Arbor Realty Trust Reports Second Quarter 2020 Results and Increases Quarterly Dividend to $0.31 per Share

Nachrichtenquelle: globenewswire
31.07.2020, 14:00  |  139   |   |   

Company Highlights:

-   GAAP net income of $0.40 and core earnings of $0.46 per diluted common share1
-   Raised cash dividend on common stock to $0.31 per share, a 7% increase from 2Q19
-   Generated pretax income of $20.9 million from our residential mortgage banking joint venture
-   Strong liquidity position currently at approximately $450 million

Agency Business

-   Servicing portfolio of $21.58 billion, a 7% increase from 1Q20 and 11% from 2Q19
-   Strong loan origination volume of $1.40 billion, a 9% increase from 2Q19
-   Closed $727.2 million private label multifamily mortgage loan securitization generating cash of over $115 million
-   Segment income of $21.4 million 

Structured Business

-   $300.5 million of loan originations and portfolio growth of 4%
-   Segment income of $30.9 million

UNIONDALE, N.Y., July 31, 2020 (GLOBE NEWSWIRE) -- Arbor Realty Trust, Inc. (NYSE:ABR), today announced financial results for the second quarter ended June 30, 2020.  Arbor reported net income for the quarter of $44.1 million, or $0.40 per diluted common share, compared to net income of $28.9 million, or $0.31 per diluted common share for the quarter ended June 30, 2019.  Core earnings for the quarter was $60.4 million, or $0.46 per diluted common share, compared to $38.6 million, or $0.34 per diluted common share for the quarter ended June 30, 2019.1

Agency Business

Loan Origination Platform

Agency Loan Volume (in thousands)
  Quarter Ended
  June 30, 2020   March 31, 2020
Originations:      
Fannie Mae $ 1,140,181   $ 581,973
Freddie Mac   135,720     199,711
FHA   75,533     17,944
Private Label   49,122     282,345
Total Originations $ 1,400,556   $ 1,081,973
       
Total Loan Sales $ 1,992,889   $ 957,060
       
Total Loan Commitments $ 1,206,723   $ 1,267,219
       

For the quarter ended June 30, 2020, the Agency Business generated revenues (excluding gains and losses on derivative instruments) of $81.1 million, compared to $59.6 million for the first quarter of 2020. Gain on sales, including fee-based services, net was $26.4 million for the quarter, reflecting a margin of 1.32% on loan sales, compared to $14.3 million and 1.49% for the first quarter of 2020. Income from mortgage servicing rights was $32.4 million for the quarter, reflecting a rate of 2.69% as a percentage of loan commitments, compared to $21.9 million and 1.73% for the first quarter of 2020.   

At June 30, 2020, loans held-for-sale was $360.4 million which was primarily comprised of unpaid principal balances totaling $349.9 million, with financing associated with these loans totaling $333.5 million.

The Company completed its first private label multifamily securitization totaling $727.2 million comprised of fixed rate, 10-year first lien mortgage loans. The Company originated and sold the mortgage loans to the securitization and will be the primary servicer. The Company retained subordinate certificate interests in the securitization of $63.6 million, in satisfaction of credit risk retention requirements.

Fee-Based Servicing Portfolio

Our fee-based servicing portfolio totaled $21.58 billion at June 30, 2020, an increase of 6.9% from March 31, 2020, primarily the result of servicing rights retained on $727.2 million of private label loans, as well as $1.40 billion of new agency loan originations, net of $693.8 million in portfolio runoff during the quarter. Servicing revenue, net was $13.5 million for the quarter and consisted of servicing revenue of $25.4 million, net of amortization of mortgage servicing rights totaling $11.9 million.

    Fee-Based Servicing Portfolio ($ in thousands)
    As of June 30, 2020   As of March 31, 2020
    UPB Wtd. Avg. Fee Wtd. Avg. Life (in years)   UPB Wtd. Avg. Fee Wtd. Avg. Life (in years)
Fannie Mae   $ 15,672,931   0.505 % 8.2   $ 14,946,922 0.493 % 8.0
Freddie Mac     4,560,382   0.295 % 10.6     4,570,521 0.294 % 10.6
FHA     621,487   0.154 % 19.6     679,685 0.152 % 19.1
Private Label     727,132   0.200 % 9.5     - -   -
Total   $ 21,581,932   0.441 % 9.1   $ 20,197,128 0.436 % 8.9

Loans sold under the Fannie Mae program contain an obligation to partially guarantee the performance of the loan (“loss-sharing obligations”), and includes $32.8 million for the fair value of the guarantee obligation undertaken at June 30, 2020. The Company’s provision for loss sharing associated with current expected credit losses, or “CECL,” was $2.0 million for the second quarter of 2020.  At June 30, 2020, the Company’s total CECL allowance for loss-sharing obligations was $40.4 million, representing 0.26% of the Fannie Mae servicing portfolio.

Structured Business

  Portfolio and Investment Activity

  • Originated 20 loans totaling $300.5 million, of which $296.0 million was funded at June 30, 2020, and consisted primarily of 17 multifamily bridge loans totaling $298.8 million
  • Payoffs and pay downs on 20 loans totaling $159.2 million
  • Portfolio growth of $171.6 million, or 3.6%

At June 30, 2020, the loan and investment portfolio’s unpaid principal balance, excluding loan loss reserves, was $4.97 billion, with a weighted average current interest pay rate of 5.57%, compared to $4.80 billion and 5.70% at March 31, 2020.  Including certain fees earned and costs associated with the loan and investment portfolio, the weighted average current interest pay rate was 6.10% at June 30, 2020, compared to 6.35% at March 31, 2020.

The average balance of the Company’s loan and investment portfolio during the second quarter of 2020, excluding loan loss reserves, was $4.81 billion with a weighted average yield of 6.16%, compared to $4.58 billion and 6.77% for the first quarter of 2020. The decrease in average yield was primarily due to lower fees on loan payoffs, a decrease in LIBOR and lower rates on originations when compared to runoff in the second quarter as compared to the first quarter.

During the second quarter of 2020, the Company recorded provision for loan losses of $10.6 million as a result of its loan review process associated with CECL. At June 30, 2020, the Company’s total allowance for loan losses was $152.8 million.  The Company had six non-performing loans with a carrying value of $60.5 million, before related loan loss reserves of $16.6 million, compared to four loans with a carrying value of $8.3 million, before related loan loss reserves of $6.5 million as of March 31, 2020.

The Company recorded pretax income of $20.9 million from its joint venture investment in a residential mortgage banking business due to the historically low interest rate environment.

Financing Activity

The balance of debt that finances the Company’s loan and investment portfolio at June 30, 2020 was $4.54 billion with a weighted average interest rate including fees of 3.14% as compared to $4.70 billion and a rate of 3.68% at March 31, 2020. The average balance of debt that finances the Company’s loan and investment portfolio for the second quarter of 2020 was $4.53 billion, as compared to $4.25 billion for the first quarter of 2020. The average cost of borrowings for the second quarter of 2020 was 3.26%, compared to 4.11% for the first quarter of 2020. The decrease in average costs was primarily due to a decrease in LIBOR.

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 June 30, 2020 and as of the most recent collateralized securitization vehicle determination dates in July 2020.

Capital Markets

The Company issued $70.8 million in aggregate principal amount of 8.00% senior unsecured notes in two private placements, generating net proceeds of $69.6 million after deducting offering expenses. The notes are due in 2023 and the proceeds were used to repay secured indebtedness, make investments relating to its business and for general corporate purposes.

Dividends

The Company announced today that its Board of Directors has declared a quarterly cash dividend of $0.31 per share of common stock for the quarter ended June 30, 2020. The dividend is payable on August 31, 2020 to common stockholders of record on August 17, 2020. The ex-dividend date is August 14, 2020.

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, 2020 through August 31, 2020. The dividends are payable on August 31, 2020 to preferred stockholders of record on August 15, 2020. 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 9:00 a.m. Eastern Time.  A live webcast and replay of the conference call will be available at http://www.arbor.com in the investor relations section of the Company’s website. Those without web access should access the call telephonically at least ten minutes prior to the conference call. The dial-in numbers are (877) 876-9173 for domestic callers and (785) 424-1667 for international callers. Please use participant passcode ABRQ220 when prompted by the operator.

A telephonic replay of the call will be available until August 7, 2020. The replay dial-in numbers are (800) 839-5492 for domestic callers and (402) 220-2551 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, 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, changes in economic conditions generally, and the real estate markets specifically, in particular, due to the uncertainties created by 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, 2019 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 Operations - (Unaudited)  
($ in thousands—except share and per share data)  
                     
      Quarter Ended June 30,   Six Months Ended June 30,  
        2020       2019       2020       2019    
                     
Interest income   $ 83,080     $ 82,171     $ 171,606     $ 153,448    
Interest expense     41,302       48,284       91,284       90,149    
  Net interest income     41,778       33,887       80,322       63,299    
                     
Other revenue:                  
Gain on sales, including fee-based services, net     26,366       14,211       40,671       30,600    
Mortgage servicing rights     32,417       18,709       54,351       32,941    
Servicing revenue, net     13,506       12,612       26,809       26,164    
Property operating income     751       3,147       2,943       5,950    
(Loss) gain on derivative instruments, net     (7,368 )     742       (58,099 )     (1,723 )  
Other income, net     1,049       651       2,351       989    
  Total other revenue     66,721       50,072       69,026       94,921    
                     
Other expenses:                  
Employee compensation and benefits     34,438       29,022       68,690       60,786    
Selling and administrative     8,606       10,481       19,658       20,242    
Property operating expenses     1,035       2,691       3,478       5,086    
Depreciation and amortization     1,961       1,909       3,908       3,821    
Impairment loss on real estate owned     -       1,000       -       1,000    
Provision for loss sharing (net of recoveries)     2,395       368       23,932       822    
Provision for credit losses (net of recoveries)     12,714       -       67,096       -    
  Total other expenses     61,149       45,471       186,762       91,757    
                     
Income (loss) before extinguishment of debt, income from              
  equity affiliates and income taxes     47,350       38,488       (37,414 )     66,463    
Loss on extinguishment of debt     (1,592 )     -       (3,546 )     (128 )  
Income from equity affiliates     20,408       3,264       24,401       5,415    
(Provision for) benefit from income taxes     (12,077 )     (4,350 )     2,293       (4,341 )  
                     
Net income (loss)     54,089       37,402       (14,266 )     67,409    
                     
Preferred stock dividends     1,888       1,888       3,777       3,777    
Net income (loss) attributable to noncontrolling interest   8,110       6,598       (2,824 )     12,066    
Net income (loss) attributable to common stockholders   $ 44,091     $ 28,916     $ (15,219 )   $ 51,566    
                     
Basic earnings (loss) per common share   $ 0.40     $ 0.32     $ (0.14 )   $ 0.59    
Diluted earnings (loss) per common share   $ 0.40     $ 0.31     $ (0.14 )   $ 0.57    
                     
Weighted average shares outstanding:                  
  Basic     110,745,572       89,955,923       110,768,992       87,567,171    
  Diluted     131,882,398       113,624,384       131,166,018       110,779,680    
                     
Dividends declared per common share   $ 0.30     $ 0.28     $ 0.60     $ 0.55    
                     

 

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES  
Consolidated Balance Sheets  
($ in thousands—except share and per share data)  
                 
          June 30,   December 31,  
            2020       2019    
          (Unaudited)      
Assets:          
Cash and cash equivalents   $ 384,182     $ 299,687    
Restricted cash     94,847       210,875    
Loans and investments, net (allowance for credit losses of $152,811 and $71,069, respectively)      4,800,176       4,189,960    
Loans held-for-sale, net     360,372       861,360    
Capitalized mortgage servicing rights, net     313,288       286,420    
Securities held-to-maturity, net (allowance for credit losses of $3,148 and $0, respectively)      119,019       88,699    
Investments in equity affiliates     64,991       41,800    
Real estate owned, net     12,990       13,220    
Due from related party     8,416       10,651    
Goodwill and other intangible assets     108,040       110,700    
Other assets     123,803       125,788    
Total assets   $ 6,390,124     $ 6,239,160    
                 
Liabilities and Equity:          
Credit facilities and repurchase agreements   $ 1,235,613     $ 1,678,288    
Collateralized loan obligations     2,514,524       2,130,121    
Debt fund     -       68,629    
Senior unsecured notes     661,757       319,799    
Convertible senior unsecured notes, net     265,244       284,152    
Junior subordinated notes to subsidiary trust issuing preferred securities     141,295       140,949    
Due to related party     584       13,100    
Due to borrowers     70,132       79,148    
Allowance for loss-sharing obligations     73,220       34,648    
Other liabilities     169,979       134,299    
Total liabilities     5,132,348       4,883,133    
                 
Equity:          
Arbor Realty Trust, Inc. stockholders' equity:          
Preferred stock, cumulative, redeemable, $0.01 par value: 100,000,000 shares authorized;      
special voting preferred shares; 20,369,265 and 20,484,094 shares issued and          
outstanding, respectively; 8.25% Series A, $38,788 aggregate liquidation preference;      
1,551,500 shares issued and outstanding; 7.75% Series B, $31,500 aggregate          
liquidation preference; 1,260,000 shares issued and outstanding; 8.50% Series C,        
$22,500 aggregate liquidation preference; 900,000 shares issued and outstanding   89,500       89,501    
Common stock, $0.01 par value: 500,000,000 shares authorized; 112,211,461          
and 109,706,214 shares issued and outstanding, respectively     1,122       1,097    
Additional paid-in capital     1,182,449       1,154,932    
Accumulated deficit     (167,165 )     (60,920 )  
Total Arbor Realty Trust, Inc. stockholders’ equity     1,105,906       1,184,610    
                 
Noncontrolling interest     151,870       171,417    
Total equity     1,257,776       1,356,027    
                 
Total liabilities and equity   $ 6,390,124     $ 6,239,160    
                 


ARBOR REALTY TRUST, INC. AND SUBSIDIARIES  
Statement of Operations Segment Information - (Unaudited)  
(in thousands)  
                   
                   
    Quarter Ended June 30, 2020  
                   
    Structured Business   Agency Business   Other / Eliminations (1)   Consolidated  
                   
Interest income   $ 74,295     $ 8,785     $ -     $ 83,080    
Interest expense     36,739       4,563       -       41,302    
Net interest income     37,556       4,222       -       41,778    
                   
Other revenue:                  
Gain on sales, including fee-based services, net     -       26,366       -       26,366    
Mortgage servicing rights     -       32,417       -       32,417    
Servicing revenue     -       25,397       -       25,397    
Amortization of MSRs     -       (11,891 )     -       (11,891 )  
Property operating income     751       -       -       751    
Loss on derivative instruments, net     (294 )     (7,074 )     -       (7,368 )  
Other income, net     990       59       -       1,049    
Total other revenue     1,447       65,274       -       66,721    
                   
Other expenses:                  
Employee compensation and benefits     9,161       25,277       -       34,438    
Selling and administrative     3,533       5,073       -       8,606    
Property operating expenses     1,035       -       -       1,035    
Depreciation and amortization     629       1,332       -       1,961    
Provision for loss sharing (net of recoveries)     -       2,395       -       2,395    
Provision for credit losses (net of recoveries)     10,558       2,156       -       12,714    
Total other expenses     24,916       36,233       -       61,149    
                   
Income before extinguishment of debt, income from                
equity affiliates and income taxes     14,087       33,263       -       47,350    
Loss on extinguishment of debt     (1,592 )     -       -       (1,592 )  
Income from equity affiliates     20,408       -       -       20,408    
Provision for income taxes     (164 )     (11,913 )     -       (12,077 )  
                   
Net income     32,739       21,350       -       54,089    
                   
Preferred stock dividends     1,888       -       -       1,888    
Net income attributable to noncontrolling interest     -       -       8,110       8,110    
Net income (loss) attributable to common stockholders   $ 30,851     $ 21,350     $ (8,110 )   $ 44,091    
                   
(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, 2020  
    Structured Business   Agency Business   Consolidated  
Assets:              
Cash and cash equivalents   $ 268,467   $ 115,715   $ 384,182  
Restricted cash     90,457     4,390     94,847  
Loans and investments, net     4,800,176     -     4,800,176  
Loans held-for-sale, net     -     360,372     360,372  
Capitalized mortgage servicing rights, net     -     313,288     313,288  
Securities held-to-maturity, net     20,000     99,019     119,019  
Investments in equity affiliates     64,991     -     64,991  
Goodwill and other intangible assets     12,500     95,540     108,040  
Other assets     107,134     38,075     145,209  
Total assets   $ 5,363,725   $ 1,026,399   $ 6,390,124  
               
Liabilities:              
Debt obligations   $ 4,484,961   $ 333,472   $ 4,818,433  
Allowance for loss-sharing obligations   -     73,220     73,220  
Other liabilities     185,378     55,317     240,695  
Total liabilities   $ 4,670,339   $ 462,009   $ 5,132,348  
               


ARBOR REALTY TRUST, INC. AND SUBSIDIARIES  
Supplemental Schedule of Non-GAAP Financial Measures - (Unaudited)  
Reconciliation of Core Earnings to GAAP Net Income (Loss)  
($ in thousands—except share and per share data)  
   
                 
  Quarter Ended June 30,   Six Months Ended June 30,  
    2020       2019       2020       2019    
Net income (loss) attributable to common stockholders $ 44,091     $ 28,916     $ (15,219 )   $ 51,566    
                 
Adjustments:                
Net income (loss) attributable to noncontrolling interest   8,110       6,598       (2,824 )     12,066    
Income from mortgage servicing rights   (32,417 )     (18,709 )     (54,351 )     (32,941 )  
Deferred tax provision (benefit)   10,879       918       (9,025 )     (3,250 )  
Amortization and write-offs of MSRs   15,542       16,914       33,283       33,654    
Depreciation and amortization   2,906       2,853       5,863       5,717    
Loss on extinguishment of debt   1,592       -       3,546       128    
Provision for credit losses   15,109       368       91,028       822    
(Gain) loss on derivative instruments, net   (7,371 )     (742 )     43,360       1,723    
Stock-based compensation   1,915       1,502       5,432       5,258    
                 
Core earnings (1) $ 60,356     $ 38,618     $ 101,093     $ 74,743    
                 
Diluted core earnings per share (1) $ 0.46     $ 0.34     $ 0.77     $ 0.67    
                 
Diluted weighted average shares outstanding (1)   131,882,398       113,624,384       131,166,018       110,779,680    
                 
(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.  
   
Beginning in the first quarter of 2020, the Company is presenting core earnings as its non-GAAP financial measure in replacement of adjusted funds from operations ("AFFO"). Core earnings is comparable to our previous AFFO metric, revised to exclude provisions for credit losses (including CECL) related to our structured loan portfolio, securities held-to-maturity and loss-sharing obligations related to the Fannie Mae program. The Company is presenting core earnings because management believes it is important supplemental measure of the Company’s operating performance and is frequently used by peers, analysts, investors and other parties in the evaluation of REITs. Prior period amounts presented above have been conformed to reflect this change.  
   
The Company defines core 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 mortgage servicing rights ("MSRs"), amortization and write-offs of MSRs, gains and losses on derivative instruments primarily associated with private label loans that have not yet been sold and securitized, the tax impact on cumulative gains or losses on derivative instruments associated with private label loans that were sold during the periods presented, changes in fair value of GSE-related derivatives that temporarily flow through earnings, deferred tax (benefit) provision, provisions for credit losses (including CECL) and the amortization of the convertible senior notes conversion option. The Company also adds back one-time charges such as acquisition costs and one-time gains or losses on the early extinguishment of debt.  
   
Core earnings is 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 core earnings may be different from the calculations used by other companies and, therefore, comparability may be limited.  

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