Arbor Realty Trust

Good morning, ladies and gentlemen, and welcome to the second quarter Arbor Realty Trust Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this period, you will need to press the star 1 on your telephone. If you want to remove yourself from the queue, please press the pound key. Please be advised that today's conference is being recorded. If you need operator assistance, I would now like to turn the call over to Tony O, Chief Financial Officer. Please begin, sir.

Okay, and welcome to the quarterly earnings call for Arbor Realty Trust. This morning, we'll discuss the results for the quarter ended June 30th, 2020 with 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 our business. 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 cause actual results to differ materially from these statements are details 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 or circumstances after today or the occurrences of unanticipated events. I'll now turn the call over to Arbor's President and CEO, Ivan Kalk.

And thanks to everyone for joining us on today's call. We hope that you and your families are safe and healthy, and we appreciate your participation during these challenges that our country and the entire world continues to deal with from the effects of COVID. In addition, as we all know, we invented a recessionary period. After experiencing a 10-year run of tremendous economic growth, we as operators of this company were well prepared for the recessionary environment. We built a viable operating platform focusing on the right asset class with very stable liability structures. Strong liquidity, an active balance sheet, and GSE agency business, and many diversified income streams that generate strong core earnings and dividends in every market cycle. We also have nominal delinquencies and forbearances in our portfolio, an experience cycle tested management model that provides many diversified opportunities for growth, which clearly puts us in a class by ourselves. Our second quarter results are clear of the diverse platform we have developed. We had an outstanding second quarter achievements, including remarkable opportunities allowed us to increase our dividend to 31 cents a share. This is the ninth year in a row we have been able to increase our dividend, and we are confident in our ability to continue to generate core earnings in excess of this increased dividend. As Paul will discuss in more detail, the quarter was 46 cents per share. which is a remarkable accomplishment and a true testament to the value of our franchise we have created. In fact, the growth we are experiencing in our core earnings this year has already exceeded last year's pace. We realize significant benefits from our LIBOR floors, efficiencies in our CLO vehicles, GSE agency income from our residential business, overhead, and general and administrative expenses. And as a result of these reoccurring benefits, combined with our projected originations, strong pipeline, and the credit quality of our portfolio, we're uniquely positioned to continue to produce significant core earnings for the balance of the year despite the effects of the recession. The strong car earnings outlook has allowed us to once again increase our dividends in excess of this dividend. It reflects a 13% yield based on yesterday's closing price. Just a few months ago, in mid-February, we were trading at a much lower dividend yield, which applied to our current dividend. would result in a stock price of approximately $15.50 a share. And we believe, based on our resiliency and strong performance, that we should be trading above that level. As a result, we feel this is one of the best opportunities to create shareholder value in the history of our franchise. Through our GSC agency platform, We have been very active in providing liquidity in the multifamily market. We originated $1.35 billion in GFC agency loans in the second quarter and $2.2 billion for the first half of the year, which is up approximately 10% from our originations for the first half of 2019. Our pipeline is also extremely strong, and as a result, we expect to produce strong origination volumes for the balance of the year And this unprecedented platform offers a premium value as it requires limited capital and generates significant, long-dated, predictable income streams and produces significant annual cash flow. Additionally, our $21.6 billion GSE agency servicing portfolio, which is mostly prepayment protected, generates approximately $95 million a year and growing in reoccurring cash flow in addition to the strong gain-on-sale margins we continue to generate from our origination. The ability to originate and sell loans in a liquid market with minimal required capital and produce gain-on-sale income, as well as new and increasing servicing revenues, will continue to contribute greatly to our core earnings and dividends. From a liquidity perspective, we are very pleased to report that we have a current cash and liquidity position of approximately $450 million, which we believe not only provides us with adequate liquidity to navigate the current market conditions, but also gives us offensive capital to take advantage of accretive lending opportunities. We have been very successful in increasing our liquidity position growing it by approximately $100 million. In the second quarter, we issued $70 million of three-year unsecured debt, which continues to demonstrate the value of our franchise relationships. And we successfully executed our first private label securitization in the second quarter, totaling $727 million of assets, which generated approximately $115 million of cash after repaying the short-term debt associated with these loans. We have a very strong balance sheet portfolio and the appropriate liability structures. At June 30th, our balance sheet loan book grew to $5 billion and was financed with $3.4 billion of 2.5 billion or 75% of that debt is non-recourse, non-mark-to-market TLOs, and approximately $850 million is financed through warehouse and repurchase facilities that is secured by $1.2 billion of assets with eight different banks that we have long-standing relationships with. Additionally, the majority of loans being financed in these bank lines are also rated and CLO eligible. With respect to our balance sheet portfolio, very important to highlight that over 90% of our book are senior bridge loans. And most importantly, approximately 80% of our portfolio is in multifamily assets, which has been the most resilient asset class in all cycles. And we believe that will continue to outperform all other asset classes in this recession as well. Additionally, we have not provided any loan modifications with rate concessions or had any defaults to date related to our multifamily portfolio, and most of the loans in our portfolio contain interest reserves and or replenishment obligations by our borrowers, giving us the ability to effectively manage our portfolio effectively through this dislocation. We also have very little exposure to the asset classes that have been significantly affected by this recession, such as retail and hospitality. Our total exposure to these asset classes is less than $130 million, or approximately 2.5% of our portfolio. And as a reminder, we took adequate reserves against these assets in the first quarter I do not feel at this point that any material further impairments will be necessary, which gives us a confidence that our adjusted book value of $9.40 actually reflects the current impact of this recession. We continue to see positive trends related to our GSC agency business collections. with only approximately 0.4% of our $16 billion Fannie Mae book and 6% of our $5 billion Freddie Mac loan book granted forbearance through July. These numbers are relatively unchanged since April. We had very few requests forbearance in the last few months, which we believe reflects the strength of our borrowers and the quality of our GSE agency portfolio. With respect to servicing advances related to any potential forbearance claims, as a Fannie Mae servicer, we are required to advance principal and interest payments for a period of up to formally $700,000 cumulatively to date, which also not materially changed since last quarter. And as a reminder, we have a $50 million advance facility in place with one of our larger banks at a 100% advance rate. Therefore, any further potential advance requirements will not be an issue for us. Summary, we have built a versatile operating business that is multifamily-centric with significant diversified income streams and is capable of generating consistent core earnings and dividends in all cycles with a proven track record for growth. We also have a strong liquidity position the appropriate liability structures, and the asset management expertise and track record to continue to succeed in this environment, and our performance speaks for itself. We believe this puts us in a class by ourselves that investment in our company at these extremely low levels will provide a tremendous long-term return. And as the largest shareholder, my primary focus is will be to continue to maximize shareholder value. I will now turn the call over to Paul to take you through the financial results.