Arbor Realty Trust

Good day, ladies and gentlemen, and welcome to the second quarter 2019 Arbor Realty Trust earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will be given at that time. Should anyone require assistance during the conference, you may press star then zero on your touchtone phone. As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Paul Linneo, Chief Financial Officer. Please begin, sir.

Okay. Thank you, Norma. Good morning, everyone, and welcome to the quarterly earnings call for Arbor Realty Trust. This morning, we'll discuss the results for the quarter ended June 30th, 2019. With me on the call today is Ivan Kaufman, our president and chief executive officer. Before we begin, I need to inform you that statements made in this earnings call may be deemed forward-looking statements that are subject to risk and uncertainties, including information about possible or assumed future results of our business, financial condition, liquidity, results of operations, plans, and objectives. These statements are based on our beliefs, assumptions, and expectations of our future performance, taking into account the information currently available to us. Factors that could cause actual results to differ materially from Arbor's expectations in these forward-looking statements are detailed in our SEC reports. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today. Arbor undertakes no obligation to publicly update or revise these forward-looking statements to reflect events, or circumstances after today or the occurrences of unanticipated events. I'm now turning the call over to Arbor's President and CEO, Ivan Kaufman.

Thank you, Paul, and thanks to everyone for joining us on today's call. As you can see from this morning's press release, we're at another outstanding quarter, which continues to demonstrate the diversity of our operating platform and the value of our franchise. We are very pleased with the growth in our business, which has consistently increased our baseline of predictable and stable earnings, allowing us to once again increase our quarterly dividend to 29 cents a share, which represents our second increase this year and reflects an annual run rate of $1.16 per share up from $1.08 per share. Additionally, the significant growth we experienced in the second quarter reflects continues to increase our run rate of core earnings, making us very confident in our ability to comfortably maintain our current dividend as well as grow it in the future. And based on our new dividend and yesterday's closing price, we are trading at a dividend yield of approximately 9.5%, which we believe is not nearly reflective of our true value. The quality and diversity of our income streams along with the consistency of our earnings, clearly differentiates us from our peers, which is why we believe we should consistently trade at or lower dividend yield than our peer group. To highlight our success further, I would like to talk about the growth we experienced in both our business platforms. In our agency business, we grew our service and portfolio another 3% in the second quarter and 14% over last year, and is now at $19.5 billion. This portfolio generates a servicing fee of 44 basis points and has an average remaining life of nine years, which reflects an 11% increase in duration over the last two years. As a result, we have created a very significant, predictable annuity of income of $85 million gross annually and growing. the majority of which is prepayment protected. And this growth in our servicing portfolio also continues to increase the annuity of income from our escrow balances, further contributing to our growing annual run rate of core earnings. We also had a very strong originations quarter, closing $1.3 billion in agency loans, and our pipeline remains strong, providing us with confidence and our ability to produce significant origination volumes for the balance of the year. We're also very pleased in our ability to continue to generate strong margins on our loan sales, despite the extremely competitive landscape. And these income streams from our agency platform continue to create significant diversity and a high level of certainty in our income sources. With respect to our balance sheet business, we've experienced tremendous growth in our loan book, We grew this portfolio 24% in 2018 and another 20% already for the first six months of this year on record second quarter originations of $1 billion. Our balance sheet portfolio is now a $3.9 billion, and significant growth we experienced in the second quarter will continue to increase our run rate of net interest income going forward. It is also significant to note almost 80% of our portfolio is in multifamily assets, which is clearly one of the safest and best asset classes. We also have a very robust pipeline, which will allow us to continue to grow our loan book for the balance of this year. And as a result of this strong pipeline, we elected to raise $105 million of fresh capital in the second quarter through a common stock issuance, which will be immediately accretive to our core earnings as this capital will be used to fund our growth. And again, the income generated from our loan book is a significant component of our earnings, and we remain very confident in our ability to continue to grow this income stream. In the second quarter, we closed our 11th and largest non-recourse CLO securitization vehicle with $650 million of assets and significantly improved terms, including reduced pricing, increased leverage, and a three-year replenishment feature. The tremendous success we continue to experience in the securitization arena combined with our ability to substantially reduce our debt costs in all of our borrowing facilities has allowed us to achieve significant economies of scale and maintain our margins in a very competitive market. Updating you now on the single-family rental business, We continue to make tremendous progress in developing our platform and building out the appropriate infrastructure as we remain committed to becoming a leader in this space. We are very pleased with the talent we have been able to attract and with the continued growth we have seen in our pipeline of opportunities by leveraging off of our existing originations, capacity, and capabilities. We believe this is a phenomenal business with an enormous opportunity in both the bridge and permanent lending products, and we are confident that we will build this out to be a significant driver of yet another income stream and further diversify our lending platform. Over the past few years, we have outperformed our peers, delivering consistent annual shareholder returns of approximately 30%. We're a complete operating platform with a significant diversified income streams, most of which are long-dated, including income from our servicing portfolio, escrow balances, balance sheet business and single-family rental investments. We are also leaders in the CLO securitization arena and continue to generate significant efficiencies from the right side of our balance sheet. We feel we are significantly undervalued given the stability and diversity of our income streams and that we should be trading substantially higher than our current market price, and we believe there is a significant opportunity for additional appreciation in our stock price to our shareholders. I will now turn the call over to Paul to take you through the financial results.