Arbor Realty Trust Reports First Quarter 2023 Results and Increases Dividend by $0.02 to $0.42 per Share

Arbor Realty Trust

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 $0.46 per diluted common share
    

  • Distributable earnings¹ of $0.62 per diluted common share, well in excess of our current dividend, representing a 68% payout ratio

  • Raised cash dividend on common stock to $0.42 per share; a $0.02 per share, or 5% increase, representing an annualized dividend of $1.68 per share

  • Strong liquidity position with ~$785 million in cash and liquidity and ~$560 million of restricted cash in replenishable CLO vehicles with a weighted average cost of 1.64% over benchmark rates²

  • Agency loan originations of $1.09 billion and a servicing portfolio of ~$28.91 billion, up 3%

  • Structured loan originations of $268.0 million and a portfolio of ~$13.64 billion

  • Issued $95 million of 7.75% senior notes primarily to repay existing 8.00% debt

  • Announced a $50 million share repurchase program; repurchased ~ $37 million to date at an average price of $10.53 per share, or a 17% discount to book value

UNIONDALE, N.Y., May 05, 2023 (GLOBE NEWSWIRE) -- Arbor Realty Trust, Inc. (NYSE: ABR), today announced financial results for the first quarter ended March 31, 2023. Arbor reported net income for the quarter of $84.3 million, or $0.46 per diluted common share, compared to net income of $64.1 million, or $0.40 per diluted common share for the quarter ended March 31, 2022. Distributable earnings for the quarter was $122.2 million, or $0.62 per diluted common share, compared to $92.9 million, or $0.55 per diluted common share for the quarter ended March 31, 2022.

Agency Business

Loan Origination Platform

		Agency Loan Volume (in thousands)
		Quarter Ended
		March 31, 2023			December 31, 2022
Fannie Mae		$	795,021		$	1,174,827
FHA			148,940			19,658
Freddie Mac			101,332			295,258
Private Label			41,107			25,629
SFR-Fixed Rate			5,461			33,800
Total Originations		$	1,091,861		$	1,549,172
Total Loan Sales		$	932,699		$	1,739,069
Total Loan Commitments		$	1,500,110		$	1,523,069

For the quarter ended March 31, 2023, the Agency Business generated revenues of $80.4 million, compared to $95.9 million for the fourth quarter of 2022. Gain on sales, including fee-based services, net on the GSE/Agency business (excluding private label and SFR) was $13.1 million for the quarter, reflecting a margin of 1.72%, compared to $22.7 million and 1.33% for the fourth quarter of 2022. Income from mortgage servicing rights was $18.5 million for the quarter, reflecting a rate of 1.23% as a percentage of loan commitments, compared to $17.1 million and 1.12% for the fourth quarter of 2022.

At March 31, 2023, loans held-for-sale was $469.6 million, with financing associated with these loans totaling $422.0 million.

Fee-Based Servicing Portfolio

The Company’s fee-based servicing portfolio totaled $28.91 billion at March 31, 2023. Servicing revenue, net was $29.6 million for the quarter and consisted of servicing revenue of $45.0 million, net of amortization of mortgage servicing rights totaling $15.4 million.

		Fee-Based Servicing Portfolio ($ in thousands)
		March 31, 2023						December 31, 2022
		UPB		Wtd. Avg. Fee		Wtd. Avg. Life (years)		UPB		Wtd. Avg. Fee		Wtd. Avg. Life (years)
Fannie Mae		$	19,508,256	0.495	%	8.0		$	19,038,124	0.502	%	8.0
Freddie Mac			5,180,607	0.247	%	9.1			5,153,207	0.250	%	9.0
Private Label			2,233,500	0.196	%	7.7			2,074,859	0.185	%	7.6
FHA			1,242,669	0.147	%	19.8			1,155,893	0.149	%	19.5
Bridge			467,881	0.116	%	2.9			301,182	0.125	%	1.7
SFR-Fixed Rate			279,712	0.200	%	5.9			274,764	0.198	%	6.0
Total		$	28,912,625	0.403	%	8.6		$	27,998,029	0.411	%	8.6

Loans sold under the Fannie Mae program contain an obligation to partially guarantee the performance of the loan (“loss-sharing obligations”) and includes $34.5 million for the fair value of the guarantee obligation undertaken at March 31, 2023. The Company recorded a $2.6 million net provision for loss sharing associated with CECL for the first quarter of 2023, which included a $1.4 million recovery. At March 31, 2023, the Company’s total CECL allowance for loss-sharing obligations was $25.3 million, representing 0.13% of the Fannie Mae servicing portfolio.

Structured Business

Portfolio and Investment Activity

		Structured Portfolio Activity ($ in thousands)
		Quarter Ended
		March 31, 2023					December 31, 2022
		UPB		%			UPB		%
Bridge:
Multifamily		$	186,100	70	%		$	295,451	59	%
SFR			76,089	28	%			161,580	32	%
			262,189	98	%			457,031	91	%
Mezzanine/Preferred Equity			5,845	2	%			43,497	9	%
Total Originations		$	268,034	100	%		$	500,528	100	%
Number of Loans Originated			24					50
SFR Commitments		$	54,350				$	352,673
Runoff		$	1,186,649				$	1,117,806
		Structured Portfolio ($ in thousands)
		March 31, 2023					December 31, 2022
		UPB		%			UPB		%
Bridge:
Multifamily		$	12,034,638	88	%		$	12,830,999	89	%
SFR			982,026	7	%			927,373	6	%
Other			282,275	2	%			337,682	2	%
			13,298,939	97	%			14,096,054	98	%
Mezzanine/Preferred Equity			311,819	2	%			324,224	2	%
SFR Permanent			32,966	< 1	%			35,845	< 1	%
Total Portfolio		$	13,643,724	100	%		$	14,456,123	100	%

At March 31, 2023, the loan and investment portfolio’s unpaid principal balance, excluding loan loss reserves, was $13.64 billion, with a weighted average current interest pay rate of 8.60%, compared to $14.56 billion and 8.17% at December 31, 2022. Including certain fees earned and costs associated with the loan and investment portfolio, the weighted average current interest pay rate was 8.83% at March 31, 2023, compared to 8.42% at December 31, 2022.

The average balance of the Company’s loan and investment portfolio during the first quarter of 2023, excluding loan loss reserves, was $14.15 billion with a weighted average yield of 8.94%, compared to $14.83 billion and 8.12% for the fourth quarter of 2022. The increase in average yield was primarily due to increases in the benchmark index rates in the first quarter of 2023.

During the first quarter of 2023, the Company recorded a $20.5 million provision for loan losses associated with CECL. At March 31, 2023, the Company’s total allowance for loan losses was $153.1 million. The Company had four non-performing loans with a carrying value of $7.7 million, before related loan loss reserves of $5.1 million, which was unchanged from December 31, 2022.

Financing Activity

The balance of debt that finances the Company’s loan and investment portfolio at March 31, 2023 was $12.65 billion with a weighted average interest rate including fees of 6.97% as compared to $13.28 billion and a rate of 6.50% at December 31, 2022.

The average balance of debt that finances the Company’s loan and investment portfolio for the first quarter of 2023 was $13.02 billion, as compared to $13.69 billion for the fourth quarter of 2022. The average cost of borrowings for the first quarter of 2023 was 6.69%, compared to 5.80% for the fourth quarter of 2022. The increase in average cost was primarily due to increases in the benchmark index rates in the first quarter of 2023.

Capital Markets

The Company issued $95.0 million of 7.75% senior notes due 2026 in a private placement. The Company received proceeds of $93.4 million and used $70.8 million of the proceeds to repurchase its 8.00% senior notes.

Dividend

The Company announced today that its Board of Directors has declared a quarterly cash dividend of $0.42 per share of common stock for the quarter ended March 31, 2023. The dividend is payable on May 31, 2023 to common stockholders of record on May 19, 2023. The ex-dividend date is May 18, 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 ABRQ123 when prompted by the operator.

A telephonic replay of the call will be available until May 12, 2023. The replay dial-in numbers are (888) 566-0179 for domestic callers and (402) 530-9316 for international callers.

About Arbor Realty Trust, Inc.

Arbor Realty Trust, Inc. (NYSE: ABR) is a nationwide real estate investment trust and direct lender, providing loan origination and servicing for multifamily, single-family rental (SFR) portfolios, and other diverse commercial real estate assets. Headquartered in New York, Arbor manages a multibillion-dollar servicing portfolio, specializing in government-sponsored enterprise products. Arbor is a leading Fannie Mae DUS® lender and Freddie Mac Optigo® Seller/Servicer, and an approved FHA Multifamily Accelerated Processing (MAP) lender. Arbor’s product platform also includes bridge, CMBS, mezzanine and preferred equity loans. Rated by Standard and Poor’s and Fitch Ratings, Arbor is committed to building on its reputation for service, quality, and customized solutions with an unparalleled dedication to providing our clients excellence over the entire life of a loan.

Safe Harbor Statement

Certain items in this press release may constitute forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Arbor can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from Arbor’s expectations include, but are not limited to, changes in economic conditions generally, and the real estate markets specifically, in particular, due to the severity and duration of the COVID-19 pandemic, continued ability to source new investments, changes in interest rates and/or credit spreads, and other risks detailed in Arbor’s Annual Report on Form 10-K for the year ended December 31, 2022 and its other reports filed with the SEC. Such forward-looking statements speak only as of the date of this press release. Arbor expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Arbor’s expectations with regard thereto or change in events, conditions, or circumstances on which any such statement is based.

Notes

1. During the quarterly earnings conference call, the Company may discuss non-GAAP financial measures as defined by SEC Regulation G. In addition, the Company has used non-GAAP financial measures in this press release. A supplemental schedule of non-GAAP financial measures and the comparable GAAP financial measure can be found on the last page of this release.

2. Amounts reflect approximate balances as of May 4, 2023.

Contact:

Arbor Realty Trust, Inc. Paul Elenio, Chief Financial Officer 516-506-4422 pelenio@arbor.com

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
Consolidated Statements of Income - (Unaudited)
($ in thousands—except share and per share data)
			Quarter Ended March 31,
			2023				2022
Interest income			$	327,947			$	166,698
Interest expense				219,373				82,559
	Net interest income			108,574				84,139
Other revenue:
Gain on sales, including fee-based services, net				14,589				1,656
Mortgage servicing rights				18,458				15,312
Servicing revenue, net				29,565				21,054
Property operating income				1,381				295
Gain on derivative instruments, net				4,223				17,386
Other income, net				4,882				3,200
	Total other revenue			73,098				58,903
Other expenses:
Employee compensation and benefits				42,399				42,025
Selling and administrative				13,623				14,548
Property operating expenses				1,383				535
Depreciation and amortization				2,624				1,983
Provision for loss sharing (net of recoveries)				3,177				(662	)
Provision for credit losses (net of recoveries)				22,517				2,358
	Total other expenses			85,723				60,787
Income before extinguishment of debt, income from equity affiliates, and income taxes				95,949				82,255
Loss on extinguishment of debt				-				(1,350	)
Income from equity affiliates				14,326				7,212
Provision for income taxes				(8,029	)			(8,188	)
Net income				102,246				79,929
Preferred stock dividends				10,342				9,056
Net income attributable to noncontrolling interest				7,585				6,816
Net income attributable to common stockholders			$	84,319			$	64,057
Basic earnings per common share			$	0.47			$	0.42
Diluted earnings per common share			$	0.46			$	0.40
Weighted average shares outstanding:
	Basic			181,116,674				153,420,238
	Diluted			214,910,974				185,431,404
Dividends declared per common share			$	0.40			$	0.37

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
($ in thousands—except share and per share data)
					March 31,			December 31,
					2023			2022
					(Unaudited)
Assets:
Cash and cash equivalents					$	774,544		$	534,357
Restricted cash						704,844			713,808
Loans and investments, net (allowance credit losses of $153,077 and $132,559)						13,430,985			14,254,674
Loans held-for-sale, net						469,602			354,070
Capitalized mortgage servicing rights, net						396,634			401,471
Securities held-to-maturity, net (allowance credit losses of $5,025 and $3,153)						153,888			156,547
Investments in equity affiliates						77,641			79,130
Due from related party						113,105			77,419
Goodwill and other intangible assets						94,896			96,069
Other assets						372,085			371,440
	Total assets				$	16,588,224		$	17,038,985
Liabilities and Equity:
Credit and repurchase facilities					$	3,650,876		$	3,841,814
Securitized debt						7,508,472			7,849,270
Senior unsecured notes						1,409,899			1,385,994
Convertible senior unsecured notes						281,046			280,356
Junior subordinated notes to subsidiary trust issuing preferred securities						143,322			143,128
Due to related party						12,481			12,350
Due to borrowers						59,281			61,237
Allowance for loss-sharing obligations						59,757			57,168
Other liabilities						305,633			335,789
	Total liabilities					13,430,767			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 - 183,821,003
			and 178,230,522 shares issued and outstanding			1,838			1,782
		Additional paid-in capital				2,278,287			2,204,481
		Retained earnings				107,697			97,049
Total Arbor Realty Trust, Inc. stockholders’ equity						3,021,506			2,936,996
Noncontrolling interest						135,951			134,883
Total equity						3,157,457			3,071,879
Total liabilities and equity					$	16,588,224		$	17,038,985

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
Statement of Income Segment Information - (Unaudited)
(in thousands)
			Quarter Ended March 31, 2023
			Structured Business			Agency Business				Other / Eliminations (1)				Consolidated
Interest income			$	317,376		$	10,571			$	-			$	327,947
Interest expense				214,894			4,479				-				219,373
	Net interest income			102,482			6,092				-				108,574
Other revenue:
Gain on sales, including fee-based services, net				-			14,589				-				14,589
Mortgage servicing rights				-			18,458				-				18,458
Servicing revenue				-			44,981				-				44,981
Amortization of MSRs				-			(15,416	)			-				(15,416	)
Property operating income				1,381			-				-				1,381
Gain on derivative instruments, net				-			4,223				-				4,223
Other income, net				1,908			2,974				-				4,882
	Total other revenue			3,289			69,809				-				73,098
Other expenses:
Employee compensation and benefits				15,641			26,758				-				42,399
Selling and administrative				6,711			6,912				-				13,623
Property operating expenses				1,383			-				-				1,383
Depreciation and amortization				1,451			1,173				-				2,624
Provision for loss sharing (net of recoveries)				-			3,177				-				3,177
Provision for credit losses (net of recoveries)				20,645			1,872				-				22,517
	Total other expenses			45,831			39,892				-				85,723
Income before income from equity affiliates, and income taxes				59,940			36,009				-				95,949
Income from equity affiliates				14,326			-				-				14,326
Benefit from (provision for) income taxes				429			(8,458	)			-				(8,029	)
Net income				74,695			27,551				-				102,246
Preferred stock dividends				10,342			-				-				10,342
Net income attributable to noncontrolling interest				-			-				7,585				7,585
Net income attributable to common stockholders			$	64,353		$	27,551			$	(7,585	)		$	84,319
(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)
	March 31, 2023
	Structured Business			Agency Business			Consolidated
Assets:
Cash and cash equivalents	$	405,596		$	368,948		$	774,544
Restricted cash		702,360			2,484			704,844
Loans and investments, net		13,430,985			-			13,430,985
Loans held-for-sale, net		-			469,602			469,602
Capitalized mortgage servicing rights, net		-			396,634			396,634
Securities held-to-maturity, net		-			153,888			153,888
Investments in equity affiliates		77,641			-			77,641
Goodwill and other intangible assets		12,500			82,396			94,896
Other assets		413,846			71,344			485,190
Total assets	$	15,042,928		$	1,545,296		$	16,588,224
Liabilities:
Debt obligations	$	12,571,630		$	421,985		$	12,993,615
Allowance for loss-sharing obligations		-			59,757			59,757
Other liabilities		268,048			109,347			377,395
Total liabilities	$	12,839,678		$	591,089		$	13,430,767

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 March 31,
		2023				2022
Net income attributable to common stockholders	$	84,319			$	64,057
Adjustments:
Net income attributable to noncontrolling interest		7,585				6,816
Income from mortgage servicing rights		(18,458	)			(15,312	)
Deferred tax provision (benefit)		3,164				(1,720	)
Amortization and write-offs of MSRs		18,723				27,669
Depreciation and amortization		4,295				2,569
Loss on extinguishment of debt		-				1,350
Provision for credit losses, net		23,704				1,696
Gain on derivative instruments, net		(7,051	)			(298	)
Stock-based compensation		5,901				6,092
Distributable earnings (1)	$	122,182			$	92,919
Diluted distributable earnings per share (1)	$	0.62			$	0.55
Diluted weighted average shares outstanding (1) (2)		197,680,616				170,363,021
(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 March 31, 2023 and March 31, 2022, the diluted weighted average shares outstanding excluded 17,230,358 and 15,068,383 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.