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):
 
November 2, 2012 (November 2, 2012)

Arbor Realty Trust, Inc.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

MARYLAND
(STATE OF INCORPORATION)

001-32136	          20-0057959	
(COMMISSION FILE NUMBER)	       (IRS EMPLOYER ID. NUMBER)	

333 Earle Ovington Boulevard, Suite 900	       11553	
Uniondale, New York	        (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))

 

 
Item 2.02	Results of Operations and Financial Condition.	

On November 2, 2012, Arbor Realty Trust, Inc. issued a press release announcing its earnings for the quarter ended September 30, 2012, a copy of which is attached hereto as Exhibit 99.1.

Item 9.01	Financial Statements and Exhibits.	

(d)            Exhibits

Exhibit Number	 	Exhibit	
99.1	 	Press Release, dated November 2, 2012.	

 

 
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: November 2, 2012

 

 
EXHIBIT INDEX
 
Exhibit Number	 	 	
99.1	 	Press Release, dated November 2, 2012.	

EXHIBIT 99.1

Contacts:
Arbor Realty Trust, Inc.
Paul Elenio, Chief Financial Officer
516-506-4422
pelenio@arbor.com	Investors:
Stephanie Carrington / Amy Glynn
The Ruth Group
646-536-7023
scarrington@theruthgroup.com
aglynn@theruthgroup.com	
Media:
Bonnie Habyan, EVP of Marketing
516-506-4615
bhabyan@arbor.com

Arbor Realty Trust Reports Third Quarter 2012 Results and Declares Third Quarter 2012 Dividend

Third Quarter Highlights:

-	Declares a common dividend of $0.11 per share	

-	FFO of $3.7 million, or $0.13 per diluted common share1	

-	Net income attributable to Arbor Realty Trust, Inc. of $2.1 million, or $0.07 per diluted common share	

-	Closed a $125.0 million collateralized loan obligation	

-	Raised $19.2 million of capital issuing 3.5 million common shares in October	

-	Originated 12 new loans totaling $86.3 million	

-	Purchased five residential mortgage-backed securities totaling $30.1 million	

-	Generated gains of $4.1 million from the retirement of CDO debt	

-	Adjusted book value per share $11.16, GAAP book value per share $7.581	

-	Recorded $4.9 million in loan loss reserves	

Uniondale, NY, November 2, 2012 -- Arbor Realty Trust, Inc. (NYSE: ABR), a real estate investment trust focused on the business of investing in real estate related bridge and mezzanine loans, preferred and direct equity investments, mortgage-related securities and other real estate related assets, today announced financial results for the third quarter ended September 30, 2012. Arbor reported net income attributable to Arbor Realty Trust, Inc. for the quarter of $2.1 million, or $0.07 per diluted common share, compared to net loss attributable to Arbor Realty Trust, Inc. for the quarter ended September 30, 2011 of $2.4 million, or $0.10 per diluted common share. Net income attributable to Arbor Realty Trust, Inc. for the nine months ended September 30, 2012 was $21.8 million, or $0.84 per diluted common share, compared to a net loss attributable to Arbor Realty Trust, Inc. for the nine months ended September 30, 2011 of $12.5 million, or $0.50 per diluted common share.  Funds from operations (“FFO”) for the quarter ended September 30, 2012 was $3.7 million, or $0.13 per diluted common share, compared to a loss of $0.6 million, or $0.03 per diluted common share for the quarter ended September 30, 2011. FFO for the nine months ended September 30, 2012 was $22.7 million, or $0.87 per diluted common share, compared to a loss of $7.6 million, or $0.30 per diluted common share for the nine months ended September 30, 2011. 1

 

 
Arbor Realty Trust Reports Third Quarter 2012 Results and Declares Third Quarter 2012 Dividend	 	
 	 	
November 2, 2012	Page 2	
 
The balance of the Company’s loan and investment portfolio, excluding loan loss reserves, at September 30, 2012 remained relatively unchanged compared to June 30, 2012 at approximately $1.6 billion. The average balance of the Company’s loan and investment portfolio during the third quarter of 2012, excluding loan loss reserves, was $1.6 billion and the average yield on these assets for the quarter was 5.03%, compared to $1.6 billion and 4.91% for the second quarter of 2012.

The balance of debt that finances the Company’s loan and investment portfolio at September 30, 2012 remained relatively unchanged compared to June 30, 2012 at approximately $1.2 billion. The average balance of debt that finances the Company’s loan and investment portfolio was approximately $1.2 billion for the third quarter of 2012, compared to $1.3 billion for the second quarter of 2012. The average cost of borrowings for the third quarter was 3.11%, compared to 3.10% for the second quarter of 2012. In addition, the third quarter of 2012 included a $0.4 million increase in interest expense for a change in the market value of certain interest rate swaps, compared to a $0.3 million increase in interest expense in the second quarter of 2012. Excluding the effect of these swaps, the average cost of borrowings for the third quarter was 2.97%, compared to 2.99% for the second quarter of 2012.

Financing Activity

As of September 30, 2012, Arbor’s outstanding borrowings for its loan and investment portfolio totaled approximately $1.2 billion.

In September 2012, Arbor completed its first collateralized loan obligation (“CLO”) totaling approximately $125.1 million of real estate related assets and cash.  An aggregate of $87.5 million of investment grade-rated debt was issued, and Arbor retained an equity interest in the portfolio with a notional amount of $37.6 million. The notes have an initial weighted average spread of approximately 339 basis points over one-month LIBOR, excluding fees and transaction costs. The facility has a two-year replenishment period that allows the principal proceeds from repayments of the collateral assets to be reinvested in qualifying replacement assets, subject to certain conditions. The closing of this transaction provides Arbor with approximately $32 million of liquidity and approximately $42 million of capacity in short term credit facilities, due to the transfer of certain assets into the CLO. Arbor accounts for this transaction on its balance sheet as a financing.

 

 
Arbor Realty Trust Reports Third Quarter 2012 Results and Declares Third Quarter 2012 Dividend	 	
 	 	
November 2, 2012	Page 3	
 
The Company is subject to various financial covenants and restrictions under the terms of the Company’s CDO vehicles, CLO, credit facilities, and repurchase agreements. The Company believes that it was in compliance with all financial covenants and restrictions as of September 30, 2012.

The Company’s CDO vehicles contain interest coverage and asset over collateralization covenants that must be met as of the waterfall distribution date in order for the Company to receive such payments. If the Company fails these covenants in any of its CDOs, all cash flows from the applicable CDO would be diverted to repay principal and interest on the outstanding CDO bonds and the Company would not receive any residual payments until that CDO regained compliance with such covenants. As of the most recent determination dates in October 2012, the Company was in compliance with all CDO covenants. In the event of a breach of the CDO covenants that could not be cured in the near-term, the Company would be required to fund its non-CDO expenses, including management fees and employee costs, distributions required to maintain REIT status, debt costs, and other expenses with (i) cash on hand, (ii) income from any CDO not in breach of a CDO covenant test, (iii) income from real property and loan assets, (iv) sale of assets, (v) or accessing the equity or debt capital markets, if available.

The chart below is a summary of the Company’s CDO compliance tests as of the most recent determination dates in October 2012:

Cash Flow Triggers	 	CDO I (3)	 	 	CDO II (3)	 	 	CDO III (3)	 	
 	 	 	 	 	 	 	 	 	 	
Overcollateralization (1)	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	
Current	 	 	223.81	%	 	 	186.18	%	 	 	105.64	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Limit	 	 	184.00	%	 	 	169.50	%	 	 	105.60	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Pass / Fail	 	Pass	 	 	Pass	 	 	Pass	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest Coverage (2)	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Current	 	 	428.27	%	 	 	460.60	%	 	 	533.00	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Limit	 	 	160.00	%	 	 	147.30	%	 	 	105.60	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Pass / Fail	 	Pass	 	 	Pass	 	 	Pass	 	

 

 
Arbor Realty Trust Reports Third Quarter 2012 Results and Declares Third Quarter 2012 Dividend	 	
 	 	
November 2, 2012	Page 4	
 
 (1) The overcollateralization ratio divides the total principal balance of all collateral in the CDO by the total principal balance of the bonds associated with the applicable ratio.  To the extent an asset is considered a defaulted security, the asset’s principal balance for purposes of the overcollateralization test is the lesser of the asset’s market value or the principal balance of the defaulted asset multiplied by the asset’s recovery rate which is determined by the rating agencies.

(2) The interest coverage ratio divides interest income by interest expense for the classes senior to those retained by the Company.

(3) CDO I, CDO II, and CDO III have reached the end of their replenishment periods. As such, investor capital is repaid quarterly from proceeds received from loan repayments held as collateral in accordance with the terms of the respective CDO.

Portfolio Activity

During the third quarter of 2012, Arbor purchased five residential mortgage-backed securities with a total face value of $30.1 million, of which three residential mortgage-backed securities totaling $25.4 million were accounted for as derivatives net of financings of $23.7 million in other assets on the Consolidated Balance Sheets. These securities had paydowns totaling $1.1 million during the quarter, reducing their combined face value to $29.0 million as of September 30, 2012. Including this $1.1 million of paydowns, the securities portfolio had total paydowns of approximately $20.3 million during the quarter.

During the third quarter of 2012, Arbor originated nine bridge loans totaling approximately $67.9 million, two mezzanine loans totaling approximately $15.4 million, and one preferred equity investment totaling $3.0 million. In addition, eight loans paid off with an unpaid principal balance of $43.8 million during the quarter, of which $3.8 million was charged off against loan loss reserves related to two of these loans. Furthermore, two loans had paydowns totaling $5.5 million and another five loans totaling $118.2 million were modified, of which none were scheduled to repay during the quarter.

Additionally, seven loans totaling approximately $42.9 million were extended during the quarter, of which four loans totaling $10.9 million were in accordance with their existing extension options.

At September 30, 2012, the loan and investment portfolio’s unpaid principal balance, excluding loan loss reserves, was approximately $1.6 billion, with a weighted average current interest pay rate of 4.62%. Including certain fees earned and costs associated with the loan and investment portfolio, the weighted average current interest rate was 4.91% at September 30, 2012. At the same date, advances on financing facilities pertaining to the loan and investment portfolio totaled approximately $1.2 billion, with a weighted average interest rate of 3.14% excluding changes in the market value of certain interest rate swaps.

As of September 30, 2012, Arbor’s loan portfolio consisted of 33% fixed-rate and 67% variable-rate loans.

 

 
Arbor Realty Trust Reports Third Quarter 2012 Results and Declares Third Quarter 2012 Dividend	 	
 	 	
November 2, 2012	Page 5	
 
During the third quarter of 2012, the Company recorded $4.9 million in loan loss reserves related to two loans with a carrying value of approximately $35.0 million, before loan loss reserves.  The loan loss reserves were the result of the Company's regular quarterly risk rating review process, which is based on several factors including current market conditions, real estate values and the operating status of each property. The Company recorded $0.1 million of net recoveries of previously recorded loan loss reserves related to one of the Company’s assets during the third quarter of 2012. This recovery was recorded in provision for loan losses on the Consolidated Statement of Operations.  The Company charged off $3.8 million of previously recorded loan loss reserves related to two loans during the third quarter. At September 30, 2012, the Company’s total loan loss reserves were approximately $189.3 million relating to 19 loans with an aggregate carrying value before loan loss reserves of approximately $266.8 million. The Company recognizes income on impaired loans on a cash basis to the extent it is received.

The Company had nine non-performing loans with a carrying value of approximately $9.8 million, net of related loan loss reserves of $75.1 million as of September 30, 2012, compared to eight non-performing loans with a carrying value of approximately $15.2 million, net of related loan loss reserves of $31.1 million as of June 30, 2012. Income recognition on non-performing loans has been suspended and will resume if and when the loans become contractually current and performance has recommenced.

Equity Offering

In October 2012, Arbor issued 3.5 million shares of common stock in a public offering receiving net proceeds of approximately $19.2 million. The Company also granted the underwriters a 30-day option to purchase up to an additional 525,000 shares of its common stock to cover over-allotments. The Company intends to use the net proceeds from the offering to make investments, to repurchase or pay liabilities and for general corporate purposes.

Dividend

The Company announced today that its Board of Directors has declared a quarterly cash dividend of $0.11 per share of common stock for the third quarter ended September 30, 2012. The dividend is payable on November 28, 2012 to common shareholders of record on November 20, 2012. The ex-dividend date is November 16, 2012.

 

 
Arbor Realty Trust Reports Third Quarter 2012 Results and Declares Third Quarter 2012 Dividend	 	
 	 	
November 2, 2012	Page 6	
 
Earnings Conference Call

Management will host a conference call today at 10:00 a.m. ET. A live webcast of the conference call will be available online at http://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 (800) 573-4840 for domestic callers and (617) 224-4326 for international callers. Please use participant passcode 99370485.

After the live webcast, the call will remain available on the Company's Website, www.arborrealtytrust.com, through December 2, 2012. In addition, a telephonic replay of the call will be available until November 9, 2012. The replay dial-in number is (888) 286-8010   for domestic callers and (617) 801-6888 for international callers. Please use passcode 84706089.

About Arbor Realty Trust, Inc.

Arbor Realty Trust, Inc. is a real estate investment trust, which invests in a diversified portfolio of multi-family and commercial real estate related bridge and mezzanine loans, preferred equity investments, mortgage related securities and other real estate related assets. Arbor commenced operations in July 2003 and conducts substantially all of its operations through its operating partnership, Arbor Realty Limited Partnership and its subsidiaries. Arbor is externally managed and advised by Arbor Commercial Mortgage, LLC, a national commercial real estate finance company operating through 14 offices in the US that specializes in debt and equity financing for multi-family and commercial real estate.

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, 2011 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.

 

 
Arbor Realty Trust Reports Third Quarter 2012 Results and Declares Third Quarter 2012 Dividend	 	
 	 	
November 2, 2012	Page 7	
 
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 each non-GAAP financial measure and the comparable GAAP financial measure can be found on page 10 and 11 of this release.

1. See attached supplemental schedule of non-GAAP financial measures.

 

 
Arbor Realty Trust Reports Third Quarter 2012 Results and Declares Third Quarter 2012 Dividend	 	
 	 	
November 2, 2012	Page 8	
 
 ARBOR REALTY TRUST, INC. AND SUBSIDIARIES	
 	
 CONSOLIDATED STATEMENTS OF OPERATIONS	
 
 	 	Quarter Ended	 	 	Nine Months Ended	 	
 	 	September 30,	 	 	September 30,	 	
 	 	2012	 	 	2011	 	 	2012	 	 	2011	 	
 	 	(Unaudited)	 	 	(Unaudited)	 	 	(Unaudited)	 	 	(Unaudited)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 Interest income	 	$	20,030,595	 	 	$	18,524,388	 	 	$	59,139,715	 	 	$	55,104,727	 	
 Interest expense	 	 	9,510,083	 	 	 	11,407,229	 	 	 	31,042,290	 	 	 	40,240,929	 	
     Net interest income	 	 	10,520,512	 	 	 	7,117,159	 	 	 	28,097,425	 	 	 	14,863,798	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Other revenues:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Property operating income	 	 	7,884,029	 	 	 	7,202,260	 	 	 	25,219,984	 	 	 	19,410,215	 	
 Other income	 	 	334,415	 	 	 	27,003	 	 	 	736,054	 	 	 	90,435	 	
     Total other revenues	 	 	8,218,444	 	 	 	7,229,263	 	 	 	25,956,038	 	 	 	19,500,650	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Other expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Employee compensation and benefits	 	 	2,301,442	 	 	 	2,323,734	 	 	 	7,168,037	 	 	 	6,697,221	 	
 Selling and administrative	 	 	1,870,759	 	 	 	2,292,628	 	 	 	5,722,761	 	 	 	5,074,246	 	
 Property operating expenses	 	 	7,172,803	 	 	 	6,681,562	 	 	 	22,072,532	 	 	 	15,829,574	 	
 Depreciation and amortization	 	 	1,574,512	 	 	 	1,607,361	 	 	 	4,291,484	 	 	 	3,552,176	 	
 Provision for loan losses (net of recoveries)	 	 	4,849,330	 	 	 	10,223,403	 	 	 	20,584,191	 	 	 	18,318,801	 	
 Loss on sale and restructuring of loans	 	 	-	 	 	 	-	 	 	 	-	 	 	 	1,000,000	 	
 Management fee - related party	 	 	2,500,000	 	 	 	2,050,000	 	 	 	7,500,000	 	 	 	6,050,000	 	
     Total other expenses	 	 	20,268,846	 	 	 	25,178,688	 	 	 	67,339,005	 	 	 	56,522,018	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Loss from continuing operations before gain on	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
      extinguishment of debt, (loss) income from equity	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
      affiliates and (provision) benefit for income taxes	 	 	(1,529,890	)	 	 	(10,832,266	)	 	 	(13,285,542	)	 	 	(22,157,570	)	
 Gain on extinguishment of debt	 	 	4,144,688	 	 	 	5,100,462	 	 	 	30,459,023	 	 	 	7,919,662	 	
 (Loss) income from equity affiliates	 	 	(225,493	)	 	 	3,717,323	 	 	 	(700,203	)	 	 	3,766,134	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Income (loss) before (provision) benefit for income taxes	 	 	2,389,305	 	 	 	(2,014,481	)	 	 	16,473,278	 	 	 	(10,471,774	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 (Provision) benefit for income taxes	 	 	(275,000	)	 	 	-	 	 	 	526,558	 	 	 	-	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Income (loss) from continuing operations	 	 	2,114,305	 	 	 	(2,014,481	)	 	 	16,999,836	 	 	 	(10,471,774	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Loss on impairment of real estate held-for-sale	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(750,000	)	
 Gain on sale of real estate held-for-sale	 	 	-	 	 	 	-	 	 	 	3,487,145	 	 	 	-	 	
 Income (loss) from operations of real estate held-for-sale	 	 	-	 	 	 	(373,703	)	 	 	1,442,744	 	 	 	(1,146,422	)	
 Income (loss) from discontinued operations	 	 	-	 	 	 	(373,703	)	 	 	4,929,889	 	 	 	(1,896,422	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Net income (loss)	 	 	2,114,305	 	 	 	(2,388,184	)	 	 	21,929,725	 	 	 	(12,368,196	)	
 Net income attributable to noncontrolling interest	 	 	53,976	 	 	 	54,045	 	 	 	161,598	 	 	 	161,619	 	
 Net income (loss) attributable to Arbor Realty Trust, Inc.	 	$	2,060,329	 	 	$	(2,442,229	)	 	$	21,768,127	 	 	$	(12,529,815	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Basic earnings (loss) per common share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Income (loss) from continuing operations, net of	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
      noncontrolling interest	 	$	0.07	 	 	$	(0.09	)	 	$	0.66	 	 	$	(0.42	)	
 Income (loss) from discontinued operations	 	 	-	 	 	 	(0.01	)	 	 	0.19	 	 	 	(0.08	)	
 Net income (loss) attributable to Arbor Realty Trust, Inc.	 	$	0.07	 	 	$	(0.10	)	 	$	0.85	 	 	$	(0.50	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Diluted earnings (loss) per common share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Income (loss) from continuing operations, net of	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
      noncontrolling interest	 	$	0.07	 	 	$	(0.09	)	 	$	0.65	 	 	$	(0.42	)	
 Income (loss) from discontinued operations	 	 	-	 	 	 	(0.01	)	 	 	0.19	 	 	 	(0.08	)	
 Net income (loss) attributable to Arbor Realty Trust, Inc.	 	$	0.07	 	 	$	(0.10	)	 	$	0.84	 	 	$	(0.50	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Dividends declared per common share	 	$	0.100	 	 	$	-	 	 	$	0.175	 	 	$	-	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Weighted average number of shares	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 of common stock outstanding:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
     Basic	 	 	27,749,225	 	 	 	25,239,590	 	 	 	25,643,470	 	 	 	25,214,832	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
     Diluted	 	 	28,038,044	 	 	 	25,239,590	 	 	 	25,891,083	 	 	 	25,214,832	 	

 
Arbor Realty Trust Reports Third Quarter 2012 Results and Declares Third Quarter 2012 Dividend	 	
 	 	
November 2, 2012	Page 9	
 
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES	
 	
CONSOLIDATED BALANCE SHEETS	

 	 	September 30,	 	 	December 31,	 	
 	 	2012	 	 	2011	 	
 	 	(Unaudited)	 	 	 	 	
Assets:	 	 	 	 	 	 	
Cash and cash equivalents	 	$	40,848,637	 	 	$	55,236,479	 	
Restricted cash (includes $45,657,164 and $65,357,993 from consolidated VIEs, respectively)	 	 	47,756,889	 	 	 	67,326,530	 	
Loans and investments, net (includes $1,131,180,388 and $1,093,893,014 from consolidated VIEs, respectively)	 	 	1,261,444,465	 	 	 	1,302,440,660	 	
Available-for-sale securities, at fair value (includes $1,100,000 and $2,000,000 from consolidated VIEs, respectively)	 	 	3,552,736	 	 	 	4,276,368	 	
Securities held-to-maturity, net (includes $730,480 and $742,602 from consolidated VIEs, respectively)	 	 	51,359,925	 	 	 	29,942,108	 	
Investment in equity affiliates	 	 	59,881,490	 	 	 	60,450,064	 	
Real estate owned, net (includes $83,099,540 and $83,099,540 from consolidated VIEs, respectively)	 	 	126,460,580	 	 	 	128,397,612	 	
Real estate held-for-sale, net (includes $0 and $2,550,000 from consolidated VIEs, respectively)	 	 	-	 	 	 	62,084,412	 	
Due from related party (includes $267,158 and $1,217 from consolidated VIEs, respectively)	 	 	3,916,544	 	 	 	656,290	 	
Prepaid management fee - related party	 	 	19,047,949	 	 	 	19,047,949	 	
Other assets (includes $12,643,180 and $11,696,071 from consolidated VIEs, respectively)	 	 	52,708,967	 	 	 	46,855,858	 	
    Total assets	 	$	1,666,978,182	 	 	$	1,776,714,330	 	
 	 	 	 	 	 	 	 	 	
Liabilities and Equity:	 	 	 	 	 	 	 	 	
Repurchase agreements and credit facilities	 	$	80,915,500	 	 	$	76,105,000	 	
Collateralized debt obligations (includes $841,460,154 and $1,002,615,393 from consolidated VIEs, respectively)	 	 	841,460,154	 	 	 	1,002,615,393	 	
Collateralized loan obligations (includes $87,500,000 and $0 from consolidated VIEs, respectively)	 	 	87,500,000	 	 	 	-	 	
Junior subordinated notes to subsidiary trust issuing preferred securities	 	 	158,637,793	 	 	 	158,261,468	 	
Notes payable	 	 	51,457,708	 	 	 	85,457,708	 	
Mortgage notes payable – real estate owned	 	 	53,751,004	 	 	 	53,751,004	 	
Mortgage note payable – held-for-sale	 	 	-	 	 	 	62,190,000	 	
Due to related party	 	 	2,473,624	 	 	 	2,728,819	 	
Due to borrowers (includes $700,642 and $740,809 from consolidated VIEs, respectively)	 	 	23,608,708	 	 	 	2,825,636	 	
Deferred revenue	 	 	77,123,133	 	 	 	77,123,133	 	
Other liabilities (includes $24,314,438 and $27,839,757 from consolidated VIEs, respectively)	 	 	77,726,425	 	 	 	82,595,636	 	
    Total liabilities	 	 	1,454,654,049	 	 	 	1,603,653,797	 	
 	 	 	 	 	 	 	 	 	
Commitments and contingencies	 	 	-	 	 	 	-	 	
 	 	 	 	 	 	 	 	 	
Equity:	 	 	 	 	 	 	 	 	
Arbor Realty Trust, Inc. stockholders’ equity:	 	 	 	 	 	 	 	 	
Preferred stock, $0.01 par value: 100,000,000 shares authorized; no shares issued or outstanding	 	 	-	 	 	 	-	 	
Common stock, $0.01 par value: 500,000,000 shares authorized; 30,399,992 shares issued, 27,749,225 shares	 	 	 	 	
    outstanding at September 30, 2012 and 26,778,737 shares issued, 24,298,140 shares outstanding at December 31, 2011	 	 	304,000	 	 	 	267,787	 	
Additional paid-in capital	 	 	474,091,222	 	 	 	455,994,695	 	
Treasury stock, at cost - 2,650,767 shares at September 30, 2012 and 2,480,597 shares at December 31, 2011	 	 	(17,100,916	)	 	 	(16,416,152	)	
Accumulated deficit	 	 	(203,849,948	)	 	 	(221,015,880	)	
Accumulated other comprehensive loss	 	 	(43,052,006	)	 	 	(47,704,045	)	
Total Arbor Realty Trust, Inc. stockholders’ equity	 	 	210,392,352	 	 	 	171,126,405	 	
Noncontrolling interest in consolidated entity	 	 	1,931,781	 	 	 	1,934,128	 	
    Total equity	 	 	212,324,133	 	 	 	173,060,533	 	
Total liabilities and equity	 	$	1,666,978,182	 	 	$	1,776,714,330	 	

 

 
Arbor Realty Trust Reports Third Quarter 2012 Results and Declares Third Quarter 2012 Dividend	 	
 	 	
November 2, 2012	Page 10	

 	
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES	
 	
SUPPLEMENTAL SCHEDULE OF NON-GAAP FINANCIAL MEASURES	
 (Unaudited)	

 	 	September 30,
2012	 	

 GAAP Arbor Realty Trust, Inc. Stockholders' Equity	 	$	210,392,352	 	
 	 	 	 	 	
 Add: 450 West 33rd Street transaction - deferred revenue	 	 	77,123,133	 	
           Unrealized loss on derivative instruments	 	 	41,081,043	 	
 	 	 	 	 	
 Subtract: 450 West 33rd Street transaction - prepaid management fee	 	 	(19,047,949	)	
 	 	 	 	 	
 Adjusted Arbor Realty Trust, Inc. Stockholders' Equity	 	$	309,548,579	 	

 Adjusted book value per share	 	$	11.16	 	
 	 	 	 	 	
 GAAP book value per share	 	$	7.58	 	
 	 	 	 	 	
 Common shares outstanding	 	 	27,749,225	 	

Given the magnitude and the deferral structure of the 450 West 33rd Street transaction combined with the change in the fair value of certain derivative instruments, Arbor has elected to report adjusted book value per share for the affected period to currently reflect the future impact of the 450 West 33rd Street transaction on the Company's financial condition as well as the evaluation of Arbor without the effects of unrealized losses from certain of the Company's derivative instruments. Management considers this non-GAAP financial measure to be an effective indicator, for both management and investors, of Arbor’s financial performance. Arbor’s management does not advocate that investors consider this non-GAAP financial measure in isolation from, or as a substitute for, financial measures prepared in accordance with GAAP.
 
GAAP book value per share and adjusted book value per share calculations do not take into account any dilution from the potential exercise of the warrants issued to Wachovia as part of the 2009 debt restructuring.

 

 
Arbor Realty Trust Reports Third Quarter 2012 Results and Declares Third Quarter 2012 Dividend	 	
 	 	
November 2, 2012	Page 11	

 	
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES	
 	
SUPPLEMENTAL SCHEDULE OF NON-GAAP FINANCIAL MEASURES - Continued	
 (Unaudited)	

 	 	Quarter Ended	 	 	Nine Months Ended	 	
 	 	September 30,	 	 	September 30,	 	
 	 	2012	 	 	2011	 	 	2012	 	 	2011	 	

 Net income (loss) attributable to Arbor Realty Trust, Inc., GAAP basis	 	$	2,060,329	 	 	$	(2,442,229	)	 	$	21,768,127	 	 	$	(12,529,815	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Subtract:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
   Gain on sale of real estate-held-for-sale	 	 	-	 	 	 	-	 	 	 	(3,487,145	)	 	 	-	 	
 Add:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
   Loss on impairment of real estate-held-for-sale	 	 	-	 	 	 	-	 	 	 	-	 	 	 	750,000	 	
   Depreciation - real estate owned and held-for-sale (1)	 	 	1,574,512	 	 	 	1,800,461	 	 	 	4,291,484	 	 	 	4,130,960	 	
   Depreciation - investment in equity affiliate	 	 	26,936	 	 	 	-	 	 	 	80,807	 	 	 	-	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Funds from operations ("FFO")	 	$	3,661,777	 	 	$	(641,768	)	 	$	22,653,273	 	 	$	(7,648,855	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
   Diluted FFO per common share	 	$	0.13	 	 	$	(0.03	)	 	$	0.87	 	 	$	(0.30	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
   Diluted weighted average shares outstanding	 	 	28,038,044	 	 	 	25,239,590	 	 	 	25,891,083	 	 	 	25,214,832	 	
 
 (1) Includes discontinued operations
 
Arbor is presenting funds from operations, or FFO, because management believes it to be an important supplemental measure of the Company’s operating performance in that it is frequently used by analysts, investors and other parties in the evaluation of real estate investment trusts (REITs).  The revised White Paper on FFO approved by the Board of Governors of the National Association of Real Estate Investment Trusts, or NAREIT, in April 2002 defines FFO as net income (loss) attributable to Arbor Realty Trust, Inc. (computed in accordance with generally accepted accounting principles (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 partnerships and joint ventures. The Company considers gains and losses on the sales of undepreciated real estate investments to be a normal part of its recurring operating activities in accordance with GAAP and should not be excluded when calculating FFO. Losses from discontinued operations are not excluded when calculating FFO.
 
FFO is not intended to be an indication of our cash flow from operating activities (determined in accordance with GAAP) or a measure of our liquidity, nor is it entirely indicative of funding our cash needs, including our ability to make cash distributions.  Arbor’s calculation of FFO may be different from the calculation used by other companies and, therefore, comparability may be limited.