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Arbor Realty Trust Reports First Quarter 2017 Results and Increases Quarterly Dividend to $0.18 per Share

Company Highlights:

  • Net income of $15.6 million, or $0.30 per diluted common share
  • AFFO of $24.7 million, or $0.33 per diluted common share1
  • Declares a cash dividend on common stock of $0.18 per share, our third increase in the past four quarters, 6% higher than last quarter and a 20% increase in our dividend over the past year

/EIN News/ -- Agency Business

  • Segment income of $13.0 million
  • Loan originations of $1.29 billion
  • Servicing portfolio of $14.47 billion at March 31, 2017, up 7% from 4Q16

Structured Business

  • Segment income of $10.1 million
  • Generated a $7.1 million gain from the repurchase of TRUP debt
  • Loan originations of $145.9 million

Recent Developments:

  • Closed a seventh collateralized securitization vehicle totaling $360.0 million with improved terms

UNIONDALE, N.Y., May 05, 2017 (GLOBE NEWSWIRE) -- Arbor Realty Trust, Inc. (NYSE:ABR), today announced financial results for the first quarter ended March 31, 2017.  Arbor reported net income for the quarter of $15.6 million, or $0.30 per diluted common share, compared to $1.1 million, or $0.02 per diluted common share for the quarter ended March 31, 2016.  Adjusted funds from operations (“AFFO”) for the quarter was $24.7 million, or $0.33 per diluted common share, compared to $6.9 million, or $0.13 per diluted common share for the quarter ended March 31, 2016.1

Agency Business

Loan Origination Platform

Agency Loan Volume  ($ in 000's)
    Quarter Ended
    March 31,
 2017
  December 31,
2016
Fannie Mae   $   896,549   $   999,936
Freddie Mac       235,033       299,277
FHA       137,935       - 
CMBS/Conduit       21,370       - 
Total Originations   $   1,290,887   $   1,299,213
         
Total Loan Sales   $   1,364,850   $   940,550
         
Total Loan Commitments   $   1,151,944   $   1,414,900
         

For the quarter ended March 31, 2017, the Agency Business generated revenues of $48.0 million, compared to $51.1 million for the fourth quarter of 2016. Gain on sales, including fee-based services, net was $19.2 million for the quarter, reflecting a margin of 1.40% on loan sales, compared to $14.9 million and 1.58% for the fourth quarter of 2016. Income from mortgage servicing rights was $20.0 million for the quarter, reflecting a rate of 1.74% as a percentage of loan commitments, compared to $29.0 million and 2.05% for the fourth quarter of 2016. 

At March 31, 2017, loans held-for-sale was $573.2 million which was primarily comprised of unpaid principal balances totaling $565.2 million, with financing associated with these loans totaling $564.3 million.

Fee-Based Servicing Portfolio

The fee-based servicing portfolio totaled $14.47 billion at March 31, 2017, an increase of 7% from December 31, 2016, primarily as a result of $1.29 billion of new loan originations during the quarter. Servicing revenue, net was $4.8 million for the quarter, and consists of servicing revenue of $16.7 million net of amortization of mortgage servicing rights totaling $11.9 million.

    Fee-Based Servicing Portfolio ($ in 000s)
    As of March 31, 2017   As of December 31, 2016
    UPB Wtd. Avg.
Fee
Wtd. Avg. Life
(in years)
  UPB Wtd. Avg.
Fee
Wtd. Avg. Life
(in years)
Fannie Mae   $   11,804,141 0.53 % 6.9   $   11,181,152 0.53 % 6.6
Freddie Mac       2,163,124 0.23 % 10.8       1,953,245 0.22 % 10.5
FHA       498,034 0.17 % 19.7       420,689 0.18 % 19.2
Total   $   14,465,299 0.48 % 7.9   $   13,555,086 0.48 % 7.6
                 

Loans sold under the Fannie Mae program contain an obligation to partially guarantee the performance of the loan (“loss-sharing obligations”). At March 31, 2017, the Company’s allowance for loss-sharing obligations was $32.2 million which consists of general loss sharing guaranty obligations of $28.0 million, representing 0.24% of the Fannie Mae servicing portfolio, and $4.2 million of loss-sharing obligations on specifically identified loans with losses determined to be probable and estimable.

Structured Business

Portfolio and Investment Activity

First quarter of 2017:

  • 14 new loan originations totaling $145.9 million, of which 13 were bridge loans for $130.9 million
  • Payoffs and pay downs on 13 loans totaling $190.4 million

At March 31, 2017, the loan and investment portfolio’s unpaid principal balance, excluding loan loss reserves, was $1.74 billion, with a weighted average current interest pay rate of 5.81%, compared to $1.80 billion and 5.71% at December 31, 2016.  Including certain fees earned and costs associated with the loan and investment portfolio, the weighted average current interest pay rate was 6.45% at March 31, 2017, compared to 6.39% at December 31, 2016.

The average balance of the Company’s loan and investment portfolio during the first quarter of 2017, excluding loan loss reserves, was $1.80 billion with a weighted average yield on these assets of 6.39%, compared to $1.79 billion and 6.38% for the fourth quarter of 2016.

At March 31, 2017, the Company’s total loan loss reserves were $83.0 million on seven loans with an aggregate carrying value before loan loss reserves of $186.6 million. The Company also had three non-performing loans with a carrying value of $1.0 million, net of related loan loss reserves of $22.2 million.

Financing Activity

The Company purchased, at a discount, $20.9 million of its junior subordinated notes, with a carrying value of $19.8 million, resulting in the recognition of a gain on extinguishment of debt of $7.1 million.

The balance of debt that finances the Company’s loan and investment portfolio at March 31, 2017 was $1.38 billion with a weighted average interest rate including fees of 4.51%, as compared to $1.35 billion and a rate of 4.45% at December 31, 2016. The average balance of debt that finances the Company’s loan and investment portfolio for the first quarter of 2017 was $1.37 billion, as compared to $1.44 billion for the fourth quarter of 2016. The average cost of borrowings for the first quarter was 4.51%, compared to 4.82% for the fourth quarter of 2016. The decrease in average cost was primarily due to the maturity of the Company’s remaining interest rate swaps as well as from the acceleration of fees related to the unwind of a CLO in the fourth quarter, partially offset by an increase in the one-month LIBOR interest rate.

The Company is subject to various financial covenants and restrictions under the terms of its CLO vehicles and financing facilities. The Company believes it was in compliance with all financial covenants and restrictions as of March 31, 2017 and as of the most recent CLO determination dates in April 2017.

In April 2017, the Company completed its seventh collateralized securitization vehicle totaling $360.0 million of real estate related assets and cash. An aggregate of $279.0 million of investment grade-rated notes were issued, and the Company retained an $81.0 million equity interest in the portfolio. The notes have an initial weighted average interest rate of 1.99% plus one-month LIBOR, excluding fees and transaction costs. The facility has a three year replenishment period that allows the principal proceeds from repayments of the collateral assets to be reinvested in qualifying replacement assets, subject to certain conditions.

Capital Markets

The Company reopened its 6.50% Convertible Senior Notes due 2019 and issued an additional $13.8 million for a total outstanding principal amount of $100.0 million. The proceeds received by the Company are intended to be used to make investments in our business and for general corporate purposes.

Dividends

The Company announced today that its Board of Directors has declared a quarterly cash dividend of $0.18 per share of common stock for the quarter ended March 31, 2017, representing an increase of 6% over the prior quarter dividend of $0.17 per share. The dividend is payable on May 31, 2017 to common stockholders of record on May 17, 2017. The ex-dividend date is May 15, 2017.

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, 2017 through May 31, 2017. The dividends are payable on May 31, 2017 to preferred stockholders of record on May 15, 2017. 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. ET. 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 10756167.

After the live webcast, the call will remain available on the Company's website through May 31, 2017.  In addition, a telephonic replay of the call will be available until May 12, 2017. The replay dial-in numbers are (855) 859-2056 for domestic callers and (404) 537-3406 for international callers. Please use passcode 10756167.

About Arbor Realty Trust, Inc.

Arbor Realty Trust, Inc. (NYSE:ABR) is a real estate investment trust and national direct lender specializing in loan origination and servicing for multifamily, seniors housing, healthcare and other diverse commercial real estate assets. Arbor is a Top 10 Fannie Mae DUS® Multifamily Lender by volume and a Top Fannie Mae Small Loan lender, a Freddie Mac Program Plus® Seller/Servicer and the Top Freddie Mac Small Balance Loan Lender, a Fannie Mae and Freddie Mac Seniors Housing Lender, an FHA Multifamily Accelerated Processing (MAP)/LEAN Lender, a HUD-approved LIHTC Lender as well as a CMBS, bridge, mezzanine and preferred equity lender, consistently building on its reputation for service, quality and flexibility. With a fee-based servicing portfolio of over $14 billion, Arbor is a primary commercial loan servicer and special servicer rated by Standard & Poor’s with an Above Average rating. Arbor is also on the Standard & Poor’s Select Servicer List and is a primary commercial loan servicer and loan level special servicer rated by Fitch Ratings. Arbor is externally managed and advised by Arbor Commercial Mortgage, LLC.

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, 2016 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. Supplemental schedules of each non-GAAP financial measure and the comparable GAAP financial measure can be found on page 11 of this release.

   

 ARBOR REALTY TRUST, INC. AND SUBSIDIARIES   
           
 CONSOLIDATED STATEMENTS OF INCOME - (Unaudited)   
               
               
      Quarter Ended    
      March 31,    
        2017       2016      
               
Interest income   $   33,525,016     $   25,818,465      
Interest expense       19,436,838         12,748,613      
  Net interest income       14,088,178         13,069,852      
               
Other revenue:            
Gain on sales, including fee-based services,  net       19,170,856         -      
Mortgage servicing rights       20,030,340         -      
Servicing revenue, net       4,793,643         -      
Property operating income       3,223,204         5,331,532      
Other income, net       (886,297 )       89,763      
  Total other revenue       46,331,746         5,421,295      
               
Other expenses:            
Employee compensation and benefits       19,841,464         4,328,342      
Selling and administrative       7,693,887         2,655,476      
Acquisition costs       -         3,109,910      
Property operating expenses       2,637,904         4,316,555      
Depreciation and amortization       1,897,249         877,533      
Impairment loss on real estate owned       1,200,000         -      
Provision for loss sharing       1,679,385         -      
Provision for loan losses (net of recoveries)       (695,653 )       (15,000 )    
Management fee - related party       4,000,000         2,700,000      
  Total other expenses       38,254,236         17,972,816      
               
Income before gain on extinguishment of debt, gain on sale of            
  real estate, income from equity affiliates and provision            
  for income taxes       22,165,688         518,331      
Gain on extinguishment of debt       7,116,243         -      
Gain on sale of real estate       -         607,553      
Income from equity affiliates       762,777         1,897,442      
Provision for income taxes       (6,101,000 )       -      
               
Net income       23,943,708         3,023,326      
               
Preferred stock dividends       1,888,430         1,888,430      
Net income attributable to noncontrolling interest       6,441,604         -      
Net income attributable to common stockholders   $   15,613,674     $   1,134,896      
               
Basic earnings per common share   $   0.30     $   0.02      
Diluted earnings per common share   $   0.30     $   0.02      
               
               
Weighted average shares outstanding:            
  Basic       51,461,156         51,045,219      
  Diluted       73,730,068         51,095,128      
               
Dividends declared per common share   $   0.17     $   0.15      
               

 

 ARBOR REALTY TRUST, INC. AND SUBSIDIARIES   
                 
 CONSOLIDATED BALANCE SHEETS   
                 
                 
          March 31,   December 31,  
            2017       2016    
          (Unaudited)      
Assets:            
Cash and cash equivalents   $   104,843,232     $   138,645,430    
Restricted cash       115,263,038         29,314,929    
Loans and investments, net       1,639,768,626         1,695,732,351    
Loans held-for-sale, net       573,193,542         673,367,304    
Capitalized mortgage servicing rights, net       238,931,168         227,742,986    
Available-for-sale securities, at fair value       5,307,502         5,403,463    
Securities held-to-maturity, net       7,905,689         -    
Investments in equity affiliates       33,380,722         33,948,853    
Real estate owned, net       18,752,812         19,491,805    
Due from related party       37,030,187         1,464,732    
Goodwill and other intangible assets       96,089,432         97,489,884    
Other assets        43,961,884         48,184,509    
Total assets   $   2,914,427,834     $   2,970,786,246    
                 
Liabilities and Equity:          
Credit facilities and repurchase agreements       855,076,736         906,636,790    
Collateralized loan obligations        729,248,014         728,441,109    
Senior unsecured notes       94,712,335         94,521,566    
Convertible senior unsecured notes, net       94,239,527         80,660,038    
Junior subordinated notes to subsidiary trust issuing preferred securities       139,103,147         157,858,555    
Related party financing       50,000,000         50,000,000    
Due to related party       2,260,847         6,038,707    
Due to borrowers       75,967,465         81,019,386    
Allowance for loss-sharing obligations       32,219,490         32,407,554    
Other liabilities       81,934,390         86,164,613    
Total liabilities       2,154,761,951         2,223,748,318    
                 
Equity:            
  Arbor Realty Trust, Inc. stockholders' equity:          
    Preferred stock, cumulative, redeemable, $0.01 par value: 100,000,000 shares          
      authorized; special voting preferred shares, 21,230,769 shares issued and          
      outstanding; 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       89,508,213         89,508,213    
    Common stock, $0.01 par value: 500,000,000 shares authorized; 51,850,250          
      and 51,401,295 shares issued and outstanding, respectively       518,502         514,013    
    Additional paid-in capital       624,585,307         621,931,995    
    Accumulated deficit       (118,263,597 )       (125,134,403 )  
    Accumulated other comprehensive income       587,891         320,917    
Total Arbor Realty Trust, Inc. stockholders’ equity       596,936,316         587,140,735    
                 
Noncontrolling interest       162,729,567         159,897,193    
Total equity       759,665,883         747,037,928    
                 
Total liabilities and equity   $   2,914,427,834     $   2,970,786,246    
                 

 

 ARBOR REALTY TRUST, INC. AND SUBSIDIARIES   
                 
 STATEMENT OF INCOME SEGMENT INFORMATION - (Unaudited)   
                     
                     
      Quarter Ended March 31, 2017  
                     
      Structured
Business
  Agency
Business
  Other /
Eliminations (1)
  Consolidated  
                     
Interest income   $   28,508,717     $   5,016,299     $   -      $   33,525,016    
Interest expense       15,241,022         3,233,993         961,823         19,436,838    
  Net interest income       13,267,695         1,782,306         (961,823 )       14,088,178    
                     
Other revenue:                  
Gain on sales, including fee-based services,  net       -         19,170,856         -         19,170,856    
Mortgage servicing rights       -         20,030,340         -         20,030,340    
Servicing revenue       -         16,681,644         -         16,681,644    
Amortization of MSRs       -         (11,888,001 )       -         (11,888,001 )  
Property operating income       3,223,204         -         -         3,223,204    
Other income, net       110,727         (997,024 )       -         (886,297 )  
  Total other revenue       3,333,931         42,997,815         -         46,331,746    
                     
Other expenses:                  
Employee compensation and benefits       3,832,400         16,009,064         -         19,841,464    
Selling and administrative       3,081,706         4,612,181         -         7,693,887    
Property operating expenses       2,637,904         -         -         2,637,904    
Depreciation and amortization       496,795         1,400,454         -         1,897,249    
Impairment loss on real estate owned       1,200,000                   -         1,200,000    
Provision for loss sharing       -         1,679,385         -         1,679,385    
Provision for loan losses (net of recoveries)       (695,653 )       -         -         (695,653 )  
Management fee - related party       1,974,724         2,025,276         -         4,000,000    
  Total other expenses       12,527,876         25,726,360         -         38,254,236    
                     
Income before gain on extinguishment of debt,                  
  income from equity affiliates and provision                  
  for income taxes       4,073,750         19,053,761         (961,823 )       22,165,688    
Gain on extinguishment of debt       7,116,243         -         -         7,116,243    
Income from equity affiliates       762,777         -         -         762,777    
Provision for income taxes       -         (6,101,000 )       -         (6,101,000 )  
                     
Net income   $   11,952,770     $   12,952,761     $   (961,823 )   $   23,943,708    
                     
Preferred stock dividends       1,888,430         -         -         1,888,430    
Net income attributable to noncontrolling interest       -         -         6,441,604         6,441,604    
Net income attributable to common stockholders   $   10,064,340     $   12,952,761     $   (7,403,427 )   $   15,613,674    
                     
(1) Includes certain corporate expenses not allocated to the two reportable segments, such as financing costs associated with the  
 acquisition of the Agency Business as well as income allocated to the noncontrolling interest holder.      
                     

 

 ARBOR REALTY TRUST, INC. AND SUBSIDIARIES   
                     
 BALANCE SHEET SEGMENT INFORMATION - (Unaudited)   
                         
                         
          March 31, 2017  
          Structured
Business
  Agency
Business
  Other /
Eliminations (1)
  Consolidated  
Assets:                    
Cash and cash equivalents   $   66,181,142   $   38,662,090   $   -   $   104,843,232  
Restricted cash       100,408,504       14,854,534       -       115,263,038  
Loans and investments, net       1,639,768,626       -       -       1,639,768,626  
Loans held-for-sale, net       -       573,193,542       -       573,193,542  
Capitalized mortgage servicing rights, net     -       238,931,168       -       238,931,168  
Investments in equity affiliates       33,380,722       -       -       33,380,722  
Goodwill and other intangible assets       -       96,089,432       -       96,089,432  
Other assets        94,694,577       18,263,497       -       112,958,074  
Total assets   $   1,934,433,571   $   979,994,263   $   -   $   2,914,427,834  
                         
Liabilities:                  
Debt obligations       1,348,070,649       564,309,110       50,000,000       1,962,379,759  
Allowance for loss-sharing obligations       -       32,219,490       -       32,219,490  
Other liabilities       121,486,854       36,496,160       2,179,688       160,162,702  
Total liabilities   $   1,469,557,503   $   633,024,760   $   52,179,688   $   2,154,761,951  
                         
(1) Includes assets and liabilities not allocated to the two reportable segments, such as financings and acquisition costs  
  associated with the acquisition of the Agency Business.              
                         

 

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES  
         
Supplemental Schedule of Non-GAAP Financial Measures -  
Funds from Operations ("FFO") and Adjusted Funds from Operations ("AFFO")  
 (Unaudited)   
         
  Quarter Ended  
March 31,
    2017       2016    
           
Net income attributable to common stockholders $   15,613,674     $   1,134,896    
         
Subtract:        
Gain on sale of real estate      -         (607,553 )  
Add:        
Net income attributable to noncontrolling interest     6,441,604         -    
Impairment loss on real estate owned      1,200,000         -    
Depreciation - real estate owned      250,295         877,533    
Depreciation - investments in equity affiliates      101,447         93,588    
         
Funds from operations  (1) $   23,607,020     $   1,498,464    
         
Subtract:        
Income from mortgage servicing rights      (20,030,340 )       -    
Impairment loss on real estate owned      (1,200,000 )       -    
Add:        
Amortization and write-offs of MSRs      15,281,465         -    
Deferred tax provision      1,827,000        
Depreciation and amortization      1,867,553         -    
Net loss on changes in fair value of derivatives      997,024         -    
Gain on sale of real estate      -         607,553    
Stock-based compensation      2,304,522         1,681,431    
Acquisition costs      -         3,109,910    
         
Adjusted funds from operations  (1) $   24,654,244     $   6,897,358    
         
Diluted FFO per share  (1) $   0.32     $   0.03    
         
Diluted AFFO per share  (1) $   0.33     $   0.13    
         
Diluted weighted average shares outstanding  (1)     73,730,068         51,095,128    
         
(1) Amounts are attributable to common stockholders and OP Unit holder. 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 provisions and benefits and 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 owned 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.   


Contacts:
                    Arbor Realty Trust, Inc.
                    Paul Elenio, Chief Financial Officer 
                    516-506-4422
                    pelenio@arbor.com
                    
                    Media:
                    Bonnie Habyan, EVP of Marketing
                    516-506-4615
                    bhabyan@arbor.com
                    
                    Investors:
                    The Ruth Group
                    Lee Roth
                    646-536-7012
                    lroth@theruthgroup.com
                    

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