• Arbor Realty Trust Reports Third Quarter 2023 Results and Declares Dividend of $0.43 per Share

    Source: Nasdaq GlobeNewswire / 27 Oct 2023 07:15:31   America/Chicago

    Company Highlights:

    • Diversified, annuity-based operating platform with a multifamily focus that has continued to generate strong distributable earnings and dividends
      • GAAP net income of $0.41 per diluted common share
      • Distributable earnings1 of $0.55 per diluted common share, well in excess of our current dividend, representing a 78% payout ratio
      • Declares cash dividend on common stock of $0.43 per share representing an annualized dividend of $1.72 per share
      • Strong liquidity position with ~$1 billion in cash and liquidity and ~$500 million of restricted cash in replenishable CLO vehicles with a weighted average cost of 1.70% over benchmark rates2
      • Agency loan originations of $1.15 billion and a servicing portfolio of ~$29.94 billion, up 2%
      • Structured loan originations of $240.2 million and a portfolio of ~$13.12 billion

    UNIONDALE, N.Y., Oct. 27, 2023 (GLOBE NEWSWIRE) -- Arbor Realty Trust, Inc. (NYSE: ABR), today announced financial results for the third quarter ended September 30, 2023. Arbor reported net income for the quarter of $77.9 million, or $0.41 per diluted common share, compared to net income of $62.7 million, or $0.36 per diluted common share for the quarter ended September 30, 2022. Distributable earnings for the quarter was $112.2 million, or $0.55 per diluted common share, compared to $105.1 million, or $0.56 per diluted common share for the quarter ended September 30, 2022.

    Agency Business

    Loan Origination Platform

     Agency Loan Volume (in thousands)
     Quarter Ended
     September 30, 2023 June 30, 2023
    Fannie Mae$721,398 $1,079,910
    Freddie Mac 339,241  217,884
    Private Label 67,965  50,256
    FHA 19,215  62,552
    SFR-Fixed Rate 2,030  11,837
    Total Originations$1,149,849 $1,422,439
        
    Total Loan Sales$1,275,420 $1,410,724
        
    Total Loan Commitments$1,211,347 $1,133,312
     

    For the quarter ended September 30, 2023, the Agency Business generated revenues of $80.8 million, compared to $76.7 million for the second quarter of 2023. Gain on sales, including fee-based services, net on the GSE/Agency business (excluding private label and SFR) was $17.7 million for the quarter, reflecting a margin of 1.48%, compared to $22.2 million and 1.67% for the second quarter of 2023. Income from mortgage servicing rights was $14.1 million for the quarter, reflecting a rate of 1.16% as a percentage of loan commitments, compared to $16.2 million and 1.43% for the second quarter of 2023.

    At September 30, 2023, loans held-for-sale was $364.3 million, with financing associated with these loans totaling $354.6 million.

    Fee-Based Servicing Portfolio

    The Company’s fee-based servicing portfolio totaled $29.94 billion at September 30, 2023. Servicing revenue, net was $35.5 million for the quarter and consisted of servicing revenue of $51.4 million, net of amortization of mortgage servicing rights totaling $15.9 million.

     Fee-Based Servicing Portfolio ($ in thousands)
     September 30, 2023 June 30, 2023
     UPB Wtd. Avg.
    Fee (bps)    		 Wtd. Avg.
    Life (years)    		 UPB Wtd. Avg.
    Fee (bps)    		 Wtd. Avg.
    Life (years)
    Fannie Mae$20,463,620 48.3 7.7 $20,002,570 48.9 7.7
    Freddie Mac 5,184,888 24.2 8.5  5,245,325 24.8 8.8
    Private Label 2,371,475 19.2 7.3  2,305,000 19.3 7.5
    FHA 1,322,832 14.5 19.9  1,303,812 14.5 20.0
    Bridge 305,950 11.2 3.6  299,578 11.1 3.5
    SFR-Fixed Rate 287,942 20.1 5.8  290,266 20.0 5.9
    Total$29,936,707 39.7 8.3 $29,446,551 40.1 8.4
     

    Loans sold under the Fannie Mae program contain an obligation to partially guarantee the performance of the loan (“loss-sharing obligations”) and includes $34.6 million for the fair value of the guarantee obligation undertaken at September 30, 2023. The Company recorded a $1.6 million net provision for loss sharing associated with CECL for the third quarter of 2023. At September 30, 2023, the Company’s total CECL allowance for loss-sharing obligations was $34.7 million, representing 0.17% of the Fannie Mae servicing portfolio.

    Structured Business

    Portfolio and Investment Activity

     Structured Portfolio Activity ($ in thousands)
     Quarter Ended
     September 30, 2023 June 30, 2023
     UPB % UPB %
    Bridge:       
    Multifamily$92,000 38% $98,530 47%
    SFR 140,379 59%  108,964 52%
      232,379 97%  207,494 99%
            
    Mezzanine/Preferred Equity 7,779 3%  1,500 1%
    Total Originations$240,158 100% $208,994 100%
            
    Number of Loans Originated 42    26  
            
    SFR Commitments$429,452   $200,182  
            
    Runoff$664,792   $685,220  
     


     Structured Portfolio ($ in thousands)
     September 30, 2023 June 30, 2023
     UPB % UPB %
    Bridge:       
    Multifamily$11,421,819 87% $11,887,768 88%
    SFR 1,163,648 9%  1,023,959 8%
    Other 205,505 2%  256,575 2%
      12,790,972 98%  13,168,302 98%
            
    Mezzanine/Preferred Equity 321,729 2%  312,812 2%
    SFR Permanent 9,694 <1%  10,493 <1%
    Total Portfolio$13,122,395 100% $13,491,607 100%
     

    At September 30, 2023, the loan and investment portfolio’s unpaid principal balance, excluding loan loss reserves, was $13.12 billion, with a weighted average current interest pay rate of 8.80%, compared to $13.49 billion and 8.76% at June 30, 2023. Including certain fees earned and costs associated with the loan and investment portfolio, the weighted average current interest pay rate was 9.12% at September 30, 2023, compared to 9.07% at June 30, 2023.

    The average balance of the Company’s loan and investment portfolio during the third quarter of 2023, excluding loan loss reserves, was $13.40 billion with a weighted average yield of 9.25%, compared to $13.66 billion and 9.19% for the second quarter of 2023.

    During the third quarter of 2023, the Company recorded a $15.0 million provision for loan losses associated with CECL. At September 30, 2023, the Company’s total allowance for loan losses was $184.1 million. The Company had twelve non-performing loans with a carrying value of $137.9 million, before related loan loss reserves of $12.6 million, compared to seven loans with a carrying value of $122.4 million, before loan loss reserves of $10.1 million at June 30, 2023.

    Financing Activity

    The balance of debt that finances the Company’s loan and investment portfolio at September 30, 2023 was $11.86 billion with a weighted average interest rate including fees of 7.41% as compared to $12.11 billion and a rate of 7.25% at June 30, 2023.

    The average balance of debt that finances the Company’s loan and investment portfolio for the third quarter of 2023 was $12.00 billion, as compared to $12.46 billion for the second quarter of 2023. The average cost of borrowings for the third quarter of 2023 was 7.37%, compared to 7.11% for the second quarter of 2023. The increase in average cost was primarily due to increases in the benchmark index rates in the third quarter of 2023.

    Dividend

    The Company announced today that its Board of Directors has declared a quarterly cash dividend of $0.43 per share of common stock for the quarter ended September 30, 2023. The dividend is payable on November 30, 2023 to common stockholders of record on November 17, 2023. The ex-dividend date is November 16, 2023.

    Earnings Conference Call

    The Company will host a conference call today at 10:00 a.m. Eastern Time. A live webcast and replay of the conference call will be available at www.arbor.com in the investor relations section of the Company’s website, or you can access the call telephonically at least ten minutes prior to the conference call. The dial-in numbers are (800) 225-9448 for domestic callers and (203) 518-9708 for international callers. Please use participant passcode ABRQ323 when prompted by the operator.

    A telephonic replay of the call will be available until November 3, 2023. The replay dial-in numbers are (800) 839-2485 for domestic callers and (402) 220-7222 for international callers.

    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, single-family rental (SFR) portfolios, 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 leading Fannie Mae DUS® lender and Freddie Mac Optigo® Seller/Servicer, and an approved FHA Multifamily Accelerated Processing (MAP) lender. Arbor’s product platform also includes bridge, CMBS, mezzanine and preferred equity loans. 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, changes in economic conditions generally, and the real estate markets specifically, in particular, due to the severity and duration of the COVID-19 pandemic, continued ability to source new investments, changes in interest rates and/or credit spreads, and other risks detailed in Arbor’s Annual Report on Form 10-K for the year ended December 31, 2022 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.

    Notes

    1. 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 the last page of this release.
    2. Amounts reflect approximate balances as of October 25, 2023.
    Contact:Arbor Realty Trust, Inc.
    Paul Elenio, Chief Financial Officer
    516-506-4422
    pelenio@arbor.com
      


    ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
    Consolidated Statements of Income - (Unaudited)
    ($ in thousands—except share and per share data)

     Quarter Ended September 30, Nine Months Ended September 30,
      2023   2022   2023   2022 
    Interest income$336,474  $259,778  $1,000,159  $627,804 
    Interest expense 229,180   160,452   675,749   350,079 
    Net interest income 107,294   99,326   324,410   277,725 
            
    Other revenue:       
    Gain on sales, including fee-based services, net 18,619   14,360   55,795   32,526 
    Mortgage servicing rights 14,109   19,408   48,769   52,287 
    Servicing revenue, net 35,463   22,744   97,376   64,513 
    Property operating income 1,450   445   4,261   1,031 
    Gain (loss) on derivative instruments, net (421)  (15,909)  (3,582)  10,083 
    Other income (loss), net 173   (6,014)  5,099   (16,061)
    Total other revenue 69,393   35,034   207,718   144,379 
            
    Other expenses:       
    Employee compensation and benefits 39,810   38,811   123,518   119,736 
    Selling and administrative 12,367   13,225   38,574   40,960 
    Property operating expenses 1,479   366   4,227   1,443 
    Depreciation and amortization 2,286   2,078   7,297   6,092 
    Provision for loss sharing (net of recoveries) 1,679   412   12,528   (2,199)
    Provision for credit losses (net of recoveries) 18,652   2,274   55,047   9,700 
    Total other expenses 76,273   57,166   241,191   175,732 
            
    Income before extinguishment of debt, income from equity affiliates, and income taxes 100,414   77,194   290,937   246,372 
    Loss on extinguishment of debt (314)  (3,262)  (1,561)  (4,612)
    Income from equity affiliates 809   4,748   20,694   18,507 
    (Provision for) benefit from income taxes (5,854)  374   (19,436)  (13,166)
            
    Net income 95,055   79,054   290,634   247,101 
            
    Preferred stock dividends 10,342   10,342   31,027   30,612 
    Net income attributable to noncontrolling interest 6,789   6,002   21,200   19,811 
    Net income attributable to common stockholders$77,924  $62,710  $238,407  $196,678 
            
    Basic earnings per common share$0.42  $0.37  $1.30  $1.21 
    Diluted earnings per common share$0.41  $0.36  $1.28  $1.18 
            
    Weighted average shares outstanding:       
    Basic 187,023,395   170,227,553   183,340,149   162,292,235 
    Diluted 221,328,818   205,865,016   217,457,399   195,529,340 
            
    Dividends declared per common share$0.43  $0.39  $1.25  $1.14 
     


    ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
    Consolidated Balance Sheets
    ($ in thousands—except share and per share data)

     September 30, 2023 December 31, 2022
     (Unaudited)  
    Assets:   
    Cash and cash equivalents$895,298 $534,357
    Restricted cash 419,158  713,808
    Loans and investments, net (allowance credit losses of $184,069 and $132,559) 12,892,796  14,254,674
    Loans held-for-sale, net 364,320  354,070
    Capitalized mortgage servicing rights, net 392,203  401,471
    Securities held-to-maturity, net (allowance credit losses of $5,943 and $3,153) 155,172  156,547
    Investments in equity affiliates 62,795  79,130
    Due from related party 211,655  77,419
    Goodwill and other intangible assets 92,551  96,069
    Other assets 416,741  371,440
    Total assets$15,902,689 $17,038,985
        
    Liabilities and Equity:   
    Credit and repurchase facilities$3,391,441 $3,841,814
    Securitized debt 7,004,634  7,849,270
    Senior unsecured notes 1,332,926  1,385,994
    Convertible senior unsecured notes 282,428  280,356
    Junior subordinated notes to subsidiary trust issuing preferred securities 143,695  143,128
    Due to related party 2,170  12,350
    Due to borrowers 114,660  61,237
    Allowance for loss-sharing obligations 69,261  57,168
    Other liabilities 320,973  335,789
    Total liabilities 12,662,188  13,967,106
        
    Equity:   
    Arbor Realty Trust, Inc. stockholders' equity:   
    Preferred stock, cumulative, redeemable, $0.01 par value: 100,000,000 shares authorized, shares issued and outstanding by period: 633,684  633,684
    Special voting preferred shares - 16,293,589 shares   
    6.375% Series D - 9,200,000 shares   
    6.25% Series E - 5,750,000 shares   
    6.25% Series F - 11,342,000 shares   
    Common stock, $0.01 par value: 500,000,000 shares authorized - 188,501,642 and 178,230,522 shares issued and outstanding 1,885  1,782
    Additional paid-in capital 2,364,395  2,204,481
    Retained earnings 104,821  97,049
    Total Arbor Realty Trust, Inc. stockholders’ equity 3,104,785  2,936,996
        
    Noncontrolling interest 135,716  134,883
    Total equity 3,240,501  3,071,879
        
    Total liabilities and equity$15,902,689 $17,038,985
     


    ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
    Statement of Income Segment Information - (Unaudited)
    (in thousands)

     Quarter Ended September 30, 2023
     Structured
    Business    		 Agency
    Business    		 Other /
    Eliminations(1)    		 Consolidated
    Interest income$322,819  $13,655  $-  $336,474 
    Interest expense 222,996   6,184   -   229,180 
    Net interest income 99,823   7,471   -   107,294 
            
    Other revenue:       
    Gain on sales, including fee-based services, net -   18,619   -   18,619 
    Mortgage servicing rights -   14,109   -   14,109 
    Servicing revenue -   51,363   -   51,363 
    Amortization of MSRs -   (15,900)  -   (15,900)
    Property operating income 1,450   -   -   1,450 
    Gain (loss) on derivative instruments, net -   (421)  -   (421)
    Other income (loss), net 751   (578)  -   173 
    Total other revenue 2,201   67,192   -   69,393 
            
    Other expenses:       
    Employee compensation and benefits 12,912   26,898   -   39,810 
    Selling and administrative 5,291   7,076   -   12,367 
    Property operating expenses 1,479   -   -   1,479 
    Depreciation and amortization 1,114   1,172   -   2,286 
    Provision for loss sharing (net of recoveries) -   1,679   -   1,679 
    Provision for credit losses (net of recoveries) 17,243   1,409   -   18,652 
    Total other expenses 38,039   38,234   -   76,273 
            
    Income before extinguishment of debt, income from equity affiliates and income taxes 63,985   36,429   -   100,414 
            
    Loss on extinguishment of debt (314)  -   -   (314)
    Income from equity affiliates 809   -   -   809 
    Benefit from (provision for) income taxes 1,078   (6,932)  -   (5,854)
            
    Net income 65,558   29,497   -   95,055 
            
    Preferred stock dividends 10,342   -   -   10,342 
    Net income attributable to noncontrolling interest -   -   6,789   6,789 
    Net income attributable to common stockholders$55,216  $29,497  $(6,789) $77,924 
     
    (1)  Includes income allocated to the noncontrolling interest holders not allocated to the two reportable segments.


    ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
    Balance Sheet Segment Information - (Unaudited)
    (in thousands)

     September 30, 2023
     Structured
    Business    		 Agency
    Business    		 Consolidated
    Assets:     
    Cash and cash equivalents$499,511 $395,787 $895,298
    Restricted cash 410,056  9,102  419,158
    Loans and investments, net 12,892,796  -  12,892,796
    Loans held-for-sale, net -  364,320  364,320
    Capitalized mortgage servicing rights, net -  392,203  392,203
    Securities held-to-maturity, net -  155,172  155,172
    Investments in equity affiliates 62,795  -  62,795
    Goodwill and other intangible assets 12,500  80,051  92,551
    Other assets and due from related party 536,789  91,607  628,396
    Total assets$14,414,447 $1,488,242 $15,902,689
          
    Liabilities:     
    Debt obligations$11,800,537 $354,587 $12,155,124
    Allowance for loss-sharing obligations -  69,261  69,261
    Other liabilities and due to related party 323,061  114,742  437,803
    Total liabilities$12,123,598 $538,590 $12,662,188
     


    ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
    Reconciliation of Distributable Earnings to GAAP Net Income - (Unaudited)
    ($ in thousands—except share and per share data)

     Quarter Ended September 30, Nine Months Ended September 30,
      2023   2022   2023   2022 
    Net income attributable to common stockholders$77,924  $62,710  $238,407  $196,678 
            
    Adjustments:       
    Net income attributable to noncontrolling interest 6,789   6,002   21,200   19,811 
    Income from mortgage servicing rights (14,109)  (19,408)  (48,769)  (52,287)
    Deferred tax benefit (2,433)  (5,407)  (6,630)  (7,833)
    Amortization and write-offs of MSRs 18,757   26,555   58,684   81,850 
    Depreciation and amortization 3,957   2,666   12,310   7,846 
    Loss on extinguishment of debt 314   3,262   1,561   4,612 
    Provision for credit losses, net 16,922   2,708   57,437   10,254 
    Gain on derivative instruments, net 1,002   22,925   2,036   18,472 
    Stock-based compensation 3,047   3,085   12,141   12,327 
            
    Distributable earnings (1)$112,170  $105,098  $348,377  $291,730 
            
    Diluted distributable earnings per share (1)$0.55  $0.56  $1.74  $1.63 
            
    Diluted weighted average shares outstanding (1) (2) 204,016,436   187,049,617   200,185,980   179,174,194 


    (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.
       
    (2) The diluted weighted average shares outstanding were adjusted to exclude the potential shares issuable upon conversion and settlement of the Company's convertible senior notes principal balance. For the quarters ended September 30, 2023 and September 30, 2022, the diluted weighted average shares outstanding excluded 17,312,382 and 18,815,399 of these potentially issuable shares, respectively. For the nine months ended September 30, 2023 and September 30, 2022, the diluted weighted average shares outstanding excluded 17,271,419 and 16,355,146 of these potentially issuable shares, respectively.
       

    The Company is presenting distributable earnings because management believes it is an important supplemental measure of the Company's operating performance and is useful to investors, analysts and other parties in the evaluation of REITs and their ability to provide dividends to stockholders. Dividends are one of the principal reasons investors invest in REITs. To maintain REIT status, REITs are required to distribute at least 90% of their REIT-taxable income. The Company considers distributable earnings in determining its quarterly dividend and believes that, over time, distributable earnings is a useful indicator of the Company's dividends per share.

    The Company defines distributable earnings as net income (loss) attributable to common stockholders computed in accordance with GAAP, adjusted for accounting items such as depreciation and amortization (adjusted for unconsolidated joint ventures), non-cash stock-based compensation expense, income from MSRs, amortization and write-offs of MSRs, gains/losses on derivative instruments primarily associated with Private Label loans not yet sold and securitized, changes in fair value of GSE-related derivatives that temporarily flow through earnings (net of any tax impact), deferred tax provision (benefit), CECL provisions for credit losses (adjusted for realized losses as described below) and gains/losses on the receipt of real estate from the settlement of loans (prior to the sale of the real estate). The Company also adds back one-time charges such as acquisition costs and one-time gains/losses on the early extinguishment of debt and redemption of preferred stock.

    The Company reduces distributable earnings for realized losses in the period management determines that a loan is deemed nonrecoverable in whole or in part. Loans are deemed nonrecoverable upon the earlier of: (1) when the loan receivable is settled (i.e., when the loan is repaid, or in the case of foreclosure, when the underlying asset is sold); or (2) when management determines that it is nearly certain that all amounts due will not be collected. The realized loss amount is equal to the difference between the cash received, or expected to be received, and the book value of the asset.

    Distributable earnings is not intended to be an indication of the Company's cash flows 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 distributable earnings may be different from the calculations used by other companies and, therefore, comparability may be limited.

     


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