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What changed in ARBOR REALTY TRUST INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of ARBOR REALTY TRUST INC's 2023 and 2024 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 2024 report.

+301 added−296 removedSource: 10-K (2025-02-21) vs 10-K (2023-12-31)

Top changes in ARBOR REALTY TRUST INC's 2024 10-K

301 paragraphs added · 296 removed · 232 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

56 edited+9 added−8 removed79 unchanged
Biggest changeRemaining Months to Maturity (2) Bridge Loans Multifamily 316 $ 10,789,936 8.36 % 12.1 Single‑Family Rental 354 1,316,803 9.87 % 12.7 Land 7 118,595 0.13 % 0.3 Office 1 35,410 8.98 % 7.6 Retail 1 12,500 8.98 % 11.1 679 12,273,244 8.45 % 12.0 Mezzanine Loans Multifamily 46 232,104 8.77 % 60.3 Other 3 16,353 3.35 % 4.5 49 248,457 8.41 % 56.6 Preferred Equity Multifamily 14 75,941 4.46 % 66.6 Other 3 9,800 — 10.7 17 85,741 3.95 % 60.3 Other Single‑Family Rental 2 7,564 9.84 % 13.9 Total 747 $ 12,615,006 8.42 % 13.2 ________________________________________ (1) “Weighted Average Pay Rate” is a weighted average, based on each loan’s unpaid principal balance (“UPB”), of our interest rate required to be paid monthly as stated in the individual loan agreements.
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.
A REIT is generally not subject to federal income tax on its REIT-taxable income that is distributed to its stockholders, provided that at least 90% of its REIT-taxable income is distributed and provided that certain other requirements are met.
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.
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.
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.
We operate through two business segments: our Structured Loan Origination and Investment Business, or “Structured Business,” and our Agency Loan Origination and Servicing Business, or “Agency Business.” Through our Structured Business, we invest in a diversified portfolio of structured finance assets in the multifamily, single-family rental (“SFR”) and commercial real estate markets, primarily consisting of bridge loans, in addition to mezzanine loans, junior participating interests in first mortgages and preferred and direct equity.
We operate through two business segments: our Structured Loan Origination and Investment Business, or “Structured Business,” and our Agency Loan Origination and Servicing Business, or “Agency Business.” Through our Structured Business, we invest in a diversified portfolio of structured finance assets in the multifamily, single-family rental (“SFR”) and commercial real estate markets, primarily consisting of bridge loans, in addition to mezzanine loans, junior participating interests in first mortgages and preferred equity.
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, 2023 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, 2024 is as follows ($ in thousands): Type Asset Class Number Unpaid Principal Wtd.
Operating Policies and Strategies Financing Policies. We finance our structured finance investments primarily by borrowing against, or “leveraging,” our existing portfolio and using the proceeds to acquire additional mortgage assets.
Operating Policies and Strategies Financing Policies. We finance our Structured Business investments primarily by borrowing against, or “leveraging,” our existing portfolio and using the proceeds to acquire additional mortgage assets.
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 Multifamily Conventional Loan lender for multifamily, manufactured, student, affordable and certain seniors housing properties, one of 12 participants in the Freddie Mac 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 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 have a network of sales and support offices in California, Florida, Indiana, Maryland, Massachusetts, Michigan, New Jersey, New York and Pennsylvania 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, 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.
Compliance with Federal, State and Local Environmental Laws Properties that we may acquire directly or indirectly through partnerships, and the properties underlying our structured finance investments and mortgage-related securities, are subject to various federal, state and local environmental laws, ordinances and regulations.
Compliance with Federal, State and Local Environmental Laws Properties that we may acquire directly or indirectly through partnerships, and the properties underlying our Structured Business investments and mortgage-related securities, are subject to various federal, state and local environmental laws, ordinances and regulations.
In our Structured Business, our primary focus is on maximizing the interest margin on our loans (yield on investments less cost to finance investments) and growing our loan portfolio which also provides a pipeline to growth in our Agency/GSE servicing portfolio.
In our Structured Business, our primary objective is maximizing the interest margin on our loans (yield on investments less cost to finance investments) and growing our loan portfolio, which also provides a pipeline to growth in our GSE/Agency servicing portfolio.
We have a dedicated group of employees whose sole function is to monitor and analyze loan performance from closing to payoff, with the primary goal of managing and mitigating risk within the Fannie Mae portfolio. We continuously refine our underwriting criteria based upon actual loan portfolio experience and as market conditions and investor requirements evolve. Investment Approval Process.
We have a dedicated group of employees whose sole function is to monitor and analyze loan performance from closing to payoff, with the primary goal of managing and mitigating risk within the Fannie Mae portfolio. We continuously refine our underwriting criteria based upon actual loan portfolio experience and as market conditions and investor requirements evolve.
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.
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.
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.
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.
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.
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.
Loans originated under GSE and HUD programs, as well as our SFR fixed rate product, are generally sold within 60 days from the 5 Table of Contents 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 of loan origination.
Agency Business servicing portfolio product and geographic concentration information at December 31, 2023 is as follows ($ in thousands): Product Concentrations Geographic Concentrations Product Loan Count UPB (1) Percent of Total Wtd. Avg. Servicing Fee Rate (basis points) Wtd. Avg.
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.
Human Capital At December 31, 2023, we employed 647 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, 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.
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 8.98%.
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%.
All our filings with the SEC are made available free of charge through our website, including this report, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to such reports, if any, as filed with the SEC as soon as reasonably practicable after such filing.
All our filings with the Securities and Exchange Commission (“SEC”) are made available free of charge through our website, including this report, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to such reports, if any, as filed with the SEC as soon as reasonably practicable after such filing.
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 134 basis points for 2023.
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.
(2) Represents four bridge loans sold by our Structured Business that we are servicing. See Note 3 for details. (3) No other individual state represented 4% or more of the total. Operations The following describes our lending and investment process for both our Structured and Agency Businesses. Origination.
(2) Represents bridge loans sold by our Structured Business that we are servicing. (3) No other individual state represented 4% or more of the total. Operations The following describes our lending and investment process for both our Structured and Agency Businesses. Origination.
Use Our Relationships with Existing Borrowers. We have solid relationships with a large nationwide borrower base and maintain a strong reputation in the commercial real estate finance industry. Through the expertise of our originators, we offer a wide range of customized financing solutions and benefit from our existing customer base by using existing business to create potential refinancing opportunities.
We have solid relationships with a large nationwide borrower base and maintain a strong reputation in the commercial real estate finance industry. Through the expertise of our originators, we offer a wide range of customized financing solutions and benefit from our existing customer base by using existing business to create potential refinancing opportunities. Long-Established Relationships with GSEs.
We also own unconsolidated investments in equity affiliates totaling $79.3 million and described in more detail 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.
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, 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 8 Table of Contents approximately 6% of the voting interest in our stock at December 31, 2023.
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.
These laws allow third parties to seek recovery from owners of real properties for personal injuries associated with materials containing asbestos.
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.
Substantially all of our operations are conducted through our operating partnership, Arbor Realty Limited Partnership (“ARLP”), for which we serve as the indirect general partner, and ARLP’s subsidiaries. We are organized to qualify as a real estate investment trust (“REIT”) for U.S. federal income tax purposes.
Substantially all of our operations are conducted through our operating partnership, Arbor Realty Limited Partnership (“ARLP”), for which we serve as the indirect general partner, and ARLP’s subsidiaries. We are organized to qualify as a REIT for U.S. federal income tax purposes.
We offer mezzanine financing in the form of loans that are subordinate to a conventional first mortgage loan and senior to the borrower’s equity in a transaction.
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 loan approval process for the Agency Business requires the submission of a detailed loan package in accordance with our underwriting checklist to our agency loan committee for approval. Our agency loan committee consists of multiple members of our senior and executive management teams, including our chief underwriter for the Agency Business and its chief operating officer.
Our loan approval process for the Agency Business requires the submission of a detailed loan package in accordance with the applicable agency program requirements and guidelines. Our agency loan committee consists of multiple members of our senior and executive management teams, including our chief underwriter for the Agency Business and its chief operating officer.
In general, our TRS entities may hold assets that the REIT cannot hold directly and may engage in real estate or non-real estate-related business. Business Objectives and Strategy We have an annuity-based business model that drives our diversified income streams to produce consistent earnings growth and to maximize the total return to our stockholders.
In general, our TRS entities may hold assets that the REIT cannot hold directly and may engage in real estate or non-real estate-related business. Business Objectives and Strategy We have an annuity-based business model that generates diversified income streams, which allows us to maximize the total return to our stockholders.
Long-Established Relationships with GSEs. Our Agency Business benefits from our long-established relationships with Fannie Mae, Freddie Mac and HUD enabling us to offer a broad range of loan products and services which maximizes our ability to meet borrowers’ needs. Leverage the Experience of Executive Officers and Our Employees.
Our Agency Business benefits from our long-established relationships with Fannie Mae, Freddie Mac and HUD enabling us to offer a broad range of loan products and services which maximizes our ability to meet borrowers’ needs. Leverage the Experience of Executive Officers and Employees. Our executive officers and employees have extensive experience originating and managing structured commercial real estate investments.
(2) Including extension options, the weighted average remaining months to maturity was 29.4.
(2) Including extension options, the weighted average remaining months to maturity was 22.7.
The overall yield on our loan and investment portfolio in 2023 was 9.18% on average assets of $13.53 billion, which was computed by dividing the interest income earned during 2023 by the average assets during 2023.
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.
Our cost of funds in 2023 was 7.15% on average borrowings of $12.31 billion, which was computed by dividing the interest expense incurred during 2023 by the average borrowings during 2023. At December 31, 2023, our loan and investment portfolio was comprised of 94% floating rate loans and 6% fixed rate loans.
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.
We apply an established investment approval process to all loans and other investments proposed for our Structured Business before submitting each proposal for final approval.
Credit & Investment Committee Approval Process. We apply an established credit and investment approval process to all proposed loans and other investments for our Structured Business.
We are an approved Fannie Mae Delegated Underwriting and Servicing (“DUS”) lender nationally, a Freddie Mac Multifamily Conventional Loan lender, seller/servicer, in New York, New Jersey and Connecticut, a Freddie Mac affordable, manufactured housing, senior housing and small balance loan (“SBL”) lender, seller/servicer, nationally and a HUD MAP and LEAN senior housing/healthcare lender nationally.
We are an approved Fannie Mae Delegated Underwriting and Servicing (“DUS”) lender nationally, a Freddie Mac Optigo® Conventional Loan and Small Balance Loan ("SBL") lender, seller/servicer, nationally and a HUD MAP and LEAN senior housing/healthcare lender nationally.
Our loan activity in 2023 was comprised of originations totaling $5.11 billion, sales totaling $4.89 billion and commitment volume totaling $5.21 billion. Our gains and fees as a percentage of our loan sales volume (“sales margin”) was 148 basis points for 2023.
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.
We offer various financing products to borrowers who are looking to acquire conventional, workforce and affordable single-family rental housing. 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. Mezzanine Financing.
Manage Credit Quality. A critical component of our strategy is our ability to manage the real estate risks associated with our investment portfolio. We actively manage the credit quality of our portfolio by using the expertise of our asset management group, which has a proven track record of structuring and repositioning investments to improve credit quality and yield.
We actively manage the credit quality of our portfolio by using the expertise of our asset management group, which has a proven track record of structuring and repositioning investments to improve credit quality and yield. Use Our Relationships with Existing Borrowers.
We provide financing by making preferred equity investments in entities that directly or indirectly own real property. In cases where the terms of a first mortgage prohibit additional liens on the ownership entity, such as in mezzanine financing, investments structured as preferred equity in the entity owning the property serve as viable financing substitutes.
In cases where the terms of a first mortgage prohibit additional liens on the ownership entity, such as in mezzanine financing, investments structured as preferred equity in the entity owning the property serve as viable financing substitutes. With preferred equity investments, we typically become a member in the ownership entity.
All employees are eligible for health insurance, including mental health coverage, prescription drug benefits, dental and vision insurance, flexible spending accounts, paid and unpaid leaves, disability/accident coverage and participation in a 401K plan. We also have a flexible telecommuting policy, which allows eligible employees to work remotely one day per week.
All employees are eligible for health insurance, including mental health coverage, prescription drug benefits, dental and vision insurance, flexible spending accounts, paid and unpaid leaves, disability/accident coverage, life insurance and participation in a 401K plan.
We endeavor to ensure these properties are complying in all material respects with all federal, state and local laws, ordinances and regulations regarding hazardous or toxic substances or petroleum products. 9 Table of Contents Requirements of the GSEs and HUD To maintain our status as an approved lender for Fannie Mae and Freddie Mac and as a HUD-approved mortgagee and issuer of Ginnie Mae securities, we are required to meet and maintain various eligibility criteria established by these entities, such as minimum net worth, operational liquidity and collateral requirements and compliance with reporting requirements.
Requirements of the GSEs and HUD To maintain our status as an approved lender for Fannie Mae and Freddie Mac and as a HUD-approved mortgagee and issuer of Ginnie Mae securities, we are required to meet and maintain various eligibility criteria established by these entities, such as minimum net worth, operational liquidity and collateral requirements and compliance with reporting requirements.
We target borrowers whose options may be limited by conventional bank financing, have demonstrated a history of enhancing the value of the properties they operate and who may benefit from the customized financing solutions we offer. 2 Table of Contents Execute Transactions Rapidly.
We target borrowers whose options may be limited by conventional bank financing, have demonstrated a history of enhancing the value of the properties they operate and who may benefit from the customized financing solutions we offer. Execute Transactions Rapidly. We act quickly and decisively on proposals, provide commitments and close transactions within a few weeks and sometimes days, if required.
We believe the combination of competitive compensation, career growth and development opportunities, including promoting employees from within, have helped manage our employee tenure and voluntary turnover. 10 Table of Contents Corporate Governance and Internet Address Effective February 15, 2023, our Board of Directors approved and adopted the amended and restated bylaws.
We believe the combination of competitive compensation, career growth and development opportunities, including promoting employees from within, have helped manage our employee tenure and voluntary turnover. Corporate Governance and Internet Address Our internet address is www.arbor.com.
Additional yield enhancements may include origination fees, deferred interest, yield look-backs, and participating interests, which are equity interests in the borrower that share in a percentage of the underlying cash flows of the property. Borrowers typically use the proceeds of a conventional mortgage, such as our GSE/agency loans, to repay a bridge loan. SFR Portfolio Financing.
Our bridge loans are predominantly secured by first mortgage liens on the properties. Additional yield enhancements may include origination fees, deferred interest, yield look-backs, and participating interests, which are equity interests in the borrower that share in a percentage of the underlying cash flows of the property.
From the borrower’s perspective, shorter term bridge financing is advantageous because it allows for time to improve the property value without encumbering it with restrictive, long-term debt that may not reflect optimal leverage for a non-stabilized property. Our bridge loans are predominantly secured by first mortgage liens on the properties.
The borrower has usually identified an undervalued asset that has been under managed and/or is in a recovering market. From the borrower’s perspective, shorter term bridge financing is advantageous because it allows for time to improve the property value without encumbering it with restrictive, long-term debt that may not reflect optimal leverage for a non-stabilized property.
Our Primary Targeted Investments We pursue short-term and long-term lending and investment opportunities and primarily target transactions where we believe we have competitive advantages, particularly our lower cost structure and in-house underwriting capabilities. Our primary focus has been, and continues to be, first mortgage lending in the highly attractive and stable multifamily real estate sector.
Our senior management team has, on average, over 30 years of experience in the financial services industry. Our Primary Targeted Investments We pursue short-term and long-term lending and investment opportunities and primarily target transactions where we believe we have competitive advantages, particularly our lower cost structure and in-house underwriting capabilities.
Loan and investment portfolio asset class and geographic concentration information at December 31, 2023 is as follows ($ in thousands): Asset Class UPB Percentage Geographic Concentrations UPB Percentage Multifamily $ 11,097,981 88 % Texas $ 3,038,417 24 % Single-Family Rental 1,324,367 10 % Florida 2,128,952 17 % Land 136,028 1 % Georgia 1,174,465 9 % Office 35,410 North Carolina 685,945 5 % Other 21,220 New York 531,006 4 % Total $ 12,615,006 100 % Other (1) 5,056,221 41 % Total $ 12,615,006 100 % ________________________________________ (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, 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.
Through our Structured Business, we offer the following investment types: Bridge Financing. We offer bridge financing products to borrowers who are typically seeking short-term capital to use in an acquisition of property. The borrower has usually identified an undervalued asset that has been under managed and/or is in a recovering market.
Our primary focus is first mortgage lending in the highly attractive and stable multifamily real estate sector. Through our Structured Business, we focus primarily on the following investment types: Bridge Financing. We offer bridge financing products to borrowers who are typically seeking short-term capital to use in an acquisition of property.
We act quickly and decisively on proposals, provide commitments and close transactions within a few weeks and sometimes days, if required. We believe that our rapid execution attracts opportunities from both borrowers and other lenders that would not otherwise be available and that our ability to structure flexible terms and close loans quickly gives us a competitive advantage.
We believe that our rapid execution attracts opportunities from both borrowers and other lenders that would not otherwise be available and that our ability to structure flexible terms and close loans quickly gives us a competitive advantage. Manage Credit Quality. A critical component of our strategy is our ability to manage the real estate risks associated with our investment portfolio.
Life of Portfolio (years) State UPB Percentage of Total Fannie Mae 2,559 $ 21,264,578 69 % 47.4 7.4 Texas 11 % Freddie Mac 1,148 5,181,933 17 % 24.0 8.5 New York 11 % Private Label 160 2,510,449 8 % 19.5 6.7 California 8 % FHA 105 1,359,624 4 % 14.4 19.2 North Carolina 8 % Bridge (2) 4 379,425 1 % 10.9 3.2 Georgia 6 % SFR - Fixed Rate 59 287,446 1 % 20.1 5.1 Florida 6 % Total 4,035 $ 30,983,455 100 % 39.1 8.0 New Jersey 5 % Illinois 4 % Other (3) 41 % Total 100 % ________________________________________ (1) Excludes loans in which we are not collecting a servicing fee.
Life of Portfolio (years) State UPB % of Total Fannie Mae 2,644 $ 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.
To assess and improve employee retention and engagement, we conduct periodic employee surveys and take actions designed to address areas of employee concerns.
We also have a flexible telecommuting policy, which allows eligible employees to work remotely one day per week. 10 Table of Contents To assess and improve employee retention and engagement, we conduct periodic employee surveys and take actions designed to address areas of employee concerns.
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. 7 Table of Contents Timely and accurate identification of an investment’s operational and financial issues and each borrower’s objectives is essential to implementing an executable loan workout and restructuring process, if required.
Timely and accurate identification of an investment’s operational and financial issues and each borrower’s objectives is essential to implementing an executable loan workout and restructuring process, if required.
Investment Strategy The financing of multifamily, SFR and other diverse commercial real estate offers opportunities that demand customized financing solutions.
Our primary objectives are to generate cash available for distribution and facilitate capital appreciation, which we believe can be achieved through the following investment strategies: 2 Table of Contents Investment Strategy The financing of multifamily, SFR and other diverse commercial real estate offers opportunities that demand customized financing solutions.
This group also focuses on increasing the productivity of onsite property managers and leasing brokers.
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.
All transactions require the approval of the majority of the members of our credit committee. Following the approval of a transaction, our underwriting and servicing departments, together with our asset management group, assure that all loan approval terms have been satisfied and conform to lending requirements established for that particular transaction.
Following the approval of a transaction at C&IC, the deal team is responsible for ensuring that all conditioned approval terms have been satisfied and conform to programmatic lending requirements, as well as to those established for the transaction at C&IC.
In our Agency Business, our primary focus is growing the fees generated from our origination platform and the stable earnings associated with our servicing portfolio. Our primary objectives are to generate cash available for distribution and facilitate capital appreciation, which we believe can be achieved through the following investment strategies.
In our Agency Business, our primary objective is growing the fees generated from our origination platform and the stable earnings associated with our servicing portfolio. One of our core business strategies is to generate additional agency lending opportunities by refinancing our multifamily balance sheet bridge loan portfolio when it is practical and appropriate to do so.
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Our executive officers and employees have extensive experience originating and managing structured commercial real estate investments. Our senior management team has, on average, over 30 years of experience in the financial services industry.
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We are a nationwide real estate investment trust (“REIT”) and direct lender, providing loan origination and servicing for commercial real estate assets.
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With preferred equity investments, we typically become a member in the ownership entity. Similar to our bridge loans, the yield on these investments may be enhanced by prepaid and deferred interest payments, yield look-backs and participating interests. Junior Participation Financing. We offer junior participation financing in the form of a junior participating interest in the senior debt.
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We execute this strategy by underwriting the multifamily bridge loans we originate to a potential future agency financing. We then continue to work with our borrowers on this execution through the life cycle of the multifamily bridge loan.
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Junior participation financings have the same obligations, collateral and borrower as the senior debt. The junior participation interest 3 Table of Contents is subordinated to the senior debt by virtue of a contractual agreement between the senior debt lender and the junior participating interest lender.
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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.
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A written report is generated for every loan or other investment that is submitted to our credit committee for approval, which consists of our chief executive officer, chief credit officer and executive vice president of structured finance.
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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.
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The report includes a description of the prospective borrower and any guarantors, the collateral, and the proposed use of investment proceeds, as well as borrower and property financial statements and analysis. The report also includes an analysis of borrower liquidity, net worth, cash investment, income, credit history and operating experience.
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We provide financing by making preferred equity investments in entities that directly or indirectly own real property that are subordinate to a first mortgage loan (including certain GSE/Agency loans).
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The bylaws include revisions to Article II, Section 1 to clarify that all meetings of stockholders may be held partially or solely by means of remote communication. The prior bylaws mandated that all meetings of stockholders be held at a physical location.
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All proposed loans and investments are submitted to and presented to our credit & investment committee ("C&IC”) overseen by our chief credit officer and comprised of participants from originations, screening, underwriting, treasury, securitization, servicing, asset management and legal. The C&IC convenes weekly, or as needed, to review and approve transactions.
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There were also a number of other changes made that were deemed necessary to conform to the Securities and Exchange Commission’s (“SEC”) universal proxy rules.
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Prior to presentation to the C&IC, the underwriter on each proposed loan or investment submits a written credit memo for distribution to all C&IC participants. The credit memo includes all material information concerning the prospective sponsor, the property, the proposed business plan, and all loan or investment related risks and mitigants.
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The foregoing description of the bylaws does not purport to be complete and is qualified in its entirety by reference to the full text of the bylaws, a copy of which is attached hereto as Exhibit 3.9. Our internet address is www.arbor.com.
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At the C&IC meeting, the underwriter presents the transaction and answers any questions posed by C&IC members. All transactions require the unanimous approval of the respective approvers, including the chief credit officer. Minutes of each loan or other investment presented at C&IC are recorded by the committee secretary and subsequently ratified by the chief credit officer.
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We endeavor to ensure these properties are complying in all material respects with all federal, state and local laws, ordinances and regulations regarding hazardous or toxic substances or petroleum products.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeMore particularly, the consequences of the COVID-19 pandemic that have had, and may continue to have in the future, adverse impacts on our business are as follows: • During the course of the pandemic, we experienced, and may experience in the future: ◦ declines in the value of our assets, including our loan and securities portfolios, which could result in margin calls and other mandatory prepayments under the credit facilities we use to finance those assets; ◦ an increase in payment delinquencies from our borrowers resulting in additional credit losses; and ◦ an increase in the cost to obtain financing and other adverse effects of obtaining financing under terms and conditions that are less favorable to us, and if conditions worsen, could prevent us from obtaining financing at all; • In the event of any forced sales of the securities and other assets that secure our repurchase and other financing arrangements, such sales may be on terms less favorable to us than might otherwise be available under normal conditions, which could result in losses; • Disruptions in the credit markets have had, and may continue to have, a negative impact on our ability to execute on securitizations, which may have an adverse effect on our liquidity and results of operations; and • To the extent conditions worsen, there may be a materially negative effect on our results of operations, and, in turn, on cash available for distribution to our stockholders, on the value of our assets and on the market price of our common stock.
Biggest changeDepending on the severity and duration, any such major public health crisis, including any consequential adverse macroeconomic effects, has caused, and may in the future, cause the following: • declines in the value of our assets, including our loan and securities portfolios, which could result in margin calls and other mandatory prepayments under the credit facilities we use to finance those assets; • increases in payment delinquencies from our borrowers resulting in additional credit losses; • increases in loan modifications to our borrowers which could adversely impact our results of operations and financial condition; • increases in the cost to obtain financing and other adverse effects of obtaining financing under terms and conditions that are less favorable to us, and if conditions worsen, could prevent us from obtaining financing at all; • in the event of any forced sales of the securities and other assets that secure our credit and other financing arrangements, such sales may be on terms less favorable to us than might otherwise be available under normal conditions, which could result in losses; • disruptions in the credit markets causing a negative impact on our ability to execute on securitizations, which may have an adverse effect on our liquidity and results of operations; and • material negative effect on our results of operations, and, in turn, on cash available for distribution to our stockholders, on the value of our assets and on the market price of our common stock.
Other factors can lead to a to default on a loan, such as a decline in property value, cash flow, occupancy, maintenance needs and other financing obligations. If loan defaults increase, our risk-sharing obligation payments under the Fannie Mae DUS program may increase which could have a material adverse effect on our results of operations and liquidity.
Other factors can lead to a default on a loan, such as a decline in property value, cash flow, occupancy, maintenance needs and other financing obligations. If loan defaults increase, our risk-sharing obligation payments under the Fannie Mae DUS program may increase which could have a material adverse effect on our results of operations and liquidity.
These fees are primarily derived from loans that have been originated by us and sold through 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.
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.
The Agency Business is also subject to losses that may arise as a result of servicing errors, such as a failure to maintain insurance, pay taxes or provide required notices. If we fail to perform, or we breach our servicing obligations to the GSEs or HUD, our servicing engagements may be terminated.
The Agency Business is also subject to losses that may arise as a result of servicing errors, such as a failure to maintain insurance, pay taxes or provide required notices. If we fail to perform our servicing obligations, or we breach our servicing obligations to the GSEs or HUD, our servicing engagements may be terminated.
We must make certain representations and warranties concerning each loan we originate for 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 and servicing of the loans and the accuracy of the information being provided by us.
As a REIT, we are generally required to distribute at least 90% of our REIT-taxable income each year to our stockholders.
As a REIT, we are generally required to distribute at least 90% of our taxable income each year to our stockholders.
Debt service on any borrowings for this purpose will reduce our cash available for distribution. To qualify as a REIT, we must generally, among other requirements, distribute at least 90% of our REIT-taxable income, subject to certain adjustments, to our stockholders each year.
Debt service on any borrowings for this purpose will reduce our cash available for distribution. To qualify as a REIT, we must generally, among other requirements, distribute at least 90% of our taxable income, subject to certain adjustments, to our stockholders each year.
The trading price of our common stock may be highly volatile and could be subject to a number of factors beyond our control, including (1) the general reputation of REITs and the attractiveness of our equity securities in comparison to other equity securities, including securities issued by other real estate-based companies, (2) our financial performance, (3) coordinated buying and selling activity by market participants, including market manipulation and short-seller reports, (4) publication of information in the media, including online blog and social media about our Company by third parties, and (5) general stock and bond market conditions.
The trading price of our common stock may be highly volatile and could be subject to a number of factors beyond our control, including: (1) the general reputation of REITs and the attractiveness of our equity securities in comparison to other equity securities, including securities issued by other real estate-based companies; (2) our financial performance; (3) coordinated buying and selling activity by market participants, including market manipulation and short-seller reports; (4) publication of information in the media, including online blog and social media about our Company by third parties; and (5) general market conditions.
We cannot predict the effect that any such future events would have on our business or the credit quality of our loans and investments. The Terrorism Risk Insurance Act (“TRIA”), requires insurers to make terrorism insurance available under their property and casualty insurance policies in order to receive federal compensation under TRIA for insured losses.
We cannot predict the effect that any such events would have on our business or the credit quality of our loans and investments. The Terrorism Risk Insurance Act (“TRIA”) requires insurers to make terrorism insurance available under their property and casualty insurance policies in order to receive federal compensation under TRIA for insured losses.
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 and prospects.
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.
Any sustained period of increased payment delinquencies, foreclosures and resulting losses could adversely affect our net interest income as well as our ability to originate, sell and securitize loans, which could significantly harm our results of operations, financial condition, business prospects and our ability to make distributions to stockholders.
Any sustained period of increased payment delinquencies, foreclosures and resulting losses could adversely affect our net interest income as well as our ability to originate, sell and securitize loans, which could significantly harm our results of operations, financial condition, business and our ability to make distributions to stockholders.
Failure to comply with ESG-related laws, exchange policies or stakeholder expectations could materially and adversely impact the value of our stock and related cost of capital, and limit our ability to fund future growth, or result in increased investigations and litigation or threats thereof.
Failure to comply with ESG-related or anti-ESG-related laws, exchange policies or stakeholder expectations could materially and adversely impact the value of our stock and related cost of capital, and limit our ability to fund future growth, or result in increased investigations and litigation or threats thereof.
In order to qualify for the tax benefits afforded to REITs, we intend to declare quarterly dividends and to make distributions to our stockholders in amounts such that we distribute all or substantially all of our REIT-taxable income each year, subject to certain adjustments.
In order to qualify for the tax benefits afforded to REITs, we intend to declare quarterly dividends and to make distributions to our stockholders in amounts such that we distribute all or substantially all of our taxable income each year, subject to certain adjustments.
Any significant repurchase or indemnification obligations imposed on us could have a material adverse effect on the Agency Business. 18 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.
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.
If these investment banks discontinue their relationship with us and replacement investors cannot be found on a timely basis, we could be adversely affected. 16 Table of Contents Our Agency Business is subject to risk of loss in connection with defaults on loans sold under the Fannie Mae DUS program that could materially and adversely affect our results of operations and liquidity.
If these investment banks discontinue their relationship with us and replacement investors cannot be found on a timely basis, we could be adversely affected. 15 Table of Contents Our Agency Business is subject to risk of loss in connection with defaults on loans sold under the Fannie Mae DUS program that could materially and adversely affect our results of operations and liquidity.
Our ability to obtain financing 19 Table of Contents 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.
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.
These factors may also make it more difficult for our borrowers to repay our loans as they may experience difficulties in selling assets, obtaining other financing or realize increased costs of financing. Disruptions in the financial markets also may have a material adverse effect on the market value of our common stock.
These factors may also make it more difficult for our borrowers to repay our loans as they may experience difficulties in selling assets, obtaining other financing or realize increased costs of financing. Disruptions in the financial markets also may have a material adverse effect on the market price of our common stock.
Through our Private Label platform we engage in securitization transactions relating to real estate mortgage loans that expose us to potentially material risks. Securitizations and other similar transactions generally require us to incur short-term debt on a recourse basis to finance the accumulation of loans or other assets prior to securitization.
Through our Private Label platform we engage in securitization transactions relating to real estate mortgage loans that expose us to potential material risks. Securitizations and other similar transactions generally require us to incur short-term debt on a recourse basis to finance the accumulation of loans or other assets prior to securitization.
Workforce housing loans preserve rents at affordable levels in multifamily properties, typically without the use of public subsidies. The 2024 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 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.
If we fail to act proactively with delinquent borrowers in an effort to avoid defaults, the number of delinquent loans could increase, which could have a material adverse effect on us. We satisfy most of our restricted liquidity requirements with Fannie Mae with a letter of credit issued by one of our lenders.
If we fail to act proactively with delinquent borrowers in an effort to avoid defaults, the number of delinquent loans could increase, which could have a material adverse effect on our business. We satisfy most of our restricted liquidity requirements with Fannie Mae with a letter of credit issued by one of our lenders.
Potential adverse impacts of climate-related physical risks include: • Declination in asset values, due to, amongst 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.
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.
In addition, compliance with the Advisors 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.
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.
FHFA stated they will continue to monitor the market and reserves the right to increase the 2024 Caps if warranted, however, they will not reduce the 2024 Caps if the market is smaller than initially projected. To promote affordable housing preservation, loans classified as supporting workforce housing properties will be exempt from the 2024 Caps.
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.
Failure to obtain favorable terms with regard to these matters may adversely affect our cash flow and profitability. 20 Table of Contents We may not be able to find suitable replacement investments for CLO reinvestment periods. CLOs have defined periods during which principal payments on assets held in the CLO can be reinvested, commonly referred to as a reinvestment period.
Failure to obtain favorable terms with regard to these matters may adversely affect our cash flow and profitability. 19 Table of Contents We may not be able to find suitable replacement investments during CLO reinvestment periods. CLOs have defined periods during which principal payments on assets held in the CLO can be reinvested, commonly referred to as a reinvestment period.
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 charge 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 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.
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 III, Class I and Class II directors will expire in 2024, 2025 and 2026, 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 I, Class II and Class III directors will expire in 2025, 2026 and 2027, respectively.
In addition, hedges which are not highly correlated (and appropriately designated and documented as cash flow hedges) with a variable rate financing will impact our reported income as marked-to-market gains and losses will be recorded on our statement of income. 21 Table of Contents Hedging instruments may not be guaranteed by an exchange or its clearing house and involve risks and costs.
In addition, hedges which are not highly correlated (and appropriately designated and documented as cash flow hedges) with a variable rate financing will impact our reported income as marked-to-market gains and losses will be recorded on our statement of income. Hedging instruments may not be guaranteed by an exchange or its clearing house and involve risks and costs.
In addition, certain U.S. stockholders who are individuals, trusts or estates, and whose income exceeds certain thresholds, are required to pay a 3.8% medicare tax on our dividends and gain from the sale of our stock. 27 Table of Contents The Inflation Reduction Act of 2022 (“IRA”) enacted in August 2022 introduced various new provisions to the Internal Revenue Code.
In addition, certain U.S. stockholders who are individuals, trusts or estates, and whose income exceeds certain thresholds, are required to pay a 3.8% medicare tax on our dividends and gain from the sale of our stock. The Inflation Reduction Act of 2022 (“IRA”) enacted in August 2022 introduced various new provisions to the Internal Revenue Code.
We believe terms set by Freddie Mac are influenced by similar market factors as those that impact the price of Fannie Mae insured or Ginnie Mae 17 Table of Contents securities, although the pricing process differs.
We believe terms set by Freddie Mac are influenced by similar market factors as those that impact the price of Fannie Mae insured or Ginnie Mae 16 Table of Contents securities, although the pricing process differs.
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.
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.
The changes and effects of government regulation, including the Investment Advisors Act and our exemption from the Investment Company Act, could negatively impact the market value of loans or increase our costs, which could materially and adversely affect our financial results.
The changes and effects of government regulation, including the Investment Advisers Act and our exemption from the Investment Company Act, could negatively impact the market value of loans or increase our costs, which could materially and adversely affect our financial results.
The adverse resolution of a lawsuit could have a material adverse effect on our financial condition and results of operations. The adverse resolution of litigation brought against us or any of our assets could have a material adverse effect on our financial condition and results of operations. See Note 14 for information on litigation matters.
The adverse resolution of a lawsuit could have a material adverse effect on our financial condition and results of operations. The adverse resolution of litigation brought against us or any of our assets could have a material adverse effect on our financial condition and results of operations. See Note 15 for information on litigation matters.
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.
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.
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.
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.
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.
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.
If the properties that we invest in are unable to obtain affordable insurance coverage, the value of those investments could decline and in the event of an uninsured loss, we could lose all or a portion of our investment. 28 Table of Contents The impact of any future laws, and amendments to current laws, may impact our business.
If the properties that we invest in are unable to obtain affordable insurance coverage, the value of those investments could decline and in the event of an uninsured loss, we could lose all or a portion of our investment. The impact of any future laws, and amendments to current laws, may impact our business.
Fannie Mae requires the Agency Business to maintain operational liquidity based on a formula that considers the balance of the loan and the level of credit loss exposure (level of risk sharing). Fannie Mae also requires its DUS lenders to maintain collateral, which may include pledged securities, for their risk-sharing obligations.
Fannie Mae requires the Agency Business to maintain operational liquidity based on a formula that considers the balance of the loan and the level of credit loss exposure (level of risk sharing). Fannie Mae also requires its DUS lenders to maintain collateral, 21 Table of Contents which may include pledged securities, for their risk-sharing obligations.
If a 15 Table of Contents borrower defaults on our mezzanine loan or debt senior to our loan, or in the event of a borrower bankruptcy, our mezzanine loan will be satisfied only after the senior debt is paid. As a result, we may not recover some or all of our investment.
If a borrower defaults on our mezzanine loan or debt senior to our loan, or in the event of a borrower bankruptcy, our mezzanine loan will be satisfied only after the senior debt is paid. As a result, we may not recover some or all of our investment.
In addition, mezzanine loans may have higher loan to value ratios than mortgage loans, resulting in less equity in the property and increasing the risk of loss of principal. Volatility in values of multifamily and commercial properties may adversely affect our loans and investments.
In addition, mezzanine loans 14 Table of Contents may have higher loan to value ratios than mortgage loans, resulting in less equity in the property and increasing the risk of loss of principal. Volatility in values of multifamily and commercial properties may adversely affect our loans and investments.
One of our subsidiaries is required to register under the Investment Advisors 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 “Advisors Act”). The SEC oversees our activities as a registered investment adviser under this regulatory regime.
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.
These vehicles may contain restrictive covenants and may require us to provide additional collateral or repurchase 11 Table of Contents 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, some of which we guarantee, decline in value.
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 future credit facilities, our ability to make distributions to our stockholders may also be impaired.
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.
Commercial real estate can be adversely affected by a lack of liquidity caused by a prolonged economic downturn, which may limit our ability to raise equity or debt in the capital markets or obtain other financing on favorable terms.
Commercial real estate can be adversely affected by a lack of liquidity caused by a prolonged economic downturn, which may limit our ability to raise equity or debt in the capital markets or obtain financing on favorable terms, if at all.
As a result, we may be required to liquidate otherwise attractive investments, or, if we fail to liquidate the applicable investments, we may lose our status as a REIT. 26 Table of Contents We may be unable to generate sufficient revenue from operations to pay our operating expenses and to pay dividends to our stockholders.
As a result, we may be required to liquidate otherwise attractive investments, or, if we fail to liquidate the applicable investments, we may lose our status as a REIT. We may be unable to generate sufficient revenue from operations to pay our operating expenses and to pay dividends to our stockholders.
At December 31, 2023, the Agency Business’s allowance for loss-sharing balance was $71.6 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, 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.
Environmental, social and governance matters may cause us to incur additional costs, make personnel changes, 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, diversity and inclusion 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. Shareholder, public and governmental expectations and pressure have been increasing with respect to corporate responsibility, sustainability and other environmental, social and governance (“ESG”) matters.
If we fail to qualify as a REIT in any tax year, then: • We would be taxed as a domestic corporation, which, among other things, means we would be unable to deduct distributions to stockholders in computing taxable income and would be subject to federal income tax on our taxable income at corporate rates; • Any resulting tax liability could be substantial and would reduce the amount of cash available for distribution to stockholders; and • Unless we were entitled to relief under applicable statutory provisions, we would be disqualified from treatment as a REIT for the subsequent four taxable years following the year during which we lost our qualification, and thus, our cash available for distribution to stockholders would be reduced for each of the years during which we did not qualify as a REIT. 25 Table of Contents Even if we remain qualified as a REIT, we may face other tax liabilities that reduce our cash flow.
If we fail to qualify as a REIT in any tax year, then: • we would be taxed as a domestic corporation, which, among other things, means we would be unable to deduct distributions to stockholders in computing taxable income and would be subject to federal income tax on our taxable income at corporate rates; • any resulting tax liability could be substantial and would reduce the amount of cash available for distribution to stockholders; and • unless we were entitled to relief under applicable statutory provisions, we would be disqualified from treatment as a REIT for the subsequent four taxable years following the year during which we lost our qualification, and thus, our cash available for distribution to stockholders would be reduced for each of the years during which we did not qualify as a REIT.
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 24 Table of Contents outstanding stock at December 31, 2023.
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.
Companies that experience volatility in the market price of their stock may be subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert management’s attention from other business concerns, which could also harm our business.
Companies that experience volatility in the market price of their stock may be subject to securities class action litigation. We are currently the target of this type of litigation as described in Note 15. Securities litigation against us could result in substantial costs and divert management’s attention from other business concerns, which could also harm our business.
An economic slowdown, a lengthy or severe recession, declining real estate values, major bank failures or changes in interest rates could harm our operations, affect our ability to obtain financing on reasonable terms and have other adverse effects on us.
An economic slowdown, a lengthy or severe recession, declining real estate values, or changes in short and/or long term interest rates could harm our operations, affect our ability to obtain financing on reasonable terms and have other adverse effects on us.
At December 31, 2023, this requirement totaled $76.2 million and was satisfied with a $64.0 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, 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.
Borrowers may also be less able to pay principal and interest on our loans if the economy weakens.
Borrowers may also be less able 12 Table of Contents to pay principal and interest on our loans if the economy weakens.
If economic conditions deteriorate and/or we experience a turbulent economic environment, we will likely: (1) experience increases in loan loss reserves and other impairments; (2) encounter difficulty estimating loan loss reserves; and (3) experience a decline in loan repayments.
If economic conditions deteriorate and/or we experience a turbulent economic environment, we will likely: (1) experience increases in loan loss reserves and other impairments; (2) encounter difficulty estimating loan loss reserves; and (3) experience an increase in loan delinquencies and loan modifications.
Our credit and repurchase facilities and unsecured debt (senior and convertible notes) contain restrictive covenants relating to our operations.
Our credit and repurchase facilities and unsecured debt contain restrictive covenants relating to our operations.
Any failure to comply with these requirements could lead to, among other things, the loss of a license as an approved GSE or HUD lender, the inability to gain additional approvals or licenses, the termination of contractual rights without compensation, demands for indemnification or loan repurchases, class action lawsuits and administrative enforcement actions. 22 Table of Contents Failure to maintain certain qualifications and licenses could adversely affect our results of operations.
Any failure to comply with these requirements could lead to, among other things, the loss of a license as an approved GSE or HUD lender, the inability to gain additional approvals or licenses, the termination of contractual rights without compensation, demands for indemnification or loan repurchases, class action lawsuits and administrative enforcement actions.
If we are unable to remain competitive by developing and providing enhancements, new features, and integrations for our existing technology offerings and platform, our business could be harmed.
Furthermore, if we are unable to remain competitive by continuing to develop and provide enhancements, new features, and integrations for our existing technology offerings and platform, our business could be harmed.
Any future terrorist attacks, the anticipation of any such attacks, and the consequences of any military or other response by the U.S. and its allies may have an adverse impact on the U.S. financial markets, real estate markets and/or the economy in general.
The impact of any terrorist attacks and the availability of terrorism insurance expose us to certain risks. Any terrorist attacks, the anticipation of any such attacks, and the consequences of any military or other response by the U.S. and its allies may have an adverse impact on the U.S. financial markets, real estate markets and/or the economy in general.
At December 31, 2023, the Agency Business had pledged $76.2 million in restricted liquidity as collateral against future losses under $21.26 billion of loans outstanding that are subject to risk-sharing obligations. Fannie Mae collateral requirements may change in the future.
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.
While we are not currently aware of any liquidity issues directly impacting the financial institutions where we hold cash deposits or securities, if financial liquidity deteriorates, there can be no assurance we will not experience an adverse effect, which may be material, on our ability to access capital and on our business, financial condition and results of operations. 13 Table of Contents Increases in loan loss reserves and other impairments are likely if economic conditions deteriorate.
While we are not currently aware of any liquidity issues directly impacting the financial institutions where we hold cash deposits or securities, if financial liquidity deteriorates, there can be no assurance we will not experience an adverse effect, which may be material, on our ability to access capital and on our business, financial condition and results of operations.
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) losses of key personnel with long standing business relationships; (3) adverse resolutions of lawsuits; (4) future terrorist attacks; (5) military conflict; and (6) changes to laws and regulations, including environmental, social and governance matters.
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").
A decline in economic conditions could negatively impact the credit quality of our loan and investment portfolio and could cause us to experience increases in loan loss reserves, delinquent and defaulted loans and other asset impairment charges. Allowance for credit losses are particularly difficult to estimate in a turbulent economic environment.
Increases in loan loss reserves and other impairments are likely if economic conditions deteriorate. A decline in economic conditions could negatively impact the credit quality of our loan and investment portfolio and could cause us to experience increases in loan loss reserves, delinquent and defaulted loans and other asset impairment charges.
We may also face reputational damage in the event our corporate responsibility initiatives or objectives, including with respect to board diversity, do not meet the standards or expectations of shareholders, prospective investors, lawmakers, listing exchanges or other stakeholders, or if we are unable to achieve acceptable ESG ratings from third-party rating services.
We may also face reputational damage in the event our corporate responsibility initiatives or objectives do not meet the standards or expectations of shareholders, prospective investors, lawmakers, listing exchanges or other stakeholders, including third party rating services.
FHFA set its 2024 loan origination caps for Fannie Mae and Freddie Mac at $70 billion for each enterprise for a total opportunity of $140 billion (the “2024 Caps”), which is a decrease from its 2023 Caps of $75 billion for each enterprise.
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.
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 current expected credit loss (“CECL”) methodology based on current expected credit losses for the life of the loan and investment.
Any resulting need to access other sources of liquidity or short-term borrowing would increase our costs. In the event of a major bank failure, we could face major risks to the recovery of our bank deposits. Separately, although a majority of our cash is currently on deposit with major financial institutions, our balances often exceed insured limits.
In the event of a major bank failure, we could face major risks to the recovery of our bank deposits. Separately, although a majority of our cash is currently on deposit with major financial institutions, our balances often exceed insured limits.
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, prospects, financial condition or results of operations.
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.
In 29 Table of Contents addition to competitive risks, the incorporation of artificial intelligence into our technological framework poses ethical and cybersecurity risks, as well as the regulatory risks associated with compliance with state and national laws and regulations. Item 1B. Unresolved Staff Comments None.
In addition to competitive risks, the incorporation of AI into our technological framework poses ethical and cybersecurity risks, as well as the regulatory risks associated with compliance with state and national laws and regulations.
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.
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.
New risk factors emerge periodically, and we cannot guarantee that the factors described below list all risks that may become material to us at any later time. Some of the risk factors discussed below may have different impacts on our Structured and Agency Businesses. Risk Factor Summary Risks Related to Our Business.
New risk factors emerge periodically, and we cannot guarantee that the factors described below list all risks that may become material to us at any later time. Some of the risk factors discussed below may have different impacts on our Structured and Agency Businesses. Additionally, you should review “Current Market Conditions, Risks and Recent Trends” located in Item 7.
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.
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.
The risks associated with our business are more severe during periods of economic downturn, particularly if accompanied by declining real estate values.
Risks Related to Our Business An economic slowdown, a lengthy or severe recession, or declining real estate values could harm our operations. The risks associated with our business are more severe during periods of economic downturn, particularly if accompanied by declining real estate values.
Changes in the business charters, structure, or existence of one or both of the GSEs could eliminate or substantially reduce the number of loans we may originate with the GSEs, which in turn would lead to a reduction in our fee and interest income and our servicing revenue. 23 Table of Contents Conservatorships of the GSEs The Federal Housing Finance Agency (“FHFA,”) the GSEs’ regulator, placed each GSE into conservatorship in 2008.
Changes in the business charters, structure, or existence of one or both of the GSEs could eliminate or substantially reduce the number of loans we may originate with the GSEs, which in turn would lead to a reduction in our fee and interest income and our servicing revenue.
The U.S. federal income tax rules, including those dealing with REITs, are constantly under review by persons involved in the legislative process, the Internal Revenue Service and the U.S. Treasury Department, which results in statutory changes as well as frequent revisions to regulations and interpretations.
The U.S. federal income tax rules, including those dealing with REITs, are constantly under review by persons involved in the legislative process, the Internal Revenue Service and the U.S.
The COVID-19 pandemic caused severe disruptions to the U.S. and global economies and may continue to have an adverse impact on our business, results of operations and financial condition.
A major public health crisis, including a pandemic, could cause severe disruptions to the U.S. and global economies and to our business and may have an adverse impact on our business, results of operations and financial condition. A major public health crisis, including a pandemic, could cause significant disruptions to the U.S. and global economies.
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.
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.
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.
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. We finance our Structured Business loans and investments through a variety of means, including CLOs, securitizations, credit facilities, equity capital, and senior and convertible debt instruments.
The conservatorship is a statutory process designed to preserve and conserve the GSEs’ assets and property and put them in a sound and solvent condition.
Conservatorships of the GSEs The Federal Housing Finance Agency (“FHFA”), the GSEs’ regulator, placed each GSE into conservatorship in 2008. The conservatorship is a statutory process designed to preserve and conserve the GSEs’ assets and property and put them in a sound and solvent condition.
Our status as an approved lender affords us a number of advantages but may be terminated by the applicable GSE or HUD at any time.
The Agency Business is approved as a Fannie Mae DUS lender nationwide, a Freddie Mac Optigo ® Conventional Loan and SBL lender nationwide, a HUD MAP and LEAN lender nationwide, and a Ginnie Mae issuer. Our status as an approved lender affords us a number of advantages but may be terminated by the applicable GSE or HUD at any time.
Major bank failure or sustained financial market illiquidity could adversely affect our business, financial condition and results of operations. We face certain risks in the event of a sustained deterioration of domestic or international financial market liquidity. We may be unable to access funds in our deposit accounts on a timely basis.
We face certain risks in the event of a sustained deterioration of domestic or international financial market liquidity. We may be unable to access funds in our deposit accounts on a timely basis. Any resulting need to access other sources of liquidity or short-term borrowing would increase our costs.
In addition, the standards for tracking and reporting on ESG matters are relatively new, have not been harmonized, and continue to evolve.
Some legislatures, government agencies and listing exchanges have mandated or proposed, and others may in the future further mandate, certain ESG disclosure or performance. The standards for tracking and reporting on ESG matters are relatively new, have not been harmonized, and continue to evolve.

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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. Item 2.
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.
Removed
Properties Our principal corporate offices are located in leased space at 333 Earle Ovington Boulevard, Uniondale, New York, 11553. Item 3. Legal Proceedings Information with respect to certain legal proceedings is set forth in Note 14 and is incorporated herein by reference. 30 Table of Contents PART II

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings 30 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 31 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 33 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 44 Item 8. Financial Statements and Supplementary Data 47
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

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe information included in the graph and table below was obtained from 2024 Russell Investment Group. 31 Table of Contents Total Return Performance Period Ending Index 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Arbor Realty Trust, Inc 100.00 155.27 170.87 238.23 188.93 245.93 Russell 2000 100.00 125.52 150.58 172.90 137.56 160.85 FTSE Nareit Mortgage REITs 100.00 121.33 98.56 113.97 83.64 96.48 FTSE Nareit All REITs 100.00 128.07 120.56 168.64 126.30 140.81 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. 32 Table of Contents
Biggest changeThe 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
We are organized and conduct our operations to qualify as a REIT, which requires that we distribute at least 90% of our REIT-taxable income.
We are organized and conduct our operations to qualify as a REIT, which requires that we distribute at least 90% of our taxable income.
Securities Authorized for Issuance under Equity Compensation Plans This information will be contained in our definitive proxy statement for the 2024 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 2025 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, 2018 to December 31, 2023. The graph assumes a $100 investment on January 1, 2019, 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, 2019 to December 31, 2024. The graph assumes a $100 investment on January 1, 2020, 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 2, 2024, there were approximately 136,882 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 7, 2025, there were approximately 168,000 record holders of our common stock, including persons holding shares in broker accounts under street names.
Period 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, 2023 to October 31, 2023 — $ — — — November 1, 2023 to November 30, 2023 104,919 12.18 — — December 1, 2023 to December 31, 2023 — — — — 104,919 $ 12.18 — (1) These shares were purchased by certain affiliated purchasers of ours and we have not repurchased any shares under our share repurchase program during the fourth quarter of 2023.
Period 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.

Item 7. Management's Discussion & Analysis

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

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Biggest changeIn 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 11. 37 Table of Contents Comparison of Results of Operations for Years Ended December 31, 2023 and 2022 The following table provides our consolidated operating results ($ in thousands): Year Ended December 31, Increase / (Decrease) 2023 2022 Amount Percent Interest income $ 1,331,219 $ 948,401 $ 382,818 40 % Interest expense 903,228 557,617 345,611 62 % Net interest income 427,991 390,784 37,207 10 % Other revenue: Gain on sales, including fee-based services, net 72,522 55,816 16,706 30 % Mortgage servicing rights 69,912 69,346 566 1 % Servicing revenue, net 130,449 92,192 38,257 41 % Property operating income 5,708 1,877 3,831 nm % Gain (loss) on derivative instruments, net 6,763 26,609 (19,846) (75) % Other income (loss), net 7,667 (17,563) 25,230 nm % Total other revenue 293,021 228,277 64,744 28 % Other expenses: Employee compensation and benefits 159,788 161,825 (2,037) (1) % Selling and administrative 51,260 53,990 (2,730) (5) % Property operating expenses 5,897 2,136 3,761 176 % Depreciation and amortization 9,743 8,732 1,011 12 % Provision for loss sharing (net of recoveries) 15,695 1,862 13,833 nm % Provision for credit losses (net of recoveries) 73,446 21,169 52,277 nm % Litigation settlement — 7,350 (7,350) nm % Total other expenses 315,829 257,064 58,765 23 % Income before extinguishment of debt, income from equity affiliates and income taxes 405,183 361,997 43,186 12 % Loss on extinguishment of debt (1,561) (4,933) 3,372 (68) % Income from equity affiliates 24,281 14,247 10,034 70 % Provision for income taxes (27,347) (17,484) (9,863) 56 % Net income 400,556 353,827 46,729 13 % Preferred stock dividends 41,369 40,954 415 1 % Net income attributable to noncontrolling interest 29,122 28,044 1,078 4 % Net income attributable to common stockholders $ 330,065 $ 284,829 $ 45,236 16 % ________________________________________ nm – not meaningful 38 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, 2023 2022 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 $ 13,190,889 $ 1,208,180 9.16 % $ 13,997,117 $ 859,339 6.14 % Mezzanine / junior participation loans 224,784 23,939 10.65 % 202,484 19,473 9.62 % Preferred equity investments 90,960 5,892 6.48 % 142,738 15,219 10.66 % Other 20,635 3,370 16.33 % 36,262 6,141 16.94 % Core interest-earning assets 13,527,268 1,241,381 9.18 % 14,378,601 900,172 6.26 % Cash equivalents 913,382 38,052 4.17 % 585,281 3,450 0.59 % Total interest-earning assets $ 14,440,650 $ 1,279,433 8.86 % $ 14,963,882 $ 903,622 6.04 % Structured Business interest-bearing liabilities: CLO $ 7,081,594 $ 496,049 7.00 % $ 7,496,568 $ 265,560 3.54 % Credit and repurchase facilities 3,185,888 251,519 7.89 % 3,967,648 173,365 4.37 % Unsecured debt 1,658,986 103,147 6.22 % 1,610,809 91,604 5.69 % Q Series securitization 229,734 17,158 7.47 % 11,033 703 6.37 % Trust preferred 154,336 12,729 8.25 % 154,336 7,427 4.81 % Total interest-bearing liabilities $ 12,310,538 880,602 7.15 % $ 13,240,394 538,659 4.07 % Net interest income $ 398,831 $ 364,963 ________________________________________ (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, 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.
A REIT is generally not subject to federal income tax on its REIT-taxable income that is distributed to its stockholders, provided that at least 90% of its REIT-taxable income is distributed and provided that certain other requirements are met. Our operating performance is primarily driven by the following factors: Net interest income earned on our investments.
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. Our operating performance is primarily driven by the following factors: Net interest income earned on our investments.
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 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 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.
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.
Overview Through our Structured Business, we invest in a diversified portfolio of structured finance assets in the multifamily, SFR and commercial real estate markets, primarily consisting of bridge loans, in addition to mezzanine loans, junior participating interests in first mortgages and preferred and direct equity.
Overview Through our Structured Business, we invest in a diversified portfolio of structured finance assets in the multifamily, SFR and commercial real estate markets, primarily consisting of bridge loans, in addition to mezzanine loans, junior participating interests in first mortgages and preferred equity.
Workforce housing loans preserve rents at affordable levels in multifamily properties, typically without the use of public subsidies. The 2024 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 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.
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, 2023.
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.
FHFA stated they will continue to monitor the market and reserves the right to increase the 2024 Caps if warranted, however, they will not reduce the 2024 Caps if the market is smaller than initially projected. To promote affordable housing preservation, loans classified as supporting workforce housing properties will be exempt from the 2024 Caps.
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.
We either sell the Private Label loans instantaneously or pool and securitize them and sell certificates in the securitizations to third party investors, while retaining the highest risk bottom tranche certificate of the securitization (“APL certificates”). We conduct our operations to qualify as a REIT.
We either sell the Private Label loans instantaneously or pool and securitize them and sell certificates in the securitizations to third party investors, while retaining the highest risk bottom tranche certificate of the securitization. We conduct our operations to qualify as a REIT.
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 40 Table of Contents 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, as well as other general business needs.
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, 2023 Product Portfolio UPB Loan Count Wtd. Avg. Age of Portfolio (years) Wtd. Avg. Life of Portfolio (years) Interest Rate Type Wtd. Avg.
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.
Comparison of Results of Operations for Years Ended December 31, 2022 and 2021 For a discussion of our results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021, 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, 2022, which was filed with the SEC on February 17, 2023, and is available on the SEC’s website at www.sec.gov and the “Investor Relations” section of our website at www.arbor.com.
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.
As described in Note 10, certain of our repurchase facilities include margin call provisions associated with changes in interest spreads which are designed to limit the lenders credit exposure.
As described in Note 11, certain of our repurchase facilities include margin call provisions associated with changes in interest spreads which are designed to limit the lenders credit exposure.
Loans are deemed nonrecoverable upon the earlier of: (1) when the loan receivable is settled (i.e., when the loan is repaid, or in the case of foreclosure, when the underlying asset is sold); or (2) when we determine that it is nearly certain that all amounts due will not be collected.
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.
These commitments are outstanding for short periods of time (generally less than 60 days) and are described in Note 12. 41 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. 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.
Our restricted liquidity and purchase and loss obligations were satisfied with letters of credit totaling $69.0 million and cash. See Note 14 for details about our performance regarding these requirements. We also enter into contractual commitments with borrowers providing rate lock commitments while simultaneously entering into forward sale commitments with investors.
Our restricted liquidity and purchase and loss obligations were satisfied with letters of credit totaling $75.0 million and cash. See Note 15 for details about our performance regarding these requirements. We also enter into contractual commitments with borrowers providing rate lock commitments while simultaneously entering into forward sale commitments with investors.
Inflation, rising interest rates, bank failures, and geopolitical uncertainty has caused significant disruptions in many market segments, including the financial services, real estate and credit markets, which has, and may continue, to result in a further dislocation in capital markets and a continual reduction of available liquidity.
Inflation, high interest rates, bank failures, and geopolitical uncertainty has caused significant disruptions in many market segments, including the financial services, real estate and credit markets, which has, and may continue to, result in a further dislocation in capital markets and a continued reduction of available liquidity.
We define distributable earnings as net income (loss) attributable to common stockholders computed in accordance with GAAP, adjusted for accounting items such as depreciation and amortization (adjusted for unconsolidated joint ventures), non-cash stock-based compensation expense, income from MSRs, amortization and write-offs of MSRs, gains/losses on derivative instruments primarily associated with Private Label loans not yet sold and securitized, changes in fair value of GSE-related derivatives that temporarily flow through earnings (net of any tax impact), deferred tax provision (benefit), CECL provisions for credit losses (adjusted for realized losses as described below), amortization of the convertible senior notes conversion option (for 2021 only) and gains/losses on the receipt of real estate from the settlement of loans (prior to the sale of the real estate).
We define distributable earnings as net income (loss) attributable to common stockholders computed in accordance with GAAP, adjusted for accounting items such as depreciation and amortization (adjusted for unconsolidated joint ventures), non-cash stock-based compensation expense, income from MSRs, amortization and write-offs of MSRs, gains/losses on derivative instruments primarily associated with Private Label loans not yet sold and securitized, changes in fair value of GSE-related derivatives that temporarily flow through earnings, deferred tax provision (benefit), CECL provisions for credit losses (adjusted for realized losses as described below), and gains/losses on the receipt of real estate from the settlement of loans (prior to the sale of the real estate).
Instability in the banking sector, such as the recent bank failures and consolidations, further contributed to the tightening liquidity conditions in the equity and capital markets and has affected the availability and increased the cost of capital.
Instability in the banking sector, such as the multiple regional bank failures and consolidations, further contributed to the tightening liquidity conditions in the equity and capital markets and has affected the availability, and increased the cost, of capital.
Effective portfolio management is essential to maximize the performance and value of our loan and investment and servicing portfolios. Maintaining the credit quality of the loans in our portfolios is of critical importance. Loans that do not perform in accordance with their terms may have a negative impact on earnings and liquidity. COVID-19 Impact.
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.
The increased cost of credit, or degradation in debt financing terms, may impact our ability to identify and execute investments on attractive terms, or at all.
The increased cost of credit, or degradation in debt financing terms, has impacted, and may continue to impact, our ability to identify and execute investments on attractive terms, or at all.
The OP Units are redeemable for cash, or at our option for shares of our common stock on a one-for-one basis. (2) Beginning in the first quarter of 2022, the diluted weighted average shares outstanding were adjusted to exclude the potential shares issuable upon conversion and settlement of 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.
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 $11.57 billion in total structured debt outstanding at December 31, 2023.
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.
(2) See Note 14 for a breakdown of debt maturities by year. (3) Maturity dates represent the weighted average remaining maturity based on the underlying collateral at December 31, 2023. (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) 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.
Currently, the 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.
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.
We are unsure whether FHFA will impose stricter limitations on GSE multifamily production volume in the future. 35 Table of Contents Changes in Financial Condition Assets – Comparison of balances at December 31, 2023 to December 31, 2022: Our Structured loan and investment portfolio balance was $12.62 billion and $14.46 billion at December 31, 2023 and 2022, respectively.
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.
In addition to our ability to extend our credit and repurchase facilities and raise funds from equity and debt offerings, we also have a $30.98 billion agency servicing portfolio at December 31, 2023, which is mostly prepayment protected and generates approximately $121.1 million per year in recurring 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 $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.
Cash flows provided by operating activities totaled $235.9 million during 2023 and consisted primarily of net income of $400.6 million, as well as certain other non-cash net income adjustments, partially offset by net cash outflows of $196.4 million as a result of loan originations exceeding loan sales in our Agency 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.
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.
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.
Cash flows provided by investing activities totaled $1.88 billion during 2023. Loan and investment activity (originations and payoffs/paydowns) comprise the majority of our investing activities. Loan payoffs and paydowns from our Structured Business totaling $3.36 billion, net of originations of $1.36 billion, resulted in net cash inflows of $2.00 billion.
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.
This decrease was primarily due to loan payoffs and paydowns exceeding loan originations by $2.37 billion. See below for details. Our portfolio had a weighted average current interest pay rate of 8.42% and 8.17% at December 31, 2023 and 2022, respectively.
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.
Our debt that finances our loans and investment portfolio totaled $11.57 billion and $13.28 billion at December 31, 2023 and 2022, respectively, with a weighted average funding cost of 7.14% and 6.22%, respectively, which excludes financing costs. Including financing costs, the weighted average funding rate was 7.45% and 6.50% at December 31, 2023 and 2022, respectively.
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.
Although the majority of our cash is currently on deposit with major financial institutions, our balances often exceed insured limits. We limit the exposure relating to these balances by diversifying them among various counterparties. Generally, deposits may be redeemed upon demand and are maintained at financial institutions with reputable credit and therefore we believe bear minimal credit risk.
We limit the exposure relating to these balances by diversifying them among various counterparties. Generally, deposits may be redeemed upon demand and are maintained at financial institutions with reputable credit and therefore we believe bear minimal credit risk.
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 1.34% (which includes gains recognized on derivative instruments) to 1.48%, partially offset by a 10% decrease in loan sales volume ($549.4 million).
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).
Of this total, $8.74 billion, or 76%, does not contain mark-to-market provisions and is comprised of non-recourse securitized debt, senior unsecured debt and junior subordinated notes, the majority of which have maturity dates in 2025, or later. The remaining $2.83 billion of debt is in credit and repurchase facilities with several different banks with which we have long-standing relationships.
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.
Including certain fees earned and costs associated with the structured portfolio, the weighted average current interest rate was 8.98% and 8.42% at December 31, 2023 and 2022, respectively.
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.
In November 2023, FHFA set its 2024 Caps for Fannie Mae and Freddie Mac at $70 billion for each enterprise for a total opportunity of $140 billion, which is a decrease from its 2023 Caps of $75 billion for each enterprise.
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.
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, 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 December 31, 2021 3,771,684 4,493,699 4,493,699 September 30, 2021 3,191,129 3,409,598 3,409,598 June 30, 2021 2,327,114 2,021,412 2,588,456 March 31, 2021 2,177,350 2,220,307 2,262,160 Our debt facilities, including their restrictive covenants, are described in Note 10.
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.
Instability in the banking sector, such as the recent bank failures and consolidations, further contributed to the tightening liquidity conditions in the equity and capital markets and has affected the availability and increased the cost of capital.
These conditions have created, and may continue to create, further dislocations in capital markets and a continual reduction of available liquidity. Instability in the banking sector, such as the regional bank failures and consolidations, further contributed to the tightening liquidity conditions in the equity and capital markets and has affected the availability and increased the cost of capital.
Our calculation of distributable earnings may be different from the calculations used by other companies and, therefore, comparability may be limited. 43 Table of Contents Distributable earnings are as follows ($ in thousands, except share and per share data): Year Ended December 31, 2023 2022 2021 Net income attributable to common stockholders $ 330,065 $ 284,829 $ 317,412 Adjustments: Net income attributable to noncontrolling interest 29,122 28,044 38,507 Income from mortgage servicing rights (69,912) (69,346) (130,230) Deferred tax (benefit) provision (7,349) (1,741) 10,892 Amortization and write-offs of MSRs 77,829 104,378 91,356 Depreciation and amortization 16,425 11,069 10,900 Loss on extinguishment of debt 1,561 4,933 3,374 Provision for credit losses, net 68,642 25,077 (39,856) (Gain) loss on derivative instruments, net (8,844) 3,480 432 Stock-based compensation 14,940 14,973 9,929 Loss on redemption of preferred stock — — 3,479 Gain on real estate from settlement of loan — — (2,466) Distributable earnings (1) $ 452,479 $ 405,696 $ 313,729 Diluted weighted average shares outstanding - GAAP (1) 218,843,613 199,112,630 156,089,595 Less: Convertible notes dilution (2) (17,294,392) (16,888,226) — Diluted weighted average shares outstanding - distributable earnings (1) 201,549,221 182,224,404 156,089,595 Diluted distributable earnings per share (1) $ 2.25 $ 2.23 $ 2.01 ________________________________________ (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, 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.
The increase in servicing revenue, net was primarily due to an increase in earnings on escrow balances as a result of increases in benchmark index rates, partially offset by less prepayment penalties received from early runoff. 39 Table of Contents Other Income (Loss) The gain (loss) on derivative instruments in both 2023 and 2022 were related to changes in the fair values of our forward sale commitments and treasury futures held by our Agency Business.
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.
(2) Weighted average yield calculated based on annualized interest income or expense divided by average carrying value. Net Interest Income The increase in interest income was mainly due to a $375.8 million increase from our Structured Business, primarily due to a significant increase in the average yield on core interest-earning assets, as a result of increases in benchmark interest rates.
(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.
The accounting estimates requiring complex judgement that we consider to be most critical to an investor’s understanding of our financial results and condition are included in our allowance for credit losses and capitalized mortgage servicing rights accounting policies.
Many of these accounting policies require judgment and the use of estimates and assumptions when applying these policies in the preparation of our consolidated financial statements. The accounting estimates requiring complex judgment that we consider to be most critical to an investor’s understanding of our financial results and condition are included in our allowance for credit losses accounting policy.
Agency Business Activity. • Loan originations increased 7% to $5.11 billion, and includes $1.69 billion of new agency loans that were recaptured from our Structured Business runoff; and • Grew our fee-based servicing portfolio 11%, or $2.99 billion, to $30.98 billion. Dividend.
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.
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, 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, 2023, we had $1.65 billion of debt from credit and repurchase facilities that were subject to margin calls related to changes in interest spreads. As of February 18, 2024, we had approximately $1.00 billion in cash and approximately $600.0 million of replenishable cash available under our CLO vehicles, as well as other liquidity sources.
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.
Cash flows used in financing activities totaled $1.83 billion during 2023 and consisted primarily of $929.8 million of payoffs and paydowns of securitized debt, net cash outflows of $598.8 million from debt facility activities (facility paydowns were greater than financed loan originations), $380.6 million of distributions to our stockholders and OP Unit holders and $54.6 million from senior unsecured notes activity, partially offset by $193.7 million of proceeds from the issuance of common stock.
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).
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. Given the current elevated interest rate environment, we cannot guarantee that our loan portfolio will perform under the terms originally established.
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.
Note Rate Annualized Prepayments as a % of Portfolio (1) Delinquencies as a % of Portfolio (2) Fixed Adjustable 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 % December 31, 2022 Fannie Mae $ 19,038,124 2,460 3.1 8.0 96 % 4 % 4.20 % 12.71 % 0.13 % Freddie Mac 5,153,207 1,214 2.8 9.0 84 % 16 % 4.26 % 19.78 % 0.27 % Private Label 2,074,859 130 1.9 7.6 100 % — 3.60 % — — FHA 1,155,893 96 2.5 19.5 100 % — 3.17 % 1.59 % — Bridge 301,182 4 0.9 1.7 — 100 % 7.68 % — — SFR - Fixed Rate 274,764 53 1.4 6.0 100 % — 5.04 % 0.30 % — Total $ 27,998,029 3,957 2.9 8.6 93 % 7 % 4.17 % 12.35 % 0.14 % ________________________________________ (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 $ 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.
Activity from our Structured Business portfolio is comprised of the following ($ in thousands): Year Ended December 31, 2023 2022 Loans originated $ 983,343 $ 6,151,647 Number of loans 150 318 Weighted average interest rate 10.03 % 5.72 % Loan runoff $ 3,354,055 $ 3,818,554 Number of loans 187 177 Weighted average interest rate 9.21 % 7.20 % Loans extended $ 1,744,127 $ 1,684,274 Number of loans 64 66 Loans held-for-sale from the Agency Business increased $197.6 million, primarily from loan originations exceeding sales by $217.6 million as noted in the following table.
Activity from our Structured Business portfolio is comprised of the following ($ 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.
Derivative Financial Instruments We enter into derivative financial instruments in the normal course of business to manage the potential loss exposure caused by fluctuations of interest rates. See Note 12 for details.
For additional details, please see “Current Market Conditions, Risks and Recent Trends” above and “Quantitative and Qualitative Disclosures about Market Risk” below. Derivative Financial Instruments We enter into derivative financial instruments in the normal course of business to manage the potential loss exposure caused by fluctuations of interest rates. See Note 13 for details.
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.
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.
At December 31, 2023 and 2022, delinquent loans totaled $411.1 million and $38.7 million, respectively. At December 31, 2023, there were two loans totaling $4.8 million in bankruptcy and at both December 31, 2023 and 2022, there were no loans in foreclosure.
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.
Income from Equity Affiliates Income from equity affiliates 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.
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.
Since our Agency Business requires limited capital to grow, as originations are financed through warehouse facilities for generally up to 60 days before the loans are sold, tightening liquidity conditions in equity and capital markets should not have a substantial impact on our ability to sustain this business. 34 Table of Contents These adverse economic conditions have resulted in, and may continue to result in, a dislocation in capital markets, declining real estate values of certain asset classes, increased payment delinquencies and defaults and increased loan modifications and foreclosures, all of which could have a significant impact on our future results of operations, financial condition, business prospects and our ability to make distributions to our stockholders.
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.
In addition, a greater portion of our debt is fixed-rate (convertible and senior unsecured notes), as compared to our structured loan portfolio, and will not reset as interest rates rise. Therefore, increases in interest income due to rising interest rates is likely to be greater than the corresponding increase in interest expense on our variable rate debt.
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.
The increased cost of credit, or degradation in debt financing terms, may impact our ability to identify and execute investments on attractive terms, or at all. Additionally, the recent turmoil in the banking sector and financial markets has resulted in multiple regional bank failures and consolidations.
The increased cost of credit, or degradation in debt financing terms, has impacted, and may continue to impact, our ability to identify and execute investments on attractive terms, or at all. Additionally, although the majority of our cash is currently on deposit with major financial institutions, our balances often exceed insured limits.
Additionally, we also recognize revenue from originating, selling and servicing our Private Label loans. 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 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.
We are an approved Fannie Mae DUS lender nationally, a Freddie Mac Multifamily Conventional Loan lender, seller/servicer, in New York, New Jersey and Connecticut, a Freddie Mac affordable, manufactured housing, senior housing and SBL lender, seller/servicer, nationally and a HUD MAP and LEAN senior housing/healthcare lender nationally.
We retain the servicing rights and asset management responsibilities on substantially all loans we originate and sell under the GSE and HUD programs. We are an approved Fannie Mae DUS lender, seller/servicer nationally, a Freddie Mac Optigo ® Conventional Loan and SBL lender, seller/servicer, nationally and a HUD MAP and LEAN senior housing/healthcare lender nationally.
The ongoing adverse economic and market conditions, including inflation, high interest rate environment, bank failures and geopolitical uncertainty, continues to cause significant disruptions and liquidity constraints in many market segments, including the financial services, real estate and credit markets. These conditions have created, and may continue to create, a dislocation in capital markets and a continual reduction of available liquidity.
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. 41 Table of Contents The ongoing adverse economic and market conditions, including inflation, high interest rate environment, bank failures and geopolitical uncertainty, has caused significant disruptions and liquidity constraints in many market segments, including the financial services, real estate and credit markets.
The following is a summary of our debt facilities (in thousands): Debt Instruments December 31, 2023 Commitment UPB (1) Available Maturity Dates (2) Structured Business Credit and repurchase facilities $ 6,576,161 $ 2,829,341 $ 3,746,820 2024 - 2027 Securitized debt (3) 6,956,284 6,956,284 — 2025 - 2028 Senior unsecured notes 1,345,000 1,345,000 — 2024 - 2028 Convertible senior unsecured notes 287,500 287,500 — 2025 Junior subordinated notes 154,336 154,336 — 2034 - 2037 Structured Business total 15,319,281 11,572,461 3,746,820 Agency Business Credit and repurchase facilities (4) 2,100,531 413,598 1,686,933 2024 - 2025 Consolidated total $ 17,419,812 $ 11,986,059 $ 5,433,753 ________________________________________ (1) Excludes the impact of deferred financing costs.
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.
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”). There were 16,293,589 OP Units outstanding at both December 31, 2023 and 2022, which represented 8.0% and 8.4% of our outstanding stock at December 31, 2023 and 2022, respectively.
There were 16,293,589 OP Units outstanding at both December 31, 2024 and 2023, which represented 7.9% and 8.0% of our outstanding stock at December 31, 2024 and 2023, respectively.
Additionally, we earn interest on our escrow and cash balances, so an increasing interest rate environment will increase our earnings on such balances. See “Quantitative and Qualitative Disclosures about Market Risk” below for additional details.
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.
Income from equity affiliates in 2022 primarily reflects $11.1 million in distributions received from our Lexford joint venture, $4.9 million of income from our investment in a residential mortgage banking business and a $2.6 million equity participation interest on a property that was sold, partially offset by a $2.4 million other-than-temporary impairment in our North Vermont Avenue investment.
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.
Loss on Extinguishment of Debt The loss on extinguishment of debt in both 2023 and 2022 represents deferred financing fees recognized in connection with the unwind of CLOs, along with the 2022 repurchase of our 4.75% convertible notes.
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.
The increase in interest expense was mainly due to a $341.9 million increase from our Structured Business, primarily due to a significant increase in the average cost of our interest-bearing liabilities, mainly from increases in benchmark index rates.
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.
Other Expenses The decrease in employee compensation and benefits expense was primarily due to a decrease in incentive compensation. The decrease in selling and administrative expenses was primarily due to lower professional fees as a result of the settlement of the Extended Stay litigation in early 2023.
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.
Provision for Income Taxes In 2023, we recorded a tax provision of $27.3 million, which consisted of a current tax provision of $34.6 million and a deferred tax benefit of $7.3 million. In 2022, we recorded a tax provision of $17.5 million, which consisted of a current tax provision of $19.2 million and a deferred tax benefit of $1.7 million.
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”).
Senior unsecured notes decreased $52.0 million, primarily due to the redemption of our 8.00% and 5.625% notes totaling $149.6 million, partially offset by our issuance of $95.0 million of 7.75% notes. Due to borrowers increased $60.5 million, primarily due to unfunded commitments on new originations in our Structured Business, partially offset by the funding of previously committed loan originations.
Mortgage notes payable - real estate owned increased $30.6 million primarily due to financing placed on two new REO assets. Due to borrowers decreased $74.1 million, primarily due to the funding of previously unfunded loan commitments in our Structured Business.
Off-Balance-Sheet Arrangements. At December 31, 2023, we had no off-balance-sheet arrangements. Inflation. The Federal Reserve raised interest rates throughout 2022 and 2023 to combat inflation and restore price stability. As inflation begins to cool, it is possible that the Federal Reserve will pause on raising interest rates higher and potentially begin to lower rates during 2024.
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.
Liabilities – Comparison of balances at December 31, 2023 to December 31, 2022: Credit and repurchase facilities decreased $604.0 million, primarily due to runoff in our structured loan portfolio outpacing new originations. 36 Table of Contents Securitized debt decreased $914.3 million, primarily due to the unwind of two CLO vehicles totaling $842.1 million and paydowns on existing securitizations totaling $87.7 million.
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.
Removed
We retain the servicing rights and asset management responsibilities on substantially all loans we originate and sell under the GSE and HUD programs.
Added
Additionally, we also recognize revenue from originating, selling and servicing our Private Label loans. One of our core business strategies is to generate additional agency lending opportunities by refinancing our multifamily balance sheet bridge loan portfolio when it is practical and appropriate to do so.
Removed
Although vaccine availability and its usage have led to less negative short-term effects, such as travel bans, quarantines, layoffs and shutdowns, the ongoing longer-term macroeconomic effects of the COVID-19 pandemic on inflation, interest 33 Table of Contents rates, capital markets, labor shortages, property values and global supply chains continue to negatively impact many industries, including the U.S. commercial real estate market.
Added
We execute this strategy by underwriting the multifamily bridge loans we originate to a potential future agency financing. We then continue to work with our borrowers on this execution through the life cycle of the multifamily bridge loan.
Removed
The extent and duration of the economic fallout from this pandemic to our business, particularly rising inflation, increasing interest rates and dislocation in capital markets, remains unclear and present risk with respect to our financial condition, results of operations, liquidity, and ability to pay distributions.
Added
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.
Removed
Significant Developments During 2023 Financing and Capital Markets Activity. • Raised $193.7 million of capital from issuances of approximately 13.1 million shares of common stock under our “At-The-Market” equity offering sales agreement; • Unwound CLO 12 and 13, redeeming the remaining outstanding notes, which were repaid primarily from the refinancing of the remaining assets within our other CLO vehicles and credit and repurchase facilities; • Raised $93.4 million from the issuance of our 7.75% senior unsecured notes and used $70.8 million of the net proceeds to redeem our 8.00% senior unsecured notes; and • Redeemed $78.9 million of our 5.625% senior unsecured notes at maturity with cash.
Added
Structured Business Activity. • Reduced our balance sheet portfolio by 10% to $11.30 billion on loan runoff of $2.69 billion, which outpaced loan originations totaling $1.43 billion; • Modified 106 loans with a total UPB of $4.12 billion.
Removed
Share Repurchase Program. We implemented a $50.0 million share repurchase program and repurchased approximately 3.5 million shares of our common stock at a total cost of $37.4 million and an average cost of $10.56 per share. We subsequently increased the remaining availability under the share repurchase program to $150.0 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+0 added−1 removed16 unchanged
Biggest changeA 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, 2023 would have resulted in a gain of $0.8 million and $1.2 million, respectively, during 2023, while a 50 basis point and a 100 basis point decrease in the rates would have resulted in a gain of less than $0.1 million and a loss of $0.3 million, respectively.
Biggest changeA 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.
As a REIT, we are required to distribute at least 90% of our REIT-taxable income annually, which significantly limits our ability to accumulate operating cash flow and, therefore, requires us to utilize the equity and debt capital markets to finance our business.
As a REIT, we are required to distribute at least 90% of our taxable income annually, which significantly limits our ability to accumulate operating cash flow and, therefore, requires us to utilize the equity and debt capital markets to finance our business.
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.
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 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.
The performance and value of our loan and investment and servicing portfolios depend on the borrowers’ ability to operate the properties that serve as collateral so that they produce adequate cash flow to pay their loans. We attempt to mitigate these risks through our underwriting and asset 44 Table of Contents management processes.
The performance and value of our loan and investment and servicing portfolios depend on the borrowers’ ability to operate the properties that serve as collateral so that they produce adequate cash flow to pay their loans. We attempt to mitigate these risks through our underwriting and asset management processes.
The coupon rate for the loan is set after we establish the interest rate with the investor. 45 Table of Contents In addition, the fair value of our MSRs is subject to market risk since a significant driver of the fair value of these assets is the discount rates.
The coupon rate for the loan is set after we establish the interest rate with the investor. In addition, the fair value of our MSRs is subject to market risk since a significant driver of the fair value of these assets is the discount rates.
(2) Our cash, restricted cash and escrows are currently earning interest at a weighted average blended rate of approximately 5.0%, or approximately $155.0 million annually.
(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.
A 100 basis point increase in the weighted average discount rate would decrease the fair value of our MSRs by $16.4 million at December 31, 2023, while a 100 basis point decrease would increase the fair value by $17.3 million. 46 Table of Contents
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
The sale or placement of each loan to an investor is negotiated prior to closing on the loan with the borrower, and the sale or placement is generally effectuated within 60 days of closing.
Our loans held-for-sale to these agencies are not currently exposed to interest rate risk during the loan commitment, closing and delivery process. The sale or placement of each loan to an investor is negotiated prior to closing on the loan with the borrower, and the sale or placement is generally effectuated within 60 days of closing.
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 $ 12,615,006 $ 56,099 $ (55,288) $ (109,762) Interest expense from debt obligations (11,572,461) 49,785 (49,785) (99,569) Impact to net interest income from loans and investments $ 6,314 $ (5,503) $ (10,193) Interest income from cash, restricted cash and escrow balances (2) $ 3,076,723 15,384 (15,384) (30,767) Total impact from hypothetical changes in interest rates $ 21,698 $ (20,887) $ (40,960) ________________________________________ (1) Represents the UPB of our loan portfolio, the principal balance of our debt and the account balances of our cash, restricted cash and escrows at December 31, 2023.
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.
Removed
Our Agency Business originates, sells and services a range of multifamily finance products with Fannie Mae, Freddie Mac and HUD. Our loans held-for-sale to these agencies are not currently exposed to interest rate risk during the loan commitment, closing and delivery process.

Other ABR 10-K year-over-year comparisons