Arbor Realty Trust Reports Third Quarter 2019 Results and Increases Quarterly Dividend to $0.30 per Share

Company Highlights:

GAAP net income of $0.35 and AFFO of $0.36 per diluted common share¹
Declares a cash dividend on common stock of $0.30 per share, our third consecutive quarterly increase, and an 11% increase from a year ago

Agency Business

Segment income of $22.8 million
Loan originations of $1.42 billion
Servicing portfolio of $19.97 billion, up 3% from 2Q19 and 12% from a year ago

Structured Business

Segment income of $18.5 million
Loan originations of $541.5 million

Recent Development:

Issued $110.0 million of 4.75% senior unsecured notes due in 2024

UNIONDALE, N.Y., Nov. 01, 2019 (GLOBE NEWSWIRE) -- Arbor Realty Trust, Inc. (NYSE:ABR), today announced financial results for the third quarter ended September 30, 2019. Arbor reported net income for the quarter of $34.0 million, or $0.35 per diluted common share, compared to $27.7 million, or $0.36 per diluted common share for the quarter ended September 30, 2018. Adjusted funds from operations (“AFFO”) for the quarter was $42.4 million, or $0.36 per diluted common share, compared to $36.4 million, or $0.37 per diluted common share for the quarter ended September 30, 2018.¹

Agency Business

Loan Origination Platform

Agency Loan Volume (in thousands)
	Quarter Ended
	September 30, 2019		June 30, 2019
*Originations:*
Fannie Mae	$	1,097,095	$	937,977
Freddie Mac		154,986		234,851
FHA		48,995		43,558
CMBS/Conduit		34,000		71,900
Private Label		80,740		-
Total Originations	$	1,415,816	$	1,288,286

Total Loan Sales	$	1,488,430	$	923,046

Total Loan Commitments	$	1,477,436	$	1,302,128

For the quarter ended September 30, 2019, the Agency Business generated revenues of $67.0 million, compared to $52.7 million for the second quarter of 2019. Gain on sales, including fee-based services, net was $21.3 million for the quarter, reflecting a margin of 1.43% on loan sales, compared to $14.2 million and 1.54% for the second quarter of 2019. Income from mortgage servicing rights was $29.9 million for the quarter, reflecting a rate of 2.02% as a percentage of loan commitments, compared to $18.7 million and 1.44% for the second quarter of 2019.

At September 30, 2019, loans held-for-sale was $537.8 million which was primarily comprised of unpaid principal balances totaling $529.7 million, with financing associated with these loans totaling $461.2 million.

Fee-Based Servicing Portfolio

Our fee-based servicing portfolio totaled $19.97 billion at September 30, 2019, an increase of 3% from June 30, 2019, primarily a result of $1.42 billion of new loan originations, net of $799.7 million in portfolio runoff during the quarter. Servicing revenue, net was $13.8 million for the quarter and consisted of servicing revenue of $25.9 million, net of amortization of mortgage servicing rights totaling $12.1 million.

	Fee-Based Servicing Portfolio ($ in thousands)
	As of September 30, 2019					As of June 30, 2019
	UPB		Wtd. Avg. Fee		Wtd. Avg. Life (in years)	UPB		Wtd. Avg. Fee		Wtd. Avg. Life (in years)
Fannie Mae	$	14,616,816	0.492	%	8.1	$	14,122,916	0.495	%	7.8
Freddie Mac		4,664,750	0.300	%	19.2		4,657,097	0.301	%	10.9
FHA		684,316	0.154	%	11.0		684,527	0.153	%	19.1
Total	$	19,965,882	0.435	%	9.2	$	19,464,540	0.436	%	9.0

Loans sold under the Fannie Mae program contain an obligation to partially guarantee the performance of the loan (“loss-sharing obligations”). At September 30, 2019, the Company’s allowance for loss-sharing obligations was $35.5 million, representing 0.24% of the Fannie Mae servicing portfolio.

Structured Business

Portfolio and Investment Activity

Originated 32 loans totaling $541.5 million, of which $478.3 million was funded at September 30, 2019, and consisted primarily of 29 bridge loans totaling $533.7 million
Payoffs and pay downs on 43 loans totaling $456.8 million

At September 30, 2019, the loan and investment portfolio’s unpaid principal balance, excluding loan loss reserves, was $3.97 billion, with a weighted average current interest pay rate of 6.33%, compared to $3.93 billion and 6.64% at June 30, 2019. Including certain fees earned and costs associated with the loan and investment portfolio, the weighted average current interest pay rate was 7.04% at September 30, 2019, compared to 7.34% at June 30, 2019.

The average balance of the Company’s loan and investment portfolio during the third quarter of 2019, excluding loan loss reserves, was $3.94 billion with a weighted average yield of 7.31%, compared to $3.62 billion and 8.24% for the second quarter of 2019. The decrease in average yield was primarily due to higher fees on loan payoffs in the second quarter largely the result of default interest received combined with a decrease in LIBOR in the third quarter.

At September 30, 2019, the Company’s total loan loss reserves were $71.1 million on five loans with an aggregate carrying value before loan loss reserves of $131.3 million. The Company also had three non-performing loans with a carrying value of $3.5 million, net of related loan loss reserves of $1.7 million.

Financing Activity

The balance of debt that finances the Company’s loan and investment portfolio at September 30, 2019 was $3.52 billion with a weighted average interest rate including fees of 4.65% as compared to $3.62 billion and a rate of 4.96% at June 30, 2019. The average balance of debt that finances the Company’s loan and investment portfolio for the third quarter of 2019 was $3.52 billion, as compared to $3.35 billion for the second quarter of 2019. The average cost of borrowings for the third quarter was 4.87%, compared to 5.35% for the second quarter of 2019. The decrease in average costs was primarily due to the acceleration of fees related to the early repayment of debt in the second quarter combined with a decrease in LIBOR in the third quarter.

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 September 30, 2019 and as of the most recent collateralized securitization vehicle determination dates in October 2019.

Capital Markets

In October 2019, the Company issued $110.0 million in aggregate principal amount of 4.75% senior unsecured notes 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 notes are due in October 2024 and the proceeds will be 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 $0.30 per share of common stock for the quarter ended September 30, 2019, representing an increase of 11% from a year ago. The dividend is payable on December 2, 2019 to common stockholders of record on November 15, 2019. The ex-dividend date is November 14, 2019.

The Company also announced today that its 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 September 1, 2019 through November 30, 2019. The dividends are payable on December 2, 2019 to preferred stockholders of record on November 15, 2019. The Company will pay total dividends of $0.515625, $0.484375 and $0.53125 per share on the Series A, Series B and Series C preferred stock, respectively.

Earnings Conference Call

The Company will host a conference call today at 10:00 a.m. Eastern Time. A live webcast of the conference call will be available at www.arbor.com in the investor relations area of the website. Those without web access should access the call telephonically at least ten minutes prior to the conference call. The dial-in numbers are (866) 516-5034 for domestic callers and (678) 509-7616 for international callers. Please use participant passcode 7293785.

After the live webcast, the call will remain available on the Company's website through November 30, 2019. In addition, a telephonic replay of the call will be available until November 8, 2019. The replay dial-in numbers are (855) 859-2056 for domestic callers and (404) 537-3406 for international callers. Please use passcode 7293785.

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, seniors housing, healthcare 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 Fannie Mae DUS® lender and Freddie Mac Optigo Seller/Servicer. Arbor’s product platform also includes CMBS, bridge, mezzanine and preferred equity lending. 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, 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 December 31, 2018 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 page 11 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 - (Unaudited)
($ in thousands—except share and per share data)

		Quarter Ended						Nine Months Ended
		September 30,						September 30,
			2019			2018			2019			2018

Interest income		$	80,509		$	67,500		$	233,957		$	178,408
Interest expense			48,064			39,548			138,213			110,819
	Net interest income		32,445			27,952			95,744			67,589

Other revenue:
Gain on sales, including fee-based services, net			21,298			17,451			51,897			51,266
Mortgage servicing rights			29,911			25,216			62,852			62,787
Servicing revenue, net			13,790			14,244			39,954			34,662
Property operating income			2,237			2,651			8,187			8,525
Other income, net			(4,678	)		(3,982	)		(5,412	)		(1,574	)
	Total other revenue		62,558			55,580			157,478			155,666

Other expenses:
Employee compensation and benefits			32,861			27,775			93,647			84,084
Selling and administrative			10,882			9,994			31,122			27,783
Property operating expenses			2,563			2,437			7,649			8,089
Depreciation and amortization			1,841			1,848			5,663			5,539
Impairment loss on real estate owned			-			-			1,000			2,000
Provision for loss sharing (net of recoveries)			735			2,019			1,557			2,840
Provision for loan losses (net of recoveries)			-			836			-			(967	)
Litigation settlement gain			-			(10,170	)		-			(10,170	)
	Total other expenses		48,882			34,739			140,638			119,198

Income before extinguishment of debt, income from
	equity affiliates and income taxes		46,121			48,793			112,584			104,057
Loss on extinguishment of debt			-			(4,960	)		(128	)		(4,960	)
Income (loss) from equity affiliates			3,718			(1,028	)		9,133			1,104
Provision for income taxes			(6,623	)		(5,381	)		(10,963	)		(1,096	)

Net income			43,216			37,424			110,626			99,105

Preferred stock dividends			1,888			1,888			5,665			5,665
Net income attributable to noncontrolling interest			7,363			7,799			19,429			22,347
Net income attributable to common stockholders		$	33,965		$	27,737		$	85,532		$	71,093

Basic earnings per common share		$	0.36		$	0.37		$	0.95		$	1.05
Diluted earnings per common share		$	0.35		$	0.36		$	0.93		$	1.03

Weighted average shares outstanding:
	Basic		94,486,839			74,802,582			89,899,074			67,490,132
	Diluted		117,468,044			98,435,964			113,033,968			91,133,607

Dividends declared per common share		$	0.29		$	0.25		$	0.84		$	0.71

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands—except share and per share data)


				September 30,			December 31,
					2019			2018
				(Unaudited)
Assets:
Cash and cash equivalents				$	135,285		$	160,063
Restricted cash					190,046			180,606
Loans and investments, net					3,874,069			3,200,145
Loans held-for-sale, net					537,826			481,664
Capitalized mortgage servicing rights, net					283,688			273,770
Securities held to maturity, net					95,181			76,363
Investments in equity affiliates					36,698			21,580
Real estate owned, net					13,129			14,446
Due from related party					5,011			1,287
Goodwill and other intangible assets					112,026			116,165
Other assets					112,675			86,086
Total assets				$	5,395,634		$	4,612,175

Liabilities and Equity:
Credit facilities and repurchase agreements				$	1,385,764		$	1,135,627
Collateralized loan obligations					1,876,900			1,593,548
Debt fund					68,528			68,183
Senior unsecured notes					211,188			122,484
Convertible senior unsecured notes, net					255,106			254,768
Junior subordinated notes to subsidiary trust issuing preferred securities					140,767			140,259
Due to related party					3,170			-
Due to borrowers					82,451			78,662
Allowance for loss-sharing obligations					35,525			34,298
Other liabilities					137,839			118,780
Total liabilities					4,197,238			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; 94,774,590
			and 83,987,707 shares issued and outstanding, respectively		948			840
		Additional paid-in capital			1,003,355			879,029
		Accumulated deficit			(65,790	)		(74,133	)
Total Arbor Realty Trust, Inc. stockholders’ equity					1,028,014			895,238

Noncontrolling interest					170,382			170,328
Total equity					1,198,396			1,065,566

Total liabilities and equity				$	5,395,634		$	4,612,175

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
STATEMENT OF INCOME SEGMENT INFORMATION - (Unaudited)
(in thousands)


		Quarter Ended September 30, 2019

		Structured Business		Agency Business			Other / Eliminations ⁽¹⁾			Consolidated

Interest income		$	73,829	$	6,680		$	-		$	80,509
Interest expense			43,209		4,855			-			48,064
	Net interest income		30,620		1,825			-			32,445

Other revenue:
Gain on sales, including fee-based services, net			-		21,298			-			21,298
Mortgage servicing rights			-		29,911			-			29,911
Servicing revenue			-		25,916			-			25,916
Amortization of MSRs			-		(12,126	)		-			(12,126	)
Property operating income			2,237		-			-			2,237
Other income, net			17		(4,695	)		-			(4,678	)
	Total other revenue		2,254		60,304			-			62,558

Other expenses:
Employee compensation and benefits			7,769		25,092			-			32,861
Selling and administrative			5,352		5,530			-			10,882
Property operating expenses			2,563		-			-			2,563
Depreciation and amortization			503		1,338			-			1,841
Provision for loss sharing (net of recoveries)			-		735			-			735
	Total other expenses		16,187		32,695			-			48,882

Income before income from equity affiliates and
	income taxes		16,687		29,434			-			46,121
Income from equity affiliates			3,718		-			-			3,718
Provision for income taxes			-		(6,623	)		-			(6,623	)

Net income			20,405		22,811			-			43,216

Preferred stock dividends			1,888		-			-			1,888
Net income attributable to noncontrolling interest			-		-			7,363			7,363
Net income attributable to common stockholders		$	18,517	$	22,811		$	(7,363	)	$	33,965

⁽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)


	September 30, 2019
	Structured Business		Agency Business		Consolidated
Assets:
Cash and cash equivalents	$	102,734	$	32,551	$	135,285
Restricted cash		188,572		1,474		190,046
Loans and investments, net		3,874,069		-		3,874,069
Loans held-for-sale, net		-		537,826		537,826
Capitalized mortgage servicing rights, net		-		283,688		283,688
Securities held to maturity, net		20,000		75,181		95,181
Investments in equity affiliates		36,698		-		36,698
Goodwill and other intangible assets		12,500		99,526		112,026
Other assets		103,541		27,274		130,815
Total assets	$	4,338,114	$	1,057,520	$	5,395,634

Liabilities:
Debt obligations	$	3,477,005	$	461,248	$	3,938,253
Allowance for loss-sharing obligations		-		35,525		35,525
Other liabilities		166,780		56,680		223,460
Total liabilities	$	3,643,785	$	553,453	$	4,197,238

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						Nine Months Ended
	September 30,						September 30,
		2019			2018			2019			2018

Net income attributable to common stockholders	$	33,965		$	27,737		$	85,532		$	71,093

Adjustments:
Net income attributable to noncontrolling interest		7,363			7,799			19,429			22,347
Impairment loss on real estate owned		-			-			1,000			2,000
Depreciation - real estate owned		174			177			524			533
Depreciation - investments in equity affiliates		133			125			378			374

Funds from operations (1)	$	41,635		$	35,838		$	106,863		$	96,347

Adjustments:
Income from mortgage servicing rights		(29,911	)		(25,216	)		(62,852	)		(62,787	)
Impairment loss on real estate owned		-			-			(1,000	)		(2,000	)
Deferred tax provision (benefit)		2,223			(1,319	)		(1,026	)		(14,454	)
Amortization and write-offs of MSRs		18,904			18,989			52,558			52,868
Depreciation and amortization		2,482			2,525			7,595			7,035
Net loss on changes in fair value of GSE-related derivatives		4,745			4,388			6,106			2,331
Stock-based compensation		2,316			1,192			7,574			4,838

Adjusted funds from operations (1)	$	42,394		$	36,397		$	115,818		$	84,178

Diluted FFO per share (1)	$	0.35		$	0.36		$	0.95		$	1.06

Diluted AFFO per share (1)	$	0.36		$	0.37		$	1.02		$	0.92

Diluted weighted average shares outstanding (1)		117,468,044			98,435,964			113,033,968			91,133,607

(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.

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"), changes in fair value of certain 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 and 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

Arbor Realty Trust Reports Third Quarter 2019 Results and Increases Quarterly Dividend to $0.30 per Share

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