ARBOR REALTY TRUST INC 10-K

Item 8. Financial Statements and Supplementary Data ​ ​ ​ Page Report of Independent Registered Public Accounting Firm (PCAOB ID 42 ) 52 Consolidated Balance Sheets 54 Consolidated Statements of Income 55 Consolidated Statements of Changes in Equity 56 Consolidated Statements of Cash Flows 57 Notes to Consolidated Financial Statements 59 Schedule IV — Loans and Other Lending Investments 115 ​ All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto. ​ 51 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Arbor Realty Trust, Inc. and Subsidiaries Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Arbor Realty Trust, Inc. and Subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of income, changes in equity and cash flows for each of the three years in the period ended December 31, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles. We did not audit the financial statements of Wakefield Investment Holdings LLC, a corporation in which the Company has a 25.0% interest. In the consolidated financial statements, the Company’s investment in Wakefield Investment Holdings LLC is stated at $65.8 million as of December 31, 2021, and the Company’s equity in the net income of Wakefield Investment Holdings LLC is stated at $34.6 million in 2021 and $75.7 million in 2020. 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, 2022, 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 17, 2023 expressed an unqualified opinion thereon. 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. 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. 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 provide a reasonable basis for our opinion. 52 Table of Contents 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, 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 ​ ​ Description of the Matter The Company’s capitalized mortgage servicing rights (MSRs) totaled $401.5 million and $422.7 million as of December 31, 2022 and 2021, respectively. 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 and servicing cost. ​ ​ ​ Auditing the valuation of the MSRs was complex and involved a high degree of subjectivity due to the nature of the assumptions. In particular, the valuation of the MSRs was sensitive to assumptions such as discount rate and servicing cost, 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. ​ ​ ​ 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 Credit Losses ​ ​ Description of the Matter The Company’s allowance for credit losses related to structured loans and investments (including unfunded loan commitments) totaled $132.6 million and $113.2 million, as of December 31, 2022 and 2021, respectively. The Company’s allowance for loss-sharing obligations related to the Fannie Mae DUS program totaled $22.7 million and $21.7 million as of December 31, 2022 and 2021, respectively. As explained in Note 2 to the consolidated financial statements, management estimated the allowance for credit losses and allowance for loss-sharing obligations related to the Fannie Mae DUS program for the expected life 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 loan and record a specific allowance for credit losses, if impaired. ​ ​ ​ 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 allowance for loss-sharing obligations were sensitive to significant assumptions, such as reasonable and supportable forecast periods, and depending on the nature of the loan, debt service coverage ratio, loan-to-value, capitalization rates, and expected life of the loan or contractual period in which the Company is exposed to credit risk. ​ ​ 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 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 17, 2023 ​ ​ 53 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ($ in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 2021 ​ ​ ​ ​ Assets: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 534,357 ​ $ 404,580 Restricted cash ​ 713,808 ​ 486,690 Loans and investments, net (allowance for credit losses of $ 132,559 and $ 113,241 ) ​ 14,254,674 ​ 11,981,048 Loans held-for-sale, net ​ 354,070 ​ 1,093,609 Capitalized mortgage servicing rights, net ​ 401,471 ​ 422,734 Securities held-to-maturity, net (allowance for credit losses of $ 3,153 and $ 1,753 ) ​ 156,547 ​ 140,484 Investments in equity affiliates ​ 79,130 ​ 89,676 Due from related party ​ 77,419 ​ 84,318 Goodwill and other intangible assets ​ 96,069 ​ 100,760 Other assets ​ 371,440 ​ 269,946 Total assets ​ $ 17,038,985 ​ $ 15,073,845 ​ ​ ​ ​ Liabilities and Equity: ​ ​ ​ ​ ​ ​ Credit and repurchase facilities ​ $ 3,841,814 ​ $ 4,481,579 Securitized debt ​ 7,849,270 ​ 5,892,810 Senior unsecured notes ​ 1,385,994 ​ 1,280,545 Convertible senior unsecured notes, net ​ 280,356 ​ 259,385 Junior subordinated notes to subsidiary trust issuing preferred securities ​ 143,128 ​ 142,382 Due to related party ​ 12,350 ​ 26,570 Due to borrowers ​ 61,237 ​ 96,641 Allowance for loss-sharing obligations ​ 57,168 ​ 56,064 Other liabilities ​ 335,789 ​ 287,885 Total liabilities ​ 13,967,106 ​ 12,523,861 ​ ​ ​ Commitments and contingencies (Note 14) ​ ​ ​ ​ ​ ​ ​ Equity: ​ ​ ​ ​ ​ ​ Arbor Realty Trust, Inc. stockholders’ equity: ​ ​ ​ ​ ​ ​ Preferred stock, cumulative, redeemable, $ 0.01 par value: 100,000,000 shares authorized, shares issued and outstanding by period: ​ ​ 633,684 ​ ​ 556,163 Special voting preferred shares - 16,293,589 and 16,325,095 shares ​ ​ ​ ​ ​ ​ 6.375 % Series D - 9,200,000 shares ​ ​ ​ ​ ​ ​ 6.25 % Series E - 5,750,000 shares ​ ​ ​ ​ ​ ​ 6.25 % Series F - 11,342,000 and 8,050,000 shares ​ ​ ​ ​ ​ ​ Common stock, $ 0.01 par value: 500,000,000 shares authorized - 178,230,522 and 151,362,181 shares issued and outstanding ​ 1,782 ​ 1,514 Additional paid-in capital ​ 2,204,481 ​ 1,797,913 Retained earnings ​ 97,049 ​ 62,532 Total Arbor Realty Trust, Inc. stockholders’ equity ​ 2,936,996 ​ 2,418,122 Noncontrolling interest ​ 134,883 ​ 131,862 Total equity ​ 3,071,879 ​ 2,549,984 Total liabilities and equity ​ $ 17,038,985 ​ $ 15,073,845 Note: Our consolidated balance sheets include assets and liabilities of consolidated variable interest entities, or VIEs, as we are the primary beneficiary of these VIEs. At December 31, 2022 and 2021, assets of our consolidated VIEs totaled $ 9,785,261 and $ 7,144,806 , respectively, and the liabilities of our consolidated VIEs totaled $ 7,876,024 and $ 5,902,623 , respectively. See Note 15 for discussion of our VIEs. See Notes to Consolidated Financial Statements. ​ 54 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME ($ in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 2020 Interest income ​ $ 948,401 ​ $ 466,087 ​ $ 339,465 Interest expense ​ 557,617 ​ 212,005 ​ 169,216 Net interest income ​ 390,784 ​ 254,082 ​ 170,249 Other revenue: ​ ​ ​ ​ Gain on sales, including fee-based services, net ​ 55,816 ​ 123,037 ​ 94,607 Mortgage servicing rights ​ 69,346 ​ 130,230 ​ 165,517 Servicing revenue, net ​ 92,192 ​ 74,814 ​ 54,385 Property operating income ​ 1,877 ​ 185 ​ 3,976 Gain (loss) on derivative instruments, net ​ ​ 26,609 ​ ​ ( 2,684 ) ​ ​ ( 58,335 ) Other income, net ​ ( 17,563 ) ​ 7,566 ​ 4,109 Total other revenue ​ 228,277 ​ 333,148 ​ 264,259 Other expenses: ​ ​ ​ ​ Employee compensation and benefits ​ 161,825 ​ 171,796 ​ 144,380 Selling and administrative ​ 53,990 ​ 45,575 ​ 37,348 Property operating expenses ​ 2,136 ​ 718 ​ 4,898 Depreciation and amortization ​ 8,732 ​ 7,215 ​ 7,640 Provision for loss sharing (net of recoveries) ​ 1,862 ​ ( 6,167 ) ​ 14,822 Provision for credit losses (net of recoveries) ​ 21,169 ​ ( 21,113 ) ​ 61,110 Litigation settlement ​ 7,350 ​ — ​ — Total other expenses ​ 257,064 ​ 198,024 ​ 270,198 Income before extinguishment of debt, sale of real estate, income from equity affiliates and income taxes ​ 361,997 ​ 389,206 ​ 164,310 Loss on extinguishment of debt ​ ( 4,933 ) ​ ( 3,374 ) ​ ( 3,546 ) Gain (loss) on sale of real estate ​ ​ — ​ ​ 3,693 ​ ​ ( 375 ) Income from equity affiliates ​ 14,247 ​ 34,567 ​ 76,161 Provision for income taxes ​ ( 17,484 ) ​ ( 46,285 ) ​ ( 40,393 ) Net income ​ 353,827 ​ 377,807 ​ 196,157 Preferred stock dividends ​ 40,954 ​ 21,888 ​ 7,554 Net income attributable to noncontrolling interest ​ 28,044 ​ 38,507 ​ 25,208 Net income attributable to common stockholders ​ $ 284,829 ​ $ 317,412 ​ $ 163,395 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic earnings per common share ​ $ 1.72 ​ $ 2.30 ​ $ 1.44 Diluted earnings per common share ​ $ 1.67 ​ $ 2.28 ​ $ 1.41 ​ ​ ​ ​ ​ ​ Weighted average shares outstanding: ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ 165,355,167 ​ 137,830,691 ​ 113,811,471 Diluted ​ ​ 199,112,630 ​ ​ 156,089,595 ​ ​ 133,969,296 ​ See Notes to Consolidated Financial Statements. ​ ​ 55 Table of Contents ARBOR REALTY TRUST, INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY ($ in thousands, except shares) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Arbor ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Accumulated ​ Realty ​ ​ ​ ​ ​ ​ ​ ​ Preferred ​ Preferred ​ Common ​ Common ​ Additional ​ Deficit) / ​ Trust, Inc. ​ ​ ​ ​ ​ ​ ​ Stock ​ Stock ​ Stock ​ Stock ​ Paid ‑ in ​ Retained ​ Stockholders’ ​ Noncontrolling ​ Total ​ Shares Value Shares Par Value Capital Earnings Equity Interest Equity Balance — January 1, 2020 24,195,594 ​ $ 89,501 109,706,214 ​ $ 1,097 ​ $ 1,154,932 ​ $ ( 85,026 ) ​ $ 1,160,504 ​ $ 166,916 ​ $ 1,327,420 Issuance of common stock — ​ — 14,790,121 ​ 148 ​ 183,287 ​ ​ — ​ ​ 183,435 ​ ​ — ​ ​ 183,435 Repurchase of common stock — ​ — ( 2,285,178 ) ​ ​ ( 23 ) ​ ​ ( 21,508 ) ​ ​ — ​ ​ ( 21,531 ) ​ ​ — ​ ​ ( 21,531 ) Issuance of common stock from convertible debt — ​ — 368,498 ​ ​ 4 ​ ​ 90 ​ ​ — ​ ​ 94 ​ ​ — ​ ​ 94 Stock-based compensation, net — ​ — 601,518 ​ 6 ​ 2,446 ​ ​ — ​ ​ 2,452 ​ ​ — ​ ​ 2,452 Distributions - common stock — ​ — — ​ ​ — ​ ​ — ​ ​ ( 141,801 ) ​ ​ ( 141,801 ) ​ ​ — ​ ​ ( 141,801 ) Distributions - preferred stock ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 7,564 ) ​ ​ ( 7,564 ) ​ ​ — ​ ​ ( 7,564 ) Distributions - noncontrolling interest ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 23,744 ) ​ ​ ( 23,744 ) Redemption of OP Units ( 2,923,461 ) ​ ( 29 ) — ​ ​ — ​ ​ ( 2,138 ) ​ ​ — ​ ​ ( 2,167 ) ​ ​ ( 30,066 ) ​ ​ ( 32,233 ) Net income — ​ — — ​ ​ — ​ ​ — ​ ​ 170,949 ​ ​ 170,949 ​ ​ 25,208 ​ ​ 196,157 Balance—December 31, 2020 21,272,133 ​ 89,472 123,181,173 ​ ​ 1,232 ​ ​ 1,317,109 ​ ​ ( 63,442 ) ​ ​ 1,344,371 ​ ​ 138,314 ​ ​ 1,482,685 Issuance of common stock — ​ — 29,140,369 ​ ​ 291 ​ ​ 514,302 ​ ​ — ​ ​ 514,593 ​ ​ — ​ ​ 514,593 Repurchase of common stock — ​ — ( 1,962,499 ) ​ ( 19 ) ​ ( 34,385 ) ​ ​ — ​ ​ ( 34,404 ) ​ ​ — ​ ​ ( 34,404 ) Issuance of common stock from convertible debt — ​ — 386,459 ​ 4 ​ ​ ( 4 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ — Issuance of Series D preferred stock 9,200,000 ​ ​ 222,438 — ​ ​ — ​ ​ — ​ ​ — ​ ​ 222,438 ​ ​ — ​ ​ 222,438 Issuance of Series E preferred stock 5,750,000 ​ ​ 138,886 — ​ ​ — ​ ​ — ​ ​ — ​ ​ 138,886 ​ ​ — ​ 138,886 Issuance of Series F preferred stock 8,050,000 ​ 194,675 — ​ — ​ — ​ ​ — ​ ​ 194,675 ​ ​ — ​ ​ 194,675 Redemption of preferred stock ( 3,711,500 ) ​ ( 89,296 ) — ​ — ​ — ​ ​ ( 3,493 ) ​ ​ ( 92,789 ) ​ ​ — ​ ​ ( 92,789 ) Stock-based compensation, net — ​ — 616,679 ​ 6 ​ 891 ​ ​ — ​ ​ 897 ​ ​ — ​ ​ 897 Distributions - common stock — ​ — — ​ — ​ — ​ ​ ( 191,423 ) ​ ​ ( 191,423 ) ​ ​ — ​ ​ ( 191,423 ) Distributions - preferred stock — ​ — — ​ — ​ — ​ ​ ( 18,410 ) ​ ​ ( 18,410 ) ​ ​ — ​ ​ ( 18,410 ) Distributions - noncontrolling interest — ​ — — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 23,366 ) ​ ​ ( 23,366 ) Redemption of OP Units ( 1,235,538 ) ​ ( 12 ) — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 12 ) ​ ​ ( 21,593 ) ​ ​ ( 21,605 ) Net income — ​ — — ​ — ​ — ​ ​ 339,300 ​ ​ 339,300 ​ ​ 38,507 ​ ​ 377,807 Balance—December 31, 2021 39,325,095 ​ 556,163 151,362,181 ​ ​ 1,514 ​ ​ 1,797,913 ​ ​ 62,532 ​ ​ 2,418,122 ​ ​ 131,862 ​ ​ 2,549,984 Cummulative-effect adjustment (Note 2) — ​ — — ​ — ​ ( 8,684 ) ​ ​ 5,612 ​ ​ ( 3,072 ) ​ ​ 625 ​ ​ ( 2,447 ) Balance - January 1, 2022 (adjusted for adoption of ASU 2020-06) 39,325,095 ​ 556,163 151,362,181 ​ 1,514 ​ 1,789,229 ​ ​ 68,144 ​ ​ 2,415,050 ​ ​ 132,487 ​ ​ 2,547,537 Issuance of common stock — ​ — 26,335,788 ​ ​ 263 ​ ​ 408,472 ​ ​ — ​ ​ 408,735 ​ ​ — ​ ​ 408,735 Issuance of Series F preferred stock 3,292,000 ​ 77,522 — ​ ​ — ​ ​ — ​ ​ — ​ ​ 77,522 ​ ​ — ​ ​ 77,522 Stock-based compensation, net — ​ — 532,553 ​ ​ 5 ​ ​ 6,780 ​ ​ — ​ ​ 6,785 ​ ​ — ​ ​ 6,785 Distributions - common stock — ​ — — ​ ​ — ​ ​ — ​ ​ ( 255,913 ) ​ ​ ( 255,913 ) ​ ​ — ​ ​ ( 255,913 ) Distributions - preferred stock — ​ — — ​ — ​ — ​ ( 40,965 ) ​ ( 40,965 ) ​ ​ — ​ ​ ( 40,965 ) Distributions - noncontrolling interest — ​ — — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 25,103 ) ​ ​ ( 25,103 ) Redemption of operating partnership units ( 31,506 ) ​ ​ ( 1 ) — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 1 ) ​ ​ ( 545 ) ​ ( 546 ) Net income — ​ — — ​ — ​ — ​ ​ 325,783 ​ ​ 325,783 ​ ​ 28,044 ​ ​ 353,827 Balance—December 31, 2022 42,585,589 $ 633,684 178,230,522 $ 1,782 $ 2,204,481 ​ $ 97,049 ​ $ 2,936,996 ​ $ 134,883 ​ $ 3,071,879 ​ See Notes to Consolidated Financial Statements. ​ ​ 56 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 2020 Operating activities: ​ ​ ​ Net income ​ $ 353,827 ​ $ 377,807 ​ $ 196,157 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ ​ Depreciation and amortization ​ 8,732 ​ 7,215 ​ 7,640 Stock-based compensation ​ 14,973 ​ 9,929 ​ 9,046 Amortization and accretion of interest and fees, net ​ ( 13,547 ) ​ ( 2,487 ) ​ 2,964 Amortization of capitalized mortgage servicing rights ​ 59,876 ​ 58,615 ​ 49,222 Originations of loans held-for-sale ​ ( 4,788,202 ) ​ ( 6,461,023 ) ​ ( 6,709,375 ) Proceeds from sales of loans held-for-sale, net of gain on sale ​ 5,438,623 ​ 6,415,169 ​ 6,587,728 Mortgage servicing rights ​ ( 69,346 ) ​ ( 130,230 ) ​ ( 165,517 ) Write-off of capitalized mortgage servicing rights from payoffs ​ 44,502 ​ 32,741 ​ 16,757 Provision for loss sharing (net of recoveries) ​ 1,862 ​ ( 6,167 ) ​ 14,822 Provision for credit losses (net of recoveries) ​ 21,169 ​ ( 21,113 ) ​ 61,110 Net (charge-offs) recoveries for loss sharing obligations ​ ( 758 ) ​ ( 2,072 ) ​ 427 Deferred tax (benefit) provision ​ ( 1,741 ) ​ 10,892 ​ 4,726 Income from equity affiliates ​ ( 14,247 ) ​ ( 34,567 ) ​ ( 76,161 ) Distributions from operations of equity affiliates ​ ​ 16,594 ​ ​ 32,953 ​ ​ 44,579 Loss on extinguishment of debt ​ 4,933 ​ 3,374 ​ 3,546 Payoffs and paydowns of loans held-for-sale ​ 58,751 ​ 2,425 ​ 179 Loss on sale of loans ​ 11,180 ​ — ​ — Change in fair value of held-for-sale loans ​ ​ 15,703 ​ ​ — ​ ​ — Litigation settlement ​ ​ 7,350 ​ ​ — ​ ​ — (Gain) loss on real estate ​ ​ — ​ ​ ( 3,693 ) ​ ​ 375 Changes in operating assets and liabilities ​ ( 70,585 ) ​ ( 72,921 ) ​ 6,940 Net cash provided by operating activities ​ ​ 1,099,649 ​ ​ 216,847 ​ ​ 55,165 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investing Activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans and investments funded, originated and purchased, net ​ ( 5,955,061 ) ​ ( 9,209,475 ) ​ ( 2,376,233 ) Payoffs and paydowns of loans and investments ​ 3,423,498 ​ 2,370,570 ​ 1,243,694 Proceeds from sale of loans and investments ​ ​ 397,338 ​ ​ 127,700 ​ ​ — Deferred fees ​ 57,098 ​ 72,182 ​ 18,766 Contributions to equity affiliates ​ ( 17,809 ) ​ ( 48,071 ) ​ ( 892 ) Distributions from equity affiliates ​ ​ 26,008 ​ ​ 34,283 ​ ​ — Purchase of securities held-to-maturity, net ​ ​ ( 27,598 ) ​ ​ ( 53,511 ) ​ ​ ( 37,926 ) Payoffs and paydowns of securities held-to-maturity ​ 19,030 ​ 13,317 ​ 10,158 Due to borrowers and reserves ​ ( 239,626 ) ​ ( 57,249 ) ​ ( 32,925 ) Proceeds from sale of available-for-sale securities ​ ​ — ​ ​ — ​ ​ 9,995 Investments in real estate, net ​ ​ — ​ ​ — ​ ​ ( 131 ) Proceeds from sale of real estate, net ​ ​ — ​ ​ — ​ ​ 8,870 Net cash used in investing activities ​ ( 2,317,122 ) ​ ( 6,750,254 ) ​ ( 1,156,624 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Financing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Proceeds from credit and repurchase facilities ​ 11,536,220 ​ 15,688,353 ​ 12,986,256 Paydowns and payoffs of credit and repurchase facilities ​ ( 12,153,215 ) ​ ( 13,433,376 ) ​ ( 12,428,681 ) Proceeds from issuance of securitized debt ​ 2,762,502 ​ 4,281,512 ​ 668,000 Payoffs and paydowns of securitized debt ​ ( 801,141 ) ​ ( 889,150 ) ​ ( 283,125 ) Proceeds from issuance of common stock ​ ​ 408,735 ​ ​ 514,593 ​ ​ 183,585 Proceeds from issuance of preferred stock ​ ​ 77,522 ​ ​ 555,999 ​ ​ — Proceeds from issuance of senior unsecured notes ​ 437,500 ​ 625,000 ​ 345,750 Payoffs and paydowns of senior unsecured notes ​ ( 312,920 ) ​ — ​ — Redemption of OP Units ​ ( 546 ) ​ ( 21,605 ) ​ ( 32,233 ) Payments of withholding taxes on net settlement of vested stock ​ ( 8,188 ) ​ ( 9,032 ) ​ ( 6,594 ) Repurchase of common stock ​ ​ — ​ ​ ( 34,404 ) ​ ​ ( 21,531 ) Distributions to stockholders ​ ( 321,739 ) ​ ( 227,062 ) ​ ( 173,109 ) Payment of deferred financing costs ​ ( 50,362 ) ​ ( 56,060 ) ​ ( 18,087 ) Redemption of preferred stock ​ ​ — ​ ​ ( 92,789 ) ​ ​ — Extinguishment of convertible senior unsecured notes ​ ​ — ​ ​ ( 14,300 ) ​ ​ — Payoff of debt fund ​ ​ — ​ ​ — ​ ​ ( 70,000 ) Settlements of convertible senior unsecured notes ​ ​ — ​ ​ — ​ ​ ( 22,336 ) Net cash provided by financing activities ​ 1,574,368 ​ 6,887,679 ​ 1,127,895 Net increase in cash, cash equivalents and restricted cash ​ 356,895 ​ 354,272 ​ 26,436 Cash, cash equivalents and restricted cash at beginning of period ​ 891,270 ​ 536,998 ​ 510,562 Cash, cash equivalents and restricted cash at end of period ​ $ 1,248,165 ​ $ 891,270 ​ $ 536,998 ​ See Notes to Consolidated Financial Statements. 57 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 2020 Reconciliation of cash, cash equivalents and restricted cash: ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents at beginning of period ​ $ 404,580 ​ $ 339,528 ​ $ 299,687 Restricted cash at beginning of period ​ ​ 486,690 ​ ​ 197,470 ​ ​ 210,875 Cash, cash equivalents and restricted cash at beginning of period ​ $ 891,270 ​ $ 536,998 ​ $ 510,562 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents at end of period ​ $ 534,357 ​ $ 404,580 ​ $ 339,528 Restricted cash at end of period ​ ​ 713,808 ​ ​ 486,690 ​ ​ 197,470 Cash, cash equivalents and restricted cash at end of period ​ $ 1,248,165 ​ $ 891,270 ​ $ 536,998 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Supplemental cash flow information: ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash used to pay interest ​ $ 486,826 ​ $ 175,912 ​ $ 144,968 Cash used to pay taxes ​ ​ 27,560 ​ ​ 37,797 ​ ​ 35,282 ​ ​ ​ ​ Supplemental schedule of non-cash investing and financing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment in real estate, net ​ ​ 31,200 ​ ​ — ​ ​ — Distributions accrued on preferred stock ​ ​ 7,010 ​ ​ 6,767 ​ ​ 629 Cummulative-effect adjustment (adoption of convertible debt standard) ​ ​ 2,447 ​ ​ — ​ ​ — Loans transferred from loans and investment, net to loans held-for-sale ​ ​ — ​ ​ 65,144 ​ ​ — Cummulative-effect adjustment (adoption of credit loss standard) ​ ​ — ​ ​ — ​ ​ 28,607 Settlements of convertible senior unsecured notes ​ ​ — ​ ​ — ​ ​ 4,778 Fair value of conversion feature of convertible senior unsecured notes ​ ​ — ​ ​ — ​ ​ 94 Issuance of common stock from convertible debt ​ ​ — ​ ​ — ​ ​ 90 ​ See Notes to Consolidated Financial Statements. ​ ​ 58 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 — Description of Business Arbor is a Maryland corporation formed in 2003. We are a nationwide REIT and direct lender, providing loan origination and servicing for commercial real estate assets. We operate through two business segments: our Structured Business and our Agency Business. Through our Structured Business, we invest in a diversified portfolio of structured finance assets in the multifamily, SFR and commercial real estate markets, primarily consisting of bridge loans, in addition to mezzanine loans, junior participating interests in first mortgages and preferred and direct equity. We also invest in real estate-related joint ventures and may directly acquire real property and invest in real estate-related notes and certain mortgage-related securities. Through our Agency Business, we originate, sell and service a range of multifamily finance products through Fannie Mae and Freddie Mac, Ginnie Mae, FHA and HUD. We retain the servicing rights and asset management responsibilities on substantially all loans we originate and sell under the GSE and HUD programs. We are an approved Fannie Mae DUS lender nationally, a Freddie Mac Multifamily Conventional Loan lender, seller/servicer, in New York, New Jersey and Connecticut, a Freddie Mac affordable, manufactured housing, senior housing and SBL lender, seller/servicer, nationally and a HUD MAP and LEAN senior housing/healthcare lender nationally. We also originate and 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 indirect general partner, and ARLP’s subsidiaries. We are organized to qualify as a REIT for U.S. federal income tax purposes. A REIT is generally not subject to federal income tax on that portion of its REIT-taxable income that is distributed to its stockholders, provided that at least 90% of taxable income is distributed and provided that certain other requirements are met. Certain of our assets that produce non-qualifying REIT income, primarily within the Agency Business, are operated through TRS entities, which are part of our TRS Consolidated Group and are subject to U.S. federal, state and local income taxes. In general, our TRS entities may hold assets that the REIT cannot hold directly and may engage in real estate or non-real estate -related business. ​ Note 2 — Basis of Presentation and Significant Accounting Policies Basis of Presentation The consolidated financial statements and accompanying notes have been prepared in accordance with GAAP. In our opinion, all adjustments considered necessary for a fair presentation of our financial position, results of operations and cash flows have been included and are of a normal and recurring nature. 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. Our VIEs are described in Note 15. All significant intercompany transactions and balances have been eliminated in consolidation. 59 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that could materially affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The ongoing effects of the COVID-19 pandemic have caused significant disruptions to the U.S. and global economies. Although vaccine availability and usage have continued to increase, which has led to less negative short-term effects, such as travel bans, quarantines, layoffs and shutdowns, the ongoing longer-term macroeconomic effects on inflation, interest rates, capital markets, labor shortages, property values and global supply chains continue to negatively impact many industries, including the U.S. commercial real estate market. In addition, new strains of COVID-19 continue to emerge, which may cause governments and businesses to re-impose aggressive measures to help slow its spread, making the future impact difficult to predict. The ultimate impact of COVID-19 on the economy, including rising inflation, increasing interest rates, tightening of capital markets and reduced property values, both globally and to our business, makes any estimate or assumption at December 31, 2022 inherently less certain. 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. We place our cash and cash equivalents in high quality financial institutions. The consolidated account balances at each institution periodically exceed 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 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. 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 based on current expected credit losses for the life of the loan and investment. 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 and loss given defaults 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. 60 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Our method for calculating the estimate of expected credit loss considers 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 U.S. 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. 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 adjust 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 determine the amount of the expected loss more accurately and reasonably 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 evaluate whether that loan is impaired. We consider 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” methodology. 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. 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. 61 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 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. 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 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. 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 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. 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. 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. 62 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 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 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: Key rates: 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. 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. 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. 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. 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. 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. 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. 63 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 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. 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. 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, 2022, there were no indicators that the indefinite-lived intangible assets, including goodwill, were impaired and there were no events or changes in circumstances indicating impairment at December 31, 2022. 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 capitalized. Real estate acquired is recorded in other assets on our consolidated balance sheets. 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. 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. 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. 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. 64 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 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. 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. 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 hedge. These derivative instruments must be effective in reducing risk exposure 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 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. Our Swaps associated with (1) our held-for-sale Agency Business Private Label loans, and (2) our Structured Business SFR loans, do not meet the criteria for hedge accounting and are tied to the five-year and ten-year swap rates. Our Swaps 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 Swaps are recorded through earnings. 65 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Revenue Recognition. 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 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 and/or interest 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. 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. 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 and included in other assets on our consolidated balance sheets. 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. Leases. We determine if an arrangement is a lease at inception. 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 term. Leases with an initial term of twelve months or less are expensed as incurred. 66 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 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. 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 thereto. A REIT is generally not subject to federal income tax on its REIT-taxable income that is distributed to its stockholders, provided that at least 90% of its REIT-taxable income is distributed and provided that certain other requirements are met. Certain REIT income may be subject to state and local income taxes. 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 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. 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. 67 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Recently Adopted Accounting Pronouncements Description Adoption Date Effect on Financial Statements In August 2020, the FASB issued Accounting Standards Updat (“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): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). Upon adoption of this guidance, convertible debt proceeds will no longer be allocated between debt and equity components, reducing the unamortized debt discount and lowering interest expense. This guidance also changes the method used to calculate diluted EPS when an instrument may be settled in cash or shares, if the effect is dilutive. ​ First quarter of 2022 ​ We adopted this guidance on January 1, 2022 using the modified retrospective method of transition. Upon adoption, we reclassified the remaining equity component from equity to our convertible senior unsecured notes liability and ceased amortization of the debt discount through interest expense. Additionally, this guidance and the adoption method chosen requires the use of the if-converted method for the diluted net income per share calculation for our convertible instruments on a retrospective basis, regardless of our settlement intent. The adoption of this guidance resulted in a $ 2.5 million increase to the carrying value of our convertible debt, an $ 8.7 million decrease to additional paid-in capital and a $ 5.6 million increase to retained earnings at January 1, 2022. Additionally, the adoption of this guidance reduced our diluted EPS for the year ended December 31, 2022 by $ 0.05 per share, mainly due to the assumption that we will redeem the principal balance with common stock. ​ ​ Recently Issued Accounting Pronouncements Description Effective Date Effect on Financial Statements In March 2022, the FASB issued ASU 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. This guidance eliminates the accounting guidance on troubled debt restructurings and amends existing disclosures, including the requirment to disclose current period gross write-offs by year of origination. The guidance also updates the requirements related to accounting for credit losses and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty. ​ First quarter of 2023, with early adoption permitted ​ We have not early adopted this guidance and will make all the necessary additional disclosure requirements once adopted. The adoption of this guidance is not expected to have a material impact on our consolidated financial statements. ​ ​ ​ ​ ​ 68 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Note 3 — Loans and Investments Our Structured Business loan and investment portfolio consists of ($ in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Wtd. Avg. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Remaining ​ Wtd. Avg. ​ Wtd. Avg. ​ ​ ​ ​ ​ Percent of ​ Loan ​ Wtd. Avg. ​ Months to ​ First Dollar ​ Last Dollar ​ ​ ​ December 31, 2022 ​ Total ​ Count ​ Pay Rate (1) ​ Maturity ​ LTV Ratio (2) ​ LTV Ratio (3) ​ Bridge loans (4) ​ $ 14,096,054 ​ 98 % 692 8.17 % 19.8 0 % 76 % Mezzanine loans ​ 213,499 1 % 44 8.13 % 63.1 42 % 77 % Preferred equity investments ​ ​ 110,725 ​ 1 % 8 ​ 7.63 % 39.2 ​ 46 % 79 % Other loans (5) ​ 35,845 < 1 % 3 8.76 % 32.8 0 % 58 % ​ ​ 14,456,123 100 % 747 8.17 % 20.6 1 % 76 % Allowance for credit losses ​ ​ ( 132,559 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unearned revenue ​ ( 68,890 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans and investments, net ​ $ 14,254,674 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ ​ ​ ​ ​ ​ Bridge loans (4) ​ $ 11,750,710 97 % 528 4.19 % 23.8 0 % 76 % Mezzanine loans ​ 223,378 2 % 39 7.32 % 56.3 34 % 84 % Preferred equity investments ​ ​ 155,513 ​ 1 % 11 ​ 5.57 % 38.0 ​ 58 % 87 % Other loans (5) ​ ​ 29,394 ​ < 1 % 2 ​ 4.63 % 48.1 ​ 0 % 67 % ​ ​ 12,158,995 100 % 580 4.26 % 24.6 1 % 76 % Allowance for credit losses ​ ( 113,241 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unearned revenue ​ ( 64,706 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans and investments, net ​ $ 11,981,048 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (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 accrual rate to be paid at maturity are not included in the weighted average pay rate as shown in the table. (2) The “First Dollar Loan-to-Value (“LTV”) Ratio” is calculated by comparing the total of our senior most dollar and all senior lien positions within the capital stack to the fair value of the underlying collateral to determine the point at which we will absorb a total loss of our position. (3) The “Last Dollar LTV Ratio” is calculated by comparing the total of the carrying value of our loan and all senior lien positions within the capital stack to the fair value of the underlying collateral to determine the point at which we will initially absorb a loss. (4) At December 31, 2022 and 2021, bridge loans included 241 and 120 , respectively, of SFR loans with a total gross loan commitment of $ 1.57 billion and $ 804.6 million, respectively, of which $ 927.4 million and $ 408.2 million, respectively, was funded. (5) At December 31, 2022 and 2021, other loans included 3 and 2 variable rate SFR permanent loans, respectively. Concentration of Credit Risk We are subject to concentration risk in that, at December 31, 2022, the UPB related to 38 loans with five different borrowers represented 11 % of total assets. At December 31, 2021, the UPB related to 31 loans with five different borrowers represented 11 % of total assets. During both 2022 and 2021, no single loan or investment represented more than 10 % of our total assets and no single investor group generated over 10% of our revenue. See Note 18 for details on our concentration of related party loans and investments. 69 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) We assign a credit risk rating of pass, pass/watch, special mention, substandard or doubtful to each loan and investment, with a pass rating being the lowest risk and a doubtful rating being the highest risk. Each credit risk rating has benchmark guidelines that pertain to debt-service coverage ratios, LTV ratios, borrower strength, asset quality, and funded cash reserves. Other factors such as guarantees, market strength, and remaining loan term and borrower equity are also reviewed and factored into determining the credit risk rating assigned to each loan. This metric provides a helpful snapshot of portfolio quality and credit risk. All portfolio assets are subject to, at a minimum, a thorough quarterly financial evaluation in which historical operating performance and forward-looking projections are reviewed, however, we maintain a higher level of scrutiny and focus on loans that we consider “high risk” and that possess deteriorating credit quality. Generally speaking, given our typical loan profile, risk ratings of pass, pass/watch and special mention suggest that we expect the loan to make both principal and interest payments according to the contractual terms of the loan agreement. A risk rating of substandard indicates we anticipate the loan may require a modification of some kind. A risk rating of doubtful indicates we expect the loan to underperform over its term, and there could be loss of interest and/or principal. Further, while the above are the primary guidelines used in determining a certain risk rating, subjective items such as borrower strength, market strength or asset quality may result in a rating that is higher or lower than might be indicated by any risk rating matrix. 70 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) A summary of the loan portfolio’s internal risk ratings and LTV ratios by asset class at December 31, 2022 is as follows ($ in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Wtd. Avg. Wtd. Avg. ​ ​ UPB by Origination Year ​ ​ ​ ​ First Dollar ​ Last Dollar ​ Asset Class / Risk Rating 2022 2021 2020 2019 2018 Prior Total LTV Ratio LTV Ratio ​ Multifamily: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 468,655 ​ $ 744,231 ​ $ 10,135 ​ $ — ​ $ — ​ $ 20,300 ​ $ 1,243,321 ​ ​ ​ ​ ​ Pass/Watch ​ 3,163,624 ​ ​ 3,385,114 ​ ​ 523,057 ​ ​ 335,573 ​ ​ 41,650 ​ ​ — ​ ​ 7,449,018 ​ ​ ​ ​ ​ Special Mention ​ ​ 1,193,665 ​ ​ 2,843,508 ​ ​ 34,575 ​ ​ 7,285 ​ ​ — ​ ​ 7,594 ​ ​ 4,086,627 ​ ​ ​ ​ ​ Substandard ​ ​ — ​ ​ 255,779 ​ ​ 26,700 ​ ​ 22,975 ​ ​ 32,500 ​ ​ — ​ ​ 337,954 ​ ​ ​ ​ ​ Total Multifamily ​ $ 4,825,944 ​ $ 7,228,632 ​ $ 594,467 ​ $ 365,833 ​ $ 74,150 ​ $ 27,894 ​ $ 13,116,920 ​ 1 % 77 % Single-Family Rental: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of portfolio ​ ​ 91 % ​ ​ ​ ​ Pass ​ $ 18,113 ​ $ 34,871 ​ $ 3,118 ​ $ — ​ $ — ​ $ — ​ $ 56,102 ​ ​ ​ ​ ​ Pass/Watch ​ ​ 428,000 ​ ​ 272,356 ​ ​ 99,615 ​ ​ 20,965 ​ ​ — ​ ​ — ​ ​ 820,936 ​ ​ ​ ​ ​ Special Mention ​ ​ 18,344 ​ ​ 37,978 ​ ​ 29,858 ​ ​ — ​ ​ — ​ ​ — ​ ​ 86,180 ​ ​ ​ ​ ​ Total Single-Family Rental ​ $ 464,457 ​ $ 345,205 ​ $ 132,591 ​ $ 20,965 ​ $ — ​ $ — ​ $ 963,218 ​ 0 % 64 % Land: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of portfolio ​ ​ 7 % ​ ​ ​ ​ Special Mention ​ $ — ​ $ — ​ $ 8,100 ​ $ — ​ $ — ​ $ — ​ $ 8,100 ​ ​ ​ ​ ​ Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 127,928 ​ ​ 127,928 ​ ​ ​ ​ ​ Total Land ​ $ — ​ $ — ​ $ 8,100 ​ $ — ​ $ — ​ $ 127,928 ​ $ 136,028 ​ 0 % 97 % Office: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of portfolio ​ ​ 1 % ​ ​ ​ ​ Pass/Watch ​ $ — ​ $ — ​ $ 35,410 ​ $ — ​ $ — ​ $ — ​ $ 35,410 ​ ​ ​ ​ ​ Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 44,625 ​ ​ — ​ ​ 44,625 ​ ​ ​ ​ ​ Total Office ​ $ — ​ $ — ​ $ 35,410 ​ $ — ​ $ 44,625 ​ $ — ​ $ 80,035 ​ 0 % 88 % Healthcare: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of portfolio ​ ​ 1 % ​ ​ ​ ​ Pass/Watch ​ $ — ​ $ — ​ $ — ​ $ 51,069 ​ $ — ​ $ — ​ $ 51,069 ​ ​ ​ ​ ​ Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ 14,558 ​ ​ — ​ ​ — ​ ​ 14,558 ​ ​ ​ ​ ​ Total Healthcare ​ $ — ​ $ — ​ $ — ​ $ 65,627 ​ $ — ​ $ — ​ $ 65,627 ​ 0 % 70 % Hotel: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of portfolio ​ ​ < 1 % ​ ​ ​ ​ Pass ​ $ — ​ $ — ​ $ — ​ $ 40,850 ​ $ — ​ $ — ​ $ 40,850 ​ ​ ​ ​ ​ Total Hotel ​ $ — ​ $ — ​ $ — ​ $ 40,850 ​ $ — ​ $ — ​ $ 40,850 ​ 0 % 70 % Retail: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of portfolio ​ ​ < 1 % ​ ​ ​ ​ Pass ​ $ — ​ $ — ​ $ — ​ $ 4,000 ​ $ — ​ $ — ​ $ 4,000 ​ ​ ​ ​ ​ Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 18,600 ​ ​ 3,445 ​ ​ 22,045 ​ ​ ​ ​ ​ Total Retail ​ $ — ​ $ — ​ $ — ​ $ 4,000 ​ $ 18,600 ​ $ 3,445 ​ $ 26,045 ​ 12 % 71 % Student Housing: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of portfolio ​ ​ < 1 % ​ ​ ​ ​ Pass/Watch ​ $ — ​ $ 25,700 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 25,700 ​ ​ ​ ​ ​ Total Student Housing ​ $ — ​ $ 25,700 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 25,700 ​ 0 % 69 % Other: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of portfolio ​ ​ < 1 % ​ ​ ​ ​ Doubtful ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 1,700 ​ $ 1,700 ​ ​ ​ ​ ​ Total Other ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 1,700 ​ $ 1,700 ​ 63 % 63 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of portfolio ​ ​ < 1 % ​ ​ ​ ​ Grand Total ​ $ 5,290,401 ​ $ 7,599,537 ​ $ 770,568 ​ $ 497,275 ​ $ 137,375 ​ $ 160,967 ​ $ 14,456,123 ​ 1 % 76 % ​ Geographic Concentration Risk At December 31, 2022, underlying properties in Texas and Florida represented 22 % and 14 %, respectively, of the outstanding balance of our loan and investment portfolio. At December 31, 2021, underlying properties in Texas and Florida represented 19 % and 12 %, respectively, of the outstanding balance of our loan and investment portfolio. No other state represented 10 % or more of the total loan and investment portfolio. 71 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Allowance for Credit Losses A summary of the changes in the allowance for credit losses is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2022 ​ Land Multifamily Office Retail Student Housing Healthcare Hotel Other Total Allowance for credit losses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Beginning balance ​ $ 77,970 ​ $ 18,707 ​ $ 8,073 ​ $ 5,819 ​ $ 636 ​ $ 8 ​ $ 8 ​ $ 2,020 ​ $ 113,241 Provision for credit losses (net of recoveries) ​ 98 ​ ​ 19,254 ​ ​ 89 ​ ​ — ​ ​ ( 598 ) ​ ​ 8 ​ ​ 6 ​ ​ 461 ​ ​ 19,318 Ending balance ​ $ 78,068 ​ $ 37,961 ​ $ 8,162 ​ $ 5,819 ​ $ 38 ​ $ 16 ​ $ 14 ​ $ 2,481 ​ $ 132,559 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2021 Allowance for credit losses: ​ ​ ​ ​ ​ ​ ​ ​ ​ Beginning balance ​ $ 78,150 ​ $ 36,468 ​ $ 1,846 ​ $ 13,861 ​ $ 4,078 ​ $ 3,880 ​ $ 7,759 ​ $ 2,287 ​ $ 148,329 Provision for credit losses (net of recoveries) ​ ( 180 ) ​ ( 17,761 ) ​ 6,227 ​ ( 42 ) ​ ( 3,442 ) ​ ( 1,099 ) ​ ( 7,751 ) ​ ( 267 ) ​ ( 24,315 ) Charge-offs ​ — ​ — ​ — ​ ( 8,000 ) ​ — ​ ( 2,773 ) ​ — ​ — ​ ( 10,773 ) Ending balance ​ $ 77,970 ​ $ 18,707 ​ $ 8,073 ​ $ 5,819 ​ $ 636 ​ $ 8 ​ $ 8 ​ $ 2,020 ​ $ 113,241 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2020 Allowance for credit losses: ​ ​ ​ ​ ​ ​ ​ ​ ​ Beginning balance, prior to adoption of CECL ​ $ 67,869 ​ $ — ​ $ 1,500 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 1,700 ​ $ 71,069 Impact of adopting CECL - January 1, 2020 ​ ​ 77 ​ ​ 16,322 ​ ​ 287 ​ ​ 335 ​ ​ 68 ​ ​ 64 ​ ​ 29 ​ ​ 112 ​ ​ 17,294 Provision for credit losses (net of recoveries) ​ ​ 10,204 ​ ​ 20,146 ​ ​ 59 ​ ​ 13,526 ​ ​ 4,010 ​ ​ 3,816 ​ ​ 7,730 ​ ​ 475 ​ ​ 59,966 Ending balance ​ $ 78,150 ​ $ 36,468 ​ $ 1,846 ​ $ 13,861 ​ $ 4,078 ​ $ 3,880 ​ $ 7,759 ​ $ 2,287 ​ $ 148,329 ​ During 2022, we recorded a $ 19.3 million provision for credit losses, which was net of a $ 1.5 million loan loss recovery for a loan that paid off during 2022. The increase in the provision for credit losses during 2022 was primarily attributable to an increase in our loans and investments balance as a result of portfolio growth and the impact of rising interest rates, inflation and economic forecasts. Our estimate of allowance for credit losses on our structured loans and investments, including related unfunded loan commitments, was based on a reasonable and supportable forecast period that reflects recent observable data, including an increase in interest rates, higher unemployment forecasts, and rising inflation, partially offset by increasing property values and other market factors, including continued optimism of COVID-19. The expected credit losses over the contractual period of our loans also include the obligation to extend credit through our unfunded loan commitments. Our current expected credit loss (“CECL”) allowance for unfunded loan commitments is adjusted quarterly and corresponds with the associated outstanding loans. At December 31, 2022 and 2021, we had outstanding unfunded commitments of $ 1.15 billion and $ 975.2 million, respectively, that we are obligated to fund as borrowers meet certain requirements. At December 31, 2022 and 2021, accrued interest receivable related to our loans totaling $ 108.5 million and $ 58.3 million, respectively, was excluded from the estimate of credit losses and is included in other assets on the consolidated balance sheets. 72 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) All of our structured loans and investments are secured by real estate assets or by interests in real estate assets, and, as such, the measurement of credit losses may be based on the difference between the fair value of the underlying collateral and the carrying value of the assets as of the period end. A summary of our specific loans considered impaired by asset class is as follows ($ in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Wtd. Avg. First ​ Wtd. Avg. Last ​ ​ ​ ​ ​ Carrying ​ Allowance for ​ Dollar LTV ​ Dollar LTV Asset Class UPB (1) Value Credit Losses Ratio Ratio Land ​ $ 134,215 ​ $ 127,868 ​ $ 77,869 ​ ​ 0 % ​ 99 % Retail ​ ​ 22,045 ​ 17,563 ​ 5,817 ​ ​ 14 % 79 % Commercial ​ 1,700 ​ 1,700 ​ 1,700 ​ 63 % 63 % Total ​ $ 157,960 ​ $ 147,131 ​ $ 85,386 ​ ​ 3 % ​ 96 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 Land $ 134,215 $ 127,868 $ 77,869 0 % 99 % Retail ​ ​ 22,045 ​ 17,291 ​ 5,817 14 % 77 % Office ​ 1,980 ​ ​ 1,980 ​ 1,500 0 % 51 % Commercial ​ 1,700 ​ 1,700 ​ 1,700 63 % 63 % Total ​ $ 159,940 ​ $ 148,839 ​ $ 86,886 ​ 3 % 95 % (1) Represents the UPB of seven and eight impaired loans (less unearned revenue and other holdbacks and adjustments) by asset class at December 31, 2022 and 2021, respectively. There were no loans for which the fair value of the collateral securing the loan was less than the carrying value of the loan for which we had not recorded a provision for credit loss at December 31, 2022, 2021 and 2020. At December 31, 2022, four loans with an aggregate net carrying value of $ 2.6 million, net of related loan loss reserves of $ 5.1 million, were classified as non-performing and, at December 31, 2021, three loans with an aggregate net carrying value of $ 20.1 million, net of related loan loss reserves of $ 2.6 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, 2022 ​ December 31, 2021 ​ ​ ​ ​ ​ Less Than ​ Greater Than ​ ​ ​ ​ Less Than ​ Greater Than ​ ​ ​ ​ 90 Days ​ 90 Days ​ ​ ​ 90 Days ​ 90 Days ​ UPB Past Due Past Due UPB Past Due Past Due Multifamily ​ $ 2,605 ​ $ — ​ $ 2,605 ​ $ — ​ $ — ​ $ — Retail ​ ​ 3,445 ​ ​ — ​ ​ 3,445 ​ ​ 920 ​ ​ — ​ ​ 920 Commercial ​ ​ 1,700 ​ ​ — ​ ​ 1,700 ​ ​ 1,700 ​ ​ — ​ ​ 1,700 Student Housing ​ ​ — ​ ​ — ​ ​ — ​ ​ 21,500 ​ ​ — ​ ​ 21,500 Total ​ $ 7,750 ​ $ — ​ $ 7,750 ​ $ 24,120 ​ $ — ​ $ 24,120 ​ In addition, we have six loans with a carrying value totaling $ 121.4 million at December 31, 2022, that are collateralized by a land development project. The loans do not carry a current pay rate of interest, however, five of the loans with a carrying value totaling $ 112.0 million entitle us to a weighted average accrual rate of interest of 7.91 %. In 2008, we suspended the recording of the accrual rate of interest on these loans, as they were impaired and we deemed the collection of this interest to be doubtful. At both December 31, 2022 and 2021, we had a cumulative allowance for credit losses of $ 71.4 million related to these loans. The loans are subject to certain risks associated with a development project including, but not limited to, availability of construction financing, increases in projected construction costs, demand for the development’s outputs upon completion of the project, and litigation risk. Additionally, these loans were not classified as non-performing as the borrower is compliant with all of the terms and conditions of the loans. 73 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) At both December 31, 2022 and 2021, we had no loans contractually past due 90 days or more that are still accruing interest. During both 2022 and 2021, there was no interest income recognized on nonaccrual loans. In 2022, we sold 4 bridge loans with an aggregate UPB of $ 296.9 million at par less shared loan origination fees and selling costs totaling $ 2.0 million and released $ 78.0 million of capital to be used for future investments. The shared loan origination fees and selling costs were recorded as an unrealized impairment loss and included in other income, net on the consolidated statements of income. We have retained the right to service these loans. During 2022, we sold a bridge loan and mezzanine loans totaling $ 110.5 million, that were collateralized by a land development project, at a discount for $ 102.2 million. In connection with this transaction, we released $ 66.3 million of capital to be used for future investments and recorded a $ 9.2 million loss (including fees and expenses), which was included in other income, net on the consolidated statements of income. We have the potential to recover up to $ 2.8 million depending on the future performance of the loan. In 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 three years to December 2024. A portion of the foregoing interest equal to 2.00 % was deferred to payoff and would have been waived if the loan was paid off by December 31, 2022, which did not take place. The loan modification agreement also included 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 deposited an additional reserve of $ 4.6 million, which took place in 2021 and was charged-off against the previously recorded allowance for credit losses. In 2019, we purchased $ 50.0 million of a $ 110.0 million bridge loan, which was collateralized by a hotel property and scheduled to mature in December 2022. In 2020, we recorded a $ 7.5 million allowance for credit losses due to a reduction in the appraised value of the property. In 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 $ 20.1 million discount 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 was 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 2021, we entered into a second forbearance agreement that temporarily eliminated the pay rate, extended the principal reduction payoff deadline to June 30, 2021 and increased the interest rate to an unaccrued default rate of 9.50 %, which was deferred until payoff. In June 2021, we received $ 95.0 million for full satisfaction of these loans, reversed the $ 7.5 million allowance for credit losses and recorded interest income of $ 3.5 million. These two loan modifications were deemed troubled debt restructurings. There were no other loan modifications, refinancing’s and/or extensions during 2022 or 2021 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, 2022 and 2021, we had total interest reserves of $ 123.7 million and $ 87.4 million, respectively, on 480 loans and 328 loans, respectively, with an aggregate UPB of $ 7.70 billion and $ 5.75 billion, respectively. 74 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Note 4 — Loans Held-for-Sale, Net Our GSE loans held-for-sale are typically sold within 60 days of loan origination, while our non-GSE loans are generally expected to be sold and securitized within 180 days of loan origination. Loans held-for-sale, net consists of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 December 31, 2021 Fannie Mae ​ $ 173,020 ​ $ 392,876 Private Label ​ ​ 152,735 ​ ​ 507,918 FHA ​ 21,021 ​ ​ 54,532 SFR - Fixed Rate ​ ​ 12,352 ​ ​ 9,352 Freddie Mac ​ ​ 8,938 ​ ​ 112,561 ​ ​ 368,066 ​ ​ 1,077,239 Fair value of future MSR ​ ​ 5,557 ​ ​ 19,318 Unrealized impairment loss ​ ​ ( 15,703 ) ​ ​ — Unearned discount ​ ( 3,850 ) ​ ​ ( 2,948 ) Loans held-for-sale, net ​ $ 354,070 ​ $ 1,093,609 ​ During 2022, 2021 and 2020, we sold $ 5.44 billion, $ 6.42 billion and $ 6.59 billion, respectively, of loans held-for-sale.Included in the total loans sold during 2022 and 2021 were Private Label loans totaling $ 489.3 million and $ 985.1 million, respectively, which were sold to unconsolidated affiliates of ours who securitized the loans. We retained the most subordinate class of certificates in these securitizations totaling $ 43.4 million and $ 85.7 million, respectively, in satisfaction of credit risk retention requirements (see Note 7 for details), and we are also the primary servicer of the mortgage loans. We determined that the fair value of certain loans held-for-sale were below their carrying values and, based on the fair value analysis performed, recorded unrealized impairment losses of $ 15.7 million during 2022 which was included in other income, net on the consolidated statements of income. At December 31, 2022 and 2021, 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 primarily from loans sold in our Agency Business or acquired MSRs. The weighted average estimated life remaining of our MSRs was 8.6 years and 8.5 years at December 31, 2022 and 2021, respectively. A summary of our capitalized MSR activity is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2022 ​ Year Ended December 31, 2021 ​ Originated Acquired Total Originated Acquired Total Beginning balance ​ $ 395,573 ​ $ 27,161 ​ $ 422,734 ​ $ 336,466 ​ $ 43,508 ​ $ 379,974 Additions ​ ​ 83,115 ​ ​ — ​ ​ 83,115 ​ ​ 134,116 ​ ​ — ​ ​ 134,116 Amortization ​ ​ ( 53,449 ) ​ ​ ( 6,427 ) ​ ​ ( 59,876 ) ​ ​ ( 47,845 ) ​ ​ ( 10,770 ) ​ ​ ( 58,615 ) Write-downs and payoffs ​ ​ ( 38,361 ) ​ ​ ( 6,141 ) ​ ​ ( 44,502 ) ​ ​ ( 27,164 ) ​ ​ ( 5,577 ) ​ ​ ( 32,741 ) Ending balance ​ $ 386,878 ​ $ 14,593 ​ $ 401,471 ​ $ 395,573 ​ $ 27,161 ​ $ 422,734 ​ We collected prepayment fees totaling $ 48.2 million and $ 38.2 million during 2022 and 2021, respectively, which are included as a component of servicing revenue, net on the consolidated statements of income. At December 31, 2022 and 2021, we had no valuation allowance recorded on any of our MSRs. 75 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The expected amortization of capitalized MSRs recorded at December 31, 2022 is as follows (in thousands): ​ ​ ​ ​ ​ Year Amortization 2023 $ 61,024 2024 ​ 59,025 2025 ​ 55,033 2026 ​ 49,121 2027 ​ ​ 44,287 Thereafter ​ 132,981 Total ​ $ 401,471 ​ Based on scheduled maturities, actual amortization may vary from these estimates. ​ Note 6 – Mortgage Servicing Product and geographic concentrations that impact our servicing revenue are as follows ($ in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ Product Concentrations ​ Geographic Concentrations ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ UPB ​ Product UPB (1) % of Total State % of Total ​ Fannie Mae ​ $ 19,038,124 ​ 68 % Texas ​ 11 % Freddie Mac ​ ​ 5,153,207 18 % New York ​ 11 % Private Label ​ ​ 2,074,859 8 % California ​ 8 % FHA ​ ​ 1,155,893 ​ 4 % North Carolina ​ 8 % Bridge (2) ​ ​ 301,182 ​ 1 % Georgia ​ 6 % SFR - Fixed Rate ​ ​ 274,764 ​ 1 % Florida ​ 5 % Total ​ $ 27,998,029 ​ 100 % New Jersey ​ 5 % ​ ​ ​ ​ ​ ​ ​ Illinois ​ 4 % ​ ​ ​ ​ ​ ​ ​ Other (3) ​ 42 % ​ ​ ​ ​ ​ ​ ​ Total ​ 100 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ Fannie Mae $ 19,127,397 71 % Texas 12 % Freddie Mac ​ ​ 4,943,905 ​ 18 % New York ​ 11 % Private Label ​ ​ 1,711,326 ​ 6 % North Carolina ​ 9 % FHA ​ ​ 985,063 ​ 4 % California ​ 8 % SFR - Fixed Rate ​ ​ 191,698 ​ 1 % Georgia ​ 6 % Total ​ $ 26,959,389 ​ 100 % Florida ​ 6 % ​ ​ ​ ​ ​ ​ ​ New Jersey ​ 6 % ​ ​ ​ ​ ​ ​ ​ Other (3) ​ 42 % ​ ​ ​ ​ ​ ​ ​ Total ​ 100 % (1) Excludes loans which we are not collecting a servicing fee. (2) Represents four bridge loans sold by our Structured Business that we are servicing, see Note 3 for details. (3) No other individual state represented 4% or more of the total. 76 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) At December 31, 2022 and 2021, our weighted average servicing fee was 41.1 basis points and 44.9 basis points, respectively. At December 31, 2022 and 2021, we held total escrow balances of $ 1.25 billion and $ 1.40 billion, respectively, which is not reflected in our consolidated balance sheets. Of the total escrow balances, we held $ 677.4 million and $ 682.5 million at December 31, 2022 and 2021, 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 $ 24.4 million, $ 4.2 million and $ 7.1 million during 2022, 2021 and 2020, respectively, and is a component of servicing revenue, net in the consolidated statements of income. ​ Note 7 – Securities Held-to-Maturity Agency Private Label Certificates. In connection with our Private Label securitizations, we retain the most subordinate class of the APL certificates in satisfaction of credit risk retention requirements. At December 31, 2022, we retained APL certificates with an initial face value of $ 192.8 million, which were purchased at a discount for $ 119.0 million. These certificates are collateralized by 5-year to 10-year fixed rate first mortgage loans on multifamily properties, bear interest at an initial weighted average variable rate of 3.94 % and have an estimated weighted average remaining maturity of 7.5 years. The weighted average effective interest rate was 8.85 % and 9.11 % at December 31, 2022 and 2021, respectively, including the accretion of a portion of the discount deemed collectible. Approximately $ 6.7 million is estimated to mature after one year through five years and $ 186.1 million is estimated to mature after five years through ten years. Agency B Piece Bonds. Freddie Mac may choose to hold, sell or securitize loans we sell to them under the Freddie Mac SBL program. As part of the securitizations under the SBL program, we have the ability to purchase the B Piece bond through a bidding process, which represents the bottom 10%, or highest risk, of the securitization. At December 31, 2022, 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. These securities are collateralized by a pool of multifamily mortgage loans, bear interest at an initial weighted average variable rate of 3.74 % and have an estimated weighted average remaining maturity of 6.2 years. The weighted average effective interest rate was 12.20 % and 11.32 % at December 31, 2022 and 2021, respectively, including the accretion of a portion of the discount deemed collectible. Approximately $ 7.5 million is estimated to mature within one year, $ 16.4 million is estimated to mature after one year through five years, $ 0.5 million is estimated to mature after five years through ten years and $ 17.1 million is estimated to mature after ten years. ​ A summary of our securities held-to-maturity is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Carrying ​ Unrealized ​ Estimated ​ Allowance for ​ Face Value Value Gain (Loss) Fair Value Credit Losses December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ APL certificates ​ $ 192,791 ​ $ 123,475 ​ $ ( 13,348 ) ​ $ 110,127 ​ $ 2,783 B Piece bonds ​ ​ 41,464 ​ ​ 33,072 ​ ​ 1,372 ​ ​ 34,444 ​ ​ 370 Total ​ $ 234,255 ​ $ 156,547 ​ $ ( 11,976 ) ​ $ 144,571 ​ $ 3,153 December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ APL certificates ​ $ 149,368 ​ $ 92,869 ​ $ 5,007 ​ $ 97,876 ​ $ 1,422 B Piece bonds ​ ​ 61,360 ​ ​ 47,615 ​ ​ 4,420 ​ ​ 52,035 ​ ​ 331 Total ​ $ 210,728 ​ $ 140,484 ​ $ 9,427 ​ $ 149,911 ​ $ 1,753 ​ 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, 2022 ​ ​ APL ​ B Piece ​ ​ ​ ​ Certificates ​ Bonds ​ Total Beginning balance ​ $ 1,422 ​ $ 331 ​ $ 1,753 Provision for credit loss expense/(reversal) ​ 1,361 ​ 39 ​ 1,400 Ending balance ​ $ 2,783 ​ $ 370 ​ $ 3,153 ​ 77 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 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. At December 31, 2022, no other-than-temporary impairment was recorded on our held-to-maturity securities. ​ We recorded interest income (including the amortization of discount) related to these investments of $ 18.6 million, $ 13.2 million and $ 9.7 million during 2022, 2021 and 2020, respectively. ​ Note 8 —Investments in Equity Affiliates We account for all investments in equity affiliates under the equity method. A summary of these investments is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ UPB of Loans to ​ ​ Investments in Equity Affiliates at ​ Equity Affiliates at Equity Affiliates December 31, 2022 December 31, 2021 December 31, 2022 Arbor Residential Investor LLC ​ $ 46,951 ​ $ 65,756 ​ $ — AMAC Holdings III LLC ​ ​ 15,825 ​ ​ 13,772 ​ ​ — Fifth Wall Ventures ​ ​ 13,584 ​ ​ 5,409 ​ ​ — Lightstone Value Plus REIT L.P. ​ ​ 1,895 ​ ​ 1,895 ​ ​ — Docsumo Pte. Ltd. ​ ​ 450 ​ ​ — ​ ​ — JT Prime ​ 425 ​ 425 ​ — North Vermont Avenue ​ ​ — ​ ​ 2,419 ​ ​ — West Shore Café ​ ​ — ​ ​ — ​ ​ 1,688 Lexford Portfolio ​ ​ — ​ ​ — ​ ​ — East River Portfolio ​ — ​ — ​ — Total ​ $ 79,130 ​ $ 89,676 ​ $ 1,688 ​ Arbor Residential Investor LLC (“ARI”). We invested $ 9.6 million for a 50 % interest in 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, 2022, our indirect interest in this business was 12.3 %. The allocation of income is based on the underlying agreements, which may be different than our indirect interest, and was 9.2 % at December 31, 2022. 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 2022, 2021 and 2020, we recorded income of $ 4.9 million, $ 34.6 million and $ 75.7 million, respectively, to income from equity affiliates in the consolidated statements of income. We also received $ 23.8 million and $ 28.0 million in cash distributions from this investment during 2022 and 2021, respectively, which were classified as returns of capital. We have included the financial statements of Wakefield in this report. AMAC III. We committed to a $ 30.0 million investment (of which $ 25.2 million was funded at December 31, 2022) 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 2022, 2021 and 2020, we recorded a loss associated with this investment of $ 2.4 million, $ 1.3 million and $ 0.9 million, respectively. During 2022 and 2021, we made contributions of $ 4.9 million and $ 8.6 million, respectively, and received cash distributions totaling $ 0.5 million and $ 3.8 million, respectively, which were classified as returns of capital, related to this investment. Fifth Wall. We committed to a $ 25.0 million investment (of which $ 15.2 million was funded at December 31, 2022) for a 7.6 % interest in two related private equity funds whose investment objective is to invest primarily in technology, technology-enabled or technology-related companies that are relevant or complementary to the build environment, including real estate or real estate related industries. We have no role in the management of the investment funds. During 2022 and 2021, we made contributions of $ 9.7 million and $ 5.4 million, respectively, and, during 2022 we received cash distributions totaling $ 1.6 million, which were classified as returns of capital, related to this investment. Operating results from this investment were de minimis for all periods presented. 78 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Lightstone Value Plus REIT L.P. / JT Prime. We own a $ 1.9 million interest in a joint venture that holds common operating partnership units of Lightstone Value Plus REIT L.P. (“Lightstone”). We also own a 50 % noncontrolling interest in a 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. Docsumo Pte. Ltd. (“Docsumo”). During 2022, we invested $ 0.5 million for a noncontrolling interest in Docsumo, a startup company that converts unstructured documents, such as bank statements and pay stubs, to accurate structured data and checks documents for fraud, such as photoshopped layers and font changes, using artificial intelligence. Operating results from this investment were de minimis. North Vermont Avenue. We invested $ 2.4 million for an initial 85 % noncontrolling interest in a joint venture that acquired three parcels of land with multiple structures, with the intent 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. During 2022, 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 $ 2.4 million to income from equity affiliates in the consolidated statement of income for the full carrying amount of this investment. 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 %. In 2018, we determined that this investment exhibited indicators of impairment and recorded an other-than-temporary impairment of $ 2.2 million for the full carrying amount of this investment and fully reserved the $ 1.7 million first mortgage loan. Operating results from this investment were de minimis for all periods presented. Lexford Portfolio. We own a less than $ 0.1 million noncontrolling equity interest in Lexford, a portfolio of multifamily assets. In 2022 and 2020, we received distributions from this investment and recognized income totaling $ 11.1 million and $ 1.1 million, net of expenses, respectively. As a result of COVID-19, Lexford did not make any distributions to its equity holders in 2021. 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 %. Operating results from this investment were de minimis for all periods presented. Equity Participation Interest. During the first quarter of 2022, we received $ 2.6 million from an equity participation interest on a property that was sold and which we had a preferred equity loan that previously paid off. See Note 18 for details of certain investments described above. ​ ​ ​ 79 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Note 9 — Goodwill and Other Intangible Assets Goodwill. The goodwill balance at both December 31, 2022 and 2021 was $ 56.6 million. ​ Other Intangible Assets. The following table sets forth the other intangible assets activity (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ December 31, 2021 ​ ​ Gross ​ ​ ​ ​ ​ ​ ​ Gross ​ ​ ​ ​ ​ ​ ​ ​ Carrying ​ Accumulated ​ ​ ​ ​ Carrying ​ Accumulated ​ ​ ​ ​ Value Amortization Total Value Amortization Total Finite ‑ lived intangible assets: ​ ​ ​ ​ ​ ​ Broker relationships ​ $ 25,000 ​ $ ( 20,182 ) ​ $ 4,818 ​ $ 25,000 ​ $ ( 17,057 ) ​ $ 7,943 Borrower relationships ​ 14,400 ​ ( 9,300 ) ​ 5,100 ​ 14,400 ​ ( 7,860 ) ​ 6,540 Below market leases ​ 4,010 ​ ( 3,485 ) ​ 525 ​ 4,010 ​ ( 3,359 ) ​ 651 Infinite ‑ lived intangible assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ Fannie Mae DUS license ​ 17,100 ​ — ​ 17,100 ​ 17,100 ​ — ​ 17,100 Freddie Mac Program Plus license ​ 8,700 ​ — ​ 8,700 ​ 8,700 ​ — ​ 8,700 FHA license ​ 3,200 ​ — ​ 3,200 ​ 3,200 ​ — ​ 3,200 ​ ​ $ 72,410 ​ $ ( 32,967 ) ​ $ 39,443 ​ $ 72,410 ​ $ ( 28,276 ) ​ $ 44,134 ​ The amortization expense recorded for these intangible assets were $ 4.7 million, $ 4.7 million and $ 5.3 million during 2022, 2021 and 2020, respectively. At December 31, 2022, the weighted average remaining lives of our amortizable finite-lived intangible assets and the estimated amortization expense for each of the next five years are as follows ($ in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Estimated Amortization Expense for the ​ ​ ​ ​ Years Ending December 31, ​ ​ Wtd. Avg. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Remaining Life ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in years) 2023 2024 2025 2026 2027 Finite ‑ lived intangible assets: ​ ​ ​ ​ ​ Broker relationships 1.5 ​ $ 3,125 ​ $ 1,693 ​ $ — ​ $ — ​ $ — Borrower relationships 3.5 ​ 1,440 ​ 1,440 ​ 1,440 ​ 780 ​ — Below market leases 4.2 ​ 126 ​ 126 ​ 126 ​ 126 ​ 21 ​ 2.7 ​ $ 4,691 ​ $ 3,259 ​ $ 1,566 ​ $ 906 ​ $ 21 ​ See Note 20 for details of goodwill and other intangible assets by segment. ​ 80 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Note 10 — Debt Obligations Credit and Repurchase Facilities Borrowings under our credit and repurchase facilities are as follows ($ in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ December 31, 2021 ​ ​ ​ ​ ​ Debt ​ Collateral ​ ​ ​ ​ ​ ​ Debt ​ Collateral ​ ​ ​ ​ ​ ​ ​ Carrying ​ Carrying ​ Wtd. Avg. ​ ​ ​ ​ Carrying ​ Carrying ​ Wtd. Avg. ​ UPB Value(1) Value Note Rate UPB Value(1) Value Note Rate Structured Business ​ ​ ​ ​ ​ ​ ​ ​ $ 2.5 B joint repurchase facility (2) ​ $ 1,524,831 ​ $ 1,516,657 ​ $ 2,099,447 ​ 6.73 % $ 1,490,434 ​ $ 1,486,380 ​ $ 1,877,930 ​ 2.56 % $ 1 B repurchase facility (2) ​ 499,891 ​ 498,666 ​ 703,740 ​ 6.39 % 676,608 ​ 675,415 ​ 937,880 ​ 2.04 % $ 500 M repurchase facility ​ 155,121 ​ ​ 154,653 ​ ​ 188,563 ​ 7.16 % — ​ ​ — ​ ​ — ​ — ​ $ 499 M repurchase facility (2)(3) ​ 351,056 ​ 351,056 ​ 504,506 ​ 6.64 % 242,034 ​ 241,450 ​ 289,956 ​ 3.04 % $ 450 M repurchase facility ​ 344,576 ​ ​ 344,237 ​ ​ 450,736 ​ 6.36 % 397,842 ​ ​ 397,272 ​ ​ 511,269 ​ 1.89 % $ 450 M repurchase facility ​ 187,428 ​ ​ 186,639 ​ ​ 239,678 ​ 6.18 % 294,145 ​ ​ 293,700 ​ ​ 385,337 ​ 1.76 % $ 400 M credit facility ​ 33,246 ​ 33,221 ​ 43,238 ​ 6.25 % 177,599 ​ 177,406 ​ 236,538 ​ 1.70 % $ 225 M credit facility ​ 47,398 ​ 47,398 ​ 81,119 ​ 6.90 % 28,213 ​ 27,826 ​ 42,270 ​ 2.79 % $ 200 M repurchase facility ​ 33,155 ​ ​ 32,494 ​ ​ 47,750 ​ 6.95 % — ​ ​ — ​ ​ — ​ — ​ $ 200 M repurchase facility ​ 155,240 ​ ​ 154,516 ​ ​ 200,099 ​ 6.33 % — ​ ​ — ​ ​ — ​ — ​ $ 156 M loan specific credit facilities ​ 156,543 ​ ​ 156,107 ​ ​ 225,805 ​ 6.42 % 153,937 ​ ​ 153,727 ​ ​ 214,300 ​ 3.14 % $ 50 M credit facility ​ ​ 29,200 ​ ​ 29,194 ​ ​ 36,500 ​ 6.48 % ​ 29,200 ​ ​ 29,194 ​ ​ 36,500 ​ 2.13 % $ 35 M working capital facility ​ — ​ ​ — ​ ​ — ​ — ​ — ​ ​ — ​ ​ — ​ — ​ $ 25 M credit facility ​ 19,177 ​ ​ 18,701 ​ ​ 24,572 ​ 6.99 % 1,235 ​ ​ 1,235 ​ ​ 1,900 ​ 4.06 % $ 25 M credit facility ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ 10,285 ​ ​ 10,218 ​ ​ 14,773 ​ 2.38 % $ 1 M master security agreement ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ 635 ​ ​ 635 ​ ​ — ​ 4.01 % Repurchase facility - securities (2)(4) ​ ​ 12,832 ​ ​ 12,832 ​ ​ — ​ 6.99 % ​ 30,849 ​ ​ 30,849 ​ ​ — ​ 3.40 % Structured Business total ​ $ 3,549,694 ​ $ 3,536,371 ​ $ 4,845,753 ​ 6.59 % $ 3,533,016 ​ $ 3,525,307 ​ $ 4,548,653 ​ 2.34 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Agency Business ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 750 M ASAP agreement ​ $ 29,476 ​ $ 29,476 ​ $ 30,291 ​ 5.21 % $ 182,130 ​ $ 182,130 ​ $ 182,140 ​ 1.40 % $ 500 M joint repurchase facility (2) ​ 105,275 ​ ​ 104,629 ​ ​ 135,641 ​ 6.52 % 399,470 ​ ​ 395,317 ​ ​ 475,360 ​ 2.11 % $ 500 M repurchase facility ​ 66,866 ​ ​ 66,778 ​ ​ 66,866 ​ 5.73 % 236,527 ​ ​ 236,429 ​ ​ 236,527 ​ 1.58 % $ 200 M credit facility ​ 31,519 ​ ​ 31,475 ​ ​ 33,177 ​ 5.76 % 115,351 ​ ​ 115,304 ​ ​ 115,351 ​ 1.60 % $ 150 M credit facility ​ 57,974 ​ ​ 57,887 ​ ​ 57,974 ​ 5.76 % 16,657 ​ ​ 16,544 ​ ​ 16,657 ​ 1.51 % $ 50 M credit facility ​ ​ 14,671 ​ ​ 14,664 ​ ​ 14,671 ​ 5.65 % ​ 9,295 ​ ​ 9,295 ​ ​ 9,295 ​ 1.40 % $ 1 M repurchase facility (2)(3) ​ 534 ​ ​ 534 ​ ​ 920 ​ 6.66 % 1,253 ​ ​ 1,253 ​ ​ 1,477 ​ 3.00 % Agency Business total ​ $ 306,315 ​ $ 305,443 ​ $ 339,540 ​ 5.96 % $ 960,683 ​ $ 956,272 ​ $ 1,036,807 ​ 1.75 % Consolidated total ​ $ 3,856,009 ​ $ 3,841,814 ​ $ 5,185,293 ​ 6.54 % $ 4,493,699 ​ $ 4,481,579 ​ $ 5,585,460 ​ 2.21 % (1) At December 31, 2022 and 2021, debt carrying value for the Structured Business was net of unamortized deferred finance costs of $ 13.3 million and $ 7.7 million, respectively, and for the Agency Business was net of unamortized deferred finance costs of $ 0.9 million and $ 4.4 million, respectively. (2) These facilities are subject to margin call provisions associated with changes in interest spreads. (3) A portion of this facility was used to finance a fixed rate SFR permanent loan reported through our Agency Business. (4) At December 31, 2022 and 2021, this facility was collateralized by B Piece bonds with a carrying value of $ 33.1 million and $ 47.6 million, respectively. During 2022, several of our credit and repurchase facilities, in both our Structured Business and Agency Business, converted from a LIBOR-based interest rate to a SOFR-based interest rate for new financings. Existing financings generally remain at a LIBOR-based interest rate. Usually, our credit and repurchase facilities 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 &quot;wind-down&quot; feature. Joint Repurchase Facility. We have a $ 3.00 billion joint repurchase facility, which is shared between the Structured Business and the Agency Business, which matures in March 2024 with a one-year extension option. This facility is used to finance both structured and Private Label loans. The interest rate under the facility is determined on a loan-by-loan basis and may include a floor equal to a pro rata share of the floors included in our originated loans. The facility has a maximum advance rate of 80 % on all loans and includes a $ 150.0 million over advance available that bears interest at a rate of the applicable benchmark plus 7.00 % . The over advance is available through March 2023, was being amortized on a monthly basis and was paid off at December 31, 2022. If the estimated market value of the loans financed in this facility decrease, we may be required to pay down borrowings under this facility. 81 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Structured Business. We utilize credit and repurchase facilities with various financial institutions to finance our loans and investments as described below. Many of these facilities have a maximum advance rate between 75 % to 85 %, depending on the asset type financed. At December 31, 2022 and 2021, the weighted average interest rate for the credit and repurchase facilities of our Structured Business, including certain fees and costs, such as structuring, commitment, non-use and warehousing fees, was 6.95 % and 2.51 %, respectively. The leverage on our loan and investment portfolio financed through our credit and repurchase facilities, excluding the securities repurchase facility, working capital facility and the $ 1.0 million master security agreement, was 73 % and 77 % at December 31, 2022 and 2021, respectively. We have a $ 1.00 billion repurchase facility used to finance loans that matures in December 2023. The interest rate on loans funded after August 30, 2022 is SOFR plus 2.25 % with a 0.15 % SOFR floor. For existing loans, the interest rate will remain at SOFR plus 2.00 % with up to a 0.35 % SOFR floor. The interest rate spread increases by 0.20 % if the advance rate on a loan exceeds 75 %. We have a $ 500.0 million repurchase facility to finance SFR loans that has an interest rate of SOFR plus 3.26 % on loans funded after October 13, 2022 and SOFR plus 2.76 % on existing loans. The commitment amount under this facility expires six months after the lender provides written notice. We then have an additional six months to repurchase the underlying loans. We have a $ 500.0 million repurchase facility to finance SFR properties that bears interest at a rate of SOFR plus 2.36 % with a 0.25 % SOFR floor and matures in October 2023. We have a $ 450.0 million repurchase facility to finance bridge loans that matures in March 2023, with three one-year extension options through March 2026. The interest rate on loans funded in 2022 ranges from SOFR plus 1.75 % to 2.25 % for multifamily and SOFR plus 2.00 % to 2.75 % for non-multifamily. For existing loans, the interest rates will remain at LIBOR. We have a $ 450.0 million repurchase facility to finance multifamily bridge loans that matures in October 2023, with a one-year extension option. The interest rate for new loans after April 29, 2022 is determined on a loan-by-loan basis based off SOFR. We have a $ 400.0 million credit facility to finance bridge loans that matures in July 2023 and bears interest at a rate ranging from SOFR plus 1.86 % to 2.56 % depending on the type of loan financed. This facility includes a $ 25.0 million sublimit to finance healthcare related loans. We have a $ 225.0 million credit facility to finance SFR properties that bears interest at a rate of SOFR plus 2.55 %, with an all-in floor rate range of 3.00 % to 4.10 %, depending on our deposit balance. The facility matures in October 2023, with a one-year extension option. We have a $ 200.0 million repurchase facility that matures in March 2024, with a one-year extension option. This facility has an interest rate of SOFR plus 2.55 % . We have a $ 200.0 million repurchase facility to finance bridge and construction loans that matures in January 2024, with a one-year extension option. This facility has interest rates of SOFR plus 1.75 % to 3.50 % depending on the type of loan financed with a SOFR floor determined on a loan-by-loan basis. We have several loan specific credit facilities totaling $ 156.5 million used to finance individual bridge loans. The facilities bear interest at rates ranging from LIBOR plus 2.20 % to 3.375 %, SOFR plus 2.20 %, a 3.00 % fixed rate, and the greater of the prime rate or 3.25 % and mature between May 2023 and August 2025. We have a $ 50.0 million credit facility to finance multifamily loans that bears interest at a rate of SOFR plus 2.10 % and matures in April 2023, with two 1-year extension options. We have a $ 35.0 million unsecured working capital line of credit that bears interest at a rate of SOFR plus 3.00 %. This line matures in April 2023 and is typically renewed annually. 82 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) We have a $ 25.0 million credit facility to finance SFR properties that bears interest at a rate of SOFR plus 2.60 %, with an all-in floor rate of 4.25 %, and which matures in October 2024. We have a $ 25.0 million credit facility used to purchase loans that bears interest at a rate of SOFR plus 2.35 % and matures in February 2023, with a one-year extension option. We have an uncommitted repurchase facility that is 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. This facility bears interest at rate of SOFR plus 2.60 % and has no stated maturity date. Agency Business. We utilize credit facilities with various financial institutions to finance substantially all of our loans held-for-sale as described below. The financial institutions that provide these facilities generally have a security interest in the underlying mortgage notes that serve as collateral for these facilities. 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 SOFR plus 1.15 % with a 0.25 % SOFR floor. We have a $ 500.0 million repurchase facility that bears interest at a rate of SOFR plus 1.375 % and matures in November 2023. We have a $ 200.0 million credit facility that bears interest at a rate of SOFR plus 1.46 % and matures in March 2023. We have a $ 150.0 million credit facility that bears interest at a rate of SOFR plus 1.46 % and matures in July 2023. 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 SOFR plus 1.86 %. We have a $ 50.0 million credit facility that bears interest at a rate of SOFR plus 1.35 % and matures in September 2023. We have a letter of credit facility with a financial institution to secure obligations under the Fannie Mae DUS program and the Freddie Mac SBL program with a total committed amount of up to $ 75.0 million. The facility bears interest at a fixed rate of 2.875 %, matures in September 2025 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, 2022, the letters of credit outstanding include $ 64.0 million for the Fannie Mae DUS program and $ 5.0 million for the Freddie Mac SBL program. 83 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Securitized Debt We account for securitized debt transactions on our consolidated balance sheet as financing facilities. These transactions are considered VIEs for which we are the primary beneficiary and are consolidated in our financial statements. The investment grade notes and guaranteed certificates issued to third parties are treated as secured financings and are non-recourse to us. Borrowings and the corresponding collateral under our securitized debt transactions are as follows ($ in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Debt ​ Collateral (3) ​ ​ ​ ​ Loans ​ Cash ​ ​ Carrying Wtd. Avg. ​ Carrying Restricted December 31, 2022 ​ Face Value ​ Value (1) ​ Rate (2) ​ UPB ​ Value ​ Cash (4) CLO 19 ​ $ 872,812 ​ $ 866,605 ​ 6.75 % $ 952,268 ​ $ 947,336 ​ $ 64,300 CLO 18 ​ ​ 1,652,812 ​ ​ 1,645,711 ​ 6.19 % ​ 1,899,174 ​ ​ 1,891,215 ​ ​ 85,970 CLO 17 ​ ​ 1,714,125 ​ ​ 1,707,676 ​ 6.16 % ​ 1,911,866 ​ ​ 1,904,732 ​ ​ 145,726 CLO 16 ​ ​ 1,237,500 ​ ​ 1,231,887 ​ 5.79 % ​ 1,307,244 ​ ​ 1,301,794 ​ ​ 106,495 CLO 15 ​ ​ 674,412 ​ ​ 671,532 ​ 5.84 % ​ 797,755 ​ ​ 795,078 ​ ​ 2,861 CLO 14 ​ ​ 655,475 ​ ​ 652,617 ​ 5.80 % ​ 732,247 ​ ​ 730,057 ​ ​ 37,090 CLO 13 ​ ​ 462,769 ​ ​ 461,005 ​ 6.03 % ​ 552,182 ​ ​ 550,924 ​ ​ 37,875 CLO 12 ​ 379,283 ​ ​ 378,331 ​ 6.09 % ​ 466,474 ​ ​ 465,003 ​ ​ 500 Total CLOs ​ ​ 7,649,188 ​ ​ 7,615,364 ​ 6.10 % ​ 8,619,210 ​ ​ 8,586,139 ​ ​ 480,817 Q Series securitization ​ ​ 236,878 ​ ​ 233,906 ​ 6.30 % ​ 315,837 ​ ​ 313,965 ​ ​ — Total securitized debt ​ $ 7,886,066 ​ $ 7,849,270 ​ 6.11 % $ 8,935,047 ​ $ 8,900,104 ​ $ 480,817 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ ​ ​ ​ ​ CLO 17 ​ $ 1,714,125 ​ $ 1,705,549 ​ 1.81 % $ 1,914,280 ​ $ 1,903,997 ​ $ 118,520 CLO 16 ​ ​ 1,237,500 ​ ​ 1,230,093 ​ 1.44 % ​ 1,444,573 ​ ​ 1,436,743 ​ ​ — CLO 15 ​ 674,412 ​ ​ 669,723 ​ 1.49 % ​ 785,761 ​ ​ 782,682 ​ ​ 15,750 CLO 14 ​ ​ 655,475 ​ ​ 650,947 ​ 1.45 % ​ 717,396 ​ ​ 715,154 ​ ​ 53,342 CLO 13 ​ ​ 668,000 ​ ​ 665,006 ​ 1.54 % ​ 740,369 ​ ​ 738,265 ​ ​ 48,543 CLO 12 ​ ​ 534,193 ​ ​ 531,939 ​ 1.62 % ​ 557,249 ​ ​ 555,974 ​ ​ 35,635 CLO 10 ​ ​ 441,000 ​ ​ 439,553 ​ 1.57 % ​ 485,460 ​ ​ 483,995 ​ ​ 57,706 Total securitized debt ​ $ 5,924,705 ​ $ 5,892,810 ​ 1.59 % $ 6,645,088 ​ $ 6,616,810 ​ $ 329,496 (1) Debt carrying value is net of $ 36.8 million and $ 31.9 million of deferred financing fees at December 31, 2022 and 2021, respectively. (2) At December 31, 2022 and 2021, the aggregate weighted average note rate for our CLOs, including certain fees and costs, was 6.32 % and 1.86 % , respectively , and the Q Series securitization was 6.66 % at December 31, 2022. (3) At December 31, 2022 and 2021, there were no collateral deemed a “credit risk” as defined by the CLO indentures. (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 $ 230.0 million and $ 133.7 million at December 31, 2022 and 2021, respectively. 84 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) CLO 19. In May 2022, we completed CLO 19, issuing nine tranches of CLO notes through a wholly-owned subsidiary totaling $ 1.05 billion. Of the total CLO notes issued, $ 872.8 million were investment grade notes issued to third-party investors and $ 177.2 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 $ 976.9 million, consisting primarily of bridge loans that were contributed from our existing loan portfolio, and cash. The financing has an approximate two -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 $ 73.1 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 $ 1.05 billion, representing leverage of 83 % . The notes sold to third parties had an initial weighted average interest rate of 2.36 % plus term SOFR and interest payments on the notes are payable monthly. CLO 18. In February 2022, we completed CLO 18, issuing eight tranches of CLO notes through two wholly-owned subsidiaries totaling $ 1.86 billion. Of the total CLO notes issued, $ 1.65 billion were investment grade notes issued to third-party investors and $ 210.1 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 $ 1.70 billion, consisting primarily of bridge loans that were contributed from our existing loan portfolio, and cash. The financing has an approximate two -and-a-half-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 $ 347.3 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 $ 2.05 billion, representing leverage of 81 % . We retained a residual interest in the portfolio with a notional amount of $ 397.2 million, including the $ 210.1 million below investment grade notes. The notes sold to third parties had an initial weighted average interest rate of 1.81 % plus compounded SOFR and interest payments on the notes are payable monthly. CLO 17. In 2021, we completed CLO 17, issuing eight tranches of CLO notes through two wholly-owned subsidiaries totaling $ 1.91 billion. Of the total CLO notes issued, $ 1.71 billion were investment grade notes issued to third-party investors and $ 194.3 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 $ 1.79 billion, consisting primarily of bridge loans that were contributed from our existing loan portfolio, and cash. The financing has an approximate two -and-a-half-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 $ 315.0 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 $ 2.10 billion, representing leverage of 82 % . We retained a residual interest in the portfolio with a notional amount of $ 385.9 million, including the $ 194.3 million below investment grade notes. The notes sold to third parties had an initial weighted average interest rate of 1.68 % plus one-month LIBOR and interest payments on the notes are payable monthly. CLO 16. In 2021, we completed CLO 16, issuing eight tranches of CLO notes through two wholly-owned subsidiaries totaling $ 1.37 billion. Of the total CLO notes issued, $ 1.24 billion were investment grade notes issued to third-party investors and $ 135.0 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 $ 1.19 billion, consisting primarily of bridge loans that were contributed from our existing loan portfolio, and cash. The financing has an approximate two -and-a-half-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 $ 313.0 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 $ 1.50 billion, representing leverage of 83 % . We retained a residual interest in the portfolio with a notional amount of $ 262.5 million, including the $ 135.0 million below investment grade notes. The notes sold to third parties had an initial weighted average interest rate of 1.31 % plus one-month LIBOR and interest payments on the notes are payable monthly. 85 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) CLO 15. In 2021, we completed CLO 15, issuing eight tranches of CLO notes through two wholly-owned subsidiaries totaling $ 747.8 million. Of the total CLO notes issued, $ 674.4 million were investment grade notes issued to third-party investors and $ 73.4 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 $ 653.0 million, consisting primarily of bridge loans that were contributed from our existing loan portfolio, and cash. The financing has an approximate two -and-a-half-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 $ 162.0 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 $ 815.0 million, representing leverage of 83 % . We retained a residual interest in the portfolio with a notional amount of $ 140.6 million, including the $ 73.4 million below investment grade notes. The notes sold to third parties had an initial weighted average interest rate of 1.37 % plus one-month LIBOR and interest payments on the notes are payable monthly. CLO 14. In 2021, we completed CLO 14, issuing eight tranches of CLO notes through two wholly-owned subsidiaries totaling $ 724.2 million. Of the total CLO notes issued, $ 655.5 million were investment grade notes issued to third-party investors and $ 68.7 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 $ 635.2 million, consisting primarily of bridge loans that were contributed from our existing loan portfolio, and cash. The financing has a two -and-a-half-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 $ 149.8 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 $ 785.0 million, representing leverage of 84 % . We retained a residual interest in the portfolio with a notional amount of $ 129.5 million, including the $ 68.7 million below investment grade notes. The notes sold to third parties had an initial weighted average interest rate of 1.33 % plus one-month LIBOR and interest payments on the notes are payable monthly. CLO 13. In 2020, we completed CLO 13, issuing eight tranches of CLO notes through two 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, and cash. 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 $ 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. At December 31, 2022, $ 205.2 million has been repaid. CLO 12. In 2019, we completed CLO 12, issuing eight tranches of CLO notes through two 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, and cash. The financing had a three -year replacement period that allowed 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 is being 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. The replacement period for CLO 12 ended in November 2022 and $ 154.9 million has been repaid at December 31, 2022. 86 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) CLO 10. In February 2022, we unwound CLO 10, redeeming $ 441.0 million of outstanding notes which were repaid primarily from the refinancing of the remaining assets within CLO 18, as well as with cash held by CLO 10, and expensed $ 1.4 million of deferred financing fees into loss on extinguishment of debt on the consolidated statements of income. CLO 11 and CLO 9. In 2021, we unwound both CLO 11 and CLO 9, redeeming $ 889.2 million of outstanding notes which were repaid primarily from the refinancing of the remaining assets within CLOs 17 and 14, as well as with cash held by CLOs 11 and 9, and expensed $ 3.4 million of deferred financing fees into loss on extinguishment of debt on the consolidated statements of income. CLO 8. In 2020, we unwound CLO 8 redeeming $ 282.9 million of outstanding notes which were repaid primarily from the refinancing of the remaining assets within CLO 13, as well as with cash held by CLO 8, and expensed $ 1.5 million of deferred financing fees into loss on extinguishment of debt on the consolidated statements of income. Freddie Mac Q Series Securitization. In December 2022, we completed our first loan securitization through Freddie Mac’s Q Series securitization program (“Q Series Securitization”), by which we sold to Freddie Mac 11 floating rate loans totaling $ 315.8 million that are secured by first priority mortgage liens on 21 multifamily properties that qualify as mission-driven under the Federal Housing Finance Agency guidelines. The Q Series Securitization is represented through a series of pass-through certificates (the “Certificates”) issued under a pooling and servicing agreement. We retained certain subordinate and interest-only classes of the Certificates aggregating $ 79.0 million and the remaining Certificates totaling $ 236.9 million were purchased by third-party investors, representing leverage of 75 %. The Certificates sold to third parties pays interest at a rate of 2.00 % plus one-month SOFR, excluding fees and transaction costs, and are payable monthly. As part of the securitization transaction, we released all mortgage servicing obligations and rights to Freddie Mac who was designated as the master servicer. As master servicer, Freddie Mac appointed us as its subservicer, which includes obligations to collect and remit payments and otherwise administer the underlying loans, and a third-party as the special servicer. We may, subject to certain limitations, terminate the special servicer, with or without cause, and appoint a successor. In addition, the special servicer must receive our consent prior to certain decisions with respect to a specially serviced mortgage loan. Senior Unsecured Notes ​ A summary of our senior unsecured notes is as follows ($ in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Senior ​ ​ ​ ​ ​ December 31, 2022 ​ December 31, 2021 ​ Unsecured ​ Issuance ​ ​ ​ ​ ​ Carrying ​ Wtd. Avg. ​ ​ ​ Carrying ​ Wtd. Avg. ​ Notes Date Maturity UPB Value (1) Rate (2) UPB Value (1) Rate (2) ​ 8.50 % Notes (3) ​ Oct. 2022 ​ Oct. 2027 ​ $ 150,000 ​ $ 147,519 ​ ​ 8.50 % $ — ​ $ — ​ ​ — ​ 5.00 % Notes (3) ​ Dec. 2021 ​ Dec. 2028 ​ ​ 180,000 ​ ​ 177,450 ​ ​ 5.00 % ​ 180,000 ​ ​ 177,105 ​ ​ 5.00 % 4.50 % Notes (3) ​ Aug. 2021 ​ Sept. 2026 ​ ​ 270,000 ​ ​ 266,926 ​ ​ 4.50 % ​ 270,000 ​ ​ 266,090 ​ ​ 4.50 % 5.00 % Notes (3) ​ Apr. 2021 ​ Apr. 2026 ​ ​ 175,000 ​ ​ 172,917 ​ ​ 5.00 % ​ 175,000 ​ ​ 172,302 ​ ​ 5.00 % 8.00 % Notes (3) ​ Apr. 2020 ​ Apr. 2023 ​ ​ 70,750 ​ ​ 70,613 ​ ​ 8.00 % ​ 70,750 ​ ​ 70,202 ​ ​ 8.00 % 4.50 % Notes (3) ​ Mar. 2020 ​ Mar. 2027 ​ ​ 275,000 ​ ​ 272,960 ​ ​ 4.50 % ​ 275,000 ​ ​ 272,477 ​ ​ 4.50 % 4.75 % Notes (4) ​ Oct. 2019 ​ Oct. 2024 ​ ​ 110,000 ​ ​ 109,369 ​ ​ 4.75 % ​ 110,000 ​ ​ 109,018 ​ ​ 4.75 % 5.75 % Notes (4) ​ Mar. 2019 ​ Apr. 2024 ​ ​ 90,000 ​ ​ 89,514 ​ ​ 5.75 % ​ 90,000 ​ ​ 89,135 ​ ​ 5.75 % 5.625 % Notes (4) ​ Mar. 2018 ​ May 2023 ​ ​ 78,850 ​ ​ 78,726 ​ ​ 5.63 % ​ 125,000 ​ ​ 124,216 ​ ​ 5.63 % ​ ​ ​ ​ ​ ​ $ 1,399,600 ​ $ 1,385,994 ​ ​ 5.40 % $ 1,295,750 ​ $ 1,280,545 ​ ​ 5.05 % (1) At December 31, 2022 and 2021, the carrying value is net of deferred financing fees of $ 13.6 million and $ 15.2 million, respectively. (2) At December 31, 2022 and 2021, the aggregate weighted average note rate, including certain fees and costs, was 5.69 % and 5.34 % , respectively. (3) These notes can be redeemed by us prior to three months before the maturity date, at a redemption price equal to 100 % of the aggregate principal amount, plus a “ make-whole ” premium and accrued and unpaid interest. We have the right to redeem the notes within three months prior to the maturity date at a redemption price equal to 100% of the aggregate principal amount, plus accrued and unpaid interest. 87 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (4) These notes can be redeemed by us at any time prior to the maturity date, at a redemption price equal to 100 % of the aggregate principal amount, plus a “make-whole” premium and accrued and unpaid interest. We have the right to redeem the notes on the maturity date at a redemption price equal to 100 % of the aggregate principal amount, plus accrued and unpaid interest. Except as noted below, we used the proceeds of our senior unsecured debt offerings to make investments and for general corporate purposes. In October 2022, we issued $ 150.0 million aggregate principal amount of 8.50 % senior unsecured notes due in 2027 in a private offering. We received net proceeds of $ 147.5 million from the issuance, after deducting the underwriting discount and other offering expenses. We used $ 47.5 million of the proceeds, which includes accrued interest and other fees, to repurchase a portion of our 5.625 % senior unsecured notes. In 2021, we issued $ 180.0 million aggregate principal amount of 5.00 % senior unsecured notes due in 2028 in a private offering. We received net proceeds of $ 177.2 million from the issuance, after deducting the underwriting discount and other offering expenses. In 2021, we issued $ 270.0 million aggregate principal amount of 4.50 % senior unsecured notes due in 2026 in a private offering. We received net proceeds of $ 265.8 million from the issuance, after deducting the underwriting discount and other offering expenses. In 2021, we issued $ 175.0 million aggregate principal amount of 5.00 % senior unsecured notes due in 2026 in a private offering. We received net proceeds of $ 172.3 million from the issuance, after deducting the underwriting discount and other offering expenses. In 2020, we issued $ 70.8 million aggregate principal amount of 8.00 % senior unsecured notes due in April 2023 in a private offering. We received total proceeds of $ 69.6 million from the issuance, after deducting the underwriting discount and other offering expenses. We used a portion of the proceeds from the issuance to repay secured indebtedness. In 2020, we issued $ 275.0 million aggregate principal amount of 4.50 % senior unsecured notes due in March 2027 in a private offering. 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 proceeds to repay secured indebtedness. In 2019, we issued $ 110.0 million aggregate principal amount of 4.75 % senior unsecured notes due in October 2024 in a private offering. We received proceeds of $ 108.2 million from the issuance, after deducting the underwriting discount and other offering expenses. In 2019, we issued $ 90.0 million aggregate principal amount of 5.75 % senior unsecured notes due in April 2024 in a private offering. We received proceeds of $ 88.2 million from the issuance, after deducting the underwriting discount and other offering expenses. In 2018, we issued $ 125.0 million aggregate principal amount of 5.625 % senior unsecured notes due in May 2023 in a private offering. We received total proceeds of $ 122.3 million from the issuance, after deducting the underwriting discount and other offering expenses. We used a significant portion of the proceeds to fully redeem our 7.375 % senior unsecured notes. In October 2022, we repaid $ 46.2 million of the outstanding principal balance as noted above. Convertible Senior Unsecured Notes In August 2022, we issued $ 287.5 million in aggregate principal amount of 7.50 % convertible senior notes (the “ 7.50 % Convertible Notes”) through a private placement offering. The 7.50 % Convertible Notes pay interest semiannually in arrears and are scheduled to mature in August 2025, unless earlier converted or repurchased by the holders pursuant to their terms. The initial conversion rate was 59.8480 shares of common stock per $ 1,000 of principal representing a conversion price of $ 16.71 per share of common stock. We received proceeds of $ 279.3 million, net of discounts and fees. We used $ 203.1 million of the net proceeds to repurchase a portion of our 4.75 % convertible senior notes (the “ 4.75 % Convertible Notes”), which included $ 5.2 million of accrued interest and repurchase premiums, and expensed $ 3.3 million of deferred financing fees into loss on extinguishment of debt on the consolidated statements of income. At December 31, 2022, the 7.50 % Convertible Notes had a conversion rate of 59.8892 shares of common stock per $ 1,000 of principal, which represented a conversion price of $ 16.70 per share of common stock. 88 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) In the fourth quarter of 2022, the remaining $ 66.1 million principal amount of our 4.75 % Convertible Notes matured and were fully settled with cash. 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. On January 1, 2022, we adopted ASU 2020-06, see Note 2 for details, which no longer allows for the allocation of proceeds between debt and equity components, eliminates the amortization of the debt discount and requires the if-converted method to calculate diluted EPS, regardless of the settlement intent. The UPB, unamortized discount and net carrying amount of the liability and equity components of our convertible notes are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liability ​ Equity ​ ​ Component ​ Component ​ ​ ​ ​ Unamortized Debt ​ Unamortized Deferred ​ Net Carrying ​ Net Carrying Period UPB Discount Financing Fees Value Value December 31, 2022 ​ $ 287,500 ​ $ — ​ $ 7,144 ​ $ 280,356 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ $ 264,000 ​ $ 2,520 ​ $ 2,095 ​ $ 259,385 ​ $ 8,684 ​ During 2022, we incurred interest expense on the notes totaling $ 19.8 million, of which $ 16.9 million and $ 2.9 million related to the cash coupon and deferred financing fees, respectively. During 2021, we incurred interest expense on the notes totaling $ 18.6 million, of which $ 12.8 million, $ 3.2 million and $ 2.6 million related to the cash coupon, amortization of the debt discount and of the deferred financing fees, 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. Including the amortization of the deferred financing fees and debt discount, our weighted average total cost of the notes was 8.42 % and 6.71 % at December 31, 2022 and 2021, respectively, or 5.73 % at December 31, 2021, excluding the amortization of the debt discount (which ceased on January 1, 2022 with the adoption of ASU 2020-06). Junior Subordinated Notes The carrying values of borrowings under our junior subordinated notes were $ 143.1 million and $ 142.4 million at December 31, 2022 and 2021, respectively, which is net of a deferred amount of $ 9.6 million and $ 10.2 million, respectively, (which is amortized into interest expense over the life of the notes) and deferred financing fees of $ 1.6 million and $ 1.7 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 7.65 % and 3.03 % at December 31, 2022 and 2021, respectively. Including certain fees and costs, the weighted average note rate was 7.74 % and 3.12 % at December 31, 2022 and 2021, respectively. Debt Covenants Credit and Repurchase Facilities and Unsecured Debt. The credit and repurchase facilities and unsecured debt (senior and convertible notes) contain various financial covenants, including, but not limited to, minimum liquidity requirements, minimum net worth requirements, minimum unencumbered asset requirements, as well as certain other debt service coverage ratios, debt to equity ratios and minimum servicing portfolio tests. We were in compliance with all financial covenants and restrictions at December 31, 2022. 89 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) CLOs. Our CLO vehicles contain interest coverage and asset overcollateralization covenants that must be met as of the waterfall distribution date in order for us to receive such payments. If we fail these covenants in any of our CLOs, all cash flows from the applicable CLO would be diverted to repay principal and interest on the outstanding CLO bonds and we would not receive any residual payments until that CLO regained compliance with such tests. Our CLOs were in compliance with all such covenants at December 31, 2022, as well as on the most recent determination dates in January 2023. In the event of a breach of the CLO covenants that could not be cured in the near-term, we would be required to fund our non-CLO expenses, including employee costs, distributions required to maintain our REIT status, debt costs, and other expenses with (1) cash on hand, (2) income from any CLO not in breach of a covenant test, (i3) income from real property and loan assets, (4) sale of assets, or (5) accessing the equity or debt capital markets, if available. We have the right to cure covenant breaches which would resume normal residual payments to us by purchasing non-performing loans out of the CLOs. However, we may not have sufficient liquidity available to do so at such time. Our CLO compliance tests as of the most recent determination dates in January 2023 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash Flow Triggers CLO 12 CLO 13 CLO 14 CLO 15 ​ CLO 16 ​ CLO 17 ​ CLO 18 CLO 19 Overcollateralization (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Current 126.58 % 128.52 % 119.76 % 120.85 % 121.21 % 122.51 % 124.03 % 120.30 % Limit 117.87 % 118.76 % 118.76 % 119.85 % 120.21 % 121.51 % 123.03 % 119.30 % Pass / Fail Pass ​ Pass ​ Pass ​ Pass ​ Pass ​ Pass ​ Pass Pass ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest Coverage (2) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Current 197.05 % 180.22 % 148.34 % 145.30 % 145.55 % 140.69 % 159.15 % 120.12 % Limit 120.00 % 120.00 % 120.00 % 120.00 % 120.00 % 120.00 % 120.00 % 120.00 % Pass / Fail Pass ​ Pass ​ Pass ​ Pass ​ Pass ​ Pass ​ Pass Pass ​ (1) The overcollateralization ratio divides the total principal balance of all collateral in the CLO by the total principal balance of the bonds associated with the applicable ratio. To the extent an asset is considered a defaulted security, the asset’s principal balance for purposes of the overcollateralization test is the lesser of the asset’s market value or the principal balance of the defaulted asset multiplied by the asset’s recovery rate which is determined by the rating agencies. Rating downgrades of CLO collateral will generally not have a direct impact on the principal balance of a CLO asset for purposes of calculating the CLO overcollateralization test unless the rating downgrade is below a significantly low threshold (e.g., CCC-) as defined in each CLO vehicle. (2) The interest coverage ratio divides interest income by interest expense for the classes senior to those retained by us. Our CLO overcollateralization ratios as of the determination dates subsequent to each quarter are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Determination (1) CLO 12 CLO 13 CLO 14 CLO 15 CLO 16 CLO 17 CLO 18 CLO 19 ​ January 2023 ​ 126.58 % 128.52 % 119.76 % 120.85 % 121.21 % 122.51 % 124.03 % 120.30 % October 2022 ​ 118.87 % 119.76 % 119.76 % 120.85 % 121.21 % 122.51 % 124.03 % 120.30 % July 2022 ​ 118.87 % 119.76 % 119.76 % 120.85 % 121.21 % 122.51 % 124.03 % 120.30 % April 2022 ​ 118.87 % 119.76 % 119.76 % 120.85 % 121.21 % 122.51 % 124.03 % — ​ January 2022 ​ 118.87 % 119.76 % 119.76 % 120.85 % 121.21 % 122.51 % — ​ — ​ (1) This table represents the quarterly trend of our overcollateralization ratio, however, the CLO determination dates are monthly and we were in compliance with this test for all periods presented. ​ The ratio will fluctuate based on the performance of the underlying assets, transfers of assets into the CLOs prior to the expiration of their respective replenishment dates, purchase or disposal of other investments, and loan payoffs. No payment due under the junior subordinated indentures may be paid if there is a default under any senior debt and the senior lender has sent notice to the trustee. The junior subordinated indentures are also cross-defaulted with each other. ​ 90 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Note 11 — Allowance for Loss-Sharing Obligations Our allowance for loss-sharing obligations related to the Fannie Mae DUS program is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2022 2021 ​ Beginning balance ​ $ 56,064 ​ $ 64,303 ​ Provisions for loss sharing ​ ​ 3,592 ​ ​ 44 ​ Provisions reversal for loan repayments ​ ​ ( 1,730 ) ​ ​ ( 6,211 ) ​ Recoveries (charge-offs), net ​ ( 758 ) ​ ​ ( 2,072 ) ​ Ending balance ​ $ 57,168 ​ $ 56,064 ​ ​ 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 both December 31, 2022 and 2021, we had $ 34.4 million of guarantee obligations included in the allowance for loss-sharing obligations. In addition to and separately from the fair value of the guarantee, we estimate our allowance for loss-sharing under CECL over the contractual period in which we are exposed to credit risk. The current expected loss related to loss-sharing was based on a collective pooling basis with similar risk characteristics, a reasonable and supportable forecast and a reversion period based on our average historical losses through the remaining contractual term of the portfolio. When we settle a loss under the DUS loss-sharing model, the net loss is charged-off against the previously recorded loss-sharing obligation. The settled loss is often net of any previously advanced principal and interest payments in accordance with the DUS program, which are reflected as reductions to the proceeds needed to settle losses. At December 31, 2022 and 2021, we had outstanding advances of $ 0.8 million and less than $ 0.1 million, respectively, which were netted against the allowance for loss-sharing obligations. At December 31, 2022 and 2021, our allowance for loss-sharing obligations, associated with expected losses under CECL, was $ 22.7 million and $ 21.7 million, respectively, and represented 0.12 % and 0.11 %, respectively, of our Fannie Mae servicing portfolio. During 2022, we recorded a $ 1.1 million increase in CECL reserves, which included a $ 1.2 million recovery for a loan that paid off during the second quarter of 2022. At December 31, 2022 and 2021, the maximum quantifiable liability associated with our guarantees under the Fannie Mae DUS agreement was $ 3.49 billion and $ 3.60 billion, respectively. The maximum quantifiable liability is not representative of the actual loss we would incur. We would be liable for this amount only if all of the loans we service for Fannie Mae, for which we retain some risk of loss, were to default and all of the collateral underlying these loans was determined to be without value at the time of settlement. ​ Note 12 — Derivative Financial Instruments We enter into derivative financial instruments to manage exposures that arise from business activities resulting in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates and credit risk. We do not use these derivatives for speculative purposes, but are instead using them to manage our interest rate and credit risk exposure. 91 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Agency Rate Lock and Forward Sale Commitments. We enter into contractual commitments to originate and sell mortgage loans at fixed prices with fixed expiration dates. The commitments become effective when the borrower “rate locks” a specified interest rate within time frames established by us. All potential borrowers are evaluated for creditworthiness prior to the extension of the commitment. Market risk arises if interest rates move adversely between the time of the rate lock by the borrower and the sale date of the loan to an investor. To mitigate the effect of the interest rate risk inherent in providing rate lock commitments to borrowers under the GSE programs, we enter into a forward sale commitment with the investor simultaneously with the rate lock commitment with the borrower. The forward sale contract locks in an interest rate and price for the sale of the loan. The terms of the contract with the investor and the rate lock with the borrower are matched in substantially all respects, with the objective of eliminating interest rate risk to the extent practical. Sale commitments with the investors have an expiration date that is longer than our related commitments to the borrower to allow, among other things, for closing of the loan and processing of paperwork to deliver the loan into the sale commitment. These commitments meet the definition of a derivative and are recorded at fair value, including the effects of interest rate movements which are reflected as a component of gain (loss) on derivative instruments, net in the consolidated statements of income. The estimated fair value of rate lock commitments also includes the fair value of the expected net cash flows associated with the servicing of the loan which is recorded as income from MSRs in the consolidated statements of income. During 2022, 2021 and 2020, we recorded net losses of $3.6 million, net losses of $ 0.8 million and net gains of $ 3.4 million, respectively, from changes in the fair value of these derivatives and $ 69.3 million, $ 130.2 million and $ 165.5 million, respectively, of income from MSRs. See Note 13 for details. Interest Rate and Credit Default Swaps (“Swaps”). We enter into over-the-counter swaps to hedge our interest rate and credit risk exposure inherent in (1) our held-for-sale Agency Business Private Label loans from the time the loans are rate locked until sale or securitization, and (2) our Agency Business SFR – fixed rate loans from the time the loans are originated until the time they can be financed with match term fixed rate securitized debt. Our interest rate swaps typically have a three-month maturity and are tied to the five-year and ten-year swap rates. Our credit default swaps typically have a five-year maturity, are tied to the credit spreads of the underlying bond issuers and we typically hold our position until we price our Private Label loan securitizations. The Swaps do not meet the criteria for hedge accounting, are cleared by a central clearing house and variation margin payments, made in cash, are treated as a legal settlement of the derivative itself as opposed to a pledge of collateral. During 2022, we recorded realized and unrealized gains of $ 26.9 million and $ 3.5 million, respectively, to our Agency Business related to our Swaps. During 2021, we recorded realized and unrealized losses of less than $ 0.1 million and $ 1.5 million, respectively, to our Agency Business related to our Swaps. 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 Swaps. The realized and unrealized gains and losses are recorded in gain (loss) on derivative instruments, net. A summary of our non-qualifying derivative financial instruments in our Agency Business is as follows ($ in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value ​ ​ ​ ​ Notional ​ Balance Sheet ​ Derivative ​ Derivative Derivative Count Value Location Assets Liabilities Rate lock commitments 6 ​ $ 91,472 Other assets/other liabilities ​ $ 354 ​ $ ( 1,070 ) Forward sale commitments 27 ​ 294,451 Other assets/other liabilities ​ 1,151 ​ ( 3,827 ) Swaps 1,298 ​ 129,800 ​ ​ — ​ — ​ ​ ​ ​ $ 515,723 ​ ​ ​ $ 1,505 ​ $ ( 4,897 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 Rate lock commitments 2 $ 11,250 Other assets/other liabilities $ 295 $ ( 33 ) Forward sale commitments ​ 55 ​ ​ 571,220 ​ Other assets/other liabilities ​ ​ 1,370 ​ ​ ( 1,449 ) Swaps ​ 3,882 ​ ​ 388,200 ​ ​ ​ ​ — ​ ​ — ​ ​ ​ ​ $ 970,670 ​ ​ ​ $ 1,665 ​ $ ( 1,482 ) ​ ​ ​ 92 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Note 13 — Fair Value Fair value estimates are dependent upon subjective assumptions and involve significant uncertainties resulting in variability in estimates with changes in assumptions. The following table summarizes the principal amounts, carrying values and the estimated fair values of our financial instruments (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ December 31, 2021 ​ ​ Principal / ​ Carrying ​ Estimated ​ Principal / ​ Carrying ​ Estimated ​ Notional Amount Value Fair Value Notional Amount Value Fair Value Financial assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans and investments, net ​ $ 14,456,123 ​ $ 14,254,674 ​ $ 14,468,418 ​ $ 12,158,995 ​ $ 11,981,048 ​ $ 12,181,194 Loans held-for-sale, net ​ ​ 368,066 ​ ​ 354,070 ​ ​ 362,054 ​ ​ 1,077,239 ​ ​ 1,093,609 ​ ​ 1,117,085 Capitalized mortgage servicing rights, net ​ ​ n/a ​ ​ 401,471 ​ ​ 530,913 ​ ​ n/a ​ ​ 422,734 ​ ​ 477,323 Securities held-to-maturity, net ​ ​ 234,255 ​ ​ 156,547 ​ ​ 144,571 ​ ​ 210,728 ​ ​ 140,484 ​ ​ 149,911 Derivative financial instruments ​ ​ 111,950 ​ 1,505 ​ 1,505 ​ ​ 280,654 ​ 1,665 ​ 1,665 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Financial liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Credit and repurchase facilities ​ $ 3,856,009 ​ $ 3,841,814 ​ $ 3,828,192 ​ $ 4,493,699 ​ $ 4,481,579 ​ $ 4,484,107 Securitized debt ​ ​ 7,886,066 ​ 7,849,270 ​ 7,560,541 ​ ​ 5,924,705 ​ 5,892,810 ​ 5,914,453 Senior unsecured notes ​ ​ 1,399,600 ​ 1,385,994 ​ 1,262,560 ​ ​ 1,295,750 ​ 1,280,545 ​ 1,301,708 Convertible senior unsecured notes, net ​ ​ 287,500 ​ ​ 280,356 ​ ​ 287,834 ​ ​ 264,000 ​ ​ 259,385 ​ ​ 294,690 Junior subordinated notes ​ ​ 154,336 ​ 143,128 ​ 103,977 ​ ​ 154,336 ​ 142,382 ​ 101,698 Derivative financial instruments ​ ​ 273,973 ​ 4,897 ​ 4,897 ​ ​ 301,816 ​ 1,482 ​ 1,482 ​ 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. 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). 93 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Loans held-for-sale, net. Consists of originated loans that are generally expected to be transferred or sold within 60 days to 180 days of loan funding, and are valued using pricing models that incorporate observable inputs from current market assumptions or a hypothetical securitization model utilizing observable market data from recent securitization spreads and observable pricing of loans with similar characteristics (Level 2). Fair value includes the fair value allocated to the associated future MSRs and is calculated pursuant to the valuation techniques described below for capitalized mortgage servicing rights, net (Level 3). Capitalized mortgage servicing rights, net. Fair values are estimated using inputs based on discounted future net cash flow methodology (Level 3). The fair value of MSRs is estimated using a process that involves the use of independent third-party valuation experts, supported by commercially available discounted cash flow models and analysis of current market data. The key inputs used in estimating fair value include the contractually specified servicing fees, prepayment speed of the underlying loans, discount rate, annual per loan cost to service loans, delinquency rates, late charges and other economic factors. Securities held-to-maturity, net. Fair values are approximated using inputs based on current market quotes received from financial sources that trade such securities and are based on prevailing market data and, in some cases, are derived from third-party proprietary models based on well recognized financial principles and reasonable estimates about relevant future market conditions (Level 3). Derivative financial instruments. Fair values of rate lock and forward sale commitments are estimated using valuation techniques, which include internally-developed models developed based on changes in the U.S. Treasury rate and other observable market data (Level 2). The fair value of rate lock commitments includes the fair value of the expected net cash flows associated with the servicing of the loans, see capitalized mortgage servicing rights, net above for details on the applicable valuation technique (Level 3). We also consider the impact of counterparty non-performance risk when measuring the fair value of these derivatives. Given the credit quality of our counterparties, the short duration of interest rate lock commitments and forward sale contracts, and our historical experience, the risk of nonperformance by our counterparties is not significant. Credit and repurchase facilities. Fair values for credit and repurchase facilities of the Structured Business are estimated using discounted cash flow methodology, using discount rates, which, in our opinion, best reflect current market interest rates for financing with similar characteristics and credit quality (Level 3). The majority of our credit and repurchase facilities for the Agency Business bear interest at rates that are similar to those available in the market currently and fair values are estimated using Level 2 inputs. For these facilities, the fair values approximate their carrying values. Securitized debt and junior subordinated notes. Fair values are estimated based on broker quotations, representing the discounted expected future cash flows at a yield that reflects current market interest rates and credit spreads (Level 3). Senior unsecured notes. Fair values are estimated at current market quotes received from active markets when available (Level 1). If quotes from active markets are unavailable, then the fair values are estimated utilizing current market quotes received from inactive markets (Level 2). Convertible senior unsecured notes, net. Fair values are estimated using 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 at December 31, 2022 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements Using Fair ​ ​ Carrying ​ ​ ​ ​ Value Hierarchy ​ Value Fair Value Level 1 Level 2 Level 3 Financial assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Derivative financial instruments ​ $ 1,505 ​ $ 1,505 ​ $ — ​ $ 1,151 ​ $ 354 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Financial liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Derivative financial instruments ​ $ 4,897 ​ $ 4,897 ​ $ — ​ $ 4,897 ​ $ — ​ 94 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 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 at December 31, 2022 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements Using Fair ​ ​ Net Carrying ​ ​ ​ Value Hierarchy ​ Value Fair Value Level 1 Level 2 Level 3 Financial assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Impaired loans, net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans held-for-investment (1) ​ $ 61,745 ​ $ 61,745 ​ $ — ​ $ — ​ $ 61,745 Loans held-for-sale (2) ​ ​ 134,342 ​ ​ 134,342 ​ ​ — ​ ​ 134,342 ​ ​ — ​ ​ $ 196,087 ​ $ 196,087 ​ $ — ​ $ 134,342 ​ $ 61,745 (1) We had an allowance for credit losses of $ 85.4 million relating to seven impaired loans with an aggregate carrying value, before loan loss reserves, of $ 147.1 million at December 31, 2022. (2) We recorded an impairment loss of $ 15.7 million related to 13 loans held-for-sale with an aggregate carrying value, before unrealized impairment losses, of $ 150.0 million. Loan impairment assessments. Loans held for investment are intended to be held to maturity and, accordingly, are carried at cost, net of unamortized loan origination costs and fees, loan purchase discounts, and net of the allowance for credit losses, when such loan or investment is deemed to be impaired. We consider a loan impaired when, based upon current information, it is probable that all amounts due for both principal and interest will not be collected according to the contractual terms of the loan agreement. We evaluate our loans to determine if the value of the underlying collateral securing the impaired loan is less than the net carrying value of the loan, which may result in an allowance, and corresponding charge to the provision for credit losses, or an impairment loss. These valuations require significant judgments, which include assumptions regarding capitalization and discount rates, revenue growth rates, creditworthiness of major tenants, occupancy rates, availability of financing, exit plan and other factors. Loans held-for-sale are generally transferred and sold within 60 - 180 days of loan origination and are reported at lower of cost or market. We consider a loan classified as held-for-sale impaired if, based on current information, it is probable that we will sell the loan below par, or not be able to collect all principal and interest in accordance with the contractual terms of the loan agreement. These loans are valued using pricing models that incorporate observable inputs from current market assumptions or a hypothetical securitization model utilizing observable market data from recent securitization spreads and observable pricing of loans with similar characteristics. The tables above and below include all impaired loans, regardless of the period in which the impairment was recognized. Quantitative information about Level 3 fair value measurements at December 31, 2022 is as follows ($ in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Valuation Techniques Significant Unobservable Inputs Financial assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Impaired loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Land ​ $ 50,000 Discounted cash flows Discount rate ​ 21.50 % ​ ​ ​ ​ ​ ​ Revenue growth rate ​ 3.00 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Discount rate ​ 11.25 % Retail ​ ​ 11,745 ​ Discounted cash flows ​ Capitalization rate ​ 9.25 % ​ ​ ​ ​ ​ ​ ​ Revenue growth rate ​ 3.00 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Derivative financial instruments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Rate lock commitments ​ ​ 354 ​ Discounted cash flows ​ W/A discount rate ​ 13.30 % ​ 95 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The derivative financial instruments using Level 3 inputs are outstanding for short periods of time (generally less than 60 days). A roll-forward of Level 3 derivative instruments is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements Using ​ ​ Significant Unobservable Inputs ​ ​ for the Year Ended December 31, ​ ​ 2022 2021 2020 Derivative assets and liabilities, net ​ ​ ​ ​ Beginning balance ​ $ 295 ​ $ 1,967 ​ $ 1,066 Settlements ​ ( 64,896 ) ​ ( 112,836 ) ​ ( 164,654 ) Realized gains recorded in earnings ​ 64,601 ​ 110,869 ​ 163,588 Unrealized gains recorded in earnings ​ 354 ​ 295 ​ 1,967 Ending balance ​ $ 354 ​ $ 295 ​ $ 1,967 ​ 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized ​ ​ ​ ​ ​ Notional/ ​ Fair Value of ​ Interest Rate ​ Impairement ​ Total Fair Value December 31, 2022 Principal Amount Servicing Rights Movement Effect Loss Adjustment Rate lock commitments ​ $ 91,472 ​ $ 354 ​ $ ( 1,070 ) ​ $ — ​ $ ( 716 ) Forward sale commitments ​ ​ 294,451 ​ ​ — ​ ​ 1,070 ​ ​ — ​ ​ 1,070 Loans held-for-sale, net (1) ​ ​ 368,066 ​ ​ 5,558 ​ ​ — ​ ​ ( 15,703 ) ​ ​ ( 10,145 ) Total ​ ​ ​ ​ $ 5,912 ​ $ — ​ $ ( 15,703 ) ​ $ ( 9,791 ) (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 at December 31, 2022 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements Using Fair Value Hierarchy ​ Carrying Value Fair Value Level 1 Level 2 Level 3 Financial assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans and investments, net ​ $ 14,254,674 ​ $ 14,468,418 ​ $ — ​ $ — ​ $ 14,468,418 Loans held-for-sale, net ​ ​ 354,070 ​ ​ 362,054 ​ ​ — ​ ​ 356,496 ​ ​ 5,558 Capitalized mortgage servicing rights, net ​ ​ 401,471 ​ ​ 530,913 ​ ​ — ​ ​ — ​ ​ 530,913 Securities held-to-maturity, net ​ ​ 156,547 ​ ​ 144,571 ​ ​ — ​ ​ — ​ ​ 144,571 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Financial liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Credit and repurchase facilities ​ $ 3,841,814 ​ $ 3,828,192 ​ $ — ​ $ 305,443 ​ $ 3,522,749 Securitized debt ​ 7,849,270 ​ 7,560,541 ​ — ​ — ​ 7,560,541 Senior unsecured notes ​ 1,385,994 ​ 1,262,560 ​ 1,262,560 ​ — ​ — Convertible senior unsecured notes, net ​ ​ 280,356 ​ ​ 287,834 ​ ​ — ​ ​ 287,834 ​ ​ — Junior subordinated notes ​ 143,128 ​ 103,977 ​ — ​ — ​ 103,977 ​ ​ Note 14 — Commitments and Contingencies 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 deteriorate, it may have long-term impacts on our financial position, results of operations and cash flows. See Item 1A. Risk Factors and Note 2 for further discussion of COVID-19. 96 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Agency Business Commitments. Our Agency Business is subject to supervision by certain regulatory agencies. Among other things, these agencies require us to meet certain minimum net worth, operational liquidity and restricted liquidity collateral requirements, and compliance with reporting requirements. Our adjusted net worth and liquidity required by the agencies for all periods presented exceeded these requirements. At December 31, 2022, we were required to maintain at least $ 18.5 million of liquid assets in one of our subsidiaries to meet our operational liquidity requirements for Fannie Mae and we had operational liquidity in excess of this requirement. We are generally required to share the risk of any losses associated with loans sold under the Fannie Mae DUS program and are required to secure this obligation by assigning restricted cash balances and/or a letter of credit to Fannie Mae. The amount of collateral required by Fannie Mae is a formulaic calculation at the loan level by a Fannie Mae assigned tier, which considers the loan balance, risk level of the loan, age of the loan and level of risk-sharing. Fannie Mae requires restricted liquidity for Tier 2 loans of 75 basis points, 15 basis points for Tier 3 loans and 5 basis points for Tier 4 loans, which is funded over a 48 -month period that begins upon delivery of the loan to Fannie Mae. A significant portion of our Fannie Mae DUS serviced loans for which we have risk sharing are Tier 2 loans. At December 31, 2022, the restricted liquidity requirement totaled $ 64.4 million and was satisfied with a $ 64.0 million letter of credit and cash issued to Fannie Mae. At December 31, 2022, reserve requirements for the Fannie Mae DUS loan portfolio will require us to fund $ 37.0 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. We are subject to various capital requirements in connection with seller/servicer agreements that we have entered into with secondary market investors. Failure to maintain minimum capital requirements could result in our inability to originate and service loans for the respective investor and, therefore, could have a direct material effect on our consolidated financial statements. At December 31, 2022, 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 at December 31, 2022. 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. 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 12 and Note 13. Debt Obligations and Operating Leases. At December 31, 2022, the maturities of our debt obligations and the minimum annual operating lease payments under leases with a term in excess of one year are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Minimum Annual ​ ​ ​ ​ ​ Debt ​ Operating Lease ​ ​ ​ Year Obligations Payments Total 2023 ​ $ 2,660,381 ​ $ 8,946 ​ $ 2,669,327 2024 ​ 3,233,658 ​ 8,881 ​ 3,242,539 2025 ​ 2,035,226 ​ 9,008 ​ 2,044,234 2026 ​ 4,610,371 ​ 9,043 ​ 4,619,414 2027 ​ 696,707 ​ 7,598 ​ 704,305 Thereafter ​ 347,168 ​ 27,706 ​ 374,874 Total ​ $ 13,583,511 ​ $ 71,182 ​ $ 13,654,693 ​ 97 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) At December 31, 2022 and 2021, our leases had remaining lease terms of 0.2 – 10.4 years and 0.1 – 9.0 years, respectively, with a weighted average remaining lease term of 8.2 years for both periods and a weighted average discount rate of 6.8 % and 4.0 % , respectively. We recorded lease expense of $ 9.6 million, $ 9.3 million and $ 6.2 million during 2022, 2021 and 2020, respectively. ​ Unfunded Commitments. In accordance with certain structured loans and investments, we have outstanding unfunded commitments of $ 1.15 billion at December 31, 2022 that we are obligated to fund as borrowers meet certain requirements. Specific requirements include, but are not limited to, property renovations, building construction and conversions based on criteria met by the borrower in accordance with the loan agreements. Litigation. We are currently neither subject to any material litigation nor, 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. 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 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 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, 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. 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, (1) consolidate the lawsuits into one lawsuit, (2) 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 (3) 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. 98 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) After supplemental briefing and multiple adjourned conferences, in August 2020, the Court issued a decision granting our motion to dismiss in part, dismissing 9 of the 17 counts. The Court permitted claims against director designees to proceed on theories of authorization of illegal dividends and breach of fiduciary duty. The Court permitted claims against the defendant entities, including our affiliated entities, to proceed on theories of constructive fraudulent transfer and fraudulent transfer under state and federal law. Moreover, the Court affirmatively dismissed four counts against the defendant entities to the extent they are based on distributions from certain so-called LIBOR Floor Certificates. According to the amended complaint, the total LIBOR Floor Certificate transfers were $ 74.0 million in value. As a result, with what remains of the amended complaint, total possible liability against the affiliated entities has correspondingly fallen, whereas total possible liability against the director designees remains at approximately $ 139.0 million. Since the Court’s decision in August 2020, the parties have engaged in extensive discovery. In early December 2022, the plaintiff and certain co-defendants, including our affiliates, commenced discussions regarding a possible settlement of the litigation and in late December 2022, those parties reached an agreement in principal to settle the litigation. As part of the agreement, we agreed to pay $ 7.4 million to the plaintiff, and we have accrued that amount in our December 31, 2022 financial statements. As of the date of this report, the parties are negotiating the settlement documents and the settlement will be subject to the approval of the United States Bankruptcy Court of the Southern District of New York. As part of the settlement, we expect to secure certain rights against those co-defendants who have not agreed to participate in the settlement, however, we can give no assurances that will we be successful in our efforts to recover any part of the amount we have accrued. Due to Borrowers. Due to borrowers represents borrowers’ funds held by us to fund certain expenditures or to be released at our discretion upon the occurrence of certain pre-specified events, and to serve as additional collateral for borrowers’ loans. While retained, these balances earn interest in accordance with the specific loan terms they are associated with. ​ Note 15 — Variable Interest Entities Our involvement with VIEs primarily affects our financial performance and cash flows through amounts recorded in interest income, interest expense, provision for loan losses and through activity associated with our derivative instruments. Consolidated VIEs. We have determined that our operating partnership, ARLP, and our CLO and Q Series securitization entities(“Securitization Entities”) are VIEs, which we consolidate. ARLP was already consolidated in our financial statements, therefore, the identification of this entity as a VIE had no impact on our consolidated financial statements. Our Securitization Entities invest in real estate and real estate-related securities and are financed by the issuance of debt securities. We believe we hold the power necessary to direct the most significant economic activities of those entities. We also have exposure to losses to the extent of our equity interests, and rights to waterfall payments in excess of required payments to bond investors. As a result of consolidation, equity interests have been eliminated, and the consolidated balance sheets reflect both the assets held and debt issued to third parties by the Securitization Entities, prior to the unwind. Our operating results and cash flows include the gross asset and liability amounts related to the Securitization Entities as opposed to our net economic interests in those entities. 99 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The assets and liabilities related to these consolidated Securitization Entities are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 December 31, 2021 ​ Assets: ​ ​ ​ ​ ​ ​ ​ Restricted cash ​ $ 710,775 ​ $ 466,523 ​ Loans and investments, net ​ ​ 8,900,104 ​ ​ 6,616,809 ​ Other assets ​ ​ 174,382 ​ ​ 61,474 ​ Total assets ​ $ 9,785,261 ​ $ 7,144,806 ​ ​ ​ ​ ​ ​ ​ Liabilities: ​ ​ ​ ​ ​ ​ ​ Securitized debt ​ $ 7,849,270 ​ $ 5,892,810 ​ Other liabilities ​ 26,754 ​ 9,813 ​ Total liabilities ​ $ 7,876,024 ​ $ 5,902,623 ​ ​ Assets held by the Securitization Entities are restricted and can only be used to settle obligations of those entities. The liabilities of the Securitization Entities are non-recourse to us and can only be satisfied from each respective asset pool. See Note 10 for details. We are not obligated to provide, have not provided, and do not intend to provide financial support to any of the Securitization Entities. Unconsolidated VIEs . We determined that we are not the primary beneficiary of 29 VIEs in which we have a variable interest at December 31, 2022 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, at December 31, 2022 is as follows (in thousands): ​ ​ ​ ​ ​ Type Carrying Amount (1) Loans ​ $ 446,932 APL certificates ​ ​ 126,258 B Piece bonds ​ ​ 33,442 Equity investments ​ ​ 20,194 Agency interest only strips ​ ​ 237 Total ​ $ 627,063 (1) Represents the carrying amount of loans and investments before reserves. At December 31, 2022, $ 127.9 million of loans to VIEs had corresponding specific loan loss reserves of $ 77.9 million. The maximum loss exposure at December 31, 2022 would not exceed the carrying amount of our investment. These unconsolidated VIEs have exposure to real estate debt of approximately $ 4.01 billion at December 31, 2022. ​ Note 16 — Equity Preferred Stock. In the first quarter of 2022, we completed a public offering of an additional 3,292,000 shares of 6.25 % Series F fixed-to-floating rate cumulative redeemable preferred stock, generating net proceeds of $ 77.1 million after deducting the underwriting discount and other offering expenses. The additional shares issued have the same terms as the original issuance. During 2021, we completed the public offerings of 8,050,000 shares of 6.25 % Series F fixed-to-floating rate cumulative redeemable preferred stock, 5,750,000 shares of 6.25 % Series E cumulative redeemable preferred stock, and 9,200,000 shares of 6.375 % Series D cumulative redeemable preferred stock. The Series F, Series E and Series D preferred stock are not redeemable by us prior to October 12, 2026, August 11, 2026 and June 2, 2026, respectively. 100 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Common Stock. In November 2022, we amended the equity distribution agreement with JMP Securities LLC (&quot;JMP&quot;). In accordance with the terms of the amendment, we may offer and sell up to 25,000,000 shares of our common stock in &quot;At-The-Market&quot; 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 2022, we sold 18,860,788 shares of our common stock for net proceeds of $ 285.0 million. At December 31, 2022, we had 18,290,000 shares available under the amended agreement. In the first quarter of 2022, we completed a public offering of 7,475,000 shares of our common stock (including the full exercise of the overallotment) for $ 16.57 per share and received net proceeds of $ 123.7 million after deducting the underwriter’s discount and other offering expenses. The proceeds from this offering were used to make investments related to our business and for general corporate purposes. We maintain 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. We did not repurchase shares of our common stock under this program during 2022. At December 31, 2022, there was $ 96.1 million available for repurchase under this program. 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. At December 31, 2022, there were 16,293,589 OP Units outstanding, which represented 8.4 % of the voting power of our outstanding stock. Distributions. Dividends declared (on a per share basis) for the year ended December 31, 2022 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock ​ Preferred Stock ​ ​ ​ ​ ​ ​ ​ Dividend Declaration Date Dividend Declaration Date Series D Series E Series F February 16, 2022 ​ $ 0.37 ​ January 3, 2022 ​ $ 0.3984375 ​ $ 0.390625 ​ $ 0.46875 May 4, 2022 ​ $ 0.38 ​ April 1, 2022 ​ $ 0.3984375 ​ $ 0.390625 ​ $ 0.390625 July 27, 2022 ​ $ 0.39 ​ July 1, 2022 ​ $ 0.3984375 ​ $ 0.390625 ​ $ 0.390625 November 2, 2022 ​ $ 0.40 ​ September 30, 2022 ​ $ 0.3984375 ​ $ 0.390625 ​ $ 0.390625 ​ Common Stock – On February 15, 2023, the Board of Directors declared a cash dividend of $ 0.40 per share of common stock. The dividend is payable on March 17, 2023 to common stockholders of record as of the close of business on March 3, 2023. Preferred Stock – On January 3, 2023, the Board of Directors declared cash dividends of $ 0.3984375 per share of Series D preferred stock and $ 0.390625 per share of both Series E and Series F preferred stock. These amounts reflect dividends from October 30, 2022 through January 29, 2023 and are payable on January 31, 2023 to preferred stockholders of record on January 15, 2023. We have determined that 100 % of the common stock and preferred stock dividends paid during 2022, 2021 and 2020 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 2022. As a result, no portion of the 2022 dividends should be treated as excess inclusion income for federal income tax purposes. 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. 101 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) During 2022, we issued 652,596 shares of restricted common stock to our employees and members of our Board of Directors under the 2020 Amended Omnibus Stock Incentive Plan (the “2020 Plan”) with a total grant date fair value of $ 11.1 million, of which: (1) 232,899 shares with a grant date fair value of $ 4.0 million were fully vested on the grant date; (2) 217,840 shares with a grant date fair value of $ 3.7 million will vest in 2023; (3) 181,968 shares with a grant date fair value of $ 3.1 million will vest in 2024; (4) 9,951 shares with a grant date fair value of $ 0.2 million will vest in 2025; and (5) 9,938 shares with a grant date fair value of $ 0.2 million will vest in 2026. We issued 25,012 fully vested restricted stock units (“RSUs”) with a grant date fair value of $ 0.4 million to certain members of our Board of Directors and 189,873 RSUs with a grant date fair value of $ 3.3 million that vest in full in the first quarter of 2025 to our chief executive officer. The individuals decided to defer the receipt of the common stock, to which the RSUs are converted into, to a future date. The deferred awards have no voting rights and are eligible to receive dividend equivalents equal to the dividends on our common stock as, and when, declared by our Board of Directors. In 2021, we issued 384,758 shares of restricted common stock to our employees and members of our Board of Directors under the 2020 Plan with a total grant date fair value of $ 6.4 million, of which: (1) 144,951 shares with a grant date fair value of $ 2.4 million vested on the grant date; (2) 101,475 shares with a grant date fair value of $ 1.7 million vested in 2022; (3) 88,788 shares with a grant date fair value of $ 1.5 million will vest in 2023; (4) 25,479 shares with a grant date fair value of $ 0.4 million will vest in 2024; and (5) 24,065 shares with a grant date fair value of $ 0.4 million will vest in 2025. In April 2021, we granted our chief executive officer 184,729 shares of restricted common stock with a grant date fair value of $ 3.1 million that vest in full in April 2024. In July 2021, we granted our chief executive officer 165,746 shares of performance based restricted stock with a grant date fair value of $ 3.0 million, which vest in full in July 2024. In 2020, we granted 314,957 shares of restricted common stock with a total grant date fair value of $ 3.4 million to our employees. One third of the shares vested as of the grant date and one third vested on each of the first and second anniversaries of the grant date. In 2020, we granted 52,735 shares of fully vested common stock with a grant date fair value of $ 0.5 million to members of our Board of Directors. In 2020, we granted our chief executive officer 45,928 shares of restricted common stock with a grant date fair value of $ 0.5 million and 275,569 of performance-based restricted stock units with a grant date fair value of $ 0.1 million. One quarter of the restricted common stock vest on the grant date and one quarter 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. In 2020, we also granted our chief executive officer 313,152 shares of performance-based restricted stock with a grant date fair value of $ 2.9 million as a result of achieving goals related to the integration of the Acquisition. The performance-based restricted stock vest in full three years after the grant date. In 2022, 2021 and 2020, previously granted performance-based restricted stock units of 381,503 units, 448,980 units and 421,348 units, respectively, fully vested based on achieving the performance objectives for the four-year periods ended December 31, 2021, 2020 and 2019, respectively. The 381,503 units, 448,980 units and 421,348 units vested in full and were net settled for 186,772 shares, 229,083 shares and 215,014 shares, respectively, of common stock in 2022, 2021 and 2020. respectively. In addition, 246,508 shares, 294,985 shares and 357,569 shares of performance-based restricted stock granted in 2019, 2018 and 2017, respectively, vested in 2022, 2021 and 2020, respectively, which were net settled for 120,665 shares, 150,530 shares and 182,467 shares, respectively, of common stock. During 2022, 2021 and 2020, we recorded total stock-based compensation expense of $ 14.2 million, $ 9.3 million and $ 8.6 million, respectively, to employee compensation and benefits and $ 0.8 million, $ 0.6 million and $ 0.5 million, respectively, to selling and administrative expense. During 2022, a total of 1,070,248 shares of restricted stock and restricted stock units vested with a grant date fair value of $ 12.0 million. At December 31, 2022 and 2021, there were 1,389,427 shares and 1,257,199 shares, respectively, of unvested restricted common stock with a grant date fair value of $ 21.3 million and $ 17.1 million, respectively. At December 31, 2022, total unrecognized compensation cost related to unvested restricted common stock was $ 9.0 million, which is expected to be recognized ratably over the remaining weighted-average vesting period of 1.9 years. 102 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Earnings Per Share. Basic EPS is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding during each period inclusive of unvested restricted stock with full dividend participation rights. Diluted EPS is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding, plus the additional dilutive effect of common stock equivalents during each period. Our common stock equivalents include the weighted average dilutive effect of restricted stock units granted to our chief executive officer, OP Units and convertible senior unsecured notes. 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, ​ ​ 2022 ​ 2021 ​ 2020 ​ Basic Diluted Basic Diluted Basic Diluted Net income attributable to common stockholders (1) ​ $ 284,829 ​ $ 284,829 ​ $ 317,412 ​ $ 317,412 ​ $ 163,395 ​ $ 163,395 Net income attributable to noncontrolling interest (2) ​ ​ — ​ ​ 28,044 ​ ​ — ​ ​ 38,507 ​ ​ — ​ ​ 25,208 Interest expense on convertible notes (3) ​ ​ — ​ ​ 20,166 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Net income attributable to common stockholders and noncontrolling interest ​ $ 284,829 ​ $ 333,039 ​ $ 317,412 ​ $ 355,919 ​ $ 163,395 ​ $ 188,603 Weighted average shares outstanding ​ ​ 165,355,167 ​ 165,355,167 ​ 137,830,691 ​ 137,830,691 ​ ​ 113,811,471 ​ ​ 113,811,471 Dilutive effect of OP Units (2) ​ — ​ ​ 16,304,638 ​ ​ — ​ ​ 16,818,722 ​ — ​ 19,395,691 Dilutive effect of convertible notes (3) ​ ​ — ​ 16,900,204 ​ — ​ 506,949 ​ ​ — ​ ​ 43,487 Dilutive effect of restricted stock units (4) ​ ​ — ​ ​ 552,621 ​ ​ — ​ ​ 933,233 ​ ​ — ​ ​ 718,647 Weighted average shares outstanding ​ 165,355,167 ​ 199,112,630 ​ 137,830,691 ​ 156,089,595 ​ ​ 113,811,471 ​ ​ 133,969,296 Net income per common share (1) ​ $ 1.72 ​ $ 1.67 ​ $ 2.30 ​ $ 2.28 ​ $ 1.44 ​ $ 1.41 (1) Net of preferred stock dividends. (2) We consider OP Units to be common stock equivalents as the holders have voting rights, the right to distributions and the right to redeem the OP Units for the cash value of a corresponding number of shares of common stock or a corresponding number of shares of common stock, at our election. (3) Beginning January 1, 2022, the effective date we adopted ASU 2020-06, we started utilizing the if-converted method of calculating EPS to reflect the impact of our convertible senior notes. For 2021 and 2020, the convertible senior notes impacted diluted EPS if the average price of our common stock exceeded the conversion price, as calculated in accordance with the terms of the indenture. See Note 2 for details. (4) Our chief executive officer was granted restricted stock units, which vest at the end of a four-year performance period based upon our achievement of total stockholder return objectives. ​ 103 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Note 17 — 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 its REIT-taxable income that is distributed to its stockholders, provided that at least 90 % of its REIT–taxable income is distributed and provided that certain other requirements are met. 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 2022, 2021 and 2020, and therefore, have not provided for REIT federal income tax expense in either year. We have elected to retain excess inclusion income rather than passing it through to our stockholders. In 2022, 2021 and 2020, the REIT incurred no state income tax expense. 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 had no federal net operating losses remaining from prior years. For 2022, 2021 and 2020, we recorded a provision for income taxes related to the assets held in the TRS Consolidated Group and the REIT in the amount of $ 17.5 million, $ 46.3 million and $ 40.4 million, respectively. In 2022, the change in the valuation allowance previously recorded at the TRS Consolidated Group on the deferred tax assets was due to the impact of state tax rate changes. In 2021, a $ 0.1 million valuation allowance previously recorded at the TRS Consolidated Group on the deferred tax assets subject to loss limitation rules was released. In 2020, the change in valuation allowance was due to the impact of state tax rate changes. A summary of our pre-tax GAAP income is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 2020 Pre ‑ tax GAAP income: ​ ​ ​ REIT ​ $ 303,320 ​ $ 239,356 ​ $ 78,320 TRS Consolidated Group ​ 67,991 ​ 184,736 ​ 158,230 Total pre‑tax GAAP income ​ $ 371,311 ​ $ 424,092 ​ $ 236,550 ​ Our provision for income taxes is comprised as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 2020 Current tax provision: ​ ​ ​ Federal ​ $ 14,167 ​ $ 27,454 ​ $ 27,284 State ​ 5,058 ​ 7,939 ​ 8,383 Total ​ 19,225 ​ 35,393 ​ 35,667 Deferred tax (benefit) provision : ​ ​ ​ Federal ​ $ ( 1,373 ) ​ $ 8,287 ​ $ 3,932 State ​ ( 370 ) ​ 2,744 ​ 780 Valuation allowance ​ 2 ​ ( 139 ) ​ 14 Total ​ ( 1,741 ) ​ 10,892 ​ 4,726 Total income tax expense ​ $ 17,484 ​ $ 46,285 ​ $ 40,393 ​ 104 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2022 2021 2020 U.S. federal statutory rate 21.0 % 21.0 % 21.0 % REIT non‑taxable income ( 17.2 ) % ( 11.9 ) % ( 7.0 ) % State and local income taxes, net of federal tax benefit 1.0 % 2.0 % 3.0 % Other ( 0.1 ) % ( 0.2 ) % — % Effective income tax rate 4.7 % 10.9 % 17.0 % ​ The significant components of our deferred tax assets and liabilities of our TRS Consolidated Group are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 2021 Deferred tax assets: ​ ​ Expenses not currently deductible ​ $ 22,755 ​ $ 25,542 Loan loss reserves ​ 7,159 ​ 7,110 Net operating and capital loss carryforwards ​ 454 ​ 468 Valuation allowance ​ ( 294 ) ​ ( 292 ) Other ​ ​ 441 ​ ​ 372 Deferred tax assets, net ​ $ 30,515 ​ $ 33,200 Deferred tax liabilities: ​ ​ Mortgage servicing rights ​ $ 26,975 ​ $ 28,672 Intangibles ​ 6,457 ​ 7,243 Interest in equity affiliates—net ​ ​ 6,237 ​ ​ 8,179 Deferred tax liabilities, net ​ $ 39,669 ​ $ 44,094 ​ At December 31, 2022, our TRS Consolidated Group, had approximately $ 30.5 million of deferred tax assets, net of a $ 0.3 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 $ 39.7 million in deferred tax liabilities consisting of timing differences from mortgage servicing rights, intangibles and investments in equity affiliates. At December 31, 2021, our TRS Consolidated Group, had $ 33.2 million of deferred tax assets, net of a $ 0.3 million valuation allowance. The deferred tax assets consist of expenses not currently deductible, loan loss reserves and net operating loss and capital loss carryforwards. Our TRS Consolidated Group's deferred tax assets are offset by $ 44.1 million in deferred tax liabilities consisting of timing differences from mortgage servicing rights, intangibles and investments in equity affiliates. At both December 31, 2022 and 2021, the REIT (excluding the TRS Consolidated Group) had no federal net operating loss carryforwards and no capital loss carryforwards. At both December 31, 2022 and 2021, the TRS Consolidated Group had no federal net operating loss carryforwards remaining and capital loss carryforwards of $ 1.1 million, which will expire through 2023. At both December 31, 2022 and 2021, the TRS Consolidated Group had state net operating loss carryforwards of $ 0.2 million, which will begin to expire in 2036. The TRS Consolidated Group is currently under audit in certain state and local jurisdictions for tax years 2017-2020. While the impact of the current income tax examinations was undetermined, it is not expected to be material to our consolidated financial statements. We have assessed our tax positions for all open years, which includes 2017-2022, 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 2022. 105 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) ​ Note 18 — Agreements and Transactions with Related Parties Support Agreement and Employee Secondment Agreement. We have a support agreement and a secondment agreement with ACM and certain of its affiliates and certain affiliates of a relative of our chief executive officer (“Service Recipients”) where we provide support services and seconded employees to the Service Recipients. The Service Recipients reimburse us for the costs of performing such services and the cost of the seconded employees. During 2022, 2021 and 2020, we incurred $ 3.3 million, $ 3.2 million and $ 2.4 million, respectively, of costs for services provided and employees seconded to the Service Recipients, all of which are reimbursable to us and included in due from related party on the consolidated balance sheets. Other Related Party Transactions. Due from related party was $ 77.4 million and $ 84.3 million at December 31, 2022 and 2021, respectively, which consisted primarily of amounts due from our affiliated servicing operations related to real estate transactions closing at the end of 2022 and 2021 and amounts due from ACM for costs incurred in connection with the support and secondment agreements described above. Due to related party was $ 12.4 million and $ 26.6 million at December 31, 2022 and 2021, respectively, and consisted of loan payoffs, holdbacks and escrows to be remitted to our affiliated servicing operations related to real estate transactions. In July 2022, we purchased a $ 46.2 million bridge loan originated by ACM at par (none of which was funded at December 31, 2022) for an SFR build-to-rent construction project. A consortium of investors (which includes, among other unaffiliated investors, certain of our officers with a minority ownership interest) owns 70 % of the borrowing entity and an entity indirectly owned and controlled by an immediate family member of our chief executive officer owns 10 % of the borrowing entity. The loan has an interest rate of SOFR plus 5.50 % and is scheduled to mature in March 2025. In April 2022, we committed to fund a $ 67.1 million bridge loan (none of which was funded at December 31, 2022) in an SFR build-to-rent construction project. An entity owned by an immediate family member of our chief executive officer also made an equity investment in the project and owns a 2.25 % equity interest in the borrowing entity. The bridge loan has an interest rate of SOFR plus 4.625 % with a SOFR floor of 0.25 % and matures in May 2025. Interest income recorded from this loan was $ 0.1 million for 2022. In February 2022, we committed to fund a $ 39.4 million bridge loan (none of which was funded at December 31, 2022) in an SFR build-to-rent construction project. An entity owned by an immediate family member of our chief executive officer also made an equity investment in the project and owns a 2.25 % equity interest in the borrowing entity. The bridge loan has an interest rate of LIBOR plus 4.00 % with a LIBOR floor of 0.25 % and matures in March 2025. Interest income recorded from this loan was $ 0.1 million for 2022. In 2021, we invested $ 4.2 million for 49.3 % interest in a limited liability company (“LLC”) which purchased a retail property for $ 32.5 million and assumed an existing $ 26.0 million CMBS loan. A portion of the property can potentially be converted to office space, of which we obtain the right to occupy, in part. An entity owned by an immediate family member of our chief executive officer also made an investment in the LLC for a 10.0 % ownership, is the managing member and holds the right to purchase our interest in the LLC. In 2021, we originated a $ 63.4 million bridge loan to a third-party to purchase a multifamily property from a multifamily-focused commercial real estate investment fund sponsored and managed by our chief executive officer and one of his immediate family members, which fund has no continued involvement with the property following the purchase. The loan has an interest rate of LIBOR plus 3.75 % with a LIBOR floor of 0.25 % and matures in March 2024. Interest income recorded from this loan was $ 3.7 million and $ 2.1 million for 2022 and 2021, respectively. 106 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) In 2020, we committed to fund a $ 32.5 million bridge loan which was upsized to $ 41.5 million in September 2022, ($ 12.3 million was funded at December 31, 2022) and made a $ 3.5 million preferred equity investment in an SFR build-to-rent construction project. An entity owned by an immediate family member of our chief executive officer also made an equity investment in the project and owns a 21.8 % equity interest in the borrowing entity. The bridge loan has an interest rate of LIBOR plus 5.5 % with a LIBOR floor of 0.75 %, the preferred equity investment has a 12.0 % fixed rate and both loans mature in October 2023. Interest income recorded from these loans was $ 1.3 million, $ 0.5 million and less than $ 0.1 million for 2022, 2021 and 2020, respectively. In 2020, we committed to fund a $ 30.5 million bridge loan , which was upsized to $ 38.8 million in September 2022, 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 ($ 17.6 million was funded at December 31, 2022) has an interest rate of LIBOR plus 5.5 % with a LIBOR floor of 0.75 % and matures in May 2023 and the preferred equity investment has a 12.0 % fixed rate and matures in April 2023. Interest income recorded from these loans was $ 1.6 million, $ 0.6 million and $ 0.1 million for 2022, 2021 and 2020, respectively. In 2020, we originated a $ 14.8 million Private Label loan and a $ 3.4 million mezzanine loan on two multifamily properties owned in part by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers and our chief executive officer) which owns a 50 % interest in the borrowing entity. The Private Label loan bears interest at a 3.1 % fixed rate and the mezzanine loan bears interest at a 9.0 % fixed rate and both loans mature in April 2030. In 2020, we sold the Private Label loan to an unconsolidated affiliate of ours. Interest income recorded from the mezzanine loan was $ 0.3 million for all periods presented. We have a $ 35.0 million bridge loan and a $ 9.6 million preferred equity interest on an office building. The property is controlled by a third party. The day-to-day operations are currently being managed by an immediate family member, or one of his affiliated entities, of our chief executive officer. In September 2021, we entered into a forbearance agreement with the borrower on the outstanding bridge loan to defer all interest owed until maturity or early payoff. Interest income recorded from these loans was $ 1.3 million and $ 1.6 million for 2021 and 2020, respectively. In certain instances, our business requires our executives to charter privately owned aircraft in furtherance of our business. We have an aircraft time-sharing agreement with an entity controlled by our chief executive officer that owns a private aircraft. Pursuant to the agreement, we reimburse the aircraft owner for the required costs under Federal Aviation Administration regulations for the flights our executives’ charter. During 2022, 2021 and 2020, we reimbursed the aircraft owner $ 1.1 million, $ 0.2 million and $ 0.5 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 ($ 25.2 million was funded at December 31, 2022) for an 18 % interest in AMAC III. During 2022, 2021 and 2020, we received cash distributions totaling $ 0.5 million, $ 3.8 million and $ 0.1 million, respectively, and recorded a loss of $ 2.4 million, $ 1.3 million and $ 0.9 million, respectively, associated with this investment. In 2019, AMAC III originated a $ 7.0 million mezzanine loan to a borrower with which we have an outstanding $ 34.0 million bridge loan. In 2020, for full satisfaction of the mezzanine loan, AMAC III became the owner of the property. Also in 2020, the $ 34.0 million bridge loan was refinanced with a $ 35.4 million bridge loan, which bears interest at a rate of LIBOR plus 3.5 % and matures in August 2023. We also originated a $ 15.6 million Private Label loan in 2019 to a borrower which is 100 % owned by AMAC III, which bears interest at a 3.735 % fixed rate and matures in January 2030. In 2020, we sold the Private Label loan to an unconsolidated affiliate of ours. Interest income recorded from the bridge loan was $ 1.9 million, $ 1.3 million and $ 1.9 million for 2022, 2021 and 2020, 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 0.25 % and matures in August 2023. Interest income recorded from this loan was $ 1.4 million, $ 1.3 million and $ 1.4 million for 2022, 2021 and 2020, respectively. 107 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) In 2017, we originated two bridge loans totaling $ 28.0 million on two multifamily properties owned in part by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers and our chief executive officer) which owns 45 % of the borrowing entity. The loans had an interest rate of LIBOR plus 5.25 % with LIBOR floors ranging from 1.24 % to 1.54 % and were scheduled to mature in 2020. The borrower refinanced these loans with a $ 31.1 million bridge loan we originated in 2019 with an interest rate of LIBOR plus 4.0 %, a LIBOR floor of 1.8 %, which was scheduled to mature in October 2022. In May 2022, these loans paid off in full. Interest income recorded from this loan was $ 0.8 million for 2022 and $ 1.9 million for both 2021 and 2020. In 2017, we originated a $ 46.9 million Fannie Mae loan on a multifamily property owned in part by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers) which owns a 17.6 % interest in the borrowing entity. We carry a maximum loss-sharing obligation with Fannie Mae on this loan of up to 5 % of the original UPB. Servicing revenue recorded from this loan was less than $ 0.1 million for all periods presented. In 2017, Ginkgo Investment Company LLC (“Ginkgo”), of which one of our directors is a 33 % managing member, purchased a multifamily apartment complex which assumed an existing $ 8.3 million Fannie Mae loan that we service. Ginkgo subsequently sold the majority of its interest in this property and owned a 3.6 % interest at December 31, 2022. 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 2019. In 2017, a $ 6.8 million loan on one property paid off in full and in 2018 four additional loans totaling $ 28.3 million paid off in full. In 2019, $ 10.9 million of the $ 12.9 million remaining bridge loan paid off, with the $ 2.0 million remaining UPB converting to a mezzanine loan with a fixed interest rate of 10.0 % and a January 2024 maturity. Interest income recorded from the mezzanine loan was $ 0.2 million for all period presented. In 2015, we invested $ 9.6 million for 50 % of ACM’s indirect interest in a joint venture with a third party that was formed to invest in a residential mortgage banking business. At December 31, 2022, we had an indirect interest of 12.3 % in this entity. We recorded income from equity affiliates related to this investment of $ 4.9 million, $ 34.6 million and $ 75.7 million for 2022, 2021 and 2020, respectively. During 2022 and 2021, we also received cash distributions totaling $ 23.8 million and $ 28.0 million, respectively, from this investment, which were classified as returns of capital. Interest income recorded from loans that were paid off prior to 2022 totaled $ 0.5 million and $ 3.4 million for 2021 and 2020, respectively. 108 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) We, along with an executive officer of ours and a consortium of independent outside investors, hold equity investments in a portfolio of multifamily properties referred to as the “Lexford” portfolio, which is managed by an entity owned primarily by a consortium of affiliated investors, including our chief executive officer and an executive officer of ours. Based on the terms of the management contract, the management company is entitled to 4.75 % of gross revenues of the underlying properties, along with the potential to share in the proceeds of a sale or restructuring of the debt. In 2018, the owners of Lexford restructured part of its debt and we originated 12 bridge loans totaling $ 280.5 million, which were used to repay in full certain existing mortgage debt and to renovate 72 multifamily properties included in the portfolio. The loans were originated in 2018, had interest rates of LIBOR plus 4.0 % and were scheduled to mature in June 2021. During 2019, the borrower made payoffs and partial paydowns of principal totaling $ 250.0 million and in 2020, the remaining balance of the loans were refinanced with a $ 34.6 million Private Label loan, which bears interest at a fixed rate of 3.3 % and matures in March 2030. In 2020, we sold the Private Label loan to an unconsolidated affiliate of ours. Interest income recorded from these loans totaled $ 0.5 million during 2020. Further, as part of this 2018 restructuring, $ 50.0 million in unsecured financing was provided by an unsecured lender to certain parent entities of the property owners. ACM owns slightly less than half of the unsecured lender entity and, therefore, provided slightly less than half of the unsecured lender financing. In addition, in connection with our equity investment, we received distributions totaling $ 11.1 million and $ 1.1 million during 2022 and 2020, respectively, which were recorded as income from equity affiliates. Separate from the loans we originated in 2018, we provide limited (“bad boy”) guarantees for certain other debt controlled by Lexford. The bad boy guarantees may become a liability for us upon standard “bad” acts such as fraud or a material misrepresentation by Lexford or us. At December 31, 2022, this debt had an aggregate outstanding balance of $ 582.8 million and is scheduled to mature through 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. At December 31, 2022, ACM holds 2,535,870 shares of our common stock and 10,615,085 OP Units, which represents approximately 7 % 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 19 — Employee Benefits 401(k). 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 2022, we recorded $ 1.6 million and, in both 2021 and 2020, we recorded $ 0.8 million 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. The Deferred Comp Plan can be modified or discontinued at any time. All eligible participating employees may defer a portion of their compensation and, depending on the participant eligibility requirements met, we are contractually obligated to: (1) 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 (2) 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 2022, 2021 and 2020, there were $ 3.3 million, $ 2.2 million and $ 1.8 million, respectively, of employee deferrals. At December 31, 2022 and 2021, we had recorded liabilities totaling $ 28.7 million and $ 25.5 million, respectively, and assets of $ 24.7 million and $ 21.1 million, respectively, related to the Deferred Comp Plan, which is included in other liabilities and other assets, respectively, in our consolidated balance sheets. ​ 109 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Note 20 — Segment Information The summarized statements of income and balance sheet data, as well as certain other data, by segment are included in the following tables ($ in thousands). Specifically identifiable costs are recorded directly to each business segment. For items not specifically identifiable, costs have been allocated between the business segments using the most meaningful allocation methodologies, which was predominately direct labor costs (i.e., time spent working on each business segment). Such costs include, but are not limited to, compensation and employee related costs, selling and administrative expenses and stock-based compensation. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2022 ​ ​ Structured ​ Agency ​ Other / ​ ​ ​ ​ Business Business Eliminations (1) Consolidated Interest income ​ $ 903,622 ​ $ 44,779 ​ $ — ​ $ 948,401 Interest expense ​ ​ 538,659 ​ ​ 18,958 ​ ​ — ​ ​ 557,617 Net interest income ​ ​ 364,963 ​ ​ 25,821 ​ ​ — ​ ​ 390,784 Other revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain on sales, including fee-based services, net ​ ​ — ​ ​ 55,816 ​ ​ — ​ ​ 55,816 Mortgage servicing rights ​ ​ — ​ ​ 69,346 ​ ​ — ​ ​ 69,346 Servicing revenue ​ ​ — ​ ​ 152,068 ​ ​ — ​ ​ 152,068 Amortization of MSRs ​ ​ — ​ ​ ( 59,876 ) ​ ​ — ​ ​ ( 59,876 ) Property operating income ​ ​ 1,877 ​ ​ — ​ ​ — ​ ​ 1,877 Gain on derivative instruments, net ​ ​ — ​ ​ 26,609 ​ ​ — ​ ​ 26,609 Other income, net ​ ​ ( 2,360 ) ​ ​ ( 15,203 ) ​ ​ — ​ ​ ( 17,563 ) Total other revenue ​ ​ ( 483 ) ​ ​ 228,760 ​ ​ — ​ ​ 228,277 Other expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Employee compensation and benefits ​ ​ 56,032 ​ ​ 105,793 ​ ​ — ​ ​ 161,825 Selling and administrative ​ ​ 26,059 ​ ​ 27,931 ​ ​ — ​ ​ 53,990 Property operating expenses ​ ​ 2,136 ​ ​ — ​ ​ — ​ ​ 2,136 Depreciation and amortization ​ ​ 4,041 ​ ​ 4,691 ​ ​ — ​ ​ 8,732 Provision for loss sharing (net of recoveries) ​ ​ — ​ ​ 1,862 ​ ​ — ​ ​ 1,862 Provision for credit losses (net of recoveries) ​ ​ 19,770 ​ ​ 1,399 ​ ​ — ​ ​ 21,169 Litigation settlement ​ ​ 7,350 ​ ​ — ​ ​ — ​ ​ 7,350 Total other expenses ​ ​ 115,388 ​ ​ 141,676 ​ ​ — ​ ​ 257,064 Income before extinguishment of debt, income from equity affiliates and income taxes ​ ​ 249,092 ​ ​ 112,905 ​ ​ — ​ ​ 361,997 Loss on extinguishment of debt ​ ​ ( 4,933 ) ​ ​ — ​ ​ — ​ ​ ( 4,933 ) Income from equity affiliates ​ ​ 14,247 ​ ​ — ​ ​ — ​ ​ 14,247 Provision for income taxes ​ ​ ( 821 ) ​ ​ ( 16,663 ) ​ ​ — ​ ​ ( 17,484 ) Net income ​ ​ 257,585 ​ ​ 96,242 ​ ​ — ​ ​ 353,827 Preferred stock dividends ​ ​ 40,954 ​ ​ — ​ ​ — ​ ​ 40,954 Net income attributable to noncontrolling interest ​ ​ — ​ ​ — ​ ​ 28,044 ​ ​ 28,044 Net income attributable to common stockholders ​ $ 216,631 ​ $ 96,242 ​ $ ( 28,044 ) ​ $ 284,829 ​ 110 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2021 ​ ​ ​ Structured ​ ​ Agency ​ ​ Other / ​ ​ ​ ​ ​ Business ​ Business ​ Eliminations (1) ​ Consolidated Interest income ​ $ 427,039 $ 39,048 $ — $ 466,087 Interest expense ​ ​ 194,435 ​ ​ 17,570 ​ ​ — ​ ​ 212,005 Net interest income ​ ​ 232,604 ​ ​ 21,478 ​ ​ — ​ ​ 254,082 Other revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain on sales, including fee-based services, net ​ ​ — ​ ​ 123,037 ​ ​ — ​ ​ 123,037 Mortgage servicing rights ​ ​ — ​ ​ 130,230 ​ ​ — ​ ​ 130,230 Servicing revenue ​ ​ — ​ ​ 133,429 ​ ​ — ​ ​ 133,429 Amortization of MSRs ​ ​ — ​ ​ ( 58,615 ) ​ ​ — ​ ​ ( 58,615 ) Property operating income ​ ​ 185 ​ ​ — ​ ​ — ​ ​ 185 Loss on derivative instruments, net ​ ​ — ​ ​ ( 2,684 ) ​ ​ — ​ ​ ( 2,684 ) Other income, net ​ ​ 7,491 ​ ​ 75 ​ ​ — ​ ​ 7,566 Total other revenue ​ ​ 7,676 ​ ​ 325,472 ​ ​ — ​ ​ 333,148 Other expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Employee compensation and benefits ​ ​ 51,225 ​ ​ 120,571 ​ ​ — ​ ​ 171,796 Selling and administrative ​ ​ 21,064 ​ ​ 24,511 ​ ​ — ​ 45,575 Property operating expenses ​ ​ 718 ​ ​ — ​ ​ — ​ ​ 718 Depreciation and amortization ​ ​ 2,524 ​ ​ 4,691 ​ ​ — ​ ​ 7,215 Provision for loss sharing (net of recoveries) ​ ​ — ​ ​ ( 6,167 ) ​ ​ — ​ ​ ( 6,167 ) Provision for credit losses (net of recoveries) ​ ​ ( 21,223 ) ​ ​ 110 ​ ​ — ​ ​ ( 21,113 ) Total other expenses ​ ​ 54,308 ​ ​ 143,716 ​ ​ — ​ ​ 198,024 Income before extinguishment of debt, sale of real estate, income from equity affiliates and income taxes ​ ​ 185,972 ​ ​ 203,234 ​ ​ — ​ ​ 389,206 Loss on extinguishment of debt ​ ​ ( 3,374 ) ​ ​ — ​ ​ — ​ ​ ( 3,374 ) Sale of real estate ​ ​ 2,466 ​ ​ 1,227 ​ ​ — ​ ​ 3,693 Income from equity affiliates ​ ​ 34,567 ​ ​ — ​ ​ — ​ ​ 34,567 Provision for income taxes ​ ​ ( 5,940 ) ​ ​ ( 40,345 ) ​ ​ — ​ ​ ( 46,285 ) Net income ​ ​ 213,691 ​ ​ 164,116 ​ ​ — ​ ​ 377,807 Preferred stock dividends ​ ​ 21,888 ​ ​ — ​ ​ — ​ ​ 21,888 Net income attributable to noncontrolling interest ​ ​ — ​ ​ — ​ ​ 38,507 ​ ​ 38,507 Net income attributable to common stockholders ​ $ 191,803 $ 164,116 $ ( 38,507 ) $ 317,412 ​ 111 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2020 ​ ​ ​ Structured ​ ​ Agency ​ ​ Other / ​ ​ ​ ​ ​ Business ​ Business ​ Eliminations (1) ​ Consolidated Interest income ​ $ 305,893 ​ $ 33,572 ​ $ — ​ $ 339,465 Interest expense ​ ​ 150,964 ​ ​ 18,252 ​ ​ — ​ ​ 169,216 Net interest income ​ ​ 154,929 ​ ​ 15,320 ​ ​ — ​ ​ 170,249 Other revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain on sales, including fee-based services, net ​ ​ — ​ ​ 94,607 ​ ​ — ​ ​ 94,607 Mortgage servicing rights ​ ​ — ​ ​ 165,517 ​ ​ — ​ ​ 165,517 Servicing revenue ​ ​ — ​ ​ 103,607 ​ ​ — ​ ​ 103,607 Amortization of MSRs ​ ​ — ​ ​ ( 49,222 ) ​ ​ — ​ ​ ( 49,222 ) Property operating income ​ ​ 3,976 ​ ​ — ​ ​ — ​ ​ 3,976 Loss on derivative instruments, net ​ ​ ( 2,859 ) ​ ​ ( 55,476 ) ​ ​ — ​ ​ ( 58,335 ) Other income, net ​ ​ 4,052 ​ ​ 57 ​ ​ — ​ ​ 4,109 Total other revenue ​ ​ 5,169 ​ ​ 259,090 ​ ​ — ​ ​ 264,259 Other expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Employee compensation and benefits ​ ​ 40,292 ​ ​ 104,088 ​ ​ — ​ ​ 144,380 Selling and administrative ​ ​ 15,706 ​ ​ 21,642 ​ ​ — ​ ​ 37,348 Property operating expenses ​ ​ 4,898 ​ ​ — ​ ​ — ​ ​ 4,898 Depreciation and amortization ​ ​ 2,391 ​ ​ 5,249 ​ ​ — ​ ​ 7,640 Provision for loss sharing (net of recoveries) ​ ​ — ​ ​ 14,822 ​ ​ — ​ ​ 14,822 Provision for credit losses (net of recoveries) ​ ​ 59,967 ​ ​ 1,143 ​ ​ — ​ ​ 61,110 Total other expenses ​ ​ 123,254 ​ ​ 146,944 ​ ​ — ​ ​ 270,198 Income before extinguishment of debt, sale of real estate, income from equity affiliates and income taxes ​ ​ 36,844 ​ ​ 127,466 ​ ​ — ​ ​ 164,310 Loss on extinguishment of debt ​ ​ ( 3,546 ) ​ ​ — ​ ​ — ​ ​ ( 3,546 ) (Loss) gain on sale of real estate ​ ​ ( 878 ) ​ ​ 503 ​ ​ — ​ ​ ( 375 ) Income from equity affiliates ​ ​ 76,161 ​ ​ — ​ ​ — ​ ​ 76,161 Provision for income taxes ​ ​ ( 14,303 ) ​ ​ ( 26,090 ) ​ ​ — ​ ​ ( 40,393 ) Net income ​ ​ 94,278 ​ ​ 101,879 ​ ​ — ​ ​ 196,157 Preferred stock dividends ​ ​ 7,554 ​ ​ — ​ ​ — ​ ​ 7,554 Net income attributable to noncontrolling interest ​ ​ — ​ ​ — ​ ​ 25,208 ​ ​ 25,208 Net income attributable to common stockholders ​ $ 86,724 ​ $ 101,879 ​ $ ( 25,208 ) ​ $ 163,395 (1) Includes income allocated to the noncontrolling interest holders not allocated to the two reportable segments. ​ 112 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ Structured Business Agency Business Consolidated Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 200,514 ​ $ 333,843 ​ $ 534,357 Restricted cash ​ ​ 713,615 ​ ​ 193 ​ ​ 713,808 Loans and investments, net ​ ​ 14,254,674 ​ ​ — ​ ​ 14,254,674 Loans held-for-sale, net ​ ​ — ​ ​ 354,070 ​ ​ 354,070 Capitalized mortgage servicing rights, net ​ ​ — ​ ​ 401,471 ​ ​ 401,471 Securities held-to-maturity, net ​ ​ — ​ ​ 156,547 ​ ​ 156,547 Investments in equity affiliates ​ ​ 79,130 ​ ​ — ​ ​ 79,130 Goodwill and other intangible assets ​ ​ 12,500 ​ ​ 83,569 ​ ​ 96,069 Other assets and due from related party ​ ​ 367,837 ​ ​ 81,022 ​ ​ 448,859 Total assets ​ $ 15,628,270 ​ $ 1,410,715 ​ $ 17,038,985 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Debt obligations ​ $ 13,195,120 ​ $ 305,442 ​ $ 13,500,562 Allowance for loss-sharing obligations ​ ​ — ​ ​ 57,168 ​ ​ 57,168 Other liabilities and due to related parties ​ ​ 299,559 ​ ​ 109,817 ​ ​ 409,376 Total liabilities ​ $ 13,494,679 ​ $ 472,427 ​ $ 13,967,106 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 Assets: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 142,771 ​ $ 261,809 ​ $ 404,580 Restricted cash ​ 468,013 ​ ​ 18,677 ​ 486,690 Loans and investments, net ​ 11,981,048 ​ ​ — ​ 11,981,048 Loans held-for-sale, net ​ ​ — ​ ​ 1,093,609 ​ ​ 1,093,609 Capitalized mortgage servicing rights, net ​ ​ — ​ ​ 422,734 ​ ​ 422,734 Securities held-to-maturity, net ​ ​ — ​ ​ 140,484 ​ ​ 140,484 Investments in equity affiliates ​ 89,676 ​ ​ — ​ 89,676 Goodwill and other intangible assets ​ ​ 12,500 ​ ​ 88,260 ​ ​ 100,760 Other assets and due from related party ​ 285,600 ​ ​ 68,664 ​ 354,264 Total assets ​ $ 12,979,608 ​ $ 2,094,237 ​ $ 15,073,845 ​ ​ ​ ​ ​ ​ ​ Liabilities: ​ ​ ​ ​ ​ ​ Debt obligations ​ $ 11,100,429 ​ $ 956,272 ​ $ 12,056,701 Allowance for loss-sharing obligations ​ ​ — ​ ​ 56,064 ​ ​ 56,064 Other liabilities and due to related parties ​ 278,726 ​ ​ 132,370 ​ 411,096 Total liabilities ​ $ 11,379,155 ​ $ 1,144,706 ​ $ 12,523,861 ​ 113 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2022 2021 2020 ​ Origination Data: ​ ​ ​ ​ ​ Structured Business ​ ​ ​ ​ ​ Bridge loans (1) ​ $ 6,082,041 ​ $ 9,490,402 ​ $ 2,312,061 ​ Mezzanine / Preferred Equity ​ ​ 69,606 ​ ​ 203,875 ​ ​ 76,722 ​ SFR - Permanent loans ​ ​ — ​ ​ 26,238 ​ ​ 44,896 ​ Total new loan originations ​ $ 6,151,647 ​ $ 9,720,515 ​ $ 2,433,679 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1) 2022 and 2021 includes 132 and 103 SFR loans, respectively, with a UPB of $ 613.8 million and $ 389.2 million, respectively. During 2022, 2021 and 2020, we committed to fund SFR loans totaling $ 1.08 billion, $ 729.5 million and $ 261.5 million, respectively. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loan runoff ​ $ 3,818,554 ​ $ 2,516,771 ​ $ 1,208,071 ​ ​ ​ ​ ​ ​ Agency Business ​ ​ ​ ​ Origination Volumes by Investor: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fannie Mae ​ $ 2,919,566 ​ $ 3,389,312 ​ $ 5,041,925 ​ Freddie Mac ​ ​ 1,353,001 ​ ​ 1,016,142 ​ ​ 960,508 ​ Private Label ​ 217,542 ​ 1,436,853 ​ 382,191 ​ FHA ​ 188,394 ​ 430,320 ​ 327,345 ​ SFR - Fixed Rate ​ 89,683 ​ 136,931 ​ — ​ Total ​ $ 4,768,186 ​ $ 6,409,558 ​ $ 6,711,969 ​ Total loan commitment volume ​ $ 5,146,718 ​ $ 6,347,752 ​ $ 6,810,666 ​ ​ ​ ​ ​ ​ Agency Business Loan Sales Data: ​ ​ ​ ​ Fannie Mae ​ $ 3,139,414 ​ $ 3,675,763 ​ $ 4,771,113 ​ Freddie Mac ​ ​ 1,456,595 ​ ​ 1,081,702 ​ ​ 816,802 ​ Private Label ​ ​ 515,086 ​ ​ 985,094 ​ ​ 727,154 ​ FHA ​ ​ 241,457 ​ ​ 480,275 ​ ​ 272,659 ​ SFR - Fixed Rate ​ 86,071 ​ 192,335 ​ — ​ Total ​ $ 5,438,623 ​ $ 6,415,169 ​ $ 6,587,728 ​ Sales margin (fee-based services as a % of loan sales) (1) ​ 1.34 % 1.92 % 1.44 % MSR rate (MSR income as a % of loan commitments) ​ 1.35 % 2.05 % 2.43 % (1) 2022 includes $ 17.1 million of gains recognized on Swaps related to the Private Label loans sold in the three months ended March 31, 2022, which is included in gain (loss) on derivative instruments, net in the consolidated statements of income. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ ​ ​ ​ ​ Wtd. Avg. Servicing ​ Wtd. Avg. Life of ​ ​ Servicing ​ Fee Rate ​ Servicing Portfolio Key Servicing Metrics for Agency Business: Portfolio UPB (basis points) (years) Fannie Mae ​ $ 19,038,124 ​ 50.2 ​ 8.0 Freddie Mac ​ ​ 5,153,207 ​ 25.0 ​ 9.0 Private Label ​ ​ 2,074,859 ​ 18.5 ​ 7.6 FHA ​ ​ 1,155,893 ​ 14.9 ​ 19.5 Bridge ​ ​ 301,182 ​ 12.5 ​ 1.7 SFR - Fixed Rate ​ ​ 274,764 ​ 19.8 ​ 6.0 Total ​ $ 27,998,029 ​ 41.1 ​ 8.6 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 Fannie Mae $ 19,127,397 53.5 8.0 Freddie Mac ​ ​ 4,943,905 ​ 27.1 ​ 9.3 Private Label ​ ​ 1,711,326 ​ 20.0 ​ 8.3 FHA ​ ​ 985,063 ​ 15.4 ​ 21.0 SFR - Fixed Rate ​ ​ 191,698 ​ 20.0 ​ 6.5 Total ​ $ 26,959,389 ​ 44.9 ​ 8.8 ​ ​ ​ 114 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES schedule iv — Loans and other Lending Investments ($ in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Carrying ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount ​ ​ ​ ​ Periodic ​ ​ ​ Interest Pay ​ ​ ​ ​ ​ ​ ​ ​ ​ Subject to ​ ​ Payment Maturity Rate ​ ​ Face ​ Carrying ​ Delinquent Type Location Terms (1) Date (2) Index (3) Prior Liens ​ Amount (4) ​ Amount (5) Interest Bridge Loans: ​ ​ ​ ​ Bridge loans less than 3% of carrying amount of total loans (6): ​ ​ ​ ​ Multifamily Various IO / PI 2023 ‑ 2026 L+ 2.50 % to 6.75 % $ — ​ $ 12,830,999 ​ $ 12,744,463 ​ $ — ​ ​ ​ ​ ​ ​ ​ L Floor 0.10 % to 2.50 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SOFR+ 2.65 % to 5.00 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SOFR Floor 0.10 % to 4.32 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fixed 3.83 % to 12.00 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Single‑Family Rental Various IO / PI 2023 ‑ 2026 L+ 3.50 % to 6.75 % — ​ 927,373 ​ 916,498 ​ — ​ ​ ​ ​ ​ ​ ​ L Floor 0.25 % to 2.25 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SOFR+ 2.65 % to 6.25 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SOFR Floor 0.10 % to 4.33 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Land CA IO 2023 - 2025 L+ 4.00 % — ​ 118,595 ​ 40,726 ​ — ​ ​ ​ ​ ​ ​ ​ L Floor 0.15 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fixed 0.00 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Office NY IO 2023 L+ 3.50 % — ​ 70,410 ​ 69,948 ​ — ​ ​ ​ ​ ​ ​ ​ L Floor 0.29 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Healthcare AL IO / PI 2023 L+ 5.00 % to 5.35 % — ​ 65,627 ​ 65,610 ​ — ​ ​ ​ ​ ​ ​ ​ L Floor 2.15 % to 2.63 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Hotel NY IO / PI 2023 L+ 4.50 % — ​ 40,850 ​ 40,836 ​ — Student Housing NC IO 2023 L+ 4.50 % — ​ 25,700 ​ 25,589 ​ — ​ ​ ​ ​ ​ ​ ​ L Floor 0.25 % to 2.25 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Retail Various IO 2024 L+ 3.50 % to 4.00 % — ​ 16,500 ​ 14,113 ​ — ​ ​ ​ ​ ​ ​ ​ L Floor 1.00 % to 2.50 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Bridge Loans less than 3% of carrying amount of total loans ​ ​ ​ ​ ​ — ​ 14,096,054 ​ 13,917,783 ​ — Total Bridge Loans ​ ​ ​ ​ ​ — ​ 14,096,054 ​ 13,917,783 ​ — ​ 115 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES Schedule IV — Loans and other Lending Investments ( Continued ) ($ in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Carrying ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount ​ ​ ​ ​ Periodic ​ ​ ​ Interest Pay ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Subject to ​ ​ ​ ​ Payment ​ Maturity ​ Rate ​ ​ ​ ​ Face ​ Carrying ​ Delinquent Type ​ Location ​ Terms (1) ​ Date (2) ​ Index (3) ​ Prior Liens ​ Amount (4) ​ Amount (5) ​ Interest Mezzanine Loans: ​ ​ ​ ​ Mezzanine loans less than 3% of carrying amount of total loans (6): ​ ​ ​ ​ Multifamily Various IO / PI 2023 - 2033 Fixed 3.50 % to 13.00 % ​ 880,697 ​ 194,621 ​ 187,333 ​ — Land CA IO 2023 Fixed 0.00 % ​ — ​ 9,333 ​ 9,333 ​ — Retail Various IO 2024 L+ 3.50 % ​ 30,389 ​ 9,545 ​ 6,100 ​ — ​ ​ ​ ​ ​ ​ ​ L Floor 1.00 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fixed 12.00 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Mezzanine Loans ​ 911,086 ​ 213,499 ​ 202,766 ​ — Preferred Equity Investments: ​ ​ ​ ​ Preferred equity investments less than 3% of carrying amount of total loans (6): ​ ​ ​ ​ Multifamily Various IO / PI 2023 - 2033 Fixed 4.00 % to 13.00 % ​ 409,699 ​ 91,300 ​ 88,695 ​ — Office NY IO 2027 Fixed 0.00 % ​ — ​ 9,625 ​ 1,925 ​ — Land TX IO 2023 Fixed 12.00 % ​ — ​ 8,100 ​ 7,882 ​ — Commercial NY IO 2023 Fixed 6.00 % ​ 29,792 ​ 1,700 ​ — ​ — Total Preferred Equity Investments ​ 439,491 ​ 110,725 ​ 98,502 ​ — Other Loans: ​ ​ ​ ​ Other loans less than 3% of carrying amount of total loans (6): ​ ​ ​ ​ Single‑Family Rental Various IO / PI 2024 - 2026 L + 3.98 % to 4.90 % ​ — ​ 35,845 ​ 35,623 ​ — ​ ​ ​ ​ ​ ​ ​ L Floor 0.25 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ — ​ ​ 35,845 ​ ​ 35,623 ​ ​ — Total Loans ​ $ 1,350,577 $ 14,456,123 $ 14,254,674 $ — (1) IO = Interest Only, PI = Principal and Interest, L = LIBOR. ​ (2) Maturity date does not include possible extensions. ​ (3) References to LIBOR are to one-month LIBOR unless specifically stated otherwise. ​ (4) During 2022, $ 1.68 billion of loans were extended. ​ (5) The federal income tax basis is approximately $ 14.46 billion. ​ (6) Individual loans each have a carrying value less than 3 % of total loans. ​ 116 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES SCHEDULE IV – LOANS AND OTHER LENDING INVESTMENTS (Continued) The following table reconciles our loans and investments carrying amounts for the periods indicated (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 2020 Balance at beginning of year ​ $ 11,981,048 ​ $ 5,285,868 ​ $ 4,189,960 Additions during period: ​ ​ ​ New loan originations ​ 6,151,647 ​ 9,720,515 ​ 2,433,679 Funding of unfunded loan commitments (1) ​ 381,831 ​ 200,694 ​ 133,244 Accretion of unearned revenue ​ 37,468 ​ 25,618 ​ 13,590 Recoveries of reserves ​ 1,500 ​ 24,315 ​ 75 Loan charge‑offs ​ — ​ 10,773 ​ — Deductions during period: ​ ​ ​ Loan payoffs and paydowns ​ ( 3,818,554 ) ​ ( 2,516,771 ) ​ ( 1,243,694 ) Unfunded loan commitments (1) ​ ( 376,404 ) ​ ( 623,639 ) ​ ( 127,758 ) Unearned revenue and costs ​ ( 51,808 ) ​ ( 69,528 ) ​ ( 35,893 ) Reclassification to real estate owned ​ ​ ( 31,200 ) ​ ​ ( 880 ) ​ ​ — Provision for loan losses ​ ( 20,818 ) ​ — ​ ( 77,335 ) Reclassification to held-for-sale loans ​ ​ ( 36 ) ​ ​ ( 65,144 ) ​ ​ — Use of loan charge‑offs ​ — ​ ( 10,773 ) ​ — Balance at end of year ​ $ 14,254,674 ​ $ 11,981,048 ​ $ 5,285,868 (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. ​ ​ 117 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. ​