GENERAL: 800.ARBOR.10

Arbor Realty Trust Reports Second Quarter 2024 Results and Declares Dividend of $0.43 per Share

Aug 2, 2024

Company Highlights:

  • GAAP net income of $0.25 and distributable earnings of $0.45, per diluted common share1
  • Declares cash dividend on common stock of $0.43 per share
  • Strong liquidity position with ~$725 million in cash and liquidity and ~$215 million of CLO restricted cash2
  • Agency loan originations of $1.15 billion; a servicing portfolio of ~$32.28 billion, up 3%
  • Structured loan originations of $227.2 million, runoff of $629.6 million and a portfolio of ~$11.87 billion
  • Redeemed our 5.75% senior notes at maturity for ~$90.0 million
  • Repurchased $11.4 million of common stock at an average price of $12.19 per share

UNIONDALE, N.Y., Aug. 02, 2024 (GLOBE NEWSWIRE) -- Arbor Realty Trust, Inc. (NYSE: ABR), today announced financial results for the second quarter ended June 30, 2024. Arbor reported net income for the quarter of $47.4 million, or $0.25 per diluted common share, compared to net income of $76.2 million, or $0.41 per diluted common share for the quarter ended June 30, 2023. Distributable earnings for the quarter was $91.6 million, or $0.45 per diluted common share, compared to $114.0 million, or $0.57 per diluted common share for the quarter ended June 30, 2023.

Agency Business

Loan Origination Platform

    Agency Loan Volume (in thousands)
    Quarter Ended
    June 30, 2024   March 31, 2024
Fannie Mae   $ 742,724   $ 458,429
Freddie Mac     346,821     370,102
Private Label     34,714     15,410
SFR-Fixed Rate     24,996     2,318
Total Originations   $ 1,149,255   $ 846,259
         
Total Loan Sales   $ 1,135,287   $ 1,085,374
         
Total Loan Commitments   $ 1,099,713   $ 934,243
 

For the quarter ended June 30, 2024, the Agency Business generated revenues of $76.8 million, compared to $66.6 million for the first quarter of 2024. Gain on sales, including fee-based services, net was $17.4 million for the quarter, reflecting a margin of 1.54%, compared to $16.7 million and 1.54% for the first quarter of 2024. Income from mortgage servicing rights was $14.5 million for the quarter, reflecting a rate of 1.32% as a percentage of loan commitments, compared to $10.2 million and 1.32% (excluding $160.2 million of loan commitments not serviced for a fee) for the first quarter of 2024.

At June 30, 2024, loans held-for-sale was $342.9 million, with financing associated with these loans totaling $335.2 million.

Fee-Based Servicing Portfolio

The Company’s fee-based servicing portfolio totaled $32.28 billion at June 30, 2024. Servicing revenue, net was $29.9 million for the quarter and consisted of servicing revenue of $46.8 million, net of amortization of mortgage servicing rights totaling $16.9 million.

    Fee-Based Servicing Portfolio ($ in thousands)
    June 30, 2024   March 31, 2024
    UPB   Wtd. Avg. Fee
(bps)
  Wtd. Avg.
Life (years)
  UPB   Wtd. Avg. Fee
(bps)
  Wtd. Avg.
Life (years)
Fannie Mae   $ 22,114,193   46.7   7.0   $ 21,548,221   47.1   7.2
Freddie Mac     5,587,178   22.7   7.4     5,301,291   23.4   7.7
Private Label     2,547,308   18.9   6.0     2,524,013   18.9   6.3
FHA     1,369,507   14.4   18.9     1,365,329   14.4   19.0
Bridge     380,547   10.9   3.4     380,712   10.9   3.6
SFR-Fixed Rate     279,962   20.1   4.9     265,429   20.1   5.0
Total   $ 32,278,695   38.4   7.5   $ 31,384,995   38.8   7.7
 

Loans sold under the Fannie Mae program contain an obligation to partially guarantee the performance of the loan (“loss-sharing obligations”) and includes $34.8 million for the fair value of the guarantee obligation undertaken at June 30, 2024. The Company recorded a $4.4 million net provision for loss sharing associated with CECL for the second quarter of 2024. At June 30, 2024, the Company’s total CECL allowance for loss-sharing obligations was $41.8 million, representing 0.19% of the Fannie Mae servicing portfolio.

Structured Business

Portfolio and Investment Activity

    Structured Portfolio Activity ($ in thousands)
    Quarter Ended
    June 30, 2024   March 31, 2024
    UPB   %   UPB   %
Bridge:                
Multifamily   $ 19,650   9 %   $ 39,235   15 %
SFR     185,500   82 %     171,490   67 %
Land     10,350   4 %       %
      215,500   95 %     210,725   82 %
            .    
Mezzanine/Preferred Equity     11,684   5 %     45,129   18 %
Total Originations   $ 227,184   100 %   $ 255,854   100 %
                 
Number of Loans Originated     45         59    
                 
SFR Commitments   $ 277,260       $ 411,617    
                 
Loan Runoff   $ 629,641       $ 640,018    
 


    Structured Portfolio ($ in thousands)
    June 30, 2024   March 31, 2024
    UPB   %   UPB   %
Bridge:                
Multifamily   $ 9,679,128   82 %   $ 10,254,756   84 %
SFR     1,622,269   14 %     1,445,028   12 %
Other     176,855   1 %     166,505   1 %
      11,478,252   97 %     11,866,289   97 %
                 
Mezzanine/Preferred Equity     389,981   3 %     377,845   3 %
SFR Permanent     4,975   <1 %     5,728   <1 %
Total Portfolio   $ 11,873,208   100 %   $ 12,249,862   100 %
 

At June 30, 2024, the loan and investment portfolio’s unpaid principal balance ("UPB"), excluding loan loss reserves, was $11.87 billion, with a weighted average interest rate of 7.79%, compared to $12.25 billion and 8.07% at March 31, 2024. Including certain fees earned and costs associated with the loan and investment portfolio, the weighted average interest rate was 8.60% at June 30, 2024, compared to 8.81% at March 31, 2024. The decrease in rate was primarily due to an increase in non-performing loans and new non-accrual loans in the second quarter of 2024.

The average balance of the Company’s loan and investment portfolio during the second quarter of 2024, excluding loan loss reserves, was $12.15 billion with a weighted average yield of 8.99%, compared to $12.52 billion and 9.44% for the first quarter of 2024.

During the second quarter of 2024, the Company recorded a $28.9 million provision for loan losses associated with CECL. At June 30, 2024, the Company’s total allowance for loan losses was $238.9 million. The Company had 24 non-performing loans with a UPB of $676.2 million, before related loan loss reserves of $28.1 million, compared to twenty-one loans with a UPB of $464.8 million, before loan loss reserves of $32.9 million at March 31, 2024.

In addition, at June 30, 2024, the Company had fourteen loans with a total UPB of $367.9 million (before related loan loss reserves of $15.0 million) that were less than 60 days past due, compared to twelve loans with a total UPB of $489.4 million at March 31, 2024. Interest income on these loans is only being recorded to the extent cash is received.

During the second quarter of 2024, the Company modified twenty-eight loans with a total UPB of $733.3 million. Fifteen of these loans with a total UPB of $398.1 million, contained interest rates based on pricing over SOFR ranging from 3.25% to 5.25%. Under the loan modification terms, borrowers invested additional capital to recapitalize their deals in exchange for temporary rate relief, which we provided through a pay and accrual feature. At June 30, 2024, these modified loans had a weighted average pay rate of 7.18% and a weighted average accrual rate of 2.14%. A portion of these loans totaling $92.7 million were less than 60 days past due and $62.0 million were non-performing at March 31, 2024, and are now current in accordance with their modified terms.

Financing Activity

The balance of debt that finances the Company’s loan and investment portfolio at June 30, 2024 was $10.26 billion with a weighted average interest rate including fees of 7.53%, as compared to $11.11 billion and a rate of 7.44% at March 31, 2024.

The average balance of debt that finances the Company’s loan and investment portfolio for the second quarter of 2024 was $10.81 billion, as compared to $11.37 billion for the first quarter of 2024. The average cost of borrowings for the second quarter of 2024 was 7.54%, compared to 7.50% for the first quarter of 2024.

Dividend

The Company announced today that its Board of Directors has declared a quarterly cash dividend of $0.43 per share of common stock for the quarter ended June 30, 2024. The dividend is payable on August 30, 2024 to common stockholders of record on August 16, 2024.

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) 274-8461 for domestic callers and (203) 518-9843 for international callers. Please use participant passcode ABRQ224 when prompted by the operator.

A telephonic replay of the call will be available until August 9, 2024. The replay dial-in numbers are (800) 938-2487 for domestic callers and (402) 220-9026 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.

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, 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, 2023 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.

Notes

  1. 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.
  2. Amounts reflect approximate balances as of July 31, 2024.
   
Contact: Arbor Realty Trust, Inc.
Paul Elenio, Chief Financial Officer
516-506-4422
pelenio@arbor.com
   
   


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,
      2024       2023       2024       2023  
Interest income   $ 297,188     $ 335,737     $ 618,480     $ 663,685  
Interest expense     209,227       227,195       426,903       446,569  
Net interest income     87,961       108,542       191,577       217,116  
Other revenue:                
Gain on sales, including fee-based services, net     17,448       22,587       34,114       37,176  
Mortgage servicing rights     14,534       16,201       24,733       34,659  
Servicing revenue, net     29,910       32,347       61,436       61,913  
Property operating income     1,444       1,430       3,014       2,811  
Loss on derivative instruments, net     (275 )     (7,384 )     (5,533 )     (3,161 )
Other income, net     2,081       45       4,414       4,923  
Total other revenue     65,142       65,226       122,178       138,321  
Other expenses:                
Employee compensation and benefits     42,836       41,310       90,529       83,708  
Selling and administrative     12,823       12,584       26,756       26,207  
Property operating expenses     1,584       1,365       3,262       2,747  
Depreciation and amortization     2,423       2,387       4,994       5,011  
Provision for loss sharing (net of recoveries)     4,333       7,672       4,607       10,848  
Provision for credit losses (net of recoveries)     29,564       13,878       48,682       36,395  
Total other expenses     93,563       79,196       178,830       164,916  
Income before extinguishment of debt, sale of real estate, income from equity affiliates and income taxes     59,540       94,572       134,925       190,521  
Loss on extinguishment of debt     (412 )     (1,247 )     (412 )     (1,247 )
Gain on sale of real estate     3,813             3,813        
Income from equity affiliates     2,793       5,560       4,211       19,886  
Provision for income taxes     (3,901 )     (5,553 )     (7,493 )     (13,582 )
Net income     61,833       93,332       135,044       195,578  
Preferred stock dividends     10,342       10,342       20,684       20,684  
Net income attributable to noncontrolling interest     4,094       6,826       9,090       14,411  
Net income attributable to common stockholders   $ 47,397     $ 76,164     $ 105,270     $ 160,483  
                 
Basic earnings per common share   $ 0.25     $ 0.42     $ 0.56     $ 0.88  
Diluted earnings per common share   $ 0.25     $ 0.41     $ 0.56     $ 0.87  
                 
Weighted average shares outstanding:                
Basic     188,655,801       181,815,469       188,683,095       181,468,002  
Diluted     205,487,711       216,061,876       205,499,619       215,489,604  
                 
Dividends declared per common share   $ 0.43     $ 0.42     $ 0.86     $ 0.82  


 
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
($ in thousands—except share and per share data)
 
    June 30, 2024   December 31, 2023
    (Unaudited)    
Assets:        
Cash and cash equivalents   $ 737,485   $ 928,974
Restricted cash     218,228     608,233
Loans and investments, net (allowance credit losses of $238,923 and $195,664)     11,603,944     12,377,806
Loans held-for-sale, net     342,870     551,707
Capitalized mortgage servicing rights, net     380,719     391,254
Securities held-to-maturity, net (allowance credit losses of $9,132 and $6,256)     156,080     155,279
Investments in equity affiliates     72,872     79,303
Due from related party     105,097     64,421
Goodwill and other intangible assets     89,032     91,378
Other assets     490,885     490,281
Total assets   $ 14,197,212   $ 15,738,636
         
Liabilities and Equity:        
Credit and repurchase facilities   $ 3,160,384   $ 3,237,827
Securitized debt     5,716,513     6,935,010
Senior unsecured notes     1,245,956     1,333,968
Convertible senior unsecured notes     284,473     283,118
Junior subordinated notes to subsidiary trust issuing preferred securities     144,275     143,896
Due to related party     2,709     13,799
Due to borrowers     75,837     121,707
Allowance for loss-sharing obligations     76,561     71,634
Other liabilities     303,865     343,072
Total liabilities     11,010,573     12,484,031
         
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     633,684
Special voting preferred shares - 16,293,589 shares        
   6.375% Series D - 9,200,000 shares        
   6.25% Series E - 5,750,000 shares        
   6.25% Series F - 11,342,000 shares        
Common stock, $0.01 par value: 500,000,000 shares authorized - 188,548,879 and 188,505,264 shares issued and outstanding     1,885     1,885
Additional paid-in capital     2,361,466     2,367,188
Retained earnings     57,894     115,216
Total Arbor Realty Trust, Inc. stockholders’ equity     3,054,929     3,117,973
Noncontrolling interest     131,710     136,632
Total equity     3,186,639     3,254,605
Total liabilities and equity   $ 14,197,212   $ 15,738,636


 
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
Statement of Income Segment Information - (Unaudited)
(in thousands)
 
    Quarter Ended June 30, 2024
    Structured
Business
  Agency
Business
  Other (1)   Consolidated
Interest income   $ 282,077     $ 15,111     $     $ 297,188  
Interest expense     203,062       6,165             209,227  
Net interest income     79,015       8,946             87,961  
Other revenue:                
Gain on sales, including fee-based services, net           17,448             17,448  
Mortgage servicing rights           14,534             14,534  
Servicing revenue           46,797             46,797  
Amortization of MSRs           (16,887 )           (16,887 )
Property operating income     1,444                   1,444  
Loss on derivative instruments, net           (275 )           (275 )
Other income, net     1,975       106             2,081  
Total other revenue     3,419       61,723             65,142  
Other expenses:                
Employee compensation and benefits     15,805       27,031             42,836  
Selling and administrative     5,828       6,995             12,823  
Property operating expenses     1,584                   1,584  
Depreciation and amortization     1,250       1,173             2,423  
Provision for loss sharing (net of recoveries)           4,333             4,333  
Provision for credit losses (net of recoveries)     28,030       1,534             29,564  
Total other expenses     52,497       41,066             93,563  
Income before extinguishment of debt, sale of real estate, income from equity affiliates and income taxes     29,937       29,603             59,540  
Loss on extinguishment of debt     (412 )                 (412 )
Gain on sale of real estate     3,813                   3,813  
Income from equity affiliates     2,793                   2,793  
Benefit from (provision for) income taxes     865       (4,766 )           (3,901 )
Net income     36,996       24,837             61,833  
Preferred stock dividends     10,342                   10,342  
Net income attributable to noncontrolling interest                 4,094       4,094  
Net income attributable to common stockholders   $ 26,654     $ 24,837     $ (4,094 )   $ 47,397  

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


 
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
Balance Sheet Segment Information - (Unaudited)
(in thousands)
 
    June 30, 2024
    Structured
Business
  Agency
Business
  Consolidated
Assets:            
Cash and cash equivalents   $ 272,614   $ 464,871   $ 737,485
Restricted cash     203,223     15,005     218,228
Loans and investments, net     11,603,944         11,603,944
Loans held-for-sale, net         342,870     342,870
Capitalized mortgage servicing rights, net         380,719     380,719
Securities held-to-maturity, net         156,080     156,080
Investments in equity affiliates     72,872         72,872
Goodwill and other intangible assets     12,500     76,532     89,032
Other assets and due from related party     521,039     74,943     595,982
Total assets   $ 12,686,192   $ 1,511,020   $ 14,197,212
             
Liabilities:            
Debt obligations   $ 10,216,430   $ 335,171   $ 10,551,601
Allowance for loss-sharing obligations         76,561     76,561
Other liabilities and due to related party     305,813     76,598     382,411
Total liabilities   $ 10,522,243   $ 488,330   $ 11,010,573


 
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,
      2024       2023       2024       2023  
Net income attributable to common stockholders   $ 47,397     $ 76,164     $ 105,270     $ 160,483  
                 
Adjustments:                
Net income attributable to noncontrolling interest     4,094       6,826       9,090       14,411  
Income from mortgage servicing rights     (14,534 )     (16,201 )     (24,733 )     (34,659 )
Deferred tax benefit     (2,944 )     (7,360 )     (6,896 )     (4,197 )
Amortization and write-offs of MSRs     19,518       21,204       37,936       39,927  
Depreciation and amortization     3,044       4,058       6,239       8,353  
Loss on extinguishment of debt     412       1,247       412       1,247  
Provision for credit losses, net     31,457       16,810       46,260       40,515  
Loss on derivative instruments, net     371       8,085       5,894       1,034  
Stock-based compensation     2,750       3,193       8,772       9,094  
                 
Distributable earnings (1)   $ 91,565     $ 114,026     $ 188,244     $ 236,208  
                 
Diluted distributable earnings per share (1)   $ 0.45     $ 0.57     $ 0.92     $ 1.19  
                 
Diluted weighted average shares outstanding (1) (2)     205,487,711       198,791,261       205,499,619       198,239,006  


(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) The diluted weighted average shares outstanding exclude the potential shares issuable upon conversion and settlement of the Company's convertible senior notes principal balance.

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, 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 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.


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Source: Arbor Realty Trust