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Arbor Realty Trust Reports Second Quarter Results and Increases Quarterly Dividend to $0.29 per Share

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Company Highlights:

  • GAAP net income of $0.31 and AFFO of $0.33 per diluted common share1

  • Declares a cash dividend on common stock of $0.29 per share, our third increase in the past year, representing a 16% increase from a year ago

  • Raised $115.6 million of capital in a common stock offering

  • Improved funding sources by reducing pricing, increasing capacity and extending the maturities of existing facilities

Agency Business

  • Segment income of $15.6 million

  • Loan originations of $1.29 billion

  • Servicing portfolio of $19.46 billion, up 3% from 1Q19 and 14% from a year ago

Structured Business

  • Segment income of $19.9 million

  • Strong portfolio growth of 15% on record originations of $1 billion

  • Closed an eleventh collateralized securitization vehicle totaling $650.0 million

UNIONDALE, N.Y., Aug. 02, 2019 (GLOBE NEWSWIRE) -- Arbor Realty Trust, Inc. (ABR), today announced financial results for the second quarter ended June 30, 2019. Arbor reported net income for the quarter of $28.9 million, or $0.31 per diluted common share, compared to $17.2 million, or $0.25 per diluted common share for the quarter ended June 30, 2018. Adjusted funds from operations (“AFFO”) for the quarter was $37.9 million, or $0.33 per diluted common share, compared to $26.4 million, or $0.29 per diluted common share for the quarter ended June 30, 2018.1

Agency Business

Loan Origination Platform

Agency Loan Volume (in thousands)

Quarter Ended

June 30,
2019

March 31,
2019

Fannie Mae

$

937,977

$

546,886

Freddie Mac

234,851

192,492

FHA

43,558

1,110

CMBS/Conduit

71,900

105,425

Total Originations

$

1,288,286

$

845,913

Total Loan Sales

$

923,046

$

1,101,766

Total Loan Commitments

$

1,302,128

$

846,963

For the quarter ended June 30, 2019, the Agency Business generated revenues of $52.7 million, compared to $47.2 million for the first quarter of 2019. Gain on sales, including fee-based services, net was $14.2 million for the quarter, reflecting a margin of 1.54% on loan sales, compared to $16.4 million and 1.49% for the first quarter of 2019. Income from mortgage servicing rights was $18.7 million for the quarter, reflecting a rate of 1.44% as a percentage of loan commitments, compared to $14.2 million and 1.68% for the first quarter of 2019.

At June 30, 2019, loans held-for-sale was $601.8 million which was primarily comprised of unpaid principal balances totaling $597.3 million, with financing associated with these loans totaling $597.2 million.

Fee-Based Servicing Portfolio

Our fee-based servicing portfolio totaled $19.46 billion at June 30, 2019, an increase of 3% from March 31, 2019, primarily a result of $1.29 billion of new loan originations, net of $635.6 million in portfolio runoff during the quarter. Servicing revenue, net was $12.6 million for the quarter and consisted of servicing revenue of $24.9 million, net of amortization of mortgage servicing rights totaling $12.3 million.

Fee-Based Servicing Portfolio ($ in thousands)

As of June 30, 2019

As of March 31, 2019

UPB

Wtd. Avg.
Fee

Wtd. Avg.
Life (in years)

UPB

Wtd. Avg.
Fee

Wtd. Avg.
Life (in years)

Fannie Mae

$

14,122,916

0.495

%

7.8

$

13,719,351

0.507

%

7.6

Freddie Mac

4,657,097

0.301

%

10.9

4,515,829

0.303

%

10.8

FHA

684,527

0.153

%

19.1

648,583

0.155

%

19.6

Total

$

19,464,540

0.436

%

9.0

$

18,883,763

0.446

%

8.7

Loans sold under the Fannie Mae program contain an obligation to partially guarantee the performance of the loan (“loss-sharing obligations”). At June 30, 2019, the Company’s allowance for loss-sharing obligations was $34.4 million, representing 0.24% of the Fannie Mae servicing portfolio.

Structured Business

Portfolio and Investment Activity

  • Originated 47 loans totaling $1.01 billion, of which 37 were bridge loans for $942.7 million

  • Payoffs and pay downs on 43 loans totaling $503.1 million

At June 30, 2019, the loan and investment portfolio’s unpaid principal balance, excluding loan loss reserves, was $3.93 billion, with a weighted average current interest pay rate of 6.64%, compared to $3.41 billion and 7.05% at March 31, 2019. Including certain fees earned and costs associated with the loan and investment portfolio, the weighted average current interest pay rate was 7.34% at June 30, 2019, compared to 7.71% at March 31, 2019.

The average balance of the Company’s loan and investment portfolio during the second quarter of 2019, excluding loan loss reserves, was $3.62 billion with a weighted average yield of 8.24%, compared to $3.34 billion and 7.84% for the first quarter of 2019. The increase in average yield was primarily due to higher fees on loan payoffs in the second quarter as compared to the first quarter, largely the result of default interest received.

At June 30, 2019, the Company’s total loan loss reserves were $71.1 million on five loans with an aggregate carrying value before loan loss reserves of $131.3 million. The Company also had two non-performing loans with a carrying value of $2.5 million, net of related loan loss reserves of $1.7 million.

Financing Activity

The Company completed its eleventh collateralized securitization vehicle (“CLO XI”) totaling $650.0 million of real estate related assets and cash. Investment grade-rated notes totaling $533.0 million were issued, and the Company retained subordinate interests in the issuing vehicle of $117.0 million. The facility has a three-year asset replenishment period and an initial weighted average interest rate of 1.44% over LIBOR, excluding fees and transaction costs.

The Company completed the unwind of CLO VI, redeeming $250.3 million of outstanding notes repaid with proceeds received from the refinancing of CLO VI’s outstanding assets primarily within CLO XI, which has an interest rate 104 basis points lower than CLO VI. As a result of this transaction, the Company recognized an expense of $1.2 million from the acceleration of deferred fees.

The balance of debt that finances the Company’s loan and investment portfolio at June 30, 2019 was $3.62 billion with a weighted average interest rate including fees of 4.96% as compared to $3.13 billion and a rate of 5.22% at March 31, 2019. The average balance of debt that finances the Company’s loan and investment portfolio for the second quarter of 2019 was $3.35 billion, as compared to $2.96 billion for the first quarter of 2019. The average cost of borrowings for the second quarter was 5.35%, compared to 5.24% for the first quarter of 2019. The increase in average costs was primarily due to the acceleration of fees related to the early repayment of debt.

The Company is subject to various financial covenants and restrictions under the terms of its collateralized securitization vehicles and financing facilities. The Company believes it was in compliance with all financial covenants and restrictions as of June 30, 2019 and as of the most recent collateralized securitization vehicle determination dates in July 2019.

Capital Markets

The Company issued 9.2 million shares of our common stock receiving net proceeds of $115.6 million. The proceeds were primarily used to make investments and for general corporate purposes.

Dividends

The Company announced today that its Board of Directors has declared a quarterly cash dividend of $0.29 per share of common stock for the quarter ended June 30, 2019, representing an increase of 4% over the prior quarter dividend of $0.28 per share and 16% from a year ago. The dividend is payable on September 3, 2019 to common stockholders of record on August 15, 2019. The ex-dividend date is August 14, 2019.

The Company also announced today that its 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 June 1, 2019 through August 31, 2019. The dividends are payable on September 3, 2019 to preferred stockholders of record on August 15, 2019. 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. Eastern Time. A live webcast of the conference call will be available at www.arbor.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 6947538.

After the live webcast, the call will remain available on the Company's website through August 31, 2019. In addition, a telephonic replay of the call will be available until August 9, 2019. The replay dial-in numbers are (855) 859-2056 for domestic callers and (404) 537-3406 for international callers. Please use passcode 6947538.

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, seniors housing, healthcare 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 Fannie Mae DUS® lender and Freddie Mac Optigo Seller/Servicer. Arbor’s product platform also includes CMBS, bridge, mezzanine and preferred equity lending. 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, 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, 2018 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. A supplemental schedule of non-GAAP financial measures and the comparable GAAP financial measure can be found on page 11 of this release.

Contacts:

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

Investors:
The Ruth Group
Janhavi Mohite
646-536-7026
jmohite@theruthgroup.com

Media:
Bonnie Habyan, Chief Marketing Officer
516-506-4615
bhabyan@arbor.com



ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME - (UNAUDITED)

($ in thousands—except share and per share data)

Quarter Ended

Six Months Ended

June 30,

June 30,

2019

2018

2019

2018

Interest income

$

82,171

$

59,295

$

153,448

$

110,908

Interest expense

48,284

37,884

90,149

71,271

Net interest income

33,887

21,411

63,299

39,637

Other revenue:

Gain on sales, including fee-based services, net

14,211

15,622

30,600

33,815

Mortgage servicing rights

18,709

17,936

32,941

37,571

Servicing revenue, net

12,612

10,871

26,164

20,418

Property operating income

3,147

2,964

5,950

5,874

Other income, net

1,393

(470

)

(734

)

2,408

Total other revenue

50,072

46,923

94,921

100,086

Other expenses:

Employee compensation and benefits

29,022

26,815

60,786

56,309

Selling and administrative

10,481

8,873

20,242

17,789

Property operating expenses

2,691

2,856

5,086

5,652

Depreciation and amortization

1,909

1,845

3,821

3,691

Impairment loss on real estate owned

1,000

2,000

1,000

2,000

Provision for loss sharing (net of recoveries)

368

348

822

821

Provision for loan losses (net of recoveries)

-

(2,127

)

-

(1,802

)

Total other expenses

45,471

40,610

91,757

84,460

Income before extinguishment of debt, income from

equity affiliates and income taxes

38,488

27,724

66,463

55,263

Loss on extinguishment of debt

-

-

(128

)

-

Income from equity affiliates

3,264

1,387

5,415

2,132

(Provision for) benefit from income taxes

(4,350

)

(4,499

)

(4,341

)

4,285

Net income

37,402

24,612

67,409

61,680

Preferred stock dividends

1,888

1,888

3,777

3,777

Net income attributable to noncontrolling interest

6,598

5,557

12,066

14,547

Net income attributable to common stockholders

$

28,916

$

17,167

$

51,566

$

43,356

Basic earnings per common share

$

0.32

$

0.26

$

0.59

$

0.68

Diluted earnings per common share

$

0.31

$

0.25

$

0.57

$

0.66

Weighted average shares outstanding:

Basic

89,955,923

65,683,057

87,567,171

63,773,306

Diluted

113,624,384

90,055,170

110,779,680

87,420,543

Dividends declared per common share

$

0.28

$

0.25

$

0.55

$

0.46



ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

($ in thousands—except share and per share data)

June 30,

December 31,

2019

2018

(Unaudited)

Assets:

Cash and cash equivalents

$

198,917

$

160,063

Restricted cash

316,455

180,606

Loans and investments, net

3,836,554

3,200,145

Loans held-for-sale, net

601,827

481,664

Capitalized mortgage servicing rights, net

276,648

273,770

Securities held to maturity, net

86,017

76,363

Investments in equity affiliates

31,159

21,580

Real estate owned, net

13,382

14,446

Due from related party

16,986

1,287

Goodwill and other intangible assets

113,364

116,165

Other assets

110,421

86,086

Total assets

$

5,601,730

$

4,612,175

Liabilities and Equity:

Credit facilities and repurchase agreements

$

1,621,678

$

1,135,627

Collateralized loan obligations

1,875,444

1,593,548

Debt fund

68,422

68,183

Senior unsecured notes

210,963

122,484

Convertible senior unsecured notes, net

253,729

254,768

Junior subordinated notes to subsidiary trust issuing preferred securities

140,587

140,259

Due to related party

7,219

-

Due to borrowers

92,296

78,662

Allowance for loss-sharing obligations

34,417

34,298

Other liabilities

110,997

118,780

Total liabilities

4,415,752

3,546,609

Equity:

Arbor Realty Trust, Inc. stockholders' equity:

Preferred stock, cumulative, redeemable, $0.01 par value: 100,000,000

shares authorized; special voting preferred shares; 20,484,094 and

20,653,584 shares issued and outstanding, respectively; 8.25% Series A,

$38,787,500 aggregate liquidation preference; 1,551,500 shares issued and

outstanding; 7.75% Series B, $31,500,000 aggregate liquidation preference;

1,260,000 shares issued and outstanding; 8.50% Series C, $22,500,000

aggregate liquidation preference; 900,000 shares issued and outstanding

89,501

89,502

Common stock, $0.01 par value: 500,000,000 shares authorized; 94,225,567

and 83,987,707 shares issued and outstanding, respectively

942

840

Additional paid-in capital

998,897

879,029

Accumulated deficit

(72,321

)

(74,133

)

Total Arbor Realty Trust, Inc. stockholders’ equity

1,017,019

895,238

Noncontrolling interest

168,959

170,328

Total equity

1,185,978

1,065,566

Total liabilities and equity

$

5,601,730

$

4,612,175



ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

STATEMENT OF INCOME SEGMENT INFORMATION - (Unaudited)

(in thousands)

Quarter Ended June 30, 2019

Structured
Business

Agency
Business

Other /
Eliminations (1)

Consolidated

Interest income

$

76,144

$

6,027

$

-

$

82,171

Interest expense

44,716

3,568

-

48,284

Net interest income

31,428

2,459

-

33,887

Other revenue:

Gain on sales, including fee-based services, net

-

14,211

-

14,211

Mortgage servicing rights

-

18,709

-

18,709

Servicing revenue

-

24,936

-

24,936

Amortization of MSRs

-

(12,324

)

-

(12,324

)

Property operating income

3,147

-

-

3,147

Other income, net

290

1,103

-

1,393

Total other revenue

3,437

46,635

-

50,072

Other expenses:

Employee compensation and benefits

6,815

22,207

-

29,022

Selling and administrative

5,328

5,153

-

10,481

Property operating expenses

2,691

-

-

2,691

Depreciation and amortization

509

1,400

-

1,909

Impairment loss on real estate owned

1,000

-

-

1,000

Provision for loss sharing (net of recoveries)

-

368

-

368

Total other expenses

16,343

29,128

-

45,471

Income before income from equity affiliates and

income taxes

18,522

19,966

-

38,488

Income from equity affiliates

3,264

-

-

3,264

Provision for income taxes

-

(4,350

)

-

(4,350

)

Net income

21,786

15,616

-

37,402

Preferred stock dividends

1,888

-

-

1,888

Net income attributable to noncontrolling interest

-

-

6,598

6,598

Net income attributable to common stockholders

$

19,898

$

15,616

$

(6,598

)

$

28,916

(1) Includes certain income or expenses not allocated to the two reportable segments. Amount reflects income attributable to the noncontrolling interest holders.



ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

BALANCE SHEET SEGMENT INFORMATION - (Unaudited)

(in thousands)

June 30, 2019

Structured
Business

Agency
Business

Consolidated

Assets:

Cash and cash equivalents

$

116,282

$

82,635

$

198,917

Restricted cash

315,195

1,260

316,455

Loans and investments, net

3,836,554

-

3,836,554

Loans held-for-sale, net

-

601,827

601,827

Capitalized mortgage servicing rights, net

-

276,648

276,648

Securities held to maturity, net

10,000

76,017

86,017

Investments in equity affiliates

31,159

-

31,159

Goodwill and other intangible assets

12,500

100,864

113,364

Other assets

110,205

30,584

140,789

Total assets

$

4,431,895

$

1,169,835

$

5,601,730

Liabilities:

Debt obligations

$

3,573,659

$

597,164

$

4,170,823

Allowance for loss-sharing obligations

-

34,417

34,417

Other liabilities

162,859

47,653

210,512

Total liabilities

$

3,736,518

$

679,234

$

4,415,752



ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

Supplemental Schedule of Non-GAAP Financial Measures - (Unaudited)

Funds from Operations ("FFO") and Adjusted Funds from Operations ("AFFO")

($ in thousands—except share and per share data)

Quarter Ended

Six Months Ended

June 30,

June 30,

2019

2018

2019

2018

Net income attributable to common stockholders

$

28,916

$

17,167

$

51,566

$

43,356

Adjustments:

Net income attributable to noncontrolling interest

6,598

5,557

12,066

14,547

Impairment loss on real estate owned

1,000

2,000

1,000

2,000

Depreciation - real estate owned

176

178

350

356

Depreciation - investments in equity affiliates

128

125

252

250

Funds from operations (1)

$

36,818

$

25,027

$

65,234

$

60,509

Adjustments:

Income from mortgage servicing rights

(18,709

)

(17,936

)

(32,941

)

(37,571

)

Impairment loss on real estate owned

(1,000

)

(2,000

)

(1,000

)

(2,000

)

Deferred tax provision (benefit)

918

185

(3,250

)

(13,135

)

Amortization and write-offs of MSRs

16,914

17,203

33,654

33,879

Depreciation and amortization

2,549

2,255

5,113

4,511

Net (gain) loss on changes in fair value of derivatives

(1,103

)

587

1,362

(2,057

)

Stock-based compensation

1,502

1,100

5,258

3,645

Adjusted funds from operations (1)

$

37,889

$

26,421

$

73,430

$

47,781

Diluted FFO per share (1)

$

0.32

$

0.28

$

0.59

$

0.69

Diluted AFFO per share (1)

$

0.33

$

0.29

$

0.66

$

0.55

Diluted weighted average shares outstanding (1)

113,624,384

90,055,170

110,779,680

87,420,543

(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.

The Company is presenting FFO and AFFO because management believes they are important supplemental measures of the Company’s operating performance in that they are frequently used by analysts, investors and other parties in the evaluation of REITs. The National Association of Real Estate Investment Trusts, or NAREIT, defines FFO as net income (loss) attributable to common stockholders (computed in accordance with 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 ventures.

The Company defines AFFO as funds from operations adjusted for accounting items such as non-cash stock-based compensation expense, income from mortgage servicing rights ("MSRs"), changes in fair value of certain derivatives that temporarily flow through earnings, amortization and write-offs of MSRs, deferred taxes and the amortization of the convertible senior notes conversion option. The Company also adds back one-time charges such as acquisition costs and impairment losses on real estate and gains (losses) on sales of real estate. The Company is generally not in the business of operating real estate property and has obtained real estate by foreclosure or through partial or full settlement of mortgage debt related to the Company's loans to maximize the value of the collateral and minimize the Company's exposure. Therefore, the Company deems such impairment and gains (losses) on real estate as an extension of the asset management of its loans, thus a recovery of principal or additional loss on the Company's initial investment.

FFO and AFFO are not intended to be an indication of the Company's cash flow 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 FFO and AFFO may be different from the calculations used by other companies and, therefore, comparability may be limited.