What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-10-30 compared with 2020-07-31 · 459 added, 417 removed, 1259 unchanged (41% of the section changed)

4 unchanged sentences

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

September 30,

Cash and cash equivalents

Restricted cash

Loans and investments, net (allowance for credit losses of $ 152,811 and $ 71,069 , respectively)

Loans and investments, net (allowance for credit losses:

$ 146,745 and $ 71,069 , respectively)

Loans held-for-sale, net

Capitalized mortgage servicing rights, net

Securities held-to-maturity, net (allowance for credit losses of $ 3,148 and $ 0 , respectively)

Securities held-to-maturity, net (allowance for credit losses:

$ 1,628 and $ 0 , respectively)

Investments in equity affiliates

36 unchanged sentences

Our consolidated balance sheets include assets and liabilities of consolidated variable interest entities, or VIEs, as we are the primary beneficiary of these VIEs.

As of June 30, 2020 and December 31, 2019, assets of our consolidated VIEs totaled $ 3,127,169 and $ 2,784,756 , respectively, and the liabilities of our consolidated VIEs totaled $ 2,517,315 and $ 2,209,599 , respectively.

As of September 30, 2020 and December 31, 2019, assets of our consolidated VIEs totaled $ 3,112,755 and $ 2,784,756 , respectively, and the liabilities of our consolidated VIEs totaled $ 2,518,745 and $ 2,209,599 , respectively.

See Note 15 for discussion of our VIEs.

2 unchanged sentences

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Interest income

6 unchanged sentences

Property operating income

(Loss) gain on derivative instruments, net

Loss on derivative instruments, net

Other income, net

9 unchanged sentences

Total other expenses

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

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

Loss on extinguishment of debt

Loss on sale of real estate

Income from equity affiliates

(Provision for) benefit from income taxes

Net income (loss)

Provision for income taxes

Preferred stock dividends

Net income (loss) attributable to noncontrolling interest

Net income (loss) attributable to common stockholders

Basic earnings (loss) per common share

Diluted earnings (loss) per common share

Net income attributable to noncontrolling interest

Net income attributable to common stockholders

Basic earnings per common share

Diluted earnings per common share

Weighted average shares outstanding:

5 unchanged sentences

($ in thousands, except shares)

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Realty Trust, Inc.

2 unchanged sentences

Noncontrolling

Balance - April 1, 2020

Balance – June 30, 2020

Issuance of common stock

Repurchase of common stock

Issuance of common stock from convertible debt

Stock-based compensation, net

2 unchanged sentences

Distributions - noncontrolling interest

Balance – June 30, 2020

Six Months Ended June 30, 2020

Realty Trust, Inc.

Additional Paid-

Stockholders'

Noncontrolling

Redemption of OP Units

( 2,736,894 )

Balance – September 30, 2020

Nine Months Ended September 30, 2020

Balance - January 1, 2020

9 unchanged sentences

Distributions - noncontrolling interest

Redemption of operating partnership units

Balance – June 30, 2020

Redemption of OP Units

( 2,851,723 )

Balance – Semptember 30, 2020

See Notes to Consolidated Financial Statements.

3 unchanged sentences

($ in thousands, except shares)

Three Months Ended June 30, 2019

Three Months Ended September 30, 2019

Realty Trust, Inc.

2 unchanged sentences

Noncontrolling

Balance - April 1, 2019

Balance - June 30, 2019

Issuance of common stock

Repurchase of common stock

Extinguishment of convertible senior unsecured notes

Issuance of common stock from convertible debt

Stock-based compensation, net

2 unchanged sentences

Distributions - noncontrolling interest

Redemption of operating partnership units

Balance – June 30, 2019

Six Months Ended June 30, 2019

Realty Trust, Inc.

Additional Paid-

Stockholders'

Noncontrolling

Balance – September 30, 2019

Nine Months Ended September 30, 2019

Balance – January 1, 2019

1 unchanged sentence

Repurchase of common stock

Issuance of common stock upon vesting of restricted stock units

Issuance of common stock from convertible debt

1 unchanged sentence

Stock-based compensation, net

Forfeiture of unvested restricted stock

Issuance of common stock from special dividend

Issuance of operating partnership units and special voting preferred stock from special dividend

Issuance of OP Units and special voting preferred stock from special dividend

Distributions - common stock

1 unchanged sentence

Distributions - noncontrolling interest

Redemption of operating partnership units

Balance – June 30, 2019

Redemption of OP Units

Balance – Semptember 30, 2019

See Notes to Consolidated Financial Statements.

3 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Operating activities:

Net (loss) income

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

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

7 unchanged sentences

Payoffs and paydowns of loans held-for-sale

Loss on sale of real estate

Mortgage servicing rights

8 unchanged sentences

Changes in operating assets and liabilities

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Investing Activities:

5 unchanged sentences

Investments in real estate, net

Proceeds from sale of real estate, net

Contributions to equity affiliates

Distributions from equity affiliates

Purchase of securities held-to-maturity, net

9 unchanged sentences

Payoffs and paydowns of collateralized loan obligations

Payoffs and paydowns of debt fund

Payoffs of debt fund

Proceeds from issuance of common stock

1 unchanged sentence

Proceeds from issuance of senior unsecured notes

Redemption of operating partnership units

Redemption of OP Units

Payments of withholding taxes on net settlement of vested stock

5 unchanged sentences

Net cash provided by financing activities

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

Net decrease in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

5 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Reconciliation of cash, cash equivalents and restricted cash:

9 unchanged sentences

Supplemental schedule of non-cash investing and financing activities:

Dividends declared on common stock and operating partnership units

Cummulative-effect adjustment (Note 2)

6 unchanged sentences

Special dividend - common stock issued

Special dividend - special voting preferred stock and operating partnership units issued

Redemption of OP Units for common stock

Special dividend - special voting preferred stock and OP Units issued

See Notes to Consolidated Financial Statements.

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

September 30, 2020

Note 1 — Description of Business

5 unchanged sentences

Through our Structured Business, we invest in a diversified portfolio of structured finance assets in the multifamily, single-family rental and commercial real estate markets, primarily consisting of bridge and mezzanine loans, including junior participating interests in first mortgages, preferred and direct equity.

We may also directly acquire real property and invest in real estate-related notes and certain mortgage-related securities.

We also invest in real estate-related joint ventures and may also directly acquire real property and invest in real estate-related notes and certain mortgage-related securities.

Through our Agency Business, we originate, sell and service a range of multifamily finance products through the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac,"

3 unchanged sentences

We are an approved Fannie Mae Delegated Underwriting and Servicing ("DUS") lender nationally, a Freddie Mac Multifamily Conventional Loan lender, seller/servicer, in New York, New Jersey and Connecticut, a Freddie Mac affordable, manufactured housing, senior housing and small balance loan ("SBL") lender, seller/servicer, nationally and a HUD MAP and LEAN senior housing/healthcare lender nationally.

We also originate and sell finance products through conduit/commercial mortgage-backed securities ("CMBS") programs and during the second half of 2019, we began to originate and service permanent financing loans underwritten using the guidelines of our existing agency loans sold to the GSEs, which we refer to as "Private Label"

We also originate and sell finance products through conduit/commercial mortgage-backed securities ("CMBS") programs and during the third quarter of 2019, we began to originate and service permanent financing loans underwritten using the guidelines of our existing agency loans sold to the GSEs, which we refer to as "Private Label"

We pool and securitize the Private Label loans and sell certain securities in the securitizations to third-party investors, while retaining the highest risk bottom tranche certificate.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

September 30, 2020

Principles of Consolidation

5 unchanged sentences

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that could materially affect the amounts reported in the consolidated financial statements and accompanying notes.

During the first half of 2020, there has been a global outbreak of a novel coronavirus ("COVID-19"), which has forced many countries, including the United States, to declare national emergencies, to institute "stay-at-home"

During the nine months ended September 30, 2020, there has been a global outbreak of COVID-19, which has forced many countries, including the United States, to declare national emergencies, to institute "stay-at-home"

orders, to close financial markets and to restrict operations of non-essential businesses.

Such actions are creating significant disruptions in global supply chains, and adversely impacting many industries.

COVID-19 could have a continued and prolonged adverse impact on economic and market conditions and could trigger a period of global economic slowdown.

The impact of COVID-19 on companies is evolving rapidly, and the extent and duration of the economic fallout from this pandemic, both globally and to our business, remain unclear, making any estimate or assumption as of June 30, 2020 inherently less certain than they would be absent the current and potential impacts of COVID-19.

COVID-19 has had, and may continue to have, a prolonged adverse impact on economic and market conditions, which could lead to an extended period of global economic slowdown.

The impact of COVID-19 on companies is evolving rapidly, and the extent and duration of the economic fallout from this pandemic, both globally and to our business, remain unclear, making any estimate or assumption as of September 30, 2020 inherently less certain than they would be absent the current and potential impacts of COVID-19.

Actual results could differ from those estimates.

1 unchanged sentence

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

The net gain/loss from changes in fair value of derivative instruments previously recorded to other income, net is now recorded to (loss) gain on derivative instruments, net.

The net gain/loss from changes in fair value of derivative instruments previously recorded to other income, net is now recorded to loss on derivative instruments, net.

These reclassifications had no effect on the previously reported net income.

5 unchanged sentences

This methodology replaces the multiple existing impairment methods in GAAP and generally requires that a loss be incurred before it is recognized.

We adopted ASU 2016-13 using the modified retrospective method, therefore, the results for reporting periods prior to January 1, 2020 have been unadjusted and reported in accordance with previously applicable GAAP.

In connection with the adoption of ASU 2016-13, we recorded a $ 28.6 million increase to accumulated deficit, which is net of a deferred tax asset of $ 3.6 million as of January 1, 2020.

We adopted ASU 2016-13 using the modified retrospective method, therefore, the results for reporting periods prior to January 1, 2020 are unadjusted and reported in accordance with previously applicable GAAP.

In connection with the adoption of ASU 2016-13, we recorded a $ 28.6 million increase to accumulated deficit, which was net of a deferred tax asset of $ 3.6 million at January 1, 2020.

ARBOR REALTY TRUST, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

September 30, 2020

The following table illustrates the impact of adopting ASU 2016-13 (in thousands):

23 unchanged sentences

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

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

September 30, 2020

Recently Issued Accounting Pronouncements

1 unchanged sentence

Effect on Financial Statements

On March 12, 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848)—Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference LIBOR or other reference rates expected to be discontinued because of reference rate reform.

In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40), which includes amendments to the guidance on convertible instruments and the derivative scope exception for contracts in an entity's own equity.

The guidance also simplifies the accounting for convertible instruments which include beneficial conversion features or cash conversion features by removing certain separation models in Subtopic 470-20 and requires entities to use the "if-converted"

method when calculating diluted earnings per share for convertible instruments.

First quarter of 2022, with early adoption permitted beginning in the first quarter of 2021

We are currently evaluating the timing of our adoption and the impact this guidance may have on our consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848)—Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference LIBOR or other reference rates expected to be discontinued because of reference rate reform.

This ASU is effective as of March 12, 2020 through December 31, 2022

We have not adopted any of the optional expedients or exceptions through June 30, 2020 , but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period as circumstances evolve.

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

We have not adopted any of the optional expedients or exceptions through September 30, 2020 , but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period as circumstances evolve.

Significant Accounting Policies

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We also perform a qualitative assessment beyond model estimates, and apply qualitative adjustments as necessary.

Our qualitative analysis includes a review of data that may directly impact our estimates including internal and external information about the loan or property including current market conditions, asset specific conditions, property operations or borrower/sponsor details (i.e.

Our qualitative analysis includes a review of data that may directly impact our estimates including internal and external information about the loan or

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

September 30, 2020

property including current market conditions, asset specific conditions, property operations or borrower/sponsor details (i.e.

refinance, sale, bankruptcy) which allows us to more accurately and reasonably determine the amount of the expected loss for these investments.

9 unchanged sentences

If upon completion of the valuation, the fair value of the underlying collateral securing the impaired loan is less than the net carrying value of the loan, we record a specific allowance for credit losses with a corresponding charge to the provision for credit losses, and remove the impaired loan from the CECL analysis described above.

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

If the loan modification constitutes a concession whereas we do not receive ample consideration in return for the modification, and the borrower is experiencing financial difficulties and cannot repay the loan under the current terms, then the modification is considered by us to be a troubled debt restructuring.

9 unchanged sentences

In addition, a gain or loss may be recorded upon the sale of a loan to a third party in the consolidated statements of operations in the period in which the loan was sold.

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

September 30, 2020

Note 3 — Loans and Investments

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

June 30, 2020

September 30, 2020

LTV Ratio (2)

6 unchanged sentences

Loans and investments, net

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

December 31, 2019

LTV Ratio (2)

LTV Ratio (3)

Bridge loans (4)

8 unchanged sentences

(3) The “Last Dollar LTV Ratio” is calculated by comparing the total of the carrying value of our loan and all senior lien positions within the capital stack to the fair value of the underlying collateral to determine the point at which we will initially absorb a loss.

(4) As of June 30, 2020 and December 31, 2019, bridge loans included 5 and 11 , respectively, single-family rental loans with an aggregate UPB of $ 53.4 million and $ 66.7 million, respectively, of which $ 28.3 million and $ 30.0 million, respectively, was funded.

(5) As of June 30, 2020 and December 31, 2019, other included 19 and 12 , respectively, single-family rental permanent loans with an aggregate UPB of $ 73.7 million and $ 41.6 million, respectively, and 1 and 9 , respectively, purchased loans with an aggregate UPB of $ 6.4 million and $ 28.6 million, respectively.

(4) As of September 30, 2020 and December 31, 2019, bridge loans included 9 and 11 , respectively, single-family rental loans with an aggregate UPB of $ 150.8 million and $ 66.7 million, respectively, of which $ 53.7 million and $ 30.0 million, respectively, was funded.

(5) As of September 30, 2020 and December 31, 2019, other included 20 and 12 , respectively, single-family rental permanent loans with an aggregate UPB of $ 60.8 million and $ 41.6 million, respectively, and, at December 31, 2019, there were 9 purchased loans with an aggregate UPB of $ 28.6 million.

Concentration of Credit Risk

We are subject to concentration risk in that, at June 30, 2020, the UPB related to 23 loans with five different borrowers represented 13 % of total assets.

At December 31, 2019, the UPB related to 24 loans with five different borrowers represented 13 % of total assets.

During both the six months ended June 30, 2020 and the year ended December 31, 2019, no single loan or investment represented more than 10% of our total assets and no single investor group generated over 10% of our revenue.

We are subject to concentration risk in that, at September 30, 2020, the UPB related to 22 loans with five different borrowers represented 13 % of total assets.

At December 31, 2019, the UPB related to 24 loans with five different borrowers represented 13 % of

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

September 30, 2020

total assets.

During both the nine months ended September 30, 2020 and the year ended December 31, 2019, no single loan or investment represented more than 10% of our total assets and no single investor group generated over 10% of our revenue.

See Note 18 for details on our concentration of related party loans and investments.

4 unchanged sentences

All portfolio assets are subject to, at a minimum, a thorough quarterly financial evaluation in which historical operating performance and forward-looking projections are reviewed, however, we maintain a higher level of scrutiny and focus on loans that we consider “high risk” and that possess deteriorating credit quality.

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

Generally speaking, given our typical loan profile, risk ratings of pass, pass/watch and special mention suggest that we expect the loan to make both principal and interest payments according to the contractual terms of the loan agreement.

2 unchanged sentences

Further, while the above are the primary guidelines used in determining a certain risk rating, subjective items such as borrower strength, market strength or asset quality may result in a rating that is higher or lower than might be indicated by any risk rating matrix.

A summary of the loan portfolio’s internal risk ratings and LTV ratios by asset class as of June 30, 2020 is as follows ($ in thousands):

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

September 30, 2020

A summary of the loan portfolio’s internal risk ratings and LTV ratios by asset class as of September 30, 2020 is as follows ($ in thousands):

UPB by Origination Year

12 unchanged sentences

Percentage of portfolio

Special Mention

4 unchanged sentences

Percentage of portfolio

Special Mention

Percentage of portfolio

Geographic Concentration Risk

As of June 30, 2020, 16 % and 12 % of the outstanding balance of our loan and investment portfolio had underlying properties in New York and Texas, respectively.

As of September 30, 2020, 16 % and 12 % of the outstanding balance of our loan and investment portfolio had underlying properties in New York and Texas, respectively.

As of December 31, 2019, 18 % and 12 % of the outstanding balance of our loan and investment portfolio had underlying properties in New York and Texas, respectively.

3 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

September 30, 2020

Allowance for Credit Losses

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

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Student Housing

2 unchanged sentences

Provision for credit losses (net of recoveries)

Recoveries of reserves

Ending balance

Three Months Ended June 30, 2019

Three Months Ended September 30, 2019

Allowance for credit losses

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Allowance for credit losses:

2 unchanged sentences

Provision for credit losses (net of recoveries)

Recoveries of reserves

Ending balance

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2019

Allowance for credit losses

The increase in the provision for credit losses during the three and six months ended June 30, 2020 of $ 10.6 million and $ 64.4 million, respectively, compared to the January 1, 2020 cumulative-effect adjustment upon adoption of CECL of $ 17.3 million, is primarily attributed to the significant adverse change in the economic outlook due to the COVID-19 pandemic.

Our estimate of allowance for credit losses on our structured loans and investments, including related unfunded loan commitments, during 2020 was based on a reasonable and supportable forecast period that was adjusted for the expectations that the markets in which we operate will experience a decline in economic conditions, increases in unemployment rates and other market driven factors largely the result of the COVID-19 pandemic that will likely impact loan delinquencies, modifications and potential risk of loss.

The decrease in the provision for credit losses during the three months ended September 30, 2020 of $ 6.1 million was due to improved market conditions and expected future forecasts during the third quarter of 2020.

The increase in the provision for credit losses during the nine months ended September 30, 2020 of $ 58.4 million, compared to the January 1, 2020 cumulative-effect adjustment upon adoption of CECL of $ 17.3 million, is primarily attributed to the significant adverse change in the economic outlook during the first half of 2020 due to the COVID-19 pandemic.

Our estimate of allowance for credit losses on our structured loans and investments, including related unfunded loan commitments, during 2020 was based on a reasonable and supportable forecast period that was adjusted for the expectations that the markets we operate in will experience declines in economic conditions, increases in unemployment rates and other market driven factors largely the result of the COVID-19 pandemic that will likely impact loan delinquencies, modifications and potential risk of loss.

For the periods beyond the reasonable and supportable forecast, we reverted to our historical loss rate, which was adjusted to address for factors that are not present in our existing portfolio.

We also made adjustments for loans that are expected to extend based on available extension options and the timing of their maturities in relation to the current economic conditions.

The expected credit losses over the contractual period of our loans also include the obligation to extend credit through our unfunded loan commitments.

Our CECL allowance for unfunded loan commitments are adjusted quarterly and correspond with the associated outstanding loans.

As of June 30, 2020, we had outstanding unfunded commitments of $ 150.9 million that we are obligated to fund as borrowers meet certain requirements.

We also made adjustments for loans that are expected to extend based on available extension options and the timing of their maturities in relation to current economic conditions.

ARBOR REALTY TRUST, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

As of June 30, 2020, accrued interest receivable related to our loans totaling $ 36.2 million was excluded from the estimate of credit losses and is included in other assets on the consolidated balance sheet.

September 30, 2020

The expected credit losses over the contractual period of our loans also include the obligation to extend credit through our unfunded loan commitments.

Our CECL allowance for unfunded loan commitments are adjusted quarterly and correspond with the associated outstanding loans.

As of September 30, 2020, we had outstanding unfunded commitments of $ 194.9 million that we are obligated to fund as borrowers meet certain requirements.

As of September 30, 2020, accrued interest receivable related to our loans totaling $ 38.1 million was excluded from the estimate of credit losses and is included in other assets on the consolidated balance sheet.

All of our structured loans and investments are collateral dependent, and as such, the measurement of credit losses may be based on the difference between the fair value of the underlying collateral and the carrying value of the assets as of the period end.

A summary of our specific loans considered impaired by asset class is as follows (in thousands):

June 30, 2020

September 30, 2020

Allowance for

1 unchanged sentence

December 31, 2019

(1) Represents the UPB of ten and five impaired loans (less unearned revenue and other holdbacks and adjustments) by asset class at June 30, 2020 and December 31, 2019, respectively.

There were no loans for which the fair value of the collateral securing the loan was less than the carrying value of the loan for which we had not recorded a provision for credit loss as of June 30, 2020 and December 31, 2019.

At June 30, 2020, six loans with an aggregate net carrying value of $ 43.9 million, net of related loan loss reserves of $ 16.6 million, were classified as non-performing and, at December 31, 2019, three loans with an aggregate net carrying value of $ 1.8 million, net of related loan loss reserves of $ 1.7 million, were classified as non-performing.

(1) Represents the UPB of ten and five impaired loans (less unearned revenue and other holdbacks and adjustments) by asset class at September 30, 2020 and December 31, 2019, respectively.

At September 30, 2020, eight loans with an aggregate net carrying value of $ 53.8 million, net of related loan loss reserves of $ 9.1 million, were classified as non-performing and, at December 31, 2019, three loans with an aggregate net carrying value of $ 1.8 million, net of related loan loss reserves of $ 1.7 million, were classified as non-performing.

Income from non-performing loans is generally recognized on a cash basis when it is received.

Full income recognition will resume when the loan becomes contractually current and performance has recommenced.

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

June 30, 2020

December 31, 2019

ARBOR REALTY TRUST, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

In addition, we have six loans with a carrying value totaling $ 120.7 million at June 30, 2020, that are collateralized by a land development project.

These loans were scheduled to mature in March 2020 and were extended to September 2020.

September 30, 2020

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

September 30, 2020

December 31, 2019

Student Housing

In addition, we have six loans with a carrying value totaling $ 120.9 million at September 30, 2020, that are collateralized by a land development project.

These loans were scheduled to mature in September 2020 and we are currently in negotiations with the borrower to extend the maturity.

The loans do not carry a current pay rate of interest, however, five of the loans with a carrying value totaling $ 111.5 million entitle us to a weighted average accrual rate of interest of 7.86 %.

In 2008, we suspended the recording of the accrual rate of interest on these loans, as they were impaired and we deemed the collection of this interest to be doubtful.

At June 30, 2020 and December 31, 2019, we had a cumulative allowance for credit losses of $ 71.4 million and $ 61.4 million, respectively, related to these loans.

At September 30, 2020 and December 31, 2019, we had a cumulative allowance for credit losses of $ 71.4 million and $ 61.4 million, respectively, related to these loans.

The loans are subject to certain risks associated with a development project including, but not limited to, availability of construction financing, increases in projected construction costs, demand for the development's outputs upon completion of the project, and litigation risk.

Additionally, these loans were not classified as non-performing as the borrower is in compliance with all of the terms and conditions of the loans.

At both June 30, 2020 and December 31, 2019, we had no loans contractually past due 90 days or more that are still accruing interest.

During both the three and six months ended June 30, 2020 and 2019, interest income recognized on nonaccrual loans was de minimis.

There were no loan modifications, refinancing's and/or extensions during both the six months ended June 30, 2020 and 2019 that were considered troubled debt restructurings.

At both September 30, 2020 and December 31, 2019, we had no loans contractually past due 90 days or more that are still accruing interest.

During both the three and nine months ended September 30, 2020 and 2019, interest income recognized on nonaccrual loans was de minimis.

In the fourth quarter of 2019, we purchased $ 50.0 million of a $ 110.0 million bridge loan, which is collateralized by a hotel property and scheduled to mature in December 2022.

In the first quarter of 2020, we recorded a $ 7.5 million allowance for credit losses due to a reduction in the appraisal value of the property.

In August 2020, we purchased the remaining $ 60.0 million bridge loan at a discount for $ 39.9 million, which we determined had experienced a more than insignificant deterioration in credit quality since origination and, therefore, deemed to be a purchased loan with credit deterioration.

The total discount received of $ 20.1 million was classified as a noncredit discount and no portion of the discount was allocated to allowance for credit losses at the date of purchase since the appraised value of the property is greater than the purchase price.

Shortly after the purchase, we entered into a forbearance agreement with the borrower to temporarily reduce the interest rate from LIBOR plus 3.00 % with a 1.50 % LIBOR floor to a pay rate of 1.00 % and to include a $ 10.0 million principal reduction if the loan is paid-off by March 2, 2021.

The temporary reduction in the interest rate is deferred to payoff.

In August 2020, we entered into a loan modification agreement on a $ 26.5 million bridge loan with an interest rate of LIBOR plus 6.00 % with a 2.375 % LIBOR floor and a $ 6.1 million mezzanine loan with a fixed rate of 12 % collateralized by a retail property to:

(1) reduce the interest rate on both loans to the greater of:

(i) LIBOR plus 5.50 % and (ii) 6.50 %, and (2) to extend the maturity date three years to December 2024.

A portion of the foregoing interest equal to 2.00 % will be deferred to payoff and will be waived if the loan is paid-off by December 31, 2022.

The loan modification agreement also includes a $ 6.0 million required principal paydown, which occurred at the closing of the modification transaction, and an $ 8.0 million principal reduction once the borrower deposits an additional reserve deposit of approximately $ 4.6 million by December 31, 2021.

We have the ability to potentially recapture up to $ 8.0 million of the principal reduction to the extent that the property is sold or refinanced in excess of the debt.

These two loan modifications were deemed troubled debt restructurings.

There were no loan modifications, refinancing's and/or extensions during 2019 that were considered troubled debt restructurings.

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

September 30, 2020

Given the transitional nature of some of our real estate loans, we may require funds to be placed into an interest reserve, based on contractual requirements, to cover debt service costs.

At June 30, 2020 and December 31, 2019, we had total interest reserves of $ 54.4 million and $ 37.0 million, respectively, on 151 loans and 131 loans, respectively, with an aggregate UPB of $ 2.85 billion and $ 2.43 billion, respectively.

At September 30, 2020 and December 31, 2019, we had total interest reserves of $ 56.6 million and $ 37.0 million, respectively, on 152 loans and 131 loans, respectively, with an aggregate UPB of $ 2.99 billion and $ 2.43 billion, respectively.

Note 4 — Loans Held-for-Sale, Net

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Loans held-for-sale, net consists of the following (in thousands):

June 30, 2020

September 30, 2020

December 31, 2019

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Loans held-for-sale, net

During the three and six months ended June 30, 2020, we sold $ 1.99 billion and $ 2.95 billion, respectively, of loans held-for-sale and recorded gain on sales of $ 24.9 million and $ 38.2 million, respectively.

During the three and nine months ended September 30, 2020, we sold $ 1.22 billion and $ 4.17 billion, respectively, of loans held-for-sale and recorded gain on sales of $ 19.2 million and $ 57.3 million, respectively.

Included in the total loans sold in the second quarter of 2020 were Private Label loans totaling $ 727.2 million, which were sold to an unconsolidated affiliate of ours who pooled and securitized the loans in May 2020.

We retained the most subordinate class of certificates in the securitization totaling $ 63.6 million in satisfaction of credit risk retention requirements (see Note 7 for details), and are the primary servicer of the mortgage loans.

During the three and six months ended June 30, 2019, we sold $ 923.0 million and $ 2.02 billion, respectively, of loans held-for-sale and recorded gain on sales of $ 12.9 million and $ 28.0 million, respectively.

At June 30, 2020 and December 31, 2019, there were no loans held-for-sale that were 90 days or more past due, and there were no loans held-for-sale that were placed on a non-accrual status.

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

During the three and nine months ended September 30, 2019, we sold $ 1.49 billion and $ 3.51 billion, respectively, of loans held-for-sale and recorded gain on sales of $ 20.1 million and $ 48.1 million, respectively.

At September 30, 2020 and December 31, 2019, there were no loans held-for-sale that were 90 days or more past due, and there were no loans held-for-sale that were placed on a non-accrual status.

Note 5 — Capitalized Mortgage Servicing Rights

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The discount rates used to determine the present value of our MSRs throughout the periods presented for all MSRs were between 8 % - 13 % (representing a weighted average discount rate of 11 %) based on our best estimate of market discount rates.

The weighted average estimated life remaining of our MSRs was 8.2 years and 8.0 years at June 30, 2020 and December 31, 2019, respectively.

The weighted average estimated life remaining of our MSRs was 8.3 years and 8.0 years at September 30, 2020 and December 31, 2019, respectively.

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

September 30, 2020

A summary of our capitalized MSR activity is as follows (in thousands):

Three Months Ended June 30, 2020

Six Months Ended June 30, 2020

Balance at beginning of period

Three Months Ended September 30, 2020

Nine Months Ended September 30, 2020

Beginning balance

Write-downs and payoffs

Balance at end of period

Three Months Ended June 30, 2019

Six Months Ended June 30, 2019

Balance at beginning of period

Ending balance

Three Months Ended September 30, 2019

Nine Months Ended September 30, 2019

Beginning balance

Write-downs and payoffs

Balance at end of period

We collected prepayment fees totaling $ 3.0 million and $ 8.1 million during the three and six months ended June 30, 2020, respectively, and $ 3.5 million and $ 8.5 million during the three and six months ended June 30, 2019, respectively.

Prepayment fees are included as a component of servicing revenue, net on the consolidated statements of operations.

As of June 30, 2020 and December 31, 2019, we had no valuation allowance recorded on any of our MSRs.

The expected amortization of capitalized MSRs recorded as of June 30, 2020 is as follows (in thousands):

2020 (six months ending 12/31/2020)

Ending balance

We collected prepayment fees totaling $ 2.0 million and $ 10.1 million during the three and nine months ended September 30, 2020, respectively, and $ 5.3 million and $ 13.8 million during the three and nine months ended September 30, 2019, respectively.

Prepayment fees are included as a component of servicing revenue, net on the consolidated statements of income.

As of September 30, 2020 and December 31, 2019, we had no valuation allowance recorded on any of our MSRs.

The expected amortization of capitalized MSRs recorded as of September 30, 2020 is as follows (in thousands):

2020 (three months ending 12/31/2020)

Actual amortization may vary from these estimates.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

September 30, 2020

Note 6 — Mortgage Servicing

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

June 30, 2020

September 30, 2020

Product Concentrations

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(3) No other individual state represented 4% or more of the total.

At June 30, 2020 and December 31, 2019, our weighted average servicing fee was 44.1 basis points and 43.8 basis points, respectively.

At June 30, 2020 and December 31, 2019, we held total escrow balances of $ 1.02 billion and $ 947.1 million, respectively, which is not reflected in our consolidated balance sheets.

Of the total escrow balances, we held $ 635.4 million and $ 562.1 million at June 30, 2020 and December 31, 2019, respectively, related to loans we are servicing within our Agency Business.

At September 30, 2020 and December 31, 2019, our weighted average servicing fee was 44.8 basis points and 43.8 basis points, respectively.

At September 30, 2020 and December 31, 2019, we held total escrow balances of $ 1.15 billion and $ 947.1 million, respectively, which is not reflected in our consolidated balance sheets.

Of the total escrow balances, we held $ 784.4 million and $ 562.1 million at September 30, 2020 and December 31, 2019, respectively, related to loans we are servicing within our Agency Business.

These escrows are maintained in separate accounts at several federally insured depository institutions, which may exceed FDIC insured limits.

We earn interest income on the total escrow deposits, generally based on a market rate of interest negotiated with the financial institutions that hold the escrow deposits.

Interest earned on total escrows, net of interest paid to the borrower, was $ 1.4 million and $ 4.5 million during the three and six months ended June 30, 2020, respectively, and $ 4.1 million and $ 8.1 million during the three and six months ended June 30, 2019, respectively, and is a component of servicing revenue, net in the consolidated statements of operations.

Interest earned on total escrows, net of interest paid to the borrower, was $ 1.3 million and $ 5.8 million during the three and nine months ended September 30, 2020, respectively, and $ 4.7 million and $ 12.9 million during the three and nine months ended September 30, 2019, respectively, and is a component of servicing revenue, net in the consolidated statements of income.

ARBOR REALTY TRUST, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

September 30, 2020

Note 7 — Securities Held-to-Maturity

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As part of the securitizations under the SBL program, we have the option to purchase the B Piece bond through a bidding process, which represents the bottom 10%, or highest risk, of the securitization.

As of June 30, 2020, we retained 49 %, or $ 106.2 million initial face value, of seven B Piece bonds, which were purchased at a discount for $ 74.7 million, and sold the remaining 51 % to a third-party at par.

As of September 30, 2020, we retained 49 %, or $ 106.2 million initial face value, of seven B Piece bonds, which were purchased at a discount for $ 74.7 million, and sold the remaining 51 % to a third-party at par.

These securities are collateralized by a pool of multifamily mortgage loans, bear interest at an initial weighted average variable rate of 3.74 % and have an estimated weighted average remaining maturity of 5.7 years.

The weighted average effective interest rate was 10.66 % and 10.85 % at June 30, 2020 and December 31, 2019, respectively, including the accretion of a portion of the discount deemed collectible.

The weighted average effective interest rate was 10.68 % and 10.85 % at September 30, 2020 and December 31, 2019, respectively, including the accretion of a portion of the discount deemed collectible.

Approximately $ 12.8 million is estimated to mature within one year, $ 37.8 million is estimated to mature after one year through five years, $ 14.6 million is estimated to mature after five years through ten years and $ 15.8 million is estimated to mature after ten years.

2 unchanged sentences

We purchased the APL certificates at a discount for $ 37.9 million, which are collateralized by a pool of 40 fixed rate 10-year mortgage loans secured by first mortgage leans on 49 multifamily properties, bear interest at an initial weighted average variable rate of 4.95 % and have an estimated weighted average remaining maturity of 9.3 years.

The weighted average effective interest rate was 11.50 % at June 30, 2020 and the full $ 63.6 million is expected to mature after five years through ten years.

The weighted average effective interest rate was 10.15 % at September 30, 2020 and the full $ 63.6 million is expected to mature after five years through ten years.

Structured Single-Family Rental Bonds (“SFR bonds”).

As of June 30, 2020, we held $ 20.0 million initial face value of Class A2 securitized SFR bonds at par, which are collateralized by a pool of single-family rental properties.

As of September 30, 2020, we held $ 20.0 million initial face value of Class A2 securitized SFR bonds at par, which are collateralized by a pool of single-family rental properties.

These securities have a three-year maturity, bear interest at a weighted average fixed interest rate of 4.58 % and have an estimated weighted average remaining maturity of 0.4 years.

3 unchanged sentences

Credit Losses

June 30, 2020

September 30, 2020

B Piece bonds

3 unchanged sentences

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

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Beginning balance

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

Six Months Ended June 30, 2020

APL Certificates

B Piece Bonds

September 30, 2020

Nine Months Ended September 30, 2020

Beginning balance, prior to adoption of CECL

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The issuers continue to make timely principal and interest payments and we continue to accrue interest on all our securities.

As of June 30, 2020, no other-than-temporary impairment was recorded on our held-to-maturity securities.

We recorded interest income (including the amortization of discount) related to these investments of $ 1.7 million and $ 4.0 million during the three and six months ended June 30, 2020, respectively, and $ 2.3 million and $ 4.4 million during the three and six months ended June 30, 2019, respectively.

As of June 30, 2020, accrued interest receivable related to these bonds totaling $ 0.6 million was excluded from the estimate of credit losses and is included in other assets on the consolidated balance sheet.

As of September 30, 2020, no other-than-temporary impairment was recorded on our held-to-maturity securities.

We recorded interest income (including the amortization of discount) related to these investments of $ 2.9 million and $ 6.9 million during the three and nine months ended September 30, 2020, respectively, and $ 2.3 million and $ 6.8 million during the three and nine months ended September 30, 2019, respectively.

As of September 30, 2020, accrued interest receivable related to these bonds totaling $ 0.6 million was excluded from the estimate of credit losses and is included in other assets on the consolidated balance sheet.

Note 8 — Investments in Equity Affiliates

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Equity Affiliates

June 30, 2020

September 30, 2020

December 31, 2019

June 30, 2020

September 30, 2020

Arbor Residential Investor LLC

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Arbor Residential Investor LLC (“ARI”).

During the three and six months ended June 30, 2020, we recorded income of $ 20.9 million and $ 23.8 million, respectively, and during the three and six months ended June 30, 2019, we recorded income of $ 2.7 million and $ 3.5 million, respectively, to income from equity affiliates in our consolidated statements of operations.

During the three and nine months ended September 30, 2020, we recorded income of $ 32.3 million and $ 56.1 million, respectively, and during the three and nine months ended September 30, 2019, we recorded income of $ 2.6 million and $ 6.1 million, respectively, to income from equity affiliates in our consolidated statements of income.

During the third quarter of 2020, we received a $ 15.0 million cash distribution from this equity investment, which was classified as a return on capital.

ARBOR REALTY TRUST, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

September 30, 2020

Summarized statements of income for our investment in ARI are as follows (in thousands):

Six Months Ended June 30,

Statements of Operations:

Nine Months Ended September 30,

Statements of Income:

Total revenues

1 unchanged sentence

Lexford Portfolio.

During the first quarter of 2020, we received distributions of $ 1.1 million and during the three and six months ended June 30, 2019, we received distributions of $ 0.6 million and $ 1.9 million, respectively, from this equity investment, which was recognized as income.

During the first quarter of 2020, we received distributions of $ 1.1 million and during the three and nine months ended September 30, 2019, we received distributions of $ 1.2 million and $ 3.0 million, respectively, from this equity investment, which was recognized as income.

As a result of COVID-19, Lexford has temporarily suspended paying distributions to its equity holders.

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Note 9 — Real Estate Owned

Our real estate assets at both June 30, 2020 and December 31, 2019 were comprised of a hotel property and an office building.

June 30, 2020

A summary of our real estate assets is as follows (in thousands):

September 30, 2020

December 31, 2019

(in thousands)

Building and intangible assets

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Real estate owned, net

During the six months ended June 30, 2020 and 2019, our hotel property had a weighted average occupancy rate of 20 % and 62 %, respectively, a weighted average daily rate of $ 134 and $ 111 , respectively, and weighted average revenue per available room of $ 27 and $ 69 , respectively.

The operation of a hotel property is seasonal with the majority of revenues earned in the first two quarters of the calendar year.

As a result of the COVID-19 pandemic, our hotel property temporarily ceased operations during April and May 2020 and has since resumed operations.

During the second quarter of 2019, based on discussions with market participants, we determined that the hotel property exhibited indicators of impairment and performed an impairment analysis.

As a result of this analysis, we recorded an impairment loss of $ 1.0 million.

In September 2020, we sold our hotel property for $ 8.4 million and recorded a $ 1.9 million loss, which was included in loss on sale of real estate.

In addition, we recorded a $ 2.5 million charge for a litigation settlement, which is included in selling and administrative expenses.

Our office building was fully occupied by a single tenant until April 2017 when the lease expired.

The building is currently vacant.

Our real estate owned assets had restricted cash balances due to escrow requirements totaling $ 0.4 million and $ 0.5 million at June 30, 2020 and December 31, 2019, respectively.

At December 31, 2019, our hotel property had a restricted cash balance totaling $ 0.5 million due to escrow requirements.

ARBOR REALTY TRUST, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

September 30, 2020

Note 10 — Debt Obligations

1 unchanged sentence

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

June 30, 2020

September 30, 2020

December 31, 2019

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$ 50 million credit facility

all in floor rate

$ 25 million credit facility

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Consolidated total

(1) The debt carrying value for the Structured Business at June 30, 2020 and December 31, 2019 was net of unamortized deferred finance costs of $ 4.0 million and $ 2.1 million, respectively.

The debt carrying value for the Agency Business at June 30, 2020 and December 31, 2019 was net of unamortized deferred finance costs of $ 1.2 million and $ 0.2 million, respectively.

(2) This facility was scheduled to mature in July 2020, which was extended to August 2020, and we are currently in negotiations with this lender to renew this facility, which could reflect changes in facility size, pricing and advance rates.

(1) The debt carrying value for the Structured Business at September 30, 2020 and December 31, 2019 was net of unamortized deferred finance costs of $ 3.5 million and $ 2.1 million, respectively.

The debt carrying value for the Agency Business at September 30, 2020 and December 31, 2019 was net of unamortized deferred finance costs of $ 0.9 million and $ 0.2 million, respectively.

(2) This facility includes a LIBOR floor equal to 75 % of the LIBOR floors included in our originated loans.

(3) These repurchase facilities are subject to margin call provisions associated with changes in interest spreads.

As of June 30, 2020 and December 31, 2019, these facilities were collateralized by our CLO bonds retained and consolidated by us with a principal balance of $ 275.7 million and $ 234.9 million, respectively, B Piece bonds held-to-maturity with a carrying value of $ 63.2 million and $ 68.7 million, respectively, and SFR bonds with a carrying value of $ 20.0 million at both June 30, 2020 and December 31, 2019.

During the six months ended June 30, 2020, we significantly reduced the UPB of these facilities by $ 160.1 million through a debt restructuring and the use of proceeds from our senior notes issued in the second quarter of 2020 and have further reduced this debt to approximately $ 42.0 million in July 2020.

As of September 30, 2020 and December 31, 2019, these facilities were collateralized by our CLO bonds retained and consolidated by us with a principal balance of $ 275.7 million and $ 234.9 million, respectively, B Piece bonds held-to-maturity with a carrying value of $ 60.7 million and $ 68.7 million, respectively, and SFR bonds with a carrying value of $ 20.0 million at both September 30, 2020 and December 31, 2019.

During the nine months ended September 30, 2020, we significantly reduced the UPB of these facilities by $ 175.0 million to $ 42.2 million through a debt restructuring and the use of proceeds from our senior notes issued in the second quarter of 2020.

(4) This facility was amended in October 2020 to increase the facility to $ 400.0 million, extend the maturity to October 2021 and increase the interest rate to LIBOR plus 150 basis points.

Generally, our credit facilities and repurchase agreements have extension options that are at the discretion of the banking institutions in which we have long standing relationships with.

6 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

September 30, 2020

Structured Business

At June 30, 2020 and December 31, 2019, the weighted average interest rate for the credit facilities and repurchase agreements of our Structured Business, including certain fees and costs, such as structuring, commitment, non-use and warehousing fees, was 3.33 % and 4.39 %, respectively.

The leverage on our loan and investment portfolio financed through our credit facilities and repurchase agreements, excluding the securities repurchase facilities, working capital facility and the master security agreements used to finance leasehold and capital expenditure improvements at our corporate office, was 71 % at both June 30, 2020 and December 31, 2019.

At September 30, 2020 and December 31, 2019, the weighted average interest rate for the credit facilities and repurchase agreements of our Structured Business, including certain fees and costs, such as structuring, commitment, non-use and warehousing fees, was 3.18 % and 4.39 %, respectively.

In September 2020, we amended our $ 200.0 million repurchase facility to extend the maturity date to September 2021 and increase the interest rate 60 basis points with a LIBOR floor of 25 basis points on new loans and on existing loans after February 2021.

In September 2020, we amended our $ 100.0 million repurchase facility to extend the maturity date to September 2021, remove the stated interest rate range of 175 basis points to 195 basis points over LIBOR to a loan specific rate to be determined on a loan-by-loan basis and added a LIBOR floor of 50 basis points.

In July 2020, we amended our $ 125.0 million credit facility decreasing the committed amount under the facility to $ 100.0 million and extended the maturity date to July 2021.

Previously during 2020, we increased the committed amount under this facility from $ 75.0 million to $ 125.0 million, increased the interest rate range by 50 to 55 basis points and added a LIBOR floor of 50 basis points.

In June 2020, we entered into a $ 23.0 million credit facility used to finance a multifamily bridge loan.

The facility bears interest at a fixed rate of 3.50 % and matures in September 2021.

In March 2020, we amended a $ 300.0 million repurchase agreement, increasing the committed amount to $ 400.0 million.

In March 2020, we amended our $ 300.0 million repurchase agreement, increasing the committed amount to $ 400.0 million.

In June 2020, we further amended this repurchase agreement extending the maturity date to June 2021 and increasing the interest rate by 25 basis points with a LIBOR floor of 75 basis points.

In February 2020, we amended one of our $ 75.0 million credit facilities to temporarily increase the committed amount under the facility by $ 75.0 million to $ 150.0 million, which was scheduled to expire in May 2020.

In May 2020, we further amended this facility which now has a total permanent committed amount of $ 125.0 million, an interest rate range of 230 basis points to 300 basis points over LIBOR, with a LIBOR floor of 50 basis points.

This facility was scheduled to mature in July 2020, which was extended to August 2020, and we are currently in negotiations with this lender to renew this facility, which could reflect changes in facility size, pricing and advance rates.

Agency Business

In July 2020, we amended one of our $ 150.0 million credit facilities to include a $ 50.0 million sublimit for principal and interest advances we make as the primary servicer to Fannie Mae in connection with potential delinquent loans under the Fannie Mae forbearance program.

In the third quarter of 2020, we amended one of our $ 150.0 million credit facilities increasing the interest rate 25 basis points and adding a LIBOR floor of 25 basis points and extending the maturity date to July 2021.

In addition, we added a $ 50.0 million sublimit for principal and interest advances we make as the primary servicer to Fannie Mae in connection with potential delinquent loans under the Fannie Mae forbearance program.

The sublimit bears interest at a rate of 200 basis points over LIBOR, with a LIBOR floor of 25 basis points.

In September 2020, we amended our $ 50.0 million letter of credit facility with a financial institution to secure obligations under the Fannie Mae DUS program and the Freddie Mac SBL program to extend the maturity three years to September 2023.

In March 2020, we amended our $ 500.0 million repurchase facility reducing the committed amount to $ 300.0 million.

3 unchanged sentences

The investment grade tranches are treated as secured financings, and are non-recourse to us.

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

Collateral (3)

June 30, 2020

ARBOR REALTY TRUST, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

September 30, 2020

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

Collateral (3)

September 30, 2020

December 31, 2019

(1) Debt carrying value is net of $ 18.1 million and $ 17.3 million of deferred financing fees at June 30, 2020 and December 31, 2019, respectively.

(2) At June 30, 2020 and December 31, 2019, the aggregate weighted average note rate for our CLOs, including certain fees and costs, was 1.97 % and 3.63 %, respectively.

(3) As of June 30, 2020, there was one loan with a UPB of $ 46.5 million deemed at risk of default or a “credit risk” as defined by the CLO indenture, which we repurchased from the respective CLOs in July 2020.

(1) Debt carrying value is net of $ 16.6 million and $ 17.3 million of deferred financing fees at September 30, 2020 and December 31, 2019, respectively.

(2) At September 30, 2020 and December 31, 2019, the aggregate weighted average note rate for our CLOs, including certain fees and costs, was 1.94 % and 3.63 %, respectively.

(3) As of September 30, 2020, there was one loan with a UPB of $ 16.6 million deemed at risk of default or a “credit risk” as defined by the CLO indenture, which we repurchased from the respective CLOs in October 2020.

As of December 31, 2019, there was no collateral deemed a credit risk.

(4) Represents restricted cash held for principal repayments as well as for reinvestment in the CLOs.

Does not include restricted cash related to interest payments, delayed fundings and expenses totaling $ 71.1 million and $ 58.6 million at June 30, 2020 and December 31, 2019, respectively.

Does not include restricted cash related to interest payments, delayed fundings and expenses totaling $ 58.1 million and $ 58.6 million at September 30, 2020 and December 31, 2019, respectively.

In March 2020, we completed CLO XIII, issuing eight tranches of CLO notes through two newly-formed wholly-owned subsidiaries totaling $ 738.0 million.

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Thereafter, the outstanding debt balance will be reduced as loans are repaid.

Initially, the proceeds of the issuance of the securities also included $ 159.5 million for the purpose of acquiring additional loan obligations for a period of up to 180 days from the CLO closing date (a majority of which was subsequently utilized) which will result in the issuer owning loan obligations with a face value of $ 800.0 million, representing leverage of 84 %.

Initially, the proceeds of the issuance of the securities also included $ 159.5 million for the purpose of acquiring additional loan obligations for a period of up to 180 days from the CLO closing date (all of which was subsequently utilized) which resulted in the issuer owning loan obligations with a face value of $ 800.0 million, representing leverage of 84 %.

We retained a residual interest in the portfolio with a notional amount of $ 132.0 million, including the $ 70.0 million below investment grade notes.

The notes sold to third parties had an initial weighted average interest rate of 1.41 % plus one-month LIBOR and interest payments on the notes are payable monthly.

In March 2020, we completed the unwind of CLO VIII, redeeming $ 282.9 million of outstanding notes, which were repaid primarily from the refinancing of the remaining assets primarily within CLO XIII, as well as with cash held by CLO VIII, and expensed $ 1.5 million of deferred financing fees into loss on extinguishment of debt on the consolidated statements of operations.

Luxembourg Debt Fund

Our Luxembourg commercial real estate debt fund (“Debt Fund”) was a VIE for which we were the primary beneficiary and was consolidated in our financial statements.

In April 2020, we completed the unwind of the Debt Fund and redeemed all the outstanding notes with a portion of the proceeds from our senior unsecured notes issued in March 2020 described below and recorded a loss on extinguishment of debt of $ 1.6 million, which was primarily comprised of deferred financing fees.

ARBOR REALTY TRUST, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

September 30, 2020

Luxembourg Debt Fund

Our Luxembourg commercial real estate debt fund (“Debt Fund”) was a VIE for which we were the primary beneficiary and was consolidated in our financial statements.

Senior Unsecured Notes

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

June 30, 2020

September 30, 2020

December 31, 2019

8.00 % Notes (3)

(1) At June 30, 2020 and December 31, 2019, the carrying value is net of deferred financing fees of $ 9.0 million and $ 5.2 million, respectively.

(2) At June 30, 2020 and December 31, 2019, the aggregate weighted average note rate, including certain fees and costs, was 5.65 % and 5.82 % , respectively.

4.50 % Notes (3)

4.75 % Notes (4)

5.75 % Notes (4)

5.625 % Notes (4)

(1) At September 30, 2020 and December 31, 2019, the carrying value is net of deferred financing fees of $ 8.5 million and $ 5.2 million, respectively.

(2) At September 30, 2020 and December 31, 2019, the aggregate weighted average note rate, including certain fees and costs, was 5.65 % and 5.82 % , respectively.

(3) These notes can be redeemed by us prior to three months before the maturity date, at a redemption price equal to 100 % of the aggregate principal amount, plus a "make-whole"

premium and accrued and unpaid interest.

We have the right to redeem the notes three months prior to or after the maturity date, at a redemption price equal to 100 % of the aggregate principal amount, plus accrued and unpaid interest.

(4) These notes can be redeemed by us at any time prior to the maturity date, at a redemption price equal to 100 % of the aggregate principal amount, plus a “make-whole” premium and accrued and unpaid interest.

We have the right to redeem the notes on or after the maturity date, at a redemption price equal to 100 % of the aggregate principal amount, plus accrued and unpaid interest.

In April 2020, we issued $ 40.5 million aggregate principal amount of 8.00 % senior unsecured notes due in April 2023 (the "Initial Notes") in a private placement, and, in June 2020, we issued an additional $ 30.3 million (the "Reopened Notes"

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We used the net proceeds from the issuances to repay secured indebtedness, make investments relating to our business and for general corporate purposes.

Our senior unsecured notes can be redeemed by us at any time prior to the redemption date, at a redemption price equal to 100 % of the aggregate principal amount, plus a “make-whole” premium and accrued and unpaid interest.

We have the right to redeem the notes on or after the redemption date, at a redemption price equal to 100 % of the aggregate principal amount, plus accrued and unpaid interest.

Convertible Senior Unsecured Notes

5 unchanged sentences

The remaining net proceeds were used for general corporate purposes.

During 2019, we recorded a loss on extinguishment of debt of $ 7.3 million in connection with this exchange, which included an inducement charge of $ 1.1 million.

As of June 30, 2020, the 4.75 % Convertible Notes had conversion rates of 56.1695 shares, common stock per $ 1,000 of principal, which represented a conversion price of $ 17.80 per share of common stock.

During 2019, we recorded a loss on

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

September 30, 2020

extinguishment of debt of $ 7.3 million in connection with this exchange, which included an inducement charge of $ 1.1 million.

As of September 30, 2020, the 4.75 % Convertible Notes had conversion rates of 56.2185 shares, common stock per $ 1,000 of principal, which represented a conversion price of $ 17.79 per share of common stock.

In 2018, we completed a similar exchange where we used the net proceeds from two separate private placements of our 5.25 % convertible senior notes (the "

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6.50 % Convertible Notes").

At June 30, 2020, there were $ 0.5 million, $ 13.8 million and $ 0.2 million aggregate principal amount remaining of our 5.25 % Convertible Notes issued on July 3, 2018, 5.25 % Convertible Notes issued on July 20, 2018 and 5.375 % Convertible Notes,

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

respectively.

At September 30, 2020, there were $ 0.5 million, $ 13.8 million and $ 0.2 million aggregate principal amount remaining of our 5.25 % Convertible Notes issued on July 3, 2018, 5.25 % Convertible Notes issued on July 20, 2018 and 5.375 % Convertible Notes, respectively.

The initial conversion rates of the 5.25 % Convertible Notes issued on July 3, 2018, 5.25 % Convertible Notes issued on July 20, 2018 and 5.375 % Convertible Notes were 86.9943 shares, 77.8331 shares and 107.7122 shares, respectively, of common stock per $ 1,000 of principal, which represented a conversion price of $ 11.50 per share, $ 12.85 per share and $ 9.28 per share of common stock, respectively.

At June 30, 2020, the 5.25 % Convertible Notes issued on July 3, 2018, 5.25 % Convertible Notes issued on July 20, 2018 and 5.375 % Convertible Notes had conversion rates of 90.093 shares, 80.6055 shares and 116.9744 shares, respectively, of common stock per $ 1,000 of principal, which represented a conversion price of $ 11.10 per share, $ 12.41 per share and $ 8.55 per share of common stock, respectively.

At September 30, 2020, the 5.25 % Convertible Notes issued on July 3, 2018, 5.25 % Convertible Notes issued on July 20, 2018 and 5.375 % Convertible Notes had conversion rates of 90.5672 shares, 81.0297 shares and 118.2123 shares, respectively, of common stock per $ 1,000 of principal, which represented a conversion price of $ 11.04 per share, $ 12.34 per share and $ 8.46 per share of common stock, respectively.

The 5.25 % Convertible Notes and 5.375 % Convertible Notes pay interest semiannually in arrears and have scheduled maturity dates in July 2021 and November 2020, respectively, unless earlier converted or repurchased by the holders pursuant to their terms.

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The initial value of the liability component reflects the present value of the discounted cash flows using the nonconvertible debt borrowing rate at the time of the issuance.

The debt discount represents the difference between the proceeds received from the issuance and the initial carrying value of the liability component, which is accreted back to the notes principal amount through interest expense over the term of the notes, which was 2.27 years and 2.67 years at June 30, 2020 and December 31, 2019, respectively, on a weighted average basis.

The UPB, unamortized discount and net carrying amount of the liability and equity components of our convertible notes were as follows (in thousands):

The debt discount represents the difference between the proceeds received from the issuance and the initial carrying value of the liability component, which is accreted back to the notes principal amount through interest expense over the term of the notes, which was 2.02 years and 2.67 years at September 30, 2020 and December 31, 2019, respectively, on a weighted average basis.

The UPB, unamortized discount and net carrying amount of the liability and equity components of our convertible notes are as follows (in thousands):

Unamortized Debt

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Financing Fees

June 30, 2020

September 30, 2020

December 31, 2019

During the three months ended June 30, 2020, we incurred interest expense on the notes totaling $ 4.8 million, of which $ 3.3 million, $ 0.8 million and $ 0.7 million related to the cash coupon, amortization of the debt discount and of the deferred financing fees, respectively.

During the six months ended June 30, 2020, we incurred interest expense on the notes totaling $ 10.0 million, of which $ 6.7 million, $ 1.7 million and $ 1.6 million related to the cash coupon, amortization of the debt discount and of the deferred financing fees, respectively.

During the three months ended June 30, 2019, we incurred total interest expense on the notes of $ 4.9 million, of which $ 3.4 million, $ 0.8 million and $ 0.7 million related to the cash coupon, amortization of the debt discount and of the deferred financing fees, respectively.

During the six months ended June 30, 2019, we incurred total interest expense on the notes of $ 10.2 million, of which $ 6.9 million, $ 1.7 million and $ 1.5 million related to the cash coupon, amortization of the debt discount and of the deferred financing fees, respectively.

Including the amortization of the deferred financing fees and debt discount, our weighted average total cost of the notes was 6.75 % and 6.80 % at June 30, 2020 and December 31, 2019, respectively.

During the three months ended September 30, 2020, we incurred interest expense on the notes totaling $ 4.8 million, of which $ 3.3 million, $ 0.8 million and $ 0.7 million related to the cash coupon, amortization of the debt discount and of the deferred financing fees, respectively.

During the nine months ended September 30, 2020, we incurred interest expense on the notes totaling $ 14.8 million, of which $ 10.0 million, $ 2.5 million and $ 2.3 million related to the cash coupon, amortization of the debt discount and of the deferred

ARBOR REALTY TRUST, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

September 30, 2020

financing fees, respectively.

During the three months ended September 30, 2019, we incurred total interest expense on the notes of $ 5.0 million, of which $ 3.5 million, $ 0.8 million and $ 0.7 million related to the cash coupon, amortization of the debt discount and of the deferred financing fees, respectively.

During the nine months ended September 30, 2019, we incurred total interest expense on the notes of $ 15.1 million, of which $ 10.4 million, $ 2.5 million and $ 2.2 million related to the cash coupon, amortization of the debt discount and of the deferred financing fees, respectively.

Including the amortization of the deferred financing fees and debt discount, our weighted average total cost of the notes was 6.75 % and 6.80 % at September 30, 2020 and December 31, 2019, respectively.

Junior Subordinated Notes

The carrying values of borrowings under our junior subordinated notes were $ 141.3 million and $ 140.9 million at June 30, 2020 and December 31, 2019, respectively, which is net of a deferred amount of $ 11.1 million and $ 11.4 million, respectively, (which is amortized into interest expense over the life of the notes) and deferred financing fees of $ 1.9 million and $ 2.0 million, respectively.

The carrying values of borrowings under our junior subordinated notes were $ 141.5 million and $ 140.9 million at September 30, 2020 and December 31, 2019, respectively, which is net of a deferred amount of $ 11.0 million and $ 11.4 million, respectively, (which is amortized into interest expense over the life of the notes) and deferred financing fees of $ 1.9 million and $ 2.0 million, respectively.

These notes have maturities ranging from March 2034 through April 2037 and pay interest quarterly at a floating rate based on LIBOR.

The weighted average note rate was 3.12 % and 4.75 % at June 30, 2020 and December 31, 2019, respectively.

Including certain fees and costs, the weighted average note rate was 3.21 % and 4.83 % at June 30, 2020 and December 31, 2019, respectively.

The weighted average note rate was 3.05 % and 4.75 % at September 30, 2020 and December 31, 2019, respectively.

Including certain fees and costs, the weighted average note rate was 3.14 % and 4.83 % at September 30, 2020 and December 31, 2019, respectively.

Debt Covenants

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The credit facilities, repurchase agreements and unsecured debt (senior and convertible notes) contain various financial covenants, including, but not limited to, minimum liquidity requirements, minimum net worth requirements, as well as certain other debt service coverage ratios, debt to equity ratios and minimum servicing portfolio tests.

We were in compliance with all financial covenants and restrictions at June 30, 2020.

We were in compliance with all financial covenants and restrictions at September 30, 2020.

Our CLO vehicles contain interest coverage and asset overcollateralization covenants that must be met as of the waterfall distribution date in order for us to receive such payments.

If we fail these covenants in any of our CLOs, all cash flows from the applicable CLO would be diverted to repay principal and interest on the outstanding CLO bonds and we would not receive any residual payments until that CLO regained compliance with such tests.

Our CLOs were in compliance with all such covenants as of June 30, 2020, as well as on the most recent determination dates in July 2020.

Our CLOs were in compliance with all such covenants as of September 30, 2020, as well as on the most recent determination dates in October 2020.

In the event of a breach of the CLO covenants that could not be cured in the near-term, we would be required to fund our non-CLO expenses, including employee costs, distributions required to maintain our REIT status, debt costs, and other expenses with (i) cash on hand, (ii) income from any CLO not in breach of a covenant test, (iii) income from real property and loan assets, (iv) sale of assets, or (v) accessing the equity or debt capital markets, if available.

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However, we may not have sufficient liquidity available to do so at such time.

Our CLO compliance tests as of the most recent determination dates in July 2020 are as follows:

Our CLO compliance tests as of the most recent determination dates in October 2020 are as follows:

Cash Flow Triggers

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(1) The overcollateralization ratio divides the total principal balance of all collateral in the CLO by the total principal balance of the bonds associated with the applicable ratio.

To the extent an asset is considered a defaulted security, the asset’s principal balance for purposes of the overcollateralization test is the lesser of the asset’s market value or the principal balance of the defaulted asset multiplied by the asset’s recovery rate which is determined by the rating agencies.

Rating downgrades of CLO collateral will generally not have a direct impact on the principal balance of a CLO asset for purposes of calculating the CLO overcollateralization test unless the rating downgrade is below a significantly low threshold (e.g.

CCC-) as defined in each CLO vehicle.

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

To the extent an asset is considered a defaulted security, the asset’s principal balance

ARBOR REALTY TRUST, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

September 30, 2020

for purposes of the overcollateralization test is the lesser of the asset’s market value or the principal balance of the defaulted asset multiplied by the asset’s recovery rate which is determined by the rating agencies.

CCC-) as defined in each CLO vehicle.

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

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

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Beginning balance

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A liability is recognized for the fair value of the guarantee obligation undertaken for the non-contingent aspect of the guarantee and is removed only upon either the expiration or settlement of the guarantee.

At June 30, 2020 and 2019, guarantee obligations of $ 32.8 million and $ 31.6 million, respectively, were included in the allowance for loss-sharing obligations.

At September 30, 2020 and 2019, guarantee obligations of $ 33.2 million and $ 32.1 million, respectively, were included in the allowance for loss-sharing obligations.

In addition to and separately from the fair value of the guarantee, we estimate our allowance for loss-sharing under CECL over the contractual period in which we are exposed to credit risk.

The current expected loss related to loss-sharing was based on a collective pooling basis with similar risk characteristics, a reasonable and supportable forecast and a reversion period based on our average historical losses through the remaining contractual term of the portfolio.

The increase in the provision for credit losses during the six months ended June 30, 2020 of $ 24.6 million, compared to the January 1, 2020 cumulative-effect adjustment upon adoption of CECL of $ 14.4 million, is primarily attributed to the significant adverse change in the economic outlook due to the COVID-19 pandemic.

When we settle a loss under the DUS loss-sharing model, the net loss is charged-off against the previously recorded loss-sharing obligation.

The settled loss is often net of any previously advanced principal and interest payments in accordance with the DUS program, which are reflected as reductions to the proceeds needed to settle losses.

At June 30, 2020 and December 31, 2019, we had outstanding advances of $ 0.3 million and $ 0.5 million, respectively, which were netted against the allowance for loss-sharing obligations.

At June 30, 2020, our allowance for loss-sharing obligations, associated with expected losses under CECL was $ 40.4 million and represented 0.26 % of the Fannie Mae servicing portfolio.

The increase in the provision for credit losses during the nine months ended September 30, 2020 of $ 22.5 million, compared to the January 1, 2020 cumulative-effect adjustment upon adoption of CECL of $ 14.4 million, is primarily attributed to the significant adverse change in the economic outlook due to the COVID-19 pandemic.

ARBOR REALTY TRUST, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

At June 30, 2020 and December 31, 2019, the maximum quantifiable liability associated with our guarantees under the Fannie Mae DUS agreement was $ 2.91 billion and $ 2.73 billion, respectively.

September 30, 2020

When we settle a loss under the DUS loss-sharing model, the net loss is charged-off against the previously recorded loss-sharing obligation.

The settled loss is often net of any previously advanced principal and interest payments in accordance with the DUS program, which are reflected as reductions to the proceeds needed to settle losses.

At September 30, 2020 and December 31, 2019, we had outstanding advances of $ 0.1 million and $ 0.5 million, respectively, which were netted against the allowance for loss-sharing obligations.

At September 30, 2020, our allowance for loss-sharing obligations, associated with expected losses under CECL was $ 38.0 million and represented 0.23 % of the Fannie Mae servicing portfolio.

At September 30, 2020 and December 31, 2019, the maximum quantifiable liability associated with our guarantees under the Fannie Mae DUS agreement was $ 3.06 billion and $ 2.73 billion, respectively.

The maximum quantifiable liability is not representative of the actual loss we would incur.

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The estimated fair value of rate lock commitments also includes the fair value of the expected net cash flows associated with the servicing of the loan which is recorded as income from MSRs in the consolidated statements of operations.

During the three and six months ended June 30, 2020, we recorded a net loss of $ 4.1 million and a net gain of $ 4.2 million, respectively, from changes in the fair value of these derivatives in (loss) gain on derivative instruments, net and $ 32.4 million and $ 54.4 million, respectively, of income from MSRs.

During the three and six months ended June 30, 2019, we recorded a net gain of $ 1.1 million and a net loss of $ 1.4 million, respectively, from changes in the fair value of these derivatives in (loss) gain on derivative instruments, net and $ 18.7 million and $ 32.9 million, respectively, of income from MSRs.

During the three and nine months ended September 30, 2020, we recorded a net loss of $ 0.9 million and a net gain of $ 3.3 million, respectively, from changes in the fair value of these derivatives in loss on derivative instruments, net and $ 42.4 million and $ 96.7 million, respectively, of income from MSRs.

During the three and nine months ended September 30, 2019, we recorded a net loss of $ 4.7 million and $ 6.1 million, respectively, from changes in the fair value of these derivatives in loss on derivative instruments, net and $ 29.9 million and $ 62.9 million, respectively, of income from MSRs.

See Note 13 for details.

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Our Swap Futures are cleared by a central clearing house and variation margin payments, made in cash, are treated as a legal settlement of the derivative itself as opposed to a pledge of collateral.

During the three months ended June 30, 2020, we recorded realized losses of $ 0.2 million and unrealized losses of $ 0.1 million to our Structured Business and realized losses of $ 11.2 million and unrealized gains of $ 8.2 million to our Agency Business related to our Swap Futures.

During the six months ended June 30, 2020, we recorded realized losses of $ 2.8 million and unrealized losses of $ 0.5 million to our Structured Business and realized losses of $ 57.3 million and unrealized losses of $ 1.6 million to our Agency Business related to our Swap Futures.

During both the three and six months ended June 30, 2019, we recorded realized losses of $ 0.3 million and unrealized losses of $ 0.1 million to our Structured Business from our Swap Futures.

The realized and unrealized gains and losses are recorded in loss on derivative instruments, net on our consolidated statements of operations.

ARBOR REALTY TRUST, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

September 30, 2020

During the three months ended September 30, 2020, we recorded realized losses of $ 0.2 million and unrealized gains of $ 0.4 million to our Structured Business and realized losses of $ 0.1 million and unrealized gains of $ 0.1 million to our Agency Business related to our Swap Futures.

During the nine months ended September 30, 2020, we recorded realized losses of $ 3.0 million and unrealized losses of $ 0.1 million to our Structured Business and realized losses of $ 57.3 million and unrealized losses of $ 1.5 million to our Agency Business related to our Swap Futures.

During the three and nine months ended September 30, 2019, we recorded realized losses of $ 0.4 million and $ 0.6 million, respectively, and unrealized gains of $ 0.1 million and unrealized losses of less than $ 0.1 million, respectively, to our Structured Business related to our Swap Futures.

During both the three and nine months ended September 30, 2019, we recorded realized gains of $ 0.2 million and unrealized losses of $ 0.2 million to our Agency Business related to our Swap Futures.

The realized and unrealized gains and losses are recorded in loss on derivative instruments, net on our consolidated statements of income.

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

June 30, 2020

September 30, 2020

Balance Sheet

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

September 30, 2020

Note 13 — Fair Value

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The following table summarizes the principal amounts, carrying values and the estimated fair values of our financial instruments (in thousands):

June 30, 2020

September 30, 2020

December 31, 2019

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

September 30, 2020

Loans held-for-sale, net.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

September 30, 2020

We measure certain financial assets and financial liabilities at fair value on a recurring basis.

The fair values of these financial assets and liabilities were determined using the following input levels as of June 30, 2020 (in thousands):

The fair values of these financial assets and liabilities are determined using the following input levels as of September 30, 2020 (in thousands):

Fair Value Measurements Using Fair

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We measure certain financial and non-financial assets at fair value on a nonrecurring basis.

The fair values of these financial and non-financial assets, if applicable, were determined using the following input levels as of June 30, 2020 (in thousands):

The fair values of these financial and non-financial assets, if applicable, are determined using the following input levels as of September 30, 2020 (in thousands):

Fair Value Measurements Using Fair

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Impaired loans, net (1)

(1) We had an allowance for loan losses of $ 106.3 million relating to ten impaired loans with an aggregate carrying value, before loan loss reserves, of $ 220.7 million at June 30, 2020.

(1) We had an allowance for loan losses of $ 106.3 million relating to ten impaired loans with an aggregate carrying value, before loan loss reserves, of $ 253.9 million at September 30, 2020.

Loan impairment assessments.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

Quantitative information about Level 3 fair value measurements at June 30, 2020 were as follows ($ in thousands):

September 30, 2020

Quantitative information about Level 3 fair value measurements at September 30, 2020 is as follows ($ in thousands):

Significant Unobservable Inputs

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Discount rate

direct capitalization

Capitalization rate

Revenue growth rate

1 unchanged sentence

Discount rate

direct capitalization

Capitalization rate

Revenue growth rate

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The derivative financial instruments using Level 3 inputs are outstanding for short periods of time (generally less than 60 days).

A roll-forward of Level 3 derivative instruments were as follows (in thousands):

A roll-forward of Level 3 derivative instruments is as follows (in thousands):

Fair Value Measurements Using

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Significant Unobservable Inputs

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Derivative assets and liabilities, net

Balance at beginning of period

Beginning balance

Realized gains recorded in earnings

Unrealized gains recorded in earnings

Balance at end of period

The components of fair value and other relevant information associated with our rate lock commitments, forward sales commitments and the estimated fair value of cash flows from servicing on loans held-for-sale were as follows (in thousands):

Ending balance

Fair Value of

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Total Fair Value

June 30, 2020

September 30, 2020

Principal Amount

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

September 30, 2020

We measure certain assets and liabilities for which fair value is only disclosed.

The fair value of these assets and liabilities are determined using the following input levels as of June 30, 2020 (in thousands):

The fair value of these assets and liabilities are determined using the following input levels as of September 30, 2020 (in thousands):

Fair Value Measurements Using Fair Value Hierarchy

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Our adjusted net worth and liquidity required by the agencies for all periods presented exceeded these requirements.

As of June 30, 2020, we were required to maintain at least $ 15.4 million of liquid assets in one of our subsidiaries to meet our operational liquidity requirements for Fannie Mae and we had operational liquidity in excess of this requirement.

As of September 30, 2020, we were required to maintain at least $ 16.1 million of liquid assets in one of our subsidiaries to meet our operational liquidity requirements for Fannie Mae and we had operational liquidity in excess of this requirement.

We are generally required to share the risk of any losses associated with loans sold under the Fannie Mae DUS program and are required to secure this obligation by assigning restricted cash balances and/or a letter of credit to Fannie Mae.

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A significant portion of our Fannie Mae DUS serviced loans for which we have risk sharing are Tier 2 loans.

As of June 30, 2020, we met the restricted liquidity requirement with a $ 45.0 million letter of credit and $ 4.4 million of cash collateral.

As of June 30, 2020, reserve requirements for the Fannie Mae DUS loan portfolio will require us to fund $ 37.7 million in additional restricted liquidity over the next 48 months , assuming no further principal paydowns, prepayments, or defaults within our at-risk portfolio.

As of September 30, 2020, we met the restricted liquidity requirement with a $ 45.0 million letter of credit and $ 6.9 million of cash collateral.

As of September 30, 2020, reserve requirements for the Fannie Mae DUS loan portfolio will require us to fund $ 39.7 million in additional restricted liquidity over the next 48 months , assuming no further principal paydowns, prepayments, or defaults within our at-risk portfolio.

Fannie Mae periodically reassesses these collateral requirements and may make changes to these requirements in the future.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

September 30, 2020

We are subject to various capital requirements in connection with seller/servicer agreements that we have entered into with secondary market investors.

Failure to maintain minimum capital requirements could result in our inability to originate and service loans for the respective investor and, therefore, could have a direct material effect on our consolidated financial statements.

As of June 30, 2020, we met all of Fannie Mae’s quarterly capital requirements and our Fannie Mae adjusted net worth was in excess of the required net worth.

As of September 30, 2020, we met all of Fannie Mae’s quarterly capital requirements and our Fannie Mae adjusted net worth was in excess of the required net worth.

We are not subject to capital requirements on a quarterly basis for Ginnie Mae or FHA, as such requirements for these investors are only required on an annual basis.

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Debt Obligations and Operating Leases.

As of June 30, 2020, the maturities of our debt obligations and the minimum annual operating lease payments under leases with a term in excess of one year are as follows (in thousands):

As of September 30, 2020, the maturities of our debt obligations and the minimum annual operating lease payments under leases with a term in excess of one year are as follows (in thousands):

Minimum Annual

Operating Lease

2020 (six months ending December 31, 2020)

During the both the three months ended June 30, 2020 and 2019, we recorded lease expense of $ 1.5 million, and during the six months ended June 30, 2020 and 2019, we recorded lease expense of $ 3.1 million and $ 2.9 million, respectively.

2020 (three months ending December 31, 2020)

During both the three months ended September 30, 2020 and 2019, we recorded lease expense of $ 1.5 million, and during the nine months ended September 30, 2020 and 2019, we recorded lease expense of $ 4.6 million and $ 4.5 million, respectively.

Unfunded Commitments.

In accordance with certain structured loans and investments, we have outstanding unfunded commitments of $ 150.9 million as of June 30, 2020 that we are obligated to fund as borrowers meet certain requirements.

In accordance with certain structured loans and investments, we have outstanding unfunded commitments of $ 194.9 million as of September 30, 2020 that we are obligated to fund as borrowers meet certain requirements.

Specific requirements include, but are not limited to, property renovations, building construction and conversions based on criteria met by the borrower in accordance with the loan agreements.

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The New York State Court action has been removed to the Bankruptcy Court.

Our affiliates filed a motion to dismiss the three lawsuits.

ARBOR REALTY TRUST, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

September 30, 2020

The lawsuits all allege, as a factual basis and background, certain facts surrounding the June 2007 leveraged buyout of ESI from affiliates of Blackstone Capital.

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In June 2013, the Trust filed a motion to amend the lawsuits, to, among other things, (i) consolidate the lawsuits into one lawsuit, (ii) remove 47 defendants, none of whom are related to us, from the lawsuits so that there are 26 remaining defendants, including 16 corporate and partnership entities and 10 individuals, and (iii) reduce the counts within the lawsuits from over 100 down to 17 .

The remaining counts in the amended complaint against our affiliates are principally state law claims for breach of fiduciary duties, waste, unlawful dividends and unjust enrichment, and claims under the Bankruptcy Code for avoidance and recovery actions, among others.

The remaining counts in the sole remaining amended complaint against our affiliates are principally state law claims for breach of fiduciary duties, waste, unlawful dividends and unjust enrichment, and claims under the Bankruptcy Code for avoidance and recovery actions, among others.

The bankruptcy court granted the motion and the amended complaint has been filed.

The amended complaint seeks approximately $ 139.0 million in the aggregate, plus interest from the date of the alleged unlawful transfers, from director designees, portions of which are also sought from our affiliates as well as from unaffiliated defendants.

We have moved to dismiss the referenced actions and intend to vigorously defend against the claims asserted therein.

During a status conference held in March 2014, the Court heard oral argument on the motion to dismiss and adjourned the case pending a ruling.

Subsequent to that hearing, a new judge was assigned to the case and, in November 2016, the new judge entered an order directing the parties to file supplemental briefs addressing new cases decided since the last round of briefing.

Oral arguments regarding the motion to dismiss were heard at a hearing held in January 2017.

The Court reserved decision at that hearing.

The next hearing on the case has been adjourned to August 11, 2020.

We moved to dismiss the referenced remaining action in December 2013.

After supplemental briefing and multiple adjourned conferences, in August 2020, the Court issued a decision granting our motion to dismiss in part, dismissing 9 of the 17 counts.

The Court permitted claims against director designees to proceed on theories of authorization of illegal dividends and breach of fiduciary duty.

The Court permitted claims against the defendant entities, including our affiliated entities, to proceed on theories of constructive fraudulent transfer and fraudulent transfer under state and federal law.

Moreover, the Court affirmatively dismissed four counts against the defendant entities to the extent they are based on distributions from certain so-called LIBOR Floor Certificates.

According to the amended complaint, the total LIBOR Floor Certificate transfers were $ 74.0 million in value.

As a result, with what remains of the amended complaint, total possible liability against the affiliated entities has correspondingly fallen, whereas total possible liability against the director designees remains at approximately $ 139.0 million.

The parties have stipulated to a schedule for discovery and we intend to vigorously defend against the remaining claims.

We have not made a loss accrual for this litigation because we believe that it is not probable that a loss has been incurred and an amount cannot be reasonably estimated.

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While retained, these balances earn interest in accordance with the specific loan terms they are associated with.

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

September 30, 2020

Note 15 — Variable Interest Entities

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Prior to the unwind, the Debt Fund entity was consolidated and considered a VIE.

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

Our CLO consolidated entities invest in real estate and real estate-related securities and are financed by the issuance of debt securities.

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The assets and liabilities related to these consolidated CLOs and Debt Fund are as follows (in thousands):

June 30, 2020

September 30, 2020

December 31, 2019

2 unchanged sentences

Collateralized loan obligations

Due to related party

Other liabilities

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Unconsolidated VIEs .

We determined that we are not the primary beneficiary of 31 VIEs in which we have a variable interest as of June 30, 2020 because we do not have the ability to direct the activities of the VIEs that most significantly impact each entity’s economic performance.

A summary of our variable interests in identified VIEs, of which we are not the primary beneficiary, as of June 30, 2020 is as follows (in thousands):

We determined that we are not the primary beneficiary of 32 VIEs in which we have a variable interest as of September 30, 2020 because we do not have the ability to direct the activities of the VIEs that most significantly impact each entity’s economic performance.

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

September 30, 2020

A summary of our variable interests in identified VIEs, of which we are not the primary beneficiary, as of September 30, 2020 is as follows (in thousands):

Carrying Amount (1)

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(1) Represents the carrying amount of loans and investments before reserves.

At June 30, 2020, $ 129.4 million of loans to VIEs had corresponding specific loan loss reserves of $ 79.4 million.

The maximum loss exposure as of June 30, 2020 would not exceed the carrying amount of our investment.

These unconsolidated VIEs have exposure to real estate debt of approximately $ 4.86 billion at June 30, 2020.

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June 30, 2020

At September 30, 2020, $ 218.8 million of loans to VIEs had corresponding specific loan loss reserves of $ 86.9 million.

The maximum loss exposure as of September 30, 2020 would not exceed the carrying amount of our investment.

These unconsolidated VIEs have exposure to real estate debt of approximately $ 4.88 billion at September 30, 2020.

Note 16 — Equity

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Common Stock.

We have an “At-The-Market” equity offering sales agreement with JMP Securities LLC (“JMP”) which entitles us to issue and sell up to 7,500,000 shares of our common stock through JMP by means of ordinary brokers' transactions or otherwise at market prices prevailing at the time of sale, or at negotiated prices.

During the six months ended June 30, 2020, we sold 3,308,008 shares for net proceeds of $ 38.0 million.

As of June 30, 2020, we had approximately 1,000,000 shares available under this agreement.

In August 2020, we filed a shelf registration statement as a "well-known seasoned issuer"

as defined in Rule 405 under the Securities Act, which registered an unlimited and indeterminate amount of debt or equity securities for future issuance and sale.

The shelf registration statement was declared effective upon filing.

In August 2020, we amended the equity distribution agreement with JMP Securities LLC (“JMP”).

In accordance with the terms of the amendment, we may offer and sell up to 10,000,000 shares of our common stock in “At-The-Market” equity offerings through JMP by means of ordinary brokers' transactions or otherwise at market prices prevailing at the time of sale, or at negotiated prices.

During the nine months ended September 30, 2020, we sold 6,887,274 shares for net proceeds of $ 78.5 million.

We used a portion of the net proceeds to redeem 2,736,894 operating partnership units ("OP Units") for cash totaling $ 29.7 million.

As of September 30, 2020, we had approximately 7,300,000 shares available under the amended agreement.

In March 2020, the Board of Directors authorized a share repurchase program providing for the repurchase of up to $ 100.0 million of our outstanding common stock.

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The program may be discontinued or modified at any time.

As of June 30, 2020, we repurchased 993,106 shares of our common stock under this program at a total cost of $ 3.9 million and an average cost of $ 3.98 per share.

During the six months ended June 30, 2020, we issued 363,013 and 41,601 shares in connection with the settlements of our 5.25 % and 5.375 % Convertible Notes, respectively.

As of September 30, 2020, we repurchased 993,106 shares of our common stock under this program at a total cost of $ 3.9 million and an average cost of $ 3.98 per share.

During the nine months ended September 30, 2020, we issued 321,412 and 41,601 shares in connection with the settlements of our 5.25 % and 5.375 % Convertible Notes, respectively.

In February 2020, we also used a portion of the net proceeds from our public offering in December 2019 to purchase an aggregate of 747,500 shares of our common stock and OP Units from our chief executive officer and ACM at the same price the underwriters paid to purchase the shares.

As of June 30, 2020, we had $ 99.4 million available under our $ 500.0 million shelf registration statement that was declared effective by the SEC in June 2018.

Noncontrolling Interest.

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The OP Units are also redeemable for cash, or at our option, for shares of our common stock on a one -for-one basis.

At June 30, 2020, there were 20,369,265 OP Units outstanding, which represented 15.4 % of the voting power of our outstanding stock.

As noted above, during the third quarter of 2020, we redeemed 2,736,894 OP Units for

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September 30, 2020

cash and there were 17,632,371 OP Units outstanding at September 30, 2020, which represented 13.2 % of the voting power of our outstanding stock.

Distributions.

Dividends declared (on a per share basis) during the six months ended June 30, 2020 were as follows:

Dividends declared (on a per share basis) during the nine months ended September 30, 2020 are as follows:

Preferred Stock

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January 31, 2020

(1) The dividend declared on May 1, 2020 was for March 1, 2020 through May 31, 2020 and the dividend declared on January 31, 2020 was for December 1, 2019 through February 29, 2020.

Common Stock – On July 29, 2020, the Board of Directors declared a cash dividend of $ 0.31 per share of common stock.

The dividend is payable on August 31, 2020 to common stockholders of record as of the close of business on August 17, 2020.

Preferred Stock – On July 29, 2020, the Board of Directors declared a cash dividend of $ 0.515625 per share of 8.25 % Series A preferred stock;

July 29, 2020

(1) The dividend declared on July 29, 2020 was for June 1, 2020 through August 31, 2020, the dividend declared on May 1, 2020 was for March 1, 2020 through May 31, 2020 and the dividend declared on January 31, 2020 was for December 1, 2019 through February 29, 2020.

Common Stock – On October 28, 2020, the Board of Directors declared a cash dividend of $ 0.32 per share of common stock.

The dividend is payable on November 30, 2020 to common stockholders of record as of the close of business on November 16, 2020.

Preferred Stock – On October 28, 2020, the Board of Directors declared a cash dividend of $ 0.515625 per share of 8.25 % Series A preferred stock;

a cash dividend of $ 0.484375 per share of 7.75 % Series B preferred stock;

and a cash dividend of $ 0.53125 per share of 8.50 % Series C preferred stock.

These amounts reflect dividends from June 1, 2020 through August 31, 2020 and are payable on August 31, 2020 to preferred stockholders of record on August 15, 2020.

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June 30, 2020

These amounts reflect dividends from September 1, 2020 through November 30, 2020 and are payable on November 30, 2020 to preferred stockholders of record on November 15, 2020.

Deferred Compensation.

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Our chief executive officer was also granted up to 275,569 performance-based restricted stock units with a grant date fair value of $ 0.1 million that vest at the end of a four-year performance period based on our achievement of certain total stockholder return objectives.

During the first quarter of 2020, 421,348 shares of previously granted performance-based restricted stock units fully vested, which were net settled for 215,014 common shares.

During the first quarter of 2020, 421,348 shares of performance-based restricted stock units previously granted fully vested and were net settled for 215,014 common shares.

During the third quarter of 2020, our chief executive officer was granted 313,152 shares of performance-based restricted stock with a grant date fair value of $ 3.0 million as a result of achieving goals related to the integration of the Acquisition, which vests in full three years after the grant date.

In addition, 357,569 shares of performance-based restricted stock granted in 2017 vested in the third quarter of 2020, which were net settled for 182,467 common shares.

During the first quarter of 2020, we withheld 149,595 shares from the net settlement of restricted common stock by employees for payment of withholding taxes.

3 unchanged sentences

Our common stock equivalents include the weighted average dilutive effect of performance-based restricted stock units granted to our chief executive officer, OP Units and convertible senior unsecured notes.

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September 30, 2020

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

Three Months Ended June 30,

Three Months Ended September 30,

Net income attributable to common stockholders (1)

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Net income per common share (1)

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June 30, 2020

Six Months Ended June 30,

Net (loss) income attributable to common stockholders (1)

Net (loss) income attributable to noncontrolling interest (2)

Net (loss) income attributable to common stockholders and noncontrolling interest

Nine Months Ended September 30,

Net income attributable to common stockholders (1)

Net income attributable to noncontrolling interest (2)

Net income attributable to common stockholders and noncontrolling interest

Weighted average shares outstanding

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Weighted average shares outstanding

Net (loss) income per common share (1)

Net income per common share (1)

(1) Net of preferred stock dividends.

1 unchanged sentence

Kaufman is granted restricted stock units annually, which vest at the end of a four-year performance period based upon our achievement of total stockholder return objectives.

(4) The convertible senior unsecured notes impact diluted earnings per share if the average price of our common stock exceeds the conversion price, as calculated in accordance with the terms of the indenture, of which was antidilutive at June 30, 2020.

Note 17 — Income Taxes

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We believe that all of the criteria to maintain our REIT qualification have been met for the applicable periods, but there can be no assurance that these criteria will continue to be met in subsequent periods.

The Agency Business is operated through our TRS Consolidated Group and is subject to U.S.

federal, state and local income taxes.

In general, our TRS entities may hold assets that the REIT cannot hold directly and may engage in real estate or non-real estate-related business.

In the three and six months ended June 30, 2020, we recorded a tax provision of $ 12.1 million and a tax benefit of $ 2.3 million, respectively.

In the three and six months ended June 30, 2019, we recorded a tax provision of $ 4.4 million and $ 4.3 million, respectively.

The tax provision recorded in the three months ended June 30, 2020 consisted of a deferred tax provision of $ 10.9 million and a current tax provision of $ 1.2 million.

The tax benefit recorded in the six months ended June 30, 2020 consisted of a deferred tax benefit of $ 9.0 million and a current tax provision of $ 6.7 million.

The tax provision recorded in the three months ended June 30, 2019 consisted of a current tax provision of $ 3.5 million and a deferred tax provision of $ 0.9 million.

The tax provision recorded in the six months ended June 30, 2019 consisted of a current tax provision of $ 7.6 million and a deferred tax benefit of $ 3.3 million.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

September 30, 2020

The Agency Business is operated through our TRS Consolidated Group and is subject to U.S.

federal, state and local income taxes.

In general, our TRS entities may hold assets that the REIT cannot hold directly and may engage in real estate or non-real estate-related business.

In the three and nine months ended September 30, 2020, we recorded a tax provision of $ 17.8 million and $ 15.5 million, respectively.

In the three and nine months ended September 30, 2019, we recorded a tax provision of $ 6.6 million and $ 11.0 million, respectively.

The tax provision recorded in the three months ended September 30, 2020 consisted of a current tax provision of $ 13.9 million and a deferred tax provision of $ 3.9 million.

The tax provision recorded in the nine months ended September 30, 2020 consisted of a current tax provision of $ 20.7 million and a deferred tax benefit of $ 5.2 million.

The tax provision recorded in the three months ended September 30, 2019 consisted of a current tax provision of $ 4.4 million and a deferred tax provision of $ 2.2 million.

The tax provision recorded in the nine months ended September 30, 2019 consisted of a current tax provision of $ 12.0 million and a deferred tax benefit of $ 1.0 million.

Current and deferred taxes are primarily recorded on the portion of earnings (losses) recognized by us with respect to our interest in the TRS’s.

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We have a shared services agreement with ACM where we provide limited support services to ACM and they reimburse us for the costs of performing such services.

During the three and six months ended June 30, 2020, we incurred $ 0.7 million and $ 1.2 million, respectively, and, during the three and six months ended June 30, 2019, we incurred $ 0.5 million and $ 1.5 million, respectively, of costs for services provided to ACM, which are included in due from related party on the consolidated balance sheets.

During the three and nine months ended September 30, 2020, we incurred $ 0.6 million and $ 1.8 million, respectively, and, during the three and nine months ended September 30, 2019, we incurred $ 0.6 million and $ 2.1 million, respectively, of costs for services provided to ACM, which are included in due from related party on the consolidated balance sheets.

Other Related Party Transactions.

Due from related party was $ 8.4 million and $ 10.7 million at June 30, 2020 and December 31, 2019, respectively, which consisted primarily of amounts due from our affiliated servicing operations related to real estate transactions closing at the end of the quarter and amounts due from ACM for costs incurred in connection with the shared services agreement described above.

Due to related party was $ 0.6 million and $ 13.1 million at June 30, 2020 and December 31, 2019, respectively, and consisted of loan payoffs, holdbacks and escrows to be remitted to our affiliated servicing operations related to real estate transactions.

Due from related party was $ 23.8 million and $ 10.7 million at September 30, 2020 and December 31, 2019, respectively, which consisted primarily of amounts due from our affiliated servicing operations related to real estate transactions closing at the end of the quarter and amounts due from ACM for costs incurred in connection with the shared services agreement described above.

Due to related party was $ 0.1 million and $ 13.1 million at September 30, 2020 and December 31, 2019, respectively, and consisted of loan payoffs, holdbacks and escrows to be remitted to our affiliated servicing operations related to real estate transactions.

We have a $ 35.0 million bridge loan and a $ 7.8 million preferred equity interest on an office building in New York City.

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Pursuant to the agreement, we reimburse the aircraft owner for the required costs under Federal Aviation Administration regulations for the flights our executives' charter.

During the six months ended June 30, 2020, we reimbursed the aircraft owner $ 0.3 million for the flights chartered by our executives pursuant the agreement.

During the nine months ended September 30, 2020, we reimbursed the aircraft owner $ 0.4 million for the flights chartered by our executives pursuant the agreement.

In the first quarter of 2019, we, along with ACM, certain executives of ours and a consortium of independent outside investors, formed AMAC Holdings III LLC ("AMAC III"), a multifamily-focused commercial real estate investment fund sponsored and managed by our chief executive officer and one of his immediate family members.

We committed to a $ 30.0 million investment (of which $ 10.9 million was funded as of June 30, 2020) for an 18 % interest in AMAC III.

We recorded a loss of $ 0.5 million and $ 0.6 million in the three and six months ended June 30, 2020, respectively, related to this investment.

We committed to a $ 30.0 million investment (of which $ 10.9 million was funded as of September 30, 2020) for an 18 % interest in AMAC III.

We recorded a loss of less than $ 0.1 million and $ 0.6 million in the three and nine months ended September 30, 2020, respectively, related to this investment.

In July 2019, AMAC III originated a $ 7.0 million mezzanine loan to a borrower with which we have an outstanding $ 34.0 million bridge loan.

In connection with the AMAC III mezzanine loan, we entered into an inter-creditor agreement with AMAC III.

In addition, we originated a $ 15.6 million Private Label loan in December 2019 to a borrower which is 100 % owned by AMAC III, which bears interest at a fixed rate of 3.735 % and matures in January 2030.

In June 2020, for full satisfaction of the mezzanine loan, AMAC III became the owner of the property.

In August 2020, the $ 34.0 million

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September 30, 2020

bridge loan was refinanced with a $ 35.3 million bridge loan, which bears interest at a rate of 350 basis points over LIBOR and matures in August 2022.

We also originated a $ 15.6 million Private Label loan in December 2019 to a borrower which is 100 % owned by AMAC III, which bears interest at a fixed rate of 3.735 % and matures in January 2030.

In May 2020, we sold the Private Label loan to an unconsolidated affiliate of ours.

Interest income recorded from our bridge and Private Label loans totaled $ 0.7 million and $ 1.6 million for the three and six months ended June 30, 2020, respectively.

Interest income recorded from our bridge and Private Label loans totaled $ 1.6 million for the nine months ended September 30, 2020.

In 2018, we originated a $ 61.2 million bridge loan on a multifamily property owned in part by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers and our chief executive officer) which owns 10 % of the borrowing entity.

1 unchanged sentence

In the fourth quarter of 2019, the related party investors liquidated their equity investment.

Interest income recorded from this loan totaled $ 0.3 million and $ 0.6 million for the three and six months ended June 30, 2019, respectively.

Interest income recorded from this loan totaled $ 0.3 million and $ 1.0 million for the three and nine months ended September 30, 2019, respectively.

In 2018, we originated a $ 37.5 million bridge loan, which was used to purchase several multifamily properties.

In January 2019, an entity owned, in part, by an immediate family member of our chief executive officer, purchased a 23.9 % interest in the borrowing

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June 30, 2020

In January 2019, an entity owned, in part, by an immediate family member of our chief executive officer, purchased a 23.9 % interest in the borrowing entity.

The loan had an interest rate of LIBOR plus 4.25 % with a LIBOR floor of 2.375 % and was scheduled to mature in October 2020.

In May 2020, the borrower repaid this loan in full.

Interest income recorded from this loan totaled $ 0.8 million and $ 1.4 million for the three and six months ended June 30, 2020 , respectively, and $ 0.7 million and $ 1.4 million for the three and six months ended June 30, 2019, respectively.

Interest income recorded from this loan totaled $ 1.4 million for the nine months ended September 30, 2020 and $ 0.7 million and $ 2.0 million for the three and nine months ended September 30, 2019, respectively.

In 2018, we acquired a $ 19.5 million bridge loan originated by ACM.

1 unchanged sentence

The loan has an interest rate of LIBOR plus 4.0 % with a LIBOR floor of 2.125 % and matures in July 2021.

Interest income recorded from this loan totaled $ 0.3 million and $ 0.6 million for the three and six months ended June 30, 2020, respectively, and $ 0.3 million and $ 0.7 million for the three and six months ended June 30, 2019, respectively.

Interest income recorded from this loan totaled $ 0.3 million and $ 0.9 million for the three and nine months ended September 30, 2020, respectively, and $ 0.3 million and $ 1.0 million for the three and nine months ended September 30, 2019, respectively.

In 2018, we originated a $ 17.7 million bridge loan to an entity owned, in part, by an immediate family member of our chief executive officer, who owned a 10.8 % interest in the borrowing entity.

2 unchanged sentences

In September 2019, the borrower made a partial paydown of principal totaling $ 4.7 million and the remaining balance was paid off in January 2020.

Interest income recorded from this loan totaled $ 0.1 million for the six months ended June 30, 2020 and $ 0.5 million and $ 1.1 million for the three and six months ended June 30, 2019, respectively.

Interest income recorded from this loan totaled $ 0.1 million for the nine months ended September 30, 2020 and $ 0.4 million and $ 1.5 million for the three and nine months ended September 30, 2019, respectively.

In 2018, we originated a $ 21.7 million bridge loan on a multifamily property owned in part by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers and our chief executive officer) which owns 75 % in the borrowing entity.

The loan has an interest rate of LIBOR plus 4.75 % with a LIBOR floor of 1.25 % and matures in June 2021.

Interest income recorded from this loan totaled $ 0.3 million and $ 0.7 million for the three and six months ended June 30, 2020, respectively, and $ 0.3 million and $ 0.6 million for the three and six months ended June 30,2019, respectively.

In 2018, we acquired a $ 9.4 million bridge loan originated by ACM, of which $ 9.1 million was funded as of June 30, 2020.

Interest income recorded from this loan totaled $ 0.3 million and $ 1.0 million for the three and nine months ended September 30, 2020, respectively, and $ 0.4 million and $ 1.0 million for the three and nine months ended September 30,2019, respectively.

In 2018, we acquired a $ 9.4 million bridge loan originated by ACM.

The loan was used to purchase several multifamily properties by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers and our chief executive officer) which owns 75 % of the borrowing entity.

The loan has an interest rate of LIBOR plus 5.0 % with a LIBOR floor of 1.25 % and matures in January 2021.

Interest income recorded from this loan totaled $ 0.1 million and $ 0.3 million for the three and six months ended June 30, 2020, respectively, and $ 0.1 million and $ 0.3 million for the three and six months ended June 30, 2019, respectively.

Interest income recorded from this loan totaled $ 0.1 million and $ 0.4 million for the three and nine months ended September 30, 2020, respectively, and $ 0.2 million and $ 0.4 million for the three and nine months ended September 30, 2019, respectively.

In 2017, we acquired a $ 32.8 million bridge loan originated by ACM.

The loan had an interest rate of LIBOR plus 5.0 % with a LIBOR floor of 1.13 % and was scheduled to mature in June 2020.

The loan had an interest rate of LIBOR plus 5.0 % with a LIBOR floor of 1.13 % and was

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September 30, 2020

scheduled to mature in June 2020.

In October 2019, the borrower repaid this loan in full.

Interest income recorded from this loan totaled $ 0.6 million and $ 1.2 million for the three and six months ended June 30, 2019, respectively.

Interest income recorded from this loan totaled $ 0.6 million and $ 1.9 million for the three and nine months ended September 30, 2019, respectively.

In 2017, we originated two bridge loans totaling $ 28.0 million on two multifamily properties owned in part by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers and our chief executive officer) which owns 45 % of the borrowing entity.

1 unchanged sentence

The borrower refinanced these loans with a $ 31.1 million bridge loan we originated in November 2019 with an interest rate of LIBOR plus 4.0 %, a LIBOR floor of 1.80 % and a maturity date in October 2021.

Interest income recorded from these loans totaled $ 0.5 million and $ 1.0 million for the three and six months ended June 30, 2020, respectively, and $ 0.6 million and $ 1.1 million for the three and six months ended June 30, 2019, respectively.

Interest income recorded from these loans totaled $ 0.5 million and $ 1.4 million for the three and nine months ended September 30, 2020, respectively, and $ 0.6 million and $ 1.7 million for the three and nine months ended September 30, 2019, respectively.

In 2017, we originated a $ 46.9 million Fannie Mae loan on a multifamily property owned in part by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers) which owns a 17.6 % interest in the borrowing entity.

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Servicing revenue recorded from this loan was less than $ 0.1 million for all periods presented.

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June 30, 2020

In 2017, Ginkgo Investment Company LLC (“Ginkgo”), of which one of our directors is a 33 % managing member, purchased a multifamily apartment complex which assumed an existing $ 8.3 million Fannie Mae loan that we service.

Ginkgo subsequently sold the majority of its interest in this property and owned a 3.6 % interest at June 30, 2020.

Ginkgo subsequently sold the majority of its interest in this property and owned a 3.6 % interest at September 30, 2020.

We carry a maximum loss-sharing obligation with Fannie Mae on this loan of up to 20 % of the original UPB.

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In January 2019, $ 10.9 million of the $ 12.9 million remaining bridge loan paid off, with the $ 2.0 million remaining UPB converting to a mezzanine loan with a fixed interest rate of 10.0 % and a January 2024 maturity.

Interest income recorded from the remaining mezzanine loan was $ 0.1 million for both the three and six months ended June 30, 2020 and $ 0.1 million and $ 0.2 million for the three and six months ended June 30,2019, respectively.

Interest income recorded from the remaining mezzanine loan totaled $ 0.1 million and $ 0.2 million for the three and nine months ended September 30, 2020, respectively, and $ 0.1 million and $ 0.2 million for the three and nine months ended September 30, 2019, respectively.

In 2016, we originated a $ 12.7 million bridge loan and a $ 5.2 million preferred equity investment on two multifamily properties owned in part by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers and our chief executive officer) which owns a 50 % interest in the borrowing entity.

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In May 2020, we sold the Private Label loan to an unconsolidated affiliate of ours.

Interest income recorded from these loans totaled $ 0.2 million for both the three and six months ended June 30, 2020 and $ 0.2 million and $ 0.6 million for the three and six months ended June 30, 2019, respectively.

Interest income recorded from these loans totaled $ 0.3 million for the nine months ended September 30, 2020 and $ 0.6 million for the nine months ended September 30, 2019.

In 2015, we invested $ 9.6 million for 50 % of ACM's indirect interest in a joint venture with a third party that was formed to invest in a residential mortgage banking business.

As a result of this transaction, we had an initial indirect interest of 22.5% in this entity.

We recorded income from these investments of $ 20.9 million and $ 23.8 million in the three and six months ended June 30, 2020, respectively, and $ 2.7 million and $ 3.5 million in the three and six months ended June 30, 2019, respectively .

We recorded income from these investments of $ 32.3 million and $ 56.1 million in the three and nine months ended September 30, 2020, respectively, and $ 2.6 million and $ 6.1 million in the three and nine months ended September 30, 2019, respectively .

In connection with a litigation settlement related to this investment, we provided a guaranty of up to 50 % of any amounts payable in connection with the settlement.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

September 30, 2020

We, along with an executive officer of ours and a consortium of independent outside investors, hold equity investments in a portfolio of multifamily properties referred to as the “Lexford” portfolio, which is managed by an entity owned primarily by a consortium of affiliated investors, including our chief executive officer and an executive officer of ours.

5 unchanged sentences

In May 2020, we sold the Private Label loan to an unconsolidated affiliate of ours.

Interest income recorded from these loans totaled $ 0.2 million during both the three and six months ended June 30, 2020 and $ 3.5 million and $ 8.0 million for the three and six months ended June 30, 2019, respectively.

Interest income recorded from these loans totaled $ 0.5 million for the nine months ended September 30, 2020 and $ 1.1 million and $ 9.1 million for the three and nine months ended September 30, 2019, respectively.

Further, as part of this June 2018 restructuring, $ 50.0 million in unsecured financing was provided by an unsecured lender to certain parent entities of the property owners.

ACM owns slightly less than half of the unsecured lender entity and, therefore, provided slightly less than half of the unsecured lender financing.

In addition, in connection with our equity investment, we received distributions totaling $ 1.1 million during the six months ended June 30, 2020 and $ 0.6 million and $ 1.9 million during the three and six months ended June 30, 2019, respectively, which were recorded as income from equity affiliates.

In addition, in connection with our equity investment, we received distributions totaling $ 1.1 million during the nine months ended September 30, 2020 and $ 1.2 million and $ 0.7 million during the three and nine months ended September 30, 2019, respectively, which were recorded as income from equity affiliates.

Separate from the loans we originated in June 2018, we provide limited ("bad boy") guarantees for certain other debt controlled by Lexford.

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acts such as fraud or a material misrepresentation by Lexford or us.

At June 30, 2020, this debt had an aggregate outstanding balance of $ 615.2 million and is scheduled to mature between 2020 and 2029.

At September 30, 2020, this debt had an aggregate outstanding balance of $ 613.9 million and is scheduled to mature between 2020 and 2029.

Several of our executives, including our chief financial officer, general counsel and our chairman, chief executive officer and president, hold similar positions for ACM.

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Upon the closing of the Acquisition in 2016, we issued OP Units, each paired with one share of our special voting preferred shares.

At June 30, 2020, ACM holds 3,898,554 shares of our common stock and 14,669,101 OP Units, which represents 14.0 % of the voting power of our outstanding stock.

At September 30, 2020, ACM holds 3,898,554 shares of our common stock and 11,932,207 OP Units, which represents 11.9 % of the voting power of our outstanding stock.

Our Board of Directors approved a resolution under our charter allowing our chief executive officer and ACM, (which our chief executive officer has a controlling equity interest in), to own more than the 5 % ownership interest limit of our common stock as stated in our amended charter.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

September 30, 2020

Note 19 — Segment Information

The summarized statements of operations and balance sheet data, as well as certain other data, by segment are included in the following tables ($ in thousands).

The summarized statements of income and balance sheet data, as well as certain other data, by segment are included in the following tables ($ in thousands).

Specifically identifiable costs are recorded directly to each business segment.

1 unchanged sentence

Such costs include, but are not limited to, compensation and employee related costs, selling and administrative expenses and stock-based compensation.

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Eliminations (1)

8 unchanged sentences

Property operating income

Loss on derivative instruments, net

Gain (loss) on derivative instruments, net

Other income, net

8 unchanged sentences

Total other expenses

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

Loss on extinguishment of debt

Income before sale of real estate, income from equity affiliates and income taxes

Loss on sale of real estate

Income from equity affiliates

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

Three Months Ended June 30, 2019

September 30, 2020

Three Months Ended September 30, 2019

Eliminations (1)

8 unchanged sentences

Property operating income

(Loss) gain on derivative instruments, net

Loss on derivative instruments, net

Other income, net

5 unchanged sentences

Depreciation and amortization

Impairment loss on real estate owned

Provision for loss sharing (net of recoveries)

Total other expenses

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

Income before income from equity affiliates and income taxes

Income from equity affiliates

6 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

Six Months Ended June 30, 2020

September 30, 2020

Nine Months Ended September 30, 2020

Eliminations (1)

19 unchanged sentences

Total other expenses

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

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

Loss on extinguishment of debt

Loss on sale of real estate

Income from equity affiliates

(Provision for) benefit from income taxes

Provision for income taxes

Preferred stock dividends

Net loss attributable to noncontrolling interest

Net loss attributable to common stockholders

Net income attributable to noncontrolling interest

Net income attributable to common stockholders

ARBOR REALTY TRUST, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

Six Months Ended June 30, 2019

September 30, 2020

Nine Months Ended September 30, 2019

Eliminations (1)

31 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

September 30, 2020

Structured Business

28 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2020

Three Months Ended June 30,

Six Months Ended June 30,

September 30, 2020

Three Months Ended September 30,

Nine Months Ended September 30,

Origination Data:

2 unchanged sentences

Loan payoffs / paydowns

(1) We committed to fund two SFR build-to-rent bridge loans totaling $ 75.3 million in the third quarter of 2020.

Agency Business

7 unchanged sentences

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

June 30, 2020

September 30, 2020

UPB of Servicing

5 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements