What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-02-19 compared with 2020-02-14 · 1234 added, 2018 removed, 1031 unchanged (76% of the section changed)

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Schedule IV — Loans and Other Lending Investments

other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.

All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.

Report of Independent Registered Public Accounting Firm

the Stockholders and the Board of Directors of Arbor Realty Trust, Inc.

To the Stockholders and the Board of Directors of Arbor Realty Trust, Inc.

and Subsidiaries

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We have audited the accompanying consolidated balance sheets of Arbor Realty Trust, Inc.

and Subsidiaries (the Company) as of

December 31, 2019 and 2018, the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended

December 31, 2019, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the "consolidated financial statements").

opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its operations

and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with U.S.

and Subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).

In our opinion, based on our audits and the report of other auditors, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S.

generally accepted accounting principles.

also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting

as of December 31, 2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework)

and our report dated February 14, 2020 expressed an unqualified opinion thereon.

We did not audit the financial statements of Wakefield Investment Holdings LLC, a corporation in which the Company has a 16.3% interest.

In the consolidated financial statements, the Company's investment in Wakefield Investment Holdings LLC is stated at $59.2 million and $26.5 million as of December 31, 2020 and 2019, respectively, and the Company's equity in the net income of Wakefield Investment Holdings LLC is stated at $75.7 million in 2020, $7.2 million in 2019 and $0.7 million in 2018.

Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Wakefield Investment Holdings LLC, is based solely on the report of the other auditors.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 19, 2021 expressed an unqualified opinion thereon.

Adoption of New Accounting Standard

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for credit losses for financial instruments carried at amortized cost in 2020 using the modified retrospective approach due to the adoption of Accounting Standard Update 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

See below for discussion of our related critical audit matter.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company's

financial statements based on our audits.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the

financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial

statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in

the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the

financial statements.

We believe that our audits provide a reasonable basis for our opinion.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits and the report of other auditors provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were

communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our

especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements,

as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are

not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of Mortgage Servicing Rights

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The Company’s capitalized mortgage servicing rights (MSRs) totaled $380.0 million as of December 31, 2020.

As explained in Note 2 to the consolidated financial statements, the Company recognized MSRs at

estimated fair value upon the sale of an originated loan when the Company retained the right to service the loan.

The MSRs are amortized over the period of net servicing income or loss and are evaluated for impairment based on the fair value at each

reporting date.

As explained in Note 2 to the consolidated financial statements, the Company recognized MSRs at estimated fair value upon the sale of an originated loan when the Company retained the right to service the loan.

The MSRs are amortized over the period of net servicing income or loss and are evaluated for impairment based on the fair value at each reporting date.

The Company engaged an independent third-party valuation expert to assist in determining the fair value of the MSRs.

The fair value estimates for the MSRs primarily utilize discounted cash flow models that incorporate significant

assumptions including discount rate, prepayment rate, servicing cost and estimated life.

The fair value estimates for the MSRs primarily utilize discounted cash flow models that incorporate significant assumptions including discount rate, prepayment rate, servicing cost and estimated life.

Auditing the valuation of MSRs was complex and involved a high degree of subjectivity due to the nature of the assumptions.

In particular, the valuation of MSRs was sensitive to assumptions such as discount rate,

prepayment rate, servicing cost and estimated life, which were based on current market data and had a significant effect on the valuation of the MSRs.

In particular, the valuation of MSRs was sensitive to assumptions such as discount rate, prepayment rate, servicing cost and estimated life, which were based on current market data and had a significant effect on the valuation of the MSRs.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the MSR valuation process.

This included testing controls over management's evaluation of the MSR

valuations prepared by the third-party expert and controls over the data inputs and the significant assumptions used in the discounted cash flow models.

This included testing controls over management’s evaluation of the MSR valuations prepared by the third-party expert and controls over the data inputs and the significant assumptions used in the discounted cash flow models.

We involved our valuation professionals to assist with our procedures.

Our audit procedures included, among others, testing the completeness and accuracy of the data provided to management's third-party expert,

evaluating the appropriateness of the methodology used to determine the fair value of the MSRs and testing the significant assumptions used in the discounted cash flow models.

We utilized information obtained from market participants and recent

market activity on other MSR transactions to test management's assumptions and identify potential sources of contrary information.

Allowance for Loan Losses

Our audit procedures included, among others, testing the completeness and accuracy of the data provided to management’s third-party expert, evaluating the appropriateness of the methodology used to determine the fair value of the MSRs and testing the significant assumptions used in the discounted cash flow models.

We utilized information obtained from market participants and recent market activity on other MSR transactions to test management’s assumptions and identify potential sources of contrary information.

Allowance for Credit Losses

Description of the Matter

The Company's loans held for investment totaled $4.2 billion as of December 31, 2019, and the allowance for loan losses (ALL) was $71.1 million.

As discussed in Notes 2 and 3 to the consolidated

financial statements, management assigned a credit risk rating to each loan and evaluated each loan on a quarterly basis to determine whether a loan is impaired.

Management utilized internally developed discounted cash flow and direct capitalization

models in determining the fair value of the underlying collateral for use when evaluating whether a loan is impaired.

Management utilized information at both a loan level and general market trends level to determine the appropriate assumptions, such

as capitalization and market discount rates, in the discounted cash flow and direct capitalization models.

Auditing management's evaluation of whether a loan is impaired and estimating the ALL was complex and involved a high degree of subjectivity due to the significant uncertainty associated with the assumptions used in the

In particular, the estimation of the ALL was sensitive to significant assumptions such as discount rates, capitalization rates, and revenue growth rates.

These assumptions are based on current market data and had a significant effect on

the estimation of the ALL.

The Company’s allowance for credit losses related to structured loans and loss-sharing obligations related to the Fannie Mae DUS program totaled $148.3 million and $30.3 million, respectively, as of December 31, 2020.

As discussed in Note 2 to the consolidated financial statements, management estimated the allowance for credit losses for the expected term of the loan using third party models, which consider loss factors determined through the generation of probability of defaults and loss given defaults for similar loans with similar credit, historical experience and current conditions for similar loans, reasonable and supportable forecasts about the future, and specific factors depending on the nature of the loans.

For loans experiencing credit deterioration, management may use cash flow models or third party appraisals to estimate the fair value of the underlying collateral securing the impaired loan to estimate the expected credit losses.

Auditing management’s estimation of credit loss for structured loans and loss-sharing obligations related to the Fannie Mae DUS program was complex and involved a high degree of subjectivity due to the significant uncertainty associated with the assumptions used in the estimation.

In particular, the estimation of the allowance for credit losses and loss-sharing obligations were sensitive to significant assumptions, such as historical loss information, reasonable and supportable forecast periods, and depending on the nature of the loan, debt service coverage ratio, loan-to-value, capitalization rates, and expected loan term.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the ALL process.

This included testing internal controls over management's risk rating process,

management's evaluation of whether a loan is impaired and the models used to value the loan collateral, including testing controls over significant assumptions, and data inputs used in those models.

Our audit procedures included, among others, testing management's identification of individually impaired loans and evaluating the ALL for loans that are impaired but not specifically identified by assessing the

assumptions and parameters in the ALL models.

We involved our valuation professionals to assist in testing a sample of models used to determine the value of the loan collateral.

We tested the completeness and accuracy of data used in the discounted

cash flow or direct capitalization models and evaluated whether assumptions, such as capitalization rates, discount rates and revenue growth rates, used in the models were representative of current market data.

We utilized information obtained from

market participants and recent market activity on similar property transactions to test management's assumptions and identify potential sources of contrary information.

Ernst & Young LLP

have served as the Company's auditor since 2003.

York, New York

We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the allowance for credit losses process.

This included testing internal controls over management’s expected credit loss and impaired loan assessments, including testing controls over significant model assumptions and data inputs used in those assessments.

We involved our valuation professionals to assist with our procedures.

Our audit procedures included, among others, evaluating the appropriateness of the methodologies used to estimate the allowance for credit losses and loss-sharing obligations, testing the completeness and accuracy of data used in the expected credit loss and cash flow models, and testing the significant assumptions used in the models.

We utilized the Company’s historical data and information obtained from market participants to test management’s assumptions and identify potential sources of contrary information.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2003.

New York, New York

February 19, 2021

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Restricted cash

Loans and investments, net

Loans and investments, net (allowance for credit losses:

$ 148,329 and $ 71,069 , respectively)

Loans held-for-sale, net

Capitalized mortgage servicing rights, net

Securities held-to-maturity, net

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

$ 1,644 and $ 0 , respectively)

Investments in equity affiliates

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special voting preferred shares;

20,484,094 and 20,653,584 shares

issued and outstanding, respectively;

17,560,633 and 20,484,094 shares issued and outstanding , respectively;

8.25 % Series A, $ 38,788 aggregate liquidation preference;

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1,260,000 shares issued and outstanding;

8.50% Series C, $22,500 aggregate liquidation

8.50 % Series C, $ 22,500 aggregate liquidation preference;

900,000 shares issued and outstanding

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500,000,000 shares authorized;

109,706,214 and 83,987,707 shares

issued and outstanding, respectively

123,181,173 and 109,706,214 shares issued and outstanding , respectively

Additional paid-in capital

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Total liabilities and equity

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 December 31, 2019 and 2018, assets of our consolidated VIEs totaled $2,784,756 and $2,198,096, respectively, and the liabilities of our consolidated VIEs

totaled $2,209,599 and $1,665,139, respectively.

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 December 31, 2020 and 2019, assets of our consolidated VIEs totaled $ 3,134,447 and $ 2,784,756 , respectively, and the liabilities of our consolidated VIEs totaled $ 2,520,064 and $ 2,209,599 , respectively.

See Note 16 for discussion of our VIEs.

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Property operating income

(Loss) gain on derivative instruments, net

Other income, net

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Provision for loss sharing (net of recoveries)

Provision for loan losses (net of recoveries)

Provision for credit losses (net of recoveries)

Litigation settlement gain

Management feerelated party

Total other expenses

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

(Loss) gain on extinguishment of debt

Income (loss) from equity affiliates

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

Loss on extinguishent of debt

Loss on sale of real estate

Income from equity affiliates

Provision for income taxes

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securities into accumulated deficit

Unrealized loss on securities available-for-sale, at fair value

Reclassification of net realized loss on derivatives designated as cash flow hedges into earnings

Comprehensive income

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Issuance of common stock

Stock-based compensation

Repurchase of common stock

Issuance of common stock from convertible debt

Issuance of convertible senior unsecured notes, net

Forfeiture of unvested restricted stock

Extinguishment of convertible senior unsecured notes

Stock‑based compensation, net

Distributions—common stock

Distributions—preferred stock

Distributionspreferred stock of private REIT

Distributions—noncontrolling interest

Unrealized loss on securities available-for-sale

Reclassification of net realized loss on derivatives designated as cash flow hedges into earnings

Redemption of OP Units

Reclassification of net unrealized gains on available‑for‑sale securities into accumulated deficit

Balance—December 31, 2018

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Extinguishment of convertible senior unsecured notes

Stock-based compensation

Forfeiture of unvested restricted stock

Stock‑based compensation, net

Issuance of common stock from special dividend

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

Distributions—common stock

Distributions—preferred stock

Distributionspreferred stock of private REIT

Distributions—noncontrolling interest

Redemption of operating partnership units

Reclassification of net unrealized gains on available-for-sale securities into accumulated deficit

Redemption of OP Units

Balance—December 31, 2019

Notes to Consolidated Financial Statements.

ARBOR REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued)

($ in thousands, except shares)

Comprehensive

Stockholders'

Noncontrolling

Cummulative-effect adjustment (Note 2)

Balance - January 1, 2020 (as adjusted for the adoption of ASU 2016-13)

Issuance of common stock

Repurchase of common stock

Issuance of common stock upon vesting of restricted units

Net settlement on vesting of restricted stock

( 2,285,178 )

Issuance of common stock from convertible debt

Issuance of convertible senior unsecured notes, net

Extinguishment of convertible senior unsecured notes

Stock-based compensation

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

Stock-based compensation, net

Distributions - common stock

Distributions - preferred stock

Distributionspreferred stock of private REIT

Distributions - noncontrolling interest

Redemption of operating partnership units

Redemption of OP Units

( 2,923,461 )

Balance—December 31, 2020

Notes to Consolidated Financial Statements.

See Notes to Consolidated Financial Statements.

ARBOR REALTY TRUST, INC.

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Operating activities:

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

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

Depreciation and amortization

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Originations of loans held-for-sale

( 6,709,375 )

( 4,564,032 )

( 5,074,662 )

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

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Write-off of capitalized mortgage servicing rights from payoffs

Provision for loan losses (net of recoveries)

Provision for credit losses (net of recoveries)

Provision for loss sharing (net of recoveries)

Net charge-offs for loss sharing obligations

Net recoveries (charge-offs) for loss sharing obligations

Deferred tax provision (benefit)

(Income) loss from equity affiliates

Loss (gain) on extinguishment of debt

Income from equity affiliates

Distributions from equity affiliates

Loss on extinguishment of debt

Payoffs and paydowns of loans held-for-sale

Loss on sale of real estate

Changes in operating assets and liabilities

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities

Investing Activities:

Loans and investments funded, originated and purchased, net

( 2,376,233 )

( 2,712,354 )

( 1,545,499 )

Payoffs and paydowns of loans and investments

Internalization of management team

Deferred fees

Investments in real estate, net

Proceeds from sale of real estate, net

Proceeds from sale of available-for-sale securities

Contributions to equity affiliates

Distributions from equity affiliates

Due to borrowers and reserves

Purchases of securities held-to-maturity, net

Purchase of securities held-to-maturity, net

Payoffs and paydowns of securities held-to-maturity

Purchases of capitalized mortgage servicing rights

(Distributions of) proceeds from insurance settlements, net

Due to borrowers and reserves

Distributions of insurance settlements, net

Net cash used in investing activities

( 1,156,624 )

Financing activities:

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Paydowns and payoffs of repurchase agreements and credit facilities

( 12,428,681 )

( 8,443,275 )

( 8,559,057 )

Proceeds from issuance of collateralized loan obligations

Payoffs and paydowns of collateralized loan obligations

Payoff of debt fund

Proceeds from issuance of common stock

Proceeds from issuance of convertible senior unsecured notes

Extinguishment of convertible senior unsecured notes

Settlements of convertible senior unsecured notes

Proceeds from issuance of senior unsecured notes

Payoffs of senior unsecured notes

Payment of withholding taxes on net settlement of vested stock

Proceeds from issuance of common stock

Distribution for repurchase of common stock

Redemption of operating partnership units

Redemption of OP Units

Payments of withholding taxes on net settlement of vested stock

Repurchase of common stock

Distributions paid on common stock

1 unchanged sentence

Distributions paid on preferred stock

Distributions paid on preferred stock of private REIT

Payoffs of related party financing

Payment of deferred financing costs

Proceeds from debt fund

Payoffs of junior subordinated notes to subsidiary trust issuing preferred securities

Receipts on swaps and returns of margin calls from counterparties

Payoff of related party financing

Net cash provided by financing activities

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Supplemental schedule of non-cash investing and financing activities:

Cummulative-effect adjustment (Note 2)

Issuance of common stock from convertible debt

Extinguishment of convertible senior unsecured notes

Fair value of conversion feature of convertible senior unsecured notes

Special dividendcommon stock issued

Special dividendspecial voting preferred stock and operating partnership units issued

Redemption of operating partnership units for common stock

Distributions accrued on 8.25 % Series A preferred stock

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Distributions accrued for special dividend declared

Settlements of convertible senior unsecured notes

Fair value of conversion feature of convertible senior unsecured notes

Special dividend - common stock issued

Redemption of OP Units for common stock

Special dividend - special voting preferred stock and OP Units issued

See Notes to Consolidated Financial Statements.

5 unchanged sentences

Arbor is a Maryland corporation formed in 2003.

We are a nationwide REIT and direct lender, providing loan origination and servicing for multifamily, seniors housing, healthcare and

other diverse commercial real estate assets.

We are a nationwide REIT and direct lender, providing loan origination and servicing for multifamily, seniors housing, healthcare and other diverse commercial real estate assets.

We operate through two business segments:

our Structured Business and our Agency Business.

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.

our Agency Business, we originate, sell and service a range of multifamily finance products through Fannie Mae and Freddie Mac, Ginnie Mae, FHA and HUD.

We retain the servicing

rights and asset management responsibilities on substantially all loans we originate and sell under the GSE and HUD programs.

We are an approved Fannie Mae DUS lender nationally, a Freddie Mac

Multifamily Conventional Loan lender, seller/servicer, in New York, New Jersey and Connecticut, a Freddie Mac affordable, manufactured housing, senior housing and SBL lender, seller/servicer,

nationally and a HUD MAP and LEAN senior housing/healthcare lender nationally.

We also originate and sell finance products through 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" loans.

We intend to 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 bond referred to as the "B Piece."

July 2016, we acquired the Agency platform of ACM and, in May 2017, we terminated our existing management agreement with ACM and internalized our management team.

Substantially all of

our operations are conducted through our operating partnership, ARLP, for which we serve as the general partner, and ARLP's subsidiaries.

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 and preferred and direct equity.

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

Through our Agency Business, we originate, sell and service a range of multifamily finance products through Fannie Mae and Freddie Mac, Ginnie Mae, FHA and HUD.

We retain the servicing rights and asset management responsibilities on substantially all loans we originate and sell under the GSE and HUD programs.

We are an approved Fannie Mae DUS lender nationally, a Freddie Mac Multifamily Conventional Loan lender, seller/servicer, in New York, New Jersey and Connecticut, a Freddie Mac affordable, manufactured housing, senior housing and SBL lender, seller/servicer, nationally and a HUD MAP and LEAN senior housing/healthcare lender nationally.

We also originate and service permanent financing loans underwritten using the guidelines of our existing agency loans sold to the GSEs, which we refer to as "Private Label"

loans and originate and sell finance products through CMBS programs.

We pool and securitize the Private Label loans and sell certificates in the securitizations to third-party investors, while retaining the servicing rights and the highest risk bottom tranche certificate of the securitization.

Substantially all of our operations are conducted through our operating partnership, ARLP, for which we serve as the general partner, and ARLP’s subsidiaries.

We are organized to qualify as a REIT for U.S.

federal income tax purposes.

Certain of our assets that produce non-qualifying REIT income, primarily within the Agency Business, are operated through TRS entities, which is part of 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.

Note 2 — Basis of Presentation and Significant Accounting Policies

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The consolidated financial statements and accompanying notes have been prepared in accordance with GAAP.

In the opinion of management, all

adjustments considered

necessary for a fair presentation of our financial position, results of operations and cash flows have been included and are of a normal and recurring nature.

Reclassification

Certain prior period amounts have been reclassified to conform to the current period presentation.

In connection with the retrospective adoption

in 2018 of Accounting Standards Update ("ASU") 2016-15, Statement of Cash Flows, we reclassified $1.1 million of net proceeds from insurance settlements from net cash provided by

operating activities to net cash used in investing activities in the 2017 consolidated cash flow statement.

In addition, we adjusted the 2017 consolidated cash flow statement in connection with the

retrospective adoption in 2018 of ASU 2016-18, Statement of Cash Flows:

Restricted Cash, which requires changes in the total of cash, cash equivalents, restricted cash,

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2019

Note 2Basis of Presentation and Significant Accounting Policies (Continued)

restricted cash equivalents to be shown in the statement of cash flows.

Previous guidance required the change in cash and cash equivalents be shown on the statement of cash flows, with cash used

to fund restricted cash and restricted cash equivalents shown as a component of operating, investing, or financing activities.

following table shows the impact of the adoption of ASU 2016-15 and ASU 2016-18:

(in thousands)

December 31, 2017

As previously reported under GAAP applicable at the time

Cash and cash equivalents at beginning of period

Net decrease in cash and cash equivalents

Cash and cash equivalents at end of period

Net cash provided by (used in) operating activities:

changes in operating assets and liabilities

Net cash used in investing activities

Net cash provided by financing activities

As currently reported under ASU 2016-15 and ASU 2016-18

Cash, cash equivalents and restricted cash at beginning of period

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

Cash, cash equivalents and restricted cash at end of period

Net cash provided by (used in) operating activities:

changes in operating assets and liabilities

Net cash used in investing activities

Net cash provided by financing activities

In the opinion of management, all adjustments considered necessary for a fair presentation of our financial position, results of operations and cash flows have been included and are of a normal and recurring nature.

Principles of Consolidation

The consolidated financial statements include our financial statements and the financial statements of our wholly owned subsidiaries,

partnerships and other joint ventures in which we own a controlling interest, including variable interest entities ("VIEs") of which we are the primary beneficiary.

Entities in which we have a

significant influence are accounted for under the equity method.

See Note 16 for information about our VIEs.

All significant inter-company transactions and balances have been eliminated in

consolidation.

The consolidated financial statements include our financial statements and the financial statements of our wholly owned subsidiaries, partnerships and other joint ventures in which we own a controlling interest, including variable interest entities (“VIEs”) of which we are the primary beneficiary.

Entities in which we have a significant influence are accounted for under the equity method.

Our VIEs are described in Note 16.

All significant inter-company transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that could

materially affect the amounts reported in the consolidated financial statements and accompanying notes.

As future events cannot be determined with precision, actual results could differ from those

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

During 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 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

ARBOR REALTY TRUST, INC.

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December 31, 2020

Note 2Basis of Presentation and Significant Accounting Policies (Continued)

assumption as of December 31, 2020 inherently less certain than they would be absent the current and potential impacts of COVID-19.

Actual results could differ from those estimates.

Reclassification

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.

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

Significant Accounting Policies

Cash and Cash Equivalents .

All highly liquid investments with original maturities of three months or less are considered to be

cash equivalents.

place our cash and cash equivalents in high quality financial institutions.

The consolidated account balances at each institution periodically exceed Federal Deposit Insurance Corporation ("FDIC")

insurance coverage and we believe that this risk is not significant.

All highly liquid investments with original maturities of three months or less are considered to be cash equivalents.

We place our cash and cash equivalents in high quality financial institutions.

The consolidated account balances at each institution periodically exceed Federal Deposit Insurance Corporation (“FDIC”) insurance coverage limits and we believe that this risk is not significant.

Loans, Investments and Securities.

Loans held-for-investment are intended to be held-to-maturity and, accordingly, are carried

at cost, net of

unamortized loan origination costs and fees, loan purchase discounts, and net of the allowance for loan losses when such loan or investment is deemed to be impaired.

We invest in preferred equity

interests that, in some cases, allow us to participate in a percentage of the underlying property's cash flows from operations and proceeds from a sale or refinancing.

At the inception of each such

investment, we determine whether such investment should be accounted for as a loan, equity interest or as real estate.

To date, we have determined that all such investments are properly accounted for

and reported as loans.

the time of purchase, we designate a debt security as available-for-sale, held-to-maturity, or trading depending on our ability and intent for the security.

available-for-sale, which is included as a component of other assets in the consolidated balance sheets, is reported at fair value with the fluctuations in fair value recognized through earnings.

Loans held-for-investment are intended to be held-to-maturity and, accordingly, are carried at cost, net of unamortized loan origination costs and fees, loan purchase discounts, and net of the allowance for credit losses.

We invest in preferred equity interests that, in some cases, allow us to participate in a percentage of the underlying property’s cash flows from operations and proceeds from a sale or refinancing.

At the inception of each such investment, we determine whether such investment should be accounted for as a loan, equity interest or as real estate.

To date, we have determined that all such investments are properly accounted for and reported as loans.

At the time of purchase, we designate a debt security as available-for-sale, held-to-maturity, or trading depending on our ability and intent for the security.

Securities available-for-sale, which is included as a component of other assets in the consolidated balance sheets, is reported at fair value with the fluctuations in fair value recognized through earnings.

Held-to-maturity securities are carried at cost net of any unamortized premiums or discounts, which are amortized or accreted over the life of the securities.

For securities classified as

held-to-maturity, an evaluation is performed as to whether a decline in fair value below the amortized cost basis is other-than-temporary.

determination of other-than-temporary impairment is a subjective process requiring judgments and assumptions and is not necessarily intended to indicate a permanent decline in value.

The process includes, but is not limited to, assessment of recent market events and prospects for near-term recovery, assessment of cash flows, internal review of the underlying assets securing the

investments, credit of the issuer and the rating of the security, as well as our ability and intent to hold the investment to maturity.

We closely monitor market conditions on which we base such

Impaired Loans, Allowance for Loan Losses and Charge-offs.

We consider a loan impaired when, based upon current information, it

is probable that we

will be unable to collect all amounts due for both principal and interest according to the contractual terms of the loan agreement.

We evaluate each loan in our portfolio on a quarterly basis.

loans are individually specific and unique as it relates to product type, geographic location, and collateral type, as well as to the rights and remedies and the position in the capital structure our

loans have in relation to the underlying collateral.

We evaluate this information at both a loan level and general market trends level when determining the appropriate assumptions such as

capitalization and market discount rates, as well as the borrower's operating income and cash flows, in estimating the value of the underlying collateral when determining if a loan is impaired.

utilize internally developed valuation models and techniques primarily consisting of discounted cash flow and direct capitalization models in determining the fair value of the underlying collateral on

an individual loan.

We may also obtain a third party appraisal, which may value the collateral through an "as-is" or "stabilized value" methodology.

Such appraisals may be used as an additional source

of valuation information only and no adjustments are made to appraisals.

For securities classified as held-to-maturity, an evaluation is performed as to whether a decline in fair value below the amortized cost basis is other-than-temporary.

The determination of other-than-temporary impairment is a subjective process requiring judgments and assumptions and is not necessarily intended to indicate a permanent decline in value.

The process includes, but is not limited to, assessment of recent market events and prospects for near-term recovery, assessment of cash flows, internal review of the underlying assets securing the investments, credit of the issuer and the rating of the security, as well as our ability and intent to hold the investment to maturity.

We closely monitor market conditions on which we base such decisions.

Allowance for Credit Losses.

We estimate allowances for credit losses on our structured loans and investments (including unfunded loan commitments), loss-sharing obligations related to the Fannie Mae DUS program and our held-to-maturity debt securities under CECL.

This method is based on expected credit losses for the life of the loan.

Our estimation of credit losses utilizes information obtained from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts about the future.

We have licensed a third party model to assist with the measurement of expected credit losses, which utilizes incurred losses inherent in the portfolio.

The loss factors are determined through the generation of probability of defaults (PD) and loss given defaults (LGD) for similar loans with similar credit.

These results require a significant amount of judgment applied in selecting inputs and analyzing the results produced by the models to determine the allowance for credit losses.

Changes in such estimates can significantly affect our expected credit losses.

Our method for calculating the estimate of expected credit loss takes into account historical experience and current conditions for similar loans and reasonable and supportable forecasts about the future.

The reasonable and supportable forecast period is determined based on our assessment of the most likely scenario of assumptions and plausible outcomes for the US economy, level of historical loss forecast estimates, material changes in growth and credit strategy and other factors that may affect our loss experience.

We regularly evaluate the reasonable and supportable forecast period to determine if a change is needed.

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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, an allowance is created with

a corresponding charge to the provision for loan losses.

The allowance for each loan is maintained at a level that we believe to be adequate to absorb probable losses.

terms may be modified if we determine that, based on the individual circumstances of a loan and the underlying collateral, a modification would more likely increase the total

recovery of the combined principal and interest from the loan.

Any loan modification is predicated upon a goal of maximizing the collection of the loan.

Typical triggers for a modification would

include situations where the projected cash flow is insufficient to cover required debt service, when asset performance is lagging the initial projections, where there is a requirement for

rebalancing, where there is an impending maturity of the loan, and where there is an actual loan default.

Loan terms that have been modified have included, but are not limited to, maturity date,

interest rate and, in certain cases, principal amount.

Length and amounts of each modification have varied based on individual circumstances and are determined on a case by case basis.

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.

If we receive a benefit, either monetary or strategic, and the above criteria are not met, the

modification is not considered to be a troubled debt restructuring.

Beyond our reasonable and supportable forecast period, we generally revert to historical loss information over the remaining loan/asset period, taken from a period that most accurately reflects the expectation of conditions expected to exist during the period of reversion.

We may make adjustments to historical loss information for differences in risk that may not reflect the characteristics of our current portfolio, including but not limited to, loan-to-value and debt service coverage ratios, among other relevant factors.

The method of reversion selected represents the best estimate of the collectability of the investments and is reevaluated each reporting period.

We generally expect to use an average historical loss for reversion, utilizing an immediate or straight line method for the remaining life of the investments.

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.

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

We also evaluate the contractual life of our assets to determine if changes are needed for contractual extension options, renewals, modifications and prepayments.

To the extent possible, we estimate our allowance for credit losses using a pooling approach for homogeneous assets with similar risk characteristics with the goal of enhancing the precision of their estimate.

If particular assets no longer display risk characteristics that are similar to those of the pool, we may decide to revise our pools or perform an individual assessment of expected credit losses.

If it is determined that a foreclosure is probable, or we expect repayment through the operation or sale of the collateral and the borrower is experiencing financial difficulty, we calculate expected credit losses based on the fair value of the collateral as of the reporting date.

During the loan review process, if we determine that it is probable that we will be unable to collect all amounts due for both principal and interest according to the contractual terms of a loan, we consider that loan impaired.

We evaluate the capitalization and market discount rates, as well as the borrower's operating income and cash flows, in estimating the value of the underlying collateral when determining if a loan is impaired.

We may also obtain a third party appraisal, which may value the collateral through an "as-is"

or "stabilized value"

Such appraisals may be used as an additional source of valuation information only and no adjustments are made to appraisals.

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.

If a 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.

We record interest on modified loans on an accrual basis to the extent the modified loan is contractually current.

to the allowance for loan losses occur when losses are confirmed through the receipt of cash or other consideration from the completion of a sale;

when a modification or

restructuring takes place in which we grant a concession to a borrower or agree to a discount in full or partial satisfaction of the loan;

when we take ownership and control of the underlying

collateral in full satisfaction of the loan;

The allowance for credit losses on a troubled debt restructuring is measured using the same method as all other loans held for investment.

Charge-offs to the allowance for credit losses occur when losses are confirmed through the receipt of cash or other consideration from the completion of a sale;

when a modification or restructuring takes place in which we grant a concession to a borrower or agree to a discount in full or partial satisfaction of the loan;

when we take ownership and control of the underlying collateral in full satisfaction of the loan;

when loans are reclassified as other investments;

or when significant collection efforts have ceased and it is highly likely that a loss has been realized.

on restructured loans is recorded when we have granted a concession to the borrower in the form of principal forgiveness related to the payoff or the substitution or addition of a

new debtor for the original borrower or when we incur costs on behalf of the borrower related to the modification, payoff or the substitution or addition of a new debtor for the original borrower.

Loss on restructured loans is recorded when we have granted a concession to the borrower in the form of principal forgiveness related to the payoff or the substitution or addition of a new debtor for the original borrower or when we incur costs on behalf of the borrower related to the modification, payoff or the substitution or addition of a new debtor for the original borrower.

When a loan is restructured, we record our investment at net realizable value, taking into account the cost of all concessions at the date of restructuring.

In addition, a gain or loss may be recorded

upon the sale of a loan to a third party in the consolidated statements of income in the period in which the loan was sold.

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.

Loans Held-for-Sale, Net.

Loans held-for-sale, net represents our Agency Business commercial real estate loans originated and

sold under the GSE and

HUD programs, which are generally transferred or sold within 60 days of loan origination, as well as our Private Label loans, which are generally sold and securitized within 180 days of

loan origination.

Such loans are reported at the lower of cost or market on an aggregate basis and include the value allocated to the associated future MSRs.

During the period prior to its sale,

interest income on a loan held-for-sale is calculated in accordance with the terms of the individual loan and the loan origination fees and direct loan origination costs are deferred until the loan is

All of our held-for-sale loans are financed with matched borrowings from credit facilities

Loans held-for-sale, net represents our Agency Business commercial real estate loans originated and sold under the GSE and HUD programs, which are generally transferred or sold within 60 days of loan origination, as well as our

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to finance such loans.

Private Label loans, which are generally sold and securitized within 180 days of loan origination.

Such loans are reported at the lower of cost or market on an aggregate basis and include the value allocated to the associated future MSRs.

During the period prior to its sale, interest income on a loan held-for-sale is calculated in accordance with the terms of the individual loan and the loan origination fees and direct loan origination costs are deferred until the loan is sold.

All of our held-for-sale loans are financed with matched borrowings from credit facilities contracted to finance such loans.

Interest income and expense are earned or incurred after a loan is closed and before a loan is sold.

of financial assets are accounted for as sales when control over the assets has been surrendered.

Control over transferred assets is deemed to be surrendered when

(1) the assets have been isolated, put presumptively beyond the reach of the entity, even in bankruptcy, (2) the transferee (or if the transferee is an entity whose sole purpose is to

engage in securitization and the entity is constrained from pledging or exchanging the assets it receives, each third-party holder of its beneficial interests) has the right to pledge or exchange the

transferred financial assets, and (3) we or our agents do not maintain effective control over the transferred financial assets or third-party beneficial interest related to those transferred

assets through an agreement to repurchase them before their maturity.

We have determined that all loans sold have met these specific conditions and account for all transfers of mortgage loans as

completed sales.

Transfers of financial assets are accounted for as sales when control over the assets has been surrendered.

Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated, put presumptively beyond the reach of the entity, even in bankruptcy, (2) the transferee (or if the transferee is an entity whose sole purpose is to engage in securitization and the entity is constrained from pledging or exchanging the assets it receives, each third-party holder of its beneficial interests) has the right to pledge or exchange the transferred financial assets, and (3) we or our agents do not maintain effective control over the transferred financial assets or third-party beneficial interest related to those transferred assets through an agreement to repurchase them before their maturity.

We have determined that all loans sold have met these specific conditions and account for all transfers of mortgage loans as completed sales.

Allowance for Loss-Sharing Obligations.

When a loan is sold under the Fannie Mae DUS program, we undertake an obligation to

partially guarantee the

performance of the loan.

Generally, we are responsible for losses equal to the first 5% of the UPB and a portion of any additional losses to an overall maximum of 20% of the original principal

When a loan is sold under the Fannie Mae DUS program, we undertake an obligation to partially guarantee the performance of the loan.

Generally, we are responsible for losses equal to the first 5 % of the UPB and a portion of any additional losses to an overall maximum of 20 % of the original principal balance.

Fannie Mae bears any remaining loss.

In addition, under the terms of the master loss-sharing agreement with Fannie Mae, we are responsible for funding 100% of mortgage delinquencies

(principal and interest) and servicing advances (taxes, insurance and foreclosure costs) until the amounts advanced exceed 5% of the UPB at the date of default.

Thereafter, we may request interim

loss-sharing adjustments which allow us to fund 25% of such advances until final settlement.

inception, a liability for the fair value of the obligation undertaken in issuing the guaranty is recognized.

In determining the fair value of the guaranty obligation, we consider the

risk profile of the collateral and the historical loss experience in our portfolio.

In addition, under the terms of the master loss-sharing agreement with Fannie Mae, we are responsible for funding 100 % of mortgage delinquencies (principal and interest) and servicing advances (taxes, insurance and foreclosure costs) until the amounts advanced exceed 5 % of the UPB at the date of default.

Thereafter, we may request interim loss-sharing adjustments which allow us to fund 25 % of such advances until final settlement.

At inception, a liability for the fair value of the obligation undertaken in issuing the guaranty is recognized.

In determining the fair value of the guaranty obligation, we consider the risk profile of the collateral and the historical loss experience in our portfolio.

The guaranty obligation is removed only upon either the expiration or settlement of the guaranty.

evaluate the allowance for loss-sharing obligations by monitoring the performance of each loss-sharing loan for events or conditions that may signal a potential default.

Historically,

initial loss recognition occurs at or before a loan becomes 60 days delinquent.

In instances where payment under the guaranty on a loan is determined to be probable and estimable (as the loan

is probable of, or is, in foreclosure), we record a liability for the estimated allowance for loss-sharing (a "specific reserve") by transferring the guarantee obligation recorded on the loan to the

specific reserve with any adjustments to this reserve amount recorded in provision for loss sharing in the statements of income.

The amount of the allowance considers our assessment of the likelihood

of repayment by the borrower or key principal(s), the risk characteristics of the loan, the loan's risk rating, historical loss experience, adverse situations affecting individual loans, the estimated

disposition value of the underlying collateral, and the level of risk sharing.

We evaluate the allowance for loss-sharing obligations by monitoring the performance of each loss-sharing loan for events or conditions that may signal a potential default.

Historically, initial loss recognition occurs at or before a loan becomes 60 days delinquent.

In instances where payment under the guaranty on a loan is determined to be probable and estimable (as the loan is probable of, or is, in foreclosure), we record a liability for the estimated allowance for loss-sharing (a "specific reserve") by transferring the guarantee obligation recorded on the loan to the specific reserve with any adjustments to this reserve amount recorded in provision for loss sharing in the statements of income.

The amount of the allowance considers our assessment of the likelihood of repayment by the borrower or key principal(s), the risk characteristics of the loan, the loan's risk rating, historical loss experience, adverse situations affecting individual loans, the estimated disposition value of the underlying collateral, and the level of risk sharing.

We regularly monitor the specific reserves and update loss estimates as current information is received.

Capitalized Mortgage Servicing Rights.

We recognize, as separate assets, rights to service mortgage loans for others, including

such rights from our

origination of mortgage loans sold with the servicing rights retained, as well as rights associated with acquired MSRs.

Income from MSRs related to loans we originate are recognized when we record a

derivative asset upon the commitment to originate a

We recognize, as separate assets, rights to service mortgage loans for others, including such rights from our origination of mortgage loans sold with the servicing rights retained, as well as rights associated with acquired MSRs.

Income from MSRs related to loans we originate are recognized when we record a derivative asset upon the commitment to originate a loan with a borrower and sell the loan to an investor.

This commitment asset is recognized at fair value based on the discounted expected net cash flows associated with the servicing of the loan.

When a mortgage loan we originate is sold, we retain the right to service the loan and recognize the MSR at the initial capitalized valuation.

We amortize our MSRs using the amortization method, which requires the MSRs to be amortized over the period of estimated net servicing income or loss and that the servicing assets or liabilities be assessed for impairment, or increased obligation, based on the fair value at each reporting date.

Amortization of MSRs is recorded as a reduction of servicing revenues, net in the consolidated statements of income.

The following assumptions were used in calculating the fair value of our MSRs for the periods presented:

We used discount rates ranging from 8 % to 13 %, representing a weighted average discount rate of 12 %, based on our best estimate of market discount rates to determine the present value of MSRs.

The inflation rate used for adequate compensation was 3 %.

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with a borrower and sell the loan to an investor.

This commitment asset is recognized at fair value based on the discounted expected net cash flows associated with the servicing of the loan.

a mortgage loan we originate is sold, we retain the right to service the loan and recognize the MSR at the initial capitalized valuation.

We amortize our MSRs using the amortization method, which

requires the MSRs to be amortized over the period of estimated net servicing income or loss and that the servicing assets or liabilities be assessed for impairment, or increased obligation, based on

the fair value at each reporting date.

Amortization of MSRs is recorded as a reduction of servicing revenues, net in the consolidated statements of income.

The following assumptions were used in

calculating the fair value of our MSRs for the periods presented:

We used discount rates ranging from 8% to 15%, representing a weighted average discount rate of 12%, based on

our best estimate of market discount rates to determine the present value of MSRs.

The inflation rate used for adequate compensation was 3%.

Servicing Cost:

A market participant's estimated future cost to service the loan for the estimated life of the MSR is

subtracted from the estimated future cash flows.

A market participant's estimated future cost to service the loan for the estimated life of the MSR is subtracted from the estimated future cash flows.

Estimated Life:

We estimate the life of our MSRs based upon the stated yield maintenance and/or prepayment protection

term of the underlying loan and are reduced using prepayment rates that consider the note rate of the loan and the expiration of various types of prepayment penalty and/or lockout provisions prior to

that stated maturity date.

are initially recorded at fair value and are carried at amortized cost.

The fair value of MRSs from loans we originate and sell are estimated considering market prices for similar

MSRs, when available, and by estimating the present value of the future net cash flows of the capitalized MSRs, net of adequate compensation for servicing.

Adequate compensation is based on the market

rate of similar servicing contracts.

We estimate the life of our MSRs based upon the stated yield maintenance and/or prepayment protection term of the underlying loan and are reduced using prepayment rates that consider the note rate of the loan and the expiration of various types of prepayment penalty and/or lockout provisions prior to that stated maturity date.

MSRs are initially recorded at fair value and are carried at amortized cost.

The fair value of MRSs from loans we originate and sell are estimated considering market prices for similar MSRs, when available, and by estimating the present value of the future net cash flows of the capitalized MSRs, net of adequate compensation for servicing.

Adequate compensation is based on the market rate of similar servicing contracts.

The fair value of MSRs acquired approximate the purchase price paid.

evaluate the MSR portfolio for impairment on a quarterly basis based on the difference between the aggregate carrying amount of the MSRs and their aggregate fair value.

independent third-party valuation expert to assist in determining an estimated fair value of our MSR portfolio on a quarterly basis.

For purposes of impairment evaluation, the MSRs are stratified

based on predominant risk characteristics of the underlying loans, which we have identified as loan type, note rate and yield maintenance provisions.

To the extent that the carrying value of the MSRs

exceeds fair value, a valuation allowance is established.

record write-offs of MSRs related to loans that were repaid prior to their expected maturity and loans that have defaulted and determined to be unrecoverable.

When this occurs, the

write-off is recorded as a direct write-down to the carrying value of MSRs and is included as a component of servicing revenue, net in the consolidated statements of income.

This direct write-down

permanently reduces the carrying value of the MSRs, precluding recognition of subsequent recoveries.

For loans that payoff prior to maturity, we may collect a prepayment fee which is included as a

component of servicing revenue, net.

We evaluate the MSR portfolio for impairment on a quarterly basis based on the difference between the aggregate carrying amount of the MSRs and their aggregate fair value.

We engage an independent third-party valuation expert to assist in determining an estimated fair value of our MSR portfolio on a quarterly basis.

For purposes of impairment evaluation, the MSRs are stratified based on predominant risk characteristics of the underlying loans, which we have identified as loan type, note rate and yield maintenance provisions.

To the extent that the carrying value of the MSRs exceeds fair value, a valuation allowance is established.

We record write-offs of MSRs related to loans that were repaid prior to their expected maturity and loans that have defaulted and determined to be unrecoverable.

When this occurs, the write-off is recorded as a direct write-down to the carrying value of MSRs and is included as a component of servicing revenue, net in the consolidated statements of income.

This direct write-down permanently reduces the carrying value of the MSRs, precluding recognition of subsequent recoveries.

For loans that payoff prior to maturity, we may collect a prepayment fee which is included as a component of servicing revenue, net.

Real Estate Owned and Held-For-Sale.

Real estate acquired is recorded at its estimated fair value at acquisition and is shown

net of accumulated

depreciation and impairment charges.

Costs incurred in connection with the acquisition of a property are expensed as incurred.

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Note 2Basis of Presentation and Significant Accounting Policies (Continued)

allocate the purchase price of our real estate acquisitions to land, building, tenant improvements, origination asset of the in-place leases, intangibles for the value of any above or

below market leases at fair value and to any other identified intangible assets or liabilities.

We amortize the value allocated to in-place leases over the remaining lease term, which is reported in

depreciation and amortization expense on our consolidated statements of income.

The value allocated to above or below market leases are amortized over the remaining lease term as an adjustment to

rental income.

estate assets are depreciated using the straight-line method over their estimated useful lives.

Ordinary repairs and maintenance which are not reimbursed by the tenants are expensed

Real estate acquired is recorded at its estimated fair value at acquisition and is shown net of accumulated depreciation and impairment charges.

Costs incurred in connection with the acquisition of a property are capitalized.

We allocate the purchase price of our real estate acquisitions to land, building, tenant improvements, origination asset of the in-place leases, intangibles for the value of any above or below market leases at fair value and to any other identified intangible assets or liabilities.

We amortize the value allocated to in-place leases over the remaining lease term, which is reported in depreciation and amortization expense on our consolidated statements of income.

The value allocated to above or below market leases are amortized over the remaining lease term as an adjustment to rental income.

Real estate assets are depreciated using the straight-line method over their estimated useful lives.

Ordinary repairs and maintenance which are not reimbursed by the tenants are expensed as incurred.

Major replacements and betterments which improve or extend the life of the asset are capitalized and depreciated over their estimated useful life.

properties are reviewed for impairment each quarter, if events or circumstances change indicating that the carrying amount of an asset may not be recoverable.

We recognize impairment

if the undiscounted estimated cash flows to be generated by an asset is less than the carrying amount of such asset.

Our properties are reviewed for impairment each quarter, if events or circumstances change indicating that the carrying amount of an asset may not be recoverable.

We recognize impairment if the undiscounted estimated cash flows to be generated by an asset is less than the carrying amount of such asset.

Measurement of impairment is based on the asset’s estimated fair value.

evaluating for impairment, many factors are considered, including estimated current and expected operating cash flows from the property during the projected holding period, costs necessary to extend

the life or improve the asset, expected capitalization rates, projected stabilized net operating income, selling costs, and the ability to hold and dispose of the asset in the ordinary course of

Impairment charges may be necessary in the event discount rates, capitalization rates, lease-up periods, future economic conditions, and other relevant factors vary significantly from those

assumed in valuing the property.

estate is classified as held-for-sale when we commit to a plan of sale, the asset is available for immediate sale, there is an active program to locate a buyer, and it is probable

the sale will be completed within one year.

In evaluating for impairment, many factors are considered, including estimated current and expected operating cash flows from the property during the projected holding period, costs necessary to extend the life or improve the asset, expected capitalization rates, projected stabilized net operating income, selling costs, and the ability to hold and dispose of the asset in the ordinary course of business.

Impairment charges may be necessary in the event discount rates, capitalization rates, lease-up periods, future economic conditions, and other relevant factors vary significantly from those assumed in valuing the property.

Real estate is classified as held-for-sale when we commit to a plan of sale, the asset is available for immediate sale, there is an active program to locate a buyer, and it is probable the sale will be completed within one year .

Real estate assets that are expected to be disposed of are valued at the lower of the asset’s carrying amount or its fair value less costs to sell.

recognize sales of real estate properties upon closing.

We recognize sales of real estate properties upon closing.

Payments received from purchasers prior to closing are recorded as deposits.

Gain on real estate sold is recognized when the

collectability of the sale price is reasonably assured, we are not obligated to perform significant activities after the sale and when control of the asset transfers to the buyer.

A gain may be

deferred in whole or in part until collectability of the sales price is reasonably assured and the earnings process is complete.

Investments in Equity Affiliates.

We invest in joint ventures that are formed to invest in real estate related assets or

ventures are not majority owned or controlled by us, or are VIEs for which we are the primary beneficiary, and are not consolidated in our financial statements.

These investments are recorded under

either the equity or cost method of accounting as deemed appropriate.

We evaluate these investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of

such investments may not be recoverable.

We recognize an impairment loss if the estimated fair value of the investment is less than its carrying amount and we determine that the impairment is

other-than-temporary.

We record our share of the net income and losses from the underlying properties of our equity method investments and any other-than-temporary impairment on these investments as

income or losses from equity affiliates in the consolidated statements of income.

Gain on real estate sold is recognized when the collectability of the sale price is reasonably assured, we are not obligated to

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perform significant activities after the sale and when control of the asset transfers to the buyer.

A gain may be deferred in whole or in part until collectability of the sales price is reasonably assured and the earnings process is complete.

Investments in Equity Affiliates .

We invest in joint ventures that are formed to invest in real estate related assets or businesses.

These joint ventures are not majority owned or controlled by us, or are VIEs for which we are not the primary beneficiary, and are not consolidated in our financial statements.

These investments are recorded under either the equity or cost method of accounting as deemed appropriate.

We evaluate these investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable.

We recognize an impairment loss if the estimated fair value of the investment is less than its carrying amount and we determine that the impairment is other-than-temporary.

We record our share of the net income and losses from the underlying properties of our equity method investments and any other-than-temporary impairment on these investments as income or losses from equity affiliates in the consolidated statements of income.

Goodwill and Other Intangible Assets.

Significant judgement is required to estimate the fair value of intangible assets and in

assigning their

estimated useful lives.

Significant judgement is required to estimate the fair value of intangible assets and in assigning their estimated useful lives.

Accordingly, we typically seek the assistance of independent third party valuation specialists for significant intangible assets.

The fair value estimates are based on

available historical information and on future expectations and assumptions we deem reasonable.

generally use an income based valuation method to estimate the fair value of intangible assets, which discounts expected future cash flows to present value using estimates and

assumptions we deem reasonable.

For intangible assets related to acquired technology, we use the replacement cost method to determine fair value.

the estimated useful lives of intangible assets also requires judgment.

Certain intangible assets, such as GSE licenses, have been deemed to have indefinite lives while other

intangible assets, such as broker and borrower relationships, above/below market rent and acquired technology have been deemed to have finite lives.

Our assessment as to which intangible assets are

deemed to have finite or indefinite lives is based on several factors including economic barriers of entry for the acquired product lines, scarcity of available GSE licenses, technology life cycles,

retention trends and our operating plans, among other factors.

and indefinite-lived intangible assets are not amortized, while finite-lived intangible assets are amortized over their estimated useful lives on a straight-line basis.

The fair value estimates are based on available historical information and on future expectations and assumptions we deem reasonable.

We generally use an income based valuation method to estimate the fair value of intangible assets, which discounts expected future cash flows to present value using estimates and assumptions we deem reasonable.

Determining the estimated useful lives of intangible assets also requires judgment.

Certain intangible assets, such as GSE licenses, have been deemed to have indefinite lives while other intangible assets, such as broker and borrower relationships and above/below market rent have been deemed to have finite lives.

Our assessment as to which intangible assets are deemed to have finite or indefinite lives is based on several factors including economic barriers of entry for the acquired product lines, scarcity of available GSE licenses, retention trends and our operating plans, among other factors.

Goodwill and indefinite-lived intangible assets are not amortized, while finite-lived intangible assets are amortized over their estimated useful lives on a straight-line basis.

Indefinite-lived intangible assets, including goodwill, are tested for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable.

addition, with respect to goodwill, an impairment analysis is performed at least annually.

We have elected to make the first day of our fiscal fourth quarter the annual impairment assessment date for

In addition, with respect to goodwill, an impairment analysis is performed at least annually.

We have elected to make the first day of our fiscal fourth quarter the annual impairment assessment date for goodwill.

We first assess qualitative factors to determine whether it is more likely than not that the fair value is less than the carrying value.

on that assessment, we believe it is more likely than not that the fair value is less than the carrying value, then a two-step goodwill impairment test is performed.

Based on the impairment analysis

performed as of October 1, 2019, there was no indication that the indefinite-lived intangible assets, including goodwill, were impaired and there were no events or changes in circumstances

indicating impairment at December 31, 2019.

If, based on that assessment, we believe it is more likely than not that the fair value is less than the carrying value, then a two-step goodwill impairment test is performed.

Based on the impairment analysis performed as of October 1, 2020, there was no indication that the indefinite-lived intangible assets, including goodwill, were impaired and there were no events or changes in circumstances indicating impairment at December 31, 2020.

Hedging Activities and Derivatives .

We measure derivative instruments at fair value and record them as assets or liabilities.

Fair value adjustments

will affect either accumulated other comprehensive income until the hedged item is recognized in earnings, or net income depending on whether the derivative instrument qualifies as a hedge for

accounting purposes and, if so, the nature of the hedging activity.

Fair value adjustments will affect either accumulated other comprehensive income until the hedged item is recognized in earnings, or net income depending on whether the derivative instrument qualifies as a hedge for accounting purposes and, if so, the nature of the hedging activity.

We use derivatives for hedging purposes rather than trading or speculation.

Fair values are estimated based on current market data

from financial sources that trade such instruments and are based on prevailing market data and derived from third party proprietary models based on well recognized financial principles and reasonable

estimates about relevant future market conditions.

accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and

apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting.

Derivatives designated and qualifying as a hedge of the exposure to changes

in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate

Fair values are estimated based on current market data from financial sources that trade such instruments and are based on prevailing market data and derived from third party proprietary models based on well recognized financial principles and reasonable estimates about relevant future market conditions.

The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting.

Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges.

Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.

Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow

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are considered fair value hedges.

Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are

considered cash flow hedges.

Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair

value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge.

derivative instruments must be effective in reducing risk exposure in order to qualify for hedge accounting.

When the terms of an underlying transaction are modified, or when the underlying hedged

item ceases to exist, all changes in the fair value of the instrument are marked-to-market with changes in value included in net income for each period until the derivative instrument matures or is

These derivative instruments must be effective in reducing risk exposure in order to qualify for hedge accounting.

When the terms of an underlying transaction are modified, or when the underlying hedged item ceases to exist, all changes in the fair value of the instrument are marked-to-market with changes in value included in net income for each period until the derivative instrument matures or is settled.

Any derivative instrument used for risk management that does not meet the hedging criteria is marked-to-market with the changes in value included in earnings.

In cases where a derivative

instrument is terminated early, any gain or loss is generally amortized over the remaining life of the hedged item.

We may also enter into derivative contracts that are intended to economically hedge

certain risks, even though hedge accounting does not apply or we elect not to apply hedge accounting.

The ineffective portion of a derivative's change in fair value is recognized immediately in

connection with our interest rate risk management, we may hedge a portion of our interest rate risk by entering into derivative instrument contracts to manage differences in the

amount, timing, and duration of our expected cash receipts and our expected cash payments principally related to our investments and borrowings.

Our objectives in using interest rate derivatives are

to add stability to interest income and to manage our exposure to interest rate movements.

To accomplish this objective, we have used, and may again in the future, use interest rate swaps as part of

our interest rate risk management strategy.

Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for us making fixed-rate

payments over the life of the agreements without exchange of the underlying notional amount.

rate lock and forward sales commitments associated with the Agency Business meet the definition of a derivative and are recorded at fair value.

The estimated fair value of rate lock

commitments includes the effects of interest rate movements as well as the fair value of the expected net cash flows associated with the servicing of the loan which is recorded as income from MSRs in

the consolidated statements of income.

In cases where a derivative instrument is terminated early, any gain or loss is generally amortized over the remaining life of the hedged item.

We may also enter into derivative contracts that are intended to economically hedge certain risks, even though hedge accounting does not apply or we elect not to apply hedge accounting.

The ineffective portion of a derivative’s change in fair value is recognized immediately in earnings.

In connection with our interest rate risk management, we may hedge a portion of our interest rate risk by entering into derivative instrument contracts to manage differences in the amount, timing, and duration of our expected cash receipts and our expected cash payments principally related to our investments and borrowings.

Our objectives in using interest rate derivatives are to add stability to interest income and to manage our exposure to interest rate movements.

To accomplish this objective, we have used, and may again in the future, use interest rate swaps as part of our interest rate risk management strategy.

Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

Our rate lock and forward sales commitments associated with the Agency Business meet the definition of a derivative and are recorded at fair value.

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

The estimated fair value of forward sale commitments includes the effects of interest rate movements between the trade date and balance sheet date.

to the fair value are reflected as a component of other income, net in the consolidated statements of income.

Swap Futures associated with (1) our Structured Business SFR loans, and (2) our held-for-sale Agency Business Private Label loans do not meet the criteria for hedge

accounting and are tied to the five-year and ten-year swap rates.

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.

Our Swap Futures associated with (1) our Structured Business SFR loans, and (2) our held-for-sale Agency Business Private Label loans do not meet the criteria for hedge accounting and are tied to the five-year and ten-year swap rates.

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.

Realized and unrealized gains and losses related to our Swap Futures are recorded through earnings.

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Interest income is recognized on the accrual basis as it is earned.

In certain instances, the borrower pays

an additional amount

of interest at the time the loan is closed, an origination fee, a prepayment fee and/or deferred interest upon maturity.

In some cases, interest income may also include the amortization or accretion

of premiums and discounts arising from the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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Note 2Basis of Presentation and Significant Accounting Policies (Continued)

or origination of the loan or security.

This additional income, net of any direct loan origination costs incurred, is deferred and accreted into interest income on an effective yield or

"interest" method adjusted for actual prepayment activity over the life of the related loan or security as a yield adjustment.

Income recognition is suspended for loans when, in our opinion, a full

recovery of all contractual principal is not probable.

In certain instances, the borrower pays an additional amount of interest at the time the loan is closed, an origination fee, a prepayment fee and/or deferred interest upon maturity.

In some cases, interest income may also include the amortization or accretion of premiums and discounts arising from the purchase or origination of the loan or security.

This additional income, net of any direct loan origination costs incurred, is deferred and accreted into interest income on an effective yield or “interest” method adjusted for actual prepayment activity over the life of the related loan or security as a yield adjustment.

Income recognition is suspended for loans when, in our opinion, a full recovery of all contractual principal is not probable.

Income recognition is resumed when the loan becomes contractually current and performance is resumed.

We record interest income on certain

impaired loans to the extent cash is received, as the borrower continues to make interest payments.

We record loan

loss reserves related to these loans when it is deemed that full recovery of principal and accrued interest is not probable.

of our loans provide for accrual of interest at specified rates, which differ from current payment terms.

Interest is recognized on such loans at the accrual rate subject to our

determination that accrued interest and outstanding principal are ultimately collectible, based on the underlying collateral and operations of the asset.

If we cannot make this determination, interest

income above the current pay rate is recognized only upon actual receipt.

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

We record interest income on certain impaired loans to the extent cash is received, as the borrower continues to make interest payments.

We record loan loss reserves related to these loans when it is deemed that full recovery of principal and accrued interest is not probable.

Several of our loans provide for accrual of interest at specified rates, which differ from current payment terms.

Interest is recognized on such loans at the accrual rate subject to our determination that accrued interest and outstanding principal are ultimately collectible, based on the underlying collateral and operations of the asset.

If we cannot make this determination, interest income above the current pay rate is recognized only upon actual receipt.

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.

We will analyze these interest reserves on a periodic basis and determine if any additional interest reserves are needed.

Recognition of income on loans with funded interest reserves are

accounted for in the same manner as loans without funded interest reserves.

We do not recognize interest income on loans in which the borrower has failed to make the contractual interest payment due

or has not replenished the interest reserve account.

Recognition of income on loans with funded interest reserves are accounted for in the same manner as loans without funded interest reserves.

We do not recognize interest income on loans in which the borrower has failed to make the contractual interest payment due or has not replenished the interest reserve account.

Income from non-performing loans is generally recognized on a cash basis only to the extent it is received.

Full income recognition will resume

when the loan becomes contractually current and performance has recommenced.

Additionally,

interest income is recorded when earned from equity participation interests, referred to as equity kickers.

These equity kickers have the potential to generate additional

revenues to us as a result of excess cash flow distributions and/or as appreciated properties are sold or refinanced.

Gain on sales, including fee-based services, net Gain on sales, including fee-based services, net includes commitment fees, broker fees, loan

assumption fees, loan origination fees and gains on sale of loans of our Agency Business.

In some instances, the borrower pays an additional amount of interest at the time the loan is closed, an

origination fee, net of any direct loan origination costs incurred, which is recognized upon the sale of the loan.

Revenue recognition occurs when the related services are performed, unless

significant contingencies exist, and for the sale of loans, when all the incidence of ownership passes to the buyer.

Interest income is recognized on the accrual basis as it is earned from loans

held-for-sale.

Property operating income Property operating income represents income associated with the operations of commercial real estate properties classified

as real estate owned.

We recognize revenue for these activities when the fees are fixed or determinable, or are evidenced by an arrangement, collection is reasonably assured and the services under the

arrangement have been provided.

Other income, net Other income, net represents loan structuring, modification and defeasance, as well as broker fees, miscellaneous asset management

fees associated with our loan and investment

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

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and changes in the fair value of certain derivatives.

We recognize these forms of income when the fees are fixed or determinable, are evidenced by an arrangement, collection is reasonably

assured and the services under the arrangement have been provided.

Additionally, interest income is recorded when earned from equity participation interests, referred to as equity kickers.

These equity kickers have the potential to generate additional revenues to us as a result of excess cash flow distributions and/or as appreciated properties are sold or refinanced.

Gain on sales, including fee-based services, net — Gain on sales, including fee-based services, net includes commitment fees, broker fees, loan assumption fees, loan origination fees and gains on sale of loans of our Agency Business.

In some instances, the borrower pays an additional amount of interest at the time the loan is closed, an origination fee, net of any direct loan origination costs incurred, which is recognized upon the sale of the loan.

Revenue recognition occurs when the related services are performed, unless significant contingencies exist, and for the sale of loans, when all the incidence of ownership passes to the buyer.

Interest income is recognized on the accrual basis as it is earned from loans held-for-sale.

Property operating income — Property operating income represents income associated with the operations of commercial real estate properties classified as real estate owned.

We recognize revenue for these activities when the fees are fixed or determinable, or are evidenced by an arrangement, collection is reasonably assured and the services under the arrangement have been provided.

Other income, net — Other income, net represents loan structuring, modification and defeasance, as well as broker fees and miscellaneous asset management fees associated with our loan and investment portfolio.

We recognize these forms of income when the fees are fixed or determinable, are evidenced by an arrangement, collection is reasonably assured and the services under the arrangement have been provided.

We determine if an arrangement is a lease at inception.

Our right to use an underlying asset for the lease term is

recorded as operating

lease right-of-use ("ROU") assets and our obligation to make lease payments arising from the lease are recorded as lease liabilities.

The operating lease ROU assets and lease liabilities are included

in other assets and other liabilities, respectively, in our consolidated balance sheets.

Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of

lease payments over the lease term.

Our right to use an underlying asset for the lease term is recorded as an operating lease right-of-use ("ROU") asset and our obligation to make lease payments arising from the lease is recorded as a lease liability.

Operating lease ROU assets and lease liabilities are included in other assets and other liabilities, respectively, in our consolidated balance sheets.

Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

Our leases do not provide an implicit rate;

therefore, we use our incremental borrowing rate in determining the present value of lease payments.

Our lease terms may

include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Lease expense for lease payments is recognized on a straight-line basis over the lease

At the adoption date, we made an accounting policy election to exclude leases with an initial term of twelve months or less.

Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Leases with an initial term of twelve months or less are expensed as incurred.

Stock-Based Compensation.

We grant stock awards to certain of our employees and directors, consisting of shares of our common

stock that vest

immediately or annually over a multi-year period, subject to the recipient's continued service to us.

We record stock-based compensation expense at the grant date fair value of the related stock-based

award at the grant date (for the portion that vests immediately) or ratably over the respective vesting periods.

Dividends are paid on restricted stock as dividends are paid on shares of our common

stock whether or not they are vested.

Stock-based compensation is disclosed in our consolidated statements of income under "employee compensation and benefits" for employees and under "selling and

administrative" expense for non-employees and the Board of Directors.

We grant stock awards to certain of our employees and directors, consisting of shares of our common stock that vest immediately or annually over a multi-year period, subject to the recipient’s continued service to us.

We record stock-based compensation expense at the grant date fair value of the related stock-based award at the grant date (for the portion that vests immediately) or ratably over the respective vesting periods.

Dividends are paid on restricted stock as dividends are paid on shares of our common stock whether or not they are vested.

Stock-based compensation is disclosed in our consolidated statements of income under “employee compensation and benefits” for employees and under “selling and administrative” expense for non-employees and the Board of Directors.

Income Taxes.

We organize and conduct our operations to qualify as a REIT and to comply with the provisions of the Internal

Revenue Code with respect

A REIT is generally not subject to federal income tax on its REIT-taxable income that it distributes to its stockholders, provided that it

distributes at least 90% of its REIT-taxable income and meets certain other requirements.

We organize and conduct our operations to qualify as a REIT and to comply with the provisions of the Internal Revenue Code with respect thereto.

A REIT is generally not subject to federal income tax on its REIT-taxable income that it distributes to its stockholders, provided that it distributes at least 90% of its REIT-taxable income and meets certain other requirements.

Certain REIT income may be subject to state and local income taxes.

Agency Business mainly operates through a TRS, which is a part of our TRS Consolidated Group and is subject to U.S.

The Agency Business mainly operates through a TRS, which is a part of 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.

Current and deferred taxes are recorded on the portion of earnings

(losses) recognized by us with respect to our interest in TRSs.

Deferred income tax assets and liabilities are calculated based on temporary differences between our GAAP consolidated financial

statements and the federal, state, local tax basis of assets and liabilities as of the consolidated balance sheets.

We evaluate the realizability of our deferred tax assets (e.g., net operating

loss and capital loss carryforwards) and recognize a valuation allowance if, based on the available evidence, it is more likely than not that some portion or all of our deferred tax assets will not be

When evaluating the realizability of our deferred tax assets, we consider estimates of expected future taxable income, existing and projected book/tax differences, tax planning strategies

available and the general and industry specific economic outlook.

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.

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

Deferred income tax assets and liabilities are calculated based on temporary differences between our GAAP consolidated financial statements and the federal, state, local tax basis of assets and liabilities as of the consolidated balance sheets.

We evaluate the realizability of our deferred tax assets (e.g., net operating loss and capital loss carryforwards) and recognize a valuation allowance if, based on the available evidence, it is more likely than not that some portion or all of our deferred tax assets will not be realized.

When evaluating the realizability of our deferred tax assets, we consider estimates of expected future taxable income, existing and projected book/tax differences, tax planning strategies available and the general and industry specific economic outlook.

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Note 2Basis of Presentation and Significant Accounting Policies (Continued)

We periodically evaluate tax positions to determine whether it is more likely than not that such positions would be sustained upon examination by a tax authority for all open tax years,

as defined by the statute of limitations, based on their technical merits.

We periodically evaluate tax positions to determine whether it is more likely than not that such positions would be sustained upon examination by a tax authority for all open tax years, as defined by the statute of limitations, based on their technical merits.

We report interest and penalties related to tax uncertainties as a component of the income tax provision.

Earnings Per Share.

We present both basic and diluted earnings per share ("EPS").

Basic EPS excludes dilution and is computed by

dividing net income

available to common stockholders by the weighted average number of shares outstanding for the period.

Diluted EPS reflects the potential dilution that could occur if securities or other contracts to

issue common stock were exercised or converted into common stock, where such exercise or conversion would result in a lower EPS amount.

We present both basic and diluted earnings per share ("EPS").

Basic EPS excludes dilution and is computed by dividing net income available to common stockholders by the weighted average number of shares outstanding for the period.

Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, where such exercise or conversion would result in a lower EPS amount.

Recently Adopted Accounting Pronouncements

Credit Losses

On January 1, 2020, we adopted ASU 2016-13, which utilizes the CECL methodology for the recognition of credit losses for our structured loans and investments, held-to-maturity debt securities and our loss-sharing obligations related to the Fannie Mae DUS program, at the time the financial asset is originated or acquired.

The allowance for credit losses is adjusted each period for changes in expected credit losses.

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 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.

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

January 1, 2020

Allowance for credit losses:

Structured loans and investments (1)

Held-to-maturity debt securities

Deferred tax assets

Allowance for loss-sharing obligations

(1) See Note 3 for details by asset class.

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Recently Adopted Accounting Pronouncements

Other Accounting Pronouncements Adopted

Adoption Date

Effect on Financial Statements

ASU 2016-02, Leases (Topic 842) requires lessees to record most leases on their balance sheet through operating and finance lease liabilities and corresponding ROU assets, as well as adding additional footnote

disclosures of key information about those arrangements.

ASU 2018-11, Leases (Topic 842)Targeted Improvements provides transition relief on comparative period reporting through a cumulative-effect adjustment at the beginning of the

period of adoption ("Effective Date Method").

In November 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2018-17, Consolidation (Topic 810):

Targeted Improvements to Related Party Guidance for Variable Interest Entities.

This ASU amends the guidance for determining whether a decision-making fee is a variable interest and requires companies to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety (as currently required under GAAP).

First quarter of 2020

We adopted this guidance using the Effective Date Method and elected the group of optional practical expedients, therefore, comparative reporting periods have not been adjusted and are reported under the previous

accounting guidance.

Upon adoption, we recorded an operating lease ROU asset and corresponding lease liability of $20.1 million, which are included as other assets and other liabilities in our consolidated balance sheets.

We also added the

required footnote disclosures in Note 15.

ASU 2018-07, CompensationStock Compensation expands the scope of ASC Topic 718, CompensationStock Compensation, to include share-based payment transactions for acquiring goods and services from

nonemployees.

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

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820)—Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with changes between hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements.

Early adoption is permitted upon issuance of the update.

First quarter of 2020

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

ASU 2017-12, Derivatives and Hedging:

Targeted Improvements to Accounting for Hedging Activities better aligns risk management activities and financial reporting for hedging relationships through changes to both

the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results.

Among other amendments, the update allows entities to designate the variability in cash flows attributable to changes in a

contractually specified component stated in the contract as the hedged risk in a cash flow hedge of a forecasted purchase or sale of a nonfinancial asset.

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other:

Simplifying the Test for Goodwill Impairment.

This ASU eliminates step two from the goodwill impairment test, which measures a goodwill impairment loss by comparing the implied fair value with the carrying amount of goodwill.

First quarter of 2020

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

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AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2019

Note 2Basis of Presentation and Significant Accounting Policies (Continued)

Recently Issued Accounting Pronouncements

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Effect on Financial Statements

In June 2016, the FASB issued ASU 2016-13, Financial InstrumentsCredit Losses:

Measurement of Credit Losses on Financial Instruments.

This ASU requires the measurement of all expected credit losses for

financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

Entities will be required to use forward-looking information to better form their credit loss estimates.

ASU also requires enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses.

First quarter of 2020 with early adoption permitted

We expect the adoption of this guidance on January 1, 2020 to increase our allowance for loan losses by $27 million to $37 million related to our Structured Business loan and investment portfolio, our

Agency Business loss-sharing obligations under the Fannie Mae DUS program and our held-to-maturity debt securities within both businesses.

We will record the cumulative effect of initially applying this guidance as an adjustment to our Accumulated

Deficit using the modified retrospective method of adoption.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

This ASU removes certain exceptions to the general principles in Topic 740 and also

clarifies and amends existing guidance to improve consistent application.

First quarter of 2021 with early adoption permitted

We do not expect the adoption of this guidance to have a significant impact on consolidated financial statements.

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 September 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.

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Note 3 — Loans and Investments

The composition of our Structured Business loan and investment portfolio is as follows ($ in thousands):

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

December 31, 2020

LTV Ratio (2)

LTV Ratio (3)

Bridge loans (4)

Mezzanine loans

Preferred equity investments

Allowance for loan losses

Mezzanine loans

Allowance for credit losses

Unearned revenue

Loans and investments, net

Mezzanine loans

December 31, 2019

Bridge loans (4)

Preferred equity investments

Allowance for loan losses

Mezzanine loans

Allowance for credit losses

Unearned revenue

Loans and investments, net

(1) "Weighted

Average Pay Rate" is a weighted average, based on the UPB of each loan in our portfolio, of the interest rate required to be paid monthly as stated in the

individual loan agreements.

Certain loans and investments that require an additional rate of interest "Accrual Rate" to be paid at maturity are not included in the weighted average pay rate as shown

in the table.

"First Dollar Loan-to-Value ("LTV") Ratio" is calculated by comparing the total of our senior most dollar and all senior lien positions within the capital stack

to the fair value of the underlying collateral to determine the point at which we will absorb a total loss of our position.

"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.

“Weighted Average Pay Rate” is a weighted average, based on the UPB of each loan in our portfolio, of the interest rate required to be paid monthly as stated in the individual loan agreements.

Certain loans and investments that require an additional rate of interest “Accrual Rate” to be paid at maturity are not included in the weighted average pay rate as shown in the table.

The “First Dollar Loan-to-Value ("LTV") Ratio” is calculated by comparing the total of our senior most dollar and all senior lien positions within the capital stack to the fair value of the underlying collateral to determine the point at which we will absorb a total loss of our position.

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.

As of December 31, 2020 and 2019, bridge loans included 38 and 11 , respectively, single-family rental loans with an aggregate UPB of $ 309.2 million and $ 66.7 million, respectively, of which $ 88.1 million and $ 30.0 million, respectively, was funded.

As of December 31, 2020 and 2019, other included 22 and 12 , respectively, single-family rental permanent loans with an aggregate UPB of $ 68.4 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 December 31, 2020, the UPB related to 22 loans with five different borrowers represented 12 % of total assets.

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

During both 2020 and 2019, no single loan or investment represented more than 10% of our total assets and no single

ARBOR REALTY TRUST, INC.

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December 31, 2020

Note 3Loans and Investments (Continued)

within bridge loans are 11 single-family rental loans with an aggregate UPB of $66.7 million, of which $30.0 million was funded.

within other are 12 single-family rental permanent loans with an aggregate UPB of $41.6 million and 9 purchased loans with an aggregate UPB of

$28.6 million.

Concentration of Credit Risk

We are subject to concentration risk in that, at December 31, 2019, the UPB related to 24 loans with five different borrowers represented

13% of total assets.

At December 31, 2018, the UPB related to 45 loans with five different borrowers represented 22% of total assets.

During both 2019 and 2018, 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 19 for details on our concentration of related party loans and

assign a credit risk rating of pass, pass/watch, special mention, substandard or doubtful to each loan and investment, with a pass rating being the lowest risk and a doubtful rating

being the highest risk.

investor group generated over 10% of our revenue.

See Note 19 for details on our concentration of related party loans and investments.

We assign a credit risk rating of pass, pass/watch, special mention, substandard or doubtful to each loan and investment, with a pass rating being the lowest risk and a doubtful rating being the highest risk.

Each credit risk rating has benchmark guidelines that pertain to debt-service coverage ratios, LTV ratios, borrower strength, asset quality, and funded cash reserves.

factors such as guarantees, market strength, and remaining loan term and borrower equity are also reviewed and factored into determining the credit risk rating assigned to each loan.

provides a helpful snapshot of portfolio quality and credit risk.

All portfolio assets are subject to, at a minimum, a thorough quarterly financial evaluation in which historical operating performance

and forward-looking projections are reviewed, however, we maintain a higher level of scrutiny and focus on loans that we consider "high risk" and that possess deteriorating credit quality.

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, and is not considered impaired.

Other factors such as guarantees, market strength, and remaining loan term and borrower equity are also reviewed and factored into determining the credit risk rating assigned to each loan.

This metric provides a helpful snapshot of portfolio quality and credit risk.

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

and that possess deteriorating credit quality.

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

A risk rating of substandard indicates we anticipate the loan may require a modification of some kind.

rating of doubtful indicates we expect the loan to underperform over its term, and there could be loss of interest and/or principal.

Further, while the above are the primary guidelines used in

determining a certain risk rating, subjective items such as borrower strength, market strength or asset quality may result in a rating that is higher or lower than might be indicated by any risk

rating matrix.

a result of the loan review process, at December 31, 2019 and 2018, we identified eight loans and investments that we consider higher-risk loans that had a carrying value,

before loan loss reserves, of $127.6 million and $128.7 million, respectively, and a weighted average last dollar LTV ratio of 98% and 99%, respectively.

A risk rating of doubtful indicates we expect the loan to underperform over its term, and there could be loss of interest and/or principal.

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

ARBOR REALTY TRUST, INC.

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December 31, 2020

Note 3Loans and Investments (Continued)

summary of the loan portfolio's weighted average internal risk ratings and LTV ratios by asset class is as follows ($ in thousands):

December 31, 2019

Internal Risk

A summary of the loan portfolio’s internal risk ratings and LTV ratios by asset class as of December 31, 2020 is as follows ($ in thousands):

UPB by Origination Year

Asset Class / Risk Rating

Special Mention

Total Multifamily

Percentage of portfolio

Special Mention

Percentage of portfolio

Special Mention

Total Healthcare

Percentage of portfolio

Single-Family Rental:

Percentage of portfolio

Special Mention

December 31, 2018

Total Single-Family Rental

Percentage of portfolio

Special Mention

Student Housing:

Percentage of portfolio

Special Mention

Total Student Housing

Percentage of portfolio

Special Mention

Percentage of portfolio

Geographic Concentration Risk

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.

As of December 31, 2020, 19 % and 11 % 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.

No other states represented 10% or more of the total loan and investment portfolio.

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December 31, 2020

Note 3Loans and Investments (Continued)

Impaired Loans and Allowance for Loan Losses

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

Allowance for Credit Losses

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

Year Ended December 31, 2020

Allowance at beginning of period

Provision for loan losses

Student Housing

Allowance for credit losses:

Beginning balance, prior to adoption of CECL

Impact of adopting CECL - January 1, 2020

Provision for credit losses (net of recoveries)

Ending balance

Year Ended December 31, 2019

Allowance for credit losses

Year Ended December 31, 2018

Allowance for credit losses:

Beginning balance

Provision for credit losses

Recoveries of reserves

Allowance at end of period

2018, we determined that the fair value of the underlying collateral (land development project) securing six loans with a carrying value of $121.4 million was less than the

net carrying value of the loans, which resulted in a provision for loan losses of $12.3 million.

We also fully reserved a bridge loan and recorded a provision for loan loss of

$1.7 million.

addition, during 2018, we received $31.6 million to settle a non-performing preferred equity investment in a hotel property with a UPB of $34.8 million and a net

carrying value of $29.1 million, resulting in a charge-off of $3.2 million and a reserve recovery of $2.5 million.

We also received payments and recorded recoveries of

$3.1 million related to previously written-off loans and investments, which are included as a component of provision for loan losses (net of recoveries) on the consolidated statements of

2017, we incurred a $20.5 million charge-off of a fully reserved junior participation loan and we determined that the fair value of the underlying collateral securing a

preferred equity investment with an aggregate carrying value of $34.8 million was less than the net carrying value of the investment, which resulted in a $2.0 million provision for loan

In addition, a fully reserved mezzanine loan with a UPB of $1.8 million paid off in full, which resulted in a $1.8 million reserve recovery, and we recorded a reserve recovery of

$0.7 million on a multifamily bridge loan.

ratio of net recoveries (charge-offs) to the average loans and investments outstanding was 0.1% and (0.8)% for 2018 and 2017, respectively.

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 loan loss as

of December 31, 2019, 2018 and 2017.

have six loans with a carrying value totaling $120.3 million at December 31, 2019 that are collateralized by a land development project.

These loans were scheduled to

mature in September 2019 and were extended to March 2020, with the expectation to further extend these loans.

The loans do not carry a current pay rate of interest, however, five of the loans with a

carrying value totaling $111.0 million entitle us to a weighted average accrual rate of interest of 8.74%.

In 2008, we suspended the recording of the accrual rate of interest on these loans, as they

were impaired and we deemed the collection of this interest to be doubtful.

At both December 31, 2019 and 2018, we had cumulative allowances for loan losses of $61.4 million related to

The loans are subject to certain risks

Ending balance

The increase in the provision for credit losses during 2020 of $ 60.0 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 due to the COVID-19 pandemic.

Our estimate of allowance for credit losses on our structured loans and investments during 2020, including related unfunded loan commitments, 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 current economic conditions.

During 2018, we determined that the fair value of the underlying collateral (land development project) securing six loans with a carrying value of $ 121.4 million was less than the net carrying value of the loans, which resulted in a provision for loan losses of $ 12.3 million.

We also fully reserved a bridge loan and recorded a provision for loan loss of $ 1.7 million.

In addition, during 2018, we received $ 31.6 million to settle a non-performing preferred equity investment in a hotel property with a UPB of $ 34.8 million and a net carrying value of $ 29.1 million, resulting in a charge-off of $ 3.2 million and a reserve recovery of $ 2.5 million.

We also received payments and recorded recoveries of $ 3.1 million related to previously written-off loans and investments, which are included as a component of provision for loan losses (net of recoveries) on the consolidated statements of income.

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 December 31, 2020, we had outstanding unfunded commitments of $ 353.8 million that we are obligated to fund as borrowers meet certain requirements.

As of December 31, 2020, accrued interest receivable related to our loans totaling $ 41.6 million was excluded from the estimate of credit losses and is included in other assets on the consolidated balance sheet.

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December 31, 2020

Note 3Loans and Investments (Continued)

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.

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

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

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

December 31, 2020

December 31, 2019

Investment(2)

(1) Represents the UPB of ten and five impaired loans (less unearned revenue and other holdbacks and adjustments) by asset class at December 31, 2020 and 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 December 31, 2020, 2019 and 2018.

At December 31, 2020, seven loans with an aggregate net carrying value of $ 53.8 million, net of related loan loss reserves of $ 6.5 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):

December 31, 2020

December 31, 2019

(1) Represents

the UPB of five impaired loans (less unearned revenue and other holdbacks and adjustments) by asset class at both December 31, 2019 and 2018.

(2) Represents

an average of the beginning and ending UPB of each asset class.

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.

At December 31, 2018, two loans with an aggregate net carrying value of $0.8 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.

Student Housing

In addition, we have six loans with a carrying value totaling $ 121.3 million at December 31, 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 $ 112.0 million entitle us to a weighted average accrual rate of interest of 7.98 %.

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.

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December 31, 2020

Note 3Loans and Investments (Continued)

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

December 31, 2019

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

During both 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.

In January 2021, we entered into a second forbearance agreement which temporarily eliminated the pay rate, extended the principal reduction payoff deadline to June 30, 2021 and increased the interest rate to 9.50 %, which is the default rate.

The payment of the interest 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.

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 December 31, 2020 and 2019, we had total interest reserves of $ 78.3 million and $ 37.0 million, respectively, on 186 loans and 131 loans, respectively, with an aggregate UPB of $ 3.60 billion and $ 2.43 billion, respectively.

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

December 31, 2020

both December 31, 2019 and 2018, we had no loans contractually past due 90 days or more that are still accruing interest.

were no loan modifications, refinancing's and/or extensions during 2019 and 2018 that were considered troubled debt restructurings.

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

At December 31, 2019 and 2018, we had total interest reserves of $37.0 million and $48.9 million, respectively, on 131 loans and 110 loans, respectively, with an aggregate

UPB of $2.43 billion and $2.22 billion, respectively.

Note 4 — Loans Held-for-Sale, Net

Our GSE loans held-for-sale are typically sold within 60 days of loan origination, while our Private Label loans are generally expected to be sold and securitized within 180 days of loan origination.

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

December 31, 2020

December 31, 2019

Private Label

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Loans held-for-sale, net

GSE loans held-for-sale are typically sold within 60 days of loan origination, while our Private Label loans are expected to be sold and securitized within 180 days of

loan origination.

During 2019, 2018 and 2017, we sold $4.40 billion, $4.92 billion and $4.81 billion, respectively, of loans held-for-sale and recorded gain on sales of

$61.1 million, $65.5 million and $68.3 million, respectively.

At December 31, 2019 and 2018, 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 (Continued)

December 31, 2019

During 2020, 2019 and 2018, we sold $ 6.59 billion, $ 4.40 billion and $ 4.92 billion, respectively, of loans held-for-sale and recorded gain on sales of $ 89.5 million, $ 61.1 million and $ 65.5 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.

At December 31, 2020 and 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

Our capitalized MSRs reflect commercial real estate MSRs derived from loans sold in our Agency Business, or MSRs acquired as part of the Acquisition or in the open market from third

Our capitalized MSRs reflect commercial real estate MSRs derived from loans sold in our Agency Business or acquired MSRs.

The weighted average estimated life remaining of our MSRs was 8.6 years and 8.0 years at December 31, 2020 and 2019, respectively.

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

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

Year Ended December 31, 2020

Year Ended December 31, 2019

Balance at beginning of period

Beginning balance

Write-downs and payoffs

Balance at end of period

collected prepayment fees totaling $18.4 million and $21.9 million during 2019 and 2018, respectively, which are included as a component of servicing revenue, net on the

consolidated statements of income.

Ending balance

We collected prepayment fees totaling $ 12.8 million and $ 18.4 million during 2020 and 2019, respectively, which are included as a component of servicing revenue, net on the consolidated statements of income.

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

expected amortization of capitalized MSRs recorded as of December 31, 2019 is as follows (in thousands):

amortization may vary from these estimates.

ARBOR REALTY TRUST, INC.

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December 31, 2020

The expected amortization of capitalized MSRs recorded as of December 31, 2020 is as follows (in thousands):

Actual amortization may vary from these estimates.

Note 6 – Mortgage Servicing

4 unchanged sentences

North Carolina

Private Label (2)

December 31, 2019

Product Concentrations

Geographic Concentrations

North Carolina

loans which we are not collecting a servicing fee.

other individual state represented 4% or more of the total.

December 31, 2019 and 2018, our weighted average servicing fee was 43.8 basis points and 45.2 basis points, respectively.

At December 31, 2019 and 2018, we held total

escrow balances of $947.1 million and $824.1 million, respectively, which is not reflected in our consolidated balance sheets.

Of the total escrow balances, we held $562.1 million

and $521.2 million at December 31, 2019 and 2018, 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 $17.3 million, $12.8 million and

(1) Excludes loans which we are not collecting a servicing fee.

(2) Represents loans we service in connection with our Private Label securitization in May 2020 (see Note 4 for details).

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

At December 31, 2020 and 2019, our weighted average servicing fee was 45.4 basis points and 43.8 basis points, respectively.

At December 31, 2020 and 2019, we held total escrow balances of $ 1.29 billion and $ 947.1 million, respectively, which is not reflected in our consolidated balance sheets.

Of the total escrow balances, we held $ 867.6 million and $ 562.1 million at December 31, 2020 and 2019, respectively, related to loans we are servicing within our Agency Business.

These escrows are maintained in separate accounts

ARBOR REALTY TRUST, INC.

2 unchanged sentences

December 31, 2020

Note 6Mortgage Servicing (Continued)

during 2019, 2018 and 2017, respectively, and is a component of servicing revenue, net in the consolidated statements of income.

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 $ 7.1 million, $ 17.3 million and $ 12.8 million during 2020, 2019 and 2018, respectively, and is a component of servicing revenue, net in the consolidated statements of income.

Note 7 – Securities Held-to-Maturity

1 unchanged sentence

Freddie Mac may choose to hold, sell or securitize loans we sell to them under the Freddie Mac SBL program.

As part of the

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

December 31, 2019, 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 5.8 years.

The weighted average effective interest rate

was 10.85% and 10.94% at December 31, 2019 and 2018, respectively, including the accretion of a portion of the discount deemed collectible.

Approximately $14.2 million is estimated to

mature within one year, $40.8 million is estimated to mature after one year through five years, $20.6 million is estimated to mature after five years through ten years and

$15.4 million is estimated to mature after ten years.

Structured Single-Family Rental Bonds.

During 2019, we purchased $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 0.5 years.

Approximately $18.7 million is estimated to mature within one year and $1.3 million is estimated to mature after one

year through five years.

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

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 December 31, 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 5.9 years.

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

Approximately $ 12.6 million is estimated to mature within one year, $ 36.0 million is estimated to mature after one year through five years, $ 11.3 million is estimated to mature after five years through ten years and $ 16.6 million is estimated to mature after ten years.

Agency Private Label Certificates.

In connection with our $ 727.2 million Private Label securitization in May 2020, we retained the most subordinate class of certificates with an initial face value of $ 63.6 million (APL certificates).

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 loans 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 9.0 years.

The weighted average effective interest rate was 10.15 % at December 31, 2020 and the full $ 63.6 million is expected to mature after five years through ten years.

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

During the fourth quarter of 2020, we reclassified our Class A2 SFR bonds with a carrying value of $ 20.0 million to available-for-sale from held-to-maturity as a result of a change in our intent to hold the securities to maturity due to an isolated and nonrecurring event.

We do not anticipate sales of any of our remaining securities classified as held-to-maturity in the future.

During the fourth quarter of 2020, we sold one of our $ 10.0 million SFR bonds, and in January 2021, we sold the remaining $ 10.0 million SFR bond to third-party investors for an amount slightly below par.

The $ 10.0 million SFR bond that remained at December 31, 2020 was included as a component of other assets in the consolidated balance sheets.

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

Allowance for

Credit Losses

December 31, 2020

B Piece bonds

APL certificates

December 31, 2019

of December 31, 2019, no impairment was recorded on these held-to-maturity securities.

During 2019, 2018 and 2017, we recorded interest income (including the amortization of

discount) of $9.9 million, $5.8 million and $1.8 million, respectively, related to these investments.

B Piece bonds

ARBOR REALTY TRUST, INC.

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December 31, 2020

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

Year Ended December 31, 2020

Beginning balance, prior to adoption of CECL

Impact of adopting CECL – January 1, 2020

Provision for credit loss expense

Ending balance

The allowance for credit losses on our held-to-maturity securities was estimated on a collective basis by major security type and was based on a reasonable and supportable forecast period and a historical loss reversion for similar securities.

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

As of December 31, 2020, no other-than-temporary impairment was recorded on our held-to-maturity securities.

During 2020, 2019 and 2018, we recorded interest income (including the amortization of discount) of $ 9.7 million, $ 9.9 million and $ 5.8 million, respectively, related to these investments.

Note 8 —Investments in Equity Affiliates

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A summary of our investments in equity affiliates is as follows (in thousands):

Investments in Equity

Affiliates at

UPB of Loans to

Investments in Equity Affiliates at

Equity Affiliates at

Equity Affiliates

December 31, 2020

December 31, 2019

December 31, 2020

Arbor Residential Investor LLC

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Lightstone Value Plus REIT L.P.

West Shore Café

Lexford Portfolio

East River Portfolio

Arbor Residential Investor LLC ("ARI").

In 2015, we invested $9.6 million for 50% of our Former Manager'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 the mortgage banking

business, which was subject to dilution upon attaining certain profit hurdles of the business, and at December 31, 2019, our indirect interest was 16.3%.

During 2019, 2018 and 2017, we recorded

income of $7.2 million, income of $0.7 million and a loss of $7.3 million, respectively, to income (loss) from equity affiliates in the consolidated statements of income related

to this investment.

The loss in 2017 included a $5.5 million charge for our proportionate share of a litigation settlement that was paid.

During 2018, we made a $2.4 million payment for

our proportionate share of the litigation settlement, which was distributed back to us by our equity affiliate.

2015, we invested $1.7 million through ARI for a 50% noncontrolling interest in a joint venture that invests in non-qualified residential mortgages purchased from the mortgage

banking business's origination platform.

During 2018 and 2017, we received cash distributions totaling $0.7 million and $3.2 million, respectively, as a result of the joint venture

selling most of its mortgage assets, which were classified as returns of capital.

The income (loss) associated with this investment for all periods presented was de minimis.

At December 31,

2019, our basis in this investment was zero.

AMAC Holdings III LLC ("AMAC III").

In the first quarter of 2019, we committed to a $30.0 million investment (of which

$10.9 million was funded as of December 31, 2019) for an 18% interest in a multifamily-focused commercial real estate investment fund that is sponsored and managed by our chief executive

officer and one of his immediate family members.

We received a $0.2 million cash distribution, which was classified as a return of capital, related to this investment.

The loss associated with

this investment for 2019 was de minimis.

North Vermont Avenue.

In the fourth quarter of 2019, we invested $2.4 million for an initial 85% noncontrolling interest in

a joint venture

that acquired three parcels of land, which currently has three

Arbor Residential Investor LLC.

In 2015, we invested $ 9.6 million for a 50 % interest in Arbor Residential Investor LLC (“ARI”), with our former manager (ACM) holding the remaining 50 %.

ARI was formed to hold a 50 % interest in Wakefield Investment Holdings LLC (“Wakefield”), an entity that was formed with a third party to hold a controlling interest ( 65 )% in a residential mortgage banking business.

ARI has no other assets, liabilities or activity other than its investment in Wakefield.

At December 31, 2020, our indirect interest in the residential mortgage banking business was 16.3 %.

We account for our ownership interest in ARI under the equity method of accounting and ARI accounts for its ownership interest in Wakefield under the equity method of accounting.

During 2020, 2019 and 2018, we recorded income of $ 75.7 million, $ 7.2 million and $ 0.7 million, respectively, to income from equity affiliates in the consolidated statements of income, and during 2020, we received $ 43.2 million in cash distributions from this investment, which were classified as a return on capital.

During 2018, we made a $ 2.4 million payment for our proportionate share of the litigation settlement, which was distributed back to us by our equity affiliate.

Because of the significance of the operating results of this investment in 2020, we have included the audited financial statements of Wakefield in this report.

Subsequent Event.

In January 2021, an equity investor in the underlying residential mortgage banking business exercised their right to purchase an additional interest in this investment, which decreased our indirect interest to 12.3 %.

ARBOR REALTY TRUST, INC.

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December 31, 2020

Note 8Investments in Equity Affiliates (Continued)

structures, a commercial structure and a parking lot.

The joint venture intends to tear down the existing structures and construct a new 206 unit multifamily complex with ground floor

AMAC Holdings III LLC (“AMAC III”).

In 2019, we committed to a $ 30.0 million investment (of which $ 11.7 million was funded as of December 31, 2020) for an 18 % interest in a multifamily-focused commercial real estate investment fund that is sponsored and managed by our chief executive officer and one of his immediate family members.

During 2020 and 2019, we received cash distributions from this investment totaling $ 0.1 million and $ 0.2 million, respectively, which were classified as a return of capital.

The loss associated with this investment for 2020 was $ 0.9 million and the operating results for 2019 were de minimis.

North Vermont Avenue.

In 2019, we invested $ 2.4 million for an initial 85 % noncontrolling interest in a joint venture that acquired three parcels of land, which currently has three residential structures, a commercial structure and a parking lot.

The joint venture intends to tear down the existing structures and construct a new 202 unit multifamily complex with ground floor retail.

Operating results from this investment were de minimis for all periods presented.

Lightstone Value Plus REIT L.P.

We own a $1.9 million interest in an unconsolidated joint venture that

operating partnership units of Lightstone Value Plus REIT L.P.

We own a $ 1.9 million interest in an unconsolidated joint venture that holds common operating partnership units of Lightstone Value Plus REIT L.P.

(“Lightstone”).

We also own a 50% noncontrolling interest in an unconsolidated joint venture, JT Prime, which holds common

operating partnership units of Lightstone at a carrying value of $0.4 million.

The income associated with these investments for all periods presented was de minimis.

West Shore Café.

We own a 50% noncontrolling interest in the West Shore Lake Café, a restaurant/inn lakefront

in Lake Tahoe, California.

We provided a $1.7 million first mortgage loan to an affiliated entity to acquire property adjacent to the original property, which is scheduled to mature in March

2020 and bears interest at LIBOR plus 4.0%.

We also own a 50 % noncontrolling interest in an unconsolidated joint venture, JT Prime, which holds common operating partnership units of Lightstone at a carrying value of $ 0.4 million.

Operating results from these investments were de minimis for all periods presented.

West Shore Café.

We own a 50 % noncontrolling interest in the West Shore Lake Café, a restaurant/inn lakefront property in Lake Tahoe, California.

We provided a $ 1.7 million first mortgage loan to an affiliated entity to acquire property adjacent to the original property, which is scheduled to mature in September 2025 and bears interest at LIBOR plus 4.0 %.

During 2018, we determined that this investment exhibited indicators of impairment and, as a result of an impairment analysis performed;

we recorded an

other-than-temporary impairment of $2.2 million for the full carrying amount of this investment, which was recorded in income (loss) from equity affiliates in the consolidated statements of

we recorded an other-than-temporary impairment of $ 2.2 million for the full carrying amount of this investment, which was recorded in income from equity affiliates in the consolidated statements of income.

Also during 2018, we recorded a provision for loan loss of $ 1.7 million, fully reserving the first mortgage loan.

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We own a $ 44,000 noncontrolling equity interest in Lexford, a portfolio of multifamily assets.

In 2019, 2018

and 2017, we received

distributions from this equity investment and recognized income totaling $3.5 million, $2.5 million and $2.5 million, net of expenses, respectively.

In 2020, 2019 and 2018, we received distributions from this investment and recognized income totaling $ 1.1 million, $ 3.5 million and $ 2.5 million, net of expenses, respectively.

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

East River Portfolio.

We invested $ 0.1 million for a 5 % interest in a joint venture that owns two multifamily properties.

The joint venture is

comprised of a consortium of investors (which includes, among other unaffiliated investors, certain of our officers, our chief executive officer and certain other related parties) who together own an

interest of 95%.

We originated a $1.7 million bridge loan to the joint venture with an interest rate of 5.5% over LIBOR that was repaid in full during 2017.

The losses associated with this

investment for all periods presented was de minimis.

Equity Participation Interest.

During 2017, we received $1.5 million from the redemption of a 25% equity participation

interest we held in a

multifamily property, which is included in income (loss) from equity affiliates in our consolidated statements of income.

Our basis in this investment was zero prior to this transaction.

Note 19 for details of certain investments described above.

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2019

The joint venture is comprised of a consortium of investors (which includes, among other unaffiliated investors, certain of our officers, our chief executive officer and certain other related parties) who together own an interest of 95 %.

Operating results from this investment were de minimis for all periods presented.

See Note 19 for details of certain investments described above.

Note 9 – Real Estate Owned

Our real estate assets at both December 31, 2019 and 2018 were comprised of a hotel property and an office building.

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

December 31, 2020

December 31, 2019

(in thousands)

Building and intangible assets

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Real estate owned, net

2019, 2018 and 2017, our hotel property had a weighted average occupancy rate of 51%, 49% and 52%, respectively, a weighted average daily rate of $111, $108 and $108,

respectively, and weighted average revenue per available room of $57, $53 and $56, respectively.

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

quarters of the calendar year.

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

The building is currently vacant.

site visits and discussions with market participants, we determined that our real estate assets exhibited indicators of impairment and, based on our impairment analyses

performed, we recorded impairment losses of $1.0 million, $2.0 million and $3.2 million in 2019, 2018 and 2017, respectively.

real estate assets had restricted cash balances due to escrow requirements totaling $0.5 million at both December 31, 2019 and 2018.

Note 10Goodwill and Other Intangible Assets

The goodwill balance at both December 31, 2019 and 2018 was $56.6 million.

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

In addition, we paid $ 2.5 million in connection with a litigation settlement related to this property, which is included in selling and administrative expenses.

ARBOR REALTY TRUST, INC.

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December 31, 2020

Note 10Goodwill and Other Intangible Assets (Continued)

In November 2020, we sold a non-operating property for $ 4.1 million and recorded a $ 1.0 million gain, which was included in loss on sale of real estate.

This non-operating property was previously included in other assets on the consolidated balance sheets.

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

The building is currently vacant.

In the fourth quarter of 2020, we received $ 1.5 million related to a signage easement sold on this property and recorded the proceeds as a reduction of the carrying cost.

Through site visits and discussions with market participants, we determined that our real estate assets exhibited indicators of impairment and, based on our impairment analyses performed, we recorded impairment losses of $ 1.0 million and $ 2.0 million in 2019 and 2018, respectively.

Note 10 — Goodwill and Other Intangible Assets

The goodwill balance at both December 31, 2020 and 2019 was $ 56.6 million.

Other Intangible Assets.

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Below market leases

Acquired technology

Infinite ‑ lived intangible assets:

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Freddie Mac Program Plus license

amortization expense recorded for these intangible assets were $5.5 million, $5.6 million and $5.6 million during 2019, 2018 and 2017, respectively.

December 31, 2019, the weighted average remaining lives of our amortizable finite-lived intangible assets and the estimated amortization expense for each of the succeeding five

years are as follows ($ in thousands):

The amortization expense recorded for these intangible assets were $ 5.3 million, $ 5.5 million and $ 5.6 million during 2020, 2019 and 2018, respectively.

At December 31, 2020, the weighted average remaining lives of our amortizable finite-lived intangible assets and the estimated amortization expense for each of the succeeding five years are as follows ($ in thousands):

Estimated Amortization Expense for the

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Below market leases

Note 21 for details of goodwill and other intangible assets by segment.

See Note 21 for details of goodwill and other intangible assets by segment.

ARBOR REALTY TRUST, INC.

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$ 148.8 million loan specific credit facilities

$100 million repurchase facility

$ 100 million credit facility

$50 million credit facility

$ 100 million repurchase facility

$ 50 million credit facility

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$ 25 million credit facility

$8 million credit facility

$ 1.4 million master security agreements

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$ 750 million ASAP agreement

$500 million repurchase facility

$ 400 million joint repurchase facility

$ 400 million repurchase facility

$ 325 million credit facility

3 unchanged sentences

Consolidated total

debt carrying value for the Structured Business at December 31, 2019 and 2018 was net of unamortized deferred finance costs of $2.1 million and

$2.4 million, respectively.

The debt carrying value for the Agency Business at December 31, 2019 and 2018 was net of unamortized deferred finance costs of $0.2 million and

$0.1 million, respectively.

of December 31, 2019 and 2018, these facilities were collateralized by CLO bonds retained by us with a principal balance of $234.9 million and

$114.2 million, respectively, B Piece bonds with a carrying value of $68.7 million and $76.4 million, respectively, and SFR bonds with a carrying value of $20.0 million at

December 31, 2019.

(1) The debt carrying value for the Structured Business at December 31, 2020 and 2019 was net of unamortized deferred finance costs of $ 3.3 million and $ 2.1 million, respectively.

The debt carrying value for the Agency Business at December 31, 2020 and 2019 was net of unamortized deferred finance costs of $ 0.6 million and $ 0.2 million, respectively.

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

As of December 31, 2020 and 2019, these facilities were collateralized by our CLO bonds retained and consolidated by us with a principal balance of zero and $ 234.9 million, respectively, B Piece bonds with a carrying value of $ 58.5 million and $ 68.7 million, respectively, and SFR bonds with a carrying value of $ 10.0 million and $ 20.0 million, respectively.

During 2020, we significantly reduced the UPB of these facilities by $ 178.6 million to $ 38.5 million, primarily through a debt restructuring and the use of proceeds from our senior notes issued in the second quarter of 2020.

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.

These facilities typically renew annually and also include a "wind-down"

Joint Repurchase Facility.

We have a $700.0 million joint repurchase facility, which is shared between the Structured

Business and the Agency

Business, used to finance structured loans as well as Private Label loans.

The facility bears interest at a rate of 175 basis points over LIBOR on structured multifamily senior mortgage loans, 200 to

225 basis points over LIBOR on structured non-multifamily senior mortgage loans, 350 basis points over LIBOR on structured junior mortgage loans and 150 basis points over LIBOR on Private Label loans.

The facility matures in March 2020, with a one-year extension option, and has a maximum advance rate of 80% on all structured loans and 85% on Private Label loans.

If the estimated market value of the

loans financed in this facility decrease, we may be required to pay down borrowings under this facility.

Structured Business.

We utilize credit facilities and repurchase agreements with various financial institutions to finance our

Structured Business

loans and investments as described below.

We have a $ 1.10 billion joint repurchase facility, which is shared between the Structured Business and the Agency Business, of which $ 600.0 million matures in March 2021 and $ 500.0 million matures in March 2022 with each maturity eligible for a one-year extension option.

This facility is used to finance structured loans and includes an $ 800.0 million sublimit to finance Private Label loans, which expires in March 2021 unless that portion of the facility is extended through March 2022.

There is no stated interest rate under the facility and the interest rate is determined on a loan-by-loan basis and may include a LIBOR floor

ARBOR REALTY TRUST, INC.

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December 31, 2020

Note 11Debt Obligations (Continued)

December 31, 2019 and 2018, 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 4.39% and 5.07%, 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% and 70% at December 31, 2019 and 2018, respectively.

have a $300.0 million repurchase facility to finance loans that bears interest at a rate of 195 basis points over LIBOR that matures in December 2020, with quarterly extension

options having an extended maturity date no later than March 2023.

equal to a pro rata share of the LIBOR floors included in our originated loans.

The facility has a maximum advance rate of 80 % on all loans and has a $ 25.0 million over advance available to structured assets that bears interest at a rate of 650 basis points over LIBOR.

If the estimated market value of the loans financed in this facility decrease, we may be required to pay down borrowings under this facility.

Structured Business.

We utilize credit facilities and repurchase agreements with various financial institutions to finance our Structured Business loans and investments as described below.

At December 31, 2020 and 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 2.97 % 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 69 % and 71 % at December 31, 2020 and 2019, respectively.

We have a $ 400.0 million repurchase facility used to finance loans.

The facility bears interest at a rate of 220 basis points over LIBOR with a LIBOR floor of 75 basis points and matures in September 2021, with quarterly extension options having an extended maturity date no later than March 2023.

The facility has a maximum advance rate of 75 %.

have a $200.0 million repurchase facility to finance single-family rental properties that bears interest at a rate of 240 basis points over LIBOR and matures in August 2020,

with six-month extension options in perpetuity.

have several loan specific credit facilities totaling $128.7 million used to finance individual bridge loans.

The facilities bear interest at rates ranging from 210 to 250

basis points over LIBOR and mature between May 2020 and May 2022.

have a $100.0 million repurchase facility to finance multifamily bridge loans that bears interest at a rate ranging from 175 to 195 basis points over LIBOR (depending on the

class of loan financed) and matures in June 2020.

We have a $ 200.0 million repurchase facility to finance single-family rental properties.

The facility bears interest at a rate of 275 basis points over LIBOR with a LIBOR floor of 25 basis points and matures in December 2021.

The facility has a maximum advance rate of 85% .

have a $75.0 million credit facility to finance multifamily bridge loans that bears interest at 175 basis points over LIBOR and matures in May 2020, with three one-year

extension options.

This facility includes a $25.0 million sublimit to finance healthcare related loans at an interest rate ranging from 212.5 to 250 basis points over LIBOR depending on the

type of healthcare facility financed and the advance rate.

The facility has a maximum advance rate of 80% on multifamily bridge loans and 75% on healthcare related loans.

have another $75.0 million credit facility to finance bridge loans that bears interest at a rate of 175 basis points over LIBOR and matures in June 2020.

The facility has a

maximum advance rate of 70% to 80%, depending on the property type.

have a $50.0 million credit facility to finance multifamily loans that bears interest at a rate of 200 basis points over LIBOR and matures in April 2020, with two one-year

extension options.

We have several loan specific credit facilities totaling $ 148.8 million used to finance individual bridge loans.

The facilities bear interest at rates ranging from 220 to 250 basis points over LIBOR and fixed rates ranging from 3.50 % to 4.00 % and mature between June 2021 and December 2022.

We have a $ 100.0 million credit facility to finance bridge loans that bears an interest rate ranging from 230 to 300 basis points over LIBOR depending on the property type financed, a LIBOR floor of 50 basis points and a July 2021 maturity date.

This facility includes a $ 25.0 million sublimit to finance healthcare related loans.

The facility has a maximum advance rate of 75 %.

We have another $ 100.0 million credit facility to finance single-family rental properties that bears interest at a rate of 300 basis points over LIBOR with an interest rate floor of 4.00 % and matures in October 2022.

The facility has a maximum advance rate of 75 %.

We have a $ 100.0 million repurchase facility to finance multifamily bridge loans that the interest rate is determined on a loan-by-loan basis with a LIBOR floor of 50 basis points and matures in September 2021.

The facility has a maximum advance rate of 75 %.

We have a $ 50.0 million credit facility to finance multifamily loans that bears interest at a rate of 200 basis points over LIBOR and matures in April 2021, with a one-year extension option.

This facility has a maximum advance rate of 80 %.

have a $50.0 million credit facility to finance single-family rental properties that bears interest at a rate of 250 basis points over LIBOR with an interest rate floor of

We have another $ 50.0 million credit facility to finance single-family rental properties that bears interest at a rate of 250 basis points over LIBOR with an interest rate floor of 4.00 %.

The facility matures in October 2022, with a one-year extension option, and has a maximum advance rate equal to the lesser of:

(1) 75% of the UPB, (2) 50% of the appraised value

of the collateral, or (3) 55% of the projected cost of construction.

have another $50.0 million credit facility that bears interest at a rate ranging from 250 to 325 basis points over LIBOR, depending on the type of healthcare facility financed,

and matures in September 2020.

The facility includes a one-year extension option and has a maximum advance rate of 80%.

(1) 75 % of the UPB, (2) 50 % of the appraised value of the collateral, or (3) 55 % to 65% of the projected cost of construction.

We have a $ 30.0 million unsecured working capital line of credit that bears interest at a rate of 325 basis points over LIBOR with a LIBOR floor of 25 basis points.

This line matures in November 2021 and is renewable annually.

We have a $ 25.0 million credit facility used to purchase loans that bears interest at a rate of 225 basis points over LIBOR and matures in June 2022, with a one -year extension option.

This facility has a maximum advance rate of 80%.

ARBOR REALTY TRUST, INC.

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December 31, 2020

Note 11Debt Obligations (Continued)

We have a $25.0 million credit facility used to purchase loans.

The facility bears interest at a rate of 225 basis points over LIBOR and matures in June 2022, with a one-year

extension option.

have a $25.0 million unsecured working capital line of credit that bears interest at a rate of 225 basis points over LIBOR.

This line matures in August 2020 and is renewable

had a $20.0 million credit facility used to finance a healthcare facility bridge loan.

The facility bore interest at a rate of 250 basis points over LIBOR and, in the fourth

quarter of 2019, the facility was repaid and the loan collateralizing this facility was placed into another facility.

had an $8.0 million credit facility used to finance a healthcare facility bridge loan.

The facility bore interest at a rate of 250 basis points over LIBOR and, in the second

quarter of 2019, the loan collateralizing this facility was placed into a CLO and we simultaneously repaid this facility.

have four notes payable under master security agreements that were used to finance leasehold improvements and capital expenditures for our corporate office.

The notes bear interest at

a weighted average fixed rate of 4.08%, require monthly amortization payments and mature between 2020 and 2022.

have four uncommitted repurchase facilities that are used to finance securities we retained in connection with our CLOs and our purchases of B Piece bonds from SBL program

securitizations and SFR bonds.

We have two notes payable under master security agreements that were used to finance capital expenditures.

The notes bear interest at a weighted average fixed rate of 4.10 % and mature between 2021 and 2022.

We have four uncommitted repurchase facilities that are used to finance securities we retained in connection with our CLOs and our purchases of B Piece bonds from SBL program securitizations and SFR bonds.

These facilities bear interest at rates ranging from 120 to 275 basis points over LIBOR and have no stated maturity dates.

Agency Business.

We utilize credit facilities with various financial institutions to finance substantially all of our loans

held-for-sale as

described below.

have a $750.0 million ASAP agreement with Fannie Mae providing us with a warehousing credit facility for mortgage loans that are to be sold to Fannie Mae and serviced under the

Fannie Mae DUS program.

The ASAP agreement is not a committed line, has no expiration date and bears interest at a rate of 105 basis points over LIBOR, with a LIBOR Floor of 0.35%.

have a $500.0 million repurchase facility that bears interest at a rate of 115 basis points over LIBOR and matures in October 2020.

The financial institution that provided this

facility has a security interest in the underlying mortgage notes that serve as collateral for this facility.

have a $100.0 million repurchase facility that bears interest at a rate of 115 basis points over LIBOR and matures in June 2020.

The committed amount under the facility was

temporarily increased $150.0 million to $250.0 million, which expired in January 2020.

The financial institution that provided this facility has a security interest in the underlying

mortgage notes that serve as collateral for this facility.

have a $150.0 million credit facility that bears interest at a rate of 115 basis points over LIBOR and was scheduled to mature in January 2020, which was temporarily extended

to March 2020.

We are currently in negotiations with the lender to further amend and extend the agreement.

The financial institution that provided this facility has a security interest in the

underlying mortgage notes that serve as collateral for this facility.

We utilize credit facilities with various financial institutions to finance substantially all of our loans held-for-sale as described below.

We have a $ 750.0 million ASAP agreement with Fannie Mae providing us with a warehousing credit facility for mortgage loans that are to be sold to Fannie Mae and serviced under the Fannie Mae DUS program.

The ASAP agreement is not a committed line, has no expiration date and bears interest at a rate of 115 basis points over SOFR, with a SOFR Floor of 25 basis points.

We have a $ 400.0 million repurchase facility that bears interest at a rate of 150 basis points over LIBOR and matures in October 2021.

The financial institution that provided this facility has a security interest in the underlying mortgage notes that serve as collateral for this facility.

We have a $ 150.0 million credit facility that bears interest at a rate of 115 basis points over LIBOR and matures in March 2021.

The facility was temporarily increased to $ 325.0 million, which expires in February 2021.

The facility bears interest at a rate of 115 basis points over LIBOR for the initial $ 150.0 million and 140 basis points over LIBOR with a LIBOR floor of 25 basis points for amounts outstanding under the temporary increase.

The financial institution that provided this facility has a security interest in the underlying mortgage notes that serve as collateral for this facility.

We have a $ 100.0 million credit facility that bears interest at a rate of 115 basis points over LIBOR with a LIBOR floor of 50 basis points and matures in June 2021.

This facility was temporarily increased to $ 250.0 million, which expires in February 2021.

The financial institution that provided this facility has a security interest in the underlying mortgage notes that serve as collateral for this facility.

We have another $ 150.0 million credit facility that bears interest at a rate of 140 basis points over LIBOR with a LIBOR floor of 25 basis points and matures in July 2021.

This facility includes 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, which bears interest at a rate of 200 basis points over LIBOR with a LIBOR floor of 25 basis points.

The financial institution that provided this facility has a security interest in the underlying mortgage notes that serve as collateral for this facility.

We have a $ 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.

The facility bears interest at a fixed rate of 2.875 %, matures in September 2023 and is primarily collateralized by our servicing revenue as approved by Fannie Mae and Freddie Mac.

The facility includes a $ 5.0 million sublimit for an obligation under the Freddie Mac SBL program.

At December 31, 2020, the letters of credit outstanding include $ 45.0 million for the Fannie Mae DUS program and $ 5.0 million for the Freddie Mac SBL program.

ARBOR REALTY TRUST, INC.

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Note 11Debt Obligations (Continued)

have another $150.0 million credit facility that bears interest at a rate of 115 basis points over LIBOR and matures in July 2020.

The financial institution that provided this

facility has a security interest in the underlying mortgage notes that serve as collateral for this facility.

have a $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.

bears interest at a fixed rate of 2.875%, matures in September 2020 and is primarily collateralized by our servicing revenue as approved by Fannie Mae and Freddie Mac.

The facility includes a

$5.0 million sublimit for an obligation

under the Freddie Mac SBL program.

At December 31, 2019, the letters of credit outstanding include $45.0 million for the Fannie Mae DUS program and $5.0 million for the Freddie

Mac SBL program.

We account for our CLO transactions on our consolidated balance sheet as financing facilities.

Our CLOs are VIEs for which we are the primary

beneficiary and are consolidated in our financial statements.

Our CLOs are VIEs for which we are the primary beneficiary and are consolidated in our financial statements.

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

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

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

Collateral (3)

December 31, 2020

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2019

Note 11Debt Obligations (Continued)

Collateral(3)

December 31, 2018

carrying value is net of $17.3 million and $16.0 million of deferred financing fees at December 31, 2019 and 2018, respectively.

December 31, 2019 and 2018, the aggregate weighted average note rate for our CLOs, including certain fees and costs, was 3.63% and 4.73%, respectively.

of December 31, 2019 and 2018, there was no collateral at risk of default or deemed to be a "credit risk" as defined by the CLO indenture.

(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 $58.6 million and $25.1 million at December 31, 2019 and 2018, respectively.

In November 2019, we completed CLO XII, issuing eight tranches of CLO notes through two newly-formed wholly-owned

subsidiaries totaling

$585.8 million.

Of the total CLO notes issued, $534.2 million were investment grade notes issued to third party investors and $51.6 million were below investment grade notes

retained by us.

As of the CLO closing date, the notes were secured by a portfolio of loan obligations with a face value of $510.9 million, consisting primarily of bridge loans that were

contributed from our existing loan portfolio.

The financing has a three-year replacement period that allows the principal proceeds and sale proceeds (if any) of the loan obligations to be reinvested

in qualifying replacement loan obligations, subject to the satisfaction of certain conditions set forth in the indenture.

(1) Debt carrying value is net of $ 15.0 million and $ 17.3 million of deferred financing fees at December 31, 2020 and 2019, respectively.

(2) At December 31, 2020 and 2019, the aggregate weighted average note rate for our CLOs, including certain fees and costs, was 1.93 % and 3.63 % , respectively.

(3) As of December 31, 2020 and 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 $ 49.5 million and $ 58.6 million at December 31, 2020 and 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.

Of the total CLO notes issued, $ 668.0 million were investment grade notes issued to third party investors and $ 70.0 million were below investment grade notes retained by us.

As of the CLO closing date, the notes were secured by a portfolio of loan obligations with a face value of $ 640.5 million, consisting primarily of bridge loans that were contributed from our existing loan portfolio.

The financing has a three -year replacement period that allows the principal proceeds and sale proceeds (if any) of the loan obligations to be reinvested in qualifying replacement loan obligations, subject to the satisfaction of certain conditions set forth in the indenture.

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

Initially, the proceeds of the issuance of the securities also included $124.1 million for the purpose of acquiring additional loan obligations for a period of up to 180 days from the

CLO closing date, which we subsequently utilized, resulting in the issuer owning loan obligations with a face value of $635.0 million, representing leverage of 84%.

We retained a residual

interest in the portfolio with a notional amount of $100.8 million, including the $51.6 million below investment grade notes.

The notes had an initial weighted average interest rate of

1.50% plus one-month LIBOR and interest payments on the notes are payable monthly.

In June 2019, we completed CLO XI, issuing eight tranches of CLO notes through two newly-formed wholly-owned subsidiaries

$602.1 million.

Of the total CLO notes issued, $533.0 million were investment grade notes issued to third party investors and $69.1 million were below investment grade notes

retained by us.

As of the CLO closing date, the notes were secured by a

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, which we subsequently utilized, resulting 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.

ARBOR REALTY TRUST, INC.

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Note 11Debt Obligations (Continued)

of loan obligations with a face value of $520.4 million, consisting primarily of bridge loans that were contributed from our existing loan portfolio.

The financing has a three-year

replacement period that allows the principal proceeds and sale proceeds (if any) of the loan obligations to be reinvested in qualifying replacement loan obligations, subject to the satisfaction of

certain conditions set forth in the indenture.

In November 2019, we completed CLO XII, issuing eight tranches of CLO notes through two newly-formed wholly-owned subsidiaries totaling $ 585.8 million.

Of the total CLO notes issued, $ 534.2 million were investment grade notes issued to third party investors and $ 51.6 million were below investment grade notes retained by us.

As of the CLO closing date, the notes were secured by a portfolio of loan obligations with a face value of $ 510.9 million, consisting primarily of bridge loans that were contributed from our existing loan portfolio.

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

Initially, the proceeds of the issuance of the securities also included

$129.6 million for the purpose of acquiring additional loan obligations for a period of up to 120 days from the CLO closing date, which we subsequently utilized, resulting in the issuer

owning loan obligations with a face value of $650.0 million, representing leverage of 82%.

We retained a residual interest in the portfolio with a notional amount of $117.0 million,

including the $69.1 million below investment grade notes.

The notes had an initial weighted average interest rate of 1.44% plus one-month LIBOR and interest payments on the notes are payable

In June 2018, we completed CLO X, issuing seven tranches of CLO notes through two newly-formed wholly-owned subsidiaries

$494.2 million.

Of the total CLO notes issued, $441.0 million were investment grade notes issued to third party investors and $53.2 million were below investment grade notes

retained by us.

As of the CLO closing date, the notes were secured by a portfolio of loan obligations with a face value of $501.9 million, consisting primarily of bridge loans that were

contributed from our existing loan portfolio.

The financing has a stated maturity date in June 2028 and a four-year replacement period that allows the principal proceeds and sale proceeds (if any) of

the loan obligations to be reinvested in qualifying replacement loan obligations, subject to the satisfaction of certain conditions set forth in the indenture.

Thereafter, the outstanding debt balance

will be reduced as loans are repaid.

Initially, the proceeds of the issuance of the securities also included $58.1 million for the purpose of acquiring additional loan obligations for a period

of up to 120 days from the CLO closing date, which were subsequently utilized, resulting in the issuer owning loan obligations with a face value of $560.0 million, representing leverage

Initially, the proceeds of the issuance of the securities also included $ 124.1 million for the purpose of acquiring additional loan obligations for a period of up to 180 days from the CLO closing date, which we subsequently utilized, resulting in the issuer owning loan obligations with a face value of $ 635.0 million, representing leverage of 84 % .

We retained a residual interest in the portfolio with a notional amount of $ 100.8 million, including the $ 51.6 million below investment grade notes.

The notes had an initial

weighted average interest rate of 1.45% plus one-month LIBOR and interest payments on the notes are payable monthly.

In December 2017, we completed CLO IX, issuing five tranches of CLO notes through two

newly-formed wholly-owned subsidiaries totaling $388.2 million.

Of the total CLO notes issued, $356.4 million were investment grade notes issued to third party investors and

$31.8 million were below investment grade notes retained by us.

As of the CLO closing date, the notes were secured by a portfolio of loan obligations with a face value of $387.3 million,

consisting primarily of bridge loans that were contributed from our existing loan portfolio.

The financing has a stated maturity date in December 2027 and a three-year replacement period that allows

the principal proceeds and sale proceeds (if any) of the loan obligations to be reinvested in qualifying replacement loan obligations, subject to the satisfaction of certain conditions set forth in

the indenture.

The notes had an initial weighted average interest rate of 1.50 % plus one-month LIBOR and interest payments on the notes are payable monthly.

In June 2019, we completed CLO XI, issuing eight tranches of CLO notes through two newly-formed wholly-owned subsidiaries totaling $ 602.1 million.

Of the total CLO notes issued, $ 533.0 million were investment grade notes issued to third party investors and $ 69.1 million were below investment grade notes retained by us.

As of the CLO closing date, the notes were secured by a portfolio of loan obligations with a face value of $ 520.4 million, consisting primarily of bridge loans that were contributed from our existing loan portfolio.

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

Initially, the proceeds of the issuance of the securities also included $92.7 million for the

purpose of acquiring additional loan obligations for a period of up to 120 days from the CLO closing date, which were subsequently utilized, resulting in the issuer owning loan obligations with

a face value of $480.0 million, representing leverage of 74%.

We retained a residual interest in the portfolio with a notional amount of $123.6 million, including the

$31.8 million

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2019

Note 11Debt Obligations (Continued)

investment grade notes.

The notes had an initial weighted average interest rate of 1.36% plus LIBOR and interest payments on the notes are payable monthly.

In August 2017, we completed CLO VIII, issuing six tranches of CLO notes through two newly-formed wholly-owned

subsidiaries totaling

$312.1 million.

Of the total CLO notes issued, $282.9 million were investment grade notes issued to third party investors and $29.2 million were below investment grade notes

retained by us.

As of the CLO closing date, the notes were secured by a portfolio of loan obligations with a face value of $293.7 million, consisting primarily of bridge loans that were

contributed from our existing loan portfolio.

The financing has a stated maturity date in August 2027 and a three-year replacement period that allows the principal proceeds and sale proceeds (if any)

of the loan obligations to be reinvested in qualifying replacement loan obligations, subject to the satisfaction of certain conditions set forth in the indenture.

Thereafter, the outstanding debt

balance will be reduced as loans are repaid.

Initially, the proceeds of the issuance of the securities also included $71.3 million for the purpose of acquiring additional loan obligations for a

period of up to 120 days from the CLO closing date, which were subsequently utilized, resulting in the issuer owning loan obligations with a face value of $365.0 million, representing

leverage of 78%.

Initially, the proceeds of the issuance of the securities also included $ 129.6 million for the purpose of acquiring additional loan obligations for a period of up to 120 days from the CLO closing date, which we subsequently utilized, resulting in the issuer owning loan obligations with a face value of $ 650.0 million, representing leverage of 82 % .

We retained a residual interest in the portfolio with a notional amount of $ 117.0 million, including the $ 69.1 million below investment grade notes.

The notes had an

initial weighted average interest rate of 1.31% plus LIBOR and interest payments on the notes are payable monthly.

In November 2019, we unwound CLO VII redeeming $279.0 million of outstanding notes which were repaid primarily

from the refinancing

of the remaining assets within our existing financing facilities (including CLO XII), as well as with cash held by CLO VII, and expensed $1.4 million of deferred financing fees into interest

expense on the consolidated statements of income.

In June 2019, we unwound CLO VI redeeming $250.3 million of outstanding notes which were repaid primarily from the

refinancing of the

remaining assets within our existing financing facilities (including CLO XI), as well as with cash held by CLO VI, and expensed $1.2 million of deferred financing fees into interest expense on

the consolidated statements of income.

In June 2018, we unwound CLO V, redeeming $267.8 million of outstanding notes which were repaid primarily from the

refinancing of the

remaining assets within our existing financing facilities (including CLO X), as well as with cash held by CLO V, and expensed $1.3 million of deferred financing fees into interest expense on

the consolidated statements of income.

In September 2017, we unwound CLO IV, redeeming $219.0 million of our outstanding notes which were repaid primarily

refinancing of the remaining assets within our existing financing facilities (including CLO VIII), as well as with cash held by CLO IV, and expensed $1.1 million of deferred financing fees into

interest expense on the consolidated statements of income.

Luxembourg Debt Fund

In November 2017, we formed a $100.0 million Debt Fund and issued $70.0 million of floating rate notes to third party investors

which bore an initial interest rate of 4.15% over LIBOR.

The notes mature in 2025 and we retained a $30.0 million equity interest in the Debt Fund.

The Debt Fund is a VIE for which we are the

primary beneficiary and is consolidated in our financial statements.

The notes had an initial weighted average interest rate of 1.44 % plus one-month LIBOR and interest payments on the notes are payable monthly.

In June 2018, we completed CLO X, issuing seven tranches of CLO notes through two newly-formed wholly-owned subsidiaries totaling $ 494.2 million.

Of the total CLO notes issued, $ 441.0 million were investment grade notes issued to third party investors and $ 53.2 million were below investment grade notes retained by us.

As of the CLO closing date, the notes were secured by a portfolio of loan obligations with a face value of $ 501.9 million, consisting primarily of bridge loans that were contributed from our existing loan portfolio.

The financing has a stated maturity date in June 2028 and a four -year replacement period that allows the principal proceeds and sale proceeds (if any) of the loan obligations to be reinvested in qualifying replacement loan obligations, subject to the satisfaction of certain conditions set forth in the indenture.

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

Initially, the proceeds of the issuance of the securities also included $ 58.1 million for the purpose of acquiring additional loan obligations for a period of up to 120 days from the CLO closing date, which we subsequently utilized, resulting in the issuer owning loan obligations with a face value of $ 560.0 million, representing leverage of 79 % .

We retained a residual interest in the portfolio with a notional amount of $ 119.0 million, including the $ 53.2 million below investment grade notes.

The notes had an initial weighted average interest rate of 1.45 % plus one-month LIBOR and interest payments on the notes are payable monthly.

In December 2017, we completed CLO IX, issuing five tranches of CLO notes through two newly-formed wholly-owned subsidiaries totaling $ 388.2 million.

Of the total CLO notes issued, $ 356.4 million were investment grade notes issued to third party investors and $ 31.8 million were below investment grade notes retained by us.

As of the CLO closing date, the notes were secured by a portfolio of loan obligations with a face value of $ 387.3 million, consisting primarily of bridge loans that were contributed from our existing loan portfolio.

The financing has a stated maturity date in December 2027 and had a three -year replacement period that expired in December 2020, therefore, the outstanding debt balance will reduce as loans are repaid.

Initially, the proceeds of the issuance of the securities also included $ 92.7 million for the purpose of acquiring additional loan obligations for a period of up to 120 days from the CLO closing date, which we subsequently utilized, resulting in the issuer owning loan obligations with a face value of $ 480.0 million, representing leverage of 74 % .

We retained a residual interest in the portfolio with a notional amount of $ 123.6 million, including the $ 31.8 million below investment grade notes.

The notes had an initial weighted average interest rate of 1.36 % plus LIBOR and interest payments on the notes are payable monthly.

ARBOR REALTY TRUST, INC.

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Note 11Debt Obligations (Continued)

is secured by a portfolio of loan obligations and cash with a face value of $100.0 million, which includes first mortgage bridge loans, senior participation interests in first mortgage

bridge loans, subordinate participation interest in first mortgage bridge loans and participation interests in mezzanine

The Debt Fund allows, for a period of three years, principal proceeds from portfolio assets to be reinvested in qualifying replacement assets, subject to certain conditions.

and the corresponding collateral under our Debt Fund are as follows ($ in thousands):

Collateral(3)

In March 2020, we unwound 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 income.

In November 2019, we unwound CLO VII redeeming $ 279.0 million of outstanding notes which were repaid primarily from the refinancing of the remaining assets within our existing financing facilities (including CLO XII), as well as with cash held by CLO VII, and expensed $ 1.4 million of deferred financing fees into interest expense on the consolidated statements of income.

In June 2019, we unwound CLO VI redeeming $ 250.3 million of outstanding notes which were repaid primarily from the refinancing of the remaining assets within our existing financing facilities (including CLO XI), as well as with cash held by CLO VI, and expensed $ 1.2 million of deferred financing fees into interest expense on the consolidated statements of income.

In June 2018, we unwound CLO V, redeeming $ 267.8 million of outstanding notes which were repaid primarily from the refinancing of the remaining assets within our existing financing facilities (including CLO X), as well as with cash held by CLO V, and expensed $ 1.3 million of deferred financing fees into interest expense on the consolidated statements of income.

Luxembourg Debt Fund

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.

The 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):

December 31, 2020

December 31, 2019

carrying value is net of $1.4 million and $1.8 million of deferred financing fees at December 31, 2019 and 2018, respectively.

December 31, 2019 and 2018, the aggregate weighted average note rate, including certain fees and costs, was 7.17% and 7.49%, respectively.

both December 31, 2019 and 2018, there was no collateral at risk of default or deemed to be a "credit risk."

(4) Represents

restricted cash held for reinvestment.

Excludes restricted cash related to interest payments, delayed fundings and expenses.

Senior Unsecured Notes

In October 2019, we issued $110.0 million aggregate principal amount of 4.75% senior unsecured notes due in October 2024 (the "4.75%

Notes") in a private placement.

We received proceeds of $108.2 million from the issuances, after deducting the underwriting discount and other offering expenses.

We used the net proceeds to

make investments and for general corporate purposes.

The 4.75% Notes are unsecured and can be redeemed by us at any time prior to October 15, 2024, 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 4.75% Notes on or after October 15, 2024, at a redemption price equal to

100% of the aggregate principal amount, plus accrued and unpaid interest.

The interest is paid semiannually in April and October starting in April 2020.

At December 31, 2019, the debt carrying

value of the 4.75% Notes was $108.4 million, net of $1.6 million of deferred financing fees, and the weighted average note rate, including certain fees and costs, was 5.23%.

March 2019, we issued $90.0 million aggregate principal amount of 5.75% senior unsecured notes due in April 2024 (the "5.75% Notes") in a private placement.

proceeds of $88.2 million from the issuances, after deducting the underwriting discount and other offering expenses.

We used the net proceeds to make investments and for general corporate

The 5.75% Notes

8.00% Notes (3)

4.50% Notes (3)

4.75% Notes (4)

5.75% Notes (4)

5.625% Notes (4)

(1) At December 31, 2020 and 2019, the carrying value is net of deferred financing fees of $ 7.9 million and $ 5.2 million, respectively.

(2) At December 31, 2020 and 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

ARBOR REALTY TRUST, INC.

2 unchanged sentences

December 31, 2020

Note 11Debt Obligations (Continued)

unsecured and can be redeemed by us at any time prior to April 1, 2024, 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 5.75% Notes on or after April 1, 2024, at a redemption price equal to 100% of the aggregate principal amount, plus accrued and unpaid interest.

The interest is paid semiannually in April and October.

At December 31, 2019, the debt carrying value of the 5.75% Notes was $88.4 million, net of $1.6 million of deferred

financing fees, and the weighted average note rate, including certain fees and costs, was 6.18%.

March 2018, we issued $100.0 million aggregate principal amount of 5.625% senior unsecured notes due in May 2023 (the "Initial Notes") in a private placement, and, in May 2018,

we issued an additional $25.0 million (the "Reopened Notes" and, together with the Initial Notes, the "5.625% Notes,") which brought the aggregate outstanding principal amount to

$125.0 million.

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"

and, together with the Initial Notes, the "8.00% Notes,") which brought the aggregate outstanding principal amount to $ 70.8 million.

The Reopened Notes are fully fungible with, and rank equally in right of payment with the Initial Notes.

We received total proceeds of $122.3 million from the issuances,

after deducting the underwriting discount and other offering expenses.

We used the net proceeds from the Initial Notes to fully redeem our 7.375% Notes totaling $97.9 million and the net

proceeds from the Reopened Notes to make investments and for general corporate purposes.

The 5.625% Notes are unsecured and can be redeemed by us at any time prior to April 1, 2023, 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 5.625% Notes on or after April 1,

2023, at a redemption price equal to 100% of the aggregate principal amount, plus accrued and unpaid interest.

The interest is paid semiannually in May and November.

At December 31, 2019 and

2018, the debt carrying value of the 5.625% Notes were $123.1 million and $122.5 million, respectively, net of $1.9 million and $2.5 million, respectively, of deferred

financing fees.

At both December 31, 2019 and 2018, the weighted average note rate was 6.08%, respectively, including certain fees and costs.

We received total proceeds of $ 69.6 million from the issuances, after deducting the underwriting discount and other offering expenses.

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

In March 2020, we issued $ 275.0 million aggregate principal amount of 4.50 % senior unsecured notes due in March 2027 (the "4.50% Notes") in a private placement.

We received proceeds of $ 271.8 million from the issuance, after deducting the underwriting discount and other offering expenses.

We used a significant portion of the net proceeds to repay secured indebtedness.

In October 2019, we issued $ 110.0 million aggregate principal amount of 4.75 % senior unsecured notes due in October 2024 (the "4.75% Notes") in a private placement.

We received proceeds of $ 108.2 million from the issuances, after deducting the underwriting discount and other offering expenses.

We used the net proceeds to make investments and for general corporate purposes.

In March 2019, we issued $ 90.0 million aggregate principal amount of 5.75 % senior unsecured notes due in April 2024 (the "5.75% Notes") in a private placement.

We received proceeds of $ 88.2 million from the issuances, after deducting the underwriting discount and other offering expenses.

We used the net proceeds to make investments and for general corporate purposes.

In March 2018, we issued $ 100.0 million aggregate principal amount of 5.625 % senior unsecured notes due in May 2023 (the “Initial Notes”) in a private placement, and, in May 2018, we issued an additional $ 25.0 million (the “Reopened Notes” and, together with the Initial Notes, the “5.625% Notes,”) which brought the aggregate outstanding principal amount to $ 125.0 million.

The Reopened Notes are fully fungible with, and rank equally in right of payment with the Initial Notes.

We received total proceeds of $ 122.3 million from the issuances, after deducting the underwriting discount and other offering expenses.

We used the net proceeds from the Initial Notes to fully redeem 7.375% senior unsecured notes totaling $97.9 million and the net proceeds from the Reopened Notes to make investments and for general corporate purposes.

Convertible Senior Unsecured Notes

In November 2019, we issued $264.0 million in aggregate principal amount of 4.75% convertible notes through a private placement offering,

which includes the exercised purchaser's total over-allotment option of $34.0 million.

The 4.75% convertible notes pay interest semiannually in arrears and are scheduled to mature in November

2022, unless earlier converted or repurchased by the holders pursuant to their terms.

The initial conversion rate and the conversion rate at December 31, 2019 was 56.1695 shares of common stock

per $1,000 of principal representing a conversion price of $17.80 per share of common stock.

We received proceeds totaling $256.5 million, net of the underwriter's discount and fees, which is

being amortized through interest expense over the life of such notes.

We used the net proceeds from the issuance primarily for the exchange of $228.7 million of our 5.25% convertible notes for

a combination of $233.1 million in cash (which includes accrued interest) and 4,478,315 shares of our common stock.

The remaining net proceeds were used for general

corporate purposes.

In 2019, we issued $ 264.0 million in aggregate principal amount of 4.75 % convertible notes through a private placement offering, which includes the exercised purchaser’s total over-allotment option of $ 34.0 million.

The 4.75% convertible notes pay interest semiannually in arrears and are scheduled to mature in November 2022, unless earlier converted or repurchased by the holders pursuant to their terms.

The initial conversion rate and the conversion rate at December 31, 2019 was 56.1695 shares of common stock per $ 1,000 of principal representing a conversion price of $ 17.80 per share of common stock.

We received proceeds totaling $ 256.5 million, net of the underwriter’s discount and fees, which is being amortized through interest expense over the life of such notes.

We used the net proceeds from the issuance primarily for the exchange of $ 228.7 million of our 5.25 % convertible notes for a combination of $ 233.1 million in cash (which included accrued interest) and 4,478,315 shares of our common stock.

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.

2018, we completed a similar exchange where we used the net proceeds from two separate private placements of our 5.25% convertible notes to initially exchange $127.6 million of

our 5.375% convertible notes and $99.8 million of our 6.50% convertible notes for a combination of $219.8 million

As of December 31, 2020, the 4.75% convertible notes had conversion rates of 56.3058 shares, common stock per $ 1,000 of principal, which represented a conversion price of $ 17.76 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 notes to initially exchange $ 127.6 million of our 5.375 % convertible notes and $ 99.8 million of our 6.50 % convertible notes for a combination of $ 219.8 million in cash (which included accrued interest) and 6,820,196 shares of our common stock.

ARBOR REALTY TRUST, INC.

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December 31, 2020

Note 11Debt Obligations (Continued)

cash (which includes accrued interest) and 6,820,196 shares of our common stock.

During 2018, we recorded a loss on extinguishment of debt of $5.0 million in connection with these exchanges,

which included an inducement charge of $1.1 million.

December 31, 2019, there were $11.5 million, $24.3 million and $1.1 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 December 31, 2019, 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 89.2795 shares, 79.8777 shares and 114.6568 shares,

respectively, of common stock per $1,000 of principal, which represented a conversion price of $11.20 per share, $12.52 per share and $8.72 per share of common stock, respectively.

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.

convertible senior unsecured notes are not redeemable by us prior to their maturities and are convertible into, at our election, cash, shares of our common stock or a combination of

both, subject to the satisfaction of certain conditions and during specified periods.

The conversion rates are subject to adjustment upon the occurrence of certain specified events and the holders may

require us to repurchase all, or any portion, of their notes for cash equal to 100% of the principal amount, plus accrued and unpaid interest, if we undergo a fundamental change specified in the

During 2018, we recorded a loss on extinguishment of debt of $ 5.0 million in connection with these exchanges, which included an inducement charge of $ 1.1 million.

At December 31, 2020, there were $ 0.5 million and $ 13.8 million aggregate principal amount remaining of our 5.25 % convertible notes issued on July 3, 2018 and 5.25 % convertible notes issued on July 20, 2018, respectively.

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

At December 31, 2020, the 5.25% convertible notes issued on July 3, 2018 and 5.25% convertible notes issued on July 20, 2018 had conversion rates of 91.0613 shares and 81.4718 shares, respectively, of common stock per $ 1,000 of principal, which represented a conversion price of $ 10.98 per share and $ 12.27 per share of common stock, respectively.

The 5.25% convertible notes pay interest semiannually in arrears and has a scheduled maturity date in July 2021, unless earlier converted or repurchased by the holders pursuant to their terms.

Our convertible senior unsecured notes are not redeemable by us prior to their maturities and are convertible by the holder into, at our election, cash, shares of our common stock or a combination of both, subject to the satisfaction of certain conditions and during specified periods.

The conversion rates are subject to adjustment upon the occurrence of certain specified events and the holders may require us to repurchase all, or any portion, of their notes for cash equal to 100 % of the principal amount, plus accrued and unpaid interest, if we undergo a fundamental change specified in the agreements.

We intend to settle the principal balance of our convertible debt in cash and have not assumed share settlement of the principal balance for purposes of computing EPS.

At the time of

issuance, there is no precedent or policy that would indicate that we would settle the principal in shares or the conversion spread in cash.

guidance requires that convertible debt instruments with cash settlement features, including partial cash settlement, account for the liability component and equity component

(conversion feature) of the instrument separately.

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 2.67 years and 2.49 years at December 31, 2019 and 2018, respectively, on a weighted

average basis.

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2019

Note 11Debt Obligations (Continued)

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

Liability Component

At the time of issuance, there was no precedent or policy that would indicate that we would settle the principal in shares or the conversion spread in cash.

Accounting guidance requires that convertible debt instruments with cash settlement features, including partial cash settlement, account for the liability component and equity component (conversion feature) of the instrument separately.

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 1.77 years and 2.67 years at December 31, 2020 and 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

Unamortized Deferred

Financing Fees

December 31, 2020

December 31, 2019

2019, we incurred total aggregate interest expense on the notes of $28.3 million, of which $13.5 million, $6.8 million and $7.9 million related to the

cash coupon, amortization of the deferred financing fees and of the debt discount, respectively.

During 2018, we incurred total aggregate interest expense on the notes of $21.1 million, of

which $13.4 million, $4.8 million and $2.9 million related to the cash coupon, amortization of the deferred financing fees and of the debt discount, respectively.

Including the

amortization of the deferred financing fees and debt discount, our weighted average total cost of the notes was 6.80% and 7.45% at December 31, 2019 and 2018, respectively.

During 2020, we incurred interest expense on the notes totaling $ 20.0 million, of which $ 13.4 million, $ 3.6 million and $ 3.0 million related to the cash coupon, amortization of the debt discount and of the deferred financing fees, respectively.

During 2019, we incurred interest expense on the notes totaling $ 28.3 million, of which $ 13.5 million, $ 7.9 million and $ 6.8 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 December 31, 2020 and 2019, respectively.

Junior Subordinated Notes

In 2017, we purchased, at a discount, $20.9 million of our junior subordinated notes with a carrying value of $19.8 million and

recorded a gain on extinguishment of debt of $7.1 million.

The carrying value of borrowings under our junior subordinated notes were $140.9 million and $140.3 million at

December 31, 2019 and 2018, respectively, which is net of a deferred amount of $11.4 million and $12.0 million, respectively, (which is amortized into interest expense over the

life of the notes) and deferred financing fees of $2.0 million and $2.1 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 4.75% and 5.66% at December 31, 2019 and 2018, respectively.

Including certain fees and costs, the weighted

average note rate was 4.83% and 5.75% at December 31, 2019 and 2018, respectively.

Debt Covenants

Credit Facilities, Repurchase Agreements and Unsecured Debt.

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 December 31, 2019.

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 December 31, 2019, as well as

on the most recent determination dates in January

The carrying values of borrowings under our junior subordinated notes were $ 141.7 million and $ 140.9 million at December 31, 2020 and 2019, respectively, which is net of a deferred amount of $ 10.8 million and $ 11.4 million, respectively, (which is amortized into interest expense over the life of the notes) and deferred financing fees of $ 1.8 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.

ARBOR REALTY TRUST, INC.

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December 31, 2020

Note 11Debt Obligations (Continued)

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.

We have the right to cure covenant breaches which would resume normal residual payments to

us by purchasing non-performing loans out of the CLOs.

weighted average note rate was 3.06 % and 4.75 % at December 31, 2020 and 2019, respectively.

Including certain fees and costs, the weighted average note rate was 3.15 % and 4.83 % at December 31, 2020 and 2019, respectively.

Debt Covenants

Credit Facilities, Repurchase Agreements and Unsecured Debt.

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 December 31, 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 December 31, 2020, as well as on the most recent determination dates in January 2021.

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.

We have the right to cure covenant breaches which would resume normal residual payments to us by purchasing non-performing loans out of the CLOs.

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

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

Our CLO compliance tests as of the most recent determination dates in January 2021 are as follows:

Cash Flow Triggers

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Interest Coverage (2)

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

(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.

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

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

ARBOR REALTY TRUST, INC.

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December 31, 2020

Note 11Debt Obligations (Continued)

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

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

Determination (1)

table above represents the quarterly trend of our overcollateralization ratio, however, the CLO determination dates are monthly and we were in compliance with

this test for all periods presented.

ratio will fluctuate based on the performance of the underlying assets, transfers of assets into the CLOs prior to the expiration of their respective replenishment dates, purchase or

disposal of other investments, and loan payoffs.

No payment due under the junior subordinated indentures may be paid if there is a default under any senior debt and the senior lender has sent notice

to the trustee.

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

The ratio will fluctuate based on the performance of the underlying assets, transfers of assets into the CLOs prior to the expiration of their respective replenishment dates, purchase or disposal of other investments, and loan payoffs.

No payment due under the junior subordinated indentures may be paid if there is a default under any senior debt and the senior lender has sent notice to the trustee.

The junior subordinated indentures are also cross-defaulted with each other.

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Beginning balance

Provision for loss sharing

Provision reversal for loan repayments

Charge-offs, net

Impact of adopting CECL - January 1, 2020

Provisions for loss sharing

Provisions reversal for loan repayments

Recoveries (charge-offs), net

Ending balance

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 December 31, 2019 and 2018,

we had outstanding advances of $0.5 million and $0.1 million, respectively, which were netted against the allowance for loss-sharing obligations.

December 31, 2019 and 2018, our allowance for loss-sharing obligations represented 0.23% and 0.25%, respectively, of the Fannie Mae servicing portfolio.

When a loan is sold under the Fannie Mae DUS program, we undertake an obligation to partially guarantee the performance of the loan.

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

At December 31, 2020 and 2019, guarantee obligations of $ 34.0 million and $ 32.2 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 2020 of $ 16.4 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 December 31, 2020 and 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 December 31, 2020, our allowance for loss-sharing obligations , associated with expected losses under CECL was $ 30.3 million and represented 0.17 % of the Fannie Mae servicing portfolio.

ARBOR REALTY TRUST, INC.

2 unchanged sentences

December 31, 2020

Note 12Allowance for Loss-Sharing Obligations (Continued)

December 31, 2019 and 2018, the maximum quantifiable liability associated with our guarantees under the Fannie Mae DUS agreement was $2.73 billion and

$2.46 billion, respectively.

At December 31, 2020 and 2019, the maximum quantifiable liability associated with our guarantees under the Fannie Mae DUS agreement was $ 3.41 billion and $ 2.73 billion, respectively.

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

We would be liable for this amount only if all of the loans we service

for Fannie Mae, for which we retain some risk of loss, were to default and all of the collateral underlying these loans was determined to be without value at the time of settlement.

We would be liable for this amount only if all of the loans we service for Fannie Mae, for which we retain some risk of loss, were to default and all of the collateral underlying these loans was determined to be without value at the time of settlement.

Note 13 — Derivative Financial Instruments

We enter into derivative financial instruments to manage exposures that arise from business activities resulting in the receipt or payment of future known and uncertain cash amounts, the

value of which are determined by interest rates.

We enter into derivative financial instruments to manage exposures that arise from business activities resulting in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates.

We do not use these derivatives for speculative purposes, but are instead using them to manage our exposure to interest rate risk.

Agency Rate Lock and Forward Sale Commitments.

We enter into contractual commitments to originate and sell mortgage loans at

fixed prices with fixed

expiration dates.

We enter into contractual commitments to originate and sell mortgage loans at fixed prices with fixed expiration dates.

The commitments become effective when the borrower “rate locks” a specified interest rate within time frames established by us.

All potential borrowers are evaluated for

creditworthiness prior to the extension of the commitment.

Market risk arises if interest rates move adversely between the time of the rate lock by the borrower and the sale date of the loan to an

To mitigate the effect of the interest rate risk inherent in providing rate lock commitments to borrowers under the GSE programs, we enter into a forward sale commitment with the investor

simultaneously with the rate lock commitment with the borrower.

All potential borrowers are evaluated for creditworthiness prior to the extension of the commitment.

Market risk arises if interest rates move adversely between the time of the rate lock by the borrower and the sale date of the loan to an investor.

To mitigate the effect of the interest rate risk inherent in providing rate lock commitments to borrowers under the GSE programs, we enter into a forward sale commitment with the investor simultaneously with the rate lock commitment with the borrower.

The forward sale contract locks in an interest rate and price for the sale of the loan.

The terms of the contract with the investor and

the rate lock with the borrower are matched in substantially all respects, with the objective of eliminating interest rate risk to the extent practical.

Sale commitments with the investors have an

expiration date that is longer than our related commitments to the borrower to allow, among other things, for closing of the loan and processing of paperwork to deliver the loan into the sale

commitments meet the definition of a derivative and are recorded at fair value, including the effects of interest rate movements which are reflected as a component of other income,

net in the consolidated statements of income.

The estimated fair value of rate lock commitments also includes the fair value of the expected net cash flows associated with the servicing of the loan

which is recorded as income from MSRs in the consolidated statements of income.

During 2019, 2018 and 2017, we recorded net losses of $7.8 million, net gains of $6.0 million and net

losses of $1.4 million, respectively, from changes in the fair value of these derivatives in other income, net and $90.8 million, $98.8 million and $76.8 million,

respectively, of income from MSRs.

The terms of the contract with the investor and the rate lock with the borrower are matched in substantially all respects, with the objective of eliminating interest rate risk to the extent practical.

Sale commitments with the investors have an expiration date that is longer than our related commitments to the borrower to allow, among other things, for closing of the loan and processing of paperwork to deliver the loan into the sale commitment.

These commitments meet the definition of a derivative and are recorded at fair value, including the effects of interest rate movements which are reflected as a component of (loss) gain on derivative instruments, net in the consolidated statements of operations.

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 2020, 2019 and 2018, we recorded net gains of $ 3.4 million, net losses of $ 7.8 million and net gains of $ 6.0 million, respectively, from changes in the fair value of these derivatives in (loss) gain on derivative instruments, net and $ 165.5 million, $ 90.8 and $ 98.8 million, respectively, of income from MSRs.

See Note 14 for details.

Interest Rate Swap Futures.

We enter into Swap Futures to hedge our exposure to changes in interest rates inherent in

(1) our Structured

Business SFR loans from the time the loans are originated until the time they can be financed with match term fixed rate securitized debt, and (2) our held-for-sale Agency Business Private

Label loans from the time the loans are rate locked until sale and securitization.

The Swap Futures do not meet the criteria for hedge accounting, typically have a three-month maturity and are tied to

the five-year and ten-year swap rates.

Our Swap Futures are

We enter into Swap Futures to hedge our exposure to changes in interest rates inherent in (1) our Structured Business SFR loans from the time the loans are originated until the time they can be financed with match term fixed rate securitized debt, and (2) our held-for-sale Agency Business Private Label loans from the time the loans are rate locked until sale and securitization.

The Swap Futures do not meet the criteria for hedge accounting, typically have a three -month maturity and are tied to the five-year and ten-year swap rates.

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 2020, we recorded realized losses of $ 3.0 million and unrealized gains of $ 0.2 million to our Structured Business and realized losses of $ 57.1 million and unrealized losses of $ 1.7 million to our Agency Business related to our Swap Futures.

During 2019, we recorded realized losses of $ 0.4 million and unrealized gains of $ 0.2 million to our Structured Business and realized gains of $ 4.6 million and unrealized gains of $ 1.5 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.

ARBOR REALTY TRUST, INC.

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December 31, 2020

Note 13Derivative Financial Instruments (Continued)

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.

2019, we recorded realized losses of $0.4 million and unrealized gains of $0.2 million, respectively, to our Structured Business related to our Swap Futures.

2019, we recorded realized gains of $4.6 million and unrealized gains of $1.5 million to our Private Label Agency Business related to our Swap Futures.

The realized and unrealized gains

and losses are recorded in other income, net on our consolidated statements of income.

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

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

December 31, 2020

Notional Value

Balance Sheet Location

Balance Sheet

Agency Business

3 unchanged sentences

Other Assets/Other Liabilities

Structures Business

Other Assets/ Other Liabilities

December 31, 2019

4 unchanged sentences

Other Assets/Other Liabilities

Structured Business

ARBOR REALTY TRUST, INC.

4 unchanged sentences

Fair value estimates are dependent upon subjective assumptions and involve significant uncertainties resulting in variability in estimates with changes in assumptions.

The following

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

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

December 31, 2020

December 31, 2019

Notional Amount

Financial assets:

11 unchanged sentences

Derivative financial instruments

and liabilities disclosed at fair value are categorized based upon the level of judgment associated with the inputs used to measure their fair value.

Hierarchical levels directly

related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities are as follows:

Level 1Inputs

are unadjusted and quoted prices exist in active markets for identical assets or liabilities, such as government, agency and equity securities.

Level 2Inputs

(other than quoted prices included in Level 1) are observable for the asset or liability through correlation with market data.

inputs may include quoted market prices for a similar asset or liability, interest rates and credit risk.

Examples include non-government securities, certain mortgage and asset-backed securities,

certain corporate debt and certain derivative instruments.

Level 3Inputs

reflect our best estimate of what market participants would use in pricing the asset or liability and are based on significant unobservable inputs that

require a considerable amount of judgment and assumptions.

Assets and liabilities disclosed at fair value are categorized based upon the level of judgment associated with the inputs used to measure their fair value.

Determining which category an asset or liability falls within the hierarchy requires judgment and we evaluate our hierarchy disclosures each quarter.

Hierarchical levels directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities are as follows:

Level 1 —Inputs are unadjusted and quoted prices exist in active markets for identical assets or liabilities, such as government, agency and equity securities.

Level 2—Inputs (other than quoted prices included in Level 1) are observable for the asset or liability through correlation with market data.

Level 2 inputs may include quoted market prices for a similar asset or liability, interest rates and credit risk.

Examples include non-government securities, certain mortgage and asset-backed securities, certain corporate debt and certain derivative instruments.

Level 3—Inputs reflect our best estimate of what market participants would use in pricing the asset or liability and are based on significant unobservable inputs that require a considerable amount of judgment and assumptions.

Examples include certain mortgage and asset-backed securities, certain corporate debt and certain derivative instruments.

which category an asset or liability falls within the hierarchy requires judgment and we evaluate our hierarchy disclosures each quarter.

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

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

Loans and investments, net.

Fair values of loans and investments that are not impaired are estimated using inputs based on direct capitalization rate and discounted cash flow methodologies using discount rates, which, in our opinion, best reflect current market interest rates that would be offered for loans with similar characteristics and credit quality (Level 3).

Fair values of impaired loans and investments are estimated using inputs that require significant judgments, which include assumptions regarding discount rates, capitalization rates, creditworthiness of major tenants, occupancy rates, availability of financing, exit plans and other factors (Level 3).

ARBOR REALTY TRUST, INC.

2 unchanged sentences

December 31, 2020

Note 14Fair Value (Continued)

Loans and investments, net.

Fair values of loans and investments that are not impaired are estimated using inputs based on direct

capitalization rate

and discounted cash flow methodologies using discount rates, which, in our opinion, best reflect current market interest rates that would be offered for loans with similar characteristics and credit

quality (Level 3).

Fair values of impaired loans and investments are estimated using inputs that require significant judgments, which include assumptions regarding discount rates,

capitalization rates, creditworthiness of major tenants, occupancy rates, availability of financing, exit plans and other factors (Level 3).

Loans held-for-sale, net.

Consists of originated loans that are generally transferred or sold within 60 days to

180 days of loan

funding, and are valued using pricing models that incorporate observable inputs from current market assumptions or a hypothetical securitization model utilizing observable market data from recent

securitization spreads and observable pricing of loans with similar characteristics (Level 2).

Fair value includes the fair value allocated to the associated future MSRs and is calculated

pursuant to the valuation techniques described below for capitalized mortgage servicing rights, net (Level 3).

Consists of originated loans that are generally expected to be transferred or sold within 60 days to 180 days of loan funding, and are valued using pricing models that incorporate observable inputs from current market assumptions or a hypothetical securitization model utilizing observable market data from recent securitization spreads and observable pricing of loans with similar characteristics (Level 2).

Fair value includes the fair value allocated to the associated future MSRs and is calculated pursuant to the valuation techniques described below for capitalized mortgage servicing rights, net (Level 3).

Capitalized mortgage servicing rights, net.

Fair values are estimated using inputs based on discounted future net cash flow

The fair value of MSRs carried at amortized cost are estimated using a process that involves the use of independent third-party valuation experts, supported by commercially available

discounted cash flow models and analysis of current market data.

The key inputs used in estimating fair value include the contractually specified servicing fees, prepayment speed of the underlying

loans, discount rate, annual per loan cost to service loans, delinquency rates, late charges and other economic factors.

Fair values are estimated using inputs based on discounted future net cash flow methodology (Level 3).

The fair value of MSRs carried at amortized cost are estimated using a process that involves the use of independent third-party valuation experts, supported by commercially available discounted cash flow models and analysis of current market data.

The key inputs used in estimating fair value include the contractually specified servicing fees, prepayment speed of the underlying loans, discount rate, annual per loan cost to service loans, delinquency rates, late charges and other economic factors.

Securities held-to-maturity, net.

Fair values are approximated using inputs based on current market quotes received from

financial sources that trade

such securities and are based on prevailing market data and, in some cases, are derived from third-party proprietary models based on well recognized financial principles and reasonable estimates about

relevant future market conditions (Level 3).

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

Derivative financial instruments.

The fair values of rate lock and forward sale commitments are estimated using valuation

techniques, which include

internally-developed models developed based on changes in the U.S.

The fair values of rate lock and forward sale commitments are estimated using valuation techniques, which include internally-developed models developed based on changes in the U.S.

Treasury rate and other observable market data (Level 2).

The fair value of rate lock commitments includes the fair value of

the expected net cash flows associated with the servicing of the loans, see capitalized mortgage servicing rights, net above for details on the applicable valuation technique (Level 3).

consider the impact of counterparty non-performance risk when measuring the fair value of these derivatives.

Given the credit quality of our counterparties, the short duration of interest rate lock

commitments and forward sale contracts, and our historical experience, the risk of nonperformance by our counterparties is not significant.

The fair value of rate lock commitments includes the fair value of the expected net cash flows associated with the servicing of the loans, see capitalized mortgage servicing rights, net above for details on the applicable valuation technique (Level 3).

We also consider the impact of counterparty non-performance risk when measuring the fair value of these derivatives.

Given the credit quality of our counterparties, the short duration of interest rate lock commitments and forward sale contracts, and our historical experience, the risk of nonperformance by our counterparties is not significant.

Credit facilities and repurchase agreements.

Fair values for credit facilities and repurchase agreements of the Structured

Business are estimated

using discounted cash flow methodology, using discount rates, which, in our opinion, best reflect current market interest rates for financing with similar characteristics and credit quality

The majority of our credit facilities and repurchase agreement for the Agency Business bear interest at rates that are similar to those available in the

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2019

Note 14Fair Value (Continued)

currently and the fair values are estimated using Level 2 inputs.

Fair values for credit facilities and repurchase agreements of the Structured Business are estimated using discounted cash flow methodology, using discount rates, which, in our opinion, best reflect current market interest rates for financing with similar characteristics and credit quality (Level 3).

The majority of our credit facilities and repurchase agreement for the Agency Business bear interest at rates that are similar to those available in the market currently and the fair values are estimated using Level 2 inputs.

For these facilities, the fair values approximate their carrying values.

Collateralized loan obligations, Debt Fund and junior subordinated notes.

Fair values are estimated based on broker quotations,

representing the

discounted expected future cash flows at a yield that reflects current market interest rates and credit spreads (Level 3).

Collateralized loan obligations, junior subordinated notes and Debt Fund.

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

Senior unsecured notes.

Fair values are estimated at current market quotes received from active markets when available

from active markets are unavailable, then the fair values are estimated utilizing current market quotes received from inactive markets (Level 2).

Fair values are estimated at current market quotes received from active markets when available (Level 1).

If quotes from active markets are unavailable, then the fair values are estimated utilizing current market quotes received from inactive markets (Level 2).

Convertible senior unsecured notes, net.

Fair values are estimated based on current market quotes received from inactive markets

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 December 31, 2019 (in thousands):

Fair Value Measurements

Using Fair Value Hierarchy

Fair values are estimated based on current market quotes received from inactive markets (Level 2).

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

The fair values of these financial assets and liabilities are determined using the following input levels as of December 31, 2020 (in thousands):

Fair Value Measurements Using Fair

Value Hierarchy

Financial assets:

2 unchanged sentences

Derivative financial instruments

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 December 31, 2019 (in thousands):

Fair Value Measurements

Using Fair Value Hierarchy

Financial assets:

Impaired loans, net(1)

Non-financial assets:

Long-lived assets(2)

had an allowance for loan losses of $71.1 million relating to five loans with an aggregate carrying value, before loan loss reserves, of

$130.7 million at December 31, 2019.

recorded a $1.0 million impairment loss during 2019 on the hotel property we own.

See Note 9 for details.

Loan impairment assessments.

Loans held for investment are intended to be held to maturity and, accordingly, are carried at cost,

net of unamortized

loan origination costs and fees, loan purchase

ARBOR REALTY TRUST, INC.

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December 31, 2020

Note 14Fair Value (Continued)

and net of the allowance for loan losses, when such loan or investment is deemed to be impaired.

We consider a loan impaired when, based upon current information, it is probable that we

will be unable to collect all amounts due for both principal and interest according to the contractual terms of the loan agreement.

We evaluate our loans to determine if the value of the underlying

collateral securing the impaired loan is less than the net carrying value of the loan, which may result in an allowance and corresponding charge to the provision for loan losses.

These valuations

require significant judgments, which include assumptions regarding capitalization and discount rates, revenue growth rates, creditworthiness of major tenants, occupancy rates, availability of

financing, exit plan and

other factors.

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 December 31, 2020 (in thousands):

Fair Value Measurements Using Fair

Value Hierarchy

Financial assets:

Impaired loans, net (1)

(1) We had an allowance for loan losses of $ 106.3 million relating to ten loans with an aggregate carrying value, before loan loss reserves, of $ 254.9 million at December 31, 2020.

Loan impairment assessments.

Loans held for investment are intended to be held to maturity and, accordingly, are carried at cost, net of unamortized loan origination costs and fees, loan purchase discounts, and net of the allowance for loan losses, when such loan or investment is deemed to be impaired.

We consider a loan impaired when, based upon current information, it is probable that we will be unable to collect all amounts due for both principal and interest according to the contractual terms of the loan agreement.

We evaluate our loans to determine if the value of the underlying collateral securing the impaired loan is less than the net carrying value of the loan, which may result in an allowance and corresponding charge to the provision for loan losses.

These valuations require significant judgments, which include assumptions regarding capitalization and discount rates, revenue growth rates, creditworthiness of major tenants, occupancy rates, availability of financing, exit plan and other factors.

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

Long-lived assets.

We review our real estate owned assets when events or circumstances change, indicating that the carrying

amount of an asset may

not be partially or fully recoverable.

In the evaluation of a real estate owned asset for impairment, many factors are considered, including broker quotes, estimated current and expected operating

cash flows from the asset during the projected holding period, costs necessary to extend the life or improve the asset, expected capitalization rates, projected stabilized net operating income,

selling costs, and the ability to hold and dispose of the asset in the ordinary course of business.

We first compare the undiscounted cash flows to be generated by the asset to the carrying value of

If the undiscounted cash flows are less than the carrying value, we recognize an impairment loss by comparing the carrying value of the asset to its fair value.

information about Level 3 fair value measurements at December 31, 2019 is as follows ($ in thousands):

Valuation Techniques

Quantitative information about Level 3 fair value measurements at December 31, 2020 is as follows ($ in thousands):

Significant Unobservable Inputs

3 unchanged sentences

Discount rate

direct capitalization

Capitalization rate

Revenue growth rate

1 unchanged sentence

Discount rate

Revenue growth rate

Discounted cash flows

Discount rate

Capitalization rate

Revenue growth rate

Discounted cash flows

Capitalization rate

Discounted cash flows

Discount rate

Capitalization rate

Revenue growth rate

Derivative financial instruments:

2 unchanged sentences

W/A discount rate

Long-lived assets:

Hotel property

Broker quotes

ARBOR REALTY TRUST, INC.

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December 31, 2020

Note 14Fair Value (Continued)

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

A roll-forward of Level 3

derivative instruments is as follows (in thousands):

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

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

Fair Value Measurements Using

1 unchanged sentence

for the Year Ended December 31,

Derivative assets

Balance at beginning of period

Derivative assets and liabilities, net

Beginning balance

Realized gains recorded in earnings

Unrealized gains recorded in earnings

Balance at end of period

components of fair value and other relevant information associated with our rate lock commitments, forward sales commitments and the estimated fair value of cash flows from servicing

on loans held-for-sale are as follows (in thousands):

December 31, 2019

Ending balance

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

Fair Value of

Servicing Rights

Interest Rate

Total Fair Value

December 31, 2020

Principal Amount

Servicing Rights

Movement Effect

2 unchanged sentences

Loans held-for-sale, net (1)

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

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2019

Note 14Fair Value (Continued)

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

The fair values of these assets and liabilities are determined using the following input levels as of

December 31, 2019 (in thousands):

Fair Value Measurements

Using Fair Value Hierarchy

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

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

The fair values of these assets and liabilities are determined using the following input levels as of December 31, 2020 (in thousands):

Fair Value Measurements Using Fair Value Hierarchy

Carrying Value

11 unchanged sentences

Note 15 — Commitments and Contingencies

Agency Business Commitments.

Our Agency Business is subject to supervision by certain regulatory agencies.

Among other things,

these agencies require

us to meet certain minimum net worth, operational liquidity and restricted liquidity collateral requirements, and compliance with reporting requirements.

Our adjusted net worth and liquidity required

by the agencies for all periods presented exceeded these requirements.

of December 31, 2019, we were required to maintain at least $14.4 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.

are generally required to share the risk of any losses associated with loans sold under the Fannie Mae DUS program and are required to secure this obligation by assigning restricted

cash balances and/or a letter of credit to Fannie Mae.

The amount of collateral required by Fannie Mae is a formulaic calculation at the loan level by a Fannie Mae assigned tier which considers the

loan balance, risk level of the loan, age of the loan and level of risk-sharing.

Fannie Mae requires restricted liquidity for Tier 2 loans of 75 basis points, 15 basis points for Tier 3

loans and 5 basis points for Tier 4 loans, which is funded over a 48-month period that begins upon delivery of the loan to Fannie Mae.

A significant portion of our Fannie Mae DUS serviced loans

for which we have risk sharing are Tier 2

As of December 31, 2019, we met the restricted liquidity requirement with a $45.0 million letter of credit and $1.9 million of cash collateral.

Impact of COVID-19.

The magnitude and duration of COVID-19 and its impact on our business and on our borrowers is uncertain and will mostly depend on future events, which cannot be predicted.

As this pandemic continues and if economic conditions worsen, it may have long-term impacts on our financial position, results of operations and cash flows.

Risk Factors and Note 2 for further discussion of COVID-19.

ARBOR REALTY TRUST, INC.

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December 31, 2020

Note 15Commitments and Contingencies (Continued)

of December 31, 2019, reserve requirements for the Fannie Mae DUS loan portfolio will require us to fund $36.3 million in additional restricted liquidity over the next

48 months, assuming no further principal paydowns, prepayments, or defaults within our at-risk portfolio.

Fannie Mae periodically reassesses these collateral requirements and may make changes

to these requirements in the future.

We generate sufficient cash flow from our operations to meet these capital standards and do not expect any changes to have a material impact on our future

Agency Business Commitments.

Our Agency Business is subject to supervision by certain regulatory agencies.

Among other things, these agencies require us to meet certain minimum net worth, operational liquidity and restricted liquidity collateral requirements, and compliance with reporting requirements.

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

As of December 31, 2020, we were required to maintain at least $ 17.7 million of liquid assets in one of our subsidiaries to meet our operational liquidity requirements for Fannie Mae and we had operational liquidity in excess of this requirement.

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

The amount of collateral required by Fannie Mae is a formulaic calculation at the loan level by a Fannie Mae assigned tier, which considers the loan balance, risk level of the loan, age of the loan and level of risk-sharing.

Fannie Mae requires restricted liquidity for Tier 2 loans of 75 basis points, 15 basis points for Tier 3 loans and 5 basis points for Tier 4 loans, which is funded over a 48 -month period that begins upon delivery of the loan to Fannie Mae.

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

As of December 31, 2020, we met the restricted liquidity requirement with a $ 45.0 million letter of credit and $ 9.2 million of cash collateral.

As of December 31, 2020, reserve requirements for the Fannie Mae DUS loan portfolio will require us to fund $ 46.0 million in additional restricted liquidity over the next 48 months, assuming no further principal paydowns, prepayments, or defaults within our at-risk portfolio.

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

We generate sufficient cash flow from our operations to meet these capital standards and do not expect any changes to have a material impact on our future operations;

however, future changes to collateral requirements may adversely impact our available cash.

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

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 December 31, 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 also subject

to capital requirements on an annual basis for Ginnie Mae and FHA and we believe we have met all requirements as of December 31, 2019.

an approved designated seller/servicer under Freddie Mac's SBL program, we are required to post collateral to ensure that we are able to meet certain purchase and loss obligations

required by this program.

We are also subject to capital requirements on an annual basis for Ginnie Mae and FHA and we believe we have met all requirements as of December 31, 2020.

As an approved designated seller/servicer under Freddie Mac’s SBL program, we are required to post collateral to ensure that we are able to meet certain purchase and loss obligations required by this program.

Under the SBL program, we are required to post collateral equal to $ 5.0 million, which is satisfied with a $ 5.0 million letter of credit.

enter into contractual commitments with borrowers providing rate lock commitments while simultaneously entering into forward sale commitments with investors.

These commitments are

outstanding for short periods of time (generally less than 60 days) and are described in more detail in Note 13 and Note 14.

We enter into contractual commitments with borrowers providing rate lock commitments while simultaneously entering into forward sale commitments with investors.

These commitments are outstanding for short periods of time (generally less than 60 days) and are described in more detail in Note 13 and Note 14.

Debt Obligations and Operating Leases.

As of December 31, 2019, 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 December 31, 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

of December 31, 2019, our leases had remaining lease terms of 0.7 - 7.2 years with a weighted average remaining lease term of 5.2 years and a

weighted average discount rate of 4.7%.

We recorded lease expense of $6.1 million, $5.4 million and $4.7 million during 2019, 2018 and 2017, respectively.

ARBOR REALTY TRUST, INC.

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December 31, 2020

Note 15Commitments and Contingencies (Continued)

As of December 31, 2020 and 2019, our leases had remaining lease terms of 0.5 – 10.0 years and 0.7 - 7.2 years, respectively, with a weighted average remaining lease term of 9.0 years and 5.2 years, respectively, and a weighted average discount rate of 4.9 % and 4.7 % , respectively.

We recorded lease expense of $ 6.2 million, $ 6.1 million and $ 5.4 million during 2020, 2019 and 2018, respectively.

Unfunded Commitments.

In accordance with certain structured loans and investments, we have outstanding unfunded commitments of

$163.8 million

as of December 31, 2019 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.

We are currently neither subject to any material litigation nor, to the best of our knowledge, threatened by any

material litigation

other than the following:

June 2011, three related lawsuits were filed by the Extended Stay Litigation Trust (the "Trust"), a post-bankruptcy litigation trust alleged to have standing to pursue claims that

previously had been held by Extended Stay, Inc.

In accordance with certain structured loans and investments, we have outstanding unfunded commitments of $ 353.8 million as of December 31, 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.

We are currently neither subject to any material litigation nor, to the best of our knowledge, threatened by any material litigation other than the following:

In June 2011, three related lawsuits were filed by the Extended Stay Litigation Trust (the "Trust"), a post-bankruptcy litigation trust alleged to have standing to pursue claims that previously had been held by Extended Stay, Inc.

and the Homestead Village L.L.C.

family of companies (together "ESI") (formerly Chapter 11 debtors, together the "Debtors") that have

emerged from bankruptcy.

family of companies (together "ESI") (formerly Chapter 11 debtors, together the "Debtors") that have emerged from bankruptcy.

Two of the lawsuits were filed in the U.S.

Bankruptcy Court for the Southern District of New York, and the third in the Supreme Court of the State of New York, New York

Bankruptcy Court for the Southern District of New York, and the third in the Supreme Court of the State of New York, New York County.

There were 73 defendants in the three lawsuits, including 55 corporate and partnership entities, and 18 individuals.

A subsidiary of ours and certain other entities that are affiliates of ours

are included as defendants.

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

Our affiliates filed a motion to dismiss the three lawsuits.

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

Our subsidiary, Arbor

ESH II, LLC, had a $115.0 million investment in the Series A1 Preferred Units of a holding company of Extended Stay, Inc.

The New York State Court action and one of the two

federal court actions name as defendants, Arbor ESH II, LLC, Arbor Commercial Mortgage, LLC ("ACM") and ABT-ESI LLC, an entity in which we have a membership interest, among the

broad group of defendants.

A subsidiary of ours and certain other entities that are affiliates of ours are included as defendants.

The New York State Court action was removed to the Bankruptcy Court.

Currently, there is just a single case in Bankruptcy Court.

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

Our subsidiary, Arbor ESH II, LLC, had a $ 115.0 million investment in the Series A1 Preferred Units of a holding company of Extended Stay, Inc.

The New York State Court action and one of the two federal court actions named as defendants Arbor ESH II, LLC, Arbor Commercial Mortgage, LLC (“ACM”), and ABT-ESI LLC, an entity in which we have a membership interest, among the broad group of defendants.

These two actions were commenced by substantially identical complaints.

The defendants are alleged in these complaints, among other things, to have breached fiduciary and

contractual duties by causing or allowing the Debtors to pay illegal dividends or other improper distributions of value at a time when the Debtors were insolvent.

These two complaints also allege that

the defendants aided and abetted, induced, or participated in breaches of fiduciary duty, waste, and unjust enrichment ("Fiduciary Duty Claims") and name a director of ours, and a former general

counsel of ACM, each of whom had served on the Board of Directors of ESI for a period of time.

The defendants are alleged, among other things, to have breached fiduciary and contractual duties by causing or allowing the Debtors to pay illegal dividends or other improper distributions of value at a time when the Debtors were insolvent.

The Trust also alleges that the defendants aided and abetted, induced, or participated in breaches of fiduciary duty, waste, and unjust enrichment ("Fiduciary Duty Claims") and name a director of ours, and a former general counsel of ACM, each of whom had served on the Board of Directors of ESI for a period of time.

We are defending these two defendants and paying the costs of such defense.

On the basis of the foregoing

allegations, the Trust has asserted claims under a number of common law theories, seeking the return of assets transferred by the Debtors prior to the Debtors' bankruptcy filing.

the third action, filed in Bankruptcy Court, the same plaintiff, the Trust, has named ACM and ABT-ESI LLC, together with a number of other defendants and asserts claims,

including constructive and fraudulent conveyance claims under state and federal statutes, as well as a claim under the Federal Debt Collection Procedure Act.

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.

On the basis of the foregoing allegations, the Trust has asserted claims under a number of common law theories, seeking the return of assets transferred by the Debtors prior to the Debtors' bankruptcy filing.

In the third action, filed in Bankruptcy Court, the same plaintiff, the Trust, named ACM and ABT-ESI LLC, together with a number of other defendants, and asserts claims, including constructive and fraudulent conveyance claims, under state and federal statutes, as well as a claim under the Federal Debt Collection Procedure Act.

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 from the lawsuits, none of whom are related to us, 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 Trust’s 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 to amend 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 moved to dismiss the referenced remaining actions 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

ARBOR REALTY TRUST, INC.

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December 31, 2020

Note 15Commitments and Contingencies (Continued)

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 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 is scheduled for February 19, 2020.

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.

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.

Litigation Settlement.

In 2018, we received net proceeds of $10.2 million from the settlement of a litigation related to a

prior investment,

which was recognized as a gain.

In 2018, we received net proceeds of $ 10.2 million from the settlement of a litigation related to a prior investment, which was recognized as a gain.

Due to Borrowers.

Due to borrowers represents borrowers' funds held by us to fund certain expenditures or to be released at our

discretion upon the

occurrence of certain pre-specified events, and to serve as

additional collateral for borrowers' loans.

Due to borrowers represents borrowers’ funds held by us to fund certain expenditures or to be released at our discretion upon the occurrence of certain pre-specified events, and to serve as additional collateral for borrowers’ loans.

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

Note 16 — Variable Interest Entities

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

activity associated with our derivative instruments.

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

Consolidated VIEs.

We have determined that our operating partnership, ARLP, and our CLO and Debt Fund entities, which we

consolidate, are VIEs.

is already consolidated in our financial statements, therefore, the identification of this entity as a VIE had no impact on our consolidated financial statements.

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

We, or one of our affiliates,

are named collateral manager, servicer, and special servicer for all collateral assets held in CLOs, which we believe gives us the power to direct the most significant economic activities of those

We have determined that our operating partnership, ARLP, and our CLO entities, which we consolidate, are VIEs.

ARLP is already consolidated in our financial statements, therefore, the identification of this entity as a VIE had no impact on our consolidated financial statements.

As described in Note 11, we completed the unwind of the Debt Fund in April 2020 and redeemed all the outstanding notes.

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

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

We, or one of our affiliates, are named collateral manager, servicer, and special servicer for all collateral assets held in CLOs, which we believe gives us the power to direct the most significant economic activities of those entities.

We also have exposure to losses to the extent of our equity interests and also have rights to waterfall payments in excess of required payments to bond investors.

As a result of

consolidation, equity interests have been eliminated, and the consolidated balance sheets reflect both the assets held and debt issued by the CLOs and Debt Fund to third parties.

Our operating results

and cash flows include the gross amounts related to CLO and Debt Fund assets and liabilities as opposed to our net economic interests in those entities.

As a result of consolidation, equity interests have been eliminated, and the consolidated balance sheets reflect both the assets held and debt issued to third parties by the CLOs and Debt Fund, prior to the unwind.

Our operating results and cash flows include the gross asset and liability amounts related to the CLOs and Debt Fund, prior to the unwind, as opposed to our net economic interests in those entities.

ARBOR REALTY TRUST, INC.

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December 31, 2020

Note 16Variable Interest Entities (Continued)

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

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

December 31, 2020

December 31, 2019

Restricted cash

1 unchanged sentence

Collateralized loan obligations

Due to related party

Other liabilities

Total liabilities

held by the CLOs and Debt Fund are restricted and can only be used to settle obligations of the CLOs and Debt Fund, respectively.

The liabilities of the CLOs and Debt Fund are

non-recourse to us and can only be satisfied from each respective asset pool.

Assets held by the CLOs are restricted and can only be used to settle obligations of the CLOs.

The liabilities of the CLOs are non-recourse to us and can only be satisfied from each respective asset pool.

See Note 11 for details.

We are not obligated to provide, have not provided, and do not intend to provide financial

support to any of the consolidated CLOs or Debt Fund.

We are not obligated to provide, have not provided, and do not intend to provide financial support to any of the consolidated CLOs.

Unconsolidated VIEs .

We determined that we are not the primary beneficiary of 30 VIEs in which we have a variable interest as of

2019 because we do not have the ability to direct the activities of the VIEs that most significantly impact each entity's economic performance.

summary of our variable interests in identified VIEs, of which we are not the primary beneficiary, as of December 31, 2019 is as follows (in thousands):

B Piece and SFR bonds

We determined that we are not the primary beneficiary of 32 VIEs in which we have a variable interest as of December 31, 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 December 31, 2020 is as follows (in thousands):

Carrying Amount (1)

B Piece bonds

APL certificates

Equity investments

Agency interest only strips

(1) Represents

the carrying amount of loans and investments before reserves.

At December 31, 2019, $129.0 million of loans to VIEs had corresponding loan

loss reserves of $69.4 million.

See Note 3 for details.

In addition, the maximum loss exposure as of December 31, 2019 would not exceed the carrying amount of our investment.

unconsolidated VIEs have exposure to real estate debt of approximately $4.48 billion at December 31, 2019.

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2019

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

At December 31, 2020, $ 219.6 million of loans to VIEs had corresponding loan loss reserves of $ 86.9 million.

The maximum loss exposure as of December 31, 2020 would not exceed the carrying amount of our investment.

These unconsolidated VIEs have exposure to real estate debt of approximately $ 4.41 billion at December 31, 2020.

Note 17 - Equity

2 unchanged sentences

Common Stock.

In December 2019, we completed a public offering in which we sold 7,475,000 shares of our common stock (which

underwriter's exercised over-allotment option of 975,000 shares) for $13.93 per share, and received net proceeds of $104.0 million after deducting the underwriter's discount and other offering

In November 2020, we completed a public offering in which we sold 7,000,000 shares of our common stock for $ 13.30 per share, and received net proceeds of $ 93.0 million after deducting the underwriter's discount and other offering expenses.

The proceeds were used to make investments related to our business and for general corporate purposes.

We also used a portion of the net proceeds to purchase, in February 2020, 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.

May 2019, we completed a public offering in which we sold 9,200,000 shares of our common stock (which includes the underwriter's exercised over-allotment option of 1,200,000 shares)

for $12.58 per share, and received net proceeds of $115.6 million after deducting the underwriter's discount and other offering expenses.

The proceeds were used to make investments related to

our business and for general corporate purposes.

We also used a portion of the net proceeds to purchase an aggregate of 920,000 shares of our common stock from our chief executive officer and ACM at

the same price the underwriters paid to purchase the shares.

August 2019, we amended our "At-The-Market" equity offering sales agreement with JMP Securities LLC ("JMP").

In connection with the amendment we are entitled 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 2019, we

an aggregate of 3,162,000 shares under the JMP agreement for net proceeds of $41.0 million.

As of February 7, 2020, we had approximately 3,000,000 shares available under this agreement.

2019, we issued approximately 4,700,000 shares of our common stock in connection with the exchanges and subsequent settlements of our 5.25% convertible notes, 5.375% convertible

notes and 6.50% convertible notes.

December 2018, our Board of Directors declared a special dividend of $0.15 per common share, which was paid in January 2019 with a combination of $2.5 million of cash and

901,432 common shares.

of December 31, 2019, we had $137.9 million available under our $500.0 million shelf registration statement that was declared effective by the SEC in June 2018.

Noncontrolling Interest.

Noncontrolling interest relates to the OP Units issued to satisfy a portion of the purchase price in

connection with the

Each of these OP Units are paired with one share of our special voting preferred shares having a par value of $0.01 per share and is entitled to one vote each on any matter submitted for

stockholder approval.

The OP Units are entitled to receive distributions if and when our Board of Directors authorizes and declares common stock distributions.

The OP Units are also redeemable for

cash, or at our option, for shares of our common stock on a one-for-one basis.

2019, we redeemed 391,156 OP Units with a combination of cash totaling $1.7 million and 258,677 common shares.

We also redeemed 577,185 OP Units in 2018 for cash totaling

$6.8 million.

In addition, our Board of Directors declared a special dividend of $0.15 per common share in December

We also used a portion of the net proceeds to purchase an aggregate of 700,000 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.

ARBOR REALTY TRUST, INC.

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December 31, 2020

Note 17Equity (Continued)

which was paid to the OP Unit holders in a combination of $0.6 million of cash and 221,666 OP Units in January 2019.

December 31, 2019, there were 20,484,094 OP Units outstanding, which represented 15.7% of the voting power of our outstanding stock.

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.

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 2020, we sold 7,790,121 shares for net proceeds of $ 90.5 million.

We used a portion of the net proceeds to redeem 2,736,894 OP Units for cash totaling $ 28.4 million.

As of December 31, 2020, we had approximately 6,400,000 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.

The repurchase of our common stock may be made from time to time in the open market, in privately negotiated transactions or in compliance with a Rule 10b5-1 plan based on our stock price, general market conditions, applicable legal requirements and other factors.

The program may be discontinued or modified at any time.

As of December 31, 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 2020, we issued 321,412 and 47,086 shares in connection with the settlements of our 5.25 % and 5.375 % Convertible Notes, respectively.

Noncontrolling Interest.

Noncontrolling interest relates to the OP Units issued to satisfy a portion of the purchase price in connection with the Acquisition.

Each of these OP Units are paired with one share of our special voting preferred shares having a par value of $ 0.01 per share and is entitled to one vote each on any matter submitted for stockholder approval.

The OP Units are entitled to receive distributions if and when our Board of Directors authorizes and declares common stock distributions.

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

As noted above, during the 2020, we redeemed 2,768,033 OP Units for cash and there were 17,560,633 OP Units outstanding at December 31, 2020, which represented 12.5 % of the voting power of our outstanding stock.

Distributions.

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February 13, 2020

February 1, 2019

January 31, 2020

July 29, 2020

2 unchanged sentences

October 28, 2020

dividend declared on February 1, 2019 was for December 1, 2018 through February 28, 2019.

The dividend declared on May 1, 2019 was

for March 1, 2019 through May 31, 2019.

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

The dividend declared on May 1, 2020 was for March 1, 2020 through May 31, 2020.

The dividend declared on July 29, 2020 was for June 1, 2020 through August 31, 2020.

The dividend declared on

October 30, 2019 was for September 1, 2019 through November 30, 2019.

The dividend declared on October 28, 2020 was for September 1, 2020 through November 30, 2020.

Common Stock – On February 17, 2021, the Board of Directors declared a cash dividend of $ 0.33 per share of common stock.

The dividend is payable

on March 17, 2020 to common stockholders of record as of the close of business on February 28, 2020.

Preferred Stock On January 31, 2020, the Board of Directors declared a cash dividend of $0.515625 per share of 8.25% Series A preferred

The dividend is payable on March 19, 2021 to common stockholders of record as of the close of business on March 3, 2021.

Preferred Stock – On February 1, 2021, 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 December 1, 2019 through February 29, 2020 and are payable on March 2, 2020 to preferred stockholders of record on February 15, 2020.

have determined that 100% of the common stock and preferred stock dividends paid during 2019, 2018 and 2017 represented ordinary income to our stockholders for income tax purposes.

Pursuant to Internal Revenue Code Section 59(d), alternative minimum tax ("AMT") could be apportioned between a REIT and its stockholders' to the extent the REIT distributes its regular taxable

However, among the numerous provisions included in the Tax Reform enacted in December 2017, the AMT was repealed for corporate taxpayers.

Therefore, the apportionment of AMT between a REIT and

its stockholders is no longer applicable for tax years beginning after December 31, 2017.

Deferred Compensation.

We have a stock incentive plan under which the Board of Directors has the authority to issue shares of

stock to certain

employees, officers, directors and, prior to May 31, 2017, employees of our Former Manager.

2019, 2018 and 2017, we granted 333,884 shares, 265,444 shares and 299,750 shares, respectively, of restricted common stock with a total grant date fair value of $4.2 million,

$2.3 million and

These amounts reflect dividends from December 1, 2020 through February 28, 2021 and are payable on March 1, 2021 to preferred stockholders of record on February 15, 2021.

We have determined that 100 % of the common stock and preferred stock dividends paid during 2020, 2019 and 2018 represented ordinary income to our stockholders for income tax purposes.

For stockholders that may be required to report excess inclusion income to the Internal Revenue Service, we will not pass through any excess inclusion income to our stockholders for 2020.

As a result, no portion of the 2020 dividends should be treated as excess inclusion income for federal income tax purposes.

ARBOR REALTY TRUST, INC.

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December 31, 2020

Note 17Equity (Continued)

$2.4 million,

respectively, to certain employees of ours and our Former Manager.

One third of the shares vested as of the grant date and one third will vest on each of the first and second

anniversaries of the grant date.

In 2019, 2018 and 2017, we granted 55,244 shares, 67,002 shares and 74,375 shares, respectively, of fully vested common stock with a grant date fair value of

$0.7 million, $0.6 million and $0.6 million, respectively, to the independent members of our Board of Directors.

In July 2019, we also issued 124,069 shares of restricted common

stock to an employee with a total grant date fair value of $1.5 million.

One quarter of the shares vested as of the grant date and one quarter will vest on each of the first, second and third

anniversaries of the grant date.

2019, 2018 and 2017, we granted our chief executive officer 58,738 shares 63,584 shares 74,830 shares, respectively, of restricted common stock with a grant date fair value of

$0.7 million, $0.6 million and $0.6 million, respectively, and up to 352,427, 381,503 and 448,980, respectively, of performance-based restricted stock units with a grant date fair

value of $1.7 million, $0.8 million and $1.0 million, respectively.

One quarter of the restricted common stock vested on the grant date and one quarter will vest on each of the

first, second and third anniversaries of the grant date.

The performance-based restricted stock units vest at the end of a four-year performance period based on our achievement of certain total

stockholder return objectives.

To date, our chief executive officer was granted in the aggregate up to 2,050,023 performance-based restricted stock units, of which 421,348 units and 445,765 units

fully vested based on achieving the performance objectives for the four-year periods ended December 31, 2019 and 2018, respectively.

The 445,765 fully vested units were net settled for 203,492

common shares in 2019.

2019, 2018 and 2017, we also granted our chief executive officer 246,508 shares, 294,985 shares and 357,569 shares, respectively, of performance-based restricted stock with a grant

date fair value of $3.0 million, $3.4 million and $2.7 million, respectively, as a result of achieving goals related to the integration of the Acquisition.

The performance-based

restricted stock vests in full three years after the grant date.

2019, 2018 and 2017, we recorded total stock-based compensation expense of $8.8 million, $5.4 million and $3.2 million, respectively, to employee compensation

and benefits and $0.7 million, $0.6 million and $1.7 million, respectively, to selling and administrative expense.

2019, a total of 900,092 shares of restricted stock and restricted stock units with a grant date fair value of $5.9 million vested.

of December 31, 2019 and 2018, there were 1,379,615 shares and 1,033,616 shares, respectively, of unvested restricted common stock with a grant date fair value of

$14.8 million and $9.5 million, respectively.

December 31, 2019, total unrecognized compensation cost related to unvested restricted common stock was $7.0 million, which is expected to be recognized ratably over the

remaining weighted-average vesting period of 1.8 years.

Deferred Compensation.

We have a stock incentive plan under which the Board of Directors has the authority to issue shares of stock to certain employees, officers and directors.

In 2020, 2019 and 2018, we granted 314,957 shares, 333,884 shares and 265,444 shares, respectively, of restricted common stock with a total grant date fair value of $ 3.4 million, $ 4.2 million and $ 2.3 million, respectively, to certain employees.

One third of the shares vested as of the grant date and one third will vest on each of the first and second anniversaries of the grant date.

In 2020, 2019 and 2018, we granted 52,735 shares, 55,244 shares and 67,002 shares, respectively, of fully vested common stock with a grant date fair value of $ 0.5 million, $ 0.7 million and $ 0.6 million, respectively, to the independent members of our Board of Directors.

In 2020, 2019 and 2018, we granted our chief executive officer 45,928 shares 58,738 shares and 63,584 shares, respectively, of restricted common stock with a grant date fair value of $ 0.5 million, $ 0.7 million and $ 0.6 million, respectively, and 275,569 , 352,427 and 381,503 , respectively, of performance-based restricted stock units with a grant date fair value of $ 0.1 million, $ 1.7 million and $ 0.8 million, respectively.

One quarter of the restricted common stock vested on the grant date and one quarter will vest on each of the first, second and third anniversaries of the grant date.

The performance-based restricted stock units vest at the end of a four-year performance period based on our achievement of certain total stockholder return objectives.

To date, our chief executive officer was granted in the aggregate 2,325,592 performance-based restricted stock units, of which 448,980 , 421,348 units and 445,765 units fully vested based on achieving the performance objectives for the four-year periods ended December 31, 2020, 2019 and 2018, respectively.

The 421,348 and 445,765 fully vested units were net settled for 215,014 and 203,492 , respectively, common shares in 2020 and 2019, respectively.

In 2020, 2019 and 2018, we also granted our chief executive officer 313,152 shares, 246,508 shares and 294,985 shares, respectively, of performance-based restricted stock with a grant date fair value of $ 2.9 million, $ 3.0 million and $ 3.4 million, respectively, as a result of achieving goals related to the integration of the Acquisition.

The performance-based restricted stock vests in full three years after the grant date.

In 2020, we withheld 175,102 shares from the net settlement of previously granted performance-based restricted stock that vested in 2020 for payment of withholding taxes.

During 2020, 2019 and 2018, we recorded total stock-based compensation expense of $ 8.6 million, $ 8.8 million and $ 5.4 million, respectively, to employee compensation and benefits and $ 0.5 million, $ 0.7 million and $ 0.6 million, respectively, to selling and administrative expense.

During 2020, a total of 1,248,355 shares of restricted stock and restricted stock units with a grant date fair value of $ 8.7 million vested.

As of December 31, 2020 and 2019, there were 1,300,568 shares and 1,379,615 shares, respectively, of unvested restricted common stock with a grant date fair value of $ 14.4 million and $ 14.8 million, respectively.

At December 31, 2020, total unrecognized compensation cost related to unvested restricted common stock was $ 6.1 million, which is expected to be recognized ratably over the remaining weighted-average vesting period of 1.6 years.

Earnings Per Share.

Basic EPS is calculated by dividing net income attributable to common stockholders by the weighted average

number of shares of

common stock outstanding during each period inclusive of unvested restricted stock with full dividend participation rights.

Diluted EPS is calculated by dividing net income by the weighted average

number of shares of common stock

Basic EPS is calculated by dividing net income attributable to common stockholders by the weighted average number of shares of common stock outstanding during each period inclusive of unvested restricted stock with full dividend participation rights.

Diluted EPS is calculated by dividing net income by the weighted average number of shares of common stock outstanding, plus the additional dilutive effect of common stock equivalents during each period using the treasury stock method.

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.

ARBOR REALTY TRUST, INC.

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December 31, 2020

Note 17Equity (Continued)

plus the additional dilutive effect of common stock equivalents during each period using the treasury stock method.

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.

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

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:

Year Ended December 31,

9 unchanged sentences

Net income per common share (1)

of preferred stock dividends.

consider OP Units to be common stock equivalents as the holders have voting rights, the right to distributions and the right to redeem the OP Units for the cash

value of a corresponding number of shares of common stock or a corresponding number of shares of common stock, at our election.

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.

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.

(5) Represents

the dilutive effect of the portion of the special dividend that was paid with common shares.

(1) Net of preferred stock dividends.

(2) We consider OP Units to be common stock equivalents as the holders have voting rights, the right to distributions and the right to redeem the OP Units for the cash value of a corresponding number of shares of common stock or a corresponding number of shares of common stock, at our election.

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.

(5) Represents the dilutive effect of the portion of the special dividend that was paid with common shares.

Note 18 — Income Taxes

We are organized and conduct our operations to qualify as a REIT and to comply with the provisions of the Internal Revenue Code.

A REIT is generally not subject to federal income tax on

taxable income which it distributes to its stockholders, provided that it distributes at least 90% of its REITtaxable income and meets certain other requirements.

Certain REIT income may

be subject to state and local income taxes.

In 2019, we elected to retain excess inclusion income rather than passing it through to our shareholders.

Consequently, we had REIT-federal taxable income,

net of dividends

A REIT is generally not subject to federal income tax on taxable income which it distributes to its stockholders, provided that it distributes at least 90% of its REIT–taxable income and meets certain other requirements.

Certain REIT income may be subject to state and local income taxes.

We did not have any REIT–federal taxable income, net of dividends paid and net operating loss deductions, for 2020, and therefore, have not provided for REIT federal income tax expense.

In 2019, we elected to retain excess inclusion income rather than passing it through to our stockholders.

Consequently, we had REIT-federal taxable income, net of dividends paid deduction, for 2019, and therefore, had provided for REIT federal income tax expense of $ 0.6 million attributable to excess inclusion income.

In 2018, we did not have any REIT–federal taxable income, net of dividends paid and net operating loss deductions, and therefore, did not provide for REIT federal income tax expense.

In 2020, the REIT incurred no state tax expense.

In 2019 and 2018, the REIT incurred state tax expense/(benefit) in the amount of $ 0.1 million and ($ 0.1 ) million, respectively.

For the 2009 and 2010 tax years, the income and the tax on certain debt extinguishment transactions was, at our election, deferred to be recognized ratably over five years from 2014 to 2018.

Certain of our assets and operations that would not otherwise comply with the REIT requirements, such as the Agency Business and our residential mortgage banking joint venture, are owned or conducted through our taxable REIT subsidiaries (the “TRS Consolidated Group”), the majority of the income of which is subject to U.S.

federal, state and local income taxes.

The TRS Consolidated Group has federal net operating losses from prior years which will be used against the income from the Agency Business subject to loss limitation rules.

For 2020, 2019 and 2018, we recorded a provision for income taxes related to the assets held in the TRS Consolidated Group and the REIT in the amount of $ 40.4 million, $ 15.0 million and $ 9.7 million, respectively.

In 2020, the change in valuation allowance was due to the impact of state tax rate changes.

In 2019, valuation allowance previously recorded at the

ARBOR REALTY TRUST, INC.

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December 31, 2020

Note 18Income Taxes (Continued)

deduction, for 2019, and therefore, have provided for REIT federal income tax expense of $0.6 million attributable to excess inclusion income.

We did not have any REITfederal

taxable income, net of dividends paid and net operating loss deductions, for 2018 and 2017, and therefore, have not provided for REIT federal income tax expense.

The REIT incurred state tax

expense/(benefit) for 2019, 2018 and 2017, in the amount of $0.1 million, ($0.1) million and $1.0 million, respectively.

For the 2009 and 2010 tax years, the income and the tax on

certain debt extinguishment transactions was, at our election, deferred to be recognized ratably over five years from 2014 to 2018.

of our assets and operations that would not otherwise comply with the REIT requirements, such as the Agency Business, are owned or conducted through our TRS Consolidated Group,

the majority of the income of which is subject to U.S.

federal, state and local income taxes.

The TRS Consolidated Group has federal net operating losses from prior years which will be used against

the income from the Agency Business.

For 2019, 2018 and 2017, we recorded a provision for income taxes related to the assets held in the TRS Consolidated Group and the REIT in the amount of

$15.0 million, $9.7 million and $13.4 million, respectively.

In 2019, valuation allowance previously recorded at the TRS Consolidated Group was released in the amount of

$3.3 million on the deferred tax assets subject to loss limitation rules.

In 2018, valuation allowance was recorded at the TRS Consolidated Group in the amount of $0.3 million on the

deferred tax assets related to capital loss carryforwards.

In 2017, valuation allowance previously recorded at the TRS Consolidated Group was released in the amount of $3.5 million.

January 2018, the $50.0 million preferred equity interest entered into with ACM to finance a portion of the Acquisition purchase price was paid off.

When we entered into the

Acquisition, we established a deferred tax liability in connection with the $50.0 million preferred equity interest.

Upon payoff in January 2018, the deferred tax liability was written off and

we recorded a deferred tax benefit in the amount of $12.5 million.

See Note 19 for details.

summary of our pre-tax GAAP income is as follows (in thousands):

TRS Consolidated Group on the deferred tax assets subject to loss limitation rules was released in the amount of $ 3.3 million.

In 2018, valuation allowance was recorded at the TRS Consolidated Group in the amount of $ 0.3 million on the deferred tax assets related to capital loss carryforwards.

In January 2018, the $ 50.0 million preferred equity interest entered into with ACM to finance a portion of the Acquisition purchase price was paid off.

When we entered into the Acquisition, we established a deferred tax liability in connection with the $ 50.0 million preferred equity interest.

Upon payoff in January 2018, the deferred tax liability was written off and we recorded a deferred tax benefit in the amount of $ 12.5 million.

A summary of our pre-tax GAAP income is as follows (in thousands):

Year Ended December 31,

2 unchanged sentences

Total pre‑tax GAAP income

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2019

Note 18Income Taxes (Continued)

provision for (benefit from) income taxes is comprised as follows (in thousands):

Our provision for income taxes is comprised as follows (in thousands):

Year Ended December 31,

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Total income tax expense

reconciliation of our effective income tax rate as a percentage of pre-tax income to the U.S.

A reconciliation of our effective income tax rate as a percentage of pre-tax income to the U.S.

federal statutory rate is as follows:

5 unchanged sentences

Preferred equity interest deferred tax write‑off

Tax rate change

Effective income tax rate

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December 31, 2020

Note 18Income Taxes (Continued)

significant components of our deferred tax assets and liabilities of our TRS Consolidated Group are as follows (in thousands):

The significant components of our deferred tax assets and liabilities of our TRS Consolidated Group are as follows (in thousands):

Deferred tax assets:

5 unchanged sentences

Deferred tax liabilities:

Interest in equity affiliatesnet

Mortgage servicing rights

Interest in equity affiliates—net

Deferred tax liabilities, net

Tax Reform was signed into law on December 22, 2017.

Among numerous provisions included in the new tax law was the reduction of the corporate federal income tax rate from 35%

The provision for income taxes for 2019 and 2018 reflects the newly enacted corporate federal income tax rate of 21%.

We applied the guidance in SAB 118 when accounting for the

enactment-date effects of the Tax Reform throughout 2018 and in 2017.

At December 31, 2018, we completed our accounting for the enactment-date income tax effects of the Tax Reform and no

material adjustments were recorded.

At December 31, 2017, the provision for income taxes for 2017 included the newly enacted corporate federal income tax rate of 21%, which resulted in a

deferred income tax benefit of approximately $5.3 million primarily from applying the new lower income tax rates to our net long term deferred tax assets and liabilities recorded on our

consolidated balance sheets.

December 31, 2019, our TRS Consolidated Group, had approximately $23.7 million of deferred tax assets net of a $0.4 million valuation allowance.

The deferred tax

assets consist of expenses not currently deductible, loan loss reserves, net operating loss and capital loss carryforwards.

Our TRS Consolidated Group's deferred tax assets are offset by approximately

$22.6 million in deferred tax liabilities consisting of timing differences from investments in equity affiliates, intangibles, and mortgage servicing rights.

December 31, 2018, our TRS Consolidated Group, had approximately $17.2 million of deferred tax assets net of a $3.7 million valuation allowance.

The deferred tax

assets consist of expenses not currently deductible, loan loss reserves, net operating loss and capital loss carryforwards.

Our TRS Consolidated Group's deferred tax assets are offset by approximately

$15.9 million in deferred tax liabilities consisting of timing differences from investments in equity affiliates, intangibles, and mortgage servicing rights.

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2019

Note 18Income Taxes (Continued)

of both December 31, 2019 and 2018, the REIT (excluding the TRS Consolidated Group) had no federal net operating loss carryforwards remaining and no capital loss carryforwards.

both of December 31, 2019 and 2018, the TRS Consolidated Group had federal and state net operating loss carryforwards of approximately $0.5 million, which will expire

through 2031 and capital loss carryforwards of approximately $1.1 million, which will expire through 2023.

have assessed our tax positions for all open years, which includes 2016-2019, and have concluded that there were no material uncertainties to be recognized.

We have not recognized any

interest and penalties related to tax uncertainties for the years ended 2016 through 2019.

At December 31, 2020, our TRS Consolidated Group, had $ 32.2 million of deferred tax assets net of a $ 0.4 million valuation allowance.

The deferred tax assets consist of expenses not currently deductible, loan loss reserves, net operating loss and capital loss carryforwards.

Our TRS Consolidated Group's deferred tax assets are offset by $ 32.2 million in deferred tax liabilities consisting of timing differences from investments in equity affiliates, intangibles and mortgage servicing rights.

At December 31, 2019, our TRS Consolidated Group, had $ 23.7 million of deferred tax assets net of a $ 0.4 million valuation allowance.

The deferred tax assets consist of expenses not currently deductible, loan loss reserves, net operating loss and capital loss carryforwards.

Our TRS Consolidated Group's deferred tax assets are offset by $ 22.6 million in deferred tax liabilities consisting of timing differences from investments in equity affiliates, intangibles and mortgage servicing rights.

As of both December 31, 2020 and 2019, the REIT (excluding the TRS Consolidated Group) had no federal net operating loss carryforwards remaining and no capital loss carryforwards.

At both December 31, 2020 and 2019, the TRS Consolidated Group had federal net operating loss carryforwards of $ 0.5 million, which will expire through 2031 and capital loss carryforwards of $ 1.1 million, which will expire through 2023.

At December 31, 2020, the TRS Consolidated Group had state net operating loss carryforwards of $ 0.3 million, which will begin to expire in 2036.

At December 31, 2019, the TRS Consolidated Group had no state net operating loss carryforwards.

The TRS Consolidated Group is currently under audit in certain state and local jurisdictions for tax years 2017-2018.

While the impact of the current income tax examinations are undetermined, it is not expected to have a material impact on our consolidated financial statements.

We have assessed our tax positions for all open years, which includes 2017-2020, and have concluded that there were no material uncertainties to be recognized.

We have not recognized any interest and penalties related to tax uncertainties for the years ended 2017 through 2020.

Note 19 — Agreements and Transactions with Related Parties

Management Agreement.

Prior to May 31, 2017, we had a management agreement with ACM, pursuant to which ACM provided us with

professional and advisory services vital to our operations, including underwriting, accounting and treasury, compliance, marketing, information technology and human resources.

Pursuant to the terms of

the management agreement, we reimbursed ACM for its actual costs incurred in connection with managing our business through a base management fee, and, under certain circumstances, an annual incentive

In May 2017, we terminated the existing management agreement.

We incurred base management fees of $6.7 million in 2017.

Shared Services Agreement.

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 2019, 2018 and 2017, we incurred $2.7 million, $1.3 million and $0.7 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 $10.7 million and $1.3 million at 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 2019 and amounts due from ACM for costs

incurred in connection with the shared services agreement described above.

to related party was $13.1 million at December 31, 2019 and consisted of loan payoffs, holdbacks and escrows to be remitted to our affiliated servicing operations

related to real estate transactions.

certain instances our business requires our executives to charter privately-owned aircraft in furtherance of our business.

In October 2019, we entered into an aircraft time sharing

agreement with an entity controlled by our chief executive officer that owns a private aircraft.

Pursuant to the agreement, we reimburse the aircraft owner for the required costs under Federal

Aviation Administration regulations for the flights our executives' charter.

During 2019, we reimbursed the aircraft owner $0.1 million for the flights chartered by our executives pursuant the

the first quarter of 2019, we, along with ACM, certain executives of ours and a consortium of independent outside investors, formed AMAC III, a multifamily-focused commercial real

estate investment fund sponsored and managed by our chief executive officer and one of his immediate family

Support Agreement and Employee Secondment Agreement.

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

We also have an employee secondment agreement with ACM pursuant to which we have seconded certain employees to ACM and ACM covers the cost of those seconded employees.

During 2020, 2019 and 2018, we incurred $ 2.4 million, $ 2.7 million and $ 1.3 million, respectively, of costs for services provided to ACM, which are included in due from related party on the consolidated balance sheets.

ARBOR REALTY TRUST, INC.

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Note 19Agreements and Transactions with Related Parties (Continued)

Other Related Party Transactions.

Due from related party was $ 12.4 million and $ 10.7 million at December 31, 2020 and 2019, respectively, which consisted primarily of amounts due from our affiliated servicing operations related to real estate transactions closing at the end of 2020 and 2019 and amounts due from ACM for costs incurred in connection with the shared services agreement described above.

Due to related party was $ 2.4 million and $ 13.1 million at December 31, 2020 and 2019, respectively, and consisted of loan payoffs, holdbacks and escrows to be remitted to our affiliated servicing operations related to real estate transactions.

In December 2020, we committed to fund a $ 32.5 million bridge loan and we made a $ 3.5 million preferred equity investment in a SFR build-to-rent construction project.

An entity owned by an immediate family member of our chief executive officer also made an equity investment in the project and owns a 21.8 % equity interest in the borrowing entity.

The bridge loan, which was not funded as of December 31, 2020, has an interest rate of LIBOR plus 5.50 % with a LIBOR floor of 0.75 % and matures in October 2023 and the preferred equity investment has a fixed rate of 12 % and matures in October 2023.

Interest income recorded from these loans totaled less than $ 0.1 million for 2020.

In October 2020, we committed to fund a $ 30.5 million bridge loan and we made a $ 4.6 million preferred equity investment in a SFR build-to-rent construction project.

ACM and an entity owned by an immediate family member of our chief executive officer also made equity investments in the project and own an 18.9 % equity interest in the borrowing entity.

The bridge loan, which was not funded as of December 31, 2020, has an interest rate of LIBOR plus 5.50 % with a LIBOR floor of 0.75 % and matures in May 2023 and the preferred equity investment has a fixed rate of 12 % and matures in April 2023.

Interest income recorded from these loans totaled $ 0.1 million for 2020.

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

The property is controlled by a third party and, beginning in June 2020, its day-to-day operations are managed by an entity owned by an immediate family member of our chief executive officer, which is entitled to an annual fee of $ 0.3 million and a 33 % equity participation interest.

In certain instances, our business requires our executives to charter privately owned aircraft in furtherance of our business.

In 2019, we entered into an aircraft time-sharing agreement with an entity controlled by our chief executive officer that owns a private aircraft.

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

During 2020 and 2019, we reimbursed the aircraft owner $ 0.5 million and $ 0.1 million, respectively, for the flights chartered by our executives pursuant the agreement.

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

We committed to a $ 30.0 million investment (of which $ 11.7 million was funded as of December 31, 2020) for an 18 % interest in AMAC III.

In July 2019, AMAC III originated

a $7.0 million mezzanine loan to a borrower 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.

We received a $0.2 million cash distribution and recorded a $0.2 million loss in 2019 related to this investment.

Interest income recorded from our

bridge and Private Label loans totaled $3.3 million for 2019.

November 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.

The loan has an interest rate of LIBOR plus 4.50% with a LIBOR floor of 2.00% and matures in

October 2021.

In the fourth quarter of 2019, the loan commitment was reduced to $22.6 million (of which $17.4 million was funded as of December 31, 2019) and the related party

investors liquidated their equity investment.

Interest income recorded from this loan totaled $1.3 million and $0.2 million for 2019 and 2018, respectively.

October 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 entity.

During 2020 and 2019, we received cash distributions totaling $ 0.1 million and $ 0.2 million, respectively, and recorded a loss of $ 0.9 million and $ 0.2 million, 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 June 2020, for full satisfaction of the mezzanine loan, AMAC III became the owner of the property.

In August 2020, the $ 34.0 million 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 $ 1.9 million and $ 3.3 million for 2020 and 2019, respectively.

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.

The loan has an interest rate of LIBOR plus 4.50 % with a LIBOR floor of 2.00 % and matures in October 2021.

Interest income recorded from this loan totaled $2.7 million for 2019.

October 2018, we acquired a $19.5 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 85% of the borrowing entity.

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 $1.3 million and $0.3 million for 2019 and 2018, respectively.

August 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 owns a 10.8% interest in

the borrowing entity.

The loan was used to purchase several undeveloped parcels of land.

The loan has a fixed interest rate of 10% and is scheduled to mature in February 2020.

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 $1.8 million

and $0.8 million for 2019 and 2018, respectively.

June 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.

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

Interest income recorded from this loan totaled $ 1.3 million and $ 0.2 million for 2019 and 2018, respectively.

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Note 19Agreements and Transactions with Related Parties (Continued)

April 2018, we acquired a $9.4 million bridge loan originated by ACM, of which $8.6 million was funded as of December 31, 2019.

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 $0.6 million and

$0.3 million for 2019 and 2018, respectively.

January 2018, we paid $50.0 million in full satisfaction of the related party financing we entered into with ACM to finance a portion of the Acquisition purchase price.

incurred interest expense related to this financing of $0.3 million and $3.8 million for 2018 and 2017, respectively.

December 2017, we acquired a $32.8 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 90% of the borrowing entity.

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.

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

Interest income recorded from this loan totaled $1.7 million,

$2.4 million and $0.1 million for 2019, 2018 and 2017, respectively.

the fourth quarter of 2017, we originated two bridge loans totaling $28.0 million on two multifamily properties owned in part by a consortium of investors (which includes,

among other unaffiliated investors, certain of our officers and our chief executive officer) which owns 45% of the borrowing entity.

The loans had an interest rate of LIBOR plus 5.25% with LIBOR

floors ranging from 1.24% to 1.54% and was scheduled to mature in the fourth quarter of 2020.

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 $2.2 million, $2.1 million and

$0.2 million for 2019, 2018 and 2017, respectively.

July 2017, we originated a $36.0 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 a 95% interest in the borrowing entity.

The loan had an interest rate of LIBOR plus 4.5% with a LIBOR floor of 1% and was scheduled

to mature in July 2020.

This loan was repaid in full in August 2018.

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

In 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 in October 2020.

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

Interest income recorded from this loan totaled $ 1.4 million and $ 2.7 million for 2020 and 2019, respectively.

May 2017, we originated a $46.9 million Fannie Mae loan on a multifamily property owned in part by a consortium of investors (which includes, among other unaffiliated

investors, certain of our officers) which owns a 17.6% interest in the borrowing entity.

We carry a maximum loss-sharing obligation with Fannie Mae on this loan of up to 5% of the original UPB.

Servicing revenue recorded from this loan was $0.1 million, $0.1 million and less than $0.1 million for 2019, 2018 and 2017, respectively.

March 2017, a consortium of investors (which includes, among other unaffiliated investors, our chief executive officer and ACM) invested $2.0 million for a 26.1% ownership

interest in two portfolios of multifamily properties which has two bridge loans totaling $14.8 million originated by us in 2016.

The loans had an interest rate of LIBOR plus 5.25% with a LIBOR

floor of 0.5% and were scheduled

In 2018, we acquired a $ 19.5 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 85 % of the borrowing entity.

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 $ 1.2 million, $ 1.3 million and $ 0.3 million for 2020, 2019 and 2018, 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 owns a 10.8 % interest in the borrowing entity.

The loan was used to purchase several undeveloped parcels of land.

The loan has a fixed interest rate of 10 % and was scheduled to mature in February 2020.

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, $ 1.8 million and $ 0.8 million for 2020, 2019 and 2018, 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 $ 1.4 million for both 2020 and 2019, and $ 0.6 million for 2018.

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

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

In January 2021, the maturity date of this loan was extended to January 2022.

Interest income recorded from this loan totaled $ 0.6 million for both 2020 and 2019, and $ 0.3 million for 2018.

In 2018, we paid $ 50.0 million in full satisfaction of the related party financing we entered into with ACM to finance a portion of the Acquisition purchase price.

We incurred interest expense related to this financing of $ 0.3 million for 2018.

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.

In 2019, the borrower repaid this loan in full.

Interest income recorded from this loan totaled $ 1.7 million and $ 2.4 million for 2019 and 2018, respectively.

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

The loans had an interest rate of LIBOR plus 5.25 % with LIBOR floors ranging from 1.24 % to 1.54 % and were scheduled to mature in the fourth quarter of 2020.

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

Interest income recorded from these loans totaled $ 1.9 million, $ 2.2 million and $ 2.1 million for 2020, 2019 and 2018, respectively.

In 2017, we originated a $ 36.0 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 a 95 % interest in the borrowing entity.

The loan had an interest rate of LIBOR plus 4.5 % with a LIBOR floor of 1 % and was scheduled to mature in July 2020.

This loan was repaid in full in 2018.

Interest income recorded from this loan totaled $ 1.9 million for 2018.

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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Note 19Agreements and Transactions with Related Parties (Continued)

mature in November 2018.

One of the loans was repaid in full in the fourth quarter of 2017 and the remaining loan paid off in June 2018.

Interest income recorded from these loans totaled

$0.3 million and $1.0 million for 2018 and 2017, respectively.

January 2017, we modified a $5.0 million preferred equity investment, subsequently increasing our balance to $15.0 million, with a commitment to fund an additional

$5.0 million.

This investment had a fixed interest rate of 11% that was scheduled to mature in January 2020.

We also entered into an agreement with a consortium of investors (which include,

among other unaffiliated investors, certain of our officers and our chief executive officer) which admitted them as a member to fund the remaining $5.0 million preferred equity investment,

which was generally subordinate to our investment.

The principal balance was repaid in full in the fourth quarter of 2017.

Interest income recorded from our investment totaled $1.1 million for

January 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.

carry a maximum loss-sharing obligation with Fannie Mae on this loan of up to 5 % of the original UPB.

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

In 2017, a consortium of investors (which includes, among other unaffiliated investors, our chief executive officer and ACM) invested $ 2.0 million for a 26.1 % ownership interest in two portfolios of multifamily properties which has two bridge loans totaling $ 14.8 million originated by us in 2016.

The loans had an interest rate of LIBOR plus 5.25 % with a LIBOR floor of 0.5 % and were scheduled to mature in November 2018.

One of the loans was repaid in full in 2017 and the remaining loan paid off in 2018.

Interest income recorded from the loan that paid off in 2018 was $ 0.3 million for 2018.

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 December 31, 2020.

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

Upon the sale, we received a 1% loan assumption fee which was governed by existing loan agreements that

were in place when the loan was originated in 2015, prior to such purchase.

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

2016, we originated $48.0 million of bridge loans on six 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 interests ranging from 10.5% to 12.0% in the borrowing entities.

The loans have an interest rate of LIBOR plus 4.5% with a LIBOR

floor of 0.25% and were scheduled to mature in September 2019.

In 2017, a $6.8 million loan on one property paid off in full and in 2018 four additional loans totaling $28.3 million paid

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 these loans totaled $0.3 million, $1.9 million and $2.7 million for 2019, 2018 and 2017,

respectively.

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.

The bridge loan has an interest rate of

LIBOR plus 4.5% with a LIBOR floor of 0.25% and the preferred equity investment has a fixed interest rate of 10%.

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

Upon the sale, we received a 1 % loan assumption fee which was governed by existing loan agreements that were in place when the loan was originated in 2015, prior to such purchase.

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

In 2016, we originated $ 48.0 million of bridge loans on six 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 interests ranging from 10.5 % to 12.0 % in the borrowing entities.

The loans had an interest rate of LIBOR plus 4.5 % with a LIBOR floor of 0.25 % and were scheduled to mature in September 2019.

In 2017, a $ 6.8 million loan on one property paid off in full and in 2018 four additional loans totaling $ 28.3 million paid off in full.

In 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 these loans totaled $ 0.2 million, $ 0.3 million and $ 1.9 million for 2020, 2019 and 2018, 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.

The bridge loan had an interest rate of LIBOR plus 4.5 % with a LIBOR floor of 0.25 % and the preferred equity investment had a fixed interest rate of 10 %.

The bridge loan and the preferred equity investment paid off in full in May 2019.

In March 2020, we originated a $ 14.8 million Private Label loan and a $ 3.4 million mezzanine loan to the properties.

The Private Label loan bears interest at a fixed rate of 3.10 % and the mezzanine loan bears interest at a fixed rate of 9.00 % and both loans mature in April 2030.

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

Interest income recorded from these loans totaled $ 0.3 million, $ 0.6 million and $ 1.4 million for 2020, 2019 and 2018, respectively.

2016, we originated a $19.0 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 a 7.5% interest in the borrowing entity.

The loan had an interest rate of LIBOR plus 4.5% with a LIBOR floor of 0.25% and was

scheduled to mature in

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2019

Note 19Agreements and Transactions with Related Parties (Continued)

In 2016, we originated a $ 19.0 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 a 7.5 % interest in the borrowing entity.

The loan had an interest rate of LIBOR plus 4.5 % with a LIBOR floor of 0.25 % and was scheduled to mature in January 2019.

In January 2018, this loan paid off in full.

Interest income recorded from this loan totaled $0.3 million and $1.1 million for 2018 and 2017, respectively.

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.

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

Since the initial investment, we invested an additional $16.1 million through this joint venture in

non-qualified residential mortgages purchased from the mortgage banking business's origination platform and we received cash distributions totaling $16.9 million (that were classified as

returns of capital) as a result of the joint venture selling most of its mortgage assets.

We recorded income from these investments of $7.2 million, $0.9 million and a loss of

$7.2 million for 2019, 2018 and 2017, 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.

Interest income recorded from this loan totaled $ 0.3 million for 2018.

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 $ 75.7 million, $ 7.2 million and $ 0.9 million for 2020, 2019 and 2018, 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.

ACM has also provided us with a guaranty to pay up to 50 % of any amounts we may pay under this guaranty.

As of December 31, 2019, our maximum exposure under this

guaranty totals $0.4 million.

We have not accrued this amount as we do not believe that we will be required to make any nonrefundable payments under this guaranty.

income recorded from loans originated in 2015 or prior years with our affiliates totaled $1.3 million and $5.8 million for 2018 and 2017, respectively.

along with an executive officer of ours and a consortium of independent outside investors, hold equity investments in a portfolio of multifamily properties referred to as the

"Lexford" portfolio, which is managed by an entity owned primarily by a consortium of affiliated investors, including our chief executive officer and an executive officer of ours.

Based on the terms

of the management contract, the management company is entitled to 4.75% of gross revenues of the underlying properties, along with the potential to share in the proceeds of a sale or restructuring of

In June 2018, the owners of Lexford restructured part of its debt and we originated twelve bridge loans totaling $280.5 million, which were used to repay in full certain existing

mortgage debt and to renovate 72 multifamily properties included in the portfolio.

The loans, which we originated in June 2018, have interest rates of LIBOR plus 4.0% and mature in June 2021 (with 2

one-year extension options).

During 2019, the borrower made payoffs and partial paydowns of principal totaling $250.0 million.

Interest income recorded from these loans totaled

$9.6 million and $10.1 million during 2019 and 2018, 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 $3.5 million, $2.5 million and $2.5 million during 2019, 2018 and 2017, respectively, which were recorded as income (loss) 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.

The bad boy guarantees may become a liability for us upon standard "bad" acts such

as fraud or a material misrepresentation by Lexford or us.

At December 31, 2019, this debt had an aggregate outstanding balance of $617.9 million and is scheduled to mature between 2020

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

executive officer and his affiliated entities ("the Kaufman Entities") together beneficially own approximately 31% of the

The final payment was made under this settlement in January 2020 and we have no additional exposure.

Interest income recorded from loans originated in 2015 or prior years with our affiliates totaled $ 1.3 million for 2018.

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

Based on the terms of the

ARBOR REALTY TRUST, INC.

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December 31, 2020

Note 19Agreements and Transactions with Related Parties (Continued)

membership interests of ACM and certain of our employees and directors also hold an ownership interest in ACM.

Furthermore, one of our directors serves as the trustee and co-trustee of two

of the Kaufman Entities that hold membership interests in ACM.

management contract, the management company is entitled to 4.75 % of gross revenues of the underlying properties, along with the potential to share in the proceeds of a sale or restructuring of the debt.

In June 2018, the owners of Lexford restructured part of its debt and we originated twelve bridge loans totaling $ 280.5 million, which were used to repay in full certain existing mortgage debt and to renovate 72 multifamily properties included in the portfolio.

The loans were originated in June 2018, had interest rates of LIBOR plus 4.0 % and were scheduled to mature in June 2021.

During 2019, the borrower made payoffs and partial paydowns of principal totaling $ 250.0 million and in March 2020, the remaining balance of the loans were refinanced with a $ 34.6 million Private Label loan, which bears interest at a fixed rate of 3.30 % and matures in March 2030.

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

Interest income recorded from these loans totaled $ 0.5 million, $ 9.6 million and $ 10.1 million during 2020, 2019 and 2018, 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, $ 3.5 million and $ 2.5 million during 2020, 2019 and 2018, 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.

The bad boy guarantees may become a liability for us upon standard “bad” acts such as fraud or a material misrepresentation by Lexford or us.

At December 31, 2020, this debt had an aggregate outstanding balance of $ 612.4 million and is scheduled to mature between 2021 and 2029.

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

Our chief executive officer and his affiliated entities (“the Kaufman Entities”) together beneficially own approximately 35 % of the outstanding membership interests of ACM and certain of our employees and directors also hold an ownership interest in ACM.

Furthermore, one of our directors serves as the trustee and co-trustee of two of the Kaufman Entities that hold membership interests in ACM.

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

December 31, 2019, ACM holds 4,285,694 shares of our common stock and 14,685,729 OP Units, which represents 14.6% 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.

At December 31, 2020, ACM holds 3,528,083 shares of our common stock and 11,901,068 OP Units, which represents 11.0 % 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.

Note 20 — Employee Benefits

We have a 401(k) defined contribution plan (the "401(k) Plan") which is available to all employees who have completed six

continuous service.

We have a 401(k) defined contribution plan (the "401(k) Plan") which is available to all employees who have completed six months of continuous service.

The 401(k) Plan matches 25 % of the first 6 % of each employee's contribution.

We have the option to increase the employer match based on our operating results.

In 2019, 2018 and

2017, we recorded $0.7 million, $0.6 million and $0.6 million, respectively, of expenses associated with the 401(k) Plan, which is included in employee compensation and benefits

in our consolidated statements of income.

In 2020, 2019 and 2018, we recorded $ 0.8 million, $ 0.7 million and $ 0.6 million, respectively, of expenses associated with the 401(k) Plan, which is included in employee compensation and benefits in our consolidated statements of income .

Deferred Compensation.

We have a non-qualified deferred compensation plan (the "Deferred Comp Plan") which is offered to certain

full-time employees

and is subject to the rules of section 409(a) of the Internal Revenue Code.

Under the Deferred Comp Plan, which can be modified or discontinued at any time, participating employees may defer a

portion of their compensation and we are contractually obligated to match the contribution, as specified in the Deferred Comp Plan, and fund such amounts upon vesting and an election by participants

to redeem their interests.

All employee deferrals vest immediately and matching contributions vest over a nine-year period beginning after year five.

For 2019, 2018 and 2017, there were

$4.7 million, $3.4 million and $2.4 million, respectively, of employee deferrals.

At December 31, 2019 and 2018, we had recorded liabilities totaling $13.2 million

and $8.8 million, respectively, and assets of $8.2 million and $5.9 million, respectively, related to the Deferred Comp Plan, which is included in other liabilities and other

assets, respectively, in our consolidated balance sheets.

We have a non-qualified deferred compensation plan (the “Deferred Comp Plan") which is offered to certain full-time employees and is subject to the rules of section 409(a) of the Internal Revenue Code.

The Deferred Comp Plan can be modified or discontinued at any time and, in 2020, we modified the eligibility requirements to allow participation to certain additional employees.

All eligible participating employees may defer a portion of their compensation and, depending on the participant eligibility requirements met, we are contractually obligated to:

(i) match the contribution, as specified in the Deferred Comp Plan, and fund such amounts upon vesting and an election by participants to redeem their interests;

and/or (ii) supply additional life insurance benefits.

All employee deferrals vest immediately and the matching contributions, where applicable, vest over a nine -year period beginning after year five.

For 2020, 2019 and 2018, there were $ 1.8 million, $ 1.6 million and $ 1.6 million, respectively, of employee deferrals.

At December 31, 2020 and 2019, we had recorded liabilities totaling $ 18.7 million and $ 13.2 million, respectively, and assets of $ 14.1 million and $ 8.2 million, respectively, related to the Deferred Comp Plan, which is included in other liabilities and other assets, respectively, in our consolidated balance sheets.

Note 21 — Segment Information

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

Specifically identifiable costs are recorded directly to each business segment.

For items not specifically identifiable, costs have been allocated between the business segments using the most meaningful allocation

ARBOR REALTY TRUST, INC.

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December 31, 2020

Note 21Segment Information

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

Specifically identifiable

costs are recorded directly to each business segment.

For items not specifically identifiable, costs have been allocated between the business segments using the most meaningful allocation

methodologies, which was predominately direct labor costs (i.e., time spent working on each business segment).

Such costs include, but are not limited to, compensation and employee related

costs, selling and administrative expenses, management fees (through May 31, 2017effective date of the termination of the existing management agreement with ACM) and stock-based

compensation.

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

Year Ended December 31, 2020

9 unchanged sentences

Property operating income

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)

Provision for credit losses (net of recoveries)

Total other expenses

Income 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) gain on sale of real estate

Income from equity affiliates

7 unchanged sentences

December 31, 2020

Note 21Segment Information (Continued)

Year Ended December 31, 2019

9 unchanged sentences

Property operating income

Loss on derivative instruments, net

Other income, net

5 unchanged sentences

Depreciation and amortization

Impairment loss on real estae owned

Impairment loss on real estate owned

Provision for loss sharing (net of recoveries)

Provision for loan losses (net of recoveries)

Litigation settlement gain

Total other expenses

2 unchanged sentences

Income from equity affiliates

Benefit from (provision for) income taxes

Provision for income taxes

Preferred stock dividends

5 unchanged sentences

December 31, 2020

Note 21Segment Information (Continued)

Year Ended December 31, 2018

9 unchanged sentences

Property operating income

Gain on derivative instruments, net

Other income, net

8 unchanged sentences

Provision for loan losses (net of recoveries)

Management feerelated party

Litigation settlement gain

Total other expenses

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

Gain on extinguishment of debt

Loss from equity affiliates

Provision for income taxes

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

Loss on extinguishment of debt

Income from equity affiliates

Benefit from (provision for) income taxes

Preferred stock dividends

1 unchanged sentence

Net income attributable to common stockholders

certain corporate expenses not allocated to the two reportable segments, such as financing costs associated with the Acquisition, as well as income

allocated to the noncontrolling interest holders.

(1) Includes certain corporate expenses not allocated to the two reportable segments, primarily income allocated to the noncontrolling interest holders.

ARBOR REALTY TRUST, INC.

2 unchanged sentences

December 31, 2020

Note 21Segment Information (Continued)

December 31, 2020

Structured Business

Agency Business

Cash and cash equivalents

27 unchanged sentences

December 31, 2020

Note 21Segment Information (Continued)

Year Ended December 31,

3 unchanged sentences

Loan payoffs / paydowns

(1) We committed to fund six SFR build-to-rent bridge loans totaling $ 197.8 million in the third and fourth quarters of 2020.

Agency Business

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Agency Business

Private Label

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

1 unchanged sentence

December 31, 2020

Key Servicing Metrics for Agency Business:

UPB of Servicing

Servicing Portfolio

Key Servicing Metrics for Agency Business:

(basis points)

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2019

Note 21Segment Information (Continued)

December 31, 2018

Note 22Selected Quarterly Financial DataUnaudited

Summarized quarterly financial data for 2019 and 2018 is as follows ($ in thousands, except per share data):

Three Months Ended

December 31, 2019

September 30, 2019

June 30, 2019

March 31, 2019

Net interest income

Total other revenue

Total other expenses

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

Loss on extinguishment of debt

Income from equity affiliates

(Provision for) benefit from income taxes

Preferred stock dividends

Net income attributable to noncontrolling interest

Net income attributable to common stockholders

Basic earnings per common share(1)

Diluted earnings per common share(1)

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2019

Note 22Selected Quarterly Financial DataUnaudited (Continued)

Three Months Ended

Private Label

December 31, 2019

September 30, 2018

June 30, 2018

March 31, 2018

Net interest income

Total other revenue

Total other expenses

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

Loss on extinguishment of debt

Income (loss) from equity affiliates

(Provision for) benefit from income taxes

Preferred stock dividends

Net income attributable to noncontrolling interest

Net income attributable to common stockholders

Basic earnings per common share(1)

Diluted earnings per common share(1)

sum of the quarterly amounts may not equal amounts reported for year-to-date periods, due to the effects of rounding for each period.

ARBOR REALTY TRUST, INC.

13 unchanged sentences

Floor 0.15 % ‑ 1.66

LIBOR + 4.00% - 4.50%

Floor 0.15% - 0.75%

Fixed 0.00 % ‑ 11.64

2 unchanged sentences

LIBOR + 1.45 % ‑ 6.75

Floor 1.12% - 2.13%

LIBOR + 3.10 % ‑ 8.00

3 unchanged sentences

Floor 0.50 % ‑ 2.25

Fixed 10.00 % ‑ 12.00

Student Housing

LIBOR + 4.00 % ‑ 5.00

Floor 1.23 % ‑ 2.38

LIBOR + 3.50 % ‑ 4.95

Floor 1.00 % ‑ 2.50

Total Bridge Loans less than 3% of carrying amount of total loans

Total Bridge Loans

ARBOR REALTY TRUST, INC.

AND SUBSIDIARIES

SCHEDULE IVLOANS AND OTHER LENDING INVESTMENTS (Continued)

DECEMBER 31, 2019

($ in thousands)

Mezzanine Loans:

Mezzanine loans less than 3% of carrying amount of total loans (6):

Fixed 5.00% - 12.00%

Fixed 0.00% - 13.00%

LIBOR + 3.85 % ‑ 4.75

Floor 1.00 % ‑ 1.25

Fixed 5.00 % ‑ 12.00

Total Mezzanine Loans

2 unchanged sentences

Fixed 3.00 % ‑ 14.00

Student Housing

Fixed 8.00 % ‑ 15.00

Total Preferred Equity Investments

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Fixed 4.40 % ‑ 5.90

Fixed 2.83% - 5.32%

Interest Only, PI = Principal and Interest.

date does not include possible extensions.

(3) References

to LIBOR are to one-month LIBOR unless specifically stated otherwise.

2019, $808.1 million of loans were extended.

federal income tax basis is approximately $4.29 billion.

(6) Individual

loans each have a carrying value less than 3% of total loans.

(1) IO = Interest Only, PI = Principal and Interest.

(2) Maturity date does not include possible extensions.

(3) References to LIBOR are to one-month LIBOR unless specifically stated otherwise.

(4) During 2020, $ 748.6 million of loans were extended.

(5) The federal income tax basis is approximately $ 5.48 billion.

(6) Individual loans each have a carrying value less than 3 % of total loans.

ARBOR REALTY TRUST, INC.

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DECEMBER 31, 2020

($ in thousands)

following table reconciles our loans and investments carrying amounts for the periods indicated (in thousands):

The following table reconciles our loans and investments carrying amounts for the periods indicated (in thousands):

Year Ended December 31,

8 unchanged sentences

Loan payoffs and paydowns

( 1,243,694 )

( 1,753,693 )

Unfunded loan commitments (1)

3 unchanged sentences

Balance at end of year

accordance with certain loans and investments, we have outstanding unfunded commitments that we are obligated to fund as the borrowers meet certain requirements.

(1) In accordance with certain loans and investments, we have outstanding unfunded commitments that we are obligated to fund as the 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.

1 unchanged sentence

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-K

Item 8. Financial Statements and Supplementary Data