Arbor Realty Trust Reports Third Quarter 2023 Results and Declares Dividend of $0.43 per Share
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, NY, October 27, 2023 -- 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.
Arbor Realty Trust Reports Third Quarter 2023 Results and Declares Dividend of $0.43 per Share
October 27, 2023
Page 2
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.
Arbor Realty Trust Reports Third Quarter 2023 Results and Declares Dividend of $0.43 per Share
October 27, 2023
Page 3
Fee-Based Servicing Portfolio ($ 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.
Arbor Realty Trust Reports Third Quarter 2023 Results and Declares Dividend of $0.43 per Share
October 27, 2023
Page 4
Structured Business
Portfolio and Investment Activity
Structured Portfolio Activity ($ 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.
Arbor Realty Trust Reports Third Quarter 2023 Results and Declares Dividend of $0.43 per Share
October 27, 2023
Page 5
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
Arbor Realty Trust Reports Third Quarter 2023 Results and Declares Dividend of $0.43 per Share
October 27, 2023
Page 6
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 Reports Third Quarter 2023 Results and Declares Dividend of $0.43 per Share
October 27, 2023
Page 7
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
Consolidated Statements of Income - (Unaudited)
($ 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 Reports Third Quarter 2023 Results and Declares Dividend of $0.43 per Share
October 27, 2023
Page 8
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
($ 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 Reports Third Quarter 2023 Results and Declares Dividend of $0.43 per Share
October 27, 2023
Page 9
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 Reports Third Quarter 2023 Results and Declares Dividend of $0.43 per Share
October 27, 2023
Page 10
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 Reports Third Quarter 2023 Results and Declares Dividend of $0.43 per Share
October 27, 2023
Page 11
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
Reconciliation of Distributable Earnings to GAAP Net Income - (Unaudited)
($ 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.
