ARBOR REALTY TRUST INC [ABR-PE] Filings

10-Q 1 abr-20230930.htm 10-Q abr-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


þ			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


o			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 incorporation)			(I.R.S. Employer Identification No.)

333 Earle Ovington Boulevard, Suite 900, Uniondale, NY (Address of principal executive offices)			11553 (Zip Code)

(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, 6.375% Series D Cumulative
Redeemable, par value $0.01 per share

ABR-PD

New York Stock Exchange

Preferred Stock, 6.25% Series E Cumulative
Redeemable, par value $0.01 per share

ABR-PE

New York Stock Exchange

Preferred Stock, 6.25% Series F Fixed-to-Floating Rate Cumulative Redeemable, par value $0.01 per share

ABR-PF

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 þ No o

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 þ No o

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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Issuer has 188,501,642 shares of common stock outstanding at October 20, 2023.

Table of Contents

INDEX


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)			2
Consolidated Balance Sheets			2
Consolidated Statements of Income			3
Consolidated Statements of Changes in Equity			4
Consolidated Statements of Cash Flows			7
Notes to Consolidated Financial Statements			8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			47
Item 3. Quantitative and Qualitative Disclosures about Market Risk			60
Item 4. Controls and Procedures			61
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			61
Item 1A. Risk Factors			61
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			62
Item 6. Exhibits			63
Signatures			64

Table of Contents

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 in this report, as well as information in our annual report on Form 10-K for the year ended December 31, 2022 (the “2022 Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on February 17, 2023 and in our other reports and filings with the SEC.

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,” “could,” “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, macroeconomic and geopolitical conditions generally, and the real estate market specifically, in particular, due to the severity and duration of the novel coronavirus (“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; inflation; 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.

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.

Table of Contents

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)


	September 30, 2023		December 31, 2022
	(Unaudited)
Assets:
Cash and cash equivalents	$	895,298	$	534,357
Restricted cash	419,158		713,808
Loans and investments, net (allowance for credit losses of $184,069 and $132,559)	12,892,796		14,254,674
Loans held-for-sale, net	364,320		354,070
Capitalized mortgage servicing rights, net	392,203		401,471
Securities held-to-maturity, net (allowance for credit losses of $5,943 and $3,153)	155,172		156,547
Investments in equity affiliates	62,795		79,130
Due from related party	211,655		77,419
Goodwill and other intangible assets	92,551		96,069
Other assets	416,741		371,440
Total assets	$	15,902,689	$	17,038,985

Liabilities and Equity:
Credit and repurchase facilities	$	3,391,441	$	3,841,814
Securitized debt	7,004,634		7,849,270
Senior unsecured notes	1,332,926		1,385,994
Convertible senior unsecured notes	282,428		280,356
Junior subordinated notes to subsidiary trust issuing preferred securities	143,695		143,128
Due to related party	2,170		12,350
Due to borrowers	114,660		61,237
Allowance for loss-sharing obligations	69,261		57,168
Other liabilities	320,973		335,789
Total liabilities	12,662,188		13,967,106

Commitments and contingencies (Note 13)

Equity:
Arbor Realty Trust, Inc. stockholders' equity:
Preferred stock, cumulative, redeemable, $0.01 par value: 100,000,000 shares authorized, shares issued and outstanding by period:	633,684		633,684
Special voting preferred shares - 16,293,589 shares
6.375% Series D - 9,200,000 shares
6.25% Series E - 5,750,000 shares
6.25% Series F - 11,342,000 shares
Common stock, $0.01 par value: 500,000,000 shares authorized - 188,501,642 and 178,230,522 shares issued and outstanding	1,885		1,782
Additional paid-in capital	2,364,395		2,204,481
Retained earnings	104,821		97,049
Total Arbor Realty Trust, Inc. stockholders' equity	3,104,785		2,936,996
Noncontrolling interest	135,716		134,883
Total equity	3,240,501		3,071,879
Total liabilities and equity	$	15,902,689	$	17,038,985

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. At September 30, 2023 and December 31, 2022, assets of our consolidated VIEs totaled $8,689,298 and $9,785,261, respectively, and the liabilities of our consolidated VIEs totaled $7,027,893 and $7,876,024, respectively. See Note 14 for discussion of our VIEs.

See Notes to Consolidated Financial Statements.

Table of Contents

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

($ in thousands, except share and per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Interest income	$	336,474	$	259,778	$	1,000,159	$	627,804
Interest expense	229,180		160,452		675,749		350,079
Net interest income	107,294		99,326		324,410		277,725
Other revenue:
Gain on sales, including fee-based services, net	18,619		14,360		55,795		32,526
Mortgage servicing rights	14,109		19,408		48,769		52,287
Servicing revenue, net	35,463		22,744		97,376		64,513
Property operating income	1,450		445		4,261		1,031
Gain (loss) on derivative instruments, net	(421)		(15,909)		(3,582)		10,083
Other income (loss), net	173		(6,014)		5,099		(16,061)
Total other revenue	69,393		35,034		207,718		144,379
Other expenses:
Employee compensation and benefits	39,810		38,811		123,518		119,736
Selling and administrative	12,367		13,225		38,574		40,960
Property operating expenses	1,479		366		4,227		1,443
Depreciation and amortization	2,286		2,078		7,297		6,092
Provision for loss sharing (net of recoveries)	1,679		412		12,528		(2,199)
Provision for credit losses (net of recoveries)	18,652		2,274		55,047		9,700
Total other expenses	76,273		57,166		241,191		175,732
Income before extinguishment of debt, income from equity affiliates and income taxes	100,414		77,194		290,937		246,372
Loss on extinguishment of debt	(314)		(3,262)		(1,561)		(4,612)
Income from equity affiliates	809		4,748		20,694		18,507
(Provision for) benefit from income taxes	(5,854)		374		(19,436)		(13,166)
Net income	95,055		79,054		290,634		247,101
Preferred stock dividends	10,342		10,342		31,027		30,612
Net income attributable to noncontrolling interest	6,789		6,002		21,200		19,811
Net income attributable to common stockholders	$	77,924	$	62,710	$	238,407	$	196,678

Basic earnings per common share	$	0.42	$	0.37	$	1.30	$	1.21
Diluted earnings per common share	$	0.41	$	0.36	$	1.28	$	1.18

Weighted average shares outstanding:
Basic	187,023,395		170,227,553		183,340,149		162,292,235
Diluted	221,328,818		205,865,016		217,457,399		195,529,340

Dividends declared per common share	$	0.43	$	0.39	$	1.25	$	1.14

See Notes to Consolidated Financial Statements.

Table of Contents

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)

($ in thousands, except shares)


Three Months Ended September 30, 2023
	Preferred Stock Shares	Preferred Stock Value		Common Stock Shares	Common Stock Par Value		Additional Paid-in Capital		Retained Earnings		Total Arbor Realty Trust, Inc. Stockholders’ Equity		Noncontrolling Interest		Total Equity
Balance – July 1, 2023	42,585,589	$	633,684	183,067,388	$	1,831	$	2,280,632	$	107,561	$	3,023,708	$	135,933	$	3,159,641
Issuance - common stock	—	—		5,576,496	55		83,937		—		83,992		—		83,992
Stock-based compensation, net	—	—		(142,242)	(1)		(174)		—		(175)		—		(175)
Distributions - common stock	—	—		—	—		—		(80,660)		(80,660)		—		(80,660)
Distributions - preferred stock	—	—		—	—		—		(10,346)		(10,346)		—		(10,346)
Distributions - noncontrolling interest	—	—		—	—		—		—		—		(7,006)		(7,006)
Net income	—	—		—	—		—		88,266		88,266		6,789		95,055
Balance – September 30, 2023	42,585,589	$	633,684	188,501,642	$	1,885	$	2,364,395	$	104,821	$	3,104,785	$	135,716	$	3,240,501

Nine Months Ended September 30, 2023
Balance – January 1, 2023	42,585,589	$	633,684	178,230,522	$	1,782	$	2,204,481	$	97,049	$	2,936,996	$	134,883	$	3,071,879
Issuance - common stock	—	—		13,113,296	130		193,530		—		193,660		—		193,660
Repurchase - common stock	—	—		(3,545,604)	(36)		(37,396)		—		(37,432)		—		(37,432)
Stock-based compensation, net	—	—		703,428	9		3,780		—		3,789		—		3,789
Distributions - common stock	—	—		—	—		—		(230,632)		(230,632)		—		(230,632)
Distributions - preferred stock	—	—		—	—		—		(31,030)		(31,030)		—		(31,030)
Distributions - noncontrolling interest	—	—		—	—		—		—		—		(20,367)		(20,367)
Net income	—	—		—	—		—		269,434		269,434		21,200		290,634
Balance – September 30, 2023	42,585,589	$	633,684	188,501,642	$	1,885	$	2,364,395	$	104,821	$	3,104,785	$	135,716	$	3,240,501

See Notes to Consolidated Financial Statements.

Table of Contents

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited) (Continued)

($ in thousands, except shares)


Three Months Ended September 30, 2022
	Preferred Stock Shares	Preferred Stock Value		Common Stock Shares	Common Stock Par Value		Additional Paid-in Capital		Retained Earnings		Total Arbor Realty Trust, Inc. Stockholders’ Equity		Noncontrolling Interest		Total Equity
Balance - July 1, 2022	42,585,589	$	633,684	168,454,805	$	1,685	$	2,060,837	$	83,271	$	2,779,477	$	133,519	$	2,912,996
Issuance - common stock	—	—		3,170,688	31		44,491		—		44,522		—		44,522
Stock-based compensation, net	—	—		(101,685)	(1)		581		—		580		—		580
Distributions - common stock	—	—		—	—		—		(66,447)		(66,447)		—		(66,447)
Distributions - preferred stock	—	—		—	—		—		(10,345)		(10,345)		—		(10,345)
Distributions - noncontrolling interest	—	—		—	—		—		—		—		(6,354)		(6,354)
Net income	—	—		—	—		—		73,052		73,052		6,002		79,054
Balance – September 30, 2022	42,585,589	$	633,684	171,523,808	$	1,715	$	2,105,909	$	79,531	$	2,820,839	$	133,167	$	2,954,006

Nine Months Ended September 30, 2022
Balance - January 1, 2022	39,325,095	$	556,163	151,362,181	$	1,514	$	1,789,229	$	68,144	$	2,415,050	$	132,487	$	2,547,537
Issuance - common stock	—	—		19,625,788	196		312,570		—		312,766		—		312,766
Issuance - Series F preferred stock	3,292,000	77,522		—	—		(130)		—		77,392		—		77,392
Stock-based compensation, net	—	—		535,839	5		4,240		—		4,245		—		4,245
Distributions - common stock	—	—		—	—		—		(185,285)		(185,285)		—		(185,285)
Distributions - preferred stock	—	—		—	—		—		(30,618)		(30,618)		—		(30,618)
Distributions - noncontrolling interest	—	—		—	—		—		—		—		(18,586)		(18,586)
Redemption - operating partnership units	(31,506)	(1)		—	—		—		—		(1)		(545)		(546)
Net income	—	—		—	—		—		227,290		227,290		19,811		247,101
Balance – September 30, 2022	42,585,589	$	633,684	171,523,808	$	1,715	$	2,105,909	$	79,531	$	2,820,839	$	133,167	$	2,954,006

See Notes to Consolidated Financial Statements.

Table of Contents

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in thousands)


	Nine Months Ended September 30,
	2023		2022
Operating activities:
Net income	$	290,634	$	247,101
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	7,297		6,092
Stock-based compensation	12,141		12,330
Amortization and accretion of interest and fees, net	(3,084)		(10,022)
Amortization of capitalized mortgage servicing rights	46,920		44,532
Originations of loans held-for-sale	(3,619,570)		(3,232,962)
Proceeds from sales of loans held-for-sale, net of gain on sale	3,607,665		3,699,555
Mortgage servicing rights	(48,769)		(52,287)
Write-off of capitalized mortgage servicing rights from payoffs	11,764		37,318
Provision for loss sharing (net of recoveries)	12,528		(2,199)
Provision for credit losses (net of recoveries)	55,047		9,700
Net charge-offs for loss sharing obligations	(434)		(354)
Deferred tax benefit	(6,630)		(7,833)
Income from equity affiliates	(20,694)		(18,507)
Distributions from operations of equity affiliates	22,507		16,546
Change in fair value of held-for-sale loans	(1,634)		12,163
Loss on extinguishment of debt	1,561		4,612
Payoffs and paydowns of loans held-for-sale	463		58,339
Loss on sale of loans	—		10,120
Changes in operating assets and liabilities	(209,214)		(23,138)
Net cash provided by operating activities	158,498		811,106

Investing Activities:
Loans and investments funded, originated and purchased, net	(1,061,865)		(5,418,113)
Payoffs and paydowns of loans and investments	2,541,373		2,302,874
Proceeds from sale of loans and investments	—		397,338
Deferred fees	13,624		50,385
Contributions to equity affiliates	(1,029)		(16,730)
Distributions from equity affiliates	15,552		24,321
Purchase of securities held-to-maturity, net	—		(27,598)
Payoffs and paydowns of securities held-to-maturity	3,544		16,676
Due to borrowers and reserves	(92,358)		(152,036)
Net cash provided by (used in) investing activities	1,418,841		(2,822,883)

Financing activities:
Proceeds from credit and repurchase facilities	6,575,575		8,474,821
Paydowns and payoffs of credit and repurchase facilities	(7,033,287)		(8,325,608)
Payoffs and paydowns of securitized debt	(856,864)		(441,000)
Proceeds from issuance of common stock	193,660		312,766
Proceeds from issuance of senior unsecured notes	95,000		—
Payoffs and paydowns of senior unsecured notes	(149,600)		—
Payments of withholding taxes on net settlement of vested stock	(8,352)		(8,085)
Repurchase of common stock	(37,432)		—
Distributions to stockholders	(282,029)		(234,246)
Payment of deferred financing costs	(7,719)		(35,267)
Proceeds from issuance of securitized debt	—		2,525,624
Proceeds from issuance of convertible senior unsecured notes	—		287,500
Extinguishment of convertible senior unsecured notes	—		(200,662)
Proceeds from issuance of preferred stock	—		77,392
Redemption of operating partnership units	—		(546)
Net cash (used in) provided by financing activities	(1,511,048)		2,432,689
Net increase in cash, cash equivalents and restricted cash	66,291		420,912
Cash, cash equivalents and restricted cash at beginning of period	1,248,165		891,270
Cash, cash equivalents and restricted cash at end of period	$	1,314,456	$	1,312,182

See Notes to Consolidated Financial Statements.

Table of Contents

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Continued)

(in thousands)


	Nine Months Ended September 30,
	2023		2022
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents at beginning of period	$	534,357	$	404,580
Restricted cash at beginning of period	713,808		486,690
Cash, cash equivalents and restricted cash at beginning of period	$	1,248,165	$	891,270

Cash and cash equivalents at end of period	$	895,298	$	389,651
Restricted cash at end of period	419,158		922,531
Cash, cash equivalents and restricted cash at end of period	$	1,314,456	$	1,312,182

Supplemental cash flow information:
Cash used to pay interest	$	654,108	$	306,671
Cash used to pay taxes	22,916		25,770

Supplemental schedule of non-cash investing and financing activities:
Distributions accrued on preferred stock	7,010		7,010
Cumulative-effect adjustment (adoption of convertible debt standard)	—		2,447

ARBOR REALTY TRUST INC [ABR-PE] Filings
ARBOR REALTY TRUST INC [ABR] Filings
ARBOR REALTY TRUST INC [ABR-PD] Filings
ARBOR REALTY TRUST INC [ABR-PF] Filings
10-Q	[2023-10-27]
10-Q	[2023-07-28]
10-Q	[2023-05-05]
10-K	[2023-02-17]
10-Q	[2022-11-04]
10-Q	[2022-07-29]
10-Q	[2022-05-06]
10-K	[2022-02-18]
10-Q	[2021-10-29]
10-Q	[2021-07-30]
10-Q	[2021-05-07]
10-K	[2021-02-19]
10-Q	[2020-10-30]
10-Q	[2020-07-31]
10-Q	[2020-05-08]
10-K	[2020-02-14]
10-Q	[2019-11-01]
10-Q	[2019-08-02]
10-Q	[2019-05-10]
10-K	[2019-02-15]
10-Q	[2018-11-02]
10-Q	[2018-08-03]
10-Q	[2018-05-04]
10-K	[2018-02-23]
10-Q	[2017-11-03]
10-Q	[2017-08-04]
10-Q	[2017-05-05]
10-K	[2017-03-03]
10-Q	[2016-11-09]
10-Q	[2016-08-05]
10-Q	[2016-05-06]
10-K	[2016-02-26]
10-Q	[2015-11-06]
10-Q	[2015-07-31]
10-Q	[2015-05-01]
10-K	[2015-02-13]
10-Q	[2014-11-07]
10-Q	[2014-08-01]
10-Q	[2014-05-01]
10-K	[2014-02-14]
10-Q	[2013-11-08]
10-Q	[2013-08-02]
10-Q	[2013-05-03]
10-K	[2013-02-15]
10-Q	[2012-11-02]
10-Q	[2012-08-03]
10-Q	[2012-05-04]
10-K	[2012-03-02]

ARBOR REALTY TRUST INC [ABR-PE] Filings

ARBOR REALTY TRUST INC [ABR] Filings

ARBOR REALTY TRUST INC [ABR-PD] Filings

ARBOR REALTY TRUST INC [ABR-PF] Filings