UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-32136
Arbor Realty Trust, Inc.
(Exact name of registrant as specified in its charter)
|
Maryland |
|
20-0057959 |
|
(State or other jurisdiction of
|
|
(I.R.S. Employer
|
|
|
|
|
|
333 Earle Ovington Boulevard, Suite 900
|
|
11553
|
(Registrant’s telephone number, including area code): (516) 506-4200
Securities registered pursuant to Section 12(b) of the Act:
|
Title of each class |
|
Trading symbols |
|
Name of each exchange on which registered |
|
Common Stock, par value $0.01 per share |
|
ABR |
|
New York Stock Exchange |
|
Preferred Stock, 8.25% Series A Cumulative Redeemable, par value $0.01 per share |
|
ABR-PA |
|
New York Stock Exchange |
|
Preferred Stock, 7.75% Series B Cumulative Redeemable, par value $0.01 per share |
|
ABR-PB |
|
New York Stock Exchange |
|
Preferred Stock, 8.50% Series C Cumulative Redeemable, par value $0.01 per share |
|
ABR-PC |
|
New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
|
|
|
|
|
Large accelerated filer ☑ |
|
Accelerated filer ☐ |
Non-accelerated filer ☐ |
|
Smaller reporting company ☐ |
|
Emerging growth company ☐ |
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common stock, $0.01 par value per share: 112,213,035 outstanding as of July 24, 2020.
INDEX
|
|
|
|
|
|
2 |
|
|
|
2 |
|
|
|
3 |
|
|
|
4 |
|
|
|
6 |
|
|
|
8 |
|
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
53 |
|
Item 3. Quantitative and Qualitative Disclosures about Market Risk |
|
68 |
|
|
69 |
|
|
|
|
|
|
|
69 |
|
|
|
69 |
|
|
|
71 |
|
|
|
72 |
Forward-Looking Statements
The information contained in this quarterly report on Form 10-Q is not a complete description of our business or the risks associated with an investment in Arbor Realty Trust, Inc. We urge you to carefully review and consider the various disclosures made by us in this report.
This report contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to, among other things, the operating performance of our investments and financing needs. We use words such as “anticipate,” “expect,” “believe,” “intend,” “should,” “will,” “may” and similar expressions to identify forward-looking statements, although not all forward-looking statements include these words. Forward-looking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain projections of results of operations or of financial condition or state other forward-looking information. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. These forward-looking statements involve risks, uncertainties and other factors that may cause our actual results in future periods to differ materially from forecasted results. Factors that could have a material adverse effect on our operations and future prospects include, but are not limited to, changes in economic conditions generally, and the real estate market specifically, in particular, due to the uncertainties created by the COVID-19 pandemic; the potential impact of the COVID-19 pandemic on our business, results of operations and financial condition; adverse changes in our status with government-sponsored enterprises affecting our ability to originate loans through such programs; changes in interest rates; the quality and size of the investment pipeline and the rate at which we can invest our cash; impairments in the value of the collateral underlying our loans and investments; changes in federal and state laws and regulations, including changes in tax laws; the availability and cost of capital for future investments; and competition. Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect our views as of the date of this report. The factors noted above could cause our actual results to differ significantly from those contained in any forward-looking statement.
Additional information regarding these and other risks and uncertainties we face is contained in our annual report on Form 10-K for the year ended December 31, 2019 (the “2019 Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on February 14, 2020 and in our other reports and filings with the SEC.
Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We are under no duty to update any of the forward-looking statements after the date of this report to conform these statements to actual results.
i
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
||
|
|
|
2020 |
|
2019 |
||
|
|
|
(Unaudited) |
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
384,182 |
|
$ |
299,687 |
|
Restricted cash |
|
|
94,847 |
|
|
210,875 |
|
Loans and investments, net (allowance for credit losses of $152,811 and $71,069, respectively) |
|
|
4,800,176 |
|
|
4,189,960 |
|
Loans held-for-sale, net |
|
|
360,372 |
|
|
861,360 |
|
Capitalized mortgage servicing rights, net |
|
|
313,288 |
|
|
286,420 |
|
Securities held-to-maturity, net (allowance for credit losses of $3,148 and $0, respectively) |
|
|
119,019 |
|
|
88,699 |
|
Investments in equity affiliates |
|
|
64,991 |
|
|
41,800 |
|
Real estate owned, net |
|
|
12,990 |
|
|
13,220 |
|
Due from related party |
|
|
8,416 |
|
|
10,651 |
|
Goodwill and other intangible assets |
|
|
108,040 |
|
|
110,700 |
|
Other assets |
|
|
123,803 |
|
|
125,788 |
|
Total assets |
|
$ |
6,390,124 |
|
$ |
6,239,160 |
|
|
|
|
|
|
|
|
|
Liabilities and Equity: |
|
|
|
|
|
|
|
Credit facilities and repurchase agreements |
|
$ |
1,235,613 |
|
$ |
1,678,288 |
|
Collateralized loan obligations |
|
|
2,514,524 |
|
|
2,130,121 |
|
Debt fund |
|
|
— |
|
|
68,629 |
|
Senior unsecured notes |
|
|
661,757 |
|
|
319,799 |
|
Convertible senior unsecured notes, net |
|
|
265,244 |
|
|
284,152 |
|
Junior subordinated notes to subsidiary trust issuing preferred securities |
|
|
141,295 |
|
|
140,949 |
|
Due to related party |
|
|
584 |
|
|
13,100 |
|
Due to borrowers |
|
|
70,132 |
|
|
79,148 |
|
Allowance for loss-sharing obligations |
|
|
73,220 |
|
|
34,648 |
|
Other liabilities |
|
|
169,979 |
|
|
134,299 |
|
Total liabilities |
|
|
5,132,348 |
|
|
4,883,133 |
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 14) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
Arbor Realty Trust, Inc. stockholders' equity: |
|
|
|
|
|
|
|
Preferred stock, cumulative, redeemable, $0.01 par value: 100,000,000 shares authorized; special voting preferred shares; 20,369,265 and 20,484,094 shares issued and outstanding, respectively; 8.25% Series A, $38,788 aggregate liquidation preference; 1,551,500 shares issued and outstanding; 7.75% Series B, $31,500 aggregate liquidation preference; 1,260,000 shares issued and outstanding; 8.50% Series C, $22,500 aggregate liquidation preference; 900,000 shares issued and outstanding |
|
|
89,500 |
|
|
89,501 |
|
Common stock, $0.01 par value: 500,000,000 shares authorized; 112,211,461 and 109,706,214 shares issued and outstanding, respectively |
|
|
1,122 |
|
|
1,097 |
|
Additional paid-in capital |
|
|
1,182,449 |
|
|
1,154,932 |
|
Accumulated deficit |
|
|
(167,165) |
|
|
(60,920) |
|
Total Arbor Realty Trust, Inc. stockholders' equity |
|
|
1,105,906 |
|
|
1,184,610 |
|
Noncontrolling interest |
|
|
151,870 |
|
|
171,417 |
|
Total equity |
|
|
1,257,776 |
|
|
1,356,027 |
|
Total liabilities and equity |
|
$ |
6,390,124 |
|
$ |
6,239,160 |
Note: Our consolidated balance sheets include assets and liabilities of consolidated variable interest entities, or VIEs, as we are the primary beneficiary of these VIEs. As of June 30, 2020 and December 31, 2019, assets of our consolidated VIEs totaled $3,127,169 and $2,784,756, respectively, and the liabilities of our consolidated VIEs totaled $2,517,315 and $2,209,599, respectively. See Note 15 for discussion of our VIEs.
See Notes to Consolidated Financial Statements.
2
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
($ in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||
|
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||
|
Interest income |
|
$ |
83,080 |
|
$ |
82,171 |
|
$ |
171,606 |
|
$ |
153,448 |
|
Interest expense |
|
|
41,302 |
|
|
48,284 |
|
|
91,284 |
|
|
90,149 |
|
Net interest income |
|
|
41,778 |
|
|
33,887 |
|
|
80,322 |
|
|
63,299 |
|
Other revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sales, including fee-based services, net |
|
|
26,366 |
|
|
14,211 |
|
|
40,671 |
|
|
30,600 |
|
Mortgage servicing rights |
|
|
32,417 |
|
|
18,709 |
|
|
54,351 |
|
|
32,941 |
|
Servicing revenue, net |
|
|
13,506 |
|
|
12,612 |
|
|
26,809 |
|
|
26,164 |
|
Property operating income |
|
|
751 |
|
|
3,147 |
|
|
2,943 |
|
|
5,950 |
|
(Loss) gain on derivative instruments, net |
|
|
(7,368) |
|
|
742 |
|
|
(58,099) |
|
|
(1,723) |
|
Other income, net |
|
|
1,049 |
|
|
651 |
|
|
2,351 |
|
|
989 |
|
Total other revenue |
|
|
66,721 |
|
|
50,072 |
|
|
69,026 |
|
|
94,921 |
|
Other expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits |
|
|
34,438 |
|
|
29,022 |
|
|
68,690 |
|
|
60,786 |
|
Selling and administrative |
|
|
8,606 |
|
|
10,481 |
|
|
19,658 |
|
|
20,242 |
|
Property operating expenses |
|
|
1,035 |
|
|
2,691 |
|
|
3,478 |
|
|
5,086 |
|
Depreciation and amortization |
|
|
1,961 |
|
|
1,909 |
|
|
3,908 |
|
|
3,821 |
|
Impairment loss on real estate owned |
|
|
— |
|
|
1,000 |
|
|
— |
|
|
1,000 |
|
Provision for loss sharing (net of recoveries) |
|
|
2,395 |
|
|
368 |
|
|
23,932 |
|
|
822 |
|
Provision for credit losses (net of recoveries) |
|
|
12,714 |
|
|
— |
|
|
67,096 |
|
|
— |
|
Total other expenses |
|
|
61,149 |
|
|
45,471 |
|
|
186,762 |
|
|
91,757 |
|
Income (loss) before extinguishment of debt, income from equity affiliates and income taxes |
|
|
47,350 |
|
|
38,488 |
|
|
(37,414) |
|
|
66,463 |
|
Loss on extinguishment of debt |
|
|
(1,592) |
|
|
— |
|
|
(3,546) |
|
|
(128) |
|
Income from equity affiliates |
|
|
20,408 |
|
|
3,264 |
|
|
24,401 |
|
|
5,415 |
|
(Provision for) benefit from income taxes |
|
|
(12,077) |
|
|
(4,350) |
|
|
2,293 |
|
|
(4,341) |
|
Net income (loss) |
|
|
54,089 |
|
|
37,402 |
|
|
(14,266) |
|
|
67,409 |
|
Preferred stock dividends |
|
|
1,888 |
|
|
1,888 |
|
|
3,777 |
|
|
3,777 |
|
Net income (loss) attributable to noncontrolling interest |
|
|
8,110 |
|
|
6,598 |
|
|
(2,824) |
|
|
12,066 |
|
Net income (loss) attributable to common stockholders |
|
$ |
44,091 |
|
$ |
28,916 |
|
$ |
(15,219) |
|
$ |
51,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per common share |
|
$ |
0.40 |
|
$ |
0.32 |
|
$ |
(0.14) |
|
$ |
0.59 |
|
Diluted earnings (loss) per common share |
|
$ |
0.40 |
|
$ |
0.31 |
|
$ |
(0.14) |
|
$ |
0.57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
110,745,572 |
|
|
89,955,923 |
|
|
110,768,992 |
|
|
87,567,171 |
|
Diluted |
|
|
131,882,398 |
|
|
113,624,384 |
|
|
131,166,018 |
|
|
110,779,680 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per common share |
|
$ |
0.30 |
|
$ |
0.28 |
|
$ |
0.60 |
|
$ |
0.55 |
See Notes to Consolidated Financial Statements.
3
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)
($ in thousands, except shares)
Three Months Ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Arbor |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common |
|
|
|
|
|
|
|
Realty Trust, Inc. |
|
|
|
|
|
|
||
|
|
|
Preferred |
|
Preferred |
|
Common |
|
Stock Par |
|
Additional Paid- |
|
Accumulated |
|
Stockholders' |
|
Noncontrolling |
|
|
|
||||||
|
|
|
Stock Shares |
|
Stock Value |
|
Stock Shares |
|
Value |
|
in Capital |
|
Deficit |
|
Equity |
|
Interest |
|
Total Equity |
|||||||
|
Balance - April 1, 2020 |
|
24,080,765 |
|
$ |
89,500 |
|
110,608,903 |
|
$ |
1,106 |
|
$ |
1,163,161 |
|
$ |
(177,589) |
|
$ |
1,076,178 |
|
$ |
149,872 |
|
$ |
1,226,050 |
|
Issuance of common stock |
|
— |
|
|
— |
|
1,958,008 |
|
|
19 |
|
|
18,565 |
|
|
— |
|
|
18,584 |
|
|
— |
|
|
18,584 |
|
Repurchase of common stock |
|
— |
|
|
— |
|
(376,000) |
|
|
(3) |
|
|
(1,467) |
|
|
— |
|
|
(1,470) |
|
|
— |
|
|
(1,470) |
|
Issuance of common stock from convertible debt |
|
— |
|
|
— |
|
2,153 |
|
|
— |
|
|
276 |
|
|
— |
|
|
276 |
|
|
— |
|
|
276 |
|
Stock-based compensation, net |
|
— |
|
|
— |
|
18,397 |
|
|
— |
|
|
1,914 |
|
|
— |
|
|
1,914 |
|
|
— |
|
|
1,914 |
|
Distributions - common stock |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
|
|
|
(33,671) |
|
|
(33,671) |
|
|
— |
|
|
(33,671) |
|
Distributions - preferred stock |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
|
|
|
(1,884) |
|
|
(1,884) |
|
|
— |
|
|
(1,884) |
|
Distributions - noncontrolling interest |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(6,112) |
|
|
(6,112) |
|
Net income |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
45,979 |
|
|
45,979 |
|
|
8,110 |
|
|
54,089 |
|
Balance – June 30, 2020 |
|
24,080,765 |
|
$ |
89,500 |
|
112,211,461 |
|
$ |
1,122 |
|
$ |
1,182,449 |
|
$ |
(167,165) |
|
$ |
1,105,906 |
|
$ |
151,870 |
|
$ |
1,257,776 |
Six Months Ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Arbor |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common |
|
|
|
|
|
|
|
Realty Trust, Inc. |
|
|
|
|
|
|
||
|
|
|
Preferred |
|
Preferred |
|
Common |
|
Stock Par |
|
Additional Paid- |
|
Accumulated |
|
Stockholders' |
|
Noncontrolling |
|
|
|
||||||
|
|
|
Stock Shares |
|
Stock Value |
|
Stock Shares |
|
Value |
|
in Capital |
|
Deficit |
|
Equity |
|
Interest |
|
Total Equity |
|||||||
|
Balance - January 1, 2020 |
|
24,195,594 |
|
$ |
89,501 |
|
109,706,214 |
|
$ |
1,097 |
|
$ |
1,154,932 |
|
$ |
(60,920) |
|
$ |
1,184,610 |
|
$ |
171,417 |
|
$ |
1,356,027 |
|
Cummulative-effect adjustment (Note 2) |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
(24,106) |
|
|
(24,106) |
|
|
(4,501) |
|
|
(28,607) |
|
Balance - January 1, 2020 (as adjusted for the adoption of ASU 2016-13) |
|
24,195,594 |
|
$ |
89,501 |
|
109,706,214 |
|
$ |
1,097 |
|
$ |
1,154,932 |
|
$ |
(85,026) |
|
$ |
1,160,504 |
|
$ |
166,916 |
|
$ |
1,327,420 |
|
Issuance of common stock |
|
— |
|
|
— |
|
3,308,008 |
|
|
33 |
|
|
37,975 |
|
|
— |
|
|
38,008 |
|
|
— |
|
|
38,008 |
|
Repurchase of common stock |
|
— |
|
|
— |
|
(1,625,777) |
|
|
(16) |
|
|
(12,745) |
|
|
— |
|
|
(12,761) |
|
|
— |
|
|
(12,761) |
|
Issuance of common stock from convertible debt |
|
— |
|
|
— |
|
363,013 |
|
|
3 |
|
|
90 |
|
|
— |
|
|
93 |
|
|
— |
|
|
93 |
|
Stock-based compensation, net |
|
— |
|
|
— |
|
460,003 |
|
|
5 |
|
|
3,796 |
|
|
— |
|
|
3,801 |
|
|
— |
|
|
3,801 |
|
Distributions - common stock |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
(66,920) |
|
|
(66,920) |
|
|
— |
|
|
(66,920) |
|
Distributions - preferred stock |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
(3,777) |
|
|
(3,777) |
|
|
— |
|
|
(3,777) |
|
Distributions - noncontrolling interest |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(12,222) |
|
|
(12,222) |
|
Redemption of operating partnership units |
|
(114,829) |
|
|
(1) |
|
— |
|
|
— |
|
|
(1,599) |
|
|
— |
|
|
(1,600) |
|
|
— |
|
|
(1,600) |
|
Net loss |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
(11,442) |
|
|
(11,442) |
|
|
(2,824) |
|
|
(14,266) |
|
Balance – June 30, 2020 |
|
24,080,765 |
|
$ |
89,500 |
|
112,211,461 |
|
$ |
1,122 |
|
$ |
1,182,449 |
|
$ |
(167,165) |
|
$ |
1,105,906 |
|
$ |
151,870 |
|
$ |
1,257,776 |
See Notes to Consolidated Financial Statements.
4
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited) (Continued)
($ in thousands, except shares)
Three Months Ended June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Arbor |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common |
|
|
|
|
|
|
|
Realty Trust, Inc. |
|
|
|
|
|
|
||
|
|
|
Preferred |
|
Preferred |
|
Common |
|
Stock Par |
|
Additional Paid- |
|
Accumulated |
|
Stockholders' |
|
Noncontrolling |
|
|
|
||||||
|
|
|
Stock Shares |
|
Stock Value |
|
Stock Shares |
|
Value |
|
in Capital |
|
Deficit |
|
Equity |
|
Interest |
|
Total Equity |
|||||||
|
Balance - April 1, 2019 |
|
24,199,044 |
|
$ |
89,501 |
|
85,955,995 |
|
$ |
860 |
|
$ |
893,471 |
|
$ |
(74,589) |
|
|
909,243 |
|
$ |
168,140 |
|
$ |
1,077,383 |
|
Issuance of common stock |
|
— |
|
|
— |
|
9,200,000 |
|
|
91 |
|
|
115,494 |
|
|
— |
|
|
115,585 |
|
|
— |
|
|
115,585 |
|
Repurchase of common stock |
|
— |
|
|
— |
|
(920,000) |
|
|
(9) |
|
|
(11,565) |
|
|
— |
|
|
(11,574) |
|
|
— |
|
|
(11,574) |
|
Extinguishment of convertible senior unsecured notes |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
(6) |
|
|
— |
|
|
(6) |
|
|
— |
|
|
(6) |
|
Stock-based compensation, net |
|
— |
|
|
— |
|
(10,428) |
|
|
— |
|
|
1,503 |
|
|
— |
|
|
1,503 |
|
|
— |
|
|
1,503 |
|
Distributions - common stock |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
(26,645) |
|
|
(26,645) |
|
|
— |
|
|
(26,645) |
|
Distributions - preferred stock |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
(1,891) |
|
|
(1,891) |
|
|
— |
|
|
(1,891) |
|
Distributions - noncontrolling interest |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(5,736) |
|
|
(5,736) |
|
Redemption of operating partnership units |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(43) |
|
|
(43) |
|
Net income |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
30,804 |
|
|
30,804 |
|
|
6,598 |
|
|
37,402 |
|
Balance – June 30, 2019 |
|
24,199,044 |
|
$ |
89,501 |
|
94,225,567 |
|
$ |
942 |
|
$ |
998,897 |
|
$ |
(72,321) |
|
$ |
1,017,019 |
|
$ |
168,959 |
|
$ |
1,185,978 |
Six Months Ended June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Arbor |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common |
|
|
|
|
|
|
|
Realty Trust, Inc. |
|
|
|
|
|
|
||
|
|
|
Preferred |
|
Preferred |
|
Common |
|
Stock Par |
|
Additional Paid- |
|
Accumulated |
|
Stockholders' |
|
Noncontrolling |
|
|
|
||||||
|
|
|
Stock Shares |
|
Stock Value |
|
Stock Shares |
|
Value |
|
in Capital |
|
Deficit |
|
Equity |
|
Interest |
|
Total Equity |
|||||||
|
Balance – January 1, 2019 |
|
24,365,084 |
|
$ |
89,502 |
|
83,987,707 |
|
$ |
840 |
|
$ |
879,029 |
|
$ |
(74,133) |
|
|
895,238 |
|
$ |
170,328 |
|
$ |
1,065,566 |
|
Issuance of common stock |
|
— |
|
|
— |
|
9,200,000 |
|
|
91 |
|
|
115,494 |
|
|
|
|
|
115,585 |
|
|
|
|
|
115,585 |
|
Repurchase of common stock |
|
— |
|
|
— |
|
(920,000) |
|
|
(9) |
|
|
(11,565) |
|
|
|
|
|
(11,574) |
|
|
|
|
|
(11,574) |
|
Issuance of common stock upon vesting of restricted stock units |
|
— |
|
|
— |
|
203,492 |
|
|
2 |
|
|
(2,904) |
|
|
— |
|
|
(2,902) |
|
|
— |
|
|
(2,902) |
|
Issuance of common stock from convertible debt |
|
— |
|
|
— |
|
210,466 |
|
|
2 |
|
|
2,505 |
|
|
— |
|
|
2,507 |
|
|
— |
|
|
2,507 |
|
Extinguishment of convertible senior unsecured notes |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
(1,337) |
|
|
— |
|
|
(1,337) |
|
|
— |
|
|
(1,337) |
|
Stock-based compensation, net |
|
— |
|
|
— |
|
383,793 |
|
|
4 |
|
|
4,669 |
|
|
— |
|
|
4,673 |
|
|
— |
|
|
4,673 |
|
Issuance of common stock from special dividend |
|
— |
|
|
— |
|
901,432 |
|
|
9 |
|
|
10,070 |
|
|
— |
|
|
10,079 |
|
|
— |
|
|
10,079 |
|
Issuance of operating partnership units and special voting preferred stock from special dividend |
|
221,666 |
|
|
2 |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2 |
|
|
2,476 |
|
|
2,478 |
|
Distributions - common stock |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
(49,746) |
|
|
(49,746) |
|
|
— |
|
|
(49,746) |
|
Distributions - preferred stock |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
(3,785) |
|
|
(3,785) |
|
|
— |
|
|
(3,785) |
|
Distributions - noncontrolling interest |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(11,302) |
|
|
(11,302) |
|
Redemption of operating partnership units |
|
(387,706) |
|
|
(3) |
|
258,677 |
|
|
3 |
|
|
2,936 |
|
|
— |
|
|
2,936 |
|
|
(4,609) |
|
|
(1,673) |
|
Net income |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
55,343 |
|
|
55,343 |
|
|
12,066 |
|
|
67,409 |
|
Balance – June 30, 2019 |
|
24,199,044 |
|
$ |
89,501 |
|
94,225,567 |
|
$ |
942 |
|
$ |
998,897 |
|
$ |
(72,321) |
|
$ |
1,017,019 |
|
$ |
168,959 |
|
$ |
1,185,978 |
See Notes to Consolidated Financial Statements.
5
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
||||
|
|
|
2020 |
|
2019 |
||
|
Operating activities: |
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(14,266) |
|
$ |
67,409 |
|
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
3,908 |
|
|
3,821 |
|
Stock-based compensation |
|
|
3,801 |
|
|
5,258 |
|
Amortization and accretion of interest and fees, net |
|
|
3,007 |
|
|
2,092 |
|
Amortization of capitalized mortgage servicing rights |
|
|
23,713 |
|
|
24,606 |
|
Originations of loans held-for-sale |
|
|
(2,452,745) |
|
|
(1,971,876) |
|
Proceeds from sales of loans held-for-sale, net of gain on sale |
|
|
2,949,949 |
|
|
1,847,488 |
|
Payoffs and paydowns of loans held-for-sale |
|
|
62 |
|
|
66 |
|
Mortgage servicing rights |
|
|
(54,351) |
|
|
(32,941) |
|
Write-off of capitalized mortgage servicing rights from payoffs |
|
|
9,570 |
|
|
9,048 |
|
Impairment loss on real estate owned |
|
|
— |
|
|
1,000 |
|
Provision for loss sharing (net of recoveries) |
|
|
23,932 |
|
|
822 |
|
Provision for credit losses (net of recoveries) |
|
|
67,096 |
|
|
— |
|
Net recoveries (charge-offs) for loss sharing obligations |
|
|
233 |
|
|
(703) |
|
Deferred tax benefit |
|
|
(9,025) |
|
|
(3,250) |
|
Income from equity affiliates |
|
|
(24,401) |
|
|
(5,415) |
|
Loss on extinguishment of debt |
|
|
3,546 |
|
|
128 |
|
Changes in operating assets and liabilities |
|
|
(297) |
|
|
(25,251) |
|
Net cash provided by (used in) operating activities |
|
|
533,732 |
|
|
(77,698) |
|
|
|
|
|
|
|
|
|
Investing Activities: |
|
|
|
|
|
|
|
Loans and investments funded, originated and purchased, net |
|
|
(1,117,004) |
|
|
(1,398,834) |
|
Payoffs and paydowns of loans and investments |
|
|
459,489 |
|
|
796,652 |
|
Deferred fees |
|
|
5,835 |
|
|
11,505 |
|
Investments in real estate, net |
|
|
(129) |
|
|
(287) |
|
Contributions to equity affiliates |
|
|
(60) |
|
|
(6,105) |
|
Distributions from equity affiliates |
|
|
77 |
|
|
— |
|
Purchase of securities held-to-maturity, net |
|
|
(37,927) |
|
|
(10,000) |
|
Payoffs and paydowns of securities held-to-maturity |
|
|
5,823 |
|
|
2,679 |
|
Due to borrowers and reserves |
|
|
(44,028) |
|
|
(24,052) |
|
Net cash used in investing activities |
|
|
(727,924) |
|
|
(628,442) |
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
Proceeds from repurchase agreements and credit facilities |
|
|
4,781,801 |
|
|
4,126,430 |
|
Paydowns and payoffs of repurchase agreements and credit facilities |
|
|
(5,222,038) |
|
|
(3,640,107) |
|
Proceeds from issuance of collateralized loan obligations |
|
|
668,000 |
|
|
533,000 |
|
Payoffs and paydowns of collateralized loan obligations |
|
|
(282,874) |
|
|
(250,250) |
|
Payoffs and paydowns of debt fund |
|
|
(70,000) |
|
|
— |
|
Proceeds from issuance of common stock |
|
|
38,008 |
|
|
115,736 |
|
Settlements of convertible senior unsecured notes |
|
|
(22,145) |
|
|
(3,037) |
|
Proceeds from issuance of senior unsecured notes |
|
|
345,750 |
|
|
90,000 |
|
Redemption of operating partnership units |
|
|
(1,600) |
|
|
(1,673) |
|
Payments of withholding taxes on net settlement of vested stock |
|
|
— |
|
|
(3,487) |
|
Repurchase of common stock |
|
|
(12,761) |
|
|
(11,574) |
|
Distributions paid on common stock |
|
|
(33,249) |
|
|
(49,746) |
|
Distributions paid on noncontrolling interest |
|
|
(6,110) |
|
|
(11,302) |
|
Distributions paid on preferred stock |
|
|
(3,781) |
|
|
(3,785) |
|
Payment of deferred financing costs |
|
|
(16,342) |
|
|
(9,362) |
|
Net cash provided by financing activities |
|
|
162,659 |
|
|
880,843 |
|
Net (decrease) increase in cash, cash equivalents and restricted cash |
|
|
(31,533) |
|
|
174,703 |
|
Cash, cash equivalents and restricted cash at beginning of period |
|
|
510,562 |
|
|
340,669 |
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
479,029 |
|
$ |
515,372 |
See Notes to Consolidated Financial Statements.
6
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Continued)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
||||
|
|
|
2020 |
|
2019 |
||
|
|
|
|
|
|
|
|
|
Reconciliation of cash, cash equivalents and restricted cash: |
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
$ |
299,687 |
|
$ |
160,063 |
|
Restricted cash at beginning of period |
|
|
210,875 |
|
|
180,606 |
|
Cash, cash equivalents and restricted cash at beginning of period |
|
$ |
510,562 |
|
$ |
340,669 |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
384,182 |
|
$ |
198,917 |
|
Restricted cash at end of period |
|
|
94,847 |
|
|
316,455 |
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
479,029 |
|
$ |
515,372 |
|
|
|
|
|
|
|
|
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
Cash used to pay interest |
|
$ |
76,294 |
|
$ |
85,776 |
|
Cash used to pay taxes |
|
|
2,832 |
|
|
13,186 |
|
|
|
|
|
|
|
|
|
Supplemental schedule of non-cash investing and financing activities: |
|
|
|
|
|
|
|
Dividends declared on common stock and operating partnership units |
|
$ |
39,778 |
|
$ |
— |
|
Cummulative-effect adjustment (Note 2) |
|
|
28,607 |
|
|
— |
|
Issuance of common stock from convertible debt |
|
|
93 |
|
|
2,507 |
|
Distributions accrued on 8.25% Series A preferred stock |
|
|
267 |
|
|
267 |
|
Distributions accrued on 7.75% Series B preferred stock |
|
|
203 |
|
|
203 |
|
Distributions accrued on 8.50% Series C preferred stock |
|
|
159 |
|
|
159 |
|
Settlements of convertible senior unsecured notes |
|
|
(4,778) |
|
|
(1,337) |
|
Fair value of conversion feature of convertible senior unsecured notes |
|
|
(185) |
|
|
1,175 |
|
Special dividend - common stock issued |
|
|
— |
|
|
10,079 |
|
Special dividend - special voting preferred stock and operating partnership units issued |
|
|
— |
|
|
2,478 |
See Notes to Consolidated Financial Statements.
7
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
June 30, 2020
Note 1 — Description of Business
Arbor Realty Trust, Inc. (“we,” “us,” or “our”) is a Maryland corporation formed in 2003. We operate through two business segments: our Structured Loan Origination and Investment Business, or "Structured Business," and our Agency Loan Origination and Servicing Business, or "Agency Business."
Through our Structured Business, we invest in a diversified portfolio of structured finance assets in the multifamily, single-family rental and commercial real estate markets, primarily consisting of bridge and mezzanine loans, including junior participating interests in first mortgages, preferred and direct equity. We may also directly acquire real property and invest in real estate-related notes and certain mortgage-related securities.
Through our Agency Business, we originate, sell and service a range of multifamily finance products through the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac," and together with Fannie Mae, the government-sponsored enterprises, or "GSEs"), the Government National Mortgage Association ("Ginnie Mae"), Federal Housing Authority ("FHA") and the U.S. Department of Housing and Urban Development (together with Ginnie Mae and FHA, "HUD"). We retain the servicing rights and asset management responsibilities on substantially all loans we originate and sell under the GSE and HUD programs. We are an approved Fannie Mae Delegated Underwriting and Servicing ("DUS") lender nationally, a Freddie Mac Multifamily Conventional Loan lender, seller/servicer, in New York, New Jersey and Connecticut, a Freddie Mac affordable, manufactured housing, senior housing and small balance loan ("SBL") lender, seller/servicer, nationally and a HUD MAP and LEAN senior housing/healthcare lender nationally. We also originate and sell finance products through conduit/commercial mortgage-backed securities ("CMBS") programs and during the second half of 2019, we began to originate and service permanent financing loans underwritten using the guidelines of our existing agency loans sold to the GSEs, which we refer to as "Private Label" loans. We pool and securitize the Private Label loans and sell certain securities in the securitizations to third-party investors, while retaining the highest risk bottom tranche certificate.
Substantially all of our operations are conducted through our operating partnership, Arbor Realty Limited Partnership ("ARLP"), for which we serve as the general partner, and ARLP's subsidiaries. We are organized to qualify as a real estate investment trust ("REIT") for U.S. federal income tax purposes. A REIT is generally not subject to federal income tax on that portion of its REIT-taxable income that is distributed to its stockholders, provided that at least 90% of taxable income is distributed and provided that certain other requirements are met. Certain of our assets that produce non-qualifying REIT income, primarily within the Agency Business, are operated through taxable REIT subsidiaries ("TRS"), which is part of our TRS consolidated group (the "TRS Consolidated Group") and is subject to U.S. federal, state and local income taxes. In general, our TRS entities may hold assets that the REIT cannot hold directly and may engage in real estate or non-real estate-related business. See Note 17 for details.
Note 2 — Basis of Presentation and Significant Accounting Policies
Basis of Presentation
These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), for interim financial statements and the instructions to Form 10-Q. Accordingly, certain information and footnote disclosures normally included in the consolidated financial statements prepared under GAAP have been condensed or omitted. In our opinion, all adjustments considered necessary for a fair presentation of our financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These financial statements should be read in conjunction with our financial statements and notes thereto included in our 2019 Annual Report.
8
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
June 30, 2020
Principles of Consolidation
These consolidated financial statements include our financial statements and the financial statements of our wholly owned subsidiaries, partnerships and other joint ventures in which we own a controlling interest, including variable interest entities (“VIEs”) of which we are the primary beneficiary. Entities in which we have a significant influence are accounted for under the equity method. Our VIEs are described in Note 15. All significant inter-company transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that could materially affect the amounts reported in the consolidated financial statements and accompanying notes. During the first half of 2020, there has been a global outbreak of a novel coronavirus ("COVID-19"), which has forced many countries, including the United States, to declare national emergencies, to institute "stay-at-home" orders, to close financial markets and to restrict operations of non-essential businesses. Such actions are creating significant disruptions in global supply chains, and adversely impacting many industries. COVID-19 could have a continued and prolonged adverse impact on economic and market conditions and could trigger a period of global economic slowdown. The impact of COVID-19 on companies is evolving rapidly, and the extent and duration of the economic fallout from this pandemic, both globally and to our business, remain unclear, making any estimate or assumption as of June 30, 2020 inherently less certain than they would be absent the current and potential impacts of COVID-19. Actual results could differ from those estimates.
Reclassification
Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements. The net gain/loss from changes in fair value of derivative instruments previously recorded to other income, net is now recorded to (loss) gain on derivative instruments, net. These reclassifications had no effect on the previously reported net income.
Recently Adopted Accounting Pronouncements
Credit Losses
On January 1, 2020, we adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which utilizes a current expected credit loss methodology (“CECL”) for the recognition of credit losses for our structured loans and investments, held-to-maturity debt securities and our loss-sharing obligations related to the Fannie Mae DUS program, at the time the financial asset is originated or acquired. The allowance for credit losses is adjusted each period for changes in expected credit losses. This methodology replaces the multiple existing impairment methods in GAAP and generally requires that a loss be incurred before it is recognized. We adopted ASU 2016-13 using the modified retrospective method, therefore, the results for reporting periods prior to January 1, 2020 have been unadjusted and reported in accordance with previously applicable GAAP. In connection with the adoption of ASU 2016-13, we recorded a $28.6 million increase to accumulated deficit, which is net of a deferred tax asset of $3.6 million as of January 1, 2020.
9
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
June 30, 2020
The following table illustrates the impact of adopting ASU 2016-13 (in thousands):