Arbor Realty Trust Reports Second Quarter 2022 Results and Increases Dividend for Ninth Consecutive Quarter to $0.39 per Share

Jul 29th, 2022 12:00 EST

Company Highlights:

  • Diversified, annuity-based operating platform with a multifamily focus that generates strong distributable earnings and dividends in all cycles
    • GAAP net income of $0.41 and distributable earnings of $0.52 per diluted common share1
    • Raised cash dividend on common stock to $0.39 per share, our 9th consecutive quarterly increase, representing a 30% increase over that time span
    • Distributable earnings well in excess of current dividend, representing a 75% payout ratio
    • Structured portfolio net interest income increased $10.8 million compared to 1Q22 from strong portfolio growth and increases in interest rates

Structured Business:

  • Loan portfolio surpasses $15.00 billion, representing growth of 6% on $2.05 billion of loan originations
  • Closed a $1.05 billion collateralized securitization vehicle

Agency Business:

  • Loan originations of $1.27 billion and a servicing portfolio of $26.77 billion

UNIONDALE, N.Y., July 29, 2022 (GLOBE NEWSWIRE) -- Arbor Realty Trust, Inc. (NYSE: ABR), today announced financial results for the second quarter ended June 30, 2022. Arbor reported net income for the quarter of $69.9 million, or $0.41 per diluted common share, compared to net income of $69.1 million, or $0.51 per diluted common share for the quarter ended June 30, 2021. Distributable earnings for the quarter was $93.7 million, or $0.52 per diluted common share, compared to $68.8 million, or $0.45 per diluted common share for the quarter ended June 30, 2021.1

Agency Business

Loan Origination Platform

 Agency Loan Volume (in thousands)
 Quarter Ended
 June 30, 2022 March 31, 2022
Fannie Mae$665,449  $449,680 
Freddie Mac 407,691   299,072 
Private Label 83,346   72,896 
FHA 78,364   11,990 
SFR-Fixed Rate 34,334   4,871 
Total Originations$1,269,184  $838,509 
    
Total Loan Sales$1,030,703  $1,586,715 
    
Total Loan Commitments$1,184,282  $975,132 
    
    
    

 

 

For the quarter ended June 30, 2022, the Agency Business generated revenues of $68.8 million, compared to $65.9 million for the first quarter of 2022. Gain on sales, including fee-based services, net on the GSE/Agency business was $16.2 million for the quarter, reflecting a margin of 1.59%, compared to $15.3 million and 1.39% for the first quarter of 2022. Income from mortgage servicing rights was $17.6 million for the quarter, reflecting a rate of 1.48% as a percentage of loan commitments, compared to $15.3 million and 1.57% for the first quarter of 2022.

At June 30, 2022, loans held-for-sale was $518.9 million which was primarily comprised of unpaid principal balances (“UPB”) totaling $519.1 million, with financing associated with these loans totaling $455.6 million.

Fee-Based Servicing Portfolio

The Company’s fee-based servicing portfolio totaled $26.77 billion at June 30, 2022 and excludes $106.0 million of private label loans originated that were not yet securitized. Servicing revenue, net was $20.7 million for the quarter and consisted of servicing revenue of $35.5 million, net of amortization of mortgage servicing rights totaling $14.8 million.

 Fee-Based Servicing Portfolio ($ in thousands)
 As of June 30, 2022 As of March 31, 2022
 UPBWtd. Avg. FeeWtd. Avg. Life (years) UPBWtd. Avg. FeeWtd. Avg. Life (years)
Fannie Mae$18,600,196  0.526%8.2 $18,781,6110.534%8.1
Freddie Mac 4,805,068  0.264%9.5  4,792,7640.267%9.3
Private Label 2,061,813  0.200%8.4  2,200,2060.200%8.4
FHA 1,076,237  0.151%19.5  999,4460.153%20.9
SFR-Fixed Rate 226,568  0.200%6.3  190,5900.200%6.4
Total$26,769,882  0.436%8.9 $26,964,6170.443%8.8

Loans sold under the Fannie Mae program contain an obligation to partially guarantee the performance of the loan (“loss-sharing obligations”) and includes $34.3 million for the fair value of the guarantee obligation undertaken at June 30, 2022. The Company recorded a $2.1 million reversal of provision for loss sharing associated with CECL for the second quarter of 2022, which included a $1.2 million recovery. At June 30, 2022, the Company’s total CECL allowance for loss-sharing obligations was $18.7 million, representing 0.10% of the Fannie Mae servicing portfolio.

Structured Business

Portfolio and Investment Activity

 Structured Portfolio Activity ($ in thousands)
 Quarter Ended
 June 30, 2022 March 31, 2022
 UPB% UPB%
Bridge:     
Multifamily$1,892,61892% $2,687,30995%
SFR 154,9818%  133,4075%
  2,047,599100%  2,820,716100%
      
Mezzanine/Preferred Equity --%  8,139< 1%
Total Originations$2,047,599100% $2,828,855100%
Number of Loans Originated 91   125 
SFR Commitments$185,201  $83,306 
Payoffs and Paydowns$1,122,407  $666,551 

 Structured Portfolio ($ in thousands)
 As of June 30, 2022 As of March 31, 2022
 UPB% of Total UPB% of Total
Bridge:     
Multifamily$13,663,34391% $12,712,01589%
SFR 653,8145%  521,2754%
Other 351,2612%  523,6584%
  14,668,41898%  13,756,94897%
      
Mezzanine/Preferred Equity 329,2732%  376,4863%
SFR Permanent 36,120< 1%  36,362< 1%
Total Portfolio$15,033,811100% $14,169,796100%
      

 

 

At June 30, 2022, the loan and investment portfolio’s unpaid principal balance, excluding loan loss reserves, was $15.03 billion, with a weighted average current interest pay rate of 5.49%, compared to $14.17 billion and 4.38% at March 31, 2022. Including certain fees earned and costs associated with the loan and investment portfolio, the weighted average current interest pay rate was 5.82% at June 30, 2022, compared to 4.74% at March 31, 2022.

The average balance of the Company’s loan and investment portfolio during the second quarter of 2022, excluding loan loss reserves, was $14.63 billion with a weighted average yield of 5.26%, compared to $13.02 billion and 4.86% for the first quarter of 2022. The increase in average yield was primarily due to increases in the benchmark index rates in the second quarter of 2022.

During the second quarter of 2022, the Company recorded a $4.9 million provision for loan losses associated with CECL, which was net of a $1.5 million loan loss recovery. At June 30, 2022, the Company’s total allowance for loan losses was $121.3 million. The Company had four non-performing loans with a carrying value of $25.2 million, before related loan loss reserves of $5.1 million, which is unchanged from March 31, 2022.

Financing Activity

The Company completed its 19th collateralized securitization vehicle to date totaling $1.05 billion of real estate related assets and cash. Investment grade-rated notes totaling $872.8 million were issued, and the Company retained subordinate interests in the issuing vehicle of $177.2 million. The facility has a two-year asset replenishment period and an initial weighted average interest rate of 2.36% over term SOFR, excluding fees and transaction costs.

The balance of debt that finances the Company’s loan and investment portfolio at June 30, 2022 was $13.83 billion with a weighted average interest rate including fees of 4.00% as compared to $12.86 billion and a rate of 2.81% at March 31, 2022. The average balance of debt that finances the Company’s loan and investment portfolio for the second quarter of 2022 was $13.37 billion, as compared to $11.99 billion for the first quarter of 2022. The average cost of borrowings for the second quarter of 2022 was 3.10%, compared to 2.65% for the first quarter of 2022. The increase in average cost was primarily due to increases in the benchmark index rates in the second quarter of 2022.

Dividends

The Company announced today that its Board of Directors has declared a quarterly cash dividend of $0.39 per share of common stock for the quarter ended June 30, 2022. The dividend is payable on August 31, 2022 to common stockholders of record on August 15, 2022. The ex-dividend date is August 12, 2022.

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) 459-5346 for domestic callers and (785) 424-1249 for international callers. Please use participant passcode ABRQ222 when prompted by the operator.

A telephonic replay of the call will be available until August 5, 2022. The replay dial-in numbers are (800) 938-1601 for domestic callers and (402) 220-1546 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 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, 2021 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 the last page of this release.

Contact:Arbor Realty Trust, Inc.Paul Elenio, Chief Financial Officer 516-506-4422[email protected]

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
        
Consolidated Statements of Income - (Unaudited)
($ in thousands—except share and per share data)
        
 Quarter Ended June 30, Six Months Ended June 30,
  2022   2021   2022   2021 
        
Interest income$201,328  $105,148  $368,026  $196,292 
Interest expense 107,067   46,378   189,627   88,562 
Net interest income 94,261   58,770   178,399   107,730 
        
Other revenue:       
Gain on sales, including fee-based services, net 16,510   40,901   18,166   69,768 
Mortgage servicing rights 17,567   26,299   32,879   63,235 
Servicing revenue, net 20,714   15,315   41,769   30,850 
Property operating income 290   -   586   - 
Gain (loss) on derivative instruments, net 8,606   (2,607)  25,992   (5,828)
Other income, net (13,249)  1,263   (10,048)  1,943 
Total other revenue 50,438   81,171   109,344   159,968 
        
Other expenses:       
Employee compensation and benefits 38,900   43,700   80,925   86,674 
Selling and administrative 13,188   11,133   27,735   21,947 
Property operating expenses 542   129   1,077   272 
Depreciation and amortization 2,031   1,788   4,014   3,543 
Provision for loss sharing (net of recoveries) (1,949)  549   (2,611)  2,201 
Provision for credit losses (net of recoveries) 5,067   (7,815)  7,426   (8,890)
Total other expenses 57,779   49,484   118,566   105,747 
        
Income before extinguishment of debt, sale of real estate, income from equity affiliates, and income taxes   86,920    90,457    169,177    161,951
Loss on extinguishment of debt -   -   (1,350)  (1,370)
Gain on sale of real estate -   -   -   1,228 
Income from equity affiliates 6,547   4,759   13,759   27,010 
Provision for income taxes (5,352)  (10,959)  (13,540)  (23,451)
        
Net income 88,115   84,257   168,046   165,368 
        
Preferred stock dividends 11,214   6,414   20,270   8,303 
Net income attributable to noncontrolling interest 6,992   8,717   13,808   18,459 
Net income attributable to common stockholders$69,909  $69,126  $133,968  $138,606 
        
Basic earnings per common share$0.43  $0.51  $0.85  $1.06 
Diluted earnings per common share$0.41  $0.51  $0.82  $1.06 
        
Weighted average shares outstanding:       
Basic 163,044,217   135,262,197   158,258,813   130,276,499 
Diluted 195,013,810   153,616,591   190,357,030   148,818,030 
        
Dividends declared per common share$0.38  $0.34  $0.75  $0.67 
        

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
    
Consolidated Balance Sheets
($ in thousands—except share and per share data)
    
    
 June 30, December 31,
  2022   2021 
 (Unaudited)  
Assets:   
Cash and cash equivalents$341,991  $404,580 
Restricted cash 787,952   486,690 
Loans and investments, net (allowance for credit losses of $121,331 and $113,241) 14,832,302   11,981,048 
Loans held-for-sale, net 518,935   1,093,609 
Capitalized mortgage servicing rights, net 411,534   422,734 
Securities held-to-maturity, net (allowance for credit losses of $2,022 and $1,753) 159,686   140,484 
Investments in equity affiliates 90,855   89,676 
Due from related party 53,037   84,318 
Goodwill and other intangible assets 98,414   100,760 
Other assets 284,884   269,946 
Total assets$17,579,590  $15,073,845 
    
Liabilities and Equity:   
Credit and repurchase facilities$4,549,460  $4,481,579 
Collateralized loan obligations 7,968,495   5,892,810 
Senior unsecured notes 1,282,498   1,280,545 
Convertible senior unsecured notes, net 263,126   259,385 
Junior subordinated notes to subsidiary trust issuing preferred securities 142,758   142,382 
Due to related party 27,014   26,570 
Due to borrowers 115,990   96,641 
Allowance for loss-sharing obligations 53,053   56,064 
Other liabilities 264,200   287,885 
Total liabilities 14,666,594   12,523,861 
    
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   556,163 
Special voting preferred shares - 16,293,589 and 16,325,095 shares   
6.375% Series D - 9,200,000 shares   
6.25% Series E - 5,750,000 shares   
6.25% Series F - 11,342,000 and 8,050,000 shares   
Common stock, $0.01 par value: 500,000,000 shares authorized - 168,454,805     
and 151,362,181 shares issued and outstanding 1,685   1,514 
Additional paid-in capital 2,060,837   1,797,913 
Retained earnings 83,271   62,532 
Total Arbor Realty Trust, Inc. stockholders’ equity 2,779,477   2,418,122 
    
Noncontrolling interest 133,519   131,862 
Total equity 2,912,996   2,549,984 
    
Total liabilities and equity$17,579,590  $15,073,845 

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
      
Statement of Income Segment Information - (Unaudited)
(in thousands)
        
        
 Quarter Ended June 30, 2022
        
 Structured Business Agency Business Other / Eliminations(1) Consolidated
        
Interest income$192,047  $9,281  $-  $201,328 
Interest expense 103,165   3,902   -   107,067 
Net interest income 88,882   5,379   -   94,261 
        
Other revenue:       
Gain on sales, including fee-based services, net -   16,510   -   16,510 
Mortgage servicing rights -   17,567   -   17,567 
Servicing revenue -   35,493   -   35,493 
Amortization of MSRs -   (14,779)  -   (14,779)
Property operating income 290   -   -   290 
Gain on derivative instruments, net -   8,606   -   8,606 
Other income, net (9,328)  (3,921)  -   (13,249)
Total other revenue (9,038)  59,476   -   50,438 
        
Other expenses:       
Employee compensation and benefits 13,866   25,034   -   38,900 
Selling and administrative 6,429   6,759   -   13,188 
Property operating expenses 542   -   -   542 
Depreciation and amortization 858   1,173   -   2,031 
Provision for loss sharing (net of recoveries) -   (1,949)  -   (1,949)
Provision for credit losses (net of recoveries) 5,088   (21)  -   5,067 
Total other expenses 26,783   30,996   -   57,779 
        
Income before income from equity affiliates, and income taxes 53,061   33,859   -   86,920
        
Income from equity affiliates 6,547   -   -   6,547 
Provision for income taxes (255)  (5,097)  -   (5,352)
        
Net income 59,353   28,762   -   88,115 
        
Preferred stock dividends 11,214   -   -   11,214 
Net income attributable to noncontrolling interest -   -   6,992   6,992 
Net income attributable to common stockholders$48,139  $28,762  $(6,992) $69,909 
        
(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)
      
      
 June 30, 2022
 Structured Business Agency Business Consolidated
Assets:     
Cash and cash equivalents$94,983 $247,008 $341,991
Restricted cash 769,009  18,943  787,952
Loans and investments, net 14,832,302  -  14,832,302
Loans held-for-sale, net -  518,935  518,935
Capitalized mortgage servicing rights, net -  411,534  411,534
Securities held-to-maturity, net -  159,686  159,686
Investments in equity affiliates 90,855  -  90,855
Goodwill and other intangible assets 12,500  85,914  98,414
Other assets 272,679  65,242  337,921
Total assets$16,072,328 $1,507,262 $17,579,590
      
Liabilities:     
Debt obligations$13,750,783 $455,554 $14,206,337
Allowance for loss-sharing obligations -  53,053  53,053
Other liabilities 311,873  95,331  407,204
Total liabilities$14,062,656 $603,938 $14,666,594
      

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 June 30, Six Months Ended June 30,
  2022   2021   2022   2021 
Net income attributable to common stockholders$69,909  $69,126  $133,968  $138,606 
        
Adjustments:       
Net income attributable to noncontrolling interest 6,992   8,717   13,808   18,459 
Income from mortgage servicing rights (17,567)  (26,299)  (32,879)  (63,235)
Deferred tax (benefit) provision (706)  (50)  (2,426)  4,436 
Amortization and write-offs of MSRs 27,625   20,299   55,295   38,331 
Depreciation and amortization 2,617   2,733   5,186   5,432 
Loss on extinguishment of debt -   -   1,350   1,370 
Provision for credit losses, net 5,849   (8,065)  7,546   (8,343)
Gain on derivative instruments, net (4,155)  (3,230)  (4,453)  (9)
Stock-based compensation 3,149   2,044   9,241   5,375 
Loss on redemption of preferred stock -   3,479   -   3,479 
        
Distributable earnings (1)$93,713  $68,754  $186,636  $143,901 
        
Diluted distributable earnings per share (1)$0.52  $0.45  $1.06  $0.97 
        
Diluted weighted average shares outstanding (1) (2) 179,873,329   153,616,591   175,252,399   148,818,030 
        
(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) Beginning in the first quarter of 2022, 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. Excluding the effect of a potential conversion in shares until a conversion occurs is consistent with past treatment and other unrealized adjustments to distributable earnings. For the quarter and six months ended June 30, 2022, the diluted weighted average shares outstanding excluded 15,140,481 and 15,104,631 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, the tax impact on cumulative gains/losses on derivative instruments associated with Private Label loans sold during the periods presented, changes in fair value of GSE-related derivatives that temporarily flow through earnings, deferred tax provision (benefit), CECL provisions for credit losses (adjusted for realized losses as described below), amortization of the convertible senior notes conversion option (in comparative periods prior to 2022) 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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