Arbor Realty Trust Reports Fourth Quarter and Full Year 2017 Results and Increases Quarterly Dividend 11% to $0.21 per Share

Fourth Quarter Company Highlights:

·                 GAAP net income of $0.35 and AFFO of $0.25 per diluted common share(1)

·                 Declares a cash dividend on common stock of $0.21 per share, a 24% increase in our dividend from a year ago and 11% higher than last quarter

Agency Business

·                 Segment income of $28.8 million

·                 Loan originations of $1.15 billion

·                 Servicing portfolio of $16.21 billion, up 4% from 3Q17 and 20% for 2017

Structured Business

·                 Segment income of $7.1 million (excluding a non-recurring charge)

·                 Portfolio growth of 27% on $786.0 million of loan originations, our strongest quarter of originations in over ten years

·                 Issued $143.8 million of 5.375% convertible senior notes with more than a 100 basis point rate reduction from our prior issuance less than a year ago

·                 Closed a ninth collateralized securitization vehicle totaling $480.0 million

Full Year Highlights:

·                 GAAP net income of $1.12 and AFFO of $1.04 per diluted common share(1)

·                 Record loan originations of $6.31 billion, with $4.46 billion from the agency business, a 19% increase over 2016

·                 Significant structured portfolio growth of 48% on new originations of $1.84 billion

·                 Raised forward annualized common dividend rate to $0.84 per share, our third increase in the past four quarters

·                 Total return to shareholders of 25% for 2017

·                 Completed the full internalization of our management team

·                 Accessed accretive capital raising $157.5 million of convertible notes and $76.2 million of common equity with attractive terms

·                 Improved financing sources by adding three collateralized securitization vehicles totaling $1.21 billion with significantly reduced interest rates and increased financing capacity

·                 Generated a $7.1 million gain from the repurchase of TRUP debt

Agency Business

Loan Origination Platform

For the quarter ended December 31, 2017, the Agency Business generated revenues of $53.7 million, compared to $49.7 million for the third quarter of 2017.  Gain on sales, including fee-based services, net was $17.7 million for the quarter, reflecting a margin of 1.48% on loan sales, compared to $17.1 million and 1.63% for the third quarter of 2017. Income from mortgage servicing rights was $20.6 million for the quarter, reflecting a rate of 1.77% as a percentage of loan commitments, compared to $18.9 million and 2.04% for the third quarter of 2017.

At December 31, 2017, loans held-for-sale was $297.4 million which was primarily comprised of unpaid principal balances totaling $292.2 million, with financing associated with these loans totaling $291.5 million.

Fee-Based Servicing Portfolio

The fee-based servicing portfolio totaled $16.21 billion at December 31, 2017, an increase of 4% from September 30, 2017, primarily as a result of $1.15 billion of new loan originations during the quarter. Servicing revenue, net was $9.3 million for the quarter, and consists of servicing revenue of $21.1 million net of amortization of mortgage servicing rights totaling $11.8 million.

Loans sold under the Fannie Mae program contain an obligation to partially guarantee the performance of the loan (“loss-sharing obligations”). At December 31, 2017, the Company’s allowance for loss-sharing obligations was $30.5 million which consists of general loss sharing guaranty obligations of $29.6 million, representing 0.24% of the Fannie Mae servicing portfolio, and $0.9 million of loss-sharing obligations on specifically identified loans with losses determined to be probable and estimable.

Structured Business

Portfolio and Investment Activity

At December 31, 2017, the loan and investment portfolio’s unpaid principal balance, excluding loan loss reserves, was $2.66 billion, with a weighted average current interest pay rate of 6.28%, compared to $2.10 billion and 6.04% at September 30, 2017.  Including certain fees earned and costs associated with the loan and investment portfolio, the weighted average current interest pay rate was 6.99% at December 31, 2017, compared to 6.84% at September 30, 2017.

The average balance of the Company’s loan and investment portfolio during the fourth quarter of 2017, excluding loan loss reserves, was $2.31 billion with a weighted average yield on these assets of 6.94%, compared to $2.00 billion and 7.34% for the third quarter of 2017.  The decrease in average yield was primarily due to lower accelerated fees on early loan payoffs in the fourth quarter as compared to the third quarter, as well as lower rates on fourth quarter new originations, partially offset by an increase in LIBOR.

The Company recorded a loss from equity affiliates of $4.7 million consisting primarily of a $5.5 million non-recurring charge for our proportionate share of a litigation settlement related to our joint venture investment in a residential mortgage banking business partially offset by $0.6 million of income from a distribution received.

Financing Activity

The balance of debt that finances the Company’s loan and investment portfolio at December 31, 2017 was $2.24 billion with a weighted average interest rate including fees of 4.83%, as compared to $1.67 billion and a rate of 4.48% at September 30, 2017. The average balance of debt that finances the Company’s loan and investment portfolio for the fourth quarter of 2017 was $1.90 billion, as compared to $1.62 billion for the third quarter of 2017. The average cost of borrowings for the fourth quarter was 4.66%, compared to 4.89% for the third quarter of 2017.

Capital Markets

The Company issued $143.8 million of 5.375% convertible senior notes due 2020 (the “Notes”), including the underwriter’s $18.8 million over-allotment option. The conversion rate was initially equal to 107.7122 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of $9.28 per share of common stock, representing an approximate 10% conversion premium based on the closing price of the Company’s common stock of $8.44 per share on November 7, 2017. The Company received proceeds totaling $139.2 million, net of the underwriter’s discount and fees, from these offerings which is 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 $0.21 per share of common stock for the quarter ended December 31, 2017, representing an increase of 11% over the prior quarter dividend of $0.19 per share. The dividend is payable on March 21, 2018 to common stockholders of record on March 8, 2018. The ex-dividend date is March 7, 2018.

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 December 1, 2017 through February 28, 2018. The dividends are payable on February 28, 2018 to preferred stockholders of record on February 15, 2018. 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. 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 1786665.

About Arbor Realty Trust, Inc.

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, 2017 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 12 of this release.