Arbor Realty Trust Reports First Quarter Results and Increases Quarterly Dividend to $0.28 per Share – Wire Real Estate

Arbor Realty Trust Reports First Quarter Results and Increases Quarterly Dividend to $0.28 per Share




May 13, 2019

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Company Highlights:

  • GAAP net income of $0.26 and AFFO of $0.33 per diluted common share1
  • Declares a cash dividend on common stock of $0.28 per share, a 4% increase in our dividend from last quarter and 12% higher than a year ago
  • Issued $90.0 million of 5.75% senior unsecured notes due in 2024

Agency Business

  • Segment income of $13.1 million
  • Loan originations of $845.9 million
  • Servicing portfolio of $18.88 billion, up 2% from 4Q18 and 13% from a year ago

Structured Business

  • Segment income of $15.0 million
  • Portfolio growth of 4% on $416.3 million of loan originations

UNIONDALE, N.Y., May 10, 2019 (GLOBE NEWSWIRE) — Arbor Realty Trust, Inc. (NYSE: ABR), today announced financial results for the first quarter ended March 31, 2019.  Arbor reported net income for the quarter of $22.7 million, or $0.26 per diluted common share, compared to $26.2 million, or $0.42 per diluted common share for the quarter ended March 31, 2018. Adjusted funds from operations (“AFFO”) for the quarter was $35.5 million, or $0.33 per diluted common share, compared to $21.4 million, or $0.25 per diluted common share for the quarter ended March 31, 2018.1

Agency Business

  Loan Origination Platform

Agency Loan Volume  (in thousands)
  Quarter Ended
  March 31, 
2019
  December 31, 
2018
Originations:      
Fannie Mae $ 546,886   $ 1,067,230
Freddie Mac   192,492     527,502
FHA   1,110     15,549
CMBS/Conduit   105,425     14,025
Total Originations $ 845,913   $ 1,624,306
       
Total Loan Sales $ 1,101,766   $ 1,653,421
       
Total Loan Commitments $ 846,963   $ 1,604,502
 

For the quarter ended March 31, 2019, the Agency Business generated revenues of $47.2 million, compared to $84.4 million for the fourth quarter of 2018. Gain on sales, including fee-based services, net was $16.4 million for the quarter, reflecting a margin of 1.49% on loan sales, compared to $18.7 million and 1.13% for the fourth quarter of 2018. Income from mortgage servicing rights was $14.2 million for the quarter, reflecting a rate of 1.68% as a percentage of loan commitments, compared to $36.1 million and 2.25% for the fourth quarter of 2018. 

At March 31, 2019, loans held-for-sale was $225.9 million which was primarily comprised of unpaid principal balances totaling $222.9 million, with financing associated with these loans totaling $222.7 million.

  Fee-Based Servicing Portfolio

Our fee-based servicing portfolio totaled $18.88 billion at March 31, 2019, an increase of 2% from December 31, 2018, primarily a result of $845.9 million of new loan originations, net of $458.4 million in portfolio runoff during the quarter. Servicing revenue, net was $13.5 million for the quarter and consists of servicing revenue of $25.8 million, net of amortization of mortgage servicing rights totaling $12.3 million.

    Fee-Based Servicing Portfolio ($ in thousands)
    As of March 31, 2019   As of December 31, 2018
    UPB Wtd. Avg. 
Fee
Wtd. Avg. 
Life (in years)
  UPB Wtd. Avg. 
Fee
Wtd. Avg. 
Life (in years)
Fannie Mae   $ 13,719,351 0.507 % 7.6   $ 13,562,667 0.513 % 7.4
Freddie Mac     4,515,829 0.303 % 10.8     4,394,287 0.308 % 10.8
FHA     648,583 0.155 % 19.6     644,687 0.155 % 19.6
Total   $ 18,883,763 0.446 % 8.7   $ 18,601,641 0.452 % 8.6
 

Loans sold under the Fannie Mae program contain an obligation to partially guarantee the performance of the loan (“loss-sharing obligations”). At March 31, 2019, the Company’s allowance for loss-sharing obligations was $34.5 million, representing 0.25% of the Fannie Mae servicing portfolio.

Structured Business

  Portfolio and Investment Activity

  • Originated 28 loans totaling $416.3 million, of which 23 were bridge loans for $357.3 million
  • Payoffs and pay downs on 26 loans totaling $279.5 million

At March 31, 2019, the loan and investment portfolio’s unpaid principal balance, excluding loan loss reserves, was $3.41 billion, with a weighted average current interest pay rate of 7.05%, compared to $3.28 billion and 7.02% at December 31, 2018.  Including certain fees earned and costs associated with the loan and investment portfolio, the weighted average current interest pay rate was 7.71% at March 31, 2019, compared to 7.66% at December 31, 2018.

The average balance of the Company’s loan and investment portfolio during the first quarter of 2019, excluding loan loss reserves, was $3.34 billion with a weighted average yield of 7.84%, compared to $3.23 billion and 7.76% for the fourth quarter of 2018. The increase in average yield was primarily due to an increase in LIBOR.

At March 31, 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 balance of debt that finances the Company’s loan and investment portfolio at March 31, 2019 was $3.13 billion with a weighted average interest rate including fees of 5.22% as compared to $2.89 billion and a rate of 5.24% at December 31, 2018. The average balance of debt that finances the Company’s loan and investment portfolio for the first quarter of 2019 was $2.96 billion, as compared to $2.90 billion for the fourth quarter of 2018. The average cost of borrowings for the first quarter was 5.24%, compared to 5.12% for the fourth quarter of 2018. The increase in average costs was primarily due to an increase in LIBOR.

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 March 31, 2019 and as of the most recent collateralized securitization vehicle determination dates in April 2019.

Capital Markets

The Company issued $90.0 million in aggregate principal amount of 5.75% senior unsecured notes in a private placement, generating net proceeds of $88.2 million after deducting offering expenses. The notes are due in April 2024 and the proceeds were 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 $0.28 per share of common stock for the quarter ended March 31, 2019, representing an increase of 4% over the prior quarter dividend of $0.27 per share and 12% from a year ago. The dividend is payable on May 31, 2019 to common stockholders of record on May 23, 2019. The ex-dividend date is May 22, 2019.

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 March 1, 2019 through May 31, 2019. The dividends are payable on May 31, 2019 to preferred stockholders of record on May 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 6079039.

After the live webcast, the call will remain available on the Company’s website through May 31, 2019.  In addition, a telephonic replay of the call will be available until May 17, 2019. The replay dial-in numbers are (855) 859-2056 for domestic callers and (404) 537-3406 for international callers. Please use passcode 6079039.

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 CMBSbridgemezzanine and preferred equitylending. 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  
      March 31,  
      2019   2018  
                 
             
Interest income   $ 71,277     $ 51,612  
Interest expense     41,865       33,387  
  Net interest income     29,412       18,225  
             
Other revenue:          
Gain on sales, including fee-based services, net     16,389       18,193  
Mortgage servicing rights     14,232       19,634  
Servicing revenue, net     13,552       9,547  
Property operating income     2,803       2,910  
Other income, net     (2,128 )     2,878  
  Total other revenue     44,848       53,162  
             
Other expenses:          
Employee compensation and benefits     31,764       29,494  
Selling and administrative     9,761       8,915  
Property operating expenses     2,396       2,796  
Depreciation and amortization     1,912       1,846  
Provision for loss sharing (net of recoveries)     454       473  
Provision for loan losses (net of recoveries)           325  
  Total other expenses     46,287       43,849  
             
Income before extinguishment of debt, income from          
  equity affiliates and income taxes     27,973       27,538  
Loss on extinguishment of debt     (128 )      
Income from equity affiliates     2,151       746  
Benefit from income taxes     10       8,784  
             
Net income     30,006       37,068  
             
Preferred stock dividends     1,888       1,888  
Net income attributable to noncontrolling interest     5,468       8,991  
Net income attributable to common stockholders   $ 22,650     $ 26,189  
             
Basic earnings per common share   $ 0.27     $ 0.42  
Diluted earnings per common share   $ 0.26     $ 0.42  
             
Weighted average shares outstanding:          
  Basic     85,151,878       61,842,336  
  Diluted     107,869,511       84,699,735  
             
Dividends declared per common share   $ 0.27     $ 0.21  
             

 

 ARBOR REALTY TRUST, INC. AND SUBSIDIARIES 
CONSOLIDATED BALANCE SHEETS
($ in thousands—except share and per share data)
               
               
          March 31,   December 31,
          2019   2018
          (Unaudited)    
Assets:        
Cash and cash equivalents   $ 124,505     $ 160,063  
Restricted cash     291,865       180,606  
Loans and investments, net     3,323,778       3,200,145  
Loans held-for-sale, net     225,878       481,664  
Capitalized mortgage servicing rights, net     277,639       273,770  
Securities held to maturity, net     86,036       76,363  
Investments in equity affiliates     28,444       21,580  
Real estate owned, net     14,473       14,446  
Due from related party     1,975       1,287  
Goodwill and other intangible assets     114,764       116,165  
Other assets     108,368       86,086  
Total assets   $ 4,597,725     $ 4,612,175  
               
Liabilities and Equity:        
Credit facilities and repurchase agreements     1,032,495       1,135,627  
Collateralized loan obligations     1,594,970       1,593,548  
Debt fund     68,304       68,183  
Senior unsecured notes     211,001       122,484  
Convertible senior unsecured notes, net     252,229       254,768  
Junior subordinated notes to subsidiary trust issuing preferred securities     140,434       140,259  
Due to related party     261        
Due to borrowers     76,396       78,662  
Allowance for loss-sharing obligations     34,518       34,298  
Other liabilities     109,734       118,780  
Total liabilities     3,520,342       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; 20,487,544 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; 85,955,995      
      and 83,987,707 shares issued and outstanding, respectively     860       840  
    Additional paid-in capital     893,471       879,029  
    Accumulated deficit     (74,589 )     (74,133 )
Total Arbor Realty Trust, Inc. stockholders’ equity     909,243       895,238  
               
Noncontrolling interest     168,140       170,328  
Total equity     1,077,383       1,065,566  
               
Total liabilities and equity   $ 4,597,725     $ 4,612,175  
               

 

 ARBOR REALTY TRUST, INC. AND SUBSIDIARIES 
STATEMENT OF INCOME SEGMENT INFORMATION- (Unaudited)
(in thousands)
                   
                   
      Quarter Ended March 31, 2019
                   
      Structured 
Business
  Agency 
Business
  Other / 
Eliminations (1)
  Consolidated
                   
Interest income   $ 65,809     $ 5,468     $     $ 71,277  
Interest expense     38,257       3,608             41,865  
  Net interest income     27,552       1,860             29,412  
                   
Other revenue:                
Gain on sales, including fee-based services, net           16,389             16,389  
Mortgage servicing rights           14,232             14,232  
Servicing revenue           25,834             25,834  
Amortization of MSRs           (12,282 )           (12,282 )
Property operating income     2,803                   2,803  
Other income, net     337       (2,465 )           (2,128 )
  Total other revenue     3,140       41,708             44,848  
                   
Other expenses:                
Employee compensation and benefits     8,464       23,300             31,764  
Selling and administrative     4,421       5,340             9,761  
Property operating expenses     2,396                   2,396  
Depreciation and amortization     512       1,400             1,912  
Provision for loss sharing (net of recoveries)           454             454  
  Total other expenses     15,793       30,494             46,287  
                   
Income before extinguishment of debt, income                
  from equity affiliates and income taxes     14,899       13,074             27,973  
Loss on extinguishment of debt     (128 )                 (128 )
Income from equity affiliates     2,151                   2,151  
Benefit from income taxes           10             10  
                   
Net income   $ 16,922     $ 13,084     $     $ 30,006  
                   
Preferred stock dividends     1,888                   1,888  
Net income attributable to noncontrolling interest               5,468       5,468  
Net income attributable to common stockholders   $ 15,034     $ 13,084     $ (5,468 )   $ 22,650  
                   
(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)
             
    March 31, 2019
    Structured 
Business
  Agency 
Business
  Consolidated
Assets:            
Cash and cash equivalents   $ 53,006   $ 71,499   $ 124,505
Restricted cash     291,865         291,865
Loans and investments, net     3,323,778         3,323,778
Loans held-for-sale, net         225,878     225,878
Capitalized mortgage servicing rights, net       277,639     277,639
Securities held to maturity, net     10,000     76,036     86,036
Investments in equity affiliates     28,444         28,444
Goodwill and other intangible assets     12,500     102,264     114,764
Other assets     96,436     28,380     124,816
Total assets   $ 3,816,029   $ 781,696   $ 4,597,725
             
Liabilities:            
Debt obligations     3,076,716     222,717     3,299,433
Allowance for loss-sharing obligations       34,518     34,518
Other liabilities     143,022     43,369     186,391
Total liabilities   $ 3,219,738   $ 300,604   $ 3,520,342
             

 

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
  March 31,
  2019   2018
Net income attributable to common stockholders $ 22,650     $ 26,189  
               
Adjustments:              
Net income attributable to noncontrolling interest   5,468       8,991  
Depreciation – real estate owned   175       178  
Depreciation – investments in equity affiliates   126       125  
               
Funds from operations  (1) $ 28,419     $ 35,483  
               
Adjustments:              
Income from mortgage servicing rights   (14,232 )     (19,634 )
Deferred tax benefit   (4,168 )     (13,320 )
Amortization and write-offs of MSRs   16,739       16,676  
Depreciation and amortization   2,564       2,255  
Net loss (gain) on changes in fair value of derivatives   2,465       (2,645 )
Stock-based compensation   3,756       2,545  
               
Adjusted funds from operations  (1) $ 35,543     $ 21,360  
               
Diluted FFO per share  (1) $ 0.26     $ 0.42  
               
Diluted AFFO per share  (1) $ 0.33     $ 0.25  
               
Diluted weighted average shares outstanding  (1)   107,869,511       84,699,735  
               
(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.

See Campaign: https://www.globenewswire.com/news-release/2019/05/10/1821801/0/en/Arbor-Realty-Trust-Reports-First-Quarter-Results-and-Increases-Quarterly-Dividend-to-0-28-per-Share.html
Contact Information:
Arbor Realty Trust, Inc. Paul Elenio, Chief Financial Officer 516-506-4422 pelenio@arbor.com

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