Arbor Realty Trust Reports First Quarter 2020 Results and Declares Dividend of $0.30 per Share
Company Highlights:
- GAAP net loss of
$59.3 million , or$0.54 per diluted common share - Core earnings of
$40.7 million , or$0.31 per diluted common share1 - Declares a cash dividend on common stock of
$0.30 per share - Issued
$275.0 million of 4.50% senior unsecured notes due in 2027
Agency Business
- Loan originations of
$1.08 billion and a servicing portfolio of$20.20 billion - Segment income of
$36.1 million , excluding a$47.7 million loss on derivative instruments and a$22.0 million CECL loss provision
Structured Business
- Portfolio growth of 12% on
$856.2 million of loan originations - Closed our largest collateralized securitization vehicle of
$800.0 million - Segment income of
$17.3 million , excluding a$53.9 million CECL loss provision
- Issued
$40.5 million of 8.00% senior unsecured notes due in 2023
At
Agency Business
Loan Origination Platform
Agency Loan Volume (in thousands) | ||||||
Quarter Ended | ||||||
2020 |
2019 |
|||||
Originations: | ||||||
Fannie Mae | $ | 581,973 | $ | 764,314 | ||
Freddie Mac | 199,711 | 96,993 | ||||
FHA | 17,944 | 78,428 | ||||
Private Label | 282,345 | 320,476 | ||||
Total Originations | $ | 1,081,973 | $ | 1,260,211 | ||
Total Loan Sales | $ | 957,060 | $ | 887,868 | ||
Total Loan Commitments | $ | 1,267,219 | $ | 1,203,194 | ||
For the quarter ended
At
Fee-Based Servicing Portfolio
Our 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 | $ | 14,946,922 | 0.493 | % | 8.0 | $ | 14,832,844 | 0.493 | % | 7.8 | ||
Freddie Mac | 4,570,521 | 0.294 | % | 10.6 | 4,534,714 | 0.300 | % | 10.6 | ||||
FHA | 679,685 | 0.152 | % | 19.1 | 691,519 | 0.154 | % | 18.7 | ||||
Total | $ | 20,197,128 | 0.436 | % | 8.9 | $ | 20,059,077 | 0.438 | % | 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
Structured Business
Portfolio and Investment Activity
- Originated 47 loans totaling
$856.2 million , of which$798.2 million was funded atMarch 31, 2020 , and consisted primarily of 34 bridge loans totaling$785.1 million - Payoffs and pay downs on 21 loans totaling
$275.3 million - Portfolio growth of
$520.9 million , or 12% - No material loan modifications that resulted in interest rate concessions
- Provision for loan losses of
$54.4 million from CECL
At
The average balance of the Company’s loan and investment portfolio during the first quarter of 2020, excluding loan loss reserves, was
During the first quarter of 2020, the Company recorded a provision for loan losses of
Financing Activity
The Company completed a collateralized securitization vehicle (“CLO XIII”) totaling
The Company completed the unwind of CLO VIII, redeeming
The balance of debt that finances the Company’s loan and investment portfolio at
The Company is subject to various financial covenants and restrictions under the terms of its collateralized securitization vehicles, financing facilities and unsecured debt. The Company believes it was in compliance with all financial covenants and restrictions as of
Capital Markets
The Company issued $275.0 million in aggregate principal amount of 4.50% senior unsecured notes due in 2027 in a private placement, generating net proceeds of $271.8 million after deducting offering expenses. The Company used a significant portion of the proceeds to repay secured indebtedness.
In
Dividends
The Company announced today that its Board of Directors has declared a quarterly cash dividend of
As previously announced, the 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
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 page 11 of this release.
Contacts: 516-506-4422 pelenio@arbor.com |
Investors: 646-536-7037 alobo@theruthgroup.com |
Media: Chief Marketing Officer 516-506-4615 bhabyan@arbor.com |
Consolidated Statements of Operations - (Unaudited) | |||||||||
($ in thousands—except share and per share data) | |||||||||
Quarter Ended |
|||||||||
2020 | 2019 | ||||||||
Interest income | $ | 88,526 | $ | 71,277 | |||||
Interest expense | 49,982 | 41,865 | |||||||
Net interest income | 38,544 | 29,412 | |||||||
Other revenue: | |||||||||
Gain on sales, including fee-based services, net | 14,305 | 16,389 | |||||||
Mortgage servicing rights | 21,934 | 14,232 | |||||||
Servicing revenue, net | 13,302 | 13,552 | |||||||
Property operating income | 2,192 | 2,803 | |||||||
Loss on derivative instruments, net | (50,731 | ) | (2,465 | ) | |||||
Other income, net | 1,303 | 337 | |||||||
Total other revenue | 2,305 | 44,848 | |||||||
Other expenses: | |||||||||
Employee compensation and benefits | 34,252 | 31,764 | |||||||
Selling and administrative | 11,052 | 9,761 | |||||||
Property operating expenses | 2,443 | 2,396 | |||||||
Depreciation and amortization | 1,947 | 1,912 | |||||||
Provision for loss sharing (net of recoveries) | 21,537 | 454 | |||||||
Provision for credit losses (net of recoveries) | 54,382 | - | |||||||
Total other expenses | 125,613 | 46,287 | |||||||
(Loss) income before extinguishment of debt, income from | |||||||||
equity affiliates and income taxes | (84,764 | ) | 27,973 | ||||||
Loss on extinguishment of debt | (1,954 | ) | (128 | ) | |||||
Income from equity affiliates | 3,992 | 2,151 | |||||||
Benefit from income taxes | 14,370 | 10 | |||||||
Net (loss) income | (68,356 | ) | 30,006 | ||||||
Preferred stock dividends | 1,888 | 1,888 | |||||||
Net (loss) income attributable to noncontrolling interest | (10,934 | ) | 5,468 | ||||||
Net (loss) income attributable to common stockholders | $ | (59,310 | ) | $ | 22,650 | ||||
Basic (loss) earnings per common share | $ | (0.54 | ) | $ | 0.27 | ||||
Diluted (loss) earnings per common share | $ | (0.54 | ) | $ | 0.26 | ||||
Weighted average shares outstanding: | |||||||||
Basic | 110,792,412 | 85,151,878 | |||||||
Diluted | 131,217,199 | 107,869,511 | |||||||
Dividends declared per common share | $ | 0.30 | $ | 0.27 | |||||
Consolidated Balance Sheets | ||||||||
($ in thousands—except share and per share data) | ||||||||
2020 | 2019 | |||||||
(Unaudited) | ||||||||
Assets: | ||||||||
Cash and cash equivalents | $ | 222,330 | $ | 299,687 | ||||
Restricted cash | 304,067 | 210,875 | ||||||
Loans and investments, net (allowance for credit losses of |
4,638,004 | 4,189,960 | ||||||
Loans held-for-sale, net | 991,696 | 861,360 | ||||||
Capitalized mortgage servicing rights, net | 288,954 | 286,420 | ||||||
Securities held-to-maturity, net (allowance for credit losses of |
84,406 | 88,699 | ||||||
Investments in equity affiliates | 44,701 | 41,800 | ||||||
Real estate owned, net | 13,270 | 13,220 | ||||||
Due from related party | 13,821 | 10,651 | ||||||
109,371 | 110,700 | |||||||
Other assets | 224,030 | 125,788 | ||||||
Total assets | $ | 6,934,650 | $ | 6,239,160 | ||||
Liabilities and Equity: | ||||||||
Credit facilities and repurchase agreements | $ | 1,846,473 | $ | 1,678,288 | ||||
Collateralized loan obligations | 2,513,096 | 2,130,121 | ||||||
Debt fund | 68,717 | 68,629 | ||||||
Senior unsecured notes | 591,854 | 319,799 | ||||||
Convertible senior unsecured notes, net | 264,689 | 284,152 | ||||||
Junior subordinated notes to subsidiary trust issuing preferred securities | 141,128 | 140,949 | ||||||
Due to related party | 3,103 | 13,100 | ||||||
Due to borrowers | 81,447 | 79,148 | ||||||
Allowance for loss-sharing obligations | 70,752 | 34,648 | ||||||
Other liabilities | 127,341 | 134,299 | ||||||
Total liabilities | 5,708,600 | 4,883,133 | ||||||
Equity: | ||||||||
Preferred stock, cumulative, redeemable, |
||||||||
special voting preferred shares; 20,369,265 and 20,484,094 shares issued and | ||||||||
outstanding, respectively; 8.25% Series A, |
||||||||
1,551,500 shares issued and outstanding; 7.75% Series B, |
||||||||
liquidation preference; 1,260,000 shares issued and outstanding; 8.50% Series C, | ||||||||
89,500 | 89,501 | |||||||
Common stock, |
||||||||
and 109,706,214 shares issued and outstanding, respectively | 1,106 | 1,097 | ||||||
Additional paid-in capital | 1,163,161 | 1,154,932 | ||||||
Accumulated deficit | (177,589 | ) | (60,920 | ) | ||||
1,076,178 | 1,184,610 | |||||||
Noncontrolling interest | 149,872 | 171,417 | ||||||
Total equity | 1,226,050 | 1,356,027 | ||||||
Total liabilities and equity | $ | 6,934,650 | $ | 6,239,160 | ||||
Statement of Operations Segment Information - (Unaudited) | ||||||||||||||||
(in thousands) | ||||||||||||||||
Quarter Ended |
||||||||||||||||
Structured Business |
Agency Business |
Other / Eliminations (1) |
Consolidated | |||||||||||||
Interest income | $ | 78,477 | $ | 10,049 | $ | - | $ | 88,526 | ||||||||
Interest expense | 43,399 | 6,583 | - | 49,982 | ||||||||||||
Net interest income | 35,078 | 3,466 | - | 38,544 | ||||||||||||
Other revenue: | ||||||||||||||||
Gain on sales, including fee-based services, net | - | 14,305 | - | 14,305 | ||||||||||||
Mortgage servicing rights | - | 21,934 | - | 21,934 | ||||||||||||
Servicing revenue | - | 25,124 | - | 25,124 | ||||||||||||
Amortization of MSRs | - | (11,822 | ) | - | (11,822 | ) | ||||||||||
Property operating income | 2,192 | - | - | 2,192 | ||||||||||||
Loss on derivative instruments, net | (3,000 | ) | (47,731 | ) | - | (50,731 | ) | |||||||||
Other income, net | 1,303 | - | - | 1,303 | ||||||||||||
Total other revenue | 495 | 1,810 | - | 2,305 | ||||||||||||
Other expenses: | ||||||||||||||||
Employee compensation and benefits | 10,846 | 23,406 | - | 34,252 | ||||||||||||
Selling and administrative | 4,450 | 6,602 | - | 11,052 | ||||||||||||
Property operating expenses | 2,443 | - | - | 2,443 | ||||||||||||
Depreciation and amortization | 620 | 1,327 | - | 1,947 | ||||||||||||
Provision for loss sharing (net of recoveries) | - | 21,537 | - | 21,537 | ||||||||||||
Provision for credit losses (net of recoveries) | 53,890 | 492 | - | 54,382 | ||||||||||||
Total other expenses | 72,249 | 53,364 | - | 125,613 | ||||||||||||
Loss before extinguishment of debt, income | ||||||||||||||||
from equity affiliates and income taxes | (36,676 | ) | (48,088 | ) | - | (84,764 | ) | |||||||||
Loss on extinguishment of debt | (1,954 | ) | - | - | (1,954 | ) | ||||||||||
Income from equity affiliates | 3,992 | - | - | 3,992 | ||||||||||||
(Provision for) benefit from income taxes | (83 | ) | 14,453 | - | 14,370 | |||||||||||
Net loss | (34,721 | ) | (33,635 | ) | - | (68,356 | ) | |||||||||
Preferred stock dividends | 1,888 | - | - | 1,888 | ||||||||||||
Net loss attributable to noncontrolling interest | - | - | (10,934 | ) | (10,934 | ) | ||||||||||
Net (loss) income attributable to common stockholders | $ | (36,609 | ) | $ | (33,635 | ) | $ | 10,934 | $ | (59,310 | ) | |||||
(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 | $ | 106,879 | $ | 115,451 | $ | 222,330 | ||||||
Restricted cash | 301,468 | 2,599 | 304,067 | |||||||||
Loans and investments, net | 4,638,004 | - | 4,638,004 | |||||||||
Loans held-for-sale, net | - | 991,696 | 991,696 | |||||||||
Capitalized mortgage servicing rights, net | - | 288,954 | 288,954 | |||||||||
Securities held-to-maturity, net | 20,000 | 64,406 | 84,406 | |||||||||
Investments in equity affiliates | 44,701 | - | 44,701 | |||||||||
12,500 | 96,871 | 109,371 | ||||||||||
Other assets | 174,409 | 76,712 | 251,121 | |||||||||
Total assets | $ | 5,297,961 | $ | 1,636,689 | $ | 6,934,650 | ||||||
Liabilities: | ||||||||||||
Debt obligations | $ | 4,635,218 | $ | 790,739 | $ | 5,425,957 | ||||||
Allowance for loss-sharing obligations | - | 70,752 | 70,752 | |||||||||
Other liabilities | 155,383 | 56,508 | 211,891 | |||||||||
Total liabilities | $ | 4,790,601 | $ | 917,999 | $ | 5,708,600 | ||||||
Supplemental Schedule of Non-GAAP Financial Measures - (Unaudited) | |||||||
Reconciliation of Core Earnings to GAAP Net (Loss) Income | |||||||
($ in thousands—except share and per share data) | |||||||
Quarter Ended |
|||||||
2020 | 2019 | ||||||
Net (loss) income attributable to common stockholders | $ | (59,310 | ) | $ | 22,650 | ||
Adjustments: | |||||||
Net (loss) income attributable to noncontrolling interest | (10,934 | ) | 5,468 | ||||
Income from mortgage servicing rights | (21,934 | ) | (14,232 | ) | |||
Deferred tax benefit | (19,904 | ) | (4,168 | ) | |||
Amortization and write-offs of MSRs | 17,741 | 16,739 | |||||
Depreciation and amortization | 2,958 | 2,865 | |||||
Loss on extinguishment of debt | 1,954 | 128 | |||||
Provision for credit losses | 75,919 | 454 | |||||
Loss on derivative instruments, net | 50,731 | 2,465 | |||||
Stock-based compensation | 3,517 | 3,756 | |||||
Core earnings (1) | $ | 40,738 | $ | 36,125 | |||
Diluted core earnings per share (1) | $ | 0.31 | $ | 0.33 | |||
Diluted weighted average shares outstanding (1) | 131,217,199 | 107,869,511 | |||||
(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. | |||||||
Beginning in the first quarter of 2020, the Company is presenting core earnings as its non-GAAP financial measure in replacement of adjusted funds from operations ("AFFO"). Core earnings is comparable to our previous AFFO metric, revised to exclude provisions for credit losses (including CECL) related to our structured loan portfolio, securities held-to-maturity and loss-sharing obligations related to the Fannie Mae program. The Company is presenting core earnings because management believes it is important supplemental measure of the Company’s operating performance and is frequently used by peers, analysts, investors and other parties in the evaluation of REITs. Prior period amounts presented above have been conformed to reflect this change. | |||||||
The Company defines core 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 mortgage servicing rights ("MSRs"), amortization and write-offs of MSRs, gains and losses on derivative instruments primarily associated with private label loans that have not yet been sold and securitized, the cumulative gains or losses on derivative instruments associated with private label loans that were sold during the periods presented, changes in fair value of GSE-related derivatives that temporarily flow through earnings, deferred tax (benefit) provision, provisions for credit losses (including CECL) and the amortization of the convertible senior notes conversion option. The Company also adds back one-time charges such as acquisition costs and one-time gains or losses on the early extinguishment of debt. | |||||||
Core earnings is 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 core earnings may be different from the calculations used by other companies and, therefore, comparability may be limited. |
Source: Arbor Realty Trust