Arbor Realty Trust Reports Fourth Quarter and Full Year 2018 Results and Declares Common Stock Dividend
Fourth Quarter Company Highlights:
- GAAP net income of
$0.47 per diluted common share; AFFO of$0.29 , or$0.39 per share excluding a$10 million non-cash loss reserve on a legacy asset1 - Declares a cash dividend on common stock of
$0.27 per share, 29% higher than a year ago - Declared a special dividend of
$0.15 per share of common stock - Raised
$100.5 million of capital in a common stock offering
Agency Business
- Segment income of
$42.4 million - Loan originations of
$1.62 billion , a 15% increase from 3Q18 - Servicing portfolio of
$18.60 billion , up 5% from 3Q18 and 15% for 2018
Structured Business
- Segment income of
$4.7 million - Loan originations of
$447.5 million
Full Year Highlights:
- GAAP net income of
$1.50 and AFFO of$1.21 per diluted common share1 - Record loan originations of
$6.78 billion , with$5.12 billion from the agency business, a 15% increase over 2017 - Improved funding sources by adding our tenth and largest collateralized securitization vehicle totaling
$560.0 million , increased warehouse facility capacity and reduced pricing, issued$389.5 million of senior debt replacing$336.1 million of higher cost senior debt - Raised
$217.1 million of capital through the issuance of common stock and debt - Structured portfolio growth of 24% from loan originations of
$1.66 billion - Declared dividends on common stock of
$1.13 per share, a 57% increase from 2017 - Significant return to shareholders of 30% for 2018
- Market cap surpasses
$1 billion mark - Recognized a
$10 million gain from the settlement of a litigation
Agency Business
Loan Origination Platform
| Agency Loan Volume (in thousands) | ||||||||||||
| Quarter Ended | Year Ended | |||||||||||
| December 31, 2018 |
September 30, 2018 |
December 31, 2018 |
December 31, 2017 |
|||||||||
| Fannie Mae | $ | 1,067,230 | $ | 995,662 | $ | 3,332,100 | $ | 2,929,481 | ||||
| Freddie Mac | 527,502 | 317,516 | 1,587,958 | 1,322,498 | ||||||||
| FHA | 15,549 | 77,236 | 153,523 | 189,087 | ||||||||
| CMBS/Conduit | 14,025 | 20,650 | 50,908 | 21,370 | ||||||||
| Total Originations | $ | 1,624,306 | $ | 1,411,064 | $ | 5,124,489 | $ | 4,462,436 | ||||
| Total Loan Sales | $ | 1,653,421 | $ | 1,190,004 | $ | 4,924,144 | $ | 4,814,906 | ||||
| Total Loan Commitments | $ | 1,604,502 | $ | 1,376,376 | $ | 5,104,072 | $ | 4,344,328 | ||||
For the quarter ended
At
Fee-Based Servicing Portfolio
Our fee-based servicing portfolio totaled
| Fee-Based Servicing Portfolio ($ in thousands) | |||||||||||||
| As of December 31, 2018 | As of September 30, 2018 | ||||||||||||
| UPB | Wtd. Avg. Fee | Wtd. Avg. Life (in years) | UPB | Wtd. Avg. Fee | Wtd. Avg. Life (in years) | ||||||||
| Fannie Mae | $ | 13,562,667 | 0.513 | % | 7.4 | $ | 13,195,643 | 0.523 | % | 7.7 | |||
| Freddie Mac | 4,394,287 | 0.308 | % | 10.8 | 3,977,619 | 0.308 | % | 11.0 | |||||
| FHA | 644,687 | 0.155 | % | 19.6 | 621,419 | 0.157 | % | 20.1 | |||||
| Total | $ | 18,601,641 | 0.452 | % | 8.6 | $ | 17,794,681 | 0.462 | % | 8.8 | |||
Loans sold under the
Structured Business
Portfolio and Investment Activity
Quarter ended
- 21 new loan originations totaling
$447.5 million , of which 18 were bridge loans for$404.9 million - Payoffs and pay downs on 23 loans totaling
$271.4 million
Year ended
- Portfolio growth of 24% was driven by loan origination volume consisting of 90 new loan originations totaling
$1.66 billion , of which 84 were bridge loans for$1.55 billion - Payoffs and pay downs on 79 loans totaling
$955.6 million
At
The average balance of the Company’s loan and investment portfolio during the fourth quarter of 2018, excluding loan loss reserves, was
The Company recorded
Financing Activity
The balance of debt that finances the Company’s loan and investment portfolio at
The Company is subject to various financial covenants and restrictions under the terms of its collateralized securitization vehicles and financing facilities. The Company believes it was in compliance with all financial covenants and restrictions as of
Capital Markets
The Company issued 8.7 million shares of common stock in a public offering receiving net proceeds of
Dividends
The Company announced today that its Board of Directors has declared a quarterly cash dividend of
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
In addition, the Board of Directors declared a special dividend of
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 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. 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 Lee Roth 646-536-7012 lroth@theruthgroup.com |
| Media: Bonnie Habyan, EVP of Marketing 516-506-4615 bhabyan@arbor.com |
| ARBOR REALTY TRUST, INC. AND SUBSIDIARIES | |||||||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||||
| ($ in thousands—except share and per share data) | |||||||||||||||||
| Quarter Ended | Year Ended | ||||||||||||||||
| December 31, | December 31, | ||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||||
| (Unaudited) | (Unaudited) | ||||||||||||||||
| Interest income | $ | 73,360 | $ | 46,045 | $ | 251,768 | $ | 156,177 | |||||||||
| Interest expense | 42,999 | 26,374 | 153,818 | 90,072 | |||||||||||||
| Net interest income | 30,361 | 19,671 | 97,950 | 66,105 | |||||||||||||
| Other revenue: | |||||||||||||||||
| Gain on sales, including fee-based services, net | 18,735 | 17,672 | 70,002 | 72,799 | |||||||||||||
| Mortgage servicing rights | 36,052 | 20,638 | 98,839 | 76,820 | |||||||||||||
| Servicing revenue, net | 11,372 | 9,287 | 46,034 | 29,210 | |||||||||||||
| Property operating income | 1,569 | 2,219 | 10,095 | 10,973 | |||||||||||||
| Other income, net | 9,736 | 1,615 | 8,161 | 685 | |||||||||||||
| Total other revenue | 77,464 | 51,431 | 233,131 | 190,487 | |||||||||||||
| Other expenses: | |||||||||||||||||
| Employee compensation and benefits | 26,386 | 25,265 | 110,470 | 92,126 | |||||||||||||
| Selling and administrative | 9,291 | 7,605 | 37,074 | 30,738 | |||||||||||||
| Property operating expenses | 2,342 | 2,639 | 10,431 | 10,482 | |||||||||||||
| Depreciation and amortization | 1,914 | 1,843 | 7,453 | 7,385 | |||||||||||||
| Impairment loss on real estate owned | - | 500 | 2,000 | 3,200 | |||||||||||||
| Provision for loss sharing (net of recoveries) | 1,003 | 147 | 3,843 | (259 | ) | ||||||||||||
| Provision for loan losses (net of recoveries) | 9,319 | - | 8,353 | (456 | ) | ||||||||||||
| Litigation settlement gain | - | - | (10,170 | ) | - | ||||||||||||
| Management fee - related party | - | - | - | 6,673 | |||||||||||||
| Total other expenses | 50,255 | 37,999 | 169,454 | 149,889 | |||||||||||||
| Income before extinguishment of debt, income from | |||||||||||||||||
| equity affiliates and income taxes | 57,570 | 33,103 | 161,627 | 106,703 | |||||||||||||
| (Loss) gain on extinguishment of debt | (82 | ) | - | (5,041 | ) | 7,116 | |||||||||||
| Income (loss) from equity affiliates | 91 | (4,706 | ) | 1,196 | (2,951 | ) | |||||||||||
| (Provision for) benefit from income taxes | (8,635 | ) | 2,885 | (9,731 | ) | (13,359 | ) | ||||||||||
| Net income | 48,944 | 31,282 | 148,051 | 97,509 | |||||||||||||
| Preferred stock dividends | 1,888 | 1,888 | 7,554 | 7,554 | |||||||||||||
| Net income attributable to noncontrolling interest | 9,838 | 7,524 | 32,185 | 24,120 | |||||||||||||
| Net income attributable to common stockholders | 37,218 | $ | 21,870 | $ | 108,312 | $ | 65,835 | ||||||||||
| Basic earnings per common share | $ | 0.48 | $ | 0.35 | $ | 1.54 | $ | 1.14 | |||||||||
| Diluted earnings per common share | $ | 0.47 | $ | 0.35 | $ | 1.50 | $ | 1.12 | |||||||||
| Weighted average shares outstanding: | |||||||||||||||||
| Basic | 78,273,633 | 61,712,782 | 70,208,165 | 57,890,574 | |||||||||||||
| Diluted | 101,148,081 | 84,361,612 | 93,642,168 | 80,311,252 | |||||||||||||
| Dividends declared per common share | $ | 0.42 | $ | 0.19 | $ | 1.13 | $ | 0.72 | |||||||||
| ARBOR REALTY TRUST, INC. AND SUBSIDIARIES | |||||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||||
| ($ in thousands—except share and per share data) | |||||||||||
| December 31, | December 31, | ||||||||||
| 2018 | 2017 | ||||||||||
| Assets: | |||||||||||
| Cash and cash equivalents | $ | 160,063 | $ | 104,374 | |||||||
| Restricted cash | 180,606 | 139,398 | |||||||||
| Loans and investments, net | 3,200,145 | 2,579,127 | |||||||||
| Loans held-for-sale, net | 481,664 | 297,443 | |||||||||
| Capitalized mortgage servicing rights, net | 273,770 | 252,608 | |||||||||
| Securities held to maturity, net | 76,363 | 27,837 | |||||||||
| Investments in equity affiliates | 21,580 | 23,653 | |||||||||
| Real estate owned, net | 14,446 | 16,787 | |||||||||
| Due from related party | 1,287 | 688 | |||||||||
| Goodwill and other intangible assets | 116,165 | 121,766 | |||||||||
| Other assets | 86,086 | 62,264 | |||||||||
| Total assets | $ | 4,612,175 | $ | 3,625,945 | |||||||
| Liabilities and Equity: | |||||||||||
| Credit facilities and repurchase agreements | 1,135,627 | 528,573 | |||||||||
| Collateralized loan obligations | 1,593,548 | 1,418,422 | |||||||||
| Debt fund | 68,183 | 68,084 | |||||||||
| Senior unsecured notes | 122,484 | 95,280 | |||||||||
| Convertible senior unsecured notes, net | 254,768 | 231,287 | |||||||||
| Junior subordinated notes to subsidiary trust issuing preferred securities | 140,259 | 139,590 | |||||||||
| Related party financing | - | 50,000 | |||||||||
| Due to borrowers | 78,662 | 99,829 | |||||||||
| Allowance for loss-sharing obligations | 34,298 | 30,511 | |||||||||
| Other liabilities | 118,780 | 99,813 | |||||||||
| Total liabilities | 3,546,609 | 2,761,389 | |||||||||
| Equity: | |||||||||||
| Arbor Realty Trust, Inc. stockholders' equity: | |||||||||||
| Preferred stock, cumulative, redeemable, $0.01 par value: 100,000,000 | |||||||||||
| shares authorized; special voting preferred shares; 20,653,584 and 21,230,769 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 | 89,502 | 89,508 | |||||||||
| Common stock, $0.01 par value: 500,000,000 shares authorized; 83,987,707 | |||||||||||
| and 61,723,387 shares issued and outstanding, respectively | 840 | 617 | |||||||||
| Additional paid-in capital | 879,029 | 707,450 | |||||||||
| Accumulated deficit | (74,133 | ) | (101,926 | ) | |||||||
| Accumulated other comprehensive income | - | 176 | |||||||||
| Total Arbor Realty Trust, Inc. stockholders’ equity | 895,238 | 695,825 | |||||||||
| Noncontrolling interest | 170,328 | 168,731 | |||||||||
| Total equity | 1,065,566 | 864,556 | |||||||||
| Total liabilities and equity | $ | 4,612,175 | $ | 3,625,945 | |||||||
| ARBOR REALTY TRUST, INC. AND SUBSIDIARIES | |||||||||||||||||
| STATEMENT OF INCOME SEGMENT INFORMATION - (Unaudited) | |||||||||||||||||
| (in thousands) | |||||||||||||||||
| Quarter Ended December 31, 2018 | |||||||||||||||||
| Structured Business | Agency Business | Other / Eliminations (1) | Consolidated | ||||||||||||||
| Interest income | $ | 64,105 | $ | 9,255 | $ | - | $ | 73,360 | |||||||||
| Interest expense | 37,395 | 5,604 | - | 42,999 | |||||||||||||
| Net interest income | 26,710 | 3,651 | - | 30,361 | |||||||||||||
| Other revenue: | |||||||||||||||||
| Gain on sales, including fee-based services, net | - | 18,735 | - | 18,735 | |||||||||||||
| Mortgage servicing rights | - | 36,052 | - | 36,052 | |||||||||||||
| Servicing revenue | - | 23,857 | - | 23,857 | |||||||||||||
| Amortization of MSRs | - | (12,485 | ) | - | (12,485 | ) | |||||||||||
| Property operating income | 1,569 | - | - | 1,569 | |||||||||||||
| Other income, net | 734 | 9,002 | - | 9,736 | |||||||||||||
| Total other revenue | 2,303 | 75,161 | - | 77,464 | |||||||||||||
| Other expenses: | |||||||||||||||||
| Employee compensation and benefits | 6,437 | 19,949 | - | 26,386 | |||||||||||||
| Selling and administrative | 4,142 | 5,149 | - | 9,291 | |||||||||||||
| Property operating expenses | 2,342 | - | - | 2,342 | |||||||||||||
| Depreciation and amortization | 514 | 1,400 | - | 1,914 | |||||||||||||
| Provision for loss sharing (net of recoveries) | - | 1,003 | - | 1,003 | |||||||||||||
| Provision for loan losses (net of recoveries) | 9,319 | - | - | 9,319 | |||||||||||||
| Total other expenses | 22,754 | 27,501 | - | 50,255 | |||||||||||||
| Income before extinguishment of debt, income from | |||||||||||||||||
| equity affiliates and income taxes | 6,259 | 51,311 | - | 57,570 | |||||||||||||
| Loss on extinguishment of debt | (82 | ) | - | - | (82 | ) | |||||||||||
| Income from equity affiliates | 91 | - | - | 91 | |||||||||||||
| Benefit from (provision for) income taxes | 273 | (8,908 | ) | - | (8,635 | ) | |||||||||||
| Net income | 6,541 | 42,403 | - | 48,944 | |||||||||||||
| Preferred stock dividends | 1,888 | - | - | 1,888 | |||||||||||||
| Net income attributable to noncontrolling interest | - | - | 9,838 | 9,838 | |||||||||||||
| Net income attributable to common stockholders | $ | 4,653 | $ | 42,403 | $ | (9,838 | ) | $ | 37,218 | ||||||||
| (1) Includes certain income or expenses not allocated to the two reportable segments. Amount reflects income attributable to the noncontrolling interest holders. | |||||||||||||||||
| ARBOR REALTY TRUST, INC. AND SUBSIDIARIES | ||||||||||||
| BALANCE SHEET SEGMENT INFORMATION - (Unaudited) | ||||||||||||
| (in thousands) | ||||||||||||
| December 31, 2018 | ||||||||||||
| Structured Business | Agency Business | Consolidated | ||||||||||
| Assets: | ||||||||||||
| Cash and cash equivalents | $ | 89,457 | $ | 70,606 | $ | 160,063 | ||||||
| Restricted cash | 180,606 | - | 180,606 | |||||||||
| Loans and investments, net | 3,200,145 | - | 3,200,145 | |||||||||
| Loans held-for-sale, net | - | 481,664 | 481,664 | |||||||||
| Capitalized mortgage servicing rights, net | - | 273,770 | 273,770 | |||||||||
| Securities held to maturity, net | - | 76,363 | 76,363 | |||||||||
| Investments in equity affiliates | 21,580 | - | 21,580 | |||||||||
| Goodwill and other intangible assets | 12,500 | 103,665 | 116,165 | |||||||||
| Other assets | 81,494 | 20,325 | 101,819 | |||||||||
| Total assets | $ | 3,585,782 | $ | 1,026,393 | $ | 4,612,175 | ||||||
| Liabilities: | ||||||||||||
| Debt obligations | 2,842,688 | 472,181 | 3,314,869 | |||||||||
| Allowance for loss-sharing obligations | - | 34,298 | 34,298 | |||||||||
| Other liabilities | 159,413 | 38,029 | 197,442 | |||||||||
| Total liabilities | $ | 3,002,101 | $ | 544,508 | $ | 3,546,609 | ||||||
| ARBOR REALTY TRUST, INC. AND SUBSIDIARIES | ||||||||||||||||
| Supplemental Schedule of Non-GAAP Financial Measures - (Unaudited) | ||||||||||||||||
| Funds from Operations ("FFO") and Adjusted Funds from Operations ("AFFO") | ||||||||||||||||
| ($ in thousands—except share and per share data) | ||||||||||||||||
| Quarter Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Net income attributable to common stockholders | $ | 37,218 | $ | 21,870 | $ | 108,312 | $ | 65,835 | ||||||||
| Adjustments: | ||||||||||||||||
| Net income attributable to noncontrolling interest | 9,838 | 7,524 | 32,185 | 24,120 | ||||||||||||
| Impairment loss on real estate owned | - | 500 | 2,000 | 3,200 | ||||||||||||
| Depreciation - real estate owned | 176 | 177 | 708 | 769 | ||||||||||||
| Depreciation - investments in equity affiliates | 125 | 102 | 499 | 406 | ||||||||||||
| Funds from operations (1) | $ | 47,357 | $ | 30,173 | $ | 143,704 | $ | 94,330 | ||||||||
| Adjustments: | ||||||||||||||||
| Income from mortgage servicing rights | (36,052 | ) | (20,638 | ) | (98,839 | ) | (76,820 | ) | ||||||||
| Impairment loss on real estate owned | - | (500 | ) | (2,000 | ) | (3,200 | ) | |||||||||
| Deferred tax provision (benefit) | 2,421 | (7,414 | ) | (12,033 | ) | (7,399 | ) | |||||||||
| Amortization and write-offs of MSRs | 20,314 | 16,894 | 73,182 | 63,034 | ||||||||||||
| Depreciation and amortization | 2,582 | 2,073 | 9,618 | 7,697 | ||||||||||||
| Net (gain) loss on changes in fair value of derivatives | (9,002 | ) | (914 | ) | (6,672 | ) | 1,398 | |||||||||
| Stock-based compensation | 1,257 | 1,007 | 6,095 | 4,840 | ||||||||||||
| Adjusted funds from operations (1) (2) | $ | 28,877 | $ | 20,681 | $ | 113,055 | $ | 83,880 | ||||||||
| Diluted FFO per share (1) | $ | 0.47 | $ | 0.36 | $ | 1.53 | $ | 1.17 | ||||||||
| Diluted AFFO per share (1) (2) | $ | 0.29 | $ | 0.25 | $ | 1.21 | $ | 1.04 | ||||||||
| Diluted weighted average shares outstanding (1) | 101,148,081 | 84,361,612 | 93,642,168 | 80,311,252 | ||||||||||||
| (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) Excluding the impact of a non-cash $10.1 million loan loss reserve related to a legacy pre-crisis asset, AFFO for the quarter ended December 31, 2018 was $39.0 million, or $0.39 per diluted common share. 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
