Arbor Realty Trust Reports Fourth Quarter and Full Year 2016 Results and Increases Quarterly Dividend to $0.17 per Share

Fourth Quarter Company Highlights:

• Net income of $20.5 million, or $0.40 per diluted common share
  
• AFFO of $15.1 million, or $0.21 per diluted common share¹
  
• Declares a cash dividend on common stock of $0.17 per share, a 6% increase over prior quarter
  

Agency Business

• Segment income of $26.9 million
  
• Loan originations of $1.3 billion
  
• Servicing portfolio of $13.6 billion at December 31, 2016, up 8% from 3Q16
  

Structured Business

• Segment income of $3.0 million
  
• Issued $86 million of convertible senior notes due 2019
  
• Loan originations of $193 million
  
• Earned $1.8 million of income from equity investments
  

Full Year Highlights:

• Completed the acquisition of Arbor Commercial Mortgage’s agency platform including a Top 10 DUS® Lender with a significant servicing portfolio
  
• Net income of $42.8 million, or $0.83 per diluted common share
  
• AFFO of $49.0 million, or $0.79 per diluted common share¹
  
• Total return to shareholders of 13% for 2016
  
• Raised forward annualized common dividend rate to $0.68 per share, a 13% increase from prior year
  
• Structured portfolio growth of 17% on new originations of $848 million
  
• Earned $14.9 million of income from equity investments and structured transactions
  
• Continued focus on improving funding sources by adding a sixth collateralized securitization vehicle totaling $325 million, issuing $86 million of convertible senior notes and increasing warehouse facility capacity
  
• Strong liquidity position with $150 million of cash on hand to fund new investment opportunities
  

UNIONDALE, N.Y., March 03, 2017 (GLOBE NEWSWIRE) -- Arbor Realty Trust, Inc. (NYSE:ABR), today announced financial results for the fourth quarter and year ended December 31, 2016.  Arbor reported net income for the quarter of $20.5 million, or $0.40 per diluted common share, compared to $5.0 million, or $0.10 per diluted common share for the quarter ended December 31, 2015. Net income for the year was $42.8 million, or $0.83 per diluted common share, compared to $45.9 million, or $0.90 per diluted common share for the year ended December 31, 2015.  Adjusted funds from operations (“AFFO”) for the quarter was $15.1 million, or $0.21 per diluted common share, compared to $8.6 million, or $0.17 per diluted common share for the quarter ended December 31, 2015. AFFO for the year was $49.0 million, or $0.79 per diluted common share, compared to $58.3 million, or $1.14 per diluted common share for the year ended December 31, 2015.¹

Agency Business

Loan Origination Platform

Loan originations for the fourth quarter ended December 31, 2016 totaled $1.3 billion, as compared to $850.4 million for the third quarter of 2016, and consisted of:

• $1.0 billion of Fannie Mae loans
• $299.3 million of Freddie Mac loans

Loan originations for the period from the date of the Agency Business acquisition (July 14, 2016) through December 31, 2016 totaled $2.1 billion and consisted of:

• $1.7 billion of Fannie Mae loans
• $456.4 million of Freddie Mac loans
• $24.6 million of FHA loans

Loan sales for the fourth quarter of 2016 totaled $940.6 million, as compared to $551.8 million for the third quarter of 2016, excluding $418.2 million of sales on loans that were acquired on July 14, 2016 as part of the acquisition.

At December 31, 2016, loans held-for-sale was $673.4 million which was primarily comprised of unpaid principal balances totaling $662.3 million, with financing associated with these loans totaling $660.1 million.

For the quarter ended December 31, 2016, the Agency Business generated revenues of $51.1 million. Gain on sales, including fee-based services, net was $14.9 million, reflecting a margin of 1.58% on fourth quarter loan sales of $940.6 million. Income from mortgage servicing rights was $29.0 million for the quarter, reflecting a rate of 2.05% as a percentage of fourth quarter loan commitments of $1.4 billion.   

Servicing Portfolio

The servicing portfolio totaled $13.6 billion at December 31, 2016, an increase of 8% from September 30, 2016, primarily as a result of $1.3 billion of new loan originations during the quarter. Servicing revenue, net was $3.2 million for the quarter, and consists of servicing revenue of $17.3 million net of amortization of mortgage servicing rights totaling $14.1 million.

Loans sold under the Fannie Mae program contain an obligation to partially guarantee the performance of the loan (“loss-sharing obligations”). At December 31, 2016, the Company’s allowance for loss-sharing obligations was $32.4 million which consists of general loss sharing guaranty obligations of $26.3 million, representing 0.23% of the Fannie Mae servicing portfolio, and $6.1 million of loss-sharing obligations on specifically identified loans with losses determined to be probable and estimable.

Structured Business

Portfolio and Investment Activity

Fourth quarter of 2016:

• 16 new loan originations totaling $192.7 million, of which 14 were bridge loans for $149.7 million
• Payoffs and pay downs on 14 loans totaling $135.0 million

Year ended December 31, 2016:

• 70 new loan originations totaling $847.7 million, of which 64 were bridge loans for $779.9 million
• Payoffs and pay downs on 54 loans totaling $553.4 million

At December 31, 2016, the loan and investment portfolio’s unpaid principal balance, excluding loan loss reserves, was $1.80 billion, with a weighted average current interest pay rate of 5.71%, compared to $1.76 billion and 5.47% at September 30, 2016.  Including certain fees earned and costs associated with the loan and investment portfolio, the weighted average current interest pay rate was 6.39% at December 31, 2016, compared to 6.14% at September 30, 2016.

The average balance of the Company’s loan and investment portfolio during the fourth quarter of 2016, excluding loan loss reserves, was $1.79 billion and the weighted average yield on these assets for the quarter was 6.38%, compared to $1.73 billion and 6.15% for the third quarter of 2016. The increase in average yield was primarily due to an increase in income from the acceleration of fees on early loan payoffs in the fourth quarter as compared to the third quarter, as well as an increase in one-month LIBOR.

At December 31, 2016, the Company’s total loan loss reserves were $83.7 million on eight loans with an aggregate carrying value before loan loss reserves of $187.4 million. The Company also had three non-performing loans with a carrying value of $22.9 million that were fully reserved.

The Company recorded $1.8 million of income from equity affiliates primarily consisting of $1.1 million of income from its joint venture investment in a residential mortgage banking business and $0.7 million of income from a distribution received from another one of its joint venture equity investments.

Financing Activity

The Company completed the unwind of one of its collateralized loan obligation vehicles (“CLO III”). CLO III’s $281.3 million of outstanding notes were redeemed and repaid with proceeds received from the refinancing of CLO III’s remaining assets within the Company’s existing financing facilities, as well as cash held by CLO III. As a result of this transaction, the Company recognized an expense of $1.0 million from the acceleration of deferred fees.

The balance of debt that finances the Company’s loan and investment portfolio at December 31, 2016 was $1.35 billion with a weighted average interest rate including fees of 4.45%, as compared to $1.42 billion and a rate of 4.09% at September 30, 2016. The average balance of debt that finances the Company’s loan and investment portfolio for the fourth quarter of 2016 was $1.44 billion, as compared to $1.37 billion for the third quarter of 2016. The average cost of borrowings for the fourth quarter was 4.82%, compared to 4.19% for the third quarter of 2016. The increase in average cost was primarily due to the acceleration of fees related to the unwind of CLO III, the issuance of the convertible senior notes as well as an increase in one-month LIBOR.

The Company is subject to various financial covenants and restrictions under the terms of its CLO vehicles and financing facilities, including financings assumed as part of the Agency Business acquisition. The Company believes it was in compliance with all financial covenants and restrictions as of December 31, 2016 and as of the most recent CLO determination dates in February 2017.

In February 2017, the Company purchased, at a discount, $20.9 million of its junior subordinated notes, with a carrying value of $19.9 million, resulting in the recognition of an estimated gain on extinguishment of debt of $7.2 million in the first quarter of 2017.

Capital Markets

The Company issued $86.3 million of 6.50% Convertible Senior Notes due 2019 (the “Notes”), including the underwriter’s $11.3 million over-allotment option. The conversion rate was initially equal to 119.3033 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of $8.38 per share of common stock, representing an approximate 10% conversion premium based on the closing price of the Company’s common stock of $7.62 per share on September 29, 2016. In January 2017, the Company reopened the Notes and issued an additional $13.8 million for a total outstanding principal amount of $100.0 million. The Company received proceeds totaling $96.3 million, net of the underwriters’ discount and fees, from these offerings which is intended to be used to make investments in our business and for general corporate purposes.

Dividends

The Company announced today that its Board of Directors has declared a quarterly cash dividend of $0.17 per share of common stock for the quarter ended December 31, 2016, representing an increase of 6% over the prior quarter dividend of $0.16 per share. The dividend is payable on March 21, 2017 to common stockholders of record on March 15, 2017. The ex-dividend date is March 13, 2017.

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 December 1, 2016 through February 28, 2017. The dividends are payable on February 28, 2017 to preferred stockholders of record on February 15, 2017. The Company will pay total dividends of $0.515625, $0.484375 and $0.53125 per share on the Series A, Series B and Series C preferred stock, respectively.

Earnings Conference Call

The Company will host a conference call today at 10:00 a.m. ET. A live webcast of the conference call will be available at www.arborrealtytrust.com in the investor relations area of the website. Those without web access should access the call telephonically at least ten minutes prior to the conference call. The dial-in numbers are (866) 516-5034 for domestic callers and (678) 509-7613 for international callers. Please use participant passcode 70644208.

After the live webcast, the call will remain available on the Company's website, www.arborrealtytrust.com, through March 31, 2017.  In addition, a telephonic replay of the call will be available until March 10, 2017. The replay dial-in numbers are (855) 859-2056 for domestic callers and (404) 537-3406 for international callers. Please use passcode 70644208.

About Arbor Realty Trust, Inc.

Arbor Realty Trust, Inc. (NYSE:ABR) is a real estate investment trust and national direct lender specializing in loan origination and servicing for multifamily, seniors housing, healthcare and other diverse commercial real estate assets. Arbor is a Top 10 Fannie Mae DUS^® Multifamily Lender by volume and a Top Fannie Mae Small Loan lender, a Freddie Mac Program Plus^® Seller/Servicer and the Top Freddie Mac Small Balance Loan Lender, a Fannie Mae and Freddie Mac Seniors Housing Lender, an FHA Multifamily Accelerated Processing (MAP)/LEAN Lender, a HUD-approved LIHTC Lender as well as a CMBS, bridge, mezzanine and preferred equity lender, consistently building on its reputation for service, quality and flexibility. With a current servicing portfolio of approximately $13.6 billion, Arbor is a primary commercial loan servicer and special servicer rated by Standard & Poor’s with an Above Average rating. Arbor is also on the Standard & Poor’s Select Servicer List and is a primary commercial loan servicer and loan level special servicer rated by Fitch Ratings. Arbor is externally managed and advised by Arbor Commercial Mortgage, LLC.

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 December 31, 2016 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.

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. Supplemental schedules of each non-GAAP financial measure and the comparable GAAP financial measure can be found on page 12 of this release.

Contacts:
Arbor Realty Trust, Inc.
Paul Elenio, Chief Financial Officer
516-506-4422
pelenio@arbor.com

Media:
Bonnie Habyan, EVP of Marketing
516-506-4615
bhabyan@arbor.com

Investors:
The Ruth Group
Lee Roth
646-536-7012
lroth@theruthgroup.com