ARBOR REALTY TRUST INC 10-K

Item 8. Financial Statements and Supplementary Data Page Report of Independent Registered Public Accounting Firm (PCAOB ID 42 ) 49 Consolidated Balance Sheets 51 Consolidated Statements of Income 52 Consolidated Statements of Changes in Equity 53 Consolidated Statements of Cash Flows 54 Notes to Consolidated Financial Statements 57 Schedule IV — Loans and Other Lending Investments 113 All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto. 48 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Arbor Realty Trust, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Arbor Realty Trust, Inc. and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of income, changes in equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 21, 2025 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates. 49 Table of Contents Allowance for Credit Losses Description of the Matter The Company’s allowance for credit losses (“ACL”) for the structured loan portfolio was $239.0 million as of December 31, 2024. As discussed in Note 2 to the consolidated financial statements, for structured loans with similar risk characteristics, management estimated the ACL using a third-party probability of default and loss-given default model (the “general reserve”). The model used loss factors that were developed from the historical loss experience of loans with similar credit and default history, individual characteristics of loans currently in the portfolio, and a reasonable and supportable economic forecast to estimate expected losses over the life of the loans. For structured loans that were considered collateral-dependent or where it was determined that foreclosure was probable, management estimated the ACL on an individual basis by comparing the estimated fair value of the collateral as of the reporting date to the net carrying value of the loan (the “specific reserve”). The fair value of the collateral was estimated using internally-developed cash flow models or third-party appraisals. Auditing management’s allowance for credit losses for the structured loan portfolio involved a high degree of subjectivity and was especially challenging due to the complexity of the statistical methods used to estimate the general reserve and the significant judgments required to estimate the fair value of collateral for loans that were individually evaluated for a specific reserve, which were sensitive to the use of certain market-based assumptions, including capitalization rates. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s process to measure the allowance for credit losses for the structured loan portfolio. For example, we tested controls over the inputs into and operation and monitoring of the ACL model, the methodology and assumptions used to update collateral values and measure expected credit losses on individually evaluated loans, and management review controls over key judgments used in the evaluation of ACL model results and the estimate of collateral values for individually evaluated loans. Our test of controls included observation of and inspection of the related documentation for certain key meetings of the Company’s CECL working group, where key judgments on current and forward-looking macroeconomic conditions, internal and external factors, and uncertainty as it relates to economic, model, or credit risks, were discussed and effectively challenged. Our procedures over the general reserve included, among others, the involvement of EY specialists to assist us with evaluating the ACL model’s methodology, conceptual soundness, and model performance. We performed procedures to test the completeness and accuracy of data used in the model, evaluating the economic forecast selected by management, and evaluating the reasonableness of model results. Our procedures over the specific reserve included, among others, the testing of the completeness and accuracy of data inputs, the clerical accuracy of cash-flow models, and the involvement of EY valuation specialists to assist us with auditing management’s estimate of the fair value of collateral for a sample of loans, including testing certain key assumptions such as capitalization rates. As part of our overall evaluation of the Company’s determination of the ACL and our search for contrary evidence, we compared the current ACL to historical loss levels and evaluated subsequent events. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2003. New York, New York February 21, 2025 50 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ($ in thousands, except share and per share data) December 31, 2024 2023 Assets: Cash and cash equivalents $ 503,803 $ 928,974 Restricted cash 156,376 608,233 Loans and investments, net (allowance for credit losses of $ 238,967 and $ 195,664 ) 11,033,997 12,377,806 Loans held-for-sale, net 435,759 551,707 Capitalized mortgage servicing rights, net 368,678 391,254 Securities held-to-maturity, net (allowance for credit losses of $ 10,846 and $ 6,256 ) 157,154 155,279 Investments in equity affiliates 76,312 79,303 Real estate owned, net 176,543 86,991 Due from related party 12,792 64,421 Goodwill and other intangible assets 88,119 91,378 Other assets 481,448 403,290 Total assets $ 13,490,981 $ 15,738,636 Liabilities and Equity: Credit and repurchase facilities $ 3,559,490 $ 3,237,827 Securitized debt 4,622,489 6,935,010 Senior unsecured notes 1,236,147 1,333,968 Convertible senior unsecured notes 285,853 283,118 Junior subordinated notes to subsidiary trust issuing preferred securities 144,686 143,896 Mortgage notes payable - real estate owned 74,897 44,339 Due to related party 4,474 13,799 Due to borrowers 47,627 121,707 Allowance for loss-sharing obligations 83,150 71,634 Other liabilities 280,198 298,733 Total liabilities 10,339,011 12,484,031 Commitments and contingencies (Note 15) 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 - 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 - 189,259,435 and 188,505,264 shares issued and outstanding 1,893 1,885 Additional paid-in capital 2,375,469 2,367,188 Retained earnings 13,039 115,216 Total Arbor Realty Trust, Inc. stockholders’ equity 3,024,085 3,117,973 Noncontrolling interest 127,885 136,632 Total equity 3,151,970 3,254,605 Total liabilities and equity $ 13,490,981 $ 15,738,636 ________________________________________ Note: Our consolidated balance sheets include assets and liabilities of consolidated variable interest entities, or VIEs, as we are the primary beneficiary of these VIEs. At December 31, 2024 and 2023, assets of our consolidated VIEs totaled $ 6,124,925 and $ 8,614,571 , respectively, and the liabilities of our consolidated VIEs totaled $ 4,637,744 and $ 6,967,877 , respectively. See Note 16 for discussion of our VIEs. See Notes to Consolidated Financial Statements. 51 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME ($ in thousands, except share and per share data) Year Ended December 31, 2024 2023 2022 Interest income $ 1,167,872 $ 1,331,219 $ 948,401 Interest expense 804,615 903,228 557,617 Net interest income 363,257 427,991 390,784 Other revenue: Gain on sales, including fee-based services, net 74,932 72,522 55,816 Mortgage servicing rights 51,272 69,912 69,346 Servicing revenue, net 125,896 130,449 92,192 Property operating income 7,226 5,708 1,877 (Loss) gain on derivative instruments, net ( 8,543 ) 6,763 26,609 Other income (loss), net 8,083 7,667 ( 17,563 ) Total other revenue 258,866 293,021 228,277 Other expenses: Employee compensation and benefits 181,694 159,788 161,825 Selling and administrative 54,931 51,260 53,990 Property operating expenses 7,394 5,897 2,136 Depreciation and amortization 9,555 9,743 8,732 Provision for loss sharing (net of recoveries) 11,782 15,695 1,862 Provision for credit losses (net of recoveries) 68,543 73,446 21,169 Litigation settlement — — 7,350 Total other expenses 333,899 315,829 257,064 Income before extinguishment of debt, gain on real estate, income from equity affiliates and income taxes 288,224 405,183 361,997 Loss on extinguishment of debt ( 412 ) ( 1,561 ) ( 4,933 ) Gain on real estate 3,813 — — Income from equity affiliates 5,772 24,281 14,247 Provision for income taxes ( 13,478 ) ( 27,347 ) ( 17,484 ) Net income 283,919 400,556 353,827 Preferred stock dividends 41,369 41,369 40,954 Net income attributable to noncontrolling interest 19,278 29,122 28,044 Net income attributable to common stockholders $ 223,272 $ 330,065 $ 284,829 Basic earnings per common share $ 1.18 $ 1.79 $ 1.72 Diluted earnings per common share $ 1.18 $ 1.75 $ 1.67 Weighted average shares outstanding: Basic 188,701,149 184,641,642 165,355,167 Diluted 205,526,610 218,843,613 199,112,630 See Notes to Consolidated Financial Statements. 52 Table of Contents ARBOR REALTY TRUST, INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY ($ in thousands, except shares) Preferred Stock Shares Preferred Stock Value Common Stock Shares Common Stock Par Value Additional Paid‑in Capital Retained Earnings Total Arbor Realty Trust, Inc. Stockholders’ Equity Noncontrolling Interest Total Equity Balance — December 31, 2021 39,325,095 $ 556,163 151,362,181 $ 1,514 $ 1,797,913 $ 62,532 $ 2,418,122 $ 131,862 $ 2,549,984 Cumulative - effect adjustment (1) — — — — ( 8,684 ) 5,612 ( 3,072 ) 625 ( 2,447 ) Balance - January 1, 2022 (adjusted for adoption of ASU 2020-06) 39,325,095 556,163 151,362,181 1,514 1,789,229 68,144 2,415,050 132,487 2,547,537 Issuance - common stock — — 26,335,788 263 408,472 — 408,735 — 408,735 Issuance - Series F preferred stock 3,292,000 77,522 — — — — 77,522 — 77,522 Stock-based compensation, net — — 532,553 5 6,780 — 6,785 — 6,785 Distributions - common stock — — — — — ( 255,913 ) ( 255,913 ) — ( 255,913 ) Distributions - preferred stock — — — — — ( 40,965 ) ( 40,965 ) — ( 40,965 ) Distributions - noncontrolling interest — — — — — — — ( 25,103 ) ( 25,103 ) Redemption - OP Units ( 31,506 ) ( 1 ) — — — — ( 1 ) ( 545 ) ( 546 ) Net income — — — — — 325,783 325,783 28,044 353,827 Balance — December 31, 2022 42,585,589 633,684 178,230,522 1,782 2,204,481 97,049 2,936,996 134,883 3,071,879 Issuance - common stock — — 13,113,296 131 193,530 — 193,661 — 193,661 Repurchase - common stock — — ( 3,545,604 ) ( 35 ) ( 37,396 ) — ( 37,431 ) — ( 37,431 ) Stock-based compensation, net — — 707,050 7 6,573 — 6,580 — 6,580 Distributions - common stock — — — — — ( 311,884 ) ( 311,884 ) — ( 311,884 ) Distributions - preferred stock — — — — — ( 41,383 ) ( 41,383 ) — ( 41,383 ) Distributions - noncontrolling interest — — — — — — — ( 27,373 ) ( 27,373 ) Net income — — — — — 371,434 371,434 29,122 400,556 Balance — December 31, 2023 42,585,589 633,684 188,505,264 1,885 2,367,188 115,216 3,117,973 136,632 3,254,605 Issuance - common stock — — 661,708 7 10,023 — 10,030 — 10,030 Repurchase - common stock — — ( 935,739 ) ( 9 ) ( 11,399 ) — ( 11,408 ) — ( 11,408 ) Stock-based compensation, net — — 1,028,202 10 9,657 — 9,667 — 9,667 Distributions - common stock — — — — — ( 325,435 ) ( 325,435 ) — ( 325,435 ) Distributions - preferred stock — — — — — ( 41,383 ) ( 41,383 ) — ( 41,383 ) Distributions - noncontrolling interest — — — — — — — ( 28,025 ) ( 28,025 ) Net income — — — — — 264,641 264,641 19,278 283,919 Balance — December 31, 2024 42,585,589 $ 633,684 189,259,435 $ 1,893 $ 2,375,469 $ 13,039 $ 3,024,085 $ 127,885 $ 3,151,970 (1) In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The adoption of this guidance resulted in a $ 2.5 million increase to the carrying value of our convertible debt, an $ 8.7 million decrease to additional paid-in capital and a $ 5.6 million increase to retained earnings at January 1, 2022. See Notes to Consolidated Financial Statements. 53 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended December 31, 2024 2023 2022 Operating activities: Net income $ 283,919 $ 400,556 $ 353,827 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 9,555 9,743 8,732 Stock-based compensation 14,232 14,940 14,973 Amortization and accretion of interest and fees, net ( 705 ) ( 3,612 ) ( 13,547 ) Amortization of capitalized mortgage servicing rights 68,422 63,093 59,876 Originations of loans held-for-sale ( 4,501,081 ) ( 5,074,445 ) ( 4,788,202 ) Proceeds from sales of loans held-for-sale, net of gain on sale 4,609,686 4,878,021 5,438,623 Mortgage servicing rights ( 51,272 ) ( 69,912 ) ( 69,346 ) Write-off of capitalized mortgage servicing rights from payoffs 8,500 14,736 44,502 Provision for loss sharing (net of recoveries) 11,782 15,695 1,862 Provision for credit losses (net of recoveries) 68,543 73,446 21,169 Net (charge-offs) recoveries for loss sharing obligations ( 266 ) ( 1,229 ) ( 758 ) Deferred tax benefit ( 11,613 ) ( 7,349 ) ( 1,741 ) Income from equity affiliates ( 5,772 ) ( 24,281 ) ( 14,247 ) Distributions from operations of equity affiliates 17,131 27,542 16,594 Loss on extinguishment of debt 412 1,561 4,933 Payoffs and paydowns of loans held-for-sale 5,487 987 58,751 Change in fair value of held-for-sale loans ( 609 ) ( 2,536 ) 15,703 Loss (gain) on derivative instruments, net 8,543 ( 6,763 ) ( 26,609 ) Loss on sale of loans — — 11,180 Litigation settlement — — 7,350 Gain on real estate ( 3,813 ) — — Changes in operating assets and liabilities ( 69,564 ) ( 74,336 ) ( 43,976 ) Net cash provided by operating activities 461,517 235,857 1,099,649 Investing Activities: Loans and investments funded, originated and purchased, net ( 1,600,461 ) ( 1,362,171 ) ( 5,955,061 ) Payoffs and paydowns of loans and investments 2,781,658 3,359,810 3,423,498 Deferred fees 25,792 21,299 57,098 Proceeds from sale of real estate, net 14,103 — — Contributions to equity affiliates ( 19,593 ) ( 18,986 ) ( 17,809 ) Distributions from equity affiliates 11,224 15,552 26,008 Payoffs and paydowns of securities held-to-maturity 483 4,626 19,030 Investments in real estate, net ( 3,471 ) — — Due to borrowers and reserves ( 57,966 ) ( 141,152 ) ( 239,626 ) Proceeds from sale of loans and investments — — 397,338 Purchase of securities held-to-maturity, net — — ( 27,598 ) Net cash provided by (used in) investing activities 1,151,769 1,878,978 ( 2,317,122 ) Financing activities: Proceeds from credit and repurchase facilities 9,350,727 9,148,451 11,536,220 Payoffs and paydowns of credit and repurchase facilities ( 9,025,305 ) ( 9,747,252 ) ( 12,153,215 ) Proceeds from mortgage note payable - REO 39,547 — — Payoffs and paydowns of mortgage notes payable - REO ( 8,989 ) — — Proceeds from issuance of securitized debt — — 2,762,502 Payoffs and paydowns of securitized debt ( 2,324,269 ) ( 929,782 ) ( 801,141 ) Proceeds from issuance of common stock 10,030 193,661 408,735 Proceeds from issuance of preferred stock — — 77,522 Proceeds from issuance of senior unsecured notes 100,000 95,000 437,500 Payoffs and paydowns of senior unsecured notes ( 200,000 ) ( 149,600 ) ( 312,920 ) Redemption of OP Units — — ( 546 ) Payments of withholding taxes on net settlement of vested stock ( 4,565 ) ( 8,360 ) ( 8,188 ) 54 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (in thousands) Repurchase of common stock ( 11,408 ) ( 37,431 ) — Distributions to stockholders and non-controlling interest ( 394,843 ) ( 380,640 ) ( 321,739 ) Payment of deferred financing costs ( 21,239 ) ( 9,840 ) ( 50,362 ) Net cash (used in) provided by financing activities ( 2,490,314 ) ( 1,825,793 ) 1,574,368 Net (decrease) increase in cash, cash equivalents and restricted cash ( 877,028 ) 289,042 356,895 Cash, cash equivalents and restricted cash at beginning of period 1,537,207 1,248,165 891,270 Cash, cash equivalents and restricted cash at end of period $ 660,179 $ 1,537,207 $ 1,248,165 See Notes to Consolidated Financial Statements. 55 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (in thousands) Year Ended December 31, 2024 2023 2022 Reconciliation of cash, cash equivalents and restricted cash: Cash and cash equivalents at beginning of period $ 928,974 $ 534,357 $ 404,580 Restricted cash at beginning of period 608,233 713,808 486,690 Cash, cash equivalents and restricted cash at beginning of period $ 1,537,207 $ 1,248,165 $ 891,270 Cash and cash equivalents at end of period $ 503,803 $ 928,974 $ 534,357 Restricted cash at end of period 156,376 608,233 713,808 Cash, cash equivalents and restricted cash at end of period $ 660,179 $ 1,537,207 $ 1,248,165 Supplemental cash flow information: Cash used to pay interest $ 782,047 $ 861,141 $ 486,826 Cash used to pay taxes 28,813 30,129 27,560 Supplemental schedule of non-cash investing and financing activities: Real estate acquired in settlement of loans and investments, net 278,330 — — Settlement of loans and investments, net of real estate ( 279,480 ) — — Derecognition of real estate owned 177,146 — — Loan funded in conjunction with real estate sold ( 182,485 ) — — Distributions accrued on preferred stock 7,010 7,010 7,010 Investment in real estate, net — 39,400 31,200 Cumulative - effect adjustment (adoption of convertible debt standard) — — 2,447 See Notes to Consolidated Financial Statements. 56 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 — Description of Business Arbor is a Maryland corporation formed in 2003. We are a nationwide REIT and direct lender, providing loan origination and servicing for commercial real estate assets. We operate through two business segments: our Structured Business and our Agency Business. Through our Structured Business, we invest in a diversified portfolio of structured finance assets in the multifamily, SFR and commercial real estate markets, primarily consisting of bridge loans, in addition to mezzanine loans, junior participating interests in first mortgages and preferred equity. We also invest in real estate-related joint ventures and may directly acquire real property and invest in real estate-related notes and certain mortgage-related securities. Through our Agency Business, we originate, sell and service a range of multifamily finance products through Fannie Mae and Freddie Mac, Ginnie Mae, FHA and HUD. We retain the servicing rights and asset management responsibilities on substantially all loans we originate and sell under the GSE and HUD programs. We are an approved Fannie Mae DUS lender nationally, a Freddie Mac Optigo ® Conventional Loan and SBL lender, seller/servicer, nationally and a HUD MAP and LEAN senior housing/healthcare lender nationally. We also originate and retain the servicing rights on permanent financing loans underwritten using the guidelines of our existing agency loans sold to the GSEs, which we refer to as “Private Label” loans and originate and sell finance products through CMBS programs. We 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. Substantially all of our operations are conducted through our operating partnership, ARLP, for which we serve as the indirect general partner, and ARLP’s subsidiaries. We are organized to qualify as a REIT for U.S. federal income tax purposes. A REIT is generally not subject to federal income tax on that portion of its taxable income that is distributed to its stockholders; provided that at least 90% of its taxable income is distributed and provided that certain other requirements are met. Certain of our assets that produce non-qualifying REIT income, primarily within the Agency Business, are operated through TRS entities, which are part of our TRS Consolidated Group and are subject to U.S. federal, state and local income taxes. In general, our TRS entities may hold assets that the REIT cannot hold directly and may engage in real estate or non-real estate-related business. Note 2 — Basis of Presentation and Significant Accounting Policies Basis of Presentation The consolidated financial statements and accompanying notes have been prepared in accordance with GAAP. In our opinion, all adjustments considered necessary for a fair presentation of our financial position, results of operations and cash flows have been included and are of a normal and recurring nature. Principles of Consolidation The consolidated financial statements include our financial statements and the financial statements of our wholly owned subsidiaries, partnerships and other joint ventures in which we have a controlling interest, including variable interest entities (“VIEs”) of which we are the primary beneficiary. Entities in which we have a significant influence are accounted for under the equity method. Our VIEs are described in Note 16. All significant intercompany transactions and balances have been eliminated in consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that could materially affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The ultimate impact of inflation, a currently high interest rate environment, bank failures, tightening of capital markets and reduced property values, both globally and to our business, makes any estimate or assumption at December 31, 2024 inherently less certain. 57 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Significant Accounting Policies Cash and Cash Equivalents . All highly liquid investments with original maturities of three months or less are considered to be cash equivalents. We place our cash and cash equivalents in high quality financial institutions. The consolidated account balances at each institution periodically exceed FDIC insurance coverage limits and we believe that this risk is not significant. Loans, Investments and Securities. Loans held-for-investment are intended to be held-to-maturity and, accordingly, are carried at cost, net of unamortized loan origination costs and fees, loan purchase discounts, and net of the allowance for credit losses. We invest in preferred equity interests that, in some cases, allow us to participate in a percentage of the underlying property’s cash flows from operations and proceeds from a sale or refinancing. At the inception of each such investment, we determine whether such investment should be accounted for as a loan, equity interest or as real estate. At the time of purchase, we designate a debt security as available-for-sale, held-to-maturity, or trading depending on our ability and intent for the security. Securities available-for-sale, which is included as a component of other assets in the consolidated balance sheets, is reported at fair value with the fluctuations in fair value recognized through earnings. We do not intend to sell our held-to-maturity securities and it is not likely we will be required to sell the investments before their maturity, therefore, we carry our held-to-maturity securities at cost, net of any unamortized premiums or discounts, which are amortized or accreted over the life of the securities, and net of allowance for credit losses. Allowance for Credit Losses. We estimate allowances for credit losses on our structured loans and investments (including unfunded loan commitments), loss-sharing obligations related to the Fannie Mae DUS program and our held-to-maturity debt securities under CECL based on current expected credit losses for the life of the loan and investment. Our estimation of credit losses utilizes information obtained from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts about the future. We have licensed a third party model to assist with the measurement of expected credit losses, which utilizes historical loss experience on similar loans. The loss factors are determined through the generation of probability of defaults and loss given defaults for similar loans with similar credit (the "general reserve"). These results require a significant amount of judgment applied in selecting inputs and analyzing the results produced by the models to determine the general reserve. Changes in such estimates can significantly affect our expected credit losses. We have a CECL working group consisting of members of accounting, asset management, credit risk management and capital markets that is responsible for, among other things, regularly reviewing the CECL methodology, including the adequacy of allowance levels, and ensuring that it is designed and applied in accordance with GAAP. Our method for calculating the estimate of expected credit loss considers historical experience, current conditions, and reasonable and supportable forecasts about the future. The reasonable and supportable forecast period is determined based on our assessment of the most likely scenario of assumptions and plausible outcomes for the macroeconomic environment, level of historical loss forecast estimates, material changes in growth and credit strategy and other factors that may affect our loss experience. The macroeconomic factors that have a significant influence on our estimate of expected credit losses include price indices for commercial real estate, unemployment rates, and interest rates. We are currently using a one year reasonable and supportable forecast period that we regularly evaluate to determine if a change is needed. Beyond our reasonable and supportable forecast period, we generally revert to historical loss information over the remaining loan/asset period, taken from a period that most accurately reflects the expectation of conditions expected to exist during the period of reversion. We may adjust historical loss information for differences in risk that may not reflect the characteristics of our current portfolio, including, but not limited to, loan-to-value and debt service coverage ratios, among other relevant factors. The method of reversion selected represents the best estimate of the collectability of the investments and is reevaluated each reporting period. We generally expect to use an average historical loss for reversion, utilizing a straight-line method for the remaining life of the investments. We also perform a qualitative assessment beyond model estimates and apply qualitative adjustments as necessary. Our qualitative analysis includes a review of data that may directly impact our estimates including internal and external information about the loan or property including current market conditions, asset specific conditions, property operations or borrower/sponsor details (i.e., refinance, sale, loan modification, bankruptcy) which allows us to determine the amount of the expected loss more accurately and reasonably for these investments. We also evaluate the contractual life of our assets to determine if changes are needed for contractual extension options, renewals, modifications, and prepayments. To the extent possible, we estimate our general reserve using a pooling approach for homogeneous assets with similar risk characteristics with the goal of enhancing the precision of their estimate. If particular assets no longer display risk characteristics that are similar to those of the pool, we may decide to revise our pools or perform an individual assessment of expected credit losses. Loans for which the borrower or sponsor is experiencing financial difficulty, and where repayment of the loan is expected substantially through the operation or sale of the underlying collateral, are considered collateral dependent loans. For collateral dependent loans, we use the 58 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) practical expedient under CECL which allows us to measure expected losses based on the difference between the collateral’s fair value and the amortized cost basis of the loan (the "specific reserve"). When the repayment or satisfaction of the loan is dependent on a sale, rather than operations of the collateral, the fair value is adjusted for the estimated costs to sell the collateral. If foreclosure is probable, we measure expected losses using the fair value of the collateral as of the reporting date. During the loan review process, if we determine that it is probable that we will be unable to collect all amounts due for both principal and interest according to the contractual terms of a loan because the borrower is experiencing financial difficulty, or where foreclosure is probable, we evaluate whether that loan is impaired and a specific reserve is required. We consider the capitalization and market discount rates, as well as the borrower’s operating income and cash flows, in estimating the value of the underlying collateral when determining if a loan is impaired. We may also obtain a third party appraisal, which may value the collateral through an “as-is” or “stabilized value” methodology. Such appraisals may be used as an additional source of valuation information only and no adjustments are made to appraisals. If, upon completion of the valuation, the fair value of the underlying collateral securing the impaired loan is less than the net carrying value of the loan, we record a specific reserve for credit losses with a corresponding charge to the provision for credit losses and remove the impaired loan from the general reserve CECL analysis described above. In order to improve long-term collectibility efforts, we may agree to amend or modify loans to certain borrowers experiencing financial difficulty based on specific facts and circumstances in order to avoid foreclosure and repossession of the underlying collateral. The loan modifications to borrowers experiencing financial difficulty may include a delay in payments, including payment deferrals, term extensions, principal forgiveness and interest rate reductions, or a combination thereof. We record interest on modified loans on an accrual basis to the extent the modified loan is contractually current. The allowance for credit losses on loan modifications is measured using the same method as all other loans held for investment. Charge-offs to the allowance for credit losses occur when losses are confirmed through the receipt of cash or other consideration from the completion of a sale; when a modification or restructuring takes place in which we grant a concession to a borrower or agree to a discount in full or partial satisfaction of the loan; when we take ownership and control of the underlying collateral in full satisfaction of the loan; when loans are reclassified as other investments; or when significant collection efforts have ceased and it is highly likely that a loss has been realized. We record a charge-off on a restructured loan when we grant a concession to the borrower in the form of principal forgiveness related to the payoff or the substitution or addition of a new debtor for the original borrower or when we incur costs on behalf of the borrower related to the modification, payoff or the substitution or addition of a new debtor for the original borrower. When a loan is restructured, we record our investment at net realizable value, taking into account the cost of all concessions at the date of restructuring. In addition, a gain or loss may be recorded upon the sale of a loan to a third party in the consolidated statements of income in the period in which the loan was sold. Loans Held-for-Sale, Net. Loans held-for-sale, net represents our Agency Business commercial real estate loans originated and sold under the GSE and HUD programs, which are generally transferred or sold within 60 days of loan origination, as well as our Private Label loans, which are either sold instantaneously or pooled and securitized, or sold, within 180 days of loan origination. Such loans are reported at the lower of cost or market on an aggregate basis and include the value allocated to the associated future MSRs. During the period prior to its sale, interest income on a loan held-for-sale is calculated in accordance with the terms of the individual loan and the loan origination fees and direct loan origination costs are deferred until the loan is sold. All of our held-for-sale loans are financed with matched borrowings from credit facilities contracted to finance such loans. Interest income and expense are earned or incurred after a loan is closed and before a loan is sold. Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated, put presumptively beyond the reach of the entity, even in bankruptcy, (2) the transferee (or if the transferee is an entity whose sole purpose is to engage in securitization and the entity is constrained from pledging or exchanging the assets it receives, each third party holder of its beneficial interests) has the right to pledge or exchange the transferred financial assets, and (3) we or our agents do not maintain effective control over the transferred financial assets or third party beneficial interest related to those transferred assets through an agreement to repurchase them before their maturity. We have determined that all loans sold have met these specific conditions and account for all transfers of mortgage loans as completed sales. Allowance for Loss-Sharing Obligations. When a loan is sold under the Fannie Mae DUS program, we undertake an obligation to partially guarantee the performance of the loan. Generally, we are responsible for losses equal to the first 5 % of the UPB and a portion of any additional losses to an overall maximum of 20 % of the original principal balance. Fannie Mae bears any remaining loss. In addition, under the terms of the master loss-sharing agreement with Fannie Mae, we are responsible for funding 100 % of mortgage delinquencies (principal and interest) and servicing advances (taxes, insurance and foreclosure costs) until the amounts advanced exceed 5 % of the UPB 59 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) at the date of default. Thereafter, we may request interim loss-sharing adjustments which allow us to fund 25 % of such advances until final settlement. At inception, a liability for the fair value of the obligation undertaken in issuing the guaranty is recognized. In determining the fair value of the guaranty obligation, we consider the risk profile of the collateral and the historical loss experience in our portfolio. The guaranty obligation is removed only upon either the expiration or settlement of the guaranty. We evaluate the allowance for loss-sharing obligations by monitoring the performance of each loss-sharing loan for events or conditions that may signal a potential default. Historically, initial loss recognition occurs at or before a loan becomes 60 days delinquent. In instances where payment under the guaranty on a loan is determined to be probable and estimable (as the loan is probable of, or is, in foreclosure), we record a liability for the estimated loss-sharing specific reserve by transferring the guarantee obligation recorded on the loan to the specific reserve with any adjustments to this reserve amount recorded in provision for loss sharing in the statements of income. The amount of the allowance considers our assessment of the likelihood of repayment by the borrower or key principal(s), the risk characteristics of the loan, the loan’s risk rating, historical loss experience, adverse situations affecting individual loans, the estimated disposition value of the underlying collateral, and the level of risk sharing. We regularly monitor the specific reserves and update loss estimates as current information is received. Capitalized Mortgage Servicing Rights. We recognize, as separate assets, rights to service mortgage loans for others, including such rights from our origination of mortgage loans sold with the servicing rights retained, as well as rights associated with acquired MSRs. Income from MSRs related to loans we originate are recognized when we record a derivative asset upon the commitment to originate a loan with a borrower and sell the loan to an investor. This commitment asset is recognized at fair value based on the discounted expected net cash flows associated with the servicing of the loan. When a mortgage loan we originate is sold, we retain the right to service the loan and recognize the MSR at the initial capitalized valuation. We amortize our MSRs using the amortization method, which requires the MSRs to be amortized over the period of estimated net servicing income or loss and that the servicing assets or liabilities be assessed for impairment, or increased obligation, based on the fair value at each reporting date. Amortization of MSRs is recorded as a reduction of servicing revenues, net in the consolidated statements of income. The following assumptions were used in calculating the fair value of our MSRs for the periods presented: Key rates: We used discount rates ranging from 8 % to 14 %, representing a weighted average discount rate of 12 %, based on our best estimate of market discount rates to determine the present value of MSRs. Servicing Cost: A market participant’s estimated future cost to service the loan for the estimated life of the MSR is subtracted from the estimated future cash flows. Estimated Life: We estimate the life of our MSRs based upon the stated yield maintenance and/or prepayment protection term of the underlying loan and are reduced using prepayment rates that consider the note rate of the loan and the expiration of various types of prepayment penalty and/or lockout provisions prior to that stated maturity date. MSRs are initially recorded at fair value and are carried at amortized cost. The fair value of MRSs from loans we originate and sell are estimated considering market prices for similar MSRs, when available, and by estimating the present value of the future net cash flows of the capitalized MSRs, net of adequate compensation for servicing. Adequate compensation is based on the market rate of similar servicing contracts. The fair value of MSRs acquired approximate the purchase price paid. We evaluate the MSR portfolio for impairment on a quarterly basis based on the difference between the aggregate carrying amount of the MSRs and their aggregate fair value. We engage an independent third party valuation expert to assist in determining an estimated fair value of our MSR portfolio on a quarterly basis. For purposes of impairment evaluation, the MSRs are stratified based on predominant risk characteristics of the underlying loans, which we have identified as loan type, note rate and yield maintenance provisions. To the extent that the carrying value of the MSRs exceeds fair value, a valuation allowance is established. We record write-offs of MSRs related to loans that were repaid prior to their expected maturity and loans that have defaulted and determined to be unrecoverable. When this occurs, the write-off is recorded as a direct write-down to the carrying value of MSRs and is included as a component of servicing revenue, net in the consolidated statements of income. This direct write-down permanently reduces the carrying value of the MSRs, precluding recognition of subsequent recoveries. For loans that payoff prior to maturity, we may collect a prepayment fee which is included as a component of servicing revenue, net. Investments in Equity Affiliates. We invest in joint ventures that are formed to invest in real estate-related assets or businesses. These joint ventures are not majority owned or controlled by us or are VIEs for which we are not the primary beneficiary, and are not 60 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) consolidated in our financial statements. These investments are recorded under either the equity or cost method of accounting as deemed appropriate. We evaluate these investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable. We recognize an impairment loss if the estimated fair value of the investment is less than its carrying amount and we determine that the impairment is other-than-temporary. We record our share of the net income and losses from the underlying properties of our equity method investments and any other-than-temporary impairment on these investments as income or losses from equity affiliates in the consolidated statements of income. Goodwill and Other Intangible Assets. We typically use independent third party valuation specialists to assist us in estimating the fair value of intangible assets and in assigning their estimated useful lives. The fair value estimates are based on available historical information and on future expectations and assumptions we deem reasonable. We generally use an income-based valuation method to estimate the fair value of intangible assets, which discounts expected future cash flows to present value using estimates and assumptions we deem reasonable. Determining the estimated useful lives of intangible assets also requires judgment. Certain intangible assets, such as GSE licenses, have been deemed to have indefinite lives while other intangible assets, such as broker and borrower relationships and below market rent have been deemed to have finite lives. Our assessment as to which intangible assets are deemed to have finite or indefinite lives is based on several factors including economic barriers of entry for the acquired product lines, scarcity of available GSE licenses, retention trends and our operating plans, among other factors. Goodwill and indefinite-lived intangible assets are not amortized, while finite-lived intangible assets are amortized over their estimated useful lives on a straight-line basis. Indefinite-lived intangible assets, including goodwill, are tested for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. In addition, with respect to goodwill, an impairment analysis is performed at least annually. We have elected to make the first day of our fiscal fourth quarter the annual impairment assessment date for goodwill. We first assess qualitative factors to determine whether it is more likely than not that the fair value is less than the carrying value. If, based on that assessment, we believe it is more likely than not that the fair value is less than the carrying value, then a two-step goodwill impairment test is performed. Based on the impairment analysis performed as of October 1, 2024, there were no indicators that the indefinite-lived intangible assets, including goodwill, were impaired and there were no events or changes in circumstances indicating impairment at December 31, 2024. Real Estate Owned and Held-For-Sale. Real estate acquired is recorded at its estimated fair value, less costs to sell if classified as held for sale, at acquisition and is shown net of accumulated depreciation and impairment charges. Costs incurred in connection with the acquisition of a property are capitalized. We allocate our real estate acquisitions to land, building, tenant improvements, origination asset of the in-place leases, intangibles for the value of any above or below market leases at fair value and to any other identified intangible assets or liabilities based on their relative fair values. We amortize the value allocated to in-place leases over the remaining lease term, which is reported in depreciation and amortization expense on our consolidated statements of income. The value allocated to above or below market leases are amortized over the remaining lease term as an adjustment to rental income. Real estate assets are depreciated using the straight-line method over their estimated useful lives. Ordinary repairs and maintenance which are not reimbursed by the tenants are expensed as incurred. Major replacements and betterments which improve or extend the life of the asset are capitalized and depreciated over their estimated useful life. Our properties are reviewed for impairment each quarter if events or circumstances change indicating that the carrying amount of an asset may not be recoverable. We recognize impairment if the undiscounted estimated cash flows to be generated by an asset is less than the carrying amount of such asset. Measurement of impairment is based on the asset’s estimated fair value. In evaluating for impairment, many factors are considered, including estimated current and expected operating cash flows from the property during the projected holding period, costs necessary to extend the life or improve the asset, expected capitalization rates, projected stabilized net operating income, selling costs, and the ability to hold and dispose of the asset in the ordinary course of business. Impairment charges may be necessary in the event discount rates, capitalization rates, lease-up periods, future economic conditions, and other relevant factors vary significantly from those assumed in valuing the property. Real estate is classified as held-for-sale when we commit to a plan of sale, the asset is available for immediate sale, there is an active program to locate a buyer, and it is probable the sale will be completed within one year . Real estate assets that are expected to be disposed of are valued at the lower of the asset’s carrying amount or its fair value less costs to sell. 61 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) We recognize sales of real estate properties, including the respective gains and losses, upon closing, when control of the asset transfers to the buyer, when it is probable that we will collect substantially all of the agreed upon consideration, and we are not obligated to perform significant activities after the sale. Hedging Activities and Derivatives . We measure derivative instruments at fair value and record them as assets or liabilities. Fair value adjustments will affect either accumulated other comprehensive income until the hedged item is recognized in earnings, or net income depending on whether the derivative instrument qualifies as a hedge for accounting purposes and, if so, the nature of the hedging activity. We use derivatives for hedging purposes rather than trading or speculation. Fair values are estimated based on current market data from financial sources that trade such instruments and are based on prevailing market data and derived from third party proprietary models based on well recognized financial principles and reasonable estimates about relevant future market conditions. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. These derivative instruments must be effective in reducing risk exposure to qualify for hedge accounting. When the terms of an underlying transaction are modified, or when the underlying hedged item ceases to exist, all changes in the fair value of the instrument are marked-to-market with changes in value included in net income for each period until the derivative instrument matures or is settled. Any derivative instrument used for risk management that does not meet the hedging criteria is marked-to-market with the changes in value included in earnings. In cases where a derivative instrument is terminated early, any gain or loss is generally amortized over the remaining life of the hedged item. We may also enter into derivative contracts that are intended to economically hedge certain risks, even though hedge accounting does not apply, or we elect not to apply hedge accounting. The ineffective portion of a derivative’s change in fair value is recognized immediately in earnings. In connection with our interest rate risk management, we may hedge a portion of our interest rate risk by entering into derivative instrument contracts to manage differences in the amount, timing, and duration of our expected cash receipts and our expected cash payments principally related to our investments and borrowings. Our objectives in using interest rate derivatives are to add stability to interest income and to manage our exposure to interest rate movements. To accomplish this objective, we have used, and may again in the future, use treasury futures and interest rate and credit default swaps as part of our interest rate risk management strategy. Instruments designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Our rate lock and forward sales commitments associated with the Agency Business meet the definition of a derivative and are recorded at fair value. The estimated fair value of rate lock commitments includes the effects of interest rate movements as well as the fair value of the expected net cash flows associated with the servicing of the loan which is recorded as income from MSRs in the consolidated statements of income. The estimated fair value of forward sale commitments includes the effects of interest rate movements between the trade date and balance sheet date. Our treasury futures associated with (1) our held-for-sale Agency Business Private Label loans, and (2) our Structured Business SFR loans, do not meet the criteria for hedge accounting and are tied to the five-year and ten-year treasury rates. Our treasury futures are cleared by a central clearing house and variation margin payments (made in cash) are treated as a legal settlement of the derivative itself, as opposed to a pledge of collateral. Realized and unrealized gains and losses related to our treasury futures are recorded through earnings. Revenue Recognition. Interest income is recognized on the accrual basis as it is earned. In certain instances, the borrower pays an additional amount of interest at the time the loan is closed, an origination fee, a prepayment fee, an exit fee and/or deferred interest upon maturity. In some cases, interest income may also include the amortization or accretion of premiums and discounts arising from the purchase or origination of the loan or security. This additional income, net of any direct loan origination costs incurred, is deferred and accreted into interest income on an effective yield or “interest” method adjusted for actual prepayment activity over the life of the related loan or security as a yield adjustment. We record interest on modified loans on an accrual basis to the extent the modified loan is contractually current. Income recognition is suspended and all accrued interest to date is reversed for loans when, in our opinion, a full recovery of all contractual principal and/or interest is not probable. Income recognition is resumed when the loan becomes contractually current, and performance is resumed. We record interest income on certain impaired loans to the extent cash is received, as the borrower continues to make interest payments. 62 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Several of our loans provide for accrual of interest at specified rates, which differ from current payment terms. Interest is recognized on such loans at the accrual rate subject to our determination that accrued interest and outstanding principal are ultimately collectible, based on the underlying collateral and operations of the asset, as well as the strength and guarantee of the sponsors. If we cannot make this determination, interest income above the current pay rate is recognized only upon actual receipt. Given the transitional nature of some of our real estate loans, we may require funds to be placed into an interest reserve, based on contractual requirements, to cover debt service costs. We will analyze these interest reserves on a periodic basis and determine if any additional interest reserves are needed. Recognition of income on loans with funded interest reserves are accounted for in the same manner as loans without funded interest reserves. We classify loans as non-accrual and recognize income only to the extent cash is received on: (1) all loans that exceed 60 days past due (otherwise referred to as non-performing loans); and (2) loans that are 60 days past due or less, if we have determined there is reasonable doubt about collectability of all principal and interest. When a loan is placed on non-accrual status, all accrued interest to date is reversed and full income recognition resumes when the loan becomes contractually current and performance has recommenced. Additionally, interest income is recorded when earned from equity participation interests, referred to as equity kickers. These equity kickers have the potential to generate additional revenues to us as a result of excess cash flow distributions and/or as appreciated properties are sold or refinanced. Gain on sales, including fee-based services, net — Gain on sales, including fee-based services, net includes commitment fees, broker fees, loan assumption fees, loan origination fees and gains on sale of loans of our Agency Business. In some instances, the borrower pays an additional amount of interest at the time the loan is closed, an origination fee, net of any direct loan origination costs incurred, which is recognized upon the sale of the loan. Revenue recognition occurs when the related services are performed, unless significant contingencies exist, and for the sale of loans, when all the incidence of ownership passes to the buyer. Interest income is recognized on the accrual basis as it is earned from loans held-for-sale. Property operating income — Property operating income represents income associated with the operations of commercial real estate properties classified as real estate owned. We recognize revenue for these activities when the fees are fixed or determinable, or are evidenced by an arrangement, collection is reasonably assured and the services under the arrangement have been provided. Other income (loss), net — Other income (loss), net represents loan structuring, modification and defeasance, as well as broker fees and miscellaneous asset management fees associated with our loan and investment portfolio. We recognize these forms of income when the fees are fixed or determinable, are evidenced by an arrangement, collection is reasonably assured and the services under the arrangement have been provided. Leases. We determine if an arrangement is a lease at inception. Our right to use an underlying asset for the lease term is recorded as an operating lease right-of-use (“ROU”) asset and our obligation to make lease payments arising from the lease is recorded as a lease liability. Operating lease ROU assets and lease liabilities are included in other assets and other liabilities, respectively, in our consolidated balance sheets. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Our leases do not provide an implicit rate; therefore, we use our incremental borrowing rate in determining the present value of lease payments. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Leases with an initial term of twelve months or less are expensed as incurred. Stock-Based Compensation. We grant stock awards to certain of our employees and directors, consisting of shares of our common stock that vest immediately or annually over a multi-year period, subject to the recipient’s continued service to us. We record stock-based compensation expense at the grant date fair value of the related stock-based award at the grant date (for the portion that vests immediately) or ratably over the respective vesting periods. Dividends are paid on restricted stock as dividends are paid on shares of our common stock whether or not they are vested. Stock-based compensation is disclosed in our consolidated statements of income under “employee compensation and benefits” for employees and under “selling and administrative” expense for the Board of Directors. Income Taxes. We organize and conduct our operations to qualify as a REIT and to comply with the provisions of the Internal Revenue Code with respect thereto. A REIT is generally not subject to federal income tax on its taxable income that is distributed to its stockholders; provided that at least 90% of its taxable income is distributed and provided that certain other requirements are met. Certain REIT income may be subject to state and local income taxes. The Agency Business mainly operates through a TRS, which is a part of our TRS Consolidated Group and is subject to U.S. federal, state and local income taxes. In general, our TRS entities may hold assets that the REIT cannot hold directly and may engage in real estate 63 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) or non-real estate-related business. Current and deferred taxes are recorded on the portion of earnings (losses) recognized by us with respect to our interest in TRSs. Deferred income tax assets and liabilities are calculated based on temporary differences between our GAAP consolidated financial statements and the federal, state, local tax basis of assets and liabilities as of the consolidated balance sheets. We evaluate the realizability of our deferred tax assets (e.g., net operating loss and capital loss carryforwards) and recognize a valuation allowance if, based on the available evidence, it is more likely than not that some portion or all our deferred tax assets will not be realized. When evaluating the realizability of our deferred tax assets, we consider estimates of expected future taxable income, existing and projected book/tax differences, tax planning strategies available and the general and industry specific economic outlook. We periodically evaluate tax positions to determine whether it is more likely than not that such positions would be sustained upon examination by a tax authority for all open tax years, as defined by the statute of limitations, based on their technical merits. We report interest and penalties related to tax uncertainties as a component of the income tax provision. Earnings Per Share. We present both basic and diluted earnings per share (“EPS”). Basic EPS excludes dilution and is computed by dividing net income available to common stockholders by the weighted average number of shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, where such exercise or conversion would result in a lower EPS amount. Reclassification Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements. Our real estate owned assets and mortgage notes payable previously recorded within other assets and other liabilities on our consolidated balance sheets are now recorded to real estate owned, net and mortgage notes payable - real estate owned for all periods presented. Recently Adopted Accounting Pronouncements Description Effective Date Effect on Financial Statements In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures, which expands disclosures about a public entity’s reportable segments and requires more enhanced information about a reportable segment’s expenses, interim segment profit or loss, and how a public entity’s chief operating decision maker uses reported segment profit or loss information in assessing segment performance and allocating resources. Fiscal year 2024, with early adoption permitted The adoption of this guidance did not have a material impact on our consolidated financial statements and we have included the required enhanced disclosures within Note 21. 64 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Recently Issued Accounting Pronouncements Description Effective Date Effect on Financial Statements In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This guidance focuses on disclosures around effective tax rates and cash income taxes paid and to improve the usefulness of income tax disclosures for investors. This guidance requires public entities to disclose, on an annual basis, a rate reconciliation presented in both dollars and percentages and to include specific categories and provides further guidance on disaggregation of those categories based on a quantitative threshold equal to 5% or more. This guidance also makes changes to annual disclosures of income taxes paid for all entities by requiring entities to disclose the amount of income taxes paid, net of refunds received, disaggregated by federal, state and foreign jurisdiction. First quarter of 2025, with early adoption permitted The adoption of this guidance is not expected to have a material impact on our consolidated financial statements. We are not early adopting and will add the necessary disclosures upon adoption. In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disclosures of expenses in the income statement by breaking down expenses into specific categories, such as purchases of inventory, employee compensation, and costs related to depreciation and amortization, and presenting them in a clear, tabular format. Fiscal year 2026, with early adoption permitted We are currently assessing the impact this guidance will have on our consolidated financial statements and will make all necessary additional disclosure requirements once adopted. Other Recently Issued Accounting Pronouncements In March 2024, the FASB issued ASU 2024-01, Scope Application of Profits Interest and Similar Awards, effective in the first quarter of 2025. We currently do not have any transactions that fall under the scope of this ASU; therefore, the adoption is not expected to have an impact on our consolidated financial statements. 65 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Note 3 — Loans and Investments Our Structured Business loan and investment portfolio consists of ($ in thousands): December 31, 2024 Percent of Total Loan Count Wtd. Avg. Pay Rate (1) Wtd. Avg. Remaining Months to Maturity (2) Wtd. Avg. First Dollar LTV Ratio (3) Wtd. Avg. Last Dollar LTV Ratio (4) Bridge loans (5) $ 10,893,106 96 % 688 6.89 % 11.6 0 % 80 % Mezzanine loans 255,556 2 % 58 7.52 % 51.8 51 % 82 % Preferred equity investments 148,845 1 % 27 6.42 % 53.9 62 % 79 % Construction - multifamily 4,367 < 1 % 2 9.97 % 20.8 0 % 42 % SFR permanent loans 3,082 < 1 % 1 9.36 % 10.3 0 % 40 % Total UPB 11,304,956 100 % 776 6.90 % 13.1 2 % 80 % Allowance for credit losses ( 238,967 ) Unearned revenue ( 31,992 ) Loans and investments, net (6) $ 11,033,997 December 31, 2023 Bridge loans (5) $ 12,273,244 97 % 679 8.45 % 12.0 0 % 78 % Mezzanine loans 248,457 2 % 49 8.41 % 56.6 48 % 80 % Preferred equity investments 85,741 1 % 17 3.95 % 60.3 53 % 82 % SFR permanent loans 7,564 < 1 % 2 9.84 % 13.9 0 % 56 % Total UPB 12,615,006 100 % 747 8.42 % 13.2 1 % 78 % Allowance for credit losses ( 195,664 ) Unearned revenue ( 41,536 ) Loans and investments, net (6) $ 12,377,806 ________________________________________ (1) “Weighted Average Pay Rate” is a weighted average, based on the UPB of each loan in our portfolio, of the interest rate required to be paid 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) Including extension options, the weighted average remaining months to maturity at December 31, 2024 and 2023 was 22.7 and 29.4, respectively. (3) 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. (4) 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. (5) At December 31, 2024 and 2023, bridge loans included 423 and 354 , respectively, of SFR loans with a total gross loan commitment of $ 4.18 billion and $ 2.86 billion, respectively, of which $ 1.99 billion and $ 1.32 billion, respectively, was funded. (6) Excludes exit fee receivables of $ 46.6 million and $ 38.5 million at December 31, 2024 and 2023, respectively, which is included in other assets on the consolidated balance sheets. Concentration of Credit Risk We are subject to concentration risk in that, at December 31, 2024, the UPB related to 83 loans with five different borrowers represented 10 % of total assets. At December 31, 2023, the UPB related to 31 loans with five different borrowers represented 11 % of total assets. During both 2024 and 2023, no single loan or investment represented more than 10% of our total assets and no single investor group generated over 10% of our revenue. See Note 19 for details on our concentration of related party loans and investments. We assign a credit risk rating of pass, pass/watch, special mention, substandard or doubtful to each loan and investment, with a pass rating being the lowest risk and a doubtful rating being the highest risk. Each credit risk rating has benchmark guidelines that pertain to debt-service coverage ratios, LTV ratios, borrower strength, asset quality, payment status in accordance with current contractual terms, 66 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 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 current loan agreement or based on our current assessment of the collateral value of the property or financial strength of the guarantors. A risk rating of substandard indicates we have observed weaknesses in one or more of the loan's credit quality factors and we anticipate the loan may require a modification of some kind to avoid a loss of interest and/or principal. A risk rating of doubtful indicates we expect the loan to underperform over its term, there could be loss of interest and/or principal, and we may need to take action to protect our investment including foreclosing on the underlying collateral. Further, while the above are the primary guidelines used in determining a certain risk rating, subjective items such as financial strength of guarantors, market strength, asset quality, or a borrower's ability to perform under modified loan terms may result in a rating that is higher or lower than might be indicated by any risk rating matrix. A summary of the loan portfolio’s internal risk ratings and LTV ratios by asset class at December 31, 2024, and charge-offs recorded during 2024 is as follows ($ in thousands): UPB by Origination Year Total Wtd. Avg. First Dollar LTV Ratio Wtd. Avg. Last Dollar LTV Ratio Asset Class / Risk Rating 2024 2023 2022 2021 2020 Prior Multifamily: Pass $ 308,228 $ 41,713 $ 69,000 $ 10,205 $ 2,010 $ 24,823 $ 455,979 Pass/Watch 357,724 308,353 1,012,593 462,709 119,860 113,100 2,374,339 Special Mention 79,618 31,344 2,340,782 2,958,064 — 94,529 5,504,337 Substandard — 658 159,100 206,277 — 21,700 387,735 Doubtful 12,460 — 193,850 159,379 14,800 9,765 390,254 Total Multifamily $ 758,030 $ 382,068 $ 3,775,325 $ 3,796,634 $ 136,670 $ 263,917 $ 9,112,644 2 % 83 % Single-Family Rental: Percentage of portfolio 81 % Pass $ 246,234 $ 32,875 $ 10,683 $ — $ — $ — $ 289,792 Pass/Watch 422,063 410,419 356,567 94,503 41,848 — 1,325,400 Special Mention — 31,043 139,125 107,155 87,967 — 365,290 Doubtful 5,704 10,786 — — — — 16,490 Total Single-Family Rental $ 674,001 $ 485,123 $ 506,375 $ 201,658 $ 129,815 $ — $ 1,996,972 0 % 61 % Land: Percentage of portfolio 18 % Pass $ 7,282 $ — $ — $ — $ — $ — $ 7,282 Special Mention — — — — 3,500 — 3,500 Substandard — — — — — 127,928 127,928 Total Land $ 7,282 $ — $ — $ — $ 3,500 $ 127,928 $ 138,710 0 % 96 % Office: Percentage of portfolio 1 % Special Mention $ — $ — $ — $ — $ 35,410 $ — $ 35,410 Total Office $ — $ — $ — $ — $ 35,410 $ — $ 35,410 0 % 94 % Retail: Percentage of portfolio < 1 % Substandard $ — $ — $ — $ — $ — $ 19,520 $ 19,520 Total Retail $ — $ — $ — $ — $ — $ 19,520 $ 19,520 0 % 88 % Commercial: Percentage of portfolio < 1 % Doubtful $ — $ — $ — $ — $ — $ 1,700 $ 1,700 Total Commercial $ — $ — $ — $ — $ — $ 1,700 $ 1,700 0 % 100 % Percentage of portfolio < 1 % Grand Total $ 1,439,313 $ 867,191 $ 4,281,700 $ 3,998,292 $ 305,395 $ 413,065 $ 11,304,956 2 % 80 % Charge-offs $ 464 $ — $ 4,077 $ 7,668 $ — $ — $ 12,209 67 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) A summary of the loan portfolio’s internal risk ratings and LTV ratios by asset class at December 31, 2023, and charge-offs recorded during 2023 is as follows ($ in thousands): UPB by Origination Year Total Wtd. Avg. First Dollar LTV Ratio Wtd. Avg. Last Dollar LTV Ratio Asset Class / Risk Rating 2023 2022 2021 2020 2019 Prior Multifamily: Pass $ 80,814 $ 53,316 $ 26,185 $ 2,010 $ 4,598 $ 20,300 $ 187,223 Pass/Watch 317,358 2,561,938 2,223,155 119,860 84,600 58,044 5,364,955 Special Mention 24,424 1,762,539 2,631,689 180,750 140,685 350 4,740,437 Substandard — 435,878 322,987 8,006 — — 766,871 Doubtful — — 13,930 14,800 9,765 — 38,495 Total Multifamily $ 422,596 $ 4,813,671 $ 5,217,946 $ 325,426 $ 239,648 $ 78,694 $ 11,097,981 1 % 80 % Single-Family Rental: Percentage of portfolio 88 % Pass $ 9,709 $ 608 $ — $ — $ — $ — $ 10,317 Pass/Watch 289,482 465,057 144,846 119,692 — — 1,019,077 Special Mention 31,131 45,145 218,697 — — — 294,973 Total Single-Family Rental $ 330,322 $ 510,810 $ 363,543 $ 119,692 $ — $ — $ 1,324,367 0 % 62 % Land: Percentage of portfolio 10 % Pass/Watch $ — $ — $ — $ 4,600 $ — $ — $ 4,600 Special Mention — — — 3,500 — — 3,500 Substandard — — — — — 127,928 127,928 Total Land $ — $ — $ — $ 8,100 $ — $ 127,928 $ 136,028 0 % 97 % Office: Percentage of portfolio 1 % Special Mention $ — $ — $ — $ 35,410 $ — $ — $ 35,410 Total Office $ — $ — $ — $ 35,410 $ — $ — $ 35,410 0 % 80 % Retail: Percentage of portfolio < 1 % Substandard $ — $ — $ — $ — $ — $ 19,520 $ 19,520 Total Retail $ — $ — $ — $ — $ — $ 19,520 $ 19,520 0 % 88 % Commercial: Percentage of portfolio < 1 % Doubtful $ — $ — $ — $ — $ — $ 1,700 $ 1,700 Total Commercial $ — $ — $ — $ — $ — $ 1,700 $ 1,700 63 % 66 % Percentage of portfolio < 1 % Grand Total $ 752,918 $ 5,324,481 $ 5,581,489 $ 488,628 $ 239,648 $ 227,842 $ 12,615,006 1 % 78 % Charge-offs $ — $ — $ — $ — $ — $ 5,700 $ 5,700 Geographic Concentration Risk At December 31, 2024, underlying properties in Texas and Florida represented 23 % and 17 %, respectively, of the outstanding balance of our loan and investment portfolio. At December 31, 2023, underlying properties in Texas and Florida represented 24 % and 17 %, 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. 68 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Allowance for Credit Losses A summary of the changes in the allowance for credit losses is as follows (in thousands): Year Ended December 31, 2024 Multifamily Land Retail Commercial Single-Family Rental Office Other Total Allowance for credit losses: Beginning balance $ 110,847 $ 78,058 $ 3,293 $ 1,700 $ 1,624 $ 142 $ — $ 195,664 Provision for credit losses (net of recoveries) 49,501 72 — — 5,900 39 — 55,512 Charge-offs (1) ( 12,209 ) — — — — — — ( 12,209 ) Ending balance $ 148,139 $ 78,130 $ 3,293 $ 1,700 $ 7,524 $ 181 $ — $ 238,967 Year Ended December 31, 2023 Allowance for credit losses: Beginning balance $ 37,961 $ 78,068 $ 5,819 $ 1,700 $ 780 $ 8,162 $ 69 $ 132,559 Provision for credit losses (net of recoveries) 72,886 ( 10 ) ( 2,526 ) — 844 ( 2,320 ) ( 69 ) 68,805 Charge-offs — — — — — ( 5,700 ) — ( 5,700 ) Ending balance $ 110,847 $ 78,058 $ 3,293 $ 1,700 $ 1,624 $ 142 $ — $ 195,664 Year Ended December 31, 2022 Allowance for credit losses: Beginning balance $ 18,707 $ 77,970 $ 5,819 $ 1,700 $ 319 $ 8,073 $ 653 $ 113,241 Provision for credit losses (net of recoveries) 19,254 98 — — 461 89 ( 584 ) 19,318 Ending balance $ 37,961 $ 78,068 $ 5,819 $ 1,700 $ 780 $ 8,162 $ 69 $ 132,559 ________________________ (1) Includes $ 8.4 million of specific reserves on two multifamily bridge loans that we foreclosed on and took back the underlying collateral as REO assets at fair value. During 2024, we recorded a $ 55.5 million provision for credit losses, net of recoveries, on our structured portfolio. The additional provision for credit losses was primarily attributable to specifically impaired multifamily loans and the impact from the macroeconomic outlook of the commercial real estate market. Our estimate of allowance for credit losses on our structured portfolio, including related unfunded loan commitments, was based on a reasonable and supportable forecast period that reflects recent observable data, including price indices for commercial real estate, unemployment rates, and interest rates. The expected credit losses over the contractual period of our loans also include the obligation to extend credit through our unfunded loan commitments. Our CECL allowance for unfunded loan commitments is adjusted quarterly and corresponds with the associated outstanding loans. At December 31, 2024 and 2023, we had outstanding unfunded commitments of $ 2.20 billion and $ 1.31 billion, respectively, that we are obligated to fund as borrowers meet certain requirements. The outstanding unfunded commitments are predominantly related to our SFR build-to-rent business. At December 31, 2024 and 2023, accrued interest receivable related to our loans totaling $ 154.4 million and $ 124.2 million, respectively, was excluded from the estimate of credit losses and is included in other assets on the consolidated balance sheets. 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 reserve loans considered impaired by asset class is as follows ($ in thousands): 69 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) December 31, 2024 Asset Class UPB (1) Carrying Value Allowance for Credit Losses Wtd. Avg. First Dollar LTV Ratio Wtd. Avg. Last Dollar LTV Ratio Multifamily $ 456,261 $ 444,400 $ 60,887 0 % 99 % Land 134,215 127,868 77,869 0 % 99 % Retail 19,520 15,068 3,293 0 % 87 % Commercial 1,700 1,700 1,700 0 % 100 % Total $ 611,696 $ 589,036 $ 143,749 0 % 99 % December 31, 2023 Multifamily $ 272,493 $ 260,291 $ 37,750 0 % 100 % Land 134,215 127,868 77,869 0 % 99 % Retail 19,521 15,037 3,292 0 % 88 % Commercial 1,700 1,700 1,700 0 % 100 % Total $ 427,929 $ 404,896 $ 120,611 0 % 99 % ________________________________________ (1) Represents the UPB of twenty-seven and nineteen impaired loans (less unearned revenue and other holdbacks and adjustments) by asset class at December 31, 2024 and 2023, respectively. Non-performing Loans Loans are classified as non-performing once the contractual payments exceed 60 days past due. 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. At December 31, 2024, twenty-six loans with an aggregate net carrying value of $ 598.9 million, net of related loan loss reserves of $ 23.8 million, were classified as non-performing and, at December 31, 2023, sixteen loans with a total net carrying value of $ 235.6 million, net of related loan loss reserves of $ 27.1 million, were classified as non-performing. A summary of our non-performing loans by asset class is as follows (in thousands): December 31, 2024 December 31, 2023 UPB Carrying Value UPB Carrying Value Multifamily $ 649,227 $ 620,072 $ 271,532 $ 260,129 Commercial 1,700 1,700 1,700 1,700 Retail 920 910 920 910 Total $ 651,847 $ 622,682 $ 274,152 $ 262,739 At both December 31, 2024 and 2023, we had no loans contractually past due greater than 60 days that are still accruing interest. Other Non-accrual Loans In this challenging economic environment, we began experiencing late and partial payments on certain loans in our structured portfolio. Beginning in the fourth quarter of 2023, for loans that are 60 days past due or less, if we have determined there is reasonable doubt about collectability of all principal and interest, we classify those loans as non-accrual and recognize interest income only when cash is received. The table below is a summary of those loans that are 60 days past due or less that we have classified as non-accrual, and changes to those loans for the period presented (in thousands). 70 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Year ended December 31, 2024 Beginning balance ( twenty-four multifamily bridge loans) $ 956,917 Loans that progressed to greater than 60 days past due ( 676,881 ) Loans modified or paid off (1) ( 1,103,676 ) Additional loans that are now less than 60 days past due experiencing late and partial payments 991,068 Ending balance ( nine multifamily bridge loans) $ 167,428 ________________________ (1) The modifications included bringing the loans current by paying past due interest owed (see Loan Modifications section below). There were no other non-accrual loans that were 60 days or less past due at December 31, 2024. During the year ended December 31, 2024 and 2023, we recorded $ 23.2 million and $ 92.5 million, respectively, of interest income on non-performing and other non-accrual loans. In addition, we have six loans with a carrying value totaling $ 121.4 million at December 31, 2024, 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 $ 112.1 million entitle us to a weighted average accrual rate of interest of 10.05 %. In 2008, we suspended the recording of the accrual rate of interest on these loans, as they were impaired and we deemed the collection of this interest to be doubtful. At both December 31, 2024 and 2023, 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. Loan Modifications We may agree to amend or modify loans to certain borrowers experiencing financial difficulty based on specific facts and circumstances in order to improve long-term collectability efforts and avoid foreclosure and repossession of the underlying collateral. The loan modifications to borrowers experiencing financial difficulty may include a delay in payments, including payment deferrals, term extensions, principal forgiveness, interest rate reductions, or a combination thereof. We record interest on modified loans on an accrual basis to the extent the modified loan is contractually current and we believe it is ultimately collectible. The allowance for credit losses on loan modifications is measured using the same method as all other loans held for investment. As part of the modifications of each of these loans, we expect borrowers to invest additional capital to recapitalize their projects, which the vast majority have funded in the form of either, or a combination of: (1) reallocation of and/or additional deposits into interest, renovation and/or general reserves; (2) the purchase of a new rate cap; (3) a principal paydown of the loan; and (4) bringing any delinquent loans current by paying past due interest owed. The following table represents the UPB of loan modifications, as of the modification date, made to borrowers experiencing financial difficulty during 2024 and the deferred interest recorded on those loans at December 31, 2024 (in thousands): Asset Class Payment Deferrals With/Without Term Extensions (1) Term Extensions (2) Rate Reductions With/Without Term Extensions (3) Other (4) Total (5)(6) December 31, 2024 Deferred Interest (7) Multifamily $ 2,312,067 $ 984,372 $ 134,630 $ 574,491 $ 4,005,560 $ 28,600 Single-Family Rental 74,078 — 38,479 — 112,557 570 Total UPB $ 2,386,145 $ 984,372 $ 173,109 $ 574,491 $ 4,118,117 $ 29,170 ________________________ (1) These loans were modified to a weighted average pay rate and deferred rate of 5.99 % and 2.06 %, respectively, at December 31, 2024 and to extend the weighted average term by 14.4 months. These modifications include loans with a total UPB of $ 379.0 million in which the pay rate increases from time-to-time throughout the loans maturities. (2) These loans were modified to extend the maturity date. The weighted average term extension was 11.7 months. 71 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (3) These loans were modified to extend the weighted average term by 23.6 months and to reduce the weighted average interest rate by 0.62 %. (4) These loan modifications included amending certain terms, such as reallocating and/or replenishment of reserves. (5) The total UPB of the loan modifications made during 2024 was $ 3.97 billion at December 31, 2024 and represents 35 % of our total Structured Business loans and investments portfolio. (6) At December 31, 2024, modified loans with a total UPB of $ 413.4 million have specific reserves totaling $ 44.3 million. (7) These amounts are included in other assets on the consolidated balance sheets. The following table represents the UPB of loan modifications, as of the modification date, made to borrowers experiencing financial difficulty during 2023 and the deferred interest recorded on those loans at December 31, 2024 (in thousands): Asset Class Payment Deferrals With Term Extensions (1)(2) December 31, 2024 Deferred Interest (3) Multifamily $ 398,461 $ 9,945 ________________________ (1) These loans were modified to a weighted average pay rate and deferred rate of 5.92 % and 2.16 % at December 31, 2024, respectively, and to extend the weighted average term by 14.6 months. (2) The total UPB of the loan modifications made during 2023 was $ 351.8 million at December 31, 2024 and represents 3 % of our total Structured Business loans and investments portfolio. (3) The deferred interest balance was $ 2.3 million at December 31, 2023. These amounts are included in other assets on the consolidated balance sheets. At December 31, 2024, we had future funding commitments on modified loans with borrowers experiencing financial difficulty of $ 56.4 million, which are generally subject to performance covenants that must be met by the borrower to receive funding. All of the above modified loans were performing pursuant to their contractual terms at December 31, 2024, except for twelve loans with a total UPB of $ 395.8 million which were modified in 2024. Since these loans are not performing pursuant to their modified terms, these loans are classified as non-accrual loans. Three of these loans with a UPB of $ 100.4 million have a specific reserve of $ 20.2 million. The remaining nine loans with a total UPB of $ 295.4 million have no specific reserves as the estimated fair value of the properties exceeded our carrying value at December 31, 2024. Seven of the twelve loans with a total UPB of $ 204.6 million were modified to provide temporary rate relief through a pay and accrual feature. There were no other material loan modifications, refinancings and/or extensions during 2024, 2023 or 2022 for borrowers experiencing financial difficulty. Loan Resolutions In the fourth quarter of 2024, we exercised our right to foreclose on two properties in Houston, Texas, that were the underlying collateral for two bridge loans with an aggregate UPB of $ 73.3 million, a weighted average interest rate of SOFR plus 3.29 %, with a weighted average SOFR floor of 0.68 %, and an aggregate net carrying value of $ 56.5 million, which includes loan loss reserves totaling $ 9.0 million and holdback reserves totaling $ 8.2 million. At foreclosure, we recorded a $ 7.7 million loan loss recovery and charged-off the remaining loan loss reserves of $ 1.3 million. Additionally, we simultaneously sold both properties for $ 67.6 million to a new borrower and provided two new bridge loans totaling $ 67.6 million with a weighted average fixed interest rate of 4.25 % for the first two years and 5.75 % in the third year. The new financing was deemed to be a significant financing component of the transaction and, as a result, we recorded a loss and corresponding liability totaling $ 5.0 million as an adjustment to the purchase price, which will be accreted into interest income over the life of the loan. The gains and losses of this transaction were recorded through the provision for credit losses (net of recoveries) on the consolidated statements of income. In July 2024, we exercised our right to foreclose on a property in Waco, Texas, that was the underlying collateral for a non-performing bridge loan with a UPB of $ 12.7 million, an interest rate of SOFR plus 3.75 %, with a SOFR floor of 0.10 %, and a net carrying value of $ 11.3 million, which was net of a $ 1.5 million loan loss reserve. At foreclosure, we recorded a $ 1.0 million loan loss recovery and charged-off the remaining loan loss reserve. Additionally, we simultaneously sold the property for $ 12.3 million to a new borrower and provided a new $ 12.3 million bridge loan with an interest rate of SOFR, with a SOFR floor of 5.25 %, which was deemed to be a significant financing component of the transaction. As a result, we recorded a loss and corresponding liability of $ 1.0 million as an 72 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) adjustment to the purchase price which will be accreted into interest income over the life of the loan. The gains and losses of this transaction were recorded through the provision for credit losses (net of recoveries) on the consolidated statements of income. In July 2024, we exercised our right to foreclose on a property in Savannah, Georgia, that was the underlying collateral for a non-performing bridge loan with a UPB of $ 7.3 million, an interest rate of SOFR plus 3.75 %, with a SOFR floor of 0.10 %, and a net carrying value of $ 6.6 million, which was net of a $ 0.8 million loan loss reserve. At foreclosure, we recorded a $ 0.8 million loan loss recovery and a gain of $ 0.3 million. Additionally, we simultaneously sold the property for $ 7.7 million to a new borrower and provided a new $ 7.3 million bridge loan with a fixed pay rate of 4.00 % and a fixed accrual rate of 2.00 % that is deferred to payoff, which was deemed to be a significant financing component of the transaction. As a result, we recorded a loss and corresponding liability of $ 0.5 million as an adjustment to the purchase price which will be accreted into interest income over the life of the loan. The gains and losses of this transaction were recorded through the provision for credit losses (net of recoveries). In April 2024, we exercised our right to foreclose on a group of properties in Houston, Texas, that were the underlying collateral for a bridge loan with a UPB of $ 100.3 million. We simultaneously sold the properties for $ 101.3 million to a newly formed entity, which was initially capitalized with $ 15.0 million of equity and a new $ 95.3 million bridge loan that we provided at SOFR plus 3.00 %. At December 31, 2024, total equity invested was $ 21.2 million and is made up of $ 9.4 million from AWC Real Estate Opportunity Partners I LP ("AWC”), a fund in which we have a 49 % non-controlling limited partnership interest (see Note 8 for details) and $ 11.8 million from multiple independent ownership groups. AWC and one of the other equity members are the co-managing members of the entity that owns the real estate. We did not record a loss on the original bridge loan and received all past due interest owed. In the fourth quarter of 2023, we converted a first mortgage loan and a preferred equity investment in an office building to a common equity investment, which is classified as real estate owned in our consolidated balance sheets. On the date of the conversion, the investment had a net carrying value of $ 37.1 million, net of an $ 8.0 million reserve. Upon conversion, we recognized a $ 2.3 million loan loss recovery as a result of the fair value of the property exceeding the carrying value of our loan and preferred equity investment. We intend to convert the building to residential condominiums. In April 2023, we exercised our right to foreclose on a group of properties in Houston, Texas, that are the underlying collateral for 4 bridge loans with a total UPB of $ 217.4 million. 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 totaling $ 239.4 million with a fixed pay rate increasing over time from 3.00 % to 5.00 %, while deferring up to a weighted average rate of SOFR plus 3.47 %. 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. At December 31, 2024 and 2023, we have deferred interest totaling $ 22.2 million and $ 10.3 million accrued, respectively, related to these new loans, which is included in other assets. In 2022, we sold four bridge loans with an aggregate UPB of $ 296.9 million at par less shared loan origination fees and selling costs totaling $ 2.0 million and recaptured $ 78.0 million of capital to be used for future investments. The $ 2.0 million in fees and costs were recorded as an unrealized impairment loss and included in other income (loss), net on the consolidated statements of income. We retained the right to service these loans. During 2022, we sold a bridge loan and mezzanine loans totaling $ 110.5 million, that were collateralized by a land development project, at a discount for $ 102.2 million. In connection with this transaction, we recaptured $ 66.3 million of capital to be used for future investments and recorded a $ 9.2 million loss (including fees and expenses), which was included in other income (loss), net on the consolidated statements of income. We have the potential to recover up to $ 2.8 million depending on the future performance of the loan. Given the transitional nature of some of our real estate loans, we may require funds to be placed into an interest reserve, based on contractual requirements, to cover debt service costs. At December 31, 2024 and 2023, we had total interest reserves of $ 215.4 million and $ 156.1 million, respectively, on 589 loans and 537 loans, respectively, with an aggregate UPB of $ 8.65 billion and $ 8.44 billion, respectively. 73 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Note 4 — Loans Held-for-Sale, Net Our GSE loans held-for-sale are typically sold within 60 days of loan origination, while our non-GSE loans are generally expected to be sold to third parties or securitized within 180 days of loan origination. Loans held-for-sale, net consists of the following (in thousands): December 31, 2024 December 31, 2023 Fannie Mae $ 171,235 $ 477,212 Freddie Mac 159,201 50,235 FHA 65,589 4,832 Private Label 38,962 11,350 SFR - Fixed Rate 3,246 8,696 438,233 552,325 Fair value of future MSR 5,138 7,784 Unrealized impairment loss ( 1,381 ) ( 1,989 ) Unearned discount ( 6,231 ) ( 6,413 ) Loans held-for-sale, net $ 435,759 $ 551,707 During 2024, 2023 and 2022, we sold $ 4.61 billion, $ 4.89 billion and $ 5.44 billion, respectively, of loans held-for-sale. During 2022, we recorded a net impairment loss of $ 5.2 million on seven Private Label loans held-for-sale 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 impaired loans above the net carrying value and recorded a gain of $ 0.9 million. At December 31, 2024 and 2023, there were no loans held-for-sale that were 90 days or more past due, and there were no loans held-for-sale that were placed on a non-accrual status. Note 5 — Capitalized Mortgage Servicing Rights Our capitalized MSRs reflect commercial real estate MSRs derived primarily from loans sold in our Agency Business or acquired MSRs. The discount rates used to determine the present value of all our MSRs throughout the periods presented were between 8 % - 14 % (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 6.9 years and 8.0 years at December 31, 2024 and 2023, respectively. A summary of our capitalized MSR activity is as follows (in thousands): Year Ended December 31, 2024 Year Ended December 31, 2023 Originated Acquired Total Originated Acquired Total Beginning balance $ 382,582 $ 8,672 $ 391,254 $ 386,878 $ 14,593 $ 401,471 Additions 54,346 — 54,346 67,612 — 67,612 Amortization ( 65,570 ) ( 2,852 ) ( 68,422 ) ( 59,182 ) ( 3,911 ) ( 63,093 ) Write-downs and payoffs ( 7,497 ) ( 1,003 ) ( 8,500 ) ( 12,726 ) ( 2,010 ) ( 14,736 ) Ending balance $ 363,861 $ 4,817 $ 368,678 $ 382,582 $ 8,672 $ 391,254 We collected prepayment fees totaling $ 3.0 million and $ 6.4 million during 2024 and 2023, respectively, which are included as a component of servicing revenue, net on the consolidated statements of income. At December 31, 2024 and 2023, no MSRs were considered impaired. 74 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The expected amortization of capitalized MSRs recorded at December 31, 2024 is as follows (in thousands): Year Amortization 2025 $ 69,382 2026 64,023 2027 59,510 2028 52,288 2029 43,178 Thereafter 80,297 Total $ 368,678 Based on scheduled maturities, actual amortization may vary from these estimates. Note 6 – Mortgage Servicing Product and geographic concentrations that impact our servicing revenue are as follows ($ in thousands): December 31, 2024 Product Concentrations Geographic Concentrations Product UPB (1) % of Total State UPB % of Total Fannie Mae $ 22,730,056 67 % Texas 11 % Freddie Mac 6,077,020 18 % New York 11 % Private Label 2,605,980 8 % California 8 % FHA 1,506,948 5 % North Carolina 7 % Bridge (2) 278,494 1 % Georgia 6 % SFR - Fixed Rate 271,859 1 % Florida 6 % Total $ 33,470,357 100 % New Jersey 5 % Other (3) 46 % Total 100 % December 31, 2023 Fannie Mae $ 21,264,578 69 % Texas 11 % Freddie Mac 5,181,933 17 % New York 11 % Private Label 2,510,449 8 % California 8 % FHA 1,359,624 4 % North Carolina 8 % Bridge (2) 379,425 1 % Georgia 6 % SFR - Fixed Rate 287,446 1 % Florida 6 % Total $ 30,983,455 100 % New Jersey 5 % Illinois 4 % Other (3) 41 % Total 100 % ________________________________________ (1) Excludes loans which we are not collecting a servicing fee. (2) Represents four bridge loans sold by our Structured Business that we are servicing, see Note 3 for details. (3) No other individual state represented 4% or more of the total. At December 31, 2024 and 2023, our weighted average servicing fee was 37.8 basis points and 39.1 basis points, respectively. At December 31, 2024 and 2023, we held total escrow balances (including unfunded CLO hold backs) of approximately $ 1.45 billion and $ 1.60 billion, respectively, of which approximately $ 1.41 billion and $ 1.54 billion is not included in our consolidated balance sheets at December 31, 2024 and 2023, respectively. These escrows are maintained in separate accounts at several federally insured depository 75 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 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. The components of servicing revenue, net are as follows (in thousands): Year Ended December 31, 2024 2023 2022 Servicing fees $ 129,092 $ 123,975 $ 123,937 Interest earned on escrows 70,742 77,916 24,436 Prepayment fees 2,984 6,387 48,197 Write-offs and payoffs of MSRs ( 8,500 ) ( 14,736 ) ( 44,502 ) Amortization of MSRs ( 68,422 ) ( 63,093 ) ( 59,876 ) Servicing revenue, net $ 125,896 $ 130,449 $ 92,192 Note 7 – Securities Held-to-Maturity Agency Private Label Certificates. In connection with our Private Label securitizations, we retain the most subordinate class of the APL certificates in satisfaction of credit risk retention requirements. At December 31, 2024, 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 6.3 years. The weighted average effective interest rate was 8.84 % and 8.85 % at December 31, 2024 and 2023, respectively, including the accretion of a portion of the discount deemed collectible. Approximately $ 192.8 million is estimated to mature in five to ten years. Agency B Piece Bonds. Freddie Mac may choose to hold, sell or securitize loans we sell to them under the Freddie Mac SBL program. As part of the securitizations under the SBL program, we have the ability to purchase the B Piece bond through a bidding process, which represents the bottom 10%, or highest risk, of the securitization. At December 31, 2024, we retained 49 %, or $ 106.2 million initial face value, of seven B Piece bonds, which were previously 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 13.1 years. The weighted average effective interest rate was 11.76 % and 11.28 % at December 31, 2024 and 2023, respectively, including the accretion of a portion of the discount deemed collectible. Approximately $ 37.2 million is estimated to mature after ten years. A summary of our securities held-to-maturity is as follows (in thousands): Face Value Net Carrying Value Unrealized Gain (Loss) Estimated Fair Value Allowance for Credit Losses December 31, 2024 APL certificates $ 192,791 $ 134,834 $ ( 22,803 ) $ 112,031 $ 1,658 B Piece bonds 37,221 22,320 10,157 32,477 9,188 Total $ 230,012 $ 157,154 $ ( 12,646 ) $ 144,508 $ 10,846 December 31, 2023 APL certificates $ 192,791 $ 128,865 $ ( 31,331 ) $ 97,534 $ 2,272 B Piece bonds 37,704 26,414 5,442 31,856 3,984 Total $ 230,495 $ 155,279 $ ( 25,889 ) $ 129,390 $ 6,256 76 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) A summary of the changes in the allowance for credit losses for our securities held-to-maturity is as follows (in thousands): Year Ended December 31, 2024 Year Ended December 31, 2023 APL Certificates B Piece Bonds Total APL Certificates B Piece Bonds Total Beginning balance $ 2,272 $ 3,984 $ 6,256 $ 2,783 $ 370 $ 3,153 Provision for credit loss expense/(reversal) ( 614 ) 5,204 4,590 ( 511 ) 3,614 3,103 Ending balance $ 1,658 $ 9,188 $ 10,846 $ 2,272 $ 3,984 $ 6,256 The allowance for credit losses on our held-to-maturity securities consists of (1) a general reserve 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, and (2) a specific reserve for underlying loans that are probable of, or is, in foreclosure. 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 $ 15.9 million, $ 13.6 million and $ 18.6 million during 2024, 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): Investments in Equity Affiliates at UPB of Loans to Equity Affiliates at December 31, 2024 Equity Affiliates December 31, 2024 December 31, 2023 Arbor Residential Investor LLC $ 23,868 $ 32,743 $ — AMAC Holdings III LLC 15,413 13,591 35,410 Fifth Wall Ventures 14,490 13,365 — AWC Real Estate Opportunity Partners I LP 13,562 11,671 108,450 ARSR DPREF I LLC 5,603 5,163 — Lightstone Value Plus REIT L.P. 1,895 1,895 — The Park at Via Terrossa 606 — 21,845 Docsumo Pte. Ltd. 450 450 — JT Prime 425 425 — West Shore Café — — 1,688 Lexford Portfolio — — — East River Portfolio — — — Total $ 76,312 $ 79,303 $ 167,393 Arbor Residential Investor LLC (“ARI”). We invested $ 9.6 million for a 50 % interest in ARI, with our former manager (ACM) holding the remaining 50 %. ARI was formed to hold a 50 % interest in Wakefield Investment Holdings LLC (“Wakefield”), an entity that was formed with a third party to hold a controlling interest ( 65 %) in a residential mortgage banking business. ARI has no other assets, liabilities or activity other than its investment in Wakefield. At December 31, 2024, our indirect interest in this business was 12.3 %. The allocation of income is based on the underlying agreements, which may be different than our indirect interest, and was 9.2 % at December 31, 2024. We account for our ownership interest in ARI under the equity method of accounting and ARI accounts for its ownership interest in Wakefield under the equity method of accounting. During 2024, 2023 and 2022, we recorded a loss of $ 1.2 million, income of $ 0.6 million and income of $ 4.9 million, respectively, to income from equity affiliates in the consolidated statements of income. We also received $ 7.7 million and $ 15.0 million in cash distributions from this investment during 2024 and 2023, respectively, which were classified as returns of capital. AMAC III. We committed to a $ 30.0 million investment for an 18 % interest in a multifamily-focused commercial real estate investment fund that is sponsored and managed by our chief executive officer and one of his immediate family members. During 2024, 2023 and 2022, we recorded losses associated with this investment of $ 2.3 million, $ 1.9 million and $ 2.4 million, respectively. During 77 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 2024 and 2023, we made contributions of $ 4.1 million and $ 0.7 million, respectively, and received cash distributions of $ 1.1 million in 2023, which were classified as returns of capital, related to this investment. Fifth Wall. We committed to a $ 25.0 million investment for a 7.6 % interest in two related private equity funds whose investment objective is to invest primarily in technology, technology-enabled or technology-related companies that are relevant or complementary to the build environment, including real estate or real estate-related industries. We have no role in the management of the investment funds. During 2024 and 2023, we made contributions of $ 1.1 million and $ 1.0 million, respectively, and recorded income associated with this investment of $ 0.1 million and a loss of $ 1.2 million, respectively. Operating results from this investment were de minimis for 2022. AWC Real Estate Opportunity Partners I LP ("AWC"). In the fourth quarter of 2023, we committed to a $ 24.0 million investment, of which $ 11.7 million was initially funded, for an initial 99 % noncontrolling interest in a fund whose objective is to make investments in sustainable affordable housing structures, with the intention to bring in additional partners. In addition, we entered into an agreement with the general partner to provide a loan, up to a maximum of $ 0.9 million, to fund a portion of their 1 % general partnership interest, of which $ 0.3 million was funded at December 31, 2024. In the second quarter of 2024, in accordance with the fund's objectives, AWC brought in an additional capital partner who committed to a $ 25.0 million investment ($ 16.3 million was funded at December 31, 2024) in exchange for a 51 % non-controlling limited partnership interest and 17.5 % of the general partner's interest in the fund. This new equity partner diluted our limited partnership interest in the fund to a 49 % non-controlling limited partnership interest. Additionally, AWC invested $ 9.4 million for a 44 % interest in a newly formed entity, which purchased a group of properties in Houston, Texas, that were the collateral for a $ 100.3 million bridge loan that we foreclosed on simultaneously with the sale. We sold the Houston properties for $ 101.3 million, which was primarily financed with a new $ 95.3 million bridge loan we provided at SOFR plus 3 %. See Note 3 for details. In the fourth quarter of 2023, this fund also purchased our equity interest in North Vermont Avenue at a discount for $ 1.3 million, which was recorded as a reduction to our investment in AWC. The remaining $ 14.3 million of capital invested in the fund was used to purchase four additional qualified investments and to pay for legal and administrative expenses primarily related to the formation of the fund. We provided a $ 13.0 million Fannie Mae DUS loan and a $ 13.2 million bridge loan to the owners of the real estate on two of these investments. During 2024, we made contributions of $ 13.6 million, received distributions of $ 11.2 million, which were classified as returns of capital, and recorded a loss of $ 0.5 million related to this investment. Interest income recorded from the $ 95.3 million and $ 13.2 million bridge loans was $ 5.4 million for the year ended December 31, 2024. ARSR DPREF I LLC. In the fourth quarter of 2023, we entered into a joint venture whose objective is to invest in preferred equity investments in commercial real estate and we contributed 50 % of a $ 10.2 million preferred equity loan originated by us to the joint venture. We hold a 50 % interest in the joint venture which is structured to reflect joint control, allocation of profits and losses and capital contributions. The agreement provides for a total joint venture contribution of $ 70.0 million, which may be upsized to $ 140.0 million. During 2024, we recorded income associated with this investment of $ 0.7 million and received distributions of $ 0.4 million which were classified as returns of capital. Lightstone Value Plus REIT L.P. / JT Prime. We own a $ 1.9 million interest in a joint venture that holds common operating partnership units of Lightstone Value Plus REIT L.P. (“Lightstone”). We also own a 50 % noncontrolling interest in a joint venture, JT Prime, which holds common operating partnership units of Lightstone at a carrying value of $ 0.4 million. Operating results from these investments were de minimis for all periods presented. The Park at Via Terrossa. In the first quarter of 2024, we contributed $ 0.6 million, for a 5 % interest in a multifamily property. Operating results from this investment were de minimis during 2024. Docsumo Pte. Ltd. (“Docsumo”). 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 AI. Operating results from this investment were de minimis for all periods presented. West Shore Café. We own a 50 % noncontrolling interest in the West Shore Lake Café, a restaurant/inn lakefront property in Lake Tahoe, California. We provided a $ 1.7 million first mortgage loan to an affiliated entity to acquire property adjacent to the original property, which matures in September 2025 and bears interest at SOFR plus 4 % with a SOFR floor of 0.15 %. In 2018, we determined that this investment exhibited indicators of impairment and recorded an other-than-temporary impairment of $ 2.2 million for the full carrying amount of this investment and fully reserved the $ 1.7 million first mortgage loan. Operating results from this investment were de minimis for all periods presented. Lexford Portfolio. We own a less than $ 0.1 million noncontrolling equity interest in Lexford, a portfolio of multifamily assets. In 2024 and 2023, we received distributions from this investment and recognized income totaling $ 9.0 million and $ 12.2 million, respectively. 78 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) East River Portfolio. We invested $ 0.1 million for a 5 % interest in a joint venture that owns two multifamily properties. The joint venture is comprised of a consortium of investors (which includes, among other unaffiliated investors, certain of our officers, our chief executive officer and certain other related parties) who together own an interest of 95 %. Operating results from this investment were de minimis for all periods presented. Equity Participation Interest. During 2023, we received $ 14.5 million from equity participation interests on properties that were sold and which we had loans that previously paid off. These were classified as returns of capital and recognized as income from equity affiliates. North Vermont Avenue. We invested $ 2.4 million for an initial 85 % noncontrolling interest in a joint venture that acquired three parcels of land with multiple structures, with the intent to tear down the existing structures and construct a new 202 -unit multifamily complex with ground floor retail. Operating results from this investment were de minimis for all periods presented. During 2022, we determined that this investment exhibited indicators of impairment and, as a result of an impairment analysis performed; we recorded an other-than-temporary impairment of $ 2.4 million to income from equity affiliates for the full carrying amount of this investment. In the fourth quarter of 2023, AWC purchased our equity interest in North Vermont Avenue at a discount for $ 1.3 million (described above). See Note 19 for details of certain investments described above. Note 9 — Real Estate Owned A summary of our REO assets is as follows (in thousands): December 31, 2024 December 31, 2023 Multifamily Office Land Total Multifamily Office Land Total Land $ 29,171 $ 13,599 $ 7,947 $ 50,717 $ 3,148 $ 12,028 $ 7,947 $ 23,123 Building and intangible assets 99,812 35,561 — 135,373 26,953 42,781 — 69,734 Less: Impairment loss — ( 2,500 ) — ( 2,500 ) — — — — Less: Accumulated depreciation and amortization ( 4,497 ) ( 2,550 ) — ( 7,047 ) ( 2,168 ) ( 3,698 ) — ( 5,866 ) Real estate owned, net $ 124,486 $ 44,110 $ 7,947 $ 176,543 $ 27,933 $ 51,111 $ 7,947 $ 86,991 At December 31, 2024, our REO assets were comprised of four multifamily properties, two office buildings and two land parcels. At December 31, 2023, our REO assets were comprised of one multifamily property, three office buildings and two land parcels. At December 31, 2024 and 2023, we had mortgage notes payable totaling $ 74.9 million and $ 44.3 million, respectively, which are collateralized by our REO assets. At December 31, 2024 and 2023, our multifamily properties had a weighted average occupancy rate of approximately 77 % and 98 %, respectively. At December 31, 2024, both our office buildings were vacant, and at December 31, 2023, two office buildings were vacant and the third building was 89 % occupied. During 2024, we foreclosed on three multifamily bridge loans and took back the underlying collateral as REO assets. These properties have a total carrying value of $ 97.4 million at December 31, 2024. During 2024, we sold an office REO asset for $ 14.2 million, repaid the mortgage note outstanding of $ 9.0 million, and recognized a $ 3.8 million gain. During 2024 and 2023, we recorded depreciation expense related to the REO assets of $ 3.7 million and $ 2.9 million, respectively. Our REO assets had restricted cash balances due to escrow requirements totaling $ 2.9 million and $ 1.4 million at December 31, 2024 and 2023, respectively. Subsequent Event. In January and February 2025, we foreclosed on and took back three multifamily properties collateralizing bridge loans with a total UPB of $ 101.6 million. 79 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Note 10 — Goodwill and Other Intangible Assets Goodwill. The goodwill balance at both December 31, 2024 and 2023 was $ 56.6 million. Other Intangible Assets. The following table sets forth the other intangible assets activity (in thousands): December 31, 2024 December 31, 2023 Gross Carrying Value Accumulated Amortization Total Gross Carrying Value Accumulated Amortization Total Finite‑lived intangible assets: Broker relationships $ 25,000 $ ( 25,000 ) $ — $ 25,000 $ ( 23,307 ) $ 1,693 Borrower relationships 14,400 ( 12,180 ) 2,220 14,400 ( 10,740 ) 3,660 Below market leases 4,010 ( 3,737 ) 273 4,010 ( 3,611 ) 399 Infinite‑lived intangible assets: Fannie Mae DUS license 17,100 — 17,100 17,100 — 17,100 Freddie Mac Program Plus license 8,700 — 8,700 8,700 — 8,700 FHA license 3,200 — 3,200 3,200 — 3,200 $ 72,410 $ ( 40,917 ) $ 31,493 $ 72,410 $ ( 37,658 ) $ 34,752 The amortization expense recorded for these intangible assets was $ 3.3 million in 2024 and $ 4.7 million in both 2023 and 2022. At December 31, 2024, the weighted average remaining lives of our amortizable finite-lived intangible assets and the estimated annual amortization expense are as follows ($ in thousands): Wtd. Avg. Remaining Life (in years) Estimated Amortization Expense for the Years Ending December 31, 2025 2026 2027 Finite‑lived intangible assets: Borrower relationships 1.5 $ 1,440 $ 780 $ — Below market leases 2.2 126 126 21 1.6 $ 1,566 $ 906 $ 21 See Note 21 for details of goodwill and other intangible assets by segment. 80 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Note 11 — Debt Obligations Credit and Repurchase Facilities Borrowings under our credit and repurchase facilities are as follows ($ in thousands): December 31, 2024 December 31, 2023 UPB Debt Carrying Value (1) Collateral Carrying Value Wtd. Avg. Note Rate UPB Debt Carrying Value (1) Collateral Carrying Value Wtd. Avg. Note Rate Structured Business $ 1.9 B joint repurchase facility (2) $ 661,159 $ 657,690 $ 1,104,791 6.76 % $ 870,073 $ 868,077 $ 1,371,436 7.81 % $ 1 B repurchase facility (2) 215,832 215,459 336,193 6.97 % 386,576 385,779 589,533 7.68 % $ 1 B repurchase facility 782,956 781,812 1,055,321 7.20 % 448,411 447,490 597,205 8.38 % $ 750 M repurchase facility (2) 203,348 202,798 362,695 7.28 % — — — — $ 649 M repurchase facility (2)(3) 499,039 499,017 678,017 6.98 % 355,328 355,328 506,753 7.83 % $ 400 M credit facility 140,412 138,695 237,123 7.69 % — — — — $ 350 M repurchase facility 134,368 134,189 203,135 6.53 % 263,061 262,820 362,465 7.55 % $ 250 M repurchase facility — — — — — — — — $ 250 M repurchase facility — — — — — — — — $ 250 M repurchase facility (4) — — — — 17,997 17,964 23,088 7.32 % $ 200 M repurchase facility 74,925 74,896 109,920 6.59 % 107,355 107,324 141,130 7.44 % $ 200 M repurchase facility 156,329 155,676 214,441 6.98 % 46,403 45,969 68,762 8.04 % $ 150 M credit facility 108,861 108,696 145,148 7.43 % 120,645 120,610 162,068 8.05 % $ 134 M loan specific credit facilities 134,131 133,965 181,108 6.59 % 120,660 120,328 161,700 6.91 % $ 100 M repurchase facility (5) — — — — 32,599 32,579 41,522 7.03 % $ 50 M credit facility (6) — — — — 29,200 29,200 36,500 7.58 % $ 40 M credit facility 15,576 15,387 24,610 6.77 % — — — — $ 35 M working capital facility — — — — — — — — Repurchase facility - securities (2)(7) 18,549 18,549 — 6.12 % 31,033 31,033 — 7.15 % Structured Business total (8) $ 3,145,485 $ 3,136,829 $ 4,652,502 7.00 % $ 2,829,341 $ 2,824,501 $ 4,062,162 7.80 % Agency Business $ 750 M ASAP agreement $ 62,196 $ 62,196 $ 62,372 5.48 % $ 73,011 $ 73,011 $ 73,781 6.49 % $ 500 M repurchase facility 40,878 40,872 41,165 5.81 % 115,841 115,730 241,895 6.83 % $ 200 M credit facility 141,217 141,169 141,971 5.89 % 187,185 187,138 187,185 6.78 % $ 200 M credit facility 137,878 137,762 138,793 5.84 % — — — — $ 100 M joint repurchase facility (2) 28,656 28,611 38,962 6.34 % 7,945 7,833 11,350 7.77 % $ 50 M credit facility 11,723 11,723 11,723 5.84 % 29,085 29,083 29,418 6.73 % $ 1 M repurchase facility (2)(3) 328 328 469 6.83 % 531 531 866 7.86 % Agency Business total $ 422,876 $ 422,661 $ 435,455 5.84 % $ 413,598 $ 413,326 $ 544,495 6.76 % Consolidated total $ 3,568,361 $ 3,559,490 $ 5,087,957 6.86 % $ 3,242,939 $ 3,237,827 $ 4,606,657 7.67 % ________________________________________ (1) At December 31, 2024 and 2023, debt carrying value for the Structured Business was net of unamortized deferred finance costs of $ 8.6 million and $ 4.8 million, respectively, and for the Agency Business was net of unamortized deferred finance costs of $ 0.2 million and $ 0.3 million, respectively. (2) These facilities are subject to margin call provisions associated with changes in interest spreads. (3) A portion of this facility was used to finance a fixed rate SFR permanent loan reported through our Agency Business. (4) In December 2024, we terminated this facility. (5) This facility matured in October 2024 and was not renewed. (6) In June 2024, we terminated this facility. (7) At December 31, 2024 and 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 $ 26.6 million and $ 43.1 million, respectively. (8) These amounts exclude outstanding mortgage notes payable on our REO assets with a debt carrying value of $ 74.9 million and $ 44.3 million as of December 31, 2024 and 2023, respectively. 81 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Usually, our credit and repurchase facilities have extension options that are at the discretion of the financial institutions in which we have long standing relationships with. These facilities typically renew annually and also include a "wind-down" feature. Joint Repurchase Facility. We have a $ 2.00 billion joint repurchase facility that is shared between the Structured Business and the Agency Business, and matures in July 2025 with a one-year extension option. This facility is used to finance both structured and Private Label loans. The interest rate under the facility is determined on a loan-by-loan basis and may include a floor equal to a pro rata share of the floors included in our originated loans. The facility has a maximum advance rate of 80 % on all loans. If the estimated market value of the loans financed in this facility decrease, we may be required to pay down borrowings under this facility. Structured Business. We utilize credit and repurchase facilities with various financial institutions to finance our loans and investments as described below. Many of these facilities have a maximum advance rate between 70 % to 80 %, depending on the asset type financed. At December 31, 2024 and 2023, 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 7.43 % and 8.26 %, respectively. The leverage on our loan and investment portfolio financed through our credit and repurchase facilities, excluding the securities repurchase facility and working capital facility, was 67 % and 69 % at December 31, 2024 and 2023, respectively. We have a $ 1.00 billion repurchase facility used to finance bridge loans that matures in August 2025, with a one-year extension option. The facility bears interest at SOFR plus 2.50 %. We have a $ 1.00 billion repurchase facility to finance SFR loans that has an interest rate ranging from SOFR plus 2.50 % to 3.26 %. The commitment amount under this facility expires six months after the lender provides written notice. We then have an additional six months to repurchase the underlying loans. We have a $ 750.0 million repurchase facility of which $ 500.0 million may be used to finance performing loans and $ 250.0 million may be used to finance non-performing loans that matures in December 2026, with the ability to extend the maturity in one-year increments, subject to lender approval. The $ 500.0 million portion of the facility has an interest rate of SOFR plus 1.75 %, with a SOFR floor of 0.15 % and will increase to SOFR plus 2.25 %, with a 0.15 % SOFR floor in March 2026. The $ 250.0 million portion of the facility has an interest rate of SOFR plus 3.25 %, with a SOFR floor of 2.50 %. We have a $ 650.0 million repurchase facility to finance SFR loans that has an interest rate ranging from SOFR plus 2.46 % to 3.11 %, with a 0.25 % SOFR floor, and matures in October 2025. We have a $ 400.0 million credit facility to finance performing and non-performing loans that bears interest at SOFR plus 3.25 %, with a SOFR floor of 1.00 %. The facility matures in March 2027. We have a $ 350.0 million repurchase facility to finance bridge loans that matures in March 2025, with a one-year extension option. The interest rate under the facility is determined on a loan-by-loan basis and includes a floor of SOFR plus 2.00 %. We have a $ 250.0 million repurchase facility to finance multifamily construction loans that matures in September 2027, with the ability to extend the maturity in one-year increments, subject to lender approval. The facility has an interest rate of SOFR plus 3.25 %, with a SOFR floor of 2.00 %. We have a $ 250.0 million repurchase facility to finance bridge loans that bears interest ranging from SOFR plus 2.00 % to 2.65 % depending on the duration of time the loan is being financed. The facility matures in October 2025, with a one-year extension option. We have a $ 200.0 million repurchase facility to finance bridge and construction loans that has interest rates ranging from SOFR plus 1.75 % to 3.50 % depending on the type of loan financed, with a SOFR floor determined on a loan-by-loan basis. In January 2025, this facility was increased to $ 400.0 million and the maturity was extended from January 2025 to January 2027, with a one-year extension option. We have a $ 200.0 million repurchase facility to finance SFR loans that matures in March 2027, with a one-year extension option. This facility has an interest rate of SOFR plus 2.55 %. We have a $ 150.0 million credit facility to finance SFR loans that matures in October 2025. This facility bears interest at SOFR plus 3.00 %, with an all-in floor of 5.50 %. 82 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) We have several loan specific credit facilities totaling $ 134.1 million used to finance individual bridge loans. The facilities bear interest ranging from SOFR plus 1.91 % to 2.40 %, with a SOFR floor up to 2.40 %, and Prime plus 0.85 %, with a Prime floor of 6.15 %. The facilities mature between June 2025 and August 2027. We have a $ 40.0 million credit facility used to purchase loans that bears interest at SOFR plus 2.35 % and matures in April 2026, with a one-year extension option. We have a $ 35.0 million unsecured working capital line of credit that bears interest at SOFR plus 3.00 %. This line matures in April 2025 and is typically renewed annually. We have an uncommitted repurchase facility that is used to finance certificates retained by us from our Q Series securitization and our purchases of B Piece bonds from SBL program securitizations. This facility bears interest ranging from SOFR plus 1.50 % to 3.50 % and matures in July 2025, with a one-year extension option. Agency Business. We utilize credit and repurchase facilities with various financial institutions to finance substantially all of our loans held-for-sale as described below. The financial institutions that provide these facilities generally have a security interest in the underlying mortgage notes that serve as collateral for these facilities. We have a $ 750.0 million ASAP agreement with Fannie Mae providing us with a warehousing credit facility for mortgage loans that are to be sold to Fannie Mae and serviced under the Fannie Mae DUS program. The ASAP agreement is not a committed line, has no expiration date and bears interest at SOFR plus 1.15 %, with a 0.25 % SOFR floor. We have a $ 500.0 million repurchase facility that bears interest at SOFR plus 1.48 % and matures in November 2025. We have a $ 200.0 million credit facility that bears interest at SOFR plus 1.40 % and matures in March 2025. We have a $ 200.0 million credit facility that bears interest at SOFR plus 1.35 % and matures in July 2025. We have the ability to borrow up to an additional $ 200.0 million under this facility at the lenders discretion determined on a loan-by-loan basis. This facility includes a $ 37.5 million sublimit for principal and interest advances we make as the primary servicer to Fannie Mae in connection with potential delinquent loans under the Fannie Mae forbearance program, which bears interest at SOFR plus 1.75 %. We have a $ 50.0 million credit facility that bears interest at SOFR plus 1.35 % and matures in September 2025. We have a letter of credit facility to secure obligations under the Fannie Mae DUS program and the Freddie Mac SBL program with a total committed amount of up to $ 75.0 million. The facility bears interest at a fixed rate of 2.875 %, matures in September 2025, and is primarily collateralized by our servicing revenue as approved by Fannie Mae and Freddie Mac. The facility includes a $ 5.0 million sublimit for obligations under the Freddie Mac SBL program. At December 31, 2024, the letters of credit outstanding include $ 70.0 million for the Fannie Mae DUS program and $ 5.0 million for the Freddie Mac SBL program. 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. 83 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Borrowings and the corresponding collateral under our securitized debt transactions are as follows ($ in thousands): Debt Collateral (3) Loans Cash December 31, 2024 Face Value Carrying Value (1) Wtd. Avg. Rate (2) UPB Carrying Value Restricted Cash (4) CLO 19 $ 753,987 $ 751,364 7.02 % $ 912,935 $ 912,392 $ — CLO 18 1,335,647 1,332,950 6.47 % 1,684,765 1,684,285 37,090 CLO 17 1,482,657 1,480,495 6.15 % 1,811,391 1,810,463 50,910 CLO 16 682,845 681,008 5.93 % 944,660 943,542 — CLO 14 326,238 326,238 6.11 % 452,751 452,526 — Total CLOs (5) 4,581,374 4,572,055 6.35 % 5,806,502 5,803,208 88,000 Q Series securitization 50,641 50,434 6.49 % 94,940 94,895 — Total securitized debt $ 4,632,015 $ 4,622,489 6.35 % $ 5,901,442 $ 5,898,103 $ 88,000 December 31, 2023 CLO 19 $ 872,812 $ 868,359 7.84 % $ 1,031,772 $ 1,028,669 $ 4,527 CLO 18 1,652,812 1,647,885 7.29 % 1,784,921 1,780,930 244,629 CLO 17 1,714,125 1,709,800 7.14 % 1,870,388 1,865,878 203,938 CLO 16 1,237,500 1,233,769 6.76 % 1,456,872 1,453,297 847 CLO 15 (5) 674,412 673,367 6.82 % 734,120 732,498 42,600 CLO 14 (5) 589,345 588,176 6.82 % 680,814 679,469 33,271 Total CLOs 6,741,006 6,721,356 7.14 % 7,558,887 7,540,741 529,812 Q Series securitization 215,278 213,654 7.38 % 287,038 286,053 — Total securitized debt $ 6,956,284 $ 6,935,010 7.15 % $ 7,845,925 $ 7,826,794 $ 529,812 ________________________________________ (1) Debt carrying value is net of $ 9.5 million and $ 21.3 million of deferred financing fees at December 31, 2024 and 2023, respectively. (2) At December 31, 2024 and 2023, the aggregate weighted average note rate for our CLOs, including certain fees and costs, was 6.59 % and 7.37 %, respectively, and the Q Series securitization was 7.46 % and 7.99 %, respectively. (3) At December 31, 2024 and 2023, 46 and 12 loans, respectively, with a total UPB of $ 1.60 billion and $ 308.3 million, respectively, were deemed a "credit risk" as defined by the CLO indentures. A credit risk asset is 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 $ 43.4 million and $ 63.9 million at December 31, 2024 and 2023, respectively. (5) The replenishment period for all CLOs has ended: CLO 14 - September 2023, CLO 15 – December 2023, CLO 16 – March 2024, CLO 19 – May 2024, CLO 17 – June 2024, and CLO 18 – August 2024. CLO 19. In 2022, we completed CLO 19, issuing nine tranches of CLO notes through a wholly owned subsidiary totaling $ 1.05 billion. Of the total CLO notes issued, $ 872.8 million were investment grade notes issued to third party investors and $ 177.2 million were below investment grade notes retained by us. As of the CLO closing date, the notes were secured by a portfolio of loan obligations with a face value of $ 976.9 million, consisting primarily of bridge loans that were contributed from our existing loan portfolio, and cash. The financing had an approximate two-year replacement period that allowed the principal proceeds and sale proceeds (if any) of the loan obligations to be reinvested in qualifying replacement loan obligations, subject to the satisfaction of certain conditions set forth in the indenture. Thereafter, the outstanding debt balance is being reduced as loans are repaid. Initially, the proceeds of the issuance of the securities also included $ 73.1 million for the purpose of acquiring additional loan obligations for a period of up to 180 days from the CLO closing date, which we subsequently utilized, resulting in the issuer owning loan obligations with a face value of $ 1.05 billion, representing leverage of 83 %. The notes sold to third parties had an initial weighted average interest rate of 2.36 % plus term SOFR and interest payments on the notes are payable monthly. CLO 18. In 2022, we completed CLO 18, issuing eight tranches of CLO notes through two wholly owned subsidiaries totaling $ 1.86 billion. Of the total CLO notes issued, $ 1.65 billion were investment grade notes issued to third party investors and $ 210.1 million were 84 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) below investment grade notes retained by us. As of the CLO closing date, the notes were secured by a portfolio of loan obligations with a face value of $ 1.70 billion, consisting primarily of bridge loans that were contributed from our existing loan portfolio, and cash. The financing had an approximate two-and-a-half-year replacement period that allowed the principal proceeds and sale proceeds (if any) of the loan obligations to be reinvested in qualifying replacement loan obligations, subject to the satisfaction of certain conditions set forth in the indenture. Thereafter, the outstanding debt balance is being reduced as loans are repaid. Initially, the proceeds of the issuance of the securities also included $ 347.3 million for the purpose of acquiring additional loan obligations for a period of up to 180 days from the CLO closing date, which we subsequently utilized, resulting in the issuer owning loan obligations with a face value of $ 2.05 billion, representing leverage of 81 %. We retained a residual interest in the portfolio with a notional amount of $ 397.2 million, including the $ 210.1 million below investment grade notes. The notes sold to third parties had an initial weighted average interest rate of 1.81 % plus compounded SOFR and interest payments on the notes are payable monthly. CLO 17. In 2021, we completed CLO 17, issuing eight tranches of CLO notes through two wholly owned subsidiaries totaling $ 1.91 billion. Of the total CLO notes issued, $ 1.71 billion were investment grade notes issued to third party investors and $ 194.3 million were below investment grade notes retained by us. As of the CLO closing date, the notes were secured by a portfolio of loan obligations with a face value of $ 1.79 billion, consisting primarily of bridge loans that were contributed from our existing loan portfolio, and cash. The financing had an approximate two-and-a-half-year replacement period that allowed the principal proceeds and sale proceeds (if any) of the loan obligations to be reinvested in qualifying replacement loan obligations, subject to the satisfaction of certain conditions set forth in the indenture. Thereafter, the outstanding debt balance is being reduced as loans are repaid. Initially, the proceeds of the issuance of the securities also included $ 315.0 million for the purpose of acquiring additional loan obligations for a period of up to 180 days from the CLO closing date, which we subsequently utilized, resulting in the issuer owning loan obligations with a face value of $ 2.10 billion, representing leverage of 82 %. We retained a residual interest in the portfolio with a notional amount of $ 385.9 million, including the $ 194.3 million below investment grade notes. The notes sold to third parties had an initial weighted average interest rate of 1.68 % plus one-month LIBOR and interest payments on the notes are payable monthly. CLO 16. In 2021, we completed CLO 16, issuing eight tranches of CLO notes through two wholly owned subsidiaries totaling $ 1.37 billion. Of the total CLO notes issued, $ 1.24 billion were investment grade notes issued to third party investors and $ 135.0 million were below investment grade notes retained by us. As of the CLO closing date, the notes were secured by a portfolio of loan obligations with a face value of $ 1.19 billion, consisting primarily of bridge loans that were contributed from our existing loan portfolio, and cash. The financing had an approximate two-and-a-half-year replacement period that allowed the principal proceeds and sale proceeds (if any) of the loan obligations to be reinvested in qualifying replacement loan obligations, subject to the satisfaction of certain conditions set forth in the indenture. Thereafter, the outstanding debt balance is being reduced as loans are repaid. Initially, the proceeds of the issuance of the securities also included $ 313.0 million for the purpose of acquiring additional loan obligations for a period of up to 180 days from the CLO closing date, which we subsequently utilized, resulting in the issuer owning loan obligations with a face value of $ 1.50 billion, representing leverage of 83 %. We retained a residual interest in the portfolio with a notional amount of $ 262.5 million, including the $ 135.0 million below investment grade notes. The notes sold to third parties had an initial weighted average interest rate of 1.31 % plus one-month LIBOR and interest payments on the notes are payable monthly. CLO 14. In 2021, we completed CLO 14, issuing eight tranches of CLO notes through two wholly owned subsidiaries totaling $ 724.2 million. Of the total CLO notes issued, $ 655.5 million were investment grade notes issued to third party investors and $ 68.7 million were below investment grade notes retained by us. As of the CLO closing date, the notes were secured by a portfolio of loan obligations with a face value of $ 635.2 million, consisting primarily of bridge loans that were contributed from our existing loan portfolio, and cash. The financing had a two-and-a-half-year replacement period that allowed the principal proceeds and sale proceeds (if any) of the loan obligations to be reinvested in qualifying replacement loan obligations, subject to the satisfaction of certain conditions set forth in the indenture. Thereafter, the outstanding debt balance is being reduced as loans are repaid. Initially, the proceeds of the issuance of the securities also included $ 149.8 million for the purpose of acquiring additional loan obligations for a period of up to 180 days from the CLO closing date, which we subsequently utilized, resulting in the issuer owning loan obligations with a face value of $ 785.0 million, representing leverage of 84 %. We retained a residual interest in the portfolio with a notional amount of $ 129.5 million, including the $ 68.7 million below investment grade notes. The notes sold to third parties had an initial weighted average interest rate of 1.33 % plus one-month LIBOR and interest payments on the notes are payable monthly. CLO 15. In June 2024, we unwound CLO 15, redeeming the remaining outstanding notes totaling $ 674.4 million, which were paid primarily from the refinancing of the remaining assets within our other CLO vehicles and credit and repurchase facilities. CLO 13 and 12. In June 2023 and August 2023, we unwound CLO 13 and 12, respectively, redeeming the remaining outstanding notes, which were repaid primarily from the refinancing of the remaining assets within our other CLO vehicles and credit and repurchase facilities. We expensed $ 1.5 million of deferred financing fees in 2023 related to the unwind of these CLOs, into loss on extinguishment of debt on the consolidated statements of income. 85 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Freddie Mac Q Series Securitization. In December 2022, we completed a Q Series securitization, by which we sold to Freddie Mac 11 floating rate loans totaling $ 315.8 million that are secured by first priority mortgage liens on 21 multifamily properties that qualify as mission-driven under the Federal Housing Finance Agency guidelines. The Q Series securitization is represented through a series of pass-through certificates (the “Certificates”) issued under a pooling and servicing agreement. We retained certain subordinate and interest-only classes of the Certificates aggregating $ 79.0 million and the remaining Certificates totaling $ 236.9 million were purchased by third party investors, representing leverage of 75 %. The Certificates sold to third parties pay interest at 2.00 % plus SOFR, excluding fees and transaction costs, and are payable monthly. Securitization Paydowns. During 2024, outstanding notes totaling $ 896.5 million on our CLOs and $ 58.1 million on the Q Series securitization have been paid down. As part of the securitization transaction, we released all mortgage servicing obligations and rights to Freddie Mac who was designated as the master servicer. As master servicer, Freddie Mac appointed us as its subservicer, which includes obligations to collect and remit payments and otherwise administer the underlying loans, and a third party as the special servicer. We may, subject to certain limitations, terminate the special servicer, with or without cause, and appoint a successor. In addition, the special servicer must receive our consent prior to certain decisions with respect to a specially serviced mortgage loan. Senior Unsecured Notes A summary of our senior unsecured notes is as follows ($ in thousands): December 31, 2024 December 31, 2023 Senior Unsecured Notes Issuance Date Maturity UPB Carrying Value (1) Wtd. Avg. Rate (2) UPB Carrying Value (1) Wtd. Avg. Rate (2) 9.00 % Notes (3) Oct. 2024 Oct. 2027 $ 100,000 $ 98,352 9.00 % $ — $ — — 7.75 % Notes (3) Mar. 2023 Mar. 2026 95,000 94,275 7.75 % 95,000 93,697 7.75 % 8.50 % Notes (3) Oct. 2022 Oct. 2027 150,000 148,531 8.50 % 150,000 148,023 8.50 % 5.00 % Notes (3) Dec. 2021 Dec. 2028 180,000 178,300 5.00 % 180,000 177,875 5.00 % 4.50 % Notes (3) Aug. 2021 Sept. 2026 270,000 268,601 4.50 % 270,000 267,763 4.50 % 5.00 % Notes (3) Apr. 2021 Apr. 2026 175,000 174,161 5.00 % 175,000 173,542 5.00 % 4.50 % Notes (3) Mar. 2020 Mar. 2027 275,000 273,927 4.50 % 275,000 273,444 4.50 % 4.75 % Notes Oct. 2019 Oct. 2024 — — — 110,000 109,721 4.75 % 5.75 % Notes Mar. 2019 Apr. 2024 — — — 90,000 89,903 5.75 % $ 1,245,000 $ 1,236,147 5.73 % $ 1,345,000 $ 1,333,968 5.41 % ________________________________________ (1) At December 31, 2024 and 2023, the carrying value is net of deferred financing fees of $ 8.9 million and $ 11.0 million, respectively. (2) At December 31, 2024 and 2023, the aggregate weighted average note rate, including certain fees and costs, was 6.02 % and 5.70 %, 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. Except as noted below, we used the proceeds of our senior unsecured debt offerings to make investments and for general corporate purposes. In October 2024, we issued $ 100.0 million aggregate principal amount of 9.00 % senior unsecured notes due October 2027 in a private offering. We received proceeds of $ 98.4 million from the issuance, after deducting the underwriting discount and other offering expenses. We used the proceeds to pay down debt and for general corporate purposes. 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 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 included accrued interest and other fees, to repurchase the remaining portion of our 8.00 % senior unsecured notes due in 2023. 86 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) In 2022, we issued $ 150.0 million aggregate principal amount of 8.50 % senior unsecured notes due in 2027 in a private offering. We received proceeds of $ 147.5 million from the issuance, after deducting the underwriting discount and other offering expenses. We used $ 47.5 million of the proceeds, which included accrued interest and other fees, to repurchase a portion of our 5.625 % senior unsecured notes. In 2021, we issued $ 180.0 million aggregate principal amount of 5.00 % senior unsecured notes due in 2028 in a private offering. We received proceeds of $ 177.2 million from the issuance, after deducting the underwriting discount and other offering expenses. In 2021, we issued $ 270.0 million aggregate principal amount of 4.50 % senior unsecured notes due in 2026 in a private offering. We received proceeds of $ 265.8 million from the issuance, after deducting the underwriting discount and other offering expenses. In 2021, we issued $ 175.0 million aggregate principal amount of 5.00 % senior unsecured notes due in 2026 in a private offering. We received proceeds of $ 172.3 million from the issuance, after deducting the underwriting discount and other offering expenses. In 2020, we issued $ 275.0 million aggregate principal amount of 4.50 % senior unsecured notes due in March 2027 in a private offering. We received proceeds of $ 271.8 million from the issuance, after deducting the underwriting discount and other offering expenses. We used a significant portion of the proceeds to repay secured indebtedness. The following senior unsecured notes matured during 2023 and 2024: • in April 2023, we redeemed our 8.00 % notes totaling $ 70.8 million; • in May 2023, we redeemed the remaining $ 78.8 million of our 5.625 % notes; • in April 2024, we redeemed our 5.75 % notes totaling $ 90.0 million; and • in October 2024, we redeemed our 4.75 % notes totaling $ 110.0 million. Convertible Senior Unsecured Notes In 2022, we issued $ 287.5 million in aggregate principal amount of 7.50 % convertible senior notes (the “ 7.50 % Convertible Notes”) through a private placement offering. We received proceeds of $ 279.3 million, net of discounts and fees. The 7.50 % Convertible Notes pay interest semiannually in arrears and are scheduled to mature in August 2025, unless earlier converted or repurchased by the holders pursuant to their terms. The initial conversion rate was 59.8480 shares of common stock per $1,000 of principal representing a conversion price of $ 16.71 per share of common stock. At December 31, 2024, the 7.50 % Convertible Notes had a conversion rate of 61.0757 shares of common stock per $1,000 of principal, which represented a conversion price of $ 16.37 per share of common stock. We used $ 203.1 million of the net proceeds from our 7.50 % Convertible Notes to repurchase a portion of our 4.75 % convertible senior notes and expensed $ 3.3 million of deferred financing fees into loss on extinguishment of debt on the consolidated statements of income. The remaining $ 66.1 million of our 4.75 % convertible notes were redeemed at maturity in 2022. 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): Period UPB Unamortized Deferred Financing Fees Net Carrying Value December 31, 2024 $ 287,500 $ 1,647 $ 285,853 December 31, 2023 $ 287,500 $ 4,382 $ 283,118 During 2024, we incurred interest expense on the convertible notes totaling $ 24.3 million, of which $ 21.5 million and $ 2.8 million related to the cash coupon and deferred financing fees, respectively. During 2023, we incurred interest expense on the notes totaling $ 24.8 million, of which $ 22.1 million and $ 2.7 million related to the cash coupon and deferred financing fees, respectively. During 2022, we incurred interest expense on the notes totaling $ 19.8 million, of which $ 16.9 million and $ 2.9 million related to the cash coupon and 87 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) deferred financing fees, respectively. Including the amortization of the deferred financing fees, our weighted average total cost of the convertible notes was 8.43 % and 8.42 % at December 31, 2024 and 2023, respectively. Junior Subordinated Notes The carrying values of borrowings under our junior subordinated notes were $ 144.7 million and $ 143.9 million at December 31, 2024 and 2023, respectively, which is net of a deferred amount of $ 8.3 million and $ 9.0 million, respectively, (which is amortized into interest expense over the life of the notes) and deferred financing fees of $ 1.4 million and $ 1.5 million, respectively. These notes have maturities ranging from March 2034 through April 2037 and pay interest quarterly at a floating rate. The weighted average note rate was 7.18 % and 8.48 % at December 31, 2024 and 2023, respectively. Including certain fees and costs, the weighted average note rate was 7.26 % and 8.56 % at December 31, 2024 and 2023, respectively. Debt Covenants Credit and Repurchase Facilities and Unsecured Debt. The credit and repurchase facilities and unsecured debt (senior and convertible notes) contain various financial covenants, including, but not limited to, minimum liquidity requirements, minimum net worth requirements, minimum unencumbered asset requirements, as well as certain other debt service coverage ratios, debt to equity ratios and minimum servicing portfolio tests. We were in compliance with all financial covenants and restrictions at December 31, 2024. CLOs. Our CLO vehicles contain interest coverage and asset overcollateralization covenants that must be met as of the waterfall distribution date in order for us to receive such payments. If we fail these covenants in any of our CLOs, all cash flows from the applicable CLO would be diverted to repay principal and interest on the outstanding CLO bonds and we would not receive any residual payments until that CLO regained compliance with such tests. Our CLOs were in compliance with all such covenants at December 31, 2024, as well as on the most recent determination dates in January 2025. 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 loans out of the CLOs. However, we may not have sufficient liquidity available to do so at such time. Our CLO compliance tests as of the most recent determination dates in January 2025 are as follows: Cash Flow Triggers CLO 14 CLO 16 CLO 17 CLO 18 CLO 19 Overcollateralization (1) Current 137.46 % 136.19 % 122.10 % 123.89 % 119.56 % Limit 118.76 % 120.21 % 121.51 % 123.03 % 119.30 % Pass / Fail Pass Pass Pass Pass Pass Interest Coverage (2) Current 172.64 % 176.22 % 152.15 % 143.01 % 133.28 % Limit 120.00 % 120.00 % 120.00 % 120.00 % 120.00 % Pass / Fail Pass Pass Pass Pass Pass ________________________________________ (1) The overcollateralization ratio divides the total principal balance of all collateral in the CLO by the total principal balance of the bonds associated with the applicable ratio. To the extent an asset is considered a defaulted security, the asset’s principal balance for purposes of the overcollateralization test is the lesser of the asset’s market value or the principal balance of the defaulted asset multiplied by the asset’s recovery rate which is determined by the rating agencies. Rating downgrades of CLO collateral will generally not have a direct impact on the principal balance of a CLO asset for purposes of calculating the CLO overcollateralization test unless the rating downgrade is below a significantly low threshold (e.g., CCC-) as defined in each CLO vehicle. (2) The interest coverage ratio divides interest income by interest expense for the classes senior to those retained by us. 88 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Our CLO overcollateralization ratios as of the determination dates subsequent to each quarter are as follows: Determination (1) CLO 14 CLO 16 CLO 17 CLO 18 CLO 19 January 2025 137.46 % 136.19 % 122.10 % 123.89 % 119.56 % October 2024 133.88 % 129.98 % 123.14 % 124.20 % 121.78 % July 2024 132.91 % 127.64 % 121.78 % 123.67 % 119.98 % April 2024 125.22 % 120.81 % 121.71 % 123.87 % 119.30 % January 2024 120.00 % 120.81 % 121.71 % 123.87 % 120.30 % ________________________________________ (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 12 — Allowance for Loss-Sharing Obligations Our allowance for loss-sharing obligations related to the Fannie Mae DUS program is as follows (in thousands): Year Ended December 31, 2024 2023 Beginning balance $ 71,634 $ 57,168 Provisions for loss sharing 13,319 17,864 Provisions reversal for loan repayments ( 764 ) ( 2,169 ) Recoveries (charge-offs), net ( 1,039 ) ( 1,229 ) Ending balance $ 83,150 $ 71,634 When a loan is sold under the Fannie Mae DUS program, we undertake an obligation to partially guarantee the performance of the loan. A liability is recognized for the fair value of the guarantee obligation undertaken for the non-contingent aspect of the guarantee and is removed only upon either the expiration or settlement of the guarantee. At December 31, 2024 and 2023, we had $ 34.8 million and $ 34.6 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 general reserve 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. In instances where payment under the loss-sharing obligations of a loan is determined to be probable and estimable (as the loan is probable of, or is, in foreclosure), we record a liability for the estimated loss-sharing specific reserve. When we settle a loss under the DUS loss-sharing model, the net loss is charged-off against the previously recorded loss-sharing obligation. The settled loss is often net of any previously advanced principal and interest payments in accordance with the DUS program, which are reflected as reductions to the proceeds needed to settle losses. At December 31, 2024 and 2023, we had outstanding advances of $ 1.9 million and $ 1.1 million, respectively, which were netted against the allowance for loss-sharing obligations. At December 31, 2024 and 2023, our allowance for loss-sharing obligations, associated with expected losses under CECL, was $ 48.3 million and $ 37.0 million, respectively, and represented 0.21 % and 0.17 %, respectively, of our Fannie Mae servicing portfolio. During 2024, we recorded a $ 11.6 million increase in CECL reserves. At December 31, 2024 and 2023, the maximum quantifiable liability associated with our guarantees under the Fannie Mae DUS agreement was $ 4.30 billion and $ 3.95 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. 89 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Note 13 — Derivative Financial Instruments We enter into derivative financial instruments to manage exposures that arise from business activities resulting in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates 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 aspects, with the objective of eliminating interest rate risk to the extent practical. Sale commitments with the investors have an expiration date that is longer than our related commitments to the borrower to allow, among other things, for closing of the loan and processing of paperwork to deliver the loan into the sale commitment. These commitments meet the definition of a derivative and are recorded at fair value, including the effects of interest rate movements which are reflected as a component of (loss) gain on derivative instruments, net in the consolidated statements of 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 2024, 2023 and 2022, we recorded net losses of $ 3.7 million, net gains of of $ 8.8 million and net losses of $ 3.6 million, respectively, from changes in the fair value of these derivatives and $ 51.3 million, $ 69.9 million and $ 69.3 million, respectively, of income from MSRs. See Note 14 for details. Treasury Futures and Credit Default Swaps. We enter into over-the-counter treasury futures and credit default 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 treasury futures typically have a three-month maturity and are tied to the five-year and ten-year treasury 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. These instruments 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. Our agreements with the counterparties provide for bilateral collateral pledging based on the counterparties' market value. The counterparties have the right to re-pledge the collateral posted, but have the obligation to return the pledged collateral as the market value of the treasury futures change. Our policy is to record the asset and liability positions on a net basis. At December 31, 2024 and 2023, we had $ 2.3 million and $ 1.5 million, respectively, included in others assets, which was comprised of cash posted as collateral of $ 2.0 million and $ 1.9 million, respectively, and net liability positions of $ 0.3 million and $ 0.4 million, respectively, from the fair value of our treasury futures. During 2024, 2023 and 2022, we recorded realized and unrealized gains of $ 0.1 million and $ 0.6 million, realized gains and unrealized losses of $ 1.6 million and $ 3.7 million, and realized and unrealized gains of $ 26.9 million and $ 3.5 million, respectively, to our Agency Business. 90 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) A summary of our non-qualifying derivative financial instruments in our Agency Business is as follows ($ in thousands): December 31, 2024 Fair Value Derivative Count Notional Value Balance Sheet Location Derivative Assets Derivative Liabilities Forward sale commitments 44 $ 396,024 Other assets/other liabilities $ 95 $ ( 4,209 ) Treasury futures 82 8,200 — — $ 404,224 $ 95 $ ( 4,209 ) December 31, 2023 Rate lock commitments 3 $ 26,800 Other assets/other liabilities $ 428 $ ( 759 ) Forward sale commitments 33 559,079 Other assets/other liabilities 6,119 ( 262 ) Treasury futures 82 8,200 — — $ 594,079 $ 6,547 $ ( 1,021 ) Note 14 — Fair Value Fair value estimates are dependent upon subjective assumptions and involve significant uncertainties resulting in variability in estimates with changes in assumptions. The following table summarizes the principal amounts, carrying values and the estimated fair values of our financial instruments (in thousands): December 31, 2024 December 31, 2023 Principal / Notional Amount Carrying Value Estimated Fair Value Principal / Notional Amount Carrying Value Estimated Fair Value Financial assets: Loans and investments, net $ 11,304,956 $ 11,033,997 $ 11,122,205 $ 12,615,006 $ 12,377,806 $ 12,452,563 Loans held-for-sale, net 438,233 435,759 449,339 552,325 551,707 566,451 Capitalized mortgage servicing rights, net n/a 368,678 511,282 n/a 391,254 510,472 Securities held-to-maturity, net 230,012 157,154 144,508 230,495 155,279 129,390 Derivative financial instruments 41,724 95 95 447,609 6,547 6,547 Financial liabilities: Credit and repurchase facilities $ 3,568,361 $ 3,559,490 $ 3,592,120 $ 3,242,939 $ 3,237,827 $ 3,228,324 Securitized debt 4,632,015 4,622,489 4,616,409 6,956,284 6,935,010 6,864,557 Senior unsecured notes 1,245,000 1,236,147 1,160,154 1,345,000 1,333,968 1,214,331 Convertible senior unsecured notes 287,500 285,853 287,500 287,500 283,118 301,156 Junior subordinated notes 154,336 144,686 109,099 154,336 143,896 106,444 Mortgage notes payable - real estate owned 74,897 74,897 74,495 44,339 44,339 44,103 Derivative financial instruments 354,300 4,209 4,209 138,270 1,021 1,021 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. 91 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Level 2—Inputs (other than quoted prices included in Level 1) are observable for the asset or liability through correlation with market data. Level 2 inputs may include quoted market prices for a similar asset or liability, interest rates and credit risk. Examples include non-government securities, certain mortgage and asset-backed securities, certain corporate debt and certain derivative instruments. Level 3—Inputs reflect our best estimate of what market participants would use in pricing the asset or liability and are based on significant unobservable inputs that require a considerable amount of judgment and assumptions. Examples include certain mortgage and asset-backed securities, certain corporate debt and certain derivative instruments. The following is a description of the valuation techniques used to measure fair value and the general classification of these instruments pursuant to the fair value hierarchy. Loans and investments, net. Fair values of loans and investments that are not impaired are estimated using inputs based on direct capitalization rate and discounted cash flow methodology 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). MSRs are initially recorded at fair value and are carried at amortized cost. 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 discount rate and contractually specified servicing fees, and to a lessor extent the prepayment speed of the underlying loans 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 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. Credit facilities, repurchase facilities, and mortgage notes payable. Fair values for credit and repurchase facilities and mortgage notes payable 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). 92 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) We measure certain financial assets and financial liabilities at fair value on a recurring basis. The fair values of these financial assets and liabilities are determined using the following input levels at December 31, 2024 (in thousands): Carrying Value Fair Value Fair Value Measurements Using Fair Value Hierarchy Level 1 Level 2 Level 3 Financial assets: Derivative financial instruments $ 95 $ 95 $ — $ 95 $ — Financial liabilities: Derivative financial instruments $ 4,209 $ 4,209 $ — $ 4,209 $ — We measure certain financial and non-financial assets at fair value on a nonrecurring basis. The fair values of these financial and non-financial assets, if applicable, were determined using the following input levels at December 31, 2024 (in thousands): Fair Value Measurements Using Fair Value Hierarchy Net Carrying Value Fair Value Level 1 Level 2 Level 3 Financial assets: Impaired loans, net Loans held-for-investment (1) $ 445,287 $ 445,287 $ — $ — $ 445,287 Loans held-for-sale (2) 13,178 13,178 — 13,178 — $ 458,465 $ 458,465 $ — $ 13,178 $ 445,287 ________________________________________ (1) We had an allowance for credit losses of $ 143.7 million relating to twenty-seven impaired loans with an aggregate carrying value, before loan loss reserves, of $ 589.0 million at December 31, 2024. The fair values of these impaired loans are based on the value of the underlying collateral. (2) We have an impairment of $ 1.4 million related to four loans held-for-sale with an aggregate carrying value, before unrealized impairment losses, of $ 14.6 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 expected to be transferred or sold within 60 days to 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. 93 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Quantitative information about Level 3 fair value measurements at December 31, 2024 is as follows ($ in thousands): Fair Value Valuation Techniques Significant Unobservable Inputs Financial assets: Impaired loans: Weighted Average Minimum / Maximum Multifamily $ 383,513 Discounted cash flows Capitalization rate 6.19 % 5.75 % - 7.25 % Land $ 49,999 Discounted cash flows Discount rate 21.50 % 21.50 % Revenue growth rate 3.00 % 3.00 % Retail $ 11,775 Sales comparative Price per acre $ 165 $ 165 The derivative financial instruments using Level 3 inputs are outstanding for short periods of time (generally less than 60 days). A roll-forward of Level 3 derivative instruments is as follows (in thousands): Fair Value Measurements Using Significant Unobservable Inputs for the Year Ended December 31, 2024 2023 2022 Derivative assets and liabilities, net Beginning balance $ 428 $ 354 $ 295 Settlements ( 50,492 ) ( 66,407 ) ( 64,896 ) Realized gains recorded in earnings 50,064 66,053 64,601 Unrealized gains recorded in earnings — 428 354 Ending balance $ — $ 428 $ 354 The components of fair value and other relevant information associated with our forward sales commitments and the estimated fair value of cash flows from servicing on loans held-for-sale are as follows (in thousands): December 31, 2024 Notional/ Principal Amount Fair Value of Servicing Rights Interest Rate Movement Effect Unrealized Impairment Loss Total Fair Value Adjustment Forward sale commitments $ 396,024 $ — $ — $ — $ — Loans held-for-sale, net (1) 438,233 5,138 — ( 1,381 ) 3,757 Total $ 5,138 $ — $ ( 1,381 ) $ 3,757 ________________________________________ (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. 94 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) We measure certain assets and liabilities for which fair value is only disclosed. The fair values of these assets and liabilities are determined using the following input levels at December 31, 2024 (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 $ 11,033,997 $ 11,122,205 $ — $ — $ 11,122,205 Loans held-for-sale, net 435,759 449,339 — 444,201 5,138 Capitalized mortgage servicing rights, net 368,678 511,282 — — 511,282 Securities held-to-maturity, net 157,154 144,508 — — 144,508 Financial liabilities: Credit and repurchase facilities $ 3,559,490 $ 3,592,120 $ — $ 422,661 $ 3,169,459 Securitized debt 4,622,489 4,616,409 — — 4,616,409 Senior unsecured notes 1,236,147 1,160,154 1,160,154 — — Convertible senior unsecured notes, net 285,853 287,500 — 287,500 — Junior subordinated notes 144,686 109,099 — — 109,099 Note 15 — Commitments and Contingencies Agency Business Commitments. We must make certain representations and warranties concerning each loan we originate for the GSE or HUD programs. The representations and warranties relate to our practices in the origination and servicing of the loans and the accuracy of the information being provided by us. In the event of a breach of any representation or warranty, the GSEs or HUD could require us to repurchase a loan, even if the loan is not in default. Our obligation to repurchase the loan is independent of our risk-sharing obligations. Our Agency Business is subject to supervision by certain regulatory agencies. Among other things, these agencies require us to meet certain minimum net worth, operational liquidity and restricted liquidity collateral requirements, and compliance with reporting requirements. Our adjusted net worth and liquidity required by the agencies for all periods presented exceeded these requirements. At December 31, 2024, we were required to maintain at least $ 22.4 million of liquid assets in one of our subsidiaries to meet our operational liquidity requirements for Fannie Mae and we had operational liquidity in excess of this requirement. We are generally required to share the risk of any losses associated with loans sold under the Fannie Mae DUS program and are required to secure this obligation by assigning restricted cash balances and/or a letter of credit to Fannie Mae. The amount of collateral required by Fannie Mae is a formulaic calculation at the loan level by a Fannie Mae assigned tier, which considers the loan balance, risk level of the loan, age of the loan and level of risk-sharing. Fannie Mae requires restricted liquidity for Tier 2 loans of 75 basis points, 15 basis points for Tier 3 loans and 5 basis points for Tier 4 loans, which is funded over a 48 -month period that begins upon delivery of the loan to Fannie Mae. A significant portion of our Fannie Mae DUS serviced loans for which we have risk sharing are Tier 2 loans. At December 31, 2024, the restricted liquidity requirement totaled $ 91.5 million and was satisfied with a $ 70.0 million letter of credit and cash issued to Fannie Mae. At December 31, 2024, reserve requirements for the current Fannie Mae DUS loan portfolio will require us to fund $ 35.2 million in additional restricted liquidity over the next 48 months, assuming no further principal paydowns, prepayments, or defaults within our at-risk portfolio. Fannie Mae periodically reassesses these collateral requirements and may make changes to these requirements in the future. We generate sufficient cash flow from our operations to meet these capital standards and do not expect any changes to have a material impact on our future operations; however, future changes to collateral requirements may adversely impact our available cash. We are subject to various capital requirements in connection with seller/servicer agreements that we have entered into with secondary market investors. Failure to maintain minimum capital requirements could result in our inability to originate and service loans for the respective investor and, therefore, could have a direct material effect on our consolidated financial statements. At December 31, 2024, we met all of Fannie Mae’s quarterly capital requirements and our Fannie Mae adjusted net worth was in excess of the required net worth. We are also subject to capital requirements on an annual basis for Ginnie Mae and FHA, and we believe we have met all requirements at December 31, 2024. 95 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) As an approved designated seller/servicer under Freddie Mac’s SBL program, we are required to post collateral to ensure that we are able to meet certain purchase and loss obligations required by this program. Under the SBL program, we are required to post collateral equal to $ 5.0 million, which is satisfied with a $ 5.0 million letter of credit. We enter into contractual commitments with borrowers providing rate lock commitments while simultaneously entering into forward sale commitments with investors. These commitments are outstanding for short periods of time (generally less than 60 days) and are described in more detail in Note 13 and Note 14. Debt Obligations and Operating Leases. At December 31, 2024, 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): Year Debt Obligations Minimum Annual Operating Lease Payments Total 2025 $ 4,314,861 $ 11,081 $ 4,325,942 2026 3,540,874 11,297 3,552,171 2027 1,772,038 9,782 1,781,820 2028 180,000 9,093 189,093 2029 — 8,576 8,576 Thereafter 154,336 19,308 173,644 Total $ 9,962,109 $ 69,137 $ 10,031,246 At December 31, 2024 and 2023, our leases had remaining lease terms of 2.1 – 9.2 years and 0.8 – 10.1 years, respectively, with a weighted average remaining lease term of 6.8 years and 7.6 years, respectively, and a weighted average discount rate of 5.8 % and 5.7 %, respectively. We recorded lease expense of $ 10.9 million, $ 10.9 million and $ 9.6 million during 2024, 2023 and 2022, respectively. Unfunded Commitments. In accordance with certain structured loans and investments, we have outstanding unfunded commitments of $ 2.20 billion at December 31, 2024 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. From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. Except as set forth below under “Securities Class Action,” we are not currently a party to any material legal proceedings, and we are not aware of any pending or threatened legal proceeding against us that we believe could have an adverse effect on our business, operating results or financial condition. Because the results of legal proceedings is inherently unpredictable and uncertain, we are currently unable to predict whether it will have a material adverse effect on our business, financial condition or results of operations. Securities Class Action On July 31, 2024, a purported shareholder filed a securities class action lawsuit against us and certain of our executive officers in the United States District Court for the Eastern District of New York (the “Court”), alleging violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder. The plaintiffs seek to represent a class of shareholders who purchased our shares of common stock between May 7, 2021 and July 11, 2024. On November 5, 2024, the Court approved the motion appointing the lead plaintiffs and their counsel. An amended complaint was filed by the lead plaintiffs on January 21, 2025. The amended complaint alleges that we have made false and misleading statements and/or failed to disclose material information in connection with allegedly overriding internal controls, engaging in substandard lending practices and not complying with agency requirements. The plaintiffs are seeking damages in an unspecified amount, as well as attorneys’ fees and costs. We believe that the allegations in the lawsuit are without merit, and we intend to vigorously defend against the claims. At this time, we are unable to determine whether an unfavorable outcome is probable or to estimate reasonably possible losses. Extended Stay Litigation This litigation was settled and discontinued in 2023. 96 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 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. In June 2013, the Trust amended the lawsuits, to, among other things, (1) consolidate the lawsuits into one lawsuit, (2) dismiss certain defendants from the lawsuits, none of whom were related to us, and (3) reduce the counts within the lawsuits. 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 $ 38.0 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. In early March 2023, the parties to the settlement finalized the settlement documents and on April 25, 2023, the Bankruptcy Court approved the settlement. Following the Bankruptcy Court approval, the parties made the agreed upon payments, the broad mutual releases became effective and on June 23, 2023, the litigation was discontinued, with prejudice. For more detailed information regarding the Action, please refer to Note 15 of our 2022 Annual Report. 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 16 — Variable Interest Entities Our involvement with VIEs primarily affects our financial performance and cash flows through amounts recorded in interest income, interest expense, provision for loan losses and through activity associated with our derivative instruments. 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): December 31, 2024 December 31, 2023 Assets: Restricted cash $ 131,381 $ 593,956 Loans and investments, net 5,898,102 7,826,793 Other assets 95,442 193,822 Total assets $ 6,124,925 $ 8,614,571 Liabilities: Securitized debt $ 4,622,489 $ 6,935,010 Other liabilities 15,255 32,867 Total liabilities $ 4,637,744 $ 6,967,877 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 11 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. 97 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Unconsolidated VIEs . We determined that we are not the primary beneficiary of 50 VIEs in which we have a variable interest at December 31, 2024 because we do not have the ability to direct the activities of the VIEs that most significantly impact each entity’s economic performance. A summary of our variable interests in identified VIEs, of which we are not the primary beneficiary, at December 31, 2024 is as follows (in thousands): Type Carrying Amount (1) Loans $ 1,023,169 APL certificates 136,492 B Piece bonds 31,508 Equity investments 33,591 Agency interest only strips 94 Total $ 1,224,854 ________________________________________ (1) Represents the carrying amount of loans and investments before reserves. At December 31, 2024, $ 202.9 million of loans to VIEs had corresponding specific loan loss reserves of $ 90.5 million. The maximum loss exposure at December 31, 2024 would not exceed the carrying amount of our investment. These unconsolidated VIEs have exposure to real estate debt of approximately $ 4.33 billion at December 31, 2024. Note 17 — Equity Preferred Stock. The Series D, Series E and Series F preferred stock are not redeemable by us prior to June 2, 2026, August 11, 2026 and October 12, 2026, respectively. Holders of the Series F preferred stock are entitled to receive cumulative dividends at a fixed rate equal to 6.25 % from the date of issuance through October 29, 2026 and at a floating rate equal to a benchmark rate (which is expected to be the three-month term SOFR) plus a spread of 5.442 % per annum beginning October 30, 2026; provided that in no event should the rate be lower than 6.125 %. Common Stock. In May 2024, we entered into a new equity distribution agreement with JMP Securities LLC ("JMP"). In accordance with the terms of the agreement, we may offer and sell up to 30,000,000 shares of our common stock in "At-The-Market" equity offerings through JMP by means of ordinary brokers' transactions or otherwise at market prices prevailing at the time of sale, or at negotiated prices. During 2024, we sold 661,708 shares of our common stock at an average price of $ 15.16 per share for net proceeds of $ 10.0 million. At December 31, 2024, we had 29,338,292 shares available under the agreement. During 2023, the Board of Directors authorized a share repurchase program providing for the repurchase of up to $ 150.0 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 Exchange Act, based on our stock price, general market conditions, applicable legal requirements and other factors. The program may be discontinued or modified at any time. During April 2024, we repurchased 935,739 shares of our common stock under the share repurchase program at a total cost of $ 11.4 million and an average cost of $ 12.19 per share. At December 31, 2024, there was $ 138.6 million available for repurchase under this program. Noncontrolling Interest. Noncontrolling interest relates to the OP Units issued to satisfy a portion of the purchase price in connection with the Acquisition. Each of these OP Units are paired with one share of our special voting preferred shares having a par value of $ 0.01 per share and is entitled to one vote each on any matter submitted for stockholder approval. The OP Units are entitled to receive distributions if and when our Board of Directors authorizes and declares common stock distributions. The OP Units are also redeemable 98 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) for cash, or at our option, for shares of our common stock on a one -for-one basis. At December 31, 2024, there were 16,293,589 OP Units outstanding, which represented 7.9 % of the voting power of our outstanding stock. Distributions. Dividends declared (on a per share basis) for the year ended December 31, 2024 are as follows: Common Stock Preferred Stock Dividend Declaration Date Dividend Declaration Date Series D Series E Series F February 14, 2024 $ 0.43 March 29, 2024 $ 0.3984375 $ 0.390625 $ 0.390625 May 1, 2024 $ 0.43 June 28, 2024 $ 0.3984375 $ 0.390625 $ 0.390625 July 31, 2024 $ 0.43 September 27, 2024 $ 0.3984375 $ 0.390625 $ 0.390625 October 30, 2024 $ 0.43 December 30, 2024 $ 0.3984375 $ 0.390625 $ 0.390625 Common Stock – On February 19, 2025, the Board of Directors declared a cash dividend of $ 0.43 per share of common stock. The dividend is payable on March 21, 2025 to common stockholders of record as of the close of business on March 7, 2025. We have determined that 100 % of the common stock and preferred stock dividends paid during 2024, 2023 and 2022 represented ordinary income to our stockholders for income tax purposes. For stockholders that may be required to report excess inclusion income to the Internal Revenue Service, we will not pass through any excess inclusion income to our stockholders for 2024. As a result, no portion of the 2024 dividends should be treated as excess inclusion income for federal income tax purposes. Deferred Compensation. We have a stock incentive plan under which the Board of Directors has the authority to issue shares of stock to certain employees, officers and directors. During 2024, we issued 828,073 shares of restricted common stock to certain employees and members of our Board of Directors under the Amended Omnibus Stock Incentive Plan with a total grant date fair value of $ 10.9 million, of which: (1) 268,869 shares with a grant date fair value of $ 3.5 million vested in 2024; (2) 244,794 shares with a grant date fair value of $ 3.2 million will vest in 2025; (3) 248,346 shares with a grant date fair value of $ 3.3 million will vest in 2026; (4) 31,314 shares with a grant date fair value of $ 0.5 million will vest in 2027; and (5) 34,750 shares with a grant date fair value of $ 0.5 million will vest in 2028. During 2024, we issued our chief executive officer 309,775 shares of restricted common stock with a grant date fair value of $ 3.9 million that vest in full in the first quarter of 2027. We also issued 36,688 fully vested restricted stock units (“RSUs”) with a grant date fair value of $ 0.5 million to certain members of our Board of Directors, who have decided to defer the receipt of the common stock, into which the RSUs are converted, to a future date pursuant to a pre-established deferral election. During 2024, we withheld 273,163 shares from the net settlement of restricted common stock by employees for payment of withholding taxes on shares that vested. During 2023, we issued 943,788 shares of restricted common stock to our employees and members of our Board of Directors under the 2020 Amended Omnibus Stock Incentive Plan (the “2020 Plan”) with a total grant date fair value of $ 11.3 million, of which: (1) 299,710 shares with a grant date fair value of $ 3.6 million were fully vested on the grant date; (2) 277,751 shares with a grant date fair value of $ 3.4 million vested in 2024; (3) 253,479 shares with a grant date fair value of $ 3.0 million will vest in 2025; (4) 78,126 shares with a grant date fair value of $ 0.9 million will vest in 2026; and (5) 34,722 shares with a grant date fair value of $ 0.4 million will vest in 2027. We issued 40,796 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. The deferred awards have no voting rights and are eligible to receive dividend equivalents equal to the dividends on our common stock as, and when, declared by our Board of Directors. During 2022, we issued 652,596 shares of restricted common stock to our employees and members of our Board of Directors under the 2020 Plan with a total grant date fair value of $ 11.1 million, of which: (1) 232,899 shares with a grant date fair value of $ 4.0 million were fully vested on the grant date; (2) 217,840 shares with a grant date fair value of $ 3.7 million vested in 2023; (3) 181,968 shares with a grant date fair value of $ 3.1 million vested in 2024; (4) 9,951 shares with a grant date fair value of $ 0.2 million will vest in 2025; and (5) 9,938 shares with a grant date fair value of $ 0.2 million will vest in 2026. We issued 25,012 fully vested RSUs with a grant date fair 99 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) value of $ 0.4 million to certain members of our Board of Directors and 189,873 RSUs with a grant date fair value of $ 3.3 million that vest in full in the first quarter of 2025 to our chief executive officer. The individuals decided to defer the receipt of the common stock, to which the RSUs are converted into, to a future date. The deferred awards have no voting rights and are eligible to receive dividend equivalents equal to the dividends on our common stock as, and when, declared by our Board of Directors. In 2024, 2023 and 2022, previously granted performance-based restricted stock units of 275,569 units, 352,427 units and 381,503 units, respectively, to our chief executive officer fully vested based on achieving the performance objectives for the four-year periods ended December 31, 2023, 2022 and 2021, respectively. The 275,569 units vested in full and were not net settled. The 352,427 units and 381,503 units vested in full and were net settled for 172,513 shares and 186,772 shares, respectively, of common stock in 2023 and 2022. respectively. In addition, 313,152 shares and 246,508 shares of performance-based restricted stock granted to our chief executive officer in 2020 and 2019, respectively, vested in 2023 and 2022, respectively, which were net settled for 153,287 shares and 120,665 shares, respectively, of common stock. Further, 165,746 shares and 184,729 shares of restricted common stock granted to our chief executive officer in 2021 vested in 2024, of which the 165,746 shares were net settled for 81,132 shares of common stock and the 184,729 shares were not net settled. During 2024, 2023 and 2022, we recorded total stock-based compensation expense of $ 13.4 million, $ 14.2 million and $ 14.2 million, respectively, to employee compensation and benefits and $ 0.8 million, $ 0.7 million and $ 0.8 million, respectively, to selling and administrative expense. During 2024, a total of 894,913 shares of restricted stock and restricted stock units vested with a grant date fair value of $ 9.6 million. At December 31, 2024 and 2023, there were 1,689,556 shares and 1,657,078 shares, respectively, of unvested restricted common stock with a grant date fair value of $ 22.2 million and $ 23.7 million, respectively. At December 31, 2024, total unrecognized compensation cost related to unvested restricted common stock was $ 8.8 million, which is expected to be recognized ratably over the remaining weighted-average vesting period of 1.9 years. Earnings Per Share. Basic EPS is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding during each period inclusive of unvested restricted stock with full dividend participation rights. Diluted EPS is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding, plus the additional dilutive effect of common stock equivalents during each period. Our common stock equivalents include the weighted average dilutive effect of RSUs, 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): Year Ended December 31, 2024 2023 2022 Basic Diluted Basic Diluted Basic Diluted Net income attributable to common stockholders (1) $ 223,272 $ 223,272 $ 330,065 $ 330,065 $ 284,829 $ 284,829 Net income attributable to noncontrolling interest (2) — 19,278 — 29,122 — 28,044 Interest expense on convertible notes (3) — — — 24,832 — 20,166 Net income attributable to common stockholders and noncontrolling interest $ 223,272 $ 242,550 $ 330,065 $ 384,019 $ 284,829 $ 333,039 Weighted average shares outstanding 188,701,149 188,701,149 184,641,642 184,641,642 165,355,167 165,355,167 Dilutive effect of OP Units (2) — 16,293,589 — 16,293,589 — 16,304,638 Dilutive effect of convertible notes (3) — — — 17,294,392 — 16,900,204 Dilutive effect of RSUs (4) — 531,872 — 613,990 — 552,621 Weighted average shares outstanding 188,701,149 205,526,610 184,641,642 218,843,613 165,355,167 199,112,630 Net income per common share (1) $ 1.18 $ 1.18 $ 1.79 $ 1.75 $ 1.72 $ 1.67 ________________________________________ (1) Net of preferred stock dividends. 100 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (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) The year ended December 31, 2024 excludes interest expense of $ 24.3 million, and potentially dilutive shares of 17,487,435 , attributable to convertible debt since their effect would have been anti-dilutive. (4) Our chief executive officer was granted RSUs, which vest at the end of a four-year performance period based upon our achievement of total stockholder return objectives. Note 18 — Income Taxes We are organized and conduct our operations to qualify as a REIT and to comply with the provisions of the Internal Revenue Code. A REIT is generally not subject to federal income tax on taxable income which it distributes to its stockholders; provided that it distributes at least 90% of its taxable income and meets certain other requirements. Certain REIT income may be subject to state and local income taxes. We did not have any REIT–federal taxable income, net of dividends paid and net operating loss deductions, for 2024, 2023 and 2022, and therefore, have not provided for REIT federal income tax expense in any of those years. In 2024, 2023 and 2022, the REIT incurred no state income tax expense. We have elected to retain excess inclusion income rather than passing it through to our stockholders. Certain of our assets and operations that would not otherwise comply with the REIT requirements, such as the Agency Business and our residential mortgage banking joint venture, are owned or conducted through our TRS Consolidated Group, the majority of the income of which is subject to U.S. federal, state and local income taxes. A summary of our pre-tax GAAP income is as follows (in thousands): Year Ended December 31, 2024 2023 2022 Pre‑tax GAAP income: REIT $ 247,068 $ 320,045 $ 303,320 TRS Consolidated Group 50,329 107,858 67,991 Total pre‑tax GAAP income $ 297,397 $ 427,903 $ 371,311 Our provision for income taxes is comprised as follows (in thousands): Year Ended December 31, 2024 2023 2022 Current tax provision: Federal $ 18,880 $ 26,269 $ 14,167 State 6,211 8,427 5,058 Total 25,091 34,696 19,225 Deferred tax (benefit) provision: Federal $ ( 8,795 ) $ ( 5,272 ) $ ( 1,373 ) State ( 2,818 ) ( 1,783 ) ( 370 ) Valuation allowance — ( 294 ) 2 Total ( 11,613 ) ( 7,349 ) ( 1,741 ) Total income tax expense $ 13,478 $ 27,347 $ 17,484 101 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) A reconciliation of our effective income tax rate as a percentage of pre-tax income to the U.S. federal statutory rate is as follows: Year Ended December 31, 2024 2023 2022 U.S. federal statutory rate 21.0 % 21.0 % 21.0 % REIT non‑taxable income ( 17.4 ) % ( 15.7 ) % ( 17.2 ) % State and local income taxes, net of federal tax benefit 0.9 % 1.2 % 1.0 % Other 0.1 % ( 0.1 ) % ( 0.1 ) % Effective income tax rate 4.6 % 6.4 % 4.7 % The significant components of our deferred tax assets and liabilities of our TRS Consolidated Group are as follows (in thousands): December 31, 2024 2023 Deferred tax assets: Expenses not currently deductible $ 33,189 $ 27,144 Loan loss reserves 7,084 7,088 Net operating loss carryforwards 234 188 Other 396 346 Deferred tax assets, net $ 40,903 $ 34,766 Deferred tax liabilities: Mortgage servicing rights $ 24,420 $ 28,286 Intangibles 5,106 5,565 Interest in equity affiliates, net 1,568 2,719 Deferred tax liabilities, net $ 31,094 $ 36,570 At both December 31, 2024 and 2023, the REIT (excluding the TRS Consolidated Group) had no federal net operating loss carryforwards and no capital loss carryforwards. At both December 31, 2024 and 2023, the TRS Consolidated Group had no federal net operating loss carryforwards remaining. At both December 31, 2024 and 2023, the TRS Consolidated Group had state net operating loss carryforwards of $ 0.2 million, which will begin to expire in 2036. The TRS Consolidated Group is currently under audit in certain state and local jurisdictions for tax years 2017-2021. While the impact of the current income tax examinations were undetermined, it is not expected to be material to our consolidated financial statements. We have assessed our tax positions for all open years, which includes 2017-2024, and have concluded that there were no material uncertainties to be recognized. We have not recognized any interest and penalties related to tax uncertainties for the years ended 2017 through 2024. Note 19 — 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 2024, 2023 and 2022, we incurred $ 3.3 million, $ 3.2 million and $ 3.3 million, respectively, of costs for services provided and employees seconded to the Service Recipients, all of which are reimbursable to us and included in due from related party on the consolidated balance sheets. 102 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Other Related Party Transactions. Due from related party was $ 12.8 million and $ 64.4 million at December 31, 2024 and 2023, respectively, which consisted primarily of amounts due from our affiliated servicing operations related to real estate transactions closing at the end of 2024 and 2023 and amounts due from ACM for costs incurred in connection with the support and secondment agreements described above. Due to related party was $ 4.5 million and $ 13.8 million at December 31, 2024 and 2023, respectively, and consisted of loan payoffs, holdbacks and escrows to be remitted to our affiliated servicing operations related to real estate transactions. Investments in equity affiliates, which represent related parties under GAAP, and their related disclosures, are included in Note 8. 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 2024, 2023 and 2022, we reimbursed the aircraft owner $ 0.5 million, $ 0.8 million and $ 1.1 million, respectively, for the flights chartered by our executives pursuant the agreement. In July 2024, we committed to fund a $ 62.4 million bridge loan ( none of which was funded at December 31, 2024) 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 3.34 % equity interest in the borrowing entity. The loan has an interest rate of SOFR plus 4.25 % with a SOFR floor of 3.50 % and matures in July 2027. Interest income recorded from this loan was $ 0.1 million for 2024. In May 2024, we committed to fund a $ 42.5 million bridge loan ($ 4.5 million was funded at December 31, 2024) 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 2.28 % equity interest in the borrowing entity. The loan has an interest rate of SOFR plus 4.25 % with a SOFR floor of 3.50 % and matures in May 2027. Interest income recorded from this loan was $ 0.2 million for 2024. In May 2023, we committed to fund a $ 56.9 million bridge loan ($ 50.1 million was funded at December 31, 2024) for an SFR build-to-rent construction project. Two of our officers made minority equity investments totaling $ 0.5 million, representing approximately 4 % of the total equity invested in the project. The loan has an interest rate of SOFR plus 5.50 % with a SOFR floor of 3.25 % and matures in December 2025, with two six-month extension options. Interest income recorded from this loan was $ 3.2 million and $ 0.4 million for 2024 and 2023, respectively. In 2022, we purchased a $ 46.2 million bridge loan originated by ACM at par ($ 7.4 million was funded at December 31, 2024) 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 matures in March 2025. Interest income recorded from this loan was $ 0.7 million and $ 0.2 million for 2024 and 2023, respectively. In 2022, we committed to fund a $ 67.1 million bridge loan ($ 37.0 million was funded at December 31, 2024) 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 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 $ 1.6 million, $ 0.2 million and $ 0.1 million for 2024, 2023 and 2022, respectively. In 2022, we committed to fund a $ 39.4 million bridge loan ($ 32.3 million was funded at December 31, 2024) 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 loan has an interest rate of SOFR plus 4.00 % with a SOFR floor of 0.25 % and matures in March 2025. Interest income recorded from this loan was $ 1.9 million, $ 0.4 million and $ 0.1 million for 2024, 2023 and 2022, respectively. 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 % ownership, is the managing member and holds the right to purchase our interest in the LLC. 103 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 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 had an interest rate of SOFR plus 3.75 % with a SOFR floor of 0.25 % and was scheduled to mature in March 2024. In December 2023, the loan was paid off in full. Interest income recorded from this loan was $ 5.6 million and $ 3.7 million for 2023 and 2022, respectively. In 2020, we committed to fund a $ 32.5 million bridge loan, 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 SOFR plus 3.75 % with a SOFR floor of 0.75 % and the preferred equity investment has a 12.00 % fixed rate. Both loans were scheduled to mature in December 2023. In November 2023, the bridge loan was upsized to a maximum of $ 39.9 million ($ 39.5 million was funded at December 31, 2024) and the maturity on the bridge loan and preferred equity investment were both extended to May 2025. Interest income recorded from these loans was $ 4.2 million, $ 2.8 million and $ 1.3 million for 2024, 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 had an interest rate of SOFR plus 4.25 % with a SOFR floor of 1.00 % and was scheduled to mature in May 2023 and the preferred equity investment has a 12.00 % fixed rate and was scheduled to mature in April 2023. In April 2023, the bridge loan was upsized to a maximum of $ 38.8 million ($ 33.8 million was funded at December 31, 2024), and the maturity on both loans was extended to May 2025 . Interest income recorded from these loans was $ 4.4 million, $ 3.6 million and $ 1.6 million for 2024, 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 9.00 % fixed rate and matures in April 2030. Interest income recorded from the mezzanine loan was $ 0.3 million for all periods presented. We had a $ 35.0 million bridge loan and a $ 10.0 million preferred equity interest on an office building. The bridge loan was scheduled to mature in October 2023 and the preferred equity investment was scheduled to mature in June 2027. The day-to-day operations were being managed by an affiliated entity of an immediate family member of our chief executive officer. In September 2021, we entered into a forbearance agreement with the borrower on the outstanding bridge loan to defer all interest owed until maturity or early payoff. In the fourth quarter of 2023, we converted these loans in the building to a common equity investment. See Note 3 for details. 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 invested $ 30.0 million for an 18 % interest in AMAC III. During 2024, 2023 and 2022, we recorded losses of $ 2.3 million, $ 1.9 million and $ 2.4 million, respectively. During 2024 and 2023, we made contributions of $ 4.1 million and $ 0.7 million, respectively, and received cash distributions of $ 1.1 million in 2023 associated with this investment. In 2019, AMAC III originated a $ 7.0 million mezzanine loan to a borrower with which we have an outstanding $ 34.0 million bridge loan. In 2020, for full satisfaction of the mezzanine loan, AMAC III became the owner of the property. Also in 2020, the $ 34.0 million bridge loan was refinanced with a $ 35.4 million bridge loan, which bears interest at SOFR plus 3.50 %, and was scheduled to mature in August 2024, which was extended to February 2025. Interest income recorded from the bridge loan was $ 3.1 million, $ 3.1 million and $ 1.9 million for 2024, 2023 and 2022, respectively. In February 2025, we modified this loan to extend the maturity three years in exchange for an immediate paydown of $ 0.3 million and an additional paydown of $ 1.7 million to be made on or prior to March 31, 2025. In 2019, we converted an existing bridge loan into a $ 2.0 million mezzanine loan with a fixed interest rate of 10.00 % and a January 2024 maturity. The underlying multifamily property is 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 . In January 2024, the maturity was extended to January 2025, and we are currently in negotiations with this borrower to further extend the maturity. Interest income recorded from this loan was $ 0.2 million for all period presented. 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 SOFR plus 4.75 % with a SOFR floor of 0.25 %, and was scheduled to mature in November 2024, which was extended to February 2025. In the fourth quarter of 2024, we recorded a $ 5.5 million specific reserve on this loan. Interest income recorded from this bridge loan was $ 2.2 million, $ 2.2 million and $ 1.4 million for 2024, 2023 and 2022, respectively. In February 104 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 2025, we modified this loan to extend the maturity two years in exchange for $ 3.0 million of additional collateral and a $ 2.5 million paydown to be made in February 2026. In 2017, we originated a $ 46.9 million Fannie Mae loan on a multifamily property owned in part by a consortium of investors (which includes, among other unaffiliated investors, certain of our officers) which owns a 17.6 % interest in the borrowing entity. We carry a maximum loss-sharing obligation with Fannie Mae on this loan of up to 5 % of the original UPB. Servicing revenue recorded from this loan was less than $ 0.1 million for all periods presented. In 2017, Ginkgo Investment Company LLC (“Ginkgo”), of which one of our directors is a 33 % managing member, purchased a multifamily apartment complex which assumed an existing $ 8.3 million Fannie Mae loan that we service. Ginkgo subsequently sold the majority of its interest in this property and owned a 3.6 % interest at December 31, 2024. In July 2023, the Fannie Mae loan was paid off in full. Servicing revenue recorded from this loan was less than $ 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 December 31, 2024, we had an indirect interest of 12.3 % in this entity. We recorded a loss from equity affiliates related to this investment of $ 1.2 million, income of $ 0.6 million and income of $ 4.9 million for 2024, 2023 and 2022, respectively. During 2024 and 2023, we also received cash distributions totaling $ 7.7 million and $ 15.0 million, respectively, from this investment, which were classified as returns of capital. 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 4.00 % 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 3.30 % and matures in March 2030. In 2020, we sold the Private Label loan to an unconsolidated affiliate of ours. Interest income recorded from these loans totaled $ 0.5 million during 2020. Further, as part of this 2018 restructuring, $ 50.0 million in unsecured financing was provided by an unsecured lender to certain parent entities of the property owners. ACM owns slightly less than half of the unsecured lender entity and, therefore, provided slightly less than half of the unsecured lender financing. In addition, in connection with our equity investment, we received distributions totaling $ 9.0 million and $ 12.2 million during 2024 and 2023, respectively, which were recorded as income from equity affiliates. Separate from the loans we originated in 2018, we provide limited (“bad boy”) guarantees for certain other debt controlled by Lexford. The bad boy guarantees may become a liability for us upon standard “bad” acts such as fraud or a material misrepresentation by Lexford or us. At December 31, 2024, this debt had an aggregate outstanding balance of approximately $ 500.0 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 December 31, 2024, ACM holds 2,535,870 shares of our common stock and 10,597,566 OP Units, which represents 6.4 % of the voting power of our outstanding stock. Our Board of Directors approved a resolution under our charter allowing our chief executive officer and ACM, (which our chief executive officer has a controlling equity interest in), to own more than the 5 % ownership interest limit of our common stock as stated in our amended charter. Note 20 — Employee Benefits 401(k). We have a 401(k) defined contribution plan (the “401(k) Plan”) which is available to all employees who have completed six months of continuous service. The 401(k) Plan matches 25 % of the first 6 % of each employee’s contribution. We have the option to increase the employer match based on our operating results. In 2024, 2023 and 2022, we recorded $ 1.3 million, $ 1.2 million and $ 1.0 million, respectively, of expenses associated with the 401(k) Plan, which is included in employee compensation and benefits in our consolidated statements of income. Deferred Compensation. We have a non-qualified deferred compensation plan (the “Deferred Comp Plan”) which is offered to certain full-time employees and is subject to the rules of section 409A of the Internal Revenue Code. The Deferred Comp Plan can be 105 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) modified or discontinued at any time. All eligible participating employees may defer a portion of their compensation and, depending on the participant eligibility requirements met, we are contractually obligated to: (1) match the contribution, as specified in the Deferred Comp Plan, and fund such amounts upon vesting and an election by participants to redeem their interests; and/or (2) supply additional life insurance benefits. All employee deferrals vest immediately and the matching contributions, where applicable, vest over a nine-year period beginning after year five. For 2024, 2023 and 2022, there were $ 2.8 million, $ 3.1 million and $ 3.3 million, respectively, of employee deferrals. At December 31, 2024 and 2023, we had recorded liabilities totaling $ 45.9 million and $ 37.6 million, respectively, and assets of $ 38.3 million and $ 30.2 million, respectively, related to the Deferred Comp Plan, which is included in other liabilities and other assets, respectively, in our consolidated balance sheets. Note 21 — Segment Information As described in Note 1, we operate through two business segments – our Structured Business and our Agency Business. 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. Intersegment revenue and expenses have been eliminated in the computation of total revenue and operating income. Our chief operating decision maker (“CODM”) is Ivan Kaufman, our Chief Executive Officer. The CODM uses both net interest income and net income for each segment predominantly in the annual budget and forecasting process. The CODM considers both budget and actual results on a quarterly basis for both profit measures when making decisions about the allocation of operating and capital resources to each segment. The CODM also uses segment net interest income and net income to assess the performance of each segment by comparing the results of each segment with one another and in determining the compensation of certain employees. 106 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Year Ended December 31, 2024 Structured Business Agency Business Other (1) Consolidated Interest income $ 1,112,763 $ 55,109 $ — $ 1,167,872 Interest expense 781,668 22,947 — 804,615 Net interest income 331,095 32,162 — 363,257 Other revenue: Gain on sales, including fee-based services, net — 74,932 — 74,932 Mortgage servicing rights — 51,272 — 51,272 Servicing revenue — 194,318 — 194,318 Amortization of MSRs — ( 68,422 ) — ( 68,422 ) Property operating income 7,226 — — 7,226 Loss on derivative instruments, net — ( 8,543 ) — ( 8,543 ) Other income, net 7,255 828 — 8,083 Total other revenue 14,481 244,385 — 258,866 Other expenses: Employee compensation and benefits 67,187 87,728 — 154,915 Commissions — 26,779 — 26,779 Selling and administrative 26,922 28,009 — 54,931 Property operating expenses 7,394 — — 7,394 Depreciation and amortization 6,296 3,259 — 9,555 Provision for loss sharing — 11,782 — 11,782 Provision for loan losses (net of recoveries) 63,953 4,590 — 68,543 Total other expenses 171,752 162,147 — 333,899 Income before extinguishment of debt, gain on real estate, income from equity affiliates and income taxes 173,824 114,400 — 288,224 Loss on extinguishment of debt ( 412 ) — — ( 412 ) Gain on real estate 3,813 — — 3,813 Income from equity affiliates 5,772 — — 5,772 Benefit from (provision for) income taxes 3,590 ( 17,068 ) — ( 13,478 ) Net income 186,587 97,332 — 283,919 Preferred stock dividends 41,369 — — 41,369 Net income attributable to noncontrolling interest — — 19,278 19,278 Net income attributable to common stockholders $ 145,218 $ 97,332 $ ( 19,278 ) $ 223,272 107 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Year Ended December 31, 2023 Structured Business Agency Business Other (1) Consolidated Interest income $ 1,279,433 $ 51,786 $ — $ 1,331,219 Interest expense 880,602 22,626 — 903,228 Net interest income 398,831 29,160 — 427,991 Other revenue: Gain on sales, including fee-based services, net — 72,522 — 72,522 Mortgage servicing rights — 69,912 — 69,912 Servicing revenue — 193,542 — 193,542 Amortization of MSRs — ( 63,093 ) — ( 63,093 ) Property operating income 5,708 — — 5,708 Gain on derivative instruments, net — 6,763 — 6,763 Other income, net 4,868 2,799 — 7,667 Total other revenue 10,576 282,445 — 293,021 Other expenses: Employee compensation and benefits 53,507 87,760 — 141,267 Commissions — 18,521 — 18,521 Selling and administrative 23,234 28,026 — 51,260 Property operating expenses 5,897 — — 5,897 Depreciation and amortization 5,052 4,691 — 9,743 Provision for loss sharing (net of recoveries) — 15,695 — 15,695 Provision for credit losses (net of recoveries) 70,344 3,102 — 73,446 Total other expenses 158,034 157,795 — 315,829 Income before extinguishment of debt, income from equity affiliates and income taxes 251,373 153,810 — 405,183 Loss on extinguishment of debt ( 1,561 ) — — ( 1,561 ) Income from equity affiliates 24,281 — — 24,281 Benefit from (provision for) income taxes 803 ( 28,150 ) — ( 27,347 ) Net income 274,896 125,660 — 400,556 Preferred stock dividends 41,369 — — 41,369 Net income attributable to noncontrolling interest — — 29,122 29,122 Net income attributable to common stockholders $ 233,527 $ 125,660 $ ( 29,122 ) $ 330,065 108 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Year Ended December 31, 2022 Structured Business Agency Business Other (1) Consolidated Interest income $ 903,622 $ 44,779 $ — $ 948,401 Interest expense 538,659 18,958 — 557,617 Net interest income 364,963 25,821 — 390,784 Other revenue: Gain on sales, including fee-based services, net — 55,816 — 55,816 Mortgage servicing rights — 69,346 — 69,346 Servicing revenue — 152,068 — 152,068 Amortization of MSRs — ( 59,876 ) — ( 59,876 ) Property operating income 1,877 — — 1,877 Gain on derivative instruments, net — 26,609 — 26,609 Other income (loss), net ( 2,360 ) ( 15,203 ) — ( 17,563 ) Total other revenue ( 483 ) 228,760 — 228,277 Other expenses: Employee compensation and benefits 56,032 81,903 — 137,935 Commissions — 23,890 — 23,890 Selling and administrative 26,059 27,931 — 53,990 Property operating expenses 2,136 — — 2,136 Depreciation and amortization 4,041 4,691 — 8,732 Provision for loss sharing (net of recoveries) — 1,862 — 1,862 Provision for credit losses (net of recoveries) 19,770 1,399 — 21,169 Litigation settlement 7,350 — — 7,350 Total other expenses 115,388 141,676 — 257,064 Income before extinguishment of debt, income from equity affiliates and income taxes 249,092 112,905 — 361,997 Loss on extinguishment of debt ( 4,933 ) — — ( 4,933 ) Income from equity affiliates 14,247 — — 14,247 Provision for income taxes ( 821 ) ( 16,663 ) — ( 17,484 ) Net income 257,585 96,242 — 353,827 Preferred stock dividends 40,954 — — 40,954 Net income attributable to noncontrolling interest — — 28,044 28,044 Net income attributable to common stockholders $ 216,631 $ 96,242 $ ( 28,044 ) $ 284,829 ________________________________________ (1) Includes income allocated to the noncontrolling interest holders not allocated to the two reportable segments. 109 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) December 31, 2024 Structured Business Agency Business Consolidated Assets: Cash and cash equivalents $ 58,188 $ 445,615 $ 503,803 Restricted cash 134,320 22,056 156,376 Loans and investments, net 11,033,997 — 11,033,997 Loans held-for-sale, net — 435,759 435,759 Capitalized mortgage servicing rights, net — 368,678 368,678 Securities held-to-maturity, net — 157,154 157,154 Investments in equity affiliates 76,312 — 76,312 Real estate owned, net 176,543 — 176,543 Goodwill and other intangible assets 12,500 75,619 88,119 Other assets and due from related party 415,310 78,930 494,240 Total assets $ 11,907,170 $ 1,583,811 $ 13,490,981 Liabilities: Debt obligations $ 9,500,901 $ 422,661 $ 9,923,562 Allowance for loss-sharing obligations — 83,150 83,150 Other liabilities and due to related parties 244,948 87,351 332,299 Total liabilities $ 9,745,849 $ 593,162 $ 10,339,011 December 31, 2023 Assets: Cash and cash equivalents $ 619,487 $ 309,487 $ 928,974 Restricted cash 595,342 12,891 608,233 Loans and investments, net 12,377,806 — 12,377,806 Loans held-for-sale, net — 551,707 551,707 Capitalized mortgage servicing rights, net — 391,254 391,254 Securities held-to-maturity, net — 155,279 155,279 Investments in equity affiliates 79,303 — 79,303 Real estate owned, net 86,991 — 86,991 Goodwill and other intangible assets 12,500 78,878 91,378 Other assets and due from related party 366,082 101,629 467,711 Total assets $ 14,137,511 $ 1,601,125 $ 15,738,636 Liabilities: Debt obligations $ 11,520,492 $ 413,327 $ 11,933,819 Allowance for loss-sharing obligations — 71,634 71,634 Other liabilities and due to related parties 369,588 108,990 478,578 Total liabilities $ 11,890,080 $ 593,951 $ 12,484,031 110 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Year Ended December 31, 2024 2023 2022 Origination Data: Structured Business Bridge: Multifamily $ 444,635 $ 415,330 $ 5,468,222 SFR 869,141 524,060 613,819 Land 10,350 — — 1,324,126 939,390 6,082,041 Mezzanine / Preferred Equity 97,305 43,953 69,606 Construction - Multifamily 4,368 — — Total New Loan Originations $ 1,425,799 $ 983,343 $ 6,151,647 Number of Loans Originated 170 150 318 Commitments: SFR $ 1,438,841 $ 1,150,687 $ 1,086,833 Construction - Multifamily 101,000 — — Total Commitments $ 1,539,841 $ 1,150,687 $ 1,086,833 Loan runoff $ 2,691,583 $ 3,354,055 $ 3,818,554 Agency Business Origination Volumes by Investor: Fannie Mae $ 2,374,040 $ 3,773,532 $ 2,919,566 Freddie Mac 1,770,976 756,827 1,353,001 Private Label 151,936 299,934 217,542 FHA 146,507 257,199 188,394 SFR - Fixed Rate 27,314 19,328 89,683 Total New Loan Originations $ 4,470,773 $ 5,106,820 $ 4,768,186 Total Loan Commitment Volume $ 4,443,972 $ 5,207,148 $ 5,146,718 Agency Business Loan Sales Data: Fannie Mae $ 2,680,018 $ 3,469,340 $ 3,139,414 Freddie Mac 1,662,010 715,530 1,456,595 Private Label 124,286 441,319 515,086 FHA 116,058 240,079 241,457 SFR - Fixed Rate 27,314 22,931 86,071 Total Loan Sales $ 4,609,686 $ 4,889,199 $ 5,438,623 Sales Margin (fee-based services as a % of loan sales) (1) 1.63 % 1.48 % 1.34 % MSR Rate (MSR income as a % of loan commitments) 1.15 % 1.34 % 1.35 % ________________________________________ 111 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (1) 2022 includes $ 17.1 million of gains recognized on treasury futures related to Private Label loans sold, which is included in (loss) gain on derivative instruments, net in the consolidated statements of income. December 31, 2024 Key Servicing Metrics for Agency Business: Servicing Portfolio UPB Wtd. Avg. Servicing Fee Rate (basis points) Wtd. Avg. Life of Portfolio (years) Fannie Mae $ 22,730,056 46.4 6.4 Freddie Mac 6,077,020 21.5 6.8 Private Label 2,605,980 18.7 5.5 FHA 1,506,948 14.1 19.2 Bridge 278,494 10.4 3.0 SFR - Fixed Rate 271,859 20.1 4.4 Total $ 33,470,357 37.8 6.9 December 31, 2023 Fannie Mae $ 21,264,578 47.4 7.4 Freddie Mac 5,181,933 24.0 8.5 Private Label 2,510,449 19.5 6.7 FHA 1,359,624 14.4 19.2 Bridge 379,425 10.9 3.2 SFR - Fixed Rate 287,446 20.1 5.1 Total $ 30,983,455 39.1 8.0 112 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES SCHEDULE IV — LOANS AND OTHER LENDING INVESTMENTS ($ in thousands) Type Location Periodic Payment Terms (1) Maturity Date (2) Interest Pay Rate Index (3) Prior Liens Face Amount (4) Carrying Amount (5) Carrying Amount Subject to Delinquent Interest Bridge Loans: Bridge loans less than 3% of carrying amount of total loans (6): Multifamily Various IO / PI 2025 - 2031 SOFR+ - 1.25 % to 5.75 % $ — $ 8,725,429 $ 8,588,684 $ — SOFR Floor 0.10 % to 5.36 % Fixed 0.00 % to 11.00 % Single‑Family Rental Various IO / PI 2025 - 2027 SOFR+ 2.95 % to 6.20 % — 1,993,890 1,967,835 — SOFR Floor 0.10 % to 5.36 % Land CA IO 2025 SOFR+ 4.00 % — 125,877 47,977 — SOFR Floor 0.15 % Fixed 13.00 % Office NY IO 2025 SOFR+ 3.50 % — 35,410 35,229 — Retail CT IO 2025 SOFR+ 3.50 % — 12,500 12,500 — SOFR Floor 1.00 % Total Bridge Loans — 10,893,106 10,652,225 — Mezzanine Loans: Mezzanine loans less than 3% of carrying amount of total loans (6): Multifamily Various IO / PI 2025 - 2034 Fixed 0.00 % to 14.00 % 1,335,133 239,203 221,689 — Land CA IO 2025 Fixed 0.00 % — 9,333 9,333 — Retail Various IO 2025 SOFR+ 3.50 % — 7,020 3,727 — SOFR Floor 1.00 % Fixed 0.00 % Total Mezzanine Loans 1,335,133 255,556 234,749 — Preferred Equity Investments: Preferred equity investments less than 3% of carrying amount of total loans (6): Multifamily Various IO / PI 2025 - 2033 Fixed 0.00 % to 16.00 % 927,026 143,645 137,163 — Land TX IO 2025 Fixed 0.00 % — 3,500 3,251 — Commercial NY IO 2025 Fixed 6.00 % 29,792 1,700 — — Total Preferred Equity Investments 956,818 148,845 140,414 — Other Loans: Other loans less than 3% of carrying amount of total loans (6): Single‑Family Rental Various IO / PI 2025 SOFR + 4.90 % — 3,082 3,078 — SOFR Floor 0.25 % Construction - Multifamily Various IO 2026 - 2027 SOFR+ 5.50 % — 4,367 3,531 — SOFR Floor 4.00 % Fixed 4.25 % Total Other Loans — 7,449 6,609 — Total Loans $ 2,291,951 $ 11,304,956 $ 11,033,997 $ — ________________________________________ (1) IO = Interest Only, PI = Principal and Interest. (2) Maturity date does not include possible extensions. (3) References to SOFR are to one-month SOFR unless specifically stated otherwise. (4) During 2024, $ 5.99 billion of loans were extended. (5) The federal income tax basis is approximately $ 11.30 billion. (6) Individual loans each have a carrying value less than 3 % of total loans. 113 Table of Contents ARBOR REALTY TRUST, INC. AND SUBSIDIARIES SCHEDULE IV — LOANS AND OTHER LENDING INVESTMENTS (Continued) ($ in thousands) The following table reconciles our loans and investments carrying amounts for the periods indicated (in thousands): Year Ended December 31, 2024 2023 2022 Balance at beginning of year $ 12,377,806 $ 14,254,674 $ 11,981,048 Additions during period: New loan originations 1,425,799 983,343 6,151,647 Funding of unfunded loan commitments (1) 627,790 835,484 381,831 Accretion of unearned revenue 33,501 41,125 37,468 Recoveries of reserves 12,959 4,776 1,500 Loan charge‑offs 15,709 — — Deductions during period: Loan payoffs and paydowns ( 2,691,583 ) ( 3,354,055 ) ( 3,818,554 ) Unfunded loan commitments (1) ( 564,777 ) ( 260,789 ) ( 376,404 ) Unearned revenue and costs ( 19,001 ) ( 13,772 ) ( 51,808 ) Reclassification to real estate owned, net ( 100,025 ) ( 39,400 ) ( 31,200 ) Provision for loan losses ( 68,472 ) ( 73,580 ) ( 20,818 ) Reclassification to held-for-sale loans — — ( 36 ) Use of loan charge‑offs ( 15,709 ) — — Balance at end of year $ 11,033,997 $ 12,377,806 $ 14,254,674 ________________________________________ (1) In accordance with certain loans and investments, we have outstanding unfunded commitments that we are obligated to fund as the borrowers meet certain requirements. Specific requirements include, but are not limited to, property renovations, building construction and conversions based on criteria met by the borrower in accordance with the loan agreements. 114 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.