Arbor Realty Trust Reports Fourth Quarter and Full Year 2019 Results and Declares Common Stock Dividend

Fourth Quarter Highlights:

Agency Business

Structured Business

Full Year Highlights:

Agency Business

Loan Origination Platform

For the quarter ended December 31, 2019, the Agency Business generated revenues of $68.5 million, compared to $67.0 million for the third quarter of 2019. Gain on sales, including fee-based services, net was $13.8 million for the quarter, reflecting a margin of 1.55% on loan sales, compared to $21.3 million and 1.43% for the third quarter of 2019. Income from mortgage servicing rights was $27.9 million for the quarter, reflecting a rate of 2.32% as a percentage of loan commitments, compared to $29.9 million and 2.02% for the third quarter of 2019.

At December 31, 2019, loans held-for-sale was $861.4 million which was primarily comprised of unpaid principal balances totaling $847.1 million, with financing associated with these loans totaling $743.6 million.

Fee-Based Servicing Portfolio

Our fee-based servicing portfolio totaled $20.06 billion at December 31, 2019, an increase of 0.4% from September 30, 2019, primarily a result of $939.7 million of new loan originations (excluding $320.5 million of private label loans that are yet to be sold), net of $846.5 million in portfolio runoff during the quarter. Servicing revenue, net was $14.6 million for the quarter and consisted of servicing revenue of $26.5 million, net of amortization of mortgage servicing rights totaling $12.0 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, 2019, the Company’s allowance for loss-sharing obligations was $34.6 million, representing 0.23% of the Fannie Mae servicing portfolio.

At December 31, 2019, the loan and investment portfolio’s unpaid principal balance, excluding loan loss reserves, was $4.29 billion, with a weighted average current interest pay rate of 5.98%, compared to $3.97 billion and 6.33% at September 30, 2019. Including certain fees earned and costs associated with the loan and investment portfolio, the weighted average current interest pay rate was 6.68% at December 31, 2019, compared to 7.04% at September 30, 2019.

The average balance of the Company’s loan and investment portfolio during the fourth quarter of 2019, excluding loan loss reserves, was $4.02 billion with a weighted average yield of 7.18%, compared to $3.94 billion and 7.31% for the third quarter of 2019. The decrease in average yield was primarily due to a decrease in LIBOR in the fourth quarter, partially offset by higher fees on loan payoffs in the fourth quarter as compared to the third quarter.

The Company completed its twelfth collateralized securitization vehicle (“CLO XII”) totaling $635.0 million of real estate related assets and cash. Investment grade-rated notes totaling $534.2 million were issued, and the Company retained subordinate interests in the issuing vehicle of $100.8 million. The facility has a three-year asset replenishment period and an initial weighted average interest rate of 1.50% over LIBOR, excluding fees and transaction costs.

The Company issued 7.5 million shares of common stock in a public offering receiving net proceeds of $104.0 million. The proceeds are primarily to be used to make investments and for general corporate purposes.

The Company issued $264.0 million in aggregate principal amount of 4.75% convertible senior notes due 2022 in a private placement, including the exercised initial purchaser’s over-allotment option of $34.0 million. The Company received proceeds totaling $256.5 million, net of the underwriter’s discount and fees from this offering. The Company used the net proceeds to exchange $103.5 million of its 5.25% convertible senior notes due 2021 that were issued on July 3, 2018 and $125.2 million of 5.25% convertible senior notes due 2021 that were issued on July 20, 2018 for a combination of $233.1 million in cash and 4.5 million shares of the Company’s common stock to settle such exchanges. The remaining net proceeds are to be used for general corporate purposes.

Dividends

The Company announced today that its Board of Directors has declared a quarterly cash dividend of $0.30 per share of common stock for the quarter ended December 31, 2019. The dividend is payable on March 17, 2020 to common stockholders of record on February 28, 2020. The ex-dividend date is February 27, 2020.

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, 2019 through February 29, 2020. The dividends are payable on March 2, 2020 to preferred stockholders of record on February 15, 2020. 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 and replay of the conference call will be available at http://www.arbor.com in the investor relations section of the Company’s 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 4199042.

A telephonic replay of the call will be available until February 21, 2020. The replay dial-in numbers are (855) 859-2056 for domestic callers and (404) 537-3406 for international callers. Please use passcode 4199042.

About Arbor Realty Trust, Inc.

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 12 of this release.

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

STATEMENT OF INCOME SEGMENT INFORMATION - (Unaudited)

(in thousands)

⁽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 Reports Fourth Quarter and Full Year 2019 Results and Declares Common Stock Dividend

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

BALANCE SHEET SEGMENT INFORMATION - (Unaudited)

(in thousands)

Arbor Realty Trust Reports Fourth Quarter and Full Year 2019 Results and Declares Common Stock Dividend

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)  

⁽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⁾ During the fourth quarter of 2019, the Company updated its definition of AFFO to (i)  exclude one-time gains or losses on the early extinguishment of debt, (ii) exclude gains and losses on derivative instruments associated with Private Label loans that have not yet been sold and securitized and (iii) include the cumulative gains or losses on derivative instruments associated with Private Label loans that were sold during the periods presented.  Prior period amounts presented above have been conformed to reflect this change.

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"), gains or losses on Private Label-related derivative instruments until the loans are sold, changes in fair value of GSE-related 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, gains and losses on the extinguishment of debt, 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.