ARBOR REALTY TRUST INC 10-Q

Item 1. Financial Statements ARBOR REALTY TRUST, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ($ in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, December 31, ​ ​ 2023 ​ 2022 ​ ​ (Unaudited) ​ ​ ​ Assets: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 774,544 ​ $ 534,357 Restricted cash ​ 704,844 ​ 713,808 Loans and investments, net (allowance for credit losses of $ 153,077 and $ 132,559 ) ​ ​ 13,430,985 ​ ​ 14,254,674 Loans held-for-sale, net ​ ​ 469,602 ​ ​ 354,070 Capitalized mortgage servicing rights, net ​ ​ 396,634 ​ ​ 401,471 Securities held-to-maturity, net (allowance for credit losses of $ 5,025 and $ 3,153 ) ​ ​ 153,888 ​ ​ 156,547 Investments in equity affiliates ​ 77,641 ​ 79,130 Due from related party ​ 113,105 ​ 77,419 Goodwill and other intangible assets ​ ​ 94,896 ​ ​ 96,069 Other assets ​ 372,085 ​ 371,440 Total assets ​ $ 16,588,224 ​ $ 17,038,985 ​ ​ ​ ​ ​ ​ ​ Liabilities and Equity: ​ ​ ​ ​ ​ ​ Credit and repurchase facilities ​ $ 3,650,876 ​ $ 3,841,814 Securitized debt ​ ​ 7,508,472 ​ ​ 7,849,270 Senior unsecured notes ​ 1,409,899 ​ 1,385,994 Convertible senior unsecured notes ​ ​ 281,046 ​ ​ 280,356 Junior subordinated notes to subsidiary trust issuing preferred securities ​ 143,322 ​ 143,128 Due to related party ​ 12,481 ​ 12,350 Due to borrowers ​ 59,281 ​ 61,237 Allowance for loss-sharing obligations ​ ​ 59,757 ​ ​ 57,168 Other liabilities ​ 305,633 ​ 335,789 Total liabilities ​ 13,430,767 ​ 13,967,106 ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies (Note 13) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ​ 633,684 Special voting preferred shares - 16,293,589 shares ​ ​ ​ ​ ​ ​ 6.375 % Series D - 9,200,000 shares ​ ​ ​ ​ ​ ​ 6.25 % Series E - 5,750,000 shares ​ ​ ​ ​ ​ ​ 6.25 % Series F - 11,342,000 shares ​ ​ ​ ​ ​ ​ Common stock, $ 0.01 par value: 500,000,000 shares authorized - 183,821,003 and 178,230,522 shares issued and outstanding ​ 1,838 ​ 1,782 Additional paid-in capital ​ 2,278,287 ​ 2,204,481 Retained earnings ​ 107,697 ​ 97,049 Total Arbor Realty Trust, Inc. stockholders' equity ​ ​ 3,021,506 ​ ​ 2,936,996 Noncontrolling interest ​ ​ 135,951 ​ ​ 134,883 Total equity ​ 3,157,457 ​ 3,071,879 Total liabilities and equity ​ $ 16,588,224 ​ $ 17,038,985 ​ 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 March 31, 2023 and December 31, 2022, assets of our consolidated VIEs totaled $ 9,354,036 and $ 9,785,261 , respectively, and the liabilities of our consolidated VIEs totaled $ 7,532,335 and $ 7,876,024 , respectively. See Note 14 for discussion of our VIEs. ​ See Notes to Consolidated Financial Statements. ​ 2 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) ($ in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ 2023 2022 Interest income ​ $ 327,947 ​ $ 166,698 Interest expense ​ ​ 219,373 ​ 82,559 Net interest income ​ ​ 108,574 ​ 84,139 Other revenue: ​ ​ ​ ​ ​ ​ Gain on sales, including fee-based services, net ​ ​ 14,589 ​ ​ 1,656 Mortgage servicing rights ​ ​ 18,458 ​ ​ 15,312 Servicing revenue, net ​ ​ 29,565 ​ ​ 21,054 Property operating income ​ ​ 1,381 ​ ​ 295 Gain on derivative instruments, net ​ ​ 4,223 ​ ​ 17,386 Other income, net ​ ​ 4,882 ​ 3,200 Total other revenue ​ ​ 73,098 ​ 58,903 Other expenses: ​ ​ ​ ​ ​ ​ Employee compensation and benefits ​ ​ 42,399 ​ ​ 42,025 Selling and administrative ​ ​ 13,623 ​ ​ 14,548 Property operating expenses ​ ​ 1,383 ​ ​ 535 Depreciation and amortization ​ ​ 2,624 ​ ​ 1,983 Provision for loss sharing (net of recoveries) ​ ​ 3,177 ​ ​ ( 662 ) Provision for credit losses (net of recoveries) ​ ​ 22,517 ​ ​ 2,358 Total other expenses ​ 85,723 ​ 60,787 Income before extinguishment of debt, income from equity affiliates and income taxes ​ 95,949 ​ 82,255 Loss on extinguishment of debt ​ ​ — ​ ​ ( 1,350 ) Income from equity affiliates ​ ​ 14,326 ​ ​ 7,212 Provision for income taxes ​ ​ ( 8,029 ) ​ ​ ( 8,188 ) Net income ​ 102,246 ​ 79,929 Preferred stock dividends ​ 10,342 ​ 9,056 Net income attributable to noncontrolling interest ​ ​ 7,585 ​ ​ 6,816 Net income attributable to common stockholders ​ $ 84,319 ​ $ 64,057 ​ ​ ​ ​ ​ ​ ​ Basic earnings per common share ​ $ 0.47 ​ $ 0.42 Diluted earnings per common share ​ $ 0.46 ​ $ 0.40 ​ ​ ​ ​ ​ ​ ​ Weighted average shares outstanding: ​ ​ ​ ​ ​ ​ Basic ​ ​ 181,116,674 ​ 153,420,238 Diluted ​ ​ 214,910,974 ​ ​ 185,431,404 ​ ​ ​ ​ ​ ​ ​ Dividends declared per common share ​ $ 0.40 ​ $ 0.37 ​ See Notes to Consolidated Financial Statements. ​ ​ 3 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited) ($ in thousands, except shares) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Arbor ​ ​ ​ ​ ​ ​ ​ ​ Preferred ​ Preferred ​ Common ​ Common ​ Additional ​ ​ ​ Realty Trust, Inc. ​ ​ ​ ​ ​ ​ ​ ​ Stock ​ Stock ​ Stock ​ Stock ​ Paid-in ​ Retained ​ Stockholders’ ​ Noncontrolling ​ ​ ​ ​ Shares Value Shares Par Value Capital Earnings Equity Interest Total Equity Balance – January 1, 2023 42,585,589 ​ $ 633,684 178,230,522 ​ $ 1,782 ​ $ 2,204,481 ​ $ 97,049 ​ $ 2,936,996 ​ $ 134,883 ​ $ 3,071,879 Issuance of common stock — ​ — ​ 5,635,800 ​ ​ 56 ​ ​ 82,688 ​ ​ — ​ ​ 82,744 ​ ​ — ​ ​ 82,744 Repurchase of common stock ​ — ​ ​ — ​ ( 886,432 ) ​ ​ ( 9 ) ​ ​ ( 9,662 ) ​ ​ — ​ ​ ( 9,671 ) ​ ​ — ​ ​ ( 9,671 ) Stock-based compensation, net — ​ — 841,113 ​ 9 ​ 780 ​ — ​ 789 ​ — ​ 789 Distributions - common stock — ​ — — ​ — ​ — ​ ( 73,666 ) ​ ( 73,666 ) ​ — ​ ( 73,666 ) Distributions - preferred stock — ​ — — ​ — ​ — ​ ( 10,347 ) ​ ( 10,347 ) ​ — ​ ( 10,347 ) Distributions - noncontrolling interest — ​ — — ​ — ​ — ​ — ​ — ​ ( 6,517 ) ​ ( 6,517 ) Net income — ​ — — ​ — ​ — ​ 94,661 ​ 94,661 ​ 7,585 ​ 102,246 Balance – March 31, 2023 42,585,589 ​ $ 633,684 183,821,003 ​ $ 1,838 ​ $ 2,278,287 ​ $ 107,697 ​ $ 3,021,506 ​ $ 135,951 ​ $ 3,157,457 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, 2022 Balance - January 1, 2022 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 — ​ — ​ 8,225,750 ​ ​ 82 ​ ​ 137,718 ​ ​ — ​ ​ 137,800 ​ ​ — ​ ​ 137,800 Issuance of Series F preferred stock ​ 3,292,000 ​ ​ 77,571 ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 77,571 ​ ​ — ​ ​ 77,571 Stock-based compensation, net — ​ — 610,184 ​ 6 ​ 674 ​ — ​ 680 ​ — ​ 680 Distributions - common stock — ​ — — ​ — ​ — ​ ( 56,373 ) ​ ( 56,373 ) ​ — ​ ( 56,373 ) Distributions - preferred stock — ​ — — ​ — ​ — ​ ( 9,056 ) ​ ( 9,056 ) ​ — ​ ( 9,056 ) Distributions - noncontrolling interest — ​ — — ​ — ​ — ​ — ​ — ​ ( 6,040 ) ​ ( 6,040 ) Net income — ​ — — ​ — ​ — ​ 73,113 ​ 73,113 ​ 6,816 ​ 79,929 Balance – March 31, 2022 42,617,095 ​ $ 633,734 160,198,115 ​ $ 1,602 ​ $ 1,927,621 ​ $ 75,828 ​ $ 2,638,785 ​ $ 133,263 ​ $ 2,772,048 ​ See Notes to Consolidated Financial Statements. ​ ​ ​ 4 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ 2023 2022 Operating activities: ​ ​ ​ ​ ​ ​ Net income ​ $ 102,246 ​ $ 79,929 Adjustments to reconcile net income to net cash (used in) provided by operating activities: ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ 2,624 ​ 1,983 Stock-based compensation ​ 5,901 ​ 6,095 Amortization and accretion of interest and fees, net ​ ( 236 ) ​ ( 2,840 ) Amortization of capitalized mortgage servicing rights ​ ​ 15,416 ​ ​ 14,972 Originations of loans held-for-sale ​ ​ ( 1,033,384 ) ​ ​ ( 845,620 ) Proceeds from sales of loans held-for-sale, net of gain on sale ​ ​ 921,522 ​ ​ 1,586,715 Mortgage servicing rights ​ ​ ( 18,458 ) ​ ​ ( 15,312 ) Write-off of capitalized mortgage servicing rights from payoffs ​ ​ 3,307 ​ ​ 12,697 Provision for loss sharing (net of recoveries) ​ ​ 3,177 ​ ​ ( 662 ) Provision for credit losses (net of recoveries) ​ ​ 22,517 ​ ​ 2,358 Net charge-offs for loss sharing obligations ​ ​ ( 588 ) ​ ​ ( 230 ) Deferred tax provision (benefit) ​ ​ 3,164 ​ ​ ( 1,720 ) Income from equity affiliates ​ ( 14,326 ) ​ ​ ( 7,212 ) Distributions from operations of equity affiliates ​ ​ 4,748 ​ ​ 12,859 Change in fair value of held-for-sale loans ​ ​ ( 2,960 ) ​ ​ — Loss on extinguishment of debt ​ ​ — ​ ​ 1,350 Payoffs and paydowns of loans held-for-sale ​ ​ 13 ​ ​ 3,258 Changes in operating assets and liabilities ​ ​ ( 71,468 ) ​ ​ ( 11,792 ) Net cash (used in) provided by operating activities ​ ​ ( 56,785 ) ​ ​ 836,828 ​ ​ ​ ​ ​ ​ ​ Investing Activities: ​ ​ ​ ​ ​ ​ Loans and investments funded, originated and purchased, net ​ ( 380,633 ) ​ ​ ( 2,656,874 ) Payoffs and paydowns of loans and investments ​ ​ 1,191,076 ​ ​ 668,379 Deferred fees ​ 3,953 ​ ​ 20,767 Contributions to equity affiliates ​ ( 500 ) ​ ( 12,807 ) Distributions from equity affiliates ​ ​ 11,567 ​ ​ — Payoffs and paydowns of securities held-to-maturity ​ ​ 2,580 ​ ​ 2,647 Purchase of securities held-to-maturity, net ​ ​ — ​ ​ ( 27,598 ) Due to borrowers and reserves ​ ​ — ​ ​ ( 12,150 ) Net cash provided by (used in) investing activities ​ ​ 828,043 ​ ​ ( 2,017,636 ) ​ ​ ​ ​ ​ ​ ​ Financing activities: ​ ​ ​ ​ ​ ​ Proceeds from credit and repurchase facilities ​ 1,849,389 ​ ​ 3,035,664 Paydowns and payoffs of credit and repurchase facilities ​ ( 2,042,692 ) ​ ​ ( 3,213,976 ) Payoffs and paydowns of securitized debt ​ ​ ( 344,547 ) ​ ​ ( 441,000 ) Proceeds from issuance of common stock ​ ​ 82,744 ​ ​ 137,800 Proceeds from issuance of senior unsecured notes ​ ​ 95,000 ​ ​ — Payoffs and paydowns of senior unsecured notes ​ ​ ( 70,750 ) ​ ​ — Payments of withholding taxes on net settlement of vested stock ​ ​ ( 5,112 ) ​ ​ ( 5,415 ) Repurchase of common stock ​ ​ ( 9,671 ) ​ ​ — Distributions to stockholders ​ ​ ( 90,530 ) ​ ​ ( 72,099 ) Payment of deferred financing costs ​ ​ ( 3,866 ) ​ ​ ( 13,915 ) Proceeds from issuance of securitized debt ​ ​ — ​ ​ 1,652,812 Proceeds from issuance of preferred stock ​ ​ — ​ ​ 77,571 Net cash (used in) provided by financing activities ​ ​ ( 540,035 ) ​ ​ 1,157,442 Net increase (decrease) in cash, cash equivalents and restricted cash ​ 231,223 ​ ​ ( 23,366 ) Cash, cash equivalents and restricted cash at beginning of period ​ ​ 1,248,165 ​ ​ 891,270 Cash, cash equivalents and restricted cash at end of period ​ $ 1,479,388 ​ $ 867,904 ​ See Notes to Consolidated Financial Statements. ​ 5 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Continued) (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ 2023 2022 Reconciliation of cash, cash equivalents and restricted cash: ​ ​ ​ ​ ​ ​ Cash and cash equivalents at beginning of period ​ $ 534,357 ​ $ 404,580 Restricted cash at beginning of period ​ ​ 713,808 ​ ​ 486,690 Cash, cash equivalents and restricted cash at beginning of period ​ $ 1,248,165 ​ $ 891,270 ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents at end of period ​ $ 774,544 ​ $ 350,814 Restricted cash at end of period ​ ​ 704,844 ​ ​ 517,090 Cash, cash equivalents and restricted cash at end of period ​ $ 1,479,388 ​ $ 867,904 ​ ​ ​ ​ ​ ​ ​ Supplemental cash flow information: ​ ​ ​ ​ ​ ​ Cash used to pay interest ​ $ 213,849 ​ $ 70,069 Cash used to pay taxes ​ ​ 1,032 ​ ​ 741 ​ ​ ​ ​ ​ ​ ​ Supplemental schedule of non-cash investing and financing activities: ​ ​ ​ ​ ​ ​ Distributions accrued on preferred stock ​ ​ 7,010 ​ ​ 6,138 Cummulative-effect adjustment (adoption of convertible debt standard) ​ ​ — ​ ​ 2,447 ​ See Notes to Consolidated Financial Statements. ​ ​ 6 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ Note 1 — Description of Business ​ Arbor Realty Trust, Inc. (“we,” “us,” or “our”) is a Maryland corporation formed in 2003. We are a nationwide real estate investment trust (“REIT”) and direct lender, providing loan origination and servicing for commercial real estate assets. We operate through two business segments: our Structured Loan Origination and Investment Business, or “Structured Business,” and our Agency Loan Origination and Servicing Business, or “Agency Business.” ​ Through our Structured Business, we invest in a diversified portfolio of structured finance assets in the multifamily, single-family rental (“SFR”) and commercial real estate markets, primarily consisting of bridge loans, in addition to mezzanine loans, junior participating interests in first mortgages and preferred and direct equity. We 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 the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac,” and together with Fannie Mae, the government-sponsored enterprises, or “GSEs”), the Government National Mortgage Association (“Ginnie Mae”), Federal Housing Authority (“FHA”) and the U.S. Department of Housing and Urban Development (together with Ginnie Mae and FHA, “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 Delegated Underwriting and Servicing (“DUS”) lender nationally, a Freddie Mac Multifamily Conventional Loan lender, seller/servicer, in New York, New Jersey and Connecticut, a Freddie Mac affordable, manufactured housing, senior housing and small balance loan (“SBL”) lender, seller/servicer, nationally and a HUD MAP and LEAN senior housing/healthcare lender nationally. We also originate and 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 conduit/commercial mortgage-backed securities (“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 (“APL certificates”). ​ Substantially all of our operations are conducted through our operating partnership, Arbor Realty Limited Partnership (“ARLP”), for which we serve as the indirect general partner, and ARLP’s subsidiaries. We are organized to qualify as a REIT for U.S. federal income tax purposes. 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 taxable REIT subsidiaries (“TRS”), which are part of our TRS consolidated group (the “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 have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), for interim financial statements and the instructions to Form 10-Q. Accordingly, certain information and footnote disclosures normally included in the consolidated financial statements prepared under GAAP have been condensed or omitted. 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. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These financial statements should be read in conjunction with our financial statements and notes thereto included in our 2022 Annual Report. ​ Principles of Consolidation ​ The consolidated financial statements include our financial statements and the financial statements of our wholly owned subsidiaries, partnerships and other entities 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 14. All significant intercompany transactions and balances have been eliminated in consolidation. 7 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ ​ 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 March 31, 2023 inherently less certain. ​ Reclassification ​ Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements. ​ Recently Adopted Accounting Pronouncements ​ Description Adoption Date Effect on Financial Statements In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 ​ The adoption of this guidance did not have a material impact on our consolidated financial statements. ​ Recently Issued Accounting Pronouncements ​ In March 2023, the FASB issued ASU 2023-01, Leases (Topic 842) – Common Control Arrangements and ASU 2023-02, Investments – Equity Method and Joint Ventures: Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method, both effective for us in the first quarter of 2024. We currently do not have any transactions that fall under the scope of this guidance; therefore, the adoption of this guidance is not expected to have an impact on our consolidated financial statements. ​ Significant Accounting Policies ​ See Item 8 – Financial Statements and Supplementary Data in our 2022 Annual Report for a description of our significant accounting policies. There have been no significant changes to our significant accounting policies since December 31, 2022. ​ 8 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ 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 ​ ​ ​ March 31, 2023 ​ Total ​ Count ​ Pay Rate (1) ​ Maturity ​ LTV Ratio (2) ​ LTV Ratio (3) ​ Bridge loans (4) ​ $ 13,298,939 ​ 97 % 659 8.62 % 18.3 0 % 76 % Mezzanine loans ​ 222,094 2 % 46 8.15 % 60.7 44 % 80 % Preferred equity investments ​ ​ 89,725 ​ 1 % 7 ​ 6.56 % 45.3 ​ 47 % 84 % Other loans (5) ​ 32,966 < 1 % 3 9.23 % 29.5 0 % 57 % ​ ​ 13,643,724 100 % 715 8.60 % 19.2 1 % 76 % Allowance for credit losses ​ ​ ( 153,077 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unearned revenue ​ ( 59,662 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans and investments, net ​ $ 13,430,985 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ ​ ​ ​ ​ ​ ​ 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 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1) “Weighted Average Pay Rate” is a weighted average, based on the unpaid principal balance (“UPB”) of each loan in our portfolio, of the interest rate required to be paid 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 March 31, 2023 and December 31, 2022, bridge loans included 254 and 241 , respectively, of SFR loans with a total gross loan commitment of $ 1.63 billion and $ 1.57 billion, respectively, of which $ 982.0 million and $ 927.4 million, respectively, was funded. (5) At both March 31, 2023 and December 31, 2022, other loans included 3 variable rate SFR permanent loans. ​ Concentration of Credit Risk ​ We are subject to concentration risk in that, at March 31, 2023, the UPB related to 84 loans with five different borrowers represented 11 % of total assets. At December 31, 2022, the UPB related to 38 loans with five different borrowers represented 11 % of total assets. During both the three months ended March 31, 2023 and the year ended December 31, 2022, 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 17 for details on our concentration of related party loans and investments. ​ 9 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ 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. ​ 10 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ ​ A summary of the loan portfolio’s internal risk ratings and LTV ratios by asset class at March 31, 2023 is as follows ($ in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Wtd. Avg. Wtd. Avg. ​ ​ UPB by Origination Year ​ ​ ​ ​ First Dollar ​ Last Dollar ​ Asset Class / Risk Rating ​ 2023 ​ 2022 ​ 2021 ​ 2020 ​ 2019 ​ Prior ​ Total ​ LTV Ratio ​ LTV Ratio ​ Multifamily: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 22,360 ​ $ 549,835 ​ $ 268,328 ​ $ 3,155 ​ $ — ​ $ 20,300 ​ $ 863,978 ​ ​ ​ ​ Pass/Watch ​ ​ 160,465 ​ ​ 2,781,244 ​ ​ 3,236,800 ​ ​ 303,109 ​ ​ 203,354 ​ ​ 22,050 ​ ​ 6,707,022 ​ ​ ​ ​ Special Mention ​ — ​ ​ 1,322,873 ​ ​ 2,884,543 ​ ​ 51,175 ​ ​ 51,785 ​ ​ 27,194 ​ ​ 4,337,570 ​ ​ ​ ​ Substandard ​ ​ — ​ ​ 97,218 ​ ​ 259,302 ​ ​ — ​ ​ 10,565 ​ ​ 32,500 ​ ​ 399,585 ​ ​ ​ ​ ​ Total Multifamily ​ $ 182,825 ​ $ 4,751,170 ​ $ 6,648,973 ​ $ 357,439 ​ $ 265,704 ​ $ 102,044 ​ $ 12,308,155 ​ 1 % 77 % Single-Family Rental: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of portfolio ​ ​ 91 % ​ ​ ​ ​ Pass ​ $ — ​ $ — ​ $ 22,928 ​ $ 3,113 ​ $ — ​ $ — ​ $ 26,041 ​ ​ ​ ​ ​ Pass/Watch ​ ​ 33,188 ​ ​ 449,188 ​ ​ 293,140 ​ ​ 107,147 ​ ​ 20,965 ​ ​ — ​ ​ 903,628 ​ ​ ​ ​ ​ Special Mention ​ ​ — ​ ​ 20,710 ​ ​ 27,474 ​ ​ 37,139 ​ ​ — ​ ​ — ​ ​ 85,323 ​ ​ ​ ​ ​ Total Single-Family Rental ​ $ 33,188 ​ $ 469,898 ​ $ 343,542 ​ $ 147,399 ​ $ 20,965 ​ $ — ​ $ 1,014,992 ​ 0 % 63 % 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 % 98 % Office: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of portfolio ​ ​ 1 % ​ ​ ​ ​ Pass/Watch ​ $ — ​ $ — ​ $ — ​ $ 35,410 ​ $ — ​ $ — ​ $ 35,410 ​ ​ ​ ​ ​ Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 44,625 ​ ​ 44,625 ​ ​ ​ ​ ​ Total Office ​ $ — ​ $ — ​ $ — ​ $ 35,410 ​ $ — ​ $ 44,625 ​ $ 80,035 ​ 0 % 99 % Healthcare: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of portfolio ​ ​ 1 % ​ ​ ​ ​ Pass/Watch ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 51,069 ​ $ — ​ $ 51,069 ​ ​ ​ ​ ​ Total Healthcare ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 51,069 ​ $ — ​ $ 51,069 ​ 0 % 69 % Retail: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of portfolio ​ ​ < 1 % ​ ​ ​ ​ Pass ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 4,000 ​ $ — ​ $ 4,000 ​ ​ ​ ​ Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 3,445 ​ ​ 3,445 ​ ​ ​ ​ ​ Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 18,600 ​ ​ 18,600 ​ ​ ​ ​ ​ Total Retail ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 4,000 ​ $ 22,045 ​ $ 26,045 ​ 11 % 71 % Student Housing: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of portfolio ​ ​ < 1 % ​ ​ ​ ​ Pass/Watch ​ $ — ​ $ — ​ $ 25,700 ​ $ — ​ $ — ​ $ — ​ $ 25,700 ​ ​ ​ ​ ​ Total Student Housing ​ $ — ​ $ — ​ $ 25,700 ​ $ — ​ $ — ​ $ — ​ $ 25,700 ​ 0 % 67 % Other: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of portfolio ​ ​ < 1 % ​ ​ ​ ​ Doubtful ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 1,700 ​ $ 1,700 ​ ​ ​ ​ ​ Total Other ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 1,700 ​ $ 1,700 ​ 63 % 63 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of portfolio ​ ​ < 1 % ​ ​ ​ ​ Grand Total ​ $ 216,013 ​ $ 5,221,068 ​ $ 7,018,215 ​ $ 548,348 ​ $ 341,738 ​ $ 298,342 ​ $ 13,643,724 ​ 1 % 76 % ​ 11 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ Geographic Concentration Risk ​ At March 31, 2023, underlying properties in Texas and Florida represented 24 % and 15 %, respectively, of the outstanding balance of our loan and investment portfolio. 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. No other states represented 10% or more of the total loan and investment portfolio. ​ Allowance for Credit Losses ​ A summary of the changes in the allowance for credit losses is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, 2023 ​ Land Multifamily Office Retail Commercial Single-Family Rental Other Total Allowance for credit losses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Beginning balance ​ $ 78,068 ​ $ 37,961 ​ $ 8,162 ​ $ 5,819 ​ $ 1,700 ​ $ 781 ​ $ 68 ​ $ 132,559 Provision for credit losses (net of recoveries) ​ ​ 18 ​ 20,387 ​ ( 56 ) ​ — ​ ​ — ​ 192 ​ ( 23 ) ​ 20,518 Ending balance ​ $ 78,086 ​ $ 58,348 ​ $ 8,106 ​ $ 5,819 ​ $ 1,700 ​ $ 973 ​ $ 45 ​ $ 153,077 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, 2022 Allowance for credit losses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Beginning balance ​ $ 77,970 ​ $ 18,707 ​ $ 8,073 ​ $ 5,819 ​ $ 1,700 ​ $ 320 ​ $ 652 ​ $ 113,241 Provision for credit losses (net of recoveries) ​ ​ ( 30 ) ​ 3,377 ​ 12 ​ — ​ ​ — ​ 101 ​ ( 319 ) ​ 3,141 Ending balance ​ $ 77,940 ​ $ 22,084 ​ $ 8,085 ​ $ 5,819 ​ $ 1,700 ​ $ 421 ​ $ 333 ​ $ 116,382 ​ The increase in the provision for credit losses during the three months ended March 31, 2023 of $ 20.5 million was primarily attributable to the impact from the macroeconomic outlook of the commercial real estate market. 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, including an estimated continual decline in real estate values and other market factors. ​ 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 March 31, 2023 and December 31, 2022, we had outstanding unfunded commitments of $ 1.05 billion and $ 1.15 billion, respectively, that we are obligated to fund as borrowers meet certain requirements. ​ At March 31, 2023 and December 31, 2022, accrued interest receivable related to our loans totaling $ 112.8 million and $ 108.5 million, respectively, was excluded from the estimate of credit losses and is included in other assets on the consolidated balance sheets. ​ 12 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 % Office ​ ​ 44,625 ​ ​ 44,625 ​ ​ 7,951 ​ 0 % 100 % Retail ​ 22,045 ​ 17,563 ​ 5,817 13 % 78 % Commercial ​ 1,700 ​ 1,700 ​ 1,700 63 % 63 % Total ​ $ 202,585 ​ $ 191,756 ​ $ 93,337 ​ 2 % 96 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ 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 % (1) Represents the UPB of eight and seven impaired loans (less unearned revenue and other holdbacks and adjustments) by asset class at March 31, 2023 and December 31, 2022, 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 March 31, 2023 and December 31, 2022. ​ At both March 31, 2023 and 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. 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2023 ​ December 31, 2022 ​ ​ ​ ​ ​ 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 ​ $ 2,605 ​ $ — ​ $ 2,605 Retail ​ ​ 3,445 ​ ​ — ​ ​ 3,445 ​ ​ 3,445 ​ ​ — ​ ​ 3,445 Commercial ​ ​ 1,700 ​ ​ — ​ ​ 1,700 ​ ​ 1,700 ​ ​ — ​ ​ 1,700 Total ​ $ 7,750 ​ $ — ​ $ 7,750 ​ $ 7,750 ​ $ — ​ $ 7,750 ​ In addition, we have six loans with a carrying value totaling $ 121.4 million at March 31, 2023, 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 March 31, 2023 and December 31, 2022, 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. ​ 13 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ At both March 31, 2023 and December 31, 2022, we had no loans contractually past due 90 days or more that are still accruing interest. During the three months ended March 31, 2023 and 2022, we received $ 0.6 million and zero , respectively, of interest income on nonaccrual loans. ​ There were no loan modifications, refinancing’s and/or extensions during the three months ended March 31, 2023 or 2022 for borrowers experiencing financial difficulty. ​ 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 March 31, 2023 and December 31, 2022, we had total interest reserves of $ 118.0 million and $ 123.7 million, respectively, on 479 loans and 480 loans, respectively, with an aggregate UPB of $ 7.48 billion and $ 7.70 billion, respectively. ​ Subsequent Event ​ In April 2023, we exercised our right to foreclose on a group of properties in Houston, Texas that are the underlying collateral for four bridge loans with a total UPB of $ 217.4 million at March 31, 2023. We simultaneously sold these properties to a significant equity investor in the original bridge loans and provided new bridge loan financing as part of the sale. We did not record a loss on the original bridge loans and recovered all the outstanding interest owed to us as part of this restructuring. ​ 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 to third-parties or securitized within 180 days of loan origination. Loans held-for-sale, net consists of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2023 December 31, 2022 Fannie Mae ​ $ 316,283 ​ $ 173,020 FHA ​ ​ 68,008 ​ ​ 21,021 Freddie Mac ​ 41,813 ​ ​ 8,938 Private Label ​ ​ 33,897 ​ ​ 152,735 SFR - Fixed Rate ​ ​ 8,737 ​ ​ 12,352 ​ ​ 468,738 ​ ​ 368,066 Fair value of future MSR ​ ​ 7,387 ​ ​ 5,557 Unrealized impairment loss ​ ​ ( 1,565 ) ​ ​ ( 15,703 ) Unearned discount ​ ( 4,958 ) ​ ​ ( 3,850 ) Loans held-for-sale, net ​ $ 469,602 ​ $ 354,070 ​ During the three months ended March 31, 2023 and 2022, we sold $ 932.7 million and $ 1.59 billion, respectively, of loans held-for-sale. Included in the total loans sold in the first quarters of 2023 and 2022 were $ 159.9 million and $ 489.3 million, respectively, of Private Label loans that were sold to unconsolidated affiliates. In connection with the Private Label loans sold in the first quarter of 2022, which were securitized by the purchaser, we retained the most subordinate class of certificates in this securitization totaling $ 43.4 million in satisfaction of credit risk retention requirements (see Note 7 for details), and we are also the primary servicer of the mortgage loans. ​ During 2022, we recorded a loss of $ 5.2 million (net of corresponding swap gains associated with these loans) on seven Private Label loans with a UPB of $ 129.9 million and a net carrying value of $ 116.4 million. During the first quarter of 2023, we sold these loans and recorded a gain of $ 0.9 million. ​ At March 31, 2023 and December 31, 2022, 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. ​ 14 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ Note 5 — Capitalized Mortgage Servicing Rights ​ Our capitalized mortgage servicing rights (“MSRs”) reflect commercial real estate MSRs derived primarily from loans sold in our Agency Business or acquired MSRs. The discount rates used to determine the present value of all our MSRs throughout the periods presented were between 8 % - 13 % (representing a weighted average discount rate of 12 %) based on our best estimate of market discount rates. The weighted average estimated life remaining of our MSRs was 8.6 years at both March 31, 2023 and December 31, 2022. ​ A summary of our capitalized MSR activity is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, 2023 ​ Three Months Ended March 31, 2022 ​ Originated Acquired Total Originated Acquired Total Beginning balance ​ $ 386,878 ​ $ 14,593 ​ $ 401,471 ​ $ 395,573 ​ $ 27,161 ​ $ 422,734 Additions ​ ​ 13,886 ​ ​ — ​ ​ 13,886 ​ ​ 26,971 ​ ​ — ​ ​ 26,971 Amortization ​ ​ ( 14,287 ) ​ ​ ( 1,129 ) ​ ​ ( 15,416 ) ​ ​ ( 12,927 ) ​ ​ ( 2,045 ) ​ ​ ( 14,972 ) Write-downs and payoffs ​ ​ ( 2,841 ) ​ ​ ( 466 ) ​ ​ ( 3,307 ) ​ ​ ( 11,556 ) ​ ​ ( 1,141 ) ​ ​ ( 12,697 ) Ending balance ​ $ 383,636 ​ $ 12,998 ​ $ 396,634 ​ $ 398,061 ​ $ 23,975 ​ $ 422,036 ​ We collected prepayment fees totaling $ 2.1 million and $ 16.1 million during the three months ended March 31, 2023 and 2022, respectively, which are included as a component of servicing revenue, net on the consolidated statements of income. At March 31, 2023 and December 31, 2022, we had no valuation allowance recorded on any of our MSRs. ​ The expected amortization of capitalized MSRs recorded at March 31, 2023 is as follows (in thousands): ​ ​ ​ ​ ​ Year Amortization 2023 (nine months ending 12/31/2023) $ 46,546 2024 ​ 60,349 2025 ​ 56,515 2026 ​ 50,349 2027 ​ ​ 45,525 Thereafter ​ 137,350 Total ​ $ 396,634 ​ Based on scheduled maturities, actual amortization may vary from these estimates. ​ 15 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ Note 6 — Mortgage Servicing ​ Product and geographic concentrations that impact our servicing revenue are as follows ($ in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2023 ​ Product Concentrations ​ Geographic Concentrations ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ UPB ​ Product UPB (1) % of Total State % of Total ​ Fannie Mae ​ $ 19,508,256 ​ 67 % Texas ​ 12 % Freddie Mac ​ ​ 5,180,607 18 % New York ​ 11 % Private Label ​ ​ 2,233,500 8 % California ​ 8 % FHA ​ ​ 1,242,669 ​ 4 % North Carolina ​ 8 % Bridge (2) ​ ​ 467,881 ​ 2 % Georgia ​ 6 % SFR - Fixed Rate ​ ​ 279,712 ​ 1 % Florida ​ 5 % Total ​ $ 28,912,625 ​ 100 % New Jersey ​ 5 % ​ ​ ​ ​ ​ ​ ​ Illinois ​ 4 % ​ ​ ​ ​ ​ ​ ​ Other (3) ​ 41 % ​ ​ ​ ​ ​ ​ ​ Total ​ 100 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ 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 % (1) Excludes loans which we are not collecting a servicing fee. (2) Represents bridge loans that were either sold by our Structured Business or refinanced by a third-party lender which we retained the right to service. (3) No other individual state represented 4% or more of the total. ​ At March 31, 2023 and December 31, 2022, our weighted average servicing fee was 40.3 basis points and 41.1 basis points, respectively. At March 31, 2023 and December 31, 2022, we held total escrow balances (including unfunded CLO holdbacks) of approximately $ 1.5 billion and $ 1.7 billion, respectively, of which approximately $ 1.3 billion and $ 1.5 billion, respectively, is not included in our consolidated balance sheets. 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, which is 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, is included as a component of servicing revenue, net in the consolidated statements of income as noted in the following table. 16 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ The components of servicing revenue, net are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ ​ 2023 2022 Servicing fees ​ $ 29,210 ​ $ 31,748 Interest earned on escrows ​ 17,003 ​ 837 Prepayment fees ​ ​ 2,075 ​ ​ 16,138 Write-offs of MSRs ​ ​ ( 3,307 ) ​ ​ ( 12,697 ) Amortization of MSRs ​ ( 15,416 ) ​ ( 14,972 ) Servicing revenue, net ​ $ 29,565 ​ $ 21,054 ​ ​ Note 7 — Securities Held-to-Maturity ​ Agency Private Label Certificates (“APL 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 March 31, 2023, 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 7.30 years. The weighted average effective interest rate was 8.85 % at both March 31, 2023 and December 31, 2022, 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 March 31, 2023, 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 6.0 years. The weighted average effective interest rate was 11.43 % and 12.20 % at March 31, 2023 and December 31, 2022, respectively, including the accretion of a portion of the discount deemed collectible. Approximately $ 7.3 million is estimated to mature within one year, $ 15.8 million is estimated to mature after one year through five years, $ 0.4 million is estimated to mature after five years through ten years and $ 16.3 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 March 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ APL certificates ​ $ 192,791 ​ $ 124,118 ​ $ ( 16,178 ) ​ $ 107,940 ​ $ 3,330 B Piece bonds ​ ​ 39,750 ​ ​ 29,770 ​ ​ 3,253 ​ ​ 33,023 ​ ​ 1,695 Total ​ $ 232,541 ​ $ 153,888 ​ $ ( 12,925 ) ​ $ 140,963 ​ $ 5,025 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 ​ 17 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ A summary of the changes in the allowance for credit losses for our securities held-to-maturity is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, 2023 ​ ​ APL ​ B Piece ​ ​ ​ ​ Certificates Bonds Total Beginning balance ​ $ 2,783 ​ $ 370 ​ $ 3,153 Provision for credit loss expense/(reversal) ​ 547 ​ 1,325 ​ 1,872 Ending balance ​ $ 3,330 ​ $ 1,695 ​ $ 5,025 ​ 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. We recorded interest income (including the amortization of discount) related to these investments of $ 3.1 million and $ 5.2 million during the three months ended March 31, 2023 and 2022, 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 March 31, 2023 December 31, 2022 March 31, 2023 Arbor Residential Investor LLC ​ $ 46,141 ​ $ 46,951 ​ $ — AMAC Holdings III LLC ​ ​ 14,791 ​ ​ 15,825 ​ ​ — Fifth Wall Ventures ​ ​ 13,939 ​ ​ 13,584 ​ ​ — Lightstone Value Plus REIT L.P. ​ ​ 1,895 ​ ​ 1,895 ​ ​ — Docsumo Pte. Ltd. ​ ​ 450 ​ ​ 450 ​ ​ — JT Prime ​ 425 ​ 425 ​ — North Vermont Avenue ​ ​ — ​ ​ — ​ ​ — West Shore Café ​ ​ — ​ ​ — ​ ​ 1,688 Lexford Portfolio ​ ​ — ​ ​ — ​ ​ — East River Portfolio ​ — ​ — ​ — Total ​ $ 77,641 ​ $ 79,130 ​ $ 1,688 ​ Arbor Residential Investor LLC (“ARI”). During the three months ended March 31, 2023 and 2022, we recorded a loss of $ 0.9 million and income of $ 5.0 million, respectively, to income from equity affiliates in our consolidated statements of income. We also received cash distributions of $ 7.5 million during the three months ended March 31, 2022, which were classified as returns of capital. The allocation of income is based on the underlying agreements, which may be different than our indirect interest, and was 9.2 % at March 31, 2023. At March 31, 2023, our indirect interest was 12.3 % . ​ AMAC Holdings III LLC (“AMAC III”). During the first quarter of 2023, we received distributions of $ 0.6 million, which were classified as returns of capital and recorded a loss of $ 0.4 million. During the first quarter of 2022, we funded an additional $ 4.9 million and recorded a loss of $ 0.5 million. ​ Fifth Wall Ventures (“Fifth Wall”). We funded an additional $ 0.4 million and $ 4.8 million during the first quarters of 2023 and 2022, respectively . ​ Docsumo Pte. Ltd. (“Docsumo”). In the first quarter of 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. ​ 18 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ Lexford Portfolio. During the three months ended March 31, 2023, we received distributions of $ 4.7 million, which were recognized as income from equity affiliates. ​ Equity Participation Interest. During the first quarters of 2023 and 2022, we received $ 11.0 million and $ 2.6 million, respectively, from equity participation interests on properties that were sold and which we had a preferred equity loan that previously paid-off. ​ See Note 17 for details of certain investments described above. ​ ​ Note 9 — Debt Obligations ​ Credit and Repurchase Facilities ​ Borrowings under our credit and repurchase facilities are as follows ($ in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2023 ​ December 31, 2022 ​ ​ ​ ​ ​ ​ Note ​ Debt ​ Collateral ​ ​ ​ Debt ​ Collateral ​ ​ Current ​ Extended ​ Rate ​ Carrying ​ Carrying ​ Wtd. Avg. ​ Carrying ​ Carrying ​ Maturity Maturity Type Value (1) Value Note Rate Value (1) Value Structured Business ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 2.5 B joint repurchase facility (2) ​ Mar. 2024 ​ Mar. 2025 ​ V ​ $ 1,336,305 ​ $ 1,876,423 ​ 7.26 % $ 1,516,657 ​ $ 2,099,447 $ 1 B repurchase facility (2) ​ Dec. 2023 ​ N/A ​ V ​ 391,056 ​ 559,341 ​ 6.97 % 498,666 ​ ​ 703,740 $ 500 M repurchase facility ​ (3) ​ N/A ​ V ​ ​ 198,152 ​ ​ 240,799 ​ 7.89 % ​ 154,653 ​ ​ 188,563 $ 499 M repurchase facility (2)(4) ​ Oct. 2023 ​ N/A ​ V ​ ​ 339,819 ​ ​ 487,321 ​ 7.22 % ​ 351,056 ​ ​ 504,506 $ 450 M repurchase facility ​ Mar. 2024 ​ Mar. 2026 ​ V ​ ​ 319,106 ​ ​ 419,485 ​ 7.03 % ​ 344,237 ​ ​ 450,736 $ 450 M repurchase facility ​ Oct. 2023 ​ Oct. 2024 ​ V ​ ​ 102,470 ​ ​ 131,924 ​ 6.57 % ​ 186,639 ​ ​ 239,678 $ 400 M credit facility ​ July 2023 ​ N/A ​ V ​ ​ 33,232 ​ ​ 43,383 ​ 6.83 % ​ 33,221 ​ ​ 43,238 $ 225 M credit facility ​ Oct. 2023 ​ Oct. 2024 ​ V ​ 64,877 ​ ​ 116,288 ​ 7.52 % ​ 47,398 ​ ​ 81,119 $ 200 M repurchase facility ​ Mar. 2024 ​ Mar. 2025 ​ V ​ ​ 45,769 ​ 65,401 ​ 7.52 % 32,494 ​ ​ 47,750 $ 200 M repurchase facility ​ Jan. 2024 ​ Jan. 2025 ​ V ​ 147,948 ​ ​ 187,508 ​ 6.92 % ​ 154,516 ​ ​ 200,099 $ 169 M loan specific credit facilities ​ May 2023 to Aug. 2025 ​ May 2023 to Aug. 2027 ​ V/F ​ ​ 169,111 ​ 238,458 ​ 6.97 % 156,107 ​ ​ 225,805 $ 50 M credit facility ​ Apr. 2024 ​ Apr. 2025 ​ V ​ 29,199 ​ ​ 36,500 ​ 7.07 % ​ 29,194 ​ ​ 36,500 $ 35 M working capital facility ​ Apr. 2024 ​ N/A ​ V ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ — $ 25 M credit facility ​ Oct. 2024 ​ N/A ​ V ​ ​ 18,747 ​ ​ 24,475 ​ 7.57 % ​ 18,701 ​ ​ 24,572 $ 25 M credit facility ​ Apr. 2026 ​ Apr. 2027 ​ V ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ — Repurchase facility - securities (2)(5) ​ N/A ​ N/A ​ V ​ ​ 33,100 ​ ​ — ​ 6.59 % ​ 12,832 ​ ​ — Structured Business total ​ ​ ​ ​ ​ ​ ​ $ 3,228,891 ​ $ 4,427,306 ​ 7.18 % $ 3,536,371 ​ $ 4,845,753 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Agency Business ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 750 M ASAP agreement ​ N/A ​ N/A ​ V ​ $ 82,581 ​ $ 82,679 ​ 5.78 % $ 29,476 ​ $ 30,291 $ 500 M joint repurchase facility (2) ​ Mar. 2024 ​ Mar. 2025 ​ V ​ ​ 8,047 ​ ​ 11,350 ​ 7.03 % ​ 104,629 ​ ​ 135,641 $ 500 M repurchase facility ​ Nov. 2023 ​ N/A ​ V ​ ​ 112,978 ​ ​ 125,336 ​ 6.18 % ​ 66,778 ​ ​ 66,866 $ 200 M credit facility ​ Mar. 2024 ​ N/A ​ V ​ ​ 167,480 ​ ​ 167,681 ​ 6.27 % ​ 31,475 ​ ​ 33,177 $ 150 M credit facility ​ July 2023 ​ N/A ​ V ​ ​ 50,365 ​ ​ 50,408 ​ 6.33 % ​ 57,887 ​ ​ 57,974 $ 50 M credit facility ​ Sept. 2023 ​ N/A ​ V ​ ​ — ​ ​ — ​ — ​ ​ 14,664 ​ ​ 14,671 $ 1 M repurchase facility (2)(4) ​ Oct. 2023 ​ N/A ​ V ​ ​ 534 ​ ​ 907 ​ 7.18 % ​ 534 ​ ​ 920 Agency Business total ​ ​ ​ ​ ​ ​ ​ $ 421,985 ​ $ 438,361 ​ 6.17 % $ 305,443 ​ $ 339,540 Consolidated total ​ ​ ​ ​ ​ ​ ​ $ 3,650,876 ​ $ 4,865,667 ​ 7.06 % $ 3,841,814 ​ $ 5,185,293 V = Variable Note Rate ; F = Fixed Note Rate ​ (1) At March 31, 2023 and December 31, 2022, debt carrying value for the Structured Business was net of unamortized deferred finance costs of $ 11.1 million and $ 13.3 million, respectively, and for the Agency Business was net of unamortized deferred finance costs of $ 0.8 million and $ 0.9 million, respectively. (2) These facilities are subject to margin call provisions associated with changes in interest spreads. (3) The commitment amount under this repurchase facility expires six months after the lender provides written notice. We then have an additional six months to repurchase the underlying loans. (4) A portion of this facility was used to finance a fixed rate SFR permanent loan reported through our Agency Business. (5) At March 31, 2023 , this facility was collateralized by certificates retained by us from our Freddie Mac Q Series securitization (“Q Series securitization”) with a principal balance of $ 47.4 million. At December 31, 2022, this facility was collateralized by B Piece bonds with a carrying value of $ 33.1 million. ​ 19 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ During 2022 and 2023, 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. ​ Structured Business ​ At March 31, 2023 and December 31, 2022, 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 7.57 % and 6.95 %, respectively. The leverage on our loan and investment portfolio financed through our credit and repurchase facilities, excluding the securities repurchase facility and the working capital facility, was 72 % and 73 % at March 31, 2023 and December 31, 2022, respectively. In March 2023, we amended a $ 450.0 million repurchase facility to exercise a one-year extension option to March 2024 and amend the interest rate to a minimum of SOFR plus 2.00 %. ​ Agency Business ​ In March 2023, we amended a $ 200.0 million credit facility to extend the maturity to March 2024 and amend the interest rate to SOFR plus 1.40 %. ​ 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. ​ 20 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ 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 March 31, 2023 ​ Face Value ​ Value (1) ​ Rate (2) ​ UPB ​ Value ​ Cash (4) CLO 19 ​ $ 872,812 ​ $ 867,037 ​ 7.33 % $ 985,430 ​ $ 980,805 ​ $ 34,882 CLO 18 ​ ​ 1,652,812 ​ ​ 1,646,248 ​ 6.77 % ​ 1,970,977 ​ ​ 1,963,706 ​ ​ — CLO 17 ​ ​ 1,714,125 ​ ​ 1,708,200 ​ 6.63 % ​ 1,939,977 ​ ​ 1,933,198 ​ ​ 129,142 CLO 16 ​ ​ 1,237,500 ​ ​ 1,232,352 ​ 6.26 % ​ 1,411,145 ​ ​ 1,405,680 ​ ​ 55,931 CLO 15 ​ ​ 674,412 ​ ​ 671,983 ​ 6.32 % ​ 607,100 ​ ​ 604,704 ​ ​ 186,520 CLO 14 ​ ​ 655,475 ​ ​ 653,034 ​ 6.27 % ​ 673,732 ​ ​ 671,839 ​ ​ 73,802 CLO 13 ​ ​ 294,477 ​ ​ 293,022 ​ 6.76 % ​ 400,617 ​ ​ 399,695 ​ ​ 24,175 CLO 12 ​ 203,027 ​ ​ 202,375 ​ 6.93 % ​ 257,714 ​ ​ 256,655 ​ ​ 27,900 Total CLOs ​ ​ 7,304,640 ​ ​ 7,274,251 ​ 6.63 % ​ 8,246,692 ​ ​ 8,216,282 ​ ​ 532,352 Q Series securitization ​ ​ 236,878 ​ ​ 234,221 ​ 6.87 % ​ 315,837 ​ ​ 314,166 ​ ​ — Total securitized debt ​ $ 7,541,518 ​ $ 7,508,472 ​ 6.64 % $ 8,562,529 ​ $ 8,530,448 ​ $ 532,352 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ ​ ​ ​ ​ ​ 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 (1) Debt carrying value is net of $ 33.0 million and $ 36.8 million of deferred financing fees at March 31, 2023 and December 31, 2022, respectively. (2) At March 31, 2023 and December 31, 2022, the aggregate weighted average note rate for our collateralized loan obligations (“CLOs”), including certain fees and costs, was 6.86 % and 6.32 % , respectively. (3) At March 31, 2023, five loans with an aggregate UPB of $ 121.4 million were deemed a &quot;credit risk&quot; as defined by the CLO indentures. At December 31, 2022, there were no collateral deemed a “credit risk” as defined by the CLO indentures. Credit risk assets are generally defined as one that, in the CLO collateral manager's reasonable business judgment, has a significant risk of becoming a defaulted asset. (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 $ 167.5 million and $ 230.0 million at March 31, 2023 and December 31, 2022, respectively. ​ CLO 13 and CLO 12. During the three months ended March 31, 2023, $ 168.3 million and $ 176.3 million of CLO 13 and CLO 12, respectively, have been paid down. ​ 21 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ Senior Unsecured Notes ​ A summary of our senior unsecured notes is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Senior ​ ​ ​ ​ ​ March 31, 2023 December 31, 2022 Unsecured ​ Issuance ​ ​ ​ ​ ​ ​ Carrying ​ Wtd. Avg. ​ ​ ​ ​ Carrying ​ Wtd. Avg. Notes Date Maturity UPB Value (1) Rate (2) ​ UPB Value (1) Rate (2) 7.75 % Notes (3) ​ Mar. 2023 ​ Mar. 2026 ​ $ 95,000 ​ $ 93,518 ​ 7.75 % $ — ​ $ — ​ — ​ 8.50 % Notes (3) ​ Oct. 2022 ​ Oct. 2027 ​ ​ 150,000 ​ ​ 147,647 ​ 8.50 % ​ 150,000 ​ ​ 147,519 ​ 8.50 % 5.00 % Notes (3) ​ Dec. 2021 ​ Dec. 2028 ​ ​ 180,000 ​ ​ 177,557 ​ 5.00 % ​ 180,000 ​ ​ 177,450 ​ 5.00 % 4.50 % Notes (3) Aug. 2021 Sept. 2026 ​ 270,000 ​ ​ 267,136 ​ 4.50 % ​ 270,000 ​ ​ 266,926 ​ 4.50 % 5.00 % Notes (3) Apr. 2021 Apr. 2026 175,000 ​ ​ 173,073 5.00 % ​ 175,000 ​ ​ 172,917 5.00 % 8.00 % Notes (3) Apr. 2020 Apr. 2023 — ​ — — ​ 70,750 ​ 70,613 8.00 % 4.50 % Notes (3) Mar. 2020 Mar. 2027 275,000 ​ 273,081 4.50 % 275,000 ​ 272,960 4.50 % 4.75 % Notes (4) Oct. 2019 Oct. 2024 110,000 ​ 109,457 4.75 % 110,000 ​ 109,369 4.75 % 5.75 % Notes (4) ​ Mar. 2019 ​ Apr. 2024 ​ ​ 90,000 ​ 89,611 5.75 % 90,000 ​ 89,514 5.75 % 5.625 % Notes (4) ​ Mar. 2018 ​ May 2023 ​ ​ 78,850 ​ ​ 78,819 5.63 % ​ 78,850 ​ ​ 78,726 5.63 % ​ ​ ​ ​ ​ ​ $ 1,423,850 ​ $ 1,409,899 ​ 5.42 % $ 1,399,600 ​ $ 1,385,994 ​ 5.40 % (1) At March 31, 2023 and December 31, 2022, the carrying value is net of deferred financing fees of $ 14.0 million and $ 13.6 million, respectively. (2) At March 31, 2023 and December 31, 2022, the aggregate weighted average note rate, including certain fees and costs, was 5.72 % and 5.69 % , 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. (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. ​ In March 2023, we issued $ 95.0 million aggregate principal amount of 7.75 % senior unsecured notes due in 2026 in a private offering. We received net proceeds of $ 93.4 million from the issuance, after deducting the placement agent commission and other offering expenses. We used $ 70.8 million of the proceeds, which includes accrued interest and other fees, to repurchase the remaining portion of our 8.00 % senior unsecured notes due in 2023. ​ Subsequent Event. In May 2023, our 5.625 % senior unsecured notes matured and were redeemed for cash. Convertible Senior Unsecured Notes ​ 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. ​ The UPB and net carrying value of our convertible notes are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unamortized Deferred ​ Net Carrying Period UPB Financing Fees Value March 31, 2023 ​ $ 287,500 ​ $ 6,454 ​ $ 281,046 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ $ 287,500 ​ $ 7,144 ​ $ 280,356 ​ 22 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ During the three months ended March 31, 2023, we incurred interest expense on the notes totaling $ 6.1 million, of which $ 5.4 million and $ 0.7 million related to the cash coupon and deferred financing fees, respectively. During the three months ended March 31, 2022, we incurred interest expense on the notes totaling $ 3.8 million, of which $ 3.1 million and $ 0.7 million related to the cash coupon and deferred financing fees, respectively. Including the amortization of the deferred financing fees, our weighted average total cost of the notes was 8.42 % at both March 31, 2023 and December 31, 2022. At March 31, 2023, the 7.50 % convertible senior notes had a conversion rate of 59.9317 shares of common stock per $ 1,000 of principal, which represented a conversion price of $ 16.69 per share of common stock. ​ Junior Subordinated Notes ​ The carrying values of borrowings under our junior subordinated notes were $ 143.3 million and $ 143.1 million at March 31, 2023 and December 31, 2022, respectively, which is net of a deferred amount of $ 9.5 million and $ 9.6 million, respectively, (which is amortized into interest expense over the life of the notes) and deferred financing fees of $ 1.6 million at both March 31, 2023 and December 31, 2022. 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 8.08 % and 7.65 % at March 31, 2023 and December 31, 2022, respectively. Including certain fees and costs, the weighted average note rate was 8.16 % and 7.74 % at March 31, 2023 and December 31, 2022, 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 March 31, 2023. ​ 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 March 31, 2023, as well as on the most recent determination dates in April 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, (3) 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 April 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 149.65 % 144.83 % 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 181.78 % 157.94 % 181.82 % 169.24 % 159.94 % 145.12 % 150.89 % 124.34 % 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 23 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ 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 ​ April 2023 ​ 149.65 % 144.83 % 119.76 % 120.85 % 121.21 % 122.51 % 124.03 % 120.30 % 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 % — ​ (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. ​ Note 10 — Allowance for Loss-Sharing Obligations ​ Our allowance for loss-sharing obligations related to the Fannie Mae DUS program is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ 2023 2022 Beginning balance ​ $ 57,168 ​ $ 56,064 Provisions for loss sharing ​ ​ 4,567 ​ ​ 133 Provisions reversal for loan repayments ​ ​ ( 1,390 ) ​ ​ ( 795 ) Recoveries (charge-offs), net ​ ( 588 ) ​ ​ ( 230 ) Ending balance ​ $ 59,757 ​ $ 55,172 ​ 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 March 31, 2023 and 2022, we had $ 34.5 million and $ 34.4 million, respectively, 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 March 31, 2023 and December 31, 2022, we had outstanding advances of $ 0.4 million and $ 0.8 million, respectively, which were netted against the allowance for loss-sharing obligations. ​ At March 31, 2023 and December 31, 2022, our allowance for loss-sharing obligations, associated with expected losses under CECL, was $ 25.3 million and $ 22.7 million, respectively, and represented 0.13 % and 0.12 %, respectively, of our Fannie Mae servicing portfolio. During the three months ended March 31, 2023, we recorded a $ 2.6 million increase in CECL reserves. 24 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ ​ At March 31, 2023 and December 31, 2022, the maximum quantifiable liability associated with our guarantees under the Fannie Mae DUS agreement was $ 3.58 billion and $ 3.49 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 11 — 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. ​ 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 the three months ended March 31, 2023 and 2022, we recorded a gain of $ 7.1 million and a loss of $ 2.5 million, respectively, from changes in the fair value of these derivatives and $ 18.5 million and $ 15.3 million, respectively, of income from MSRs. See Note 12 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 the three months ended March 31, 2023, we recorded realized gains of $ 1.6 million and unrealized losses of $ 4.4 million and during the three months ended March 31, 2022, we recorded realized and unrealized gains of $ 18.0 million and $ 2.0 million, respectively, to our Agency Business related to our Swaps. The realized and unrealized gains and losses are recorded in gain on derivative instruments, net. ​ 25 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ A summary of our non-qualifying derivative financial instruments in our Agency Business is as follows ($ in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value ​ ​ ​ ​ Notional ​ Balance Sheet ​ Derivative ​ Derivative Derivative Count Value Location Assets Liabilities Rate lock commitments ​ 9 ​ $ 334,722 ​ Other assets/other liabilities ​ $ 3,097 ​ $ ( 2,352 ) Forward sale commitments ​ 48 ​ ​ 760,826 ​ Other assets/other liabilities ​ ​ 6,679 ​ ​ ( 1,022 ) Swaps ​ 250 ​ ​ 25,000 ​ ​ ​ ​ — ​ ​ — ​ ​ ​ ​ $ 1,120,548 ​ ​ ​ $ 9,776 ​ $ ( 3,374 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 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 ) ​ ​ Note 12 — 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2023 ​ December 31, 2022 ​ ​ Principal / ​ Carrying ​ Estimated ​ Principal / ​ Carrying ​ Estimated ​ Notional Amount Value Fair Value Notional Amount Value Fair Value Financial assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans and investments, net ​ $ 13,643,724 ​ $ 13,430,985 ​ $ 13,634,147 ​ $ 14,456,123 ​ $ 14,254,674 ​ $ 14,468,418 Loans held-for-sale, net ​ ​ 468,738 ​ ​ 469,602 ​ ​ 483,727 ​ ​ 368,066 ​ ​ 354,070 ​ ​ 362,054 Capitalized mortgage servicing rights, net ​ ​ n/a ​ ​ 396,634 ​ ​ 502,282 ​ ​ n/a ​ ​ 401,471 ​ ​ 530,913 Securities held-to-maturity, net ​ ​ 232,541 ​ ​ 153,888 ​ ​ 140,963 ​ ​ 234,255 ​ ​ 156,547 ​ ​ 144,571 Derivative financial instruments ​ ​ 591,688 ​ 9,776 ​ 9,776 ​ ​ 111,950 ​ 1,505 ​ 1,505 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Financial liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Credit and repurchase facilities ​ $ 3,662,756 ​ $ 3,650,876 ​ $ 3,610,881 ​ $ 3,856,009 ​ $ 3,841,814 ​ $ 3,828,192 Securitized debt ​ ​ 7,541,518 ​ 7,508,472 ​ 7,326,912 ​ ​ 7,886,066 ​ 7,849,270 ​ 7,560,541 Senior unsecured notes ​ ​ 1,423,850 ​ 1,409,899 ​ 1,257,377 ​ ​ 1,399,600 ​ 1,385,994 ​ 1,262,560 Convertible senior unsecured notes ​ ​ 287,500 ​ ​ 281,046 ​ ​ 264,141 ​ ​ 287,500 ​ ​ 280,356 ​ ​ 287,834 Junior subordinated notes ​ ​ 154,336 ​ 143,322 ​ 104,595 ​ ​ 154,336 ​ 143,128 ​ 103,977 Derivative financial instruments ​ ​ 503,860 ​ 3,374 ​ 3,374 ​ ​ 273,973 ​ 4,897 ​ 4,897 ​ 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. 26 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ ​ 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). ​ 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. Fair values are estimated using current market quotes received from inactive markets (Level 2). ​ 27 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ 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 March 31, 2023 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements Using Fair ​ ​ Carrying ​ ​ ​ ​ Value Hierarchy ​ Value Fair Value Level 1 Level 2 Level 3 Financial assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Derivative financial instruments ​ $ 9,776 ​ $ 9,776 ​ $ — ​ $ 6,679 ​ $ 3,097 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Financial liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Derivative financial instruments ​ $ 3,374 ​ $ 3,374 ​ $ — ​ $ 3,374 ​ $ — ​ 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, are determined using the following input levels at March 31, 2023 (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) ​ $ 98,419 ​ $ 98,419 ​ $ — ​ $ — ​ $ 98,419 Loans held-for-sale (2) ​ ​ 41,068 ​ ​ 41,068 ​ ​ — ​ ​ 41,068 ​ ​ — ​ ​ $ 139,487 ​ $ 139,487 ​ $ — ​ $ 41,068 ​ $ 98,419 (1) We had an allowance for credit losses of $ 93.3 million relating to eight impaired loans with an aggregate carrying value, before loan loss reserves, of $ 191.8 million at March 31, 2023. (2) We had unrealized impairment losses of $ 1.6 million related to ten held-for-sale loans with an aggregate carrying value, before unrealized impairment losses, of $ 42.6 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. 28 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ Quantitative information about Level 3 fair value measurements at March 31, 2023 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 ​ 7.50 % Office ​ ​ 36,674 ​ Discounted cash flows ​ Capitalization rate ​ 5.25 % ​ ​ ​ ​ ​ ​ ​ 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 ​ ​ 3,097 ​ Discounted cash flows ​ W/A discount rate ​ 13.27 % ​ 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 ​ ​ Three Months Ended March 31, ​ 2023 2022 Derivative assets and liabilities, net ​ ​ ​ ​ ​ ​ Beginning balance ​ $ 354 ​ $ 295 Settlements ​ ​ ( 15,066 ) ​ ​ ( 13,683 ) Realized gains recorded in earnings ​ ​ 14,712 ​ ​ 13,388 Unrealized gains recorded in earnings ​ ​ 3,097 ​ ​ 1,355 Ending balance ​ $ 3,097 ​ $ 1,355 ​ 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 March 31, 2023 Principal Amount Servicing Rights Movement Effect Loss Adjustment Rate lock commitments ​ $ 334,722 ​ $ 3,097 ​ $ 1,185 ​ $ — ​ $ 4,282 Forward sale commitments ​ ​ 760,826 ​ ​ — ​ ​ ( 1,185 ) ​ ​ — ​ ​ ( 1,185 ) Loans held-for-sale, net (1) ​ ​ 468,738 ​ ​ 7,388 ​ ​ — ​ ​ ( 1,565 ) ​ ​ 5,823 Total ​ ​ ​ ​ $ 10,485 ​ $ — ​ $ ( 1,565 ) ​ $ 8,920 (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. ​ 29 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ We measure certain assets and liabilities for which fair value is only disclosed. The fair value of these assets and liabilities are determined using the following input levels at March 31, 2023 (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 ​ $ 13,430,985 ​ $ 13,634,147 ​ $ — ​ $ — ​ $ 13,634,147 Loans held-for-sale, net ​ ​ 469,602 ​ ​ 483,727 ​ ​ — ​ ​ 476,339 ​ ​ 7,388 Capitalized mortgage servicing rights, net ​ ​ 396,634 ​ ​ 502,282 ​ ​ — ​ ​ — ​ ​ 502,282 Securities held-to-maturity, net ​ ​ 153,888 ​ ​ 140,963 ​ ​ — ​ ​ — ​ ​ 140,963 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Financial liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Credit and repurchase facilities ​ $ 3,650,876 ​ $ 3,610,881 ​ $ — ​ $ 421,985 ​ $ 3,188,896 Securitized debt ​ 7,508,472 ​ 7,326,912 ​ — ​ — ​ 7,326,912 Senior unsecured notes ​ 1,409,899 ​ 1,257,377 ​ 1,257,377 ​ — ​ — Convertible senior unsecured notes ​ ​ 281,046 ​ ​ 264,141 ​ ​ — ​ ​ 264,141 ​ ​ — Junior subordinated notes ​ 143,322 ​ 104,595 ​ — ​ — ​ 104,595 ​ ​ Note 13 — Commitments and Contingencies ​ Agency Business Commitments. Our Agency Business is subject to supervision by certain regulatory agencies. Among other things, these agencies require us to meet certain minimum net worth, operational liquidity and restricted liquidity collateral requirements, and compliance with reporting requirements. Our adjusted net worth and liquidity required by the agencies for all periods presented exceeded these requirements. ​ At March 31, 2023, we were required to maintain at least $ 18.8 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 March 31, 2023, the restricted liquidity requirement totaled $ 67.3 million and was satisfied with a $ 64.0 million letter of credit and $ 2.5 million of cash issued to Fannie Mae. ​ At March 31, 2023, reserve requirements for the Fannie Mae DUS loan portfolio will require us to fund $ 35.7 million in additional restricted liquidity over the next 48 months , assuming no further principal paydowns, prepayments, or defaults within our at-risk portfolio. Fannie Mae periodically reassesses these collateral requirements and may make changes to these requirements in the future. 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 March 31, 2023, we met all of Fannie Mae’s quarterly capital requirements and our Fannie Mae adjusted net worth was in excess of the required net worth. We are not subject to capital requirements on a quarterly basis for Ginnie Mae and FHA, as requirements for these investors are only required on an annual basis. ​ 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. 30 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ ​ 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 11 and Note 12. ​ Debt Obligations and Operating Leases. At March 31, 2023, 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 (nine months ending December 31, 2023) ​ $ 1,944,655 ​ $ 7,076 ​ $ 1,951,731 2024 ​ 2,997,340 ​ 9,180 ​ 3,006,520 2025 ​ 1,902,049 ​ 9,318 ​ 1,911,367 2026 ​ 4,905,927 ​ 9,363 ​ 4,915,290 2027 ​ 985,653 ​ 7,929 ​ 993,582 2028 ​ ​ 180,000 ​ ​ 7,301 ​ ​ 187,301 Thereafter ​ 154,336 ​ 20,491 ​ 174,827 Total ​ $ 13,069,960 ​ $ 70,658 ​ $ 13,140,618 ​ During the three months ended March 31, 2023 and 2022, we recorded lease expense of $ 2.6 million and $ 2.4 million, respectively. ​ Unfunded Commitments. In accordance with certain structured loans and investments, we have outstanding unfunded commitments of $ 1.05 billion at March 31, 2023 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 that had emerged from bankruptcy. There were 73 defendants in the three lawsuits, including 55 corporate and partnership entities and 18 individuals. A subsidiary of ours and certain individuals and other entities that are affiliates of ours were included as defendants. ​ In June 2013, the Trust amended the lawsuits, to, among other things, (1) consolidate the lawsuits into one lawsuit, (2) remove 47 defendants from the lawsuits, none of whom were related to us, so that there were 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 (as consolidated, the &quot;Action&quot;). For more detailed information regarding the Action, please refer to Note 14 of our 2022 Annual Report filed with the SEC on February 17, 2023. ​ After extensive motion practice and discovery, in early December 2022, the plaintiff and certain co-defendants, including our affiliates, commenced discussions regarding a possible settlement of the Action, and in late December 2022, those parties reached an agreement in principle to settle the Action for a total of $ 38 million. We agreed to pay up to $ 7.4 million of the settlement amount, which amount was accrued in our December 31, 2022 financial statements. We maintain certain claims against a co-defendant on which we may recover amounts in the future, reducing our contribution to the settlement, but we can give no assurances that we will be successful in any such recovery. In early March 2023, the parties to the settlement finalized the settlement documents and on April 25, 2023, the Bankruptcy Court approved the settlement in open court. Pursuant to the settlement agreement, the parties to the settlement are expected to make the agreed upon payments and the broad mutual releases will become effective during the second quarter, upon which the Action will be discontinued, with prejudice. 31 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ ​ 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 14 — 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. ​ The assets and liabilities related to these consolidated Securitization Entities are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2023 December 31, 2022 ​ Assets: ​ ​ ​ ​ ​ ​ ​ Restricted cash ​ $ 699,892 ​ $ 710,775 ​ Loans and investments, net ​ ​ 8,530,448 ​ ​ 8,900,104 ​ Other assets ​ ​ 123,696 ​ ​ 174,382 ​ Total assets ​ $ 9,354,036 ​ $ 9,785,261 ​ ​ ​ ​ ​ ​ ​ Liabilities: ​ ​ ​ ​ ​ ​ ​ Securitized debt ​ $ 7,508,472 ​ $ 7,849,270 ​ Other liabilities ​ 23,863 ​ 26,754 ​ Total liabilities ​ $ 7,532,335 ​ $ 7,876,024 ​ ​ 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 9 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 28 VIEs in which we have a variable interest at March 31, 2023 because we do not have the ability to direct the activities of the VIEs that most significantly impact each entity’s economic performance. ​ 32 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ A summary of our variable interests in identified VIEs, of which we are not the primary beneficiary, at March 31, 2023 is as follows (in thousands): ​ ​ ​ ​ ​ Type Carrying Amount (1) Loans ​ $ 437,448 APL certificates ​ ​ 127,448 B Piece bonds ​ ​ 31,465 Equity investments ​ ​ 19,160 Agency interest only strips ​ ​ 214 Total ​ $ 615,735 (1) Represents the carrying amount of loans and investments before reserves. At March 31, 2023, $ 172.5 million of loans to VIEs had corresponding specific loan loss reserves of $ 85.8 million. The maximum loss exposure at March 31, 2023 would not exceed the carrying amount of our investment. ​ These unconsolidated VIEs have exposure to real estate debt of approximately $ 3.95 billion at March 31, 2023. ​ Note 15 — Equity ​ Common Stock. During the first quarter of 2023, we sold 5,635,800 shares of our common stock at an average price of $ 14.68 per share for net proceeds of $ 82.7 million through an “At-The-Market” equity offering sales agreement. The proceeds were used to make investments related to our business and for general corporate purposes. ​ In March 2023, the Board of Directors authorized a share repurchase program providing for the repurchase of up to $ 50.0 million of our outstanding common stock. The repurchase of our common stock may be made from time to time in the open market, through privately negotiated transactions, or otherwise in compliance with Rule 10b-18 and Rule 10b5-1 under the Securities Exchange Act of 1934, based on our stock price, general market conditions, applicable legal requirements and other factors. The program may be discontinued or modified at any time. As of April 30, 2023, we repurchased 3,545,604 shares of our common stock under this program at a total cost of $ 37.4 million and an average cost of $ 10.56 per share. ​ Noncontrolling Interest. Noncontrolling interest relates to the operating partnership units (“OP Units”) issued to satisfy a portion of the purchase price in connection with the acquisition of the agency platform of Arbor Commercial Mortgage, LLC (“ACM”) in 2016. 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 March 31, 2023, there were 16,293,589 OP Units outstanding, which represented 8.1 % of the voting power of our outstanding stock. ​ Distributions. Dividends declared (on a per share basis) during the three months ended March 31, 2023 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock ​ Preferred Stock ​ ​ ​ ​ ​ ​ ​ Dividend Declaration Date Dividend Declaration Date Series D Series E Series F February 15, 2023 ​ $ 0.40 ​ January 3, 2023 ​ $ 0.3984375 ​ $ 0.390625 ​ $ 0.390625 ​ ​ ​ ​ ​ March 31, 2023 ​ $ 0.3984375 ​ $ 0.390625 ​ $ 0.390625 ​ Common Stock – On May 3, 2023, the Board of Directors declared a cash dividend of $ 0.42 per share of common stock. The dividend is payable on May 31, 2023 to common stockholders of record as of the close of business on May 19, 2023. ​ Deferred Compensation. During the first quarter of 2023, we issued 889,822 shares of restricted common stock to our employees and Board of Directors under the 2020 Amended Omnibus Stock Incentive Plan (the “2020 Plan”) with a total grant date fair value of $ 10.4 million, of which: (1) 256,208 shares with a grant date fair value of $ 3.0 million vested on the grant date; (2) 24,493 shares with a grant date fair value of $ 0.4 million will vest during the remainder of 2023; (3) 260,304 shares with a grant date fair value of $ 3.1 33 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ million will vest in 2024; (4) 235,969 shares with a grant date fair value of $ 2.7 million will vest in 2025; (5) 78,126 shares with a grant date fair value of $ 0.9 million will vest in 2026; and (6) 34,722 shares with a grant date fair value of $ 0.4 million will vest in 2027. We also issued 40,796 fully vested restricted stock units (“RSUs”) with a grant date fair value of $ 0.5 million to certain members of our Board of Directors and 247,275 RSUs with a grant date fair value of $ 2.9 million that vest in full in the first quarter of 2026 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 pursuant to a pre-established deferral election. ​ During the first quarter of 2023, 352,427 shares of performance-based restricted stock units previously granted to our chief executive officer fully vested and were net settled for 172,513 common shares. ​ During the first quarter of 2023, we withheld 188,542 shares from the net settlement of restricted common stock by employees for payment of withholding taxes on shares that vested. ​ Earnings Per Share (“EPS”). 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 is as follows ($ in thousands, except share and per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ ​ 2023 ​ 2022 ​ Basic Diluted Basic Diluted Net income attributable to common stockholders (1) ​ $ 84,319 ​ $ 84,319 ​ $ 64,057 ​ $ 64,057 Net income attributable to noncontrolling interest (2) ​ ​ — ​ ​ 7,585 ​ ​ — ​ ​ 6,816 Interest expense on convertible notes ​ ​ — ​ ​ 6,081 ​ ​ — ​ ​ 3,995 Net income attributable to common stockholders and noncontrolling interest ​ $ 84,319 ​ $ 97,985 ​ $ 64,057 ​ $ 74,868 Weighted average shares outstanding ​ ​ 181,116,674 ​ 181,116,674 ​ 153,420,238 ​ 153,420,238 Dilutive effect of OP Units (2) ​ — ​ ​ 16,293,589 ​ ​ — ​ ​ 16,325,095 Dilutive effect of convertible notes ​ ​ — ​ ​ 17,230,358 ​ ​ — ​ ​ 15,111,154 Dilutive effect of restricted stock units (3) ​ ​ — ​ 270,353 ​ — ​ 574,917 Weighted average shares outstanding ​ 181,116,674 ​ 214,910,974 ​ 153,420,238 ​ 185,431,404 Net income per common share (1) ​ $ 0.47 ​ $ 0.46 ​ $ 0.42 ​ $ 0.40 (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) 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. ​ ​ 34 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ Note 16 — Income Taxes ​ As a REIT, we are generally not subject to U.S. federal income tax to the extent of our distributions to stockholders and as long as certain asset, income, distribution, ownership and administrative tests are met. To maintain our qualification as a REIT, we must annually distribute at least 90 % of our REIT-taxable income to our stockholders and meet certain other requirements. We may also be subject to certain state, local and franchise taxes. Under certain circumstances, federal income and excise taxes may be due on our undistributed taxable income. If we were to fail to meet these requirements, we would be subject to U.S. federal income tax, which could have a material adverse impact on our results of operations and amounts available for distributions to our stockholders. We believe that all of the criteria to maintain our REIT qualification have been met for the applicable periods, but there can be no assurance that these criteria will continue to be met in subsequent periods. ​ The Agency Business is operated through our TRS Consolidated Group and is subject to U.S. federal, state and local income taxes. In general, our TRS entities may hold assets that the REIT cannot hold directly and may engage in real estate or non-real estate-related business. ​ In the three months ended March 31, 2023 and 2022, we recorded a tax provision of $ 8.0 million and $ 8.2 million, respectively. The tax provision recorded in the three months ended March 31, 2023 consisted of a current and deferred tax provision of $ 4.8 million and $ 3.2 million, respectively. The tax provision recorded in the three months ended March 31, 2022 consisted of a current tax provision of $ 9.9 million and a deferred tax benefit of $ 1.7 million. Current and deferred taxes are primarily recorded on the portion of earnings (losses) recognized by us with respect to our interest in the TRS’s. Deferred income tax assets and liabilities are calculated based on temporary differences between our U.S. GAAP consolidated financial statements and the federal, state, local tax basis of assets and liabilities as of the consolidated balance sheets. ​ Note 17 — 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 the three months ended March 31, 2023 and 2022, we incurred $ 0.7 million and $ 0.8 million, respectively, of costs for services provided and employees seconded to the Service Recipients, all of which were reimbursed to us and included in due from related party on the consolidated balance sheets. ​ Other Related Party Transactions. Due from related party was $ 113.1 million and $ 77.4 million at March 31, 2023 and December 31, 2022, respectively, which consisted primarily of amounts due from our affiliated servicing operations related to real estate transactions closing at the end of the quarter and amounts due from ACM for costs incurred in connection with the support and secondment agreements described above. ​ Due to related party was $ 12.5 million and $ 12.4 million at March 31, 2023 and December 31, 2022, 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 March 31, 2023) 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 March 31, 2023) 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 4.63 % with a SOFR floor of 0.25 % and matures in May 2025. Interest income recorded from this loan was less than $ 0.1 million for the three months ended March 31, 2023. ​ 35 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ In February 2022, we committed to fund a $ 39.4 million bridge loan (none of which was funded at March 31, 2023) 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 less than $ 0.1 million for the three months ended March 31, 2023. ​ 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 $ 1.4 million and $ 0.7 million for the three months ended March 31, 2023 and 2022, respectively. ​ In 2020, we committed to fund a $ 32.5 million bridge loan ($ 16.0 million was funded at March 31, 2023) 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 $ 0.5 million and $ 0.2 million for the three months ended March 31, 2023 and 2022, respectively. ​ In 2020, we committed to fund a $ 30.5 million bridge loan and we made a $ 4.6 million preferred equity investment in a SFR build-to-rent construction project. ACM and an entity owned by an immediate family member of our chief executive officer also made equity investments in the project and own an 18.9 % equity interest in the borrowing entity. The bridge loan ($ 21.1 million was funded at March 31, 2023) has an interest rate of LIBOR plus 5.5 % with a LIBOR floor of 0.75 % and was scheduled to mature in May 2023 and the preferred equity investment has a 12.0 % fixed rate and was scheduled to mature in April 2023. In April 2023, the bridge loan was upsized to $ 38.4 million, and the interest rate was changed to SOFR plus 5.25 % with a SOFR floor of 0.75 %. In addition, the maturity date on both loans were extended to May 2025. Interest income recorded from these loans was $ 0.7 million and $ 0.3 million for the three months ended March 31, 2023 and 2022, 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. In 2020, we sold the Private Label loan to an unconsolidated affiliate of ours. The mezzanine loan bears interest at a 9.0 % fixed rate and matures in April 2030. Interest income recorded from the mezzanine loan was $ 0.1 million for both the three months ended March 31, 2023 and 2022. ​ 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 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. At both March 31, 2023 and December 31, 2022, these loans had an allowance for credit loss recorded against them totaling $ 8.0 million. ​ 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 both the three months ended March 31, 2023 and 2022, we reimbursed the aircraft owner $ 0.2 million for the flights chartered by our executives pursuant the agreement. ​ 36 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ 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 March 31, 2023) for an 18 % interest in AMAC III. During the three months ended March 31, 2023 and 2022, we recorded a loss associated with this investment of $ 0.4 million and $ 0.5 million, respectively, and during the three months ended March 31, 2023, we received a cash distribution of $ 0.6 million. 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 $ 0.7 million and $ 0.3 million for the three months ended March 31, 2023 and 2022, 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 $ 0.5 million and $ 0.3 million for the three months ended March 31, 2023 and 2022, respectively. ​ In 2017, we originated two bridge loans totaling $ 28.0 million on two multifamily properties owned in part by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers and our chief executive officer) which owns 45 % of the borrowing entity. The loans had an interest rate of LIBOR plus 5.25 % with LIBOR floors ranging from 1.24 % to 1.54 % and were scheduled to mature in 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, this loan paid off in full. Interest income recorded from this loan was $ 0.5 million for the three months ended March 31, 2022. ​ 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 March 31, 2023. 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 $ 0.1 million for all periods 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 March 31, 2023, we had an indirect interest of 12.3 % in this entity. We recorded a loss related to this investment of $ 0.9 million and income of $ 5.0 million in the three months ended March 31, 2023 and 2022, respectively. During the three months ended March 31, 2022, we also received a cash distribution of $ 7.5 million which were classified as returns of capital. ​ 37 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ 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. 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 $ 4.7 million during the three months ended March 31, 2023, 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 March 31, 2023, this debt had an aggregate outstanding balance of approximately $ 600.0 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 March 31, 2023, ACM holds 2,535,870 shares of our common stock and 10,615,085 OP Units, which represents 6.6 % of the voting power of our outstanding stock. Our Board of Directors approved a resolution under our charter allowing our chief executive officer and ACM, (which our chief executive officer has a controlling equity interest in), to own more than the 5 % ownership interest limit of our common stock as stated in our amended charter. ​ 38 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ Note 18 — 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. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, 2023 ​ ​ Structured ​ Agency ​ Other / ​ ​ ​ ​ Business Business Eliminations (1) Consolidated Interest income ​ $ 317,376 ​ $ 10,571 ​ $ — ​ $ 327,947 Interest expense ​ 214,894 ​ ​ 4,479 ​ ​ — ​ ​ 219,373 Net interest income ​ 102,482 ​ ​ 6,092 ​ ​ — ​ ​ 108,574 Other revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain on sales, including fee-based services, net ​ — ​ ​ 14,589 ​ ​ — ​ ​ 14,589 Mortgage servicing rights ​ — ​ ​ 18,458 ​ ​ — ​ ​ 18,458 Servicing revenue ​ ​ — ​ ​ 44,981 ​ ​ — ​ ​ 44,981 Amortization of MSRs ​ — ​ ​ ( 15,416 ) ​ ​ — ​ ​ ( 15,416 ) Property operating income ​ 1,381 ​ ​ — ​ ​ — ​ ​ 1,381 Gain on derivative instruments, net ​ — ​ ​ 4,223 ​ ​ — ​ ​ 4,223 Other income, net ​ 1,908 ​ ​ 2,974 ​ ​ — ​ ​ 4,882 Total other revenue ​ 3,289 ​ ​ 69,809 ​ ​ — ​ ​ 73,098 Other expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Employee compensation and benefits ​ 15,641 ​ ​ 26,758 ​ ​ — ​ ​ 42,399 Selling and administrative ​ 6,711 ​ ​ 6,912 ​ ​ — ​ ​ 13,623 Property operating expenses ​ 1,383 ​ ​ — ​ ​ — ​ ​ 1,383 Depreciation and amortization ​ ​ 1,451 ​ ​ 1,173 ​ ​ — ​ ​ 2,624 Provision for loss sharing (net of recoveries) ​ — ​ ​ 3,177 ​ ​ — ​ ​ 3,177 Provision for credit losses (net of recoveries) ​ 20,645 ​ ​ 1,872 ​ ​ — ​ ​ 22,517 Total other expenses ​ 45,831 ​ ​ 39,892 ​ ​ — ​ ​ 85,723 Income before income from equity affiliates and income taxes ​ ​ 59,940 ​ ​ 36,009 ​ ​ — ​ ​ 95,949 Income from equity affiliates ​ 14,326 ​ ​ — ​ ​ — ​ ​ 14,326 Benefit from (provision for) income taxes ​ 429 ​ ​ ( 8,458 ) ​ ​ — ​ ​ ( 8,029 ) Net income ​ 74,695 ​ ​ 27,551 ​ ​ — ​ ​ 102,246 Preferred stock dividends ​ 10,342 ​ ​ — ​ ​ — ​ ​ 10,342 Net income attributable to noncontrolling interest ​ — ​ ​ — ​ ​ 7,585 ​ ​ 7,585 Net income attributable to common stockholders ​ $ 64,353 ​ $ 27,551 ​ $ ( 7,585 ) ​ $ 84,319 ​ 39 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, 2022 ​ ​ Structured ​ Agency ​ Other / ​ ​ ​ Business Business Eliminations (1) Consolidated Interest income $ 156,260 $ 10,438 $ — $ 166,698 Interest expense ​ ​ 78,202 ​ ​ 4,357 ​ ​ — ​ ​ 82,559 Net interest income ​ ​ 78,058 ​ ​ 6,081 ​ ​ — ​ ​ 84,139 Other revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain on sales, including fee-based services, net ​ ​ — ​ ​ 1,656 ​ ​ — ​ ​ 1,656 Mortgage servicing rights ​ ​ — ​ ​ 15,312 ​ ​ — ​ ​ 15,312 Servicing revenue ​ ​ — ​ ​ 36,026 ​ ​ — ​ ​ 36,026 Amortization of MSRs ​ ​ — ​ ​ ( 14,972 ) ​ ​ — ​ ​ ( 14,972 ) Property operating income ​ ​ 295 ​ ​ — ​ ​ — ​ ​ 295 Gain on derivative instruments, net ​ ​ — ​ ​ 17,386 ​ ​ — ​ ​ 17,386 Other income, net ​ ​ 3,196 ​ ​ 4 ​ ​ — ​ ​ 3,200 Total other revenue ​ ​ 3,491 ​ ​ 55,412 ​ ​ — ​ ​ 58,903 Other expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Employee compensation and benefits ​ ​ 15,487 ​ ​ 26,538 ​ ​ — ​ ​ 42,025 Selling and administrative ​ ​ 7,409 ​ ​ 7,139 ​ ​ — ​ 14,548 Property operating expenses ​ ​ 535 ​ ​ — ​ ​ — ​ ​ 535 Depreciation and amortization ​ ​ 810 ​ ​ 1,173 ​ ​ — ​ ​ 1,983 Provision for loss sharing (net of recoveries) ​ ​ — ​ ​ ( 662 ) ​ ​ — ​ ​ ( 662 ) Provision for credit losses (net of recoveries) ​ ​ 2,069 ​ ​ 289 ​ ​ — ​ ​ 2,358 Total other expenses ​ ​ 26,310 ​ ​ 34,477 ​ ​ — ​ ​ 60,787 Income before extinguishment of debt, income from equity affiliates and income taxes ​ ​ 55,239 ​ ​ 27,016 ​ ​ — ​ ​ 82,255 Loss on extinguishment of debt ​ ​ ( 1,350 ) ​ ​ — ​ ​ — ​ ​ ( 1,350 ) Income from equity affiliates ​ ​ 7,212 ​ ​ — ​ ​ — ​ ​ 7,212 Provision for income taxes ​ ​ ( 1,432 ) ​ ​ ( 6,756 ) ​ ​ — ​ ​ ( 8,188 ) Net income ​ ​ 59,669 ​ ​ 20,260 ​ ​ — ​ ​ 79,929 Preferred stock dividends ​ ​ 9,056 ​ ​ — ​ ​ — ​ ​ 9,056 Net income attributable to noncontrolling interest ​ ​ — ​ ​ — ​ ​ 6,816 ​ ​ 6,816 Net income attributable to common stockholders $ 50,613 $ 20,260 $ ( 6,816 ) $ 64,057 (1) Includes income allocated to the noncontrolling interest holders not allocated to the two reportable segments. 40 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2023 ​ Structured Business Agency Business Consolidated Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 405,596 ​ $ 368,948 ​ $ 774,544 Restricted cash ​ ​ 702,360 ​ ​ 2,484 ​ ​ 704,844 Loans and investments, net ​ ​ 13,430,985 ​ ​ — ​ ​ 13,430,985 Loans held-for-sale, net ​ ​ — ​ ​ 469,602 ​ ​ 469,602 Capitalized mortgage servicing rights, net ​ ​ — ​ ​ 396,634 ​ ​ 396,634 Securities held-to-maturity, net ​ ​ — ​ ​ 153,888 ​ ​ 153,888 Investments in equity affiliates ​ ​ 77,641 ​ ​ — ​ ​ 77,641 Goodwill and other intangible assets ​ ​ 12,500 ​ ​ 82,396 ​ ​ 94,896 Other assets and due from related party ​ ​ 413,846 ​ ​ 71,344 ​ ​ 485,190 Total assets ​ $ 15,042,928 ​ $ 1,545,296 ​ $ 16,588,224 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Debt obligations ​ $ 12,571,630 ​ $ 421,985 ​ $ 12,993,615 Allowance for loss-sharing obligations ​ ​ — ​ ​ 59,757 ​ ​ 59,757 Other liabilities and due to related parties ​ ​ 268,048 ​ ​ 109,347 ​ ​ 377,395 Total liabilities ​ $ 12,839,678 ​ $ 591,089 ​ $ 13,430,767 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 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 ​ 41 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ ​ 2023 2022 Origination Data: ​ ​ ​ ​ ​ ​ ​ Structured Business ​ ​ ​ ​ ​ ​ ​ Bridge loans (1) ​ $ 262,189 ​ $ 2,820,716 ​ Mezzanine / Preferred Equity ​ ​ 5,845 ​ ​ 8,139 ​ Total new loan originations ​ $ 268,034 ​ $ 2,828,855 ​ ​ ​ ​ ​ ​ ​ ​ ​ Loan runoff ​ $ 1,186,649 ​ $ 666,551 ​ ​ ​ ​ ​ ​ ​ ​ ​ Agency Business ​ ​ ​ ​ ​ ​ ​ Origination Volumes by Investor: ​ ​ ​ ​ ​ ​ ​ Fannie Mae ​ $ 795,021 ​ $ 449,680 ​ FHA ​ ​ 148,940 ​ ​ 11,990 ​ Freddie Mac ​ ​ 101,332 ​ ​ 299,072 ​ Private Label ​ ​ 41,107 ​ ​ 72,896 ​ SFR - Fixed Rate ​ ​ 5,461 ​ ​ 4,871 ​ Total ​ $ 1,091,861 ​ $ 838,509 ​ Total loan commitment volume ​ $ 1,500,110 ​ $ 975,132 ​ ​ ​ ​ ​ ​ ​ ​ ​ Agency Business Loan Sales Data: ​ ​ ​ ​ ​ ​ ​ Fannie Mae ​ $ 651,758 ​ $ 666,544 ​ Private Label ​ ​ 159,945 ​ ​ 489,269 ​ Freddie Mac ​ ​ 68,457 ​ ​ 359,086 ​ FHA ​ ​ 43,475 ​ ​ 71,816 ​ SFR - Fixed Rate ​ ​ 9,064 ​ ​ — ​ Total ​ $ 932,699 ​ $ 1,586,715 ​ Sales margin (fee-based services as a % of loan sales) (2) ​ ​ 1.56 % ​ 1.18 % MSR rate (MSR income as a % of loan commitments) ​ ​ 1.23 % ​ 1.57 % (1) 2023 and 2022 includes 20 and 35 SFR loans, respectively, with a UPB of $ 76.1 million and $ 133.4 million, respectively. During 2023 and 2022, we committed to fund SFR loans totaling $ 54.4 million and $ 83.3 million, respectively. (2) 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 on derivative instruments, net in the consolidated statements of income . ​ 42 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2023 ​ ​ ​ ​ ​ 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 ​ $ 19,508,256 ​ 49.5 ​ 8.0 Freddie Mac ​ ​ 5,180,607 ​ 24.7 ​ 9.1 Private Label ​ ​ 2,233,500 ​ 19.6 ​ 7.7 FHA ​ ​ 1,242,669 ​ 14.7 ​ 19.8 Bridge ​ ​ 467,881 ​ 11.6 ​ 2.9 SFR - Fixed Rate ​ ​ 279,712 ​ 20.0 ​ 5.9 Total ​ $ 28,912,625 ​ 40.3 ​ 8.6 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 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 ​ ​ ​ 43 Table of Contents