Arbor Realty Trust Reports Third Quarter 2016 Results and Declares Common Stock Dividend
Company Highlights:
- Completed the acquisition of Arbor Commercial Mortgage’s agency platform
- Net income of
$10.9 million , or$0.21 per diluted common share - AFFO of
$15.0 million , or$0.21 per diluted common share1 - Declares a cash dividend on common stock of
$0.16 per share
Segment Highlights:
Structured Business
- Segment net income of
$7.8 million - Loan and investment portfolio growth of 10% from 2Q16 on new originations of
$267 million - Earned
$4.9 million of income from equity investments - Closed a sixth collateralized securitization vehicle totaling
$325 million
Agency Business
- Segment net income of
$14.0 million - Loan originations totaling
$850 million - Servicing portfolio of
$12.6 billion atSeptember 30, 2016 , up 5% from the acquisition date ofJuly 14, 2016
Recent Developments:
- Issued
$86 million of Convertible Senior Notes due 2019
Acquisition of Arbor Commercial Mortgage’s Agency Platform
As previously announced, on
Based on the closing price of the Company’s common stock on the day of the acquisition, the estimated fair value of the total consideration given was
The acquisition includes a leading national multifamily agency loan origination and servicing platform with over 230 direct employees, including 20 originators in eight states. The agency business originated over
In addition, the Company obtained a two year option to purchase for
As a result of the acquisition, we currently evaluate our results from operations from two major business segments – our existing on-balance sheet structured loan origination and investment portfolio, the (“Structured Business”), and the newly acquired agency loan origination and servicing platform, the (“Agency Business”).
Structured Business Segment
Portfolio and Investment Activity
Loan and investment portfolio activity consisted of:
- 22 new loan originations totaling
$266.6 million , of which 21 were bridge loans for$261.6 million - Payoffs and pay downs on 14 loans totaling
$118.3 million
At
The average balance of the Company’s loan and investment portfolio during the third quarter of 2016, excluding loan loss reserves, was
At
The Company recorded
Financing Activity
During the third quarter, the Company completed its sixth collateralized securitization vehicle ("CLO VI") totaling
The Company closed on a three year,
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 CLO vehicles and financing facilities, including financings assumed as part of the agency business acquisition. The Company believes it was in compliance with all financial covenants and restrictions as of
Agency Business Segment
Loan Origination Platform
Loan originations for the third quarter ended
$668.6 million ofFannie Mae loans$157.1 million ofFreddie Mac loans$24.6 million of FHA loans
Loan sales for the third quarter of 2016 totaled
At
For the quarter ended
Servicing Portfolio
The servicing portfolio totaled
Servicing Portfolio ($ in 000s) | ||||||||||||||||
As of September 30, 2016 | As of July 14, 2016 | |||||||||||||||
UPB | Wtd. Avg. Fee |
Wtd. Avg. Life (in years) |
UPB | Wtd. Avg. Fee |
Wtd. Avg. Life (in years) |
|||||||||||
Fannie Mae | $ | 10,520,107 | 0.53 | % | 6.4 | $ | 9,990,276 | 0.52 | % | 6.4 | ||||||
Freddie Mac | 1,660,941 | 0.23 | % | 10.3 | 1,527,317 | 0.24 | % | 10.6 | ||||||||
FHA | 420,962 | 0.18 | % | 19.3 | 419,980 | 0.19 | % | 20.3 | ||||||||
Total | $ | 12,602,010 | 0.48 | % | 7.3 | $ | 11,937,573 | 0.47 | % | 7.4 | ||||||
Loans sold under the
Capital Markets
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
After the live webcast, the call will remain available on the Company's website, www.arborrealtytrust.com, through
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. Supplemental schedules of each non-GAAP financial measure and the comparable GAAP financial measure can be found on page 12 of this release.
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES | ||||||||||||||||||
CONSOLIDATED STATEMENTS OF INCOME - (Unaudited) | ||||||||||||||||||
Quarter Ended | Nine Months Ended | |||||||||||||||||
September 30, | September 30, | |||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||
Interest income | $ | 29,636,227 | $ | 26,025,709 | $ | 83,424,190 | $ | 79,575,689 | ||||||||||
Other interest income, net | - | - | 2,539,274 | 7,884,344 | ||||||||||||||
Interest expense | 16,966,228 | 11,885,363 | 42,958,329 | 37,405,492 | ||||||||||||||
Net interest income | 12,669,999 | 14,140,346 | 43,005,135 | 50,054,541 | ||||||||||||||
Other revenue: | ||||||||||||||||||
Fee-based services, including gain on sales, net | 9,693,822 | - | 9,693,822 | - | ||||||||||||||
Mortgage servicing rights | 15,968,067 | - | 15,968,067 | - | ||||||||||||||
Servicing revenue, net | 5,885,884 | - | 5,885,884 | - | ||||||||||||||
Property operating income | 2,960,940 | 7,202,851 | 12,719,027 | 22,855,028 | ||||||||||||||
Other income, net | 359,546 | 51,633 | 663,977 | 164,449 | ||||||||||||||
Total other revenue | 34,868,259 | 7,254,484 | 44,930,777 | 23,019,477 | ||||||||||||||
Other expenses: | ||||||||||||||||||
Employee compensation and benefits | 14,216,679 | 4,877,059 | 22,856,433 | 14,133,403 | ||||||||||||||
Selling and administrative | 5,903,031 | 2,063,408 | 10,277,844 | 7,442,979 | ||||||||||||||
Acquisition costs | 6,406,258 | 1,116,126 | 10,261,902 | 1,542,169 | ||||||||||||||
Property operating expenses | 2,819,004 | 6,028,585 | 10,991,823 | 18,381,317 | ||||||||||||||
Depreciation and amortization | 1,808,765 | 1,250,761 | 3,129,410 | 4,137,080 | ||||||||||||||
Impairment loss on real estate owned | - | - | 11,200,000 | - | ||||||||||||||
Provision for loss sharing | 1,316,862 | - | 1,316,862 | - | ||||||||||||||
Provision for loan losses (net of recoveries) | (54,000 | ) | 277,464 | (24,995 | ) | 2,353,688 | ||||||||||||
Management fee - related party | 3,325,000 | 2,725,000 | 8,875,000 | 8,075,000 | ||||||||||||||
Total other expenses | 35,741,599 | 18,338,403 | 78,884,279 | 56,065,636 | ||||||||||||||
Income before gain on acceleration of deferred income, loss | ||||||||||||||||||
on termination of swaps, gain on sale of real estate, income | ||||||||||||||||||
from equity affiliates and provision for income taxes | 11,796,659 | 3,056,427 | 9,051,633 | 17,008,382 | ||||||||||||||
Gain on acceleration of deferred income | - | 8,162,720 | - | 19,171,882 | ||||||||||||||
Loss on termination of swaps | - | (340,197 | ) | - | (4,629,647 | ) | ||||||||||||
Gain on sale of real estate | - | - | 11,630,687 | 3,984,364 | ||||||||||||||
Income from equity affiliates | 4,929,375 | 6,353,239 | 11,193,918 | 10,983,177 | ||||||||||||||
Provision for income taxes | (300,000 | ) | - | (300,000 | ) | - | ||||||||||||
Net income | 16,426,034 | 17,232,189 | 31,576,238 | 46,518,158 | ||||||||||||||
Preferred stock dividends | 1,888,430 | 1,888,430 | 5,665,290 | 5,665,290 | ||||||||||||||
Net income attributable to noncontrolling interest | 3,649,432 | - | 3,649,432 | - | ||||||||||||||
Net income attributable to common stockholders | $ | 10,888,172 | $ | 15,343,759 | $ | 22,261,516 | $ | 40,852,868 | ||||||||||
Basic earnings per common share | $ | 0.21 | $ | 0.30 | $ | 0.43 | $ | 0.80 | ||||||||||
Diluted earnings per common share | $ | 0.21 | $ | 0.30 | $ | 0.43 | $ | 0.80 | ||||||||||
Weighted average shares outstanding: | ||||||||||||||||||
Basic | 51,390,467 | 50,962,516 | 51,272,795 | 50,822,444 | ||||||||||||||
Diluted | 70,271,796 | 50,962,516 | 51,627,550 | 50,917,442 | ||||||||||||||
Dividends declared per common share | $ | 0.16 | $ | 0.15 | $ | 0.46 | $ | 0.43 | ||||||||||
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES | ||||||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||||||
September 30, | December 31, | |||||||||||
2016 | 2015 | |||||||||||
(Unaudited) | ||||||||||||
Assets: | ||||||||||||
Cash and cash equivalents | $ | 71,613,974 | $ | 188,708,687 | ||||||||
Restricted cash | 176,615,179 | 48,301,244 | ||||||||||
Loans and investments, net | 1,656,748,937 | 1,450,334,341 | ||||||||||
Loans held-for-sale, net | 310,252,600 | - | ||||||||||
Capitalized mortgage servicing rights, net | 224,297,210 | - | ||||||||||
Available-for-sale securities, at fair value | 5,214,998 | 2,022,030 | ||||||||||
Investments in equity affiliates | 41,962,338 | 30,870,235 | ||||||||||
Real estate owned, net | 19,762,787 | 60,845,509 | ||||||||||
Real estate held-for-sale, net | - | 8,669,203 | ||||||||||
Due from related party | 493,412 | 8,082,265 | ||||||||||
Goodwill and other intangible assets | 99,932,986 | - | ||||||||||
Other assets | 43,326,307 | 29,558,430 | ||||||||||
Total assets | $ | 2,650,220,728 | $ | 1,827,391,944 | ||||||||
Liabilities and Equity: | ||||||||||||
Credit facilities and repurchase agreements | 431,060,399 | 136,252,135 | ||||||||||
Collateralized loan obligations | 1,007,736,720 | 758,899,661 | ||||||||||
Senior unsecured notes | 94,330,797 | 93,764,994 | ||||||||||
Junior subordinated notes to subsidiary trust issuing preferred securities | 157,662,855 | 157,117,130 | ||||||||||
Mortgage note payable - real estate owned | - | 27,155,000 | ||||||||||
Related party financing | 50,000,000 | - | ||||||||||
Due to related party | 18,583,192 | 3,428,333 | ||||||||||
Due to borrowers | 50,823,894 | 34,629,595 | ||||||||||
Allowance for loss-sharing obligations | 31,113,413 | - | ||||||||||
Other liabilities | 83,477,916 | 51,054,321 | ||||||||||
Total liabilities | 1,924,789,186 | 1,262,301,169 | ||||||||||
Equity: | ||||||||||||
Arbor Realty Trust, Inc. stockholders' equity: | ||||||||||||
Preferred stock, cumulative, redeemable, $0.01 par value: 100,000,000 shares | ||||||||||||
authorized; special voting preferred shares; 21,230,769 shares issued and | ||||||||||||
outstanding, no 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 | 89,508,213 | 89,295,905 | ||||||||||
Common stock, $0.01 par value: 500,000,000 shares authorized; 51,401,295 | ||||||||||||
and 50,962,516 shares issued and outstanding, respectively | 514,013 | 509,625 | ||||||||||
Additional paid-in capital | 619,179,982 | 616,244,196 | ||||||||||
Accumulated deficit | (137,441,120 | ) | (136,118,001 | ) | ||||||||
Accumulated other comprehensive loss | (1,142,053 | ) | (4,840,950 | ) | ||||||||
Total Arbor Realty Trust, Inc. stockholders’ equity | 570,619,035 | 565,090,775 | ||||||||||
Noncontrolling interest | 154,812,507 | - | ||||||||||
Total equity | 725,431,542 | 565,090,775 | ||||||||||
Total liabilities and equity | $ | 2,650,220,728 | $ | 1,827,391,944 | ||||||||
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES | ||||||||||||||||||
STATEMENT OF INCOME SEGMENT INFORMATION- (Unaudited) | ||||||||||||||||||
Quarter Ended September 30, 2016 | ||||||||||||||||||
Structured Business |
Agency Business |
Other / Eliminations (1) |
Consolidated | |||||||||||||||
Interest income | $ | 26,893,151 | $ | 2,743,076 | $ | - | $ | 29,636,227 | ||||||||||
Interest expense | 14,455,058 | 1,680,561 | 830,609 | 16,966,228 | ||||||||||||||
Net interest income | 12,438,093 | 1,062,515 | (830,609 | ) | 12,669,999 | |||||||||||||
Other revenue: | ||||||||||||||||||
Fee-based services, including gain on sales, net | - | 9,693,822 | - | 9,693,822 | ||||||||||||||
Mortgage servicing rights | - | 15,968,067 | - | 15,968,067 | ||||||||||||||
Servicing revenue, net | - | 5,885,884 | - | 5,885,884 | ||||||||||||||
Property operating income | 2,960,940 | - | - | 2,960,940 | ||||||||||||||
Other income, net | 111,036 | 248,510 | - | 359,546 | ||||||||||||||
Total other revenue | 3,071,976 | 31,796,283 | - | 34,868,259 | ||||||||||||||
Other expenses: | ||||||||||||||||||
Employee compensation and benefits | 3,460,745 | 10,755,934 | - | 14,216,679 | ||||||||||||||
Selling and administrative | 2,182,406 | 3,720,625 | - | 5,903,031 | ||||||||||||||
Acquisition costs | - | - | 6,406,258 | 6,406,258 | ||||||||||||||
Property operating expenses | 2,819,004 | - | - | 2,819,004 | ||||||||||||||
Depreciation and amortization | 641,721 | 1,167,044 | - | 1,808,765 | ||||||||||||||
Provision for loss sharing | - | 1,316,862 | - | 1,316,862 | ||||||||||||||
Provision for loan losses (net of recoveries) | (54,000 | ) | - | - | (54,000 | ) | ||||||||||||
Management fee - related party | 1,712,307 | 1,612,693 | - | 3,325,000 | ||||||||||||||
Total other expenses | 10,762,183 | 18,573,158 | 6,406,258 | 35,741,599 | ||||||||||||||
Income before income from equity affiliates and provision | ||||||||||||||||||
for income taxes | 4,747,886 | 14,285,640 | (7,236,867 | ) | 11,796,659 | |||||||||||||
Income from equity affiliates | 4,929,375 | - | - | 4,929,375 | ||||||||||||||
Provision for income taxes | - | (300,000 | ) | - | (300,000 | ) | ||||||||||||
Net income | $ | 9,677,261 | $ | 13,985,640 | $ | (7,236,867 | ) | $ | 16,426,034 | |||||||||
Preferred stock dividends | 1,888,430 | - | - | 1,888,430 | ||||||||||||||
Net income attributable to noncontrolling interest | - | - | 3,649,432 | 3,649,432 | ||||||||||||||
Net income attributable to common stockholders | $ | 7,788,831 | $ | 13,985,640 | $ | (10,886,299 | ) | $ | 10,888,172 | |||||||||
(1) Includes certain corporate expenses not allocated to the two reportable segments, such as costs associated with the acquisition of the | ||||||||||||||||||
Agency Business as well as income allocated to the noncontrolling interest holder. | ||||||||||||||||||
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES | |||||||||||||||||||
BALANCE SHEET SEGMENT INFORMATION - (Unaudited) | |||||||||||||||||||
September 30, 2016 | |||||||||||||||||||
Structured Business |
Agency Business |
Other / Eliminations (1) |
Consolidated | ||||||||||||||||
Assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 41,562,243 | $ | 30,051,731 | $ | - | $ | 71,613,974 | |||||||||||
Restricted cash | 174,583,396 | 2,031,783 | - | 176,615,179 | |||||||||||||||
Loans and investments, net | 1,656,748,937 | - | - | 1,656,748,937 | |||||||||||||||
Loans held-for-sale, net | - | 310,252,600 | - | 310,252,600 | |||||||||||||||
Capitalized mortgage servicing rights, net | - | 224,297,210 | - | 224,297,210 | |||||||||||||||
Investments in equity affiliates | 41,962,338 | - | - | 41,962,338 | |||||||||||||||
Goodwill and other intangible assets | - | 99,932,986 | - | 99,932,986 | |||||||||||||||
Other assets | 53,677,419 | 15,120,085 | - | 68,797,504 | |||||||||||||||
Total assets | $ | 1,968,534,333 | $ | 681,686,395 | $ | - | $ | 2,650,220,728 | |||||||||||
Liabilities: | |||||||||||||||||||
Debt obligations | 1,388,916,564 | 301,874,207 | 50,000,000 | 1,740,790,771 | |||||||||||||||
Allowance for loss-sharing obligations | - | 31,113,413 | - | 31,113,413 | |||||||||||||||
Other liabilities | 114,779,654 | 36,396,692 | 1,708,656 | 152,885,002 | |||||||||||||||
Total liabilities | $ | 1,503,696,218 | $ | 369,384,312 | $ | 51,708,656 | $ | 1,924,789,186 | |||||||||||
(1) Includes assets and liabilities not allocated to the two reportable segments, such as financings and accrued acquisition costs | |||||||||||||||||||
associated with the acquisition of the Agency Business. | |||||||||||||||||||
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES | ||||||||||||||||
Supplemental Schedule of Non-GAAP Financial Measures - | ||||||||||||||||
Funds from Operations ("FFO") and Adjusted Funds from Operations ("AFFO") | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Quarter Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net income attributable to common stockholders | $ | 10,888,172 | $ | 15,343,759 | $ | 22,261,516 | $ | 40,852,868 | ||||||||
Subtract: | ||||||||||||||||
Gain on sale of real estate | - | - | (11,630,687 | ) | (3,984,364 | ) | ||||||||||
Add: | ||||||||||||||||
Net income attributable to noncontrolling interest | 3,649,432 | - | 3,649,432 | - | ||||||||||||
Impairment loss on real estate owned | - | - | 11,200,000 | - | ||||||||||||
Depreciation - real estate owned and held-for-sale | 443,684 | 1,250,761 | 1,764,329 | 4,137,080 | ||||||||||||
Depreciation - investments in equity affiliates | 93,588 | 93,588 | 280,764 | 280,764 | ||||||||||||
Funds from operations (1) | $ | 15,074,876 | $ | 16,688,108 | $ | 27,525,354 | $ | 41,286,348 | ||||||||
Subtract: | ||||||||||||||||
Income from mortgage servicing rights | (15,968,067 | ) | - | (15,968,067 | ) | - | ||||||||||
Impairment loss on real estate owned | - | - | (11,200,000 | ) | - | |||||||||||
Net gain on changes in fair value of derivatives | (248,510 | ) | - | (248,510 | ) | - | ||||||||||
Add: | ||||||||||||||||
Amortization of MSRs | 7,586,524 | - | 7,586,524 | - | ||||||||||||
Depreciation and amortization | 1,365,081 | - | 1,365,081 | - | ||||||||||||
Gain on sale of real estate | - | - | 11,630,687 | 3,984,364 | ||||||||||||
Stock-based compensation | 777,080 | 463,313 | 2,940,174 | 2,890,582 | ||||||||||||
Acquisition costs | 6,406,258 | 1,116,126 | 10,261,902 | 1,542,169 | ||||||||||||
Adjusted funds from operations (1) | $ | 14,993,242 | $ | 18,267,547 | $ | 33,893,145 | $ | 49,703,463 | ||||||||
Diluted FFO per share (1) | $ | 0.21 | $ | 0.33 | $ | 0.48 | $ | 0.81 | ||||||||
Diluted AFFO per share (1) | $ | 0.21 | $ | 0.36 | $ | 0.59 | $ | 0.98 | ||||||||
Diluted weighted average shares outstanding (1) | 70,271,796 | 50,962,516 | 57,748,830 | 50,917,442 | ||||||||||||
(1) Amounts are attributable to common stockholders and OP Unit holder. The OP Units are redeemable for cash, or at the Company's option for shares of the Company's common stock on a one-for-one basis. | ||||||||||||||||
The Company is presenting 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"), amortization of MSRs, changes in fair value of certain derivatives that temporarily flow through earnings as well as the add-back of one-time charges such as acquisition costs. The Company also adds back 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 owned 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. |
Contacts:Arbor Realty Trust, Inc. Paul Elenio , Chief Financial Officer 516-506-4422 pelenio@arbor.com Media:Bonnie Habyan , EVP of Marketing 516-506-4615 bhabyan@arbor.com Investors:The Ruth Group Joseph Green 646-536-7013 jgreen@theruthgroup.com