Arbor Realty Trust

Good morning, ladies and gentlemen, and welcome to the fourth quarter full-year 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 star and 1 on your touch-tone phone. If you want to remove yourself from the queue, please press the pound key. Please be advised that today's conference is being recorded online. If you need operator assistance, press star zero. I would now like to turn the call over to your speaker today, Paul Alenio, Chief Financial Officer.

Please go ahead. Okay, thank you, Keith, and good morning, everyone, and welcome to the quarterly earnings call for Arbor Realty Trust. This morning, we'll discuss the results for the quarter and year-ended December 31, 2020. 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 ARBA'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. ARBA 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. We also have one housekeeping item we'd like to mention. Historically, we have disclosed core earnings as an important non-GAAP financial metric to assess the performance of our business. Effective in the fourth quarter, we are changing the name from core earnings to distributable earnings as a result of discussions between the mortgage rate industry and the SEC over the past several months to adopt terminology that is more descriptive of what this metric represents. This is nothing more than a name change and not a change in how we calculate the metric. Distributable earnings is calculated the same way we calculated core earnings in the past. I'll now turn the call over to Arbus President and CEO, Ivan Kaufman.

Thank you, Paul, and thanks to everyone for joining us on today's call. We're very excited today to discuss the significant success we had in closing out what was an exceptional 2020, as well as our plans and outlook for 2021, which we believe will be another outstanding year. As you can see from this morning's press release, we had another record quarter, and 2020's results reflect one of the best years as a public company. We are very well positioned to succeed in the current economic climate, which gives us great confidence in our ability to continue to have tremendous success in 2021. We have 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 earnings and dividends in every market cycle. Our business model also provides many diversified opportunities for growth, which clearly puts us in a class by ourselves and allows us to increase our dividend three times in 2020, while maintaining the lowest dividend payout ratio in the industry. Over the last five years, we have delivered an annualized shareholder return of approximately 22% per year, significantly outperforming our peers in each and every year, including the distinction of being the only commercial mortgage REIT in our space to deliver a positive shareholder return in 2020, despite the significant effects of the pandemic. and the performance combined with the quality and diversity of our income streams, along with a track record of consistent earnings growth and an industry low dividend payout ratio, clearly differentiates us and is why we believe we are extremely undervalued and we should be trading at a substantial premium to our current price. As I mentioned earlier, We had another record quarter with our fourth quarter results reflecting the continued commitment and successful execution of our business strategy and a diverse platform we have developed. These truly remarkable results have once again allowed us to increase our dividend to 33 cents a share. This is our third consecutive quarterly dividend increase, reflecting a 10% increase in 2020, and represent a payout ratio of around 70% compared to an industry average of 95% to 100%. Before I discuss in more detail the growth and success we had in all of our business platforms, I want to highlight some of our more significant 2020 accomplishments, which include generating substantial growth in our earnings, allowing us to increase our dividend three times to an annual run rate of $1.32 a share, up from $1.20 per share, resulting in nine straight years of consistent dividend growth with 19 increases over that time, delivering a total shareholder return of 7.4% in 2020 and 166% cumulatively for the last five years with an annualized return of approximately 22%, achieving industry-leading ROEs of 19%, a 30% increase over last year, producing record originations of $9.1 billion, a 20% increase from our 2019 numbers, moving up three positions in the league tables, finishing sixth in Fannie Mae dust production and number one in Fannie Mae small balance lending category for the second year in a row, producing record agency originations of $6.3 billion, a 44% increase over last year. Increasing our balance sheet portfolio 28% in 2020 to $5.5 billion. Growing our servicing portfolio to $25 billion, a 23% increase from 2019 and a 52% increase over the last three years. Continuing to be a market leader in the non-recourse securitization arena, closing our largest CLO to date, totaling $800 million with improved terms and flexibility. and raising $250 million of accretive growth capital to fund our growing pipeline and increase our earnings run rate. To further highlight this incredible success, I would like to talk about the significant growth we experienced in all areas of our business and how well positioned we are to continue this success going forward. As Paul will discuss in more detail, our distributable earnings for the fourth quarter were $0.49 per share, which is an incredible accomplishment and is a true testament to the value of our franchise and the many diverse income streams we have created. We continue to realize significant benefits from many areas of our diverse platform, including record growth in our GFC agency platform that continues to produce strong margins and increased servicing fees, continued growth and significant benefits in the size and scale of our balance sheet business, strong performance of our multifamily-focused portfolios with very few delinquencies and extremely low forbearances, and substantial income from our residential business. And these reoccurring benefits, combined with our versatile originations platform, strong pipeline, and credit quality of our portfolio puts us in a unique position to be able to continue to produce significant distributable earnings going forward, and we are appropriately positioned to excel in this environment. We experienced significant growth in our GFC agency platform in 2020. We originated $2.7 billion in GFC agency loans in the fourth quarter and $6.3 billion in the full year, both which are new record levels. Equally important, we also have a very robust pipeline. As a result, we expect to produce strong origination volumes in the first quarter and and remain confident in our ability to continue to produce significant agency volumes in 2021. Our GFC agency platform continues to offer a premium value as it requires limited capital and generates significant, long-dated, predictable income streams and produces significant annual cash flow. Additionally, our 24.6 billion GFC agency servicing portfolio, which grew 23% in 2020, is mostly prepayment protected and generated $112 million a year and growing in reoccurring cash flow, which is up 27% from $88 million annually last year. This is in addition to the strong gain-on-sale margins we continue to generate from our origination platform, which combined with new and increasing servicing revenues will continue to contribute greatly to our earnings and dividends. From a liquidity perspective, we're very pleased to have a current cash and liquidity position of approximately $400 million, which provides us with adequate liquidity to navigate the current market conditions and gives us offensive capital to take advantage of accretive lending opportunities. This has allowed us to replace our runoff and meaningfully grow our balance sheet loan book with high-quality multifamily bridge loans that generate attractive levered returns and creates a substantial pipeline of future GSE agency origination volumes and long-dated servicing revenues. We are very pleased with the high-quality balance sheet portfolio we have built that is also financed with the appropriate liability structures. We grew our balance sheet loan book 28% in 2020 to $5.5 billion on $2.4 billion in new originations. This significant growth will continue to increase our run rate of net interest income going forward and we also have a very robust pipeline, which we believe will allow us to continue to grow our loan book in 2021 and increase our earnings. It is also very important to highlight that over 90% of our book are senior bridge loans, and more importantly, 80% of our portfolio is in multifamily assets, which has been the most resilient asset class in all cycles and continues to significantly outperform all other asset classes in this recession as well. In reflecting on 2020, we had an exceptional year and clearly outperformed our peer group. We had the best-performing REIT five years in a row, delivering a 22% annualized return over that time period. Our team was extremely well-positioned for this dislocation that occurred, and as a result, we suffered no dilution or substantial loss in value from issuing dilutive rescue capital or high-yielding debt to navigate through this recession. We also set up for continued success in 2021 to a versatile operating platform that is multifamily-centric with a strong pipeline, significant servicing income, sizable balance sheet portfolio, single-family rental platform, and our investment in the residential mortgage business. And as a result, we are optimistic that this year we will enter a dividend elite club of 10 straight years of dividend growth. I will now turn the call over to Paul to take you through the financial results.