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

    ソース: Nasdaq GlobeNewswire / 17 2 2023 07:15:00   America/Chicago

    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, 2022December 31, 2021
      UPBWtd. Avg. FeeWtd. Avg. Life (years) UPBWtd. Avg. FeeWtd. Avg. Life (years) UPBWtd. Avg. FeeWtd. Avg. Life (years)
    Fannie Mae $19,038,1240.502%8.1 $18,331,4570.521%8.3 $19,127,3970.535%8.0
    Freddie Mac  5,153,2070.250%9.0  4,979,6120.260%9.5  4,943,9050.271%9.3
    Private Label  2,074,8590.185%7.6  2,075,7910.200%8.2  1,711,3260.200%8.3
    FHA  1,155,8930.149%19.5  1,136,6840.149%19.8  985,0630.154%21.0
    Bridge  301,1820.125%1.7  299,6960.125%2.3  ---
    SFR-Fixed Rate 274,7640.198%6.0  241,8870.200%6.2  191,6980.200%6.5
    Total $27,998,0290.411%8.6 $27,065,1270.424%8.9 $26,959,3890.449%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 $295,45159% $592,84477% $5,468,22289% $9,101,13994%
      SFR  161,58032%  163,85121%  613,81910%  415,5014%
       457,03191%  756,69598%  6,082,04199%  9,516,64098%
                 
    Mezzanine/Preferred Equity 43,4979%  17,9702%  69,6061%  203,8752%
    Total Originations $500,528100% $774,665100% $6,151,647100% $9,720,515100%
                 
    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 $12,830,99989% $13,455,07390% $10,800,89689%   
      SFR  927,3736%  825,7716%  408,2453%   
      Other  337,6822%  337,6822%  541,5684%   
       14,096,05498%  14,618,52698%  11,750,70997%   
                 
    Mezzanine/Preferred Equity 324,2242%  335,0032%  378,8913%   
    SFR Permanent  35,845< 1%  36,114< 1%  29,395< 1%   
    Total Portfolio $14,456,123100% $14,989,643100% $12,158,995100%   
                 

    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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