ABR - Arbor Realty Trust Reports Fourth Quarter and Full Year 2023 Results and Declares Dividend of $0.43 per Share

Fourth Quarter Highlights:

• GAAP net income of $0.48 per diluted common share
• Distributable earnings ¹ of $0.51, or $0.54 per diluted common share excluding a $7.0 million realized loss on an office property that was previously reserved for
• 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 ~$600 million of restricted cash in replenishable CLO vehicles with a weighted average cost of 1.74% over SOFR ²
• Agency loan originations of $1.44 billion and a servicing portfolio of ~$30.98 billion, up 3.5%
• Structured loan originations of $266.2 million, runoff of $817.4 million, and a portfolio of ~$12.62 billion

Full Year Highlights:

• GAAP net income of $1.75 per diluted common share representing an increase of 5% over last year, and distributable earnings of $2.25 per diluted common share ¹
• Raised dividend twice during 2023 to an annual run rate of $1.72 per share, representing a 7.5% increase over the prior year
• Best-in-class total stockholder return of 28%
• Agency servicing portfolio growth of 11% from loan originations of $5.11 billion, a 7% increase over the prior year
• Structured portfolio reduction of 13% with $3.02 billion of multifamily loan runoff, $1.69 billion of which was recaptured into new agency loan originations
  

UNIONDALE, N.Y., Feb. 16, 2024 (GLOBE NEWSWIRE) -- Arbor Realty Trust, Inc. (NYSE: ABR), today announced financial results for the fourth quarter ended December 31, 2023. Arbor reported net income for the quarter of $91.7 million, or $0.48 per diluted common share, compared to net income of $88.2 million, or $0.49 per diluted common share for the quarter ended December 31, 2022. Net income for the year was $330.1 million, or $1.75 per diluted common share, compared to $284.8 million, or $1.67 per diluted common share for the year ended December 31, 2022. Distributable earnings for the quarter was $104.1 million, or $0.51 per diluted common share, compared to $114.0 million, or $0.60 per diluted common share for the quarter ended December 31, 2022. Distributable earnings for the year was $452.5 million, or $2.25 per diluted common share, compared to $405.7 million, or $2.23 per diluted common share for the year ended December 31, 2022. ¹

Agency Business

Loan Origination Platform

For the quarter ended December 31, 2023, the Agency Business generated revenues of $96.3 million, compared to $80.8 million for the third quarter of 2023. Gain on sales, including fee-based services, net on the GSE/Agency business (excluding private label and SFR) was $15.4 million for the quarter, reflecting a margin of 1.36%, compared to $17.7 million and 1.48% for the third quarter of 2023. Income from mortgage servicing rights was $21.1 million for the quarter, reflecting a rate of 1.55% as a percentage of loan commitments, compared to $14.1 million and 1.16% for the third quarter of 2023.

At December 31, 2023, loans held-for-sale was $551.7 million, with financing associated with these loans totaling $413.3 million.

Fee-Based Servicing Portfolio

The Company’s fee-based servicing portfolio totaled $30.98 billion at December 31, 2023. Servicing revenue, net was $33.1 million for the quarter and consisted of servicing revenue of $49.2 million, net of amortization of mortgage servicing rights totaling $16.2 million.

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 December 31, 2023. The Company recorded a $3.1 million net provision for loss sharing associated with CECL for the fourth quarter of 2023. At December 31, 2023, the Company’s total CECL allowance for loss-sharing obligations was $37.0 million, representing 0.17% of the Fannie Mae servicing portfolio.

Structured Business

Portfolio and Investment Activity

At December 31, 2023, the loan and investment portfolio’s unpaid principal balance, excluding loan loss reserves, was $12.62 billion, with a weighted average current interest pay rate of 8.42%, compared to $13.12 billion and 8.80% at September 30, 2023. Including certain fees earned and costs associated with the loan and investment portfolio, the weighted average current interest pay rate was 8.98% at December 31, 2023, compared to 9.12% at September 30, 2023. The decrease in pay rate was primarily due to an increase in non-performing loans in the fourth quarter of 2023.

The average balance of the Company’s loan and investment portfolio during the fourth quarter of 2023, excluding loan loss reserves, was $12.96 billion with a weighted average yield of 9.31%, compared to $13.40 billion and 9.28% for the third quarter of 2023.

During the fourth quarter of 2023, the Company recorded a $17.3 million provision for loan losses associated with CECL, which was net of $4.8 million of loan loss recoveries. At December 31, 2023, the Company’s total allowance for loan losses was $195.7 million. The Company had sixteen non-performing loans with a carrying value of $262.7 million, before related loan loss reserves of $27.1 million, compared to twelve loans with a carrying value of $150.5 million, before loan loss reserves of $12.6 million at September 30, 2023.

Financing Activity

The balance of debt that finances the Company’s loan and investment portfolio at December 31, 2023 was $11.57 billion with a weighted average interest rate including fees of 7.45% as compared to $11.86 billion and a rate of 7.41% at September 30, 2023.

The average balance of debt that finances the Company’s loan and investment portfolio for the fourth quarter of 2023 was $11.77 billion, as compared to $12.00 billion for the third quarter of 2023. The average cost of borrowings for the fourth quarter of 2023 was 7.48%, compared to 7.37% for the third quarter of 2023. The increase in average cost was primarily due to an increase in the SOFR rate in the fourth 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 December 31, 2023. The dividend is payable on March 15, 2024 to common stockholders of record on March 4, 2024. The ex-dividend date is March 1, 2024.

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) 245-3047 for domestic callers and (203) 518-9765 for international callers. Please use participant passcode ABRQ423 when prompted by the operator.

A telephonic replay of the call will be available until February 23, 2024. The replay dial-in numbers are (800) 934-8221 for domestic callers and (402) 220-6990 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, 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, 2023 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 February 14, 2024.

(1)  Includes income allocated to the noncontrolling interest holders not allocated to the two reportable segments.

(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 December 31, 2023 and December 31, 2022, the diluted weighted average shares outstanding excluded 17,362,563 and 18,470,080 of these potentially issuable shares, respectively. For the years ended December 31, 2023 and December 31, 2022, the diluted weighted average shares outstanding excluded 17,294,392 and 16,888,226 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.