UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND
(STATE OF INCORPORATION)
| (COMMISSION FILE NUMBER) | (IRS EMPLOYER ID. NUMBER) | ||||
| (ZIP CODE) | |||||
| (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) | |||||
(516 ) 506-4200
(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbols | Name of each exchange on which registered | ||||||||||||
Item 2.02 Results of Operations and Financial Condition.
On July 28, 2023, Arbor Realty Trust, Inc. issued a press release announcing its earnings for the quarter ended June 30, 2023, a copy of which is attached hereto as Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| Exhibit Number | Exhibit | |||||||
| 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. | |||||||
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ARBOR REALTY TRUST, INC. | ||||||||
| By: | /s/ Paul Elenio | |||||||
| Name: | Paul Elenio | |||||||
| Title: | Chief Financial Officer | |||||||
| Date: July 28, 2023 | ||||||||
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, NY, July 28, 2023 -- 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.
Arbor Realty Trust Reports Second Quarter 2023 Results and Increases Quarterly Dividend to $0.43 per Share July 28, 2023 Page 2 Agency Business Loan Origination Platform June 30, 2023 March 31, 2023 Fannie Mae 1,079,910$ 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$ Quarter Ended Agency Loan Volume (in thousands) 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.
Arbor Realty Trust Reports Second Quarter 2023 Results and Increases Quarterly Dividend to $0.43 per Share July 28, 2023 Page 3 UPB Wtd. Avg. Fee Wtd. Avg. Life (years) UPB Wtd. Avg. Fee Wtd. Avg. Life (years) Fannie Mae 20,002,570$ 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 Fee-Based Servicing Portfolio ($ in thousands) June 30, 2023 March 31, 2023 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 $32.2 million, representing 0.16% of the Fannie Mae servicing portfolio. Structured Business Portfolio and Investment Activity UPB % UPB % Bridge: Multifamily 98,530$ 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$ 699672 Structured Portfolio Activity ($ in thousands) June 30, 2023 March 31, 2023 Quarter Ended
Arbor Realty Trust Reports Second Quarter 2023 Results and Increases Quarterly Dividend to $0.43 per Share July 28, 2023 Page 4 UPB % UPB % Bridge: Multifamily 11,887,768$ 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% Structured Portfolio ($ in thousands) June 30, 2023 March 31, 2023 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.
Arbor Realty Trust Reports Second Quarter 2023 Results and Increases Quarterly Dividend to $0.43 per Share July 28, 2023 Page 5 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
Arbor Realty Trust Reports Second Quarter 2023 Results and Increases Quarterly Dividend to $0.43 per Share July 28, 2023 Page 6 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 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. Amounts reflect approximate balances as of July 25, 2023. Contact: pel Arbor Realty Trust, Inc. Paul Elenio, Chief Financial Officer 516-506-4422 pelenio@arbor.com
Arbor Realty Trust Reports Second Quarter 2023 Results and Increases Quarterly Dividend to $0.43 per Share July 28, 2023 Page 7 Interest income 335,737$ 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 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 Income before extinguishment of debt, income from equity affiliates, and income taxes Quarter Ended June 30, 2023 2022 Six Months Ended June 30, 2023 2022 ARBOR REALTY TRUST, INC. AND SUBSIDIARIES Consolidated Statements of Income - (Unaudited) ($ in thousands—except share and per share data)
Arbor Realty Trust Reports Second Quarter 2023 Results and Increases Quarterly Dividend to $0.43 per Share July 28, 2023 Page 8 June 30, December 31, 2023 2022 (Unaudited) Assets: Cash and cash equivalents 846,362$ 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 Consolidated Balance Sheets ($ in thousands—except share and per share data)
Arbor Realty Trust Reports Second Quarter 2023 Results and Increases Quarterly Dividend to $0.43 per Share July 28, 2023 Page 9 Structured Business Agency Business Other / Eliminations (1) Consolidated Interest income 322,105$ 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 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. Quarter Ended June 30, 2023 Income before extinguishment of debt, income from equity affiliates, and income taxes ARBOR REALTY TRUST, INC. AND SUBSIDIARIES Statement of Income Segment Information - (Unaudited) (in thousands)
Arbor Realty Trust Reports Second Quarter 2023 Results and Increases Quarterly Dividend to $0.43 per Share July 28, 2023 Page 10 Structured Business Agency Business Consolidated Assets: Cash and cash equivalents 468,515$ 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$ June 30, 2023 ARBOR REALTY TRUST, INC. AND SUBSIDIARIES Balance Sheet Segment Information - (Unaudited) (in thousands)
Arbor Realty Trust Reports Second Quarter 2023 Results and Increases Quarterly Dividend to $0.43 per Share July 28, 2023 Page 11 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 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 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. 2022 (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.