Arbor Realty Trust Reports Second Quarter 2023 Results and Increases Quarterly Dividend to $0.43 per Share

Company Highlights:

Diversified, annuity-based operating platform with a multifamily focus that generates strong distributable earnings and dividends in all cycles
- GAAP net income of $0.41 per diluted common share
- Distributable earnings¹ of $0.57 per diluted common share, well in excess of our current dividend, representing a 75% payout ratio
- Raised cash dividend on common stock to $0.43 per share; a $0.01 per share, or 2% increase, representing an annualized dividend of $1.72 per share
- Strong liquidity position with ~$1 billion in cash and liquidity and ~$265 million of restricted cash in replenishable CLO vehicles with a weighted average cost of 1.67% over benchmark rates²
- Agency loan originations of $1.42 billion and a servicing portfolio of ~$29.45 billion, up 2%
- Structured loan originations of $209.0 million and a portfolio of ~$13.49 billion

UNIONDALE, N.Y., July 28, 2023 (GLOBE NEWSWIRE) -- Arbor Realty Trust, Inc. (NYSE: ABR), today announced financial results for the second quarter ended June 30, 2023. Arbor reported net income for the quarter of $76.2 million, or $0.41 per diluted common share, compared to net income of $69.9 million, or $0.41 per diluted common share for the quarter ended June 30, 2022. Distributable earnings for the quarter was $114.0 million, or $0.57 per diluted common share, compared to $93.7 million, or $0.52 per diluted common share for the quarter ended June 30, 2022.

Agency Business

Loan Origination Platform

	Agency Loan Volume (in thousands)
	Quarter Ended
	June 30, 2023		March 31, 2023
Fannie Mae	$	1,079,910	$	795,021
Freddie Mac		217,884		101,332
FHA		62,552		148,940
Private Label		50,256		41,107
SFR-Fixed Rate		11,837		5,461
Total Originations	$	1,422,439	$	1,091,861

Total Loan Sales	$	1,410,724	$	932,699

Total Loan Commitments	$	1,133,312	$	1,500,110

For the quarter ended June 30, 2023, the Agency Business generated revenues of $76.7 million, compared to $80.4 million for the first quarter of 2023. Gain on sales, including fee-based services, net on the GSE/Agency business (excluding private label and SFR) was $22.2 million for the quarter, reflecting a margin of 1.67%, compared to $13.1 million and 1.72% for the first quarter of 2023. Income from mortgage servicing rights was $16.2 million for the quarter, reflecting a rate of 1.43% as a percentage of loan commitments, compared to $18.5 million and 1.23% for the first quarter of 2023.

At June 30, 2023, loans held-for-sale was $485.1 million, with financing associated with these loans totaling $463.3 million.

Fee-Based Servicing Portfolio

The Company’s fee-based servicing portfolio totaled $29.45 billion at June 30, 2023. Servicing revenue, net was $32.3 million for the quarter and consisted of servicing revenue of $48.0 million, net of amortization of mortgage servicing rights totaling $15.6 million.

	Fee-Based Servicing Portfolio ($ in thousands)
	June 30, 2023				March 31, 2023
	UPB		Wtd. Avg. Fee	Wtd. Avg. Life (years)	UPB		Wtd. Avg. Fee	Wtd. Avg. Life (years)
Fannie Mae	$	20,002,570	0.489%	7.7	$	19,508,256	0.495%	8.0
Freddie Mac		5,245,325	0.248%	8.8		5,180,607	0.247%	9.1
Private Label		2,305,000	0.193%	7.5		2,233,500	0.196%	7.7
FHA		1,303,812	0.145%	20.0		1,242,669	0.147%	19.8
Bridge		299,578	0.111%	3.5		467,881	0.116%	2.9
SFR-Fixed Rate		290,266	0.200%	5.9		279,712	0.200%	5.9
Total	$	29,446,551	0.401%	8.4	$	28,912,625	0.403%	8.6

Loans sold under the Fannie Mae program contain an obligation to partially guarantee the performance of the loan (“loss-sharing obligations”) and includes $34.5 million for the fair value of the guarantee obligation undertaken at June 30, 2023. The Company recorded a $7.6 million provision for loss sharing associated with CECL for the second quarter of 2023. At June 30, 2023, the Company’s total CECL allowance for loss-sharing obligations was $32.2 million, representing 0.16% of the Fannie Mae servicing portfolio.

Structured Business

Portfolio and Investment Activity

	Structured Portfolio Activity ($ in thousands)
	Quarter Ended
	June 30, 2023			March 31, 2023
	UPB		%	UPB		%
Bridge:
Multifamily	$	98,530	47%	$	186,100	70%
SFR		108,964	52%		76,089	28%
		207,494	99%		262,189	98%

Mezzanine/Preferred Equity		1,500	1%		5,845	2%
Total Originations	$	208,994	100%	$	268,034	100%

Number of Loans Originated		26			24

SFR Commitments	$	200,182		$	54,350

Runoff	$	685,220		$	1,186,649



	Structured Portfolio ($ in thousands)
	June 30, 2023			March 31, 2023
	UPB		%	UPB		%
Bridge:
Multifamily	$	11,887,768	88%	$	12,034,638	88%
SFR		1,023,959	8%		982,026	7%
Other		256,575	2%		282,275	2%
		13,168,302	98%		13,298,939	97%

Mezzanine/Preferred Equity		312,812	2%		311,819	2%
SFR Permanent		10,493	< 1%		32,966	< 1%
Total Portfolio	$	13,491,607	100%	$	13,643,724	100%

At June 30, 2023, the loan and investment portfolio’s unpaid principal balance, excluding loan loss reserves, was $13.49 billion, with a weighted average current interest pay rate of 8.76%, compared to $13.64 billion and 8.60% at March 31, 2023. Including certain fees earned and costs associated with the loan and investment portfolio, the weighted average current interest pay rate was 9.07% at June 30, 2023, compared to 8.83% at March 31, 2023.

The average balance of the Company’s loan and investment portfolio during the second quarter of 2023, excluding loan loss reserves, was $13.66 billion with a weighted average yield of 9.19%, compared to $14.15 billion and 8.94% for the first quarter of 2023. The increase in average yield was primarily due to increases in the benchmark index rates in the second quarter of 2023.

During the second quarter of 2023, the Company recorded a $16.0 million provision for loan losses associated with CECL. At June 30, 2023, the Company’s total allowance for loan losses was $169.1 million. The Company had seven non-performing loans with a carrying value of $122.4 million, before loan loss reserves of $10.1 million, compared to four loans with a carrying value of $7.7 million, before loan loss reserves of $5.1 million at March 31, 2023.

Financing Activity

The balance of debt that finances the Company’s loan and investment portfolio at June 30, 2023 was $12.11 billion with a weighted average interest rate including fees of 7.25% as compared to $12.65 billion and a rate of 6.97% at March 31, 2023.

The average balance of debt that finances the Company’s loan and investment portfolio for the second quarter of 2023 was $12.46 billion, as compared to $13.02 billion for the first quarter of 2023. The average cost of borrowings for the second quarter of 2023 was 7.11%, compared to 6.69% for the first quarter of 2023. The increase in average cost was primarily due to increases in the benchmark index rates in the second quarter of 2023.

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 June 30, 2023. The dividend is payable on August 31, 2023 to common stockholders of record on August 15, 2023. The ex-dividend date is August 14, 2023.

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) 225-9448 for domestic callers and (203) 518-9708 for international callers. Please use participant passcode ABRQ223 when prompted by the operator.

A telephonic replay of the call will be available until August 4, 2023. The replay dial-in numbers are (800) 934-4548 for domestic callers and (402) 220-1175 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, 2022 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

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.
Amounts reflect approximate balances as of July 25, 2023.

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 June 30,						Six Months Ended June 30,
			2023			2022			2023			2022

Interest income		$	335,737		$	201,328		$	663,685		$	368,026
Interest expense			227,195			107,067			446,569			189,627
	Net interest income		108,542			94,261			217,116			178,399

Other revenue:
Gain on sales, including fee-based services, net			22,587			16,510			37,176			18,166
Mortgage servicing rights			16,201			17,567			34,659			32,879
Servicing revenue, net			32,347			20,714			61,913			41,769
Property operating income			1,430			290			2,811			586
Gain (loss) on derivative instruments, net			(7,384	)		8,606			(3,161	)		25,992
Other income (loss), net			45			(13,249	)		4,923			(10,048	)
	Total other revenue		65,226			50,438			138,321			109,344

Other expenses:
Employee compensation and benefits			41,310			38,900			83,708			80,925
Selling and administrative			12,584			13,188			26,207			27,735
Property operating expenses			1,365			542			2,747			1,077
Depreciation and amortization			2,387			2,031			5,011			4,014
Provision for loss sharing (net of recoveries)			7,672			(1,949	)		10,848			(2,611	)
Provision for credit losses (net of recoveries)			13,878			5,067			36,395			7,426
	Total other expenses		79,196			57,779			164,916			118,566


Income before extinguishment of debt, income from equity affiliates, and income taxes			94,572			86,920			190,521			169,177
Loss on extinguishment of debt			(1,247	)		-			(1,247	)		(1,350	)
Income from equity affiliates			5,560			6,547			19,886			13,759
Provision for income taxes			(5,553	)		(5,352	)		(13,582	)		(13,540	)

Net income			93,332			88,115			195,578			168,046

Preferred stock dividends			10,342			11,214			20,684			20,270
Net income attributable to noncontrolling interest			6,826			6,992			14,411			13,808
Net income attributable to common stockholders		$	76,164		$	69,909		$	160,483		$	133,968

Basic earnings per common share		$	0.42		$	0.43		$	0.88		$	0.85
Diluted earnings per common share		$	0.41		$	0.41		$	0.87		$	0.82

Weighted average shares outstanding:
	Basic		181,815,469			163,044,217			181,468,002			158,258,813
	Diluted		216,061,876			195,013,810			215,489,604			190,357,030

Dividends declared per common share		$	0.42		$	0.38		$	0.82		$	0.75

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

Consolidated Balance Sheets
($ in thousands—except share and per share data)


				June 30,		December 31,
					2023		2022
				(Unaudited)
Assets:
Cash and cash equivalents				$	846,362	$	534,357
Restricted cash					396,866		713,808
Loans and investments, net (allowance credit losses of $169,054 and $132,559)					13,271,359		14,254,674
Loans held-for-sale, net					485,126		354,070
Capitalized mortgage servicing rights, net					394,410		401,471
Securities held-to-maturity, net (allowance credit losses of $4,534 and $3,153)					155,210		156,547
Investments in equity affiliates					72,806		79,130
Due from related party					73,263		77,419
Goodwill and other intangible assets					93,723		96,069
Other assets					368,502		371,440
Total assets				$	16,157,627	$	17,038,985

Liabilities and Equity:
Credit and repurchase facilities				$	3,579,080	$	3,841,814
Securitized debt					7,168,104		7,849,270
Senior unsecured notes					1,331,875		1,385,994
Convertible senior unsecured notes					281,737		280,356
Junior subordinated notes to subsidiary trust issuing preferred securities					143,506		143,128
Due to related party					3,556		12,350
Due to borrowers					102,495		61,237
Allowance for loss-sharing obligations					66,681		57,168
Other liabilities					320,952		335,789
Total liabilities					12,997,986		13,967,106

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 - 183,067,388
			and 178,230,522 shares issued and outstanding		1,831		1,782
		Additional paid-in capital			2,280,632		2,204,481
		Retained earnings			107,561		97,049
Total Arbor Realty Trust, Inc. stockholders’ equity					3,023,708		2,936,996

Noncontrolling interest					135,933		134,883
Total equity					3,159,641		3,071,879

Total liabilities and equity				$	16,157,627	$	17,038,985

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

Statement of Income Segment Information - (Unaudited)
(in thousands)

		Quarter Ended June 30, 2023

		Structured Business			Agency Business			Other / Eliminations⁽¹⁾			Consolidated

Interest income		$	322,105		$	13,632		$	-		$	335,737
Interest expense			220,966			6,229			-			227,195
	Net interest income		101,139			7,403			-			108,542

Other revenue:
Gain on sales, including fee-based services, net			-			22,587			-			22,587
Mortgage servicing rights			-			16,201			-			16,201
Servicing revenue			-			47,952			-			47,952
Amortization of MSRs			-			(15,605	)		-			(15,605	)
Property operating income			1,430			-			-			1,430
Loss on derivative instruments, net			-			(7,384	)		-			(7,384	)
Other income (loss), net			760			(715	)		-			45
	Total other revenue		2,190			63,036			-			65,226

Other expenses:
Employee compensation and benefits			13,438			27,872			-			41,310
Selling and administrative			5,833			6,751			-			12,584
Property operating expenses			1,365			-			-			1,365
Depreciation and amortization			1,214			1,173			-			2,387
Provision for loss sharing (net of recoveries)			-			7,672			-			7,672
Provision for credit losses (net of recoveries)			14,369			(491	)		-			13,878
	Total other expenses		36,219			42,977			-			79,196


Income before extinguishment of debt, income from equity affiliates, and income taxes			67,110			27,462			-			94,572

Loss on extinguishment of debt			(1,247	)		-			-			(1,247	)
Income from equity affiliates			5,560			-			-			5,560
Provision for income taxes			(1,200	)		(4,353	)		-			(5,553	)

Net income			70,223			23,109			-			93,332

Preferred stock dividends			10,342			-			-			10,342
Net income attributable to noncontrolling interest			-			-			6,826			6,826
Net income attributable to common stockholders		$	59,881		$	23,109		$	(6,826	)	$	76,164

(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)

	June 30, 2023
	Structured Business		Agency Business		Consolidated
Assets:
Cash and cash equivalents	$	468,515	$	377,847	$	846,362
Restricted cash		391,872		4,994		396,866
Loans and investments, net		13,271,359		-		13,271,359
Loans held-for-sale, net		-		485,126		485,126
Capitalized mortgage servicing rights, net		-		394,410		394,410
Securities held-to-maturity, net		-		155,210		155,210
Investments in equity affiliates		72,806		-		72,806
Goodwill and other intangible assets		12,500		81,223		93,723
Other assets		358,528		83,237		441,765
Total assets	$	14,575,580	$	1,582,047	$	16,157,627

Liabilities:
Debt obligations	$	12,041,014	$	463,288	$	12,504,302
Allowance for loss-sharing obligations		-		66,681		66,681
Other liabilities		309,875		117,128		427,003
Total liabilities	$	12,350,889	$	647,097	$	12,997,986

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 June 30,						Six Months Ended June 30,
		2023			2022			2023			2022

Net income attributable to common stockholders	$	76,164		$	69,909		$	160,483		$	133,968

Adjustments:
Net income attributable to noncontrolling interest		6,826			6,992			14,411			13,808
Income from mortgage servicing rights		(16,201	)		(17,567	)		(34,659	)		(32,879	)
Deferred tax benefit		(7,360	)		(706	)		(4,197	)		(2,426	)
Amortization and write-offs of MSRs		21,204			27,625			39,927			55,295
Depreciation and amortization		4,058			2,617			8,353			5,186
Loss on extinguishment of debt		1,247			-			1,247			1,350
Provision for credit losses, net		16,810			5,849			40,515			7,546
(Gain) loss on derivative instruments, net		8,085			(4,155	)		1,034			(4,453	)
Stock-based compensation		3,193			3,149			9,094			9,241

Distributable earnings (1)	$	114,026		$	93,713		$	236,208		$	186,636

Diluted distributable earnings per share (1)	$	0.57		$	0.52		$	1.19		$	1.06

Diluted weighted average shares outstanding (1) (2)		198,791,261			179,873,329			198,239,006			175,252,399

(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 were adjusted to exclude the potential shares issuable upon conversion and settlement of the Company's convertible senior notes principal balance. For the quarters ended June 30, 2023 and June 30, 2022, the diluted weighted average shares outstanding excluded 17,270,615 and 15,140,481 of these potentially issuable shares, respectively. For the six months ended June 30, 2023 and June 30, 2022, the diluted weighted average shares outstanding excluded 17,250,598 and 15,104,631 of these potentially issuable shares, respectively.

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 (net of any tax impact), 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.

Source: Arbor Realty Trust

Arbor Realty Trust Reports Second Quarter 2023 Results and Increases Quarterly Dividend to $0.43 per Share

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