Arbor Realty Trust Reports Fourth Quarter and Full Year 2020 Results and Increases Dividend for Third Consecutive Quarter to $0.33 per Share
Fourth Quarter Highlights:
- Diversified operating platform with a multifamily focus that continues to produce strong distributable earnings and dividends in all cycles
- GAAP net income of
$0.80 and distributable earnings of$0.49 per diluted common share1 - Raised cash dividend on common stock to
$0.33 per share, our third consecutive quarterly increase - Continued strong performance from our residential mortgage banking joint venture generating pretax income of
$19.6 million - Raised
$105 million of accretive growth capital through the issuance of common shares
- GAAP net income of
Agency Business:
- Segment income of
$70.9 million - Record loan originations of
$2.75 billion , an 87% increase over last quarter - Servicing portfolio of
$24.63 billion representing 9% growth in the current quarter
Structured Business:
- Segment income of
$39.9 million - Portfolio growth of 7% on
$985.2 million of loan originations
Full Year Highlights:
- GAAP net income of
$1.41 and distributable earnings of$1.75 per diluted common share1 - Raised annual dividend run rate to
$1.32 per share, a 10% increase from a year ago, representing nine straight years of dividend growth - Record originations of
$9.15 billion , a 20% increase over 2019 - Agency servicing portfolio growth of 23% from record loan originations of
$6.71 billion - Structured portfolio growth of 28% from loan originations of
$2.43 billion - Industry leading shareholder return of 7% in 2020 despite ongoing pandemic; all other commercial mortgage REITs in our space had a negative return during 2020
- Raised
$250 million of accretive growth capital through issuance of common stock and senior unsecured debt - Continued focus on improving funding sources: issued
$275.0 million of 4.50% senior notes to replace higher cost debt, increased warehouse capacity by$420.0 million , added a new$800.0 million CLO vehicle and completed first private label securitization totaling$727.2 million - Generated pretax income of
$75.7 million from residential mortgage banking joint venture - Named the top Fannie Mae Small Loan Producer two years running (2019-2020); jumped up to sixth on the Top Fannie Mae DUS Multifamily Lender list for 2020
“We had a tremendous fourth quarter and an exceptional 2020 demonstrating the value of our franchise and the strength of our diverse business model,” said
Agency Business
Loan Origination Platform
| Agency Loan Volume (in thousands) | |||||||||||||
| Quarter Ended | Year Ended | ||||||||||||
2020 |
2020 |
2020 |
2019 |
||||||||||
| Fannie Mae | $ | 2,202,092 | $ | 1,117,679 | $ | 5,041,925 | $ | 3,346,272 | |||||
| Freddie Mac | 373,063 | 252,014 | 960,508 | 728,317 | |||||||||
| FHA | 133,523 | 100,345 | 327,345 | 123,095 | |||||||||
| Private Label | 44,884 | 5,840 | 382,191 | 401,216 | |||||||||
| CMBS/Conduit | - | - | - | 211,325 | |||||||||
| Total Originations | $ | 2,753,562 | $ | 1,475,878 | $ | 6,711,969 | $ | 4,810,225 | |||||
| Total Loan Sales | $ | 2,418,317 | $ | 1,219,462 | $ | 6,587,728 | $ | 4,401,112 | |||||
| Total Loan Commitments | $ | 2,808,173 | $ | 1,528,551 | $ | 6,810,666 | $ | 4,829,721 | |||||
For the quarter ended
At
Fee-Based Servicing Portfolio
Our fee-based servicing portfolio totaled
| Fee-Based Servicing Portfolio ($ in thousands) | |||||||||||||
| As of |
As of |
||||||||||||
| UPB | Wtd. Avg. Fee |
Wtd. Avg. Life (in years) |
UPB | Wtd. Avg. Fee |
Wtd. Avg. Life (in years) |
||||||||
| Fannie Mae | $ | 18,268,268 | 0.523 | % | 8.2 | $ | 16,462,041 | 0.516 | % | 8.4 | |||
| Freddie Mac | 4,881,080 | 0.279 | % | 9.9 | 4,687,197 | 0.288 | % | 10.4 | |||||
| FHA | 752,116 | 0.163 | % | 20.3 | 685,263 | 0.171 | % | 20.4 | |||||
| Private Label | 726,992 | 0.200 | % | 8.7 | 727,063 | 0.200 | % | 9.4 | |||||
| Total | $ | 24,628,456 | 0.454 | % | 8.9 | $ | 22,561,564 | 0.448 | % | 9.2 | |||
Loans sold under the Fannie Mae program contain an obligation to partially guarantee the performance of the loan (“loss-sharing obligations”), and includes
Structured Business
Portfolio and Investment Activity
Quarter ended
- Strong growth in the portfolio of
$378.2 million , or 7.4% - Continued significant income generated by our residential mortgage banking joint venture
- Originated 57 loans totaling
$985.2 million , consisted primarily of multifamily bridge loans totaling$868.7 million - Payoffs and pay downs on 32 loans totaling
$567.6 million
Year ended
- Portfolio growth of
$1.20 billion , or$27 .9% - Originated 137 loans totaling
$2.43 billion , consisted primarily of multifamily bridge loans totaling$2.12 billion - Payoffs and pay downs totaling
$1.21 billion
The Company recorded pretax income of
At
The average balance of the Company’s loan and investment portfolio during the fourth quarter of 2020, excluding loan loss reserves, was
During the fourth quarter of 2020, the Company recorded additional provisions for loan losses of
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, financing facilities and unsecured debt. The Company believes it was in compliance with all financial covenants and restrictions as of
Capital Markets
The Company issued 7.0 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
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
A telephonic replay of the call will be available until
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, changes in economic conditions generally, and the real estate markets specifically, in particular, due to the uncertainties created by the COVID-19 pandemic, 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
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 12 of this release.
| Contacts: 516-506-4422 pelenio@arbor.com |
Investors: 646-536-7019/7028 dboateng@theruthgroup.com jsalierno@theruthgroup.com |
Media: Chief Marketing Officer 516-506-4615 bhabyan@arbor.com |
| Consolidated Statements of Income | |||||||||||||||||
| ($ in thousands—except share and per share data) | |||||||||||||||||
| Quarter Ended |
Year Ended |
||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||
| (Unaudited) | (Unaudited) | ||||||||||||||||
| Interest income | $ | 86,157 | $ | 81,983 | $ | 339,465 | $ | 315,940 | |||||||||
| Interest expense | 40,044 | 48,186 | 169,216 | 186,399 | |||||||||||||
| Net interest income | 46,113 | 33,797 | 170,249 | 129,541 | |||||||||||||
| Other revenue: | |||||||||||||||||
| Gain on sales, including fee-based services, net | 34,041 | 13,755 | 94,607 | 65,652 | |||||||||||||
| Mortgage servicing rights | 68,809 | 27,909 | 165,517 | 90,761 | |||||||||||||
| Servicing revenue, net | 14,229 | 14,587 | 54,385 | 54,542 | |||||||||||||
| Property operating income | - | 1,487 | 3,976 | 9,674 | |||||||||||||
| Gain (loss) on derivative instruments, net | 518 | 4,764 | (58,335 | ) | (1,962 | ) | |||||||||||
| Other income, net | 706 | (137 | ) | 4,109 | 1,178 | ||||||||||||
| Total other revenue | 118,303 | 62,365 | 264,259 | 219,845 | |||||||||||||
| Other expenses: | |||||||||||||||||
| Employee compensation and benefits | 42,728 | 28,456 | 144,380 | 122,102 | |||||||||||||
| Selling and administrative | 8,334 | 9,205 | 37,348 | 40,329 | |||||||||||||
| Property operating expenses | 120 | 2,571 | 4,898 | 10,220 | |||||||||||||
| Depreciation and amortization | 1,810 | 1,847 | 7,640 | 7,510 | |||||||||||||
| Impairment loss on real estate owned | - | - | - | 1,000 | |||||||||||||
| Provision for loss sharing (net of recoveries) | (6,884 | ) | (409 | ) | 14,822 | 1,147 | |||||||||||
| Provision for credit losses (net of recoveries) | 1,600 | - | 61,110 | - | |||||||||||||
| Total other expenses | 47,708 | 41,670 | 270,198 | 182,308 | |||||||||||||
| Income before extinguishment of debt, sale of real estate, income from equity affiliates, and income taxes |
|||||||||||||||||
| 116,708 | 54,492 | 164,310 | 167,078 | ||||||||||||||
| Loss on extinguishment of debt | - | (7,311 | ) | (3,546 | ) | (7,439 | ) | ||||||||||
| Gain (loss) on sale of real estate | 1,493 | - | (375 | ) | - | ||||||||||||
| Income from equity affiliates | 19,402 | 1,502 | 76,161 | 10,635 | |||||||||||||
| Provision for income taxes | (24,901 | ) | (4,072 | ) | (40,393 | ) | (15,036 | ) | |||||||||
| Net income | 112,702 | 44,611 | 196,157 | 155,238 | |||||||||||||
| Preferred stock dividends | 1,888 | 1,888 | 7,554 | 7,554 | |||||||||||||
| Net income attributable to noncontrolling interest | 14,197 | 7,181 | 25,208 | 26,610 | |||||||||||||
| Net income attributable to common stockholders | $ | 96,617 | $ | 35,542 | $ | 163,395 | $ | 121,074 | |||||||||
| Basic earnings per common share | $ | 0.81 | $ | 0.35 | $ | 1.44 | $ | 1.30 | |||||||||
| Diluted earnings per common share | $ | 0.80 | $ | 0.34 | $ | 1.41 | $ | 1.27 | |||||||||
| Weighted average shares outstanding: | |||||||||||||||||
| Basic | 119,875,315 | 101,611,818 | 113,811,471 | 92,851,327 | |||||||||||||
| Diluted | 138,630,532 | 125,498,359 | 133,969,296 | 116,192,951 | |||||||||||||
| Dividends declared per common share | $ | 0.32 | $ | 0.30 | $ | 1.23 | $ | 1.14 | |||||||||
| Consolidated Balance Sheets | ||||||||||||
| ($ in thousands—except share and per share data) | ||||||||||||
| 2020 | 2019 | |||||||||||
| Assets: | ||||||||||||
| Cash and cash equivalents | $ | 339,528 | $ | 299,687 | ||||||||
| Restricted cash | 197,470 | 210,875 | ||||||||||
| Loans and investments, net (allowance for credit losses: |
5,285,868 | 4,189,960 | ||||||||||
| Loans held-for-sale, net | 986,919 | 861,360 | ||||||||||
| Capitalized mortgage servicing rights, net | 379,974 | 286,420 | ||||||||||
| Securities held-to-maturity, net (allowance for credit losses: |
95,524 | 88,699 | ||||||||||
| Investments in equity affiliates | 74,274 | 41,800 | ||||||||||
| Real estate owned, net | 1,485 | 13,220 | ||||||||||
| Due from related party | 12,449 | 10,651 | ||||||||||
| 105,451 | 110,700 | |||||||||||
| Other assets | 182,044 | 125,788 | ||||||||||
| Total assets | $ | 7,660,986 | $ | 6,239,160 | ||||||||
| Liabilities and Equity: | ||||||||||||
| Credit facilities and repurchase agreements | $ | 2,234,883 | $ | 1,678,288 | ||||||||
| Collateralized loan obligations | 2,517,309 | 2,130,121 | ||||||||||
| Debt fund | - | 68,629 | ||||||||||
| Senior unsecured notes | 662,843 | 319,799 | ||||||||||
| Convertible senior unsecured notes, net | 267,973 | 284,152 | ||||||||||
| Junior subordinated notes to subsidiary trust issuing preferred securities | 141,656 | 140,949 | ||||||||||
| Due to related party | 2,365 | 13,100 | ||||||||||
| Due to borrowers | 89,325 | 79,148 | ||||||||||
| Allowance for loss-sharing obligations | 64,303 | 34,648 | ||||||||||
| Other liabilities | 197,644 | 134,299 | ||||||||||
| Total liabilities | 6,178,301 | 4,883,133 | ||||||||||
| Equity: | ||||||||||||
| Preferred stock, cumulative, redeemable, |
||||||||||||
| special voting preferred shares; 17,560,633 and 20,369,265 shares issued and | ||||||||||||
| outstanding, respectively; 8.25% Series A, |
||||||||||||
| 1,551,500 shares issued and outstanding; 7.75% Series B, |
||||||||||||
| liquidation preference; 1,260,000 shares issued and outstanding; 8.50% Series C, | ||||||||||||
| 89,472 | 89,501 | |||||||||||
| Common stock, |
||||||||||||
| and 109,706,214 shares issued and outstanding, respectively | 1,232 | 1,097 | ||||||||||
| Additional paid-in capital | 1,317,109 | 1,154,932 | ||||||||||
| Accumulated deficit | (63,442 | ) | (60,920 | ) | ||||||||
| 1,344,371 | 1,184,610 | |||||||||||
| Noncontrolling interest | 138,314 | 171,417 | ||||||||||
| Total equity | 1,482,685 | 1,356,027 | ||||||||||
| Total liabilities and equity | $ | 7,660,986 | $ | 6,239,160 | ||||||||
| Statement of Income Segment Information - (Unaudited) | |||||||||||||||||
| (in thousands) | |||||||||||||||||
| Quarter Ended |
|||||||||||||||||
| Structured Business |
Agency Business |
Other / Eliminations (1) |
Consolidated | ||||||||||||||
| Interest income | $ | 77,651 | $ | 8,506 | $ | - | $ | 86,157 | |||||||||
| Interest expense | 35,574 | 4,470 | - | 40,044 | |||||||||||||
| Net interest income | 42,077 | 4,036 | - | 46,113 | |||||||||||||
| Other revenue: | |||||||||||||||||
| Gain on sales, including fee-based services, net | - | 34,041 | - | 34,041 | |||||||||||||
| Mortgage servicing rights | - | 68,809 | - | 68,809 | |||||||||||||
| Servicing revenue | - | 27,322 | - | 27,322 | |||||||||||||
| Amortization of MSRs | - | (13,093 | ) | - | (13,093 | ) | |||||||||||
| Gain on derivative instruments, net | 317 | 201 | - | 518 | |||||||||||||
| Other income, net | 706 | - | - | 706 | |||||||||||||
| Total other revenue | 1,023 | 117,280 | - | 118,303 | |||||||||||||
| Other expenses: | |||||||||||||||||
| Employee compensation and benefits | 11,412 | 31,316 | - | 42,728 | |||||||||||||
| Selling and administrative | 3,059 | 5,275 | - | 8,334 | |||||||||||||
| Property operating expenses | 120 | - | - | 120 | |||||||||||||
| Depreciation and amortization | 546 | 1,264 | - | 1,810 | |||||||||||||
| Provision for loss sharing (net of recoveries) | - | (6,884 | ) | - | (6,884 | ) | |||||||||||
| Provision for credit losses (net of recoveries) | 1,584 | 16 | - | 1,600 | |||||||||||||
| Total other expenses | 16,721 | 30,987 | - | 47,708 | |||||||||||||
| Income before sale of real estate, income from equity affiliates, and income taxes |
|||||||||||||||||
| 26,379 | 90,329 | - | 116,708 | ||||||||||||||
| Gain on sale of real estate | 990 | 503 | - | 1,493 | |||||||||||||
| Income from equity affiliates | 19,402 | - | - | 19,402 | |||||||||||||
| Provision for income taxes | (4,966 | ) | (19,935 | ) | - | (24,901 | ) | ||||||||||
| Net income | 41,805 | 70,897 | - | 112,702 | |||||||||||||
| Preferred stock dividends | 1,888 | - | - | 1,888 | |||||||||||||
| Net income attributable to noncontrolling interest | - | - | 14,197 | 14,197 | |||||||||||||
| Net income (loss) attributable to common stockholders | $ | 39,917 | $ | 70,897 | $ | (14,197 | ) | $ | 96,617 | ||||||||
| (1) Includes certain income or expenses not allocated to the two reportable segments. Amount reflects income attributable | |||||||||||||||||
| to the noncontrolling interest holders. | |||||||||||||||||
| Balance Sheet Segment Information - (Unaudited) | ||||||||||||
| (in thousands) | ||||||||||||
| Structured Business |
Agency Business |
Consolidated | ||||||||||
| Assets: | ||||||||||||
| Cash and cash equivalents | $ | 172,568 | $ | 166,960 | $ | 339,528 | ||||||
| Restricted cash | 188,226 | 9,244 | 197,470 | |||||||||
| Loans and investments, net | 5,285,868 | - | 5,285,868 | |||||||||
| Loans held-for-sale, net | - | 986,919 | 986,919 | |||||||||
| Capitalized mortgage servicing rights, net | - | 379,974 | 379,974 | |||||||||
| Securities held-to-maturity, net | - | 95,524 | 95,524 | |||||||||
| Investments in equity affiliates | 74,274 | - | 74,274 | |||||||||
| 12,500 | 92,951 | 105,451 | ||||||||||
| Other assets | 142,844 | 53,134 | 195,978 | |||||||||
| Total assets | $ | 5,876,280 | $ | 1,784,706 | $ | 7,660,986 | ||||||
| Liabilities: | ||||||||||||
| Debt obligations | $ | 4,872,626 | $ | 952,038 | $ | 5,824,664 | ||||||
| Allowance for loss-sharing obligations | - | 64,303 | 64,303 | |||||||||
| Other liabilities | 203,554 | 85,780 | 289,334 | |||||||||
| Total liabilities | $ | 5,076,180 | $ | 1,102,121 | $ | 6,178,301 | ||||||
| Reconciliation of Distributable Earnings to GAAP Net Income - (Unaudited) | |||||||||||
| ($ in thousands—except share and per share data) | |||||||||||
| Quarter Ended |
Year Ended |
||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||
| Net income attributable to common stockholders | $ | 96,617 | $ | 35,542 | $ | 163,395 | $ | 121,074 | |||
| Adjustments: | |||||||||||
| Net income attributable to noncontrolling interest | 14,197 | 7,181 | 25,208 | 26,610 | |||||||
| Income from mortgage servicing rights | (68,809) | (27,909) | (165,517) | (90,761) | |||||||
| Deferred tax provision | 9,898 | 1,176 | 4,726 | 150 | |||||||
| Amortization and write-offs of MSRs | 17,241 | 18,547 | 65,979 | 71,105 | |||||||
| Depreciation and amortization | 2,755 | 2,690 | 11,486 | 11,194 | |||||||
| Loss on extinguishment of debt | - | 7,311 | 3,546 | 7,439 | |||||||
| Provision for credit losses, net | (5,742) | 172 | 73,402 | 1,193 | |||||||
| (Gain) loss on derivative instruments, net | (518) | (4,372) | 43,596 | 1,687 | |||||||
| Stock-based compensation | 1,761 | 1,941 | 9,046 | 9,515 | |||||||
| Distributable earnings (1) | $ | 67,400 | $ | 42,279 | $ | 234,867 | $ | 159,206 | |||
| Diluted distributable earnings per share (1) | $ | 0.49 | $ | 0.34 | $ | 1.75 | $ | 1.37 | |||
| Diluted weighted average shares outstanding (1) | 138,630,532 | 125,498,359 | 133,969,296 | 116,192,951 | |||||||
| (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. |
|||||||||||
| Beginning in the fourth quarter of 2020, the Company changed the name of its non-GAAP financial measure from core earnings to distributable earnings. Although calculated the same way as core earnings, the Company believes the name change to distributable earnings better reflects what this non-GAAP financial measure presents. |
|||||||||||
| 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, the tax impact on cumulative gains/losses on derivative instruments associated with Private Label loans sold during the periods presented, changes in fair value of GSE-related derivatives that temporarily flow through earnings, deferred tax (benefit) provision, CECL provisions for credit losses (adjusted for realized losses as described below) and amortization of the convertible senior notes conversion option. The Company also adds back one-time charges such as acquisition costs and one-time gains/losses on the early extinguishment of debt. |
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| The Company reduces distributable earnings for realized losses in the period management determines that a loan is deemed nonrecoverable. Loans are deemed nonrecoverable upon the earlier of: (i) 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 (ii) 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. |
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| 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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| As noted above, the Company changed the name of its non-GAAP financial measure from core earnings to distributable earnings in the fourth quarter of 2020. Core earnings was introduced as the Company's non-GAAP performance measure in the first quarter of 2020 as a replacement of adjusted funds from operations (“AFFO”). Core earnings was comparable to the previous AFFO metric, revised to exclude provisions for credit losses (including CECL) related to the Company's structured loan portfolio, securities held-to maturity and loss-sharing obligations related to the Fannie Mae program. Prior period amounts presented in the table above have been conformed to reflect these changes. | |||||||||||
Source: Arbor Realty Trust
