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Arbor Realty Trust Reports Fourth Quarter and Full Year 2018 Results and Declares Common Stock Dividend
Globe Newswire 15-Feb-2019 8:15 AM
Fourth Quarter Company Highlights:
GAAP net income of $0.47 per diluted common share; AFFO of $0.29, or $0.39 per share excluding a $10 million non-cash loss reserve on a legacy asset1
Declares a cash dividend on common stock of $0.27 per share, 29% higher than a year ago
Declared a special dividend of $0.15 per share of common stock
Raised $100.5 million of capital in a common stock offering
Agency Business
Segment income of $42.4 million
Loan originations of $1.62 billion, a 15% increase from 3Q18
Servicing portfolio of $18.60 billion, up 5% from 3Q18 and 15% for 2018
Structured Business
Segment income of $4.7 million
Loan originations of $447.5 million
Full Year Highlights:
GAAP net income of $1.50 and AFFO of $1.21 per diluted common share1
Record loan originations of $6.78 billion, with $5.12 billion from the agency business, a 15% increase over 2017
Improved funding sources by adding our tenth and largest collateralized securitization vehicle totaling $560.0 million, increased warehouse facility capacity and reduced pricing, issued $389.5 million of senior debt replacing $336.1 million of higher cost senior debt
Raised $217.1 million of capital through the issuance of common stock and debt
Structured portfolio growth of 24% from loan originations of $1.66 billion
Declared dividends on common stock of $1.13 per share, a 57% increase from 2017
Significant return to shareholders of 30% for 2018
Market cap surpasses $1 billion mark
Recognized a $10 million gain from the settlement of a litigation
UNIONDALE, N.Y., Feb. 15, 2019 (GLOBE NEWSWIRE) -- Arbor Realty Trust, Inc. (NYSE:ABR), today announced financial results for the fourth quarter and year ended December 31, 2018. Arbor reported net income for the quarter of $37.2 million, or $0.47 per diluted common share, compared to $21.9 million, or $0.35 per diluted common share for the quarter ended December 31, 2017. Net income for the year was $108.3 million, or $1.50 per diluted common share, compared to $65.8 million, or $1.12 per diluted common share for the year ended December 31, 2017. Adjusted funds from operations ("AFFO") for the quarter was $28.9 million, or $0.29 per diluted common share, compared to $20.7 million, or $0.25 per diluted common share for the quarter ended December 31, 2017. AFFO for the year was $113.1 million, or $1.21 per diluted common share, compared to $83.9 million, or $1.04 per diluted common share for the year ended December 31, 2017.1
Agency Business
Loan Origination Platform
Agency Loan Volume (in thousands)
Quarter Ended
Year Ended
December 31, 2018
September 30, 2018
December 31, 2018
December 31, 2017
Fannie Mae
$
1,067,230
$
995,662
$
3,332,100
$
2,929,481
Freddie Mac
527,502
317,516
1,587,958
1,322,498
FHA
15,549
77,236
153,523
189,087
CMBS/Conduit
14,025
20,650
50,908
21,370
Total Originations
$
1,624,306
$
1,411,064
$
5,124,489
$
4,462,436
Total Loan Sales
$
1,653,421
$
1,190,004
$
4,924,144
$
4,814,906
Total Loan Commitments
$
1,604,502
$
1,376,376
$
5,104,072
$
4,344,328
For the quarter ended December 31, 2018, the Agency Business generated revenues of $84.4 million, compared to $58.8 million for the third quarter of 2018. Gain on sales, including fee-based services, net was $18.7 million for the quarter, reflecting a margin of 1.13% on loan sales, compared to $17.5 million and 1.47% for the third quarter of 2018. Income from mortgage servicing rights was $36.1 million for the quarter, reflecting a rate of 2.25% as a percentage of loan commitments, compared to $25.2 million and 1.83% for the third quarter of 2018.
At December 31, 2018, loans held-for-sale was $481.7 million which was primarily comprised of unpaid principal balances totaling $473.0 million, with financing associated with these loans totaling $ 472.2 million.
Fee-Based Servicing Portfolio
Our fee-based servicing portfolio totaled $18.60 billion at December 31, 2018, an increase of 5% from September 30, 2018, primarily a result of $1.62 billion of new loan originations, net of $ 803.3 million in portfolio runoff during the quarter. Servicing revenue, net was $11.4 million for the quarter and consists of servicing revenue of $23.9 million, net of amortization of mortgage servicing rights totaling $12.5 million.
Fee-Based Servicing Portfolio ($ in thousands)
As of December 31, 2018
As of September 30, 2018
UPB
Wtd. Avg. Fee
Wtd. Avg. Life (in years)
UPB
Wtd. Avg. Fee
Wtd. Avg. Life (in years)
Fannie Mae
$
13,562,667
0.513
%
7.4
$
13,195,643
0.523
%
7.7
Freddie Mac
4,394,287
0.308
%
10.8
3,977,619
0.308
%
11.0
FHA
644,687
0.155
%
19.6
621,419
0.157
%
20.1
Total
$
18,601,641
0.452
%
8.6
$
17,794,681
0.462
%
8.8
Loans sold under the Fannie Mae program contain an obligation to partially guarantee the performance of the loan ("loss-sharing obligations"). At December 31, 2018, the Company's allowance for loss-sharing obligations was $34.3 million, representing 0.25% of the Fannie Mae servicing portfolio.
Structured Business
Portfolio and Investment Activity
Quarter ended December 31, 2018:
21 new loan originations totaling $447.5 million, of which 18 were bridge loans for $404.9 million
Payoffs and pay downs on 23 loans totaling $271.4 million
Year ended December 31, 2018:
Portfolio growth of 24% was driven by loan origination volume consisting of 90 new loan originations totaling $1.66 billion, of which 84 were bridge loans for $1.55 billion
Payoffs and pay downs on 79 loans totaling $955.6 million
At December 31, 2018, the loan and investment portfolio's unpaid principal balance, excluding loan loss reserves, was $3.28 billion, with a weighted average current interest pay rate of 7.02%, compared to $3.17 billion and 6.88% at September 30, 2018. Including certain fees earned and costs associated with the loan and investment portfolio, the weighted average current interest pay rate was 7.66% at December 31, 2018, compared to 7.52% at September 30, 2018. The increase in average yield was primarily due to an increase in LIBOR.
The average balance of the Company's loan and investment portfolio during the fourth quarter of 2018, excluding loan loss reserves, was $3.23 billion with a weighted average yield on these assets of 7.76%, compared to $3.26 billion and 7.37% for the third quarter of 2018. The increase in average yield was primarily due to higher fees on loan payoffs in the fourth quarter as compared to the third quarter, as well as an increase in LIBOR.
The Company recorded $10.1 million in loan loss reserves related to a loan with a carrying value of approximately $121.4 million, before loan loss reserves. At December 31, 2018, the Company's total loan loss reserves were $71.1 million on five loans with an aggregate carrying value before loan loss reserves of $131.8 million. The Company also had two non-performing loans with a carrying value of $2.5 million, net of related loan loss reserves of $1.7 million.
Financing Activity
The balance of debt that finances the Company's loan and investment portfolio at December 31, 2018 was $2.89 billion with a weighted average interest rate including fees of 5.24% as compared to $2.92 billion and a rate of 5.03% at September 30, 2018. The average balance of debt that finances the Company's loan and investment portfolio for the fourth quarter of 2018 was $2.89 billion, as compared to $2.86 billion for the third quarter of 2018. The average cost of borrowings for the fourth quarter was 5.13%, compared to 4.93% for the third quarter of 2018. The increase in average costs was primarily due to an increase in LIBOR.
The Company is subject to various financial covenants and restrictions under the terms of its collateralized securitization vehicles and financing facilities. The Company believes it was in compliance with all financial covenants and restrictions as of December 31, 2018 and as of the most recent collateralized securitization vehicle determination dates in January 2019.
Capital Markets
The Company issued 8.7 million shares of common stock in a public offering receiving net proceeds of $100.5 million. The Company intends to use the net proceeds to make investments and for general corporate purposes.
Dividends
The Company announced today that its Board of Directors has declared a quarterly cash dividend of $0.27 per share of common stock for the quarter ended December 31, 2018, representing an increase of 29% over the prior year dividend of $0.21 per share. The dividend is payable on March 20, 2019 to common stockholders of record on March 1, 2019. The ex-dividend date is February 28, 2019.
The Company also announced today that its Board of Directors has declared cash dividends on the Company's Series A, Series B and Series C cumulative redeemable preferred stock reflecting accrued dividends from December 1, 2018 through February 28, 2019. The dividends are payable on February 28, 2019 to preferred stockholders of record on February 15, 2019. 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.
In addition, the Board of Directors declared a special dividend of $0.15 per common share, which was paid in a combination of 80% common stock and 20% cash in January 2019.
Earnings Conference Call
The Company will host a conference call today at 10:00 a.m. Eastern Time. 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 6283438.
After the live webcast, the call will remain available on the Company's website through March 31, 2019. In addition, a telephonic replay of the call will be available until February 22, 2019. The replay dial-in numbers are (855) 859-2056 for domestic callers and (404) 537-3406 for international callers. Please use passcode 6283438.
About Arbor Realty Trust, Inc.
Arbor Realty Trust, Inc. (NYSE:ABR) is a nationwide real estate investment trust and direct lender, providing loan origination and servicing for multifamily, seniors housing, healthcare, and other diverse commercial real estate assets. Headquartered in Uniondale, New York, Arbor manages a multibillion-dollar servicing portfolio, specializing in Fannie Mae, Freddie Mac, and other government-sponsored enterprises, as well as CMBS, bridge, mezzanine, and preferred equity lending. Rated by Standard and Poor's and Fitch Ratings, Arbor is committed to building on its reputation for service, quality, and flexibility, and dedicated 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, 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, 2018 and its other reports filed with the SEC. Such forward-looking statements speak only as of the date of this press release. Arbor expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Arbor's expectations with regard thereto or change in events, conditions, or circumstances on which any such statement is based.
1. Non-GAAP Financial Measures
During the quarterly earnings conference call, the Company may discuss non-GAAP financial measures as defined by SEC Regulation G. In addition, the Company has used non-GAAP financial measures in this press release. A supplemental schedule of non-GAAP financial measures and the comparable GAAP financial measure can be found on page 11 of this release.
Contacts:
Arbor Realty Trust, Inc. Paul Elenio, Chief Financial Officer 516-506-4422 pelenio@arbor.com
Media: Bonnie Habyan, EVP of Marketing 516-506-4615 bhabyan@arbor.com
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
($ in thousands—except share and per share data)
Quarter Ended
Year Ended
December 31,
December 31,
2018
2017
2018
2017
(Unaudited)
(Unaudited)
Interest income
$
73,360
$
46,045
$
251,768
$
156,177
Interest expense
42,999
26,374
153,818
90,072
Net interest income
30,361
19,671
97,950
66,105
Other revenue:
Gain on sales, including fee-based services, net
18,735
17,672
70,002
72,799
Mortgage servicing rights
36,052
20,638
98,839
76,820
Servicing revenue, net
11,372
9,287
46,034
29,210
Property operating income
1,569
2,219
10,095
10,973
Other income, net
9,736
1,615
8,161
685
Total other revenue
77,464
51,431
233,131
190,487
Other expenses:
Employee compensation and benefits
26,386
25,265
110,470
92,126
Selling and administrative
9,291
7,605
37,074
30,738
Property operating expenses
2,342
2,639
10,431
10,482
Depreciation and amortization
1,914
1,843
7,453
7,385
Impairment loss on real estate owned
-
500
2,000
3,200
Provision for loss sharing (net of recoveries)
1,003
147
3,843
(259
)
Provision for loan losses (net of recoveries)
9,319
-
8,353
(456
)
Litigation settlement gain
-
-
(10,170
)
-
Management fee - related party
-
-
-
6,673
Total other expenses
50,255
37,999
169,454
149,889
Income before extinguishment of debt, income from
equity affiliates and income taxes
57,570
33,103
161,627
106,703
(Loss) gain on extinguishment of debt
(82
)
-
(5,041
)
7,116
Income (loss) from equity affiliates
91
(4,706
)
1,196
(2,951
)
(Provision for) benefit from income taxes
(8,635
)
2,885
(9,731
)
(13,359
)
Net income
48,944
31,282
148,051
97,509
Preferred stock dividends
1,888
1,888
7,554
7,554
Net income attributable to noncontrolling interest
9,838
7,524
32,185
24,120
Net income attributable to common stockholders
37,218
$
21,870
$
108,312
$
65,835
Basic earnings per common share
$
0.48
$
0.35
$
1.54
$
1.14
Diluted earnings per common share
$
0.47
$
0.35
$
1.50
$
1.12
Weighted average shares outstanding:
Basic
78,273,633
61,712,782
70,208,165
57,890,574
Diluted
101,148,081
84,361,612
93,642,168
80,311,252
Dividends declared per common share
$
0.42
$
0.19
$
1.13
$
0.72
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands—except share and per share data)
December 31,
December 31,
2018
2017
Assets:
Cash and cash equivalents
$
160,063
$
104,374
Restricted cash
180,606
139,398
Loans and investments, net
3,200,145
2,579,127
Loans held-for-sale, net
481,664
297,443
Capitalized mortgage servicing rights, net
273,770
252,608
Securities held to maturity, net
76,363
27,837
Investments in equity affiliates
21,580
23,653
Real estate owned, net
14,446
16,787
Due from related party
1,287
688
Goodwill and other intangible assets
116,165
121,766
Other assets
86,086
62,264
Total assets
$
4,612,175
$
3,625,945
Liabilities and Equity:
Credit facilities and repurchase agreements
1,135,627
528,573
Collateralized loan obligations
1,593,548
1,418,422
Debt fund
68,183
68,084
Senior unsecured notes
122,484
95,280
Convertible senior unsecured notes, net
254,768
231,287
Junior subordinated notes to subsidiary trust issuing preferred securities
140,259
139,590
Related party financing
-
50,000
Due to borrowers
78,662
99,829
Allowance for loss-sharing obligations
34,298
30,511
Other liabilities
118,780
99,813
Total liabilities
3,546,609
2,761,389
Equity:
Arbor Realty Trust, Inc. stockholders' equity:
Preferred stock, cumulative, redeemable, $0.01 par value: 100,000,000
shares authorized; special voting preferred shares; 20,653,584 and 21,230,769 shares
issued and outstanding, respectively; 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
89,502
89,508
Common stock, $0.01 par value: 500,000,000 shares authorized; 83,987,707
and 61,723,387 shares issued and outstanding, respectively
840
617
Additional paid-in capital
879,029
707,450
Accumulated deficit
(74,133
)
(101,926
)
Accumulated other comprehensive income
-
176
Total Arbor Realty Trust, Inc. stockholders' equity
895,238
695,825
Noncontrolling interest
170,328
168,731
Total equity
1,065,566
864,556
Total liabilities and equity
$
4,612,175
$
3,625,945
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
STATEMENT OF INCOME SEGMENT INFORMATION - (Unaudited)
(in thousands)
Quarter Ended December 31, 2018
Structured Business
Agency Business
Other / Eliminations (1)
Consolidated
Interest income
$
64,105
$
9,255
$
-
$
73,360
Interest expense
37,395
5,604
-
42,999
Net interest income
26,710
3,651
-
30,361
Other revenue:
Gain on sales, including fee-based services, net
-
18,735
-
18,735
Mortgage servicing rights
-
36,052
-
36,052
Servicing revenue
-
23,857
-
23,857
Amortization of MSRs
-
(12,485
)
-
(12,485
)
Property operating income
1,569
-
-
1,569
Other income, net
734
9,002
-
9,736
Total other revenue
2,303
75,161
-
77,464
Other expenses:
Employee compensation and benefits
6,437
19,949
-
26,386
Selling and administrative
4,142
5,149
-
9,291
Property operating expenses
2,342
-
-
2,342
Depreciation and amortization
514
1,400
-
1,914
Provision for loss sharing (net of recoveries)
-
1,003
-
1,003
Provision for loan losses (net of recoveries)
9,319
-
-
9,319
Total other expenses
22,754
27,501
-
50,255
Income before extinguishment of debt, income from
equity affiliates and income taxes
6,259
51,311
-
57,570
Loss on extinguishment of debt
(82
)
-
-
(82
)
Income from equity affiliates
91
-
-
91
Benefit from (provision for) income taxes
273
(8,908
)
-
(8,635
)
Net income
6,541
42,403
-
48,944
Preferred stock dividends
1,888
-
-
1,888
Net income attributable to noncontrolling interest
-
-
9,838
9,838
Net income attributable to common stockholders
$
4,653
$
42,403
$
(9,838
)
$
37,218
(1) Includes certain income or expenses not allocated to the two reportable segments. Amount reflects income attributable to the noncontrolling interest holders.
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
BALANCE SHEET SEGMENT INFORMATION - (Unaudited)
(in thousands)
December 31, 2018
Structured Business
Agency Business
Consolidated
Assets:
Cash and cash equivalents
$
89,457
$
70,606
$
160,063
Restricted cash
180,606
-
180,606
Loans and investments, net
3,200,145
-
3,200,145
Loans held-for-sale, net
-
481,664
481,664
Capitalized mortgage servicing rights, net
-
273,770
273,770
Securities held to maturity, net
-
76,363
76,363
Investments in equity affiliates
21,580
-
21,580
Goodwill and other intangible assets
12,500
103,665
116,165
Other assets
81,494
20,325
101,819
Total assets
$
3,585,782
$
1,026,393
$
4,612,175
Liabilities:
Debt obligations
2,842,688
472,181
3,314,869
Allowance for loss-sharing obligations
-
34,298
34,298
Other liabilities
159,413
38,029
197,442
Total liabilities
$
3,002,101
$
544,508
$
3,546,609
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
Supplemental Schedule of Non-GAAP Financial Measures - (Unaudited)
Funds from Operations ("FFO") and Adjusted Funds from Operations ("AFFO")
($ in thousands—except share and per share data)
Quarter Ended
Year Ended
December 31,
December 31,
2018
2017
2018
2017
Net income attributable to common stockholders
$
37,218
$
21,870
$
108,312
$
65,835
Adjustments:
Net income attributable to noncontrolling interest
9,838
7,524
32,185
24,120
Impairment loss on real estate owned
-
500
2,000
3,200
Depreciation - real estate owned
176
177
708
769
Depreciation - investments in equity affiliates
125
102
499
406
Funds from operations (1)
$
47,357
$
30,173
$
143,704
$
94,330
Adjustments:
Income from mortgage servicing rights
(36,052
)
(20,638
)
(98,839
)
(76,820
)
Impairment loss on real estate owned
-
(500
)
(2,000
)
(3,200
)
Deferred tax provision (benefit)
2,421
(7,414
)
(12,033
)
(7,399
)
Amortization and write-offs of MSRs
20,314
16,894
73,182
63,034
Depreciation and amortization
2,582
2,073
9,618
7,697
Net (gain) loss on changes in fair value of derivatives
(9,002
)
(914
)
(6,672
)
1,398
Stock-based compensation
1,257
1,007
6,095
4,840
Adjusted funds from operations (1) (2)
$
28,877
$
20,681
$
113,055
$
83,880
Diluted FFO per share (1)
$
0.47
$
0.36
$
1.53
$
1.17
Diluted AFFO per share (1) (2)
$
0.29
$
0.25
$
1.21
$
1.04
Diluted weighted average shares outstanding (1)
101,148,081
84,361,612
93,642,168
80,311,252
(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) Excluding the impact of a non-cash $10.1 million loan loss reserve related to a legacy pre-crisis asset, AFFO for the quarter ended December 31, 2018 was $39.0 million, or $0.39 per diluted common share.
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 (benefit) provision and the amortization of 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 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.
