Arbor Realty Trust Reports Fourth Quarter and Full Year 2019 Results and Declares Common Stock Dividend
Fourth Quarter Highlights:
- GAAP net income of
$0.34 per diluted common share - AFFO per diluted common share of
$0.34 , excluding a one-time loss from the early repayment of debt and gains from derivative instruments1 - Raised
$250.7 million of accretive growth capital through the issuance of common stock and senior unsecured notes - Issued
$264.0 million of 4.75% convertible senior notes due 2022 to exchange our 5.25% convertible senior notes - Declares a cash dividend on common stock of
$0.30 per share, 11% higher than a year ago
Agency Business
- Segment income of
$33.2 million - Loan originations of
$1.26 billion - Servicing portfolio of
$20.06 billion representing 8% growth for 2019
Structured Business
- Segment income of
$9.5 million - Portfolio growth of 8% on
$831.4 million of loan originations - Closed a
$635.0 million collateralized securitization vehicle with improved terms
Full Year Highlights:
- GAAP net income of
$1.27 and AFFO of$1.36 per diluted common share1 - Record loan originations of
$7.61 billion , a 12% increase over 2018 - Structured portfolio growth of 30% from record loan originations of
$2.80 billion - Significant return to shareholders of 54% for 2019
- Raised common dividend three times in 2019 to a forward annual rate of
$1.20 per share, up from$1.08 per share a year ago - Continued focus on improving our funding sources by increasing warehouse capacity by
$1.00 billion , adding two collateralized securitization vehicles totaling$1.29 billion and issuing$264.0 million of convertible senior notes, replacing higher cost debt - Raised
$456.9 million of accretive growth capital through the issuance of common stock and senior unsecured notes at attractive terms - Launched the single-family rental portfolio and private label programs, further diversifying our lending platform
Agency Business
Loan Origination Platform
| Agency Loan Volume (in thousands) | ||||||||||||
| Quarter Ended | Year Ended | |||||||||||
| December 31, 2019 | September 30, 2019 | December 31, 2019 | December 31, 2018 | |||||||||
| Fannie Mae | $ | 764,314 | $ | 1,097,095 | $ | 3,346,272 | $ | 3,332,100 | ||||
| Freddie Mac | 96,993 | 203,981 | 728,317 | 1,587,958 | ||||||||
| FHA | 78,428 | - | 123,095 | 153,523 | ||||||||
| CMBS/Conduit | - | 34,000 | 211,325 | 50,908 | ||||||||
| Private Label | 320,476 | 80,740 | 401,216 | - | ||||||||
| Total Originations | $ | 1,260,211 | $ | 1,415,816 | $ | 4,810,225 | $ | 5,124,489 | ||||
| Total Loan Sales | $ | 887,868 | $ | 1,488,430 | $ | 4,401,112 | $ | 4,924,144 | ||||
| Total Loan Commitments | $ | 1,203,194 | $ | 1,477,436 | $ | 4,829,721 | $ | 5,104,072 | ||||
For the quarter ended
At
Fee-Based Servicing Portfolio
Our fee-based servicing portfolio totaled
| Fee-Based Servicing Portfolio ($ in thousands) | ||||||||||
| As of December 31, 2019 | As of September 30, 2019 | |||||||||
| UPB | Wtd. Avg. Fee | Wtd. Avg. Life (in years) |
UPB | Wtd. Avg. Fee | Wtd. Avg. Life (in years) |
|||||
| Fannie Mae | $ | 14,832,844 | 0.493% | 7.8 | $ | 14,616,816 | 0.492% | 8.1 | ||
| Freddie Mac | 4,534,714 | 0.300% | 10.6 | 4,664,750 | 0.300% | 11.0 | ||||
| FHA | 691,519 | 0.154% | 18.7 | 684,316 | 0.154% | 19.2 | ||||
| Total | $ | 20,059,077 | 0.438% | 8.8 | $ | 19,965,882 | 0.435% | 9.2 | ||
Loans sold under the
Structured Business
Portfolio and Investment Activity
Quarter ended
- Originated 66 loans totaling
$831.4 million , of which$799.2 million was funded atDecember 31, 2019 , and consisted primarily of 51 bridge loans totaling$765.0 million - Payoffs and pay downs on 25 loans totaling
$508.9 million - Portfolio growth of
$317.9 million , or 8%
Year ended
- Record origination volume of
$2.80 billion , a 69% increase from 2018, and consists of 173 new loan originations, of which 140 were bridge loans for$2.60 billion - Payoffs and pay downs on 137 loans totaling
$1.75 billion - Portfolio growth of
$1.00 billion , or 30%
At
The average balance of the Company’s loan and investment portfolio during the fourth quarter of 2019, excluding loan loss reserves, was
At
Financing Activity
The Company completed its twelfth collateralized securitization vehicle (“CLO XII”) totaling
The Company completed the unwind of CLO VII, 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 7.5 million shares of common stock in a public offering receiving net proceeds of
The Company issued
The Company issued $110.0 million in aggregate principal amount of 4.75% senior unsecured notes due 2024 in a private placement, generating net proceeds of $108.2 million after deducting offering expenses. This offering reflects a 100 basis point reduction in rate as compared to our previous senior unsecured notes offering in March 2019. The proceeds were 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
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, 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
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 12 of this release.
| Contacts: Arbor Realty Trust, Inc. Paul Elenio, Chief Financial Officer 516-506-4422 pelenio@arbor.com |
Investors: The Ruth Group Alexander Lobo 646-536-7037 alobo@theruthgroup.com |
| Media: Bonnie Habyan, Chief Marketing Officer 516-506-4615 bhabyan@arbor.com |
| ARBOR REALTY TRUST, INC. AND SUBSIDIARIES | |||||||||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||||||
| ($ in thousands—except share and per share data) | |||||||||||||||||||
| Quarter Ended | Year Ended | ||||||||||||||||||
| December 31, | December 31, | ||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||||||
| (Unaudited) | (Unaudited) | ||||||||||||||||||
| Interest income | $ | 81,983 | $ | 73,360 | $ | 315,940 | $ | 251,768 | |||||||||||
| Interest expense | 48,186 | 42,999 | 186,399 | 153,818 | |||||||||||||||
| Net interest income | 33,797 | 30,361 | 129,541 | 97,950 | |||||||||||||||
| Other revenue: | |||||||||||||||||||
| Gain on sales, including fee-based services, net | 13,755 | 18,735 | 65,652 | 70,002 | |||||||||||||||
| Mortgage servicing rights | 27,909 | 36,052 | 90,761 | 98,839 | |||||||||||||||
| Servicing revenue, net | 14,587 | 11,372 | 54,542 | 46,034 | |||||||||||||||
| Property operating income | 1,487 | 1,569 | 9,674 | 10,095 | |||||||||||||||
| Other income, net | 4,627 | 9,736 | (784 | ) | 8,161 | ||||||||||||||
| Total other revenue | 62,365 | 77,464 | 219,845 | 233,131 | |||||||||||||||
| Other expenses: | |||||||||||||||||||
| Employee compensation and benefits | 28,456 | 26,386 | 122,102 | 110,470 | |||||||||||||||
| Selling and administrative | 9,205 | 9,291 | 40,329 | 37,074 | |||||||||||||||
| Property operating expenses | 2,571 | 2,342 | 10,220 | 10,431 | |||||||||||||||
| Depreciation and amortization | 1,847 | 1,914 | 7,510 | 7,453 | |||||||||||||||
| Impairment loss on real estate owned | - | - | 1,000 | 2,000 | |||||||||||||||
| Provision for loss sharing (net of recoveries) | (409 | ) | 1,003 | 1,147 | 3,843 | ||||||||||||||
| Provision for loan losses (net of recoveries) | - | 9,319 | - | 8,353 | |||||||||||||||
| Litigation settlement gain | - | - | - | (10,170 | ) | ||||||||||||||
| Total other expenses | 41,670 | 50,255 | 182,308 | 169,454 | |||||||||||||||
| Income before extinguishment of debt, income from | |||||||||||||||||||
| equity affiliates and income taxes | 54,492 | 57,570 | 167,078 | 161,627 | |||||||||||||||
| Loss on extinguishment of debt | (7,311 | ) | (82 | ) | (7,439 | ) | (5,041 | ) | |||||||||||
| Income from equity affiliates | 1,502 | 91 | 10,635 | 1,196 | |||||||||||||||
| Provision for income taxes | (4,072 | ) | (8,635 | ) | (15,036 | ) | (9,731 | ) | |||||||||||
| Net income | 44,611 | 48,944 | 155,238 | 148,051 | |||||||||||||||
| Preferred stock dividends | 1,888 | 1,888 | 7,554 | 7,554 | |||||||||||||||
| Net income attributable to noncontrolling interest | 7,181 | 9,838 | 26,610 | 32,185 | |||||||||||||||
| Net income attributable to common stockholders | $ | 35,542 | $ | 37,218 | $ | 121,074 | $ | 108,312 | |||||||||||
| Basic earnings per common share | $ | 0.35 | $ | 0.48 | $ | 1.30 | $ | 1.54 | |||||||||||
| Diluted earnings per common share | $ | 0.34 | $ | 0.47 | $ | 1.27 | $ | 1.50 | |||||||||||
| Weighted average shares outstanding: | |||||||||||||||||||
| Basic | 101,611,818 | 78,273,633 | 92,851,327 | 70,208,165 | |||||||||||||||
| Diluted | 125,498,359 | 101,148,081 | 116,192,951 | 93,642,168 | |||||||||||||||
| Dividends declared per common share | $ | 0.30 | $ | 0.42 | (1) | $ | 1.14 | $ | 1.13 | (1) | |||||||||
| (1) Includes a special dividend of $0.15 per share of common stock declared in December 2018. | |||||||||||||||||||
| ARBOR REALTY TRUST, INC. AND SUBSIDIARIES | |||||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||||
| ($ in thousands—except share and per share data) | |||||||||||
| December 31, | December 31, | ||||||||||
| 2019 | 2018 | ||||||||||
| Assets: | |||||||||||
| Cash and cash equivalents | $ | 299,687 | $ | 160,063 | |||||||
| Restricted cash | 210,875 | 180,606 | |||||||||
| Loans and investments, net | 4,189,960 | 3,200,145 | |||||||||
| Loans held-for-sale, net | 861,360 | 481,664 | |||||||||
| Capitalized mortgage servicing rights, net | 286,420 | 273,770 | |||||||||
| Securities held to maturity, net | 88,699 | 76,363 | |||||||||
| Investments in equity affiliates | 41,800 | 21,580 | |||||||||
| Real estate owned, net | 13,220 | 14,446 | |||||||||
| Due from related party | 10,651 | 1,287 | |||||||||
| Goodwill and other intangible assets | 110,700 | 116,165 | |||||||||
| Other assets | 125,788 | 86,086 | |||||||||
| Total assets | $ | 6,239,160 | $ | 4,612,175 | |||||||
| Liabilities and Equity: | |||||||||||
| Credit facilities and repurchase agreements | $ | 1,678,288 | $ | 1,135,627 | |||||||
| Collateralized loan obligations | 2,130,121 | 1,593,548 | |||||||||
| Debt fund | 68,629 | 68,183 | |||||||||
| Senior unsecured notes | 319,799 | 122,484 | |||||||||
| Convertible senior unsecured notes, net | 284,152 | 254,768 | |||||||||
| Junior subordinated notes to subsidiary trust issuing preferred securities | 140,949 | 140,259 | |||||||||
| Due to related party | 13,100 | - | |||||||||
| Due to borrowers | 79,148 | 78,662 | |||||||||
| Allowance for loss-sharing obligations | 34,648 | 34,298 | |||||||||
| Other liabilities | 134,299 | 118,780 | |||||||||
| Total liabilities | 4,883,133 | 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; 109,706,214 | |||||||||||
| and 83,987,707 shares issued and outstanding, respectively | 1,097 | 840 | |||||||||
| Additional paid-in capital | 1,154,932 | 879,029 | |||||||||
| Accumulated deficit | (60,920 | ) | (74,133 | ) | |||||||
| Total Arbor Realty Trust, Inc. stockholders’ equity | 1,184,610 | 895,238 | |||||||||
| Noncontrolling interest | 171,417 | 170,328 | |||||||||
| Total equity | 1,356,027 | 1,065,566 | |||||||||
| Total liabilities and equity | $ | 6,239,160 | $ | 4,612,175 | |||||||
| ARBOR REALTY TRUST, INC. AND SUBSIDIARIES | |||||||||||||||||
| STATEMENT OF INCOME SEGMENT INFORMATION - (Unaudited) | |||||||||||||||||
| (in thousands) | |||||||||||||||||
| Quarter Ended December 31, 2019 | |||||||||||||||||
| Structured Business | Agency Business | Other / Eliminations (1) | Consolidated | ||||||||||||||
| Interest income | $ | 74,060 | $ | 7,923 | $ | - | $ | 81,983 | |||||||||
| Interest expense | 43,620 | 4,566 | - | 48,186 | |||||||||||||
| Net interest income | 30,440 | 3,357 | - | 33,797 | |||||||||||||
| Other revenue: | |||||||||||||||||
| Gain on sales, including fee-based services, net | - | 13,755 | - | 13,755 | |||||||||||||
| Mortgage servicing rights | - | 27,909 | - | 27,909 | |||||||||||||
| Servicing revenue | - | 26,538 | - | 26,538 | |||||||||||||
| Amortization of MSRs | - | (11,951 | ) | - | (11,951 | ) | |||||||||||
| Property operating income | 1,487 | - | - | 1,487 | |||||||||||||
| Other income, net | 256 | 4,371 | - | 4,627 | |||||||||||||
| Total other revenue | 1,743 | 60,622 | - | 62,365 | |||||||||||||
| Other expenses: | |||||||||||||||||
| Employee compensation and benefits | 8,217 | 20,239 | - | 28,456 | |||||||||||||
| Selling and administrative | 2,998 | 6,207 | - | 9,205 | |||||||||||||
| Property operating expenses | 2,571 | - | - | 2,571 | |||||||||||||
| Depreciation and amortization | 523 | 1,324 | - | 1,847 | |||||||||||||
| Provision for loss sharing (net of recoveries) | - | (409 | ) | - | (409 | ) | |||||||||||
| Total other expenses | 14,309 | 27,361 | - | 41,670 | |||||||||||||
| Income before extinguishment of debt, income | |||||||||||||||||
| from equity affiliates and income taxes | 17,874 | 36,618 | - | 54,492 | |||||||||||||
| Loss on extinguishment of debt | (7,311 | ) | - | - | (7,311 | ) | |||||||||||
| Income from equity affiliates | 1,502 | - | - | 1,502 | |||||||||||||
| Provision for income taxes | (667 | ) | (3,405 | ) | - | (4,072 | ) | ||||||||||
| Net income | 11,398 | 33,213 | - | 44,611 | |||||||||||||
| Preferred stock dividends | 1,888 | - | - | 1,888 | |||||||||||||
| Net income attributable to noncontrolling interest | - | - | 7,181 | 7,181 | |||||||||||||
| Net income attributable to common stockholders | $ | 9,510 | $ | 33,213 | $ | (7,181 | ) | $ | 35,542 | ||||||||
| (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) | |||||||||||||
| December 31, 2019 | |||||||||||||
| Structured Business | Agency Business | Consolidated | |||||||||||
| Assets: | |||||||||||||
| Cash and cash equivalents | $ | 264,468 | $ | 35,219 | $ | 299,687 | |||||||
| Restricted cash | 208,926 | 1,949 | 210,875 | ||||||||||
| Loans and investments, net | 4,189,960 | - | 4,189,960 | ||||||||||
| Loans held-for-sale, net | - | 861,360 | 861,360 | ||||||||||
| Capitalized mortgage servicing rights, net | - | 286,420 | 286,420 | ||||||||||
| Securities held to maturity, net | 20,000 | 68,699 | 88,699 | ||||||||||
| Investments in equity affiliates | 41,800 | - | 41,800 | ||||||||||
| Goodwill and other intangible assets | 12,500 | 98,200 | 110,700 | ||||||||||
| Other assets | 118,175 | 31,484 | 149,659 | ||||||||||
| Total assets | $ | 4,855,829 | $ | 1,383,331 | $ | 6,239,160 | |||||||
| Liabilities: | |||||||||||||
| Debt obligations | $ | 3,878,343 | $ | 743,595 | $ | 4,621,938 | |||||||
| Allowance for loss-sharing obligations | - | 34,648 | 34,648 | ||||||||||
| Other liabilities | 171,004 | 55,543 | 226,547 | ||||||||||
| Total liabilities | $ | 4,049,347 | $ | 833,786 | $ | 4,883,133 | |||||||
| 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 | Year Ended | ||||||||||||||
| December 31, | December 31, | ||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Net income attributable to common stockholders | $ | 35,542 | $ | 37,218 | $ | 121,074 | $ | 108,312 | |||||||
| Adjustments: | |||||||||||||||
| Net income attributable to noncontrolling interest | 7,181 | 9,838 | 26,610 | 32,185 | |||||||||||
| Impairment loss on real estate owned | - | - | 1,000 | 2,000 | |||||||||||
| Depreciation - real estate owned | 177 | 176 | 701 | 708 | |||||||||||
| Depreciation - investments in equity affiliates | 124 | 125 | 510 | 499 | |||||||||||
| Funds from operations (1) | $ | 43,024 | $ | 47,357 | $ | 149,895 | $ | 143,704 | |||||||
| Adjustments: | |||||||||||||||
| Income from mortgage servicing rights | (27,909 | ) | (36,052 | ) | (90,761 | ) | (98,839 | ) | |||||||
| Impairment loss on real estate owned | - | - | (1,000 | ) | (2,000 | ) | |||||||||
| Deferred tax provision (benefit) | 1,176 | 2,421 | 150 | (12,033 | ) | ||||||||||
| Amortization and write-offs of MSRs | 18,547 | 20,314 | 71,105 | 73,182 | |||||||||||
| Depreciation and amortization | 2,389 | 2,582 | 9,983 | 9,618 | |||||||||||
| Loss on extinguishment of debt | 7,311 | 82 | 7,439 | 5,041 | |||||||||||
| Net gain on Private Label-related derivatives prior to sale | (6,050 | ) | - | (6,098 | ) | - | |||||||||
| Net loss (gain) on changes in fair value of GSE-related derivatives | 1,678 | (9,002 | ) | 7,785 | (6,672 | ) | |||||||||
| Stock-based compensation | 1,941 | 1,257 | 9,515 | 6,095 | |||||||||||
| Adjusted funds from operations (1) (2) | $ | 42,107 | $ | 28,959 | $ | 158,013 | $ | 118,096 | |||||||
| Diluted FFO per share (1) | $ | 0.34 | $ | 0.47 | $ | 1.29 | $ | 1.53 | |||||||
| Diluted AFFO per share (1) (2) | $ | 0.34 | $ | 0.29 | $ | 1.36 | $ | 1.26 | |||||||
| Diluted weighted average shares outstanding (1) | 125,498,359 | 101,148,081 | 116,192,951 | 93,642,168 | |||||||||||
| (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) During the fourth quarter of 2019, the Company updated its definition of AFFO to (i) exclude one-time gains or losses on the early extinguishment of debt, (ii) exclude gains and losses on derivative instruments associated with Private Label loans that have not yet been sold and securitized and (iii) include the cumulative gains or losses on derivative instruments associated with Private Label loans that were sold during the periods presented. Prior period amounts presented above have been conformed to reflect this change. | |||||||||||||||
| 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"), gains or losses on Private Label-related derivative instruments until the loans are sold, changes in fair value of GSE-related derivatives that temporarily flow through earnings, amortization and write-offs of MSRs, deferred tax (benefit) provision and the amortization of the convertible senior notes conversion option. The Company also adds back one-time charges such as acquisition costs, gains and losses on the extinguishment of debt, 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. | |||||||||||||||
Source: Arbor Realty Trust
