Arbor Realty Trust Reports Second Quarter 2013 Results and Declares Common and Preferred Dividends Second Quarter Highlights: *Declares a common dividend of $0.13 per share, an 8% increase from 1Q13 *Declares a dividend of $0.515625 per share of Series A preferred stock and $0.6028 per share of Series B preferred stock *FFO of $4.8 million, or $0.11 per diluted common share^1 *Net income attributable to common stockholders of $3.0 million, or $0.07 per diluted common share *Raised $30.4 million of capital in a preferred stock offering *Closed a $40.0 million warehouse facility *Originated 16 new loans totaling $181.2 million *Purchased 10 residential mortgage-backed securities totaling $84.8 million *Adjusted book value per common share of $9.63, GAAP book value per common share of $7.60^1 *Recorded $1.5 million in loan loss reserves *Recorded $0.7 million in cash recoveries of previously recorded reserves UNIONDALE, N.Y., Aug. 2, 2013 (GLOBE NEWSWIRE) -- Arbor Realty Trust, Inc. (NYSE:ABR), a real estate investment trust focused on the business of investing in real estate related bridge and mezzanine loans, preferred and direct equity investments, mortgage-related securities and other real estate related assets, today announced financial results for the second quarter ended June 30, 2013. Arbor reported net income attributable to common stockholders for the quarter of $3.0 million, or $0.07 per diluted common share, compared to net income attributable to common stockholders for the quarter ended June 30, 2012 of $15.5 million, or $0.62 per diluted common share. Net income attributable to common stockholders for the six months ended June 30, 2013 was $9.6 million, or $0.25 per diluted common share, compared to net income attributable to common stockholders for the six months ended June 30, 2012 of $19.7 million, or $0.79 per diluted common share. Funds from operations ("FFO") for the quarter ended June 30, 2013 was $4.8 million, or $0.11 per diluted common share, compared to FFO of $17.1 million, or $0.68 per diluted common share for the quarter ended June 30, 2012. ^ FFO for the six months ended June 30, 2013 was $13.1 million, or $0.34 per diluted common share, compared to FFO of $19.0 million, or $0.77 per diluted common share for the six months ended June 30, 2012.^1 The balance of the Company's loan and investment portfolio, excluding loan loss reserves, at June 30, 2013 was approximately $1.8 billion, as compared to approximately $1.7 billion at March 31, 2013. The average balance of the Company's loan and investment portfolio during the second quarter of 2013, excluding loan loss reserves, was $1.8 billion and the average yield on these assets for the quarter was 5.47%, compared to $1.7 billion and 5.63% for the first quarter of 2013. The balance of debt that finances the Company's loan and investment portfolio at June 30, 2013 remained relatively unchanged compared to March 31, 2013 at approximately $1.3 billion. The average balance of debt that finances the Company's loan and investment portfolio for the second quarter of 2013 also remained relatively unchanged compared to the first quarter of 2013 at approximately $1.3 billion. The average cost of borrowings for the second quarter was 3.15%, compared to 3.38% for the first quarter of 2013. Financing Activity As of June 30, 2013, Arbor's outstanding borrowings for its loan and investment portfolio totaled approximately $1.3 billion. In June 2013, the Company closed a one year, $40 million warehouse facility with a financial institution to finance first mortgage loans on multifamily properties, including a $10 million sublimit to finance retail and office properties. The facility has an interest rate of 200 basis points over LIBOR, warehousing fees, a maximum advance rate of up to 75% and contains certain financial covenants and restrictions. The Company is subject to various financial covenants and restrictions under the terms of the Company's CDO/CLO vehicles, credit facilities, and repurchase agreements. The Company believes that it was in compliance with all financial covenants and restrictions as of June 30, 2013. The Company's CDO/CLO vehicles contain interest coverage and asset over collateralization covenants that must be met as of the waterfall distribution date in order for the Company to receive such payments. If the Company fails these covenants in any of its CDOs or CLO, all cash flows from the applicable vehicle would be diverted to repay principal and interest on the outstanding bonds and the Company would not receive any residual payments until that vehicle regained compliance with such covenants. As of the most recent determination dates in July 2013, the Company was in compliance with all CDO/CLO covenants. In the event of a breach of the covenants that could not be cured in the near-term, the Company would be required to fund its non CDO/CLO expenses, including management fees and employee costs, distributions required to maintain REIT status, debt costs, and other expenses with (i) cash on hand, (ii) income from any CDO/CLO not in breach of a covenant test, (iii) income from real property and loan assets, (iv) sale of assets, (v) or accessing the equity or debt capital markets, if available. The chart below is a summary of the Company's CDO/CLO compliance tests as of the most recent determination dates in July 2013: Cash Flow Triggers CDO I ^(3) CDO II ^ CDO III CLO I CLO II (3) ^(3) Overcollateralization ^(1) Current 176.69% 139.10% 106.61% 142.96% 146.89% Limit 145.00% 127.30% 105.60% 137.86% 144.25% Pass / Fail Pass Pass Pass Pass Pass Interest Coverage ^(2) Current 590.16% 509.66% 621.88% 255.32% 367.57% Limit 160.00% 147.30% 105.60% 120.00% 120.00% Pass / Fail Pass Pass Pass Pass Pass (1) The overcollateralization ratio divides the total principal balance of all collateral in the CDO/CLO by the total principal balance of the bonds associated with the applicable ratio.To the extent an asset is considered a defaulted security, the asset's principal balance for purposes of the overcollateralization test is the lesser of the asset's market value or the principal balance of the defaulted asset multiplied by the asset's recovery rate which is determined by the rating agencies. (2) The interest coverageratio divides interest income by interest expense for the classes senior to those retained by the Company. (3) CDO I, CDO II, and CDO III have reached the end of their replenishment periods. As such, investor capital is repaid quarterly from proceeds received from loan repayments held as collateral in accordance with the terms of the respective CDO. Portfolio Activity During the second quarter of 2013, Arbor purchased 10 residential mortgage-backed securities with a total face value of $84.8 million, of which six residential mortgage-backed securities totaling $76.1 million were accounted for as derivatives net of financings of $60.6 million in other assets on the Consolidated Balance Sheets. These securities had paydowns totaling approximately $2.2 million during the quarter, reducing their combined face value to $82.6 million as of June 30, 2013. Including this $2.2 million of paydowns, the securities portfolio had total paydowns of approximately $29.2 million during the quarter. During the second quarter of 2013, Arbor originated 12 bridge loans totaling approximately $164.2 million, three mezzanine loans totaling approximately $7.5 million, and one preferred equity investment totaling $9.5 million. In addition, four loans paid off with an unpaid principal balance of $34.4 million during the quarter. Additionally, three loans totaling approximately $12.3 million were extended during the quarter. At June 30, 2013, the loan and investment portfolio's unpaid principal balance, excluding loan loss reserves, was approximately $1.8 billion, with a weighted average current interest pay rate of 5.07%. Including certain fees earned and costs associated with the loan and investment portfolio, the weighted average current interest rate was 5.48% at June 30, 2013. At the same date, advances on financing facilities pertaining to the loan and investment portfolio totaled approximately $1.3 billion, with a weighted average interest rate of 3.21% excluding changes in the market value of certain interest rate swaps. As of June 30, 2013, Arbor's loan portfolio consisted of 29% fixed-rate and 71% variable-rate loans. During the second quarter of 2013, the Company recorded $1.5 million in loan loss reserves related to two loans with a carrying value of approximately $12.9 million, before loan loss reserves. The loan loss reserves were the result of the Company's regular quarterly risk rating review process, which is based on several factors including current market conditions, real estate values and the operating status of each property. The Company recorded $0.7 million of net recoveries of previously recorded loan loss reserves related to three of the Company's assets during the second quarter of 2013. These recoveries were recorded in provision for loan losses on the Consolidated Statement of Operations. At June 30, 2013, the Company's total loan loss reserves were approximately $146.6 million relating to 20 loans with an aggregate carrying value before loan loss reserves of approximately $247.6 million. The Company recognizes income on impaired loans on a cash basis to the extent it is received. The Company had six non-performing loans with a carrying value of approximately $14.8 million, net of related loan loss reserves of $30.1 million as of June 30, 2013, which was relatively unchanged from March 31, 2013. Income recognition on non-performing loans has been suspended and will resume if and when the loans become contractually current and performance has recommenced. Equity Offering In May 2013, Arbor completed an underwritten public offering of approximately 1.3 million shares of its 7.75% Series B Cumulative Redeemable Preferred Stock generating net proceeds of approximately $30.4 million after deducting underwriting fees and estimated offering costs. The Company intends to use the net proceeds from the offering to make investments, to repurchase or pay liabilities and for general corporate purposes. Common Dividend The Company announced today that its Board of Directors has declared a quarterly cash dividend of $0.13 per share of common stock for the second quarter ended June 30, 2013. The dividend is payable on September 3, 2013 to common shareholders of record on August 14, 2013. The ex-dividend date is August 12, 2013. Preferred Dividends The Company announced today that its Board of Directors has declared a cash dividend of $0.515625 per share of Series A cumulative redeemable preferred stock reflecting accrued dividends through August 31, 2013. The dividend is payable on September 3, 2013 to preferred shareholders of record on August 14, 2013. The Company announced today that its Board of Directors has declared a cash dividend of $0.6028 per share of Series B cumulative redeemable preferred stock reflecting accrued dividends from the date of issuance, May 9, 2013, through August 31, 2013. The dividend is payable on September 3, 2013 to preferred shareholders of record on August 14, 2013. Earnings Conference Call Management will host a conference call today at 9:00 a.m. ET. A live webcast of the conference call will be available online at http://www.arborrealtytrust.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) 515-2912 for domestic callers and (617) 399-5126 for international callers. Please use participant passcode 98005895. After the live webcast, the call will remain available on the Company's Website, www.arborrealtytrust.com, through September 2, 2013. In addition, a telephonic replay of the call will be available until August 9, 2013. The replay dial-in number is (888) 286-8010 for domestic callers and (617) 801-6888 for international callers. Please use passcode 98316976. About Arbor Realty Trust, Inc. Arbor Realty Trust, Inc. is a real estate investment trust, which invests in a diversified portfolio of multi-family and commercial real estate related bridge and mezzanine loans, preferred equity investments, mortgage related securities and other real estate related assets. Arbor commenced operations in July 2003 and conducts substantially all of its operations through its operating partnership, Arbor Realty Limited Partnership and its subsidiaries. Arbor is externally managed and advised by Arbor Commercial Mortgage, LLC, a national commercial real estate finance company operating through 14 offices in the US that specializes in debt and equity financing for multi-family and commercial real estate. 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, 2012 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. 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 each non-GAAP financial measure and the comparable GAAP financial measure can be found on page 10 and 11 of this release. 1. See attached supplemental schedule of non-GAAP financial measures. ARBOR REALTY TRUST, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Quarter Ended Six Months Ended June 30, June 30, 2013 2012 2013 2012 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Interest income $24,329,116 $19,502,713 $47,317,938 $39,109,120 Interest expense 10,333,073 9,770,807 20,975,317 21,532,207 Net interest income 13,996,043 9,731,906 26,342,621 17,576,913 Other revenues: Property operating 8,231,822 8,109,440 17,127,256 16,854,910 income Other income, net 605,317 369,609 1,984,775 401,639 Total other revenues 8,837,139 8,479,049 19,112,031 17,256,549 Other expenses: Employee compensation 2,968,678 2,381,817 6,052,317 4,866,595 and benefits Selling and 2,969,733 2,191,769 5,159,016 3,852,002 administrative Property operating 7,161,334 7,363,040 14,031,493 14,497,378 expenses Depreciation and 1,827,595 1,512,024 3,459,726 2,660,980 amortization Provision for loan losses (net of 821,722 7,945,453 3,321,877 15,734,861 recoveries) Management fee - 2,800,000 2,500,000 5,600,000 5,000,000 related party Total other expenses 18,549,062 23,894,103 37,624,429 46,611,816 Income (loss) from continuing operations before gain on extinguishment of 4,284,120 (5,683,148) 7,830,223 (11,778,354) debt, loss from equity affiliates and (provision) benefit for income taxes Gain on extinguishment -- 20,968,214 3,763,000 26,314,335 of debt Loss from equity (81,804) (224,136) (163,689) (474,710) affiliates Income before benefit 4,202,316 15,060,930 11,429,534 14,061,271 from income taxes (Provision) benefit -- (600,000) -- 801,558 for income taxes Income from continuing 4,202,316 14,460,930 11,429,534 14,862,829 operations Gain on sale of real -- -- -- 3,487,145 estate held-for-sale Income from operations of real estate -- 1,138,899 -- 1,465,446 held-for-sale Income from discontinued -- 1,138,899 -- 4,952,591 operations Net income 4,202,316 15,599,829 11,429,534 19,815,420 Preferred stock 1,152,617 -- 1,685,945 -- dividends Net income attributable to 53,833 53,811 107,484 107,622 noncontrolling interest Net income attributable to Arbor $2,995,866 $15,546,018 $9,636,105 $19,707,798 Realty Trust, Inc. common stockholders Basic earnings per common share: Income from continuing operations, net ofnoncontrolling $0.07 $0.57 $0.25 $0.60 interest and preferred stock dividends Income from discontinued -- 0.05 -- 0.20 operations Net income attributable to Arbor Realty Trust, $0.07 $0.62 $0.25 $0.80 Inc.common stockholders Diluted earnings per common share: Income from continuing operations, net ofnoncontrolling $0.07 $0.57 $0.25 $0.59 interest and preferred stock dividends Income from discontinued -- 0.05 -- 0.20 operations Net income attributable to Arbor Realty Trust, $0.07 $0.62 $0.25 $0.79 Inc.common stockholders Dividends declared per $0.120 $0.075 $0.240 $0.075 common share Weighted average number of sharesof common stock outstanding: Basic 43,113,898 24,977,879 38,468,718 24,579,022 Diluted 43,555,495 25,267,459 38,921,834 24,805,807 ARBOR REALTY TRUST, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30, December 31, 2012 2013 (Unaudited) Assets: Cash and cash equivalents $50,712,074 $29,188,889 Restricted cash (includes $33,056,424 and $41,537,212 from consolidated VIEs, 34,147,603 42,535,514 respectively) Loans and investments, net (includes $1,322,272,207 and $1,113,745,356 from 1,532,567,253 1,325,667,053 consolidated VIEs, respectively) Available-for-sale securities, at fair value (includes $0 and $1,100,000 from 2,511,525 3,552,736 consolidated VIEs, respectively) Securities held-to-maturity, net 47,598,688 42,986,980 Investment in equity affiliates 59,368,740 59,581,242 Real estate owned, net (includes $80,787,215 and $80,787,215 from 124,274,290 124,148,199 consolidated VIEs, respectively) Due from related party(includes $7,279 and 25,283 24,094 $0 from consolidated VIEs, respectively) Prepaid management fee - related party 19,047,949 19,047,949 Other assets (includes $15,170,276 and $11,709,103 from consolidated VIEs, 63,089,178 55,148,624 respectively) Total assets $1,933,342,583 $1,701,881,280 Liabilities and Equity: Repurchase agreements and credit facilities $101,097,436 $130,661,619 Collateralized debt obligations (includes $744,105,570 and $812,452,845 from 744,105,570 812,452,845 consolidated VIEs, respectively) Collateralized loan obligations (includes $264,500,000 and $87,500,000 from 264,500,000 87,500,000 consolidated VIEs, respectively) Junior subordinated notes to subsidiary 159,025,006 158,767,145 trust issuing preferred securities Notes payable 51,457,708 51,457,708 Mortgage notes payable – real estate owned 53,751,004 53,751,004 Due to related party 1,902,881 3,084,627 Due to borrowers (includes $0 and $1,320,943 from consolidated VIEs, 17,556,616 23,056,640 respectively) Deferred revenue 77,123,133 77,123,133 Other liabilities (includes $17,767,315 and $22,013,896 from consolidated VIEs, 65,599,159 72,765,437 respectively) Total liabilities 1,536,118,513 1,470,620,158 Commitments and contingencies -- -- Equity: Arbor Realty Trust, Inc. stockholders' equity: Preferred stock, $0.01 par value: 100,000,000 shares authorized; 8.25% Series A cumulative redeemable preferred stock, $38,787,500 aggregate liquidation preference; 1,551,500 issued and outstanding at June 30, 2013, no shares 67,654,655 -- issued and outstanding at December 31, 2012; 7.75% Series B cumulative redeemable preferred stock, $31,500,000 aggregate liquidation preference; 1,260,000 issued and outstanding at June 30, 2013, no shares issued and outstanding at December 31, 2012 Common stock, $0.01 par value: 500,000,000 shares authorized; 45,787,742 shares issued, 43,136,975 shares outstanding at 457,877 339,000 June 30, 2013 and 33,899,992 shares issued, 31,249,225 shares outstanding at December 31, 2012 Additional paid-in capital 582,842,587 493,211,222 Treasury stock, at cost - 2,650,767 shares (17,100,916) (17,100,916) at June 30, 2013 and December 31, 2012 Accumulated deficit (207,260,372) (207,558,257) Accumulated other comprehensive loss (31,305,199) (39,561,700) Total Arbor Realty Trust, Inc. 395,288,632 229,329,349 stockholders' equity Noncontrolling interest in consolidated 1,935,438 1,931,773 entity Total equity 397,224,070 231,261,122 Total liabilities and equity $1,933,342,583 $1,701,881,280 ARBOR REALTY TRUST, INC. AND SUBSIDIARIES SUPPLEMENTAL SCHEDULE OF NON-GAAP FINANCIAL MEASURES (Unaudited) June 30, 2013 GAAP Arbor Realty Trust, Inc. Stockholders' Equity $395,288,632 Subtract: 8.25% Series A and7.75% Series B (67,654,655) cumulative redeemable preferred stock GAAP Arbor Realty Trust, Inc. Common Stockholders' $327,633,977 Equity Add: 450 West 33rd Street transaction - deferred 77,123,133 revenue Unrealized loss on derivative instruments 29,782,120 Subtract: 450 West 33rd Street transaction - prepaid (19,047,949) management fee Adjusted Arbor Realty Trust, Inc. Common $415,491,281 Stockholders' Equity Adjusted book value per common share $9.63 GAAP book value per common share $7.60 Common shares outstanding 43,136,975 Given the magnitude and the deferral structure of the 450 West 33rd Street transaction combined with the change in the fair value of certain derivative instruments, Arbor has elected to report adjusted book value per share for the affected period to currently reflect the future impact of the 450 West 33rd Street transaction on the Company's financial condition as well as the evaluation of Arbor without the effects of unrealized losses from certain of the Company's derivative instruments. Management considers this non-GAAP financial measure to be an effective indicator, for both management and investors, of Arbor's financial performance. Arbor's management does not advocate that investors consider this non-GAAP financial measure in isolation from, or as a substitute for, financial measures prepared in accordance with GAAP. GAAP book value per share and adjusted book value per share calculations do not take into account any dilution from the potential exercise of the warrants issued to Wachovia as part of the 2009 debt restructuring. ARBOR REALTY TRUST, INC. AND SUBSIDIARIES SUPPLEMENTAL SCHEDULE OF NON-GAAP FINANCIAL MEASURES - Continued (Unaudited) Quarter Ended Six Months Ended June 30, June 30, 2013 2012 2013 2012 Net income attributable to Arbor Realty Trust, Inc. $2,995,866 $15,546,018 $9,636,105 $19,707,798 common stockholders, GAAP basis Subtract: Gain on sale of real -- -- -- (3,487,145) estate-held-for-sale Add: Depreciation - real estate owned and 1,827,595 1,540,217 3,459,726 2,716,972 held-for-sale (1) Depreciation - investment in equity 22,599 26,936 45,198 53,871 affiliate Funds from operations $4,846,060 $17,113,171 $13,141,029 $18,991,496 ("FFO") Diluted FFO per $0.11 $0.68 $0.34 $0.77 common share Diluted weighted average shares 43,555,495 25,267,459 38,921,834 24,805,807 outstanding (1) Includes discontinued operations Arbor is presenting funds from operations, or FFO, because management believes it to be an important supplemental measure of the Company's operating performance in that it is frequently used by analysts, investors and other parties in the evaluation of real estate investment trusts (REITs).The revised White Paper on FFO approved by the Board of Governors of the National Association of Real Estate Investment Trusts, or NAREIT, in April 2002 defines FFO as net income (loss) attributable to Arbor Realty Trust, Inc. (computed in accordance with generally accepted accounting principles (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 partnerships and joint ventures. The Company considers gains and losses on the sales of undepreciated real estate investments to be a normal part of its recurring operating activities in accordance with GAAP and should not be excluded when calculating FFO. Losses from discontinued operations are not excluded when calculating FFO. FFO is not intended to be an indication of our cash flow from operating activities (determined in accordance with GAAP) or a measure of our liquidity, nor is it entirely indicative of funding our cash needs, including our ability to make cash distributions.Arbor's calculation of FFO may be different from the calculation used by other companies and, therefore, comparability may be limited. CONTACT: Arbor Realty Trust, Inc. Paul Elenio, Chief Financial Officer 516-506-4422 firstname.lastname@example.org Media: Bonnie Habyan, EVP of Marketing 516-506-4615 email@example.com Investors: Stephanie Carrington The Ruth Group 646-536-7017 firstname.lastname@example.org
Arbor Realty Trust Reports Second Quarter 2013 Results and Declares Common and Preferred Dividends
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