GENERAL: 800.ARBOR.10

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

Nov 1, 2024

Company Highlights:

  • GAAP net income of $0.31 and distributable earnings of $0.43, per diluted common share1
  • Declares cash dividend on common stock of $0.43 per share
  • Successfully delevered the Company 25% from a peak debt to equity ratio of 4:1 in 2023, to 3:1 at 3Q242
  • Cash and liquidity of ~$600 million3
  • Agency loan originations of $1.10 billion; a servicing portfolio of ~$33.01 billion, up 2% from 2Q24 and 10% from a year ago
  • Structured loan originations of $258.5 million, runoff of $521.3 million and a portfolio of ~$11.57 billion
  • In October 2024, issued $100.0 million of 9.00% senior notes due 2027

UNIONDALE, N.Y., Nov. 01, 2024 (GLOBE NEWSWIRE) -- Arbor Realty Trust, Inc. (NYSE: ABR), today announced financial results for the third quarter ended September 30, 2024. Arbor reported net income for the quarter of $58.2 million, or $0.31 per diluted common share, compared to net income of $77.9 million, or $0.41 per diluted common share for the quarter ended September 30, 2023. Distributable earnings for the quarter was $88.2 million, or $0.43 per diluted common share, compared to $112.2 million, or $0.55 per diluted common share for the quarter ended September 30, 2023.

Agency Business

Loan Origination Platform

  Agency Loan Volume (in thousands)
  Quarter Ended
  September 30, 2024   June 30, 2024
Fannie Mae $ 616,211     $ 742,724  
Freddie Mac   378,809       346,821  
Private Label   74,162       34,714  
FHA   27,457        
SFR-Fixed Rate         24,996  
Total Originations $ 1,096,639     $ 1,149,255  
       
Total Loan Sales $ 1,118,977     $ 1,135,287  
       
Total Loan Commitments $ 1,056,490     $ 1,099,713  
 

For the quarter ended September 30, 2024, the Agency Business generated revenues of $77.4 million, compared to $76.8 million for the second quarter of 2024. Gain on sales, including fee-based services, net was $18.6 million for the quarter, reflecting a margin of 1.67%, compared to $17.4 million and 1.54% for the second quarter of 2024. Income from mortgage servicing rights was $13.2 million for the quarter, reflecting a rate of 1.25% as a percentage of loan commitments, compared to $14.5 million and 1.32% for the second quarter of 2024.

At September 30, 2024, loans held-for-sale was $326.1 million, with financing associated with these loans totaling $319.4 million.

Fee-Based Servicing Portfolio

The Company’s fee-based servicing portfolio totaled $33.01 billion at September 30, 2024. Servicing revenue, net was $31.1 million for the quarter and consisted of servicing revenue of $48.4 million, net of amortization of mortgage servicing rights totaling $17.3 million.

  Fee-Based Servicing Portfolio ($ in thousands)
  September 30, 2024   June 30, 2024
  UPB   Wtd. Avg.
Fee (bps)
  Wtd. Avg.
Life (years)
  UPB   Wtd. Avg.
Fee (bps)
  Wtd. Avg.
Life (years)
Fannie Mae $22,526,022   46.6   6.6   $22,114,193   46.7   7.0
Freddie Mac 5,820,026   21.9   7.1   5,587,178   22.7   7.4
Private Label 2,619,485   18.7   5.8   2,547,308   18.9   6.0
FHA 1,390,766   14.2   18.9   1,369,507   14.4   18.9
Bridge 380,379   10.9   3.0   380,547   10.9   3.4
SFR-Fixed Rate 275,081   20.1   4.6   279,962   20.1   4.9
Total $33,011,759   38.0   7.1   $32,278,695   38.4   7.5
 

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 September 30, 2024. The Company recorded a $3.2 million net provision for loss sharing associated with CECL for the third quarter of 2024. At September 30, 2024, the Company’s total CECL allowance for loss-sharing obligations was $45.8 million, representing 0.20% of the Fannie Mae servicing portfolio.

Structured Business

Portfolio and Investment Activity

  Structured Portfolio Activity ($ in thousands)
  Quarter Ended
  September 30, 2024   June 30, 2024
  UPB   %   UPB   %
Bridge:              
Multifamily $ 14,500       6 %   $ 19,650       9 %
SFR   239,064       92 %     185,500       82 %
Land         %     10,350       4 %
    253,564       98 %     215,500       95 %
          .    
Mezzanine/Preferred Equity   4,900       2 %     11,684       5 %
Total Originations $ 258,464       100 %   $ 227,184       100 %
               
Number of Loans Originated   38           45      
               
Commitments:              
SFR $ 374,070         $ 277,260      
Construction - Multifamily   47,000                
Total Commitments $ 421,070         $ 277,260      
               
Loan Runoff $ 521,341         $ 629,641      


  Structured Portfolio ($ in thousands)
  September 30, 2024   June 30, 2024
  UPB   %   UPB   %
Bridge:              
Multifamily $ 9,208,954       80 %   $ 9,679,128       82 %
SFR   1,783,475       15 %     1,622,269       14 %
Other   176,855       2 %     176,855       1 %
    11,169,284       97 %     11,478,252       97 %
               
Mezzanine/Preferred Equity   393,168       3 %     389,981       3 %
SFR Permanent   3,086       <1 %     4,975       <1 %
Total Portfolio $ 11,565,538       100 %   $ 11,873,208       100 %
 

At September 30, 2024, the loan and investment portfolio’s unpaid principal balance ("UPB"), excluding loan loss reserves, was $11.57 billion, with a weighted average interest rate of 7.25%, compared to $11.87 billion and 7.79% at June 30, 2024. Including certain fees earned and costs associated with the loan and investment portfolio, the weighted average interest rate was 8.16% at September 30, 2024, compared to 8.60% at June 30, 2024. The decrease in rate was primarily due to a decrease in the SOFR rate in the third quarter of 2024.

The average balance of the Company’s loan and investment portfolio during the third quarter of 2024, excluding loan loss reserves, was $11.80 billion with a weighted average yield of 9.04%, compared to $12.15 billion and 8.99% for the second quarter of 2024.

During the third quarter of 2024, the Company recorded a $14.8 million net provision for loan losses associated with CECL. At September 30, 2024, the Company’s total allowance for loan losses was $243.6 million. The Company had twenty-six non-performing loans with a UPB of $625.4 million, before related loan loss reserves of $37.3 million, compared to twenty-four loans with a UPB of $676.2 million, before loan loss reserves of $28.1 million at June 30, 2024.

In addition, at September 30, 2024, the Company had ten loans with a total UPB of $319.2 million (before related loan loss reserves of $1.0 million) that were less than 60 days past due, compared to fourteen loans with a total UPB of $367.9 million at June 30, 2024. Interest income on these loans is only being recorded to the extent cash is received.

During the third quarter of 2024, the Company modified twenty-four loans with a total UPB of $1.15 billion. Eighteen of these loans with a total UPB of $710.7 million, contained interest rates based on pricing over SOFR ranging from 3.25% to 4.85%, and one loan with a 7.00% fixed rate. 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 September 30, 2024, these modified loans had a weighted average pay rate of 5.91% and a weighted average accrual rate of 2.50%. A portion of these loans totaling $87.5 million were less than 60 days past due and $151.8 million were non-performing at June 30, 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 September 30, 2024 was $9.97 billion with a weighted average interest rate including fees of 7.18%, as compared to $10.26 billion and a rate of 7.53% at June 30, 2024.

The average balance of debt that finances the Company’s loan and investment portfolio for the third quarter of 2024 was $10.09 billion, as compared to $10.81 billion for the second quarter of 2024. The average cost of borrowings for the third quarter of 2024 was 7.58%, compared to 7.54% for the second quarter of 2024.

In October 2024, the Company issued $100.0 million of its 9.00% senior unsecured notes due October 2027 through a private offering. The Company expects that the net proceeds of this offering will be used to pay down debt and for general corporate purposes.

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 September 30, 2024. The dividend is payable on November 27, 2024 to common stockholders of record on November 15, 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) 579-2543 for domestic callers and (785) 424-1699 for international callers. Please use participant passcode ABRQ324 when prompted by the operator.

A telephonic replay of the call will be available until November 8, 2024. The replay dial-in numbers are (800) 839-5493 for domestic callers and (402) 220-2552 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. Debt to equity ratio reflects junior subordinated notes as equity.
  3. Amounts reflect approximate balances as of October 30, 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 September 30,   Nine Months Ended September 30,
    2024       2023       2024       2023  
Interest income $ 286,522     $ 336,474     $ 905,002     $ 1,000,159  
Interest expense   197,710       229,180       624,613       675,749  
Net interest income   88,812       107,294       280,389       324,410  
Other revenue:              
Gain on sales, including fee-based services, net   18,638       18,619       52,752       55,795  
Mortgage servicing rights   13,195       14,109       37,928       48,769  
Servicing revenue, net   31,142       35,463       92,577       97,376  
Property operating income   1,507       1,450       4,521       4,261  
Gain (loss) on derivative instruments, net   822       (421 )     (4,711 )     (3,582 )
Other income, net   2,537       173       6,955       5,099  
Total other revenue   67,841       69,393       190,022       207,718  
Other expenses:              
Employee compensation and benefits   44,881       39,810       135,411       123,518  
Selling and administrative   13,141       12,367       39,897       38,574  
Property operating expenses   1,686       1,479       4,948       4,227  
Depreciation and amortization   1,944       2,286       6,937       7,297  
Provision for loss sharing (net of recoveries)   3,180       1,679       7,787       12,528  
Provision for credit losses (net of recoveries)   16,220       18,652       64,903       55,047  
Total other expenses   81,052       76,273       259,883       241,191  
Income before extinguishment of debt, sale of real estate, income from equity affiliates and income taxes   75,601       100,414       210,528       290,937  
Loss on extinguishment of debt         (314 )     (412 )     (1,561 )
Gain on sale of real estate               3,813        
Income from equity affiliates   3,177       809       7,388       20,694  
Provision for income taxes   (5,233 )     (5,854 )     (12,726 )     (19,436 )
Net income   73,545       95,055       208,591       290,634  
Preferred stock dividends   10,342       10,342       31,027       31,027  
Net income attributable to noncontrolling interest   5,028       6,789       14,119       21,200  
Net income attributable to common stockholders $ 58,175     $ 77,924     $ 163,445     $ 238,407  
               
Basic earnings per common share $ 0.31     $ 0.42     $ 0.87     $ 1.30  
Diluted earnings per common share $ 0.31     $ 0.41     $ 0.86     $ 1.28  
               
Weighted average shares outstanding:              
Basic   188,513,832       187,023,395       188,626,263       183,340,149  
Diluted   205,347,309       221,328,818       205,448,479       217,457,399  
               
Dividends declared per common share $ 0.43     $ 0.43     $ 1.29     $ 1.25  



ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
($ in thousands—except share and per share data)
 
  September 30, 2024
(Unaudited)
  December 31, 2023
Assets:      
Cash and cash equivalents $ 687,540     $ 928,974  
Restricted cash   179,906       608,233  
Loans and investments, net (allowance credit losses of $243,588 and $195,664)   11,292,647       12,377,806  
Loans held-for-sale, net   326,141       551,707  
Capitalized mortgage servicing rights, net   376,403       391,254  
Securities held-to-maturity, net (allowance credit losses of $10,564 and $6,256)   156,027       155,279  
Investments in equity affiliates   76,294       79,303  
Real estate owned, net   127,926       86,991  
Due from related party   96,823       64,421  
Goodwill and other intangible assets   88,510       91,378  
Other assets   473,241       403,290  
Total assets $ 13,881,458     $ 15,738,636  
       
Liabilities and Equity:      
Credit and repurchase facilities $ 3,257,719     $ 3,237,827  
Securitized debt   5,315,079       6,935,010  
Senior unsecured notes   1,246,908       1,333,968  
Convertible senior unsecured notes   285,170       283,118  
Junior subordinated notes to subsidiary trust issuing preferred securities   144,480       143,896  
Mortgage notes payable — real estate owned   35,350       44,339  
Due to related party   25,474       13,799  
Due to borrowers   56,975       121,707  
Allowance for loss-sharing obligations   80,577       71,634  
Other liabilities   270,349       298,733  
Total liabilities   10,718,081       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 - 188,608,777 and 188,505,264 shares issued and outstanding   1,886       1,885  
Additional paid-in capital   2,363,259       2,367,188  
Retained earnings   34,816       115,216  
Total Arbor Realty Trust, Inc. stockholders' equity   3,033,645       3,117,973  
Noncontrolling interest   129,732       136,632  
Total equity   3,163,377       3,254,605  
Total liabilities and equity $ 13,881,458     $ 15,738,636  



ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
Statement of Income Segment Information - (Unaudited)
(in thousands)
 
  Quarter Ended September 30, 2024
  Structured
Business
  Agency
Business
  Other(1)   Consolidated
Interest income $ 274,102     $ 12,420     $     $ 286,522  
Interest expense   192,945       4,765             197,710  
Net interest income   81,157       7,655             88,812  
Other revenue:              
Gain on sales, including fee-based services, net         18,638             18,638  
Mortgage servicing rights         13,195             13,195  
Servicing revenue         48,441             48,441  
Amortization of MSRs         (17,299 )           (17,299 )
Property operating income   1,507                   1,507  
Gain on derivative instruments, net         822             822  
Other income, net   1,364       1,173             2,537  
Total other revenue   2,871       64,970             67,841  
Other expenses:              
Employee compensation and benefits   16,772       28,109             44,881  
Selling and administrative   6,345       6,796             13,141  
Property operating expenses   1,686                   1,686  
Depreciation and amortization   1,422       522             1,944  
Provision for loss sharing (net of recoveries)         3,180             3,180  
Provision for credit losses (net of recoveries)   14,788       1,432             16,220  
Total other expenses   41,013       40,039             81,052  
Income before income from equity affiliates and income taxes   43,015       32,586             75,601  
Income from equity affiliates   3,177                   3,177  
Benefit from (provision for) income taxes   2,080       (7,313 )           (5,233 )
Net income   48,272       25,273             73,545  
Preferred stock dividends   10,342                   10,342  
Net income attributable to noncontrolling interest               5,028       5,028  
Net income attributable to common stockholders $ 37,930     $ 25,273     $ (5,028 )   $ 58,175  

(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)
 
  September 30, 2024
  Structured Business   Agency Business   Consolidated
Assets:          
Cash and cash equivalents $ 212,588     $ 474,952     $ 687,540  
Restricted cash   161,892       18,014       179,906  
Loans and investments, net   11,292,647             11,292,647  
Loans held-for-sale, net         326,141       326,141  
Capitalized mortgage servicing rights, net         376,403       376,403  
Securities held-to-maturity, net         156,027       156,027  
Investments in equity affiliates   76,294             76,294  
Real estate owned, net   127,926             127,926  
Goodwill and other intangible assets   12,500       76,010       88,510  
Other assets and due from related party   484,921       85,143       570,064  
Total assets $ 12,368,768     $ 1,512,690     $ 13,881,458  
           
Liabilities:          
Debt obligations $ 9,965,287     $ 319,419     $ 10,284,706  
Allowance for loss-sharing obligations         80,577       80,577  
Other liabilities and due to related parties   270,830       81,968       352,798  
Total liabilities $ 10,236,117     $ 481,964     $ 10,718,081  



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 September 30,   Nine Months Ended September 30,
    2024       2023       2024       2023  
Net income attributable to common stockholders $ 58,175     $ 77,924     $ 163,445     $ 238,407  
               
Adjustments:              
Net income attributable to noncontrolling interest   5,028       6,789       14,119       21,200  
Income from mortgage servicing rights   (13,195 )     (14,109 )     (37,928 )     (48,769 )
Deferred tax benefit   (2,026 )     (2,433 )     (8,922 )     (6,630 )
Amortization and write-offs of MSRs   18,792       18,757       56,728       58,684  
Depreciation and amortization   2,564       3,957       8,802       12,310  
Loss on extinguishment of debt         314       412       1,561  
Provision for credit losses, net   17,077       16,922       63,337       57,437  
(Gain) loss on derivative instruments, net   (1,217 )     1,002       4,677       2,036  
Stock-based compensation   2,977       3,047       11,748       12,141  
               
Distributable earnings (1) $ 88,175     $ 112,170     $ 276,418     $ 348,377  
               
Diluted distributable earnings per share (1) $ 0.43     $ 0.55     $ 1.35     $ 1.74  
               
Diluted weighted average shares outstanding (1) (2)   205,347,309       204,016,436       205,448,479       200,185,980  

(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