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Arbor Realty Trust Reports Third Quarter 2019 Results and Increases Quarterly Dividend to $0.30 per Share

Company Highlights:

  • GAAP net income of $0.35 and AFFO of $0.36 per diluted common share1

  • Declares a cash dividend on common stock of $0.30 per share, our third consecutive quarterly increase, and an 11% increase from a year ago

Agency Business

  • Segment income of $22.8 million

  • Loan originations of $1.42 billion

  • Servicing portfolio of $19.97 billion, up 3% from 2Q19 and 12% from a year ago

Structured Business

  • Segment income of $18.5 million

  • Loan originations of $541.5 million

Recent Development:

  • Issued $110.0 million of 4.75% senior unsecured notes due in 2024

UNIONDALE, N.Y., Nov. 01, 2019 (GLOBE NEWSWIRE) -- Arbor Realty Trust, Inc. (ABR), today announced financial results for the third quarter ended September 30, 2019. Arbor reported net income for the quarter of $34.0 million, or $0.35 per diluted common share, compared to $27.7 million, or $0.36 per diluted common share for the quarter ended September 30, 2018. Adjusted funds from operations (“AFFO”) for the quarter was $42.4 million, or $0.36 per diluted common share, compared to $36.4 million, or $0.37 per diluted common share for the quarter ended September 30, 2018.1

Agency Business

Loan Origination Platform

Agency Loan Volume (in thousands)

Quarter Ended

September 30,
2019

June 30,
2019

Originations:

Fannie Mae

$

1,097,095

$

937,977

Freddie Mac

154,986

234,851

FHA

48,995

43,558

CMBS/Conduit

34,000

71,900

Private Label

80,740

-

Total Originations

$

1,415,816

$

1,288,286

Total Loan Sales

$

1,488,430

$

923,046

Total Loan Commitments

$

1,477,436

$

1,302,128

For the quarter ended September 30, 2019, the Agency Business generated revenues of $67.0 million, compared to $52.7 million for the second quarter of 2019. Gain on sales, including fee-based services, net was $21.3 million for the quarter, reflecting a margin of 1.43% on loan sales, compared to $14.2 million and 1.54% for the second quarter of 2019. Income from mortgage servicing rights was $29.9 million for the quarter, reflecting a rate of 2.02% as a percentage of loan commitments, compared to $18.7 million and 1.44% for the second quarter of 2019.

At September 30, 2019, loans held-for-sale was $537.8 million which was primarily comprised of unpaid principal balances totaling $529.7 million, with financing associated with these loans totaling $461.2 million.

Fee-Based Servicing Portfolio

Our fee-based servicing portfolio totaled $19.97 billion at September 30, 2019, an increase of 3% from June 30, 2019, primarily a result of $1.42 billion of new loan originations, net of $799.7 million in portfolio runoff during the quarter. Servicing revenue, net was $13.8 million for the quarter and consisted of servicing revenue of $25.9 million, net of amortization of mortgage servicing rights totaling $12.1 million.

Fee-Based Servicing Portfolio ($ in thousands)

As of September 30, 2019

As of June 30, 2019

UPB

Wtd. Avg.
Fee

Wtd. Avg.
Life (in
years)

UPB

Wtd. Avg.
Fee

Wtd. Avg.
Life (in
years)

Fannie Mae

$

14,616,816

0.492

%

8.1

$

14,122,916

0.495

%

7.8

Freddie Mac

4,664,750

0.300

%

19.2

4,657,097

0.301

%

10.9

FHA

684,316

0.154

%

11.0

684,527

0.153

%

19.1

Total

$

19,965,882

0.435

%

9.2

$

19,464,540

0.436

%

9.0

Loans sold under the Fannie Mae program contain an obligation to partially guarantee the performance of the loan (“loss-sharing obligations”). At September 30, 2019, the Company’s allowance for loss-sharing obligations was $35.5 million, representing 0.24% of the Fannie Mae servicing portfolio.

Structured Business

Portfolio and Investment Activity

  • Originated 32 loans totaling $541.5 million, of which $478.3 million was funded at September 30, 2019, and consisted primarily of 29 bridge loans totaling $533.7 million

  • Payoffs and pay downs on 43 loans totaling $456.8 million

At September 30, 2019, the loan and investment portfolio’s unpaid principal balance, excluding loan loss reserves, was $3.97 billion, with a weighted average current interest pay rate of 6.33%, compared to $3.93 billion and 6.64% at June 30, 2019. Including certain fees earned and costs associated with the loan and investment portfolio, the weighted average current interest pay rate was 7.04% at September 30, 2019, compared to 7.34% at June 30, 2019.

The average balance of the Company’s loan and investment portfolio during the third quarter of 2019, excluding loan loss reserves, was $3.94 billion with a weighted average yield of 7.31%, compared to $3.62 billion and 8.24% for the second quarter of 2019. The decrease in average yield was primarily due to higher fees on loan payoffs in the second quarter largely the result of default interest received combined with a decrease in LIBOR in the third quarter.

At September 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 three non-performing loans with a carrying value of $3.5 million, net of related loan loss reserves of $1.7 million.

Financing Activity

The balance of debt that finances the Company’s loan and investment portfolio at September 30, 2019 was $3.52 billion with a weighted average interest rate including fees of 4.65% as compared to $3.62 billion and a rate of 4.96% at June 30, 2019. The average balance of debt that finances the Company’s loan and investment portfolio for the third quarter of 2019 was $3.52 billion, as compared to $3.35 billion for the second quarter of 2019. The average cost of borrowings for the third quarter was 4.87%, compared to 5.35% for the second quarter of 2019. The decrease in average costs was primarily due to the acceleration of fees related to the early repayment of debt in the second quarter combined with a decrease in LIBOR in the third quarter.

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

Capital Markets

In October 2019, the Company issued $110.0 million in aggregate principal amount of 4.75% senior unsecured notes in a private placement, generating net proceeds of $108.2 million after deducting offering expenses. This offering reflects a 100 basis point reduction in rate as compared to our previous senior unsecured notes offering in March 2019. The notes are due in October 2024 and the proceeds will be 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 $0.30 per share of common stock for the quarter ended September 30, 2019, representing an increase of 11% from a year ago. The dividend is payable on December 2, 2019 to common stockholders of record on November 15, 2019. The ex-dividend date is November 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 September 1, 2019 through November 30, 2019. The dividends are payable on December 2, 2019 to preferred stockholders of record on November 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) 509-7616 for international callers. Please use participant passcode 7293785.

After the live webcast, the call will remain available on the Company's website through November 30, 2019. In addition, a telephonic replay of the call will be available until November 8, 2019. The replay dial-in numbers are (855) 859-2056 for domestic callers and (404) 537-3406 for international callers. Please use passcode 7293785.

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
Alexander Lobo
646-536-7037
alobo@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

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

Interest income

$

80,509

$

67,500

$

233,957

$

178,408

Interest expense

48,064

39,548

138,213

110,819

Net interest income

32,445

27,952

95,744

67,589

Other revenue:

Gain on sales, including fee-based services, net

21,298

17,451

51,897

51,266

Mortgage servicing rights

29,911

25,216

62,852

62,787

Servicing revenue, net

13,790

14,244

39,954

34,662

Property operating income

2,237

2,651

8,187

8,525

Other income, net

(4,678

)

(3,982

)

(5,412

)

(1,574

)

Total other revenue

62,558

55,580

157,478

155,666

Other expenses:

Employee compensation and benefits

32,861

27,775

93,647

84,084

Selling and administrative

10,882

9,994

31,122

27,783

Property operating expenses

2,563

2,437

7,649

8,089

Depreciation and amortization

1,841

1,848

5,663

5,539

Impairment loss on real estate owned

-

-

1,000

2,000

Provision for loss sharing (net of recoveries)

735

2,019

1,557

2,840

Provision for loan losses (net of recoveries)

-

836

-

(967

)

Litigation settlement gain

-

(10,170

)

-

(10,170

)

Total other expenses

48,882

34,739

140,638

119,198

Income before extinguishment of debt, income from

equity affiliates and income taxes

46,121

48,793

112,584

104,057

Loss on extinguishment of debt

-

(4,960

)

(128

)

(4,960

)

Income (loss) from equity affiliates

3,718

(1,028

)

9,133

1,104

Provision for income taxes

(6,623

)

(5,381

)

(10,963

)

(1,096

)

Net income

43,216

37,424

110,626

99,105

Preferred stock dividends

1,888

1,888

5,665

5,665

Net income attributable to noncontrolling interest

7,363

7,799

19,429

22,347

Net income attributable to common stockholders

$

33,965

$

27,737

$

85,532

$

71,093

Basic earnings per common share

$

0.36

$

0.37

$

0.95

$

1.05

Diluted earnings per common share

$

0.35

$

0.36

$

0.93

$

1.03

Weighted average shares outstanding:

Basic

94,486,839

74,802,582

89,899,074

67,490,132

Diluted

117,468,044

98,435,964

113,033,968

91,133,607

Dividends declared per common share

$

0.29

$

0.25

$

0.84

$

0.71


ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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

September 30,

December 31,

2019

2018

(Unaudited)

Assets:

Cash and cash equivalents

$

135,285

$

160,063

Restricted cash

190,046

180,606

Loans and investments, net

3,874,069

3,200,145

Loans held-for-sale, net

537,826

481,664

Capitalized mortgage servicing rights, net

283,688

273,770

Securities held to maturity, net

95,181

76,363

Investments in equity affiliates

36,698

21,580

Real estate owned, net

13,129

14,446

Due from related party

5,011

1,287

Goodwill and other intangible assets

112,026

116,165

Other assets

112,675

86,086

Total assets

$

5,395,634

$

4,612,175

Liabilities and Equity:

Credit facilities and repurchase agreements

$

1,385,764

$

1,135,627

Collateralized loan obligations

1,876,900

1,593,548

Debt fund

68,528

68,183

Senior unsecured notes

211,188

122,484

Convertible senior unsecured notes, net

255,106

254,768

Junior subordinated notes to subsidiary trust issuing preferred securities

140,767

140,259

Due to related party

3,170

-

Due to borrowers

82,451

78,662

Allowance for loss-sharing obligations

35,525

34,298

Other liabilities

137,839

118,780

Total liabilities

4,197,238

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; 94,774,590

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

948

840

Additional paid-in capital

1,003,355

879,029

Accumulated deficit

(65,790

)

(74,133

)

Total Arbor Realty Trust, Inc. stockholders’ equity

1,028,014

895,238

Noncontrolling interest

170,382

170,328

Total equity

1,198,396

1,065,566

Total liabilities and equity

$

5,395,634

$

4,612,175


ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

STATEMENT OF INCOME SEGMENT INFORMATION - (Unaudited)

(in thousands)

Quarter Ended September 30, 2019

Structured
Business

Agency
Business

Other /
Eliminations (1)

Consolidated

Interest income

$

73,829

$

6,680

$

-

$

80,509

Interest expense

43,209

4,855

-

48,064

Net interest income

30,620

1,825

-

32,445

Other revenue:

Gain on sales, including fee-based services, net

-

21,298

-

21,298

Mortgage servicing rights

-

29,911

-

29,911

Servicing revenue

-

25,916

-

25,916

Amortization of MSRs

-

(12,126

)

-

(12,126

)

Property operating income

2,237

-

-

2,237

Other income, net

17

(4,695

)

-

(4,678

)

Total other revenue

2,254

60,304

-

62,558

Other expenses:

Employee compensation and benefits

7,769

25,092

-

32,861

Selling and administrative

5,352

5,530

-

10,882

Property operating expenses

2,563

-

-

2,563

Depreciation and amortization

503

1,338

-

1,841

Provision for loss sharing (net of recoveries)

-

735

-

735

Total other expenses

16,187

32,695

-

48,882

Income before income from equity affiliates and

income taxes

16,687

29,434

-

46,121

Income from equity affiliates

3,718

-

-

3,718

Provision for income taxes

-

(6,623

)

-

(6,623

)

Net income

20,405

22,811

-

43,216

Preferred stock dividends

1,888

-

-

1,888

Net income attributable to noncontrolling interest

-

-

7,363

7,363

Net income attributable to common stockholders

$

18,517

$

22,811

$

(7,363

)

$

33,965

(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)

September 30, 2019

Structured
Business

Agency
Business

Consolidated

Assets:

Cash and cash equivalents

$

102,734

$

32,551

$

135,285

Restricted cash

188,572

1,474

190,046

Loans and investments, net

3,874,069

-

3,874,069

Loans held-for-sale, net

-

537,826

537,826

Capitalized mortgage servicing rights, net

-

283,688

283,688

Securities held to maturity, net

20,000

75,181

95,181

Investments in equity affiliates

36,698

-

36,698

Goodwill and other intangible assets

12,500

99,526

112,026

Other assets

103,541

27,274

130,815

Total assets

$

4,338,114

$

1,057,520

$

5,395,634

Liabilities:

Debt obligations

$

3,477,005

$

461,248

$

3,938,253

Allowance for loss-sharing obligations

-

35,525

35,525

Other liabilities

166,780

56,680

223,460

Total liabilities

$

3,643,785

$

553,453

$

4,197,238




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

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

Net income attributable to common stockholders

$

33,965

$

27,737

$

85,532

$

71,093

Adjustments:

Net income attributable to noncontrolling interest

7,363

7,799

19,429

22,347

Impairment loss on real estate owned

-

-

1,000

2,000

Depreciation - real estate owned

174

177

524

533

Depreciation - investments in equity affiliates

133

125

378

374

Funds from operations (1)

$

41,635

$

35,838

$

106,863

$

96,347

Adjustments:

Income from mortgage servicing rights

(29,911

)

(25,216

)

(62,852

)

(62,787

)

Impairment loss on real estate owned

-

-

(1,000

)

(2,000

)

Deferred tax provision (benefit)

2,223

(1,319

)

(1,026

)

(14,454

)

Amortization and write-offs of MSRs

18,904

18,989

52,558

52,868

Depreciation and amortization

2,482

2,525

7,595

7,035

Net loss on changes in fair value of GSE-related derivatives

4,745

4,388

6,106

2,331

Stock-based compensation

2,316

1,192

7,574

4,838

Adjusted funds from operations (1)

$

42,394

$

36,397

$

115,818

$

84,178

Diluted FFO per share (1)

$

0.35

$

0.36

$

0.95

$

1.06

Diluted AFFO per share (1)

$

0.36

$

0.37

$

1.02

$

0.92

Diluted weighted average shares outstanding (1)

117,468,044

98,435,964

113,033,968

91,133,607

(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 tax (benefit) provision 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.