
   Consolidated 
Assets:               
Cash and cash equivalents  $94,983   $247,008   $341,991 
Restricted cash   769,009    18,943    787,952 
Loans and investments, net   14,832,302    -    14,832,302 
Loans held-for-sale, net   -    518,935    518,935 
Capitalized mortgage servicing rights, net   -    411,534    411,534 
Securities held-to-maturity, net   -    159,686    159,686 
Investments in equity affiliates   90,855    -    90,855 
Goodwill and other intangible assets   12,500    85,914    98,414 
Other assets   272,679    65,242    337,921 
Total assets  $16,072,328   $1,507,262   $17,579,590 
                
Liabilities:               
Debt obligations  $13,750,783   $455,554   $14,206,337 
Allowance for loss-sharing obligations   -    53,053    53,053 
Other liabilities   311,873    95,331    407,204 
Total liabilities  $14,062,656   $603,938   $14,666,594 

 

 

 

 

Arbor Realty Trust Reports Second Quarter 2022 Results and Increases Dividend for Ninth Consecutive Quarter to $0.39 per Share
   
July 29, 2022 Page 11

 

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

Reconciliation of Distributable Earnings to GAAP Net Income - (Unaudited)

($ in thousands—except share and per share data)

 

   Quarter Ended June 30,   Six Months Ended June 30, 
   2022   2021   2022   2021 
Net income attributable to common stockholders  $69,909   $69,126   $133,968   $138,606 
                     
Adjustments:                    
Net income attributable to noncontrolling interest   6,992    8,717    13,808    18,459 
Income from mortgage servicing rights   (17,567)   (26,299)   (32,879)   (63,235)
Deferred tax (benefit) provision   (706)   (50)   (2,426)   4,436 
Amortization and write-offs of MSRs   27,625    20,299    55,295    38,331 
Depreciation and amortization   2,617    2,733    5,186    5,432 
Loss on extinguishment of debt   -    -    1,350    1,370 
Provision for credit losses, net   5,849    (8,065)   7,546    (8,343)
Gain on derivative instruments, net   (4,155)   (3,230)   (4,453)   (9)
Stock-based compensation   3,149    2,044    9,241    5,375 
Loss on redemption of preferred stock   -    3,479    -    3,479 
Distributable earnings  (1)  $93,713   $68,754   $186,636   $143,901 
Diluted distributable earnings per share  (1)  $0.52   $0.45   $1.06   $0.97 
Diluted weighted average shares outstanding  (1) (2)   179,873,329    153,616,591    175,252,399    148,818,030 

 

(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.

(2) Beginning in the first quarter of 2022, the diluted weighted average shares outstanding were adjusted to exclude the potential shares issuable upon conversion and settlement of the Company's convertible senior notes principal balance. Excluding the effect of a potential conversion in shares until a conversion occurs is consistent with past treatment and other unrealized adjustments to distributable earnings. For the quarter and six months ended June 30, 2022, the diluted weighted average shares outstanding excluded 15,140,481 and 15,104,631 of these potentially issuable shares, respectively.

 

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), amortization of the convertible senior notes conversion option (in comparative periods prior to 2022) and gains/losses on the receipt of real estate from the settlement of loans (prior to the sale of the real estate). 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 in whole or in part. Loans are deemed nonrecoverable upon the earlier of: (1) 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 (2) 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.