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What changed in ARBOR REALTY TRUST INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of ARBOR REALTY TRUST INC's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+347 added−296 removedSource: 10-K (2026-02-27) vs 10-K (2025-02-21)

Top changes in ARBOR REALTY TRUST INC's 2025 10-K

347 paragraphs added · 296 removed · 240 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

39 edited+2 added−3 removed102 unchanged
Biggest changeRemaining Months to Maturity (2) Bridge Loans Multifamily 255 $ 8,725,429 6.57 % 11.8 Single‑Family Rental 423 1,993,890 8.65 % 12.0 Land 8 125,877 0.88 % 0.3 Office 1 35,410 7.94 % 1.6 Retail 1 12,500 7.94 % 11.1 688 10,893,106 6.89 % 11.6 Mezzanine Loans Multifamily 55 239,203 7.83 % 55.0 Other 3 16,353 2.96 % 4.1 58 255,556 7.52 % 51.8 Preferred Equity Multifamily 25 143,645 6.65 % 55.7 Other 2 5,200 — 2.7 27 148,845 6.42 % 53.9 Construction Multifamily 2 4,367 9.97 % 20.8 Other Single‑Family Rental 1 3,082 9.36 % 10.3 Total 776 $ 11,304,956 6.90 % 13.1 ________________________________________ (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 as stated in the individual loan agreements.
Biggest changeRemaining Months to Maturity (2) Bridge Loans Multifamily 224 $ 8,143,114 5.83 % 12.9 Single‑Family Rental 298 3,184,910 7.88 % 12.8 Office 1 33,410 1.01 % 30.0 Retail 1 10,324 9.32 % 5.1 524 11,371,758 6.39 % 12.9 Mezzanine Loans Multifamily 63 283,581 7.82 % 53.4 Other 2 6,631 8.57 % 4.7 65 290,212 7.84 % 52.3 Construction Multifamily 9 249,019 9.13 % 24.6 Preferred Equity Multifamily 32 198,127 7.01 % 46.8 Other 2 3,991 — 2.5 34 202,118 6.87 % 46.0 Total 632 $ 12,113,107 6.49 % 14.7 ________________________________________ (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 as stated in the individual loan agreements.
A REIT is generally not subject to federal income tax on its taxable income that is distributed to its stockholders; provided that at least 90% of its taxable income is distributed and provided that certain other requirements are met.
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 taxable income is distributed and provided that certain other requirements are met.
In general, our underwriting guidelines require evaluation of the following: • The borrower and each person directing a borrowing entity’s activities (a “key principal”), including a review of their experience, credit, operating, bankruptcy and foreclosure history; • Historic and current property revenues and expenses; • Potential for near-term revenue growth and opportunity for expense reduction and increased operating efficiencies; 6 Table of Contents • Property location, its attributes and competitive position within its market; • Proposed ownership structure, financial strength and real estate experience of the borrower and property management; • Third party appraisal, environmental review, flood certification, zoning and engineering studies; • Market assessment, including property inspection, review of tenant lease files, surveys of comparable properties and an analysis of area economic and demographic trends; • Review of an acceptable mortgagee’s title policy and an “as built” survey; • Construction quality of the property to determine future maintenance and capital expenditure requirements; • The requirements for any reserves, including those for immediate repairs or rehabilitation, replacement reserves, tenant improvement and leasing commission costs, real estate taxes and property casualty and liability insurance; and • For any application for one of our agency products, we will underwrite the loan to the relevant agency or Company guidelines.
In general, our underwriting guidelines require evaluation of the following: • The borrower and each person directing a borrowing entity’s activities (a “key principal”), including a review of their experience, credit, operating, bankruptcy and foreclosure history; • Historic and current property revenues and expenses; • Potential for near-term revenue growth and opportunity for expense reduction and increased operating efficiencies; • Property location, its attributes and competitive position within its market; • Proposed ownership structure, financial strength and real estate experience of the borrower and property management; • Third-party appraisal, environmental review, flood certification, zoning and engineering studies; 6 Table of Contents • Market assessment, including property inspection, review of tenant lease files, surveys of comparable properties and an analysis of area economic and demographic trends; • Review of an acceptable mortgagee’s title policy and an “as built” survey; • Construction quality of the property to determine future maintenance and capital expenditure requirements; • The requirements for any reserves, including those for immediate repairs or rehabilitation, replacement reserves, tenant improvement and leasing commission costs, real estate taxes and property casualty and liability insurance; and • For any application for one of our agency products, we will underwrite the loan to the relevant agency or Company guidelines.
These securities are generally carried at cost and are often purchased at a discount to their face value, which is accreted into interest income, if deemed collectable, over the expected remaining life of the related security as a yield adjustment. 4 Table of Contents Structured Business Portfolio Overview Loan and investment portfolio product type and asset class information at December 31, 2024 is as follows ($ in thousands): Type Asset Class Number Unpaid Principal Wtd.
These securities are generally carried at cost and are often purchased at a discount to their face value, which is accreted into interest income, if deemed collectable, over the expected remaining life of the related security as a yield adjustment. 4 Table of Contents Structured Business Portfolio Overview Loan and investment portfolio product type and asset class information at December 31, 2025 is as follows ($ in thousands): Type Asset Class Number Unpaid Principal Wtd.
We are one of 25 approved lenders that participate in Fannie Mae’s DUS program and one of 22 lenders approved as a Freddie Mac Optigo ® Conventional Loan lender for multifamily, manufactured, and student housing properties, one of 12 participants in the Freddie Mac Optigo ® SBL program and an approved HUD MAP and LEAN lender providing construction permanent loans to developers and owners of multifamily housing, affordable housing, seniors housing and healthcare facilities.
We are one of 25 approved lenders that participate in Fannie Mae’s DUS program and one of 22 lenders approved as a Freddie Mac Optigo ® Conventional Loan lender for multifamily, manufactured, and student housing properties, one of 10 participants in the Freddie Mac Optigo ® SBL program and an approved HUD MAP and LEAN lender providing construction permanent loans to developers and owners of multifamily housing, affordable housing, seniors housing and healthcare facilities.
We may elect to bear a level of interest rate risk that could otherwise be hedged when we believe, based on all relevant facts, that bearing such risk is worthwhile. Disposition Policies. We evaluate our Structured Business portfolio on a regular basis to determine if it continues to satisfy our investment criteria.
We may elect to bear a level of interest rate risk that could otherwise be mitigated when we believe, based on all relevant facts, that bearing such risk is worthwhile. Disposition Policies. We evaluate our Structured Business portfolio on a regular basis to determine if it continues to satisfy our investment criteria.
We, our executive officers, and Arbor Commercial Mortgage, LLC (“ACM”), our former manager, face conflicts of interests because of our relationships with each other and the way in which our business is structured. ACM has approximately 6% of the voting interest in our stock at December 31, 2024.
We, our executive officers, and Arbor Commercial Mortgage, LLC (“ACM”), our former manager, face conflicts of interests because of our relationships with each other and the way in which our business is structured. ACM has approximately 6% of the voting interest in our stock at December 31, 2025.
All our Fannie Mae loans are subject to credit committee and management review and approval in accordance with our policies and procedures, and loans of $50.0 million and greater are subject to modified risk-sharing in accordance with Fannie Mae requirements. We also rely heavily on loan surveillance and credit risk management.
All our Fannie Mae loans are subject to credit committee and management review and approval in accordance with our policies and procedures, and loans of $105.0 million and greater are subject to modified risk-sharing in accordance with Fannie Mae requirements. We also rely heavily on loan surveillance and credit risk management.
Agency Business servicing portfolio product and geographic concentration information at December 31, 2024 is as follows ($ in thousands): Product Concentrations Geographic Concentrations Product Loan Count UPB (1) % of Total Wtd. Avg. Servicing Fee Rate (basis points) Wtd. Avg.
Agency Business servicing portfolio product and geographic concentration information at December 31, 2025 is as follows ($ in thousands): Product Concentrations Geographic Concentrations Loan Count UPB (1) % of Total Wtd. Avg. Servicing Fee Rate (basis points) Wtd. Avg.
Subject to applicable law, our Board of Directors have the authority, without further stockholder approval, to issue additional previously authorized common stock and preferred stock or otherwise raise capital, including through the issuance of debt 8 Table of Contents instruments, in any manner and on the terms and for the consideration it deems appropriate, including in exchange for property.
Subject to applicable law, our Board of Directors have the authority, without further stockholder approval, to issue additional previously authorized common stock and preferred stock or otherwise raise capital, including through the issuance of debt instruments, in any manner and on the terms and for the consideration it deems appropriate, including in exchange for property.
Our operating costs and the values of these assets may be adversely affected by the obligation to pay for the cost of complying with existing environmental laws, ordinances, and regulations, as well as the cost of complying with future legislation, and our income and ability to make distributions to our stockholders could be affected adversely by the existence of an environmental liability with respect to properties we may acquire.
Our operating costs and the values of these assets may be adversely affected by the obligation to pay for the cost of complying with existing environmental laws, ordinances, and regulations, as 9 Table of Contents well as the cost of complying with future legislation, and our income and ability to make distributions to our stockholders could be affected adversely by the existence of an environmental liability with respect to properties we may acquire.
Mezzanine financing may take the form of loans secured by pledges of ownership interests in entities that directly or indirectly control the real property or subordinated loans secured by second mortgage liens on the property. We may also require additional security such as personal guarantees, letters of credit 3 Table of Contents and/or additional collateral unrelated to the property.
Mezzanine financing may take the form of loans secured by pledges of ownership interests in entities that directly or indirectly control the real property or subordinated loans secured by second mortgage liens on the property. We may also require additional security such as personal guarantees, letters of credit and/or additional collateral unrelated to the property.
This group assesses ongoing and potential operational and 7 Table of Contents financial performance of each investment in order to evaluate and ultimately improve its operations and financial viability. The asset management group performs frequent onsite inspections, conducts meetings with borrowers and evaluates and participates in the budgeting process, financial and operational review and renovation plans of each underlying property.
This group assesses ongoing and potential operational and financial performance of each investment in order to evaluate and ultimately improve its operations and financial viability. The asset management group performs frequent onsite inspections, conducts meetings with borrowers and evaluates and participates in the budgeting process, financial and operational review and renovation plans of each underlying property.
These borrowers are usually looking to purchase properties to hold for the long-term with permanent financing or acquire investments to develop with bridge, build-to-rent or line of credit financing options. Mezzanine Financing.
These borrowers are usually looking to purchase properties to hold for the long-term with permanent financing or acquire investments to develop with bridge, build-to-rent or line of credit financing options. Construction Financing.
The asset management group customizes a plan with the loan originators and underwriters to track each investment from origination through disposition. This group monitors each investment’s operating history, local economic trends and rental and occupancy rates and evaluates the underlying property’s competitiveness within its market.
The asset management group customizes a plan with the loan originators and underwriters to track each investment from origination through repayment or other disposition. This group monitors each investment’s operating history, local economic trends and rental and occupancy rates and evaluates the underlying property’s competitiveness within its market.
This group also focuses on increasing the productivity of onsite property managers and leasing brokers. This group communicates the status of each transaction against its established asset management plan to senior management, in order to enhance and preserve capital, as well as to avoid litigation and potential exposure.
This group also 7 Table of Contents focuses on increasing the productivity of onsite property managers and leasing brokers. This group communicates the status of each transaction against its established asset management plan to senior management, in order to enhance and preserve capital, as well as to avoid litigation and potential exposure.
Borrowers typically use the proceeds of a conventional mortgage, such as our GSE/Agency loans, to repay a bridge loan. SFR Portfolio Financing. We offer various financing products to borrowers who are looking to acquire conventional, workforce and affordable single-family rental housing.
Borrowers typically use the proceeds of a conventional mortgage, such as our GSE/Agency loans, to repay a bridge loan. SFR Portfolio Financing. We offer various financing products to borrowers who are looking to develop, acquire or refinance conventional, workforce and affordable single-family rental housing.
We may in the future issue common stock or units of partnership interest in our operating partnership in connection with acquisitions. We may, under certain circumstances, repurchase our common stock in private transactions with our stockholders, if those purchases are approved by our Board of Directors. Conflicts of Interest Policies.
We may in the future issue common stock or units of partnership interest in our operating partnership in connection with acquisitions. We may, 8 Table of Contents under certain circumstances, repurchase our common stock in private transactions with our stockholders, if those purchases are approved by our Board of Directors. Conflicts of Interest Policies.
Loans originated under GSE and HUD programs, as well as our SFR fixed rate product, are generally sold within 60 days from the loan origination date. Our Private Label loans are either sold instantaneously or pooled and securitized, or sold, generally within 180 days of loan origination.
Loans originated under GSE and HUD programs, as well as our SFR-fixed rate product, are generally sold within 60 days from the loan origination date. Our Private Label loans are either sold instantaneously or pooled and securitized, or sold, generally within 180 days 5 Table of Contents of loan origination.
These instruments may be used to hedge as much of the interest rate risk we determine is in the best interest of our stockholders, given the cost of such hedges and the need to maintain our status as a REIT. In general, income from hedging transactions does not constitute qualifying income for purposes of the REIT gross income requirements.
These instruments may be used to manage as much of the interest rate risk we determine is in the best interest of our stockholders, given the cost of such instruments and the need to maintain our status as a REIT. In general, income from these transactions does not constitute qualifying income for purposes of the REIT gross income requirements.
Human Capital At December 31, 2024, we employed 659 individuals, none of which are represented by a union or subject to a collective bargaining agreement, and we have never experienced a work stoppage. The attraction, development and retention of our employees is a critical success factor for our business.
Human Capital At December 31, 2025, we employed 653 individuals, none of which are represented by a union or subject to a collective bargaining agreement, and we have never experienced a work stoppage. The attraction, development and retention of our employees is a critical success factor for our business.
Servicing revenue is generated from the fees we receive for servicing the loans and on escrow deposits held on behalf of borrowers, net of amortization on the MSR assets. Our income from MSRs as a percentage of loan commitment volume (“MSR rate”) was 115 basis points for 2024.
Servicing revenue is generated from the fees we receive for servicing the loans and on escrow deposits held on behalf of borrowers, net of amortization on the MSR assets. Our income from MSRs as a percentage of loan commitment volume (“MSR rate”) was 107 basis points for 2025.
To the extent, however, that a hedging contract reduces interest rate risk on indebtedness incurred to acquire or carry real estate assets, any income that is derived from the hedging contract would not give rise to non-qualifying income for purposes of the 75% or 95% gross income tests.
To the extent, however, that a derivative instrument reduces interest rate risk on indebtedness incurred to acquire or carry real estate assets, any income that is derived from the derivative instrument would not give rise to non-qualifying income for purposes of the 75% or 95% gross income tests.
These transactions may include over-the-counter treasury futures, interest rate and credit default swaps, the purchase or sale of interest rate collars, caps or floors, options, mortgage derivatives and other hedging instruments.
These transactions typically include over-the-counter treasury futures, interest rate and credit default swaps, the purchase or sale of interest rate collars, caps or floors, options, mortgage derivatives and other instruments.
These laws allow third parties to seek recovery from owners of real 9 Table of Contents properties for personal injuries associated with materials containing asbestos.
These laws allow third parties to seek recovery from owners of real properties for personal injuries associated with materials containing asbestos.
We have a network of sales and support offices in California, Florida, Indiana, Maryland, Massachusetts, Michigan, New Jersey, New York, and Texas that staff 26 loan originators who solicit property owners, developers, and mortgage loan brokers. In some instances, the originators accept loan applications which meet our underwriting criteria from a select group of mortgage loan brokers.
We have a network of sales and support offices in California, Florida, Georgia, Indiana, Maryland, Massachusetts, New Jersey, New York, Ohio, Oklahoma, Pennsylvania and Texas that staff 24 loan originators who solicit property owners, developers, and mortgage loan brokers. In some instances, the originators accept loan applications which meet our underwriting criteria from a select group of mortgage loan brokers.
One of our directors is the chief operating officer of Arbor Management, LLC (the managing member of ACM) and a trustee of two trusts that own noncontrolling membership interests in ACM.
One of our directors is an executive officer of ours, the chief operating officer of Arbor Management, LLC (the managing member of ACM), the treasurer for ACM and a trustee of two trusts that own noncontrolling membership interests in ACM.
We minimize our interest rate risk from borrowings by attempting to structure the key terms of our borrowings to generally correspond to the interest rate terms of our assets. We enter into hedging transactions to protect our investment portfolio from interest rate and credit risk exposures.
We minimize our interest rate risk from borrowings by attempting to structure the key terms of our borrowings to generally correspond to the interest rate terms of our assets. We may enter into derivative financial instruments to protect our investment portfolio from interest rate and credit risk exposures.
The overall yield on our loan and investment portfolio in 2024 was 9.01% on average assets of $11.98 billion, which was computed by dividing the interest income earned during 2024 by the average assets during 2024.
The overall yield on our loan and investment portfolio in 2025 was 7.60% on average assets of $11.63 billion, which was computed by dividing the interest income earned during 2025 by the average assets during 2025.
Our cost of funds in 2024 was 7.44% on average borrowings of $10.48 billion, which was computed by dividing the interest expense incurred during 2024 by the average borrowings during 2024. At December 31, 2024, our loan and investment portfolio was comprised of 92% floating rate loans and 8% fixed rate loans.
Our cost of funds in 2025 was 6.94% on average borrowings of $9.75 billion, which was computed by dividing the interest expense incurred during 2025 by the average borrowings during 2025. At December 31, 2025, our loan and investment portfolio was comprised of 90% floating rate loans and 10% fixed rate loans.
We also own unconsolidated investments in equity affiliates totaling $76.3 million and described in more detail in Note 8. 5 Table of Contents Agency Business Lending and Servicing Overview One of the Agency Business’s primary sources of revenue are the gains and fees recognized from the origination and sale of mortgage loans.
We also hold interests in unconsolidated investments in equity affiliates totaling $58.0 million, which are described in Note 8. Agency Business Lending and Servicing Overview One of the Agency Business’s primary sources of revenue are the gains and fees recognized from the origination and sale of mortgage loans.
Certain loans and investments that require an additional rate of interest “accrual rate” to be paid at maturity are not included in the weighted average pay rate as shown in the table. Including certain fees earned and costs associated with the structured portfolio, the weighted average current interest rate was 7.80%.
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. Including certain fees earned and costs associated with the structured portfolio, the weighted average current interest rate was 7.08%. (2) Including extension options, the weighted average remaining months to maturity was 19.9.
Our loan activity in 2024 was comprised of originations totaling $4.47 billion, sales totaling $4.61 billion and commitment volume totaling $4.44 billion. Our gains and fees as a percentage of our loan sales volume (“sales margin”) was 163 basis points for 2024.
Our loan activity in 2025 was comprised of originations totaling $5.07 billion, sales totaling $5.10 billion and commitment volume totaling $5.10 billion. Our gains and fees as a percentage of our loan sales volume (“sales margin”) was 138 basis points for 2025.
We have, and may in the future, invest in bond securities, such as those issued by Freddie Mac SBL securitizations from loans originated under the Freddie Mac SBL program and APL certificates.
As such, these transactions may require the use of additional capital prior to completion of the specific plan. Debt Securities. We have, and may in the future, invest in bond securities, such as those issued by Freddie Mac SBL securitizations from loans originated under the Freddie Mac SBL program and APL certificates.
In addition, our chief financial officer, our treasurer and some of our counsel also perform similar roles for ACM, and another of our executive officers’ acts as the general counsel of ACM.
In addition, our chief financial officer and some of our counsel also perform similar roles for ACM, and another of our executive officers’ acts as the general counsel of ACM. Our chief executive officer and certain aforementioned executive officers are members of ACM’s executive committee and, excluding our chief executive officer, own minority membership interests in ACM.
We offer mezzanine financing in the form of loans that are subordinate to a conventional first mortgage loan (including certain GSE/Agency loans) and senior to the borrower’s equity in a transaction.
Our construction lending also complements our SFR lending program by expanding our ability to support borrowers across both multifamily and single-family rental housing strategies. Mezzanine Financing. We offer mezzanine financing in the form of loans that are subordinate to a conventional first mortgage loan (including certain GSE/Agency loans) and senior to the borrower’s equity in a transaction.
We may identify such assets and initiate an asset-specific plan to maximize the value of the investment, which may include appointing a third party property manager, renovating the property, leasing or increasing occupancy, or selling the asset. As such, these transactions may require the use of additional capital prior to completion of the specific plan. Debt Securities.
We have, and may in the future, obtain real estate by foreclosure, through partial or full settlement of mortgage debt related to our loans. We may identify such assets and initiate an asset-specific plan to maximize the value of the investment, which may include appointing a third-party property manager, renovating the property, leasing or increasing occupancy, or selling the asset.
Life of Portfolio (years) State UPB % of Total Fannie Mae 2,644 $ 22,730,056 67 % 46.4 6.4 Texas 11 % Freddie Mac 1,159 6,077,020 18 % 21.5 6.8 New York 11 % Private Label 161 2,605,980 8 % 18.7 5.5 California 8 % FHA 106 1,506,948 5 % 14.1 19.2 North Carolina 7 % Bridge (2) 3 278,494 1 % 10.4 3.0 Georgia 6 % SFR - Fixed Rate 52 271,859 1 % 20.1 4.4 Florida 6 % Total 4,125 $ 33,470,357 100 % 37.8 6.9 New Jersey 5 % Other (3) 46 % Total 100 % ________________________________________ (1) Excludes loans in which we are not collecting a servicing fee.
Life of Portfolio (years) State UPB % of Total Fannie Mae 2,702 $ 24,085,960 66 % 44.7 5.5 New York 13 % Freddie Mac 1,109 7,455,088 21 % 18.3 5.9 Texas 10 % Private Label 159 2,558,048 7 % 18.7 4.5 North Carolina 8 % FHA 107 1,549,483 4 % 13.9 19.1 California 7 % Bridge (2) 3 277,738 1 % 10.4 2.2 Florida 7 % SFR - Fixed Rate 51 277,490 1 % 20.0 4.0 Georgia 5 % Total 4,131 $ 36,203,807 100 % 35.6 6.1 New Jersey 5 % Illinois 4 % Other (3) 41 % Total 100 % ________________________________________ (1) Excludes loans in which we are not collecting a servicing fee.
Loan and investment portfolio asset class and geographic concentration information at December 31, 2024 is as follows ($ in thousands): Asset Class UPB Percentage Geographic Concentrations UPB Percentage Multifamily $ 9,112,644 81 % Texas $ 2,638,285 23 % Single-Family Rental 1,996,972 18 % Florida 1,948,643 17 % Land 138,710 1 % Georgia 1,083,580 10 % Office 35,410 North Carolina 549,682 5 % Other 21,220 New York 538,721 5 % Total $ 11,304,956 100 % Other (1) 4,546,045 40 % Total $ 11,304,956 100 % ________________________________________ (1) No other individual state represented 4% or more of the total.
Loan and investment portfolio asset class and geographic concentration information at December 31, 2025 is as follows ($ in thousands): Asset Class UPB Percentage Geographic Concentrations UPB Percentage Multifamily $ 8,873,841 73 % Texas $ 2,808,834 23 % Single-Family Rental 3,184,910 26 % Florida 2,094,006 17 % Office 33,410 Arizona 982,786 8 % Land 2,291 New York 962,795 8 % Other 18,655 Georgia 892,794 7 % Total $ 12,113,107 100 % Other (1) 4,371,892 37 % Total $ 12,113,107 100 % ________________________________________ (1) No other individual state represented 4% or more of the total.
Removed
We have, and may in the future, obtain real estate by foreclosure, through partial or full settlement of mortgage debt related to our loans.
Added
We offer construction lending through our Arbor Private Construction program, offering multifamily investors short-term floating-rate financing for new and construction-ready multifamily projects for experienced sponsors and projects located in major metropolitan areas.
Removed
(2) Including extension options, the weighted average remaining months to maturity was 22.7.
Added
We serve as a financing partner throughout the construction and ownership life cycle of loans which are underwritten to an Agency-qualifying loan exit, which facilitates a smooth transition to permanent financing through our GSE and 3 Table of Contents HUD lending platform.
Removed
Our chief executive officer, one of our directors and certain aforementioned executive officers are members of ACM’s executive committee and, excluding our chief executive officer, own minority membership interests in ACM.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

106 edited+59 added−28 removed229 unchanged
Biggest changeWe are incorporating AI into some of our computer systems, and challenges with properly managing its use and failing to effectively develop AI, could result in reputational harm, competitive harm and legal liability, and adversely affect our results of operations. 29 Table of Contents Some of our computer systems currently, and may in the future, incorporate AI solutions, including machine learning and generative AI tools that collect, aggregate, and analyze data to assist in the development of our services and products and in the use of internal tools that support our business.
Biggest changeWe continue to incorporate AI solutions, and challenges with properly managing its use and failing to effectively develop AI, could result in reputational harm, competitive harm and legal liability, and adversely affect our results of operations.
Unfavorable global economic and political conditions could adversely affect our business, financial condition or results of operations. Our results of operations could be adversely affected by general conditions in the global economy, the global financial markets and the global political conditions.
Unfavorable global economic and political conditions could adversely affect our business, financial condition or results of operations. Our results of operations could be adversely affected by general conditions in the global economy, the global financial markets and global political conditions.
However, a prolonged period of elevated short and long term interest rates may result in: (1) increased payment delinquencies and defaults; (2) increased loan modifications and foreclosures; (3) an increase in real estate owned ("REO") assets; (4) declining real estate values of certain asset classes; and (5) a dislocation in capital markets, all of which would adversely impact our results of operations, financial condition, business prospects and our ability to make distributions to our stockholders.
However, a prolonged period of elevated short and long-term interest rates may result in: (1) increased payment delinquencies and defaults; (2) increased loan modifications and foreclosures; (3) an increase in REO assets; (4) declining real estate values of certain asset classes; and (5) a dislocation in capital markets, all of which would adversely impact our results of operations, financial condition, business prospects and our ability to make distributions to our stockholders.
The Trump Administration has made recent comments indicating that housing finance reform may be on its agenda, however, it is unclear at this time what the Trump Administration’s views are with respect to the future of the GSEs.
The Trump Administration has made comments indicating that housing finance reform may be on its agenda, however, it is unclear at this time what the Trump Administration’s views are with respect to the future of the GSEs.
We must make certain representations and warranties concerning each loan we originate for the GSE or HUD programs. The representations and warranties relate to our practices in the origination and servicing of the loans and the accuracy of the information being provided by us.
We must make certain representations and warranties concerning each loan we originate for the GSE or HUD programs. The representations and warranties relate to our practices in the origination, underwriting and servicing of the loans and the accuracy of the information being provided by us.
If we do issue equity, it may be dilutive to our existing stockholders or could result in the issuance of securities that have rights, preferences and privileges that are senior to those of our existing securities.
If we issue equity, it may be dilutive to our existing stockholders or could result in the issuance of securities that have rights, preferences and privileges that are senior to those of our existing securities.
We are subject to certain general risks, all of which could have an adverse effect on our business, financial condition and results of operations, such as: (1) volatility in our stock price; (2) major public health crisis; (3) global economic and political conditions; (4) major bank failures; (5) losses of key personnel with long standing business relationships; (6) adverse resolutions of lawsuits; (7) terrorist attacks; (8) military conflict; (9) changes to laws and regulations, including environmental, social and governance matters; and (10) the effective development of artificial intelligence ("AI").
We are subject to certain general risks, all of which could have an adverse effect on our business, financial condition and results of operations, such as: (1) volatility in our stock price; (2) major public health crisis; (3) global economic and political conditions; (4) major bank failures; (5) losses of key personnel with long standing business relationships; (6) adverse resolutions of lawsuits; (7) terrorist attacks; (8) military conflict; (9) changes to laws and regulations, including environmental, social and governance matters; and (10) the impact of the continuing development of artificial intelligence ("AI").
In addition, current shareholders and prospective investors may use these ratings, and/or their own internal ESG benchmarks, to determine whether, and to what extent, they may choose to invest in our securities, engage with us to advocate for improved ESG performance or disclosure, make voting decisions as shareholders, or take other actions to hold us and our Board of Directors accountable with respect to ESG matters.
In addition, current stockholders and prospective investors may use these ratings, and/or their own internal ESG benchmarks, to determine whether, and to what extent, they may choose to invest in our securities, engage with us to advocate for improved ESG performance or disclosure, make voting decisions as stockholders, or take other actions to hold us and our Board of Directors accountable with respect to ESG matters.
Workforce housing loans preserve rents at affordable levels in multifamily properties, typically without the use of public subsidies. The 2025 Caps will continue to mandate that at least 50% be directed towards mission driven, affordable housing, with affordability levels corresponding to 80%-120% of area median income, depending on the market.
Workforce housing loans preserve rents at affordable levels in multifamily properties, typically without the use of public subsidies. The 2026 Caps will continue to mandate that at least 50% be directed towards mission driven, affordable housing, with affordability levels corresponding to 80%-120% of area median income, depending on the market.
Further, lenders may require us to maintain a certain amount of uninvested cash or set aside unlevered assets sufficient to maintain a specified liquidity position. As a result, we may not be able to leverage our assets as fully as we would choose, which could reduce our return on assets.
Further, lenders may require us to maintain a certain amount of uninvested cash or set aside unlevered assets sufficient to maintain a specified liquidity position. As a result, we may not be able to leverage our assets as effectively as we would choose, which could reduce our return on assets.
FHFA stated they will continue to monitor the market and reserves the right to increase the 2025 Caps if warranted, however, they will not reduce the 2025 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 2025 Caps.
FHFA stated they will continue to monitor the market and reserves the right to increase the 2026 Caps if warranted, however, they will not reduce the 2026 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 2026 Caps.
Any misappropriation, loss or unauthorized disclosure of confidential information gathered, stored or used by us could have a material impact on the operation of our business, including damaging our reputation with our borrowers, employees, third parties and investors.
Any misappropriation, loss or unauthorized disclosure of confidential information gathered, stored or used by us or by our third-party providers could have a material impact on the operation of our business, including damaging our reputation with our borrowers, employees, third parties and investors.
Our staggered board and other provisions of our charter and bylaws may prevent a change in our control. Our Board of Directors is divided into three classes of directors. The current terms of the Class I, Class II and Class III directors will expire in 2025, 2026 and 2027, respectively.
Our staggered board and other provisions of our charter and bylaws may prevent a change in our control. Our Board of Directors is divided into three classes of directors. The current terms of the Class II, Class III and Class I directors will expire in 2026, 2027 and 2028, respectively.
Environmental, social and governance matters may cause us to incur additional costs and affect the attractiveness of our stock to investors. Shareholder, public and governmental expectations and pressure have been increasing with respect to corporate responsibility, sustainability and other environmental, social and governance (“ESG”) matters.
Environmental, social and governance matters may cause us to incur additional costs and affect the attractiveness of our stock to investors. Stockholder, public and governmental expectations and pressure have been increasing with respect to corporate responsibility, sustainability and other environmental, social and governance (“ESG”) matters.
Multifamily and commercial property values and net operating income derived from such properties are subject to volatility and may be affected adversely by a number of factors, including fires and other casualties, natural disasters, acts of war and/or terrorism, adverse economic conditions, local real estate conditions (such as an oversupply of similar properties), changes or continued weakness in specific industry segments, construction quality, construction cost, age and design, demographic factors, retroactive changes to building or similar codes, increases in operating expenses (such as insurance, energy costs and real estate tax increases) and other factors that may cause unanticipated and uninsured performance declines and/or losses to us or the owners and operators of the real estate securing our investment.
Multifamily and commercial property values and net operating income derived from such properties are subject to volatility and may be affected adversely by a number of factors, including fires and other casualties, natural disasters, acts of war and/or terrorism, adverse economic conditions, adoption of, or changes in, rent control or rent stabilization laws, local real estate conditions (such as an oversupply of similar properties), changes or continued weakness in specific industry segments, construction quality, construction cost, age and design, demographic factors, retroactive changes to building or similar codes, increases in operating expenses (such as insurance, energy costs and real estate tax increases) and other factors that may cause unanticipated and uninsured performance declines and/or losses to us or the owners and operators of the real estate securing our investment.
As a result of our chief executive officer’s beneficial ownership of stock held by ACM, as well as his beneficial ownership of additional shares of our common stock, our chief executive officer has approximately 7% of the voting power of our outstanding stock at December 31, 2024.
As a result of our chief executive officer’s beneficial ownership of stock held by ACM, as well as his beneficial ownership of additional shares of our common stock, our chief executive officer has approximately 7% of the voting power of our outstanding stock at December 31, 2025.
For example, the COVID-19 pandemic, resulted in travel bans, quarantines, layoffs and shutdowns, causing negative long-term macroeconomic effects on inflation, interest rates, capital markets, labor shortages, property values and global supply chains, which had 27 Table of Contents an adverse impact on our business, results of operations and financial condition.
For example, the COVID-19 pandemic resulted in travel bans, quarantines, layoffs and business shutdowns, causing negative long-term macroeconomic effects on inflation, interest rates, capital markets, labor shortages, property values and global supply chains, which had an adverse impact on our business, results of operations and financial condition.
Shareholder advisory services and other organizations have developed and published, and others may in the future develop and publish, rating systems and other scoring and reporting mechanisms to evaluate and compare our ESG performance with that of others in our industry.
Stockholder advisory services and other organizations have developed and published, and others may in the future develop and publish, rating systems and other scoring and reporting mechanisms to evaluate and compare our ESG performance with that of others in our industry.
We may be required to make distributions to stockholders at disadvantageous times or when we do not have funds readily available for distribution. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits. 25 Table of Contents Complying with REIT requirements may force us to liquidate otherwise attractive investments.
We may be required to make distributions to stockholders at disadvantageous times or when we do not have funds readily available for distribution. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits. Complying with REIT requirements may force us to liquidate otherwise attractive investments.
Even if we remain qualified as a REIT, we may face other tax liabilities, including taxes on any undistributed income, tax on income from some activities conducted as a result of a foreclosure, and state or local income, property and transfer taxes, all of which could reduce our cash flow and our distributions to stockholders.
Even if we remain qualified as a REIT, we may face other tax liabilities, including taxes on any undistributed income, tax on income from some activities conducted as a result of a foreclosure, and state or local income, property and transfer taxes, all of which could reduce our cash 12 Table of Contents flow and our distributions to stockholders.
Our ability to obtain financing through CLOs is subject to conditions in the debt capital markets which are impacted by factors beyond our control that may reduce the level of investor demand for such securities. 18 Table of Contents The debt facilities that we use to finance our investments may require us to provide additional collateral.
Our ability to obtain financing through CLOs is subject to conditions in the debt capital markets which are impacted by factors beyond our control that may reduce the level of investor demand for such securities. The debt facilities that we use to finance our investments may require us to provide additional collateral.
However, this legislation does not regulate the 28 Table of Contents pricing of such insurance. The absence of affordable insurance coverage may adversely affect the real estate lending market, lending volume and the market’s overall liquidity and may reduce the number of suitable investment opportunities available to us and the pace at which we are able to make investments.
However, this legislation does not regulate the pricing of such insurance. The absence of affordable insurance coverage may adversely affect the real estate lending market, lending volume and the market’s overall liquidity and may reduce the number of suitable investment opportunities available to us and the pace at which we are able to make investments.
If we are unable to acquire eligible investments, find 11 Table of Contents suitable replacement investments and access financing sources on favorable terms, or at all, we may not be able to obtain the level of leverage necessary to optimize our return on investment and cash available for distribution to our stockholders may decline.
If we are unable to acquire eligible investments, find suitable replacement investments and access financing sources on favorable terms, or at all, we may not be able to obtain the level of leverage necessary to optimize our return on investment and cash available for distribution to our stockholders may decline.
We may employ hedging strategies to limit the effects of changes in interest rates (and in some cases credit spreads), 20 Table of Contents including treasury futures, interest rate and credit default swaps, caps, floors and other derivative products, however, no strategy can completely insulate us from the risks associated with interest rate changes.
We may employ hedging strategies to limit the effects of changes in interest rates (and in some cases credit spreads), including treasury futures, interest rate and credit default swaps, caps, floors and other derivative products, however, no strategy can completely insulate us from the risks associated with interest rate changes.
As a result, our selection of ESG disclosure frameworks and topics may change from time to time, may result in a lack of comparative data from period to period, or differ from the expectations of our shareholders and other stakeholders.
As a result, our selection of ESG disclosure frameworks and topics may change from time to time, may result in a lack of comparative data from period to period, or differ from the expectations of our stockholders and other stakeholders.
For most loans we service under the Fannie Mae and HUD programs, we are required to advance payments due to investors if the borrower is delinquent in making such payments, which requirement could adversely impact our liquidity and harm our results of operations. Risks Related to Our Financing and Hedging Activities.
For most loans we service under the Fannie Mae and HUD programs, we are required to advance payments due to investors if the borrower is delinquent in making such payments, which may adversely impact our liquidity and harm our results of operations. Risks Related to Our Financing and Hedging Activities.
We may be unable to generate sufficient revenue from operations to pay our operating expenses and to pay dividends to our stockholders, resulting in the need to borrow funds to satisfy our REIT distribution requirements, which could cause a portion of our distributions to be treated as a return of capital. General Risks.
We may be unable to generate sufficient cash flow from operations to pay our operating expenses and to pay dividends to our stockholders, resulting in the need to borrow funds to satisfy our REIT distribution requirements, which could cause a portion of our distributions to be treated as a return of capital. General Risks.
Although generally we will seek to reserve the right to terminate our hedging positions, it may not always be possible to dispose of or close out a hedging position without the consent of the counterparty, and we may not be able to enter into an offsetting contract to cover our risk.
Although generally we will seek to reserve 22 Table of Contents the right to terminate our hedging positions, it may not always be possible to dispose of or close out a hedging position without the consent of the counterparty, and we may not be able to enter into an offsetting contract to cover our risk.
The nature of our executive officers’ experience and the extent of the relationships they have developed with owners of multifamily and commercial properties and financial institutions are important to our success. We cannot assure their continued employment as our officers. The loss of services of certain of our executive officers could harm our business.
The nature of our executive officers’ experience and the extent of the relationships they have developed 29 Table of Contents with owners of multifamily and commercial properties and financial institutions are important to our success. We cannot assure their continued employment as our officers. The loss of services of certain of our executive officers could harm our business.
Preferred equity investments involve a greater risk of loss than traditional mortgage financing. In our Structured Business, we may invest in preferred equity investments, which involve a higher degree of risk than traditional mortgage financing. Such investments are usually subordinate to other loans and are not secured by the property underlying the investment.
In our Structured Business, we invest in preferred equity investments, which involve a higher degree of risk than traditional mortgage financing. Such investments are usually subordinate to other loans and are not secured by the property underlying the investment.
Further, operating expenses or the costs necessary to bring an acquired property up to standards established for its intended market position may be underestimated. The loss of, or changes in, our Agency Business’s relationships with the GSEs, U.S.
Further, operating expenses or the costs necessary to bring an acquired property up to standards established for its intended market position may be underestimated. 16 Table of Contents The loss of, or changes in, our Agency Business’s relationships with the GSEs, U.S.
These events could have a negative impact on our cash flows and on the net carrying value of the MSRs on our balance sheet and could result in a reduction to our earnings. As a result of the foregoing, a rise in delinquencies could have a material adverse effect on our Agency Business.
These events could have a negative impact on our cash flows and on the 17 Table of Contents net carrying value of the MSRs on our balance sheet and could result in a reduction to our earnings. As a result of the foregoing, a rise in delinquencies could have a material adverse effect on our Agency Business.
Repurchased loans typically require a significant allocation of working capital to carry on our books, and our ability to borrow against such assets is limited. Any significant repurchases or indemnification payments could adversely affect our financial condition and operating results.
Repurchased loans typically require a significant allocation of working capital to carry on our books, and our ability to borrow against such assets may be limited. Any significant repurchases or indemnification payments could adversely affect our financial condition and operating results.
The market value of our stock is based primarily on the market’s perception of our growth potential and our current and future earnings and dividends. Consequently, our common stock may trade at prices that are higher or lower than our book value per share of common stock.
The market value of our stock is based primarily on the market’s perception of our growth potential and our current and future earnings and dividends. Consequently, our common stock may trade at prices that are higher or lower than our book value per share of 28 Table of Contents common stock.
Accordingly, if the value of our Agency Business or the income generated thereby increases relative to the value of our other, REIT-compliant assets and income, we or ARSR may fail to satisfy one or more of the Internal Revenue Code requirements applicable to REITs.
Accordingly, if the value of our Agency Business or the income generated thereby increases relative to the value of our other, REIT-compliant assets and income, we or ARSR may fail to satisfy one or more of the Internal Revenue Code requirements 26 Table of Contents applicable to REITs.
Allowance for credit losses are particularly difficult to estimate in a turbulent economic environment. We estimate allowances for credit losses on our loans and investments under the current expected credit loss (“CECL”) methodology based on current expected credit losses for the life of the loan and investment.
Allowance for credit losses are particularly difficult to estimate in a turbulent economic environment. We estimate allowances for credit losses on our loans and investments under the CECL methodology based on current expected credit losses for the life of the loan and investment.
As a result of past dislocation of the credit markets, the securitization market has become subject to additional regulation. In particular, pursuant to the Dodd-Frank Act, various federal agencies have promulgated rules that require issuers in securitizations to retain at least 5% of the risk associated with the securities.
As a result of past dislocation of the credit markets, the securitization market is subject to regulation. In particular, pursuant to the Dodd-Frank Act, various federal agencies have promulgated rules that require issuers in securitizations to retain at least 5% of the risk associated with the securities.
The return on our investments and cash available for distribution to our stockholders may be reduced to the extent that changes in market conditions increase our financing cost relative to the income that we can derive from our assets. Our debt service payments reduce the net income available for distributions to our stockholders.
The return on our investments and cash available for distribution to our stockholders may be reduced to the extent that changes in market conditions increase our financing cost relative to the income that we can derive from our assets. 20 Table of Contents Our debt service payments reduce the net income available for distributions to our stockholders.
Management’s Discussion and Analysis of Financial Condition and Results of Operations for a discussion of the current adverse market conditions that we are currently experiencing, and may continue to experience in the future, that are having an adverse impact on our business. Risk Factor Summary Risks Related to Our Business.
Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussions of the adverse market conditions we are currently experiencing, and may continue to experience in the future, that are having an adverse impact on our business. Risk Factor Summary Risks Related to Our Business.
We finance a significant amount of our loans and investments through a variety of means, including CLOs, securitizations, credit facilities, equity capital, senior and convertible debt instruments, and other structured financings.
We finance a significant amount of our loans and investments through a variety of means, including CLOs, securitizations, credit facilities, equity capital, senior and convertible debt instruments, and other structured financings, some of which we guarantee.
Prolonged disruptions in the financial markets could affect our ability to obtain financing on reasonable terms and have other adverse effects on us and the market price of our common stock.
A prolonged disruption in the financial markets could affect our ability to obtain financing on reasonable terms and have other adverse effects on us and the market price of our common stock.
If we are unable to safeguard against cybersecurity breaches and cyberattacks with respect to our information systems, our business may be adversely affected. With cyber threats increasing in frequency and severity, potential breaches pose a significant threat to our operations, potentially leading to reputational damage, financial losses, and legal repercussions. Risks Related to Our Corporate and Ownership Structure.
If we are unable to safeguard against cybersecurity breaches and cyberattacks with respect to our information systems, our business may be adversely affected. With cyber threats increasing in frequency and severity, potential breaches pose a significant threat to our operations, potentially leading to reputational damage, financial losses, and legal repercussions.
At December 31, 2024, the Agency Business’s allowance for loss-sharing balance was $83.2 million, which may not be sufficient to cover future loss sharing obligations. While our Agency Business originates loans that meet the underwriting guidelines defined by Fannie Mae, in addition to our own internal underwriting guidelines, underwriting criteria may not always protect against loan defaults.
At December 31, 2025, the Agency Business’s allowance for loss-sharing balance was $97.6 million, which may not be sufficient to cover future loss sharing obligations. While our Agency Business originates loans that meet the underwriting guidelines defined by Fannie Mae, in addition to our own internal underwriting guidelines, underwriting criteria may not always protect against loan defaults.
At December 31, 2024, this requirement totaled $91.5 million and was satisfied with a $70.0 million letter of credit and cash issued to Fannie Mae. Our current letter of credit facility expires in September 2025. The facility is collateralized by the cash flow generated from the Agency Business’s Fannie Mae servicing portfolio and contains certain financial and other covenants.
At December 31, 2025, this requirement totaled $100.9 million and was satisfied with a $70.0 million letter of credit and cash issued to Fannie Mae. Our current letter of credit facility expires in September 2027. The facility is collateralized by the cash flow generated from the Agency Business’s Fannie Mae servicing portfolio and contains certain financial and other covenants.
Among the factors that could adversely affect our results of operations and impair our ability to make distributions to our stockholders are: • use of funds and our ability to make profitable structured finance investments; • defaults in our asset portfolio or decreases in the value of our portfolio; • anticipated operating expense levels may not prove accurate, as actual results may vary from estimates; and • increased debt service requirements, including those resulting from higher interest rates on variable rate indebtedness.
Among the factors that could adversely affect our results of operations and impair our ability to make distributions to our stockholders are: • use of funds and our ability to make profitable structured finance investments; • defaults in our asset portfolio or decreases in the value of our portfolio; • anticipated operating expense levels may not prove accurate, as actual results may vary from estimates; and • increased debt service requirements, including those resulting from higher interest rates on variable rate indebtedness. 27 Table of Contents A change in any one of these factors could affect our ability to make distributions.
One of our subsidiaries is required to register under the Investment Advisers Act, and is subject to regulation under that Act. One of our subsidiaries is subject to the extensive regulation prescribed by the Investment Advisers Act of 1940 (the “Advisers Act”). The SEC oversees our activities as a registered investment adviser under this regulatory regime.
One of our subsidiaries is subject to the extensive regulation prescribed by the Investment Advisers Act of 1940 (the “Advisers Act”). The SEC oversees our activities as a registered investment adviser under this regulatory regime.
We conduct our operations to qualify as a REIT under the Internal Revenue Code. If we fail to remain qualified as a REIT, we will be subject to corporate tax and could face a substantial tax liability, including taxable mortgage pools resulting from certain of our securitizations.
We conduct a substantial portion of our operations to qualify as a REIT under the Internal Revenue Code. If we fail to remain qualified as a REIT, a greater proportion of our income will be subject to corporate tax and we could face a substantial increase in our tax liability, including taxable mortgage pools resulting from certain of our securitizations.
These vehicles may contain restrictive covenants and may require us to provide additional collateral or repurchase assets if the value of pledged assets, some of which we guarantee, decline in value.
These vehicles may contain restrictive covenants and may require us to provide additional collateral or repurchase assets if the value of pledged assets decline in value.
Loan repayments are a significant source of liquidity for us. If borrowers are unable to refinance loans at maturity, the loans could go into default and the liquidity that we expect to receive from such repayments may not be available.
Loan repayments are less likely in a volatile market environment. Loan repayments are a significant source of liquidity for us. If borrowers are unable to refinance loans at maturity, the loans could go into default and the liquidity that we expect to receive from such repayments may not be available.
Fixed rate investments, however, may experience changes in value as interest rates change. The majority of our interest-earning assets and interest-bearing liabilities in our Structured Business have floating rates of interest. However, depending on market conditions, fixed rate assets may become a greater portion of our new loan originations.
The majority of our interest-earning assets and interest-bearing liabilities in our Structured Business have floating rates of interest. However, depending on market conditions, fixed rate assets may become a greater portion of our new loan originations.
Since the vast majority of our structured loan portfolio is floating rate based on SOFR and a greater portion of our debt balances consist of fixed-rate instruments (such as convertible and senior unsecured notes), a rising interest rate environment generally has a positive impact on our net 13 Table of Contents interest income from our structured loan portfolio.
Since the vast majority of our structured loan portfolio is floating rate based on the Secured Overnight Financing Rate ("SOFR") and a significant portion of our debt balances consist of fixed-rate instruments (such as convertible and senior unsecured notes), a rising interest rate environment generally has a positive impact on our net interest income from our structured loan portfolio.
A weak or declining economy or political disruption, including any international trade disputes, could exacerbate supply chain constraints that could ultimately harm our business. Major bank failure or sustained financial market illiquidity could adversely affect our business, financial condition and results of operations.
Such factors include a weak or declining economy or political disruption, including any international trade disputes, could exacerbate constraints that could adversely affect our business. Major bank failure or sustained financial market illiquidity could adversely affect our business, financial condition and results of operations.
If we were required to register as an investment company, we would become subject to regulation with respect to our capital structure (including our ability to use leverage), management, operations, transactions with affiliated persons (as defined in the Act) and portfolio composition, including restrictions with respect to diversification and industry concentration and other matters.
If we were required to register as an investment company, we would become subject to regulation with respect to our capital structure (including our ability to use leverage), management, operations, transactions with affiliated persons (as defined in the Act) and portfolio composition, including restrictions with respect to diversification and industry concentration and other matters. 23 Table of Contents One of our subsidiaries is required to register, and is subject to regulation, under the Investment Advisers Act.
Borrowers may also be less able 12 Table of Contents to pay principal and interest on our loans if the economy weakens.
Borrowers may also be less able to pay principal and interest on our loans if the economy weakens.
These economic losses will be reflected in our financial results of operations, and our ability to fund these obligations will depend on the liquidity of our assets and access to capital at the time, and the need to fund these obligations could adversely impact our financial condition. Our investments financed in foreign locations may involve significant risks.
These economic losses will be reflected in our financial results of operations, and our ability to fund these obligations will depend on the liquidity of our assets and access to capital at the time, and the need to fund these obligations could adversely impact our financial condition.
In the course of our business, we gather, transmit and retain confidential information through our information systems. Although we endeavor to protect confidential information through the implementation of security technologies, processes and procedures, it is possible that an individual or group could penetrate our security systems and access sensitive information about our business, borrowers and employees.
Although we endeavor to protect confidential information through the implementation of security technologies, processes and procedures, it is possible that an individual or group could penetrate our security systems or those of our third-party providers and access sensitive information about our business, borrowers and employees.
With respect to future CLOs we may issue, we cannot assure that the terms of the delinquency tests, over-collateralization requirements and interest coverage terms, cash flow release mechanisms or other significant terms will be favorable to us.
With respect to future CLOs we may issue, we cannot assure that the terms of the delinquency tests, over-collateralization requirements and interest coverage terms, cash flow release mechanisms or other significant terms will be favorable to us. Failure to obtain favorable terms with regard to these matters may adversely affect our cash flow and profitability.
Such conditions could include political unrest, war, such as the ongoing war with Russia and Ukraine or the ongoing war and tensions in the Middle East, natural disasters or global pandemics. The U.S. and global economies are facing higher inflation and interest rates and potential recession.
Such conditions could include, among others, political unrest, war, such as the ongoing war with Russia and Ukraine, ongoing tensions in the Middle East, and tensions between the U.S. and Venezuela, among others, tariff and trade disputes, or natural disasters or global pandemics. The U.S. and global economies are facing higher inflation and interest rates and recession risks.
FHFA set its 2025 loan origination caps for Fannie Mae and Freddie Mac at $73 billion for each enterprise for a total opportunity of $146 billion (the “2025 Caps”), which is an increase from its 2024 Caps of $70 billion for each enterprise.
FHFA set its 2026 loan origination caps for Fannie Mae and Freddie Mac at $88 billion for each enterprise for a total opportunity of $176 billion (the “2026 Caps”), which is an increase from its 2025 Caps of $73 billion for each enterprise.
Should the issuer default on our investment, we can only proceed against the entity in which we have an interest, and not the underlying property. As a result, we may not recover some or all of our investment.
Should the issuer default on our investment, we can only proceed against the entity in which we have an interest, and not the underlying property. As a result, we may not recover some or all of our investment. Volatility in values of multifamily and commercial properties may adversely affect our loans and investments.
At December 31, 2024, the Agency Business had pledged $91.5 million in restricted liquidity as collateral against future losses under $22.73 billion of loans outstanding that are subject to risk-sharing obligations. Fannie Mae collateral requirements may change in the future.
At December 31, 2025, the Agency Business had pledged $100.9 million in restricted liquidity as collateral against future losses under $24.09 billion of loans outstanding that are subject to risk-sharing obligations. Fannie Mae collateral requirements may change in the future.
A change in any one of these factors could affect our ability to make distributions. If we are not able to comply with the restrictive covenants and financial ratios contained in credit and repurchase facilities and unsecured debt, our ability to make distributions to our stockholders may also be impaired.
If we are not able to comply with the restrictive covenants and financial ratios contained in credit and repurchase facilities and unsecured debt, our ability to make distributions to our stockholders may also be impaired.
The GSEs or HUD could require us to repurchase a loan if representations and warranties are breached, even if the loan is not in default.
Our obligation to repurchase the loan is independent of our risk-sharing obligations. The GSEs or HUD could require us to repurchase a loan if representations and warranties are breached, even if the loan is not in default.
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, a decline in our GSE originations could negatively impact our financial results. We are unsure whether FHFA will impose stricter limitations on GSE multifamily production volume in the future.
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, a decline in our GSE originations could negatively impact our financial results.
For example, we are generally required to provide the following, among other, representations and warranties: we are authorized to do business and to sell or assign the loan; the loan conforms to the requirements of the GSEs or HUD and certain laws and regulations; the underlying mortgage represents a valid first lien on the property and there are no other liens on the property; the loan documents are valid and enforceable; taxes, assessments, insurance premiums, rents and similar other payments have been paid or escrowed; the property is insured, conforms to zoning laws and remains intact; and we do not know of any issues regarding the loan that are reasonably expected to cause the loan to be delinquent or unacceptable for investment or adversely affect its value.
For example, we are generally required to provide the following, among other, representations and warranties: we are authorized to do business and to sell or assign the loan; the loan conforms to the requirements of the GSEs or HUD and certain laws and regulations; the underlying mortgage represents a valid first lien on the property and there are no other liens on the property; the loan documents are valid and enforceable; taxes, assessments, insurance premiums, rents and similar other payments have been paid or escrowed; the property is insured, conforms to zoning laws and remains intact; and we do not know of any issues regarding the loan that are reasonably expected to cause the loan to be delinquent or unacceptable for investment or adversely affect its value. 18 Table of Contents In the event of a breach of any representation or warranty, whether because of fraud or negligence, investors could, among other things, require us to repurchase the loan or seek indemnification for losses or, in the case of Fannie Mae, increase the level of risk-sharing on the loan.
Even if a sanction imposed against our subsidiary or its personnel involves a small monetary amount, the adverse publicity related to such sanction could harm our reputation and our relationship with our investors and impede our ability to raise additional capital.
Even if a sanction imposed against our subsidiary or its personnel involves a small monetary amount, the adverse publicity related to such sanction could harm our reputation and our relationship with our investors and impede our ability to raise additional capital. In addition, compliance with the Advisers Act requires us to incur additional costs, and these costs may be material.
We currently have a credit facility with a $37.5 million sublimit for principal and interest advances we make as the primary servicer to Fannie Mae in connection with potential delinquent loans under the Fannie Mae forbearance program, however, such financing may not be available to us in the future, or, may be costly and could prevent the Agency Business from pursuing its business and growth strategies.
We currently have a credit facility with a $37.5 million sublimit for principal and interest advances we make as the primary servicer to Fannie Mae in connection with potential delinquent loans under the Fannie Mae forbearance program, however, such financing may not be available to us in the future, or, may be costly and could prevent the Agency Business from pursuing its business and growth strategies. 19 Table of Contents Risks Related to Our Financing and Hedging Activities We may not be able to access financing sources on favorable terms, or at all, which could adversely affect our ability to execute our business plan.
These fees are primarily derived from loans that have been originated by us and sold through the GSE and HUD programs. A decline in the number or value of loans that the Agency Business originates for these investors or terminations of its servicing engagements will decrease these fees. HUD has the right to terminate our current servicing engagements for cause.
A decline in the number or value of loans that the Agency Business originates for these investors or terminations of its servicing engagements will decrease these fees. HUD has the right to terminate our current servicing engagements for cause.
We finance our Agency Business loan originations, prior to sale to, or securitization by, an agency, through credit facilities provided by commercial banks. Our access to these sources of funding can be impacted by conditions in the financing markets that are beyond our control, including lack of liquidity and wider credit spreads, which we have experienced in the past.
Our access to these sources of funding can be impacted by conditions in the financing markets that are beyond our control, including lack of liquidity and wider credit spreads, which we have experienced in the past.
In addition, our ability to satisfy the requirements to qualify as a REIT depends in part on the actions of third parties over which we have no control or only limited influence, including in cases where we own an equity interest in an entity that is classified as a partnership for U.S. federal income tax purposes. 24 Table of Contents Furthermore, new tax legislation, administrative guidance or court decisions, in each instance potentially with retroactive effect, could make it more difficult or impossible for us to qualify as a REIT.
In addition, our ability to satisfy the requirements to qualify as a REIT depends in part on the actions of third parties over which we have no control or only limited influence, including in cases where we own an equity interest in an entity that is classified as a partnership for U.S. federal income tax purposes.
Any significant repurchase or indemnification obligations imposed on us could have a material adverse effect on the Agency Business. 17 Table of Contents For most loans we service under the Fannie Mae and HUD programs, we are required to advance payments due to investors if the borrower is delinquent in making such payments, which requirement could adversely impact our liquidity and harm our results of operations.
For most loans we service under the Fannie Mae and HUD programs, we are required to advance payments due to investors if the borrower is delinquent in making such payments, which requirement could adversely impact our liquidity and harm our results of operations.
Our current investment strategy for our Structured Business emphasizes loans with both floating and fixed interest rates. Floating rate investments earn interest at rates that adjust from time to time (typically monthly) based upon an index, allowing this portion of our portfolio to be insulated from changes in value due to changes in interest rates.
Floating rate investments earn interest at rates that adjust from time to time (typically monthly) based upon an index, allowing this portion of our portfolio to be insulated from changes in value due to changes in interest rates. Fixed rate investments, however, may experience changes in value as interest rates change.
Our Agency Business has modified its risk-sharing obligations on some Fannie Mae DUS loans to reduce potential loss exposure on those loans. In addition, Fannie Mae can increase our risk-sharing obligations if the loan does not meet specific underwriting criteria or if the loan defaults within 12 months of its sale to Fannie Mae.
In addition, Fannie Mae can increase our risk-sharing obligations or require us to repurchase loans if the loan does not meet specific underwriting criteria or if the loan defaults within 12 months of its sale to Fannie Mae.
This process is particularly important and sometimes, more subjective with respect to newly organized entities because there may be little or no information publicly available about the entities. There can be no assurance that our due diligence process will uncover all relevant facts or that any investment will be successful.
This process is particularly important and sometimes, more subjective with respect to newly organized entities because there may be little or no information publicly available about the entities.
We have not experienced any material misappropriation, loss or unauthorized disclosure of confidential or personally identifiable information as a result of a cybersecurity breach or other act, however, a cybersecurity breach or other act and/or disruption to our information technology systems could have a material adverse effect on our business, financial condition or results of operations. 23 Table of Contents Risks Related to Our Corporate and Ownership Structure ACM and our chief executive officer have significant influence over our policies and strategies.
We have not experienced any material misappropriation, loss or unauthorized disclosure of confidential or personally identifiable information as a result of a cybersecurity breach or other act, however, a cybersecurity breach or other act and/or disruption to our information technology systems or to the information technology systems of our third-party providers could have a material adverse effect on our business, financial condition or results of operations.
A significant portion of our Agency Business’s revenue is derived from loan servicing fees and declines in, or terminations of, servicing engagements, or breaches of servicing agreements, could have a material adverse effect on us. We expect that loan servicing fees will continue to represent a significant portion of our Agency Business’ revenues.
There can be no assurance that such fees will continue to remain at current levels or that such levels will be sufficient if delinquencies occur. A significant portion of our Agency Business’s revenue is derived from loan servicing fees and declines in, or terminations of, servicing engagements, or breaches of servicing agreements, could have a material adverse effect on us.
In addition, compliance with the Advisers Act may require us to incur additional costs, and these costs may be material. The effects of government regulation could negatively impact the market value of loans. Loans related to development projects bear additional risk in that government regulation could impact the value of the project by limiting the development of the property.
The effects of government regulation could negatively impact the market value of loans. Loans related to development projects bear additional risk in that government regulation could impact the value of the project by limiting the development of the property.
If the proper approvals for the completion of the project are not granted, the value of the collateral may be adversely affected which may negatively impact the value of the loan. 22 Table of Contents A change to the conservatorship of Fannie Mae and Freddie Mac and related actions, along with any changes in laws and regulations affecting the relationship between Fannie Mae and Freddie Mac and the U.S. federal government, could materially and adversely affect our Agency Business.
A change to the conservatorship of Fannie Mae and Freddie Mac and related actions, along with any changes in laws and regulations affecting the relationship between Fannie Mae and Freddie Mac and the U.S. federal government, could materially and adversely affect our Agency Business.
Since the CECL methodology for the recognition of credit losses estimates losses for the life of our investment, our financial results may be negatively affected when weak or deteriorating economic conditions are forecasted, which generally results in increases in estimated credit losses under CECL. Loan repayments are less likely in a volatile market environment.
If our estimates and judgments are not correct, our results of operations and financial condition could be severely impacted. 13 Table of Contents Since the CECL methodology for the recognition of credit losses estimates losses for the life of our investment, our financial results may be negatively affected when weak or deteriorating economic conditions are forecasted, which generally results in increases in estimated credit losses under CECL.
Potential adverse impacts of climate-related physical risks include: • declination in asset values, due to, among other events, the destruction or degradation of property; • reduced availability or increased cost of insurance for our borrowers; and • interruptions to business operations, including supply chain disruption.
Climate-related physical risks include the increased frequency or severity of acute weather events, such as floods, wildfires and tropical storms, and chronic shifts in the climate, such as persistent changes in precipitation levels, rising sea levels, or increases in average ambient temperature. 30 Table of Contents Potential adverse impacts of climate-related physical risks include: • declination in asset values, due to, among other events, the destruction or degradation of property; • reduced availability or increased cost of insurance for our borrowers; and • interruptions to business operations, including supply chain disruption.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe continuously strive to strengthen our cybersecurity measures to protect our systems, data, customers and stakeholders from evolving threats. To date, cybersecurity incidents and risks have not materially affected us, including our business strategy, results of operations, or financial condition. For more details on our cybersecurity risk management, please refer to the relevant sections of this Form 10-K.
Biggest changeTo date, cybersecurity incidents and risks have not materially affected us, including our business strategy, results of operations, or financial condition. For more details on our cybersecurity risk management, please refer to the relevant sections of this Form 10-K. Item 2. Properties Our principal corporate offices are located in leased space at 333 Earle Ovington Boulevard, Uniondale, New York, 11553.
In addition to third party engagements, we maintain rigorous oversight of cybersecurity risks associated with our use of third party service providers. Vendor management processes are employed to evaluate vendors' cybersecurity practices, assess risk position and implement measures to mitigate potential threats arising from these external relationships. The Board of Directors has been designated to oversee cybersecurity risk management.
In addition to third-party engagements, we maintain oversight of cybersecurity risks associated with our use of third-party service providers. Vendor management processes are employed to evaluate vendors' cybersecurity practices, assess risk position and implement measures to mitigate potential threats arising from these external relationships. The Board of Directors has been designated to oversee cybersecurity risk management.
Item 1C. Cybersecurity Our management recognizes the critical importance of addressing cybersecurity threats and risks to our business and operations. Therefore, we have established a comprehensive framework to assess, respond to, and manage material risks arising from cybersecurity threats. Our chief technology officer and the Cybersecurity Incident Response Team (“IRT”) are responsible for assessing and managing cybersecurity risks.
Item 1C. Cybersecurity Our management recognizes the critical importance of addressing cybersecurity threats and risks to our business and operations. Therefore, we have established a framework to assess, respond to, and manage material risks arising from cybersecurity threats. Our chief technology officer and the Cybersecurity Incident Response Team (“IRT”) are responsible for assessing and managing cybersecurity risks.
The diverse expertise of the IRT members enables comprehensive risk assessment and swift responses to mitigate the potential impact of breaches or other cybersecurity incidents. We actively engage consultants, outside counsel and other technology experts to enhance our cybersecurity risk management processes, who perform regular assessments and evaluations of the effectiveness of our cybersecurity measures.
The diverse expertise of the IRT members enables comprehensive risk assessment and timely responses to mitigate the potential impact of breaches or other cybersecurity incidents. We actively engage consultants, outside counsel and other technology experts to enhance our cybersecurity risk management processes, who perform regular assessments and evaluations of the effectiveness of our cybersecurity measures.
The Board of Directors acknowledges cybersecurity as a strategic risk and a priority for the Company. The Board of Directors is actively involved in the oversight of our cybersecurity risk management efforts, ensuring alignment with our overall business objectives. Our commitment to cybersecurity resilience is rooted in the collaborative efforts between management, the IRT and the Board of Directors.
The Board of Directors acknowledges cybersecurity as a strategic risk and 31 Table of Contents a priority for the Company. The Board of Directors is actively involved in the oversight of our cybersecurity risk management efforts, which is one of our core components of our enterprise risk management, ensuring alignment with our overall business objectives.
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Our commitment to cybersecurity resilience is rooted in the collaborative efforts between management, the IRT and the Board of Directors. The Board of Directors is briefed twice annually by our chief technology officer and on an as needed basis when, and if, threats materialize.
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Item 3. Legal Proceedings Information with respect to certain legal proceedings is set forth in Note 15 and is incorporated herein by reference. 32 Table of Contents PART II

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings 31 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 32 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 34 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 45 Item 8. Financial Statements and Supplementary Data 48
Biggest changeItem 3. Legal Proceedings 32 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 33 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 35 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 47 Item 8. Financial Statements and Supplementary Data 50

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePeriod Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares That May Yet Be Purchased Under the Publicly Announced Plans or Programs October 1, 2024 to October 31, 2024 — $ — — — November 1, 2024 to November 30, 2024 — — — — December 1, 2024 to December 31, 2024 5,269 14.17 — — 5,269 $ 14.17 — (1) These shares were purchased by an affiliated purchaser of ours and we have not repurchased any shares under our share repurchase program during the fourth quarter of 2024.
Biggest changePeriod Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of a Publicly Announced Program Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (1) October 1 - 31, 2025 — $ — — $ 138,591 November 1 - 30, 2025 71,800 8.72 — $ 138,591 December 1 - 31, 2025 257,796 7.78 257,796 $ 136,585 329,596 $ 7.98 257,796 (1) Amount represents the total amount available under our share repurchase program approved by our Board of Directors in 2023.
Securities Authorized for Issuance under Equity Compensation Plans This information will be contained in our definitive proxy statement for the 2025 Annual Meeting of Stockholders, to be filed within 120 days following the end of our fiscal year and is incorporated herein by reference.
Securities Authorized for Issuance under Equity Compensation Plans This information will be contained in our definitive proxy statement for the 2026 Annual Meeting of Stockholders, to be filed within 120 days following the end of our fiscal year and is incorporated herein by reference.
Stockholder Return The graph below compares the cumulative total stockholder return for our common stock with the Russell 2000 Index, the Nareit Mortgage REITs Index and the Nareit All REITs Index for the five-year period from December 31, 2019 to December 31, 2024. The graph assumes a $100 investment on January 1, 2020, and the reinvestment of any dividends.
Stockholder Return The graph below compares the cumulative total stockholder return for our common stock with the Russell 2000 Index, the Nareit Mortgage REITs Index and the Nareit All REITs Index for the five-year period from December 31, 2020 to December 31, 2025. The graph assumes a $100 investment on January 1, 2021, and the reinvestment of any dividends.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “ABR.” On February 7, 2025, there were approximately 168,000 record holders of our common stock, including persons holding shares in broker accounts under street names.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “ABR.” On February 13, 2026, there were approximately 136,000 record holders of our common stock, including persons holding shares in broker accounts under street names.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table sets forth all purchases made by or on behalf of us or any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) under the Exchange Act, of shares of our common stock during each of the indicated periods.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table sets forth all common stock purchases made by or on behalf of us and any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) under the Exchange Act, during each of the indicated periods ($ in thousands, except share and per share data).
The information included in the graph and table below was obtained from 2025 Russell Investment Group. 32 Table of Contents Total Return Performance Period Ending Index 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 12/31/24 Arbor Realty Trust, Inc $ 100.00 $ 110.05 $ 153.43 $ 121.68 $ 158.39 $ 163.61 Russell 2000 $ 100.00 $ 119.96 $ 137.74 $ 109.59 $ 128.14 $ 142.93 FTSE Nareit Mortgage REITs $ 100.00 $ 81.23 $ 93.93 $ 68.94 $ 79.52 $ 79.80 FTSE Nareit All REITs $ 100.00 $ 94.14 $ 131.68 $ 98.62 $ 109.95 $ 114.71 In accordance with SEC rules, this “Stockholder Return” section shall not be incorporated by reference into any of our future filings under the Securities Act or the Exchange Act and shall not be deemed to be soliciting material or to be filed under the Securities Act or the Exchange Act. 33 Table of Contents
The information included in the graph and table below was obtained from 2025 Russell Investment Group. 33 Table of Contents Total Return Performance Period Ending Index 12/31/20 12/31/21 12/31/22 12/31/23 12/31/24 12/31/25 Arbor Realty Trust, Inc $ 100.00 $ 139.42 $ 110.57 $ 143.93 $ 148.67 $ 94.07 Russell 2000 $ 100.00 $ 114.82 $ 91.35 $ 106.82 $ 119.14 $ 134.40 FTSE Nareit Mortgage REITs $ 100.00 $ 115.64 $ 84.86 $ 97.89 $ 98.24 $ 113.98 FTSE Nareit All REITs $ 100.00 $ 139.88 $ 104.76 $ 116.79 $ 121.85 $ 123.88 In accordance with SEC rules, this “Stockholder Return” section shall not be incorporated by reference into any of our future filings under the Securities Act or the Exchange Act and shall not be deemed to be soliciting material or to be filed under the Securities Act or the Exchange Act. 34 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeComparison of Results of Operations for Years Ended December 31, 2024 and 2023 The following table provides our consolidated operating results ($ in thousands): Year Ended December 31, Increase / (Decrease) 2024 2023 Amount Percent Interest income $ 1,167,872 $ 1,331,219 $ (163,347) (12) % Interest expense 804,615 903,228 (98,613) (11) % Net interest income 363,257 427,991 (64,734) (15) % Other revenue: Gain on sales, including fee-based services, net 74,932 72,522 2,410 3 % Mortgage servicing rights 51,272 69,912 (18,640) (27) % Servicing revenue, net 125,896 130,449 (4,553) (3) % Property operating income 7,226 5,708 1,518 27 % (Loss) gain on derivative instruments, net (8,543) 6,763 (15,306) nm Other income, net 8,083 7,667 416 5 % Total other revenue 258,866 293,021 (34,155) (12) % Other expenses: Employee compensation and benefits 181,694 159,788 21,906 14 % Selling and administrative 54,931 51,260 3,671 7 % Property operating expenses 7,394 5,897 1,497 25 % Depreciation and amortization 9,555 9,743 (188) (2) % Provision for loss sharing (net of recoveries) 11,782 15,695 (3,913) (25) % Provision for credit losses (net of recoveries) 68,543 73,446 (4,903) (7) % Total other expenses 333,899 315,829 18,070 6 % Income before extinguishment of debt, gain on real estate, income from equity affiliates and income taxes 288,224 405,183 (116,959) (29) % Loss on extinguishment of debt (412) (1,561) 1,149 (74) % Gain on real estate 3,813 — 3,813 nm Income from equity affiliates 5,772 24,281 (18,509) (76) % Provision for income taxes (13,478) (27,347) 13,869 (51) % Net income 283,919 400,556 (116,637) (29) % Preferred stock dividends 41,369 41,369 — — Net income attributable to noncontrolling interest 19,278 29,122 (9,844) (34) % Net income attributable to common stockholders $ 223,272 $ 330,065 $ (106,793) (32) % ________________________________________ nm – not meaningful 39 Table of Contents 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): Year ended December 31, 2024 2023 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 $ 11,593,718 $ 1,045,057 8.99 % $ 13,190,889 $ 1,208,180 9.16 % Mezzanine 264,241 27,414 10.35 % 224,784 23,939 10.65 % Preferred equity investments 117,131 9,082 7.73 % 90,960 5,892 6.48 % Other 4,601 481 10.43 % 20,635 3,370 16.33 % Core interest-earning assets 11,979,691 1,082,034 9.01 % 13,527,268 1,241,381 9.18 % Cash equivalents 624,908 30,729 4.90 % 913,382 38,052 4.17 % Total interest-earning assets $ 12,604,599 $ 1,112,763 8.80 % $ 14,440,650 $ 1,279,433 8.86 % Structured Business interest-bearing liabilities: CLO $ 5,762,959 $ 420,137 7.27 % $ 7,081,594 $ 496,049 7.00 % Credit and repurchase facilities 2,827,184 235,909 8.32 % 3,185,888 251,519 7.89 % Unsecured debt 1,564,112 98,187 6.26 % 1,658,986 103,147 6.22 % Q Series securitization 172,965 14,230 8.20 % 229,734 17,158 7.47 % Trust preferred 154,336 13,205 8.53 % 154,336 12,729 8.25 % Total interest-bearing liabilities $ 10,481,556 781,668 7.44 % $ 12,310,538 880,602 7.15 % Net interest income $ 331,095 $ 398,831 ________________________________________ (1) Based on UPB for loans, amortized cost for securities and principal amount for debt.
Biggest changeComparison of Results of Operations for Years Ended December 31, 2025 and 2024 The following table provides our consolidated operating results ($ in thousands): Year Ended December 31, Increase / (Decrease) 2025 2024 Amount Percent Interest income $ 940,008 $ 1,167,872 $ (227,864) (20) % Interest expense 701,836 804,615 (102,779) (13) % Net interest income 238,172 363,257 (125,085) (34) % Other revenue: Gain on sales, including fee-based services, net 70,669 74,932 (4,263) (6) % Mortgage servicing rights 54,532 51,272 3,260 6 % Servicing revenue, net 109,617 125,896 (16,279) (13) % Property operating income 21,347 7,226 14,121 195 % Gain (loss) on derivative instruments, net 1,259 (8,543) 9,802 nm Other income, net 14,801 8,083 6,718 83 % Total other revenue 272,225 258,866 13,359 5 % Other expenses: Employee compensation and benefits 174,145 181,694 (7,549) (4) % Selling and administrative 59,805 54,931 4,874 9 % Property operating expenses 27,980 7,394 20,586 nm Depreciation and amortization 23,214 9,555 13,659 143 % Impairment loss on real estate owned 20,500 — 20,500 nm Provision for loss sharing, net 24,259 11,782 12,477 106 % Provision for credit losses, net 42,696 68,543 (25,847) (38) % Total other expenses 372,599 333,899 38,700 12 % Income before extinguishment of debt, (loss) gain on real estate, income from equity affiliates and income taxes 137,798 288,224 (150,426) (52) % Loss on extinguishment of debt (2,919) (412) (2,507) nm (Loss) gain on real estate (9,151) 3,813 (12,964) nm Income from equity affiliates 50,880 5,772 45,108 nm Provision for income taxes (18,779) (13,478) (5,301) 39 % Net income 157,829 283,919 (126,090) (44) % Preferred stock dividends 41,369 41,369 — — Net income attributable to noncontrolling interest 9,033 19,278 (10,245) (53) % Net income attributable to common stockholders $ 107,427 $ 223,272 $ (115,845) (52) % ________________________________________ nm – not meaningful 40 Table of Contents 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): Year ended December 31, 2025 2024 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 $ 11,084,014 $ 827,404 7.46 % $ 11,593,718 $ 1,045,057 8.99 % Mezzanine 270,052 27,322 10.12 % 264,241 27,414 10.35 % Preferred equity investments 165,157 16,925 10.25 % 117,131 9,082 7.73 % Other 114,049 12,421 10.89 % 4,601 481 10.43 % Core interest-earning assets 11,633,272 884,072 7.60 % 11,979,691 1,082,034 9.01 % Cash equivalents 193,730 6,861 3.54 % 624,908 30,729 4.90 % Total interest-earning assets $ 11,827,002 $ 890,933 7.53 % $ 12,604,599 $ 1,112,763 8.80 % Structured Business interest-bearing liabilities: Credit and repurchase facilities $ 4,111,154 $ 304,341 7.40 % $ 2,827,184 $ 235,909 8.32 % CLO 3,787,182 247,124 6.53 % 5,762,959 420,137 7.27 % Unsecured debt 1,670,096 111,281 6.66 % 1,564,112 98,187 6.26 % Trust preferred 154,336 11,670 7.56 % 154,336 13,205 8.53 % Q Series securitization 26,501 2,225 8.40 % 172,965 14,230 8.20 % Total interest-bearing liabilities $ 9,749,269 676,641 6.94 % $ 10,481,556 781,668 7.44 % Net interest income $ 214,292 $ 331,095 ________________________________________ (1) Based on UPB for loans, amortized cost for securities and principal amount for debt.
To maintain our status as a REIT under the Internal Revenue Code, we must distribute annually at least 90% of our taxable income. These distribution requirements limit our ability to retain earnings and thereby replenish or increase capital for operations.
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.
To maintain REIT status, REITs are required to distribute at least 90% of their 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.
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.
When effective, this strategy allows us to recapture refinancing opportunities, deleverage 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.
When effective, this strategy allows us to recapture refinancing opportunities, deleverage our balance sheet, and generate additional income streams through our capital-light Agency Business. Income earned from other structured investments. Our other structured investments 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.
Workforce housing loans preserve rents at affordable levels in multifamily properties, typically without the use of public subsidies. The 2025 Caps will continue to mandate that at least 50% be directed towards mission driven, affordable housing, with affordability levels corresponding to 80%-120% of area median income, depending on the market.
Workforce housing loans preserve rents at affordable levels in multifamily properties, typically without the use of public subsidies. The 2026 Caps will continue to mandate that at least 50% be directed towards mission driven, affordable housing, with affordability levels corresponding to 80%-120% of area median income, depending on the market.
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 44 Table of Contents collected.
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 46 Table of Contents collected.
FHFA stated they will continue to monitor the market and reserves the right to increase the 2025 Caps if warranted, however, they will not reduce the 2025 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 2025 Caps.
FHFA stated they will continue to monitor the market and reserves the right to increase the 2026 Caps if warranted, however, they will not reduce the 2026 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 2026 Caps.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion in conjunction with the sections of this report entitled “Forward-Looking Statements” and”Risk Factors,” along with the historical consolidated financial statements including related notes, included in this report.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion in conjunction with the sections of this report entitled “Forward-Looking Statements” and “Risk Factors,” along with the historical consolidated financial statements including related notes, included in this report.
These commitments are outstanding for short periods of time (generally less than 60 days) and are described in Note 13. 42 Table of Contents 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.
These commitments are outstanding for short periods of time (generally less than 60 days) and are described in Note 13. 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 preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions that could affect the reported amounts in our consolidated financial statements. Actual results could differ from these estimates. A summary of our significant accounting policies is presented in Note 2.
The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions that could affect the reported amounts in our consolidated financial statements. Actual results could differ from these estimates. 45 Table of Contents A summary of our significant accounting policies is presented in Note 2.
Given the current elevated interest rate environment, we cannot guarantee that our loan portfolio will perform under the current loan terms.
Given the current elevated interest rate environment, we cannot guarantee that our loan portfolio will continue to perform under the current loan terms.
If our financing sources, borrowers and their tenants continue to be impacted by 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.
If our borrowers and their tenants continue to be impacted by these adverse economic and market conditions, or by the other risks disclosed in our filings with the SEC, it could have a material adverse effect on our liquidity and capital resources.
(2) Weighted average yield calculated based on annualized interest income or expense divided by average carrying value. Net Interest Income The decrease in interest income was mainly due to a $166.7 million decrease from our Structured Business.
(2) Weighted average yield calculated based on annualized interest income or expense divided by average carrying value. Net Interest Income The decrease in interest income was mainly due to a $221.8 million decrease from our Structured Business.
We employ rigorous risk management and underwriting practices to proactively maintain the quality of our loan portfolio and work very closely with borrowers to mitigate potential losses, while safeguarding the integrity of our portfolio, which may include modifying original loan terms.
We employ rigorous risk management and underwriting practices to proactively maintain the quality of our loan portfolio and work very closely with borrowers to mitigate potential losses, while safeguarding the integrity of our portfolio, which may result in the continuation of modifying loan terms.
These rate reductions have resulted in and will continue to result in a decrease in the net interest income on our floating rate loan book and reductions in the earnings on our cash and escrow balances. For additional details, please see “Quantitative and Qualitative Disclosures about Market Risk” below.
The above mentioned short-term interest rate reductions have resulted, and will continue to result, in a decrease in the net interest income on our floating rate loan book and reductions in the earnings on our cash and escrow balances. For additional details, see “Quantitative and Qualitative Disclosures about Market Risk” below.
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. We had $9.54 billion in total structured debt outstanding at December 31, 2024.
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. We had $10.68 billion in total structured debt outstanding at December 31, 2025.
The OP Units are redeemable for cash, or at our option for shares of our common stock on a one-for-one basis. (2) The diluted weighted average shares outstanding were adjusted to exclude the potential shares issuable upon conversion and settlement of our convertible senior notes principal balance.
The OP Units are redeemable for cash, or at our option for shares of our common stock on a one-for-one basis. (2) The diluted weighted average shares outstanding were adjusted to exclude the potential shares issuable upon conversion and settlement of our convertible senior notes principal balance, which were fully settled in the third quarter of 2025.
Each quarter, we assess these estimates and assumptions based on several factors, including historical experience, which we believe to be reasonable under the circumstances. These estimates are subject to change in the future if any of the underlying assumptions or factors change. Non-GAAP Financial Measures Distributable Earnings.
Each quarter, we assess these estimates and assumptions based on several factors, including historical experience, which we believe to be reasonable under the circumstances. These estimates are subject to change in the future if any of the underlying assumptions or factors change.
Our debt that finances our Structured loan and investment portfolio totaled $9.46 billion and $11.57 billion at December 31, 2024 and 2023, respectively, with a weighted average funding cost of 6.55% and 7.14%, respectively, which excludes financing costs. Including financing costs, the weighted average funding rate was 6.88% and 7.45% at December 31, 2024 and 2023, respectively.
Our debt that finances our Structured loan and investment portfolio totaled $10.46 billion and $9.46 billion at December 31, 2025 and 2024, respectively, with a weighted average funding cost of 6.16% and 6.55%, respectively, which excludes financing costs. Including financing costs, the weighted average funding rate was 6.45% and 6.88% at December 31, 2025 and 2024, respectively.
FHFA set its 2025 Caps for Fannie Mae and Freddie Mac at $73 billion for each enterprise for a total opportunity of $146 billion, which is an increase from its 2024 Caps of $70 billion for each enterprise.
FHFA set its 2026 Caps for Fannie Mae and Freddie Mac at $88 billion for each enterprise for a total opportunity of $176 billion, which is an increase from its 2025 Caps of $73 billion for each enterprise.
Including certain fees earned and costs, the weighted average current interest rate was 7.80% and 8.98% at December 31, 2024 and 2023, respectively.
Including certain fees earned and costs, the weighted average current interest rate was 7.08% and 7.80% at December 31, 2025 and 2024, respectively.
Of this total, $6.32 billion, or 67%, does not contain mark-to-market provisions and is comprised of non-recourse securitized debt, senior unsecured debt and junior subordinated notes. The remaining $3.22 billion of debt is in credit and repurchase facilities with several different banks that we have long-standing relationships with.
Of this total, $5.69 billion, or 54%, does not contain mark-to-market provisions and is comprised of non-recourse securitized debt, senior unsecured debt and junior subordinated notes. The remaining $4.99 billion of debt is in credit and repurchase facilities with several different banks that we have long-standing relationships with.
Income from Equity Affiliates Income from equity affiliates in 2024 primarily reflects $9.0 million in distributions received from our Lexford joint venture, partially offset by losses totaling $3.5 million from our investments in AMAC III and a residential mortgage banking business.
Income from Equity Affiliates Income from equity affiliates in 2025 primarily reflects $56.0 million of income recognized related to the cash distributions received from our Lexford joint venture, partially offset by losses from our investments in AMAC III and a residential mortgage banking business totaling $5.3 million; while income in 2024 primarily reflects $9.0 million in distributions received from our Lexford joint venture, partially offset by losses totaling $3.5 million from our investments in AMAC III and a residential mortgage banking business.
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 December 31, 2024.
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 December 31, 2025.
This environment could also limit our ability to resolve delinquent loans, leading to potential additional foreclosures and REO assets on our balance sheet, all of which could have a material adverse effect on our future results of operations, financial condition, liquidity and our ability to make distributions to our stockholders.
Additionally, this high-interest rate environment has limited our ability to resolve delinquent loans, leading to additional foreclosures and REO assets on our balance sheet, all of which could have a further material adverse effect on our future results of operations, financial condition, liquidity and ability to make distributions to our stockholders.
In addition to our ability to extend our credit and repurchase facilities and raise funds from equity and debt offerings, we also have a $33.47 billion agency servicing portfolio at December 31, 2024, which is mostly prepayment protected and generates approximately $126.5 million per year in recurring gross cash flow.
In addition to our ability to extend our credit and repurchase facilities and raise funds from equity and debt offerings, we also have a $36.20 billion agency servicing portfolio at December 31, 2025, which is mostly prepayment protected, and escrow/cash balances that generates approximately $200 million per year in recurring gross cash flow.
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.
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, fund capital expenditures and other property level costs associated with REO assets (including tenant improvements and rehabilitation/ renovation costs) and to fund draws due under unfunded loan commitments, as well as other general business needs.
No adjustment was necessary for the year ended December 31, 2024, as their effect was anti-dilutive and not reflected in the GAAP diluted weighted average shares outstanding.
No adjustments were necessary for the years ended December 31, 2025 and 2024, as their effect was anti-dilutive and not reflected in the diluted weighted average shares outstanding.
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 has impacted, and may continue to impact, our future results of operations, financial condition, business prospects and our ability to make distributions to our stockholders.
This elevated and unpredictable rate environment has resulted in, and may continue to result in, increased payment delinquencies and defaults, increased loan modifications and foreclosures and declining real estate values of certain asset classes, all of which have impacted, and may continue to impact, our future results of operations, financial condition, business prospects and ability to make distributions to our stockholders.
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 has impacted, and may continue to impact, our future results of operations, financial condition, business prospects and our ability to make distributions to our stockholders.
This elevated and unpredictable rate environment has resulted in, and may continue to result in, increased payment delinquencies and defaults, increased loan modifications and foreclosures and declining real estate values of certain asset classes, all of which have impacted, and may continue to impact, our future results of operations, financial condition, business prospects and ability to make distributions to our stockholders.
Historically, the high interest rate environment has positively impacted 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.
In general, a rising or high-interest rate environment positively impacts 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.
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 12.
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 12.
Agency Business Revenue The increase in gain on sales, including fee-based services, net was primarily due to a 10% increase in the sales margin from 1.48% to 1.63%, partially offset by a 6% decrease in loan sales volume ($279.5 million).
Agency Business Revenue The decrease in gain on sales, including fee-based services, net was primarily due to a 15% decrease in the sales margin from 1.63% to 1.38%, partially offset by an 11% increase in loan sales volume ($494.8 million).
Additionally, since a greater portion of our debt consists of fixed-rate instruments (such as convertible and senior unsecured notes), as compared to our structured loan portfolio, the increase in interest income from high interest rates tends to outpace the rise in interest expense on our debt.
Additionally, since a sizable portion of our debt consists of fixed-rate instruments (such as senior unsecured notes), as compared to our structured loan portfolio, the increase in interest income from high interest rates tends to outpace the rise in interest expense on our debt. Furthermore, our earnings on escrows and cash balances also benefit from an elevated rate environment.
This environment could also limit our ability to resolve delinquent loans, leading to potential additional foreclosures and REO assets on our balance sheet, all of which could have a material adverse effect on our future results of operations, financial condition, liquidity and our ability to make distributions to our stockholders.
Additionally, this high-interest rate environment has limited our ability to resolve delinquent loans, 36 Table of Contents leading to additional foreclosures and REO assets on our balance sheet, all of which could have a further material adverse effect on our future results of operations, financial condition, liquidity and ability to make distributions to our stockholders.
At December 31, 2023, there were two loans totaling $4.8 million in bankruptcy and no loans in foreclosure. 38 Table of Contents 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.
At December 31, 2024, there were two loans totaling $4.8 million in bankruptcy and six loans totaling $28.2 million were foreclosed. 39 Table of Contents Our Agency Business servicing portfolio represents commercial real estate loans, which are generally transferred or sold within 60 days from the date the loan is funded.
Comparison of Results of Operations for Years Ended December 31, 2023 and 2022 For a discussion of our results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022, please refer to Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 20, 2024, and is available on the SEC’s website at www.sec.gov and the “Investor Relations” section of our website at www.arbor.com.
There were 16,169,858 and 16,293,589 OP Units outstanding at December 31, 2025 and 2024, respectively, which represented 7.6% and 7.9% of our outstanding stock at December 31, 2025 and 2024, respectively. 42 Table of Contents Comparison of Results of Operations for Years Ended December 31, 2024 and 2023 For a discussion of our results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023, please refer to Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on February 21, 2025, and is available on the SEC’s website at www.sec.gov and the “Investor Relations” section of our website at www.arbor.com.
Distributable earnings are as follows ($ in thousands, except share and per share data): Year Ended December 31, 2024 2023 2022 Net income attributable to common stockholders $ 223,272 $ 330,065 $ 284,829 Adjustments: Net income attributable to noncontrolling interest 19,278 29,122 28,044 Income from mortgage servicing rights (51,272) (69,912) (69,346) Deferred tax benefit (11,613) (7,349) (1,741) Amortization and write-offs of MSRs 76,922 77,829 104,378 Depreciation and amortization 12,040 16,425 11,069 Loss on extinguishment of debt 412 1,561 4,933 Provision for credit losses, net 65,537 68,642 25,077 (Gain) loss on derivative instruments, net 9,212 (8,844) 3,480 Stock-based compensation 14,232 14,940 14,973 Distributable earnings (1) $ 358,020 $ 452,479 $ 405,696 Diluted weighted average shares outstanding - GAAP (1) 205,526,610 218,843,613 199,112,630 Less: Convertible notes dilution (2) — (17,294,392) (16,888,226) Diluted weighted average shares outstanding - distributable earnings (1) 205,526,610 201,549,221 182,224,404 Diluted distributable earnings per share (1) $ 1.74 $ 2.25 $ 2.23 ________________________________________ (1) Amounts are attributable to common stockholders and OP Unit holders.
Distributable earnings are as follows ($ in thousands, except share and per share data): Year Ended December 31, 2025 2024 2023 Net income attributable to common stockholders $ 107,427 $ 223,272 $ 330,065 Adjustments: Net income attributable to noncontrolling interest 9,033 19,278 29,122 Income from mortgage servicing rights (54,532) (51,272) (69,912) Deferred tax provision (benefit) 3,773 (11,613) (7,349) Amortization and write-offs of MSRs 81,113 76,922 77,829 Depreciation and amortization 26,217 12,040 16,425 Loss on extinguishment of debt 2,919 412 1,561 Provision for credit losses, net 9,872 65,537 68,642 (Gain) loss on derivative instruments, net (3,379) 9,212 (8,844) Loss on real estate 27,338 — — Stock-based compensation 13,789 14,232 14,940 Distributable earnings (1) $ 223,570 $ 358,020 $ 452,479 Diluted weighted average shares outstanding - GAAP (1) 209,733,331 205,526,610 218,843,613 Less: Convertible notes dilution (2) — — (17,294,392) Diluted weighted average shares outstanding (1)(2) 209,733,331 205,526,610 201,549,221 Diluted distributable earnings per share (1) $ 1.07 $ 1.74 $ 2.25 ________________________________________ (1) Amounts are attributable to common stockholders and OP Unit holders.
Furthermore, our earnings on escrows and cash balances also benefit from an elevated rate environment. However, the prolonged period of elevated interest rates has led to an increase in loan delinquencies, a decrease in loan originations and lower cash and escrow balances, which is having, and may continue to have, a negative impact on our net interest income.
However, the prolonged period of elevated interest rates has also led to a significant increase in loan delinquencies, modifications, foreclosures and decreases in loan originations and cash and escrow balances, which is having, and may continue to have, a negative impact on our net interest income.
At December 31, 2024, we had $1.42 billion of debt from credit and repurchase facilities that were subject to margin calls related to changes in interest spreads. As of February 19, 2025, we had approximately $435 million in cash and liquidity.
At December 31, 2025, we had $1.91 billion of debt from credit and repurchase facilities that were subject to margin calls related to changes in interest spreads.
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. Credit quality of our loans and investments, including our servicing portfolio.
Operating results from these investments can be difficult to predict and can vary significantly period-to-period. We also 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.
The following table provides additional information regarding the balances of our borrowings (in thousands): Quarter Ended Quarterly Average UPB End of Period UPB Maximum UPB at Any Month End December 31, 2024 $ 3,412,416 $ 3,607,907 $ 3,793,231 September 30, 2024 3,082,185 3,264,033 3,299,414 June 30, 2024 3,078,714 3,167,067 3,280,998 March 31, 2024 3,010,216 2,921,206 3,132,279 December 31, 2023 3,274,139 3,242,938 3,251,330 September 30, 2023 3,432,725 3,398,451 3,463,825 June 30, 2023 3,565,377 3,588,538 3,677,755 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 Our debt facilities, including their restrictive covenants, are described in Note 11.
The following table provides additional information regarding the balances of our borrowings ($ in thousands): Quarter Ended Quarterly Average UPB End of Period UPB Maximum UPB at Any Month End December 31, 2025 $ 4,917,924 $ 5,161,707 $ 5,556,285 September 30, 2025 4,633,344 4,133,965 5,553,722 June 30, 2025 4,846,239 4,730,120 4,922,270 March 31, 2025 3,609,646 4,791,967 4,803,572 December 31, 2024 3,412,416 3,607,907 3,793,231 September 30, 2024 3,082,185 3,264,033 3,299,414 June 30, 2024 3,078,714 3,167,067 3,280,998 March 31, 2024 3,010,216 2,921,206 3,132,279 December 31, 2023 3,274,139 3,242,938 3,251,330 September 30, 2023 3,432,725 3,398,451 3,463,825 June 30, 2023 3,565,377 3,588,538 3,677,755 March 31, 2023 3,691,191 3,662,756 3,696,760 Our debt facilities, including their restrictive covenants, are described in Note 11.
Cash flows provided by investing activities totaled $1.15 billion during 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 $2.78 billion, net of originations of $1.60 billion, resulted in net cash inflows of $1.18 billion.
Cash flows used in investing activities totaled $1.28 billion during 2025. Loan and investment activity (originations and payoffs/paydowns) comprise the majority of our investing activities. Loan originations from our Structured Business totaling $3.69 billion, net of payoffs and paydowns of $2.42 billion, resulted in net cash outflows of $1.27 billion.
This decrease was primarily due to loan runoff exceeding loan originations by $1.27 billion. See below for details. Our portfolio had a weighted average current interest pay rate of 6.90% and 8.42% at December 31, 2024 and 2023, respectively.
This increase was primarily due to loan originations exceeding loan runoff by $1.31 billion (see below for details), partially offset by loans we foreclosed on and received ownership of the underlying collateral as REO assets. The portfolio had a weighted average current interest pay rate of 6.49% and 6.90% at December 31, 2025 and 2024, respectively.
Agency Servicing Portfolio The following table sets forth the characteristics of our loan servicing portfolio collateralizing our mortgage servicing rights and servicing revenue ($ in thousands): December 31, 2024 Product Portfolio UPB Loan Count Wtd. Avg. Age of Portfolio (years) Wtd. Avg. Life of Portfolio (years) Interest Rate Type Wtd. Avg.
Equity See Note 17 for details of our stock transactions, dividends declared and deferred compensation transactions during 2025. 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): December 31, 2025 Product Portfolio UPB Loan Count Wtd. Avg. Age of Portfolio (years) Wtd. Avg.
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.
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.
Activity from our Structured Business portfolio is comprised of the following ($ in thousands): Year Ended December 31, 2024 2023 Loans originated $ 1,425,799 $ 983,343 Number of loans 170 150 Weighted average interest rate 8.93 % 10.03 % Loan runoff $ 2,691,583 $ 3,354,055 Number of loans 156 187 Weighted average interest rate 8.51 % 9.21 % Loans modified $ 4,118,117 $ 398,461 Number of Loans 106 5 Loans extended $ 5,998,103 $ 1,744,127 Number of loans 318 64 Loans held-for-sale from the Agency Business decreased $115.9 million, primarily from loan sales exceeding originations as noted in the following table.
Activity from our Structured Business portfolio is comprised of the following ($ in thousands): Year Ended December 31, 2025 2024 Loans originated $ 3,523,538 $ 1,425,799 Number of loans 98 170 Weighted average interest rate 8.42 % 8.93 % Loan runoff $ 2,213,378 $ 2,691,583 Number of loans 119 156 Weighted average interest rate 8.46 % 8.51 % Loans modified $ 1,712,203 $ 3,712,804 Number of loans 43 99 Loans extended $ 5,139,692 $ 5,998,103 Number of loans 294 318 Loans held-for-sale from the Agency Business decreased $26.7 million, primarily from loan sales exceeding originations by $30.2 million as noted in the following table.
(2) See Note 15 for a breakdown of debt maturities by year. These maturity dates exclude extension options. (3) Maturity dates represent the weighted average remaining maturity based on the underlying collateral at December 31, 2024. (4) The $750 million As Soon as Pooled ® Plus (“ASAP”) agreement we have with Fannie Mae has no expiration date.
(2) See Note 15 for a breakdown of debt maturities by year. These maturity dates exclude extension options. (3) Commitment totals include available overadvances. (4) Maturity dates represent the weighted average remaining maturity based on the underlying collateral at December 31, 2025.
Note Rate Annualized Prepayments as a % of Portfolio (1) Delinquencies as a % of Portfolio (2) Fixed Adjustable Fannie Mae $ 22,730,056 2,644 3.9 6.4 96 % 4 % 4.60 % 2.19 % 1.27 % Freddie Mac 6,077,020 1,159 3.3 6.8 86 % 14 % 4.91 % 5.78 % 3.63 % Private Label 2,605,980 161 3.4 5.5 100 % — 4.15 % — 0.43 % FHA 1,506,948 106 3.6 19.2 100 % — 3.79 % — — Bridge 278,494 3 2.0 3.0 85 % 15 % 6.41 % — — SFR - Fixed Rate 271,859 52 2.8 4.4 100 % — 5.47 % 9.02 % 1.66 % Total $ 33,470,357 4,125 3.7 6.9 95 % 5 % 4.60 % 2.61 % 1.57 % December 31, 2023 Fannie Mae $ 21,264,578 2,559 3.4 7.4 96 % 4 % 4.50 % 5.09 % 0.86 % Freddie Mac 5,181,933 1,148 3.2 8.5 83 % 17 % 4.72 % 7.92 % 4.39 % Private Label 2,510,449 160 2.5 6.7 100 % — 4.02 % — — FHA 1,359,624 105 3.0 19.2 100 % — 3.52 % — — Bridge 379,425 4 1.2 3.2 63 % 37 % 7.14 % — — SFR - Fixed Rate 287,446 59 2.3 5.1 100 % — 5.20 % 1.18 % — Total $ 30,983,455 4,035 3.2 8.0 94 % 6 % 4.49 % 4.83 % 1.33 % ________________________________________ (1) Prepayments reflect loans repaid prior to six months from loan maturity.
Note Rate Annualized Prepayments as a % of Portfolio (1) Delinquencies as a % of Portfolio (2) Fixed Adjustable Fannie Mae $ 24,085,960 2,702 4.2 5.5 97 % 3 % 4.68 % 3.58 % 2.59 % Freddie Mac 7,455,088 1,109 3.1 5.9 90 % 10 % 4.98 % 3.63 % 3.96 % Private Label 2,558,048 159 4.4 4.5 100 % — 4.16 % 0.44 % 1.35 % FHA 1,549,483 107 4.3 19.1 100 % — 3.91 % 1.11 % — Bridge 277,738 3 3.0 2.2 85 % 15 % 6.31 % — — SFR - Fixed Rate 277,490 51 3.3 4.0 100 % — 5.62 % 2.42 % 1.62 % Total $ 36,203,807 4,131 4.0 6.1 96 % 4 % 4.69 % 3.22 % 2.65 % December 31, 2024 Fannie Mae $ 22,730,056 2,644 3.9 6.4 96 % 4 % 4.60 % 2.19 % 1.27 % Freddie Mac 6,077,020 1,159 3.3 6.8 86 % 14 % 4.91 % 5.78 % 3.63 % Private Label 2,605,980 161 3.4 5.5 100 % — 4.15 % — 0.43 % FHA 1,506,948 106 3.6 19.2 100 % — 3.79 % — — Bridge 278,494 3 2.0 3.0 85 % 15 % 6.41 % — — SFR - Fixed Rate 271,859 52 2.8 4.4 100 % — 5.47 % 9.02 % 1.66 % Total $ 33,470,357 4,125 3.7 6.9 95 % 5 % 4.60 % 2.61 % 1.57 % ________________________________________ (1) Prepayments reflect loans repaid prior to six months from loan maturity.
The decline was primarily from a decrease in the average balance of our core interest-earning assets as loan runoff exceeded loan originations, as well as a decrease in the average yield on core interest-earning assets from a rise in non-performing and other non-accrued loans.
The decline was primarily due to a decrease in the average yield on core interest-earning assets and, to a lesser extent, a decrease in the average balance of our core interest-earning assets (loan runoff exceeded loan originations in 2024) and lower average bank balances.
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.
Generally, deposits may be redeemed upon demand and are maintained at financial institutions with reputable credit and, therefore, we believe we bear minimal credit risk. 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.
Additionally, the prolonged high interest rate 35 Table of Contents environment has contributed to a decline in certain commercial real estate values, leading to increased reserves, as the collateral value is insufficient to fully repay the loans. As discussed earlier, the Federal Reserve began lowering short term interest rates in 2024 and may continue to cut interest rates during 2025.
Additionally, the prolonged high-interest rate environment has contributed to a decline in certain commercial real estate values, leading to increased reserves, when the collateral value is considered insufficient to fully repay the loans.
In 2023, we recorded a tax provision of $27.3 million, which consisted of a current tax provision of $34.7 million and a deferred tax benefit of $7.3 million. Net Income Attributable to Noncontrolling Interest The noncontrolling interest relates to the outstanding operating partnership units (“OP Units”) issued as part of the 2016 acquisition of ACM’s agency platform (the “Acquisition”).
Net Income Attributable to Noncontrolling Interest The noncontrolling interest relates to the outstanding operating partnership units (“OP Units”) issued as part of the 2016 acquisition of ACM’s agency platform.
Cash flows used in financing activities totaled $2.49 billion during 2024 and consisted primarily of $2.32 billion of payoffs and paydowns of securitized debt, $394.8 million of distributions to our stockholders and OP Unit holders and $100.0 million from senior unsecured notes activity, partially offset by net cash inflows of $325.4 million from debt facility activities (financed loan originations were greater than facility paydowns).
Cash flows provided by financing activities totaled $798.8 million during 2025 consisted primarily of net cash inflows of $1.64 billion from debt facility activities (financed loan originations were greater than facility paydowns), $805.0 million cash inflow from senior unsecured notes (proceeds exceeded payoffs) and net cash inflows of $101.7 million from notes payable - REO activities (proceeds exceeded payoffs and paydowns), partially offset by $1.15 billion of net securitized debt activity (payoffs and paydowns exceeded proceeds), $319.9 million of distributions to our stockholders and OP Unit holders and $287.5 million payoff of our convertible notes. 43 Table of Contents Unencumbered Assets.
The decrease in interest expense was mainly due to a $98.9 million decrease from our Structured Business, primarily due to a decline in the average balance of our interest-bearing liabilities from loan runoff and note paydowns in our securitizations and senior unsecured notes, partially offset by an increase in the average cost of interest-bearing liabilities, mainly from lower rate debt tranches being paid down from CLO runoff.
The decrease in interest expense was mainly due to a $105.0 million decrease from our Structured Business, primarily due to a decline in the average balance of our interest-bearing liabilities (from a decrease in the average loan portfolio and note paydowns in our securitizations) and a reduction in the average cost of interest-bearing liabilities (mainly from a decrease in SOFR).
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 34 Table of Contents portfolios is of critical importance. Loans that do not perform in accordance with their terms may have a negative impact on earnings and liquidity.
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.
Off-Balance-Sheet Arrangements. At December 31, 2024, we had no off-balance-sheet arrangements. Inflation. The Federal Reserve lowered the federal funds rate three times during 2024 for a total reduction of 100 basis points, which marks the first rate cuts since 2020, and it is possible that rates will continue to decline during 2025.
Off-Balance-Sheet Arrangements. At December 31, 2025, we had no off-balance-sheet arrangements. Inflation. During 2025, the Federal Reserve has lowered the federal funds rate three times totaling a 75-basis point reduction. General consensus is that the Federal Reserve may continue to lower rates during 2026.
The following is a summary of our debt facilities (in thousands): December 31, 2024 Debt Instruments Commitment UPB (1) Available Maturity Dates (2) Structured Business Credit and repurchase facilities $ 7,266,316 $ 3,145,485 $ 4,120,831 2025 - 2027 Securitized debt (3) 4,632,015 4,632,015 — 2025 - 2027 Senior unsecured notes 1,245,000 1,245,000 — 2026 - 2028 Convertible senior unsecured notes 287,500 287,500 — 2025 Junior subordinated notes 154,336 154,336 — 2034 - 2037 Mortgage notes payable - real estate owned 74,897 74,897 — 2025 Structured Business total 13,660,064 9,539,233 4,120,831 Agency Business Credit and repurchase facilities (4) 1,800,328 422,876 1,377,452 2025 Consolidated total $ 15,460,392 $ 9,962,109 $ 5,498,283 ________________________________________ (1) Excludes the impact of deferred financing costs.
The following is a summary of our debt facilities ($ in thousands): December 31, 2025 Debt Instruments Commitment UPB (1) Available Maturity Dates (2) Structured Business Credit and repurchase facilities (3) $ 7,481,388 $ 4,770,994 $ 2,710,394 2026 - 2028 Securitized debt (4) 3,485,786 3,485,786 — 2026 - 2029 Senior unsecured notes 2,050,000 2,050,000 — 2026 - 2030 Junior subordinated notes 154,336 154,336 — 2034 - 2037 Notes payable - real estate owned 222,965 222,965 — 2026 - 2027 Structured Business total 13,394,475 10,684,081 2,710,394 Agency Business Credit and repurchase facilities (3)(5) 1,775,000 390,713 1,384,287 2026 - 2027 Consolidated total $ 15,169,475 $ 11,074,794 $ 4,094,681 ________________________________________ (1) Excludes the impact of deferred financing costs.
At December 31, 2024 and 2023, delinquent loans totaled $524.5 million and $411.1 million, respectively. At December 31, 2024, there were two loans totaling $4.8 million in bankruptcy and six loans totaling $28.2 million have been foreclosed.
At December 31, 2025 and 2024, delinquent loans totaled $959.0 million and $524.5 million, respectively. At December 31, 2025, there were five loans totaling $56.0 million in bankruptcy and nineteen loans totaling $176.5 million were foreclosed.
Income in 2023 primarily reflects $14.5 million received from equity participation interests on properties that were sold and $12.2 million in distributions received from our Lexford joint venture. Provision for Income Taxes In 2024, we recorded a tax provision of $13.5 million, which consisted of a current tax provision of $25.1 million and a deferred tax benefit of $11.6 million.
Provision for Income Taxes In 2025, we recorded a tax provision of $18.8 million, which consisted of a current tax provision of $15.0 million and a deferred tax provision of $3.8 million. In 2024, we recorded a tax provision of $13.5 million, which consisted of a current tax provision of $25.1 million and a deferred tax benefit of $11.6 million.
Agency Business Activity. • Loan originations totaled $4.47 billion and includes $1.58 billion of new agency loans that were recaptured from our Structured Business runoff; and • Grew our fee-based servicing portfolio 8%, or $2.49 billion, to $33.47 billion.
Agency Business Activity. • Servicing portfolio of $36.20 billion (up $2.73 billion) with loan originations totaling $5.07 billion, which includes $669.4 million of new Agency loans that were recaptured from our Structured Business runoff.
Current Market Conditions, Risks and Recent Trends The Federal Reserve lowered the federal funds rate three times during 2024 for a total reduction of 100 basis points, which marks the first rate cuts since 2020, and it is possible that they will continue to reduce short term rates in 2025.
Current Market Conditions, Risks and Recent Trends During 2025, the Federal Reserve has lowered the federal funds rate three times totaling a 75-basis point reduction. General consensus is that the Federal Reserve may continue to lower rates during 2026.
Loss on Extinguishment of Debt The loss on extinguishment of debt in both 2024 and 2023 represents deferred financing fees recognized in connection with the unwind of CLOs. Gain on Real Estate In 2024, we recorded a $3.8 million gain on real estate from the sale of an REO asset for $14.2 million.
Loss on Extinguishment of Debt The loss on extinguishment of debt in both 2025 and 2024 reflects deferred financing fees recognized in connection with the unwind of CLOs.
Despite these periodic disruptions, we have been successful in raising capital through various vehicles, when needed, to continue to operate and strengthen our business.
Despite these periodic disruptions, we have been successful in raising capital through various vehicles, when needed, to continue to operate and strengthen our business. 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.
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.
(5) The $750 million As Soon as Pooled ® Plus (“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.
Other Expenses The increase in employee compensation and benefits expense was primarily due to increases in incentive compensation and commissions from higher bonus allocation targets and annual merit increases. The increase in selling and administrative expenses was primarily due to increases in professional and legal costs.
The increase in other income, net was primarily due to increases in the fair values of our Private Label loans and loan fees from higher loan originations and modified loans. Other Expenses The decrease in employee compensation and benefits expense was primarily due to decreases in commissions and incentive compensation from lower GSE/Agency loan sales volume and bonus allocation targets.
The decrease in servicing revenue, net was primarily due to a decrease in earnings on escrow balances from lower average balances and lower prepayment fees, partially offset by an increase in servicing fees due to growth in our servicing portfolio. 40 Table of Contents Other Income (Loss) The (loss) gain on derivative instruments in both 2024 and 2023 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.
The decrease in the MSR rate was mainly due to a decrease in the Fannie Mae MSR rates from lower servicing rates on newer loans, as a result of larger portfolio deals in 2025 that produced lower MSR rates. 41 Table of Contents The decrease in servicing revenue, net was primarily due to a decrease in earnings on escrow balances from lower average balances and a decrease in the applicable interest rate, partially offset by an increase in servicing fees due to growth in our servicing portfolio.
Securitized debt decreased $2.31 billion, primarily due to the unwind of CLO 15 and paydowns on existing securitizations totaling $1.65 billion. Senior unsecured notes decreased $97.8 million, primarily due to the repayment of our 4.75% and 5.75% notes totaling $200.0 million, partially offset by the issuance of $100.0 million of our 9.00% notes.
Securitized debt decreased $1.15 billion, primarily due to the unwind of three CLOs totaling $1.56 billion and paydowns on our existing securitizations of $841.7 million, partially offset by the issuances of BTR CLO 1 and CLO 20 where we issued $1.46 billion of notes to third-party investors.
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. As discussed above, the current high interest rate environment could lead to a decline in our GSE originations, which could negatively impact our financial results.
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. We are also unsure whether FHFA will impose stricter limitations on GSE multifamily production volume in the future. On July 4, 2025, the OBBBA was enacted into law.
The decreases in our CECL provisions were primarily due to a decrease in general reserves as a result of a decline in the structured portfolio as well as general improvements in the forecasted outlook for commercial real estate, as compared to 2023.
The decrease in the provision for credit losses, net primarily reflects a decrease in specifically impaired loans and a decrease in general reserves as a result of improvements in the forecasted outlook for commercial real estate, as compared to the prior year forecasted outlook, partially offset by additional provisions recorded upon foreclosure of REO assets.
Other assets increased $78.2 million, primarily due to additional fundings of unsecured line of credit loans totaling $41.7 million and an increase in deferred interest on modified loans. 37 Table of Contents Liabilities – Comparison of balances at December 31, 2024 to December 31, 2023: Credit and repurchase facilities increased $321.7 million, primarily due to refinancing loans from the unwind of CLOs in our Structured Business, substantially offset by loan sales exceeding originations in our Agency Business.
Real estate owned increased $322.4 million, primarily due to the foreclosure of sixteen multifamily bridge loans totaling $441.0 million, through which we took back the underlying collateral, partially offset by the sale of five multifamily properties. 38 Table of Contents Liabilities – Comparison of balances at December 31, 2025 to December 31, 2024: Credit and repurchase facilities increased $1.59 billion, primarily due to refinancing loans from the unwind of three CLOs and loan originations exceeding runoff in our Structured Business, partially offset by the issuance of BTR CLO 1 and CLO 20.
The decrease in income from MSRs was primarily due to a 15% decrease in loan commitment volume ($763.2 million) and a 14% decrease in the MSR rate from 1.34% to 1.15%. The decrease in the MSR rate was primarily due to a higher percentage of Freddie Mac loan commitments, which contain lower servicing fees.
The decrease in the sales margin was mainly due to the sales volume product mix and larger portfolio deals in 2025 that produced lower margins. The increase in income from MSRs was primarily due to a 15% increase in loan commitment volume ($659.9 million), partially offset by a 7% decrease in the MSR rate from 1.15% to 1.07%.
We are also unsure whether FHFA will impose stricter limitations on GSE multifamily production volume in the future. 36 Table of Contents Changes in Financial Condition Assets – Comparison of balances at December 31, 2024 to December 31, 2023: Our Structured loan and investment portfolio balance was $11.30 billion and $12.62 billion at December 31, 2024 and 2023, respectively.
We are reviewing the potential implications of the new law, including interpretive guidance related to corporate taxation, and as a result of the complexity of the legislation and the evolving nature of its implementation, it is difficult to predict the effects of this legislation on our business, financial condition, results of operations or the real estate markets in general. 37 Table of Contents Changes in Financial Condition Assets – Comparison of balances at December 31, 2025 to December 31, 2024: Our Structured loan and investment portfolio balance was $12.11 billion and $11.30 billion at December 31, 2025 and 2024, respectively.
Activity from our Agency Business portfolio is comprised of the following (in thousands): Year Ended December 31, 2024 Loan Originations Loan Sales Fannie Mae $ 2,374,040 $ 2,680,018 Freddie Mac 1,770,976 1,662,010 Private Label 151,936 124,286 FHA 146,507 116,058 SFR - Fixed Rate 27,314 27,314 Total $ 4,470,773 $ 4,609,686 Capitalized mortgage servicing r ights decreased $22.6 million, primarily due to amortization and prepayment write-downs totaling $76.9 million exceeding additions from new originations of $54.3 million.
Activity from our Agency Business portfolio is comprised of the following ($ in thousands): Year Ended December 31, 2025 Loan Originations Loan Sales Fannie Mae $ 2,982,659 $ 2,850,697 Freddie Mac 1,924,773 2,081,749 FHA 78,145 128,282 Private Label 44,925 — SFR - Fixed Rate 43,762 43,762 Total $ 5,074,264 $ 5,104,490 Investments in equity affiliates decreased $18.3 million, primarily due to $22.0 million in distributions received from the completed sale of the residential mortgage banking business.
Cash flows provided by operating activities totaled $461.5 million during 2024 and consisted primarily of net income of $283.9 million, as well as certain other non-cash net income adjustments, partially offset by net cash outflows of $108.6 million as a result of loan originations exceeding loan sales in our Agency Business.
Cash flows provided by operating activities totaled $372.4 million during 2025 and consisted primarily of net income (adjusted for the increase in CECL reserves of $67.0 million) of $224.8 million, cash distributions of $59.0 million received from our Lexford investment and net cash inflows of $23.1 million from loan sales exceeding loan originations in our Agency Business.
Although short term rates have declined 100 basis points, we currently remain in a high interest rate environment which could remain higher for longer than expected if inflation and other economic indicators do not continue to meet the Federal Reserve’s expectations.
The high-interest rate environment, that has persisted longer than anticipated, could persist even longer if certain key economic indicators, such as inflation, fail to align with the Federal Reserve’s expectations. Although short-term interest rates have declined, long-term interest rates remain highly volatile since the announcement of the current administration's imposition of increased tariffs and macroeconomic uncertainty.
Borrowers of 63 of these loans with a total UPB of $2.39 billion invested additional capital to recapitalize their deals in exchange for temporary rate relief, which we provided through a pay and accrual feature. See Note 3 for details; and • Sold a real estate owned asset for $14.2 million and recognized a $3.8 million gain.
In 2024, we sold a real estate owned asset for $14.2 million and recognized a $3.8 million gain.
Removed
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.
Added
Loans that do not perform in accordance with their terms may have a negative impact on earnings and liquidity. 35 Table of Contents Significant Developments During 2025 Financing and Capital Markets Activity. • Entered into a $1.22 billion repurchase facility to refinance loans previously held in our CLOs. The facility has a 24-month reinvestment period through March 2027.
Removed
Significant Developments During 2024 Financing and Capital Markets Activity. • Unwound CLO 15, redeeming the remaining outstanding notes, and paid down outstanding notes totaling $1.65 billion on our other securitizations; • Entered into three new debt facilities totaling $900.0 million of warehouse capacity, amended existing facilities resulting in a net $50.0 million increase in the committed amounts of these facilities and terminated three facilities totaling $400.0 million; • Raised $100.0 million from the issuance of our 9.00% senior notes and repaid our 4.75% and 5.75% senior notes totaling $200.0 million; • Entered into a new equity distribution agreement with JMP to sell up to 30,000,000 shares of our common stock and raised $10.0 million of capital under the plan from the issuance of 661,708 shares at an average price of $15.16 per share; and • Repurchased $11.4 million of our common stock at an average price of $12.19 per share.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeMultifamily and commercial property values, net operating income derived from such properties, and borrowers’ credit ratings are subject to volatility and may be negatively affected by a number of factors, including, but not limited to, events such as natural disasters and 45 Table of Contents pandemics, acts of war, terrorism, local economic and/or real estate conditions (such as industry slowdowns, oversupply of real estate space, occupancy rates, construction delays and costs) and other macroeconomic factors beyond our control.
Biggest changeCommercial mortgage assets may be viewed as exposing an investor to greater risk of loss than residential mortgage assets since such assets are typically secured by larger loans to fewer obligors than residential mortgage assets. 47 Table of Contents Multifamily and commercial property values, net operating income derived from such properties, and borrowers’ credit ratings are subject to volatility and may be negatively affected by a number of factors, including, but not limited to, events such as natural disasters and pandemics, acts of war, terrorism, local economic and/or real estate conditions (such as industry slowdowns, oversupply of real estate space, occupancy rates, construction delays and costs) and other macroeconomic factors beyond our control.
Our treasury futures are tied to the five-year and ten-year treasury 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.
Our treasury futures are tied to the 5-year and 10-year treasury 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 treasury rates on our treasury futures held at December 31, 2024 would have resulted in a gain of $1.2 million and $2.1 million, respectively, while a 50 basis point and a 100 basis point decrease in the rates would have resulted in a loss of $0.7 million and $1.7 million, respectively. 46 Table of Contents Our Agency Business originates, sells and services a range of multifamily finance products with Fannie Mae, Freddie Mac and HUD.
A 50 basis point and a 100 basis point increase to the 5-year and 10-year treasury rates on our treasury futures held at December 31, 2025 would have resulted in a gain of $1.6 million and $3.1 million, respectively, in 2025, while a 50 basis point and a 100 basis point decrease in the rates would have resulted in a loss of $1.5 million and $3.1 million, respectively. 48 Table of Contents Our Agency Business originates, sells and services a range of multifamily finance products with Fannie Mae, Freddie Mac and HUD.
(2) Our cash, restricted cash and escrows are currently earning interest at a weighted average blended rate of approximately 4.1%, or approximately $85.0 million annually.
(2) Our cash, restricted cash and escrows are currently earning interest at a weighted average blended rate of approximately 3.5%, or approximately $66.0 million annually.
A 100 basis point increase in the weighted average discount rate would decrease the fair value of our MSRs by $15.2 million at December 31, 2024, while a 100 basis point decrease would increase the fair value by $16.0 million. 47 Table of Contents
A 100 basis point increase in the weighted average discount rate would decrease the fair value of our MSRs by $13.0 million at December 31, 2025, while a 100 basis point decrease would increase the fair value by $13.6 million. 49 Table of Contents
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 $ 11,304,956 $ 46,072 $ (44,701) $ (87,126) Interest expense from debt obligations (9,539,233) 40,245 (40,198) (80,377) Impact to net interest income from loans and investments $ 5,827 $ (4,503) $ (6,749) Interest income from cash, restricted cash and escrow balances (2) $ 2,074,405 10,372 (10,372) (20,744) Total impact from hypothetical changes in interest rates $ 16,199 $ (14,875) $ (27,493) ________________________________________ (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 December 31, 2024.
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 $ 12,113,107 $ 45,880 $ (38,868) $ (67,732) Interest expense from debt obligations (10,684,081) 41,464 (40,875) (80,632) Impact to net interest income from loans and investments 4,416 2,007 12,900 Interest income from cash, restricted cash and escrow balances (2) $ 1,887,177 9,436 (9,436) (18,872) Total impact from hypothetical changes in interest rates $ 13,852 $ (7,429) $ (5,972) ________________________________________ (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 December 31, 2025.
Removed
Commercial mortgage assets may be viewed as exposing an investor to greater risk of loss than residential mortgage assets since such assets are typically secured by larger loans to fewer obligors than residential mortgage assets.

Other ABR 10-K year-over-year comparisons