What changed in this filing

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Item 1. Business

2024-02-20 compared with 2023-02-17 · 63 added, 31 removed, 266 unchanged (26% of the section changed)

10 unchanged sentences

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

We also originate and 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”).

We also originate and retain the servicing rights on permanent financing loans that are generally 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 either sell the Private Label loans instantaneously or pool and securitize them and sell certificates in the securitizations to third party investors, while retaining the highest risk bottom tranche certificate of the securitization (“APL certificates”).

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.

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Investment Strategy

The financing of multifamily, senior housing, healthcare, SFR and other diverse commercial real estate offers opportunities that demand customized financing solutions.

The financing of multifamily, SFR and other diverse commercial real estate offers opportunities that demand customized financing solutions.

We believe that providing both structured products and GSE/agency loans through direct originations and in-house underwriting capabilities throughout our national network of sales offices and lending solutions through various GSE and HUD programs provides us with a competitive advantage, since this allows us to meet the multiple needs of borrowers through fully integrated, comprehensive product offerings.

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Junior participation financings have the same obligations, collateral and borrower as the senior debt.

The junior participation interest is subordinated to the senior debt by virtue of a contractual agreement between the senior debt lender and the junior participating interest lender.

The junior participation interest

is subordinated to the senior debt by virtue of a contractual agreement between the senior debt lender and the junior participating interest lender.

Similar to our bridge loans, the yield on these investments may be enhanced by prepaid and deferred interest payments, yield look-backs and participating interests.

9 unchanged sentences

Private Label.

We underwrite, originate and service permanent financing loans underwritten using similar guidelines of our existing agency loans sold to the GSEs.

We pool and securitize the Private Label loans and sell certain certificates in the securitizations to third-party investors, while retaining the APL certificates.

We underwrite, originate and service 5 to 10 year fixed rate permanent financing loans underwritten using similar guidelines of our existing agency loans sold to the GSEs.

We either sell the Private Label loans instantaneously or pool and securitize them and sell certain certificates in the securitizations to third party investors, while retaining the APL certificates.

SFR Fixed Rate.

8 unchanged sentences

Debt Securities.

We have, and may in the future, invest in bond securities, such as those issued by Freddie Mac SBL securitizations from loans originated under the Freddie Mac SBL program and SFR bonds.

We have, and may in the future, invest in bond securities, such as those issued by Freddie Mac SBL securitizations from loans originated under the Freddie Mac SBL program and APL certificates.

These securities are generally carried at cost and are often purchased at a discount to their face value, which is accreted into interest income, if deemed collectable, over the expected remaining life of the related security as a yield adjustment.

1 unchanged sentence

Loan and investment portfolio product type and asset class information at December 31, 2023 is as follows ($ in thousands):

Type Asset Class Number Unpaid Principal Wtd.

Pay Rate (1) Wtd.

Remaining Months

Unpaid Principal

Single-Family Rental

Student Housing

Mezzanine Loans

Preferred Equity

to Maturity (2)

Bridge Loans Multifamily 316 $ 10,789,936 8.36 % 12.1

Single‑Family Rental 354 1,316,803 9.87 % 12.7

Land 7 118,595 0.13 % 0.3

Office 1 35,410 8.98 % 7.6

Retail 1 12,500 8.98 % 11.1

679 12,273,244 8.45 % 12.0

Mezzanine Loans Multifamily 46 232,104 8.77 % 60.3

Other 3 16,353 3.35 % 4.5

49 248,457 8.41 % 56.6

Preferred Equity Multifamily 14 75,941 4.46 % 66.6

Other 3 9,800 — 10.7

17 85,741 3.95 % 60.3

Other Single‑Family Rental 2 7,564 9.84 % 13.9

Total 747 $ 12,615,006 8.42 % 13.2

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(1) “Weighted Average Pay Rate” is a weighted average, based on each loan’s unpaid principal balance (“UPB”), of our interest rate required to be paid monthly as stated in the individual loan agreements.

1 unchanged sentence

Including certain fees earned and costs associated with the structured portfolio, the weighted average current interest rate was 8.98%.

(2) Including extension options, the weighted average remaining months to maturity was 29.4.

Loan and investment portfolio asset class and geographic concentration information at December 31, 2023 is as follows ($ in thousands):

Concentrations

Single-Family Rental

North Carolina

Asset Class UPB Percentage Geographic

Concentrations UPB Percentage

Multifamily $ 11,097,981 88 % Texas $ 3,038,417 24 %

Single-Family Rental 1,324,367 10 % Florida 2,128,952 17 %

Land 136,028 1 % Georgia 1,174,465 9 %

Office 35,410 <1 % North Carolina 685,945 5 %

Other 21,220 <1 % New York 531,006 4 %

Total $ 12,615,006 100 % Other (1) 5,056,221 41 %

Total $ 12,615,006 100 %

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

1 unchanged sentence

Our cost of funds in 2023 was 7.15% on average borrowings of $12.31 billion, which was computed by dividing the interest expense incurred during 2023 by the average borrowings during 2023.

At December 31, 2022, our loan and investment portfolio were comprised of 97% floating rate loans and 3% fixed rate loans.

We also own unconsolidated investments in equity affiliates totaling $79.1 million, which consists primarily of a joint venture formed to invest in a residential mortgage banking business and an investment in a multifamily-focused commercial real estate investment fund.

At December 31, 2023, our loan and investment portfolio was comprised of 94% floating rate loans and 6% fixed rate loans.

We also own unconsolidated investments in equity affiliates totaling $79.3 million and described in more detail in Note 8.

Agency Business Lending and Servicing Overview

One of the Agency Business’s primary sources of revenue are the gains and fees recognized from the origination and sale of mortgage loans.

Loans originated under GSE and HUD programs, as well as our SFR fixed rate product, are generally sold within 60 days from the loan origination date, while our Private Label loans are pooled and generally expected to be sold and securitized within 180 days of loan origination.

Loans originated under GSE and HUD programs, as well as our SFR fixed rate product, are generally sold within 60 days from the

loan origination date.

Our Private Label loans are either sold instantaneously or pooled and securitized, or sold, generally within 180 days of loan origination.

Our loan activity in 2023 was comprised of originations totaling $5.11 billion, sales totaling $4.89 billion and commitment volume totaling $5.21 billion.

4 unchanged sentences

Agency Business servicing portfolio product and geographic concentration information at December 31, 2023 is as follows ($ in thousands):

Product Concentrations

Geographic Concentrations

Servicing Fee

(basis points)

Private Label

North Carolina

SFR - Fixed Rate

Product Concentrations Geographic Concentrations

Count UPB (1) Percent

Servicing Fee Rate

(basis points) Wtd.

(years) State UPB

Fannie Mae 2,559 $ 21,264,578 69 % 47.4 7.4 Texas 11 %

Freddie Mac 1,148 5,181,933 17 % 24.0 8.5 New York 11 %

Private Label 160 2,510,449 8 % 19.5 6.7 California 8 %

FHA 105 1,359,624 4 % 14.4 19.2 North Carolina 8 %

Bridge (2) 4 379,425 1 % 10.9 3.2 Georgia 6 %

SFR - Fixed Rate 59 287,446 1 % 20.1 5.1 Florida 6 %

Total 4,035 $ 30,983,455 100 % 39.1 8.0 New Jersey 5 %

Other (3) 41 %

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

(2) Represents four bridge loans sold by our Structured Business that we are servicing.

See Note 3 for details.

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

The following describes our lending and investment process for both our Structured and Agency Businesses.

We have a network of sales and support offices in California, Florida, Georgia, Indiana, Maryland, Massachusetts, New Jersey, New York, Ohio, Oklahoma, Pennsylvania and Texas that staff approximately 26 loan originators who solicit property owners, developers, and mortgage loan brokers.

We have a network of sales and support offices in California, Florida, Indiana, Maryland, Massachusetts, Michigan, New Jersey, New York and Pennsylvania that staff 26 loan originators who solicit property owners, developers, and mortgage loan brokers.

In some instances, the originators accept loan applications which meet our underwriting criteria from a select group of mortgage loan brokers.

72 unchanged sentences

We enter into hedging transactions to protect our investment portfolio from interest rate and credit risk exposures.

These transactions may include interest rate and credit default swaps, the purchase or sale of interest rate collars, caps or floors, options, mortgage derivatives and other hedging instruments.

These transactions may include over-the-counter treasury futures, interest rate and credit default swaps, the purchase or sale of interest rate collars, caps or floors, options, mortgage derivatives and other hedging instruments.

These instruments may be used to hedge as much of the interest rate risk we determine is in the best interest of our stockholders, given the cost of such hedges and the need to maintain our status as a REIT.

6 unchanged sentences

Equity Capital Policies.

Subject to applicable law, our Board of Directors has the authority, without further stockholder approval, to issue additional authorized common stock and preferred stock or otherwise raise capital, including through the issuance of senior securities and convertible debt instruments, in any manner and on the terms and for the consideration it deems appropriate, including in exchange for property.

Subject to applicable law, our Board of Directors have the authority, without further stockholder approval, to issue additional previously authorized common stock and preferred stock or otherwise raise capital, including through the issuance of debt instruments, in any manner and on the terms and for the consideration it deems appropriate, including in exchange for property.

We may in the future issue common stock or units of partnership interest in our operating partnership in connection with acquisitions.

1 unchanged sentence

Conflicts of Interest Policies.

We, our executive officers, and Arbor Commercial Mortgage, LLC (“ACM”) face conflicts of interests because of our relationships with each other and the way in which our business is structured.

ACM has approximately 7% of the voting interest in our stock at December 31, 2022.

We, our executive officers, and Arbor Commercial Mortgage, LLC (“ACM”), our former manager, face conflicts of interests because of our relationships with each other and the way in which our business is structured.

approximately 6% of the voting interest in our stock at December 31, 2023.

Our chairman and chief executive officer also serves as the chief executive officer of ACM, beneficially owns approximately 35% of the outstanding membership interests of ACM and controls all voting interests in ACM.

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We have a dedicated recruitment team which leverages internal and external resources to enable successful employee recruitment.

We emphasize employee development and training and have established Arbor University, an on-line portal with a variety of training and development courses for our employees.

We emphasize employee development and training and have established Arbor University, an online portal with a variety of training and development courses for our employees.

Our compensation and benefit programs aim to attract, retain, and motivate employees to achieve superior results.

16 unchanged sentences

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

What changed 10-K

Item 1. Business