ABR - Earnings call transcript Q3 2019 | Arbor Realty Trust, Inc.

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Third Quarter Arbor Realty Trust Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session [Operator Instructions]. Please be adviced that today’s c conference is being recorded [Operator Instructions].

to Elenio. call like speaker to now Paul today, would turn over the your I sir. begin, Please

Paul Elenio

Okay, thank Realty Chief President and quarter the quarterly we’ll you, call Norma, the Executive ended earnings to And discuss Ivan With call Officer. the September welcome today XX, for me for is and Arbor results Trust. XXXX. morning, good This the morning, on everyone. our Kaufman,

of deemed earnings the forward-looking to our and financial liquidity, inform currently that us. you information statements assumptions performance, call Before may expectations risks begin, this are statements plans be assumed results future of to information future I need business, subject available objectives. results we including to These and beliefs, about condition, on of statements account or made are our into based that uncertainties, in and our operations, taking possible

our occurrences in cautioned Arbor’s statements these that are differ materially reliance undue to Factors from forward-looking unanticipated only circumstances statements, obligation undertakes after in reports. no events results to on these update or to or cause today. these forward-looking could to revise today, the place Arbor speak SEC as forward-looking or expectations Listeners of events. statements actual detailed not are which publicly reflect of

Arbor’s turn and now over CEO, to the President I’ll call Ivan Kaufman.

Ivan Kaufman

call. on Thank everyone you, to Paul. today’s thanks joining us for And

which continues value the can morning's the had franchise. demonstrate this press outstanding from to As quarter, see of we platform our you our release, diversity of and operating another

again third reflecting per this of allowing share, represents $X.XX business, $X.XX our pleased share. a dividend growth our has which run of consistently us increase predictable the increase the our to quarterly stable baseline rate which continued $X.XX and very from and are our up share, earnings, per year annual with to once We increased in

comfortably continues very this maintain growth in our significant the experienced making to us run ability it we dividend as in as confident core well of our future. earnings, to grow year our increase current Additionally, rate the

we dividend shareholder XX%. clearly quality us, why our combined our along we a years, clearly earnings Over lower our annual with the group. and outperformed of delivering approximately which consistently few ratio, of diversity the yield consistent substantial streams peers, last income our and have with payout And this the performance, is trade differentiates should we premium our peer consistency low dividend believe and a to of at returns

grew further, XX% the prepayment annually, which have created very an XX of has income nine remaining life increase in the This gross over annuity an basis our servicing success quarter last To and is of our points and $XX I of years, protected. And of In experienced talk majority a years. a significant growing of fee $XX in and we in generates portfolio Agency highlight Business, to our growth we both platforms. portfolio year, like and servicing now as of billion. another reflects duration two over at about million our over last business average XX% which the is X% second a would the result, we predictable

growth annual currently in a of are this earning which $XX earnings annuity million. annually As escrow escrow our to income increase balances, also for of income servicing portfolio and $XXX combined the rate from our million servicing of continues run

our with the closing consistent us the origination year. strong, quarter, We also pipeline loans providing confidence in to had of a $X.X very and volumes balance in produce our ability remains billion for agency strong originations

effect to our these level diversity platform income our the has potential streams the our agency a in new the talk cap of reform lot There's for continue pleased streams. in about certainty high and in to landscape continue GSE very create lately and on our future. could on margins generate also the have it lenders ability extremely competitive to been strong loan and that despite the from significant the We're sales income a as of GSE

The XX% the eliminates market. be cap that multifamily any XXXX XXXX affordable business approximately and and or XX.X% exceptions of cap been housing. towards new The represents increased projected for new mandates also has mission-driven directed

position cap, able been GSE housing agency portion production to continue believe a the going Our the to to affordable the dedicated a grow production and has that historically large component affordable us mostly housing in increase being market; in therefore, to we to with favorable be our forward. the puts combined

our In being which launched navigated. the anticipation In advantage a slight did market beginning footprint, period experienced Arbor In agency program. time, of industry the the agency occur, Label the were of of a of short able million quarter, had in $XXX any that a the a we will we’re competitive quarter disruption build agencies. not of the expect product of to a product, million we caps as and the in the Private as reduction potential XXXX, to this development the we And platform pipeline changes our in and to this to believe first against close of mitigant further further line lending diversify we act and securitize $XXX and which third

this X months With experienced and nearly another the year in for of We originations. already sheet our billion nine we this portfolio first on growth balance XX% respect in our to loan XX% tremendous business, grew book. XXXX

$X sheet balance interest to and net is going income of significant we continue growth will now at portfolio run our forward. billion Our rate the increase experienced

our to also of is class. significant assets, portfolio multifamily is XX% which It clearly is asset almost in the safest that note

continue fresh of to year. debt of the loan a allow result debt X.XX issuance tighter our as March. capital raise $XXX We last our million the And the also elected strong XXX have issuance to in pipeline, than basis we a us of through was pipeline, October balance will very a book for that points grow robust in to unsecured which

accretive be earnings. our was and This attractive used of capital to core be immediately very to as pipeline new it'll our investments fund

book banking through allowed our in debt our has We expertise which from of our generated to maintain balance reducing income is we the sheet very income component substantially loan a again, And continue remain relationships confident and growth our continue tremendous to success have of economies significant market. this significant competitive to to our ability achieve earnings, in our strong and us stream. a costs, and securitization our in margin very scale

Updating you on business. rental single-family now our

committed We considerable our space. progress make to continue this in we're platform, and developing leader becoming in a to

of with growth opportunities the are our We’re existing continued leveraging very capacity, by seeing and pleased originations, in our off pipeline we capabilities.

permanent we believe we are of stream approximately enormous platform. bridge our a with further lending driver significant this will phenomenal out a confident products, million closed of rental to this income and $XXX opportunity have lending build product and another is source that of and both business the we diversify and to-date, We single-family yet be in

that of Overall, on outsized The our we’re confident, current to our base be pipeline line diversity generate will pleased our quality growing and our in makes comfortable operating future, shareholders. with of income extremely in of continue us to revenues our and progress to status continue to dividend the and our based platform. stability with very have and streams the returns tremendous grow dividend the our success strong able and our consistently we the

results. to take the turn through I Paul will you call over financials the to now

Paul Elenio

Okay, thank you, Ivan.

efficiencies the annualized average cost per third our generating quarter, are we equity increase morning as and on share. of as increase million share, the significant very release year reflect balance growth business, confident Ivan we we earnings grow ability of remain to pleased $X.XX an our results AFFO ago sheet this future. once it the maintain As our to our well or continue scale continues to And of and ability mentioned, which in to These very dividend $X.XX light our capital return a from as XX%, well as press comfortably indicated, a dividend, we our agency strong experiencing with to as quarterly current common $XX.X power demonstrate had an XX% our a are portfolio. as reflecting again in

million our second billion and miscellaneous our in sales. in was generated results to the on approximately quarter the billion business, on X.XX% originations third at on $X.X $X.X all-in fees The compared sales. Looking pre-tax sales we quarter third income agency X.XX%, in quarter from margin our $XX margin of loans including

of of we due generally around rate also We services income to billion to servicing rights $X.X MSR during related our the have compared mortgage to loans of that the which average second rate million committed of quarter, $XX X.XX% large fee. for recorded mostly deals in quarter, closed an representing second X.XX% quarter, third the some

approximately Our servicing portfolio fee estimated up from time years. around another This with of September, and the a annuity predictable XX.X billion points weighted $XX annual a at million generate which an quarter to income year. million continue basis gross X.X remaining portfolio the $XX annually, X% is of servicing forward, during going basis on average same life last of will to $X grew

off last meaningfully Additionally, balances million have quarter. as maintenance to in quarter, the contribute third on balances have $X We This and loans or streams. the was servicing rate that provisions. annual to $X.X yield continues certain XX% early run around in year. approximately in million our were are the prepayment from which to associated approximately for run producer prepayments with continues also fees currently The recurring to up million accounted escrow escrow which income book our time this these earning with balances, to fees in up $X.X related earnings earnings and $XXX grow second compared X%, million of associated an

$X in based grew pipeline, to on nine for extremely confident portfolio In we sheet to remain our our the lending grow our first year to balance investment the ability And our in our XX% billion. future. operation, current sheet balance continue months the we of portfolio

investment June an XXth at X.XX% billion X.XX% compared $X XXth. yield all-in Our to September at had of portfolio approximately

to quarter, quarter compared quarter originations investments to And compared second in balance default core second from our due this off in billion the from loan to quarter average due to up was quarter. collected average billion yield and LIBOR third a was during the these our third $X.X and X.XX% pay reduction rates second quarter on to third interest last The off, our on interest run the growth. on for X.XX% $X.X as mainly the higher quarter for investments

non-cash of in compared during a third at to debt debt the second The our for fees reduction full that for X.XX% to the debt $X.X to a were unwind accelerated effect to second on for third X.XX% approximately was core lower due on in cost up the approximately decreased due average new the quarter approximately quarter in LIBOR our CLO facilities billion all-in balance And of growth. borrowing debt mainly billion cost was second the $X.X Total funds around billion financing the due September of third from at quarter. reduction quarter compared to June of to the approximately X.XX% our assets debt X.XX% costs facilities portfolio quarter to million $X.X from the from for of XXth LIBOR our XXth, quarter. with cost average quarter, the early our the VI CLO third in a and with in associated to $X.X

a effect relatively of interest compared compared Overall, and assets costs our quarter, core to to spreads from run overall respectively, recent reduced are X.XX% at XXth was our XXth of received and borrowing due And on LIBOR and last X.XX% to X.XX% mainly spot mainly interest rates higher positive again, off in sheet net on June net interest second as at September quarter quarter to due default our interest in the our balance and execution. floors down CLO portfolio from spread the originations. portion X.XX% to flat this

our the lending ratio debt-to-equity quarter. a at X trust stock down as on the and The average at X.X XX% to X XX% XXth. on overall assets, equity, also for basis, was June slightly to was preferred X.X spot stock preferreds preferred as the including September and core in our compared And the from third leverage perpetual down to ratio to preferred equity XXth trust as to including quarter second

the banking strong us to quarter, income networks very investment retail another success million continue from branch joint of our had have in quarter also generate $X.X to interest we from and environment. we rate to due the Lastly, venture. out residential This building current the mainly this

of line from fourth normal in quarter record this performances to more income quarter nature due expect streams continues assessment demonstrate our And also in our success that fourth to banking the franchise. business. to be We the this will with and operating past the the of the diversity of residential value seasonal income additional

back to this have Norma? now for turn I remarks questions operator to prepared it may this the any morning. our you completes will That And at time. take

Operator

[Operator you Instructions]. Thank

JMP Delaney comes question Securities. first from Steve of Our

line open. Your is

Steve Delaney

know quarter, that little the you as gain Paul, deal over And second obviously, in on the run factor you XX%, X% in Mae sale a mega to had gain? project of component, you your for the given third X% a quarter. the about reasonable, mix in Fannie level that’s there, a that which MSR I to large The rate? was but do on up feel margin deal business, us a is or mentioned how reasonable

Paul Elenio

I MSR said rate. I gain but think think you meant on sale, you

closed versus you the in mix So, Mae higher Fannie other have reasons the products, quarter little than mentioned. quarter. We mentioned last as mix the second didn’t X.XX MSR that you larger and also fees. was quarter, on, it’s and heavier quarter did in servicing towards of it for for lower kind We Mae. it rate depends was Fannie with third the loans some we It the was of have a the that

be picked rate in a servicing to it which the one we it’s forward. business relatively the that the up are cap high should And the would going fees developments So Fannie, to MSR that unless mix the trend Freddie don’t end staying few that project. over that new Mae the new not but changes so has tough than the with last I significantly it business, higher maybe quarter, quarters, the trend anticipate, because on think end, could there. should high and every it say X% on I higher has Fannie But

Steve Delaney

me you up mentioned smoked volume in UPB servicing the interested maintenances. the you the I out X% on yield -- going XX% up up, was And with revenue the and only

the As XXX. of think do are drop early to you consider that refi’ing it attribute XXX from in bailing you are early out year XX routine saw Did loans? or in their GSE year that, you was actually that kind there the the and people you what

Paul Elenio

it little view because a would talk than rates Ivan mentioned, came probably $X.X this And the little thought let trending think you with maybe perspective. next it surprising, but kind interest quarter the drop last and I'll I of and that to, portfolio, about expected. my rates. where over we’ll be quarter, it would market. do thinks pegged he but Steve, that fees prepayment last, a from more, normalized was probably where that the as to I that the and The their higher got opinion, market million I I in were get But in the it in to attribute on do quarter. it I That’s the had think I Ivan’s interest people refinancing is down

Ivan Kaufman

product the just not it’s think of I refinancing.

assets their with more activities, are rates sale do an gain the deal are be when there some and of the yield think own on issues, willing and to their because I drop, may sale acceleration maintenance people robust.

and a us consistent factor a So, factor in our it’s for earnings. definitely it’s

lower, sometimes within but it's range. sometimes, it’s certain always higher, a it's And

Operator

Thank you.

question next Laws Raymond Stephen of from Our comes James.

Your line open. is

Stephen Laws

do the private or to follow there couple of the yields, securitizations of then private prepared little remarks that to And quarter versus it your on side, a on million underwriting label the label yields in agency point, the of Ivan, from, want QX. What two? characteristics on the we in originations I private normal the up you'll on standard should things a difference that that what’s think bit about, loans a the distinguish label is business? $XX the in maybe

Ivan Kaufman

would at the as be of their they against the agencies, anticipation the hitting off, our back the label created cutting that's were was first we because that result cap think, least how created a private and agencies I program.

up was void it the the steep not was backing inside So, their where and filling quoting, were very private the pricing an pricing. agency agencies absolute label they very, were actually of

product agencies and of produce the be primary will will be So, will label real aggressive not issue. that's be the we the of private a or amount how

they'll they The less is secondary more non-mission basis. the their are on business the is issue mission driven mission-driven aggressive aggressive which XX.X%, will be the if on mandate be business, and fulfilling not on

we'll business less private-label they're on aggressive more business, in if do general. So, a non-mission-driven

Sometimes, void less and and a the market, specific as a a they're aggressive agencies have well. to filled in that's concentration be

a and have they concentration sponsor sometimes However, as affects that well. them

are there to and at time short they period more and but So, various of on getting expect we we in now of on I a more taking did operating private-label be are the their more shy level that number factors the exist, that market. production. business aggressive a would of agencies rate back not They unless of think are the run amount

I the to pipeline right have for anticipate to now we what than seeing pipeline in it's probably in half. right probably billion that would XXXX. suggests So, level be about lower have we rate $X.X billion What expect the I'll now. run securitization $X

Stephen Laws

of Great, when we building those should that line I with there, ti ROE as to place going SFR line the really up like think but the put benefits And out $XXX your building million expenses a follow up gaps ROEs the think you expansion been there date, and or not about it, I it have that ramping about a the associated the right and market. platform. How have way fill that costs leverage to top know of in what growth, sound lot platform? in bottom are type in a opportunity comment, to good to does appreciate color in been out on and shifting

Ivan Kaufman

on of that around of believe business. to level, will to we've a get sheet lending So, drag. balance probably rate that XXXX, At producing able positive for our positive grow for month get to a can if It's continue My I somewhat contributor be securitization it side. and as bridge to in have now, I right not it's loans be our $XX to substantial objective our to bottom there, absorb each and earnings. on a we that a million turning would But XXXX, the been numbers line. both cost we able run think operating will now we neutral

Stephen Laws

each When about bit a that competitors, more are your as you thinking with credit side see competition in side. underwriting maybe spreads the at then competition market? on addressing do to talk And of standards? pressure And look the or how to on that the side you you little

Ivan Kaufman

constant spreads. Yes, on pressure there's

On the another sheet XX say spreads would points four considerably. basis in months points side, in balance call. have last XX they're come in to I last since quarterly our basis

scale positive However, we've borrowing and economy for offset our quite able of lot the grow same at to our to time. side that's and so maintain book been been on get a the spread, that us

pretty with we’re So where we comfortable are.

Although, are to degree. large that tighter, have our coupons offset borrowers our a

is fiercely levels, And on and it in volume too On market. what we competitive wait much ambitious been overhead. a being and our not do the and able aggressively overly side, agency to up our be maintain growing we’ve about

trying So about manage we’ve a doing good business accordingly and to disciplined our pretty been job.

effectively. I franchise think we base. a will we And been competitive, business be fairly customer good a our have that maintain and market we’ve able to to but continue plans good have

Operator

I’m for Jade open. I at Thank Ivan you like no closing [Operator questions I’m line with this to have turn showing is question. the time. Kaufman to sorry Rahmani your call Actually, I’d Mr. over back Instructions]. KBW, comments. And currently

Jade Rahmani

be would in company's definitely single well. We know focus you've you property wondering scale management a the And there as as additional technology the the increasing institutional that because residential business. it an market. to would family add, investments in the also on know been theme complementary and line in to was for economics interested a business management, seem if requirements technology, and space, has made I rental is need property that I

could comment on So you that?

Ivan Kaufman

very declined lot margins being intensive, management a We’ve that of the into requiring and a people lot and evaluated that with area of we’ve very reasons. of infrastructure in the past, number in It's low. going for

wanted risk because that from not of that of or as management your properties, can headline come the not and occur justified time, a some to to of when with the company our property manage along headline of we the that, also is negative you there public some is whether be probably things we and afraid We’re businesses. time it's some effect might rest where that felt risk

sure synergies issue The the it all is only managing financing and will revenue real properties opportunities us that create additional offset and streams, whether for creating not and does. from we’re

capital time. there're we places think at management our put better So present the to and

Jade Rahmani

Turning residential general, rest other the view single continue as business, And toward to bridge positive the very have you housing affordable particularly do to toward What’s or rental commercial office your it estate estate originate expect in such commercial multifamily, risk view the like family seems real overall and in as lower a focus. dynamics equities? property of in to real loans types, the you market? as and well

Ivan Kaufman

retail, have XX% classes. and pick So healthcare. XX% probably we’ll some some asset office of some in we our some hospitality, spots, other portfolio about And certainly our originations do to we

in So players major we’re area. not that

for or engaged But that borrowers in and the opportunistic our the opportunity. either of we We’re unique love It's market. historically in. performer markets outside all a we’ve multifamily other best seeing been servicing

the probably will So balance our that book. in be

Jade Rahmani

classes, you Would loan expect asset you an delinquencies estate residential. real commercial the next wide mentioned from away in in And year? market uptick

Ivan Kaufman

at time a sponsors of and the a we'll point liquidity, becomes level of the in is that lot lot what with lot with caution in that a do very, business players, that into with there's of and feeling do syndicated this think of new a proceed the very time point be I capital of of market, in lot is we cycle. there're with cautious risk. the we're and of certain lot a there's entrants a cycle, Our new And

a bit in be general. in uptick do of industry, the expect in we little delinquencies the So it'll

with interest lot a as increases. will do well And rates, as rent

control nobody for rent which right be rate growth, well a attractive very of environment. our rates very cautious. performance now and positive and interest over variables Those would underwrite interest of that but is loans multifamily run to X% a XX way had the exit the are our rates as period So of conservative rental in or very be historical cap exit we're loans. increases, two the to we you've time years But can that as on asset a very, X%

Jade Rahmani

And the touching chose capital? you decision the defensive hope fact let's uncertainty. not with as dividend, some more an rates, paying dividend raise on again to just to additional the being be instead in spreads mentioned the Why

Ivan Kaufman

one, we number Well, feel we are very conservative.

We our have noting when within dividend. grow a just room And down. go levels. continues what's lot of think our tremendous baseline it And at our our to core is grows earnings I grows, worth doesn't earnings

a a our Our shows balances, a -- escrow feel the we're We tremendous payout from it balance ratio. year-to-year. very a And have is low servicing core lot of that our there at baseline we earnings still revenues, And at sheet, rate. with with and it payout growing our are a room ratio such have be comfortable it. us we lower to very inappropriate would rapid almost for

Operator

next comes from our And JPMorgan. you. Rick Thank question Shane of

open. line Your is

Rick Shane

of want it’s on not this do bit just where there agency Ivan, be How that provide How look sort the like economics you are talk a agency of the decided But the I'm are. business? meant it to whether versus appreciate you the do curious, run a thresholds state to fluctuations based basis. business do when I on in capacity to the to study private-label the at side, or label in question. of about out is stability other the on I is private loans? response the the you where periods in on sounds plan sort can't and Steve's of to parts there little in a that's tactically. commentary obviously, market. Obviously,

Ivan Kaufman

the I product, will will dramatically how not aggressive and our are nice are time and what an be grow I we're aggressive. depending in where happen think just of is, of that originator There are, in agencies or a on may swing markets, periods effective both where way. on because agencies footprint the too think pricing they

So significant and execution. currently, the lead pipeline we is really, really to should good generated

the every us week, not I agencies product for that be the may in think that up now tightening originate are to space market. there

the degree a the large agencies the with dictate will to is. So room for there much in the leader market how market being

continue X.XX right basis week-by-week from X.XX or to X And points, they being get XX. X.XX, of we’re enough went although, around the quoting. or and actively it quoting spreads if they their won’t But they is it to X.XX X, And are will from agencies that product. be. be which sufficient tighten now widen, X.XX inside over They if then

right board again. dominate to probably it's and of line agencies now, with the market So kind that

wait So, we’ll have to it and how see works.

Rick Shane

gain And I'm heard how But a sale not business did basis? to agency not. Steve’s on question compare this the or sure I on if answered economics you the versus

Ivan Kaufman

economics. So its two we think the Freddie, that lie somewhere the between agencies, between and Fannie

Freddie business and Mac economics that between. we on lies Mae on the than right the are think business, stronger Fannie So in the

Rick Shane

impact at So margin it on the gain sale margin? probably will

Ivan Kaufman

feeling what’s Paul, your on that?

Paul Elinio

right. Yes, I think that’s

I are depend that on in active we Rick, Ivan as how, how laid think business. it’ll out label private

on as the being the in side economics, on obviously servicing and than gain side between Freddie. robust Ivan the think out I the more Fannie sale two agencies fee on laid fall

So it in between two. falls just those

bigger move margin the doesn’t regress. likely than it's in significantly total It our part unless a the of book agencies

unless materially. moves be won’t it affect that all, margin a are will it’s real part big it their means and don’t agencies business, you that footprint, think at our hard I to me reducing the the So tell but margin for the it of

Ivan Kaufman

have will million fixed $XXX targeted least which do that. million, expenses. some $XXX hope to our of probably expenses on we and larger The and those factors be you market are by the that million has doing deal impact at that between come deal. a out absorbing in somewhere fixed percent there Yes, We $XXX very a positive on there'll on quarter originally big margins, impact

and we will pricing it. to -- which hoping trying how we’re the can brand in our don’t And our know to which impact given expertise the have. in. with trade we’re the to advantage, doing can part business, market it servicing the maintaining item, we be of being of other think us pricing We BPs securitization market. side brand CMBS much it the way the factored and perhaps a been comparable of an trade there And hasn’t we’re some the We're build in

little we very now, out. favorable. say it's looking where So early to come right it's But exactly

Operator

Thank turn Kaufman. currently call you Mr. to at questions would time. I And [Operator Instructions]. showing this Ivan to over no like back I’m the

Ivan Kaufman

you Thank call. participating for today’s everybody on

that for of on inception the call. the technical the Sorry difficulty occurred originally

again rest way. year once the another everybody. third the again, Thank was of care in The you complete quarter a quarter. optimistic outstanding to very And we’re positive take

Operator

Ladies this today’s and conference. concludes gentlemen,

disconnect. You may now

Arbor Realty Trust (ABR) 1 Nov 192019 Q3 Earnings call transcript