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Arbor Realty Trust Reports Fourth Quarter and Full Year 2022 Results and Declares Dividend of $0.40 per Share

Feb 17, 2023
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Fourth Quarter Highlights:

  • Diversified, annuity-based operating platform with a multifamily focus that generates strong distributable earnings and dividends in all cycles
  • GAAP net income of $0.49 per diluted common share
  • Distributable earnings of $0.60 per diluted common share1, well in excess of our current dividend, representing a 67% payout ratio
  • Declares cash dividend on common stock of $0.40 per share
  • Strong liquidity position with ~$685 million in cash and liquidity and ~$420 million of restricted cash in replenishable CLO vehicles with a weighted average cost of 1.67% over benchmark rates2
  • Structured loan originations of $500.5 million and a portfolio of $14.46 billion
  • Agency loan originations of $1.55 billion and a servicing portfolio of ~$28.00 billion
  • Completed our first Freddie Mac Q Series securitization totaling ~$315 million

Full Year Highlights:

  • GAAP net income of $1.67 per diluted common share; distributable earnings of $2.23 per diluted common share1, representing an 11% increase over last year
  • Raised dividend 3 times in 2022 to an annual run rate of $1.60 per share, representing an 8% increase over the prior year
  • Best-in-class return on equity of 18%
  • Structured portfolio growth of 19% from loan originations of $6.15 billion
  • Agency servicing portfolio growth of 4% from loan originations of $4.77 billion
  • Continued success from our industry-leading securitization platform closing 4 new securitizations totaling $3.91 billion
  • Raised ~$486 million of accretive growth capital through several common and preferred equity offerings
  • Issued ~$438 million of debt offerings primarily to repay existing debt

UNIONDALE, N.Y., Feb. 17, 2023 (GLOBE NEWSWIRE) -- Arbor Realty Trust, Inc. (NYSE: ABR), today announced financial results for the fourth quarter ended December 31, 2022. Arbor reported net income for the quarter of $88.2 million, or $0.49 per diluted common share, compared to net income of $106.0 million, or $0.71 per diluted common share for the quarter ended December 31, 2021. Net income for the year was $284.8 million, or $1.67 per diluted common share, compared to $317.4 million, or $2.28 per diluted common share for the year ended December 31, 2021. Distributable earnings for the quarter was $114.0 million, or $0.60 per diluted common share, compared to $94.2 million, or $0.57 per diluted common share for the quarter ended December 31, 2021. Distributable earnings for the year was $405.7 million, or $2.23 per diluted common share, compared to $313.7 million, or $2.01 per diluted common share for the year ended December 31, 2021. 1

Agency Business

Loan Origination Platform

    Agency Loan Volume (in thousands)
    Quarter Ended   Year Ended
    December 31, 2022   September 30, 2022   December 31, 2022   December 31, 2021
Fannie Mae   $ 1,174,827   $ 629,610   $ 2,919,566   $ 3,389,312
Freddie Mac     295,258     350,980     1,353,001     1,016,142
Private Label     25,629     35,671     217,542     1,436,853
FHA     19,658     78,382     188,394     430,320
SFR-Fixed Rate     33,800     16,678     89,683     136,931
Total Originations $ 1,549,172   $ 1,111,321   $ 4,768,186   $ 6,409,558
                 
Total Loan Sales $ 1,739,069   $ 1,082,136   $ 5,438,623   $ 6,415,169
                 
Total Loan Commitments $ 1,523,069   $ 1,464,235   $ 5,146,718   $ 6,347,752
                 

For the quarter ended December 31, 2022, the Agency Business generated revenues of $95.9 million, compared to $43.1 million for the third quarter of 2022. Gain on sales, including fee-based services, net on the GSE/Agency business (excluding private label and SFR) was $22.7 million for the quarter, reflecting a margin of 1.33%, compared to $13.4 million and 1.30% for the third quarter of 2022. Income from mortgage servicing rights was $17.1 million for the quarter, reflecting a rate of 1.12% as a percentage of loan commitments, compared to $17.6 million (excluding $1.8 million related to the sale of $296.9 million of bridge loans) and 1.51% for the third quarter of 2022.  

At December 31, 2022, loans held-for-sale was $354.1 million, with financing associated with these loans totaling $305.4 million.

Fee-Based Servicing Portfolio

The Company’s fee-based servicing portfolio totaled $28.00 billion at December 31, 2022 and excludes $152.7 million of private label loans originated that were not yet sold or securitized. Servicing revenue, net was $27.7 million for the quarter and consisted of servicing revenue of $43.0 million, net of amortization of mortgage servicing rights totaling $15.3 million.

    Fee-Based Servicing Portfolio ($ in thousands)
    December 31, 2022   September 30, 2022 December 31, 2021
    UPB Wtd. Avg. Fee Wtd. Avg. Life (years)   UPB Wtd. Avg. Fee Wtd. Avg. Life (years)   UPB Wtd. Avg. Fee Wtd. Avg. Life (years)
Fannie Mae   $ 19,038,124 0.502% 8.1   $ 18,331,457 0.521% 8.3   $ 19,127,397 0.535% 8.0
Freddie Mac     5,153,207 0.250% 9.0     4,979,612 0.260% 9.5     4,943,905 0.271% 9.3
Private Label     2,074,859 0.185% 7.6     2,075,791 0.200% 8.2     1,711,326 0.200% 8.3
FHA     1,155,893 0.149% 19.5     1,136,684 0.149% 19.8     985,063 0.154% 21.0
Bridge     301,182 0.125% 1.7     299,696 0.125% 2.3     - - -
SFR-Fixed Rate   274,764 0.198% 6.0     241,887 0.200% 6.2     191,698 0.200% 6.5
Total   $ 27,998,029 0.411% 8.6   $ 27,065,127 0.424% 8.9   $ 26,959,389 0.449% 8.8


Loans sold under the Fannie Mae program contain an obligation to partially guarantee the performance of the loan (“loss-sharing obligations”) and includes $34.4 million for the fair value of the guarantee obligation undertaken at December 31, 2022. The Company recorded a $3.5 million net provision for loss sharing associated with CECL for the fourth quarter of 2022. At December 31, 2022, the Company’s total CECL allowance for loss-sharing obligations was $22.7 million, representing 0.12% of the Fannie Mae servicing portfolio.

Structured Business

Portfolio and Investment Activity

    Structured Portfolio Activity ($ in thousands)
    Quarter Ended   Year Ended
    December 31, 2022   September 30, 2022   December 31, 2022   December 31, 2021
    UPB %   UPB %   UPB %   UPB %
Bridge:                        
  Multifamily   $ 295,451 59 %   $ 592,844 77 %   $ 5,468,222 89 %   $ 9,101,139 94 %
  SFR     161,580 32 %     163,851 21 %     613,819 10 %     415,501 4 %
      457,031 91 %     756,695 98 %     6,082,041 99 %     9,516,640 98 %
                         
Mezzanine/Preferred Equity   43,497 9 %     17,970 2 %     69,606 1 %     203,875 2 %
Total Originations   $ 500,528 100 %   $ 774,665 100 %   $ 6,151,647 100 %   $ 9,720,515 100 %
                         
Number of Loans Originated   50       52       318       422  
                         
SFR Commitments   $ 352,673     $ 457,564     $ 1,078,744     $ 264,101  
                         
Runoff   $ 1,117,806     $ 911,790     $ 3,818,554     $ 2,516,771  
                         
                         
                         
    Structured Portfolio ($ in thousands)      
    December 31, 2022   September 30, 2022   December 31, 2021    
    UPB %   UPB %   UPB %      
Bridge:                        
  Multifamily   $ 12,830,999 89 %   $ 13,455,073 90 %   $ 10,800,896 89 %      
  SFR     927,373 6 %     825,771 6 %     408,245 3 %      
  Other     337,682 2 %     337,682 2 %     541,568 4 %      
      14,096,054 98 %     14,618,526 98 %     11,750,709 97 %      
                         
Mezzanine/Preferred Equity   324,224 2 %     335,003 2 %     378,891 3 %      
SFR Permanent     35,845 < 1 %     36,114 < 1 %     29,395 < 1 %      
Total Portfolio   $ 14,456,123 100 %   $ 14,989,643 100 %   $ 12,158,995 100 %      
                         

At December 31, 2022, the loan and investment portfolio’s unpaid principal balance, excluding loan loss reserves, was $14.56 billion, with a weighted average current interest pay rate of 8.17%, compared to $14.99 billion and 6.90% at September 30, 2022. Including certain fees earned and costs associated with the loan and investment portfolio, the weighted average current interest pay rate was 8.42% at December 31, 2022, compared to 7.15% at September 30, 2022.

The average balance of the Company’s loan and investment portfolio during the fourth quarter of 2022, excluding loan loss reserves, was $14.83 billion with a weighted average yield of 8.12%, compared to $15.01 billion and 6.57% for the third quarter of 2022. The increase in average yield was primarily due to increases in the benchmark index rates in the fourth quarter of 2022, as well as from back interest received upon the payoff of a non-performing loan.

During the fourth quarter of 2022, the Company recorded a $10.3 million provision for loan losses associated with CECL. At December 31, 2022, the Company’s total allowance for loan losses was $132.6 million. The Company had four non-performing loans with a carrying value of $7.7 million, before related loan loss reserves of $5.1 million, compared to four loans with a carrying value of $24.2 million, before related loan loss reserves of $5.1 million at September 30, 2022.

Financing Activity

The Company completed its first loan securitization vehicle through Freddie Mac’s Q Series securitization program, totaling $315.8 million of first priority multifamily mortgage loans. A series of pass-through certificates totaling $236.9 million were purchased by third-party investors, and the Company retained subordinate and interest-only classes in the issuing vehicle of $79.0 million. The facility has an initial interest rate of 2.00% over one-month SOFR, excluding certain fees and transaction costs.

The balance of debt that finances the Company’s loan and investment portfolio at December 31, 2022 was $13.28 billion with a weighted average interest rate including fees of 6.50% as compared to $13.94 billion and a rate of 5.33% at September 30, 2022. The average balance of debt that finances the Company’s loan and investment portfolio for the fourth quarter of 2022 was $13.69 billion, as compared to $13.90 billion for the third quarter of 2022. The average cost of borrowings for the fourth quarter of 2022 was 5.80%, compared to 4.49% for the third quarter of 2022. The increase in average cost was due to increases in the benchmark index rates in the fourth quarter of 2022.

Capital Markets

The Company issued $150.0 million of 8.50% senior notes due 2027 in a private placement. The Company received proceeds totaling $147.7 million, net of discount and fees from this offering. The Company used the net proceeds to repay debt and for general corporate purposes.

Dividend

The Company announced today that its Board of Directors has declared a quarterly cash dividend of $0.40 per share of common stock for the quarter ended December 31, 2022. The dividend is payable on March 17, 2023 to common stockholders of record on March 3, 2023. The ex-dividend date is March 2, 2023.

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) 267-6316 for domestic callers and (203) 518-9783 for international callers. Please use participant passcode ABRQ422 when prompted by the operator.

A telephonic replay of the call will be available until February 24, 2023. The replay dial-in numbers are (800) 688-7945 for domestic callers and (402) 220-1370 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, in particular, due to the severity and duration of the COVID-19 pandemic, 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, 2022 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 8, 2023.  
Contact:

 Arbor Realty Trust, Inc.
Paul Elenio, Chief Financial Officer
516-506-4422
pelenio@arbor.com      


ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
Consolidated Statements of Income - (Unaudited)
($ in thousands—except share and per share data)
               
  Quarter Ended December 31,   Year Ended December 31,
    2022       2021       2022       2021  
  (Unaudited)   (Unaudited)        
Interest income $ 320,597     $ 144,315     $ 948,401     $ 466,087  
Interest expense   207,538       67,883       557,617       212,005  
 Net interest income   113,059       76,432       390,784       254,082  
               
Other revenue:              
Gain on sales, including fee-based services, net   23,290       36,935       55,816       123,037  
Mortgage servicing rights   17,059       34,542       69,346       130,230  
Servicing revenue, net   27,679       23,875       92,192       74,814  
Property operating income   846       185       1,877       185  
Gain (loss) on derivative instruments, net   16,526       4,636       26,609       (2,684 )
Other income, net   (1,500 )     3,425       (17,563 )     7,566  
 Total other revenue   83,900       103,598       228,277       333,148  
               
Other expenses:              
Employee compensation and benefits   42,089       43,149       161,825       171,796  
Selling and administrative   13,030       11,868       53,990       45,575  
Property operating expenses   694       297       2,136       718  
Depreciation and amortization   2,640       1,865       8,732       7,215  
Provision for loss sharing (net of recoveries)   4,061       (5,096 )     1,862       (6,167 )
Provision for credit losses (net of recoveries)   11,469       (8,424 )     21,169       (21,113 )
Litigation settlement   7,350       -       7,350       -  
 Total other expenses   81,333       43,659       257,064       198,024  
               
               
Income before extinguishment of debt, sale of real estate, income from equity affiliates, and income taxes   115,626       136,371       361,997       389,206  
Loss on extinguishment of debt   (320 )     (2,004 )     (4,933 )     (3,374 )
Gain on sale of real estate   -       2,466       -       3,693  
(Loss) income from equity affiliates   (4,260 )     2,472       14,247       34,567  
Provision for income taxes   (4,318 )     (12,929 )     (17,484 )     (46,285 )
               
Net income   106,728       126,376       353,827       377,807  
               
Preferred stock dividends   10,342       8,672       40,954       21,888  
Net income attributable to noncontrolling interest   8,234       11,701       28,044       38,507  
Net income attributable to common stockholders $ 88,152     $ 106,003     $ 284,829     $ 317,412  
               
Basic earnings per common share $ 0.51     $ 0.72     $ 1.72     $ 2.30  
Diluted earnings per common share $ 0.49     $ 0.71     $ 1.67     $ 2.28  
               
Weighted average shares outstanding:              
 Basic   174,444,084       147,899,133       165,355,167       137,830,691  
 Diluted   209,743,771       166,104,325       199,112,630       156,089,595  
               
Dividends declared per common share $ 0.40     $ 0.36     $ 1.54     $ 1.38  
               


ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
($ in thousands—except share and per share data)
       
  December 31,   December 31,
  2022   2021
       
Assets:      
Cash and cash equivalents $ 534,357   $ 404,580
Restricted cash   713,808     486,690
Loans and investments, net (allowance for credit losses of $132,559 and $113,241)   14,254,674     11,981,048
Loans held-for-sale, net   354,070     1,093,609
Capitalized mortgage servicing rights, net   401,471     422,734
Securities held-to-maturity, net (allowance for credit losses of $3,153 and $1,753)   156,547     140,484
Investments in equity affiliates   79,130     89,676
Due from related party   77,419     84,318
Goodwill and other intangible assets   96,069     100,760
Other assets   371,440     269,946
Total assets $ 17,038,985   $ 15,073,845
       
Liabilities and Equity:      
Credit and repurchase facilities $ 3,841,814   $ 4,481,579
Securitized debt   7,849,270     5,892,810
Senior unsecured notes   1,385,994     1,280,545
Convertible senior unsecured notes, net   280,356     259,385
Junior subordinated notes to subsidiary trust issuing preferred securities   143,128     142,382
Due to related party   12,350     26,570
Due to borrowers   61,237     96,641
Allowance for loss-sharing obligations   57,168     56,064
Other liabilities   335,789     287,885
Total liabilities   13,967,106     12,523,861
       
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     556,163
   Special voting preferred shares - 16,293,589 and 16,325,095 shares      
   6.375% Series D - 9,200,000 shares      
   6.25% Series E - 5,750,000 shares      
   6.25% Series F - 11,342,000 and 8,050,000 shares      
  Common stock, $0.01 par value: 500,000,000 shares authorized - 178,230,522       
   and 151,362,181 shares issued and outstanding   1,782     1,514
  Additional paid-in capital   2,204,481     1,797,913
  Retained earnings   97,049     62,532
Total Arbor Realty Trust, Inc. stockholders’ equity   2,936,996     2,418,122
       
Noncontrolling interest   134,883     131,862
Total equity   3,071,879     2,549,984
       
Total liabilities and equity $ 17,038,985   $ 15,073,845
       


ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
Statement of Income Segment Information - (Unaudited)
(in thousands)
               
  Quarter Ended December 31, 2022
               
  Structured Business   Agency Business   Other / Eliminations (1)   Consolidated
               
Interest income $ 305,775     $ 14,822     $ -     $ 320,597  
Interest expense   199,968       7,570       -       207,538  
 Net interest income   105,807       7,252       -       113,059  
               
Other revenue:              
Gain on sales, including fee-based services, net   -       23,290       -       23,290  
Mortgage servicing rights   -       17,059       -       17,059  
Servicing revenue   -       43,023       -       43,023  
Amortization of MSRs   -       (15,344 )     -       (15,344 )
Property operating income   846       -       -       846  
Gain on derivative instruments, net   -       16,526       -       16,526  
Other income, net   2,012       (3,512 )     -       (1,500 )
 Total other revenue   2,858       81,042       -       83,900  
               
Other expenses:              
Employee compensation and benefits   13,338       28,751       -       42,089  
Selling and administrative   6,260       6,770       -       13,030  
Property operating expenses   694       -       -       694  
Depreciation and amortization   1,467       1,173       -       2,640  
Provision for loss sharing (net of recoveries)   -       4,061       -       4,061  
Provision for credit losses (net of recoveries)   10,407       1,062       -       11,469  
Litigation settlement   7,350       -       -       7,350  
 Total other expenses   39,516       41,817       -       81,333  
               
Income before extinguishment of debt, income from equity affiliates, and income taxes   69,149       46,477       -       115,626  
               
Loss on extinguishment of debt   (320 )     -       -       (320 )
Loss from equity affiliates   (4,260 )     -       -       (4,260 )
Benefit from (provision for) income taxes   548       (4,866 )     -       (4,318 )
               
Net income   65,117       41,611       -       106,728  
               
Preferred stock dividends   10,342       -       -       10,342  
Net income attributable to noncontrolling interest   -       -       8,234       8,234  
Net income attributable to common stockholders $ 54,775     $ 41,611     $ (8,234 )   $ 88,152  
               
(1) Includes income allocated to the noncontrolling interest holders not allocated to the two reportable segments.              
               


ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
Balance Sheet Segment Information - (Unaudited)
(in thousands)
           
  December 31, 2022
  Structured Business   Agency Business   Consolidated
Assets:          
Cash and cash equivalents $ 200,514   $ 333,843   $ 534,357
Restricted cash   713,615     193     713,808
Loans and investments, net   14,254,674     -     14,254,674
Loans held-for-sale, net   -     354,070     354,070
Capitalized mortgage servicing rights, net   -     401,471     401,471
Securities held-to-maturity, net   -     156,547     156,547
Investments in equity affiliates   79,130     -     79,130
Goodwill and other intangible assets   12,500     83,569     96,069
Other assets   367,837     81,022     448,859
Total assets $ 15,628,270   $ 1,410,715   $ 17,038,985
           
Liabilities:          
Debt obligations $ 13,195,120   $ 305,442   $ 13,500,562
Allowance for loss-sharing obligations   -     57,168     57,168
Other liabilities   299,559     109,817     409,376
Total liabilities $ 13,494,679   $ 472,427   $ 13,967,106
           


ARBOR REALTY TRUST, INC. AND SUBSIDIARIES    
Reconciliation of Distributable Earnings to GAAP Net Income - (Unaudited)    
($ in thousands—except share and per share data)    
                   
  Quarter Ended December 31,   Year Ended December 31,    
    2022       2021       2022       2021      
 
                   
Net income attributable to common stockholders $ 88,152     $ 106,003     $ 284,829     $ 317,412      
                   
Adjustments:                  
Net income attributable to noncontrolling interest   8,234       11,701       28,044       38,507      
Income from mortgage servicing rights   (17,059 )     (34,542 )     (69,346 )     (130,230 )    
Deferred tax provision (benefit)   6,092       201       (1,741 )     10,892      
Amortization and write-offs of MSRs   22,528       29,268       104,378       91,356      
Depreciation and amortization   3,225       2,763       11,069       10,900      
Loss on extinguishment of debt   320       2,004       4,933       3,374      
Provision for credit losses, net   14,823       (21,646 )     25,077       (39,856 )    
(Gain) loss on derivative instruments, net   (14,992 )     (1,053 )     3,480       432      
Gain on real estate from settlement of loan   -       (2,466 )     -       (2,466 )    
Stock-based compensation   2,643       1,943       14,973       9,929      
Loss on redemption of preferred stock   -       -       -       3,479      
                   
Distributable earnings (1) $ 113,966     $ 94,176     $ 405,696     $ 313,729      
                   
Diluted distributable earnings per share (1) $ 0.60     $ 0.57     $ 2.23     $ 2.01      
                   
Diluted weighted average shares outstanding (1) (2)   191,273,691       166,104,325       182,224,404       156,089,595      
                   
(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) Beginning in the first quarter of 2022, 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. Excluding the effect of a potential conversion in shares until a conversion occurs is consistent with past treatment and other unrealized adjustments to distributable earnings. For the quarter and year ended December 31, 2022, the diluted weighted average shares outstanding excluded 18,470,080 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), amortization of the convertible senior notes conversion option (in comparative periods prior to 2022) 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.    

 


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Source: Arbor Realty Trust


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