0001253986us-gaap:EstimateOfFairValueFairValueDisclosureMember2023-03-31

Table of Contents

`

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

2024

or

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-32136

Arbor Realty Trust, Inc.

(Exact name of registrant as specified in its charter)

Maryland

20-0057959

(State or other jurisdiction of
incorporation)

(I.R.S. Employer
Identification No.)

333 Earle Ovington Boulevard,, Suite 900,
Uniondale,, NY
(Address of principal executive offices)

11553
(Zip Code)

(Registrant’s telephone number, including area code): (516 (516) 506-4200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbols

Name of each exchange on which registered

Common Stock, par value $0.01 per share

ABR

New York Stock Exchange

Preferred Stock, 6.375% Series D Cumulative
Redeemable, par value $0.01 per share

ABR-PD

New York Stock Exchange

Preferred Stock, 6.25% Series E Cumulative
Redeemable, par value $0.01 per share

ABR-PE

New York Stock Exchange

Preferred Stock, 6.25% Series F Fixed-to-
FloatingFixed-to-Floating Rate Cumulative Redeemable, par value
$0.01 $0.01 per share

ABR-PF

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yesþ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

þ

Accelerated filer

o

Non-accelerated filer

o

Smaller reporting company

o

Emerging growth company

o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No

þ

Issuer has 181,161,134188,514,660 shares of common stock outstanding at April 28, 2023.

26, 2024.



Table of Contents

INDEX

2

2

2

2

3

3

4

4

5

5

7

7

42

44

52

55

53

56

53

56

53

56

54

57

55

58

56

59



Table of Contents

Forward-Looking Statements

The information contained in this quarterly report on Form 10-Q is not a complete description of our business or the risks associated with an investment in Arbor Realty Trust, Inc. We urge you to carefully review and consider the various disclosures in this report, as well as information in our annual report on Form 10-K for the year ended December 31, 20222023 (the “2022“2023 Annual Report”) filed with the SECSecurities and Exchange Commission (“SEC”) on February 17, 202320, 2024 and in our other reports and filings with the SEC.

This report contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to, among other things, the operating performance of our investments and financing needs. We use words such as “anticipate,” “expect,” “believe,” “intend,” “should,” “could,” “will,” “may” and similar expressions to identify forward-looking statements, although not all forward-looking statements include these words. Forward-looking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain projections of results of operations or of financial condition or state other forward-looking information. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. These forward-looking statements involve risks, uncertainties and other factors that may cause our actual results in future periods to differ materially from forecasted results. Factors that could have a material adverse effect on our operations and future prospects include, but are not limited to, changes in economic, macroeconomic and geopolitical conditions generally, and the real estate market specifically, in particular, due to the severity and duration of the novel coronavirus (“COVID-19”) pandemic; the potential impact of the COVID-19 pandemic on our business, results of operations and financial condition;specifically; adverse changes in our status with government-sponsored enterprises affecting our ability to originate loans through such programs; changes in interest rates; the quality and size of the investment pipeline and the rate at which we can invest our cash; impairments in the value of the collateral underlying our loans and investments; inflation; changes in federal and state laws and regulations, including changes in tax laws; the availability and cost of capital for future investments; and competition. Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect our views as of the date of this report. The factors noted above could cause our actual results to differ significantly from those contained in any forward-looking statement.

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We are under no duty to update any of the forward-looking statements after the date of this report to conform these statements to actual results.

i

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Table of Contents

PART I.    FINANCIAL INFORMATION

Item 1.    Financial Statements

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

($ in thousands, except share and per share data)

    

March 31, 

    

December 31, 

2023

2022

(Unaudited)

Assets:

Cash and cash equivalents

$

774,544

$

534,357

Restricted cash

 

704,844

 

713,808

Loans and investments, net (allowance for credit losses of $153,077 and $132,559)

13,430,985

14,254,674

Loans held-for-sale, net

469,602

354,070

Capitalized mortgage servicing rights, net

396,634

401,471

Securities held-to-maturity, net (allowance for credit losses of $5,025 and $3,153)

153,888

156,547

Investments in equity affiliates

 

77,641

 

79,130

Due from related party

 

113,105

 

77,419

Goodwill and other intangible assets

94,896

96,069

Other assets

 

372,085

 

371,440

Total assets

$

16,588,224

$

17,038,985

Liabilities and Equity:

Credit and repurchase facilities

$

3,650,876

$

3,841,814

Securitized debt

7,508,472

7,849,270

Senior unsecured notes

 

1,409,899

 

1,385,994

Convertible senior unsecured notes

281,046

280,356

Junior subordinated notes to subsidiary trust issuing preferred securities

 

143,322

 

143,128

Due to related party

 

12,481

 

12,350

Due to borrowers

 

59,281

 

61,237

Allowance for loss-sharing obligations

59,757

57,168

Other liabilities

 

305,633

 

335,789

Total liabilities

 

13,430,767

 

13,967,106

Commitments and contingencies (Note 13)

 

 

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

 

633,684

Special voting preferred shares - 16,293,589 shares

6.375% Series D - 9,200,000 shares

6.25% Series E - 5,750,000 shares

6.25% Series F - 11,342,000 shares

Common stock, $0.01 par value: 500,000,000 shares authorized - 183,821,003 and 178,230,522 shares issued and outstanding

 

1,838

 

1,782

Additional paid-in capital

 

2,278,287

 

2,204,481

Retained earnings

 

107,697

 

97,049

Total Arbor Realty Trust, Inc. stockholders' equity

3,021,506

2,936,996

Noncontrolling interest

135,951

134,883

Total equity

 

3,157,457

 

3,071,879

Total liabilities and equity

$

16,588,224

$

17,038,985

March 31, 2024December 31, 2023
(Unaudited)
Assets:
Cash and cash equivalents$908,049 $928,974 
Restricted cash546,643 608,233 
Loans and investments, net (allowance for credit losses of $211,942 and $195,664)12,001,544 12,377,806 
Loans held-for-sale, net322,875 551,707 
Capitalized mortgage servicing rights, net385,520 391,254 
Securities held-to-maturity, net (allowance for credit losses of $7,597 and $6,256)155,413 155,279 
Investments in equity affiliates90,244 79,303 
Due from related party104,365 64,421 
Goodwill and other intangible assets90,205 91,378 
Other assets499,998 490,281 
Total assets$15,104,856 $15,738,636 
Liabilities and Equity:
Credit and repurchase facilities$2,913,483 $3,237,827 
Securitized debt6,691,958 6,935,010 
Senior unsecured notes1,335,013 1,333,968 
Convertible senior unsecured notes283,776 283,118 
Junior subordinated notes to subsidiary trust issuing preferred securities144,096 143,896 
Due to related party14,159 13,799 
Due to borrowers95,807 121,707 
Allowance for loss-sharing obligations72,790 71,634 
Other liabilities319,466 343,072 
Total liabilities11,870,548 12,484,031 
Commitments and contingencies (Note 13)  
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:633,684 633,684 
       Special voting preferred shares - 16,293,589 shares
       6.375% Series D - 9,200,000 shares
       6.25% Series E - 5,750,000 shares
       6.25% Series F - 11,342,000 shares
Common stock, $0.01 par value: 500,000,000 shares authorized - 189,452,116 and 188,505,264 shares issued and outstanding1,895 1,885 
Additional paid-in capital2,372,336 2,367,188 
Retained earnings91,770 115,216 
Total Arbor Realty Trust, Inc. stockholders' equity3,099,685 3,117,973 
Noncontrolling interest134,623 136,632 
Total equity3,234,308 3,254,605 
Total liabilities and equity$15,104,856 $15,738,636 
Note: Our consolidated balance sheets include assets and liabilities of consolidated variable interest entities, or VIEs, as we are the primary beneficiary of these VIEs. At March 31, 20232024 and December 31, 2022,2023, assets of our consolidated VIEs totaled $9,354,036$8,289,662 and $9,785,261,$8,614,571, respectively, and the liabilities of our consolidated VIEs totaled $7,532,335$6,715,750 and $7,876,024,$6,967,877, respectively. See Note 14 for discussion of our VIEs.

See Notes to Consolidated Financial Statements.

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Table of Contents

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

($ in thousands, except share and per share data)

Three Months Ended March 31, 

    

2023

    

2022

Interest income

$

327,947

$

166,698

Interest expense

219,373

 

82,559

Net interest income

108,574

 

84,139

Other revenue:

Gain on sales, including fee-based services, net

14,589

1,656

Mortgage servicing rights

18,458

15,312

Servicing revenue, net

29,565

21,054

Property operating income

1,381

295

Gain on derivative instruments, net

4,223

17,386

Other income, net

4,882

 

3,200

Total other revenue

73,098

 

58,903

Other expenses:

Employee compensation and benefits

42,399

42,025

Selling and administrative

13,623

14,548

Property operating expenses

1,383

535

Depreciation and amortization

2,624

1,983

Provision for loss sharing (net of recoveries)

3,177

(662)

Provision for credit losses (net of recoveries)

22,517

2,358

Total other expenses

 

85,723

 

60,787

Income before extinguishment of debt, income from equity affiliates and income taxes

 

95,949

 

82,255

Loss on extinguishment of debt

(1,350)

Income from equity affiliates

14,326

7,212

Provision for income taxes

(8,029)

(8,188)

Net income

 

102,246

 

79,929

Preferred stock dividends

 

10,342

 

9,056

Net income attributable to noncontrolling interest

7,585

6,816

Net income attributable to common stockholders

$

84,319

$

64,057

Basic earnings per common share

$

0.47

$

0.42

Diluted earnings per common share

$

0.46

$

0.40

Weighted average shares outstanding:

Basic

181,116,674

 

153,420,238

Diluted

214,910,974

185,431,404

Dividends declared per common share

$

0.40

$

0.37

Three Months Ended March 31,
20242023
Interest income$321,292 $327,947 
Interest expense217,676 219,373 
Net interest income103,616 108,574 
Other revenue:
Gain on sales, including fee-based services, net16,666 14,589 
Mortgage servicing rights10,199 18,458 
Servicing revenue, net31,526 29,565 
Property operating income1,570 1,381 
Gain (loss) on derivative instruments, net(5,257)4,223 
Other income, net2,333 4,882 
Total other revenue57,037 73,098 
Other expenses:
Employee compensation and benefits47,694 42,399 
Selling and administrative13,933 13,623 
Property operating expenses1,678 1,383 
Depreciation and amortization2,571 2,624 
Provision for loss sharing (net of recoveries)273 3,177 
Provision for credit losses (net of recoveries)19,118 22,517 
Total other expenses85,267 85,723 
Income before income from equity affiliates and income taxes75,386 95,949 
Income from equity affiliates1,418 14,326 
Provision for income taxes(3,592)(8,029)
Net income73,212 102,246 
Preferred stock dividends10,342 10,342 
Net income attributable to noncontrolling interest4,997 7,585 
Net income attributable to common stockholders$57,873 $84,319 
Basic earnings per common share$0.31 $0.47 
Diluted earnings per common share$0.31 $0.46 
Weighted average shares outstanding:
Basic188,710,390181,116,674
Diluted222,926,076214,910,974
Dividends declared per common share$0.43 $0.40 
See Notes to Consolidated Financial Statements.

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Table of Contents

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)

($ in thousands, except shares)

Three Months Ended March 31, 2024
Preferred
Stock
Shares
Preferred
Stock
Value
Common
Stock
Shares
Common
Stock
Par Value
Additional
Paid-in
Capital
Retained
Earnings
Total Arbor
Realty Trust, Inc.
Stockholders’
Equity
Noncontrolling
Interest
Total Equity
Balance – January 1, 202442,585,589$633,684 188,505,264$1,885 $2,367,188 $115,216 $3,117,973 $136,632 $3,254,605 
Stock-based compensation, net— 946,852 10 5,148 — 5,158 — 5,158 
Distributions - common stock— — — (81,314)(81,314)— (81,314)
Distributions - preferred stock— — — (10,347)(10,347)— (10,347)
Distributions - noncontrolling interest— — — — — (7,006)(7,006)
Net income— — — 68,215 68,215 4,997 73,212 
Balance – March 31, 202442,585,589$633,684 189,452,116$1,895 $2,372,336 $91,770 $3,099,685 $134,623 $3,234,308 
Three Months Ended March 31, 2023
Balance – January 1, 202342,585,589$633,684 178,230,522$1,782 $2,204,481 $97,049 $2,936,996 $134,883 $3,071,879 
Issuance - common stock— 5,635,80056 82,688 — 82,744 — 82,744 
Repurchase - common stock— (886,432)(9)(9,662)— (9,671)— (9,671)
Stock-based compensation, net— 841,113780 — 789 — 789 
Distributions - common stock— — — (73,666)(73,666)— (73,666)
Distributions - preferred stock— — — (10,347)(10,347)— (10,347)
Distributions - noncontrolling interest— — — — — (6,517)(6,517)
Net income— — — 94,661 94,661 7,585 102,246 
Balance – March 31, 202342,585,589$633,684 183,821,003$1,838 $2,278,287 $107,697 $3,021,506 $135,951 $3,157,457 

Three Months Ended March 31, 2023

Total Arbor

Preferred

Preferred

Common

Common

Additional 

Realty Trust, Inc.

Stock 

Stock 

Stock 

Stock 

Paid-in

Retained

Stockholders’

Noncontrolling

    

Shares

    

Value

    

Shares

    

Par Value

    

Capital

    

Earnings

    

Equity

    

Interest

    

Total Equity

Balance – January 1, 2023

 

42,585,589

$

633,684

 

178,230,522

$

1,782

$

2,204,481

$

97,049

$

2,936,996

$

134,883

$

3,071,879

Issuance of common stock

 

 

5,635,800

56

82,688

82,744

82,744

Repurchase of common stock

(886,432)

(9)

(9,662)

(9,671)

(9,671)

Stock-based compensation, net

 

 

 

841,113

 

9

 

780

 

 

789

 

 

789

Distributions - common stock

 

 

 

 

 

 

(73,666)

 

(73,666)

 

 

(73,666)

Distributions - preferred stock

 

 

 

 

 

 

(10,347)

 

(10,347)

 

 

(10,347)

Distributions - noncontrolling interest

 

 

 

 

 

 

 

 

(6,517)

 

(6,517)

Net income

 

 

 

 

 

 

94,661

 

94,661

 

7,585

 

102,246

Balance – March 31, 2023

 

42,585,589

$

633,684

 

183,821,003

$

1,838

$

2,278,287

$

107,697

$

3,021,506

$

135,951

$

3,157,457

Three Months Ended March 31, 2022

Balance - January 1, 2022

    

39,325,095

    

556,163

    

151,362,181

    

1,514

    

1,789,229

    

68,144

    

2,415,050

    

132,487

    

2,547,537

Issuance of common stock

 

 

8,225,750

82

137,718

137,800

137,800

Issuance of Series F preferred stock

3,292,000

77,571

77,571

77,571

Stock-based compensation, net

 

 

 

610,184

 

6

 

674

 

 

680

 

 

680

Distributions - common stock

 

 

 

 

 

 

(56,373)

 

(56,373)

 

 

(56,373)

Distributions - preferred stock

 

 

 

 

 

 

(9,056)

 

(9,056)

 

 

(9,056)

Distributions - noncontrolling interest

 

 

 

 

 

 

 

 

(6,040)

 

(6,040)

Net income

 

 

 

 

 

 

73,113

 

73,113

 

6,816

 

79,929

Balance – March 31, 2022

 

42,617,095

$

633,734

 

160,198,115

$

1,602

$

1,927,621

$

75,828

$

2,638,785

$

133,263

$

2,772,048

See Notes to Consolidated Financial Statements.

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Table of Contents

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in thousands)

Three Months Ended March 31, 

    

2023

    

2022

Operating activities:

Net income

$

102,246

$

79,929

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Depreciation and amortization

 

2,624

 

1,983

Stock-based compensation

 

5,901

 

6,095

Amortization and accretion of interest and fees, net

 

(236)

 

(2,840)

Amortization of capitalized mortgage servicing rights

15,416

14,972

Originations of loans held-for-sale

(1,033,384)

(845,620)

Proceeds from sales of loans held-for-sale, net of gain on sale

921,522

1,586,715

Mortgage servicing rights

(18,458)

(15,312)

Write-off of capitalized mortgage servicing rights from payoffs

3,307

12,697

Provision for loss sharing (net of recoveries)

3,177

(662)

Provision for credit losses (net of recoveries)

22,517

2,358

Net charge-offs for loss sharing obligations

(588)

(230)

Deferred tax provision (benefit)

3,164

(1,720)

Income from equity affiliates

 

(14,326)

(7,212)

Distributions from operations of equity affiliates

4,748

12,859

Change in fair value of held-for-sale loans

(2,960)

Loss on extinguishment of debt

1,350

Payoffs and paydowns of loans held-for-sale

13

3,258

Changes in operating assets and liabilities

(71,468)

(11,792)

Net cash (used in) provided by operating activities

(56,785)

836,828

Investing Activities:

Loans and investments funded, originated and purchased, net

 

(380,633)

(2,656,874)

Payoffs and paydowns of loans and investments

1,191,076

668,379

Deferred fees

 

3,953

20,767

Contributions to equity affiliates

 

(500)

 

(12,807)

Distributions from equity affiliates

11,567

Payoffs and paydowns of securities held-to-maturity

2,580

2,647

Purchase of securities held-to-maturity, net

(27,598)

Due to borrowers and reserves

(12,150)

Net cash provided by (used in) investing activities

828,043

(2,017,636)

Financing activities:

Proceeds from credit and repurchase facilities

 

1,849,389

3,035,664

Paydowns and payoffs of credit and repurchase facilities

 

(2,042,692)

(3,213,976)

Payoffs and paydowns of securitized debt

(344,547)

(441,000)

Proceeds from issuance of common stock

82,744

137,800

Proceeds from issuance of senior unsecured notes

95,000

Payoffs and paydowns of senior unsecured notes

(70,750)

Payments of withholding taxes on net settlement of vested stock

(5,112)

(5,415)

Repurchase of common stock

(9,671)

Distributions to stockholders

(90,530)

(72,099)

Payment of deferred financing costs

(3,866)

(13,915)

Proceeds from issuance of securitized debt

1,652,812

Proceeds from issuance of preferred stock

77,571

Net cash (used in) provided by financing activities

(540,035)

1,157,442

Net increase (decrease) in cash, cash equivalents and restricted cash

 

231,223

(23,366)

Cash, cash equivalents and restricted cash at beginning of period

1,248,165

891,270

Cash, cash equivalents and restricted cash at end of period

$

1,479,388

$

867,904

Three Months Ended March 31,
20242023
Operating activities:
Net income$73,212 $102,246 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization2,571 2,624 
Stock-based compensation6,020 5,901 
Amortization and accretion of interest and fees, net(46)(236)
Amortization of capitalized mortgage servicing rights16,631 15,416 
Originations of loans held-for-sale(857,805)(1,033,384)
Proceeds from sales of loans held-for-sale, net of gain on sale1,085,374 921,522 
Mortgage servicing rights(10,199)(18,458)
Write-off of capitalized mortgage servicing rights from payoffs1,787 3,307 
Provision for loss sharing (net of recoveries)273 3,177 
Provision for credit losses (net of recoveries)19,118 22,517 
Net charge-offs for loss sharing obligations883 (588)
Deferred tax (benefit) provision(3,952)3,164 
Income from equity affiliates(1,418)(14,326)
Distributions from operations of equity affiliates— 4,748 
Change in fair value of held-for-sale loans(19)(2,960)
Loss (gain) on derivative instruments, net5,257 (4,223)
Payoffs and paydowns of loans held-for-sale14 13 
Changes in operating assets and liabilities(77,745)(67,245)
Net cash provided by (used in) operating activities259,956 (56,785)
Investing Activities:
Loans and investments funded, originated and purchased(313,557)(380,633)
Payoffs and paydowns of loans and investments670,388 1,191,076 
Deferred fees3,464 3,953 
Contributions to equity affiliates(9,593)(500)
Distributions from equity affiliates69 11,567 
Payoffs and paydowns of securities held-to-maturity47 2,580 
Due to borrowers and reserves(19,234)— 
Net cash provided by investing activities331,584 828,043 
Financing activities:
Proceeds from credit and repurchase facilities1,865,362 1,849,389 
Paydowns and payoffs of credit and repurchase facilities(2,187,147)(2,042,692)
Payoffs and paydowns of securitized debt(246,165)(344,547)
Proceeds from issuance of common stock— 82,744 
Proceeds from issuance of senior unsecured notes— 95,000 
Payoffs and paydowns of senior unsecured notes— (70,750)
Payments of withholding taxes on net settlement of vested stock(862)(5,112)
Repurchase of common stock— (9,671)
Distributions to stockholders(98,667)(90,530)
Payment of deferred financing costs(6,576)(3,866)
Net cash used in financing activities(674,055)(540,035)
Net (decrease) increase in cash, cash equivalents and restricted cash(82,515)231,223 
Cash, cash equivalents and restricted cash at beginning of period1,537,207 1,248,165 
Cash, cash equivalents and restricted cash at end of period$1,454,692 $1,479,388 

See Notes to Consolidated Financial Statements.

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Continued)

(in thousands)

Three Months Ended March 31, 

    

2023

    

2022

Reconciliation of cash, cash equivalents and restricted cash:

Cash and cash equivalents at beginning of period

$

534,357

$

404,580

Restricted cash at beginning of period

713,808

486,690

Cash, cash equivalents and restricted cash at beginning of period

$

1,248,165

$

891,270

Cash and cash equivalents at end of period

$

774,544

$

350,814

Restricted cash at end of period

704,844

517,090

Cash, cash equivalents and restricted cash at end of period

$

1,479,388

$

867,904

Supplemental cash flow information:

Cash used to pay interest

$

213,849

$

70,069

Cash used to pay taxes

1,032

741

Supplemental schedule of non-cash investing and financing activities:

Distributions accrued on preferred stock

7,010

6,138

Cummulative-effect adjustment (adoption of convertible debt standard)

2,447

Three Months Ended March 31,
20242023
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents at beginning of period$928,974 $534,357 
Restricted cash at beginning of period608,233 713,808 
Cash, cash equivalents and restricted cash at beginning of period$1,537,207 $1,248,165 
Cash and cash equivalents at end of period$908,049 $774,544 
Restricted cash at end of period546,643 704,844 
Cash, cash equivalents and restricted cash at end of period$1,454,692 $1,479,388 
Supplemental cash flow information:
Cash used to pay interest$209,712 $213,849 
Cash used to pay taxes567 1,032 
Supplemental schedule of non-cash investing and financing activities:
Distributions accrued on preferred stock7,010 7,010 
See Notes to Consolidated Financial Statements.

6


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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1 — Description of Business

Arbor Realty Trust, Inc. (“we,” “us,” or “our”) is a Maryland corporation formed in 2003. We are a nationwide real estate investment trust (“REIT”) and direct lender, providing loan origination and servicing for commercial real estate assets. We operate through two business segments: our Structured Loan Origination and Investment Business, or “Structured Business,” and our Agency Loan Origination and Servicing Business, or “Agency Business.”

Through our Structured Business, we invest in a diversified portfolio of structured finance assets in the multifamily, single-family rental (“SFR”) and commercial real estate markets, primarily consisting of bridge loans, in addition to mezzanine loans, junior participating interests in first mortgages and preferred and direct equity. We also invest in real estate-related joint ventures and may directly acquire real property and invest in real estate-related notes and certain mortgage-related securities.

Through our Agency Business, we originate, sell and service a range of multifamily finance products through the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac,” and together with Fannie Mae, the government-sponsored enterprises, or “GSEs”), the Government National Mortgage Association (“Ginnie Mae”), Federal Housing Authority (“FHA”) and the U.S. Department of Housing and Urban Development (together with Ginnie Mae and FHA, “HUD”). We retain the servicing rights and asset management responsibilities on substantially all loans we originate and sell under the GSE and HUD programs. We are an approved Fannie Mae Delegated Underwriting and Servicing (“DUS”) lender nationally, a Freddie Mac Multifamily Conventional Loan lender, seller/servicer in New York, New Jersey and Connecticut, a Freddie Mac affordable, manufactured housing, senior housing and small balance loan (“SBL”) lender, seller/servicer nationally and a HUD MAP and LEAN senior housing/healthcare lender nationally. We also originate and serviceretain the servicing rights on permanent financing loans underwritten using the guidelines of our existing agency loans sold to the GSEs, which we refer to as “Private Label” loans and originate and sell finance products through conduit/commercial mortgage-backed securities (“CMBS”)CMBS programs. We either sell the Private Label loans instantaneously or pool and securitize the Private Label loansthem and sell certificates in the securitizations to third-partythird party investors, while retaining the servicing rights and the highest risk bottom tranche certificate of the securitization (“APL certificates”).

securitization.

Substantially all of our operations are conducted through our operating partnership, Arbor Realty Limited Partnership (“ARLP”), for which we serve as the indirect general partner, and ARLP’s subsidiaries. We are organized to qualify as a REIT for U.S. federal income tax purposes. A REIT is generally not subject to federal income tax on that portion of its REIT-taxable income that is distributed to its stockholders, provided that at least 90% of taxable income is distributed and provided that certain other requirements are met. Certain of our assets that produce non-qualifying REIT income, primarily within the Agency Business, are operated through taxable REIT subsidiaries (“TRS”), which are part of our TRS consolidated group (the “TRS Consolidated Group”) and are subject to U.S. federal, state and local income taxes. In general, our TRS entities may hold assets that the REIT cannot hold directly and may engage in real estate or non-real estate-related business.

Note 2 — Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), for interim financial statements and the instructions to Form 10-Q. Accordingly, certain information and footnote disclosures normally included in the consolidated financial statements prepared under GAAP have been condensed or omitted. In our opinion, all adjustments considered necessary for a fair presentation of our financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These financial statements should be read in conjunction with our financial statements and notes thereto included in our 20222023 Annual Report.

Principles of Consolidation

The consolidated financial statements include our financial statements and the financial statements of our wholly owned subsidiaries, partnerships and other entities in which we own a controlling interest, including variable interest entities (“VIEs”) of which we are the primary beneficiary. Entities in which we have a significant influence are accounted for under the equity method. Our VIEs are described in Note 14. All significant intercompany transactions and balances have been eliminated in consolidation.

7

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that could materially affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The ongoing effects of the COVID-19 pandemic have caused significant disruptions to the U.S. and global economies. Although vaccine availability and usage have continued to increase, which has led to less negative short-term effects, such as travel bans, quarantines, layoffs and shutdowns, the ongoing longer-term macroeconomic effects on inflation, interest rates, capital markets, labor shortages, property values and global supply chains continue to negatively impact many industries, including the U.S. commercial real estate market. In addition, new strains of COVID-19 continue to emerge, which may cause governments and businesses to re-impose aggressive measures to help slow its spread, making the future impact difficult to predict. The ultimate impact of COVID-19 on the economy, including rising inflation, increasing interest rates, bank failures, tightening of capital markets and reduced property values, both globally and to our business, makes any estimate or assumption at March 31, 20232024 inherently less certain.

7

Reclassification

Certain amounts in the prior period financial statements have been reclassified to conform to the presentationTable of the current period financial statements.

Contents

Recently Adopted Accounting Pronouncements

Description

Adoption Date

Effect on Financial Statements

In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. This guidance eliminates the accounting guidance on troubled debt restructurings and amends existing disclosures, including the requirment to disclose current period gross write-offs by year of origination. The guidance also updates the requirements related to accounting for credit losses and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty.

First quarter of 2023

The adoption of this guidance did not have a material impact on our consolidated financial statements.

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Recently Issued Accounting Pronouncements

In March 2023,2024, the FASBFinancial Accounting Standards Board issued ASU 2023-01, LeasesAccounting Standards Update ("ASU") 2024-01, Compensation – Stock Compensation (Topic 842) – Common Control Arrangements718): Scope Application of Profits Interest and ASU 2023-02, Investments – Equity Method and Joint Ventures: Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method, bothSimilar Awards, effective for us in the first quarter of 2024.2025. We currently do not have any transactions that fall under the scope of this guidance;ASU; therefore, the adoption of this guidance is not expected to have an impact on our consolidated financial statements.

Significant Accounting Policies

See Item 8 – Financial Statements and Supplementary Data in our 20222023 Annual Report for a description of our significant accounting policies. There have been no significant changes to our significant accounting policies since December 31, 2022.

8

2023.

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 3 — Loans and Investments

Our Structured Business loan and investment portfolio consists of ($ in thousands):

March 31, 2024Percent of
Total
Loan
Count
Wtd. Avg.
Pay Rate (1)
Wtd. Avg.
Remaining
Months to
Maturity (2)
Wtd. Avg.
First Dollar
LTV Ratio (3)
Wtd. Avg.
Last Dollar
LTV Ratio (4)
Bridge loans (5)$11,866,289 97 %6988.11 %11.4%81 %
Mezzanine loans260,414 %557.87 %53.349 %82 %
Preferred equity investments117,431 %265.09 %57.954 %78 %
SFR permanent loans5,728 <1%29.94 %12.8%53 %
Total UPB12,249,862 100 %7818.07 %12.8%81 %
Allowance for credit losses(211,942)
Unearned revenue(36,376)
Loans and investments, net$12,001,544 
December 31, 2023
Bridge loans (5)$12,273,244 97 %6798.45 %12.0%78 %
Mezzanine loans248,457 %498.41 %56.648 %80 %
Preferred equity investments85,741 %173.95 %60.353 %82 %
SFR permanent loans7,564 <1%29.84 %13.9%56 %
Total UPB12,615,006 100 %7478.42 %13.2%78 %
Allowance for credit losses(195,664)
Unearned revenue(41,536)
Loans and investments, net$12,377,806 
________________________
(1)

    

    

    

    

    

Wtd. Avg.

    

    

Remaining

Wtd. Avg.

Wtd. Avg.

Percent of

Loan

Wtd. Avg.

Months to

First Dollar

Last Dollar

March 31, 2023

Total

Count

Pay Rate (1)

Maturity

LTV Ratio (2)

LTV Ratio (3)

Bridge loans (4)

$

13,298,939

97

%  

659

 

8.62

%  

18.3

 

0

%  

76

%

Mezzanine loans

 

222,094

 

2

%  

46

 

8.15

%  

60.7

 

44

%  

80

%

Preferred equity investments

89,725

1

%  

7

6.56

%  

45.3

47

%  

84

%

Other loans (5)

 

32,966

 

<1

%  

3

 

9.23

%  

29.5

 

0

%  

57

%

 

13,643,724

 

100

%  

715

 

8.60

%  

19.2

 

1

%  

76

%

Allowance for credit losses

(153,077)

Unearned revenue

 

(59,662)

Loans and investments, net

$

13,430,985

“Weighted Average Pay Rate” is a weighted average, based on the unpaid principal balance (“UPB”) of each loan in our portfolio, of the interest rate required to be paid monthly as stated in the individual loan agreements. Certain loans and investments that require an accrual rate to be paid at maturity are not included in the weighted average pay rate as shown in the table.

    

December 31, 2022

    

    

    

    

    

    

Bridge loans (4)

$

14,096,054

 

98

%  

692

 

8.17

%  

19.8

 

0

%  

76

%

Mezzanine loans

 

213,499

 

1

%  

44

 

8.13

%  

63.1

 

42

%  

77

%

Preferred equity investments

110,725

1

%  

8

7.63

%  

39.2

46

%  

79

%

Other loans (5)

35,845

<1

%  

3

8.76

%  

32.8

0

%  

58

%

 

14,456,123

 

100

%  

747

 

8.17

%  

20.6

 

1

%  

76

%

Allowance for credit losses

 

(132,559)

Unearned revenue

 

(68,890)

Loans and investments, net

$

14,254,674

(2)Including extension options, the weighted average remaining months to maturity at March 31, 2024 and December 31, 2023 was 27.6 and 29.4, respectively.
(3)The “First Dollar Loan-to-Value (“LTV”) Ratio” is calculated by comparing the total of our senior most dollar and all senior lien positions within the capital stack to the fair value of the underlying collateral to determine the point at which we will absorb a total loss of our position.
(4)The “Last Dollar LTV Ratio” is calculated by comparing the total of the carrying value of our loan and all senior lien positions within the capital stack to the fair value of the underlying collateral to determine the point at which we will initially absorb a loss.
(5)At March 31, 2024 and December 31, 2023, bridge loans included 389 and 354, respectively, of SFR loans with a total gross loan commitment of $3.21 billion and $2.86 billion, respectively, of which $1.45 billion and $1.32 billion, respectively, was funded.
8
(1)“Weighted Average Pay Rate” is a weighted average, based on the unpaid principal balance (“UPB”) of each loan in our portfolio, of the interest rate required to be paid monthly as stated in the individual loan agreements. Certain loans and investments that require an accrual rate to be paid at maturity are not included in the weighted average pay rate as shown in the table.
(2)The “First Dollar Loan-to-Value (“LTV”) Ratio” is calculated by comparing the total of our senior most dollar and all senior lien positions within the capital stack to the fair value of the underlying collateral to determine the point at which we will absorb a total loss of our position.
(3)The “Last Dollar LTV Ratio” is calculated by comparing the total of the carrying value of our loan and all senior lien positions within the capital stack to the fair value of the underlying collateral to determine the point at which we will initially absorb a loss.
(4)At March 31, 2023 and December 31, 2022, bridge loans included 254 and 241, respectively, of SFR loans with a total gross loan commitment of $1.63 billion and $1.57 billion, respectively, of which $982.0 million and $927.4 million, respectively, was funded.
(5)At both March 31, 2023 and December 31, 2022, other loans included 3 variable rate SFR permanent loans.


Table of Contents

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Concentration of Credit Risk

We are subject to concentration risk in that, at both March 31, 2024 and December 31, 2023, the UPB related to 84 loans with five different borrowers represented 11% of total assets. At December 31 2022, the UPB related to 38 loans with five different borrowers represented 11% of total assets. During both the three months ended March 31, 20232024 and the year ended December 31, 2022,2023, no single loan or investment represented more than 10% of our total assets and no single investor group generated over 10% of our revenue. See Note 17 for details on our concentration of related party loans and investments.

9

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

We assign a credit risk rating of pass, pass/watch, special mention, substandard or doubtful to each loan and investment, with a pass rating being the lowest risk and a doubtful rating being the highest risk. Each credit risk rating has benchmark guidelines that pertain to debt-service coverage ratios, LTV ratios, borrower strength, asset quality, and funded cash reserves. Other factors such as guarantees, market strength, and remaining loan term and borrower equity are also reviewed and factored into determining the credit risk rating assigned to each loan. This metric provides a helpful snapshot of portfolio quality and credit risk. All portfolio assets are subject to, at a minimum, a thorough quarterly financial evaluation in which historical operating performance and forward-looking projections are reviewed, however, we maintain a higher level of scrutiny and focus on loans that we consider “high risk” and that possess deteriorating credit quality.

Generally speaking, given our typical loan profile, risk ratings of pass, pass/watch and special mention suggest that we expect the loan to make both principal and interest payments according to the contractual terms of the loan agreement. A risk rating of substandard indicates we anticipate the loan may require a modification of some kind. A risk rating of doubtful indicates we expect the loan to underperform over its term, and there could be loss of interest and/or principal. Further, while the above are the primary guidelines used in determining a certain risk rating, subjective items such as borrower strength, market strength or asset quality may result in a rating that is higher or lower than might be indicated by any risk rating matrix.

10

Table of Contents

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

A summary of the loan portfolio’s internal risk ratings and LTV ratios by asset class at March 31, 2024, and charge-offs recorded for the three months ended March 31, 2024 is as follows ($ in thousands):

UPB by Origination YearTotalWtd. Avg.
First Dollar
LTV Ratio
Wtd. Avg.
Last Dollar
LTV Ratio
Asset Class / Risk Rating20242023202220212020Prior
Multifamily:
Pass$36,060 $92,062 $52,027 $8,835 $2,010 $24,879 $215,873 
Pass/Watch36,501 319,437 2,336,702 1,846,835 119,860 113,100 4,772,435 
Special Mention9,069 3,014 1,771,071 2,787,716 28,250 167,229 4,766,349 
Substandard— 21,100 467,123 151,612 8,006 350 648,191 
Doubtful— — 4,800 174,235 14,800 9,765 203,600 
Total Multifamily$81,630 $435,613 $4,631,723 $4,969,233 $172,926 $315,323 $10,606,448 %84 %
Single-Family Rental:Percentage of portfolio87 %
Pass$— $— $9,476 $9,673 $— $— $19,149 
Pass/Watch105,172 308,123 446,660 174,652 126,066 — 1,160,673 
Special Mention6,496 57,147 77,385 129,906 — — 270,934 
Total Single-Family Rental$111,668 $365,270 $533,521 $314,231 $126,066 $— $1,450,756 %63 %
Land:Percentage of portfolio12 %
Pass/Watch$— $— $— $— $8,100 $— $8,100 
Substandard— — — — — 127,928 127,928 
Total Land$— $— $— $— $8,100 $127,928 $136,028 %97 %
Office:Percentage of portfolio%
Special Mention$— $— $— $— $35,410 $— $35,410 
Total Office$— $— $— $— $35,410 $— $35,410 %80 %
Retail:Percentage of portfolio< 1%
Substandard$— $— $— $— $— $19,520 $19,520 
Total Retail$— $— $— $— $— $19,520 $19,520 %95 %
Commercial:Percentage of portfolio< 1%
Doubtful$— $— $— $— $— $1,700 $1,700 
Total Other$— $— $— $— $— $1,700 $1,700 63 %66 %
Percentage of portfolio < 1%
Grand Total$193,298 $800,883 $5,165,244 $5,283,464 $342,502 $464,471 $12,249,862 %81 %
Charge-offs$— $— $— $1,500 $— $— $1,500 
9

Table of Contents
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
A summary of the loan portfolio’s internal risk ratings and LTV ratios by asset class at December 31, 2023, and charge-offs recorded during 2023 is as follows ($ in thousands):

    

    

    

    

    

    

    

    

    

Wtd. Avg.

    

Wtd. Avg.

 

UPB by Origination Year

First Dollar

Last Dollar

Asset Class / Risk Rating

2023

2022

2021

2020

2019

Prior

Total

LTV Ratio

LTV Ratio

Multifamily:

Pass

$

22,360

$

549,835

$

268,328

$

3,155

$

$

20,300

$

863,978

 

Pass/Watch

160,465

2,781,244

3,236,800

303,109

203,354

22,050

6,707,022

 

Special Mention

 

1,322,873

2,884,543

51,175

51,785

27,194

4,337,570

 

Substandard

97,218

259,302

10,565

32,500

399,585

Total Multifamily

$

182,825

$

4,751,170

$

6,648,973

$

357,439

$

265,704

$

102,044

$

12,308,155

1

%

77

%

Single-Family Rental:

Percentage of portfolio

91

%

Pass

$

$

$

22,928

$

3,113

$

$

$

26,041

Pass/Watch

33,188

449,188

293,140

107,147

20,965

903,628

Special Mention

20,710

27,474

37,139

85,323

Total Single-Family Rental

$

33,188

$

469,898

$

343,542

$

147,399

$

20,965

$

$

1,014,992

0

%

63

%

Land:

Percentage of portfolio

7

%

Special Mention

$

$

$

$

8,100

$

$

$

8,100

Substandard

127,928

127,928

Total Land

$

$

$

$

8,100

$

$

127,928

$

136,028

0

%

98

%

Office:

Percentage of portfolio

1

%

Pass/Watch

$

$

$

$

35,410

$

$

$

35,410

Substandard

44,625

44,625

Total Office

$

$

$

$

35,410

$

$

44,625

$

80,035

0

%

99

%

Healthcare:

Percentage of portfolio

1

%

��

Pass/Watch

$

$

$

$

$

51,069

$

$

51,069

Total Healthcare

$

$

$

$

$

51,069

$

$

51,069

0

%

69

%

Retail:

Percentage of portfolio

< 1

%

Pass

$

$

$

$

$

4,000

$

$

4,000

 

Special Mention

3,445

3,445

Substandard

18,600

18,600

Total Retail

$

$

$

$

$

4,000

$

22,045

$

26,045

11

%

71

%

Student Housing:

Percentage of portfolio

< 1

%

Pass/Watch

$

$

$

25,700

$

$

$

$

25,700

Total Student Housing

$

$

$

25,700

$

$

$

$

25,700

0

%

67

%

Other:

Percentage of portfolio

< 1

%

Doubtful

$

$

$

$

$

$

1,700

$

1,700

Total Other

$

$

$

$

$

$

1,700

$

1,700

63

%

63

%

Percentage of portfolio

< 1

%

Grand Total

$

216,013

$

5,221,068

$

7,018,215

$

548,348

$

341,738

$

298,342

$

13,643,724

1

%

76

%

UPB by Origination YearTotalWtd. Avg.
First Dollar
LTV Ratio
Wtd. Avg.
Last Dollar
LTV Ratio
Asset Class / Risk Rating20232022202120202019Prior
Multifamily:
Pass$80,814 $53,316 $26,185 $2,010 $4,598 $20,300 $187,223 
Pass/Watch317,358 2,561,938 2,223,155 119,860 84,600 58,044 5,364,955 
Special Mention24,424 1,762,539 2,631,689 180,750 140,685 350 4,740,437 
Substandard— 435,878 322,987 8,006 — — 766,871 
Doubtful— — 13,930 14,800 9,765 — 38,495 
Total Multifamily$422,596 $4,813,671 $5,217,946 $325,426 $239,648 $78,694 $11,097,981 %80 %
Single-Family Rental:Percentage of portfolio88 %
Pass$9,709 $608 $— $— $— $— $10,317 
Pass/Watch289,482 465,057 144,846 119,692 — — 1,019,077 
Special Mention31,131 45,145 218,697 — — — 294,973 
Total Single-Family Rental$330,322 $510,810 $363,543 $119,692 $— $— $1,324,367 %62 %
Land:Percentage of portfolio10 %
Pass/Watch$— $— $— $4,600 $— $— $4,600 
Special Mention— — — 3,500 — — 3,500 
Substandard— — — — — 127,928 127,928 
Total Land$— $— $— $8,100 $— $127,928 $136,028 %97 %
Office:Percentage of portfolio%
Special Mention— — — 35,410 — — 35,410 
Total Office$— $— $— $35,410 $— $— $35,410 %80 %
Retail:Percentage of portfolio< 1%
Substandard— — — — — 19,520 19,520 
Total Retail$— $— $— $— $— $19,520 $19,520 %88 %
Commercial:Percentage of portfolio< 1%
Doubtful$— $— $— $— $— $1,700 $1,700 
Total Other$— $— $— $— $— $1,700 $1,700 63 %66 %
Percentage of portfolio< 1%
Grand Total$752,918 $5,324,481 $5,581,489 $488,628 $239,648 $227,842 $12,615,006 %78 %
Charge-offs$— $— $— $— $5,700 $5,700 

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Geographic Concentration Risk

At March 31, 2023,2024, underlying properties in Texas and Florida represented 24%23% and 15%17%, respectively, of the outstanding balance of our loan and investment portfolio. At December 31, 2022,2023, underlying properties in Texas and Florida represented 22%24% and 14%17%, respectively, of the outstanding balance of our loan and investment portfolio. No other states represented 10% or more of the total loan and investment portfolio.

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Allowance for Credit Losses

A summary of the changes in the allowance for credit losses is as follows (in thousands):

Three Months Ended March 31, 2023

    

Land

    

Multifamily

    

Office

    

Retail

    

Commercial

    

Single-Family Rental

    

Other

    

Total

Allowance for credit losses:

Beginning balance

$

78,068

$

37,961

$

8,162

$

5,819

$

1,700

$

781

$

68

$

132,559

Provision for credit losses (net of recoveries)

18

 

20,387

 

(56)

 

 

192

 

(23)

 

20,518

Ending balance

$

78,086

$

58,348

$

8,106

$

5,819

$

1,700

$

973

$

45

$

153,077

Three Months Ended March 31, 2022

Allowance for credit losses:

    

    

    

    

    

    

    

    

Beginning balance

$

77,970

$

18,707

$

8,073

$

5,819

$

1,700

$

320

$

652

$

113,241

Provision for credit losses (net of recoveries)

(30)

 

3,377

 

12

 

 

101

 

(319)

 

3,141

Ending balance

$

77,940

$

22,084

$

8,085

$

5,819

$

1,700

$

421

$

333

$

116,382

Three Months Ended March 31, 2024
MultifamilyLandRetailSingle-Family RentalCommercialOfficeOtherTotal
Allowance for credit losses:
Beginning balance$110,847 $78,058 $3,293 $1,624 $1,700 $142 $— $195,664 
Provision for credit losses (net of recoveries)16,652 62 — 1,113 — (49)— 17,778 
Charge-offs(1,500)— — — — — — (1,500)
Ending balance$125,999 $78,120 $3,293 $2,737 $1,700 $93 $— $211,942 
Three Months Ended March 31, 2023
Allowance for credit losses:
Beginning balance$37,961 $78,068 $5,819 $781 $1,700 $8,162 $68 $132,559 
Provision for credit losses (net of recoveries)20,387 18 — 192 — (56)(23)20,518 
Ending balance$58,348 $78,086 $5,819 $973 $1,700 $8,106 $45 $153,077 
During the three months ended March 31, 2024 and 2023, we recorded a $17.8 million and a $20.5 million provision for credit losses on our structured portfolio, respectively. The increase in theadditional provision for credit losses during the three months ended March 31, 2023 of $20.5 million2024 was primarily attributable to specifically impaired multifamily loans and the impact from the macroeconomic outlook of the commercial real estate market. Our estimate of allowance for credit losses on our structured loans and investments,portfolio, including related unfunded loan commitments, was based on a reasonable and supportable forecast period that reflects recent observable data, including an increase in interest rates, higher unemployment forecasts, and rising inflation,continuing inflationary pressures, including an estimated continual decline in real estate values and other market factors.

The expected credit losses over the contractual period of our loans also include the obligation to extend credit through our unfunded loan commitments. Our current expected credit loss (“CECL”) allowance for unfunded loan commitments is adjusted quarterly and corresponds with the associated outstanding loans. At March 31, 20232024 and December 31, 2022,2023, we had outstanding unfunded commitments of $1.05$1.59 billion and $1.15$1.31 billion, respectively, that we are obligated to fund as borrowers meet certain requirements.

At March 31, 20232024 and December 31, 2022,2023, accrued interest receivable related to our loans totaling $112.8$131.0 million and $108.5$124.2 million, respectively, was excluded from the estimate of credit losses and is included in other assets on the consolidated balance sheets.

12

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

All of our structured loans and investments are secured by real estate assets or by interests in real estate assets, and, as such, the measurement of credit losses may be based on the difference between the fair value of the underlying collateral and the carrying value of the assets as of the period end. A summary of our specific loans considered impaired by asset class is as follows (in($ in thousands):

March 31, 2024
Asset ClassUPBCarrying
Value (1)
Allowance for
Credit Losses
Wtd. Avg. First
Dollar LTV Ratio
Wtd. Avg. Last
Dollar LTV Ratio
Multifamily$352,223 $338,772 $50,500 %99 %
Land134,215 127,868 77,869 %99 %
Retail19,521 15,037 3,292 %95 %
Commercial1,700 1,700 1,700 %100 %
Total$507,659 $483,377 $133,361 %99 %
December 31, 2023
Multifamily$272,493 $260,291 $37,750 %100 %
Land134,215 127,868 77,869 %99 %
Retail19,521 15,037 3,292 %88 %
Commercial1,700 1,700 1,700 %100 %
Total$427,929 $404,896 $120,611 %99 %
________________________

March 31, 2023

Wtd. Avg. First

Wtd. Avg. Last

Carrying

Allowance for

Dollar LTV

Dollar LTV

Asset Class

    

UPB (1)

    

 Value

    

Credit Losses

    

Ratio

    

Ratio

Land

$

134,215

$

127,868

$

77,869

0

%

99

%

Office

44,625

44,625

7,951

0

%

100

%

Retail

 

22,045

 

17,563

 

5,817

 

13

%

78

%

Commercial

 

1,700

 

1,700

 

1,700

 

63

%

63

%

Total

$

202,585

$

191,756

$

93,337

2

%

96

%

(1)

December 31, 2022

Land

    

$

134,215

    

$

127,868

    

$

77,869

    

0

%

99

%

Retail

22,045

17,563

5,817

14

%

79

%

Commercial

1,700

1,700

1,700

63

%

63

%

Total

$

157,960

$

147,131

$

85,386

3

%

96

%

Represents the UPB of twenty-two and nineteen impaired loans (less unearned revenue and other holdbacks and adjustments) by asset class at March 31, 2024 and December 31, 2023, respectively.
(1)Represents the UPB of eight and seven impaired loans (less unearned revenue and other holdbacks and adjustments) by asset class at March 31, 2023 and December 31, 2022, respectively.

There were no loans for which the fair value of the collateral securing the loan was less than the carrying value of the loan for which we had not recorded a provision for credit loss at March 31, 20232024 and December 31, 2022.

At both March 31, 2023 and December 31, 2022, four loans with an aggregate net carrying value of $2.6 million, net of related loan loss reserves of $5.1 million, were2023.

Non-performing Loans
Loans are classified as non-performing.non-performing once the contractual payments exceed 60 days past due. Income from non-performing loans is generally recognized on a cash basis when it is received. Full income recognition will resume when the loan becomes contractually current, and performance has recommenced.

At March 31, 2024, twenty-one loans with an aggregate net carrying value of $406.1 million, net of loan loss reserves of $32.9 million, were classified as non-performing and, at December 31, 2023, sixteen loans with an aggregate net carrying value of $235.6 million, net of related loan loss reserves of $27.1 million, were classified as non-performing.

A summary of our non-performing loans by asset class is as follows (in thousands):

March 31, 2024December 31, 2023
UPB61 - 90 Days
Past Due
Greater Than
90 Days
Past Due
UPB61 - 90 Days
Past Due
Greater Than
90 Days
Past Due
Multifamily$462,207 $— $462,207 $271,532 $— $271,532 
Commercial1,700 — 1,700 1,700 — 1,700 
Retail920 — 920 920 — 920 
Total$464,827 $— $464,827 $274,152 $— $274,152 
Other Non-accrued Loans
In this challenging economic environment, we have recently experienced late and partial payments on certain loans in our structured portfolio. At March 31, 2024 and December 31, 2023, these loans included twelve and twenty-four multifamily bridge loans with a total UPB of $489.4 million and $956.9 million, respectively, that were 60 days or less past due. We are recognizing income on these loans only to the extent cash is received. This decrease was due to $174.9 million of loans progressing to greater than 60 days past due and $712.9 million of loans that were modified and are now performing in accordance with the terms of their modifications, including bringing the loans current by paying past due interest owed (see Loan Modifications section below), partially offset by an additional $420.3 million of loans in the first quarter of 2024 that are now less than 60 days past due and are recently experiencing late and partial payments.
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March 31, 2023

December 31, 2022

Less Than 

Greater Than

Less Than 

Greater Than

90 Days

90 Days

90 Days

90 Days

    

UPB

    

Past Due

    

Past Due

    

UPB

    

Past Due

    

Past Due

Multifamily

$

2,605

$

$

2,605

$

2,605

$

$

2,605

Retail

3,445

3,445

3,445

3,445

Commercial

1,700

1,700

1,700

1,700

Total

$

7,750

$

$

7,750

$

7,750

$

$

7,750

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
At both March 31, 2024 and December 31, 2023, we had no loans contractually past due 90 days or more that are still accruing interest. During the three months ended March 31, 2024 and 2023, we recorded $8.7 million and $0.6 million, respectively, of interest income on non-accrual loans.
In addition, we have six loans with a carrying value totaling $121.4 million at March 31, 2023,2024, that are collateralized by a land development project. The loans do not carry a current pay rate of interest, however, five of the loans with a carrying value totaling $112.0$112.1 million entitle us to a weighted average accrual rate of interest of 7.91%. In 2008, we suspended the recording of the accrual rate of interest on these loans, as they were impaired and we deemed the collection of this interest to be doubtful. At both March 31, 20232024 and December 31, 2022,2023, we had a cumulative allowance for credit losses of $71.4 million related to these loans. The loans are subject to certain risks associated with a development project including, but not limited to, availability of construction financing, increases in projected construction costs, demand for the development’s outputs upon completion of the project, and litigation risk. Additionally, these loans were not classified as non-performing as the borrower is compliant with all of the terms and conditions of the loans.

13

Loan Modifications
We may amend or modify loans that involve other-than-insignificant payment delays and provide interest rate reductions and/or extend the maturity dates for borrowers experiencing financial difficulty based on specific facts and circumstances. All of the below modified loans were performing pursuant to their contractual terms at March 31, 2024.
During the first quarter of 2024, we modified twenty-three multifamily bridge loans with a total UPB of $1.07 billion. These loans contained interest rates with pricing over SOFR ranging from 3.25% to 4.25% and maturities between April 2024 to August 2025. As part of the modification of these loans, borrowers invested additional capital to recapitalize their projects in exchange for temporary rate relief, which we provided through a pay and accrual feature. The capital invested by the borrowers was in the form of either, or a combination of: (1) additional deposits into interest and/or renovation reserves; (2) the purchase of a new rate cap; (3) a principal paydown of the loan and (4) bringing any delinquent loans current by paying past due interest owed. In each case, we reduced the pay rate and deferred the remaining portion of the foregoing interest until payoff. The pay rates were amended to either SOFR, a spread over SOFR or a fixed rate, with the balance of the interest due under the original loan terms being deferred. At March 31, 2024, these modified loans had a weighted average pay rate of 6.95% and a weighted average accrual rate of 1.86%. These modified loans included: (1) loans totaling $712.9 million that were less than 60 days past due at December 31, 2023; (2) two specifically impaired loans with a total loan loss reserve of $7.0 million and a total UPB of $49.6 million; and (3) fifteen loans with a total UPB of $671.0 million that were extended between twelve and thirty months.
During the first quarter of 2024, we also modified sixteen multifamily bridge loans with a total UPB of $692.8 million. The modification terms required the borrowers to invest additional capital in the form of either, or a combination of: (1) additional deposits into interest and/or renovation reserves; (2) the purchase of a new rate cap; (3) a principal paydown of the loan; and (4) bringing any delinquent loans current by paying past due interest owed. The modifications on eleven of these loans with a total UPB of $456.5 million included extensions between two and nineteen months.
As of March 31, 2024, we had future funding commitments on modified loans with borrowers experiencing financial difficulty of $28.0 million, which are generally subject to performance covenants that must be met by the borrower to receive funding.
In the fourth quarter of 2023, we modified an $86.9 million multifamily bridge loan with an interest rate of SOFR plus 4.25% and a maturity in November 2023 to: (1) change the pay rate of interest to SOFR plus available cash flow which has approximated $0.5 million per month, and (2) extend the maturity oneyear. The remaining interest will be deferred to payoff.
In the fourth quarter of 2023, we modified three multifamily bridge loans with a total UPB of $241.0 million, interest rates over SOFR ranging from 4.00% to 4.30% and maturities between October 2024 to January 2025 to: (1) defer a portion of the foregoing interest ranging from 2.00% to 2.15% to payoff; and (2) extend the maturity of each loan by one year. We also agreed to waive 25% of the deferred interest if the loans are paid off by the extended maturity dates.
In the fourth quarter of 2023, we converted a first mortgage loan and a preferred equity investment in an office building to a common equity investment, which is included in other assets in our consolidated balance sheets. On the date of the conversion, the investment had a net carrying value of $37.1 million, net of an $8.0 million reserve. Upon conversion, we recognized a $2.3 million loan loss recovery as a result of the fair value of the property exceeding the carrying value of our loan and preferred equity investment. We intend to convert the building to residential condominiums.
In the second quarter of 2023, a borrower of a $70.5 million multifamily bridge loan, with an interest rate of SOFR plus 3.40% and a maturity date of September 2024, defaulted on its interest payments and, as a result, this loan was classified as a non-performing loan. In September 2023, the borrower sold the underlying property to a third party who assumed our loan. At the time of the property sale, we entered into a loan modification agreement with the new borrower to extend the maturity to September 2025 and reduce the interest rate to

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

At both March 31, 2023a fixed pay rate of 3.00% and December 31, 2022, we had no loans contractually past due 90 days or more that are still accruing interest. Duringan accrual rate of 3.00% for a total fixed rate of 6.00% for a period of eighteen months, after which the three months ended March 31, 2023interest rate resumes to the original rate for the duration of the loan. The new borrower was also required to fund $10.5 million over time: $2.5 million in interest reserves, which was funded at the closing of the loan assumption, and 2022, we received $0.6$8.0 million in capital improvements within fifteen months. If the new borrower fails to timely complete the required capital improvements, it will be required to fund a renovation reserve at the lesser of (1) $2.5 million and zero, respectively, of interest income on nonaccrual loans.

(2) the difference between the $8.0 million capital commitment and the costs actually incurred for such capital improvements. The key principal is also personally guaranteeing the $8.0 million capital improvement.

There were no other material loan modifications, refinancing’srefinancings and/or extensions during the three months ended March 31, 20232024 or 2022year ended December 31, 2023 for borrowers experiencing financial difficulty.

Given the transitional nature of some of our real estate loans, we may require funds to be placed into an interest reserve, based on contractual requirements, to cover debt service costs. At March 31, 2023 and December 31, 2022, we had total interest reserves of $118.0 million and $123.7 million, respectively, on 479 loans and 480 loans, respectively, with an aggregate UPB of $7.48 billion and $7.70 billion, respectively.

Subsequent Event

Loan Sales
In April 2023, we exercised our right to foreclose on a group of properties in Houston, Texas that are the underlying collateral for four bridge loans with a total UPB of $217.4 million at March 31, 2023.million. We simultaneously sold these properties to a significant equity investor in the original bridge loans and provided new bridge loan financing as part of the sale. We did not record a loss on the original bridge loans and recovered all the outstanding interest owed to us as part of this restructuring.


Interest Reserves

Given the transitional nature of some of our real estate loans, we may require funds to be placed into an interest reserve, based on contractual requirements, to cover debt service costs. At March 31, 2024 and December 31, 2023, we had total interest reserves of $167.6 million and $156.1 million, respectively, on 572 loans and 537 loans, respectively, with a total UPB of $8.47 billion and $8.44 billion, respectively.
Note 4 — Loans Held-for-Sale, Net

Our GSE loans held-for-sale are typically sold within 60 days of loan origination, while our non-GSE loans are generally expected to be sold to third-partiesthird parties or securitized within 180 days of loan origination. Loans held-for-sale, net consists of the following (in thousands):

   

March 31, 2023

   

December 31, 2022

Fannie Mae

$

316,283

$

173,020

FHA

68,008

21,021

Freddie Mac

 

41,813

8,938

Private Label

33,897

152,735

SFR - Fixed Rate

8,737

12,352

 

468,738

368,066

Fair value of future MSR

7,387

5,557

Unrealized impairment loss

(1,565)

(15,703)

Unearned discount

 

(4,958)

(3,850)

Loans held-for-sale, net

$

469,602

$

354,070

March 31, 2024December 31, 2023
Fannie Mae$209,743 $477,212 
Freddie Mac90,658 50,235 
Private Label11,350 11,350 
SFR - Fixed Rate8,683 8,696 
FHA4,309 4,832 
324,743 552,325 
Fair value of future MSR4,656 7,784 
Unrealized impairment loss(1,971)(1,989)
Unearned discount(4,553)(6,413)
Loans held-for-sale, net$322,875 $551,707 
During the three months ended March 31, 20232024 and 2022,2023, we sold $1.09 billion and $932.7 million, and $1.59 billion, respectively, of loans held-for-sale. Included in the total loans sold in the first quarters of 2023 and 2022 were $159.9 million and $489.3 million, respectively, of Private Label loans that were sold to unconsolidated affiliates. In connection with the Private Label loans sold in the first quarter of 2022, which were securitized by the purchaser, we retained the most subordinate class of certificates in this securitization totaling $43.4 million in satisfaction of credit risk retention requirements (see Note 7 for details), and we are also the primary servicer of the mortgage loans.

During 2022, we recorded a net impairment loss of $5.2 million (net of corresponding swap gains associated with these loans) on seven Private Label loans with a UPB of $129.9 million and a net carrying value of $116.4 million. During the first quarter of 2023, we sold these impaired loans above the net carrying value and recorded a gain of $0.9 million.

At March 31, 20232024 and December 31, 2022,2023, there were no loans held-for-sale that were 90 days or more past due, and there were no loans held-for-sale that were placed on a non-accrual status.

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 5 — Capitalized Mortgage Servicing Rights

Our capitalized mortgage servicing rights (“MSRs”) reflect commercial real estate MSRs derived primarily from loans sold in our Agency Business or acquired MSRs. The discount rates used to determine the present value of all our MSRs throughout the periods presented were between 8%9% - 13%14% (representing a weighted average discount rate of 12%) based on our best estimate of market discount rates. The weighted average estimated life remaining of our MSRs was 8.67.7 years and 8.0 years at both March 31, 20232024 and December 31, 2022.

2023, respectively.

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
A summary of our capitalized MSR activity is as follows (in thousands):

Three Months Ended March 31, 2023

Three Months Ended March 31, 2022

    

Originated

    

Acquired

    

Total

    

Originated

    

Acquired

    

Total

Beginning balance

$

386,878

$

14,593

$

401,471

$

395,573

$

27,161

$

422,734

Additions

13,886

13,886

26,971

26,971

Amortization

(14,287)

(1,129)

(15,416)

(12,927)

(2,045)

(14,972)

Write-downs and payoffs

(2,841)

(466)

(3,307)

(11,556)

(1,141)

(12,697)

Ending balance

$

383,636

$

12,998

$

396,634

$

398,061

$

23,975

$

422,036

Three Months Ended March 31, 2024
OriginatedAcquiredTotal
Beginning balance$382,582 $8,672 $391,254 
Additions12,684 — 12,684 
Amortization(15,821)(810)(16,631)
Write-downs and payoffs(1,698)(89)(1,787)
Ending balance$377,747 $7,773 $385,520 
Three Months Ended March 31, 2023
Beginning balance$386,878 $14,593 $401,471 
Additions13,886 — 13,886 
Amortization(14,287)(1,129)(15,416)
Write-downs and payoffs(2,841)(466)(3,307)
Ending balance$383,636 $12,998 $396,634 
We collected prepayment fees totaling $2.1$0.4 million and $16.1$2.1 million during the three months ended March 31, 20232024 and 2022,2023, respectively, which are included as a component of servicing revenue, net on the consolidated statements of income. At March 31, 20232024 and December 31, 2022,2023, we had no valuation allowance recorded on any of our MSRs.

The expected amortization of capitalized MSRs recorded at March 31, 20232024 is as follows (in thousands):

Year

    

Amortization

2023 (nine months ending 12/31/2023)

 

$

46,546

2024

 

60,349

2025

 

56,515

2026

 

50,349

2027

45,525

Thereafter

 

137,350

Total

$

396,634

YearAmortization
2024 (nine months ending 12/31/2024)$50,032 
202563,963 
202658,488 
202753,971 
202846,721 
Thereafter112,345 
Total$385,520 
Based on scheduled maturities, actual amortization may vary from these estimates.

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 6 — Mortgage Servicing

Product and geographic concentrations that impact our servicing revenue are as follows ($ in thousands):

March 31, 2024
Product ConcentrationsGeographic Concentrations
ProductUPB (1)% of TotalStateUPB % of Total
Fannie Mae$21,548,221 69 %New York11 %
Freddie Mac5,301,291 17 %Texas11 %
Private Label2,524,013 %North Carolina%
FHA1,365,329 %California%
Bridge (2)380,712 %Georgia%
SFR - Fixed Rate265,429 %Florida%
Total$31,384,995 100 %New Jersey%
Illinois%
Other (3)42 %
Total100 %
December 31, 2023
Fannie Mae$21,264,578 69 %Texas11 %
Freddie Mac5,181,933 17 %New York11 %
Private Label2,510,449 %California%
FHA1,359,624 %North Carolina%
Bridge (2)379,425 %Georgia%
SFR - Fixed Rate287,446 %Florida%
Total$30,983,455 100 %New Jersey%
Illinois%
Other (3)41 %
Total100 %
________________________

March 31, 2023

Product Concentrations

Geographic Concentrations

UPB 

Product

    

UPB (1)

    

% of Total

    

State

    

% of Total

Fannie Mae

$

19,508,256

67

%  

Texas

12

%

Freddie Mac

5,180,607

 

18

%  

New York

11

%

Private Label

2,233,500

 

8

%  

California

8

%

FHA

1,242,669

4

%

North Carolina

8

%

Bridge (2)

467,881

2

%

Georgia

6

%

SFR - Fixed Rate

279,712

1

%  

Florida

5

%

Total

$

28,912,625

100

%  

New Jersey

5

%

Illinois

4

%

Other (3)

41

%

Total

100

%

(1)

December 31, 2022

Fannie Mae

    

$

19,038,124

    

68

%  

Texas

    

11

%

Freddie Mac

5,153,207

18

%  

New York

11

%

Private Label

2,074,859

8

%  

California

8

%

FHA

1,155,893

4

%

North Carolina

8

%

Bridge (2)

301,182

1

%

Georgia

6

%

SFR - Fixed Rate

274,764

1

%  

Florida

5

%

Total

$

27,998,029

100

%  

New Jersey

5

%

Illinois

4

%

Other (3)

42

%

Total

100

%

Excludes loans which we are not collecting a servicing fee.
(2)Represents four bridge loans sold by our Structured Business that we are servicing, see Note 3 for details.
(3)No other individual state represented 4% or more of the total.
(1)Excludes loans which we are not collecting a servicing fee.
(2)Represents bridge loans that were either sold by our Structured Business or refinanced by a third-party lender which we retained the right to service.
(3)No other individual state represented 4% or more of the total.

At March 31, 20232024 and December 31, 2022,2023, our weighted average servicing fee was 40.338.8 basis points and 41.139.1 basis points, respectively. At March 31, 20232024 and December 31, 2022,2023, we held total escrow balances (including unfunded CLOcollateralized loan obligation holdbacks) of approximately $1.5$1.4 billion and $1.7$1.6 billion, respectively, of which approximately $1.3 billion and $1.5 billion, respectively, is not included in our consolidated balance sheets. These escrows are maintained in separate accounts at several federally insured depository institutions, which may exceed FDIC insured limits. We earn interest income on the total escrow deposits, which is generally based on a market rate of interest negotiated with the financial institutions that hold the escrow deposits. Interest earned on total escrows, net of interest paid to the borrower, is included as a component of servicing revenue, net in the consolidated statements of income as noted in the following table.

16

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The components of servicing revenue, net are as follows (in thousands):

    

Three Months Ended March 31,

2023

    

2022

Servicing fees

$

29,210

$

31,748

Interest earned on escrows

 

17,003

 

837

Prepayment fees

2,075

16,138

Write-offs of MSRs

(3,307)

(12,697)

Amortization of MSRs

 

(15,416)

 

(14,972)

Servicing revenue, net

$

29,565

$

21,054

Three Months Ended March 31,
20242023
Servicing fees$31,780 $29,210 
Interest earned on escrows17,754 17,003 
Prepayment fees410 2,075 
Write-offs of MSRs(1,787)(3,307)
Amortization of MSRs(16,631)(15,416)
Servicing revenue, net$31,526 $29,565 
Note 7 — Securities Held-to-Maturity

Agency Private Label Certificates (“APL certificates”). In connection with our Private Label securitizations, we retain the most subordinate class of the APL certificates in satisfaction of credit risk retention requirements. At March 31, 2023,2024, we retainedheld APL certificates with an initial face value of $192.8 million, which were purchased at a discount for $119.0 million. These certificates are collateralized by 5-year to 10-year fixed rate first mortgage loans on multifamily properties, bear interest at an initial weighted average variable rate of 3.94% and have an estimated weighted average remaining maturity of 7.307.1 years. The weighted average effective interest rate was 8.85%8.84% at both March 31, 20232024 and 8.85% atDecember 31, 2022,2023, including the accretion of a portion of the discount deemed collectible. Approximately $6.7At March 31, 2024, $192.8 million is estimated to mature after one year through five years and $186.1 million is estimated to mature aftermaturing within five years through ten10 years.

Agency B Piece Bonds. Freddie Mac may choose to hold, sell or securitize loans we sell to them under the Freddie Mac SBL program. As part of the securitizations under the SBL program, we have the ability to purchase the B Piece bond through a bidding process, which represents the bottom 10%, or highest risk, of the securitization. At March 31, 2023,2024, we retainedheld 49%, or $106.2 million initial face value, of seven B Piece bonds, which were previously purchased at a discount for $74.7 million, and sold the remaining 51% to a third party. These securities are collateralized by a pool of multifamily mortgage loans, bear interest at an initial weighted average variable rate of 3.74% and have an estimated weighted average remaining maturity of 6.013.9 years. The weighted average effective interest rate was 11.43%11.26% and 12.20%11.28% at March 31, 20232024 and December 31, 2022,2023, respectively, including the accretion of a portion of the discount deemed collectible. Approximately $7.3At March 31, 2024, $37.7 million is estimated to mature within one year, $15.8 million is estimated to mature after one year through five years, $0.4 million is estimated to mature after five years through ten years and $16.3 million is estimated to maturematuring after ten years.

A summary of our securities held-to-maturity is as follows (in thousands):

Net Carrying

Unrealized 

Estimated 

Allowance for

    

Face Value

    

Value

    

Gain (Loss)

    

Fair Value

    

Credit Losses

March 31, 2023

APL certificates

$

192,791

$

124,118

$

(16,178)

$

107,940

$

3,330

B Piece bonds

39,750

29,770

3,253

33,023

1,695

Total

$

232,541

$

153,888

$

(12,925)

$

140,963

$

5,025

December 31, 2022

APL certificates

$

192,791

$

123,475

$

(13,348)

$

110,127

$

2,783

B Piece bonds

41,464

33,072

1,372

34,444

370

Total

$

234,255

$

156,547

$

(11,976)

$

144,571

$

3,153

17

Face ValueNet Carrying
Value
Unrealized
Gain (Loss)
Estimated
Fair Value
Allowance for
Credit Losses
March 31, 2024
APL certificates$192,791 $130,280 $(28,703)$101,577 $2,157 
B Piece bonds37,657 25,133 7,090 32,223 5,440 
Total$230,448 $155,413 $(21,613)$133,800 $7,597 
December 31, 2023
APL certificates$192,791 $128,865 $(31,331)$97,534 $2,272 
B Piece bonds37,704 26,414 5,442 31,856 3,984 
Total$230,495 $155,279 $(25,889)$129,390 $6,256 

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

A summary of the changes in the allowance for credit losses for our securities held-to-maturity is as follows (in thousands):

Three Months Ended March 31, 2023

APL

B Piece

    

Certificates

    

Bonds

    

Total

Beginning balance

$

2,783

$

370

$

3,153

Provision for credit loss expense/(reversal)

 

547

 

1,325

 

1,872

Ending balance

$

3,330

$

1,695

$

5,025

Three Months Ended March 31, 2024
APL CertificatesB Piece BondsTotal
Beginning balance$2,272 $3,984 $6,256 
Provision for credit loss expense/(reversal)(115)1,456 1,341 
Ending balance$2,157 $5,440 $7,597 
The allowance for credit losses on our held-to-maturity securities was estimated on a collective basis by major security type and was based on a reasonable and supportable forecast period and a historical loss reversion for similar securities. The issuers continue to make timely principal and interest payments and we continue to accrue interest on all our securities.

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
We recorded interest income (including the amortization of discount) related to these investments of $3.1$3.7 million and $5.2$3.1 million during the three months ended March 31, 2024 and 2023, and 2022, respectively.

Note 8 — Investments in Equity Affiliates

We account for all investments in equity affiliates under the equity method. A summary of these investments is as follows (in thousands):

Investments in Equity Affiliates atUPB of Loans to Equity Affiliates at March 31, 2024
Equity Affiliates March 31, 2024December 31, 2023
Arbor Residential Investor LLC$34,459 $32,743 $— 
AWC Real Estate Opportunity Partners I LP20,064 11,671 — 
Fifth Wall Ventures14,184 13,365 — 
AMAC Holdings III LLC13,047 13,591 — 
ARSR DPREF I LLC5,100 5,163 — 
Lightstone Value Plus REIT L.P.1,895 1,895 — 
The Park at Via Terrossa620 — — 
Docsumo Pte. Ltd.450 450 — 
JT Prime425 425 — 
West Shore Café— — 1,688 
Lexford Portfolio— — — 
East River Portfolio— — — 
Total$90,244 $79,303 $1,688 

UPB of Loans to

Investments in Equity Affiliates at

Equity Affiliates at

Equity Affiliates

    

March 31, 2023

    

December 31, 2022

    

March 31, 2023

Arbor Residential Investor LLC

$

46,141

$

46,951

$

AMAC Holdings III LLC

14,791

15,825

Fifth Wall Ventures

13,939

13,584

Lightstone Value Plus REIT L.P.

1,895

1,895

Docsumo Pte. Ltd.

450

450

JT Prime

 

425

 

425

 

North Vermont Avenue

West Shore Café

1,688

Lexford Portfolio

East River Portfolio

 

 

 

Total

$

77,641

$

79,130

$

1,688

Arbor Residential Investor LLC (“ARI”).LLC. During the three months ended March 31, 20232024 and 2022,2023, we recorded income of $1.6 million and a loss of $0.9$0.9 million and income of $5.0 million,, respectively, to income from equity affiliates in our consolidated statements of income. We also received cash distributions of $7.5 million during the three months endedAt both March 31, 2022, which were classified as returns of capital.2024 and December 31, 2023, our indirect interest in this business was 12.3%. The allocation of income is based on the underlying agreements, which may be different than our indirect interest, and was 9.2% at both March 31, 2024 and December 31, 2023. At
AWC Real Estate Opportunity Partners I LP. During the three months ended March 31, 2024, we made contributions of $8.4 million.
Fifth Wall Ventures. During the three months ended March 31, 2024, we made contributions of $0.5 million and recorded income of $0.3 million. During the three months ended March 31, 2023, our indirect interest waswe made contributions of $0.4 million and operating results were de minimus. 12.3%.

AMAC Holdings III LLC (“AMAC III”). During the first quarterthree months ended March 31, 2024, we recorded a loss of $0.5 million. During the three months ended March 31, 2023, we received distributions of $0.6 million, which were classified as returns of capital, and recorded a loss of $0.4 million.
The Park at Via Terrossa. During the first quarter of 2022,three months ended March 31, 2024, we funded an additional $4.9 million and recorded a loss of $0.5 million.

Fifth Wall Ventures (“Fifth Wall”). We funded an additional $0.4 million and $4.8 million during the first quarters of 2023 and 2022, respectively.

Docsumo Pte. Ltd. (“Docsumo”). In the first quarter of 2022, we invested $0.5contributed $0.6 million for a noncontrolling4.96% interest in Docsumo, a startup company that converts unstructured documents, such as bank statements and pay stubs, to accurate structured data and checks documents for fraud, such as photoshopped layers and font changes, using artificial intelligence.

multifamily property.

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Lexford Portfolio. During the three months ended March 31, 2023, we received distributions of $4.7 million, which were classified as returns on capital and recognized as income from equity affiliates.

Equity Participation Interest. During the first quarters ofthree months ended March 31, 2023, and 2022, we received $11.0 million and $2.6 million, respectively, from an equity participation interestsinterest on propertiesa property that werewas sold and which we had a preferred equity loan that previously paid-off.

paid-off, which was recognized as income from equity affiliates.

See Note 17 for details of certain investments described above.

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 9 — Debt Obligations

Credit and Repurchase Facilities

Borrowings under our credit and repurchase facilities are as follows ($ in thousands):

March 31, 2024December 31, 2023
Current
Maturity
Extended
Maturity
Note
Rate
Type
Debt
Carrying
Value (1)
Collateral
Carrying
Value
Wtd. Avg.
Note Rate
Debt
Carrying
Value (1)
Collateral
Carrying
Value
Structured Business
$1.9B joint repurchase facility (2)(3)Jul. 2025Jul. 2026V$783,102 $1,268,862 7.79 %$868,077 $1,371,436 
$1B repurchase facility (2)Aug. 2025Aug. 2026V346,099 537,148 7.85 %385,779 589,533 
$1B repurchase facility(6)N/AV440,959 588,623 8.39 %447,490 597,205 
$499M repurchase facility (2)(4)Oct. 2024N/AV396,650 565,610 7.81 %355,328 506,753 
$350M repurchase facilityMar. 2025Mar. 2026V151,448 228,535 7.54 %262,820 362,465 
$250M credit facilityMar. 2026(7)V18,166 36,470 8.71 %— — 
$250M repurchase facilityJul. 2024N/AV13,903 23,088 7.29 %17,964 23,088 
$250M credit facilityOct. 2025Oct. 2026V— — — — — 
$200M credit facilityOct. 2024N/AV8,818 13,692 7.13 %32,579 41,522 
$200M repurchase facilityMar. 2025Mar. 2026V58,464 92,615 8.00 %45,969 68,762 
$200M repurchase facilityJan. 2025N/AV106,950 141,130 7.40 %107,324 141,130 
$150M repurchase facilityOct. 2025Oct. 2026V91,858 124,003 8.46 %120,610 162,068 
$126M loan specific credit facilitiesMay 2024 to Sept. 2025Aug. 2025 to Aug. 2027V/F125,819 170,237 6.77 %120,328 161,700 
$50M credit facilityApr. 2025N/AV29,200 36,500 7.54 %29,200 36,500 
$40M credit facilityApr. 2026Apr. 2027V— — — — — 
$35M working capital facilityJul. 2024N/AV— — — — — 
Repurchase facility - securities (2)(5)N/AN/AV30,084 — 7.12 %31,033 — 
Structured Business total$2,601,520 $3,826,513 7.84 %$2,824,501 $4,062,162 
Agency Business
$750M ASAP agreementN/AN/AV$83,866 $83,961 6.47 %$73,011 $73,781 
$500M repurchase facilityNov. 2024N/AV64,632 65,065 6.81 %115,730 241,895 
$200M credit facilityMar. 2025N/AV129,967 130,604 6.74 %187,138 187,185 
$100M joint repurchase facility (2)(3)Jul. 2025Jul. 2026V7,912 11,350 7.74 %7,833 11,350 
$100M credit facilityJul. 2024N/AV— — — — — 
$50M credit facilitySept. 2024N/AV25,055 25,080 6.69 %29,083 29,418 
$1M repurchase facility (2)(4)Oct. 2024N/AV531 853 7.79 %531 866 
Agency Business total$311,963 $316,913 6.71 %$413,326 $544,495 
Consolidated total$2,913,483 $4,143,426 7.72 %$3,237,827 $4,606,657 

March 31, 2023

December 31, 2022

Note

Debt

Collateral

Debt

Collateral

Current

Extended

 Rate

Carrying

Carrying

Wtd. Avg.

Carrying

Carrying

    

Maturity

    

Maturity

    

Type

    

Value (1)

    

Value

    

Note Rate

    

Value (1)

    

Value

Structured Business

$2.5B joint repurchase facility (2)

Mar. 2024

Mar. 2025

V

$

1,336,305

$

1,876,423

7.26

%  

$

1,516,657

$

2,099,447

$1B repurchase facility (2)

Dec. 2023

N/A

V

 

391,056

 

559,341

6.97

%  

 

498,666

703,740

$500M repurchase facility

(3)

N/A

V

198,152

240,799

7.89

%  

154,653

188,563

$499M repurchase facility (2)(4)

Oct. 2023

N/A

V

339,819

487,321

7.22

%

351,056

504,506

$450M repurchase facility

Mar. 2024

Mar. 2026

V

319,106

419,485

7.03

%  

344,237

450,736

$450M repurchase facility

Oct. 2023

Oct. 2024

V

102,470

131,924

6.57

%  

186,639

239,678

$400M credit facility

July 2023

N/A

V

33,232

43,383

6.83

%  

33,221

43,238

$225M credit facility

Oct. 2023

Oct. 2024

V

 

64,877

116,288

7.52

%  

47,398

81,119

$200M repurchase facility

Mar. 2024

Mar. 2025

V

45,769

 

65,401

7.52

%  

 

32,494

47,750

$200M repurchase facility

Jan. 2024

Jan. 2025

V

 

147,948

187,508

6.92

%  

154,516

200,099

$169M loan specific credit facilities

May 2023 to Aug. 2025

May 2023 to Aug. 2027

V/F

169,111

 

238,458

6.97

%  

 

156,107

225,805

$50M credit facility

Apr. 2024

Apr. 2025

V

 

29,199

36,500

7.07

%  

29,194

36,500

$35M working capital facility

Apr. 2024

N/A

V

$25M credit facility

Oct. 2024

N/A

V

18,747

24,475

7.57

%  

18,701

24,572

$25M credit facility

Apr. 2026

Apr. 2027

V

Repurchase facility - securities (2)(5)

N/A

N/A

V

33,100

6.59

%  

12,832

Structured Business total

$

3,228,891

$

4,427,306

7.18

%  

$

3,536,371

$

4,845,753

Agency Business

$750M ASAP agreement

N/A

N/A

V

$

82,581

$

82,679

5.78

%  

$

29,476

$

30,291

$500M joint repurchase facility (2)

Mar. 2024

Mar. 2025

V

8,047

11,350

7.03

%  

104,629

135,641

$500M repurchase facility

Nov. 2023

N/A

V

112,978

125,336

6.18

%  

66,778

66,866

$200M credit facility

Mar. 2024

N/A

V

167,480

167,681

6.27

%  

31,475

33,177

$150M credit facility

July 2023

N/A

V

50,365

50,408

6.33

%  

57,887

57,974

$50M credit facility

Sept. 2023

N/A

V

14,664

14,671

$1M repurchase facility (2)(4)

Oct. 2023

N/A

V

534

907

7.18

%  

534

920

Agency Business total

$

421,985

$

438,361

6.17

%  

$

305,443

$

339,540

Consolidated total

$

3,650,876

$

4,865,667

7.06

%  

$

3,841,814

$

5,185,293

________________________

V = Variable Note Rate;variable note rate; F = Fixed Note Ratefixed note rate

(1)

At March 31, 2024 and December 31, 2023, debt carrying value for the Structured Business was net of unamortized deferred finance costs of $7.4 million and $4.8 million, respectively, and for the Agency Business was net of unamortized deferred finance costs of $0.3 million and $0.3 million, respectively.

(1)At March 31, 2023 and December 31, 2022, debt carrying value for the Structured Business was net of unamortized deferred finance costs of $11.1 million and $13.3 million, respectively, and for the Agency Business was net of unamortized deferred finance costs of $0.8 million and $0.9
(2)These facilities are subject to margin call provisions associated with changes in interest spreads.
(3)In March 2024, this joint repurchase facility was reduced from $3.00 billion to $2.00 billion.
(4)A portion of this facility was used to finance a fixed-rate SFR permanent loan reported through our Agency Business.
(5)At March 31, 2024 and December 31, 2023, this facility was collateralized by certificates retained by us from our Freddie Mac Q Series securitization (“Q Series securitization”) with a principal balance of $36.7 million and $43.1 million, respectively.
(2)These facilities are subject to margin call provisions associated with changes in interest spreads.
(3)The commitment amount under this repurchase facility expires six months after the lender provides written notice. We then have an additional six months to repurchase the underlying loans.
(4)A portion of this facility was used to finance a fixed rate SFR permanent loan reported through our Agency Business.
(5)At March 31, 2023 , this facility was collateralized by certificates retained by us from our Freddie Mac Q Series securitization (“Q Series securitization”) with a principal balance of $47.4 million. At December 31, 2022, this facility was collateralized by B Piece bonds with a carrying value of $33.1 million.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

During 2022 and 2023, several(6)The commitment amount under this repurchase facility expires six months after the lender provides written notice. We then have an additional six months to repurchase the underlying loans.

(7)We have the ability to extend the maturity of ourthis credit and repurchase facilities,facility in both our one-year increments, subject to lender approval.
Structured Business and Agency Business, converted from a LIBOR-based interest rate to a SOFR-based interest rate for new financings. Existing financings generally remain at a LIBOR-based interest rate.

Structured Business

At March 31, 20232024 and December 31, 2022,2023, the weighted average interest rate for the credit and repurchase facilities of our Structured Business, including certain fees and costs, such as structuring, commitment, non-use and warehousing fees, was 7.57%8.33% and 6.95%8.26%, respectively. The leverage on our loan and investment portfolio financed through our credit and repurchase facilities, excluding the securities repurchase facility and the working capital facility, was 72%67% and 73%69% at March 31, 20232024 and December 31, 2022,2023, respectively.

In March 2023,2024, we amended a $500.0 million repurchase facility to increase the facility size to $1.0 billion.
In March 2024, we amended a $450.0 million repurchase facility to exercise adecrease the facility size to $350.0 million and exercised one of two remaining one-year extension optionoptions to extend maturity to March 2024 and amend the interest rate to a minimum of SOFR plus 2.00%.

Agency Business

2025.

In March 2023,2024, we amendedentered into a $200.0$250.0 million creditrepurchase facility to finance non-performing loans that matures in March 2026, with the ability to extend the maturity in one-year increments, subject to March 2024 and amend thelender approval. The facility has an interest rate toof SOFR plus 1.40%3.25%, with a SOFR floor of 2.50%.

In January 2024, we consolidated two credit facilities of $225.0 million and $25.0 million into one facility totaling $150.0 million. This facility bears interest at SOFR plus 3.00% with an all-in floor of 5.50% and matures in October 2025, with a one-year extension option.
Securitized Debt

We account for securitized debt transactions on our consolidated balance sheet as financing facilities. These transactions are considered VIEs for which we are the primary beneficiary and are consolidated in our financial statements. The investment grade notes and guaranteed certificates issued to third parties are treated as secured financings and are non-recourse to us.

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Borrowings and the corresponding collateral under our securitized debt transactions are as follows ($ in thousands):

Debt

Collateral (3)

Loans

Cash

    

    

Carrying

    

Wtd. Avg.

    

    

Carrying

    

Restricted

March 31, 2023

Face Value

Value (1)

Rate (2)

UPB

Value

Cash (4)

CLO 19

$

872,812

$

867,037

7.33

%

$

985,430

$

980,805

$

34,882

CLO 18

1,652,812

1,646,248

6.77

%  

1,970,977

1,963,706

CLO 17

1,714,125

1,708,200

6.63

%  

1,939,977

1,933,198

129,142

CLO 16

1,237,500

1,232,352

6.26

%  

1,411,145

1,405,680

55,931

CLO 15

674,412

671,983

6.32

%  

607,100

604,704

186,520

CLO 14

655,475

653,034

6.27

%  

673,732

671,839

73,802

CLO 13

294,477

293,022

6.76

%  

400,617

399,695

24,175

CLO 12

 

203,027

202,375

6.93

%  

257,714

256,655

27,900

Total CLOs

7,304,640

7,274,251

6.63

%  

8,246,692

8,216,282

532,352

Q Series securitization

236,878

234,221

6.87

%

315,837

314,166

Total securitized debt

$

7,541,518

$

7,508,472

6.64

%

$

8,562,529

$

8,530,448

$

532,352

December 31, 2022

    

    

    

    

    

    

CLO 19

$

872,812

$

866,605

6.75

%  

$

952,268

$

947,336

$

64,300

CLO 18

1,652,812

1,645,711

6.19

%  

1,899,174

1,891,215

85,970

CLO 17

1,714,125

1,707,676

6.16

%  

1,911,866

1,904,732

145,726

CLO 16

1,237,500

1,231,887

5.79

%  

1,307,244

1,301,794

106,495

CLO 15

 

674,412

671,532

5.84

%  

797,755

795,078

2,861

CLO 14

655,475

652,617

5.80

%  

732,247

730,057

37,090

CLO 13

462,769

461,005

6.03

%  

552,182

550,924

37,875

CLO 12

379,283

378,331

6.09

%  

466,474

465,003

500

Total CLOs

7,649,188

7,615,364

6.10

%  

8,619,210

8,586,139

480,817

Q Series securitization

236,878

233,906

6.30

%  

315,837

313,965

Total securitized debt

$

7,886,066

$

7,849,270

6.11

%  

$

8,935,047

$

8,900,104

$

480,817

DebtCollateral (3)
LoansCash
March 31, 2024Face ValueCarrying
Value (1)
Wtd. Avg.
Rate (2)
UPBCarrying
Value
Restricted
Cash (4)
CLO 19$872,812 $868,814 7.80 %$999,513 $997,140 $25,097 
CLO 181,652,812 1,648,440 7.25 %1,751,575 1,748,518 280,922 
CLO 171,714,125 1,710,343 7.11 %1,931,235 1,927,741 121,339 
CLO 16 (5)1,237,500 1,234,248 6.74 %1,432,124 1,429,369 21,800 
CLO 15 (5)582,218 581,595 6.84 %720,663 719,523 — 
CLO 14 (5)467,204 466,385 6.90 %571,929 570,921 20,164 
Total CLOs6,526,671 6,509,825 7.13 %7,407,039 7,393,212 469,322 
Q Series securitization183,448 182,133 7.34 %244,598 243,927 — 
Total securitized debt$6,710,119 $6,691,958 7.14 %$7,651,637 $7,637,139 $469,322 
December 31, 2023
CLO 19$872,812 $868,359 7.84 %$1,031,772 $1,028,669 $4,527 
CLO 181,652,812 1,647,885 7.29 %1,784,921 1,780,930 244,629 
CLO 171,714,125 1,709,800 7.14 %1,870,388 1,865,878 203,938 
CLO 161,237,500 1,233,769 6.76 %1,456,872 1,453,297 847 
CLO 15 (5)674,412 673,367 6.82 %734,120 732,498 42,600 
CLO 14 (5)589,345 588,176 6.82 %680,814 679,469 33,271 
Total CLOs6,741,006 6,721,356 7.14 %7,558,887 7,540,741 529,812 
Q Series securitization215,278 213,654 7.38 %287,038 286,053 — 
Total securitized debt$6,956,284 $6,935,010 7.15 %$7,845,925 $7,826,794 $529,812 
20
(1)Debt carrying value is net of $33.0 million and $36.8 million of deferred financing fees at March 31, 2023 and December 31, 2022, respectively.
(2)At March 31, 2023 and December 31, 2022, the aggregate weighted average note rate for our collateralized loan obligations (“CLOs”), including certain fees and costs, was 6.86% and 6.32%, respectively.
(3)At March 31, 2023, five loans with an aggregate UPB of $121.4
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
________________________
(1)Debt carrying value is net of $18.2 million and $21.3 million of deferred financing fees at March 31, 2024 and December 31, 2023, respectively.
(2)At March 31, 2024 and December 31, 2023, the aggregate weighted average note rate for our collateralized loan obligations ("CLO"), including certain fees and costs, was 7.35% and 7.37%, respectively, and the Q Series securitization was 8.06% and 7.99%, respectively.
(3)At March 31, 2024 and December 31, 2023, twenty-one and twelve loans, respectively, with a total UPB of $651.1 million and $308.3 million, respectively, were deemed a "credit risk" as defined by the CLO indentures. At December 31, 2022, there were no collateral deemed a “credit risk” as defined by the CLO indentures. Credit risk assets are generally defined as one that, in the CLO collateral manager's reasonable business judgment, has a significant risk of becoming a defaulted asset.
(4)Represents restricted cash held for principal repayments as well as for reinvestment in the CLOs. Does not include restricted cash related to interest payments, delayed fundings and expenses totaling $167.5 million and $230.0 million at March 31, 2023 and December 31, 2022, respectively.

CLO 13indentures. A credit risk asset is generally defined as one that, in the CLO collateral manager's reasonable business judgment, has a significant risk of becoming a defaulted asset.

(4)Represents restricted cash held for principal repayments as well as for reinvestment in the CLOs. Excludes restricted cash related to interest payments, delayed fundings and expenses totaling $59.1 million and $63.9 million at March 31, 2024 and December 31, 2023, respectively.
(5)The replenishment periods of CLO 14, CLO 15 and CLO 12.16 ended in September 2023, December 2023 and March 2024, respectively.
Securitization Paydowns. During the three months ended March 31, 2023, $168.32024, outstanding notes totaling $122.1 million on CLO 14, $92.2 million on CLO 15, and $176.3$31.8 million of CLO 13 and CLO 12, respectively,on the Q Series securitization have been paid down.

down.

21

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Senior Unsecured Notes

A summary of our senior unsecured notes is as follows (in($ in thousands):

Senior
Unsecured Notes
Issuance
Date
March 31, 2024December 31, 2023
MaturityUPBCarrying
Value (1)
Wtd. Avg.
Rate (2)
UPBCarrying
Value (1)
Wtd. Avg.
Rate (2)
 
7.75% Notes (3)Mar. 2023Mar. 2026$95,000 $93,840 7.75 %$95,000 $93,697 7.75 %
8.50% Notes (3)Oct. 2022Oct. 2027150,000 148,153 8.50 %150,000 $148,023 8.50 %
5.00% Notes (3) Dec. 2021Dec. 2028180,000 177,981 5.00 %180,000 $177,875 5.00 %
4.50% Notes (3) Aug. 2021Sept. 2026270,000 267,973 4.50 %270,000 $267,763 4.50 %
5.00% Notes (3) Apr. 2021Apr. 2026175,000 173,698 5.00 %175,000 $173,542 5.00 %
4.50% Notes (3) Mar. 2020 Mar. 2027275,000 273,563 4.50 %275,000 $273,444 4.50 %
4.75% Notes (4) Oct. 2019Oct. 2024110,000 109,805 4.75 %110,000 $109,721 4.75 %
5.75% Notes (4) Mar. 2019Apr. 2024 (5)90,000 90,000 5.75 %90,000 $89,903 5.75 %
$1,345,000 $1,335,013 5.41 %$1,345,000 $1,333,968 5.41 %
________________________
(1)

Senior

March 31, 2023

    

December 31, 2022

 

Unsecured

Issuance 

Carrying 

Wtd. Avg. 

Carrying 

Wtd. Avg. 

 

Notes

    

Date

    

Maturity

    

UPB

    

Value (1)

    

Rate (2)

UPB

    

Value (1)

    

Rate (2)

 

7.75% Notes (3)

Mar. 2023

Mar. 2026

$

95,000

$

93,518

7.75

%

$

$

8.50% Notes (3)

Oct. 2022

Oct. 2027

150,000

147,647

8.50

%

150,000

147,519

8.50

%

5.00% Notes (3)

Dec. 2021

Dec. 2028

180,000

177,557

5.00

%

180,000

177,450

5.00

%

4.50% Notes (3)

 

Aug. 2021

 

Sept. 2026

 

270,000

267,136

4.50

%

270,000

266,926

4.50

%

5.00% Notes (3)

 

Apr. 2021

 

Apr. 2026

 

 

175,000

173,073

 

5.00

%  

175,000

172,917

 

5.00

%

8.00% Notes (3)

 

Apr. 2020

 

Apr. 2023

 

 

 

 

 

70,750

 

70,613

 

8.00

%

4.50% Notes (3)

 

Mar. 2020

 

Mar. 2027

 

 

275,000

 

273,081

 

4.50

%  

 

275,000

 

272,960

 

4.50

%

4.75% Notes (4)

 

Oct. 2019

 

Oct. 2024

 

 

110,000

 

109,457

 

4.75

%  

 

110,000

 

109,369

 

4.75

%

5.75% Notes (4)

Mar. 2019

Apr. 2024

90,000

 

89,611

 

5.75

%  

 

90,000

 

89,514

 

5.75

%

5.625% Notes (4)

Mar. 2018

May 2023

78,850

78,819

 

5.63

%  

78,850

78,726

 

5.63

%

$

1,423,850

$

1,409,899

5.42

%  

$

1,399,600

$

1,385,994

5.40

%  

At March 31, 2024 and December 31, 2023, the carrying value is net of deferred financing fees of $10.0 million and $11.0 million, respectively.
(2)At both March 31, 2024 and December 31, 2023, the aggregate weighted average note rate, including certain fees and costs, was 5.70%.
(1)At March 31, 2023 and December 31, 2022, the carrying value is net of deferred financing fees of $14.0 million and $13.6 million, respectively.
(2)At March 31, 2023 and December 31, 2022, the aggregate weighted average note rate, including certain fees and costs, was 5.72% and 5.69%, respectively.
(3)These notes can be redeemed by us prior to three months before the maturity date, at a redemption price equal to 100% of the aggregate principal amount, plus a “make-whole” premium and accrued and unpaid interest. We have the right to redeem the notes within three months prior to the maturity date at a redemption price equal to 100% of the aggregate principal amount, plus accrued and unpaid interest.
(4)These notes can be redeemed by us at any time prior to the maturity date, at a redemption price equal to 100% of the aggregate principal amount, plus a “make-whole” premium and accrued and unpaid interest. We have the right to redeem the notes on the maturity date at a redemption price equal to 100% of the aggregate principal amount, plus accrued and unpaid interest.

In March 2023, we issued $95.0 million aggregate principal amount, of 7.75% senior unsecuredplus a “make-whole” premium and accrued and unpaid interest. We have the right to redeem the notes due in 2026 inwithin three months prior to the maturity date at a private offering. We received net proceeds of $93.4 million from the issuance, after deducting the placement agent commission and other offering expenses. We used $70.8 millionredemption price equal to 100% of the proceeds, which includesaggregate principal amount, plus accrued interest and other fees,unpaid interest.

(4)These notes can be redeemed by us at any time prior to repurchase the remaining portionmaturity date, at a redemption price equal to 100% of our 8.00% senior unsecuredthe aggregate principal amount, plus a “make-whole” premium and accrued and unpaid interest. We have the right to redeem the notes due in 2023.

on the maturity date at a redemption price equal to 100% of the aggregate principal amount, plus accrued and unpaid interest.

(5)

Subsequent Event.In May 2023, our 5.625% senior unsecuredApril 2024, these notes matured and were redeemed for cash.

Convertible Senior Unsecured Notes

Our 7.50% convertible senior unsecured notes are not redeemable by us prior to their maturitiesmaturity (August 2025) and are convertible by the holder into, at our election, cash, shares of our common stock, or a combination of both, subject to the satisfaction of certain conditions and during specified periods. The conversion rates are subject to adjustment upon the occurrence of certain specified events and the holders may require us to repurchase all, or any portion, of their notes for cash equal to 100% of the principal amount, plus accrued and unpaid interest, if we undergo a fundamental change specified in the agreements.

21

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The UPB and net carrying value of our convertible notes are as follows (in thousands):

Unamortized Deferred 

Net Carrying 

Period

    

UPB

    

Financing Fees

    

Value

March 31, 2023

$

287,500

$

6,454

$

281,046

December 31, 2022

$

287,500

$

7,144

$

280,356

22

PeriodUPBUnamortized Deferred
Financing Fees
Net Carrying
Value
March 31, 2024$287,500 $3,724 $283,776 
December 31, 2023$287,500 $4,382 $283,118 

Table of Contents

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

During both the three months ended March 31, 2024 and 2023, we incurred interest expense on the notes totaling $6.1 million, of which $5.4 million and $0.7 million related to the cash coupon and deferred financing fees, respectively. During the three months ended March 31, 2022, we incurred interest expense on the notes totaling $3.8 million, of which $3.1 million and $0.7 million related to the cash coupon and deferred financing fees, respectively. Including the amortization of the deferred financing fees, our weighted average total cost of the notes was 8.43% and 8.42% at both March 31, 20232024 and December 31, 2022.2023, respectively. At March 31, 2023,2024, the 7.50% convertible senior notes had a conversion rate of 59.931760.5723 shares of common stock per $1,000 of principal, which represented a conversion price of $16.69$16.51 per share of common stock.

Junior Subordinated Notes

The carrying values of borrowings under our junior subordinated notes were $143.3$144.1 million and $143.1$143.9 million at March 31, 20232024 and December 31, 2022,2023, respectively, which is net of a deferred amount of $9.5$8.8 million and $9.6$9.0 million, respectively, (which is amortized into interest expense over the life of the notes) and deferred financing fees of $1.6$1.4 million at both March 31, 2023 and December 31, 2022.$1.5 million, respectively. These notes have maturities ranging from March 2034 through April 2037 and pay interest quarterly at a floating rate based on LIBOR.rate. The weighted average note rate was 8.08% and 7.65%8.48% at both March 31, 20232024 and December 31, 2022, respectively.2023. Including certain fees and costs, the weighted average note rate was 8.16% and 7.74%8.56% at both March 31, 20232024 and December 31, 2022, respectively.

2023.

Debt Covenants

Credit and Repurchase Facilities and Unsecured Debt. The credit and repurchase facilities and unsecured debt (senior and convertible notes) contain various financial covenants, including, but not limited to, minimum liquidity requirements, minimum net worth requirements, minimum unencumbered asset requirements, as well as certain other debt service coverage ratios, debt to equity ratios and minimum servicing portfolio tests. We were in compliance with all financial covenants and restrictions at March 31, 2023.

2024.

CLOs. Our CLO vehicles contain interest coverage and asset overcollateralization covenants that must be met as of the waterfall distribution date in order for us to receive such payments. If we fail these covenants in any of our CLOs, all cash flows from the applicable CLO would be diverted to repay principal and interest on the outstanding CLO bonds and we would not receive any residual payments until that CLO regained compliance with such tests. Our CLOs were in compliance with all such covenants at March 31, 2023,2024, as well as on the most recent determination dates in April 2023.2024. In the event of a breach of the CLO covenants that could not be cured in the near-term, we would be required to fund our non-CLO expenses, including employee costs, distributions required to maintain our REIT status, debt costs, and other expenses with (1) cash on hand, (2) income from any CLO not in breach of a covenant test, (3) income from real property and loan assets, (4) sale of assets, or (5) accessing the equity or debt capital markets, if available. We have the right to cure covenant breaches which would resume normal residual payments to us by purchasing non-performing loans out of the CLOs. However, we may not have sufficient liquidity available to do so at such time.

22

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Our CLO compliance tests as of the most recent determination dates in April 20232024 are as follows:

Cash Flow Triggers

    

CLO 12

    

CLO 13

    

CLO 14

    

CLO 15

    

CLO 16

    

CLO 17

    

CLO 18

    

CLO 19

Overcollateralization (1)

Current

 

149.65

%  

144.83

%

119.76

%  

120.85

%  

121.21

%  

122.51

%  

124.03

%  

120.30

%

Limit

 

117.87

%  

118.76

%

118.76

%  

119.85

%  

120.21

%  

121.51

%  

123.03

%  

119.30

%

Pass / Fail

 

Pass

Pass

Pass

Pass

Pass

Pass

Pass

 

Pass

Interest Coverage (2)

Current

 

181.78

%  

157.94

%  

181.82

%  

169.24

%  

159.94

%

145.12

%  

150.89

%  

124.34

%

Limit

 

120.00

%  

120.00

%  

120.00

%  

120.00

%  

120.00

%

120.00

%  

120.00

%  

120.00

%

Pass / Fail

 

Pass

Pass

Pass

Pass

Pass

Pass

Pass

 

Pass

(1)The overcollateralization ratio divides the total principal balance of all collateral in the CLO by the total principal balance of the bonds associated with the applicable ratio. To the extent an asset is considered a defaulted security, the asset’s principal balance for purposes of the overcollateralization test is the lesser of the asset’s market value or the principal balance of the defaulted asset multiplied by the asset’s recovery rate which is determined by the rating agencies. Rating downgrades of CLO collateral will generally not have a direct impact on the principal balance of a CLO asset for purposes of calculating the CLO

23

Cash Flow TriggersCLO 14CLO 15CLO 16CLO 17CLO 18CLO 19
Overcollateralization (1)
Current125.22 %124.15 %120.81 %121.71 %123.87 %119.30 %
Limit118.76 %119.85 %120.21 %121.51 %123.03 %119.30 %
Pass / FailPassPassPassPassPassPass
Interest Coverage (2)
Current158.39 %167.06 %147.54 %142.84 %138.90 %128.48 %
Limit120.00 %120.00 %120.00 %120.00 %120.00 %120.00 %
Pass / FailPassPassPass PassPass Pass
________________________

Table(1)The overcollateralization ratio divides the total principal balance of Contentsall collateral in the CLO by the total principal balance of the bonds associated with the applicable ratio. To the extent an asset is considered a defaulted security, the asset’s principal balance for purposes of the overcollateralization test is the lesser of the asset’s market value or the principal balance of the defaulted asset multiplied by the asset’s recovery rate which is determined by the rating agencies. Rating downgrades of CLO collateral will generally not have a direct impact on the principal balance of a CLO asset for purposes of calculating the CLO overcollateralization test unless the rating downgrade is below a significantly low threshold (e.g. CCC-) as defined in each CLO vehicle.

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

overcollateralization test unless the rating downgrade is below a significantly low threshold (e.g. CCC-) as defined in each CLO vehicle.
(2)The interest coverage ratio divides interest income by interest expense for the classes senior to those retained by us.

(2)

The interest coverage ratio divides interest income by interest expense for the classes senior to those retained by us.

Our CLO overcollateralization ratios as of the determination dates subsequent to each quarter are as follows:

Determination (1)CLO 14CLO 15CLO 16CLO 17CLO 18CLO 19
April 2024125.22 %124.15 %120.81 %121.71 %123.87 %119.30 %
January 2024120.00 %120.85 %120.81 %121.71 %123.87 %120.30 %
October 2023119.76 %120.85 %121.21 %122.51 %124.03 %120.30 %
July 2023119.76 %120.85 %121.21 %122.51 %124.03 %120.30 %
April 2023119.76 %120.85 %121.21 %122.51 %124.03 %120.30 %
________________________
(1)

Determination (1)

    

CLO 12

    

CLO 13

    

CLO 14

    

CLO 15

    

CLO 16

    

CLO 17

    

CLO 18

    

CLO 19

April 2023

149.65

%  

144.83

%  

119.76

%  

120.85

%  

121.21

%  

122.51

%  

124.03

%  

120.30

%

January 2023

126.58

%  

128.52

%  

119.76

%  

120.85

%  

121.21

%  

122.51

%  

124.03

%  

120.30

%

October 2022

118.87

%  

119.76

%  

119.76

%  

120.85

%  

121.21

%  

122.51

%  

124.03

%  

120.30

%

July 2022

118.87

%  

119.76

%  

119.76

%  

120.85

%  

121.21

%  

122.51

%  

124.03

%  

120.30

%

April 2022

118.87

%  

119.76

%  

119.76

%  

120.85

%  

121.21

%  

122.51

%  

124.03

%  

This table represents the quarterly trend of our overcollateralization ratio, however, the CLO determination dates are monthly and we were in compliance with this test for all periods presented.
(1)This table represents the quarterly trend of our overcollateralization ratio, however, the CLO determination dates are monthly and we were in compliance with this test for all periods presented.

The ratio will fluctuate based on the performance of the underlying assets, transfers of assets into the CLOs prior to the expiration of their respective replenishment dates, purchase or disposal of other investments, and loan payoffs. No payment due under the junior subordinated indentures may be paid if there is a default under any senior debt and the senior lender has sent notice to the trustee. The junior subordinated indentures are also cross-defaulted with each other.

Note 10 — Allowance for Loss-Sharing Obligations

Our allowance for loss-sharing obligations related to the Fannie Mae DUS program is as follows (in thousands):

Three Months Ended March 31, 

    

2023

    

2022

Beginning balance

$

57,168

$

56,064

Provisions for loss sharing

4,567

133

Provisions reversal for loan repayments

(1,390)

(795)

Recoveries (charge-offs), net

 

(588)

(230)

Ending balance

$

59,757

$

55,172

Three Months Ended March 31,
20242023
Beginning balance$71,634 $57,168 
Provisions for loss sharing1,059 4,567 
Provisions reversal for loan repayments(13)(1,390)
Recoveries (charge-offs), net110 (588)
Ending balance$72,790 $59,757 
When a loan is sold under the Fannie Mae DUS program, we undertake an obligation to partially guarantee the performance of the loan. A liability is recognized for the fair value of the guarantee obligation undertaken for the non-contingent aspect of the guarantee and is
23

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
removed only upon either the expiration or settlement of the guarantee. At March 31, 20232024 and 2022,December 31, 2023, we had $34.5$34.7 million and $34.4$34.6 million, respectively, of guarantee obligations included in the allowance for loss-sharing obligations.

In addition to and separately from the fair value of the guarantee, we estimate our allowance for loss-sharing under CECL over the contractual period in which we are exposed to credit risk. The current expected loss related to loss-sharing was based on a collective pooling basis with similar risk characteristics, a reasonable and supportable forecast and a reversion period based on our average historical losses through the remaining contractual term of the portfolio.

When we settle a loss under the DUS loss-sharing model, the net loss is charged-off against the previously recorded loss-sharing obligation. The settled loss is often net of any previously advanced principal and interest payments in accordance with the DUS program, which are reflected as reductions to the proceeds needed to settle losses. At March 31, 20232024 and December 31, 2022,2023, we had outstanding advances of $0.4$1.0 million and $0.8$1.1 million, respectively, which were netted against the allowance for loss-sharing obligations.

At March 31, 20232024 and December 31, 2022,2023, our allowance for loss-sharing obligations, associated with expected losses under CECL, was $25.3$38.1 million and $22.7$37.0 million, respectively, and represented 0.13%0.18% and 0.12%0.17%, respectively, of our Fannie Mae servicing portfolio. During the three months ended March 31, 2024 and 2023, we recorded a $2.6 millionan increase in CECL reserves.

reserves of $1.1 million and $2.6 million, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

At March 31, 20232024 and December 31, 2022,2023, the maximum quantifiable liability associated with our guarantees under the Fannie Mae DUS agreement was $3.58$4.02 billion and $3.49$3.95 billion, respectively. The maximum quantifiable liability is not representative of the actual loss we would incur. We would be liable for this amount only if all of the loans we service for Fannie Mae, for which we retain some risk of loss, were to default and all of the collateral underlying these loans was determined to be without value at the time of settlement.

Note 11 — Derivative Financial Instruments

We enter into derivative financial instruments to manage exposures that arise from business activities resulting in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates and credit risk. We do not use these derivatives for speculative purposes, but are instead using them to manage our interest rate and credit risk exposure.

Agency Rate Lock and Forward Sale Commitments. We enter into contractual commitments to originate and sell mortgage loans at fixed prices with fixed expiration dates. The commitments become effective when the borrower “rate locks” a specified interest rate within time frames established by us. All potential borrowers are evaluated for creditworthiness prior to the extension of the commitment. Market risk arises if interest rates move adversely between the time of the rate lock by the borrower and the sale date of the loan to an investor. To mitigate the effect of the interest rate risk inherent in providing rate lock commitments to borrowers under the GSE programs, we enter into a forward sale commitment with the investor simultaneously with the rate lock commitment with the borrower. The forward sale contract locks in an interest rate and price for the sale of the loan. The terms of the contract with the investor and the rate lock with the borrower are matched in substantially all respects, with the objective of eliminating interest rate risk to the extent practical. Sale commitments with the investors have an expiration date that is longer than our related commitments to the borrower to allow, among other things, for closing of the loan and processing of paperwork to deliver the loan into the sale commitment.

These commitments meet the definition of a derivative and are recorded at fair value, including the effects of interest rate movements which are reflected as a component of gain (loss) on derivative instruments, net in the consolidated statements of income. The estimated fair value of rate lock commitments also includes the fair value of the expected net cash flows associated with the servicing of the loan which is recorded as income from MSRs in the consolidated statements of income. During the three months ended March 31, 20232024 and 2022,2023, we recorded a gaingains of $7.1less than $0.1 million and a loss of $2.5$7.1 million, respectively, from changes in the fair value of these derivatives and income from MSRs of $10.2 million and $18.5 million, and $15.3 million, respectively, of income from MSRs.respectively. See Note 12 for details.

Interest RateTreasury Futures and Credit Default Swaps (“Swaps”).Swaps. We enter into over-the-counter treasury futures and credit default swaps to hedge our interest rate and credit risk exposure inherent in (1) our held-for-sale Agency Business Private Label loans from the time the loans are rate locked until sale or securitization, and (2) our Agency Business SFR – fixed rate loans from the time the loans are originated until the time they can be financed with match term fixed rate securitized debt. Our interest rate swapstreasury futures typically have a three-month maturity and are tied to the five-year and ten-year swaptreasury rates. Our credit default swaps typically have a five-year maturity, are tied to the credit spreads of the underlying bond issuers and we typically hold our position until we price our Private Label loan securitizations. The SwapsThese instruments do not meet the criteria for hedge accounting, are cleared by a central clearing house and variation margin payments made in cash are treated as a legal settlement of the derivative itselfitself. Our agreements with the counterparties provide for bilateral collateral pledging based on the counterparties' market value. The counterparties have the right to re-pledge the collateral posted, but have the obligation to return the pledged collateral as opposedthe market value of the treasury futures change. Our policy is to record the asset and liability positions on a pledgenet basis. At March 31, 2024 and December 31, 2023, we had $1.8 million and $1.5 million, respectively included in others assets, which was

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
comprised of cash posted as collateral of $1.8 million and $1.9 million, respectively, and net liability positions of less than $0.1 million and $0.4 million, respectively, from the fair value of our treasury futures.
During the three months ended March 31, 2024, we recorded realized losses of $0.1 million and unrealized gains of $0.4 million to our Agency Business related to our Swaps. During the three months ended March 31, 2023, we recorded realized gains of $1.6 million and unrealized losses of $4.4 million and during the three months ended March 31, 2022, we recorded realized and unrealized gains of $18.0 million and $2.0 million, respectively, to our Agency Business related to our Swaps. The realized and unrealized gains and losses are recorded in gain (loss) on derivative instruments, net.

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

A summary of our non-qualifying derivative financial instruments in our Agency Business is as follows ($ in thousands):

March 31, 2023

Fair Value

Notional

Balance Sheet

Derivative

Derivative

Derivative

    

Count

    

Value

    

Location

    

Assets

    

Liabilities

Rate lock commitments

9

$

334,722

Other assets/other liabilities

$

3,097

$

(2,352)

Forward sale commitments

48

760,826

Other assets/other liabilities

6,679

(1,022)

Swaps

250

25,000

$

1,120,548

$

9,776

$

(3,374)

    

December 31, 2022

Rate lock commitments

    

6

    

$

91,472

    

Other assets/other liabilities

    

$

354

    

$

(1,070)

Forward sale commitments

27

294,451

Other assets/other liabilities

1,151

(3,827)

Swaps

1,298

129,800

$

515,723

$

1,505

$

(4,897)

March 31, 2024
Fair Value
DerivativeCountNotional ValueBalance Sheet LocationDerivative AssetsDerivative Liabilities
Rate lock commitments3$114,784 Other assets/other liabilities$1,071 $(293)
Forward sale commitments23419,494 Other assets/other liabilities607 (739)
Treasury futures828,200 — — 
$542,478 $1,678 $(1,032)
December 31, 2023
Rate lock commitments3$26,800 Other assets/other liabilities$428 $(759)
Forward sale commitments33559,079 Other assets/other liabilities6,119 (262)
Treasury futures828,200 — — 
$594,079 $6,547 $(1,021)
Note 12 — Fair Value

Fair value estimates are dependent upon subjective assumptions and involve significant uncertainties resulting in variability in estimates with changes in assumptions. The following table summarizes the principal amounts, carrying values and the estimated fair values of our financial instruments (in thousands):

March 31, 2023

December 31, 2022

Principal /

Carrying

Estimated

Principal /

Carrying

Estimated

    

Notional Amount

    

Value

    

Fair Value

    

Notional Amount

    

Value

    

Fair Value

Financial assets:

Loans and investments, net

$

13,643,724

$

13,430,985

$

13,634,147

$

14,456,123

$

14,254,674

$

14,468,418

Loans held-for-sale, net

468,738

469,602

483,727

368,066

354,070

362,054

Capitalized mortgage servicing rights, net

n/a

396,634

502,282

n/a

401,471

530,913

Securities held-to-maturity, net

232,541

153,888

140,963

234,255

156,547

144,571

Derivative financial instruments

591,688

 

9,776

 

9,776

111,950

 

1,505

 

1,505

Financial liabilities:

Credit and repurchase facilities

$

3,662,756

$

3,650,876

$

3,610,881

$

3,856,009

$

3,841,814

$

3,828,192

Securitized debt

7,541,518

 

7,508,472

 

7,326,912

7,886,066

 

7,849,270

 

7,560,541

Senior unsecured notes

1,423,850

 

1,409,899

 

1,257,377

1,399,600

 

1,385,994

 

1,262,560

Convertible senior unsecured notes

287,500

281,046

264,141

287,500

280,356

287,834

Junior subordinated notes

154,336

 

143,322

 

104,595

154,336

 

143,128

 

103,977

Derivative financial instruments

503,860

 

3,374

 

3,374

273,973

 

4,897

 

4,897

March 31, 2024December 31, 2023
Principal /
Notional Amount
Carrying
Value
Estimated
Fair Value
Principal /
Notional Amount
Carrying
Value
Estimated
Fair Value
Financial assets:
Loans and investments, net$12,249,862 $12,001,544 $12,158,245 $12,615,006 $12,377,806 $12,452,563 
Loans held-for-sale, net324,743 322,875 327,487 552,325 551,707 566,451 
Capitalized mortgage servicing rights, netn/a385,520 518,391 n/a391,254 510,472 
Securities held-to-maturity, net230,448 155,413 133,800 230,495 155,279 129,390 
Derivative financial instruments241,538 1,678 1,678 447,609 6,547 6,547 
Financial liabilities:
Credit and repurchase facilities$2,921,206 $2,913,483 $2,908,678 $3,242,939 $3,237,827 $3,228,324 
Securitized debt6,710,119 6,691,958 6,620,181 6,956,284 6,935,010 6,864,557 
Senior unsecured notes1,345,000 1,335,013 1,216,241 1,345,000 1,333,968 1,214,331 
Convertible senior unsecured notes287,500 283,776 287,500 287,500 283,118 301,156 
Junior subordinated notes154,336 144,096 107,096 154,336 143,896 106,444 
Derivative financial instruments292,740 1,032 1,032 138,270 1,021 1,021 
Assets and liabilities disclosed at fair value are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Determining which category an asset or liability falls within the hierarchy requires judgment and we evaluate our hierarchy disclosures each quarter. Hierarchical levels directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities are as follows:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Level 1—Inputs are unadjusted and quoted prices exist in active markets for identical assets or liabilities, such as government, agency and equity securities.

Level 2—Inputs (other than quoted prices included in Level 1) are observable for the asset or liability through correlation with market data. Level 2 inputs may include quoted market prices for a similar asset or liability, interest rates and credit risk. Examples include non-government securities, certain mortgage and asset-backed securities, certain corporate debt and certain derivative instruments.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Level 3—Inputs reflect our best estimate of what market participants would use in pricing the asset or liability and are based on significant unobservable inputs that require a considerable amount of judgment and assumptions. Examples include certain mortgage and asset-backed securities, certain corporate debt and certain derivative instruments.

The following is a description of the valuation techniques used to measure fair value and the general classification of these instruments pursuant to the fair value hierarchy.

Loans and investments, net. Fair values of loans and investments that are not impaired are estimated using inputs based on direct capitalization rate and discounted cash flow methodologiesmethodology using discount rates, which, in our opinion, best reflect current market interest rates that would be offered for loans with similar characteristics and credit quality (Level 3). Fair values of impaired loans and investments are estimated using inputs that require significant judgments, which include assumptions regarding discount rates, capitalization rates, creditworthiness of major tenants, occupancy rates, availability of financing, exit plans and other factors (Level 3).

Loans held-for-sale, net. Consists of originated loans that are generally expected to be transferred or sold within 60 days to 180 days of loan funding, and are valued using pricing models that incorporate observable inputs from current market assumptions or a hypothetical securitization model utilizing observable market data from recent securitization spreads and observable pricing of loans with similar characteristics (Level 2). Fair value includes the fair value allocated to the associated future MSRs and is calculated pursuant to the valuation techniques described below for capitalized mortgage servicing rights, net (Level 3).

Capitalized mortgage servicing rights, net. Fair values are estimated using inputs based on discounted future net cash flow methodology (Level 3). MSRs are initially recorded at fair value and are carried at amortized cost. The fair value of MSRs is estimated using a process that involves the use of independent third-party valuation experts, supported by commercially available discounted cash flow models and analysis of current market data. The key inputs used in estimating fair value include the contractually specified servicing fees, prepayment speed of the underlying loans, discount rate, annual per loan cost to service loans, delinquency rates, late charges and other economic factors.

Securities held-to-maturity, net. Fair values are approximated using inputs based on current market quotes received from financial sources that trade such securities and are based on prevailing market data and, in some cases, are derived from third-party proprietary models based on well recognized financial principles and reasonable estimates about relevant future market conditions (Level 3).

Derivative financial instruments. Fair values of rate lock and forward sale commitments are estimated using valuation techniques, which include internally-developed models developed based on changes in the U.S. Treasury rate and other observable market data (Level 2). The fair value of rate lock commitments includes the fair value of the expected net cash flows associated with the servicing of the loans, see capitalized mortgage servicing rights, net above for details on the applicable valuation technique (Level 3). We also consider the impact of counterparty non-performance risk when measuring the fair value of these derivatives. Given the credit quality of our counterparties, the short duration of interest rate lock commitments and forward sale contracts, and our historical experience, the risk of nonperformance by our counterparties is not significant.

Credit and repurchase facilities. Fair values for credit and repurchase facilities of the Structured Business are estimated using discounted cash flow methodology, using discount rates, which, in our opinion, best reflect current market interest rates for financing with similar characteristics and credit quality (Level 3). The majority of our credit and repurchase facilities for the Agency Business bear interest at rates that are similar to those available in the market currently and fair values are estimated using Level 2 inputs. For these facilities, the fair values approximate their carrying values.

Securitized debt and junior subordinated notes.Fair values are estimated based on broker quotations, representing the discounted expected future cash flows at a yield that reflects current market interest rates and credit spreads (Level 3).

Senior unsecured notes. Fair values are estimated at current market quotes received from active markets when available (Level 1). If quotes from active markets are unavailable, then the fair values are estimated utilizing current market quotes received from inactive markets (Level 2).

Convertible senior unsecured notes.notes, net. Fair values are estimated using current market quotes received from inactive markets (Level 2).

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

We measure certain financial assets and financial liabilities at fair value on a recurring basis. The fair values of these financial assets and liabilities are determined using the following input levels at March 31, 20232024 (in thousands):

Fair Value Measurements Using Fair

Carrying

Value Hierarchy

    

Value

    

Fair Value

    

Level 1

    

Level 2

    

Level 3

Financial assets:

Derivative financial instruments

$

9,776

$

9,776

$

$

6,679

$

3,097

Financial liabilities:

Derivative financial instruments

$

3,374

$

3,374

$

$

3,374

$

Carrying ValueFair ValueFair Value Measurements Using Fair Value Hierarchy
Level 1Level 2Level 3
Financial assets:
Derivative financial instruments$1,678 $1,678 $— $607 $1,071 
Financial liabilities:
Derivative financial instruments$1,032 $1,032 $— $1,032 $— 
We measure certain financial and non-financial assets at fair value on a nonrecurring basis. The fair values of these financial and non-financial assets, if applicable, are determined using the following input levels at March 31, 20232024 (in thousands):

Net Carrying ValueFair ValueFair Value Measurements Using Fair Value Hierarchy
Level 1Level 2Level 3
Financial assets:
Impaired loans, net
Loans held-for-investment (1)$350,016 $350,016 $— $— $350,016 
Loans held-for-sale (2)18,062 18,062 — 18,062 — 
$368,078 $368,078 $— $18,062 $350,016 
________________________
(1)

Fair Value Measurements Using Fair

Net Carrying

Value Hierarchy

    

Value

    

Fair Value

    

Level 1

    

Level 2

    

Level 3

Financial assets:

Impaired loans, net

Loans held-for-investment (1)

$

98,419

$

98,419

$

$

$

98,419

Loans held-for-sale (2)

41,068

41,068

41,068

$

139,487

$

139,487

$

$

41,068

$

98,419

We had an allowance for credit losses of $133.4 million related to twenty-two impaired loans with a total carrying value, before loan loss reserves, of $483.4 million at March 31, 2024.
(2)We had unrealized impairment losses of $2.0 million related to six held-for-sale loans with a total carrying value, before unrealized impairment losses, of $20.0 million.
(1)We had an allowance for credit losses of $93.3 million relating to eight impaired loans with an aggregate carrying value, before loan loss reserves, of $191.8 million at March 31, 2023.
(2)We had unrealized impairment losses of $1.6 million related to ten held-for-sale loans with an aggregate carrying value, before unrealized impairment losses, of $42.6 million.

Loan impairment assessments. Loans held-for-investment are intended to be held to maturity and, accordingly, are carried at cost, net of unamortized loan origination costs and fees, loan purchase discounts, and net of the allowance for credit losses, when such loan or investment is deemed to be impaired. We consider a loan impaired when, based upon current information, it is probable that all amounts due for both principal and interest will not be collected according to the contractual terms of the loan agreement. We evaluate our loans to determine if the value of the underlying collateral securing the impaired loan is less than the net carrying value of the loan, which may result in an allowance, and corresponding charge to the provision for credit losses, or an impairment loss. These valuations require significant judgments, which include assumptions regarding capitalization and discount rates, revenue growth rates, creditworthiness of major tenants, occupancy rates, availability of financing, exit plan and other factors.

Loans held-for-sale are generally expected to be transferred andor sold within 60-180 days to 180 days of loan origination and are reported at lower of cost or market. We consider a loan classified as held-for-sale impaired if, based on current information, it is probable that we will sell the loan below par, or not be able to collect all principal and interest in accordance with the contractual terms of the loan agreement. These loans are valued using pricing models that incorporate observable inputs from current market assumptions or a hypothetical securitization model utilizing observable market data from recent securitization spreads and observable pricing of loans with similar characteristics.

The tables above and below include all impaired loans, regardless of the period in which the impairment was recognized.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Quantitative information about Level 3 fair value measurements at March 31, 20232024 is as follows ($ in thousands):

    

Fair Value

    

Valuation Techniques

    

Significant Unobservable Inputs

 

Financial assets:

Impaired loans:

Land

$

50,000

 

Discounted cash flows

 

Discount rate

21.50

%

 

Revenue growth rate

3.00

%

Discount rate

7.50

%

Office

36,674

Discounted cash flows

Capitalization rate

5.25

%

Revenue growth rate

3.00

%

Discount rate

11.25

%

Retail

11,745

Discounted cash flows

Capitalization rate

9.25

%

Revenue growth rate

3.00

%

Derivative financial instruments:

Rate lock commitments

3,097

Discounted cash flows

W/A discount rate

13.27

%

Fair ValueValuation TechniquesSignificant Unobservable Inputs
Financial assets:
Impaired loans:Weighted AverageMinimum / Maximum
Multifamily$288,272 Discounted cash flowsCapitalization rate6.31%6.00% - 7.00%
Land49,999 Discounted cash flowsDiscount rate21.50%21.50%
Revenue growth rate3.00%3.00%
Retail11,745 Sales comparativePrice per acre$165,128$165,128
Derivative financial instruments:
Rate lock commitments1,071 Discounted cash flowsW/A discount rate13.60%13.60%
The derivative financial instruments using Level 3 inputs are outstanding for short periods of time (generally less than 60 days). A roll-forward of Level 3 derivative instruments is as follows (in thousands):

Fair Value Measurements Using 

Significant Unobservable Inputs

Three Months Ended March 31, 

    

2023

    

2022

Derivative assets and liabilities, net

Beginning balance

$

354

$

295

Settlements

(15,066)

(13,683)

Realized gains recorded in earnings

14,712

13,388

Unrealized gains recorded in earnings

3,097

1,355

Ending balance

$

3,097

$

1,355

Fair Value Measurements Using Significant Unobservable Inputs
Three Months Ended March 31,
20242023
Derivative assets and liabilities, net
Beginning balance$428 $354 
Settlements(9,436)(15,066)
Realized gains recorded in earnings9,008 14,712 
Unrealized gains recorded in earnings1,071 3,097 
Ending balance$1,071 $3,097 
The components of fair value and other relevant information associated with our rate lock commitments, forward sales commitments and the estimated fair value of cash flows from servicing on loans held-for-sale are as follows (in thousands):

March 31, 2024Notional/
Principal Amount
Fair Value of
Servicing Rights
Interest Rate
Movement Effect
Unrealized
Impairment Loss
Total Fair Value
Adjustment
Rate lock commitments$114,784 $1,071 $84 $— $1,155 
Forward sale commitments419,494 — (84)— (84)
Loans held-for-sale, net (1)324,743 4,656 — (1,971)2,685 
Total$5,727 $— $(1,971)$3,756 
________________________
(1)

Unrealized

Notional/

Fair Value of

Interest Rate

Impairement

Total Fair Value

March 31, 2023

    

Principal Amount

    

Servicing Rights

    

Movement Effect

    

Loss

    

Adjustment

Rate lock commitments

$

334,722

$

3,097

$

1,185

$

$

4,282

Forward sale commitments

760,826

(1,185)

(1,185)

Loans held-for-sale, net (1)

468,738

7,388

(1,565)

5,823

Total

$

10,485

$

$

(1,565)

$

8,920

(1)Loans held-for-sale, net are recorded at the lower of cost or market on an aggregate basis and includes fair value adjustments related to estimated cash flows from MSRs.

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ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

We measure certain assets and liabilities for which fair value is only disclosed. The fair value of these assets and liabilities are determined using the following input levels at March 31, 20232024 (in thousands):

Fair Value Measurements Using Fair Value Hierarchy

    

Carrying Value

    

Fair Value

    

Level 1

    

Level 2

    

Level 3

Financial assets:

Loans and investments, net

$

13,430,985

$

13,634,147

$

$

$

13,634,147

Loans held-for-sale, net

469,602

483,727

476,339

7,388

Capitalized mortgage servicing rights, net

396,634

502,282

502,282

Securities held-to-maturity, net

153,888

140,963

140,963

Financial liabilities:

Credit and repurchase facilities

$

3,650,876

$

3,610,881

$

$

421,985

$

3,188,896

Securitized debt

 

7,508,472

 

7,326,912

 

 

 

7,326,912

Senior unsecured notes

 

1,409,899

 

1,257,377

 

1,257,377

 

 

Convertible senior unsecured notes

281,046

264,141

264,141

Junior subordinated notes

 

143,322

 

104,595

 

 

 

104,595

Fair Value Measurements Using Fair Value Hierarchy
Carrying ValueFair ValueLevel 1Level 2Level 3
Financial assets: 
Loans and investments, net$12,001,544 $12,158,245 $— $— $12,158,245 
Loans held-for-sale, net322,875 327,487 — 322,831 4,656 
Capitalized mortgage servicing rights, net385,520 518,391 — — 518,391 
Securities held-to-maturity, net155,413 133,800 — — 133,800 
Financial liabilities:
Credit and repurchase facilities$2,913,483 $2,908,678 $— $311,963 $2,596,715 
Securitized debt6,691,958 6,620,181 — — 6,620,181 
Senior unsecured notes1,335,013 1,216,241 1,216,241 — — 
Convertible senior unsecured notes283,776 287,500 — 287,500 — 
Junior subordinated notes144,096 107,096 — — 107,096 
Note 13 — Commitments and Contingencies

Agency Business Commitments.Our Agency Business is subject to supervision by certain regulatory agencies. Among other things, these agencies require us to meet certain minimum net worth, operational liquidity and restricted liquidity collateral requirements, and compliance with reporting requirements. Our adjusted net worth and liquidity required by the agencies for all periods presented exceeded these requirements.

At March 31, 2023,2024, we were required to maintain at least $18.8$21.1 million of liquid assets in one of our subsidiaries to meet our operational liquidity requirements for Fannie Mae and we had operational liquidity in excess of this requirement.

We are generally required to share the risk of any losses associated with loans sold under the Fannie Mae DUS program and are required to secure this obligation by assigning restricted cash balances and/or a letter of credit to Fannie Mae. The amount of collateral required by Fannie Mae is a formulaic calculation at the loan level by a Fannie Mae assigned tier, which considers the loan balance, risk level of the loan, age of the loan and level of risk-sharing. Fannie Mae requires restricted liquidity for Tier 2 loans of 75 basis points, 15 basis points for Tier 3 loans and 5 basis points for Tier 4 loans, which is funded over a 48-month period that begins upon delivery of the loan to Fannie Mae. A significant portion of our Fannie Mae DUS serviced loans for which we have risk sharing are Tier 2 loans. At March 31, 2023,2024, the restricted liquidity requirement totaled $67.3$79.7 million and was satisfied with a $64.0 million letter of credit and $2.5 million of cash issued to Fannie Mae.

At March 31, 2023,2024, reserve requirements for the Fannie Mae DUS loan portfolio will require us to fund $35.7$38.9 million in additional restricted liquidity over the next 48 months, assuming no further principal paydowns, prepayments, or defaults within our at-risk portfolio. Fannie Mae periodically reassesses these collateral requirements and may make changes to these requirements in the future. We generate sufficient cash flow from our operations to meet these capital standards and do not expect any changes to have a material impact on our future operations; however, future changes to collateral requirements may adversely impact our available cash.

We are subject to various capital requirements in connection with seller/servicer agreements that we have entered into with secondary market investors. Failure to maintain minimum capital requirements could result in our inability to originate and service loans for the respective investor and, therefore, could have a direct material effect on our consolidated financial statements. At March 31, 2023,2024, we met all of Fannie Mae’s quarterly capital requirements and our Fannie Mae adjusted net worth was in excess of the required net worth. We are not subject to capital requirements on a quarterly basis for Ginnie Mae and FHA, as requirements for these investors are only required on an annual basis.

As an approved designated seller/servicer under Freddie Mac’s SBL program, we are required to post collateral to ensure that we are able to meet certain purchase and loss obligations required by this program. Under the SBL program, we are required to post collateral equal to $5.0 million, which is satisfied with a $5.0 million letter of credit.

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We enter into contractual commitments with borrowers providing rate lock commitments while simultaneously entering into forward sale commitments with investors. These commitments are outstanding for short periods of time (generally less than 60 days) and are described in more detail in Note 11 and Note 12.

Debt Obligations and Operating Leases. At March 31, 2023,2024, the maturities of our debt obligations and the minimum annual operating lease payments under leases with a term in excess of one year are as follows (in thousands):

Minimum Annual

Debt

Operating Lease

Year

    

Obligations

    

Payments

    

Total

2023 (nine months ending December 31, 2023)

$

1,944,655

$

7,076

$

1,951,731

2024

 

2,997,340

 

9,180

 

3,006,520

2025

 

1,902,049

 

9,318

 

1,911,367

2026

 

4,905,927

 

9,363

 

4,915,290

2027

 

985,653

 

7,929

 

993,582

2028

180,000

7,301

187,301

Thereafter

 

154,336

 

20,491

 

174,827

Total

$

13,069,960

$

70,658

$

13,140,618

YearDebt ObligationsMinimum Annual Operating Lease PaymentsTotal
2024 (nine months ending December 31, 2024)$1,891,132 $8,295 $1,899,427 
20253,407,613 11,206 3,418,819 
20264,547,643 11,297 4,558,940 
20271,237,437 9,782 1,247,219 
2028180,000 9,093 189,093 
2029— 8,576 8,576 
Thereafter154,336 19,308 173,644 
Total$11,418,161 $77,557 $11,495,718 
During both the three months ended March 31, 20232024 and 2022,2023, we recorded lease expense of $2.6 million and $2.4 million, respectively.

million.

Unfunded Commitments.In accordance with certain structured loans and investments, we have outstanding unfunded commitments of $1.05$1.59 billion at March 31, 20232024 that we are obligated to fund as borrowers meet certain requirements. Specific requirements include, but are not limited to, property renovations, building construction and conversions based on criteria met by the borrower in accordance with the loan agreements.

Litigation. We are currently neither subject to any material litigation nor,a variety of claims and suits that arise from time to time in the bestordinary course of our knowledge, threatened by anybusiness. Although management currently believes that resolving claims against us, individually or in aggregate, will not have a material litigation other than the following:

In June 2011, three related lawsuits were filed by the Extended Stay Litigation Trust (the “Trust”), a post-bankruptcy litigation trust allegedadverse impact in our consolidated financial statements, these matters are subject to have standing to pursue claims that previously had been held by Extended Stay, Inc.inherent uncertainties and the Homestead Village L.L.C. familymanagement’s view of companies that had emerged from bankruptcy. There were 73 defendantsthese matters may change in the three lawsuits, including 55 corporate and partnership entities and 18 individuals. A subsidiary of ours and certain individuals and other entities that are affiliates of ours were included as defendants.

future.

In June 2013, the Trust amended the lawsuits, to, among other things, (1) consolidate the lawsuits into one lawsuit, (2) remove 47 defendants from the lawsuits, none of whom were related to us, so that there were 26 remaining defendants, including 16 corporate and partnership entities and 10 individuals, and (3) reduce the counts within the lawsuits from over 100 down to 17 (as consolidated, the "Action"). For more detailed information regarding the Action, please refer to Note 14 of our 2022 Annual Report filed with the SEC on February 17, 2023.

After extensive motion practice and discovery, in early December 2022, the plaintiff and certain co-defendants, including our affiliates, commenced discussions regarding a possible settlement of the Action, and in late December 2022, those parties reached an agreement in principle to settle the Action for a total of $38 million. We agreed to pay up to $7.4 million of the settlement amount, which amount was accrued in our December 31, 2022 financial statements. We maintain certain claims against a co-defendant on which we may recover amounts in the future, reducing our contribution to the settlement, but we can give no assurances that we will be successful in any such recovery.

In early March 2023, the parties to the settlement finalized the settlement documents and on April 25, 2023, the Bankruptcy Court approved the settlement in open court. Pursuant to the settlement agreement, the parties to the settlement are expected to make the agreed upon payments and the broad mutual releases will become effective during the second quarter, upon which the Action will be discontinued, with prejudice.

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Due to Borrowers. Due to borrowers represents borrowers’ funds held by us to fund certain expenditures or to be released at our discretion upon the occurrence of certain pre-specified events, and to serve as additional collateral for borrowers’ loans. While retained, these balances earn interest in accordance with the specific loan terms they are associated with.

Note 14 — Variable Interest Entities

Our involvement with VIEs primarily affects our financial performance and cash flows through amounts recorded in interest income, interest expense, provision for loan losses and through activity associated with our derivative instruments.

Consolidated VIEs. We have determined that our operating partnership, ARLP, and our CLO and Q Series securitization entities (“Securitization Entities”) are VIEs, which we consolidate. ARLP was already consolidated in our financial statements, therefore, the identification of this entity as a VIE had no impact on our consolidated financial statements.

Our Securitization Entities invest in real estate and real estate-related securities and are financed by the issuance of debt securities. We believe we hold the power necessary to direct the most significant economic activities of those entities. We also have exposure to losses to the extent of our equity interests and rights to waterfall payments in excess of required payments to bond investors. As a result of consolidation, equity interests have been eliminated, and the consolidated balance sheets reflect both the assets held and debt issued to third parties by the Securitization Entities, prior to the unwind. Our operating results and cash flows include the gross asset and liability amounts related to the Securitization Entities as opposed to our net economic interests in those entities.

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The assets and liabilities related to these consolidated Securitization Entities are as follows (in thousands):

    

March 31, 2023

    

December 31, 2022

Assets:

Restricted cash

$

699,892

$

710,775

Loans and investments, net

8,530,448

8,900,104

Other assets

123,696

174,382

Total assets

$

9,354,036

$

9,785,261

 

 

Liabilities:

Securitized debt

$

7,508,472

$

7,849,270

Other liabilities

 

23,863

 

26,754

Total liabilities

$

7,532,335

$

7,876,024

March 31, 2024December 31, 2023
Assets:
Restricted cash$528,658 $593,956 
Loans and investments, net7,637,138 7,826,793 
Other assets123,866 193,822 
Total assets$8,289,662 $8,614,571 
  
Liabilities:
Securitized debt$6,691,958 $6,935,010 
Other liabilities23,792 32,867 
Total liabilities$6,715,750 $6,967,877 
Assets held by the Securitization Entities are restricted and can only be used to settle obligations of those entities. The liabilities of the Securitization Entities are non-recourse to us and can only be satisfied from each respective asset pool. See Note 9 for details. We are not obligated to provide, have not provided, and do not intend to provide financial support to any of the Securitization Entities.

Unconsolidated VIEs.We determined that we are not the primary beneficiary of 2833 VIEs in which we have a variable interest at March 31, 20232024 because we do not have the ability to direct the activities of the VIEs that most significantly impact each entity’s economic performance.

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A summary of our variable interests in identified VIEs, of which we are not the primary beneficiary, at March 31, 20232024 is as follows (in thousands):

Type

    

Carrying Amount (1)

Loans

$

437,448

APL certificates

127,448

B Piece bonds

31,465

Equity investments

19,160

Agency interest only strips

214

Total

$

615,735

TypeCarrying Amount (1)
Loans$Represents the carrying amount of loans and636,297 
APL certificates132,437 
Equity investments before reserves. At March 31, 2023, $172.5 million of loans to VIEs had corresponding specific loan loss reserves of $85.8 million. The maximum loss exposure at March 31, 2023 would not exceed the carrying amount of our investment.37,726 
B Piece bonds30,573 
Agency interest only strips134 
Total$837,167 

________________________
(1)

Represents the carrying amount of loans and investments before reserves. At March 31, 2024, $128.2 million of loans to VIEs had corresponding specific loan loss reserves of $80.9 million. The maximum loss exposure at March 31, 2024 would not exceed the carrying amount of our investment.

These unconsolidated VIEs have exposure to real estate debt of approximately $3.95$4.01 billion at March 31, 2023.

2024.

Note 15 — Equity

Common Stock. During the first quarter of 2023, we sold 5,635,800 shares of our common stock at an average price of $14.68 per share for net proceeds of $82.7 million through an “At-The-Market” equity offering sales agreement. The proceeds were used to make investments related to our business and for general corporate purposes.

In March 2023, the Board of Directors authorized a share repurchase program providing for the repurchase of up to $50.0$150.0 million of our outstanding common stock. The repurchase of our common stock may be made from time to time in the open market, through privately negotiated transactions, or otherwise in compliance with Rule 10b-18 and Rule 10b5-1 under the Securities Exchange Act, of 1934, based on our stock price, general market conditions, applicable legal requirements and other factors. The program may be discontinued or modified at any time. As ofAt March 31, 2024, there was $150.0 million available for repurchase under this program.

Subsequent Event. During April 30, 2023,2024, we repurchased 3,545,604935,739 shares of our common stock under thisthe share repurchase program at a total cost of $37.4$11.4 million and an average cost of $10.56$12.19 per share.

Noncontrolling Interest. Noncontrolling interest relates to the operating partnership units (“OP Units”) issued to satisfy a portion of the purchase price in connection with the acquisition of the agency platform of Arbor Commercial Mortgage, LLC (“ACM”) in 2016. Each of these OP Units are paired with one share of our special voting preferred shares having a par value of $0.01 per share and is entitled to one vote each on any matter submitted for stockholder approval. The OP Units are entitled to receive distributions if and when our Board of
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Directors authorizes and declares common stock distributions. The OP Units are also redeemable for cash, or at our option, for shares of our common stock on a one-for-one basis. At March 31, 2023,2024, there were 16,293,589 OP Units outstanding, which represented 8.1%7.9% of the voting power of our outstanding stock.

Distributions. Dividends declared (on a per share basis) during the three months ended March 31, 20232024 are as follows:

Common StockPreferred Stock
Dividend
Declaration DateDividendDeclaration DateSeries DSeries ESeries F
February 14, 2024$0.43 March 29, 2024$0.3984375 $0.390625 $0.390625 

Common Stock

Preferred Stock

Dividend

Declaration Date

    

Dividend

    

Declaration Date

    

Series D

    

Series E

    

Series F

February 15, 2023

$

0.40

January 3, 2023

$

0.3984375

$

0.390625

$

0.390625

March 31, 2023

$

0.3984375

$

0.390625

$

0.390625

Common Stock – On May 3, 2023,1, 2024, the Board of Directors declared a cash dividend of $0.42$0.43 per share of common stock. The dividend is payable on May 31, 20232024 to common stockholders of record as of the close of business on May 19, 2023.

17, 2024.

Deferred Compensation. During the first quarter of 2023,2024, we issued 889,822603,903 shares of restricted common stock to ourcertain employees and Board of Directors members under the 2020 Amended Omnibus Stock Incentive Plan (the “2020 Plan”) with a total grant date fair value of $10.4$7.7 million, of which: (1) 256,208219,578 shares with a grant date fair value of $3.0$2.9 million vested on the grant date;date in 2024; (2) 24,493192,062 shares with a grant date fair value of $0.4$2.4 million will vest during the remainder of 2023;in 2025; and (3) 260,304192,263 shares with a grant date fair value of $3.1

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$2.4 million will vest in 2024; (4) 235,9692026.

During 2024, we issued our chief executive officer 309,775 shares of restricted common stock with a grant date fair value of $2.7$3.9 million willthat vest in 2025; (5) 78,126 shares with a grant date fair valuefull in the first quarter of $0.9 million will vest in 2026; and (6) 34,722 shares with a grant date fair value of $0.4 million will vest in 2027.
We also issued 40,796 fully vested36,688 fully-vested restricted stock units (“RSUs”) with a grant date fair value of $0.5 million to certain members of our Board of Directors, and 247,275 RSUs with a grant date fair value of $2.9 million that vest in full in the first quarter of 2026 to our chief executive officer. The individualswho have decided to defer the receipt of the common stock, tointo which the RSUs are converted, into, to a future date pursuant to a pre-established deferral election.

During the first quarter of 2023, 352,4272024, 275,569 shares of performance-based restricted stock unitsRSUs previously granted to our chief executive officer fully vested and were net settled for 172,513 common shares.

vested.

During the first quarter of 2023,2024, we withheld 188,542242,395 shares from the net settlement of restricted common stock by employees for payment of withholding taxes on shares that vested.

Earnings Per Share (“EPS”). Basic EPS is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding during each period inclusive of unvested restricted stock with full dividend participation rights. Diluted EPS is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding, plus the additional dilutive effect of common stock equivalents during each period. Our common stock equivalents include the weighted average dilutive effect of restricted stock units granted to our chief executive officer,RSUs, OP Units and convertible senior unsecured notes.

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A reconciliation of the numerator and denominator of our basic and diluted EPS computations is as follows ($ in thousands, except share and per share data):

Three Months Ended March 31, 

2023

2022

    

Basic

    

Diluted

    

Basic

    

Diluted

Net income attributable to common stockholders (1)

$

84,319

$

84,319

$

64,057

$

64,057

Net income attributable to noncontrolling interest (2)

7,585

6,816

Interest expense on convertible notes

6,081

3,995

Net income attributable to common stockholders and noncontrolling interest

$

84,319

$

97,985

$

64,057

$

74,868

Weighted average shares outstanding

181,116,674

 

181,116,674

 

153,420,238

 

153,420,238

Dilutive effect of OP Units (2)

 

16,293,589

16,325,095

Dilutive effect of convertible notes

17,230,358

15,111,154

Dilutive effect of restricted stock units (3)

 

270,353

 

 

574,917

Weighted average shares outstanding

 

181,116,674

 

214,910,974

 

153,420,238

 

185,431,404

Net income per common share (1)

$

0.47

$

0.46

$

0.42

$

0.40

(1)Net of preferred stock dividends.
(2)We consider OP Units to be common stock equivalents as the holders have voting rights, the right to distributions and the right to redeem the OP Units for the cash value of a corresponding number of shares of common stock or a corresponding number of shares of common stock, at our election.
(3)Our chief executive officer was granted restricted stock units, which vest at the end of a four-year performance period based upon our achievement of total stockholder return objectives.

34

Three Months Ended March 31,
20242023
BasicDilutedBasicDiluted
Net income attributable to common stockholders (1)$57,873 $57,873 $84,319 $84,319 
Net income attributable to noncontrolling interest (2)— 4,997 — 7,585 
Interest expense on convertible notes— 6,084 — 6,081 
Net income attributable to common stockholders and noncontrolling interest$57,873 $68,954 $84,319 $97,985 
Weighted average shares outstanding188,710,390188,710,390181,116,674181,116,674
Dilutive effect of OP Units (2)16,293,58916,293,589
Dilutive effect of convertible notes17,414,54717,230,358
Dilutive effect of restricted stock units (3)507,550270,353
Weighted average shares outstanding188,710,390222,926,076181,116,674214,910,974
Net income per common share (1)$0.31 $0.31 $0.47 $0.46 
________________________
(1)Net of preferred stock dividends.
(2)We consider OP Units to be common stock equivalents as the holders have voting rights, the right to distributions and the right to redeem the OP Units for the cash value of a corresponding number of shares of common stock or a corresponding number of shares of common stock, at our election.
(3)Our chief executive officer was granted RSUs, which vest at the end of a 4-year performance period based upon our achievement of total stockholder return objectives.

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Note 16 — Income Taxes

As a REIT, we are generally not subject to U.S. federal income tax to the extent of our distributions to stockholders and as long as certain asset, income, distribution, ownership and administrative tests are met. To maintain our qualification as a REIT, we must annually distribute at least 90% of our REIT-taxable income to our stockholders and meet certain other requirements. We may also be subject to certain state, local and franchise taxes. Under certain circumstances, federal income and excise taxes may be due on our undistributed taxable income. If we were to fail to meet these requirements, we would be subject to U.S. federal income tax, which could have a material adverse impact on our results of operations and amounts available for distributions to our stockholders. We believe that all of the criteria to maintain our REIT qualification have been met for the applicable periods, but there can be no assurance that these criteria will continue to be met in subsequent periods.

The Agency Business is operated through our TRS Consolidated Group and is subject to U.S. federal, state and local income taxes. In general, our TRS entities may hold assets that the REIT cannot hold directly and may engage in real estate or non-real estate-related business.

In the three months ended March 31, 20232024 and 2022,2023, we recorded a tax provision of $3.6 million and $8.0 million, respectively. The tax provision recorded in the three months ended March 31, 2024 consisted of a current tax provision of $7.6 million and $8.2 million, respectively.a deferred tax benefit of $4.0 million. The tax provision recorded in the three months ended March 31, 2023 consisted of a current and deferred tax provision of $4.8 million and $3.2 million, respectively. The tax provision recorded in the three months ended March 31, 2022 consisted of a current tax provision of $9.9 million and a deferred tax benefit of $1.7 million. Current and deferred taxes are primarily recorded on the portion of earnings (losses) recognized by us with respect to our interest in the TRS’s. Deferred income tax assets and liabilities are calculated based on temporary differences between our U.S. GAAP consolidated financial statements and the federal, state, local tax basis of assets and liabilities as of the consolidated balance sheets.

Note 17 — Agreements and Transactions with Related Parties

Support Agreement and Employee Secondment Agreement. We have a support agreement and a secondment agreement with ACM and certain of its affiliates and certain affiliates of a relative of our chief executive officer (“Service Recipients”) where we provide support services and seconded employees to the Service Recipients. The Service Recipients reimburse us for the costs of performing such services and the cost of the seconded employees. During the three months ended March 31, 20232024 and 2022,2023, we incurred $0.7$0.9 million and $0.8 $0.7
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million, respectively, of costs for services provided and employees seconded to the Service Recipients, all of which were reimbursedare reimbursable to us and included in due from related party on the consolidated balance sheets.

Other Related Party Transactions. Due from related party was $113.1$104.4 million and $77.4$64.4 million at March 31, 20232024 and December 31, 2022,2023, respectively, which consisted primarily of amounts due from our affiliated servicing operations related to real estate transactions closing at the end of the quarter and amounts due from ACM for costs incurred in connection with the support and secondment agreements described above.

Due to related party was $12.5$14.2 million and $12.4$13.8 million at March 31, 20232024 and December 31, 2022,2023, respectively, and consisted of loan payoffs,settlements, holdbacks and escrows to be remitted to our affiliated servicing operations related to real estate transactions.

In Julycertain instances, our business requires our executives to charter privately owned aircraft in furtherance of our business. We have an aircraft time-sharing agreement with an entity controlled by our chief executive officer that owns a private aircraft. Pursuant to the agreement, we reimburse the aircraft owner for the required costs under Federal Aviation Administration regulations for the flights our executives’ charter. During the three months ended March 31, 2024 and 2023, we reimbursed the aircraft owner $0.3 million and $0.2 million, respectively, for the flights chartered by our executives pursuant the agreement.
In May 2023, we committed to fund a $56.9 million bridge loan ($14.9 million was funded at March 31, 2024) for an SFR build-to-rent construction project. Two of our officers have made minority equity investments totaling $0.5 million, representing approximately 4% of the total equity invested in the project. The loan has an interest rate of SOFR plus 5.50% with a SOFR floor of 3.25% and matures in December 2025, with two six-month extension options. Interest income recorded from this loan was $0.3 million for the three months ended March 31, 2024.
In 2022, we purchased a $46.2 million bridge loan originated by ACM at par (none of which($6.5 million was funded at March 31, 2023)2024) for an SFR build-to-rent construction project. A consortium of investors (which includes, among other unaffiliated investors, certain of our officers with a minority ownership interest) owns 70% of the borrowing entity and an entity indirectly owned and controlled by an immediate family member of our chief executive officer owns 10% of the borrowing entity. The loan has an interest rate of SOFR plus 5.50% and is scheduled to maturematures in March 2025.

Interest income recorded from this loan was $0.2 million for the three months ended March 31, 2024. No interest was received during the three months ended March 31, 2023 since there were no amounts funded as of March 31, 2023.

In April 2022, we committed to fund a $67.1 million bridge loan (none of which($6.5 million was funded at March 31, 2023)2024) in an SFR build-to-rent construction project. An entity owned by an immediate family member of our chief executive officer also made an equity investment in the project and owns a 2.25% equity interest in the borrowing entity. The bridge loan has an interest rate of SOFR plus 4.63% with a SOFR floor of 0.25% and matures in May 2025. Interest income recorded from this loan was $0.1 million and less than $0.1 million for the three months ended March 31, 2023.

2024 and 2023, respectively.

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In February 2022, we committed to fund a $39.4 million bridge loan (none of which($12.7 million was funded at March 31, 2023)2024) in an SFR build-to-rent construction project. An entity owned by an immediate family member of our chief executive officer also made an equity investment in the project and owns a 2.25% equity interest in the borrowing entity. The bridge loan has an interest rate of LIBORSOFR plus 4.00% with a LIBORSOFR floor of 0.25% and matures in March 2025. Interest income recorded from this loan was $0.3 million and less than $0.1 million for the three months ended March 31, 2023.

2024 and 2023, respectively.

In 2021, we invested $4.2 million for 49.3% interest in a limited liability company (“LLC”) which purchased a retail property for $32.5 million and assumed an existing $26.0 million CMBS loan. A portion of the property can potentially be converted to office space, of which we obtainhave the right to occupy, in part. An entity owned by an immediate family member of our chief executive officer also made an investment in the LLC for a 10.0%10% ownership, is the managing member and holds the right to purchase our interest in the LLC.

In 2021, we originated a $63.4 million bridge loan to a third party to purchase a multifamily property from a multifamily-focused commercial real estate investment fund sponsored and managed by our chief executive officer and one of his immediate family members, which fund has no continued involvement with the property following the purchase. The loan hashad an interest rate of LIBORSOFR plus 3.75% with a LIBORSOFR floor of 0.25% and matureswas scheduled to mature in March 2024. In December 2023, the loan was paid off in full. Interest income recorded from this loan was $1.4 million and $0.7 million for the three months ended March 31, 2023 and 2022, respectively.

2023.

In 2020, we committed to fund a $32.5 million bridge loan, ($16.0 million was funded at March 31, 2023) and made a $3.5 million preferred equity investment in an SFR build-to-rent construction project. An entity owned by an immediate family member of our chief executive officer also made an equity investment in the project and owns a 21.8% equity interest in the borrowing entity. The bridge loan has an interest rate of LIBORSOFR plus 5.5%4.75% with a LIBORSOFR floor of 0.75%, and the preferred equity investment has a 12.0%12.00% fixed rate,rate. Both loans were scheduled to mature in December 2023. In November 2023, the bridge loan was upsized to a maximum of $39.9 million ($37.0 million was funded at March 31, 2024) and the maturity for both loans mature inwas extended to October 2023.2024. Interest income recorded from these loans was $0.5$1.0 million and $0.2$0.5 million for the three months ended March 31, 2024 and 2023, and 2022, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
In 2020, we committed to fund a $30.5 million bridge loan and we made a $4.6 million preferred equity investment in a SFR build-to-rent construction project. ACM and an entity owned by an immediate family member of our chief executive officer also made equity investments in the project and own an 18.9% equity interest in the borrowing entity. The bridge loan ($21.1 million was funded at March 31, 2023) has an interest rate of LIBORSOFR plus 5.5%5.25% with a LIBORSOFR floor of 0.75%1.00% and was scheduled to mature in May 2023 and the preferred equity investment has a 12.0%12.00% fixed rate and was scheduled to mature in April 2023. In April 2023, the bridge loan was upsized to $38.4a maximum of $38.8 million ($36.7 million was funded at March 31, 2024), and the interest rate was changed to SOFR plus 5.25% with a SOFR floor of 0.75%. In addition, the maturity date on both loans werewas extended to May 2025. Interest income recorded from these loans was $0.7$1.1 million and $0.3$0.7 million for the three months ended March 31, 2024 and 2023, and 2022, respectively.

In 2020, we originated a $14.8 million Private Label loan and a $3.4 million mezzanine loan on two multifamily properties owned in part by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers and our chief executive officer) which owns a 50% interest in the borrowing entity. In 2020, we sold the Private Label loan to an unconsolidated affiliate of ours. The mezzanine loan bears interest at a 9.0%9.00% fixed rate and matures in April 2030. Interest income recorded from the mezzanine loan was $0.1 million for both the three months ended March 31, 20232024 and 2022.

2023.

We havehad a $35.0 million bridge loan and a $9.6$10.0 million preferred equity interest on an office building. The property is controlled by a third party.bridge loan was scheduled to mature in October 2023 and the preferred equity investment was scheduled to mature in June 2027. The day-to-day operations are currently beingwere managed by an affiliated entity of an immediate family member or one of his affiliated entities, of our chief executive officer. In September 2021, we entered into a forbearance agreement with the borrower on the outstanding bridge loan to defer all interest owed until maturity or early payoff. At both March 31,In the fourth quarter of 2023, and December 31, 2022,we converted these loans had an allowance for credit loss recorded against them totaling $8.0 million.

In certain instances, our business requires our executivesin the building to charter privately owned aircraft in furtherance of our business. We have an aircraft time-sharing agreement with an entity controlled by our chief executive officer that owns a private aircraft. Pursuant to the agreement, we reimburse the aircraft owner for the required costs under Federal Aviation Administration regulations for the flights our executives’ charter. During both the three months ended March 31, 2023 and 2022, we reimbursed the aircraft owner $0.2 million for the flights chartered by our executives pursuant the agreement.

common equity investment.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

In 2019, we, along with ACM, certain executives of ours and a consortium of independent outside investors, formed AMAC III, a multifamily-focused commercial real estate investment fund sponsored and managed by our chief executive officer and one of his immediate family members. We committed to a $30.0 million investment ($25.225.9 million was funded at March 31, 2023)2024) for an 18% interest in AMAC III. During the three months ended March 31, 20232024 and 2022,2023, we recorded a losslosses associated with this investment of $0.4$0.5 million and $0.5$0.4 million, respectively, and received cash distributions of $0.6 million during the three months ended March 31, 2023, we received a cash distribution of $0.6 million.2023. In 2019, AMAC III originated a $7.0 million mezzanine loan to a borrower with which we have an outstanding $34.0 million bridge loan. In 2020, for full satisfaction of the mezzanine loan, AMAC III became the owner of the property. Also in 2020, for full satisfaction of the mezzanine loan, AMAC III became the owner of the property. Also in 2020, the $34.0 million bridge loan was refinanced with a $35.4 million bridge loan, which bears interest at a rate of LIBORSOFR plus 3.5%3.50%, and matures in August 2023. We also originated a $15.6 million Private Label loan in 2019 to a borrower which is 100% owned by AMAC III, which bears interest at a 3.735% fixed rate and matures in January 2030. In 2020, we sold the Private Label loan to an unconsolidated affiliate of ours.2024. Interest income recorded from the bridge loan was $0.7$0.8 million and $0.3$0.7 million for the three months ended March 31, 2024 and 2023, and 2022, respectively.

In 2018, we originated a $21.7 million bridge loan on a multifamily property owned in part by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers and our chief executive officer) which owns 75% in the borrowing entity. The loan has an interest rate of LIBORSOFR plus 4.75% with a LIBORSOFR floor of 0.25%, and matures in August 2023.2024. Interest income recorded from this loan was $0.5$0.6 million and $0.3 million for the three months ended March 31, 2023 and 2022, respectively.

In 2017, we originated two bridge loans totaling $28.0 million on two multifamily properties owned in part by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers and our chief executive officer) which owns 45% of the borrowing entity. The loans had an interest rate of LIBOR plus 5.25% with LIBOR floors ranging from 1.24% to 1.54% and were scheduled to mature in 2020. The borrower refinanced these loans with a $31.1 million bridge loan we originated in 2019 with an interest rate of LIBOR plus 4.0%, a LIBOR floor of 1.8%,which was scheduled to mature in October 2022. In May 2022, this loan paid off in full. Interest income recorded from this loan was $0.5 million for the three months ended March 31, 2022.

2024 and 2023, respectively.

In 2017, we originated a $46.9 million Fannie Mae loan on a multifamily property owned in part by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers) which owns a 17.6% interest in the borrowing entity. We carry a maximum loss-sharing obligation with Fannie Mae on this loan of up to 5% of the original UPB. Servicing revenue recorded from this loan was less than $0.1 million for all periods presented.

In 2017, Ginkgo Investment Company LLC (“Ginkgo”), of which one of our directors is a 33% managing member, purchased a multifamily apartment complex which assumed an existing $8.3 million Fannie Mae loan that we service. Ginkgo subsequently sold the majority of its interest in this property and owned a 3.6% interest at March 31, 2023. We carry a maximum loss-sharing obligation with2024. In July 2023, the Fannie Mae on this loan of up to 20% of the original UPB. Upon the sale, we received a 1% loan assumption fee which was governed by existing loan agreements that were in place when the loan was originatedpaid off in 2015, prior to such purchase.full. Servicing revenue recorded from this loan was less than $0.1 million for all periods presented.

the three months ended March 31, 2023.

In 2016,2019, we originated $48.0converted an existing bridge loan into a $2.0 million mezzanine loan with a fixed interest rate of bridge loans on six10.00% and a January 2024 maturity. In January 2024, the maturity was extended to January 2025. Interest income recorded from this loan was $0.1 million for both the three months ended March 31, 2024 and 2023. The underlying multifamily propertiesproperty is owned in part by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers and our chief executive officer) which owns interests ranging from 10.5% to 12.0% in the borrowing entities. The loans had an interest rate of LIBOR plus 4.5% with a LIBOR floor of 0.25% and were scheduled to mature in 2019. In 2017, a $6.8 million loan on one property paid off in full and in 2018 four additional loans totaling $28.3 million paid off in full. In 2019, $10.9 million of the $12.9 million remaining bridge loan paid off, with the $2.0 million remaining UPB converting to a mezzanine loan with a fixed interest rate of 10.0% and a January 2024 maturity. Interest income recorded from the mezzanine loan was $0.1 million for all periods presented.

entities.

In 2015, we invested $9.6 million for 50% of ACM’s indirect interest in a joint venture with a third party that was formed to invest in a residential mortgage banking business. At March 31, 2023,2024, we had an indirect interest of 12.3% in this entity. We recorded income of $1.6 million and a loss of $0.9 million related to this investment of $0.9 million and income of $5.0 million infor the three months ended March 31, 2024 and 2023, and 2022, respectively. During the three months ended March 31, 2022, we also received a cash distribution of $7.5 million which were classified as returns of capital.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

We, along with an executive officer of ours and a consortium of independent outside investors, hold equity investments in a portfolio of multifamily properties referred to as the “Lexford” portfolio, which is managed by an entity owned primarily by a consortium of affiliated investors, including our chief executive officer and an executive officer of ours. Based on the terms of the management contract, the management company is entitled to 4.75% of gross revenues of the underlying properties, along with the potential to share in the proceeds

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
of a sale or restructuring of the debt. In 2018, the owners of Lexford restructured part of its debt and we originated 12 bridge loans totaling $280.5 million, which were used to repay in full certain existing mortgage debt and to renovate 72 multifamily properties included in the portfolio. The loans were originated in 2018, had interest rates of LIBOR plus 4.0%4.00% and were scheduled to mature in June 2021. During 2019, the borrower made payoffs and partial paydowns of principal totaling $250.0 million and in 2020, the remaining balance of the loans were refinanced with a $34.6 million Private Label loan, which bears interest at a fixed rate of 3.3%3.30% and matures in March 2030. In 2020, we sold the Private Label loan to an unconsolidated affiliate of ours. Further, as part of this 2018 restructuring, $50.0 million in unsecured financing was provided by an unsecured lender to certain parent entities of the property owners. ACM owns slightly less than half of the unsecured lender entity and, therefore, provided slightly less than half of the unsecured lender financing. In addition, in connection with our equity investment, we received distributions totaling $4.7 million during the three months ended March 31, 2023, which were recorded as income from equity affiliates. Separate from the loans we originated in 2018, we provide limited (“bad boy”) guarantees for certain other debt controlled by Lexford. The bad boy guarantees may become a liability for us upon standard “bad” acts such as fraud or a material misrepresentation by Lexford or us. At March 31, 2023,2024, this debt had an aggregate outstanding balance of approximately $600.0$500.0 million and is scheduled to mature through 2029.

Several of our executives, including our chief financial officer, senior counselcorporate secretary and our chairman, chief executive officer and president, hold similar positions for ACM. Our chief executive officer and his affiliated entities (“the Kaufman Entities”) together beneficially own approximately 35% of the outstanding membership interests of ACM and certain of our employees and directors also hold an ownership interest in ACM. Furthermore, one of our directors serves as the trustee and co-trustee of two of the Kaufman Entities that hold membership interests in ACM. At March 31, 2023,2024, ACM holds 2,535,870 shares of our common stock and 10,615,085 OP Units, which represents 6.6%6.4% of the voting power of our outstanding stock. Our Board of Directors approved a resolution under our charter allowing our chief executive officer and ACM, (which our chief executive officer has a controlling equity interest in), to own more than the 5% ownership interest limit of our common stock as stated in our amended charter.

38

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 18 — Segment Information

The summarized statements of income and balance sheet data, as well as certain other data, by segment are included in the following tables ($ in thousands). Specifically identifiable costs are recorded directly to each business segment. For items not specifically identifiable, costs have been allocated between the business segments using the most meaningful allocation methodologies, which was predominately direct labor costs (i.e., time spent working on each business segment). Such costs include, but are not limited to, compensation and employee related costs, selling and administrative expenses and stock-based compensation.

Three Months Ended March 31, 2023

Structured

Agency

Other /

    

Business

    

Business

    

Eliminations (1)

    

Consolidated

Interest income

$

317,376

$

10,571

$

$

327,947

Interest expense

 

214,894

4,479

219,373

Net interest income

 

102,482

6,092

108,574

Other revenue:

 

Gain on sales, including fee-based services, net

 

14,589

14,589

Mortgage servicing rights

 

18,458

18,458

Servicing revenue

44,981

44,981

Amortization of MSRs

 

(15,416)

(15,416)

Property operating income

 

1,381

1,381

Gain on derivative instruments, net

 

4,223

4,223

Other income, net

 

1,908

2,974

4,882

Total other revenue

 

3,289

69,809

73,098

Other expenses:

 

Employee compensation and benefits

 

15,641

26,758

42,399

Selling and administrative

 

6,711

6,912

13,623

Property operating expenses

 

1,383

1,383

Depreciation and amortization

1,451

1,173

2,624

Provision for loss sharing (net of recoveries)

 

3,177

3,177

Provision for credit losses (net of recoveries)

 

20,645

1,872

22,517

Total other expenses

 

45,831

39,892

85,723

Income before income from equity affiliates and income taxes

59,940

36,009

95,949

Income from equity affiliates

 

14,326

14,326

Benefit from (provision for) income taxes

 

429

(8,458)

(8,029)

Net income

 

74,695

27,551

102,246

Preferred stock dividends

 

10,342

10,342

Net income attributable to noncontrolling interest

 

7,585

7,585

Net income attributable to common stockholders

$

64,353

$

27,551

$

(7,585)

$

84,319

39

Three Months Ended March 31, 2024
Structured
Business
Agency
Business
Other (1)Consolidated
Interest income$307,888 $13,404 $— $321,292 
Interest expense212,600 5,076 — 217,676 
Net interest income95,288 8,328 — 103,616 
Other revenue:
Gain on sales, including fee-based services, net— 16,666 — 16,666 
Mortgage servicing rights— 10,199 — 10,199 
Servicing revenue— 48,157 — 48,157 
Amortization of MSRs— (16,631)— (16,631)
Property operating income1,570 — — 1,570 
Loss on derivative instruments, net— (5,257)— (5,257)
Other income, net2,300 33 — 2,333 
Total other revenue3,870 53,167 — 57,037 
Other expenses:
Employee compensation and benefits18,547 29,147 — 47,694 
Selling and administrative6,796 7,137 — 13,933 
Property operating expenses1,678 — — 1,678 
Depreciation and amortization1,398 1,173 — 2,571 
Provision for loss sharing (net of recoveries)— 273 — 273 
Provision for credit losses (net of recoveries)17,777 1,341 — 19,118 
Total other expenses46,196 39,071 — 85,267 
Income before income from equity affiliates and income taxes52,962 22,424 — 75,386 
Income from equity affiliates1,418 — — 1,418 
Provision for income taxes(81)(3,511)— (3,592)
Net income54,299 18,913 — 73,212 
Preferred stock dividends10,342 — — 10,342 
Net income attributable to noncontrolling interest— — 4,997 4,997 
Net income attributable to common stockholders$43,957 $18,913 $(4,997)$57,873 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Three Months Ended March 31, 2022

Structured

Agency

Other /

 

    

Business

    

 Business

    

Eliminations (1)

    

Consolidated

Interest income

 

$

156,260

 

$

10,438

 

$

 

$

166,698

Interest expense

78,202

4,357

82,559

Net interest income

78,058

6,081

84,139

Other revenue:

Gain on sales, including fee-based services, net

1,656

1,656

Mortgage servicing rights

15,312

15,312

Servicing revenue

36,026

36,026

Amortization of MSRs

(14,972)

(14,972)

Property operating income

295

295

Gain on derivative instruments, net

17,386

17,386

Other income, net

3,196

4

3,200

Total other revenue

3,491

55,412

58,903

Other expenses:

Employee compensation and benefits

15,487

26,538

42,025

Selling and administrative

7,409

7,139

 

14,548

Property operating expenses

535

535

Depreciation and amortization

810

1,173

1,983

Provision for loss sharing (net of recoveries)

(662)

(662)

Provision for credit losses (net of recoveries)

2,069

289

2,358

Total other expenses

26,310

34,477

60,787

Income before extinguishment of debt, income from equity affiliates and income taxes

55,239

27,016

82,255

Loss on extinguishment of debt

(1,350)

(1,350)

Income from equity affiliates

7,212

7,212

Provision for income taxes

(1,432)

(6,756)

(8,188)

Net income

59,669

20,260

79,929

Preferred stock dividends

9,056

9,056

Net income attributable to noncontrolling interest

6,816

6,816

Net income attributable to common stockholders

 

$

50,613

 

$

20,260

 

$

(6,816)

 

$

64,057

(1)Includes income allocated to the noncontrolling interest holders not allocated to the two reportable segments.

40

Three Months Ended March 31, 2023
Structured
Business
Agency
Business
Other (1)Consolidated
Interest income$317,376 $10,571 $— $327,947 
Interest expense214,894 4,479 — 219,373 
Net interest income102,482 6,092 — 108,574 
Other revenue:
Gain on sales, including fee-based services, net— 14,589 — 14,589 
Mortgage servicing rights— 18,458 — 18,458 
Servicing revenue— 44,981 — 44,981 
Amortization of MSRs— (15,416)— (15,416)
Property operating income1,381 — — 1,381 
Gain on derivative instruments, net— 4,223 — 4,223 
Other income, net1,908 2,974 — 4,882 
Total other revenue3,289 69,809 — 73,098 
Other expenses:
Employee compensation and benefits15,641 26,758 — 42,399 
Selling and administrative6,711 6,912 — 13,623 
Property operating expenses1,383 — — 1,383 
Depreciation and amortization1,451 1,173 — 2,624 
Provision for loss sharing (net of recoveries)— 3,177 — 3,177 
Provision for credit losses (net of recoveries)20,645 1,872 — 22,517 
Total other expenses45,831 39,892 — 85,723 
Income before income from equity affiliates and income taxes59,940 36,009 — 95,949 
Income from equity affiliates14,326 — — 14,326 
Benefit from (provision for) for income taxes429 (8,458)— (8,029)
Net income74,695 27,551 — 102,246 
Preferred stock dividends10,342 — — 10,342 
Net income attributable to noncontrolling interest— — 7,585 7,585 
Net income attributable to common stockholders$64,353 $27,551 $(7,585)$84,319 
________________________
(1)Includes income allocated to the noncontrolling interest holders not allocated to the two reportable segments.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2023

    

Structured Business

    

Agency Business

    

Consolidated

Assets:

Cash and cash equivalents

$

405,596

$

368,948

$

774,544

Restricted cash

702,360

2,484

704,844

Loans and investments, net

13,430,985

13,430,985

Loans held-for-sale, net

469,602

469,602

Capitalized mortgage servicing rights, net

396,634

396,634

Securities held-to-maturity, net

153,888

153,888

Investments in equity affiliates

77,641

77,641

Goodwill and other intangible assets

12,500

82,396

94,896

Other assets and due from related party

413,846

71,344

485,190

Total assets

$

15,042,928

$

1,545,296

$

16,588,224

Liabilities:

Debt obligations

$

12,571,630

$

421,985

$

12,993,615

Allowance for loss-sharing obligations

59,757

59,757

Other liabilities and due to related parties

268,048

109,347

377,395

Total liabilities

$

12,839,678

$

591,089

$

13,430,767

December 31, 2022

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 and due from related party

 

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 and due to related parties

 

299,559

109,817

 

409,376

Total liabilities

$

13,494,679

$

472,427

$

13,967,106

41

March 31, 2024
Structured BusinessAgency BusinessConsolidated
Assets:
Cash and cash equivalents$453,316 $454,733 $908,049 
Restricted cash530,099 16,544 546,643 
Loans and investments, net12,001,544 — 12,001,544 
Loans held-for-sale, net— 322,875 322,875 
Capitalized mortgage servicing rights, net— 385,520 385,520 
Securities held-to-maturity, net— 155,413 155,413 
Investments in equity affiliates90,244 — 90,244 
Goodwill and other intangible assets12,500 77,705 90,205 
Other assets and due from related party532,385 71,978 604,363 
Total assets$13,620,088 $1,484,768 $15,104,856 
Liabilities:
Debt obligations$11,056,363 $311,963 $11,368,326 
Allowance for loss-sharing obligations— 72,790 72,790 
Other liabilities and due to related parties343,557 85,875 429,432 
Total liabilities$11,399,920 $470,628 $11,870,548 
December 31, 2023
Assets:
Cash and cash equivalents$619,487 $309,487 $928,974 
Restricted cash595,342 12,891 608,233 
Loans and investments, net12,377,806 — 12,377,806 
Loans held-for-sale, net— 551,707 551,707 
Capitalized mortgage servicing rights, net— 391,254 391,254 
Securities held-to-maturity, net— 155,279 155,279 
Investments in equity affiliates79,303 — 79,303 
Goodwill and other intangible assets12,500 78,878 91,378 
Other assets and due from related party453,073 101,629 554,702 
Total assets$14,137,511 $1,601,125 $15,738,636 
Liabilities:
Debt obligations$11,520,492 $413,327 $11,933,819 
Allowance for loss-sharing obligations— 71,634 71,634 
Other liabilities and due to related parties369,588 108,990 478,578 
Total liabilities$11,890,080 $593,951 $12,484,031 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Three Months Ended March 31, 

    

2023

    

2022

    

Origination Data:

Structured Business

Bridge loans (1)

$

262,189

$

2,820,716

Mezzanine / Preferred Equity

5,845

8,139

Total new loan originations

$

268,034

$

2,828,855

Loan runoff

$

1,186,649

$

666,551

Agency Business

Origination Volumes by Investor:

Fannie Mae

$

795,021

$

449,680

FHA

148,940

11,990

Freddie Mac

101,332

299,072

Private Label

41,107

72,896

SFR - Fixed Rate

5,461

4,871

Total

$

1,091,861

$

838,509

Total loan commitment volume

$

1,500,110

$

975,132

Agency Business Loan Sales Data:

Fannie Mae

$

651,758

$

666,544

Private Label

159,945

489,269

Freddie Mac

68,457

359,086

FHA

43,475

71,816

SFR - Fixed Rate

9,064

Total

$

932,699

$

1,586,715

Sales margin (fee-based services as a % of loan sales) (2)

1.56

%  

1.18

%

MSR rate (MSR income as a % of loan commitments)

1.23

%  

1.57

%

(1)2023 and 2022 includes 20 and 35 SFR loans, respectively, with a UPB of $76.1 million and $133.4 million, respectively. During 2023 and 2022, we committed to fund SFR loans totaling $54.4 million and $83.3 million, respectively.
(2)2022 includes $17.1 million of gains recognized on Swaps related to the Private Label loans sold in the three months ended March 31, 2022, which is included in gain on derivative instruments, net in the consolidated statements of income.

42

Three Months Ended March 31,
20242023
Origination Data:
Structured Business
Bridge:
Multifamily$39,235 $186,100 
SFR171,490 76,089 
210,725 262,189 
Mezzanine / Preferred Equity45,129 5,845 
Total New Loan Originations$255,854 $268,034 
Number of Loans Originated5924
SFR Commitments$411,617 $54,350 
Loan Runoff$640,018 $1,186,649 
Agency Business
Origination Volumes by Investor:
Fannie Mae$458,429 $795,021 
Freddie Mac370,102 101,332 
Private Label15,410 41,107 
SFR - Fixed Rate2,318 5,461 
FHA— 148,940 
Total$846,259 $1,091,861 
Total Loan Commitment Volume$934,243 $1,500,110 
Agency Business Loan Sales Data:
Fannie Mae$725,898 $651,758 
Freddie Mac329,679 68,457 
Private Label15,410 159,945 
FHA12,069 43,475 
SFR - Fixed Rate2,318 9,064 
Total$1,085,374 $932,699 
Sales Margin (fee-based services as a % of loan sales)1.54 %1.56 %
MSR Rate (MSR income as a % of loan commitments) (1)1.09 %1.23 %
________________________

(1) Excluding $160.2 million of loan commitments not serviced for a fee, the MSR rate was 1.32% for the three months ended March 31, 2024.

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Table of Contents

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2023

Wtd. Avg. Servicing

Wtd. Avg. Life of

Servicing

Fee Rate

Servicing Portfolio

Key Servicing Metrics for Agency Business:

    

Portfolio UPB

    

(basis points)

    

(years)

Fannie Mae

$

19,508,256

49.5

8.0

Freddie Mac

5,180,607

24.7

9.1

Private Label

2,233,500

19.6

7.7

FHA

1,242,669

14.7

19.8

Bridge

467,881

11.6

2.9

SFR - Fixed Rate

279,712

20.0

5.9

Total

$

28,912,625

40.3

8.6

    

December 31, 2022

Fannie Mae

    

$

19,038,124

    

50.2

    

8.0

Freddie Mac

5,153,207

25.0

9.0

Private Label

2,074,859

18.5

7.6

FHA

1,155,893

14.9

19.5

Bridge

301,182

12.5

1.7

SFR - Fixed Rate

274,764

19.8

6.0

Total

$

27,998,029

41.1

8.6

March 31, 2024
Key Servicing Metrics for Agency Business:Servicing Portfolio UPBWtd. Avg. Servicing Fee Rate (basis points)Wtd. Avg. Life of Portfolio (years)
Fannie Mae$21,548,221 47.17.2
Freddie Mac5,301,291 23.47.7
Private Label2,524,013 18.96.3
FHA1,365,329 14.419.0
Bridge380,712 10.93.6
SFR - Fixed Rate265,429 20.15.0
Total$31,384,995 38.87.7
December 31, 2023
Fannie Mae$21,264,578 47.47.4
Freddie Mac5,181,933 24.08.5
Private Label2,510,449 19.56.7
FHA1,359,624 14.419.2
Bridge379,425 10.93.2
SFR - Fixed Rate287,446 20.15.1
Total$30,983,455 39.18.0

43


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Table of Contents

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion in conjunction with the unaudited consolidated interim financial statements, and related notes and the section entitled “Forward-Looking Statements” included herein.

Overview

Through our Structured Business, we invest in a diversified portfolio of structured finance assets in the multifamily, SFR and commercial real estate markets, primarily consisting of bridge loans, in addition to mezzanine loans, junior participating interests in first mortgages and preferred and direct equity. We also invest in real estate-related joint ventures and may directly acquire real property and invest in real estate-related notes and certain mortgage-related securities.

Through our Agency Business, we originate, sell and service a range of multifamily finance products through Fannie Mae and Freddie Mac, Ginnie Mae, FHA and HUD. We retain the servicing rights and asset management responsibilities on substantially all loans we originate and sell under the GSE and HUD programs. We are an approved Fannie Mae DUS lender nationally, a Freddie Mac Multifamily Conventional Loan lender, seller/servicer, in New York, New Jersey and Connecticut, a Freddie Mac affordable, manufactured housing, senior housing and SBL lender, seller/servicer, nationally and a HUD MAP and LEAN senior housing/healthcare lender nationally. We also originate and serviceretain the servicing rights on permanent financing loans underwritten using the guidelines of our existing agency loans sold to the GSEs, which we refer to as “Private Label” loans and originate and sell finance products through CMBS programs. We pool and securitizeeither sell the Private Label loans instantaneously or pool and securitize them and sell certificates in the securitizations to third-party investors, while retaining the servicing rights and APL certificateshighest risk bottom tranche certificate of the securitization.

We conduct our operations to qualify as a REIT. A REIT is generally not subject to federal income tax on its REIT—taxable income that is distributed to its stockholders, provided that at least 90% of its REIT—taxable income is distributed and provided that certain other requirements are met.

Our operating performance is primarily driven by the following factors:

Net interest income earned on our investments.Net interest income represents the amount by which the interest income earned on our assets exceeds the interest expense incurred on our borrowings. If the yield on our assets increases or the cost of borrowings decreases, this will have a positive impact on earnings. However, if the yield earned on our assets decreases or the cost of borrowings increases, this will have a negative impact on earnings. Net interest income is also directly impacted by the size and performance of our asset portfolio. We recognize the bulk of our net interest income from our Structured Business. Additionally, we recognize net interest income from loans originated through our Agency Business, which are generally sold within 60 days of origination.

Fees and other revenues recognized from originating, selling and servicing mortgage loans through the GSE and HUD programs. Revenue recognized from the origination and sale of mortgage loans consists of gains on sale of loans (net of any direct loan origination costs incurred), commitment fees, broker fees, loan assumption fees and loan origination fees. These gains and fees are collectively referred to as gain on sales, including fee-based services, net. We record income from MSRs at the time of commitment to the borrower, which represents the fair value of the expected net future cash flows associated with the rights to service mortgage loans that we originate, with the recognition of a corresponding asset upon sale. We also record servicing revenue which consists of fees received for servicing mortgage loans, net of amortization on the MSR assets recorded. Although we have long-established relationships with the GSE and HUD agencies, our operating performance would be negatively impacted if our business relationships with these agencies deteriorate. Additionally, we also recognize revenue from originating, selling and servicing our Private Label loans.

One of our core business strategies is to generate additional agency lending opportunities by refinancing our multifamily balance sheet bridge loan portfolio when it is practical and appropriate to do so. We execute this strategy by underwriting the multifamily bridge loans we originate to a potential future agency financing. We then continue to work with our borrowers on this execution through the life cycle of the multifamily bridge loan. When effective, this strategy allows us to recapture refinancing opportunities, delever our balance sheet, and generate additional income streams through our capital-light Agency Business.
Income earned from our structured transactions.Our structured transactions are primarily comprised of investments in equity affiliates, which represent unconsolidated joint venture investments formed to acquire, develop and/or sell real estate-related assets. Operating results from these investments can be difficult to predict and can vary significantly period-to-period. When interest rates rise, the income from these investments can be significantly and negatively impacted, particularly from our investment in a residential mortgage banking business, since rising interest rates generally decrease the demand for residential real estate loans. In addition, we periodically receive distributions from our equity investments. It is difficult to forecast the timing of such payments, which can be substantial in any given quarter. We account for structured transactions within our Structured Business.

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Table of Contents

Credit quality of our loans and investments, including our servicing portfolio.Effective portfolio management is essential to maximize the performance and value of our loan and investment and servicing portfolios. Maintaining the credit quality of the loans in our portfolios is of critical importance. Loans that do not perform in accordance with their terms may have a negative impact on earnings and liquidity.

42

COVID-19 Impact. The ongoing effectsTable of COVID-19 created significant disruptions to the U.S. and global economies, which could continue a period of global economic slowdown. Although vaccine availability and usage have continued to increase, which has led to less negative short-term effects, such as travel bans, quarantines, layoffs and shutdowns, the ongoing longer-term macroeconomic effects on inflation, interest rates, capital markets, labor shortages, property values and global supply chains continue to negatively impact many industries, including the U.S. commercial real estate market. Although we have not been significantly impacted by COVID-19 to-date, the impact of COVID-19 on companies continues to evolve, and the extent and duration of the economic fallout from this pandemic to our business, particularly rising inflation, increasing interest rates and dislocation in capital markets, remains unclear and present risk with respect to our financial condition, results of operations, liquidity, and ability to pay distributions.

Contents


Significant Developments During the First Quarter of 2023

2024

Financing and Capital Markets Activity.

Raised $93.4 million from the issuance of our 7.75% senior unsecured notes and used a significant portion of the net proceeds from such issuance to redeem our 8.00% senior unsecured notes; and
Raised $82.7 million of capital from the issuances of common stock under our “At-The-Market” equity offering sales agreement.

Share Repurchase Program. In March, we implementedModified existing debt facilities, resulting in a share repurchase program authorizingnet $700.0 million decrease in the repurchasecommitted amounts of upthese facilities and entered into a new $250.0 million debt facility; and

Paid down outstanding notes of existing securitizations totaling $246.1 million.
Structured Business Activity.
Reduced our balance sheet portfolio by 3% to $50.0$12.25 billion, as loan runoff of $640.0 million outpaced loan originations totaling $255.9 million; and
We modified thirty-nine loans with a total UPB of $1.76 billion, all of which required the borrowers to invest additional capital to recapitalize their loans. The modifications on twenty-three of these loans with a total UPB of $1.07 billion provided the borrowers with temporary rate relief provided through a pay and accrual feature. See Note 3 for details.
Agency Business Activity.
Loan originations totaled $846.3 million and includes $206.9 million of new agency loans that were recaptured from our outstanding common stock. As ofStructured Business runoff; and
Grew our fee-based servicing portfolio approximately 1%, or $401.5 million, to $31.38 billion.
Recent Developments in April 30, 2023, we2024
Our 5.75% senior unsecured notes, totaling $90.0 million, matured and were redeemed for cash; and
We repurchased 3,545,604 shares$11.4 million of our common stock under this program at a total cost of $37.4 million and an average costprice of $10.56$12.19 per share.

Structured Business Activity.

Our structured loan and investment portfolio decreased 6% to $13.64 billion as loan runoff totaling $1.19 billion outpaced loan originations totaling $268.0 million; and
Received and recorded $15.7 million in income from equity affiliates from an equity participation interest on a property that was sold and a cash distribution from our Lexford joint venture.

Agency Business Activity.

Loan originations and sales totaled $1.09 billion and $932.7 million, respectively; and
Grew our fee-based servicing portfolio over 3%, or $914.6 million, to $28.91 billion.

Dividend. We raised our quarterly common dividend $0.02 to $0.42 per share, representing an annual run rate of $1.68 per share.

Current Market Conditions, Risks and Recent Trends

As discussed throughout this report,

We are currently in a high interest rate environment, as the ongoing COVID-19 pandemic continuesFederal Reserve has raised interest rates several times over the past two years to impactcombat inflation and restore price stability. Based on the global economylatest comments from the Federal Reserve in unprecedented ways, causingMarch 2024, we expect they may begin to lower interest rates at some point during 2024. Interest rates could remain higher for longer than expected if inflation and other economic indicators do not meet the Federal Reserve’s expectations.
Inflation, rising interest rates, bank failures, and geopolitical uncertainty has caused significant disruptions and liquidity constraints in many market segments, including the financial services, real estate and credit markets. Although vaccine availability and usage have continued to increase,markets, which has, led to less negative short-term effects, such as travel bans, quarantines, layoffs and shutdowns, the ongoing longer-term macroeconomic effects on inflation, interest rates, capital markets, labor shortages, property values and global supply chains continue to negatively impact many industries, including the U.S. commercial real estate market. Although we have not been significantly impacted by COVID-19 to-date, adverse economic conditions have resulted, and may continue, to result in rising interest rates,a further dislocation in capital markets and a continual reduction of available liquidity. Despite these periodic disruptions, we have been successful in raising capital through various vehicles, when needed, to grow our business.
Recent instability in the banking sector, such as the multiple regional bank failures and consolidations, further contributed to the tightening liquidity conditions in the equity and capital markets and has affected the availability and increased the cost of capital. The increased cost of credit, or degradation in debt financing terms, may impact our ability to identify and execute investments on attractive terms, or at all. Additionally, although the majority of our cash is currently on deposit with major financial institutions, our balances often exceed insured limits. We limit the exposure relating to these balances by diversifying them among various counterparties. Generally, deposits may be redeemed upon demand and are maintained at financial institutions with reputable credit and therefore we believe bear minimal credit risk.
These current market conditions may continue to limit our ability to grow our Structured Business since this business is more reliant on the capital markets to grow, but can also present us with options to build on existing relationships or create new relationships with lenders. Runoff in our Structured Business also provides an opportunity to refinance these loans with new Agency loans, when practical and appropriate to do so. Since our Agency Business requires limited capital to grow, as originations are financed through warehouse facilities for generally up to 60 days before the loans are sold, tightening liquidity conditions in equity and capital markets should not have a substantial impact on our ability to sustain this business.
These adverse economic conditions have resulted in, and may continue to result in, a dislocation in capital markets, declining real estate values of certain asset classes, increased payment delinquencies and defaults and increased loan modifications and foreclosures, all of which could have a significant impact on our future results of operations, financial condition, business prospects and our ability to make distributions to our stockholders.

45

As a result of the current high interest rate environment, some of our borrowers have experienced, and may continue to experience, financial stress that has resulted in an increase in payment delinquencies, loan loss reserves and realized losses on certain loans within our portfolio. We employ rigorous risk management and underwriting practices to proactively maintain the quality of our loan portfolio and

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The Federal Reserve has raisedwork very closely with borrowers to mitigate potential losses while safeguarding the integrity of our portfolio. Given the current elevated interest rates throughout 2022 to combat inflation and restore price stability and it is expectedrate environment, we cannot guarantee that ratesour loan portfolio will continue to rise throughoutperform under the first half of 2023, potentially even longer. terms originally established.

Currently, risingthe high interest rates willrate environment positively impactimpacts our net interest income since our structured loan portfolio exceeds our corresponding debt balances and the vast majority of our loan portfolio is floating-ratefloating rate based on SOFR or LIBOR.SOFR. In addition, a greater portion of our debt is fixed-ratefixed rate (convertible and senior unsecured notes), as compared to our structured loan portfolio, and willdoes not reset as interest rates rise. Therefore, increases in interest income due to rising interest rates is likely to be greater than the corresponding increase in interest expense on our variable rate debt. Additionally, we earn interest on our escrow and cash balances, so an increasinga high interest rate environment will increase our earnings on such balances. See “Quantitative and Qualitative Disclosures about Market Risk” below for additional details. Conversely, such rising interest rates couldhave negatively impactimpacted real estate values and limit a borrower’s abilityhave limited certain borrowers abilities to make debt service payments, which may limit new mortgage loan originations and increase the likelihood of incurringadditional delinquencies and losses fromincurred on defaulted loans if the reduction in the collateral value is insufficient to repay their loans in full.

We have recently witnessed significant volatility in the banking sector as a result of disruptions to the banking system and financial markets resulting from multiple bank failures. Although the majority of our cash is currently on deposit with major financial institutions, our balances often exceed insured limits. We limit the exposure relating to these balances by diversifying them among various counterparties. Generally, deposits may be redeemed upon demand and are maintained with financial institutions with reputable credit and therefore we believe bear minimal credit risk.

We have been very successful in raising capital through various vehicles to grow our businesses. The anticipated continual rise in interest rates, inflation, recent bank failures and unpredictable geopolitical landscape have caused a dislocation and additional volatility in the capital markets, which may result in a continual reduction of available liquidity. Instability in the banking sector, such as the recent bank failures and consolidations, have further contributed to the tightening liquidity conditions in equity and capital markets and has affected the availability and cost of capital. The increased cost of credit, or degradation in debt financing terms, may impact our ability to identify and execute investments on attractive terms, or at all. Periods of volatility and dislocation in the capital markets, as observed recently, could limit our ability to grow our Structured Business since this business is more reliant on the capital markets to grow, but can also present us with unique avenues to participate in other lower cost financing options and build on existing relationships, or, create new relationships with lenders. Since our Agency Business requires limited capital to grow, as originations are financed through warehouse facilities for generally up to 60 days before the loans are sold, tightening liquidity conditions in equity and capital markets should not have a substantial impact on our ability to grow this business.

We are a national originator with Fannie Mae and Freddie Mac, and the GSEs remain the most significant providers of capital to the multifamily market. In November 2022, the Federal Housing Finance Agency (“FHFA”) announced that2023, FHFA set its 20232024 Caps for Fannie Mae and Freddie Mac will be $75at $70 billion for each enterprise for a total opportunity of $150$140 billion, (the “2023 Caps”), which has decreasedis a decrease from its 2022 loan origination caps2023 Caps of $78$75 billion for each enterprise. The FHFA has stated that they will continue to monitor the market and reserves the right to increase the 20232024 Caps if warranted, however, they will not reduce the 20232024 Caps if the market is smaller than initially projected. To promote affordable housing preservation, loans classified as supporting workforce housing properties will be exempt from the 2024 Caps. Workforce housing loans preserve rents at affordable levels in multifamily properties, typically without the use of public subsidies. The 20232024 Caps will continue to apply to all multifamily business, have no exclusions, and mandate that at least 50% be directed towards mission driven, affordable housing. The FHFA has removed the requirement that at least 25% be affordablehousing, with affordability levels corresponding to residents at or below 60%80%-120% of area median income, (“AMI”) to reduce inconsistencies with their Housing Goals regulation. Further,depending on the FHFA has changed certain definitions of mission driven affordable housing and also allows loans to finance energy or water efficiency improvements with units affordable at or below 80% of AMI to be classified as mission-driven, up from 60% AMI in 2022. This increase will allow the GSEs to expand their effort on energy and water conservation measures at workforce housing properties.market. Our originations with the GSEs are highly profitable executions as they provide significant gains from the sale of our loans, non-cash gains related to MSRs, and servicing revenues. Therefore,The current high interest rate environment could lead to a decline in our GSE originations, which could negatively impact our financial results. We are unsure whether the FHFA will impose stricter limitations on GSE multifamily production volume in the future.

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Changes in Financial Condition

Assets — Comparison of balances at March 31, 20232024 to December 31, 2022:

2023:

Our Structured loan and investment portfolio balance was $13.64$12.25 billion and $14.46$12.62 billion at March 31, 20232024 and December 31, 2022,2023, respectively. This decrease was primarily due to loan runoff exceeding loan originations by $918.6$384.2 million. See below for details.

Our portfolio had a weighted average current interest pay rate of 8.60%8.07% and 8.17%8.42% at March 31, 20232024 and December 31, 2022,2023, respectively. Including certain fees earned and costs associated with the structured portfolio, the weighted average current interest rate was 8.83%8.81% and 8.42%8.98% at March 31, 20232024 and December 31, 2022,2023, respectively. Our debt that finances our loans and investment portfolio totaled $12.65$11.11 billion and $13.28$11.57 billion at March 31, 20232024 and December 31, 2022,2023, respectively, with a weighted average funding cost of 6.68%7.13% and 6.22%7.14%, respectively, which excludes financing costs. Including financing costs, the weighted average funding rate was 6.97%7.44% and 6.50%7.45% at March 31, 20232024 and December 31, 2022,2023, respectively.

Activity from our Structured Business portfolio is comprised of the following ($ in thousands):

Three Months Ended March 31, 2024
Loans originated$255,854 
Number of loans59
Weighted average interest rate7.14%
Loan runoff$640,018 
Number of loans41
Weighted average interest rate9.19%
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Table of Contents

Three Months Ended

    

March 31, 2023

    

Loans originated

$

268,034

Number of loans

 

24

Weighted average interest rate

 

9.62

%  

Loan runoff

$

1,186,649

Number of loans

 

65

Weighted average interest rate

 

8.86

%  

Loans extended

$

360,613

Number of loans

 

14

Loans held-for-sale from the Agency Business increased $115.5decreased $228.8 million, primarily from loan originationssales exceeding loan salesoriginations by $159.2$239.1 million as noted in the following table, partially offset by an unfunded construction loan origination totaling $60.4 million. Our GSE loans are generally sold within 60 days, while our Private Label loans are generally expected to be sold to third-parties or securitized within 180 days from the loan origination date.table. Activity from our Agency Business portfolio is comprised of the following (in thousands):
Three Months Ended March 31, 2024
Loan OriginationsLoan Sales
Fannie Mae$458,429 $725,898 
Freddie Mac370,102 329,679 
Private Label15,410 15,410 
SFR - Fixed Rate2,318 2,318 
FHA— 12,069 
Total$846,259 $1,085,374 
I

Three Months Ended

March 31, 2023

Loan

    

Originations

    

Loan Sales

Fannie Mae

$

795,021

$

651,758

FHA

148,940

43,475

Freddie Mac

 

101,332

 

68,457

Private Label

 

41,107

 

159,945

SFR - Fixed Rate

 

5,461

 

9,064

Total

$

1,091,861

$

932,699

nvestments in equity affiliates increased $10.9 million, primarily due to additional investments made in an existing joint venture.

Due from related party was $113.1increased $39.9 million, and $77.4 million at March 31, 2023 and December 31, 2022, respectively, and representsdue to an increase in funds received from payoffs to be remitted by our affiliated servicing operations related to real estate transactions at the end of the reporting period, which were remitted to us subsequent to quarter end.
Other assets increased $9.7 million, primarily due to an increase in unsecured loan payoffs.fundings.

Liabilities – Comparison of balances at March 31, 20232024 to December 31, 2022:

2023:

Credit and repurchase facilities decreased $190.9$324.3 million, primarily due to loan runoff in our Structured Business portfolio partially offset byas well as loan originationssales exceeding salesoriginations in our Agency Business.

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Table of Contents

Securitized debt decreased $340.8$243.1 million, primarily due to repayments of debtpaydowns on CLO 12 and CLO 13 as the replacement period has ended for both CLOs.

Senior unsecured notes increased $23.9existing securitizations.

Due to borrowers decreased $25.9 million, primarily due to the issuancefunding of $95.0 million of 7.75% senior notes, partially offset by the repurchase of $70.8 million ofpreviously committed originations in our 8.00% senior notes.

Structured Business.

Other liabilities decreased $30.2$23.6 million, primarily due to payments of accrued commissionsincentive compensation and incentive compensationcommissions during the first quarter of 2023,2024, related to 2022 performance, and decreases in accrued legal fees, from the payment made to settle the Extended Stay litigation, and accrued interest payable, from payment of the semi-annual interest due on our 7.50% convertible notes.

Equity

During the first quarter of 2023 we sold 5,635,800 shares of our common stock through our “At-The-Market” equity agreement. In addition, through April 30, 2023, we repurchased 3,545,604 shares of our common stock under our share repurchase program.

performance.

Equity
See Note 15 for details of our dividends declared and our deferred compensation transactions.

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Table of Contents

Agency Servicing Portfolio

The following table sets forth the characteristics of our loan servicing portfolio collateralizing our mortgage servicing rights and servicing revenue ($ in thousands):

March 31, 2024
ProductPortfolio UPBLoan CountWtd. Avg. Age of Portfolio (years)Wtd. Avg. Life of Portfolio (years)Interest Rate TypeWtd. Avg. Note RateAnnualized Prepayments as a % of Portfolio (1)Delinquencies as a % of Portfolio (2)
FixedAdjustable
Fannie Mae$21,548,221 2,5753.57.296 %%4.52 %1.35 %0.88 %
Freddie Mac5,301,291 1,1383.37.784 %16 %4.76 %7.92 %3.77 %
Private Label2,524,013 1612.76.3100 %— 4.02 %— 0.18 %
FHA1,365,329 1053.219.0100 %— 3.54 %— — 
Bridge380,712 41.53.662 %38 %7.14 %— — 
SFR - Fixed Rate265,429 562.35.0100 %— 5.27 %24.51 %1.70 %
Total$31,384,995 4,0393.47.794 %%4.52 %2.47 %1.27 %
December 31, 2023
Fannie Mae$21,264,578 2,5593.47.496 %%4.50 %5.09 %0.86 %
Freddie Mac5,181,933 1,1483.28.583 %17 %4.72 %7.92 %4.39 %
Private Label2,510,449 1602.56.7100 %— 4.02 %— — 
FHA1,359,624 1053.019.2100 %— 3.52 %— — 
Bridge379,425 41.23.263 %37 %7.14 %— — 
SFR - Fixed Rate287,446 592.35.1100 %— 5.20 %1.18 %— 
Total$30,983,455 4,0353.28.094 %%4.49 %4.83 %1.33 %
________________________

    

March 31, 2023

 

Wtd. Avg.

Wtd. Avg.

Annualized

 

Servicing

Age of

Portfolio

Prepayments

Delinquencies

 

Portfolio

Loan

Portfolio

Maturity

Interest Rate Type

Wtd. Avg.

as a %

as a %

 

Product

    

UPB

    

Count

    

(years)

    

(years)

    

Fixed

    

Adjustable

    

Note Rate

    

of Portfolio (1)

    

of Portfolio (2)

 

Fannie Mae

    

$

19,508,256

 

2,487

 

3.2

 

8.3

 

94

%  

6

%  

4.30

%  

4.64

%  

0.43

%

Freddie Mac

 

5,180,607

 

1,201

 

3.0

 

10.0

 

80

%  

20

%  

4.47

%  

4.64

%  

2.86

%

Private Label

2,233,500

139

2.1

7.6

100

%  

3.71

%  

FHA

 

1,242,669

 

101

 

2.5

 

33.4

 

100

%  

3.31

%  

Bridge

467,881

5

0.9

2.6

35

%  

65

%  

7.42

%  

SFR - Fixed Rate

279,712

56

1.6

6.1

100

%  

5.09

%  

Total

$

28,912,625

 

3,989

 

3.0

 

9.5

 

91

%  

9

%  

4.30

%  

3.97

%  

0.80

%

(1)

    

December 31, 2022

 

Fannie Mae

    

$

19,038,124

 

2,460

 

3.1

 

8.5

 

96

%  

4

%  

4.20

%  

12.71

%  

0.13

%

Freddie Mac

 

5,153,207

 

1,214

 

2.8

 

10.2

 

84

%  

16

%  

4.26

%  

19.78

%  

0.27

%

Private Label

2,074,859

130

1.9

7.8

100

%  

3.60

%  

FHA

1,155,893

 

96

 

2.5

 

33.5

 

100

%  

3.17

%  

1.59

%  

Bridge

301,182

4

0.9

1.6

100

%

7.68

%

SFR - Fixed Rate

 

274,764

53

1.4

6.3

100

%  

5.04

%  

0.30

%  

Total

$

27,998,029

 

3,957

 

2.9

 

9.7

 

93

%  

7

%  

4.17

%  

12.35

%  

0.14

%

Prepayments reflect loans repaid prior to six months from the loan maturity. The majority of our loan servicing portfolio has a prepayment protection term and therefore, we may collect a prepayment fee which is included as a component of servicing revenue, net. See Note 5 for details.
(2)Delinquent loans reflect loans that are contractually 60 days or more past due. At March 31, 2024 and December 31, 2023, delinquent loans totaled $399.0 million and $411.1 million, respectively. At both March 31, 2024 and December 31, 2023, there were two loans totaling $4.8 million in bankruptcy and no loans in foreclosure.
(1)Prepayments reflect loans repaid prior to six months from the loan maturity. The majority of our loan servicing portfolio has a prepayment protection term and therefore, we may collect a prepayment fee which is included as a component of servicing revenue, net. See Note 5 for details.
(2)Delinquent loans reflect loans that are contractually 60 days or more past due. At March 31, 2023 and December 31, 2022, delinquent loans totaled $232.1 million and $38.7 million, respectively. At March 31, 2023, there were two loans totaling $3.3 million in bankruptcy and a $1.0 million loan in foreclosure. There were no loans in the foreclosure process or in bankruptcy at December 31, 2022.

Our Agency Business servicing portfolio represents commercial real estate loans, which are generally transferred or sold within 60 days from the date the loan is funded. Primarily all loans in our servicing portfolio are collateralized by multifamily properties. In addition, we are generally required to share in the risk of any losses associated with loans sold under the Fannie Mae DUS program, see Note 10.

48

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Comparison of Results of Operations for the Three Months Ended March 31, 20232024 and 2022

2023

The following table provides our consolidated operating results ($ in thousands):

    

Three Months Ended March 31,

    

Increase / (Decrease)

 

2023

    

2022

Amount

    

Percent

 

Interest income

$

327,947

$

166,698

$

161,249

 

97

%

Interest expense

 

219,373

 

82,559

 

136,814

 

166

%

Net interest income

 

108,574

 

84,139

 

24,435

 

29

%

Other revenue:

 

 

 

 

Gain on sales, including fee-based services, net

 

14,589

 

1,656

 

12,933

 

nm

Mortgage servicing rights

 

18,458

 

15,312

 

3,146

 

21

%

Servicing revenue, net

 

29,565

 

21,054

 

8,511

 

40

%

Property operating income

 

1,381

 

295

 

1,086

 

nm

Gain on derivative instruments, net

 

4,223

 

17,386

 

(13,163)

 

(76)

%

Other income, net

 

4,882

 

3,200

 

1,682

 

53

%

Total other revenue

 

73,098

 

58,903

 

14,195

 

24

%

Other expenses:

 

 

 

 

Employee compensation and benefits

 

42,399

 

42,025

 

374

 

1

%

Selling and administrative

 

13,623

 

14,548

 

(925)

 

(6)

%

Property operating expenses

 

1,383

 

535

 

848

 

159

%

Depreciation and amortization

 

2,624

 

1,983

 

641

 

32

%

Provision for loss sharing (net of recoveries)

 

3,177

 

(662)

 

3,839

 

nm

Provision for credit losses (net of recoveries)

 

22,517

 

2,358

 

20,159

 

nm

Total other expenses

 

85,723

 

60,787

 

24,936

 

41

%

Income before extinguishment of debt, income from equity affiliates and income taxes

 

95,949

 

82,255

 

13,694

 

17

%

Loss on extinguishment of debt

(1,350)

1,350

nm

Income from equity affiliates

 

14,326

 

7,212

 

7,114

 

99

%

Provision for income taxes

 

(8,029)

 

(8,188)

 

159

 

(2)

Net income

 

102,246

 

79,929

 

22,317

 

28

%

Preferred stock dividends

 

10,342

 

9,056

 

1,286

 

14

%

Net income attributable to noncontrolling interest

 

7,585

 

6,816

 

769

 

11

%

Net income attributable to common stockholders

$

84,319

$

64,057

$

20,262

 

32

%

Three Months Ended March 31, Increase / (Decrease)
2024 2023Amount Percent
Interest income$321,292 $327,947 $(6,655)(2)%
Interest expense217,676 219,373 (1,697)(1)%
Net interest income103,616 108,574 (4,958)(5)%
Other revenue:   
Gain on sales, including fee-based services, net16,666 14,589 2,077 14%
Mortgage servicing rights10,199 18,458 (8,259)(45)%
Servicing revenue, net31,526 29,565 1,961 7%
Property operating income1,570 1,381 189 14
Gain (loss) on derivative instruments, net(5,257)4,223 (9,480)nm%
Other income, net2,333 4,882 (2,549)(52)
Total other revenue57,037 73,098 (16,061)(22)%
Other expenses:   
Employee compensation and benefits47,694 42,399 5,295 12%
Selling and administrative13,933 13,623 310 2%
Property operating expenses1,678 1,383 295 21
Depreciation and amortization2,571 2,624 (53)(2)%
Provision for loss sharing (net of recoveries)273 3,177 (2,904)(91)
Provision for credit losses (net of recoveries)19,118 22,517 (3,399)(15)
Total other expenses85,267 85,723 (456)(1)%
Income before income from equity affiliates and income taxes75,386 95,949 (20,563)(21)%
Income from equity affiliates1,418 14,326 (12,908)(90)%
Provision for income taxes(3,592)(8,029)4,437 (55)
Net income73,212 102,246 (29,034)(28)%
Preferred stock dividends10,342 10,342 — 
Net income attributable to noncontrolling interest4,997 7,585 (2,588)(34)%
Net income attributable to common stockholders$57,873 $84,319 $(26,446)(31)%
________________________

nm — not meaningful

49

47

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The following table presents the average balance of our Structured Business interest-earning assets and interest-bearing liabilities, associated interest income (expense) and the corresponding weighted average yields ($ in thousands):

Three Months Ended March 31,
20242023
Average
Carrying
Value (1)
Interest
Income /
Expense
W/A Yield /
Financing
Cost (2)
Average
Carrying
Value (1)
Interest
Income /
Expense
W/A Yield /
Financing
Cost (2)
Structured Business interest-earning assets:
Bridge loans$12,164,713 $286,117 9.43 %$13,799,379 $303,019 8.91 %
Mezzanine / junior participation loans249,983 6,877 11.03 %214,971 5,884 11.10 %
Preferred equity investments96,908 1,600 6.62 %97,192 1,998 8.34 %
Other6,511 166 10.23 %34,152 833 9.89 %
Core interest-earning assets12,518,115 294,760 9.44 %14,145,694 311,734 8.94 %
Cash equivalents1,024,655 13,128 5.14 %871,105 5,642 2.63 %
Total interest-earning assets$13,542,770 $307,888 9.12 %$15,016,799 $317,376 8.57 %
Structured Business interest-bearing liabilities:
CLO$6,619,361 $121,861 7.38 %$7,480,943 $119,051 6.45 %
Credit and repurchase facilities2,764,919 57,974 8.41 %3,438,091 62,730 7.40 %
Unsecured debt1,632,500 25,330 6.22 %1,713,633 26,289 6.22 %
Q Series securitization202,744 4,091 8.09 %236,878 3,906 6.69 %
Trust preferred154,336 3,344 8.69 %154,336 2,918 7.67 %
Total interest-bearing liabilities$11,373,860 212,600 7.50 %$13,023,881 214,894 6.69 %
Net interest income$95,288 $102,482 
________________________
(1)

Three Months Ended March 31, 

2023

2022

Average

Interest

W/A Yield /

Average

Interest

W/A Yield /

 

Carrying

Income /

Financing

Carrying

Income /

Financing

 

    

Value (1)

    

Expense

    

Cost (2)

    

Value (1)

    

Expense

    

Cost (2)

 

Structured Business interest-earning assets:

 

  

 

  

 

  

 

  

 

  

 

  

Bridge loans

$

13,799,379

$

303,019

 

8.91

%  

$

12,506,401

$

143,483

 

4.65

%

Mezzanine / junior participation loans

 

214,971

 

5,884

 

11.10

%  

 

222,758

 

5,078

 

9.25

%

Preferred equity investments

 

97,192

 

1,998

 

8.34

%  

 

152,761

 

2,660

 

7.06

%

Other

34,152

833

9.89

%

140,666

4,926

14.20

%

Core interest-earning assets

 

14,145,694

 

311,734

 

8.94

%  

 

13,022,586

 

156,147

 

4.86

%

Cash equivalents

 

871,105

 

5,642

 

2.63

%  

 

758,362

 

113

 

0.06

%

Total interest-earning assets

$

15,016,799

$

317,376

 

8.57

%  

$

13,780,948

$

156,260

 

4.60

%

Based on UPB for loans, amortized cost for securities and principal amount of debt.

Structured Business interest-bearing liabilities:

    

 

  

    

 

  

    

  

    

 

  

    

 

  

    

  

CLO

$

7,480,943

$

119,051

 

6.45

%  

$

6,604,069

$

31,723

 

1.95

%

Credit and repurchase facilities

 

3,438,091

 

62,730

 

7.40

%  

 

3,668,456

 

24,121

 

2.67

%

Unsecured debt

 

1,713,633

 

26,289

 

6.22

%  

 

1,559,751

 

21,153

 

5.50

%

Q Series securitization

236,878

3,906

6.69

%  

Trust preferred

 

154,336

 

2,918

 

7.67

%  

 

154,336

 

1,205

 

3.17

%

Total interest-bearing liabilities

$

13,023,881

 

214,894

 

6.69

%  

$

11,986,612

 

78,202

 

2.65

%

Net interest income

$

102,482

 

  

 

  

$

78,058

 

  

(2)Weighted average yield calculated based on annualized interest income or expense divided by average carrying value.
(1)Based on UPB for loans, amortized cost for securities and principal amount of debt.
(2)Weighted average yield calculated based on annualized interest income or expense divided by average carrying value.

Net Interest Income

The increasedecrease in interest income was mainly due to a $161.1$9.5 million decrease from our Structured Business, partially offset by a $2.8 million increase from our Agency Business. The decrease from the Structured Business was primarily due to a significant increasedecrease in the average yield on core interest-earning assets, as a result of increases in benchmark interest rates, and an increase in our average balance of our core interest-earning assets, mainly from loan originationsrunoff exceeding loan runoff during 2022.

originations, partially offset by an increase in the average yield on core interest-earning assets, mainly from increases in SOFR. The increase from the Agency Business was primarily due to increases in both the average loans held-for-sale balance and SOFR.

The decrease in interest expense was mainly due to a $136.7$2.3 million increasedecrease from our Structured Business, primarily due to a significant increase in the average cost of our interest-bearing liabilities, mainly from increases in benchmark index rates, and an increasedecrease in the average balance of our interest-bearing liabilities, primarily due to the growthloan runoff and note paydowns in our loan portfolio during 2022 andsecuritizations, substantially offset by an increase in the issuanceaverage cost of additional unsecured debt.

interest-bearing liabilities, mainly from increases in SOFR.

Agency Business Revenue

The increase in gain on sales, including fee-based services, net was primarily due to a 32%16% increase in the sales margin from 1.18% (which includes gains recognized on Swaps) to 1.56%, partially offset by a 41% decrease ($654.0 million) in loan sales volume. volume ($152.7 million).
The increase in the sales margin was primarily driven by higher margins received on Fannie Mae and Private Label loan sales.

The increasedecrease in income from MSRs was primarily due to a 54% increase ($525.0 million)38% decrease in loan commitment volume partially offset by a 22%($565.9 million) and an 11% decrease in the MSR rate from 1.57%1.23% to 1.23%1.09%. The decrease in the MSR rate was primarily due to a reductionhigher percentage of Fannie Mae loan commitments in the prior year period, which contain higher servicing rates on newer loans.

fees.

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The increase in servicing revenue, net was primarily due to an increase in earnings on escrow balances as a result of increases in benchmark index rates and higher escrow balances,SOFR, partially offset by less prepayment penalties received.

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Table of Contents

Other Income

(Loss)

The gainloss on derivative instruments in both2024 and gain in 2023 and 2022 were related to changes in the fair values of our forward sale commitments and Swaps held by our Agency Business as a result of changes in market interest rates as well as from the timing of GSE Agency loan sales.
Other income, net in 2024 primarily reflects loan origination and modification fees from our Structured Business, while 2023 primarily reflects a $2.9 million mark-to-market recovery on Private Label and SFR loans in our Agency Business and loan origination fees from our Structured Business.

Other Expenses

The decreaseincrease in sellingemployee compensation and administrative expensesbenefits expense was primarily due to lower legal fees due to the settlement of the Extended Stay litigation.

increases in incentive compensation, including commissions, from increases in headcount, annual merit increases and higher GSE/Agency loan sales volume.


The increase in our provisionsprovision for loss sharing and credit losses (“(net of recoveries) reflects a net recovery in 2024 compared to a net CECL provisions”) wereprovision recorded in 2023 primarily due to the impactrecovery of an increasea Fannie Mae DUS loan in interest rates, higher unemployment rates2024 that exceeded the CECL reserve recorded in the current quarter.
The provision for credit losses (net of recoveries) in 2024 primarily reflects specifically identified CECL reserves, whereas the CECL reserves in 2023 primarily reflected a greater decline in economic and rising inflation, along with changes in property values, in our CECL forecast models.

Loss on Extinguishment of Debt

The loss on extinguishment of debt in 2022 represents deferred financing fees recognized in connection with the unwind of CLOs.

market conditions at that time, and to a lesser extent, specific reserves.

Income from Equity Affiliates

Income from equity affiliates in the first quarter2024 primarily reflects $1.6 million of income from our investment in a residential mortgage banking business, while income in 2023 primarily reflects $11.0 million received from an equity participation interest on a property that was sold and a $4.7 million distribution received from our Lexford joint venture, while income inventure.
Provision for Income Taxes
In the first quarterthree months ended March 31, 2024, we recorded a tax provision of 2022 primarily reflects income from our investment in$3.6 million, which consisted of a residential mortgage banking businesscurrent tax provision of $5.0$7.6 million and a $2.6 million equity participation interest on a property that was sold.

Provision for Income Taxes

deferred tax benefit of $4.0 million. In the three months ended March 31, 2023, we recorded a tax provision of $8.0 million, which consisted of a current and deferred tax provision of $4.8 million and $3.2 million, respectively. In the three months ended March 31, 2022, we recorded a tax provision of $8.2 million, which consisted of a current tax provision of $9.9 million and a deferred tax benefit of $1.7 million. The decrease in the tax provision was primarily due to lower income generated from our investment in a residential banking business.

Preferred Stock Dividends

The increase in preferred stock dividends was due to the issuance of an additional 3,292,000 shares of our Series F preferred stock during the first quarter of 2022.

Net Income Attributable to Noncontrolling Interest

The noncontrolling interest relates to the outstanding OP Units (see Note 15). There were 16,293,589 OP Units and 16,325,095 OP Units outstanding at both March 31, 20232024 and 2022, respectively,2023, which represented 8.1%7.9% and 9.2%8.1% of our outstanding stock at March 31, 2024 and 2023, and 2022, respectively.

Liquidity and Capital Resources

Sources of Liquidity. Liquidity is a measure of our ability to meet our potential cash requirements, including ongoing commitments to repay borrowings, satisfaction of collateral requirements under the Fannie Mae DUS risk-sharing agreement and, as an approved designated seller/servicer of Freddie Mac’s SBL program, operational liquidity requirements of the GSE agencies, fund new loans and investments, fund operating costs and distributions to our stockholders, as well as other general business needs. Our primary sources of funds for liquidity consist of proceeds from equity and debt offerings, proceeds from CLOs and securitizations, debt facilities and cash flows from operations. We closely monitor our liquidity position and believe our existing sources of funds and access to additional liquidity will be adequate to meet our liquidity needs.

51

Table of Contents

The ongoing COVID-19 pandemic has contributed to adverse economic and market conditions, causingincluding inflation, rising interest rates, bank failures and geopolitical uncertainty, continues to cause significant disruptions and liquidity constraints in many market segments, including the financial services, real estate and credit markets. These conditions have created, and may continue to create, a dislocation in capital markets while adding to ongoing longer-term macroeconomic effects on inflation, interest rates and capital markets. In addition,a continual reduction of available liquidity. Instability in the banking sector, such as the recent bank failures and consolidations, have further contributed to a dislocation in capital markets and tightening liquidity conditions affecting the availability and cost of capital. We are monitoring its impact on our financing sources, borrowers and their tenants, as well as the economy as a whole, including the tightening liquidity conditions in the equity and capital markets. Tomarkets and has affected the extent thatavailability and increased the cost of capital. The increased cost of credit, or degradation in debt financing terms, may impact our ability to identify and execute investments on attractive terms, or at all. If our financing sources, borrowers and their tenants continue to be impacted by the pandemic,these adverse economic and market conditions, or by the other risks disclosed in our filings with the SEC, it would have a material adverse effect on our liquidity and capital resources.

As described in Note 9, certain of our repurchase facilities include margin call provisions associated with changes in interest spreads which are designed to limit the lenders credit exposure. If we experience significant decreases in the value of the properties serving as collateral under these repurchase agreements, which is set by the lenders based on current market conditions, the lenders have the right to require us to repay all, or a portion, of the funds advanced, or provide additional collateral.

We had $12.65 billion in total structured debt outstanding at March 31, 2023. Of this total, $9.41 billion, or 74%, does not contain mark-to-market provisions and is comprised of non-recourse securitized debt, senior unsecured debt and junior subordinated notes, the majority of which have maturity dates in 2024, or later. The remaining $3.24 billion of debt is in credit and repurchase facilities with several different banks that we have long-standing relationships with. At March 31, 2023, we had $2.12 billion of debt from credit and repurchase facilities that were subject to margin calls related to changes in interest spreads. While we expect to extend or renew all of our facilities as they mature, we cannot provide assurance that they will be extended or renewed on as favorable terms.

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Table of Contents

We had $11.11 billion in total structured debt outstanding at March 31, 2024. Of this total, $8.50 billion, or 77%, does not contain mark-to-market provisions and is comprised of non-recourse securitized debt, senior unsecured debt and junior subordinated notes. The remaining $2.61 billion of debt is in credit and repurchase facilities with several different banks that we have long-standing relationships with. At May 4, 2023,March 31, 2024, we had $1.56 billion of debt from credit and repurchase facilities that were subject to margin calls related to changes in interest spreads.
At April 30, 2024, we had approximately $785.0$800 million in cash and approximately $560.0$600 million of replenishable cash available under our CLO vehicles, as well as other liquidity sources. In addition to our ability to extend our credit and repurchase facilities and raise funds from equity and debt offerings, we also have a $28.91$31.38 billion agency servicing portfolio at March 31, 2023,2024, which is mostly prepayment protected and generates approximately $117.0$122 million per year in recurring gross cash flow.

To maintain our status as a REIT under the Internal Revenue Code, we must distribute annually at least 90% of our REIT-taxable income. These distribution requirements limit our ability to retain earnings and thereby replenish or increase capital for operations. However, we believe that our capital resources and access to financing will provide us with financial flexibility and market responsiveness at levels sufficient to meet current and anticipated capital and liquidity requirements.

Cash Flows. Cash flows used inprovided by operating activities totaled $56.8$260.0 million during the three months ended March 31, 20232024 and consisted primarily of net cash outflowsinflows of $111.9$227.6 million due tofrom loan originationssales exceeding loan salesoriginations in our Agency Business and net income (adjusted for the increase in CECL reserves of $19.4 million) of $92.6 million, partially offset by a $30.2 million decrease in other liabilities, primarily due to payments made for commissions, incentive compensation and the settlement of the Extended Stay litigation and a $35.7$39.9 million increase in funds from payoffs due from related party, partially offset by net income of $102.2 million.

our affiliated servicing operations.

Cash flows provided by investing activities totaled $828.0$331.6 million during the three months ended March 31, 2023.2024. Loan and investment activity (originations and payoffs/paydowns) comprise the majority of our investing activities. Loan payoffs and paydowns from our Structured Business totaling $1.19 billion,$670.4 million, net of originations of $380.6$313.6 million, resulted in net cash inflows of $810.4$356.8 million.

Cash flows used in financing activities totaled $540.0$674.1 million during the three months ended March 31, 20232024 and consisted primarily of $344.5 million of paydowns on CLO 12 and CLO 13 (replacement period ended), net cash outflows of $193.3$321.8 million from debt facility activities (facility paydowns were greater than loan originations), $246.1 million of pay downs on existing securitizations and $90.5$98.7 million of distributions to our stockholders and OP Unit holders, partially offset by $82.7 million of proceeds from the issuance of common stock.

holders.

Agency Business Requirements. The Agency Business is subject to supervision by certain regulatory agencies. Among other things, these agencies require us to meet certain minimum net worth, operational liquidity and restricted liquidity collateral requirements, purchase and loss obligations and compliance with reporting requirements. Our adjusted net worth and operational liquidity exceeded the agencies’ requirements at March 31, 2023.2024. Our restricted liquidity and purchase and loss obligations were satisfied with letters of credit totaling $69.0 million and $2.5 million of cash. See Note 13 for details about our performance regarding these requirements.

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Table of Contents

We also enter into contractual commitments with borrowers providing rate lock commitments while simultaneously entering into forward sale commitments with investors. These commitments are outstanding for short periods of time (generally less than 60 days) and are described in Note 11.

Debt Facilities. We maintain various forms of short-term and long-term financing arrangements. Borrowings underlying these arrangements are primarily secured by a significant amount of our loans and investments and substantially all our loans held-for-sale. The following is a summary of our debt facilities (in($ in thousands):

Debt InstrumentsMarch 31, 2024
CommitmentUPB (1)AvailableMaturity Dates (2)
Structured Business
Credit and repurchase facilities$6,530,603 $2,608,942 $3,921,661 2024 - 2027
Securitized debt (3)6,710,119 6,710,119 — 2024 - 2027
Senior unsecured notes1,345,000 1,345,000 — 2024 - 2028
Convertible senior unsecured notes287,500 287,500 — 2025
Junior subordinated notes154,336 154,336 — 2034 - 2037
Structured Business total15,027,558 11,105,897 3,921,661 
Agency Business
Credit and repurchase facilities (4)1,700,531 312,264 1,388,267 2024 - 2026
Consolidated total$16,728,089 $11,418,161 $5,309,928 
________________________
(1)

March 31, 2023

Maturity

Debt Instruments

    

Commitment

    

UPB (1)

    

Available 

    

Dates (2)

Structured Business

 

  

 

 

  

 

  

Credit and repurchase facilities

$

6,762,047

$

3,239,951

$

3,522,096

 

2023 - 2026

Securitized debt (3)

 

7,541,518

 

7,541,518

 

 

2023 - 2027

Senior unsecured notes

 

1,423,850

 

1,423,850

 

 

2023 - 2028

Convertible senior unsecured notes

 

287,500

 

287,500

 

 

2025

Junior subordinated notes

 

154,336

 

154,336

 

 

2034 - 2037

Structured Business total

 

16,169,251

 

12,647,155

 

3,522,096

 

  

Agency Business

 

 

 

 

  

Credit and repurchase facilities (4)

 

2,150,534

 

422,805

 

1,727,729

 

2023 - 2024

Consolidated total

$

18,319,785

$

13,069,960

$

5,249,825

 

  

Excludes the impact of deferred financing costs.
(2)See Note 13 for a breakdown of debt maturities by year.
50
(1)Excludes the impact of deferred financing costs.
(2)See Note 13 for a breakdown of debt maturities by year.
(3)Maturity dates represent the weighted average remaining maturity based on the underlying collateral at March 31, 2023.
(4)The ASAP agreement we have with Fannie Mae has no expiration date.


Table of Contents

(3)Maturity dates represent the weighted average remaining maturity based on the underlying collateral at March 31, 2024.
(4)The ASAP agreement we have with Fannie Mae has no expiration date.
We utilize our credit and repurchase facilities primarily to finance our loan originations on a short-term basis prior to loan securitizations, including through CLOs. The timing, size and frequency of our securitizations impact the balances of these borrowings and produce some fluctuations. The following table provides additional information regarding the balances of our borrowings (in thousands):

    

Quarterly Average 

    

End of Period

    

Maximum UPB at

Quarter Ended

UPB

UPB

Any Month-End

March 31, 2023

$

3,691,191

$

3,662,756

$

3,696,760

December 31, 2022

4,441,774

3,856,009

4,403,368

September 30, 2022

4,534,744

4,642,911

4,642,911

June 30, 2022

 

4,581,226

 

4,561,393

 

4,926,070

March 31, 2022

 

4,224,503

 

4,315,388

 

4,842,785

Quarter EndedQuarterly Average UPBEnd of Period UPBMaximum UPB at Any Month End
March 31, 2024$3,010,216 $2,921,206 $3,132,279 
December 31, 20233,274,139 3,242,938 3,251,330 
September 30, 20233,432,725 3,398,451 3,463,825 
June 30, 20233,565,377 3,588,538 3,677,755 
March 31, 20233,691,191 3,662,756 3,696,760 
Our debt facilities, including their restrictive covenants, are described in Note 9.

Off-Balance Sheet Arrangements. At March 31, 2023,2024, we had no off-balance sheet arrangements.

Inflation. The We are currently in a high interest rate environment, as the Federal Reserve has raised interest rates throughout 2022several times over the past two years to combat inflation and restore price stabilitystability. Based on the latest comments from the Federal Reserve in March 2024, we expect they may begin to lower interest rates at some point during 2024. Interest rates could remain higher for longer than expected if inflation and it is expected that rates will continue to rise throughoutother economic indicators do not meet the first half of 2023, potentially even longer.Federal Reserve's expectations. Currently, rising interest rates will positively impact our net interest income since our structured loan portfolio exceeds our corresponding debt balances and the vast majority of our loan portfolio is floating-rate based on SOFR or LIBOR.SOFR. In addition, a greater portion of our debt is fixed-rate (convertible and senior unsecured notes), as compared to our structured loan portfolio, and will not reset as interest rates rise. Therefore, increases in interest income due to rising interest rates is likely to be greater than the corresponding increase in interest expense on our variable rate debt. See “Quantitative and Qualitative Disclosures about Market Risk” below for additional details.

Conversely, such rising interest rates have negatively impacted real estate values and have limited certain borrowers abilities to make debt service payments, which may limit new mortgage loan originations and increase the likelihood of additional delinquencies and losses incurred on defaulted loans if the reduction in the collateral value is insufficient to repay their loans in full.

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Contractual Obligations. During the three months ended March 31, 2023,2024, the following significant changes were made to our contractual obligations disclosed in our 20222023 Annual Report:


issued $95.0 million of 7.75% senior unsecured notes due in 2026, and used $70.8 million of the proceeds to repurchase our 8.00% senior unsecured notes; and
modified existing debt facilities.

Modified existing debt facilities, resulting in a net $700.0 million decrease in the committed amount of these facilities;

Entered into a new $250.0 million debt facility; and
Paid down outstanding notes of CLOs 14 and 15 and Q Series securitization totaling $246.1 million.
Refer to Note 13 for a description of our debt maturities by year and unfunded commitments at March 31, 2023.

2024.

Derivative Financial Instruments

We enter into derivative financial instruments in the normal course of business to manage the potential loss exposure caused by fluctuations of interest rates. See Note 11 for details.

Critical Accounting Policies

Please refer to Note 2 of the Notes to Consolidated Financial Statements in our 20222023 Annual Report for a discussion of our critical accounting policies. During the three months ended March 31, 2023,2024, there were no material changes to these policies.

Non-GAAP Financial Measures

Distributable Earnings. We are presenting distributable earnings because we believe it is an important supplemental measure of our 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. We consider distributable earnings in determining our quarterly dividend and believe that, over time, distributable earnings is a useful indicator of our dividends per share.

We define 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
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through earnings, (net of any tax impact), deferred tax provision (benefit), CECL provisions for credit losses (adjusted for realized losses as described below), and gains/losses on the receipt of real estate from the settlement of loans (prior to the sale of the real estate). We also add back one-time charges such as acquisition costs and one-time gains/losses on the early extinguishment of debt and redemption of preferred stock.

We reduce distributable earnings for realized losses in the period we determine 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 we determine 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 our cash flows from operating activities (determined in accordance with GAAP) or a measure of our liquidity, nor is it entirely indicative of funding our cash needs, including our ability to make cash distributions. Our calculation of distributable earnings may be different from the calculations used by other companies and, therefore, comparability may be limited.

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Distributable earnings are as follows ($ in thousands, except share and per share data):

Three Months Ended March 31,
20242023
Net income attributable to common stockholders$57,873 $84,319 
Adjustments:  
Net income attributable to noncontrolling interest4,997 7,585 
Income from mortgage servicing rights(10,199)(18,458)
Deferred tax (benefit) provision(3,952)3,164 
Amortization and write-offs of MSRs18,418 18,723 
Depreciation and amortization3,193 4,295 
Provision for credit losses, net14,804 23,704 
Loss (gain) on derivative instruments, net5,523 (7,051)
Stock-based compensation6,020 5,901 
Distributable earnings (1)$96,677 $122,182 
Diluted weighted average shares outstanding - GAAP (1)222,926,076214,910,974
Less: Convertible notes dilution(17,414,547)(17,230,358)
Diluted weighted average shares outstanding - distributable earnings (1)205,511,529197,680,616
Diluted distributable earnings per share (1)$0.47 $0.62 
________________________
(1)

Three Months Ended March 31, 

    

2023

    

2022

Net income attributable to common stockholders

$

84,319

$

64,057

Adjustments:

 

 

Net income attributable to noncontrolling interest

 

7,585

 

6,816

Income from mortgage servicing rights

 

(18,458)

 

(15,312)

Deferred tax provision (benefit)

 

3,164

 

(1,720)

Amortization and write-offs of MSRs

 

18,723

 

27,669

Depreciation and amortization

 

4,295

 

2,569

Loss on extinguishment of debt

1,350

Provision for credit losses, net

23,704

1,696

Gain on derivative instruments, net

(7,051)

(298)

Stock-based compensation

5,901

 

6,092

Distributable earnings (1)

$

122,182

$

92,919

Diluted weighted average shares outstanding - GAAP (1)

214,910,974

185,431,404

Less: Convertible notes dilution

(17,230,358)

(15,068,383)

Diluted weighted average shares outstanding - distributable earnings (1)

197,680,616

170,363,021

Diluted distributable earnings per share (1)

$

0.62

$

0.55

Amounts are attributable to common stockholders and OP Unit holders. The OP Units are redeemable for cash, or at our option for shares of our common stock on a one-for-one basis.
(1)Amounts are attributable to common stockholders and OP Unit holders. The OP Units are redeemable for cash, or at our option for shares of our common stock on a one-for-one basis.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

We disclosed a quantitative and qualitative analysis regarding market risk in Item 7A of our 20222023 Annual Report. That information is supplemented by the information included above in Item 2 of this report. Other than the developments described thereunder, there have been no material changes in our exposure to market risk since December 31, 2022.

2023.

The following table projects the potential impact on interest (in thousands) for a 12-month period, assuming a hypothetical instantaneous increase or decrease of both 50 basis points and a decrease of 100 basis points in LIBOR, SOFR, or other applicable index rate (collectively referred to as the “Index Rates” below).

    

Assets (Liabilities)

    

    

    

    

Subject to Interest

50 Basis Point

100 Basis Point

50 Basis Point

100 Basis Point

Rate Sensitivity (1)

Increase

Increase

Decrease

Decrease

Interest income from loans and investments

$

13,643,724

$

65,843

$

131,687

$

(65,360)

$

(129,746)

Interest expense from debt obligations

 

(12,647,155)

 

54,713

 

109,408

 

(54,676)

 

(109,371)

Impact to net interest income (2)

$

11,130

$

22,279

$

(10,684)

$

(20,375)

(1)Represents the UPB of our loan portfolio and the principal balance of our debt.
(2)The impact of hypothetical rate changes to netcorresponding interest rates. Since it is unlikely that interest income are further benefited by interest income earned on our cash, restricted cash and escrow balances. At March 31, 2023, we had approximately $2.8 billion of cash, restricted cash and escrows, which is earning interest at a weighted average blended rate of approximately 4%, or approximately $100 million annually. Interest income earned on escrows is included as a component of servicing revenue, net and interest income earned on our cash and restricted cash is included as a component of interest income in the consolidated statements of income. The interest earned on our cash, restricted cash and escrows is based on an average daily balance and may be different from the end of period balance. Additionally, the interest rates on these balances are not indexed to an Index Rate and are negotiated periodically with each

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corresponding bank, therefore, the interest rates may change frequently and may not necessarily change in conjunction with changes in Index Rates.

We enter intorates will significantly increase in the near future as a result of the current high interest rate swapsenvironment, we have excluded the impact of a 100 basis point increase in corresponding interest rates.

Assets (Liabilities)
Subject to Interest
Rate Sensitivity (1)
50 Basis Point
Increase
50 Basis Point
Decrease
100 Basis Point
Decrease
Interest income from loans and investments$12,249,862 $52,702 $(51,525)$(102,244)
Interest expense from debt obligations(11,105,897)47,437 (47,437)(94,873)
Impact to net interest income from loans and investments5,265 (4,088)(7,371)
Interest income from cash, restricted cash and escrow balances (2)2,758,799 13,794 (13,794)(27,890)
Total impact from hypothetical changes in interest rates$19,059 $(17,882)$(35,261)
________________________
(1)Represents the UPB of our structured loan portfolio, the principal balance of our debt and the account balances of our cash, restricted cash and escrows at March 31, 2024.
(2)Our cash, restricted cash and escrows are currently earning interest at a weighted average blended rate of approximately 5.0%, or approximately $140.0 million annually. Interest income earned on our cash and restricted cash is included as a component of interest income and interest income earned on escrows is included as a component of servicing revenue, net in the consolidated statements of income. The interest earned on our cash, restricted cash and escrows is based on an average daily balance and may be different from the end of period balance.
We entered into treasury futures to hedge our exposure to changes in interest rates inherent in (1) our held-for-sale Agency Business Private Label loans from the time the loans are rate locked until sale and securitization, and (2) our Agency Business SFR – fixed rate loans from the time the loans are originated until the time they can be financed with match term fixed rate securitized debt. Our interest rate swapstreasury futures are tied to the five-year and ten-year swaptreasury rates and hedge our exposure to Private Label loans, until the time they are securitized, and changes in the fair value of our held-for-sale Agency Business SFR – fixed rate loans. A 50 basis point and a 100 basis point increase to the five-year and ten-year swaptreasury rates on our interest rate swapstreasury futures held at March 31, 20232024 would have resulted in a gain of $1.0$0.3 million and $2.0$0.7 million, respectively, in the three months ended March 31, 2023,2024, while a 50 basis point and a 100 basis point decrease in the rates would have resulted in a loss of $1.1$0.4 million and $2.2$0.7 million, respectively.

Our Agency Business originates, sells and services a range of multifamily finance products with Fannie Mae, Freddie Mac and HUD. Our loans held-for-sale to these agencies are not currently exposed to interest rate risk during the loan commitment, closing and delivery process. The sale or placement of each loan to an investor is negotiated prior to closing on the loan with the borrower, and the sale or placement is generally effectuated within 60 days of closing. The coupon rate for the loan is set after we establish the interest rate with the investor.

In addition, the fair value of our MSRs is subject to market risk since a significant driver of the fair value of these assets is the discount rates. A 100 basis point increase in the weighted average discount rate would decrease the fair value of our MSRs by $16.7$16.2 million at March 31, 2023,2024, while a 100 basis point decrease would increase the fair value by $17.6$17.1 million.

Item 4.Controls and Procedures

Management, with the participation of our chief executive officer and chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures at March 31, 2023.2024. Based on this evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective at March 31, 2023.

2024.

There were no changes in our internal control over financial reporting during the quarter ended March 31, 20232024 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II.    OTHER INFORMATION

Item 1.Legal Proceedings

We are not involved in any material litigation nor, to our knowledge, is any material litigation threatened against us other than the litigation described in Note 13.

us.

Item 1A.    Risk Factors

There have been no material changes to the risk factors set forth in Item 1A of our 20222023 Annual Report.

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Item 2.    Unregistered SaleSales of Equity Securities and Use of Proceeds

In March 2023, the Board of Directors authorized a share repurchase program providing for the repurchase of up to $50.0 million of our outstanding common stock. The repurchase of our common stock may be made from time to time in the open market, through privately negotiated transactions, or otherwise in compliance with Rule 10b-18 and Rule 10b5-1 under the Securities Exchange Act, of 1934, based on our stock price, general market conditions, applicable legal requirements and other factors. In December 2023, the Board of Directors authorized an increase to the remaining availability under the share repurchase program to $150.0 million. At March 31, 2024, there was $150.0 million available for repurchase under this program. The program may be discontinued or modified at any time.

The following table includes

There were no purchases made by, or on behalf of us, under this plan or by any "affiliated purchaser," as defined in Rule 10b-18(a)(3) under the purchases madeExchange Act, during the three months ended March 31, 2023 ($ in thousands, except share and per share data):

    

    

    

    

    

    

Approximate Dollar

Total Number of

Value of Shares That

Shares Purchased as

May Yet Be

Total Number of

Average Price Paid

Part of a Publicly

Purchased Under the

Period

    

Shares Purchased

    

per Share

    

Announced Program

    

Program

January 1 - 31, 2023

 

 

 

 

February 1 - 28, 2023

 

 

 

 

March 1 - 31, 2023

 

886,432

$

10.91

 

886,432

$

40,329

Total

 

886,432

$

10.91

 

886,432

 

  

Subsequent to March 31, 2023, we repurchased additional shares under this share repurchase program. Through April 30, 2023, we repurchased a total of 3,545,604 shares of our common stock under this program at a total cost of $37.4 million and an average cost of $10.56 per share.

2024.

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Item 6.Exhibits

Exhibit #

  

Description

  

Form

  

Exhibit #

  

Filing Date

3.1

Articles of Incorporation of Arbor Realty Trust, Inc.

S-11

3.1

11/13/03

3.2

Articles of Amendment to Articles of Incorporation of Arbor Realty Trust, Inc.

10-Q

3.2

08/07/07

3.3

Amended and Restated Bylaws of Arbor Realty Trust, Inc.

8-K

3.1

12/01/20

31.1

Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14, filed herewith

31.2

Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14, filed herewith

32

Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith

101.1

Financial statements from the Quarterly Report on Form 10-Q of Arbor Realty Trust, Inc. for the quarter ended March 31, 2023, filed on May 5, 2023, formatted in Inline Extensible Business Reporting Language (“XBRL”): (1) the Consolidated Balance Sheets, (2) the Consolidated Statements of Income, (3) the Consolidated Statements of Changes in Equity, (4) the Consolidated Statements of Cash Flows and (5) the Notes to Consolidated Financial Statements.

104

Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

58

Incorporated by Reference
Exhibit #DescriptionFormExhibit #Filing Date
3.1S-113.111/13/03
3.210-Q3.208/07/07
3.38-K3.112/01/20
10.1
31.1
31.2
32
101
Financial statements from the Quarterly Report on Form 10-Q of Arbor Realty Trust, Inc. for the quarter ended March 31, 2024, filed on May 3, 2024, formatted in Inline Extensible Business Reporting Language (“XBRL”): (1) the Consolidated Balance Sheets, (2) the Consolidated Statements of Income, (3) the Consolidated Statements of Changes in Equity, (4) the Consolidated Statements of Cash Flows and (5) the Notes to Consolidated Financial Statements.
104Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)
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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ARBOR REALTY TRUST, INC.

Date: May 5, 2023

3, 2024

By:

/s/ Ivan Kaufman

Ivan Kaufman

Chief Executive Officer

Date: May 5, 2023

3, 2024

By:

/s/ Paul Elenio

Paul Elenio

Chief Financial Officer

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